Exhibit 10.3

Execution Version

FIRST AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

ROSEHILL OPERATING COMPANY, LLC

DATED AS OF APRIL 27, 2017

THE LIMITED LIABILITY COMPANY INTERESTS IN ROSEHILL OPERATING COMPANY, 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 HAVE
BEEN OR ARE BEING ISSUED 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

 

Article I DEFINITIONS    2  

Section 1.1 Definitions

     2  

Section 1.2 Interpretive Provisions

     13  

Article II ORGANIZATION OF THE LIMITED LIABILITY COMPANY

     14  

Section 2.1 Formation

     14  

Section 2.2 Filing

     14  

Section 2.3 Name

     14  

Section 2.4 Registered Office; Registered Agent

     14  

Section 2.5 Principal Place of Business

     14  

Section 2.6 Purpose; Powers

     15  

Section 2.7 Term

     15  

Section 2.8 Intent

     15  

Article III CLOSING TRANSACTIONS

     15  

Section 3.1 Transactions In Connection With the Combination Agreement

     15  

Article IV OWNERSHIP AND CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS

     16  

Section 4.1 Authorized Units; General Provisions With Respect to Units

     16  

Section 4.2 Voting Rights

     19  

Section 4.3 Capital Contributions; Unit Ownership

     19  

Section 4.4 Capital Accounts

     20  

Section 4.5 Other Matters

     21  

Section 4.6 Exchange of Common Units

     21  

Article V ALLOCATIONS OF PROFITS AND LOSSES

     27  

Section 5.1 Profits and Losses

     27  

Section 5.2 Special Allocations

     28  

Section 5.3 Allocations for Tax Purposes in General

     30  

Section 5.4 Income Tax Allocations with Respect to Depletable Properties

     31  

Section 5.5 Other Allocation Rules

     33  

Section 5.6 Tax Consolidation

     34  

Article VI DISTRIBUTIONS

     35  

Section 6.1 Distributions

     35  

Section 6.2 Tax-Related Distributions

     36  

Section 6.3 Distribution Upon Withdrawal

     37  

Article VII MANAGEMENT

     37  

Section 7.1 The Managing Member; Fiduciary Duties

     37  

Section 7.2 Officers

     38  

Section 7.3 Warranted Reliance by Officers on Others

     39  

 

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Section 7.4 Indemnification

     39  

Section 7.5 Maintenance of Insurance or Other Financial Arrangements

     40  

Section 7.6 Resignation or Termination of Managing Member

     40  

Section 7.7 No Inconsistent Obligations

     40  

Section 7.8 Reclassification Events of Rosehill

     40  

Section 7.9 Certain Costs and Expenses

     41  

Article VIII ROLE OF MEMBERS

     41  

Section 8.1 Rights or Powers

     41  

Section 8.2 Voting

     42  

Section 8.3 Various Capacities

     42  

Article IX TRANSFERS OF INTERESTS

     43  

Section 9.1 Restrictions on Transfer

     43  

Section 9.2 Notice of Transfer

     44  

Section 9.3 Transferee Members

     44  

Section 9.4 Legend

     44  

Article X ACCOUNTING

     45  

Section 10.1 Books of Account

     45  

Section 10.2 Tax Elections

     45  

Section 10.3 Tax Returns; Information

     46  

Section 10.4 Tax Matters Member and Company Representative

     47  

Section 10.5 Withholding Tax Payments and Obligations

     48  

Article XI DISSOLUTION AND TERMINATION

     49  

Section 11.1 Liquidating Events

     49  

Section 11.2 Bankruptcy

     49  

Section 11.3 Procedure

     50  

Section 11.4 Rights of Members

     51  

Section 11.5 Notices of Dissolution

     51  

Section 11.6 Reasonable Time for Winding Up

     51  

Section 11.7 No Deficit Restoration

     51  

Article XII GENERAL

     52  

Section 12.1 Amendments; Waivers

     52  

Section 12.2 Further Assurances

     52  

Section 12.3 Successors and Assigns

     53  

Section 12.4 Entire Agreement

     53  

Section 12.5 Rights of Members Independent

     53  

Section 12.6 Governing Law

     53  

Section 12.7 Jurisdiction and Venue

     53  

Section 12.8 Headings

     53  

Section 12.9 Counterparts

     53  

Section 12.10 Notices

     54  

 

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Section 12.11 Representation By Counsel; Interpretation

     55  

Section 12.12 Severability

     55  

Section 12.13 Expenses

     55  

Section 12.14 No Third Party Beneficiaries

     55  

 

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FIRST AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

ROSEHILL OPERATING COMPANY, 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 April 27, 2017, by and among Rosehill Operating Company, 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 January 6, 2017
and is currently governed by the Limited Liability Company Agreement of the
Company dated as of January 6, 2017 (the “Existing LLC Agreement”);

WHEREAS, Rosehill Resources Inc. (formerly KLR Energy Acquisition Corp.), a
Delaware corporation (“Rosehill”), and Tema Oil and Gas Company, a Maryland
corporation (“Tema”), have entered into a Business Combination Agreement dated
December 20, 2016 (the “Combination Agreement”), which contemplates that Tema
will contribute certain assets to the Company subject to certain liabilities in
exchange for Units;

WHEREAS, pursuant to the Combination Agreement, Rosehill is contributing all of
its assets, including the net proceeds of its initial public offering and the
Equity Financing (as defined in the Combination Agreement) to the Company and
issuing and contributing shares of its Class B Common Stock (as defined below)
to the Company in exchange for (x) a number of Common Units equal to the number
of shares of Class A Common Stock (as defined below) and (y) a number of Series
A Preferred Units equal to the number of shares of Series A Preferred Stock (as
defined below), in each case outstanding immediately prior to the consummation
of the transactions contemplated by the Combination Agreement;

WHEREAS, pursuant to the Combination Agreement, Rosehill is issuing and
contributing the Tema Warrants to the Company in exchange for a number of
Warrants equal to the number of Tema Warrants;

WHEREAS, pursuant to the Combination Agreement, the Company will distribute
cash, all of its shares of Class B Common Stock and the Tema Warrants (as
defined below) to Tema in redemption of a certain number of Common Units;

WHEREAS, each Common Unit (other than any Common Unit held by Rosehill) may be
redeemed, at the election of the holder of such Common Unit (together with the
transfer and surrender by such holder of one share of Class B Common Stock), for
one share of Class A Common Stock in accordance with the terms and conditions of
this Agreement;

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WHEREAS, the Members of the Company desire that Rosehill become the sole
managing Member of the Company (in its capacity as managing Member, 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. 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.

“Adjusted Capital Account Deficit” means the deficit balance, if any, in such
Member’s Capital Account at the end of any Fiscal Year or other taxable period,
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 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 Member Minimum Gain;
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.

 

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“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.

“After-Tax TRA Payments” means, at any date of determination, with respect to a
Member that has received payments under the Tax Receivable Agreement, the excess
of (i) the aggregate payments received by such Member pursuant to the Tax
Receivable Agreement at such time, over (ii) the cumulative amount of federal,
state and local income taxes payable with respect to such payments, determined
taking into account the character of income or gain applicable to such payments
and assuming the Member is subject to tax at the Assumed Tax Rate.

“Agreement” is defined in the preamble.

“Assumed Tax Liability” means, with respect to any Member at any Tax Advance
Date, 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 Assumed Tax
Rate, that the Managing Member estimates would be due from such Member as of the
relevant Tax Advance 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) taking into account items
determined at the Member level with respect to Depletable Properties owned by
the Company, as if such items were allocated at the Company level and using the
cost depletion method, (iii) 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
(iv) assuming that such Member is subject to tax at the Assumed Tax Rate. The
Managing Member shall reasonably determine the Assumed Tax Liability for each
Member based on such assumptions as the Managing Member deems necessary.

“Assumed Tax Rate” means, for any taxable year, the sum of the highest marginal
effective rate of federal, state, and local income tax applicable to any direct,
or in the case of ownership through an entity classified as a partnership or
disregarded entity for federal income tax purposes, indirect owner of a Member
(other than Rosehill) (including any tax rate imposed under Section 1411 of the
Code) 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 excluding any deduction of state and local income
taxes in computing a Member’s liability for federal income tax. The Managing
Member shall consult in good faith with each other Member to determine the
Assumed Tax Rate for such Member for any taxable year.

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

 

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“Bipartisan Budget Act of 2015” means Title XI of the Bipartisan Budget Act of
2015, as may be amended from time to time (or any corresponding provisions of
succeeding law), and any related provisions of law, including court decisions,
regulations and administrative guidance.

“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 4.6(f)(ii).

“Call Right” has the meaning set forth in Section 4.6(f)(i).

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

“Capital Contribution” 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 Contribution of a
Member will include any Capital Contributions made by a predecessor holder of
such Member’s Units to the extent that such Capital Contribution was made in
respect of Units Transferred to such Member.

“Cash Election” is defined in Section 4.6(a)(iv).

“Cash Election Amount” means with respect to a particular Exchange on any
Exchange Date, an amount of cash equal to the number of shares of Class A Common
Stock that would be received in such Exchange, multiplied by the Class A VWAP
Price.

“Class A Common Stock” means, as applicable, (i) the Class A Common Stock, par
value $0.001 per share, of Rosehill or (ii) following any consolidation, merger,
reclassification or other similar event involving Rosehill, any shares or other
securities of Rosehill or any other Person or cash or other property that become
payable in consideration for the Class A Common Stock or into which the Class A
Common Stock is exchanged or converted as a result of such consolidation,
merger, reclassification or other similar event.

“Class A VWAP Price” means the (i) the volume weighted average price of a share
of Class A Common Stock for the 20 trading days ending on and including the
trading day prior to the Exchange Notice Date, as reported by Bloomberg, L.P.,
or its successor, or (ii) in the event the shares of Class A Common 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 B Common Stock” means, as applicable, (i) the Class B Common Stock, par
value $0.001 per share, of Rosehill or (ii) following any consolidation, merger,
reclassification or other similar event involving Rosehill, any shares or other
securities of Rosehill or any other Person or cash or other property that become
payable in consideration for the Class B Common Stock or into which the Class B
Common Stock is exchanged or converted as a result of such consolidation,
merger, reclassification or other similar event.

 

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“Closing 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 A as determined
immediately following the contributions and distributions from and to the
Members, respectively, pursuant to the Combination Agreement.

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

“Combination Agreement” is defined in the Recitals.

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

“Common Units” has the meaning set forth in Section 4.1(b).

“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 1.704-2(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.

“Company Representative” has the meaning assigned to the term “partnership
representative” in Section 6223 of the Code and any Treasury Regulations or
other administrative or judicial pronouncements promulgated thereunder and as
appointed in Section 10.4.

“Consolidated Group” has the meaning set forth in in Section 5.6(a).

“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.

“Debt Securities” means, with respect to Rosehill, any and all debt instruments
or debt securities that are not convertible or exchangeable into Equity
Securities of Rosehill.

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

 

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“Depreciation” means, for each Fiscal Year or other taxable period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
(excluding depletion) allowable with respect to an asset for such Fiscal Year or
other taxable period, except that (a) with respect to any such property the
Gross Asset Value of which differs from its Adjusted Basis for U.S. 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 or other taxable period shall be the amount of
book basis recovered for such Fiscal Year or other taxable period 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 U.S. federal income tax purposes at the beginning of such
Fiscal Year or other taxable period, 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 or other taxable period bears to such beginning Adjusted Basis; provided,
however, that if the Adjusted Basis for U.S. federal income tax purposes of an
asset at the beginning of such Fiscal Year or other taxable period 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).

“Discount” has the meaning set forth in Section 7.9.

“Effective Time” means the time of the Closing (as defined in the Combination
Agreement).

“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.

“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 4.6(a)(i).

“Exchange Date” means (i) (x) if the Company has not made a valid Cash Election
with respect to the relevant Exchange, the date that is three (3) Business Days
after the Exchange Notice Date or (y) if the Company has made a valid Cash
Election with respect to the relevant Exchange, the date that is the first
Business Day on which the Company has available funds to pay the Cash Election
Amount (but in any event no more than 10 days after the Exchange Notice Date),
or (ii) such later date specified in or pursuant to the Exchange Notice.

 

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“Exchange Notice” is defined in Section 4.6(a)(iii).

“Exchange Notice Date” is defined in Section 4.6(a)(iii).

“Exchanging Member” is defined in Section 4.6(a)(ii).

“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 reasonably deem appropriate.

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

“GAAP” means U.S. 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, self-regulatory or administrative authority, agency or commission or
any court, tribunal, or judicial or arbitral body.

“Gross Asset Value” means, with respect to any asset, the asset’s Adjusted Basis
for U.S. 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
(including any Series A Preferred Units issued/distributed to Rosehill with
respect to Series A Preferred Units pursuant to Section 6.1(a)(i)) 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

 

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  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 or appropriate 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(h); 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 and Simulated Depletion taken into account with respect to such
asset for purposes of computing Profits, Losses 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.

 

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“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.

“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).

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

“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 appointed as an officer of the Company pursuant to
and in accordance with the provisions of Section 7.2.

“Permitted Transferee” means, with respect to any Member, (a) any Affiliate of
such Member; (b) any partner, shareholder or member 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 (e) upon an individual Member’s death,
an executor, administrator or beneficiary of the estate of the deceased Member.

 

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“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.

“President and Chief Executive Officer” is defined in Section 7.2(b).

“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 taxable 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 U.S. federal income
tax and not otherwise taken into account in computing Profits or Losses shall be
added to such taxable income or loss;

 

  (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 subsections (b) or (c) of 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 U.S.
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;

 

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  (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 Section 5.1(a) or 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 5.1(a) and
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.

“Reclassification Event” means any of the following: (i) any reclassification or
recapitalization of Rosehill 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
Rosehill, or (iii) any sale, conveyance, lease, or other disposal of all or
substantially all the properties and assets of Rosehill to any other Person, in
each of clauses (i), (ii) or (iii), as a result of which holders of Rosehill
Common Stock shall be entitled to receive cash, securities or other property for
their shares of Rosehill Common Stock.

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

“Reporting Member” has the meaning set forth in in Section 5.6(a).

“Retraction Notice” is defined in Section 4.6(b)(i).

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

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

“Rosehill Offer” is defined in Section 4.6(g).

“Rosehill Stock” means the Rosehill Common Stock, together with any other stock
of Rosehill, including the Series A Preferred Stock.

 

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“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).

“Series A Preferred Stock” means, as applicable, the 8.0% Series A Cumulative
Perpetual Convertible Preferred Stock, par value $0.0001 per share, of Rosehill.

“Series A Preferred Units” has the meaning set forth in Section 4.1(b).

“Simulated Basis” means the Gross Asset Value of any Depletable Property.

“Simulated Depletion” means, with respect to each Depletable Property, a
depletion allowance computed in accordance with U.S. federal income tax
principles (as if the Simulated Basis of the property were its Adjusted Basis)
using the cost depletion method 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 Advance” has the meaning set forth in Section 6.2(b).

“Tax Advance 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
individual taxpayers and the due date for federal income tax returns of
individual 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 10.4.

“Tax Receivable Agreement” means the Tax Receivable Agreement dated as of
April 27, 2017 by and among Rosehill, Tema and the Agent as set forth thereunder
and any similar agreement entered into by Rosehill after the date hereof.

“Tax Return Preparer” has the meaning provided in Section 10.3(d).

“Tax Returns” has the meaning provided in Section 10.3(a).

“Tema” has the meaning set forth in the Recitals.

 

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“Tema Warrants” is defined in Section 3.1(c).

“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 4.6(a)(iii).

“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, including the Common Units and the
Series A Preferred Units, and shall also include any equity security issued in
respect of or in exchange for such units, whether by way of dividend or other
distribution, split, recapitalization, merger, rollup transaction,
consolidation, conversion or reorganization.

“Unpaid Excess Cash Amount” shall mean the total amount of any unpaid excess
cash payment amounts excused from payment as a dividend on Series A Preferred
Stock as a result of restrictions in any financing agreements or other third
party agreement to which the Company is a party or legal requirement set forth
in the Certificate of Designation for the Series A Preferred Stock.

“Warrants” has the meaning set forth in in Section 3.1(f).

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

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 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;

 

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  (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 “Rosehill Operating Company, 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 United Corporate Services, Inc., 874 Walker
Road, Suite C, Dover, Delaware 19904, Kent County, 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.

 

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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 U.S. 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.

ARTICLE III

CLOSING TRANSACTIONS

Section 3.1 Transactions In Connection With the Combination Agreement.

 

  (a) Effective immediately prior to the Effective Time, Tema shall contribute
the Contributed Assets (as defined in the Combination Agreement) to the Company
in exchange for 100% of the Equity Securities of the Company. Immediately
following such contribution and effective as of the Effective Time, the Company
will be recapitalized as set forth in this Agreement.

 

  (b) Effective as of the Effective Time and immediately following the
transactions contemplated by Section 3.1(a), and in accordance with the terms of
the Combination Agreement, Rosehill will contribute, transfer, assign and
deliver (i) all of its right, title and interest in all of its assets, including
the net proceeds of its initial public offering and the Equity Financing, and
(ii) the number of shares of its Class B Common Stock as contemplated under the
Combination Agreement to the Company in exchange for (y) a number of Common
Units equal to the number of Common Units set forth opposite its name in Exhibit
A and (z) a number of Series A Preferred Units equal to the number of Series A
Preferred Units set forth opposite its name in Exhibit A.

 

  (c) Effective as of the Effective Time and immediately following the
transactions contemplated by Sections 3.1(a)-(b), and in accordance with the
terms of the Combination Agreement, Rosehill will contribute, transfer, assign
and deliver the number of warrants to purchase shares of Rosehill Class A Common
Stock as contemplated under the Combination Agreement to the Company (the “Tema
Warrants”) in exchange for a number of Warrants equal to the number of Tema
Warrants (as set forth in Section 3.1(f));

 

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  (d) Effective as of the Effective Time and immediately following the
transactions contemplated by Sections 3.1(a)-(c), and in accordance with the
terms of the Combination Agreement, the Company will distribute cash, all of its
shares of Class B Common Stock and the Tema Warrants to Tema in redemption of a
certain number of Common Units as is set forth in the Combination Agreement.

 

  (e) 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(a)-(d) of this Agreement and the Combination Agreement is set forth
on Exhibit A hereto (as amended from time to time in accordance with the terms
of this Agreement).

 

  (f) Effective as of the Effective Time and immediately following the
transactions contemplated by Sections 3.1(a)-(c), and prior to giving effect to
Section 4.1, the Company shall issue to Rosehill a number of warrants
exercisable for Common Units (the “Warrants”) in an amount equal to the number
of warrants exercisable for shares of Class A Common Stock outstanding
immediately prior to such issuance of Warrants pursuant to this Section 3.1(e)
(including, but not limited to, a number of warrants equal to the number of Tema
Warrants). For the avoidance of doubt, each Warrant shall be treated as a
“noncompensatory option” within the meaning of Treasury Regulations Sections
1.721-2(f) and 1.761-3(b)(2) and not be treated as a partnership interest
pursuant to Treasury Regulations Section 1.761-3(a).

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) As of the date of this Agreement, the Company shall have two authorized
classes of Units, consisting of units of limited liability company interests
denominated as “Common Units” and “Series A Preferred Units.” All Common Units
shall be identical and all Series A Preferred Units shall be identical.

 

  (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

 

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  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 A (as amended from time to time in accordance with the
terms of this Agreement) as of the date set forth therein.

 

  (e)

If at any time after the Effective Time Rosehill issues a share of its Class A
Common Stock, its Series A Preferred Stock or any other Equity Security of
Rosehill (other than shares of Class B Common Stock), (i) the Company shall
concurrently issue to Rosehill one Common Unit (if Rosehill issues a share of
Class A Common Stock), one Series A Preferred Unit (if Rosehill issues a share
of Series A Preferred Stock) or such other Equity Security of the Company (if
Rosehill issues Equity Securities other than Class A Common Stock or Series A
Preferred Stock) corresponding to the Equity Securities issued by Rosehill, 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 Rosehill to be issued and (ii) Rosehill shall concurrently
contribute to the Company the net proceeds received by Rosehill for such share
of Class A Common Stock, Series A Preferred Stock or other Equity Security
(including any exercise price related thereto); provided, however, that if
Rosehill issues any shares of Class A Common Stock in order to purchase or fund
the purchase from a Member of a number of Common Units (and shares of Class B
Common Stock) equal to the number of shares of Class A Common Stock so issued,
then the Company shall not issue any new Common Units in connection therewith,
Rosehill shall not be required to transfer such net proceeds to the Company, and
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 (i) the issuance and distribution to holders of shares of Rosehill
Stock of rights to purchase Equity Securities of Rosehill under a “poison pill”
or similar shareholders rights plan (and upon any exchange of Common Units for
Class A Common Stock, such Class A Common Stock will be issued together with a
corresponding right under such plan) or (ii) the issuance under Rosehill’s
employee benefit plans of any warrants, options, other rights to acquire Equity
Securities of Rosehill or rights or property that may be converted into or
settled in Equity Securities of Rosehill, but shall in each of the foregoing
cases apply to the issuance of Equity Securities of Rosehill in connection with
the exercise or settlement of such rights, warrants, options or other rights or
property (it being understood that Rosehill shall contribute to the Company the
net proceeds, if any, received by Rosehill in connection with such exercise or
settlement). Except pursuant to Section 4.6, (x) the Company may not issue any
additional Common Units to Rosehill or any of its Subsidiaries unless
substantially simultaneously therewith Rosehill or such Subsidiary issues or
sells an equal number of shares of Rosehill’s Class A Common Stock to another
Person, (y) the Company may not

 

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  issue any additional Series A Preferred Units to Rosehill or any of its
Subsidiaries unless substantially simultaneously therewith Rosehill or such
Subsidiary issues or sells an equal number of shares of Rosehill’s Series A
Preferred Stock to another Person and (z) the Company may not issue any other
Equity Securities of the Company to Rosehill or any of its Subsidiaries unless
substantially simultaneously Rosehill or such Subsidiary issues or sells, to
another Person, an equal number of shares of a new class or series of Equity
Securities of Rosehill 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. If at any
time Rosehill issues Debt Securities, Rosehill shall transfer to the Company (in
a manner to be determined by the Manager Member in its reasonable discretion)
the proceeds received by Rosehill in exchange for such Debt Securities in a
manner that directly or indirectly burdens the Company with the repayment of the
Debt Securities. In the event any Equity Security outstanding at Rosehill
(including the Series A Preferred Stock) is exercised or otherwise converted
and, as a result, any shares of Class A Common Stock or other Equity Securities
of Rosehill are issued, the corresponding Equity Security outstanding at the
Company (including the Series A Preferred Units or the Warrants, if applicable)
shall be similarly exercised or otherwise converted, as applicable, and an
equivalent number of Common Units or other Equity Securities of the Company
shall be issued to Rosehill as contemplated by the first sentence of this
Section 4.1(e).

 

  (f)

Rosehill or any of its Subsidiaries may not redeem, repurchase or otherwise
acquire (i) any shares of Class A Common Stock (including upon forfeiture of any
unvested shares of Class A Common Stock) unless substantially simultaneously the
Company redeems, repurchases or otherwise acquires from Rosehill or such
Subsidiary an equal number of Common Units for the same price per security,
(ii) any shares of Series A Preferred Stock (including upon forfeiture of any
unvested shares of Series A Preferred Stock) unless substantially simultaneously
the Company redeems, repurchases or otherwise acquires from Rosehill or such
Subsidiary an equal number of Series A Preferred Units for the same price per
security or (iii) any other Equity Securities of Rosehill, unless substantially
simultaneously the Company redeems, repurchases or otherwise acquires from
Rosehill an equal number of Equity Securities of Rosehill 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 Rosehill for the same price per
security. The Company may not redeem, repurchase or otherwise acquire (x) except
pursuant to Section 4.6, any Common Units from Rosehill or any of its
Subsidiaries unless substantially simultaneously Rosehill or such Subsidiary
redeems, repurchases or otherwise acquires an equal number of shares of Class A
Common Stock for the same price per security from holders thereof, (y) any
Series A Preferred Units from Rosehill or any of its Subsidiaries unless
substantially simultaneously Rosehill or such Subsidiary redeems, repurchases or
otherwise acquires an equal number of shares of Series A Preferred Stock for the
same price per security from holders thereof or (z) any other Equity Securities
of the Company from Rosehill

 

18

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  or any of its Subsidiaries unless substantially simultaneously Rosehill or
such Subsidiary redeems, repurchases or otherwise acquires for the same price
per security an equal number of Equity Securities of Rosehill 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 Rosehill. Notwithstanding the
foregoing, to the extent that any consideration payable by Rosehill in
connection with the redemption or repurchase of any shares of Class A Common
Stock, Series A Preferred Stock or other Equity Securities of Rosehill or any of
its Subsidiaries consists (in whole or in part) of shares of Class A Common
Stock, Series A Preferred 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 equity
split, equity distribution, reclassification, recapitalization or otherwise) or
combination (by reverse equity split, reclassification, recapitalization or
otherwise) of the outstanding Units or any class thereof unless accompanied by
an identical subdivision or combination, as applicable, of the outstanding
Rosehill Stock or applicable class thereof, with corresponding changes made with
respect to any other exchangeable or convertible securities. Rosehill 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
Rosehill Stock or any class thereof unless accompanied by an identical
subdivision or combination, as applicable, of the outstanding Units or
applicable class thereof, 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 Common Units having voting
rights will vote together as a single class on all matters to be approved by the
Members.

Section 4.3 Capital Contributions; Unit Ownership.

 

  (a) Capital Contributions. Each Member named on Exhibit A shall be credited
with the Closing Date Capital Account Balance set forth on Exhibit A in respect
of its Interest specified thereon. Except as otherwise set forth in
Section 4.1(e), 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 including but not limited to Section 4.1, the
Managing Member

 

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  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) additional
Units or other Equity Securities in the Company (including creating preferred
interests or other classes or series of interests having such rights,
preferences and privileges as determined by the Managing Member, which rights,
preferences and privileges may be senior to the Units), 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. Upon such issuance and execution, such Person shall be admitted as a
Member of the Company. In that event, the Managing Member shall amend Exhibit A
to reflect such additional issuances. Subject to Section 12.1, the Managing
Member is hereby authorized to amend this Agreement to set forth the
designations, preferences, rights, powers and duties of such additional Units or
other Equity Securities in the Company, or such other amendments that the
Managing Member determines to be otherwise necessary or appropriate in
connection with the creation, authorization or issuance of, any class or series
of Units or other Equity Securities in the Company pursuant to this
Section 4.3(b). Notwithstanding the foregoing, the Managing Member shall have
the right to amend this Agreement as set forth in this sentence without the
approval of any other Person (including any Member) and notwithstanding any
other provision of this Agreement (including Section 12.1) if such amendment is
necessary in order to consummate any offering of shares of Rosehill Stock or
other Equity Securities of Rosehill provided that the designations, preferences,
rights, powers and duties of any such additional Units or other Equity
Securities of the Company as set forth in such amendment are substantially
similar to those applicable to such shares of Rosehill Stock or other Equity
Securities of Rosehill.

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 Closing Date Capital Account
Balance set forth on Exhibit A. 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 Member 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

 

20

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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). For the avoidance of doubt, any
distribution/issuance of Series A Preferred Units to Rosehill pursuant to
Section 6.1(a)(i) shall be treated as: (i) a distribution of cash in an amount
that would apply if payment were made in cash rather than Series A Preferred
Units; and (ii) a contribution of the amount described in clause (i) to the
Company in exchange for the Series A Preferred Units issued.

Section 4.5 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
Section 7.9 or otherwise 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, except as otherwise set forth herein, to make any additional
contributions or payments to the Company.

 

  (e) The Company shall not be obligated to repay any Capital Contributions of
any Member.

Section 4.6 Exchange of Common Units.

 

  (a) (i) Each of the Members (other than Rosehill) shall be entitled to cause
the Company to redeem, at any time and from time to time, all or any portion of
such Member’s Common Units (together with the transfer and surrender of the same
number of shares of Class B Common Stock) for an equivalent number of shares of
Class A Common Stock (an “Exchange”) or, at the Company’s election made in
accordance with Section 4.6(a)(iv), cash equal to the Cash Election Amount
calculated with respect to such Exchange, upon the terms and subject to the
conditions set forth in this Section 4.6 and in Section 6.2(b). Upon the
Exchange by a Member of all of its Common Units, if the Member does not hold any
other Units, such Member shall, for the avoidance of doubt, cease to be a Member
of the Company.

 

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  (ii) Each exchanging Member (the “Exchanging Member”) shall be permitted to
effect a redemption of Common Units pursuant to Section 4.6(a)(i) that involves
less than 1,500,000 Common Units no more frequently than (i) six times per
calendar year and (ii) no more than two times per calendar quarter; provided,
however, that if an Exchanging Member provides an Exchange Notice with respect
to all of the Common Units held by such Exchanging Member, such Exchange may
occur at any time, subject to this Section 4.6; provided, further, that the
Managing Member may, in its sole discretion and at any time, permit any Member
to effect a redemption of a lesser number of Common Units.

 

  (iii) In order to exercise the redemption right under Section 4.6(a)(i), the
Exchanging Member shall provide written notice (the “Exchange Notice”) to the
Company, with a copy to Rosehill (the date of delivery of such Exchange Notice,
the “Exchange Notice Date”), stating (i) the number of Common Units (together
with the transfer and surrender of an equal number of shares of Class B Common
Stock) the Exchanging Member elects to have the Company redeem, (ii) if the
shares of Class A Common Stock to be received are to be issued other than in the
name of the Exchanging Member, the name(s) of the Person(s) in whose name or on
whose order the shares of Class A Common Stock are to be issued, and (iii) if
the Exchanging Member requires the Exchange to take place on a specific date,
such date, provided that, any such specified date shall not be earlier than the
date that would otherwise apply pursuant to clause (i) of the definition of
Exchange Date. If the Common Units to be redeemed (or the shares of Class B
Common Stock to be transferred and surrendered) by the Exchanging Member are
represented by a certificate or certificates, prior to the Exchange Date, the
Exchanging Member shall also present and surrender such certificate or
certificates representing such Common Units (or shares of Class B Common Stock)
during normal business hours at the principal executive offices of the Company,
or if any agent for the registration or transfer of Class A Common Stock is then
duly appointed and acting (the “Transfer Agent”), at the office of the Transfer
Agent. If required by the Managing Member, any certificate for Common Units and
any certificate for shares of Class B Common Stock (in each case, if
certificated) surrendered to the Company hereunder shall be accompanied by
instruments of transfer, in forms reasonably satisfactory to the Managing Member
and the Transfer Agent, duly executed by the Exchanging Member or the Exchanging
Member’s duly authorized representative.

 

  (iv)

Upon receipt of an Exchange Notice, the Company shall be entitled to elect (a
“Cash Election”) to settle the Exchange by delivering to the Exchanging Member,
in lieu of the applicable number of shares of Class A

 

22

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  Common 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 (with a copy to Rosehill) prior to 1:00 p.m.,
Houston time, on the second Business Day after the Exchange Notice Date. 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.

 

  (v) For U.S. federal income (and applicable state and local) tax purposes,
each of the Exchanging Member, the Company and Rosehill, as the case may be,
agree to treat each Exchange and, in the event Rosehill exercises its Call
Right, each transaction between the Exchanging Member and Rosehill, as a sale of
the Exchanging Member’s Common Units (together with the same number of shares of
Class B Common Stock) to Rosehill in exchange for shares of Class A Common Stock
or cash, as applicable.

 

  (b) (i) The Exchange shall be completed on the Exchange Date; provided that
the Company, Rosehill and the Exchanging Member may change the number of Common
Units specified in the Exchange Notice as to be redeemed and/or the Exchange
Date to another number and/or date by unanimous agreement signed in writing by
each of them; provided further that 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 Common Stock into
which the Common Units are redeemable, or the closing of an announced merger,
consolidation or other transaction or event in which the shares of Class A
Common 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; provided further, that the Exchange Date may be
moved to a later date to the extent Rosehill reasonably determines is necessary
for, and the Company, Rosehill and the Exchanging Member shall take any action
reasonably necessary to cause, the Exchange and any subsequent sale of Class A
Common Stock resulting therefrom to be in compliance with applicable securities
Law. Provided the Company has not made a valid Cash Election, the Exchanging
Member may retract its Exchange Notice by giving written notice (the “Retraction
Notice”) to the Company (with a copy to Rosehill) at any time prior to the
Exchange Date. The timely delivery of a Retraction Notice shall terminate all of
the Exchanging Member’s, the Company’s and Rosehill’s rights and obligations
arising from the retracted Exchange Notice.

 

  (ii)

Unless the Exchanging Member has timely delivered a Retraction Notice as
provided in Section 4.6(b)(i) or Rosehill has elected its Call Right

 

23

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  pursuant to Section 4.6(f), on the Exchange Date (to be effective immediately
prior to the close of business on the Exchange Date) (A) the Exchanging Member
shall transfer and surrender the Common Units to be redeemed (and a
corresponding number of shares of Class B Common Stock) to the Company, in each
case free and clear of all liens and encumbrances, (B) Rosehill shall contribute
to the Company the consideration the Exchanging Member is entitled to receive
under Section 4.6(a)(i), (C) the Company shall (x) cancel the redeemed Common
Units, (y) transfer to the Exchanging Member the consideration the Exchanging
Member is entitled to receive under Section 4.6(a)(i), and (z) if the Common
Units are certificated, issue to the Exchanging Member a certificate for a
number of Common Units equal to the difference (if any) between the number of
Common Units evidenced by the certificate surrendered by the Exchanging Member
pursuant to clause (ii)(A) of this Section 4.6(b) and the number of redeemed
Common Units, (D) the Company shall issue to Rosehill a number of Common Units
equal to the number of Common Units surrendered by the Exchanging Member and
(E) Rosehill shall cancel the surrendered shares of Class B Common Stock.
Notwithstanding any other provisions of this Agreement to the contrary, in the
event that the Company makes a valid Cash Election, Rosehill shall only be
obligated to contribute to the Company an amount in cash equal to the net
proceeds (after deduction of any underwriters’ discounts or commissions and
brokers’ fees or commissions) from the sale by Rosehill of a number of shares of
Class A Common Stock equal to the number of Common Units to be redeemed with
such cash; provided that Rosehill’s Capital Account shall be increased by an
amount equal to any such discounts, commissions and fees relating to such sale
of shares of Class A Stock in accordance with Section 7.9; provided further,
that the contribution of such net proceeds shall in no event affect the
Exchanging Member’s right to receive the Cash Election Amount.

 

  (c)

If (i) there is any reclassification, reorganization, recapitalization or other
similar transaction pursuant to which the shares of Class A Common Stock are
converted or changed into another security, securities or other property (other
than as a result of a subdivision or combination or any transaction subject to
Section 4.1(g)), or (ii) Rosehill, by dividend or otherwise, distributes to all
holders of the shares of Class A Common Stock evidences of its Indebtedness or
assets, including securities (including shares of Class A Common Stock and any
rights, options or warrants to all holders of the shares of Class A Common Stock
to subscribe for or to purchase or to otherwise acquire shares of Class A Common
Stock, or other securities or rights convertible into, exchangeable for or
exercisable for shares of Class A Common Stock) but excluding any cash dividend
or distribution as well as any such distribution of Indebtedness or assets
received by Rosehill from the Company in respect of the Units, then upon any
subsequent Exchange, in addition to the shares of Class A Common 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

 

24

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  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 Common 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 4.6 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.

 

  (d) Rosehill shall at all times keep available, solely for the purpose of
issuance upon an Exchange, out of its authorized but unissued shares of Class A
Common Stock or other Equity Securities, such number of shares of Class A Common
Stock that shall be issuable upon the Exchange of all outstanding Common Units
(other than those Common Units held by Rosehill or any Subsidiary of Rosehill);
provided, that nothing contained herein shall be construed to preclude Rosehill
from satisfying its obligations with respect to an Exchange by delivery of cash
pursuant to a Cash Election or shares of Class A Common Stock or other Equity
Securities that are held in the treasury of Rosehill. Rosehill covenants that
all shares of Class A Common Stock and other Equity Securities 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
Common Stock or other Equity Securities are listed on a National Securities
Exchange, Rosehill shall use its reasonable best efforts to cause all shares of
Class A Common Stock and such other Equity Securities issued upon an Exchange to
be listed on such National Securities Exchange at the time of such issuance.

 

  (e) The issuance of shares of Class A Common Stock or other Equity Securities
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 of Class A Common Stock or other Equity Securities 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 Rosehill 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 Rosehill that such tax
has been paid or is not payable.

 

  (f)

(i) Notwithstanding anything to the contrary in this Section 4.6, but subject to
Section 4.6(g), an Exchanging Member shall be deemed to have offered to sell its
Common Units as described in the Exchange Notice to Rosehill, and Rosehill

 

25

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  may, in its sole discretion, by means of delivery of Call Election Notice in
accordance with, and subject to the terms of, this Section 4.6(f), elect to
purchase directly and acquire such Common Units (together with the transfer and
surrender of the same number of shares of Class B Common 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 Common Stock the
Exchanging Member (or its designee) would otherwise receive pursuant to
Section 4.6(a)(i) or, at Rosehill’s election, an amount of cash equal to the
Cash Election Amount of such shares of Class A Common Stock (the “Call Right”),
whereupon Rosehill shall acquire the Common Units offered for exchange by the
Exchanging Member (together with the transfer and surrender of the same number
of shares of Class B Common Stock) and shall be treated for all purposes of this
Agreement as the owner of such Common Units and shares of Class B Common Stock.

 

  (ii) Rosehill may, at any time prior to the Exchange Date, in its sole
discretion deliver written notice (a “Call Election Notice”) to the Company and
the Exchanging Member setting forth its election to exercise its Call Right. A
Call Election Notice may be revoked by Rosehill at any time; provided that any
such revocation does not prejudice the ability of the parties to consummate an
Exchange on the Exchange Date. Except as otherwise provided by this
Section 4.6(f), an exercise of the Call Right shall be consummated pursuant to
the same timeframe and in the same manner as the relevant Exchange would have
been consummated if Rosehill had not delivered a Call Election Notice.

 

  (g) 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 Common Stock (a “Rosehill Offer”) is proposed by Rosehill or is proposed
to Rosehill or its stockholders and approved by the board of directors of
Rosehill or is otherwise effected or to be effected with the consent or approval
of the board of directors of Rosehill, the Members (other than Rosehill) shall
be permitted to participate in such Rosehill Offer by delivery of a contingent
Exchange Notice in accordance with the second proviso of the first sentence of
Section 4.6(b)(i). In the case of a Rosehill Offer proposed by Rosehill,
Rosehill 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 Rosehill Offer to the same
extent or on an economically equivalent basis as the holders of shares of
Class A Common Stock without discrimination; provided that, without limiting the
generality of this sentence, Rosehill will use its reasonable best efforts
expeditiously and in good faith to ensure that such Members may participate in
each such Rosehill Offer without being required to redeem Common Units (or, if
so required, to ensure that any such redemption pursuant to an Exchange shall be
effective only upon, and shall be conditional upon, the closing of such Rosehill
Offer). In no event shall Members participating in a Rosehill Offer pursuant to
this Section 4.6(g) be entitled to receive in such Rosehill Offer aggregate
consideration for each Common Unit that is greater than the consideration
payable in respect of each share of Class A Common Stock in connection with a
Rosehill Offer.

 

26

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  (h) No Exchange shall impair the right of the Exchanging Member to receive any
distributions payable on the Common Units redeemed pursuant to such Exchange 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 Common Stock,
shall be entitled to receive, with respect to such record date, distributions or
dividends both on Common Units redeemed by the Company from such Exchanging
Member and on shares of Class A Common Stock received by such Exchanging Member,
or other Person so designated, if applicable, in such Exchange.

 

  (i) Any Common Units acquired by the Company under this Section 4.6 and
transferred by the Company to Rosehill shall remain outstanding and shall not be
cancelled as a result of their acquisition by the Company. Notwithstanding any
other provision of this Agreement, Rosehill shall be automatically admitted as a
member of the Company with respect to any Common Units or other Equity
Securities in the Company it receives under this Agreement (including under this
Section 4.6 in connection with any Exchange).

ARTICLE V

ALLOCATIONS OF PROFITS AND LOSSES

Section 5.1 Profits and Losses.

 

  (a) Following any allocations under Section 5.2 and prior to any allocations
under Section 5.1(b), items of gross income and gain shall be allocated to
Rosehill in respect of its Series A Preferred Units until the cumulative amount
of items of income and gain so allocated to Rosehill for the current and all
prior Fiscal Years or other relevant periods equals the sum of (i) the
cumulative amount of distributions received by Rosehill pursuant to
Section 6.1(a)(i) in respect of the Series A Preferred Units for the current and
all prior Fiscal Years or other relevant periods, plus (ii) the sum of the
accrued and unpaid dividends and Unpaid Excess Cash Amounts on all of the
outstanding shares of Series A Preferred Stock as of the end of the current
Fiscal Year or other relevant period. For purposes of clause (i) above, any
issuance/distribution of Series A Preferred Units to Rosehill with respect to
its Series A Preferred Units pursuant to Section 6.1(a)(i) shall be treated as a
distribution of cash in an amount that would apply if payment were made in cash
rather than Series A Preferred Units followed by an immediate contribution of
such amount of cash to the Company in exchange for Series A Preferred Units.

 

  (b)

After giving effect to the allocations under Section 5.1(a), Section 5.2 and
subject to Section 5.5, Profits and Losses (and, to the extent determined by the
Managing

 

27

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  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 or other taxable period shall be allocated among the Members
during such Fiscal Year or other taxable period in a manner such that, after
giving effect to the allocations set forth in Section 5.1(a) and Section 5.2 and
all distributions through the end of such Fiscal Year or other taxable period,
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)(iii) if all assets of the Company on hand at
the end of such Fiscal Year or other taxable period 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, and the amount
any such Member is treated as obligated to contribute to the Company, computed
immediately after the hypothetical sale of assets.

Section 5.2 Special Allocations.

 

  (a) Nonrecourse Deductions for any Fiscal Year or other taxable period shall
be specially allocated to the Members pro rata in proportion to their Units. The
amount of Nonrecourse Deductions for a Fiscal Year or other taxable period shall
equal the excess, if any, of the net increase, if any, in the amount of Company
Minimum Gain during that Fiscal Year or other taxable period over the aggregate
amount of any distributions during that Fiscal Year or other taxable period 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 or other taxable
period 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.

 

  (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 other
taxable period (or if there was a net decrease in Company Minimum Gain for a

 

28

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  prior Fiscal Year or other taxable period 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 or other taxable period 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 other taxable period (or if there was a net decrease in Member
Minimum Gain for a prior Fiscal Year or other taxable period 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(a)
and Section 5.2(b), no Losses or other items of loss or expense shall be
allocated to any Member to the extent that such allocation would cause such
Member to have an Adjusted Capital Account Deficit (or increase any existing
Adjusted Capital Account Deficit) at the end of such Fiscal Year or other
taxable period. All Losses and other items of loss and expense in excess of the
limitation set forth in this Section 5.2(e) shall be allocated to the Members
who do not have an Adjusted Capital Account Deficit in proportion to their
relative positive Capital Accounts but only to the extent that such Losses and
other items of loss and expense do not cause any such Member to have an Adjusted
Capital Account Deficit.

 

  (f) 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 or other taxable period) 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(f) 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(f) were not in this Agreement. This Section 5.2(f) 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.

 

29

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  (g) If any Member has a deficit balance in its Capital Account at the end of
any Fiscal Year or other taxable period 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(g) 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(f) and this Section 5.2(g) were not in this Agreement.

 

  (h) 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.

 

  (i) 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.

 

  (j) The allocations set forth in Sections 5.2(a) through 5.2(i) (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(j) 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 U.S. 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 such method or methods determined by the
Managing Member to be appropriate and in accordance with the applicable Treasury
Regulations; provided that the Managing Member will use the “traditional method
with curative allocations” (provided, however, that curative allocation to
correct ceiling rule limitations attributable to a property shall be limited to
gains from the sale of such property) under Treasury Regulation
Section 1.704-3(c) with respect to the assets contributed by Tema to the Company
pursuant to the Combination Agreement including, for the avoidance of doubt:
(i) with respect to the difference between Gross Asset Value and adjusted U.S.
federal income tax basis for such assets; and (ii) with respect to increases or
decreases in the Gross Asset Value as adjusted pursuant to a revaluation of such
assets pursuant to clause (b) of the definition of Gross Asset Value. For the
avoidance of doubt, the method applied under Section 704(c) for purposes of
Section 5.4(a) shall be the same method specified for the relevant asset under
this Section 5.3(b).

 

  (c) Any 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) to the extent the Member is
allocated gain from the sale or disposition of the property.

 

  (d) Allocations pursuant to this Section 5.3 are solely for purposes of U.S.
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.

 

  (e) If, as a result of an exercise of a noncompensatory option to acquire an
interest in the Company (including the conversion of the Series A Preferred
Units hereunder), a Capital Account reallocation is required under Treasury
Regulation Section 1.704-1(b)(2)(iv)(s)(3), the Company shall make corrective
allocations pursuant to Treasury Regulation Section 1.704-1(b)(4)(x).

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 pursuant to
Section 613A(c)(7)(D) of the Code. Except as otherwise required by Section

 

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  704(c) of the Code (which for the avoidance of doubt shall be applied using
the method specified for the relevant asset under Section 5.3(b)) and Treasury
Regulation Section 1.613A-3(e)(5), 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, together with such other
information that a Member may reasonably request in connection with the Member’s
(or its direct or indirect owner) obligation to file its U.S. federal, state or
local income tax returns. All such information shall be provided in electronic
format at such time and from time to time as reasonably requested by the Member.

 

  (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 U.S. 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.

 

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  (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.

 

  (e) 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.

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) The provisions regarding the establishment and maintenance for each Member
of a Capital Account as provided by Section 4.4 and the allocations set forth in
Sections 5.1, 5.2, 5.3 and 5.4 are intended to comply with the Treasury
Regulations and to reflect the intended economic entitlement of the Members. If
the Managing Member determines, in its sole discretion, on advice of tax counsel
to the Company (and after consultation with Tema for so long as it holds at
least 20% of the then-outstanding Common Units), that the application of the
provisions in Sections 4.4, 5.1, 5.2, 5.3 or 5.4 would result in non-compliance
with the Treasury Regulations or would be inconsistent with the intended
economic entitlement of the Members, the Managing Member is authorized to make
any appropriate adjustments to such provisions.

 

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  (c) 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 or other taxable period 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.

 

  (d) 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; provided, however, that with respect to liabilities assumed by the
Company from Tema in connection with contribution of properties by Tema pursuant
to the Combination Agreement or to which assets contributed by Tema to the
Company pursuant to the Combination Agreement were subject, such liabilities to
the extent they are excess nonrecourse liabilities shall be allocated under
Treasury Regulation Section 1.752-3(a) to Tema up to the amount of the built-in
gain that is allocable to Tema under Section 704(c) of the Code for such assets
to the extent such built-in gain exceeds the gain allocated under Treasury
Regulation Section 1.752-3(a)(2) with respect to such assets.

Section 5.6 Tax Consolidation.

 

  (a) If the Company is treated as a member of a consolidated, combined, or
unitary group for any tax purpose with any Member or an Affiliate thereof (a
“Consolidated Group”), such Member shall cause one of the members of such
Consolidated Group other than the Company to be the reporting or parent entity
for any tax return of such Consolidated Group (the “Reporting Member”) and pay
the tax liability due with respect to such Consolidated Group.

 

  (b)

The Members agree that the Company shall promptly reimburse the Reporting Member
for any Applicable Tax (defined below) paid by or on behalf of the Reporting
Member or any other member of such Consolidated Group; provided, however, that
the Members agree that (a) any such Applicable Tax shall be considered as paid
on behalf of the Company for U.S. federal income tax purposes, (b) except as
provided in clause (c) below, the Company shall deduct for U.S. federal income
tax purposes one hundred percent (100%) of the Applicable Tax, and (d) in the
event that it is determined, pursuant to a final determination as defined in
Section 1313 of the Code, that all or a portion of such deduction may be
properly claimed by the Reporting Member, its Affiliate or any other member of
the Consolidated Group, but not the Company, the Company shall reimburse the
Reporting Member only for the after-tax cost of such payment of Applicable Tax.
With respect to any tax of a Consolidated Group of which the Company is a
member, the “Applicable Tax” shall be equal to the tax of the

 

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  Consolidated Group that the Company would have paid if it had computed its tax
liability for the applicable period on a separate entity basis (rather than as a
member of the Consolidated Group). Except as provided in this Section 5.6 with
respect to the amount of such Consolidated Group’s tax that the Company is
required to reimburse the Reporting Member, the Reporting Member shall indemnify
and hold the Company harmless from and against any and all taxes of the
Consolidated Group.

ARTICLE VI

DISTRIBUTIONS

Section 6.1 Distributions.

 

  (a) Distributions.

 

  (i) Immediately prior to the time that any cash dividends are to be paid by
Rosehill with respect to the Series A Preferred Stock, the Company shall make a
cash distribution to Rosehill with respect to the Series A Preferred Units in an
amount equal to such cash dividends to be paid by Rosehill with respect to the
Series A Preferred Stock. At the time that any dividends are to be paid in kind
by Rosehill with respect to the Series A Preferred Stock through the issuance of
additional shares of Series A Preferred Stock, the Company shall issue
additional Series A Preferred Units to Rosehill in a number equal to the number
of shares of Series A Preferred Stock being distributed by Rosehill with respect
to the Series A Preferred Stock.

 

  (ii)

To the extent permitted by applicable Law and hereunder, and after making
provision for distributions under Section 6.1(a)(i) and Section 6.2, except as
otherwise provided in Section 11.3, 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; any 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, for the
avoidance of doubt, distributions described in Section 6.1(a)(i), the
distributions described in the last sentence of this Section 6.1(a)(ii),
repurchases or redemptions made in accordance with Section 4.1(f) or Section 4.6
or payments made in accordance with Section 7.4 or Section 7.9 need not be on a
pro rata basis), in accordance with the number of Common Units owned by each
Member as of the close of business on such record date. Promptly following the
designation of a record date and the declaration of a distribution pursuant to
this Section 6.1(a)(ii), 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. For the avoidance of

 

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  doubt, the receipt and subsequent distribution to Tema by Company of the
“Unadjusted Consideration” (as defined in the Combination Agreement) on the date
of this Agreement and any amounts received as adjustments thereto shall not be
subject to this Section 6.1(a)(ii).

The Managing Member shall have the obligation to make distributions set forth in
Section 6.1(a)(i), Section 6.2 and Section 11.3(b)(iii), provided, however 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 or violate the Act. For purposes of the foregoing sentence,
insolvency means the inability of the Company to meet its payment obligations
when due.

 

  (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) The Company shall make distributions to all Members on a pro rata basis,
in accordance with the number of Common Units owned by each Member, at such
times and in such amounts as the Managing Member reasonably determines is
necessary to enable Rosehill to (i) timely satisfy all of its U.S. federal,
state and local and non-U.S. tax liabilities and (ii) timely meet its
obligations pursuant to the Tax Receivable Agreement.

 

  (b)

If a Member (other than Rosehill) has an Assumed Tax Liability at a Tax Advance
Date in excess of the sum of the cumulative amount of distributions under
Section 6.1(a)(ii), distributions under Section 6.2(a), any Tax Advances (as
defined below) and After-Tax TRA Payments made to such Member through such 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 advances to such Member in an amount equal
to such excess (a “Tax Advance”). Any such Tax Advance shall be treated as an
advance against and, thus, shall reduce (without duplication), any future
distributions that would otherwise be made to such Member pursuant to Sections

 

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  6.1(a)(ii), 6.2(a) and 11.3(b)(iii). If there is a Tax Advance outstanding
with respect to a Member who elects to participate in an Exchange, such Member
shall be required to pay to the Company within fifteen (15) days after the
Exchange Date an amount of cash equal to the proportionate share of such Tax
Advance relating to its Common Units subject to the Exchange (determined at the
time of the Exchange based on the number of Common Units subject to the Exchange
as compared to the total number of Common Units held by such Member). For the
avoidance of doubt, any repayment of a Tax Advance pursuant to the previous
sentence shall not be treated as a Capital Contribution.

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.

ARTICLE VII

MANAGEMENT

Section 7.1 The Managing Member; Fiduciary Duties.

 

  (a) Rosehill shall be the sole Managing Member of the Company. Except as
otherwise required by Law or as explicitly set forth in this Agreement, (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. Any action required or permitted to be taken by the Managing Member may
be taken by a consent thereto in writing

 

  (b) In connection with the performance of its duties as the Managing Member of
the Company, except as otherwise set forth herein, 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 Members 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. The provisions of this Agreement, to the
extent that they restrict or eliminate the duties (including fiduciary duties)
and liabilities of the Managing Member otherwise existing at law or in equity,
are agreed by the Members to replace, to the fullest extent permitted by
applicable Law, such other duties and liabilities of the Managing Member.

 

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  (c) Whenever in this Agreement or any other agreement contemplated herein, the
Managing Member is permitted or required to take any action or to make a
decision in its “sole discretion” or “discretion” or under a grant of similar
authority or latitude, the Managing Member shall be entitled to consider such
interests and factors as it desires, including its own interests, and shall, to
the fullest extent permitted by applicable Law, have no duty or obligation to
give any consideration to any interest of or factors affecting the Company or
other Members.

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 Alan Townsend.

 

  (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.

 

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  (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:

 

  (a) one or more employees or other agents of the Company or 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 he, she or it, or a Person of which he, she or it is the legal
representative, is or was a Member, an Officer, or acting as the, Managing
Member, Tax Matters Member or Company Representative of the Company, 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 as such expenses are incurred upon receipt of an undertaking by
or on behalf of such Person to repay such amount if it shall ultimately be

 

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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. Rosehill 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 Rosehill as
Managing Member shall be effective unless proper provision is made, in
compliance with this Agreement, so that the obligations of Rosehill, 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 Rosehill (or its successor, as applicable)
as Managing Member shall be effective unless Rosehill (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 Rosehill (or its successor, as applicable) and the new Managing Member
(as applicable), to cause (a) Rosehill to comply with all Rosehill’s obligations
under this Agreement (including its obligations under Section 4.6) 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. The 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 Rosehill. 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 Common Units set forth in Section 4.6 provide that
each Common Unit and share of Class B Common Stock is exchangeable for the

 

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same amount and same type of property, securities or cash (or combination
thereof) that one share of Class A Common Stock becomes exchangeable for or
converted into as a result of the Reclassification Event and (ii) Rosehill or
the successor to Rosehill, as applicable, is obligated to deliver such property,
securities or cash upon such exchange. Rosehill shall not consummate or agree to
consummate any Reclassification Event unless the successor Person, if any,
becomes obligated to comply with the obligations of Rosehill (in whatever
capacity) under this Agreement.

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, 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; provided that the Company shall not pay or bear any income tax
obligations of the Managing Member. In the event that (i) shares of Class A
Stock are sold to underwriters in any public offering after the Effective Time,
in each case, at a price per share that is lower than the price per share for
which such shares of Class A Stock are sold to the public in such public
offering after taking into account underwriters’ discounts or commissions and
brokers’ fees or commissions (including, for the avoidance of doubt, any
deferred discounts or commissions and brokers’ fees or commissions payable in
connection with or as a result of such public offering) (such difference, the
“Discount”) and (ii) the proceeds from such public offering are used to fund the
Cash Election Amount for any redeemed Common Units or otherwise contributed to
the Company, the Company shall reimburse the Managing Member for such Discount
by treating such Discount as an additional Capital Contribution made by the
Managing Member to the Company, issuing Common Units in respect of such deemed
Capital Contribution in accordance with Section 4.6(b)(ii), and increasing the
Managing Member’s Capital Account by the amount of such Discount. For the
avoidance of doubt, any payments made to or on behalf of the Managing Member
pursuant to this Section 7.9 shall not be treated as a distribution pursuant to
Section 6.1(a) but shall instead be treated as an expense of the Company.

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

 

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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 Common 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 and not 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 Common 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 or Company Representative.

 

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ARTICLE IX

TRANSFERS OF INTERESTS

Section 9.1 Restrictions on Transfer.

 

  (a) Except as provided in Section 4.6 and except for the Transfers by a Member
to Permitted Transferee, no Member shall Transfer all or any portion of its
Interest without the Managing Member’s prior written consent, which consent
shall be granted or withheld in the Managing Member’s sole discretion. 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 Common Stock may be Transferred unless a corresponding number of Common
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; (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 U.S. 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). Any Transfer purported to be made in violation
of this Section 9.1(b) shall be void ab initio.

 

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Section 9.2 Notice of Transfer. Other than in connection with Transfers made
pursuant to Section 4.6, 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.

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 ROSEHILL OPERATING COMPANY, LLC DATED AS OF APRIL 27, 2017 AMONG THE MEMBERS
LISTED THEREIN, AS IT MAY BE AMENDED, SUPPLEMENTED AND/OR RESTATED FROM TIME TO
TIME, AND NO

 

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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. Such books and records of account shall be kept in
sufficient detail to provide each Member with the information required for such
Member to prepare their tax returns to the extent the Company is notified by
such Member that such information is required for such Member to prepare its tax
returns. Any such information may be reasonably requested by such Member.
Electronic version of such books and records of account shall be provided to a
Member upon request, at the Company’s expense.

Section 10.2 Tax Elections.

 

  (a) The Company and any eligible Subsidiary shall make an election pursuant to
Section 754 of the Code, shall not thereafter revoke such election and shall
make a new election pursuant to Section 754 of the Code to the extent necessary
following any “termination” of the Company or the Subsidiary, as applicable,
under Section 708 of the Code. In addition, the Company shall make the following
elections on the appropriate forms or tax returns:

 

  i. to adopt the calendar year as the Company’s Fiscal Year, if permitted under
the Code;

 

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

 

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

 

  iv. to elect to deduct intangible drilling costs under Section 263(c) of the
Code; and

 

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

 

  (b) Upon request of the Tax Matters Member or Company Representative, as
applicable, each Member shall cooperate in good faith with the Company in
connection with the Company’s efforts to elect out of the application of the
company-level audit and adjustment rules of the Bipartisan Budget Act of 2015,
if applicable.

 

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Section 10.3 Tax Returns; Information.

 

  (a) The Managing Member (at the Company’s sole cost and expense) shall cause
the Tax Return Preparer to prepare and timely file all income and other tax and
informational returns (collectively the “Tax Returns”) of the Company. No later
than 30 days after the end of each Fiscal Year, the Managing Member shall
furnish to each Member that holds at such time at least 20% of the
then-outstanding Common Units a draft of each Tax Return for the preceding
Fiscal Year together with all supporting schedules and other information as
approved by the Managing Member and shall consider in good faith any comments
provided by such Member with respect to such draft Tax Return within 15 days
after such Member’s receipt of such draft Tax Return. No later than 60 days
after the end of each Fiscal Year, the Managing Member shall furnish to each
Member a copy of each Tax Return for the preceding Fiscal Year to be filed with
the applicable taxing authority together with all supporting schedules and other
information that is necessary for each Member to comply with its applicable U.S.
federal, state and local income tax reporting obligations. The Tax Returns
together with schedules and other information required by this Section 10.3
shall be furnished electronically to the Members.

 

  (b) No later than 30 days before the end of each Fiscal Year, the Managing
Member (at the Company’s sole cost and expense) shall provide electronically to
each Member that holds at such time at least 20% of the then-outstanding Common
Units a projection of the U.S. federal (and state and local as applicable)
taxable income or loss of the Company for the next succeeding Fiscal Year
together with supporting schedules as approved by the Managing Member and such
Member’s estimated allocable share of such taxable income or loss. No later than
the end of each Quarterly Period, the Managing Member shall provide
electronically to each Member that holds at such time at least 20% of the
then-outstanding Common Units an update of the projections of taxable income or
loss for the Fiscal Year and such Member’s allocable share thereof in sufficient
detail that will permit such Member to comply with its U.S. federal, state and
local income tax filing obligations.

 

  (c) All Tax Returns and other reports required by this Section 10.3 to be
provided to a Member that holds at such time at least 20% of the
then-outstanding Common Units will be accompanied with: (i) two balance sheets
as of the end of the applicable period covered by the report, one of which shall
be prepared in accordance with the Capital Account maintenance rules provided
herein and one of which shall be on a tax basis; and (ii) two income or loss
statements for the applicable period covered by such statement, one of which
will be prepared showing Profits and Losses and one of which will show taxable
income or loss.

 

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  (d) The “Tax Return Preparer” shall be Price Waterhouse Coopers, LLP, (or such
other nationally recognized accounting firm mutually agreed to by the Members).

 

  (e) The Members agree to take all actions reasonably requested by the Company
Representative to comply with the Bipartisan Budget Act of 2015, including where
applicable, filing amended returns as provided in Sections 6225 or 6226 of the
Code and providing confirmation thereof to the Company Representative. The
Company Representative is authorized to make or refrain from making any
elections permitted by the Company Representative under the Bipartisan Budget
Act of 2015. As long as a Member holds at least 20% of the then-outstanding
Common Units, the Company Representative shall keep such Member timely informed
of any proposed actions and elections referred to above in this Section 10.3(e)
and consider in good faith such Member’s timely written comments regarding such
proposed actions and elections. The Company agrees, upon request by a Member, to
provide detailed financial forecasts of the Company’s operations sufficient to
allow such Member to perform its own internal tax forecasting; provided, that
the preparation of such forecasts shall be subject to the Company’s public
reporting obligations.

 

  (f) Within thirty (30) days following the end of each Fiscal Year, or as such
other times as reasonably requested in writing by the Managing Member, each
Member agrees to provide the Company the written data required by Treasury
Regulations Section 1.613A-3(e)(3(iii)(B).

Section 10.4 Tax Matters Member and Company Representative.

 

  (a) The Managing Member is specially authorized and appointed to act as the
Tax Matters Member and as the Company Representative (as applicable) and in any
similar capacity under state or local Law. The Tax Matters Member or Company
Representative (as applicable) 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 or Company Representative (as applicable).

 

  (b) As long as a Member holds at least 20% of the then-outstanding Common
Units:

 

  (i)

The Managing Member shall promptly notify such Member if any federal income tax
return of the Company is audited. In addition, the Managing Member shall
promptly furnish to such member all notices concerning administrative and
judicial proceedings relating to federal income tax audits and litigation of the
Company. During the pendency of any administrative proceeding or judicial
proceeding of the Company, the Managing Member shall furnish such Member timely
notice of any material meeting, conferences or hearings with the Internal
Revenue Service, Justice Department or the courts, and allow such Member (at
such Member’s sole cost and expense) the right to attend such meetings,
conferences or proceedings and to review and comment on any material

 

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  written submissions to the Internal Revenue Service, Justice Department or the
courts prepared by or on behalf of the Managing Member. The Managing Member will
promptly inform such Member of any settlement offers by the taxing authority and
consider in good faith any timely written comments from such Member regarding
any such settlement offers.

 

  (ii) The Managing Member shall not file a request for an administrative
adjustment of items for any Company taxable year without first providing written
notification to the Member prior to the filing of such adjustment and
considering in good faith the Member’s written comments thereto.

 

  (iii) Before the Managing Member files a petition in a judicial proceeding
with respect to any federal income tax item or other matter involving the
Company, the Managing Member shall provide timely written notification to such
Member of such intention and the nature of the contemplated proceeding and
consider in good faith such Member’s written comments.

Section 10.5 Withholding Tax Payments and Obligations.

 

  (a) The Company and its Subsidiaries may withhold from distributions,
allocations or portions thereof if it is required to do so by any applicable
rule, regulation or law, and each Member hereby authorizes the Company and its
Subsidiaries to withhold or pay on behalf of or with respect to such Member any
amount of taxes that the Managing Member determines, in good faith, that the
Company or any of its Subsidiaries is required to withhold or pay with respect
to any amount distributable or allocable to such Member pursuant to this
Agreement.

 

  (b) To the extent that any tax is paid by (or withheld from amounts payable
to) the Company or any of its Subsidiaries and the Managing Member determines,
in good faith, that such tax relates to one or more specific Members (including
any tax payable by the Company or any of its Subsidiaries pursuant to
Section 6225 of the Code with respect to items of income, gain, loss deduction
or credit allocable or attributable to such Member), such tax shall be treated
as an amount of taxes withheld or paid with respect to such Member pursuant to
this Section 10.5.

 

  (c) For all purposes under this Agreement, any amounts withheld or paid with
respect to a Member pursuant to this Section 10.5 shall be treated as if
distributed to such Member at the time such withholding or payment is made.
Further, to the extent that the cumulative amount of such withholding or payment
for any period exceeds the distributions to which such Member is entitled for
such period, the amount of such excess shall be considered a loan from the
Company to such Member, with interest accruing 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 (which payment shall not be deemed a Capital Contribution for
purposes of this Agreement), 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.

 

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  (d) 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.

 

  (e) Notwithstanding any other provision of this Agreement, (i) any Person who
ceases to be a Member shall be treated as a Member for purposes of this
Section 10.5 and (ii) the obligations of a Member pursuant to this Section 10.5
shall survive indefinitely with respect to any taxes withheld or paid by the
Company that relate to the period during which such Person was actually a
Member, regardless of whether such taxes are assessed, withheld or otherwise
paid during such period.

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

 

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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 unless the Managing Member is
in bankruptcy or dissolved (“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 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 (iii),
below); and

 

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  iii. Third, subject to Section 6.2, (A) first, to Rosehill in respect of the
Series A Preferred Units, until Rosehill has received an amount equal to the
total amount that would then be required to be distributed by Rosehill in
respect of all outstanding shares of Series A Preferred Stock if Rosehill were
to liquidate, wind up or dissolve, and (B) the balance to the Members, pro rata
in proportion to their respective Common 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 the 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.

 

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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:

 

  i. waive, modify or amend this Section 12.1(a) without the written consent of
each Member;

 

  ii. waive, modify or amend any provision of this Agreement which requires the
approval or action of certain Persons or percentage thereof without obtaining
the consent of such Persons or percentage thereof;

 

  iii. modify the limited liability of any Member, or increase the liabilities
or obligations of any Member, in each case, without the written consent of each
such affected Member; or

 

  iv. 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 written consent of the Members holding a majority of 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 A, (i) 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) and (ii) to the minimum extent necessary to
(A) comply with the provisions of the Bipartisan Budget Act of 2015 and any
Treasury Regulations or other administrative pronouncements promulgated
thereunder and (B) to administer the effects of such provisions in an equitable
manner.

 

  (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.

 

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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.

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
arising out of or in connection with this Agreement (a “Legal Action”). 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:

Rosehill Resources Inc.

16200 Park Row, Suite 300

Houston, Texas 77084

Attention: Alan Townsend

With copies (which shall not constitute notice) to:

Rosehill Resources Inc.

811 Main Street, 18th Floor

Houston, TX 77002

Facsimile: (713) 654-8080

Attention: Edward Kovalik

Rosehill Resources Inc.

405 Lexington Avenue, Suite 29C

New York, NY 10174

Facsimile: (646) 576-8640

Attention: Gregory R. Dow

Vinson & Elkins L.L.P.

1001 Fannin St., Suite 2500

Houston, TX 77002

Facsimile: (713) 758-4588

Attention: W. Matthew Strock; Bryan Loocke

If to Tema, addressed to it at:

Tema Oil and Gas Company

c/o Rosemore, Inc.

1 North Charles Street, 22nd Floor

Baltimore, MD 21201

Facsimile: (410) 347-7081

Attention: General Counsel

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

 

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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 or in the
Combination 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 Pages Follow]

 

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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 as of the day and
year first above written.

 

COMPANY: ROSEHILL OPERATING COMPANY, LLC By:  

/s/ J. A. Townsend

Name:   J. A. Townsend Title:   President and Chief Executive Officer MEMBERS:
TEMA OIL AND GAS COMPANY By:  

/s/ J. A. Townsend

Name:   J. A. Townsend Title:   President

 

SIGNATURE PAGE TO

FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF

ROSEHILL OPERATING COMPANY, LLC

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ROSEHILL RESOURCES INC. By:  

/s/ J. A. Townsend

Name:   J. A. Townsend Title:   President, Chief Executive Officer MANAGING
MEMBER: ROSEHILL RESOURCES INC. By:  

/s/ J. A. Townsend

Name:   J. A. Townsend Title:   President, Chief Executive Officer

 

SIGNATURE PAGE TO

FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF

ROSEHILL OPERATING COMPANY, LLC

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EXHIBIT A1

 

Member

   Number of Common
Units Owned      Number of Series
A Preferred Units
Owned      Closing Date Capital
Account Balance  

Rosehill Resources Inc.

     5,856,579        95,000      $ 119,857,139.00  

Tema Oil and Gas Company

     29,807,692        0      $ 253,067,343.54  

 

 

1  To be updated by the Managing Member in its reasonable discretion following
the closing of the transactions contemplated by the Combination Agreement,
including to take into account any adjustments to the consideration as described
in the Combination Agreement.

 

A-1