Exhibit 10.4

Execution Version

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

GAVILAN RESOURCES HOLDCO, LLC 
a Delaware limited liability company

Dated as of March 1, 2017

THE MEMBERSHIP INTERESTS REFERENCED IN THIS LIMITED LIABILITY COMPANY AGREEMENT
HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND THEIR OFFER AND SALE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR THE SECURITIES LAWS OF ANY STATE.  THE MEMBERSHIP INTERESTS WHICH ARE
REFERENCED HEREIN MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT IF THE OFFER OR SALE HAS BEEN REGISTERED AND/OR QUALIFIED UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM
REGISTRATION AND/OR QUALIFICATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE.  THERE IS CURRENTLY NO TRADING MARKET FOR THE
MEMBERSHIP INTERESTS, AND IT IS NOT ANTICIPATED THAT ONE WILL DEVELOP.  THERE
ARE SUBSTANTIAL RESTRICTIONS UPON THE TRANSFERABILITY AND VOTING RIGHTS OF THE
MEMBERSHIP INTERESTS SET FORTH HEREIN.  NO SALE, TRANSFER OR OTHER DISPOSITION
BY A MEMBER OF ITS MEMBERSHIP INTERESTS MAY BE MADE EXCEPT IN ACCORDANCE WITH
THE TERMS SET FORTH HEREIN.  THEREFORE, MEMBERS MAY NOT BE ABLE TO READILY
LIQUIDATE THEIR INVESTMENTS.

 

 

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TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

ARTICLE I DEFINITIONS

1

1.1

Specific Definitions

1

1.2

Other Terms

12

1.3

Construction

12

 

 

 

ARTICLE II ORGANIZATION

13

2.1

Formation

13

2.2

Name

13

2.3

Principal U.S. Office; Registered Office and Registered Agent; Other Offices

13

2.4

Purpose

13

2.5

Foreign Qualification

13

2.6

Term

13

2.7

Fiduciary Duties

13

 

 

 

ARTICLE III MEMBERSHIP INTERESTS AND TRANSFERS

15

3.1

Classes and Series of Membership Interests; Members

15

3.2

Number of Members.

15

3.3

Representations, Warranties and Covenants.

15

3.4

Restrictions on the Transfer of Interests

19

3.5

Bankruptcy-Related Events

20

3.6

Tag-Along Rights

20

3.7

Drag-Along Rights

22

3.8

Vesting of Class A Units

23

 

 

 

ARTICLE IV CAPITAL CONTRIBUTIONS

24

4.1

Capital Contributions; Return of Cash

24

4.2

Capital Accounts

25

4.3

Contributions of Contributed Property

26

 

 

 

ARTICLE V ALLOCATIONS AND DISTRIBUTIONS

27

5.1

Allocations for Capital Account Purposes

27

5.2

Allocations for Tax Purposes

30

5.3

Requirement of Distributions

32

5.4

Withholding

34

5.5

Deemed Distribution

34

5.6

Distributions upon Merger, Sale or Similar Transaction

35

 

 

 

ARTICLE VI MANAGEMENT OF THE COMPANY

35

6.1

Management by Managers

35

6.2

Board

36

6.3

Powers of the Board

37

6.4

Meetings of the Board

37

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6.5

Quorum and Voting

38

6.6

Resignation; Removal and Vacancies

39

6.7

Discharge of Duties; Reliance on Reports

39

6.8

Officers

39

6.9

Term of Officers

40

6.10

Compensation and Reimbursement

40

6.11

Management Services

40

6.12

Member Meetings

41

6.13

VCOC Management Rights

41

6.14

Affiliate Transactions.

41

 

 

 

ARTICLE VII INDEMNIFICATION

42

7.1

Right to Indemnification

42

7.2

Indemnification of Officers, Employees (if any) and Agents

42

7.3

Advance Payment

43

7.4

Appearance as a Witness

43

7.5

Nonexclusivity of Rights

43

7.6

Insurance

43

7.7

Member Notification

43

7.8

Savings Clause

43

7.9

Scope of Indemnity

44

7.10

Other Indemnities

44

7.11

Certain Limitations

44

 

 

 

ARTICLE VIII TAXES

44

8.1

Tax Returns

44

8.2

Tax Elections

45

8.3

Tax Matters Member

45

8.4

PTP Qualifying Income

46

8.5

Code Section 83 Safe Harbor Election

46

 

 

 

ARTICLE IX BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS

47

9.1

Maintenance of Books

47

9.2

Rights of Members.

47

9.3

Reports

48

 

 

 

ARTICLE X DISSOLUTION, LIQUIDATION, AND TERMINATION

48

10.1

Dissolution

48

10.2

Liquidation and Termination

49

10.3

Provision for Contingent Claims

50

10.4

Deficit Capital Accounts

50

10.5

Deemed Contribution and Distribution

50

 

 

 

ARTICLE XI AMENDMENT OF THE AGREEMENT; OTHER TRANSACTIONS

50

11.1

Amendments to be Adopted by the Company

50

11.2

Amendment Procedures

51

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11.3

Decisions Requiring Additional Consents

51

 

 

 

ARTICLE XII MEMBERSHIP INTERESTS

52

12.1

Certificates

52

12.2

Registered Holders

52

12.3

Security

52

 

 

 

ARTICLE XIII GENERAL PROVISIONS

52

13.1

Offset

52

13.2

Entire Agreement

52

13.3

Waivers

53

13.4

Binding Effect

53

13.5

Governing Law; Severability

53

13.6

Further Assurances

53

13.7

Exercise of Certain Rights

53

13.8

Notice to Members of Provisions of this Agreement

53

13.9

Counterparts

54

13.10

Books and Records

54

13.11

Information

54

13.12

Liability to Third Parties

56

13.13

No Third Party Beneficiaries

56

13.14

Notices

56

13.15

Disputes

57

13.16

Expenses

58

13.17

No Recourse

58

13.18

Adjustments for Unit Splits

59

 

 

 

 

Attachments

 

 

 

Exhibit A

Ownership Information

Exhibit B

Initial Capital Contributions

Schedule 6.2

Initial Board of Managers

Schedule 6.8

Initial Officers

Annex A

Form of VCOC Management Rights Letter

 

 

 

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AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

GAVILAN RESOURCES HOLDCO, LLC

a Delaware limited liability company

This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of Gavilan
Resources HoldCo, LLC (the “Company”), dated as of March 1, 2017 (the “Effective
Date”), is (a) adopted by the Members (as defined below) and (b) executed and
agreed to, for good and valuable consideration, by the Members.

RECITALS:

WHEREAS, the Company was formed as a limited liability company pursuant to the
Delaware Limited Liability Company Act by filing a Certificate of Formation with
the Secretary of State of the State of Delaware on January 9, 2017 (the
“Formation Date”), and was governed by an initial limited liability company
agreement by and between Blackstone and the Company (the “Original Agreement”);

WHEREAS, contemporaneously with the execution of this Agreement and in order to
provide for certain services to the Company, the Company and Sanchez (as defined
herein) have entered into the Management Services Agreement (as defined herein),
pursuant to which Sanchez will agree, among other things, to provide certain
services, or cause such services to be provided, to the Company; and

WHEREAS, for the foregoing purposes the Parties wish to amend and restate the
Original Agreement in its entirety to, among other things, (a) admit Sanchez as
a Member, (b) issue to Sanchez the Class A Units (as defined herein) which will
be entitled to the rights set forth herein, (c) provide for the management of
the Company and (d) set forth their respective rights and obligations.

NOW,  THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration (the receipt and sufficiency of which are hereby confirmed and
acknowledged), the Parties hereby agree as follows:

Article I

DEFINITIONS

1.1      Specific Definitions.  As used in this Agreement, the following terms
have the following meanings:

“Act” means the Delaware Limited Liability Company Act, and any successor
statute, as amended from time to time.

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“Adjusted Capital Account” means the Capital Account, with respect to each
Member, maintained for such Member as of the end of each taxable year of the
Company, (a) increased by any amounts that such Member is obligated to restore
pursuant to any provision of this Agreement or is deemed to be obligated to
restore pursuant to the penultimate sentences of Treasury Regulations sections
1.704-2(g)(1) and (i)(5), and (b) decreased by the items described in Treasury
Regulations sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).  The foregoing
definition of Adjusted Capital Account is intended to comply with the provisions
of Treasury Regulation section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.

“Adjusted Property” means any property the Carrying Value of which has been
adjusted pursuant to Section 4.2(d).

“Affiliate” means, when used with respect to any Person, any other Person that,
directly or indirectly, through one (1) or more intermediaries, Controls, is
Controlled by, or is under common Control with, such Person in question.

“Aggregate Capital Contributions Amount” means, with respect to a Member as of a
given time of determination, the aggregate amount of Capital Contributions made
to the Company by such Member from the Effective Date through such time of
determination.

“Agreed Allocation” means any allocation, other than a Required Allocation, of
an item of income, gain, loss or deduction pursuant to the provisions of Section
5.1.

“Agreed Duties” has the meaning set forth in Section 2.7(a).

“Agreed Value” of any Contributed Property means the Fair Market Value of such
property at the time of contribution as determined by Majority Consent.

“Agreement” means this Amended and Restated Limited Liability Company Agreement
of the Company (including any schedules, exhibits and annexes hereto), as
amended, supplemented or otherwise modified from time to time.

“AMI Properties” means any rights, title or interests to any oil and gas
properties covering lands within the AMI (as defined in the Joint Development
Agreement). 

“Assignee” means any Person that acquires an interest in any Membership Interest
but has not been admitted as a Member in accordance with the terms of this
Agreement.

“Available Cash” means, as of the end of each quarter ended March 31, June 30,
September 30 and December 31 immediately preceding the date of distribution or
any other date of distribution as the Board may determine, the following,
without duplication:

(a)      all revenues and other cash or cash equivalent amounts collected or
received by the Company and its Subsidiaries from any and all sources during
such quarter, plus cash and cash equivalents of the Company and its Subsidiaries
on hand (other than Capital Contributions and the proceeds of indebtedness for
borrowed money), less

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(b)      the bona fide costs and expenses paid by the Company and its
Subsidiaries to other Persons during such quarter and amounts reserved for
payment of costs, including capital costs and administrative and operating costs
and expenses production taxes and other applicable taxes and similar amounts,
debt service, or other reasonable reserves in each case determined in good faith
by the Board.

“BBA” means Subchapter C of Chapter 63 of the Code (Sections 6221 through 6241
of the Code), as enacted by the Bipartisan Budget Act of 2015, Pub. L. No.
114-74, as amended from time to time, and the Treasury Regulations thereunder
(whether proposed, temporary or final), including any subsequent amendments,
successor provisions or other guidance thereunder, and any equivalent provisions
for state or local tax purposes.

“BBA Effective Period” means any taxable year commencing after 2017, taking into
account any extensions of the effective date set forth in Bipartisan Budget Act
Section 1101(g)(1), as applicable, or in any other BBA guidance.

“Blackstone” means Gavilan Resources Holdings, LLC.

“Blackstone Funds” shall have the meaning set forth in the Joint Development
Agreement.

“Board” has the meaning set forth in Section 6.1(a).

“Book-Tax Disparity” means with respect to any item of Contributed Property or
Adjusted Property, as of the date of any determination, the difference between
the Carrying Value of such Contributed Property or Adjusted Property and the
adjusted basis thereof for federal income tax purposes as of such date.

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized or required by applicable Law to be closed in
New York, New York or Houston, Texas.

“Capital Account” means the capital account maintained for each Member pursuant
to Section 4.2.

“Capital Contribution” means any cash, cash equivalents or the Agreed Value of
Contributed Property that a Member contributes to the Company in respect of
Common Units.

“Carrying Value” means (a) with respect to Contributed Property, the Agreed
Value of such property reduced (but not below zero (0)) by all Depreciation and
depletion (including Simulated Depletion), deductions charged to the Members’
Capital Accounts in respect of such Contributed Property, and (b) with respect
to any other Company property, the adjusted basis of such property for federal
income tax purposes, all as of the time of determination.  In the case of oil
and gas property (as defined in section 614 of the Code), adjusted basis shall
be determined pursuant to Treasury Regulation section
1.613A-3(e).  Notwithstanding the foregoing, the Carrying Value of any property
shall be adjusted from time to time in accordance with Section 4.2(d) to reflect
changes, additions or other adjustments to the Carrying Value for dispositions
and acquisitions of Company properties, as deemed appropriate by the Board.

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“Certificate” has the meaning set forth in Section 2.1.

“Chairman” has the meaning set forth in Section 6.2(a)(iii).

“Change in Control” means, with respect to the Company, any events, transactions
or other circumstances (or any series of the foregoing) resulting in the
Blackstone Funds no longer owning (directly or indirectly, individually or
collectively) Common Units or other Equity Interests in the Company that entitle
the holders thereof to, in the absence of contingencies, vote for the election
of Managers (or Persons with management authority performing similar functions)
(i) representing over 50% of the voting interests in the Company or (ii)
entitling the Blackstone Funds to elect at least a majority of Managers (or
Persons with management authority performing similar functions).  

“Class A Units” has the meaning set forth in Section 3.1(a).

“Class A Units Member” means Sanchez and any other Members holding a Class A
Unit, including upon any Transfer of Class A Units permitted by this Agreement.

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

“Common Units” has the meaning set forth in Section 3.1(a).

“Common Units Member” means all Members holding a Common Unit, including upon
any Transfer of any Common Units permitted by this Agreement.  If at any time
any other new Common Units Member is admitted to the Company so that more than
one (1) Member holds a Common Unit, then the term “Common Units Member” is
intended to include and shall be deemed to include all such Members holding
Common Units whether or not references to the term “Common Units Member” herein
are singular or plural, unless otherwise stated otherwise herein.

“Company” has the meaning set forth in the Preamble.

“Company Business” means the business related to (a) the acquisition, ownership,
operation and finance, of oil, gas or mineral fee interests and royalty
interests and other related rights, assets and interests, the sale or other
disposition of such interests, and any other activities related or incidental
thereto or in anticipation thereof, (b) the acquisition, ownership, operation,
finance, maintenance, exploration, production and development of oil, gas or
mineral leases and other related rights, assets and interests, the production
and sale of oil, gas and other hydrocarbons produced from such interests, the
sale or other disposition of such interests, (c) any midstream business or
activities or oil or gas marketing activities or any other energy related
activities (including activities related to the provision or disposal of water),
and any other activities related or incidental thereto or in anticipation
thereof, and (d) any additional activities as mutually agreed by the Members.

“Company Minimum Gain” has the meaning given the term “partnership minimum gain”
in Treasury Regulation section 1.704-2(b)(2) and the amount of which shall be
determined in accordance with the principles of Treasury Regulation section
1.704-2(d).

“Confidential Information” has the meaning set forth in Section 13.11(a).

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“Consent” means the affirmative consent of the indicated party (including the
Board or any committee thereof) to the action requested, whether by an
affirmative vote of the required number of Managers at a duly called and
convened meeting of the Board where a quorum is present or the execution of a
written consent by the required number of Managers, in either case in accordance
with the terms hereof and any applicable requirements of the Act.

“Contributed Property” means each property or other asset, in such form as may
be permitted by the Act, but excluding cash, contributed to the Company.  Once
the Carrying Value of a Contributed Property is adjusted pursuant to Section
4.2(d), such property shall no longer constitute a Contributed Property, but
shall be deemed an Adjusted Property.

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

“Core Acquisition” means an acquisition in the Core Area. 

“Core Area” has the meaning set forth in the Joint Development Agreement.

“Curative Allocation” means any allocation of an item of income, gain, deduction
or loss pursuant to the provisions of Section 5.1(c)(xi).

“Depreciation” means, for any Fiscal Year or other period, except as provided in
Treasury Regulation section 1.704-3(d)(2), an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable for federal income tax
purposes with respect to an asset for such year or other period, except that, if
the Carrying Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
will be an amount that bears the same ratio to such beginning Carrying Value as
the federal income tax depreciation, amortization, or other cost recovery
deduction for such year or other period bears to such beginning adjusted tax
basis; except that if the federal income tax depreciation, amortization, or
other cost recovery deduction for such year is zero (0), Depreciation will be
determined with reference to such beginning Carrying Value using any reasonable
method selected by the Tax Matters Member.

“Dissolution Event” has the meaning set forth in Section 10.1.

“Drag-Along Transaction” has the meaning set forth in Section 3.7(a).

“Economic Risk of Loss” has the meaning set forth in Treasury Regulation section
1.752-2(a).

“Effective Date” has the meaning set forth in the Preamble.

“Equity Interest” means (a) with respect to a corporation, any and all shares of
capital stock and any commitments with respect thereto, (b) with respect to a
partnership, limited liability company, trust or similar Person, any and all
units, equity interests or other partnership/limited liability company
interests, and any commitments with respect thereto, and (c) any other direct or
indirect equity ownership or participation in a Person.

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“Estimated Tax Payment Date” has the meaning set forth in Section 5.3(b)(i).

“Estimated Tax Period” has the meaning set forth in Section 5.3(b)(i).

“Excluded AMI Transactions” has the meaning set forth in the Joint Development
Agreement.

“Fair Market Value” means the value of any specified interest or property, which
shall not in any event be less than zero (0), that would be obtained in an arm’s
length transaction for cash between an informed and willing buyer and an
informed and willing seller, neither of whom is under any compulsion to purchase
or sell, respectively, and without regard to the particular circumstances of the
buyer or seller.

“Fiscal Year” means the fiscal year of the Company, and its taxable year for
federal income tax purposes, each of which shall be the calendar year unless
otherwise established by the Board; provided, that, for purposes of making
allocations under Article V hereof, Fiscal Year shall also include or mean any
other period in which it becomes necessary to allocate items of income, gain,
loss or deduction for tax purposes.

“Formation Date” has the meaning set forth in the Recitals.

“GAAP” means those generally accepted accounting principles and practices that
are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and that, in the case of the Company and its
consolidated Subsidiaries, are applied for all periods after the date hereof in
a consistent manner.  If any change in any accounting principle or practice is
required by the Financial Accounting Standards Board (or any such successor) in
order for such principle or practice to continue as a generally accepted
accounting principle or practice, all reports and financial statements required
hereunder with respect to the Company or with respect to the Company and its
consolidated Subsidiaries shall be prepared in accordance with such change.

“Governmental Authority” means any legislature, court, tribunal, arbitrator,
authority, agency, department, commission, division, board, bureau, branch,
official or other instrumentality of the U.S., or any domestic state, county,
city, tribal or other political subdivision, governmental department or similar
governing entity, and including any governmental, quasi-governmental,
regulatory, administrative or non-governmental body exercising similar powers of
authority.

“IDCs” has the meaning set forth in Section 5.1(c)(ix).

“Indemnitee” has the meaning set forth in Section 7.1.

“Independent Expert” means a Person appointed by the Board in good faith who is
independent of the Company and its Affiliates who is in the business of
rendering opinions regarding the value of oil and gas properties based upon the
evaluation of all pertinent economic, financial, geologic and engineering
information available to the Company or its Affiliates.

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“Interim Investors Agreement” means that certain Interim Investors Agreement,
dated as of January 12, 2017 among Sanchez Energy Corporation, SN EF Maverick,
LLC, SN EF UnSub, LP, the Company, Blackstone Capital Partners VII L.P. and
Blackstone Energy Partners II L.P.

“Internal Rate of Return” means the interest rate at which the holder’s cash
flow in respect of a Common Unit, both positive and negative (that is, the
Aggregate Capital Contributions Amount made by the holder and his predecessors
in interest in respect of such Common Unit and the aggregate amount of
distributions made with respect to such Common Unit) must be discounted on an
annual basis (to account for the time value of money concept) so that the
aggregate of such discounted amount equals zero (0).

 “JDA Default” has the meaning set forth in the definition of “Default” in the
Joint Development Agreement.

“JDA Default Notice” has the meaning set forth in the definition of “Default
Notice” in the Joint Development Agreement.

“Joinder” has the meaning set forth in Section 3.4(c).

“Joint Development Agreement” means that certain Joint Development Agreement
dated as of March 1, 2017 by and among SN EF Maverick, LLC, SN EF UnSub, LP,
Gavilan Resources, LLC, and for the limited purposes set forth therein, Sanchez
Energy Corporation, in effect as of the Effective Date.

“Laws” means all federal, state and local statutes, laws (including common law),
rules, regulations, codes, orders, ordinances, licenses, writs, injunctions,
judgments, subpoenas, awards and decrees and other legally enforceable
requirements enacted, adopted, issued or promulgated by any Governmental
Authority.

“Letter Agreement” has the meaning set forth in Section Error! Reference source
not found..

“Liabilities” means, as to any Person, all liabilities and obligations of such
Person, whether matured or unmatured, liquidated or unliquidated, primary or
secondary, direct or indirect, absolute, fixed or contingent, and whether or not
required to be considered pursuant to GAAP.

“Lien” means, with respect to any property or assets, any right or interest
therein of a creditor to secure Liabilities owed to it or any other arrangement
with such creditor that provides for the payment of such Liabilities out of such
property or assets or that allows such creditor to have such Liabilities
satisfied out of such property or assets prior to the general creditors of any
owner thereof, including any lien, mortgage, security interest, pledge, deposit,
production payment, rights of a vendor under any title retention or conditional
sale agreement or lease substantially equivalent thereto, tax lien (other than a
lien for taxes that are not yet due and payable), mechanic’s or materialman’s
lien, or any other charge or encumbrance for security purposes, whether arising
by Law or agreement or otherwise, but excluding any right of offset that arises
without agreement in the ordinary course of business.  “Lien” also means any
filed financing statement, any registration of a pledge (such as with a lender
of uncertificated securities), or any other arrangement or action that would
serve to perfect a Lien described in the preceding sentence,

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regardless of whether such financing statement is filed, such registration is
made, or such arrangement or action is undertaken before or after such Lien
exists.

“Liquidator” has the meaning set forth in Section 10.2.

“Majority Consent” means the affirmative vote at any duly called and convened
meeting of the Board of more than fifty percent (50%) of all Managers then
constituting the entire Board.

“Management Services Agreement” means the Management Services Agreement, dated
as of the date hereof, by and between the Company and Sanchez, as the same may
be amended, supplemented or otherwise modified from time to time in accordance
with the provisions thereof.

“Manager” has the meaning set forth in Section 6.1(a).

“Manager Alternate” has the meaning set forth in Section 6.2(a)(ii).

“Member” means any Person executing this Agreement as of the date of this
Agreement as a Member or any Person hereafter admitted to the Company as a new
Member as provided in this Agreement, but does not include any Assignee or any
Person who has ceased to be a Member in the Company.

“Member Affiliate” has the meaning set forth in Section 13.17.

“Member Nonrecourse Debt” has the meaning set forth for “partner nonrecourse
liability” in Treasury Regulation section 1.704-2(b)(4).

“Member Nonrecourse Debt Minimum Gain” has the meaning set forth for the term
“partner nonrecourse debt minimum gain” in Treasury Regulation section
1.704-2(i)(2).

“Member Nonrecourse Deductions” means any and all items of loss, deduction,
expenditure (including any expenditure described in section 705(a)(2)(B) of the
Code), Simulated Depletion or Simulated Loss that, in accordance with the
principles of Treasury Regulation section 1.704-2(i), are attributable to Member
Nonrecourse Debt.

“Membership Interest” means the limited liability company interest of a Member
in the Company.

“Non-Core Acquisition” means an Acquisition (as defined in the Joint Development
Agreement) in the Non-Core Area.

“Non-Core Area” has the meaning set forth in the Joint Development Agreement.

“Nonrecourse Built-in Gain” means with respect to any Contributed Properties or
Adjusted Properties that are subject to a mortgage or pledge securing a
Nonrecourse Liability, the amount of any taxable gain that would be allocated to
the Members if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.

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“Nonrecourse Deductions” means any and all items of loss, deduction, expenditure
(described in section 705(a)(2)(b) of the Code), Simulated Depletion or
Simulated Loss that, in accordance with the principles of Treasury Regulation
section 1.704-2(b)(1), are attributable to a Nonrecourse Liability.

“Nonrecourse Liability” has the meaning assigned to such term in Treasury
Regulation section 1.704-2(b)(3).

“Notice” has the meaning set forth in Section 8.5(b).

“Observer” has the meaning set forth in Section 6.2(c).

“Officers” has the meaning set forth in Section 6.8(a).

“Original Agreement” has the meaning set forth in the recitals.

“Other Indemnification Agreement” means one (1) or more certificate or articles
of incorporation, by-laws, limited liability company operating agreement,
limited partnership agreement and any other organizational document, and
insurance policies maintained by any Member or Manager or Affiliate thereof
providing for, among other things, indemnification of and advancement of
expenses for any Indemnitee for, among other things, the same matters that are
subject to indemnification and advancement of expenses under this Agreement.

“Parties” means the Members and the Company.

“Percentage Interest” means, as of any date with respect to any Member other
than a Class A Units Member (in its capacity as such), a percentage equal to the
aggregate number of Common Units owned by such Member as of such date divided by
the aggregate number of all Common Units issued and outstanding as of such date.
No Class A Units Member (in its capacity as such) shall be entitled to a
Percentage Interest.

“Permitted Affiliate” means, when used with respect to any Person, any other
Person that, directly or indirectly, through one (1) or more intermediaries,
Controls, or is Controlled by, or is under common Control with, such
Person.  For the Common Units Member, Permitted Affiliate shall include any
entity affiliated with or managed by the Blackstone Funds.

“Permitted Holders” has the meaning set forth in the Joint Development
Agreement.

“Person” means any individual or entity, including any corporation, limited
liability company, partnership (general or limited), joint venture, association,
joint stock company, trust, unincorporated organization or Governmental
Authority.

“Pro Rata Share” means, with respect to each Membership Interest as of any date
of determination, the proportionate amount such Membership Interest would
receive if an amount equal to the Total Equity Value were distributed to all
Membership Interests in accordance with the provisions of Section 5.3.

“Proceeding” has the meaning set forth in Section 7.1.

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“Proposed Sale” has the meaning set forth in Section 3.6(a).

“Proposed Transferee” has the meaning set forth in Section 3.6(a)(i).

“Purchase Agreement” means that certain Purchase and Sale Agreement, dated as of
January 12, 2017, among Anadarko E&P Onshore LLC, Kerr-McGee Oil & Gas Onshore
LP, Sanchez Energy Corporation, SN EF Maverick, LLC and SN EF UnSub, LP, in
effect as of the Effective Date.

“Required Allocations” means any allocation of an item of income, gain, loss or
deduction pursuant to Section 5.1(c)(i),  Section 5.1(c)(ii),  Section
5.1(c)(iii),  Section 5.1(c)(iv),  Section 5.1(c)(v),  Section 5.1(c)(vi),
 Section 5.1(c)(vii) and Section 5.1(c)(viii).

“Safe Harbor” has the meaning set forth in Section 8.5(b).

“Safe Harbor Election” has the meaning set forth in Section 8.5(b).

“Sanchez” means SN Comanche Manager, LLC.

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

“Security Interest” means any security interest, lien, mortgage, deed of trust,
encumbrance, hypothecation, pledge, purchase option or other similar adverse
claim or obligation, whether created by operation of Law or otherwise, created
by any Person in any of its property or rights.

“Simulated Basis” means, with respect to each oil and gas property, the Carrying
Value of such property.  For purposes of such computation, the Simulated Basis
of each oil and gas property shall be allocated to each Member in accordance
with such Member’s relative Percentage Interest as of the time such oil and gas
property is acquired by the Company, and shall be reallocated among the Members
in accordance with the Members’ relative Percentage Interest as determined
immediately following the occurrence of an event giving rise to any adjustment
to the Carrying Values of the Company’s oil and gas properties pursuant to the
terms of this Agreement.

“Simulated Depletion” means a depletion allowance computed for each oil and gas
property (as defined in section 614 of the Code) using the cost depletion
method, subject, however, to the requirements set forth in Treasury Regulation
section 1.704-1(b)(2)(iv)(k).  For the purposes of computing Simulated Depletion
with respect to any oil and gas property (as defined in section 614 of the
Code), the Simulated Basis of such property shall be deemed to be the Carrying
Value of such property, and in no event shall such allowance for Simulated
Depletion, in the aggregate, exceed such Simulated Basis.  If the Carrying Value
of an oil and gas property is adjusted pursuant to Section 4.2(d) during a
taxable period, following such adjustment Simulated Depletion shall thereafter
be calculated under the foregoing provisions based upon such adjusted Carrying
Value.

“Simulated Gain” or “Simulated Loss” means the simulated gain or loss, as
applicable, computed with respect to a sale or other disposition of an oil and
gas property pursuant to Treasury Regulation section 1.704-1(b)(2)(iv)(k).

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“Subsidiary” means, with respect to any relevant Person as of the date the
determination is being made, any other Person that (a) is Controlled (directly
or indirectly) by such Person and (b) the equity entitled to vote to elect the
board of directors, board of managers or other governing authority of which is
more than fifty percent (50%) owned (directly or indirectly) by the relevant
Person.

“Tag-Along Member” has the meaning set forth in Section 3.6(a).

“Tag-Along Notice” has the meaning set forth in Section 3.6(a).

“Tag-Along Offer” has the meaning set forth in Section 3.6(b).

“Tag-Along Sale” has the meaning set forth in Section 3.6(g).

“Tag-Along Sale Percentage” has the meaning set forth in Section 3.6(a)(i).

“Tax Advances” has the meaning set forth in Section 5.4.

“Tax Matters Member” has the meaning set forth in Section 8.3(a).

“Tax Rate” has the meaning set forth in Section 5.3(b)(i).

“Third Party” means any Person other than the Members’ respective Permitted
Affiliates, and the Company and its Subsidiaries.

“Total Equity Value” means, at any time or with respect to any transaction or
potential transaction, the aggregate proceeds which would be received by the
holders of Membership Interests if: (a) all of the assets of the Company were
sold at their Fair Market Value to an unrelated third-party on arm’s-length
terms (including price), with neither the seller nor the buyer being under
compulsion to buy or sell such assets and (b) the Company satisfied and paid in
full all of its obligations and liabilities (limited in the case of a
nonrecourse liability to the value of any asset securing such liability),
including all taxes, costs and expenses incurred and imposed on the Company (as
opposed to its direct or indirect owners) in connection with such transaction
and any amounts agreed by the Board to be reserved by the Company after the
actions in clause (a) and this clause (b) with respect to any contingent or
other liabilities.

“Transfer” or “Transferred” means, with respect to a Membership Interest, (a) a
direct or indirect voluntary or involuntary, sale, assignment, transfer,
conveyance, exchange, bequest, devise, gift or any other alienation, including
any pledge or grant of a security interest (in each case, with or without
consideration and whether by operation of Law or otherwise, including by merger
or consolidation) of any rights, interests or obligations with respect to all or
any portion of such Membership Interest, or (b) a grant or sufferance of a
Security Interest on all or any portion of such Membership Interest.

“Transferee” means a Person who receives all or part of a Member’s Membership
Interest through a Transfer.

“Transferring Member” has the meaning set forth in Section 3.4(a).

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“Treasury Regulation” means the Income Tax Regulations promulgated under the
Code, as may be amended from time to time (including corresponding provisions of
successor regulations).

“Unanimous Consent” means the affirmative vote of all of the Managers
constituting the entire Board at a duly called and convened meeting of the Board
or the affirmative written consent in lieu of a meeting executed by all of the
Managers.

“Units” has the meaning set forth in Section 13.18.

“Unpaid Indemnity Amounts” means any amount that the Company fails to indemnify
or advance to an Indemnitee as required by Article VII of this Agreement.

“Unrealized Gain” attributable to any item of Company property means, as of any
date of determination, the excess, if any, of (a) the Fair Market Value of such
property as of such date (as determined under Section 4.2(d)) over (b) the
Carrying Value of such property as of such date (prior to any adjustment to be
made pursuant to Section 4.2(d) as of such date).

“Unrealized Loss” attributable to any item of Company property means, as of any
date of determination, the excess, if any, of (a) the Carrying Value of such
property as of such date (prior to any adjustment to be made pursuant to
Section 4.2(d) as of such date) over (b) the Fair Market Value of such property
as of such date (as determined under Section 4.2(d)).

“Vested Class A Units” means any issued Class A Units that have vested as of the
date of determination pursuant to this Agreement.

“Warrant Holders” has the meaning set forth in Section Error! Reference source
not found..

“Withheld Amounts” has the meaning set forth in Section 5.3(b)(iii).

1.2      Other Terms.  Other capitalized terms may be defined elsewhere in the
text of this Agreement and shall have the meaning so given.

1.3      Construction.  Unless the context otherwise requires, the gender of all
words used in this Agreement includes the masculine, feminine, and neuter, the
singular shall include the plural, and the plural shall include the
singular.  All references to Articles and Sections refer to articles and
sections of this Agreement, and, unless otherwise indicated, all references to
Exhibits and Schedules are to exhibits and schedules attached hereto, each of
which is incorporated herein for all purposes.  Article and section titles or
headings are for convenience only, and neither limit nor amplify the provisions
of the Agreement itself; and all references herein to articles, sections or
subdivisions thereof shall refer to the corresponding article, section or
subdivision thereof of this Agreement unless specific reference is made to such
articles, sections or subdivisions of another document or instrument.  Unless
the context of this Agreement clearly requires otherwise, the words “include,”
“includes” and “including” shall be deemed to be followed by the words “without
limitation,” and the words “hereof,” “herein,” “hereunder” and similar terms in
this Agreement shall refer to this Agreement as a whole and not any particular
section or Article in which such words appear.

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Article II

ORGANIZATION

2.1      Formation.  The Company was organized as a Delaware limited liability
company by the filing of a Certificate of Formation (as such Certificate of
Formation may be amended, supplemented or otherwise modified from time to time,
the “Certificate”) with the Secretary of State of the State of Delaware pursuant
to the Act on the Formation Date.  This Agreement is adopted and agreed to by
the Members to set forth their agreement with respect to the Company’s business
and the rights, duties and obligations of the Members.

2.2      Name.  The name of the Company is “Gavilan Resources HoldCo, LLC,” and
all Company Business shall be conducted in that name or such other names that
comply with Law as the Board may select from time to time.

2.3      Principal U.S. Office; Registered Office and Registered Agent; Other
Offices.  The principal office of the Company in the United States shall be at
200 Bellevue Parkway, Suite 210, Wilmington, New Castle County, Delaware 19809,
or at such other place as the Board may designate from time to time, which need
not be in the State of Delaware.  The Company may have such other offices as the
Board may designate from time to time.

2.4      Purpose.  The sole purpose of the Company is (a) to engage in the
Company Business and (b) to engage in all lawful activities and to enter into,
exercise the rights and enjoy the benefits under, and discharge the obligations
of the Company pursuant to, all contracts, agreements, and other instruments
which the Board determines to be necessary or suitable for or incidental to the
accomplishment and conduct of the purposes in the foregoing clause (a).  The
Company shall not engage in any activity or conduct inconsistent with the
Company Business.

2.5      Foreign Qualification.  Prior to the Company’s conducting business in
any jurisdiction other than Delaware, the Board shall cause the Company to
comply, to the extent procedures are available and those matters are reasonably
within the control of the Company, with all requirements necessary to qualify
the Company as a foreign limited liability company, and, if necessary, to make
such filings and take such actions as may be required to keep the Company in
good standing in that jurisdiction, it being understood that the Board shall
cause the Company to be registered as a foreign limited liability company in the
State of Texas.  Each Member agrees to execute, acknowledge and deliver such
certificates and other instruments, if any, that are necessary or appropriate to
qualify, continue and terminate the Company as a foreign limited liability
company in all such jurisdictions in which the Company may conduct business.

2.6      Term.  Subject to earlier termination pursuant to other provisions of
this Agreement (including those contained in Article X), the term of the Company
shall be perpetual.

2.7      Fiduciary Duties.  Subject in all respects to Section 7.11:

(a)      Each Member and Manager shall, to the fullest extent required by
Delaware law, owe to the Company and its Members the duties of good faith and
fair dealing, and in the case of each Manager, the duty not to exceed in such
capacity the bounds of the authority granted to

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any Manager by this Agreement and Delaware law (all such duties collectively,
the “Agreed Duties”).

(b)      To the fullest extent permitted by Law,

(i)      except for the Agreed Duties and as expressly provided in this
Agreement, none of the Managers shall owe any fiduciary or similar duty or
obligation whatsoever to the Company, any Member (other than the Member
designating such Manager), Assignee or the other Managers, except as required by
any provisions of applicable Law that cannot be waived, and

(ii)      to the extent that, at law or in equity, a Manager owes any duties
(including fiduciary duties) to the Company, any other Member or any Assignee
pursuant to applicable Law, any such duty other than the Agreed Duties is hereby
eliminated to the fullest extent permitted pursuant to applicable Law.

(c)      Subject to the foregoing clauses (a) and (b), the Company and the
Members acknowledge and agree that each Manager may decide or determine any
matter subject to the Board’s approval hereunder in the sole and absolute
discretion of such Manager, it being the intent of all Members that such Manager
have the right to make such decision or determination solely on the basis of the
interests such Manager desires to consider, including such Manager’s own
interests, the interests of the Member(s) that designated such Member and the
interests of such Member’s Affiliates.

(d)      The Company and the Members agree that any claims against, actions,
rights to sue, other remedies or recourse to or against any Manager (except for
such claims, actions, rights to sue, remedies or recourse that may be initiated
or brought solely by the Member that appointed such Manager) grounded in or
alleging any breach of any fiduciary or similar duty, other than an Agreed Duty,
are expressly released and waived by the Company and each Member (and each
Assignee), to the fullest extent permitted by Law, as a condition to and as part
of the consideration for the execution of this Agreement and the undertaking to
incur the obligations provided for in this Agreement.

(e)      To the extent that, at law or in equity, a Member owes any duties
(including fiduciary duties) to the Company, any other Member or any Assignee
pursuant to applicable Law, any such duty, other than the Agreed Duties, is
hereby eliminated to the fullest extent permitted pursuant to applicable Law, it
being the intent of the Members that to the extent permitted by Law and except
to the extent set forth in this Section 2.7 or expressly specified elsewhere in
this Agreement or the Management Services Agreement, no Member or Manager shall
owe any duties of any nature whatsoever to the Company, the other Members or any
Assignee, other than the Agreed Duties, and each Member may decide or determine
any matter in its sole and absolute discretion taking into account solely its
interests and those of its Affiliates (excluding the Company and its
Subsidiaries) subject to the Agreed Duties.  Each Member further acknowledges
and agrees that it would not have become a Member in the Company if this
arrangement were not acceptable to it.

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(f)      Nothing herein is intended to create a partnership, joint venture,
agency or other relationship creating fiduciary or quasi-fiduciary duties or
similar duties or obligations, otherwise subject the Members to joint and
several liability or vicarious liability or to impose any duty, obligation or
liability that would arise therefrom with respect to any or all of the Members
or the Company.

Article III

MEMBERSHIP INTERESTS AND TRANSFERS

3.1       Classes and Series of Membership Interests; Members.

(a)      Classes.  The Company is hereby authorized to issue two (2) classes of
Membership Interests of the Company, with such classes referred to herein as the
“Common Units” and the “Class A Units.”  Common Units and Class A Units may be
issued in whole or fractional interests.  A total of 1,200,000 Common Units are
hereby authorized for issuance, and a total of 100 Class A Units are hereby
authorized for issuance.  The holders of Class A Units and Common Units shall
have the respective rights, preferences, privileges, restrictions and
obligations set forth in this Agreement and, to the extent applicable, the Act.

(b)      Members.  At the Effective Date, and upon the execution and delivery by
the Members of this Agreement, the Company issued:

(i)      800,000 Common Units to Blackstone, and Blackstone was admitted to the
Company as a Common Units Member; and

(ii)      100 Class A Units to Sanchez, and Sanchez was admitted to the Company
as Class A Units Member.

Additional Persons may be admitted to the Company as new Members only as
provided in this Agreement.

(c)      Amendments to Exhibit A.  The Class A Units and the Common Units and
respective Membership Interests held by each Member and the Percentage Interests
of each Member are set forth on Exhibit A hereto.  Exhibit A shall be amended
from time to time to reflect changes and adjustments resulting from (i) the
admission of any new Member, (ii) any Transfer in accordance with this
Agreement, and/or (iii) any Capital Contributions made, changes to Membership
Interests or additional Membership Interests issued, in each case as permitted
by this Agreement (provided, that a failure to reflect such change or adjustment
on Exhibit A shall not prevent any otherwise valid change or adjustment from
being effective); provided, that the Board shall provide each Member with a copy
of any amendment to Exhibit A within thirty (30) Business Days after adoption
thereof. 

3.2      Number of Members.  The number of Members of the Company shall never be
less than one (1).

3.3      Representations, Warranties and Covenants.

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(a)      Member Representations and Warranties.  Each Member hereby represents
and warrants to the Company and each other Member as of the date of such
Member’s admittance to the Company that:

(i)      To the extent it is not a natural person, it is duly formed, validly
existing and in good standing under the Laws of the jurisdiction of its
formation, and if required by Law is duly qualified to conduct business and is
in good standing in the jurisdiction of its principal place of business (if not
formed in such jurisdiction); 

(ii)      To the extent it is not a natural person, it has full corporate,
limited liability company, partnership, trust or other applicable power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and all necessary actions by the board of directors, shareholders,
managers, members, partners, trustees, beneficiaries or other Persons necessary
for the due authorization, execution, delivery and performance of this Agreement
by that Member have been duly taken; 

(iii)     It has duly executed and delivered this Agreement, and this Agreement
is enforceable against such Member in accordance with its terms, subject to
bankruptcy, moratorium, insolvency and other Laws generally affecting creditors’
rights and general principles of equity (whether applied in a proceeding in a
court of law or equity); 

(iv)     Its authorization, execution, delivery, and performance of this
Agreement does not breach or conflict with or constitute a default under
(i) such Member’s charter or other governing documents to the extent it is not a
natural person or (ii) any material obligation under any other material
agreement or arrangement to which that Member is a party or by which it is
bound; and 

(v)      It (i) has been furnished with such information about the Company and
the Membership Interest as that Member has requested, (ii) has made its own
independent inquiry and investigation into, and based thereon has formed an
independent judgment concerning, the Company and such Member’s Membership
Interest herein, (iii) has adequate means of providing for its current needs and
possible contingencies, is able to bear the economic risks of this investment
and has a sufficient net worth to sustain a loss of its entire investment in the
Company in the event such loss should occur, (iv) has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the Company, (v) solely in respect of the
Common Units Member, is an “accredited investor,” as that term is defined in
Rule 501(a) of Regulation D, promulgated under the Securities Act, and (vi)
understands and agrees that its Membership Interest shall not be sold, pledged,
hypothecated or otherwise Transferred except in accordance with the terms of
this Agreement and pursuant to an effective registration statement under the
Securities Act or an applicable exemption from registration and/or qualification
under the Securities Act and applicable state securities Laws.

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(b)      Company Representations, Warranties and Covenants.  The Company hereby
represents, warrants and covenants to each Member as of the date of such
Member’s admittance to the Company that:

(i)      The Class A Units have been duly authorized and, when issued in
accordance with this Agreement, will be duly and validly issued and will be free
and clear of all Encumbrances (as defined in the Purchase Agreement), other than
Encumbrances created by the Class A Units Member and restrictions on transfer
imposed by this Agreement, the Securities Act, and applicable state securities
Laws.

(ii)      Assuming the accuracy of the Class A Units Member’s representations
and warranties set forth in this Agreement, the Company has complied in all
material respects with all applicable federal and state securities Laws in
connection with the issuance of the Class A Units.  Neither the Company nor any
Person acting on its behalf has taken or will take any other action (including
any offer, issuance or sale of any security of the Company under any
circumstances which might require the integration of such security with the
Class A Units under the Securities Act or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder), in either case so as
to subject the issuance of the Class A Units to the registration provisions of
the Securities Act.  Neither the Company nor any Person acting on its behalf has
offered the Membership Interests to any Person by means of general or public
solicitation or general or public advertising, such as by newspaper or magazine
advertisements, by broadcast media, or at any seminar or meeting whose attendees
were solicited by such means.

(iii)     The Company has had no operations or business, incurred no debt or
liability, and has no assets, other than, in each case, in connection with the
transactions contemplated by the Purchase Agreement and the Interim Investors
Agreement and related matters. 

(c)      AMI Acquisitions.  The Company hereby covenants that any Acquisition
(as defined in the Joint Development Agreement) of AMI Properties shall be
subject to the following:

(i)      In the event that the Company, Blackstone or any Affiliate of
Blackstone elects to make any Core Acquisitions, such Core Acquisitions shall be
acquired directly or indirectly by the Company with the consent of the Class A
Units Member, or by an Affiliate of the Company with a capital structure similar
and limited liability company agreement substantially similar to those of the
Company, and in which only Sanchez and/or one or more of its designated
Affiliates that are reasonably acceptable to the Company holds a profits
interest with rights identical to the Class A Units, and distributions with
respect to such  Core Acquisition, including in connection with any exit event,
shall be applied in the same order of priority as set forth in Section 5.3(a);
provided, that the Class A Units (or such other profits interests) shall be
entitled to only 50% of the distributions that such Class A Units (or such other
profits interests) would be entitled to under Section 5.3(a) at each
distribution tier with respect to the portion

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of any Core Acquisitions that result in the Company and its Affiliates owning,
in the aggregate, greater than a 35% working interest in the Leases (as defined
in the Purchase Agreement).

(ii)      In the event that the Company, Blackstone or any Affiliate of
Blackstone elects to make any Non-Core Acquisitions in which Sanchez or any of
its Affiliates elects to participate, such Non-Core Acquisitions shall be
acquired directly or indirectly by the Company with the consent of the Class A
Units Member, or by an Affiliate of the Company; provided that such Affiliate
adopts a limited liability company agreement substantially similar to that of
the Company, and in which Sanchez and/or one or more of its designated
Affiliates that are reasonably acceptable to such Affiliate will hold a profits
interest with rights identical to the Class A Units, and distributions with
respect to such Core Acquisition, including in connection with any exit event,
shall be applied in the same order of priority as set forth in Section 5.3(a).
Notwithstanding the foregoing, Sanchez or such designated Affiliate will be
entitled to (A) 50% of the distributions that such Class A Units (or such other
profits interests) would be entitled to under Section 5.3(a) at each
distribution tier with respect to any Non-Core Acquisition that is originally
proprietary to the Company or any of its Affiliates and not operated by Sanchez
or any of its Affiliates, and (B) 100% of the distributions that such Class A
Units (or such other profits interests) would be entitled to under Section
5.3(a) at each distribution tier with respect to any other Non-Core Acquisition
made by Blackstone or any of its Controlled Affiliates.     

(iii)      Sanchez shall cause its Affiliates and all Permitted Holders that are
members or shareholders in Sanchez, or such other designated Affiliate referred
to above, if applicable, or otherwise hold, directly or indirectly, incentive
equity units directly linked to the Class A Units or such other profits
interests, if applicable (and Affiliates of such Permitted Holders that are
Controlled by such Permitted Holders), to comply with the provisions of Section
5.2 of the Joint Development Agreement in the same manner as required by SN EF
Maverick, LLC and SN EF UnSub, LP thereunder.  Notwithstanding anything to the
contrary in this Agreement, the obligations set forth in this Section 3.3(c)
with respect to Blackstone and its Affiliates shall not apply to Excluded AMI
Transactions.

(iv)      Any Acquisitions made by Sanchez or any of its Affiliates, on the one
hand, or the Company, Blackstone or any of their Affiliates, on the other hand,
on or after the execution of the Purchase Agreement and prior to the Effective
Date, shall be subject to the provisions of this Section 3.3(c) as if such
Acquisition had occurred on or after the Effective Date.

(d)      Available Cash. The Company hereby covenants that it will not maintain
excessive levels of Available Cash as determined in the reasonable business
judgment of the Board. 

3.4       Restrictions on the Transfer of Interests.

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(a)      Permitted Transfers.  Any Member may Transfer all or part of such
Member’s Membership Interests (a “Transferring Member”) only in accordance with
applicable Law and the provisions of this Agreement, including this Article III
to a Person.  A Common Units Member may transfer its Common Units without the
prior written consent of any other Member, but subject to compliance with the
other provisions of this Section 3.4.  Except for Transfers pursuant to Section
3.6 or Section 3.7, no Class A Units Member may Transfer, directly or
indirectly, any Class A Units without the consent of the Common Units Member,
which consent may be given or withheld in the sole discretion of the Common
Units Member.    Any purported Transfer in breach of the terms of this Agreement
shall be null and void ab initio, and the Company shall not recognize any such
prohibited Transfer on its books and records.  Any Member who Transfers any
Membership Interests except in compliance herewith shall be liable to, and shall
indemnify and hold harmless, the Company and the other Members for all costs,
expenses, damages and other liabilities resulting therefrom.  For the avoidance
of doubt, all Transfers to Permitted Affiliates shall comply with Sections
3.4(b) through 3.4(e).

(b)      Securities Laws.  Notwithstanding anything in this Agreement to the
contrary, no Membership Interest shall be Transferred except pursuant to an
effective registration statement under the securities Laws or an applicable
exemption from registration and/or qualification under the Securities Act and
applicable state securities Laws.

(c)      Documentation; Validity of Permitted Transfer.  Any Transfer of a
Membership Interest that complies with Section 3.4(a) and Section 3.4(b) shall
be effective to assign the right to become a Member, and, without the need for
any action or consent of any other Person, a Transferee of such Membership
Interest shall automatically be admitted as a Member once the Company has
received a customary joinder agreement in a form reasonably acceptable to the
Board which has been executed by such Transferee (a “Joinder”), pursuant to
which such Transferee shall (i) become a party to this Agreement as a Member and
shall have the rights and obligations of a Member hereunder, (ii) expressly
assume all liabilities and obligations of the Transferring Member (or its
applicable Affiliates) to the Company or the other Members and (iii) if the
Transferee is to be admitted to the Company as a new Member, acknowledge the
representations and warranties in Section 3.3(a) are true and correct with
respect to such Transferee as of the date of the Joinder.  Each Transfer is
effective against the Company as of the first (1st) Business Day following
delivery of the Joinder to the Company.

(d)      Expenses.  Any costs incurred by the Company in connection with any
Transfer by a Member of all or a part of its Membership Interests shall be borne
by such Transferring Member.  Any transfer or similar taxes arising as a result
of the Transfer of a Member’s Membership Interest shall be paid by the
Transferring Member.

(e)      Distributions.  Any distribution or payment made by the Company to the
Transferring Member prior to such time as the Transferee was admitted as a
Member pursuant to the provisions of this Agreement with respect to the
Transferred Membership Interests shall constitute a release of the Company, the
Managers authorizing such distribution and the Members of all liability to such
Assignee or new Member who may be interested in such distribution or payment by
reason of such Transfer.

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(f)      Certain Indirect Transfers.  Except for Transfers to Permitted
Affiliates thereof, no Member shall indirectly Transfer any Membership Interests
to the extent such Member is not permitted to sell Membership Interests directly
pursuant to the terms hereof and any indirect sale shall be structured and
consummated in such a manner that each other Member is given the same rights and
protections as it would have had if such Transfer were structured as a direct
sale of Membership Interests pursuant to the terms hereof.

3.5      Bankruptcy-Related Events.  Without the prior written consent of the
Common Units Member, no Member (except in Sanchez’s capacity as Manager under
the Management Services Agreement, and then only to the extent permitted by
Section 2.4 of the Management Services Agreement) shall take any action to
directly encumber the assets of the Company, or subject such assets to a right
of foreclosure in favor of any Person.  To the extent that prior to the date
hereof any Member has entered into any contract, agreement or understanding with
the effect of directly encumbering such assets, or subjecting such assets to a
right of foreclosure in favor of any Person, such Member shall take all actions
necessary to release such assets from such contract, agreement or understanding
as promptly as practicable.

3.6       Tag-Along Rights. 

(a)      If at any time following the Effective Date, the Common Units Member
proposes to Transfer in a transaction or series of related transactions greater
than sixty percent (60%) of the outstanding Common Units to a Third Party
purchaser (a “Proposed Sale”), then the Common Units Member (the “Tag-Along
Member”) shall furnish to the Class A Unit Members a written notice of such
Proposed Sale (the “Tag-Along Notice”) and provide them the opportunity to
participate in such Proposed Sale on the terms described in this Section
3.6.  The Tag-Along Notice will include:

(i)      the material terms and conditions of the Proposed Sale, including
(A) the number of Common Units proposed to be so Transferred, (B) the name of
the proposed Transferee (the “Proposed Transferee”), (C) the proposed amount and
form of consideration (including the consideration payable to each Common Units
Member and Class A Member assuming each Common Units Member and Class A Units
Member included the maximum percentage of Membership Interests it would be
entitled to sell in such Proposed Sale, such amounts calculated based on a
hypothetical application of Section 5.3) and all other material terms of the
Proposed Sale, (D) the proposed Transfer date, if known, which date shall not be
less than thirty (30) Business Days after delivery of such Tag-Along Notice and
(E) the fraction, expressed as a percentage, determined by dividing (I) the
number of Common Units to be Transferred by the Tag-Along Member, by (II) the
total number of Common Units held by the Tag-Along Member (the “Tag-Along Sale
Percentage”); and

(ii)      an invitation to each Class A Units Member to include a percentage of
its Class A Units in the Proposed Sale up to a number equal to (A) the Tag-Along
Sale Percentage multiplied by (B) the total Class A Units held by such
Member.  The Tag-Along Member will deliver or cause to be delivered to the other
Members

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copies of all transaction documents relating to the Proposed Sale as promptly as
practicable after they become available.

(b)      Each other Member must exercise the tag-along rights provided by this
Section 3.6 within twenty one (21) calendar days following delivery of the
Tag-Along Notice by delivering a notice (the “Tag-Along Offer”) to the Tag-Along
Member indicating its desire to exercise its rights hereunder and specifying the
percentage of Class A Units it elects to include in the Proposed Sale pursuant
to Section 3.6(a)(ii).  If any other Member does not make a Tag-Along Offer
within twenty one (21) calendar days following delivery of the Tag-Along Notice,
such other Member shall be deemed to have waived its rights under this Section
3.6 with respect to such Proposed Sale, and the Tag-Along Member shall
thereafter be free to Transfer the Common Units to the Proposed Transferee
without the participation of such other Member, in the same amount and for the
same form of consideration set forth in the Tag-Along Notice, at a price no
greater than the price set forth in the Tag-Along Notice and on other terms and
conditions which are not more favorable to the Tag-Along Member than those set
forth in the Tag-Along Notice.  If any other Member elects to participate in the
Proposed Sale pursuant to this Section 3.6, such other Member shall agree to
make to the Proposed Transferee the same representations and warranties,
covenants and indemnities as the Tag-Along Member agrees to make in connection
with the Proposed Sale; provided, that (w) such other Member shall not be liable
for the breach of any covenant by the Tag-Along Member (or any other Member) and
vice versa, (x) in no event shall any Member be required to make representations
and warranties or provide indemnities as to any other Member or to make
representations or warranties or covenants (including indemnities) not required
by each other Member, (y) any liability relating to representations and
warranties (and related indemnities) or other indemnification obligations
regarding the business of the Company in connection with the Proposed Sale shall
be shared by the Members pro rata on a several but not joint basis in proportion
to the consideration to be received in the Proposed Sale by each Member and (z)
in no event shall any Member other than the Tag-Along Member be responsible for
any liabilities or indemnities in connection with such Proposed Sale in excess
of the proceeds received by such Member in the Proposed Sale.

(c)      In the event that the consideration received in connection with a
Proposed Sale consists of securities that are not registered under the
Securities Act, and one or more Members exercise their tag-along rights
hereunder in connection with such Proposed Sale, if the Tag-Along Member is
entitled to registration rights in respect of such securities, the Tag-Along
Member shall ensure that such  Members will receive piggy-back registration
rights on any registration in which the Tag-Along Member is entitled to register
such securities (including any demand registrations exercised by the Tag-Along
Member).

(d)      The offer of any Member contained in such Member’s Tag-Along Offer
shall be irrevocable, and, to the extent such offer is accepted, such Member
shall be bound and obligated to Transfer in the Proposed Sale on the same terms
and conditions (other than, for the avoidance of doubt, inside tax basis
associated with such interests), with respect to all of the Class A Units
Transferred, as the Tag-Along Member, up to such percentage of Class A Units as
such Member shall have specified in its Tag-Along Offer; provided,  however,
that if the material terms of the Proposed Sale change with the result that the
price applicable to the Class A Units shall be less than the price applicable to
the Class A Units set forth in the Tag-Along Notice, the form of consideration
shall be different or the other terms and conditions shall be less favorable to
such

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Member than those set forth in the Tag-Along Notice, such Member shall be
permitted to withdraw the offer contained in the applicable Tag-Along Offer by
written notice to the Tag-Along Member and upon such withdrawal shall be
released from such holder’s obligations.

(e)      If a Member exercises its rights under this Section 3.6, the closing of
the sale of each Member’s Membership Interest in the Proposed Sale will take
place concurrently.  If the closing with the Proposed Transferee (whether or not
a Member has exercised its rights under this Section 3.6) shall not have
occurred by 5:00 p.m.  Eastern Time on the date that is ninety (90) days after
the date of the Tag-Along Notice, as such period may be extended to obtain any
required regulatory approvals or any other required consent (but in no event
later than one hundred eighty (180) days  after the date of the Tag-Along
Notice), and on terms and conditions not more favorable to the Tag-Along Member
than those set forth in the Tag-Along Notice, all the restrictions on Transfer
contained herein shall again be in effect with respect to such Common Units and
proposed Transfer.

(f)      Each Member shall bear its own costs in connection with the
transactions contemplated by this Section 3.6.

(g)     The aggregate consideration to be paid in connection with any sale
consummated pursuant to this Section 3.6 (a “Tag-Along Sale”) shall be allocated
among each Membership Interest included therein on a proportionate basis based
on such Membership Interest’s Pro Rata Share, which shall be determined based on
the Total Equity Value implied by the price offered in the Tag-Along Sale.

3.7       Drag-Along Rights.

(a)      Subject to the limitations and conditions set forth in this Section
3.7,  Section 6.14 and Article V and Article XI,  (x) if the Common Units Member
elects to consummate, or to cause the Company to consummate, a sale of all of
the assets or all of the equity interests in the Company by whatever means
(including merger, consolidation, equity purchase, sale of assets or otherwise)
following the Effective Date or (y) if the Common Units Member elects to cause a
public offering of the Company (each, a “Drag-Along Transaction”), the other
Members will consent to such Drag-Along Transaction, and will take or cause to
be taken all other actions, reasonably necessary or desirable to cause the
consummation of such Drag-Along Transaction on the terms proposed by the Common
Units Member, including entering into a customary registration rights agreement
in connection with a public offering of the Company; provided, however, that
none of the transactions described in clauses (x) or (y) of this sentence shall
constitute a Drag-Along Transaction unless it is made to a Third Party on an
arm’s-length basis.  The Members will execute any applicable merger, asset
purchase, security purchase, recapitalization or other agreement negotiated by
the Common Units Member in connection with such Drag-Along Transaction;
provided, that (v) each Member shall make the same representations and
warranties, covenants and indemnities as the Common Units Member agrees to make
in connection with the Drag-Along Transaction, except that in no event shall any
Member be required to agree to any non-competition or non-solicitation covenant
in connection with the Drag-Along Transaction or to make any representation or
warranty that would be inaccurate when made without the ability to provide
disclosure against such representation or warranty; (v) no Member shall be
liable for the breach of any covenants of any other Member; (w) in no event
shall any

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Member be required to make representations and warranties or provide indemnities
as to any other Member; (x) any liability relating to representations and
warranties (and related indemnities) or other indemnification obligations
regarding the business of the Company in connection with the Drag-Along
Transaction shall be shared by the Members pro rata on a several but not joint
basis in proportion to the proceeds received by each Member in the Drag-Along
Transaction, and in no event shall any Member other than the Common Units Member
be responsible for any liabilities or indemnities in connection with such
Drag-Along Transaction in excess of the proceeds received by such Member in the
Drag-Along Transaction; (y) each Class A Member shall only be obligated to
provide representations, warranties, covenants or indemnities to the extent all
other Members are similarly obligated; and (z) any escrow or other holdback of
proceeds shall be allocated on a pro rata basis among the applicable Members.

(b)      In connection with a Drag-Along Transaction, (i) all of the Members
shall be allocated the same form of consideration, or if any Members are given
an option as to the form and amount of consideration to be received, all Members
will be given the same option, and (ii) the consideration to be received by the
Members in a Drag-Along Transaction will be calculated by taking the aggregate
proceeds from such Drag-Along Transaction and allocating such proceeds among the
Members in such relative amounts as would have resulted if the Company had
liquidated and sold its assets for a cash amount equal to such consideration,
valuing any non-cash consideration at its Fair Market Value, and immediately
distributed such proceeds to the Members in accordance with Section 10.2(d).

(c)      The Company shall bear the reasonable and documented costs incurred by
each Member arising pursuant to a Drag-Along Transaction; provided that costs
incurred by or on behalf of a Member for its sole benefit will not be considered
costs of the transaction hereunder.

(d)      Notwithstanding anything contained in this Section 3.7 to the contrary,
there shall be no liability or obligation on behalf of the Common Units Member
or its Affiliates or the Company if either determines, for any reason, not to
consummate a Drag-Along Transaction, and the Common Units Member shall be
permitted to, and shall have the authority to cause the Company to, discontinue
at any time any Drag-Along Transaction initiated by the Common Units Member by
providing written notice to the Company and the other Members.

(e)      In the event that the Common Units Member is entitled to registration
rights in respect of its securities in a Sale Transaction (as defined in the
Joint Development Agreement) or a public offering of the Company, the Common
Units Member shall ensure that the Class A Units Member will receive piggy-back
registration rights on any registration in which the Common Units Member is
entitled to register such securities (including any demand registrations
exercised by the Common Units Member).

3.8       Vesting of Class A Units; Forfeiture.

(a)      Subject to the provisions of this Section 3.8, twenty percent (20%) of
the Class A Units shall become Vested Class A Units on each of the first five
(5) anniversaries of the Effective Date; provided,  however, that if (i) the
Company, directly or indirectly, disposes of all or substantially all of its
interests in the Assets (as defined in the Joint Development Agreement) in one
or more transactions to a Person that is not a Member or an Affiliate of a
Member, (ii)

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Blackstone, together with its Affiliates, ceases to own at least fifty percent
(50%) of the Common Units, or (iii) a Change in Control occurs, any Class A
Units that remain unvested shall fully vest and become Vested Class A Units.

(b)      In the event of a JDA Default, as a condition precedent to a forfeiture
event under Section 3.8(c), the Company must assert such JDA Default pursuant to
a JDA Default Notice within three (3) years of the date on which the alleged JDA
Default occurred (and to the extent any director or officer of the Company or
employee of Blackstone obtains actual knowledge of any such alleged JDA Default,
the Company must assert such JDA Default within sixty (60) days from such
date).  During the pendency of an alleged JDA Default, any distributions with
respect to Class A Units shall be retained by the Company and held in trust in a
segregated escrow account for the benefit of the Class A Unit Members until such
time that it is determined whether a JDA Default has occurred by a court of
competent jurisdiction pursuant to a final, nonappealable order. In the event it
is determined that a JDA Default has not occurred by a court of competent
jurisdiction pursuant to a final, nonappealable order, the monetary value of the
Vested Class A Units shall accrue interest at a rate of five percent (5%),
compounded annually, from the date upon which the JDA Default is first alleged
to have occurred.  For the avoidance of doubt, the Company shall have the burden
of proof for determining whether a JDA Default has occurred.

(c)      In the event of the occurrence of a JDA Default (as determined by a
court of competent jurisdiction pursuant to a final, nonappealable order) that
results in material irreparable harm to the Company for which monetary damages
(or other remedy at Law) would be inadequate, all Class A Units shall be
cancelled and forfeited without payment of any kind with respect thereto.  In
the event such JDA Default is reasonably curable by monetary damages, the number
of Class A Units cancelled and forfeited in lieu thereof shall equal the amount
of monetary damages awarded plus accrued interest at a rate of five percent (5%)
compounded annually from the date upon which the JDA Default occurred.

(d)      The Company and its Subsidiaries shall not incur any material costs or
expenses not reasonably related to its business, as set forth in Section 2.4, or
incur any costs or expenses that disproportionately and adversely affect the
Class A Unit Members as compared to the other Members.

Article IV

CAPITAL CONTRIBUTIONS

4.1       Capital Contributions; Return of Cash.

(a)      General.  No Member shall be required to make any additional Capital
Contributions to the Company, except as agreed to in writing by such Member. 

(b)      Allocation of Capital Contributions.  Unless otherwise agreed by the
Majority Consent of the Board, Capital Contributions made by the Common Units
Members under this Section 4.1 shall be deemed to be Capital Contributions made
with respect to such Common Units Members’ Common Units.  No additional
Membership Interest shall be issued to any Common Units Member in exchange for
such Member making Capital Contributions.

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4.2      Capital Accounts.  The Company shall maintain a separate Capital
Account for each Member with respect to with respect to the Membership Interests
owned by such Member in accordance with the rules of Treasury Regulation section
1.704-1(b)(2)(iv) and in accordance with the following provisions:

(a)      Each Member’s Capital Account shall be increased by (i) the amount of
all Capital Contributions made to the Company by such Member pursuant to this
Agreement (net of any liabilities assumed by the Company in connection with such
Capital Contributions and any liabilities to which any property comprising such
Capital Contributions is subject), and (ii) all items of Company income and gain
(including Simulated Gain and income and gain exempt from tax) computed in
accordance with Section 4.2(b) and allocated with respect to such Member
pursuant to Section 5.1, and decreased by (x) the amount of cash or Agreed Value
of property actually or deemed distributed to such Member pursuant to this
Agreement (net of liabilities assumed by such Member and the liabilities to
which such property is subject), and (y) all items of Company deduction and loss
(including Simulated Loss and Simulated Depletion) computed in accordance with
Section 4.2(b) and allocated to such Member pursuant to Section 5.1.  The
initial Capital Accounts of the Members are listed on Exhibit B to this
Agreement.

(b)      For purposes of computing the amount of any item of income, gain, loss,
deduction, Simulated Depletion, Simulated Gain or Simulated Loss which is to be
allocated pursuant to Article V and is to be reflected in the Members’ Capital
Accounts, the determination, recognition and classification of any such item
shall be the same as its determination, recognition and classification for
federal income tax purposes, provided, that:

(i)      All fees and other expenses incurred by the Company to promote the sale
of (or to sell) a Membership Interest that can neither be deducted nor amortized
under section 709 of the Code, if any, shall, for purposes of Capital Account
maintenance, be treated as an item of deduction at the time such fees and other
expenses are incurred and shall be allocated among the Members pursuant to
Section 5.1.

(ii)      As to those items described in section 705(a)(1)(B) or 705(a)(2)(B) of
the Code, without regard to the fact that such items are not includable in gross
income or are neither currently deductible nor capitalized for federal income
tax purposes.  To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to section 734(b) or 743(b) of the Code is required,
pursuant to Treasury Regulation section 1.704-1(b)(2)(iv)(m), to be taken into
account in determining Capital Accounts, the amount of such adjustment in the
Capital Accounts shall be treated as an item of gain or loss.

(iii)      In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such items, there shall be taken into
account Depreciation, computed in accordance with the definition of
“Depreciation.”  Simulated Depletion will be computed in accordance with the
definition of “Simulated Depletion.”

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(iv)      For purposes of determining income, gain, loss, and deduction, or any
other item allocable to any period, such items will be determined on a daily,
monthly or other basis, as reasonably determined by the Board using any
permissible method under Code section 706 and the related Treasury Regulations.

(v)      If the Carrying Value of any asset differs from its adjusted tax basis
for U.S. federal income tax purposes, any gain, loss, Simulated Gain or
Simulated Loss resulting from a disposition of such asset shall be calculated
with reference to such Carrying Value.

(vi)      In the event an adjustment to the Carrying Value of the assets of the
Company occurs pursuant to Section 4.2(d), any Unrealized Gain or Unrealized
loss shall be treated as having been actually realized.

(c)      A Transferee shall succeed to the pro rata portion of the Capital
Account of the transferor relating to the Membership Interest so
transferred.  Except as otherwise provided herein, all items of income, gain,
expense, loss, deduction, and credit allocable to any Membership Interest that
may have been transferred during any calendar year shall, if permitted by law,
be allocated between the transferor and the transferee based on the portion of
the calendar year during which each was recognized as owning that Membership
Interest, based upon the interim closing of the books method or such other
method as agreed between the transferor and the transferee; provided,
however, that this allocation must be made in accordance with a method
permissible under section 706 of the Code and the Treasury Regulations
thereunder.

(d)      In accordance with Treasury Regulation section 1.704-1(b)(2)(iv)(f),
(i) on an issuance of additional Membership Interests for cash or Contributed
Property (including the issuance of Membership Interests), (ii) immediately
prior to any actual or deemed distribution to a Member of any Company property
(other than a distribution of cash that is not in redemption or retirement of a
Membership Interest) or (iii) upon the occurrence of any other event provided in
such Treasury Regulation, the Capital Accounts of all Members and the Carrying
Value of each Company property immediately prior to such issuance or adjustment
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Company property, as if such Unrealized
Gain or Unrealized Loss had been recognized on an actual sale of each such
property immediately prior to such issuance or adjustment and had been allocated
to the Members at such time pursuant to Section 5.1 in the same manner as any
item of gain or loss actually recognized during such period would have been
allocated, provided, however, that such adjustments shall be made only if the
Board reasonably determines that such adjustments are necessary or appropriate
to reflect the relative economic interests of the Members in the Company.  In
determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount
and Fair Market Value of all Company assets (including cash and cash
equivalents) immediately prior to the event triggering such adjustment shall be
determined by the Board using such method of valuation as it may reasonably
adopt.  The Board shall allocate such aggregate value among the assets of the
Company (in such manner as it determines) to arrive at a Fair Market Value for
individual properties.

4.3      Contributions of Contributed Property.  All Capital Contributions
contemplated by this Agreement are to be made in readily available cash
funds.  To the extent that any subsequent

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Capital Contribution is made in the form of Contributed Property, any costs or
expenses associated with the transfer, assignment, conveyance or recordation of
such Contributed Property, including any taxes in respect thereof, shall be
borne by the Company, and any such costs or expenses, whether paid directly by
the Member or reimbursed to the Company, shall not be deemed Capital
Contributions.

Article V

ALLOCATIONS AND DISTRIBUTIONS

5.1      Allocations for Capital Account Purposes.  For purposes of maintaining
the Capital Accounts, the Company’s items of income, gain, loss and deduction
(computed in accordance with Section 4.2(b)) shall be allocated among the
Members in each taxable year (or portion thereof) as provided herein below.

(a)      General.  Except as otherwise provided in this Agreement, all items of
income, gain, loss and deduction for a Fiscal Year shall be allocated between
the Members in a manner such that, after giving effect to the special
allocations set forth in Section 5.1(c), the Capital Account of each Member,
immediately after making such allocation, is, as nearly as possible, equal
(proportionately) to (i) the distributions that would be made to such Member
pursuant to Section 10.2(d) if the Company were dissolved, its affairs wound up
and its assets sold for cash equal to their Carrying Value, all Company
liabilities were satisfied (limited with respect to each nonrecourse liability
to the Carrying Value of the assets securing such liability), and the net assets
of the Company were distributed in accordance with Section 10.2(d)(ii) to the
Members immediately after making such allocation minus (ii) such Member’s share
of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, computed
immediately prior to the hypothetical sale of assets, provided,  however, that
the allocations pursuant to this Section 5.1(a) may be adjusted to the extent
the Board determines that such adjustment is necessary to comply with the
provisions of Section 704(b) of the Code and the Treasury Regulations thereunder
or give economic effect to Sections 3.4,  5.3 and 10.2 and the other relevant
provisions of this Agreement.

(b)      Allocations on Liquidation.  Notwithstanding any other provisions of
this Article V, after taking into account the special allocations in Section
5.1(c), in the year in which the Company liquidates pursuant to Article X and
all subsequent years (and for any prior years with respect to which the due date
(without regard to extensions) for the filing of the Company’s federal income
tax return has not passed as of the date of the liquidation), all items of
income, gain, loss and deduction of the Company shall be allocated among the
Members in a manner reasonably determined by Board as shall cause to the nearest
extent possible the Capital Account of each Member to equal the amount to be
distributed to such Member pursuant to Section 10.2(d)(ii).

(c)      Special Allocations.  Notwithstanding any other provision of this
Section 5.1, the following special allocations shall be made for such taxable
period in the following order and priority:

(i)      Company Minimum Gain Chargeback.  Notwithstanding the other provisions
of this Section 5.1, if there is a net decrease in Company Minimum Gain

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during any Fiscal Year, each Member shall be allocated items of Company income
and gain for such taxable period (and, if necessary, subsequent taxable periods)
in the manner and amounts provided in Treasury Regulation sections 1.704-2(f)(6)
and (g)(2) and section 1.704-2(j)(2)(i), or any successor provisions.  This
Section 5.1(c)(i) is intended to comply with the Company Minimum Gain chargeback
requirement in Treasury Regulation section 1.704-2(f) and shall be interpreted
consistently therewith.

(ii)      Chargeback of Minimum Gain Attributable to Member Nonrecourse
Debt.  Notwithstanding the other provisions of this Section 5.1 (other than
Section 5.1(c)(i)), except as provided in Treasury Regulation
section 1.704-2(i)(4), if there is a net decrease in Member Nonrecourse Debt
Minimum Gain during any Fiscal Year, any Member with a share of Member
Nonrecourse Debt Minimum Gain at the beginning of such Fiscal Year shall be
allocated items of Company income and gain for such Fiscal Year (and, if
necessary, subsequent taxable periods) in the manner and amounts provided in
Treasury Regulation sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any
successor provisions.  This Section 5.1(c)(ii) is intended to comply with the
chargeback of items of income and gain requirement in Treasury Regulation
section 1.704-2(i)(4) and shall be interpreted consistently therewith.

(iii)      Qualified Income Offset.  In the event any Member unexpectedly
receives any adjustments, allocations or distributions described in Treasury
Regulation sections 1.704-1(b)(2)(ii)(d)(4) through (6), items of Company income
and gain shall be specially allocated to such Member in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations
promulgated under section 704(b) of the Code, the deficit balance, if any, in
such Member’s Adjusted Capital Account created by such adjustments, allocations
or distributions as quickly as possible; provided, that an allocation pursuant
to this Section 5.1(c)(iii) shall be made only if and to the extent that such
Member would have a deficit in such Member’s Adjusted Capital Account after all
other allocations provided in this Article V have been tentatively made as if
this Section 5.1(c)(iii) were not a part of this Agreement.  This Section
5.1(c)(iii) is intended to be a “qualified income offset” as that term is used
in Treasury Regulation section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.

(iv)      Stop Loss.  No amount of loss or deduction shall be allocated pursuant
to Section 5.1(a) to the extent that such allocation would cause any Member to
have a deficit balance in its Adjusted Capital Account at the end of such Fiscal
Year (or increase any existing deficit balance in its Adjusted Capital
Account).  All loss and deductions in excess of the limitation set forth in the
preceding sentence shall be allocated among such other Members, who have
positive Adjusted Capital Account balances, in proportion thereto until each
Member’s Adjusted Capital Account balance is reduced to zero (0).

(v)      Gross Income Allocations.  In the event any Member has a deficit
balance in its Capital Account at the end of any Fiscal Year, such Member shall
be specially allocated items of Company gross income and gain in the amount of
such

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excess as quickly as possible; provided, that an allocation pursuant to this
Section 5.1(c)(v) shall be made only if and to the extent that such Member would
have a deficit balance in its Capital Account after all other allocations
provided in this Section 5.1 have been tentatively made as if this Section
5.1(c)(v) and Section 5.1(c)(iii) were not in the Agreement.

(vi)      Nonrecourse Deductions.  Nonrecourse Deductions for any taxable period
shall be allocated to the Members in accordance with their respective Percentage
Interests.

(vii)     Member Nonrecourse Deductions.  Member Nonrecourse Deductions for any
Fiscal Year shall be allocated one hundred percent (100%) to the Member that
bears the Economic Risk of Loss with respect to such Member Nonrecourse Debt to
which such Member Nonrecourse Deductions are attributable in accordance with
Treasury Regulation section 1.704-2(i).  If more than one (1) Member bears the
Economic Risk of Loss with respect to a Member Nonrecourse Debt, such Member
Nonrecourse Deductions attributable thereto shall be allocated between or among
such Members in accordance with the ratios in which they share such Economic
Risk of Loss.

(viii)    Nonrecourse Liabilities.  For purposes of Treasury Regulation section
1.752-3(a)(3), the Members agree that Nonrecourse Liabilities of the Company in
excess of the sum of (A) the amount of Company Minimum Gain and (B) the total
amount of Nonrecourse Built-in Gain shall be allocated among the Members in
accordance with their relative Percentage Interests.

(ix)      Simulated Depletion, Simulated Loss and IDCs.  Simulated Depletion,
Simulated Loss and intangible drilling costs (“IDCs”) with respect to each oil
and gas property will be allocated in proportion to the manner in which the
Simulated Basis of such property is allocated among the Members.

(x)       Simulated Gains.  Simulated Gain with respect to any oil and gas
property will be treated as an item of income or gain and be allocated as
provided in Section 5.1(a).

(xi)      Curative Allocation.  Notwithstanding any other provision of this
Section 5.1, other than the Required Allocations, the Required Allocations shall
be taken into account in making the Agreed Allocations so that, to the extent
possible, the net amount of items of income, gain, loss or deduction allocated
to each Member pursuant to the Required Allocations and the Agreed Allocations,
together, shall be equal to the net amount of such items that would have been
allocated to each such Member under the Agreed Allocations had the Required
Allocations and the related Curative Allocations not otherwise been provided in
this Section 5.1.  It is the intention of the Members that allocations pursuant
to this Section 5.1(c)(xi) be made among the Members in a manner that is likely
to minimize economic distortions.

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5.2       Allocations for Tax Purposes.

(a)      Except as otherwise provided herein, for federal income tax purposes,
each item of income, gain, loss and deduction shall be allocated among the
Members in the same manner as its correlative item of “book” income, gain, loss
or deduction is allocated pursuant to Section 5.1.

(b)      Notwithstanding any provisions to the contrary, allocations of
depletion with respect to each oil and gas property (as defined in section 614
of the Code) and gain and losses therefrom shall be governed by the following:

(i)      For purposes of such computations, the federal income tax basis of each
oil and gas property shall be allocated to each Member in accordance with such
Member’s respective Percentage Interest as of the time such oil and gas property
is acquired by the Company, and shall be reallocated among the Members in
accordance with the Members’ respective Percentage Interests as determined
immediately following the occurrence of an event giving rise to an adjustment to
the Carrying Values of the Company’s oil and gas properties pursuant to the
terms of this Agreement (or at the time of any material additions to the federal
income tax basis of such oil and gas property).  Such allocations are intended
to be applied in accordance with the “partners’ interests in partnership
capital” under Section 613A(c)(7)(D) of the Code; provided, that the Members
understand and agree that the Board may authorize special allocations of tax
basis, income, gain, deduction or loss, as computed for federal income tax
purposes, in order to eliminate differences between Simulated Basis and adjusted
federal income tax basis with respect to any oil and gas properties, in such
manner as determined consistent with the principles of Section 704(c) of the
Code and Section 5.2(b)(iv) hereof.

(ii)      For purposes of the separate computation of gain or loss by each
Member on the taxable sale or other disposition of an oil and gas property, the
amount realized from such sale or disposition shall be allocated (i) first, to
the Members in an amount equal to the Simulated Basis in such oil and gas
property and in the same proportion as their shares thereof were allocated, and
(ii) second, consistent with the allocation of Simulated Gains; provided,
however, that the Members understand and agree that the Board may authorize
special allocations of tax basis, income, gain, deduction or loss, as computed
for federal income tax purposes, in order to eliminate differences between
Simulated Basis and adjusted federal income tax basis with respect to any oil
and gas properties, in such manner as determined consistent with the principles
of Section 704(c) of the Code and Section 5.2(b)(iv) hereof.

(iii)      Each Member shall separately keep records of its share of the
adjusted tax basis in each oil and gas property, adjust such 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 Company.  Upon the request of the Company, each Member shall
advise the Company of its

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adjusted tax basis in each oil and gas property and any depletion computed with
respect thereto, both as computed in accordance with the provisions of this
subsection.  The Company may rely on such information and, if it is not provided
by the Member, may make such reasonable assumptions as it shall determine with
respect thereto.

(iv)      The Members recognize that that with respect to Contributed Property
and Adjusted Property there will be a difference between the Carrying Value of
such property at the time of contribution or revaluation, as the case may be,
and the adjusted tax basis of such property at that time.  All items of tax
depreciation, cost recovery, amortization, adjusted tax basis of depletable
properties, amount realized and gain or loss with respect to such Contributed
Property and Adjusted Property shall be allocated among the Members to take into
account the disparities between the Carrying Values and the adjusted tax basis
with respect to such properties by applying whatever method(s) the Managers may
choose among those methods that are allowed under the principles of Treasury
Regulation section 1.704-3.  For the purposes of applying any such methods to
oil and gas properties (as defined in section 614 of the Code) (A) the amount by
which any Member’s Capital Account is adjusted for Simulated Depletion shall be
treated as an amount of book depletion allocated to such Member and (B) the
amount of cost depletion computed by such Member under section 613A(c)(7)(D) of
the Code shall be treated as an amount of tax depletion allocated to such
Member.

(c)      Notwithstanding any provisions contained herein to the contrary, solely
for federal (and applicable state and local) income tax purposes, items of
income, gain, depreciation, amortization, gain or loss with respect to property
for which a Book-Tax Disparity exists, other than oil and gas properties (as
defined in section 614 of the Code), shall be allocated so as to take into
account the variation between the Company’s tax basis in such property and its
Carrying Value consistent with whatever method(s) the Managers may choose among
those methods that are allowed under the principles of Treasury Regulations
section 1.704-3.

(d)      For the proper administration of the Company, the Board shall (i) adopt
such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including gross income or
deductions) to the extent necessary and consistent with the principles of
Section 704(c) of the Code; and (iii) amend the provisions of this Agreement as
appropriate to reflect the proposal or promulgation of Treasury Regulations
under section 704(b) or section 704(c) of the Code.  The Board may adopt such
conventions, make such allocations and make such amendments to this Agreement as
provided in this Section 5.2(d) only if such conventions, allocations or
amendments are consistent with the principles of section 704 of the Code.

(e)      All recapture of income tax deductions resulting from the taxable sale
or other disposition of Company property shall, to the maximum extent possible,
be allocated to the Member to whom the deduction that gave rise to such
recapture was allocated hereunder to the extent that such Member is allocated
any gain from the disposition of such property.

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(f)      All items of income, gain, loss, deduction and credit recognized by the
Company for federal income tax purposes and allocated to the Members in
accordance with the provisions hereof shall be determined without regard to the
election under section 754 of the Code that will be made by the Company;
provided,  however, that such allocations, once made, shall be adjusted (in any
manner determined by the Board) as necessary or appropriate to take into account
those adjustments permitted or required by sections 734 and 743 of the Code.

5.3       Requirement of Distributions.

(a)      Subject to Section 5.3(b) and Section 10.2(d) and the applicable
provisions of the Act, Available Cash (and other assets and properties of the
Company as contemplated by this Agreement if approved by Majority Consent),
shall be distributed by the Company to the Members upon the Majority Consent of
the Board.  Distributions of assets and properties other than cash and cash
equivalents shall be based upon the Fair Market Value of the applicable assets
or properties and in accordance with the terms of this Section 5.3 as if such
assets and properties were cash or cash equivalents equal to their Fair Market
Value.  Distributions of cash shall be made to the Members by wire transfer of
immediately available funds to the account designated by the relevant
Member.  Subject to Section 5.3(b), any distribution to the Members shall be
made to the Members as follows:

(i)      First, pro rata to the Common Units Members until each holder of the
Common Units has received cumulative distributions in an amount sufficient to
achieve a ten percent (10%) Internal Rate of Return with respect to each Common
Unit;

(ii)      Second, thereafter to the holders of Class A Units pro rata in
proportion to their ownership of the issued and authorized Class A Units in an
amount equal to fifteen percent (15%) of the portion of any distribution to
which this Section 5.3(a)(ii) applies and the remainder to the holders of Common
Units until (x) each Common Units Member has received cumulative distributions
in an amount sufficient to achieve a seventeen percent (17%) Internal Rate of
Return with respect to each Common Unit and (y) each holder of the Common Units
has received cumulative distributions in an amount equal to two (2) multiplied
by each such Member’s Aggregate Capital Contributions Amount;

(iii)      Third,  thereafter to the holders of Class A Units pro rata in
proportion to their ownership of the issued and authorized Class A Units in an
amount equal to twenty percent (20%) of the portion of any distribution to which
this Section 5.3(a)(ii) applies and the remainder to the Common Units Member
until (x) each holder of the Common Units has received cumulative distributions
in an amount sufficient to achieve a twenty-five percent (25%) Internal Rate of
Return with respect to each Common Unit and (y) each holder of the Common Units
has received cumulative distributions in an amount equal to three (3) multiplied
by each such Member’s Aggregate Capital Contributions Amount; and

(iv)      Fourth,  thereafter to the holders of Class A Units pro rata in
proportion to their ownership of the issued and authorized Vested Class A Units
an

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amount equal to thirty percent (30%) of the portion of any distribution to which
this Section 5.3(a)(iv) applies and the remainder to the Common Units Member. 

(b)      Notwithstanding the foregoing:

(i)      The Board shall cause Available Cash to be distributed on or prior to
each April 15, June 15, September 15 and December 15 (or the next succeeding
Business Day if such date falls on a date other than a Business Day) (each an
“Estimated Tax Payment Date”), with respect to the taxable period related to
each Estimated Tax Payment Date (each, an “Estimated Tax Period”), to each
Member.  Such distributions shall be made pro rata to each Member based on that
Member’s liability for income tax for such Estimated Tax Period, determined as
set forth in the next sentence.  The amount distributed pursuant to this Section
5.3(b) shall be in an amount such that, for every Member, the amount distributed
is equal to the excess, if any, of (A) the product of (x) the amount of net
taxable income allocable to such Member (determined taking into account the
allocations described in Section 5.2(c)) including for this purposes any income
treated as a distributive share of the income of the Company or as a “guaranteed
payment” under Section 707(c) of the Code for the use of capital but not
including any such “guaranteed payments” made for services in respect of such
Estimated Tax Period (net of (I) cumulative taxable losses allocated to such
Member for any taxable period beginning on or after the Effective Date and not
previously taken into account under this clause (b) and (II) any depletion
calculated at the Member level during such period, utilizing the cost depletion
method) times (y) an assumed tax rate equal to the highest maximum combined
marginal federal, state and local income tax rates applicable to an individual
or corporate taxpayer resident in New York, NY (taking into account the
character of such taxable income and the deductibility of state and local income
tax for federal income tax purposes) (the “Tax Rate”), over (B) distributions
previously made during such Estimated Tax Period pursuant to Section 5.3(a) to
such Member.  To the  extent that the amount actually distributed with respect
to an Estimated Tax Period is less than the amount specified in this Section
5.3(b), the shortfall in the amount actually distributed shall continue to the
next Estimated Tax Period (and to any subsequent Estimated Tax Periods as
required) and shall be distributed to the respective Members in that next
Estimated Tax Period under this this Section 5.3(b).

(ii)      Any distributions with respect to unvested Class A Units shall be
retained by the Company and held in trust in a segregated escrow account for the
benefit of the Class A Unit Members until such unvested Class A Units become
Vested Class A Units (the “Withheld Amounts”).  Withheld Amounts shall be
promptly distributed by the Company upon vesting of the Class A Units.  Prior to
making any distribution pursuant to Section 5.6, but subject to Section 5.3(b)
(iii), the Company will distribute the Withheld Amounts with respect to each
Class A Unit that has become a Vested Class A Unit to the holder of such Class A
Unit.

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(iii)      Distributions pursuant to this Section 5.3(b) shall be treated as
advances against, and shall reduce, any Member’s entitlement to any subsequent
distributions made pursuant to Section 5.3(a) or Section 10.2(d)(ii).

(iv)      The Company hereby covenants that the Class A Member will receive all
value and proceeds due to it pursuant to that certain Letter Agreement, dated
March 1, 2017, by and among Gavilan Resources Holdings, LLC, and SN Comanche
Manager, LLC, and the holders of the Warrants (as defined in the Letter
Agreement), Gavilan Resources Holdings - A, LLC, Gavilan Resources Holdings - B,
LLC, and Gavilan Resources Holdings - C, LLC (the “Warrant Holders”) (the
“Letter Agreement”).  For the avoidance of doubt, any proceeds received by the
Warrant Holders upon the monetization or other transfer of the Warrants shall be
deemed a distribution received by the Company, solely for the purposes of
Section 5.3(a), including with respect to determining the Internal Rate of
Return and any required multiple of capital to be achieved.  The Company and the
Warrant Holders intend that the ownership of the Warrants by the Warrant Holders
have no adverse impact upon the distributions due to the Class A Units Member as
compared to if such Warrants were held directly by the Company, and the parties
further agree to take any such actions in the future as may be necessary to
ensure that the Class A Units Member receives the same economic benefit with
respect the Warrants as though the Warrants were held directly by the
Company.  Furthermore, the Company hereby represents and warrants that the
Warrant Holders will engage in no business and incur no liabilities other than
pursuant to their ownership of the Warrants.

5.4      Withholding.  To the extent the Company is required by law to withhold
or to make tax payments on behalf of or with respect to any Member (“Tax
Advances”), the Company may withhold such amounts and make such tax payments as
so required.  All Tax Advances made on behalf of a Member shall be repaid by
reducing the amount of the current or next succeeding distribution or
distributions which would otherwise have been made to such Member or, if such
distributions are not sufficient for that purpose, by so reducing the proceeds
of liquidation otherwise payable to such Member.  If at the time of liquidation
of the Company, any such Tax Advances to a Member exceed the proceeds of
liquidation to the Member, such Member shall repay such excess to the
Company.  If a distribution to a Member is actually reduced as a result of a Tax
Advance, for all other purposes of this Agreement such Member shall be treated
as having received the amount of the distribution that is reduced by the Tax
Advance.  Each Member hereby agrees to indemnify and hold harmless the Company
and the other Members from and against any liability from such Member’s failure
to repay Tax Advances.  Each Member shall provide the Company with such
information that the Company reasonably requests in order to determine the
amount of any taxes required to be withheld with respect to such Member.

5.5      Deemed Distribution.  Notwithstanding anything in this Agreement to the
contrary, and without duplication, any withholding or other taxes, interest and
penalties directly or indirectly paid or incurred (including under any BBA
provision) by the Company with respect to income allocable to or distribution
to, or otherwise attributable to, any Member shall be treated as if the amounts
paid or incurred had been distributed to such Member, and amounts otherwise
distributable to such Member pursuant to Section 5.3 shall be reduced
accordingly. 

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5.6      Distributions upon Merger, Sale or Similar Transaction. Each Member and
other Person made party hereto shall take all necessary or desirable actions in
connection with the distribution of the aggregate consideration from any sale of
all or substantially all of the Company’s assets or Membership Interests, a
merger or consolidation of the Company or a similar transaction, or a
transaction giving rise to tag-along rights under Section 3.6 or drag-along
rights under Section 3.7, as necessary to implement the economics contemplated
by this Agreement, including, without limitation, executing and delivering a
proceeds sharing agreement to reflect the foregoing.    

Article VI

MANAGEMENT OF THE COMPANY

6.1       Management by Managers. 

(a)      The Company shall be managed by a board of managers (the “Board”, each
member of the Board, a “Manager” and such members collectively, the “Managers”)
which Board shall collectively act as the “manager” of the Company (as such term
is used in the Act), according to this Article VI and, except with respect to
certain consent requirements required by the Act or provided in this Agreement
(and except with respect to any Member which is acting in its capacity as the
manager under and in accordance with the provisions of the Management Services
Agreement), no Member, by virtue of having the status of a Member, shall have
any management power or control over the business and affairs of the Company or
actual or apparent authority to enter into contracts on behalf of, or to
otherwise bind, the Company, and the Members shall not have any control over the
day-to-day operation or management of the Company or its Subsidiaries.  Except
as described in the preceding sentence, (i) the powers of the Company shall be
exercised by or under the authority of, and the business and affairs of the
Company shall be managed under the direction of, the Board in accordance with
this Agreement and (ii) the Board shall exercise such powers in compliance with
this Agreement and ensure that all organizational formalities are observed with
respect to the Company.  Under the direction of the Board, certain activities of
the Company may be conducted on the Company’s behalf by the Officers as
specified and authorized by the Board, who shall be agents of the Company, and
the management and administration of the day-to-day business and affairs of the
Company will be provided by Sanchez under the Management Services Agreement
pursuant to Section 6.11.  In addition to the powers that now or hereafter can
be granted under the Act and to all other powers granted under any other
provision of this Agreement, the Board shall have (subject to the Act and all
consent rights and other limitations in this Agreement) full power and authority
to do all things on such terms as they may deem necessary or appropriate to
conduct, or cause to be conducted, the business and affairs of the Company.  Any
Person dealing with the Company, other than a Member or a Member’s Affiliate,
may rely on the authority of the Board or the Officers in taking any action in
the name of the Company without inquiry into the provisions of this Agreement or
compliance with it, regardless of whether that action actually is taken in
accordance with the provisions of this Agreement.

(b)      Except as otherwise provided in this Agreement, each Member hereby
(i) specifically delegates to the Board its rights and powers to manage and
control the business and affairs of the Company, and (ii) waives its right to
bind the Company, in each case as, and to the extent permitted by, the Act.

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(c)      Subject to the Unanimous Consent requirements of Section 6.3(b), the
Board is specifically empowered to, acting by Majority Consent, authorize and
take any actions and activities that do not require Unanimous Consent under
Section 6.3(b).

6.2       Board. 

(a)      Composition.  Except as otherwise set forth herein:

(i)       The Board shall consist of three (3) natural persons, none of whom
need be Members or residents of the State of Delaware.  The initial Managers on
the Board are set forth on Schedule 6.2.

(ii)      The Common Units Member shall have the right to appoint the three (3)
Managers and the right to designate one (1) person to represent each Manager at
any Board meeting at which a Manager is unable to attend (the “Manager
Alternate”).

(iii)      One Manager shall be the chairman of the Company (the “Chairman”) for
so long as such individual serves in such role.  The initial Chairman shall be
Angelo Acconcia.

(iv)      The term “Manager” shall also refer to any Manager Alternate that is
actually performing the duties of the applicable Manager in lieu of that
Manager.  The initial Managers and Manager Alternate are set forth on Schedule
6.2.

(b)      Each Manager may vote by delivering his written proxy to another
Manager.  A Manager shall serve until such Manager resigns or is removed as
provided in Section 6.6.

(c)      The Class A Unit Member, shall be entitled to designate one natural
person to attend all meetings of the Board or committee thereof (the
“Observer”).  It is agreed that the initial Observer shall be Antonio R.
Sanchez, III, who shall serve as the Observer until he ceases to serve in such
capacity, including as required by the Class A Units Member. The Company shall
provide to the Observer any notices delivered to the Managers and a copy of all
meeting materials concurrently with providing such notices and materials to the
Managers.  The Observer shall not have any voting rights with respect to any
action brought before the Board.  The Observer shall not be entitled to attend
any portion of a meeting of the Board or any committee thereof, or to receive
any meeting materials in connection therewith, that would constitute, or be
deemed to constitute, a waiver of the attorney-client privilege or for which the
Board determines in its reasonable judgment relates directly to a conflict
between the Company and Sanchez.  If requested by the Board, unless the Class A
Units Member requires the Observer to cease serving in such capacity, the Class
A Member shall execute a Members Agreement further providing for the rights of
the Observer substantially similar in form and substance to that certain
Shareholders Agreement, dated the Effective Date, between Sanchez Energy
Corporation and Gavilan Resources HoldCo, LLC.

6.3       Powers of the Board.

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(a)      Subject to Section 6.3(b) and Section 6.5, the Board (and any Officer
or committee duly authorized by the Board) shall have the power, right and
authority to take all actions by Majority Consent which the Board deems
necessary, useful or appropriate for the management and conduct of the Company’s
business or to the accomplishment of the purposes of the Company.

(b)      Without Unanimous Consent, the Company shall not (directly or through
any Subsidiaries), and the Board shall not approve (directly or through
committees), any action by the Company or its Subsidiaries to:

(i)       Amend or restate the Certificate or this Agreement (except pursuant to
the terms of Article XI or amendments or restatements of Exhibit A hereto) if
such amendment or restatement would result in a material, disproportionate and
adverse effect on any rights, preferences or privileges of the holders of the
Class A Units;

(ii)      Enter into or modify any agreement or transaction with any Affiliate
(including Blackstone and its Subsidiaries or Affiliates) or any Affiliate
contract other than on arms’ length terms; provided, that any acquisition or
disposition of assets, merger, business combination or similar transaction with
an Affiliate of Blackstone shall require Unanimous Consent unless the Fair
Market Value of such transaction is determined by an Independent Expert;

(iii)     Fundamentally transform the Company Business; or

(iv)     Liquidate or dissolve the Company, commence a voluntary bankruptcy by
the Company, or consent to the appointment of a receiver, liquidator, assignor,
custodian or trustee for the purposes of winding up the affairs of the Company.

6.4       Meetings of the Board.

(a)      Regular meetings of the Board shall be held at least once each calendar
quarter, at the principal offices of the Company, or at such other times or
places as may be determined by the Board.  Special meetings of the Board may be
called by any of the Managers.  Each Member shall use commercially reasonable
efforts, in good faith, to cause its designated Managers to attend each regular
or special meeting of the Board.

(b)      Notice of the time and place of any regular meeting of the Board shall
be in accordance with the meeting schedule approved by the Board or by providing
notice at least ten (10) days but no more than thirty (30) days prior to the
meeting.  Special meetings of the Board may be called by providing at least
three (3) days’ notice prior to the meeting.  Special meetings of the Board to
deal with emergencies may be called by providing at least six (6) hours’ notice
prior to the meeting, so long as each Manager provides written confirmation of
receipt of notice or waives notice (including by attending the emergency
meeting).  Written notice of meetings of the Board, including the purpose of the
meeting, shall be given to each Manager with the notice of the meeting.  Any
Manager may waive notice of any meeting by the execution of a written waiver

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prior or subsequent to such meeting.  The attendance of a Manager at any meeting
shall constitute a waiver of notice of such meeting, except where a Manager
attends a meeting for the express purpose of objecting to the transaction of any
business on the grounds that the meeting is not lawfully called or
convened.  Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the Board, need be specified in the waiver of
notice of such meeting.  Notice may be given by electronic mail to an electronic
mail address provided in writing by a Manager, by facsimile to a facsimile
number provided in writing by a Manager, by personal delivery or by national
reputable courier service such as Federal Express or United Parcel Service to an
address specified in writing by a Manager.

(c)      The Company’s Secretary (or if such person is not available, the person
designated by a majority of the Managers of the Board to be the acting secretary
at a meeting) shall act as the secretary of the meeting who shall make a written
record of the proceedings of such meeting which shall be provided to the Members
promptly after the meeting.

(d)      The Board may adopt whatever rules and procedures relating to its
activities as it may deem appropriate, provided, that such rules and procedures
shall not be inconsistent with or violate the provisions of this Agreement, and
provided, that such rules and regulations shall permit Managers to participate
in meetings by telephone or video conference or the like or by written proxy,
and such participation shall be deemed attendance for purposes of determining
whether a quorum is present.

6.5       Quorum and Voting.

(a)      Subject to Section 6.5(e), at all meetings of the Board, the presence
of a majority of the Managers shall be necessary and sufficient to constitute a
quorum of the Board for the transaction of business.

(b)      All actions and approvals of the Board shall be approved and passed at
a meeting at which a quorum is present by Majority Consent, except for matters
required to be approved by Unanimous Consent pursuant to Section 6.3(b).

(c)      Any Manager may participate in a meeting of the Board by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can communicate with each other.

(d)      Any action required or permitted to be taken at any meeting of the
Board may be taken without a meeting, without prior notice, and without a vote,
if consents in writing, setting forth the action so taken, are signed by the
number of Managers required to approve such action if a meeting of the Board
were to be called pursuant to this Article VI.  Each written consent shall bear
the date and signature of each Manager who signs the consent.

(e)      If a quorum shall not be present at any two (2) consecutive duly called
meetings of the Board, the Managers present thereat may reschedule such meeting
by duly called notice, and in such subsequent meeting any number of Managers
shall constitute quorum; provided,  however, the foregoing shall not in any way
limit the requirement that the matters set forth in Section 6.3(b) be approved
by Unanimous Consent.

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6.6       Resignation; Removal and Vacancies.

(a)      Any Manager may resign at any time by giving written notice to the
Board.  The resignation of any Manager shall take effect upon receipt of notice
thereof or at such later time as shall be specified in such notice; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.  If any Manager is the subject of civil or
criminal charges instituted by a Governmental Authority based upon allegations
of breach or violation of securities Laws or the Foreign Corrupt Practices Act,
15 U.S.C. §§ 78dd-1, et seq., or is indicted, convicted or enters a plea of no
contest or nolo contendere to any felony or other crime involving moral
turpitude, then such Manager shall immediately resign from the Board or the
Member(s) who appointed such Manager shall immediately remove such Manager from
serving as a Manager and shall appoint another Person to fill the vacancy on the
Board resulting from such Manager’s removal.

(b)      Any Manager may be removed at any time, with or without cause, by (and
only by) the action of the Common Units Member.  The Chairman may be removed at
any time, with or without cause, by (and only by) the majority of the other
Managers.  The removal of a Manager shall be effective only upon receipt of
notice thereof by the remaining Managers.

(c)      Any vacancy in the number of Managers occurring for any reason shall be
filled promptly by the appointment of, as applicable, (i) new Manager(s) by the
Common Units Member or (ii) a new Chairman, by the majority of the Members.  The
appointment of a new Manager is effective upon receipt of notice thereof by or
at such time as shall be specified in such notice to the remaining Managers.

6.7       Discharge of Duties; Reliance on Reports.  Each Manager may rely and
shall be protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, or other paper or document believed by it in good faith
to be genuine and to have been signed or presented by the Board.  The Board may
consult with legal counsel, accountants, appraisers, management consultants,
investment bankers and other consultants and advisers selected by it and any act
taken or omitted in good faith reliance upon the opinion of such Persons as to
matters that the Managers reasonably believe to be within such Person’s
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.  Neither the
Board nor any individual Manager shall be responsible or liable to the Company
or any Member for any mistake, action, inaction, misconduct, negligence, fraud
or bad faith on the part of any Person delivering such document, advice or
opinion as provided in this Section 6.7 unless, with respect to an individual
Manager only, such Manager had knowledge that such Person was acting unlawfully
or engaging in fraud.

6.8       Officers.  Under the direction of the Board and except as provided in
Section 6.3, certain administrative activities of the Company shall be conducted
on the Company’s behalf by the Officers, who shall be agents of the Company.

(a)      The officers of the Company shall be such officers as the Board deems
necessary (the “Officers”).  The Officers shall be appointed by the Board.  The
initial Officer

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appointees are listed on Schedule 6.8.  The Officers shall report to the Board
as requested from time to time.

(b)      The Board may appoint such other Officers and agents as it shall deem
necessary, and the Officers shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.

(c)      The authority of any Officers of the Company shall be restricted to
those actions specifically authorized by the Board in accordance with this
Agreement.  On the Effective Date, the Officers shall be authorized to execute
this Agreement and any agreement related to the transactions contemplated hereby
on behalf of the Company.

6.9       Term of Officers.

(a)      An Officer shall serve until he resigns, his term expires or he is
removed as provided in Section 6.9(b).  Any Officer of the Company may resign at
any time by giving written notice to the Board.  The resignation of any Officer
shall take effect upon receipt of notice or at such later time as shall be
specified in such notice; and, unless otherwise specified in such notice, the
acceptance of such resignation shall not be necessary to make it effective.

(b)      An Officer may be removed from office at any time with or without cause
by the Board.  If any vacancy shall occur in any office, for any reason
whatsoever, then the Board shall have the right to appoint a new Officer to fill
the vacancy.

6.10     Compensation and Reimbursement.  The Managers may, at the discretion of
the Board, receive from the Company compensation for managing the affairs of the
Company.  Managers shall be reimbursed by the Company for all of the Managers’
reasonable business expenses relating to the Company, provided, that any
reimbursed expenses are properly substantiated by the Manager.

6.11     Management Services.  Concurrently with the execution of this
Agreement, the Company will execute, deliver and be bound by the terms and
conditions of the Management Services Agreement, pursuant to which the Company
will engage Sanchez to manage and administer the day-to-day business and affairs
of the Company as provided therein.  The Members hereby acknowledge and agree
that, pursuant to the Management Services Agreement, Sanchez shall be
authorized, empowered and directed to take any and all actions required or
permitted by the terms of the Management Services Agreement, including actions
taken for and on behalf of the Company, without the requirement of any
additional authorization or approval, except to the extent specifically required
under the terms of such agreements or pursuant to Section 6.3(b).  Except for
the fees or other sums payable as provided under the Management Services
Agreement, neither Sanchez nor any Affiliate thereof (except as may be received
by virtue of holdings of Class A Units) shall receive any incentive fee or other
incentive compensation in connection with the performance by it of its
obligations under this Agreement.  Notwithstanding anything in this Agreement to
the contrary, to the extent approval of the Company is sought by Sanchez with
respect to any Affiliate agreement or arrangement in accordance with Section
5.5(b) of the Management Services Agreement, such approval shall be deemed given
if such agreement or arrangement is approved by Majority Consent, such consent
not to be unreasonably withheld,

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conditioned or delayed (and each Member shall cause its appointed Manager to not
unreasonably withhold, condition or delay such consent).

6.12     Member Meetings.

(a)      Location; Quorum; Voting.  To the extent a meeting of the Members is
required by Law or this Agreement, Member meetings shall be held at the
principal office of the Company or at such other place within or without the
State of Delaware specified in the notice or waivers of notice thereof.  Except
as provided herein or under applicable Law, the presence of Members holding a
majority of the Common Units, present in person or represented by proxy and
entitled to vote, shall constitute a quorum at any meeting of the Members for
the transaction of business, and the affirmative vote of the Members holding a
majority of the Percentage Interests shall constitute the act of the
Members.  Each Common Units Member shall be entitled to one (1) vote for each
percent of the Percentage Interests held by such Member.  No Class A Units
Member shall have any vote or any rights to consent to or approve any matter
except as otherwise provided in this Agreement or as required by Law.  A Member
may vote at a meeting by a written proxy executed by that Member and delivered
to a Manager, Member, or the Secretary.  A proxy shall be revocable unless it is
stated to be irrevocable.

(b)      Action by Class A Units Members.  Subject to the limitations contained
in Section 6.12(a) and any exceptions in this Agreement, any actions, consents,
or approvals required by the Class A Units Members shall be deemed given upon
the affirmative vote or consent of a majority of the then-Vested Class A
Units.  If there are no Vested Class A Units, then any action by the Class A
Units Members may be taken upon the affirmative vote or consent of a majority of
the Class A Units then issued and outstanding pursuant to this Agreement,
regardless of whether such Class A Units are “unvested” thereunder.

(c)      Waiver of Notice.  Attendance of a Member at a meeting shall constitute
a waiver of notice of such meeting, except where such Member attends the meeting
for the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.

(d)      Action by Written Consent.  Any action required or permitted to be
taken at a particular meeting may be taken without a meeting, without notice and
without a vote if a consent in writing setting forth the action so taken is
signed by all of the Members entitled to vote thereon.  A copy of such written
consent shall be provided within ten (10) Business Days to the Members who did
not sign such written consent.

6.13      VCOC Management Rights.  The Company and each Member agree that (x) on
the date hereof the Company shall enter into a letter agreement with each Common
Units Member substantially in the form of Annex A hereto, and (y) the Company
shall enter into a VCOC letter agreement with any Affiliate of any Common Units
Member on request of such Common Units Member substantially in the form of Annex
A hereto.

6.14      Affiliate Transactions. Other than customary compensatory,
indemnification and similar arrangements with Managers and Officers, the Company
will not enter into (and shall not permit any of its Subsidiaries to enter into)
any agreement or arrangement, or any amendments or

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modifications to, or waivers of, any agreement or arrangement, with any Member
or an Affiliate of a Member unless (i) approved by Members holding a majority of
Class A Units, such consent not to be unreasonably withheld, conditioned or
delayed, or (ii) the terms of any such agreement or arrangement (including any
amendment, modification or waiver) are on an arm’s-length basis and not
materially less favorable, directly or indirectly, to the Company and its
Members than would be obtained in a transaction with a Third Party. 

Article VII

INDEMNIFICATION

7.1      Right to Indemnification.  Subject to the limitations and conditions as
provided herein or by Laws, each Person who was or is made a party or is
threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative (hereinafter a “Proceeding”), or any appeal in such
a Proceeding or any inquiry or investigation that could lead to such a
Proceeding, by reason of the fact that he or she, or a Person of whom he or she
is the legal representative, is or was a Member of the Company or Affiliate
thereof or any of their respective representatives, a Manager, a member of a
committee of the Company or an Officer of the Company, or while such a Person is
or was serving at the request of the Company as a director, officer, partner,
venturer, member, trustee, employee, agent or similar functionary of another
foreign or domestic general partnership, corporation, limited partnership, joint
venture, limited liability company, trust, employee benefit plan or other
enterprise (each an “Indemnitee”), shall be indemnified by the Company to the
extent such Proceeding or other above-described process relates to any such
above-described relationships with, status with respect to, or representation of
any such Person to the fullest extent permitted by the Act, as the same exists
or may hereinafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Company to provide broader
indemnification rights than said Laws permitted the Company to provide prior to
such amendment) against judgments, penalties (including excise and similar taxes
and punitive damages), fines, settlements and reasonable expenses (including
attorneys’ and experts’ fees) actually incurred by such Person in connection
with such Proceeding, and indemnification under this Article VII shall continue
as to a Person who has ceased to serve in the capacity which initially entitled
such Person to indemnity hereunder for any and all liabilities and damages
related to and arising from such Person’s activities while acting in such
capacity; provided, however, that no Person shall be entitled to indemnification
under this Section 7.1 if the Proceeding involves acts or omissions of such
Person which constitute an intentional breach of this Agreement or gross
negligence on the part of such Person.  The rights granted pursuant to this
Article VII shall be deemed contract rights, and no amendment, modification or
repeal of this Article VII shall have the effect of limiting or denying any such
rights with respect to actions taken or Proceedings arising prior to any such
amendment, modification or repeal.  It is acknowledged that the indemnification
provided in this Article VII could involve indemnification for negligence or
under theories of strict liability.

7.2      Indemnification of Officers, Employees (if any) and Agents.  The
Company may indemnify and advance expenses to Persons who are not entitled to
indemnification under Section 7.1, including current and former employees (if
any) or agents of the Company, and those Persons who are or were serving at the
request of the Company as a manager, director, officer, partner, venturer,
member, trustee, employee (if any), agent or similar functionary of another
foreign or

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domestic general partnership, corporation, limited partnership, joint venture,
limited liability company, trust, employee (if any) benefit plan or other
enterprise against any liability asserted against such Person and incurred by
such Person in such a capacity or arising out of his status as such a Person to
the same extent that it may indemnify and advance expenses to a Member under
this Article VII.

7.3      Advance Payment.  Any right to indemnification conferred in this
Article VII shall include a limited right to be paid or reimbursed by the
Company for any and all reasonable expenses as they are incurred by a Person
entitled or authorized to be indemnified under Sections 7.1 and 7.2 who was, or
is threatened, to be made a named defendant or respondent in a Proceeding in
advance of the final disposition of the Proceeding and without any determination
as to such Person’s ultimate entitlement to indemnification; provided, however,
that the payment of such expenses incurred by any such Person in advance of
final disposition of a Proceeding shall be made only upon delivery to the
Company of a written affirmation by such Person of his good faith belief that he
has met the requirements necessary for indemnification under this Article VII
and a written undertaking by or on behalf of such Person to repay all amounts so
advanced if it shall ultimately be determined that such indemnified Person is
not entitled to be indemnified under this Article VII or otherwise.

7.4      Appearance as a Witness.  Notwithstanding any other provision of this
Article VII, the Company shall pay or reimburse expenses incurred by any Person
entitled to be indemnified pursuant to this Article VII in connection with such
Person’s appearance as a witness or other participation in a Proceeding at a
time when he is not a named defendant or respondent in the Proceeding.

7.5      Nonexclusivity of Rights.  The right to indemnification and the
advancement and payment of expenses conferred in this Article VII shall not be
exclusive of any other right which a Person indemnified pursuant to Sections 7.1
and 7.2 may have or hereafter acquire under any Laws, this Agreement, or any
other agreement, vote of Members or otherwise.

7.6      Insurance.  The Company may purchase and maintain indemnification
insurance, at its expense, to protect itself and any other Persons from any
expenses, liabilities, or losses that may be indemnified under this Article VII.

7.7      Member Notification.  To the extent discretionary to the Company, the
Board by Majority Consent shall approve or disapprove of indemnification or
advancement of expenses under this Article VII.  Any indemnification of or
advance of expenses to any Person entitled or authorized to be indemnified under
this Article VII shall be reported in writing to the Board with or before the
notice or waiver of notice of the next Board meeting or with or before the next
submission to the Board of a consent to action without a meeting and, in any
case, within the twelve (12) month period immediately following the date the
indemnification or advance was made.

7.8      Savings Clause.  If this Article VII or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless any Person entitled to be
indemnified pursuant to this Article VII as to costs, charges and expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement

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with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative to the full extent permitted by any applicable
portion of this Article VII that shall not have been invalidated and to the
fullest extent permitted by Laws.

7.9      Scope of Indemnity.  For the purposes of this Article VII, references
to the “Company” include all constituent entities, whether corporations or
otherwise, absorbed in a consolidation or merger as well as the resulting or
surviving entity.  Thus, any Person entitled to be indemnified or receive
advances under this Article VII shall stand in the same position under the
provisions of this Article VII with respect to the resulting or surviving entity
as he would have if such merger, consolidation, or other reorganization never
occurred.

7.10     Other Indemnities.

(a)      The Company acknowledges and agrees that the obligation of the Company
under this Agreement to indemnify or advance expenses to any Indemnitee for the
matters covered thereby shall be the primary source of indemnification and
advancement of such Indemnitee in connection therewith and any obligation on the
part of any Indemnitee under any Other Indemnification Agreement to indemnify or
advance expenses to such Indemnitee shall be secondary to the Company’s
obligation and shall be reduced by any amount that the Indemnitee may collect as
indemnification or advancement from the Company.  If the Company fails to
indemnify or advance expenses to an Indemnitee as required or contemplated by
this Agreement, and any Person makes any payment to such Indemnitee in respect
of indemnification or advancement of expenses under any Other Indemnification
Agreement on account of such Unpaid Indemnity Amounts, such other Person shall
be subrogated to the rights of such Indemnitee under this Agreement in respect
of such Unpaid Indemnity Amounts.

(b)      The Company, as an indemnifying Party from time to time, agrees that,
to the fullest extent permitted by applicable Law, its obligation to indemnify
Indemnitees under this Agreement shall include any amounts expended by any other
Person under any Other Indemnification Agreement in respect of indemnification
or advancement of expenses to any Indemnitee in connection with any Proceedings
to the extent such amounts expended by such other Person are on account of any
Unpaid Indemnity Amounts.

7.11     Certain Limitations.  Notwithstanding anything to the contrary
contained herein, nothing in this Article VII shall provide indemnification for
the Class A Units Members other than in their capacity as Members. 

Article VIII

TAXES

8.1       Tax Returns.  The Company shall timely cause to be prepared and filed
all U.S. federal, state, local and foreign tax returns for the Company,
including making the elections described in Section 8.2.  Upon written request
by the Company, each Member shall furnish to the Company all pertinent
information in its possession relating to Company operations that is necessary
to enable the Company’s tax returns to be prepared and filed.

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8.2       Tax Elections.  The Company shall be entitled to make the following
elections on the appropriate tax returns:

(a)      to adopt the accrual method of accounting;

(b)      to use the calendar year as the taxable year;

(c)      an election pursuant to Section 754 of the Code;

(d)      to deduct and/or amortize the organizational expenses of the Company as
permitted by Section 709(b) of the Code;

(e)      to deduct and/or amortize the start-up expenditures of the Company as
permitted by Section 195(b) of the Code;

(f)      to deduct IDCs currently;

(g)      to use the safe harbor cost depletion method; and

(h)      any other election approved by Majority Consent.

It is the intention of the Members that the Company be treated as a partnership
for U.S. federal income tax purposes, and neither the Company nor any Member may
make any election to the contrary, including an election pursuant to Treasury
Regulation section 301.7701-3(c) or any similar provisions of applicable state
law, and no provision of this Agreement shall be construed to sanction or
approve such an election.

8.3       Tax Matters Member.

(a)      By joining this Agreement, each Member appoints and designates
Blackstone (i) as the “tax matters partner,” within the meaning of Section
6231(a)(7) of the Code and (ii) for any BBA Effective Period, as the
“partnership representative” within the meaning of Section 6223 of the Code (as
applicable, the “Tax Matters Member”), or, in each case, under any similar state
or local law.  The Tax Matters Member shall have any powers necessary to perform
fully in such capacity, and shall be permitted to take any and all actions, to
the extent permitted by law, in consultation with Blackstone if Blackstone is
not the Tax Matters Member.  Blackstone shall have the exclusive authority to
appoint and designate a successor Tax Matters Member for any BBA Effective
Period.  The Tax Matters Member shall be reimbursed by the Company for all costs
and expenses incurred by it, and indemnified by the Company with respect to any
action brought against it, in its capacity as the Tax Matters Member. 

(b)      The Members agree that any and all actions taken by the Tax Matters
Member shall be binding on the Company and all of the Members (provided, that
the Tax Matters Member shall not bind any Member to a settlement agreement that
would reasonably be expected to materially affect such Member disproportionately
to the other Members without obtaining the consent of such Member, which consent
shall not be unreasonably delayed or withheld) and the Members shall reasonably
cooperate with the

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Company and the Tax Matters Member, and undertake any action reasonably
requested by the Company or the Tax Matters Member, in connection with any
elections made by the Tax Matters Member or as determined to be reasonably
necessary by the Tax Matters Member under any BBA provision.

(c)      Each Member further agrees that, except as otherwise required by
applicable law, such Member will not treat any Company item inconsistently on
such Member’s U.S. federal, state, local and/or non-U.S. tax returns or in any
claim for a refund with the treatment of the item on the Company’s tax returns,
and will not independently act with respect to tax audits or tax litigation
affecting the Company, unless the prior written consent of the Tax Matters
Member has been obtained.

(d)      The Tax Matters Member may in its sole discretion cause the Company to
make all elections not otherwise expressly provided for in this Agreement
required or permitted to be made by the Company under the Code and any state,
local or non-U.S. tax laws.

(e)      The obligations and covenants of the Members set forth in Sections
8.3(b) and 8.3(c) shall survive the Transfer or withdrawal by any Member of the
whole or any portion of its Membership Interests, the death or legal disability
of any Member, and the dissolution or termination of the Company.

8.4      PTP Qualifying Income.  The Company shall use its best efforts to avoid
making any investment, executing any contract or otherwise undertaking any
activity that would generate income which is not “qualifying income” (as such
term is defined in section 7704(d) of the Code).

8.5      Code Section 83 Safe Harbor Election.

(a)      Class A Units.  The Class A Units are intended to constitute “profit
interests” within the meaning of Internal Revenue Service Revenue Procedures
93-27 and 2001-43 and Internal Revenue Service Notice 2005-43.

(b)      Safe Harbor Election.  Notwithstanding Section 8.2, by executing this
Agreement, each Member authorizes and directs the Company to elect to have the
“Safe Harbor” described in the proposed Revenue Procedure set forth in Internal
Revenue Service Notice 2005-43 (the “Notice”) apply to any interest in the
Company transferred to a service provider or a Person who provides services for
the benefit of the Company (should such an election be applicable to a Person
who provides services for the benefit of the Company) on or after the effective
date of such Revenue Procedure (or any substantially similar Revenue Procedure
or other guidance issued by the Internal Revenue Service).  For purposes of
making such Safe Harbor election, Blackstone is hereby designated as the
“partner who has responsibility for federal income tax reporting” by the Company
and, accordingly, execution of such Safe Harbor election by Blackstone
constitutes execution of a “Safe Harbor Election” in accordance with Section
3.03(1) of the Notice.  The Company and each Member hereby agree to comply with
all requirements of the Safe Harbor described in the Notice (and any
substantially similar Revenue Procedure or other guidance issued by the Internal
Revenue Service) with respect to all Membership Interests transferred in
connection with the performance of services while the election remains
effective, including the requirement

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that each Member shall prepare and file all federal income tax returns reporting
the income tax effects of each Safe Harbor Membership Interest issued by the
Company in a manner consistent with the requirements of the Notice (and any
substantially similar Revenue Procedure or other guidance issued by the Internal
Revenue Service).

(c)      Certain Amendments.  Each Member authorizes the Board to amend Section
8.5(a) to the extent necessary to achieve substantially the same tax treatment
with respect to any interest in the Company transferred by the Company to a
service provider in connection with services provided to the Company or for the
benefit of the Company (should such an election be applicable to a person who
provides services for the benefit of the Company) to reflect changes from the
rules set forth in the Notice in subsequent Internal Revenue Service guidance,
provided, that such amendment is not adverse to any Member (as compared with the
after-tax consequences that would result if the provisions of the Notice applied
to all interests in the Company transferred to a service provider by the Company
in connection with services provided to or for the benefit of the Company).

Article IX

BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS

9.1      Maintenance of Books.  The Company shall keep books and records of
accounts (including a list of the names, addresses, Capital Contributions and
Membership Interests of all Members) and shall keep minutes of the proceedings
of its Board.  The books of account for the Company shall be maintained on an
accrual basis in accordance with the terms of this Agreement and GAAP, except
that the Capital Accounts of the Members shall be maintained in accordance with
Section 4.2.  The accounting year of the Company shall be the Fiscal Year.

9.2      Rights of Members.  In addition to other rights provided by this
Agreement or by applicable Law, each Member shall have the right, for a lawful
purpose reasonably related to such Member’s interest in the Company as a Member
in the Company, upon reasonable written demand containing a concise statement of
such purposes and at such Member’s own expense:

(a)      promptly after becoming available, to obtain a copy of the Company’s
federal, state and local income tax returns for each year;

(b)      to have furnished to such Member a current list of the name and last
known business, residence or mailing address of each Member;

(c)      to have furnished to it a copy of this Agreement and the Certificate
and all amendments thereto, together with copies of the executed copies of all
powers of attorney pursuant to which this Agreement, the Certificate and all
amendments thereto have been executed;

(d)      true and full information regarding the amount of cash and a
description and statement of the agreed value of any other property or services
contributed by each Member and which each Member has agreed to contribute in the
future, and the date on which each became a Member; and

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(e)      to obtain such other information regarding the affairs of the Company
as is just and reasonable and consistent with the stated purposes of the written
demand.

9.3       Reports.  The Company shall provide each Member with the following
financial statements and reports at the times indicated below: 

(a)       Within one-hundred twenty (120) days after the end of such Fiscal
Year, (i) a statement of operations, a statement of cash flows and a statement
of Member’s capital for such Fiscal Year and (ii) a balance sheet as of the end
of such Fiscal Year, in each case setting forth in comparative form the figures
from the previous Fiscal Year, together with an auditor’s report thereon to the
extent prepared by the Company.

(b)      annually within one-hundred twenty (120) days after the end of each
Fiscal Year, a reserve report for the Company as of the last day of such Fiscal
Year prepared by an independent petroleum engineering firm that sets forth with
respect to the Company as a whole, proved reserves, future net revenues relating
thereto and the discounted present value of such future net revenues, in
accordance with the rules and regulations promulgated by the Securities and
Exchange Commission under the Securities Act and Securities Exchange Act of
1934, as amended;

(c)       From time to time, the Company shall provide (or cause to be provided)
to the Members any other financial or tax information regarding the Company
reasonably requested by a Member (or its Affiliates and designees).

(d)      The Company shall cause to be furnished to each Member all information
reasonably necessary or appropriate to file its respective tax reports within
forty-five (45) days after the financial statements are required to be issued by
the Company.

(e)      To the extent actually provided to the VCOC Investor (as defined in
Annex A hereto) not already provided pursuant to this Section 9.3, copies of all
financial statements or other reports referred to in clauses (ii), (iii) and
(iv) of the letter agreement attached as Annex A hereto. 

Article X

DISSOLUTION, LIQUIDATION, AND TERMINATION

10.1     Dissolution.  Subject to the provisions of Section 10.2 and any
applicable Laws, the Company shall wind up its affairs and dissolve only on the
first to occur of the following (each a “Dissolution Event”):

(a)      approval of dissolution pursuant to Section 6.3;

(b)      the consummation of a direct or indirect sale of all or substantially
all of the assets of the Company; or

(c)      entry of a decree of judicial dissolution of the Company in accordance
with the Act.

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Dissolution of the Company shall be effective on the day on which the event
occurs giving rise to the dissolution, but the Company will not terminate until
the assets of the Company have been liquidated and the assets distributed as
provided in Section 10.2 and the Certificate has been canceled.

10.2     Liquidation and Termination.  In connection with the winding up and
dissolution of the Company, Blackstone shall act as a liquidator (“Liquidator”),
unless the Board otherwise determines by Majority Consent.  The Liquidator shall
proceed diligently to wind up the affairs of the Company in an orderly manner
and make final distributions as provided herein and in the Act.  The Liquidator
shall use commercially reasonable efforts to complete the liquidation of the
Company within two (2) years after an applicable Dissolution Event; provided,
that such period may be extended for up to two (2) additional one-year periods
by the Board upon Majority Consent.  The costs of liquidation shall be borne as
a Company expense (including the costs and expenses of the Liquidator, in its
capacity as such).  Until final distribution, the Liquidator shall continue to
operate the Company properties for a reasonable period of time to allow for the
sale of all or a part of the assets thereof with all of the power and authority
of the Members.  The steps to be accomplished by the Liquidator are as follows:

(a)      as promptly as possible after approval of the winding up and
dissolution of the Company and again after final liquidation, the Liquidator
shall cause a proper accounting to be made of the Company’s assets, liabilities,
and operations through the last day of the calendar month in which the winding
up and dissolution is approved or the final liquidation is completed, as
applicable;

(b)      the Liquidator shall cause any notices required by applicable Law to be
sent to each known creditor of and claimant against the Company in the manner
described by applicable Law;

(c)      upon approval of the winding up and dissolution of the Company, the
Liquidator shall, unless the Board otherwise determines by Majority Consent, be
prohibited from distributing assets in kind and shall instead sell for cash the
equity of the Company or the assets of the Company at the best price
available.  The property of the Company shall be liquidated as promptly as is
consistent with obtaining the fair value thereof.  The Liquidator may sell all
of the Company property, including to one (1) or more of the Members; provided,
that any such sale to a Member must be made on an arm’s-length basis under terms
which are in the best interest of the Company and approved by the Common Units
Member.  If any assets are sold or otherwise liquidated for value, the
Liquidator shall proceed as promptly as practicable in a commercially reasonable
manner to implement the procedures of this Section 10.2(c); and

(d)      subject to the terms and conditions of this Agreement any applicable
Law (including the Act), the Liquidator shall distribute the assets of the
Company in the following order of priority:

(i)      First, the Liquidator shall pay, satisfy or discharge from Company
assets all of the debts, liabilities and obligations of the Company, or
otherwise make adequate provision for payment, satisfaction and discharge
thereof; provided, however, that such payments shall not include any Capital
Contributions described

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in Article IV or any other obligations of the Members created by this Agreement;
and

(ii)      Second, all remaining assets of the Company shall be distributed to
the Members in accordance with Section 5.3(a).

(e)      All distributions to the Members pursuant to Section 10.2(d)(ii) above
shall be in the form of cash, unless the Board otherwise determines by Majority
Consent.

(f)      When the Liquidator has complied with the foregoing liquidation plan,
the Liquidator (or the Board), on behalf of all Members, shall execute,
acknowledge and cause to be filed a Certificate of Cancellation.

10.3     Provision for Contingent Claims.

(a)      The Liquidator shall make a reasonable provision to pay all claims and
obligations, including all contingent, conditional or unmatured claims and
obligations, actually known to the Company but for which the identity of the
claimant is unknown; and

(b)      If there are insufficient assets to both pay the creditors pursuant to
Section 10.2 and to establish the provision contemplated by Section 10.3(a),
subject to applicable Law, the claims shall be paid as provided for in
accordance to their priority and, among claims of equal priority, ratably to the
extent of assets therefor.

10.4     Deficit Capital Accounts.  Notwithstanding anything contained in this
Agreement or any custom or rule of law to the contrary, no Member shall have any
obligation to restore any negative balance in its Capital Account upon
liquidation of the Company.

10.5     Deemed Contribution and Distribution.  In the event the Company is
“liquidated” within the meaning of Treasury Regulation section
1.704-1(b)(2)(ii)(g) but no Dissolution Event has occurred, the Company’s
property shall not be liquidated, the Company’s liabilities shall not be paid or
discharged, and the Company’s affairs shall not be wound up.  Instead, solely
for federal income tax purposes, the Company shall be deemed to have contributed
all Company property and liabilities to a new limited liability company in
exchange for an interest in such new limited liability company and, immediately
thereafter, the Company will be deemed to liquidate by distributing interests in
the new limited liability company to the Members.

Article XI

AMENDMENT OF THE AGREEMENT; OTHER TRANSACTIONS

11.1     Amendments to be Adopted by the Company.  Each Member agrees that an
appropriate Manager or Officer of the Company, in accordance with and subject to
the limitations contained in Article VI, may execute, swear to, acknowledge,
deliver, file and record whatever documents may be required to reflect:

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(a)      a change in the name of the Company in accordance with this Agreement,
the location of the principal place of business of the Company or the registered
agent or office of the Company which has been approved by Majority Consent;

(b)      admission or substitution of Members whose admission or substitution
has been made in accordance with this Agreement;

(c)      a change that the Board believes is reasonable and necessary or
appropriate to qualify or continue the qualification of the Company as a limited
liability company under the Laws of any state or that is necessary or advisable
in the opinion of the Board to ensure that the Company will not be taxable as a
corporation or otherwise taxed as an entity for federal income tax purposes; and

(d)      an amendment that is necessary, in the opinion of counsel, to prevent
the Company or its officers from in any manner being subjected to the provisions
of the Investment Company Act of 1940, as amended, or “plan asset” regulations
adopted under the Employee Retirement Income Security Act of 1974, as amended,
whether or not substantially similar to plan asset regulations currently applied
or proposed by the United States Department of Labor.

11.2     Amendment Procedures.  Except as provided in Section 11.1 and Section
11.3, all amendments to this Agreement must be in writing and signed by the
Common Units Member and, if required under Section 6.3(b), approved by the Board
with Unanimous Consent.

11.3     Decisions Requiring Additional Consents. In addition to any other vote
or consent of the Members required by applicable Law or this Agreement, the
Company shall not, directly or indirectly (including through merger,
consolidation, operation of Law or otherwise), do or agree to do, and shall not
permit any of its Subsidiaries to do or agree to do, any of the following,
without the consent of Members holding at least a majority of the Class A Units:

(a)      authorize or approve any amendment or modification to this Agreement
that materially, disproportionately and adversely affects the Class A Units
Members as a class;

(b)      amend or modify this Agreement (i) to increase the Capital Contribution
obligation (or any liability) of a Class A Units Member, (ii) in any other
manner that adversely affects any Class A Unit Member’s rights hereunder unless
such amendment or modification applies equally to all Members, or (iii) in any
other manner that adversely affects any Member’s rights as a Class A Unit Member
(except as permitted by Section 11.3(h));

(c)      authorize or approve the issuance of any Class A Units or the increase
or decrease in the number of authorized Class A Units;

(d)      amend or modify Section 2.4,  Section 3.3,  Section 3.6(c),  Section
3.7(e),  Section 3.8,  Section 6.2(c),  Section 6.14,  Section 9.2,  Section 9.3
or this Article XI;  

(e)      purchase, or agree to purchase, any oil and gas assets outside of the
Core Area or the Non-Core Area (which for the avoidance of doubt shall not
include the receipt of any form of equity security in connection with any sale
transaction effected by the Company);

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(f)      approve the merger or consolidation of the Company with or into any
other Person (or the exchange or conversion of securities with or into those of
any other Person), unless the Class A Units Member would receive the same class
of Equity Interests as the Common Units Member to the extent the Class A Units
Member would be entitled to distributions pursuant to Section 5.3(a); 

(g)      merge or consolidate the Company or any of its Subsidiaries with or
into a “special purpose acquisition company,” “shell company,” “blank check
company” or similar entity; or

(h)      issue any additional Equity Interests or accept any additional Capital
Contributions (or other capital contributions) unless, in the good faith
judgment of the Board, for valid business purposes consistent with the business
of the Company and not with the intent to adversely affect the rights of the
Class A Units Members or the Class A Units in any respect.    

Article XII

MEMBERSHIP INTERESTS

12.1      Certificates.  Membership Interests will not be certificated unless
otherwise approved by Majority Consent, and subject to the provisions set by
Majority Consent, of the Board.

12.2      Registered Holders.  The Company shall be entitled to recognize the
exclusive right of a Person registered on its books and records as the owner of
the indicated Membership Interest and shall not be bound to recognize any
equitable or other claim to or interest in such Membership Interest on the part
of any Person other than such registered owner, whether or not it shall have
express or other notice thereof, except as otherwise provided by Law.

12.3      Security.  For purposes of providing for Transfer of, perfecting a
Security Interest in, and other relevant matters related to, a Membership
Interest, the Membership Interest will be deemed to be a “security” subject to
the provisions of Articles 8 and 9 of the Delaware Uniform Commercial Code and
any similar Uniform Commercial Code provision adopted by the State of Delaware
or any other relevant jurisdiction.

Article XIII

GENERAL PROVISIONS

13.1      Offset.  Whenever the Company is to pay any sum to any Member or any
Member is to pay or contribute any sum to the Company, any amounts that a Member
or the Company owes the other for which it is due or past due may be deducted
from that sum before payment.

13.2      Entire Agreement.  This Agreement and the Management Services
Agreement (along with any exhibits or schedules to such documents and any other
agreement specifically referenced herein and therein) constitute the entire
agreement and supersedes (a) all prior oral or written proposals, term sheets or
agreements, (b) all contemporaneous oral proposals or agreements and (c) all
previous negotiations and all other communications or understandings between the
Members with respect to the subject matter hereof.  In the event of a conflict
between

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the terms of this Agreement and the terms of the Management Services Agreement
as between the Members hereto, the terms of this Agreement shall control, except
for the confidentiality and non-use provisions of such agreements (in which
event the terms of the Management Services Agreement shall control).

13.3     Waivers.  Neither action taken (including any investigation by or on
behalf of any Party) nor inaction pursuant to this Agreement shall be deemed to
constitute a waiver of compliance with any representation, warranty, covenant or
agreement contained herein by the Party not committing such action or
inaction.  A waiver by any Member of a particular right, including breach of any
provision of this Agreement, shall not operate or be construed as a subsequent
waiver of that same right or a waiver of any other right.

13.4     Binding Effect.  This Agreement shall be binding upon and inure to the
benefit of the Members and their respective heirs, legal representatives,
successors and permitted assigns.

13.5     Governing Law; Severability.

(a)      THIS AGREEMENT HAS BEEN EXECUTED AND DELIVERED AND SHALL BE CONSTRUED,
INTERPRETED AND GOVERNED PURSUANT TO AND IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES WHICH, IF
APPLIED, MIGHT PERMIT OR REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.

(b)      In the event of a direct conflict between the provisions of this
Agreement and any mandatory provision of the Act or other Laws, the applicable
provision of the Act or such other Laws, as the case may be, shall control.  If
any provision of this Agreement, or the application thereof to any Person or
circumstance, is held invalid or unenforceable to any extent, the remainder of
this Agreement and the application of that provision to other Persons or
circumstances shall not be affected thereby and that provision shall be enforced
to the greatest extent permitted by the Act or other Laws, as the case may be.

13.6     Further Assurances.  Subject to the terms and conditions set forth in
this Agreement, each of the Parties agrees to use all reasonable efforts to
take, or to cause to be taken, all reasonable actions, and to do, or to cause to
be done, all reasonable things necessary, proper or advisable under applicable
Laws to consummate and make effective the transactions contemplated by this
Agreement.  In case, at any time after the execution of this Agreement, any
further action is necessary or desirable to carry out its purposes, the proper
officers or directors of the Parties shall take or cause to be taken all such
reasonably necessary action.

13.7     Exercise of Certain Rights.  Except for rights expressly provided in
this Agreement, no Member may maintain any action for partition of the property
of the Company.  The Members agree not to maintain any action for dissolution
and liquidation of the Company pursuant to Section 18-802 of the Act or any
similar applicable statutory or common law dissolution right without Majority
Consent.

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13.8     Notice to Members of Provisions of this Agreement.  By executing this
Agreement, each Member acknowledges that it has actual notice of all of the
provisions of this Agreement.  Each Member hereby agrees that this Agreement
constitutes adequate notice of all such provisions.

13.9     Counterparts.  This Agreement may be executed in multiple counterparts
and delivered by facsimile or portable document format, each of which, when
executed, shall be deemed an original, and all of which shall constitute but one
and the same instrument.

13.10   Books and Records.  The Officers of the Company shall keep correct and
complete books and records of account, including the names and addresses of all
Members and the number and class of the interest held by each at its registered
office or principal place of business, or at the office of its transfer agent or
registrar.

13.11   Information.

(a)      The Members acknowledge that they and their respective appointed
Managers shall receive information from or regarding the Company and its
Subsidiaries in the nature of trade secrets or that otherwise is confidential
information or proprietary information (as further defined below in this Section
13.11(a), “Confidential Information”), the release of which would be damaging to
the Company or Persons with which the Company conducts business.  Each Member
shall hold in strict confidence, and shall require that such Member’s appointed
Managers hold in strict confidence, any Confidential Information that such
Member or such Member’s appointed Managers receives, and each Member shall not,
and each Member shall require that such Member’s appointed Managers agree not
to, disclose such Confidential Information to any Person other than another
Member, Manager or officer of the Company, or use such information for any
purpose other than to evaluate, analyze, and keep apprised of the Company’s
assets and its interest therein, except for disclosures (i) to comply with any
Laws (including applicable stock exchange or quotation system requirements),
provided, that, if permitted by applicable Laws, a Member or Manager must notify
the Company promptly of any disclosure of Confidential Information which is
required by Law, and any such disclosure of Confidential Information shall be to
the minimum extent required by Law, (ii) to (A) Affiliates, partners,
stockholders, investors, directors, officers, employees, agents, attorneys,
consultants, lenders, professional advisers or representatives of the Member or
Manager or their respective Affiliates, in each case who have a reasonable need
to know such Confidential Information or (B) solely in connection with
disclosures of a general nature regarding general financial and operational
information, return on investment and similar information to partners (including
limited partners), members, partners, stockholders or investors of the Member
and its Affiliates (provided, that in each case such Member or Manager shall be
responsible for assuring such Affiliates’, partners’, members’, stockholders’,
investors’, directors’, officers’, employees’, agents’, attorneys’,
consultants’, lenders’, professional advisers’ and representatives’ compliance
with the terms hereof (and such Member or Manager, as applicable, shall be
liable for any non-compliance by such Persons as if such Persons were bound
as  a party hereto), except to the extent any such Person who is not an
Affiliate, partner, member, stockholder, director, officer or employee has
agreed in writing addressed to the Company to be bound by customary undertakings
with respect to confidential and proprietary information substantially similar
to this Section 13.11(a)), (iii) to Persons to which that Member’s Membership
Interest may be Transferred as permitted by this Agreement, but only if the
recipients of such information have

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agreed to be bound by customary confidentiality and non-use undertakings
substantially similar to this Section 13.11(a), (iv) of information that a
Member also has received from a source independent of the Company and that such
Member reasonably believes such source obtained such information without breach
of any obligation of confidentiality to the Company, another Member, Manager or
any of their Affiliates, (v) of information obtained prior to the formation of
the Company, provided, that this clause (v) shall not relieve any Member or any
of its Affiliates from any obligations it may have to any other Member or any of
its Affiliates under any existing confidentiality agreement, (vi) that have been
or become independently developed by a Member, a Manager or its Affiliates or on
their behalf without using any of the Confidential Information, (vii) that are
or become generally available to the public (other than as a result of a
prohibited disclosure by such Member or Manager or its representatives), (viii)
in connection with any proposed Transfer of all or part of a Membership Interest
of a Member, or of working interests or other assets of such Member, or the
proposed sale of all or substantially all of a Member or its direct or indirect
parent or the proposed debt or equity financing of a Member or its direct or
indirect parent, to Persons to which such interest may be directly or indirectly
transferred or which may provide such debt or equity financing (and their
respective advisors or representatives), but only if the recipients of such
information have agreed to be bound by customary undertakings with respect to
confidential and proprietary information similar to this Section 13.11(a)
(unless, in the case of advisors or representatives, such Persons are otherwise
bound by a duty of non-disclosure and non-use with respect to confidential and
proprietary information), (ix) to Third Parties to the extent necessary for a
person to provide services under the Management Services Agreement or as
operator of any of the Company’s assets, as applicable, or (x) to the extent the
Company shall have consented to such disclosure in writing.  The Members agree
that breach of the provisions of this Section 13.11(a) by such Member or such
Member’s appointed Managers would cause irreparable injury to the Company for
which monetary damages (or other remedy at Law) would be inadequate in view of
(i) the complexities and uncertainties in measuring the actual damages that
would be sustained by reason of the failure of a Member or Manager to comply
with such provisions and (ii) the uniqueness of the Company’s business and the
confidential nature of the Confidential Information.  Accordingly, the Members
agree that the provisions of this Section 13.11(a) may be enforced by the
Company (or any Member on behalf of the Company) by temporary or permanent
injunction (without the need to post bond or other security therefor), specific
performance or other equitable remedy and by any other rights or remedies that
may be available at law or in equity.  The term “Confidential Information” shall
include any information pertaining to the identity of the Members and the
Company’s (or its Subsidiaries’, if any) business which is not available to the
public, whether written, oral, electronic, visual form or in any other media,
including such information that is proprietary, confidential or concerning the
Company’s (or its Subsidiaries’, if any) ownership and operation of assets or
related matters, including any actual or proposed operations or development
project or strategies, other operations and business plans, actual or projected
revenues and expenses, finances, contracts and books and records.

(b)      The Members acknowledge that, from time to time, the Company may need
information from any or all of such Members for various reasons, including for
complying with various federal and state Laws.  Each Member shall provide to the
Company all information reasonably requested by the Company for purposes of
complying with federal or state Laws within a reasonable amount of time from the
date such Member receives such request; provided, however, that, except as
required by applicable Law, no Member shall be obligated to provide such

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information to the Company to the extent such disclosure (i) could reasonably be
expected to result in the breach or violation of any contractual obligation (if
a waiver of such restriction cannot reasonably be obtained) or Law or (ii)
involves secret, confidential or proprietary information of such Member or its
Affiliates.

(c)      The Members acknowledge and agree that none of the Members nor the
Company shall furnish or otherwise provide a copy of this Agreement (or any part
hereof) to any Person (other than the Members and their respective Affiliates,
representative(s) and adviser(s)), unless (i) otherwise agreed in writing by the
Members, (ii) required by applicable Laws (and if required by applicable Laws, a
copy of the applicable portions of this Agreement shall be furnished only to the
extent necessary to comply with such applicable Laws) and (iii) in compliance
with clauses (i) – (x) of Section 13.11(a), as if this Agreement were
Confidential Information.

(d)      No Class A Units Member shall be entitled to obtain any information
relating to the Company except as expressly provided in this Agreement or to the
extent required by Law; and to the extent a Class A Units Member is so entitled
to such information, such Class A Units Member shall be subject to the
provisions of this Section 13.11. Except as expressly provided in this
Agreement, no Class A Units Member shall be entitled to obtain any information
relating to the Company described in Section 18-305 of the Act.

13.12   Liability to Third Parties.  Except as required by applicable Law or as
otherwise expressly provided herein, no Member shall be liable to any Person
(including any Third Party, the Company or to another Member) (a) as the result
of any act or omission of another Member or (b) for Company losses, liabilities
or obligations (except as otherwise expressly agreed to in writing by such
Member or as a result of such Member having made available to the Company, for
its proportionate share equal to its Membership Interest, such Member’s
insurance program (commercial, self-funded, self-insured or other similar
programs)).

13.13   No Third Party Beneficiaries.  Except as set forth in Section 7.1 (with
respect to Indemnitees) and Section 13.17, the provisions of this Agreement are
for the exclusive benefit of the Members and the Company and their respective
successors and permitted assigns and, solely with respect to Article VII, the
indemnified Persons described therein.  Except for the foregoing, this Agreement
is not intended to benefit or create rights in any other Person or Governmental
Authority, including (a) any Person or Governmental Authority to whom any debts,
liabilities or obligations are owed by the Company or any Member, or (b) any
liquidator, trustee or creditor acting on behalf of the Company, and no such
creditor or any other Person or Governmental Authority shall have any rights
under this Agreement, including rights with respect to enforcing the payment of
Capital Contributions.

13.14   Notices.  Except as otherwise provided in this Agreement to the
contrary, any notice or communication required or permitted to be given under
this Agreement shall be in writing and sent to the address of the Party set
forth below, or to such other more recent address of which the sending Party
actually has received written notice:

(a)      if to the Company:

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c/o Blackstone Management Partners L.L.C.
345 Park Avenue, 31st Floor
New York, NY 10154
Attention:  Angelo Acconcia
Facsimile:  (212) 201-2874

 

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

 

Sanchez Energy Corporation

1000 Main Street, Suite 3000

Houston, Texas 77002

Attn: Antonio R. Sanchez, III

Email:  Tony@sanchezog.com

 

Kirkland & Ellis LLP
600 Travis Street, Suite 2400
Houston, Texas 77002
Attention:        Andrew Calder, P.C.
                        Rhett Van Syoc
Facsimile:       (713) 835-3601
Email:             andrew.calder@kirkland.com
                        rhett.vansyoc@kirkland.com

(b)      if to the Members, to each of the Members listed on Exhibit A at the
address set forth therein.

Each such notice or other communication shall be sent by personal delivery, by
registered or certified mail (return receipt requested), by national, reputable
courier service (such as Federal Express or United Parcel Service) or by
facsimile or electronic mail.

13.15   Disputes.

(a)      Consent to Jurisdiction and Service of Process; Appointment of Agent
for Service of Process. EACH PARTY TO THIS AGREEMENT HEREBY CONSENTS TO THE
EXCLUSIVE JURISDICTION OF ANY UNITED STATES DISTRICT COURT LOCATED IN
WILMINGTON, DELAWARE OR DELAWARE CHANCERY COURT LOCATED IN WILMINGTON, DELAWARE
AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER SUCH
ACTIONS OR PROCEEDINGS ARE BASED IN STATUTE, TORT, CONTRACT OR OTHERWISE), SHALL
BE LITIGATED IN SUCH COURTS.  EACH PARTY (i) CONSENTS TO SUBMIT ITSELF TO THE
PERSONAL JURISDICTION OF SUCH COURTS FOR SUCH ACTIONS OR PROCEEDINGS, (ii)
AGREES THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY
MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (iii) AGREES THAT IT
WILL NOT BRING ANY SUCH ACTION OR PROCEEDING IN ANY COURT OTHER THAN SUCH
COURTS.  EACH PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,

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GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE AND IRREVOCABLE JURISDICTION AND
VENUE OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS,
AND IRREVOCABLY AGREES TO BE BOUND BY ANY NON-APPEALABLE JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH ACTIONS OR PROCEEDINGS.  A COPY OF ANY SERVICE
OF PROCESS SERVED UPON THE PARTIES SHALL BE MAILED BY REGISTERED MAIL TO THE
RESPECTIVE PARTY EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY
FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS.  IF ANY AGENT APPOINTED BY A PARTY REFUSES TO ACCEPT SERVICE, EACH
PARTY AGREES THAT SERVICE UPON THE APPROPRIATE PARTY BY REGISTERED MAIL SHALL
CONSTITUTE SUFFICIENT SERVICE.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

(b)      Waiver of Jury Trial.  TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF
THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED.  EACH PARTY ALSO
WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS
WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES.  THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS.  EACH PARTY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP; THAT EACH HAS ALREADY RELIED
ON THE WAIVER IN ENTERING INTO THIS AGREEMENT; AND THAT EACH WILL CONTINUE TO
RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.  EACH PARTY FURTHER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION
CONTEMPLATED HEREBY.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAYBE FILED AS
A WRITTEN CONSENT TO A TRIAL BY THE COURT.

13.16   Expenses.  The Company will promptly reimburse each of the Class A Units
Members and Common Units Member for all reasonable costs and expenses incurred
by or on behalf of such Members (including the fees and expenses of attorneys,
consultants, accountants, and other advisors, travel costs and miscellaneous
expenses) in connection with the negotiation, preparation, execution and
delivery of this Agreement and any other document or agreement referred to
herein or therein not to exceed $25,000 in the aggregate for the Class A Units
Members.

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13.17   No Recourse.  Notwithstanding anything that may be expressed or implied
in this Agreement or any document, agreement, or instrument delivered
contemporaneously herewith, and notwithstanding the fact that any Member may be
a partnership or limited liability company, each Member hereto, by its
acceptance of the benefits of this Agreement, covenants, agrees and acknowledges
that no Persons other than the Members shall have any obligation hereunder and
that it has no rights of recovery hereunder against, and no recourse hereunder
or under any documents, agreements, or instruments delivered contemporaneously
herewith or in respect of any oral representations made or alleged to be made in
connection herewith or therewith shall be had against, any former, current or
future director, officer, agent, Affiliate, manager, assignee, incorporator,
controlling Person, fiduciary, representative or employee of any Member (or any
of their successor or permitted assignees), against any former, current, or
future general or limited partner, manager, stockholder or member of any Member
(or any of their successors or permitted assignees) or any Affiliate thereof or
against any former, current or future director, officer, agent, employee,
Affiliate, manager, assignee, incorporator, controlling Person, fiduciary,
representative, general or limited partner, stockholder, manager or member of
any of the foregoing, but in each case not including the Members (each, but
excluding for the avoidance of doubt, the Members, a “Member Affiliate”),
whether by or through attempted piercing of the corporate veil, by or through a
claim (whether in tort, contract or otherwise) by or on behalf of such party
against the Member Affiliates, by the enforcement of any assessment or by any
legal or equitable proceeding, or by virtue of any statute, regulation or other
applicable law, or otherwise; it being expressly agreed and acknowledged that no
personal liability whatsoever shall attach to, be imposed on, or otherwise be
incurred by any Member Affiliate, as such, for any obligations of the applicable
party under this Agreement or the transactions contemplated hereby, under any
documents or instruments delivered contemporaneously herewith, in respect of any
oral representations made or alleged to be made in connection herewith or
therewith, or for any claim (whether in tort, contract or otherwise) based on,
in respect of, or by reason of, such obligations or their creation.    Except to
the extent otherwise expressly set forth in, and subject in all cases to the
terms and conditions of and limitations herein, this Agreement may only be
enforced against, and any claim or cause of action of any kind based upon,
arising out of, or related to this Agreement, or the negotiation, execution or
performance of this Agreement, may only be brought against the entities that are
expressly named as parties hereto and then only with respect to the specific
obligations set forth herein with respect to such party.  Each Member Affiliate
is expressly intended as a third-party beneficiary of this Section 13.17.

13.18   Adjustments for Unit Splits.  Wherever in this Agreement there is a
reference to a specific number of Common Units, Class A Units or other units of
any class or series of Membership Interests (“Units”), or a price per Unit, or
consideration received in respect of such Unit, then, upon the occurrence of any
subdivision, combination or distribution of such class or series of Membership
Interests, the specific number of Units so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the effect on the
outstanding Units of such class or series of Membership Interests by such
subdivision, combination or distribution.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

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IN WITNESS WHEREOF, the Members have executed this Agreement as of the Effective
Date.

 

THE COMPANY:

 

 

 

GAVILAN RESOURCES HOLDCO, LLC

 

 

 

 

 

By:

/s/ Angelo Acconcia

 

Name: Angelo Acconcia

 

Title: President

[Signature page to Gavilan Resources HoldCo, LLC Agreement]

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

 

 

 

CLASS A UNITS MEMBER:

 

 

 

SN COMANCHE MANAGER, LLC

 

 

 

 

 

By:

/s/ Antonio R. Sanchez, III

 

Name: Antonio R. Sanchez, III

 

Title: Chief Executive Officer

 

[Signature page to Gavilan Resources HoldCo, LLC Agreement]

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COMMON UNITS MEMBER:

 

 

 

GAVILAN RESOURCES HOLDINGS, LLC

 

 

 

 

 

By:

/s/ Angelo Acconcia

 

Name: Angelo Acconcia

 

Title: President

 

 

[Signature page to Gavilan Resources HoldCo, LLC Agreement]

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Exhibit A

Ownership Information
(as of March 1, 2017)

 

Common Units

 

 

Name and Address of Common Units Member

Common Units

Gavilan Resources Holdings, LLC

Attn: Angelo Acconcia

c/o The Blackstone Group

345 Park Avenue, 31st Floor

New York, NY 10154

Attention:  Angelo Acconcia

Facsimile:  (212) 201-2874

 

800,000

Total Common Units Member Common Unit:

800,000

 

 

Class A Units

 

 

Name and Address of Class A Units Members

Class A Units

SN Comanche Manager, LLC

1000 Main Street, Suite 3000

Houston, TX 77002

Attn: Antonio R. Sanchez, III

Email: Tony@sanchezog.com

100

Total Class A Units Issued:

100

 

 

 

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Exhibit B

Initial Capital Contributions
(as of March 1, 2017)

Common Units Member: $800,000,000.00

 

 

 

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Schedule 6.2

Initial Board of Managers

Managers

Angelo Acconcia

Gary Levin

Chris Placca

Manager Alternate:

 

 

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Schedule 6.8

Initial Officers

 

 

Chief Executive Officer:

David E. Roberts Jr.

President:

Angelo Acconia

Vice President:

Gary Levin

Vice President:

Christopher Placca

Vice President:

Jun Hyung Lee

 

 

 

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Annex A

VCOC LETTER

[Company Name]

[Date]

[VCOC Partnership]
[Address]

Dear Sir/Madam:

Reference is made to the Limited Liability Company Agreement by and among
[_______], LLC (the “Company”), [Name of the VCOC Partnership] (the “VCOC
Investor”) and the other parties thereto, dated as of [*], 2016 (the “LLC
Agreement”).

The Company hereby agrees that for so long as the VCOC Investor, directly or
through one (1) or more subsidiaries, continues to hold any Common Units (or
other securities of the Company into which such Common Units may be converted or
for which such Common Units may be exchanged), without limitation or prejudice
of any the rights provided to the VCOC Investor under the LLC Agreement, the
Company shall:

Provide the VCOC Investor or its designated representative with:

(i)        the right to visit and inspect any of the offices and properties of
the Company and its subsidiaries during normal business hours at the VCOC
Investor’s expense (and subject to, in the case of the Company’s oil and gas
properties, (a) the execution of an access agreement reasonably satisfactory to
the Company and (b) if the property is not operated by the Company or an
affiliate, subject to approval of the operator of the property) and inspect and
copy the books and records of the Company and its subsidiaries, at such times as
the VCOC Investor shall reasonably request;

(ii)       as soon as available and in any event within sixty (60) days after
the end of each of the first (1st) three (3) quarters of each fiscal year of the
Company, consolidated balance sheets of the Company and its subsidiaries as of
the end of such period, and consolidated statements of income and cash flows of
the Company and its subsidiaries for the period then ended prepared in
conformity with generally accepted accounting principles in the United States
applied on a consistent basis, except as otherwise noted therein, and subject to
the absence of footnotes and to year-end adjustments;

(iii)      as soon as available and in any event within one hundred twenty (120)
days after the end of each fiscal year of the Company, a consolidated balance
sheet of the Company and its subsidiaries as of the end of such year, and
consolidated statements of income and cash flows of the Company and its
subsidiaries for the year then ended prepared in conformity with generally
accepted accounting principles in the United States applied on a consistent
basis, except as otherwise

 

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noted therein, together with an auditor’s report thereon of a firm of
established national reputation;

(iv)      to the extent the Company is required by law or pursuant to the terms
of any outstanding indebtedness of the Company to prepare such reports, any
annual reports, quarterly reports and other periodic reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934, actually prepared by the
Company as soon as available; and

(v)       copies of all materials provided to the Company’s Board at the same
time as provided to the directors of the Company and if requested, copies of all
materials provided to the board of directors of the Company’s subsidiaries.

Make appropriate officers and directors of the Company, and its subsidiaries,
available periodically and at such times as reasonably requested by the VCOC
Investor for consultation with the VCOC Investor or its designated
representative with respect to matters relating to the business and affairs of
the Company and its subsidiaries, including, without limitation, significant
changes in management personnel and compensation of employees, introduction of
new products or new lines of business, important acquisitions or dispositions of
plants and equipment, significant research and development programs, the
purchasing or selling of important trademarks, licenses or concessions or the
proposed commencement or compromise of significant litigation;

·

To the extent consistent with applicable law (and with respect to events which
require public disclosure, only following the Company’s public disclosure
thereof through applicable securities law filings or otherwise), inform the VCOC
Investor or its designated representative in advance with respect to any
significant corporate actions, including, without limitation, extraordinary
dividends, mergers, acquisitions or dispositions of assets, issuances of
significant amounts of debt or equity and material amendments to the certificate
of incorporation or formation or other organizational documents of the Company
or any of its subsidiaries, and to provide the VCOC Investor or its designated
representative with the right to consult with the Company and its subsidiaries
with respect to such actions; and

·

Provide the VCOC Investor or its designated representative with such other
rights of consultation which the VCOC Investor’s counsel may determine to be
reasonably necessary under applicable legal authorities promulgated after the
date hereof to qualify its investment in the Company as a “venture capital
investment” for purposes of the United States Department of Labor Regulation
published at 29 C.F.R. Section 2510.3-101(d)(3)(i) (the “Plan Asset
Regulation”).

The Company agrees to consider, in good faith, the recommendations of the VCOC
Investor or its designated representative in connection with the matters on
which it is consulted as described above, recognizing that the ultimate
discretion with respect to all such matters shall be retained by the Company.

 

 

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The VCOC Investor agrees, and will require each designated representative of the
VCOC Investor to agree, to hold in confidence and not use or disclose to any
third party (other than its legal counsel and accountants) any confidential
information provided to or learned by such party in connection with the VCOC
Investor’s rights under this letter agreement except as may otherwise be
required by law or legal, judicial or regulatory process, provided, that the
VCOC Investor takes reasonable steps to minimize the extent of any such required
disclosure.

In the event the VCOC Investor or any of the other purchasers transfers all or
any portion of their investment in the Company to an affiliated entity (or to a
direct or indirect wholly-owned conduit subsidiary of any such affiliated
entity) that is intended to qualify as a venture capital operating company under
the Plan Asset Regulation, such affiliated entity shall be afforded the same
rights with respect to the Company afforded to the VCOC Investor  hereunder and
shall be treated, for such purposes, as a third party beneficiary hereunder.

This letter agreement and the rights and the duties of the parties hereto shall
be governed by, and construed in accordance with, the laws of the State of New
York and may be executed in counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute one
and the same instrument.

 

 

 

 

[COMPANY]

 

 

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

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Agreed and acknowledged as of the date first above written:

[VCOC PARTNERSHIP]

 

 

 

 

 

 

 

By:

 

 

       Name:

 

       Title:

 

 

 

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