Exhibit 10.1

EXECUTION VERSION

 

 

 

Third Amended and Restated Credit Agreement

Dated as of September 28, 2012

MRC ENERGY COMPANY,

as Borrower,

The Lending Entities From Time to Time Parties Hereto,

as Lenders,

and

Royal Bank of Canada,

as Administrative Agent

RBC Capital Markets,

as Joint Lead Arranger and Sole Bookrunner

and

Comerica Bank, as Joint Lead Arranger

 

 

 

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TABLE OF CONTENTS

 

     Page  

ARTICLE 1. DEFINITIONS

     1   

1.1 Certain Defined Terms

     1   

1.2 Terms, Generally

     28   

1.3 Oil and Gas Definitions

     28   

ARTICLE 2. REVOLVING CREDIT

     28   

2.1 Commitment

     28   

2.2 Accrual of Interest and Maturity; Evidence of Indebtedness

     29   

2.3 Requests for Continuations and Conversions of Advances

     29   

2.4 Disbursement of Advances

     31   

2.5 [Intentionally Omitted]

     32   

2.6 Interest Payments; Default Interest

     32   

2.7 Optional Prepayments

     33   

2.8 Base Rate Advance in Absence of Election or Upon Default

     34   

2.9 Commitment Fees

     34   

2.10 Mandatory Prepayment of Advances

     34   

2.11 Optional Reduction or Termination of Commitments

     36   

2.12 Use of Proceeds of Advances

     36   

ARTICLE 3. LETTERS OF CREDIT

     36   

3.1 Letters of Credit

     36   

3.2 Conditions to Issuance

     37   

3.3 Notice

     38   

3.4 Letter of Credit Fees; Increased Costs

     38   

3.5 Other Fees

     40   

3.6 Participation Interests in and Drawings and Demands for Payment Under
Letters of Credit

     40   

3.7 Obligations Irrevocable and Absolute

     42   

3.8 Risk Under Letters of Credit

     43   

3.9 Indemnification

     44   

3.10 Right of Reimbursement

     45   

 

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ARTICLE 4. BORROWING BASE

     45   

4.1 Borrowing Base

     45   

4.2 Periodic Determinations of Borrowing Base

     46   

4.3 Engineering Data to be Provided Prior to Scheduled Determination Dates

     46   

4.4 Special Determinations of Borrowing Base

     47   

4.5 General Procedures With Respect to Determination of Borrowing Base

     47   

4.6 Borrowing Base Deficiency

     47   

ARTICLE 5. CONDITIONS

     48   

5.1 Conditions of Initial Advances

     48   

5.2 Conditions to Each Advance and Letter of Credit

     51   

ARTICLE 6. REPRESENTATIONS AND WARRANTIES

     52   

6.1 Corporate Authority

     52   

6.2 Due Authorization

     52   

6.3 Good Title; Leases; Assets; No Liens

     52   

6.4 Taxes

     53   

6.5 No Defaults

     53   

6.6 Enforceability

     53   

6.7 Compliance with Laws

     53   

6.8 Non-contravention

     54   

6.9 Litigation

     54   

6.10 Consents, Approvals and Filings, etc

     55   

6.11 No Investment Company or Margin Stock

     55   

6.12 ERISA

     55   

6.13 Conditions Affecting Business or Properties

     56   

6.14 Environmental and Safety Matters

     56   

6.15 Subsidiaries

     56   

6.16 Capital Structure

     57   

6.17 Accuracy of Information

     57   

6.18 Solvency

     57   

6.19 No Misrepresentation

     57   

6.20 Engineering Reports

     58   

6.21 Gas Balancing Agreements and Advance Payment Contracts

     58   

6.22 Commodity Hedging Agreements

     58   

6.23 Corporate Documents and Corporate Existence

     58   

 

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ARTICLE 7. AFFIRMATIVE COVENANTS

     59   

7.1 Financial Statements

     59   

7.2 Certificates; Other Information

     60   

7.3 Payment of Obligations

     61   

7.4 Conduct of Business and Maintenance of Existence; Compliance with Laws

     61   

7.5 Maintenance of Property; Insurance

     62   

7.6 Inspection of Property; Books and Records, Discussions

     63   

7.7 Notices

     63   

7.8 Hazardous Material Laws

     64   

7.9 Financial Covenants

     64   

7.10 Governmental and Other Approvals

     64   

7.11 Compliance with ERISA; ERISA Notices

     64   

7.12 Future Restricted Subsidiaries; Additional Collateral

     65   

7.13 Use of Proceeds

     66   

7.14 Further Assurances and Information

     66   

7.15 Reserve Reports

     66   

7.16 Title Information and Mortgage Coverage

     67   

7.17 Collateral

     68   

ARTICLE 8. NEGATIVE COVENANTS

     69   

8.1 Limitation on Debt

     69   

8.2 Limitation on Liens

     71   

8.3 Fundamental Changes

     71   

8.4 Dispositions

     72   

8.5 Restricted Payments

     73   

8.6 Limitation on Investments, Loans and Advances

     74   

8.7 Transactions with Affiliates and Unrestricted Subsidiaries

     75   

8.8 Limitations on Other Restrictions

     75   

 

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8.9 Fiscal Year

     76   

8.10 Gas Balancing Agreements and Advance Payment Contracts

     76   

8.11 Hedging Transactions

     76   

8.12 Nature of Business

     77   

ARTICLE 9. DEFAULTS

     77   

9.1 Events of Default

     77   

9.2 Exercise of Remedies

     80   

9.3 Rights Cumulative

     80   

9.4 Waiver by Borrower of Certain Laws

     80   

9.5 Waiver of Defaults

     80   

9.6 Set Off

     81   

ARTICLE 10. PAYMENTS, RECOVERIES AND COLLECTIONS

     81   

10.1 Payment Procedure

     81   

10.2 Application of Proceeds of Collateral

     82   

10.3 Pro-rata Recovery

     83   

10.4 Treatment of a Defaulting Lender; Reallocation of Defaulting Lender’s
Fronting Exposure

     83   

ARTICLE 11. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS

     84   

11.1 Reimbursement of Prepayment Costs

     84   

11.2 Eurodollar Lending Office

     85   

11.3 Circumstances Affecting LIBOR Rate Availability

     85   

11.4 Laws Affecting LIBOR Rate Availability

     86   

11.5 Increased Cost of Advances Carried at the LIBOR Rate

     86   

11.6 Capital Adequacy and Other Increased Costs

     87   

11.7 Right of Lenders to Fund through Branches and Affiliates

     88   

11.8 Margin Adjustment

     88   

11.9 Taxes

     88   

ARTICLE 12. AGENT

     92   

12.1 Appointment of Administrative Agent

     92   

12.2 Deposit Account with Administrative Agent or any Lender

     92   

 

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12.3 Scope of Administrative Agent’s Duties

     93   

12.4 Successor Administrative Agent

     93   

12.5 Credit Decisions

     94   

12.6 Authority of Administrative Agent to Enforce This Agreement

     94   

12.7 Indemnification of Administrative Agent

     94   

12.8 Knowledge of Default

     95   

12.9 Administrative Agent’s Authorization; Action by Lenders

     95   

12.10 Enforcement Actions by Administrative Agent

     96   

12.11 Collateral Matters

     96   

12.12 Administrative Agent in its Individual Capacity

     96   

12.13 Administrative Agent’s Fees

     96   

12.14 Documentation Administrative Agent or other Titles

     96   

12.15 No Reliance on Administrative Agent’s Customer Identification Program

     97   

ARTICLE 13. MISCELLANEOUS

     97   

13.1 Accounting Principles

     97   

13.2 Consent to Jurisdiction

     98   

13.3 Law of Texas

     98   

13.4 Interest

     98   

13.5 Closing Costs and Other Costs; Indemnification

     99   

13.6 Notices

     101   

13.7 Successors and Assigns; Participations; Assignments

     103   

13.8 Counterparts

     107   

13.9 Amendment and Waiver

     107   

13.10 Confidentiality

     109   

13.11 Substitution or Removal of Lenders

     110   

13.12 WAIVER OF JURY TRIAL

     112   

13.13 USA Patriot Act Notice

     112   

13.14 Complete Agreement; Conflicts

     112   

13.15 Severability

     112   

13.16 Table of Contents and Headings; Section References

     112   

 

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13.17 Electronic Transmissions

     113   

13.18 Reliance on and Survival of Provisions

     113   

13.19 Concerning Lender Hedging Obligations and Lender Product Obligations

     114   

13.20 Release of Guarantees and Liens

     114   

13.21 Existing Credit Agreement

     115   

13.22 Reallocation of Commitments and Revolving Credit Advances

     115   

13.23 Flood Insurance

     116   

 

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EXHIBITS

 

A    Form of Request for Revolving Credit Advance B    Form of Revolving Credit
Note C    Intentionally Omitted D    Form of Assignment and Assumption E    Form
of Guaranty F    Form of Compliance Certificate G    Form of Notice of Request
for Letter of Credit H    Form of Notice of Prepayment I-1    Form of U.S. Tax
Compliance Certificate (for Foreign Lenders That Are Not Partnerships) I-2   
Form of U.S. Tax Compliance Certificate (for Foreign Participants That Are Not
Partnerships) I-3    Form of U.S. Tax Compliance Certificate (for Foreign
Participants That Are Partnerships) I-4    Form of U.S. Tax Compliance
Certificate (for Foreign Lenders That Are Partnerships)

SCHEDULES

 

1.1    Applicable Margin Grid 1.2    Percentages and Allocations 1.4    Existing
Letters of Credit 1.5    Existing Mortgages 5.1(b)(iii)    Qualification
Jurisdictions 6.3    Good Title; Leases; Assets; No Liens 6.9    Litigation 6.12
   ERISA 6.14    Environmental and Safety Matters 6.15    Subsidiaries 6.16   
Capital Structure 6.21    Gas Balancing Agreements and Advance Payment Contracts
6.22    Commodity Hedging Agreements 6.23    Compliance Information 8.1   
Existing Debt 8.2    Existing Liens 8.6    Existing Investments 8.7   
Transactions with Affiliates 13.6    Notices

 

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THIRD AMENDED AND RESTATED CREDIT AGREEMENT

This Third Amended and Restated Credit Agreement (“Agreement”) is made as of
September 28, 2012, by and among the lending entities from time to time party
hereto (individually a “Lender,” and collectively “Lenders”), Royal Bank of
Canada, as administrative agent for the Lenders (in such capacity,
“Administrative Agent”), and MRC Energy Company, a Texas corporation
(“Borrower”).

RECITALS

A. Borrower entered into that certain Second Amended and Restated Credit
Agreement, dated as of December 30, 2011 (as amended, amended and restated,
supplemented or otherwise modified from time to time prior to the date hereof,
the “Existing Credit Agreement”), among Borrower, the lenders from time to time
party thereto, and Comerica Bank, as the administrative agent (in such capacity,
the “Original Administrative Agent”).

B. The Original Administrative Agent resigned as administrative agent under the
Existing Credit Agreement and Royal Bank of Canada was appointed by the Lenders
as administrative agent under the Existing Credit Agreement.

C. The Original Administrative Agent assigned to Royal Bank of Canada all of its
right, title and interest in, to and under the Existing Credit Agreement and the
other Loan Documents (as defined in the Existing Credit Agreement).

D. Borrower has requested that the Lenders amend and restate the Existing Credit
Agreement and provide certain loans to and extensions of credit on behalf of
Borrower, and the Lenders have agreed to make such loans and extensions of
credit subject to the terms and conditions of this Agreement.

E. This Agreement is an amendment and restatement of, and is made in extension
and renewal, and not in extinguishment or novation, of the outstanding
indebtedness under the Existing Credit Agreement, it being acknowledged and
agreed by Borrower that the Indebtedness under this Agreement constitutes an
extension, renewal, increase and ratification of the outstanding indebtedness
under the Existing Credit Agreement.

NOW THEREFORE, in consideration of the covenants contained herein, Borrower,
Lenders, and Administrative Agent agree as follows:

ARTICLE 1. DEFINITIONS.

1.1 Certain Defined Terms. For the purposes of this Agreement, the following
terms will have the following meanings:

“Administrative Agent” has the meaning set forth in the preamble, and includes
any Successor Administrative Agent appointed in accordance with Section 12.4.

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

 

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“Advance” means a Revolving Credit Advance.

“Advance Payment Contract” means any contract whereby any Credit Party either
(a) receives or becomes entitled to receive (either directly or indirectly) any
payment (an “Advance Payment”) to be applied toward payment of the purchase
price of Hydrocarbons produced or to be produced from Oil and Gas Properties
owned by any Credit Party and which Advance Payment is paid or to be paid in
advance of actual delivery of such production to or for the account of the
purchaser regardless of such production, or (b) grants an option or right of
refusal to the purchaser to take delivery of such production in lieu of payment,
and, in either of the foregoing instances, the Advance Payment is, or is to be,
applied as payment in full for such production when sold and delivered or is, or
is to be, applied as payment for a portion only of the purchase price thereof or
of a percentage or share of such production; provided that inclusion of the
standard “take or pay” provision in any gas sales or purchase contract or any
other similar contract shall not, in and of itself, constitute such contract as
an Advance Payment Contract for the purposes hereof.

“Affected Lender” shall have the meaning set forth in Section 13.11(a).

“Affiliate” means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, “control” of a Person means the
power, directly or indirectly, either to (a) vote 30% or more of the securities
having ordinary voting power for the election of directors of such Person or
(b) direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.

“Aggregate Credit Exposure” means, as of any date of determination, the sum of
the Credit Exposure of all of the Lenders as of such date.

“Applicable Fee Percentage” means, as of any date of determination thereof, the
applicable percentage used to calculate certain of the fees due and payable
hereunder, determined by reference to the appropriate columns in the Applicable
Margin Grid, such Applicable Fee Percentage to be adjusted solely as specified
in Section 11.8.

“Applicable Interest Rate” means, with respect to each Revolving Credit Advance,
the Eurodollar-based Rate or the Base Rate, as selected by Borrower from time to
time subject to the terms and conditions of this Agreement.

“Applicable Margin” means, as of any date of determination thereof, the
applicable interest rate margin, determined by reference to the appropriate
columns in the Applicable Margin Grid, such Applicable Margin to be adjusted
solely as specified in Section 11.8.

“Applicable Margin Grid” means that certain pricing grid attached to this
Agreement as Schedule 1.1.

“Approved Counterparty” means, at any time and from time to time, (a) any Lender
Counterparty or (b) any Person engaged in the business of writing Commodity
Hedging Agreements or Interest Rate Agreements that has (or the credit support
provider of such Person has), at the time Borrower or any Restricted Subsidiary
enters into a Commodity Hedging Agreement or Interest Rate Agreement, as
applicable, with such Person, a long term senior unsecured debt credit rating of
BBB-/Baa3 by S&P or Moody’s (or their equivalent) or higher.

 

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“ASC 815” means the Accounting Standards Codification No. 815 (Derivatives and
Hedging), as issued by the Financial Accounting Standards Board.

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is
required by Section 13.7(b)), and accepted by the Administrative Agent, in
substantially the form of Exhibit D or any other form approved by the
Administrative Agent.

“Bankruptcy Code” means Title 11 of the United States Code and the rules
promulgated thereunder.

“Base Rate” means for any day, that rate of interest which is equal to the sum
of the Applicable Margin plus the greatest of (a) the Prime Rate for such day,
(b) the Federal Funds Effective Rate in effect on such day, plus  1/2 of one
percent (0.5%) and (c) the Daily Adjusting LIBOR Rate plus one percent (1.0%);
provided, however, for purposes of determining the Base Rate during any period
that the LIBOR Rate is unavailable as determined under Sections 11.3 or 11.4,
the Base Rate shall be determined using, for clause (c) hereof, the Daily
Adjusting LIBOR Rate in effect on the Business Day immediately prior to the
LIBOR Rate becoming unavailable pursuant to Sections 11.3 or 11.4.

“Base Rate Advances” means Advances the rate of interest applicable to which is
based upon the Base Rate.

“Board” means the Board of Governors of the Federal Reserve System of the United
States (or any successor).

“Borrower” has the meaning set forth in the preamble to this Agreement.

“Borrower Materials” has the meaning set forth in the last paragraph of
Section 7.1.

“Borrowing Base” has the meaning specified in Section 4.1.

“Borrowing Base Deficiency” means, as of any date, the amount, if any, by which
the Aggregate Credit Exposure on such date exceeds the Borrowing Base in effect
on such date; provided, that, for purposes of determining the existence and
amount of any Borrowing Base Deficiency, Letter of Credit Obligations will not
be deemed to be outstanding to the extent such obligations are secured by cash
in the manner contemplated by this Agreement or any other Loan Document.

“Borrowing Base Equalization Date” means the earlier of (a) December 31, 2013,
(b) the second Business Day following receipt by Parent of Net Cash Proceeds
from the closing of a secondary public offering of Equity Interests by Parent in
an amount greater than or equal to $25,000,000 or (c) the date on which the
Borrowing Base is equal to the Conforming Borrowing Base and Borrower
voluntarily informs the Administrative Agent in writing that the Conforming
Borrowing Base and the Borrowing Base are and will be the same.

 

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“Borrowing Base Properties” means, at any time, all Oil and Gas Properties of
Borrower and the Restricted Subsidiaries in the most recent Reserve Report
evaluated by the Lenders for purposes of establishing the Borrowing Base.
Borrowing Base Properties do not include any Oil and Gas Properties owned by a
Foreign Subsidiary.

“Borrowing Base Utilization” means, as of any date of determination, the
quotient, expressed as a percentage, of (a) the Aggregate Credit Exposure as of
such date, divided by (b) (i) on any date prior to the Borrowing Base
Equalization Date, the Conforming Borrowing Base as of such date and (ii) on any
date on or after the Borrowing Base Equalization Date, the Borrowing Base as of
such date.

“Business Day” means any day other than a Saturday or a Sunday or other day on
which commercial banks in Houston, Texas or New York, New York are authorized or
required by law to close, provided, that with respect to notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar-based Advances, such day is also a day for trading by and between
banks in Dollar deposits in the Interbank Eurodollar Market.

“Capitalized Lease” means, as applied to any Person, any lease of any property
(whether real, personal or mixed) with respect to which the discounted present
value of the rental obligations of such Person as lessee thereunder, in
conformity with GAAP, is required to be capitalized on the balance sheet of that
Person.

“Cash Equivalents” means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition;
(b) certificates of deposit, time deposits, Eurodollar time deposits or
overnight bank deposits having maturities of six months or less from the date of
acquisition issued by any Lender or by any commercial bank organized under the
laws of the United States or any state thereof having combined capital and
surplus of not less than $500,000,000; (c) commercial paper of an issuer rated
at least A 1 by S&P or P 1 by Moody’s, or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating agencies
cease publishing ratings of commercial paper issuers generally, and maturing
within six months from the date of acquisition; (d) repurchase obligations of
any Lender or of any commercial bank satisfying the requirements of clause
(b) of this definition, having a term of not more than 30 days, with respect to
securities issued or fully guaranteed or insured by the United States
government; (e) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody’s; (f) securities with maturities of six months or less
from the date of acquisition backed by standby letters of credit issued by any
Lender or any commercial bank satisfying the requirements of clause (b) of this
definition; (g) money market mutual or similar funds that invest exclusively in
assets satisfying the requirements of clauses (a) through (f) of this
definition; or (h) money market funds that (i) comply with the criteria set
forth in SEC Rule 2a 7 under the Investment Company Act of 1940, as amended,
(ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of
at least $5,000,000,000.

 

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“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation, implementation or application thereof by any
Governmental Authority or (c) the making or issuance of any request, rule,
guideline or directive (whether or not having the force of law) by any
Governmental Authority; provided that notwithstanding anything herein to the
contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, guidelines or directives thereunder or issued in connection
therewith and (y) 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 or
foreign 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.

“Change of Control” means an event or series of events whereby any of the
following occurs:

(a) the Parent controls, directly or indirectly, less than 100% on a fully
diluted basis of the aggregate issued and outstanding voting stock (or
comparable voting interests) of Borrower; or

(b) an event or series of events by which any “person” or “group” (as such terms
are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but
excluding any employee benefit plan of such person or its subsidiaries, and any
person or entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) becomes the “beneficial owner” (as defined in
Rules 13d 3 and 13d 5 under the Securities Exchange Act of 1934, except that a
person or group shall be deemed to have “beneficial ownership” of all securities
that such person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time (such right, an
“option right”)), directly or indirectly, of a majority or more of each class of
the equity securities of the Parent entitled to vote for members of the board of
directors or equivalent governing body of the Parent on a fully-diluted basis
(and taking into account all such securities that such person or group has the
right to acquire pursuant to any option right); provided, however, such “group”
shall not consist of any existing “group” of shareholders (or the members
thereof) that may be deemed to beneficially own more than a majority of any
class of voting equity securities of the Parent pursuant to existing voting
agreements or otherwise.

“CIP Regulations” has the meaning ascribed to such term in Section 12.15.

“Collateral” means all property of the Credit Parties, now owned or hereafter
acquired, upon which a Lien is created by any Collateral Document to secure the
Indebtedness, including, without limitation, (a) all Mortgaged Properties,
(b) 100% of the Equity Interests of each Restricted Subsidiary that is a
Domestic Subsidiary, (c) 65% of the Equity Interests of each Restricted
Subsidiary that is a Foreign Subsidiary, and (d) all other tangible and
intangible personal property now owned or hereafter acquired by the Credit
Parties that is located on, or relates to, any of the Mortgaged Properties
including accounts, notes, contract receivables, inventory, machinery, equipment
and general intangibles, provided, however, that notwithstanding the foregoing,
the Collateral shall not include any Excluded Assets.

 

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“Collateral Documents” means the Pledge Agreements, the Mortgages and all other
security documents and pledge documents (and any joinders thereto) executed by
any Credit Party in favor of Administrative Agent for the benefit of the Secured
Parties.

“Commitment Fee” means the fee payable to Administrative Agent for distribution
to the Revolving Credit Lenders in accordance with Section 2.9.

“Commitments” means the Revolving Credit Aggregate Commitment.

“Commodity Hedging Agreement” means any commodity hedging or purchase agreement
or similar arrangement entered into with the intent of protecting against
fluctuations in commodity prices or the exchange of notional commodity
obligations, either generally or under specific contingencies, including,
without limitation, commodity price swap agreements, forward agreements or
contracts of sale which provide for prepayment for deferred shipment or delivery
of oil, gas or other commodities.

“Compliance Certificate” means a certificate substantially in the form of
Exhibit F, or in such other form acceptable to the Administrative Agent.

“Conforming Borrowing Base” means, at any time prior to the Borrowing Base
Equalization Date, an amount equal to the amount determined in accordance with
Section 4.1, as the “Conforming Borrowing Base”, as the same may be
redetermined, adjusted or reduced from time to time pursuant to Section 4.2 or
Section 4.4.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes or
branch profits Taxes.

“Consolidated” (or “consolidated”) means, when used with reference to any
financial term in this Agreement, the aggregate for two or more Persons of the
amounts signified by such term for all such Persons determined on a consolidated
basis in accordance with GAAP, applied on a consistent basis.

“Consolidated Current Assets” means, as of any date of determination, the total
consolidated current assets of Parent and its Subsidiaries determined in
accordance with GAAP (except as provided herein with respect to ASC 815) as of
such date, plus the Unused Revolving Credit Availability on such date after
giving effect to all borrowings and repayments on such date. For purposes of
this definition, “Consolidated Current Assets” shall not include any non-cash
items resulting from the application of ASC 815 or the fair value of any
Commodity Hedging Agreement or any non-hedge derivative contract (whether deemed
effective or non-effective).

“Consolidated Current Liabilities” means, as of any date of determination, the
total consolidated current liabilities of Parent and its Subsidiaries determined
in accordance with GAAP (except as provided herein with respect to ASC 815) as
of such date, less current

 

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maturities under this Agreement on such date. For purposes of this definition,
“Consolidated Current Liabilities” shall not include any non-cash items
resulting from the requirements of ASC 815 or the fair value of any Commodity
Hedging Agreement or any non-hedge derivative contract (whether deemed effective
or non-effective), or any liability resulting from the accounting for stock
option expense.

“Consolidated EBITDA” means for any Test Period, the sum of Consolidated Net
Income for such period plus without duplication the following expenses or
charges to the extent deducted from Consolidated Net Income in such period:
interest, taxes, depreciation, depletion, amortization, and accretion of asset
retirement obligations. The term “Consolidated EBITDA” shall exclude (a) any
non-cash revenue or expense associated with hedging contracts resulting from ASC
815, (b) any non-cash income, gain, loss or expense arising from the issuance of
stock options or restricted stock, to the extent such items are included in
Consolidated Net Income and (c) any other non-cash charges (excluding accruals
for cash expenses made in the ordinary course of business) or non-cash gains.

“Consolidated Net Income” means with respect to Parent and its Subsidiaries, for
any period, the consolidated net income (or loss) of Parent and its
Subsidiaries, 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 Parent or any Subsidiary has an interest which interest does not cause the
net income of such other Person to be consolidated with the net income of Parent
and its Subsidiaries in accordance with GAAP, except to the extent of the amount
of dividends or distributions actually paid in such period by such other Person
to Parent or to a Subsidiary, as the case may be; (b) any extraordinary gains or
losses, including gains or losses attributable to property sales not in the
ordinary course of business; and (c) the cumulative effect of a change in
accounting principles and any gains or losses attributable to writeups or write
downs of assets or any full cost ceiling impairment.

“Contractual Obligation” means, as to any Person, any provision of any security
issued by such Person or of any material agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

“Credit Exposure” means, as to any Lender at any time, an amount equal to the
sum of (a) the aggregate principal amount of all Revolving Credit Advances held
by such Lender then outstanding and (b) such Lender’s Revolving Credit
Percentage of the Letter of Credit Obligations then outstanding.

“Credit Parties” means Borrower and its Restricted Subsidiaries, and “Credit
Party” means any one of them, as the context indicates or otherwise requires.

“Current Ratio” means, as of any date of determination, the ratio of
(a) Consolidated Current Assets as of such date to (b) Consolidated Current
Liabilities as of such date.

“Daily Adjusting LIBOR Rate” means for any day a per annum interest rate which
is equal to the quotient of the following:

(a) the LIBOR Rate;

 

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divided by

(b) a percentage (expressed as a decimal) equal to 1.00 minus the maximum rate
on such date at which Administrative Agent is required to maintain reserves on
“Euro-currency Liabilities” as defined in and pursuant to Regulation D of the
Board of Governors of the Federal Reserve System or, if such regulation or
definition is modified, and as long as Administrative Agent is required to
maintain reserves against a category of liabilities which includes Eurodollar
deposits or includes a category of assets which includes Eurodollar loans, the
rate at which such reserves are required to be maintained on such category;

such sum to be rounded upward, if necessary, in the discretion of Administrative
Agent, to the seventh decimal place.

“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,
debentures, notes or other similar instruments (including principal, but
excluding interest, fees and charges); (b) all obligations of such Person
(whether contingent or otherwise) in respect of bankers’ acceptances, letters of
credit, surety or other bonds and similar instruments; (c) all obligations of
such Person to pay the deferred purchase price of property or services (other
than for borrowed money and other than accounts payable (for the deferred
purchase price of property or services) from time to time incurred in the
ordinary course of business which, if greater than ninety (90) days past the
invoice or billing date, are being contested in good faith by appropriate
proceedings and for which reserves adequate under GAAP shall have been
established therefor); (d) all obligations under leases which shall have been,
or should have been, in accordance with GAAP, recorded as capital leases in
respect of which such Person is liable (whether contingent or otherwise
including principal but excluding interest, fees and charges); (e) all
obligations under operating leases which require such Person or its Affiliate to
make payments over the term of such lease, including payments at termination,
based on the purchase price or appraisal value of the property subject to such
lease plus a marginal interest rate, and used primarily as a financing vehicle
for, or to monetize, such property; (f) all Debt (as described in the other
clauses of this definition) of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person, but valued at the
lesser of (i) the amount of such Debt and (ii) the fair market value of the
property securing such Debt; (g) all Debt (as described in the other clauses of
this definition) and other obligations of others guaranteed by such Person or in
which such Person otherwise assures a creditor against loss of the debtor or
obligations of others; (h) all obligations or undertakings of such Person to
maintain or cause to be maintained the financial position or covenants of others
or to purchase the Debt of others; (i) all obligations to deliver or sell
Hydrocarbons in consideration of advance payments, as disclosed by
Section 7.15(c); (j) any Disqualified Equity Interests; and (k) the undischarged
balance of any production payment created by such Person or for the creation of
which such Person directly or indirectly received payment; provided, however,
the items described in clauses (b), (c), (d), (e), (f), (g), (h), (i), (j) and
(k) shall only constitute part of Debt if and to the extent the aggregate amount
of obligations described in such clauses exceeds $1,000,000. Notwithstanding the
foregoing, Debt shall not include (i) contingent obligations of Borrower or any
Restricted Subsidiary pursuant to any purchase and sale agreement, stock
purchase agreement, merger agreement or similar agreement so long as such
obligations are contingent (and not for amounts due and payable), (ii)

 

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obligations in respect of Commodity Hedging Agreements or Interest Rate
Agreements, (iii) indemnities incurred in the ordinary course of business or in
connection with the disposition of assets, (iv) any employee or director
compensation or any compensation paid to employees or directors pursuant to
stock appreciation rights or other equity based compensation awards, or
(v) except to the extent set forth in clause (e) above, obligations under
operating leases.

“Debtor Relief Laws” means the Bankruptcy Code, 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 that with the giving of notice or the passage of time,
or both, would constitute an Event of Default under this Agreement.

“Defaulting Lender” means a Lender that, as determined by Administrative Agent
(with notice to Borrower of such determination), (a) has failed to perform any
of its funding obligations hereunder, including, without limitation, in respect
of its Revolving Credit Percentage of any Advances or participations in Letters
of Credit, within two Business Days of the date required to be funded by it
hereunder, (b) has notified Borrower, Administrative Agent or any Lender that it
does not intend to comply with its funding obligations or has made a public
statement to that effect with respect to its funding obligations hereunder or
under other agreements in which it commits to extend credit, (c) has failed,
within three Business Days after request by Administrative Agent, to confirm in
a manner satisfactory to Administrative Agent that it will comply with its
funding obligations; provided that such Lender shall cease to be a Defaulting
Lender pursuant to this clause (c) upon receipt by Administrative Agent of such
confirmation in form and substance satisfactory to Administrative Agent, or
(d) has, or has a direct or indirect parent company that has, (i) become the
subject of a proceeding under any Debtor Relief Law, or (ii) had appointed for
it a receiver, custodian, conservator, trustee, administrator, assignee for the
benefit of creditors or similar Person charged with reorganization or
liquidation of its business or assets, including the Federal Deposit Insurance
Corporation or any other state, federal or other governmental or regulatory
authority acting in such a capacity; provided that a Lender shall not be a
Defaulting Lender solely by virtue of the ownership or acquisition of any equity
interest in that Lender or any direct or indirect parent company thereof by a
Governmental Authority unless deemed so by Administrative Agent in its sole
discretion.

“Deficiency Payment Commencement Date” has the meaning specified in Section 4.6.

“Designated Jurisdiction” means any country or territory to the extent that such
country or territory itself is the subject of any Sanction.

“Determination Date” has the meaning specified in Section 4.2.

“Disposition” or “Dispose” means the sale, transfer, license, lease, exchange or
other disposition (including any sale and leaseback transaction) of any property
by any Person, including any sale, assignment, transfer or other disposal, with
or without recourse, of any notes or accounts receivable or any rights and
claims associated therewith.

 

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“Disqualified Equity Interest” means any Equity Interest which, by its terms (or
by the terms of any security or other Equity Interest into which it is
convertible or for which it is exchangeable), or upon the happening of any event
or condition (i) matures or is mandatorily redeemable (other than solely for an
Equity Interest which would not otherwise be a Disqualified Equity Interest),
pursuant to a sinking fund obligation, other provision for payment or otherwise,
(ii) is redeemable at the option of the holder thereof (other than solely for an
Equity Interest which would not otherwise be a Disqualified Equity Interest), in
whole or in part, (iii) provides for any scheduled payments or dividends to be
made in cash, or (iv) is or becomes convertible into, or exchangeable for, Debt
or any other Equity Interest that would constitute a Disqualified Equity
Interest under any other provision of this definition, in each case, prior to
the date that is 91 days after the Revolving Credit Maturity Date at the time of
issuance, except, in the case of clauses (i) and (ii), if as a result of a
change of control event or asset sale or other Disposition or casualty event, so
long as any rights of the holders thereof to require the redemption thereof upon
the occurrence of such a change of control event or asset sale or other
Disposition or casualty event are subject to the prior payment in full of the
Indebtedness (other than Lender Hedging Obligations); provided that if such
Equity Interest is issued pursuant to a plan for the benefit of employees of
Parent, Borrower or any of their respective Subsidiaries or by any such plan to
such employees, such Equity Interest shall not constitute a Disqualified Equity
Interest solely because it may be required to be repurchased by Parent, Borrower
or the Restricted Subsidiaries.

“Distribution” has the meaning specified in Section 8.5.

“Dollars” and the sign “$” means lawful money of the United States of America.

“Domestic Subsidiary” means any Subsidiary of Borrower organized under the laws
of any jurisdiction within the United States of America.

“Effective Date” means the date on which all the conditions precedent set forth
in Sections 5.1 and 5.2 (with respect to the initial Advance) have been
satisfied.

“Electronic Transmission” means each document, instruction, authorization, file,
information and any other communication transmitted, posted or otherwise made or
communicated by e-mail or E-Fax, or otherwise to or from an E-System or other
equivalent service.

“Eligible Assignee” means any Person that meets the requirements to be an
assignee under Section 13.7(b)(iii), (v) and (vi) (subject to such consents, if
any, as may be required under Section 13.7(b)(iii)).

“Equity Interest” means (i) in the case of any corporation, all capital stock
and any securities exchangeable for or convertible into capital stock, (ii) in
the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents of corporate stock (however
designated) in or to such association or entity, (iii) in the case of a
partnership or limited liability company, partnership or membership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distribution of assets of, the issuing Person, and including, in all of the
foregoing cases described in clauses (i), (ii), (iii) or (iv), any warrants,
rights or other options to purchase or otherwise acquire any of the interests
described in any of the foregoing cases.

 

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
or any successor act or code and the regulations in effect from time to time
thereunder.

“E-System” means any electronic system and any other Internet or extranet-based
site, whether such electronic system is owned, operated, hosted or utilized by
Administrative Agent, any of its Affiliates or any other Person, providing for
access to data protected by passcodes or other security system.

“Eurodollar-based Advance” means any Advance which bears interest at the
Eurodollar-based Rate.

“Eurodollar-based Rate” means a per annum interest rate which is equal to the
sum of the Applicable Margin, plus the quotient of:

(a) the LIBOR Rate,

divided by

(b) a percentage equal to 100% minus the maximum rate on such date at which
Administrative Agent is required to maintain reserves on ‘Eurocurrency
Liabilities’ as defined in and pursuant to Regulation D of the Board of
Governors of the Federal Reserve System or, if such regulation or definition is
modified, and as long as Administrative Agent is required to maintain reserves
against a category of liabilities which includes Eurocurrency deposits or
includes a category of assets which includes Eurocurrency loans, the rate at
which such reserves are required to be maintained on such category,

such sum to be rounded upward, if necessary, in the discretion of Administrative
Agent, to the seventh decimal place.

“Eurodollar-Interest Period” means, for any Eurodollar-based Advance, an
Interest Period of one, two, three or six months (or any shorter or longer
periods agreed to in advance by Borrower, Administrative Agent and Revolving
Credit Lenders) as selected by Borrower, for such Eurodollar-based Advance
pursuant to Section 2.3.

“Eurodollar Lending Office” means, (a) with respect to Administrative Agent,
Administrative Agent’s office identified on Schedule 13.6 or such other branch
of Administrative Agent, domestic or foreign, as it may hereafter designate as
its Eurodollar Lending Office by written notice to Borrower and Lenders and
(b) as to each of Lenders, the office, branch or affiliate designated by such
Lender as its Eurodollar Lending Office by written notice to Borrower and
Administrative Agent.

“Event of Default” means each of the Events of Default specified in Section 9.1
hereof.

“Excluded Assets” means the collective reference to:

 

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(a) any interest in leased real property that is not an Oil and Gas Property,
including, without limitation, any leasehold interests in real property (except
to the extent a security interest in any such interest can be perfected solely
by filing a UCC financing statement);

(b) any fee interest in real property that is not an Oil and Gas Property;

(c) any licenses, franchises, charters and authorizations of a Governmental
Authority to the extent a security interest therein under the Loan Documents is
prohibited or would require the consent, license or approval of any Governmental
Authority;

(d) any asset if the granting of a security interest under the Loan Documents in
such asset would be prohibited by any Requirement of Law;

(e) any lease, license or other agreement to the extent that a grant of a
security interest therein under the Loan Documents would violate, create a
default under or invalidate such lease, license or agreement;

(f) any Equity Interests issued by, or assets of, any Unrestricted Subsidiary;

(g) any Equity Interests issued by Borrower;

(h) any assets subject to a Lien permitted by Section 8.2(b) if the contract or
other agreement in which such Lien is granted prohibits the creation of any
other Lien on such assets (but only for so long as such contract or other
agreement in which such Lien is granted is in effect); and

(i) any motor vehicles and any other assets subject to a certificate of title
(other than proceeds thereof), to the extent a security interest on such motor
vehicles or other assets cannot be perfected solely by filing a UCC financing
statement;

provided that (A) in the case of clauses (c), (d) and (e) above, such exclusion
shall not apply (i) to the extent the prohibition or restriction is ineffective
under Section 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code or
other applicable law or (ii) to proceeds of the assets referred to in such
clauses, the assignment of which is expressly deemed effective under
Section 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code or other
applicable law, and (B) assets described in clauses (c), (d), (e) and (h) above
shall no longer be “Excluded Assets” upon termination of the applicable
prohibition or restriction described above that caused such assets to be treated
as “Excluded Assets” or receipt of a consent from the applicable parties
necessary to grant a Lien on such assets.

“Excluded Hedges” means, collectively, Commodity Hedging Agreements that (a) are
basis differential only swaps for volumes of natural gas included under other
Commodity Hedging Agreements permitted by Section 8.11 or (b) are a hedge of
volumes of crude oil or natural gas or natural gas liquids by means of a price
“floor” for which there exists no deferred obligation to pay the related premium
or other purchase price or the only deferred obligation is to either pay the
premium or other purchase price on each settlement date, or pay the financing
for such premium or other purchase price.

 

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“Excluded Taxes” means any of the following Taxes imposed on or with respect to
a Recipient or required to be withheld or deducted from a payment to a
Recipient, (a) Taxes imposed on or measured by net income (however denominated),
franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result
of such Recipient being organized under the laws of, or having its principal
office or, in the case of any Lender, its applicable lending office located in,
the jurisdiction imposing such Tax (or any political subdivision thereof) or
(ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal
withholding Taxes imposed on amounts payable to or for the account of such
Lender with respect to an applicable interest in an Advance or Revolving Credit
Commitment Amount pursuant to a law in effect on the date on which (i) such
Lender acquires such interest in an Advance or Revolving Credit Commitment
Amount (other than pursuant to an assignment request by Borrower under
Section 13.11(a)) or (ii) such Lender changes its lending office, except in each
case to the extent that, pursuant to Section 11.9, amounts with respect to such
Taxes were payable either to such Lender’s assignor immediately before such
Lender became a party hereto or to such Lender immediately before it changed its
lending office, (c) Taxes attributable to such Recipient’s failure to comply
with Section 11.9(g) and (d) any U.S. federal withholding Taxes imposed under
FATCA.

“Existing Commodity Hedging Agreements” means any Commodity Hedging Agreements
entered into between any Credit Party and any Lender or Affiliate of a Lender
prior to the Effective Date and in effect on the Effective Date.

“Existing Credit Agreement” has the meaning set forth in the Recitals to this
Agreement.

“Existing Letters of Credit” means the letters of credit issued under the
Existing Credit Agreement and set forth on the attached Schedule 1.4.

“Existing Mortgages” means the Mortgages listed on Schedule 1.5 hereto.

“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code, as of the
date of this Agreement (or any amended or successor version that is
substantively comparable), any current or future regulations or official
interpretations thereof and any agreements entered into pursuant to
Section 1471(b)(1) of the Internal Revenue Code.

“Federal Funds Effective Rate” means, for any day, a fluctuating interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by
Administrative Agent from three Federal funds brokers of recognized standing
selected by Administrative Agent, all as conclusively determined by
Administrative Agent, such sum to be rounded upward, if necessary, in the
discretion of Administrative Agent, to the nearest whole multiple of 1/100th of
1%.

“Fee Letter” means (a) the fee letter by and between Borrower and RBC, dated as
of September 28, 2012, relating to the Indebtedness hereunder, as amended,
restated, replaced or otherwise modified from time to time, and (b) the fee
letter by and between Borrower and Comerica Bank, dated as of September 28,
2012, relating to Letter of Credit Fees due and payable to Comerica Bank, in its
capacity as an Issuing Lender, pursuant to Section 3.4(a)(ii), as amended,
restated, replaced or otherwise modified from time to time.

 

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“Fees” means the Commitment Fee, the Letter of Credit Fees and the other fees
and charges (including any agency fees) payable by Borrower to Lenders, Issuing
Lender or Administrative Agent hereunder or under the Fee Letter.

“Fiscal Quarter” means any of the four quarters of any Fiscal Year.

“Fiscal Year” means the twelve-month period ending on each December 31.

“Foreign Lender” means a Lender that is not a U.S. Person.

“Foreign Subsidiary” means any Subsidiary, other than a Domestic Subsidiary, and
“Foreign Subsidiaries” means any or all of them.

“Fronting Exposure” means, at any time there is an Defaulting Lender, with
respect to Issuing Lender, such Defaulting Lender’s Revolving Credit Percentage
of the outstanding Letter of Credit Obligations with respect to Letters of
Credit issued by such Issuing Lender.

“GAAP” means, generally accepted accounting principles and practices which are
recognized as such by the American Institute of Certified Public Accountants
acting through its Accounting Principles Board or by the Financial Accounting
Standards Board or through other appropriate boards or committees thereof and
which are consistently applied for all periods after the date hereof so as to
properly reflect the financial conditions, and the results of operations and
changes in financial position, of the Parent and Borrower, except that any
accounting principle or practice required to be changed by the Accounting
Principles Board or Financial Accounting Standards Board (or other appropriate
board or committee or such Boards) in order to continue as a generally accepted
accounting principle or practice may be so changed.

“Gas Balancing Agreement” means any agreement or arrangement whereby any Credit
Party, or any other party having an interest in any Hydrocarbons to be produced
from Oil and Gas Properties in which any Credit Party owns an interest, has a
right to take more than its proportionate share of production therefrom.

“Governmental Authority” means the government of the United States of America or
any other nation, or of 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 (including without limitation any supranational bodies such as the
European Union or the European Central Bank).

“Guarantor(s)” means the Parent and each Restricted Subsidiary of Borrower.

“Guaranty” means the Second Amended, Restated and Consolidated Unconditional
Guaranty to be executed and delivered by the Guarantors on the Effective Date in
the form attached hereto as Exhibit E.

 

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“Hazardous Material” means any hazardous or toxic waste, substance or material
defined or regulated as such in or for purposes of the Hazardous Material Laws.

“Hazardous Material Laws” means all laws, codes, ordinances, rules, regulations
and other governmental restrictions and requirements issued by any federal,
state, local or other Governmental Authority or quasi-Governmental Authority or
body (or any agency, instrumentality or political subdivision
thereof) pertaining to any substance or material which is regulated for reasons
of health, safety or the environment and which is present or alleged to be
present on or about or used in any facilities owned, leased or operated by any
Credit Party, or any portion thereof including, without limitation, those
relating to soil, surface, subsurface ground water conditions and the condition
of the indoor and outdoor ambient air; any so-called “superfund” or “superlien”
law; and any other United States federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, any Hazardous Material,
as now or at any time during the term of the Agreement in effect.

“Hedge Termination Value” means, in respect of any one or more Commodity Hedging
Agreements or Interest Rate Agreements, after taking into account the effect of
any legally enforceable netting agreement relating to such Commodity Hedging
Agreements or Interest Rate Agreements, as applicable, (a) for any date on or
after the date such Commodity Hedging Agreements or Interest Rate Agreements, as
applicable, have been closed out and termination value(s) determined in
accordance therewith, such termination value(s) and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Commodity Hedging Agreements or Interest Rate
Agreements, as applicable, as determined by the counterparties to such Commodity
Hedging Agreements or Interest Rate Agreements, as applicable.

“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.

“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined or separated therefrom.

“Immaterial Title Deficiencies” means, with respect to Hydrocarbon Interests,
defects or clouds on title, discrepancies in reported net revenue or working
interest ownership interests and other defects, discrepancies, Liens and similar
matters which do not, individually or in the aggregate, affect Oil and Gas
Properties with a value greater than five percent (5%) of the value of all such
properties included in the Borrowing Base.

“Increased Costs” has the meaning ascribed to such term in Section 11.6.

“Indebtedness” means (a) all indebtedness, obligations and liabilities of every
nature, contingent or otherwise, of Borrower or any Guarantor to any of the
Lenders, any of the Lenders’

 

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Affiliates, the Administrative Agent, or the Issuing Lender, individually or
collectively, under any Loan Document, whether for principal, interest,
reimbursement of amounts drawn under any Letter of Credit, funding
indemnification amounts, fees, expenses, indemnification or otherwise,
(b) Lender Hedging Obligations, and (c) Lender Product Obligations, in each case
whether existing on the date of this Agreement or arising thereafter, direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, including interest accruing
subsequent to the filing of a petition or other action concerning bankruptcy or
other similar proceedings, and all renewals, extensions, refinancings and
replacements for the foregoing.

“Indemnified Person” has the meaning specified in Section 13.5.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by or on account of any obligation of any
Credit Party under any Loan Document and (b) to the extent not otherwise
described in (a), Other Taxes.

“Information” has the meaning specified in Section 13.10.

“Interest Period” means with respect to a Eurodollar-based Advance, a
Eurodollar-Interest Period, commencing on the day a Eurodollar-based Advance is
made, or on the effective date of an election of the Eurodollar-based Rate made
under Section 2.3; provided, however that (i) any Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day, except that as to an Interest Period in respect of a
Eurodollar-based Advance, if the next succeeding Business Day falls in another
calendar month, such Interest Period shall end on the next preceding Business
Day, (ii) when an Interest Period in respect of a Eurodollar-based Advance
begins on a day which has no numerically corresponding day in the calendar month
during which such Interest Period is to end, it shall end on the last Business
Day of such calendar month, and (iii) no Interest Period in respect of any
Advance shall extend beyond the Revolving Credit Maturity Date.

“Interest Rate Agreement” means any interest rate protection agreement, interest
rate future agreement, interest rate option agreement, interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedge agreement or other similar agreement or arrangement designed to
protect against fluctuations in interest rates.

“Internal Revenue Code” means the Internal Revenue Code of 1986 of the United
States of America, as amended from time to time.

“Investment” has the meaning specified in Section 8.6.

“IRS” means the United States Internal Revenue Service

“Issuing Lender” means (a) RBC, in its capacity as issuer of one or more Letters
of Credit hereunder, and any successor designated by Borrower and the Revolving
Credit Lenders and (b) Comerica Bank, solely in its capacity as issuer of the
Existing Letters of Credit.

“Issuing Office” means such office as Issuing Lender shall designate as its
Issuing Office.

 

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“L/C Indemnified Amounts” has the meaning ascribed to such term in Section 3.9.

“L/C Indemnified Person” has the meaning ascribed to such term in Section 3.9.

“Lender Counterparty” means any Lender or any Affiliate of a Lender counterparty
to a Commodity Hedging Agreement or Interest Rate Agreement with any Credit
Party.

“Lender Hedging Obligations” means all obligations arising from time to time
under Commodity Hedging Agreements and Interest Rate Agreements permitted
hereunder and entered into from time to time between any Credit Party, on the
one hand and a Lender Counterparty on the other hand (including any such
obligations under any Existing Commodity Hedging Agreements); provided, however,
that if a Lender Counterparty ceases to be a Lender hereunder or an Affiliate of
a Lender hereunder, then all Commodity Hedging Agreements and Interest Rate
Agreements between a Credit Party and such Lender Counterparty shall not
constitute Lender Hedging Obligations and shall not be secured by the Collateral
Documents or guaranteed pursuant to the Guaranty.

“Lender Product Obligations” means all obligations arising from time to time
under Lender Products (including any such obligations existing on the Effective
Date); provided, however, that if a Lender or an Affiliate of a Lender ceases to
be a Lender hereunder or an Affiliate of a Lender hereunder, then all Lender
Products between a Credit Party or Parent and such Lender or Affiliate of a
Lender shall not constitute Lender Product Obligations and shall not be secured
by the Collateral Documents or guaranteed pursuant to the Guaranty.

“Lender Products” means any one or more of the following types of services or
facilities extended to the Parent or any Credit Party by any Lender or Affiliate
of a Lender: (i) credit cards, (ii) credit card processing services, (iii) debit
cards, (iv) purchase cards, (v) Automated Clearing House (ACH) transactions,
(vi) cash management, including controlled disbursement services, and
(vii) establishing and maintaining deposit accounts.

“Lenders” shall have the meaning set forth in the preamble, and shall include
the Revolving Credit Lenders and any Eligible Assignee which becomes a Lender
pursuant to Section 13.7.

“Letter of Credit Agreement” means, collectively, the letter of credit
application and related documentation executed and/or delivered by Borrower in
respect of each Letter of Credit, in each case reasonably satisfactory to
Issuing Lender.

“Letter of Credit Documents” shall have the meaning ascribed to such term in
Section 3.7(a).

“Letter of Credit Fees” means the fees payable in connection with Letters of
Credit pursuant to Sections 3.4(a)(i) and (ii).

“Letter of Credit Maximum Amount” means, on any date of determination, the
greater of (a) 10% of the Conforming Borrowing Base on such date (or, if the
Borrowing Base Equalization Date has occurred, 10% of the Borrowing Base on such
date) or (b) Ten Million Dollars ($10,000,000).

 

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“Letter of Credit Obligations” means at any date of determination, the sum of
(a) the aggregate undrawn amount of all Letters of Credit then outstanding, and
(b) the aggregate amount of Reimbursement Obligations which remain unpaid as of
such date.

“Letter of Credit Payment” means any amount paid or required to be paid by
Issuing Lender in its capacity hereunder as issuer of a Letter of Credit as a
result of a draft or other demand for payment under any Letter of Credit.

“Letter of Credit” means each Existing Letter of Credit and each standby letter
of credit issued by Issuing Lender at the request of or for the account of
Borrower pursuant to Article 3.

“LIBOR Rate” means,

(a) for any Interest Period with respect to any Eurodollar-based Advance, the
per annum rate of interest, expressed on the basis of a year of 360 days,
determined by the Administrative Agent, which is equal to the offered rate that
appears on the page of the Reuters LIBOR01 screen (or any successor thereto as
may be reasonably selected by the Administrative Agent) that displays an average
British Bankers Association Interest Settlement Ratio for deposits in Dollars
with a term equivalent to such Eurodollar-Interest Period, determined as of
approximately 11:00 a.m. (London time) two (2) Business Days prior to the first
day of such Eurodollar-Interest Period. If the rates referenced in the preceding
sentence are not available, “LIBOR Rate” shall mean the per annum rate of
interest determined by the Administrative Agent as the rate of interest,
expressed on a basis of 360 days, at which deposits in Dollars for delivery on
the first day of such Euordollar-Interest Period in same day funds in the
approximate amount of the Eurodollar-based Advance being made, continued or
converted by the Administrative Agent and with a term and amount comparable to
such Eurodollar-Interest Period and principal amount of such Eurodollar-based
Advance as would be offered by the Administrative Agent’s London Branch to major
banks in the offshore Dollar market at their request at approximately 11:00 a.m.
(London time) two (2) Business Days prior to the first day of such
Eurodollar-Interest Period; and

(b) for purposes of determining the Daily Adjusting LIBOR Rate in connection
with a Base Rate Advance, the per annum rate of interest, expressed on the basis
of a year of 360 days, determined by the Administrative Agent, which is equal to
the offered rate that appears on the page of the Reuters LIBOR01 screen (or any
successor thereto as may be selected by the Administrative Agent) that displays
an average British Bankers Association Interest Settlement Ratio for deposits in
Dollars with a term equivalent to one (1) month, determined as of approximately
11:00 a.m. (London time) on such day, or if such day is not a Business Day, on
the immediately preceding Business Day. If the rates referenced in the preceding
sentence are not available, “LIBOR Rate” shall mean the per annum rate of
interest determined by the Administrative Agent as the rate of interest,
expressed on a basis of 360 days, at which deposits in Dollars for delivery on
such day in same day funds in the approximate amount of the Base Rate Advance
being made or converted by the Administrative Agent and with a term equal to one
(1) month and amount comparable to the principal amount of such Base Rate
Advance as would be offered by the Administrative Agent’s London Branch to major
banks in the offshore Dollar market at their request at approximately 11:00 a.m.
(London time) on such day.

 

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“Lien” means any security interest in or lien on or against any property arising
from any pledge, assignment, hypothecation, mortgage, security interest, deposit
arrangement, trust receipt, conditional sale or title retaining contract, sale
and leaseback transaction, Capitalized Lease, consignment or bailment for
security, or any other type of lien, charge, encumbrance, title exception,
preferential or priority arrangement affecting property (including with respect
to stock, any stockholder agreements, voting rights agreements, buy-back
agreements and all similar arrangements), whether based on common law or
statute.

“Loan Documents” means, collectively, this Agreement, the Notes, the Letter of
Credit Agreements, the Letters of Credit, the Guaranty, the Collateral
Documents, and any other agreements, instruments and documents executed by the
Parent or a Credit Party pursuant to this Agreement, but excluding Commodity
Hedge Agreements, Interest Rate Agreements and Lender Products documents.

“Majority Lenders” means at any time, the Revolving Credit Lenders holding at
least 51.0% of the Revolving Credit Aggregate Commitment (or, if the Revolving
Credit Aggregate Commitment has been terminated (whether by maturity,
acceleration or otherwise), the aggregate principal amount outstanding under the
Revolving Credit); provided that, for purposes of determining Majority Lenders
hereunder, the Letter of Credit Obligations shall be allocated among the
Revolving Credit Lenders based on their respective Revolving Credit Percentages.
The Revolving Credit Commitment Amount of, and portion of the Aggregate Credit
Exposure attributable to, any Defaulting Lender shall be excluded for purposes
of making a determination of “Majority Lenders”.

“Material Adverse Effect” means a material adverse effect on (a) the business,
operations, properties or financial condition of the Parent and the Credit
Parties taken as a whole, (b) the ability of the Parent, Borrower or any other
Credit Party to perform its material obligations under this Agreement or any
other Loan Document to which it is a party, or (c) the validity or
enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of Administrative Agent or Lenders hereunder or thereunder.

“Material Debt” means Debt (other than Advances and Letters of Credit), or
obligations in respect of Commodity Hedging Agreements or Interest Rate
Agreements, of Parent or any one or more of the Credit Parties in an aggregate
principal amount exceeding the Threshold Amount. For purposes of determining
Material Debt, the “principal amount” of the obligations of Parent or any Credit
Party in respect of any Commodity Hedging Agreement or Interest Rate Agreement
at any time shall be the Hedge Termination Value.

“Material Domestic Subsidiary” means a wholly-owned Domestic Subsidiary of
Borrower having 10% or more of the book value of the consolidated assets of the
Parent, Borrower and the Subsidiaries as of the end of the most recent Fiscal
Quarter for which Borrower has delivered financial statements pursuant to
Section 7.1(a) or (b), provided, however, the aggregate of all wholly-owned
Subsidiaries that are Domestic Subsidiaries of Borrower not considered Material
Domestic Subsidiaries herein shall not exceed at any time 20% or more of the
book value of the consolidated assets of the Parent, Borrower and its
Subsidiaries as of the end of the most recent Fiscal Quarter for which Borrower
has delivered financial statements pursuant to Section 7.1(a) or (b).

 

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“Material Gas Imbalance” means, with respect to all Gas Balancing Agreements to
which any Credit Party is a party or by which any Oil and Gas Property owned by
any Credit Party is bound, a net gas imbalance to Borrower or any other Credit
Party, individually or taken as a whole in excess of $1,000,000. Gas imbalances
will be determined based on written agreements, if any, specifying the method of
calculation thereof, or, alternatively, if no such agreements are in existence,
gas imbalances will be calculated by multiplying (x) the volume of gas imbalance
as of the date of calculation (expressed in thousand cubic feet) by (y) the
heating value in Btu’s per thousand cubic feet, times the Henry Hub average
daily spot price for the month immediately preceding the date of calculation.

“Maximum Facility Amount” means, as of the Effective Date, $500,000,000, as such
amount may be adjusted from time to time thereafter in accordance with
Section 2.11.

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgaged Properties” means all of the right, title and interest of Borrower
and the other Credit Parties in and to those Oil and Gas Properties, whether now
owned or hereafter acquired, in which a Lien is created by any Collateral
Document in favor of the Administrative Agent for the benefit of the Secured
Parties, whether executed prior to, contemporaneous with or after the execution
of this Agreement.

“Mortgages” means (a) the Existing Mortgages, and (b) all other mortgages, deeds
of trust, amendments to mortgages or deeds of trust, assignments of production,
pledge agreements, collateral mortgages, collateral chattel mortgages,
collateral assignments, financing statements and other documents, instruments
and agreements evidencing, creating, perfecting or otherwise establishing Liens
in favor of the Administrative Agent for the benefit of the Secured Parties and
securing the Indebtedness pursuant to Section 4.6, Section 5.1, Section 7.12,
Section 7.17 or otherwise.

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

“Net Cash Proceeds” means the aggregate cash payments received by Parent or any
Credit Party from any Disposition of property, the issuance of Equity Interests
or the issuance of Debt, as the case may be, net of all costs and expenses
incurred in connection with any such sale or issuance, as the case may be,
including, without limitation, legal, accounting and investment banking fees,
underwriting discounts, sales commissions, and other third party charges, and
net of property taxes, transfer taxes and all other taxes paid or payable by
Parent or such Credit Party in respect of any such sale or issuance, and, in the
case of a Disposition of property, net of all amounts required to be applied to
the repayment of Debt secured by a Lien expressly permitted hereunder on any
asset that is the subject of such Disposition (other than any Lien pursuant to a
Collateral Document).

“Non-Compliant Lender” shall have the meaning set forth in Section 13.11(b).

 

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“Non-Defaulting Lender” means any Lender that is not, as of the date of
relevance, a Defaulting Lender.

“Notes” means the Revolving Credit Notes.

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

“Oil and Gas Properties” means the Hydrocarbon Interests; the properties now or
hereafter pooled or unitized with the Hydrocarbon Interests; all presently
existing or future unitization, 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; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby
and all rents, issues, profits, proceeds, products, revenues and other incomes
from or attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests; and 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 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.

“Original Administrative Agent” has the meaning set forth in the Recitals to
this Agreement.

“Organizational Documents” means (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws; (b) with respect to any
limited liability company, the certificate 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.

 

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“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as
a result of a present or former connection between such Recipient and the
jurisdiction imposing such Tax (other than connections arising from such
Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Loan Document, or sold or assigned an interest in any Advance or Loan Document).

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Loan Document.

“Parent” means Matador Resources Company, a Texas corporation, formerly known as
Matador Holdco, Inc.

“Participant” has the meaning set forth in Section 13.7(d).

“Participant Register” has the meaning set forth in Section 13.7(d).

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

“Pension Plan” means any plan established and maintained by the Parent or a
Credit Party, or contributed to by the Parent or a Credit Party, which is
qualified under Section 401(a) of the Internal Revenue Code and subject to the
minimum funding standards of Section 412 of the Internal Revenue Code.

“Permitted Encumbrances” means with respect to any Person:

(a) Liens imposed by law for taxes, assessments or other governmental charges or
levies which are not yet delinquent or which (i) are being contested in good
faith by appropriate proceedings, (ii) the relevant Credit Party has set aside
on its books adequate reserves with respect thereto in accordance with GAAP, and
(iii) the failure to make payment pending such contest would not have a Material
Adverse Effect;

(b) vendors’, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s
and other like Liens imposed by law, and contractual Liens granted to operators
and non-operators under oil and gas operating agreements, in each case, arising
in the ordinary course of business or incident to the exploration, development,
operation and maintenance of Oil and Gas Properties and securing obligations
that are not overdue by more than 60 days or which (i) are being contested in
good faith by appropriate proceedings, (ii) the relevant Credit Party has set
aside on its books adequate reserves with respect thereto in accordance with
GAAP, and (iii) the failure to make payment pending such contest would not have
a Material Adverse Effect;

(c) contractual Liens which arise in the ordinary course of business under
operating agreements, oil and gas partnership and joint venture 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

 

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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;

(d) Liens in connection with workmen’s compensation, unemployment insurance or
other social security, old age, pension or public liability obligations;

(e) Liens on cash, Cash Equivalents, securities and deposits to secure the
performance of bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature, in each
case in the ordinary course of business;

(f) bankers liens and rights of set-off with respect to customary depositary
arrangements entered into in the ordinary course of business;

(g) judgment liens in respect of judgments that do not constitute an Event of
Default under Section 9.1(h);

(h) easements, zoning restrictions, rights-of-way, servitudes, permits, surface
leases, and similar encumbrances on real property imposed by law or arising in
the ordinary course of business that, in the aggregate, do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of business of the Credit Parties;

(i) royalties, overriding royalties, reversionary interests, calls on
production, preferential purchase rights, net profits interests, production
payments and other similar burdens with respect to the Oil and Gas Properties
owned by the Credit Parties if the net cumulative effect of such burdens does
not operate to deprive any Credit Party of any material right in respect of its
assets or properties (except for rights customarily granted with respect to such
interests);

(j) Liens arising from Uniform Commercial Code financing statement filings
regarding operating leases entered into by Borrower or any Restricted Subsidiary
in the ordinary course of business covering the property under the lease and not
securing any Debt;

(k) unperfected Liens reserved in leases (other than oil and gas leases) or
arising by operation of law for rent or compliance with the lease in the case of
leasehold estates;

(l) environmental Liens which are being contested in good faith by appropriate
proceedings and which do not and cannot rank in priority above the Liens created
under the Collateral Documents; and

(m) Immaterial Title Deficiencies.

 

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Notwithstanding the foregoing, regardless of the language set forth in this
definition, no Lien over the Equity Interests of any Restricted Subsidiary
granted to any Person other than to Administrative Agent for the benefit of the
Secured Parties shall be deemed a “Permitted Encumbrance” under the terms of
this Agreement.

“Person” means a natural person, corporation, limited liability company,
partnership, limited liability partnership, trust, incorporated or
unincorporated organization, joint venture, joint stock company, firm or
association or a government or any agency or political subdivision thereof or
other entity of any kind.

“Platform” has the meaning set forth in the last paragraph of Section 7.1.

“Pledge Agreement” means the Second Amended and Restated Pledge Agreement to be
executed and delivered by the Credit Parties on the Effective Date.

“Prime Rate” means the per annum rate of interest announced by RBC, at its main
office from time to time as its “prime rate” (it being acknowledged that such
announced rate may not necessarily be the lowest rate charged by RBC to any of
its customers), which Prime Rate shall change simultaneously with any change in
such announced rate.

“Public Lenders” shall have the meaning set forth in the last paragraph of
Section 7.1.

“Purchasing Lender” shall have the meaning set forth in Section 13.11(a).

“Rating Agency” means Moody’s, S&P, their respective successors or any other
nationally recognized statistical rating organization which is acceptable to
Administrative Agent.

“RBC” means Royal Bank of Canada, and its successors or assigns in accordance
with the terms of this Agreement.

“Recipient” means (a) the Administrative Agent, (b) any Lender and (c) any
Issuing Lender, as applicable.

“Register” has the meaning set forth in Section 13.7(c).

“Reimbursement Obligation(s)” means the aggregate amount of all unreimbursed
drawings under all Letters of Credit (excluding for the avoidance of doubt,
reimbursement obligations that are deemed satisfied pursuant to a deemed
disbursement under Section 3.6(c)).

“Related Parties” means, with respect to any Person, such Person’s Affiliates
and the partners, directors, officers, employees, agents, trustees,
administrators, managers, advisors and representatives of such Person and of
such Person’s Affiliates.

“Reported Month” is defined in Section 7.2(e).

“Resignation Agreement” means that certain Resignation and Assignment Agreement,
dated as of September 28, 2012, among the Original Administrative Agent,
Administrative Agent and each of the Credit Parties.

 

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“Request for Revolving Credit Advance” means a request for a Revolving Credit
Advance issued by Borrower under Section 2.3 of this Agreement in the form
attached hereto as Exhibit A, or in such other form acceptable to the
Administrative Agent.

“Requirement of Law” means as to any Person, any law, treaty, rule or regulation
or determination of an arbitration or a court or other Governmental Authority,
in each case applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.

“Reserve Report” means a report in form reasonably satisfactory to
Administrative Agent evaluating the oil and gas reserves attributable to
Hydrocarbon Interests of the Credit Parties in all of their Oil and Gas
Properties and which shall, among other things, (a) identify the wells covered
thereby, (b) specify such engineers’ opinions with respect to the total volume
of proved reserves of Hydrocarbons (using the terms or categories “proved
developed producing reserves,” “proved developed nonproducing reserves” and
“proved undeveloped reserves”) which Borrower has advised such engineers that
the Credit Parties have the right to produce for their own account, (c) set
forth such engineers’ opinions with respect to the projected future cash
proceeds from the proved reserves, discounted for present value at a rate
reasonably acceptable to Administrative Agent, for each calendar year or portion
thereof after the date of such findings and data, (d) set forth such engineers’
opinions with respect to the projected future rate of production from the proved
reserves, (e) contain such other information as may be reasonably requested by
Administrative Agent with respect to the projected rate of production, gross
revenues, operating expenses, taxes, capital costs, net revenues and present
value of future net revenues attributable to such proved reserves and production
therefrom, and (f) contain a statement of the price and escalation parameters,
procedures and assumptions upon which such determinations were based.

“Responsible Officer” means the chief executive officer, president, chief
financial officer or any executive vice president of Borrower.

“Restricted Subsidiary” means, on any date of determination, (a) any Subsidiary
that is a Material Domestic Subsidiary and (b) any Subsidiary that owns or
operates Borrowing Base Properties.

“Revolving Credit” means the Revolving Credit Advances to be advanced to
Borrower by the applicable Revolving Credit Lenders, in an aggregate amount
(subject to the terms hereof), not to exceed, at any one time outstanding, the
Revolving Credit Aggregate Commitment.

“Revolving Credit Advance” means a borrowing requested by Borrower and made by
the Revolving Credit Lenders under Section 2.1 of this Agreement, including
without limitation any readvance, refunding or conversion of such borrowing
pursuant to Section 2.3 and any deemed disbursement of an Advance in respect of
a Letter of Credit under Section 3.6(c), and may include, subject to the terms
hereof, Eurodollar-based Advances and Base Rate Advances.

“Revolving Credit Aggregate Commitment” means, on any date of determination, the
lesser of the Maximum Facility Amount and the Borrowing Base on such date,
subject to reduction or termination under Section 2.11 or Section 9.2 and
redetermination or adjustments under Article 4, Section 7.16 or Section 8.5.

 

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“Revolving Credit Commitment Amount” means with respect to any Revolving Credit
Lender, (a) if the Revolving Credit Aggregate Commitment has not been
terminated, the amount specified opposite such Revolving Credit Lender’s name in
the column entitled “Revolving Credit Allocations” on Schedule 1.2, as adjusted
from time to time in accordance with the terms hereof; and (b) if the Revolving
Credit Aggregate Commitment has been terminated (whether by maturity,
acceleration or otherwise), the amount equal to its Revolving Credit Percentage
of the Aggregate Credit Exposure.

“Revolving Credit Lenders” means the financial institutions from time to time
parties hereto as lenders of the Revolving Credit.

“Revolving Credit Maturity Date” means December 29, 2016.

“Revolving Credit Notes” means the revolving credit notes described in
Section 2.2, made by Borrower to each of the Revolving Credit Lenders in the
form attached hereto as Exhibit B, as such notes may be amended or supplemented
from time to time, and any other notes issued in substitution, replacement or
renewal thereof from time to time.

“Revolving Credit Percentage” means, with respect to any Revolving Credit
Lender, the percentage specified opposite such Revolving Credit Lender’s name in
the column entitled “Revolving Credit Percentage” on Schedule 1.2, as adjusted
from time to time in accordance with the terms hereof.

“Sanction(s)” means any international economic sanction administered or enforced
by OFAC, the United Nations Security Council, the European Union, Her Majesty’s
Treasury or other relevant sanctions authority.

“S&P” means Standard & Poor’s Rating Services.

“Secured Party” means each of the Administrative Agent, any Lender, any Lender
Counterparty, or any Affiliate of any Lender to which any Indebtedness is owed,
including any Lender Hedging Obligations and Lender Product Obligations,
provided, however, that a Lender Counterparty and Lenders and Affiliates of
Lenders to whom Lender Product Obligations or Lender Hedging Obligations are
owed shall be a Secured Party only while such Person (or, in the case of an
Affiliate of a Lender, such Lender) is a Lender under this Agreement.

“Subsidiary” means any other corporation, association, joint stock company,
business trust, limited liability company, partnership or any other business
entity of which more than 50% of the outstanding voting stock, share capital,
membership, partnership or other interests, as the case may be, is owned either
directly or indirectly by any Person or one or more of its Subsidiaries, or the
management of which is otherwise controlled, directly, or indirectly through one
or more intermediaries, or both, by any Person and/or its Subsidiaries. Unless
otherwise specified to the contrary herein or the context otherwise requires,
Subsidiary shall refer to a Subsidiary of Borrower.

 

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“Successor Administrative Agent” has the meaning ascribed to such term in
Section 12.4.

“Supermajority Lenders” means at any time, the Revolving Credit Lenders holding
at least 66-2/3% of the Revolving Credit Aggregate Commitment (or, if the
Revolving Credit Aggregate Commitment has been terminated (whether by maturity,
acceleration or otherwise), the aggregate principal amount outstanding under the
Revolving Credit); provided that, for purposes of determining Supermajority
Lenders hereunder, the Letter of Credit Obligations shall be allocated among the
Revolving Credit Lenders based on their respective Revolving Credit Percentages.
The Revolving Credit Commitment Amount of, and portion of the Aggregate Credit
Exposure attributable to, any Defaulting Lender shall be excluded for purposes
of making a determination of “Supermajority Lenders”.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.

“Test Period” means, at any time, the four consecutive Fiscal Quarters of
Borrower then last ended (in each case taken as one accounting period) for which
financial statements have been or are required to be delivered pursuant to this
Agreement.

“Threshold Amount” means an amount equal to the greater of (a) $5,000,000 and
(b) 2% of (i) the Conforming Borrowing Base at any time prior to the Borrowing
Base Equalization Date and (ii) the Borrowing Base at any time on or after the
Borrowing Base Equalization Date.

“Total Debt to Consolidated EBITDA Ratio” means, for any Test Period, the ratio
of (a) total Debt of the Parent and its Subsidiaries as of the last day of such
Test Period to (b) Consolidated EBITDA of the Parent and its Subsidiaries for
such Test Period.

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in
effect in any applicable state; provided that, unless specified otherwise or the
context otherwise requires, such terms shall refer to the Uniform Commercial
Code as in effect in the State of Texas.

“Unrestricted Subsidiary” means any Subsidiary that at the time of the
determination shall be designated an Unrestricted Subsidiary of Borrower in a
manner provided below. Borrower may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries at the time of such
designation or at any time thereafter (a) is a Material Domestic Subsidiary or
(b) owns or operates Borrowing Base Properties.

“Unused Revolving Credit Availability” means, on any date of determination, the
amount equal to the positive difference (if any) between (a) the Revolving
Credit Aggregate Commitment minus (b) the Aggregate Credit Exposure.

“U.S. Person” means any Person that is a “United States person” as defined in
Section 7701(a)(30) of the Internal Revenue Code.

 

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“USA Patriot Act” means the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed
into law October 26, 2001).

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

“Withholding Agent” means any Credit Party and the Administrative Agent.

1.2 Terms, Generally. 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” 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, restated,
supplemented or otherwise modified (subject to any restrictions on such
amendments, restatements, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person’s successors and assigns, (c) 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, (d) all
references herein to Sections, Exhibits and Schedules shall be construed to
refer to Sections of, and Exhibits and Schedules to, this Agreement and (e) the
words “asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.

1.3 Oil and Gas Definitions. For purposes of this Agreement, the terms “proved
reserves,” “proved developed reserves,” “proved undeveloped reserves,” “proved
developed nonproducing reserves” and “proved developed producing reserves,” have
the meaning given such terms from time to time and at the time in question by
the Society of Petroleum Engineers of the American Institute of Mining
Engineers.

ARTICLE 2. REVOLVING CREDIT.

2.1 Commitment. Subject to the terms and conditions of this Agreement (including
without limitation Section 2.3), each Revolving Credit Lender severally and for
itself alone agrees to make Advances of the Revolving Credit in Dollars to
Borrower from time to time on any Business Day during the period from the
Effective Date hereof until (but excluding) the Revolving Credit Maturity Date
in an aggregate principal amount that will not result in (a) such Lender’s
Credit Exposure exceeding such Lender’s Revolving Credit Commitment Amount or
(b) the Aggregate Credit Exposure exceeding the Revolving Credit Aggregate
Commitment. Subject to the terms and conditions set forth herein, advances,
repayments and readvances may be made under the Revolving Credit.

 

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2.2 Accrual of Interest and Maturity; Evidence of Indebtedness.

(a) Borrower hereby unconditionally promises to pay to Administrative Agent for
the account of each Revolving Credit Lender the then unpaid principal amount of
each Revolving Credit Advance (plus all accrued and unpaid interest) of such
Revolving Credit Lender to Borrower on the Revolving Credit Maturity Date and on
such other dates and in such other amounts as may be required from time to time
pursuant to this Agreement. Subject to the terms and conditions hereof, each
Revolving Credit Advance shall, from time to time from and after the date of
such Advance (until paid), bear interest at its Applicable Interest Rate.

(b) Each Revolving Credit Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of Borrower to the
appropriate lending office of such Revolving Credit Lender resulting from each
Revolving Credit Advance made by such lending office of such Revolving Credit
Lender from time to time, including the amounts of principal and interest
payable thereon and paid to such Revolving Credit Lender from time to time under
this Agreement.

(c) The Register shall be maintained pursuant to Section 13.7(g), and a
subaccount therein for each Revolving Credit Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount of each Revolving
Credit Advance made hereunder, the type thereof and each Eurodollar-Interest
Period applicable to any Eurodollar-based Advance, (ii) the amount of any
principal or interest due and payable or to become due and payable from Borrower
to each Revolving Credit Lender hereunder in respect of the Revolving Credit
Advances and (iii) both the amount of any sum received by Administrative Agent
hereunder from Borrower in respect of the Revolving Credit Advances and each
Revolving Credit Lender’s share thereof.

(d) The entries made in the Register maintained pursuant to paragraph (c) of
this Section 2.2 shall, absent manifest error, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of Borrower therein recorded; provided, however, that the failure of
any Revolving Credit Lender or Administrative Agent to maintain the Register or
any account, as applicable, or any error therein, shall not in any manner affect
the obligation of Borrower to repay the Revolving Credit Advances (and all other
amounts owing with respect thereto) made to Borrower by the Revolving Credit
Lenders in accordance with the terms of this Agreement.

(e) Borrower agrees that, upon written request to Administrative Agent by any
Revolving Credit Lender, Borrower will execute and deliver, to such Revolving
Credit Lender, at Borrower’s own expense, a Revolving Credit Note evidencing the
outstanding Revolving Credit Advances owing to such Revolving Credit Lender,
with appropriate insertions as to date and principal amount.

2.3 Requests for Continuations and Conversions of Advances. Borrower may request
an Advance of the Revolving Credit, a continuation of any Revolving Credit
Advance in the same type of Advance or to convert any Revolving Credit Advance
to any other type of Revolving Credit Advance only by delivery to Administrative
Agent of a Request for Revolving Credit Advance executed by a Responsible
Officer for Borrower, subject to the following:

 

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(a) each such Request for Revolving Credit Advance shall set forth the
information required on the Request for Revolving Credit Advance, including
without limitation:

(i) the proposed date of such Revolving Credit Advance (or the continuation or
conversion date of an outstanding Revolving Credit Advance), which must be a
Business Day;

(ii) whether such Advance is a new Revolving Credit Advance or a continuation or
conversion of an outstanding Revolving Credit Advance; and

(iii) whether such Revolving Credit Advance is to be a Base Rate Advance or a
Eurodollar-based Advance, and, except in the case of a Base Rate Advance, the
first Eurodollar-Interest Period applicable thereto.

(b) each such Request for Revolving Credit Advance (including without limitation
any request for Advances to be made on the Effective Date) shall be delivered to
Administrative Agent by 12:00 p.m. (New York time) three (3) Business Days prior
to the proposed date of the Revolving Credit Advance, except in the case of a
Base Rate Advance, for which the Request for Revolving Credit Advance must be
delivered by 12:00 p.m. (New York time) one (1) Business Day prior to the
proposed date for such Revolving Credit Advance;

(c) on the proposed date of the borrowing of such Revolving Credit Advance,
after giving effect to all borrowings and repayments on such date, the Aggregate
Credit Exposure shall not exceed the Revolving Credit Aggregate Commitment;

(d) in the case of a Base Rate Advance, the principal amount of the initial
funding of such Advance, as opposed to any continuation or conversion thereof,
shall be at least $1,000,000 or the remainder available under the Revolving
Credit Aggregate Commitment if less than $1,000,000;

(e) in the case of a Eurodollar-based Advance, the principal amount of such
Advance, plus the amount of any other outstanding Revolving Credit Advance to be
then combined therewith having the same Eurodollar-Interest Period, if any,
shall be at least $1,500,000 (or a larger integral multiple of $100,000) or the
remainder available under the Revolving Credit Aggregate Commitment if less than
$1,500,000 and at any one time there shall not be in effect more than ten
(10) different Eurodollar-Interest Periods;

(f) each such Request for Revolving Credit Advance, once delivered to
Administrative Agent, shall not be revocable by Borrower and shall constitute a
certification by Borrower that as of the date of borrowing of the requested
Advance, each of the conditions set forth in Section 5.2 will be satisfied; and

(g) any Revolving Credit Advances to be made on the Effective Date pursuant to a
Request for Revolving Credit Advance shall be Base Rate Advances;

 

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Administrative Agent, acting on behalf of the Revolving Credit Lenders, may
also, at its option, lend under this Section 2.3 upon the telephone or email
request of a Responsible Officer of Borrower and, in the event Administrative
Agent, acting on behalf of the Revolving Credit Lenders, makes any such Advance
upon a telephone or email request, a Responsible Officer shall fax to
Administrative Agent, on the same day as such telephone or email request, an
executed Request for Revolving Credit Advance. Borrower hereby authorizes
Administrative Agent to disburse Advances under this Section 2.3 pursuant to the
telephone or email instructions of any person purporting to be a Responsible
Officer. Notwithstanding the foregoing, Borrower acknowledges that Borrower
shall bear all risk of loss resulting from disbursements made upon any telephone
or email request. Each telephone or email request for an Advance from a
Responsible Officer shall constitute a certification of the matters set forth in
Section 5.2.

2.4 Disbursement of Advances.

(a) Upon receiving any Request for Revolving Credit Advance in accordance with
the terms of Section 2.3, Administrative Agent shall promptly notify each
Revolving Credit Lender by wire, telex or telephone (confirmed by wire, telecopy
or telex) of the amount of such Advance being requested and the date such
Advance is to be made by each Revolving Credit Lender in an amount equal to its
Revolving Credit Percentage of such Advance. Unless such Revolving Credit
Lender’s commitment to make Revolving Credit Advances hereunder shall have been
suspended or terminated in accordance with this Agreement, each such Revolving
Credit Lender shall make available the amount of its Revolving Credit Percentage
of each Revolving Credit Advance in immediately available funds by 1:00 p.m.
(New York time) on the date of such Revolving Credit Advance to the account of
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders.

(b) Subject to receipt by the Administrative Agent of an executed Request for
Revolving Credit Advance from a Responsible Officer, Administrative Agent shall
make available to Borrower the aggregate of the amounts so received by it from
the Revolving Credit Lenders in like funds and currencies not later than 4:00
p.m. (New York time) on the date of such Revolving Credit Advance, by credit to
an account of Borrower maintained with Administrative Agent or to such other
account or third party as Borrower may reasonably direct in writing, provided
that such direction is timely given.

(c) Unless Administrative Agent shall have been notified by any Revolving Credit
Lender prior to the date of any proposed Revolving Credit Advance that such
Revolving Credit Lender does not intend to make available to Administrative
Agent such Revolving Credit Lender’s Revolving Credit Percentage of such
Advance, Administrative Agent may assume that such Revolving Credit Lender has
made such amount available to Administrative Agent on such date, as aforesaid.
Administrative Agent may, but shall not be obligated to, make available to
Borrower the amount of such payment in reliance on such assumption. If such
amount is not in fact made available to Administrative Agent by such Revolving
Credit Lender, as aforesaid, Administrative Agent shall be entitled to recover
such amount on demand from such Revolving Credit Lender. If such Revolving
Credit Lender does not pay such amount forthwith upon Administrative Agent’s
demand therefor and Administrative Agent has in fact made a corresponding

 

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amount available to Borrower, Administrative Agent shall promptly notify
Borrower and Borrower shall pay such amount to Administrative Agent, if such
notice is delivered to Borrower prior to 1:00 p.m. (New York time) on a Business
Day, on the day such notice is received, and otherwise on the next Business Day,
and such amount paid by Borrower shall be applied as a prepayment of the
Revolving Credit (without any corresponding reduction in the Revolving Credit
Aggregate Commitment), reimbursing Administrative Agent for having funded said
amounts on behalf of such Revolving Credit Lender. Borrower shall retain without
prejudice its claim against such Revolving Credit Lender with respect to the
amounts repaid by it to Administrative Agent and, if such Revolving Credit
Lender subsequently makes such amounts available to Administrative Agent,
Administrative Agent shall promptly make such amounts available to Borrower as a
Revolving Credit Advance. Administrative Agent shall also be entitled to recover
from such Revolving Credit Lender or Borrower, as the case may be, but without
duplication, interest on such amount in respect of each day from the date such
amount was made available by Administrative Agent to Borrower, to the date such
amount is recovered by Administrative Agent, at a rate per annum equal to:

(i) in the case of such Revolving Credit Lender, for the first two (2) Business
Days such amount remains unpaid, the Federal Funds Effective Rate, and
thereafter, at the rate of interest then applicable to such Revolving Credit
Advance; and

(ii) in the case of Borrower, the rate of interest then applicable to such
Advance of the Revolving Credit.

Until such Revolving Credit Lender has paid Administrative Agent such amount,
such Revolving Credit Lender shall have no interest in or rights with respect to
such Advance for any purpose whatsoever. The obligation of any Revolving Credit
Lender to make any Revolving Credit Advance hereunder shall not be affected by
the failure of any other Revolving Credit Lender to make any Advance hereunder,
and no Revolving Credit Lender shall have any liability to Borrower, the Parent
or any of its Subsidiaries, Administrative Agent, any other Revolving Credit
Lender, or any other party for another Revolving Credit Lender’s failure to make
any loan or Advance hereunder.

2.5 [Intentionally Omitted].

2.6 Interest Payments; Default Interest.

(a) Interest on the unpaid balance of all Base Rate Advances of the Revolving
Credit from time to time outstanding shall accrue from the date of such Advance
to the date repaid, at a per annum interest rate equal to the Base Rate, and
shall be payable in immediately available funds quarterly in arrears on the last
day of each March, June, September and December. Whenever any payment under this
Section 2.6(a) shall become due on a day which is not a Business Day, the date
for payment thereof shall be extended to the next Business Day. Interest
accruing at the Base Rate shall be computed on the basis of a 365 or 366, as the
case may be, day year and assessed for the actual number of days elapsed, and in
such computation effect shall be given to any change in the interest rate
resulting from a change in the Base Rate on the date of such change in the Base
Rate.

 

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(b) Interest on each Eurodollar-based Advance of the Revolving Credit shall
accrue at its Eurodollar-based Rate and shall be payable in immediately
available funds on the last day of the Eurodollar-Interest Period applicable
thereto (and, if any Eurodollar-Interest Period shall exceed three months, then
on the last Business Day of the third month of such Eurodollar-Interest Period,
and at three month intervals thereafter). Interest accruing at the
Eurodollar-based Rate shall be computed on the basis of a 360 day year and
assessed for the actual number of days elapsed from the first day of the
Eurodollar-Interest Period applicable thereto to but not including the last day
thereof.

(c) [Intentionally Omitted].

(d) Notwithstanding anything to the contrary in the preceding sections, all
accrued and unpaid interest on any Advance continued or converted pursuant to
Section 2.3 shall be due and payable in full on the date such Revolving Credit
Advance is continued, refunded or converted.

(e) In the case of any Event of Default under Section 9.1(j), immediately upon
the occurrence thereof (and for so long as such Event of Default is continuing),
and in the case of any other Event of Default (and for so long as such Event of
Default is continuing), immediately upon receipt by Administrative Agent of
notice from the Majority Lenders (with a copy to Borrower), interest shall be
payable on demand on all Revolving Credit Advances from time to time outstanding
at a per annum rate equal to the Applicable Interest Rate in respect of each
such Advance plus two percent (2%).

2.7 Optional Prepayments.

(a) (i) Borrower may prepay all or part of the outstanding principal of any Base
Rate Advance(s) of the Revolving Credit at any time (subject to not less than
one (1) Business Day prior notice to Administrative Agent), provided that, after
giving effect to any partial prepayment, the aggregate balance of Base Rate
Advance(s) of the Revolving Credit remaining outstanding shall be at least
$250,000 and (ii) subject to Section 2.10(e), Borrower may prepay all or part of
the outstanding principal of any Eurodollar-based Advance of the Revolving
Credit at any time (subject to not less than three (3) Business Days’ prior
notice to Administrative Agent), provided that, after giving effect to any
partial prepayment, the unpaid portion of any Eurodollar-based Advance of the
Revolving Credit which is to be continued or converted under Section 2.3 shall
be at least $250,000.

(b) Each partial prepayment of the outstanding principal of any Base Rate
Advance(s) or Eurodollar-based Advance(s) shall be in an amount that would be
permitted in the case of a borrowing of a Base Rate Advance or Eurodollar-based
Advance, as applicable, pursuant to Section 2.3.

(c) Any prepayment of a Base Rate Advance made in accordance with this Section
shall be without premium or penalty and any prepayment of any other type of
Advance shall be subject to the provisions of Section 11.1, but otherwise
without premium or penalty.

 

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(d) Any notice of prepayment pursuant to this Section 2.7 shall be in the form
attached hereto as Exhibit H or such other form reasonably acceptable to the
Administrative Agent.

2.8 Base Rate Advance in Absence of Election or Upon Default. If, (a) as to any
outstanding Eurodollar-based Advance of the Revolving Credit, Administrative
Agent has not received payment of all outstanding principal and accrued interest
on the last day of the Interest Period applicable thereto, or does not receive a
timely Request for Revolving Credit Advance meeting the requirements of
Section 2.3 with respect to the continuation, refunding or conversion of such
Advance, or (b) if on the last day of the applicable Interest Period a Default
or an Event of Default shall have occurred and be continuing, then, on the last
day of the applicable Interest Period the principal amount of any
Eurodollar-based Advance which has not been prepaid shall, absent a contrary
election of the Majority Lenders, be converted automatically to a Base Rate
Advance and Administrative Agent shall thereafter promptly notify Borrower of
said action. All accrued and unpaid interest on any Advance converted to a Base
Rate Advance under this Section 2.8 shall be due and payable in full on the date
such Advance is converted.

2.9 Commitment Fees. Except as otherwise provided in Section 10.4(c), from the
Effective Date to the Revolving Credit Maturity Date, Borrower shall pay to
Administrative Agent for distribution to the Revolving Credit Lenders pro-rata
in accordance with their respective Revolving Credit Percentages, a Commitment
Fee in arrears on the last day of each March, June, September and December (in
respect of the prior three months or any portion thereof) and on the Revolving
Credit Maturity Date. The Commitment Fee payable to each Revolving Credit Lender
shall be determined by multiplying the Applicable Fee Percentage times such
Lender’s Revolving Credit Percentage of the average daily amount of the Unused
Revolving Credit Availability. The Commitment Fee shall be computed on the basis
of a year of three hundred sixty (360) days and assessed for the actual number
of days elapsed. Whenever any payment of the Commitment Fee shall be due on a
day which is not a Business Day, the date for payment thereof shall be extended
to the next Business Day. Upon receipt of such payment, Administrative Agent
shall make prompt payment to each Revolving Credit Lender of its share of the
Commitment Fee based upon its respective Revolving Credit Percentage. It is
expressly understood that the Commitment Fee described in this Section is not
refundable.

2.10 Mandatory Prepayment of Advances.

(a) If, after giving effect to any termination or reduction of the Maximum
Facility Amount or the Borrowing Base, as the case may be, pursuant to
Section 2.11 the Aggregate Credit Exposure exceeds the Revolving Credit
Aggregate Commitment, then Borrower shall immediately (and in any event on the
Business Day of such termination or reduction) prepay, subject to any funding
indemnification amounts required by Section 11.1, the principal amount of the
Advances to the extent necessary to eliminate such excess.

 

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(b) If at any time and for any reason a Borrowing Base Deficiency exists, then
Borrower shall comply with Section 4.6.

(c) Subject to clauses (e) and (f) below, no later than the second Business Day
following receipt by (x) any Credit Party of Net Cash Proceeds from the issuance
of any Equity Interests by any Credit Party in an amount in excess of $5,000,000
(other than Equity Interests issued (A) under any stock option or employee
incentive plans or (B) to a Credit Party), (y) any Credit Party of Net Cash
Proceeds of any Debt issuance in excess of $5,000,000 under Section 8.1(r), or
(z) any Credit Party of Net Cash Proceeds from the Disposition of Borrowing Base
Properties pursuant to Section 8.4(k), Borrower shall prepay the Revolving
Credit by an amount equal to 100% of such Net Cash Proceeds, but only to the
extent that the Aggregate Credit Exposure exceeds (1) at any time prior to the
Borrowing Base Equalization Date, the Conforming Borrowing Base and (2) at any
time from and after the Borrowing Base Equalization Date, the Revolving Credit
Aggregate Commitment; provided that, for purposes of clause (z) and so long as
such Disposition of Borrowing Base Properties did not result in an automatic
reduction of the Borrowing Base and Conforming Borrowing Base, as applicable,
pursuant to Section 8.4(k), Borrower shall not be required to prepay the
Revolving Credit in accordance with clause (z) until the fair market value of
all Borrowing Base Properties Disposed of (whether pursuant to a Disposition of
Equity Interests of any Restricted Subsidiary owning Borrowing Base Properties
or otherwise) since the most recent scheduled redetermination of the Borrowing
Base is greater than or equal to $5,000,000 in the aggregate.

(d) [Intentionally Omitted].

(e) Subject to Section 10.2, any prepayment required pursuant to this
Section 2.10 shall be applied first to outstanding Base Rate Advances under the
Revolving Credit and then to Eurodollar-based Advances under the Revolving
Credit at the discretion of Borrower. If any amounts remain thereafter, a
portion of such prepayment equivalent to the undrawn amount of any outstanding
Letters of Credit shall be held by Administrative Agent as cash collateral for
the Reimbursement Obligations, with any additional prepayment monies being
applied to any Fees, costs or expenses due and outstanding under this Agreement,
and with the remainder of such prepayment thereafter being returned to Borrower.

(f) To the extent that, on the date any mandatory prepayment of the Revolving
Credit Advances under this Section 2.10 or payment pursuant to the terms of any
of the Loan Documents is due, the Advances under the Revolving Credit to be
prepaid is being carried, in whole or in part, at the Eurodollar-based Rate and
no Default or Event of Default has occurred and is continuing, Borrower may, at
Borrower’s election, deposit the amount of such mandatory prepayment in a
non-interest bearing cash collateral account to be held by Administrative Agent,
for and on behalf of the Revolving Credit Lenders, on such terms and conditions
as are reasonably acceptable to Administrative Agent and upon such deposit the
obligation of Borrower to make such mandatory prepayment shall be deemed
satisfied. Subject to the terms and conditions of said cash collateral account,
sums on deposit in said cash collateral account shall be applied (until
exhausted) to reduce the principal balance of the Revolving Credit on the

 

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last day of each Eurodollar-Interest Period attributable to the Eurodollar-based
Advances, thereby avoiding breakage costs under Section 11.1; provided, however,
that if a Default or Event of Default shall have occurred at any time while sums
are on deposit in the cash collateral account, Administrative Agent may, in its
sole discretion, elect to apply such sums to reduce the principal balance of
such Eurodollar-based Advances prior to the last day of the applicable
Eurodollar-Interest Period, and Borrower will be obligated to pay any resulting
breakage costs under Section 11.1.

2.11 Optional Reduction or Termination of Commitments. Borrower may, upon at
least three (3) Business Days’ prior written notice to Administrative Agent, at
any time terminate, or from time to time permanently reduce, the Maximum
Facility Amount or the Borrowing Base in whole or in part, without premium or
penalty, provided that: (i) each partial reduction of the Maximum Facility
Amount or the Borrowing Base, as applicable, shall be in an aggregate amount
equal to at least One Million Dollars ($1,000,000); (ii) Borrower shall prepay
in accordance with the terms hereof the amount, if any, by which the Aggregate
Credit Exposure exceeds either or both (A) the Maximum Facility Amount and/or
(B) the Borrowing Base, in each case after such reduction, together with
interest thereon to the date of prepayment; and (iii) no reduction shall reduce
the Maximum Facility Amount or the Borrowing Base to an amount which is less
than the aggregate undrawn amount of any Letters of Credit outstanding at such
time; provided, however that if the termination or reduction of the Maximum
Facility Amount or the Borrowing Base requires the prepayment of a
Eurodollar-based Advance and such termination or reduction is made on a day
other than the last Business Day of the then current Interest Period applicable
to such Eurodollar-based Advance, then Borrower shall compensate the Revolving
Credit Lenders in accordance with Section 11.1 or, so long as no Default or
Event of Default has occurred and is continuing, Borrower may deposit the amount
of such prepayment in a non-interest bearing cash collateral account as provided
in Section 2.10(f). Any reductions of the Maximum Facility Amount or the
Borrowing Base pursuant to this Section 2.11 shall be permanent and irrevocable.
Any payments made pursuant to this Section shall be applied first to outstanding
Base Rate Advances under the Revolving Credit and then to Eurodollar-based
Advances of the Revolving Credit.

2.12 Use of Proceeds of Advances. Advances shall be used for acquisition
financing and general corporate purposes, including capital expenditures,
development and operational activities, ongoing working capital, and payment of
fees and expenses incurred in connection with this Agreement and the other Loan
Documents.

ARTICLE 3. LETTERS OF CREDIT.

3.1 Letters of Credit. Subject to the terms and conditions of this Agreement,
Issuing Lender may through the Issuing Office, at any time and from time to time
from and after the date hereof until thirty (30) days prior to the Revolving
Credit Maturity Date, upon the written request of Borrower accompanied by a duly
executed Letter of Credit Agreement and such other documentation related to the
requested Letter of Credit as Issuing Lender may reasonably require, issue
Letters of Credit in Dollars for the account of Borrower, in an aggregate amount
for all Letters of Credit issued hereunder at any one time outstanding not to
exceed the Letter of Credit Maximum Amount. Each Letter of Credit shall be in a
minimum face amount of Ten Thousand Dollars ($10,000) (or such lesser amount as
may be agreed to by Issuing Lender) and

 

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each Letter of Credit (including any renewal thereof) shall expire not later
than the first to occur of (i) twelve (12) months after the date of issuance
thereof and (ii) ten (10) Business Days prior to the Revolving Credit Maturity
Date in effect on the date of issuance thereof; provided, however, in connection
with the request for the initial issuance of a Letter of Credit, Borrower may
request that the Letter of Credit will be automatically renewed for similar
successive periods of time unless and until Borrower provides a notice no later
than 10 days prior to its expiration to the Issuing Lender that the Letter of
Credit should not be renewed. Notwithstanding anything to the contrary contained
herein, no Letter of Credit shall be renewed for a similar successive period of
time if its expiration is later than ten (10) Business Days before the Revolving
Credit Maturity Date. The submission of all applications in respect of and the
issuance of each Letter of Credit hereunder shall be subject in all respects to
such industry rules and governing laws as are acceptable to Issuing Lender. In
the event of any conflict between this Agreement and any Letter of Credit
Document other than any Letter of Credit, this Agreement shall control. All
Existing Letters of Credit shall be deemed to have been issued pursuant hereto,
and from and after the Effective Date shall be subject to and governed by the
terms and conditions hereof.

3.2 Conditions to Issuance. No Letter of Credit shall be issued (including the
renewal or extension of any Letter of Credit previously issued) at the request
and for the account of Borrower unless, as of the date of issuance (or renewal
or extension) of such Letter of Credit:

(a) after giving effect to the Letter of Credit requested, (i) the Letter of
Credit Obligations do not exceed the Letter of Credit Maximum Amount; and
(ii) the Aggregate Credit Exposure does not exceed the Revolving Credit
Aggregate Commitment;

(b) the representations and warranties of the Credit Parties contained in this
Agreement and the other Loan Documents are true and correct in all material
respects and shall be true and correct in all material respects as of date of
the issuance of such Letter of Credit (both before and immediately after the
issuance of such Letter of Credit), other than any representation or warranty
that expressly speaks only as of a different date;

(c) there is no Default or Event of Default in existence, and none will exist
upon the issuance of such Letter of Credit;

(d) Borrower shall have delivered to Issuing Lender at its Issuing Office, not
less than three (3) Business Days prior to the requested date for issuance (or
such shorter time as Issuing Lender, in its sole discretion, may permit), the
Letter of Credit Agreement related thereto, together with such other documents
and materials as may be reasonably required pursuant to the terms thereof, and
the terms of the proposed Letter of Credit shall be reasonably satisfactory to
Issuing Lender;

(e) concurrently with the delivery to Issuing Lender of the Letter of Credit
Agreement pursuant to clause (d) above, Borrower shall have delivered to the
Administrative Agent notice of the request for such Letter of Credit in the form
attached hereto as Exhibit G or in such other form reasonably acceptable to the
Administrative Agent, together with a copy of the Letter of Credit Agreement
delivered to the Issuing Lender in respect of such Letter of Credit;

 

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(f) no order, judgment or decree of any court, arbitrator or Governmental
Authority shall purport by its terms to enjoin or restrain Issuing Lender from
issuing the Letter of Credit requested, or any Revolving Credit Lender from
taking its participation interest therein in accordance with the terms of
Section 3.6, and no law, rule, regulation, request or directive (whether or not
having the force of law) shall prohibit Issuing Lender from issuing, or any
Revolving Credit Lender from acquiring a participation in, the Letter of Credit
requested or letters of credit generally;

(g) after the Effective Date, there shall have been (i) no introduction of or
change in the interpretation of any law or regulation, (ii) no declaration of a
general banking moratorium by banking authorities in the United States, Texas or
the respective jurisdictions in which the Revolving Credit Lenders, Borrower and
the beneficiary of the requested Letter of Credit are located, and (iii) no
establishment of any new restrictions by any central bank or other Governmental
Authority on transactions involving letters of credit or on banks generally
that, in any case described in this clause (f), would make it unlawful for
Issuing Lender to issue or any Revolving Credit Lender to acquire its
participation interest in accordance with the terms of Section 3.6 in the
requested Letter of Credit or letters of credit generally;

(h) if any Revolving Credit Lender is a Defaulting Lender, Issuing Lender has
entered into arrangements satisfactory to it to eliminate the Fronting Exposure
with respect to the participation in the Letter of Credit Obligations by such
Defaulting Lender, including creation by such Defaulting Lender of a cash
collateral account on terms reasonably satisfactory to Administrative Agent or
delivery of other security by such Defaulting Lender to assure payment of such
Defaulting Lender’s Revolving Credit Percentage of all outstanding Letter of
Credit Obligations; and

(i) Issuing Lender shall have received the issuance fees required in connection
with the issuance of such Letter of Credit pursuant to Section 3.4.

Each Letter of Credit Agreement submitted to Issuing Lender pursuant hereto
shall constitute the certification by Borrower of the matters set forth in
Section 5.2.

3.3 Notice. Issuing Lender shall deliver to Administrative Agent, concurrently
with or promptly following its issuance of any Letter of Credit, a true and
complete copy of each Letter of Credit. Promptly upon its receipt thereof,
Administrative Agent shall give notice to each Revolving Credit Lender of the
issuance of each Letter of Credit, specifying the amount thereof and the amount
of such Revolving Credit Lender’s Revolving Credit Percentage thereof.

3.4 Letter of Credit Fees; Increased Costs.

(a) Borrower shall pay letter of credit fees as follows:

(i) A per annum letter of credit fee with respect to the undrawn amount of each
Letter of Credit issued pursuant hereto (based on the amount of each Letter of
Credit) in the amount of the Applicable Fee Percentage (determined with
reference to Schedule 1.1 to this Agreement) shall be paid to Administrative
Agent for distribution to the Revolving Credit Lenders in accordance with their
Revolving Credit Percentages.

 

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(ii) A letter of credit facing fee on the face amount of each Letter of Credit
shall be paid to the appropriate Issuing Lender for its own account, in
accordance with the terms of the Fee Letter.

(b) All payments by Borrower to Administrative Agent for distribution to Issuing
Lender or the Revolving Credit Lenders under this Section 3.4 shall be made in
Dollars in immediately available funds at the Issuing Office or such other
office of Administrative Agent as may be designated from time to time by written
notice to Borrower by Administrative Agent. The fees described in
clauses (a)(i) and (ii) above (i) shall be nonrefundable under all
circumstances, (ii) in the case of fees due under clause (a)(i) above, shall be
payable quarterly in arrears on the last day of each March, June, September and
December and on the Revolving Credit Maturity Date and (iii) in the case of fees
due under clause (a)(ii) above, shall be payable upon the issuance of such
Letter of Credit and quarterly in arrears thereafter and on the Revolving Credit
Maturity Date. The fees due under clause (a)(i) above shall be determined by
multiplying the Applicable Fee Percentage times the undrawn amount of the face
amount of each such Letter of Credit on the date of determination, and shall be
calculated on the basis of a 360 day year and assessed for the actual number of
days from the date of the issuance thereof to the stated expiration thereof. The
parties hereto acknowledge that, unless Issuing Lender otherwise agrees, any
material amendment and any extension to a Letter of Credit issued hereunder
shall be treated as a new Letter of Credit for the purposes of the letter of
credit facing fee.

(c) If any Change in Law shall either (i) impose, modify or cause to be deemed
applicable any reserve, special deposit, limitation or similar requirement
against letters of credit issued or participated in by, or assets held by, or
deposits in or for the account of, Issuing Lender or any Revolving Credit Lender
or (ii) impose on Issuing Lender or any Revolving Credit Lender any other
condition regarding this Agreement, the Letters of Credit or any participations
in such Letters of Credit, and the result of any event referred to in
clause (i) or (ii) above shall be to increase the cost or expense to Issuing
Lender or such Revolving Credit Lender of issuing or maintaining or
participating in any of the Letters of Credit (which increase in cost or expense
shall be determined by Issuing Lender’s or such Revolving Credit Lender’s
reasonable allocation of the aggregate of such cost increases and expenses
resulting from such events), then, upon demand by Issuing Lender or such
Revolving Credit Lender, as the case may be, Borrower shall, within thirty
(30) days following demand for payment, pay to Issuing Lender or such Revolving
Credit Lender, as the case may be, from time to time as specified by Issuing
Lender or such Revolving Credit Lender, additional amounts which shall be
sufficient to compensate Issuing Lender or such Revolving Credit Lender for such
increased cost and expense, provided that if Issuing Lender or such Revolving
Credit Lender could take any reasonable action, without cost or administrative
or other burden or restriction to such Lender, to mitigate or eliminate such
cost or expense, it agrees to do so within a reasonable time after becoming
aware of the foregoing matters. Each demand for payment under this
Section 3.4(c) shall be accompanied by a certificate

 

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of Issuing Lender or the applicable Revolving Credit Lender setting forth the
amount of such increased cost or expense incurred by Issuing Lender or such
Revolving Credit Lender, as the case may be, as a result of any event mentioned
in clause (i) or (ii) above, and in reasonable detail, the methodology for
calculating and the calculation of such amount, which certificate shall be
prepared in good faith and shall be conclusive evidence, absent manifest error,
as to the amount thereof.

(d) Notwithstanding anything to the contrary contained in Section 3.4(c),
Borrower shall not be required to reimburse or pay any costs or expenses to
Issuing Lender or any Revolving Credit Lender as required by Section 3.4(c)
which have accrued more than 180 days prior to such Lender’s giving notice to
Borrower that such Lender has suffered or incurred such costs or expenses. None
of the Lenders shall be permitted to pass through to Borrower costs and expenses
under Section 3.4(c) which are not also passed through by such Lender to other
customers of such Lender similarly situated when such customer is subject to
documents containing substantively similar provisions as those contained in this
Section.

3.5 Other Fees. In connection with the Letters of Credit, and in addition to the
Letter of Credit Fees, Borrower shall pay, for the sole account of Issuing
Lender, standard documentation, administration, payment and cancellation charges
assessed by Issuing Lender or the Issuing Office, at the times, in the amounts
and on the terms set forth or to be set forth from time to time in the standard
fee schedule of the Issuing Office in effect from time to time.

3.6 Participation Interests in and Drawings and Demands for Payment Under
Letters of Credit.

(a) Upon issuance by Issuing Lender of each Letter of Credit hereunder, each
Revolving Credit Lender shall automatically acquire a pro rata participation
interest in such Letter of Credit and each related Letter of Credit Payment
based on its respective Revolving Credit Percentage.

(b) If Issuing Lender shall honor a draft or other demand for payment presented
or made under any Letter of Credit, Borrower agrees to pay to Issuing Lender an
amount equal to the amount paid by Issuing Lender in respect of such draft or
other demand under such Letter of Credit and all reasonable expenses paid or
incurred by Administrative Agent relative thereto not later than 1:00 p.m. (New
York time), in Dollars, on (i) the Business Day that Borrower received notice of
such presentment and honor, if such notice is received prior to 11:00 a.m. (New
York time) or (ii) the Business Day immediately following the day that Borrower
received such notice, if such notice is received after 11:00 a.m. (New York
time).

(c) If Issuing Lender shall honor a draft or other demand for payment presented
or made under any Letter of Credit, but Borrower does not reimburse Issuing
Lender as required under clause (b) above and the Revolving Credit Aggregate
Commitment has not been terminated (whether by maturity, acceleration or
otherwise), Borrower shall be deemed to have immediately requested that the
Revolving Credit Lenders make a Base Rate Advance of the Revolving Credit (which
Advance may be

 

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subsequently converted at any time into a Eurodollar-based Advance pursuant to
Section 2.3) in the principal amount equal to the amount paid by Issuing Lender
in respect of such draft or other demand under such Letter of Credit and all
reasonable expenses paid or incurred by Administrative Agent relative thereto.
Administrative Agent will promptly notify the Revolving Credit Lenders of such
deemed request, and each such Lender shall make available to Administrative
Agent an amount equal to its pro rata share (based on its Revolving Credit
Percentage) of the amount of such Advance.

(d) If Issuing Lender shall honor a draft or other demand for payment presented
or made under any Letter of Credit, but Borrower does not reimburse Issuing
Lender as required under clause (b) above, and (i) the Revolving Credit
Aggregate Commitment has been terminated (whether by maturity, acceleration or
otherwise), or (ii) any reimbursement received by Issuing Lender from Borrower
is or must be returned or rescinded upon or during any bankruptcy or
reorganization of any Credit Party or otherwise, then Administrative Agent shall
notify each Revolving Credit Lender, and each Revolving Credit Lender will be
obligated to pay Administrative Agent for the account of Issuing Lender its pro
rata share (based on its Revolving Credit Percentage) of the amount paid by
Issuing Lender in respect of such draft or other demand under such Letter of
Credit and all reasonable expenses paid or incurred by Administrative Agent
relative thereto (but no such payment shall diminish the obligations of Borrower
hereunder). To the extent that a Revolving Credit Lender fails to make such
amount available to Administrative Agent by 11:00 a.m. (New York time) on the
Business Day next succeeding the date such notice is given, such Revolving
Credit Lender shall pay interest on such amount in respect of each day from the
date such amount was required to be paid, to the date paid to Administrative
Agent, at a rate per annum equal to the Federal Funds Effective Rate. The
failure of any Revolving Credit Lender to make its pro rata portion of any such
amount available under to Administrative Agent shall not relieve any other
Revolving Credit Lender of its obligation to make available its pro rata portion
of such amount, but no Revolving Credit Lender shall be responsible for failure
of any other Revolving Credit Lender to make such pro rata portion available to
Administrative Agent.

(e) In the case of any Advance made under this Section 3.6, each such Advance
shall be disbursed notwithstanding any failure to satisfy any conditions for
disbursement of any Advance set forth in Article 2 or Article 5, and, to the
extent of the Advance so disbursed, the Reimbursement Obligation of Borrower to
Administrative Agent under this Section 3.6 shall be deemed satisfied (unless,
in each case, taking into account any such deemed Advances, the Aggregate Credit
Exposure exceeds the then applicable Revolving Credit Aggregate Commitment).

(f) If Issuing Lender shall honor a draft or other demand for payment presented
or made under any Letter of Credit, Issuing Lender shall provide notice thereof
to Borrower on the date such draft or demand is honored, and to each Revolving
Credit Lender on such date unless Borrower shall have satisfied its
reimbursement obligations by payment to Administrative Agent (for the benefit of
Issuing Lender) as required under this Section 3.6. Issuing Lender shall further
use reasonable efforts to provide notice to Borrower prior to honoring any such
draft or other demand for payment, but such notice, or the failure to provide
such notice, shall not affect the rights or obligations of Issuing Lender with
respect to any Letter of Credit or the rights and obligations of the parties
hereto, including without limitation the obligations of Borrower under this
Section 3.6.

 

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(g) Nothing in this Agreement shall be construed to require or authorize any
Revolving Credit Lender to issue any Letter of Credit, it being recognized that
Issuing Lender shall be the sole issuer of Letters of Credit under this
Agreement.

(h) In the event that any Revolving Credit Lender becomes a Defaulting Lender,
and the reallocation of Fronting Exposure pursuant to Section 10.4 cannot be
achieved, Issuing Lender may, at its option, require that Borrower enter into
arrangements satisfactory to Issuing Lender to eliminate the Fronting Exposure
with respect to the participation in the Letter of Credit Obligations by such
Defaulting Lender, including creation of a cash collateral account on terms
reasonably satisfactory to Administrative Agent or delivery of other security to
assure payment of such Defaulting Lender’s Revolving Credit Percentage of all
outstanding Letter of Credit Obligations.

3.7 Obligations Irrevocable and Absolute. The obligations of Borrower to make
payments to Administrative Agent for the account of Issuing Lender or the
Revolving Credit Lenders with respect to Letter of Credit Obligations under
Section 3.6, shall be unconditional, irrevocable and absolute and not subject to
any qualification or exception whatsoever, including, without limitation:

(a) Any lack of validity or enforceability of any Letter of Credit, any Letter
of Credit Agreement, any other documentation relating to any Letter of Credit,
this Agreement or any of the other Loan Documents (the “Letter of Credit
Documents”);

(b) Any amendment, modification, waiver, consent, or any substitution, exchange
or release of or failure to perfect any interest in collateral or security, with
respect to or under any Letter of Credit Document;

(c) The existence of any claim, setoff, defense or other right which Borrower
may have at any time against any beneficiary or any transferee of any Letter of
Credit (or any persons or entities for whom any such beneficiary or any such
transferee may be acting), Administrative Agent, Issuing Lender or any Revolving
Credit Lender or any other Person, whether in connection with this Agreement,
any of the Letter of Credit Documents, the transactions contemplated herein or
therein or any unrelated transactions;

(d) Any draft or other statement or document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;

(e) Payment by Issuing Lender to the beneficiary under any Letter of Credit
against presentation of documents which do not comply with the terms of such
Letter of Credit, including failure of any documents to bear any reference or
adequate reference to such Letter of Credit;

 

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(f) Any failure, omission, delay or lack on the part of Administrative Agent,
Issuing Lender or any Revolving Credit Lender or any party to any of the Letter
of Credit Documents or any other Loan Document to enforce, assert or exercise
any right, power or remedy conferred upon Administrative Agent, Issuing Lender,
any Revolving Credit Lender or any such party under this Agreement, any of the
other Loan Documents or any of the Letter of Credit Documents, or any other acts
or omissions on the part of Administrative Agent, Issuing Lender, any Revolving
Credit Lender or any such party; or

(g) Any other event or circumstance that would, in the absence of this
Section 3.7, result in the release or discharge by operation of law or otherwise
of Borrower from the performance or observance of any obligation, covenant or
agreement contained in Section 3.6 (other than the defense of payment or
performance).

No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which Borrower has or may have against the
beneficiary of any Letter of Credit shall be available hereunder to Borrower
against Administrative Agent, Issuing Lender or any Revolving Credit Lender.
With respect to any Letter of Credit, nothing contained in this Section 3.7
shall be deemed to prevent Borrower, after satisfaction in full of the absolute
and unconditional obligations of Borrower hereunder with respect to such Letter
of Credit, from asserting in a separate action any claim, defense, set off or
other right which it may have against Administrative Agent, Issuing Lender or
any Revolving Credit Lender in connection with such Letter of Credit.

3.8 Risk Under Letters of Credit.

(a) In the administration and handling of Letters of Credit and any security
therefor, or any documents or instruments given in connection therewith, Issuing
Lender shall have the sole right to take or refrain from taking any and all
actions under or upon the Letters of Credit.

(b) Subject to other terms and conditions of this Agreement, Issuing Lender
shall issue the Letters of Credit and shall hold the documents related thereto
in its own name and shall make all collections thereunder and otherwise
administer the Letters of Credit in accordance with Issuing Lender’s regularly
established practices and procedures and will have no further obligation with
respect thereto. In the administration of Letters of Credit, Issuing Lender
shall not be liable for any action taken or omitted on the advice of counsel,
accountants, appraisers or other experts selected by Issuing Lender with due
care and Issuing Lender may rely upon any notice, communication, certificate or
other statement from Borrower, beneficiaries of Letters of Credit, or any other
Person which Issuing Lender believes to be authentic. Issuing Lender will, upon
request, furnish the Revolving Credit Lenders with copies of Letter of Credit
Documents related thereto.

(c) In connection with the issuance and administration of Letters of Credit and
the assignments hereunder, Issuing Lender makes no representation and shall have
no responsibility with respect to (i) the obligations of Borrower or the
validity, sufficiency or enforceability of any document or instrument given in
connection therewith, or the taking of any action with respect to same, (ii) the
financial condition of, any representations

 

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made by, or any act or omission of Borrower or any other Person, or (iii) any
failure or delay in exercising any rights or powers possessed by Issuing Lender
in its capacity as issuer of Letters of Credit in the absence of its gross
negligence or willful misconduct. Each of the Revolving Credit Lenders expressly
acknowledges that it has made and will continue to make its own evaluations of
Borrower’s creditworthiness without reliance on any representation of Issuing
Lender or Issuing Lender’s officers, agents and employees.

(d) If at any time Issuing Lender shall recover any part of any unreimbursed
amount for any draw or other demand for payment under a Letter of Credit, or any
interest thereon, Administrative Agent or Issuing Lender, as the case may be,
shall receive same for the pro rata benefit of the Revolving Credit Lenders in
accordance with their respective Revolving Credit Percentages and shall promptly
deliver to each Revolving Credit Lender its share thereof, less such Revolving
Credit Lender’s pro rata share of the costs of such recovery, including court
costs and attorney’s fees. If at any time any Revolving Credit Lender shall
receive from any source whatsoever any payment on any such unreimbursed amount
or interest thereon in excess of such Revolving Credit Lender’s Revolving Credit
Percentage of such payment, such Revolving Credit Lender will promptly pay over
such excess to Administrative Agent, for redistribution in accordance with this
Agreement.

3.9 Indemnification. Borrower hereby indemnifies and agrees to hold harmless the
Revolving Credit Lenders, Issuing Lender and Administrative Agent and their
respective Affiliates, and the respective officers, directors, employees and
agents of such Persons (each an “L/C Indemnified Person”), from and against any
and all claims, damages, losses, liabilities, costs or expenses of any kind or
nature whatsoever which the Revolving Credit Lenders, Issuing Lender or
Administrative Agent or any such Person may incur or which may be claimed
against any of them by reason of or in connection with any Letter of Credit
(collectively, the “L/C Indemnified Amounts”), and none of the L/C Indemnified
Persons shall be liable or responsible for:

(a) the use which may be made of any Letter of Credit or for any acts or
omissions of any beneficiary in connection therewith;

(b) the validity, sufficiency or genuineness of documents or of any endorsement
thereon, even if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged;

(c) payment by Issuing Lender to the beneficiary under any Letter of Credit
against presentation of documents which do not strictly comply with the terms of
any Letter of Credit (unless such payment resulted from the gross negligence or
willful misconduct of Issuing Lender), including failure of any documents to
bear any reference or adequate reference to such Letter of Credit;

(d) any error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in connection with any
Letter of Credit (except for errors and omissions resulting from gross
negligence or willful misconduct of the Issuing Lender); or

 

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(e) any other event or circumstance whatsoever arising in connection with any
Letter of Credit.

It is understood that in making any payment under a Letter of Credit Issuing
Lender will rely on documents presented to it under such Letter of Credit as to
any and all matters set forth therein without further investigation and
regardless of any notice or information to the contrary.

With respect to subparagraphs (a) through (e) hereof, (i) Borrower shall not be
required to indemnify any L/C Indemnified Person for any L/C Indemnified Amounts
to the extent such amounts result from (x) the gross negligence or willful
misconduct of such L/C Indemnified Person or any officer, director, employee or
agent of such L/C Indemnified Person or (y) matters arising solely by reason of
claims between or among L/C Indemnified Persons and not relating to any action
of such L/C Indemnified Person in its capacity as Administrative Agent or
Issuing Lender, and (ii) each of Administrative Agent, Lenders and Issuing
Lender shall be liable to Borrower to the extent, but only to the extent, of any
direct, as opposed to consequential or incidental, damages suffered by Borrower
which were caused by the gross negligence or willful misconduct of such Person
(including in the case of the Issuing Lender, any wrongful dishonor of any
Letter of Credit after the presentation to it by the beneficiary thereunder of a
draft or other demand for payment and other documentation strictly complying
with the terms and conditions of such Letter of Credit).

3.10 Right of Reimbursement. Each Revolving Credit Lender agrees to reimburse
Issuing Lender on demand, pro rata in accordance with its respective Revolving
Credit Percentage, for (i) the reasonable out-of-pocket costs and expenses of
Issuing Lender to be reimbursed by Borrower pursuant to any Letter of Credit
Agreement or any Letter of Credit, to the extent not reimbursed by Borrower or
any other Credit Party and (ii) any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, fees, reasonable
out-of-pocket expenses or disbursements of any kind and nature whatsoever which
may be imposed on, incurred by or asserted against Issuing Lender in any way
relating to or arising out of this Agreement (including Section 3.6(c)), any
Letter of Credit, any documentation or any transaction relating thereto, or any
Letter of Credit Agreement, to the extent not reimbursed by Borrower, except to
the extent that such liabilities, losses, costs or expenses were incurred by
Issuing Lender as a result of Issuing Lender’s gross negligence or willful
misconduct or by Issuing Lender’s wrongful dishonor of any Letter of Credit
after the presentation to it by the beneficiary thereunder of a draft or other
demand for payment and other documentation strictly complying with the terms and
conditions of such Letter of Credit.

ARTICLE 4. BORROWING BASE.

4.1 Borrowing Base. The term “Conforming Borrowing Base” means, as of the date
of determination thereof prior to the Borrowing Base Equalization Date, the
designated loan value as calculated by Lenders in their sole discretion assigned
to the discounted present value of future net income accruing to the Borrowing
Base Properties, based upon Lenders’ in-house evaluation of Borrowing Base
Properties. Before the Borrowing Base Equalization Date the term “Borrowing
Base” has the meaning set forth below, and will be determined in relation to the
Conforming Borrowing Base. On and after the Borrowing Base Equalization Date,
the term “Borrowing Base” means, as of the date of determination thereof, the
designated loan value as

 

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calculated by Lenders in their sole discretion assigned to the discounted
present value of future net income accruing to the Borrowing Base Properties,
based upon Lenders’ in-house evaluation of Borrowing Base Properties. The
Lenders’ determination of the Conforming Borrowing Base and Borrowing Base will
be made in accordance with then-current practices, economic and pricing
parameters, methodology, assumptions, and customary procedures and standards
established by each Lender from time to time for its petroleum industry
customers including without limitation (a) an analysis of such reserves and
production data with respect to the Hydrocarbon Interests of the Credit Parties
in all of their Oil and Gas Properties, including the Mortgaged Properties, as
is provided to Lenders in accordance herewith, (b) an analysis of the assets,
liabilities, cash flow, business, properties, prospects, management and
ownership of each Credit Party, and (c) such other credit factors as each Lender
customarily considers in evaluating similar oil and gas credits. Borrower
acknowledges that the determination of the Borrowing Base contains an equity
cushion (collateral value in excess of loan amount) which Borrower acknowledges
to be essential for the adequate protection of Lenders. The Borrowing Base shall
initially be $200,000,000 and the Conforming Borrowing Base shall initially be
$165,000,000. Until the Borrowing Base Equalization Date, the Borrowing Base
shall exceed the Conforming Borrowing Base by $35,000,000, subject to
adjustments as a result of dispositions permitted under Section 8.4(k). Prior to
the Borrowing Base Equalization Date, any increase in the Conforming Borrowing
Base as a result of the most recent redetermination thereof shall result in an
equal increase in the Borrowing Base. On and after the Borrowing Base
Equalization Date, the Borrowing Base shall equal the Conforming Borrowing Base
then in effect and all references to Conforming Borrowing Base and Borrowing
Base shall mean the Borrowing Base then in effect.

4.2 Periodic Determinations of Borrowing Base. Until the Borrowing Base
Equalization Date, the Conforming Borrowing Base, and after the Borrowing Base
Equalization Date, the Borrowing Base shall be redetermined by Lenders as of
May 1 and November 1 of each year (each a “Determination Date”) until maturity,
commencing November 1, 2012. The Conforming Borrowing Base or Borrowing Base, as
applicable, as redetermined shall remain in effect until the next Determination
Date, provided the Borrowing Base may be redetermined between Determination
Dates in accordance with Section 4.4.

4.3 Engineering Data to be Provided Prior to Scheduled Determination Dates. On
or before March 1 of each year for the Determination Date of May 1, Borrower
shall deliver to Administrative Agent a Reserve Report and the other data
specified in Section 7.15. Lenders shall then determine the Conforming Borrowing
Base or the Borrowing Base, as applicable, for the six (6) month period
commencing May 1, which determination shall be made in accordance with the
standards specified in Section 4.1 and the procedures set forth in Section 4.5.
On or before September 1 of each year for the Determination Date of November 1
(or in the case of the Determination Date to occur on November 1, 2012, on or
before October 15, 2012), Borrower shall deliver to Administrative Agent a
Reserve Report and the other data specified in Section 7.15. Lenders shall then
determine the Conforming Borrowing Base or the Borrowing Base, as applicable,
for the six (6) month period commencing November 1, which determination shall be
made in accordance with the standards specified in Section 4.1 and the
procedures set forth in Section 4.5.

 

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4.4 Special Determinations of Borrowing Base. Special determinations of the
Conforming Borrowing Base prior to the Borrowing Base Equalization Date, and the
Borrowing Base on and after the Borrowing Base Equalization Date, may be
requested by the Administrative Agent once and by Borrower once, in each case,
between scheduled Determination Dates. If any special determination is requested
by Administrative Agent or Borrower, Borrower will provide Administrative Agent
with engineering data for the oil and gas reserves included in the most recent
Reserve Report furnished Administrative Agent and the other data specified in
Section 7.15 and within the time period specified therein. The determination
whether to increase or decrease the Conforming Borrowing Base or the Borrowing
Base, as applicable, shall then be made by Lenders in their sole discretion in
accordance with the standards set forth in Section 4.1 and the procedures set
forth in Section 4.5.

4.5 General Procedures With Respect to Determination of Borrowing Base.
Administrative Agent shall propose a redetermined Conforming Borrowing Base or
Borrowing Base, as applicable, within thirty (30) days following receipt by
Administrative Agent and Lenders of a Reserve Report and other applicable
information. After having received notice of such proposal from Administrative
Agent, the Supermajority Lenders (or all Lenders in the event of a proposed
increase in the Conforming Borrowing Base or the Borrowing Base, as
applicable) shall have fifteen (15) days to agree or disagree with such
proposal. If, at the end of such fifteen (15) day period, the Supermajority
Lenders (or all Lenders, in the event of a proposed increase of the Conforming
Borrowing Base or the Borrowing Base, as applicable) shall not have communicated
their approval or disapproval, such silence shall be deemed an approval, and
Administrative Agent’s proposal shall be the new Conforming Borrowing Base or
the new Borrowing Base, as applicable. If, however, the Supermajority Lenders
(or any Lender, in the event of a proposed increase of the Conforming Borrowing
Base or the Borrowing Base, as applicable) notify Administrative Agent within
such fifteen (15) days of their disapproval, the Supermajority Lenders (or all
Lenders, in the event of a proposed increase of the Conforming Borrowing Base or
the Borrowing Base, as applicable) shall, within a reasonable period of time,
agree on a new Conforming Borrowing Base or a new Borrowing Base, as applicable.
Lenders may exclude any oil and gas reserves or portion of production therefrom
or any income from any other property from the Conforming Borrowing Base or the
Borrowing Base, as applicable, at any time because title information is not
reasonably satisfactory. After a redetermined Borrowing Base is approved or
deemed approved by all of the Lenders or the Supermajority Lenders, as
applicable, Administrative Agent shall promptly provide Borrower with written
notice of the redetermined Borrowing Base, and the redetermined Borrowing Base
shall become effective on the date of Borrower’s receipt of such notice.
Administrative Agent shall provide prompt written notice to Borrower of each
Lender that disapproves a redetermined Conforming Borrowing Base or Borrowing
Base, as applicable, proposed by Administrative Agent.

4.6 Borrowing Base Deficiency. If a Borrowing Base Deficiency shall exist
because of a periodic or special redetermination of the Conforming Borrowing
Base or the Borrowing Base, as applicable, pursuant to Section 4.2 or
Section 4.4, then Administrative Agent shall notify Borrower of the same, and
Borrower shall within thirty (30) days following receipt of such notice elect in
writing whether to (i) prepay an amount which will eliminate the Borrowing Base
Deficiency, or (ii) execute and deliver to Administrative Agent instruments
mortgaging such other collateral as is reasonably acceptable to the Majority
Lenders, pursuant to security

 

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documents in form reasonably acceptable to Administrative Agent having present
values which, in the opinion of Majority Lenders, based upon Majority Lenders’
evaluation of the engineering data provided them, taken in the aggregate are
sufficient to increase the Borrowing Base to an amount at least equal to the
Aggregate Credit Exposure, or (iii) do any combination of the foregoing. If
Borrower elects to prepay such deficiency under clause (i) above, then such
prepayment shall be made in six (6) equal consecutive monthly installments
beginning on the Deficiency Payment Commencement Date and continuing on the same
day of each month thereafter until paid. If Borrower so elects to mortgage
additional Oil and Gas Properties, then clause (ii) above shall be accomplished
within thirty (30) days from Administrative Agent’s date of notification. If
Borrower fails to make an election among clauses (i) through (iii) above within
thirty (30) days from Administrative Agent’s notification, then (x) Borrower
shall be deemed to have selected the payment option specified in clause (i)
above, and (y) Borrower shall make such payment in six (6) equal consecutive
monthly installments beginning on the Deficiency Payment Commencement Date and
continuing on the same day of each month thereafter until paid. “Deficiency
Payment Commencement Date” means (a) a day not later than the thirtieth
(30th) day from the date of Administrative Agent’s notification of the Borrowing
Base Deficiency, in the case where Borrower elects the payment option for
clause (i) above or fails to make an election, or (b) a day which is within ten
(10) days after receipt of notice from Administrative Agent that such property
submitted pursuant to clause (ii) above are not acceptable or do not have
sufficient present value to eliminate the Borrowing Base Deficiency, as
applicable. If Borrower makes an election to mortgage additional Oil and Gas
Properties but such Oil and Gas Properties are not reasonably acceptable to the
Majority Lenders or do not have present values which in the aggregate are
sufficient to eliminate the Borrowing Base Deficiency, then (x) Borrower shall
be deemed to have selected the payment option specified in clause (i) above, and
(y) Borrower shall make such payment in six (6) equal consecutive monthly
installments beginning on the Deficiency Payment Commencement Date and
continuing on the same day of each month thereafter until paid. Notwithstanding
anything to the contrary contained herein, if the Aggregate Credit Exposure
exceeds the Conforming Borrowing Base on the Borrowing Base Equalization Date,
then Borrower shall make an immediate prepayment to the Administrative Agent of
the Advances in an amount equal to such excess.

ARTICLE 5. CONDITIONS.

The obligations of Lenders to make Advances pursuant to this Agreement and the
obligation of Issuing Lender to issue Letters of Credit, and the continuation of
the advances and letters of credit under the Existing Credit Agreement as
Advances and Letters of Credit under this Agreement as contemplated by
Section 13.21, shall not become effective until the date on which the following
conditions have been satisfied (or waived in accordance with Section 13.9):

5.1 Conditions of Initial Advances. The obligations of Lenders to make initial
Advances pursuant to this Agreement and the obligation of Issuing Lender to
issue initial Letters of Credit, in each case, on the Effective Date only, are
subject to the following conditions:

(a) Notes, this Agreement and the other Loan Documents.

 

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(i) Borrower shall have executed and delivered to Administrative Agent this
Agreement and the Notes (for the account of each Lender requesting Notes); and
each Credit Party shall have executed and delivered the other Loan Documents to
which such Credit Party is required to be a party (including all schedules and
other documents to be delivered pursuant hereto); and this Agreement, the Notes
(if any) and the other Loan Documents shall be in full force and effect.

(b) Corporate Authority. Administrative Agent shall have received from each
Credit Party and the Parent, a certificate of its Secretary dated as of the
Effective Date as to:

(i) corporate resolutions (or the equivalent) of the Parent and each Credit
Party authorizing the transactions contemplated by this Agreement and the other
Loan Documents, in each case to which the Parent or such Credit Party is party,
and authorizing the execution and delivery of this Agreement and the other Loan
Documents, and in the case of Borrower, authorizing the execution and delivery
of any Request for Revolving Credit Advances and the issuance of Letters of
Credit hereunder,

(ii) the incumbency and signature of the officers or other authorized persons of
the Parent and such Credit Party executing any Loan Document and in the case of
Borrower, the officers who are authorized to execute any Request for Revolving
Credit Advance, or requests for the issuance of Letters of Credit,

(iii) a certificate of good standing or continued existence (or the equivalent
thereof) from the state of its incorporation or formation, and from every state
or other jurisdiction where the Parent and such Credit Party are qualified to do
business, which jurisdictions are listed on Schedule 5.1(b)(iii) attached
hereto, and

(iv) copies of the Parent’s and such Credit Party’s Organizational Documents as
in effect on the Effective Date.

(c) Collateral Documents, Guaranties and other Loan Documents. Administrative
Agent shall have received the following documents, each in form and substance
reasonably satisfactory to Administrative Agent and fully executed by each party
thereto:

(i) The Guaranty fully executed by each party thereto and dated as of the
Effective Date.

(ii) A Pledge Agreement fully executed by each party thereto covering the Equity
Interests of each Restricted Subsidiary and dated as of the Effective Date.

(iii) Mortgages duly executed by each party thereto with respect to the Oil and
Gas Properties of the Credit Parties, or the portion thereof, as required by
Section 7.17 and amendments and/or assignments to each of the Existing Mortgages
as reasonably requested by Administrative Agent to evidence the assignment of
the Original Administrative Agent’s right, title and interest in, to and under
the Existing Mortgages to Administrative Agent.

 

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(iv) Copies of Uniform Commercial Code requests for information, or a similar
search report certified by a party reasonably acceptable to Administrative
Agent, dated a date reasonably prior to the Effective Date, listing all
effective financing statements in the jurisdictions required by Administrative
Agent which name any Credit Party (under their present names or under any
previous names used within five (5) years prior to the date hereof) as debtors,
together with (x) copies of such financing statements, and (y) authorized
Uniform Commercial Code (Form UCC-3) Termination Statements, if any, necessary
to release all Liens and other rights of any Person in any Collateral described
in the Collateral Documents previously granted by any Person (other than Liens
permitted by Section 8.2).

(v) Any documents (including, without limitation, financing statements,
amendments to financing statements and assignments of financing statements,
stock powers executed in blank and any endorsements) requested by Administrative
Agent and reasonably required to be provided in connection with the Collateral
Documents to create, in favor of Administrative Agent (for and on behalf of
Lenders), a first priority (subject to Liens permitted by Section 8.2) perfected
security interest in the Collateral thereunder shall have been filed, registered
or recorded, or shall have been delivered to Administrative Agent in proper form
for filing, registration or recordation.

(d) Insurance. Administrative Agent shall have received evidence reasonably
satisfactory to it that the Credit Parties have obtained the insurance policies
required by Section 7.5 and that such insurance policies are in full force and
effect.

(e) No Default. On the Effective Date, no Default or Event of Default shall
exist.

(f) Opinions of Counsel. The Parent and the Credit Parties shall furnish
Administrative Agent prior to the initial Advance under this Agreement, opinions
of counsel to the Parent and the Credit Parties (including local counsel
opinions), to the extent reasonably deemed necessary by Administrative Agent, in
each case dated the Effective Date and covering such matters as reasonably
required by and otherwise reasonably satisfactory in form and substance to
Administrative Agent.

(g) Payment of Fees. Borrower shall have paid to RBC and its Affiliates any fees
due under the terms of the Fee Letter, along with any other reasonable and
documented out-of-pocket fees, costs or expenses due and outstanding to
Administrative Agent as of the Effective Date (including reasonable and
documented fees, disbursements and other charges of counsel to Administrative
Agent).

 

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(h) Financial Statements. Borrower shall have delivered to Lenders and
Administrative Agent, in form and substance reasonably satisfactory to
Administrative Agent: (a) audited financial statements of Parent and its
consolidated Subsidiaries for the Fiscal Year ending December 31, 2011, and
presented in accordance with GAAP, and the quarterly financial statements of
Parent and its consolidated Subsidiaries for the Fiscal Quarter ended June 30,
2012 and (b) monthly cash flow projections of Borrower through December 31,
2012, in form reasonably acceptable to Administrative Agent.

(i) Due Diligence. Administrative Agent and Lenders shall have received, in each
case in form and substance reasonably satisfactory to Administrative Agent,
engineering reports and other reserve information covering the Oil and Gas
Properties of the Credit Parties, including, without limitation, a Reserve
Report dated as of July 1, 2012.

(j) Closing Certificate. Administrative Agent shall have received a certificate
(which may be combined with the certificate required under Section 5.1(b)) of a
Responsible Officer of Borrower dated the Effective Date, stating that to the
best of his or her respective knowledge, (a) the representations and warranties
made by the Parent and the Credit Parties in this Agreement or any of the other
Loan Documents, as applicable, are true and correct in all material respects
(except to the extent such representation and warranty is already qualified by
materiality or by a “Material Adverse Effect” clause, in which case such
representation and warranty shall be true and correct in all respects); (b) no
Default or Event of Default shall have occurred and be continuing; and (c) since
December 31, 2011, nothing has occurred which has had, or would reasonably be
expected to have, a Material Adverse Effect.

(k) Title Due Diligence. Administrative Agent shall have received title opinions
and other title information and data reasonably acceptable to Administrative
Agent covering not less than 80% of the value of the Mortgaged Properties
included in the Borrowing Base, reflecting title to the Hydrocarbon Interests of
the Credit Parties in such Mortgaged Properties which is reasonably acceptable
to Administrative Agent.

(l) Customer Identification Forms. Administrative Agent shall have received
completed customer identification forms (forms to be provided by Administrative
Agent to Borrower) from Parent, Borrower and each Guarantor.

(m) Resignation Agreement. Administrative Agent shall have received a copy of
the Resignation Agreement, duly executed by each party thereto and otherwise in
form and substance satisfactory to Administrative Agent.

5.2 Conditions to Each Advance and Letter of Credit. The obligations of each
Lender to make each Advance (including the initial Advance) under this Agreement
and the obligation of Issuing Lender to issue or renew any Letter of Credit
shall, in each case, be subject to the following conditions:

(a) No Default or Event of Default shall exist as of the date of the Advance or
the request for the issuance or renewal of the Letter of Credit, as the case may
be;

 

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(b) Each of the representations and warranties contained in this Agreement and
in each of the other Loan Documents shall be true and correct in all material
respects (except to the extent such representation and warranty is already
qualified by materiality or by a “Material Adverse Effect” clause, in which case
such representation and warranty shall be true and correct in all respects) as
of the date of the Advance or Letter of Credit (as the case may be) as if made
on and as of such date (other than any representation or warranty that expressly
speaks only as of a different date); and

(c) After giving effect to such Advance or Letter of Credit, the Aggregate
Credit Exposure will not exceed the Revolving Credit Aggregate Commitment.

Each borrowing of an Advance by, and issuance of a Letter of Credit on behalf
of, Borrower hereunder shall constitute a representation and warranty by
Borrower as of the date of such extension of credit that the conditions
contained in this Section 5.2 have been satisfied.

ARTICLE 6. REPRESENTATIONS AND WARRANTIES.

Borrower represents and warrants to Administrative Agent, Lenders and Issuing
Lender as follows:

6.1 Corporate Authority. Each Credit Party and the Parent (a) is a limited
liability company, partnership or corporation duly organized, legally existing
and in good standing under the laws of the state or jurisdiction of its
incorporation, formation or organization, as applicable, (b) is duly qualified
and authorized to do business as a foreign limited liability company,
partnership or corporation (or other business entity) in each jurisdiction where
the character of its assets or the nature of its activities makes such
qualification and authorization necessary except where failure to be so
qualified or be in good standing could not reasonably be expected to have a
Material Adverse Effect, (c) has all requisite partnership, limited liability
company or corporate power, as applicable, and has all material governmental
consents, approvals, licenses and authorizations necessary in all material
respects to carry on its business and own its material assets as now being or as
proposed to be conducted and (d) has all requisite partnership, limited
liability company or corporate power, as applicable, and authority to own all
its material property (whether real, personal, tangible or intangible or of any
kind whatsoever).

6.2 Due Authorization.

(a) Each Credit Party and the Parent has all necessary partnership, limited
liability company or corporate power, as applicable, to execute, deliver and
perform its obligations under the Loan Documents to which it is a party,

(b) The execution, delivery and performance by the Parent and each Credit Party
of the Loan Documents, to which it is a party, (i) have been duly authorized by
all necessary organizational action, and (ii) are not in contravention in any
material respect of any law applicable to the Parent or such Credit Party or the
terms of the Parent’s or such Credit Party’s Organizational Documents.

6.3 Good Title; Leases; Assets; No Liens. On the Effective Date (except as
disclosed in Schedule 6.3) and thereafter except as disclosed to Administrative
Agent:

 

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(a) Each Credit Party, to the extent applicable, has good and defensible title
to the material Hydrocarbon Interests and Oil and Gas Properties evaluated in
the Reserve Report most recently provided to Administrative Agent, in each case
free and clear of all Liens except the Liens permitted by Section 8.2;

(b) Each Credit Party has good title to, or valid leasehold interests in, all of
its (i) real property that is not real property referenced in
clause(a) preceding and that is material to the business of the Credit Parties
taken as a whole and (ii) personal property that is material to the business of
the Credit Parties taken as a whole, in each case of (i) and (ii) preceding,
except for Liens permitted by Section 8.2;

(c) (i) On the Effective Date, no material condemnation, eminent domain or
expropriation action has been commenced or threatened against any owned or
leased real property; and (ii) after the Effective Date, no material
condemnation, eminent domain or expropriation action has been commenced or
threatened against any such owned or leased real property that could reasonably
be expected to have a Material Adverse Effect; and

(d) There are no Liens on, and no financing statements on file, with respect to
any of the assets owned by the Credit Parties, except for the Liens permitted by
Section 8.2 of this Agreement.

6.4 Taxes. Parent, Borrower and each Restricted Subsidiary has timely filed or
caused to be filed all Federal, State and other tax returns that are required to
be filed and has paid or caused to be paid all federal, state and other taxes,
assessments and other governmental charges levied or imposed upon them or their
properties, income or assets otherwise due and payable, except, in each case,
(a) those which are being contested in good faith by appropriate proceedings and
for which Parent, Borrower or such Restricted Subsidiary, 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.

6.5 No Defaults. To the Borrower’s knowledge, neither Borrower nor any
Restricted Subsidiary 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, would constitute a default under any material agreement, instrument or
undertaking to which it is a party or by which any of them or any of their
property is bound, in each case which would reasonably be expected to cause a
Material Adverse Effect.

6.6 Enforceability. This Agreement and each of the other Loan Documents to which
the Parent or any Credit Party is a party, have each been duly executed and
delivered by its duly authorized officers and constitute the valid and binding
obligations of the Parent and such Credit Party, enforceable against the Parent
or such Credit Party (as applicable) in accordance with their respective terms,
except as enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium or similar laws
affecting the enforcement of creditor’s rights, generally and by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in law or equity).

6.7 Compliance with Laws.

 

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(a) Each of the Credit Parties and the Parent is in compliance with (i) all
Requirements of Law, and (ii) its Organizational Documents, except, in each case
of clause (i) and (ii) preceding, to the extent that failure to comply therewith
could not reasonably be expected to have a Material Adverse Effect;

(b) On the Effective Date, no Credit Party is liable for any material refunds or
interest thereon as a result of any order from the Federal Energy Regulatory
Commission or any Governmental Authority with respect to any pipeline system;

(c) Except for such acts or failures to act as would not reasonably be expected
to have a Material Adverse Effect, the Oil and Gas Properties (and properties
unitized therewith) of the Credit Parties have been maintained, operated and
developed in a good and workmanlike manner and in conformity with all applicable
laws and all rules, regulations and orders of all duly constituted authorities
having jurisdiction and in conformity with the provisions of all leases,
subleases or other contracts comprising a part of the Oil and Gas Properties and
other contracts and agreements forming a part of the Oil and Gas Properties; and

(d) No Credit Party or the Parent, nor, any Related Party, (i) is currently the
subject of any Sanctions, (ii) is located, organized or residing in any
Designated Jurisdiction, or (iii) is or has been (within the previous five
(5) years) engaged in any transaction with any Person who is now or was then the
subject of Sanctions or who is located, organized or residing in any Designated
Jurisdiction. Borrower has not directly or indirectly used the proceeds of any
Advance or loaned, contributed or otherwise made available such proceeds to any
Subsidiary, Affiliate or other Person, to fund any activity or business in any
Designated Jurisdiction or to fund any activity or business of any Person
located, organized or residing in any Designated Jurisdiction or who is the
subject of any Sanctions, or in any other manner that will result in any
violation by any Person (including any Lender, the Administrative Agent or the
Issuing Lender) of Sanctions.

6.8 Non-contravention.

(a) The execution, delivery and performance of this Agreement and the other Loan
Documents by the Parent and each Credit Party (as applicable) will not violate
in any material respect any Requirement of Law.

(b) The execution, delivery and performance of this Agreement and the other Loan
Documents (including each Request for Revolving Credit Advance) to which the
Parent and each Credit Party is a party are not in contravention of the terms of
any material Contractual Obligation, indenture, agreement or undertaking to
which the Parent or such Credit Party is a party or by which it or its
properties are bound where such violation could reasonably be expected to have a
Material Adverse Effect.

6.9 Litigation. Except as disclosed on Schedule 6.9 or to Administrative Agent
hereafter in writing, there are no suits, actions or proceedings by or before
any arbitrator or Governmental Authority, including, without limitation, any
bankruptcy proceeding, or governmental investigations, pending against or, to
the knowledge of Borrower, threatened

 

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against or affecting the Parent or any Credit Party (i) as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably expected, individually or in the aggregate, to
result in a Material Adverse Effect (taking into account insurance or other
recoveries) or (ii) that involve this Agreement or any other Loan Documents or
any of the transactions contemplated hereby or thereby.

6.10 Consents, Approvals and Filings, etc.

(a) No material authorizations, permits, consents, approvals, licenses,
qualifications or formal exemptions from, nor any material filing, declaration
or registration with, any court, Governmental Authority or any Person are
necessary for the execution, delivery and performance: (i) by the Parent or any
Credit Party of this Agreement and any of the other Loan Documents to which the
Parent or such Credit Party is a party or (ii) by the Credit Parties of the
grant of Liens granted, conveyed or otherwise established (or to be granted,
conveyed or otherwise established) by or under this Agreement or the other Loan
Documents, as applicable, except for the recording and filing of the Collateral
Documents as required by this Agreement.

(b) No authorizations, permits, consents, approvals, licenses, qualifications or
formal exemptions from, nor any filing, declaration or registration with, any
court, Governmental Authority or any Person are necessary for the operation of
any Credit Party’s business, except in each case (i) such matters which have
been previously obtained, and (ii) those the failure of which to obtain could
not reasonably be expected to result in a Material Adverse Effect.

6.11 No Investment Company or Margin Stock. No Credit Party is, nor is the
Parent, engaged and will not engage, principally or as one of its important
activities, in the business of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the FRB) or extending credit for the purpose
of purchasing or carrying margin stock. None of the proceeds of any of the
Advances will be used by any Credit Party to purchase or carry margin stock. No
Credit Party or the Parent is or is required to be registered as an “investment
company” under the Investment Company Act of 1940, as amended.

6.12 ERISA. No Credit Party or Parent maintains or contributes to any Pension
Plan subject to Title IV of ERISA, except as set forth on Schedule 6.12 hereto
or otherwise disclosed to Administrative Agent in writing. Except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect:

(a) There is no accumulated funding deficiency within the meaning of Section 412
of the Internal Revenue Code or Section 302 of ERISA, or any outstanding
liability with respect to any Pension Plans owed to the PBGC other than future
premiums due and owing pursuant to Section 4007 of ERISA, and no “reportable
event” as defined in Section 4043(c) of ERISA has occurred with respect to any
Pension Plan, other than an event for which the notice requirement has been
waived by the PBGC;

 

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(b) Each Pension Plan is being maintained and funded in accordance with its
terms and is in compliance with the requirements of the Internal Revenue Code
and ERISA;

(c) None of the Credit Parties or Parent has engaged in a prohibited transaction
with respect to any Pension Plan, other than a prohibited transaction for which
an exemption is available and has been obtained, which could subject such Credit
Parties or the Parent to a material tax or penalty imposed by Section 4975 of
the Internal Revenue Code or Section 502(i) of ERISA; and

(d) No Credit Party or Parent has had a complete or partial withdrawal from any
Multiemployer Plan.

6.13 Conditions Affecting Business or Properties. Neither the respective
businesses nor the properties of any Credit Party is affected by any fire,
explosion, accident, strike, lockout or other dispute, drought, storm, hail,
earthquake, embargo, Act of God, or other casualty that could reasonably be
expected to have a Material Adverse Effect.

6.14 Environmental and Safety Matters. Except (i) as set forth in Schedule 6.14
or as otherwise disclosed to the Lenders in writing or (ii) as would not have a
Material Adverse Effect:

(a) all facilities and property owned or leased by the Credit Parties are in
compliance with all Hazardous Material Laws;

(b) there have been no unresolved and outstanding past, and there are no pending
or threatened:

(i) claims, complaints, notices or requests for information received by any
Credit Party with respect to any alleged violation of any Hazardous Material
Law, or

(ii) written complaints, notices or inquiries to any Credit Party regarding
potential liability of any Credit Parties under any Hazardous Material Law; and

(c) no conditions exist at, on or under any property now or previously owned or
leased by any Credit Party which, with the passage of time, or the giving of
notice or both, are reasonably likely to give rise to liability under any
Hazardous Material Law or create a significant adverse effect on the value of
the property.

6.15 Subsidiaries. Except as disclosed on Schedule 6.15 hereto as of the
Effective Date, and thereafter, except as disclosed to Administrative Agent in
writing from time to time, no Credit Party or the Parent has any Subsidiaries.
As of the Effective Date, each Subsidiary that is an Unrestricted Subsidiary is
listed as such on Schedule 6.15 and is designated so in accordance with the
terms of this Agreement. After the Effective Date, the Administrative Agent has
received prompt written notice of the existence of each Unrestricted Subsidiary
formed, acquired, created or converted after the Effective Date.

 

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6.16 Capital Structure. Schedule 6.16 attached hereto sets forth all issued and
outstanding Equity Interests of each Credit Party, including the number of
authorized, issued and outstanding Equity Interests of each Credit Party, the
par value of such Equity Interests and the holders of such Equity Interests, all
on and as of the Effective Date. All issued and outstanding Equity Interests of
each Credit Party are duly authorized and validly issued, fully paid,
nonassessable, free and clear of all Liens (except for the benefit of
Administrative Agent) and such Equity Interests were issued in compliance with
all applicable state, federal and foreign laws concerning the issuance of
securities. Except as disclosed on Schedule 6.16, there are no preemptive or
other outstanding rights, options, warrants, conversion rights or similar
agreements or understandings for the purchase or acquisition from any Credit
Party, of any Equity Interests of any Credit Party.

6.17 Accuracy of Information.

(a) The audited financial statements for the Fiscal Year ended December 31,
2011, and the unaudited consolidated financial statements at June 30, 2012,
furnished to Administrative Agent and Lenders prior to the Effective Date fairly
present in all material respects the financial condition of Parent and its
Subsidiaries and the results of their operations for the periods covered
thereby, and have been prepared in accordance with GAAP (subject, in the case of
the interim financial statements, to normal year-end adjustments, including
tests for impairment of assets and lack of footnotes).

(b) Since December 31, 2011, there has been no change, circumstance or event
that has had a Material Adverse Effect.

6.18 Solvency. After giving effect to the transactions contemplated hereby,
(a) the assets (after giving effect to amounts that could reasonably be received
by reason of indemnity, offset, insurance or any similar arrangement), at a fair
market valuation, of the Parent and the Credit Parties on a consolidated basis
will exceed the aggregate Debt of the Parent and the Credit Parties on a
consolidated basis, as the Debt becomes absolute and matures, (b) the Parent and
the Credit Parties on a consolidated basis will not have incurred or intended to
incur Debt beyond their ability to pay such Debt (after taking into account the
timing and amounts of cash to be received by Parent and each of the Credit
Parties and the amounts to be payable on or in respect of their 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) the Parent and the Credit Parties on a consolidated
basis will not have unreasonably small capital for the conduct of their business
taken as a whole.

6.19 No Misrepresentation. The written information, statements, exhibits,
certificates, documents and reports, taken as a whole, furnished to the
Administrative Agent and the Lenders (or any of them) by Borrower, any other
Credit Party or Parent in connection with the negotiation or administration of
this Agreement or any other Loan Document, or any other transaction contemplated
hereby, do not contain any material misstatement of a material fact and do not
omit to state a material fact or any fact necessary to make the statement
contained therein not materially misleading in the light of the circumstances in
which made and with respect to Borrower and its Restricted Subsidiaries taken as
a whole. All projections and pro-forma financial information contained in the
documents and materials referenced above are based upon

 

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good faith estimates and assumptions believed by management of Borrower to be
reasonable at the time made, it being recognized by Administrative Agent and
Lenders that such financial information as it relates to future events is not to
be viewed as fact and that actual results during the period or periods covered
by such financial information may differ from the projected results set forth
therein by a material amount. There is no fact, other than information known to
the public generally, known to any Credit Party, that could reasonably be
expected to have a Material Adverse Effect that has not expressly been disclosed
to Administrative Agent in writing. Neither Borrower nor any Restricted
Subsidiary or Parent 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 under any material agreement or
instrument to which the Parent or any Credit Party is a party or by which the
Parent or any Credit Party is bound which default could reasonably be expected
to have a Material Adverse Effect.

6.20 Engineering Reports. Each Credit Party executing a Mortgage owns or will
own (subject to Liens permitted by Section 8.2), the net interest and production
attributable to the material Mortgaged Properties evaluated in the engineering
reports it has most recently furnished to Administrative Agent. The ownership of
such properties shall not in the aggregate in any material respect obligate such
Credit Party to bear costs and expenses relating to the maintenance, development
and operations of such properties in an amount materially in excess of the
working interests of such properties as shown in such engineering reports most
recently furnished to Administrative Agent. Each Credit Party executing a
Mortgage has paid all royalties payable under the oil and gas leases to which it
is an operator, except (a) those contested in accordance with the terms of the
applicable joint operating agreement or otherwise contested in good faith by
appropriate proceedings, or (b) to the extent such failure would not reasonably
be expected to cause or result in a Material Adverse Effect. Upon delivery of
each Reserve Report furnished to Lenders pursuant to Section 7.15, the
statements made in the preceding sentences of this Section 6.20 shall be true
with respect to such Reserve Reports.

6.21 Gas Balancing Agreements and Advance Payment Contracts. Except as set forth
on Schedule 6.21, as of the Effective Date, (a) there is no Material Gas
Imbalance, and (b) the aggregate amount of all Advance Payments received by any
Credit Party under Advance Payment Contracts which have not been satisfied by
delivery of production does not exceed $1,000,000.

6.22 Commodity Hedging Agreements. Schedule 6.22 sets forth, as of the Effective
Date, a true and complete list of all Commodity Hedging Agreements (other than
Excluded Hedges) of the Credit Parties, the material terms thereof (including
the type, term, effective date, termination date and notional amounts or
volumes), the net mark to market value thereof (as of August 31, 2012), all
credit support agreements relating thereto (including any margin required or
supplied), and the counterparty to each such agreement.

6.23 Corporate Documents and Corporate Existence. As to the Parent and each
Credit Party, (a) it is an organization as described on Schedule 6.23 hereto and
has provided Administrative Agent with complete and correct copies of its
Organizational Documents in effect on the Effective Date, and, if applicable, a
good standing certificate within 30 days of the Effective Date and (b) its
correct legal name, business address, type of organization and jurisdiction of
organization, tax identification number and organization identification number
from its jurisdiction of organization (i) as of the Effective Date, are set
forth on Schedule 6.23 hereto or (ii) after the Effective Date, as disclosed to
Administrative Agent in writing.

 

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ARTICLE 7. AFFIRMATIVE COVENANTS.

Borrower covenants and agrees, so long as any Lender has any commitment to
extend credit hereunder, or any of the Indebtedness remains outstanding and
unpaid (excluding contingent reimbursement and indemnification obligations for
which no claim has been made and Lender Hedging Obligations and Lender Product
Obligations) that it will, and, as applicable, it will cause each of its
Restricted Subsidiaries to:

7.1 Financial Statements. Furnish to Administrative Agent, for delivery to each
Lender, the following documents:

(a) as soon as available, but in any event within ninety (90) days after the end
of each Fiscal Year, a copy of the audited Consolidated balance sheet of Parent
and its Subsidiaries as at the end of such Fiscal Year and the related audited
Consolidated statements of income, equity, and cash flows of Parent and its
Subsidiaries for such Fiscal Year, setting forth in each case in comparative
form the figures for the previous Fiscal Year, certified by Grant Thornton or
another independent, nationally recognized certified public accounting firm
reasonably satisfactory to Administrative Agent; and

(b) as soon as available, but in any event within sixty (60) days after the end
of each Fiscal Quarter of the Credit Parties (excluding the last quarter of each
Fiscal Year) subject to standard audit adjustments, Borrower prepared unaudited
Consolidated balance sheet of Parent and its Subsidiaries as at the end of such
Fiscal Quarter and the related unaudited statements of income, equity and cash
flows of Parent and its Subsidiaries for the portion of the Fiscal Year through
the end of such Fiscal Quarter, setting forth in each case in comparative form
the figures for the corresponding periods in the previous Fiscal Year, and
certified by a Responsible Officer of Borrower as being fairly stated in all
material respects (subject to year-end audit adjustments).

All such financial statements shall be complete and correct in all material
respects and be prepared in reasonable detail and in accordance with GAAP
throughout the periods reflected therein and with prior periods (except as
approved by a Responsible Officer and disclosed therein), provided however that
the financial statements delivered pursuant to clause (b) hereof will not be
required to include footnotes and will be subject to change for audit and
year-end adjustments.

Documents required to be delivered pursuant to this Section 7.1 or Section 7.2
(to the extent any such documents are included in materials otherwise filed with
the Securities and Exchange Commission) may be delivered electronically and if
so delivered, shall be deemed to have been delivered on the date (1) on which
Borrower posts such documents, or provides a link thereto, on Borrower’s website
on the Internet at http://www.matadorresources.com or (2) on which such
documents are posted on Borrower’s behalf on an Internet or intranet website, if
any, to which each Lender and the Administrative Agent have access (whether a
commercial, third-party website or whether sponsored by the Administrative
Agent); provided that Borrower shall notify

 

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the Administrative Agent (by telecopier or electronic mail) of the posting of
any such documents and, upon request, provide to the Administrative Agent by
electronic mail electronic versions (i.e., soft copies) of such documents.
Notwithstanding anything contained herein and except as otherwise authorized
pursuant to Section 13.6(b), in every instance Borrower shall be required to
provide paper copies of the Compliance Certificates required by
Section 7.2(a) to the Administrative Agent.

Borrower hereby acknowledges that (a) the Administrative Agent may, but shall
not be obligated to, make available to the Lenders and the Issuing Lender
materials and/or information provided by or on behalf of Borrower hereunder
(collectively, “Borrower Materials”) by posting Borrower Materials on Debt
Domain, IntraLinks, Syndtrak 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 Borrower or its 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. Borrower hereby agrees that
(w) all Borrower Materials that are to be made available to Public Lenders 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;
provided that such Public Lenders identify themselves as such in writing to
Borrower and Administrative Agent; (x) by marking Borrower Materials “PUBLIC,”
Borrower shall be deemed to have authorized the Administrative Agent, any Joint
Lead Arranger, the Issuing Lender and the Lenders to treat such Borrower
Materials as not containing any material non-public information with respect to
Borrower or its 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 13.10);
(y) all Borrower Materials marked “PUBLIC” are permitted to be made available
through a portion of the Platform designated “Public Side Information;” and
(z) the Administrative Agent and the Joint Lead Arrangers 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.” Notwithstanding the foregoing, Borrower shall be under no
obligation to mark any Borrower Materials “PUBLIC”.

7.2 Certificates; Other Information. Furnish to Administrative Agent, for
delivery to each Lender, the following documents:

(a) Concurrently with the delivery of the financial statements described in
Sections 7.1(a) for each Fiscal Year end, and 7.1(b) for each Fiscal Quarter
end, a Compliance Certificate duly executed by a Responsible Officer;

(b) If at any time applicable, promptly upon its becoming available, each
financial statement, report, notice or proxy statement sent by Parent to its
shareholders generally and each regular or periodic report and any registration
statement, prospectus or written communication (other than transmittal
letters) in respect thereof filed by Parent with or received by Parent in
connection therewith from any securities exchange or the SEC or any successor
agency;

(c) Promptly after the furnishing thereof, copies of any statement, report or
notice furnished to any Person pursuant to the terms of any 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;

 

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(d) Upon reasonable request of the Administrative Agent, within thirty (30) days
after the end of each month (the “Reported Month”), a monthly report, in form
and substance satisfactory to the Majority Lenders, indicating the Reported
Month’s production volumes for each well on the Oil and Gas Properties of the
Credit Parties, sales volumes, sales revenues, production taxes, operating
expenses and net operating income from production from such Oil and Gas
Properties, with detailed calculations and worksheets;

(e) Concurrently with the delivery of financial statements under Sections 7.1(a)
and 7.1(b), a certificate of a Responsible Officer of Borrower, in form and
substance reasonably satisfactory to Administrative Agent, setting forth as of
the last day of such Fiscal Quarter or Fiscal Year, as applicable, a true and
complete list of all Commodity Hedging Agreements (other than Excluded
Hedges) of the Credit Parties, the material terms thereof (including the type,
term, effective date, termination date and notional amounts or volumes), the net
mark to market value thereof (as of the last day of such fiscal quarter or
fiscal year), any new credit support agreements relating thereto not listed on
Schedule 6.22 (including any margin required or supplied), and the counterparty
to each such agreement; and

(f) Such additional financial and/or other information regarding the Parent or
any Credit Party, or any of their properties or assets as Administrative Agent
or any Lender may from time to time reasonably request, promptly following such
request.

7.3 Payment of Obligations. Pay, discharge or otherwise satisfy, at or before
maturity or before they become delinquent, as the case may be, all of its
obligations of whatever nature, including without limitation all assessments,
governmental charges, claims for labor, supplies, rent or other obligations,
except where (a) the failure to do so could not reasonably be expected to have a
Material Adverse Effect or (b) the amount or validity thereof is currently being
appropriately contested in good faith and reserves in conformity with GAAP with
respect thereto have been provided on the books of the Credit Parties.

7.4 Conduct of Business and Maintenance of Existence; Compliance with Laws.

(a) Preserve, renew and keep in full force and effect its existence except as
otherwise permitted pursuant to Section 8.3 and maintain its qualifications to
do business in each jurisdiction where such qualifications are necessary for its
operations and the failure to be so qualified would not be reasonably expected
to result in a Material Adverse Effect;

(b) Take all action it deems necessary in its reasonable business judgment to
maintain all rights, privileges, licenses and franchises necessary for the
normal conduct of its business except where the failure to so maintain such
rights, privileges or franchises could not, either singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect;

 

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(c) Comply with all Contractual Obligations and Requirements of Law, except to
the extent that failure to comply therewith could not, either singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect; and

(d) (i) Continue to be a Person whose property or interests in property is not
blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of
September 23, 2001 Blocking Property and Prohibiting Transactions With Persons
Who Commit, Threaten to Commit or Support Terrorism (66 Fed. Reg. 49079
(2001)) (the “Order”), (ii) not engage in the transactions prohibited by
Section 2 of that Order or become associated with Persons such that a violation
of Section 2 of the Order would arise, and (iii) not become a Person on the list
of Specially Designated National and Blocked Persons, or (iv) otherwise not
become subject to the limitation of any OFAC regulation or executive order.

7.5 Maintenance of Property; Insurance.

(a) At its own expense, do or cause to be done all things reasonably necessary
to preserve and keep in good repair, working order and efficiency all of its
material Oil and Gas Properties and other material properties including, without
limitation, all equipment, machinery and facilities, and from time to time will
make all the reasonably necessary repairs, renewals and replacements so that at
all times the state and condition of its material Oil and Gas Properties and
other material properties will be fully preserved and maintained, except to the
extent a portion of such properties is no longer capable of producing
Hydrocarbons in economically reasonable amounts.

(b) (i) 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
material Oil and Gas Properties, (ii) 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 material interests in its
material Oil and Gas Properties and other material properties, (iii) cause each
Subsidiary to do all other things necessary to keep unimpaired in all material
respects, its rights with respect to its material Oil and Gas Properties and
other material properties, and prevent any forfeiture thereof or a default
thereunder, except in each case (A) for Liens permitted by the terms of
Section 8.2, (B) to the extent a portion of such properties is no longer capable
of producing Hydrocarbons in economically reasonable amounts and (C) for
Dispositions permitted by Section 8.4.

(c) Operate its material Oil and Gas Properties and other material properties or
cause or make reasonable and customary efforts to cause such material 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 in all
material respects with all Requirements of Law.

 

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Notwithstanding the foregoing, with respect to those Borrowing Base Properties
which are being operated by operators other than a Credit Party, Borrower and
the other Credit Parties shall not be obligated to perform any undertakings
contemplated by the covenants and agreements contained herein which are
performable only by such operators and are beyond the control of Borrower or
such Credit Party, as applicable; provided, however, Borrower and the other
Credit Parties agree to promptly take all reasonable actions available under any
operating agreements or otherwise to bring about the performance of any such
undertakings required to be performed under this Section.

(d) Maintain, with financially sound and reputable insurance companies,
insurance 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. The loss payable clauses or provisions in said insurance
policy or policies insuring any of the Collateral shall name Administrative
Agent as lender loss payee and such policies shall name the Administrative Agent
as “additional insured”; provided, that if no Default shall have occurred and be
continuing, Borrower or any Restricted Subsidiary may use the proceeds of
casualty insurance to repair or replace assets or otherwise reinvest such
proceeds in its business.

7.6 Inspection of Property; Books and Records, Discussions. 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, provided that an officer
of Borrower may be present at any such discussion with such independent
accountants. Reasonable costs and expenses of such inspections and examinations
shall be paid by Borrower, provided, however, that prior to the occurrence and
continuance of an Event of Default, Borrower shall only be obligated to pay for
the out-of-pocket and documented reasonable costs and expenses of one inspection
and examination by the Administrative Agent per Fiscal Year.

7.7 Notices. Promptly give written notice to Administrative Agent of:

(a) the occurrence of any Default or Event of Default of which any Credit Party
has knowledge;

(b) any litigation or proceeding existing at any time between the Parent and any
Credit Party, on the one hand, and any Governmental Authority or other third
party, on the other hand, or any investigation of the Parent or any Credit Party
conducted by any Governmental Authority, of which Borrower has knowledge and
which in any case if adversely determined would have a Material Adverse Effect;

(c) the occurrence of any event which any Credit Party believes could reasonably
be expected to have a Material Adverse Effect, promptly after concluding that
such event could reasonably be expected to have such a Material Adverse Effect;

(d) any damage to the Oil and Gas Properties in excess of the Threshold Amount
in the aggregate per occurrence; and

 

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(e) any event of which Borrower has knowledge giving rise to an obligation for
Borrower to make a mandatory prepayment hereunder.

Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of Borrower setting forth details of the occurrence referred
to therein and, in the case of notices referred to in clauses (a), (b), (c),
(d), and (e) hereof stating what action the applicable Credit Party has taken or
proposes to take with respect thereto.

7.8 Hazardous Material Laws.

(a) Use and operate (or cause to be operated) all of its facilities and
properties in material compliance with applicable Hazardous Material Laws, keep
all material required permits, approvals, certificates, licenses and other
authorizations required under such Hazardous Material Laws in effect and remain
in compliance therewith, and handle Hazardous Materials in material compliance
with all applicable Hazardous Material Laws except to the extent the failure to
do any of the foregoing would not reasonably be expected to have a Material
Adverse Effect; and

(b) To the extent necessary to comply in all material respects with Hazardous
Material Laws, remediate or monitor contamination arising from a release or
disposal of Hazardous Material, which solely, or together with other releases or
disposals of Hazardous Materials could reasonably be expected to have a Material
Adverse Effect.

7.9 Financial Covenants.

(a) Total Debt to Consolidated EBITDA Ratio. Maintain as of the last day of each
Fiscal Quarter, a Total Debt to Consolidated EBITDA Ratio of not more than 4.00
to 1.00.

(b) Current Ratio. Maintain as of the last day of each Fiscal Quarter,
commencing with the Fiscal Quarter ending March 31, 2013, a Current Ratio of not
less than 1.00 to 1.00.

7.10 Governmental and Other Approvals. Apply for, obtain and/or maintain in
effect, as applicable, all authorizations, consents, approvals, licenses,
qualifications, exemptions, filings, declarations and registrations (whether
with any court, Governmental Authority, regulatory authority, securities
exchange or otherwise) which are necessary or reasonably requested by
Administrative Agent in connection with the execution, delivery and performance
by the Parent or any Credit Party, as applicable, of this Agreement, the other
Loan Documents, or any other documents or instruments to be executed and/or
delivered by the Parent or any Credit Party, as applicable in connection
therewith or herewith, except where the failure to so apply for, obtain or
maintain could not reasonably be expected to have a Material Adverse Effect.

7.11 Compliance with ERISA; ERISA Notices.

(a) Comply in all material respects with all material requirements imposed by
ERISA and the Internal Revenue Code, including, but not limited to, the minimum
funding requirements for any Pension Plan, except to the extent that any
noncompliance could not reasonably be expected to have a Material Adverse
Effect.

 

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(b) Promptly notify Administrative Agent upon the occurrence of any of the
following events of which Borrower has knowledge if any such event or events
would reasonably be expected to have a Material Adverse Effect: (i) the
termination, other than a standard termination, as defined in ERISA, of any
Pension Plan subject to Subtitle C of Title IV of ERISA by any Credit Party;
(ii) the appointment of a trustee by a United States District Court to
administer any Pension Plan subject to Title IV of ERISA; (iii) the commencement
by the PBGC, of any proceeding to terminate any Pension Plan subject to Title IV
of ERISA; (iv) the failure of any Credit Party to make any payment in respect of
any Pension Plan required under Section 412 of the Internal Revenue Code or
Section 302 of ERISA; (v) the withdrawal of any Credit Party from any
Multiemployer Plan if any Credit Party reasonably believes that such withdrawal
would give rise to the imposition of Withdrawal Liability with respect thereto;
or (vi) the occurrence of (x) a “reportable event” which is required to be
reported by a Credit Party under Section 4043 of ERISA other than any event for
which the reporting requirement has been waived by the PBGC or (y) a “prohibited
transaction” as defined in Section 406 of ERISA or Section 4975 of the Internal
Revenue Code other than a transaction for which a statutory exemption is
available or an administrative exemption has been obtained.

7.12 Future Restricted Subsidiaries; Additional Collateral.

(a) Within thirty (30) days after the date any Person becomes a Restricted
Subsidiary (or such longer time period as Administrative Agent may determine),
whether by acquisition, an Unrestricted Subsidiary becoming a Restricted
Subsidiary or otherwise, cause such new Restricted Subsidiary to execute and
deliver to Administrative Agent, for and on behalf of each of the Secured
Parties (unless waived by Administrative Agent) a joinder agreement to the
Guaranty whereby such Restricted Subsidiary shall become obligated as a
Guarantor under the Guaranty; and

(b) Within thirty (30) days after the date any Person becomes a Restricted
Subsidiary (or such longer time period as Administrative Agent may determine),
whether by acquisition, an Unrestricted Subsidiary becoming a Restricted
Subsidiary or otherwise, Borrower shall (i) in the event Borrower is the owner
of the Equity Interests of such Restricted Subsidiary, pledge such Equity
Interests to Administrative Agent, for the benefit of the Secured Parties
pursuant to a Pledge Agreement (or a joinder to a Pledge Agreement), (ii) in the
event that a Credit Party (other than Borrower) is the owner of such Equity
Interests, cause such Credit Party to execute and deliver a Pledge Agreement (or
a joinder to a Pledge Agreement) and pledge such Equity Interests to the
Administrative Agent, for the benefit of the Secured Parties, and (iii) take, or
cause to be taken, such action as may be necessary to perfect the Liens created
pursuant to a Pledge Agreement on such Equity Interests.

Borrower will also deliver, or cause to be delivered, to Administrative Agent
such supporting documentation, including without limitation corporate authority
items, certificates and opinions of counsel, as may be reasonably required by
Administrative Agent in connection with the actions required under this
Section 7.12. Upon Administrative Agent’s reasonable request, Borrower shall
take, or cause to be taken, such additional steps as are necessary under
applicable law to perfect and ensure the validity and priority of the Liens
granted under this Section 7.12.

 

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7.13 Use of Proceeds. Use all Advances of the Revolving Credit as set forth in
Section 2.12. Borrower shall not use any portion of the proceeds of any such
Advances for the purpose of purchasing or carrying any “margin stock” (as
defined in Regulation U of the Board of Governors of the Federal Reserve
System) in any manner which violates the provisions of Regulation T, U or X of
said Board of Governors or for any other purpose in violation of any applicable
statute or regulation.

7.14 Further Assurances and Information.

(a) Promptly execute and deliver, and cause the Parent and each Restricted
Subsidiary to promptly execute and deliver, to Administrative Agent all such
other documents, agreements and instruments reasonably requested by the
Administrative Agent or the Majority Lenders to effectuate more fully the
purposes and intent of this Agreement and the other Loan Documents, or to comply
with, cure any defects, or accomplish the covenants and agreements of the
Parent, Borrower or any Restricted Subsidiary, as the case may be, in this
Agreement and the other Loan Documents, 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 any other Loan Document, or to state more
fully the obligations secured in any of the Collateral Documents, or to perfect,
protect or preserve any Liens created pursuant to this Agreement or any of the
Collateral Documents or the priority thereof, or to make any recordings, file
any notices or obtain any consents, all as may be necessary or appropriate in
connection therewith.

(b) Provide Administrative Agent and Lenders with any other information required
by Section 326 of the USA Patriot Act or necessary for Administrative Agent and
Lenders to verify the identity of the Parent or any Credit Party as required by
Section 326 of the USA Patriot Act.

7.15 Reserve Reports.

(a) On March 1 and September 1 of each year (or in the case of the Determination
Date to occur on November 1, 2012, October 15, 2012), commencing October 15,
2012, Borrower shall furnish to Administrative Agent and Lenders a Reserve
Report dated as of the preceding January 1 of that year for the Reserve Report
due March 1 and as of the preceding July 1 of that year for the Reserve Report
due September 1 (or in the case of the Reserve Report due October 15, 2012, a
Reserve Report dated as of October 1, 2012). Each Reserve Report required to be
delivered on March 1 of each year shall be prepared by or audited by Netherland,
Sewell & Associates, Inc. or another independent petroleum consulting firm
reasonably acceptable to Administrative Agent. Each other Reserve Report shall
be prepared by Borrower’s in-house staff under the supervision of the
appropriate officer who shall certify such Reserve Report to be true and
accurate in all material respects and, except as disclosed therein, to have been
prepared in accordance with the methodology and procedures used in the
immediately preceding January 1 Reserve Report.

 

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(b) In the event of any special determination of the Conforming Borrowing Base
or the Borrowing Base under Section 4.4, Borrower shall furnish to
Administrative Agent and Lenders a Reserve Report prepared by Borrower’s
in-house staff under the supervision of the appropriate officer who shall
certify such Reserve Report to be true and accurate in all material respects
and, except as disclosed therein, and to have been prepared in accordance with
the methodology and procedures used in the immediately preceding Reserve Report.
Borrower shall provide such Reserve Report with an “as of” date as reasonably
requested by Administrative Agent as soon as possible, but in any event no later
than sixty (60) days following the receipt of the reasonable request by
Administrative Agent. For any special determination requested by Borrower
pursuant to Section 4.4, the “as of” date shall be not more than 120 days
preceding the date of delivery of the corresponding Reserve Report.

(c) With the delivery of each Reserve Report, Borrower shall provide to
Administrative Agent and Lenders, a certificate from a Responsible Officer
certifying on behalf of Borrower 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 Credit Parties own good
and defensible title to the Borrowing Base Properties evaluated in such Reserve
Report (which shall note which Oil and Gas Properties are Mortgaged
Properties) and such Borrowing Base Properties are free of all Liens except for
Liens permitted under Section 8.2, (iii) except as set forth on an exhibit to
the certificate, on a net basis there are no Material Gas Imbalances and the
aggregate amount of all Advance Payments received by any Credit Party under
Advance Payment Contracts that have not been satisfied by delivery of production
does not exceed $1,000,000, and (iv) none of their Borrowing Base Properties
evaluated in the most recent Reserve Report 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 (A) all Borrowing Base Properties
sold, (B) all Borrowing Base Properties added to and deleted from the
immediately prior Reserve Report, showing any change in working interest or net
revenue interest and the reason for such change, and (C) all Persons disbursing
proceeds to the Credit Parties from the Borrowing Base Properties.

7.16 Title Information and Mortgage Coverage.

(a) Delivery. On or before the delivery to Administrative Agent and Lenders of
each Reserve Report required by Section 7.15, Borrower will deliver title
information in form and substance reasonably acceptable to 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
Administrative Agent shall have received together with title information
previously delivered to Administrative Agent, reasonably satisfactory title
information on at least 80% of the value of the Oil and Gas Properties evaluated
by such Reserve Report and constituting Mortgaged Properties.

 

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(b) Cure of Title Defects. Upon reasonable request by Administrative Agent,
Borrower shall cure any title defects or exceptions which are not Liens
permitted under Section 8.2 and which in the reasonable discretion of
Administrative Agent render the title to the Mortgaged Properties not good and
defensible (except for Liens permitted by Section 8.2), or substitute acceptable
Borrowing Base Properties of an equivalent value, with no title defects or
exceptions except for Liens permitted under Section 8.2, within ninety (90) days
after a reasonable request by Administrative Agent or Lenders to cure such
defects or exceptions.

(c) Failure to Cure Title Defects. If Borrower is unable to cure any title
defect required to be cured under Section 7.16(b) above as reasonably requested
by Administrative Agent or Lenders to be cured within the 90-day period or
Borrower does not comply with the requirements to provide reasonably acceptable
title information covering 80% of the value of the Oil and Gas Properties
evaluated in the most recent Reserve Report and constituting Mortgaged
Properties, such default shall not be a Default or an Event of Default, but
instead Administrative Agent and 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 Administrative Agent or Lenders. To the extent that
Administrative Agent or the Majority Lenders are not satisfied with title to any
Mortgaged Property after the time period in Section 7.15(b) has elapsed, such
unacceptable Mortgaged Property shall not count towards the 80% requirement, and
Administrative Agent may send a notice to Borrower and Lenders that the then
outstanding Borrowing Base shall be reduced by an amount as reasonably
determined by Administrative Agent with the concurrence of the Supermajority
Lenders to cause Borrower to be in compliance with the requirement to provide
reasonably acceptable title information on 80% of the value of the Mortgaged
Properties. This new Borrowing Base shall become effective immediately after
receipt of such notice.

7.17 Collateral.

(a) Collateral. The Indebtedness shall be secured by a perfected first priority
Lien (subject only to Liens permitted under Section 8.2) granted to
Administrative Agent for the benefit of the Secured Parties on (i) no less than
90% before the Borrowing Base Equalization Date and 80% after the Borrowing Base
Equalization Date of the value of Oil and Gas Properties owned by the Credit
Parties to which proved reserves of oil or gas are attributed in the most recent
Reserve Report; provided that, notwithstanding the foregoing, for the 45 day
period following the Effective Date, Borrower shall be in compliance with this
clause (i) so long as Administrative Agent has been granted a Lien, for the
benefit of the Secured Parties, on no less than 85% of the value of Oil and Gas
Properties owned by the Credit Parties to which proved reserves of oil or gas
are attributed in the most recent Reserve Report, (ii) all tangible and
intangible personal property of the Credit Parties (other than Excluded Assets)
located on or related to, any of the Mortgaged Properties, (iii) all accounts
receivable and other proceeds arising from the sale of Hydrocarbons produced
from the Mortgaged Properties, and (iv) the Equity Interests directly or
indirectly owned by the Credit Parties in any Restricted Subsidiary.

 

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(b) Title Information. Upon reasonable request by Administrative Agent in
connection with the granting of the Lien on Oil and Gas Properties referred to
in clause (a) above, Borrower will provide to Administrative Agent title
information in form and substance reasonably satisfactory to Administrative
Agent with respect to such Credit Party’s interests, provided that Borrower will
not be required to provide title information for more than 80% of the value of
the Mortgaged Properties evaluated by the most recent Reserve Report.

(c) Legal Opinions. Promptly after the filing of any new Collateral Document in
any state, upon the reasonable request of Administrative Agent, Borrower will
provide to Administrative Agent an opinion of counsel addressed to
Administrative Agent, for the benefit of Lenders, in form and substance
reasonably satisfactory to Administrative Agent, stating that the Collateral
Document is valid, binding, and enforceable in accordance with its terms in
legally sufficient form for such jurisdiction and containing such other matters
as reasonably requested by Administrative Agent.

ARTICLE 8. NEGATIVE COVENANTS.

Borrower covenants and agrees that, so long as any Lender has any commitment to
extend credit hereunder, or any of the Indebtedness remains outstanding and
unpaid (excluding contingent reimbursement and indemnification obligations for
which no claim has been made and Lender Hedging Obligations and Lender Product
Obligations), it will not, and, as applicable, it will not permit any of its
Restricted Subsidiaries to:

8.1 Limitation on Debt. Create, incur, assume or suffer to exist any Debt,
except:

(a) Debt of any Credit Party to Administrative Agent and/or any Secured Party
constituting Indebtedness;

(b) any Debt existing on the Effective Date and set forth in Schedule 8.1
attached hereto and any refinancing, refundings and renewals thereof (without
increasing the principal amount thereof);

(c) Debt of any Credit Party to finance the acquisition, construction or
improvement of any fixed or capital assets, including Capitalized Leases,
provided that both at the time of and immediately after giving effect to the
incurrence thereof the aggregate amount of all such Debt at any one time
outstanding (including, without limitation, any Debt of the type described in
this clause (c) which is set forth on Schedule 8.1) shall not exceed $10,000,000
and any renewals or refinancings of such Debt;

(d) [Intentionally Omitted];

(e) Debt arising from judgments that do not constitute a Default or Event of
Default under Section 9.1(h);

(f) Debt of Borrower or any Restricted Subsidiary to Parent, and intercompany
Debt among Borrower and its Subsidiaries;

 

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(g) obligations to royalty, overriding and working interest owners, joint
interest obligations, trade payables and other lease operating expenses incurred
in the ordinary course of business which are not more than one hundred
twenty (120) days past due or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP;

(h) Debt associated with bonds or sureties provided to any Governmental
Authority or to any other Person in connection with the operation of Oil and Gas
Properties;

(i) Debt under Advance Payment Contracts permitted by Section 8.10;

(j) Debt in connection with the endorsement of negotiable instruments, cash
management and other similar obligations in respect of netting services,
overdraft protection and similar arrangements, in each case in the ordinary
course of business;

(k) Debt associated with or in respect of workers’ compensation claims,
performance, bid, release, appeal and surety bonds and performance and
completion guarantees and similar obligations provided by Borrower or any of the
Restricted Subsidiaries, in each case in the ordinary course of business;

(l) Debt consisting of the financing of insurance premiums;

(m) Debt in respect of self-insurance obligations to the extent incurred in the
ordinary course of business in accordance with customary industry practices in
amounts customary in Borrower’s and its Restricted Subsidiaries’ industry;

(n) to the extent constituting Debt, indemnification, deferred purchase price
adjustments, earn-outs or similar obligations, in each case, incurred or assumed
in connection with the acquisition of any business or assets or any Investment
permitted to be acquired or made hereunder or any Disposition permitted
hereunder;

(o) Debt representing deferred compensation or similar obligations to employees
of Parent and its Subsidiaries incurred in the ordinary course of business;

(p) Debt incurred in the ordinary course of business with respect to customer
deposits and other unsecured current liabilities not the result of borrowing and
not evidenced by any note or other evidence of Debt;

(q) guarantee obligations in respect of (i) Debt otherwise permitted pursuant to
this Section 8.1 and (ii) loans to employees of the Parent and its Subsidiaries
for the exercise of stock options, provided that, in the case of clause (ii),
such loans shall not exceed $1,000,000 in the aggregate at any time outstanding;
and

(r) additional Debt in an aggregate principal amount outstanding for all such
Debt not to exceed at any time ten percent (10%) of the amount of the Borrowing
Base then in effect.

 

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8.2 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon
any of its property, assets or revenues, whether now owned or hereafter
acquired, except for:

(a) Permitted Encumbrances;

(b) Liens securing Debt permitted by Section 8.1(c), provided that (i) such
Liens are created upon fixed or capital assets acquired, constructed or improved
by the applicable Credit Party after the date of this Agreement (including
without limitation by virtue of a loan or a Capitalized Lease), (ii) any such
Lien is created solely for the purpose of securing indebtedness representing or
incurred to finance the cost of the acquisition of the item of property subject
thereto, (iii) the principal amount of the Debt secured by any such Lien shall
at no time exceed 100% of the sum of the purchase price or cost of the
applicable property, equipment or improvements and the related costs and charges
imposed by the vendors thereof and (iv) the Lien does not cover any property
other than the fixed or capital asset acquired (and proceeds and accessions and
additions to such property);

(c) Liens created pursuant to the Loan Documents;

(d) other Liens, existing on the Effective Date, set forth on Schedule 8.2 and
renewals, refinancings and extensions thereof;

(e) Liens securing insurance premium financings, provided that no such Lien may
extend to or cover any property other than the insurance being acquired with
such financings, the proceeds thereof and any unearned or refunded insurance
premiums related thereto; and

(f) Liens on property not constituting Borrowing Base Properties or Collateral
or any proceeds thereof.

Regardless of the provisions of this Section 8.2, no Lien over the Equity
Interests of any Restricted Subsidiary of Borrower (except for those Liens for
the benefit of Administrative Agent and the other Secured Parties) shall be
permitted under the terms of this Agreement.

8.3 Fundamental Changes. Merge into or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or Dispose of (in
one transaction or in a series of transactions) all or substantially all of its
assets, or liquidate, wind up or dissolve, except that:

(a) any Restricted Subsidiary may merge into Borrower in a transaction in which
Borrower is the continuing or surviving entity;

(b) any Restricted Subsidiary may merge into any other Restricted Subsidiary or
an Unrestricted Subsidiary, in each case only to the extent that the continuing
or surviving entity is a Restricted Subsidiary;

 

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(c) Borrower or any Restricted Subsidiary may merge with or into any other
Person, provided that Borrower or a Restricted Subsidiary, as applicable, is the
continuing or surviving entity;

(d) any Restricted Subsidiary may Dispose of its assets to Parent, Borrower or
to another Restricted Subsidiary or any Unrestricted Subsidiary;

(e) Dispositions permitted by Section 8.4 may be made; and

(f) any Restricted Subsidiary may liquidate or dissolve if Borrower determines
in good faith that such liquidation or dissolution is in the best interests of
Borrower or such Restricted Subsidiary and any remaining assets are thereafter
held by Borrower or another Restricted Subsidiary.

8.4 Dispositions. Dispose of any of the Borrowing Base Properties, whether now
owned or hereafter acquired, except:

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

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

(c) the Disposition of equipment and other property in the ordinary course of
business, in each case that is obsolete or no longer necessary in the business
of any of the Credit Parties or that is being replaced by equipment of
comparable value and utility;

(d) Liens permitted by Section 8.2, Investments permitted by Section 8.6 and
Distributions permitted by Section 8.5;

(e) Dispositions permitted by Section 8.3;

(f) Dispositions of cash and Cash Equivalents in the ordinary course of
business;

(g) Borrower may Dispose of its Borrowing Base Properties to any Restricted
Subsidiary and any Restricted Subsidiary may Dispose of its Borrowing Base
Properties to Borrower or any other Restricted Subsidiary;

(h) sales or discounts of overdue accounts receivable in the ordinary course of
business;

(i) Dispositions of owned or leased vehicles in the ordinary course of business;

(j) Dispositions consisting of any compulsory pooling or unitization ordered by
a Governmental Authority with jurisdiction over the subject Oil and Gas
Properties; and

 

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(k) other Dispositions of Borrowing Base Properties, provided that: (i) 90% of
the consideration received in respect of such Disposition shall be cash,
(ii) the consideration received in respect of such Disposition shall be equal to
or greater than the fair market value of the Borrowing Base Property or interest
therein, (iii) if such Disposition of Borrowing Base Properties (or the Equity
Interests of any Restricted Subsidiary owning Borrowing Base Properties) during
any period between two successive scheduled redeterminations has a fair market
value in excess of five percent (5%) of the Borrowing Base then in effect (as
reasonably determined by the Administrative Agent), individually or in the
aggregate for all such Borrowing Base Properties, the Borrowing Base and, at any
time prior to the Borrowing Base Equalization Date, the Conforming Borrowing
Base shall be reduced, effective immediately upon such Disposition, by an amount
equal to the value, if any, assigned such Borrowing Base Properties in the most
recently delivered Reserve Report; provided that, notwithstanding the foregoing,
in no event shall the Borrowing Base exceed 122% of the Conforming Borrowing
Base as a result of such Disposition, (iv) after giving effect to any reduction
in the Borrowing Base and, at any time prior to the Borrowing Base Equalization
Date, the Conforming Borrowing Base pursuant to clause (iii) above, Borrower
shall use the Net Cash Proceeds received from such Disposition to reduce the
Aggregate Credit Exposure pursuant to and in accordance with the terms of
Section 2.10(c) and (v) immediately before and after giving effect thereto, no
Default shall have occurred and been continuing.

Lenders hereby consent and agree to the release by Administrative Agent of any
and all Liens on the property sold or otherwise Disposed of in compliance with
this Section 8.4.

8.5 Restricted Payments. Declare or make any distributions, dividend, payment or
other distribution of assets, properties, cash, rights, obligations or
securities (collectively, “Distributions”) on account of any of its Equity
Interests, as applicable, or purchase, redeem or otherwise acquire for value any
of its Equity Interests, as applicable, or any warrants, rights or options to
acquire any of its Equity Interests, now or hereafter outstanding (collectively,
“Purchases”), except that:

(a) each Credit Party may pay cash Distributions to Borrower or a Restricted
Subsidiary;

(b) Borrower and each Credit Party may declare and make Distributions payable in
the Equity Interests of such Person, provided that the issuance of such Equity
Interests does not otherwise violate the terms of this Agreement and no Default
has occurred and is continuing at the time of making such Distribution or would
result from the making of such Distribution; and

(c) Borrower may declare and make Distributions to the Parent; provided,
however, that if an Event of Default has occurred and is continuing,
Distributions to the Parent during such period while an Event of Default exists
must be used by the Parent only for operational purposes.

 

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8.6 Limitation on Investments, Loans and Advances. Make or permit to remain
outstanding any loans, or advances to, or investments in (collectively,
“Investments”), (whether such investment shall be of the character of investment
in shares of stock, evidences of indebtedness or other securities or otherwise),
or any loans or advances to, any Person, other than:

(a) Investments in cash and Cash Equivalents;

(b) Investments existing on the Effective Date and listed on Schedule 8.6;

(c) Investments (i) made by Borrower in any Restricted Subsidiary, any
Unrestricted Subsidiary or Parent, or (ii) made by any Restricted Subsidiary in
Borrower, any other Restricted Subsidiary, any Unrestricted Subsidiary or
Parent;

(d) Investments in respect of Commodity Hedging Agreements and Interest Rate
Agreements permitted by Section 8.1(d);

(e) advances to employees of Parent and its Subsidiaries for travel, meals and
entertainment expenses in the ordinary course of business and loans to employees
for the purpose of exercise of stock options, all of which in the aggregate
outstanding at any time shall not exceed 2% of the amount of the Borrowing Base;

(f) the creation or acquisition of additional Restricted Subsidiaries made in
compliance with Section 7.12;

(g) demand deposits with financial institutions, prepaid expenses and extensions
of trade credit in the ordinary course of business (and any Investments received
in satisfaction or partial satisfaction thereof from financially troubled
account debtors to the extent reasonably necessary in order to prevent or limit
loss);

(h) guarantee obligations permitted by Section 8.1;

(i) Investments by Borrower and its Restricted Subsidiaries that are
(i) customary in the oil and gas business, and (ii) made in the form of, or
pursuant to, Oil and Gas Properties, operating agreements, farm-in agreements,
farm-out agreements, mutual interest agreements, development agreements,
unitization agreements, joint bidding agreements, joint venture agreements,
services contracts and other similar agreements;

(j) the acquisition of Oil and Gas Properties, equipment and other property, and
investments with respect to and relating to the production of oil, gas and other
liquid or gaseous Hydrocarbons from Oil and Gas Properties;

(k) the entry into operating agreements, working interests, royalty interests,
mineral leases, processing agreements, farm-out agreements, contracts for the
sale, transportation or exchange of oil and natural gas, unitization agreements,
pooling arrangements, area of mutual interest agreements, production sharing
agreements or other similar or customary agreements, transactions, properties,
interests or arrangements, and investments and expenditures in connection
therewith or pursuant thereto in the ordinary course of business;

 

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(l) Investments representing the non-cash portion of the consideration received
for any Disposition of any assets permitted under Section 8.4;

(m) Investments (including, without limitation, capital contributions) in
general or limited partnerships or other types of entities or joint ventures
entered into by Borrower or a Restricted Subsidiary;

(n) extensions of trade credit in the ordinary course of business; and

(o) in addition to Investments otherwise expressly permitted by this Section,
Investments by Borrower or any of its Restricted Subsidiaries in an aggregate
amount at any time outstanding not to exceed the greater of (x) $5,000,000 or
(y) two percent (2%) of the amount of the Borrowing Base then in effect.

For purposes of determining compliance with this Section 8.6, the amount of any
Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment, but with
adjustment for amounts actually returned in cash to Borrower or the applicable
Restricted Subsidiary on such Investment.

8.7 Transactions with Affiliates and Unrestricted Subsidiaries. Except as set
forth in Schedule 8.7, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Unrestricted Subsidiary or any Affiliate of the Credit
Parties; provided that the foregoing restrictions shall not apply to:
(a) transactions among Borrower, Parent or Subsidiaries of Borrower that are
Guarantors; (b) transactions otherwise specifically permitted under this
Agreement; (c) transactions in the ordinary course of a Credit Party’s business
and upon fair and reasonable terms no less favorable to such Credit Party than
it would obtain in a comparable arm’s length transaction from unrelated third
parties, (d) the payment of directors’ fees and indemnification and
reimbursement of expenses to directors, officers or employees; (e) any issuance
of securities or other payments, awards or grants in cash, securities or
otherwise pursuant to, or the funding of, employment agreements, stock options
and stock ownership plans, and (f) employment and severance arrangements entered
into in the ordinary course of business between Borrower or any Subsidiary and
any employee thereof.

8.8 Limitations on Other Restrictions. Enter into any agreement, document or
instrument which would (a) restrict the ability of any Restricted Subsidiary of
Borrower to pay or make dividends or distributions in cash or kind to Borrower
or any other Restricted Subsidiary, to make loans, advances or other payments of
whatever nature to any Credit Party, or to make transfers or distributions of
all or any part of its assets to any Credit Party; or (b) restrict or prevent
any Credit Party from granting Administrative Agent on behalf of Lenders Liens
upon, security interests in and pledges of their respective assets, provided,
however, that the preceding restrictions will not apply to encumbrances or
restrictions arising under or by reason of (i) this Agreement or the other Loan
Documents, (ii) any agreements governing any Debt permitted by Section 8.1(c)
and any other purchase money Debt or Capitalized Leases otherwise permitted

 

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hereby (in which case, any prohibition or limitation shall only be effective
against the assets financed by or the subject of such Debt and the proceeds and
products thereof and all accessions and attachments thereto), (iii) customary
restrictions that arise in connection with any Disposition permitted by
Section 8.4 and applicable solely to the assets subject to such Disposition,
(iv) customary provisions in joint venture agreements and similar agreements
that restrict transfer of assets of, or Equity Interests in, joint ventures,
(v) prohibitions and limitations that are binding on a Restricted Subsidiary at
the time such Restricted Subsidiary first becomes a Restricted Subsidiary, so
long as such prohibitions and limitations were not created in contemplation of
such Person becoming a Restricted Subsidiary and apply only to such Restricted
Subsidiary, (vi) restrictions with respect to Oil and Gas Properties that are
not Borrowing Base Properties and are not included in the most recent Reserve
Report delivered pursuant to Section 4.3, (vii) customary provisions contained
in agreements that restrict assignment of such agreement entered into in the
ordinary course of business, (viii) customary provisions in leases, subleases,
licenses, sublicenses and similar contracts that restrict the transfer thereof
or the transfer of the assets subject thereto by the lessee, sublessee, licensee
or sublicensee, and (ix) prohibitions and limitations arising by operation of
law.

8.9 Fiscal Year. Permit the Fiscal Year of any Credit Party or Parent to end on
a day other than December 31.

8.10 Gas Balancing Agreements and Advance Payment Contracts. Allow (a) any
Material Gas Imbalance and (b) the aggregate amount of all Advance Payments
received by any Credit Party under Advance Payment Contracts which have not been
satisfied by delivery of production to exceed $1,000,000.

8.11 Hedging Transactions. Enter into any Commodity Hedging Agreements or
Interest Rate Agreements, except Commodity Hedging Agreements and Interest Rate
Agreements entered into with an Approved Counterparty in the ordinary course of
business and not for speculative purposes to:

(a) hedge or mitigate crude oil and condensate, natural gas and natural gas
liquids price risks to which Borrower or any Restricted Subsidiary has actual
exposure (whether or not treated as a hedge for accounting purposes under GAAP);
provided that at the time Borrower or any Restricted Subsidiary enters into any
such Commodity Hedging Agreement, such Commodity Hedging Agreement (A) does not
have a term greater than forty-eight (48) months from the date such Commodity
Hedging Agreement is entered into, and (B) when aggregated and netted with all
other Commodity Hedging Agreements of Borrower and its Restricted Subsidiaries
then in effect would not cause the aggregate notional volume per month for each
of crude oil and condensate, natural gas and natural gas liquids, calculated
separately, under all Commodity Hedging Agreements then in effect (other than
Excluded Hedges) to exceed for any month during the forthcoming four year
period, eighty-five percent (85%) of the total anticipated production of
Borrower and its Restricted Subsidiaries, taken as a whole; and

(b) effectively cap, collar or exchange interest rates (from fixed to floating
rates, from one floating rate to another floating rate or otherwise) with
respect to any interest-bearing liability or investment of Borrower or any
Restricted Subsidiary.

 

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In no event shall any Commodity Hedging Agreement or Interest Rate Agreement
entered into by Borrower or any Restricted Subsidiary contain any requirement,
agreement or covenant for Borrower or any Restricted Subsidiary to post
collateral or margin to secure their obligations under such Commodity Hedging
Agreement or Interest Rate Agreement, as the case may be, or to cover market
exposures; provided that this sentence shall not prevent (x) a Lender
Counterparty from requiring the obligations under any Commodity Hedging
Agreement or Interest Rate Agreement with Borrower or any Restricted Subsidiary
to be secured by the Liens granted to Administrative Agent pursuant to the
Collateral Documents and (y) Borrower or any Restricted Subsidiary from
delivering letters of credit (including Letters of Credit issued by an Issuing
Lender pursuant to this Agreement) to secure their obligations under Commodity
Hedging Agreements and Interest Rate Agreements so long as the aggregate face
amount of all such letters of credit, taken as a whole, shall not exceed fifty
percent (50%) of the Letter of Credit Maximum Amount at any time.

8.12 Nature of Business. Permit any material change to be made in the character
of its business as an oil and gas exploration and production company and related
businesses, including without limitation, the gas gathering business.

ARTICLE 9. DEFAULTS.

9.1 Events of Default. The occurrence of any of the following events shall
constitute an Event of Default hereunder:

(a) Borrower shall fail to pay when due or declared due any part of the
principal of or interest on any Advance and any such payment default shall
continue unremedied for more than one Business Day;

(b) [Intentionally Omitted];

(c) non-payment of any Reimbursement Obligation, fees or other amounts (other
than as set forth in subsection (a) above) due and owing by Borrower, any other
Credit Party or the Parent under this Agreement or by any Credit Party or the
Parent under any of the other Loan Documents to which it is a party, when and as
the same shall become due and payable, and such failure shall continue
unremedied for a period of five (5) Business Days after the same is due and
payable;

(d) default in the observance or performance of any of the covenants or
agreements (as applicable) of Borrower set forth in Sections 7.1, 7.2(a),
7.4(a), 7.5(d), 7.7(a), 7.9, 7.13, 7.15, or Article 8 in its entirety, provided
that an Event of Default arising from a breach of Sections 7.1, 7.2(a) or 7.15
shall be deemed to have been cured upon delivery of the required item; and
provided further that any Event of Default arising solely due to a breach of
Section 7.7(a) shall be deemed cured upon the earlier of (x) the giving of the
notice required by Section 7.7(a) and (y) the date upon which the Default or
Event of Default giving rise to the notice obligation is cured or waived;

(e) default in the observance or performance of any of the other covenants or
agreements (as applicable) of the Parent or any Credit Party set forth in this
Agreement or any other Loan Document (other than those specified in clauses (a),
(c) and (d) above) and such default shall continue unremedied for a period
of forty-five (45) consecutive days after written notice thereof has been given
to Borrower;

 

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(f) any representation or warranty under the Loan Documents, including this
Agreement, or in any certificate or statement furnished or made to the
Administrative Agent or Lenders pursuant hereto, or in connection herewith, or
in connection with any document furnished hereunder, shall prove to be untrue in
any material respect as of the date on which such representation or warranty is
made (or deemed made), or any representation, statement (including financial
statements), certificate, report or other data furnished or made under any Loan
Document, including this Agreement, proves to have been untrue in any material
respect, as of the date as of which the facts therein set forth were stated or
certified (except as such information shall have specifically been replaced or
modified);

(g) (i) default by Parent or any Credit Party in the payment of any Material
Debt, whether under a direct obligation or guaranty, and continuance thereof
beyond any applicable period of grace or cure, if any, provided in the
instrument or agreement under which such Material Debt was created or
(ii) failure by Parent or any Credit Party to observe or perform any other
agreement contained in any instrument or agreement evidencing or securing such
Material Debt which continues beyond any applicable period of grace or cure, if
any, provided in the instrument or agreement under which such Material Debt was
created, and the effect of which would permit the holder or holders thereof to
accelerate such Material Debt, or require the prepayment, repurchase, redemption
or defeasance of such Material Debt; provided, that a default, event or
condition described in clause (i) or (ii) of this paragraph (g) shall not
constitute an Event of Default if any such defaults, events or conditions are
remedied or waived, prior to the exercise of any remedies by Administrative
Agent pursuant to Section 9.2 (other than the charging of interest at the
default rate specified herein), by the requisite holders or beneficiaries of
such Material Debt (or a trustee or agent on behalf of such holders or
beneficiaries);

(h) A judgment (not paid or fully covered by insurance as to which the relevant
insurance company has not denied coverage in writing), for the payment of money
in excess of the Threshold Amount is rendered by any court or other governmental
body against Parent or any Credit Party and such Person does not discharge the
judgment or provide for its discharge in accordance with its terms, or procure a
stay of execution thereof within sixty (60) days from the date of entry thereof,
and within said period of sixty (60) days from the date of entry thereof or such
longer period during which execution of such judgment shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such appeal
while providing such reserves therefor as may be required under GAAP;

(i) the occurrence of (i) a “reportable event”, as defined in ERISA, which is
determined by the PBGC to constitute grounds for a distress termination of any
Pension Plan subject to Title IV of ERISA maintained or contributed to by or on
behalf of any Credit Party for the benefit of any of its employees or for the
appointment by the appropriate United States District Court of a trustee to
administer such Pension Plan and

 

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such reportable event is not corrected and such determination is not revoked
within sixty (60) days after notice thereof has been given to the plan
administrator of such Pension Plan (without limiting any of Administrative
Agent’s or any Lender’s other rights or remedies hereunder), or (ii) the
termination or the institution of proceedings by the PBGC to terminate any such
Pension Plan, or (iii) the appointment of a trustee by the appropriate United
States District Court to administer any such Pension Plan, or (iv) the
reorganization (within the meaning of Section 4241 of ERISA) or insolvency
(within the meaning of Section 4245 of ERISA) of any Multiemployer Plan, or
receipt of notice from any Multiemployer Plan that it is in reorganization or
insolvency, or the complete or partial withdrawal by any Credit Party from any
Multiemployer Plan, which in the case of any of the foregoing, could reasonably
be expected to have a Material Adverse Effect;

(j) (i) except as expressly permitted under this Agreement, the Parent or any
Credit Party shall be dissolved or liquidated (or any judgment, order or decree
therefor shall be entered); or (ii) a creditors’ committee shall have been
appointed for the business of the Parent or any Credit Party; or (iii) the
Parent or any Credit Party (A) shall have made a general assignment for the
benefit of creditors or (B) shall have been adjudicated bankrupt and if not an
adjudication based on a filing by the Parent or any Credit Party, as applicable,
it shall not have been dismissed within sixty (60) days, or (C) shall have filed
a voluntary petition in bankruptcy or for reorganization or to effect a plan or
arrangement with creditors, or (D) shall file an answer to a creditor’s petition
or other petition filed against it, admitting the material allegations thereof
for an adjudication in bankruptcy or for reorganization, or (E) shall have
applied for or permitted the appointment of a receiver or trustee or custodian
for any of its property or assets; or (iv) a receiver, trustee or custodian
shall have been appointed for any of its property or assets (other than upon
application or consent of the Parent or any Credit Party, as applicable) and
shall not have been removed within sixty (60) days; or (v) an order shall be
entered approving any petition for reorganization of the Parent or any Credit
Party (other than upon application or consent of the Parent or any Credit Party,
as applicable) and shall not have been reversed or dismissed within sixty
(60) days;

(k) a Change of Control;

(l) Borrower, any other Credit Party or the Parent shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become due;
or

(m) the Loan Documents after delivery thereof shall for any reason, except to
the extent permitted by the terms hereof or thereof, cease to be in full force
and effect and valid, binding and enforceable in accordance with their terms
(other than in accordance with the terms hereof or thereof), or cease to create
a valid and perfected Lien of the priority required thereby on any material
portion of the Collateral, except to the extent permitted by the terms of this
Agreement or any of the other Loan Documents, or Borrower, the Parent or any
Credit Party shall so state in writing.

 

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9.2 Exercise of Remedies. If an Event of Default has occurred and is continuing
hereunder: (a) with the consent of the Majority Lenders, Administrative Agent
may, and shall, upon being directed to do so by the Majority Lenders, declare
the Revolving Credit Aggregate Commitment terminated; (b) with the consent of
the Majority Lenders, Administrative Agent may, and shall, upon being directed
to do so by the Majority Lenders, declare the entire unpaid principal
Indebtedness, including the Notes (but excepting Indebtedness under Lender
Hedging Obligations and Lender Product Obligations), immediately due and
payable, without presentment, notice or demand, all of which are hereby
expressly waived by Borrower; (c) upon the occurrence of any Event of Default
specified in Section 9.1(j) and notwithstanding the lack of any declaration by
Administrative Agent under preceding clauses (a) or (b), the entire unpaid
principal Indebtedness (excepting Indebtedness under Lender Hedging Obligations
and Lender Product Obligations) shall become automatically and immediately due
and payable, and the Revolving Credit Aggregate Commitment shall be
automatically and immediately terminated; (d) Administrative Agent may, and
shall, upon being directed to do so by the Majority Lenders, demand immediate
delivery of cash collateral, and Borrower agrees to deliver such cash collateral
upon demand, in an amount equal to 100% of the maximum amount that may be
available to be drawn at any time prior to the stated expiry of all outstanding
Letters of Credit, for deposit into an account controlled by Administrative
Agent; (e) Administrative Agent may, and shall, upon being directed to do so by
the Majority Lenders, notify Borrower or any Credit Party that interest shall be
payable on demand on all Indebtedness (other than (1) Revolving Credit Advances
with respect to which Section 2.6 shall govern and (2) Lender Hedging
Obligations and Lender Product Obligations) owing from time to time to
Administrative Agent or any Lender, at a per annum rate equal to the then
applicable Base Rate plus 2%; and (f) Administrative Agent may, and shall, upon
being directed to do so by the Majority Lenders or Lenders, as applicable
(subject to the terms hereof), exercise any remedy permitted by this Agreement,
the other Loan Documents or law.

9.3 Rights Cumulative. No delay or failure of Administrative Agent and/or
Lenders in exercising any right, power or privilege hereunder shall affect such
right, power or privilege, nor shall any single or partial exercise thereof
preclude any further exercise thereof, or the exercise of any other power, right
or privilege. The rights of Administrative Agent and Lenders under this
Agreement are cumulative and not exclusive of any right or remedies which
Lenders would otherwise have.

9.4 Waiver by Borrower of Certain Laws. To the extent permitted by applicable
law, Borrower hereby agrees to waive, and does hereby absolutely and irrevocably
waive and relinquish the benefit and advantage of any valuation, stay,
appraisement, extension or redemption laws now existing or which may hereafter
exist, which, but for this provision, might be applicable to any sale made under
the judgment, order or decree of any court, on any claim for interest on the
Notes, or any security interest or mortgage contemplated by or granted under or
in connection with this Agreement or any other Loan Document. These waivers have
been voluntarily given, with full knowledge of the consequences thereof.

9.5 Waiver of Defaults. No Event of Default shall be waived by Administrative
Agent and the Lenders except in accordance with Section 13.9. No single or
partial exercise of any right, power or privilege hereunder, nor any delay in
the exercise thereof, shall preclude other or further exercise of their rights
by Administrative Agent or Lenders. No waiver of any Event of Default shall
extend to any other or further Event of Default. No forbearance on the part of
Administrative Agent or Lenders in enforcing any of their rights shall
constitute a waiver of any of their rights. Borrower expressly agrees that this
Section may not be waived or modified by Lenders or Administrative Agent by
course of performance, estoppel or otherwise.

 

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9.6 Set Off. Upon the occurrence and during the continuance of any Event of
Default, each Lender, each Issuing Lender and each of their respective
Affiliates may at any time and from time to time, without notice to Borrower but
subject to the provisions of Section 10.3 (any requirement for such notice being
expressly waived by Borrower), setoff and apply any and all deposits (general or
special, time or demand, provisional or final, in whatever currency) at any time
held, and other obligations (in whatever currency) at any time owing by such
Lender, such Issuing Lender or any such Affiliate, to or for the credit or the
account of Borrower or any other Credit Party against any and all of the
obligations of Borrower or such Credit Party now or hereafter existing under
this Agreement or any other Loan Document to such Lender, such Issuing Lender or
their respective Affiliates, irrespective of whether or not such Lender, such
Issuing Lender or Affiliate shall have made any demand under this Agreement or
any other Loan Document and although such obligations of Borrower or such Credit
Party may be contingent or unmatured or are owed to a branch, office or
Affiliate of such Lender or such Issuing Lender different from the branch,
office or Affiliate holding such deposit or obligated on such indebtedness. Each
Lender and each Issuing Lender agrees to notify Borrower and the Administrative
Agent promptly after any such setoff and application; provided that the failure
to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender, each Issuing Lender and their respective
Affiliates under this Section 9.6 are in addition to other rights and remedies
(including other rights of setoff) that such Lender, such Issuing Lender or
their respective Affiliates may have.

ARTICLE 10. PAYMENTS, RECOVERIES AND COLLECTIONS.

10.1 Payment Procedure.

(a) All payments to be made by Borrower shall be made without condition or
deduction for any counterclaim, defense, recoupment or setoff. Except as
otherwise provided herein, all payments made by Borrower of principal, interest
or fees hereunder shall be made without setoff or counterclaim on the date
specified for payment under this Agreement and must be received by
Administrative Agent not later than 1:00 p.m. (New York time) on the date such
payment is required or intended to be made in Dollars in immediately available
funds to Administrative Agent at Administrative Agent’s office identified on
Schedule 13.6, for the ratable benefit of the Revolving Credit Lenders in the
case of payments in respect of the Revolving Credit and any Letter of Credit
Obligations. Any payment received by Administrative Agent after 1:00 p.m. (New
York time) shall be deemed received on the next succeeding Business Day and any
applicable interest or fee shall continue to accrue. Upon receipt of each such
payment, Administrative Agent shall make prompt payment to each applicable
Lender, or, in respect of Eurodollar-based Advances, such Lender’s Eurodollar
Lending Office, in like funds and currencies, of all amounts received by it for
the account of such Lender.

 

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(b) Unless Administrative Agent shall have been notified in writing by Borrower
at least two (2) Business Days prior to the date on which any payment to be made
by Borrower is due that Borrower does not intend to remit such payment,
Administrative Agent may, in its sole discretion and without obligation to do
so, assume that Borrower has remitted such payment when so due and
Administrative Agent may, in reliance upon such assumption, make available to
each Revolving Credit Lender on such payment date an amount equal to such
Lender’s share of such assumed payment. If Borrower has not in fact remitted
such payment to Administrative Agent, each Lender shall forthwith on demand
repay to Administrative Agent the amount of such assumed payment made available
or transferred to such Lender, together with the interest thereon, in respect of
each day from and including the date such amount was made available by
Administrative Agent to such Lender to the date such amount is repaid to
Administrative Agent at a rate per annum equal to the Federal Funds Effective
Rate for the first two (2) Business Days that such amount remains unpaid, and
thereafter at a rate of interest then applicable to such Revolving Credit
Advances.

(c) Subject to the definition of “Interest Period” in Section 1.1 of this
Agreement, whenever any payment to be made hereunder shall otherwise be due on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest, if any, in connection with such payment.

10.2 Application of Proceeds of Collateral. Notwithstanding anything to the
contrary in this Agreement, (a) in the case of any Event of Default under
Section 9.1(j), immediately following the occurrence and during the continuance
thereof, (b) on and after the Revolving Credit Maturity Date, and (c) in the
case of any other Event of Default that is continuing:

(a) upon the termination of the Revolving Credit Aggregate Commitment, or

(b) the acceleration of any Indebtedness arising under this Agreement (other
than Commodity Hedging Agreements and Interest Rate Agreements), or

(c) at Administrative Agent’s option, or

(d) upon the request of the Majority Lenders after the commencement of any
remedies hereunder,

all proceeds realized from the liquidation or other disposition of Collateral or
otherwise received after maturity of the Indebtedness, whether by acceleration
or otherwise, shall be applied:

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

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

(c) third, pro rata to payment of accrued interest on Advances;

 

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(d) fourth, pro rata to payment of principal outstanding on Advances, and the
payment of Lender Hedging Obligations and Lender Product Obligations owing to a
Lender or an Affiliate of a Lender;

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

(f) sixth, to serve as cash collateral to be held by the Administrative Agent to
secure Reimbursement Obligations; and

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

10.3 Pro-rata Recovery. Subject to Section 10.4(c), if any Lender shall obtain
any payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of principal of, or interest on, any of the
Advances made by it, or the participations in Letter of Credit Obligations held
by it in excess of its pro rata share of payments then or thereafter obtained by
all Lenders upon principal of and interest on all such Indebtedness, such Lender
shall purchase from the other Lenders such participations in the Revolving
Credit and/or the Letter of Credit Obligations held by them as shall be
necessary to cause such purchasing Lender to share the excess payment or other
recovery ratably in accordance with the applicable Revolving Credit Percentages
of Lenders; provided, however, that if all or any portion of the excess payment
or other recovery is thereafter recovered from such purchasing holder, the
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.

10.4 Treatment of a Defaulting Lender; Reallocation of Defaulting Lender’s
Fronting Exposure.

(a) The obligation of any Lender to make any Advance hereunder shall not be
affected by the failure of any other Lender to make any Advance under this
Agreement, and no Lender shall have any liability to Borrower or any of their
Subsidiaries, Administrative Agent, any other Lender, or any other Person for
another Lender’s failure to make any loan or Advance hereunder.

(b) If any Lender shall become a Defaulting Lender, then such Defaulting
Lender’s right to vote in respect of any amendment, consent or waiver of the
terms of this Agreement or such other Loan Documents, or to approve or consent
to any redetermination of the Conforming Borrowing Base or the Borrowing Base or
to direct or approve any action or inaction by Administrative Agent shall be
subject to the restrictions set forth in Section 13.9.

(c) To the extent and for so long as a Lender remains a Defaulting Lender and
notwithstanding the provisions of Section 10.3 hereof, Administrative Agent
shall be entitled, without limitation, (i) to withhold or setoff and to apply in
satisfaction of those obligations for payment (and any related interest) in
respect of which the Defaulting Lender shall be delinquent or otherwise in
default to Administrative Agent or any Lender (or to hold as cash collateral for
such delinquent obligations or any future defaults) the amounts otherwise
payable to such Defaulting Lender under this Agreement or any other

 

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Loan Document, (ii) if the amount of Advances made by such Defaulting Lender is
less than its Revolving Credit Percentage requires, apply payments of principal
made by Borrower amongst the Non-Defaulting Lenders on a pro rata basis until
all outstanding Advances are held by all Lenders according to their respective
Revolving Credit Percentages and (iii) to bring an action or other proceeding,
in law or equity, against such Defaulting Lender in a court of competent
jurisdiction to recover the delinquent amounts, and any related interest.
Furthermore, the rights and remedies of Borrower, Administrative Agent, Issuing
Lender, and the other Lenders against a Defaulting Lender under this Section
shall be in addition to any other rights and remedies such parties may have
against the Defaulting Lender under this Agreement or any of the other Loan
Documents, applicable law or otherwise, and Borrower waives no rights or
remedies against any Defaulting Lender.

(d) If any Lender shall become a Defaulting Lender, then, for so long as such
Lender remains a Defaulting Lender, any Fronting Exposure shall be reallocated
by Administrative Agent at the request of the Issuing Lender among the
Non-Defaulting Lenders in accordance with their respective Revolving Credit
Percentages of the Revolving Credit, but only to the extent that the sum of the
aggregate principal amount of all Revolving Credit Advances made by each
Non-Defaulting Lender, plus such Non-Defaulting Lender’s Revolving Credit
Percentage of the aggregate outstanding principal amount of Letter of Credit
Obligations prior to giving effect to such reallocation plus such Non-Defaulting
Lender’s Revolving Credit Percentage of the Fronting Exposure to be reallocated
does not exceed such Non- Defaulting Lender’s Revolving Credit Percentage of the
Revolving Credit Aggregate Commitment, and only so long as no Default or Event
of Default has occurred and is continuing on the date of such reallocation.

(e) In the event that each of Administrative Agent, Borrower and Issuing Lender
agrees that a Defaulting Lender has adequately remedied all matters that caused
such Lender to be a Defaulting Lender, then any reallocation of the Fronting
Exposure of such Defaulting Lender pursuant to clause (d) above shall be
readjusted to reflect the inclusion of such Lender’s Revolving Credit Commitment
Amount and on the date of such readjustment such Lender shall purchase at par
such of the Advances of the other Lenders as the Administrative Agent shall
determine may be necessary in order for such Lender to hold such Advances in
accordance with its Revolving Credit Percentage.

ARTICLE 11. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS.

11.1 Reimbursement of Prepayment Costs. If (i) Borrower makes any prepayment of
principal with respect to any Eurodollar-based Advance on any day other than the
last day of the Interest Period applicable thereto (whether voluntarily,
pursuant to any mandatory provisions hereof, by acceleration, or otherwise);
(ii) Borrower converts or continues (or attempts to convert or continue) any
such Advance on any day other than the last day of the Interest Period
applicable thereto; (iii) Borrower fails to borrow, continue, refund or convert
any Eurodollar-based Advance after notice has been given by Borrower to
Administrative Agent in accordance with the terms hereof requesting such
Advance; or (iv) if Borrower fails to make any payment of

 

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principal in respect of a Eurodollar-based Advance when due, Borrower shall
reimburse Administrative Agent for itself and/or on behalf of any Lender, as the
case may be, within ten (10) Business Days of written demand therefor for any
resulting loss, cost or expense incurred (excluding the loss of any Applicable
Margin) by Administrative Agent and Lenders, as the case may be, as a result
thereof, including, without limitation, any such loss, cost or expense incurred
in obtaining, liquidating, employing or redeploying deposits from third parties,
whether or not Administrative Agent and Lenders, as the case may be, shall have
funded or committed to fund such Advance. The amount payable under this Section
by Borrower to Administrative Agent for itself and/or on behalf of any Lender,
as the case may be, shall be deemed to equal an amount equal to the excess, if
any, of (a) the amount of interest which would have accrued on the amount so
prepaid, or not so borrowed, refunded, continued or converted, for the period
from the date of such prepayment or of such failure to borrow, continue, refund
or convert, through the last day of the relevant Interest Period, at the
applicable rate of interest for said Advance(s) provided under this Agreement
(excluding, however, the Applicable Margin included therein, if any), over
(b) the amount of interest (as reasonably determined by Administrative Agent and
Lenders, as the case may be) which would have accrued to Administrative Agent
and Lenders, as the case may be, on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank Eurocurrency
market. Calculation of any amounts payable to any Lender under this paragraph
shall be made as though such Lender shall have actually funded or committed to
fund the relevant Advance through the purchase of an underlying deposit in an
amount equal to the amount of such Advance and having a maturity comparable to
the relevant Interest Period; provided, however, that any Lender may fund any
Eurodollar-based Advance in any manner it deems fit and the foregoing
assumptions shall be utilized only for the purpose of the calculation of amounts
payable under this paragraph. Upon the written request of Borrower,
Administrative Agent and Lenders shall deliver to Borrower a certificate setting
forth in reasonable detail the basis for determining such losses, costs and
expenses, which certificate shall be conclusively presumed correct, absent
manifest error.

11.2 Eurodollar Lending Office. For any Eurodollar-based Advance, if
Administrative Agent or a Lender, as applicable, shall designate a Eurodollar
Lending Office which maintains books separate from those of the rest of
Administrative Agent or such Lender, Administrative Agent or such Lender, as the
case may be, shall have the option of maintaining and carrying the relevant
Advance on the books of such Eurodollar Lending Office.

11.3 Circumstances Affecting LIBOR Rate Availability. If Administrative Agent or
the Majority Lenders (after consultation with Administrative Agent) shall
determine in good faith that, by reason of circumstances affecting the foreign
exchange and interbank markets generally, deposits in Eurodollars in the
applicable amounts are not being offered to Administrative Agent or such Lenders
at the applicable LIBOR Rate, then Administrative Agent shall forthwith give
notice thereof to Borrower. Thereafter, until Administrative Agent notifies
Borrower that such circumstances no longer exist, (i) the obligation of Lenders
to make Advances which bear interest at or by reference to the LIBOR Rate, and
the right of Borrower to convert an Advance to or continue or refund an Advance
as an Advance which bear interest at or by reference to the LIBOR Rate shall be
suspended, (ii) effective upon the last day of each Eurodollar-Interest Period
related to any existing Eurodollar-based Advance, each such Eurodollar-based
Advance shall automatically be converted into an Advance which bears interest at
or by reference to the Base Rate (without regard to the satisfaction of any
conditions to

 

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conversion contained elsewhere herein), and (iii) effective immediately
following such notice, each Advance which bears interest at or by reference to
the Daily Adjusting LIBOR Rate shall automatically be converted into an Advance
which bears interest at or by reference to the Base Rate (without regard to the
satisfaction of any conditions to conversion contained elsewhere herein).

11.4 Laws Affecting LIBOR Rate Availability. If any Change in Law shall make it
unlawful or impossible for any of Lenders (or any of their respective Eurodollar
Lending Offices) to honor its obligations hereunder to make or maintain any
Advance which bears interest at or by reference to the LIBOR Rate, such Lender
shall forthwith give notice thereof to Borrower and to Administrative Agent.
Thereafter, (a) the obligations of the applicable Lenders to make Advances which
bear interest at or by reference to the LIBOR Rate and the right of Borrower to
convert an Advance into or continue or refund an Advance as an Advance which
bears interest at or by reference to the LIBOR Rate shall be suspended and
thereafter only the Base Rate shall be available, and (b) if any of Lenders may
not lawfully continue to maintain an Advance which bears interest at or by
reference to the LIBOR Rate, the applicable Advance shall immediately be
converted to an Advance which bears interest at or by reference to the Base
Rate.

11.5 Increased Cost of Advances Carried at the LIBOR Rate. If any Change in Law
shall:

(a) subject any Recipient to any Taxes (other than (i) Indemnified Taxes,
(ii) Taxes described in clauses (b) through (d) of the definition of Excluded
Taxes and (iii) Connection Income Taxes) on its advances, loans, loan principal,
letters of credit, commitments, or other obligations, or its deposits, reserves,
other liabilities or capital attributable thereto; or

(b) impose, modify or deem applicable any reserve (including, without
limitation, any imposed by the Board of Governors of the Federal Reserve
System), special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, any of Lenders (or any of their
respective Eurodollar Lending Offices) (except any reserve requirement reflected
in the Eurodollar-based rate) or shall impose on any of Lenders (or any of their
respective Eurodollar Lending Offices) or the foreign exchange and interbank
markets any other condition (other than Taxes) affecting any Eurodollar-based
Advance;

and the result of any of the foregoing matters is to increase the costs to any
of Lenders by an amount that any such Lender in its sole and absolute discretion
deems material, of maintaining any part of the Indebtedness hereunder as an
Advance which bears interest at or by reference to the LIBOR Rate or to reduce
the amount of any sum received or receivable by any of Lenders under this
Agreement in respect of an Advance which bears interest at or by reference to
the LIBOR Rate, then such Lender shall promptly notify Administrative Agent, and
Administrative Agent shall promptly notify Borrower of such fact and demand
compensation therefor and, within thirty (30) Business Days after such notice,
Borrower agrees to pay to such Lender or Lenders such additional amount or
amounts as will compensate such Lender or Lenders for such increased cost or
reduction, provided that each Lender agrees to take any reasonable action, to
the extent such action could be taken without cost or administrative or other
burden or restriction

 

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to such Lender, to mitigate or eliminate such cost or reduction, within a
reasonable time after becoming aware of the foregoing matters. Administrative
Agent will promptly notify Borrower of any event of which it has knowledge which
will entitle Lenders to compensation pursuant to this Section, or which will
cause Borrower to incur additional liability under Section 11.1, provided that
Administrative Agent shall incur no liability whatsoever to Lenders or Borrower
in the event it fails to do so. A certificate of Administrative Agent (or such
Lender, if applicable) setting forth the basis for determining such additional
amount or amounts necessary to compensate such Lender or Lenders shall accompany
such demand and shall be conclusively presumed to be correct absent manifest
error.

Notwithstanding anything to the contrary contained in this Section 11.5,
Borrower shall not be required to reimburse or pay any costs or expenses to any
Lender as required by such sections which have accrued more than 180 days prior
to such Lender’s giving notice to Borrower that such Lender has suffered or
incurred such costs or expenses, and none of the Lenders shall be permitted to
pass through to Borrower costs and expenses under this Section 11.5 which are
not also passed through by such Lender to other customers of such Lender
similarly situated when such customer is subject to documents containing
substantively similar provisions as those contained in such Section.

11.6 Capital Adequacy and Other Increased Costs. If, after the Effective Date,
the adoption or introduction of, or any change in any applicable law, treaty,
rule or regulation (whether domestic or foreign) now or hereafter in effect and
whether or not presently applicable to any Lender or Administrative Agent, or
any interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or compliance by any
Lender or Administrative Agent with any guideline, request or directive of any
such authority (whether or not having the force of law), including any risk
based capital guidelines, affects or would affect the amount of capital or
liquidity required to be maintained by such Lender or Administrative Agent (or
any corporation controlling such Lender or Administrative Agent) and such Lender
or Administrative Agent, as the case may be, determines that the amount of such
capital or liquidity is increased by or based upon the existence of such
Lender’s or Administrative Agent’s obligations or Advances hereunder, the effect
of such Change in Law to result in such an increase, and such increase has the
effect of reducing the rate of return on such Lender’s or Administrative Agent’s
(or such controlling corporation’s) capital as a consequence of such obligations
or Advances hereunder to a level below that which such Lender or Administrative
Agent (or such controlling corporation) could have achieved but for such
circumstances (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Lender or Administrative Agent to be
material (collectively, “Increased Costs”), then Administrative Agent or such
Lender shall notify Borrower, and thereafter Borrower shall pay to such Lender
or Administrative Agent, as the case may be, within ten (10) Business Days of
written demand therefor from such Lender or Administrative Agent, additional
amounts sufficient to compensate such Lender or Administrative Agent (or such
controlling corporation) for any increase in the amount of capital or liquidity
and reduced rate of return which such Lender or Administrative Agent reasonably
determines to be allocable to the existence of such Lender’s or Administrative
Agent’s obligations or Advances hereunder. A statement setting forth the amount
of such compensation, the methodology for the calculation and the calculation
thereof which shall also be prepared in good faith and in reasonable detail by
such Lender or Administrative Agent, as the case may be, shall be submitted by
such Lender or by Administrative Agent to Borrower, reasonably promptly after
becoming aware of any event described in this Section 11.6 and shall be
conclusively presumed to be correct, absent manifest error.

 

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Notwithstanding anything to the contrary contained in this Section 11.6,
Borrower shall not be required to reimburse or pay any costs or expenses to any
Lender as required by this Section which have accrued more than 180 days prior
to such Lender’s giving notice to Borrower that such Lender has suffered or
incurred such costs or expenses, and none of the Lenders shall be permitted to
pass through to Borrower costs and expenses under this Section 11.6 which are
not also passed through by such Lender to other customers of such Lender
similarly situated when such customer is subject to documents containing
substantively similar provisions as those contained in this Section.

11.7 Right of Lenders to Fund through Branches and Affiliates. Each Lender may,
if it so elects, fulfill its commitment as to any Advance hereunder by
designating a branch or Affiliate of such Lender to make such Advance; provided
that (a) such Lender shall remain solely responsible for the performances of its
obligations hereunder and (b) no such designation shall result in any material
increased costs to Borrower.

11.8 Margin Adjustment. Adjustments to the Applicable Margins and the Applicable
Fee Percentages set forth on Schedule 1.1 shall be calculated by Administrative
Agent and based on the Borrowing Base Utilization in effect from time to time.
Each change in the Applicable Margins and the Applicable Fee Percentages (based
on the Borrowing Base Utilization) 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 change; provided, however, that if at any time
Borrower fails to deliver a Reserve Report within five (5) days of the date
required to be delivered pursuant to Section 7.15, and for each day during the
period from and including such date to but excluding the date on which such
Reserve Report is delivered, the Applicable Margins and Applicable Fee
Percentages shall be at the highest level on the Applicable Margin Grid.

11.9 Taxes.

(a) Defined Terms. For purposes of this Section 11.9, the term “Lender” includes
any Issuing Lender and the term “applicable law” includes FATCA.

(b) Payments Free of Taxes. Any and all payments by or on account of any
obligation of any Credit Party under any Loan Document shall be made without
deduction or withholding for any Taxes, except as required by applicable law. If
any applicable law (as determined in the good faith discretion of an applicable
Withholding Agent) requires the deduction or withholding of any Tax from any
such payment by a Withholding Agent, then the applicable Withholding Agent shall
be entitled to make such deduction or withholding and shall timely pay the full
amount deducted or withheld to the relevant Governmental Authority in accordance
with applicable law and, if such Tax is an Indemnified Tax, then the sum payable
by the applicable Loan Party shall be increased as necessary so that after such
deduction or withholding has been made (including such deductions and
withholdings applicable to additional sums payable under this paragraph (a)) the
applicable Recipient receives an amount equal to the sum it would have received
had no such deduction or withholding been made.

 

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(c) Payment of Other Taxes by Borrower. The Credit Parties shall timely pay to
the relevant Governmental Authority in accordance with applicable law, or at the
option of the Administrative Agent timely reimburse it for the payment of, any
Other Taxes.

(d) Indemnification by Borrower. The Credit Parties shall jointly and severally
indemnify each Recipient, within 10 days after demand therefor, for the full
amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted
on or attributable to amounts payable under this paragraph (d) payable or paid
by such Recipient or required to be withheld or deducted from a payment to such
Recipient and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified 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 Borrower by a Lender (with a copy to
the Administrative Agent), or by the Administrative Agent on its own behalf or
on behalf of a Lender, shall be conclusive absent manifest error.

(e) 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 any
Credit Party has not already indemnified the Administrative Agent for such
Indemnified Taxes and without limiting the obligation of the Credit Parties to
do so), (ii) any Taxes attributable to such Lender’s failure to comply with the
provisions of Section 13.7(d) 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 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 (e).

(f) Evidence of Payments. As soon as practicable after any payment of Taxes by
any Credit Party to a Governmental Authority pursuant to this Section 11.9, such
Credit Party 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.

(g) Status of Lenders. 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 Borrower and the Administrative Agent, at the time or
times reasonably

 

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requested by Borrower or the Administrative Agent, such properly completed and
executed documentation reasonably requested by Borrower or the Administrative
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
Borrower or the Administrative Agent, shall deliver such other documentation
prescribed by applicable law or reasonably requested by Borrower or the
Administrative Agent as will enable Borrower or the Administrative 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 clause (i), (ii) and
(iv) 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.

Without limiting the generality of the foregoing:

(i) any Lender that is a U.S. Person shall deliver to Borrower and the
Administrative 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 Borrower or the Administrative Agent), executed originals
of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup
withholding tax;

(ii) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to Borrower and the Administrative Agent (in such number of copies as
shall be requested by the recipient) on or prior to the date on which such
Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of Borrower or the Administrative Agent),
whichever of the following is applicable:

(A) in the case of a Foreign Lender claiming the benefits of an income tax
treaty to which the United States is a party (2) 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 (2) 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;

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

(C) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Internal Revenue Code, (1) a
certificate substantially in the form of Exhibit I-1 to the effect that such
Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the
Internal Revenue Code, a “10 percent

 

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shareholder” of Borrower within the meaning of Section 881(c)(3)(B) of the
Internal Revenue Code, or a “controlled foreign corporation” described in
Section 881(c)(3)(C) of the Internal Revenue Code (a “U.S. Tax Compliance
Certificate”) and (2) executed originals of IRS Form W-8BEN; or

(D) 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 I-2 or
Exhibit I-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 I-4 on
behalf of each such direct and indirect partner;

(iii) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to Borrower and the Administrative Agent (in such number of copies as
shall be requested by the recipient) on or prior to the date on which such
Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of Borrower or the Administrative 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 Borrower or the Administrative Agent to determine
the withholding or deduction required to be made; and

(iv) if a payment made to a Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Internal Revenue Code, as
applicable), such Lender shall deliver to Borrower and the Administrative Agent
at the time or times prescribed by law and at such time or times reasonably
requested by Borrower or the Administrative Agent such documentation prescribed
by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the
Internal Revenue Code) and such additional documentation reasonably requested by
Borrower or the Administrative Agent as may be necessary for Borrower and the
Administrative Agent to comply with their obligations under FATCA and 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 clause (iv), “FATCA” shall include any amendments
made to FATCA after the date of this Agreement.

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 Borrower and the Administrative Agent
in writing of its legal inability to do so.

 

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(h) Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of any Taxes
as to which it has been indemnified pursuant to this Section 11.9 (including by
the payment of additional amounts pursuant to this Section 11.9), it shall pay
to the indemnifying party an amount equal to such refund (but only to the extent
of indemnity payments made under this Section 11.9 with respect to the Taxes
giving rise to such refund), net of all out-of-pocket expenses (including Taxes)
of such indemnified party and without interest (other than any interest paid by
the relevant Governmental Authority with respect to such refund). Such
indemnifying party, upon the request of such indemnified party, shall repay to
such indemnified party the amount paid over pursuant to this paragraph (h) (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) in the event that such indemnified party is required to repay such
refund to such Governmental Authority. Notwithstanding anything to the contrary
in this paragraph (h), in no event will the indemnified party be required to pay
any amount to an indemnifying party pursuant to this paragraph (h) the payment
of which would place the indemnified party in a less favorable net after-Tax
position than the indemnified party would have been in if the Tax subject to
indemnification and giving rise to such refund had not been deducted, withheld
or otherwise imposed and the indemnification payments or additional amounts with
respect to such Tax had never been paid. This paragraph shall not be construed
to require any indemnified party to make available its Tax returns (or any other
information relating to its Taxes that it deems confidential) to the
indemnifying party or any other Person.

(i) Survival. Each party’s obligations under this Section 11.9 shall survive the
resignation or replacement of the Administrative Agent or any assignment of
rights by, or the replacement of, a Lender, the termination of the Commitments
and the repayment, satisfaction or discharge of all obligations under any Loan
Document.

ARTICLE 12. AGENT.

12.1 Appointment of Administrative Agent. Each Lender and the holder of each
Note (if issued) irrevocably appoints and authorizes Administrative Agent to act
on behalf of such Lender or holder under this Agreement and the other Loan
Documents and to exercise such powers hereunder and thereunder as are
specifically delegated to Administrative Agent by the terms hereof and thereof,
together with such powers as may be reasonably incidental thereto, including
without limitation the power to execute or authorize the execution of financing
or similar statements or notices, and other documents. In performing its
functions and duties under this Agreement, Administrative Agent shall act solely
as agent of Lenders and does not assume and shall not be deemed to have assumed
any obligation towards or relationship of agency or trust with or for any Credit
Party.

12.2 Deposit Account with Administrative Agent or any Lender. Unless such
authorization is revoked by written notice to Administrative Agent, Borrower
authorizes Administrative Agent, in Administrative Agent’s sole discretion, upon
notice to Borrower to charge its general deposit account(s), if any, maintained
with Administrative Agent for the amount of any principal, interest, or other
amounts or costs due under this Agreement when the same become due and payable
under the terms of this Agreement or the Notes.

 

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12.3 Scope of Administrative Agent’s Duties. Administrative Agent shall have no
duties or responsibilities except those expressly set forth herein, and shall
not, by reason of this Agreement or otherwise, have a fiduciary relationship
with any Lender (and no implied covenants or other obligations shall be read
into this Agreement against Administrative Agent). None of Administrative Agent,
its Affiliates nor any of their respective directors, officers, employees or
agents shall be liable to any Lender for any action taken or omitted to be taken
by it or them under this Agreement or any document executed pursuant hereto, or
in connection herewith or therewith with the consent or at the request of the
Majority Lenders or the Supermajority Lenders (or all of Lenders for those acts
requiring consent of all of Lenders) (except for its or their own willful
misconduct or gross negligence), nor be responsible for or have any duties to
ascertain, inquire into or verify (a) any recitals or warranties made by the
Credit Parties or any Affiliate of the Credit Parties, or any officer thereof
contained herein or therein, (b) the effectiveness, enforceability, validity or
due execution of this Agreement or any document executed pursuant hereto or any
security thereunder, (c) the performance by the Credit Parties of their
respective obligations hereunder or thereunder, or (d) the satisfaction of any
condition hereunder or thereunder, including without limitation in connection
with the making of any Advance or the issuance of any Letter of Credit.
Administrative Agent and its Affiliates shall be entitled to rely upon any
certificate, notice, document or other communication (including any cable,
telegraph, telex, facsimile transmission or oral communication) believed by it
to be genuine and correct and to have been sent or given by or on behalf of a
proper person. Administrative Agent may treat the payee of any Note as the
holder thereof. Administrative Agent may employ agents and may consult with
legal counsel, independent public accountants and other experts selected by it
and shall not be liable to Lenders (except as to money or property received by
them or their authorized agents), for the negligence or misconduct of any such
agent selected by it with reasonable care or for any action taken or omitted to
be taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.

12.4 Successor Administrative Agent. Administrative Agent may resign as such at
any time upon at least thirty (30) days prior notice to Borrower and each of
Lenders. If Administrative Agent at any time shall resign or if the office of
Administrative Agent shall become vacant for any other reason, Majority Lenders
shall, by written instrument, appoint successor agent(s) (“Successor
Administrative Agent”) satisfactory to such Majority Lenders and, so long as no
Default or Event of Default has occurred and is continuing, to Borrower (which
approval shall not be unreasonably withheld or delayed); provided, however that
any such Successor Administrative Agent shall be a bank or a trust company or
other financial institution which maintains an office in the United States, or a
commercial bank organized under the laws of the United States or any state
thereof, or any Affiliate of such bank or trust company or other financial
institution which is engaged in the banking business, and shall have a combined
capital and surplus of at least $500,000,000. Such Successor Administrative
Agent shall thereupon become Administrative Agent hereunder, as applicable, and
Administrative Agent shall deliver or cause to be delivered to any successor
agent such documents of transfer and assignment as such Successor Administrative
Agent may reasonably request. If a Successor Administrative Agent is not so
appointed or does not accept such appointment before the

 

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resigning Administrative Agent’s resignation becomes effective, the resigning
Administrative Agent may appoint a temporary successor to act until such
appointment by the Majority Lenders and, if applicable, Borrower, is made and
accepted, or if no such temporary successor is appointed as provided above by
the resigning Administrative Agent, the Majority Lenders shall thereafter
perform all of the duties of the resigning Administrative Agent hereunder until
such appointment by the Majority Lenders and, if applicable, Borrower, is made
and accepted. Such Successor Administrative Agent shall succeed to all of the
rights and obligations of the resigning Administrative Agent as if originally
named. The resigning Administrative Agent shall duly assign, transfer and
deliver to such Successor Administrative Agent all moneys at the time held by
the resigning Administrative Agent hereunder after deducting therefrom its
expenses for which it is entitled to be reimbursed hereunder. Upon such
succession of any such Successor Administrative Agent, the resigning
Administrative Agent shall be discharged from its duties and obligations, in its
capacity as Administrative Agent hereunder, except for its gross negligence or
willful misconduct arising prior to its resignation hereunder, and the
provisions of this Article 12 shall continue in effect for the benefit of the
resigning Administrative Agent in respect of any actions taken or omitted to be
taken by it while it was acting as Administrative Agent.

12.5 Credit Decisions. Each Lender acknowledges that it has, independently of
Administrative Agent and each other Lender and based on the financial statements
of Borrower and such other documents, information and investigations as it has
deemed appropriate, made its own credit decision to extend credit hereunder from
time to time. Each Lender also acknowledges that it will, independently of
Administrative Agent and each other Lender and based on such other documents,
information and investigations as it shall deem appropriate at any time,
continue to make its own credit decisions as to exercising or not exercising
from time to time any rights and privileges available to it under this
Agreement, any Loan Document or any other document executed pursuant hereto.

12.6 Authority of Administrative Agent to Enforce This Agreement. Each Lender,
subject to the terms and conditions of this Agreement, grants Administrative
Agent full power and authority as attorney-in-fact to institute and maintain
actions, suits or proceedings for the collection and enforcement of any
Indebtedness outstanding under this Agreement or any other Loan Document and to
file such proofs of debt or other documents as may be necessary to have the
claims of Lenders allowed in any proceeding relative to any Credit Party, or
their respective creditors or affecting their respective properties, and to take
such other actions which Administrative Agent considers to be necessary or
desirable for the protection, collection and enforcement of the Notes, this
Agreement or the other Loan Documents.

12.7 Indemnification of Administrative Agent. Lenders agree (which agreement
shall survive the expiration or termination of this Agreement) to indemnify
Administrative Agent and its Affiliates (to the extent not reimbursed by
Borrower, but without limiting any obligation of Borrower to make such
reimbursement), ratably according to their respective Revolving Credit
Percentages, from and against any and all claims, damages, losses, liabilities,
costs or expenses of any kind or nature whatsoever (including, without
limitation, reasonable fees and expenses of house and outside counsel) which may
be imposed on, incurred by, or asserted against Administrative Agent and its
Affiliates in any way relating to or arising out of this Agreement, any of the
other Loan Documents or the transactions contemplated hereby or any action taken
or omitted by Administrative Agent and its Affiliates under this Agreement or
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Documents; provided, however, that no Lender shall be liable for any portion of
such claims, damages, losses, liabilities, costs or expenses resulting from
Administrative Agent’s or its Affiliate’s gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to reimburse
Administrative Agent and its Affiliates promptly upon demand for its ratable
share of any reasonable out-of-pocket expenses (including, without limitation,
reasonable fees and expenses of in-house and outside counsel) incurred by
Administrative Agent and its Affiliates in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement or any of
the other Loan Documents, to the extent that Administrative Agent and its
Affiliates are not reimbursed for such expenses by Borrower, but without
limiting the obligation of Borrower to make such reimbursement. Each Lender
agrees to reimburse Administrative Agent and its Affiliates promptly upon demand
for its ratable share of any amounts owing to Administrative Agent and its
Affiliates by Lenders pursuant to this Section, provided that, if Administrative
Agent or its Affiliates are subsequently reimbursed by Borrower for such
amounts, they shall refund to Lenders on a pro rata basis the amount of any
excess reimbursement. If the indemnity furnished to Administrative Agent and its
Affiliates under this Section shall become impaired as determined in
Administrative Agent’s reasonable judgment or Administrative Agent shall elect
in its sole discretion to have such indemnity confirmed by Lenders (as to
specific matters or otherwise), Administrative Agent shall give notice thereof
to each Lender and, until such additional indemnity is provided or such existing
indemnity is confirmed, Administrative Agent may cease, or not commence, to take
any action.

12.8 Knowledge of Default. It is expressly understood and agreed that
Administrative Agent shall be entitled to assume that no Default or Event of
Default has occurred and is continuing, unless the officers of Administrative
Agent immediately responsible for matters concerning this Agreement shall have
received a written notice from a Lender or a Borrower specifying such Default or
Event of Default and stating that such notice is a “notice of default”. Upon
receiving such a notice, Administrative Agent shall promptly notify each Lender
of such Default or Event of Default and provide each Lender with a copy of such
notice and shall endeavor to provide such notice to Lenders within three
(3) Business Days (but without any liability whatsoever in the event of its
failure to do so). Administrative Agent shall also furnish Lenders, promptly
upon receipt, with copies of all other notices or other information required to
be provided by Borrower hereunder.

12.9 Administrative Agent’s Authorization; Action by Lenders. Except as
otherwise expressly provided herein, whenever Administrative Agent is authorized
and empowered hereunder on behalf of Lenders to give any approval or consent, or
to make any request, or to take any other action on behalf of Lenders (including
without limitation the exercise of any right or remedy hereunder or under the
other Loan Documents), Administrative Agent shall be required to give such
approval or consent, or to make such request or to take such other action only
when so requested in writing by the Majority Lenders, the Supermajority Lenders
or Lenders, as applicable hereunder. Action that may be taken by the Majority
Lenders, the Supermajority Lenders, any other specified Revolving Credit
Percentage of Lenders or all of Lenders, as the case may be (as provided for
hereunder) may be taken (i) pursuant to a vote of the requisite percentages of
Lenders as required hereunder at a meeting (which may be held by telephone
conference call), provided that Administrative Agent exercises good faith,
diligent efforts to give all of Lenders reasonable advance notice of the
meeting, or (ii) pursuant to the written consent of the requisite percentages of
Lenders as required hereunder, provided that all of Lenders are given reasonable
advance notice of the requests for such consent.

 

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12.10 Enforcement Actions by Administrative Agent. Except as otherwise expressly
provided under this Agreement or in any of the other Loan Documents and subject
to the terms hereof, Administrative Agent will take such action, assert such
rights and pursue such remedies under this Agreement and the other Loan
Documents as the Majority Lenders, the Supermajority Lenders, or all of Lenders,
as the case may be (as provided for hereunder), shall direct; provided, however,
that Administrative Agent shall not be required to act or omit to act if, in the
reasonable judgment of Administrative Agent, such action or omission may expose
Administrative Agent to personal liability for which Administrative Agent has
not been satisfactorily indemnified hereunder or is contrary to this Agreement,
any of the Loan Documents or applicable law. Except as expressly provided above
or elsewhere in this Agreement or the other Loan Documents, no Lender (other
than Administrative Agent, acting in its capacity as agent) shall be entitled to
take any enforcement action of any kind under this Agreement or any of the other
Loan Documents.

12.11 Collateral Matters. Administrative Agent is authorized on behalf of all
Lenders, without the necessity of any notice to or further consent from Lenders,
from time to time to take any action with respect to any Collateral or the
Collateral Documents which may be necessary to perfect and maintain a perfected
security interest in and Liens upon the Collateral granted pursuant to the Loan
Documents.

12.12 Administrative Agent in its Individual Capacity. RBC and its Affiliates,
successors and assigns shall each have the same rights and powers hereunder as
any other Lender and may exercise or refrain from exercising the same as though
such Lender were not Administrative Agent. RBC and its Affiliates may (without
having to account therefor to any Lender) accept deposits from, lend money to,
and generally engage in any kind of banking, trust, financial advisory or other
business with the Credit Parties as if such Lender were not acting as
Administrative Agent hereunder, and may accept fees and other consideration
therefor without having to account for the same to Lenders.

12.13 Administrative Agent’s Fees. Borrower shall pay to the Administrative
Agent the administrative agency fee set forth in the Fee Letter until the
Indebtedness has been repaid and discharged in full and no commitment to extend
any credit hereunder is outstanding. The agency fees referred to in this
Section 12.13 shall not be refundable under any circumstances.

12.14 Documentation Administrative Agent or other Titles. Any Lender identified
on the facing page or signature page of this Agreement or in any amendment
hereto or as designated with consent of Administrative Agent in any assignment
agreement as Lead Arranger, Documentation Agent, Syndication Agent or any
similar titles, shall not have any right, power, obligation, liability,
responsibility or duty under this Agreement as a result of such title other than
those applicable to all Lenders as such. Without limiting the foregoing, Lenders
so identified shall not have or be deemed to have any fiduciary relationship
with any Lender as a result of such title. Each Lender acknowledges that it has
not relied, and will not rely, on Lender so identified in deciding to enter into
this Agreement or in taking or not taking action hereunder.

 

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12.15 No Reliance on Administrative Agent’s Customer Identification Program.

(a) Each Lender acknowledges and agrees that neither such Lender, nor any of its
Affiliates, participants or assignees, may rely on Administrative Agent to carry
out such Lender’s, Affiliate’s, participant’s or assignee’s customer
identification program, or other obligations required or imposed under or
pursuant to the USA Patriot Act or the regulations thereunder, including the
regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the
“CIP Regulations”), or any other Anti-Terrorism Law, including any programs
involving any of the following items relating to or in connection with Borrower
or any of its Subsidiaries, any of their respective Affiliates or agents, the
Loan Documents or the transactions hereunder: (i) any identity verification
procedures, (ii) any record keeping, (iii) any comparisons with government
lists, (iv) any customer notices or (v) any other procedures required under the
CIP Regulations or such other laws.

(b) Each Lender or assignee or participant of a Lender that is not organized
under the laws of the United States or a state thereof (and is not excepted from
the certification requirement contained in Section 313 of the USA Patriot Act
and the applicable regulations because it is both (i) an affiliate of a
depository institution or foreign bank that maintains a physical presence in the
United States or foreign country, and (ii) subject to supervision by a banking
authority regulating such affiliated depository institution or foreign
bank) shall deliver to Administrative Agent the certification, or, if
applicable, recertification, certifying that such Lender is not a “shell” and
certifying to other matters as required by Section 313 of the USA Patriot Act
and the applicable regulations: (x) within 10 days after the Effective Date, and
(y) at such other times as are required under the USA Patriot Act.

ARTICLE 13. MISCELLANEOUS.

13.1 Accounting Principles. Except as otherwise expressly provided herein, all
terms of an accounting or financial nature shall be construed in accordance with
GAAP, as in effect from time to time; provided that, if after the date hereof
there occurs any change in GAAP or in the application thereof on the operation
of any provision hereof and Borrower notifies Administrative Agent that Borrower
requests an amendment to any provision hereof to eliminate the effect of such
change in GAAP or in the application thereof (or if Administrative Agent
notifies Borrower that Majority Lenders request an amendment to any provision
hereof for such purpose), regardless of whether any such notice is given before
or after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith. Notwithstanding
anything in this Agreement or any other Loan Document to the contrary, for the
purposes of calculating compliance with any covenant in this Agreement or any
other Loan Document, no effect shall be given to any change in GAAP arising out
of a change described in the Proposed Accounting Standards Update to Leases
(Topic 840) dated August 17, 2010 or a substantially similar pronouncement.

 

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13.2 Consent to Jurisdiction. Borrower, Administrative Agent and Lenders hereby
irrevocably submit to the non-exclusive jurisdiction of any United States
Federal Court or Texas state court sitting in Dallas, Texas in any action or
proceeding arising out of or relating to this Agreement or any of the Loan
Documents and the parties hereto irrevocably agree that all claims in respect of
such action or proceeding may be heard and determined in any such United States
Federal Court or Texas state court. Each of the parties irrevocably consents to
the service of any and all process in any such action or proceeding brought in
any court in or of the State of Texas by the delivery of copies of such process
to it at the applicable addresses specified on the signature page hereto or by
certified mail directed to such address or such other address as may be
designated by it in a notice to the other parties that complies as to delivery
with the terms of Section 13.6. Nothing in this Section shall affect the right
of any party to serve process in any other manner permitted by law or limit the
right of Lenders or Administrative Agent (or any of them) to bring any such
action or proceeding against any party hereto, or any of their property in the
courts with subject matter jurisdiction of any other jurisdiction. Each of the
parties irrevocably waives any objection to the laying of venue of any such suit
or proceeding in the above described courts.

13.3 Law of Texas. This Agreement, the Notes and, except where otherwise
expressly specified therein to be governed by local law, the other Loan
Documents shall be governed by and construed and enforced in accordance with the
laws of the State of Texas (without regard to its conflict of laws provisions).
Whenever possible each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.

13.4 Interest. It is the intent of Borrower and each Lender in the execution and
performance of this Agreement and the other Loan Documents to contract in strict
compliance with applicable usury laws, including conflicts of law concepts,
governing the Advances of each Lender including such applicable laws of the
State of Texas, if any, and the United States of America from time to time in
effect. In furtherance thereof, Lenders and Borrower stipulate and agree that
none of the terms and provisions contained in this Agreement or the other Loan
Documents shall ever be construed to create a contract to pay, as consideration
for the use, forbearance or detention of money, interest at a rate in excess of
the maximum nonusurious interest rate under applicable law (the “Maximum
Rate”) and that for purposes of this Agreement “interest” shall include the
aggregate of all charges which constitute interest under such laws that are
contracted for, charged or received under this Agreement; and in the event that,
notwithstanding the foregoing, under any circumstances the aggregate amounts
taken, reserved, charged, received or paid on the Advances, include amounts
which by applicable law are deemed interest which would exceed the Maximum Rate,
then such excess shall be deemed to be a mistake and each Lender receiving same
shall credit the same on the outstanding principal of the Indebtedness (other
than Lender Hedging Obligations and Lender Product Obligations) owing to such
Lender (or if such Indebtedness shall have been paid in full, refund said excess
to Borrower). In the event that the maturity of the Indebtedness (other than
Lender Hedging Obligations and Lender Product Obligations) is accelerated by
reason of any 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

 

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may never include more than the Maximum Rate, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically as
of the date of such acceleration or prepayment and, if theretofore paid, shall
be credited on such Indebtedness (or, if such Indebtedness shall have been paid
in full, refunded to Borrower of such interest). In determining whether or not
the interest paid or payable under any specific contingencies exceeds the
Maximum Rate, Borrower and Lenders shall to the maximum extent permitted under
applicable law amortize, prorate, allocate and spread in equal parts during the
period of the full stated term of the Indebtedness all amounts considered to be
interest under applicable law at any time contracted for, charged, received or
reserved in connection with the Indebtedness. The provisions of this Section
shall control over all other provisions of this Agreement or the other Loan
Documents which may be in apparent conflict herewith. For purposes of
determining the Maximum Rate under the law of the State of Texas, the applicable
interest rate ceiling shall be the “weekly ceiling” from time to time in effect
under Chapter 303 of the Texas Finance Code, as amended.

13.5 Closing Costs and Other Costs; Indemnification.

(a) Borrower shall pay or reimburse (i) Administrative Agent and its Affiliates
for payment of, on demand, all reasonable and documented out-of-pocket costs and
expenses, including, by way of description and not limitation, reasonable
outside attorney fees and advisor fees and advances, appraisal and accounting
fees, lien search fees, and required travel costs, incurred by Administrative
Agent and its Affiliates in connection with the commitment, syndication,
negotiation, consummation, closing and funding of the loans contemplated hereby,
or in connection with the preparation, administration or enforcement of this
Agreement or the other Loan Documents (including the obtaining of legal advice
regarding the rights and responsibilities of the parties hereto) or any
refinancing or restructuring of the loans or Advances provided under this
Agreement or the other Loan Documents, or any amendment, revision, modification,
consent or waiver thereof requested by Borrower, and (ii) Administrative Agent
and its Affiliates and each of Lenders, as the case may be, for all stamp and
other taxes and duties payable or determined to be payable in connection with
the execution, delivery, filing or recording of this Agreement and the other
Loan Documents and the consummation of the transactions contemplated hereby
(other than Excluded Taxes), and any and all liabilities with respect to or
resulting from any delay in paying or omitting to pay such taxes or duties.
Furthermore, Borrower shall pay or reimburse all reasonable and documented
out-of pocket costs and expenses, including without limitation reasonable
attorney fees and advisor fees, incurred by Administrative Agent and its
Affiliates and, after the occurrence and during the continuance of an Event of
Default, by Lenders in revising, preserving, protecting, exercising or enforcing
any of its or any of Lenders’ rights against Borrower or any other Credit Party,
or otherwise incurred by Administrative Agent and its Affiliates and Lenders in
connection with any Event of Default or the enforcement of the Advances (whether
incurred through negotiations, legal proceedings or otherwise), including by way
of description and not limitation, such charges in any court or bankruptcy
proceedings or arising out of any claim or action by any person against
Administrative Agent, its Affiliates, or any Lender which would not have been
asserted were it not for Administrative Agent’s or such Affiliate’s or Lender’s
relationship with Borrower hereunder or otherwise, shall also be paid by
Borrower. Borrower shall pay any amounts due under this Section 13.5 within
thirty (30) days of the receipt by Borrower of notice of the amount due.

 

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(b) BORROWER AGREES TO INDEMNIFY AND HOLD ADMINISTRATIVE AGENT, ISSUING LENDER
AND EACH LENDER AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH, AN
“INDEMNIFIED PERSON”) HARMLESS FROM ALL LOSS, COST, DAMAGE, LIABILITY OR
EXPENSES, INCLUDING REASONABLE DOCUMENTED OUTSIDE ATTORNEYS’ FEES AND
DISBURSEMENTS (BUT WITHOUT DUPLICATION OF SUCH FEES AND DISBURSEMENTS FOR THE
SAME SERVICES), INCURRED BY ANY INDEMNIFIED PERSON BY REASON OF AN EVENT OF
DEFAULT, OR ENFORCING THE OBLIGATIONS OF ANY CREDIT PARTY UNDER THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS, AS APPLICABLE, OR IN THE PROSECUTION OR
DEFENSE OF ANY ACTION OR PROCEEDING CONCERNING ANY MATTER GROWING OUT OF OR
CONNECTED WITH THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS, EXCLUDING, HOWEVER,
ANY LOSS, COST, DAMAGE, LIABILITY OR EXPENSES TO THE EXTENT ARISING, AS TO ANY
INDEMNIFIED PERSON, (1) AS A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNIFIED PERSON, AS DETERMINED BY A COURT OF COMPETENT
JURISDICTION IN A FINAL NON-APPEALABLE JUDGMENT, (2) AS A RESULT OF A MATERIAL
BREACH IN BAD FAITH BY SUCH INDEMNIFIED PERSON OF ITS OBLIGATIONS UNDER THIS
AGREEMENT OR ANY LOAN DOCUMENT, AS DETERMINED BY A COURT OF COMPETENT
JURISDICTION IN A FINAL NON-APPEALABLE JUDGMENT, OR (3) AS A RESULT OF DISPUTES
SOLELY BETWEEN INDEMNIFIED PERSONS AND NOT RELATING TO ANY ACTION OF SUCH
INDEMNIFIED PARTY IN ITS CAPACITY AS ADMINISTRATIVE AGENT OR ISSUING LENDER.

(c) BORROWER AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS EACH INDEMNIFIED
PERSON FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, PENALTIES, FINES,
LIABILITIES, SETTLEMENTS, DAMAGES, COSTS OR EXPENSES OF WHATEVER KIND OR NATURE
(INCLUDING WITHOUT LIMITATION, REASONABLE AND DOCUMENTED ATTORNEYS AND
CONSULTANTS FEES, INVESTIGATION AND LABORATORY FEES, ENVIRONMENTAL STUDIES
REQUIRED BY ADMINISTRATIVE AGENT OR ANY LENDER IN CONNECTION WITH THE VIOLATION
OF HAZARDOUS MATERIAL LAWS), COURT COSTS AND LITIGATION EXPENSES, ARISING OUT OF
OR RELATED TO (I) THE PRESENCE, USE, DISPOSAL, RELEASE OR THREATENED RELEASE OF
ANY HAZARDOUS MATERIALS ON, FROM OR AFFECTING ANY PREMISES OWNED OR OCCUPIED BY
ANY CREDIT PARTY IN VIOLATION OF OR THE NON-COMPLIANCE WITH APPLICABLE HAZARDOUS
MATERIAL LAWS, (II) ANY PERSONAL INJURY (INCLUDING WRONGFUL DEATH) OR PROPERTY
DAMAGE (REAL OR PERSONAL) ARISING OUT OF OR RELATED TO SUCH HAZARDOUS MATERIALS,
(III) ANY LAWSUIT OR OTHER PROCEEDING BROUGHT OR THREATENED, SETTLEMENT REACHED
OR GOVERNMENTAL

 

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ORDER OR DECREE RELATING TO SUCH HAZARDOUS MATERIALS, AND/OR (IV) COMPLYING OR
COMING INTO COMPLIANCE WITH ALL HAZARDOUS MATERIAL LAWS (INCLUDING THE COST OF
ANY REMEDIATION OR MONITORING REQUIRED IN CONNECTION THEREWITH) OR ANY OTHER
REQUIREMENT OF LAW; PROVIDED, HOWEVER, THAT BORROWER SHALL HAVE NO OBLIGATIONS
UNDER THIS SECTION 13.5(C) WITH RESPECT TO CLAIMS, DEMANDS, PENALTIES, FINES,
LIABILITIES, SETTLEMENTS, DAMAGES, COSTS OR EXPENSES OWING TO ANY INDEMNIFIED
PERSON TO THE EXTENT ARISING (A) AS A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNIFIED PERSON, AS DETERMINED BY A COURT OF COMPETENT
JURISDICTION IN A FINAL NON-APPEALABLE JUDGMENT, OR (B) AFTER SUCH INDEMNIFIED
PERSON THEREOF TAKES POSSESSION OR CONTROL OF THE RELEVANT PROPERTY AND NOT
RESULTING FROM ANY ACTIONS OR OMISSIONS OF BORROWER, PARENT OR ANY OF ITS
SUBSIDIARIES. THE OBLIGATIONS OF BORROWER UNDER THIS SECTION 13.5(C) SHALL BE IN
ADDITION TO ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES BORROWER MAY HAVE TO
ADMINISTRATIVE AGENT, ANY OF LENDERS OR ANY OTHER INDEMNIFIED PERSON AT COMMON
LAW OR PURSUANT TO ANY OTHER AGREEMENT.

(d) To the extent permitted by applicable law, (i) no Credit Party shall assert,
and each hereby waives, any claim against any Indemnified Person and
(ii) neither the Administrative Agent, the Issuing Lender nor any Lender shall
assert, and each hereby waives, any claim against any Credit Party, in each
case, 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 or any agreement or
instrument contemplated hereby, the transaction contemplated hereby, any Advance
or Letter of Credit or the use of the proceeds thereof.

13.6 Notices.

(a) Except as expressly provided otherwise in this Agreement (and except as
provided in clause (b) below), all notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing and shall be given by personal delivery, by mail, by reputable overnight
courier or by facsimile and addressed or delivered to it at its address set
forth on Schedule 13.6 or at such other address as may be designated by such
party in a notice to the other parties that complies as to delivery with the
terms of this Section 13.6 or posted to an E-System set up by or at the
direction of Administrative Agent (as set forth below). Any notice, if
personally delivered or if mailed and properly addressed with postage prepaid
and sent by registered or certified mail, shall be deemed given when received or
when delivery is refused; any notice, if given to a reputable overnight courier
and properly addressed, shall be deemed given two (2) Business Days after the
date on which it was sent, unless it is actually received sooner by the named
addressee; and any notice, if transmitted by facsimile, shall be deemed given
when received. Administrative Agent may, but shall not be required to, take any
action on the basis of any notice given to it by telephone, but the giver of any
such notice shall promptly confirm such notice in writing or by facsimile,

 

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and such notice will not be deemed to have been received until such confirmation
is deemed received in accordance with the provisions of this Section set forth
above. If such telephonic notice conflicts with any such confirmation, the terms
of such written notice shall control. Any notice given by Administrative Agent
or any Lender to Borrower shall be deemed to be a notice to all of the Credit
Parties.

(b) Notices and other communications provided to Administrative Agent, the
Issuing Lender and Lenders party hereto under this Agreement or any other Loan
Document may be delivered or furnished by electronic communication (including
email and Internet or intranet websites) pursuant to procedures approved by
Administrative Agent; provided that the foregoing shall not apply to notices
pursuant to Article 2 and Article 3 or to Compliance Certificates delivered
pursuant to Section 7.2(a) unless otherwise agreed by the Administrative Agent,
the Issuing Lender or the applicable Lender, as the case may be. Administrative
Agent or Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications (including email and
any E-System) pursuant to procedures approved by it. Unless otherwise agreed to
in a writing by and among the parties to a particular communication, (i) notices
and other communications sent to an email address shall be deemed received upon
the sender’s receipt of an acknowledgment from the intended recipient (such as
by the “return receipt requested” function, return email, or other written
acknowledgment) and (ii) notices and other communications posted to any E-System
shall be deemed received upon the deemed receipt by the intended recipient at
its email address as described in the foregoing clause (i) of notification that
such notice or other communication is available and identifying the website
address therefore.

(c) Each of Borrower, the Administrative Agent and the Issuing Lender may change
its address, facsimile or telephone number for notices and other communications
hereunder by notice to the other parties hereto. Each other Lender may change
its address, facsimile or telephone number for notices and other communications
hereunder by notice to Borrower, the Administrative Agent and the Issuing
Lender. In addition, each Lender agrees to notify the Administrative Agent from
time to time to ensure that the Administrative Agent has on record (i) an
effective address, contact name, telephone number, facsimile number and
electronic mail address to which notices and other communications may be sent
and (ii) accurate wire instructions for such Lender. Furthermore, each Public
Lender agrees to cause at least one individual at or on behalf of such Public
Lender to at all times have selected the “Private Side Information” or similar
designation on the content declaration screen of the Platform in order to enable
such Public Lender or its delegate, in accordance with such Public Lender’s
compliance procedures and applicable law, including United States Federal and
state securities laws, to make reference to Borrower Materials that are not made
available through the “Public Side Information” portion of the Platform and that
may contain material non-public information with respect to Borrower or its
securities for purposes of United States Federal or state securities laws.

 

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13.7 Successors and Assigns; Participations; Assignments.

(a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that Borrower may not assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent of the Administrative Agent and each Lender, and no Lender may
assign or otherwise transfer any of its rights or obligations hereunder except
(i) to an assignee in accordance with the provisions of paragraph (b) of this
Section, (ii) by way of participation in accordance with the provisions of
paragraph (d) of this Section, or (iii) by way of pledge or assignment of a
security interest subject to the restrictions of paragraph (f) of this Section
(and any other attempted assignment or transfer by any party hereto shall be
null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants to the extent
provided in paragraph (d) of this Section and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

(b) Assignments by Lenders. Any Lender may at any time 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 Revolving Credit Commitment Amount and the
Advances at the time owing to it); provided that any such assignment shall be
subject to the following conditions:

(i) Minimum Amounts.

(A) in the case of an assignment of the entire remaining amount of the assigning
Lender’s Revolving Credit Commitment Amount and/or the Advances at the time
owing to it, no minimum amount need be assigned; and

(B) in any case not described in paragraph (b)(i)(A) of this Section, the
aggregate amount of the Revolving Credit Commitment Amount (which for this
purpose includes Advances outstanding thereunder) or, if the applicable
Revolving Credit Commitment Amount is not then in effect, the principal
outstanding balance of the Advances of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Administrative Agent or, if “Trade Date”
is specified in the Assignment and Assumption, as of the Trade Date) shall not
be less than $5,000,000, unless each of the Administrative Agent and, so long as
no Event of Default has occurred and is continuing, Borrower otherwise consents
(each such consent not to be unreasonably withheld or delayed).

(ii) Proportionate Amounts. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Advance or the Revolving
Credit Commitment Amount assigned.

 

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(iii) Required Consents. No consent shall be required for any assignment except
to the extent required by paragraph (b)(i)(B) of this Section and, in addition:

(A) the consent of Borrower (such consent not to be unreasonably withheld or
delayed) shall be required unless (x) an Event of Default has occurred and is
continuing at the time of such assignment, or (y) such assignment is to a Lender
or an Affiliate of a Lender;

(B) the consent of the Administrative Agent (such consent not to be unreasonably
withheld or delayed) shall be required for assignments if such assignment is to
a Person that is not a Lender or an Affiliate of such Lender; and

(C) the consent of each Issuing Lender.

(iv) Assignment and Assumption. The parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Assumption, together with
a processing and recordation fee of $3,500 for which Borrower shall not be
responsible; provided that the Administrative Agent may, in its sole discretion,
elect to waive such processing and recordation fee in the case of any
assignment. The assignee, if it is not a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

(v) No Assignment to Certain Persons. No such assignment shall be made to
(A) Borrower or any of Borrower’s Affiliates or Subsidiaries, (B) to any
Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a
Lender hereunder, would constitute any of the foregoing Persons described in
this clause (B) or (C) a hedge fund, loan fund, investment fund, trust or other
similar investment vehicle or entity without the prior written approval of
Borrower.

(vi) No Assignment to Natural Persons. No such assignment shall be made to a
natural Person.

(vii) Certain Additional Payments. In connection with any assignment of rights
and obligations of any Defaulting Lender hereunder, no such assignment shall be
effective unless and until, in addition to the other conditions thereto set
forth herein, the parties to the assignment shall make such additional payments
to the Administrative Agent in an aggregate amount sufficient, upon distribution
thereof as appropriate (which may be outright payment, purchases by the assignee
of participations or subparticipations, or other compensating actions, including
funding, with the consent of Borrower and the Administrative Agent, the
applicable pro rata share of Advances previously requested but not funded by the
Defaulting Lender, to each of which the applicable assignee and assignor hereby
irrevocably consent), to (x) pay and satisfy in full all payment liabilities
then owed by such Defaulting Lender to the Administrative Agent, each Issuing
Lender and each other Lender hereunder (and interest accrued thereon), and (y)

 

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acquire (and fund as appropriate) its full pro rata share of all Advances and
participations in Letters of Credit in accordance with its Revolving Credit
Percentage. Notwithstanding the foregoing, in the event that any assignment of
rights and obligations of any Defaulting Lender hereunder shall become effective
under applicable law without compliance with the provisions of this paragraph,
then the assignee of such interest shall be deemed to be a Defaulting Lender for
all purposes of this Agreement until such compliance occurs.

Subject to acceptance and recording thereof by the Administrative Agent pursuant
to paragraph (c) of this Section, from and after the effective date specified in
each Assignment and Assumption, the assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Assumption, be released from its obligations
under this Agreement (and, in the case of an Assignment and Assumption covering
all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto) but shall continue to be entitled to
the benefits of Section 3.4(c), Section 11.1, Section 11.5, Section 11.6,
Section 11.9 and Section 13.5 with respect to facts and circumstances occurring
prior to the effective date of such assignment; provided, that except to the
extent otherwise expressly agreed by the affected parties, no assignment by a
Defaulting Lender will constitute a waiver or release of any claim of any party
hereunder arising from that Lender’s having been a Defaulting Lender. Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this paragraph shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (d) of this Section.

(c) Register. The Administrative Agent, acting solely for this purpose as an
agent of Borrower, shall maintain at one of its offices in the United States of
America 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 Revolving
Credit Commitment Amounts of, and principal amounts (and stated interest) of the
Advances 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 Borrower, the Administrative Agent and the Lenders shall
treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by Borrower and any Lender, at any reasonable
time and from time to time upon reasonable prior notice.

(d) Participations. Any Lender may at any time, without the consent of, or
notice to, Borrower or the Administrative Agent, sell participations to any
Person (other than a natural Person or Borrower or any of Borrower’s Affiliates
or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s
rights and/or obligations under this Agreement (including all or a portion of
its Revolving Credit Commitment Amount and/or the Advances owing to it);
provided that (i) such Lender’s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, and (iii) Borrower, the

 

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Administrative Agent, the Issuing Lender and Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement. For the avoidance of doubt, each Lender shall
be responsible for the indemnity under Section 12.7 with respect to any payments
made by such Lender to its Participant(s).

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 first proviso to
Section 13.9(b) that affects such Participant. Borrower agrees that each
Participant shall be entitled to the benefits of Section 3.4(c), Section 11.1,
Section 11.5, Section 11.6, and Section 11.9 (subject to the requirements and
limitations therein, including the requirements under Section 11.9(g) (it being
understood that the documentation required under Section 11.9(g) shall be
delivered to the participating Lender)) to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section; provided that such Participant (A) agrees to be subject to the
provisions of Section 13.11 as if it were an assignee under paragraph (b) of
this Section; and (B) shall not be entitled to receive any greater payment under
Section 3.4(c), Section 11.5, Section 11.6 or Section 11.9, with respect to any
participation, than its participating Lender would have been entitled to
receive, unless the sale of the participation to such Participant is made with
Borrower’s prior written consent. Each Lender that sells a participation agrees,
at Borrower’s request and expense, to use reasonable efforts to cooperate with
Borrower to effectuate the provisions of Section 13.11 with respect to any
Participant. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.6 as though it were a Lender; provided
that such Participant agrees to be subject to Section 10.3 as though it were a
Lender. Each Lender that sells a participation shall, acting solely for this
purpose as an agent of 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 Advances 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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(e) Certain Pledges. 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 any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

13.8 Counterparts. This Agreement may be executed in several counterparts, and
each executed copy shall constitute an original instrument, but such
counterparts shall together constitute but one and the same instrument. Delivery
of an executed counterpart of a signature page of this Agreement or any other
Loan Document by facsimile or in electronic (i.e., “pdf” or “tif”) format shall
be as effective as delivery of a manually executed counterpart of this Agreement
or such other Loan Document, as applicable.

13.9 Amendment and Waiver.

(a) No amendment or waiver of any provision of this Agreement or any other Loan
Document, nor consent to any departure by any Credit Party therefrom, shall in
any event be effective unless the same shall be in writing and signed by
Administrative Agent and the Majority Lenders (or by Administrative Agent at the
written request of the Majority Lenders) or, if this Agreement expressly so
requires with respect to the subject matter thereof, by all Lenders (and, with
respect to any amendments to this Agreement or the other Loan Documents, by the
Parent, or any Credit Party or the Guarantors that are signatories thereto), and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. All references in this Agreement to
“Lenders” shall refer to all Lenders, unless expressly stated to refer to
Majority Lenders or Supermajority Lenders (or the like).

(b) Notwithstanding anything to the contrary herein,

(i) no amendment, waiver or consent shall increase the stated amount of any
Lender’s Revolving Credit Commitment Amount hereunder without such Lender’s
consent;

(ii) no amendment, waiver or consent shall, unless in writing and signed by each
Lender holding Indebtedness directly affected thereby, do any of the following:

(A) reduce the principal of, or interest on, any outstanding Advance or Letter
of Credit Obligation or any Fees or other amounts payable hereunder; or

(B) postpone any date fixed for any payment of principal of, or interest on, any
outstanding Indebtedness (other than Lender Hedging Obligations and Lender
Product Obligations) or any Fees or other amounts payable hereunder (except with
respect to the payments required under Section 2.10);

(iii) no amendment, waiver or consent shall, unless in writing and signed by all
Lenders, do any of the following:

 

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(A) change any of the provisions of this Section 13.9 or the definitions of
“Majority Lenders”, “Supermajority Lenders” or any other provision of any Loan
Document specifying the number or percentage of Lenders required to waive, amend
or modify any rights thereunder or make any determination or grant any consent
thereunder;

(B) increase the Borrowing Base or modify the definition of “Borrowing Base”;

(C) except as expressly permitted hereunder or under the Collateral Documents,
release all or substantially all of the Collateral (provided that neither
Administrative Agent nor any Lender shall be prohibited thereby from proposing
or participating in a consensual or nonconsensual debtor-in-possession or
similar financing), or release any material guaranty provided by any Person in
favor of Administrative Agent and Lenders, provided however that Administrative
Agent shall be entitled, without notice to or any further action or consent of
Lenders, to release any Collateral which any Credit Party is permitted to sell,
assign or otherwise transfer in compliance with this Agreement or the other Loan
Documents or release any guaranty to the extent expressly permitted in this
Agreement or any of the other Loan Documents (whether in connection with the
sale, transfer or other disposition of the applicable Guarantor or otherwise);

(D) increase the maximum duration of Interest Periods permitted hereunder;

(E) modify Sections 10.2 or 10.3; or

(F) increase the Maximum Facility Amount;

(iv) any amendment, waiver or consent that will (A) amend any provision in
Article 3 or (B) otherwise affect the rights or duties of Issuing Lender under
this Agreement or any of the other Loan Documents, shall require the written
concurrence of Issuing Lender; and

(v) any amendment, waiver, or consent that will affect the rights or duties of
Administrative Agent under this Agreement or any other Loan Document, shall
require the written concurrence of Administrative Agent.

(c) Notwithstanding anything to the contrary herein, no Defaulting Lender shall
have any right to approve or disapprove of any amendment, consent, waiver or any
other modification to any Loan Document (and all amendments, consents, waivers
and other modifications may be effected without the consent of the Defaulting
Lenders), except that the foregoing shall not permit, in each case without such
Defaulting Lender’s consent, (i) an increase in such Defaulting Lender’s
Revolving Credit Commitment Amount, (ii) the waiver, forgiveness or reduction of
the principal amount of any Advance or Letter of Credit Obligations owing to
such Defaulting Lender (unless all other Lenders

 

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affected thereby are treated similarly), (iii) the extension of the final
maturity date(s) of such Defaulting Lenders’ portion of any of the Indebtedness
or the extension of any commitment to extend credit of such Defaulting Lender,
or (iv) any other modification which requires the consent of all Lenders or
Lender(s) affected thereby which affects such Defaulting Lender more adversely
than the other affected Lenders (other than a modification which results in a
reduction of such Defaulting Lender’s Revolving Credit Percentage of any
Commitments or repayment of any amounts owing to such Defaulting Lender on a non
pro-rata basis). For the avoidance of doubt, a Defaulting Lender shall not have
the right to approve or disapprove any redetermination of the Borrowing Base.

(d) Notwithstanding anything to the contrary herein, nothing in this Agreement
shall be interpreted to require that any waiver, amendment, modification or
consent to any Commodity Hedging Agreement, Interest Rate Agreement, Letter of
Credit Document or any document executed or delivered in connection with any
Lender Product require the consent of any Lender.

(e) Notwithstanding anything to the contrary herein Administrative Agent may,
with the consent of Borrower only, amend, modify or supplement this Agreement or
any of the other Loan Documents to cure any ambiguity, omission, mistake, defect
or inconsistency.

13.10 Confidentiality. Each of the Administrative Agent, the Lenders and the
Issuing Lender agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its Affiliates
and to its Related Parties (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 required or requested by any regulatory authority purporting to have
jurisdiction over such Person or its Related Parties (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable laws or regulations or
by any subpoena or similar legal process, (d) to any other party hereto, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any 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, to (i) any assignee of or participant in, or any prospective assignee
of or participant in, any of its rights and obligations under this Agreement, or
any Eligible Assignee, or (ii) any actual or prospective party (or its Related
Parties) to any swap, derivative or other transaction under which payments are
to be made by reference to Borrower and its obligations, this Agreement or
payments hereunder, (g) on a confidential basis to (i) any Rating Agency in
connection with rating the Parent, Borrower or the Restricted Subsidiaries or
the credit facilities provided hereunder or (ii) the CUSIP Service Bureau or any
similar agency in connection with the issuance and monitoring of CUSIP numbers
or other market identifiers with respect to the credit facilities provided
hereunder, (h) with the consent of Borrower or (i) to the extent such
Information (x) becomes publicly available other than as a result of a breach of
this Section or (y) becomes available to the Administrative Agent, any Lender,
the Issuing Lender or any of their respective Affiliates on a nonconfidential
basis from a source other than Borrower.

 

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For purposes of this Section, “Information” means (i) all information received
from the Parent, Borrower or any Subsidiary relating to the Parent, Borrower or
any Subsidiary, or any of their respective businesses, other than any such
information that is available to the Administrative Agent, any Lender or the
Issuing Lender on a nonconfidential basis prior to disclosure by the Parent,
Borrower or any Subsidiary, provided that, in the case of information received
from the Parent, Borrower or any Subsidiary 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 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. For the avoidance of doubt, any Reserve Report,
engineering report, geologic data, financial statements or financial information
furnished by Parent or any Credit Party to Administrative Agent or any Lender
shall constitute Information and be treated as “confidential” for the purposes
of this Section.

Each of the Administrative Agent, the Lenders and the Issuing Lender
acknowledges that (a) the Information may include material non-public
information concerning the Parent, Borrower or a Subsidiary, as the case may be,
(b) it has developed compliance procedures regarding the use of material
non-public information and (c) it will handle such material non-public
information in accordance with applicable law, including United States Federal
and state securities laws.

13.11 Substitution or Removal of Lenders.

(a) With respect to any Lender (i) whose obligation to make Eurodollar-based
Advances has been suspended pursuant to Section 11.4, (ii) that has demanded
compensation under Sections 3.4(c), 11.5 or 11.6, (iii) that has become a
Defaulting Lender, (iv) that has not approved an increase in the Conforming
Borrowing Base or the Borrowing Base, as applicable, that has been approved by
the Supermajority Lenders or (v) that has failed to consent to a requested
amendment, waiver or modification to any Loan Document as to which the Majority
Lenders have already consented (in each case, an “Affected Lender”), then
Borrower may, at Borrower’s sole expense, require the Affected Lender to sell
and assign all of its interests, rights and obligations under this Agreement,
including, without limitation, its Revolving Credit Commitment Amount, to an
Eligible Assignee (which may be one or more of Lenders) (such assignee shall be
referred to herein as the “Purchasing Lender” or “Purchasing Lenders”) within
two (2) Business Days after receiving notice from Borrower requiring it to do
so, for an aggregate price equal to the sum of the portion of all Advances made
by it, interest and fees accrued for its account through but excluding the date
of such payment, and all other amounts payable to it hereunder, from the
Purchasing Lender(s) (to the extent of such outstanding principal and accrued
interest and fees) or Borrower (in the case of all other amounts, including
without limitation, if demanded by the Affected Lender, the amount of any
compensation then due to the Affected Lender under Sections 3.4(c), 11.1, 11.5
and 11.6 to but excluding said date), payable (in immediately available
funds) in cash. The Affected Lender, as assignor, such Purchasing Lender, as
assignee, Borrower and Administrative Agent, shall enter into an Assignment and
Assumption pursuant to Section 13.7, whereupon such Purchasing Lender shall be a
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Agreement, shall be deemed to be an assignee hereunder and shall have all the
rights and obligations of a Lender with a Revolving Credit Commitment Amount
equal to the Affected Lender’s Revolving Credit Percentage (immediately prior to
such assignment) of the then applicable Revolving Credit Aggregate Commitment,
provided, however, that if the Affected Lender does not execute such Assignment
and Assumption within (2) Business Days of receipt thereof, Administrative Agent
may execute the Assignment and Assumption as the Affected Lender’s
attorney-in-fact. Each of Lenders hereby irrevocably constitutes and appoints
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full power and
authority in the name of such Lender or in its own name to execute and deliver
the Assignment and Assumption while such Lender is an Affected Lender hereunder
(such power of attorney to be deemed coupled with an interest and irrevocable).
In connection with any assignment pursuant to this Section 13.11, Purchasing
Lender shall pay to Administrative Agent the processing and recordation fee
required under Section 13.7.

(b) If any Lender is an Affected Lender of the type described in
Section 13.11(a)(iii) and (iv) (any such Lender, a “Non-Compliant Lender”),
Borrower may, with the prior written consent of Administrative Agent (which
consent shall not be unreasonably withheld, conditioned or delayed), and
notwithstanding Section 10.3 of this Agreement or any other provisions requiring
pro rata payments to Lenders, elect to reduce the Revolving Credit Aggregate
Commitment by an amount equal to the Non-Compliant Lender’s Revolving Credit
Percentage of the Revolving Credit Aggregate Commitment and repay such
Non-Compliant Lender an amount equal the principal amount of all Advances owing
to it, all interest and fees accrued for its account through but excluding the
date of such repayment, and all other amounts payable to it hereunder (including
without limitation, if demanded by the Non-Compliant Lender, the amount of any
compensation then due to the Non-Compliant Lender under Sections 3.4(c), 11.1,
11.5 and 11.6 to but excluding said date), payable (in immediately available
funds) in cash, so long as, after giving effect to the termination of such
Non-Compliant Lender’s Revolving Credit Commitment Amount and the repayments
described in this clause (b), any Fronting Exposure of such Non-Compliant Lender
shall be reallocated among Lenders that are not Non-Compliant Lenders in
accordance with their respective Revolving Credit Percentages, but only to the
extent that the sum of the aggregate principal amount of all Revolving Credit
Advances made by each such Lender, plus such Lender’s Revolving Credit
Percentage of the aggregate outstanding principal amount of Letter of Credit
Obligations prior to giving effect to such reallocation plus such Lender’s
Revolving Credit Percentage of the Fronting Exposure to be reallocated does not
exceed such Lender’s Revolving Credit Percentage of the Revolving Credit
Aggregate Commitment and only so long as no Default or Event of Default has
occurred and is continuing on the date of such reallocation; provided that with
respect to any portion of the Fronting Exposure that may not be reallocated,
Borrower shall deliver to Administrative Agent, for the benefit of Issuing
Lender, cash collateral or other security satisfactory to Administrative Agent,
with respect any such remaining Fronting Exposure.

 

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13.12 WAIVER OF JURY TRIAL. LENDERS, ADMINISTRATIVE AGENT AND BORROWER
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO
A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT,
THE OTHER LOAN DOCUMENTS OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTION OF ANY OF THEM. NEITHER LENDERS,
ADMINISTRATIVE AGENT NOR BORROWER SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR
OTHERWISE, ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS
SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY
LENDERS, ADMINISTRATIVE AGENT OR BORROWER EXCEPT BY A WRITTEN INSTRUMENT
EXECUTED BY ALL OF THEM.

13.13 USA Patriot Act Notice. Pursuant to Section 326 of the USA Patriot Act,
Administrative Agent and Lenders hereby notify the Credit Parties that if they
or any of their Subsidiaries or the Parent open an account, including any loan,
deposit account, treasury management account, or other extension of credit with
Administrative Agent or any Lender, Administrative Agent or the applicable
Lender will request the applicable Person’s name, tax identification number,
business address and other information necessary to identify such Person (and
may request such Person’s organizational documents or other identifying
documents) to the extent necessary for Administrative Agent and the applicable
Lender to comply with the USA Patriot Act.

13.14 Complete Agreement; Conflicts. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. In the event of any conflict
between the terms of this Agreement and the other Loan Documents, this Agreement
shall govern.

13.15 Severability. In case any one or more of the obligations of the Credit
Parties under this Agreement, the Notes or any of the other Loan Documents shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining obligations of the Credit Parties shall not
in any way be affected or impaired thereby, and such invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity, legality or
enforceability of the obligations of the Credit Parties under this Agreement,
the Notes or any of the other Loan Documents in any other jurisdiction.

13.16 Table of Contents and Headings; Section References. The table of contents
and the headings of the various subdivisions hereof are for convenience of
reference only and shall in no way modify or affect any of the terms or
provisions hereof and references herein to “sections,” “subsections,” “clauses,”
“paragraphs,” “subparagraphs,” “exhibits” and “schedules” shall be to sections,
subsections, clauses, paragraphs, subparagraphs, exhibits and schedules,
respectively, of this Agreement unless otherwise specifically provided herein or
unless the context otherwise clearly indicates.

 

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13.17 Electronic Transmissions.

(a) Each of Administrative Agent, the Credit Parties, Lenders, and each of their
Affiliates is authorized (but not required) to transmit, post or otherwise make
or communicate, in its sole discretion, Electronic Transmissions in connection
with any Loan Document and the transactions contemplated therein. Borrower and
each other Credit Party hereby acknowledges and agrees that the use of
Electronic Transmissions is not necessarily secure and that there are risks
associated with such use, including risks of interception, disclosure and abuse
and each indicates it assumes and accepts such risks by hereby authorizing the
transmission of Electronic Transmissions.

(b) All uses of an E-System shall be governed by and subject to, in addition to
Section 13.6 and this Section 13.17, separate terms and conditions posted or
referenced in such E-System and related contractual obligations executed by
Administrative Agent, the Credit Parties and Lenders in connection with the use
of such E-System.

(c) All E-Systems and Electronic Transmissions shall be provided “as is” and “as
available”. None of Administrative Agent or any of its Affiliates, nor Borrower
or any of its respective Affiliates warrants the accuracy, adequacy or
completeness of any E-Systems or Electronic Transmission, and each disclaims all
liability for errors or omissions therein. No warranty of any kind is made by
Administrative Agent or any of its Affiliates, or Borrower or any of its
respective Affiliates in connection with any E-Systems or Electronic
Transmission, including any warranty of merchantability, fitness for a
particular purpose, non-infringement of third-party rights or freedom from
viruses or other code defects. Administrative Agent, Borrower and its
Subsidiaries, and Lenders agree that Administrative Agent has no responsibility
for maintaining or providing any equipment, software, services or any testing
required in connection with any Electronic Transmission or otherwise required
for any E-System. Administrative Agent and Lenders agree that Borrower has no
responsibility for maintaining or providing any equipment, software, services or
any testing required in connection with any Electronic Transmission or otherwise
required for any E-System.

13.18 Reliance on and Survival of Provisions. All terms, covenants, agreements,
representations and warranties of the Credit Parties and the Parent to any of
the Loan Documents made herein or in any of the Loan Documents or in any
certificate, report, financial statement or other document furnished by or on
behalf of any Credit Party or the Parent in connection with this Agreement or
any of the Loan Documents shall be deemed to have been relied upon by Lenders,
notwithstanding any investigation heretofore or hereafter made by any Lender or
on such Lender’s behalf, and those covenants and agreements of Borrower set
forth in Section 13.5 (together with any other indemnities of any Credit Party
or Parent contained elsewhere in this Agreement or in any of the other Loan
Documents) and of Lenders set forth in Section 12.7 shall survive the repayment
in full of the Indebtedness and the termination of any commitment to extend
credit.

 

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13.19 Concerning Lender Hedging Obligations and Lender Product Obligations. The
benefit of the Collateral Documents and of the provisions of this Agreement
relating to any collateral securing the Indebtedness shall also extend to the
Lender Hedging Obligations and the Lender Product Obligations, and be available
to those Lender Counterparties and to Lenders and their Affiliates which are
parties to any Lender Product, in each case with the Parent or any Credit Party,
as the case may be, on a pro rata basis in respect of any obligations of the
Parent or any Credit Party, as the case may be, which arise under any such
Commodity Hedging Agreements, Interest Rate Agreements and agreements relating
to Lender Products, while such Person or its Affiliate is a Lender, but only
while such Person or its Affiliate is a Lender, including all Existing Commodity
Hedging Agreements. No Lender or any Affiliate of a Lender shall have any voting
rights under any Loan Document or with respect to any Collateral, as a result of
the existence of obligations owed to it under any such Commodity Hedging
Agreements, Interest Rate Agreements or agreements relating to Lender Products.
All Commodity Hedging Agreements, Interest Rate Agreements and agreements
relating to Lender Products, if any, are independent agreements governed by the
written provisions of such agreements, which will remain in full force and
effect, unaffected by any repayment, prepayment, acceleration, reduction,
increase or change in the terms of the Advances or this Agreement, except as
otherwise expressly provided in such agreements, and any payoff statement from
any Lender relating to this Agreement shall not apply to such agreements except
as otherwise expressly provided in such payoff statement.

13.20 Release of Guarantees and Liens.

(a) Notwithstanding anything to the contrary contained herein or in any other
Loan Document, the Administrative Agent is hereby irrevocably authorized (but
not required) by each Lender (without requirement of notice to or consent of any
Lender except as expressly required by Section 13.9) to take any action
requested by Borrower having the effect of releasing any Collateral or guarantee
obligations (i) to the extent necessary to permit consummation of any
transaction not prohibited by any Loan Document or that has been consented to in
accordance with Section 13.9 or (ii) under the circumstances described in
paragraph (b), (c) or (d) below.

(b) At such time as (i) the Advances and the other Indebtedness (other than
contingent indemnification and reimbursement obligations for which no claim has
been made and Lender Product Obligations) shall have been paid in full in cash,
(ii) the Revolving Credit Aggregate Commitment has been terminated and no
Letters of Credit shall be outstanding (other than Letters of Credit that have
been cash collateralized or otherwise backstopped in a manner satisfactory to
the Issuing Lender), and (iii) all Lender Hedging Obligations shall have
terminated or acceptable substitute collateral shall have been posted to secure
such Lender Hedging Obligations or such Lender Hedging Obligations shall have
been novated to third parties, the Collateral shall be released from the Liens
created by the Collateral Documents, and the Collateral Documents and all
obligations (other than those expressly stated to survive such termination) of
each Credit Party under the Collateral Documents shall terminate, all without
delivery of any instrument or performance of any act by any Person.
Administrative Agent agrees, upon the request of Borrower, to promptly execute
and deliver to Borrower any and all Lien releases as may be required to
effectuate the foregoing.

 

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(c) If any of the Collateral shall be sold, transferred or otherwise Disposed of
by any Credit Party in a transaction permitted by this Agreement or any other
Loan Document, then the Administrative Agent, at the request and sole expense of
Borrower, shall execute and deliver to the relevant Credit Party all releases or
other documents reasonably necessary or desirable for the release of the Liens
created by the Collateral Documents on such Collateral. At the request and sole
expense of Borrower, a Guarantor that is a Restricted Subsidiary shall be
released from its obligations hereunder, under the Guaranty and under the
Collateral Documents in the event that any of the Equity Interests issued by
such Guarantor shall be Disposed of in a transaction permitted by this
Agreement; provided that Borrower shall have delivered to the Administrative
Agent, at least five (5) Business Days prior to the date of the proposed
release, a written request for release identifying the relevant Guarantor and
the terms of the Disposition in reasonable detail, including the price thereof
and any anticipated expenses in connection therewith.

(d) If any Restricted Subsidiary shall become an Unrestricted Subsidiary in
accordance with this Agreement, then so long as there exists no (x) Default or
Event of Default, or (y) Borrowing Base Deficiency, in each case both prior to
and/or immediately after taking such action, all obligations of such
Unrestricted Subsidiary under the Loan Documents shall automatically terminate,
and the Administrative Agent, at the request and sole expense of Borrower, shall
(i) release all Liens created by the Collateral Documents on (A) any and all
property of such Unrestricted Subsidiary, and (B) any and all Equity Interests
issued by such Unrestricted Subsidiary, and (ii) deliver to Borrower any and all
certificates representing such Equity Interests that were pledged to the
Administrative Agent pursuant to the Collateral Documents.

(e) Administrative Agent shall promptly release its Lien on any property of a
Credit Party that is not Collateral upon the written request of such Credit
Party.

13.21 Existing Credit Agreement. On the Effective Date, this Agreement shall
supersede and replace in its entirety the Existing Credit Agreement; provided,
however, that (a) all loans, letters of credit, interest periods, and other
indebtedness, obligations and liabilities outstanding under the Existing Credit
Agreement on such date shall continue to constitute Advances, Letters of Credit,
Interest Periods and other Indebtedness, obligations and liabilities under this
Agreement, (b) the execution and delivery of this Agreement or any of the Loan
Documents hereunder shall not constitute a novation or refinancing or any other
fundamental change in the relationship among the parties, and (c) the Advances,
Letters of Credit, Interest Periods and other Indebtedness, obligations and
liabilities outstanding hereunder, to the extent outstanding under the Existing
Credit Agreement immediately prior to the date hereof, shall constitute the same
loans, letters of credit, interest periods and other indebtedness, obligations
and liabilities as were outstanding under the Existing Credit Agreement.
Notwithstanding any provision of this Agreement or any other Loan Document or
instrument executed in connection herewith, the execution and delivery of this
Agreement and the incurrence of the Indebtedness hereunder shall be in
substitution for, but not in payment of, the Indebtedness owed by Borrower under
the Existing Credit Agreement.

13.22 Reallocation of Commitments and Revolving Credit Advances. The Lenders
party to the Existing Credit Agreement have agreed among themselves to
reallocate their respective Commitments (as defined in the Existing Credit
Agreement) as contemplated by this Agreement, and to, among other things, allow
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Lead Arrangers in consultation with Borrower, to become a party to this
Agreement as a Lender (each, a “New Lender”). On the Effective Date and after
giving effect to such reallocation and adjustment of the Commitments, the
Commitments and Revolving Credit Percentages of each Lender, including each New
Lender, shall be as set forth on Schedule 1.2 and each Lender, including each
New Lender, shall own its Revolving Credit Percentage of the outstanding
Revolving Credit Advances. The reallocation and adjustment to the Commitments of
each Lender, including each New Lender, as contemplated by this Section 13.22
shall be deemed to have been consummated pursuant to the terms of the Assignment
and Assumption attached as Exhibit D hereto as if each of the Lenders, including
each New Lender, had executed an Assignment and Assumption with respect to such
reallocation and adjustment. Borrower and Administrative Agent hereby consent to
such reallocation and adjustment of the Commitments and each New Lender’s
Commitment. The Administrative Agent hereby waives the $3,500 processing and
recordation fee with respect to the assignments and reallocations of the
Commitments contemplated by this Section 13.22. To the extent requested by any
Lender, and in accordance with Section 11.1, Borrower shall pay to such Lender,
within the time period prescribed by Section 11.1, any amounts required to be
paid by Borrower under Section 11.1 in the event the payment of any principal of
any Eurodollar-based Advance or the conversion of any Eurodollar-based Advance
other than on the last day of an Interest Period applicable thereto is required
in connection with the reallocation contemplated by this Section 13.22.

13.23 Flood Insurance. Notwithstanding any provision in this Agreement or any
other Loan Document to the contrary, in no event is any Building (as defined in
the applicable Flood Insurance Regulation) or Manufactured (Mobile) Home (as
defined in the applicable Flood Insurance Regulation) included in the definition
of “Mortgaged Properties” in the Mortgages and no Building or Manufactured
(Mobile) Home is hereby encumbered by the Collateral Documents. As used herein,
“Flood Insurance Regulations” shall mean (i) the National Flood Insurance Act of
1968 as now or hereafter in effect or any successor statute thereto, (ii) the
Flood Disaster Protection Act of 1973 as now or hereafter in effect or any
successor statue thereto, (iii) 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 (iv) the Flood Insurance Reform Act of 2004 and any
regulations promulgated thereunder.

PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, A LOAN
AGREEMENT IN WHICH THE AMOUNT INVOLVED IN THE LOAN AGREEMENT EXCEEDS $50,000.00
IN VALUE IS NOT ENFORCEABLE UNLESS THE LOAN AGREEMENT IS IN WRITING AND SIGNED
BY THE PARTY TO BE BOUND OR THAT PARTY’S AUTHORIZED REPRESENTATIVE.

THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO AN AGREEMENT SUBJECT TO THE
PRECEDING PARAGRAPH SHALL BE DETERMINED SOLELY FROM THE WRITTEN LOAN AGREEMENT,
AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED
INTO THE LOAN AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS, AS
DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH
RESPECT TO THE SUBJECT MATTERS SET FORTH HEREIN AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.

 

MRC Energy Company Credit Agreement

 

116

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[Signatures Follow On Succeeding Pages]

 

MRC Energy Company Credit Agreement

 

117

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

WITNESS the due execution hereof as of the day and year first above written.

 

ROYAL BANK OF CANADA,

as Administrative Agent

By:

  /s/ Ann Hurley

Name:

  Ann Hurley

Title:

  Manager, Agency

ROYAL BANK OF CANADA,

as a Lender and as a Issuing Lender

By:

  /s/ Don J. McKinnerney

Name:

  Don J. McKinnerney

Title:

  Authorized Signatory

 

MRC Energy Company Credit Agreement   Signature Page  

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

MRC ENERGY COMPANY,

as Borrower

By:

  /s/ David E. Lancaster

Name:

  David E. Lancaster

Title:

  Executive Vice President

 

MRC Energy Company Credit Agreement   Signature Page  

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

CITIBANK, N.A.,

as a Lender

By:

  /s/ Phil Ballard

Name:

  Phil Ballard

Title:

  VP

 

MRC Energy Company Credit Agreement   Signature Page  

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COMERICA BANK,

as a Lender and as a Issuing Lender

By:

  /s/ Mark Fuqua

Name:

  Mark Fuqua

Title:

  Senior Vice President Manager, Energy Lending

 

MRC Energy Company Credit Agreement   Signature Page  

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

SUNTRUST BANK,

as a Lender

By:

  /s/ Scott Mackey

Name:

  Scott Mackey

Title:

  Director

 

MRC Energy Company Credit Agreement   Signature Page  

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

THE BANK OF NOVA SCOTIA,

as a Lender

By:

  /s/ Terry Donovan

Name:

  Terry Donovan

Title:

  Managing Director

 

MRC Energy Company Credit Agreement   Signature Page  

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Schedule 1.1

Applicable Margin Grid

Revolving Credit Facility

(basis points per annum)

 

Basis for Pricing

   Level I      Level II      Level III      Level IV      Level V      Level VI
 

Borrowing Base Utilization*

   < 25%      ³ 25% but
< 50%      ³ 50% but
< 75%      ³ 75% but
< 90%      ³ 90% but
< 100%      > 100%  

Revolving Credit Eurodollar Margin

     175         200         225         250         275         325   

Revolving Credit Base Rate Margin

     75         100         125         150         175         225   

Commitment Fees

     37.5         37.5         50         50         50         50   

Letter of Credit Fees (exclusive of fronting fees)

     175         200         225         250         275         325   

 

* Definitions as set forth in the Credit Agreement.

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

Schedule 1.2

Percentages and Allocations

Revolving Credit

 

LENDERS

   REVOLVING
CREDIT
ALLOCATIONS      REVOLVING
CREDIT
PERCENTAGE  

Royal Bank of Canada

   $ 55,000,000         27.5 % 

Comerica Bank

   $ 45,000,000         22.5 % 

Citibank , N.A.

   $ 40,000,000         20.0 % 

SunTrust Bank

   $ 30,000,000         15.0 % 

The Bank of Nova Scotia

   $ 30,000,000         15.0 % 

TOTALS

   $ 200,000,000         100.00000000 % 

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

EXHIBIT A

FORM OF REQUEST FOR REVOLVING CREDIT ADVANCE

Dated:                , 20        

 

TO: Royal Bank of Canada, as Administrative Agent

 

RE: Third Amended and Restated Credit Agreement (as amended, restated, amended
and restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”) dated as of September 28, 2012, among the Lenders from time to time
party thereto, Royal Bank of Canada, as administrative agent for the Lenders,
and MRC Energy Company, a Texas corporation (the “Borrower”).

Pursuant to the Credit Agreement, the Borrower hereby requests an Advance from
the Lenders, as described herein:

 

(A) Date of Advance:                                     

 

(B) ¨ (check if applicable):

This Advance is or includes a whole or partial continuation/conversion of:

[Describe Advance(s)]

 

(C) Type of Advance (check only one):

¨ Base Rate Advance

¨ Eurodollar-based Advance

 

(D) Amount of Advance:

$                                 

 

(E) Interest Period (applicable to Eurodollar-based Advances):

                        months (insert 1, 2, 3, or 6)

 

(F) Disbursement Instructions:

 

         

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

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

The Borrower hereby represents and warrants that the conditions specified in
Section 5.2 of the Credit Agreement will be satisfied on and as of the date of
the Advance requested hereunder.

 

MRC ENERGY COMPANY,

as the Borrower

By:     Name:     Title:    

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

EXHIBIT B

FORM OF REVOLVING CREDIT NOTE

                    , 20        

FOR VALUE RECEIVED, the undersigned MRC Energy Company, a Texas corporation (the
“Borrower”), hereby unconditionally promises to pay to [            ] and its
registered assigns (the “Lender”), the principal sum equal to its Revolving
Credit Commitment Amount as set forth in the Credit Agreement (as defined
below), or if less, the aggregate unpaid principal amount of all Advances made
by the Lender to Borrower pursuant to the terms of the Credit Agreement,
together with interest on the unpaid principal balance thereof as set forth in
the Credit Agreement, both principal and interest payable as therein provided in
lawful money of the United State of America at the offices of Administrative
Agent provided in Section 13.6 of the Credit Agreement, or at such other place,
as from time to time may be designated by Administrative Agent in accordance
with the Credit Agreement.

This Revolving Credit Note (this “Note”) is one of the Notes referred to in the
Third Amended and Restated Credit Agreement, dated as of September 28, 2012 (as
amended, restated, amended and restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”), among the Borrower, the lenders from time
to time party thereto, and Royal Bank of Canada, as Administrative Agent. Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement.

This Note is entitled to the benefits of the Credit Agreement and may be prepaid
in whole or in part subject to the terms and conditions provided therein. This
Note is also entitled to the benefits of the Guaranty and the Collateral
Documents. Upon the occurrence and continuation of one or more of the Events of
Default specified in the Credit Agreement, all amounts then remaining unpaid on
this Note shall become, or may be declared to be, immediately due and payable
all as provided in the Credit Agreement.

The Borrower hereby waives presentment for payment, demand, protest and notice
of dishonor and nonpayment of this Note.

This Note shall be governed by and construed in accordance with the applicable
laws of the United States of America and the laws of the State of Texas.

THIS NOTE, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[SIGNATURE FOLLOWS ON SUCCEEDING PAGE]

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

MRC ENERGY COMPANY,

as the Borrower

By:     Name:   Title:  

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

EXHIBIT D

FORM OF ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between
[the][each]1 Assignor identified in item 1 below ([the][each, an] “Assignor”)
and [the][each]2 Assignee identified in item 2 below ([the][each, an]
“Assignee”). [It is understood and agreed that the rights and obligations of
[the Assignors][the Assignees]3 hereunder are several and not joint.]4
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][each]
Assignee. The Standard Terms and Conditions set forth in Annex 1 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][each] Assignor hereby irrevocably sells and
assigns to [the Assignee][the respective Assignees], and [the][each] Assignee
hereby irrevocably purchases and assumes from [the Assignor][the respective
Assignors], 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][the
respective Assignors’] rights and obligations in [its capacity as a
Lender][their respective capacities as Lenders] 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][the respective Assignors]
under the respective facilities identified below (including without limitation
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)][the respective Assignors (in their respective capacities as Lenders)]
against any Person, whether known or unknown, arising under or in connection
with the Credit Agreement, any other documents or instruments delivered pursuant
thereto or the loan transactions governed thereby or in any way based on or
related to any of the foregoing, including, but not limited to, contract claims,
tort claims, malpractice claims, statutory claims and all other claims at law or
in equity related to the rights and obligations sold and assigned pursuant to
clause (i) above (the rights and obligations sold and assigned by [the][any]
Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being
referred to herein collectively as [the][an] “Assigned Interest”). Each such
sale and assignment is without recourse to [the][any] Assignor and, except as
expressly provided in this Assignment and Assumption, without representation or
warranty by [the][any] Assignor.

 

1. Assignor[s]:                         
                                                 

 

2. Assignee[s]:                         
                                                 

 

1 

For bracketed language here and elsewhere in this form relating to the
Assignor(s), if the assignment is from a single Assignor, choose the first
bracketed language. If the assignment is from multiple Assignors, choose the
second bracketed language.

2 

For bracketed language here and elsewhere in this form relating to the
Assignee(s), if the assignment is to a single Assignee, choose the first
bracketed language. If the assignment is to multiple Assignees, choose the
second bracketed language.

3 

Select as appropriate.

4 

Include bracketed language if there are either multiple Assignors or multiple
Assignees.

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

 

        [for each Assignee, indicate Affiliate of [identify Lender]]

 

3.    Borrower:   MRC Energy Company 4.    Administrative Agent:   Royal Bank of
Canada, as the administrative agent under the Credit Agreement 5.    Credit
Agreement:   Third Amended and Restated Credit Agreement dated as of
September 28, 2012 among MRC Energy Company, as borrower, the Lenders parties
thereto, Royal Bank of Canada, as Administrative Agent. 6.   
AssignedInterest[s]:  

 

Assignor[s]5

  

Assignee[s]6

   Aggregate Amount of
Revolving Credit
Aggregate
Commitment/Advances
for all Lenders7    Amount of
Revolving Credit
Aggregate Commitment/
Advances Assigned8    Percentage Assigned of
Revolving Credit
Aggregate Commitment/
Advances 8       $    $    %       $    $    %       $    $    %

 

5 

List each Assignor, as appropriate.

6 

List each Assignee, as appropriate.

7 

Amount to be adjusted by the counterparties to take into account any payments or
prepayments made between the Trade Date and the Effective Date.

8 

Set forth, to at least 9 decimals.

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

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[S]

[NAME OF ASSIGNOR]

By:

     

Title:

[NAME OF ASSIGNOR]

By:

     

Title:

ASSIGNEE[S]

[NAME OF ASSIGNEE]

By:

     

Title:

[NAME OF ASSIGNEE]

By:

      Title:

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

[Consented to and]9 Accepted:

 

[NAME OF ADMINISTRATIVE AGENT], as
Administrative Agent

By:

      Title:

[Consented to:]10

[NAME OF RELEVANT PARTY]

By:

      Title:

 

 

9 

To be added only if the consent of the Administrative Agent is required by the
terms of the Credit Agreement.

10 

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.

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

ANNEX 1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor[s]. [The][Each] Assignor (a) represents and warrants that (i) it is
the legal and beneficial owner of [the][the relevant] Assigned Interest,
(ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or
other adverse claim, (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 (iv) it is not a Defaulting
Lender; 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[s]. [The][Each] Assignee (a) represents and warrants that (i) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) it
meets all the requirements to be an assignee under Section 13.7(b)(iii), (v) and
(vi) of the Credit Agreement (subject to such consents, if any, as may be
required under Section 13.7(b)(iii) or (v) of the Credit Agreement), (iii) from
and after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and, to the extent of [the][the relevant]
Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is
sophisticated with respect to decisions to acquire assets of the type
represented by the Assigned Interest and either it, or the Person exercising
discretion in making its decision to acquire the Assigned Interest, is
experienced in acquiring assets of such type, (v) it has received a copy of the
Credit Agreement, and has received or has been accorded the opportunity to
receive copies of the most recent financial statements delivered pursuant to
Section 7.1 thereof, as applicable, and such other documents and information as
it deems appropriate to make its own credit analysis and decision to enter into
this Assignment and Assumption and to purchase [the][such] Assigned Interest,
(vi) it has, independently and without reliance upon the Administrative Agent or
any other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase [the][such] Assigned Interest, and
(vii) 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][such] Assignee; and (b) agrees
that (i) it will, independently and without reliance on the Administrative
Agent, [the][any] Assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Documents, and
(ii) it will perform in accordance with their terms all of the obligations which
by the terms of the Loan Documents are required to be performed by it as a
Lender.

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

2. Payments. From and after the Effective Date, the Administrative Agent shall
make all payments in respect of [the][each] Assigned Interest (including
payments of principal, interest, fees and other amounts) to [the][the relevant]
Assignor for amounts which have accrued to but excluding the Effective Date and
to [the][the relevant] Assignee for amounts which have accrued from and after
the Effective Date. Notwithstanding the foregoing, the Administrative Agent
shall make all payments of interest, fees or other amounts paid or payable in
kind from and after the Effective Date to [the][the relevant] Assignee.

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
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of Texas.

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

EXHIBIT E

FORM OF GUARANTY

See attached.

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

SECOND AMENDED, RESTATED AND CONSOLIDATED

UNCONDITIONAL GUARANTY

SEPTEMBER 28, 2012

1. Pursuant to this Second Amended, Restated and Consolidated Unconditional
Guaranty (this agreement, together with all amendments, restatements,
supplements, other modifications and Guaranty Supplements (as defined below),
this “Guaranty”), the undersigned, MRC Permian Company, a Texas corporation, MRC
Rockies Company, a Texas corporation, Matador Production Company, a Texas
corporation, Longwood Gathering and Disposal Systems GP, Inc., a Texas
corporation, Longwood Gathering and Disposal Systems, LP, a Texas limited
partnership, and Matador Resources Company (formerly known as Matador Holdco,
Inc.), a Texas corporation, and each other Person who becomes a party hereto
pursuant to Section 21 (each, a “Guarantor,” and collectively, the
“Guarantors”), whose address is 5400 LBJ Freeway, Suite 1500, Dallas, Texas
75240, hereby jointly and severally, irrevocably, unconditionally and absolutely
guarantee in favor of (i) Royal Bank of Canada, as administrative agent (in such
capacity, “Administrative Agent”) for the Lenders from time to time parties to
that certain Third Amended and Restated Credit Agreement, dated as of
September 28, 2012, among MRC Energy Company, a Texas corporation formerly known
as Matador Resources Company (the “Borrower”), the Lenders from time to time
party thereto, and the Administrative Agent (as the same may be amended,
restated, amended and restated, renewed, extended, supplemented, or otherwise
modified from time to time, the “Credit Agreement”; capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in the Credit Agreement) and (ii) the other Secured Parties, their
respective successors, endorsees, permitted transferees and permitted assigns,
the prompt and complete payment and performance when due, after the expiration
of any applicable cure period under the Credit Agreement, if any, of all
Guaranteed Obligations (as herein defined).

As used herein, “Guaranteed Obligations” means all Indebtedness and interest
(including any interest which, but for the application of the provisions of the
Bankruptcy Code, would have accrued on amounts owed by the Borrower) under the
Credit Agreement. This is a joint and several, irrevocable, unconditional and
continuing guaranty of payment, and not a guaranty of collection, and the
Administrative Agent, on behalf of Secured Parties, may enforce each Guarantor’s
obligations hereunder without first suing or enforcing its rights or remedies
against the Borrower or any other Guarantor or obligor or enforcing or
collecting any present or future collateral security for the Guaranteed
Obligations. Notwithstanding anything herein or in any other Loan Document to
the contrary, in any action or proceeding involving any state corporate law, or
any state or federal bankruptcy, insolvency, reorganization or other law
affecting the rights of creditors generally, if, as a result of applicable law
relating to fraudulent conveyance or fraudulent transfer, including Section 548
of the Bankruptcy Code or any applicable provisions of comparable state law
(collectively, “Fraudulent Transfer Laws”), the obligations of any Guarantor
under this Section 1 would otherwise, after giving effect to (y) all other
liabilities of such Guarantor, contingent or otherwise, that are relevant under
such Fraudulent Transfer Laws (specifically excluding, however, any liabilities
of such Guarantor in respect of intercompany Debt to the Borrower to the extent
that such Debt would be discharged in an amount equal to the amount paid by such
Guarantor hereunder) and (z) the value as assets of such Guarantor (as
determined under the applicable provisions of such Fraudulent Transfer Laws) of
any rights of

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

subrogation, contribution, reimbursement, indemnity or similar rights held by
such Guarantor pursuant to (i) applicable requirements of law, (ii) Section 10
hereof or (iii) any other contractual obligations providing for an equitable
allocation among such Guarantor and other Subsidiaries or Affiliates of the
Borrower of obligations arising under this Guaranty or other guaranties of the
Guaranteed Obligations by such parties, be held or determined to be void,
invalid or unenforceable, or subordinated to the claims of any other creditors,
on account of the amount of its liability under this Section 1, then the amount
of such liability shall, without any further action by such Guarantor, any
Secured Party or any other Person, be automatically limited and reduced to the
highest amount that is valid and enforceable and not subordinated to the claims
of other creditors as determined in such action or proceeding.

2. Payment of any sum or sums due to the Secured Parties hereunder will be made
by each Guarantor immediately upon demand by Administrative Agent. Each
Guarantor agrees that its obligation hereunder shall not be discharged or
impaired in any respect by reason of any failure by Administrative Agent to
perfect, or continue perfection of, any Lien or security interest in any
security or any delay by Administrative Agent in perfecting any such Lien or
security interest.

3. Each Guarantor hereby waives (a) notice of acceptance of this Guaranty,
(b) notice of the extension of credit by the Lenders or Issuing Lender to the
Borrower, (c) notice of the occurrence of any breach or default by the Borrower
in respect of the Guaranteed Obligations, (d) notice of the sale or foreclosure
on any collateral for the Guaranteed Obligations, (e) notice of the transfer of
any part or all of the Guaranteed Obligations to any third party, (f) demand for
payment, presentment, protest, notice of protest and non-payment, or other
notice of default, notice of acceleration and intention to accelerate, and
(g) all other notices (other than notices required by the Loan Documents).

4. Each Guarantor hereby consents, agrees and acknowledges that its obligations
hereunder shall not be released or discharged by, the following: (a) the
renewal, extension, modification, increase, amendment or alteration of the
Credit Agreement, the Guaranteed Obligations or any related document or
instrument; (b) any forbearance, waiver, extension or compromise granted to the
Borrower by the Secured Parties; (c) the insolvency, bankruptcy, liquidation or
dissolution of the Borrower or any other Guarantor or obligor; (d) the
invalidity, illegality or unenforceability of all or any part of the Guaranteed
Obligations; (e) the full or partial release of the Borrower, any other
Guarantor or obligor; (f) the release, surrender, exchange, subordination,
deterioration, waste, loss or impairment (including without limitation
negligent, willful unreasonable or unjustifiable impairment) of any collateral
for the Guaranteed Obligations; (g) the failure of the Secured Parties to
properly obtain, perfect or preserve any security interest or Lien in any such
collateral; (h) the failure of the Secured Parties to exercise diligence,
commercial reasonableness or reasonable care in the preservation, enforcement or
sale of any such collateral; (i) the time for the Borrower’s performance of or
compliance with any covenant or agreement contained in the Credit Agreement or
any other Loan Document may be extended or such performance or compliance may be
waived; and (j) any other act or omission of the Secured Parties, the Borrower
or any other Person or any other circumstance which would otherwise constitute
or create a legal or equitable defense in favor of any Guarantor (other than the
defenses of final payment and performance).

 

- 2 -

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

5. Until all of the Guaranteed Obligations have been paid in full in cash, each
Guarantor hereby waives any rights of subrogation, reimbursement, indemnity, or
contribution which it may have as a result of paying the Guaranteed Obligations.
Any amounts paid to a Guarantor on account of subrogation rights under this
Guaranty at any time when all the Guaranteed Obligations have not been paid in
full, shall be held in trust for the benefit of the Administrative Agent and
shall promptly be paid to the Administrative Agent to be credited and applied to
the Guaranteed Obligations, whether matured or unmatured or absolute or
contingent, in accordance with the terms of the Credit Agreement.

6. Each Guarantor represents and warrants that (a) it has received or will
receive direct or indirect benefit from the making of this Guaranty and the
creation of the Guaranteed Obligations; (b) each Guarantor is familiar with the
financial condition of the Borrower and the value of any collateral security for
the Guaranteed Obligations; (c) none of the Secured Parties has made any
representations to any Guarantor in order to induce such Guarantor to execute
this Guaranty; (d) to the best of its knowledge and belief, the execution,
delivery and performance by each Guarantor of this Guaranty and the consummation
of the transactions contemplated hereunder do not, and will not, contravene or
conflict in any material respect with any law, statute or regulation whatsoever
to which such Guarantor is subject or constitute a default (or an event which
with notice or lapse of time or both would constitute a default) under, or
result in the breach of, any indenture, mortgage, deed of trust, charge, Lien,
or any contract, agreement or other instrument to which such Guarantor is a
party or which may be applicable to such Guarantor or any of its assets, except
where such contravention, default or breach could not reasonably be expected to
have a Material Adverse Effect; (e) this Guaranty has been authorized by all
necessary action of each Guarantor and is a legal and binding obligation of each
Guarantor and is enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency or other laws of general application relating to the
enforcement of creditors’ rights and general equitable principles; and (f) all
representations and warranties made by each Guarantor herein shall survive the
execution hereof.

7. Each Guarantor hereby acknowledges that any Guarantor’s termination or
disposition of any ownership interest in the Borrower shall not alter, affect or
in any way limit the obligations of such Guarantor hereunder.

8. In the event the Borrower is not liable for part or all of the Guaranteed
Obligations because the act of creating the obligation is ultra vires, or the
officers or persons creating same acted in excess of their authority, and for
these reasons any part of the Guaranteed Obligations cannot be enforced against
the Borrower, such fact shall in no manner affect any Guarantor’s liability
hereunder; but each Guarantor shall be liable hereunder, notwithstanding any
finding that the Borrower is not liable for part or all of the Guaranteed
Obligations, and to the same extent as such Guarantor would have been if the
Guaranteed Obligations had been enforceable against the Borrower.

9. In the event of a default in the payment or performance of all or any part of
the Guaranteed Obligations when such Guaranteed Obligations become due, whether
by its terms, by acceleration or otherwise, each Guarantor shall, upon demand,
promptly pay the amount due thereon to Administrative Agent, in lawful money of
the United States, at Administrative Agent’s address set forth in the Credit
Agreement. One or more successive or concurrent

 

- 3 -

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

actions may be brought against any Guarantor, either in the same action in which
the Borrower is sued or in separate actions, as often as Administrative Agent
deems advisable. Suit may be brought or demand may be made against all parties
who have signed this Guaranty or any other guaranty in favor of Administrative
Agent covering all or any part of the Guaranteed Obligations, or against any one
or more of them, separately or together, without impairing the rights of
Administrative Agent against any party hereto. The exercise by Administrative
Agent of any right or remedy under this Guaranty or under any other agreement or
instrument, at law, in equity or otherwise, shall not preclude concurrent or
subsequent exercise of any other right or remedy. No delay on the part of
Administrative Agent in exercising any right hereunder or failure to exercise
the same shall operate as a waiver of such right. In no event shall any waiver
of the provisions of this Guaranty be effective unless the same be in writing
and signed by Administrative Agent, and then only in the specific instance and
for the purpose given.

10. To the extent that any Guarantor shall be required hereunder to pay a
portion of the Guaranteed Obligations exceeding the greater of (a) the amount of
the economic benefit actually received by such Guarantor from the Advances and
the Letters of Credit and (b) the amount such Guarantor would otherwise have
paid if such Guarantor had paid the aggregate amount of the Guaranteed
Obligations (excluding the amount thereof repaid by the Borrower) in the same
proportion as such Guarantor’s net worth at the date enforcement is sought
hereunder bears to the aggregate net worth of all the Guarantors at the date
enforcement is sought hereunder, then such Guarantor shall be reimbursed by such
other Guarantors for the amount of such excess, pro rata, based on the
respective net worths of such other Guarantors at the date enforcement hereunder
is sought. Notwithstanding anything to the contrary, each Guarantor agrees that
the Guaranteed Obligations may at any time and from time to time exceed the
amount of the liability of such Guarantor hereunder without impairing its
guaranty herein or affecting the rights and remedies of the Guarantors
hereunder. This Section 10 is intended only to define the relative rights of the
Guarantors, and nothing set forth in this Section 10 is intended to or shall
impair the obligations of the Guarantors, jointly and severally, to pay to the
Administrative Agent, for the benefit of the Secured Parties, the Guaranteed
Obligations as and when the same shall become due and payable in accordance with
the terms hereof.

11. Any and all payments by or on account of any obligation of any Guarantor
hereunder shall be made free and clear of and without deduction or withholding
for any Indemnified Taxes or Other Taxes on the same terms and to the same
extent that payments by the Borrower are required to be made free and clear of
Indemnified Taxes and Other Taxes pursuant to the terms of Section 11.9 of the
Credit Agreement.

12. This Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by any Secured Party or any other Person
upon the insolvency, bankruptcy or reorganization of the Borrower or any
Guarantor or otherwise, all as though such payment had not been made.

13. If an Event of Default shall have occurred and be continuing, the
Administrative Agent and each of the Secured Parties shall be entitled, at their
option, to offset balances (general or special, time or demand, provisional or
final) held by them for the accounts of the Guarantors at any of the
Administrative Agent’s or any Secured Party’s offices, in United States

 

- 4 -

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dollars or in any other currency, against any amount payable by the Guarantors
under this Guaranty which is not paid when due, in which case it shall promptly
notify the Guarantors thereof; provided that the Administrative Agent’s or any
Secured Party’s failure to give such notice shall not affect the validity
thereof.

14. All notices shall be given as provided by the terms of the Credit Agreement
and to the addresses for notices set forth on the signature pages hereto.

15. This Guaranty shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, assigns, transferees, and endorsees;
provided that the Guarantors may not assign or transfer their respective rights
or obligations under this Guaranty.

16. Whenever herein the singular number is used, the same shall include the
plural where appropriate, and words of any gender shall include each other
gender where appropriate.

17. This Guaranty embodies the entire agreement between the parties hereto, and
supersedes all prior agreements, conditions and understandings, if any, related
to the subject matter hereof. This Guaranty may be amended only by a written
instrument executed by Guarantors and Administrative Agent. The substantive laws
of the State of Texas shall govern the validity, construction, enforcement and
interpretation of this Guaranty. For purposes of litigation pertaining to this
Guaranty, each Guarantor, Administrative Agent, and each Secured Party by its
acceptance of the benefits of this Guaranty, hereby irrevocably consent and
submit to the non-exclusive personal jurisdiction of state and federal courts
located in the State of Texas. The Guarantors, Administrative Agent, and each
Secured Party by its acceptance of the benefits of this Guaranty agree that
Dallas County, Texas, is a convenient forum in which to decide any dispute
related to this Guaranty or the Credit Agreement and agrees that all actions
pertaining to this Guaranty and the Credit Agreement may be brought in Dallas
County, Texas.

18. In addition to the obligation of each Guarantor set forth in Section 1
hereof, such Guarantor shall pay to the Secured Parties all reasonable and
documented costs and expenses (including court costs and reasonable attorneys’
fees) incurred by any of the Secured Parties in the preservation or enforcement
of its rights and remedies hereunder. The obligations of the Guarantors under
this Section 19 shall survive the termination of this Guaranty.

19. This Guaranty is an amendment and restatement, but not an extinguishment,
novation, or release of that certain Amended, Restated and Consolidated
Unconditional Guaranty dated December 30, 2011 (the “Existing Guaranty”),
executed by the Guarantors. Each Guarantor who is a party to the Existing
Guaranty hereby reaffirms, ratifies, restates and confirms its obligations
pursuant to the Existing Guaranty, as applicable, as amended and restated by
this Guaranty. This Guaranty, as it relates to any Guarantor, shall be released
and/or terminated in accordance with Section 13.20 of the Credit Agreement.

20. Upon the execution and delivery by any other Person of a Guaranty Supplement
in substantially the form of Exhibit A (each, a “Guaranty Supplement”), such
Person shall become a “Guarantor” hereunder with the same force and effect as if
originally named as a Guarantor herein. The execution and delivery of any
Guaranty Supplement shall not require the consent of any other Guarantor
hereunder. The rights and obligations of each Guarantor hereunder shall remain
in full force and effect notwithstanding the addition of any new Guarantor as a
party to this Guaranty.

 

- 5 -

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21. This Guaranty may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Guaranty by signing any such counterpart. Delivery of an executed
counterpart of a signature page of this Guaranty by facsimile or by other
electronic transmission shall be effective as delivery of a manually executed
counterpart of this Guaranty.

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

23. EACH PARTY HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF
THIS GUARANTY OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS GUARANTY OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTION OF ANY PARTY HERETO. NONE OF THE PARTIES
HERETO SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION
IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO
HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY ANY PARTY HERETO EXCEPT BY
A WRITTEN INSTRUMENT EXECUTED BY ALL THE PARTIES HERETO. EACH REFERENCE TO A
“PARTY” OR THE “PARTIES” IN THIS SECTION 23 SHALL INCLUDE EACH PERSON WHO
EXECUTES AND DELIVERS A GUARANTY SUPPLEMENT.

[Signature page follows]

 

- 6 -

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IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the day and year first written above.

 

GUARANTORS: MRC PERMIAN COMPANY By:     Name:   David E. Lancaster Title:  
Executive Vice President MRC ROCKIES COMPANY By:     Name:   David E. Lancaster
Title:   Executive Vice President MATADOR PRODUCTION COMPANY By:     Name:  
David E. Lancaster Title:   Executive Vice President LONGWOOD GATHERING AND
DISPOSAL SYSTEMS GP, INC. By:     Name:   David E. Lancaster Title:   Executive
Vice President

 

Second Amended and Restated Guaranty – Signature Page

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

LONGWOOD GATHERING AND DISPOSAL
SYSTEMS, LP By:   Longwood Gathering and Disposal Systems GP, Inc., its General
Partner By:     Name:   David E. Lancaster Title:   Executive Vice President
MATADOR RESOURCES COMPANY By:     Name:   David E. Lancaster Title:   Executive
Vice President Address for each Guarantor: 5400 LBJ Freeway, Suite 1500 Dallas,
Texas 75240 Attention: David Lancaster Facsimile No: (214) 866-4832

 

Second Amended and Restated Guaranty – Signature Page

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

ACCEPTED AND AGREED TO BY:

ROYAL BANK OF CANADA,as Administrative Agent

By:

    Name:   Title:  

Address:

Royal Bank of Canada, as Agent

20 King Street West,

4th Floor

Toronto, Ontario

M5H1C4, Canada

Attn: Manager Agency Services Group

Fax: (416) 842 4023

With a copy to:

2800 Post Oak Blvd.

Suite 3900

Houston, Texas 77056

Telephone: (713) 403-5607

Fax: (713) 403-5624

Attn: Don J. McKinnerney

 

Second Amended and Restated Guaranty – Signature Page

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Exhibit A

Form of Guaranty Supplement

GUARANTY SUPPLEMENT NO.             

THIS GUARANTY SUPPLEMENT NO.            (this “Guaranty Supplement”) is made as
of            , to the Second Amended, Restated and Consolidated Unconditional
Guaranty dated as of September 28, 2012 (such agreement, together with all
amendments, restatements, other modifications and Guaranty Supplements (as such
term is defined therein), the “Guaranty”), among the initial signatories thereto
and each other Person which from time to time thereafter became a party thereto
pursuant to Section 21 thereof (each, individually, a “Guarantor” and,
collectively, the “Guarantors”), in favor of Administrative Agent (as defined in
the Guaranty) for the benefit of the Secured Parties (as defined in the
Guaranty).

BACKGROUND.

Capitalized terms not otherwise defined herein have the meaning specified in the
Guaranty. The Guaranty provides that additional parties may become Guarantors
under the Guaranty by execution and delivery of this Guaranty Supplement.
Pursuant to the provisions of Section 21 of the Guaranty, the undersigned is
becoming a Guarantor under the Guaranty. The undersigned desires to become a
Guarantor under the Guaranty in order to induce the Secured Parties to continue
to make credit extensions and accommodations under the Loan Documents.

AGREEMENT.

NOW, THEREFORE, the undersigned agrees with Administrative Agent and each other
Secured Party as follows:

SECTION 1. In accordance with the Guaranty, the undersigned hereby becomes a
Guarantor under the Guaranty with the same force and effect as if it were an
original signatory thereto as a Guarantor, and the undersigned hereby (a) agrees
to all the terms and provisions of the Guaranty applicable to it as a Guarantor
thereunder and (b) represents and warrants that the representations and
warranties made by it as a Guarantor thereunder are true and correct in all
material respects (except to the extent such representation and warranty is
already qualified by materiality or by a “Material Adverse Effect” clause, in
which case such representation and warranty shall be true and correct in all
respects) on and as of the date hereof, except for any such representations and
warranties that were made as of a specified date. Each reference to a
“Guarantor” in the Guaranty shall be deemed to include the undersigned.

SECTION 2. Except as expressly supplemented hereby, the Guaranty shall remain in
full force and effect in accordance with its terms.

SECTION 3. The substantive laws of the State of Texas shall govern the validity,
construction, enforcement and interpretation of this Guaranty Supplement.

 

Exhibit A – Guaranty Supplement

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

SECTION 4. This Guaranty Supplement hereby incorporates by reference the
provisions of the Guaranty, which provisions are deemed to be a part hereof, and
this Guaranty Supplement shall be deemed to be a part of the Guaranty.

SECTION 5. This Guaranty Supplement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Guaranty Supplement by signing any
such counterpart. Delivery of an executed counterpart of a signature page of
this Guaranty Supplement by facsimile or by other electronic transmission shall
be effective as delivery of a manually executed counterpart of this Guaranty
Supplement. The notice address of the undersigned for any notices or other
communications under the Guaranty shall be the notice address as set forth on
the signature page attached hereto.

[Signature page follows]

 

Exhibit A – Guaranty Supplement

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

EXECUTED as of the date above first written.

 

ADDRESS:     [ADDITIONAL GUARANTOR]       By:           Print
Name:                                        
                                                                       
Print Title:                                                                   
                                         Attention:                            
                                                                              

 

ACCEPTED BY:

ROYAL BANK OF CANADA, as Administrative Agent

By:

   

Print Name:                                                               
            

Print Title:                                                               
              

 

Exhibit A – Guaranty Supplement

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

EXHIBIT F

FORM OF COMPLIANCE CERTIFICATE

Financial Statement Date:                        

To: Royal Bank of Canada, as Administrative Agent

Ladies and Gentlemen:

Reference is made to that certain Third Amended and Restated Credit Agreement,
dated as of September 28, 2012 (as amended, restated, amended and restated,
extended, supplemented or otherwise modified in writing from time to time, the
“Credit Agreement;” the terms defined therein being used herein as therein
defined), among MRC Energy Company (the “Borrower”), the Lenders from time to
time party thereto, and Royal Bank of Canada, as Administrative Agent (the
“Administrative Agent”).

The undersigned Responsible Officer hereby certifies as of the date hereof that
he/she is the                 of the Borrower, and that, as such, he/she is
authorized to execute and deliver this Compliance Certificate (this
“Certificate”) to the Administrative Agent on the behalf of the Borrower, and
that:

[Use following paragraph 1 for fiscal year-end financial statements]

1. Attached hereto as Schedule 1 are the year-end audited Consolidated financial
statements of Parent and its Subsidiaries required by Section 7.1(a) of the
Credit Agreement for the Fiscal Year ended as of the above date certified by an
independent, nationally recognized certified public accounting firm required by
such section.

[Use following paragraph 1 for fiscal quarter-end financial statements]

1. Attached hereto as Schedule 1 are the unaudited Consolidated financial
statements of Parent and its Subsidiaries required by Section 7.1(b) of the
Credit Agreement for the Fiscal Quarter ended as of the above date.

Such financial statements fairly present the consolidated financial condition
and results of operations of the Parent and its Subsidiaries in accordance with
GAAP (except as disclosed on Annex 1 hereto) throughout the periods reflected
therein and with prior periods, provided that financial statements delivered
pursuant to Section 7.1(b) are not required to include footnotes and will be
subject to change for audit and year-end adjustments, including tests for
impairment of assets.

[select one:]

[to the best knowledge of the undersigned during such fiscal period, no Default
has occurred and is continuing.]

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

[The following is a list of the existing Defaults and their nature and status:]

2. The representations and warranties of the Borrower contained in Article 6 of
the Credit Agreement or in any other Loan Document are true and correct in all
material respects on and as of the date hereof, except to the extent that such
representations and warranties specifically refer to an earlier date, in which
case they shall be true and correct in all material respects as of such earlier
date, and except that for purposes of this Certificate, the representations and
warranties contained in Section 6.17 of the Credit Agreement shall be deemed to
refer to the most recent statements furnished pursuant to Section 7.1(a) and
Section 7.1(b) of the Credit Agreement, including the statements in connection
with which this Certificate is delivered.

3. The financial covenant analyses and information set forth on Schedule 2
attached hereto are true and accurate on and as of the date of this Certificate.

IN WITNESS WHEREOF, the undersigned has executed this Certificate as
of                    ,                 .

 

MRC ENERGY COMPANY

By:

   

Name:

 

Title:

 

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

SCHEDULE 1

See attached.

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

ANNEX 1

The attached financial statements are in accordance with GAAP, except:
[            ]

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

For the Quarter/Year ended                     (“Statement Date”)

SCHEDULE 2

TO THE COMPLIANCE CERTIFICATE

($ IN 000’S)

 

2.            Total Debt to Consolidated EBITDA Ratio (Section 7.9(a))      
(a)        total Debt of Parent and its Subsidiaries determined on a
consolidated basis in accordance with GAAP:          (i)    All obligations of
such Person for borrowed money or evidenced by bonds, debentures, notes or other
similar instruments (including principal, but excluding interest, fees and
charges):    $                                   (ii)    All obligations of such
Person (whether contingent or otherwise) in respect of bankers’ acceptances,
letters of credit, surety or other bonds and similar instruments:   
$                                   (iii)        All obligations of such Person
to pay the deferred purchase price of property or services (other than for
borrowed money and other than accounts payable (for the deferred purchase price
of property or services) from time to time incurred in the ordinary course of
business which, if greater than ninety (90) days past the invoice or billing
date, are being contested in good faith by appropriate proceedings and for which
reserves adequate under GAAP shall have been established therefor):   
$                                   (iv)    All obligations under leases which
shall have been, or should have been, in accordance with GAAP, recorded as
capital leases in respect of which such Person is liable (whether contingent or
otherwise including principal but excluding interest, fees and charges):   
$                                   (v)    All obligations under operating
leases which require such Person or its Affiliate to make payments over the term
of such lease, including payments at termination, based on the purchase price or
appraisal value of the Property subject to such lease plus a marginal interest
rate, and used primarily as a financing vehicle for, or to monetize, such
Property:    $                                   (vi)    All Debt (as described
in the other clauses of this certificate) of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person, but
valued at the lesser of (x) the amount of such Debt and (y) the fair market
value of the property securing such Debt:    $                            

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

      (vii)    All Debt (as described in the other clauses of this certificate)
and other obligations of others guaranteed by such Person or in which such
Person otherwise assures a creditor against loss of the debtor or obligations of
others:    $                                        (viii)    All obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt of others:    $
                                       (ix)    Obligations to deliver or sell
Hydrocarbons in consideration of advance payments, as disclosed by Section
7.15(c) of the Credit Agreement:    $                                          
         (x)    Any Disqualified Equity Interests:    $
                                       (xi)    The undischarged balance of any
production payment created by such Person or for the creation of which such
Person directly or indirectly received payment:    $                            
           (xii)    Total of Lines A.2 + A.3 + A.4 + A.5 + A.6 + A.7 + A.8 + A.9
+ A.10 + A.11, minus $1,000,000, but not less than zero:    $
                                       (xiii)        Total Debt of Borrower and
its Subsidiaries (Lines A.1 + A.12):    $                                    
(b)        Consolidated EBITDA (for the four Fiscal Quarters then last ended)   
      (i)    Consolidated Net Income (the consolidated net income (or loss) of
Parent and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP1):    $                                        (ii)    Interest,
taxes, depreciation, depletion, amortization, and accretion of asset retirement
obligations (to the extent such expenses or charges have been deducted from
Consolidated Net Income for the applicable period):    $
                                

 

1 

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 Parent or any Subsidiary has an interest which interest does not cause the
net income of such other Person to be consolidated with the net income of Parent
and its Subsidiaries in accordance with GAAP, except to the extent of the amount
of dividends or distributions actually paid in such period by such other Person
to Parent or to a Subsidiary, as the case may be; (b) any extraordinary gains or
losses, including gains or losses attributable to property sales not in the
ordinary course of business; and (c) the cumulative effect of a change in
accounting principles and any gains or losses attributable to writeups or write
downs of assets or any full cost ceiling impairment.

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

      (iii)        Any non-cash revenue or expense associated with hedging
contracts resulting from ASC 815 and any non-cash income, gain, loss or expense
arising from the issuance of stock options or restricted stock, to the extent
such items are included in Consolidated Net Income:   
$                                        (iv)    Any other non-cash charges
(excluding accruals for cash expenses made in the ordinary course of business)
or non-cash gains:    $                                        (v)   
Consolidated EBITDA (Line B.1 + Line B.2 and + or - Line B.3 (as appropriate)
and + or - Line B.4 (as appropriate)):    $                                    
(c)        Total Debt to Consolidated EBITDA Ratio (Line A.13 / Line B.5)      
(d)    Required ratio for compliance:    Less than or equal to
4.00 to 1.00    (e)    Compliance:    Yes/No 3.            Current Ratio
(Section 7.9(b)).       (a)    Consolidated Current Assets of Parent and its
Subsidiaries determined in accordance with GAAP:          (i)    The total
consolidated current assets of Parent and its Subsidiaries, determined in
accordance with GAAP (except as provided with respect to ASC 815), as of such
date, which shall not include any non-cash items resulting from the application
of ASC 815 or the fair value of any Commodity Hedging Agreement or any non-hedge
derivative contract (whether deemed effective or non-effective):   
$                                        (ii)    The excess, if any, of (a) the
lesser of (i) the Maximum Facility Amount or (ii) the Borrowing Base minus (b)
the Aggregate Credit Exposure then outstanding:   
$                                        (iii)        Consolidated Current
Assets (Line A.1 + Line A.2):    $                                     (b)   
Consolidated Current Liabilities of Parent and its Subsidiaries determined in
accordance with GAAP:          (i)    The total consolidated current liabilities
of Parent and its Subsidiaries, determined in accordance with GAAP (except as
provided herein with respect to ASC 815), as of such date, less current
maturities under the Credit Agreement on such date, which shall not include any
non-cash items resulting from    $                                 

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

         the requirements of ASC 815 or the fair value of any Commodity Hedging
Agreement or any non-hedge derivative contract (whether deemed effective or
non-effective), or any liability resulting from the accounting for stock option
expense:          (ii)        Total Consolidated Current Liabilities (Line B.1):
   $                                         (c)        Current Ratio (Line A.3
/ Line B.2):                : 1.0    (d)    Required ratio for compliance:   
Greater than or equal to
1.0 to 1.0    (e)    Compliance:    Yes/No

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

EXHIBIT G

FORM OF NOTICE OF REQUEST FOR LETTER OF CREDIT

Dated:                 , 20        

 

TO: Royal Bank of Canada, as Administrative Agent

 

RE: Third Amended and Restated Credit Agreement (as amended, restated, amended
and restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”) dated as of September 28, 2012, among the Lenders from time to time
party thereto, Royal Bank of Canada, as administrative agent for the Lenders,
and MRC Energy Company, a Texas corporation (the “Borrower”).

Pursuant to the Credit Agreement, the Borrower has requested a Letter of Credit
from an Issuing Lender, as described herein:

 

(A) Date of Issuance:                                     

 

(B) Stated Amount:                                    

 

(C) Name and Address of Beneficiary:                                    

 

(D) Expiration Date:                                    

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

[Signature Page Follows]

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

The Borrower hereby represents and warrants that the conditions specified in
Section 5.2 of the Credit Agreement will be satisfied on and as of the date of
issuance of the Letter of Credit described herein.

 

MRC ENERGY COMPANY,

as the Borrower

By:     Name:     Title:    

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

EXHIBIT H

FORM OF NOTICE OF PREPAYMENT

Dated:                 , 20        

 

TO: Royal Bank of Canada, as Administrative Agent

 

RE: Third Amended and Restated Credit Agreement (as amended, restated, amended
and restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”) dated as of September 28, 2012, among the Lenders from time to time
party thereto, Royal Bank of Canada, as administrative agent for the Lenders,
and MRC Energy Company, a Texas corporation (the “Borrower”).

This Notice of Prepayment is delivered to you pursuant to Section 2.7 of the
Credit Agreement. Capitalized terms used herein and not defined herein shall
have the meanings assigned thereto in the Credit Agreement.

1. The Borrower hereby provides notice to the Administrative Agent that it shall
repay the following [Base Rate Advances] [Eurodollar-based Advances]:
                . (Complete with an amount in accordance with Section 2.7(b) of
the Credit Agreement.)

3. The Borrower shall repay the above-referenced Advances on the following
Business Day:                 . (Complete with a date no earlier than (i) one
Business Day subsequent to the date of this Notice of Prepayment with respect to
any Base Rate Advance and (ii) three (3) Business Days subsequent to date of
this Notice of Prepayment with respect to any Eurodollar-based Advances.)

[Signature Page Follows]

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

IN WITNESS WHEREOF, the undersigned has executed this Notice of Prepayment as of
the day and year first written above.

 

MRC ENERGY COMPANY,

as the Borrower

By:

   

Name:

   

Title:

   

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

EXHIBIT I-1

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Third Amended and Restated Credit Agreement
(“Credit Agreement”) is dated as of September 28, 2012, by and among the
Lenders, Royal Bank of Canada, as administrative agent for the Lenders (in such
capacity, the “Administrative Agent”), and MRC Energy Company, a Texas
corporation (“Borrower”). Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.

Pursuant to the provisions of Section 11.9 of the Credit Agreement, the
undersigned hereby certifies that (a) it is the sole record and beneficial owner
of the Advance(s) (as well as any Note(s) evidencing such Advance(s)) in respect
of which it is providing this certificate, (b) it is not a bank within the
meaning of Section 881(c)(3)(A) of the Code, (c) it is not a ten percent
(10%) shareholder of Borrower within the meaning of Section 871(h)(3)(B) of the
Code and (d) it is not a controlled foreign corporation related to Borrower as
described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and Borrower with a
certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this
certificate, the undersigned agrees that (a) if the information provided on this
certificate changes, the undersigned shall promptly so inform Borrower and the
Administrative Agent and (b) the undersigned shall have at all times furnished
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 (2) calendar years preceding
such payments.

 

[NAME OF LENDER]

By:

      Name:   Title:

Date:                 , 20        

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

EXHIBIT I-2

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Third Amended and Restated Credit Agreement
(“Credit Agreement”) is dated as of September 28, 2012, by and among the
Lenders, Royal Bank of Canada, as administrative agent for the Lenders (in such
capacity, the “Administrative Agent”), and MRC Energy Company, a Texas
corporation (“Borrower”). Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.

Pursuant to the provisions of Section 11.9 of the Credit Agreement, the
undersigned hereby certifies that (a) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate,
(b) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code,
(c) it is not a ten percent (10%) shareholder of Borrower within the meaning of
Section 871(h)(3)(B) of the Code and (d) it is not a controlled foreign
corporation related to 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 (a) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender in writing and
(b) 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 (2) calendar years preceding such payments.

 

[NAME OF PARTICIPANT]

By:

      Name:   Title:

Date:                 , 20        

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

EXHIBIT I-3

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Third Amended and Restated Credit Agreement
(“Credit Agreement”) is dated as of September 28, 2012, by and among the
Lenders, Royal Bank of Canada, as administrative agent for the Lenders (in such
capacity, the “Administrative Agent”), and MRC Energy Company, a Texas
corporation (“Borrower”). Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.

Pursuant to the provisions of Section 11.9 of the Credit Agreement, the
undersigned hereby certifies that (a) it is the sole record owner of the
participation in respect of which it is providing this certificate, (b) its
direct or indirect partners/members are the sole beneficial owners of such
participation, (c) with respect 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, (d) none of its
direct or indirect partners/members is a ten percent (10%) shareholder of
Borrower within the meaning of Section 871(h)(3)(B) of the Code and (e) none of
its direct or indirect partners/members is a controlled foreign corporation
related to 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: (a) an IRS Form W-8BEN or (b) 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 (i) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Lender and (ii) 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 (2) calendar years preceding such payments.

 

[NAME OF PARTICIPANT]

By:

      Name:   Title:

Date:                 , 20        

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

EXHIBIT I-4

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Third Amended and Restated Credit Agreement
(“Credit Agreement”) is dated as of September 28, 2012, by and among the
Lenders, Royal Bank of Canada, as administrative agent for the Lenders (in such
capacity, the “Administrative Agent”), and MRC Energy Company, a Texas
corporation (“Borrower”). Capitalized terms used herein and not defined herein
shall have the meanings assigned thereto in the Credit Agreement.

Pursuant to the provisions of Section 11.9 of the Credit Agreement, the
undersigned hereby certifies that (a) it is the sole record owner of the
Advance(s) (as well as any Note(s) evidencing such Advance(s)) in respect of
which it is providing this certificate, (b) its direct or indirect
partners/members are the sole beneficial owners of such Advance(s) (as well as
any Note(s) evidencing such Advance(s)), (c) 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, (d) none of its direct or indirect partners/members is a ten percent
(10%) shareholder of Borrower within the meaning of Section 871(h)(3)(B) of the
Code and (e) none of its direct or indirect partners/members is a controlled
foreign corporation related to Borrower as described in Section 881(c)(3)(C) of
the Code.

The undersigned has furnished the Administrative Agent and 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: (a) an IRS
Form W-8BEN or (b) 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
(i) if the information provided on this certificate changes, the undersigned
shall promptly so inform the Borrower and the Administrative Agent and (ii) 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 (2) calendar years preceding such
payments.

 

[NAME OF LENDER]

By:

      Name:   Title:

Date:                , 20