Exhibit 10.1

FIRST AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

PARSLEY ENERGY, LLC

DATED AS OF MAY 29, 2014

THE LIMITED LIABILITY COMPANY INTERESTS IN PARSLEY ENERGY, LLC HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, THE SECURITIES
LAWS OF ANY STATE, OR ANY OTHER APPLICABLE SECURITIES LAWS, AND ARE BEING SOLD
IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND SUCH LAWS. SUCH INTERESTS MUST BE ACQUIRED FOR INVESTMENT ONLY AND MAY
NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT
ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT, ANY APPLICABLE
SECURITIES LAWS OF ANY STATE AND ANY OTHER APPLICABLE SECURITIES LAWS; (II) THE
TERMS AND CONDITIONS OF THIS FIRST AMENDED AND RESTATED LIMITED LIABILITY
COMPANY AGREEMENT; AND (III) ANY OTHER TERMS AND CONDITIONS AGREED TO IN WRITING
BETWEEN THE MANAGING MEMBER AND THE APPLICABLE MEMBER. THE LIMITED LIABILITY
COMPANY INTERESTS MAY NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH
SUCH LAWS, THIS FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT,
AND ANY OTHER TERMS AND CONDITIONS AGREED TO IN WRITING BY THE MANAGING MEMBER
AND THE APPLICABLE MEMBER. THEREFORE, PURCHASERS AND OTHER TRANSFEREES OF SUCH
LIMITED LIABILITY COMPANY INTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR
INVESTMENT OR ACQUISITION FOR AN INDEFINITE PERIOD OF TIME.

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Table of Contents

 

     Page  

ARTICLE I DEFINITIONS

     3   

Section 1.1 Definitions

     3   

Section 1.2 Interpretive Provisions

     11   

ARTICLE II ORGANIZATION OF THE LIMITED LIABILITY COMPANY

     11   

Section 2.1 Formation

     11   

Section 2.2 Filing

     11   

Section 2.3 Name

     11   

Section 2.4 Registered Office; Registered Agent

     11   

Section 2.5 Principal Place of Business

     11   

Section 2.6 Purpose; Powers

     11   

Section 2.7 Term

     11   

Section 2.8 Intent

     11   

ARTICLE III REORGANIZATION TRANSACTIONS

     12   

Section 3.1 Reorganization Transactions Undertaken In Connection with IPO

     12   

ARTICLE IV OWNERSHIP AND CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS

     12   

Section 4.1 Authorized Units; General Provisions With Respect to Units

     12   

Section 4.2 Voting Rights

     13   

Section 4.3 Capital Contributions; Unit Ownership

     14   

Section 4.4 Capital Accounts

     14   

Section 4.5 Reserved

     14   

Section 4.6 Other Matters

     14   

Section 4.7 Exchange of Units

     14   

ARTICLE V ALLOCATIONS OF PROFITS AND LOSSES

     17   

Section 5.1 Profits and Losses

     17   

Section 5.2 Special Allocations

     17   

Section 5.3 Allocations for Tax Purposes in General

     18   

Section 5.4 Income Tax Allocations with Respect to Depletable Properties

     19   

Section 5.5 Other Allocation Rules

     19   

ARTICLE VI DISTRIBUTIONS

     20   

Section 6.1 Distributions

     20   

Section 6.2 Tax-Related Distributions

     20   

Section 6.3 Distribution Upon Withdrawal

     20   

ARTICLE VII MANAGEMENT

     21   

Section 7.1 The Managing Member; Fiduciary Duties

     21   

Section 7.2 Officers

     21   

Section 7.3 Warranted Reliance by Officers on Others

     21   

Section 7.4 Indemnification

     22   

Section 7.5 Maintenance of Insurance or Other Financial Arrangements

     22   

Section 7.6 Resignation or Termination of Managing Member

     22   

Section 7.7 No Inconsistent Obligations

     22   

Section 7.8 Reclassification Events of PubCo

     22   

Section 7.9 Certain Costs and Expenses

     23   

ARTICLE VIII ROLE OF MEMBERS

     23   

Section 8.1 Rights or Powers

     23   

Section 8.2 Voting

     23   

Section 8.3 Various Capacities

     23   

 

(i)

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ARTICLE IX TRANSFERS OF INTERESTS

     24   

Section 9.1 Restrictions on Transfer

     24   

Section 9.2 Notice of Transfer

     24   

Section 9.3 Transferee Members

     24   

Section 9.4 Legend

     25   

ARTICLE X ACCOUNTING

     25   

Section 10.1 Books of Account

     25   

Section 10.2 Tax Elections

     25   

Section 10.3 Tax Returns; Information

     25   

Section 10.4 Tax Matters Member

     25   

Section 10.5 Withholding Tax Payments and Obligations

     25   

ARTICLE XI DISSOLUTION AND TERMINATION

     26   

Section 11.1 Liquidating Events

     26   

Section 11.2 Bankruptcy

     26   

Section 11.3 Procedure

     26   

Section 11.4 Rights of Members

     27   

Section 11.5 Notices of Dissolution

     27   

Section 11.6 Reasonable Time for Winding Up

     27   

Section 11.7 No Deficit Restoration

     27   

ARTICLE XII GENERAL

     27   

Section 12.1 Amendments; Waivers

     27   

Section 12.2 Further Assurances

     28   

Section 12.3 Successors and Assigns

     28   

Section 12.4 Entire Agreement

     28   

Section 12.5 Rights of Members Independent

     28   

Section 12.6 Governing Law

     28   

Section 12.7 Jurisdiction and Venue

     28   

Section 12.8 Headings

     28   

Section 12.9 Counterparts

     28   

Section 12.10 Notices

     29   

Section 12.11 Representation By Counsel; Interpretation

     29   

Section 12.12 Severability

     29   

Section 12.13 Expenses

     29   

Section 12.14 No Third Party Beneficiaries

     29   

 

(ii)

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FIRST AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

PARSLEY ENERGY, LLC

This FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (as amended,
supplemented or restated from time to time, this “Agreement”) is entered into as
of May 29, 2014, by and among PARSLEY ENERGY, LLC, a Delaware limited liability
company (the “Company”), and each other Person who is or at any time becomes a
Member in accordance with the terms of this Agreement and the Act. Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in Section 1.1.

RECITALS

WHEREAS, the Company was formed pursuant to a Certificate of Formation filed in
the office of the Secretary of State of the State of Delaware on June 1, 2013
and is currently governed by the Limited Liability Company Agreement, dated as
of June 11, 2013, of the Company (the “Existing LLC Agreement”);

WHEREAS, pursuant to the terms of the Reorganization Agreement, the parties
thereto have agreed to consummate the reorganization of the Company contemplated
by the Reorganization Agreement and to take the other actions contemplated in
such Reorganization Agreement (collectively, the “Reorganization”);

WHEREAS, in connection with the Reorganization, Parsley Energy, Inc., a Delaware
corporation (“PubCo”), is issuing shares of Class A Stock to the public in the
initial underwritten public offering of shares of its stock (the “IPO”), and
contributing a portion of the net proceeds received by it from the IPO to the
Company in exchange for a number of Units equal to the number of shares of
Class A Stock issued in the IPO for such proceeds;

WHEREAS, in connection with the Reorganization, PubCo is issuing and
contributing shares of its Class B Stock to the Company to be distributed to the
Members;

WHEREAS, each share of Class B Stock, together with a corresponding Unit, may be
exchanged for one share of Class A Stock;

WHEREAS, the Members of the Company desire that PubCo become the sole managing
Member of the Company (in its capacity as managing Member as well as in any
other capacity, the “Managing Member”);

WHEREAS, the Members of the Company desire to amend and restate the Existing LLC
Agreement; and

WHEREAS, this Agreement shall supersede the Existing LLC Agreement in its
entirety as of the date hereof;

NOW THEREFORE, in consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound, the parties
hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions. (a) As used in this Agreement and the Schedules and
Exhibits attached to this Agreement, the following definitions shall apply:

“Act” means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et
seq., as amended from time to time (or any corresponding provisions of
succeeding law).

“Action” means any claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Entity.

“Adjusted Basis” has the meaning given such term in Section 1011 of the Code.

 

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“Adjusted Capital Account Deficit” means the deficit balance, if any, in such
Member’s Capital Account at the end of any Fiscal Year, with the following
adjustments:

(a) credit to such Capital Account any amount that such Member is obligated to
restore under Treasury Regulations Section 1.704-1(b)(2)(ii)(c), as well as any
addition thereto pursuant to the next to last sentences of the Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) after taking into account
thereunder any changes during such year in Company Minimum Gain and in the
minimum gain attributable to any Member Nonrecourse Debt; and

(b) debit to such Capital Account the items described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

This definition of Adjusted Capital Account Deficit is intended to comply with
the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.

“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 these purposes, “control” means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; provided that, for purposes of this Agreement, (i) no Member shall be
deemed an Affiliate of the Company or any of its Subsidiaries and (ii) none of
the Company or any of its Subsidiaries shall be deemed an Affiliate of any
Member.

“Agreement” is defined in the preamble.

“Assumed Tax Liability” of each Member means an amount equal to the cumulative
amount of federal, state and local income taxes (including any applicable
estimated taxes), determined taking into account the character of income and
loss allocated as it affects the applicable tax rate, that the Managing Member
estimates would be due from such Member as of such Tax Distribution Date,
(i) assuming such Member were an individual who earned solely the items of
income, gain, deduction, loss, and/or credit allocated to such Member pursuant
to Article V, (ii) after taking proper account of loss carryforwards available
to individual taxpayers resulting from losses allocated to the Members by the
Company, to the extent not taken into account in prior periods, and
(iii) assuming that such Member is subject to tax at the Assumed Tax Rate. For
purposes of determining the Assumed Tax Liability of any Member, the following
items: (i) shall not be taken into account adjustments by reason of
Section 734(b) or (ii) adjustments by reason of Section 743(b) of the Code.

“Assumed Tax Rate” means, for any taxable year, the highest marginal effective
rate of federal, state and local income tax applicable to an individual resident
in Texas (or, if higher, a corporation doing business in Texas) determined by
applying the rates applicable to ordinary income (in cases where taxes are being
determined on ordinary income allocated to a Member) and capital gains (in cases
where taxes are being determined on capital gains allocated to a Member), and by
assuming that state and local income taxes are not deductible in computing a
Member’s liability for federal income tax.

“Assumed Tax Liability” is defined in Section 6.2.

“beneficially own” and “beneficial owner” shall be as defined in Rule 13d-3 of
the rules promulgated under the Exchange Act.

“Business Day” means any day that is not a Saturday, a Sunday or other day on
which banks are required or authorized by Law to be closed in the City of New
York.

“Call Election Notice” is defined in Section 4.7(g)(ii).

“Call Right” has the meaning set forth in Section 4.7(g)(i).

“Capital Account” means, with respect to any Member, the Capital Account
maintained for such Member in accordance with Section 4.4.

“Capital Contributions” means, with respect to any Member, the amount of cash
and the initial Gross Asset Value of any property (other than cash) contributed
to the Company by such Member. Any reference to the Capital Contributions of a
Member will include the Capital Contributions made by a predecessor holder of
such Member’s Units to the extent the Capital Contribution was made in respect
of Units Transferred to such Member.

“Cash Election” is defined in Section 4.7(a)(ii).

 

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“Cash Election Amount” means with respect to a particular Exchange, an amount of
cash equal to the value of the shares of Class A Stock that would be received in
such Exchange as of the date of receipt by the Company of the Exchange Notice
with respect to such Exchange pursuant to Section 4.7 (the “Valuation Date”),
decreased by any distributions received by the Exchanging Member with respect to
the Units that are the subject of the Exchange following the date of receipt by
the Company of the Exchange Notice where the record date for such distribution
was after the date of receipt of such notice. For this purpose, the value of a
share of Class A Stock shall equal (i) the volume weighted average price of a
share of Class A Stock for the 10 trading days ending on the trading day prior
to the Valuation Date or (ii) in the event the share of Class A Stock are not
then publicly traded, the value, as reasonably determined by the Managing Member
in good faith, that would be obtained in an arm’s length transaction for cash
between an informed and willing buyer and an informed and willing seller,
neither of whom is under any compulsion to purchase or sell, respectively, and
without regard to the particular circumstances of the buyer or seller.

“Class A Stock” shall, as applicable, (i) mean the Class A Common Stock, par
value $0.01 per share, of the Managing Member or (ii) following any
consolidation, merger, reclassification or other similar event involving the
Managing Member, mean any shares or other securities of the Managing Member or
any other Person or cash or other property that become payable in consideration
for the Class A Stock or into which the Class A Stock is exchanged or converted
as a result of such consolidation, merger, reclassification or other similar
event.

“Class B Stock” shall, as applicable, (i) mean the Class B Common Stock, par
value $0.01 per share, of the Managing Member or (ii) following any
consolidation, merger, reclassification or other similar event involving the
Managing Member, mean any shares or other securities of the Managing Member or
any other Person or cash or other property that become payable in consideration
for the Class B Stock or into which the Class B Stock is exchanged or converted
as a result of such consolidation, merger, reclassification or other similar
event.

“Code” means the Internal Revenue Code of 1986, as amended from time to time (or
any corresponding provisions of succeeding law).

“Company” is defined in the preamble to this Agreement.

“Commission” means the U.S. Securities and Exchange Commission.

“Company” is defined in the preamble to this Agreement.

“Company Minimum Gain” has the meaning of “partnership minimum gain” set forth
in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d). It is further
understood that Company Minimum Gain shall be determined in a manner consistent
with the rules of Treasury Regulations Section 1.702-2(b)(2), including the
requirement that if the adjusted Gross Asset Value of property subject to one or
more Nonrecourse Liabilities differs from its adjusted tax basis, Company
Minimum Gain shall be determined with reference to such Gross Asset Value.

“Contract” means any written agreement, contract, lease, sublease, license,
sublicense, obligation, promise or undertaking.

“control” (including the terms “controlled by” and “under common control with”),
with respect to the relationship between or among two or more Persons, means the
possession, directly or indirectly or as trustee, personal representative or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee, personal representative or executor, by contract, credit arrangement or
otherwise.

“Depletable Property” means each separate oil and gas property as defined in
Code Section 614.

“Depreciation” means, for each Fiscal Year, an amount equal to the depreciation,
amortization, or other cost recovery deduction (excluding depletion) allowable
with respect to an asset for such Fiscal Year, except that (a) with respect to
any such property the Gross Asset Value of which differs from its Adjusted Basis
for federal income tax purposes and which difference is being eliminated by use
of the “remedial method” pursuant to Treasury Regulations Section 1.704-3(d),
Depreciation for such Fiscal Year shall be the amount of book basis recovered
for such Fiscal Year under the rules prescribed by Treasury Regulations
Section 1.704-3(d)(2), and (b) with respect to any other such property the Gross
Asset Value of which differs from its Adjusted Basis for federal income tax
purposes at the beginning of such Fiscal Year, Depreciation shall be an amount
which bears the same ratio to such beginning Gross Asset Value as the federal
income tax depreciation, amortization, or other cost recovery deduction for such
Fiscal Year bears to such beginning Adjusted Basis; provided, however, that if
the Adjusted Basis for federal income tax purposes of an asset at the beginning
of such Fiscal Year is zero, Depreciation with respect to such asset shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Tax Matters Member.

“DGCL” means the General Corporation Law of the State of Delaware, as amended
from time to time (or any corresponding provisions of succeeding law).

 

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“Effective Time” means 12:01 a.m. Central Daylight Time on the date of the
closing of the IPO.

“Equity Securities” means (a) with respect to a partnership, limited liability
company or similar Person, any and all units, interests, rights to purchase,
warrants, options or other equivalents of, or other ownership interests in, any
such Person as well as debt or equity instruments convertible, exchangeable or
exercisable into any such units, interests, rights or other ownership interests
and (b) with respect to a corporation, any and all shares, interests,
participation or other equivalents (however designated) of corporate stock,
including all common stock and preferred stock, or warrants, options or other
rights to acquire any of the foregoing, including any debt instrument
convertible or exchangeable into any of the foregoing.

“Excess Tax Distribution” has the meaning set forth in Section 6.2(b).

“Exchange Act” means the Securities Exchange Act of 1934, and the rules and
regulations promulgated thereunder, as the same may be amended from time to time
(or any corresponding provisions of succeeding law).

“Exchange” has the meaning set forth in Section 4.7(a).

“Exchange Date” is defined in Section 4.7(c).

“Exchange Notice” is defined in Section 4.7(b).

“Exchanging Member” is defined in Section 4.7(c).

“Existing LLC Agreement” is defined in the recitals to this Agreement.

“Fair Market Value” means the fair market value of any property as determined in
good faith by the Managing Member after taking into account such factors as the
Managing Member shall deem appropriate.

“Fiscal Year” means the fiscal year of the Company, which shall end on
December 31 of each calendar year unless, for federal income tax purposes,
another fiscal year is required. The Company shall have the same fiscal year for
federal income tax purposes and for accounting purposes.

“GAAP” means generally acceptable accounting principles at the time.

“Good Faith” means a Person having acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to a criminal proceeding, having had no reasonable
cause to believe such Person’s conduct was unlawful.

“Governmental Entity” means any federal, national, supranational, state,
provincial, local, foreign or other government, governmental, stock exchange,
regulatory or administrative authority, agency or commission or any court,
tribunal, or judicial or arbitral body.

 

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“Gross Asset Value” means, with respect to any asset, the asset’s Adjusted Basis
for federal income tax purposes, except as follows:

(a) the initial Gross Asset Value of any asset contributed by a Member to the
Company shall be the gross Fair Market Value of such asset as of the date of
such contribution;

(b) the Gross Asset Values of all Company assets shall be adjusted to equal
their respective gross Fair Market Values as of the following times: (i) the
acquisition of an interest (or additional interest) in the Company by any new or
existing Member in exchange for more than a de minimis Capital Contribution to
the Company or in exchange for the performance of more than a de minimis amount
of services to or for the benefit of the Company; (ii) the distribution by the
Company to a Member of more than a de minimis amount of Company assets as
consideration for an interest in the Company; (iii) the liquidation of the
Company within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(g)(1) (other than pursuant to Code
Section 708(b)(1)(B)), (iv) the acquisition of an interest in the Company by any
new or existing Member upon the exercise of a noncompensatory option in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(s); or (v) any
other event to the extent determined by the Managing Member to be permitted and
necessary to properly reflect Gross Asset Values in accordance with the
standards set forth in Treasury Regulations Section 1.704-1(b)(2)(iv)(q);
provided, however, that adjustments pursuant to clauses (i), (ii) and (iv) above
shall be made only if the Managing Member reasonably determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the Company. If any noncompensatory options are
outstanding upon the occurrence of an event described in this paragraph (b)(i)
through (b)(v), the Company shall adjust the Gross Asset Values of its
properties in accordance with Treasury Regulations Sections
1.704-1(b)(2)(iv)(f)(1) and 1.704-1(b)(2)(iv)(h)(2);

(c) the Gross Asset Value of any Company asset distributed to any Member shall
be adjusted to equal the gross Fair Market Value of such asset on the date of
such distribution;

(d) the Gross Asset Values of Company assets shall be increased (or decreased)
to reflect any adjustments to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and subsection (g) in the
definition of “Profits” or “Losses” below or Section 5.2(g); provided, however,
that the Gross Asset Value of a Company asset shall not be adjusted pursuant to
this subsection to the extent the Managing Member determines that an adjustment
pursuant to subsection (b) of this definition is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this subsection (d); and

(e) if the Gross Asset Value of a Company asset has been determined or adjusted
pursuant to subsections (a), (b) or (d) of this definition of Gross Asset Value,
such Gross Asset Value shall thereafter be adjusted by the Depreciation taken
into account with respect to such asset for purposes of computing Profits,
Losses, Simulated Depletion and other items allocated pursuant to Article V.

“Indebtedness” means (a) all indebtedness for borrowed money (including
capitalized lease obligations, sale-leaseback transactions or other similar
transactions, however evidenced), (b) any other indebtedness that is evidenced
by a note, bond, debenture, draft or similar instrument, (c) notes payable and
(d) lines of credit and any other agreements relating to the borrowing of money
or extension of credit.

“Interest” means the entire interest of a Member in the Company, including the
Units and all of such Member’s rights, powers and privileges under this
Agreement and the Act.

“IPO” is defined in the recitals to this Agreement.

“IPO Date Capital Account Balance” means, with respect to any Member, the
positive Capital Account balance of such Member as of the date hereof, the
amount or deemed value of which is set forth on Exhibit D.

“Law” means any federal, national, supranational, state, provincial, local or
similar statute, law, ordinance, regulation, rule, code, order, requirement or
rule of law (including common law).

“Legal Action” is defined in Section 12.7.

“Liability” means any liability or obligation, whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated and whether due or to become due, regardless of when asserted.

“Liquidating Events” is defined in Section 11.1.

“Loss” means any and all losses, damages, claims, costs and expenses, interest,
awards, judgments and penalties (including reasonable attorneys’ fees and
expenses, but excluding any allocation of corporate overhead, internal legal
department costs and other internal costs and expenses).

 

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“Managing Member” is defined in the recitals to this Agreement.

“Member” means any Person that executes this Agreement as a Member, and any
other Person admitted to the Company as an additional or substituted Member,
that has not made a disposition of such Person’s entire Interest.

“Member Minimum Gain” has the meaning ascribed to “partner nonrecourse debt
minimum gain” set forth in Treasury Regulations Section 1.704-2(i). It is
further understood that the determination of Member Minimum Gain and the net
increase or decrease in Member Minimum Gain shall be made in the same manner as
required for such determination of Company Minimum Gain under Treasury
Regulations Sections 1.704-2(d) and -2(g)(3).

“Member Nonrecourse Debt” has the meaning of “partner nonrecourse debt” set
forth in Treasury Regulations Section 1.704-2(b)(4).

“Member Nonrecourse Deductions” has the meaning of “partner nonrecourse
deductions” set forth in Treasury Regulations Sections 1.704-2(i)(1) and
1.704-2(i)(2).

“Merger” is defined in Section 3.1(b).

“National Securities Exchange” means an exchange registered with the Commission
under the Exchange Act.

“NGP” means NGP X U.S. Holdings, L.P.

“Nonrecourse Deductions” has the meaning assigned that term in Treasury
Regulations Section 1.704-2(b).

“Nonrecourse Liability” is defined in Treasury Regulations
Section 1.704-2(b)(3).

“Officer” means each Person designated as an officer of the Company pursuant to
and in accordance with the provisions of Section 7.2, subject to any resolution
of the Managing Member appointing such Person as an officer or relating to such
appointment.

“PEEH” is defined in Section 3.1(b).

“Permitted Transferee” means, with respect to any Member, (a) any Affiliate of
such Member; (b) any successor entity of such Member; (c) a trust established by
or for the benefit of a Member of which only such Member and his or her
immediate family members are beneficiaries; (d) any Person established for the
benefit of, and beneficially owned solely by, an entity Member or the sole
individual direct or indirect owner of an entity Member; and (d) upon an
individual Member’s death, an executor, administrator or beneficiary of the
estate of the deceased Member.

“Person” means any individual, partnership, firm, corporation, limited liability
company, association, trust, unincorporated organization or other entity, as
well as any syndicate or group that would be deemed to be a person under
Section 13(d)(3) of the Exchange Act.

“Plan Asset Regulations” means the regulations issued by the U.S. Department of
Labor at Section 2510.3-101 of Part 2510 of Chapter XXV, Title 29 of the Code of
Federal Regulations, or any successor regulations as the same may be amended
from time to time.

“Prime Rate” means, on any date of determination, a rate per annum equal to the
rate of interest most recently published by The Wall Street Journal as the
“prime rate” at large U.S. money center banks.

“Proceeding” is defined in Section 7.4.

“Profits” or “Losses” means, for each Fiscal Year or other period, an amount
equal to the Company’s taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments (without duplication):

(a) any income or gain of the Company that is exempt from federal income tax and
not otherwise taken into account in computing Profits or Losses shall be added
to such taxable income or loss;

 

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(b) any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses, shall be subtracted from such taxable income or
loss;

(c) in the event the Gross Asset Value of any Company asset is adjusted pursuant
to subsection (b) or (c) or the definition of Gross Asset Value above, the
amount of such adjustment shall be treated as an item of gain (if the adjustment
increases the Gross Asset Value of the Company asset) or an item of loss (if the
adjustment decreases the Gross Asset Value of the Company asset) from the
disposition of such asset and shall, except to the extent allocated pursuant to
Section 5.2, be taken into account for purposes of computing Profits or Losses;

(d) gain or loss resulting from any disposition of Company assets (other than
Depletable Property) with respect to which gain or loss is recognized for
federal income tax purposes shall be computed with reference to the Gross Asset
Value of the asset disposed of, notwithstanding that the adjusted tax basis of
such asset differs from its Gross Asset Value;

(e) Gain resulting from any disposition of a Depletable Property with respect to
which gain is recognized for U.S. federal income tax purposes shall be treated
as being equal to the corresponding Simulated Gain;

(f) in lieu of the depreciation, amortization and other cost recovery deductions
taken into account in computing such taxable income or loss, there shall be
taken into account Depreciation;

(g) to the extent an adjustment to the adjusted tax basis of any asset pursuant
to Code Section 734(b) is required, pursuant to Treasury Regulations
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Account balances as a result of a distribution other than in liquidation of a
Member’s interest in the Company, the amount of such adjustment shall be treated
as an item of gain (if the adjustment increases the basis of the asset) or an
item of loss (if the adjustment decreases such basis) from the disposition of
such asset and shall be taken into account for purposes of computing Profits or
Losses; and

(h) any items of income, gain, loss or deduction which are specifically
allocated pursuant to the provisions of Section 5.2 shall not be taken into
account in computing Profits or Losses for any taxable year, but such items
available to be specially allocated pursuant to Section 5.2 will be determined
by applying rules analogous to those set forth in subparagraphs (a) through
(g) above.

“Property” means all real and personal property owned by the Company from time
to time, including both tangible and intangible property.

“PubCo” is defined in the recitals to this Agreement.

“PubCo Common Stock” means all classes and series of common stock of the
Managing Member, including the Class A Stock and Class B Stock.

“PubCo Offer” is defined in Section 4.7(h).

“Reclassification Event” means any of the following: (i) any reclassification or
recapitalization of PubCo Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination or any transaction subject to
Section 4.1(g)), (ii) any merger, consolidation or other combination involving
the Managing Member, or (iii) any sale, conveyance, lease, or other disposal of
all or substantially all the properties and assets of the Managing Member to any
other Person, in each of clauses (i), (ii) or (iii), as a result of which
holders of PubCo Common Stock shall be entitled to receive cash, securities or
other property for their shares of PubCo Common Stock.

“Regulatory Allocations” is defined in Section 5.2(h).

“Reorganization” is defined in the recitals to this Agreement.

“Reorganization Agreement” means the Master Reorganization Agreement dated as of
May 2, 2014, by and among the Company, PubCo and the Persons listed on signature
pages thereto, as it may be amended, supplemented or restated from time to time.

“Revocation Notice” is defined in Section 4.7(g)(ii).

“Securities Act” means the Securities Act of 1933, and the rules and regulations
promulgated thereunder, as the same may be amended from time to time (or any
corresponding provisions of succeeding law).

 

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“Simulated Basis” means the Gross Asset Value of any Depletable Property. The
Simulated Basis of each Depletable Property shall be allocated to each Member
pro rata, in accordance with the number of Units owned by such Member as of the
time such Depletable Property is acquired by the Company (and any additions to
such Simulated Basis resulting from expenditures required to be capitalized in
such Simulated Basis shall be allocated among the Members in a manner designed
to cause the Members’ proportionate shares of such Simulated Basis to be in
accordance with their proportionate ownership of Units as determined at the time
of any such additions), and shall be reallocated among the Members pro rata, in
accordance with the number of Units owned by such Member as determined
immediately following the occurrence of an event giving rise to an adjustment to
the Gross Asset Values of the Company’s Depletable Properties pursuant to
clause (b) of the definition of Gross Asset Value.

“Simulated Depletion” means, with respect to each Depletable Property, a
depletion allowance computed in accordance with federal income tax principles
(as if the Simulated Basis of the property were its Adjusted Basis) and in the
manner specified in Treasury Regulations Section 1.704-1(b)(2)(iv)(k)(2). For
purposes of computing Simulated Depletion with respect to any Depletable
Property, the Simulated Basis of such property shall be deemed to be the Gross
Asset Value of such property, and in no event shall such allowance, in the
aggregate, exceed such Simulated Basis.

“Simulated Gain” means the amount of gain realized from the sale or other
disposition of Depletable Property as calculated in Treasury Regulations
Section 1.704-1(b)(2)(iv)(k)(2).

“Simulated Loss” means the amount of loss realized from the sale or other
disposition of Depletable Property as calculated in Treasury Regulations
Section 1.704-1(b)(2)(iv)(k)(2).

“Subsidiary” means, with respect to any specified Person, any other Person with
respect to which such specified Person (a) has, directly or indirectly, the
power, through the ownership of securities or otherwise, to elect a majority of
directors or similar managing body or (b) beneficially owns, directly or
indirectly, a majority of such Person’s Equity Securities.

“Tax Distribution Date” means any date that is two business days prior to the
date on which estimated federal income tax payments are required to be made by
calendar year corporate taxpayers and the due date for federal income tax
returns of corporate calendar year taxpayers (without regard to extensions).

“Tax Matters Member” means the “tax matters partner” as defined in Code
Section 6231(a)(7) and as appointed in Section 10.5.

“Tax Receivable Agreement” means the Tax Receivable Agreement dated as of
May 29, 2014, by and among PubCo and certain members of the Company, as the same
may be amended, supplemented or restated from time to time.

“Transfer” means, as a noun, any voluntary or involuntary, direct or indirect
(whether through a change of control of the Transferor or any Person that
controls the Transferor, the issuance or transfer of Equity Securities of the
Transferor, by operation of law or otherwise), transfer, sale, pledge or
hypothecation or other disposition and, as a verb, voluntarily or involuntarily,
directly or indirectly (whether through a change of control of the Transferor or
any Person that controls the Transferor, the issuance or transfer of Equity
Securities of the Transferor or any Person that controls the Transferor, by
operation of law or otherwise), to transfer, sell, pledge or hypothecate or
otherwise dispose of. The terms “Transferee,” “Transferor,” “Transferred,” and
other forms of the word “Transfer” shall have the correlative meanings.

“Transfer Agent” is defined in Section 4.7(b).

“Treasury Regulations” means pronouncements, as amended from time to time, or
their successor pronouncements, which clarify, interpret and apply the
provisions of the Code, and which are designated as “Treasury Regulations” by
the United States Department of the Treasury.

“Units” means the Units issued hereunder and shall also include any equity
security issued in respect of or in exchange for Units, whether by way of
dividend or other distribution, split, recapitalization, merger, rollup
transaction, consolidation, conversion or reorganization.

“Valuation Date” is defined in the definition of “Cash Election Amount.”

“Winding-Up Member” is defined in Section 11.3(a).

 

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Section 1.2 Interpretive Provisions. For all purposes of this Agreement, except
as otherwise expressly provided or unless the context otherwise requires:

(a) the terms defined in Section 1.1 have the meanings assigned to them in
Section 1.1 and are applicable to the singular as well as the plural forms of
such terms;

(b) all accounting terms not otherwise defined herein have the meanings assigned
under GAAP;

(c) all references to currency, monetary values and dollars set forth herein
shall mean United States (U.S.) dollars and all payments hereunder shall be made
in United States dollars;

(d) when a reference is made in this Agreement to an Article, Section, Exhibit
or Schedule, such reference is to an Article or Section of, or an Exhibit or
Schedule to, this Agreement unless otherwise indicated;

(e) whenever the words “include”, “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation”;

(f) “or” is not exclusive;

(g) pronouns of either gender or neuter shall include, as appropriate, the other
pronoun forms; and

(h) the words “hereof”, “herein” and “hereunder” and words of similar import,
when used in this Agreement, refer to this Agreement as a whole and not to any
particular provision of this Agreement.

ARTICLE II

ORGANIZATION OF THE LIMITED LIABILITY COMPANY

Section 2.1 Formation. The Company has been formed as a limited liability
company subject to the provisions of the Act upon the terms, provisions and
conditions set forth in this Agreement.

Section 2.2 Filing. The Company’s Certificate of Formation has been filed with
the Secretary of State of the State of Delaware in accordance with the Act. The
Members shall execute such further documents (including amendments to such
Certificate of Formation) and take such further action as is appropriate to
comply with the requirements of Law for the formation or operation of a limited
liability company in Delaware and in all states and counties where the Company
may conduct its business.

Section 2.3 Name. The name of the Company is “PARSLEY ENERGY, LLC” and all
business of the Company shall be conducted in such name or, in the discretion of
the Managing Member, under any other name.

Section 2.4 Registered Office; Registered Agent. The location of the registered
office of the Company in the State of Delaware is 1209 Orange Street,
Wilmington, Delaware 19801, or at such other place as the Managing Member from
time to time may select. The name and address for service of process on the
Company in the State of Delaware are The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware 19801, or such other qualified Person as the
Managing Member may designate from time to time and its business address.

Section 2.5 Principal Place of Business. The principal place of business of the
Company shall be located in such place as is determined by the Managing Member
from time to time.

Section 2.6 Purpose; Powers. The nature of the business or purposes to be
conducted or promoted by the Company is to engage in any lawful act or activity
for which limited liability companies may be formed under the Act. The Company
shall have the power and authority to take any and all actions and engage in any
and all activities necessary, appropriate, desirable, advisable, ancillary or
incidental to the accomplishment of the foregoing purpose.

Section 2.7 Term. The term of the Company commenced on the date of filing of the
Certificate of Formation of the Company with the office of the Secretary of
State of the State of Delaware in accordance with the Act and shall continue
indefinitely. The Company may be dissolved and its affairs wound up only in
accordance with Article XI.

Section 2.8 Intent. It is the intent of the Members that the Company be operated
in a manner consistent with its treatment as a “partnership” for federal and
state income tax purposes. It is also the intent of the Members that the Company
not be operated or treated as a “partnership” for purposes of Section 303 of the
Federal Bankruptcy Code. Neither the Company nor any Member shall take any
action inconsistent with the express intent of the parties hereto as set forth
in this Section 2.8.

 

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ARTICLE III

REORGANIZATION TRANSACTIONS

Section 3.1 Reorganization Transactions Undertaken In Connection with IPO.

(a) Effective immediately prior to the Effective Time, the Members agreed to
(i) amend and restate the Existing LLC Agreement and adopt this Agreement;
(ii) consummate the recapitalization of the Company contemplated by Section 2.2
of the Reorganization Agreement; and (iii) take the other actions contemplated
in such Reorganization Agreement. Immediately following such amendment and
restatement and recapitalization, the Members of the Company and the Units held
by each such Member were as set forth on Exhibit A hereto.

(b) Effective immediately following the Effective Time and in connection with
the IPO, the Members set forth on Exhibit B hereby contribute, transfer, assign
and deliver all of their right, title and interest in the number of Units set
forth opposite their name to PubCo in exchange for shares of Class A Stock.

(c) Effective immediately following the Effective Time and in connection with
the IPO, Parsley Energy Employee Holdings, LLC (“PEEH”) will merge with and into
PubCo (with PubCo continuing as the surviving entity) (the “Merger”) and PubCo
will issue to each member of PEEH shares of Class A Stock. Following the Merger,
the Company will become the holder of record of the Units held by PEEH
immediately prior to the Merger. Immediately following the contribution in
Section 3.1(b) and the Merger, the Members of the Company and the Units held by
each such Member will be as set forth on Exhibit C hereto.

(d) Immediately following the closing of the IPO, (i) PubCo shall contribute all
of the net proceeds from the IPO received by PubCo to the Company in exchange
for the issuance of 49,963,636 Units, and (ii) the Company shall make a cash
payment to NGP and each PSP Member (as such term is defined the Reorganization
Agreement) in complete redemption of their remaining Units pursuant to
Section 2.4(c) of the Reorganization Agreement.

(e) Immediately following the redemption described in Section 3.1(d) of this
Agreement, PubCo shall issue to the Company 32,145,296 shares of Class B Stock,
which shares the Company shall distribute to the then- existing Members (other
than PubCo) pro rata.

(f) The total number of Units issued and outstanding and held by the Members
immediately following the consummation of the transactions contemplated by
Sections 3.1(b)-(d) of this Agreement is set forth on Exhibit D hereto (as
amended from time to time in accordance with the terms of this Agreement).

ARTICLE IV

OWNERSHIP AND CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS

Section 4.1 Authorized Units; General Provisions With Respect to Units.

(a) Subject to the provisions of this Agreement, the Company shall be authorized
to issue from time to time such number of Units and such other Equity Securities
as the Managing Member shall determine in accordance with Section 4.3. Each
authorized Unit may be issued pursuant to such agreements as the Managing Member
shall approve, including pursuant to options and warrants. The Company may
reissue any Units that have been repurchased or acquired by the Company.

(b) Each outstanding Unit shall be identical (except with respect to vesting and
as provided in Section 4.3).

(c) Initially, none of the Units will be represented by certificates. If the
Managing Member determines that it is in the interest of the Company to issue
certificates representing the Units, certificates will be issued and the Units
will be represented by those certificates, and this Agreement shall be amended
as necessary or desirable to reflect the issuance of certificated Units for
purposes of the Uniform Commercial Code. Nothing contained in this
Section 4.1(c) shall be deemed to authorize or permit any Member to Transfer its
Units except as otherwise permitted under this Agreement.

(d) The total number of Units issued and outstanding and held by the Members is
set forth on Exhibit D (as amended from time to time in accordance with the
terms of this Agreement) as of the date set forth therein.

 

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(e) If at any time the Managing Member issues a share of its Class A Stock
(including in the IPO) or any other Equity Security of the Managing Member
(other than shares of Class B Stock), (i) the Company shall issue to the
Managing Member one Unit (if the Managing Member issues a share of Class A
Stock), or such other Equity Security of the Company (if the Managing Member
issues Equity Securities other than Class A Stock) corresponding to the Equity
Securities issued by the Managing Member, and with substantially the same rights
to dividends and distributions (including distributions upon liquidation) and
other economic rights as those of such Equity Securities of the Managing Member
and (ii) the net proceeds received by the Managing Member with respect to the
corresponding share of Class A Stock or other Equity Security, if any, shall be
concurrently transferred to the Company; provided, however, that if the Managing
Member issues any shares of Class A Stock in order to purchase or fund the
purchase from a Member of a number of Units (and shares of Class B Stock) equal
to the number of shares of Class A Stock so issued, then the Company shall not
issue any new Units in connection therewith and the Managing Member shall not be
required to transfer such net proceeds to the Company (it being understood that
such net proceeds shall instead be transferred to such Member as consideration
for such purchase). Notwithstanding the foregoing, this Section 4.1(e) shall not
apply to the issuance and distribution to holders of shares of PubCo Common
Stock of rights to purchase Equity Securities of the Managing Member under a
“poison pill” or similar shareholders rights plan (it being understood that upon
exchange of Units for Class A Stock, such Class A Stock will be issued together
with a corresponding right), or to the issuance under the Managing Member’s
employee benefit plans of any warrants, options, other rights to acquire Equity
Securities of the Managing Member or rights or property that may be converted
into or settled in Equity Securities of the Managing Member, but shall in each
of the foregoing cases apply to the issuance of Equity Securities of the
Managing Member in connection with the exercise or settlement of such rights,
warrants, options or other rights or property. Except pursuant to Section 4.7,
(x) the Company may not issue any additional Units to the Managing Member or any
of its Subsidiaries unless substantially simultaneously the Managing Member or
such Subsidiary issues or sells an equal number of shares of the Managing
Member’s Class A Stock to another Person, and (y) the Company may not issue any
other Equity Securities of the Company to the Managing Member or any of its
Subsidiaries unless substantially simultaneously the Managing Member or such
Subsidiary issues or sells, to another Person, an equal number of shares of a
new class or series of Equity Securities of the Managing Member or such
Subsidiary with substantially the same rights to dividends and distributions
(including distributions upon liquidation) and other economic rights as those of
such Equity Securities of the Company.

(f) The Managing Member or any of its Subsidiaries may not redeem, repurchase or
otherwise acquire (i) any shares of Class A Stock (including upon forfeiture of
any unvested shares of Class A Stock) unless substantially simultaneously the
Company redeems, repurchases or otherwise acquires from the Managing Member an
equal number of Units for the same price per security or (ii) any other Equity
Securities of the Managing Member unless substantially simultaneously the
Company redeems, repurchases or otherwise acquires from the Managing Member an
equal number of Equity Securities of the Company of a corresponding class or
series with substantially the same rights to dividends and distributions
(including distributions upon liquidation) and other economic rights as those of
such Equity Securities of the Managing Member for the same price per security.
Except pursuant to Section 4.7, the Company may not redeem, repurchase or
otherwise acquire (A) any Units from the Managing Member or any of its
Subsidiaries unless substantially simultaneously the Managing Member or such
Subsidiary redeems, repurchases or otherwise acquires an equal number of shares
of Class A Stock for the same price per security from holders thereof, or
(B) any other Equity Securities of the Company from the Managing Member or any
of its Subsidiaries unless substantially simultaneously the Managing Member or
such Subsidiary redeems, repurchases or otherwise acquires for the same price
per security an equal number of Equity Securities of the Managing Member of a
corresponding class or series with substantially the same rights to dividends
and distributions (including distribution upon liquidation) and other economic
rights as those of such Equity Securities of the Managing Member.
Notwithstanding the foregoing, to the extent that any consideration payable by
the Managing Member in connection with the redemption or repurchase of any
shares of Class A Stock or other Equity Securities of the Managing Member or any
of its Subsidiaries consists (in whole or in part) of shares of Class A Stock or
such other Equity Securities (including, for the avoidance of doubt, in
connection with the cashless exercise of an option or warrant), then the
redemption or repurchase of the corresponding Units or other Equity Securities
of the Company shall be effectuated in an equivalent manner.

(g) The Company shall not in any manner effect any subdivision (by any stock
split, stock dividend, reclassification, recapitalization or otherwise) or
combination (by reverse stock split, reclassification, recapitalization or
otherwise) of the outstanding Units unless accompanied by an identical
subdivision or combination, as applicable, of the outstanding PubCo Common
Stock, with corresponding changes made with respect to any other exchangeable or
convertible securities. The Managing Member shall not in any manner effect any
subdivision (by any stock split, stock dividend, reclassification,
recapitalization or otherwise) or combination (by reverse stock split,
reclassification, recapitalization or otherwise) of the outstanding PubCo Common
Stock unless accompanied by an identical subdivision or combination, as
applicable, of the outstanding Units, with corresponding changes made with
respect to any other exchangeable or convertible securities.

Section 4.2 Voting Rights. No Member has any voting right except with respect to
those matters specifically reserved for a Member vote under the Act and for
matters expressly requiring the approval of Members under this Agreement. Except
as otherwise required by the Act, each Unit will entitle the holder thereof to
one vote on all matters to be voted on by the Members. Except as otherwise
expressly provided in this Agreement, the holders of Units having voting rights
will vote together as a single class on all matters to be approved by the
Members.

 

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Section 4.3 Capital Contributions; Unit Ownership.

(a) Capital Contributions. Each Member named on Exhibit D shall be credited with
the IPO Date Capital Account Balance set forth on Exhibit D in respect of its
Interest specified thereon. No Member shall be required to make additional
Capital Contributions.

(b) Issuance of Additional Units or Interests. Except as otherwise expressly
provided in this Agreement, the Managing Member shall have the right to
authorize and cause the Company to issue on such terms (including price) as may
be determined by the Managing Member (i) subject to the limitations of
Section 4.1, additional Units or other Equity Securities in the Company
(including creating preferred interests or other classes or series of securities
having such rights, preferences and privileges as determined by the Managing
Member), and (ii) obligations, evidences of Indebtedness or other securities or
interests convertible or exchangeable for Units or other Equity Securities in
the Company; provided that, at any time following the date hereof, in each case
the Company shall not issue Equity Securities in the Company to any Person
unless such Person shall have executed a counterpart to this Agreement and all
other documents, agreements or instruments deemed necessary or desirable in the
discretion of the Managing Member. In that event, the Managing Member shall
amend Exhibit D to reflect such additional issuances.

Section 4.4 Capital Accounts. A Capital Account shall be maintained for each
Member in accordance with the provisions of Treasury Regulations
Section 1.704-1(b)(2)(iv) and, to the extent consistent with such regulations,
the other provisions of this Agreement. The Capital Account balance of each of
the Members as of the date hereof is its respective IPO Date Capital Account
Balance set forth on Exhibit D. Thereafter, each Member’s Capital Account shall
be (a) increased by (i) allocations to such Member of Profits pursuant to
Section 5.1 and any other items of income or gain allocated to such Member
pursuant to Section 5.2, (ii) the amount of additional cash or the initial Gross
Asset Value of any asset (net of any Liabilities assumed by the Company and any
Liabilities to which the asset is subject) contributed to the Company by such
Member, and (iii) any other increases allowed or required by Treasury
Regulations Section 1.704-1(b)(2)(iv), and (b) decreased by (i) allocations to
such Member of Losses pursuant to Section 5.1 and any other items of deduction
or loss allocated to such Member pursuant to the provisions of Section 5.2,
(ii) the amount of any cash or the Gross Asset Value of any asset (net of any
Liabilities assumed by the Company and any Liabilities to which the asset is
subject) distributed to such Member, and (iii) any other decreases allowed or
required by Treasury Regulations Section 1.704-1(b)(2)(iv). In the event of a
Transfer of Units made in accordance with this Agreement, the Capital Account of
the Transferor that is attributable to the Transferred Units shall carry over to
the Transferee Member in accordance with the provisions of Treasury Regulations
Section 1.704-1(b)(2)(iv)(l).

Section 4.5 Reserved.

Section 4.6 Other Matters.

(a) No Member shall demand or receive a return on or of its Capital
Contributions or withdraw from the Company without the consent of the Managing
Member. Under circumstances requiring a return of any Capital Contributions, no
Member has the right to receive property other than cash.

(b) No Member shall receive any interest, salary, compensation, draw or
reimbursement with respect to its Capital Contributions or its Capital Account,
or for services rendered or expenses incurred on behalf of the Company or
otherwise in its capacity as a Member, except as otherwise provided in or
contemplated by this Agreement.

(c) The Liability of each Member shall be limited as set forth in the Act and
other applicable Law and, except as expressly set forth in this Agreement or
required by Law, no Member (or any of its Affiliates) shall be personally
liable, whether to the Company, to any of the other Members, to the creditors of
the Company, or to any other third party, for any debt or Liability of the
Company, whether arising in contract, tort or otherwise, solely by reason of
being a Member of the Company.

(d) Except as otherwise required by the Act, a Member shall not be required to
restore a deficit balance in its Capital Account, to lend any funds to the
Company or to make any additional contributions or payments to the Company.

(e) The Company shall not be obligated for the repayment of any Capital
Contributions of any Member.

Section 4.7 Exchange of Units.

(a) (i) Subject to adjustment as provided in Section 4.7(d) and subject to
PubCo’s rights described in Section 4.7(g), each of the Members other than PubCo
shall be entitled to exchange with the Company, at any time and from time to
time, any or all of such Member’s Units (together with the same number of shares
of Class B Stock) for an equivalent number of shares of Class A Stock (an
“Exchange”) or, at the Company’s election made in accordance with
Section 4.7(a)(ii), cash equal to the Cash Election Amount calculated with
respect to such Exchange. Each Exchange shall be treated for federal income tax
purposes as a sale of the Exchanging Member’s Units (together with the same
number of shares of Class B Stock) to PubCo in exchange for shares of Class A
Stock or cash, as applicable.

 

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(ii) Upon receipt of an Exchange Notice, the Company shall be entitled to elect
(a “Cash Election”) to settle the Exchange by the delivery to the Exchanging
Member, in lieu of the applicable number of shares of Class A Stock that would
be received in such Exchange, an amount of cash equal to the Cash Election
Amount for such Exchange. In order to make a Cash Election with respect to an
Exchange, the Company must provide written notice of such election to the
Exchanging Member prior to 1:00 pm, Houston time, on the Business Day after the
date on which the Exchange Notice shall have been received by the Company. If
the Company fails to provide such written notice prior to such time, it shall
not be entitled to make a Cash Election with respect to such Exchange.

(iii) Each Exchanging Member shall be permitted to effect an exchange of Units
and shares of Class B Stock pursuant to this Section 4.7 that involves less than
1,000,000 Units no more frequently than on a quarterly basis; provided, however,
that if an Exchanging Member provides an Exchange Notice with respect to all of
the Units and shares of Class B Stock held by such Exchanging Member, such
Exchange may occur at any time, subject to this Section 4.7; provided, further,
that the Managing Member may, in its sole discretion, permit any Member to
effect an exchange of a lesser number of Units (together with the same number of
shares of Class B Stock).

(b) In order to exercise the exchange right under Section 4.7(a), the exchanging
Member (the “Exchanging Member”) shall provide written notice (the “Exchange
Notice”) to the Company and PubCo, stating that the Exchanging Member elects to
exchange with the Company a stated (and equal) number of Units and shares of
Class B Stock represented, if applicable, by a certificate or certificates, to
the extent specified in such notice, and if the shares of Class A Stock to be
received are to be issued other than in the name of the Exchanging Member,
specifying the name(s) of the Person(s) in whose name or on whose order the
shares of Class A Stock are to be issued, and shall present and surrender the
certificate or certificates representing such Units and shares of Class B Stock
(in each case, if certificated) during normal business hours at the principal
executive offices of the Company, or if any agent for the registration or
transfer of Class A Stock is then duly appointed and acting (the “Transfer
Agent”), at the office of the Transfer Agent with respect to such Class A Stock.

(c) If required by PubCo, any certificate for Units and shares of Class B Stock
(in each case, if certificated) surrendered for exchange with the Company shall
be accompanied by instruments of transfer, in form reasonably satisfactory to
PubCo and the Transfer Agent, duly executed by the Exchanging Member or the
Exchanging Member’s duly authorized representative. If the Company has not made
a valid Cash Election, then as promptly as practicable after the receipt of the
Exchange Notice and the surrender to the Company of the certificate or
certificates, if any, representing such Units and shares of Class B Stock (but
in any event by the Exchange Date, as defined below), PubCo shall issue and
contribute to the Company, and the Company shall deliver to the Exchanging
Member, or on the Exchanging Member’s written order, a certificate or
certificates, if applicable, for the number of shares of Class A Stock issuable
upon the Exchange, and the Company shall deliver such Units and shares of Class
B Stock to PubCo in exchange for no additional consideration. If the Company has
made a valid Cash Election, then as promptly as practicable after the receipt of
the Exchange Notice (but in no event more than 90 days after receipt of the
Exchange Notice), upon surrender to the Company of the certificate or
certificates, if any, representing such Units and shares of Class B Stock, the
Company shall deliver to the Exchanging Member as directed by the Exchanging
Member by wire transfer of immediately available funds the Cash Election Amount
payable upon the Exchange, and the Company shall deliver such Units and shares
of Class B Stock to PubCo for no additional consideration. Each Exchange shall
be deemed to have been effected on (i) (x) the Business Day after the date on
which the Exchange Notice shall have been received by the Company, PubCo or the
Transfer Agent, as applicable (subject to receipt by the Company, PubCo or the
Transfer Agent, as applicable, within three Business Days thereafter of any
required instruments of transfer as aforesaid) if the Company has not made a
valid Cash Election with respect to such Exchange or (y) if the Company has made
a valid Cash Election with respect to such Exchange, the first Business Day on
which the Company has available funds to pay the Cash Election Amount (but in no
event more than 90 days after receipt of the Exchange Notice), or (ii) such
later date specified in or pursuant to the Exchange Notice (such date identified
in clause (i) or (ii), as applicable, the “Exchange Date”). If the Company has
not made a valid Cash Election, and the Person or Persons in whose name or names
any certificate or certificates for shares of Class A Stock (which certificates
shall bear any legends as may be required in accordance with applicable Law)
shall be issuable upon such Exchange as aforesaid shall be deemed to have
become, on the Exchange Date, the holder or holders of record of the shares
represented thereby. Notwithstanding anything herein to the contrary, unless the
Company has made a valid Cash Election, any Exchanging Member may withdraw or
amend an Exchange request, in whole or in part, prior to the effectiveness of
the applicable Exchange, at any time prior to 5:00 p.m., New York City time, on
the Business Day immediately preceding the Exchange Date (or any such later time
as may be required by applicable law) by delivery of a written notice of
withdrawal to the Company, PubCo or the Transfer Agent, specifying (1) the
certificate numbers of the withdrawn Units and shares of Class B Stock, (2) if
any, the number of Units and shares of Class B Stock as to which the Exchange
Notice remains in effect and (3) if the Exchanging Member so determines, a new
Exchange Date or any other new or revised information permitted in an Exchange
Notice. An Exchange Notice may specify that the Exchange is to be contingent
(including as to timing) upon the consummation of a purchase by another Person
(whether in a tender or exchange offer, an underwritten offering or otherwise)
of the shares of Class A Stock into which the Units and

 

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shares of Class B Stock are exchangeable, or contingent (including as to timing)
upon the closing of an announced merger, consolidation or other transaction or
event in which the shares of Class A Stock would be exchanged or converted or
become exchangeable for or convertible into cash or other securities or
property, provided that the foregoing shall not apply to any Exchange with
respect to which the Company has made a valid Cash Election.

(d) If (i) there is any reclassification, reorganization, recapitalization or
other similar transaction pursuant to which the shares of Class A Stock are
converted or changed into another security, securities or other property, or
(ii) PubCo shall, by dividend or otherwise, distribute to all holders of the
shares of Class A Stock evidences of its indebtedness or assets, including
securities (including shares of Class A Stock and any rights, options or
warrants to all holders of the shares of Class A Stock to subscribe for or to
purchase or to otherwise acquire shares of Class A Stock, or other securities or
rights convertible into, exchangeable for or exercisable for shares of Class A
Stock) but excluding any cash dividend or distribution as well as any such
distribution of indebtedness or assets received by PubCo from the Company in
respect of the Units, then upon any subsequent Exchange, in addition to the
shares of Class A Stock or the Cash Election Amount, as applicable, each Member
shall be entitled to receive the amount of such security, securities or other
property that such Member would have received if such Exchange had occurred
immediately prior to the effective date of such reclassification,
reorganization, recapitalization, other similar transaction dividend or other
distribution, taking into account any adjustment as a result of any subdivision
(by any split, distribution or dividend, reclassification, reorganization,
recapitalization or otherwise) or combination (by reverse split,
reclassification, recapitalization or otherwise) of such security, securities or
other property that occurs after the effective time of such reclassification,
reorganization, recapitalization or other similar transaction. For the avoidance
of doubt, if there is any reclassification, reorganization, recapitalization or
other similar transaction in which the shares of Class A Stock are converted or
changed into another security, securities or other property, or any dividend or
distribution (other than an excluded dividend or distribution, as described
above), this Section 4.7 shall continue to be applicable, mutatis mutandis, with
respect to such security or other property. This Agreement shall apply to the
Units held by the Members and their Permitted Transferees as of the date hereof,
as well as any Units hereafter acquired by a Member and his or her or its
Permitted Transferees.

(e) PubCo shall at all times keep available, solely for the purpose of issuance
upon an Exchange, such number of shares of Class A Stock that shall be issuable
upon the Exchange of all such outstanding Units and shares of Class B Stock;
provided, that nothing contained herein shall be construed to preclude PubCo
from satisfying its obligations with respect of an Exchange by delivery of
shares of Class A Stock that are held in the treasury of PubCo. PubCo covenants
that all shares of Class A Stock that shall be issued upon an Exchange shall,
upon issuance thereof, be validly issued, fully paid and non-assessable. In
addition, for so long as the shares of Class A Stock are listed on a National
Securities Exchange, PubCo shall use its reasonable best efforts to cause all
shares of Class A Stock issued upon an Exchange to be listed on such National
Securities Exchange at the time of such issuance.

(f) The issuance of shares of Class A Stock upon an Exchange shall be made
without charge to the Exchanging Member for any stamp or other similar tax in
respect of such issuance; provided, however, that if any such shares are to be
issued in a name other than that of the Exchanging Member, then the Person or
Persons in whose name the shares are to be issued shall pay to PubCo the amount
of any tax that may be payable in respect of any transfer involved in such
issuance or shall establish to the satisfaction of PubCo that such tax has been
paid or is not payable.

(g) (i) Notwithstanding anything to the contrary in this Section 4.7, but
subject to Section 4.7(h), an Exchanging Member shall be deemed to have offered
to sell its Units and shares of Class B Stock as described in the Exchange
Notice to PubCo, and PubCo may, in its sole discretion, by means of delivery of
Call Election Notices and/or Revocation Notices in accordance with, and subject
to the terms of, this Section 4.7(g), elect to purchase directly and acquire
such Units and shares of Class B Stock on the Exchange Date by paying to the
Exchanging Member (or, on the Exchanging Member’s written order, its designee)
that number of shares of Class A Stock the Exchanging Member (or its designee)
would otherwise receive pursuant to Section 4.7(a) or, at PubCo’s election, an
amount of cash equal to the Cash Election Amount of such shares of Class A Stock
(the “Call Right”), whereupon PubCo shall acquire the Units and shares of Class
B Stock offered for exchange by the Exchanging Member and shall be treated for
all purposes of this Agreement as the owner of such Units and shares of Class B
Stock. In the event PubCo shall exercise the Call Right, each of the Exchanging
Member, the Company and PubCo, as the case may be, shall treat the transaction
between the Company and the Exchanging Member for federal income tax purposes as
a sale of the Exchanging Member’s Units and shares of Class B Stock to PubCo.

(ii) PubCo may at any time in its sole discretion deliver written notice (a
“Call Election Notice”) to each other Member setting forth its election to
exercise its Call Right as contemplated by Section 4.7(g) with respect to future
Exchanges (without needing to provide further notice of its intention to
exercise its Call Right). Subject to the remainder of this Section 4.7(g)(ii), a
Call Election Notice will be effective until such time as PubCo amends such Call
Election Notice with a superseding Call Election Notice or revokes such Call
Election Notice by delivery of a written notice of revocation delivered to each
other Member or, with respect to a particular Exchange, the Company exercises
its Cash Election (a “Revocation Notice”). A Call Election Notice may be amended
or revoked by PubCo at any time; provided that any Exchange Notice delivered by
a Member will not, without such Member’s written consent, be affected by the
subsequent delivery of a Revocation Notice or by an Exchange Notice that is not

 

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effective until after the Exchange Date. Following delivery of a Revocation
Notice, PubCo may deliver a new Call Election Notice pursuant to this
Section 4.7(g). Any amendment of a Call Election Notice will not be effective
until the Business Day after its delivery to each Member (other than PubCo).
Each Call Election Notice shall specify the date from which it shall be
effective (which shall be no earlier than the Business Day after delivery).

(h) In the event that a tender offer, share exchange offer, issuer bid,
take-over bid, recapitalization or similar transaction with respect to shares of
Class A Stock (a “PubCo Offer”) is proposed by PubCo or is proposed to PubCo or
its stockholders and approved by the board of directors of PubCo or is otherwise
effected or to be effected with the consent or approval of the board of
directors of PubCo, the Members (other than PubCo) shall be permitted to
participate in such PubCo Offer by delivery of a contingent Exchange Notice in
accordance with the last sentence of Section 4.7(c). In the case of a PubCo
Offer proposed by PubCo, PubCo will use its reasonable best efforts
expeditiously and in good faith to take all such actions and do all such things
as are necessary or desirable to enable and permit the Members to participate in
such PubCo Offer to the same extent or on an economically equivalent basis as
the holders of shares of Members without discrimination; provided that, without
limiting the generality of this sentence, PubCo will use its reasonable best
efforts expeditiously and in good faith to ensure that such Members may
participate in each such PubCo Offer without being required to exchange Units
and shares of Class B Stock (or, if so required, to ensure that any such
Exchange shall be effective only upon, and shall be conditional upon, the
closing of such PubCo Offer and only to the extent necessary to tender or
deposit to PubCo Offer in accordance with the last sentence of Section 4.7(c),
or, as applicable, to the extent necessary to exchange the number of Units and
shares of Class B Stock being repurchased). For the avoidance of doubt, in no
event shall Members (other than PubCo) be entitled to receive in such PubCo
Offer aggregate consideration for each Unit and corresponding share of Class B
Stock that is greater than the consideration payable in respect of each share of
Class A Stock in connection with a PubCo Offer.

(i) No Exchange shall impair the right of the Exchanging Member to receive any
distributions payable on the Units so exchanged in respect of a record date that
occurs prior to the Exchange Date for such Exchange. For the avoidance of doubt,
no Exchanging Member, or a Person designated by an Exchanging Member to receive
shares of Class A Stock, shall be entitled to receive, with respect to the same
fiscal quarter, distributions or dividends both on Units exchanged by such
Exchanging Member and on shares of Class A Stock received by such Exchanging
Member, or other Person so designated, if applicable, in such Exchange.

ARTICLE V

ALLOCATIONS OF PROFITS AND LOSSES

Section 5.1 Profits and Losses. After giving effect to the allocations under
Section 5.2, Profits and Losses (and, to the extent determined by the Managing
Member to be necessary and appropriate to achieve the resulting Capital Account
balances described below, any allocable items of income, gain, loss, deduction
or credit includable in the computation of Profits and Losses) for each Fiscal
Year shall be allocated among the Members during such Fiscal Year in a manner
such that, after giving effect to the special allocations set forth in Sections
5.2 and all distributions through the end of such Fiscal Year, the Capital
Account balance of each Member, immediately after making such allocation, is, as
nearly as possible, equal to (i) the amount such Member would receive pursuant
to Section 11.3(b) if all assets of the Company on hand at the end of such
Fiscal Year were sold for cash equal to their Gross Asset Values, all
liabilities of the Company were satisfied in cash in accordance with their terms
(limited with respect to each nonrecourse liability to the Gross Asset Value of
the assets securing such liability), and all remaining or resulting cash was
distributed, in accordance with Section 11.3(b), to the Members immediately
after making such allocation, minus (ii) such Member’s share of Company Minimum
Gain and Member Minimum Gain, computed immediately prior to the hypothetical
sale of assets.

Section 5.2 Special Allocations.

(a) Nonrecourse Deductions for any Fiscal Year shall be specially allocated to
the Members in the manner excess nonrecourse liabilities of the Company are
allocated pursuant to Section 5.5(c). The amount of Nonrecourse Deductions for a
Fiscal Year shall equal the excess, if any, of the net increase, if any, in the
amount of Company Minimum Gain during that Fiscal Year over the aggregate amount
of any distributions during that Fiscal Year of proceeds of a Nonrecourse
Liability that are allocable to an increase in Company Minimum Gain, determined
in accordance with the provisions of Treasury Regulations Section 1.704-2(d).

(b) Any Member Nonrecourse Deductions for any Fiscal Year shall be specially
allocated to the Member who bears economic risk of loss with respect to the
Member Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Treasury Regulations Section 1.704-2(i). If more
than one Member bears the economic risk of loss for such Member Nonrecourse
Debt, the Member Nonrecourse Deductions attributable to such Member Nonrecourse
Debt shall be allocated among the Members according to the ratio in which they
bear the economic risk of loss. This Section 5.2(b) is intended to comply with
the provisions of Treasury Regulations Section 1.704-2(i) and shall be
interpreted consistently therewith.

 

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(c) Notwithstanding any other provision of this Agreement to the contrary, if
there is a net decrease in Company Minimum Gain during any Fiscal Year (or if
there was a net decrease in Company Minimum Gain for a prior Fiscal Year and the
Company did not have sufficient amounts of income and gain during prior periods
to allocate among the Members under this Section 5.2(c), each Member shall be
specially allocated items of Company income and gain for such Fiscal Year in an
amount equal to such Member’s share of the net decrease in Company Minimum Gain
during such year (as determined pursuant to Treasury Regulations
Section 1.704-2(g)(2)). This section is intended to constitute a minimum gain
chargeback under Treasury Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith.

(d) Notwithstanding any other provision of this Agreement except Section 5.2(c),
if there is a net decrease in Member Minimum Gain during any Fiscal Year (or if
there was a net decrease in Member Minimum Gain for a prior Fiscal Year and the
Company did not have sufficient amounts of income and gain during prior periods
to allocate among the Members under this Section 5.2(d)), each Member shall be
specially allocated items of Company income and gain for such year in an amount
equal to such Member’s share of the net decrease in Member Minimum Gain (as
determined pursuant to Treasury Regulations Section 1.704-2(i)(4)). This section
is intended to constitute a partner nonrecourse debt minimum gain chargeback
under Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.

(e) Notwithstanding any provision hereof to the contrary except Section 5.2(c)
and Section 5.2(d), in the event any Member unexpectedly receives any
adjustment, allocation or distribution described in paragraph (4), (5) or (6) of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d), items of income and gain
(consisting of a pro rata portion of each item of income, including gross
income, and gain for the Fiscal Year) shall be specially allocated to such
Member in an amount and manner sufficient to eliminate any Adjusted Capital
Account Deficit of that Member as quickly as possible; provided that an
allocation pursuant to this Section 5.2(e) shall be made only if and to the
extent that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article V have been tentatively made as
if this Section 5.2(e) were not in this Agreement. This Section 5.2(e) is
intended to constitute a qualified income offset under Treasury Regulations
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

(f) If any Member has a deficit balance in its Capital Account at the end of any
Fiscal Year that is in excess of the sum of (i) the amount that such Member is
obligated to restore and (ii) the amount that the Member is deemed to be
obligated to restore pursuant to the penultimate sentence of Treasury
Regulations Sections 1.704-2(g)(1) and (i)(5), that Member shall be specially
allocated items of Company income, gain and Simulated Gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 5.2(f) shall be made only if and to the extent that such Member would
have a deficit balance in its Capital Account in excess of such sum after all
other allocations provided for in this Article V have been made as if
Section 5.2(e) and this Section 5.2(f) were not in this Agreement.

(g) To the extent an adjustment to the adjusted tax basis of any Company asset
pursuant to Code Sections 734(b) or 743(b) is required, pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as a result of a distribution
to any Member in complete liquidation of such Member’s Interest in the Company,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such item of gain or loss shall be
allocated to the Members in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv)(m)(2) if such section applies or to the Member to whom
such distribution was made if Treasury Regulations
Section 1.704-1(b)(2)(iv)(m)(4) applies.

(h) Simulated Depletion for each Depletable Property, and Simulated Loss upon
the Disposition of a Depletable Property, shall be allocated among the Members
in proportion to their shares of the Simulated Basis in such property.

(i) The allocations set forth in Sections 5.2(a) through 5.2(h) (the “Regulatory
Allocations”) are intended to comply with certain requirements of Treasury
Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding any other provision
of this Article V (other than the Regulatory Allocations), the Regulatory
Allocations (and anticipated future Regulatory Allocations) shall be taken into
account in allocating other items of income, gain, loss and deduction among the
Members so that, to the extent possible, the net amount of such allocation of
other items and the Regulatory Allocations to each Member should be equal to the
net amount that would have been allocated to each such Member if the Regulatory
Allocations had not occurred. This Section 5.2(i) is intended to minimize to the
extent possible and to the extent necessary any economic distortions which may
result from application of the Regulatory Allocations and shall be interpreted
in a manner consistent therewith.

Section 5.3 Allocations for Tax Purposes in General.

(a) Except as otherwise provided in this Section 5.3, each item of income, gain,
loss and deduction of the Company for federal income tax purposes shall be
allocated among the Members in the same manner as such item is allocated under
Sections 5.1 and 5.2.

 

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(b) In accordance with Code Section 704(c) and the Treasury Regulations
thereunder (including the Treasury Regulations applying the principles of Code
Section 704(c) to changes in Gross Asset Values), items of income, gain, loss
and deduction with respect to any Company property having a Gross Asset Value
that differs from such property’s adjusted U.S. federal income tax basis shall,
solely for U.S. federal income tax purposes, be allocated among the Members to
account for any such difference using the “remedial method” under Treasury
Regulations Section 1.704-3(d) or such other method or methods as determined by
the Managing Member to be appropriate and in accordance with the applicable
Treasury Regulations.

(c) Any (i) recapture of depreciation or any other item of deduction shall be
allocated, in accordance with Treasury Regulations Sections 1.1245-1(e) and
1.1254-5, to the Members who received the benefit of such deductions (taking
into account the effect of remedial allocations), and (ii) recapture of grants
credits shall be allocated to the Members in accordance with applicable law.

(d) Allocations pursuant to this Section 5.3 are solely for purposes of federal,
state and local taxes and shall not affect or in any way be taken into account
in computing any Member’s Capital Account or share of Profits, Losses, other
items or distributions pursuant to any provision of this Agreement.

Section 5.4 Income Tax Allocations with Respect to Depletable Properties.

(a) Cost and percentage depletion deductions with respect to any Depletable
Property shall be computed separately by the Members rather than the Company.
For purposes of such computations, the federal income tax basis of each
Depletable Property shall be allocated to each Member pro rata, in accordance
with the number of Units owned by such Member as of the time such Depletable
Property is acquired by the Company (and any additions to such federal income
tax basis resulting from expenditures required to be capitalized in such basis
shall be allocated among the Members in a manner designed to cause the Members’
proportionate shares of such adjusted federal income tax basis to be in
accordance with their proportionate ownership of Units as determined at the time
of any such additions), and shall be reallocated among the Members pro rata, in
accordance with the number of Units owned by such Member as determined
immediately following the occurrence of an event giving rise to an adjustment to
the Gross Asset Values of the Company’s Depletable Properties pursuant to clause
(b) of the definition of Gross Asset Value. The Company shall inform each Member
of such Member’s allocable share of the federal income tax basis of each
Depletable Property promptly following the acquisition of such Depletable
Property by the Company, any adjustment resulting from expenditures required to
be capitalized in such basis, and any reallocation of such basis as provided in
the previous sentence.

(b) For purposes of the separate computation of gain or loss by each Member on
the taxable disposition of Depletable Property, the amount realized from such
disposition shall be allocated (i) first, to the Members in an amount equal to
the Simulated Basis in such Depletable Property in proportion to their allocable
shares thereof and (ii) second, any remaining amount realized shall be allocated
consistent with the allocation of Simulated Gains.

(c) The allocations described in this Section 5.4 are intended to be applied in
accordance with the Members’ “interests in partnership capital” under
Section 613A(c)(7)(D) of the Code; provided that the Members understand and
agree that the Managing Member may authorize special allocations of federal
income tax basis, income, gain, deduction or loss, as computed for federal
income tax purposes, in order to eliminate differences between Simulated Basis
and adjusted federal income tax basis with respect to Depletable Properties, in
such manner as determined consistent with the principles outlined in
Section 5.3(b). The provisions of this Section 5.4(c) and the other provisions
of this Agreement relating to allocations under Code Section 613A(c)(7)(D) are
intended to comply with Treasury Regulations Section 1.704-1(b)(4)(v) and shall
be interpreted and applied in a manner consistent with such Treasury
Regulations.

(d) Each Member, with the assistance of the Company, shall separately keep
records of its share of the adjusted tax basis in each Depletable Property,
adjust such share of the adjusted tax basis for any cost or percentage depletion
allowable with respect to such property and use such adjusted tax basis in the
computation of its cost depletion or in the computation of its gain or loss on
the disposition of such property by the Company. Upon the reasonable request of
the Company, each Member shall advise the Company of its adjusted tax basis in
each Depletable Property and any depletion computed with respect thereto, both
as computed in accordance with the provisions of this subsection for purposes of
allowing the Company to make adjustments to the tax basis of its assets as a
result of certain transfers of interests in the Company or distributions by the
Company. The Company may rely on such information and, if it is not provided by
the Member, may make such reasonable assumptions as it shall determine with
respect thereto.

Section 5.5 Other Allocation Rules.

(a) The Members are aware of the income tax consequences of the allocations made
by this Article V and the economic impact of the allocations on the amounts
receivable by them under this Agreement. The Members hereby agree to be bound by
the provisions of this Article V in reporting their share of Company income and
loss for income tax purposes.

(b) All items of income, gain, loss, deduction and credit allocable to an
interest in the Company that may have been Transferred shall be allocated
between the Transferor and the Transferee based on the portion of the Fiscal
Year during which each was recognized as the owner of such interest, without
regard to the results of Company operations during any particular portion of
that year and without regard to whether cash distributions were made to the
Transferor or the Transferee during that year; provided, however, that this
allocation must be made in accordance with a method permissible under Code
Section 706 and the Treasury Regulations thereunder.

 

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(c) The Members’ proportionate shares of the “excess nonrecourse liabilities” of
the Company, within the meaning of Treasury Regulations Section 1.752-3(a)(3),
shall be allocated to the Members in any manner determined by the Managing
Member and permissible under the Treasury Regulations.

ARTICLE VI

DISTRIBUTIONS

Section 6.1 Distributions.

(a) Distributions. To the extent permitted by applicable Law and hereunder,
distributions to Members may be declared by the Managing Member out of funds
legally available therefor in such amounts and on such terms (including the
payment dates of such distributions) as the Managing Member shall determine
using such record date as the Managing Member may designate; such distribution
shall be made to the Members as of the close of business on such record date on
a pro rata basis (except that repurchases or redemptions made in accordance with
Section 4.1(f) or payments made in accordance with Section 7.4 need not be on a
pro rata basis), in accordance with the number of Units owned by each Member as
of the close of business on such record date; provided, however, that the
Managing Member shall have the obligation to make distributions as set forth in
Sections 4.1(f), 6.2 and 7.4; and provided further that, notwithstanding any
other provision herein to the contrary, no distributions shall be made to any
Member to the extent such distribution would render the Company insolvent. For
purposes of the foregoing sentence, insolvency means the inability of the
Company to meet its payment obligations when due. Promptly following the
designation of a record date and the declaration of a distribution pursuant to
this Section 6.1, the Managing Member shall give notice to each Member of the
record date, the amount and the terms of the distribution and the payment date
thereof.

(b) Successors. For purposes of determining the amount of distributions, each
Member shall be treated as having made the Capital Contributions and as having
received the Distributions made to or received by its predecessors in respect of
any of such Member’s Units.

(c) Distributions In-Kind. Except as otherwise provided in this Agreement, any
distributions may be made in cash or in kind, or partly in cash and partly in
kind, as determined by the Managing Member. To the extent that the Company
distributes property in-kind to the Members, the Company shall be treated as
making a distribution equal to the Fair Market Value of such property for
purposes of Section 6.1(a) and such property shall be treated as if it were sold
for an amount equal to its Fair Market Value. Any resulting gain or loss shall
be allocated to the Member’s Capital Accounts in accordance with Section 5.1 and
Section 5.2.

Section 6.2 Tax-Related Distributions.

(a) Prior to making distributions pursuant to Section 6.1, on each Tax
Distribution Date, the Company shall, subject to the availability of funds and
to any restrictions contained in any agreement to which the Company is bound,
make distributions to the Members pro rata in proportion to their respective
Units an amount sufficient to cause each Member to receive a distribution equal
to such Member’s Assumed Tax Liability, if any.

(b) If the cumulative amount of actual federal, state and local income tax
liabilities payable by PubCo at a Tax Distribution Date exceeds the sum of the
cumulative amount of Tax Distributions, distributions under Section 6.1 and the
Excess Tax Distributions (as defined below) made to PubCo through such Tax
Distribution Date, the Company shall, to the extent permitted by applicable Law,
but subject to the Act, the availability of funds and any restrictions contained
in any agreement to which the Company is bound, make additional tax
distributions to PubCo in an amount equal to such excess (an “Excess Tax
Distribution”). Any such Excess Tax Distribution shall be treated as an advance
against and, thus, shall reduce (without duplication), any future distributions
that would otherwise be made to PubCo pursuant to Sections 6.1 and 6.2(a).

(c) The Company shall, to the extent permitted by applicable Law, but subject to
the Act, the availability of funds and any restrictions contained in any
agreement to which the Company is bound, make distributions to the Members, pro
rata in proportion to the number of Units owned by each Member, in such amounts
as shall (when combined with the distributions made to PubCo pursuant to
Sections 6.1 and 6.2(a)) enable PubCo to meet its obligations pursuant to the
Tax Receivable Agreement.

Section 6.3 Distribution Upon Withdrawal. No withdrawing Member shall be
entitled to receive any distribution or the value of such Member’s Interest in
the Company as a result of withdrawal from the Company prior to the liquidation
of the Company, except as specifically provided in this Agreement.

 

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ARTICLE VII

MANAGEMENT

Section 7.1 The Managing Member; Fiduciary Duties.

(a) PubCo shall be the sole Managing Member of the Company. Except as otherwise
required by Law, (i) the Managing Member shall have full and complete charge of
all affairs of the Company, (ii) the management and control of the Company’s
business activities and operations shall rest exclusively with the Managing
Member, and the Managing Member shall make all decisions regarding the business,
activities and operations of the Company (including the incurrence of costs and
expenses) in its sole discretion without the consent of any other Member and
(iii) the Members other than the Managing Member (in their capacity as such)
shall not participate in the control, management, direction or operation of the
activities or affairs of the Company and shall have no power to act for or bind
the Company.

(b) In connection with the performance of its duties as the Managing Member of
the Company, the Managing Member acknowledges that it will owe to the Members
the same fiduciary duties as it would owe to the stockholders of a Delaware
corporation if it were a member of the board of directors of such a corporation
and the Members were stockholders of such corporation. The parties acknowledge
that the Managing Member will take action through its board of directors, and
that the members of the Managing Member’s board of directors will owe comparable
fiduciary duties to the stockholders of the Managing Member.

Section 7.2 Officers.

(a) The Managing Member may appoint, employ or otherwise contract with any
Person for the transaction of the business of the Company or the performance of
services for or on behalf of the Company, and the Managing Member may delegate
to any such Persons such authority to act on behalf of the Company as the
Managing Member may from time to time deem appropriate.

(b) The initial president and chief executive officer of the Company (the
“President and Chief Executive Officer”) will be Bryan Sheffield.

(c) Except as otherwise set forth herein, the President and Chief Executive
Officer will be responsible for the general and active management of the
business of the Company and its Subsidiaries and will see that all orders of the
Managing Member are carried into effect. The President and Chief Executive
Officer will report to the Managing Member and have the general powers and
duties of management usually vested in the office of president and chief
executive officer of a corporation organized under the DGCL, subject to the
terms of this Agreement, and will have such other powers and duties as may be
prescribed by the Managing Member or this Agreement. The President and Chief
Executive Officer will have the power to execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Company, except where required
or permitted by Law to be otherwise signed and executed, and except where the
signing and execution thereof will be expressly delegated by the Managing Member
to some other Officer or agent of the Company.

(d) Except as set forth herein, the Managing Member may appoint Officers at any
time, and the Officers may include one or more vice presidents, a secretary, one
or more assistant secretaries, a chief financial officer, a general counsel, a
treasurer, one or more assistant treasurers, a chief operating officer, an
executive chairman, and any other officers that the Managing Member deems
appropriate. Except as set forth herein, the Officers will serve at the pleasure
of the Managing Member, subject to all rights, if any, of such Officer under any
contract of employment. Any individual may hold any number of offices, and an
Officer may, but need not, be a Member of the Company. The Officers will
exercise such powers and perform such duties as specified in this Agreement or
as determined from time to time by the Managing Member.

(e) Subject to this Agreement and to the rights, if any, of an Officer under a
contract of employment, any Officer may be removed, either with or without
cause, by the Managing Member. Any Officer may resign at any time by giving
written notice to the Managing Member. Any resignation will take effect at the
date of the receipt of that notice or at any later time specified in that
notice; and, unless otherwise specified in that notice, the acceptance of the
resignation will not be necessary to make it effective. Any resignation is
without prejudice to the rights, if any, of the Company under any contract to
which the Officer is a party. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause will be filled in the
manner prescribed in this Agreement for regular appointments to that office.

Section 7.3 Warranted Reliance by Officers on Others. In exercising their
authority and performing their duties under this Agreement, the Officers shall
be entitled to rely on information, opinions, reports, or statements of the
following persons or groups unless they have actual knowledge concerning the
matter in question that would cause such reliance to be unwarranted:

 

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(a) one or more employees or other agents of the Company or in subordinates whom
the Officer reasonably believes to be reliable and competent in the matters
presented; and

(b) any attorney, public accountant, or other person as to matters which the
Officer reasonably believes to be within such person’s professional or expert
competence.

Section 7.4 Indemnification. Subject to the limitations and conditions provided
in this Section 7.4, each Person who was or is made a party or is threatened to
be made a party to or is involved in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
arbitrative (each, a “Proceeding”), or any appeal in such a Proceeding or any
inquiry or investigation that could lead to such a Proceeding, by reason of the
fact the, she or it, or a Person of which he, she or it is the legal
representative, is or was a Member or an Officer, in each case, shall be
indemnified by the Company to the fullest extent permitted by applicable law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to provide
broader indemnification rights than such law permitted the Company to provide
prior to such amendment) against all judgment, penalties (including excise and
similar taxes and punitive damages), fines, settlement and reasonable expenses
(including reasonable attorneys’ fees and expenses) actually incurred by such
person in connection with such Proceeding, appeal, inquiry or investigation, if
such Person acted in Good Faith. Reasonable expenses incurred by a Person of the
type entitled to be indemnified under this Section 7.4 who was, is or is
threatened to be made a named defendant or respondent in a Proceeding shall be
paid by the Company in advance of the final disposition of the Proceeding upon
receipt of an undertaking by or on behalf of such Person to repay such amount if
it shall ultimately be determined that he, she or it is not entitled to be
indemnified by the Company. Indemnification under this Section 7.4 shall
continue as to a Person who has ceased to serve in the capacity which initially
entitled such Person to indemnity hereunder. The rights granted pursuant to this
Section 7.4 shall be deemed contract rights, and no amendment, modification or
repeal of this Section 7.4 shall have the effect of limiting or denying any such
rights with respect to actions taken or Proceedings, appeals, inquiries or
investigations arising prior to any amendment, modification or repeal. It is
expressly acknowledged that the indemnification provided in this Section 7.4
could involve indemnification for negligence or under theories of strict
liability.

Section 7.5 Maintenance of Insurance or Other Financial Arrangements. In
compliance with applicable Law, the Company (with the approval of the Managing
Member) may purchase and maintain insurance or make other financial arrangements
on behalf of any Person who is or was a Member, employee or agent of the
Company, or at the request of the Company is or was serving as a manager,
director, officer, employee or agent of another limited liability company,
corporation, partnership, joint venture, trust or other enterprise, for any
Liability asserted against such Person and Liability and expenses incurred by
such Person in such Person’s capacity as such, or arising out of such Person’s
status as such, whether or not the Company has the authority to indemnify such
Person against such Liability and expenses.

Section 7.6 Resignation or Termination of Managing Member. PubCo shall not, by
any means, resign as, cease to be or be replaced as Managing Member except in
compliance with this Section 7.6. No termination or replacement of PubCo as
Managing Member shall be effective unless proper provision is made, in
compliance with this Agreement, so that the obligations of PubCo, its successor
(if applicable) and any new Managing Member and the rights of all Members under
this Agreement and applicable Law remain in full force and effect. No
appointment of a Person other than PubCo (or its successor, as applicable) as
Managing Member shall be effective unless PubCo (or its successor, as
applicable) and the new Managing Member (as applicable) provide all other
Members with contractual rights, directly enforceable by such other Members
against PubCo (or its successor, as applicable) and the new Managing Member (as
applicable), to cause (a) PubCo to comply with all PubCo’s obligations under
this Agreement (including its obligations under Section 4.7) other than those
that must necessarily be taken in its capacity as Managing Member and (b) the
new Managing Member to comply with all the Managing Member’s obligations under
this Agreement.

Section 7.7 No Inconsistent Obligations. Managing Member represents that it does
not have any contracts, other agreements, duties or obligations that are
inconsistent with its duties and obligations (whether or not in its capacity as
Managing Member) under this Agreement and covenants that, except as permitted by
Section 7.1, it will not enter into any contracts or other agreements or
undertake or acquire any other duties or obligations that are inconsistent with
such duties and obligations.

Section 7.8 Reclassification Events of PubCo. If a Reclassification Event
occurs, the Managing Member or its successor, as the case may be, shall, as and
to the extent necessary, amend this Agreement in compliance with Section 12.1,
and enter into any necessary supplementary or additional agreements, to ensure
that, following the effective date of the Reclassification Event: (i) the
exchange rights of holders of Units set forth in Section 4.7 provide that each
Unit and share of Class B Stock is exchangeable for the same amount and same
type of property, securities or cash (or combination thereof) that one share of
Class A Stock becomes exchangeable for or converted into as a result of the
Reclassification Event and (ii) PubCo or the successor to PubCo, as applicable,
is obligated to deliver such property, securities or cash upon such exchange.
PubCo shall not consummate or agree to consummate any Reclassification Event
unless the successor Person, if any, becomes obligated to comply with the
obligations of PubCo (in whatever capacity) under this Agreement.

 

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Section 7.9 Certain Costs and Expenses. The Company shall (i) pay, or cause to
be paid, all costs, fees, operating expenses and other expenses of the Company
(including the costs, fees and expenses of attorneys, accountants or other
professionals and the compensation of all personnel providing services to the
Company) incurred in pursuing and conducting, or otherwise related to, the
activities of the Company, and (ii) in the sole discretion of the Managing
Member, bear and/or reimburse the Managing Member for any costs, fees or
expenses incurred by it in connection with serving as the Managing Member. To
the extent that the Managing Member determines in its sole discretion that such
expenses are related to the business and affairs of the Managing Member that are
conducted through the Company and/or its Subsidiaries (including expenses that
relate to the business and affairs of the Company and/or its Subsidiaries and
that also relate to other activities of the Managing Member), the Managing
Member may cause the Company to pay or bear all expenses of the Managing Member,
including, without limitation, costs of securities offerings not borne directly
by members, board of directors compensation and meeting costs, cost of periodic
reports to its stockholders, litigation costs and damages arising from
litigation, accounting and legal costs and franchise taxes, provided that the
Company shall not pay or bear any income tax obligations of the Managing Member.

ARTICLE VIII

ROLE OF MEMBERS

Section 8.1 Rights or Powers. Other than the Managing Member, the Members,
acting in their capacity as Members, shall not have any right or power to take
part in the management or control of the Company or its business and affairs or
to act for or bind the Company in any way. Notwithstanding the foregoing, the
Members have all the rights and powers specifically set forth in this Agreement
and, to the extent not inconsistent with this Agreement, in the Act. A Member,
any Affiliate thereof or an employee, stockholder, agent, director or officer of
a Member or any Affiliate thereof, may also be an employee or be retained as an
agent of the Company. The existence of these relationships and acting in such
capacities will not result in the Member (other than the Managing Member) being
deemed to be participating in the control of the business of the Company or
otherwise affect the limited liability of the Member. Except as specifically
provided herein, a Member (other than the Managing Member) shall not, in its
capacity as a Member, take part in the operation, management or control of the
Company’s business, transact any business in the Company’s name or have the
power to sign documents for or otherwise bind the Company

Section 8.2 Voting.

(a) Meetings of the Members may be called upon the written request of Members
holding at least 50% of the outstanding Units. Such request shall state the
location of the meeting and the nature of the business to be transacted at the
meeting. Written notice of any such meeting shall be given to all Members not
less than two Business Days nor more than 30 days prior to the date of such
meeting. Members may vote in person, by proxy or by telephone at any meeting of
the Members and may waive advance notice of such meeting. Whenever the vote or
consent of Members is permitted or required under this Agreement, such vote or
consent may be given at a meeting of the Members or may be given in accordance
with the procedure prescribed in this Section 8.2. Except as otherwise expressly
provided in this Agreement, the affirmative vote of the Members holding a
majority of the outstanding Units shall constitute the act of the Members.

(b) Each Member may authorize any Person or Persons to act for it by proxy on
all matters in which such Member is entitled to participate, including waiving
notice of any meeting, or voting or participating at a meeting. Every proxy must
be signed by such Member or its attorney-in-fact. No proxy shall be valid after
the expiration of 11 months from the date thereof unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the Member
executing it.

(c) Each meeting of Members shall be conducted by an Officer designated by the
Managing Member or such other individual person as the Managing Member deems
appropriate.

(d) Any action required or permitted to be taken by the Members may be taken
without a meeting if the requisite Members whose approval is necessary consent
thereto in writing.

Section 8.3 Various Capacities. The Members acknowledge and agree that the
Members or their Affiliates will from time to time act in various capacities,
including as a Member and as the Tax Matters Member.

 

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ARTICLE IX

TRANSFERS OF INTERESTS

Section 9.1 Restrictions on Transfer.

(a) Except as provided in Section 4.7 and except for the Transfers by a Member
to Permitted Transferee, no Member shall Transfer all or any portion of its
Interest without the prior written consent of the Managing Member in its sole
discretion; provided, that, to the extent that the Managing Member determines in
good faith that a proposed transfer would not have the effect contemplated by
Section 9.1(b)(iii), then the Managing Member will not unreasonably withhold its
consent to a transfer by any Member that holds at least 10% of the Units not
held by the Managing Member and who intends, in connection with such proposed
transfer, to transfer all or substantially all of the Units then held by such
Member to any Person or group of Persons acting together that would constitute a
“group” for purposes of Section 13(d) of the Securities and Exchange Act of 1934
or any successor provisions thereto. If, notwithstanding the provisions of this
Section 9.1(a), all or any portion of a Member’s Interests are Transferred in
violation of this Section 9.1(a), involuntarily, by operation of law or
otherwise, then without limiting any other rights and remedies available to the
other parties under this Agreement or otherwise, the Transferee of such Interest
(or portion thereof) shall not be admitted to the Company as a Member or be
entitled to any rights as a Member hereunder, and the Transferor will continue
to be bound by all obligations hereunder, unless and until the Managing Member
consents in writing to such admission, which consent shall be granted or
withheld in the Managing Member’s sole discretion. Any attempted or purported
Transfer of all or a portion of a Member’s Interests in violation of this
Section 9.1(a) shall be null and void and of no force or effect whatsoever. For
the avoidance of doubt, the restrictions on Transfer contained in this
Article IX shall not apply to the Transfer of any capital stock of the Managing
Member; provided that no shares of Class B Stock may be Transferred unless a
corresponding number of Units are Transferred therewith in accordance with this
Agreement.

(b) In addition to any other restrictions on Transfer herein contained,
including the provisions of this Article IX, in no event may any Transfer or
assignment of Interests by any Member be made (i) to any Person who lacks the
legal right, power or capacity to own Interests; (ii) if in the opinion of legal
counsel or a qualified tax advisor to the Company such Transfer presents a
material risk that such Transfer would cause the Company to cease to be
classified as a partnership or to be classified as a “publicly traded
partnership” within the meaning of Section 7704(b) of the Code for federal
income tax purposes; (iii) if such Transfer would cause the Company to become,
with respect to any employee benefit plan subject to Title I of ERISA, a
“party-in-interest” (as defined in Section 3 (14) of ERISA) or a “disqualified
person” (as defined in Section 4975(e)(2) of the Code); (iv) if such Transfer
would, in the opinion of counsel to the Company, cause any portion of the assets
of the Company to constitute assets of any employee benefit plan pursuant to the
Plan Asset Regulation or otherwise cause the Company to be subject to regulation
under ERISA; (v) if such Transfer requires the registration of such Interests or
any Equity Securities issued upon any exchange of such Interests, pursuant to
any applicable federal or state securities Laws; or (vi) if such Transfer
subjects the Company to regulation under the Investment Company Act or the
Investment Advisors Act of 1940, each as amended (or any succeeding law).

Section 9.2 Notice of Transfer. Other than in connection with Transfers made
pursuant to Section 4.7, each Member shall, after complying with the provisions
of this Agreement, but in any event no later than three Business Days following
any Transfer of Interests, give written notice to the Company of such Transfer.
Each such notice shall describe the manner and circumstances of the Transfer.

Section 9.3 Transferee Members. A Transferee of Interests pursuant to this
Article IX shall have the right to become a Member only if (i) the requirements
of this Article IX are met, (ii) such Transferee executes an instrument
reasonably satisfactory to the Managing Member agreeing to be bound by the terms
and provisions of this Agreement and assuming all of the Transferor’s then
existing and future Liabilities arising under or relating to this Agreement,
(iii) such Transferee represents that the Transfer was made in accordance with
all applicable securities Laws, (iv) the Transferor or Transferee shall have
reimbursed the Company for all reasonable expenses (including attorneys’ fees
and expenses) of any Transfer or proposed Transfer of a Member’s Interest,
whether or not consummated and (v) if such Transferee or his or her spouse is a
resident of a community property jurisdiction, then such Transferee’s spouse
shall also execute an instrument reasonably satisfactory to the Managing Member
agreeing to be bound by the terms and provisions of this Agreement to the extent
of his or her community property or quasi-community property interest, if any,
in such Member’s Interest. Unless agreed to in writing by the Managing Member,
the admission of a Member shall not result in the release of the Transferor from
any Liability that the Transferor may have to each remaining Member or to the
Company under this Agreement or any other Contract between the Managing Member,
the Company or any of its Subsidiaries, on the one hand, and such Transferor or
any of its Affiliates, on the other hand. Written notice of the admission of a
Member shall be sent promptly by the Company to each remaining Member.
Notwithstanding anything to the contrary in this Section 9.3, and except as
otherwise provided in this Agreement, following a Transfer by one or more
Members (or a transferee of the type described in this sentence) to an Permitted
Transferee of all or substantially all of their Interests, such transferee shall
succeed to all of the rights of such Member(s) under this Agreement.

 

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Section 9.4 Legend. Each certificate representing a Unit, if any, will be
stamped or otherwise imprinted with a legend in substantially the following
form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.

THE TRANSFER AND VOTING OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF PARSLEY ENERGY, LLC DATED AS OF MAY 29, 2014, AMONG THE MEMBERS LISTED
THEREIN, AS IT MAY BE AMENDED, SUPPLEMENTED AND/OR RESTATED FROM TIME TO TIME,
AND NO TRANSFER OF THESE SECURITIES WILL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE ISSUER OF SUCH SECURITIES.”

ARTICLE X

ACCOUNTING

Section 10.1 Books of Account. The Company shall, and shall cause each
Subsidiary to, maintain true books and records of account in which full and
correct entries shall be made of all its business transactions pursuant to a
system of accounting established and administered in accordance with GAAP, and
shall set aside on its books all such proper accruals and reserves as shall be
required under GAAP.

Section 10.2 Tax Elections. The Company shall make the following elections on
the appropriate forms or tax returns:

(a) to adopt the calendar year as the Company’s Fiscal Year, if permitted under
the Code;

(b) to adopt the accrual method of accounting for U.S. federal income tax
purposes;

(c) to elect to amortize the organizational expenses of the Company as permitted
by Code Section 709(b);

(d) to make an election described in Section 754 of the Code (which the Company
shall ensure that it has in effect at all times); and

(e) any other election the Managing Member may deem appropriate and in the best
interests of the Company.

Section 10.3 Tax Returns; Information. The Tax Matters Member shall arrange for
the preparation and timely filing of all income and other tax and informational
returns of the Company. The Tax Matters Member shall furnish to each Member a
copy of each approved return and statement, together with any schedules or other
information which each Member may require in connection with such Member’s own
tax affairs as soon as practicable (but in no event more than 60 days after the
end of each Fiscal Year).

Section 10.4 Tax Matters Member. The Managing Member is specially authorized and
appointed to act as the “Tax Matters Member” under the Code and in any similar
capacity under state or local Law. The Tax Matters Member may retain, at the
Company’s expense, such outside counsel, accountants and other professional
consultants as it may reasonably deem necessary in the course of fulfilling its
obligations as Tax Matters Member.

Section 10.5 Withholding Tax Payments and Obligations. If withholding taxes are
paid or required to be paid in respect of payments made to or by the Company,
such payments or obligations shall be treated as follows:

(a) If the Company receives proceeds in respect of which a tax has been
withheld, the Company shall be treated as having received cash in an amount
equal to the amount of such withheld tax, and, for all purposes of this
Agreement but subject to Section 10.5(d), each Member shall be treated as having
received a distribution pursuant to Section 6.1 equal to the portion of the
withholding tax allocable to such Member, as determined by the Managing Member
in its discretion.

(b) The Company is authorized to withhold from any payment made to, or any
distributive share of, a Member any taxes required by Law to be withheld.

 

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(c) Neither the Company nor the Managing Member shall be liable for any excess
taxes withheld in respect of any Member, and, in the event of overwithholding, a
Member’s sole recourse shall be to apply for a refund from the appropriate
Governmental Entity.

(d) Any taxes withheld pursuant to Section 10.5(a) or (b) shall be treated as if
distributed to the relevant Member to the extent an amount equal to such
withheld taxes would then be distributable to such Member, and, to the extent in
excess of such distributable amounts, as a demand loan payable by the Member to
the Company with interest at the Prime Rate in effect from time to time,
compounded annually. The Managing Member may, in its discretion, either demand
payment of the principal and accrued interest on such demand loan at any time,
and enforce payment thereof by legal process, or may withhold from one or more
distributions to a Member amounts sufficient to satisfy such Member’s
obligations under any such demand loan.

(e) If the Company is required by Law to make any payment to a Governmental
Entity that is specifically attributable to a Member or a Member’s status as
such (including federal withholding taxes, state personal property taxes, and
state unincorporated business taxes), then such Member shall indemnify and
contribute to the Company in full for the entire amount of taxes paid (plus
interest, penalties and related expenses if the failure of the Company to make
such payment is due to the fault of the Member) (which payment shall not be
deemed a Capital Contribution for purposes of this Agreement). The Managing
Member may offset distributions to which a Person is otherwise entitled under
this Agreement against such Person’s obligation to indemnify the Company under
this Section 10.5(e).

ARTICLE XI

DISSOLUTION AND TERMINATION

Section 11.1 Liquidating Events. The Company shall dissolve and commence winding
up and liquidating upon the first to occur of the following (“Liquidating
Events”):

(a) The sale of all or substantially all of the assets of the Company; and

(b) The determination of the Managing Member to dissolve, wind up, and liquidate
the Company.

The Members hereby agree that the Company shall not dissolve prior to the
occurrence of a Liquidating Event and that no Member shall seek a dissolution of
the Company, under Section 18-802 of the Act or otherwise, other than based on
the matters set forth in subsections (a) and (b) above. If it is determined by a
court of competent jurisdiction that the Company has dissolved prior to the
occurrence of a Liquidating Event, the Members hereby agree to continue the
business of the Company without a winding up or liquidation. In the event of a
dissolution pursuant to Section 11.1(b), the relative economic rights of each
class of Units immediately prior to such dissolution shall be preserved to the
greatest extent practicable with respect to distributions made to Members
pursuant to Section 11.3 in connection with such dissolution, taking into
consideration tax and other legal constraints that may adversely affect one or
more parties to such dissolution and subject to compliance with applicable laws
and regulations, unless, with respect to any class of Units, holders of a
majority of the Units of such class consent in writing to a treatment other than
as described above.

Section 11.2 Bankruptcy. For purposes of this Agreement, the “bankruptcy” of a
Member shall mean the occurrence of any of the following: (a) any Governmental
Entity shall take possession of any substantial part of the property of that
Member or shall assume control over the affairs or operations thereof, or a
receiver or trustee shall be appointed, or a writ, order, attachment or
garnishment shall be issued with respect to any substantial part thereof, and
such possession, assumption of control, appointment, writ or order shall
continue for a period of 90 consecutive days; or (b) a Member shall admit in
writing of its inability to pay its debts when due, or make an assignment for
the benefit of creditors; or apply for or consent to the appointment of any
receiver, trustee or similar officer or for all or any substantial part of its
property; or shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment
of debts, dissolution, liquidation, or similar proceeding under the Laws of any
jurisdiction; or (c) a receiver, trustee or similar officer shall be appointed
for such Member or with respect to all or any substantial part of its property
without the application or consent of that Member, and such appointment shall
continue undischarged or unstayed for a period of 90 consecutive days or any
bankruptcy, insolvency, reorganization, arrangements, readjustment of debt,
dissolution, liquidation or similar proceedings shall be instituted (by
petition, application or otherwise) against that Member and shall remain
undismissed for a period of 90 consecutive days.

Section 11.3 Procedure.

(a) In the event of the dissolution of the Company for any reason, the Members
shall commence to wind up the affairs of the Company and to liquidate the
Company’s investments; provided that if a Member is in bankruptcy or dissolved,
another Member, who shall be the Managing Member (“Winding-Up Member”) shall
commence to wind up the affairs of the Company and, subject to Section 11.4(a),
such Winding-Up Member shall have full right and unlimited discretion to
determine in good faith the time, manner

 

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and terms of any sale or sales of the Property or other assets pursuant to such
liquidation, having due regard to the activity and condition of the relevant
market and general financial and economic conditions. The Members shall continue
to share profits, losses and distributions during the period of liquidation in
the same manner and proportion as though the Company had not dissolved. The
Company shall engage in no further business except as may be necessary, in the
reasonable discretion of the Managing Member or the Winding-Up Member, as
applicable, to preserve the value of the Company’s assets during the period of
dissolution and liquidation.

(b) Following the payment of all expenses of liquidation and the allocation of
all Profits and Losses as provided in Article V, the proceeds of the liquidation
and any other funds of the Company shall be distributed in the following order
of priority:

(i) First, to the payment and discharge of all of the Company’s debts and
Liabilities to creditors (whether third parties or Members), in the order of
priority as provided by Law, except any obligations to the Members in respect of
their Capital Accounts;

(ii) Second, to set up such cash reserves which the Managing Member reasonably
deems necessary for contingent or unforeseen Liabilities or future payments
described in Section 11.3(b)(i) (which reserves when they become unnecessary
shall be distributed in accordance with the provisions of subsection (iv),
below); and

(iii) Third, subject to Section 6.2(b), the balance to the Members, pro rata in
proportion to their respective Units.

(c) Except as provided in Section 11.4(a), no Member shall have any right to
demand or receive property other than cash upon dissolution and termination of
the Company.

(d) Upon the completion of the liquidation of the Company and the distribution
of all Company funds, the Company shall terminate and the Managing Member or the
Winding-Up Member, as the case may be, shall have the authority to execute and
record a certificate of cancellation of the Company, as well as any and all
other documents required to effectuate the dissolution and termination of the
Company.

Section 11.4 Rights of Members.

(a) Each Member irrevocably waives any right that it may have to maintain an
action for partition with respect to the property of the Company.

(b) Except as otherwise provided in this Agreement, (i) each Member shall look
solely to the assets of the Company for the return of its Capital Contributions,
and (ii) no Member shall have priority over any other Member as to the return of
its Capital Contributions, distributions or allocations.

Section 11.5 Notices of Dissolution. In the event a Liquidating Event occurs or
an event occurs that would, but for provisions of Section 11.1, result in a
dissolution of the Company, the Company shall, within 30 days thereafter,
(a) provide written notice thereof to each of the Members and to all other
parties with whom the Company regularly conducts business (as determined in the
discretion of the Managing Member), and (b) comply, in a timely manner, with all
filing and notice requirements under the Act or any other applicable Law.

Section 11.6 Reasonable Time for Winding Up. A reasonable time shall be allowed
for the orderly winding up of the business and affairs of the Company and the
liquidation of its assets in order to minimize any losses that might otherwise
result from such winding up.

Section 11.7 No Deficit Restoration. No Member shall be personally liable for a
deficit Capital Account balance of that Member, it being expressly understood
that the distribution of liquidation proceeds shall be made solely from existing
Company assets.

ARTICLE XII

GENERAL

Section 12.1 Amendments; Waivers.

(a) The terms and provisions of this Agreement may be waived, modified or
amended (including by means of merger, consolidation or other business
combination to which the Company is a party) only with the approval of the
Managing Member; provided, however, that no amendment to this Agreement may:

 

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(i) modify the limited liability of any Member, or increase the liabilities or
obligations of any Member, in each case, without the consent of each such
affected Member; or

(ii) materially alter or change any rights, preferences or privileges of any
Interests in a manner that is different or prejudicial relative to any other
Interests, without the approval of a majority in interest of the Members holding
the Interests affected in such a different or prejudicial manner.

(b) Notwithstanding the foregoing subsection (a), the Managing Member, acting
alone, may amend this Agreement, including Exhibit D, to reflect the admission
of new Members, Transfers of Interests, the issuance of additional Units or
Equity Securities, as provided by the terms of this Agreement, and, subject to
Section 12.1(a), subdivisions or combinations of Units made in compliance with
Section 4.1(g).

(c) No waiver of any provision or default under, nor consent to any exception
to, the terms of this Agreement or any agreement contemplated hereby shall be
effective unless in writing and signed by the party to be bound and then only to
the specific purpose, extent and instance so provided.

Section 12.2 Further Assurances. Each party agrees that it will from time to
time, upon the reasonable request of another party, execute such documents and
instruments and take such further action as may be required to accomplish the
purposes of this Agreement.

Section 12.3 Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon the parties and their respective successors and
assigns, but shall inure to the benefit of and be enforceable by the successors
and assigns of any Member only to the extent that they are permitted successors
and assigns pursuant to the terms hereof. No party may assign its rights
hereunder except as herein expressly permitted.

Section 12.4 Entire Agreement. This Agreement, together with all Exhibits and
Schedules hereto and all other agreements referenced therein and herein,
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof and supersede all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties and there are no warranties, representations or other agreements between
the parties in connection with the subject matter hereof except as specifically
set forth herein and therein.

Section 12.5 Rights of Members Independent. The rights available to the Members
under this Agreement and at Law shall be deemed to be several and not dependent
on each other and each such right accordingly shall be construed as complete in
itself and not by reference to any other such right. Any one or more and/or any
combination of such rights may be exercised by a Member and/or the Company from
time to time and no such exercise shall exhaust the rights or preclude another
Member from exercising any one or more of such rights or combination thereof
from time to time thereafter or simultaneously.

Section 12.6 Governing Law. This Agreement, the legal relations between the
parties and any Action, whether contractual or non-contractual, instituted by
any party with respect to matters arising under or growing out of or in
connection with or in respect of this Agreement shall be governed by and
construed in accordance with the Laws of the State of Delaware applicable to
contracts made and performed in such State and without regard to conflicts of
law doctrines, except to the extent that certain matters are preempted by
federal Law or are governed as a matter of controlling Law by the Law of the
jurisdiction of organization of the respective parties.

Section 12.7 Jurisdiction and Venue. The parties hereto hereby agree and consent
to be subject to the jurisdiction of any federal court of the District of
Delaware or the Delaware Court of Chancery over any action, suit or proceeding
(a “Legal Action”) arising out of or in connection with this Agreement. The
parties hereto irrevocably waive the defense of an inconvenient forum to the
maintenance of any such Legal Action. Each of the parties hereto further
irrevocably consents to the service of process out of any of the aforementioned
courts in any such Legal Action by the mailing of copies thereof by registered
mail, postage prepaid, to such party at its address set forth in this Agreement,
such service of process to be effective upon acknowledgment of receipt of such
registered mail. Nothing in this Section 12.7 shall affect the right of any
party hereto to serve legal process in any other manner permitted by law.

Section 12.8 Headings. The descriptive headings of the Articles, Sections and
subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.

Section 12.9 Counterparts. This Agreement and any amendment hereto or any other
agreement (or document) delivered pursuant hereto may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts shall constitute one and the same agreement (or other document) and
shall become effective (unless otherwise provided therein) when one or more
counterparts have been signed by each party and delivered to the other party.

 

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Section 12.10 Notices. Any notice or other communication hereunder must be given
in writing and (a) delivered in person, (b) transmitted by facsimile or
telecommunications mechanism, provided, that any notice so given is also mailed
as provided in clause (c), or (c) mailed by certified or registered mail,
postage prepaid, receipt requested as follows:

If to the Company or the Managing Member, addressed to it at:

c/o Parsley Energy, Inc.

500 W. Texas Ave., Tower I, Suite 200

Midland, Texas 79701

Telephone: 432.818.2100

Attention: Colin Roberts, General Counsel

With copies (which shall not constitute notice) to:

Vinson & Elkins L.L.P.

1001 Fannin, Suite 2500-6760

Houston, Texas 77002

Telephone: 713.758.3613

Facsimile: 713.615.5725

Attention: Douglas E. McWilliams

or to such other address or to such other person as either party shall have last
designated by such notice to the other parties. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 12.10 and an appropriate answerback is received or, if transmitted after
4:00 p.m. local time on a Business Day in the jurisdiction to which such notice
is sent or at any time on a day that is not a Business Day in the jurisdiction
to which such notice is sent, then on the immediately following Business Day,
(ii) if given by mail, on the first Business Day in the jurisdiction to which
such notice is sent following the date three days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, on the Business Day when actually received
at such address or, if not received on a Business Day, on the Business Day
immediately following such actual receipt.

Section 12.11 Representation By Counsel; Interpretation. The parties acknowledge
that each party to this Agreement has been represented by counsel in connection
with this Agreement and the transactions contemplated by this Agreement.
Accordingly, any rule of Law, or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement against the party
that drafted it has no application and is expressly waived.

Section 12.12 Severability. If any provision of this Agreement is determined to
be invalid, illegal or unenforceable by any Governmental Entity, the remaining
provisions of this Agreement, to the extent permitted by Law shall remain in
full force and effect, provided, that the essential terms and conditions of this
Agreement for all parties remain valid, binding and enforceable.

Section 12.13 Expenses. Except as otherwise provided in this Agreement, in the
Reorganization Agreement, each party shall bear its own expenses in connection
with the transactions contemplated by this Agreement.

Section 12.14 No Third Party Beneficiaries. Except as expressly provided in
Section 7.4 and Section 10.2, nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto and their
respective successors and permitted assigns, any rights or remedies under this
Agreement or otherwise create any third party beneficiary hereto.

[Signatures on Next Page]

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this First Amended and
Restated Limited Liability Company Agreement to be executed by its duly
authorized officers as of the day and year first above written.

 

COMPANY: PARSLEY ENERGY, LLC By:   /s/ Bryan Sheffield   Name: Bryan Sheffield  
Title: President

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

 

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MANAGING MEMBER: PARSLEY ENERGY, INC. By:   /s/ Bryan Sheffield   Name: Bryan
Sheffield   Title: President and Chief Executive Officer

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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PARSLEY ENERGY EMPLOYEE HOLDINGS, LLC By:   /s/ Bryan Sheffield   Name:   Bryan
Sheffield   Title:   Bryan Sheffield, Sole Manager

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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MANAGEMENT MEMBERS: /s/ Bryan Sheffield Bryan Sheffield

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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SHEFFIELD MANAGEMENT, L.L.C. By:   /s/ Bryan Sheffield Name:   Bryan Sheffield
Title:   President

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ Matt Gallagher Matt Gallagher

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ Paul Treadwell Paul Treadwell

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ Michael Hinson Michael Hinson

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ Ryan Dalton Ryan Dalton

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ Colin Roberts Colin Roberts

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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LEGACY INVESTOR MEMBERS: PARSLEY INTERESTS, L.P. By:   /s/ Joe M. Parsley Name:
  Joe M. Parsley Title:   President of JOMO Oil Corp. GP of Parsley Interests,
L.P.

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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MARBELLA INTERESTS, LLC By:   /s/ Bryan Sheffield   Bryan Sheffield, President

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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Cecilla Camarillo Self Directed IRA By:   /s/ Cecilla Camarillo Name:   Title:  

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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BACK NINE OIL & GAS, LTD. By:   /s/ Howard W. Parker Name:   Sure Putt, Inc. GP
Title:   President

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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HOWJAN PROPERTIES, INC. By:   /s/ Howard W. Parker Name:   Howard W. Parker
Title:   President

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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NINE-IRON OIL & GAS, LTD. By:   /s/ Howard W. Parker Name:   Sure Putt, Inc. GP
Title:   President

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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ONE PUTT OIL & GAS, LTD.

By:

  /s/ Howard W. Parker

Name:

  Sure Putt, Inc. GP

Title:

  President

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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DIAMOND K INTERESTS, LP By:   /s/ Christopher Kayem Title:   Vice President

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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PLZ PROPERTIES, LLC By:   /s/ Paul Treadwell Name:   Paul Treadwell Title:  
Managing Owner

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ David W. Askew

David Askew

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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HHR Energy, LLC By:   /s/ Colin Roberts Name:   Colin Roberts

Title:

  Member

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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HEDLOC INVESTMENT COMPANY, L.P. By:   Hedloc Investment GP, LLC By:   /s/ Jack
Harper Name:   Jack Harper Title:   Manager

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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OCO CAPITAL II, L.P. By:   Utopia Management, Inc. By:   /s/ Dan Hord Name:  
Dan Hord Title:   President

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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BUCK HORN, L.P. By:   /s/ Dan Hord Name:   Dan Hord Title:   General Partner

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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SHACK VENTURES, LP By:   Shack Energy, LLC By:   /s/ Jack Harper Name:   Jack
Harper Title:   Manager

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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SD GRAY FAMILY PARTNERSHIP, LP By:   SD Gary Management, LLC   Its General
Partner By:   /s/ Steven Gray   Steven D. Gray, Manager

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ Landon Martin Landon Martin

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ Kara Wood Kara Wood

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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Kara Wood IRA By:   /s/ Kara Wood IRA Name:   Kara Wood Title:  

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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KMG ENERGY LLC By:   /s/ Matt Gallagher Name:   Matt Gallagher Title:   Member

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

-59-

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/s/ Stephanie Reed Stephanie Reed

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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Stephanie Reed By:   /s/ Stephanie Reed Name:   Stephanie Reed, Individually

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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Cecilia Camarillo By:   /s/ Cecilia Camarillo Name:   Cecilia Camarillo,
Individually

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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Blackbear Resources, LLC By:   /s/ Isaac Hayes Name:   Isaac Hayes Title:  
Managing Member

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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Brad Sublett By:   /s/ Brad Sublett 5-1-14 Name:   Brad Sublett, Individually

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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MARBELLA INTERESTS, LLC By:   /s/ Bryan Sheffield   Bryan Sheffield, President

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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HHR Energy, LLC By:   /s/ Colin Roberts Name:   Colin Roberts Title:   Member

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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BUTTE FAMILY PARTNERS, LLC By:   /s/ Ryan Dalton Name:   Ryan Dalton Title:  
Member

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ Kristin McClure Kristin McClure

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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PARSLEY INTERESTS, L.P. By:   /s/ Joe M. Parsley Name   Joe M. Parsley Title:  
President of JOMO Oil Corp. GP of Parsley Interests LP

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ Kirk Fritschen Kirk Fritschen

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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PLZ PROPERTIES, LLC By:   /s/ Paul Treadwell Name:   Paul Treadwell Title:  
Managing Owner

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ Justin Clark Justin Clark

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ David Smith David Smith

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

-73-

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/s/ Frank Cremer

Frank Cremer

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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/s/ Rob Crumpler

Rob Crumpler

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

-75-

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/s/ Isaac Hayes

Isaac Hayes

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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Franco Services, Inc. By:   /s/ Gary P. Little Name:   Gary P. Little Title:  
President

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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1993 Little Inter Vivos Trust By:   /s/ Mike O’Donnel, Trustee Name:   Mike
O’Donnel Title:   Trustee

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

-78-

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Mike Senich By:   /s/ Michael A. Senich Name:   Mike Senich, Individually

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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NGP:

NGP X US HOLDINGS, L.P.

By:   NGP X Holdings GP, L.L.C.   Its General Partner By:   /s/ Kenneth A. Hersh
  Kenneth A. Hersh, Authorized Person

 

[Signature Page to the First Amended and Restated Limited Liability Company
Agreement]

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EXHIBIT A

 

Member

   Units  

1993 Little Inter Vivos Trust

     4,161   

Back Nine Oil & Gas Ltd.

     1,353,097   

Blackbear Resources LLC

     14,563   

Brad Sublett

     18,772   

Bryan Sheffield

     37,860,955   

Buck Horn, L.P.

     125,548   

Butte Family Partners, LLC

     416,099   

Cecilia Camarillo

     10,402   

Cecilia Camarillo Self Directed IRA

     13,870   

Colin Roberts

     20,925   

David Askew

     461,283   

David Smith

     8,370   

Diamond K Interests, LP

     6,150,438   

Franco Services Inc.

     6,935   

Frank Cremer

     8,370   

Hedloc Investment Company, L.P.

     334,797   

HHR Energy, LLC

     29,127   

HowJan Properties, Inc.

     565,840   

Isaac Hayes

     15,061   

Justin Clark

     8,370   

Kara Wood

     8,370   

Kara Wood IRA

     6,935   

Kirk Fristchen

     16,740   

KMG Energy, LLC

     221,913   

Kristin McClure

     8,370   

Landon Martin

     27,860   

Marbella Interests, LLC

     83,699   

Matt Gallagher

     1,537,610   

Michael Hinson

     3,142,180   

Mike Senich

     15,305   

NGP X US Holdings, L.P.

     10,880,874   

Nine Iron Oil & Gas Ltd.

     418,230   

One Putt Oil & Gas Ltd.

     123,009   

OSO Capital II, L.P.

     125,548   

Parsley Interests, L.P.

     3,158,919   

Paul Treadwell

     1,551,480   

PLZ Properties, LLC

     33,480   

Rob Crumpler

     8,370   

Ryan Dalton

     1,596,200   

SD Gray Family Partnership, LP

     125,548   

Shack Ventures, LP

     125,548   

Sheffield Energy Management, LLC

     3,604,356   

Stephanie Reed

     69,589   

PEEH

     1,396,388      

 

 

 

Total

     75,713,504   

 

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EXHIBIT B

 

Member

   Units Contributed
to PubCo  

1993 Little Inter Vivos Trust

     4,161   

Back Nine Oil & Gas Ltd.

     541,239   

Blackbear Resources LLC

     14,563   

Brad Sublett

     18,525   

Bryan Sheffield

     15,144,382   

Buck Horn, L.P.

     121,840   

Butte Family Partners, LLC

     416,099   

Cecilia Camarillo

     10,402   

Cecilia Camarillo Self Directed IRA

     13,870   

Colin Roberts

     20,307   

David Askew

     461,283   

David Smith

     8,123   

Diamond K Interests, LP

     6,150,438   

Franco Services Inc.

     6,935   

Frank Cremer

     8,123   

Hedloc Investment Company, L.P.

     324,908   

HHR Energy, LLC

     29,127   

HowJan Properties, Inc.

     226,336   

Isaac Hayes

     14,616   

Justin Clark

     8,123   

Kara Wood

     8,123   

Kara Wood IRA

     6,935   

Kirk Fristchen

     16,245   

KMG Energy, LLC

     219,441   

Kristin McClure

     8,123   

Landon Martin

     27,242   

Marbella Interests, LLC

     81,227   

Matt Gallagher

     307,522   

Michael Hinson

     1,602,592   

Mike Senich

     15,058   

NGP X US Holdings, L.P.

     10,559,506   

Nine Iron Oil & Gas Ltd.

     167,292   

One Putt Oil & Gas Ltd.

     49,204   

OSO Capital II, L.P.

     121,840   

Parsley Interests, L.P.

     1,618,837   

Paul Treadwell

     782,675   

PLZ Properties, LLC

     32,491   

Rob Crumpler

     8,123   

Ryan Dalton

     518,142   

SD Gray Family Partnership, LP

     121,840   

Shack Ventures, LP

     121,840   

Sheffield Energy Management, LLC

     1,802,178   

Stephanie Reed

     68,353      

 

 

 

Total

     41,808,229   

 

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EXHIBIT C

 

Members

   Units  

Back Nine Oil & Gas Ltd.

     811,858   

Brad Sublett

     247   

Bryan Sheffield

     22,716,573   

Buck Horn, L.P.

     3,708   

Colin Roberts

     618   

David Smith

     247   

Frank Cremer

     247   

Hedloc Investment Company, L.P.

     9,889   

HowJan Properties, Inc.

     339,504   

Isaac Hayes

     445   

Justin Clark

     247   

Kara Wood

     247   

Kirk Fristchen

     495   

KMG Energy, LLC

     2,472   

Kristin McClure

     247   

Landon Martin

     618   

Marbella Interests, LLC

     2,472   

Matt Gallagher

     1,230,088   

Michael Hinson

     1,539,588   

Mike Senich

     247   

NGP X US Holdings, L.P.

     321,368   

Nine Iron Oil & Gas Ltd.

     250,938   

One Putt Oil & Gas Ltd.

     73,805   

OSO Capital II, L.P.

     3,708   

Parsley Interests, L.P.

     1,540,082   

Paul Treadwell

     768,805   

PLZ Properties, LLC

     989   

Rob Crumpler

     247   

Ryan Dalton

     1,078,058   

SD Gray Family Partnership, LP

     3,708   

Shack Ventures, LP

     3,708   

Sheffield Energy Management, LLC

     1,802,178   

Stephanie Reed

     1,236   

Parsley Energy, Inc.

     1,396,388      

 

 

 

Total

     33,905,275   

 

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EXHIBIT D

 

Member

   IPO Date Capital
Balance      Units      Percentage of
Class of Units     Date Issued By
Company  

Back Nine Oil & Gas Ltd.

   $ 14,118,210.62         811,858         0.65 %      May 29, 2014   

Bryan Sheffield

   $ 395,041,204.47         22,716,573         18.13 %      May 29, 2014   

HowJan Properties, Inc.

   $ 5,903,974.56         339,504         0.27 %      May 29, 2014   

Matt Gallagher

   $ 21,391,230.32         1,230,088         0.98 %      May 29, 2014   

Michael Hinson

   $ 26,739,037.90         1,537,610         1.23 %      May 29, 2014   

Nine Iron Oil & Gas Ltd.

   $ 4,363,811.82         250,938         0.20 %      May 29, 2014   

One Putt Oil & Gas Ltd.

   $ 1,283,468.95         73,805         0.06 %      May 29, 2014   

Parsley Interests, L.P.

   $ 26,739,037.90         1,537,610         1.23 %      May 29, 2014   

Paul Treadwell

   $ 13,369,518.95         768,805         0.61 %      May 29, 2014   

Ryan Dalton

   $ 18,717,326.53         1,076,327         0.86 %      May 29, 2014   

Sheffield Energy Management, LLC

   $ 31,339,875.42         1,802,178         1.44 %      May 29, 2014   

Parsley Energy, Inc.

   $ 1,620,195,919.67         93,168,253         74.35 %      May 29, 2014      

 

 

    

 

 

      

Total Units

     2,179,202,617         125,313,549         100.00 %   

 

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