8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report

(Date of earliest event reported):  March 25, 2014

ALTA MESA HOLDINGS, LP

(Exact name of registrant as specified in its charter)

Texas	333-173751	20-3565150
(State or other jurisdiction of	(Commission File Number)	(I.R.S. Employer
incorporation or organization)		Identification Number)

15021 Katy Freeway, Suite 400

Houston, Texas, 77094

(Address of principal executive offices)

(281) 530-0991

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01.   Entry into a Material Definitive Agreement.

On March 25, 2014,our wholly owned subsidiary Alta Mesa Eagle, LLC executed a purchase and sale agreement (the “Sale Agreement”) to sell a portion of our Eagleville field oil and natural gas properties, as described below in Item 2.01 Completion of Acquisition or Disposition of Assets.  The description of the Sale Agreement is a summary only, and is not necessarily complete, and is qualified by the full text of the Sale Agreement filed herewith as Exhibit 10.1 and incorporated herein by reference.

Item 2.01.Completion of Acquisition or Disposition of Assets.

On March 25, 2014, we closedthe sale of certain of our properties located primarily in Karnes County, Texas to Memorial Production Operating LLC (“Memorial”), comprising a portion of our Eagleville field (the “EaglevilleDivestiture”).  The sale included (i) the divestiture of the proved developed producing reservesin all of our 112 producing wells and five wells in which we own an overriding royalty interest(collectively, the “PDP Wells”) owned by us and our subsidiaries as of the effective date of January 1, 2014 (the “Effective Date”) and (ii)a 30% undivided interest in the proved undeveloped reserves owned by us and our subsidiaries as of January 1, 2014 located in the Eagle Ford shale play.  We retained a net profits interest in the production from the PDP Wells equal to 50% until January 1, 2015, declining to 30% until January 1, 2016,  further reducing to 15% until terminated on December 31, 2016.  The cash purchase price paid to us at closing by Memorial was$173 million.  The Sale Agreement provides for customary adjustments to the purchase price for revenues and expenses incurred after the Effective Date.  Cash received was utilized to pay down borrowings under our senior secured revolving credit facility.

As of the Effective Date,  the estimated net proved reserves sold were approximately 7.7 MMBOE. 

Item 2.03.   Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

OnMarch 25, 2014,we entered into an amendment (the “Amendment”) to our senior secured revolving credit facility (the “Credit Facility”).  As a result of the Eagleville Divestiture,  the borrowing base under our Credit Facility was decreased by the lenders to $285 million. This represents a decrease of $100 million from the previous level of $385 million. The Credit Facility wasalso amended to remove as an Event of Default (as defined in the Credit Facility) a claim over title defects in our properties.  The Amendmentnow provides that such title defect claims may triggera reduction in our borrowing base. The Amendment also increased the threshold amount of certain cross-defaults, security interest defaults and judgments that would trigger a default under the Credit Facility.  The Credit Facility was further revised to allow for certain change of control transactions including an initial public offering resulting in gross proceeds of at least $300 million and the transaction withHighbridge.  We are in compliance with all of the financial covenants associated with the Credit Facility and the next scheduled redetermination of the borrowing base is May 1, 2014. The Credit Facility is available to provide funds for the exploration, development and/or acquisition of oil and gas properties and for working capital and other general corporate purposes. The Credit Facility is provided by a syndicate of nine banks agented by Wells Fargo Bank, N.A. and co-agented by Union Bank, N.A.  Subsequent to the closing  of the Eagleville Divestiture described in Item 2.01 above, the total debt outstanding under our Credit Facility is approximately $172.5 million as of March25, 2014.

On March 25, 2014, we entered into three Second Amended and Restated Promissory Notes with entities owned by Michael Ellis, our founder, chairman, vice president of engineering and chief operating officer (the “Founder Notes”), pursuant to which Mr. Ellis agreed to extend the maturity date of the Founder Notes to December 31, 2021.  The Founder Noteswere also amended to subordinate Mr. Ellis’s right to repayment under the Founder Notes to the rights of the holders of the Notes and other senior unsecured notes, of the holders of Class B Units to receive distributions under the Amended Partnership Agreement and of the holders of Series B Preferred Stockto receive payments.  The Founder Notes may not be further amended or assigned without the consent of the lead investor of the Notes (as defined below) or the holders of greater than 50% of the Series B Preferred Stock.  The

Founder Notesare convertible into shares of our Class B partner,  Alta Mesa Investment Holdings, Inc. (“AMIH”) common stock upon certain conditions in the event of an initial public offering.

Item 3.03. Material Modification to Rights of Security Holders.

In connection with the Recapitalization (as defined in Item 8.01 below), on March 25, 2014, Alta Mesa Holdings GP, our general partner (“AMGP”),  AMIH, as holder of 100% of our Class B Units, and all of our Class A Limited Partners entered into a Second Amended and Restated Limited Partnership Agreement (the “Amended Partnership Agreement”) which provided for the contribution of 50% of the interest held by the Class A Limited Partners to AMIH in exchange for common stock in AMIH.  The Class A interests contributed to AMIH were terminated.  The Amended Partnership Agreement provides for certain drag-along rights, including the mandatory contribution to AMIH by the Class A Limited Partners of their remaining Class A Units upon an initial public offering. 

All distributions under the Amended Partnership Agreement shall first be made to holders of Class B Units, until all principal and interest has been extinguished under the Notes (as defined below).  After such extinguishment of the Notes, distributions shall then be made to holders of Class A and Class B Units pursuant to the distribution formulas set forth in the Amended Partnership Agreement.

Item 5.02.Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On March 25, 2014,  Don Dimitrievich was appointed to the board of directors of AMGP as Highbridge’s director nominee.

Mr. Dimitrievich is a Managing Director at Highbridge Principal Strategies, an alternative investment management organization that together with its affiliates manages approximately $29 billion in capital for institutional investors, pension funds, endowments and foundations. At Highbridge, Mr. Dimitrievich oversees Highbridge Principal Strategies’ direct credit investment strategy for the energy and power sectors. Highbridge has invested over $1.5 billion in direct energy-related investments. Prior to joining Highbridge in 2012, Mr. Dimitrievich was a Managing Director of Citi Credit Opportunities, a credit-focused principal investment group. At Citi Credit Opportunities, Mr. Dimitrievich oversaw the energy and power portfolio and invested over $800 million in mezzanine, special situation and equity co-investments, and secondary market opportunities. Mr. Dimitrievich began his career as a corporate attorney in the New York office of Skadden, Arps, Slate, Meagher & Flom LLP from 1998 to 2004 focusing on energy mergers and acquisitions and capital markets transactions.  Mr. Dimitrievich also serves on the board of Energy & Exploration Partners, Inc. Mr. Dimitrievich has a Law degree with Great Distinction from McGill University in Montreal, Canada and earned a Chemical Engineering degree with Great Distinction from Queen’s University in Kingston, Canada.

On March 25, 2014, Michael A. McCabe was appointed to the board of directors of AMGP. 

Mr. McCabe is our CFO as well as a Vice President; he joined Alta Mesa in September 2006. Mr. McCabe has over 25 years of corporate finance experience, with a focus on the energy industry. From 2004 until 2006, Mr. McCabe served as President and sole owner of Bridge Management Group, Inc., a private consulting firm primarily providing advisory services to us and to MultiFuels, Inc., a Houston based developer of natural gas storage facilities. He has served in senior positions with Bank of Tokyo, Bank of New England, and Key Bank. Mr. McCabe holds a Bachelor of Science in Chemistry and Physics from Bridgewater State University, a Masters of Science in Chemical Engineering from Purdue University and a Masters of Business Administration in Financial Management from Pace University.

Item 8.01.  Other Events.

On March 25,2014, our Class B partner, Alta Mesa Investment Holdings, Inc., completed a $350 million recapitalization with an investment from Highbridge Principal Strategies, LLC (“Highbridge”).  Proceeds from the investment were used to purchase Denham Capital Management, L.P.’s investment in Alta Mesa Investment Holdings, Inc., and for other general corporate purposes.  Alta Mesa Investment Holdings, Inc. will issue convertible

preferred stock and senior notes(“Notes”) to Highbridge.  Pursuant to the recapitalization, AMIH appointed a new director Don Dimitrievich as a nominee of Highbridge, who was simultaneously appointed to the board of AMGP.

Item 9.01.  Financial Statements and Exhibits.

(b)  Pro forma Financial Information.

Unaudited pro forma financial information of Alta Mesa Holdings, LP to give effect to the EaglevilleDivestiture is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference:

· Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2013;

· Unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine months ended September 30, 2013; and

· Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2012.

(d)  Exhibits

Exhibit Number	Title of Document
3.1	Second Amended and Restated Agreement of Limited Partnership of Alta Mesa Holdings, LP, dated as of March 25, 2014.
10.1	Purchase and Sale Agreement dated March 25, 2014 among AM Eagle LLC and Memorial Production Partners LP
10.2	Agreement and Amendment No. 7 dated March 25, 2014 to the Sixth Amended and Restated Credit Agreement dated May 13, 2010 among Alta Mesa Holdings, LP, certain affiliate Guarantors, the lenders party thereto and Wells Fargo Bank, N.A. as administrative agent for such lenders.
10.3	Second Amended and RestatedPromissory Note, dated March 25, 2014, executed by Galveston Bay Resources, LP in favor of Michael E. Ellis
10.4	Second Amended and Restated Promissory Note, dated March 25, 2014, executed by Alta Mesa Holdings, LP in favor of Michael E. Ellis.
10.5	Second Amended and Restated Promissory Note, dated March 25, 2014, executed by Petro Acquisitions, LP in favor of Michael E. Ellis.
99.1	Unaudited Pro Forma Condensed Consolidated Financial Statements of Alta Mesa Holdings, LP as of September 30, 2013 and for the Nine Months ended September 30, 2013 and the year ended December 31, 2012.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ALTA MESA HOLDINGS, LP
March 25, 2014	By:	/s/ Michael A. McCabe
		Michael A. McCabe, Vice President and Chief Financial Officer of Alta Mesa Holdings GP, LLC, general partner of Alta Mesa Holdings, LP

Exhibit Index

Exhibit Number	Title of Document
3.1	Second Amended and Restated Agreement of Limited Partnership of Alta Mesa Holdings, LP, dated as of March 25, 2014.
10.1	Purchase and Sale Agreement dated March 25, 2014 among AM Eagle LLC and Memorial Production Partners LP
10.2	Agreement and Amendment No. 7 dated March 25, 2014 to the Sixth Amended and Restated Credit Agreement dated May 13, 2010 among Alta Mesa Holdings, LP, certain affiliate Guarantors, the lenders party thereto and Wells Fargo Bank, N.A. as administrative agent for such lenders.
10.3	Second Amended and Restated Promissory Note, dated March 25, 2014, executed by Galveston Bay Resources, LP in favor of Michael E. Ellis.
10.4	Second Amended and Restated Promissory Note, dated March 25, 2014, executed by Alta Mesa Holdings, LP in favor of Michael E. Ellis.
10.5	Second Amended and Restated Promissory Note, dated March 25, 2014, executed by Petro Acquisitions, LP in favor of Michael E. Ellis.
99.1	Unaudited Pro Forma Condensed Consolidated Financial Statements of Alta Mesa Holdings, LP as of September 30, 2013 and for the Nine Months ended September 30, 2013 and the year ended December 31, 2012.

EX-3.1

EXHIBIT 3.1

SECOND AMENDED AND RESTATED

LIMITED PARTNERSHIP AGREEMENT

OF

ALTA MESA HOLDINGS, LP

(a Texas limited partnership)

March 25, 2014

THE Partnership INTERESTS REFERENCED HEREIN HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.  WITHOUT REGISTRATION, THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER, EXCEPT ON DELIVERY TO THE Partnership OF AN OPINION OF COUNSEL SATISFACTORY TO THE General partner THAT REGISTRATION IS NOT REQUIRED FOR THE TRANSFER, OR THE SUBMISSION TO THE General partner OF OTHER EVIDENCE SATISFACTORY TO THE General partner TO THE EFFECT THAT ANY TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATIONS PROMULGATED THEREUNDER.  ADDITIONALLY, ANY SALE OR OTHER TRANSFER OF Partnership INTERESTS IS SUBJECT TO CERTAIN RESTRICTIONS THAT ARE SET FORTH IN THESE REGULATIONS.

Table of Contents

		Page
ARTICLE I	Definitions	1
ARTICLE II	Organization	9
2.1	Formation	9
2.2	Filing	9
2.3	Name	9
2.4	Office and Agent	9
2.5	Addresses for Notices	9
2.6	Foreign Qualification	9
ARTICLE III	Limited Partners; Units; Transfer restrictions	10
3.1	Limited Partners	10
3.2	Management by the Limited Partners	10
3.3	Units	10
3.4	Admission of Limited Partners	10
3.5	Limitations on Transfers	11
3.6	Liquidity Event	11
3.7	Indirect Transfer	12
3.8	Certificates	12
3.9	Death of Certain Individuals	14
ARTICLE IV	Distributions	15
4.1	Distributions	15
4.2	Tax Distributions	17
4.3	Restriction on Distributions	17
ARTICLE V	PROFIT AND LOSS ALLOCATION	18
5.1	Allocation Rules	18
5.2	Special and Regulatory Allocations	19
5.3	Tax Allocation	20
5.4	Withholding	21
ARTICLE VI	Capital Contributions	22
6.1	Class A Contribution	22
6.2	Class B Contribution	22
6.3	Subsequent Capital Contributions	22
ARTICLE VII	Capital Accounts	22
7.1	Capital Account	22
7.2	Transfer of Units	22
ARTICLE VIII	Management; Indemnification	22
8.1	Management of Partnership Affairs	22
8.2	GP Units.	23

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Table of Contents

(continued)

		Page
8.3	Officers	23
8.4	Expenses in Connection with Organization of the Partnership	23
8.5	Reimbursement of Expenses	23
8.6	Nature of Relationship	23
8.7	Indemnification	23
8.8	Power of Attorney	24
8.9	Other Activities	24
ARTICLE IX	WITHDRAWAL, REMOVAL, BANKRUPTCY, ETC.	25
9.1	Voluntary Withdrawal	25
9.2	Consequence of Wrongful Withdrawal	25
9.3	No Conversion of Interest	25
9.4	Removal of the General Partner	25
9.5	New General Partner	25
ARTICLE X	Dissolution; Liquidation	26
10.1	Events Giving Rise to Dissolution	26
10.2	Liquidation	26
ARTICLE XI	Miscellaneous Provisions	26
11.1	Amendments	26
11.2	Confidentiality	27
11.3	Incorporated Documents	27
11.4	Notices	27
11.5	Entire Agreement	28
11.6	Further Assurances	28
11.7	Tax Matters	28
11.8	Governing Law; Severability; Jurisdiction	28
11.9	Binding Effect	30
11.1	Severability	30
11.11	Time of the Essence	30
11.12	No Third Party Beneficiaries	30
11.13	Counterparts	30
11.14	Spousal Joinder	30

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SECOND AMENDED AND RESTATED

LIMITED PARTNERSHIP AGREEMENT
OF
ALTA MESA HOLDINGS, LP

This Second Amended and Restated Limited Partnership Agreement (as amended from time to time in accordance with its terms, this “Agreement”) of Alta Mesa Holdings, LP, a Texas limited partnership (the “Partnership”)  is entered into effective as of March 25, 2014 (the “Effective Date”)  by and among Alta Mesa Holdings GP, LLC, a Texas limited liability company, as general partner (the “General Partner”), Alta Mesa Investment Holdings, Inc.,  a Delaware corporation, as holder of Class B Units  (“AMIH” or the“Class B Limited Partner”), and the parties set forth on ScheduleIas Class A Limited Partners (each, a “Class A Limited Partner”, and collectively, the “Class A Limited Partners”, and together with the Class B Limited Partner, the “Limited Partners”) of this Agreement.Capitalized terms used herein and not defined herein have the meaning ascribed to such terms in the Stockholders Agreement (as defined below).

RECITALS

WHEREAS, the Partnership was formed as a limited partnership under the Texas Revised Limited Partnership Act pursuant to the filing of a Certificate of Limited Partnership of Alta Mesa Holdings, LP (the “Certificate”) filed with the Secretary of State of Texas on September 26, 2005 and the Agreement of Limited Partnership of Alta Mesa Holdings, LP, dated September 26, 2005, by and among the General Partner and the limited partners party thereto, which was amended and restated as the First Amended and Restated Agreement of Limited Partnership of Alta Mesa Holdings, LP, dated September 1, 2006, by and among the General Partner, the Class B Limited Partner and the Class A Limited Partners party thereto, as amended (the “Predecessor Agreement”);

WHEREAS, immediately prior to the execution of this Agreement the Class A Limited Partnersshall contribute to AMIHPredecessor Class A Units representing 49.955% of the total outstanding Predecessor Class A Units, in the aggregate (the “Class A Contribution”);

WHEREAS, contemporaneously withthe execution of this Agreement (i) the Partnership shall issue Class B Units to the Class B Limited Partner on the terms set forth herein (the “Class B Contribution”); (ii) the Predecessor Class A Units contributed to AMIH by the Class A Limited Partners shall be terminated and extinguished by the Partnership;and (iii) AMIH, the Class A Limited Partners, the Highbridge Holders and Highbridge Principal Strategies, LLC shall enter into a Stockholders Agreement (the “Stockholders Agreement”); and

WHEREAS, the Partners desire to provide for the governance of the Partnership and to set forth in detail their respective rights and duties relating to Partnership and to amend and restate in its entirety the Predecessor Agreement as set forth herein.

ARTICLE I
Definitions

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In addition to the terms in the Stockholders Agreement, the following terms used in this Agreement shall have the following meaning.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with that Person.  For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“AMIH” means Alta Mesa Holdings Inc., a Delaware corporation.

“Book Value”means with respect to any Partnership asset, the asset’s adjusted basis for federal income tax purposes, except that the Book Values of all Partnership assets shall be adjusted to equal their respective fair market values, in accordance with the rules set forth in Section 1.704-1 (b)(2)(iv)(l) of the Treasury Regulations, except as otherwise provided herein, immediately prior to: (a) the date of the acquisition of any additional Unit by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) the date of the actual distribution of more than a de minimis amount of Partnership property (other than a pro rata distribution) to a Partner; or (c) the date of the actual liquidation of the Partnership within the meaning of Section 1,704-1 (b)(2)(ii)(g) of the Treasury Regulations; provided that adjustments pursuant to clauses (a) and (b) above shall be made only if the General Partner determines in its sole discretion that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners. The Book Value of any Partnership asset distributed to any Partner shall be adjusted immediately prior to such distribution to equal its fair market value, The Book Value of any Partnership asset shall be adjusted from time to time by the depreciation, amortization and cost recovery deductions calculated in the manner provided in the definition of Net Income and Net Loss and by Simulated Depletion, as applicable.

“Breaching Class A Limited Partner”has the meaning ascribed to such term in Section 0.

“Capital Account” has the meaning ascribed to such term in ARTICLE VI.

“Capital Contribution” means any cash or cash equivalents that a Limited Partner contributes to the Partnership.

“Cash Dividend”has the meaning set forth in the Series B Certificate of Designations.

“Catch-Up Common Distribution Amount” has the meaning ascribed to such term in the Series B Certificate of Designations.

“Certificate” has the meaning ascribed to such term in the Recitals.

“Class A Contribution” has the meaning ascribed to such term in the Recitals.

“Class A Limited Partner” means each Person listed on ScheduleIas Class A Limited Partners.  

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“Class A Percentage Interest” means, with respect to any holder or group of holders of Class A Units as of any determination time, a fraction (expressed as a percentage), the numerator of which equals the number of outstanding Class A Units held of record by such holder or group of holders as of any determination time and the denominator of which equals the total number of outstanding Class A Units held by all holders of Class A Units as of any determination time.

“Class A Unit” has the meaning ascribed to such term in Section 0.

“Class B Contribution” has the meaning ascribed to such term in the Recitals.

“Class B Limited Partner” has the meaning ascribed to such term in the preamble of this Agreement.

“Class B Liquidation Amount” has the meaning ascribed to such term in Section 4.1(b)(v)(2).

“Class B Unit” has the meaning ascribed to such term in Section 0.

“Conversion Percentage” has the meaning ascribed to such term in the Series B Certificate of Designations.

“Deceased Executive” has the meaning ascribed to such term in Section 3.9(a).

“Distributable Cash” means all cash, revenues and funds received by the Partnership from the Partnership’s operations, less the sum of the following to the extent paid or set aside by the Partnership: (i) all principal and interest payments on indebtedness of the Partnership and all other sums paid to lenders; (ii) all cash expenditures incurred incident to the normal operations of the Partnership’s business; (iii) such cash reserves as the General Partner deems reasonably necessary to the proper operation of the Partnership’s business; and (iv) any tax distribution made pursuant to Section 4.2.

“Effective Date” has the meaning ascribed to such term in the preamble of this Agreement.

“Equity Security” shall mean (i) any shares of capital stock, (ii) any rights, options, warrants or similar securities to subscribe for, purchase or otherwise acquire any shares of capital stock, and (iii) debt or other evidences of indebtedness, capital stock or other securities directly or indirectly convertible into or exercisable or exchangeable for any shares of capital stock.For purposes of this Agreement, when either the term “Equity Securities” or the term “capital stock” is used with respect to any Person that is not a corporation, including PubCo, such term shall have the meaning that, with respect to such Person, including PubCo (which may or may not be a corporation), achieves an identical effect to the meaning of such term when it is used with respect to the Class B Limited Partner, a corporation.

“General Partner” has the meaning ascribed to such term in the preamble of this Agreement.

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“General Partner Company Agreement” means the Amended and Restated Limited Liability Company Agreement of the General Partner, dated as of the date hereof.

“GP Units” has the meaning ascribed to such term in Section 0.

“Highbridge Holders” has the meaning ascribed to such term in the Stockholders Agreement.

“Immediate Family” means, with respect to any individual, (i) that individual’s spouse, parents and lineal descendants (including by adoption) and any trust the sole beneficiaries of which are that individual or any of that individual’s spouse, parents or lineal descendants (including by adoption), and (ii) that individual’s former spouse.

“Indemnified Expenses” has the meaning ascribed to such term in Section 8.7(b).

“Indemnified Parties” has the meaning ascribed to such term in Section 8.7(b).

“Indirect Permitted Transferee”means, subject to Section 3.9, with respect to any Class A Limited Partner, (a) Michael E. Ellis or Harlan H. Chappelle, (b) a member of the Immediate Family of an individual that directly or indirectly owns Equity Securities in such Class A Limited Partner; provided, that, either Michael E. Ellis or Harlan H. Chappelle, as applicable, for so long as such individual is living, must retain, directly or indirectly, voting control of the Units held by such Class A Limited Partnerpursuant to a voting agreement that is delivered to the Partnership and the Highbridge Holders within five (5) Business Days after the applicable Transfer, and (c) any owner or Affiliate of such Class A Limited Partner; provided, that, either Michael E. Ellis or Harlan H. Chappelle, as applicable, for so long as such individual is living, must retain, directly or indirectly, voting control of the Units held by such Class A Limited Partnerpursuant to a voting agreement that is delivered to the Partnership and the Highbridge Holders within five (5) Business Days after the applicable Transfer.

“Indirect Transfer” means, with respect to any Class A Limited Partner (other than RBS Equity Corporation and Macquarie Americas Corp.), any single or series of related transactions that result in a Person (or Persons acting in concert), other than an Indirect Permitted Transferee of the Class A Limited Partner in question, who did not directly or indirectly own Equity Securitiesin such Class A Limited Partner prior to the consummation of such single or series of related transactions acquiring or owning, directly or indirectly, any Equity Securities in such Class A Limited Partner.  

“IPO” has the meaning set forth in the definition of “Liquidity Event.”

“Limited Partner” means each of the Class A Limited Partners or the Class B Limited Partner.

“Liquidity Event” means the first to occur, in one or a series of related transactions, of (i) a disposition of all or substantially all of the assets of the Class B Limited Partner and its Subsidiaries to a Person that is not an Affiliate of the Class B Limited Partner, whether by virtue of an asset sale or a transfer of Equity Securities (whether through a sale, merger consolidation,

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share exchange or otherwise), except to the extent described in clause (ii) of this definition, (ii) a disposition of all of the Equity Securities of the Class B Limited Partner, held directly or indirectly, by the holders thereof (through a sale, merger, consolidation, share exchange or otherwise), (iii) the consummation of a firm underwritten initial public offering registered under the Securities Act of any class of Equity Securities of the Class B Limited Partner (or any successor thereto) or any of its Subsidiaries that hold all or substantially all of the Class B Limited Partner’s assets on a consolidated basis (an “IPO”) that is not a Qualified IPO and, (iv) a Qualified IPO, and (a) in the case of (i), the distribution by the Class B Limited Partner to the holders of Equity Securities of the Class B Limited Partner of all or substantially all of the proceeds received by the Class B Limited Partner and its Subsidiaries pursuant to such transaction, and (b), in the case of (iii) or (iv),(1) the payment infull by the Class B Limited Partner of any Special IPO Dividend (as defined in the Series B Certificate of Designations)  if  and  as  required  pursuant  to  Section  9(j)  of the  Series  B  Certificate of Designations and (2) if the IPO or Qualified IPO is of a Subsidiary of the Class B Limited Partner or a holding company parent of the Class B Limited Partner (the “PubCo”), then either (x) the distribution by the Class B Limited Partner (or its holding company parent) to the holders of Equity Securities of the Class B Limited Partner the residual traded securities of PubCo or (y) if PubCo is not owned directly by the stockholders of the Class B Limited Partner, the distribution to the stockholders of the Class B Limited Partner of the maximum amount of cash proceeds, if any, of such IPO or Qualified IPO, as the case may be, that the managing underwriters advising PubCo, in their reasonable discretion, conclude in writing can be distributed to the stockholders of the Class B Limited Partner without adversely affecting the price per share of the Equity Securities being sold in connection with such IPO or Qualified IPO, as the case may be.

“Majority Consent”means with respect to the Class A Limited Partners as of any determination time, the affirmative written consent of Class A Limited Partners that collectively hold more than fifty percent (50%) of the Class A Units then held by all Class A Limited Partners.

“Mezzanine Interest Termination Event” means, as of any determination time, an event that shall be deemed to occur upon the final payment in full of all accrued and unpaid interest under the Notes (as defined in the Note Purchase Agreement) at such time.

“Mezzanine Total Termination Event” means an event that shall be deemed to occur upon thefinal payment in full of all of the Note Obligations (as defined in the Note Purchase Agreement), which shall include, without limitation, all Note Obligations constituting outstanding principal under the Notes (as defined in the Note Purchase Agreement) at such time. For purposes of clarity, the Mezzanine Interest Termination Event must occur prior to the Mezzanine Total Termination Event.

“Net Income and Net Loss” means for each fiscal year or other period, the taxable income or loss of the Partnership, as the case may be; determined in accordance with the accounting method used by the Partnership for federal income tax purposes with the following adjustments: (a) all items of income, gain, loss, deduction or expense specially allocated pursuant to Section 5.2 of this Agreement shall not be taken into account in computing such NetIncome or Net Loss; (b) any income of the Partnership that is exempt from federal income taxation, and not otherwise taken into account in computing Net Income and Net Loss shall be added to such

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taxable income orloss; (c) if the Book Value of any asset differs from its adjusted tax basis for federal income tax purposes any gain or loss resulting from a disposition of such asset shall be calculated with reference to such Book Value; (d) upon an adjustment to the Book Value of any asset pursuant to the definition of Book Value, the amount of the adjustment shall be included as gain or loss in computing Net Income or Net Loss; (e) if the Book Value of any asset differs from its adjusted tax basis for federal income tax purposes the amount of depreciation, amortization or cost recovery deductions with respect to such asset for purposes of determining Net Income and Net Loss shall be an amount which bears the same ratio to such Book Value as the federal income tax depreciation, amortization or other cost recovery deductions bears to such adjusted tax basis (provided, that if the federal income tax depreciation, amortization or other cost recovery deduction is zero, the General Partner may use any reasonable method for purposes of determining depreciation, amortization or other cost recovery deductions in calculating Net Income and Net Loss); and (f) except for items in (a) above, any expenditures of the Partnership not deductible in computing taxable income or loss, not properly capitalizable and not otherwise taken into account in computing Net Income and Net Loss pursuant to this definition, shall be treated as deductible items. Simulated Depletion, Simulated Gain and Simulated Loss shall not be taken into account in computing Net Income and Net Loss.

“Outstanding Liquidation Amount” means $150,000,000.

“Participation Event” has the meaning ascribed to such term in Section3.6(b).

“Partner”means any of the Limited Partners or the General Partner, individually.

“Partners”means the Limited Partners and the General Partner, together.

“Partnership” has the meaning ascribed to such term in the recitals.

“Passing Holder” or “Passing Holders” has the meaning ascribed to such term in Section 3.9(b).

“Passing Interest” has the meaning ascribed to such term in Section 3.9(a).

“Passing Interest Notice” has the meaning ascribed to such term in Section 3.9(b).

“Permitted Transfer” means(1) a Transfer pursuant to and in accordance with Sections  0 and 0;  (2) a Transfer pursuant to and in accordance with Section 3.9,  (3) a Transfer to be made in connection with an IPO or Qualified IPO; or (4) a Transfer at any time of all or any portion of Class A Limited Partner’s Units to: (a)  if such Class A Limited Partner is an individual, any members of such Class A Limited Partner’s Immediate Family; provided, that, Michael E. Ellis or Harlan H. Chappelle, as applicable,for so long as such individual is living, must retain, directly or indirectly, voting control of such Immediate Family Member’s Unitspursuant to a voting agreement that is delivered to the Partnership and the Highbridge Holders within five (5) Business Days after such Transfer; (b) if such Class A Limited Partner is a trust, the beneficiary or beneficiaries thereof; (c) if such Class A Limited Partner is an individual, the guardian or legal representative of a Class A Limited Partner as to whose estate a guardian or legal representative is appointed and to the executor or administrator of the estate of a deceased Class A Limited Partner; (d)anotherClass A Limited Partner (other than RBS Equity Corporation, Macquarie

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Americas Corp. or any of their respective Affiliates),(e) if such Class A Limited Partner is an entity, any owner or Affiliate of such Class A Limited Partner;provided, that, if such transferee is an owner or Affiliate of such Class A Limited Partner (other than RBS Equity Corporation, Macquarie Americas Corp. or any of their respective Affiliates), Michael E. Ellis or Harlan H. Chappelle, as applicable, for so long as such individual is living, must retain, directly or indirectly, voting control of such Class A Limited Partner’s Unitspursuant to a voting agreement that is delivered to the Partnership and the Highbridge Holders within five (5) Business Days after such Transfer and (f) if such Class A Limited Partner is RBS Equity Corporation, Macquarie Americas Corp. or any of their respective Affiliates, the Class B Limited Partner.

“Personal Representative” has the meaning ascribed to such term in Section 3.9(b).

“Predecessor Agreement”  has the meaning ascribed to such term in the recitals.

“Predecessor Class A Units” means the Class A Units of the Partnership issued under the Predecessor Agreement and contributed to AMIH concurrently with the execution of this Agreement.

“PubCo” has the meaning set forth in the definition of “Liquidity Event.”

“Qualified IPO” means an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8 (or any successor form)) of the common equity of the Class B Limited Partner or any of its direct or indirect shareholders (or a corporate successor of any of the foregoing) (a) pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act (whether alone or in conjunction with a secondary public offering), (b) resulting in gross proceeds of at least $300,000,000, (c) for which, were such public offering to constitute an IPO for purposes of Section 9(g) of the Series B Certificate of Designations, the Conversion Percentage with respect to such public offering for purposes of Section 9(a)(iv) of the Series B Certificate of Designations would be less than forty-seven and five-tenths percent (47.50%) based on the assumed distribution of the Hypothetical IPO Proceeds (as defined in the Series B Certificate of Designations) in connection with such public offering pursuant to Section 9(g) of the Series B Certificate of Designations and(d) with respect to which the Class B Limited Partner shall be able to satisfy in full its payment obligations to the Highbridge Holders in respect of payments of the Special IPO Dividend (as defined in the Series B Certificate of Designations) if and as required pursuant to Section 9(j) of the Series BCertificate of Designations.

“Remaining Liquidation Distribution Amount” has the meaning ascribed to such term in Section 4.1(b)(v)(2).

“Series B Certificate of Designations” means  the Certificate of Designations of Series B Convertible Preferred Stock of the Class B Limited Partner filed with the Delaware Secretary of State on or about the date hereof, as amended, restated or modified from time to time.

“Simulated Basis” shall mean the Book Value of any oil and gas property (as defined in Section 614 of the Code) as adjusted from time to time for Simulated Depletion.

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“Simulated Depletion” shall mean, with respect to each oil and gas property, a depletion allowance computed in accordance with federal income tax principles and in the manner specified in Treasury Regulation Section 1.704-1 (b)(2)(iv)(k)(2). For purposes of computing Simulated Depletion with respect to any property, the Simulated Basis of such property shall be deemed to be the Book Value of such property, and in no event shall such allowance, in the aggregate, exceed such Simulated Basis.

“Simulated Gain” shall mean the excess of the amount realized from the sale or other disposition of an oil or gas property over the Book Value of such property. If the Book Value of any property the sale of which would result in Simulated Gain is adjusted as provided in this Agreement, the amount of such adjustment shall be taken into account as gain from the disposition of such property for purposes of computing Simulated Gain.

“Simulated Loss” shall mean the excess of the Book Value of an oil or gas property over the amount realized from the sale or other disposition of such property. If the Book Value of any property the sale of which would result in Simulated Loss is adjusted as provided in this Agreement, the amount of such adjustment shall be taken into account as loss from the disposition of such property for purposes of computing Simulated Loss.

“Stockholders Agreement” has the meaning ascribed to such term in the recitals.

“Subject Holder” has the meaning ascribed to such term in Section 3.9(b).

“Subsidiary”  of a Person shall mean any other Person of which more than fifty percent (50%) of the outstanding Equity Securities having ordinary voting power under ordinary circumstances to elect a majority of the board of directors or similar governing body of such other Person (irrespective of whether at such time Equity Securities of any other classes of such other Person shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly controlled by such Person, by such Person and one or more Subsidiaries of such Person or by one or more Subsidiaries of such Person.  Unless otherwise indicated herein, each reference to the term “Subsidiary” shall mean a Subsidiary of the Class B Limited Partner. 

“Surviving Party”  has the meaning ascribed to such term in Section 3.9(c)

“Tax Matters Partner” has the meaning ascribed to such term in Section 11.7.

“TBOC” means the Texas Business Organizations Code as in effect on the date hereof and as it may be amended hereafter from time to time.

“Treasury Regulations” means the income tax regulations, including temporary regulations, promulgated under the Code, as amended from time to time.

“Units” means the Class A Units and Class B Units, collectively, representing ownership interest of a Partner in the Partnership, and includes any and all rights, benefits and privileges to which such Partner is entitled in his capacity as a Partner of the Partnership as provided in this Agreement, the TBOC, the Certificate or otherwise, together with all obligations, duties and liabilities imposed on such Partner in his capacity as a Partner of the Partnership as provided in

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this Agreement, the TBOC, the Certificate or otherwise  and any “Unit” shall refer to any one of the foregoing.

“Voting Agreement” has the meaning ascribed to such term in Section 3.9(c).

ARTICLE II
Organization

2.1Formation.  The Partnership was formed as a limited partnership under the TBOC by the filing of the Certificate with the Office of the Secretary of State of Texas on the applicable date referred to in the Recitals to this Agreement.  The parties hereto agree to continue the Partnership.  The rights, obligations and liabilities of the Limited Partners shall be determined pursuant to the TBOC and this Agreement and shall be subject to the terms, provisions and conditions set forth therein and herein.  To the extent that the rights, obligations or liabilities of any Limited Partner are different by reason of any provision of this Agreement than they would be in the absence of such provision, this Agreement shall, to the extent permitted by the TBOC, control.  The purpose of the Partnership is to engage in any lawful act or activity for which limited liability companies may be formed under the TBOC.

2.2Filing.  The General Partner shall accomplish all filing, recording, publishing and other acts necessary or appropriate for compliance with all requirements for operation of the Partnership as a limited partnership under this Agreement and the TBOC and under all other laws of the State of Texas and such other jurisdictions in which the Partnership determines that it may conduct business.

2.3Name.  The name of the Partnership is “Alta Mesa Holdings, LP” as such name may be modified from time to time by the General Partner as it may deem advisable.

2.4Office and Agent.  The Partnership shall continuously maintain an office and registered agent in the State of Texas as required by the TBOC.  The Texas office and registered agent for the Partnership shall be the name and address set forth in the Certificate or such other Texas office and/or registered agent as the General Partner may designate from time to time.  The Partnership also may have such other offices as the General Partner from time to time may determine or as the business of the Partnership may require.

2.5Addresses for Notices.  The addresses of the Limited Partners are set forth on Schedule I and otherwise as set forth in the Partnership’s records as maintained by the General Partner.  The administrative address of the Partnership is Attn: Michael A. McCabe, 15021 Katy Freeway, Suite 400, Houston, TX 77094.  Any Limited Partner may change its address by prior written notice to the General Partner at the administrative address of the Partnership, in which case the General Partner shall update the schedules hereto accordingly.  The General Partner may change its address by prior written notice to the Limited Partners at their respective addresses for notices.  Any notice issued in connection with this Agreement shall be in writing and shall be sent to the Partnership, the General Partner, or the Limited Partners, as the case may be, at their respective addresses provided for in this Section 0.

2.6Foreign Qualification.  Prior to the Partnership’s conducting business in any jurisdiction other than Texas, the General Partner shall cause the Partnership to comply, to the

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extent those matters are reasonably within the control of the General Partner, with all requirements necessary to qualify the Partnership as a foreign limited partnership (or a partnership in which the Limited Partners have limited liability) in that jurisdiction. At the request of the General Partner, each Partner shall execute, acknowledge, swear to, and deliver all certificates and other instruments conforming with this Agreement that are necessary or appropriate to form, qualify, continue, and terminate the Partnership as a limited partnership under the law of the State of Texas and to qualify, continue, and terminate the Partnership as a foreign limited partnership (or a partnership in which the Limited Partners have limited liability) in all other jurisdictions in which the Partnership may conduct business, and to this end the General Partner may use the power of attorney described in Section 0.

ARTICLE III
Limited Partners; Units; Transfer restrictions

3.1Limited Partners.  As of the Effective Date, the Persons listed on Schedule I shall be the only Limited Partners of the Partnership.

3.2Management by the Limited Partners.

(a)The Limited Partners, in their capacity as Limited Partners, shall not have any power or authority to manage the business or affairs of the Partnership or to bind the Partnership or to enter into agreements on behalf of the Partnership, whether by voting or otherwise.  To the fullest extent permitted by applicable law, no Limited Partner, in its capacity as a Limited Partner, shall have any duty, fiduciary or otherwise to the Partnership or any other Limited Partner in connection with the business and affairs of the Partnership or any consent or approval given or withheld pursuant to this Agreement.

(b)In exercising its rights under this Agreement,AMIH in its capacity as theClass B Limited Partnershall act in accordance with the Stockholders Agreement.

(c)The Limited Partners, as such, shall have no vote on any matters except if and to the extent voting is required by the applicable provisions of the TBOC and such voting rights cannot be extinguished by agreement of the Partners.

3.3Units.  The Units in the Partnership shall be divided into non-economic general partner interests owned by the General Partner (the “GP Units”) and two classes of non-voting economic units referred to as “Class A Units” and “Class B Units” with the relative rights and obligations specified in this Agreement.  The Class A Units are held by the General Partner and each of the Class A Limited Partners listed on Schedule I.  Immediately following the Class A Contribution, the Predecessor Class A Units associated therewith were terminated and extinguished.  The Class B Limited Partner owns 100% of the Class B Units.

3.4Admission of Limited Partners.  Any assignee of Units pursuant to a Transfer in accordance with the terms of this Agreement shall be admitted to the Partnership as a Limited Partner, uponconsent of the General Partnerand receipt by the General Partner of counterpart signature pages to documents in form and substance satisfactory to the General Partner to evidence such assignee’s agreement to be bound by the terms and provisions of this Agreement and the Stockholders Agreement;  provided, however, that if the Class B Member is an assignee

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of Class A Units in connection with a Permitted Transfer under clause (3)(f) of the definition of “Permitted Transfer” and the execution, delivery and performance of obligations by the Class B Member pursuant to a definitive agreement in respect of such Permitted Transfer has been duly authorized by the Unanimous Consent of the Board of the Class B Partner, the foregoing requirements of this Section 3.4 shall not apply to the Class B Partner in respect of such Permitted Transferor the Class A Units assigned to the Class B Partner in connection therewith.To the extent any such assignee is a natural person, the assignee’s spouse shall also execute such documents as are required by the Partnership.  Upon the admission of any assignee as a new Limited Partner in accordance with the terms of this Agreement, the General Partner shall update Schedule I accordingly.

3.5Limitations on Transfers.No Class A Limited Partner shall Transfer any of its Class A Units unless pursuant to a Permitted Transfer, or with the prior written consent of the Class B Limited Partner and the General Partner.Except as otherwise provided in the previous sentence, any Transfer of Class A Units shall be subject to the limitations and conditions on Transfer contained in the Stockholders Agreement as though such Class A Units were “Shares” under the Stockholders Agreement.

3.6Liquidity Event.

(a)Drag Along.

(i)If theClass A Limited Partners receive a Liquidity Event Notice (in their capacities as Stockholders) that involves the direct sale of Class B Units, the Class B Limited Partner shall also provide the General Partner the same such Liquidity Event Notice provided to the Class A Limited Partners, and each Class A Limited Partner and the General Partner shall cooperate with the Class B Limited Partner in good faith in connection therewith. Each Class A Limited Partner and the General Partnershall, and shall cause its Affiliates to, take all actions, including those set forth in Section 13(d) of the Stockholders Agreement, if applicable, reasonably necessary or appropriate to (i) cooperate with the Class B Limited Partner in working toward the consummation of a Liquidity Event and (ii) execute and perform such sale, conveyance, transfer, assignment or any other documents of any kind as are or become necessary to effect a Liquidity Event.  Each Class ALimited Partner and the General Partner shall, and shall cause its Affiliates to, collaborate with the other Partners in good faith in order to optimize the tax structure of the Liquidity Event for all Partners.

(ii)The value of any GP Units Transferred in connection with the Liquidity Event described in Section 3.6(a)(i) shall be deemed to be zero.  The General Partner shall not have any right to receive, be transferred or be entitled to any interest in any proceeds or consideration that would be transferred to or received by the General Partner from the sale or transfer of the General Partner’s GP Units in connection with such Liquidity Event.  Notwithstanding the foregoing, the General Partner shall be entitled to proceeds and consideration pursuant to the Liquidity Event with respect to its Class A Units.

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(b)Mandatory Contribution.  If the Class A Limited Partners receive a Liquidity Event Notice in respect of an IPO or Qualified IPO (a “Participation Event”), then (i) all Class A Limited Partners shall contribute all of their outstanding Class A Units, and (ii) the members of the General Partner shall contribute the General Partner, to the Class B Limited Partner in connection therewith at the instruction of the Class B Limited Partner pursuant to a Contribution Agreement that is in the form attached hereto as Exhibit B.

(c)Special Rule for Distributions.  No Limited Partner shall have any right to receive, be transferred or be entitled to any interest in any proceeds or consideration that would bedirectly transferred to or received by such Limited Partner from the sale or transfer of such Limited Partner’s Units in connection witha Liquidity Event conducted pursuant toSection 3.6(a)(i)(the “Drag-Along Proceeds”).  The General Partner shallcausethe Drag-Along Proceeds to be applied by the Partnership solely pursuant to Section 0(b).

3.7Indirect Transfer.No Indirect Transfer in respect of a Class A Limited Partner shall occur, and no Class A Limited Partner shall cause or permit such a Indirect Transfer to occur in respect of such Class A Limited Partner, without the prior written consent of the Class B Limited Partner.  If, any such Indirect Transfer occurs with respect to any Class A Limited Partner in violation of this Section 0 and such Indirect Transfer has not, to the reasonable satisfaction of the Class B Limited Partner been cured or reversed or has not otherwise ceased to exist within ten (10) days following the earlier to occur of (i) the applicable Class A Limited Partner becoming aware of the occurrence of such Indirect Transfer or (ii) notice of such Indirect Transfer being provided to such Class A Limited Partner by the Partnership or the Class B Limited Partner, then such Class A Limited Partner shall, effective as of the occurrence of such Indirect Transfer, constitute a “Breaching Class A Limited Partner” for purposes of this Agreement.  In consideration for the benefits provided to each Class A Limited Partner through its ownership of the Class A Units owned by it and its rights under this Agreement, the receipt and sufficiency of which are each hereby irrevocably acknowledged, each Class A Limited Partner agrees that if such Class A Limited Partner in the future constitutes a Breaching Class A Limited Partner, then from and after the occurrence of the Indirect Transfer that causes such Class A Limited Partner to constitute a Breaching Class A Limited Partner, it shall have irrevocably surrendered its Class A Units to the non-Breaching Class A  Limited Partners pro rata in proportion to the Class A Units held by suchnon-Breaching Class A  Limited Partners.For purposes of clarity, in the event an “Indirect Transfer” occurs pursuant to the Stockholders Agreement with respect to a Class A Limited Partner and such event would constitute an Indirect Transfer hereunder and notice of such event is provided to such Class A Limited Partner pursuant to the Stockholders Agreement, such notice shall also constitute notice of an Indirect Transfer for purposes of this Section 3.7.

3.8Certificates.

(a)Entitlement to Certificates.  The Partnership shall provide each owner of a Unit in the Partnership a certificate in such form as is approved by the Partnership and conforms with applicable law, certifying the Unit owned by it.  Further, for purposes of providing for Transfer of, perfecting a lien orencumbrance in, and other relevant matters related to, a Unit, the Unit will be deemed to be a “security” subject to the rules set forth in Chapters 8 and 9 of the Texas Uniform Commercial Code and any similar Uniform Commercial Code provision adopted

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by any other relevant jurisdiction.

(b)Restrictive Legend.  In the absence of a more restrictive legend, all certificates evidencing Units will be stamped or typed in a conspicuous place with the following legend:

THE Partnership INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.  WITHOUT REGISTRATION, THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER, EXCEPT ON DELIVERY TO THE Partnership OF AN OPINION OF COUNSEL SATISFACTORY TO THE General partner THAT REGISTRATION IS NOT REQUIRED FOR THE TRANSFER, OR THE SUBMISSION TO THE General partner OF OTHER EVIDENCE SATISFACTORY TO THE General partner TO THE EFFECT THAT ANY TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATIONS PROMULGATED THEREUNDER.  ADDITIONALLY, ANY SALE OR OTHER TRANSFER OF Partnership INTERESTS IS SUBJECT TO CERTAIN RESTRICTIONS THAT ARE SET FORTH IN THE SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF ALTA MESA HOLDINGS, LP, AS AMENDED.

Such legend will also be placed on all certificates that are hereafter issued to any Partner.

(c)Lost, Stolen or Destroyed Certificates.  ThePartnership may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Partnership alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the Person claiming the certificate to be lost, stolen or destroyed.  When authorizing such issue of a new certificate or certificates, the Partnershipmay, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or its legal representative, to advertise the same in such manner as it will require and/or to give the Partnershipa bond in such sum as it may direct as indemnity against any claim that may be made against the Partnershipwith respect to the certificate alleged to have been lost, stolen or destroyed.

(d)Transfer of Partnership Interest.  Upon surrender to the Partnership or its transfer agent, if any, of a certificate representing Units duly endorsed or accompanied by proper evidence of succession, assignation or Transfer in accordance with this Agreement and of the payment of all taxes applicable to the Transfer of said Interest, the Partnership will be obligated to issue a new certificate to the Person entitled thereto, cancel the old certificate and record the transaction upon its books, provided,  however, that the Partnershipwill not be so obligated

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unless such Transfer was made in compliance with the provisions of this Agreement and any applicable state and federal laws.

(e)Registered Holders.  The Partnershipwill be entitled to recognize the exclusive right of a Person registered on its books as the owner of the indicated Units and will not be bound to recognize any equitable or other claim to or interest in such Units on the part of any Person other than such registered owner, whether or not it will have express or other notice thereof, except as otherwise provided by law.

3.9Death of Certain Individuals.

(a)Upon the death of either Michael E. Ellis or Harlan H. Chappelle (such executive, the “Deceased Executive”), all or any portion of the Units held directly or indirectly by such Deceased Executive (including, for purposes of clarity, the Units of any Class A Limited Partner over or with respect to which such Deceased Executive possessed or held (including, pursuant to the definition of Permitted Transfer, any Class A Limited Partner over which such Deceased Executive was required to possess or hold), directly or indirectly, voting control of the Units held by such Class A Limited Partner, whether under a Voting Agreement or otherwise) (such Units or any interest therein being referred to herein as the “Passing Interest”) shall be subject to the provisions of this Section 3.9.

(b)Upon such Deceased Executive’s death, the Partnership shall give prompt written notice to the Class B Limited Partner and HighbridgeHolders of such event(the “Passing Interest Notice”), which such notice shall contain the names and addresses for purposes of notice of (i) if all or any portion of the Passing Interest that is directly held by such Deceased Executive’s personal representative (thepersonal representative of the Deceased Executive’s estate, the “Personal Representative”) and (ii) if all or any portion of the Passing Interest is directly held by any Class A Limited Partner (any such Class A Limited Partner, a “Subject Holder” and together with each other Subject Holder, if any, and the Personal Representative, if any, collectively referred to herein as the “Passing Holders” and individually referred to herein as a “Passing Holder”).

(c)If, following the delivery of any Passing Interest Notice, either Michael E. Ellis or Harlan H. Chappelle, as applicable (the “Surviving Party”), survives such Deceased Executive, then, within thirty (30) days after delivery of such Passing Interest Notice, each Passing Holder shall transfer voting control of the Passing Interest to the Surviving Party, and the Passing Interest may be transferred or retained, as applicable, to, or by such Persons who would have otherwise held such Passing Interest had such Passing Interest not been subject to the provisions of this Section 3.9, and such Persons may hold suchportion of such Passing Interest subject to the terms and conditions hereof, including entering into a Voting Agreement.  If the Transfer of such portion of such Passing Interest is in connection with an Indirect Transfer, after giving effect to such Indirect Transfer (but prior to giving effect to any future Indirect Transfer or Transfer), theholders of suchportion of such Passing Interest will be considered for all purposes hereunder an IndirectPermitted Transferee with respect to such Passing Interest.  If the Transfer of such portion of such Passing Interest is in connection with a direct Transfer, subject to compliance with Section 3.4, after giving effect to such direct Transfer (but prior to giving effect to any future Indirect Transfer or Transfer), such Transfer will be considered a Permitted

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Transfer for all purposes hereunder and the holders of such portion of such Passing Interest will be considered for all purposes hereunder a Permitted Transferee with respect to such Passing Interest.  A “Voting Agreement” is an agreement between the Passing Holder and the Surviving Party, whereby voting control of the Passing Interest is held by such Surviving Party.  The Surviving Party will provide a copy of the Voting Agreement to the Company and the Highbridge Holders within forty-five (45) days of the end of such thirty (30)-day period.  If Harlan H. Chappelle or Michael E. Ellis is a party to a Voting Agreement and such individual dies, then the provisions of this Section 3.9 shall apply with respect to the Units held by the Passing Holder and its successors, assigns and transferees.  

(d)Notwithstanding the foregoing Section 3.9©, if following the delivery of any Passing Interest Notice, neither Michael E. Ellis nor Harlan H. Chappelle is still living, then, each Passing Holder shall be subject to, and upon the request of the Highbridge Holders, shall enter into, a voting agreement substantially in the form of the Highbridge Voting Agreement that will be attached as an exhibit to the Stockholders Agreement following the Effective Date with conforming changes.

ARTICLE IV
Distributions

4.1Distributions.

(a)Each distribution made by the Partnership,  regardless of the source, shall be made in accordance with this Section 4.1 and applicable law.

(b)Current distributions of Distributable Cash and distributions upon the liquidation, sale, merger, consolidation, dissolution or winding up of the Partnership shall be made by the General Partner in accordance with this Section 4.1(b). The General Partner shall have sole discretion to determine the timing of any distribution and the aggregate amounts available for such distribution and, subject to the proviso at the end of this Section 4.1(b), such distributions shall be made:

(i)First, unless  a Mezzanine Interest Termination Event has occurred as of the time of such distribution, 100% of any such distribution shall be paidto the holders of the Class B Units, but if the Mezzanine Interest Termination Event would occur in connection with the payment of such distribution, then only the amount necessary to cause the Mezzanine Interest Termination Event to occur will be paid to the holders of the Class B Units pursuant to this Section 4.l(b)(i) and the remaining amount of such distribution shall be paid in accordance with the following provisions of this Section 4.1(b); then

(ii)Second, unless a Mezzanine Total Termination Event has occurred as of the time of such distribution, 100% of any such distribution(including the remaining amount of any distribution after giving effect to any payment to the holders of the Class B Units pursuant to Section 4.1(b)(i) shall be paid to the holders of the Class B Units, but if the Mezzanine Total Termination Event would occur in connection with the payment of such distribution, then only the amount

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necessary to cause the Mezzanine Total Termination Event to occur will be paid to the holders of the Class B Units pursuant to this Section 4.l(b)(ii) and the remaining amount of such distribution shall be paid in accordance with the following provisions of this Section 4.1(b);

(iii)Third,  ifeach of the Mezzanine Interest Termination Event and the Mezzanine Total Termination Event has occurred as of the time of such distribution or the latter occurs in connection with a payment of such distribution pursuant to Section 4.1(b)(ii)then,  unless the PIK Amount (as defined in the Series B Certificate of Designations) equals zero as of the time of (but before giving effect to) such distribution,100% of any such distribution(including the remaining amount of any distribution after giving effect to any payment to the holders of the Class B Units pursuant to Section 4.1(b)(ii)) shall be paid to the holders of the Class B Units until such time as the holders of the Class B Units have received an amount equal to the PIK Amount as of the time of (but before giving effect to) such distribution, and if any amount of such distribution remains to be paid by the Partnership after the holders of the Class B Units have received an amount equal to such PIK Amount, then such remaining amount of such distribution shall be paid in accordance with the following provisions of this Section 4.1(b); then

(iv)Fourth,  if each of the Mezzanine Interest Termination Event and the Mezzanine Total Termination Event has occurred as of the time of such distribution and the PIK Amount equals zero as of the time of or after giving effect to such distribution pursuant to Section 4.1(b)(iii)then, unless the Catch-Up Common Distribution Amount (as defined in the Certificate of Designations) equals zero as of the time of (but before giving effect to) such distribution, then 100% of any such distribution (including the remaining amount of any distribution after giving effect to any payment to the holders of the Class B Units pursuant to Section 4.1(b)(iii)) shall be paid to the holders of the Class B Units until such time as the holders of the Class B Units have received an amount equal to the Catch-Up Common Distribution Amount as of the time of (but before giving effect to) such distribution, and if any amount of such distribution remains to be paid by the Partnership after the holders of the Class B Units have received an amount equal to such Catch-Up Common Distribution Amount, then such remaining amount of such distribution shall be paid in accordance with the following provisions of this Section 4.1(b); then

(v)Fifth, if all holders of the Class B Units have received all distributions to which they are entitled at such time pursuant to the foregoing provisions of this Section 4.1(b) (such that, for purposes of clarity, each of the Mezzanine Interest Termination Event and the Mezzanine Total Termination Event have occurred, and each of the PIK Amount andthe Catch-Up Common Distribution Amount equal zero), then:

(1)If such distribution is not being made pursuant to Section 10.2(b), (A) 68.81% of any such distribution shall be paid to the holders of the Class B

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Units and (B) 31.19% of any such distribution shall be paid to the holders of the Class A Units (and among such holders, pro rata based on their relative Class A Percentage Interests as of the date of such distribution); or

(2)If such distribution is being made pursuant to Section 10.2(b),  (x) the amount of such distribution that remains available to be distributed pursuant to this Section 4.1(b)(v) prior to giving effect to distribution pursuant to this Section 4.1(b)(v) shall constitute the “Remaining Liquidation Distribution Amount” with respect to any such distribution and (y) if the Remaining Liquidation Distribution Amount is less than the Outstanding Liquidation Amount, then 100% of any such distribution shall be paid to the holders of the Class B Units; or

(3)If such distribution is being made pursuant to Section 10.2(b),  (x)  if the Remaining Liquidation Distribution Amount is greater than the Outstanding Liquidation Amount and (y) if the sum of (A) the Outstanding Liquidation Amount plus (B) the product obtained by multiplying 28.41%times an amount equal to the difference between (X)the Remaining Liquidation Distribution Amountminus (Y) the Outstanding Liquidation Amount (such sum, with respect to such distribution, the “Class B Liquidation Amount”) exceeds the product of 68.81%times the Remaining Liquidation Distribution Amount, then an amount equal to the Class B Liquidation Amount shall be paid to the holders of the Class B Units and the remaining portion of the Remaining Liquidation Distribution Amount shall be paid to the holders of the Class A Units (and among such holders, pro rata based on their relative Class A Percentage Interests as of the date of such distribution);  or

(4)If such distribution is being made pursuant to Section 10.2(b),  (x) if the Remaining Liquidation Distribution Amount is greater than the Outstanding Liquidation Amount and (y) if the sum of (A) the Outstanding Liquidation Amount plus (B) the product obtained by multiplying 28.41%times an amount equal to the difference between (X) the Remaining Liquidation Distribution Amountminus (Y) the Outstanding Liquidation Amount (such sum, with respect to such distribution, the “Class B Liquidation Amount”) is less than the product of 68.81%times the Remaining Liquidation Distribution Amount, then an amount equal to 68.81%times the Remaining Liquidation Amount shall be paid to the holders of the Class B Units and the remaining portion of the Remaining Liquidation Distribution Amount shall be paid to the holders of the Class A Units (and among such holders, pro rata based on their relative Class A Percentage Interests as of the date of such distribution);  

provided, however, that if a Participation Event has occurred as of the time of such distribution, 100% of any such distribution shall be paid to the holders of Class B Units.

4.2Tax Distributions.  If the Partnership has sufficient cash, as determined by the General Partner, the General Partner shall make tax distributions to the Partners.  The General Partner may declare any tax distributions to be made in cash to each Partner to satisfy all of such Partner’s estimated tax liability with respect to any taxable income of the Partnership allocated to such Partner pursuant to Article V.  Tax distributions, if made, shall be made at such times as are determined by the General Partner, but no less frequently than annually, and, if annually, by April 15 following each taxable year of the Partnership.  The General Partner shall determine the amount distributed to a Partner based upon the estimated amount of income or loss allocated to

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such Partner pursuant to Article V and the applicable tax rate.  If, in the discretion of the General Partner, there is insufficient cash available to provide all Partners with cash equal to the full amount of their estimated tax liability as described above, as determined by the General Partner, then tax distributions shall be made to the Partners pro rata in proportion to their respective liability.  Any distribution made to a Partner pursuant to this Section 4.2 shall be treated as an advance of the next succeeding distribution or distributions which would otherwise have been made to such Partner pursuant to Section 4.1(b) or 10.2(b).    If any portion of the tax advances made to any Partner pursuant to this Section 4.2 is not offset and repaid with distributions to such Partner pursuant to Sections 4.1 and 10.2(d), such Partner shall not be required to repay such advance to the Partnership, provided,  however, to the extent such Partner was allocated items of loss, deduction or credit by the Partnership after the date hereof in excess of the amount of allocations of income or gain that, in each case, were not previously taken into account in determining the amount of any tax advance pursuant to this Section 4.2, the Partner shall be required to repay such outstanding advance to the extent such items of available loss, deduction or credit (treated as applied before any other available loss, deduction or credit of such Partner that is not attributable to its interest in the Partnership) resulted in a reduction in its cash tax liability including as a refund of taxes (or the cash tax liability or refund of a direct or indirect equity holder of such Partner).

4.3Restriction on Distributions.  Notwithstanding anything to the contrary contained in this Agreement, unless the General Partner has first obtained the Unanimous Consent of the Board pursuant to the General Partner Company Agreement, the Partnership shall not make any distribution of cash or property to any holder of Class A Units under Section 4.1 unless, at the time of such distribution, no PIK Dividends (as defined in the Series B Certificate of Designations) are accrued and unpaid at such time.  This Section 4.3 shall not apply to tax distributions described in Section 4.2.

ARTICLE V
PROFIT AND LOSS ALLOCATION

5.1Allocation Rules.

(a)Net Loss.  After taking into account the special allocations in Section 5.2, and the allocations provided in Section 5.1(c) for the fiscal year or other period, Net Loss (and items thereof) shall be allocated in a manner such that the Capital Account of each Partner, immediately after giving effect to such allocation, is, as nearly, as possible, equal (proportionately) to the amount of the distributions that would be made to such Partner pursuant to Section 4.1(b), if (i) the Partnership were dissolved and terminated; (ii) its affairs were wound up and each Partnership asset was sold for cash equal to its Book Value; (iii) all Partnership liabilities were satisfied (limited with respect to each nonrecourse liability to the Book Value of the assets securing such liability); and (iv) the net assets of the Partnership were distributed in accordance with Section 4.1(b) to the Partners immediately after giving effect to such allocation.

(b)Net Income and Simulated Gain.  After taking into account the special allocations in Section 5.2and the allocations provided in Section 5.1(c)for the fiscal year or other period, Net Income (and items thereof) and Simulated Gain shall be allocated in a manner such that the Capital Account of each Partner, immediately after giving effect to such allocation,

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is, as nearly as possible, equal (proportionately) to the amount of the distributions that would be made to such Partner pursuant to Section 4.1(b), if (A) the Partnership were dissolved and terminated; (B) its affairs were wound up and each Partnership asset was sold for cash equal to its Book Value; (C) all Partnership liabilities were satisfied (limited with respect to each nonrecourse liability to the Book Value of the assets securing such liability); and (D) the net assets of the Partnership were distributed in accordance with Section 4.1(b) to the Partners immediately after giving effect to such allocation.

(c)Allocation of Simulated Basis, Simulated Depletion and Simulated Loss.  The Simulated Basis in each oil and gas property owned by the Partnership on the date of this Agreement and anySimulated Depletion or Simulated Loss calculated with respect thereto shall be allocated among the Partners based on their respective shares of the Partnership’s capital (within the meaning of Code Section 613A(c)(7)(D) and the Treasury Regulations promulgated thereunder) as of the time such oil and gas property is acquired by the Partnership, and shall be reallocated among the Limited Partners based on their respective shares of the Partnership’s capital, as determined immediately following the occurrence of an event giving rise to any adjustment to the Book Value of the Partnership’s oil and gas properties pursuant to the terms of this Agreement.

(d)Allocation in the fiscal year of the Class A Contribution and Class B Contribution. For the fiscal year of the Partnership in which both the Class A Contribution and the Class B Contribution are consummated, the Partnership shall determine the Partners’ distributive share of Partnership items by using the interim closing method described in Treasury Regulation Section 1.706-4©.  

5.2Special and Regulatory Allocations.

(a)Minimum Gain Chargeback.  Notwithstanding any other provision of this ARTICLE V, if there is a net decrease in partnership minimum gain (as defined in Treasury Regulations Section 1.704-2(b)(2) and (d)) during any fiscal year of the Partnership, the Partners shall be specially allocated items of Partnership income and gain for such fiscal year (and, if necessary, subsequent fiscal years). in an amount equal to the portion of such Partner’s share of the net decrease in partnership minimum gain, determined in accordance with Treasury Regulations Section 1.704-2(f) and (g). This Section 5.2(a) is intended to comply with the minimum gain chargeback requirement in such section of the Treasury Regulations and shall be interpreted consistently therewith.

(b)Partner Minimum Gain Chargeback.  Notwithstanding any other provision of this ARTICLE V, if there is a net decrease in Partner nonrecourse debt minimum gain attributable to a Partner nonrecourse debt (as defined in Treasury Regulations Section 1.704-2(i)) during any fiscal year, each Partner shall be specially allocated items of Partnership income and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal to the portion of such Partner’s share of the net decrease in Partner nonrecourse debt minimum gain attributable to such Partner’s nonrecourse debt, determined in accordance with Treasury Regulations Section 1.704-2(i). This Section 5.2(b) is intended to comply with the minimum gain chargeback requirement in such section of the Treasury Regulations and shall be interpreted consistently therewith.

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(c)Qualified Income Offset.  In the event any Partner unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulations Sections 1.704-1 (b)(2)(ii)(d)(4), (5) or (6), items of Partnership income and gain shall be specially allocated to each such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the deficit, if any, in such Partner’s Capital Account (as determined under Treasury Regulations Section 1.704-1 and after crediting such Capital Account for any amounts that such Partner is obligated to restore or is deemed obligated to restore pursuant to Treasury Regulations Section 1.704-2) as quickly as possible; provided that an allocation pursuant to this Section 5.2(c) shall be made only if and to the extent that such Partner would have such Capital Account deficit after all other allocations provided for in Sections 5.1 and 5.2  have been tentatively made as if this Section 5.2(c) were not in this Agreement.  This Section 5.2(c) is intended to comply with the qualified income offset provisions in Treasury Regulations Section 1.704-. 1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

(d)Gross Income Allocation.  In the event any Partner has a deficit balance in such Partner’s Capital Account (as determined after crediting such Capital Account for any amounts that such Partner is obligated to restore or is deemed obligated to restore pursuant to Treasury Regulations Section 1.704-2), items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate such deficit (as so determined) of such Partner’s Capital Account as quickly as possible; provided that an allocation pursuant to this Section 5.2(d) shall be made only if and to the extent that such Partner would have such Capital Account deficit (as so determined) after all other allocations provided for in Sections 5.1 and 5.2 (other than Section 5.2(c)) have been tentatively made as if this Section 5.2(d) were not in this Agreement.

(e)Loss Allocation Limitation.  No allocation of Net Loss (or items thereof) or Simulated Loss shall be made to any Partner to the extent that such allocation would create or increase a deficit in such Partner’s Capital Account (as determined after debiting such Capital Account for the items described in Treasury Regulations Section 1.704-1 (b)(2)(ii)(d)(4),(5) and (6) and crediting such Capital Account for any amounts that such Partner is obligated to restore or is deemed obligated to restore pursuant to Treasury Regulations Section 1.704-2).

5.3Tax Allocation.

(a)General Rules.  Except as otherwise provided in Section 5.3(c) and 5.3(d), for each fiscal year, items of Partnership income, gain, loss, deduction and expense shall be allocated, for federal, state and local income tax purposes, among the Partners in the same manner as the Net Income (and items thereof) or Net Loss (and items thereof) of which such items are components were allocated pursuant to Section 5.1.

(b)Section 613A(c)(7)(D) of the Code. The deduction for depletion with respect to each separate oil and gas property (as defined in Section 614 of the Code) shall in accordance with Section 613A(c)(7)(D) of the Code be computed separately by the Partners rather than the Partnership. For such purpose, except as provided in Section 5.3(c), the adjusted tax basis of each such property shall be allocated among the Partners in the same manner in which the Simulated Basis of such property is allocated. Each Partner shall separately keep records of its share of the adjusted tax basis in each separate oil and gas property, adjust such

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share of the adjusted tax basis for any cost or percentage depletion allowable with respect to such property and use such adjusted tax basis in the computation of its cost depletion or in the computation of its gain or loss on the disposition of such property by the Partnership.

(c)Section 704(c) of the Code. Income, gains, losses and deductions with respect to any property (other than cash) contributed or deemed contributed to the capital of the Partnership shall, solely for income tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its fair market value at the time of the contribution or deemed contribution in accordance with Section 704(c) of the Code and the Treasury Regulations promulgated thereunder, Such allocations shall be made in such manner and utilizing such permissible tax elections at the discretion of the General Partner in its capacity as the Tax Matters Partner. If there is a revaluation of Partnership property pursuant to the definition of Book Value (including upon execution of this Agreement), subsequent allocations of income, gains, losses or deductions with respect to such property shall be allocated among the Partners so as to take account of any variation between the adjusted tax basis of such property to the Partnership for federal income tax purposes and its fair market value in accordance with Section 704(c) of the Code and the Treasury Regulations promulgated thereunder. Such allocations shall be made in such manner and utilizing such permissible tax elections at the discretion of the General Partner in its capacity as the Tax Matters Partner.

(d)Allocation with respect to the Founder Notes.  For the avoidance of doubt and notwithstanding anything to the contrary stated herein, any gross income recognized by the Partnership in connection with the subordination of the Founder Notes shall not be offset by any loss of the Partnership and shall be treated as an item of gross income of a taxable period prior to the date hereof, and as such the Class A Limited Partners and the Class B Limited Partner hereby agree that such item of gross income shall be allocated in its entirety to the Class A Limited Partners and not to the Class B Limited Partner. The Class A Limited Partners hereby agree to indemnify the Class B Limited Partner for any tax cost arising out of or relating to the subordination of the Founder Notes.

(e)Capital Accounts Not Affected.  Allocations pursuant to this Section 5.3 are solely for federal, state and local tax purposes and shall not affect, or in any way be taken into account, in computing any Partner’s Capital Account or allocable share of Net Income (or items thereof) or Net Loss (or items thereof).

5.4Withholding.  Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines to be necessary or appropriate to cause the Partnership to comply with any foreign or United States federal, state or local withholding or deduction requirement with respect to any allocation, payment or distribution by the Partnership to any Partner or other Person. All amounts so withheld, and, in the manner determined by the General Partner in its discretion, amounts withheld with respect to any allocation, payment or distribution by any Person to the Partnership, shall be treated as distributions to the applicable Partners under the applicable provisions of this Agreement. If any such withholding requirement with respect to any Partner exceeds the amount distributable to such Partner under the applicable provision of this Agreement, or if any such withholding requirement was not satisfied with respect to any amount previously allocated or distributed to

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such Partner, such Partner and any successor or assignee with respect to such Partner’s Units hereby indemnifies and agrees to hold harmless the General Partner and the Partnership for such excess amount or such withholding requirement, as the case may be.

ARTICLE VI
Capital Contributions

6.1Class A Contribution.  Immediately prior to the execution and delivery of this Agreement, the Class A Limited Partners made the Class A Contribution and the Predecessor Class A Units associated therewith were extinguished and terminated.

6.2Class B Contribution.  AMIH shall make the Class B Contribution in connection with the execution and delivery of this Agreement.

6.3Subsequent Capital Contributions.  Notwithstanding anything to the contrary contained herein, no Class A ManagementLimited Partnershall be permitted or required to make any Capital Contribution to the Partnership without the consent of the General Partner.  The Class B Limited Partner shall have the right to make capital contributions to the Partnership from time to time in such amounts and at such times as determined by the General Partner.

ARTICLE VII
Capital Accounts

7.1Capital Account.  There shall be established and maintained for each Partner a separate capital account (“Capital Account”), which as of the Effective Date shall reflect the amounts described in ARTICLE VI and is attached hereto as Schedule I.There shall be added to the Capital Account of each Partner (i) such Partner’s Capital Contributions and (ii) such Partner’s distributive share of Net Income and any item in the nature of income or gain that is specially allocated to the Partner pursuant to Section 5.2.  There shall be subtracted from the Capital Account of each Partner (x) the amount of any money, and the fair market value of any other property, distributed to such Partner and (y) such Partner’s distributive share of Net Losses and any item in the nature of loss or expense that is specially allocated to such Partner pursuant to Section 5.2. The foregoing provision and other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Treasury Regulations.

7.2Transfer of Units.A transferee of any Unit shall succeed to the Capital Account of the transferor Partner to the extent it relates to the Transferred Units.

ARTICLE VIII
Management; Indemnification

8.1Management of Partnership Affairs.Except as is otherwise provided for in this Agreement or by non-waivable provisions of applicable law, the General Partner shall have full, complete, and exclusive authority to manage and control the business, affairs, and properties of the Partnership, to make all decisions regarding the same, and to perform any and all other acts or activities customary or incident to the management of the Partnership’s business.  Except as is

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otherwise provided for in this Agreement or the TBOC, the Limited Partners shall not participate in the control of the business affairs of the Partnership, transact any business on behalf of the Partnership, or have any power or authority to bind or obligate the Partnership.

8.2GP Units. The General Partner’s interest in the Partnership shall be represented by Class A Units and GP Units.  GP Units shall constitute a non-economic interest in the Partnership and shall not receive distributions pursuant to Section 4.1(b).  The General Partner may not Transfer GP Units except pursuant to a Liquidity Event described in Section3.6(a)(i),or Class A Units except pursuant to the provisions of Section 3.5, in each case either directly or indirectly, by assignment, merger, consolidation or otherwise.

8.3Officers.  The General Partner may from time to time designate officers of the Partnership to carry out the day-to-day business of the Partnership.  Any officer may be removed as such at any time by the General Partner, either with or without cause, in the discretion of the General Partner, provided that such removal shall be without prejudice to the contract rights, if any, of the Person so removed.  Designation of an officer shall not of itself create contract rights.

8.4Expenses in Connection with Organization of the Partnership.  The Partnership shall be responsible for all out-of-pocket fees, costs and expenses actually incurred by the General Partner and its Affiliates and paid to third parties in connection with: (a) maintaining the continued organization and existence of the Partnership; (b) the qualification of the Partnership to do business in any state in which the General Partner determines that such qualification is advisable; (c) the legal (including tax advice) and accounting fees and disbursements of the Partnership; and (d) other out-of-pocket expenses of a similar nature incurred by the General Partner or its Affiliates and paid to third parties in connection with such activities.

8.5Reimbursement of Expenses.  The General Partner shall be entitled to reimbursement by the Partnership from time-to-time for all out-of-pocket expenses which are incurred by the General Partner and paid to third parties in connection with the business and affairs of the Partnership.

8.6Nature of Relationship.  Except as is otherwise provided in this Agreement, the General Partner shall perform its duties with respect to the Partnership in good faith and in the best interests of the Partnership and shall devote such time and effort to the Partnership business and operations as is reasonably necessary to manage the affairs of the Partnership prudently.  The General Partner is liable for acts, errors, or omissions in performing its duties with respect to the Partnership only if such performance is conducted in bad faith or with gross negligence.  THE GENERAL PARTNER IS NOT LIABLE FOR ACTS, ERRORS, OR OMISSIONS IN PERFORMING ITS DUTIES IN ANY CAPACITY WITH RESPECT TO THE PARTNERSHIP FOR ANY OTHER REASON, INCLUDING THE GENERAL PARTNER’S SOLE, PARTIAL, OR CONCURRENT NEGLIGENCE.

8.7Indemnification.

(a)To the fullest extent permitted by applicable law, neither the General Partner, the Limited Partners, their respective affiliates, nor their respective partners, employees,

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officers, directors, members, managers or agents will be liable to the Partnership, whether for breach of contract, breach of duties (including fiduciary duties) or otherwise, for (a) any act or omission taken or suffered by such persons  in connection with the conduct of the affairs of the Partnership, unless such act or omission resulted from fraud, bad faith, willful misconduct or gross negligence by such persons; (b) any action or omission taken or suffered by any other Limited Partner; (c) good faith reliance on the provisions of the Agreement; (d) any change in federal, state or local or foreign income tax laws, or in interpretations thereof, as they apply to the Partnership or the Partners, whether such change occurs through legislative, judicial or administrative action; or (e) any act or omission suffered or taken by such persons on behalf of the Partnership or in furtherance of the interests of the Partnership in good faith in reliance upon and in accordance with the advice of legal counsel or accountants provided such counsel or accountants was selected with reasonable care.

(b)To the fullest extent permitted by applicable law, the Partnership will indemnify and hold harmless the General Partner and the Limited Partners, and may, in the sole judgment of the General Partner, affiliates of the General Partner and the Limited Partners, and their respective partners, members, officers, directors, managers, employees, agents, owners and stockholders (collectively, the “Indemnified Parties”) from and against any and all claims, liabilities, damages, losses, costs and expenses of any nature whatsoever, known or unknown, liquidated or unliquidated, that are incurred by any Indemnified Party and arise out of or in connection with the affairs of the Partnership or in connection with the Partnership’s business or the performance by such Indemnified Party of any of the Partnership’s responsibilities under the Agreement (the “Indemnified Expenses”); provided, however, an Indemnified Party will not be entitled to indemnification if and to the extent that there is a final adjudication, in an underlying action or proceeding in which the Indemnified Expenses were incurred, that the Indemnified Party’s conduct constituted fraud, bad faith, willful misconduct or gross negligence. Notwithstanding the foregoing and subject to applicable law, Partners will not be individually obligated with respect to such indemnification beyond their respective unreturned capital contributions to the Partnership. The Partnership may, in the judgment of the General Partner, pay or reimburse the Indemnified Expenses reasonably incurred by an Indemnified Party that may be subject to a right of indemnification as such expenses are incurred in advance of any final disposition.

8.8Power of Attorney.  Each Limited Partner hereby appoints the General Partner as such Partner’s true and lawful attorney-in-fact for the purpose of executing, swearing to, acknowledging, and delivering all certificates, documents, and other instruments as may be necessary, appropriate, or advisable in the judgment of the General Partner in furtherance of the business of the Partnership or complying with applicable law.  Such power shall be irrevocable and is coupled with an interest.  Upon request by the General Partner, any Partner shall confirm its grant of such power of attorney or any use thereof by the General Partner or shall execute, swear to, acknowledge and deliver any such certificate, document, or other instrument.

8.9Other Activities.  Neither this Agreement nor the relationship created hereby shall preclude or limit, in any respect, the right of the Partners to engage, directly or indirectly, through participation, investment, or otherwise, in any opportunity or business of any type, including those that may be the same as or similar to the Partnership or its business, those that compete with the Partnership, and those in which the Partnership has invested.  The Partners

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shall not have any obligation to offer to the Partnership or any other Partner the right to participate in any such activity.  Neither the Partnership nor any Partner shall have any right, by virtue of this Agreement or the relationship created by this Agreement, with respect to any such activity.

ARTICLE IX
WITHDRAWAL, REMOVAL, BANKRUPTCY, ETC.

9.1Voluntary Withdrawal.The General Partner does not have the right to withdraw from the Partnership as a general partner.  The General Partner agrees that it will not voluntarily withdraw from the Partnership as a general partner within the meaning of Section 153.155 of the TBOC, and any such voluntary withdrawal shall be a violation of this Agreement.  If the General Partner voluntarily withdraws from the Partnership in violation of this covenant, the withdrawal will not be effective until the ninetieth (90th) day following notice of the withdrawal to all other Partners or such later date as the notice may specify.

9.2Consequence of Wrongful Withdrawal.  If a General Partner wrongfully withdraws from the Partnership, including but not limited to in violation of Section 9.1, the Partnership may (i) recover damages from the withdrawing General Partner, including, without limitation, the reasonable cost of obtaining replacement of the services that the General Partner is obligated to perform, (ii) pursue any other remedies available under applicable law, and/or (iii) effect the recovery of damages by offsetting those damages against the amount otherwise distributable to that General Partner.

9.3No Conversion of Interest.  Simultaneously with an event of withdrawal (as defined under Section 153.155 of the TBOC) with respect to the General Partner, the former General Partner’s GP Units shall not automatically convert into that of a Limited Partner having a right to receive distributions from the Partnership.  Following an event of withdrawal with respect to the General Partner, the Class B Limited Partner shall select a new General Partner in accordance with Section 9.5.  The new General Partner shall be admitted to the Partnership as a General Partner effective immediately prior to the existing General Partner ceasing to be a General Partner.  For the avoidance of doubt, upon an event of withdrawal with respect to the General Partner, the General Partner shall continue to hold its Class A Units.

9.4Removal of the General Partner.  The General Partner may be removed from the Partnership by the Class B Limited Partner acting with the Unanimous Consent of its Board.

9.5New General Partner.  Any action for removal is conditioned on a new General Partner, selected by the Class B Limited Partner, being admitted to the Partnership immediately prior to the effective date of such removal.  In connection with such admission, the new General Partner shall (i) make or agree to make such Capital Contributions as all of the Limited Partners specify in exchange for GP Units and (ii) execute a written instrument pursuant to which it agrees to be bound by this Agreement, specifies its address for notice, and makes such representations, warranties, and covenants as the Limited Partners specify.  The new General Partner so selected shall be admitted to the Partnership as a General Partner on such terms, and the removal of the former General Partner is effective only immediately subsequent to that admission.

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ARTICLE X
Dissolution; Liquidation

10.1Events Giving Rise to Dissolution.

(a)The Partnership shall dissolve upon the first to occur of any of the following events or occurrence, and upon no other event or occurrence:

(i)any event that makes it unlawful for the business of the Partnership to be carried on by the General Partner; or

(ii)at the election of the General Partner; or

(iii)at any time there are no Limited Partners of the Partnership unless the Partnership is continued in accordance with the TBOC; or

(iv)the entry of a decree of judicial dissolution under Subchapter B of Section 11 of the TBOC.

(b)To the extent permitted by the TBOC and the law, each Limited Partner irrevocably waives any right it may have to maintain any action for dissolution of the Partnership. 

10.2Liquidation.  Upon dissolution of the Partnership, the General Partner shall serve as the liquidator and the assets of the Partnership shall be liquidated and the proceeds thereof shall be applied in the following order:

(a)to the satisfaction (whether by payment or the making of reasonable provision for payment) of the Partnership’s liabilities to creditors in the order of priority required by law, including the creation of a reasonable reserve for reasonably foreseeable contingent liabilities to be distributed when and as the General Partner determines; and

(b)thereafter to the Partners in accordance with the terms of Section 4.1(b), which is intended to be consistent with a liquidation in accordance with relative Capital Account balances.

ARTICLE XI
Miscellaneous Provisions

11.1Amendments.  This Agreement or the Certificate may be amended, modified, supplemented, or restated at any time at the election of the General Partner and any such amendment, modification, supplement or restatement shall be binding upon the Limited Partners without further action or consent of the Limited Partners; provided, however, that (i) any such amendment, modification, supplement, restatement or waiver that by its explicit terms would alter or change the rights, obligations, powers or preferences specific to any series of Units in a disproportionate and adverse manner (financially or otherwise) compared to the rights, obligations, powers and preferences specific to other series of Units shall require the prior written consent of Limited Partners holding a majority of the series of Units so

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disproportionately and adversely affected, (ii) any such amendment, modification, supplement, restatement or waiver that by its explicit terms would alter or change the rights, obligations, powers or preferences of any Limited Partner in its capacity as a holder of a specific series of Units in a disproportionate and adverse manner compared to other Limited Partners in their capacities as holders of the same series of Units shall require the prior written consent of such Limited Partner so disproportionately and adversely affected.

11.2Confidentiality.  Each Limited Partner agrees that, except as required by law or consented to in writing by the Partnership, it will, and will cause its directors, officers, employees, representatives and/or agents (collectively, “Representatives”) to, keep strictly confidential all information concerning the Partnership or its business, properties or plans; provided, however, that the foregoing shall not apply to (a) any Limited Partner in such Limited Partner’s capacity as an officer or director of the Partnership, (b) any information that is or becomes generally available to the public (other than as a result of a disclosure directly or indirectly by such Limited Partner or its Representatives in violation hereof), (c) any disclosure of information to the investors, limited partners or potential investors of any Limited Partner as such Limited Partner may reasonably deem necessary or appropriate, (d) any information the disclosure of which is required by law, provided that the Limited Partner promptly notifies the Partnership of, and takes reasonable steps to minimize the extent of, any such required disclosure or (e) any disclosure of information to lenders or prospective or permitted assignees of any Limited Partner, provided that any such lender or prospective or permitted assignee has agreed in writing to be bound by, or is already bound by, confidentiality obligations reasonably comparable in the aggregate to the provisions contained in this Section 11.2.

11.3Incorporated Documents.  The Stockholders Agreement and the Series B Certificate of Designations are incorporated by reference herein and made a part hereof.  Each of the Stockholders Agreement and the Series B Certificate of Designations is on file with the Partnership at its principal executive office and will be provided to the Limited Partners upon their written request.  The Stockholders Agreement shall continue to be incorporated into this agreement notwithstanding the termination of such agreement pursuant to Section 29 thereof.  The Series B Certificate of Designations shall continue to be incorporated into this Agreement notwithstanding the partial or complete conversion of all of the preferred stock established thereby.

11.4Notices.

(a)Except as expressly set forth to the contrary in this Agreement, all notices, requests or consents provided for or required to be given hereunder shall be in writing and shall be deemed to be duly given if personally delivered or mailed by certified mail, return receipt requested, or nationally recognized overnight delivery service with proof of receipt maintained, at the following addresses (or any other address that any such party may designate by written notice to the other parties):

(i)if to the Partnership, at its administrative address pursuant to Section 2.5; and

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(ii)if to a Person who is a Limited Partner, to the address given for such Limited Partner on Schedule I hereto.

(b)Any such notice shall, if delivered personally, be deemed received upon delivery; shall, if delivered by certified mail, be deemed received upon the earlier of actual receipt thereof or five Business Days after the date of deposit in the United States mail, as the case may be; and shall, if delivered by nationally recognized overnight delivery service, be deemed received upon the first Business Day after the date of deposit with the delivery service.

(c)Whenever any notice is required to be given by applicable law, the Certificate or this Agreement, a written waiver thereof, signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

11.5Entire Agreement.  This Agreement, the Exhibit and Schedule thereto, the Series B Certificate of Designations and the Stockholders Agreement embody the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersede all prior agreements or understandings (whether written or oral), with respect to the subject matter hereof.

11.6Further Assurances.  In connection with this Agreement, the Partnership and each Limited Partner shall execute and deliver all such future instruments and take such other and further action as may be reasonably necessary or appropriate to carry out the provisions of this Agreement and the intention of the parties as expressed herein.

11.7Tax Matters.  The General Partner shall be designated the tax matters partner under Section 6231 of the Code (the “Tax Matters Partner”).  The Tax Matters Partner is authorized to take such actions and to execute and file all statements and forms on behalf of the Partnership which may be permitted or required by the applicable provisions of the Code or Treasury Regulations issued thereunder.  The Tax Matters Partner is authorized to make any election permissible under law (including the election under Section 754 of the Code) that is in its sole and reasonable determination in the best interests of the Partnership and the Tax Matters Partner shall solely determine the manner in which, in the event of a transfer of all or part of a Partner’s Units, the shares of Net Income and Net Losses are allocated between the transferor and the transferee, provided that such manner is not inconsistent with the applicable provisions of the Code and the Treasury Regulations.  The Tax Matters Partner shall have full and exclusive power and authority on behalf of the Partnership to represent the Partnership (at the Partnership’s expense) in connection with all examinations of the Partnership’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith.  The Tax Matters Partner shall keep the Limited Partners informed as to the status of any audit of the Partnership’s tax affairs, and shall take such action as may be necessary to cause any Limited Partner so requesting to become a “notice partner” within the meaning of Section 6223 of the Code.

11.8Governing Law; Severability; Jurisdiction.

(a)Governing Law.This Agreement and any claim, controversy or dispute arising under or related in any way to this Agreement, the transactions leading to this Agreement

28

or contemplated hereby, and/or the interpretation and enforcement of the rights and duties of the parties hereunder or related in any way to the foregoing, shall be governed by and construed in accordance with the internal, substantive laws of the State of Texas applicable to agreements entered into and to be performed solely within such state without giving effect to the principles of conflict of laws thereof.

(b)CONSENT TO JURISDICTION AND SERVICE OF PROCESS.  ANY PROCEEDING ARISING UNDER OR RELATED IN ANY WAY TO THIS AGREEMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER OR RELATED IN ANY WAY TO THE FOREGOING MAY ONLY BE INSTITUTED IN THE State or FEDERAL COURTS OF THE State of Delaware AND EACH PARTY WAIVES ANY OBJECTION WHICH SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING, AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH PROCEEDING.  SERVICE OF PROCESS WITH RESPECT THERETO MAY BE MADE UPON a party hereto BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS AS PROVIDED INSECTION 11.4. 

(c)WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 11.9(C).

(d)In the event of a direct conflict between the provisions of this Agreement and (i) any provision of the Certificate or (ii) any mandatory, non-waivable provision of the TBOC, such provision of the Certificate or the TBOC shall control.  If any provision of the TBOC provides that it may be varied or superseded in the agreement of a limited partnership (or otherwise by agreement of the partners or General Partners of a limited partnership), such provision shall be deemed superseded and waived in its entirety if this Agreement contains a provision addressing the same issue or subject matter.

(e)If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such

29

illegal, invalid or unenforceable provision had never comprised a part of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.  Furthermore, in lieu of each such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

11.9Binding Effect.  Subject to the restrictions on Transfer set forth in this Agreement, this Agreement shall be binding upon and shall inure to the benefit of the Partnership and each Limited Partner and their respective heirs, permitted successors, permitted assigns, permitted distributees and legal representatives; and by their signatures hereto, the Partnership and each Limited Partner intends to and does hereby become bound.  Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any Person other than the parties hereto and their respective permitted successors and assigns any legal or equitable right, remedy or claim under, in or in respect of this Agreement or any provision herein contained.  The rights under this Agreement may be assigned by a Limited Partner to a transferee of all or a portion of such Limited Partner’s Units transferred in accordance with this Agreement (and shall be assigned to the extent this Agreement requires such assignment), but only to the extent of such Units so transferred; it being understood that the assignment of any rights under this Agreement shall not constitute admission to the Partnership as a Limited Partner unless and until such transferee is duly admitted as a Limited Partner in accordance with this Agreement.

11.10Severability.  If any provisions contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not invalidate the entire Agreement.  Instead, such provision shall be deemed to be modified to the extent necessary to render it valid and enforceable and if no such modification shall render it valid and enforceable then the Agreement shall be construed as if not containing such provision.

11.11Time of the Essence.  Time is of the essence with respect to this Agreement.

11.12No Third Party Beneficiaries.  Except for the provisions of Section 3.9, which may be enforced solely by any Highbridge Holder, nothingherein expressed or implied is intended to confer upon any person, other than the parties hereto or their respective permitted assigns, successors, heirs and legal representatives, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

11.13Counterparts.  This Agreement may be executed in counterparts and all such counterparts shall be construed together to form a single document.

11.14Spousal Joinder.  If a Class A Limited Partner is an individual, such Class A Limited Partner acknowledges, on his own behalf and on behalf of his spouse, (i)  that they are fully aware of, understand and fully consent and agree to the provisions of this Agreement and its binding effect upon any community property or similar marital property interests in the Units that they may now or hereafter own and (ii) that they agree that the termination of their marital relationship with such Limited Partner for any reason shall not have the effect of removing any

30

Units otherwise subject to this Agreement from the coverage hereof.  The spouse of each Class A Limited Partner, by executing or acknowledging the Spousal Joinder in form attached as Exhibit A hereto, represents to all other parties that he or she has read this Agreement, understands the effect of the same on his or her interest, if any, in the Units and agrees to be bound by the terms of this Agreement.  If any Limited Partner becomes married subsequent to the Effective Date of this Agreement, he or she shall, as soon as practical after such marriage, obtain the acknowledgement of his/her spouse to this Agreement.  In addition, each Class A Limited Partner and his spouse, as applicable, acknowledges that (A) the Partnership has recommended to each of them that they obtain individual, independent legal advice concerning the terms of this Agreement and the advisability of entering into this Agreement prior to executing it and (B) they have either done so or voluntarily elected not to do so.

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

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IN WITNESS WHEREOF, the undersigned has caused this counterpart signature page to the Limited Partnership Agreement of Alta Mesa Holdings, LPto be duly executed as of the date first above written.

ALTA MESA HOLDINGS GP, LLC
a Texas limited liability company
By:	/s/ Harlan H. Chappelle
	Harlan H. Chappelle,
	President and Chief Executive Officer

Signatures Continued on Next Page.

CLASS B LIMITED PARTNER:

ALTA MESA INVESTMENT HOLDINGS INC.,
a Delaware corporation
By:	/s/ Harlan H. Chappelle
	Harlan H. Chappelle,
	President and Chief Executive Officer

Signatures Continued on Next Page.

CLASS A LIMITED PARTNERS:

Alta Mesa Resources, LP,
a Texas limited partnership
By:	Alta Mesa Resources GP, LLC,
	a Texas limited liability company,
	its sole General Partner
By:	/s/ Harlan H. Chappelle
	Harlan H. Chappelle,
	Chief Executive Officer

Signatures Continue on Next Page.

Galveston Bay Resources Holdings, LP,,
a Texas limited partnership
By:	Galveston Bay  Resources Holdings GP, LLC,
	a Texas limited liability company,
	its sole General Partner
By:	/s/ Harlan H. Chappelle
	Harlan H. Chappelle,
	Chief Executive Officer

Signatures Continue on Next Page.

Petro Acquisitions Holdings, LP,
a Texas limited partnership
By:	Petro Acquisitions Holdings GP, LLC,
	a Texas limited liability company,
	its sole General Partner
By:	/s/ Harlan H. Chappelle
	Harlan H. Chappelle,
	Chief Executive Officer

Signatures Continue on Next Page.

Petro Operating Company Holdings, Inc.,
a Florida corporation
By:	/s/ Harlan H. Chappelle
	Harlan H. Chappelle,
	President

Signatures Continue on Next Page.

/s/ Harlan H. Chappelle

HARLAN H. CHAPPELLE

Signatures Continue on Next Page.

/s/ Dale Hayes

DALE HAYES

Signatures Continue on Next Page.

RBS EQUITY CORPORATION
By:	/s/ Robert McClorey
	Robert McClorey
	Vice President

Signatures Continue on Next Page.

MACQUARIE AMERICAS CORP.,
a Delaware corporation
By:	/s/ Brian B. Hughes
	Brian B. Hughes
	Director
By:	/s/ Paul B. Beck
	Paul B. Beck
	Director

End of Signatures.

EX-10.1

EXHIBIT 10.1

PURCHASE AND SALE AGREEMENT

BETWEEN

ALTA MESA EAGLE, LLC,

AS SELLER

AND

MEMORIAL PRODUCTION OPERATION LLC,

AS BUYER

TABLE OF CONTENTS

		Page
ARTICLE 1. DEFINITIONS		1
1.1.	Definitions; References and Construction	1
ARTICLE 2. SALE OF ASSETS/PURCHASE PRICE		13
2.1.	Purchase and Sale of Assets	13
2.2.	Purchase Price	13
2.3.	Receipts and Credits	13
2.4.	Purchase Price Adjustments	15
2.5.	Final Settlement Statement	16
2.6.	Allocated Values	17
2.7.	Suspended Funds	17
2.8.	Assumed Liabilities	17
ARTICLE 3.  ALLOCATION OF RESPONSIBILITIES AND INDEMNITIES		17
3.1.	Opportunity for Review	17
3.2.	Seller’s Indemnity Obligation	18
3.3.	Buyer’s Indemnity Obligation	18
3.4.	Claim Periods, Deductible, Threshold, Cap and Materiality Exclusion	18
3.5.	Materiality Qualifiers	19
3.6.	Notice of Claims	19
3.7.	Defense of Non-Party Claims	20
3.8.	Investigation and Knowledge	21
3.9.	Waiver of Certain Damages	21
3.10.	Extent of Indemnification	21
ARTICLE 4.  DISCLAIMER		21
ARTICLE 5.  SELLER’S REPRESENTATIONS AND WARRANTIES		22
5.1.	Organization and Good Standing	22
5.2.	Authority; Authorization of Agreement	22
5.3.	No Violations	22
5.4.	Liability for Brokers’ Fees	23
5.5.	Legal Proceedings	23
5.6.	Bankruptcy	23
5.7.	Taxes	23
5.8.	Material Contracts	23
5.9.	No Violation of Laws	25
5.10.	Preferential Rights	25
5.11.	Consents	25
5.12.	Royalties	25
5.13.	Current Commitments	25
5.14.	ERISA	25
5.15.	Assets of the E&P Business	25
5.16.	Environmental Laws	26
5.17.	Production Imbalances	26
5.18.	Leases	26
5.19.	Permits	26
5.20.	Equipment and Personal Property	26

ii

5.21.	Wells	27
5.22.	Non-Consent Operations	27
5.23.	Casualty Loss; Condemnation	27
5.24.	Insurance	27
ARTICLE 6.  BUYER’S REPRESENTATIONS AND WARRANTIES		27
6.1.	Organization and Good Standing	27
6.2.	Authority; Authorization of Agreement	27
6.3.	No Violations	28
6.4.	Liability for Brokers’ Fees	28
6.5.	Claims, Disputes and Litigation	28
6.6.	Bankruptcy	28
6.7.	Independent Evaluation	28
6.8.	Capabilities	28
ARTICLE 7.  COVENANTS		28
7.1.	Data Sharing	29
7.2.	Consents	29
7.3.	Approvals of Governmental Authorities	30
7.4.	Efforts	30
7.5.	Records in Seller’s Possession	31
7.6.	SEC Matters	31
7.7.	Confidentiality Agreement	31
ARTICLE 8.  THE CLOSING		31
8.1.	Closing	31
8.2.	Obligations of Seller at Closing	32
8.3.	Obligations of Buyer at Closing	32
ARTICLE 9.  TAXES		33
9.1.	Cooperation on Tax Matters	33
9.2.	Property and Excise Taxes	33
9.3.	Severance Taxes	33
9.4.	Transfer Taxes	34
ARTICLE 10.  MISCELLANEOUS		34
10.1.	Notices	34
10.2.	Transaction and Filing Costs	34
10.3.	Amendments and Severability	35
10.4.	Successors and Assigns	35
10.5.	Headings	35
10.6.	Governing Law; Jurisdiction; Waiver of Trial by Jury	35
10.7.	No Partnership Created	35
10.8.	Public Announcements	36
10.9.	No Third Party Beneficiaries	36
10.10.	Construction	36
10.11.	Schedules	36
10.12.	Conspicuousness of Provisions	36
10.13.	Execution in Counterparts	36
10.14	Entire Agreement	36

iii

PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (together with the Exhibits and Schedules made a part hereof, this “Agreement”), dated the 25thday of March, 2014, is made by and between Alta Mesa Eagle, LLC, a Texas limited liability company (“Seller”), and Memorial Production Operating LLC, a Delaware limited liability company (“Buyer”).  Seller and Buyer are sometimes hereinafter referred to individually as a “Party” and collectively as the “Parties”:

WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, the Assets;

NOW, THEREFORE, for a good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

Article 1
DEFINITIONS

Definitions; References and Construction

.  In this Agreement, capitalized terms have the meanings provided in this Article 1, unless defined elsewhere in this Agreement.  All defined terms include both the singular and the plural of such terms.  All references to Sections refer to Sections in this Agreement, and all references to Exhibits or Schedules refer to Exhibits or Schedules made a part of this Agreement.  When the term “herein” is used in this Agreement, reference is made to the entire Agreement and not to any particular Section or subparagraph of a Section.  The word “including” shall mean including without limitation.  The words “shall” and “will” are interchangeably used throughout this Agreement and shall accordingly be given the same meaning, regardless of which word is used.

“Accounting Referee” means Deloitte LLP.

“Adjusted Purchase Price” has the meaning set forth in Section 2.2.

“Adjustments” means the adjustments to the Base Purchase Price pursuant to Section 2.4.

“AFE’s” has the meaning set forth in Section 5.13.

“Affiliate” means any Person that, directly or indirectly, through one or more entities, controls or is controlled by or is under common control with the Person specified.  For the purpose of the immediately preceding sentence, the term “control” means the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or agency or otherwise.

“Agreement” has the meaning set forth in the introductory paragraph

“Allocated Values” means the allocation of the Base Purchase Price among the Assets as mutually agreed to by the Parties.

 “Assets” means:

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(a) an undivided thirty percent (30%) of all of Seller’s right, title and interest in and to all oil and gas leases, oil, gas and mineral leases, mineral servitudes, subleases and other leaseholds, royalties, overriding royalties, net profits interests, carried interests, mineral fee interests, farmout rights that are described on Exhibit A-1, and including an undivided thirty percent (30%) of all other right, title and interest of Seller in and to all the landscovered by or described in the instruments described on Exhibit A-1, whether or not such rights, titles and interests are listed on Exhibit A-1 (collectively, the “Leases”) and all tenements, hereditaments and appurtenances belonging to the Leases, and all pooled, communitized or unitized acreage therewith  (the “Units”) and;

(b) an undivided thirty percent (30%) of all of Seller’s right, title and interest in and to all oil, gas, water, CO2, injection, or other wells (but excluding the PDP Wells) located on the Leases or on pooled, communitized, or unitized acreage that includes all or any part of the Leases, whether currently being drilled, producing, non-producing, inactive, shut-in or otherwise (“Developmental Wells”), together with a like interest in all equipment, machinery, fixtures, facilities, gathering systems, pipelines, flow lines, tank batteries, materials and equipment inventory, abandoned property, junk and other tangible personal property, fixtures and improvements exclusively used or held for use in connection with the ownership or operation of the Developmental Wells, but excluding all or any part of the Central Facilities (the “Developmental Wells Equipment”);

(c) an undivided thirty percent (30%) of all of Seller’s right, title and interest in all surface fee interests, easements, permits, licenses, servitudes, rights-of-way, surface leases and other rights to use the surface appurtenant to, and used or held for use in connection with, the Wells, Central Facilities, Equipment, Leases and/or Units, including those listed on Exhibit C (the “Surface Contracts”);

(d) an undivided thirty percent (30%) of all of Seller’s right, title and interest in and to the equipment and facilities used or held for use in connection with the Wells, Leases, and/or Units, including those described on Exhibit D, but excluding the Equipment (the “Central Facilities”,);

(e) all of Seller’s right, title and interest in and to the well bores described on Exhibit A-2, as such well bores exist on the date hereof, as described on Exhibit A-2 and/or reflected in the records of the Railroad Commission of Texas (the “PDP Wells”, and collectively, together with the Developmental Wells, the “Wells”), together with all of Seller’s right, title, and interest in all equipment, machinery, fixtures, facilities, gathering systems, pipelines, flow lines, tank batteries, materials and equipment inventory, abandoned property, junk and other tangible personal property, fixtures and improvements exclusively used or held for use in connection with the ownership or operation of the PDP Wells, up to but excluding all or any part of the Central Facilities (the “PDP Wells Equipment” and together with the Developmental Wells Equipment, collectively the “Equipment”, and the Leases, Units, Wells, Equipment, Surface Contracts and Central Facilities, collectively, the “Oil and Gas Properties”);

(f) to the extent pertaining to the Oil and Gas Properties, an undivided interest equal to the ownership interest in the respective Oil and Gas Properties in all contracts, agreements and instruments existing as of the Closing Date by which the Oil and Gas Properties

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are bound, subject or that relate to or are otherwise applicable with respect to the Oil and Gas Properties, including operating agreements, unitization, pooling, and communitization agreements, declarations and orders, area of mutual interest agreements, joint venture agreements, farm in and farm out agreements, exploration agreements, participation agreements, marketing agreements, exchange agreements, transportation agreements, gathering agreements, agreements for the sale and purchase of Hydrocarbons, processing and treating agreements, including the contracts, agreements and instruments listed on Schedule 5.8, but provided the term “Contracts” does not include the Leases and the Surface Contracts (the foregoing, subject to such exclusions, the “Contracts”);

(g) all Hydrocarbons produced from or attributable to the Oil and Gas Properties after the Effective Time; all oil, condensate and scrubber liquids inventories and ethane, propane, iso-butane, normal butane and gasoline inventories from the Oil and Gas Properties in storage as of the Effective Time (including pipeline inventories and linefill); all Imbalances as of the Effective Time, together with all proceeds of any thereof; and all make-up rights attributable to the period of time from and after the Effective Time with respect to take-or-pay arrangements;

(h) copies of the data and records of Seller (including lease files; land files; well files; gas and oil sales contract files; gas processing files; division order files; abstracts; title opinions; land surveys; logs; maps; engineering data and reports; geological and geophysical data and files; reserve reports; technical evaluations and technical outputs; and other books, records, data, files and accounting records) to the extent relating to the Oil and Gas Properties or the other Assets, excluding:

(1) originals of the data and records described in the foregoing clause (h);

(2) all corporate, financial, Tax and legal data and records of Seller that relate to Seller’s business generally;

(3) any data and records to the extent disclosure or transfer is prohibited, or subjected to payment of a fee or other consideration, by any license agreement or other agreement with a Person other than Affiliates of Seller, or by applicable Law, and for which no consent to transfer has been received or for which Buyer has not agreed in writing to pay the fee or other consideration, as applicable;

(4) all legal records and legal files of Seller, including, but not limited to, all work product of, and attorney-client communications with, Seller’s legal counsel (other than Leases, Surface Contracts, title opinions, Contracts);

(5) any data and records relating to the sale of the Assets, including bids received from and records of negotiations with Non-Parties;

(6) any data and records constituting or relating solely to the Excluded Assets;

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(7) to the extent not assignable without the payment of fees or other penalties to Persons other than Affiliates of Seller or the securing of a licensor’s consent, unless Buyer has agreed in writing to pay the same or such consent has been secured, all seismic, geological, geochemical or geophysical data licensed by Seller and interpretations of such data; and

(8) employee information, internal valuation data, business plans, business studies, and transaction proposals pertaining to the sale of the Assets and related correspondence.

(The data and records referred to in Clauses (1) through (8) shall hereinafter be referred to as the “Excluded Records” and, subject to such exclusions, the data and records described in this Clause (h) shall be referred to as the “Records”);

(i) to the extent pertaining to the Oil and Gas Properties, an undivided interest equal to the ownership interest in the respective Oil and Gas Properties in the Marketing Agreements described on Exhibit A-3;  

(j) to the extent pertaining to the Oil and Gas Properties, an undivided interest equal to the ownership interest in the respective Oil and Gas Properties in (A) trade credits, accounts receivable, notes receivable, take-or-pay amounts receivable, and other receivables and general intangibles, attributable to the Assets with respect to periods of time from and after the Effective Time; (B) liens and security interests in favor of Seller, whether choate or inchoate, under any Law or Contract to the extent arising from, or relating to, the ownership, operation, or sale or other disposition on or after the Effective Time of any of the Assets or to the extent arising in favor of Seller as the operator or non-operator of any Oil and Gas Property; and (C) indemnity, contribution, and other such rights in favor of Seller or its Affiliates, to the extent relating to obligations or liabilities assumed by Buyer pursuant to this Agreement or otherwise borne or paid by Buyer or with respect to which Buyer has an obligation to indemnify Seller;

(k) all rights of Seller to audit the records of any Person and to receive refunds or payments of any nature, and all amounts of money relating thereto, whether before, on, or after the Effective Time, to the extent relating to the obligations assumed by Buyer pursuant to this Agreement or with respect to which Buyer has an obligation to indemnify Seller; and

(l) to the extent assignable, an undivided interest equal to the ownership interest in the respective Oil and Gas Properties in all franchises, licenses, permits, approvals, consents, certificates and other authorizations, and other rights granted by third Persons, and all certificates of convenience or necessity, immunities, privileges, grants, and other such rights that relate to, or arise from, the Oil and Gas Properties or the ownership or operation thereof.

“Assignment” means a document in the form of Exhibit E.

“Assumed Liabilities” has the meaning set forth in Section 2.8.

“Base Purchase Price” has the meaning set forth in Section 2.2.

4

“Business Day” means a Day other than Saturday, Sunday or any other Day when federally chartered banks in the United States are required to be closed.

“Buyer” has the meaning set forth in the introductory paragraph.

“Buyer Group” means Buyer and its Affiliates together with its and their members, partners, officers, directors, agents, representatives, consultants and employees.

“Casualty Loss” means any loss, damage or reduction in value of the Assets that occurs as a result of acts of God, fire, explosion, earthquake, windstorm, flood or other casualty, but excluding any loss, damage or reduction in value as a result of depreciation, ordinary wear and tear and any change in condition of the Assets for production of Hydrocarbons through normal depletion (including the watering-out of any well, collapsed casing or sand infiltration of any well).

“Central Facilities” has the meaning set forth in clause (d) of the definition of Assets.

“Certificate of Non-Foreign Status” means a certificate in the form of Exhibit F.

“Claims” means any and all written claims, demands, suits, causes of action, losses, damages, liabilities, fines, penalties, fees, expenses and costs (including reasonable attorneys’ fees and costs of litigation).

“Close” or “Closing” means the consummation of the sale of the Assets from Seller to Buyer, including execution and delivery of all documents and other legal consideration as provided for in this Agreement pursuant to Article 8.

“Closing Date” has the meaning set forth in Section 8.1.

“Code” means the Internal Revenue Code of 1986, as amended.

“Condemnation” means the condemnation, exercise of the right of eminent domain, or other taking by a Governmental Authority or other Person.

“Confidentiality Agreement” means that certain Confidentiality Agreement dated August 28, 2013 between Seller and Memorial Resource Development LLC.

“Consent Agreement” has the meaning set forth in Section 7.2.

“Contracts” has the meaning set forth in clause (f) of the definition of Assets.

“Customary Post-Closing Consents” means consents and approvals from Governmental Authorities that are customarily obtained after Closing in connection with a transaction similar to the one contemplated by this Agreement.

“Day” means a calendar day consisting of 24 hours from midnight to midnight.

5

“Developmental Wells” has the meaning set forth in clause (b) of the definition of Assets.

“Developmental Wells Equipment” has the meaning set forth in clause (b) of the definition of Assets.

“Dollars” means United States Dollars.

“E&P Business” means the business and operations conducted with the Assets.

“Effective Time” means 12:01 a.m., Central Time, on January 1, 2014.

“Environmental Condition” shall mean (a) a condition existing prior to, at or after the Closing Date with respect to the air, soil, subsurface, surface waters, ground waters and/or sediments that causes any Asset to not be in compliance with any Environmental Laws, Lease, Surface Contract, or Contract, or (b) any environmental pollution, contamination, degradation, or damage to property such that remedial or corrective action is presently (or if known, would be presently) necessary to resolve liability existing under Environmental Laws or any Lease, Surface Contract, or Contract, excluding any Excluded Environmental Condition.

 “Environmental Laws” means any and all Laws relating to the prevention of pollution, the preservation and restoration of environmental quality, the protection of human health, wildlife or environmentally sensitive areas, the remediation of contamination, the generation, handling, treatment, storage, transportation, disposal or release into the environment of waste materials, or the regulation of or exposure to hazardous, toxic or other substances alleged to be harmful.  Environmental Laws include all applicable judicial and administrative Orders, consent decrees or directives issued by a Governmental Authority pursuant to the foregoing.  Unless expressly included in and required by applicable requirements of statutes, regulations, judicial and administrative Orders, consent decrees or directives issued by a Governmental Authority included in Environmental Laws, Environmental Laws do not include good or desirable operating practices or standards that may be employed or adopted by other oil or gas well or pipeline operators or recommended but not required by a Governmental Authority.  Environmental Laws do not include any laws, orders, rules, and regulations of the Railroad Commission of Texas relating to spacing, density, setbacks, specifications or grades for equipment or materials (including drilling mud or fluid), well integrity or construction, the prevention of physical or economic waste, or the protection of correlative rights in Hydrocarbons, and, in each case, any cause of action or other rights in favor of third Persons arising therefrom or relation thereto, but do include laws, order, rules, and regulations Railroad Commission of Texas regarding contamination and cleanup thereof. Furthermore, Environmental Laws do not include the Occupational Safety and Health Act or any other Law governing worker safety or workplace conditions.

“Equipment” has the meaning given to such term in clause (b) of the definition of Assets.

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

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“ERISA Affiliate” means each trade or business (whether or not incorporated) that together with the Seller has ever been deemed to be a “single employer” within the meaning of Section 4001 of ERISA or Section 414 of the Code.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excise Taxes” has the meaning set forth in Section 9.2.

“Excluded Assets” means (a) the Retained Interests, (b) those assets, interests, rights and contracts described on Exhibit B, (c) any Consent Agreements excluded from the Assets pursuant to Section 7.2,  or (d) other Assets excluded pursuant to the terms hereof.  

“Excluded Environmental Conditions” means any conditions or Claims arising out of or relating to the presence of naturally occurring radioactive material, but only with respect to Equipment currently being utilized in operations, asbestos, mercury or drilling fluids and chemicals in quantities typical for oilfield operations in Karnes County, Texas, to the extent arising from operations conducted in accordance with applicable Law.

“Excluded Records” has the meaning set forth in clause (h) of the definition of Assets.

“Final Settlement Statement” has the meaning set forth in Section 2.5.

“Financial Statements” has the meaning set forth in Section 7.6.

“Governmental Authority” means any federal, state, local, municipal or other government; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; and any court or governmental tribunal having jurisdiction.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“Hazardous Materials” shall mean any substance or material that is, or if released or disposed of would be, designated, classified, characterized or regulated as a “hazardous substance”, “hazardous waste”, “hazardous material”, “toxic substance”, “pollutant” or “contaminant” under Environmental Laws.

“Hedges” means any swap, collar, floor, cap, option or other Contract that is intended to eliminate or reduce the risk of fluctuations in the price of Hydrocarbons.

“Hydrocarbons” means oil, gas, natural gas liquids, casinghead gas, coal bed methane, condensate and other gaseous and liquid hydrocarbons or any combination thereof.

“Imbalance” means over-production or under-production or over-deliveries or under-deliveries on account of (a) any imbalance at the wellhead between the amount of Hydrocarbons produced from a Well and allocable to the interests of Seller being assigned

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hereunder and the amount of production from the relevant Well that are actually taken by or delivered to or for the account of such assigned interest of Seller and (b) any marketing imbalance between the quantity of Hydrocarbons constituting part of the Assets and required to be delivered on behalf of or to or for the account of Seller under any Contracts relating to the purchase and sale, gathering, transportation, storage, treating, processing, or marketing of Hydrocarbons and the quantity of Hydrocarbons actually delivered on behalf of or to or for the account of Seller pursuant to the applicable Contracts.

“Indemnity Claim” has the meaning set forth in Section 3.6.

“Indemnity Claim Notice” has the meaning set forth in Section 3.6.

“Indemnity Deductible Amount” means an amount equal to 1.5% of the Base  Purchase Price.

“Indemnity Obligations” mean the obligations of a Party to RELEASE, DEFEND, INDEMNIFY and HOLD HARMLESS the other Party from and against specified Claims as provided in this Agreement.

“Individual Indemnity Threshold” has the meaning set forth in Section 3.4(a)(ii).

“Knowledge” means (a) with respect to Seller, the actual knowledge of the individuals set forth on Schedule 1.1-A after due inquiry by such individuals of Seller’s employees and officers, and (b) with respect to Buyer, the actual knowledge of the individuals set forth on Schedule 1.1-B after due inquiry by such individuals of Buyer’s employees and officers.

“Laws” means any and all laws, statutes, ordinances, permits, decrees, writs, injunctions, Orders, codes, judgments, rules or regulations (including Environmental Laws) that are promulgated, issued or enacted by a Governmental Authority having jurisdiction.

“Leases” has the meaning set forth in clause (a) of the definition of Assets.

“Legal Proceedings” means any and all proceedings, suits and causes of action by or before any Governmental Authority and all arbitration proceedings.

“Marketing Agreements” means the agreements described on Exhibit A-3.

“Material Adverse Effect” means a change, event, circumstance, development, state of facts or condition that results, or would reasonably be expected to result, in a material adverse effect on the Assets (as currently owned and operated) or the results of operations of Seller with respect to the Wells and Leases, individually or taken as a whole; provided, any actual change or changes in reserves (including any reclassification or recalculation of reserves in the ordinary course of business, consistent with past practice) or in the prices of Hydrocarbons; natural declines in well performances; general business, economic or political conditions; casualty events; local, regional, national or international industry conditions (including changes in applicable Laws and changes in financial or market conditions); changes or reinterpretations in U.S. generally accepted accounting principles or Law; any change

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resulting from the taking of any action required by, or through failure to take any action prohibited by this Agreement; changes as a result of the negotiation, announcement, execution or performance of this Agreement; actions taken or omitted to be taken by or at the request of Buyer; or Orders, actions or inactions of any Governmental Authority, shall be deemed not to constitute a Material Adverse Effect.

“Material Contracts” has the meaning set forth in Section 5.8.

“MCF” means thousand cubic feet.

“Net Profits Interest” means that certain net profits overriding royalty interest defined on Annex 1 to the Assignment.

“Net Revenue Interest” means the interest (expressed as a percentage or decimal fraction) in and to the Hydrocarbons produced from or allocated to a Well or a Lease.

“Non-Party” means any Person other than the Parties or their respective Affiliates.

“Oil and Gas Properties” has the meaning set forth in clause (e) of the definition of Assets.

“Operating Expenses” shall mean Seller’s obligation for any expenses (including, without limitation, lease operating expense, drilling and completion costs, plugging and abandonment costs, surface restoration and remediation costs, seismic costs, workover costs, capital expenditures, joint interest billings and overhead charges) to the extent chargeable under applicable operating agreements which relate to the Assets.

“Operative Documents” means those documents referenced in Section 8.2 and 8.3.

“Order” means any order, judgment, injunction, non-appealable final order, ruling or decree of any court or other Governmental Authority.

“Party” or “Parties” has the meaning set forth in the introductory paragraph.

“PDP Wells” has the meaning set forth in clause (e) of the definition of Assets.

“PDP Wells Equipment” has the meaning set forth in clause (e) of the definition of Assets.

“Permitted Encumbrances” means with respect to any Asset any and all of the following:

(a) consents to assignment and similar contractual provisions affecting such Asset including Customary Post-Closing Consents to the extent waivers or consents are obtained from the appropriate Person prior to the Closing Date;

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(m) preferential rights to purchase and similar contractual provisions affecting such Asset insofar as the same have been waived or complied with in accordance with the terms thereof;

(n) required notices to and filings with a Governmental Authority in connection with the consummation of the transaction contemplated by this Agreement;

(o) rights reserved to or vested in a Governmental Authority having jurisdiction to control or regulate such Asset in any manner whatsoever and all Laws of such Governmental Authorities, provided that the foregoing does not reduce the Net Revenue Interest or increase the Working Interest of any Well or reduce the Net Mineral Acres or Net Revenue Interest of any Lease;

(p) easements, rights-of-way, permits, licenses, servitudes, surface leases, sub-surface leases, equipment, pipelines, utility lines and structures on, over or through such Asset that do not (i) materially detract from the value of or materially affect or impair the ownership, use or operation of such Asset or (ii) reduce the Net Revenue Interest or increase the Working Interest of any Well or reduce the Net Mineral Acres or Net Revenue Interest of any Lease;

(q) liens for Taxes or assessments not yet delinquent or, if delinquent, are being contested in good faith in the normal course of business, the responsibility for which is retained by Assignor;

(r) any (i) undetermined or inchoate liens or charges constituting or securing the payment of expenses that were incurred incidental to maintenance, development, production or operation of such Asset or for the purpose of developing, producing or processing Hydrocarbons therefrom or therein, and (ii) materialman’s, mechanics’, repairmen’s, employees’, contractors’ or other similar liens or charges relating to obligations not yet delinquent or, if delinquent, that are, being contested in good faith in the normal course of business, the responsibility for which is retained by Assignor;

(s) conventional rights of reassignment upon final intention to abandon or release an Asset;

(t) any liens or security interests created by Law or reserved in oil and gas leases for royalty, bonus or rental, or created to secure compliance with the terms of the agreements, instruments and documents or records that create or reserve such Asset;

(u) any obligations or duties affecting such Asset to any Governmental Authority with respect to any franchise, grant, license or permit of record or contained in the Records;

(v) liens of operators relating to obligations not yet delinquent or, if delinquent, that are being contested in good faith in the normal course of business;

(w) rights of a common owner of an interest in rights-of-way, permits or easements held by Assignor and such owner as tenant in common or through common ownership;

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(x) zoning and planning ordinances and municipal regulations; and

(y) the terms and conditions of the Assignment.

“Person” means an individual, group, partnership, corporation, limited liability company, trust or other entity.

“Preferential Right” has the meaning set forth in Section 5.10.

“Prime Rate” means the rate of interest published and updated from time to time by the Wall Street Journal as the “prime” rate.

“Property Taxes” has the meaning set forth in Section 9.2.

“Purchase Price Allocation” has the meaning set forth in Section 2.6(b).

“Records” has the meaning set forth in clause (h) of the definition of Assets.

“Retained Interests” means all right, title and interest of Seller in and to the oil and gas leases, wells and other assets described herein which are not conveyed by Seller to Buyer pursuant to this Agreement, including the Net Profits Interest reserved in the Assignment.

 “Retained Liabilities” means the following obligations:

(a) any and all obligations or liabilities owed to Non-Parties or Claims by Non-Parties in any way relating to the ownership and/or operation of the Assets arising during, related to or otherwise attributable to the period prior to the Effective Time, excluding Excluded Environmental Conditions and any obligation to plug, replug and abandon the Wells;

(b) all obligations and amounts owed to any employees of Seller relating to the employment of such individuals by Seller or the termination of employment of such individuals by Seller;

(c) all obligations and liabilities owed to any employees of Seller arising under any employee benefit or welfare plan maintained by Seller;

(z) all Claims asserted by any employee of Seller for bodily injury or death;

(aa) all Claims asserted by any Non-Parties for bodily injury to or death of such  Non-Parties or damage to property owned by such Non-Parties to the extent resulting or arising from, or attributable to, the use, ownership or operation of the Assets and attributable to periods prior to the Closing Date;

(bb) all Hedges of Seller;

(cc) the disposal or transportation of any Hazardous Material to any location not on the Assets or lands pooled or unitized therewith to the extent resulting or arising from, or attributable to, the use, ownership or operation of the Assets and attributable to periods prior to the Closing Date;

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(dd) the responsibility for the disposition of and the liabilities and obligations with respect to the Legal Proceedings described on Schedule 5.5;

(ee) all Claims relating to any Taxes imposed on or with respect to Seller or any of its Affiliates other than Taxes allocated to Buyer pursuant to Sections 9.2,  9.3 and 9.4; and

(ff) any and all obligations, liabilities and Claims relating to the Excluded Assets.

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Seller” has the meaning set forth in the introductory paragraph.

“Seller Group” means Seller and its Affiliates, together with its and their members, partners, officers, directors, agents, representatives, consultants and employees.

“Specified Representations and Warranties” means the representations and warranties of Seller set forth in Sections 5.1,  5.2,  5.3,  5.4,  5.6 and 5.7.

“Surface Contracts” has the meaning set forth in clause (c) of the definition of Assets.

“Suspended Funds” means those proceeds from the sale of Hydrocarbons attributable to the Assets and payable to owners of working interests, royalties, overriding royalties and other similar interests that are held by Seller in suspense as of the Closing Date including royalty proceeds held in suspense.

“Tax” or “Taxes” means any taxes, assessments, fees and other governmental charges imposed by any Taxing Authority, including without limitation income, profits, gross receipts, net proceeds, alternative or add-on minimum, ad valorem, value added, turnover, sales, use, property, personal property (tangible and intangible), environmental, stamp, leasing, lease, user, excise, duty, franchise, capital stock, transfer, registration, license, withholding, social security (or similar), unemployment, disability, payroll, employment, fuel, excess profits, occupational, premium, windfall profit, severance, estimated, or other charge of any kind whatsoever, including any interest, penalty, or addition thereto, and including any liability for any of the foregoing items that arises by reason of transferee or successor liability.

“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto.

“Taxing Authority” means, with respect to any Tax, the Governmental Authority or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision, including any governmental or quasi-governmental entity or agency that imposes, or is charged with collecting, social security or similar charges or premiums.

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“Transfer Taxes” has the meaning set forth in Section 9.4.  

“Treasury” means the United States Department of the Treasury.

“Units” has the meaning set forth in clause (a) of the definition of Assets.

“Wells” has the meaning given to such term in clause (e) of the definition of Assets.

“Working Interest” means the percentage of costs and expenses associated with the exploration, drilling, development, operation and abandonment of any Well required to be borne with respect thereto.

Article 2
SALE OF ASSETS/PURCHASE PRICE

         2.1     Purchase and Sale of Assets.  Subject to and in accordance with the terms and conditions of this Agreement, Seller agrees to sell and assign to Buyer, and Buyer agrees to purchase and acquire from Seller the Assets, effective as of the Effective Time.

         2.2      Purchase Price.  The total purchase price, subject to adjustment in accordance with the terms of this Agreement, to be paid to Seller by Buyer for the Assets is ONE HUNDRED SEVENTY-THREE MILLION Dollars ($173,000,000) (the “Base Purchase Price”).  The Base Purchase Price shall be adjusted as set forth in Section 2.4 (as so adjusted, the “Adjusted Purchase Price”) post-Closing in accordance with Section 2.5. 

         2.3     Receipts and Credits.

(a) Allocation of Income and Costs. 

(i) Buyer (A) shall be entitled to all revenues, production, proceeds, income, and products from or attributable to the Assets from and after the Effective Time, and to all other income, proceeds, receipts, and credits earned (including delay rentals, shut-in royalties, and lease bonuses) with respect to the Assets from and after the Effective Time, and (B) shall be responsible for (and entitled to any refunds and indemnities with respect to) all Operating Expenses incurred from and after the Effective Time; and

(ii) Seller (A) shall be entitled to all revenues, production, proceeds, income, and products from or attributable to the Assets prior to the Effective Time, and to all other income, proceeds, receipts, and credits earned (including delay rentals, shut-in royalties, and lease bonuses) with respect to the Assets prior to the Effective Time, and (B) shall be responsible for (and entitled to any refunds and indemnities with respect to) all Operating Expenses incurred prior to the Effective Time.

(iii) Seller (A) shall be entitled to all revenues, production, proceeds, income, and products from or attributable to the Retained Interests, and to all

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other income, proceeds, receipts, and credits earned (including delay rentals, shut-in royalties, and lease bonuses) with respect to the Retained Interests before, on and after the Effective Time, and (B) shall be responsible for (and entitled to any refunds and indemnities with respect to) all Operating Expenses with respect to the Retained Interests incurred before, on and after the Effective Time.

(b) Determinations.  The terms “earned” and “incurred,” as used in this Agreement, shall be interpreted in accordance with generally accepted accounting principles in the United States and the standards established by the Council of Petroleum Accountants Societies, Inc.  For purposes of this Section 2.3, determination of whether Operating Expenses are attributable to the period before or after the Effective Time shall be based on when services are rendered, when the goods are delivered, or when the work is performed.  For clarification, the date an item or work is ordered is not the date of such transaction for interpretive purposes, but rather the date on which the item ordered is delivered to the job site, or the date on which the work ordered is performed, shall be the relevant date.  For purposes of allocating Hydrocarbon production, revenues, proceeds, income, accounts receivable, and products under this Section 2.3:

(i) liquid Hydrocarbons shall be deemed to be “from or attributable to” the Oil and Gas Properties when they pass through the pipeline connecting into the storage facilities into which they are run, or, if there is no such facility, the applicable lease automatic custody transfer meters through which they are run; and

(ii) gaseous Hydrocarbons shall be deemed to be “from or attributable to” the Oil and Gas Properties when they pass through the delivery point sales meters on the pipelines through which they are transported.

(c) Allocation of Taxes.  Taxes, right-of-way fees, insurance premiums and other Operating Expenses that are paid periodically shall be prorated based on the number of days in the applicable period falling before, and the number of days in the applicable period falling at or after, the Effective Time, except that Hydrocarbon production, severance and similar Taxes shall be prorated based on the number of units actually produced, purchased or sold or proceeds of sale, as applicable, before, and at or after, the Effective Time.

(d) Imbalances.  If as of the Effective Time there exists (i) an Imbalance owing to Seller with respect to the incremental interest in any PDP Well that Buyer is entitled to as of such time, as more particularly described in the definition of PDP Wells, then Buyer shall pay to Seller the value of such Imbalance as of such time, with the value to be based on the then current sales price being received on such date under the applicable Marketing Contract for such Hydrocarbons, and (ii) an Imbalance owed by Seller with respect to the incremental interest in any PDP Well that Buyer is entitled to as of such time, as more particularly described in the definition of PDP Wells, then Seller shall pay to Buyer the value of such Imbalance as of such time, with the value to be based on the then current sales price being received on such date under the applicable Marketing Contract for such Hydrocarbons.

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(e) Payments.  Except to the extent the Base Purchase Price is adjusted in respect of such amount as provided in Section 2.4, if Buyer or Seller receives any amount to which the other is entitled pursuant to this Section 2.3, such receiving Party will account for and transmit such amount to the other as provided under Section 2.5.  If Buyer or Seller pays any amount for which the other is obligated pursuant to this Section 2.3, such paying Party will notify the other Party, and such other Party shall account to the other Party as provided under Section 2.5.

         2.4     Purchase Price Adjustments.The Base Purchase Price shall be adjusted, without duplication, as follows:

(f) Upward by the sum of the following:

(i) an amount equal to the value of all saleable oil, condensate and scrubber liquids inventories and ethane, propane, iso-butane, nor-butane, and gasoline inventories produced from the Wells in storage as of the Effective Time (excluding pipeline inventories and linefill), with the value to be based on the then current sales price being received on such date under the applicable Marketing Contract for such Hydrocarbons, less amounts payable therefrom as royalties, overriding royalties and other burdens upon, measured by or payable in respect of such Hydrocarbons;

(ii) an amount equal to all Operating Expenses paid by Seller that are attributable to the Assets from and after the Effective Time, whether paid before or after the Effective Time, including, without duplication of any other amounts set forth in this Section 2.4(a);

(iii) without duplication of any other amounts set forth in this Section 2.4(a), the amount of all Taxes, if any, allocated to Buyer pursuant to Article 9 but paid by Seller;

(iv) an amount equal to the value of Imbalances owing to Seller as of the Effective Time, with the value to be based on the then current sales price being received on such date under the applicable Marketing Contract for such Hydrocarbons; and

(v) except as expressly provided otherwise herein, any other amount provided for elsewhere in this Agreement or otherwise agreed in writing by the Parties. 

(g) Downward by the sum of the following:

(i) an amount equal to all proceeds received by Seller for the sale of the Hydrocarbons produced from the Wells from and after the Effective Time less amounts actually paid by Seller as royalties, overriding royalties and other burdens measured by or payable out of such production, and less severance taxes actually paid by Seller applicable to such production, except as otherwise accounted for pursuant to Section 2.4(a)(i);  

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(ii) without duplication of any other amounts set forth in this Section 2.4(b), the amount of all Taxes, if any, allocated to Seller pursuant to Article 9 but paid by Buyer;

(iii) an amount equal to the value of Imbalances owed by Seller as of the Effective Time, with the value to be based on the then current sales price being received on such date under the applicable Marketing Contract for such Hydrocarbons; 

(iv) the Allocated Values of the Consent Agreements being retained by Seller pursuant to Sections 7.2,  

(v) an amount equal to the Suspended Funds; and

(vi) except as expressly provided otherwise herein, any other amount provided for elsewhere in this Agreement or otherwise agreed in writing by the Parties. 

(h) To the extent applicable, the Adjustments pursuant to this Section 2.4 shall be determined in accordance with generally accepted accounting principles in the United States.

2.5Final Settlement Statement.No later than 120 Days after the Closing Date Seller will deliver to Buyer the final settlement statement (the “Final Settlement Statement”) setting forth the actual amounts of Adjustments and the resulting Adjusted Purchase Price, together with associated back-up documentation.  As soon as reasonably practicable, but in no event later than 30 Days after Buyer receives the Final Settlement Statement, Buyer may deliver to Seller a written report containing any changes that Buyer proposes to be made to such statement.  If Buyer fails to timely deliver the written report to Seller containing changes Buyer proposes to be made to the Final Settlement Statement, the statement as delivered by Seller will be deemed to be correct and will be final and binding on the Parties and not subject to further audit or arbitration.  As soon as reasonably practicable, but in no event later than 15 Days after Seller receives Buyer’s written report, the Parties shall meet and undertake to agree on the final adjustments to the Final Settlement Statement.  If the Parties fail to agree on the final adjustments within such 15-Day period, either Party may submit the disputed items to the Accounting Referee for resolution.  The Parties shall direct the Accounting Referee to resolve the disputes within 20 Days after having the relevant materials submitted for review.  The decision of the Accounting Referee will be binding on and non-appealable by the Parties.  The fees and expenses associated with the Accounting Referee will be borne equally by the Parties.  Any amounts owed by one Party to the other as a result of the Final Settlement Statement, together with interest on such amount from (and including) the Closing Date to (and excluding) the date of payment at the Prime Rate, will be paid within 5 Business Days after the date when the amounts are agreed upon by the Parties or the Parties receive a decision of the Accounting Referee, and the Adjustments included in the Final Settlement Statement will be final and binding between the Parties and not subject to further audit or arbitration.

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2.6     Allocated Values.

(i) Seller and Buyer agree that for the purpose of making the requisite filings under Section 1060 of the Code and the Treasury regulations thereunder, the Base Purchase Price and any liabilities assumed by Buyer under this Agreement shall be allocated among the Assets, as mutually agreed to by the Parties within thirty (30) days of Closing (the “Purchase Price Allocation”).  Seller and Buyer each agree to report, and to cause their respective Affiliates to report, the federal, state and local income Tax consequences of the transactions contemplated herein, and in particular to report the information required by Section 1060(b) of the Code, and to jointly prepare (provided, Seller shall prepare and deliver the first draft) Form 8594 (Asset Acquisition Statement under Section 1060) consistent with the Purchase Price Allocation as revised to take into account subsequent adjustments to the Base Purchase Price, including any adjustments pursuant to Section 2.4, and shall not take any position inconsistent therewith upon examination of any Tax return, in any refund claim, in any litigation, investigation or otherwise, unless required to do so by applicable Law after notice to and discussions with the other Party, or with such other Party’s prior consent.

2.7Suspended Funds.If Seller is holding any Suspended Funds as of the Closing Date, then (a) in lieu of Seller transferring these funds to Buyer at Closing, Seller shall retain the Suspended Funds held in its accounts and the Base Purchase Price shall be adjusted downward in accordance with Section 2.4(b)(v), and (b) from and after Closing, Buyer shall be responsible for the proper payment and distribution of the Suspended Funds to the Non-Parties entitled to receive the Suspended Funds (including with respect to escheat obligations).

         2.8     Assumed Liabilities.Upon Closing, Buyer assumes and hereby agrees to fulfill, perform, be bound by, pay and discharge (or cause to be fulfilled, performed, paid or discharged) all obligations and liabilities of any kind whatsoever of Seller arising from or relating to the Assets that are attributable to periods on or after the Effective Time, including Excluded Environmental Conditions (the “Assumed Liabilities”); provided, Buyer does not assume (and Assumed Liabilities shall not include): (i) the Retained Liabilities, (ii) any obligations or liabilities of Seller to the extent that they are attributable to or arise out of the ownership, use or operation of the Excluded Assets, or (iii) any other Claims for which Seller is required to indemnify Buyer pursuant to Article 3.

Article 3
ALLOCATION OF RESPONSIBILITIES AND INDEMNITIES

         3.1     Opportunity for Review.Each Party represents that it has had an adequate opportunity to review the release and indemnity provisions in this Agreement, including the opportunity to submit the same to legal counsel for review and comment.  Based upon the foregoing representation, the Parties agree to the provisions set forth below.

         3.2      Seller’s Indemnity Obligation.Effective from and after the Closing Date Seller shall DEFEND, INDEMNIFY and HOLD HARMLESS Buyer Group from and against any and all Claims arising out of, resulting from, or relating to:

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(a) any breach by Seller of Seller’s representations or warranties set forth in Article 5 of this Agreement;

(b) any breach by Seller of Seller’s covenants set forth in this Agreement;

(c) the ownership or operation of the Excluded Assets; and

(d) the Retained Liabilities.

        3.3     Buyer’s Indemnity Obligation.From and after the Closing Date, Buyer shall RELEASE, DEFEND, INDEMNIFY and HOLD HARMLESS Seller Group from and against any and all Claims arising out of, resulting from, or relating to:

(e) any breach by Buyer of Buyer’s representations or warranties set forth in Article 6 of this Agreement;

(f) any breach by Buyer of Buyer’s covenants set forth in this Agreement; and

(g) the Assumed Liabilities.

        3.4     Claim Periods, Deductible, Threshold, Cap and Materiality Exclusion.

(h) Notwithstanding anything to the contrary, Seller shall have no obligation or liability under Section 3.2(a) for:

(i) any Claim asserted against Seller hereunder, if Buyer has not provided Seller with an Indemnity Claim Notice within 12 months after the Closing Date with respect to such Claim;

(ii) any Claim asserted against Seller hereunder, if such Claim has a value of $50,000 or less (the “Individual Indemnity Threshold”) (and these types of Claims shall not be counted in determining the Indemnity Deductible Amount);

(iii) any Claim asserted against Seller hereunder to the extent the aggregate of all Claims by Buyer does not exceed the Indemnity Deductible Amount, after which point the Buyer Group shall be entitled to defense and indemnification only to the incremental extent of the value of any Claims in excess of the Indemnity Deductible Amount; and

(iv) any Claims that in the aggregate exceed 20% of the Base Purchase Price;

provided, the limitations above in Section 3.4(a) shall not apply to any Claim for breach of any of the Specified Representations and Warranties which must be asserted within the applicable statute of limitations and Seller’s Indemnity Obligations with respect thereto shall survive for a like amount of time.

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(i) Any Claim for breach of any covenant or similar obligation of Seller must be asserted within the applicable statute of limitations and Seller’s Indemnity Obligations with respect thereto shall survive for a like amount of time.

(j) Any Claim for breach of any covenant or similar obligation of Buyer must be asserted within the applicable statute of limitations and Buyer’s Indemnity Obligations with respect thereto shall survive for a like amount of time.

(k) The period within which Buyer may make Claims against Seller under the provisions of Section 3.2(c) shall remain open forever, and Seller’s Indemnity Obligations under Section 3.2(c) shall survive forever.

(l) The period within which Buyer may make Claims against Seller under the provisions of Section 3.2(d) with respect to the Retained Liability described in item (a) of the definition of Retained Liabilities shall remain open for a period of 4 years following the Closing, and Seller’s Indemnity Obligations under Section 3.2(d) with respect to the Retained Liability described in item (a) of the definition of Retained Liabilities shall survive with respect to such Claims made prior to 4 years following the Closing.

(m) Except as provided in Section 3.4(e), the period within which Buyer may make Claims against Seller under the provisions of Section 3.2(d) shall remain open forever, and Seller’s Indemnity Obligations under Section 3.2(d) shall survive forever.

(n) The period within which Seller may make Claims against Buyer under the provisions of Section 3.3(c)shall remain open for a period of 4 years following the Closing, and Buyer’s Indemnity Obligations under Section 3.3(c)shall survive with respect to such Claims made prior to 4 years following the Closing.

(o) The Parties shall treat, for Tax purposes, any amounts paid under this Article 4 as an adjustment to the Adjusted Purchase Price.

        3.5     Materiality Qualifiers.Notwithstanding anything to the contrary contained in this Article 3, for the purposes of the indemnification obligations of the Parties pursuant to this Article 3, all of the representations and warranties set forth in this Agreement or any certificate or schedule related hereto shall be read without giving effect to any materiality, Material Adverse Effect or qualification with a similar meaning contained or incorporated directly or indirectly in such representation or warranty for purposes of determining whether a breach of any such representation or warranty has occurred and the amount of the Claims resulting from, arising out of, or relating to any such breach of representation or warranty.

        3.6     Notice of Claims.If a Claim is asserted against a Person for which a Party may have Indemnity Obligations under this Agreement (an “Indemnity Claim”), the indemnified Person shall give the indemnifying Party written notice of the underlying Claim setting forth the particulars associated with the underlying Claim (including a copy of the written underlying Claim, if any) as then known by the indemnified Person (“Indemnity Claim Notice”).  The indemnified Person shall, to the extent practicable, give an Indemnity Claim Notice within such time as will allow the indemnifying Party a reasonable period in which to evaluate and timely respond to the underlying Claim; provided failure to do so shall not affect an indemnified

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Person’s rights hereunder except for, and only to the extent of, any incremental increase in the cost of the Indemnity Claim resulting from the failure to give notice.

        3.7     Defense of Non-Party Claims.  Upon receipt of an Indemnity Claim Notice involving a Non-Party for which an indemnifying Party believes it may have an obligation of indemnity under this Agreement, the indemnifying Party shall, if it so elects in accordance with this Section 3.7 (without prejudice to its right to contest its obligation of indemnity under this Agreement), assume the defense of the Non-Party Claim with counsel selected by the indemnifying Party, and the indemnified Person shall cooperate in all reasonable respects.  If any Non-Party Claim involves a fact pattern wherein each Party may have an obligation to indemnify the other Party, each Party may assume the defense of and hire counsel for that portion of the Non-Party Claim for which it may have an obligation of indemnity.  In all instances, the indemnified Person may employ separate counsel and participate in the defense of any Non-Party Claim; provided, if the indemnifying Party has assumed the defense of a Non-Party Claim pursuant to this Section 3.7 and has agreed to indemnify the indemnified Person, the fees and expenses of counsel employed by the indemnified Person shall be borne solely by the indemnified Person.  If the indemnifying Party elects by written notice to undertake the defense of the Non-Party Claim within 30 Days after receipt of the Indemnity Claim Notice, then (i) the indemnifying Party shall defend the indemnified Person against such Non-Party Claim, (ii) the indemnifying Party shall pay any judgment entered or settlement with respect to such Non-Party Claim, (iii) the indemnifying Party shall not consent to the entry of any judgment or enter into any settlement with respect to such Non-Party Claim that (A) does not include a provision whereby the plaintiff or claimant in the matter releases the indemnified Person from all liability with respect to such Non-Party Claim, or (B) would restrict such indemnified Person’s ability to conduct its business in the ordinary course, and (iv) the indemnified Person shall not consent to the entry of any judgment or enter into any settlement with respect to such Non-Party Claim without the indemnifying Party’s prior written consent.  If the indemnifying Party has not elected to undertake the defense of a Non-Party Claim, or if the indemnifying Party assumes the defense of a Non-Party Claim pursuant to this Section 3.7 but fails to diligently defend against the Non-Party Claim within 30 Days following any written notice from such indemnified Person asserting such failure, then the indemnified Person shall have the right to defend, at the sole cost and expense of the indemnifying Party (to the extent the indemnified Person is entitled to indemnification hereunder), the Non-Party Claim by all appropriate proceedings.  In such instances, the indemnified Person shall have full control of such defense and proceedings; provided, the indemnified Person shall not settle such Non-Party Claim without the written consent of the indemnifying Party; provided further, if the indemnifying Party fails to notify the indemnified Person in writing as to whether or not it consents to such settlement within 30 Days following its receipt of notice of such settlement from the indemnified Person, then such consent shall be deemed given.  The indemnifying Party may participate in, but not control, any defense or settlement controlled by an indemnified Person pursuant to this Section 3.7, and the indemnifying Party shall bear its own costs and expenses with respect to such participation.  Notwithstanding the other provisions of this Section 3.7, if the indemnifying Party disputes its potential liability to the indemnified Person under this Section 3.7 and if such dispute is resolved in favor of the indemnifying Party, the indemnifying Party shall not be required to bear the costs and expenses of the indemnified Person’s defense pursuant to this Section 3.7.

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        3.8     Investigation and Knowledge. The right to indemnification or other remedy based on the inaccuracy of or non-compliance with any representation or warranty in this Agreement shall not be enforceable to the extent the Party claiming indemnity or other remedy had Knowledge of such inaccuracy of or noncompliance prior to Closing.

        3.9     Waiver of Certain Damages.Each of the Parties expressly waives and releases, and shall cause its Affiliates to waive and release, special, punitive, remote, unforeseeable, speculative and exemplary damages with respect to any dispute arising under, related to, or in connection with this Agreement or any other agreement, contract or instrument contemplated herein or in connection with the transactions contemplated hereby.

        3.10    Extent of Indemnification.Without limiting the scope of the indemnification, disclaimer, release and assumption obligations set forth in this Agreement, to the fullest extent permitted by Law, an indemnified Person shall be entitled to indemnification hereunder in accordance with the terms hereof, regardless of whether the Claim or indemnifiable loss giving rise to any such Indemnity Obligation is the result of the sole, partial, active, passive, concurrent or comparative negligence, gross negligence, strict liability, other legal fault or responsibility, or violation of any Law of or by any such indemnified Person.

DISCLAIMER

        4.1     Disclaimer as to Representations and Warranties. Buyeracknowledges and agrees that, except as otherwise expressly provided in Article 5 and in the special warranty set forth in the Assignment, neither Seller nor any Affiliate of Seller has made or makes any representation or warranty, express, statutory, implied or otherwise with respect to the Assets and the transactions contemplated hereby and Buyer has not relied upon any other such representation, warranty, statement or information made or communicated to Buyer or any of its Affiliates, or its or their employees, agents, officers, representatives or advisors.  Except as otherwise expressly provided in Article 5 and in the special warranty set forth in the Assignment, Seller, for itself and its Affiliates, hereby expressly disclaims and negates any and all representations and warranties, express, statutory, implied or otherwise, and projections, forecasts, statements or information made, communicated or furnished (orally or in writing) to Buyer or any of its Affiliates or Representatives, associated with the Assets.

4.2     Non-reliance on Projections.  Except to the extent expressly set forth in Article 5 and the special warranty set forth in the Assignment, without limiting the generality of Section 4.1, Seller expressly disclaims, and Buyer acknowledges and agrees that it has not relied upon, any representation or warranty, statutory, express or implied, as to (i) title to any of the Assets, (ii) the contents, character or nature of any descriptive memorandum, or any report of any petroleum engineering consultant, or any geological or seismic data or interpretation, relating to the Assets, (iii) the quantity, quality or  recoverability of petroleum substances in or from the Assets, (iv) any estimates of the value of the Assets or future revenues generated by the Assets, (v) the production of petroleum substances from the Assets, (vi) any estimates of operating costs and capital requirements for any Well,  

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operation, or project, (vii) the maintenance, repair, condition, quality, suitability, design or marketability of the Assets, (viii) the content, character or nature of any descriptive memorandum, reports, brochures, charts or statements prepared by third parties, or (ix) any other materials or information that may have been made available or communicated to Buyeror its Affiliates, or its or their employees, agents, officers, representatives or advisors in connection with the transactions contemplated by this Agreement or any discussion or presentation relating thereto, and further disclaims any representation or warranty, statutory, express or implied, of merchantability, fitness for a particular purpose or conformity to models or samples of materials of any equipment, it being expressly understood and agreed by the Parties hereto that Buyer shall be deemed to be obtaining the Assets,  including the Equipment, in its present status, condition and state of repair, “as is” and “where is” with all faults and that Buyer has made or caused to be made such inspections as Buyer deems appropriate.

Article 4
SELLER’S REPRESENTATIONS AND WARRANTIES

Seller represents and warrants to Buyer the following as of the date hereof:

         5.1     Organization and Good Standing.

(a) Seller is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Texas and has all requisite power and authority to own and/or dispose of the Assets.

         5.2     Authority; Authorization of Agreement.  Seller has all requisite power and authority to execute and deliver this Agreement and the Operative Documents to which it is a party, to consummate the transactions contemplated by this Agreement and the Operative Documents to which it is a party and to perform all of its obligations under this Agreement and the Operative Documents to which it is a party.  This Agreement constitutes, and the Operative Documents to which it is a party, when executed and delivered by Seller, shall constitute, the valid and binding obligations of Seller, enforceable against it in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency or other Laws relating to or affecting the enforcement of creditors’ rights and general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

         5.3     No Violations. Except for (i) Customary Post-Closing Consents, (ii) any consents or approvals listed on Schedule 5.3, and (iii) any preferential rights listed on Schedule 5.10, Seller’s execution and delivery of this Agreement and the Operative Documents to which it is a party and the consummation and performance of the transactions contemplated by this Agreement by it shall not:

(b) conflict with any of the terms, conditions or provisions of the organizational documents of Seller;

(c) violate any material provision of, or require any material consent or approval under, any Laws applicable to Seller;

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(d) conflict with, result in a breach of, constitute a default under or constitute an event that with notice or lapse of time, or both, would constitute a default under, accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under (i) any Material Contract or financing instrument or (ii) any Order, judgment, or decree of any Governmental Authority, except as does not or would not result in a Material Adverse Effect; or

(e) result in the creation or imposition of any lien or encumbrance upon one or more of the Assets, except for the Permitted Encumbrances.

         5.4     Liability for Brokers’ Fees.  Seller has not incurred any liability, contingent or otherwise, for investment bankers’, brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Buyer or any Affiliate of Buyer shall, directly or indirectly, have any responsibility whatsoever.

        5.5    Legal Proceedings.Schedule 5.5 sets forth all Legal Proceedings pending or, to Seller’s Knowledge, threatened in writing against Seller or, to Seller’s Knowledge, the operator of the Oil and Gas Properties in respect of any of the Assets.

        5.6    Bankruptcy.  There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by, or to Seller’s Knowledge, threatened against, Seller.

 5.7     Taxes.  Except as disclosed on Schedule 5.7, (i) all Tax Returns required to be filed by Seller with respect to the Assets have been timely filed, (ii) all Taxes with respect to the Assets have been timely paid and all Tax Returns filed by Seller with respect to the Assets are true, correct and complete in all material respects, (iii) there are no liens existing on any of the Assets that arose in connection with any failure (or alleged failure) by Seller to pay any Tax, (iv) there are no claims pending or threatened by any Taxing Authority in connection with any such Tax that would adversely affect the Assets after the Closing, (v) to Seller’s Knowledge there are no Tax audits currently pending that would adversely affect the Assets after the Closing, (vi) none of the Assets is an equity interest in any entity, and no Asset is subject to a tax partnership or provision requiring a partnership Tax Return to be filed for U.S. federal or applicable state income tax purposes.

         5.8     Material Contracts.

(f) Schedule 5.8 sets forth all Contracts of the type described below (i) to which Seller is a party and that relate to the Assets or (ii) by which the Assets are bound (collectively, the “Material Contracts”):

(i) any Contract that can reasonably be expected to result in aggregate payments by or revenues Seller of more than $70,000 (net to the interest of Seller) during the current or any subsequent fiscal year of Seller (based solely on the terms thereof and without regard to any expected increase in volumes or revenues);

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(ii) any Hydrocarbons transportation, gathering, storage, treating and processing or similar Contract that is not terminable without penalty on 90 Days or less notice;

(iii) any Contract for the purchase, sale, marketing or exchange of any Hydrocarbons that is not terminable without penalty on 90 Days or less notice;

(iv) contracts to sell, lease, farmin, farmout, exchange, or otherwise dispose of all or any part of the Assets (other than Hydrocarbons or obsolete Equipment), but excluding conventional rights of reassignment upon intent to abandon or release a well or Lease and excluding any operating agreements or Surface Contracts;

(v) joint operating agreements, unit operating agreements, unit, pooling or communitization agreements, order or declarations, exploration agreements, participation agreements, joint venture agreements or other similar agreements;

(vi) non-competition agreements or any agreements that purport to restrict, limit, or prohibit Seller from engaging in any line of business or the manner in which, or the locations at which, Seller (or Buyer, as successor in interest to Seller) conducts business, including area of mutual interest agreements;

(vii) indentures, mortgages or deeds of trust, loans, credit or note purchase agreements, sale-lease back agreements, guaranties, bonds, letters of credit, or similar financial agreements which are secured by or create an encumbrance upon the Assets;

(viii) contracts for the construction and installation or rental of equipment, fixtures, or facilities with guaranteed production throughput requirements or demand charges or which cannot be terminated without penalty on sixty (60) days or less notice;

(ix) any Contract with an Affiliate of Seller that will not be terminated prior to or in connection with the Closing;

(x) master seismic licenses or agreements; or

(xi) any contract the expiration or termination of which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and is not of a type required to be disclosed (without regard to Dollar, acreage, date or volume limitations therein) pursuant to the foregoing clauses in this Section 5.8(a).

(g) Except as set forth on Schedule 5.8, the Material Contracts are in full force and effect in all material respects in accordance with their respective terms except as such enforceability may be limited by bankruptcy, insolvency or other Laws relating to or affecting the enforcement of creditors’ rights and general principles of equity (regardless of whether such

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enforceability is considered in a proceeding at law or in equity), there exist no material defaults thereunder by Seller or, to Seller’s Knowledge, by any other Person that is a party to such Material Contracts, and no event has occurred that with notice or lapse of time or both would constitute any default under any such Contract by Seller or, to Seller’s Knowledge, any other Person who is a party to such Material Contract.  Prior to the date of this Agreement, Seller has made available to Buyer (or its representatives) true and complete copies of each Material Contract and all amendments or modifications thereto.

5.9     No Violation of Laws.  Except as set forth on Schedule 5.9, neither Seller nor, to Seller’s Knowledge, the operator of the Oil and Gas Properties has violated any applicable Laws with respect to the ownership or operation of the Assets.

        5.10     Preferential Rights.  Except as set forth on Schedule 5.10, there are no preferential rights to purchase that are applicable to the transaction contemplated hereby (each, a “Preferential Right”).

5.11     Consents.  Except as set forth on Schedule 5.3, there are no third party consent requirements that are applicable to the transaction contemplated hereby.

        5.12     Royalties.  All royalties due with respect to the Oil and Gas Properties have been timely paid, or if not paid, are being contested in good faith in the normal course of business and are set forth on Schedule 5.12.

       5.13     Current Commitments.Schedule 5.13 sets forth all authorities for expenditures in excess of $50,000 (“AFE’s”) (net to the interest of Seller) relating to the Oil and Gas Properties to drill or rework wells or for other capital expenditures pursuant to any of the Material Contracts for which all of the activities covered in such AFE’s have not been completed.

      5.14ERISA

.  Neither the Seller nor any of its ERISA Affiliates has made or been required to make contributions to (i) any plan that is subject to Section 302 or Title IV of ERISA or Section 412 or 430 of the Code, (ii) a “multiemployer plan” within the meaning of Section 3(37) and 4001(a)(3) of ERISA, (iii) a “multiple employer plan” within the meaning of Sections 4063 and 4064 of ERISA or Section 413(c) of the Code, or (iv) a “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA.  Seller and its ERISA Affiliates have paid and discharged promptly all obligations and liabilities arising under ERISA or the Code of a character which, if unpaid or unperformed, might result in a claim against Buyer or its Affiliates or the imposition of a lien against the Buyer or its Affiliates or with respect to the Assets.

      5.15     Assets of the E&P Business.  Neither Seller nor its Affiliates are operator of any of the Oil and Gas Properties.  To Seller’s Knowledge, since January 1, 2013, the Assets have been operated in the ordinary course of business consistent with past practices of the operator of the Oil and Gas Properties and the Assets are sufficient to conduct the E&P Business.

     5.16      Environmental Laws

.  Except as disclosed on Schedule 5.17, to Seller’s Knowledge, the ownership and operation of the Assets by Seller and the operator of the Oil and Gas Properties is in compliance with all applicable Environmental Laws.  Except as disclosed on

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Schedule 5.17, to Seller’s Knowledge there is not an Environmental Condition existing with respect to the Assets.

         5.17     Production Imbalances.  Seller is not obligated by virtue of a take-or-pay payment, advance payment, or other similar payment (other than royalties, overriding royalties, similar arrangements established in the Leases), to deliver Hydrocarbons, or proceeds from the sale thereof, attributable to Seller's interest in the Oil and Gas Properties at some future time without receiving payment for the market value thereof at or after the time of delivery.  Schedule 5.17 sets forth all Imbalances with respect to Oil and Gas Properties. 

       5.18     Leases.  Except for proceeds attributable to interests being held in suspense, Seller (or, to Seller's Knowledge, the applicable operator of the Oil and Gas Properties) has timely and properly paid all accrued bonuses, delay rentals, minimum royalties, and royalties due with respect to Seller's interest in the Leases, in each case in accordance with the Leases and applicable Law.  With respect to Leases issued by any Governmental Authority, Seller has received no notice that any Lease accounts are not current or that any payments required thereunder have not been paid.  Schedule 5.19 contains a true, correct, and complete list of all Leases which (a) are currently held by payment of shut-in royalties, reworking operations, any substitute for production in paying quantities, or any other means other than production in paying quantities that will expire or terminate on or before a date that is sixty (60) days after the Closing Date unless the lessee thereunder conducts operations in accordance with the terms of such Lease on or before such date or (b) Seller has received written notice of a default from a lessor with respect thereto which is currently unresolved.

          5.19     Permits.  To Seller’s Knowledge, the operator of the Oil and Gas Properties has maintained and is maintaining all material permits with respect to the Assets necessary to operate the Oil and Gas Properties in accordance with the methods and practices of a prudent operator of oil and gas properties in Karnes County, Texas. To Seller’s Knowledge, the Assets are in material compliance with applicable permits and no event has occurred which permits, or after the giving of notice or lapse of time or both would permit, the revocation or termination of any permit or the imposition of any restrictions of such a nature as may limit the operation or use of the Assets in accordance with the methods and practices of a prudent operator of oil and gas properties in Karnes County, Texas.

        5.20     Equipment and Personal Property.  Except as set forth on Schedule 5.20, to Seller’s Knowledge the Equipment and the Central Facilities are in an operable state of repair adequate to maintain normal operations in accordance with the methods and practices of a prudent operator of oil and gas properties in Karnes County, Texas, ordinary wear and tear excepted.  Seller or, to Seller’s Knowledge, the respective operator of the Oil and Gas Properties, has all material easements, rights of way, licenses and authorizations, from Governmental Authorities and Non-Parties necessary to access, construct, operate, maintain and repair the Equipment and the Central Facilities in the ordinary course of business as currently conducted and in material compliance with all Laws, except such failures would not individually or in the aggregate have a Material Adverse Effect.

          5.21     Wells.  To Seller’s Knowledge, (i) all wells have been drilled and completed within the limits permitted by all applicable Leases and Contracts, (ii) no well is subject to

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penalties on allowables after the Effective Time because of any overproduction or any other violation of Laws, and (iii) there are not any wells, equipment or other facilities located on the Assets that (A) Seller or the operator of the Oil and Gas Properties is obligated by any Laws or contract to currently plug, dismantle and/or abandon, or (B) have been plugged, dismantled or abandoned in a manner that does not comply in all material respects with Laws.  To Seller’s Knowledge, all currently producing Wells are in an operable state of repair adequate to maintain normal operations in accordance with the methods and practices of a prudent operator of oil and gas properties in Karnes County, Texas, ordinary wear and tear excepted, and, without limiting the foregoing, do not contain junk or other obstructions which could reasonably be expected to materially interfere with drilling, completion, and recompletion, stimulation, or other operations on, with respect to, or affecting the Assets.

         5.22     Non-Consent Operations.  Seller has not elected not to participate in any operation or activity proposed with respect to the Oil and Gas Properties which could result in any of Seller's interest in such Oil and Gas Properties becoming subject to a penalty or forfeiture as a result of such election not to participate in such operation or activity.

         5.23     Casualty Loss; Condemnation.  Since January 1, 2013, to Seller’s Knowledge (i) there has not been any material Casualty Loss to or Condemnation of any Asset and (ii) no Condemnation is pending or threatened against the Assets. 

         5.24     Insurance.Schedule 5.24 lists all the insurance policies (and descriptions thereof, including deductibles) maintained by Seller that provide coverage to the Assets.  Each such policy is in full force and effect.

Article 5
BUYER’S REPRESENTATIONS AND WARRANTIES

Buyer represents and warrants to Seller the following as of the date hereof:

         6.1    Organization and Good Standing.  Buyer is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite power and authority to own the Assets.

         6.2     Authority; Authorization of Agreement.  Buyer has all requisite power and authority to execute and deliver this Agreement and the Operative Documents to which it is a party, to consummate the transactions contemplated by this Agreement and the Operative Documents to which it is a party and to perform all of its obligations under this Agreement and the Operative Documents to which it is a party.  This Agreement constitutes, and the Operative Documents to which it is a party, when executed and delivered by Buyer, shall constitute, the valid and binding obligation of Buyer, enforceable against it in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency or other Laws relating to or affecting the enforcement of creditors’ rights and general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

         6.3   No Violations.  No consent is required to be obtained with respect to the consummation of the transactions contemplated by this Agreement by Buyer.  Buyer’s execution and delivery of this Agreement and the Operative Documents, to which it is a party and the

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consummation and performance of the transactions contemplated by this Agreement by it shall not:

(a) conflict with or require the consent of any Person under any of the terms, conditions or provisions of the organizational documents of Buyer;

(b) violate any provision of, or require any filing, consent or approval under any Laws applicable to Buyer; or

(c) conflict with, result in a breach of, constitute a default under or constitute an event that with notice or lapse of time, or both, would constitute a default under, accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under:  (i) any material agreement or any mortgage, indenture, loan, credit agreement or other agreement evidencing indebtedness for borrowed money to which Buyer is a party or by which Buyer is bound, except (in each case) where such conflict, breach or default would not materially affect Buyer’s ability to consummate the transactions contemplated hereby or (ii) any order, judgment or decree of any Governmental Authority.

        6.4     Liability for Brokers’ Fees.  Buyer has not incurred any liability, contingent or otherwise, for investment bankers’, brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Seller or any Affiliate of Seller shall, directly or indirectly, have any responsibility whatsoever.

        6.5     Claims, Disputes and Litigation.  There are no Legal Proceedings pending or, to Buyer’s Knowledge, threatened in writing against Buyer that would prevent the consummation of the transactions contemplated by this Agreement.

         6.6     Bankruptcy.  There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to Buyer’s Knowledge, threatened against Buyer.

6.7Independent Evaluation.Buyer is sophisticated in the evaluation, purchase, ownership and operation of oil and gas properties and related facilities.  Buyer acknowledges and agrees that Seller has not made any representations or warranties as to the Assets except as expressly and specifically provided in Article 5 and the special warranty set forth in the Assignment, and that Buyer may not rely on any other representations or warranties made by Seller or its representatives or on any of Seller’s estimates with respect to reserves or the value of the Assets, or any projections as to future events or other analyses or forward looking statements. 

         6.8     Capabilities.  Buyer has the financial, technical and other capabilities to perform all of Buyer’s other obligations under this Agreement and all of the obligations assumed from Seller with respect to the Assets.

Article 6
COVENANTS

         7.1     Data Sharing.  The Parties agree to meet, at a mutually agreeable location, at least semiannually in order to share data, including reserve reports, and other technical information

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related to the operation of the Oil and Gas Properties, provided neither Party shall be obligated to violate any agreement of confidentiality or pay any material amounts to Non-Parties, in order to fulfill the foregoing obligation, and provided further, the foregoing obligation shall apply only to the extent the Parties own an interest in the oil and gas leases, wells and other assets described herein. 

         7.2     Consents.

(a) Seller shall use commercially reasonable efforts to procure the consents set forth on Schedule 5.3 which have not been obtained or waived as of the date hereof, and Buyer shall reasonably cooperate with Seller in seeking to obtain such consents, but, in each case, without being obligated to pay any consideration or waive or release any right or privilege to obtain such consent.  If the Parties are not able to effect the assignment of any of the Assets at Closing due to the lack of a required Non-Party consent to transfer the same, then, except as otherwise provided herein, such Assets shall not, and shall not be deemed to be, assigned at Closing.

(b) As to any Contract (subject to Section 7.2(c) and Section 7.2(d)), until any such consent is obtained, to the extent permissible under Law and under the terms of such Contract, Seller shall post-Closing (i) continue to perform the liabilities and obligations under or with regard to such Contract, (ii) hold such Contract in trust for the benefit of Buyer and shall promptly forward to Buyer any monies or other benefits received that are attributable to such Contract and Buyer shall fully indemnify and hold harmless Seller with respect to any costs, claims or liabilities arising thereunder, and (iii) endeavor to mutually agree with Buyer to institute alternative arrangements intended to put the Parties in substantially the same economic position as if such non-assigned Contract had been assigned.  If the foregoing arrangements are not permissible under Law or under the terms of the Contract, then the Parties shall use commercially reasonable efforts to take such other actions or put into place such other arrangements as are permissible with regard to the non-assigned Contract so as to provide the Parties with the same economic results as would otherwise have resulted. Provided, Seller’s obligations under this Section 7.1(b) shall continue only for so long as Seller holds an interest in any portion of the Retained Interests.

(c) If the assignment of a Lease, Contract or Surface Contract is subject to a consent requirement other than Customary Post-Closing Consents and (i) the Person holding such consent right is not a Governmental Authority, (ii) the Lease, Contract or Surface Contract does not contain language to the effect that the lessor or counterparty thereto (as applicable) will have the right to terminate the Lease, Contract or Surface Contract if an assignment is made without the consent requirement being satisfied, (iii) the failure to obtain such consent would not cause the assignment to Buyer to be void or voidable, and (iv) the holder of such consent right has not denied such consent in writing, then such Lease, Contract or Surface Contract shall be assigned to Buyer at Closing and following the Closing Seller and Buyer shall continue, for 180 Days, to use of commercially reasonable efforts to obtain the required consent with Buyer lending reasonable assistance.  If at the end of such 180-Day period the required consent has not been obtained, then the Parties shall discuss in good faith what further mutually agreeable actions (if any) will be taken with respect to such unobtained consent.

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(d) If the assignment of a Lease, Contract or Surface Contract is subject to a consent requirement other than Customary Post-Closing Consents and (i) the holder of the consent right is a Governmental Authority, (ii) the Lease, Contract or Surface Contract contains language to the effect that the counterparty will have the right to terminate the Lease, Contract or Surface Contract if an assignment is made without the consent requirement being satisfied, (iii) the failure to obtain such consent would cause the assignment to Buyer to be void or voidable, or (iv) the holder of such consent right has denied such consent in writing (in such case, a “Consent Agreement”), then such Consent Agreement shall be excluded from the Assets to be assigned and sold to Buyer hereunder and the Base Purchase Price shall be reduced by the Allocated Value of the excluded Consent Agreement.  Following the Closing, Seller shall continue to use commercially reasonable efforts to procure such consent within 180 Days following the Closing, with Buyer lending reasonable assistance.  If at the end of such 180-Day period the required consent has not been obtained, then the Parties shall discuss in good faith what further mutually agreeable actions (if any) will be taken with respect to such Consent Agreement. If no further action is mutually agreed to between the Parties within 60 Days (following such 180-Day period), the Consent Agreement and any Assets related thereto shall be deemed an Excluded Asset. If during such 180-Day period the required consent is obtained, then Seller shall notify Buyer and Buyer shall purchase, on or before 10 Business Days following receipt of such notice, the Consent Agreement under the terms of this Agreement for a price equal to the Allocated Value of such Consent Agreement.  To the extent such Consent Agreement has not been included in determining the Adjustments to be made pursuant to Section 2.4, then the Adjustments that are specific to such Consent Agreement shall be calculated and contemporaneous with the payment of such Allocated Value there shall be applied as a deduction to such Allocated Value (if the sum of the downward Adjustments exceeds the sum of the upward Adjustments) the net amount resulting from such Adjustments or there shall be applied as an addition to such Allocated Value (if the sum of the upward Adjustments exceeds the sum of the downward Adjustments) the net amount resulting from such Adjustments.

        7.3     Approvals of Governmental Authorities.  Seller and Buyer shall use their commercially reasonable efforts to take or cause to be taken all appropriate action, and to do, or cause to be done, all things necessary or reasonably advisable under applicable Laws to consummate and make effective the transactions contemplated by this Agreement, including using their commercially reasonable efforts to obtain, or cause to be obtained, all waivers, permits, consents, approvals, authorizations, qualifications and orders of all Governmental Authorities and officials and parties to contracts with the Parties that may be or become necessary for the performance of obligations pursuant to this Agreement and the consummation of the transactions contemplated by this Agreement and each Party will cooperate fully with the other Party in promptly seeking to obtain all such waivers, permits, consents, approvals, authorizations, qualifications and orders. 

         7.4     Efforts.  Each Party shall use commercially reasonable efforts to take all actions and to do all things necessary to consummate, make effective and comply with all of the terms of this Agreement.  Without limiting the generality of the foregoing, from time to time after Closing, Seller and Buyer shall each execute, acknowledge and deliver to the other such further instruments as may be reasonably requested by the other Party, at such requesting Party’s cost, and as are commercially reasonable to be performed in order to accomplish more effectively the purposes of the transactions contemplated by this Agreement, including those post-Closing

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actions contemplated by Section 7.2.  Promptly after Closing, Buyer shall: (a) record the Assignment and all state and federal assignments executed at the Closing in all applicable real property records and/or, if applicable, all state and federal Governmental Authorities and Buyer shall provide to Seller copies of such recorded documents; (b) actively pursue the approval of all Customary Post-Closing Consents from the applicable Governmental Authorities; and (c) except as otherwise provided for herein, actively pursue all other consents and approvals that may be required in connection with the assignment of the Assets to Buyer and the assumption of the rights, interests, obligations and liabilities assumed by Buyer hereunder that have not been obtained prior to Closing, provided that Seller shall reasonably cooperate with Buyer in obtaining such other consents and approvals.  Promptly after Closing, Seller shall deliver all notices that are required to be delivered in connection with the assignment of the Assets to Buyer and the assumption of the rights, interests, obligations and liabilities assumed by Buyer hereunder.

         7.5     Records in Seller’s Possession.  Following Closing, Seller shall grant Buyer reasonable access (at reasonable times and upon reasonable notice) to the Records.  Within 5 Business Days after the Closing Date, Seller shall furnish to Buyer legible copies of the Records.  Buyer shall maintain the Records received from Seller for a period of 5 years after Closing.

         7.6     SEC Matters.  Seller acknowledges that Buyer and its Affiliates may be required to include statements of revenues and direct operating expenses and other financial information relating to the Assets (“Financial Statements”) in documents filed with the SEC by Buyer and its Affiliates pursuant to the Securities Act or the Exchange Act, and that such Financial Statements may be required to be audited.  In that regard, Seller shall reasonably cooperate with Buyer, and provide Buyer reasonable access to such records (to the extent such information is available) and personnel of Seller as Buyer may reasonably request to enable Buyer, and its representatives and accountants, at Buyer’s sole cost and expense, to create and audit any Financial Statements that Buyer deems necessary. Notwithstanding anything to the contrary herein, Seller shall provide Buyer and its independent accountants with reasonable access to any and all existing information, books, records, and documents in Seller’s possession that relate to the Assets (subject to any privilege or confidentiality obligations) and other data delivered to Buyer by Seller pursuant to the provisions of this Agreement relevant to the periods being audited.

         7.7     Confidentiality Agreement.  If Closing of the transaction contemplated under the terms of this Agreement occurs, the Confidentiality Agreement shall terminate (which termination shall be effective as of Closing).

Article 7
THE CLOSING

         7.8     Closing.  The consummation of the purchase and sale of the Assets contemplated by this Agreement shall, unless otherwise agreed to in writing by Buyer and Seller, take place at the offices of Haynes and Boone, LLP located at 1221 McKinney, Suite 2100, Houston, Texas, 77010 at 10:00 a.m., local time, on the date hereof (the “Closing Date”).  Seller shall provide Buyer with wiring instructions designating the account or accounts to which the Base Purchase Price is to be delivered.

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         8.2     Obligations of Seller at Closing.  At Closing, Seller shall, subject to the simultaneous performance by Buyer of its obligations pursuant to Section 8.3, deliver or cause to be delivered to Buyer, unless waived by Buyer (provided, Buyer may not waive the requirements of Section 8.2(i)), the following:

(a) originals of the Assignment executed and acknowledged by Seller in sufficient counterparts and modified as necessary for recording in all applicable jurisdictions;

(b) assignments in form required by any Governmental Authority for the assignment of any Assets, duly executed by Seller, in sufficient duplicate originals to allow recording and/or filing in all appropriate offices;

(c) executed originals of the Certificate of Non-Foreign Status;

(d) certificates of good standing for Seller from all applicable jurisdictions;

(e) letters-in-lieu of transfer or division orders, in form attached hereto as Exhibit E, executed by Seller relating to the Assets to reflect the transaction contemplated hereby;

(f) any other forms required by any Governmental Authority relating to the assignments of the Assets to Buyer;

(g) notices of approval, consents, or waivers received by Seller with respect to the transfer of the Assets, including those set forth on Schedule 5.3 and  Schedule 5.10;

(h) all releases and terminations of any mortgages, deeds of trust, assignments of production, financing statements, fixture filings, and other encumbrances and interests burdening the Assets (or any thereof), duly executed and acknowledged, which shall, in each case, be in form and substance reasonably satisfactory to Buyer; and

(i) copies of required consents and/or approvals of Seller’s members and board or other governing body authorizing the consummation of the transaction contemplated hereby.

Seller shall take such other actions and deliver such other documents as are contemplated by this Agreement or as may be reasonably requested by Buyer.

         8.3     Obligations of Buyer at Closing

.  At Closing, Buyer shall, subject to the simultaneous performance by Buyer of its obligations pursuant to Section 8.2, deliver or cause to be delivered to Seller, unless waived by Seller, the following:

(j) the Base Purchase Price by wire transfer, and Buyer shall take such other actions and deliver such other documents as are contemplated by this Agreement or as may be reasonably requested by Seller; and

(k) originals of the Assignment executed and acknowledged by Buyer in sufficient counterparts and modified as necessary for recording in all applicable jurisdictions.

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Article 8
TAXES

         9.1     Cooperation on Tax Matters.  Buyer and Seller shall cooperate fully, as and to the extent reasonably requested by the other Party, in connection with the filing of any Tax Return and any audit, litigation or other proceeding with respect to Taxes.  Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such Tax Return, audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.  Each of Buyer and Seller agrees (a) to retain all books and records with respect to Tax matters pertinent to the acquired Assets relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Buyer or Seller, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any Taxing Authority, and (b) in the case of Seller, to give the Buyer reasonable written notice prior to transferring, destroying or discarding any such books and records and, if Buyer so requests, Seller shall allow Buyer the option of taking possession of such books and records prior to their disposal.  Buyer and Seller further agree, upon request, to use their commercially reasonable efforts to obtain any certificate or other document from any Taxing Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed with respect to the transactions contemplated.

         9.2      Property and Excise Taxes

.  All ad valorem, real property, personal property, and similar Taxes assessed on the Assets (“Property Taxes”) and excise Taxes associated with any of the Assets (“Excise Taxes”) are Seller’s obligation with respect to periods before the Effective Time and Buyer’s obligation with respect to periods from and after the Effective Time; provided that, if the taxable period with respect to such a Tax begins on or before and ends after the Effective Time, then such Tax shall be attributable to the portions of such taxable period before and after the Effective Time based on the relative number days in each portion of such taxable period.  If either Party pays Property Taxes or Excise Taxes for which the other Party is responsible, and the amount of such payment is not taken into account as an adjustment to the Base Purchase Price under Section 2.4, then upon receipt of evidence of payment the nonpaying Party will reimburse the paying Party promptly for the nonpaying Party’s share of such Taxes.

         9.3     Severance Taxes.  Seller shall bear and pay all severance or other Taxes based upon or measured by Hydrocarbon production from the Assets, or the receipt of proceeds therefrom, to the extent attributable to production from the Assets before the Effective Time. Buyer shall bear and pay all such Taxes on production from the Assets from and after the Effective Time.  Seller shall withhold and pay on behalf of Buyer all such Taxes on production from the Assets between the Effective Time and the Closing Date, and the amount of any such payment shall be reimbursed to Seller as an adjustment to the Base Purchase Price pursuant to Section 2.4.  If either Party pays any such Taxes owed by the other, and the amount of such payment is not taken into account as an adjustment to the Base Purchase Price under Section 2.4, then upon receipt of evidence of payment the nonpaying Party will reimburse the paying Party promptly for the nonpaying Party’s share of such Taxes

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         9.4     Transfer Taxes.  Buyer shall be responsible for the payment of all state and local transfer, sales, use, stamp, registration or other similar Taxes (the “Transfer Taxes”) resulting from the acquisition of the Assets contemplated by this Agreement.  Buyer and Seller shall cooperate in good faith to minimize, to the extent permissible under applicable Law, the amount of any such Transfer Taxes.

Article 9
MISCELLANEOUS

         10.1     Notices.  All notices and other communications required or desired to be given hereunder must be in writing and sent (properly addressed as set forth below) by:  (a) U.S. mail with all postage and other charges fully prepaid, (b) electronic mail with a PDF of the notice or other communication attached (with the original sent by U.S. mail the same day such electronic mail is sent), or (c) facsimile transmission.  A notice shall be deemed effective on the date on which such notice is received by the addressee, if by mail, or on the date sent, if by facsimile (as evidenced by fax machine confirmation of receipt) or if by electronic mail (as evidenced by computer generated confirmation of receipt); provided, if such date is not a Business Day, then date of receipt shall be on the next date that is a Business Day.  Each Party may change its address by notifying the other Party in writing of such address change.

If to Seller:

Alta Mesa Eagle, LLC

15021 Katy Freeway, Suite 400

Houston TX 77094

Phone: 281 530-0991

Facsimile: 281 530-5278

Attn:Mike McCabe

Email: mmcabe@altamesa.net

If to Buyer:

Memorial Production Operating LLC

c/o Memorial Production Partners LP

1301 McKinney Street, Suite 2100

Houston, TX 77010

Attention: Kyle N. Roane

Phone: (713) 588-8300

Fax: (713) 588-8301

Email: kroane@memorialrd.com

          10.2     Transaction and Filing Costs.  Buyer shall be responsible for recording and filing documents associated with the transfer of the Assets to it and for all costs and fees associated therewith, including filing the assignments with appropriate federal, state and local Governmental Authorities as required by applicable Law.  Buyer shall also be responsible for the payment of any and all stamp, documentary, real property transfer, sales, gross receipts, use or similar Taxes or assessments resulting from its acquisition of the Assets contemplated by this

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Agreement.  As soon as practicable after recording or filing, Buyer shall furnish Seller with all recording data and evidence of all required filings including filings with the appropriate state counties.

         10.3     Amendments and Severability.  No amendments or other modifications to this Agreement shall be effective or binding on either of the Parties unless the same are in writing, designated as an amendment or modification, and signed by both Seller and Buyer.  The invalidity of any one or more provisions of this Agreement shall not affect the validity of this Agreement as a whole, and in case of any such invalidity, this Agreement shall be construed as if the invalid provision had not been included herein.

         10.4     Successors and Assigns.  Except as set forth in this Section 10.4, this Agreement may not be assigned, either in whole or in part, without the express written consent of the non-assigning Party, such consent not to be unreasonably withheld, conditioned or delayed.  The terms, covenants and conditions contained in this Agreement are binding upon and inure to the benefit of Seller and Buyer and their respective successors and permitted assigns. 

         10.5    Headings.  The titles and headings set forth in this Agreement have been included solely for ease of reference and may not be considered in the interpretation or construction of this Agreement.

        10.6     Governing Law; Jurisdiction; Waiver of Trial by Jury.

(a) This Agreement is governed by the Laws of the State of Texas, excluding any choice of law rules that may direct the application of the Laws of another jurisdiction.

(b) The Parties agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transaction contemplated hereby shall be brought in the United States District Court for the Southern District of Texas or any Texas state court sitting in Houston, Texas so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Texas, and each of the Parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.

(c) With respect to any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transaction contemplated hereby, the Parties agree to waive trial by jury.

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          10.7     No Partnership Created.  It is not the purpose or intention of this Agreement to create (and it should not be construed as creating) a joint venture, partnership or any type of association, and the Parties are not authorized to act as an agent or principal for each other with respect to any matter related hereto.

         10.8      Public Announcements.  Neither Seller nor Buyer (including any of their agents, employees or Affiliates in either case) may issue a public statement or press release with respect to the transaction contemplated hereby (including the price and other terms) without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed, except as required by Law or listing agreement with a national security exchange and then only after prior consultation with the other Party.

         10.9      No Third Party Beneficiaries.  Nothing contained in this Agreement shall entitle anyone other than Seller and Buyer, their successors and permitted assigns or the express beneficiaries of indemnity provisions to any Claim, cause of action, remedy or right of any kind whatsoever.

        10.10    Construction.  The Parties acknowledge that they have had an adequate opportunity to review each and every provision contained in this Agreement and to submit the same to legal counsel for review and comment.  Moreover, the Parties have participated jointly in the negotiation and drafting of this Agreement.  Based on the foregoing, the Parties agree that the rule of construction that a contract be construed against the drafter, if any, not be applied in the interpretation or construction of this Agreement.

         10.11    Schedules.  The inclusion of any matter upon any Schedule does not constitute an admission or agreement that such matter is material with respect to the representations and warranties contained herein.

         10.12     Conspicuousness of Provisions.  The Parties acknowledge and agree that the provisions contained in this Agreement that are set out in “bold” satisfy the requirement of the “express negligence rule” and any other requirement at Law or in equity that provisions contained in a contract be conspicuously marked or highlighted.

         10.13     Execution in Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, all of which when taken together shall constitute one and the same agreement.

         10.14     Entire Agreement.  Except for the Confidentiality Agreement, this Agreement supersedes all prior and contemporaneous negotiations, understandings, letters of intent and agreements (whether oral or written) between the Parties with respect to the subject matter hereof and constitute the entire understanding and agreement between the Parties with respect thereto.

[signatures follow on next page]

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the day and year first set forth above.

SELLER:
ALTA MESA EAGLE, LLC, a Texas limited liability company
By:	/s/  Harlan H. Chappelle
Name:	Harlan H. Chappelle
Title:	President and Chief Executive Officer
BUYER: MEMORIAL PRODUCTION OPERATING LLC By: Memorial Production Partners LP, its sole member By: Memorial Production Partners GP LLC, its general partner
By:	/s/ Kyle N. Roane
Name:	Kyle N. Roane
Title:	Vice President and General Counsel

Signature Page to Purchase and Sale Agreement

EX-10.2

AGREEMENT AND AMENDMENT NO. 7

This AGREEMENT AND AMENDMENT NO. 7("Agreement") dated as of March25, 2014 ("Effective Date"), is among Alta Mesa Holdings, LP, a Texas limited partnership ("Borrower"), the affiliates of the Borrower party hereto (the "Guarantors"), the Lenders (as defined below), and Wells Fargo Bank, N.A. as administrative agent for such Lenders (in such capacity, the "Administrative Agent") and as issuing lender (in such capacity, the "Issuing Lender").

RECITALS

A.The Borrower is party to that certain Sixth Amended and Restated Credit Agreement dated as of May 13, 2010, among the Borrower, the lenders party thereto from time to time (the "Lenders"), the Administrative Agent, and the Issuing Lender, as heretofore amended (as so amended, the "Credit Agreement").

B.The parties hereto wish to (i) subject to the terms and conditions of this Agreement, make certain amendments to the Credit Agreement as provided herein and (ii) acknowledge the redetermined Borrowing Base as set forth below.

NOW THEREFORE, in consideration of the benefits to be derived by the parties hereto and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. Defined Terms; Other Provisions.  As used in this Agreement, each of the terms defined in the opening paragraph and the Recitals above shall have the meanings assigned to such terms therein.  Each term defined in the Credit Agreement and used herein without definition shall have the meaning assigned to such term in the Credit Agreement, unless expressly provided to the contrary.  Article, Section, Schedule, and Exhibit references are to Articles and Sections of and Schedules and Exhibits to this Agreement, unless otherwise specified.  The words "hereof", "herein", and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The term "including" means "including, without limitation,".  Paragraph headings have been inserted in this Agreement as a matter of convenience for reference only and it is agreed that such paragraph headings are not a part of this Agreement and shall not be used in the interpretation of any provision of this Agreement.

Section 2. Amendments to Credit Agreement. 

(a) Section 1.01 (Certain Defined Terms) of the Credit Agreement is hereby amended by adding the following new sentence to the end of the defined term "Independent Engineering Report":

Notwithstanding the foregoing, a report audited by (rather than prepared by) an Independent Engineer shall qualify as an “Independent Engineering Report” so long as (x) such report otherwise meets the criteria set forth about in this definition and (y) such report is accompanied by an audit opinion of such Independent Engineer satisfactory to the Administrative Agent and each Lender covering, among other things, the estimate of Proven Reserves set forth in such report are within the ten percent (10%) tolerance threshold set forth in the SPE Standards Pertaining to the Estimated and Auditing of Oil and Gas Reserves Information.

(b) Section 1.01 (Certain Defined Terms) of the Credit Agreement is hereby further amended by deleting the defined terms "Change In Control", "Independent Engineer", “Sanctioned Entity”, “Sanctioned Person”, and "Triggering Event" found therein, and replacing them with the following corresponding terms:

"'Change in Control' means the occurrence of any of the following events:

(a) prior to a Qualified IPO, the Permitted Investors, individually or collectively, cease to own, directly or indirectly, at least the Control Percentage of the Equity Interests of the Borrower (or if the Borrower is a limited partnership, of the General Partner), or otherwise cease to possess, directly or indirectly, the power to direct or cause the direction of the management and policies of the Borrower, by contract or otherwise;

(b) following a Qualified IPO,if the Borrower is the issuer of the Equity Interests in such Qualified IPO, (i) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Investor becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, 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 (such right, an “option right”), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 35% or more of the Equity Interests of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such Equity Interests that such person or group has the right to acquire pursuant to any option right), or (ii) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (A) who were members of that board or equivalent governing body on the first day of such period, (B) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (A) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (C) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (A) and (B) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body

(c) following a Qualified IPO,if the direct or indirect holding company of the Borrower is the issuer of the Equity Interests in such Qualified IPO (the “Parent Company”), (i) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Investor becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, 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 (such right, an “option right”), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 35% or more of the Equity Interests of the Borrower or the Parent Company entitled to vote for members of the board of directors or equivalent governing body of the Borrower or the Parent Company on a fully-diluted basis (and taking into account all such Equity Interests that such person or group has the right to acquire pursuant to any option right), (ii) during any period of 12 consecutive months, a majority of

the members of the board of directors or other equivalent governing body of the Borrower or the Parent Company cease to be composed of individuals (A) who were members of that board or equivalent governing body on the first day of such period, (B) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (A) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (C) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (A) and (B) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body, or (iii) the Parent Company ceases to own, directly or indirectly, 100% of the Equity Interests of the Borrower.

"'Independent Engineer' means (a) Netherland, Sewell and Associates, Inc., (b) Ryder Scott Company, L.P., or (c) any other independent, third-party engineering firm acceptable to the Administrative Agent in its reasonable judgment."

"Sanctioned Person" means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC or the U.S. Department of State, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person directly or indirectly controlled by any Sanctioned Person or Sanctioned Country.

“Sanctioned Entity” means (a) a Sanctioned Country, (b) an agency of any Sanctioned Country, (c) an organization directly or indirectly controlled by a Sanctioned Person or Sanctioned Country, or (d) a Sanctioned Person.

"'Triggering Event' means (a) the Disposition of Oil and Gas Properties of the Borrower or any Restricted Subsidiary that have a positive value in the most recently delivered Engineering Report or in the Engineering Report evaluated for the then effective Borrowing Base, and (b) the novation, assignment, unwinding, termination, or amendment of a hedge position or Hedge Contract considered by the Administrative Agent in determining the then effective Borrowing Base to the extent such hedge position or Hedge Contract is not  immediately replaced by a new hedge position or new Hedge Contract (or in the case of an amendment, an amended hedge position or amended Hedge Contract) which would result in an equal or greater value to the Borrowing Base (as determined by the Administrative Agent in its sole discretion)."

(c) Section 1.01 (Certain Defined Terms) of the Credit Agreement is hereby further amended by adding the following new defined terms thereto in alphabetical order:

"'Actual Production' means the 90-day average of the net volume of actual production of crude oil, natural gas and natural gas liquids, calculated separately, from the Oil and Gas Properties set forth in the Engineering Report most recently delivered to the Administrative Agent and the Lenders pursuant to Section 5.06(d)."

"Anti-Corruption Laws" means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or its Subsidiaries from time to time concerning or relating to bribery or corruption, including the United States Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases that such Act applies to the Borrower and its Subsidiaries.

“Anti-Terrorism/Money Laundering Laws” means any laws or regulations relating to money laundering or terrorist financing, including (a) the Bank Secrecy Act, 31 U.S.C. sections 5301 et seq.; (b) the Patriot Act; (c) Laundering of Monetary

Instruments, 18 U.S.C. section 1956; (d) Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity, 18 U.S.C. section 1957; (e) the Financial Recordkeeping and Reporting of Currency and Foreign Transactions Regulations, 31 C.F.R. Part 103; (f) the Trading with the Enemy Act, any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V); (g) any similar laws or regulations currently in force or hereafter enacted; and (h) any enabling legislation or executive order relating to any of the foregoing. 

"'Amendment No. 7 Effective Date' means March25, 2014."

"'AMIH' means Alta Mesa Investment Holdings, Inc., a Delaware corporation."

"'Availability' means, at any time, an amount equal to (a) the lesser of the Borrowing Base and the aggregate Commitments minus (b) the sum of the aggregate outstanding amount of the Advances plus the Letter of Credit Exposure."

"'Calculated Reserves'  means, as of any date of determination, the Borrower's and its Restricted Subsidiaries' aggregate anticipated production of natural gas volumes, crude oil volumes, and natural gas liquids by volume, in each case, attributable to the Borrower's and its Restricted Subsidiaries' PDP Reserves, PDNP Reserves and PUD Reserves, as reflected in Engineering Report most recently delivered to the Administrative Agent and the Lenders pursuant to Section 5.06(d) or Section 6.14 (c); provided that, in calculating Calculated Reserves, in no event shall the sum of PDNP Reserves and PUD Reserves exceed 25% of the Calculated Reserves.

“Conversion Transaction” means a conversion, whether by merger, statutory conversion or otherwise) of the Borrower from a limited partnership to a limited liability company or a corporation or an exchange of some or all of the outstanding partnership interest in the Borrower for Equity Interests in a corporation or a limited liability company. 

"'Highbridge' means Highbridge Principal Strategies, LLC, a Delaware limited liability company."

"'Highbridge Note Purchase Agreement' means that certain Note Purchase Agreement dated as of March 25, 2014, among AMIH, Highbridge, and the other holders party thereto."

"'Loan Party' means the Borrower and each Guarantor."

"'Permitted Investor' means each of (a) Michael Ellis, (b) Harlan Chappelle, and (c) only following a Qualified IPO, Highbridge and each Affiliate fund managed by Highbridge.”

"'Pro Forma Fixed Charge Coverage Ratio' means, as of any date on which a Restricted Payment is to be made (the “proposed Restricted Payment”), the ratio of (a) the amount equal to (i) the Borrower's consolidated EBITDAX for the four-fiscal quarter period most recently ended minus (ii) the sum of (A) cash income Taxes paid, and income tax liability Restricted Payments made, by the Borrower and its Restricted Subsidiaries during such four-fiscal quarter period plus (B) Capital Expenditures paid by the Borrower and its Restricted Subsidiaries during such four-fiscal quarter period; to (b) the sum of (i) the Borrower’s consolidated cash Interest Expense for such four-fiscal quarter period plus (ii) Restricted Payments (other than income tax liability Restricted Payments) made by the Borrower during such four-fiscal quarter period plus (iii) the proposed Restricted Payment."

"'Qualified IPO' means an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) (or any successor form) of the Equity Interests of the Borrower or any direct or indirect holding company of the Borrower of its common Equity Interests pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act of 1933, as amended (whether alone or in conjunction with a secondary public offering),which issuance, in any event, results in at least $200,000,000 of gross proceeds."

"Sanctioned Country" means, at any time, a country or territory which is the subject or target of any Sanctions.

"Sanctions" means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including those administered by OFAC or the U.S. Department of State.

"'Test Date' means each date that the Financial Statements are required to be delivered pursuant to Section 5.06(a) or (b)."

"'Updated Engineering Report' has the meaning set forth in Section 6.14(c)(i).

(d) Section 2.02(c) (Borrowing Base – Interim Redeterminations) of the Credit Agreement is hereby amended by (i) adding the word "and" to the end of clause (i) found therein, (ii) deleting the word "and" found at the end of clause (ii) found therein, (iii) replacing the semicolon found at the end of clause (ii) found therein with a period, and (iv) deleting clause (iii) found therein in its entirety.

(e) Section 2.05(b) (Borrowing Base Deficiencies) of the Credit Agreement is hereby amended by replacing the phrase “Other than as provided in clause (ii) and (iii) below,…” with the phrase “Other than as provided in clause (ii) and (iii) below and in Section 5.11,…”

(f) Section 4.19 (Material Agreements) of the Credit Agreement is hereby amended by replacing the reference to "$3,000,000" found in clause (b) thereof with "$10,000,000".

(g) Section 4.21 (OFAC) of the Credit Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

Section 4.21.OFAC, etc.

(a)The Borrower has taken appropriate measures to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Borrower, its Subsidiaries and their respective officers and employees and to the knowledge of the Borrower its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions.  None of (i) the Borrower, any Subsidiary or any of their respective directors, officers or employees, or (ii) to the knowledge of the Borrower, any agent of the Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, (x) is a Sanctioned Person, (y) is an “enemy” or an “ally of the enemy” within the meaning of Section 2 of the Trading with the Enemy Act of the United States (50 U.S.C. App. §§ 1 et seq.), or (z) is in violation of any Anti-Terrorism/Money Laundering Law. Each Credit Party is in compliance with the Patriot Act.

(b)Neither the Borrower nor any of its Subsidiaries (i) has its assets located in any Sanctioned Country or any Sanctioned Entity, (ii) derives revenues from

investments in, or transactions with, Sanctioned Persons or Sanctioned Entities, (iii)is, or will become, a Sanctioned Person or a Sanctioned Entity, or (iv) engages or will engage in any transaction with any Sanctioned Person or Sanctioned Entity.

(c)No Advance, Letter of Credit, use of proceeds of any Advance or Letter of Credit, or other transaction contemplated by this Agreement will (i) be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity or otherwise violate applicable Sanctions, or (ii) violate any Anti-Corruption Law or any Anti-Terrorism Law.

(h) Section 5.02 (Maintenance of Insurance) of the Credit Agreement is hereby amended by replacing the reference to "$3,000,000" found in clause (c) thereof with "$5,000,000".

(i) Section 5.06 (Reporting Requirements) of the Credit Agreement is hereby amended by replacing the reference to "$1,000,000" found in clauses (f), (n), and (p) thereof with "$5,000,000".

(j) Section 5.08 (Agreement to Pledge) is hereby amended by deleting such Section in its entirety and replacing it with the following:

"Section 5.08Agreement to Pledge.  The Borrower shall, and shall cause each Restricted Subsidiary to, grant to the Administrative Agent an Acceptable Security Interest in any Property of the Borrower or any Restricted Subsidiary now owned or hereafter acquired promptly after receipt of a written request from the Administrative Agent; provided that (a) in no event shall the Administrative Agent be permitted to request or the Borrower be required to grant an Acceptable Security Interest in any Oil and Gas Properties that exceeds 85% (by value) of all of the Borrower's and its Restricted Subsidiaries' Proven Reserves and Oil and Gas Properties, (b) the Borrower shall cause the Administrative Agent to, at all times and without any requirement of a written request from the Administrative Agent, have an Acceptable Security Interest in at least 85% (by value) of all of the Borrower's and its Restricted Subsidiaries' Proven Reserves and Oil and Gas Properties, and (c) notwithstanding the 85% limitation in clause (a) above, the Borrower shall cause Orion to grant to the Administrative Agent an Acceptable Security Interest in 90% of Orion's interest in its Oil and Gas Properties.  In furtherance of the foregoing clause (c), within 3 Business Days after the acquisition by Orion of Oil and Gas Properties, the Borrower shall give the Administrative Agent written notice thereof."

(k) Section 5.11  (Further Assurances; Cure of Title Defects) of the Credit Agreement is hereby amended by replacing the last sentence therein in its entirety with the following new sentences:

If, within such 60-day period, the Borrower fails to cure any such title defect or exception as required under the foregoing clause (a) or fails to deliver the title evidence required under the foregoing clause (b), such failure shall not be a Default, but instead the Administrative Agent shall have the right to exercise the following remedy in its sole discretion from time to time, and any failure to so exercise this remedy at any time shall not be a waiver as to future exercise of the remedy by the Administrative Agent.  To the extent that the Administrative Agent is not satisfied with title to any portion of any Oil and Gas Property after such 60-day period has elapsed, such unacceptable Oil and Gas Property shall not count towards the 80% requirement under Section 5.10 above, and the Administrative Agent may send a notice to the Borrower and the Lenders that the then effective Borrowing Base shall be reduced by an amount as determined by the

Administrative Agent or, if elected by the Required Lenders, by the Required Lenders, to cause the Borrower to be in compliance with the requirement to provide acceptable title information on 80% (by value) of the Borrower’s and its Restricted Subsidiaries’ Oil and Gas Properties.  This new Borrowing Base shall become effective immediately after receipt of such notice.  If the Borrowing Base is reduced pursuant to this Section 5.11 and such a reduction causes a Borrowing Base Deficiency, then (x) Borrower shall prepay the Advances or make deposits into the Cash Collateral Account to provide cash collateral for the Letters of Credit, in three consecutive monthly installments each equal to one-third of such Borrowing Base Deficiency with the first such installment due 30 days after the date such deficiency notice is received by the Borrower from the Administrative Agent and each following installment due 30 days after the preceding installment, with each prepayment of Advances  accompanied by accrued interest on the amount prepaid to the date of such prepayment and amounts, if any, required to be paid pursuant to Section 2.12 as a result of such prepayment being made on such date, and (y) such title defect or exception giving rise to such Borrowing Base reduction shall not constitute an Event of Default hereunder unless such title defect or exception is prohibited under Section 6.01.For the avoidance of doubt and for all purposes under this Agreement, if title to any of the Oil and Gas Property of the Borrower or Restricted Subsidiary (or any material part thereof) shall become the subject matter of litigation before any Governmental Authority or arbitrator that could reasonably be expected to result in a Material Adverse Change with respect to the Borrower's or such Restricted Subsidiary’s title to such Oil and Gas Properties, taken as a whole, then such litigation may be deemed to be a title defect or exception that is not a Permitted Lien regardless of whether the Borrower’s or such Restricted Subsidiary’s record title is then effected.

(l) Section 6.01 (Liens, Etc.) of the Credit Agreement is hereby amended by replacing the reference to "$1,000,000" found in clause (p) thereof with "$5,000,000".

(m) Section 6.02 (Debts, Guaranties, and other Obligations) of the Credit Agreement is hereby amended by replacing the reference to "$2,500,000" found in clause (e) thereof with "$10,000,000".

(n) Section 6.04(Merger or Consolidation; Asset Sales; Hedge Terminations) of the Credit Agreement is hereby amended by replacing clause (a)(i) therein in its entirety with the following:

(a)(i) Without the consent of all the Lenders (other than a Defaulting Lender), the Borrower shall not merge or consolidate with or into any other Person other than (x) with a Restricted Subsidiary with the Borrower being the surviving entity; provided that at the time thereof and immediately after giving effect thereto no Default shall have occurred and the Administrative Agent shall continue to have an Acceptable Security Interest in the Collateral, and (y) pursuant to a Conversion Transaction; provided that, at the time thereof and immediately after giving effect thereto, (1) no Default shall have occurred, (2) the Administrative Agent shall have received written notice and description of such Conversion Transaction at least 90 days prior (or such shorter time period acceptable to the Administrative Agent in its sole discretion) to the consummation of such Conversion Transaction (or, in the event of such Conversion Transaction is effected in connection with the entering into of the Highbridge Note Purchase Agreement, at least 14 days prior (or such shorter time period acceptable to the Administrative Agent in its sole discretion) to the consummation of such Conversion Transaction), (3) the Administrative Agent shall have received all documentation and other information that is required by regulatory authorities under applicable "know your customer" and anti-money-

laundering rules and regulations, including, without limitation, the Patriot Act, at least 10 Business Days’ prior to the consummation of such Conversion Transaction, (4) the Administrative Agent shall have received an assumption agreement in form and substance reasonably satisfactory to the Administrative Agent confirming the continuing obligations of the Borrower under each Loan Document to which it is a party and such other documents, filings and agreements necessary to maintain an Acceptable Security Interest in the Collateral, (5) the Administrative Agent shall have a certificate, as of the date acceptable to the Administrative Agent, of a Responsible Officer or the secretary or an assistant secretary of the Borrower (after giving effect to the Conversion Transaction) certifying (A) true and complete copy of the resolutions of the board of directors or managers (or other applicable governing body) of the Borrower approving the Loan Documents to which it is a party and authorizing the entering into of any Loan Document in connection with the assignment referred to in the preceding clause (4), (B) true and complete copy of the articles or certificate (as applicable) of incorporation (or formation) of the Borrower certified by the Secretary of State for the state of incorporation (or formation), (C) true and complete copy of the bylaws or other governing documents of the Borrower, (D) the names and true signatures of officers of the Borrower authorized to sign the Loan Documents to which the Borrower is a party, including notices, and (E) true and complete copy of certificate of good standing for the Borrower in the state of its incorporation (or formation), which good standing certificate shall be in effective on the date of such officer’s certificate, (6) as requested by the Administrative Agent, the Administrative Agent shall have received an opinion of counsel in form and substance satisfactory to the Administrative Agent covering the matters set forth in Exhibit K, and (7) the Administrative Agent shall have continue to have an Acceptable Security Interest in the Collateral.

(o) Section 6.05 (Restricted Payments) of the Credit Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

"Section 6.05Restricted Payments.  The Borrower shall not, nor shall it permit any of its Restricted Subsidiaries to, make any Restricted Payments, except that if no Default or Event of Default has occurred both before and after giving effect to the making of such Restricted Payment, (a) the Restricted Subsidiaries may make Restricted Payments to the Borrower, (b) the Borrower may make Restricted Payments to its Equity Interest holders in an amount equal to the income tax liabilities of such Person attributable to the earnings of the Borrower, and (c) in addition to the foregoing permitted distribution for tax liabilities, the Borrower may make Restricted Payments to AMIH on account of Equity Interests for purposes of AMIH paying interest it owes under the Highbridge Note Purchase Agreement so long as (i) the aggregate amount of all such Restricted Payments under this clause (c) shall not to exceed the aggregate amount of cash contribution made by AMIH to Borrower on account of Equity Interests since the Amendment No. 7 Effective Date, (ii) before and after giving effect to such Restricted Payment, Availability is equal to or greater than 10% of the Borrowing Base then in effect, and (iii) after giving effect to each such Restricted Payment, the Pro Forma Fixed Charge Coverage Ratio is not less than 1.00 to 1.00."

(p) Section 6.06 (Investments) of the Credit Agreement is hereby amended by (i) deleting the word "and" found at the end of clause (e) found therein, (ii) moving clause (f) found therein to clause (g), and (iii) adding the following new clause (f) thereto:

"(f)Investments in farm-outs, farm-ins, joint ventures,  area of mutual interest agreements, gathering systems, processing systems, pipelines or other similar arrangements, in each case, so long as(i) such Investment is usual and customary in the oil and gas exploration and production business located within the geographic boundaries of the United States of America, (ii) such Investment is directly in Oil and Gas Properties or in an asset (such as pipelines, gathering systems or processing facilities) which services or otherwise directly impacts the Borrower’s and Restricted Subsidiaries Oil and Gas Properties, and (iii) the Borrower would otherwise be in compliance with Section 6.10 after giving effect to such Investment; and"

(q) Section 6.13 (Gas Imbalances, Take-or-Pay or Other Prepayments) of the Credit Agreement is hereby amended by replacing the reference to "$3,000,000" found therein with "$10,000,000".

(r) Section 6.14 (Limitation on Hedging) of the Credit Agreement is hereby amended by deleting clause (c) therein in its entirety and replacing it with the following:

"(c)Additional Limitations on Hedging. Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any Hydrocarbon Hedge Contract; provided that, Borrower and its Restricted Subsidiaries may enter into Hydrocarbon Hedge Contracts covering PDP Reserves, PDNP Reserves and PUD Reserves subject to the following limitations:

(i) other than as provided in the immediately following clause (ii) and clause (iii), on the date that any such Hydrocarbon Hedge Contract is entered into and after giving effect to such Hydrocarbon Hedge Contract, no more than 85% of the Calculated Reserves may be covered by Hydrocarbon Hedge Contracts (it being understood that volumes of natural gas, crude oil, and natural gas liquids are calculated separately and that natural gas liquids may be hedged on terms reasonably satisfactory to the Administrative Agent by Hydrocarbon Hedge Contracts for crude oil, natural gas, natural gas liquids or a combination thereof);  provided that, if, as of any Test Date, the aggregate notional volumes of all the Borrower's and its Restricted Subsidiaries' respective hedges of natural gas, crude oil and natural gas liquids (calculated separately) underall Hydrocarbon Hedge Contracts corresponding to the delivery dates of the Actual Production exceeds 105% of Actual Production, then Borrower shall (A) furnish to Administrative Agent, by no later than 5:00 p.m. (Houston, Texas, time) on such Test Date, a detailed calculation of such determination and such excess, inform, and substance reasonably satisfactory to the Administrative Agent, and (B) no later than 15 days after such Test Date, Borrower shall (1) furnish to Administrative Agent an updated Engineering Report (the "Updated Engineering Report") in form and substance reasonably satisfactory to the Administrative Agent, (2) terminate, create off-setting positions or otherwise unwind existing Hydrocarbon Hedge Contracts such that, after giving effect thereto, no more than 85% of the Borrower's and its Restricted Subsidiaries' aggregate anticipated production of natural gas volumes, crude oil volumes, and natural gas liquids by volume attributable to Calculated Reserves are covered by all Hydrocarbon Hedge Contracts (it being understood that volumes of natural gas, crude oil, and natural gas liquids are calculated separately and that natural gas liquids may be hedged on terms reasonably satisfactory to the Administrative Agent by Hydrocarbon Hedge Contracts for crude oil, natural gas, natural gas liquids or a combination thereof), and Borrower shall deliver a

certificate of a Responsible  Officer of the Borrower to the Administrative Agent certifying to that effect; provided further that, if an Updated Engineering Report is updating an Independent Engineering Report, such Updated Engineering Report shall be an Independent Engineering Report;

(ii) the volume limitations in clause (i) shall not apply to put option contracts that are not related to corresponding calls, collars or swaps;

(iii) with respect to anticipated production of Hydrocarbons which are the subject of an Acquisition under which the Borrower or any Restricted Subsidiary is the purchaser, the Borrower and its Restricted Subsidiaries may enter into Hydrocarbon Hedge Contracts covering such anticipated production prior to effecting such Acquisition (regardless of the fact that such production is not yet owned by the Borrower or such Restricted Subsidiary)  so long as (A) a binding purchase agreement has been executed by the Borrower or a Restricted Subsidiary and the counterparties to such Acquisition, (B) at the time such Hydrocarbon Hedge Contracts are entered into, the aggregate Unused Commitment Amount is greater than or equal to 10% of the lesser of the Borrowing Base and the aggregate Commitments then in effect, (C) the Borrower shall, and shall cause its Restricted Subsidiaries to terminate, unwind or otherwise liquidate all such Hydrocarbon Hedge Contracts upon the earliest of (1) the 90th day following the full execution of the purchase agreement related to such Acquisition if the Acquisition has not been fully consummated by such date, (2) within 3 Business Days after the date upon on which such purchase agreement is terminated by any party thereto, and (3) the date upon which the Borrower or any Restricted Subsidiary believes, with reasonable certainty, that such Acquisition will not be consummated, and (D) at the time such Hedge Contracts are entered into, but after giving pro forma effect to such Acquisition (i.e. assuming that such Acquisition had gone into effect prior to or as of the date such Hydrocarbon Hedge Contracts are entered into and Engineering Report, for purposes of calculating Calculated Reserves, includes any Engineering Report covering the reserves that are the subject of such Acquisition)), such Hedge Contracts would be permitted under clause (i) above; and

(iv) such Hydrocarbon Hedge Contracts shall otherwise comply with the terms of this Agreement."

(s) Section 6.21 (Accounts Payable) of the Credit Agreement is hereby amended by replacing the reference to "$250,000" found in clause (b) thereof with "$3,000,000".

(t) Section 7.01 (Events of Default) of the Credit Agreement is hereby amended by (i) replacing the reference to each reference to "$2,500,000" found in clauses (d) and (f) thereof with “$5,000,000”,(ii) replacing the reference to "$1,000,000" found in clause (k) thereof with "$5,000,000", and (iii) replacing clause (l) in its entirety with the phrase “[Intentionally Omitted].”

Section 3. Representations and Warranties.  Each of the Guarantors and the Borrower hereby represents and warrants that: (a) after giving effect to this Agreement, the representations and warranties contained in the Credit Agreement, as amended hereby, and the representations and warranties contained in the other Loan Documents are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representation or warranty that already is qualified or modified by materiality in the text thereof) on and as of the Effective Date as if made on and as of such date except to the extent that any such representation or warranty expressly relates solely to an earlier date, in which case such representation or warranty is true and correct in all material respects (except that

such materiality qualifier shall not be applicable to any representation or warranty that already is qualified or modified by materiality in the text thereof) as of such earlier date; (b) no Default has occurred which is continuing; (c) the execution, delivery and performance of this Agreement are within the corporate, limited liability company, or partnership power and authority of such Person and have been duly authorized by appropriate corporate and governing action and proceedings; (d) this Agreement constitutes the legal, valid, and binding obligation of such Person enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the rights of creditors generally and general principles of equity; (e) there are no governmental or other third party consents, licenses and approvals required in connection with the execution, delivery, performance, validity and enforceability of this Agreement; and (f) the Liens under the Security Instruments are valid and subsisting and secure Borrower's and the Guarantors' obligations under the Loan Documents.

Section 4. Conditions to Effectiveness.This Agreement shall become effective on the Effective Date and enforceable against the parties hereto upon the occurrence of the following conditions precedent:

(a) The Administrative Agent shall have received multiple original counterparts, as requested by the Administrative Agent, of this Agreement duly and validly executed and delivered by duly authorized officers of the Borrower, the Guarantors and all the Lenders.

(a) The representations and warranties in this Agreement made by the Guarantors and the Borrower shall be true and correct in all material respects.

The Borrower shall have paid, and hereby agrees to pay all reasonable fees and expenses of the Administrative Agent's outside legal counsel and other consultants pursuant to all invoices presented for payment on or prior to the Effective Date. 

Section 5. Acknowledgments and Agreements. 

(a) The Borrower and each Guarantor acknowledges that on the date hereof all outstanding Obligations are payable in accordance with their terms and the Borrower and each Guarantor hereby waives any defense, offset, counterclaim or recoupment with respect thereto.

(b) The Administrative Agent and the Lenders hereby expressly reserve all of their rights, remedies, and claims under the Loan Documents.  Nothing in this Agreement shall constitute a waiver or relinquishment of (i) any Default or Event of Default under any of the Loan Documents, (ii) any of the agreements, terms or conditions contained in any of the Loan Documents, (iii) any rights or remedies of the Administrative Agent or any Lender with respect to the Loan Documents, or (iv) the rights of the Administrative Agent or any Lender to collect the full amounts owing to them under the Loan Documents.

(c) Each of the parties hereto hereby adopt, ratify, and confirm the Credit Agreement, as amended hereby, and acknowledges and agrees that the Credit Agreement, as amended hereby, is and remains in full force and effect, and the Borrower and the Guarantors acknowledge and agree that their respective liabilities and obligations under the Credit Agreement, as amended hereby, and the Guaranties, are not impaired in any respect by this Agreement.

(d) From and after the Effective Date, all references to the Credit Agreement and the Loan Documents shall mean such Credit Agreement and such Loan Documents as amended by this Agreement.

(e) This Agreement is a Loan Document for the purposes of the provisions of the other Loan Documents.  Without limiting the foregoing, any breach of representations, warranties, and covenants under this Agreement shall be a Default or Event of Default, as applicable, under the Credit Agreement.

(f) The Borrower, through its Subsidiary, Alta Mesa Eagle, LLC, intends to sell certain Oil and Gas Properties in the Eagle Ford Shale (the “Subject Disposition”) for an amount equal to $173,000,000 (the “Base Purchase Price”), subject to standard and customary purchase price closing adjustments, including reductions for the allocated value of any properties retained pending receipt of outstanding consents to assign (“Required Consents”).  Such Subject Disposition shall constitute a Triggering Event.  Each party hereto acknowledges and agrees that, pursuant to Section 2.02(e)(iii) of the Credit Agreement, effective upon the occurrence of such Triggering Event the Borrowing Base shall be automatically reduced by $100,000,000and the redetermined Borrowing Base shall be equal to $285,000,000.   The Borrowing Base as determined under this Section 5(f) shall remain in effect at that level until the effective date of the next Borrowing Base redetermination made in accordance with the terms of the Credit Agreement, as amended hereby.

(g) If, as of the effective date for the Borrowing Base redetermination scheduled under Section 2.02(b)(i) of the Credit Agreement for April of 2014 (the “Spring BB Effective Date”), the aggregate notional volumes of all of the Borrower’s and its Restricted Subsidiaries’ respective hedges of natural gas, crude oil and natural gas liquids under all Hydrocarbon Hedge Contracts exceeds 85% of the aggregate anticipated production of natural gas volumes, crude oil volumes, and natural gas liquids volumes attributable to Calculated Reserves as set forth in the Independent Engineering Report delivered in connection with such Borrowing Base redetermination, then no later than 15 days after the Spring BB Effective Date, (i) the Borrower shall  terminate, create off-setting positions or otherwise unwind existing Hydrocarbon Hedge Contracts such that, after giving effect thereto, no more than 85% of the Borrower's and its Restricted Subsidiaries' aggregate anticipated production of natural gas volumes, crude oil volumes, and natural gas liquids by volume attributable to Calculated Reserves (as set forth in the Independent Engineering Report delivered in connection with such Borrowing Base redetermination)  are covered by all Hydrocarbon Hedge Contracts (it being understood that volumes of natural gas, crude oil, and natural gas liquids are calculated separately and that natural gas liquids may be hedged on terms reasonably satisfactory to the Administrative Agent by Hydrocarbon Hedge Contracts for crude oil, natural gas, natural gas liquids or a combination thereof), and (ii) the Borrower shall deliver a certificate of a Responsible  Officer of the Borrower to the Administrative Agent certifying to that effect.The Borrower’s obligation under this Section 5(g) is notwithstanding anything to the contrary set forth in Section 6.14 of the Credit Agreement, as amended hereby.  A breach of the covenant set forth in this Section 5(g) shall constitute an immediate Event of Default under the Credit Agreement.

Section 6. Reaffirmation of the Guaranty.  Each Guarantor hereby ratifies, confirms, acknowledges and agrees that its obligations under its respective Guaranty are in full force and effect and that such Guarantor continues to unconditionally and irrevocably guarantee the full and punctual payment, when due, whether at stated maturity or earlier by acceleration or otherwise, of all of the Guaranteed Obligations (as defined in the Guaranties), as such Guaranteed Obligations may have been amended by this Agreement, and its execution and delivery of this Agreement does not indicate or establish an approval or consent requirement by such Guarantor under its respective Guaranty in connection with the execution and delivery of amendments, consents or waivers to the Credit Agreement, the Notes or any of the other Loan Documents.

Section 7. Counterparts.  This Agreement may be signed in any number of counterparts, each of which shall be an original and all of which, taken together, constitute a single instrument.  This

Agreement may be executed by facsimile signature or other similar electronic means and all such signatures shall be effective as originals.

Section 8. Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted pursuant to the Credit Agreement.

Section 9. Invalidity.  In the event that any one or more of the provisions contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement.

Section 10. Governing Law.  This Agreement shall be deemed to be a contract made under and shall be governed by and construed in accordance with the laws of the State of Texas.

Section 11. Entire Agreement.This Agreement, the Credit Agreement as amended by this Agreement, the Notes, and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

EX-10.3

EXHIBIT 10.3

SECOND AMENDED AND RESTATED PROMISSORY NOTE

$345,523.89Houston, TexasMarch 25, 2014

FOR VALUE RECEIVED, the undersigned, GALVESTON BAY RESOURCES, LP, a Texas limited partnership(“Maker”), hereby unconditionally promises to pay to MICHAEL E. ELLIS, a Texas resident (“Payee”), the original principal sum of THREE HUNDRED FORTY-FIVE THOUSAND, FIVE HUNDRED TWENTY-THREE AND 89/100 DOLLARS ($345,523.89)  in lawful money of the United States of America, together with interest on the unpaid principal balance from day to day remaining, computed from the date of the execution of the 2004 Note (defined below). Interest shall be paid at the agreed rate of ten percent (10.00%) per annum. This Note, including all principal and accrued but unpaid interest is due and payable on December 31, 2021 (the “Maturity Date”).  All past due principal and interest shall bear interest at the highest lawful rate per annum from maturity until paid.  Interest has accrued on the principal amount of $345,523.89 since the execution of the 2004 Note (defined below) as reflected in the books of Payee.

This Note is executed in assumption, renewal and extension but not discharge or novation of(a) that certain promissory note executed by Galveston Bay Resources, Inc. in favor of Payee, dated as of August 20, 2004, in the original principal amount of $345,523.89 (the “2004 Note”), (b) that certain promissory note executed by Maker in favor of Payee, dated as of October 1, 2005, in the original principal amount of $345,523.89 (the “2005 Note”), (c) that certain promissory note executed by Maker in favor of Payee, dated as of February 26, 2007, in the original principal amount of $340,249.78 (the “2007 Note”), (d) that certain promissory note executed by Maker, dated as of May 13, 2010, in favor of Payee in the original principal amount of $345,523.89 (the “2010 Note”) and (e) that certain amended and restated promissory note executed by Maker in favor of Payee, dated as of June 30, 2010, in the original principal amount of $345,523.89.  Maker and Payee agree that the principal amount of the 2007 Note was incorrectly stated, and that the correct principal amount of the 2007 Note should have been $345,523.89.

Maker’s obligations under this Note are (a) subordinate and inferior to all “Obligations” of Alta Mesa Holdings, LP, a Texas limited partnership (the “Partnership”) as defined in the Sixth Amended and Restated Credit Agreement dated as of May 13, 2010 (as such agreement has been and  may be modified, amended or restated from time to time, the “First Lien Credit Agreement”), and no principal or interest payments may be made on this Note without the unanimous approval of the “Lenders” (as defined in the First Lien Credit Agreement) and (b)  subordinate and inferior toall obligations of the Partnership in connection with any “Senior Unsecured Notes” (as defined in the First Lien Credit Agreement) issued or guaranteed by the Partnership or its affiliates and no principal or interest payments may be made on this Note until such Senior Unsecured Notes have been paid in full.  By acceptance of this Note, Payee agrees to be bound by the terms of such subordination and shall not accept any payments under this Note from Maker in violation thereof.

The Maker and Payee agree that no prepayment or other payments shall be made or received in respect of this Note prior to the Maturity Date, except pursuant to Section 13(d)(iv) of the Stockholders Agreement (defined below).

Reference is made to the Partnership Agreement the Partnership adopted on March 25, 2014 (the “Partnership Agreement”).  The Maker and Payee hereto covenant and agree that any amounts due and payable by Maker to Payee in respect of this Note shall (i) not reduce the cash or other assets that would otherwise be distributable to the holders of the Class B Units (as defined in the Partnership Agreement) in accordance with the Partnership Agreement (it being agreed that payment of this Note by Maker is expressly subordinate and junior to the right of the holders of the Class B Units to receive distributions from the Partnership unencumbered and unaffected by this Note) and (ii) without limiting the foregoing, be payable exclusively from, and recourse shall be limited exclusively to, the cash or other assets otherwise distributable to the General Partner (as defined in the Partnership Agreement) and the holders of the Class A Units.  In connection with the foregoing, the parties agree that all distributions due to the General Partner, the holders of the Class A Units and the holders of the Class B Units by the Partnership shall be determined as if this Note did not exist.  Notwithstanding the foregoing, if the Payee receives any payment or distribution on this Note in contravention of the foregoing, including any payment or distribution in connection with any bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Partnership, Payee shall hold such payment or distribution in trust for the holders of the Class B Units and shall promptly pay such amount to the holders of the Class B Units to the extent such holders are entitled to payment of same as provided under the Partnership Agreement.  The holders of the Class B Units are entitled to the benefits of the foregoing subordination provisions and (if not parties to a subordination agreement containing such terms) are third-party beneficiaries thereof.

Reference is made to the Note Purchase Agreement dated as of March 25, 2014 among Alta Mesa Investment Holdings Inc. (“AMIH”), Cortland Capital Market Services LLC, as administrative agent (the “Agent”) and the holders from time to time party thereto (as amended, restated or otherwise modified from time to time, the “Note Purchase Agreement”).  In addition to the foregoing subordination agreements, if any Note Obligation (as defined in the Note Purchase Agreement) remains outstanding, payment of the principal, interest or any other amounts owing under this Note shall not be made by Maker to Payee.  If, notwithstanding the provisions of the preceding sentence, any payment of any obligation owing under this Note shall be received by the Payee, such payment shall be (and shall be deemed to be) held in trust for the benefit of, and shall be paid over or delivered or transferred to, the Agent for the benefit of the holders of the Note Obligations for application to the payment of all Note Obligations then due and payable or, if no such Note Obligations are then due and payable, to be held as cash collateral for all future Note Obligations that may become due and payable.  The holders of the Note Obligations are entitled to the benefits of the foregoing subordination provisions and (if not parties to a subordination agreement containing such terms) are third-party beneficiaries thereof.  

Reference is made to the Certificate of Designation of Series B Preferred Stock of AMIH approved and adopted on March 25, 2014 (the “Certificate of Designation”).  If the Holders (as defined in the Certificate of Designation) have any right or claim to any assets of AMIH whether as a holder of preferred or common shares of AMIH (including, without limitation, in respect of

distributions made by AMIH), payment of the principal, interest or any other amounts owing under this Note shall not be made by Maker to Payee.  If, notwithstanding the provisions of the preceding sentence, any payment of any obligation owing under this Note shall be received by the Payee, such payment shall be (and shall be deemed to be) held in trust for the benefit of, and shall be paid over or delivered or transferred to, AMIH for application to any future distributions to be made by AMIH to the Holders.  The Holders are entitled to the benefits of the foregoing subordination provisions and (if not parties to a subordination agreement containing such terms) are third-party beneficiaries thereof.  

This Note may not be amended or otherwise modified without the consent of the Lead Investor (as defined in the Note Purchase Agreement) or the Holders (as defined in the Certificate of Designation) that collectively hold more than fifty percent (50%) of the issued and outstanding shares of Preferred Stock (as defined in the Certificate of Designation).  Neither Maker nor Payee may assign their respective rights and obligations under this Note without the consent of the Lead Investor (as defined in the Note Purchase Agreement) or the Holders (as defined in the Certificate of Designation) that collectively hold more than fifty percent (50%) of the issued and outstanding shares of Preferred Stock (as defined in the Certificate of Designation).

Subject to the foregoing subordinationagreements, this Note may be prepaid in whole or in part at any time without penalty.  If this Note is placed in the hands of an attorney for collection or is collected by suit or through the probate or bankruptcy courts, then Maker shall additionally pay the reasonable attorney’s fees and cost of collection of the holder thereof. Maker and all endorsers and guarantors hereof, if any, and all others who may become liable on or for all or any part of the obligations evidenced hereby, severally waive presentment for payment, protest, notice of protest, and notice of non-payment hereof and to the release of any person liable hereon upon any terms deemed adequate by the holder hereof, in his sole discretion.  Any such renewal or extension hereof or the release of any person liable hereon may be made without notice to any of said parties and without affecting their liability. 

Reference is made to the Stockholders Agreement dated as of March 25, 2014, by and among AMIH and each of the Stockholders named on Exhibit A thereto (the “Stockholders Agreement”).  This Note and any amounts due hereunder shall be convertible into Common Equity (as defined in the Stockholders Agreement) in accordance with the terms of Section 13(d)(iv) of the Stockholders Agreement. 

[Signature page follows]

MAKER:

GALVESTON BAY RESOURCES, LP,

a  Texas limited partnership

By:Alta Mesa GP, LLC,

its general partner

  By:/s/Michael A. McCabe  

Michael A. McCabe

Chief Financial Officer

PAYEE:

/s/ Michael E. Ellis

Michael E. Ellis

EX-10.4

EXHIBIT 10.4

SECOND AMENDED AND RESTATED PROMISSORY NOTE

$11,561,550.87Houston, TexasMarch 25, 2014

FOR VALUE RECEIVED, the undersigned, ALTA MESA HOLDINGS, LP, a Texas limited partnership(“Maker”), hereby unconditionally promises to pay to MICHAEL E. ELLIS, a Texas resident (“Payee”), the original principal sum of ELEVEN MILLION, FIVE HUNDRED SIXTY-ONE THOUSAND, FIVE HUNDRED FIFTY AND 87/100 DOLLARS ($11,561,550.87) in lawful money of the United States of America, together with interest on the unpaid principal balance from day to day remaining, computed from the date of the execution of the 2004 Note (defined below). Interest shall be paid at the agreed rate of ten percent (10.00%) per annum. This Note, including all principal and accrued but unpaid interest is due and payable on December 31, 2021 (the “Maturity Date”).  All past due principal and interest shall bear interest at the highest lawful rate per annum from maturity until paid.  Interest has accrued on the principal amount of $11,561,550.87 since the execution of the 2004 Note (defined below) as reflected in the books of Payee.

This Note is executed in assumption, renewal and extension but not discharge or novation of (a) that certain promissory note executed by Alta Mesa Resources, Inc. in favor of Payee, dated as of August 20, 2004, in the original principal amount of $11,561,550.87 (the “2004 Note”), (b) that certain promissory note executed by Alta Mesa Resources, LP in favor of Payee, dated as of October 1, 2005, in the original principal amount of $11,561,550.87 (the “2005 Note”), (c) that certain promissory note executed by Alta Mesa Resources, LP in favor of Payee, dated as of February 26, 2007, in the original principal amount of $11,386,550.87 (the “2007 Note”), (d) that certain promissory note executed by Alta Mesa Resources, LP, a Texas limited partnership, dated as of May 13, 2010, in favor of Payee in the original principal amount of $11,561,550.87 (the “2010 Note”) and (e) that certain amended and restated promissory note executed by Maker in favor of Payee, dated as of June 30, 2010, in the original principal amount of $11,561,550.87.  Maker and Payee agree that the principal amount of the 2007 Note was incorrectly stated, and that the correct principal amount of the 2007 Note should have been $11,561,550.87.

Maker’s obligations under this Note are (a) subordinate and inferior to all “Obligations” of Maker as defined in the Sixth Amended and Restated Credit Agreement dated as of May 13, 2010 (as such agreement has been and  may be modified, amended or restated from time to time, the “First Lien Credit Agreement”), and no principal or interest payments may be made on this Note without the unanimous approval of the “Lenders” (as defined in the First Lien Credit Agreement) and (b)  subordinate and inferior toall obligations of Maker in connection with any “Senior Unsecured Notes” (as defined in the First Lien Credit Agreement) issued or guaranteed by Maker or its affiliates and no principal or interest payments may be made on this Note until such Senior Unsecured Notes have been paid in full.  By acceptance of this Note, Payee agrees to be bound by the terms of such subordination and shall not accept any payments under this Note from Maker in violation thereof.

The Maker and Payee agree that no prepayment or other payments shall be made or received in respect of this Note prior to the Maturity Date, except pursuant to Section 13(d)(iv) of the Stockholders Agreement (defined below).

Reference is made to the Partnership Agreement of Alta Mesa Holdings, LP, a Texas limited partnership (the “Partnership”) Maker adopted on March 25, 2014 (the “Partnership Agreement”).  The Maker and Payee hereto covenant and agree that any amounts due and payable by Maker to Payee in respect of this Note shall (i) not reduce the cash or other assets that would otherwise be distributable to the holders of the Class B Units (as defined in the Partnership Agreement) in accordance with the Partnership Agreement (it being agreed that payment of this Note by Maker is expressly subordinate and junior to the right of the holders of the Class B Units to receive distributions from the Partnership unencumbered and unaffected by this Note) and (ii) without limiting the foregoing, be payable exclusively from, and recourse shall be limited exclusively to, the cash or other assets otherwise distributable to the General Partner (as defined in the Partnership Agreement) and the holders of the Class A Units.  In connection with the foregoing, the parties agree that all distributions due to the General Partner, the holders of the Class A Units and the holders of the Class B Units by the Partnership shall be determined as if this Note did not exist.  Notwithstanding the foregoing, if the Payee receives any payment or distribution on this Note in contravention of the foregoing, including any payment or distribution in connection with any bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Partnership, Payee shall hold such payment or distribution in trust for the holders of the Class B Units and shall promptly pay such amount to the holders of the Class B Units to the extent such holders are entitled to payment of same as provided under the Partnership Agreement.  The holders of the Class B Units are entitled to the benefits of the foregoing subordination provisions and (if not parties to a subordination agreement containing such terms) are third-party beneficiaries thereof.

Reference is made to the Note Purchase Agreement dated as of March 25, 2014 among Alta Mesa Investment Holdings Inc. (“AMIH”), Cortland Capital Market Services LLC, as administrative agent (the “Agent”) and the holders from time to time party thereto (as amended, restated or otherwise modified from time to time, the “Note Purchase Agreement”).  In addition to the foregoing subordination agreements, if any Note Obligation (as defined in the Note Purchase Agreement) remains outstanding, payment of the principal, interest or any other amounts owing under this Note shall not be made by Maker to Payee.  If, notwithstanding the provisions of the preceding sentence, any payment of any obligation owing under this Note shall be received by the Payee, such payment shall be (and shall be deemed to be) held in trust for the benefit of, and shall be paid over or delivered or transferred to, the Agent for the benefit of the holders of the Note Obligations for application to the payment of all Note Obligations then due and payable or, if no such Note Obligations are then due and payable, to be held as cash collateral for all future Note Obligations that may become due and payable.  The holders of the Note Obligations are entitled to the benefits of the foregoing subordination provisions and (if not parties to a subordination agreement containing such terms) are third-party beneficiaries thereof.  

Reference is made to the Certificate of Designation of Series B Preferred Stock of AMIH approved and adopted on March 25, 2014 (the “Certificate of Designation”).  If the Holders (as defined in the Certificate of Designation) have any right or claim to any assets of AMIH whether

as a holder of preferred or common shares of AMIH (including, without limitation, in respect of distributions made by AMIH), payment of the principal, interest or any other amounts owing under this Note shall not be made by Maker to Payee.  If, notwithstanding the provisions of the preceding sentence, any payment of any obligation owing under this Note shall be received by the Payee, such payment shall be (and shall be deemed to be) held in trust for the benefit of, and shall be paid over or delivered or transferred to, AMIH for application to any future distributions to be made by AMIH to the Holders.  The Holders are entitled to the benefits of the foregoing subordination provisions and (if not parties to a subordination agreement containing such terms) are third-party beneficiaries thereof.  

This Note may not be amended or otherwise modified without the consent of the Lead Investor (as defined in the Note Purchase Agreement) or the Holders (as defined in the Certificate of Designation) that collectively hold more than fifty percent (50%) of the issued and outstanding shares of Preferred Stock (as defined in the Certificate of Designation).  Neither Maker nor Payee may assign their respective rights and obligations under this Note without the consent of the Lead Investor (as defined in the Note Purchase Agreement) or the Holders (as defined in the Certificate of Designation) that collectively hold more than fifty percent (50%) of the issued and outstanding shares of Preferred Stock (as defined in the Certificate of Designation).

Subject to the foregoing subordinationagreements, this Note may be prepaid in whole or in part at any time without penalty.  If this Note is placed in the hands of an attorney for collection or is collected by suit or through the probate or bankruptcy courts, then Maker shall additionally pay the reasonable attorney’s fees and cost of collection of the holder thereof. Maker and all endorsers and guarantors hereof, if any, and all others who may become liable on or for all or any part of the obligations evidenced hereby, severally waive presentment for payment, protest, notice of protest, and notice of non-payment hereof and to the release of any person liable hereon upon any terms deemed adequate by the holder hereof, in his sole discretion.  Any such renewal or extension hereof or the release of any person liable hereon may be made without notice to any of said parties and without affecting their liability. 

Reference is made to the Stockholders Agreement dated as of March 25, 2014, by and among AMIH and each of the Stockholders named on Exhibit A thereto (the “Stockholders Agreement”).  This Note and any amounts due hereunder shall be convertible into Common Equity (as defined in the Stockholders Agreement) in accordance with the terms of Section 13(d)(iv) of the Stockholders Agreement. 

[Signature page follows]

MAKER:

ALTA MESA HOLDINGS, LP,

a  Texas limited partnership

By:Alta Mesa Holdings GP, LLC,

its general partner

  By:/s/Michael A. McCabe

Michael A. McCabe

Chief Financial Officer

PAYEE:

/s/ Michael E. Ellis

Michael E. Ellis

EX-10.5

EXHIBIT 10.5

SECOND AMENDED AND RESTATED PROMISSORY NOTE

$178,278.21Houston, TexasMarch 25, 2014

FOR VALUE RECEIVED, the undersigned, PETRO ACQUISITIONS, LP, a Texas limited partnership(“Maker”), hereby unconditionally promises to pay to MICHAEL E. ELLIS, a Texas resident (“Payee”), the original principal sum of ONE HUNDRED SEVENTY-EIGHT THOUSAND, TWO HUNDRED SEVENTY-EIGHT AND 21/100 DOLLARS ($178,278.21)  in lawful money of the United States of America, together with interest on the unpaid principal balance from day to day remaining, computed from the date of the execution of the 2004 Note (defined below). Interest shall be paid at the agreed rate of ten percent (10.00%) per annum. This Note, including all principal and accrued but unpaid interest is due and payable on December 31, 2021 (the “Maturity Date”).  All past due principal and interest shall bear interest at the highest lawful rate per annum from maturity until paid.  Interest has accrued on the principal amount of $178,278.21 since the execution of the 2004 Note (defined below) as reflected in the books of Payee.

This Note is executed in assumption, renewal and extension but not discharge or novation of(a) that certain promissory note executed by Petro Acquisitions, Inc. in favor of Payee, dated as of August 20, 2004, in the original principal amount of $178,278.21 (the “2004 Note”), (b) that certain promissory note executed by Maker in favor of Payee, dated as of October 1, 2005, in the original principal amount of $178,278.21 (the “2005 Note”), (c) that certain promissory note executed by Maker in favor of Payee, dated as of February 26, 2007, in the original principal amount of $178,278.21 (the “2007 Note”), (d) that certain promissory note executed by Maker, dated as of May 13, 2010, in favor of Payee in the original principal amount of $178,278.21 (the “2010 Note”) and (e) that certain amended and restated promissory note executed by Maker in favor of Payee, dated as of June 30, 2010, in the original principal amount of $178,278.21.

Maker’s obligations under this Note are (a) subordinate and inferior to all “Obligations” of Alta Mesa Holdings, LP, a Texas limited partnership (the “Partnership”) as defined in the Sixth Amended and Restated Credit Agreement dated as of May 13, 2010 (as such agreement has been and  may be modified, amended or restated from time to time, the “First Lien Credit Agreement”), and no principal or interest payments may be made on this Note without the unanimous approval of the “Lenders” (as defined in the First Lien Credit Agreement) and (b)  subordinate and inferior toall obligations of the Partnership in connection with any “Senior Unsecured Notes” (as defined in the First Lien Credit Agreement) issued or guaranteed by the Partnership or its affiliates and no principal or interest payments may be made on this Note until such Senior Unsecured Notes have been paid in full.  By acceptance of this Note, Payee agrees to be bound by the terms of such subordination and shall not accept any payments under this Note from Maker in violation thereof.

The Maker and Payee agree that no prepayment or other payments shall be made or received in respect of this Note prior to the Maturity Date, except pursuant to Section 13(d)(iv) of the Stockholders Agreement (defined below).

Reference is made to the Partnership Agreement the Partnership adopted on March 25, 2014 (the “Partnership Agreement”).  The Maker and Payee hereto covenant and agree that any amounts due and payable by Maker to Payee in respect of this Note shall (i) not reduce the cash or other assets that would otherwise be distributable to the holders of the Class B Units (as defined in the Partnership Agreement) in accordance with the Partnership Agreement (it being agreed that payment of this Note by Maker is expressly subordinate and junior to the right of the holders of the Class B Units to receive distributions from the Partnership unencumbered and unaffected by this Note) and (ii) without limiting the foregoing, be payable exclusively from, and recourse shall be limited exclusively to, the cash or other assets otherwise distributable to the General Partner (as defined in the Partnership Agreement) and the holders of the Class A Units.  In connection with the foregoing, the parties agree that all distributions due to the General Partner, the holders of the Class A Units and the holders of the Class B Units by the Partnership shall be determined as if this Note did not exist.  Notwithstanding the foregoing, if the Payee receives any payment or distribution on this Note in contravention of the foregoing, including any payment or distribution in connection with any bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Partnership, Payee shall hold such payment or distribution in trust for the holders of the Class B Units and shall promptly pay such amount to the holders of the Class B Units to the extent such holders are entitled to payment of same as provided under the Partnership Agreement.  The holders of the Class B Units are entitled to the benefits of the foregoing subordination provisions and (if not parties to a subordination agreement containing such terms) are third-party beneficiaries thereof.

Reference is made to the Note Purchase Agreement dated as of March 25, 2014 among Alta Mesa Investment Holdings Inc. (“AMIH”), Cortland Capital Market Services LLC, as administrative agent (the “Agent”) and the holders from time to time party thereto (as amended, restated or otherwise modified from time to time, the “Note Purchase Agreement”).  In addition to the foregoing subordination agreements, if any Note Obligation (as defined in the Note Purchase Agreement) remains outstanding, payment of the principal, interest or any other amounts owing under this Note shall not be made by Maker to Payee.  If, notwithstanding the provisions of the preceding sentence, any payment of any obligation owing under this Note shall be received by the Payee, such payment shall be (and shall be deemed to be) held in trust for the benefit of, and shall be paid over or delivered or transferred to, the Agent for the benefit of the holders of the Note Obligations for application to the payment of all Note Obligations then due and payable or, if no such Note Obligations are then due and payable, to be held as cash collateral for all future Note Obligations that may become due and payable.  The holders of the Note Obligations are entitled to the benefits of the foregoing subordination provisions and (if not parties to a subordination agreement containing such terms) are third-party beneficiaries thereof.  

Reference is made to the Certificate of Designation of Series B Preferred Stock of AMIH approved and adopted on March 25, 2014 (the “Certificate of Designation”).  If the Holders (as defined in the Certificate of Designation) have any right or claim to any assets of AMIH whether as a holder of preferred or common shares of AMIH (including, without limitation, in respect of

distributions made by AMIH), payment of the principal, interest or any other amounts owing under this Note shall not be made by Maker to Payee.  If, notwithstanding the provisions of the preceding sentence, any payment of any obligation owing under this Note shall be received by the Payee, such payment shall be (and shall be deemed to be) held in trust for the benefit of, and shall be paid over or delivered or transferred to, AMIH for application to any future distributions to be made by AMIH to the Holders.  The Holders are entitled to the benefits of the foregoing subordination provisions and (if not parties to a subordination agreement containing such terms) are third-party beneficiaries thereof.  

This Note may not be amended or otherwise modified without the consent of the Lead Investor (as defined in the Note Purchase Agreement) or the Holders (as defined in the Certificate of Designation) that collectively hold more than fifty percent (50%) of the issued and outstanding shares of Preferred Stock (as defined in the Certificate of Designation).  Neither Maker nor Payee may assign their respective rights and obligations under this Note without the consent of the Lead Investor (as defined in the Note Purchase Agreement) or the Holders (as defined in the Certificate of Designation) that collectively hold more than fifty percent (50%) of the issued and outstanding shares of Preferred Stock (as defined in the Certificate of Designation).

Subject to the foregoing subordinationagreements, this Note may be prepaid in whole or in part at any time without penalty.  If this Note is placed in the hands of an attorney for collection or is collected by suit or through the probate or bankruptcy courts, then Maker shall additionally pay the reasonable attorney’s fees and cost of collection of the holder thereof. Maker and all endorsers and guarantors hereof, if any, and all others who may become liable on or for all or any part of the obligations evidenced hereby, severally waive presentment for payment, protest, notice of protest, and notice of non-payment hereof and to the release of any person liable hereon upon any terms deemed adequate by the holder hereof, in his sole discretion.  Any such renewal or extension hereof or the release of any person liable hereon may be made without notice to any of said parties and without affecting their liability. 

Reference is made to the Stockholders Agreement dated as of March 25, 2014, by and among AMIH and each of the Stockholders named on Exhibit A thereto (the “Stockholders Agreement”).  This Note and any amounts due hereunder shall be convertible into Common Equity (as defined in the Stockholders Agreement) in accordance with the terms of Section 13(d)(iv) of the Stockholders Agreement. 

[Signature page follows]

MAKER:

PETRO ACQUISITIONS, LP,

a  Texas limited partnership

By:Alta Mesa GP, LLC,

its general partner

  By:/s/ Michael A. McCabe

Michael A. McCabe

Chief Financial Officer

PAYEE:

/s/ Michael E. Ellis

Michael E. Ellis

Signature Page to Second Amended and Restated Promissory Note

EX-99.1

Exhibit 99.1

ALTA MESA HOLDINGS, LP

UNAUDITED PRO FORMA CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated financial statements and explanatory notes give effect to the sale of certain oil and natural gas properties by Alta Mesa Holdings, LP (“Alta Mesa,” “we,” “us”), located in our Eagleville field in the Eagle Ford Shale inSouth Texas to Memorial Production Partners LP (“Memorial”) on March 25, 2014.

The unaudited pro forma condensed consolidated financial statements and explanatory notes are based on the estimates and assumptions set forth in the explanatory notes. The unaudited pro forma condensed consolidated financial statements have been prepared utilizing our historical consolidated financial statements, and should be read in conjunction with the historical consolidated financial statements and notes thereto.

The unaudited pro forma consolidated statements of operations have been prepared as if the sale transaction had been consummated on January 1, 2012. The unaudited condensed consolidated balance sheet has been prepared as if the sale transaction had been consummated September 30, 2013.

The unaudited pro forma condensed consolidated financial statements are presented for informational purposes only, are based on certain assumptions that we believe are reasonable, and do not purport to represent our financial condition or our results of operations had the business combinations occurred on the dates noted above or to project the results for any future date or period. In the opinion of management, all adjustments have been made that are necessary to present fairly the unaudited pro forma condensed consolidated financial information.

The unaudited pro forma condensed consolidated financial statements and explanatory notes are based on the estimates and assumptions set forth in the explanatory notes.

ALTA MESA HOLDINGS, LP

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

BALANCE SHEETS

						Pro Forma
	September 30,		Pro forma			September 30,
	2013		Adjustments			2013
	(in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	6,865	$	—		$	6,865
Accounts receivable, net		43,025		—			43,025
Other receivables		1,282		—			1,282
Prepaid expenses and other current assets		3,309		—			3,309
Derivative financial instruments		10,256		—			10,256
TOTAL CURRENT ASSETS		64,737		—			64,737
PROPERTY AND EQUIPMENT
Oil and natural gas properties, successful efforts method, net		746,454		(95,411)	(1)		651,043
Other property and equipment, net		8,724		—			8,724
TOTAL PROPERTY AND EQUIPMENT, NET		755,178		(95,411)			659,767
OTHER ASSETS
Investment in Partnership — cost		9,000		—			9,000
Deferred financing costs, net		11,661		—			11,661
Derivative financial instruments		6,915		—			6,915
Advances to operators		3,926		—			3,926
Deposits and other assets		1,804		—			1,804
TOTAL OTHER ASSETS		33,306		—			33,306
TOTAL ASSETS	$	853,221	$	(95,411)		$	757,810
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	101,663	$	—		$	101,663
Current portion, asset retirement obligations		2,519		—			2,519
Derivative financial instruments		2,241		—			2,241
TOTAL CURRENT LIABILITIES		106,423		—			106,423
LONG-TERM LIABILITIES
Asset retirement obligations, net of current portion		47,855		(286)	(1)		47,569
Long-term debt		703,741		(173,000)	(2)		530,741
Notes payable to founder		23,027		—			23,027
Other long-term liabilities		2,398		—			2,398
TOTAL LONG-TERM LIABILITIES		777,021		(173,286)			603,735
TOTAL LIABILITIES		883,444		(173,286)			710,158
PARTNERS’ CAPITAL (DEFICIT)		(30,223)		77,875	(1)		47,652
TOTAL LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)	$	853,221	$	(95,411)		$	757,810

See notes to the unaudited pro forma condensed consolidated financial statements.

ATLA MESA HOLDINGS, LP

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2012

			Pro forma				Pro Forma
		Dec 31, 2012	Adjustments				Dec 31, 2012
			(in thousands)
REVENUES
Oil, natural gas and natural gas liquids	$	332,166	$	(38,682)	(1)	$	293,484
Other		4,567		—			4,567
		336,733		(38,682)			298,051
Unrealized loss — oil and natural gas derivative contracts		(17,434)		—			(17,434)
TOTAL REVENUES		319,299		(38,682)			280,617
EXPENSES
Lease and plant operating expense		69,047		(3,982)	(1)		65,065
Production and ad valorem taxes		23,485		(3,952)	(1)		19,533
Workover expense		12,740		(473)	(1)		12,267
Exploration expense		21,912		—			21,912
Depreciation, depletion, and amortization expense		109,252		(4,522)	(1)		104,730
Impairment expense		96,227		—			96,227
Accretion expense		1,813		(10)	(1)		1,803
General and administrative expense		40,222		—			40,222
TOTAL EXPENSES		374,698		(12,939)			361,759
INCOME (LOSS) FROM OPERATIONS		(55,399)		(25,743)			(81,142)
OTHER INCOME (EXPENSE)
Interest expense, net		(41,833)		4,425	(2)		(37,408)
Litigation settlement		1,250		—			1,250
TOTAL OTHER INCOME (EXPENSE)		(40,583)		4,425			(36,158)
(LOSS) BEFORE INCOME TAXES		(95,982)		(21,318)			(117,300)
PROVISION FOR STATE INCOME TAXES		107		—			107
NET (LOSS)	$	(95,875)	$	(21,318)		$	(117,193)

See notes to the unaudited pro forma condensed consolidated financial statements.

ALTA MESA HOLDINGS, LP

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER  30, 2013

			Pro forma				Pro Forma
		Sept 30, 2013	Adjustments				Sept 30, 2013
				(in thousands)
REVENUES
Oil, natural gas and natural gas liquids	$	291,430	$	(61,443)	(1)	$	229,987
Other		1,110		—			1,110
		292,540		(61,443)			231,097
Unrealized gain — oil and natural gas derivative contracts		(20,405)		—			(20,405)
TOTAL REVENUES		272,135		(61,443)			210,692
EXPENSES
Lease and plant operating expense		51,681		(4,475)	(1)		47,206
Production and ad valorem taxes		21,326		(5,361)	(1)		15,965
Workover expense		12,013		(382)	(1)		11,631
Exploration expense		22,374		—			22,374
Depreciation, depletion, and amortization expense		83,547		(12,043)	(1)		71,504
Impairment expense		28,618		—			28,618
Accretion expense		1,352		(14)	(1)		1,338
Loss on sale of assets		2,267		—			2,267
General and administrative expense		32,139		—			32,139
TOTAL EXPENSES		255,317		(22,275)			233,042
INCOME FROM OPERATIONS		16,818		(39,168)			(22,350)
OTHER INCOME (EXPENSE)
Interest expense, net		(40,673)		3,314	(2)		(37,359)
TOTAL OTHER INCOME (EXPENSE)		(40,673)		3,314			(37,359)
INCOME BEFORE INCOME TAXES		(23,855)		(35,854)			(59,709)
PROVISION FOR STATE INCOME TAXES		—		—			—
NET INCOME	$	(23,855)	$	(35,854)		$	(59,709)

See notes to the unaudited pro forma condensed consolidated financial statements.

ALTA MESA HOLDINGS, LP

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDTAED FINANCIAL STATEMENTS

1. Description of the transaction

On March 25, 2014 we closed the sale of certain of our properties located primarily in Karnes County, Texas to Memorial Production Partners LP, comprising a portion of our Eagleville field (“Eagleville divestiture”).  The properties sold included a working interest in all of our 112 producing wells and five wells in which we own an overriding royalty interest as of the effective date of January 1, 2014.  We retained a net profits interest in these wells based on 50% of our original working interest in 2014, declining to 30% in 2015, 15% in 2016, and zero in 2017.   Also included in the sale was a 30% undivided interest in all our Eagleville mineral leases and interests, and 30% of our working interest in all our wells in progress on December 31, 2013 or drilled after January 1, 2014.  The cash purchase price was$173 million.  The purchase and sale agreement provides for customary adjustments to the purchase price for revenues and expenses incurred after the effective date.  Cash received was utilized to pay down borrowings under our senior secured revolving credit facility.

As of January 1, 2014, estimated net proved reserves sold were approximately 7.7 MMBOE. 

2. Basis of Presentation

The unaudited pro forma condensed consolidated financial information was prepared under the existing U.S. GAAP standards, which are subject to change and interpretation and was based on the historical consolidated financial statements of Alta Mesa.

The pro forma adjustments to historical financial information are based on currently available information and certain estimates and assumptions and therefore the actual effects of this transaction will differ from the pro forma adjustments.

3.  Adjustments and Assumptions to the Unaudited Pro Forma Condensed Consolidated Balance Sheet

The Unaudited Pro Forma Condensed Statements of Operations were prepared assuming the transaction occurred on September 30, 2013.

The unaudited pro forma consolidated balance sheet as of September 30, 2013 reflects the following adjustments:

(1) Adjustment to reflect the Eagleville divestiture providing for:

· recognition of net cash proceeds received;

· the elimination of the historical accounts of the assets;

· recognition of related net gain on sale of $77.9 million; and

(2) Adjustment to recognize the use of cash proceeds to repay borrowings under our senior secured revolving credit facility.

4. Adjustments and Assumptions to the Unaudited Pro Forma Condensed Consolidated Statements of Operations

The Unaudited Pro Forma Condensed Statements of Operations were prepared assuming the transaction occurred on January 1, 2012.

Adjustments to the Pro Forma Condensed Statements of Operations for the twelve months ended December 31, 2012 and the nine months ended September 30, 2013:

(1) Elimination of the revenue and direct operating expenses and depreciation, depletion and amortization of the assets sold;

(2) Adjustment to interest expense reflecting the repayment of debt under our revolving credit facility as if the sale and repayment had taken place January 1, 2012.  The estimated related reduction in our interest expense was computed using actual historical average interest rates for the periods. It also reflects the reduction in cash flow attributable to the sale.

The gain on sale of the assets is not included as a pro forma adjustment in the pro forma condensed statements of operations as it is a nonrecurring item.