Execution Version

Exhibit 10.1

 

 

 

CREDIT AGREEMENT

dated as of June 18, 2014

among

Memorial Resource Development Corp.,

as Borrower,

Bank of America, N.A.,

as Administrative Agent,

Citibank, N.A.,

as Syndication Agent,

JPMorgan Chase Bank, N.A., BMO Harris Bank, N.A., Comerica Bank,

Credit Agricole Corporate and Investment Bank, Natixis, Union Bank, N.A.,

and Wells Fargo Bank, National Association,

as Co-Documentation Agents

and

the Lenders party hereto

Merrill Lynch, Pierce, Fenner & Smith Incorporated,

Sole Lead Arranger and Sole Bookrunner

 

 

 

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TABLE OF CONTENTS

 

         Page No.   ARTICLE I    DEFINITIONS AND ACCOUNTING MATTERS   
Section 1.01  

Terms Defined Above

     1    Section 1.02  

Certain Defined Terms

     1    Section 1.03  

Types of Loans and Borrowings

     31    Section 1.04  

Terms Generally; Rules of Construction

     31    Section 1.05  

Accounting Terms and Determinations; GAAP

     31    ARTICLE II    THE CREDITS    Section 2.01  

Commitments

     32    Section 2.02  

Loans and Borrowings

     32    Section 2.03  

Requests for Borrowings

     33    Section 2.04  

Interest Elections

     34    Section 2.05  

Funding of Borrowings

     35    Section 2.06  

Termination and Reduction of Aggregate Maximum Credit Amount; Increase and
Reduction of Aggregate Elected Commitment Amount

     36    Section 2.07  

Borrowing Base

     40    Section 2.08  

Letters of Credit

     43    Section 2.09  

Defaulting Lenders

     49    ARTICLE III    PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
   Section 3.01  

Repayment of Loans

     50    Section 3.02  

Interest

     50    Section 3.03  

Alternate Rate of Interest

     51    Section 3.04  

Prepayments

     52    Section 3.05  

Fees

     54    ARTICLE IV    PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS   
Section 4.01  

Payments Generally; Pro Rata Treatment; Sharing of Set-offs

     55    Section 4.02  

Presumption of Payment by the Borrower

     56    Section 4.03  

Certain Deductions by the Administrative Agent

     56    Section 4.04  

Disposition of Proceeds

     56    ARTICLE V    INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES;
ILLEGALITY    Section 5.01  

Increased Costs

     57    Section 5.02  

Break Funding Payments

     58    Section 5.03  

Taxes

     59    Section 5.04    

Mitigation Obligations; Replacement of Lenders

     62   

 

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Section 5.05  

Illegality

     63    Section 5.06  

Availability of LIBOR Market Index Loans

     63    ARTICLE VI    CONDITIONS PRECEDENT    Section 6.01  

Effective Date

     63    Section 6.02  

Each Credit Event

     67    ARTICLE VII    REPRESENTATIONS AND WARRANTIES    Section 7.01  

Organization; Powers

     68    Section 7.02  

Authority; Enforceability

     68    Section 7.03  

Approvals; No Conflicts

     69    Section 7.04  

Financial Condition; No Material Adverse Change

     69    Section 7.05  

Litigation

     70    Section 7.06  

Environmental Matters

     70    Section 7.07  

Compliance with the Laws and Agreements; No Defaults or Borrowing Base
Deficiency

     71    Section 7.08  

Investment Company Act

     71    Section 7.09  

Taxes

     71    Section 7.10  

ERISA

     72    Section 7.11  

Disclosure; No Material Misstatements

     72    Section 7.12  

Insurance

     73    Section 7.13  

Restriction on Liens

     73    Section 7.14  

Subsidiaries

     73    Section 7.15  

Location of Business and Offices

     73    Section 7.16  

Properties; Titles, Etc.

     74    Section 7.17  

Maintenance of Properties

     75    Section 7.18  

Gas Imbalances, Prepayments

     75    Section 7.19  

Marketing of Production

     75    Section 7.20  

Swap Agreements and Qualified ECP Guarantor

     75    Section 7.21  

Use of Loans and Letters of Credit

     76    Section 7.22  

Solvency

     76    Section 7.23  

Foreign Corrupt Practices

     76    Section 7.24  

OFAC

     77    ARTICLE VIII    AFFIRMATIVE COVENANTS    Section 8.01  

Financial Statements; Other Information

     77    Section 8.02  

Notices of Material Events

     80    Section 8.03  

Existence; Conduct of Business

     81    Section 8.04  

Payment of Obligations

     81    Section 8.05  

Performance of Obligations under Loan Documents

     81    Section 8.06  

Operation and Maintenance of Properties

     81    Section 8.07  

Insurance

     82    Section 8.08  

Books and Records; Inspection Rights

     82    Section 8.09  

Compliance with Laws

     83   

 

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Section 8.10  

Environmental Matters

     83    Section 8.11  

Further Assurances

     84    Section 8.12  

Reserve Reports

     84    Section 8.13  

Title Information

     85    Section 8.14  

Additional Collateral; Additional Guarantors

     86    Section 8.15  

ERISA Compliance

     88    Section 8.16  

Commodity Price Risk Management Policy

     88    Section 8.17  

Unrestricted Subsidiaries

     89    Section 8.18  

Post-Closing Covenant

     89    Section 8.19  

Commodity Exchange Act Keepwell Provisions

     89    ARTICLE IX    NEGATIVE COVENANTS    Section 9.01  

Financial Covenants

     90    Section 9.02  

Debt

     90    Section 9.03  

Liens

     91    Section 9.04  

Dividends and Distributions; Repayment of Certain Debt; Amendments to Certain
Debt Documents

     91    Section 9.05  

Investments and Loans

     93    Section 9.06  

Nature of Business; No International Operations

     94    Section 9.07  

Limitation on Leases

     94    Section 9.08  

Proceeds of Notes

     94    Section 9.09  

ERISA Compliance

     94    Section 9.10  

Sale or Discount of Receivables

     95    Section 9.11  

Mergers, Etc.

     96    Section 9.12  

Sale of Properties

     96    Section 9.13  

Environmental Matters

     97    Section 9.14  

Transactions with Affiliates

     97    Section 9.15  

Subsidiaries

     98    Section 9.16  

Negative Pledge Agreements; Dividend Restrictions

     98    Section 9.17  

Gas Imbalances, Take-or-Pay or Other Prepayments

     98    Section 9.18  

Swap Agreements

     98    Section 9.19  

Amendments to Certain Documents

     100    Section 9.20  

Marketing Activities

     100    Section 9.21  

Sale and Leaseback

     100    Section 9.22  

Amendments to Organizational Documents; Changes in Fiscal Year End

     100    Section 9.23  

Non-Eligible Contract Participants

     101    Section 9.24  

Designation and Conversion of Restricted and Unrestricted Subsidiaries

     101    Section 9.25  

Sanctions

     101    ARTICLE X    EVENTS OF DEFAULT; REMEDIES    Section 10.01  

Events of Default

     102    Section 10.02  

Remedies

     104   

 

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ARTICLE XI    THE AGENTS    Section 11.01  

Appointment and Authority

     105    Section 11.02  

Rights as a Lender

     106    Section 11.03  

Exculpatory Provisions

     106    Section 11.04  

Reliance by Administrative Agent

     107    Section 11.05  

Delegation of Duties

     107    Section 11.06  

Resignation of Administrative Agent

     108    Section 11.07  

Non-Reliance on Administrative Agent and Other Lenders

     109    Section 11.08  

No Other Duties, Etc.

     109    Section 11.09  

Administrative Agent May File Proofs of Claim; Credit Bidding

     109    Section 11.10  

Collateral and Guaranty Matters

     111    Section 11.11  

Secured Bank Products Agreements and Secured Swap Agreements

     111    Section 11.12  

Action by Administrative Agent

     112    Section 11.13  

Intercreditor Agreements

     112    ARTICLE XII    MISCELLANEOUS    Section 12.01  

Notices

     113    Section 12.02  

Waivers; Amendments

     115    Section 12.03  

Expenses, Indemnity; Damage Waiver

     116    Section 12.04  

Successors and Assigns

     119    Section 12.05  

Survival; Revival; Reinstatement

     122    Section 12.06  

Counterparts; Integration; Effectiveness

     123    Section 12.07  

Severability

     123    Section 12.08  

Right of Setoff

     124    Section 12.09  

GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS

     124    Section 12.10  

Headings

     125    Section 12.11  

Confidentiality

     125    Section 12.12  

Interest Rate Limitation

     126    Section 12.13  

EXCULPATION PROVISIONS

     127    Section 12.14  

No Third Party Beneficiaries

     127    Section 12.15  

USA Patriot Act Notice

     127    Section 12.16  

No Advisory or Fiduciary Responsibility

     128    Section 12.17  

Electronic Execution of Assignments and Certain Other Documents

     128   

 

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ANNEXES, EXHIBITS AND SCHEDULES

 

Annex I   —   List of Maximum Credit Amounts and Elected Commitments Exhibit A  
—   Form of Note Exhibit B   —   Form of Borrowing Request Notice Exhibit C   —
  Form of Interest Election Request Notice Exhibit D   —   Form of Compliance
Certificate Exhibit E-1   —   Security Instruments as of the Effective Date
Exhibit E-2   —   Form of Guaranty Agreement Exhibit E-3   —   Form of Initial
Security Agreement Exhibit E-4   —   Form of Amended and Restated Security
Agreement Exhibit F   —   Form of Assignment and Assumption Exhibit G-1   —  
Form of U.S. Tax Compliance Certificate (Foreign Lenders; not partnerships)
Exhibit G-2   —   Form of U.S. Tax Compliance Certificate (Foreign Participants;
not partnerships) Exhibit G-3   —   Form of U.S. Tax Compliance Certificate
(Foreign Participants; partnerships) Exhibit G-4   —   Form of U.S. Tax
Compliance Certificate (Foreign Lenders; partnerships) Exhibit H   —   Form of
Elected Commitment Increase Certificate Exhibit I   —   Form of Additional
Lender Certificate Schedule 6.01   —   Summary of Effective Date Transactions
Schedule 7.05   —   Litigation Schedule 7.06   —   Environmental Matters
Schedule 7.14   —   Loan Parties and Subsidiaries Schedule 7.18   —   Gas
Imbalances Schedule 7.19   —   Marketing Contracts Schedule 7.20   —   Swap
Agreements Schedule 9.05   —   Existing Investments Schedule 9.14   —  
Affiliate Transactions

 

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THIS CREDIT AGREEMENT dated as of June 18, 2014, is among: Memorial Resource
Development Corp., a corporation duly formed and existing under the laws of the
State of Delaware (the “Borrower”); each of the Lenders from time to time party
hereto; Bank of America, N.A. (in its individual capacity, “BAML”), as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Administrative Agent”); Citibank, N.A., as
syndication agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Syndication Agent”); and JPMorgan Chase Bank,
N.A., BMO Harris Bank, N.A., Comerica Bank, Credit Agricole Corporate and
Investment Bank, Natixis, Union Bank, N.A., and Wells Fargo Bank, National
Association, as co-documentation agents for the Lenders (collectively, in such
capacity, together with their respective successors in such capacity, the
“Documentation Agents”).

R E C I T A L S

A. The Borrower has requested that the Lenders provide certain loans to and
extensions of credit on behalf of the Borrower.

B. The Lenders have agreed to make such loans and extensions of credit subject
to the terms and conditions of this Agreement.

C. In consideration of the mutual covenants and agreements herein contained and
of the loans, extensions of credit and commitments hereinafter referred to, the
parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

Section 1.01 Terms Defined Above. As used in this Agreement, each term defined
above has the meaning indicated above.

Section 1.02 Certain Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, means that such Loan is,
or the Loans comprising such Borrowing are, bearing interest at a rate
determined by reference to the Alternate Base Rate.

“Acquisition” means one or more acquisitions by Loan Parties of certain oil, gas
and mineral Properties.

“Act” has the meaning assigned such term in Section 12.15.

“Additional Lender” has the meaning assigned to such term in Section 2.06(c)(i).

“Additional Lender Certificate” has the meaning assigned to such term in Section
2.06(c)(ii)(G).

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“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100 of 1%) equal to the LIBO Rate for such Interest Period multiplied
by the Statutory Reserve Rate.

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

“Affected Loans” has the meaning assigned such term in Section 5.05.

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified. “Affiliated”
shall have the correlative meaning thereto.

“Affiliated Acquisition” means any Acquisition pursuant to which a Loan Party
will directly or indirectly acquire Oil and Gas Properties from an Affiliate of
the Borrower (other than a Loan Party).

“Agency Fee Letter” means, collectively, that certain fee letter agreement dated
as of April 15, 2014 among BAML, Arranger and the Borrower, as the same may from
time to time be amended, modified, supplemented or restated, and any another
letter agreement regarding fees entered into from time to time between or among
the Borrower, the Arranger, any Agent and/or any Lenders.

“Agents” means, collectively, the Administrative Agent, the Syndication Agent
and the Documentation Agents; and “Agent” shall mean either the Administrative
Agent, the Syndication Agent or any Documentation Agent, as the context
requires.

“Aggregate Elected Commitment Amount” at any time shall equal the sum of the
Elected Commitments, as the same may be increased, reduced or terminated
pursuant to Section 2.06(b) or Section 2.06(c). As of the Effective Date, the
Aggregate Elected Commitment Amount is $725,000,000.

“Aggregate Maximum Credit Amount” at any time shall equal the sum of the Maximum
Credit Amounts, as the same may be reduced or terminated pursuant to
Section 2.06. As of the Effective Date, the Aggregate Maximum Credit Amount is
$2,000,000,000.

“Agreement” means this Credit Agreement, as the same may from time to time be
amended, modified, supplemented or restated.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus  1⁄2 of 1% and (c) the Adjusted LIBO Rate for a
one month Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1%; provided that, solely for purposes
of determining the Alternate Base Rate, the Adjusted LIBO Rate for any day shall
be based on the rate (rounded upwards, if necessary, to the next 1/100 of 1%) at
which dollar deposits of $5,000,000 with a one month maturity are offered by the
principal London office of the Administrative Agent in immediately available
funds to major banks in the London interbank market at approximately 11:00 a.m.,
London time, on such day (or the immediately

 

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preceding Business Day if such day is not a day on which banks are open for
dealings in dollar deposits in the London interbank market). Any change in the
Alternate Base Rate due to a change in the Prime Rate, the Federal Funds
Effective Rate or the Adjusted LIBO Rate shall be effective from and including
the effective date of such change in the Prime Rate, the Federal Funds Effective
Rate or the Adjusted LIBO Rate, respectively.

“Amended and Restated Security Agreement” means an Amended and Restated Pledge
and Security Agreement among the Borrower, the Guarantors and the Administrative
Agent in substantially the form of Exhibit E-4 (or otherwise in form and
substance reasonably acceptable to the Administrative Agent) granting Liens and
a security interest on the Borrower’s and Guarantors’ personal property
constituting Collateral (as defined therein and including, without limitation,
Equity Interests in Restricted Subsidiaries) in favor of the Administrative
Agent for the benefit of the Secured Parties to secure the Indebtedness, as the
same may be further amended, modified, supplemented or restated from time to
time.

“Applicable Margin” means, for any day, with respect to any ABR Loan, LIBOR
Market Index Loan or Eurodollar Loan, or with respect to the Commitment Fee
Rate, as the case may be, the rate per annum set forth in the Total Commitments
Utilization Grid below based upon the Total Commitments Utilization Percentage
then in effect:

 

Total Commitments Utilization Grid

 

Total Commitments Utilization Percentage

     <25 %      ³25% <50 %      ³50% <75 %      ³75% <90 %      ³90 % 

Eurodollar Loans

     1.500 %      1.750 %      2.000 %      2.250 %      2.500 % 

LIBOR Market Index Loans

     1.500 %      1.750 %      2.000 %      2.250 %      2.500 % 

ABR Loans

     0.500 %      0.750 %      1.000 %      1.250 %      1.500 % 

Commitment Fee Rate

     0.375 %      0.375 %      0.375 %      0.500 %      0.500 % 

Each change in the Applicable Margin shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change; provided that if at any time the
Borrower fails to deliver a Reserve Report pursuant to Section 8.12 and such
failure continues for more than 10 Business Days from the date when such Reserve
Report is due, then the “Applicable Margin” means the rate per annum set forth
on the grid when the Total Commitments Utilization Percentage is at its highest
level until such Reserve Report is delivered.

“Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Elected Commitment Amount represented by such Lender’s Elected
Commitment as such percentage is set forth on Annex I; provided that in the case
of Section 2.09 when a Defaulting Lender shall exist, “Applicable Percentage” as
used in such Section 2.09 shall mean the percentage of the Aggregate Elected
Commitment Amount (disregarding any Defaulting Lender’s Elected Commitment)
represented by such Lender’s Elected Commitment.

 

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“Appointed Directors” means members of the board of directors of the Borrower
(a) that were appointed or nominated by any NGP Party, (b) whose election or
nomination to such board was approved by individuals referred to in clause
(a) above constituting at the time of such election or nomination at least a
majority of such board, or (c) whose election or nomination to such board was
approved by individuals referred to in clauses (a) and (b) above constituting at
the time of such election or nomination at least a majority of that board.

“Approved Counterparty” means (i) any Lender or any Affiliate of a Lender or
(ii) any other Person whose long term senior unsecured debt rating is BBB+/Baa1
by S&P or Moody’s (or their equivalent) or higher.

“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

“Approved Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc.,
(b) Ryder Scott Company Petroleum Consultants, L.P., (c) W.D. Von Gonten & Co.
Petroleum Engineering, (d) Cawley, Gillespie & Associates, Inc., (e) Miller and
Lents, Ltd., and (f) any other independent petroleum engineers reasonably
acceptable to the Administrative Agent.

“Arranger” means Merrill Lynch, Pierce, Fenner & Smith Incorporated, in its
capacity as the sole lead arranger and sole bookrunner hereunder.

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 12.04(b)), and accepted by the Administrative Agent, in the form of
Exhibit F or any other form (including electronic documentation generated by use
of an electronic platform or electronic transmission system) approved by the
Administrative Agent.

“Availability” means, at any time, (a) the then effective total Commitments
minus (b) the total Revolving Credit Exposures.

“Availability Period” means the period from and including the Effective Date to
but excluding the Termination Date.

“Bank Products” means any of the following bank or cash management services:
(a) commercial credit or debit cards, (b) stored value cards, and (c) treasury
management services (including, without limitation, controlled disbursement,
automated clearinghouse transactions, electronic funds transfer, return items,
overdrafts and interstate depository network services) and other cash management
arrangements.

“Bank Products Provider” means any Lender or Affiliate of a Lender that provides
Bank Products to the Borrower or any Guarantor; in its capacity as a provider of
such Bank Products.

 

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“Benefitting Guarantor” means a Guarantor for which funds or other support are
required for such Guarantor to constitute an Eligible Contract Participant.

“Black Diamond” means Black Diamond Minerals, LLC, a Delaware limited liability
company.

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America or any successor Governmental Authority.

“Borrower IPO” means the initial public offering of Equity Interests of the
Borrower on NASDAQ.

“Borrower Materials” has the meaning assigned such term in Section 12.01(d).

“Borrowing” means Loans of the same Type, made, converted or continued on the
same date and, in the case of Eurodollar Loans, as to which a single Interest
Period is in effect.

“Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time
pursuant to Section 8.13(c).

“Borrowing Base Deficiency” occurs if at any time the total Revolving Credit
Exposures exceeds the Borrowing Base then in effect. For the sole purpose of
determining whether a Borrowing Base Deficiency exists at a particular time, the
amount of Revolving Credit Exposures at such time shall be reduced on a dollar
for dollar basis by the amount of cash collateral held at such time by the
Administrative Agent on behalf of the Lenders as provided in Section 2.08(j),
solely to the extent such cash collateral was deposited pursuant to Section
3.04(c).

“Borrowing Base Value” means, with respect to any Oil and Gas Property of the
Borrower or a Guarantor, or any Swap Agreement in respect of commodities, the
value the Administrative Agent attributed to such asset in connection with the
most recent determination of the Borrowing Base (which Borrowing Base was
approved by the requisite Lenders in accordance with Section 2.07).

“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03.

“Borrowing Request Notice” means a notice of Borrowing Request, which shall be
substantially in the form of Exhibit B (or such other form as may be approved by
the Administrative Agent including any form on an electronic platform or
electronic transmission system as shall be approved by the Administrative
Agent), appropriately completed and signed by a Responsible Officer of the
Borrower.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City or Houston, Texas are authorized or
required by law to remain closed; and if such day relates to a Borrowing or
continuation of, a payment or prepayment of principal of or interest on, or a
conversion of or into, or the Interest Period for, a

 

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Eurodollar Loan or a notice by the Borrower with respect to any such Borrowing
or continuation, payment, prepayment, conversion or Interest Period, any day
which is also a day on which banks are open for dealings in dollar deposits in
the London interbank market.

“Capital Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, recorded as capital leases
on the balance sheet of the Person liable for the payment of rent thereunder.

“Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of any other Loan
Party having a fair market value in excess of $25,000,000.

“Change in Control” means the occurrence of any of the following:

(a) the acquisition of ownership, directly or indirectly, beneficially or of
record, by any Person or group (within the meaning of the Securities Exchange
Act of 1934 and the rules of the SEC thereunder as in effect on the date
hereof), other than any NGP Party, of Equity Interests representing more than
35% of the aggregate ordinary voting power represented by the issued and
outstanding Equity Interests of the Borrower;

(b) the members of the board of directors of the Borrower that are not Appointed
Directors shall constitute a majority of the board of directors of the Borrower;
or

(c) the Borrower or a Guarantor ceases to own 100% of the Equity Interests of
each Restricted Subsidiary.

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or,
for purposes of Section 5.01(b)), by any Lending Office of such Lender or by
such Lender’s or the Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement; provided
that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall
Street Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder or issued in connection therewith and (ii) all requests,
rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States regulatory authorities, in each case
pursuant to Basel III, shall in each case be deemed to be a “Change in Law,”
regardless of the date enacted, adopted or issued.

“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute.

“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans and to acquire participations in Letters of Credit hereunder,
expressed as an amount representing the maximum aggregate amount of such
Lender’s Revolving Credit Exposure

 

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hereunder, as such commitment may be (a) modified from time to time pursuant to
Section 2.06 and (b) modified from time to time pursuant to assignments by or to
such Lender pursuant to Section 12.04(b). The amount representing each Lender’s
Commitment shall at any time be the least of (i) such Lender’s Maximum Credit
Amount, (ii) such Lender’s Applicable Percentage of the then effective Borrowing
Base and (iii) such Lender’s Elected Commitment.

“Commitment Fee Rate” has the meaning set forth in the definition of “Applicable
Margin”.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended from time to time, and any successor statute, and any
regulations promulgated thereunder.

“Consolidated EBITDAX” means, with respect to the Borrower and the Consolidated
Restricted Subsidiaries, for any period, Consolidated Net Income for such period
plus, without duplication and to the extent reflected as a charge in the
statement of such Consolidated Net Income for such period, the sum of
(a) interest expense (including realized and unrealized losses on interest rate
derivative contracts); (b) income tax expense; (c) depreciation, depletion and
amortization expense; (d) impairment of goodwill and long-lived assets
(including Oil and Gas Properties); (e) accretion of asset retirement
obligations; (f) unrealized losses on commodity derivative contracts;
(g) realized losses upon the early termination or other monetization of
commodity derivative contracts; (h) losses on sale of assets; (i) noncash
unit-based compensation expenses; (j) exploration costs; and (k) fees and
expenses expensed and paid in cash in connection with any registered offering of
Equity Interests in the Borrower, including the Borrower IPO; minus, without
duplication and to the extent included in the statement of such Consolidated Net
Income for such period, the sum of interest income (including realized and
unrealized gains on interest rate derivative contracts); income tax benefit;
unrealized gains on commodity derivative contracts; realized gains upon the
early termination or other monetization of commodity derivative contracts; and
gains on sales of assets. For the purposes of calculating Consolidated EBITDAX
for any Rolling Period in connection with any determination of the financial
ratio contained in Section 9.01(a), if during such Rolling Period, the Borrower
or any Consolidated Restricted Subsidiary shall have made a Material Disposition
or Material Acquisition, the Consolidated EBITDAX for such Rolling Period shall
be calculated after giving pro forma effect thereto as if such Material
Disposition or Material Acquisition, as applicable, occurred on the first day of
such Rolling Period.

“Consolidated Net Income” means, with respect to the Borrower and the
Consolidated Restricted Subsidiaries, for any period, the aggregate of the net
income (or loss) of the Borrower and the Consolidated Restricted Subsidiaries
after allowances for taxes for such period determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded from such net income
(to the extent otherwise included therein) the following: (a) the net income of
any Person in which the Borrower or any Consolidated Restricted Subsidiary has
an interest (which interest does not cause the net income of such other Person
to be consolidated with the net income of the Borrower and the Consolidated
Restricted Subsidiaries in accordance with GAAP), except to the extent of the
amount of dividends or distributions actually paid in cash during such period by
such other Person to the Borrower or to a Consolidated Restricted Subsidiary, as
the case may be; (b) the net income (but not loss) during such period of any

 

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Consolidated Restricted Subsidiary to the extent that the declaration or payment
of dividends or similar distributions or transfers or loans by that Consolidated
Restricted Subsidiary is not at the time permitted by operation of the terms of
its charter or any agreement, instrument or Governmental Requirement applicable
to such Consolidated Restricted Subsidiary or is otherwise restricted or
prohibited, in each case determined in accordance with GAAP; (c) the net income
(or loss) of any Person acquired in a pooling-of-interests transaction for any
period prior to the date of such transaction; (d) any extraordinary gains or
losses during such period; and (e) any gains or losses attributable to writeups
or writedowns of assets, including ceiling test writedowns.

“Consolidated Net Interest Expense” means, with respect to the Borrower and the
Consolidated Restricted Subsidiaries, for any period, the difference between
(a) the sum of (i) all interest, premium payments, debt discount, fees, charges
and related expenses of the Borrower and the Consolidated Restricted
Subsidiaries in connection with borrowed money (including capitalized interest)
or in connection with the deferred purchase price of assets, in each case to the
extent treated as interest in accordance with GAAP, and (ii) the portion of rent
expense of the Borrower and the Consolidated Restricted Subsidiaries with
respect to such period under Capital Leases that is treated as interest in
accordance with GAAP and (b) the sum of (i) interest income actually received in
cash by the Borrower and the Consolidated Restricted Subsidiaries and (ii) net
amounts of realized cash on interest rate Swap Agreements, in the case of
(a) and (b), for such period.

“Consolidated Restricted Subsidiaries” means Restricted Subsidiaries (other than
MEMP GP) that are Consolidated Subsidiaries.

“Consolidated Subsidiaries” means each Subsidiary of the Borrower (whether now
existing or hereafter created or acquired) the financial statements of which
shall be (or should have been) consolidated with the financial statements of the
Borrower in accordance with GAAP.

“Consolidated Unrestricted Subsidiaries” means (a) MEMP GP or (b) MEMP and any
other Unrestricted Subsidiaries that are Consolidated Subsidiaries.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to “control” such other Person. “Controlling” and
“Controlled” have meanings correlative thereto.

“Debt” means, for any Person, the sum of the following (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of

 

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such Person to pay the deferred purchase price of Property or services; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) a Lien on any Property of such
Person, whether or not such Debt is assumed by such Person; (g) all Debt (as
defined in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt (howsoever such assurance shall be made) to the extent of the lesser of the
amount of such Debt and the maximum stated amount of such guarantee or assurance
against loss; (h) all obligations or undertakings of such Person to maintain or
cause to be maintained the financial position or covenants of others and, to the
extent entered into as a means of providing credit support for the obligations
of others and not primarily to enable such Person to acquire any such Property,
all obligations or undertakings of such Person to purchase the Debt or Property
of others; (i) obligations to deliver commodities, goods or services, including,
without limitation, Hydrocarbons, in consideration of one or more advance
payments, other than gas balancing arrangements in the ordinary course of
business; (j) obligations to pay for goods or services even if such goods or
services are not actually received or utilized by such Person; (k) any Debt (as
defined in the other clauses of this definition) of a partnership for which such
Person is liable either by agreement, by operation of law or by a Governmental
Requirement but only to the extent of such liability; (l) Disqualified Capital
Stock; and (m) the undischarged balance of any production payment created by
such Person or for the creation of which such Person directly or indirectly
received payment. The Debt of any Person shall include all obligations of such
Person of the character described above to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
not included as a liability of such Person under GAAP. Notwithstanding anything
to the contrary, neither direct nor indirect obligations of a Person in respect
of Swap Agreements shall constitute Debt.

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief laws of the United States or other applicable
jurisdictions from time to time in effect.

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

“Defaulting Lender” means any Lender that (a) has failed, within two Business
Days of the date required to be funded or paid, to (i) fund any portion of its
Loans, (ii) fund any portion of its participations in Letters of Credit or
(iii) pay over to any Loan Party any other amount required to be paid by it
hereunder; (b) has notified the Borrower or any Loan Party in writing, or has
made a public statement, to the effect that it does not intend or expect to
comply with any of its funding obligations under this Agreement or generally
under other agreements in which it commits to extend credit; (c) has failed,
within three Business Days after request by the Administrative Agent or a Loan
Party, acting in good faith, to provide a certification in writing from an
authorized officer of such Lender that it will comply with its obligations to
fund prospective Loans and participations in then outstanding Letters of Credit
under this Agreement; provided that such Lender shall cease to be a Defaulting
Lender pursuant to this clause (c) upon such Loan Party’s receipt of such
certification in form and substance satisfactory to it and the Administrative
Agent; or (d) has (or whose bank holding company has) been placed into

 

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receivership, conservatorship or bankruptcy; provided that a Lender shall not
become a Defaulting Lender solely as a result of the acquisition or maintenance
of an ownership interest in such Lender or Person controlling such Lender or the
exercise of control over a Lender or Person controlling such Lender by a
Governmental Authority or an instrumentality thereof (including the appointment
of an administrator, provisional liquidator, conservator, receiver, trustee,
custodian or other similar official by a supervisory authority or regulator with
respect to a Lender (or a bank holding company of a lender) under the Dutch
Financial Supervision Act 2007 (as amended from time to time and including any
successor legislation)), so long as such ownership interest does not result in
or provide such Lender with immunity from the jurisdiction of courts within the
United States or from the enforcement of judgments or writs of attachment on its
assets or permit such Lender (or such Governmental Authority) to reject,
repudiate, disavow or disaffirm any contracts or agreements made with such
Lender.

“Designated Jurisdiction” means any country or territory that is, or whose
Governmental Authorities are, the subject of any Sanction.

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Maturity Date and (b) the date on which there are no Loans, LC
Exposure or other obligations hereunder outstanding and all of the Commitments
are terminated.

“dollars” or “$” refers to lawful money of the United States of America.

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of
the United States of America or any State thereof or the District of Columbia.

“Effective Date” means the date on which the conditions specified in
Section 6.01 are satisfied (or waived in accordance with Section 12.02).

“Elected Commitment” means, as to each Lender, the amount set forth opposite
such Lender’s name on Annex I under the caption “Elected Commitment”, as the
same may be increased, reduced or terminated from time to time in connection
with an increase, reduction or termination of the Aggregate Elected Commitment
Amount pursuant to Section 2.06(b) or Section 2.06(c).

“Elected Commitment Increase Certificate” has the meaning assigned to such term
in Section 2.06(c)(ii)(F).

“Eligible Contract Participant” means an “eligible contract participant” as
defined in the Commodity Exchange Act.

 

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“Emissions Credits” means any emissions reductions credits or offsets issued,
sanctioned or required by a Governmental Authority with respect to various
pollutants, emissions or any other environmental attributes of any nature,
including, without limitation, nitrogen oxides, carbon dioxide, sulfur oxides,
volatile organic compounds, carbon monoxide, particulate matter and reactive
organic gases.

“Engineering Reports” has the meaning assigned such term in Section 2.07(c)(i).

“Environmental Laws” means any and all Governmental Requirements pertaining in
any way to health, safety, the environment or the preservation or reclamation of
natural resources or the management, Release or threatened Release of any
Hazardous Materials, in effect in any and all jurisdictions in which the
Borrower or any of the other Loan Parties is conducting or at any time has
conducted business, or where any Property of the Borrower or any of the other
Loan Parties is located, including, without limitation, the Oil Pollution Act of
1990, as amended (“OPA”), the Clean Air Act, as amended, the Comprehensive
Environmental, Response, Compensation, and Liability Act of 1980, as amended
(“CERCLA”), the Federal Water Pollution Control Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976, as amended (“RCRA”), the Safe Drinking
Water Act, as amended, the Toxic Substances Control Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous
Materials Transportation Act, as amended, and other environmental conservation
or protection Governmental Requirements.

“Environmental Permit” means any permit, registration, license, notice,
approval, consent, exemption, variance, or other authorization required under or
issued pursuant to applicable Environmental Laws.

“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute.

“ERISA Affiliate” means each trade or business (whether or not incorporated)
which together with the Borrower or any other Loan Party would be deemed to be a
“single employer” within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.

“ERISA Event” means (a) a “Reportable Event” described in section 4043 of ERISA
and the regulations issued thereunder, (b) the withdrawal of the Borrower, any
other Loan Party or any ERISA Affiliate from a Plan during a plan year in which
it was a “substantial employer” as defined in section 4001(a)(2) of ERISA,
(c) the filing of a notice of intent to terminate a Plan or the treatment of a
Plan amendment as a termination under section 4041 of ERISA, (d) the institution
of proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of
withdrawal liability pursuant to Section 4202 of ERISA or (f) any other event or
condition which constitutes grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.

 

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“Eurodollar”, when used in reference to any Loan or Borrowing, means that such
Loan is, or the Loans comprising such Borrowing are, bearing interest at a rate
determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned such term in Section 10.01.

“Excepted Liens” means: (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’,
workers’, materialmen’s, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties each of which
is in respect of obligations that are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (d) contractual Liens which arise
in the ordinary course of business under operating agreements, joint venture
agreements, oil and gas partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, transportation or exchange
of oil and natural gas, unitization and pooling declarations and agreements,
area of mutual interest agreements, overriding royalty agreements, marketing
agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP;
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any of the other Loan Parties or
materially impair the value of such Property subject thereto; (e) Liens arising
solely by virtue of any statutory or common law provision relating to banker’s
liens, rights of set-off or similar rights and remedies and burdening only
deposit accounts or other funds maintained with a creditor depository
institution; provided that no such deposit account is a dedicated cash
collateral account or is subject to restrictions against access by the depositor
in excess of those set forth by regulations promulgated by the Board and no such
deposit account is intended by the Borrower or any of the other Loan Parties to
provide collateral to the depository institution; (f) Immaterial Title
Deficiencies and easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any Property of the Borrower or any of
the other Loan Parties for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines and other means of ingress and egress
for the removal of gas, oil, coal or other minerals or timber, and other like
purposes, or for the joint or common use of real estate, rights of way,
facilities and equipment, that do not secure any monetary obligations and which
in the aggregate

 

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do not materially impair the use of such Property for the purposes of which such
Property is held by the Borrower or any of the other Loan Parties or materially
impair the value of such Property subject thereto; (g) Liens on cash or
securities pledged to secure performance of tenders, surety and appeal bonds,
government contracts, performance and return of money bonds, bids, trade
contracts, leases, statutory obligations, regulatory obligations and other
obligations of a like nature incurred in the ordinary course of business,
(h) Liens in favor of the depository bank arising under documentation governing
deposit accounts or in any Control Agreement (as defined in the Initial Security
Agreement or Amended and Restated Security Agreement, as applicable) which Liens
secure the payment of returned items, settlement item amounts, bank fees, or
similar items or fees, and (i) judgment and attachment Liens not giving rise to
an Event of Default; provided that any appropriate legal proceedings which may
have been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceeding may be initiated
shall not have expired and no action to enforce such Lien has been commenced;
provided further that (i) Liens described in clauses (a) through (e) shall
remain “Excepted Liens” only for so long as no action to enforce such Lien has
been commenced and no intention to subordinate the first priority Lien granted
in favor of the Administrative Agent and the Lenders is to be hereby implied or
expressed by the permitted existence of such Excepted Liens and (ii) the term
“Excepted Liens” shall not include any Lien securing Debt for borrowed money
other than the Indebtedness.

“Excluded Swap Obligation” means, with respect to any Loan Party individually
determined on a Loan Party by Loan Party basis, any Indebtedness or other
obligation in respect of any Swap Agreement if, and solely to the extent that,
all or a portion of the guarantee of such Loan Party of, or the grant by such
Loan Party of a security interest to secure, such Indebtedness or other
obligation in respect of such Swap Agreement (or any guarantee thereof) is or
becomes illegal under the Commodity Exchange Act or any rule, regulation or
order of the Commodity Futures Trading Commission (or the application or
official interpretation of any thereof) by virtue of such Loan Party’s failure
for any reason to constitute an Eligible Contract Participant at the time such
guarantee or grant of a security interest is entered into or otherwise becomes
effective with respect to, or any other time such Loan Party is by virtue of
such guarantee or grant of security interest otherwise deemed to enter into,
such Indebtedness or other obligation in respect of such Swap Agreement (or
guarantee thereof). If such an obligation arises under a master agreement
governing more than one swap, such exclusion shall apply only to the portion of
such obligation that is attributable to swaps the guarantee or grant of security
interest for which (or for any guarantee of which) so is or becomes illegal.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
the Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrower or any Guarantor hereunder or under
any other Loan Document, (a) taxes imposed on (or measured by) its net income
and franchise taxes (including the Texas Margin Tax) imposed on it (in lieu of
income taxes), in each case, by the United States of America or such other
jurisdiction under the laws of which such recipient is organized or in which its
principal office is located or, in the case of any Lender, in which its
applicable Lending Office is located, (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other
jurisdiction in which the Borrower or any Guarantor is located, (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 5.04(b)), any withholding tax that is imposed on amounts
payable to such Foreign

 

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Lender at the time such Foreign Lender becomes a party to this Agreement (or
designates a new Lending Office) or is attributable to such Foreign Lender’s
failure to comply with Section 5.03(f), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new Lending Office (or assignment), to receive additional amounts with respect
to such withholding tax pursuant to Section 5.03(a) or Section 5.03(c) and
(d) any United States federal withholding taxes imposed by FATCA.

“FATCA” means Sections 1471 through 1474 of the Code as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof and any agreements entered into
pursuant to Section 1471(b)(1) of the Code.

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.

“Financial Officer” means, for any Person, the chief financial officer,
principal accounting officer, treasurer or controller of such Person. Unless
otherwise specified, all references herein to a Financial Officer means a
Financial Officer of the Borrower.

“Financial Statements” means the financial statement or statements referred to
in Section 7.04(a).

“Flood Insurance Regulations” means (a) the National Flood Insurance Act of 1968
as now or hereafter in effect or any successor statute thereto, (b) the Flood
Disaster Protection Act of 1973 as now or hereafter in effect or any successor
statute thereto, (c) the National Flood Insurance Reform Act of 1994 (amending
42 USC 4001, et seq.), as the same may be amended or recodified from time to
time, and (d) the Flood Insurance Reform Act of 2004 and any regulations
promulgated thereunder.

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“Funds” means, collectively, Natural Gas Partners VIII, L.P., a Delaware limited
partnership, Natural Gas Partners IX, L.P., a Delaware limited partnership, NGP
IX Offshore Holdings, L.P., a Delaware limited partnership, and any other fund,
now or in the future, under common control with, or managed by the same
management company (or its successor) as, any of the foregoing.

 

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“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time subject to the terms and conditions set
forth in Section 1.05.

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

“Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, rules of common law, authorization or other
directive or requirement, whether now or hereinafter in effect, of any
Governmental Authority.

“Guarantors” means all Material Subsidiaries other than MEMP GP and each other
Person that guarantees the Indebtedness pursuant to Section 8.14(b). As of the
Effective Date, the Guarantors are MRD Operating, Beta Operating Company, LLC, a
Delaware limited liability company, Classic Hydrocarbons GP Co., L.L.C., a Texas
limited liability company, Classic Hydrocarbons Holdings, L.P., a Texas limited
partnership, Classic Operating Co. LLC, a Delaware limited liability company,
Classic Hydrocarbons Operating, LLC, a Delaware limited liability company,
Classic Hydrocarbons, Inc., a Delaware corporation, Craton Energy GP III, LLC, a
Texas limited liability company, Craton Energy Holdings III, LP, a Texas limited
partnership, WildHorse and Memorial Resource Finance Corp., a Delaware
corporation.

“Guaranty Agreement” means the Guaranty Agreement executed by the Guarantors in
substantially the form of Exhibit E-2 unconditionally guarantying, on a joint
and several basis, payment of the Indebtedness, as the same may be amended,
modified or supplemented from time to time.

“Hazardous Material” means any substance regulated or as to which liability
might arise under any applicable Environmental Law including: (a) any chemical,
compound, material, product, byproduct, substance or waste defined as or
included in the definition or meaning of “hazardous substance,” “hazardous
material,” “hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous
substance,” “toxic substance,” “contaminant,” “pollutant,” or words of similar
meaning or import found in any applicable Environmental Law; (b) Hydrocarbons,
petroleum products, petroleum substances, natural gas, oil, oil and gas waste,
crude oil, and any components, fractions, or derivatives thereof; and
(c) radioactive materials, explosives, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon, infectious or medical wastes.

“Highest Lawful Rate” means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.

 

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“Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.
Unless otherwise indicated herein, each reference to the term “Hydrocarbon
Interests” shall mean Hydrocarbon Interests of the Loan Parties.

“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined or separated therefrom. Unless otherwise indicated herein, each
reference to the term “Hydrocarbons” shall mean Hydrocarbons of the Loan
Parties.

“Immaterial Title Deficiencies” means minor defects or deficiencies in title
which do not diminish more than 2% of the aggregate value of the Oil and Gas
Properties evaluated in the Reserve Report used in the most recent determination
of the Borrowing Base.

“Increasing Lender” has the meaning assigned such term in Section 2.06(c).

“Indebtedness” means any and all amounts owing or to be owing by the Borrower or
any other Loan Party (whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising): (a) to any Agent, the Issuing Bank or any Lender under any
Loan Document including, without limitation, all interest on any of the Loans
(including any interest that accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of any Loan Party (or could accrue but for the operation of
applicable Debtor Relief Laws), whether or not such interest is allowed or
allowable as a claim in any such case, proceeding or other action); (b) to any
Secured Swap Provider under any Swap Agreement including any Swap Agreement in
existence prior to the date hereof, but excluding any additional transactions or
confirmations entered into (i) in the case of a Secured Swap Provider of the
type described in clauses (a) or (b) of the definition thereof, after such
Secured Swap Provider ceases to be a Lender or an Affiliate of a Lender (unless
such Person becomes a Secured Swap Provider of the type described in clause
(c) of the definition thereof at the time it ceased to be a Secured Swap
Provider of the type described in clauses (a) or (b) of the definition thereof),
or (ii) after assignment by a Secured Swap Provider to a Person who is not, at
the time of such assignment, a Secured Swap Provider; (c) to any Bank Products
Provider in respect of Bank Products; and (d) all renewals, extensions and/or
rearrangements of any of the above; provided that solely with respect to any
Guarantor that is not an Eligible Contract Participant, Excluded Swap
Obligations of such Guarantor shall in any event be excluded from “Indebtedness”
owing by such Guarantor.

“Indemnified Parties” means the Administrative Agent, each other Secured Party
and their respective officers, directors, employees, representatives, agents,
attorneys, accountants and experts.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

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“Information” has the meaning assigned such term in Section 12.11.

“Information Memorandum” means the Confidential Information Memorandum dated
April 2014 relating to the Loan Parties and the Transactions.

“Initial Reserve Report” means the Reserve Report with respect to the Borrower’s
and Guarantors’ Oil & Gas Properties prepared by Netherland, Sewell &
Associates, Inc. as of December 31, 2013, upon which the Lenders have relied
upon in the determination of the initial Borrowing Base hereunder.

“Initial Security Agreement” means a Security Agreement among the Borrower, the
Guarantors and the Administrative Agent in substantially the form of Exhibit E-3
(or otherwise in form and substance reasonably acceptable to the Administrative
Agent) granting Liens and a security interest on the Borrower’s and Guarantors’
personal property constituting Collateral (as defined therein, but excluding
Equity Interests in Restricted Subsidiaries) in favor of the Administrative
Agent for the benefit of the Secured Parties to secure the Indebtedness.

“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.04.

“Interest Election Request Notice” means a notice of Interest Election Request,
which shall be substantially in the form of Exhibit C (or such other form as may
be approved by the Administrative Agent including any form on an electronic
platform or electronic transmission system as shall be approved by the
Administrative Agent), appropriately completed and signed by a Responsible
Officer of the Borrower.

“Interest Payment Date” means (a) with respect to any ABR Loan and any LIBOR
Market Index Loan, the last day of each March, June, September and December, and
(b) with respect to any Eurodollar Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a
Eurodollar Borrowing with an Interest Period of more than three months’
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months’ duration after the first day of such Interest Period.

“Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
pertaining to a Eurodollar Borrowing that commences on the last Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period. For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.

“Interim Redetermination” has the meaning assigned such term in Section 2.07(b).

 

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“Interim Redetermination Date” means the date on which a Borrowing Base that has
been redetermined pursuant to an Interim Redetermination becomes effective as
provided in Section 2.07(d).

“Investment” means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person or any agreement to make any such acquisition (including, without
limitation, any “short sale” or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any deposit with, or advance, loan or capital contribution to,
assumption of Debt of, purchase or other acquisition of any other Debt or equity
participation or interest in, or other extension of credit to, any other Person
(including the purchase of Property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such Property to
such Person, but excluding any such advance, loan or extension of credit having
a term not exceeding 90 days representing the purchase price of inventory or
supplies sold by such Person in the ordinary course of business); (c) the
purchase or acquisition (in one or a series of transactions) of Property of
another Person that constitutes a business unit; or (d) the entering into of any
guarantee of, or other contingent obligation (including the deposit of any
Equity Interests to be sold) with respect to, Debt or other liability of any
other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person.

“ISP” means, with respect to any Letter of Credit, the “International Standby
Practices” published by the Institute of International Banking Law & Practice,
Inc. (or such later version thereof as may be in effect at the time of
issuance).

“Issuing Bank” means BAML, in its capacity as the issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section 2.08(i).
The Issuing Bank may, in its discretion, arrange for one or more Letters of
Credit to be issued by Affiliates of the Issuing Bank, in which case the term
“Issuing Bank” shall include any such Affiliate with respect to Letters of
Credit issued by such Affiliate.

“LC Commitment” at any time means $30,000,000.

“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter
of Credit.

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time. The LC Exposure of any Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time. For all purposes of
this Agreement, if on any date of determination a Letter of Credit has expired
by its terms but any amount may still be drawn thereunder by reason of the
operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be
“outstanding” in the amount so remaining available to be drawn.

“Lenders” means the Persons listed on Annex I, any Person that shall have become
a party hereto pursuant to an Assignment and Assumption, and any Person that
shall have become a party hereto as an Additional Lender pursuant to
Section 2.06(c), other than, in each case, any such Person that ceases to be a
party hereto pursuant to an Assignment and Assumption.

 

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“Lending Office” means, as to any Lender, the office or offices of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other
office or offices as a Lender may from time to time notify the Borrower and the
Administrative Agent, which office may include any Affiliate of such Lender or
any domestic or foreign branch of such Lender or such Affiliate. Unless the
context otherwise requires each reference to a Lender shall include its
applicable Lending Office.

“Letter of Credit” means, collectively, any standby letter of credit issued
pursuant to this Agreement.

“Letter of Credit Agreements” means all letter of credit applications and other
agreements (including any amendments, modifications or supplements thereto)
submitted by the Borrower, or entered into by the Borrower, with the Issuing
Bank relating to any Letter of Credit.

“LIBOR Market Index”, when used in reference to any Loan or Borrowing, means
that such Loan is, or the Loans comprising such Borrowing are, bearing interest
at a rate determined by reference to the LIBOR Market Index Rate.

“LIBOR Market Index Rate” means, for any day with respect to any LIBOR Market
Index Loan, a rate per annum equal to the greater of: (a) 0% and (b) the rate
appearing on the applicable Bloomberg screen page (or on any successor or
substitute page of such service, or any successor to or substitute for such
service, providing rate quotations comparable to those currently provided on
such page of such service, as determined by the Administrative Agent from time
to time for purposes of providing quotations of interest rates applicable to
dollar deposits in the London interbank market) at approximately 11:00 a.m.,
London time on such day (or if such day is not a Business Day, then the
immediately preceding Business Day), as the rate for dollar deposits with a
one-month maturity. In the event that such rate is not available at such time
for any reason, then the “LIBOR Market Index Rate” with respect to such LIBOR
Market Index Loan shall be the rate (rounded upwards, if necessary, to the next
1/100 of 1%) at which dollar deposits of an amount comparable to such Loan and
for a one-month maturity are offered by the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m. on such day (or if such day is not a Business
Day, then the immediately preceding Business Day).

“LIBO Rate” means the greater of: (a) 0% and (b) with respect to any Eurodollar
Borrowing for any Interest Period, the rate appearing on the applicable
Bloomberg screen page (or on any successor or substitute page of such service,
or any successor to or substitute for such service, providing rate quotations
comparable to those currently provided on such page of such service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the “LIBO Rate”
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate (rounded

 

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upwards, if necessary, to the next 1/100 of 1%) at which dollar deposits of an
amount comparable to such Eurodollar Borrowing and for a maturity comparable to
such Interest Period are offered by the principal London office of the
Administrative Agent in immediately available funds to major banks in the London
interbank market at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period.

“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a deed of trust, mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes or (b) production payments and the like payable
out of Oil and Gas Properties. The term “Lien” shall include easements,
restrictions, servitudes, permits, conditions, covenants, exceptions or
reservations, in each case, where the effect is to secure an obligation owed to,
or a claim by, a Person other than the owner of the Property. For the purposes
of this Agreement, the Borrower or any other Loan Party shall be deemed to be
the owner of any Property which it has acquired or holds subject to a
conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.

“Liquidate,” “Liquidated” and “Liquidation” when used in reference to any Swap
Agreement or any portion thereof have the correlative meanings to the term “Swap
Liquidation”.

“Loan Documents” means this Agreement, the Notes, the Letter of Credit
Agreements, the Letters of Credit, the Agency Fee Letter, and the Security
Instruments.

“Loan Parties” means the Borrower and each Restricted Subsidiary.

“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.

“Majority Lenders” means, (a) at any time while no Loans or LC Exposure is
outstanding, two or more Lenders having greater than fifty percent (50%) of the
Aggregate Elected Commitment Amount; and (b) at any time while any Loans or LC
Exposure is outstanding, two or more Lenders holding greater than fifty percent
(50%) of the outstanding aggregate principal amount of the Loans and
participation interests in Letters of Credit (without regard to any sale by a
Lender of a participation in any Loan under Section 12.04(c)); provided that the
Elected Commitment and the principal amount of the Loans and participation
interests in Letters of Credit of the Defaulting Lenders (if any) shall be
excluded from the determination of Majority Lenders.

“Material Acquisition” means any acquisition of Property or series of related
acquisitions of Property that involves the payment of consideration by the
Borrower and the Consolidated Restricted Subsidiaries in excess of
(a) $10,000,000 in the aggregate during a fiscal quarter or (b) $6,000,000 for
any single acquisition or series of related acquisitions of Property.

 

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“Material Adverse Effect” means a material adverse change in, or material
adverse effect on (a) the business, operations, Property, or condition
(financial or otherwise) of the Borrower and the other Loan Parties taken as a
whole, (b) the ability of the Borrower individually, or the other Loan Parties,
taken as a whole, to perform any of its or their obligations under any Loan
Document, (c) the validity or enforceability of any Loan Document or (d) the
rights and remedies of or benefits available to the Administrative Agent, any
other Agent, the Issuing Bank or any Lender under any Loan Document.

“Material Disposition” means any disposition of Property or series of related
dispositions of Property that yields gross proceeds to the Borrower or any of
the Consolidated Restricted Subsidiaries in excess of (a) $10,000,000 in the
aggregate during a fiscal quarter or (b) $6,000,000 for any single disposition
or series of related dispositions of Property.

“Material Indebtedness” means Debt (other than the Loans and Letters of Credit),
or obligations in respect of one or more Swap Agreements, of any one or more of
the Borrower and the other Loan Parties in an aggregate principal amount
exceeding $25,000,000. For purposes of determining Material Indebtedness, the
“principal amount” of the obligations of the Borrower or any other Loan Party in
respect of any Swap Agreement at any time shall be the Swap Termination Value.

“Material Subsidiary” means, as of any date, any Domestic Subsidiary that (a) is
a Restricted Subsidiary, (b) is a Wholly-Owned Subsidiary and (c) either
(i) together with its Subsidiaries, owns Property having a fair market value of
$10,000,000 or more, or (ii) otherwise becomes or is required to become a
Guarantor pursuant to Section 8.14.

“Maturity Date” means June 18, 2019.

“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite
such Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the
same may be (a) reduced or terminated from time to time in connection with a
reduction or termination of the Aggregate Maximum Credit Amount pursuant to
Section 2.06(b), (b) modified from time to time pursuant to Section 2.06(c), or
(c) modified from time to time pursuant to any assignment permitted by Section
12.04(b).

“MEMP” means Memorial Production Partners LP, a Delaware limited partnership.

“MEMP GP” means Memorial Production Partners GP LLC, a Delaware limited
liability company.

“MEMP GP Debt” means, with respect to MEMP GP, any Debt of MEMP constituting
Debt of MEMP GP solely pursuant to clause (k) of the definition of “Debt”.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that
is a nationally recognized rating agency.

“Mortgaged Property” means any Property owned by the Borrower or any Guarantor
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.

 

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“MRD LLC” means Memorial Resource Development LLC, a Delaware limited liability
company.

“MRD LLC Contribution” means the contribution by MRD LLC to the Borrower of all
of the Equity Interests owned by MRD LLC in MEMP GP, WildHorse, MRF Corp., MRD
Operating, Black Diamond, Classic Hydrocarbons Holdings, L.P., a Texas limited
partnership, Classic Hydrocarbons GP Co., L.L.C., a Texas limited liability
company, and Beta Operating Company, LLC, a Delaware corporation, in exchange
for Equity Interests in the Borrower pursuant to the MRD LLC Contribution
Agreement.

“MRD LLC Contribution Agreement” means that certain Contribution Agreement among
MRD LLC, MRD Holdco LLC and the Borrower in the form attached as Exhibit 10.13
to Amendment No. 2 to Form S-1 Registration Statement filed with the SEC on
May 27, 2014, as such Contribution Agreement may be amended, restated or
otherwise modified from time to time to the extent permitted under this
Agreement.

“MRD Operating” means MRD Operating LLC, a Delaware limited liability company.

“MRF Corp.” means Memorial Resource Finance Corp., a Delaware corporation.

“Multiemployer Plan” means a Plan which is a multiemployer plan as defined in
section 3(37) or 4001 (a)(3) of ERISA.

“New Borrowing Base Notice” has the meaning assigned such term in Section
2.07(d).

“NGP Group” means the Funds, MRD Holdco LLC so long as it is Controlled by the
Funds, Affiliates of any of the Funds or MRD Holdco LLC (other than the
Borrower) and all NGP Portfolio Companies.

“NGP Party” means any member of the NGP Group.

“NGP Portfolio Companies” means, collectively, entities (existing and future)
that participate in the energy industry and are Controlled by an NGP Party
(other than the Borrower).

“Notes” means the promissory notes of the Borrower described in Section 2.02(d)
and being substantially in the form of Exhibit A, together with all amendments,
modifications, replacements, extensions and rearrangements thereof.

“OFAC” means the Office of Foreign Assets Control of the United States
Department of Treasury.

“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, communitization, pooling agreements and
declarations of pooled units and the units created thereby (including, without
limitation, all units created under orders, regulations and rules of any
Governmental Authority) which may affect all or any portion of the Hydrocarbon
Interests; (d) all operating agreements, contracts and other agreements,
including production sharing contracts and agreements, which relate to any of
the Hydrocarbon Interests or the

 

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production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under
and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; (f) all tenements, hereditaments, appurtenances and Properties in any
manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests and (g) all Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment, rental equipment or other personal Property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.

“Organizational Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non US jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or Property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement and any other Loan Document.

“Participant” has the meaning set forth in Section 12.04(c)(i).

“Participant Register” has the meaning set forth in Section 12.04(c)(i).

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Permitted Senior Unsecured Notes” means those notes that may be issued by the
Borrower (or by any Loan Party as co-issuer); provided that (a) the Borrower
shall be in pro forma compliance with all financial covenants set forth in
Section 9.01 after giving effect to such issuance, (b) no Default or Event of
Default shall exist or result therefrom, (c) no Borrowing Base Deficiency
results from such issuance after giving effect to (i) any automatic reduction in
the Borrowing Base pursuant to Section 2.07(e) and (ii) any mandatory
prepayments made

 

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pursuant to Section 3.04(c), and (d) such notes shall: (i) be unsecured;
(ii) not provide for any scheduled payment of principal, scheduled mandatory
Redemption or scheduled sinking fund payment on or before the date that is at
least 180 days following the Maturity Date in effect at the time of issuance;
and (iii) contain covenants and events of default that are, taken as a whole, no
more restrictive with respect to the Loan Parties than the covenants and Events
of Default herein (as determined in good faith by senior management of the
Borrower).

“Permitted Senior Unsecured Notes Documents” means the Permitted Senior
Unsecured Notes, all guarantees thereof and all other agreements, documents or
instruments executed and delivered by any Loan Party in connection with, or
pursuant to, the issuance of Permitted Senior Unsecured Notes.

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

“PIK Toggle Notes” means the 10.00%/10.75% Senior PIK Toggle Notes due 2018
issued by MRD LLC and MRF Corp. in an aggregate principal amount of
$350,000,000.

“PIK Toggle Notes Documents” means the PIK Toggle Notes, all guarantees thereof,
that certain Indenture dated as of December 18, 2013 among the Borrower (as
successor to MRD LLC), MRF Corp., the guarantors party thereto and U.S. Bank
National Association, as trustee, as amended, supplemented or modified from time
to time to the extent permitted herein, and all other agreements, documents or
instruments executed and delivered by MRD LLC, MRF Corp. or any Loan Party in
connection with, or pursuant to, the issuance of the PIK Toggle Notes.

“Plan” means any employee pension benefit plan, as defined in section 3(2) of
ERISA, which (a) is currently or hereafter sponsored, maintained or contributed
to by the Borrower, any other Loan Party or an ERISA Affiliate or (b) was at any
time during the six calendar years preceding the date hereof, sponsored,
maintained or contributed to by the Borrower or any other Loan Party or an ERISA
Affiliate.

“Platform” has the meaning assigned such term in Section 12.01(d).

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by BAML as its prime rate in effect at its principal office in
Charlotte; each change in the Prime Rate shall be effective from and including
the date such change is publicly announced as being effective. Such rate is set
by the Administrative Agent as a general reference rate of interest, taking into
account such factors as the Administrative Agent may deem appropriate; it being
understood that many of the Administrative Agent’s commercial or other loans are
priced in relation to such rate, that it is not necessarily the lowest or best
rate actually charged to any customer and that the Administrative Agent may make
various commercial or other loans at rates of interest having no relationship to
such rate.

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, including, without limitation,
cash, securities, accounts and contract rights.

 

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“Proposed Borrowing Base” has the meaning assigned to such term in Section
2.07(c)(i).

“Proposed Borrowing Base Notice” has the meaning assigned to such term in
Section 2.07(c)(ii).

“Proved Developed Non-Producing Reserves” has the meaning assigned such term in
the SPE Definitions.

“Proved Reserves” has the meaning assigned such term in the SPE Definitions.

“Proved Undeveloped Reserves” has the meaning assigned such term in the SPE
Definitions.

“Public Lender” has the meaning assigned such term in Section 12.01(d).

“Qualified ECP Guarantor” means, with respect to any Benefitting Guarantor, in
respect of any Swap Agreement, each Loan Party that, at the time the guaranty by
such Benefitting Guarantor of, or the grant by such Benefitting Guarantor of a
security interest or lien securing, obligations under such Swap Agreement is
entered into or becomes effective with respect to, or at any other time such
Benefitting Guarantor is by virtue of such guaranty or grant of a security
interest or lien otherwise deemed to enter into, such Swap Agreement,
constitutes an Eligible Contract Participant and can cause such Benefitting
Guarantor to qualify as an Eligible Contract Participant at such time by
entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity
Exchange Act.

“Redemption” means with respect to any Debt, the repurchase, redemption,
prepayment, repayment, satisfaction and discharge or defeasance or any other
acquisition or retirement for value (or the segregation of funds with respect to
any of the foregoing) of any such Debt. “Redeem” has the correlative meaning
thereto.

“Redetermination Date” means, with respect to any Scheduled Redetermination or
any Interim Redetermination, the date that the redetermined Borrowing Base
related thereto becomes effective pursuant to Section 2.07(d).

“Register” has the meaning assigned such term in Section 12.04(b)(iv).

“Regulation D” means Regulation D of the Board, as the same may be amended,
supplemented or replaced from time to time.

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective partners, directors, officers, employees, agents,
trustees and advisors (including attorneys, accountants and experts) of such
Person and such Person’s Affiliates.

“Release” means any depositing, spilling, leaking, pumping, pouring, placing,
emitting, discarding, abandoning, emptying, discharging, migrating, injecting,
escaping, leaching, dumping, or disposing.

 

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“Remedial Work” has the meaning assigned such term in Section 8.10(a).

“Required Lenders” means, (a) at any time while no Loan or LC Exposure is
outstanding, two or more Lenders having at least sixty-six and two-thirds
percent (66 2⁄3%) of the Aggregate Elected Commitment Amount; and (b) at any
time while any Loan or LC Exposure is outstanding, two or more Lenders holding
at least sixty-six and two-thirds percent (66 2⁄3%) of the outstanding aggregate
principal amount of the Loans and participation interests in Letters of Credit
(without regard to any sale by a Lender of a participation in any Loan under
Section 12.04(c)); provided that the Elected Commitment and the principal amount
of the Loans and participation interests in Letters of Credit of the Defaulting
Lenders (if any) shall be excluded from the determination of Required Lenders.

“Reserve Report” means a report, in form and substance reasonably satisfactory
to the Administrative Agent, setting forth, as of each December 31st or
June 30th (or such other date in the event of an Interim Redetermination) the
oil and gas reserves attributable to the Oil and Gas Properties of the Borrower
and the Guarantors, together with a projection of the rate of production and
future net income, taxes, operating expenses and capital expenditures with
respect thereto as of such date, based upon pricing assumptions consistent with
SEC reporting requirements at the time of such report and reflecting Swap
Agreements in place with respect to such production.

“Resignation Effective Date” has the meaning assigned such term in Section
11.06(a).

“Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or any Vice President of such Person and,
solely for purposes of requests and notices given pursuant to Article II, any
other officer of such Person so designated by any of the foregoing officers of
such Person in a notice to the Administrative Agent or any other officer or
employee of the applicable Loan Party designated in or pursuant to an agreement
between the applicable Loan Party and the Administrative Agent. Unless otherwise
specified, all references to a Responsible Officer herein shall mean a
Responsible Officer of the Borrower. Any document delivered hereunder that is
signed by a Responsible Officer of a Loan Party shall be conclusively presumed
to have been authorized by all necessary corporate, partnership and/or other
action on the part of such Loan Party and such Responsible Officer shall be
conclusively presumed to have acted on behalf of such Loan Party.

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other Property) with respect to any Equity Interests in the
Borrower or any of the other Loan Parties, or any payment (whether in cash,
securities or other Property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such Equity Interests in the Borrower or any of the other
Loan Parties or any option, warrant or other right to acquire any such Equity
Interests in the Borrower or any of the other Loan Parties.

“Restricted Subsidiary” means any Subsidiary that is not an Unrestricted
Subsidiary.

“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender’s Loans and LC Exposure
at such time.

 

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“Rolling Period” means (a) for the fiscal quarters ending on September 30,
2014, December 31, 2014 and March 31, 2015, the period commencing on July 1,
2014 and ending on the last day of such applicable fiscal quarter and (b) for
the fiscal quarter ending on June 30, 2015, and for each fiscal quarter
thereafter, the period of four (4) consecutive fiscal quarters ending on the
last day of such applicable fiscal quarter.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.

“Sanction(s)” means any sanction administered or enforced by the United States
Government (including without limitation, OFAC).

“Scheduled Redetermination” has the meaning assigned such term in Section
2.07(b).

“Scheduled Redetermination Date” means the date on which a Borrowing Base that
has been redetermined pursuant to a Scheduled Redetermination becomes effective
as provided in Section 2.07(d).

“SEC” means the Securities and Exchange Commission or any successor Governmental
Authority.

“Secured Parties” means each Lender, each Issuing Bank, each Secured Swap
Provider, each Bank Products Provider, each Indemnified Party and any legal
owner, holder, assignee or pledgee of any of the Indebtedness.

“Secured Swap Provider” means any (a) Person that is a party to a Swap Agreement
with the Borrower or any Guarantor that entered into such Swap Agreement before
or while such Person was a Lender or an Affiliate of a Lender, whether or not
such Person at any time ceases to be a Lender or an Affiliate of a Lender, as
the case may be, (b) assignee of any Person described in clause (a) above so
long as such assignee is a Lender or an Affiliate of a Lender, or (c) any other
Approved Counterparty that (i) entered into such Swap Agreement at any time
after the Effective Date when there were less than three Lenders party to this
Agreement (or Affiliates of such Lenders) that are recognized providers of Swap
Agreements and (ii) entered into an intercreditor agreement with the
Administrative Agent in form and substance reasonably acceptable to the
Administrative Agent and providing for any proceeds realized from the
liquidation or other disposition of collateral under the Security Instruments to
be applied in accordance with Section 10.02(c).

“Security Instruments” means the Guaranty Agreement, the Initial Security
Agreement, the Amended and Restated Security Agreement, mortgages, deeds of
trust and other agreements, instruments or certificates described or referred to
in Exhibit E-1, and any and all other agreements, instruments, consents or
certificates now or hereafter executed and delivered by the Borrower or any
Guarantor (other than Swap Agreements or participation or similar agreements
between any Lender and any other lender or creditor with respect to any
Indebtedness pursuant to this Agreement) in connection with, or as security for
the payment or performance of the Indebtedness, the Notes, this Agreement, or
reimbursement obligations under the Letters of Credit, as such agreements may be
amended, modified, supplemented or restated from time to time.

 

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“Specified Acquisition” means

(a) any Affiliated Acquisition so long as, (i) at the time any Loan Party enters
into any Swap Agreements with respect to the reasonably anticipated projected
production from proved Oil and Gas Properties to be acquired in such Affiliated
Acquisition, the ratio of Availability to the then effective total Commitments
is at least 0.10 to 1.0, (ii) the aggregate volumes hedged with respect to the
reasonably anticipated projected production from proved Oil and Gas Properties
to be acquired in all pending Specified Acquisitions that have not yet been
consummated shall not exceed 15.0% of the Loan Parties’ reasonably anticipated
projected production from proved Oil and Gas Properties (without giving effect
to all such pending Specified Acquisitions), (iii) the Borrower has delivered
written notice to the Administrative Agent of the Loan Parties’ intent to enter
into such Swap Agreements not less than five Business Days prior to entering
into any Swap Agreements with respect to the reasonably anticipated projected
production from proved Oil and Gas Properties to be acquired in such Affiliated
Acquisition (which written notice shall include reserve engineering data and
such other information regarding such to-be-acquired Oil and Gas Properties and
such Affiliated Acquisition as the Administrative Agent may reasonably request),
and (iv) at the time any Loan Party enters into any Swap Agreements with respect
to the reasonably anticipated projected production from proved Oil and Gas
Properties to be acquired in such Affiliated Acquisition, no Swap Agreements
have been required to be Liquidated pursuant to Section 9.18(a)(ii) in the
immediately preceding 365-day period, and

(b) any Acquisition (other than an Affiliated Acquisition) for which: (i) a
binding and enforceable purchase and sale agreement has been signed by a Loan
Party; (ii) at the time of the signing of the applicable purchase and sale
agreement, the ratio of Availability to the then effective total Commitments is
at least 0.10 to 1.0, and (iii) the aggregate volumes hedged with respect to the
reasonably anticipated projected production from proved Oil and Gas Properties
to be acquired in all pending Specified Acquisitions that have not yet been
consummated shall not exceed 15.0% of the Loan Parties’ reasonably anticipated
projected production from proved Oil and Gas Properties (without giving effect
to all such pending Specified Acquisitions).

“SPE Definitions” means with respect to any term, the definition thereof adopted
by the Board of Directors, Society for Petroleum Engineers (SPE) Inc., March
1997.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as “Eurocurrency Liabilities” in Regulation D). Such reserve percentages
shall include those imposed pursuant to Regulation D. Eurodollar Loans shall be
deemed to constitute eurocurrency funding and to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to any Lender under Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.

 

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“subsidiary” means, with respect to any Person (the “parent”) at any date, any
other Person the accounts of which would be consolidated with those of the
parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other Person of which Equity Interests representing more than 50% of the equity
or more than 50% of the ordinary voting power (irrespective of whether or not at
the time Equity Interests of any other class or classes of such Person shall
have or might have voting power by reason of the happening of any contingency)
or, in the case of a partnership, any general partnership interests are, as of
such date, owned, controlled or held.

“Subsidiary” means any subsidiary of the Borrower.

“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction (including floors, caps and collars) or option or
similar agreement, whether exchange traded, “over-the-counter” or otherwise,
involving, or settled by reference to, one or more rates, currencies,
commodities (including Emissions Credits), equity or debt instruments or
securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any combination
of these transactions (including any agreement, contract or transaction that
constitutes a “swap” within the meaning of section 1a(47) or Section 2(e) of the
Commodity Exchange Act); provided that no phantom stock or similar plan
providing for payments only on account of services provided by current or former
directors, officers, employees or consultants of the Borrower or the other Loan
Parties shall be a Swap Agreement. For the sole purposes of Section 9.18, the
term “Swap Agreement” shall be deemed to exclude purchased put options or floors
for Hydrocarbons that are not related to corresponding calls, collars or swaps
and with respect to which neither the Borrower nor any Restricted Subsidiary has
any payment obligation other than premiums and charges the total amount of which
are fixed and known at the time such transaction is entered into.

“Swap Liquidation” means the sale, assignment, novation, liquidation, unwind or
termination of all or any part of any Swap Agreement (other than, in each case,
at its scheduled maturity).

“Swap Termination Value” means, in respect of any Swap Agreement, after taking
into account the effect of any legally enforceable netting agreement relating to
such Swap Agreement, (a) for any date on or after the date such Swap Agreement
has been closed out and the termination value determined in accordance
therewith, such termination value and (b) for any date prior to the date
referenced in clause (a), the amount determined as the mark-to-market value for
such Swap Agreement, as determined by the Borrower in good faith, so long as no
Event of Default has occurred and is continuing.

“Synthetic Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, treated as operating leases
on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, 80% of the
residual value of the Property subject to such operating lease upon expiration
or early termination of such lease.

 

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“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

“Termination Date” means the earlier of the Maturity Date and the date of
termination of the Commitments pursuant to this Agreement, whether pursuant to
Section 2.06(b), Section 10.02 or otherwise.

“Total Commitments Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Revolving
Credit Exposures of the Lenders on such day, and the denominator of which is the
total Commitments of the Lenders in effect on such day.

“Transactions” means, with respect to (a) the Borrower, (i) the execution,
delivery and performance by the Borrower of this Agreement, each other Loan
Document, the MRD LLC Contribution Agreement and the WildHorse Management Equity
Contribution Agreement, (ii) the MRD LLC Contribution, (iii) the WildHorse
Management Equity Acquisition, (iv) the Borrower IPO, (v) the borrowing of
Loans, the use of the proceeds thereof and the issuance of Letters of Credit
hereunder, and (vi) the grant of Liens by the Borrower on Mortgaged Properties
and other Properties pursuant to the Security Instruments, and (b) each
Guarantor, (i) the execution, delivery and performance by such Guarantor of each
Loan Document to which it is a party, (ii) the guaranteeing of the Indebtedness
and the other obligations under the Guaranty Agreement by such Guarantor and
(iii) the grant of Liens by such Guarantor on Mortgaged Properties and other
Properties pursuant to the Security Instruments.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Alternate Base Rate, the LIBOR Market Index Rate
or the Adjusted LIBO Rate.

“Unrestricted Subsidiary” means any Subsidiary of the Borrower designated as
such on Schedule 7.14 or which the Borrower has designated in writing to the
Administrative Agent to be an Unrestricted Subsidiary pursuant to Section 9.24;
provided that in no event shall MEMP GP be an Unrestricted Subsidiary.

“U.S. Tax Compliance Certificate” has the meaning set forth in Section 5.03(f).

“Wholly-Owned Subsidiary” means any Subsidiary of which all of the outstanding
Equity Interests (other than any directors’ qualifying shares mandated by
applicable law), on a fully-diluted basis, are owned by the Borrower or one or
more of the Wholly-Owned Subsidiaries or are owned by the Borrower and one or
more of the Wholly-Owned Subsidiaries.

“WHR Management Company” means WildHorse Resources Management Company, LLC, a
Delaware limited liability company.

“WHR Services Agreement” means that certain Services Agreement dated as of the
date hereof among the Borrower, WildHorse and WHR Management Company, as the
same may be amended, restated or otherwise modified from time to time to the
extent permitted under this Agreement.

 

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“WildHorse” means WildHorse Resources, LLC, a Delaware limited liability
company.

“WildHorse Management Equity Acquisition” means the acquisition by the Borrower
of certain Equity Interests in WildHorse from certain existing and/or former
members of WildHorse management in exchange for cash and Equity Interests in the
Borrower pursuant to the WildHorse Management Equity Contribution Agreement.

“WildHorse Management Equity Contribution Agreement” means that certain
Contribution Agreement among the Borrower and the other parties thereto in the
form attached as Exhibit 10.14 to Amendment No. 2 to Form S-1 Registration
Statement filed with the SEC on May 27, 2014, as such Contribution Agreement may
be amended, restated or otherwise modified from time to time to the extent
permitted under this Agreement.

“Withholding Agent” means any Loan Party or the Administrative Agent.

Section 1.03 Types of Loans and Borrowings. For purposes of this Agreement,
Loans and Borrowings, respectively, may be classified and referred to by Type
(e.g., a “Eurodollar Loan” or a “Eurodollar Borrowing”).

Section 1.04 Terms Generally; Rules of Construction. The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “include,”
“includes” and “including” as used in this Credit Agreement shall be deemed to
be followed by the phrase “without limitation.” The word “will” shall be
construed to have the same meaning and effect as the word “shall.” Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented, restated or otherwise modified (subject to any restrictions on
such amendments, supplements or modifications set forth in the Loan Documents),
(b) any reference herein to any law shall be construed as referring to such law
as amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, (c) any reference herein to any Person shall be construed to
include such Person’s successors and assigns (subject to the restrictions
contained in the Loan Documents), (d) the words “herein,” “hereof” and
“hereunder,” and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (e) with
respect to the determination of any time period, the word “from” means “from and
including” and the word “to” means “to and including” and (f) any reference
herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed
to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to,
this Agreement. No provision of this Agreement or any other Loan Document shall
be interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.

Section 1.05 Accounting Terms and Determinations; GAAP. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis

 

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consistent with the Financial Statements except for changes in which Borrower’s
independent certified public accountants concur and which are disclosed to
Administrative Agent on the next date on which financial statements are required
to be delivered to the Lenders pursuant to Section 8.01(a); provided that,
unless the Borrower and the Majority Lenders shall otherwise agree in writing,
no such change shall modify or affect the manner in which compliance with the
covenants contained herein is computed such that all such computations shall be
conducted utilizing financial information presented consistently with prior
periods. Notwithstanding anything herein to the contrary, for the purposes of
calculating any of the ratios tested under Section 9.01, and the components of
each of such ratios, all Subsidiaries that are not Guarantors, and their
subsidiaries (including their assets, liabilities, income, losses, cash flows,
and the elements thereof) shall be excluded, except for any cash dividends or
distributions actually paid by any such Person or any of its subsidiaries to the
Borrower or any Guarantor, which shall be deemed to be income to the Borrower or
such Guarantor when actually received by it.

ARTICLE II

THE CREDITS

Section 2.01 Commitments. Subject to the terms and conditions set forth herein,
each Lender agrees to make Loans to the Borrower during the Availability Period
in an aggregate principal amount that will not result in (a) such Lender’s
Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the total
Revolving Credit Exposures exceeding the total Commitments. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, repay and reborrow the Loans.

Section 2.02 Loans and Borrowings.

(a) Borrowings; Several Obligations. Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required.

(b) Types of Loans. Subject to Section 3.03 and Section 5.06, each Borrowing
shall be comprised entirely of ABR Loans, LIBOR Market Index Loans or Eurodollar
Loans as the Borrower may request in accordance herewith. Each Lender at its
option may make any Eurodollar Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan; provided that any exercise of such
option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement.

(c) Minimum Amounts; Limitation on Number of Borrowings. At the commencement of
each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an
aggregate amount that is an integral multiple of $1,000,000. At the time that
each ABR Borrowing or LIBOR Market Index Borrowing is made, such Borrowing shall
be in an aggregate amount that is an integral multiple of $500,000; provided
that an ABR Borrowing may be in an aggregate amount that is equal to the entire
unused balance of the total Commitments or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.08(e).
Borrowings of more than one Type may be outstanding at the same time; provided
that

 

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there shall not at any time be more than a total of ten Eurodollar Borrowings
outstanding. Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request, or to elect to convert or continue, any
Borrowing if the Interest Period requested with respect thereto would end after
the Maturity Date.

(d) Notes. Upon request of any Lender, the Loans made by each such Lender shall
be evidenced by a single promissory note of the Borrower in substantially the
form of Exhibit A, dated, in the case of (i) any Lender party hereto as of the
date of this Agreement, as of the date of this Agreement, (ii) any Lender that
becomes a party hereto pursuant to an Assignment and Assumption, as of the
effective date of the Assignment and Assumption or (iii) any Lender that
increases or decreases its Elected Commitment or Maximum Credit Amount for any
reason (whether pursuant to Section 2.06, Section 12.04(b) or otherwise) or
becomes a party hereto in connection with an increase in the Aggregate Elected
Commitment Amount pursuant to Section 2.06(c), as of the effective date of such
increase or decrease, as applicable, payable to such Lender in a principal
amount equal to its Maximum Credit Amount as in effect on such date after giving
effect to such increase or decrease, as applicable, and otherwise duly
completed. The date, amount, Type, interest rate and, if applicable, Interest
Period of each Loan made by each Lender, and all payments made on account of the
principal thereof, shall be recorded by such Lender on its books for its Note,
and, prior to any transfer, may be endorsed by such Lender on a schedule
attached to such Note or any continuation thereof or on any separate record
maintained by such Lender. Failure to make any such notation or to attach a
schedule shall not affect any Lender’s or the Borrower’s rights or obligations
in respect of such Loans or affect the validity of such transfer by any Lender
of its Note.

Section 2.03 Requests for Borrowings. To request a Borrowing, the Borrower shall
notify the Administrative Agent of such request by (A) telephone; provided that
any telephone notice must be confirmed promptly by delivery to the
Administrative Agent of a Borrowing Request Notice or (B) delivering a Borrowing
Request Notice, in the case of a Eurodollar Borrowing, not later than 12:00
noon, New York City time, three Business Days before the date of the proposed
Borrowing or in the case of an ABR Borrowing or a LIBOR Market Index Borrowing,
not later than 11:00 a.m., New York City time, on the date of the proposed
Borrowing; provided that no such notification shall be required for any deemed
request of an ABR Borrowing to finance the reimbursement of an LC Disbursement
as provided in Section 2.08(e). Each such telephonic Borrowing Request and
Borrowing Request Notice shall be irrevocable. Each such telephonic Borrowing
Request and Borrowing Request Notice shall specify the following information in
compliance with Section 2.02:

(a) the aggregate amount of the requested Borrowing;

(b) the date of such Borrowing, which shall be a Business Day;

(c) whether such Borrowing is to be an ABR Borrowing, a LIBOR Market Index
Borrowing or a Eurodollar Borrowing;

(d) in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”;

 

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(e) the amount of the then effective Borrowing Base, the amount of the then
effective Aggregate Elected Commitment Amount, the current total Revolving
Credit Exposures (without regard to the requested Borrowing) and the pro forma
total Revolving Credit Exposures (giving effect to the requested Borrowing); and

(f) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05.

If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month’s duration. Each Borrowing
Request shall constitute a representation that the amount of the requested
Borrowing shall not cause the total Revolving Credit Exposures to exceed the
total Commitments (i.e., the least of (x) the Aggregate Maximum Credit Amount,
(y) the then effective Borrowing Base and (z) the Aggregate Elected Commitment
Amount).

Promptly following receipt of a Borrowing Request in accordance with this
Section 2.03, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.

Section 2.04 Interest Elections.

(a) Conversion and Continuance. Each Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case of a Eurodollar
Borrowing, shall have an initial Interest Period as specified in such Borrowing
Request. Thereafter, the Borrower may elect to convert such Borrowing to a
different Type or to continue such Borrowing and, in the case of a Eurodollar
Borrowing, may elect Interest Periods therefor, all as provided in this
Section 2.04. The Borrower may elect different options with respect to different
portions of the affected Borrowing, in which case each such portion shall be
allocated ratably among the Lenders holding the Loans comprising such Borrowing,
and the Loans comprising each such portion shall be considered a separate
Borrowing.

(b) Interest Election Requests. To make an election pursuant to this
Section 2.04, the Borrower shall notify the Administrative Agent of such
election by (A) telephone; provided that any telephone notice must be confirmed
promptly by delivery to the Administrative Agent of an Interest Election Request
Notice or (B) an Interest Election Request Notice by the time that a Borrowing
Request would be required under Section 2.03 if the Borrower were requesting a
Borrowing of the Type resulting from such election to be made on the effective
date of such election. Each such telephonic Interest Election Request and
Interest Election Request Notice shall be irrevocable.

(c) Information in Interest Election Requests. Each telephonic Interest Election
Request and Interest Election Request Notice shall specify the following
information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to Section 2.04(c)(iii) and (iv) shall
be specified for each resulting Borrowing);

 

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(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing, a LIBOR Market
Index Borrowing or a Eurodollar Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
to be applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period.”

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.

(d) Notice to Lenders by the Administrative Agent. Promptly following receipt of
an Interest Election Request, the Administrative Agent shall advise each Lender
of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e) Effect of Failure to Deliver Timely Interest Election Request and Events of
Default and Borrowing Base Deficiencies on Interest Election. If the Borrower
fails to deliver a timely Interest Election Request with respect to a Eurodollar
Borrowing prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such Interest
Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding
any contrary provision hereof, if an Event of Default or a Borrowing Base
Deficiency has occurred and is continuing: (i) no outstanding Borrowing may be
converted to or continued as a Eurodollar Borrowing (and any Interest Election
Request that requests the conversion of any Borrowing to, or continuation of any
Borrowing as, a Eurodollar Borrowing shall be ineffective) and (ii) unless
repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the
end of the Interest Period applicable thereto.

Section 2.05 Funding of Borrowings.

(a) Funding by Lenders. Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 1:00 p.m., New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders.
The Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to an account of the
Borrower maintained with the Administrative Agent and designated by the Borrower
in the applicable Borrowing Request; provided that ABR Loans made to finance the
reimbursement of an LC Disbursement as provided in Section 2.08(e) shall be
remitted by the Administrative Agent to the Issuing Bank. Nothing herein shall
be deemed to obligate any Lender to obtain the funds for its Loan in any
particular place or manner or to constitute a representation by any Lender that
it has obtained or will obtain the funds for its Loan in any particular place or
manner.

 

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(b) Presumption of Funding by the Lenders. Unless the Administrative Agent shall
have received notice from a Lender prior to the proposed date of any Borrowing
that such Lender will not make available to the Administrative Agent such
Lender’s share of such Borrowing, the Administrative Agent may assume that such
Lender has made such share available on such date in accordance with
Section 2.05(a) and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. In such event, if a Lender has not in fact made
its share of the applicable Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative
Agent, at (i) in the case of such Lender, the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation or (ii) in the case of the
Borrower, the interest rate applicable to ABR Loans. If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing.

Section 2.06 Termination and Reduction of Aggregate Maximum Credit Amount;
Increase and Reduction of Aggregate Elected Commitment Amount.

(a) Scheduled Termination of Commitments. Unless previously terminated, the
Commitments shall terminate on the Maturity Date. If at any time the Aggregate
Maximum Credit Amount, the Borrowing Base or the Aggregate Elected Commitment
Amount is terminated or reduced to zero, then the Commitments shall terminate on
the effective date of such termination or reduction.

(b) Optional Termination and Reduction of Aggregate Maximum Credit Amount.

(i) The Borrower may at any time terminate, or from time to time reduce, the
Aggregate Maximum Credit Amount; provided that (A) each reduction of the
Aggregate Maximum Credit Amount shall be in an amount that is an integral
multiple of $1,000,000 and not less than $5,000,000, (B) the Borrower shall not
terminate or reduce the Aggregate Maximum Credit Amount if (1) after giving
effect to any concurrent prepayment of the Loans in accordance with
Section 3.04(c), the total Revolving Credit Exposures would exceed the total
Commitments or (2) the Aggregate Maximum Credit Amount would be less than
$10,000,000 (unless with respect to this clause (2), the Aggregate Maximum
Credit Amount are reduced to $0), and (C) upon any reduction of the Aggregate
Maximum Credit Amount that would otherwise result in the Aggregate Maximum
Credit Amount being less than the Aggregate Elected Commitment Amount, the
Aggregate Elected Commitment Amount shall be automatically reduced (ratably
among the Lenders in accordance with each Lender’s Applicable Percentage) so
that they equal the Aggregate Maximum Credit Amount as so reduced.

(ii) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Aggregate Maximum Credit Amount under Section 2.06(b)(i)
at least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following

 

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receipt of any notice, the Administrative Agent shall advise the Lenders of the
contents thereof. Each notice delivered by the Borrower pursuant to this
Section 2.06(b)(ii) shall be irrevocable; provided that a notice of termination
of the Aggregate Maximum Credit Amount delivered by the Borrower may state that
such notice is conditioned upon the effectiveness of other credit facilities or
other agreements, in which case such notice may be revoked by the Borrower (by
notice to the Administrative Agent on or prior to the specified effective date)
if such condition is not satisfied. Any termination or reduction of the
Aggregate Maximum Credit Amount shall be permanent and may not be reinstated.
Each reduction of the Aggregate Maximum Credit Amount shall be made ratably
among the Lenders in accordance with each Lender’s Applicable Percentage.

(c) Increases, Reductions and Terminations of Aggregate Elected Commitment
Amount.

(i) Subject to the conditions set forth in Section 2.06(c)(ii), the Borrower may
increase the Aggregate Elected Commitment Amount then in effect by increasing
the Elected Commitment of one or more existing Lenders (each such Lender, an
“Increasing Lender”) and/or causing one or more Persons acceptable to the
Administrative Agent and that at such time are not Lenders to become a Lender
(each such Person that is not at such time a Lender and becomes a Lender, an
“Additional Lender”). Notwithstanding anything to the contrary contained in this
Agreement, in no case shall an Additional Lender be the Borrower, an Affiliate
of the Borrower or a natural person.

(ii) Any increase in the Aggregate Elected Commitment Amount shall be subject to
the following additional conditions:

(A) such increase shall not be less than $50,000,000 unless (1) the
Administrative Agent otherwise consents or (2) prior to giving effect to such
increase, the Borrowing Base exceeds the Aggregate Elected Commitment Amount by
less than $50,000,000 and after giving effect to such increase, the Aggregate
Elected Commitment Amount will equal the Borrowing Base, and no such increase
shall be permitted if after giving effect thereto the Aggregate Elected
Commitment Amount exceeds the Borrowing Base then in effect;

(B) following any Scheduled Redetermination Date, the Borrower may not increase
the Aggregate Elected Commitment Amount more than once before the next Scheduled
Redetermination Date, it being understood that the Aggregate Elected Commitment
Amount may also be increased on any Scheduled Redetermination Date (for the sake
of clarity, all increases in the Aggregate Elected Commitment Amount effective
on a single date shall be deemed a single increase in the Aggregate Elected
Commitment Amount for purposes of this Section 2.06(c)(ii)(B));

(C) no Default shall have occurred and be continuing on the effective date of
such increase;

 

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(D) on the effective date of such increase, no Eurodollar Borrowings shall be
outstanding or if any Eurodollar Borrowings are outstanding, then the effective
date of such increase shall be the last day of the Interest Period in respect of
such Eurodollar Borrowings unless the Borrower pays compensation required by
Section 5.02;

(E) no Lender’s Elected Commitment may be increased without the consent of such
Lender;

(F) subject to Section 2.06(c)(ix) below, if the Borrower elects to increase the
Aggregate Elected Commitment Amount by increasing the Elected Commitment of one
or more Lenders, the Borrower and each such Increasing Lender shall execute and
deliver to the Administrative Agent a certificate substantially in the form of
Exhibit H (an “Elected Commitment Increase Certificate”) and the Borrower shall
pay any applicable fees as may have been agreed to between the Borrower, such
Increasing Lender and/or the Administrative Agent;

(G) if the Borrower elects to increase the Aggregate Elected Commitment Amount
by causing one or more Additional Lenders to become a party to this Agreement,
then the Borrower and each such Additional Lender shall execute and deliver to
the Administrative Agent a certificate substantially in the form of Exhibit I
(an “Additional Lender Certificate”), together with an Administrative
Questionnaire and a processing and recordation fee of $3,500 for each Additional
Lender, which shall be payable by the Borrower to the Administrative Agent
unless waived by the Administrative Agent, and the Borrower shall (1) if
requested by any Additional Lender, deliver a Note payable to the order of such
Additional Lender in a principal amount equal to its Maximum Credit Amount, and
otherwise duly completed and (2) pay any applicable fees as may have been agreed
to between the Borrower, any Additional Lender and/or the Administrative Agent;
and

(H) the Borrower shall, or shall cause the Guarantors to, execute and deliver
such other documents, certificates and/or legal opinions, if any, as reasonably
requested by the Administrative Agent in connection with such increase.

(iii) Subject to acceptance and recording thereof pursuant to
Section 2.06(c)(iv), from and after the effective date specified in the Elected
Commitment Increase Certificate or the Additional Lender Certificate (or if any
Eurodollar Borrowings are outstanding, then the last day of the Interest Period
in respect of such Eurodollar Borrowings, unless the Borrower has paid
compensation required by Section 5.02): (A) the amount of the Aggregate Elected
Commitment Amount shall be increased as set forth therein, and (B) in the case
of an Additional Lender Certificate, any Additional Lender party thereto shall
be a party to this Agreement and have the rights and obligations of a Lender
under this Agreement and the other Loan Documents. In addition, each Increasing
Lender and Additional Lender shall be deemed to have purchased a pro rata

 

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portion of the outstanding Loans (and participation interests in Letters of
Credit) of each of the other Lenders (and such Lenders hereby agree to sell and
to take all such further action to effectuate such sale) such that each Lender
(including any Increasing Lender and any Additional Lender) shall hold its
Applicable Percentage of the outstanding Loans (and participation interests in
Letters of Credit) after giving effect to the increase in the Aggregate Elected
Commitment Amount and the resulting modification of each Lender’s Applicable
Percentage and Maximum Credit Amount pursuant to Section 2.06(c)(v).

(iv) Upon its receipt of a duly completed Elected Commitment Increase
Certificate or an Additional Lender Certificate, executed by the Borrower and
the Lender or by the Borrower and the Additional Lender party thereto, as
applicable, the processing and recording fee referred to in Section 2.06(c)(ii),
the Administrative Questionnaire referred to in Section 2.06(c)(ii) and the
break-funding payments from the Borrower, if any, required by Section 5.02, if
applicable, the Administrative Agent shall accept such Elected Commitment
Increase Certificate or Additional Lender Certificate and record the information
contained therein in the Register required to be maintained by the
Administrative Agent pursuant to Section 12.04(b)(iv). No increase in the
Aggregate Elected Commitment Amount shall be effective for purposes of this
Agreement unless it has been recorded in the Register as provided in this
Section 2.06(c)(iv).

(v) Upon any increase in the Aggregate Elected Commitment Amount pursuant to
this Section 2.06(c), (A) each Lender’s Applicable Percentage shall be
automatically deemed amended to the extent necessary so that each such Lender’s
Applicable Percentage equals the percentage of the Aggregate Elected Commitment
Amount represented by such Lender’s Elected Commitment, in each case after
giving effect to such increase, (B) each Lender’s Maximum Credit Amount shall be
automatically deemed amended to the extent necessary so that each Lender’s
Maximum Credit Amount equals such Lender’s Applicable Percentage, after giving
effect to any adjustments thereto pursuant to the foregoing clause (A), of the
Aggregate Maximum Credit Amount, (C) Annex I to this Agreement shall be deemed
amended to reflect the Elected Commitment of any Increasing Lender and any
Additional Lender, and any changes in the Lenders’ respective Applicable
Percentages and Maximum Credit Amounts pursuant to the foregoing clauses (A) and
(B), and (D) the Borrower shall execute and deliver new Notes to the extent
required under Section 2.02(d).

(vi) The Borrower may from time to time terminate or reduce the Aggregate
Elected Commitment Amount; provided that (A) each reduction of the Aggregate
Elected Commitment Amount shall be in an amount that is an integral multiple of
$1,000,000 and not less than $1,000,000 and (B) the Borrower shall not reduce
the Aggregate Elected Commitment Amount if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 3.04(c), the total
Revolving Credit Exposures would exceed the Aggregate Elected Commitment Amount.

(vii) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Aggregate Elected Commitment Amount under
Section 2.06(c)(vi) at least three Business Days prior to the effective date of
such termination or reduction, specifying such election and the effective date
thereof.

 

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Promptly following receipt of any notice, the Administrative Agent shall advise
the Lenders of the contents thereof. Each notice delivered by the Borrower
pursuant to this Section 2.06(c)(vii) shall be irrevocable. Any termination or
reduction of the Aggregate Elected Commitment Amount shall be permanent and may
not be reinstated, except pursuant to Section 2.06(c)(i). Each reduction of the
Aggregate Elected Commitment Amount shall be made ratably among the Lenders in
accordance with each Lender’s Applicable Percentage.

(viii) Upon any redetermination or other adjustment in the Borrowing Base
pursuant to this Agreement that would otherwise result in the Borrowing Base
becoming less than the Aggregate Elected Commitment Amount, the Aggregate
Elected Commitment Amount shall be automatically reduced (ratably among the
Lenders in accordance with each Lender’s Applicable Percentage) so that they
equal such redetermined Borrowing Base (and Annex I shall be deemed amended to
reflect such amendments to each Lender’s Elected Commitment and the Aggregate
Elected Commitment Amount).

(ix) Contemporaneously with any increase in the Borrowing Base pursuant to this
Agreement, if (A) the Borrower elects to increase the Aggregate Elected
Commitment Amount and (B) each Lender has consented to such increase in its
Elected Commitment, then the Aggregate Elected Commitment Amount shall be
increased (ratably among the Lenders in accordance with each Lender’s Applicable
Percentage) by the amount requested by the Borrower (subject to the limitations
set forth in Section 2.06(c)(ii)(A)) without the requirement that any Lender
deliver an Elected Commitment Increase Certificate, and Annex I shall be deemed
amended to reflect such amendments to each Lender’s Elected Commitment and the
Aggregate Elected Commitment Amount. The Administrative Agent shall record the
information regarding such increases in the Register required to be maintained
by the Administrative Agent pursuant to Section 12.04(b)(iv).

Section 2.07 Borrowing Base.

(a) Initial Borrowing Base. For the period from and including the Effective Date
to but excluding the first Redetermination Date, the amount of the Borrowing
Base shall be $725,000,000. Notwithstanding the foregoing, the Borrowing Base
may be subject to further adjustments from time to time pursuant to
Section 2.07(e), Section 2.07(f), or Section 8.13(c).

(b) Scheduled and Interim Redeterminations. The Borrowing Base shall be
redetermined semi-annually in accordance with this Section 2.07 (a “Scheduled
Redetermination”), and, subject to Section 2.07(d), such redetermined Borrowing
Base shall become effective and applicable to the Borrower, the Agents, the
Issuing Bank and the Lenders on or about April 1st and October 1st of each year
(or, in each case, such date promptly thereafter as reasonably practicable),
commencing October 1, 2014. In addition, (i) the Borrower may, by notifying the
Administrative Agent thereof, elect to cause the Borrowing Base to be
redetermined between Scheduled Redeterminations (A) up to two times per fiscal
year and (B) in addition to the unscheduled redeterminations the Borrower may
request pursuant to the foregoing clause (A), contemporaneously with the
consummation of any Material Acquisition, and (ii) the

 

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Administrative Agent may, at the direction of the Required Lenders, by notifying
the Borrower thereof, one time per fiscal year elect to cause the Borrowing Base
to be redetermined between Scheduled Redeterminations (each such
redetermination, an “Interim Redetermination”) in accordance with this Section
2.07.

(c) Scheduled and Interim Redetermination Procedure.

(i) Each Scheduled Redetermination and each Interim Redetermination shall be
effectuated as follows: Upon receipt by the Administrative Agent of (A) the
Reserve Report and the certificate required to be delivered by the Borrower to
the Administrative Agent, in the case of a Scheduled Redetermination, pursuant
to Section 8.12(a) and (c), and, in the case of an Interim Redetermination,
pursuant to Section 8.12(b) and (c), and (B) such other reports, data and
supplemental information, including, without limitation, the information
provided pursuant to Section 8.12(c), as may, from time to time, be reasonably
requested by the Majority Lenders (the Reserve Report, such certificate and such
other reports, data and supplemental information being the “Engineering
Reports”), the Administrative Agent shall evaluate the information contained in
the Engineering Reports and shall, in its sole discretion, propose a new
Borrowing Base (the “Proposed Borrowing Base”) based upon such information and
such other information (including, without limitation, the status of title
information with respect to the Oil and Gas Properties as described in the
Engineering Reports and the existence of any other Debt, the Loan Parties’ other
assets, liabilities, fixed charges, cash flow, business, properties, prospects,
management and ownership, hedged and unhedged exposure to price, price and
production scenarios, interest rate and operating cost changes) as the
Administrative Agent deems appropriate in its sole discretion and consistent
with its normal and customary oil and gas lending criteria as it exists at the
particular time. In no event shall the Proposed Borrowing Base exceed the
Aggregate Maximum Credit Amount;

(ii) The Administrative Agent shall notify the Borrower and the Lenders of the
Proposed Borrowing Base (the “Proposed Borrowing Base Notice”) after the
Administrative Agent has received complete Engineering Reports from the Borrower
and has had a reasonable opportunity to determine the Proposed Borrowing Base in
accordance with Section 2.07(c)(i); and

(iii) Any Proposed Borrowing Base that would increase the Borrowing Base then in
effect must be approved by all of the Lenders as provided in this
Section 2.07(c)(iii); and any Proposed Borrowing Base that would decrease or
maintain the Borrowing Base then in effect must be approved by the Required
Lenders as provided in this Section 2.07(c)(iii). Upon receipt of the Proposed
Borrowing Base Notice, each Lender shall have 15 days to agree with the Proposed
Borrowing Base or disagree with the Proposed Borrowing Base by proposing an
alternate Borrowing Base. If at the end of such 15-day period, all of the
Lenders, in the case of a Proposed Borrowing Base that would increase the
Borrowing Base then in effect, or the Required Lenders, in the case of a
Proposed Borrowing Base that would decrease or maintain the Borrowing Base then
in effect, have approved, as aforesaid, then the Proposed Borrowing Base shall
become the new Borrowing Base, effective on the date specified in
Section 2.07(d). If, however, at

 

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the end of such 15-day period, all of the Lenders or the Required Lenders, as
applicable, have not approved, as aforesaid, then the Administrative Agent shall
poll the Lenders to ascertain the highest Borrowing Base then acceptable to
(x) in the case of a decrease or reaffirmation, a number of Lenders sufficient
to constitute the Required Lenders and (y) in the case of an increase, all of
the Lenders, and such amount shall become the new Borrowing Base, effective on
the date specified in Section 2.07(d).

(d) Effectiveness of a Redetermined Borrowing Base. After a redetermined
Borrowing Base is approved by all of the Lenders or the Required Lenders, as
applicable, pursuant to Section 2.07(c)(iii), the Administrative Agent shall
notify the Borrower and the Lenders of the amount of the redetermined Borrowing
Base (the “New Borrowing Base Notice”), and such amount shall become the new
Borrowing Base, effective and applicable to the Borrower, the Administrative
Agent, the Issuing Bank and the Lenders:

(i) in the case of a Scheduled Redetermination, (A) if the Administrative Agent
shall have received the Engineering Reports required to be delivered by the
Borrower pursuant to Section 8.12(a) and (c) in a timely and complete manner,
then on or about the April 1st or October 1st (or, in each case, such date
promptly thereafter as reasonably practicable), as applicable, following such
notice, or (B) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to
Section 8.12(a) and (c) in a timely and complete manner, then on the Business
Day next succeeding delivery of such notice; and

(ii) in the case of an Interim Redetermination, on the Business Day next
succeeding delivery of such notice.

Such amount shall then become the Borrowing Base until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under Section 2.07(e), Section 2.07(f), or
Section 8.13(c), whichever occurs first. Notwithstanding the foregoing, no
Scheduled Redetermination or Interim Redetermination shall become effective
until the New Borrowing Base Notice related thereto is received by the Borrower.

(e) Automatic Reduction of Borrowing Base – Issuance of Permitted Senior
Unsecured Notes. In addition to other automatic reductions of the Borrowing Base
set forth herein, upon any issuance of Permitted Senior Unsecured Notes (other
than, subject to the proviso below, Permitted Senior Unsecured Notes issued
prior to the first Scheduled Redetermination Date following the Effective Date
that refinance or replace the PIK Toggle Notes and Permitted Senior Unsecured
Notes issued at any time that refinance or replace then existing Permitted
Senior Unsecured Notes), the Borrowing Base shall automatically be decreased by
an amount equal to 25% of the principal amount of Permitted Senior Unsecured
Notes issued at such time; provided that,

(i) if (A) the principal amount of any Permitted Senior Unsecured Notes that
refinance or replace the PIK Toggle Notes or any then existing Permitted Senior
Unsecured Notes exceeds (B) (1) the principal amount of such refinanced or
replaced PIK Toggle Notes or Permitted Senior Unsecured Notes, as applicable,
plus (2) accrued interest, applicable premiums payable and transaction expenses
incurred in connection therewith, the Borrowing Base shall automatically be
decreased upon such issuance by an amount equal to 25% of the amount of such
excess; and

(ii) for purposes of this Agreement, Permitted Senior Unsecured Notes will be
deemed to “refinance or replace” the PIK Toggle Notes to the extent the proceeds
of such Permitted Senior Unsecured Notes are used to repay Loans that were used
to Redeem the PIK Toggle Notes prior to the first Scheduled Redetermination Date
following the Effective Date.

 

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Any such decrease in the Borrowing Base shall occur without any vote of Lenders
or action by Administrative Agent. Upon any such redetermination, the
Administrative Agent shall promptly deliver a New Borrowing Base Notice to the
Borrower and the Lenders.

(f) Automatic Reduction of the Borrowing Base – Asset Dispositions or Swap
Liquidations. In addition to the other automatic reductions of the Borrowing
Base set forth herein, if at any time the aggregate Borrowing Base Value of Oil
and Gas Properties sold or disposed of pursuant to Section 9.12(d), together
with the Swap Agreements in respect of commodities Liquidated, in any period
between redeterminations of the Borrowing Base, exceeds ten percent (10%) of the
Borrowing Base as of the last redetermination, then the Borrowing Base shall be
automatically reduced, effective immediately upon such sale, disposition or Swap
Liquidation by an amount equal to the Borrowing Base Value of such Properties
sold or disposed of and Swap Agreements in respect of commodities Liquidated and
such new Borrowing Base shall be effective and applicable to the Borrower, the
Administrative Agent, the Issuing Banks and the Lenders until the next
redetermination or modification of the Borrowing Base pursuant to this
Agreement; provided that for purposes of this Section 2.07(f), a Swap Agreement
shall not be deemed to have been Liquidated if, (x) such Swap Agreement is
novated from the existing counterparty to an Approved Counterparty, with the
Borrower or the applicable Loan Party being the “remaining party” for purposes
of such novation, or (y) upon its termination, it is replaced, in a
substantially contemporaneous transaction, with one or more Swap Agreements with
approximately the same mark-to-market value and without cash payments to any
Loan Party in connection therewith. Such decrease in the Borrowing Base shall
occur without any vote of Lenders or action by Administrative Agent. Upon any
such redetermination, the Administrative Agent shall promptly deliver a New
Borrowing Base Notice to the Borrower and the Lenders.

Section 2.08 Letters of Credit.

(a) General. Subject to the terms and conditions set forth herein, the Borrower
may request the issuance of dollar denominated Letters of Credit for its own
account or for the account of any of the Guarantors, in a form reasonably
acceptable to the Administrative Agent and the Issuing Bank, at any time and
from time to time during the Availability Period; provided that the Borrower may
not request the issuance, amendment, renewal or extension of Letters of Credit
hereunder if a Borrowing Base Deficiency exists at such time or would exist as a
result thereof. In the event of any inconsistency between the terms and
conditions of this Agreement and the terms and conditions of any form of letter
of credit application or other agreement submitted by the Borrower to, or
entered into by the Borrower with, the Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.

 

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(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or facsimile (or transmit by electronic communication, if arrangements for doing
so have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative Agent (not less than five Business Days in advance of the
requested date of issuance, amendment, renewal or extension) a notice:

(i) requesting the issuance of a Letter of Credit or identifying the Letter of
Credit to be amended, renewed or extended;

(ii) specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day);

(iii) specifying the date on which such Letter of Credit is to expire (which
shall comply with Section 2.08(c));

(iv) specifying the amount of such Letter of Credit;

(v) specifying the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit; and

(vi) specifying the amount of the then effective Borrowing Base and the then
effective Aggregate Elected Commitment Amount and whether a Borrowing Base
Deficiency exists at such time, the current total Revolving Credit Exposures
(without regard to the requested Letter of Credit or the requested amendment,
renewal or extension of an outstanding Letter of Credit) and the pro forma total
Revolving Credit Exposures (giving effect to the requested Letter of Credit or
the requested amendment, renewal or extension of an outstanding Letter of
Credit).

Each notice shall constitute a representation by the Borrower that after giving
effect to the requested issuance, amendment, renewal or extension, as
applicable, (x) the LC Exposure shall not exceed the LC Commitment and (y) the
total Revolving Credit Exposures shall not exceed the total Commitments (i.e.
the least of (A) the Aggregate Maximum Credit Amount, (B) the then effective
Borrowing Base and (C) the Aggregate Elected Commitment Amount). No letter of
credit issued by the Issuing Bank (if the Issuing Bank is not the Administrative
Agent) shall be deemed to be a “Letter of Credit” issued under this Agreement
unless the Issuing Bank has requested and received written confirmation from the
Administrative Agent that the representations by Borrower contained in the
foregoing clauses (x) and (y) are true and correct.

If requested by the Issuing Bank, the Borrower also shall submit a letter of
credit application on the Issuing Bank’s standard form in connection with any
request for a Letter of Credit; provided that, in the event of any conflict
between such application and the terms of the Loan Documents, the terms of the
Loan Documents shall control.

 

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The Issuing Bank shall not be under any obligation to issue any Letter of Credit
if: (x) any order, judgment or decree of any Governmental Authority or
arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank
from issuing the Letter of Credit, or any law applicable to the Issuing Bank or
any request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Bank shall prohibit,
or request that the Issuing Bank refrain from, the issuance of letters of credit
generally or the Letter of Credit in particular or shall impose upon the Issuing
Bank with respect to the Letter of Credit any restriction, reserve or capital
requirement (for which the Issuing Bank is not otherwise compensated hereunder)
not in effect on the Effective Date, or shall impose upon the Issuing Bank any
unreimbursed loss, cost or expense which was not applicable on the Effective
Date and which the Issuing Bank in good faith deems material to it, or (y) the
issuance of the Letter of Credit would violate one or more policies of the
Issuing Bank applicable to letters of credit generally.

(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close
of business on the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal, which renewal
may be provided for in the initial Letter of Credit, or extension thereof, one
year after such renewal or extension) and (ii) the date that is five Business
Days prior to the Maturity Date.

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action
on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants
to each Lender, and each Lender hereby acquires from the Issuing Bank, a
participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Issuing Bank, such Lender’s Applicable Percentage of each LC
Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the
date due as provided in Section 2.08(e), or of any reimbursement payment
required to be refunded to the Borrower for any reason. Each Lender acknowledges
and agrees that its obligation to acquire participations pursuant to this
Section 2.08(d) in respect of Letters of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including any
amendment, renewal or extension of any Letter of Credit or the occurrence and
continuance of a Default, the existence of a Borrowing Base Deficiency or
reduction or termination of the Commitments, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever.

(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by
paying to the Administrative Agent an amount equal to such LC Disbursement not
later than 12:00 noon, New York City time, (i) on the date that such LC
Disbursement is made, if the Borrower shall have received notice of such LC
Disbursement prior to 10:00 a.m., New York City time, on such date, or (ii) the
Business Day immediately following the day that the Borrower receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that the Borrower shall, subject to the conditions to Borrowing set
forth herein, be deemed to have requested, and the Borrower does hereby request
under such circumstances, that such payment be financed with an ABR Borrowing in
an equivalent amount and, to the extent so financed, the

 

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Borrower’s obligation to make such payment shall be discharged and replaced by
the resulting ABR Borrowing. If the Borrower fails to make such payment when
due, the Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from the Borrower in respect thereof and such
Lender’s Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from the Borrower, in the same manner as
provided in Section 2.05 with respect to Loans made by such Lender (and
Section 2.05 shall apply, mutatis mutandis, to the payment obligations of the
Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank
the amounts so received by it from the Lenders. Promptly following receipt by
the Administrative Agent of any payment from the Borrower pursuant to this
Section 2.08(e), the Administrative Agent shall distribute such payment to the
Issuing Bank or, to the extent that Lenders have made payments pursuant to this
Section 2.08(e) to reimburse the Issuing Bank, then to such Lenders and the
Issuing Bank as their interests may appear. Any payment made by a Lender
pursuant to this Section 2.08(e) to reimburse the Issuing Bank for any LC
Disbursement (other than the funding of ABR Loans as contemplated above) shall
not constitute a Loan and shall not relieve the Borrower of its obligation to
reimburse such LC Disbursement.

(f) Obligations Absolute. The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.08(e) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(i) any lack of validity or enforceability of any Letter of Credit, any Letter
of Credit Agreement or this Agreement, or any term or provision therein,
(ii) any draft or other document presented under a Letter of Credit proving to
be forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does not
comply with the terms of such Letter of Credit or any Letter of Credit
Agreement, or (iv) any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of this
Section 2.08(f), constitute a legal or equitable discharge of, or provide a
right of setoff against, the Borrower’s obligations hereunder. Neither the
Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related
Parties shall have any liability or responsibility by reason of or in connection
with the issuance or transfer of any Letter of Credit or any payment or failure
to make any payment thereunder (irrespective of any of the circumstances
referred to in the preceding sentence), or any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other
communication under or relating to any Letter of Credit (including any document
required to make a drawing thereunder), any error in interpretation of technical
terms or any consequence arising from causes beyond the control of the Issuing
Bank; provided that the foregoing shall not be construed to excuse the Issuing
Bank from liability to the Borrower to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are hereby waived
by the Borrower to the extent permitted by applicable law) suffered by the
Borrower that are caused by the Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised all requisite care in each such
determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to

 

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documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing Bank may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

(g) Disbursement Procedures. The Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall promptly notify the
Administrative Agent and the Borrower by telephone (confirmed by facsimile) of
such demand for payment and whether the Issuing Bank has made or will make an LC
Disbursement thereunder; provided that any failure to give or delay in giving
such notice shall not relieve the Borrower of its obligation to reimburse the
Issuing Bank and the Lenders with respect to any such LC Disbursement.

(h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then,
until the Borrower shall have reimbursed the Issuing Bank for such LC
Disbursement (either with its own funds or a Borrowing under Section 2.08(e)),
the unpaid amount thereof shall bear interest, for each day from and including
the date such LC Disbursement is made to but excluding the date that the
Borrower reimburses such LC Disbursement, at the rate per annum then applicable
to ABR Loans. Interest accrued pursuant to this Section 2.08(h) shall be for the
account of the Issuing Bank, except that interest accrued on and after the date
of payment by any Lender pursuant to Section 2.08(e) to reimburse the Issuing
Bank shall be for the account of such Lender to the extent of such payment.

(i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any
time by written agreement among the Borrower, the Administrative Agent, the
replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent
shall notify the Lenders of any such replacement of the Issuing Bank. At the
time any such replacement shall become effective, the Borrower shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 3.05(b). From and after the effective date of any such replacement,
(i) the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of the Issuing Bank hereunder, the replaced Issuing Bank shall
remain a party hereto and shall continue to have all the rights and obligations
of the Issuing Bank under this Agreement with respect to Letters of Credit
issued by it prior to such replacement, but shall not be required to issue
additional Letters of Credit.

(j) Cash Collateralization. If (i) any Event of Default shall occur and be
continuing and the Borrower receives notice from the Administrative Agent or the
Majority Lenders demanding the deposit of cash collateral pursuant to this
Section 2.08(j), or (ii) the Borrower is required to pay to the Administrative
Agent the excess attributable to an LC Exposure in connection with any
prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in an
account with the Administrative Agent, in the name of the Administrative Agent
and for the benefit of the Lenders, an amount in cash equal to, in the case of
an Event of Default, the LC Exposure, and in the case of a payment required by
Section 3.04(c), the amount

 

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of such excess as provided in Section 3.04(c), as of such date plus any accrued
and unpaid interest thereon; provided that the obligation to deposit such cash
collateral shall become effective immediately, and such deposit shall become
immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default with respect to the Borrower or any Loan
Party described in Section 10.01(h) or Section 10.01(i). The Borrower hereby
grants to the Administrative Agent, for the benefit of the Issuing Bank and the
Lenders, an exclusive first priority and continuing perfected security interest
in and Lien on such account and all cash, checks, drafts, certificates and
instruments, if any, from time to time deposited or held in such account, all
deposits or wire transfers made thereto, any and all investments purchased with
funds deposited in such account, all interest, dividends, cash, instruments,
financial assets and other Property from time to time received, receivable or
otherwise payable in respect of, or in exchange for, any or all of the
foregoing, and all proceeds, products, accessions, rents, profits, income and
benefits therefrom, and any substitutions and replacements therefor. The
Borrower’s obligation to deposit amounts pursuant to this Section 2.08(j) shall
be absolute and unconditional, without regard to whether any beneficiary of any
such Letter of Credit has attempted to draw down all or a portion of such amount
under the terms of a Letter of Credit, and, to the fullest extent permitted by
applicable law, shall not be subject to any defense or be affected by a right of
set-off, counterclaim or recoupment which the Borrower or any of its
Subsidiaries may now or hereafter have against any such beneficiary, the Issuing
Bank, the Administrative Agent, the Lenders or any other Person for any reason
whatsoever. Such deposit shall be held as collateral securing the payment and
performance of the Borrower’s and the Guarantor’s obligations under this
Agreement and the other Loan Documents. The Administrative Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such account. Other than any interest earned on the investment of such
deposits, which investments shall be made at the option and reasonable
discretion of the Administrative Agent and at the Borrower’s risk and expense,
such deposits shall not bear interest. Interest or profits, if any, on such
investments shall accumulate in such account. Moneys in such account shall be
applied by the Administrative Agent to reimburse the Issuing Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated, be applied to satisfy other obligations of the Borrower
and the Guarantors under this Agreement or the other Loan Documents. If the
Borrower is required to provide an amount of cash collateral hereunder as a
result of the occurrence of an Event of Default, and the Borrower is not
otherwise required to pay to the Administrative Agent the excess attributable to
an LC Exposure in connection with any prepayment pursuant to Section 3.04(c),
then such amount (to the extent not applied as aforesaid) shall be returned to
the Borrower within three Business Days after all Events of Default have been
cured or waived. If the Borrower is required to pay to the Administrative Agent
as cash collateral the excess attributable to an LC Exposure in connection with
any prepayment pursuant to Section 3.04(c), then upon the expiration or
termination of any Letter of Credit, so long as no Event of Default is then
continuing, and so long as the Borrower does not have any obligation at such
time to deposit cash collateral pursuant to Section 2.09, the Administrative
Agent shall return to the Borrower, within three Business Days after such
expiration or termination, all or such portion of any such cash collateral (to
the extent not previously applied as aforesaid) as exceeds the excess, if any,
of the total of the then existing Revolving Credit Exposures over the total
Commitments then in effect.

 

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(k) Applicability of ISP. Unless otherwise expressly agreed by the Issuing Bank
and the Borrower when a Letter of Credit is issued (including any such agreement
applicable to an Existing Letter of Credit), the rules of the ISP shall apply to
each Letter of Credit. Notwithstanding the foregoing, the Issuing Bank shall not
be responsible to the Borrower for, and the Issuing Bank’s rights and remedies
against the Borrower shall not be impaired by, any action or inaction of the
Issuing Bank required or permitted under any law, order, or practice that is
required or permitted to be applied to any Letter of Credit or this Agreement,
including the law or any order of a jurisdiction where the Issuing Bank or the
beneficiary is located, the practice stated in the ISP or in the decisions,
opinions, practice statements, or official commentary of the ICC Banking
Commission, the Bankers Association for Finance and Trade – International
Financial Services Association (BAFT-IFSA), or the Institute of International
Banking Law & Practice, whether or not any Letter of Credit chooses such law or
practice.

(l) Calculation of Maximum Stated Amount. For all purposes of this Agreement,
the amount of a Letter of Credit that, by its terms or the terms of any document
related thereto, provides for one or more automatic increases in the stated
amount thereof shall be deemed to be the maximum stated amount of such Letter of
Credit after giving effect to all such increases, whether or not such maximum
stated amount is in effect at the time of determination.

Section 2.09 Defaulting Lenders. Notwithstanding any provision of this Agreement
to the contrary, if any Lender becomes a Defaulting Lender, and any LC Exposure
exists at the time a Lender becomes a Defaulting Lender, then:

(a) all or any part of such LC Exposure shall be reallocated among the
non-Defaulting Lenders in accordance with their respective Applicable
Percentages but only to the extent (x) the sum of all non-Defaulting Lenders’
Revolving Credit Exposures does not exceed the total of all non-Defaulting
Lenders’ Commitments and (y) the conditions set forth in Section 6.02 are
satisfied at such time;

(b) if the reallocation described in clause (a) above cannot, or can only
partially, be effected, the Borrower shall within one Business Day following
notice by the Administrative Agent, cash collateralize such Defaulting Lender’s
LC Exposure (after giving effect to any partial reallocation pursuant to clause
(a) above) in accordance with the procedures set forth in Section 2.08(j) for so
long as such LC Exposure is outstanding;

(c) if the Borrower cash collateralizes any portion of such Defaulting Lender’s
LC Exposure pursuant to this Section 2.09, the Borrower shall not be required to
pay any fees to such Defaulting Lender pursuant to Section 3.05(b) with respect
to such Defaulting Lender’s LC Exposure during the period such Defaulting
Lender’s LC Exposure is cash collateralized;

(d) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to
this Section 2.09, then the fees payable to the Lenders pursuant to
Section 3.05(a) and Section 3.05(b) shall be adjusted in accordance with such
non-Defaulting Lenders’ Applicable Percentages; or

 

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(e) if any Defaulting Lender’s LC Exposure is neither cash collateralized nor
reallocated pursuant to this Section 2.09, then, without prejudice to any rights
or remedies of the Issuing Bank or any Lender hereunder, all commitment fees
that otherwise would have been payable to such Defaulting Lender (solely with
respect to the portion of such Defaulting Lender’s Commitment that was utilized
by such LC Exposure) under Section 3.05(a) and letter of credit fees payable
under Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure shall
be payable to the Issuing Bank until such LC Exposure is cash collateralized
and/or reallocated.

Notwithstanding any provision of this Agreement to the contrary, so long as any
Lender is a Defaulting Lender, the Issuing Bank shall not be required to issue,
amend or increase any Letter of Credit, unless it is satisfied that the related
exposure will be 100% covered by the Commitments of the non-Defaulting Lenders
and/or cash collateral will be provided by the Borrower in accordance with
Section 2.08(j), and participating interests in any such newly issued or
increased Letter of Credit shall be allocated among non-Defaulting Lenders in a
manner consistent with Section 2.09(a) (and any Defaulting Lender shall not
participate therein). Nothing in this Section 2.09 shall relieve any Defaulting
Lender from any liability it may have to the Administrative Agent, any Loan
Party, any non-Defaulting Lender, any Issuing Bank or any other Agent in
connection with any obligation any such Defaulting Lender has under this
Agreement.

ARTICLE III

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

Section 3.01 Repayment of Loans. The Borrower hereby unconditionally promises to
pay to the Administrative Agent for the account of each Lender the then unpaid
principal amount of each Loan on the Termination Date.

Section 3.02 Interest.

(a) ABR Loans and LIBOR Market Index Loans. The Loans comprising each ABR
Borrowing shall bear interest at the Alternate Base Rate plus the Applicable
Margin, but in no event to exceed the Highest Lawful Rate. The Loans comprising
each LIBOR Market Index Borrowing shall bear interest at the LIBOR Market Index
Rate plus the Applicable Margin, but in no event to exceed the Highest Lawful
Rate.

(b) Eurodollar Loans. The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Margin, but in no event to exceed the Highest
Lawful Rate.

(c) Post-Default Rate and Borrowing Base Deficiency Rate. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing, or if any
principal of or interest on any Loan, including payments due resulting from
Borrowing Base Deficiencies or any fee or other amount payable by the Borrower
or any Guarantor hereunder or under any other Loan Document is not paid when
due, whether at stated maturity, upon acceleration or otherwise, and including
any payments in respect of a Borrowing Base Deficiency under Section 3.04(c),
then, all Loans outstanding, in the case of an Event of Default, and such
overdue amount, in the

 

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case of a failure to pay amounts when due, shall bear interest, after as well as
before judgment, at a rate per annum equal to two percent (2%) plus the rate
applicable to ABR Loans as provided in Section 3.02(a), but in no event to
exceed the Highest Lawful Rate.

(d) Interest Payment Dates. Accrued interest on each Loan shall be payable in
arrears on each Interest Payment Date for such Loan and on the Termination Date;
provided that (i) interest accrued pursuant to Section 3.02(c) shall be payable
on demand, (ii) in the event of any repayment or prepayment of any Loan (other
than an optional prepayment of an ABR Loan prior to the Termination Date),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment, and (iii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion.

(e) Interest Rate Computations. All interest hereunder shall be computed on the
basis of a year of 360 days, unless such computation would exceed the Highest
Lawful Rate, in which case interest shall be computed on the basis of a year of
365 days (or 366 days in a leap year), except that interest computed by
reference to the Alternate Base Rate at times when the Alternate Base Rate is
based on the Prime Rate shall be computed on the basis of a year of 365 days (or
366 days in a leap year), and in each case shall be payable for the actual
number of days elapsed (including the first day but excluding the last day). The
applicable Alternate Base Rate, LIBOR Market Index Rate, Adjusted LIBO Rate or
LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error, and be binding upon the
parties hereto.

Section 3.03 Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate or the LIBO Rate for such Interest Period;
or

(b) the Administrative Agent is advised by the Majority Lenders that the LIBOR
Market Index Rate, Adjusted LIBO Rate or LIBO Rate, as applicable, for such
Interest Period will not adequately and fairly reflect the cost to such Lenders
of making or maintaining their Loans included in such Borrowing for such
Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or facsimile as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made either as an ABR Borrowing or at an alternate rate of
interest determined by the Majority Lenders as their cost of funds.

 

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Section 3.04 Prepayments.

(a) Optional Prepayments. The Borrower shall have the right at any time and from
time to time to prepay any Borrowing in whole or in part, subject to prior
notice in accordance with Section 3.04(b).

(b) Notice and Terms of Optional Prepayment. The Borrower shall notify the
Administrative Agent by telephone (confirmed by facsimile) or in such other
manner authorized by the Administrative Agent of any prepayment hereunder (i) in
the case of prepayment of a Eurodollar Borrowing, not later than 12:00 p.m., New
York City time, three Business Days before the date of prepayment, or (ii) in
the case of prepayment of an ABR Borrowing or a LIBOR Market Index Borrowing,
not later than 12:00 p.m., New York City time, one Business Day before the date
of prepayment. Each such notice shall be irrevocable, shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to
be prepaid and shall otherwise be in a form reasonably acceptable to the
Administrative Agent; provided that, if a notice of prepayment is given in
connection with a conditional notice of termination of the Commitments as
contemplated by Section 2.06(b), then such notice of prepayment may be revoked
if such notice of termination is revoked in accordance with Section 2.06(b).
Promptly following receipt of any such notice relating to a Borrowing, the
Administrative Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of an advance of a Borrowing of the same Type as provided
in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the
Loans included in the prepaid Borrowing. Prepayments shall be accompanied by
accrued interest to the extent required by Section 3.02.

(c) Mandatory Prepayments.

(i) If, after giving effect to any termination or reduction of the Aggregate
Maximum Credit Amount pursuant to Section 2.06(b), or any reduction in the
Aggregate Elected Commitment Amount pursuant to Section 2.06(b) or
Section 2.06(c), the total Revolving Credit Exposures exceeds the total
Commitments, then the Borrower shall (A) prepay the Borrowings on the date of
such termination or reduction in an aggregate principal amount equal to such
excess, and (B) if any excess remains after prepaying all of the Borrowings as a
result of an LC Exposure, pay to the Administrative Agent on behalf of the
Lenders an amount equal to such excess to be held as cash collateral as provided
in Section 2.08(j).

(ii) Upon any redetermination of the amount of the Borrowing Base in accordance
with Section 2.07 (other than Section 2.07(e) or Section 2.07(f)) or adjustment
to the amount of the Borrowing Base in accordance with Section 8.13(c), if a
Borrowing Base Deficiency exists, then the Borrower shall within 30 days
following receipt of the New Borrowing Base Notice in accordance with
Section 2.07(d) or the date the adjustment occurs, as applicable, provide
written notice (the “Election Notice”) to the Administrative Agent stating the
action which the Borrower proposes to remedy such Borrowing Base Deficiency, and
the Borrower shall thereafter, at its option, either (A) on the date of delivery
of the Election Notice, prepay the Borrowings in an aggregate principal amount
sufficient to eliminate such Borrowing Base Deficiency, (B) eliminate

 

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such Borrowing Base Deficiency by making five consecutive mandatory prepayments
of principal on the Borrowings, each of which shall be in the amount of 1/5th of
the amount of such Borrowing Base Deficiency, with each such payment being due
on the date that is 30 days, 60 days, 90 days, 120 days and 150 days,
respectively, following the Borrower’s receipt of the New Borrowing Base Notice
in accordance with Section 2.07(d) or the date the adjustment occurs, as
applicable, (C) within 30 days following the delivery of the Election Notice,
submit (and pledge as Mortgaged Properties) additional Oil and Gas Properties
owned by the Borrower or any Guarantor for consideration in connection with the
determination of the Borrowing Base which the Administrative Agent and the
Lenders deem sufficient in their sole discretion to eliminate such Borrowing
Base Deficiency, or (D) within 30 days following the delivery of the Election
Notice, eliminate such excess through a combination of prepayments and
submission of additional Oil and Gas Properties as set forth in subclauses
(A) and (C) above. If any Borrowing Base Deficiency remains after prepaying all
of the Borrowings as a result of LC Exposure, then the Borrower shall pay to the
Administrative Agent on behalf of the Lenders an amount equal to such remaining
Borrowing Base Deficiency to be held as cash collateral as provided in
Section 2.08(j). The Borrower shall be obligated to deposit such cash collateral
amount within five Business Days following its receipt of the New Borrowing Base
Notice in accordance with Section 2.07(d) or the date the adjustment occurs, as
applicable; provided that all payments required to be made pursuant to this
Section 3.04(c)(ii) must be made on or prior to the Termination Date.

(iii) Upon any adjustments to the Borrowing Base pursuant to Section 2.07(e) or
Section 2.07(f) if the total Revolving Credit Exposures exceeds the Borrowing
Base as adjusted, then the Borrower shall (A) prepay the Borrowings in an
aggregate principal amount equal to such excess, and (B) if any excess remains
after prepaying all of the Borrowings as a result of an LC Exposure, pay to the
Administrative Agent on behalf of the Lenders an amount equal to such excess to
be held as cash collateral as provided in Section 2.08(j). The Borrower shall be
obligated to make such prepayment and/or deposit of cash collateral on the date
of such issuance of Permitted Senior Unsecured Notes or such disposition, as
applicable; provided that all payments required to be made pursuant to this
Section 3.04(c)(iii) must be made on or prior to the Termination Date.

(iv) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be
applied, first, ratably to any ABR Borrowings then outstanding, second, ratably
to any LIBOR Market Index Borrowings then outstanding, and third to any
Eurodollar Borrowings then outstanding, and if more than one Eurodollar
Borrowing is then outstanding, to such Eurodollar Borrowing in such order as the
Borrower may direct.

(v) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be
applied ratably to the Loans included in the prepaid Borrowings. Prepayments
pursuant to this Section 3.04(c) shall be accompanied by accrued interest to the
extent required by Section 3.02.

(d) No Premium or Penalty. Prepayments permitted or required under this
Section 3.04 shall be without premium or penalty, except as required under
Section 5.02.

 

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Section 3.05 Fees.

(a) Commitment Fees. The Borrower agrees to pay to the Administrative Agent for
the account of each Lender (on a pro rata basis in accordance with each Lender’s
Applicable Percentage) a commitment fee, which shall accrue at the applicable
Commitment Fee Rate on the average daily amount of Availability during the
period from and including the date of this Agreement to but excluding the
Termination Date. Accrued commitment fees shall be payable in arrears on the
last day of March, June, September and December of each year and on the
Termination Date, commencing on the first such date to occur after the date
hereof. All commitment fees shall be computed on the basis of a year of 360
days, unless such computation would exceed the Highest Lawful Rate, in which
case interest shall be computed on the basis of a year of 365 days (or 366 days
in a leap year), and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).

(b) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative
Agent for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the same Applicable
Margin used to determine the interest rate applicable to Eurodollar Loans on the
average daily amount of such Lender’s LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the date of this Agreement to but excluding the later of the date on
which such Lender’s Commitment terminates and the date on which such Lender
ceases to have any LC Exposure, (ii) to the Issuing Bank a fronting fee, which
shall accrue at the rate of 0.125% per annum on the average daily amount of the
LC Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date of this Agreement
to but excluding the later of the date of termination of the Commitments and the
date on which there ceases to be any LC Exposure, provided that in no event
shall such fee be less than $500 during any quarter, and (iii) to the Issuing
Bank, for its own account, its standard fees with respect to the issuance,
amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on the third Business Day following such last day, commencing on the
first such date to occur after the date of this Agreement; provided that all
such fees shall be payable on the Termination Date and any such fees accruing
after the Termination Date shall be payable on demand. Any other fees payable to
the Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10
Business Days after demand. All participation fees and fronting fees shall be
computed on the basis of a year of 360 days, unless such computation would cause
interest hereunder to exceed the Highest Lawful Rate, in which case such fees
shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).

(c) Administrative Agent Fees. The Borrower agrees to pay to the Administrative
Agent, for its own account, fees payable in the amounts and at the times
separately agreed upon between the Borrower and the Administrative Agent in the
Agency Fee Letter.

(d) Defaulting Lender Fees. The Borrower shall not be obligated to pay the
Administrative Agent any Defaulting Lender’s ratable share of the fees described
in Sections 3.05(a) and (b) for the period commencing on the day such Defaulting
Lender becomes a Defaulting Lender and continuing for so long as such Lender
continues to be a Defaulting Lender.

 

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ARTICLE IV

PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) Payments by the Borrower. The Borrower shall make each payment required to
be made by it hereunder (whether of principal, interest, fees or reimbursement
of LC Disbursements, or of amounts payable under Section 5.01, Section 5.02,
Section 5.03 or otherwise) prior to 12:00 p.m., New York City time, on the date
when due, in immediately available funds, without defense, deduction,
recoupment, set-off or counterclaim. Fees, once paid, shall be fully earned and
shall not be refundable under any circumstances. Any amounts received after such
time on any date may, in the discretion of the Administrative Agent, be deemed
to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the
Administrative Agent at its offices specified in Section 12.01, except payments
to be made directly to the Issuing Bank as expressly provided herein and except
that payments pursuant to Section 5.01, Section 5.02, Section 5.03 and
Section 12.03 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.

(b) Application of Insufficient Payments. If at any time insufficient funds are
received by and available to the Administrative Agent to pay fully all amounts
of principal, unreimbursed LC Disbursements, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of interest
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, towards payment of principal and unreimbursed LC Disbursements then
due hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal and unreimbursed LC Disbursements then due to such parties.

(c) Sharing of Payments by Lenders. If any Lender shall, by exercising any right
of set-off or counterclaim or otherwise, obtain payment in respect of any
principal of or interest on any of its Loans or participations in LC
Disbursements resulting in such Lender receiving payment of a greater proportion
of the aggregate amount of its Loans and participations in LC Disbursements and
accrued interest thereon than the proportion received by any other Lender, then
the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Loans and participations in LC Disbursements of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in

 

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accordance with the aggregate amount of principal of and accrued interest on
their respective Loans and participations in LC Disbursements; provided that
(i) if any such participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded
and the purchase price restored to the extent of such recovery, without
interest, and (ii) the provisions of this Section 4.01(c) shall not be construed
to apply to any payment made by the Borrower pursuant to and in accordance with
the express terms of this Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Loans or participations in LC Disbursements to any assignee or participant,
other than to the Borrower or any Subsidiary or Affiliate thereof (as to which
the provisions of this Section 4.01(c) shall apply). The Borrower consents to
the foregoing and agrees, to the extent it may effectively do so under
applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.

Section 4.02 Presumption of Payment by the Borrower. Unless the Administrative
Agent shall have received notice from the Borrower prior to the date on which
any payment is due to the Administrative Agent for the account of the Lenders or
the Issuing Bank that the Borrower will not make such payment, the
Administrative Agent may assume that the Borrower has made such payment on such
date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or the Issuing Bank, as the case may be, the amount
due. In such event, if the Borrower has not in fact made such payment, then each
of the Lenders or the Issuing Bank, as the case may be, severally agrees to
repay to the Administrative Agent forthwith on demand the amount so distributed
to such Lender or Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.

Section 4.03 Certain Deductions by the Administrative Agent. If any Lender shall
fail to make any payment required to be made by it pursuant to Section 2.05(a),
Section 2.08(d), Section 2.08(e), or Section 4.02 or otherwise hereunder, then
the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender’s obligations under
such Sections until all such unsatisfied obligations are fully paid. If at any
time prior to the acceleration or maturity of the Loans, the Administrative
Agent shall receive any payment in respect of principal of a Loan or a
reimbursement of an LC Disbursement while one or more Defaulting Lenders shall
be party to this Agreement, the Administrative Agent shall apply such payment
first to the Borrowing(s) for which such Defaulting Lender(s) shall have failed
to fund its pro rata share until such time as such Borrowing(s) are paid in full
or each Lender (including each Defaulting Lender) is owed its Applicable
Percentage of all Loans then outstanding. After acceleration or maturity of the
Loans, all principal will be paid ratably as provided in Section 10.02(c).

Section 4.04 Disposition of Proceeds. The Security Instruments contain an
assignment by the Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Secured Parties of all of the
Borrower’s or each Guarantor’s interest in and to

 

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production and all proceeds attributable thereto which may be produced from or
allocated to the Mortgaged Property. The Security Instruments further provide in
general for the application of such proceeds to the satisfaction of the
Indebtedness and other obligations described therein and secured thereby.
Notwithstanding the assignment contained in such Security Instruments, until the
occurrence of an Event of Default, (a) the Administrative Agent and the Lenders
agree that they will neither notify the purchaser or purchasers of such
production nor take any other action to cause such proceeds to be remitted to
the Administrative Agent or the Lenders, but the Administrative Agent and the
Lenders will instead permit such proceeds to be paid to the Borrower and the
Guarantors and (b) the Lenders hereby authorize the Administrative Agent to take
such actions as may be necessary to cause such proceeds to be paid to the
Borrower and/or such Guarantors.

ARTICLE V

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

Section 5.01 Increased Costs.

(a) Eurodollar Changes in Law. If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate); or

(ii) impose on any Lender or the London interbank market any other condition
affecting this Agreement or Eurodollar Loans made by such Lender;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or otherwise), then
the Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.

(b) Capital Requirements. If any Lender or the Issuing Bank determines that any
Change in Law regarding capital or liquidity requirements has or would have the
effect of reducing the rate of return on such Lender’s or the Issuing Bank’s
capital or on the capital of such Lender’s or the Issuing Bank’s holding
company, if any, as a consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by the Issuing Bank, to a level below that which such Lender or
the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could
have achieved but for such Change in Law (taking into consideration such
Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the
Issuing Bank’s holding company with respect to capital adequacy or liquidity),
then from time to time the Borrower will pay to such Lender or the Issuing Bank,
as the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding
company for any such reduction suffered.

 

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(c) Certificates. A certificate of a Lender or the Issuing Bank setting forth
the amount or amounts necessary to compensate such Lender or the Issuing Bank or
its holding company, as the case may be, as specified in Section 5.01(a) or
(b) shall be delivered to the Borrower and shall be conclusive absent manifest
error. The Borrower shall pay such Lender or the Issuing Bank, as the case may
be, the amount shown as due on any such certificate within 10 Business Days
after receipt thereof.

(d) Effect of Failure or Delay in Requesting Compensation. Failure or delay on
the part of any Lender or the Issuing Bank to demand compensation pursuant to
this Section 5.01 shall not constitute a waiver of such Lender’s or the Issuing
Bank’s right to demand such compensation; provided that the Borrower shall not
be required to compensate a Lender or the Issuing Bank pursuant to this
Section 5.01 for any increased costs or reductions incurred more than 365 days
prior to the date that such Lender or the Issuing Bank, as the case may be,
notifies the Borrower of the Change in Law giving rise to such increased costs
or reductions and of such Lender’s or the Issuing Bank’s intention to claim
compensation therefor; provided further that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 365-day period
referred to above shall be extended to include the period of retroactive effect
thereof.

Section 5.02 Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default),
(b) the conversion of any Eurodollar Loan into an ABR Loan or a LIBOR Market
Index Loan other than on the last day of the Interest Period applicable thereto,
(c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on
the date specified in any notice delivered pursuant hereto, or (d) the
assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to
Section 5.04(b), then, in any such event, the Borrower shall compensate each
Lender for the loss, cost and expense attributable to such event (exclusive of
any lost profits or opportunity costs or processing or other related fees). In
the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be
deemed to include an amount determined by such Lender to be the excess, if any,
of (i) the amount of interest which would have accrued on the principal amount
of such Loan had such event not occurred, at the Adjusted LIBO Rate that would
have been applicable to such Loan, for the period from the date of such event to
the last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been the
Interest Period for such Loan), over (ii) the amount of interest which would
accrue on such principal amount for such period at the interest rate which such
Lender would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the eurodollar
market.

A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 Business
Days after receipt thereof; provided that the Borrower shall not have any
obligation to make any payment for any loss, cost or expense incurred by a
Lender as a result of an event described in this Section 5.02 if such event
occurred more than 180 days prior to the date such Lender notifies the Borrower
of the amount thereof; provided further that, if such event giving rise to such
loss, cost or expense is retroactive, then the 180-day period referred to above
shall be extended to include the period of retroactive effect thereof.

 

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Section 5.03 Taxes.

(a) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower or any Guarantor shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 5.03(a)), the Administrative Agent, Lender or Issuing Bank (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower or such Guarantor shall make such
deductions and (iii) the Borrower or such Guarantor shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.

(b) Payment of Other Taxes by the Borrower. The Borrower shall pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent, each Lender and the Issuing Bank, within 10 Business Days
after written demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank,
as the case may be, on or with respect to any payment by or on account of any
obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this
Section 5.03) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate of the Administrative Agent, a Lender or
the Issuing Bank as to the amount of such payment or liability under this
Section 5.03 shall be delivered to the Borrower and shall be conclusive absent
manifest error; provided that the Borrower shall not have any obligation to
indemnify the Administrative Agent, such Lender or the Issuing Bank for any
amounts paid by the Administrative Agent, such Lender or the Issuing Bank under
this Section 5.03 more than two years prior to the date the Administrative
Agent, such Lender or the Issuing Bank notifies the Borrower of the amount of
such payment; provided further that, if such amounts paid by the Administrative
Agent, such Lender or the Issuing Bank are required to be paid retroactively,
then the two year period referred to above shall be extended to include the
period of retroactive effect thereof.

(d) Indemnification by the Lenders. Each Lender shall severally indemnify the
Administrative Agent, within 10 days after demand therefor, for (i) any
Indemnified Taxes attributable to such Lender (but only to the extent that
Borrower has not already indemnified the Administrative Agent for such
Indemnified Taxes and without limiting the obligation of the Borrower to do so),
(ii) any Taxes attributable to such Lender’s failure to comply with the
provisions of Section 12.04(c) relating to the maintenance of a Participant
Register and (iii) any Excluded Taxes attributable to such Lender, in each case,
that are payable or paid by the

 

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Administrative Agent in connection with any Loan Document, and any reasonable
expenses arising therefrom or with respect thereto, whether or not such Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability delivered
to any Lender by the Administrative Agent shall be conclusive absent manifest
error. Each Lender hereby authorizes the Administrative Agent to set off and
apply any and all amounts at any time owing to such Lender under any Loan
Document or otherwise payable by the Administrative Agent to the Lender from any
other source against any amount due to the Administrative Agent under this
paragraph (d).

(e) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a
Governmental Authority, the Borrower shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.

(f) Status of Lenders.

(i) Any Lender that is entitled to an exemption from or reduction of withholding
tax with respect to payments made under any Loan Document shall deliver to the
Withholding Agent, at the time or times reasonably requested by the Withholding
Agent, such properly completed and executed documentation reasonably requested
by the Withholding Agent as will permit such payments to be made without
withholding or at a reduced rate of withholding. In addition, any Lender, if
reasonably requested by the Withholding Agent, shall deliver such other
documentation prescribed by applicable law or reasonably requested by the
Withholding Agent as will enable the Withholding Agent to determine whether or
not such Lender is subject to backup withholding or information reporting
requirements. Notwithstanding anything to the contrary in the preceding two
sentences, the completion, execution and submission of such documentation (other
than such documentation set forth in Section 5.03(f)(ii)(A) and (ii)(B) and
Section 5.03(g) below) shall not be required if in the Lender’s reasonable
judgment such completion, execution or submission would subject such Lender to
any material unreimbursed cost or expense or would materially prejudice the
legal or commercial position of such Lender.

(ii) Without limiting the generality of the foregoing, in the event that the
Borrower is a “United States person” as defined in Section 7701(a)(30) of the
Code,

(A) any Lender that is a “United States person” as defined in
Section 7701(a)(30) of the Code shall deliver to the Withholding Agent on or
prior to the date on which such Lender becomes a Lender under this Agreement
(and from time to time thereafter upon the reasonable request of the Withholding
Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt
from U.S. federal backup withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Withholding Agent (in such number of copies as shall be requested
by the recipient) on or prior to the date on which such Foreign Lender

 

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becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Withholding Agent), whichever of the following is
applicable:

(1) in the case of a Foreign Lender claiming the benefits of an income tax
treaty to which the United States is a party (x) with respect to payments of
interest under any Loan Document, executed originals of IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “interest” article of such tax treaty and (y) with respect to
any other applicable payments under any Loan Document, IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding tax
pursuant to the “business profits” or “other income” article of such tax treaty;

(2) executed originals of IRS Form W-8ECI;

(3) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code, (x) a certificate
substantially in the form of Exhibit G-1 to the effect that such Foreign Lender
is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10
percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B)
of the Code, or a “controlled foreign corporation” described in
Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and
(y) executed originals of IRS Form W-8BEN; or

(4) to the extent a Foreign Lender is not the beneficial owner, executed
originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a
U.S. Tax Compliance Certificate substantially in the form of Exhibit G-2 or
Exhibit G-3, IRS Form W-9, and/or other certification documents from each
beneficial owner, as applicable; provided that if the Foreign Lender is a
partnership and one or more direct or indirect partners of such Foreign Lender
are claiming the portfolio interest exemption, such Foreign Lender may provide a
U.S. Tax Compliance Certificate substantially in the form of Exhibit G-4 on
behalf of each such direct and indirect partner; and

(C) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Withholding Agent (in such number of copies as shall be requested
by the recipient) on or prior to the date on which such Foreign Lender becomes a
Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Withholding Agent), executed originals of any other
form prescribed by applicable law as a basis for claiming exemption from or a
reduction in U.S. federal withholding tax, duly completed, together with such
supplementary documentation as may be prescribed by applicable law to permit the
Withholding Agent to determine the withholding or deduction required to be made.

 

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Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Withholding Agent in writing of its
legal inability to do so.

(g) FATCA. If a payment made to a Lender under this Agreement would be subject
to United States Federal withholding tax imposed by FATCA if such Lender fails
to comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Withholding Agent, at the time or times prescribed by law
and at such time or times reasonably requested by the Withholding Agent, such
documentation prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Code) and such additional documentation
reasonably requested by the Withholding Agent as may be necessary for the
Withholding Agent to comply with its obligations under FATCA, to determine that
such Lender has complied with such Lender’s obligations under FATCA or to
determine the amount to deduct and withhold from such payment. Solely for
purposes of this Section 5.03(g), “FATCA” shall include any amendments made to
FATCA after the date of this Agreement.

Section 5.04 Mitigation Obligations; Replacement of Lenders.

(a) Designation of Different Lending Office. Each Lender may make any Loan or
incur any LC Exposure to the Borrower through any Lending Office, provided that
the exercise of this option shall not affect the obligation of the Borrower to
repay Loans and LC Disbursements in accordance with the terms of this Agreement.
If any Lender requests compensation under Section 5.01, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 5.03, then such
Lender shall use reasonable efforts to designate a different Lending Office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the
reasonable judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 5.01 or Section 5.03, as
the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.

(b) Replacement of Lenders. If any Lender requests compensation under
Section 5.01, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 5.03, or if any Lender shall require that its Loans be made and/or
maintained as ABR Loans rather than Eurodollar Loans pursuant to Section 5.05,
or if any Lender becomes a Defaulting Lender hereunder, then the Borrower may,
at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 12.04(b)), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (i) the
Borrower shall have received the prior written consent of the Administrative
Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans and participations in LC Disbursements,

 

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accrued interest thereon, accrued fees (subject to Section 3.05(d)) and all
other amounts payable to it hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the
case of all other amounts), and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 5.01 or payments required
to be made pursuant to Section 5.03, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.

Section 5.05 Illegality. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for any Lender or its applicable Lending
Office to honor its obligation to make or maintain Eurodollar Loans either
generally or having a particular Interest Period hereunder, then (a) such Lender
shall promptly notify the Borrower and the Administrative Agent thereof and such
Lender’s obligation to make such Eurodollar Loans shall be suspended (the
“Affected Loans”) until such time as such Lender may again make and maintain
such Eurodollar Loans and (b) all Affected Loans which would otherwise be made
by such Lender shall be made instead as ABR Loans (and, if such Lender so
requests by notice to the Borrower and the Administrative Agent, all Affected
Loans of such Lender then outstanding shall be automatically converted into ABR
Loans on the date specified by such Lender in such notice) and, to the extent
that Affected Loans are so made as (or converted into) ABR Loans, all payments
of principal which would otherwise be applied to such Lender’s Affected Loans
shall be applied instead to its ABR Loans.

Section 5.06 Availability of LIBOR Market Index Loans. Notwithstanding any other
provision of this Agreement, in the event that any Lender determines in its sole
discretion that LIBOR Market Index Loans are not available to be made by it for
any reason (including, without limitation, as a result of such Loans becoming
illegal or such Lender determining that adequate and reasonable means do not
exist for determining the LIBOR Market Index Rate), then (a) such Lender shall
promptly notify the Borrower and the Administrative Agent thereof, (b) such
Lender and no other Lender shall be required to make LIBOR Market Index Loans
(and the Borrower shall not be entitled to request LIBOR Market Index Loans or
convert any other Loans into LIBOR Market Index Loans) until such Lender
notifies the Borrower and the Administrative Agent that LIBOR Market Index Loans
are again available to be made by such Lender, and (c) if such Lender so
requests by notice to the Borrower and the Administrative Agent, all LIBOR
Market Index Loans of such Lender then outstanding shall be automatically
converted into ABR Loans on the date specified by such Lender in such notice.

ARTICLE VI

CONDITIONS PRECEDENT

Section 6.01 Effective Date. The obligations of the Lenders to make Loans and of
the Issuing Bank to issue Letters of Credit hereunder shall not become effective
until the date on which each of the following conditions is satisfied (or waived
in accordance with Section 12.02):

(a) the Administrative Agent, the Arranger and the Lenders shall have received
all commitment, facility and agency fees and all other fees and amounts due and
payable on or prior to the Effective Date, including, to the extent invoiced,
reimbursement or

 

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payment of all reasonable out-of-pocket expenses required to be reimbursed or
paid by the Borrower hereunder (including, without limitation, the reasonable
fees and expenses of Vinson & Elkins L.L.P., counsel to the Administrative
Agent);

(b) the Administrative Agent shall have received a certificate of the Secretary
or an Assistant Secretary of the Borrower and each Guarantor setting forth
(i) resolutions of its board of directors (or comparable governing body) with
respect to the authorization of the Borrower or such Guarantor to execute and
deliver the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of the Borrower
or such Guarantor (y) who are authorized to sign the Loan Documents to which the
Borrower or such Guarantor is a party and (z) who will, until replaced by
another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of such authorized officers, and
(iv) the Organizational Documents of the Borrower and such Guarantor, certified
as being true and complete. The Administrative Agent and the Lenders may
conclusively rely on such certificate until the Administrative Agent receives
notice in writing from the Borrower to the contrary;

(c) the Administrative Agent shall have received certificates of the appropriate
State agencies with respect to the existence, qualification and good standing of
the Loan Parties;

(d) the Administrative Agent shall have received from each party hereto
counterparts (in such number as may be requested by the Administrative Agent) of
this Agreement signed on behalf of such party;

(e) the Administrative Agent shall have received duly executed Notes payable to
each Lender that has requested a Note pursuant to Section 2.02(d) in a principal
amount equal to its Maximum Credit Amount dated as of the date hereof;

(f) the Administrative Agent shall have received from each party thereto duly
executed counterparts (in such number as may be requested by the Administrative
Agent) of the Security Instruments required as of the Effective Date, including
the Initial Security Agreement, the Guaranty Agreement, the mortgages and the
other Security Instruments described on Exhibit E-1. In connection with the
execution and delivery of such Security Instruments, the Administrative Agent
shall be reasonably satisfied that the Security Instruments will, when properly
recorded (or when the applicable financing statements related thereto are
properly filed or such other actions needed to perfect are taken) create first
priority, perfected Liens (subject only to Excepted Liens identified in clauses
(a) to (d) and (f) of the definition thereof, but subject to the provisos at the
end of such definition) on at least 80% of the total value of the Oil and Gas
Properties evaluated in the Initial Reserve Report and on all other Property
purported to be pledged as collateral pursuant to the Security Instruments;

(g) the Administrative Agent shall have received an opinion of Akin Gump Strauss
Hauer & Feld, LLP, special counsel to the Borrower and the Guarantors, and of
local counsel in each jurisdiction reasonably requested by the Administrative
Agent, in each case in form and substance reasonably acceptable to the
Administrative Agent and its counsel;

 

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(h) the Administrative Agent shall have received a certificate of insurance
coverage of the Loan Parties evidencing that the Loan Parties are carrying
insurance in accordance with Section 7.12;

(i) the Administrative Agent shall have received title information as the
Administrative Agent may reasonably require satisfactory to the Administrative
Agent setting forth the status of title to at least 80% of the total value of
the Oil and Gas Properties evaluated in the Initial Reserve Report;

(j) the Administrative Agent shall be reasonably satisfied with the
environmental condition of the Oil and Gas Properties of the Borrower and the
Guarantors;

(k) the Administrative Agent shall have received a certificate of a Responsible
Officer of the Borrower certifying that the Borrower has received all consents
and approvals required by Section 7.03;

(l) the Administrative Agent shall have received the financial statements
referred to in Section 7.04(a) and the Initial Reserve Report accompanied by a
certificate covering the matters described in Section 8.12(c);

(m) the Administrative Agent shall have received appropriate UCC search
certificates and county-level real property record search results reflecting no
prior Liens encumbering the Properties of the Loan Parties for each jurisdiction
requested by the Administrative Agent; other than those being assigned or
released on or prior to the Effective Date or Liens permitted by Section 9.03;

(n) the Administrative Agent shall have received a certificate of a Responsible
Officer of the Borrower certifying (i) that the Borrower is concurrently
consummating the MRD LLC Contribution in accordance with all Governmental
Requirements and the terms of the MRD LLC Contribution Agreement (with all of
the material conditions precedent thereto having been satisfied in all material
respects by the parties thereto), (ii) that the Borrower is concurrently
consummating the WildHorse Management Equity Acquisition in accordance with all
Governmental Requirements and the terms of the WildHorse Management Equity
Contribution Agreement (with all of the material conditions precedent thereto
having been satisfied in all material respects by the parties thereto), (iii) as
to the final purchase price and form of consideration for the Equity Interests
purchased pursuant to the WildHorse Management Equity Contribution Agreement,
(iv) that Black Diamond has merged or is concurrently merging with and into MRD
Operating with MRD Operating being the surviving entity following such merger,
(v) that WildHorse has sold or is concurrently selling its Equity Interests in
WHR Management Company to WildHorse Resources II, LLC, a Delaware limited
liability company, and (vi) that attached to such certificate are true, complete
and executed copies of the WHR Services Agreement, the MRD LLC Contribution
Agreement, the WildHorse Management Equity Contribution Agreement and each other
material agreement pertaining to the foregoing transactions;

 

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(o) the Administrative Agent shall have received from the Borrower a written
policy regarding the Loan Parties’ marketing activities for Hydrocarbons and
furnish a copy thereof to the Administrative Agent and the Lenders, such policy
to be in form and substance reasonably satisfactory to the Majority Lenders;

(p) on the Effective Date, none of the Loan Parties shall have any Debt (other
than Indebtedness or Debt permitted hereunder);

(q) the consummation of the Borrower IPO pursuant to an effective registration
statement under the Securities Act filed on Form S-1 shall have occurred in
accordance in all material respects with such Form S-1, and shall have resulted
in aggregate gross primary proceeds received by the Borrower at the public
offering price of at least $400,000,000;

(r) the Administrative Agent shall have received evidence reasonably
satisfactory to Administrative Agent that, concurrently with the funding of the
initial Loan under this Agreement and that upon such payment, (i) all amounts
due under any revolving and term loan credit facility provided to the Loan
Parties (other than this Agreement) have been paid in full including, without
limitation, the revolving credit facility under that certain Amended and
Restated Credit Agreement dated as of April 3, 2013 among WildHorse, as
borrower, the lenders party thereto and Bank of Montreal, as administrative
agent, and the second lien term loan facility under that certain Second Lien
Term Loan Credit Agreement dated as of June 13, 2013 among WildHorse, as
borrower, the lenders party thereto and Wells Fargo Bank, National Association,
as administrative agent, (ii) all commitments to lend under such credit
facilities have been terminated and (iii) all Liens securing such credit
facilities have been released;

(s) since December 31, 2013, there shall not have occurred any Material Adverse
Effect;

(t) all governmental and third party approvals necessary in connection with the
Transactions, the financing contemplated hereby and the continuing operations of
the Loan Parties (including shareholder approvals, if any) shall have been
obtained on terms reasonably satisfactory to the Administrative Agent and shall
be in full force and effect;

(u) the Administrative Agent shall have received, and satisfactorily completed
its review of, information regarding litigation, tax, accounting, labor,
insurance, pension liabilities (actual or contingent), real estate leases,
material contracts, debt agreements, property ownership, and contingent
liabilities of the Borrower and its Restricted Subsidiaries;

(v) the Administrative Agent and the Lenders shall have received a pro forma
balance sheet as to the Borrower and the Consolidated Restricted Subsidiaries
after giving effect to all elements of the Transactions to be consummated on or
before the Effective Date, and forecasts prepared by management of the Borrower
of balance sheets and income statements on a quarterly basis for the first year
following the Effective Date and on an annual basis for each year thereafter
during the term of this Agreement;

(w) the Administrative Agent shall have received evidence that all Swap
Agreements of the Loan Parties that existed prior to the Effective Date shall
have been terminated or otherwise novated to Lenders or Affiliates of Lenders,
in each case, on terms reasonably acceptable to the Administrative Agent;

 

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(x) after giving effect to the consummation of all of the Transactions on the
Effective Date, Availability shall be not less than $400,000,000 (it being
understood that the Transactions will occur sequentially on the Effective Date
(as more particularly described on Schedule 6.01) and that Availability will be
less than $400,000,000 on the Effective Date following the consummation of the
WildHorse Management Equity Acquisition and the repayment of all amounts owing
under the credit facilities referred to in Section 6.01(r), but prior to the
repayment of Loans hereunder with cash proceeds from the Borrower IPO);

(y) the Administrative Agent shall have received true and correct copies
(certified by a Responsible Officer of the Borrower) of all amendments,
supplemental indentures or other agreements relating to the PIK Toggle Notes
entered into on or prior to the Effective Date in connection with the
Transactions to occur on the Effective Date; and

(z) the Administrative Agent shall have received such other documents as the
Administrative Agent or special counsel to the Administrative Agent may
reasonably request.

Without limiting the generality of the provisions of Section 11.04, for purposes
of determining compliance with the conditions specified in this Section 6.01,
each Lender that has signed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or other matter
required under this Section 6.01 to be consented to or approved by or acceptable
or satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the Effective Date specifying its objection
thereto. All documents executed or submitted pursuant to this Section 6.01 by
and on behalf of the Borrower or any of its Subsidiaries shall be in form and
substance reasonably satisfactory to the Administrative Agent and its counsel.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.

Section 6.02 Each Credit Event. The obligation of each Lender to make a Loan on
the occasion of any Borrowing (including the initial funding), and of the
Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject
to the satisfaction of the following conditions:

(a) at the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default or Borrowing Base Deficiency shall have occurred and be
continuing;

(b) at the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no event, development or circumstance has occurred or shall then
exist that has resulted in, or could reasonably be expected to have, a Material
Adverse Effect;

(c) the representations and warranties of the Loan Parties set forth in this
Agreement and in the other Loan Documents shall be true and correct in all
material respects on and as of the date of such Borrowing or the date of
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, except that (i) to the extent any such representations and

 

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warranties are expressly limited to an earlier date, in which case, on and as of
the date of such Borrowing or the date of issuance, amendment, renewal or
extension of such Letter of Credit, as applicable, such representations and
warranties shall continue to be true and correct in all material respects as of
such specified earlier date and (ii) to the extent that any such representation
and warranty is qualified by materiality, such representation and warranty shall
continue to be true and correct in all respects;

(d) the making of such Loan or the issuance, amendment, renewal or extension of
such Letter of Credit, as applicable, shall not be prohibited by any applicable
Governmental Requirement, and no litigation shall be pending or threatened,
which does or, with respect to any threatened litigation, seeks to, enjoin,
prohibit or restrain, the making or repayment of any Loan, the issuance,
amendment, renewal, extension or repayment of any Letter of Credit or any
participations therein or the consummation of the transactions contemplated by
this Agreement or any other Loan Document; and

(e) the receipt by the Administrative Agent of a Borrowing Request in accordance
with Section 2.03 or a request for a Letter of Credit in accordance with
Section 2.08(b), as applicable.

Each request for a Borrowing and each request for the issuance, amendment,
renewal or extension of any Letter of Credit shall be deemed to constitute a
representation and warranty by the Borrower on the date thereof as to the
matters, and to the extent, specified in Section 6.02(a) through (d).

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders that:

Section 7.01 Organization; Powers. Each of the Loan Parties is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority, and has all material
governmental licenses, authorizations, consents and approvals necessary, to own
its assets and to carry on its business as now conducted, and is qualified to do
business in, and is in good standing in, every jurisdiction where such
qualification is required, except where failure to have such power, authority,
licenses, authorizations, consents, approvals and qualifications could not
reasonably be expected to have a Material Adverse Effect.

Section 7.02 Authority; Enforceability. The Transactions are within the Loan
Parties’ respective corporate powers and have been duly authorized by all
necessary corporate and, if required, stockholder action (including, without
limitation, any action required to be taken by any class of directors of the
Borrower or any other Person, whether interested or disinterested, in order to
ensure the due authorization of the Transactions). Each Loan Document to which
any Loan Party is a party has been duly executed and delivered by the Borrower
and such Guarantor and constitutes a legal, valid and binding obligation of the
Loan Parties, as applicable, enforceable in accordance with its terms, subject
to applicable Debtor Relief Laws and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.

 

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Section 7.03 Approvals; No Conflicts. The Transactions (a) do not require any
consent or approval of, registration or filing with, or any other action by, any
Governmental Authority or any other third Person (including shareholders,
members, partners or any class of directors or managers, whether interested or
disinterested, of the Borrower or any other Person), nor is any such consent,
approval, registration, filing or other action necessary for the validity or
enforceability of any Loan Document or the consummation of the transactions
contemplated thereby, except such as have been obtained or made and are in full
force and effect other than (i) the recording and filing of the Security
Instruments as required by this Agreement and (ii) those third party approvals
or consents which, if not made or obtained, would not cause a Default hereunder,
could not reasonably be expected to have a Material Adverse Effect and would not
have an adverse effect on the enforceability of the Loan Documents, (b) will not
violate any applicable law or regulation or the charter, bylaws or other
Organizational Documents of any Loan Party or any order of any Governmental
Authority, (c) will not violate or result in a default under any indenture or
other material agreement binding upon any Loan Party or its Properties, or give
rise to a right thereunder to require any payment to be made by any Loan Party
and (d) will not result in the creation or imposition of any Lien on any
material Property of any Loan Party (other than the Liens created by the Loan
Documents).

Section 7.04 Financial Condition; No Material Adverse Change.

(a) The Borrower has heretofore furnished to the Lenders (i) the audited
combined and consolidated balance sheet and audited, statements of income,
shareholders’ equity and cash flows of MRD LLC as of and for the fiscal year
ended December 31, 2013, reported on by KPMG LLP, independent public
accountants, (ii) the unaudited consolidated and combined balance sheet,
statements of income, shareholders’ equity and cash flows of MRD LLC as of and
for the fiscal quarter ended March 31, 2014, certified by its chief financial
officer and (iii) unaudited segment balance sheets, statements of income and
statements of cash flows, which are derived from the combined and consolidated
financial statements of MRD LLC, as of and for the (A) fiscal year ended
December 31, 2013 and (B) fiscal quarter ended March 31, 2014. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of MRD LLC and its consolidated
subsidiaries as of such dates and for such periods in accordance with GAAP,
subject to year-end audit adjustments and the absence of footnotes in the case
of the unaudited quarterly financial statements.

(b) Since December 31, 2013, (i) there has been no event, development or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the business of the Borrower and the other Loan Parties
has been conducted only in the ordinary course consistent with past business
practices.

(c) No Loan Party has on the date hereof any material Debt (including
Disqualified Capital Stock) or any contingent liabilities, off-balance sheet
liabilities or partnerships, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the Financial
Statements.

 

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Section 7.05 Litigation.

(a) Except as set forth on Schedule 7.05, there are no actions, suits,
investigations or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting any Loan Party (i) not fully covered by insurance (except
for normal deductibles) as to which there is a reasonable possibility of an
adverse determination that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect, (ii) that involve any Loan Document or the Transactions or (iii) that
could impair the consummation of the Transactions.

(b) Since the date of this Agreement, there has been no change in the status of
the matters disclosed in Schedule 7.05 that, individually or in the aggregate,
has resulted in a Material Adverse Effect.

Section 7.06 Environmental Matters. Except for such matters as set forth on
Schedule 7.06 or that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on any Loan Party:

(a) the Loan Parties and each of their respective Properties and operations
thereon are, and within all applicable statute of limitation periods have been,
in compliance with all applicable Environmental Laws;

(b) the Loan Parties have obtained all Environmental Permits required for their
respective operations and each of their Properties, with all such Environmental
Permits being currently in full force and effect, and none of Borrower or the
other Loan Parties has received any written notice or otherwise has knowledge
that any such existing Environmental Permit will be revoked or that any
application for any new Environmental Permit or renewal of any existing
Environmental Permit will be protested or denied;

(c) there are no claims, demands, suits, orders, inquiries, or proceedings
concerning any violation of, or any liability (including as a potentially
responsible party) under, any applicable Environmental Laws that is pending or,
to Borrower’s knowledge, threatened against any Loan Party or any of their
respective Properties or as a result of any operations at such Properties;

(d) none of the Properties of the Loan Parties contain or have contained any:
(i) underground storage tanks; (ii) asbestos-containing materials;
(iii) landfills or dumps; (iv) hazardous waste management units as defined
pursuant to RCRA or any comparable state law; or (v) sites on or nominated for
the National Priority List promulgated pursuant to CERCLA or any state remedial
priority list promulgated or published pursuant to any comparable state law;

(e) there has been no Release or, to the Borrower’s knowledge, threatened
Release, of Hazardous Materials at, on, under or from the Loan Parties’
Properties, there are no investigations, remediations, abatements, removals, or
monitorings of Hazardous Materials required under applicable Environmental Laws
at such Properties and, to the knowledge of the Borrower, none of such
Properties are adversely affected by any Release or threatened Release of a
Hazardous Material originating or emanating from any other real property;

 

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(f) none of the Loan Parties has received any written notice asserting an
alleged liability or obligation under any applicable Environmental Laws with
respect to the investigation, remediation, abatement, removal, or monitoring of
any Hazardous Materials at, under, or Released or threatened to be Released from
any real properties offsite the Borrower’s or any other Loan Party’s Properties
and, to the Borrower’s knowledge, there are no conditions or circumstances that
could reasonably be expected to result in the receipt of such written notice;

(g) there has been no exposure of any Person or Property to any Hazardous
Materials as a result of or in connection with the operations and businesses of
any of the Loan Parties’ Properties that could reasonably be expected to form
the basis for a claim for damages or compensation; and

(h) the Loan Parties have provided to the Lenders complete and correct copies of
all material environmental site assessment reports, investigations, studies,
analyses, and correspondence on environmental matters (including matters
relating to any alleged non-compliance with or liability under Environmental
Laws) that are in any of the Borrower’s or any other Loan Party’s possession or
control and relating to their respective Properties or operations thereon.

Section 7.07 Compliance with the Laws and Agreements; No Defaults or Borrowing
Base Deficiency.

(a) Each of the Loan Parties is in compliance with all Governmental Requirements
applicable to it or its Property and all agreements and other instruments
binding upon it or its Property, and possesses all licenses, permits,
franchises, exemptions, approvals and other governmental authorizations
necessary for the ownership of its Property and the conduct of its business,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

(b) None of the Loan Parties is in default nor has any event or circumstance
occurred which, but for the expiration of any applicable grace period or the
giving of notice, or both, would constitute a default or would require the
Borrower or any other Loan Party to Redeem or make any offer to Redeem under any
indenture, note, credit agreement or instrument pursuant to which any Material
Indebtedness is outstanding or by which the Borrower or any other Loan Party or
any of their Properties is bound.

(c) No Default or Borrowing Base Deficiency has occurred and is continuing.

Section 7.08 Investment Company Act. None of the Loan Parties is an “investment
company” or a company “controlled” by an “investment company,” within the
meaning of, or subject to regulation under, the Investment Company Act of 1940,
as amended.

Section 7.09 Taxes. Each of the Loan Parties has timely filed or caused to be
filed all Tax returns and reports required to have been filed and has paid or
caused to be paid all Taxes required to have been paid by it, except (a) Taxes
that are being contested in good faith by appropriate proceedings and for which
the Borrower or such other Loan Party, as applicable, has set aside on its books
adequate reserves in accordance with GAAP or (b) to the extent that the failure
to do so could not reasonably be expected to result in a Material Adverse
Effect. The

 

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charges, accruals and reserves on the books of the Loan Parties in respect of
Taxes and other governmental charges are, in the reasonable opinion of the
Borrower, adequate. No Tax Lien has been filed and, to the knowledge of the
Borrower, no claim is being asserted with respect to any such Tax or other such
governmental charge.

Section 7.10 ERISA.

(a) the Loan Parties and each ERISA Affiliate have complied in all material
respects with ERISA and, where applicable, the Code regarding each Plan.

(b) Each Plan is, and has been, established and maintained in substantial
compliance with its terms, ERISA and, where applicable, the Code.

(c) No act, omission or transaction has occurred which could result in
imposition on the Borrower, any other Loan Party or any ERISA Affiliate (whether
directly or indirectly) of (i) either a civil penalty assessed pursuant to
subsections (c), (i), (l) or (m) of section 502 of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary
duty liability damages under section 409 of ERISA.

(d) Full payment when due has been made of all amounts which the Borrower, the
other Loan Parties or any ERISA Affiliate is required under the terms of each
Plan or applicable law to have paid as contributions to such Plan as of the date
hereof.

(e) None of the Loan Parties nor any ERISA Affiliate sponsors, maintains, or
contributes to an employee welfare benefit plan, as defined in section 3(1) of
ERISA, including, without limitation, any such plan maintained to provide
benefits to former employees of such entities, that may not be terminated by the
Borrower, any other Loan Party or any ERISA Affiliate in its sole discretion at
any time without any material liability.

(f) None of the Loan Parties nor any ERISA Affiliate sponsors, maintains or
contributes to, or has at any time in the six-year period preceding the date
hereof sponsored, maintained or contributed to, any employee pension benefit
plan, as defined in section 3(2) of ERISA, that is subject to Title IV of ERISA,
section 302 of ERISA or section 412 of the Code.

Section 7.11 Disclosure; No Material Misstatements. The Borrower has disclosed
to the Administrative Agent and the Lenders all agreements, instruments and
corporate or other restrictions to which any Loan Party is subject, and all
other matters known to it, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. Neither the
Information Memorandum nor any of the other reports, financial statements,
certificates or other information furnished by or on behalf of the Loan Parties
to the Administrative Agent or any Lender or any of their Affiliates in
connection with the negotiation of this Agreement or any other Loan Document or
delivered hereunder or under any other Loan Document (as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time. There
is no fact peculiar to the Loan Parties which could reasonably be expected to
have a

 

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Material Adverse Effect or in the future is reasonably likely to have a Material
Adverse Effect and which has not been set forth in this Agreement or the Loan
Documents or the other documents, certificates and statements furnished to the
Administrative Agent or the Lenders by or on behalf of the Loan Parties prior
to, or on, the date hereof in connection with the transactions contemplated
hereby. There are no statements or conclusions in any Reserve Report which are
based upon or include misleading information or fail to take into account
material information regarding the matters reported therein, it being understood
that projections concerning volumes attributable to the Oil and Gas Properties
of the Borrower and the other Loan Parties and production and cost estimates
contained in each Reserve Report are necessarily based upon professional
opinions, estimates and projections and that the Borrower and the other Loan
Parties do not warrant that such opinions, estimates and projections will
ultimately prove to have been accurate.

Section 7.12 Insurance. The Loan Parties have (a) all insurance policies
sufficient for the compliance by each of them with all material Governmental
Requirements and all material agreements and (b) insurance coverage in at least
amounts and against such risk (including, without limitation, public liability)
that are usually insured against by companies similarly situated and engaged in
the same or a similar business for the assets and operations of the Loan
Parties. The Administrative Agent and the Lenders have been named as additional
insureds in respect of such liability insurance policies and the Administrative
Agent has been named as loss payee with respect to Property loss insurance.

Section 7.13 Restriction on Liens. None of the Loan Parties is a party to any
material agreement or arrangement, or subject to any order, judgment, writ or
decree, which either restricts or purports to restrict its ability to grant
Liens to the Administrative Agent and the Secured Parties on or in respect of
their Properties to secure the Indebtedness and the Loan Documents.

Section 7.14 Subsidiaries. Except as set forth on Schedule 7.14 or as disclosed
in writing to the Administrative Agent (which shall promptly furnish a copy to
the Lenders), which shall be a supplement to Schedule 7.14, the Borrower has no
Subsidiaries and the Borrower has no Foreign Subsidiaries. Schedule 7.14
identifies each Subsidiary as (a) either a Guarantor or not a Guarantor and
(b) either a Restricted Subsidiary or an Unrestricted Subsidiary, and each
Restricted Subsidiary on such schedule is a Wholly-Owned Subsidiary. Schedule
7.14 sets forth, as of the Effective Date (after giving effect to the
Transactions), (i) the Persons (and their percentage ownership) that own Equity
Interests in Restricted Subsidiaries and (ii) all Equity Interests in
Unrestricted Subsidiaries owned by a Loan Party.

Section 7.15 Location of Business and Offices. The Borrower’s jurisdiction of
organization is Delaware; the name of the Borrower as listed in the public
records of its jurisdiction of organization is Memorial Resource Development
Corp.; and the organizational identification number of the Borrower in its
jurisdiction of organization is 5475182 (or, in each case, as set forth in a
notice delivered to the Administrative Agent pursuant to Section 8.01(n) in
accordance with Section 12.01). The Borrower’s principal place of business and
chief executive offices are located at the address specified in Section 12.01
(or as set forth in a notice delivered pursuant to Section 8.01(n) and
Section 12.01(c)). Each Restricted Subsidiary’s jurisdiction of organization,
name as listed in the public records of its jurisdiction of organization,

 

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organizational identification number in its jurisdiction of organization, and
the location of its principal place of business and chief executive office is
stated on Schedule 7.14 (or as set forth in a notice delivered pursuant to
Section 8.01(n)).

Section 7.16 Properties; Titles, Etc.

(a) Each of the Loan Parties has good and defensible title to the Oil and Gas
Properties evaluated in the most recently delivered Reserve Report and good
title to all its material personal Properties, in each case, free and clear of
all Liens except Liens permitted by Section 9.03. After giving full effect to
the Excepted Liens, the Loan Party specified as the owner owns the net interests
in production attributable to the Hydrocarbon Interests as reflected in the most
recently delivered Reserve Report, and the ownership of such Properties shall
not in any material respect obligate such Loan Party to bear the costs and
expenses relating to the maintenance, development and operations of each such
Property in an amount in excess of the working interest of each Property set
forth in the most recently delivered Reserve Report that is not offset by a
corresponding proportionate increase in the Borrower’s or such other Loan
Party’s net revenue interest in such Property.

(b) All material leases and agreements necessary for the conduct of the business
of the Loan Parties are valid and subsisting, in full force and effect, and
there exists no default or event or circumstance which with the giving of notice
or the passage of time or both would give rise to a default under any such
leases or agreements, which could reasonably be expected to have a Material
Adverse Effect.

(c) The rights and Properties presently owned, leased or licensed by each Loan
Party including, without limitation, all easements and rights of way, include
all rights and Properties necessary to permit each Loan Party to conduct its
business in all material respects in the same manner as its business has been
conducted prior to the date hereof.

(d) All of the Properties of the Loan Parties which are reasonably necessary for
the operation of their businesses are in good working condition and are
maintained in accordance with prudent business standards except for such failure
as to condition or maintenance as could not be reasonably expected to have a
Material Adverse Effect.

(e) Each Loan Party owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents and other intellectual Property material to its business,
and the use thereof by the Borrower and such other Loan Parties does not
infringe upon the rights of any other Person, except for any such infringements
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect. The Loan Parties either own or have valid
licenses or other rights to use all databases, geological data, geophysical
data, engineering data, seismic data, maps, interpretations and other technical
information used in their businesses as presently conducted, subject to the
limitations contained in the agreements governing the use of the same, which
limitations are customary for companies engaged in the business of the
exploration and production of Hydrocarbons, with such exceptions as could not
reasonably be expected to have a Material Adverse Effect.

 

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Section 7.17 Maintenance of Properties. Except for such acts or failures to act
as could not be reasonably expected to have a Material Adverse Effect, the Oil
and Gas Properties (and Properties unitized therewith) of the Loan Parties have
been maintained, operated and developed in a good and workmanlike manner and in
conformity with all Governmental Requirements and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the
Oil and Gas Properties of the Borrower and the other Loan Parties. Specifically
in connection with the foregoing, except for those as could not be reasonably
expected to have a Material Adverse Effect, (i) no Oil and Gas Property of the
Loan Parties is subject to having allowable production reduced below the full
and regular allowable (including the maximum permissible tolerance) because of
any overproduction (whether or not the same was permissible at the time) and
(ii) none of the wells comprising a part of the Oil and Gas Properties (or
Properties unitized therewith) of the Loan Parties is deviated from the vertical
more than the maximum permitted by Governmental Requirements, and such wells
are, in fact, bottomed under and are producing from, and the well bores are
wholly within, the Oil and Gas Properties (or in the case of wells located on
Properties unitized therewith, such unitized Properties) of the Loan Parties.
All pipelines, wells, gas processing plants, platforms and other material
improvements, fixtures and equipment owned in whole or in part by the Loan
Parties that are necessary to conduct normal operations are being maintained in
a state adequate to conduct normal operations, and with respect to such of the
foregoing which are operated by the Loan Parties, in a manner consistent with
the Loan Parties’ past practices (other than those the failure of which to
maintain in accordance with this Section 7.17 could not reasonably be expected
to have a Material Adverse Effect).

Section 7.18 Gas Imbalances, Prepayments. Except as set forth on Schedule 7.18
or on the most recent certificate delivered pursuant to Section 8.12(c), on a
net basis there are no gas imbalances, take or pay or other prepayments which
would require the Borrower or any of its Restricted Subsidiaries to deliver
Hydrocarbons produced from their Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor exceeding one-half
bcf of gas (on an mcf equivalent basis) in the aggregate.

Section 7.19 Marketing of Production. Except for contracts listed and in effect
on the date hereof on Schedule 7.19, and thereafter either disclosed in writing
to the Administrative Agent or included in the most recently delivered Reserve
Report (with respect to all of which contracts the Borrower represents that it
or its Restricted Subsidiaries are receiving a price for all production sold
thereunder which is computed substantially in accordance with the terms of the
relevant contract and are not having deliveries curtailed substantially below
the subject Property’s delivery capacity), no material agreements exist which
are not cancelable on 60 days’ notice or less without penalty or detriment for
the sale of production from the Borrower’s or the other Loan Parties’
Hydrocarbons (including, without limitation, calls on or other rights to
purchase, production, whether or not the same are currently being exercised)
that (a) pertain to the sale of production at a fixed price and (b) have a
maturity or expiry date of longer than six (6) months from the date hereof.

Section 7.20 Swap Agreements and Qualified ECP Guarantor. Schedule 7.20, as of
the date hereof, and after the date hereof, each report required to be delivered
by the Borrower pursuant to Section 8.01(e), sets forth, a true and complete
list of all Swap Agreements of the

 

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Borrower and each other Loan Party, the material terms thereof (including the
type, term, effective date, termination date and notional amounts or volumes),
the net mark-to-market value thereof, all credit support agreements relating
thereto and the counterparty to each such agreement. The Borrower has total
assets exceeding $10,000,000 and is a Qualified ECP Guarantor.

Section 7.21 Use of Loans and Letters of Credit. The proceeds of the Loans and
the Letters of Credit shall be used (a) on the Effective Date, to fund a portion
of the purchase price of the WildHorse Management Equity Acquisition, to
refinance certain existing Debt of the Loan Parties as set forth in
Section 6.01(r), and to pay fees, commissions and expenses incurred in
connection with the Transactions and (b) following the Effective Date, to
provide working capital for exploration and production operations, for general
corporate purposes (including, without limitation, financing Acquisitions and
Investments and Redemption of 100% of the PIK Toggle Notes, in each case to the
extent permitted hereunder). The Loan Parties are not engaged principally, or as
one of its or their important activities, in the business of extending credit
for the purpose, whether immediate, incidental or ultimate, of buying or
carrying margin stock (within the meaning of Regulation T, U or X of the Board).
No part of the proceeds of any Loan or Letter of Credit will be used whether on
or following the Effective Date for any purpose which violates the provisions of
Regulations T, U or X of the Board. No Letter of Credit will be used to post
margin or collateral to secure any Loan Party’s obligations under any Swap
Agreement with a Person other than a Lender or an Affiliate of a Lender.

Section 7.22 Solvency. After giving effect to the transactions contemplated
hereby, (a) the aggregate assets (after giving effect to amounts that could
reasonably be received by reason of indemnity, offset, insurance or any similar
arrangement), at a fair valuation, of the Loan Parties, taken as a whole, will
exceed the aggregate Debt of the Loan Parties on a consolidated basis, as the
Debt becomes absolute and matures, (b) each of the Loan Parties will not have
incurred or intended to incur, and will not believe that it will incur, Debt
beyond its ability to pay such Debt (after taking into account the timing and
amounts of cash to be received by each of the Borrower and the Guarantors and
the amounts to be payable on or in respect of its liabilities, and giving effect
to amounts that could reasonably be received by reason of indemnity, offset,
insurance or any similar arrangement) as such Debt becomes absolute and matures
and (c) each of the Loan Parties will not have (and will have no reason to
believe that it will have thereafter) unreasonably small capital for the conduct
of its business.

Section 7.23 Foreign Corrupt Practices. No Loan Party, nor any director,
officer, agent, employee or Affiliate of the Loan Parties is aware of or has
taken any action, directly or indirectly, that would result in a material
violation by such Persons of the FCPA, including, without limitation, making use
of the mails or any means or instrumentality of interstate commerce corruptly in
furtherance of an offer, payment, promise to pay or authorization of the payment
of any money, or other property, gift, promise to give, or authorization of the
giving of anything of value to any “foreign official” (as such term is defined
in the FCPA) or any foreign political party or official thereof or any candidate
for foreign political office, in contravention of the FCPA; and, the Loan
Parties and their Affiliates have conducted their business in material
compliance with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to continue to
ensure, continued compliance therewith.

 

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Section 7.24 OFAC. No Loan Party, nor to the knowledge of any Loan Party, any
director, officer, employee, agent or Affiliate of a Loan Party, is an
individual or entity that is, or is owned or controlled by any individual or
entity that is (a) currently the subject or target of any Sanctions or
(b) located, organized or resident in a Designated Jurisdiction.

ARTICLE VIII

AFFIRMATIVE COVENANTS

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents then outstanding shall have been paid in full
and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Lenders that:

Section 8.01 Financial Statements; Other Information. The Borrower will furnish
to the Administrative Agent and each Lender:

(a) Annual Financial Statements. As soon as available, but in any event in
accordance with then applicable law and not later than 15 days after annual
financial statements are required to be delivered to the SEC, the Borrower’s
(i) audited consolidated (combined with MEMP) and unaudited consolidating
(combined for the Borrower and the Guarantors) balance sheet and related
statements of operations, shareholders’ equity and cash flows as of the end of
and for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, all reported on by KPMG LLP or other independent
public accountants of recognized national standing (without a “going concern” or
like qualification or exception and without any qualification or exception as to
the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition and
results of operations of the Borrower and its Consolidated Restricted
Subsidiaries on a consolidated (combined with MEMP) and consolidating (combined
for the Borrower and the Guarantors) basis in accordance with GAAP consistently
applied; provided that the timely filing with the SEC of the Borrower’s annual
report on Form 10-K will satisfy the reporting requirements of this
Section 8.01(a) and (ii) unaudited segment balance sheets, audited segment
statements of income and unaudited segment statements of cash flows as of the
end of and for such year, which are derived from the consolidated (combined with
MEMP) and consolidating (combined for the Borrower and the Guarantors) financial
statements of the Borrower.

(b) Quarterly Financial Statements. For each of the first three fiscal quarters
of the Borrower’s fiscal year, as soon as available, but in any event in
accordance with then applicable law and not later than 15 days after quarterly
financial statements are required to be delivered to the SEC, the Borrower’s
(i) unaudited consolidated (combined with MEMP) and consolidating (combined for
the Borrower and the Guarantors) balance sheets and related statements of
operations, shareholders’ equity and cash flows as of the end of and for such
fiscal quarter and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the previous
fiscal year, all certified by one of its Financial Officers as presenting fairly
in all material respects the financial condition and results of operations of
the Borrower and its Consolidated Restricted Subsidiaries on a consolidated
(combined with

 

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MEMP) and consolidating (combined for the Borrower and the Guarantors) basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes; provided that the timely filing with
the SEC of the Borrower’s quarterly reports on Form 10-Q will satisfy the
reporting requirements of this Section 8.01(b) and (ii) unaudited segment
balance sheets, unaudited segment statements of income and unaudited segment
statements of cash flows as of the end of and for such fiscal quarter and the
then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of) the previous fiscal year, which
are derived from the consolidated (combined with MEMP) and consolidating
(combined for the Borrower and the Guarantors) financial statements of the
Borrower.

(c) Certificate of Financial Officer – Compliance. Concurrently with any
delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer in substantially the form of Exhibit D hereto
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 8.13(a), Section 8.14(a) and Section 9.01
and (iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 7.04 and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate.

(d) Certificate of Financial Officer – Consolidating Information. If, at any
time, all of the Consolidated Subsidiaries of the Borrower are not Consolidated
Restricted Subsidiaries, then concurrently with any delivery of financial
statements under Section 8.01(a) or Section 8.01(b), a certificate of a
Financial Officer setting forth consolidating and segment spreadsheets that show
all Consolidated Unrestricted Subsidiaries and the eliminating entries, in such
form as would be presentable to the auditors of the Borrower.

(e) Certificate of Financial Officer – Swap Agreements. Concurrently with any
delivery of financial statements under Section 8.01(a) and Section 8.01(b) and
the delivery of each Reserve Report hereunder, a certificate of a Financial
Officer, in form and substance satisfactory to the Administrative Agent, setting
forth as of a recent date, a reasonably detailed summary of the Swap Agreements
to which any Loan Party is a party on such date, which summary shall include
information that is sufficient (as reasonably determined by the Administrative
Agent) for purposes of determining the Borrowing Base hereunder including,
without limitation, the type, term, effective date, termination date and
notional amounts or volumes).

(f) Certificate of Insurer – Insurance Coverage. Concurrently with any delivery
of financial statements under Section 8.01(a), a certificate of insurance
coverage from each insurer with respect to the insurance required by
Section 8.07, in form and substance satisfactory to the Administrative Agent,
and, if requested by the Administrative Agent or any Lender, all copies of the
applicable policies.

(g) Other Accounting Reports. Promptly upon receipt thereof, a copy of any
“management letter” received by the Borrower or any of the Loan Parties by
independent

 

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accountants that indicates, in the reasonable good faith judgment of the board
of directors (or comparable governing body), as applicable, of the Borrower or
any such other Loan Party, a material weakness in such Person’s internal
controls or procedures and the management’s responses thereto.

(h) SEC and Other Filings; Reports to Shareholders. Promptly after the same
become publicly available, copies of all periodic and other reports, proxy
statements and other materials filed by the Borrower or any other Loan Party
with the SEC, or with any national or foreign securities exchange, or
distributed by the Borrower to its equityholders generally, as the case may be;
provided that the timely filing with the SEC of any such materials or the
posting of such documents (or providing a link thereto) on the Borrower’s or
such other Loan Party’s website on the Internet at the Borrower’s or such other
Loan Party’s website address will satisfy the reporting requirements of this
Section 8.01(h).

(i) Notices Under Material Instruments. Promptly after the furnishing thereof,
copies of any financial statement, report or notice furnished to or by any
Person pursuant to the terms of any preferred stock designation, indenture, loan
or credit or other similar agreement, other than this Agreement and not
otherwise required to be furnished to the Lenders pursuant to any other
provision of this Section 8.01.

(j) Lists of Purchasers. Promptly following the written request of the
Administrative Agent, a list of all Persons purchasing material quantities of
Hydrocarbons from the Borrower or any other Loan Party.

(k) Notice of Sales of Oil and Gas Properties. In the event the Borrower or any
other Loan Party intends to sell, transfer, assign or otherwise dispose of any
Oil or Gas Properties or any Equity Interests in any Restricted Subsidiary in
accordance with Section 9.12, prior written notice of such disposition, the
price thereof and the anticipated date of closing and any other details thereof
reasonably requested by the Administrative Agent or any Lender.

(l) Notice of Casualty Events. Prompt written notice, and in any event within
five Business Days, of the occurrence of any Casualty Event or the commencement
of any action or proceeding that could reasonably be expected to result in a
Casualty Event.

(m) Issuance of Permitted Senior Unsecured Notes. In the event the Borrower
intends to issue Permitted Senior Unsecured Notes, prior written notice of such
intended offering of such Permitted Senior Unsecured Notes, the amount thereof,
and the anticipated date of closing and promptly when available will furnish a
copy of the preliminary offering memorandum (if any) and the final offering
memorandum (if any).

(n) Information Regarding Borrower and Guarantors. Prompt written notice (and in
any event within 30 days prior thereto) of any change (i) in the Borrower or any
Guarantor’s corporate name or in any trade name used to identify such Person in
the conduct of its business or in the ownership of its Properties, (ii) in the
location of the Borrower’s or any Guarantor’s chief executive office or
principal place of business, (iii) in the Borrower’s or any Guarantor’s identity
or corporate structure or in the jurisdiction in which such Person is
incorporated or formed, (iv) in the Borrower’s or any Guarantor’s jurisdiction
of organization or such Person’s organizational identification number in such
jurisdiction of organization, and (v) in the Borrower’s or any Guarantor’s
federal taxpayer identification number.

 

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(o) Production Report and Lease Operating Statements. Concurrently with the
delivery of each Reserve Report required to be delivered pursuant to
Section 8.12(a), the Borrower shall provide to the Administrative Agent and the
Lenders a report setting forth, for each calendar month during the then current
fiscal year to date, the volume of production and sales attributable to
production (and the prices at which such sales were made and the revenues
derived from such sales) for each such calendar month from the Oil and Gas
Properties of the Loan Parties, and setting forth the related ad valorem,
severance and production taxes and lease operating expenses attributable thereto
and incurred for each such calendar month.

(p) Notices of Certain Changes. Promptly, but in any event within five Business
Days after the execution thereof, copies of any amendment, modification or
supplement to any Organizational Document, any preferred stock designation or
any other organic document of the Borrower or any Restricted Subsidiary.

(q) Annual Budget and Updated Forecasted Financial Statements. Concurrently with
any delivery of financial statements under Section 8.01(a), an annual budget of
the Loan Parties in form and detail reasonably satisfactory to the
Administrative Agent and forecasts prepared by management of the Borrower of
consolidated balance sheets and income statements for the Loan Parties on a
quarterly basis for the first year following the year for which such financial
statements are then being delivered under Section 8.01(a) and on an annual basis
for each year thereafter during the term of this Agreement.

(r) Other Requested Information. Promptly following any request therefor, such
other information regarding the operations, business affairs and financial
condition of the Borrower or any other Loan Party (including, without
limitation, any Plan and any reports or other information required to be filed
with respect thereto under the Code or under ERISA), or compliance with the
terms of this Agreement or any other Loan Document, as the Administrative Agent
or any Lender may reasonably request.

Section 8.02 Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of, or the threat in writing of, any action,
suit, proceeding, investigation or arbitration by or before any arbitrator or
Governmental Authority against or affecting the Borrower or any Affiliate
thereof not previously disclosed in writing to the Lenders or any material
adverse development in any action, suit, proceeding, investigation or
arbitration (whether or not previously disclosed to the Lenders) that, in either
case, if adversely determined, could reasonably be expected to result in a
Material Adverse Effect; and

(c) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and the other Loan Parties in an aggregate amount
exceeding $500,000; and

 

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(d) any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect.

Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.

Section 8.03 Existence; Conduct of Business. The Borrower will, and will cause
each other Loan Party to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business and maintain, if necessary, its qualification to do business in
each other jurisdiction in which its Oil and Gas Properties is located or the
ownership of its Properties requires such qualification, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 9.11.

Section 8.04 Payment of Obligations. The Borrower will, and will cause each
other Loan Party to, pay its obligations, including Tax liabilities of the
Borrower and all of the other Loan Parties before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) the Borrower or
such other Loan Party has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect
or result in the seizure or levy of any material Property of the Borrower or any
other Loan Party.

Section 8.05 Performance of Obligations under Loan Documents. The Borrower will
pay the Notes according to the reading, tenor and effect thereof, and the
Borrower will, and will cause each other Loan Party to, do and perform every act
and discharge all of the obligations to be performed and discharged by it under
the Loan Documents, including, without limitation, this Agreement, at the time
or times and in the manner specified, taking into consideration any grace
periods therein.

Section 8.06 Operation and Maintenance of Properties. The Borrower at its sole
expense will, and will cause each other Loan Party to:

(a) operate its Oil and Gas Properties and other material Properties or cause
such Oil and Gas Properties and other material Properties to be operated in a
careful and efficient manner in accordance with the practices of the industry
and in compliance with all applicable contracts and agreements and in compliance
with all Governmental Requirements, including, without limitation, applicable
pro ration requirements and Environmental Laws, and all applicable laws, rules
and regulations of every other Governmental Authority from time to time
constituted to regulate the development and operation of its Oil and Gas
Properties and the production and sale of Hydrocarbons and other minerals
therefrom, except, in each case, where the failure to comply could not
reasonably be expected to have a Material Adverse Effect;

(b) keep and maintain all Property material to the conduct of its business in
good working order and condition (ordinary wear and tear excepted), preserve,
maintain and

 

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keep in good repair, working order and efficiency (ordinary wear and tear and
obsolescence excepted) all of its material Oil and Gas Properties and other
material Properties, including, without limitation, all equipment, machinery and
facilities;

(c) promptly pay and discharge, or make reasonable and customary efforts to
cause to be paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting or
pertaining to its Oil and Gas Properties and will do all other things necessary
to keep materially unimpaired its rights with respect thereto and prevent any
forfeiture thereof or default thereunder, except, in each case, where the
failure to comply could not reasonably be expected to have a Material Adverse
Effect;

(d) promptly perform, or make reasonable and customary efforts to cause to be
performed, in accordance with industry standards, the obligations required by
each and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Properties and other
material Properties, except, in each case, where the failure to comply could not
reasonably be expected to have a Material Adverse Effect;

(e) operate its Oil and Gas Properties and other material Properties or cause or
make reasonable and customary efforts to cause such Oil and Gas Properties and
other material Properties to be operated in accordance with the practices of the
industry and in material compliance with all applicable contracts and agreements
and in compliance in all material respects with all Governmental Requirements;
and

(f) to the extent that a Loan Party is not the operator of any Property, the
Borrower shall use reasonable efforts to cause the operator to comply with this
Section 8.06.

Section 8.07 Insurance. The Borrower will, and will cause each other Loan Party
to, maintain, with financially sound and reputable insurance companies,
insurance (a) in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations and (b) in accordance with all Governmental
Requirements. Within 30 days following the Effective Date, the loss payable
clauses or provisions in said insurance policy or policies insuring any of the
collateral for the Loans shall be endorsed in favor of and made payable to the
Administrative Agent as its interests may appear and such policies shall name
the Administrative Agent and the Lenders as “additional insureds” and provide
that the insurer will endeavor to give at least 30 days prior notice of any
cancellation to the Administrative Agent.

Section 8.08 Books and Records; Inspection Rights. The Borrower will, and will
cause each other Loan Party to, keep proper books of record and account in which
full, true and correct entries are made of all dealings and transactions in
relation to its business and activities. The Borrower will, and will cause each
other Loan Party to, permit any representatives designated by the Administrative
Agent or any Lender, upon reasonable prior notice, to visit and inspect its
Properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.

 

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Section 8.09 Compliance with Laws. The Borrower will, and will cause each other
Loan Party to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its Property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

Section 8.10 Environmental Matters.

(a) The Borrower shall at its sole expense: (i) comply, and shall cause its
Properties and operations and each other Loan Party and each other Loan Party’s
Properties and operations to comply, with all applicable Environmental Laws, the
violation of which could be reasonably expected to have a Material Adverse
Effect; (ii) not Release or threaten to Release, and shall cause each Subsidiary
not to Release or threaten to Release, any Hazardous Material on, under, about
or from any of the Borrower’s or any other Loan Party’s Properties or any other
property offsite the Property to the extent caused by the Borrower’s or any
other Loan Party’s operations except in compliance with applicable Environmental
Laws, the Release or threatened Release of which could reasonably be expected to
have a Material Adverse Effect; (iii) timely obtain or file, and shall cause
each Subsidiary to timely obtain or file, all material Environmental Permits, if
any, required under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of the Borrower’s or any other Loan Party’s
Properties, which failure to obtain or file could reasonably be expected to have
a Material Adverse Effect; (iv) promptly commence and diligently prosecute to
completion, and shall cause each other Loan Party to promptly commence and
diligently prosecute to completion, any assessment, evaluation, investigation,
monitoring, containment, cleanup, removal, repair, restoration, remediation or
other remedial obligations (collectively, the “Remedial Work”) in the event any
Remedial Work is required or reasonably necessary under applicable Environmental
Laws because of or in connection with the actual or suspected past, present or
future Release or threatened Release of any Hazardous Material on, under, about
or from any of the Borrower’s or any other Loan Party’s Properties, which
failure to commence and diligently prosecute to completion could reasonably be
expected to have a Material Adverse Effect; (v) conduct, and cause each other
Loan Party to conduct, its operations and businesses in a prudent manner
relative to the exposure of any Property or Person to Hazardous Materials that
could reasonably be expected to form the basis for a claim for damages or
compensation; and (vi) establish and implement, and shall cause each other Loan
Party to establish and implement, such procedures as may be necessary to
continuously determine and assure that the Borrower’s and each other Loan
Party’s obligations under this Section 8.10(a) are timely and fully satisfied,
which failure to establish and implement could reasonably be expected to have a
Material Adverse Effect.

(b) The Borrower will promptly, but in no event later than five Business Days
after obtaining knowledge of the occurrence of a triggering event, notify the
Administrative Agent and the Lenders in writing of any threatened action,
investigation or inquiry by any Governmental Authority or any threatened demand
or lawsuit by any Person against the Borrower or any other Loan Party or their
Properties in connection with any Environmental Laws that, if adversely
determined, could reasonably be expected to result in liability (whether
individually or in the aggregate) in excess of $5,000,000, not fully covered by
insurance (subject to normal deductibles).

 

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(c) The Borrower will, and will cause each other Loan Party to, provide
environmental assessments, audits and tests in accordance with the most current
version of the American Society of Testing Materials standards upon request by
the Administrative Agent and the Lenders and no more than once per year in the
absence of any Event of Default (or as otherwise required to be obtained by any
Governmental Authority), or in connection with any future Acquisitions; provided
that notwithstanding anything to the contrary in this Section 8.10(c), no
boring, subsurface sampling or phase II environmental review shall be required
with respect to any environmental assessments, audits or tests conducted
pursuant to this Section 8.10(c).

Section 8.11 Further Assurances.

(a) The Borrower at its sole expense will, and will cause each other Loan Party
to, promptly execute and deliver to the Administrative Agent all such other
documents, agreements and instruments reasonably requested by the Administrative
Agent to comply with, cure any defects or accomplish the conditions precedent,
covenants and agreements of the Borrower or any other Loan Party, as the case
may be, in the Loan Documents, including the Notes, or to further evidence and
more fully describe the collateral intended as security for the Indebtedness, or
to correct any omissions in this Agreement or the Security Instruments, or to
state more fully the obligations secured therein, or to perfect, protect or
preserve any Liens created pursuant to this Agreement or any of the Security
Instruments or the priority thereof, or to make any recordings, file any notices
or obtain any consents, all as may be reasonably necessary or appropriate, in
the reasonable discretion of the Administrative Agent, in connection therewith.

(b) The Borrower hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Mortgaged Property without the signature of the Borrower or any
Guarantor where permitted by law. A carbon, photographic or other reproduction
of the Security Instruments or any financing statement covering the Mortgaged
Property or any part thereof shall be sufficient as a financing statement where
permitted by law. The Borrower acknowledges and agrees that any such financing
statement may describe the collateral as “all assets” of the Borrower or any
such Guarantor or words of similar effect as may be required by the
Administrative Agent.

Section 8.12 Reserve Reports.

(a) On or before February 28 and August 31 of each year, commencing August 31,
2014, the Borrower shall furnish to the Administrative Agent and the Lenders a
Reserve Report evaluating the Oil and Gas Properties of the Borrower and the
Guarantors as of the immediately preceding January 1 and July 1 (or December 31
and June 30). The Reserve Report as of July 1 (or June 30) of each year shall be
prepared by or under the supervision of the chief engineer of the Borrower who
shall certify (i) there are no statements or conclusions in such Reserve Report
which are based upon or include misleading information or fail to take into
account material information regarding the matters reported therein, it being
understood that projections concerning volumes attributable to the Oil and Gas
Properties and production and cost estimates contained in any Reserve Report are
necessarily based upon professional opinions, estimates and projections and that
the Borrower and the Guarantors do not warrant that such

 

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opinions, estimates and projections will ultimately prove to have been accurate,
and (ii) that such Reserve Report has been prepared in accordance with the
procedures used in the immediately preceding January 1 (or December 31) Reserve
Report. The Reserve Report as of January 1 of each year (or December 31 of the
preceding year) shall be prepared by one or more Approved Petroleum Engineers.

(b) In the event of an Interim Redetermination, the Borrower shall furnish to
the Administrative Agent and the Lenders a Reserve Report prepared by or under
the supervision of the chief engineer of the Borrower who shall certify such
Reserve Report to be true and accurate and to have been prepared in accordance
with the procedures used in the immediately preceding January 1 (or December 31)
Reserve Report. For any Interim Redetermination requested by the Administrative
Agent or the Borrower pursuant to Section 2.07(b), the Borrower shall provide
such Reserve Report with an “as of” date as required by the Administrative Agent
as soon as possible, but in no event later than 30 days following the receipt of
such request.

(c) With the delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent and the Lenders a certificate from a Responsible Officer
certifying that in all material respects: (i) the information contained in the
Reserve Report and any other information delivered in connection therewith is
true and correct, (ii) the Borrower or a Guarantor owns good and defensible
title to the Oil and Gas Properties evaluated in such Reserve Report and such
Properties are free of all Liens except for Liens permitted by Section 9.03,
(iii) except as set forth on an exhibit to the certificate, on a net basis there
are no gas imbalances, take or pay or other prepayments in excess of the volume
specified in Section 7.18 with respect to its Oil and Gas Properties evaluated
in such Reserve Report which would require the Borrower or any of the Guarantors
to deliver Hydrocarbons either generally or produced from such Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor, (iv) none of their Oil and Gas Properties have been sold since the
date of the last Borrowing Base determination except as set forth on an exhibit
to the certificate, which certificate shall list all of its Oil and Gas
Properties sold and in such detail as reasonably required by the Administrative
Agent, (v) attached to the certificate is a list of all marketing agreements
entered into subsequent to the later of the date hereof or the most recently
delivered Reserve Report which the Borrower could reasonably be expected to have
been obligated to list on Schedule 7.19 had such agreement been in effect on the
date hereof and (vi) attached thereto is a schedule of the Oil and Gas
Properties evaluated by such Reserve Report that are Mortgaged Properties and
demonstrating the percentage of the total value of the Borrower’s and the
Guarantors’ Oil and Gas Properties that the value of such Mortgaged Properties
represent in compliance with Section 8.14(a).

Section 8.13 Title Information.

(a) On or before the delivery to the Administrative Agent and the Lenders of
each Reserve Report required by Section 8.12, the Borrower will deliver title
information in form and substance acceptable to the Administrative Agent
covering enough of the Oil and Gas Properties evaluated by such Reserve Report
that were not included in the immediately preceding Reserve Report, so that the
Administrative Agent shall have received together with title information
previously delivered to the Administrative Agent, satisfactory title information
on at least 80% of the total value of the Oil and Gas Properties evaluated by
such Reserve Report.

 

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(b) If the Borrower has provided title information for additional Properties
under Section 8.13(a), the Borrower shall, within 90 days of notice from the
Administrative Agent that material title defects or exceptions exist with
respect to such additional Properties, either (i) cure any such material title
defects or exceptions (including defects or exceptions as to priority) that do
not constitute Excepted Liens pursuant to Section 9.03, raised by such
information, (ii) substitute acceptable Mortgaged Properties with no material
title defects or exceptions except for Excepted Liens (other than Excepted Liens
described in clauses (e), (g) and (i) of such definition) having an equivalent
value, or (iii) deliver title information in form and substance acceptable to
the Administrative Agent so that the Administrative Agent shall have received,
together with title information previously delivered to the Administrative
Agent, satisfactory title information on at least 80% of the value of the Oil
and Gas Properties evaluated by such Reserve Report.

(c) If the Borrower is unable to cure any material title defect requested by the
Administrative Agent or the Lenders to be cured within the 90-day period or the
Borrower does not comply with the requirements to provide acceptable title
information covering 80% of the value of the Oil and Gas Properties evaluated in
the most recent Reserve Report, such default shall not be a Default, but instead
the Administrative Agent and/or the Majority Lenders shall have the right to
exercise the following remedy in their sole discretion from time to time, and
any failure to so exercise this remedy at any time shall not be a waiver as to
future exercise of the remedy by the Administrative Agent or the Lenders. To the
extent that the Administrative Agent or the Majority Lenders are not satisfied
with title to any Mortgaged Property after the 90-day period has elapsed, such
unacceptable Mortgaged Property shall not count towards the 80% requirement, and
the Administrative Agent may send a notice to the Borrower and the Lenders that
the Borrowing Base then in effect shall be reduced by an amount as determined by
the Required Lenders to cause the Borrower to be in compliance with the
requirement to provide acceptable title information on 80% of the value of the
Oil and Gas Properties. This new Borrowing Base shall become effective
immediately after receipt of such notice.

Section 8.14 Additional Collateral; Additional Guarantors.

(a) In connection with each redetermination of the Borrowing Base, the Borrower
shall review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties
represent at least 80% of the total value of the Oil and Gas Properties
evaluated in the most recently completed Reserve Report after giving effect to
exploration and production activities, acquisitions, dispositions and
production. In the event that the Mortgaged Properties do not represent at least
80% of such total value, then the Borrower shall, and shall cause the Guarantors
to, grant, within 30 days of delivery of the certificate required under
Section 8.12(c), to the Administrative Agent as security for the Indebtedness a
first-priority Lien interest (provided that Excepted Liens of the type described
in clauses (a) to (d) and (f) of the definition thereof may exist, but subject
to the provisos at the end of such definition) on additional Oil and Gas
Properties of the Borrower and the Guarantors not already subject to a Lien of
the Security Instruments such that after giving effect thereto, the Mortgaged
Properties will represent at least 80% of such total value. All such

 

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Liens will be created and perfected by and in accordance with the provisions of
mortgages, deeds of trust, security agreements and financing statements or other
Security Instruments, all in form and substance reasonably satisfactory to the
Administrative Agent and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes.

(b) The Borrower shall cause (i) each of its Material Subsidiaries (other than
MEMP GP) and (ii) any Person that guarantees the obligations with respect to the
PIK Toggle Notes or any Permitted Senior Unsecured Notes to unconditionally
guaranty, on a joint and several basis, the prompt payment and performance of
the Indebtedness pursuant to the Guaranty Agreement. In connection therewith,
within 20 Business Days following any acquisition or creation (or similar event)
of a new Material Subsidiary (or following any Person other than a Guarantor
providing a guaranty in respect of the PIK Toggle Notes or any Permitted Senior
Unsecured Notes), the Borrower shall cause such Material Subsidiary (or other
Person), to (A) become a party to the Guaranty Agreement by executing and
delivering an amendment or a supplement to the Guaranty Agreement in form and
substance acceptable to the Administrative Agent and (B) execute and deliver
such other additional closing documents, certificates and legal opinions as
shall reasonably be requested by the Administrative Agent. If the Borrower shall
at any time own one or more Domestic Subsidiaries that are both Restricted
Subsidiaries and Wholly-Owned Subsidiaries, each of which is not a Material
Subsidiary by virtue of owning Property having a fair market value of less than
$10,000,000 (each such Domestic Subsidiary, an “Individual Property Safe Harbor
Non-Material Subsidiary”), but the Individual Property Safe Harbor Non-Material
Subsidiaries together own, without duplication, Property having a fair market
value of $25,000,000 or more, then as soon as reasonably practicable, but in any
event within 20 Business Days (as such deadline may be extended by the
Administrative Agent in its sole discretion), the Borrower shall cause one or
more of such Individual Property Safe Harbor Non-Material Subsidiaries to
unconditionally guarantee, on a joint and several basis, the prompt payment and
performance of the Indebtedness pursuant to the Guaranty Agreement such that
after giving effect to such guarantee(s) the remaining Individual Property Safe
Harbor Non-Material Subsidiaries together own, without duplication, Property
having a fair market value of less than $25,000,000.

(c) On or before the earlier of (i) the date which is 45 days after the
Effective Date and (ii) the date on which the PIK Toggle Notes are Redeemed in
full, the Borrower and each Guarantor shall grant to the Administrative Agent
for the benefit of the Secured Parties to secure the Indebtedness, a perfected,
first-priority security interest in all of the issued and outstanding Equity
Interests in each Restricted Subsidiary of the Borrower owned by the Borrower or
such Guarantor. Such grant shall be effectuated by the Borrower and each
Guarantor executing and delivering the Amended and Restated Security Agreement
prior to such time, which Amended and Restated Security Agreement shall amend
and restate the Initial Security Agreement in its entirety. In addition, within
20 Business Days following any acquisition or creation (or similar event) of a
new Restricted Subsidiary, the Borrower shall, or shall cause the applicable
Guarantor that owns Equity Interests in such Restricted Subsidiary to, execute
and deliver an amendment or supplement to the Amended and Restated Security
Agreement to confirm the pledge all of the Equity Interests in such new
Restricted Subsidiary. The Borrower and each Guarantor shall also deliver to the
Administrative Agent, together with or prior to its delivery of the Amended and
Restated Security Agreement or any amendment or supplement thereto as set forth
above, (A) original stock or equity certificates, if any, evidencing

 

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the Equity Interests of each Restricted Subsidiary owned by it, together with an
appropriate undated stock power for each certificate duly executed in blank by
the registered owner thereof or, if uncertificated, such other documents as may
be reasonably required by the Administrative Agent to perfect the Administrative
Agent’s Lien therein by “control” in accordance with the applicable Uniform
Commercial Code (including, without limitation, Sections 8-106, 9-106 and 9-314
thereof) and (B) such other additional closing documents, certificates and legal
opinions as shall reasonably be requested by the Administrative Agent.

(d) Subject to the foregoing clauses (a) and (c), the Borrower will at all times
cause the other material tangible and intangible assets of the Borrower and each
Material Subsidiary (other than MEMP GP) to be subject to a Lien of the Security
Instruments.

(e) Notwithstanding any provision in any of the Loan Documents to the contrary,
in no event is any Building (as defined in the applicable Flood Insurance
Regulations) or Manufactured (Mobile) Home (as defined in the applicable Flood
Insurance Regulations) owned by the Borrower or any Guarantor included in the
Mortgaged Property and no Building or Manufactured (Mobile) Home shall be
encumbered by any Security Instrument; provided, that (A) the Borrower’s and
Guarantors’ interests in all lands and Hydrocarbons situated under any such
Building or Manufactured (Mobile) Home shall be included in the Mortgaged
Property and shall be encumbered by the Security Instruments and (B) the
Borrower shall not, and shall not permit any of its Restricted Subsidiaries to,
permit to exist any Lien on any Building or Manufactured (Mobile) Home except
Excepted Liens.

Section 8.15 ERISA Compliance. The Borrower will promptly furnish and will cause
the other Loan Parties and any ERISA Affiliate to promptly furnish to the
Administrative Agent (i) promptly after the filing thereof with the United
States Secretary of Labor or the Internal Revenue Service, copies of each annual
and other report with respect to each Plan that is subject to Title IV of ERISA,
section 302 of ERISA, or section 412 of the Code or any trust created
thereunder, and (ii) immediately upon becoming aware of the occurrence of any
“prohibited transaction,” as described in section 406 of ERISA or in section
4975 of the Code, in connection with any Plan or any trust created thereunder
that could reasonably be expected to result in liability of the Borrower and the
other Loan Parties in an aggregate amount exceeding $500,000 (when taken
together with all other such prohibited transactions that have occurred within
the preceding 12 months), a written notice signed by the President or the
principal Financial Officer, the Subsidiary or the ERISA Affiliate, as the case
may be, specifying the nature thereof, what action the Borrower, such other Loan
Party or the ERISA Affiliate is taking or proposes to take with respect thereto,
and, when known, any action taken or proposed by the Internal Revenue Service or
the Department of Labor with respect thereto.

Section 8.16 Commodity Price Risk Management Policy. The Loan Parties shall
maintain a commodity price risk management policy, which policy shall be
reasonably acceptable to the Administrative Agent; provided that such policy
shall be subject to the review of the Administrative Agent no more than once
every three years.

 

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Section 8.17 Unrestricted Subsidiaries. The Borrower:

(a) will cause the management, business and affairs of each of the Borrower and
its Restricted Subsidiaries to be conducted in such a manner (including, without
limitation, by keeping separate books of account, furnishing separate financial
statements of Unrestricted Subsidiaries to creditors and potential creditors
thereof and by not permitting Properties of the Borrower and its respective
Restricted Subsidiaries to be commingled) so that each Unrestricted Subsidiary
that is a corporation will be treated as a corporate entity separate and
distinct from the Borrower and the Restricted Subsidiaries; and

(b) will not, and will not permit any of the Restricted Subsidiaries to, incur,
assume, guarantee or be or become liable for any Debt of any of the Unrestricted
Subsidiaries (other than MEMP GP solely with respect to MEMP GP Debt).

Section 8.18 Post-Closing Covenant. The Borrower shall, and shall cause the
Guarantors to, deliver Deposit Account Control Agreements with respect to their
respective Deposit Accounts (other than De Minimis Accounts) in accordance with
the terms of and at such times as specified in Section 4.11 of the Initial
Security Agreement (as such Section may be amended from time to time including
pursuant to the Amended and Restated Security Agreement). All capitalized terms
used in this Section 8.18 but not otherwise defined in this Agreement shall have
the meanings given such terms in the Initial Security Agreement.

Section 8.19 Commodity Exchange Act Keepwell Provisions.

(a) The Borrower hereby guarantees the payment and performance of all
Indebtedness of each Loan Party (other than the Borrower) and absolutely,
unconditionally and irrevocably undertakes to provide such funds or other
support as may be needed from time to time by each Benefitting Guarantor in
order for such Benefitting Guarantor to honor its obligations (without giving
effect to Section 8.19(b)) under the Guaranty Agreement and any other Security
Instrument including obligations with respect to Swap Agreements (provided,
however, that the Borrower shall only be liable under this Section 8.19(a) for
the maximum amount of such liability that can be hereby incurred without
rendering its obligations under this Section 8.19(a), or otherwise under this
Agreement or any Loan Document, as it relates to such Benefitting Guarantor,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer, and not for any greater amount). The obligations of the Borrower under
this Section 8.19(a) shall remain in full force and effect until all
Indebtedness is paid in full to the Lenders, the Administrative Agent and all
other Secured Parties, and all of the Lenders’ Commitments are terminated. The
Borrower intends that this Section 8.19(a) constitute, and this Section 8.19(a)
shall be deemed to constitute, a “keepwell, support, or other agreement” for the
benefit of each Benefitting Guarantor for all purposes of
Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

(b) Notwithstanding any other provisions of this Agreement or any other Loan
Document, Indebtedness guaranteed by any Guarantor, or secured by the grant of
any Lien by such Guarantor under any Security Instrument, shall exclude all
Excluded Swap Obligations with respect to such Guarantor.

 

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ARTICLE IX

NEGATIVE COVENANTS

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents then outstanding have been paid in full and all
Letters of Credit have expired or terminated and all LC Disbursements shall have
been reimbursed, the Borrower covenants and agrees with the Lenders that:

Section 9.01 Financial Covenants.

(a) Interest Coverage Ratio. The Borrower will not, as of the last day of any
fiscal quarter commencing with the fiscal quarter ending September 30, 2014,
permit the Borrower’s ratio of (i) Consolidated EBITDAX for the Rolling Period
ending on such day to (ii) Consolidated Net Interest Expense for the Rolling
Period ending on such day to be less than 2.50 to 1.00.

(b) Current Ratio. The Borrower will not permit, as of the last day of any
fiscal quarter commencing with the fiscal quarter ending September 30, 2014, the
Borrower’s ratio of (i) consolidated current assets (including the unused amount
of the total Commitments (but only to the extent that the Borrower is permitted
to borrow such amount under the terms of this Agreement including, without
limitation, Section 6.02 hereof), and excluding non-cash assets under ASC 815)
to (ii) consolidated current liabilities (excluding non-cash obligations under
ASC 815 and current maturities under this Agreement) of the Borrower to be less
than 1.0 to 1.0.

Section 9.02 Debt. The Borrower will not, and will not permit any other Loan
Party to, incur, create, assume or suffer to exist any Debt, except:

(a) the Notes or other Indebtedness arising under the Loan Documents or any
guaranty of or suretyship arrangement for the Notes or other Indebtedness
arising under the Loan Documents;

(b) accounts payable and accrued expenses, liabilities or other obligations to
pay the deferred purchase price of Property or services, from time to time
incurred in the ordinary course of business which are not greater than 90 days
past the date of invoice or delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP;

(c) Debt under Capital Leases not to exceed $15,000,000 in the aggregate at any
one time outstanding;

(d) Debt associated with bonds or surety obligations required by Governmental
Requirements in connection with the operation of the Oil and Gas Properties;

(e) endorsements of negotiable instruments for collection in the ordinary course
of business;

 

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(f) MEMP GP Debt;

(g) Debt under the PIK Toggle Notes and Permitted Senior Unsecured Notes and, in
each case, guarantees thereof by any Loan Party;

(h) other Debt not to exceed $15,000,000 in the aggregate at any one time
outstanding; and

(i) Debt of the Borrower or a Guarantor to the Borrower or any Guarantor.

Section 9.03 Liens. The Borrower will not, and will not permit any other Loan
Party to, create, incur, assume or permit to exist any Lien on any of its
Properties (now owned or hereafter acquired), except:

(a) Liens securing the payment of any Indebtedness;

(b) Excepted Liens;

(c) Liens securing Capital Leases permitted by Section 9.02(c) but only on the
Property under lease; and

(d) Liens on cash in an aggregate amount of up to $20,000,000 at any one time
outstanding securing any Swap Agreement with any Approved Counterparty that is
neither a Lender nor an Affiliate of a Lender.

Notwithstanding the foregoing, none of the Liens permitted pursuant to this
Section 9.03 (other than Liens securing the Indebtedness and Excepted Liens) may
at any time attach to any Equity Interests in Restricted Subsidiaries or to any
Oil and Gas Properties evaluated in the Reserve Report used in the most recent
determination of the Borrowing Base.

Section 9.04 Dividends and Distributions; Repayment of Certain Debt; Amendments
to Certain Debt Documents.

(a) Restricted Payments. The Borrower will not, and will not permit any other
Loan Party to, declare or make, or agree to pay or make, directly or indirectly,
any Restricted Payment, return any capital to its stockholders or make any
distribution of its Property to its Equity Interest holders, except:

(i) the Borrower may declare and pay dividends with respect to its Equity
Interests payable solely in additional shares of its Equity Interests (other
than Disqualified Capital Stock);

(ii) Restricted Subsidiaries may declare and pay dividends to Loan Parties
ratably with respect to their Equity Interests; and

(iii) the Loan Parties may make Restricted Payments pursuant to and in
accordance with stock option plans or other benefit plans for management or
employees of the Borrower and its Restricted Subsidiaries.

 

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(b) Repayment of Permitted Senior Unsecured Notes and the PIK Toggle Notes;
Amendment of Terms of Permitted Senior Unsecured Notes Documents and the PIK
Toggle Notes Documents. The Borrower will not, and will not permit any other
Loan Party to, prior to the date that is 180 days after the Maturity Date:

(i) call, make or offer to make any optional or voluntary Redemption of or
otherwise optionally or voluntarily Redeem (whether in whole or in part) any
Permitted Senior Unsecured Notes, except that, so long as no Default exists, the
Borrower may, substantially contemporaneously with its receipt of any cash
proceeds from (A) any issuance of Permitted Senior Unsecured Notes or (B) any
sale of Equity Interests in the Borrower (other than Disqualified Capital
Stock), prepay or otherwise Redeem Permitted Senior Unsecured Notes in an amount
equal to the amount of the net cash proceeds of such issuance of Permitted
Senior Unsecured Notes or such sale of Equity Interests of the Borrower;

(ii) amend, modify, waive or otherwise change, consent or agree to any
amendment, modification, waiver or other change to, any of the terms of the
Permitted Senior Unsecured Notes Documents (except to the extent a new issuance
of Permitted Senior Unsecured Notes, the proceeds of which were used to Redeem
existing Permitted Senior Unsecured Notes pursuant to the foregoing clause (i),
would be permitted to have such terms as so amended, modified, waived or
otherwise changed) if the effect thereof would be to (A) shorten its maturity or
average life, (B) increase the amount of any payment of principal thereof,
(C) increase the rate or shorten any period for payment of interest thereon, or
(D) modify or amend covenants or events of default such that the resulting
covenants and events of default in respect thereof, taken as a whole, are more
restrictive with respect to the Loan Parties than the covenants and Events of
Default in this Agreement without this Agreement being contemporaneously amended
to add similar provisions (as determined in good faith by senior management of
the Borrower);

(iii) call, make or offer to make any optional or voluntary Redemption of or
otherwise optionally or voluntarily Redeem (whether in whole or in part) the PIK
Toggle Notes, except that, the Borrower may Redeem the PIK Toggle Notes in full
so long as (A) at the time the Borrower issues a redemption notice in respect of
the PIK Toggle Notes, (1) no Default or Event of Default exists and (2) the
Borrower will be in pro forma compliance with all financial covenants set forth
in Section 9.01 after giving effect to such Redemption, and (B) after giving
effect to such Redemption, Availability is not less than 10.0% of the total
Commitments at such time; or

(iv) amend, modify, waive or otherwise change, consent or agree to any
amendment, modification, waiver or other change to, any of the terms of the PIK
Toggle Notes Documents if the effect thereof would be to (A) shorten its
maturity or average life, (B) increase the amount of any payment of principal
thereof, (C) increase the rate or shorten any period for payment of interest
thereon, or (D) modify or amend covenants or events of default such that the
resulting covenants and events of default in respect thereof, taken as a whole,
are more restrictive with respect to the Loan Parties than the covenants and
Events of Default in this Agreement without this Agreement being
contemporaneously amended to add similar provisions (as determined in good faith
by senior management of the Borrower).

 

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Section 9.05 Investments and Loans. The Borrower will not, and will not permit
any other Loan Party to, make or permit to remain outstanding any Investments in
or to any Person or any intercompany loans, except that the foregoing
restriction shall not apply to:

(a) Investments as of the Effective Date which are disclosed to the Lenders in
Schedule 9.05;

(b) accounts receivable arising in the ordinary course of business and
promissory notes received in settlement of any such accounts receivable;

(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within one year from the date of creation thereof;

(d) commercial paper maturing within one year from the date of creation thereof
having a rating of at least P-2 or A-2 from either Moody’s or S&P, respectively;

(e) deposits maturing within one year from the date of creation thereof with,
including certificates of deposit issued by, any Lender or any office located in
the United States of any other bank or trust company which is organized under
the laws of the United States or any state thereof, has capital, surplus and
undivided profits aggregating at least $100,000,000 (as of the date of such bank
or trust company’s most recent financial reports) and has a short term deposit
rating of no lower than A2 or P2, as such rating is set forth from time to time,
by S&P or Moody’s, respectively;

(f) deposits in money market funds investing not less than 90% of their assets
in Investments described in Section 9.05(c), Section 9.05(d) or Section 9.05(e);

(g) Investments (i) made by the Borrower in or to any of the Guarantors
including any Person who, contemporaneously with the making of such Investment,
becomes a Guarantor, (ii) made by any Restricted Subsidiary in or to the
Borrower or any Guarantor, and (iii) in an aggregate amount at any one time
outstanding not to exceed $15,000,000, made by the Borrower or any Restricted
Subsidiary in or to all other Restricted Subsidiaries which are not Guarantors;

(h) Investments in Unrestricted Subsidiaries not to exceed $10,000,000 in the
aggregate at any time;

(i) Investments by MEMP GP in general partner interests in MEMP, but only to the
extent any such Investment is made in order for MEMP GP to hold or maintain a
general partner interest (on a percentage basis) of up to 0.1%; and

(j) other Investments not to exceed $15,000,000 in the aggregate at any time.

 

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Section 9.06 Nature of Business; No International Operations. The Borrower will
not, and will not permit any other Loan Party to, allow any material change to
be made in the character of its business as an independent oil and gas
exploration and production company. The Borrower will not, and will not permit
any of the other Loan Parties to, acquire or make any other expenditure (whether
such expenditure is capital, operating or otherwise) in or related to, any Oil
and Gas Properties not located within the geographical boundaries of the United
States.

Section 9.07 Limitation on Leases. The Borrower will not, and will not permit
any other Loan Party to, create, incur, assume or suffer to exist any obligation
for the payment of rent or hire of Property of any kind whatsoever (real or
personal but excluding Capital Leases to the extent such Capital Leases do not
go beyond the value and terms of the leased property and leases of Hydrocarbon
Interests), under leases or lease agreements which would cause the aggregate
amount of all payments made by the Borrower and the other Loan Parties pursuant
to all such leases or lease agreements, including, without limitation, any
residual payments at the end of any lease, to exceed $15,000,000 in any period
of twelve consecutive calendar months during the life of such leases.

Section 9.08 Proceeds of Notes. The Borrower will not permit the proceeds of the
Notes to be used for any purpose other than those described in the first
sentence of Section 7.21. Neither the Borrower nor any Person acting on behalf
of the Borrower has taken or will take any action which might cause any of the
Loan Documents to violate Regulations T, U or X or any other regulation of the
Board or to violate Section 7 of the Securities Exchange Act of 1934 or any rule
or regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect. If requested by the Administrative Agent, the Borrower
will furnish to the Administrative Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form U-1 or such
other form referred to in Regulation U, Regulation T or Regulation X of the
Board, as the case may be.

Section 9.09 ERISA Compliance. The Borrower will not, and will not permit any
other Loan Party to, at any time:

(a) engage in, or permit any ERISA Affiliate to engage in, any transaction in
connection with which the Borrower, any other Loan Party or any ERISA Affiliate
could be subjected to either a civil penalty assessed pursuant to subsections
(c), (i) or (l) of section 502 of ERISA or a tax imposed by Chapter 43 of
Subtitle D of the Code;

(b) terminate, or permit any ERISA Affiliate to terminate, any Plan in a manner,
or take any other action with respect to any Plan, which could result in any
liability of the Borrower, any other Loan Party or any ERISA Affiliate to the
PBGC;

(c) fail to make, or permit any ERISA Affiliate to fail to make, full payment
when due of all amounts which, under the provisions of any Plan, agreement
relating thereto or applicable law, the Borrower, any other Loan Party or any
ERISA Affiliate is required to pay as contributions thereto;

 

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(d) permit to exist, or allow any ERISA Affiliate to permit to exist, any
accumulated funding deficiency within the meaning of section 302 of ERISA or
section 412 of the Code, whether or not waived, with respect to any Plan;

(e) permit, or allow any ERISA Affiliate to permit, the actuarial present value
of the benefit liabilities under any Plan maintained by the Borrower, any other
Loan Party or any ERISA Affiliate which is regulated under Title IV of ERISA to
materially exceed the current value of the assets (computed on a plan
termination basis in accordance with Title IV of ERISA) of such Plan allocable
to such benefit liabilities such that a determination would result that any Plan
is, or is expected to be, in “at risk” status (as defined in Section 303(i)(4)
of ERISA or Section 430(i)(4) of the Code); provided that the term “actuarial
present value of the benefit liabilities” shall have the meaning specified in
section 4041 of ERISA;

(f) contribute to or assume an obligation to contribute to, or permit any ERISA
Affiliate to contribute to or assume an obligation to contribute to, any
Multiemployer Plan;

(g) acquire, or permit any ERISA Affiliate to acquire, an interest in any Person
that causes such Person to become an ERISA Affiliate with respect to the
Borrower or any other Loan Party or with respect to any ERISA Affiliate of the
Borrower or any other Loan Party if such Person sponsors, maintains or
contributes to, or at any time in the six-year period preceding such acquisition
has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or
(2) any other Plan that is subject to Title IV of ERISA under which the
actuarial present value of the benefit liabilities under such Plan materially
exceeds the current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such benefit
liabilities such that a determination would result that any Plan is, or is
expected to be, in “at risk” status (as defined in Section 303(i)(4) of ERISA or
Section 430(i)(4) of the Code);

(h) incur, or permit any ERISA Affiliate to incur, a liability to or on account
of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA;

(i) contribute to or assume an obligation to contribute to, or permit any ERISA
Affiliate to contribute to or assume an obligation to contribute to, any
employee welfare benefit plan, as defined in section 3(1) of ERISA, including,
without limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by such entities in their
sole discretion at any time without any material liability; or

(j) amend, or permit any ERISA Affiliate to amend, a Plan resulting in an
increase in current liability such that the Borrower, any other Loan Party or
any ERISA Affiliate is required to provide security to such Plan under section
401(a)(29) of the Code.

Section 9.10 Sale or Discount of Receivables. Except for receivables obtained by
the Loan Parties out of the ordinary course of business or the settlement of
joint interest billing accounts in the ordinary course of business or discounts
granted to settle collection of accounts receivable or the sale of defaulted
accounts arising in the ordinary course of business in connection with the
compromise or collection thereof and not in connection with any financing
transaction, the Borrower will not, and will not permit any other Loan Party to,
discount or sell (with or without recourse) any of its notes receivable or
accounts receivable.

 

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Section 9.11 Mergers, Etc. The Borrower will not, and will not permit any other
Loan Party to, merge into or with or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or sell, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its Property to any other Person
(whether now owned or hereafter acquired) (any such transaction, a
“consolidation”) or liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution), terminate or discontinue its business; provided that so long as no
Default has occurred and is continuing, or would result after giving effect
thereto, (a) any Wholly-Owned Subsidiary of the Borrower may participate in a
consolidation with any other Wholly-Owned Subsidiary of the Borrower, provided,
that if any such consolidation involves a Wholly-Owned Subsidiary that is a
Guarantor and another Wholly-Owned Subsidiary that is not a Guarantor, the
Wholly-Owned Subsidiary that is a Guarantor shall be the surviving Person,
(b) the Borrower may participate in a consolidation with any Wholly-Owned
Subsidiary of the Borrower so long as the Borrower is the surviving Person, and
(c) MRD Operating may participate in a consolidation with MRD LLC so long as MRD
Operating is the surviving Person.

Section 9.12 Sale of Properties. The Borrower will not, and will not permit any
other Loan Party to, sell, assign, farm-out, convey or otherwise transfer any
Property except for:

(a) the sale of Hydrocarbons in the ordinary course of business;

(b) farmouts of undeveloped acreage and assignments in connection with such
farmouts;

(c) the sale or transfer of equipment that is no longer necessary for the
business of the Loan Party or is replaced by equipment of at least comparable
value and use;

(d) sales or other dispositions (including Casualty Events and events that
would, but for their magnitude, constitute Casualty Events), other than as
provided in clauses (a) through (c) or (e), of Oil and Gas Properties or any
interest therein or Restricted Subsidiaries owning Oil and Gas Properties;
provided that (i) the consideration received in respect of such sale or other
disposition shall be equal to or greater than the fair market value of the Oil
and Gas Property, interest therein or Restricted Subsidiary subject of such sale
or other disposition (in each case, as reasonably determined by the Borrower
and, if requested by the Administrative Agent, the Borrower shall deliver a
certificate of a Responsible Officer certifying to that effect), (ii) not less
than (A) 75% of the proceeds of such sale or other disposition of Oil and Gas
Property, if to a Person other than an Affiliate, shall be in cash and (B) 50%
of the proceeds of such sale or other disposition of Oil and Gas Property, if to
an Affiliate, shall be in cash, provided that, if less than 75% of the proceeds
of any such sale or disposition are in cash, the Borrower shall be in pro forma
compliance with the covenants set forth in Section 9.01 both before and after
giving effect to such sale or disposition, (iii) no Default or Event of Default
has occurred and is continuing or would result from such sale or disposition, as
applicable, (iv) if such sale or disposition would result in an automatic
redetermination of the Borrowing Base pursuant to Section 2.07(f), the Borrower
delivers reasonable prior written notice thereof to the

 

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Administrative Agent, (v) if a Borrowing Base Deficiency would result from such
sale or disposition as a result of an automatic redetermination of the Borrowing
Base pursuant to Section 2.07(f), the Borrower prepays Borrowings, prior to or
contemporaneously with the consummation of such sale or disposition, to the
extent that such prepayment would have been required under Section 3.04(c)(iii)
after giving effect to such automatic redetermination of the Borrowing Base, and
(vi) if any such sale or other disposition is of a Restricted Subsidiary owning
Oil and Gas Properties, such sale or other disposition shall include all the
Equity Interests of such Restricted Subsidiary; and

(e) sales and other dispositions of Properties (other than Equity Interests in
MEMP GP) not regulated by Section 9.12(a) to (d) having a fair market value not
to exceed $10,000,000 in the aggregate during any 12-month period.

For the sake of clarity, the forfeiture of all or any portion of any lease as
the result of a decision by any Loan Party not to drill any well or take any
other action necessary to maintain such lease in full force and effect is not a
sale or other disposition which is subject to this Section 9.12.

Section 9.13 Environmental Matters. The Borrower will not, and will not permit
any other Loan Party to, cause or permit any of its Property to be in violation
of, or do anything or permit anything to be done which will subject any such
Property to a Release or threatened Release of Hazardous Materials, exposure to
any Hazardous Materials, or to any Remedial Work, under any Environmental Laws,
assuming disclosure to the applicable Governmental Authority of all relevant
facts, conditions and circumstances, if any, pertaining to such Property where
such violations, Release or threatened Release, exposure, or Remedial work could
reasonably be expected to have a Material Adverse Effect.

Section 9.14 Transactions with Affiliates. The Borrower will not, and will not
permit any other Loan Party to, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of Property or the rendering
of any service, with any Affiliate (other than the Guarantors and, in the case
of any Loan Party other than the Borrower, the Borrower) unless such
transactions are otherwise permitted under this Agreement and are upon fair and
reasonable terms no less favorable to it than it would obtain in a comparable
arm’s length transaction with a Person not an Affiliate; provided that the
foregoing restriction shall not apply to: (a) reasonable and customary fees paid
to members of the board of directors (or comparable governing body) of the
Borrower or the Loan Parties, (b) compensation arrangements for directors (or
the members of the comparable governing body), officers and other employees of
the Borrower or the Loan Parties entered into in the ordinary course of
business, (c) transactions approved by the independent directors (or the
independent members of the comparable governing body) or the conflicts committee
of the board of directors (or comparable governing body) of the Borrower,
(d) Investments by a Loan Party in an Unrestricted Subsidiary permitted by
Section 9.05(h), (e) transactions pursuant to the WHR Services Agreement, (f) to
the extent that an Affiliate of the Borrower that is not a Loan Party makes an
interest payment in respect of the PIK Toggle Notes on or about June 15, 2014,
the prompt reimbursement (and in any event on or prior to June 30, 2014) of such
Affiliate by the Borrower of the amount of such interest payment,
(g) Investments permitted by Section 9.05(j), (h) transactions described on
Schedule 6.01 occurring on the Effective Date and the Additional Transactions
(as defined in Schedule 6.01) and (i) transactions listed on Schedule 9.14.

 

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Section 9.15 Subsidiaries. The Borrower will not, and will not permit any other
Loan Party to, create or acquire any additional Restricted Subsidiary or
redesignate an Unrestricted Subsidiary as a Restricted Subsidiary unless such
subsidiary is a Wholly-Owned Subsidiary and the Borrower gives written notice to
the Administrative Agent of such creation or acquisition and complies with
Section 8.14. The Borrower shall not, and shall not permit any Restricted
Subsidiary to, sell, assign or otherwise dispose of any Equity Interests in any
Restricted Subsidiary except in compliance with Section 9.12. Neither the
Borrower nor any Restricted Subsidiary shall have any Restricted Subsidiary that
is a Foreign Subsidiary.

Section 9.16 Negative Pledge Agreements; Dividend Restrictions. The Borrower
will not, and will not permit any other Loan Party to, create, incur, assume or
suffer to exist any contract, agreement or understanding (other than this
Agreement, the Security Instruments and Capital Leases creating Liens permitted
by Section 9.03(c)) which in any way prohibits or restricts the granting,
conveying, creation or imposition of any Lien on any of its Property in favor of
the Administrative Agent and the Secured Parties or, except for restrictions
substantially no more restrictive than those in Section 9.04(a) hereof,
restricts any Restricted Subsidiary from paying dividends or making
distributions to the Borrower or any Guarantor, or which, except for dividend or
distribution restrictions as aforesaid, requires the consent of or notice to
other Persons in connection therewith.

Section 9.17 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower will
not, and will not permit any other Loan Party to, allow gas imbalances,
take-or-pay or other prepayments with respect to the Oil and Gas Properties of
the Borrower or any other Loan Party that would require the Borrower or such
other Loan Party to deliver Hydrocarbons at some future time without then or
thereafter receiving full payment therefor to exceed three bcf of gas (on an mcf
equivalent basis) in the aggregate.

Section 9.18 Swap Agreements.

(a) The Borrower will not, and will not permit any other Loan Party to, enter
into any Swap Agreements with any Person other than:

(i) Swap Agreements in respect of commodities (A) with an Approved Counterparty
and (B) the notional volumes for which (when aggregated with other commodity
Swap Agreements then in effect other than basis differential swaps on volumes
already hedged pursuant to other Swap Agreements) do not exceed, as of the date
such Swap Agreement is executed, 85% of the reasonably anticipated projected
production from proved Oil and Gas Properties included in the most recent
Reserve Report for each month during the period during which such Swap Agreement
is in effect for each of crude oil, natural gas and natural gas liquids, (which,
in the case of natural gas liquids, may be hedged with Swap Agreements for crude
oil), each calculated separately; provided that Proved Developed Non-Producing
Reserves and Proved Undeveloped Reserves, in the aggregate, do not account for
greater than 40% of the total Proved Reserves,

(ii) Swap Agreements that would be permitted by clause (i) hereof pertaining to
Oil and Gas Properties to be acquired pursuant to a Specified Acquisition;

 

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provided that Swap Agreements pursuant to this Section 9.18(a)(ii) must be
Liquidated upon the earlier to occur of: (A) the date that is 90 days after the
execution of the purchase and sale agreement relating to the Specified
Acquisition to the extent that such Specified Acquisition has not been
consummated by such date, (B) any Loan Party knows with reasonable certainty
that the Specified Acquisition will not be consummated, and (C) in the case of
any Affiliated Acquisition, the date that is 20 days following the date any Loan
Party enters into any such Swap Agreement with respect to the expected
production from the Oil and Gas Properties to be acquired in such Affiliated
Acquisition if, as of such date, no binding and enforceable purchase and sale
agreement has been entered into by and between a Loan Party and an Affiliate
thereof (other than another Loan Party) with respect to such Affiliated
Acquisition,

(iii) Swap Agreements in respect of interest rates with an Approved
Counterparty, as follows: (A) Swap Agreements effectively converting interest
rates from fixed to floating, the notional amounts of which (when aggregated
with all other Swap Agreements of the Loan Parties then in effect effectively
converting interest rates from fixed to floating) do not exceed 100% of the then
outstanding principal amount of the Loan Parties’ Debt for borrowed money which
bears interest at a fixed rate and (B) Swap Agreements effectively converting
interest rates from floating to fixed, the notional amounts of which (when
aggregated with all other Swap Agreements of the Borrower and the other Loan
Parties then in effect effectively converting interest rates from floating to
fixed) do not exceed 100% of the then outstanding principal amount of the Loan
Parties’ Debt for borrowed money which bears interest at a floating rate, and

(iv) Swap Agreements entered into in the ordinary course of the Loan Parties’
business in respect of Emission Credits; provided that the aggregate amount that
is owing but unpaid by the Loan Parties under all such Swap Agreements shall not
exceed $1,000,000 in the aggregate at any time.

(b) In no event shall any Swap Agreement contain any requirement, agreement or
covenant for a Loan Party to post collateral or margin to secure their
obligations under such Swap Agreement or to cover market exposures, except to
the extent permitted under Section 9.03(d).

(c) The Borrower will not, and will not permit any of the other Loan Parties to,
incur or permit to exist any speculative Swap Agreements or any Swap Agreements
in respect of commodities with a tenor in excess of 60 months.

(d) The Borrower will not, and will not permit any other Loan Party to,
Liquidate any Swap Agreement in respect of commodities unless (x) if such Swap
Liquidation would result in an automatic redetermination of the Borrowing Base
pursuant to Section 2.07(f), the Borrower delivers reasonable prior written
notice thereof to the Administrative Agent, and (y) if a Borrowing Base
Deficiency would result from such Swap Liquidation as a result of an automatic
redetermination of the Borrowing Base pursuant to Section 2.07(f), the Borrower
prepays Borrowings, prior to or contemporaneously with the consummation of such
Swap Liquidation to the extent that such prepayment would have been required
under Section 3.04(c)(iv) after giving effect to such automatic redetermination
of the Borrowing Base.

 

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Section 9.19 Amendments to Certain Documents. The Borrower will not, and will
not permit any other Loan Party to, amend, modify or supplement the WHR Services
Agreement, the MRD LLC Contribution Agreement or the WildHorse Management Equity
Contribution Agreement if, in any case, the effect thereof could reasonably be
expected to be materially adverse to the Lenders or in contravention of the Loan
Documents or any Governmental Requirement (and, in any case, the Borrower shall
promptly furnish to the Administrative Agent a copy of any such amendment,
modification or supplement).

Section 9.20 Marketing Activities.

(a) The Borrower will not, and will not permit any other Loan Party to, engage
in marketing activities for any Hydrocarbons or enter into any contracts related
thereto other than (i) contracts for the sale of Hydrocarbons scheduled or
reasonably estimated to be produced from their proved Oil and Gas Properties
during the period of such contract, (ii) contracts for the sale of Hydrocarbons
scheduled or reasonably estimated to be produced from proved Oil and Gas
Properties of third parties during the period of such contract associated with
the Oil and Gas Properties of the Borrower and the other Loan Parties that the
Borrower or one of the other Loan Parties has the right to market pursuant to
joint operating agreements, unitization agreements or other similar contracts
that are usual and customary in the oil and gas business and (iii) other
contracts for the purchase and/or sale of Hydrocarbons of third parties
(A) which have generally offsetting provisions (i.e. corresponding pricing
mechanics, delivery dates and points and volumes) such that no “position” is
taken and (B) for which appropriate credit support has been taken to alleviate
the material credit risks of the counterparty thereto.

(b) The Borrower will not, and will not permit any other Loan Party to, amend in
any material respect the written Hydrocarbon Marketing Policy delivered to the
Lenders pursuant to Section 6.01(o) without the prior written consent of the
Administrative Agent and the Majority Lenders.

Section 9.21 Sale and Leaseback. The Borrower shall not, and shall not permit
any other Loan Party to, enter into any arrangement, directly or indirectly,
with any Person whereby it shall sell or transfer any Property, whether now
owned or hereafter acquired, and thereafter rent or lease such Property which it
intends to use for substantially the same purpose or purposes as the Property
being sold or transferred.

Section 9.22 Amendments to Organizational Documents; Changes in Fiscal Year End.

(a) The Borrower shall not, and shall not permit any other Loan Party to, amend,
supplement or otherwise modify (or permit to be amended, supplemented or
modified) its Organizational Documents in any manner that would be adverse to
the Lenders in any material respect.

(b) The Borrower shall not, and shall not permit any other Loan Party to, change
the last day of its fiscal year from December 31 of each year, or the last days
of the first three fiscal quarters in each of its fiscal years from
March 31, June 30 and September 30 of each year, respectively

 

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Section 9.23 Non-Eligible Contract Participants. The Borrower shall not permit
any Loan Party that is not an Eligible Contract Participant to own, at any time,
any Oil and Gas Properties or any Equity Interests in any Subsidiaries.

Section 9.24 Designation and Conversion of Restricted and Unrestricted
Subsidiaries.

(a) Unless designated as an Unrestricted Subsidiary on Schedule 7.14 as of the
date hereof or thereafter, assuming compliance with Section 9.24(b), any Person
that becomes a Subsidiary of the Borrower or any of its Restricted Subsidiaries
(other than any Subsidiary of an Unrestricted Subsidiary) shall be classified as
a Restricted Subsidiary. Any Person that becomes a Subsidiary of any
Unrestricted Subsidiary shall be automatically classified as an Unrestricted
Subsidiary.

(b) The Borrower may designate by written notification thereof to the
Administrative Agent, any Restricted Subsidiary other than MEMP GP, including a
newly formed or newly acquired Subsidiary (other than any Subsidiary of an
Unrestricted Subsidiary), as an Unrestricted Subsidiary if (i) prior, and after
giving effect, to such designation, neither a Default nor a Borrowing Base
Deficiency would exist and (ii) such designation is deemed to be a cash
Investment in an Unrestricted Subsidiary in an amount equal to the fair market
value as of the date of such designation of the Borrower’s direct and indirect
ownership interest in such Subsidiary and such Investment would be permitted to
be made at the time of such designation under Section 9.05(h) or
Section 9.05(j). Except as provided in this Section 9.24(b), no Restricted
Subsidiary may be redesignated as an Unrestricted Subsidiary.

(c) The Borrower may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary if after giving effect to such designation, (i) the representations
and warranties of the Borrower and its Restricted Subsidiaries contained in each
of the Loan Documents are true and correct on and as of such date as if made on
and as of the date of such redesignation (or, if stated to have been made
expressly as of an earlier date, were true and correct as of such date), (ii) no
Default would exist and (iii) the Borrower complies with the requirements of
Section 8.14, Section 8.17 and Section 9.15. Any such designation shall be
treated as a cash dividend in an amount equal to the lesser of the fair market
value of the Borrower’s direct and indirect ownership interest in such
Subsidiary or the amount of the Borrower’s cash investment previously made for
purposes of the limitation on Investments under Section 9.05(h) or
Section 9.05(j).

Section 9.25 Sanctions. The Borrower shall not, and shall not permit any other
Loan Party, to directly or indirectly, use the proceeds of any Borrowing or any
Letter of Credit, or lend, contribute or otherwise make available such proceeds
to any Subsidiary, joint venture partner or other individual or entity, to fund
any activities of or business with any individual or entity, or in any
Designated Jurisdiction, that, at the time of such funding, is the subject of
Sanctions, or in any other manner that will result in a violation by any
individual or entity (including any individual or entity participating in the
transaction, whether as Lender, Arranger, Administrative Agent, Issuing Bank, or
otherwise) of Sanctions.

 

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ARTICLE X

EVENTS OF DEFAULT; REMEDIES

Section 10.01 Events of Default. The occurrence of one or more of the following
events shall constitute an “Event of Default”:

(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof, by acceleration or otherwise;

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in Section 10.01(a)) payable
under any Loan Document, when and as the same shall become due and payable, and
such failure shall continue unremedied for a period of five days;

(c) any representation or warranty made or deemed made by or on behalf of the
Borrower or any other Loan Party in or in connection with any Loan Document or
any amendment or modification of any Loan Document or waiver under such Loan
Document, or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with any Loan Document or any amendment
or modification thereof or waiver thereunder, shall prove to have been incorrect
in any material respect when made or deemed made;

(d) any Loan Party shall fail to observe or perform any covenant, condition or
agreement contained in Section 8.01(i), Section 8.01(n), Section 8.02,
Section 8.03, Section 8.14, Section 8.15 or in Article IX of this Agreement;

(e) any Loan Party shall fail to observe or perform any covenant, condition or
agreement contained in this Agreement (other than those specified in
Section 10.01(a), Section 10.01(b), Section 10.01(c) or Section 10.01(d)) or any
other Loan Document, and such failure shall continue unremedied for a period of
30 days after the earlier to occur of (A) notice thereof from the Administrative
Agent to the Borrower (which notice will be given at the request of any Lender)
or (B) a Responsible Officer of the Borrower or such other Loan Party otherwise
becoming aware of such default;

(f) any Loan Party shall fail to make any payment (whether of principal or
interest and regardless of amount) in respect of any Material Indebtedness, when
and as the same shall become due and payable;

(g) (i) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or (ii) any event or condition
(other than a “termination event” as set forth in Sections 5(b)(1), 5(b)(2),
5(b)(3) and 5(b)(4) of the 1992 ISDA Master Agreement form of the International
Swaps and Derivatives Association or in Sections 5(b)(1), 5(b)(2), 5(b)(3),
5(b)(4) and 5(b)(5) of the 2002 ISDA Master Agreement form of the International
Swaps and Derivatives Association) that enables or permits (after giving effect
to all applicable notice and cure periods) the holder or holders of any Material
Indebtedness or any trustee or agent on its or their behalf to cause any
Material Indebtedness to

 

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become due, or to require the Redemption thereof or any offer to Redeem to be
made in respect thereof, prior to its scheduled maturity or require the Borrower
or any other Loan Party to make an offer in respect thereof;

(h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the Borrower or any other Loan Party or its debts, or of a
substantial part of its assets, under any Debtor Relief Law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any other Loan Party or for
a substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered;

(i) any Loan Party shall (i) voluntarily commence any proceeding or file any
petition seeking liquidation, reorganization or other relief under any Debtor
Relief Law now or hereafter in effect, (ii) consent to the institution of, or
fail to contest in a timely and appropriate manner, any proceeding or petition
described in Section 10.01(h), (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any other Loan Party or for a substantial part of its
assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing; or any stockholder of the Borrower shall make any request or take
any action for the purpose of calling a meeting of the equityholders of the
Borrower to consider a resolution to dissolve and wind-up the Borrower’s
affairs;

(j) any Loan Party shall become unable, admit in writing its inability or fail
generally to pay its debts as they become due;

(k) (i) one or more final, non-appealable judgments for the payment of money in
an aggregate amount in excess of $15,000,000 (to the extent not covered by
independent third party insurance provided by insurers of the highest claims
paying rating or financial strength as to which the insurer does not dispute
coverage and is not subject to an insolvency proceeding) or (ii) any one or more
final, non-appealable non-monetary judgments that have, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
shall be rendered against any Loan Party or any combination thereof and the same
shall remain undischarged for a period of 60 consecutive days during which
execution shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to attach or levy upon any assets of any Loan Party to
enforce any such judgment;

(l) the Loan Documents after delivery thereof shall for any reason, except to
the extent permitted by the terms thereof, cease to be in full force and effect
and valid, binding and enforceable in accordance with their terms against any
Loan Party party thereto, or shall be repudiated by any of them, or cease to
create a valid and perfected Lien of the priority required thereby on any
material part of the collateral purported to be covered thereby, except to the
extent permitted by the terms of this Agreement, or the Borrower or any other
Loan Party or any of their Affiliates shall so state in writing;

 

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(m) a Change in Control shall occur;

(n) an ERISA Event shall have occurred that, in the opinion of the Majority
Lenders, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in liability of the Borrower and its
Subsidiaries in an aggregate amount exceeding $10,000,000 for all periods; or

(o) the Borrower shall cease to be a reporting company under Section 12 of the
Securities Exchange Act of 1934, as amended from time to time, and any successor
statute or the Equity Interests of the Borrower shall cease to be listed on a
nationally recognized stock exchange.

Section 10.02 Remedies.

(a) In the case of an Event of Default other than one described in
Section 10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter
during the continuance of such Event of Default, the Administrative Agent may,
and at the request of the Majority Lenders, shall, by notice to the Borrower,
take either or both of the following actions, at the same or different times:
(i) terminate the Commitments, and thereupon the Commitments shall terminate
immediately, and (ii) declare the Notes and the Loans then outstanding to be due
and payable in whole (or in part, in which case any principal not so declared to
be due and payable may thereafter be declared to be due and payable), and
thereupon the principal of the Loans so declared to be due and payable, together
with accrued interest thereon and all fees and other obligations of the Borrower
and the Guarantors accrued hereunder and under the Notes and the other Loan
Documents (including, without limitation, the payment of cash collateral to
secure the LC Exposure as provided in Section 2.08(j)), shall become due and
payable immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor; and in case of an Event of
Default described in Section 10.01(h), Section 10.01(i) or Section 10.01(j), the
Commitments shall automatically terminate and the Notes and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
the other obligations of the Borrower and the Guarantors accrued hereunder and
under the Notes and the other Loan Documents (including, without limitation, the
payment of cash collateral to secure the LC Exposure as provided in
Section 2.08(j)), shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor.

(b) In the case of the occurrence of an Event of Default, the Administrative
Agent and the Lenders will have all other rights and remedies available at law
and equity.

(c) All proceeds realized from the liquidation or other disposition of
collateral or otherwise received after maturity of the Notes, whether by
acceleration or otherwise, shall be applied:

(i) first, to payment or reimbursement of that portion of the Indebtedness
constituting fees, expenses and indemnities payable to the Administrative Agent
in its capacity as such;

 

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(ii) second, pro rata to payment or reimbursement of that portion of the
Indebtedness constituting fees, expenses and indemnities payable to the Lenders;

(iii) third, pro rata to payment of accrued interest on the Loans;

(iv) fourth, pro rata to payment of principal outstanding on the Loans, LC
Disbursements that have not yet been reimbursed by or on behalf of the Borrower
at such time and Indebtedness referred to in clause (b) of the definition of
Indebtedness owing to a Secured Swap Provider;

(v) fifth, pro rata to any other Indebtedness;

(vi) sixth, to serve as cash collateral to be held by the Administrative Agent
to secure the remaining LC Exposure; and

(vii) seventh, any excess, after all of the Indebtedness shall have been
indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise
required by any Governmental Requirement.

Notwithstanding the foregoing, amounts received from the Borrower or any
Guarantor that is not an Eligible Contract Participant shall not be applied to
any Excluded Swap Obligations owing to a Secured Swap Provider (it being
understood, that in the event that any amount is applied to Indebtedness other
than Excluded Swap Obligations as a result of this clause, the Administrative
Agent shall make such adjustments as it determines are appropriate to
distributions pursuant to clause fourth above from amounts received from
Eligible Contract Participants to ensure, as nearly as possible, that the
proportional aggregate recoveries with respect to Indebtedness described in
clause fourth above by Secured Swap Providers that are the holders of any
Excluded Swap Obligations are the same as the proportional aggregate recoveries
with respect to other Indebtedness pursuant to clause fourth above).

ARTICLE XI

THE AGENTS

Section 11.01 Appointment and Authority.

(a) Each of the Lenders and the Issuing Bank hereby irrevocably appoints BAML to
act on its behalf as the Administrative Agent hereunder and under the other Loan
Documents and authorizes the Administrative Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms hereof or thereof, together with such actions and powers as are
reasonably incidental thereto. The provisions of this Article XI are solely for
the benefit of the Administrative Agent, the Lenders and the Issuing Bank, and
neither the Borrower nor any other Loan Party shall have rights as a third party
beneficiary of any of such provisions. It is understood and agreed that the use
of the term “agent” herein or in any other Loan Documents (or any other similar
term) with reference to the Administrative Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead such term is used as a matter of market
custom, and is intended to create or reflect only an administrative relationship
between contracting parties.

 

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(b) The Administrative Agent shall also act as the “collateral agent” under the
Loan Documents, and each of the Lenders (including in its capacities as a
potential Secured Swap Provider and a potential Bank Products Provider) and the
Issuing Bank hereby irrevocably appoints and authorizes the Administrative Agent
to act as the agent of such Lender and the Issuing Bank for purposes of
acquiring, holding and enforcing any and all Liens on Mortgaged Property granted
by any of the Loan Parties to secure any of the Indebtedness, together with such
powers and discretion as are reasonably incidental thereto. In this connection,
the Administrative Agent, as “collateral agent” and any co-agents, sub-agents
and attorneys-in-fact appointed by the Administrative Agent pursuant to
Section 11.05 for purposes of holding or enforcing any Lien on the Mortgaged
Property (or any portion thereof) granted under the Security Instruments, or for
exercising any rights and remedies thereunder at the direction of the
Administrative Agent), shall be entitled to the benefits of all provisions of
this Article XI and Article XII (including Section 12.03(c), as though such
co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under
the Loan Documents) as if set forth in full herein with respect thereto.

Section 11.02 Rights as a Lender. The Person serving as the Administrative Agent
hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though it were not the
Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise
expressly indicated or unless the context otherwise requires, include the Person
serving as the Administrative Agent hereunder in its individual capacity. Such
Person and its Affiliates may accept deposits from, lend money to, own
securities of, act as the financial advisor or in any other advisory capacity
for and generally engage in any kind of business with the Borrower or any
Subsidiary or other Affiliate thereof as if such Person were not the
Administrative Agent hereunder and without any duty to account therefor to the
Lenders.

Section 11.03 Exculpatory Provisions. The Administrative Agent shall not have
any duties or obligations except those expressly set forth herein and in the
other Loan Documents, and its duties hereunder shall be administrative in
nature. Without limiting the generality of the foregoing, the Administrative
Agent:

(a) shall not be subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing;

(b) shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
is required to exercise as directed in writing by the Majority Lenders (or such
other number or percentage of the Lenders as shall be expressly provided for
herein or in the other Loan Documents), provided that the Administrative Agent
shall not be required to take any action that, in its opinion or the opinion of
its counsel, may expose the Administrative Agent to liability or that is
contrary to any Loan Document or applicable law, including for the avoidance of
doubt any action that may be in violation of the automatic stay under any Debtor
Relief Law or that may effect a forfeiture, modification or termination of
property of a Defaulting Lender in violation of any Debtor Relief Law; and

(c) shall not, except as expressly set forth herein and in the other Loan
Documents, have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Borrower or any of its Affiliates that
is communicated to or obtained by the Person serving as the Administrative Agent
or any of its Affiliates in any capacity.

 

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(d) shall not be liable for any action taken or not taken by it (i) with the
consent or at the request of the Majority Lenders (or such other number or
percentage of the Lenders as shall be necessary, or as the Administrative Agent
shall believe in good faith shall be necessary, under the circumstances as
provided in Sections 10.02 and 12.02) or (ii) in the absence of its own gross
negligence or willful misconduct, as determined by a court of competent
jurisdiction by a final and nonappealable judgment. The Administrative Agent
shall be deemed not to have knowledge of any Default unless and until notice
describing such Default is given to the Administrative Agent by the Borrower, a
Lender or the Issuing Bank.

(e) shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection with this
Agreement or any other Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or therein
or the occurrence of any Default, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document, or the creation, perfection or priority
of any Lien purported to be created by the Security Instruments, (v) the value
or the sufficiency of any Mortgaged Property, or (v) the satisfaction of any
condition set forth in Article VI or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent.

Section 11.04 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely upon, and shall not incur any liability for relying upon,
any notice, request, certificate, consent, statement, instrument, document or
other writing (including any electronic message, Internet or intranet website
posting or other distribution) believed by it to be genuine and to have been
signed, sent or otherwise authenticated by the proper Person. The Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any
liability for relying thereon. In determining compliance with any condition
hereunder to the making of a Loan, or the issuance, extension, renewal or
increase of a Letter of Credit, that by its terms must be fulfilled to the
satisfaction of a Lender or the Issuing Bank, the Administrative Agent may
presume that such condition is satisfactory to such Lender or the Issuing Bank
unless the Administrative Agent shall have received notice to the contrary from
such Lender or the Issuing Bank prior to the making of such Loan or the issuance
of such Letter of Credit. The Administrative Agent may consult with legal
counsel (who may be counsel for the Borrower), independent accountants and other
experts selected by it, and shall not be liable for any action taken or not
taken by it in accordance with the advice of any such counsel, accountants or
experts.

Section 11.05 Delegation of Duties. The Administrative Agent may perform any and
all of its duties and exercise its rights and powers hereunder or under any
other Loan Document by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all of its duties and exercise its rights and powers by or
through their respective Related Parties. The exculpatory provisions

 

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of this Article shall apply to any such sub-agent and to the Related Parties of
the Administrative Agent and any such sub-agent, and shall apply to their
respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
The Administrative Agent shall not be responsible for the negligence or
misconduct of any sub-agents except to the extent that a court of competent
jurisdiction determines in a final and nonappealable judgment that the
Administrative Agent acted with gross negligence or willful misconduct in the
selection of such sub-agents.

Section 11.06 Resignation of Administrative Agent.

(a) The Administrative Agent may at any time give notice of its resignation to
the Lenders, the Issuing Bank and the Borrower. Upon receipt of any such notice
of resignation, the Majority Lenders shall have the right, in consultation with
the Borrower, to appoint a successor, which shall be a bank with an office in
the United States, or an Affiliate of any such bank with an office in the United
States. If no such successor shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent gives notice of its resignation, (or such earlier
day as shall be agreed by the Majority Lenders) (the “Resignation Effective
Date”), then the retiring Administrative Agent may (but shall not be obligated
to) on behalf of the Lenders and the Issuing Bank, appoint a successor
Administrative Agent meeting the qualifications set forth above. Whether or not
a successor has been appointed, such resignation shall become effective in
accordance with such notice on the Resignation Effective Date.

(b) With effect from the Resignation Effective Date (1) the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Loan Documents (except that in the case of any
collateral security held by the Administrative Agent on behalf of the Lenders or
the Issuing Bank under any of the Loan Documents, the retiring Administrative
Agent shall continue to hold such collateral security until such time as a
successor Administrative Agent is appointed) and (2) except for any indemnity
payments or other amounts then owed to the retiring Administrative Agent, all
payments, communications and determinations provided to be made by, to or
through the Administrative Agent shall instead be made by or to each Lender and
the Issuing Bank directly, until such time, if any, as the Majority Lenders
appoint a successor Administrative Agent as provided for above. Upon the
acceptance of a successor’s appointment as Administrative Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring Administrative Agent (other than as
provided in Section 12.05 with respect to Section 5.03 and other than any rights
to indemnity payments or other amounts owed to the retiring Administrative Agent
as of the Resignation Effective Date), and the retiring Administrative Agent
shall be discharged from all of its duties and obligations hereunder or under
the other Loan Documents (if not already discharged therefrom as provided above
in this Section) . The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the
retiring Administrative Agent’s resignation hereunder and under the other Loan
Documents, the provisions of this Article shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while the retiring Administrative Agent was acting as
Administrative Agent.

 

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Section 11.07 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender and the Issuing Bank acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender or any of their
Related Parties and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender and the Issuing Bank also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other
Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or any related agreement or any document furnished
hereunder or thereunder. The Agents shall not be required to keep themselves
informed as to the performance or observance by the Borrower or any of the other
Loan Parties of this Agreement, the Loan Documents or any other document
referred to or provided for herein or to inspect the Properties or books of the
Borrower or the other Loan Parties. Each Lender acknowledges that Vinson &
Elkins L.L.P. is acting in this transaction as special counsel to the
Administrative Agent only. Each other party hereto will consult with its own
legal counsel to the extent that it deems necessary in connection with the Loan
Documents and the matters contemplated therein.

Section 11.08 No Other Duties, Etc. Anything herein to the contrary
notwithstanding, none of the Arranger, Syndication Agent or Documentation Agents
shall have any powers, duties or responsibilities under this Agreement or any of
the other Loan Documents, except in its capacity, as applicable, as the
Administrative Agent, a Lender or the Issuing Bank hereunder.

Section 11.09 Administrative Agent May File Proofs of Claim; Credit Bidding. In
case of the pendency of any proceeding under any Debtor Relief Law or any other
judicial proceeding relative to any Loan Party, the Administrative Agent
(irrespective of whether the principal of any Loan or LC Exposure shall then be
due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Loans, LC Exposures and all other
Indebtedness that are owing and unpaid and to file such other documents as may
be necessary or advisable in order to have the claims of the Lenders, the
Issuing Bank and the Administrative Agent (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Lenders,
the Issuing Bank and the Administrative Agent and their respective agents and
counsel and all other amounts due the Lenders, the Issuing Bank and the
Administrative Agent under Sections 3.05 and 12.03) allowed in such judicial
proceeding; and

(b) to collect and receive any monies or other property payable or deliverable
on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender and the Issuing Bank to make such payments to the Administrative
Agent and, if the Administrative Agent shall consent to the making of such
payments directly to the Lenders and the Issuing Bank, to pay to the
Administrative Agent any amount due for the reasonable compensation, expenses,
disbursements and advances of the Administrative Agent and its agents and
counsel, and any other amounts due the Administrative Agent under Sections 3.05
and 12.03.

 

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Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender or the
Issuing Bank any plan of reorganization, arrangement, adjustment or composition
affecting the Indebtedness or the rights of any Lender or the Issuing Bank to
authorize the Administrative Agent to vote in respect of the claim of any Lender
or the Issuing Bank or in any such proceeding.

The Secured Parties hereby irrevocably authorize the Administrative Agent, at
the direction of the Majority Lenders, to credit bid all or any portion of the
Indebtedness (including accepting some or all of the Mortgaged Property in
satisfaction of some or all of the Indebtedness pursuant to a deed in lieu of
foreclosure or otherwise) and in such manner purchase (either directly or
through one or more acquisition vehicles) all or any portion of the Mortgaged
Property (a) at any sale thereof conducted under the provisions of the
Bankruptcy Code of the United States, including under Sections 363, 1123 or 1129
of the Bankruptcy Code of the United States, or any similar laws in any other
jurisdictions to which a Loan Party is subject, (b) at any other sale or
foreclosure or acceptance of collateral in lieu of debt conducted by (or with
the consent or at the direction of) the Administrative Agent (whether by
judicial action or otherwise) in accordance with any applicable law. In
connection with any such credit bid and purchase, the Indebtedness owed to the
Secured Parties shall be entitled to be, and shall be, credit bid on a ratable
basis (with Indebtedness with respect to contingent or unliquidated claims
receiving contingent interests in the acquired assets on a ratable basis that
would vest upon the liquidation of such claims in an amount proportional to the
liquidated portion of the contingent claim amount used in allocating the
contingent interests) in the asset or assets so purchased (or in the Equity
Interests or debt instruments of the acquisition vehicle or vehicles that are
used to consummate such purchase). In connection with any such bid (i) the
Administrative Agent shall be authorized to form one or more acquisition
vehicles to make a bid, (ii) to adopt documents providing for the governance of
the acquisition vehicle or vehicles (provided that any actions by the
Administrative Agent with respect to such acquisition vehicle or vehicles,
including any disposition of the assets or Equity Interests thereof shall be
governed, directly or indirectly, by the vote of the Majority Lenders,
irrespective of the termination of this Agreement and without giving effect to
the limitations on actions by the Majority Lenders contained in
Section 12.02(b), (iii) the Administrative Agent shall be authorized to assign
the relevant Indebtedness to any such acquisition vehicle pro rata by the
Lenders, as a result of which each of the Lenders shall be deemed to have
received a pro rata portion of any Equity Interests and/or debt instruments
issued by such an acquisition vehicle on account of the assignment of the
Indebtedness to be credit bid, all without the need for any Secured Party or
acquisition vehicle to take any further action, and (iv) to the extent that
Indebtedness that is assigned to an acquisition vehicle is not used to acquire
Mortgaged Property for any reason (as a result of another bid being higher or
better, because the amount of Indebtedness assigned to the acquisition vehicle
exceeds the amount of debt credit bid by the acquisition vehicle or otherwise),
such Indebtedness shall automatically be reassigned to the Lenders pro rata and
the Equity Interests and/or debt instruments issued by any acquisition vehicle
on account of the Indebtedness that had been assigned to the acquisition vehicle
shall automatically be cancelled, without the need for any Secured Party or any
acquisition vehicle to take any further action.

 

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Section 11.10 Collateral and Guaranty Matters. Without limiting the provision of
Section 11.09, each of the Lenders (including in its capacities as a potential
Bank Products Provider and a potential Secured Swap Provider) and the Issuing
Bank irrevocably authorize the Administrative Agent, at its option and in its
discretion:

(a) to release any Lien on any Property granted to or held by the Administrative
Agent under any Loan Document (i) upon termination of the Commitments and
payment in full of all Indebtedness (other than (A) contingent indemnification
obligations and (B) obligations and liabilities under agreements by the Borrower
or any Guarantor with Bank Products Providers and Secured Swap Providers as to
which arrangements satisfactory to the applicable Bank Products Provider or
Secured Swap Provider shall have been made) and the expiration or termination of
all Letters of Credit (other than Letters of Credit as to which other
arrangements satisfactory to the Administrative Agent and the Issuing Bank shall
have been made), (ii) that is sold or otherwise disposed of or to be sold or
otherwise disposed of as part of or in connection with any sale or other
disposition permitted hereunder or under any other Loan Document to a Person
that is not the Borrower or a Guarantor (including, without limitation, any
Property of a Restricted Subsidiary that is redesignated as an Unrestricted
Subsidiary in accordance with Section 9.24(b)), or (iii) if approved, authorized
or ratified in writing in accordance with Section 12.02;

(b) to release any Guarantor from its obligations under the Guaranty Agreement
if such Person ceases to be a Material Subsidiary as a result of a transaction
permitted under the Loan Documents; and

(c) to subordinate any Lien on any property granted to or held by the
Administrative Agent under any Loan Document to the holder of any Lien on such
property that is permitted by Section 9.03(c).

Upon request by the Administrative Agent at any time, the Majority Lenders will
confirm in writing the Administrative Agent’s authority to release or
subordinate its interest in particular types or items of property, or to release
any Guarantor from its obligations under the Guaranty Agreement pursuant to this
Section 11.10. In each case as specified in this Section 11.10, the
Administrative Agent will, at the Borrower’s expense, execute and deliver to the
applicable Loan Party such documents as such Loan Party may reasonably request
to evidence the release of such item of Mortgaged Property from the assignment
and security interest granted under the Security Instruments or to subordinate
its interest in such item, or to release such Guarantor from its obligations
under the Guaranty Agreement, in each case in accordance with the terms of the
Loan Documents and this Section 11.10.

The Administrative Agent shall not be responsible for or have a duty to
ascertain or inquire into any representation or warranty regarding the
existence, value or collectability of the Mortgaged Property, the existence,
priority or perfection of the Administrative Agent’s Lien thereon, or any
certificate prepared by any Loan Party in connection therewith, nor shall the
Administrative Agent be responsible or liable to the Lenders for any failure to
monitor or maintain any portion of the Mortgaged Property.

Section 11.11 Secured Bank Products Agreements and Secured Swap Agreements. The
benefit of the Security Instruments and of the provisions of this Agreement
relating to any

 

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collateral securing the Indebtedness shall also extend to and be available to
the Secured Swap Providers with respect to any Swap Agreement including any Swap
Agreement in existence prior to the date hereof, but excluding any additional
transactions or confirmations entered into (a) after such Secured Swap Provider
ceases to be a Secured Swap Provider or (b) after assignment by a Secured Swap
Provider to a Person who is not, at the time of such assignment, a Secured Swap
Provider. Except as otherwise expressly set forth herein or in any Security
Instrument, no Bank Products Provider or Secured Swap Provider that obtains the
benefits of Section 10.02(c), the Guaranty Agreement or any Mortgaged Property
by virtue of the provisions hereof or of the Guaranty Agreements or any Security
Instrument shall have any right to notice of any action or to consent to, direct
or object to any action hereunder or under any other Loan Document or otherwise
in respect of the Mortgaged Property (including the release or impairment of any
Mortgaged Property) other than in its capacity as a Lender and, in such case,
only to the extent expressly provided in the Loan Documents. Notwithstanding any
other provision of this Article XI to the contrary, the Administrative Agent
shall not be required to verify the payment of, or that other satisfactory
arrangements have been made with respect to, Indebtedness arising under
agreements by any Loan Party with Bank Products Providers and Secured Swap
Providers unless the Administrative Agent has received written notice of such
Indebtedness, together with such supporting documentation as the Administrative
Agent may request, from the applicable Bank Products Provider or Secured Swap
Provider, as the case may be.

Section 11.12 Action by Administrative Agent. In all cases the Administrative
Agent shall be fully justified in failing or refusing to take any discretionary
action or exercise any discretionary power hereunder or under any other Loan
Documents unless it shall (a) receive written instructions from the Majority
Lenders or the Lenders (or such other number or percentage of the Lenders as
shall be necessary under the circumstances as provided in Section 12.02)
specifying the action to be taken and (b) be indemnified to its satisfaction by
the Lenders against any and all liability and expenses which may be incurred by
it by reason of taking or continuing to take any such action. The instructions
as aforesaid and any action taken or failure to act pursuant thereto by the
Administrative Agent shall be binding on all of the Lenders. If a Default has
occurred and is continuing, then the Administrative Agent shall take such action
with respect to such Default as shall be directed by the requisite Lenders in
the written instructions (with indemnities) described in this Section 11.12,
provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interests of the Lenders. If a
Default has occurred and is continuing, neither the Syndication Agent nor the
Documentation Agents shall have any obligation to perform any act in respect
thereof.

Section 11.13 Intercreditor Agreements. The Lenders hereby authorize the
Administrative Agent to enter into any intercreditor agreement with any Secured
Swap Provider and to amend any such agreements in accordance with the provisions
of Section 12.02. Each Lender (by receiving the benefits thereunder and of the
collateral pledged pursuant to the Security Instruments) agrees that the terms
of each such intercreditor agreement shall be binding on such Lender and its
successors and assigns, as if it were a party thereto.

 

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ARTICLE XII

MISCELLANEOUS

Section 12.01 Notices.

(a) Except in the case of notices and other communications expressly permitted
to be given by telephone (and subject to Section 12.01(b)), all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by facsimile, as follows:

(i) if to the Borrower, to it at Memorial Resource Development Corp., 1301
McKinney, Suite 2100, Houston, Texas, 77010, Attn: Andrew J. Cozby, Facsimile
No. (713) 588-8301, with a copy to Memorial Resource Development Corp., 1301
McKinney, Suite 2100, Houston, Texas 77010, Attn: Kyle N. Roane, Facsimile No.
(713) 588-8301;

(ii) if to the Administrative Agent, for payments and requests for credit
extensions, to it at Bank of America, N.A., One Independence Center, 101 Tryon
Street, Mail Code NC1-001-05-46, Charlotte, North Carolina 28255-0001, Attn:
Valerie Gravesandy, Facsimile No. (704) 409-0169;

(iii) if to the Administrative Agent, for all other notices, to it at Bank of
America, N.A., 135 South LaSalle Street, Mail Code IL4-135-09-61, Chicago,
Illinois 60603, Attn: Gerund N. Gore, Facsimile No. (312) 453-3635;

(iv) if to the Issuing Bank, to it at Bank of America, N.A., Trade Operations –
Scranton, 1 Fleet Way, Mail Code PA6-580-02-30, Scranton, Pennsylvania 18507,
Attn: Charles P. Herron, Facsimile No. (800) 755-8743; and

(v) if to any other Lender, to it at its address (or facsimile number) set forth
in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders hereunder may be delivered
or furnished by electronic communications (including e-mail, FpML Messaging, and
Internet or intranet websites pursuant to procedures approved by the
Administrative Agent; provided that the foregoing shall not apply to notices
pursuant to Article II, Article III, Article IV and Article V unless otherwise
agreed by the Administrative Agent and the applicable Lender. The Administrative
Agent or the Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.

(c) Any party hereto may change its address or facsimile number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.

 

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(d) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE
ADMINISTRATIVE AGENT AND ITS RELATED PARTIES DO NOT WARRANT THE ACCURACY OR
COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND
EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER
MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT
OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY
ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM.

(i) In no event shall the Administrative Agent or any of its Related Parties
have any liability to the Loan Parties, any Lender, the Issuing Bank or any
other Person for losses, claims, damages, liabilities or expenses of any kind
(whether in tort, contract or otherwise) arising out of any Loan Party’s or the
Administrative Agent’s transmission of Borrower Materials or notices through the
Platform, any other electronic messaging service, or through the Internet.

(ii) The Loan Parties hereby acknowledge that (a) the Administrative Agent
and/or the Arranger will make available to the Lenders and the Issuing Bank
materials and/or information provided by or on behalf of the Loan Parties
hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials
on IntraLinks, Syndtrak, ClearPar, or another similar electronic system (the
“Platform”) and (b) certain of the Lenders (each, a “Public Lender”) may have
personnel who do not wish to receive material non-public information with
respect to the Loan Parties or their Affiliates, or the respective securities of
any of the foregoing, and who may be engaged in investment and other
market-related activities with respect to such Persons’ securities. The Loan
Parties hereby agree that it will use commercially reasonable efforts to
identify that portion of the Borrower Materials that may be distributed to the
Public Lenders and that (i) all such Borrower Materials shall be clearly and
conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word
“PUBLIC” shall appear prominently on the first page thereof; (ii) by marking
Borrower Materials “PUBLIC,” the Loan Parties shall be deemed to have authorized
the Administrative Agent, the Arranger, the Issuing Bank and the Lenders to
treat such Borrower Materials as not containing any material non-public
information (although it may be sensitive and proprietary) with respect to the
Loan Parties or any of their securities for purposes of United States Federal
and state securities laws (provided, however, that to the extent such Borrower
Materials constitute Information, they shall be treated as set forth in
Section 12.11); (iii) all Borrower Materials marked “PUBLIC” are permitted to be
made available through a portion of the Platform designated “Public Side
Information;” and (iv) the Administrative Agent and the Arranger shall be
entitled to treat any Borrower Materials that are not marked “PUBLIC” as being
suitable only for posting on a portion of the Platform not designated “Public
Side Information.”

 

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Section 12.02 Waivers; Amendments.

(a) No failure on the part of the Administrative Agent, any other Agent, the
Issuing Bank or any Lender to exercise and no delay in exercising, and no course
of dealing with respect to, any right, power or privilege, or any abandonment or
discontinuance of steps to enforce such right, power or privilege, under any of
the Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under any of the Loan
Documents preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies of the Administrative
Agent, any other Agent, the Issuing Bank and the Lenders hereunder and under the
other Loan Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of this
Agreement or any other Loan Document or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be permitted by
Section 12.02(b), and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent, any other Agent, any Lender or the Issuing Bank may
have had notice or knowledge of such Default at the time.

(b) Neither this Agreement nor any provision hereof nor any Security Instrument
nor any provision thereof may be waived, amended or modified except pursuant to
an agreement or agreements in writing entered into by the Borrower and the
Majority Lenders or by the Borrower and the Administrative Agent with the
consent of the Majority Lenders; provided that no such agreement shall
(i) increase the Commitment, Elected Commitment or the Maximum Credit Amount of
any Lender without the written consent of such Lender, (ii) increase the
Borrowing Base without the written consent of each Lender, decrease or maintain
the Borrowing Base without the consent of the Required Lenders, or modify
Section 2.07 in any manner that results in an increase in the Borrowing Base
without the consent of each Lender (other than any Defaulting Lender); provided
that a Scheduled Redetermination may be postponed by Required Lenders,
(iii) reduce the principal amount of any Loan or LC Disbursement or reduce the
rate of interest thereon, or reduce any fees payable hereunder, or reduce any
other Indebtedness hereunder or under any other Loan Document, without the
written consent of each Lender affected thereby, (iv) postpone the scheduled
date of payment or prepayment of the principal amount of any Loan or LC
Disbursement, or any interest thereon, or any fees payable hereunder, or any
other Indebtedness hereunder or under any other Loan Document, or reduce the
amount of, waive or excuse any such payment, or postpone or extend the
Termination Date without the written consent of each Lender affected thereby,
(v) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender, (vi) waive or amend Section 3.04(c), Section 6.01, Section 8.14 or
Section 10.02(c) or change the definition of the terms “Domestic Subsidiary,”
“Foreign Subsidiary,” “Material Subsidiary” or “Subsidiary,” without the written
consent of each Lender (other than any Defaulting Lender), (vii) waive or amend
Section 11.11 without the written consent of each Lender (other than any
Defaulting Lender) and each Secured Swap Provider affected thereby, (viii) waive
or amend Section 12.14 without the written consent of each Secured Swap Provider
affected thereby, (ix) release any Guarantor (except as set forth in
Section 11.10 or in the Guaranty Agreement), release all or substantially all of
the collateral (other than as provided in Section 11.10), or reduce the
percentage set forth

 

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in Section 8.14(a) to less than 80%, without the written consent of each Lender
(other than any Defaulting Lender), or (x) change any of the provisions of this
Section 12.02(b) or the definitions of “Required Lenders” or “Majority Lenders”
or any other provision hereof specifying the number or percentage of Lenders
required to waive, amend or modify any rights hereunder or under any other Loan
Documents or make any determination or grant any consent hereunder or any other
Loan Documents, without the written consent of each Lender (other than any
Defaulting Lender); provided further that no such agreement shall amend, modify
or otherwise affect the rights or duties of the Administrative Agent, any other
Agent or the Issuing Bank hereunder or under any other Loan Document without the
prior written consent of the Administrative Agent, such other Agent or the
Issuing Bank, as the case may be. Notwithstanding the foregoing, any supplement
to Schedule 7.14 (Loan Parties and Subsidiaries) shall be effective simply by
delivering to the Administrative Agent a supplemental schedule clearly marked as
such and, upon receipt, the Administrative Agent will promptly deliver a copy
thereof to the Lenders.

Section 12.03 Expenses, Indemnity; Damage Waiver.

(a) The Borrower shall pay (i) all reasonable and documented out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates, including,
without limitation, the reasonable and documented fees, charges and
disbursements of counsel and other outside consultants for the Administrative
Agent, the reasonable and documented travel, photocopy, mailing, courier,
telephone and other similar expenses, including all Syndtrak (or similar
service) expenses, and the reasonable and documented cost of environmental
assessments and audits and surveys and appraisals, in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration (both before and after the
execution hereof and including advice of counsel to the Administrative Agent as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of this Agreement and the other Loan Documents and any
amendments, modifications or waivers of or consents related to the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all reasonable and documented costs,
expenses, Taxes, assessments and other charges incurred by any Agent or any
Lender in connection with any filing, registration, recording or perfection of
any security interest contemplated by this Agreement or any Security Instrument
or any other document referred to therein, (iii) all reasonable and documented
out-of-pocket expenses incurred by the Issuing Bank in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder, and (iv) if a Default has occurred, all documented
out-of-pocket expenses incurred by any Agent, the Issuing Bank or any Lender,
including the fees, charges and disbursements of any counsel for any Agent, the
Issuing Bank or any Lender, in connection with the enforcement or protection of
its rights in connection with this Agreement or any other Loan Document,
including its rights under this Section 12.03, or in connection with the Loans
made or Letters of Credit issued hereunder, including, without limitation, all
such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.

(b) THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, THE ISSUING BANK AND
EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH
PERSON BEING CALLED AN

 

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“INDEMNITEE”) AGAINST, AND DEFEND AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY
AND ALL LOSSES, CLAIMS, DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES,
INCLUDING THE REASONABLE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY
INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN
CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED
HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY
OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN
DOCUMENT (PROVIDED THAT THE INDEMNIFICATION IN THIS CLAUSE (i) SHALL NOT EXTEND
TO DISPUTES SOLELY BETWEEN OR AMONG ANY AGENT, THE LENDERS OR THEIR RESPECTIVE
AFFILIATES), (ii) THE FAILURE OF THE BORROWER OR ANY OTHER LOAN PARTY TO COMPLY
WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY
GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY
BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN
ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS
DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE
OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY THE
ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE
DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH
THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY
LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER
IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH,
(v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS
OF THE BORROWER AND THE OTHER LOAN PARTIES BY THE BORROWER AND THE OTHER LOAN
PARTIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE
PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL
LAW APPLICABLE TO THE BORROWER OR ANY OTHER LOAN PARTY REGARDING ANY OF THEIR
PROPERTIES OR OPERATIONS, INCLUDING, THE PRESENCE, GENERATION, STORAGE, RELEASE,
THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR
TREATMENT OF HAZARDOUS MATERIALS ON OR AT ANY OF THEIR PROPERTIES, (ix) THE
BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY OTHER LOAN PARTY WITH ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY OTHER LOAN PARTY, (x) THE
PAST OWNERSHIP BY THE BORROWER OR ANY OTHER LOAN PARTY OF ANY OF THEIR
PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND
FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi) THE
PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED
RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR

 

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DISPOSAL OF HAZARDOUS MATERIALS ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED
BY THE BORROWER OR ANY OTHER LOAN PARTY OR ANY ACTUAL OR ALLEGED PRESENCE OR
RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE
BORROWER OR ANY OF THE OTHER LOAN PARTIES, (xii) ANY ENVIRONMENTAL LIABILITY
RELATED IN ANY WAY TO THE BORROWER OR ANY OF THE OTHER LOAN PARTIES, OR
(xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH
THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION,
INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER BROUGHT BY THE
BORROWER OR ANY THIRD PARTY OR WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND
SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR
CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR
PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION INCLUDING, WITHOUT
LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT
(SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT
LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED
THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT
THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES (A) ARE
DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE
JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH INDEMNITEE OR (B) ARE IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING
FROM THE ACTS OR OMISSIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER DURING THE
PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS HAVE OBTAINED TITLE
AND POSSESSION OF SUCH PROPERTY BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE).

(c) To the extent that the Borrower fails to pay any amount required to be paid
by it to any Agent, the Arranger or the Issuing Bank under Section 12.03(a) or
(b), each Lender severally agrees to pay to such Agent, the Arranger or the
Issuing Bank, as the case may be, such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against such Agent, the Arranger or the
Issuing Bank in its capacity as such.

(d) To the extent permitted by applicable law, the Borrower shall not assert,
and hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of
the proceeds thereof.

(e) All amounts due under this Section 12.03 shall be payable not later than 10
Business Days after written demand therefor accompanied by appropriate
documentation thereof.

 

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Section 12.04 Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 12.04. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, the Issuing Bank and
the Lenders and their respective successors and assigns permitted hereby) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) (i) Subject to the conditions set forth in Section 12.04(b)(ii), any Lender
may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it) with the prior written consent (such
consent not to be unreasonably withheld) of:

(A) the Borrower, provided that no consent of the Borrower shall be required if
such assignment is to an assignee that is a Lender immediately prior to giving
effect to such assignment, an Affiliate of such a Lender, an Approved Fund or,
if an Event of Default has occurred and is continuing, is to any other assignee;
and

(B) the Administrative Agent, provided that no consent of the Administrative
Agent shall be required for an assignment to an assignee that is a Lender
immediately prior to giving effect to such assignment.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of (1) an assignment to an assignee that is a Lender
immediately prior to giving effect to such assignment or an Affiliate of a
Lender, (2) an assignment of the entire remaining amount of the assigning
Lender’s Commitment or Loans or (3) an assignment pursuant to clause (iii) of
the last paragraph of Section 11.09, the amount of the Commitment or Loans of
the assigning Lender subject to each such assignment (determined as of the date
the Assignment and Assumption with respect to such assignment is delivered to
the Administrative Agent) shall not be less than $5,000,000 unless each of the

 

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Borrower and the Administrative Agent otherwise consent, provided that no such
consent of the Borrower shall be required if an Event of Default has occurred
and is continuing;

(B) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement;

(C) the parties to each assignment (other than any assignment pursuant to clause
(iii) of the last paragraph of Section 11.09) shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500;

(D) the assignee, if it shall not already be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire;

(E) in no event may any Lender assign all or a portion of its rights and
obligations under this Agreement to the Borrower, any Affiliate of the Borrower
or a natural person; and

(F) the Applicable Percentage of Maximum Credit Amount and Elected Commitment
assigned are equal.

(iii) Subject to Section 12.04(b)(iv) and the acceptance and recording thereof,
from and after the effective date specified in each Assignment and Assumption
the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Section 5.01,
Section 5.02, Section 5.03 and Section 12.03). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this Section 12.04 shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with
Section 12.04(c).

(iv) The Administrative Agent, acting solely for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Maximum Credit Amount and Elected Commitment
of, and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in
the Register shall be conclusive absent manifest error, and the Borrower, the
Administrative Agent, the Issuing Bank and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
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the Borrower, the Issuing Bank and any Lender, at any reasonable time and from
time to time upon reasonable prior notice. In connection with any changes to the
Register, if necessary, the Administrative Agent will reflect the revisions on
Annex I and forward a copy of such revised Annex I to the Borrower, the Issuing
Bank and each Lender.

(v) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire and applicable tax forms (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in
Section 12.04(b) and any written consent to such assignment required by
Section 12.04(b), the Administrative Agent shall accept such Assignment and
Assumption and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this Section 12.04(b).

(c) (i) Any Lender may, without the consent of the Borrower, the Administrative
Agent or the Issuing Bank, sell participations to one or more banks or other
Person (other than the Borrower, any Affiliate of the Borrower or a natural
person) (a “Participant”) in all or a portion of such Lender’s rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it); provided that (A) such Lender’s obligations under
this Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (C) the Borrower, the Administrative Agent, the Issuing Bank and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the proviso to Section 12.02 that
affects such Participant. In addition such agreement must provide that the
Participant be bound by the provisions of Section 12.03. Subject to
Section 12.04(c)(ii), the Borrower agrees that each Participant shall be
entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 (in each
case, without duplication of any benefits afforded the Lender granting such
participation) to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to Section 12.04(b). Each Lender that sells a
participation shall, acting solely for this purpose as a non-fiduciary agent of
the Borrower, maintain a register on which it enters the name and address of
each Participant and the principal amounts (and stated interest) of each
Participant’s interest in the Loans or other obligations under the Loan
Documents (the “Participant Register”); provided that no Lender shall have any
obligation to disclose all or any portion of the Participant Register (including
the identity of any Participant or any information relating to a Participant’s
interest in any commitments, loans, letters of credit or its other obligations
under any Loan Document) to any Person except to the extent that such disclosure
is necessary to establish that such commitment, loan, letter of credit or other
obligation is in registered form under Section 5f.103-1(c) of the United States
Treasury Regulations. The entries in the Participant Register shall be
conclusive absent manifest error, and such Lender shall treat each Person whose
name is recorded in the Participant Register as the owner of such participation
for all purposes of this Agreement notwithstanding any notice to the contrary.
For the avoidance of doubt, the Administrative Agent (in its capacity as
Administrative Agent) shall have no responsibility for maintaining a Participant
Register.

 

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(ii) A Participant shall not be entitled to receive any greater payment under
Section 5.01 or Section 5.03 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower’s
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 5.03 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 5.03(f) as
though it were a Lender.

(d) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including, without limitation, any pledge or assignment to secure
obligations to a Federal Reserve Bank or other central bank, and this
Section 12.04 shall not apply to any such pledge or assignment of a security
interest; provided that no such pledge or assignment of a security interest
shall release a Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for such Lender as a party hereto.

(e) Notwithstanding any other provisions of this Section 12.04, no transfer or
assignment of the interests or obligations of any Lender or any grant of
participations therein shall be permitted if such transfer, assignment or grant
would require the Borrower and the Guarantors to file a registration statement
with the SEC or to qualify the Loans under the “Blue Sky” laws of any state.

Section 12.05 Survival; Revival; Reinstatement.

(a) All covenants, agreements, representations and warranties made by the
Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, any other Agent, the Issuing Bank or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not expired or terminated. The provisions of Section 5.01 (subject to
Section 5.01(d)), Section 5.02 (subject to the proviso in the last sentence
thereof), Section 5.03 (subject to the proviso in the last sentence of
Section 5.03(c)) and Section 12.03 (for a period of two years after the Maturity
Date) and Article XI shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, the expiration or termination of the Letters of Credit
and the Commitments or the termination of this Agreement, any other Loan
Document or any provision hereof or thereof; provided that any time limitation
on the survival of any provision hereunder shall be tolled for any claims filed
prior to the expiration of such time limitation until two months after final,
non-appealable adjudication of any such claim.

 

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(b) To the extent that any payments on the Indebtedness or proceeds of any
collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Administrative Agent’s and the Lenders’ Liens, security interests, rights,
powers and remedies under this Agreement and each Loan Document shall continue
in full force and effect. In such event, each Loan Document shall be
automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such
reinstatement.

Section 12.06 Counterparts; Integration; Effectiveness.

(a) This Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single contract.

(b) This Agreement, the other Loan Documents and any separate letter agreements
with respect to fees payable to the Administrative Agent constitute the entire
contract among the parties relating to the subject matter hereof and thereof and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof and thereof.

(c) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
AMONG THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

(d) Except as provided in Section 6.01, this Agreement shall become effective
when it shall have been executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by facsimile or other electronic
transmission (e.g. .pdf) shall be effective as delivery of a manually executed
counterpart of this Agreement.

Section 12.07 Severability. Any provision of this Agreement or any other Loan
Document held to be invalid, illegal or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof or thereof; and the invalidity
of a particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.

 

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Section 12.08 Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other obligations (of whatsoever kind, including,
without limitations obligations under Swap Agreements) at any time owing by such
Lender or Affiliate to or for the credit or the account of the Borrower or any
other Loan Party against any of and all the obligations of the Borrower or any
other Loan Party owed to such Lender now or hereafter existing under this
Agreement or any other Loan Document, irrespective of whether or not such Lender
shall have made any demand under this Agreement or any other Loan Document and
although such obligations may be unmatured. The rights of each Lender under this
Section 12.08 are in addition to other rights and remedies (including other
rights of setoff) which such Lender or its Affiliates may have.

Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, IN EITHER CASE LOCATED IN NEW
YORK COUNTY, NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH
PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION
TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING
JURISDICTION OVER ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.

(c) EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS
SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO
SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A
PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANOTHER PARTY
IN ANY OTHER JURISDICTION.

 

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(d) EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.

Section 12.10 Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

Section 12.11 Confidentiality. Each of the Administrative Agent, the Issuing
Bank and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process;
provided that, subject to the Borrower’s obligation to reimburse expenses under
Section 12.03, it shall use commercially reasonable efforts to seek to obtain
confidential treatment of such Information; provided further, that it shall not
be liable for failure to obtain such confidential treatment, (d) to any other
party to this Agreement or any other Loan Document, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any suit,
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section 12.11, to
(i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or
(ii) any actual or prospective counterparty (or its advisors) to any Swap
Agreement relating to the Borrower and its obligations, (g) with the consent of
the Borrower or (h) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section 12.11 or
(ii) becomes available to the Administrative Agent, the Issuing Bank or any
Lender on a nonconfidential basis from a source other than the Borrower. For the
purposes of this Section 12.11, “Information” means all information received
from the Borrower or any other Loan Party relating to the Borrower or any other
Loan Party and their businesses, other than any such information that is
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by the Borrower or any other Loan
Party; provided that, in the case of information received from the Borrower or
any

 

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other Loan Party after the date hereof, such information is clearly identified
at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section 12.11 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
Notwithstanding anything herein to the contrary, “Information” shall not
include, and the Borrower, the other Loan Parties, the Administrative Agent,
each Lender and the respective Affiliates of each of the foregoing (and the
respective partners, directors, officers, employees, agents, advisors and other
representatives of the aforementioned Persons), and any other party, may
disclose to any and all Persons, without limitation of any kind (a) any
information with respect to the United States federal and state income tax
treatment of the transactions contemplated hereby and any facts that may be
relevant to understanding the United States federal or state income tax
treatment of such transactions (“tax structure”), which facts shall not include
for this purpose the names of the parties or any other person named herein, or
information that would permit identification of the parties or such other
persons, or any pricing terms or other nonpublic business or financial
information that is unrelated to such tax treatment or tax structure, and
(b) all materials of any kind (including opinions or other tax analyses) that
are provided to the Borrower, the Administrative Agent or such Lender relating
to such tax treatment or tax structure.

Section 12.12 Interest Rate Limitation. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America, the State of New York, the State of Texas or any other jurisdiction
whose laws may be mandatorily applicable to such Lender notwithstanding the
other provisions of this Agreement), then, in that event, notwithstanding
anything to the contrary in any of the Loan Documents or any agreement entered
into in connection with or as security for the Notes, it is agreed as follows:
(i) the aggregate of all consideration which constitutes interest under law
applicable to any Lender that is contracted for, taken, reserved, charged or
received by such Lender under any of the Loan Documents or agreements or
otherwise in connection with the Notes shall under no circumstances exceed the
maximum amount allowed by such applicable law, and any excess shall be canceled
automatically and if theretofore paid shall be credited by such Lender on the
principal amount of the Indebtedness (or, to the extent that the principal
amount of the Indebtedness shall have been or would thereby be paid in full,
refunded by such Lender to the Borrower); and (ii) in the event that the
maturity of the Notes is accelerated by reason of an election of the holder
thereof resulting from any Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to any Lender may never include
more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in this Agreement or otherwise shall be canceled
automatically by such Lender as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited by such Lender on the principal
amount of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower). All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the stated term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time

 

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and from time to time (A) the amount of interest payable to any Lender on any
date shall be computed at the Highest Lawful Rate applicable to such Lender
pursuant to this Section 12.12 and (B) in respect of any subsequent interest
computation period the amount of interest otherwise payable to such Lender would
be less than the amount of interest payable to such Lender computed at the
Highest Lawful Rate applicable to such Lender, then the amount of interest
payable to such Lender in respect of such subsequent interest computation period
shall continue to be computed at the Highest Lawful Rate applicable to such
Lender until the total amount of interest payable to such Lender shall equal the
total amount of interest which would have been payable to such Lender if the
total amount of interest had been computed without giving effect to this
Section 12.12. To the extent that Chapter 303 of the Texas Finance Code is
relevant for the purpose of determining the Highest Lawful Rate applicable to a
Lender, such Lender elects to determine the applicable rate ceiling under such
Chapter by the weekly ceiling from time to time in effect. Chapter 346 of the
Texas Finance Code does not apply to the Borrower’s obligations hereunder.

Section 12.13 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO SPECIFICALLY
AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS AGREEMENT
AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS
AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL
COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS
ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT
IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF
THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH
LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE
VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE
OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”

Section 12.14 No Third Party Beneficiaries. This Agreement, the other Loan
Documents, and the agreement of the Lenders to make Loans and the Issuing Bank
to issue, amend, renew or extend Letters of Credit hereunder are solely for the
benefit of the Borrower, and no other Person (including, without limitation, any
other Loan Party, any obligor, contractor, subcontractor, supplier or
materialsman) shall have any rights, claims, remedies or privileges hereunder or
under any other Loan Document against the Administrative Agent, any other Agent,
the Issuing Bank or any Lender for any reason whatsoever. Except as specified in
Section 11.11 and Section 12.03, there are no third party beneficiaries.

Section 12.15 USA Patriot Act Notice. Each Lender hereby notifies the Borrower
that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law

 

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October 26, 2001)) (the “Act”), it is required to obtain, verify and record
information that identifies the Borrower, which information includes the name
and address of the Borrower and other information that will allow such Lender to
identify the Borrower in accordance with the Act.

Section 12.16 No Advisory or Fiduciary Responsibility. In connection with all
aspects of each transaction contemplated hereby (including in connection with
any amendment, waiver or other modification hereof or of any other Loan
Document), the Borrower acknowledges and agrees, and acknowledges its
Subsidiaries’ understanding, that: (a) (i) no fiduciary, advisory or agency
relationship between the Borrower and its Subsidiaries and the Administrative
Agent, any other Agent or any Lender is intended to be or has been created in
respect of the transactions contemplated hereby or by the other Loan Documents,
irrespective of whether the Administrative Agent, any other Agent or any Lender
has advised or is advising the Borrower or any Subsidiary on other matters;
(ii) the arranging and other services regarding this Agreement provided by the
Administrative Agent, the other Agents and the Lenders are arm’s-length
commercial transactions between the Borrower and its Subsidiaries, on the one
hand, and the Administrative Agent, the other Agents and the Lenders, on the
other hand; (iii) the Borrower has consulted its own legal, accounting,
regulatory and tax advisors to the extent that it has deemed appropriate; and
(iv) the Borrower is capable of evaluating, and understands and accepts, the
terms, risks and conditions of the transactions contemplated hereby and by the
other Loan Documents; and (b) (i) each of the Administrative Agent, the other
Agents and the Lenders is and has been acting solely as a principal and, except
as expressly agreed in writing by the relevant parties, has not been, is not,
and will not be acting as an advisor, agent or fiduciary for the Borrower or any
of its Subsidiaries, or any other Person; (ii) none of the Administrative Agent,
the other Agents or the Lenders has any obligation to the Borrower or any of its
Subsidiaries with respect to the transactions contemplated hereby except those
obligations expressly set forth herein and in the other Loan Documents; and
(iii) the Administrative Agent, the other Agents and the Lenders and their
respective Affiliates may be engaged, for their own accounts or the accounts of
customers, in a broad range of transactions that involve interests that differ
from those of the Borrower and its Subsidiaries, and none of the Administrative
Agent, the other Agents or the Lenders has any obligation to disclose any of
such interests to the Borrower or its Subsidiaries. To the fullest extent
permitted by law, the Borrower hereby waives and releases any claims that it may
have against the Administrative Agent, the other Agents and the Lenders with
respect to any breach or alleged breach of agency or fiduciary duty in
connection with any aspect of any transaction contemplated hereby.

Section 12.17 Electronic Execution of Assignments and Certain Other Documents.
The words “execution,” “execute,” “signed,” “signature,” and words of like
import in or related to any document to be signed in connection with this
Agreement and the transactions contemplated hereby (including without limitation
Assignment and Assumptions, Borrowing Request Notices, Interest Election Request
Notices, amendments, waivers and consents) shall be deemed to include electronic
signatures, the electronic matching of assignment terms and contract formations
on electronic platforms approved by the Administrative Agent, or the keeping of
records in electronic form, each of which shall be of the same legal effect,
validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State

 

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Electronic Signatures and Records Act, or any other similar state laws based on
the Uniform Electronic Transactions Act; provided that notwithstanding anything
contained herein to the contrary the Administrative Agent is under no obligation
to agree to accept electronic signatures in any form or in any format unless
expressly agreed to by the Administrative Agent pursuant to procedures approved
by it.

[SIGNATURES BEGIN NEXT PAGE]

 

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The parties hereto have caused this Agreement to be duly executed as of the day
and year first above written.

 

BORROWER:   MEMORIAL RESOURCE DEVELOPMENT CORP., a Delaware corporation   By:  

/s/ John Weinzierl

  Name:   John Weinzierl   Title:   Chief Executive Officer

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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ADMINISTRATIVE AGENT:   BANK OF AMERICA, N.A., as Administrative Agent   By:  

/s/ Christine Trotter

  Name:  

Christine Trotter

  Title:  

Assistant Vice President

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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ISSUING BANK AND LENDER:   BANK OF AMERICA, N.A., as Issuing Bank and a Lender  
By:  

/s/ Raza Jafferi

  Name:  

Raza Jafferi

  Title:  

Vice President

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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SYNDICATION AGENT AND LENDER:   CITIBANK, N.A., as Syndication Agent and a
Lender   By:  

/s/ Peter Kardos

  Name:  

Peter Kardos

  Title:  

Vice President

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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CO-DOCUMENTATION AGENT AND LENDER:   JPMORGAN CHASE BANK, N.A., as
Co-Documentation Agent and a Lender   By:  

/s/ Ryan Aman

  Name:  

Ryan Aman

  Title:  

Authorized Officer

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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CO-DOCUMENTATION AGENT AND LENDER:   BMO HARRIS BANK, N.A., as Co-Documentation
Agent and a Lender   By:  

/s/ Joseph A. Bliss

  Name:  

Joseph A. Bliss

  Title:  

Managing Director

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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CO-DOCUMENTATION AGENT AND LENDER:   COMERICA BANK, as Co-Documentation Agent
and a Lender   By:  

/s/ Jeffery Treadway

  Name:  

Jeffery Treadway

  Title:  

Senior Vice President

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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CO-DOCUMENTATION AGENT AND LENDER:   CREDIT AGRICOLE CORPORATE AND INVESTMENT
BANK, as Co-Documentation Agent and a Lender   By:  

/s/ Mark Roche

  Name:  

Mark Roche

  Title:  

Managing Director

  By:  

/s/ Michael Willis

  Name:  

Michael Willis

  Title:  

Managing Director

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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CO-DOCUMENTATION AGENT AND LENDER:   NATIXIS, as Co-Documentation Agent and a
Lender   By:  

/s/ Louis P. Laville, III

  Name:  

Louis P. Laville, III

  Title:  

Managing Director

  By:  

/s/ Timothy L. Polvado

  Name:  

Timothy L. Polvado

  Title:  

Managing Director

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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CO-DOCUMENTATION AGENT AND LENDER:   UNION BANK, N.A., as Co-Documentation Agent
and a Lender   By:  

/s/ Stacy A. Goldstein

  Name:  

Stacy A. Goldstein

  Title:  

Vice President

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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CO-DOCUMENTATION AGENT AND LENDER:   WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Co-Documentation Agent and a Lender   By:  

/s/ Michael Real

  Name:  

Michael Real

  Title:  

Director

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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LENDER:   BARCLAYS BANK PLC, as a Lender   By:  

/s/ Vanessa Kurbatskiy

  Name:  

Vanessa Kurbatskiy

  Title:  

Vice President

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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LENDER:   ING CAPITAL LLC, as a Lender   By:  

/s/ Juli Bieser

  Name:  

Juli Bieser

  Title:  

Director

  By:  

/s/ Charles Hall

  Name:  

Charles Hall

  Title:  

Managing Director

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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LENDER:   ROYAL BANK OF CANADA, as a Lender   By:  

/s/ Mark Lumpkin, Jr.

  Name:  

Mark Lumpkin, Jr.

  Title:  

Authorized Signatory

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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LENDER:   COMMONWEALTH BANK OF AUSTRALIA, as a Lender     By:  

/s/ Renee Simpson

    Name:  

Renee Simpson

    Title:  

Senior Associate

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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LENDER:   CAPITAL ONE, NATIONAL ASSOCIATION, as a Lender     By:  

/s/ Michael Higgins

    Name:  

Michael Higgins

    Title:  

Director

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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LENDER:   ASSOCIATED BANK, N.A., as a Lender   By:  

/s/ Brian Caddell

  Name:  

Brian Caddell

  Title:  

Senior Vice President

 

[Signature Page to Credit Agreement

Memorial Resource Development Corp.]

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ANNEX I

LIST OF MAXIMUM CREDIT AMOUNTS AND ELECTED COMMITMENTS

 

Name of Lender

   Applicable
Percentage     Maximum Credit
Amount      Elected
Commitment  

Bank of America, N.A.

     10.344828 %    $ 206,896,551.72       $ 75,000,000.00   

Citibank, N.A.

     7.241379 %    $ 144,827,586.21       $ 52,500,000.00   

JPMorgan Chase Bank, N.A.

     7.241379 %    $ 144,827,586.21       $ 52,500,000.00   

BMO Harris Bank, N.A.

     7.241379 %    $ 144,827,586.21       $ 52,500,000.00   

Comerica Bank

     7.241379 %    $ 144,827,586.21       $ 52,500,000.00   

Credit Agricole Corporate and Investment Bank

     7.241379 %    $ 144,827,586.21       $ 52,500,000.00   

Natixis

     7.241379 %    $ 144,827,586.21       $ 52,500,000.00   

Union Bank, N.A.

     7.241379 %    $ 144,827,586.21       $ 52,500,000.00   

Wells Fargo Bank, National Association

     7.241379 %    $ 144,827,586.21       $ 52,500,000.00   

Barclays Bank PLC

     5.517242 %    $ 110,344,827.58       $ 40,000,000.00   

ING Capital LLC

     5.517242 %    $ 110,344,827.58       $ 40,000,000.00   

Royal Bank of Canada

     5.517242 %    $ 110,344,827.58       $ 40,000,000.00   

Commonwealth Bank of Australia

     5.517242 %    $ 110,344,827.58       $ 40,000,000.00   

Capital One, National Association

     4.827586 %    $ 96,551,724.14       $ 35,000,000.00   

Associated Bank, N.A.

     4.827586 %    $ 96,551,724.14       $ 35,000,000.00      

 

 

   

 

 

    

 

 

 

TOTAL

     100.00 %    $ 2,000,000,000.00       $ 725,000,000.00      

 

 

   

 

 

    

 

 

 

 

Annex I–1

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

EXHIBIT A

FORM OF NOTE

 

  $[        ]    [            ], 20[    ]

FOR VALUE RECEIVED, Memorial Resource Development Corp., a Delaware corporation
(the “Borrower”), hereby promises to pay to [            ] (the “Lender”), at
the principal office of Bank of America, N.A. (the “Administrative Agent”), at
[                    ], the principal sum of [            ] Dollars
($[        ]) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans made by the Lender to the Borrower under the
Credit Agreement, as hereinafter defined), in lawful money of the United States
of America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Loan, at such office, in like money and funds, for
the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.

The date, amount, Type, interest rate, and, if applicable, Interest Period of
each Loan made by the Lender to the Borrower, and each payment made on account
of the principal thereof, shall be recorded by the Lender on its books and,
prior to any transfer of this Note, may be endorsed by the Lender on the
schedules attached hereto or any continuation thereof or on any separate record
maintained by the Lender. Failure to make any such notation or to attach a
schedule shall not affect any Lender’s or the Borrower’s rights or obligations
in respect of such Loans or affect the validity of such transfer by any Lender
of this Note.

This Note is one of the Notes referred to in the Credit Agreement dated as of
June 18, 2014 among the Borrower, the Administrative Agent, and the other agents
and lenders signatory thereto (including the Lender), and evidences Loans made
by the Lender thereunder (such Credit Agreement as the same may be amended,
supplemented or restated from time to time, the “Credit Agreement”). Capitalized
terms used but not defined in this Note have the respective meanings assigned to
them in the Credit Agreement.

This Note is issued pursuant to, and is subject to the terms and conditions set
forth in, the Credit Agreement and is entitled to the benefits provided for in
the Credit Agreement and the other Loan Documents. The Credit Agreement provides
for the acceleration of the maturity of this Note upon the occurrence of certain
events, for prepayments of Loans upon the terms and conditions specified therein
and other provisions relevant to this Note.

 

Exhibit A–1

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

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.

 

MEMORIAL RESOURCE DEVELOPMENT CORP., a Delaware corporation By:  

 

Name:  

 

Title:  

 

 

Exhibit A–2

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

EXHIBIT B

FORM OF BORROWING REQUEST NOTICE

[[            ]], 20[    ]

Memorial Resource Development Corp., a Delaware corporation (the “Borrower”),
pursuant to Section 2.03 of the Credit Agreement dated as of June 18, 2014
(together with all amendments, restatements, supplements or other modifications
thereto, the “Credit Agreement”) among the Borrower, Bank of America, N.A., as
Administrative Agent and the other agents and lenders (the “Lenders”) which are
or become parties thereto (unless otherwise defined herein, each capitalized
term used herein is defined in the Credit Agreement), hereby requests a
Borrowing as follows:

1. Aggregate amount of the requested Borrowing is $[        ];

2. Date of such Borrowing is [            ], 20[    ];

3. Requested Borrowing is to be [an ABR Borrowing] [a LIBOR Market Index
Borrowing] [a Eurodollar Borrowing];

4. In the case of a Eurodollar Borrowing, the initial Interest Period applicable
thereto is [            ];

5. Amount of Borrowing Base in effect on the date hereof is $[        ] and the
Aggregate Elected Commitment Amount in effect on the date hereof is $[        ];

6. Total Revolving Credit Exposures on the date hereof (i.e., outstanding
principal amount of Loans and total LC Exposure) is $[        ]; and

7. Pro forma total Revolving Credit Exposures (giving effect to the requested
Borrowing) is $[        ]; and

8. Location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05 of the
Credit Agreement, is as follows:

 

  [  

 

  ]      [  

 

  ]      [  

 

  ]      [  

 

  ]      [  

 

  ]   

The undersigned certifies that he/she is the [            ] of the Borrower, and
that as such he/she is authorized to execute this certificate on behalf of the
Borrower. The undersigned further certifies, represents and warrants on behalf
of the Borrower that all conditions precedent to such Borrowing set forth in
Section 6.02 of the Credit Agreement including, without limitation, the absence
of any Default at the time of and immediately after giving effect to such
Borrowing, are satisfied and that the Borrower is entitled to receive the
requested Borrowing under the terms and conditions of the Credit Agreement.

 

Exhibit B–1

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

MEMORIAL RESOURCE DEVELOPMENT CORP., a Delaware limited liability company By:  

 

Name:  

 

Title:  

 

 

Exhibit B–2

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

EXHIBIT C

FORM OF INTEREST ELECTION REQUEST NOTICE

[            ], 20[    ]

Memorial Resource Development Corp., a Delaware corporation (the “Borrower”),
pursuant to Section 2.04 of the Credit Agreement dated as of June 18, 2014
(together with all amendments, restatements, supplements or other modifications
thereto, the “Credit Agreement”) among the Borrower, Bank of America, N.A., as
Administrative Agent and the other agents and lenders (the “Lenders”) which are
or become parties thereto (unless otherwise defined herein, each capitalized
term used herein is defined in the Credit Agreement), hereby makes an Interest
Election Request as follows:

1. The Borrowing to which this Interest Election Request applies, and if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information specified pursuant to (3) and (4) below shall be specified for
each resulting Borrowing) is [            ];

2. The effective date of the election made pursuant to this Interest Election
Request is [            ], 20[    ]; [and]

3. The resulting Borrowing is to be [an ABR Borrowing] [a LIBOR Market Index
Borrowing] [a Eurodollar Borrowing][; and]

[4. [If the resulting Borrowing is a Eurodollar Borrowing] The Interest Period
applicable to the resulting Borrowing after giving effect to such election is
[            ]].

The undersigned certifies that he/she is the [            ] of the Borrower, and
that as such he/she is authorized to execute this certificate on behalf of the
Borrower. The undersigned further certifies, represents and warrants on behalf
of the Borrower that the Borrower is entitled to receive the requested
continuation or conversion under the terms and conditions of the Credit
Agreement.

 

MEMORIAL RESOURCE DEVELOPMENT CORP., a Delaware limited liability company By:  

 

Name:  

 

Title:  

 

 

Exhibit C–1

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

EXHIBIT D

FORM OF COMPLIANCE CERTIFICATE

The undersigned hereby certifies that he/she is the [            ] of Memorial
Resource Development Corp., a Delaware corporation (the “Borrower”), and that as
such he/she is authorized to execute this certificate on behalf of the Borrower.
With reference to the Credit Agreement dated as of June 18, 2014 (together with
all amendments, restatements, supplements or other modifications thereto being
the “Agreement”) among the Borrower, Bank of America, N.A., as Administrative
Agent, and the other agents and lenders (the “Lenders”) which are or become a
party thereto, and such Lenders, the undersigned represents and warrants as
follows (each capitalized term used herein having the same meaning assigned to
it in the Agreement unless otherwise specified):

1. The representations and warranties of the Borrower contained in Article VII
of the Agreement and in the Loan Documents and otherwise made in writing by or
on behalf of the Borrower pursuant to the Agreement and the Loan Documents were
true and correct when made, and are repeated at and as of the time of delivery
hereof and are true and correct in all material respects at and as of the time
of delivery hereof, except to the extent such representations and warranties are
expressly limited to an earlier date or the Majority Lenders have expressly
consented in writing to the contrary.

2. The Borrower has performed and complied with all agreements and conditions
contained in the Agreement and in the Loan Documents required to be performed or
complied with by it prior to or at the time of delivery hereof [or specify
default and describe].

3. Since December 31, 2013, no change has occurred, either in any case or in the
aggregate, in the condition, financial or otherwise, of the Borrower or any
Restricted Subsidiary which could reasonably be expected to have a Material
Adverse Effect [or specify event].

4. There exists no Default or Event of Default [or specify Default and
describe].

5. Attached hereto are the detailed computations necessary to determine whether
the Borrower is in compliance with Section 8.13(a), Section 8.14(a), and
Section 9.01 as of the end of the [fiscal quarter][fiscal year] ending
[            ].

[6. The Borrower filed [Annual] [Quarterly] financial statements with the SEC on
[            ], 20[    ].]

 

Exhibit D–1

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

EXECUTED AND DELIVERED this [            ] day of [            ].

 

MEMORIAL RESOURCE DEVELOPMENT CORP., a Delaware limited liability company By:  

 

Name:  

 

Title:  

 

 

Exhibit D–2

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

EXHIBIT E

EXHIBIT E-1

SECURITY INSTRUMENTS AS OF EFFECTIVE DATE

1. Security Agreement dated as of June 18, 2014 among the Borrower, the
Guarantors, and the Administrative Agent.

2. Mortgage, Assignment of As-Extracted Collateral, Security Agreement, Fixture
Filing and Financing Statement dated as of June 18, 2014 by WildHorse, as
mortgagor, in favor of the Administrative Agent for the benefit of the Lenders
and others.

3. Financing Statements in respect of the foregoing items.

4. Guaranty Agreement dated as of June 18, 2014 by the Guarantors party thereto
in favor of the Administrative Agent.

 

Exhibit E-1–1

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

EXHIBIT E-2

FORM OF GUARANTY AGREEMENT

[See attached.]

 

Exhibit E-2–1

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

EXHIBIT E-3

FORM OF INITIAL SECURITY AGREEMENT

[See attached.]

 

Exhibit E-3–1

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

EXHIBIT E-4

FORM OF AMENDED AND RESTATED SECURITY AGREEMENT

[See attached.]

 

Exhibit E-4–1

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

EXHIBIT F

FORM OF ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex I attached hereto
are hereby agreed to and incorporated herein by reference and made a part of
this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit and guarantees included in
such facilities) and (ii) to the extent permitted to be assigned under
applicable law, all claims, suits, causes of action and any other right of the
Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including contract claims, tort claims, malpractice claims, statutory claims and
all other claims at law or in equity related to the rights and obligations sold
and assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “Assigned Interest”). Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.

 

2.    Assignor:  

 

3.    Assignee:  

 

     [and is an Affiliate/Approved Fund of [identify Lender]1] 4.    Borrower:  
Memorial Resource Development Corp. 5.    Administrative Agent:   Bank of
America, N.A., as the administrative agent under the Credit Agreement 6.   
Credit Agreement:   The Credit Agreement dated as of June 18, 2014 among
Memorial Resource Development Corp., the Lenders parties thereto, Bank of
America, N.A., as Administrative Agent, and the other agents parties thereto

 

1  Select as applicable.

 

Exhibit F–1

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

7. Assigned Interest:

 

Commitment Assigned

   Aggregate Amount of
Commitment/Loans
for all Lenders      Amount of
Commitment/Loans
Assigned      Percentage Assigned of
Commitment/Loans2      $                $                       %     $         
      $                       %     $                $                       % 

Effective Date:                  , 20     [TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR [NAME OF ASSIGNOR] By:  

 

  Title: ASSIGNEE [NAME OF ASSIGNEE] By:  

 

  Title:

 

2  Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder.

 

Exhibit F–2

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

[Consented to and]3 Accepted: BANK OF AMERICA, N.A., as Administrative Agent By:
 

 

  Title: [Consented to:]4 [NAME OF RELEVANT PARTY] By:  

 

  Title:

 

3  To be added only if the consent of the Administrative Agent is required by
the terms of the Credit Agreement.

4  To be added only if the consent of the Borrower and/or other parties (e.g.
Issuing Bank) is required by the terms of the Credit Agreement.

 

Exhibit F–3

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

ANNEX 1

[                    ]5

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal
and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim and (iii) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of the
Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by the
Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under any Loan Document.

1.2 Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be
satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 8.01 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if it is a Foreign Lender,
attached to the Assignment and Assumption is any documentation required to be
delivered by it pursuant to the terms of the Credit Agreement, duly completed
and executed by the Assignee; and (b) agrees that (i) it will, independently and
without reliance on the Administrative Agent, the Assignor or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.

 

5  Describe Credit Agreement at option of Administrative Agent.

 

Exhibit F–4

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

2. Payments. From and after the Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
facsimile or other electronic transmission (e.g. .pdf) shall be effective as
delivery of a manually executed counterpart of this Assignment and Assumption.
This Assignment and Assumption shall be governed by, and construed in accordance
with, the law of the State of New York.

 

Exhibit F–5

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

EXHIBIT G

EXHIBIT G-1

FORM OF U.S. TAX COMPLIANCE CERTIFICATE (FOREIGN LENDERS; NOT PARTNERSHIPS)

Reference is hereby made to the Credit Agreement dated as of June 18, 2014 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Memorial Resource Development Corp., as Borrower, Bank of
America, N.A., as Administrative Agent, the Lenders party thereto, and the other
agents party thereto.

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of
which it is providing this certificate, (ii) it is not a bank within the meaning
of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder
of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and
(iv) it is not a controlled foreign corporation related to the Borrower as
described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with a
certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this
certificate, the undersigned agrees that (1) if the information provided on this
certificate changes, the undersigned shall promptly so inform the Borrower and
the Administrative Agent, and (2) the undersigned shall have at all times
furnished the Borrower and the Administrative Agent with a properly completed
and currently effective certificate in either the calendar year in which each
payment is to be made to the undersigned, or in either of the two calendar years
preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF LENDER] By:  

 

Name:  

 

Title:  

 

Date:                 , 20[    ]

 

Exhibit G-1–1

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

EXHIBIT G-2

FORM OF U.S. TAX COMPLIANCE CERTIFICATE (FOREIGN PARTICIPANTS; NOT PARTNERSHIPS)

Reference is hereby made to the Credit Agreement dated as of June 18, 2014 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Memorial Resource Development Corp., as Borrower, Bank of
America, N.A., as Administrative Agent, the Lenders party thereto, and the other
agents party thereto.

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate,
(ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code,
(iii) it is not a ten percent shareholder of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign
corporation related to the Borrower as described in Section 881(c)(3)(C) of the
Code.

The undersigned has furnished its participating Lender with a certificate of its
non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender in writing, and
(2) the undersigned shall have at all times furnished such Lender with a
properly completed and currently effective certificate in either the calendar
year in which each payment is to be made to the undersigned, or in either of the
two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF PARTICIPANT] By:  

 

Name:  

 

Title:  

 

Date:                  , 20[    ]

 

Exhibit G-2–1

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

EXHIBIT G-3

FORM OF U.S. TAX COMPLIANCE CERTIFICATE (FOREIGN PARTICIPANTS; PARTNERSHIPS)

Reference is hereby made to the Credit Agreement dated as of June 18, 2014 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Memorial Resource Development Corp., as Borrower, Bank of
America, N.A., as Administrative Agent, the Lenders party thereto, and the other
agents party thereto.

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
direct or indirect partners/members are the sole beneficial owners of such
participation, (iii) with respect to such participation, neither the undersigned
nor any of its direct or indirect partners/members is a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or
business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of
its direct or indirect partners/members is a ten percent shareholder of the
Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of
its direct or indirect partners/members is a controlled foreign corporation
related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an
IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such
partner’s/member’s beneficial owners that is claiming the portfolio interest
exemption. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Lender and (2) the undersigned shall have at all times furnished
such Lender with a properly completed and currently effective certificate in
either the calendar year in which each payment is to be made to the undersigned,
or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF PARTICIPANT] By:  

 

Name:  

 

Title:  

 

Date:                  , 20[    ]

 

Exhibit G-3–1

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

EXHIBIT G-4

FORM OF U.S. TAX COMPLIANCE CERTIFICATE (FOREIGN LENDERS; PARTNERSHIPS)

Reference is hereby made to the Credit Agreement dated as of June 18, 2014 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Memorial Resource Development Corp., as Borrower, Bank of
America, N.A., as Administrative Agent, the Lenders party thereto, and the other
agents party thereto.

Pursuant to the provisions of Section 5.03 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the Loan(s)
(as well as any Note(s) evidencing such Loan(s)) in respect of which it is
providing this certificate, (ii) its direct or indirect partners/members are the
sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such
Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit
Agreement or any other Loan Document, neither the undersigned nor any of its
direct or indirect partners/members is a bank extending credit pursuant to a
loan agreement entered into in the ordinary course of its trade or business
within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct
or indirect partners/members is a ten percent shareholder of the Borrower within
the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or
indirect partners/members is a controlled foreign corporation related to the
Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with IRS
Form W-8IMY accompanied by one of the following forms from each of its
partners/members that is claiming the portfolio interest exemption: (i) an IRS
Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from
each of such partner’s/member’s beneficial owners that is claiming the portfolio
interest exemption. By executing this certificate, the undersigned agrees that
(1) if the information provided on this certificate changes, the undersigned
shall promptly so inform the Borrower and the Administrative Agent, and (2) the
undersigned shall have at all times furnished the Borrower and the
Administrative Agent with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF PARTICIPANT] By:  

 

Name:  

 

Title:  

 

Date:                  , 20[    ]

 

Exhibit G-4–1

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

EXHIBIT H

FORM OF ELECTED COMMITMENT INCREASE CERTIFICATE

[            ], 20[    ]

 

To: Bank of America, N.A., as Administrative Agent

The Borrower, the Administrative Agent and certain Lenders and other agents have
heretofore entered into a Credit Agreement, dated as of June 18, 2014 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”). Capitalized terms not otherwise defined herein shall have
the meaning assigned to such terms in the Credit Agreement.

This Elected Commitment Increase Certificate is being delivered pursuant to
Section 2.06(c) of the Credit Agreement.

Please be advised that the undersigned Lender has agreed (a) to increase its
Elected Commitment under the Credit Agreement effective [            ], 20[    ]
(the “Increase Effective Date”) from $[        ] to $[        ] and (b) that it
shall continue to be a party in all respects to the Credit Agreement and the
other Loan Documents.

With reference to Section 2.06(c)(ii)(D) of the Credit Agreement, the Borrower
hereby confirms that [Check Applicable Box]:

[    ] There are, or if the Increase Effective Date is after the date hereof,
there will be no Eurodollar Borrowings outstanding on the Increase Effective
Date.

[    ] There are, or if the Increase Effective Date is after the date hereof,
there will be Eurodollar Borrowings outstanding on the Increase Effective Date
and the Borrower will pay any compensation required by Section 5.02 of the
Credit Agreement on the Increase Effective Date.

 

Very truly yours, MEMORIAL RESOURCE DEVELOPMENT CORP., a Delaware limited
liability company By:  

 

Name:  

 

Title:  

 

 

Exhibit H–1

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

Accepted and Agreed: BANK OF AMERICA, N.A., as Administrative Agent By:  

 

Name:  

 

Title:  

 

Accepted and Agreed: [Name of Increasing Lender] By:  

 

Name:  

 

Title:  

 

 

Exhibit H–2

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

EXHIBIT I

FORM OF ADDITIONAL LENDER CERTIFICATE

[            ], 20[    ]

 

To: Bank of America, N.A.,

as Administrative Agent

The Borrower, the Administrative Agent and certain Lenders and other agents have
heretofore entered into a Credit Agreement, dated as of June 18, 2014 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”). Capitalized terms not otherwise defined herein shall have
the meaning assigned to such terms in the Credit Agreement.

This Additional Lender Certificate is being delivered pursuant to
Section 2.06(c) of the Credit Agreement.

Please be advised that the undersigned Additional Lender has agreed (a) to
become a Lender under the Credit Agreement effective [            ], 20[    ]
(the “Additional Lender Effective Date”) with a Maximum Aggregate Credit Amount
of $[        ] and an Elected Commitment of $[        ] and (b) that it shall be
a party in all respects to the Credit Agreement and the other Loan Documents.

This Additional Lender Certificate is being delivered to the Administrative
Agent together with (i) if the Additional Lender is a Foreign Lender, any
documentation required to be delivered by such Additional Lender pursuant to
Section 5.03(f) of the Credit Agreement, duly completed and executed by the
Additional Lender, and (ii) an Administrative Questionnaire in the form supplied
by the Administrative Agent, duly completed by the Additional Lender. [The
Borrower shall pay an upfront fee in an amount equal to [            ] payable
to the Administrative Agent for the benefit of the Additional Lender.] [The
Borrower shall pay the processing and recordation fee payable to the
Administrative Agent pursuant to Section 2.06(c)(ii)(G) of the Credit
Agreement.]

With reference to Section 2.06(c)(ii)(D) of the Credit Agreement, the Borrower
hereby confirms that [Check Applicable Box]:

 

  [    ] There are, or if the Additional Lender Effective Date is after the date
hereof, there will be no Eurodollar Borrowings outstanding on the Additional
Lender Effective Date.

 

  [    ] There are, or if the Additional Lender Effective Date is after the date
hereof, there will be Eurodollar Borrowings outstanding on the Additional Lender
Effective Date and the Borrower will pay any compensation required by
Section 5.02 of the Credit Agreement on the Additional Lender Effective Date.

 

Exhibit I–1

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

Very truly yours, MEMORIAL RESOURCE DEVELOPMENT CORP., a Delaware limited
liability company By:  

 

Name:  

 

Title:  

 

 

Exhibit I–2

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

Accepted and Agreed: BANK OF AMERICA, N.A., as Administrative Agent By:  

 

Name:  

 

Title:  

 

Accepted and Agreed: [ADDITIONAL LENDER] By:  

 

Name:  

 

Title:  

 

 

Exhibit I–3

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

SCHEDULE 6.01

MRD Restructuring Transactions

Transactions Occurring Before the Effective Date (“Pre-Effective Date
Transactions”)

 

1. Natural Gas Partners VIII, L.P. (“NGP 8”), Natural Gas Partners IX, L.P.
(“NGP 9”) and NGP IX Offshore Holdings, L.P. (“NGP 9 Offshore”) formed MRD
Holdco LLC (“MRD Holdco”) and contributed their ownership interests in Memorial
Resource Development LLC (“MRD LLC”) to MRD Holdco, at which time the
then-current holders of MRD LLC incentive units exchanged those units with MRD
Holdco for MRD Holdco incentive units.

Transactions Occurring on the Effective Date (“Effective Date Transactions”)

 

2. WildHorse sells WHR Management Company to WildHorse Resources II, LLC for
approximately $0.2 million pursuant to the Purchase Agreement and Assignment.

 

3. Classic Hydrocarbons Holdings, L.P. (“Classic Holdings”) distributes Classic
Pipeline & Gathering, LLC (“Classic Pipeline”) (directly and indirectly through
Classic Hydrocarbons GP Co., L.L.C. (“Classic GP”)) to MRD LLC.

 

4. Black Diamond distributes Golden Energy Partners LLC (“Golden Energy”) to MRD
LLC.

 

5. Pursuant to the MRD LLC Contribution Agreement, MRD LLC contributes to the
Borrower all of its interests in Black Diamond, Classic GP, Classic Holdings,
WildHorse, MRD Operating, MRF Corp., MEMP GP, and Beta Operating Company, LLC
(“Beta Operating”), and receives 128,665,677 shares of Borrower common stock
(for which the transfer agent is instructed to issue such shares directly to MRD
Holdco pursuant to Step 7).

 

6. MRD LLC distributes all of the shares of Borrower common stock to MRD Holdco.

 

7. Pursuant to the WildHorse Management Equity Contribution Agreement, certain
former members of WildHorse management (the “Former WHR Management”) contribute
to the Borrower all of their membership and incentive unit interests in
WildHorse and receive (a) an aggregate of 42,334,323 shares of Borrower common
stock and (b) immediately after the closing of the Borrower IPO, an aggregate
cash amount of $30 million.

 

8. The Borrower enters into this Agreement and uses Loan proceeds to repay and
terminate the WHR Debt.

 

9. MRD LLC enters into a merger agreement (the “MRD Merger Agreement”) with MRD
Operating pursuant to which, after the discharge of the PIK Toggle Notes
Documents, MRD LLC will merge into MRD Operating, with MRD Operating being the
surviving entity.

 

Schedule 6.01–1

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

10. The Borrower IPO closes, with the Borrower issuing 21,500,000 new shares of
common stock to the public and using the net proceeds thereof to repay
outstanding Loans.

 

11. The Borrower uses Loan proceeds to pay the $30 million to the Former WHR
Management under the WildHorse Management Equity Contribution Agreement. The
Borrower will also use Loan proceeds to reimburse MRD Holdco for interest
previously paid on the PIK Toggle Notes under the MRD LLC Contribution
Agreement.

 

12. MRD LLC distributes to MRD Holdco (i) BlueStone Natural Resources Holdings,
LLC (“BlueStone Holdings”), MRD Midstream LLC (“MRD Midstream”), MRD Royalty LLC
(“MRD Royalty”), Golden Energy and Classic Pipeline, and (ii) the subordinated
units representing limited partner interests in MEMP owned by MRD LLC.

 

13. Black Diamond merges into MRD Operating.

Transactions That May Occur on or After the Effective Date (“Additional
Transactions”)

 

14. After the redemption of the PIK Toggle Notes (or after the discharge of the
PIK Toggle Notes Documents, if earlier), the cash remaining in the MRD LLC debt
service reserve account is paid over to MRD Holdco.

 

15. After the redemption of the PIK Toggle Notes (or after the discharge of the
PIK Toggle Notes Documents, if earlier), pursuant to the MRD Merger Agreement,
MRD LLC merges with and into MRD Operating.

 

Schedule 6.01–2

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

SCHEDULE 7.05

LITIGATION

None.

 

Schedule 7.05–1

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

SCHEDULE 7.06

ENVIRONMENTAL MATTERS

None.

 

Schedule 7.06–1

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

SCHEDULE 7.14

LOAN PARTIES AND SUBSIDIARIES

Borrower and Restricted Subsidiaries:

 

Loan Party:

 

Jurisdiction of
Organization

 

Organizational
Identification
Number

 

Principal Place of
Business and Chief Executive Office

 

Holder(s) of Equity Interests in
Subsidiary (and % ownership)

Memorial Resource Development Corp. *   Delaware   5475182   1301 McKinney St.,
Suite 2100, Houston, TX 77010   N/A MRD Operating LLC ***   Delaware   5238034  
1301 McKinney St., Suite 2100, Houston, TX 77010   Memorial Resource Development
Corp. – 100% Beta Operating Company, LLC ***   Delaware   4757624   1301
McKinney St., Suite 2100, Houston, TX 77010   Memorial Resource Development
Corp. – 100% Classic Hydrocarbons GP Co., L.L.C. ***   Texas   800663435   1301
McKinney St., Suite 2100, Houston, TX 77010   Memorial Resource Development
Corp. – 100% Classic Hydrocarbons Holdings, L.P. ***   Texas   800663010   1301
McKinney St., Suite 2100, Houston, TX 77010  

Memorial Resource Development Corp. – 99.59 LP%

Classic Hydrocarbons GP Co., L.L.C

– 0.41 GP%

Classic Operating Co. LLC ***   Delaware   4149386   1301 McKinney St., Suite
2100, Houston, TX 77010   Classic Hydrocarbons, Inc. – 100% Classic Hydrocarbons
Operating, LLC ***   Delaware   4409373   1301 McKinney St., Suite 2100,
Houston, TX 77010   Classic Hydrocarbons Holdings, L.P. – 100% Classic
Hydrocarbons, Inc. ***   Delaware   4149494   1301 McKinney St., Suite 2100,
Houston, TX 77010   Classic Hydrocarbons Holdings, L.P. – 100% Craton Energy GP
III, LLC ***   Texas   800708287   1301 McKinney St., Suite 2100, Houston, TX
77010   Classic Hydrocarbons Holdings, L.P. – 100% Craton Energy Holdings III,
LP ***   Texas   800708290   1301 McKinney St., Suite 2100, Houston, TX 77010  

Craton Energy GP III, LLC – 1.052%

 

Classic Hydrocarbons Holdings, L.P. – 98.948%

WildHorse Resources, LLC ***   Delaware   4403578   1301 McKinney St., Suite
2100, Houston, TX 77010   Memorial Resource Development Corp. – 100%

 

Schedule 7.14–1

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

Loan Party:

 

Jurisdiction of
Organization

 

Organizational
Identification
Number

 

Principal Place of
Business and Chief Executive Office

 

Holder(s) of Equity Interests in
Subsidiary (and % ownership)

Memorial Resource Finance Corp. ***   Delaware   5442049   1301 McKinney St.,
Suite 2100, Houston, TX 77010   Memorial Resource Development Corp. – 100%
Memorial Production Partners GP LLC **   Delaware   4974417   1301 McKinney St.,
Suite 2100, Houston, TX 77010   Memorial Resource Development Corp. – 100%

* = Borrower

** = Restricted Subsidiary (but not a Guarantor)

*** = Restricted Subsidiary and a Guarantor

Unrestricted Subsidiaries:

 

Unrestricted Subsidiary

  

Equity Interests in Unrestricted Subsidiary owned by a Loan Party

Memorial Production Partners LP    Memorial Production Partners GP LLC – 0.1%
general partner interest Memorial Production Operating LLC    N/A Columbus
Energy, LLC    N/A Prospect Energy, LLC    N/A Memorial Energy Services LLC   
N/A Memorial Midstream LLC    N/A WHT Energy Partners LLC    N/A WHT Carthage
LLC    N/A Memorial Production Finance Corporation    N/A Rise Energy Operating,
LLC    N/A Rise Energy Minerals, LLC    N/A

 

Schedule 7.14–2

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

Unrestricted Subsidiary

  

Equity Interests in Unrestricted Subsidiary owned by a Loan Party

Rise Energy Beta, LLC    N/A San Pedro Bay Pipeline Company    N/A

 

Schedule 7.14–3

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

SCHEDULE 7.18

GAS IMBALANCES

None.

 

Schedule 7.18–1

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

SCHEDULE 7.19

MARKETING CONTRACTS

[See attached.]

 

Schedule 7.19–1

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

SCHEDULE 7.20

SWAP AGREEMENTS

Hedges (Gas):

 

Type

 

Execution Date

 

Original Bank / CP

  Post-Novation
Bank / CP  

Basis

  Start   Finish     Volume
(MMbtu/mo)     Strike (Floor)
($/MMbtu)     Ceiling
($/MMbtu)  

Collar

  4/21/2011   BNP   BNP  

NYMEX NG

  7/1/2011     12/31/2014        40,000      $ 5.0000        $ 5.5800   

Collar

  4/21/2011   BNP   BNP  

NYMEX NG

  1/1/2012     12/31/2014        90,000      $ 5.0000        $ 5.8500   

Swap

  7/27/2012   CMA   CMA  

TGT Z1

  1/1/2014     12/31/2014        70,000      $ 3.9700        $ 3.9700   

Swap

  7/27/2012   BMO   BMO  

TGT Z1

  1/1/2015     12/31/2015        70,000      $ 4.1500        $ 4.1500   

Swap

  11/8/2012   CMA   CMA  

TGT Z1

  1/1/2014     12/31/2014        100,000      $ 4.0500        $ 4.0500   

Swap

  11/8/2012   BMO   BMO  

TGT Z1

  1/1/2015     12/31/2015        70,000      $ 4.2200        $ 4.2200   

Collar

  11/8/2012   BAML   BAML  

NYMEX NG

  1/1/2015     12/31/2015        130,000      $ 4.0000        $ 4.6400   

Collar

  11/13/2012   BMO   BMO  

NYMEX NG

  1/1/2014     12/31/2014        50,000      $ 3.5000        $ 4.9800   

Collar

  11/13/2012   BAML   BAML  

NYMEX NG

  1/1/2014     12/31/2014        50,000      $ 3.5000        $ 4.9800   

Swap

  1/17/2013   CMA   CMA  

TGT Z1

  1/1/2014     12/31/2014        50,000      $ 3.9700        $ 3.9700   

Swap

  1/17/2013   CMA   CMA  

TGT Z1

  1/1/2015     12/31/2015        100,000      $ 4.1300        $ 4.1300   

Swap

  1/17/2013   BAML   BAML  

TGT Z1

  1/1/2016     12/31/2016        100,000      $ 4.3000        $ 4.3000   

Collar

  1/17/2013   BMO   BMO  

NYMEX NG

  1/1/2014     12/31/2014        100,000      $ 3.5000        $ 4.8000   

Swap

  2/19/2013   BMO   BMO  

TGT Z1

  1/1/2014     12/31/2014        130,000      $ 3.9050        $ 3.9050   

Swap

  2/19/2013   BAML   BAML  

TGT Z1

  1/1/2015     12/31/2015        90,000      $ 4.1500        $ 4.1500   

Swap

  3/12/2013   BMO   BMO  

NYMEX NG

  1/1/2014     12/31/2014        70,000      $ 4.0950        $ 4.0950   

Swap

  3/12/2013   BMO   BMO  

NYMEX NG

  1/1/2015     12/31/2015        50,000      $ 4.2500        $ 4.2500   

Swap

  3/12/2013   CMA   CMA  

NYMEX NG

  1/1/2016     12/31/2016        50,000      $ 4.3750        $ 4.3750   

Swap

  3/12/2013   BAML   BAML  

NYMEX NG

  1/1/2016     12/31/2016        50,000      $ 4.3800        $ 4.3800   

Swap

  4/11/2013   WF   WF  

TGT Z1

  1/1/2014     12/31/2014        170,000      $ 4.1200        $ 4.1200   

Swap

  4/11/2013   BAML   BAML  

TGT Z1

  1/1/2015     12/31/2015        150,000      $ 4.1150        $ 4.1150   

Swap

  4/11/2013   CMA   CMA  

NYMEX NG

  1/1/2016     12/31/2016        120,000      $ 4.2250        $ 4.2250   

Swap

  4/11/2013   BAML   BAML  

TGT Z1

  1/1/2017     12/31/2017        120,000      $ 4.2350        $ 4.2350   

Swap

  5/1/2013   CMA   CMA  

NYMEX NG

  1/1/2014     12/31/2014        50,000      $ 4.4000        $ 4.4000   

Swap

  5/1/2013   BMO   BMO  

NYMEX NG

  1/1/2014     12/31/2014        50,000      $ 4.4050        $ 4.4050   

Swap

  5/8/2013   BMO   BMO  

TGT Z1

  1/1/2014     12/31/2014        200,000      $ 4.1550        $ 4.1550   

Swap

  5/8/2013   WF   WF  

TGT Z1

  1/1/2015     12/31/2015        200,000      $ 4.1850        $ 4.1850   

Swap

  5/8/2013   BAML   BAML  

TGT Z1

  1/1/2016     12/31/2016        200,000      $ 4.2550        $ 4.2550   

Swap

  5/8/2013   ING   ING  

NYMEX NG

  1/1/2017     12/31/2017        200,000      $ 4.4300        $ 4.4300   

Swap

  5/24/2013   BMO   BMO  

TGT Z1

  1/1/2014     12/31/2014        150,000      $ 4.2950        $ 4.2950   

Swap

  5/24/2013   WF   WF  

TGT Z1

  1/1/2015     12/31/2015        150,000      $ 4.3430        $ 4.3430   

Swap

  5/24/2013   BMO   BMO  

TGT Z1

  1/1/2016     12/31/2016        150,000      $ 4.4500        $ 4.4500   

Swap

  5/24/2013   BAML   BAML  

TGT Z1

  1/1/2017     12/31/2017        200,000      $ 4.6100        $ 4.6100   

Swap

  11/27/2013   BMO   BMO  

NYMEX NG

  1/1/2014     12/31/2014        80,000      $ 3.9125        $ 3.9125   

Swap

  11/29/2013   BMO   BMO  

NYMEX NG

  1/1/2014     12/31/2014        70,000      $ 3.9500        $ 3.9500   

Swap

  1/7/2014   ING   ING  

NYMEX NG

  2/1/2014     6/30/2014        120,000      $ 4.2500        $ 4.2500   

Swap

  1/7/2014   WF   WF  

NYMEX NG

  2/1/2014     6/30/2014        120,000      $ 4.2560        $ 4.2560   

Swap

  1/22/2014   BMO   BMO  

NYMEX NG

  2/1/2014     9/30/2014        80,000      $ 4.3500        $ 4.3500   

Swap

  1/22/2014   CMA   CMA  

NYMEX NG

  2/1/2014     9/30/2014        50,000      $ 4.3000        $ 4.3000   

Swap

  1/23/2014   WF   WF  

NYMEX NG

  2/1/2014     12/31/2014        50,000      $ 4.4000        $ 4.4000   

Swap

  1/23/2014   BAML   BAML  

NYMEX NG

  2/1/2014     12/31/2014        50,000      $ 4.4000        $ 4.4000   

Swap

  1/27/2014   BMO   BMO  

NYMEX NG

  6/1/2014     12/31/2014        150,000      $ 4.3650        $ 4.3650   

Swap

  1/27/2014   Fifth Third   BAML  

NYMEX NG

  6/1/2014     12/31/2014        100,000      $ 4.3400        $ 4.3400   

Collar

  1/27/2014   WF   WF  

NYMEX NG

  3/1/2014     12/31/2014        100,000      $ 4.0000        $ 4.9800   

Collar

  1/27/2014   BAML   BAML  

NYMEX NG

  3/1/2014     12/31/2014        100,000      $ 4.0000        $ 4.9700   

Swap

  2/4/2014   ING   ING  

NYMEX NG

  1/1/2015     12/31/2015        30,000      $ 4.2000        $ 4.2000   

Swap

  2/6/2014   BAML   BAML  

NYMEX NG

  1/1/2015     12/31/2015        30,000      $ 4.2000        $ 4.2000   

Collar

  2/14/2014   WF   WF  

NYMEX NG

  4/1/2014     12/31/2014        100,000      $ 4.2500        $ 5.2000   

Collar

  2/14/2014   BMO   BMO  

NYMEX NG

  4/1/2014     12/31/2014        100,000      $ 4.2500        $ 5.2000   

Swap

  4/9/2014   WF   WF  

NYMEX NG

  1/1/2015     12/31/2015        30,000      $ 4.3000        $ 4.3000   

Swap

  4/9/2014   BMO   BMO  

NYMEX NG

  1/1/2015     12/31/2015        30,000      $ 4.3000        $ 4.3000   

Swap

  4/29/2014   WF   WF  

NYMEX NG

  1/1/2016     12/31/2016        30,000      $ 4.3000        $ 4.3000   

Swap

  4/29/2014   ING   ING  

NYMEX NG

  1/1/2016     12/31/2016        20,000      $ 4.3000        $ 4.3000   

 

Basis Hedges (Gas):

 

  

Type

 

Execution Date

 

Original Bank / CP

  Post-Novation
Bank / CP  

Basis

  Start   Finish     Volume
(MMbtu/mo)     Strike (Floor)
($/MMbtu)     Ceiling
($/MMbtu)  

Swap

  11/9/2012   BAML   BAML  

Basis - TGT Z1

  1/1/2015     12/31/2015        130,000      ($ 0.0875 )      ($ 0.0875 ) 

Swap

  11/13/2012   BMO   BMO  

Basis - TGT Z1

  1/1/2014     12/31/2014        50,000      ($ 0.0825 )      ($ 0.0825 ) 

Swap

  11/13/2012   BAML   BAML  

Basis - TGT Z1

  1/1/2014     12/31/2014        50,000      ($ 0.0825 )      ($ 0.0825 ) 

Swap

  3/13/2013   BAML   BAML  

Basis - TGT Z1

  1/1/2014     12/31/2014        70,000      ($ 0.0775 )      ($ 0.0775 ) 

Swap

  3/12/2013   BAML   BAML  

Basis - TGT Z1

  1/1/2015     12/31/2015        50,000      ($ 0.0800 )      ($ 0.0800 ) 

Swap

  3/12/2013   BAML   BAML  

Basis - TGT Z1

  1/1/2016     12/31/2016        100,000      ($ 0.0800 )      ($ 0.0800 ) 

Swap

  4/11/2013   BAML   BAML  

Basis - TGT Z1

  1/1/2016     12/31/2016        120,000      ($ 0.0750 )      ($ 0.0750 ) 

Swap

  5/2/2013   CMA   CMA  

Basis - TGT Z1

  1/1/2014     12/31/2014        50,000      ($ 0.0550 )      ($ 0.0550 ) 

Swap

  5/2/2013   BMO   BMO  

Basis - TGT Z1

  1/1/2014     12/31/2014        50,000      ($ 0.0550 )      ($ 0.0550 ) 

Swap

  5/8/2013   BAML   BAML  

Basis - TGT Z1

  1/1/2017     12/31/2017        200,000      ($ 0.0750 )      ($ 0.0750 ) 

 

Schedule 7.20–1

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

Hedges (Oil):

 

Type

  Execution Date  

Original
Bank / CP

 

Post-Novation
Bank / CP

 

Basis

  Start   Finish     Volume (Bbls/mo)     Strike (Floor)
($/Bbl)     Ceiling ($/Bbl)  

Collar

  5/3/2011   WF   WF  

WTI CL Swap

  1/1/2014     12/31/2014        4,000      $ 85.0000      $ 128.0000   

Collar

  2/8/2012   BMO   BMO  

WTI CL Swap

  1/1/2014     12/31/2014        4,000      $ 85.0000      $ 107.0000   

Collar

  2/8/2012   CMA   CMA  

WTI CL Swap

  1/1/2015     12/31/2015        2,000      $ 85.0000      $ 101.3500   

Swap

  1/2/2013   BAML   BAML  

WTI CL Swap

  1/1/2014     12/31/2014        2,000      $ 91.6500      $ 91.6500   

Swap

  3/13/2013   BMO   BMO  

WTI CL Swap

  1/1/2014     12/31/2014        2,000      $ 90.0000      $ 90.0000   

Swap

  3/27/2013   CMA   CMA  

WTI CL Swap

  1/1/2014     12/31/2014        2,000      $ 92.0000      $ 92.0000   

Swap

  5/6/2013   ING   ING  

WTI CL Swap

  1/1/2014     12/31/2014        5,000      $ 90.5200      $ 90.5200   

Swap

  5/6/2013   ING   ING  

WTI CL Swap

  1/1/2015     12/31/2015        3,000      $ 87.0000      $ 87.0000   

Swap

  7/3/2013   CMA   CMA  

WTI CL Swap

  1/1/2014     12/31/2014        2,000      $ 92.1000      $ 92.1000   

Swap

  7/10/2013   WF   WF  

WTI CL Swap

  1/1/2014     12/31/2014        3,000      $ 93.0500      $ 93.0500   

Swap

  7/11/2013   WF   WF  

WTI CL Swap

  1/1/2014     12/31/2014        2,000      $ 93.3000      $ 93.3000   

Swap

  10/16/2013   BAML   BAML  

WTI CL Swap

  1/1/2015     12/31/2015        3,000      $ 90.0000      $ 90.0000   

Swap

  1/7/2014   ING   ING  

WTI CL Swap

  4/1/2014     6/30/2014        1,000      $ 92.7500      $ 92.7500   

Swap

  1/23/2014   BAML   BAML  

WTI CL Swap

  2/1/2014     6/30/2014        3,000      $ 95.0000      $ 95.0000   

Swap

  1/27/2014   CMA   CMA  

WTI CL Swap

  3/1/2014     12/31/2014        3,000      $ 91.7000      $ 91.7000   

Swap

  1/27/2014   Fifth Third   BAML  

WTI CL Swap

  1/1/2015     12/31/2015        3,000      $ 85.0900      $ 85.0900   

Swap

  2/7/2014   BMO   BMO  

WTI CL Swap

  2/1/2014     6/30/2014        3,000      $ 97.9000      $ 97.9000   

Collar

  2/28/2014   Fifth Third   BAML  

WTI CL Swap

  4/1/2014     12/31/2014        4,000      $ 90.0000      $ 102.0000   

 

Hedges (NGL):

 

  

Type

  Execution Date  

Original
Bank / CP

 

Post-Novation
Bank / CP

 

Basis

  Start   Finish     Volume (Bbls/mo)     Strike (Floor)
($/Bbl)     Ceiling ($/Bbl)  

Swap

  8/17/2012   BAML   BAML  

C5+ (Pentane)

  1/1/2014     12/31/2014        2,000      $ 84.1050      $ 84.1050   

Swap

  1/31/2013   BAML   BAML  

IC4 (Iso Butane)

  1/1/2014     12/31/2014        4,000      $ 69.5100      $ 69.5100   

Swap

  2/1/2013   BMO   BMO  

C5+ (Pentane)

  1/1/2014     12/31/2014        2,000      $ 84.0000      $ 84.0000   

Swap

  2/4/2013   BAML   BAML  

NC4 (Normal Butane)

  1/1/2014     12/31/2014        2,000      $ 65.5200      $ 65.5200   

Swap

  8/9/2013   BAML   BAML  

MBV C3 (Propane)

  1/1/2014     12/31/2014        6,000      $ 39.9000      $ 39.9000   

Swap

  8/27/2013   BAML   BAML  

C5+ (Pentane)

  1/1/2014     12/31/2014        2,000      $ 86.1000      $ 86.1000   

Swap

  1/14/2014   CMA   CMA  

MBV C3 (Propane)

  2/1/2014     6/30/2014        4,000      $ 46.6200      $ 46.6200   

Swap

  1/14/2014   WF   WF  

MBV C3 (Propane)

  2/1/2014     12/31/2014        5,000      $ 46.2000      $ 46.2000   

Swap

  1/14/2014   BAML   BAML  

C5+ (Pentane)

  2/1/2014     6/30/2014        4,000      $ 83.8950      $ 83.8950   

Swap

  1/14/2014   ING   ING  

C5+ (Pentane)

  2/1/2014     12/31/2014        6,000      $ 82.3200      $ 82.3200   

Swap

  4/8/2014   BAML   BAML  

C5+ (Pentane)

  4/1/2014     12/31/2014        2,000      $ 88.2000      $ 88.2000   

Hedges (Interest Rates):

 

Type

   Execution Date   

Original
Bank / CP

  

Post-Novation
Bank / CP

  

Basis

   Start    Finish      Notional Amount      Fixed Rate  

IR Swap

   11/9/2012    WF    WF   

1 Month LIBOR

   1/2/2014      12/31/2015         25,000,000         0.5200 % 

IR Swap

   11/9/2012    BMO    BMO   

1 Month LIBOR

   10/1/2014      12/31/2015         25,000,000         0.5900 % 

IR Swap

   5/7/2012    CapOne    CapOne   

3 month LIBOR

   9/3/2013      9/30/2014         25,000,000         0.7225 % 

IR Swap

   5/7/2012    CapOne    CapOne   

3 month LIBOR

   12/1/2013      12/31/2015         25,000,000         1.0200 % 

IR Swap

   5/7/2012    Compass    BAML   

3 month LIBOR

   1/2/2013      12/31/2015         25,000,000         0.9000 % 

IR Swap

   5/7/2012    US Bank    BAML   

3 month LIBOR

   9/3/2013      9/30/2014         25,000,000         0.7235 % 

 

Schedule 7.20–2

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

SCHEDULE 9.05

EXISTING INVESTMENTS

None.

 

Schedule 9.05–1

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

SCHEDULE 9.14

AFFILIATE TRANSACTIONS

[See attached.]

 

Schedule 9.14–1

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

The following is an excerpt from the Borrower’s Form 424B4 filed on June 16,
2014 with the SEC pursuant to Rule 424(b)(4) as Registration No. 333-195062 (the
“Prospectus”). All capitalized terms used in the following but not defined
therein shall have the meanings ascribed to such terms in the Prospectus.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Corporate Restructuring

In connection with our corporate restructuring, we will engage in transactions
with certain affiliates and our existing equity holders. See “Restructuring
Transactions” for a description of these transactions.

Historical Transactions with Affiliates

MRD LLC was formed in April 2011 and capitalized in connection with the December
2011 initial public offering of MEMP. The limited liability company agreement of
MRD LLC provides for a number of different classes of units, all of which are
currently owned by the Funds. In June 2012, MRD LLC issued incentive units to
certain of its officers and employees. These incentive units only participate in
distributions upon liquidation events meeting certain requisite financial return
thresholds. Before the closing of this offering, the Funds will contribute all
of their ownership of MRD LLC to MRD Holdco and the owners of incentive units in
MRD LLC will exchange those interests for substantially identical incentive
units in MRD Holdco.

Voting Agreement

In connection with the closing of this offering, we will enter into a voting
agreement with MRD Holdco, WHR Incentive LLC, a limited liability company
beneficially owned by Messrs. Bahr and Graham and certain former management
members of WildHorse Resources that are contributing their ownership of
WildHorse Resources to us in the restructuring transactions. Among other things,
the voting agreement will provide that those former management members of
WildHorse Resources will vote all of their shares of our common stock as
directed by MRD Holdco. The voting agreement will also prohibit the transfer of
any shares of our common stock by the former management members of WildHorse
Resources until after the termination of the services agreement described below;
provided, however, that the former management members of WildHorse Resources
(other than Anthony Bahr or Jay Graham) may transfer their shares of our common
stock after the 180 day lock-up period described in “Underwriting (Conflicts of
Interest)” has expired and these transfer restrictions will not prohibit Jay
Graham or Anthony Bahr from exercising piggyback registration rights under the
registration rights agreement described below.

Further, so long as the services agreement is in effect, the former management
members of WildHorse Resources will have the right to appoint two board
observers, Anthony Bahr and Jay Graham, to attend all meetings of our Board in a
non-voting, observer capacity. No board observer will have a vote on our Board.
The members of the Board can exclude any board observer from any board meeting
so that the members of the Board may meet in executive session, to protect
attorney-client privilege, or in connection with a conflict of interest.

The voting agreement will also provide MRD Holdco with the right to designate up
to three nominees to our Board, provided that such number of nominees shall be
reduced to two, one and zero if the Funds and their affiliates collectively own
less than 35%, 15% and 5%, respectively, of the outstanding shares of our common
stock. The voting agreement will also require us and the stockholders party
thereto to take all necessary actions, to the fullest extent permitted by
applicable law (including with respect to any fiduciary duties under Delaware
law), including voting their shares of our common stock, to cause the election
of the nominees designated by MRD Holdco. In addition, the voting agreement will
provide that for so long as MRD Holdco has the right to designate two directors
to the board, we will cause any committee of our board to include in its
membership at least one director designated by MRD Holdco, except to the extent
that such membership would violate applicable securities laws or stock exchange
rules.

Registration Rights Agreement

In connection with the closing of this offering, we will enter into a
registration rights agreement with MRD Holdco and former management members of
WildHorse Resources, Jay Graham (“Graham”) and Anthony Bahr (“Bahr”). Pursuant
to the registration rights agreement, we have agreed to register the sale of
shares of our common stock under certain circumstances.

 

145

Schedule 9.14–2

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

Demand Rights

At any time after the 180 day lock-up period, as described in “Underwriting,”
and subject to the limitations set forth below, each of MRD Holdco, Graham and
Bahr (or their permitted transferees) has the right to require us, by written
notice, to prepare and file a registration statement registering the offer and
sale of a certain number of their shares of common stock. Generally, we are
required to provide notice of the request within five business days following
the receipt of such demand request to all other holders of registrable
securities, who may, in certain circumstances, participate in the registration.
Subject to certain exceptions, we will not be obligated to effect a demand
registration within 90 days after the closing of any underwritten offering of
shares of our common stock. Further, we are not obligated to effect, (i) at the
request of MRD Holdco, more than a total of three demand registrations through
December 31, 2016 or, after January 1, 2017, more than one demand registration
per calendar year; and (ii) any demand registrations at the request of either
Graham or Bahr before the termination of the services agreement described below
or, after the termination of the services agreement, more than two demand
registrations at the request of each of Graham or Bahr.

We are also not obligated to effect any demand registration in which the
anticipated aggregate offering price included in such offering is less than $50
million. Once we are eligible to effect a registration on Form S-3, any such
demand registration may be for a shelf registration statement. We will be
required to use all commercially reasonable efforts to maintain the
effectiveness of any registration statement until all shares covered by such
registration statement have been sold.

In addition, each of MRD Holdco, Graham and Bahr (or their permitted
transferees) has the right to require us, subject to certain limitations, to
effect a distribution of any or all of their shares of common stock by means of
an underwritten offering. In general, any demand for an underwritten offering
(other than the first requested underwritten offering made in respect of a prior
demand registration and other than a requested underwritten offering made
concurrently with a demand registration) shall constitute a demand request
subject to the limitations set forth above.

Piggyback Rights

Subject to certain exceptions, if at any time we propose to register an offering
of common stock or conduct an underwritten offering, whether or not for our own
account, then we must notify MRD Holdco, Graham and Bahr (or their permitted
transferees) of such proposal at least five business days before the anticipated
filing date or commencement of the underwritten offering, as applicable, to
allow them to include a specified number of their shares in that registration
statement or underwritten offering, as applicable.

Conditions and Limitations; Expenses

These registration rights are subject to certain conditions and limitations,
including the right of the underwriters to limit the number of shares to be
included in a registration and our right to delay or withdraw a registration
statement under certain circumstances. We will generally pay all registration
expenses in connection with our obligations under the registration rights
agreement, regardless of whether a registration statement is filed or becomes
effective.

Omnibus Agreement

On December 14, 2011, in connection with the closing of MEMP’s initial public
offering, MRD LLC entered into an omnibus agreement with MEMP and its general
partner. When the restructuring transactions are completed, we will succeed to
all of MRD LLC’s duties and obligations under the omnibus agreement.

Pursuant to the omnibus agreement, MEMP is required to reimburse us for all
expenses incurred by us (or payments made on MEMP’s behalf) in conjunction with
our provision of general and administrative services to

 

146

Schedule 9.14–3

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

MEMP, including, but not limited to, public company expenses and an allocated
portion of the salary and benefits of the executive officers of MEMP’s general
partner and our other employees who perform services for MEMP or on MEMP’s
behalf. MEMP is also obligated to reimburse us for insurance coverage expenses
we incur with respect to MEMP’s business and operations and with respect to
director and officer liability coverage for the officers and directors of MEMP’s
general partner.

Pursuant to the omnibus agreement, we will indemnify MEMP’s general partner and
MEMP against (i) title defects and (ii) income taxes attributable to pre-closing
ownership or operation of the assets we contributed to MEMP in connection with
MEMP’s initial public offering, including any income tax liabilities related to
such contribution occurring on or prior to the closing of MEMP’s initial public
offering.

Our indemnification obligation will survive until December 2014 with respect to
title defects and (ii) for sixty days after the expiration of the applicable
statute of limitations with respect to income taxes. All title claims are
subject to a $25,000 per claim de minimus exception and an aggregate $2,000,000
deductible.

Pursuant to the omnibus agreement, MEMP must indemnify us for any liabilities
incurred by us attributable to the operating and administrative services
provided to MEMP under the omnibus agreement, other than liabilities resulting
from our bad faith, fraud, gross negligence or willful misconduct. In addition,
we must indemnify MEMP for any liability MEMP incurs as a result of our bad
faith or willful misconduct in providing operating and administrative services
under the omnibus agreement. We may terminate the omnibus agreement in the event
that we cease to be an affiliate of MEMP and may also terminate the omnibus
agreement in the event of MEMP’s material breach of the agreement, including
failure to pay amounts due thereunder in accordance with its terms.

Under the omnibus agreement, none of the parties thereto nor any of their
respective affiliates have any obligation to offer, or provide any opportunity
to pursue, purchase or invest in, any business opportunity to any other party or
their affiliates. Furthermore, the omnibus agreement does not restrict any of
the parties thereto and their respective affiliates from competing with either
us, MEMP or MEMP’s general partner.

Beta Management Agreement

On December 12, 2012, MRD LLC entered into a management agreement with its
wholly-owned subsidiary, Beta Operating Company, LLC pursuant to which MRD LLC
agreed to provide management and administrative oversight with respect to the
services provided by such subsidiary under certain operating agreements with a
subsidiary of MEMP, in exchange for an annual management fee. When the
restructuring transactions are completed, we will succeed to this management
agreement and we will receive approximately $0.4 million from MEMP annually
under that agreement.

Services Agreement

Upon the closing of this offering, we will enter into a services agreement with
WildHorse Resources and WildHorse Resources Management Company, LLC (“WHR
Management”), pursuant to which WHR Management Company will provide operating
and administrative services to us for twelve months relating to the Terryville
Complex. In exchange for such services, we will pay a monthly management fee to
WHR Management.

WHR Management may only terminate the services agreement by providing 90-days
prior written notice to the Company after the six-month anniversary of the date
of the agreement. We may terminate the services agreement at any time by
providing written notice to WHR Management. The services agreement may only
be assigned by either party with the other party’s consent. Upon the closing of
this offering, WHR Management will be a subsidiary of WildHorse Resources II,
LLC, an affiliate of MRD LLC and the Company. NGP and certain former management
members of WildHorse Resources own WildHorse Resources II, LLC.

 

147

Schedule 9.14–4

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

Gas Processing Agreement

On March 17, 2014, WildHorse Resources, which will become our wholly-owned
subsidiary in connection with the restructuring transactions to be entered into
in connection with the completion of this offering, entered into a gas
processing agreement with PennTex North Louisiana, LLC (“PennTex”). PennTex is a
joint venture among certain affiliates of NGP in which MRD Midstream LLC owns a
minority interest. Once PennTex’s processing plant becomes operational, it will
process natural gas produced from wells located on certain leases owned by
WildHorse Resources in the state of Louisiana. The agreement has a 15-year
primary term, subject to one-year extensions at either party’s election.
WildHorse Resources will pay PennTex a monthly fee, subject to an annual
inflationary escalation, based on volumes of natural gas delivered and
processed. Once the plant is declared operational, WildHorse Resources will be
obligated to pay a minimum processing fee equal to approximately $18.3 million
on an annual basis, subject to certain adjustments and conditions. The gas
processing agreement requires that the processing plant be operational no later
than November 1, 2015.

Classic Pipeline Gas Gathering Agreement & Water Disposal Agreement

On November 1, 2011, Classic Hydrocarbons Operating, LLC (“Classic Operating”),
which will become our wholly-owned subsidiary in connection with the
restructuring transactions to be entered into in connection with the completion
of this offering, and Classic Pipeline entered into a gas gathering agreement.
Pursuant to the gas gathering agreement, Classic Operating dedicated to Classic
Pipeline all of the natural gas produced (up to 50,000 MMBtus per day) on the
properties operated by Classic Operating within certain counties in Texas
through 2020, subject to one-year extensions at either party’s election. On
May 1, 2014, Classic Operating and Classic Pipeline amended the gas gathering
agreement with respect to Classic Operating’s remaining assets located in Panola
and Shelby Counties, Texas. Under the amended gas gathering agreement, Classic
Operating agreed to pay a fee of (i) $0.30 per MMBtu, subject to an annual 3.5%
inflationary escalation, based on volumes of natural gas delivered and
processed, and (ii) $0.07 per MMBtu per stage of compression plus its allocated
share of compressor fuel. The amended gas gathering agreement has a term until
December 31, 2023, subject to one-year extensions at either party’s election.

On May 1, 2014, Classic Operating and Classic Pipeline entered into a water
disposal agreement. The water disposal agreement has a three-year term, subject
to one-year extensions at either party’s election. Under the water disposal
agreement, Classic Operating agreed to pay a fee of $1.10 per barrel for each
barrel of water delivered to Classic Pipeline.

Propel Purchase and Sale Agreement

On October 1, 2013, the Partnership purchased certain oil and natural gas
properties from Propel Energy, LLC (“Propel”) pursuant to that certain Purchase
and Sale Agreement between Memorial Production Operating LLC, the Partnership’s
wholly-owned subsidiary, and Propel. The consideration paid by the Partnership
to Propel for the assets was approximately $80 million. At the time of the
transaction, William J. Scarff was president and chief executive officer of
Propel. Mr. Scarff’s indirect interest in the transaction was approximately
$1,016,000.

Repurchase of Net Profits Interests

On February 28, 2014, WildHorse Resources, which will become our wholly-owned
subsidiary in connection with the restructuring transactions to be entered into
in connection with the completion of this offering, repurchased net profits
interests from an affiliate of NGP for $63.4 million after customary
adjustments. These net profits interests were originally sold to the NGP
affiliate upon the completion of certain acquisitions in 2010 by WildHorse
Resources.

 

148

Schedule 9.14–5

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

Dispositions of Oil and Natural Gas Producing Properties to the Partnership

We have divested long-lived producing oil and natural gas properties to the
Partnership through the following drop down transactions:

 

  •   In April 2012, we sold 22 Bcfe of proved reserves located in East Texas to
the Partnership for cash consideration of approximately $18.5 million;

 

  •   In May 2012, we sold an additional 28 Bcfe of proved reserves in East
Texas to the Partnership for a final purchase price of approximately $27.0
million;

 

  •   In March 2013, we sold 162 Bcfe of proved reserves located in East Texas
to the Partnership for cash consideration of approximately $200.0 million;

 

  •   In October 2013, we sold 99 Bcfe of proved reserves located in East Texas
and the Rocky Mountains to the Partnership for cash consideration of
approximately $96.3 million; and

 

  •   In April 2014, we sold approximately 15 Bcfe of proved reserves located in
East Texas to the Partnership for cash consideration of approximately $34.0
million, subject to customary post-closing adjustments.

Procedures for Approval of Related Party Transactions

Prior to the closing of this offering, we have not maintained a policy for
approval of related party transactions. A “related party transaction” is a
transaction, arrangement or relationship in which we or any of our subsidiaries
was, is or will be a participant, the amount of which involved exceeds $120,000,
and in which any related person had, has or will have a direct or indirect
material interest. A “related person” means:

 

  •   any person who is, or at any time during the applicable period was, one of
our executive officers or one of our directors;

 

  •   any person who is known by us to be the beneficial owner of more than 5%
of our common stock;

 

  •   any immediate family member of any of the foregoing persons, which means
any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a
director, executive officer or a beneficial owner of more than 5% of our common
stock, and any person (other than a tenant or employee) sharing the household of
such director, executive officer or beneficial owner of more than 5% of our
common stock; and

 

  •   any firm, corporation or other entity in which any of the foregoing
persons is a partner or principal or in a similar position or in which such
person has a 10% or greater beneficial ownership interest.

We anticipate that our Board will adopt a written related party transactions
policy prior to the completion of this offering. Pursuant to this policy, we
expect that our Audit Committee will review all material facts of all related
party transactions.

 

149

Schedule 9.14–6