Exhibit 10.1

Execution Version

TAX RECEIVABLE AGREEMENT

by and between

ROSEHILL RESOURCES INC.,

TEMA OIL AND GAS COMPANY,

AND

AGENT

DATED AS OF APRIL 27, 2017

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

TABLE OF CONTENTS

 

Article I DEFINITIONS

     2  

Section 1.1 Definitions

     2  

Section 1.2 Other Definitional and Interpretative Provisions

     10  

Article II DETERMINATION OF CERTAIN REALIZED TAX BENEFITS

     10  

Section 2.1 Basis Adjustment Schedules

     10  

Section 2.2 Tax Benefit Payment Schedules

     10  

Section 2.3 Procedure; Amendments

     11  

Article III TAX BENEFIT PAYMENTS

     12  

Section 3.1 Payments

     12  

Section 3.2 No Duplicative Payments

     13  

Section 3.3 Pro Rata Payments

     13  

Article IV TERMINATION

     14  

Section 4.1 Early Termination at Election of the Corporate Taxpayer

     14  

Section 4.2 Breach of Agreement

     14  

Section 4.3 Early Termination Notice

     15  

Section 4.4 Payment upon Early Termination

     15  

Article V SUBORDINATION AND LATE PAYMENTS

     16  

Section 5.1 Subordination

     16  

Section 5.2 Late Payments by the Corporate Taxpayer

     16  

Article VI NO DISPUTES; CONSISTENCY; COOPERATION; APPROVALS

     16  

Section 6.1 Participation in the Corporate Taxpayer’s and Rosehill LLC’s Tax
Matters

     16  

Section 6.2 Consistency

     17  

Section 6.3 Cooperation

     17  

Section 6.4 Section 754 Election to be Filed

     17  

Section 6.5 Approvals

     17  

Article VII MISCELLANEOUS

     17  

Section 7.1 Notices

     18  

Section 7.2 Counterparts

     19  

Section 7.3 Entire Agreement; No Third Party Beneficiaries

     19  

Section 7.4 Governing Law

     19  

Section 7.5 Severability

     19  

Section 7.6 Successors; Assignment

     20  

Section 7.7 Amendments; Waivers

     21  

Section 7.8 Titles and Subtitles

     21  

Section 7.9 Resolution of Disputes

     21  

Section 7.10 Reconciliation

     22  

Section 7.11 Withholding

     23  

 

i

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

Section 7.12 Admission of the Corporate Taxpayer into a Consolidated Group;
Transfers of Corporate Assets

     23  

Section 7.13 Confidentiality

     24  

Section 7.14 Post-Closing TRAs

     25  

Section 7.15 Change in Law

     26  

 

ii

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

TAX RECEIVABLE AGREEMENT

This TAX RECEIVABLE AGREEMENT (this “Agreement”), dated as of April 27, 2017, is
hereby entered into by and among Rosehill Resources Inc. (formerly KLR Energy
Acquisition Corp.), a Delaware corporation (the “Corporate Taxpayer”), the TRA
Holders and the Agent.

RECITALS

WHEREAS, the Corporate Taxpayer is the managing member of Rosehill Operating
Company, LLC, a Delaware limited liability company (“Rosehill LLC”), an entity
classified as a partnership for U.S. federal income tax purposes, and holds
limited liability company interests in Rosehill LLC;

WHEREAS, Rosehill LLC and each of its direct and indirect Subsidiaries that is
treated as a partnership for U.S. federal income tax purposes will have in
effect an election under Section 754 of the Internal Revenue Code of 1986, as
amended (the “Code”), for each Taxable Year in which an Exchange occurs, which
election is expected to result, with respect to the Corporate Taxpayer, in an
adjustment to the Tax basis of the assets owned by Rosehill LLC and such
Subsidiaries;

WHEREAS, for U.S. federal and applicable state income Tax purposes,
(i) Rosemore, the tax owner of the initial TRA Holder, Tema Oil and Gas Company,
a Maryland corporation (“Tema”), will be treated as contributing the Reference
Assets to Rosehill LLC in exchange for Units, the assumption of liabilities
related to the Reference Assets and the distribution of cash and Class B Shares,
and (ii) such contribution and distribution together are intended to qualify for
nonrecognition of gain or loss pursuant to Section 721 of the Code, except to
the extent characterized as a disguised sale transaction described in
Section 707(a)(2)(B) of the Code with respect to any amounts treated as a
transfer of consideration pursuant to Treasury Regulation Section 1.707-3(a)(1)
(which, for the avoidance of doubt, excludes any part of the cash or Class B
Shares received as a reimbursement of preformation expenditures within the
meaning of Treas. Reg. § 1.707-4(d)) (any such disguised sale, a “Disguised
Sale”) or to the extent gain is required to be recognized by the TRA Holder
pursuant to Section 731(a)(1) of the Code (an “Excess Distribution”);

WHEREAS, if there were a Disguised Sale or Excess Distribution, as a result of
such Disguised Sale or Excess Distribution the Corporate Taxpayer would be
expected to obtain or be entitled to certain Tax benefits as further described
herein;

WHEREAS, the TRA Holders may transfer all or a portion of their Units pursuant
to the Exchange Right or the Call Right, as applicable, in a transaction that is
or is deemed to be a sale of such Units to the Corporate Taxpayer for U.S.
federal income tax purposes (each such transfer, an “Exchange”), and as a result
of such Exchanges, the Corporate Taxpayer is expected to obtain or be entitled
to certain Tax benefits as further described herein;

WHEREAS, this Agreement is intended to set forth the agreements among the
parties hereto regarding the sharing of the Tax benefits realized by the
Corporate Taxpayer as a result of the Basis Adjustment Events (as defined
herein);

 

1

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

NOW, THEREFORE, in consideration of the foregoing and the respective covenants
and agreements set forth herein, and intending to be legally bound hereby, the
parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. As used in this Agreement, the terms set forth in this
Article I shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined).

“Accrued Amount” has the meaning set forth in Section 3.1(b) of this Agreement.

“Actual Tax Liability” means, with respect to any Taxable Year, the actual
liability for U.S. federal income Taxes of the Corporate Taxpayer (taking into
account, for the avoidance of doubt, any deduction attributable to Imputed
Interest for the Taxable Year); provided that the actual liability for U.S.
federal income Taxes of the Corporate Taxpayer shall be calculated assuming
deductions of (and other impacts of) state income Taxes are excluded.

“Advisory Firm” means PricewaterhouseCoopers LLP, or another accounting or law
firm that is nationally recognized as being expert in tax matters, approved by
each of the Corporate Taxpayer and the Agent.

“Advisory Firm Letter” means a letter from the Advisory Firm stating that the
relevant schedule, notice or other information to be provided by the Corporate
Taxpayer to the Agent and all supporting schedules and work papers were prepared
in a manner consistent with the terms of this Agreement and, to the extent not
expressly provided in this Agreement, on a reasonable basis in light of the
facts and law in existence on the date such schedule, notice or other
information is delivered to the Agent. The cost of any Advisory Firm Letter to
be provided hereunder shall be borne equally by the Corporate Taxpayer, on the
one hand, and the TRA Holders, on the other hand; provided, that the Corporate
Taxpayer shall not be required to pay more than $50,000 in Advisory Firm Letter
costs in the aggregate during each calendar year.

“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such first Person.

“Agent” means Tema or such other Person designated as such pursuant to
Section 7.6(c).

“Agreed Rate” means a per annum rate of LIBOR plus 300 basis points.

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

“Amended Schedule” has the meaning set forth in Section 2.3(b) of this
Agreement.

“Assumed State and Local Tax Rate” means (a) the sum of the products of (i) the
Corporate Taxpayer’s income and franchise tax apportionment rate(s) for each
state and local jurisdiction in which Rosehill LLC (or any of its direct or
indirect subsidiaries that are treated as a partnership or disregarded entity)
or the Corporate Taxpayer files an income or franchise tax

 

2

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

return for the relevant Taxable Year and (ii) the highest corporate income and
franchise tax rate(s) for each state and local jurisdiction in which Rosehill
LLC (or any of its direct or indirect subsidiaries that are treated as
pass-through entities) or the Corporate Taxpayer files an income or franchise
tax return for each relevant Taxable Year, reduced by (b) the product of (i) the
Corporate Taxpayer’s marginal U.S. federal income tax rate for the relevant
Taxable Year and (ii) the rate calculated under clause (a).

“Attributable” has the meaning set forth in Section 3.1(b) of this Agreement.

“Basis Adjustment” means (a) one hundred percent (100%) of any adjustment to the
Tax basis of a Reference Asset as a result of any Disguised Sale or Excess
Distribution and the payments made pursuant to this Agreement with respect to
any Disguised Sale or Excess Distribution (as calculated under Section 2.1 of
this Agreement), including, but not limited to, under Sections 734(b) and 1012
of the Code, and (b) one hundred percent (100%) of any adjustment to the Tax
basis of a Reference Asset as a result of an Exchange and the payments made
pursuant to this Agreement with respect to such Exchange (as calculated under
Section 2.1 of this Agreement), including, but not limited to: (i) under
Sections 734(b) and 743(b) of the Code (in situations where, following an
Exchange, Rosehill LLC remains classified as a partnership for U.S. federal
income tax purposes); and (ii) under Sections 732(b), 734(b) and 1012 of the
Code (in situations where, as a result of one or more Exchanges, Rosehill LLC
becomes an entity that is disregarded as separate from its owner for U.S.
federal income tax purposes). For the avoidance of doubt, the amount of any
Basis Adjustment resulting from an Exchange of Units shall be determined without
regard to any Section 743(b) adjustment attributable to such Units prior to such
Exchange; and, further, payments made under this Agreement shall not be treated
as resulting in a Basis Adjustment to the extent such payments are treated as
Imputed Interest.

“Basis Adjustment Date” means each date on which a Basis Adjustment Event
occurs.

“Basis Adjustment Events” means and any and all Exchanges, any Disguised Sale
and any Excess Distribution.

“Basis Adjustment Schedule” has the meaning set forth in Section 2.1 of this
Agreement.

“Beneficial Owner” means, with respect to a security, a Person who directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares: (i) voting power, which includes the power to vote, or
to direct the voting of, such security and/or (ii) investment power, which
includes the power to dispose of, or to direct the disposition of, such
security. The terms “Beneficially Own” and “Beneficial Ownership” shall have
correlative meanings.

“Board” means the board of directors of the Corporate Taxpayer.

“Business Combination Agreement” means the Business Combination Agreement, dated
as of December 20, 2016, by and among the Corporate Taxpayer and Tema.

“Business Day” means Monday through Friday of each week, except that a legal
holiday recognized as such by the government of the United States of America or
the State of Texas shall not be regarded as a Business Day.

 

3

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

“Call Right” has the meaning set forth in the Rosehill LLC Agreement.

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

(i) any Person (other than Tema and its respective Permitted Transferees) or any
group of Persons acting together which would constitute a “group” for purposes
of Section 13(d) of the Exchange Act of 1934, or any successor provisions
thereto (other than any “group” for purposes of Section 13(d) of the Securities
Exchange Act of 1934, or any successor provisions thereto, which includes Tema
and its respective Permitted Transferees) is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Corporate Taxpayer representing
more than fifty percent (50%) of the combined voting power of the Corporate
Taxpayer’s then outstanding voting securities;

(ii) the following individuals cease for any reason to constitute a majority of
the number of directors of the Corporate Taxpayer then serving: individuals who
were directors of the Corporate Taxpayer on the Closing Date and any new
director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors of the
Corporate Taxpayer) whose appointment or election by the Board or nomination for
election by the Corporate Taxpayer’s stockholders was approved or recommended by
a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors of the Corporate Taxpayer on the Closing Date or whose
appointment, election or nomination for election was previously so approved or
recommended by the directors referred to in this clause (ii);

(iii) there is consummated a merger or consolidation of the Corporate Taxpayer
with any other corporation or other entity, and, immediately after the
consummation of such merger or consolidation, either (A) the members of the
Board immediately prior to the merger or consolidation do not constitute at
least a majority of the members of the board of directors of the company
surviving the merger or, if the surviving company is a Subsidiary, the ultimate
parent thereof, or (B) the voting securities of the Corporate Taxpayer
immediately prior to such merger or consolidation do not continue to represent
or are not converted into more than 50% of the combined voting power of the then
outstanding voting securities of the Person resulting from such merger or
consolidation or, if the surviving company is a Subsidiary, the ultimate parent
thereof;

(iv) the stockholders of the Corporate Taxpayer approve a plan of complete
liquidation or dissolution of the Corporate Taxpayer or there is consummated an
agreement or series of related agreements for the sale or other disposition,
directly, or indirectly, by the Corporate Taxpayer of all or substantially all
of the Corporate Taxpayer’s assets, other than such sale or other disposition by
the Corporate Taxpayer of all or substantially all of the Corporate Taxpayer’s
assets to an entity, at least fifty percent (50%) of the combined voting power
of the voting securities of which are owned by stockholders of the Corporate
Taxpayer in substantially the same proportions as their ownership of the
Corporate Taxpayer immediately prior to such sale.

Notwithstanding the foregoing, except with respect to clause (ii) and clause
(iii)(A) above, a “Change of Control” shall not be deemed to have occurred by
virtue of the consummation of any transaction or series of integrated
transactions immediately following which the record holders of the shares of the
Corporate Taxpayer immediately prior to such

 

4

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

transaction or series of transactions continue to have substantially the same
proportionate ownership in, and own substantially all of the shares of, an
entity which owns, either directly or through a Subsidiary, all or substantially
all of the assets of the Corporate Taxpayer immediately following such
transaction or series of transactions.

“Class B Shares” means the Class B common stock of the Corporate Taxpayer.

“Closing Date” has the meaning set forth in the Recitals of the Business
Combination Agreement.

“Code” has the meaning set forth in the Recitals of this Agreement.

“Control” means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership of voting securities, by contract or otherwise.

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

“Corporate Taxpayer Return” means the U.S. federal income Tax Return of the
Corporate Taxpayer (including any consolidated group of which the Corporate
Taxpayer is a member, as further described in Section 7.12(a) of this Agreement)
filed with respect to any Taxable Year.

“Cumulative Net Realized Tax Benefit” for a Taxable Year means the cumulative
amount (but not less than zero) of Realized Tax Benefits for all Taxable Years
of the Corporate Taxpayer, up to and including such Taxable Year, net of the
cumulative amount of Realized Tax Detriments for the same period. The Realized
Tax Benefit and Realized Tax Detriment for each Taxable Year shall be determined
based on the most recent Tax Benefit Payment Schedule or Amended Schedule, if
any, in existence at the time of such determination.

“Default Rate” means a per annum rate of LIBOR plus 550 basis points.

“Determination” shall have the meaning ascribed to such term in Section 1313(a)
of the Code, or similar provision of U.S. state or local tax law, as applicable,
or any other event (including the execution of IRS Form 870-AD) that finally and
conclusively establishes the amount of any liability for Tax.

“Disguised Sale” has the meaning set forth in the Recitals of this Agreement.

“Dispute” has the meaning set forth in Section 7.9(a) of this Agreement.

“Disputing Party” has the meaning set forth in Section 7.10 of this Agreement.

“Early Termination” has the meaning set forth in Section 4.1 of this Agreement.

“Early Termination Date” means the date of an Early Termination Notice for
purposes of determining the Early Termination Payment.

“Early Termination Effective Date” has the meaning set forth in Section 4.3 of
this Agreement.

“Early Termination Notice” has the meaning set forth in Section 4.3 of this
Agreement.

 

5

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

“Early Termination Objection Notice” has the meaning set forth in Section 4.3 of
this Agreement.

“Early Termination Payment” has the meaning set forth in Section 4.4(b) of this
Agreement.

“Early Termination Rate” means a per annum rate of LIBOR plus 150 basis points.

“Early Termination Schedule” has the meaning set forth in Section 4.3 of this
Agreement.

“Excess Distribution” has the meaning set forth in the Recitals of this
Agreement.

“Exchange” has the meaning set forth in the Recitals of this Agreement.

“Exchange Right” means the right set forth in Section 4.6 of the Rosehill LLC
Agreement.

“Expert” means Grant Thornton LLP or such nationally recognized expert in the
particular area of disagreement as is mutually acceptable to both parties.

“Family Group” has the meaning set forth in the definition of “Permitted
Transferee”.

“Hypothetical Tax Liability” means, with respect to any Taxable Year, the
liability for U.S. federal income Taxes of the Corporate Taxpayer (using the
same methods, elections, conventions, U.S. federal income tax rate and similar
practices used on the relevant Corporate Taxpayer Return), but without taking
into account (i) any Basis Adjustments and (ii) any deduction attributable to
Imputed Interest for the Taxable Year. For the avoidance of doubt, Hypothetical
Tax Liability shall be determined without taking into account the carryover or
carryback of any U.S. federal income Tax item (or portions thereof) that is
attributable to any Basis Adjustments and Imputed Interest. Furthermore, the
Hypothetical Tax Liability shall be calculated assuming deductions of (and other
impacts of) state and local income and franchise Taxes are excluded.

“Imputed Interest” means any interest imputed under Section 1272, 1274 or 483 or
other provision of the Code with respect to the Corporate Taxpayer’s payment
obligations under this Agreement.

“IRS” means the U.S. Internal Revenue Service.

“LIBOR” means during any period, an interest rate per annum equal to the
one-year LIBOR rate reported, on the date two (2) calendar days prior to the
first day of such period, on the Telerate Page 3750 (or if such screen shall
cease to be publicly available, as reported on Reuters Screen page “LIBOR01” or
by any other publicly available source of such market rate) for London interbank
offered rates for United States dollar deposits for such period.

“Net Tax Benefit” has the meaning set forth in Section 3.1(b) of this Agreement.

“Objection Notice” has the meaning set forth in Section 2.3(a) of this
Agreement.

“Owners” has the meaning set forth in the definition of “Permitted Transferee”.

 

6

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

“Payment Date” means any date on which a payment is required to be made pursuant
to this Agreement.

“Permitted Transferee” means, with respect to any TRA Holder, (a) its Affiliates
(including, in the case of any TRA Holder that is an entity, any distribution by
such Person to its members, partners or shareholders (the “Owners”), and any
related distributions by the Owners to their respective members, partners or
shareholders) and (b) in the case of an individual, any member of its Family
Group. For purposes hereof, “Family Group” means for any individual, such
individual’s current or former spouse, their respective parents, descendants of
such parents (whether natural or adopted) and the spouses of such descendants,
and any trust, limited partnership, corporation or limited liability company
established solely for the benefit of such individual or such individual’s
current or former spouse, their respective parents, descendants of such parents
(whether natural or adopted) or the spouses of such descendants.

“Person” means any individual, corporation, firm, partnership, joint venture,
limited liability company, estate, trust, business association, organization,
governmental entity or other entity.

“Protection Period” has the meaning set forth in Section 6.5 of this Agreement.

“Realized Tax Benefit” means, for a Taxable Year, the sum of (i) the excess, if
any, of the Hypothetical Tax Liability over the Actual Tax Liability and
(ii) the State and Local Tax Benefit. If all or a portion of the Actual Tax
Liability for the Taxable Year arises as a result of an audit by the IRS of any
Taxable Year, such liability shall not be included in determining the Realized
Tax Benefit unless and until there has been a Determination.

“Realized Tax Detriment” means, for a Taxable Year, the sum of (i) the excess,
if any, of the Actual Tax Liability over the Hypothetical Tax Liability and
(ii) the State and Local Tax Detriment. If all or a portion of the Actual Tax
Liability for the Taxable Year arises as a result of an audit by the IRS of any
Taxable Year, such liability shall not be included in determining the Realized
Tax Detriment unless and until there has been a Determination.

“Reconciliation Dispute” has the meaning set forth in Section 7.10 of this
Agreement.

“Reconciliation Procedures” means the procedures described in Section 7.10 of
this Agreement.

“Reference Asset” means, with respect to any Basis Adjustment Event, an asset
(other than cash or a cash equivalent) that is held (or acquired) by Rosehill
LLC, or any of its direct or indirect Subsidiaries that is treated as a
partnership or disregarded entity for U.S. federal income tax purposes (but only
to the extent such Subsidiaries are not held through any entity treated as a
corporation for U.S. federal income tax purposes), at the time of (or as a
result of) such Basis Adjustment Event. A Reference Asset also includes any
asset that is “substituted basis property” under Section 7701(a)(42) of the Code
with respect to a Reference Asset.

“Rosehill LLC” has the meaning set forth in the Recitals of this Agreement.

“Rosehill LLC Agreement” means the First Amended and Restated Limited Liability
Company Agreement of Rosehill LLC, as amended from time to time.

 

7

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

“Rosemore” means Rosemore, Inc., a Maryland corporation.

“Schedule” means any of the following: (i) a Basis Adjustment Schedule, (ii) a
Tax Benefit Payment Schedule, or (iii) the Early Termination Schedule.

“Senior Obligations” has the meaning set forth in Section 5.1 of this Agreement.

“State and Local Tax Benefit” means, for a Taxable Year, the excess, if any, of
the Hypothetical Tax Liability over the Actual Tax Liability; provided that, for
purposes of determining the State and Local Tax Benefit, each of the
Hypothetical Tax Liability and the Actual Tax Liability shall be calculated
using the Assumed State and Local Tax Rate instead of the rate applicable for
U.S. federal income tax purposes.

“State and Local Tax Detriment” means, for a Taxable Year, the excess, if any,
of the Actual Tax Liability over the Hypothetical Tax Liability; provided that,
for purposes of determining the State and Local Tax Detriment, each of the
Actual Tax Liability and the Hypothetical Tax Liability shall be calculated
using the Assumed State and Local Tax Rate instead of the rate applicable for
U.S. federal income tax purposes.

“Subsidiaries” means, with respect to any Person, as of any date of
determination, any other Person as to which such Person, owns, directly or
indirectly, or otherwise controls more than 50% of the voting power or other
similar interests or the sole general partner interest or managing member or
similar interest of such Person.

“Tax Benefit Payment” has the meaning set forth in Section 3.1(b) of this
Agreement.

“Tax Benefit Payment Schedule” has the meaning set forth in Section 2.2 of this
Agreement.

“Tax Proceeding” has the meaning set forth in Section 6.1 of this Agreement.

“Tax Return” means any return, declaration, report or similar statement required
to be filed with respect to Taxes (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return and
declaration of estimated Tax.

“Taxable Year” means a taxable year of the Corporate Taxpayer as defined in
Section 441(b) of the Code (which, for the avoidance of doubt, may include a
period of less than twelve (12) months for which a Tax Return is made), ending
on or after the date hereof.

“Taxes” means any and all U.S. federal, state and local taxes, assessments or
similar charges that are based on or measured with respect to net income or
profits, and any interest related to such Tax.

“Taxing Authority” means any federal, national, state, county or municipal or
other local government, any subdivision, agency, commission or authority
thereof, or any quasi-governmental body exercising any taxing authority or any
other authority exercising Tax regulatory authority.

“Tema” has the meaning set forth in the Recitals of this Agreement.

 

8

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

“TRA Holder” means Tema and its successors and permitted assigns pursuant to
Section 7.6(a) of this Agreement.

“Transferor” has the meaning set forth in Section 7.12(b) of this Agreement.

“Treasury Regulations” means the final, temporary and proposed regulations under
the Code promulgated from time to time (including corresponding provisions and
succeeding provisions) as in effect for the relevant Taxable Year.

“Units” has the meaning set forth in the Rosehill LLC Agreement.

“Valuation Assumptions” means, as of an Early Termination Date or following a
Change of Control, as applicable, the assumptions that (i) in each Taxable Year
ending on or after such Early Termination Date, the Corporate Taxpayer will have
taxable income sufficient to fully utilize the deductions arising from all Basis
Adjustments and the Imputed Interest during such Taxable Year or future Taxable
Years (including, for the avoidance of doubt, Basis Adjustments and Imputed
Interest that would result from future Tax Benefit Payments that would be paid
in accordance with the Valuation Assumptions, further assuming such future Tax
Benefit Payments would be paid on the due date, without extensions, for filing
the Corporate Taxpayer Return for the applicable Taxable Year) in which such
deductions would become available, (ii) any loss or credit carryovers generated
by deductions or losses arising from any Basis Adjustment or Imputed Interest
(including such Basis Adjustment and Imputed Interest generated as a result of
payments made under this Agreement) that are available in the Taxable Year that
includes the Early Termination Date will be fully utilized by the Corporate
Taxpayer on a pro rata basis over a five year period beginning on the Early
Termination Date, (iii) the U.S. federal, state and local income and franchise
tax rates that will be in effect for each Taxable Year ending on or after such
Early Termination Date will be those specified for each such Taxable Year by the
Code and other law as in effect on the Early Termination Date, and all taxable
income of the Corporate Taxpayer will be subject to the maximum applicable rates
for taxes throughout the relevant period, (iv) except as provided in clause
(vi) below, any non-amortizable Reference Assets (including, without limitation,
undeveloped property) to which any Basis Adjustment is attributable will be
disposed of in a fully taxable transaction for U.S. federal income tax purposes
on the earlier of (A) the fifteenth anniversary of the Basis Adjustment Event
which gave rise to such Basis Adjustment, as applicable, or (B) the Early
Termination Date, (v) if, at the Early Termination Date, there are Units that
have not been transferred in an Exchange, then all Units shall be deemed to be
transferred pursuant to the Exchange Right effective on the Early Termination
Date, and (vi) for purposes of calculating depletion deductions and resulting
reductions in adjusted tax basis with respect to depletable properties held by
Rosehill LLC and its Subsidiaries that are treated as disregarded entities or
partnerships for U.S. federal tax purposes, (A) the remaining recoverable
reserves with respect to each such property are equal to the recoverable
reserves estimated in the most recent reserve report relating to such property
(or, if there is no reserve report with respect to such property, the most
recent estimate of recoverable reserves with respect to such property which is
reflected in the financial records of Rosehill LLC) and (B) Rosehill LLC (or
such Subsidiaries) will recover the remaining recoverable reserves with respect
to each such depletable property within the time estimated and at the rate
reflected in the most recent reserve reports relating to such property (or, if
there is no reserve report with respect to such property, the most recent
estimate of the rate of recovery of recoverable reserves with respect to such
property which is reflected in the financial records of Rosehill LLC).

 

9

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

Section 1.2 Other Definitional and Interpretative Provisions. The words
“hereof,” “herein” and “hereunder” and words of like import used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. References to Articles, Sections, Exhibits and
Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement
unless otherwise specified. All Exhibits and Schedules annexed hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Any capitalized terms used in any Exhibit or
Schedule but not otherwise defined therein, shall have the meaning as defined in
this Agreement. Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Whenever the words “include,”
“includes” or “including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation,” whether or not they are in fact
followed by those words or words of like import. “Writing,” “written” and
comparable terms refer to printing, typing and other means of reproducing words
(including electronic media) in a visible form. References to any agreement or
contract are to that agreement or contract as amended, modified or supplemented
from time to time in accordance with the terms thereof. References to any Person
include the successors and permitted assigns of that Person. References from or
through any date mean, unless otherwise specified, from and including or through
and including, respectively.

ARTICLE II

DETERMINATION OF CERTAIN REALIZED TAX BENEFITS

Section 2.1 Basis Adjustment Schedules. Within ninety (90) calendar days after
the filing of the U.S. federal income Tax Return of the Corporate Taxpayer for
each Taxable Year in which any Basis Adjustment Event occurs, the Corporate
Taxpayer shall deliver to the Agent a schedule (the “Basis Adjustment Schedule”)
that shows, in reasonable detail necessary to perform the calculations required
by this Agreement, including with respect to each TRA Holder participating in
the Basis Adjustment Event during such Taxable Year, (i) the actual tax basis of
the Reference Assets as of each applicable Basis Adjustment Date, (ii) the Basis
Adjustments with respect to the Reference Assets as a result of the Basis
Adjustment Event effected by such TRA Holder in such Taxable Year and (iii) the
period (or periods) over which such Basis Adjustments are amortizable and/or
depreciable. At the time the Corporate Taxpayer delivers the Exchange Basis
Schedule to the Agent, it shall (x) deliver to the Agent an Advisory Firm Letter
supporting such Exchange Basis Schedule, (y) provide to the Agent schedules and
work papers providing reasonable detail regarding the preparation of the
Exchange Basis Schedule and (z) allow the Agent and its representatives
reasonable access at no cost to the appropriate representatives of the Corporate
Taxpayer, Rosehill LLC and the Advisory Firm in connection with its review of
such schedule.

Section 2.2 Tax Benefit Payment Schedules.

(a) Within ninety (90) calendar days after the filing of the U.S. federal income
Tax Return of the Corporate Taxpayer for any Taxable Year in which there is a
Realized Tax Benefit or Realized Tax Detriment, the Corporate Taxpayer shall
provide to the Agent: (i) a schedule

 

10

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

showing, in reasonable detail, (A) the calculation of the Realized Tax Benefit
or Realized Tax Detriment for such Taxable Year, (B) the portion of the Net Tax
Benefit, if any, that is Attributable to each TRA Holder who has participated in
the Basis Adjustment Event, (C) the Accrued Amount with respect to any such Net
Tax Benefit that is Attributable to such TRA Holder, (D) the Tax Benefit Payment
due to each such TRA Holder, and (E) the portion of such Tax Benefit Payment
that the Corporate Taxpayer intends to treat as Imputed Interest (a “Tax Benefit
Payment Schedule”), (ii) a reasonably detailed calculation by the Corporate
Taxpayer of the Hypothetical Tax Liability, (iii) a reasonably detailed
calculation by the Corporate Taxpayer of the Actual Tax Liability, (iv) any
other work papers reasonably requested by the Agent, and (v) an Advisory Firm
Letter supporting such Tax Benefit Payment Schedule. In addition, the Corporate
Taxpayer shall allow the Agent and its representatives reasonable access at no
cost to the appropriate representatives of the Corporate Taxpayer, Rosehill LLC
and the Advisory Firm in connection with a review of such Tax Benefit Payment
Schedule. The Tax Benefit Payment Schedule will become final as provided in
Section 2.3(a) and may be amended as provided in Section 2.3(b) (subject to the
procedures set forth in Section 2.3(b)).

(b) The Realized Tax Benefit or Realized Tax Detriment for each Taxable Year is
intended to measure the decrease or increase in the actual Tax liability of the
Corporate Taxpayer for such Taxable Year attributable to the Basis Adjustments
and Imputed Interest, determined using a “with and without” methodology. For
purposes of calculating the Realized Tax Benefit or Realized Tax Detriment for
any Taxable Year, carryovers or carrybacks of any U.S. federal income Tax item
attributable to the Basis Adjustments and Imputed Interest shall be considered
to be subject to the rules of the Code and the Treasury Regulations, as
applicable, governing the use, limitation and expiration of carryovers or
carrybacks of the relevant type. If a carryover or carryback of any U.S. federal
income Tax item includes a portion that is attributable to the Basis Adjustment
or Imputed Interest and another portion that is not so attributable, such
respective portions shall be considered to be used in accordance with the “with
and without” methodology. The parties agree that (i) any payment under this
Agreement (to the extent permitted by law and other than amounts accounted for
as Imputed Interest) will have the effect of creating additional Basis
Adjustments to Reference Assets for the Corporate Taxpayer in the year of
payment, and (ii) as a result, such additional Basis Adjustments will be
incorporated into the current year calculation and into future year
calculations, as appropriate.

Section 2.3 Procedure; Amendments.

(a) An applicable Schedule or amendment thereto shall become final and binding
on all parties thirty (30) calendar days from the first date on which the Agent
has received the applicable Schedule or amendment thereto unless (i) the Agent,
within thirty (30) calendar days after receiving an applicable Schedule or
amendment thereto, provides the Corporate Taxpayer and each other Agent with
notice of a material objection to such Schedule (“Objection Notice”) made in
good faith or (ii) the Agent provides a written waiver of such right of any
Objection Notice within the period described in clause (i) above, in which case
such Schedule or amendment thereto becomes binding on the date a waiver from the
Agent has been received by the Corporate Taxpayer. If the Corporate Taxpayer and
Agent, for any reason, are unable to successfully resolve the issues raised in
an Objection Notice within thirty (30) calendar days after receipt by the
Corporate Taxpayer of such Objection Notice, the Corporate Taxpayer and Agent
shall employ the Reconciliation Procedures under Section 7.10 or Resolution of
Disputes procedures under Section 7.9, as applicable.

 

11

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

(b) The applicable Schedule for any Taxable Year may be amended from time to
time by the Corporate Taxpayer (i) in connection with a Determination affecting
such Schedule, (ii) to correct inaccuracies in the Schedule identified as a
result of the receipt of additional factual information relating to a Taxable
Year after the date the Schedule was provided to the Agent, (iii) to comply with
the Expert’s determination under the Reconciliation Procedures, (iv) to reflect
a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable
Year attributable to a carryback or carryforward of a loss or other Tax item to
such Taxable Year, (v) to reflect a change in the Realized Tax Benefit or
Realized Tax Detriment for such Taxable Year attributable to an amended U.S.
federal income Tax Return filed for such Taxable Year or (vi) to take into
account payments made pursuant to this Agreement, including by adjusting a Basis
Adjustment Schedule (any such Schedule, an “Amended Schedule”). The Corporate
Taxpayer shall provide an Amended Schedule to the Agent within sixty
(60) calendar days of the occurrence of an event referenced in clauses
(i) through (vi) of the preceding sentence, together with (x) an Advisory Firm
Letter supporting such Amended Schedule, (y) schedules and work papers providing
reasonable detail regarding the preparation of the Amended Schedule and
(z) reasonable access for the Agent and its representatives to the appropriate
representatives of the Corporate Taxpayer , Rosehill LLC and the Advisory Firm
in connection with its review of such schedule. For the avoidance of doubt, in
the event a Schedule is amended after such Schedule becomes final pursuant to
Section 2.3(a), the Amended Schedule shall not be taken into account in
calculating any Tax Benefit Payment in the Taxable Year to which the amendment
relates but instead shall be taken into account in calculating the Cumulative
Net Realized Tax Benefit for the Taxable Year in which the amendment actually
occurs.

ARTICLE III

TAX BENEFIT PAYMENTS

Section 3.1 Payments.

(a) Within five (5) Business Days after a Tax Benefit Payment Schedule delivered
to the Agent becomes final in accordance with Section 2.3(a), the Corporate
Taxpayer shall pay to each TRA Holder the Tax Benefit Payment in respect of such
TRA Holder determined pursuant to Section 3.1(b) for such Taxable Year. Each
such payment shall be made by wire transfer of immediately available funds to
the bank account previously designated by the TRA Holder to the Corporate
Taxpayer, or as otherwise agreed by the Corporate Taxpayer and the TRA Holder.
For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of
estimated Tax payments, including, without limitation, U.S. federal or state
estimated income Tax payments.

(b) A “Tax Benefit Payment” in respect of a TRA Holder for a Taxable Year means
an amount, not less than zero, equal to the sum of the portion of the Net Tax
Benefit Attributable to such TRA Holder and the Accrued Amount with respect
thereto. A Net Tax Benefit is “Attributable” to a TRA Holder (i) with respect to
any Disguised Sale, to the extent that it is derived from any Basis Adjustment
or Imputed Interest that is attributable to the undivided interest in the
Reference Assets acquired or deemed acquired by Rosehill LLC in such Disguised
Sale from such TRA Holder, (ii) with respect to any Excess Distribution, to the
extent that it is

 

12

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

derived from any Basis Adjustment or Imputed Interest that is attributable to
such Excess Distribution with respect to such TRA Holder and (iii) with respect
to an Exchange, to the extent that it is derived from any Basis Adjustment or
Imputed Interest that is attributable to the Units acquired or deemed acquired
by the Corporate Taxpayer in an Exchange undertaken by or with respect to such
TRA Holder. The “Net Tax Benefit” for a Taxable Year shall be an amount equal to
the excess, if any, of 90% of the Cumulative Net Realized Tax Benefit as of the
end of such Taxable Year over the total amount of payments previously made under
this Section 3.1 (excluding payments attributable to Accrued Amounts); provided,
for the avoidance of doubt, that no TRA Holder shall be required to return any
portion of any previously made Tax Benefit Payment. The “Accrued Amount” with
respect to any portion of a Net Tax Benefit shall equal an amount determined in
the same manner as interest on such portion of the Net Tax Benefit for a Taxable
Year calculated at the Agreed Rate from the due date (without extensions) for
filing the Corporate Taxpayer Return for such Taxable Year until the Payment
Date. For the avoidance of doubt, for Tax purposes, the Accrued Amount shall not
be treated as interest but shall instead be treated as additional consideration
with respect to the relevant Basis Adjustment Event, unless otherwise required
by law. Notwithstanding the foregoing, for each Taxable Year ending on or after
the date of a Change of Control, if the Corporate Taxpayer has not elected to
terminate this Agreement pursuant to Section 4.1, then all Tax Benefit Payments,
whether paid with respect to a Basis Adjustment Event (y) prior to the date of
such Change of Control or (z) on or after the date of such Change of Control,
shall be calculated by utilizing the assumptions in clauses (i), (ii), (iv), and
(v) of the definition of Valuation Assumptions, substituting in each case the
terms “the closing date of a Change of Control” for an “Early Termination Date”.

Section 3.2 No Duplicative Payments. It is intended that the provisions of this
Agreement will not result in duplicative payment of any amount (including
interest) required under this Agreement. It is also intended that the provisions
of this Agreement will result in 90% of the Cumulative Net Realized Tax Benefit,
and the Accrued Amount thereon, being paid to the TRA Holders. The provisions of
this Agreement shall be construed in the appropriate manner to achieve these
fundamental results.

Section 3.3 Pro Rata Payments.

(a) If for any reason the Corporate Taxpayer does not fully satisfy its payment
obligations to make all Tax Benefit Payments due under this Agreement in respect
of a particular Taxable Year, then (i) the Corporate Taxpayer will pay the same
proportion of each Tax Benefit Payment due to each TRA Holder to whom a payment
is due under this Agreement in respect of such Taxable Year, without favoring
one obligation over the other, and (ii) no Tax Benefit Payment shall be made in
respect of any Taxable Year until all Tax Benefit Payments in respect of prior
Taxable Years have been made in full.

(b) To the extent the Corporate Taxpayer makes a payment to a TRA Holder in
respect of a particular Taxable Year under Section 3.1(a) of this Agreement
(taking into account Section 3.3(a), but excluding payments attributable to
Accrued Amounts) in an amount in excess of the amount of such payment that
should have been made to such TRA Holder in respect of such Taxable Year, then
(i) such TRA Holder shall not receive further payments under Section 3.1(a)
until such TRA Holder has foregone an amount of payments equal to such excess
and (ii) the Corporate Taxpayer will pay the amount of such TRA Holder’s
foregone payments to the

 

13

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

other TRA Holders to whom a payment is due under this Agreement in a manner such
that each such TRA Holder to whom a payment is due under this Agreement, to the
maximum extent possible, receives aggregate payments under Section 3.1(a)
(taking into account Section 3.3(a), but excluding payments attributable to
Accrued Amounts) in the amount it would have received if there had been no
excess payment to such TRA Holder.

ARTICLE IV

TERMINATION

Section 4.1 Early Termination at Election of the Corporate Taxpayer. Within 30
days of a Change of Control, the Corporate Taxpayer may terminate this Agreement
by paying to each TRA Holder the Early Termination Payment due to such TRA
Holder pursuant to Section 4.4(b) (such termination, an “Early Termination”);
provided that the Corporate Taxpayer may withdraw any notice of exercise of its
termination rights under this Section 4.1 prior to the time at which any Early
Termination Payment has been paid. Upon payment of the Early Termination Payment
by the Corporate Taxpayer, the Corporate Taxpayer shall not have any further
payment obligations under this Agreement, other than for any (i) Tax Benefit
Payment previously due and payable but unpaid as of the Early Termination Notice
and (ii) and (ii) Tax Benefit Payment due for the Taxable Year ending with or
including the Early Termination Date (except to the extent that the amount
described in clause (ii) is included in the Early Termination Payment).

Section 4.2 Breach of Agreement.

(a) In the event that the Corporate Taxpayer breaches any of its material
obligations under this Agreement, whether as a result of failure to make any
payment when due, as a result of failure to honor any other material obligation
required hereunder or by operation of law as a result of the rejection of this
Agreement in a case commenced under the Bankruptcy Code or otherwise, then if
the Agent so elects, such breach shall be treated as an Early Termination. Upon
such election, all obligations hereunder shall be accelerated and such
obligations shall be calculated as if an Early Termination Notice had been
delivered on the date of such breach and shall include, but shall not be limited
to, (i) the Early Termination Payment calculated as if an Early Termination
Notice had been delivered on the date of a breach, (ii) any Tax Benefit Payment
previously due and payable but unpaid as of the date of the breach and (iii) any
Tax Benefit Payment due for the Taxable Year ending with or including the date
of such breach (except to the extent that the amount described in clause (ii) is
included in the Early Termination Payment). Notwithstanding the foregoing, in
the event that the Corporate Taxpayer breaches this Agreement, the Agent, on
behalf of the TRA Holders, shall be entitled to elect either to receive the
amounts set forth in clauses (i) through (iii) above or to seek specific
performance of the terms hereof.

(b) The parties agree that the failure to make any payment due pursuant to this
Agreement within three (3) months of the date such payment is due shall be
deemed to be a breach of a material obligation under this Agreement for all
purposes of this Agreement, and that it shall not be considered to be a breach
of a material obligation under this Agreement to make a payment due pursuant to
this Agreement within three (3) months of the date such payment is due.
Notwithstanding anything in this Agreement to the contrary, it shall not be a
breach of this Agreement if the Board determines in good faith that the
Corporate Taxpayer does not have

 

14

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

sufficient cash to make any Tax Benefit Payment when due to the extent that the
Corporate Taxpayer has insufficient funds to make such payment; provided that
the interest provisions of Section 5.2 shall apply to such late payment (unless
the Corporate Taxpayer does not have sufficient cash to make such payment as a
result of limitations imposed by any existing credit agreement to which Rosehill
LLC or any Subsidiary of Rosehill LLC is a party, in which case Section 5.2
shall apply, but the Default Rate shall be replaced by the Agreed Rate); and
provided further that it shall be a breach of this Agreement, and the provisions
of Section 4.2(a) shall apply as of the original due date of the Tax Benefit
Payment, if the Corporate Taxpayer makes any distribution of cash or other
property to its shareholders while any Tax Benefit Payment is due and payable
but unpaid.

Section 4.3 Early Termination Notice. If the Corporate Taxpayer chooses to
exercise its right of early termination under Section 4.1 above, the Corporate
Taxpayer shall deliver to the Agent notice of such intention to exercise such
right (the “Early Termination Notice”) together with a schedule (the “Early
Termination Schedule”) showing in reasonable detail the calculation of the Early
Termination Payment in a manner consistent with the definition of such term and
an Advisory Firm Letter supporting such calculation. The Corporate Taxpayer
shall provide the Agent and its representatives with reasonable access to the
appropriate representatives of the Corporate Taxpayer, Rosehill LLC and the
Advisory Firm in connection with its review of such calculation. The Early
Termination Schedule shall become final and binding on all parties thirty
(30) calendar days from the first date on which the Agent has received such
Schedule or amendment thereto unless(i) the Agent, within thirty (30) calendar
days after receiving the Early Termination Schedule, provides the Corporate
Taxpayer with notice of an objection to such Schedule made in good faith (“Early
Termination Objection Notice”) or (ii) the Agent provides a written waiver of
such right of an Early Termination Objection Notice within the period described
in clause (i) above, in which case such Schedule becomes binding on the date a
waiver from the Agent has been received by the Corporate Taxpayer (the “Early
Termination Effective Date”). If the Corporate Taxpayer and Agent, for any
reason, are unable to successfully resolve the issues raised in such notice
within thirty (30) calendar days after receipt by the Corporate Taxpayer of the
Early Termination Objection Notice, the Corporate Taxpayer and Agent shall
employ the Reconciliation Procedures under Section 7.10 or Resolution of
Disputes procedures under Section 7.9, as applicable.

Section 4.4 Payment upon Early Termination.

(a) Subject to its right to withdraw any notice of Early Termination pursuant to
Section 4.1, within three (3) Business Days after the Early Termination
Effective Date, the Corporate Taxpayer shall pay to each TRA Holder its Early
Termination Payment. Each such payment shall be made by wire transfer of
immediately available funds to a bank account or accounts designated by the TRA
Holder, or as otherwise agreed by the Corporate Taxpayer and the TRA Holder. The
TRA Holders shall not be required to return any portion of any Early Termination
Payment even if there is later a Determination affecting such Early Termination
Payment.

(b) The “Early Termination Payment” shall equal, with respect to a TRA Holder,
the present value, discounted at the Early Termination Rate as of the Early
Termination Date, of all Tax Benefit Payments that would be required to be paid
by the Corporate Taxpayer to such TRA Holder beginning from the Early
Termination Date and assuming that the Valuation Assumptions are applied.

 

15

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

ARTICLE V

SUBORDINATION AND LATE PAYMENTS

Section 5.1 Subordination. Notwithstanding any other provision of this Agreement
to the contrary, any Tax Benefit Payment, Early Termination Payment or any other
payment required to be made by the Corporate Taxpayer to any TRA Holder under
this Agreement shall rank subordinate and junior in right of payment to any
principal, interest or other amounts due and payable in respect of any
obligations in respect of indebtedness for borrowed money of the Corporate
Taxpayer and its Subsidiaries (such obligations, “Senior Obligations”) and shall
rank pari passu with all current or future unsecured obligations of the
Corporate Taxpayer that are not Senior Obligations. For the avoidance of doubt,
notwithstanding the above, the determination of whether it is a breach of this
Agreement if the Corporate Taxpayer fails to make any Tax Benefit Payment when
due is governed by Section 4.2(a).

Section 5.2 Late Payments by the Corporate Taxpayer. The amount of all or any
portion of any Tax Benefit Payment, Early Termination Payment or any other
payment under this Agreement not made to any TRA Holder when due under the terms
of this Agreement shall be payable together with any interest thereon, computed
at the Default Rate (or, if so provided in Section 4.2(a), at the Agreed Rate)
and commencing from the date on which such Tax Benefit Payment, Early
Termination Payment or any other payment under this Agreement was due and
payable.

ARTICLE VI

NO DISPUTES; CONSISTENCY; COOPERATION; APPROVALS

Section 6.1 Participation in the Corporate Taxpayer’s and Rosehill LLC’s Tax
Matters. Except as otherwise provided herein, the Corporate Taxpayer shall have
full responsibility for, and sole discretion over, all Tax matters concerning
the Corporate Taxpayer and Rosehill LLC, including without limitation preparing,
filing or amending any Tax Return and defending, contesting or settling any
issue pertaining to Taxes. Notwithstanding the foregoing, the Corporate Taxpayer
shall notify the Agent of, and keep the Agent reasonably informed with respect
to the portion of any audit, examination, or any other administrative or
judicial proceeding (a “Tax Proceeding”) of the Corporate Taxpayer or Rosehill
LLC by a Taxing Authority the outcome of which is reasonably expected to affect
the rights and obligations of a TRA Holder under this Agreement, and shall
provide the Agent with reasonable opportunity to provide information and other
input to the Corporate Taxpayer, Rosehill LLC and their respective advisors
concerning the conduct of any such portion of such Tax Proceeding; provided,
however, that the Corporate Taxpayer shall not settle or otherwise resolve any
part of a Tax Proceeding described in the previous clause that relates to a
Basis Adjustment or the deduction of Imputed Interest without the consent of the
Agent, which consent shall not be unreasonably withheld, conditioned or delayed;
provided further, that the Corporate Taxpayer and Rosehill LLC shall not be
required to take any action that is inconsistent with any provision of the
Rosehill LLC Agreement.

 

16

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

Section 6.2 Consistency. Unless there is a Determination to the contrary, the
Corporate Taxpayer and the TRA Holders agree to report and cause to be reported
for all purposes, including U.S. federal, state and local Tax purposes and
financial reporting purposes, all Tax-related items (including, without
limitation, the Basis Adjustments and each Tax Benefit Payment) in a manner
consistent with that set forth in any Schedule required to be provided by or on
behalf of the Corporate Taxpayer under this Agreement, as finally determined
pursuant to Section 2.3. If the Corporate Taxpayer and any TRA Holder, for any
reason, are unable to successfully resolve any disagreement concerning such
treatment within thirty (30) calendar days, the Corporate Taxpayer and such TRA
Holder shall employ the Reconciliation Procedures under Section 7.10 or
Resolution of Disputes procedures under Section 7.9, as applicable.

Section 6.3 Cooperation. The Corporate Taxpayer, each TRA Holder and the Agent
shall (i) furnish to each other in a timely manner such information, documents
and other materials as the other may reasonably request for purposes of making
any determination or computation necessary or appropriate under this Agreement,
preparing any Tax Return or contesting or defending any Tax Proceeding,
(ii) make itself or its employees and its representatives available to each
other to provide explanations of documents and materials and such other
information as may reasonably be requested in connection with any of the matters
described in clause (i) above, and (iii) reasonably cooperate in connection with
any such matter. The Corporate Taxpayer shall reimburse the TRA Holder and the
Agent for any reasonable third-party costs and expenses incurred pursuant to
this Section 6.3.

Section 6.4 Section 754 Election to be Filed. Consistent with Section 10.2(a) of
the Rosehill LLC Agreement, Rosehill LLC and any eligible Subsidiary of Rosehill
LLC shall make an election pursuant to Section 754 of the Code effective for
such entity’s Taxable Year that includes the Closing Date (or, if such entity is
formed or acquired after such Taxable Year, for the Taxable Year of such
formation or acquisition) and shall not thereafter revoke such election until
this Agreement is no longer in effect.

Section 6.5 Approvals. During the period beginning on the date hereof and ending
36 months from the Closing Date (as defined in the Business Combination
Agreement) (the “Protection Period”), for so long as Tema beneficially holds at
least 20% of the total issued and outstanding Units of Rosehill LLC (excluding
Tema’s beneficial ownership of Rosehill LLC through Tema’s ownership of Class A
common stock of the Corporate Taxpayer), the Corporate Taxpayer shall not cause
Rosehill LLC to sell, exchange or dispose of Contributed Assets (as defined in
the Business Combination Agreement) in any twelve month period during the
Protection Period if, following such disposition, the cumulative aggregate
amount realized (as that term is defined in Section 1001 of the Code) from all
dispositions of Contributed Assets during such twelve month period would be in
excess of $40,000,000, without the consent of Tema, which consent may be granted
or withheld in Tema’s sole discretion. The Corporate Taxpayer shall provide
notice to Tema of any proposed disposition of Contributed Assets which would
have an amount realized (as defined in Section 1001 of the Code) in excess of
$20,000,000 and the material terms of such disposition no later than fifteen
(15) Business Days prior to the proposed disposition.

 

17

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

ARTICLE VII

MISCELLANEOUS

Section 7.1 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed duly given and
received (i) on the date of delivery if delivered personally, or by facsimile
upon confirmation of transmission by the sender’s fax machine if sent on a
Business Day (or otherwise on the next Business Day), (ii) on the first Business
Day following the date of dispatch if delivered by a recognized next-day courier
service or (iii) five Business Days after the date of mailing to the recipient’s
address. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:

If to the Corporate Taxpayer, to:

Rosehill Resources Inc.

16200 Park Row, Suite 300

Houston, Texas 77084

Attention: Alan Townsend

with required copies to (which shall not constitute notice to the Corporate
Taxpayer):

KLR Energy Acquisition Corp.

811 Main Street, 18th Floor

Houston, Texas 77002

Facsimile: (713) 654-8080

Attention: Edward Kovalik

KLR Group, LLC

405 Lexington Avenue, Suite 29C

New York, New York 10174

Facsimile: (646) 576-8640

Attention: Gregory R. Dow

with a required copy (which shall not constitute notice to the Corporate
Taxpayer) to:

Vinson & Elkins L.L.P.

1001 Fannin Street, Suite 2500

Houston, Texas 77002

Attention: W. Matthew Strock; John Lynch

If to the Agent, to:

Tema Oil and Gas Company

c/o Rosemore, Inc.

1 North Charles Street, 22nd Floor

Baltimore, MD 21201

Facsimile: (410) 347-7081

Attention: General Counsel

 

18

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

with a required copy (which shall not constitute notice to the Agent) to:

Norton Rose Fulbright US LLP

1301 McKinney, Suite 5100

Houston, Texas 77010

Facsimile: (713) 651-5246

Attention: Charles D. Powell, Partner

If to a TRA Holder, other than an Agent, that is or was a partner in Rosehill
LLC, to the address set forth in the records of Agent.

Any party may change its address or fax number by giving the other party written
notice of its new address or fax number in the manner set forth above.

Section 7.2 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. Delivery of an executed signature
page to this Agreement by facsimile transmission or otherwise (including an
electronically executed signature page) shall be as effective as delivery of a
manually signed counterpart of this Agreement.

Section 7.3 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be binding upon and inure solely to
the benefit of each party hereto and their respective successors and permitted
assigns, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.

Section 7.4 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of Delaware, without regard to the
conflicts of laws principles thereof that would mandate the application of the
laws of another jurisdiction.

Section 7.5 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.

 

19

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

Section 7.6 Successors; Assignment.

(a) No TRA Holder may assign this Agreement to any person without the prior
written consent of the Corporate Taxpayer; provided, however, that:

(i) to the extent Units are transferred in accordance with the terms of the
Rosehill LLC Agreement, the transferring TRA Holder shall have the option to
assign to the transferee of such Units the transferring TRA Holder’s rights
under this Agreement with respect to such transferred Units as long as such
transferee has executed and delivered, or, in connection with such transfer,
executes and delivers, a joinder to this Agreement, in form and substance
reasonably satisfactory to the Corporate Taxpayer, agreeing to become a “TRA
Holder” for all purposes of this Agreement, except as otherwise provided in such
joinder, and

(ii) any and all payments payable or that may become payable to a TRA Holder
pursuant to this Agreement that, once a Basis Adjustment Event has occurred,
arise with respect to such Basis Adjustment Event, may be assigned to any Person
or Persons as long as any such Person has executed and delivered, or, in
connection with such assignment, executes and delivers, a joinder to this
Agreement, in form and substance reasonably satisfactory to the Corporate
Taxpayer, agreeing to be bound by Section 7.13 and acknowledging specifically
the terms of Section 7.6(b).

For these purposes, a pledge by a TRA Holder of some or all of its rights,
interests or entitlements under this Agreement to any U.S. bank in connection
with a bona fide loan or other indebtedness shall not constitute an assignment
of this agreement; provided that (y) if Units are transferred to such U.S. bank
as a result of a foreclosure or other action relating to such pledge, such
transfer shall be a transfer within the meaning of Section 7.6(a)(i) or (z) if
such U.S. bank becomes entitled to payments payable or that may become payable
to a TRA Holder as a result of such pledge, such U.S. bank will be treated as a
Person to whom such payments were assigned within the meaning of
Section 7.6(a)(ii). For the avoidance of doubt, if a TRA Holder transfers Units
but does not assign to the transferee of such Units the rights of such TRA
Holder under this Agreement with respect to such transferred Units, such TRA
Holder shall continue to be entitled to receive the Tax Benefit Payments, if
any, due hereunder with respect to, including any Tax Benefit Payments arising
in respect of a subsequent Exchange of, such Units.

(b) Notwithstanding the foregoing provisions of this Section 7.6, no assignee
described in clause (ii) of Section 7.6(a) shall have any rights under this
Agreement except for the right to enforce its right to receive payments under
this Agreement.

(c) The Person designated as the Agent may not be changed without the prior
written consent of the Corporate Taxpayer and TRA Holders who would be entitled
to receive more than fifty percent (50%) of the aggregate amount of the Early
Termination Payments payable to all TRA Holders hereunder if the Corporate
Taxpayer had exercised its right of early termination on the date of the most
recent Basis Adjustment Event prior to such amendment (excluding, for purposes
of this sentence, all payments made to any TRA Holder pursuant to this Agreement
since the date of such most recent Basis Adjustment Event).

 

20

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

(d) Except as otherwise specifically provided herein, all of the terms and
provisions of this Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the parties hereto and their respective
successors, assigns, heirs, executors, administrators and legal representatives.
The Corporate Taxpayer shall cause any direct or indirect successor (whether by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business or assets of the Corporate Taxpayer, by written agreement, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporate Taxpayer would be required to perform if no such
succession had taken place.

Section 7.7 Amendments; Waivers. No provision of this Agreement may be amended
unless such amendment is approved in writing by each of the Corporate Taxpayer
and by TRA Holders who would be entitled to receive more than fifty percent
(50%) of the aggregate amount of the Early Termination Payments payable to all
TRA Holders hereunder if the Corporate Taxpayer had exercised its right of early
termination on the date of the most recent Basis Adjustment Event prior to such
amendment (excluding, for purposes of this sentence, all payments made to any
TRA Holder pursuant to this Agreement since the date of such most recent Basis
Adjustment Event); provided, however, that no such amendment shall be effective
if such amendment would have a disproportionate effect on the payments certain
TRA Holders will or may receive under this Agreement unless all such
disproportionately affected TRA Holders consent in writing to such amendment. No
provision of this Agreement may be waived unless such waiver is in writing and
signed by the party against whom the waiver is to be effective.

Section 7.8 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

Section 7.9 Resolution of Disputes.

(a) Any and all disputes which are not governed by Section 7.10, including any
ancillary claims of any party, arising out of, relating to or in connection with
the validity, negotiation, execution, interpretation, performance or
non-performance of this Agreement (including the validity, scope and
enforceability of this Section 7.9 and Section 7.10) (each a “Dispute”) shall be
governed by this Section 7.9. The parties hereto shall attempt in good faith to
resolve all Disputes by negotiation. If a Dispute between the parties hereto
cannot be resolved in such manner, such Dispute shall be finally settled by
arbitration conducted by a single arbitrator in Houston, Texas in accordance
with the then-existing Rules of Arbitration of the International Chamber of
Commerce. If the parties to the Dispute fail to agree on the selection of an
arbitrator within ten (10) calendar days of the receipt of the request for
arbitration, the International Chamber of Commerce shall make the appointment.
The arbitrator shall be a lawyer admitted to the practice of law in the State of
Texas and shall conduct the proceedings in the English language. Performance
under this Agreement shall continue if reasonably possible during any
arbitration proceedings. In addition to monetary damages, the arbitrator shall
be empowered to award equitable relief, including an injunction and specific
performance of any obligation under this Agreement. The arbitrator is not
empowered to award damages in excess of compensatory damages, and each party
hereby irrevocably waives any right to recover punitive, exemplary or similar
damages with respect to any Dispute. The award shall be the sole and exclusive
remedy between the parties regarding any claims, counterclaims, issues, or
accounting presented to the arbitral tribunal. Judgment upon any award may be
entered and enforced in any court having jurisdiction over a party or any of its
assets.

 

21

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

(b) Notwithstanding the provisions of Section 7.9(a), the Corporate Taxpayer may
bring an action or special proceeding in accordance with Section 7.9(c) for the
purpose of compelling a party to arbitrate, seeking temporary or preliminary
relief in aid of an arbitration hereunder, and/or enforcing an arbitration award
and, for the purposes of this Section 7.9(b), the Agent and each TRA Holder
(i) expressly consents to the application of Section 7.9(c) to any such action
or proceeding, and (ii) agrees that proof shall not be required that monetary
damages for breach of the provisions of this Agreement would be difficult to
calculate and that remedies at law would be inadequate.

(c) EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED
IN HARRIS COUNTY, TEXAS FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN
ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH (B) OF THIS SECTION 7.9 OR ANY
JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION
ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary
judicial proceedings include any suit, action or proceeding to compel
arbitration, to obtain temporary or preliminary judicial relief in aid of
arbitration, or to confirm an arbitration award. The parties acknowledge that
the fora designated by this Section 7.9(c) have a reasonable relation to this
Agreement, and to the parties’ relationship with one another. Each party further
agrees that it will not bring any such judicial proceeding in any court other
than in Harris County, Texas.

(d) The parties hereby waive, to the fullest extent permitted by applicable law,
any objection which they now or hereafter may have to personal jurisdiction or
to the laying of venue of any such ancillary suit, action or proceeding brought
in any court referred to in Section 7.9(c) and such parties agree not to plead
or claim the same.

Section 7.10 Reconciliation. In the event that the Corporate Taxpayer and the
Agent or any TRA Holder (as applicable, the “Disputing Party”) are unable to
resolve a disagreement with respect to the calculations required to produce the
schedules described in Section 2.3, Section 4.3 or Section 6.2 (but not, for the
avoidance doubt, with respect to any legal interpretation with respect to such
provisions or schedules) within the relevant period designated in this Agreement
(each, a “Reconciliation Dispute”), such Reconciliation Dispute shall be
submitted for determination to the Expert. The Expert shall be a partner or
principal in a nationally recognized accounting or law firm, and unless the
Corporate Taxpayer and the Disputing Party agree otherwise, the Expert shall
not, and the firm that employs the Expert shall not, have any material
relationship with the Corporate Taxpayer or the Disputing Party or other actual
or potential conflict of interest. If the parties are unable to agree on an
Expert within fifteen (15) calendar days of receipt by a party of written notice
from another party of the existence of a Reconciliation Dispute, the Expert
shall be appointed by the International Chamber of Commerce Centre for
Expertise. The Expert shall resolve (a) any matter relating to the Basis
Adjustment Schedule or an amendment thereto or the Early Termination Schedule or
an amendment thereto within thirty (30) calendar days, (b) any matter relating
to a Tax Benefit Payment Schedule or an amendment thereto within fifteen
(15) calendar days, and (c) any matter

 

22

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

related to treatment of any tax-related item as contemplated in Section 6.2
within fifteen (15) calendar days, or, in each case, as soon thereafter as is
reasonably practicable after such matter has been submitted to the Expert for
resolution. Notwithstanding the preceding sentence, if the matter is not
resolved before any payment that is the subject of a disagreement would be due
(in the absence of such disagreement) or any Tax Return reflecting the subject
of a disagreement is due, any portion of such payment that is not under dispute
shall be paid on the date prescribed by this Agreement and such Tax Return may
be filed as prepared by the Corporate Taxpayer, subject to adjustment or
amendment upon resolution. The costs and expenses relating to the engagement of
such Expert or amending any Tax Return shall be borne by the Corporate Taxpayer
except as provided in the next sentence. The Corporate Taxpayer and the
Disputing Party shall each bear its own costs and expenses of such proceeding,
unless (i) the Expert adopts such Disputing Party’s position (as determined by
the Expert), in which case the Corporate Taxpayer shall reimburse such Disputing
Party for any reasonable out-of-pocket costs and expenses in such proceeding, or
(ii) the Expert adopts the Corporate Taxpayer’s position (as determined by the
Expert), in which case such Disputing Party shall reimburse the Corporate
Taxpayer for any reasonable out-of-pocket costs and expenses in such proceeding.
Any dispute as to whether a dispute is a Reconciliation Dispute within the
meaning of this Section 7.10 shall be decided by the Expert. The Expert shall
finally determine any Reconciliation Dispute and the determinations of the
Expert pursuant to this Section 7.10 shall be binding on the Corporate Taxpayer
and its Subsidiaries and the Disputing Party and may be entered and enforced in
any court having jurisdiction.

Section 7.11 Withholding. The Corporate Taxpayer shall be entitled to deduct and
withhold from any payment payable pursuant to this Agreement such amounts as the
Corporate Taxpayer is required to deduct and withhold with respect to the making
of such payment under the Code or any provision of U.S. federal, state, local or
non-U.S. tax law. To the extent that amounts are so withheld and paid over to
the appropriate Taxing Authority by the Corporate Taxpayer, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the relevant TRA Holder.

Section 7.12 Admission of the Corporate Taxpayer into a Consolidated Group;
Transfers of Corporate Assets.

(a) If the Corporate Taxpayer becomes a member of an affiliated or consolidated
group of corporations that files a consolidated income Tax Return pursuant to
Sections 1501 et seq. of the Code or any corresponding provisions of U.S. state
or local Tax law, then, subject to the application of the Valuation Assumptions
upon a Change of Control: (i) the provisions of this Agreement shall be applied
with respect to the group as a whole; and (ii) Tax Benefit Payments, Early
Termination Payments and other applicable items hereunder shall be computed with
reference to the consolidated taxable income of the group as a whole to the
extent that any applicable Basis Adjustments can be used against such
consolidated taxable income of the group as a whole.

(b) If the Corporate Taxpayer (or any other entity that is obligated to make a
Tax Benefit Payment or Early Termination Payment hereunder), Rosehill LLC or any
of Rosehill LLC’s direct or indirect Subsidiaries that is treated as a
partnership or disregarded entity for U.S. federal income tax purposes (but only
to the extent such Subsidiaries are not held through any

 

23

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

entity treated as a corporation for U.S. federal income tax purposes) (a
“Transferor”) transfers one or more Reference Assets to a corporation (or a
Person classified as a corporation for U.S. federal income tax purposes) with
which the Transferor does not file a consolidated Tax Return pursuant to
Section 1501 of the Code, the Transferor, for purposes of calculating the amount
of any Tax Benefit Payment or Early Termination Payment (e.g., calculating the
gross income of the entity and determining the Realized Tax Benefit of such
entity) due hereunder, shall be treated as having disposed of such Reference
Assets in a fully taxable transaction on the date of such contribution. The
consideration deemed to be received by the Transferor shall be equal to the fair
market value of the transferred Reference Assets, plus, without duplication,
(i) the amount of debt to which any such Reference Asset is subject, in the case
of a transfer of an encumbered Reference Asset or (ii) the amount of debt
allocated to any such Reference Asset, in the case of a contribution of a
partnership interest. For purposes of this Section 7.12(b), a transfer of a
partnership interest shall be treated as a transfer of the Transferor’s share of
each of the assets and liabilities of that partnership.

(c) Notwithstanding anything to the contrary, before causing Rosehill LLC or any
of its Subsidiaries that are treated as a partnership or disregarded entity for
U.S. federal income tax purposes to dispose of twenty-five percent (25%) or more
of the Reference Assets in a single transaction, the Corporate Taxpayer shall
provide written notice of the proposed disposition to the Agent, and each TRA
Holder may, within ten (10) calendar days after the receipt of such notice by
the Agent, exercise its Exchange Right with respect to all of its remaining
Units; provided, that the period of time that each TRA Holder has to exercise
its Exchange Right pursuant to the foregoing clause shall be extended to the
extent the Corporate Taxpayer reasonably determines is necessary for, and the
Corporate Taxpayer and such TRA Holder shall take any action reasonably
necessary to cause, such exercise of such TRA Holder’s Exchange Right and any
subsequent sale of the Corporate Taxpayer’s common stock resulting therefrom to
be in compliance with applicable securities law. If any TRA Holder exercises its
Exchange Right during such period, the Corporate Taxpayer shall not cause
Rosehill LLC or any such Subsidiary to dispose of the Reference Assets before
the Exchange is consummated pursuant to the Rosehill LLC Agreement and the
foregoing sentence. For the avoidance of uncertainty, the rights set forth in
this Section 7.12(c) shall cease to be available to any TRA Holder that no
longer holds any Units.

Section 7.13 Confidentiality.

(a) The Agent, the TRA Holder and each of the TRA Holder’s assignees
acknowledges and agrees that the information of the Corporate Taxpayer is
confidential and, except in the course of performing any duties as necessary for
the Corporate Taxpayer and its Affiliates, as required by law or legal process
or to enforce the terms of this Agreement, such person shall keep and retain in
the strictest confidence and not disclose to any Person any confidential
matters, acquired pursuant to this Agreement, of the Corporate Taxpayer and its
Affiliates and successors, concerning Rosehill LLC and its Affiliates and
successors or the TRA Holders, learned by the Agent or any TRA Holder heretofore
or hereafter. This Section 7.13 shall not apply to (i) any information that has
been made publicly available by the Corporate Taxpayer or any of its Affiliates,
becomes public knowledge (except as a result of an act of an Agent or a TRA
Holder in violation of this Agreement) or is generally known to the business
community and (ii) the disclosure of information (A) as may be proper in the
course of

 

24

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

performing such TRA Holder’s obligations, or monitoring or enforcing such TRA
Holder’s rights, under this Agreement, (B) as part of such TRA Holder’s normal
reporting, rating or review procedure (including normal credit rating and
pricing process), or in connection with such TRA Holder’s or such TRA Holder’s
Affiliates’ normal fund raising, financing, marketing, informational or
reporting activities, or to such TRA Holder’s (or any of its Affiliates’) or its
direct or indirect owners or Affiliates, auditors, accountants, employees,
attorneys or other agents, (C) to any bona fide prospective assignee of such TRA
Holder’s rights under this Agreement, or prospective merger or other business
combination partner of such TRA Holder, provided that such assignee or merger
partner agrees to be bound by the provisions of this Section 7.13, (D) as is
required to be disclosed by order of a court of competent jurisdiction,
administrative body or governmental body, or by subpoena, summons or legal
process, or by law, rule or regulation; provided that any TRA Holder required to
make any such disclosure to the extent legally permissible shall provide the
Corporate Taxpayer prompt notice of such disclosure, or to regulatory
authorities or similar examiners conducting regulatory reviews or examinations
(without any such notice to the Corporate Taxpayer), or (E) to the extent
necessary for a TRA Holder or its direct or indirect owners to prepare and file
their Tax Returns, to respond to any inquiries regarding such Tax Returns from
any Taxing Authority or to prosecute or defend any Tax Proceeding with respect
to such Tax Returns. Notwithstanding anything to the contrary herein, the Agent
(and each employee, representative or other agent of Agent or its assignees, as
applicable) and each TRA Holder and each of its assignees (and each employee,
representative or other agent of such TRA Holder or its assignees, as
applicable) may disclose to any and all Persons, without limitation of any kind,
the Tax treatment and Tax structure of the Corporate Taxpayer, Rosehill LLC, the
Agent, the TRA Holders and their Affiliates, and any of their transactions, and
all materials of any kind (including opinions or other Tax analyses) that are
provided to the Agent or the TRA Holder relating to such Tax treatment and Tax
structure.

(b) If an Agent or an assignee or a TRA Holder or an assignee commits a breach,
or threatens to commit a breach, of any of the provisions of this Section 7.13,
the Corporate Taxpayer shall have the right and remedy to have the provisions of
this Section 7.13 specifically enforced by injunctive relief or otherwise by any
court of competent jurisdiction without the need to post any bond or other
security, it being acknowledged and agreed that any such breach or threatened
breach shall cause irreparable injury to the Corporate Taxpayer or any of its
Subsidiaries or the TRA Holders and the accounts and funds managed by the
Corporate Taxpayer and that money damages alone shall not provide an adequate
remedy to such Persons. Such rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available at law or in equity.

Section 7.14 Post-Closing TRAs. Neither the Corporate Taxpayer nor any of its
Subsidiaries shall enter into any additional agreement providing rights similar
to this Agreement to any Person (including any agreement pursuant to which the
Corporate Taxpayer is obligated to pay amounts with respect to tax benefits
resulting from any net operating losses or other tax attributes to which the
Corporate Taxpayer becomes entitled as a result of a transaction) without the
prior written consent of the TRA Holders who would be entitled to receive more
than fifty percent (50%) of the aggregate amount of the Early Termination
Payments payable to all TRA Holders hereunder if the Corporate Taxpayer had
exercised its right of early termination on the date of the most recent Basis
Adjustment Event (excluding, for purposes of this sentence, all payments made to
any TRA Holder pursuant to this Agreement since the date of such most recent
Basis Adjustment Event).

 

25

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

Section 7.15 Change in Law. Notwithstanding anything herein to the contrary, if,
in connection with an actual or proposed change in law, a TRA Holder reasonably
believes that the existence of this Agreement could cause income (other than
income arising from receipt of a payment under this Agreement) recognized by
such TRA Holder upon any Exchange to be treated as ordinary income rather than
capital gain (or otherwise taxed at ordinary income rates) for U.S. federal
income tax purposes or would have other material adverse tax consequences to the
TRA Holder and/or its direct or indirect owners, then at the election of the TRA
Holder and to the extent specified by the TRA Holder, this Agreement (i) shall
cease to have further effect, (ii) shall not apply to an Exchange by the TRA
Holder occurring after a date specified by it, or (iii) shall otherwise be
amended in a manner determined by the TRA Holder to waive any benefits to which
such TRA Holder would otherwise be entitled under this Agreement, provided that
such amendment shall not result in an increase in or acceleration of payments
under this Agreement at any time as compared to the amounts and times of
payments that would have been due in the absence of such amendment.

[Signature Page Follows]

 

26

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

IN WITNESS WHEREOF, the Corporate Taxpayer, the Agent, and the TRA Holder have
duly executed this Agreement as of the date first written above.

 

CORPORATE TAXPAYER: ROSEHILL RESOURCES INC. By:  

/s/ J. Alan Townsend

  Name:   J. Alan Townsend   Title:   Chief Executive Officer

 

[Signature page to Tax Receivable Agreement]

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

AGENT: TEMA OIL AND GAS COMPANY By:  

/s/ J. A. Townsend

  Name:   J. A. Townsend   Title:   President TRA HOLDER: TEMA OIL AND GAS
COMPANY By:  

/s/ J. A. Townsend

  Name:   J. A. Townsend   Title:   President

 

[Signature page to Tax Receivable Agreement]