EXHIBIT 10.2
EXECUTION VERSION
 
ADMINISTRATIVE SERVICES AGREEMENT
among
PIONEER SOUTHWEST ENERGY PARTNERS L.P.,
PIONEER NATURAL RESOURCES GP LLC,
PIONEER SOUTHWEST ENERGY PARTNERS USA LLC,
and
PIONEER NATURAL RESOURCES USA, INC.
dated effective as of
May 6, 2008
 

 

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TABLE OF CONTENTS

         
ARTICLE I
       
DEFINITIONS
       
 
       
Section 1.1 Definitions
    1  
Section 1.2 Construction
    4  
 
       
ARTICLE II
       
RETENTION OF PIONEER USA; SCOPE OF SERVICES
       
 
       
Section 2.1 Retention of Pioneer USA
    4  
Section 2.2 Scope of Services
    5  
Section 2.3 Exclusion of Services
    5  
Section 2.4 Performance of Services by Affiliates and Third Parties
    5  
Section 2.5 Intellectual Property
    5  
Section 2.6 Appointment of Independent Accounting Firm and Independent Petroleum
Engineer
    5  
 
       
ARTICLE III
       
BOOKS, RECORDS AND REPORTING
       
 
       
Section 3.1 Books and Records
    5  
Section 3.2 Audits
    6  
Section 3.3 Reports
    6  
 
       
ARTICLE IV
       
PAYMENT AMOUNT
       
 
       
Section 4.1 Administrative Fee
    6  
Section 4.2 Direct Costs
    7  
Section 4.3 COPAS Fee
    7  
Section 4.4 Payment Terms
    8  
Section 4.5 Disputed Charges
    8  
Section 4.6 Set Off
    8  
Section 4.7 Pioneer USA’s Employees
    8  
Section 4.8 Approval of Expenses
    9  
 
       
ARTICLE V
       
FORCE MAJEURE
       
 
       
Section 5.1 Force Majeure
    9  
 
       
ARTICLE VI
       
ASSIGNMENTS AND SUBCONTRACTS
       
 
       
Section 6.1 Assignments
    9  
Section 6.2 Other Requirements
    10  
 
       
ARTICLE VII
       
TERMINATION
       
 
       
Section 7.1 Termination.
    10  
Section 7.2 Effect of Termination
    10  

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ARTICLE VIII
       
LIMITATION OF LIABILITY; INDEMNIFICATION
       
 
       
Section 8.1 Limitation of Liability
    10  
Section 8.2 Partnership’s Indemnity
    11  
Section 8.3 Limitation of Damages
    11  
Section 8.4 Affiliate; Third Parties
    11  
 
       
ARTICLE IX
       
GENERAL PROVISIONS
       
 
       
Section 9.1 Choice of Law
    12  
Section 9.2 Notice
    12  
Section 9.3 Entire Agreement
    12  
Section 9.4 Jurisdiction; Service of Process
    12  
Section 9.5 Further Action
    12  
Section 9.6 Binding Effect
    13  
Section 9.7 Creditors
    13  
Section 9.8 Effect of Waiver or Consent
    13  
Section 9.9 Counterparts
    13  
Section 9.10 Invalidity of Provisions
    13  
Section 9.11 Amendment or Restatement
    13  
Section 9.12 Withholding or Granting of Consent
    13  
Section 9.13 Directly or Indirectly
    13  
Section 9.14 Laws and Regulations
    14  
Section 9.15 Negation of Rights of Limited Partners, Assignees and Third Parties
    14  
Section 9.16 No Recourse Against Officers, Directors or Employees
    14  
Section 9.17 Arbitration
    14  

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ADMINISTRATIVE SERVICES AGREEMENT
     THIS ADMINISTRATIVE SERVICES AGREEMENT is entered into on, and effective as
of May 6, 2008, among Pioneer Natural Resources GP LLC, a Delaware limited
liability company (the “General Partner”), Pioneer Southwest Energy Partners
L.P., a Delaware limited partnership (the “Partnership”), Pioneer Southwest
Energy Partners USA LLC, a Texas limited liability company (the “Operating
Company”), and Pioneer Natural Resources USA, Inc., a Delaware corporation
(“Pioneer USA,” and collectively with the General Partner, the Partnership and
the Operating Company, the “Parties” and each, a “Party”).
RECITALS
     A. The Partnership is the owner, directly or indirectly, of interests in
the Business (as hereinafter defined);
     B. The Partnership Entities (as hereinafter defined) require certain
services to operate the Business and to fulfill other general and administrative
functions relating to the Business; and
     C. The Partnership Entities desire that Pioneer USA provide such services,
and Pioneer USA is willing to undertake such engagement, subject to the terms
and conditions of this Agreement;
     NOW, THEREFORE, the General Partner, the Partnership, the Operating Company
and Pioneer USA agree as follows:
ARTICLE I
DEFINITIONS
     Section 1.1 Definitions. The following definitions shall be for all
purposes, unless otherwise clearly indicated to the contrary, applied to the
terms used in this Agreement.
     “AAA” is defined in Section 9.17.
     “Administrative Fee” is defined in Section 4.1.
     “Affiliate” means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with the Person in question. As used
herein, the term “control” means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of Voting Securities, by contract or
otherwise.
     “Agreement” means this Administrative Services Agreement, as it may be
amended, modified or supplemented from time to time in accordance with the terms
hereof.
     “Bbl” means a standard barrel containing 42 United States gallons.
     “BOE” means a barrel of oil equivalent and is a standard convention used to
express oil and gas volumes on a comparable oil equivalent basis. Gas
equivalents are determined under the

 

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relative energy content method by using the ratio of 6.0 Mcf of gas to 1.0 Bbl
of oil or natural gas liquid.
     “Business” means the business of the Partnership Entities.
     “Cause” has the meaning given such term in the Partnership Agreement.
     “Change of Control” means, and shall be deemed to have occurred upon, one
or more of the following events: (i) any transaction resulting in the
Partnership (or its successor or survivor by way of merger, consolidation, or
some other transaction, or a parent or subsidiary thereof) ceasing to be an
Affiliate of Pioneer (or its successor or survivor by way of merger,
consolidation, or some other transaction, or a parent or subsidiary thereof);
(ii) the limited partners of the Partnership approve, in one transaction or a
series of transactions, a plan of complete liquidation of the Partnership;
(iii) the sale or other disposition by either the General Partner or the
Partnership of all or substantially all of its assets in one or more
transactions to any Person other than the General Partner or an Affiliate of the
General Partner; or (iv) a transaction resulting in a Person other than Pioneer
(or its successor or survivor by way of merger, consolidation, or some other
transaction, or a parent or subsidiary thereof) or an Affiliate thereof being
the general partner of the Partnership (or its successor or survivor by way of
merger, consolidation, or some other transaction, or a parent or subsidiary
thereof).
     “Common Unit” has the meaning given such term in the Partnership Agreement.
     “Conflicts Committee” has the meaning given such term in the Partnership
Agreement.
     “COPAS” means the Council of Petroleum Accountants Societies.
     “Damages” is defined in Section 8.1.
     “Default Rate” means an interest rate (which shall in no event be higher
than the rate permitted by applicable Legal Requirement) equal to the prime
interest rate of the Partnership’s principal lender or if there is no such
lender, the prime rate of Bank of America, N.A. Any interest to be charged in
this Agreement shall be calculated based upon a 365 day calendar year.
     “Direct Costs” is defined in Section 4.2.
     “Dispute” is defined in Section 9.17.
     “Effective Date” means May 1, 2008 at 7:00 a.m., Central Time.
     “Force Majeure” means any cause beyond the reasonable control of a Party,
including the following causes (unless they are in such Party’s reasonable
control): acts of God, strikes, lockouts, acts of the public enemy, wars or
warlike action (whether actual or impending), arrests and other restraints of
government (civil or military), blockades, embargoes, insurrections, riots,
epidemics, landslides, lightning, earthquakes, fires, sabotage, tornadoes, named
tropical storms and hurricanes, floods, civil disturbances, terrorism,
mechanical breakdown of machinery or equipment, explosions, confiscation or
seizure by any government or other public authority and any Order.

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     “G&A Services” means the services set forth on Schedule I hereto.
     “Governmental Authorization” means any approval, consent, license, permit,
registration, variance, exemption, waiver, or other authorization issued,
granted, given, or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement that is necessary for the
construction, ownership and operation of the Business in accordance with
applicable Legal Requirements.
     “Governmental Body” means any:
     (a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
     (b) federal, state, local, municipal, foreign, or other government;
     (c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal);
     (d) multi-national organization or body; or
     (e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
     “Interest” is defined in Section 4.1(c).
     “Legal Requirement” means any federal, state, local, municipal, foreign,
international, or multinational law, Order, constitution, ordinance, or rule,
including rules of common law, regulation, statute, treaty, or other legally
enforceable directive or requirement.
     “Mcf” means one thousand cubic feet and is a measure of natural gas volume.
     “Order” means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
     “Parties” is defined in the introductory paragraph.
     “Partnership” is defined in the introductory paragraph.
     “Partnership Agreement” means the First Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of the date hereof, as such
agreement is in effect on the date hereof, to which reference is hereby made for
all purposes of this Agreement. An amendment or modification to the Partnership
Agreement subsequent to the date hereof shall be given effect for the purposes
of this Agreement only if it has received the approval of the Conflicts
Committee that would be required, if any, pursuant to Section 9.11 hereof if
such amendment or modification were an amendment or modification of this
Agreement.

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     “Partnership Entities” means the General Partner, the Partnership, the
Operating Company and all of their respective Subsidiaries.
     “Person” means an individual, corporation, partnership, joint venture,
trust, limited liability company, unincorporated organization or any other
entity.
     “Pioneer” means Pioneer Natural Resources Company, a Delaware corporation.
     “Pioneer Indemnified Party” means Pioneer, each Affiliate of Pioneer
(excluding any of the Partnership Entities) and each of Pioneer’s and each such
Affiliate’s controlling persons, directors, officers, employees, agents and
permitted assigns.
     “Rules” is defined in Section 9.17.
     “Services” is defined in Section 2.2.
     “Subsidiary” has the meaning given such term in the Partnership Agreement.
     “Voting Securities” means securities of any class of a Person entitling the
holders thereof to vote in the election of, or to appoint, members of the board
of directors or other similar governing body of the Person and, with respect to
the Partnership, means Common Units.
     “VPP” means each of the volumetric production payment agreements pursuant
to which Pioneer USA has sold or will sell proved reserves and which require or
will require the delivery by Pioneer USA of specified quantities of oil and gas.
     Other terms defined herein have the meanings so given them.
     Section 1.2 Construction. Unless the context requires otherwise: (a) any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa; (b) references to Articles and Sections
refer to Articles and Sections of this Agreement; (c) references to Exhibits
refer to the Exhibits attached to this Agreement, each of which is made a part
hereof for all purposes; (d) the terms “include”, “includes”, “including” and
words of like import shall be deemed to be followed by the words “without
limitation”; (e) the terms “hereof,” “herein” and “hereunder” refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
(f) references to money refer to legal currency of the United States of America.
The table of contents and headings contained in this Agreement are for reference
purposes only, and shall not affect in any way the meaning or interpretation of
this Agreement.
ARTICLE II
RETENTION OF PIONEER USA; SCOPE OF SERVICES
     Section 2.1 Retention of Pioneer USA. The Partnership hereby engages
Pioneer USA to perform the Services, as directed by the General Partner, and to
provide all personnel and any facilities, goods and equipment not otherwise
provided by the Partnership Entities necessary to perform the Services. Pioneer
USA hereby accepts such engagement and agrees to perform the Services requested
by the General Partner and to provide any personnel, facilities, goods and

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equipment not otherwise provided by the Partnership Entities, and to provide all
employees as may be reasonable and necessary to perform the Services.
     Section 2.2 Scope of Services. The “Services” shall consist of such general
and administrative services the General Partner determines may be reasonable and
necessary to operate the Business, including any G&A Services. Pioneer USA
hereby covenants and agrees that the Services will be performed in accordance
with (i) applicable material Governmental Authorizations and Legal Requirements
and (ii) industry standards.
     Section 2.3 Exclusion of Services. The General Partner may temporarily or
permanently exclude any particular service from the scope of the Services upon
ninety (90) days’ prior notice to Pioneer USA. With respect to any such excluded
Services, the Parties agree to negotiate in good faith to determine if a
reduction in the Administrative Fee is appropriate under the circumstances. If,
within 60 days after excluding a Service, the Parties have not agreed upon the
amount of the reduction in the Administrative Fee, if any, the Parties may
submit such dispute to arbitration in accordance with the provisions of
Section 9.17.
     Section 2.4 Performance of Services by Affiliates and Third Parties. The
Parties hereby agree that in discharging its obligations hereunder, Pioneer USA
may engage any of its Affiliates or any qualified third party to perform the
Services (or any part of the Services) on its behalf and that the performance of
the Services (or any part of the Services) by any such Affiliate or third party
shall be treated as if Pioneer USA performed such Services itself.
Notwithstanding the foregoing, nothing contained herein shall relieve Pioneer
USA of its obligations hereunder.
     Section 2.5 Intellectual Property. The Partnership Entities hereby grant to
Pioneer USA and its Affiliates an irrevocable, royalty-free, non-exclusive and
non-transferable right and license to use, during the term of this Agreement,
any intellectual property provided by the Partnership Entities to Pioneer USA or
its Affiliates, but only to the extent such use is necessary for the performance
of the Services. Pioneer USA agrees that it and its Affiliates will utilize such
intellectual property solely in connection with the performance of the Services.
     Section 2.6 Appointment of Independent Accounting Firm and Independent
Petroleum Engineer. Notwithstanding anything to the contrary in this Agreement,
the Parties hereby acknowledge and agree that the General Partner shall have the
exclusive authority to appoint an independent registered public accounting firm
to audit the financial statements of the Partnership and an independent
petroleum engineer to provide reports to the Partnership relating to estimates
of proved reserves for Securities and Exchange Commission and other reporting
purposes. Such independent registered public accounting firm or independent
petroleum engineer may also be the independent registered public accounting firm
or independent petroleum engineer retained by Pioneer to perform the same or
other services for Pioneer.
ARTICLE III
BOOKS, RECORDS AND REPORTING
     Section 3.1 Books and Records. Pioneer USA shall maintain accurate books
and records regarding the performance of the Services and its calculation of the
Administrative Fee

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and any Direct Costs, and shall maintain such books and records for the period
required by applicable accounting practices or Legal Requirement.
     Section 3.2 Audits. The Partnership shall have the right, upon reasonable
notice, and at all reasonable times during usual business hours, to audit,
examine and make copies of the books and records referred to in Section 3.1.
Such right may be exercised through any agent or employee of the Partnership
Entities designated in writing by it or by an independent public accountant,
engineer, attorney or other agent so designated. The Partnership shall bear all
costs and expenses incurred in any inspection, examination or audit. Pioneer USA
shall review and respond in a timely manner to any claims or inquiries made by
the Partnership regarding matters revealed by any such inspection, examination
or audit.
     Section 3.3 Reports. Pioneer USA shall prepare and deliver to the
Partnership any reports provided for in this Agreement and such other reports as
the Partnership may reasonably request from time to time regarding the
performance of the Services.
ARTICLE IV
PAYMENT AMOUNT
     Section 4.1 Administrative Fee.

  (a)   The Partnership shall on a quarterly basis reimburse Pioneer USA and its
Affiliates for their costs in providing the Services (the “Administrative Fee”),
pursuant to any methodology determined in accordance with this Section 4.1.
Initially and until changed as provided in this Section 4.1, the Administrative
Fee will be based on a methodology of determining the Partnership Entities’
share, on a per BOE basis, of certain of the general and administrative costs
incurred by Pioneer USA and its Affiliates (excluding the Partnership Entities).
Under this initial methodology, the per BOE cost for Services during any period
will be determined by dividing (i) the aggregate general and administrative
costs, determined in accordance with U.S. generally accepted accounting
principles, of Pioneer USA and its Affiliates (excluding the Partnership
Entities) for their onshore and offshore operations in the United States during
such period, excluding such costs directly attributable to Pioneer USA’s and its
Affiliates’ Alaska operations, by (ii) the sum of (x) the United States
production during such period of Pioneer USA and its Affiliates (including the
production of the Partnership Entities) for their onshore and offshore
operations in the United States during such period, excluding any production
attributable to Pioneer USA’s and its Affiliates’ Alaska operations, plus
(y) the volumes delivered under all VPPs during such period. The Administrative
Fee will then be determined by multiplying the per BOE costs by the total
production (including volumes, if any, delivered by the Partnership Entities
pursuant to volumetric production payment agreements) of the Partnership
Entities during such period. The Administrative Fee may be based on amounts
estimated by Pioneer USA if actual amounts are not available as determined by
Pioneer USA. The

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      Administrative Fee for the quarter containing the Effective Date shall
equal the Administrative Fee that would have been payable for the full quarter
had the Partnership’s initial public offering of common units representing
limited partner interests been consummated on the first day of such quarter
multiplied by a fraction the numerator of which is equal to the number of days
from the Effective Date until the end of such quarter and the denominator of
which is equal to the number of days in such quarter.     (b)   From time to
time, Pioneer USA may propose changes to the methodology of calculating the
Administrative Fee. Any change in the methodology of calculation will take
effect when the General Partner, on behalf of the Partnership Entities, consents
to such change. The consent of the General Partner will not be unreasonably
withheld, delayed or conditioned, so long as the methodology proposed reasonably
reimburses Pioneer USA and its Affiliates for their costs in providing the
Services.     (c)   On an annual basis, Pioneer USA will review the
Administrative Fee for the previous 12-month period. The first review will be
with respect to the 12-month period ending December 31, 2008. The purpose of the
review of the previous 12-month period shall be to compare the actual general
and administrative cost and production amounts to any estimated general and
administrative cost and production amounts used pursuant to Section 4.1(a) in
calculating the Administrative Fee for the previous 12-month period in order to
determine if the Partnership was overcharged or undercharged. Any such
overcharged or undercharged amounts will bear interest at the Default Rate (the
“Interest”) beginning from and including the date the Administrative Fee was
originally paid for such quarter in which the Partnership was overcharged or
undercharged and ending on and excluding the date the Administrative Fee
reflecting such overcharged or undercharged amounts and the Interest (as
provided in the next sentence) is paid by the Partnership. Any overcharged or
undercharged amounts as well as the Interest will be reflected as a decrease or
increase, as the case may be, to the Administrative Fee for the then current
fiscal quarter.

     Section 4.2 Direct Costs. The Partnership shall be responsible for paying
all third party expenses that the Partnership incurs in connection with services
provided by third parties to the Partnership (“Direct Costs”), and the
Partnership shall reimburse Pioneer USA and its Affiliates with respect to any
Direct Costs paid by any of them.
     Section 4.3 COPAS Fee. Pioneer USA shall be entitled to retain any COPAS
overhead charges associated with drilling and operating wells billed in
accordance with operating agreements to the extent that it is the operator of
such wells. The Partnership Entities will pay their proportionate share of all
expenses that are directly chargeable to wells in which they own an interest
pursuant to the terms of the applicable operating agreements.

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     Section 4.4 Payment Terms.

  (a)   Pioneer USA shall invoice the Partnership within twenty-five (25) days
after the close of each quarter for the actual or estimated amount of the
Administrative Fee, plus or minus any adjustments necessary to correct any prior
estimated billings to actual amounts due. Subject to Section 4.5, all invoices
shall be due and payable in immediately available funds within fifteen (15) days
after receipt of each invoice. Upon the request of the Partnership, Pioneer USA
shall furnish a reasonable detail of the calculation of the Administrative Fee
during any quarter. Pioneer USA has the right to charge the Partnership interest
on all past due invoices at the Default Rate.     (b)   The Partnership shall
reimburse Pioneer USA or its Affiliates, within five (5) days after receipt of
an invoice and related support, for Direct Costs incurred by Pioneer USA and its
Affiliates. Pioneer USA has the right to charge the Partnership interest on all
past due invoices at the Default Rate.

     Section 4.5 Disputed Charges. THE PARTNERSHIP MAY, WITHIN 120 DAYS AFTER
RECEIPT OF A CHARGE FROM PIONEER USA, TAKE WRITTEN EXCEPTION TO SUCH CHARGE, ON
THE GROUND THAT THE CHARGE WAS NOT A CORRECT CALCULATION OF THE ADMINISTRATIVE
FEE AND/OR A REASONABLE COST INCURRED BY PIONEER USA OR ITS AFFILIATES IN
CONNECTION WITH THE SERVICES. THE PARTNERSHIP SHALL NEVERTHELESS PAY PIONEER USA
IN FULL WHEN DUE THE FULL ADMINISTRATIVE FEE AND ANY DIRECT COSTS CHARGED TO
PIONEER USA. SUCH PAYMENT SHALL NOT BE DEEMED A WAIVER OF THE RIGHT OF THE
PARTNERSHIP TO RECOUP ANY CONTESTED PORTION OF ANY AMOUNT SO PAID. HOWEVER, IF
THE AMOUNT AS TO WHICH SUCH WRITTEN EXCEPTION IS TAKEN, OR ANY PART THEREOF, IS
ULTIMATELY DETERMINED PURSUANT TO THE TERMS OF THIS AGREEMENT NOT TO BE A
CORRECT CALCULATION OF THE ADMINISTRATIVE FEE AND/OR A REASONABLE COST INCURRED
BY PIONEER USA OR ITS AFFILIATES IN CONNECTION WITH ITS PROVIDING THE SERVICES
HEREUNDER, SUCH AMOUNT OR PORTION THEREOF (AS THE CASE MAY BE) SHALL BE REFUNDED
BY PIONEER USA TO THE PARTNERSHIP TOGETHER WITH INTEREST THEREON AT THE DEFAULT
RATE DURING THE PERIOD FROM THE DATE OF PAYMENT BY THE PARTNERSHIP TO THE DATE
OF REFUND BY PIONEER USA.
     Section 4.6 Set Off. In the event that Pioneer USA owes the Partnership a
sum certain in an uncontested amount under any other agreement, then any such
amounts may be aggregated and the Partnership and Pioneer USA may discharge
their obligations by netting those amounts against any amounts owed by the
Partnership to Pioneer USA under this Agreement. If the Partnership or Pioneer
USA owes the other party a greater aggregate amount, that Party may pay to the
other Party the difference between the amounts owed.
     Section 4.7 Pioneer USA’s Employees. The Partnership shall not be obligated
to pay to Pioneer USA’s or its Affiliates’ employees directly any compensation,
salaries, wages,

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bonuses, benefits, social security taxes, workers’ compensation insurance,
retirement and insurance benefits, training and other such expenses; provided,
however, that any Partnership Entity may, at its option, compensate such
employees under one or more equity-based incentive compensation plans for the
provision of Services hereunder and the Partnership will reimburse such
Partnership Entity for the cost incurred for such compensation.
     Section 4.8 Approval of Expenses. Pioneer USA acknowledges that the Audit
Committee of the Board of Directors of the General Partner, or if there is no
Audit Committee, the entire Board of Directors of the General Partner, may at
any time review the Administrative Fee, any Direct Costs and the levels of
Services and, as a result, may direct the Partnership to decrease the level of
Services or to dispute a prior invoice pursuant to Section 4.5. In addition to
the information Pioneer USA is obligated to provide pursuant to Section 4.4(a),
Pioneer USA shall provide such other information as reasonably necessary to
determine the veracity or appropriateness of any Administrative Fee or Direct
Costs hereunder.
ARTICLE V
FORCE MAJEURE
     Section 5.1 Force Majeure. A Party’s obligation under this Agreement shall
be excused when and to the extent its performance of that obligation is
prevented due to Force Majeure; provided, however, that a Party shall not be
excused by Force Majeure from any obligation to pay money. The Party that is
prevented from performing its obligation by reason of Force Majeure shall
promptly notify the other Parties of that fact and shall exercise due diligence
to end its inability to perform as promptly as practicable. Notwithstanding the
foregoing, a Party is not required to settle any strike, lockout or other labor
dispute in which it may be involved; provided, however, that, in the event of a
strike, lockout or other labor dispute affecting Pioneer USA, Pioneer USA shall
use reasonable efforts to continue to perform all obligations hereunder by
utilizing its management personnel and that of its Affiliates.
ARTICLE VI
ASSIGNMENTS AND SUBCONTRACTS
     Section 6.1 Assignments.

  (a)   Without the prior consent of Pioneer USA, none of the Partnership or the
other members or the Partnership Entities may sell, assign, transfer or convey
any of its rights, or delegate any of its obligations, under this Agreement to
any Person.     (b)   Without the prior consent of the Partnership, Pioneer USA
may not sell, assign, transfer or convey any of its rights, or delegate any of
its obligations, under this Agreement to any Person, other than the delegation
of performance of Services to an Affiliate of Pioneer USA or a qualified third
party as permitted by Section 2.4 and the sale, assignment, transfer or
conveyance of its rights hereunder to any such Affiliate.

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  (c)   Notwithstanding the foregoing, a merger of a Party shall not be deemed
to be an assignment or transfer of its rights or a delegation of its obligations
under this Agreement. Furthermore, the transfer of all or substantially all of
the assets of a Party shall not be deemed an assignment or transfer of its
rights or a delegation of its obligations under this Agreement if the assignee
assumes all of the obligations under this Agreement.

     Section 6.2 Other Requirements. Subject to the other provisions hereof, all
materials and workmanship used or provided in performing the Services shall be
in accordance with applicable specifications and standards.
ARTICLE VII
TERMINATION
     Section 7.1 Termination.
          (a) Notwithstanding any other provision of this Agreement, if the
General Partner is removed as general partner of the Partnership under
circumstances where Cause does not exist and Common Units held by the General
Partner and its Affiliates are not voted in favor of such removal, this
Agreement may immediately thereupon be terminated by Pioneer USA. This Agreement
may also be terminated immediately by any Party upon a Change of Control. Any
termination under this Section 7.1(a) shall become effective immediately upon
delivery of notice thereof.
          (b) In addition to Section 7.1(a), either Party may terminate this
Agreement at any time by giving notice of such termination to the other Party.
Any termination under this Section 7.1(b) shall become effective ninety
(90) days after delivery of such notice, or such later time (not to exceed the
first anniversary of the delivery of such notice) as may be specified by the
terminating Party.
     Section 7.2 Effect of Termination. If this Agreement is terminated in
accordance with Section 7.1(a) or 7.1(b), all rights and obligations under this
Agreement shall cease except for (a) obligations that expressly survive
termination of this Agreement, (b) liabilities and obligations that have accrued
prior to such termination, including the obligation to pay any amounts that have
become due and payable prior to such termination, (c) the obligation to pay any
portion of the Administrative Fee, any Direct Costs or amounts payable under
Section 4.7 that have accrued prior to such termination, even if such amounts
have not become due and payable at that time, and (d) Articles VIII and IX of
this Agreement, which shall survive any termination of this Agreement.
ARTICLE VIII
LIMITATION OF LIABILITY; INDEMNIFICATION
     Section 8.1 Limitation of Liability. No Pioneer Indemnified Party shall
have any liability to the Partnership Entities for any losses, damages, claims,
demands, causes of action, judgments, settlements, fines, penalties, injury,
liability, cost or expense, including court costs and reasonable attorney’s fees

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     and expert fees and expenses (“Damages”), arising out of or relating in any
way to this Agreement, whether such Damages arise on account of the furnishing
of Services hereunder, the failure to furnish Services hereunder, or otherwise,
and whether or not such Damages were caused by the negligence or gross
negligence of such Pioneer Indemnified Party, including such Pioneer Indemnified
Party’s sole negligence or sole gross negligence and whether sounding in
contract, tort, statute or otherwise; provided, however, that the foregoing
limitation shall not apply to Damages caused by a Pioneer Indemnified Party if
there has been a final decision pursuant to the terms of this Agreement
determining that such Pioneer Indemnified Party acted in bad faith or engaged in
fraud, willful misconduct or, in the case of a criminal matter, acted with
knowledge that the conduct was unlawful.
     Section 8.2 Partnership’s Indemnity. The Partnership agrees to indemnify,
defend and hold harmless each Pioneer Indemnified Party from and against any and
all Damages arising out of or relating in any way to this Agreement, whether
such Damages arise on account of the furnishing of Services hereunder, the
failure to furnish Services hereunder, or otherwise, and whether or not such
Damages were caused by the negligence or gross negligence of any Pioneer
Indemnified Party, including the Pioneer Indemnified Party’s sole negligence or
sole gross negligence; provided, however, that the foregoing indemnification
shall not apply to Damages caused by a Pioneer Indemnified Party if there has
been a final decision determining that such Pioneer Indemnified Party acted in
bad faith or engaged in fraud, willful misconduct or, in the case of a criminal
matter, acted with knowledge that the conduct was unlawful.
     Section 8.3 Limitation of Damages. Notwithstanding anything to the contrary
contained herein or at law and in equity, in no event shall any Pioneer
Indemnified Party be liable for exemplary, punitive, indirect, consequential,
remote, speculative, treble, multiple or special damages (including damages for
loss of business profits, business interruption or any other loss) arising from
or relating in any way to any claim made under this Agreement or regarding the
provision of or the failure to provide Services, even if any Pioneer Indemnified
Party had been advised or was aware of the possibility of such damages;
provided, however, that any exemplary, punitive, indirect, consequential,
remote, speculative, treble, multiple or special damages recovered by a third
party (including a Governmental Body, but excluding any Affiliate of any Party)
against a party entitled to indemnity pursuant to this Article VIII shall be
included in the Damages recoverable under such indemnity.
     Section 8.4 Affiliate; Third Parties. If Pioneer USA uses the personnel of
its Affiliates to provide Services, Pioneer USA, and not such personnel or such
Affiliates, shall be responsible for the acts and omissions of such personnel to
the extent provided in this Agreement; provided, however, that Pioneer USA will
not be responsible unless it has been determined by a final decision pursuant to
the terms of this Agreement that such personnel acted in bad faith or engaged in
fraud, willful misconduct or, in the case of a criminal matter, acted with
knowledge that the conduct was unlawful.

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ARTICLE IX
GENERAL PROVISIONS
     Section 9.1 Choice of Law. This Agreement shall be subject to and governed
by the laws of the State of Texas, excluding any conflicts-of-law rule or
principle that might refer the construction or interpretation of this Agreement
to the laws of another state.
     Section 9.2 Notice. All notices, requests or consents provided for or
permitted to be given pursuant to this Agreement must be in writing and must be
given by depositing same in the United States mail, addressed to the Person to
be notified, postpaid, and registered or certified with return receipt requested
or by delivering such notice in person or by telecopier or telegram to such
Party. Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient’s normal business hours, or at the
beginning of the recipient’s next business day after receipt if not received
during the recipient’s normal business hours. All notices to be sent to a Party
pursuant to this Agreement shall be sent to or made to the attention of such
Party at the address set forth below or at such other address as such Party may
stipulate to the other Parties in the manner provided in this Section 9.2.
5205 N. O’Connor Blvd., Suite 200
Irving, Texas 75039
Phone: (972) 444-9001
Fax: (972) 969-3587
Attention: General Counsel
     Section 9.3 Entire Agreement. This Agreement constitutes the entire
agreement of the Parties relating to the matters contained herein, superseding
all prior contracts or agreements, whether oral or written, relating to the
matters contained herein.
     Section 9.4 Jurisdiction; Service of Process. Without limiting the Parties’
agreement to arbitrate in Section 9.17, any action or proceeding seeking a
temporary or preliminary injunction to enforce any provision of, or based on any
right arising out of, this Agreement must be brought against any of the Parties
in the courts of the State of Texas, County of Dallas, or, if it has or can
acquire jurisdiction, in the United States District Court for the Northern
District of Texas (Dallas Division), and each of the Parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) for such
limited purpose in any such action or proceeding and waives any objection to
venue laid therein for such limited purpose. Process in any action or proceeding
referred to in the preceding sentence may be served on any Party anywhere in the
world.
     Section 9.5 Further Action. In connection with this Agreement and all
transactions contemplated by this Agreement, each Party agrees to execute and
deliver such additional documents and instruments and to perform such additional
acts as may be necessary or appropriate to effectuate, carry out and perform all
of the terms, provisions and conditions of this Agreement and all such
transactions.

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     Section 9.6 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns, as well as any Persons
asserting rights or claims on behalf of any of the foregoing Persons.
     Section 9.7 Creditors. None of the provisions of this Agreement shall be
for the benefit of, or shall be enforceable by, any creditor of the Partnership.
     Section 9.8 Effect of Waiver or Consent. No waiver or consent, express or
implied, by any Party to or of any breach or default by any Party in the
performance by such Party of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such Party of the same or any other obligations of such Party
hereunder. Failure on the part of a Party to complain of any act of any Party or
to declare any Party in default, irrespective of how long such failure
continues, shall not constitute a waiver by such Party of its rights hereunder
until the applicable statute of limitations period has run.
     Section 9.9 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute an agreement binding on all the Parties
hereto, notwithstanding that all such Parties are not signatories to the
original or the same counterpart. Each Party shall become bound by this
Agreement immediately upon affixing its signature hereto.
     Section 9.10 Invalidity of Provisions. If any provision of this Agreement
or the application thereof to any Person or circumstance shall be held invalid
or unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other Parties or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
     Section 9.11 Amendment or Restatement. This Agreement may be amended or
restated only by a written instrument executed by each of the Parties; provided,
however, that after the completion of the Partnership’s initial public offering
of Common Units representing limited partner interests, the Partnership may not,
without the prior approval of the Conflicts Committee or, if there is no such
committee, the independent members of such board of directors, agree to any
amendment or modification of this Agreement that the General Partner determines
will adversely affect the holders of such Common Units. The Parties hereto agree
that, for purposes of this Section 9.11, any material change in the nature,
quantity or duration of the Services to be provided under this Agreement shall
constitute a modification of this Agreement.
     Section 9.12 Withholding or Granting of Consent. Except to the extent
expressly provided for otherwise in this Agreement, each Party may, with respect
to any consent or approval that it is entitled to grant pursuant to this
Agreement, grant or withhold such consent or approval in its sole and
uncontrolled discretion, with or without cause, and subject to such conditions
as it shall deem appropriate.
     Section 9.13 Directly or Indirectly. Where any provision of this Agreement
refers to action to be taken by any Party, or which such Party is prohibited
from taking, such provision

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shall be applicable whether such action is taken directly or indirectly by such
Party, including actions taken by or on behalf of any Affiliate of such Party.
     Section 9.14 Laws and Regulations. Notwithstanding any provision of this
Agreement to the contrary, no Party shall be required to take any act, or fail
to take any act, under this Agreement if the effect thereof would be to cause
such Party to be in violation of any applicable Legal Requirement.
     Section 9.15 Negation of Rights of Limited Partners, Assignees and Third
Parties. Except as set forth in Article VIII, the provisions of this Agreement
are enforceable solely by the Parties, and no limited partner, member, or
assignee of the Partnership or other Person shall have the right, separate and
apart from the Partnership, to enforce any provision of this Agreement or to
compel any Party to comply with the terms of this Agreement.
     Section 9.16 No Recourse Against Officers, Directors, Managers or
Employees. For the avoidance of doubt, the provisions of this Agreement shall
not give rise to any right of recourse against any officer, director, manager or
employee of any Party or any officer, director, manager or employee of any
Affiliate of any Party.
     Section 9.17 Arbitration. Any claim, counterclaim, demand, cause of action,
dispute, or any other controversy arising out of or relating in any way to this
Agreement or to the subject matter of this Agreement or to any relationship
created thereby (each a “Dispute”) shall be resolved by binding arbitration. A
Dispute must be resolved through arbitration regardless of whether the Dispute
involves claims that this Agreement is unlawful, unenforceable, void or voidable
or involves claims sounding in tort, contract, statute or common law. This
Section 9.17 shall be binding on and shall inure to the benefit of the Parties
and their Affiliates, the Partnership Entities and the Pioneer Indemnified
Parties. The validity, construction and interpretation of this agreement to
arbitrate, and all other procedural aspects of the arbitration conducted
pursuant hereto, shall be decided by the arbitral tribunal. Any arbitration
under this Agreement shall be administered by the American Arbitration
Association (“AAA”) and conducted in accordance with the Commercial Arbitration
Rules (the “Rules”) of the AAA in existence at the time of the arbitration. In
resolving any Dispute, the arbitral tribunal shall refer to the governing law as
specified in Section 9.1 of this Agreement. Except for any exemplary, punitive,
indirect, consequential, remote, speculative, treble, multiple or special
damages recovered by a third party pursuant to Section 8.3, the arbitral
tribunal shall not be empowered to award exemplary, punitive, indirect,
consequential, remote, speculative, treble, multiple or special damages, and the
Parties and their Affiliates, the Partnership Entities and the Pioneer
Indemnified Parties waive any right they may have to recover such damages from
one another. The arbitral tribunal shall not be empowered to decide any dispute
ex aequo et bono or amiable compositeur. The seat (or legal place) and venue of
the arbitration shall be in Dallas, Texas. The arbitration shall be conducted in
the English language.
     The Dispute shall be decided by a panel of three neutral arbitrators. The
claimant or claimants shall nominate an arbitrator at the time of service of a
request for arbitration. The respondent or respondents shall nominate an
arbitrator at the time of service of the response to the request for
arbitration. If the claimant(s) or respondent(s) fail to appoint an arbitrator,
then that arbitrator shall be appointed in accordance with the Rules. The two
appointed arbitrators

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shall together agree upon a third arbitrator to recommend to the AAA to chair
the arbitration. If the two party-appointed arbitrators are unable to agree upon
an arbitrator within fifteen (15) days of the respondent’s appointment of an
arbitrator, then the chairman shall be chosen according to the Rules.
Notwithstanding the foregoing, if two or more respondents have interests with
regard to a Dispute that are not completely common, then all arbitrators shall
be appointed in accordance with the Rules and not by nomination or appointment
by the Parties. Any arbitration award may be enforced by the courts sitting in
Dallas, Texas or any other court of competent subject matter jurisdiction
(including any jurisdiction in which a Party holds or keeps assets). Any action
to challenge, vacate or set aside the award in whole or in part must be brought
in the courts sitting in Dallas, Texas. The Parties and their Affiliates, the
Partnership Entities and the Pioneer Indemnified Parties agree to waive any
objections they may have to personal jurisdiction, venue or forum non-conveniens
for any action brought to enforce the award in the courts sitting in Dallas,
Texas or any other jurisdiction where a party against which enforcement of the
award is sought holds or keeps assets.

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     IN WITNESS WHEREOF, the Parties have executed this Agreement on, and
effective as of, the day and year first written above.

                  PIONEER NATURAL RESOURCES GP LLC
 
           
 
  By:       /s/ Richard P. Dealy          
 
      Name:   Richard P. Dealy
 
      Title:   Executive Vice President and
 
          Chief Financial Officer
 
                PIONEER SOUTHWEST ENERGY PARTNERS L.P.
 
                By:   Pioneer Natural Resources GP LLC, its
General Partner
 
           
 
  By:       /s/ Richard P. Dealy          
 
      Name:   Richard P. Dealy
 
      Title:   Executive Vice President and
 
          Chief Financial Officer
 
                PIONEER SOUTHWEST ENERGY PARTNERS USA LLC
 
                By:   Pioneer Natural Resources USA, Inc., its sole member
 
           
 
  By:       /s/ Richard P. Dealy          
 
      Name:   Richard P. Dealy
 
      Title:   Executive Vice President and
 
          Chief Financial Officer
 
                PIONEER NATURAL RESOURCES USA, INC.
 
           
 
  By:       /s/ Richard P. Dealy          
 
      Name:   Richard P. Dealy
 
      Title:   Executive Vice President and
 
          Chief Financial Officer

[Signature page to Administrative Services Agreement]

 

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Schedule I
Services Provided by Pioneer USA
to the Partnership Entities
1. Accounting
2. Audit
3. Business Development
4. Financial Services
5. Real Property
6. Legal
7. Operations/Reservoir Engineering/Geology/Geophysics
8. Investor Relations
9. Management and Corporate Development
10. Risk Management
11. Commercial and Marketing (if applicable)
12. Information Technology
13. Insurance Services
14. Government Regulations Compliance
15. Securities and Exchange Commission Reporting
16. Sarbanes-Oxley Compliance
17. Treasury
18. Tax
19. Communications
20. Human Resources
21. Administrative Services
22. Regulatory
23. Environmental
Schedule I-1