Execution Version        Exhibit 10.1

SHARED SERVICES AGREEMENT

between

SP HOLDINGS, LLC

and

CONSTELLATION ENERGY PARTNERS LLC

dated

May 8, 2014

 

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Table of Contents

                                                                                                                                      
Page

Section 1.Definitions…………………………………………………………….2

Section 2.In-Service Date and Conditions Precedent...………………………13

Section 3.Management of Company...…………………………………………13

Section 4.Management Services.……………………………………………….14

Section 5.Performance and Authority…..…………………………………….18

Section 6.Compensation and Reimbursement………………………………..21

Section 7.Representation and Warranties; Covenants……………………….26

Section 8.Term and Termination……………………………………………….28

Section 9.Limitation of Liability; Indemnification……………………………30

Section 10.Insurance.…………………………………………………………….35

Section 11.Competition and Corporate Opportunities……………………..….35

Section 12.Confidentiality……………………………………………………….36

Section 13.Mutual Release……………………………………………………….37

Section 14.Obligations Hereunder Not Affected; Waivers…………………….39

Section 15.Notices….…………………………………………………………….39

Section 16.Assigns…………………………………………………………….….40

Section 17.Jointly Drafted……………………………………………………….41

Section 18.Further Assurances………………………………………………….41

Section 19.No Third-Party Beneficiaries; Subsidiary Obligations…………….41

Section 20.Amendment……………………………………………….………….41

Section 21.Uneforceability……………………………………………………….41

Section 22.Survival of Agreements……………………………………………....41

Section 23.Governing Law; Submission to Process…………………………….42

Section 24.Waiver of Jury Trial………………………………………………….42

Section 25.Entire Agreement…………………………………………………….42

Section 26.Laws and Regulations……………………………………….……….42

Section 27.No Recourse Against Officers, Directors, Managers or Employess.43

Section 28.Counterparts………………………………………………………….43

Section 29.Conspicuousness of Provisions……………………………………….43

Section 30.Force Majeure…………………………………………...…………….43

Section 31.Survival Following Merger, Business Combination, etc.; Unit Splits…43

Exhibit ATerms of Senior Management Incentive Interests

 

 

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SHARED SERVICES AGREEMENT

This Shared Services Agreement (this “Agreement”), dated as of May 8, 2014 (the
“Effective Date”), is made by and between SP HOLDINGS, LLC, a Texas limited
liability company (“Manager”), and Constellation Energy Partners LLC, a Delaware
limited liability company (“Company,” and, together with Manager, each a “Party”
and together the “Parties”), on Company’s own behalf and on behalf of its direct
and indirect Subsidiaries (as defined below).

RECITALS:

WHEREAS, Company wishes for Manager to provide certain management and general
and administrative support services to Company and Manager wishes to provide
such management and services to Company as provided herein.

WHEREAS, Manager has determined that its execution, delivery and performance of
this Agreement may reasonably be expected to benefit Manager, directly or
indirectly, and is in the best interests of Manager.

WHEREAS, Sanchez Oil & Gas Corporation has agreed to provide a guarantee,
entered into on the Effective Date but effective from the In-Service Date, to
guarantee certain of the obligations of Manager hereunder, in accordance with
its terms.

WHEREAS, Company has determined that its execution, delivery and performance of
this Agreement may reasonably be expected to benefit Company, directly or
indirectly, and is in the best interests of Company.

WHEREAS, Company has agreed to issue to Manager or its designee a new series of
Member Interests (as defined in the Operating Agreement (as defined below)) with
terms and conditions set forth on Exhibit A (the “New Interests”) in connection
with the first Asset Acquisition (as defined below). 

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

Section 1. Definitions

.  Capitalized terms used in this Agreement shall have the following meanings:

“Accounts” shall have the meaning set forth in Section 4(l).

“Acquisition Expenses” means any and all reasonable, documented costs, fees and
expenses, including, without limitation, legal fees and expenses, travel and
communications expenses, financial advisory fees, brokerage fees, costs of
appraisals, engineering fees and expenses, nonrefundable option payments on
property not acquired, accounting fees and expenses, title insurance premiums
and the costs of performing due diligence (including, without

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limitation, title, environmental and similar due diligence), in each case
incurred by Manager or any of its Affiliates in connection with the selection,
evaluation, acquisition, origination, making or development of any Asset
Acquisition, whether or not acquired.

“Acquisition Information” means any and all information provided by or on behalf
of Manager in the performance of the Services relating to potential Asset
Acquisitions.

“Administrative Fee”  means the administrative fee (as determined by SOG from
time to time in its discretion) payable by Manager to SOG equal to 5.00% of
SOG’s Overhead Costs, excluding SOG’s third party out-of-pocket costs with
respect to non-Affiliates, or such other amount as is approved by Company.

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly, controls, is controlled by, or is under common control with, such
Person.  For the purposes of this Agreement, “control,” when used with respect
to any specified Person, means the power, direct or indirect, to direct or cause
the direction of the management and policies of such Person, whether through
ownership of Voting Securities or partnership or other ownership interests, by
contract or otherwise; and the terms “controlling” and “controlled” shall have
correlative meanings.  Notwithstanding the foregoing, solely for the purposes of
this Agreement, Company and its Subsidiaries will be deemed not to be Affiliates
of Manager or SOG, and vice versa.

“Agreement” shall have the meaning set forth in the Preamble.

“Approved Budget” shall have the meaning set forth in Section 4(h)(i).

“Asset Acquisition” means any direct or indirect acquisition or proposed
acquisition by Company or any of its Subsidiaries of Oil and Gas Properties or
Qualified Assets or, if Manager provided Services in connection therewith, Joint
Ventures, in each case, whether by asset purchase, merger, operation of law,
Joint Venture, or otherwise.

“Asset-Based Fee” shall have the meaning set forth in Section 6(a).

“Asset-Based Fee Base” means the amount, calculated as of each Calculation Date,
equal to (i) the sum of (a) the future net revenue, discounted at 10%, of
Company’s and its Subsidiaries’ estimated proved reserves for Oil and Gas
Properties calculated as of such Calculation Date using forward pricing as
provided by a market participant or market pricing information service and
indicative of the general market for the relevant commodities without regard to
liquidity, as selected by Manager in its reasonable discretion, and (b) the
value as of such Calculation Date of all assets of Company and its Subsidiaries
other than proved reserves for Oil and Gas Properties, in each case at such
value as may be mutually agreed by Company and Manager, or in the event of a
dispute, by an Independent Appraiser, in each case subject to Section 6(h),
minus (ii) the value as of such Calculation Date of the Midcon Assets, as such
value is calculated consistent with the methodology in clause (i)(a) above,
subject to Section 6(h).

“Asset Disposition” means any direct or indirect disposition or proposed
disposition by Company or any of its Subsidiaries of Oil and Gas Properties or
Qualified Assets or, if Manager provided Services in connection therewith, Joint
Ventures, in each case, whether by asset sale,

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merger, operation of law, Joint Venture, or otherwise (other than sales of
Hydrocarbons produced from the Properties in the ordinary course of business).

“Board” means the board of managers of Company or a committee thereof, as
applicable.

“Business Day” means a day other than a Saturday, Sunday or other day that banks
in Houston, Texas are required or authorized by law to close.

“Calculation Date” means March 31, June 30, September 30 and December 31 of each
year.

“Change of Control” means the occurrence of any of the following: (i) the sale,
lease, transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the properties and assets of Manager to any Person or group
of Affiliated Persons other than Permitted Holders; or (ii) the consummation of
any transaction (including, without limitation, any merger, consolidation or
other business combination transaction) the result of which is that any Person
or group of Affiliated Persons other than Permitted Holders become the
beneficial owner of more than 50% of the Voting Securities of Manager, measured
by voting power rather than number of shares, units or the like.

“Code” means the Internal Revenue Code of 1986, as amended and in effect from
time to time.  Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
any successor law.

“Company” shall have the meaning set forth in the Preamble.

“Company Contractual Obligation”  means any contract or agreement to which
Company or any Subsidiary is a party or by which their respective assets are
bound.

“Company Releasing Parties” means Stephen R. Brunner, Richard S. Langdon,
Richard H. Bachmann, John N. Seitz, and Company, each on behalf of themselves
and on behalf of each of their respective predecessors, successors, assigns,
parents, subsidiaries, divisions, departments, affiliates, sponsors, officers,
directors, managers, employees, agents, attorneys, insurers, spouses, children,
dependents, heirs, executors, administrators, owners, partners, principals,
stockholders, and representatives; provided, however, the Company Releasing
Parties does not include any SOG Released Parties.

“Company Released Parties” means Stephen R. Brunner, Richard S. Langdon, Richard
H. Bachmann, John N. Seitz, and Company, and each of their respective
predecessors, successors, assigns, parents, subsidiaries, divisions,
departments, affiliates, sponsors, officers, directors, managers, employees,
agents, attorneys, insurers, spouses, children, dependents, heirs, executors,
administrators, owners, partners, principals, stockholders, and representatives;
provided, however, the Company Released Parties does not include any SOG
Releasing Parties.

“Commission” means the Securities and Exchange Commission or any successor
Governmental Authority.

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“Confidential Information” means all nonpublic or confidential information
(i) furnished to Manager or its representatives by or on behalf of Company or
(ii) prepared by Company (and disclosed to Manager) or, at the direction of the
Board, by Manager or its Affiliates for Company in the performance of Services
utilizing the information referred to in clause (i) (in each case, irrespective
of the form of communication and whether such information is furnished on or
after the Effective Date).

“Contract Operating Agreement” means that certain Contract Operating Agreement
dated as of the date hereof, by and between SOG and Company (as it may be
amended, restated, supplemented or otherwise modified from time to time).

“Contract Purchase Price” means the total consideration, including, without
limitation, any “carried interest” consideration or deferred or “earn-out”
payments, when paid by Company or any of its Subsidiaries or Joint Ventures in
connection with any Asset Acquisition.  With respect to any Asset Acquisition
that consists, in whole or in part, of the contribution to or acquisition by
Company or any of its Subsidiaries or Joint Ventures of Oil and Gas Properties
or Qualified Assets in consideration for equity interests of Company, its
Subsidiaries or Joint Ventures, such equity interests shall be determined to
have the value (implicit or explicit) agreed upon in the contract relating to
such Asset Acquisition or, if such value is not determinable, the fair market
value mutually agreed by the Board and Manager, or, in the event of a dispute,
by an Independent Appraiser, in each case subject to Section 6(h).  In the event
Company or any of its Subsidiaries enters into a Joint Venture or the Asset
Acquisition is effected through a Joint Venture, the Contract Purchase Price
shall be deemed equal to (A) the JVI, multiplied by (B) the greater of (i) the
amount determined in accordance with the preceding two sentences and (ii) the
fair market value of the Oil and Gas Properties and Qualified Assets held or to
be held by the Joint Venture at the relevant closing date, as mutually agreed by
the Board and Manager, or, in the event of a dispute, by an Independent
Appraiser, in each case subject to Section 6(h).

“Contract Sales Price” means the total consideration, including, without
limitation, any “carried interest” consideration or deferred or “earn-out”
payments when received by Company or any of its Subsidiaries or Joint Ventures
in connection with an Asset Disposition.  With respect to any Asset Disposition
that consists, in whole or in part, of the receipt by Company or any of its
Subsidiaries or Joint Ventures of non-cash consideration, such non-cash
consideration shall be determined to have the fair market value mutually agreed
by the Board and Manager, or, in the event of a dispute, by an Independent
Appraiser, in each case subject to Section 6(h).

“Contribution Agreement” means that certain Contribution Agreement, dated August
 9, 2013, between SEPI and Company.

“COPAS” shall have the meaning set forth in the Contract Operating Agreement.

“Development Activities” means all operations and activities related to the
development of the Properties, including, without limitation, the drilling of
any Development Wells, recompletions, workovers and operations subsequent to a
well reaching its objective depth on any Lease or other prospect held by Company
or its Subsidiaries and related proposals, activities and operations required to
commence and sustain production from such well(s), including,

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without limitation, the design, fabrication or other acquisition, and
installation, of a related development system.

“Development Well” means a well drilled within the proved area of an oil or gas
reservoir to the depth of a stratigraphic horizon known to be productive.

“Disposition Expenses” means any and all reasonable, documented costs, fees and
expenses incurred by Manager or any of its Affiliates in connection with any
Asset Disposition, whether or not sold or otherwise disposed of, including,
without limitation, legal fees and expenses, travel and communications expenses,
brokerage fees, costs of appraisals, engineering fees and expenses, accounting
fees and expenses, title insurance premiums and the costs of performing due
diligence.

“Draft Budget” shall have the meaning set forth in Section 4(h)(i).

“Effective Date” shall have the meaning set forth in the Preamble.

“Emergency” means any sudden or unexpected event which causes, or risks causing,
(a) substantial damage to any Property or the property of a third party, (b)
death of or injury to any Person, (c) damage or substantial risk of damage to
natural resources (including wildlife) or the environment, (d) safety concerns
associated with continued operations or (e) non-compliance with applicable Legal
Requirements, in each case which event is of such a nature that a response
cannot, in the reasonable discretion of Manager, await the decision of the Board
or Officers, as appropriate.

“Equity Election Notice” is defined in Section 6(f)(ii).

“Financing” means any form of financing obtained or incurred by Company or any
of its Subsidiaries or, if Manager provided Services in connection therewith,
Joint Ventures, including in connection with any Asset Acquisition, and
including, without limitation, by the issuance of any debt or equity securities
or the incurrence of Loans, or the assumption by Company or any of its
Subsidiaries or Joint Ventures of any debt or equity securities or Loans.

“Governmental Authority” means the government of the United States of America or
any other nation, or of any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government (including, without limitation, any supra-national bodies).

“Hydrocarbons” means crude oil, natural gas, coal seam gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate and all other liquid and
gaseous hydrocarbons produced or to be produced in conjunction therewith from a
well bore and all products, by-products and other substances derived therefrom
or the processing thereof, and all other minerals and substances produced in
conjunction with such substances, including, without limitation, sulfur,
geothermal steam, water, carbon dioxide, helium and any and all minerals, ores
or substances of value and the products and proceeds therefrom.

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“Independent Appraiser” means an independent investment bank or appraisal firm
with no prior material relationship with either Party or its Affiliates that has
experience valuing Oil and Gas Properties or Qualified Assets or other assets or
securities as may be at issue, as applicable.  If the Parties are unable to
agree on an Independent Appraiser within 15 days after a matter is to have been
submitted to an Independent Appraiser or within 15 days after the Parties are
unable to reach agreement on any other relevant matter relating to valuation,
 as applicable, within seven days after the end of such 15 day period, each
Party shall submit the names of three Independent Appraisers, and each Party
shall be entitled to strike one name from the other Party’s list of firms, and
the Independent Appraiser shall be selected by lot from the remaining
firms.  Such Independent Appraiser shall submit to the Parties a written report
within 30 days of its engagement setting forth such determination.  Unless
otherwise expressly specified in this Agreement, the fees and expenses of such
Independent Appraiser shall be borne equally by Company and Manager.  Prior to
any such determination, amounts due to Manager under this Agreement shall
nevertheless be paid when otherwise due or required to be paid hereunder (or
deposited into the Accounts for withdrawal by Manager when so required), subject
to the provisions of Section 6(h).

“In-Service Date” shall have the meaning set forth in Section 2(a).

“JOA” means: (i) with respect to Properties upon which SOG is the “Operator”
under the terms of the Contract Operating Agreement, the “JOA Form”, as such
terms are defined therein; and (ii) with respect to Properties which are being
developed, managed and operated by a “Third Party Operator”, the “Third Party
JOA”, as such terms are defined in the Contract Operating Agreement.

“Joint Venture” means any partnership, limited partnership or other arrangements
(in each case, that is not a Subsidiary) with a Person(s) other than Company or
any Subsidiary in which Company or any Subsidiary is or will be a member,
partner or co-venturer and which is established to own, operate or develop Oil
and Gas Properties or Qualified Assets.

“JVI” means the direct or indirect ownership percentage in the Joint Venture
held directly or indirectly by Company or any of its Subsidiaries.  For purposes
of this definition, “ownership percentage” shall be the percentage of capital
stock, membership interest, partnership interest or other equity interests held
by Company or any of its Subsidiaries, without regard to classification of such
equity interests.

“Lawsuit” refers to that certain lawsuit styled Civil Action No. 8856-VCL,
Constellation Energy Partners Management, LLC, et al. v. Stephen R. Brunner, et
al., in the Court of Chancery of the State of Delaware.

“Leases” means all oil and gas leases, oil, gas and mineral leases, oil, gas and
casinghead gas leases or any other instruments, agreements, or conveyances under
and pursuant to which the owner thereof has or obtains the right to enter upon
lands and explore for, drill, and develop such lands for the production of
Hydrocarbons.

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“Legal Requirement” means, as to any Person, any law, statute, ordinance,
decree, requirement, order, judgment, rule or regulation (or official
interpretation of any of the foregoing) of, and the terms of any Permit, in each
case to which such Person is subject.

“License Agreement” means that certain Geophysical Seismic Data Use License
Agreement, dated the date hereof, among SOG, Company and certain Subsidiaries of
Company as identified therein (as it may be amended, restated, supplemented or
otherwise modified from time to time).

“Licensing Expenses” means any amount determined by SOG and/or Manager, from
time to time, as payable by Company hereunder for its rights and benefits under
the License Agreement, including, without limitation, for Company’s ability to
access, or Manager’s and/or SOG’s ability to use for Company’s benefit, as the
case may be, seismic data, well logs, LAS files, well documents, and
interpretive geologic software and information systems.

“Lien” means any mortgage, lien, pledge, assignment, charge, deed of trust,
security interest, hypothecation, preference, deposit arrangement or encumbrance
(or other type of arrangement having the practical effect of the foregoing) to
secure or provide for the payment of any obligation of any Person, whether
arising by contract, operation of law or otherwise (including, without
limitation, the interest of a vendor or lessor under any conditional sale,
agreement, synthetic lease or other title retention agreement).

“Loan(s)” means any indebtedness or obligation in respect of borrowed money or
evidenced by bonds, notes, debentures, deeds of trust, letters of credit,
volumetric production payments, or similar instruments, including, without
limitation, secured loans and mezzanine loans.

“Losses” means losses, liabilities, claims (including, without limitation, third
party claims), demands, suits, causes of action, judgments, awards, damages,
interest, fines, fees, penalties, costs and expenses (including, without
limitation, all reasonable attorneys’ fees and other costs and expenses incurred
in defending any such claims or other matters or in asserting or enforcing any
indemnity obligation under Section 9)  of whatsoever kind and nature.

“Management Fee” shall have the meaning set forth in Section 6(b).

“Manager” shall have the meaning set forth in the Preamble.

“Manager Confidential Information” means any and all Acquisition Information or
any other nonpublic or confidential information provided by or on behalf of
Manager in the performance of the Services, including under Section 6(e) (in
each case irrespective of the form of communication and whether such information
is furnished on or after the Effective Date).

“Manager Party” shall have the meaning set forth in Section 9(a).

“Material Transaction” means any material transaction that requires the approval
of the Board pursuant to Company’s Delegation of Financial Authority as approved
by the Board from time to time.

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“Midcon Assets” means those assets, owned as of the relevant Calculation Date by
Company or its Subsidiaries, identified as the Cherokee Basin Properties in the
reserve report prepared by Netherland, Sewell & Associates, Inc., describing the
estimated proved reserves and future revenue, as of December 31, 2013, of
Company and its Subsidiaries.

“New Interests” shall have the meaning set forth in the Recitals.

“Non-Released Agreements” shall have the meaning set forth in Section 13(e).

“Notice” and “Notify” shall have the meaning set forth in Section 15.

“Officers” shall have the meaning set forth in Section 3(b).

“Oil and Gas Properties” means fee mineral interests, term mineral interests,
Leases, subleases, farmouts, royalties, overriding royalties, net profit
interests, carried interests, production payments and similar mineral interests,
and all unsevered and unextracted Hydrocarbons in, under or attributable to the
foregoing, in each case relating to Hydrocarbons.

“Operating Agreement” means the Second Amended and Restated Operating Agreement
of Company, dated as of November 20, 2006, as amended on or prior to the
Effective Date (as it may be further amended, restated, supplemented or
otherwise modified from time to time;  provided, however, that references to
defined terms in the Operating Agreement shall mean such terms as defined in the
Operating Agreement as of the Effective Date, unless the Parties agree that any
such term as subsequently defined shall apply to this Agreement).

“Overhead Costs” means, with respect to a Person, such Person’s costs of
providing the Services, allocated in accordance with such Person’s regular and
consistent accounting practices, including, without limitation, (i) Acquisition
Expenses, (ii) Disposition Expenses, (iii) Licensing Expenses, (iv) direct
costs, (v) indirect administrative costs, (vi) the allocable portion of salary,
bonus, and incentive compensation, (vii) costs and expenses which are paid or to
be paid to employees of such Person or its Affiliates or other Persons in
connection with the termination or expiration of this Agreement or the reduction
or modification of Services (as determined by such Person in its sole
discretion), and (viii) other amounts paid to Persons who provide Services;
provided, however, that with respect to Manager, Overhead Costs include, without
limitation, the Administrative Fee and any amounts payable by Manager to SOG or
any other Person in connection with the provision of Services hereunder, except
as provided in Section 5(f) or Section 5(g).

“Party” and “Parties” shall have the meanings set forth in the Preamble.

“Permit” means any approval, certificate of occupancy, consent, waiver,
exemption, variance, franchise, order, permit, authorization, right or license
of or from any Governmental Authority.

“Permitted Holder” means (i) Antonio R. Sanchez, III, A.R. Sanchez, Jr. or any
member of Manager as of the Effective Date, (ii) any spouse or descendant of any
individual named in (i), (iii) any other natural person who is related to, or
who has been adopted by, any such individual or such individual’s spouse
referenced in (i)-(ii) above within the second degree of kinship, or

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(iv) any Person controlled, directly or indirectly, by any of the Persons
referenced in clauses (i)-(iv) above, individually or collectively by one or
more of such Persons.

“Permitted Investment” means (a) any evidence of indebtedness, maturing not more
than one year after such time, issued or guaranteed by a  Governmental Authority
of the United States, (b) commercial paper, maturing not more than nine months
from the date of issue, which is issued by a corporation (other than an
Affiliate of Manager) organized under the laws of any state of the United States
or of the District of Columbia and rated A-l by Standard & Poor's Ratings Group,
or any successor thereto, or P-l by Moody's Investors Service, Inc., (c) any
certificate of deposit or bankers acceptance, maturing not more than one year
after such time, which is issued by a commercial banking institution that is a
member of the U.S. Federal Reserve System and has a combined capital and surplus
and undivided profits of not less than $500,000,000, or (d) any repurchase
agreement entered into with any commercial banking institution of the stature
referred to in clause (c) which (i) is secured by a fully perfected security
interest in any obligation of the type described in any of clauses (a) through
(c), and (ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of such
commercial banking institution thereunder.

“Permitted Liens”  means any of the following: (i) any Liens permitted or
contemplated by the terms and conditions of this Agreement or that are
customarily associated with the performance of the Services hereunder or
services under any Related Contract; (ii) any Liens resulting or arising from,
directly or indirectly, the failure of Company or any Subsidiary to pay any
amounts owed by such Person to a third party, Manager or any of Manager’s
Affiliates or to deposit funds in the Accounts when so required hereunder; (iii)
Liens arising under operating agreements, unitization and pooling agreements and
sales contracts in the ordinary course of business; (iv) materialman’s,
mechanic’s, repairman’s, contractor’s, operator’s, tax, and other similar liens
or charges arising in the ordinary course of business; and (v) any Liens arising
in connection with real property or other taxes in the ordinary course of
business.

“Person” means an individual, partnership, corporation (including, without
limitation, a business trust), joint stock company, limited liability
corporation or company, limited liability partnership, trust, unincorporated
association, joint venture or other entity, or a Governmental Authority or any
trustee, receiver, custodian or similar official.

“Properties” means, collectively, all Oil and Gas Properties, all Qualified
Assets and all interests in other real and personal property used in the
operation of Oil and Gas Properties or Qualified Assets which are, at the time
in question, owned by Company or any of its Subsidiaries, including, without
limitation, (A) all wellhead equipment, fixtures (including, without limitation,
field separators and liquid extractors), platforms, pipe, casing, and tubing;
(B) all production, gathering, treating, processing, compression, dehydration,
salt water disposal, injection, gathering line and pipeline equipment and
facilities; and (C) all tanks, machines, equipment, tools, dies, vessels and
other facilities.

“Qualified Assets” means assets that (i) produce gross income that is at least
90% “qualifying income” as defined in Section 7704 of the Code, and the rules
and regulations promulgated thereunder (the “Regulations”), or (ii) if owned by
Company or its Subsidiaries or any Joint Venture, would not cause Company not to
meet, for the then-current taxable year or

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future taxable years, the gross income requirements of Section 7704 of the Code
and the Regulations, including for the avoidance of doubt, in each case, all
Company, Subsidiary and Joint Venture assets owned by such Persons as of the
Effective Date that do not otherwise qualify as Oil and Gas Properties.

“Records” shall have the meaning set forth in Section 6(e).

“Registration Rights Agreement” means that certain Registration Rights
Agreement, dated as of August 9, 2013, between Company and SEPI.

“Regulations” shall have the meaning set forth in the definition of Qualified
Assets.

“Related Contracts” means any JOAs, contracts or agreements between Manager or
SOG, on the one hand, and Company (or any Subsidiary of Company), on the other,
relating to the Properties (other than a SOG PSA heretofore or hereafter entered
into), whether relating to the operation or development of any of the
Properties, or the drilling and completion of wells on the Properties, or the
gathering, treating, storage, processing, compressing, transporting, and
handling of Hydrocarbons produced from any of the Properties, or otherwise,
including, without limitation, the Contract Operating Agreement, License
Agreement and Transition Agreement.

“Released Parties” means collectively the Company Released Parties and the SOG
Released Parties.

“SEPI” means Sanchez Energy Partners I, L.P., a Delaware limited partnership.

“Services” shall have the meaning set forth in Section 4.

“Settlement Agreement” means that certain settlement agreement dated March 31,
2014, entered into in connection with the settlement of the Lawsuit by and
between Constellation Energy Partners Management, LLC, Gary M. Pittman, John R.
Collins, Stephen R. Brunner, Richard S. Langdon, Richard H. Bachmann, John N.
Seitz, Company, SOG, SEPI, Antonio R. Sanchez III, Gerald F. Willinger, PostRock
Energy Corporation, White Deer Management LLC, White Deer Energy L.P. and Thomas
J. Edelman.

“SOG” means Sanchez Oil & Gas Corporation, a Delaware corporation, or any
successor in interest or assignee of its interests in any Related Contract.

“SOG PSA” means a purchase and sale agreement relating to the Properties between
Company or any of its Subsidiaries, on the one hand, and SOG or any of its
Affiliates, on the other hand, including, without limitation, the Contribution
Agreement.

“SOG Released Parties” means SOG, SEPI, Antonio R. Sanchez III, and Gerald F.
Willinger and each of their respective predecessors, successors, assigns,
parents, subsidiaries, divisions, departments, direct or indirect affiliates,
sponsors, officers, directors, managers, employees, agents, attorneys, insurers,
spouses, children, dependents, heirs, executors, administrators, owners,
partners, principals, stockholders, and representatives; provided, however, the
SOG Released Parties does not include any Company Releasing Parties.

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“SOG Releasing Parties” means SOG, SEPI, Antonio R. Sanchez III, and Gerald F.
Willinger, each on behalf of themselves and on behalf of each of their
respective predecessors, successors, assigns, parents, subsidiaries, divisions,
departments, direct or indirect affiliates, sponsors, officers, directors,
managers, employees, agents, attorneys, insurers, spouses, children, dependents,
heirs, executors, administrators, owners, partners, principals, stockholders,
and representatives; provided, however, the SOG Releasing Parties does not
include any Company Released Parties.

“Subsidiary” means, with respect to any Person (the “parent”) at any date, any
other Person the accounts of which would be consolidated with those of the
parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with generally accepted accounting
principles as of such date, as well as any Person, a majority of whose
outstanding Voting Securities (other than directors’ qualifying shares) shall at
any time be owned by such parent or one or more Subsidiaries of such
parent.  Unless otherwise specified, all references herein to a “Subsidiary” or
to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of Company.

“Transaction” means an Asset Acquisition, Asset Disposition or Financing.

“Transaction Advisory Fee” shall have the meaning set forth in Section 6(c).

“Transaction Value” means (a) in the case of an Asset Acquisition, the Contract
Purchase Price of such Asset Acquisition, (b) in the case of an Asset
Disposition, the Contract Sale Price of such Asset Disposition and (c) in the
case of a Financing, (i) the aggregate gross proceeds raised by Company or any
of its Subsidiaries or, if Manager provided Services in connection therewith,
Joint Ventures, as the case may be, (ii) the principal amount of Loans incurred
by Company or any of its Subsidiaries or, if Manager provided Services in
connection therewith, Joint Ventures, as the case may be, or (iii) the principal
amount outstanding under any debt securities or Loans assumed by Company or any
of its Subsidiaries or, if Manager provided Services in connection therewith,
Joint Ventures, as the case may be.    The Transaction Value allocable for a
Joint Venture shall equal the product of (x)  the Contract Purchase Price, the
Contract Sale Price or the gross proceeds or principal amount raised, incurred
or assumed in a Financing, as applicable, and (y) the JVI.

“Transition Agreement” means that certain Transition and Assistance Agreement
dated as of the date hereof, by and between Manager, SOG and Company (as it may
be amended, restated, supplemented or otherwise modified from time to time).

“Voting Securities” means (a) with respect to any corporation (including any
unlimited liability company), capital stock of such corporation having general
voting power under ordinary circumstances to elect directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have special voting power or rights by reason of the happening of
any contingency), (b) with respect to any partnership, any partnership interest
or other ownership interest having general voting power to elect the general
partner or other management of the partnership or other Person and (c) with
respect to any limited liability company, membership certificates or interests
representing the equity interests of such Person or,

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if such Person is manager-managed, having general voting power under ordinary
circumstances to elect managers of such limited liability company.

Section 2. In-Service Date and Conditions Precedent.

(a) The Parties acknowledge and agree that, as of the Effective Date, Manager
may not be able to provide all the Services contemplated hereunder and the
Parties intend to transition certain of the Services performed as of the
Effective Date from CEP Services Company, Inc. to Manager or its Affiliates. 
Accordingly, Manager shall notify Company of the In-Service Date if and when
such transition, in Manager’s reasonable determination, has been completed or
waived by Manager. The Parties agree that the “In-Service Date” shall be the
date specified in a Notice given by Manager to Company prior to such date. Each
of the Parties acknowledges and agrees that there are a number of contingencies
that may affect the actual In-Service Date.  Accordingly, neither Party will
have any right or remedy under this Agreement against the other Party if the
In-Service Date does not occur or occurs later than any estimated or expected
In-Service Date, except that if the In-Service Date has not occurred by December
31, 2014, Manager or Company may terminate this Agreement on 30 days prior
Notice to such other Party.

(b) Notwithstanding anything in this Agreement to the contrary, until the
In-Service Date, it shall be a condition precedent to Manager’s agreements and
obligations under this Agreement that: (i) the Transition Date (as defined in
the Transition Agreement) shall have occurred, and (ii) SOG shall have retained
a sufficient number of individuals, as determined by Manager, to assist in the
performance of the Services, either through the retention of Eligible Employees
(as defined in the Transition Agreement) or otherwise.  If any of these
conditions precedent is not satisfied to the satisfaction of Manager or waived
by Manager, in its sole discretion, Manager shall have the right to terminate
this Agreement on 30 days’ written Notice to Company.    

(c)  If this Agreement is terminated pursuant to this Section 2, each Party
shall be released from any and all obligations under this Agreement, other than
for breaches, violations or inaccuracies of any representations, warranties or
covenants hereunder prior to termination, covenants which by their nature are
intended to survive termination, and under Section 6 (with respect to any
accrued but unpaid obligations as of the date of termination or expiration (and
including, without limitation, any severance costs incurred prior to or after
termination or expiration, as provided in the definition of Overhead Costs)),
Section 8(d),  Section 8(e),  Section 8(f),  Section 9,  Section 11,  Section
12,  Section 13,  Section 14,  Section 15,  Section 17,  Section 19,  Section
22,  Section 23,  Section 24,  Section 25,  Section 27,  Section 29 and Section
31 hereof, which shall survive such termination (together with Section 1 to the
extent applicable).

Section 3. Management of Company.

   Notwithstanding anything in this Agreement to the contrary, the Parties
acknowledge and agree that, except as otherwise expressly provided in the
Operating Agreement and not in conflict with or in breach or violation of any
other express provision of this Agreement:

(d) The business and affairs of Company shall be managed by or under the
direction of the Board.

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(e) The Board shall have the power and authority to appoint and dismiss such
officers with such titles, authority, duties and compensation, if any, to be
paid by Company (but not, for the avoidance of doubt, Manager or any other
non-Affiliate of Company), as determined by the Board (“Officers”).

(f) The authority and functions of the Board, on the one hand, and of the
Officers, on the other, shall be specified in the Operating Agreement.

(g) Unless provided otherwise by resolution of the Board, the Officers shall
have the titles, power, authority and duties described in the Operating
Agreement. 

(h) The Officers shall act on behalf of Company under this Agreement in
overseeing the Services provided to Company pursuant to the terms of this
Agreement.

Section 4. Management Services.

 Commencing on the Effective Date, Manager may (prior to the In-Service Date)
and shall (on and after the In-Service Date), except to the extent (x) provided
by Company for its own account prior to the In-Service Date or (y) Company and
Manager otherwise mutually agree before or after the In‑Service Date, (i) advise
and consult with the Board regarding all aspects of Company’s development,
operations and expansion, (ii) provide (or cause to be provided) management and
technical expertise and consulting services for the development and
implementation of the operational and financial plans of Company and its
Subsidiaries and for strategic planning and decisions of Company and its
Subsidiaries made by the Board, including, without limitation, the exploration
and production activities with respect to the Properties, and (iii) provide (or
cause to be provided) administrative support services to Company, including,
without limitation, investor relations services, human resources and benefits
administration services and general executive management, as necessary, useful
or required for the operation of the business of Company and its Subsidiaries,
as determined by Manager (collectively, the “Services”), including, without
limitation, the following specific Services:

(i) Overhead Services.  Manager will provide all general and administrative
overhead services and other general and administrative services to Company and
its Subsidiaries, including, without limitation, using its commercially
reasonable efforts, consistent with this Agreement, to provide support as
reasonably requested by the Board and the Officers, in accordance with the terms
and conditions of this Agreement, to enable the Board and Officers to fulfill
their respective functions and duties to Company as contemplated by the
Operating Agreement and the Delaware Limited Liability Company Act or any
successor statute, including providing such reports as may be reasonably
requested by the Board from time to time.

(j) Technical.  Manager will provide in-house geological, geophysical and
reserve engineering services that are required to determine the optimum
exploration, development and operation of the Properties, including, without
limitation, the use and interpretation of any seismic data owned by, licensed to
or otherwise available to Manager or Company relating to the Properties.

(k) Lease and Land Administration.  Manager will provide all necessary or useful
Lease and land administration services to Company and its Subsidiaries,
including, without

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limitation, administering all Leases and division orders, and maintaining all
land, Lease and other related records, providing associated services, and paying
rentals, shut-in payments and other Lease payments.

(l) Marketing and Sale of Hydrocarbons.  Manager will provide all marketing, gas
control and contract administration services necessary or useful to sell the
Hydrocarbons produced from the Properties on behalf of Company and its
Subsidiaries and collect such proceeds as the agent of Company and its
Subsidiaries.  Manager shall arrange for the marketing and sale of Hydrocarbons
from the Properties and shall, among other things use commercially reasonable
efforts to (i) collect all production funds from the purchasers of such
Hydrocarbons,  (ii) arrange for the timely payment of severance taxes to any
Governmental Authorities,  (iii) make timely payment to royalty owners and third
party working interest owners, (iv) pay all required third party marketing fees
and (v) remit to Company and its Subsidiaries their respective net proceeds from
the sale of Hydrocarbons after making all necessary or appropriate allocations
and distributions in connection with the receipt of such proceeds (including
those payments referred to in clauses (ii), (iii) and (iv) above and as
contemplated by Section 6(f)).  Payment of such net proceeds to Company shall be
made by Manager promptly (and in any event within 10 Business Days) after
revenues are received by Manager from the purchasers of Hydrocarbons and
subsequently processed through Manager’s revenue allocation system.

(m) Accounting.  Manager will perform all revenue and joint interest accounting
functions attributable to the Properties, including, without limitation:

(i) royalty and other lease payments,

(ii) payment of accounts payable,

(iii) collection of production proceeds,

(iv) computation and payment of severance and other taxes based on production,

(v) gas balancing, and

(vi) general ledger and financial reporting activities.

(n) Operations.  To the extent any Properties subject to development and
operation are not subject to a JOA, Manager will enter into a JOA, or cause (on
behalf of Company) a JOA to be entered into with respect to such Properties.

(o) Information Systems.  Manager, in its sole discretion, may utilize Company’s
and its Subsidiaries’ existing computers and/or facilities or provide computer
use and/or facilities necessary to manage and operate the Properties and
maintain the records of Company and its Subsidiaries.

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(p) Budgets and Forecasts.

(i) Budget.  At least 30 days before the beginning of each calendar year,
Manager will prepare operating and capital budgets and forecasts for Company and
its Subsidiaries (the “Draft Budget”).  The Draft Budget shall detail the
Development Activities planned to be commenced during the relevant
calendar year, which shall specify the amounts expected to be spent by Company
during such calendar year to conduct such Development Activities, and to
otherwise own its Properties and conduct its business during such
calendar year.  The Board shall approve or reject the Draft Budget no later than
15 days prior to the start of the calendar year.  If the Board approves the
Draft Budget, the Draft Budget shall be deemed the approved budget (the
“Approved Budget”) for purposes of this Agreement, until revised in accordance
with Section 4(h)(ii).    If the Board fails to approve a Draft Budget by the
commencement of a calendar year, then until a Draft Budget for such calendar
year is approved, the Approved Budget submitted by Manager and approved by the
Board for the prior calendar year, if any, as adjusted for supplements to such
Approved Budget attributable to any subsequent Asset Acquisition(s), including
in respect of costs and expenses to the extent incurred pursuant to the
contractual obligations of Company, and other costs and expenses approved as
provided in this Agreement, together with appropriate cost of living / inflation
adjustments, shall be the Approved Budget for the current calendar year until a
new Approved Budget is adopted. 

(ii) Approval of Additional Activities.  From time to time prior to the
termination of this Agreement, Manager may present to the Board supplemental
Development Activities or other activities that Manager proposes to be
undertaken by Company and that are not included in the applicable Approved
Budget for such calendar year, and revisions to a previously Approved Budget
that Manager recommends be adopted by the Board.  If the Board approves such
revised budget, the revised budget shall be deemed the Approved Budget as used
in this Agreement.

(iii) Permitted Overruns.  Manager agrees to use its commercially reasonable
efforts to conduct its activities and operations in accordance with the Approved
Budget, if any, it being understood and agreed by the Parties that the Approved
Budget is to be used as a guideline in conducting activities and operations and
not as a limit on amounts payable to or by Manager hereunder; provided, however,
that notwithstanding anything herein to the contrary, in no event shall Manager
or any of its Affiliates be required to modify their respective method or manner
of providing Services (including its method of allocating resources or
employees) or reduce or modify the level of management and general and
administrative support Services provided hereunder and whenever any provision of
this Agreement or Approved Budget permits Manager to make an expenditure or
conduct a Development Activity or other operation, or Manager is authorized
under this Agreement or otherwise to take any action or to perform a Service,
Manager will be permitted to make such expenditure, conduct such Development
Activity or other operation, take such action or perform such

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Service notwithstanding that there is no Approved Budget for the relevant period
(or no budgeted amounts therefor) or the aggregate or any individual
expenditures during any Approved Budget period exceed the amount(s) set forth in
the Approved Budget for such period for such Development Activity or other
operation, action or Service, and Company shall be responsible for all costs and
expenses associated therewith (including with respect to costs and expenses
associated with Emergencies) in accordance with Section 6(b), subject to the
provisions of Section 9;  provided, further, that notwithstanding anything
herein to the contrary, Manager, SOG and their other Affiliates shall maintain
sole and complete discretion with respect to the retention and dismissal of
their respective employees, utilization of such employees to perform Services,
and compensation determinations with respect to such employees and, to the
extent any related costs and expenses are Overhead Costs, Company shall be
responsible therefor in accordance with Section 6(b), subject to the provisions
of Section 9.  For the avoidance of doubt, in no event shall Company be entitled
to challenge or dispute any amounts payable hereunder on the grounds that
Manager has not complied with this Section 4(h)(iii), unless any amount results
from any Development Activities or operations on Company’s behalf (other than
Emergencies, the general and administrative Services under this Agreement, and
Development Activities and operations in accordance with the Approved Budget)
that Company timely directed Manager in writing not to perform or cause to be
performed (to the extent within Manager’s control), and such direction would not
be in conflict with or cause Manager, an Affiliate of Manager, Company or any
Subsidiary to violate or breach any Legal Requirement or contract to which
Manager, an Affiliate of Manager, Company or any Subsidiary is a party or under
which Manager or its Affiliates may be liable.

(q) Compliance.  Manager will take all actions, file all reports and notices and
obtain all necessary Permits to cause the operations of Company and its
Subsidiaries, including with respect to the Properties, to be in compliance with
all applicable Legal Requirements in all material respects; provided, however,
that Manager shall not be obligated to undertake any remedial or similar action
in regard to such compliance unless Company has previously advanced or otherwise
made available to Manager sufficient funds specifically for such use.

(r) Insurance.  Manager will arrange and maintain insurance policies (other than
directors and officers liability insurance policies), subject to the terms
hereof and, if applicable, the Contract Operating Agreement.

(s) Accounting.  Manager will maintain a general ledger with respect to the
business and attendant accounting matters of Company and its Subsidiaries in
accordance with, to the extent applicable, generally accepted accounting
principles in all material respects.  Manager shall prepare or assist the
Officers in preparing all annual reports, quarterly reports, current reports,
proxy statements and other filings required to be filed with or furnished to the
Commission by Company.

(t) Bank Accounts.  Manager will maintain and, to the extent required, open bank
accounts on behalf of Company and its Subsidiaries (the “Accounts”).  Funds of
Company held

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by Manager shall be employed or applied for the exclusive benefit of Company,
except as otherwise provided herein.  Manager shall invest any cash held on
behalf of Company only in Permitted Investments and shall hold all such
Permitted Investments and any cash in trust on behalf of Company, except as
otherwise provided herein.

(u) Acquisition, Disposition and Financing Services.  Manager will assist
Company in connection with Transactions; provided, however, that Manager shall
not enter into any agreements with respect to such Transactions without first
obtaining approval of the Board or Officers, as appropriate.  No Services shall
be required to be rendered by Manager in connection with a Transaction which
Manager determines, in its sole discretion, would result in a violation of Legal
Requirements or require a Permit not then in the possession of Manager.

(v) Outside Professionals and Other Persons.  Manager will coordinate with and
assist the Officers to manage and supervise the outside accountants and
attorneys of Company and coordinate the annual audit of Company’s books and
records and the preparation of Company’s tax returns (but subject in any event
to the ultimate authority of the Board or Officers, as appropriate).  It is
understood and agreed by Company that certain of the Services may be provided
directly or indirectly by other Persons, including SOG pursuant to the Contract
Operating Agreement or otherwise.  Notwithstanding the foregoing, a Management
Fee shall be payable hereunder for all such Services, to the extent that such
payment is not duplicative of any payments made under the Contract Operating
Agreement, License Agreement or a Related Contract, but subject in all cases to
Manager’s right to charge the Administrative Fee for all such Services (to the
extent performed by SOG), including, without limitation, those performed under
the Contract Operating Agreement or other Related Contracts.

Section 5. Performance and Authority.

 

(w) Standard of Care.  Manager shall provide the Services in a manner consistent
with management and administrative practices that it provides to other Persons
or would provide for itself in the performance of services similar to the
Services.    To the extent that Manager is permitted to arrange for contracts
with third parties for goods and services in connection with the provision of
Services, Manager shall use commercially reasonable efforts (i) to obtain such
goods and services at rates competitive with those otherwise generally available
in the area in which services or materials are to be furnished, and (ii) to
obtain from such third parties such customary warranties and guarantees as may
be reasonably required with respect to the goods and services so furnished.  In
the course of providing the Services, Manager shall use commercially reasonable
efforts not to cause any Lien to be imposed upon any of the Properties arising
from the provision of Services under this Agreement except as approved by the
Board or Officers, as appropriate, and Permitted Liens.

(x) Independent Contractor Relationship.  With respect to its performance of the
Services, Manager is an independent contractor, with the authority to control,
oversee and direct the performance of the details of, and the means and manner
of performance of, the Services free of control and supervision by Company,
 Company having contracted herein solely for the result of such
Services.  Neither Manager nor any Person used or employed by Manager shall be
deemed for any purpose to be the employee or servant of Company or any of its
Subsidiaries in performance of any work or services, or any part thereof, under
this Agreement.  Without

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limiting the foregoing, Manager, to the extent applicable when providing
Services on behalf of Company and its Subsidiaries, shall (i) maintain proper
books and records that show the assets, liabilities and transactions of Company
and its Subsidiaries separate from those of any other Person and prepare
financial statements of Company and its Subsidiaries in the same manner,
(ii) not commingle the funds received by Manager on behalf of Company and its
Subsidiaries with any other Person’s funds, including those of Manager or its
Affiliates, except to the extent production funds are received by Manager prior
to remitting proceeds to royalty owners, working interest owners, and Company or
as otherwise contemplated by this Agreement, and (iii) maintain separate bank
accounts belonging only to, or maintained by, Company and its Subsidiaries,
subject to Section 6(f) and Section 6(g).  Nothing in this Agreement shall
prohibit Manager and Company from acknowledging to third parties their status as
Parties to this Agreement.

(y) No Joint Venture or Partnership.  This Agreement is not intended to and
shall not be construed as creating a joint venture, partnership or other
association between Company and Manager within the meaning of the common law or
under the laws of any state.

(z) Company Information.  It is contemplated by the Parties that, during the
term of this Agreement,  Company will be required to provide certain notices,
information and data necessary for Manager to perform the Services and its
obligations under this Agreement.  Manager shall be permitted to rely on any
information or data provided by Company to Manager in connection with the
performance of its duties and provision of Services under this Agreement.

(aa) Performance of Services by Company.  The Parties understand and agree that
until the In-Service Date, Manager is under no obligation to provide any of the
Services.  Notwithstanding the foregoing, Manager may, in its sole discretion,
perform any Service contemplated herein to the extent that Company or its
Subsidiaries fail to adequately and timely perform such Services or request
Manager to provide such Services.

(bb) Performance of Services by Third Parties.  Subject to the discretion of the
Board or Officers, as appropriate, regarding the retention and dismissal of any
Person under (i) – (iv) below, the Parties understand and agree that Manager is
authorized in the performance of the Services to engage or retain, as agent on
Company’s behalf, any necessary third party, including, without limitation,
consultants, advisers, accountants, auditors and attorneys, including, without
limitation:

(i) reserve engineering consultants or advisers for preparation of reserve
engineering reports (but subject in any event to the ultimate authority of the
Board);

(ii) accountants and auditors for preparation of financial reporting and
information and tax returns (but subject in any event to the ultimate authority
of the Board);

(iii) attorneys for issues related directly to the business of Company; and

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(iv) any agreements with purchasers of Hydrocarbon products produced from the
Properties or providers of transportation services for such production.

Company shall reimburse Manager for any costs and expenses arising from or
related to such engagement or retention that have been paid with funds of
Manager rather than funds of Company or its Subsidiaries.  Any and all payments
made to Manager for reimbursements incurred pursuant to this Section 5(f) shall
be in addition to, and not considered to be a part of, the Overhead Costs
included in calculating the Management Fee to be paid in accordance with Section
6(b).  For the avoidance of doubt, payments to SOG or any Affiliate of SOG or
Manager in connection with this Agreement or a Related Contract shall not be
deemed incurred pursuant to this Section 5(f).

(cc) Accounts Receivable.  The Parties understand and agree that Manager or an
Affiliate thereof, in the performance of the Services, may incur accounts
receivable in connection with the management of Properties hereunder or under
the Contract Operating Agreement or Related Contract, to the extent Company has
operations thereon and non-working interest owners are billed with respect
thereto.  In such event, Company shall be billed for such amounts in accordance
with the procedures set forth in Section 6(f) and receive credit therefor if and
to the extent that third parties remit payment for such amounts to Manager or
such Affiliate directly.  Other than to the extent due to the gross negligence,
willful misconduct or fraudulent conduct of Manager, in no event will Manager or
any Affiliate have any liability for any amounts that are not collected from
such third parties.  Any and all payments made to Manager or an Affiliate
thereof for reimbursements incurred pursuant to this Section 5(g) shall be in
addition to, and not considered to be a part of, the Management Fee to be paid
in accordance with  Section 6(b).

(dd) Dealing with Company Assets.  Without limiting any other powers or duties
of Manager provided in this Agreement, Manager is hereby authorized, in
Company’s name and on its behalf or in the name of Manager but subject to the
terms of this Agreement, to execute, deliver, accept, assign, amend, extend,
terminate, license or release (all of the foregoing, either manually or
electronically), in the ordinary course of Company’s business:

(i) for Company, contracts for the purchase of goods or services wholly or
partially including, without limitation, purchase contracts, localization
documents, purchase orders, releases for goods or services, licensing agreements
or letters of intent or memoranda of understanding associated with negotiations
for contracts for the purchase of goods or services;

(ii) certificates, licenses and reports of any nature and permits and other
governmental authorizations of any kind and documents related thereto; and

(iii) site access agreements and other documents customary or advisable
associated with environmental compliance and control.

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Notwithstanding any of the foregoing, any Material Transactions and any
transaction that is out of the ordinary course of Company’s business will be
subject to the prior approval of the Board or Officers, as applicable.

Section 6. Compensation and Reimbursement.

 

(ee) Asset-Based Fee.  Company shall pay to Manager quarterly, for each fiscal
quarter, commencing with the fiscal quarter in which the In-Service Date occurs,
in arrears, within 20 Business Days after the end of such fiscal quarter
(subject to Section 6(f)(ii)), a fee (the “Asset-Based Fee”) equal to the
product of (i) 0.375% (expressed as a decimal) and (ii) the Asset-Based Fee Base
as of the Calculation Date at the conclusion of such fiscal quarter;  provided,
that the Asset-Based Fee payable in respect of the quarter in which
the In-Service Date occurs shall be prorated based on the number of days in such
quarter after the In-Service Date.  Manager shall provide to the Board, as
promptly as practicable before the due date, Manager’s calculation of each
Asset-Based Fee due, together with supporting records and documentation
therefor.  Company shall provide Manager access to its books and records to the
extent necessary for Manager to comply with the foregoing sentence.

(ff) Charge for Services.  In consideration for certain administrative, overhead
and other costs incurred by Manager prior to the Effective Date and/or
In-Service Date to permit Manager to provide the Services hereunder, Company
shall pay Manager a fee totaling $1,000,000.00, of which (i) $500,000.00 shall
be paid on the Effective Date and (ii) the remaining $500,000.00 shall be paid
on the In-Service Date (or if such date is not a Business Day, on the first
Business Day thereafter).  In addition to the foregoing fee payable in
accordance with the immediately preceding sentence, and the Transaction Advisory
Fee described below, Company shall compensate Manager for the provision of the
Services by paying Manager an amount equal to Manager’s Overhead Costs (also
referred to herein as the “Management Fee”).  To the extent costs and expenses
described under Section II 3 and II 4 of COPAS and any overhead charges
described under Section III of COPAS have been allocated to Company or any
Subsidiary under COPAS and paid by Company pursuant to the terms of the Contract
Operating Agreement,  Manager shall credit such amounts to Company against the
Management Fee, but such amounts shall be subject to the Administrative Fee.

(gg) Transaction Advisory Fee.  Simultaneously with the closing of each
Transaction (including, to the extent not previously included in the fee
calculation, any subsequent closing or date on which “carried interest”
consideration or deferred or earn-out payments are made),  Company shall pay to
Manager a fee (the “Transaction Advisory Fee”) not to exceed 2.00% of the
Transaction Value (including with respect to any subsequent closing or date on
which “carried interest” consideration or deferred or earn-out payments are
made) of such Transaction, each amount to be determined by Manager in its sole
discretion.  Manager shall provide to Company, as promptly as practicable before
the Board or Officers, as appropriate, considers the applicable Transaction for
approval, Manager’s Transaction Advisory Fee(s).

(hh) Taxes.  In addition to the other sums payable under this Agreement, Company
shall pay, and hold Manager harmless against, all sales, use or other taxes, or
other fees or assessments imposed by any Legal Requirement in connection with
the provision of the Services, other than income, franchise or margin taxes
measured by Manager’s net income or margin and

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any gross receipts of other privilege taxes imposed on Manager.  Manager and
Company shall cooperate with each other and use commercially reasonable efforts
to assist the other in entering into such arrangements as the other may
reasonably request in order to minimize, to the extent lawful and feasible, the
payment or assessment of any taxes relating to the transactions contemplated by
this Agreement; provided, however, that nothing in this Section 6(d) shall
obligate either Party to cooperate with, or assist, the other Party in any
arrangement proposed by the other Party that would, as determined by such Party
in such Party’s sole discretion, have a detrimental effect on such Party.

(ii) Audit Rights.  At all times during the term of this Agreement, Manager
shall maintain books of account, receipts, disbursements, Permits and all other
records relating to the Services performed hereunder (the “Records”), and all
accounting Records shall be maintained in all material respects in accordance
with generally accepted accounting principles.  Company shall have the right,
upon 30 days’ prior Notice to Manager, and at reasonable times during usual
business hours of Manager or its Affiliates to, no more than twice per
year, audit the Records;  provided, however, that such audit does not
unreasonably interfere with the operations of Manager or its Affiliates. 
Company shall bear all costs and expenses incurred in connection with any
audit.  Manager shall, and shall cause its Affiliates to, subject to the
provisions of Section 6(h), review and respond in a timely manner to any claims
or inquiries made by Company regarding matters revealed by any such
audit. Notwithstanding anything herein to the contrary, Manager shall not be
obligated to disclose or make available to Company any information prohibited by
Legal Requirement or restricted by contractual obligations of
confidentiality. This Section 6(e) shall survive termination or expiration of
this Agreement for a period of two years from termination or expiration with
respect to periods prior to such termination or expiration.

(jj) Invoicing and Payment; Issuance of Company Securities.

(i) Manager may invoice Company from time to time, including, without
limitation, advance requests for the current month’s estimated costs, fees, and
expenses, as determined by Manager in its sole discretion.  Any over or under
payments will be reconciled in subsequent invoices with appropriate credits or
deductions, as applicable.  Company shall pay invoiced amounts promptly, and in
any event within 10 days, after the receipt of each such invoice.
 Notwithstanding the foregoing or anything else in this Agreement to the
contrary, Manager may elect to retain proceeds that it receives on behalf of
Company to the extent it would otherwise invoice Company for such amounts and in
such event it shall show any such retained amounts as a credit on such
invoice. Failure by Manager to submit an invoice for any amounts due hereunder
shall not relieve Company of its payment obligations under this Agreement when
due hereunder.

(ii) Manager may elect to receive (a) the $1,000,000.00 fee described in Section
6(b), (b) the Asset Based Fee for a fiscal quarter and (c) any Transaction
Advisory Fee, in each case, that has not been paid, in any series or class of
Member Interest (including any Common Units or Class A Units (as each such term
is defined in the Operating Agreement)) selected by Manager with a per
interest/unit value based upon, in the case of Common Units, the average closing
price per unit on the principal National Securities Exchange (as defined in the

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Operating Agreement) on which the Common Units are listed or traded for the 30
Trading Days (as defined in the Operating Agreement) preceding the date the
Equity Election Notice is sent, as specified in such Notice, or if not Common
Units or otherwise traded on a National Securities Exchange, based on the fair
market value thereof, as determined by Manager and the Board (or, in the event
of a dispute, by an Independent Appraiser, subject in each such case to Section
6(h)).  To exercise the right specified in this Section 6(f)(ii), Manager shall
deliver Notice of its election (the “Equity Election Notice”) to the Board. Any
such election must be made before payment of the $1,000,000.00 fee described in
Section 6(b), the Asset Based Fee in respect of the relevant fiscal quarter or
the Transaction Advisory Fee, as applicable, and will be effective as of the
first day of such fiscal quarter.  Manager will be entitled to receive such
Member Interests no later than 20 Business Days after commencement of the
relevant fiscal quarter or receipt by Company of the Equity Election Notice,
whichever is later; provided, however, that the issuance of Member Interests to
Manager shall not occur prior to the approval of (i) the listing or admission
for trading of such Member Interests (or the Member Interests into which such
Member Interests are convertible, as the case may be) by the principal National
Securities Exchange upon which such Member Interests are then listed or admitted
for trading, (ii) the issuance of any series or class of Member Interests, if
any such approval is required pursuant to the rules and regulations of such
National Securities Exchange or the Operating Agreement, respectively and (iii)
the Board, if required by applicable Legal Requirements or the Operating
Agreement.  If such approvals have not been obtained on or before the 30th
calendar day following the Board’s receipt of the Equity Election Notice and
such approvals are required for the issuance of such Member Interests, then
Manager shall have the right to either rescind the election to receive Member
Interests or elect to receive other Company securities having such terms as the
Parties may approve that do not require such approvals, that will provide (i)
the same economic value, in the aggregate, as such Member Interests specified in
the Equity Election Notice would have had at the time of the Board’s receipt of
the Equity Election Notice, as determined by the Parties, and (ii) if desired by
Manager, and conditioned upon the receipt of any approval from Company’s
unitholders to the extent required pursuant to the rules and regulations of the
principal National Securities Exchange upon which such Member Interests are then
listed or admitted for trading, for the subsequent conversion of such Company
securities into Common Units within not more than 12 months following the
Board’s receipt of the Equity Election Notice upon the satisfaction of one or
more conditions that are acceptable to the Parties.  Company agrees not to take
any action, including amending the Operating Agreement, that would restrict or
prohibit Manager from making an Equity Election Notice hereunder or under
Section 8(f) or Company from complying with an Equity Election Notice, other
than as contemplated by Amendment No. 5 to the Operating Agreement at the
request of the Class Z Member (as defined therein), and other than in connection
with the issuance of the new Member Interests referred to in Exhibit A.

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(kk) Account Access.    In addition to the foregoing, Manager may pay (i) all
costs and expenses incurred in connection with its performance of the Services
and (ii) all financial obligations of Company or its Subsidiaries that may be
due and owing either out of the Accounts or out of its own funds; provided,
however, that Company shall fully reimburse Manager for any and all costs and
expenses Manager pays out of its own funds pursuant to Section 6(g).  Company
shall ensure that Manager is duly authorized to draw upon all of the Accounts
(and shall make all necessary arrangements with its financial institution(s))
for purposes of permitting Manager to pay (or reimburse itself for) any costs,
expenses or fees due and owing to Manager hereunder, as determined by
Manager.  In the event Manager reasonably anticipates that the funds in the
Accounts are not sufficient to pay (or reimburse itself for) any costs, expenses
or fees due for any month or other period, then Manager shall request Company to
cause sufficient funds to be deposited in the Accounts to cover all such
anticipated costs, expenses and fees and shall provide Company with reasonable
documentation to support such request.  Company shall cause such funds to be
deposited in the Accounts within 15 days of Manager’s request; it being
understood that if Company fails to make such deposits, Manager shall not be
liable in any manner for any costs, expenses or other liabilities Company, its
Subsidiaries or Manager may incur as a result of Company’s failure to timely
deposit such funds.  Notwithstanding anything to the contrary contained herein,
Manager shall have no obligation to pay any costs and expenses referenced above
out of its own funds (and seek reimbursement from Company), it being intended
instead that Company, at Manager’s request, will ensure that the funds to pay
such costs and expenses are deposited in the Accounts as described above.

(ll) Disputed Charges.

(i) THE BOARD MAY, ONLY WITHIN 180 DAYS AFTER PAYMENT, RECEIPT OF AN INVOICE
FROM MANAGER OR WITHDRAWAL BY MANAGER FROM THE ACCOUNTS,  AS APPLICABLE, TAKE
WRITTEN EXCEPTION TO ANY CHARGE, ON THE GROUND THAT THE SAME WAS NOT
AN ACTUAL (OR, IF APPLICABLE, REASONABLE) COST, FEE OR EXPENSE INCURRED BY OR
DUE TO MANAGER, OR ON ACCOUNT OF ANY ERROR OR INACCURACY ON ANY INVOICE.  WITH
RESPECT TO ANY INVOICES, PAYMENTS OR WITHDRAWALS MADE IN ADVANCE OF THE
PERFORMANCE OF ANY SERVICES, INCURRENCE OF EXPENSES OR SATISFACTION OF
CONDITIONS NECESSARY TO DETERMINE THE AMOUNT OF ANY FEES PAYABLE HEREUNDER, SUCH
180 DAY PERIOD SHALL COMMENCE UPON THE CONCLUSION OF THE MONTH IN WHICH SUCH
SERVICES WERE RENDERED, EXPENSES INCURRED OR THE SATISFACTION OF ALL CONDITIONS
NECESSARY TO DETERMINE THE AMOUNT OF SUCH FEE(S), AS THE CASE MAY BE.  COMPANY
SHALL NEVERTHELESS PAY MANAGER ANY INVOICED OR OTHER AMOUNT IN FULL WHEN DUE OR
REQUESTED, OR DEPOSIT SUCH AMOUNTS INTO THE ACCOUNTS WHEN SO REQUESTED FOR
WITHDRAWAL BY MANAGER.  SUCH PAYMENT OR DEPOSIT SHALL NOT BE DEEMED A WAIVER OF
THE RIGHT OF COMPANY TO RECOUP OR RECEIVE CREDIT FOR ANY CONTESTED PORTION OF
ANY AMOUNT SO PAID.  IF THE AMOUNT AS TO WHICH

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SUCH WRITTEN EXCEPTION IS TAKEN, OR ANY PART THEREOF, IS ULTIMATELY DETERMINED
NOT TO BE AN ACTUAL (OR, IF APPLICABLE, REASONABLE) COST, FEE OR EXPENSE
INCURRED BY OR DUE MANAGER, OR IS OTHERWISE AN ERROR OR INACCURACY, SUCH AMOUNT
OR PORTION THEREOF (AS THE CASE MAY BE) SHALL BE CREDITED AGAINST FUTURE AMOUNTS
DUE HEREUNDER OR, UPON EXPIRATION OR TERMINATION OF THIS AGREEMENT AFTER ALL
SUCH CREDITS HAVE BEEN APPLIED, REFUNDED BY MANAGER TO COMPANY.  COMPANY SHALL
HAVE NO RIGHT TO DISPUTE ANY PAYMENT, INVOICE OR WITHDRAWAL AFTER SUCH 180 DAY
PERIOD, AND SHALL BE DEEMED TO HAVE WAIVED ANY CLAIMS OR RIGHTS WITH RESPECT TO
SUCH AMOUNTS TO THE EXTENT NOT DISPUTED WITHIN SUCH PERIOD.

(ii) If, within 20 days after receipt of any written exception pursuant to
Section 6(h)(i), the Board and Manager have been unable to resolve any dispute,
either of the Board or Manager may submit the dispute to an Independent
Appraiser (in the case of disagreements with respect to valuation matters, as
provided in the definitions of “Asset-Based Fee Base,” “Contract Purchase
Price,” “Contract Sales Price,” and “Independent Appraiser,” and in Section
6(f)(ii)) or an independent third party auditing firm (with respect to any other
matter) that is mutually agreeable to the Board, on the one hand, and Manager,
on the other hand, as applicable.  If an auditing firm is used to resolve the
dispute and the Parties are unable to agree on an independent third party
auditing firm 15 days after a matter is to have been submitted to an independent
third party auditing firm, within seven days after the end of such 15 day
period, each Party shall submit the names of three firms that have no prior
material relationship with such Party, and each Party shall be entitled to
strike one name from the other Party’s list of firms, and the independent third
party auditing firm shall be selected by lot from the remaining firms.  The
Parties shall cooperate with such Independent Appraiser or auditing firm and
shall provide such Independent Appraiser or auditing firm access to such books
and records as may be reasonably necessary to permit a determination by such
Independent Appraiser or auditing firm.  The resolution by such Independent
Appraiser or auditing firm shall be final and binding on the Parties.

(mm) Audit Rights of Manager.  Manager shall have the right, upon 30 days’ prior
Notice to Company, and at reasonable times during usual business hours of
Company or its Affiliates to, no more than twice per year, audit Company’s
records to confirm the appropriate amounts due to Manager under this Agreement;
 provided, however, that such audit does not unreasonably interfere with the
operations of Company or its Affiliates.  Manager shall bear all costs and
expenses incurred in connection with any audit.  Company shall, and shall cause
its Affiliates to, review and respond in a timely manner to any claims or
inquiries made by Manager regarding matters revealed by any such audit. 
Notwithstanding anything herein to the contrary, Company shall not be obligated
to disclose or make available to Manager any information prohibited by Legal
Requirements or restricted by contractual obligations of confidentiality. This
Section 6(i) shall survive termination or expiration of this Agreement for a
period of two years

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from the date of termination of expiration with respect to periods prior to such
termination or expiration.

(nn) New Interests.  On or before the first Asset Acquisition after the
Effective Date, Company shall issue to Manager or its designee, free and clear
of all Liens (except those Liens arising under applicable securities laws and
under the Operating Agreement), the New Interests pursuant to an amendment to
the Operating Agreement, a purchase agreement and other ancillary documents in
form and substance acceptable to Manager.  Company acknowledges and agrees that
Manager would be damaged irreparably if Company’s obligations under this Section
6(j) are not performed in accordance with their specific terms or are otherwise
breached. Accordingly, Company agrees that Manager will be entitled to seek an
injunction or injunctions to prevent breaches of the provisions of this Section
6(j) and to enforce specifically this Section 6(j) and its terms and provisions
in any action instituted in any court of the United States or any state thereof
having jurisdiction over the parties and the matter, in addition to any other
remedy to which it may be entitled, at law or in equity.

Section 7. Representations and Warranties; Covenants.

 

(oo) Company Representations.  Company represents and warrants to Manager, as of
the Effective Date, as follows:

(i) Organization; Requisite Power and Authority.  Company (a) is, together with
each Subsidiary, validly existing and in good standing under the laws of the
State of Delaware or other applicable jurisdiction of organization or formation,
as the case may be, and (b) has all requisite power and authority, and is duly
authorized, to enter into this Agreement and to carry out the transactions
contemplated hereby.

(ii) Due Authorization.  The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary action, including by
Special Approval (as defined in the Operating Agreement), on the part of
Company.

(iii) No Conflict.  The execution, delivery and performance by Company of this
Agreement and the consummation of the transactions contemplated by this
Agreement do not (a) violate in any material respect any provision of any Legal
Requirement applicable to Company or any Subsidiary, or violate its certificate
of formation or Operating Agreement (or similar organizational documents, as the
case may be) or any order, judgment or decree of any court or other Governmental
Authority binding on Company or any Subsidiary; (b) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any material Company Contractual Obligation; (c) result in or require the
creation or imposition of any Lien upon any of the properties or assets of
Company or any Subsidiary or result in the acceleration of any indebtedness owed
by Company or any Subsidiary; (d) result in any default, noncompliance,
suspension, revocation, impairment, forfeiture or

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nonrenewal of any Permit material to Company’s or any Subsidiary’s operations or
any of its properties; or (e) require any approval of equityholders or any
approval or consent of any Person under any Company Contractual Obligation or
the certificate of formation of Company or the Operating Agreement (or similar
organizational documents, as the case may be) of Company or any Subsidiary,
except in the case of each of the foregoing clauses for such approvals or
consents which have been obtained or are otherwise contemplated by this
Agreement.

(iv) Binding Obligation.  This Agreement has been duly executed and delivered by
Company and is the legal, valid and binding obligation of Company, enforceable
against Company in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally or by equitable principles
relating to enforceability (whether enforcement is sought in equity or at law).

(pp) Manager Representations.  Manager represents and warrants to Company, as of
the Effective Date, as follows:

(i) Organization; Requisite Power and Authority.  Manager (a) is validly
existing and in good standing under the laws of the State of Texas and (b) has
all requisite power and authority, and is duly authorized, to enter into this
Agreement and to carry out the transactions contemplated hereby.

(ii) Due Authorization.  The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary action on the part of
Manager.

(iii) No Conflict.  The execution, delivery and performance by Manager of this
Agreement and the consummation of the transactions contemplated by this
Agreement do not (a) violate in any material respect any provision of any Legal
Requirement applicable to Manager, or violate its certificate of formation or
limited liability company agreement or any order, judgment or decree of any
court or other Governmental Authority binding on Manager; (b) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both)
a default under, any material contract or agreement to which Manager is a party
or by which its assets are bound; (c) result in, or require the creation or
imposition of, any Lien upon any of the properties or assets of Manager or
result in the acceleration of any indebtedness owed by Manager; (d) result in
any default, noncompliance, suspension, revocation, impairment, forfeiture or
nonrenewal of any Permit material to Manager’s operations or any of its
properties; or (e) require any approval of equityholders or any approval or
consent of any Person under any contract or agreement to which Manager is a
party or by which its assets are bound or the certificate of formation or
limited liability company agreement of Manager, except for such approvals or
consents which have been obtained or otherwise contemplated by this Agreement.

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(iv) Binding Obligation.  This Agreement has been duly executed and delivered by
Manager and is the legal, valid and binding obligation of Manager, enforceable
against Manager in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally or by equitable principles
relating to enforceability (whether enforcement is sought in equity or at law).

(qq) Covenants of Manager.  Except for the transactions described in this
Agreement (including, without limitation, those described in Section 4(d)),
Manager covenants and agrees with Company as follows:

(i) Manager will not commingle its assets with those of Company or its
Subsidiaries, except to the extent production funds are received by Manager
prior to remitting proceeds to royalty owners, working interest owners, and
Company or as otherwise contemplated by this Agreement.

(ii) Manager will not hold title to any assets owned by Company or its
Subsidiaries and will cause each of Company and its Subsidiaries to hold its
assets in its own name.

(iii) Manager will maintain separate accounts, financial statements, books and
records from those of Company or its Subsidiaries.

(iv) Manager shall use commercially reasonable efforts to make Persons available
to serve as Officers of Company if approved by the Board.

(v) Manager will notify Company of any Change of Control of Manager within 10
Business Days of such Change of Control.

(vi) Manager will comply with applicable Legal Requirements in all material
respects in its performance of the Services.

Section 8. Term and Termination.

 

(rr) Term.  This Agreement will take effect and become binding on the Parties as
of the Effective Date, subject to Section 2.  Subject to Section 2, the
respective rights, duties, and obligations of the Parties hereunder shall
commence on the Effective Date and shall, unless terminated as provided herein,
(i) continue initially until May 8, 2024, (ii) be renewed and shall continue
automatically thereafter for an additional 10 year term unless both Manager and
Company provides Notice to the other Party of its desire not to renew this
Agreement at least 180 days prior to May 8, 2024, and (iii) be renewed and shall
continue automatically thereafter for additional one year terms unless either
Party provides Notice to the other Party hereto of its desire not to renew this
Agreement at least 180 days prior to such anniversary date. Notwithstanding the
foregoing, Manager or Company may terminate this Agreement at any time after the
24-month anniversary of the In-Service Date by giving Notice of termination to
the other Party at least 180 days prior to the date as of which such termination
is to be effective;  provided, further, that Manager may terminate this
Agreement at any time on or after termination

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or expiration of the Transition Agreement, effective no earlier than 180 days
after Manager provides Notice to Company of Manager’s desire to so terminate. 

(ss) Termination by Manager.  This Agreement may be terminated at any time by
Manager upon Company’s material breach of this Agreement, if (i) such breach is
not remedied within 60 days (or 30 days in the event of a failure to make any
payment hereunder, which shall be deemed a material breach hereunder) after
Company’s receipt of Notice thereof, or such longer period (except for a
material breach arising out of a failure to make payment hereunder) as is
reasonably required to cure such breach; provided, however, that Company
commences to cure such breach within the applicable period and proceeds with due
diligence to cure such breach, and (ii) such breach is continuing at the time
Notice of termination is delivered to Company.

(tt) Termination by Company.  This Agreement may be terminated at any time by
Company, subject to approval of the Board, only upon (i) Manager’s material
breach of this Agreement, if (A) such breach is not remedied within 60 days
after Manager’s receipt of Notice thereof, or such longer period as is
reasonably required to cure such breach; provided, however, that Manager
commences to cure such breach within the applicable period and proceeds with due
diligence to cure such breach, and (B) such breach is continuing at the time
Notice of termination is delivered to Manager, (ii) a Change of Control of
Manager, if (A) Company provides Notice of its desire to terminate this
Agreement within five Business Days after receiving Notice of such Change in
Control, and (B) Company pays the estimated termination payments required to be
paid by Company pursuant to Section 8(f) at the time it delivers its termination
Notice (as estimated by Manager in its reasonable discretion) and Company and/or
Manager, as the case may be, shall make any additional payments (in the case of
Company) or shall make any refunds (in the case of Manager) of termination
payments due under Section 8(f) within 30 days of termination.

(uu) Return of Records.  Upon the termination or expiration of this Agreement,
subject to the License Agreement and the Transition Agreement, Manager shall
deliver to Company as promptly as reasonably possible, all records, reports,
books, data and other material(s) related to Company or any of its Subsidiaries,
the Properties or the performance of the Services to the extent such materials
constitute Confidential Information of Company or Subsidiary books and records
maintained by Manager on behalf of such Persons and, in each case, that do not
constitute Manager Confidential Information, Operator Confidential Information
(as defined in the Contract Operating Agreement), or Data or Derivatives (as
defined in the License Agreement) and are in the possession of Manager and its
Affiliates.

(vv) Transition Services.  If this Agreement is terminated other than pursuant
to Section 8(b),  Manager shall, until the effective date of termination,
continue to provide the Services (and shall be compensated therefor as provided
herein) in accordance with this Agreement and upon request from the Board or
Officers, as appropriate, will reasonably cooperate with Company in the
transition of such Services to a new manager appointed by Company by using
commercially reasonable efforts to facilitate the transfer of operations and the
management of Properties to the successor manager.

(ww) Termination Payment.    

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(i) In the event this Agreement is terminated or expires for any reason other
than (A) under the second sentence of Section 8(a) or by Company under Section
8(c), (B) by Manager for failure of the conditions precedent set forth in
Section 2, or (C) by Manager or Company if the In-Service Date has not occurred
by the date specified in Section 2(a), then, within 30 days of termination or
expiration of this Agreement, Company shall pay to Manager, in addition to the
amount described in Section 8(f)(ii), an amount equal to $5,000,000.00 plus the
product of (x) 5.00% and (y) the aggregate Transaction Value of all Asset
Acquisitions that have been consummated on or before the date on which
termination or expiration became effective.

(ii) Notwithstanding anything herein to the contrary, in the event of expiration
or termination of this Agreement for any reason, each Party shall pay to the
other Party any accrued but unpaid obligations of such Party as of the date of
termination or expiration, in addition to any severance costs incurred by
Manager and its Affiliates prior to or after termination or expiration, as
provided in the definition of Overhead Costs. 

(iii) Further, if this Agreement is terminated by Company under Section 8(a)
after the 24-month anniversary of the In-Service Date on 180 days' Notice, as
specified therein, in addition to the payment under Section 8(f)(i) and the
payment of any severance costs incurred prior to or after such termination, as
provided in the definition of Overhead Costs and Section 8(f)(ii), Company shall
also be required to pay all other fixed and variable, direct and indirect costs
and expenses incurred by Manager, prior to or after termination, as estimated by
Manager, that result or will result from such termination of this Agreement,
upon the later to occur of (A) the payments contemplated above and (B) 10
Business Days after Manager furnishes to Company an invoice therefor supported
by reasonable documentation thereof.   

(iv) Within 10 Business Days of termination or expiration of this Agreement,
Manager may elect to receive the payment due under this Section 8(f) in Member
Interests, effective as of the date of termination or expiration, by no later
than the 30th day following termination or expiration (or in the case of
expenses effective 10 Business Days after Company’s receipt of the invoice
therefor accompanied by reasonable supporting documentation therefor), in
accordance with and subject to the provisions set forth in Section 6(f)(ii), by
providing Company with an Equity Election Notice within the initial 10 Business
Day period following termination or expiration of this Agreement.

Section 9. Limitation of Liability; Indemnification.

 

(xx) Limitation of Manager Party Liability.  Notwithstanding Manager’s agreement
to perform, or cause to be performed, the Services in accordance with the
provisions hereof, Company acknowledges, on its own behalf and on behalf of its
Subsidiaries, that performance by Manager or any other Person of Services
pursuant to this Agreement will not subject Manager, its Affiliates or their
respective equity holders, directors, officers, members, agents or employees

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(each, a “Manager Party”) to any Losses whatsoever (including, without
limitation, any Losses arising under a JOA due to the breach or default by a
third party under such JOA), except as directly caused by the gross negligence,
willful misconduct or fraudulent conduct on the part of such Manager Party;
provided, however, that Manager’s and each other Manager Party’s aggregate
liability, collectively, as a result of such gross negligence, willful
misconduct or fraudulent conduct within any 12 month period under this Agreement
and any Related Contracts entered into as of the Effective Date will be limited
to an amount not to exceed the aggregate Management Fee, Transaction Advisory
Fee and Asset-Based Fee paid by Company to Manager during the preceding 12
months; provided, however, that if any of such Losses are covered by any
insurance policy of Company, the aggregate liability of such Manager Party with
respect to such Losses shall be reduced by the amount recovered by Company under
such policy in respect of such Losses.

(yy) Company Indemnification.  EXCEPT AS SPECIFICALLY SET FORTH IN THIS
AGREEMENT, COMPANY, ON ITS OWN BEHALF AND ON BEHALF OF ITS SUBSIDIARIES, HEREBY
AGREES TO INDEMNIFY AND HOLD HARMLESS EACH MANAGER PARTY FROM ANY AND ALL LOSSES
ARISING FROM, IN CONNECTION WITH, OR RELATING TO (I) THE PROVISION OR USE OF ANY
SERVICE OR PRODUCT PROVIDED HEREUNDER, TO THE EXTENT NOT DIRECTLY CAUSED BY THE
GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR FRAUDULENT CONDUCT OF SUCH MANAGER PARTY
AND (II) ANY MATERIAL BREACH, VIOLATION OR INACCURACY OF ANY COVENANT,
REPRESENTATION OR WARRANTY OF COMPANY OR ITS AFFILIATES HEREUNDER.    

(zz) Company Special Indemnification.  NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, COMPANY SHALL REIMBURSE EACH MANAGER PARTY WITHIN 10
DAYS OF RECEIPT FOR ANY REASONABLE, DOCUMENTED, OUT-OF-POCKET LEGAL OR
PROFESSIONAL FEES AND EXPENSES (PROVIDED THAT, THE MANAGER PARTIES SHALL NOT BE
REQUIRED TO PROVIDE COPIES OF ANY DETAILED TIME ENTRIES OR INFORMATION THAT MAY
BE ATTORNEY-CLIENT PRIVILEGED) INCURRED IN THE EVALUATION, DEFENSE OR SETTLEMENT
OF ANY AND ALL CLAIMS OF THIRD PARTIES THAT HOLD OR OWN ANY SECURITIES OF
COMPANY AS OF THE EFFECTIVE DATE IN ANY WAY ARISING FROM, OUT OF OR IN
CONNECTION WITH, OR OTHERWISE RELATING TO, THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT (INCLUDING WITHOUT LIMITATION THE TRANSACTIONS AND AGREEMENTS REFERRED
TO IN SECTION 6(j)), THE CONTRACT OPERATING AGREEMENT, THE TRANSITION AGREEMENT,
THE LICENSE AGREEMENT, AND ANY OTHER RELATED CONTRACTS EXECUTED AND DELIVERED ON
THE EFFECTIVE DATE EXCEPT AS MAY BE AGREED IN WRITING BY THE PARTIES OR TO THE
EXTENT SPECIFICALLY COMMUNICATED TO COMPANY IN WRITING BY MANAGER.

(aaa) Manager Indemnification.  EXCEPT AS SPECIFICALLY SET FORTH IN THIS
AGREEMENT AND SUBJECT TO THE PROVISIONS OF SECTION 9(a) and SECTION 9(c),
MANAGER HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS COMPANY AND ITS
SUBSIDIARIES AND AFFILIATES AND EACH OF THEIR RESPECTIVE EQUITY HOLDERS,
MANAGERS, OFFICERS, UNITHOLDERS, AGENTS

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AND EMPLOYEES FROM ANY AND ALL LOSSES TO THE EXTENT ARISING FROM, IN CONNECTION
WITH, OR RELATING TO A MANAGER PARTY’S GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR
FRAUDULENT CONDUCT IN MANAGER’S PERFORMANCE OF THE SERVICES.

(bbb) Negligence; Strict Liability.  EXCEPT AS EXPRESSLY PROVIDED IN SECTION
9(b),  SECTION 9(c) AND SECTION  9(f)(iv), THE INDEMNITY OBLIGATION IN SECTION
9(b), SECTION 9(c) AND SECTION 9(f)(iv) SHALL APPLY REGARDLESS OF CAUSE OR OF
ANY NEGLIGENT ACTS OR OMISSIONS (INCLUDING, WITHOUT LIMITATION, SOLE NEGLIGENCE,
CONCURRENT NEGLIGENCE OR STRICT LIABILITY), BREACH OF DUTY (STATUTORY OR
OTHERWISE), VIOLATION OF LAW OR OTHER FAULT OF ANY INDEMNIFIED PERSON OR ANY
PRE-EXISTING DEFECT; PROVIDED, HOWEVER, THAT SOLELY WITH RESPECT TO SECTION
9(b), THIS PROVISION SHALL NOT APPLY TO THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT
OR FRAUDULENT CONDUCT OF ANY INDEMNIFIED PERSON OR IN ANY WAY LIMIT OR ALTER ANY
QUALIFICATIONS SET FORTH IN SUCH INDEMNITY OBLIGATION EXPRESSLY RELATING TO
GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR FRAUDULENT CONDUCT.  BOTH PARTIES AGREE
THAT THIS STATEMENT COMPLIES WITH THE REQUIREMENT KNOWN AS THE “EXPRESS
NEGLIGENCE RULE” TO EXPRESSLY STATE IN A CONSPICUOUS MANNER AND TO AFFORD FAIR
AND ADEQUATE NOTICE THAT THIS AGREEMENT HAS PROVISIONS REQUIRING ONE PARTY TO BE
RESPONSIBLE FOR THE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANOTHER
PARTY.

(ccc) Exclusion of Damages; Disclaimers.

(i) NO PARTY SHALL BE LIABLE TO ANY OTHER PERSON UNDER THIS AGREEMENT OR FOR
EXEMPLARY, PUNITIVE, CONSEQUENTIAL, SPECIAL, INDIRECT OR INCIDENTAL DAMAGES,
EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND REGARDLESS OF THE FORM IN
WHICH ANY ACTION IS BROUGHT; PROVIDED, HOWEVER, THAT THIS SECTION 9(e)(i) SHALL
NOT LIMIT A PARTY’S RIGHT TO RECOVERY UNDER SECTION 9(b) OR SECTION 9(f)(iv) FOR
ANY DAMAGES TO THE EXTENT SUCH PARTY IS REQUIRED TO PAY SUCH DAMAGES TO A THIRD
PARTY IN CONNECTION WITH A MATTER FOR WHICH SUCH PARTY IS OTHERWISE ENTITLED TO
INDEMNIFICATION UNDER SECTION 9(b) OR SECTION 9(f)(iv), AS THE CASE MAY BE.

(ii) OTHER THAN AS SET FORTH IN SECTION 5(a) HEREOF, MANAGER DISCLAIMS ANY AND
ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR
WRITTEN) WITH RESPECT TO SERVICES RENDERED OR PRODUCTS PROCURED FOR COMPANY OR
ITS SUBSIDIARIES, OR ANY PART THEREOF, INCLUDING, WITHOUT LIMITATION, ANY AND
ALL IMPLIED WARRANTIES OF NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS OR
SUITABILITY FOR ANY PURPOSE (WHETHER MANAGER

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KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF
ANY SUCH PURPOSE) WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE
IN THE TRADE OR BY COURSE OF DEALING.

(iii) MANAGER MAKES NO EXPRESS OR IMPLIED WARRANTY, GUARANTY OR REPRESENTATION,
INCLUDING, WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF FITNESS FOR
PARTICULAR PURPOSE, SUITABILITY OR MERCHANTABILITY REGARDING ANY EQUIPMENT,
MATERIALS, SUPPLIES OR SERVICES ACQUIRED FROM VENDORS, SUPPLIERS OR
SUBCONTRACTORS.  COMPANY’S AND ITS SUBSIDIARIES’ EXCLUSIVE REMEDIES WITH RESPECT
TO EQUIPMENT, MATERIALS, SUPPLIES OR SERVICES OBTAINED BY MANAGER FROM VENDORS,
SUPPLIERS AND SUBCONTRACTORS SHALL BE THOSE UNDER THE VENDOR, SUPPLIER AND
SUBCONTRACTOR WARRANTIES, IF ANY, AND MANAGER’S ONLY OBLIGATION, ARISING OUT OF
OR IN CONNECTION WITH ANY SUCH WARRANTY OR BREACH THEREOF, SHALL BE TO USE
DILIGENT EFFORTS TO ENFORCE SUCH WARRANTIES ON BEHALF OF COMPANY, AND COMPANY
(AND ITS SUBSIDIARIES) SHALL HAVE NO OTHER REMEDIES AGAINST MANAGER WITH RESPECT
TO EQUIPMENT, MATERIALS, SUPPLIES OR SERVICES OBTAINED BY MANAGER FROM ITS
VENDORS, SUPPLIERS AND SUBCONTRACTORS.

(iv) COMPANY, ON ITS OWN BEHALF AND ON BEHALF OF EACH SUBSIDIARY, ACKNOWLEDGES
AND AGREES THAT MANAGER AND/OR SOG MAY UTILIZE COMPANY OR SUBSIDIARY EMPLOYEES
FOR THE PROVISION OF, OR ASSISTING IN PROVIDING, THE SERVICES
HEREUNDER.  NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO
EVENT SHALL ANY MANAGER PARTY HAVE ANY LIABILITY OR BE RESPONSIBLE FOR ANY
LOSSES ARISING FROM THE ACTS OR OMISSIONS OF COMPANY OR SUBSIDIARY EMPLOYEES,
REGARDLESS OF THE NEGLIGENCE, GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR FRAUDULENT
CONDUCT OF ANY MANAGER PARTY, AND COMPANY SHALL INDEMNIFY, DEFEND AND HOLD EACH
MANAGER PARTY HARMLESS FROM ANY LOSSES RESULTING OR ARISING FROM ANY SUCH ACTS
OR OMISSIONS.  COMPANY, ON ITS OWN BEHALF AND ON BEHALF OF EACH SUBSIDIARY,
FURTHER ACKNOWLEDGES THAT MANAGER SHALL HAVE NO RESPONSIBILITY OR LIABILITY FOR
FAILURE TO PROVIDE SERVICES TO THE EXTENT COMPANY OR SUBSIDIARY EMPLOYEES ARE
UTILIZED OR FOR ENSURING ANY LEVEL OF SERVICE OR QUALITY FROM ANY COMPANY OR
SUBSIDIARY EMPLOYEE, IT BEING UNDERSTOOD COMPANY OR SUCH SUBSIDIARY SHALL REMAIN
RESPONSIBLE FOR ITS EMPLOYEES

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AND THE QUALITY AND LEVEL OF SERVICE PROVIDED BY SUCH EMPLOYEES.

(ddd) Claims; Defense and Settlement.

(i) Whenever any claim arises for indemnification hereunder, the indemnified
Person shall promptly Notify the indemnifying Party of the claim and, when
known, the facts constituting the basis for such claim, except that in the event
of any claim for indemnification hereunder resulting from or in connection with
any claim or legal proceedings by a third party, except as otherwise expressly
provided in this Section 9, such Notice shall specify, if known, the amount or
an estimate of the amount of the Losses asserted by such third party.

(ii) In connection with any claim giving rise to indemnity hereunder resulting
from or arising out of any claim or legal proceeding by a Person who is not a
Party, the indemnifying Party, may, upon Notice to the indemnified Person,
assume the defense of any such claim or legal proceeding.  Except with the
written consent of the indemnified Person, the indemnifying Party shall not
consent to the entry of any judgment or settlement arising from any such claim
or legal proceedings which, in each case, provides for any non-monetary relief
or does not include as an unconditional term thereof the giving by the claimant
or the plaintiff to the indemnified Person of a release from all Losses in
respect thereof, unless in the latter case the indemnifying Party has actually
paid to the indemnified Person the full amount of such judgment or
settlement.  Any indemnified Person shall be entitled to participate in (but not
control) the defense of any such claim or litigation resulting therefrom.  If
the indemnifying Party does not elect to control the litigation as provided
above, the indemnified Person may defend against such claim or litigation in
such manner as it may deem appropriate, including, without limitation, settling
such claim or litigation, after giving Notice of the same to the indemnifying
Party, on such terms as such indemnified Person may deem appropriate, and the
indemnifying Party shall promptly reimburse the indemnified Person (subject to
Section 9(a) and Section 9(c)) from time to time as such Losses are
incurred.  All indemnification hereunder shall be effected by payment of cash or
delivery of a certified or official bank check in the amount of the
indemnification Losses.

(iii) Except as provided above, all claims for Losses brought by third parties
against Company or any Subsidiary (x) arising out of or in any way relating to
the provision of Services hereunder and (y) not discharged by insurance required
hereunder, shall only be settled or, with Manager’s concurrence, defended by
Manager, at Company’s expense;  provided, however, that, notwithstanding
anything in this Agreement to the contrary, without limiting Company’s
indemnification obligations hereunder, Manager shall (as between Company and
Manager) be entitled to assume and control Manager’s and any Manager Party’s
defense and settlement of proceedings involving any claim of a third party
asserted by such Person in its capacity as a security holder, or an affiliate of
a security holder, of Company based upon, in connection with or

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arising from the transactions contemplated by this Agreement in any proceeding
in which any Manager Party is a named party, and Manager and any Manager Party
may each retain separate counsel for such purposes, the costs and expenses of
which would be subject to the reimbursement provisions of Section 9(c).

(eee) The remedies of each Party set forth herein are in addition to any other
remedy to which it may be entitled, at law or in equity.

Section 10. Insurance.

 

 Subject to Section 4(j), Company shall obtain and maintain from insurers who
are reliable and acceptable to Manager and authorized to do business in the
state or states or jurisdictions in which Services are to be performed by
Manager or other Service provider, insurance coverages in the types and minimum
limits as Manager determines to be appropriate and as is consistent with
standard industry practice; provided, however that decisions with respect to
directors and officers liability insurance policies shall be at the sole
discretion of the Board.  Company agrees upon Manager’s reasonable request from
time to time or at any time to provide Manager with certificates of insurance
and copies of such policies evidencing such insurance coverage.  Except with
respect to workers’ compensation coverage, the policies shall name Manager and
SOG as an additional insured and shall contain waivers by the insurers of any
and all rights of subrogation to pursue any claims or causes of action against
Manager or SOG.  Company shall use commercially reasonable efforts to ensure
that the policies shall provide that they will not be cancelled or reduced
without giving Manager and SOG at least 30 days’ prior Notice of such
cancellation or reduction.

(fff) Manager shall obtain and maintain from insurers who are reliable and
acceptable to Manager and authorized to do business in the state or states or
jurisdictions in which Services are to be performed by Manager or other Service
provider, insurance coverages in the types and minimum limits as Manager
determines to be appropriate and as is consistent with standard industry
practice.  Manager agrees upon Company’s reasonable request from time to time or
at any time to provide Company with certificates of insurance and copies of such
policies evidencing such insurance coverage.  Except with respect to workers’
compensation coverage, the policies shall name Company as an additional insured
and shall contain waivers by the insurers of any and all rights of subrogation
to pursue any claims or causes of action against Company.  Manager shall use
commercially reasonable efforts to ensure that the policies shall provide that
they will not be cancelled or reduced without giving Company at least 30 days’
prior Notice of such cancellation or reduction.

Section 11. Competition and Corporate Opportunities.

 Each Party and its Affiliates are and shall be free to engage in any business
activity whatsoever, including, without limitation, those that may be in direct
competition with the other Party and its Affiliates.  The Parties further
understand and agree that Manager and its Affiliates (including SOG) provide or
may provide services similar to the Services provided hereunder to certain of
its present and former Affiliates (including Sanchez Energy Corporation). To the
extent of any conflict of interest between the Parties or their Affiliates or in
the event of any other corporate or business opportunity (including, without
limitation, a corporate or business opportunity that might otherwise constitute,
an Asset Acquisition opportunity), the Parties agree that a Party and its

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Affiliates may resolve any such conflict in a manner and on terms that it deems
appropriate, in its sole discretion and without any further liability to the
other Party or any other Person.  Each Party, on its own behalf and on behalf of
its Subsidiaries, hereby waives any interest with respect to any such matter to
the same extent as if such matter had been presented to and rejected by such
Party and such Party’s Subsidiaries and such Party and such Party’s Subsidiaries
had then consented to the other Party or any of such other Party’s Affiliates
acting as it determines in its sole discretion and whether on behalf of itself
or any of its present or former Affiliates.

Section 12. Confidentiality.

 

(ggg) Company Confidential Information.  Manager shall maintain the
confidentiality of all Confidential Information; provided, however, that Manager
may disclose such Confidential Information (i) to its Affiliates to the extent
deemed by Manager to be reasonably necessary or desirable to enable it to
perform the Services (provided, however, that such Affiliate has entered into a
confidentiality agreement containing terms no less favorable than set forth in
this Section 12 or such Affiliate is informed of the confidentiality and non-use
provisions of this Agreement and agrees to comply with such provisions); (ii) to
the extent necessary for Manager or its Affiliates to provide services for third
parties that have interests in the Properties; (iii) in any judicial or
alternative dispute resolution proceeding to resolve disputes between Manager or
its Affiliates and Company or its Affiliates arising hereunder; (iv) to the
extent disclosure is legally required under applicable Legal Requirements
(provided, however, that prior to making any legally required disclosures in any
judicial, regulatory or dispute resolution proceeding, Manager shall promptly
Notify the Board thereof and, if requested by the Board, at Company’s sole cost
and expense, seek a protective order or other relief to prevent or reduce the
scope of such disclosure); (v) to Manager’s or its Affiliates’ existing or
potential lenders, investors, joint interest owners, purchasers or other parties
with whom Manager  or its Affiliates may enter into contractual relationships,
to the extent deemed by Manager to be reasonably necessary or desirable to
enable it to perform the Services or to obtain the financing or to pursue such
other transaction or contractual arrangement for which such disclosure is
necessary or desirable, as applicable (provided, however, that such third party
has entered into a confidentiality agreement for the benefit of Company
containing terms no less favorable than set forth in this Section 12); (vi) if
authorized by the Board or Officers, as appropriate, in writing; and (vii) to
the extent such Confidential Information was already known to Manager or its
Affiliates (through a source other than Company or its representatives or
Affiliates) or becomes publicly available (other than through a breach by
Manager of its obligations arising under this Section 12(a)) or is independently
made known to Manager or its Affiliates (by a source not known by Manager or
such Affiliate, as the case may be, to be in breach of a confidentiality
obligation with respect to such disclosure).  Manager acknowledges and agrees
that (x) the Confidential Information is being furnished to it for the sole and
exclusive purpose of enabling it to perform the Services and (y) the
Confidential Information may not be used by it for any other purposes, unless
disclosure is permitted by clauses (i), (ii), (iii), (iv), (v) and (vi) above,
and in such event may be used solely to the extent contemplated by such clauses,
or by clause (vii).

(hhh) Manager Confidential Information.  Company shall maintain the
confidentiality of all Manager Confidential Information;  provided, however,
that Company may disclose Manager Confidential Information (i) to third party
advisors of Company to the extent deemed by Company to be reasonably necessary
or desirable to enable it to evaluate or consummate an

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Asset Acquisition in the case of Acquisition Information (provided, however,
 that such third party has entered into a confidentiality agreement containing
terms no less favorable than set forth in this Section 12 or such third party is
informed of the confidentiality and non-use provisions of this Agreement and
agrees to comply with such provisions); (ii) in order to permit Manager to
perform the Services, as determined in advance by Manager in writing (provided,
however, that if Manager does not consent to such disclosure and as a result
thereof, Manager is not able to perform the Services, Company shall not be in
breach of this Agreement as a result thereof);  (iii) in any judicial or
alternative dispute resolution proceeding to resolve disputes between Company or
its Affiliates and Manager or its Affiliates arising hereunder; (iv) to the
extent disclosure is legally required under applicable Legal Requirements
(provided, however, that prior to making any legally required disclosures in any
judicial, regulatory or dispute resolution proceeding, Company shall promptly
Notify Manager thereof and, if requested by Manager,  at Manager’s sole cost and
expense, seek a protective order or other relief to prevent or reduce the scope
of such disclosure); (v) to Company’s existing or potential lenders, investors,
joint interest owners, purchasers or other parties with whom Company may enter
into contractual relationships in the case of Acquisition Information, to the
extent deemed by Company to be reasonably necessary or desirable to enable it to
evaluate or cause the consummation of the related Asset Acquisition  (provided,
however, that such third party has entered into a confidentiality agreement for
the benefit of Manager containing terms no less favorable than set forth in this
Section 12); (vi) if authorized by Manager in writing; and (vii) to the extent
such Manager Confidential Information was already known to Company (through a
source other than Manager or its representatives or Affiliates) or becomes
publicly available (other than through a breach by Company of its obligations
arising under this Section 12(b)) or is independently made known to Company or
its Affiliates (by a source not known by Company or such Affiliate, as the case
may be, to be in breach of a confidentiality obligation with respect to such
disclosure).  Company acknowledges and agrees that (x) the Manager Confidential
Information is being furnished to it for the sole and exclusive purpose of
enabling it to perform the Services and (y) the Manager Confidential Information
may not be used by it for any other purposes, unless disclosure is permitted by
clauses (i), (ii), (iii), (iv), (v) and (vi) above, and in such event may be
used solely to the extent contemplated by such clause, or by clause (vii).

(iii) Remedies and Enforcement.  Manager and Company each acknowledge and agree
that a breach by it of its obligations under this Section 12 would cause
irreparable harm to the other Party and that monetary damages would not be
adequate to compensate the other Party.  Accordingly, Manager and Company agree
that the other Party shall be entitled to immediate equitable relief, including,
without limitation, a temporary or permanent injunction, to prevent any
threatened, likely or ongoing violation of this Section 12, without the
necessity of posting bond or other security.  Manager’s and Company’s right to
equitable relief shall be in addition to other rights and remedies available to
Manager or Company, for monetary damages or otherwise.

(jjj) Business Conduct.  Nothing in this Section 12 shall prohibit Manager or
any of its Affiliates or other Persons to whom it provides similar services from
conducting business in the areas where the Properties are located or otherwise
competing with Company or its Subsidiaries.

Section 13. Mutual Release.

 For and in consideration of the Parties entering into the Agreement and the
Settlement Agreement and other good and valuable consideration, the

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receipt and sufficiency of which are hereby acknowledged by the Parties, the
Parties agree to the following mutual releases, which shall be effective as of
the Effective Date.

(kkk) Subject to clause (e) below, each of the Company Releasing Parties does
hereby remise, release, settle, and forever quitclaim and discharge each of the
SOG Released Parties from and against any and all claims, actions, causes of
action, suits, defenses, covenants, liabilities, demands, contracts, agreements,
obligations, damages, costs, and expenses (including attorneys’ fees) of every
kind whatsoever, in law or in equity, civil or criminal, known or unknown,
suspected or unsuspected, accrued or unaccrued, contingent or absolute, which
any Company Releasing Party hereto ever had or now has against or with respect
to any SOG Released Party, including, without limitation, those based upon,
arising from or relating to (i) the Contribution Agreement, (ii) any securities
of Company and (iii) the Lawsuit, in each case including, without limitation,
any “clawback” or similar rights such Company Releasing Party may have relating
to payments already made to any SOG Released Party with respect to any indemnity
or reimbursement obligation.

(lll) Subject to clause (e) below, each of the SOG Releasing Parties does hereby
remise, release, settle, and forever quitclaim and discharge each of the Company
Released Parties from and against any and all claims, actions, causes of action,
suits, defenses, covenants, liabilities, demands, contracts, agreements,
obligations, damages, costs, and expenses (including attorney’s fees) of every
kind whatsoever, in law or in equity, civil or criminal, known or unknown,
suspected or unsuspected, accrued or unaccrued, contingent or absolute, which
any SOG Releasing Party hereto ever had or now has against or with respect to
any Company Released Party based upon, arising from or relating to diminution in
value of any securities of Company beneficially owned by Manager or its
Affiliates as of the Effective Date which results or may have resulted from the
costs and expenses paid by Company or the efforts expended by Company
representatives in settling the Lawsuit.

(mmm) Subject to clause (e) below, the releases set forth in this Section
13 extend to claims that the Released Parties do not know or suspect to exist at
the time of the Effective Date, which, if known, might have affected the
Released Parties’ decision to agree to the terms of this Section 13.  The
Released Parties will be deemed to relinquish, to the extent it is applicable,
and to the fullest extent permitted by law, the provisions, rights, and benefits
of §1542 of the California Civil Code, which provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

(nnn) Subject to clause (e) below, in addition to the release set forth in this
Section 13, the Released Parties will be deemed to relinquish, to the extent
they are applicable, and to the fullest extent permitted by law, the provisions,
rights, and benefits of any law of any state or territory of the United States,
federal law, or principle of common law, which is similar, comparable, or
equivalent to §1542 of the California Civil Code.  The Released Parties

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acknowledge that they may discover facts in addition to or different from those
known or believed to be true as of the Effective Date, but that it is the
intention of the Released Parties to hereby completely, fully, finally, and
forever compromise, settle, release, discharge, and extinguish any and all
claims, known or unknown, suspected or unsuspected, which now exist, or
heretofore existed, and without regard to the subsequent discovery or existence
of additional or different facts.  The Released Parties warrant that they have
read and understand §1542 of the California Civil Code and have had the
opportunity to consult with and be advised by counsel regarding its meaning and
effects.

(ooo) Notwithstanding anything to the contrary herein, this Section 13 does not
affect, and none of the Company Releasing Parties or SOG Releasing Parties
release the following claims or potential claims, which shall not be released
hereby and shall continue in force and effect:  the Parties’ or their
Affiliates’ respective rights and obligations related to future performance
under (i) this Agreement, the Contract Operating Agreement, the Transition
Agreement, the License Agreement, any other Related Contracts, the Settlement
Agreement, the Contribution Agreement, the Registration Rights Agreement, the
Operating Agreement or any SOG PSA or (ii) any other agreement executed
hereafter by such Party or its Affiliates (collectively, the “Non-Released
Agreements”), in each case including but not limited to, the right of any Party
to enforce the terms of the Non-Released Agreements.

Section 14. Obligations Hereunder Not Affected; Waivers.

 No action which a Party may take or omit to take in connection with this
Agreement, no course of dealing by a Party, its Affiliates or any other Person
with the other Party, its Affiliates or any other Person, and no change of
circumstances shall release or diminish a Party’s obligations, liabilities,
agreements or duties hereunder, affect this Agreement in any way, or afford a
Party or its Subsidiaries any recourse or setoff against the other Party,
regardless of whether any such action or inaction may be detrimental in any way
to such other Party, its Affiliates or any of the Properties.

Section 15. Notices.

 Any notice, request, consent, payment, demand (other than an invoice delivered
pursuant to Section 6(f)) or other communication (a “Notice” and including the
corollary “Notify”) which may be given hereunder shall be ineffective unless in
writing and either delivered by electronic mail or facsimile or registered or
certified mail with return receipt requested to the addresses set out below or
delivered by hand with written acknowledgment of receipt.  The addresses for any
Notice are as follows:

If to Company or the Board:

Constellation Energy Partners LLC
1801 Main Street, Suite 1300
Houston, TX 77002
Telephone: 832-308-3676

Facsimile: 832-308-3720

Email:chairman@cepllc.com

Attn: Chairman of the Board

With a copy (which shall not constitute Notice) to each of:

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Constellation Energy Partners LLC
1801 Main Street, Suite 1300
Houston, TX 77002
Telephone: 832-308-3676
Facsimile: 832-308-3720
Email: chuck.ward @cepllc.com
Attn: Chuck Ward

Andrews Kurth LLP
600 Travis, Suite 4200
Houston, TX 77002
Telephone: 713-220-4360
Facsimile: 713-238-7130
Email: moleary@andrewskurth.com
Attn: G. M. O’Leary

If to Manager:

1111 Bagby, Suite 1800
Houston, TX 77002
Telephone:(713) 783-8000
Fax:(713) 783-0915
Email:tony@sanchezog.com
Attention:Antonio R. Sanchez III

With a copy (which shall not constitute Notice) to:

Akin Gump Strauss Hauer & Feld LLP
1111 Louisiana Street, 44th Floor
Houston, TX 77002
Telephone: 713-220-5881
Facsimile: 713-236-0822
Email: delder@akingump.com
Attn: David Elder

Any such address may be changed at any time by giving the other Party Notice of
the new address in the manner set forth above.  Each Notice hereunder shall be
treated as being effective or having been given (i) when delivered if delivered
personally, (ii) when sent, if sent by electronic mail or facsimile on a
Business Day (or, if not sent on a Business Day, on the next Business Day after
the date sent by electronic mail or facsimile), (iii) on the next Business Day
after dispatch, if sent by a nationally recognized overnight courier
guaranteeing next Business Day delivery, or (iv) if sent by mail, at the earlier
of its receipt or 72 hours after the same has been deposited in a regularly
maintained receptacle for the deposit of United States mail, addressed and
postage prepaid as aforesaid.

Section 16. Assigns.

 This Agreement shall be binding upon and shall inure to the benefit of the
Parties and their respective successors and permitted assigns; provided,

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however, that (a) Company may not assign its rights hereunder without the
written consent of Manager, and (b) Manager may not assign its rights and
obligations hereunder without the written consent of the Board, such consent not
to be unreasonably withheld, except that Manager may assign any such rights and
obligations to any of its Affiliates; provided, further, that nothing herein
shall be deemed to prohibit Manager from subcontracting its obligations
hereunder to third parties or delegating the performance of any Services
hereunder to Affiliates or third parties (including, without limitation, SOG).

Section 17. Jointly Drafted.

 This Agreement, and all the provisions of this Agreement, shall be deemed
drafted by both of the Parties, and shall not be construed against either Party
on the basis of that Party’s role in drafting this Agreement.

Section 18. Further Assurances.

 In connection with this Agreement, each Party shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
reasonably necessary or appropriate to effectuate and perform the provisions of
this Agreement.

Section 19. No Third-Party Beneficiaries; Subsidiary Obligations.

 Nothing in this Agreement shall provide any benefit to any third party
(including, for the avoidance of doubt, any Subsidiary of Company) or entitle
any third party to any claim, cause of action, remedy or right of any kind
(except for Affiliates of Manager under Section 5(g), each Manager Party under
Section 9, other indemnitees under Section 9, each SOG Released Party and
Company Released Party under Section 13 and SOG), it being the intent of the
Parties that this Agreement shall not be construed as a third party beneficiary
contract.  To the extent applicable, Company shall cause its Subsidiaries to
comply with each such Subsidiary’s respective obligations, covenants and
agreements hereunder.

Section 20. Amendment.

 No amendment of any provision of this Agreement shall be effective unless it is
in writing and signed by all Parties and no waiver of any provision of this
Agreement, and no consent to any departure by any Party therefrom, shall be
effective unless it is in writing and signed by the other Party, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.

Section 21. Unenforceability.

 Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or invalidity without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.

Section 22. Survival of Agreements.

 Company’s and Manager’s various representations, warranties, covenants,
agreements and duties in and under this Agreement shall survive the execution
and delivery of this Agreement and terminate upon termination or expiration of
this Agreement, except for liability for breaches, violations or inaccuracies of
any representations, warranties or covenants hereunder prior to termination or
expiration, covenants, which by their nature are intended to survive termination
or expiration, and for Section 6 (with respect to any accrued but unpaid
obligations as of the date of termination or expiration (and including, without
limitation, any severance costs incurred prior to or after termination or
expiration, as provided in the definition of Overhead Costs)), Section 8(d),
 Section 8(e),  Section

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8(f),  Section 9,  Section 11,  Section 12,  Section 13,  Section 14,  Section
15,  Section 17,  Section 19,  Section 22,  Section 23,  Section 24,  Section
25,  Section 27,  Section 29 and Section 31, which shall survive termination or
expiration of this Agreement.

Section 23. Governing Law; Submission to Process.

 

(ppp) This Agreement shall be governed by, construed and enforced in accordance
with the internal laws of the State of Texas, without regard to principles of
conflicts of laws.

(qqq) Each of Manager and Company (i) submits itself to the exclusive
jurisdiction of the state and federal courts sitting in Harris County, Texas,
(ii) agrees and consents that service of process may be made upon it in any
legal proceeding relating to this Agreement by any means allowed under Texas or
federal law, and (iii) waives any objection that it may now or hereafter have to
the venue of any such proceeding being in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum.

Section 24. Waiver of Jury Trial.

   Each of Manager and Company hereby knowingly, voluntarily, intentionally, and
irrevocably:

(rrr) waives, to the maximum extent not prohibited by the Legal Requirements,
any right it may have to a trial by jury in respect of any litigation based
hereon, or directly or indirectly at any time arising out of, under or in
connection with this Agreement or any transaction contemplated hereby or
associated herewith;

(sss) certifies that no party nor any representative or agent or counsel for any
party has represented, expressly or otherwise, or implied that such party would
not, in the event of litigation, seek to enforce the foregoing waivers; and

(ttt) acknowledges that it has been induced to enter into this Agreement and the
transactions contemplated hereby by, among other things, the mutual waivers and
certifications contained in this section.

Section 25. Entire Agreement.

 This Agreement, including the exhibits hereto, and the Related Contracts to
which the Parties are a party as of the Effective Date set forth the entire
agreement of the Parties with respect to the subject matter hereof and thereof
and any prior agreements, understandings, negotiations and discussions, written
or oral, relating thereto are hereby superseded.

Section 26. Laws and Regulations.

 Notwithstanding any provision of this Agreement to the contrary, neither 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 Requirements.

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Section 27. No Recourse Against Officers, Directors, Managers or Employees.

 For the avoidance of doubt and notwithstanding anything herein to the contrary,
the provisions of this Agreement shall not give rise to any right of recourse
against any officer, director, manager or employee of either Party or any of its
Affiliates.

Section 28. Counterparts.

   This Agreement may be executed in any number of counterparts with the same
effect as if both of the signatory Parties had signed the same document.  All
counterparts shall be construed together and shall constitute one and the same
instrument.

Section 29. Conspicuousness of Provisions.

   The Parties acknowledge and agree that the provisions contained in this
Agreement that are set out in capital letters or “bold” satisfy the requirement
of the “express negligence rule” and any Legal Requirement or equitable doctrine
that provisions contained in a contract be conspicuously marked or highlighted.

Section 30. Force Majeure.

 If Manager is rendered unable, wholly or in part, by Force Majeure to carry out
its obligations under this Agreement, the obligations of Manager shall be
suspended during, but no longer than, the continuance of the Force
Majeure.  Manager shall use reasonable diligence to remove the Force Majeure as
reasonably promptly as practicable.  The requirement that any Force Majeure
shall be remedied as reasonably promptly as practicable shall not require the
settlement of strikes, lockouts, other labor difficulty or a lawsuit by the
affected Party, contrary to its wishes; how all such and other difficulties
shall be handled shall be entirely within the discretion of the affected
Party and shall not require more than commercially reasonable efforts on the
part of Manager.  The term “Force Majeure”, as here employed, shall mean an act
of God, strike, lockout, or other industrial disturbance, act of the public
enemy, war, blockade, public riot, lightning, fire, storm, flood or other act of
nature, explosion, governmental action, governmental delay, restraint or
inaction, unavailability of equipment or personnel (including, without
limitation, Company or Subsidiary personnel),  acts or omissions of employees of
Company and its Subsidiaries, breaches, violations or inaccuracies of Company
under the Transition Agreement, and any other cause, whether of the kind
specifically enumerated above or otherwise, which is not reasonably within the
control of the Party claiming suspension; such term shall likewise include the
inability of Manager to acquire, or delays on the part of Manager in acquiring
at reasonable cost and by the exercise of reasonable diligence, servitudes,
rights-of-way grants, permits, permissions, licenses, materials, personnel or
supplies which are required to enable Manager to fulfill its obligations
hereunder.

Section 31. Survival Following Merger, Business Combination, etc.; Unit Splits.

   

(uuu) Survival of Agreement.  This Agreement shall survive any merger, business
combination or other similar transaction, including a transaction in which
Company is converted into a limited partnership, and be binding on Company or
its successor, as applicable.  To the extent any successor in such transaction
would not be bound by this Agreement by operation of law, as a condition
precedent to such transaction, such successor entity shall be required to
execute and deliver an instrument, in a form acceptable to Manager, agreeing to
be bound by this Agreement to the same extent as Company.

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(vvv) Unit Splits, Etc.  All unit numbers and amounts derived from unit numbers
in this Agreement are to be appropriately adjusted for any unit dividend, unit
split, unit combination or other similar transaction, including as a result of
any transaction referred to in Section 31(a).  In the event Company merges,
combines with or otherwise converts to another entity by operation of law,
merger, or otherwise, as a result of which units are exchanged for or converted
into securities of such entity, the provisions hereof shall survive and apply to
such securities, and references herein to any type or class of units shall be
deemed to include such securities. 

[Remainder of page intentionally left blank; Signature page follows.]

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.

 

 

 

 

MANAGER:

 

SP HOLDINGS, LLC

 

 

 

 

 

 

 

 

By:

/S/ Antonio R. Sanchez, III

 

 

Name:

Antonio R. Sanchez, III

 

 

Title:

President

 

 

/S

 

 

 

COMPANY:

 

CONSTELLATION ENERGY PARTNERS LLC

 

 

 

 

 

 

 

 

By:

/S/ Stephen R. Brunner

 

 

Name:

Stephen R. Brunner

 

 

Title:

Chief Executive Officer, Chief Operating Officer and President

 

 

 

Signature Page to Shared Services Agreement

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written, solely for the purposes of acknowledging and agreeing to
Section 13,  Section 22,  Section 23,  Section 28,  Section 29 and relevant
parts of Section 1.

Stephen R. Brunner

/S/ Stephen R. Brunner

Richard S. Langdon

/S/ Richard S. Langdon

Richard H. Bachmann

/S/ Richard H. Bachmann

John N. Seitz

/S/ John N. Seitz

SANCHEZ OIL & GAS CORPORATION

By:/S/ Antonio R. Sanchez, III

Name:Antonio R. Sanchez, III

Title:President

 

SANCHEZ ENERGY PARTNERS I, LLC

By:/S/ Antonio R. Sanchez, III

Name:Antonio R. Sanchez, III

Title:President

 

Antonio R. Sanchez, III

/S/ Antonio R. Sanchez, III

Gerald F. Willinger

/S/ Gerald F. Willinger

 

 

 

 

 

 

 

 

 

 

 

 

 

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EXHIBIT A

TERMS OF SENIOR MANAGEMENT INCENTIVE INTERESTS

Summary:

Note:  The capitalized terms that are not defined in this Exhibit A shall have
the meaning given to them in the Operating Agreement.

Company shall issue to Manager or its designee a new class of Company Security
to be designated as Senior Management Incentive Interests.  The Senior
Management Incentive Interests (“IDRs”) are contemplated to provide Manager or
its designee with incentive distribution rights comparable to IDRs commonly
provided for in existing publicly traded partnerships and which operate to
provide incentive for Manager or its designee to grow Company and its
distributions.

The below distribution summary shall be premised on the following:

1)

$2.00 per common unit price (which reflects the price per Class B Common Unit at
the time Company and Sanchez entered into that certain Contribution Agreement
dated August 9, 2013),

2)

10% yield (which Manager believes is an appropriate initial yield for Company)
which equates to a $0.05 base quarterly distribution ($0.20 per annum),

3)

First target hurdle rate of 115% of the base quarterly distribution, after which
the IDRs are entitled to receive 13% of the incremental quarterly distributions
until the second target hurdle is met,

4)

Second target hurdle rate of 125% of the base quarterly distribution, after
which the IDRs are entitled to receive 23% of the incremental quarterly
distributions until the third target hurdle is met,

5)

Third target hurdle rate of 175% of the base quarterly distribution, after which
the IDRs are entitled to receive 35.5% of the incremental quarterly
distributions until the fourth target hurdle is met, and

6)

Fourth target hurdle rate which is equal to the Target Distribution, or a $0.532
per quarterly distribution ($2.13 per annum) that currently exists in the
Operating Agreement, after which the IDRs will be entitled to receive 33% of the
incremental quarterly distributions and Company’s existing Management Incentive
Interests will be entitled to receive 15% of the incremental quarterly
distributions.

Distribution Summary

(i) First, (A) 2% to the holders of the Class A Units, Pro Rata, and (B) 98% to
the holders of Common Units, Pro Rata, until there has been distributed in
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Outstanding an amount equal to $0.05 (the “Adjusted Base Quarterly Distribution
Amount”) for such Quarter;

(ii) Second, (A) 2% to the holders of Class A Units, Pro Rata, and (B) 98% to
the holders of Common Units, Pro Rata, until there has been distributed
(including amounts distributed pursuant to clause (i) above) in respect of each
Common Unit then Outstanding an amount equal to the Adjusted Base Quarterly
Distribution Amount for such Quarter plus $0.0075 (the “First Revised Target
Distribution”);

(iii) Third, (A) 2% to the holders of the Class A Units, Pro Rata, (B) 85% to
the holders of the Common Units, Pro Rata, and (C) 13% to the holders of the
IDRs, Pro Rata, until there has been distributed (including amounts distributed
pursuant to clauses (i) and (ii) above) in respect of each Common Unit then
Outstanding an amount equal to the Adjusted Base Quarterly Distribution Amount
for such Quarter plus $0.0125 (the “Second Revised Target Distribution”);

(iv) Fourth, (A) 2% to the holders of the Class A Units, Pro Rata, (B) 75% to
the holders of the Common Units, Pro Rata, and (C) 23% to the holders of the
IDRs, Pro Rata, until there has been distributed (including amounts distributed
pursuant to clauses (i), (ii) and (iii) above) in respect of each Common Unit
then Outstanding an amount equal to the Adjusted Base Quarterly Distribution
Amount for such Quarter plus $0.0375 (the “Third Revised Target Distribution”);

(v) Fifth, (A) 2% to the holders of the Class A Units, Pro Rata, (B) 62.5% to
the holders of the Common Units, Pro Rata, and (C) 35.5% to the holders of the
IDRs, Pro Rata, until there has been distributed (including amounts distributed
pursuant to clauses (i), (ii), (iii) and (iv) above) in respect of each Common
Unit then Outstanding an amount equal to the Initial Quarterly Distribution for
such Quarter plus $0.0695 (i.e. $0.4625 + 0.0695) for such Quarter (the “Fourth
Revised Target Distribution”); and

(vi) Thereafter, (A) 2% to the holders of Class A Units, Pro Rata, and (B) 50%
to the holders of Common Units, Pro Rata, (C) 33% to the holders of the IDRs,
Pro Rata, and (D) 15% to the holders of the Management Incentive Interests, Pro
Rata.

In connection with the issuance of the IDRs, Company shall amend its Operating
Agreement to provide in substance as set forth in the Distribution Summary with
respect to the distribution of Available Cash from Operating Surplus and shall
make corresponding and related adjustments and revisions to the Operating
Agreement as appropriate to provide for customary IDR reset and conversion
provisions, tax, allocation provisions and related matters in connection with
such issuance.  In addition and in connection with such issuance, Company will
amend the Operating Agreement to provide that Company will not issue any Company
Security other than Class B Units or take any action which, in each case, would
adversely impact the rights of the holders of the IDRs without the prior written
consent of the holders of the IDRs.

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