Exhibit 10.1

 

Execution Version

 

SECURITIES PURCHASE AGREEMENT

 

by and among

 

SANCHEZ ENERGY CORPORATION,

 

SN UR HOLDINGS, LLC

 

SN EF UNSUB GP, LLC

 

SN EF UNSUB, LP,

 

SN EF UNSUB HOLDINGS, LLC, GSO

 

ST HOLDINGS ASSOCIATES LLC,

 

and

 

GSO ST HOLDINGS LP

 

JANUARY 12, 2017

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

ARTICLE I DEFINITIONS

3

Section 1.01

Definitions

3

 

 

ARTICLE II AGREEMENT TO SELL AND PURCHASE

12

Section 2.01

Anadarko Commitment and Related Matters

12

Section 2.02

Anadarko Related Commitment and Related Matters

14

Section 2.03

 

14

Section 2.03

Closing

16

Section 2.04

Deliveries Upon the Effective Date

16

Section 2.05

Deliveries Upon Execution of [redacted] PSA. Promptly following the execution of
the [redacted] PSA:

17

Section 2.06

Deliveries Upon the Closings

17

Section 2.07

Conditions of Preferred Unit Purchaser’s Obligations at the Closing

19

Section 2.08

Conditions of the Common Unit Purchaser’s Obligations at Committed Closing

22

Section 2.09

Further Assurances

23

Section 2.10

UCC Filings After the Effective Date

23

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES RELATED TO THE GENERAL PARTNER AND
THE PARTNERSHIP

23

Section 3.01

Existence and Power

23

Section 3.02

Authority; Enforceability

24

Section 3.03

Capitalization; Issuance of Units

24

Section 3.04

Subsidiaries

26

Section 3.05

Litigation

26

Section 3.06

No Conflicts

26

Section 3.07

Approvals

27

Section 3.08

No Liabilities

27

Section 3.09

Investment Company Status

27

Section 3.10

No Registration Required

27

Section 3.11

Certain Fees

28

Section 3.12

No Integration

28

Section 3.13

No Restrictions on Dividends

28

Section 3.14

Springfield Gathering

28

 

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PREFERRED UNIT PURCHASER

29

Section 4.01

Existence

29

Section 4.02

Authorization, Enforceability

29

Section 4.03

No Breach

29

Section 4.04

Approvals

30

Section 4.05

Certain Fees

30

Section 4.06

Restricted Securities

30

Section 4.07

Financing

31

 

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ARTICLE V REPRESENTATIONS AND WARRANTIES OF SN

32

Section 5.01

Existence

32

Section 5.02

Authorization, Enforceability

33

Section 5.03

No Conflicts

33

Section 5.04

Approvals

33

Section 5.05

Certain Fees

34

Section 5.06

The SN Shares and the Warrants

34

Section 5.07

Investment Company Status

34

Section 5.08

Stock Exchange Listing and Reporting Requirements

35

Section 5.09

No Registration Required

35

Section 5.10

No Integration

35

Section 5.11

Restricted Securities

35

Section 5.12

Litigation

36

Section 5.13

Solvency

36

Section 5.14

No Obligation to be Guarantor or Restricted Subsidiary

37

 

 

ARTICLE VI INDEMNIFICATION, COSTS AND EXPENSES

38

Section 6.01

Indemnification

38

Section 6.02

Indemnification Procedure

39

Section 6.03

Survival

41

 

 

ARTICLE VII TERMINATION

41

Section 7.01

Termination

41

Section 7.02

Notice of Termination

42

Section 7.03

Effect of Termination

42

 

 

ARTICLE VIII MISCELLANEOUS

43

Section 8.01

Expenses

43

Section 8.02

Interpretation

43

Section 8.03

Amendments and Waivers

44

Section 8.04

Binding Effect

44

Section 8.05

Communications

44

Section 8.06

Entire Agreement; Integrated Transaction

45

Section 8.07

Governing Law; Submission to Jurisdiction

46

Section 8.08

Waiver of Jury Trial

46

Section 8.09

Execution in Counterparts

46

Section 8.10

Successors and Assigns

47

Section 8.11

Severability

47

Section 8.12

Interim Actions

47

Section 8.13

No Recourse

48

Section 8.14

Creditors

49

Section 8.15

Public Disclosure; Confidentiality

49

Section 8.16

Time is of the Essence

50

Section 8.17

Remedies Generally

50

 

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EXHIBITS

 

 

 

EXHIBIT A

—

Form of Amended and Restated Agreement of Limited Partnership of SN EF UnSub, LP

EXHIBIT B

—

Form of Limited Liability Company Agreement of SN EF UnSub GP, LLC

EXHIBIT C

—

Form of Warrant Agreement

EXHIBIT D

—

Form of Management Services Agreement

EXHIBIT E

—

Form of Joint Development Agreement

EXHIBIT F

—

APC/KM PSA

EXHIBIT G

—

Hydrocarbon Marketing Agreement

EXHIBIT H

—

Form of Registration Rights Agreement

EXHIBIT I

—

Opinion Matters

EXHIBIT J

—

Equity Commitment Letters

EXHIBIT K

—

Form of Non-Solicitation Agreement

EXHIBIT L

—

Form of Voting Agreement

EXHIBIT M

—

GSO Funds

EXHIBIT N

—

SN Letter Agreement

 

 

 

SCHEDULES

 

 

 

SCHEDULE 3.07 — Partnership Approvals

SCHEDULE 3.08 — Liabilities

SCHEDULE 4.04 — Preferred Unit Purchaser Approvals

SCHEDULE 5.04 — SN Approvals

 

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SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”), is entered into on
January 12, 2017 (the “Effective Date”), by and among Sanchez Energy
Corporation, a Delaware corporation (“SN”); SN UR Holdings, LLC, a Delaware
limited liability company (“SN GP Member”) SN EF UnSub Holdings, LLC, a Delaware
limited liability company (“Common Unit Purchaser”); SN EF UnSub, LP, a Delaware
limited partnership (the “Partnership”); SN EF UnSub GP, LLC, a Delaware limited
liability company and the general partner of the Partnership (the “General
Partner”); GSO ST Holdings Associates LLC, a Delaware limited liability company
(“GSO Associates”); and GSO ST Holdings LP, a Delaware limited partnership
(“Preferred Unit Purchaser” and, together with Common Unit Purchaser,
collectively, the “Purchasers”). Capitalized terms used but not defined herein
shall have the meanings assigned to such terms in accordance with Article I.

 

R E C I T A L S:

 

WHEREAS, on the Effective Date, the Partnership has entered into the APC/KM PSA
as a Buyer Party, an executed copy of which APC/KM PSA is attached as Exhibit F
hereto, pursuant to which the Partnership has agreed to purchase, and Anadarko
has agreed to sell to the Partnership, the Acquired Properties;

 

WHEREAS, upon execution of the APC/KM PSA, Anadarko sent a Sale Notice to
[redacted] whereby [redacted] will have thirty (30) days to elect to sell the
[redacted] Properties to the Buyer Parties under the same terms and conditions
that Anadarko proposes to transfer the Acquired Properties under the APC/KM PSA;

 

WHEREAS, if [redacted] elects to sell the [redacted] Properties to the Buyer
Parties pursuant to the terms included in the Sale Notice (the “[redacted]
Election”), then the Partnership and other Buyer Parties will execute a purchase
agreement with [redacted] pursuant to the terms of the Sale Notice, this
Agreement and as otherwise agreed among the parties (such purchase agreement, if
any, the “[redacted] PSA”);

 

WHEREAS, the Anadarko Closing (as defined below) and the [redacted] Closing (as
defined below) may occur on different days, provided that in such case the
[redacted] Closing shall not occur unless the Anadarko Closing has previously
occurred (“Separate Closings”), or on the same day (a “Dual Closing”);

 

WHEREAS, on the terms and subject to the conditions set forth in this Agreement,
at the Anadarko Closing, the Partnership will issue to the Common Unit Purchaser
100,000 newly issued Common Units in consideration for a contribution of
$100,000,000.00 (the “Common Unit Funding Amount”);

 

WHEREAS, on the terms and subject to the conditions set forth in this Agreement,
at the Anadarko Closing and, if applicable, the [redacted] Closing, the
Preferred Unit Purchaser has committed to contribute to the Partnership in the
aggregate up to $800,000,000.00 (the “Preferred Unit Commitment Amount”), with
the actual amount to be contributed by the Preferred Unit Purchaser at the
Anadarko Closing (whether it occurs in a Separate Closing or as part of a Dual
Closing) to be set forth in the Closing Notice, provided that if the Anadarko

 

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Closing occurs in a Separate Closing the amount to be contributed by the
Preferred Unit Purchaser shall be $500.0 million (the actual amount so
contributed at the Anadarko Closing, the “Preferred Unit Anadarko Funding
Amount”) and, if applicable, the actual amount (which shall be determined by SN
but shall not be less than $200.0 million and not greater than $300.0 million)
to be contributed by the Preferred Unit Purchaser at the [redacted] Closing
(whether it occurs in a Separate Closing or as part of a Dual Closing) to be set
forth (i) in the Closing Notice if a Dual Closing is to occur and (ii) in the
Supplemental Closing Notice if Separate Closings will occur (the “Preferred Unit
[redacted] Funding Amount” and, together with the “Preferred Unit Anadarko
Funding Amount”, the “Preferred Funding Amounts”);

 

WHEREAS, on the terms and subject to the conditions set forth in this Agreement,
(i) at the Anadarko Closing, the Partnership will issue to the Preferred Unit
Purchaser, a number of newly issued Preferred Units equal to the Preferred Unit
Anadarko Funding Amount divided by the Preferred Unit Purchase Price and (ii) if
applicable, at the [redacted] Closing, the Partnership will issue to the
Preferred Unit Purchaser a number of newly issued Preferred Units equal to the
Preferred Unit [redacted] Funding Amount divided by the Preferred Unit Purchase
Price;

 

WHEREAS, in accordance with this Agreement and the Partnership Agreement, the
Partnership will utilize the Common Unit Funding Amount and Preferred Funding
Amounts, together with the proceeds of the Credit Facility and Senior Debt drawn
at the Preferred Unit Closings, to (i) pay to Anadarko consideration for the
sale by Anadarko to the Partnership of the Acquired Properties pursuant to the
APC/KM PSA, (ii) if applicable, pay to [redacted] consideration for the sale by
[redacted] to the Partnership of the [redacted] Properties pursuant to the
[redacted] PSA and (iii) the payment of certain fees and expenses as provided
herein;

 

WHEREAS, concurrently with the execution of the APC/KM PSA, the Partnership, SN
and SN Maverick entered into the SN Letter Agreement, an executed copy of which
is attached hereto as Exhibit N, and concurrently with the execution and
delivery of this Agreement the Partnership and SN Maverick entered into the
Hydrocarbons Marketing Agreement (as defined herein) an executed copy of which
is attached hereto as Exhibit G;

 

WHEREAS, at the Anadarko Closing, the Partnership will enter into the Management
Services Agreement and the Joint Development Agreement, which agreements will be
in the form of Exhibit D and Exhibit E hereto, respectively;

 

WHEREAS, as partial consideration for the commitment by the Preferred Unit
Purchaser to contribute the Preferred Funding Amounts to the Partnership
pursuant to this Agreement, SN has agreed, on the terms and subject to the
conditions set forth in this Agreement and in the Warrant Agreement, that at the
Anadarko Closing, SN will issue to the Preferred Unit Purchaser the SN Shares
and the Warrants, which Warrants shall be issued pursuant to the Warrant
Agreement in the form attached as Exhibit C;

 

WHEREAS, the Preferred Unit Purchaser has directed SN to issue at the Anadarko
Closing the SN Shares and the Warrants to the funds managed by GSO that are
identified in Exhibit M in the proportions set forth in Exhibit M (collectively,
the “GSO Funds”);

 

2

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WHEREAS, at the Anadarko Closing SN and the GSO Funds will enter into the
Registration Rights Agreement in the form attached as Exhibit H, relating to the
registration of the SN Common Stock subject to issuance upon exercise of the
Warrants;

 

WHEREAS, as a condition to and inducement for the SN Parties to enter into this
Agreement, contemporaneously with the execution of this Agreement the GSO Funds
have executed and delivered to the Partnership and SN two equity commitment
letters, enforceable by SN and the Partnership, with respect to certain of the
Preferred Unit Purchaser’s obligations hereunder, copies of which are attached
hereto as Exhibits J-1 and J-2 (the “Equity Commitment Letters”); and

 

WHEREAS, the parties hereto intend that the General Partner and the Partnership
shall constitute bankruptcy remote, non-guarantor, unrestricted special purpose
Subsidiaries of SN.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.01 Definitions. As used in this Agreement, the following terms have
the meanings indicated:

 

“Acquired Properties” means the properties, assets and rights to be acquired,
directly or indirectly, by the Partnership from Anadarko at the Closing (as such
term is defined in the APC/KM PSA) pursuant to the “UnSub Assignment” (as such
term is defined in the APC/KM PSA) in the form attached as Exhibit C-2 to the
APC/KM PSA.

 

“Affiliate” of any Person means any other Person, directly or indirectly,
Controlling, Controlled by or under common Control with such particular Person.
For purposes of this Agreement, (i) The Blackstone Group, L.P. and all private
equity funds, portfolio companies, parallel investment entities, and alternative
investment entities owned, managed, or Controlled by The Blackstone Group, L.P.
or its Affiliates that are not part of the credit-related businesses of The
Blackstone Group L.P. shall not be considered or otherwise deemed to be an
“Affiliate” of GSO or its Affiliates that are part of the credit-related
businesses of The Blackstone Group L.P., but any fund or account managed,
advised or sub-advised by or Controlled by GSO or its Affiliates within the
credit-related businesses of The Blackstone Group L.P. shall constitute an
Affiliate of GSO, and (ii) none of GSO or its Affiliates or any fund or account
managed, advised or sub-advised by or Controlled by GSO or its Affiliates shall
constitute an Affiliate of the Partnership or the General Partner.

 

“Agreement” has the meaning set forth in the introductory paragraph of this
Agreement.

 

“Anadarko” means Anadarko Onshore and Kerr-McGee Oil and Gas Onshore LP, a
Delaware limited partnership.

 

3

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“Anadarko Closing” means the issuance and sale of the Common Units and the
Preferred Units to the Common Unit Purchaser and the Preferred Unit Purchaser,
respectively, in consideration for the Common Unit Funding Amount and the
Preferred Unit Anadarko Funding Amount, respectively, in accordance with
Section 2.01(a).

 

“Anadarko Closing Date” means the date that is the “Closing Date”, as such term
is defined in the APC/KM PSA.

 

“Anadarko Onshore” means Anadarko E&P Onshore LLC, a Delaware limited liability
company.

 

“APC/KM PSA” means that certain Purchase and Sale Agreement among Anadarko E&P
Onshore LLC, Kerr-McGee Oil and Gas Onshore LP, SN Maverick, the Partnership and
Blackstone Newco, dated January 12, 2017, an executed copy of which is attached
as Exhibit F hereto.

 

“Basic Documents” means, collectively, this Agreement, the Partnership
Agreement, the GP LLC Agreement, the APC/KM PSA, the [redacted] PSA if such
document is executed, the Management Services Agreement, the Joint Development
Agreement, the Hydrocarbons Marketing Agreement, the Warrant Agreement, the
Registration Rights Agreement, the Equity Commitment Letters, the SN Letter
Agreement, the definitive documents relating to the Credit Facility and the
Senior Debt, if any, the Voting Agreement, the Non-Solicitation Agreement and
the Drilling Commitment Agreement.

 

“Blackstone” means The Blackstone Group, L.P. and all private equity funds,
portfolio companies, parallel investment entities, and alternative investment
entities owned, managed, or Controlled by The Blackstone Group, L.P. or its
Affiliates that are not part of the credit-related businesses of The Blackstone
Group L.P.

 

“Blackstone Newco” means Aguila Production, LLC, a Delaware limited liability
company.

 

“Business Day” means any day other than a Saturday, Sunday or a day on which
commercial banks are authorized or required to close in Houston, Texas.

 

“Buyer Party” and “Buyer Parties” have the meaning set forth in the APC/KM PSA.

 

“Citi” means Citigroup Global Markets Inc., Citibank, N.A., Citicorp USA, Inc.,
Citicorp North America Inc. and/or any of their Affiliates.

 

“Class A Common Interests” has the meaning assigned to such term in
Section 2.01(b).

 

“Class B Common Interests” has the meaning assigned to such term in
Section 2.01(b).

 

“Closing Notice” means a written notice prepared and delivered by SN to the
Preferred Unit Purchaser not less than thirteen (13) Business Days prior to the
Anadarko Closing Date, which notice shall specify (i) if there will be Separate
Closings, the Preferred Unit Anadarko Funding Amount in the Anadarko Closing
that occurs in a Separate Closing (which amount shall

 

4

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be $500.0 million) and shall include wiring instructions for receipt of such
Preferred Unit Anadarko Funding Amount and (ii) if there will be a Dual Closing,
the Preferred Unit Anadarko Funding Amount in such Dual Closing and the
Preferred Unit [redacted] Funding Amount in such Dual Closing (which combined
amount shall be determined by SN, but shall not exceed $800.0 million and shall
not be less than $700.0 million) and shall include wiring instructions for
receipt of the Preferred Unit Anadarko Funding Amount and the Preferred Unit
[redacted] Funding Amount, and in all cases, the Closing Notice shall be subject
to deemed adjustment with respect to any Initial Debt Replacement Units in
accordance with Section 2.01(c). If there will be a Dual Closing, the Anadarko
Closing Date and the [redacted] Closing Date will occur on the same day.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Commitment Fee” means a fee payable by SN to the Preferred Unit Purchaser on
the Effective Date in immediately available funds accordance with
Section 2.04(a)(vii), which Commitment Fee shall be in an amount equal to $20.0
million.

 

“Common Indemnified Parties” has the meaning specified in Section 6.01(b).

 

“Common Unit Funding Amount” has the meaning specified in the recitals of this
Agreement.

 

“Common Unit Purchaser” has the meaning set forth in the introductory paragraph
of this Agreement.

 

“Common Units” means the “Common Units” as such term is defined in the
Partnership Agreement.

 

“Contract” means any contract, agreement, indenture, note, bond, mortgage, deed
of trust, loan, instrument, lease, license, commitment or other arrangement,
understanding, undertaking, commitment or obligation, whether written or oral.

 

“Control” has the meaning set forth in the Partnership Agreement.

 

“Credit Facility” means the up to $500.0 million senior secured first lien
reserve based revolving credit facility among the Partnership, as borrower, and
J.P. Morgan and Citi, as joint lead arrangers and joint book runners, J.P.
Morgan as administrative agent, and J.P. Morgan, Citi and the syndicate of banks
and financial institutions named therein as the lenders; provided, however, that
if J.P. Morgan and Citi are unable to fully syndicate such facility, SN may in
its discretion reduce, but subject to the rights of the Preferred Unit Purchaser
set forth in Section 2.01(c), the amount of such credit facility by up to $300.0
million in the aggregate (the “Facility Reduction Amount”) and incur Senior Debt
in an amount up to such reduction.

 

“Damages” means losses, judgments, liabilities, damages and fines and all
reasonable costs, fees, outlays, expenses, expenditures and disbursements of
every nature (including costs of investigation and fees and expenses of
attorneys, accountants, consultants, expert witnesses and other witnesses).

 

5

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“Delaware Act” means the Delaware Limited Liability Company Act, 6 Del. C. §
18-101 et seq., as amended from time to time, and any successor to the Delaware
Act.

 

“Deposit” has the meaning set forth in the APC/KM PSA.

 

“Drilling Commitment Agreement” means the Development Agreement to be entered
into at the Anadarko Closing (whether it occurs in a Separate Closing or at the
Dual Closing), by and among Anadarko, SN Maverick, the Partnership and Aguila
Production, LLC, and, solely for the purpose specified therein, SN, the form of
which is attached as Exhibit N to the APC/KM PSA.

 

“DRULPA” means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C
§17-101 et seq. as amended from time to time and any successor to DRULPA.

 

“Dual Closing” has the meaning specified in the recitals of this Agreement.

 

“Effective Date” has the meaning set forth in the introductory paragraph to this
Agreement.

 

“Equity Commitment Letters” has the meaning set forth in the recitals.

 

“Equity Interests” means (i) equity interests (including capital stock,
membership interests and partnership interests) of any applicable Person,
(ii) obligations, evidences of indebtedness or other securities or interests
convertible or exchangeable into equity interests, and (iii) warrants, options
or other rights to purchase or otherwise acquire or receive equity interests.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Facility Reduction Amount” has the meaning set forth in the definition of the
term “Credit Facility”.

 

“Fee Letter” means that certain Project Lightning Fee Letter, dated January 12,
2017, among J.P. Morgan, Citi and the Partnership.

 

“Final Availability Cushion” has the meaning assigned to such term in
Section 2.02(b).

 

“Final Debt Replacement Election” has the meaning assigned to such term in
Section 2.01(b).

 

“Final Debt Replacement Units” has the meaning assigned to such term in
Section 2.02(b).

 

“Final Non-Syndicated Debt” has the meaning set forth in Section 2.02(b).

 

“Fundamental Representations” means those representations and warranties set
forth in Sections 3.01, 3.02, 3.03, 3.04, 3.05 (solely as such representation
relates to the absence of proceedings as of the Effective Date), 3.06, 3.09,
3.10, 3.13, 4.01, 4.02, 5.01, 5.02, 5.03, 5.06,

 

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5.09, 5.10, 5.12 (solely as such representation relates to the absence of
proceedings as of the Effective Date) and 5.14.

 

“GAAP” means generally accepted accounting principles in the United States.

 

“General Partner” has the meaning set forth in the introductory paragraph to
this Agreement.

 

“Governmental Authority” means the United States of America or any other nation,
any state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
government.

 

“GP LLC Agreement” means the Amended and Restated Limited Liability Company
Operating Agreement of the General Partner in the form attached as Exhibit B
hereto.

 

“GSO” means GSO Capital Partners LP, a Delaware limited partnership.

 

“GSO Associates” has the meaning set forth in the introductory paragraph to this
Agreement.

 

“GSO Funds” has the meaning set forth in the recitals.

 

“Hydrocarbon Marketing Agreement” means the Hydrocarbons Purchase and Marketing
Agreement to be entered into on the Effective Date between SN Maverick and the
Partnership, substantially in the form attached as Exhibit G hereto.

 

“Indebtedness” means, with respect to any specified Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person for a deferred purchase price (other than trade
payables incurred in the ordinary course of such Person’s business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all obligations of such Person under capital leases,
(e) all obligations of such Person, contingent or otherwise, as an account party
or applicant under or in respect of acceptances, letters of credit, surety bonds
or similar arrangements, regardless of whether drawn, (f) all obligations of
such Person created or arising under any conditional sale or title retention
agreement, (g) the liquidation value or redemption price, as the case may be, of
all preferred or redeemable stock of such Person, (h) all net obligations of
such Person payable under any rate, currency, commodity or other swap, option or
derivative agreement, (i) all obligations secured by (or for which the holder of
such obligation has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned by such Person, regardless of whether such Person
has assumed or become liable for the payment of such obligation and (j) all
obligations of others guaranteed by such Person.

 

“Indemnified Party” has the meaning specified in Section 6.02(a).

 

“Indemnifying Party” has the meaning specified in Section 6.02(a).

 

“Initial Availability Cushion” has the meaning assigned to such term in
Section 2.01(c).

 

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“Initial Debt Replacement Election” has the meaning assigned to such term in
Section 2.01(c).

 

“Initial Debt Replacement Units” has the meaning assigned to such term in
Section 2.01(c).

 

“Joint Development Agreement” means the Joint Development Agreement to be
entered into between the Partnership, Blackstone Newco and SN Maverick
substantially in the form attached as Exhibit D hereto.

 

“J.P. Morgan” means J.P. Morgan Chase Bank, N.A.

 

“[redacted]” means [redacted], a Texas limited partnership.

 

“[redacted] Closing” means the issuance and sale of the [redacted] Preferred
Units to the Preferred Unit Purchaser in consideration for the Preferred Unit
[redacted] Funding Amount in accordance with Section 2.02(a); provided, however,
that in no event will the [redacted] Closing occur unless the Anadarko Closing
has previously occurred or occurs concurrently with the [redacted] Closing.

 

“[redacted] Closing Date” means, the day upon which closing occurs pursuant to
the [redacted] PSA, which date shall occur (i) on the day of the Anadarko
Closing if a Dual Closing occurs or (ii) on a date after the Anadarko Closing
has occurred if the [redacted] Closing occurs in a Separate Closing.

 

“[redacted] Election” has the meaning set forth in the recitals.

 

“[redacted] Participation Agreement” means that certain Maverick Basin Area
Participation Agreement, dated March 17, 2011, by and among Anadarko and
[redacted].

 

“[redacted] Properties” means [redacted]’s pro rata share of the Interests (as
defined in the [redacted] Participation Agreement).

 

“[redacted] PSA” has the meaning set forth in the recitals.

 

“Knowledge of SN” means the actual knowledge, after due inquiry, of any of
Antonio R. Sanchez, III, Eduardo A. Sanchez, Patricio D. Sanchez and Cameron W.
George.

 

“Law” means any federal, state, local or foreign order, writ, injunction,
judgment, settlement, award, decree, statute, law (including common law),
rule or regulation.

 

“Lien” means any mortgage, claim, encumbrance, pledge, lien (statutory or
otherwise), security agreement, conditional sale or trust receipt or a lease,
consignment or bailment, preference or priority, assessment, deed of trust,
charge, easement, servitude or other encumbrance upon or with respect to any
property of any kind.

 

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“Management Services Agreement” means the Management Services Agreement to be
entered into at the Anadarko Closing by and between the Partnership and SOG,
substantially in the form attached hereto as Exhibit D.

 

“Non-Solicitation Agreement” means the Non-Solicitation Agreement to be entered
into at the Anadarko Closing by and among SN, SOG and GSO substantially in the
form attached as Exhibit K hereto.

 

“Non-Syndicated Debt” has the meaning set forth in Section 2.01(c).

 

“NYSE” has the meaning assigned to such term in Section 5.07.

 

“Partnership” has the meaning assigned to such term in the introductory
paragraph of this Agreement.

 

“Partnership Agreement” means the Amended and Restated Agreement of Limited
Partnership of the Partnership to be entered into at the Anadarko Closing by and
among the General Partner, Common Unit Purchaser and Preferred Unit Purchaser,
substantially in the form attached as Exhibit A hereto.

 

“Permits” means any approvals, authorizations, consents, licenses, permits,
variances, waivers, grants, franchises, concessions, exemptions, orders,
registrations or certificates of a Governmental Authority.

 

“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, association or other entity or a Governmental
Authority.

 

“Preferred Funding Amounts” has the meaning specified in the recitals of this
Agreement.

 

“Preferred Unit Anadarko Funding Amount” has the meaning specified in the
recitals of this Agreement.

 

“Preferred Unit Closings” means the Anadarko Closing and the [redacted] Closing.

 

“Preferred Unit Commitment Amount” has the meaning specified in the recitals of
this Agreement.

 

“Preferred Unit [redacted] Funding Amount” has the meaning specified in the
recitals of this Agreement.

 

“Preferred Unit Purchase Price” means a cash purchase price of $1,000 per
Preferred Unit.

 

“Preferred Unit Purchaser” has the meaning set forth in the introductory
paragraph of this Agreement.

 

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“Preferred Units” means “Preferred Units”, as defined in the Partnership
Agreement.

 

“Purchased Preferred Units” means those Preferred Units purchased by the
Preferred Unit Purchaser in accordance with Section 2.01(a) and, if applicable,
Section 2.02(a).

 

“Purchaser Indemnified Parties” has the meaning specified in Section 6.01(a).

 

“Purchasers” has the meaning set forth in the introductory paragraph to this
Agreement.

 

“Registration Rights Agreement” means the Registration Rights Agreement to be
entered into at the Anadarko Closing between SN and the GSO Funds substantially
in the form attached as Exhibit H hereto.

 

“Restricted Subsidiary” has the meaning assigned to such term in the SN Credit
Agreement, or in any indenture or other agreement pertaining to indebtedness of
SN.

 

“Rights” has the meaning assigned to such term under the SN Rights Plan.

 

“Sale Notice” has the meaning assigned to such term under Section 22.2 of the
[redacted] Participation Agreement.

 

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and the rules and regulations of the Commission promulgated thereunder.

 

“Senior Debt” means the senior credit facility (other than, for the avoidance of
doubt, the Credit Facility) and/or securities or note issuance among the
Partnership, as borrower or issuer, J.P. Morgan and Citi as joint lead arrangers
and joint book runners (or other equivalent roles), J.P. Morgan as
administrative agent (or equivalent role) and J.P. Morgan, Citi and the
syndicate of banks and the financial institutions as the lenders or holders in
an original principal amount up to $300 million, but in no event shall the
original principal amount of the Senior Debt exceed the Facility Reduction
Amount.

 

“Separate Closings” has the meaning specified in the recitals of this Agreement.

 

“SN” has the meaning set forth in the introductory paragraph to this Agreement.

 

“SN Common Stock” means the common stock, par value $0.01 per share of SN. For
purposes of this Agreement, references to a share or shares of SN Common Stock
shall be deemed to include the Right(s) associated with such share or shares
that are issued pursuant to the SN Rights Plan or any similar successor plan
hereafter adopted by SN.

 

“SN Credit Agreement” means the Second Amended and Restated Credit Agreement,
dated as of June 30, 2014, among Sanchez Energy Corporation, Royal Bank of
Canada, as Administrative Agent, and the lenders party thereto, as amended,
restated, modified, renewed, refunded, replaced or refinanced from time to time.

 

“SN GP Member” has the meaning set forth in the introductory paragraph to this
Agreement.

 

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“SN Letter Agreement” means that certain Letter Agreement to be entered into on
the Effective Date by and among SN, SN Maverick and the Partnership,
substantially in the form attached as Exhibit P hereto.

 

“SN Maverick” means SN EF Maverick, LLC, a Delaware limited liability company.

 

“SN Parties” means SN, SN GP Member, the General Partner, the Partnership and
the Common Unit Purchaser.

 

“SN Rights Plan” means that certain Rights Agreement, dated as of July 28, 2015,
between SN and Continental Stock Transfer & Trust Company, as rights agent,
including the exhibits attached thereto, as such rights agreement may be
amended, modified or supplemented from time to time.

 

“SN Shares” means the 1,500,000 shares of SN Common Stock to be issued by SN to
the Preferred Unit Purchaser at the Anadarko Closing.

 

“SOG” means Sanchez Oil & Gas Corporation, a Delaware corporation.

 

“Springfield Gathering Agreements” means (a) the Second Amended and Restated
Lease Dedication and Gas Gathering Agreement between Springfield Pipeline LLC, a
Texas limited liability company (“Springfield”), and SN and (b) the Second
Amended and Restated Lease Dedication and Oil Gathering Agreement between
Springfield and SN, in each case to be entered into upon termination of the
Marketing Transition Services Agreement pursuant to the APC/KM PSA.

 

“Subsidiary” means, with respect to any Person, any corporation, limited
liability company, partnership, association or business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or Controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, (ii) if a limited liability company,
partnership, association or other business entity (other than a corporation), a
majority of the membership interests, partnership interests or other similar
ownership interests thereof with voting rights is at the time owned or
Controlled, directly or indirectly, by that Person or one or more Subsidiaries
of that Person or a combination thereof. For purposes hereof, a Person or
Persons shall be deemed to have a majority ownership interest in a limited
liability company, partnership, association or other business entity (other than
a corporation) if such Person or Persons shall be allocated a majority of the
limited liability company, partnership, association or other business entity
gains or losses or shall be or Control, directly or indirectly, the manager,
managing member, managing director (or a board comprised of any of the
foregoing) or general partner of such limited liability company, partnership,
association or other business entity.

 

“Supplemental Closing Notice” means a written notice prepared and delivered by
SN to the Preferred Unit Purchaser not less than thirteen (13) Business Days
prior to the [redacted] Closing Date that will occur in a Separate Closing,
which notice shall specify the Preferred Unit [redacted] Funding Amount (which
amount shall be determined by SN, but shall not exceed $300.0 million and shall
not be less than $200.0 million, such amount not in duplication of any amounts

 

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funded at the Anadarko Closing that has or, prior to the [redacted] Closing,
will occur in a Separate Closing), which Supplemental Closing Notice shall be
subject to deemed adjustment with respect to any Final Debt Replacement Units in
accordance with Section 2.02(b); provided that such written notice shall only be
delivered if Separate Closings will occur. A Supplemental Closing Notice may be
only be delivered by SN to the Preferred Unit Purchaser if a Closing Notice for
the Anadarko Closing that will occur in a Separate Closing has previously been
delivered by SN to the Preferred Unit Purchaser.

 

“Third Party Claim” has the meaning specified in Section 6.02(b).

 

“Unrestricted Subsidiary” has the meaning assigned to such term in the SN Credit
Agreement, or in any indenture or other agreement pertaining to Indebtedness of
SN or any of its Subsidiaries (other than the General Partner or the Partnership
or any of its Subsidiaries).

 

“Voting Agreement” mean the Voting and Standstill Agreement to be entered into
at the Anadarko Closing between the GSO Funds and SN, substantially in the form
attached as Exhibit L hereto.

 

“Warrant Agreement” means the Warrant Agreement to be entered into at the
Anadarko Closing between the GSO Funds and SN, substantially in the form
attached as Exhibit C hereto.

 

“Warrants” means the Warrants issued in accordance with the Warrant Agreement.

 

ARTICLE II

AGREEMENT TO SELL AND PURCHASE

 

Section 2.01                           Anadarko Commitment and Related Matters.

 

(a)                               At the Anadarko Closing (whether in a Separate
Closing or as part of a Dual Closing), on the terms and subject to the
conditions set forth in this Agreement, (i) the Preferred Unit Purchaser shall
contribute and fund to the Partnership by wire transfer of immediately available
funds the Preferred Unit Anadarko Funding Amount and (ii) Common Unit Purchaser
shall contribute and fund to the Partnership by wire transfer of immediately
available funds the Common Unit Funding Amount. At the Anadarko Closing (whether
in a Separate Closing or as part of a Dual Closing), on the terms and subject to
the conditions set forth in this Agreement, each of the Preferred Unit Anadarko
Funding Amount and the Common Unit Funding Amount shall be paid by wire transfer
of immediately available funds to an account of the Partnership designated in
writing by SN in the Closing Notice, in consideration for the issuance by the
Partnership (x) to the Common Unit Purchaser 100,000 Common Units and
(y) subject to increase in accordance with Section 2.01(c), to the Preferred
Unit Purchaser a number of Preferred Units equal to the Preferred Unit Anadarko
Funding Amount divided by the Preferred Unit Purchase Price. Each of the
Preferred Unit Anadarko Funding Amount and the Common Unit Funding Amount shall
be used, together with the proceeds of the Senior Debt, if any, and drawings on
the Credit Facility as of the Anadarko Closing, to fund the portion of the
“Purchase Price” (as defined in the APC/KM PSA) attributable to the Acquired
Properties, with any excess funds being retained by the Partnership for its
general business purposes and reimbursement of the Purchasers’ expenses to the
extent required under the Basic Documents.

 

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(b)                               At the Anadarko Closing (whether in a Separate
Closing or as part of a Dual Closing), on the terms and subject to the
conditions set forth in this Agreement, (i) GSO Associates and SN GP Member
shall each make the applicable nominal contribution to the General Partner set
forth in the GP LLC Agreement and (ii) the General Partner shall issue to the SN
GP Member 99 Class A common membership interest (the “Class A Common Interests”)
and to GSO Associates 1 Class B common membership interest (the “Class B Common
Interest”). Funds contributed to the General Partner pursuant to this
Section 2.01(b) shall be paid by wire transfer of immediately available funds to
an account designated by the General Partner pursuant to a written notice
delivered to SN GP Member and GSO Associates no later than two (2) Business Days
before the Anadarko Closing.

 

(c)                                Notwithstanding anything to the contrary
contained herein, not less than thirteen (13) Business Days prior to the
Anadarko Closing (whether in a Separate Closing or as part of a Dual Closing),
SN shall notify the Preferred Unit Purchaser whether (i)(a) it intends to cause
the Partnership to incur any Senior Debt on the day of the Anadarko Closing or
(b) if the lenders to the Credit Facility have not achieved a “Successful
Syndication” (as such term is defined in the Fee Letter) and the maximum size of
the “Demand Facility” (as such term is defined in the Fee Letter) that may be
requested by the lenders pursuant to a “Term Loan” (as such term is defined in
the Fee Letter) (the “Non-Syndicated Debt”), or (ii) if the availability under
the Credit Facility will be less than (A) $65.0 million immediately following
the Anadarko Closing if Separate Closings will occur or (B) $100.0 million
immediately following the Dual Closings if a Dual Closing will occur (such
shortfall in clause (ii)(A) or (ii)(B), the “Initial Availability Cushion”), and
following delivery of such notification the Preferred Unit Purchaser may elect
within seven (7) Business Days thereafter to, in its sole discretion by written
notice provided to SN (any such election, a “Initial Debt Replacement
Election”), irrevocably commit in writing to purchase on the day of the Anadarko
Closing (whether in a Separate Closing or as part of a Dual Closing) an
additional number of Preferred Units equal to (i) to the extent applicable
(a) all or part of the Senior Debt proposed to be incurred by the Partnership on
the day of the Anadarko Closing (whether in a Separate Closing or as part of a
Dual Closing), and/or (b) all or a part of the Initial Availability Cushion
and/or (c) the Non-Syndicated Debt, divided by (ii) the Preferred Unit Purchase
Price (such number of additional Preferred Units, the “Initial Debt Replacement
Units”). Following receipt of a timely Initial Debt Replacement Election and in
accordance with such election, on the day of the Anadarko Closing (whether in a
Separate Closing or as part of a Dual Closing), (i) the Partnership shall not
incur to the extent applicable (x) the portion of the proposed Senior Debt
corresponding to the portion of the proposed Senior Debt to be funded by the
Preferred Unit Purchaser as set forth in the Initial Debt Replacement Election
and/or (y) borrowings under the Credit Facility in an amount corresponding to
the portion of the Initial Availability Cushion to be funded by the Preferred
Unit Purchaser as set forth in the Initial Debt Replacement Election and/or
(z) the Non-Syndicated Debt, (ii) the Preferred Unit Purchaser shall purchase
the Initial Debt Replacement Units, (iii) the maximum number of Preferred Units
authorized to be issued by the Partnership shall be increased by the Initial
Debt Replacement Units, (iv) the Preferred Unit Anadarko Funding Amount shall
automatically be increased by the product of (A) the Initial Debt Replacement
Units to be purchased by the Preferred Unit Purchaser at the Anadarko Closing
(whether in a Separate Closing or as part of a Dual Closing) and (B) the
Preferred Unit Purchase Price and (v) the number of Preferred Units to be issued
at the Anadarko Closing (whether in a Separate Closing or as part of a Dual
Closing) to the Preferred Unit Purchaser shall be increased by the Initial Debt

 

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Replacement Units purchased on the day of the Anadarko Closing. In addition, at
the Anadarko Closing (whether in a Separate Closing or as part of a Dual
Closing), SN shall pay to the Preferred Unit Purchaser a fee equal to the
product of (a) two and one-half percent (2.5%) and (b) the product of (i) the
Preferred Unit Purchase Price and (ii) the number of Initial Debt Replacement
Units actually purchased by the Preferred Unit Purchaser at the Anadarko
Closing.

 

(d)                               Not less than thirteen (13) Business Days
prior to the Anadarko Closing Date, SN shall provide, based upon information
available to them at such time, notice to the Preferred Unit Purchaser in
writing of the proposed key terms of the Credit Facility and Senior Debt, if any
Senior Debt is contemplated. In addition, SN and the Partnership shall, and the
Common Unit Purchaser shall cause the Partnership to, keep the Preferred Unit
Purchaser reasonably apprised of the expected Anadarko Closing Date and apprised
of whether the Anadarko Closing is expected to occur on the same day as the
[redacted] Closing, and shall use their commercially reasonable efforts (based
upon information available to them) (i) to notify the Preferred Unit Purchaser
not later than thirteen (13) Business Days prior to the Anadarko Closing Date,
provided that, any failure to so notify the Preferred Unit Purchaser shall not
limit the Preferred Unit Purchaser’s obligations hereunder, including with
respect to funding the Preferred Unit Anadarko Funding Amount at the Anadarko
Closing (whether in a Separate Closing or as part of a Dual Closing) or the
Preferred Unit [redacted] Funding Amount at the [redacted] Closing (whether in a
Separate Closing or as part of a Dual Closing) and (ii) to deliver the Closing
Notice to the Preferred Unit Purchaser not later than thirteen (13) Business
Days prior to the Anadarko Closing Date, which Closing Notice shall be prepared
by SN.

 

(e)                                SN will use its commercially reasonable
efforts if the [redacted] Election is timely made to cause the Anadarko Closing
and the [redacted] Closing to occur at the Dual Closing; provided that SN shall
have no liability to any Person if the Anadarko Closing and the [redacted]
Closing do not occur on the same day.

 

Section 2.02                                Anadarko Related Commitment and
Related Matters.

 

(a)                               SN shall promptly deliver to the Preferred
Unit Purchaser a copy of the [redacted] Election upon SN’s receipt of same. At
the [redacted] Closing (whether in a Separate Closing or as part of a Dual
Closing), if applicable, on the terms and subject to the conditions set forth in
this Agreement, the Preferred Unit Purchaser shall contribute and fund to the
Partnership by wire transfer of immediately available funds the Preferred Unit
[redacted] Funding Amount in consideration for the issuance by the Partnership
to the Preferred Unit Purchaser of a number of Preferred Units equal to the
Preferred Unit [redacted] Funding Amount divided by the Preferred Unit Purchase
Price. Funds contributed to the Partnership pursuant to this
Section 2.02(a) shall be paid by wire transfer of immediately available funds to
an account designated by the General Partner pursuant to a written notice
delivered to Preferred Unit Purchaser no later than two (2) Business Days before
the [redacted] Closing (whether in a Separate Closing or as part of a Dual
Closing).

 

(b)                               Notwithstanding anything to the contrary
contained herein, but only if the [redacted] Closing will occur in a Separate
Closing, not less than thirteen (13) Business Days prior to the [redacted]
Closing that will occur in a Separate Closing, if such closing is to occur, SN
shall notify the Preferred Unit Purchaser whether (i)(a) it intends to cause the
Partnership to incur any

 

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Senior Debt at the [redacted] Closing or (b) if the lenders to the Credit
Facility have not achieved a “Successful Syndication” (as such term is defined
in the Fee Letter) and the maximum size of the “Demand Facility” (as such term
is defined in the Fee Letter) that may be requested by the lenders pursuant to a
“Term Loan” (as such term is defined in the Fee Letter) (the “Final Non-
Syndicated Debt”) or (ii) if the availability under the Credit Facility will be
less than $100.0 million at the [redacted] Closing (such shortfall, the “Final
Availability Cushion”), and following delivery of such notification the
Preferred Unit Purchaser may elect within seven (7) Business Days thereafter to,
in its sole discretion by written notice provided to SN (any such election, a
“Final Debt Replacement Election”), irrevocably commit in writing to purchase at
the [redacted] Closing an additional number of Preferred Units equal to (i) to
the extent applicable (a) all or part of the Senior Debt proposed to be incurred
by the Partnership, and/or (b) all or a part of the Final Availability Cushion
and/or (c) the Final Non-Syndicated Debt, divided by (ii) the Preferred Unit
Purchase Price (such number of additional Preferred Units, the “Final Debt
Replacement Units”). Following receipt of a timely Final Debt Replacement
Election and in accordance with such election, at the [redacted] Closing that
will occur in a Separate Closing, (i) the Partnership shall not incur to the
extent applicable (x) the portion of the proposed Senior Debt corresponding to
the portion of the proposed Senior Debt to be funded by the Preferred Unit
Purchaser as set forth in the Final Debt Replacement Election and/or
(y) borrowings under the Credit Facility in an amount corresponding to the
portion of the Final Availability Cushion to be funded by the Preferred Unit
Purchaser as set forth in the Final Debt Replacement Election and/or (z) the
Final Non-Syndicated Debt, (ii) the Preferred Unit Purchaser shall purchase on
the day of the [redacted] Closing that will occur in a Separate Closing, the
Final Debt Replacement Units, (iii) the maximum number of Preferred Units
authorized to be issued by the Partnership shall be increased on the day of the
[redacted] Closing that will occur in a Separate Closing, by the Final Debt
Replacement Units, (iv) the Preferred Unit [redacted] Funding Amount shall
automatically be increased on the day of the [redacted] Closing that will occur
in a Separate Closing, by the product of (A) the Final Debt Replacement Units to
be purchased by the Preferred Unit Purchaser at the [redacted] Closing and
(B) the Preferred Unit Purchase Price and (v) the number of Preferred Units to
be issued at the [redacted] Closing that will occur in a Separate Closing, to
the Preferred Unit Purchaser shall be increased by the Final Debt Replacement
Units. In addition, if there are Separate Closings, then at the [redacted]
Closing that will occur in a Separate Closing, if such closing occurs, SN shall
pay to the Preferred Unit Purchaser a fee equal to the product of (a) two and
one-half percent (2.5%) and (b) the product of (i) the Preferred Unit Purchase
Price and (ii) the number of Final Debt Replacement Units actually purchased by
the Preferred Unit Purchaser at the [redacted] Closing.

 

(c)                          SN will, or will cause its Affiliates to, promptly
provide the Purchasers with copies of all notices provided to and received from
[redacted] regarding its response to the Sale Notice sent to [redacted] by
Anadarko on the Effective Date. Additionally, SN will use commercially
reasonable efforts to notify the Purchasers within fifteen (15) days of the
Anadarko Closing (whether in a Separate Closing or as part of a Dual Closing) if
it anticipates that [redacted] will exercise the [redacted] Election. If
[redacted] makes the [redacted] Election, SN will, or will cause its Affiliates
to, keep the Preferred Unit Purchaser reasonably apprised of the expected
[redacted] Closing Date (whether in a Separate Closing or as part of a Dual
Closing), and shall use their commercially reasonable efforts (based upon
information available to them) (i) to notify the Preferred Unit Purchaser not
later than thirteen (13) Business Days prior to the [redacted] Closing Date
(whether in a Separate Closing or as part of a Dual Closing),

 

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which notice may be combined with the notice provided in Section 2.01(d),
provided that, any failure to so notify the Preferred Unit Purchaser shall not
limit the Preferred Unit Purchaser’s obligations hereunder, including with
respect to funding the Preferred Unit [redacted] Funding Amount at the
[redacted] Closing (whether in a Separate Closing or as part of a Dual Closing)
and (ii) to deliver the Supplemental Closing Notice to the Preferred Unit
Purchaser not later than thirteen (13) Business Days prior to the [redacted]
Closing Date, which Supplemental Closing Notice shall be prepared by SN.

 

Section 2.03                      Closing.

 

(a)                               On the terms and subject to the conditions
hereof, the consummation of the funding of each of the Preferred Unit Anadarko
Funding Amount and the Common Unit Funding Amount shall take place on the
Anadarko Closing Date (whether in a Separate Closing or as part of a Dual
Closing) at the offices of Kirkland and Ellis LLP located at 600 Travis Street,
Suite 3300, Houston, Texas 77002, at the same time as the “Closing” (as such
term is defined in the APC/KM PSA).

 

(b)                               If the [redacted] Election occurs, then on the
terms and subject to the conditions hereof, the consummation of the funding of
the Preferred Unit [redacted] Funding Amount shall take place on the [redacted]
Closing Date (whether in a Separate Closing or as part of a Dual Closing) at the
offices of Kirkland and Ellis LLP located at 600 Travis Street, Suite 3300,
Houston, Texas 77002, at the same time as the closing under the [redacted] PSA.

 

Section 2.04                           Deliveries Upon the Effective Date.

 

(a)                                Deliveries of SN Parties. On the Effective
Date:

 

(i)                                   SN shall deliver to the Purchasers
counterparts of this Agreement, duly executed by the SN Parties;

 

(ii)                                SN GP Member shall deliver to the Purchasers
an executed copy of the limited liability company agreement of the General
Partner, duly executed by the General Partner and SN GP Member;

 

(iii)                             Common Unit Purchaser shall deliver to the
Purchasers an executed copy of the agreement of limited partnership of the
Partnership, duly executed by the General Partner and Common Unit Purchaser;

 

(iv)                            SN shall deliver to Purchasers a copy of the
APC/KM PSA, duly executed by the parties thereto, including evidence that SN
Maverick has paid the Deposit on behalf of SN Maverick and the Partnership;

 

(v)                               SN shall deliver to the Purchaser a
counterpart of (A) the SN Letter Agreement, duly executed by SN, SN Maverick and
the Partnership, and (B) the Hydrocarbon Marketing Agreement, duly executed by
SN Maverick and the Partnership;

 

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(vi)                            SN shall deliver to the Purchasers copies of the
duly executed commitments for the Credit Facility and the fee letter with
respect to the Credit Facility providing the market “flex” provisions applicable
to the Senior Debt;

 

(vii)                         SN shall deliver payment to the Preferred Unit
Purchaser of the Commitment Fee within one (1) Business Day after the Effective
Date; and

 

(viii)                      SN shall deliver a copy of the Sale Notice furnished
to [redacted].

 

(b)                                Deliveries by Purchasers. On the Effective
Date, the Preferred Unit Purchaser shall deliver:

 

(i)                                   counterparts of this Agreement duly
executed by each of the Purchasers to the SN Parties; and

 

(ii)                                copies of each of the Equity Commitment
Letters, duly executed by GSO or the GSO Funds, as applicable, to SN and the
Partnership.

 

Section 2.05                             Deliveries Upon Execution of [redacted]
PSA. Promptly following the execution of the [redacted] PSA:

 

(a)                                SN will deliver or cause to be delivered to
the Preferred Unit Purchaser a copy of the [redacted] PSA (including all
schedules, exhibits and annexes thereto), duly executed by the parties thereto;
and

 

(b)                                The Preferred Unit Purchaser will deliver to
SN an equity commitment letter in form and substance consistent in all material
respects with the Equity Commitment Letter attached as Exhibit J-1 hereto with
such changes as are appropriate to address (i) the commitment of the GSO
Investors (as defined in such Equity Commitment Letter attached as Exhibit J-1
hereto) to fund to the Partnership the amount necessary for the Partnership to
fund the Preferred Unit [redacted] Funding Amount instead of the Preferred Unit
Anadarko Funding Amount and (ii) in Section 2 of such equity commitment letter
the conditions to the [redacted] Closing instead of the Anadarko Closing as are
addressed in Section 2 of the Equity Commitment Letter attached as Exhibit J-1
hereto; provided, that [redacted] shall not be a third party beneficiary of such
equity commitment letter unless specifically requested by [redacted].

 

Section 2.06                             Deliveries Upon the Closings.

 

(a)                                Deliveries of SN - Anadarko Closing. At the
Anadarko Closing (whether in a Separate Closing or as part of a Dual Closing),
SN will deliver or cause to be delivered to the Preferred Unit Purchaser (or in
the case of sub-clause (iv) below, to the Preferred Unit Purchaser on behalf of
the GSO Funds) or GSO Associates, as applicable, the following:

 

(i)                                        a counterpart of the GP LLC
Agreement, duly executed by the SN GP Member and the General Partner;

 

(ii)                                     a counterpart of the Partnership
Agreement, duly executed by the Common Unit Purchaser and the General Partner;

 

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(iii)                                  a counterpart of each of the Management
Services Agreement and the Development Agreement each of which shall be duly
executed by SOG and the Partnership, the Joint Development Agreement, duly
executed by SN Maverick, Blackstone Newco and the Partnership, the Drilling
Commitment Agreement, duly executed by the parties thereto, and the Registration
Rights Agreement, duly executed by SN;

 

(iv)                                 the SN Shares and a counterpart of the
Warrant Agreement, duly executed by SN (which in accordance with the direction
of the Preferred Unit Purchaser will be issued to the GSO Funds, but delivered
at the Anadarko Closing to the Preferred Unit Purchaser on behalf of the GSO
Funds);

 

(v)                                    fully executed copies of the definitive
agreements for the Credit Facility and, if applicable, Senior Debt, subject to
Section 2.01(c);

 

(vi)                                 payment by SN of the fee due in accordance
with the final sentence of Section 2.01(c) in respect of the Initial Debt
Replacement Units to be issued and sold to the Preferred Unit Purchaser at the
Anadarko Closing, if any, by wire transfer of immediately available funds to an
account specified by the Preferred Unit Purchaser not less than two (2) Business
Days prior to the Anadarko Closing;

 

(vii)                              an opinion of (a) Kirkland & Ellis LLP, as
counsel to SN addressing such matters set forth in substantially the same form
attached hereto as Exhibit I-1 hereto and (b) Akin, Gump, Strauss, Hauer & Feld
LLP, as counsel to SN, addressing such matters set forth in substantially the
same form attached hereto as Exhibit I-2;

 

(viii)                           a counterpart of the Voting Agreement, duly
executed by SN; and

 

(ix)                                 a counterpart of the Non-Solicitation
Agreement, duly executed by SN and SOG.

 

(b)                                          Deliveries of Preferred Unit
Purchaser — Anadarko Closing. At the Anadarko Closing (whether in a Separate
Closing or as part of a Dual Closing), the Preferred Unit Purchaser shall
deliver to each SN Party, as applicable, the following:

 

(i)                                        a counterpart of the GP LLC
Agreement, duly executed by GSO Associates;

 

(ii)                                     a counterpart of the Partnership
Agreement, duly executed by the Preferred Unit Purchaser;

 

(iii)                                  a counterpart of the Warrant Agreement,
duly executed by the GSO Funds;

 

(iv)                                 a counterpart of the Registration Rights
Agreement, duly executed by the GSO Funds;

 

(v)                                    a counterpart of the Voting Agreement,
duly executed by the GSO Funds; and

 

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(vi)                              a counterpart of the Non-Solicitation
Agreement; duly executed by GSO.

 

(c)                                 Deliveries of SN Parties - [redacted]
Closing. At the [redacted] Closing that occurs in a Separate Closing:

 

(i)                                        SN shall deliver payment of the fee
due in accordance with the final sentence of Section 2.02(b) in respect of the
Final Debt Replacement Units to be issued and sold to the Preferred Unit
Purchaser at the [redacted] Closing that occurs in a Separate Closing, if any,
by wire transfer of immediately available funds to an account specified by the
Preferred Unit Purchaser not less than two (2) Business Days prior to the
[redacted] Closing.

 

(d)                                Delivery of Funds.

 

(i)                                        At the Anadarko Closing (whether in a
Separate Closing or as part of a Dual Closing), the Preferred Unit Purchaser
shall deliver the Preferred Unit Anadarko Funding Amount to the Partnership by
wire transfer of immediately available funds pursuant to Section 2.01(a);

 

(ii)                                     At the Anadarko Closing (whether in a
Separate Closing or as part of a Dual Closing), the Common Unit Purchaser shall
deliver the Common Unit Funding Amount to the Partnership by wire transfer of
immediately available funds pursuant to Section 2.01(a);

 

(iii)                                  At the Anadarko Closing (whether in a
Separate Closing or as part of a Dual Closing), GSO Associates shall deliver to
the General Partner such nominal amounts as set forth in the GP LLC Agreement
pursuant to Section 2.01(b); and

 

(iv)                                 At the Anadarko Closing (whether in a
Separate Closing or as part of a Dual Closing), the SN GP Member shall deliver
to the General Partner such nominal amounts as set forth in the GP LLC Agreement
pursuant to Section 2.01(b).

 

(v)                                    At the [redacted] Closing (whether in a
Separate Closing or as part of a Dual Closing), if applicable, the Preferred
Unit Purchaser shall deliver the Preferred Unit [redacted] Funding Amount, if
any, to the Partnership by wire transfer of immediately available funds pursuant
to Section 2.02(b).

 

Section 2.07                Conditions of Preferred Unit Purchaser’s Obligations
at the Closing. The obligations of the Preferred Unit Purchaser and/or GSO
Associates to wire funds at the Anadarko Closing pursuant to
Section 2.06(d)(i) and Section 2.06(d)(iii) and, if applicable, the [redacted]
Closing pursuant to Section 2.06(d)(v), and the obligations of the Purchasers to
deliver the documents specified in Section 2.06(b) are subject to the
satisfaction (or waiver by the Purchasers) on or prior to the Anadarko Closing
Date (whether in a Separate Closing or as part of a Dual Closing), and, as
applicable, the [redacted] Closing Date, of the following conditions:

 

(a)                                no statute, order, rule, decree or regulation
has been entered by any Governmental Authority having jurisdiction over the
parties hereto or the subject matter of this Agreement that restrains or
prohibits the transactions contemplated by this Agreement and that remains in
effect at the applicable Preferred Unit Closing and there shall not be pending
any suit,

 

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action or proceeding by any Governmental Authority or other Person seeking to
restrain, preclude, enjoin or prohibit the transactions contemplated by this
Agreement;

 

(b)                               solely with respect to (i) the Anadarko
Closing (whether in a Separate Closing or as part of a Dual Closing), the
simultaneous “Closing” (as such term is defined in the APC/KM PSA) and (ii) the
[redacted] Closing (whether in a Separate Closing or as part of a Dual Closing),
if applicable, the simultaneous consummation of the transactions contemplated by
the [redacted] PSA and the Anadarko Closing shall have occurred or in the case
of a Dual Closing shall occur immediately before or concurrently with the
[redacted] Closing;

 

(c)                                solely with respect to the Anadarko Closing
(whether in a Separate Closing or as part of a Dual Closing), the Partnership
shall not have been assigned any interest under the Springfield Gathering
Agreements, and SN and Anadarko shall have executed and delivered at the
Anadarko Closing the Marketing Transition Services Agreement (as such term is
defined in the APC/KM PSA) in accordance with the APC/KM PSA;

 

(d)                               all of (i) the Fundamental Representations of
SN contained in Article III and Article V of this Agreement shall be true and
correct at and as of each of the Anadarko Closing Date and [redacted] Closing
Date, as applicable, (other than representations and warranties as of an earlier
specified date, which representations and warranties shall be true and correct
at and as of such date), (ii) the representations and warranties of SN contained
in Sections 3.08, 3.14 and 5.13 shall be true and correct in all material
respects at and as of each of the Anadarko Closing Date and [redacted] Closing
Date, and (iii) all of the other representations and warranties of SN contained
in Article III and Article V of this Agreement not specified in clauses (i) or
(ii) of this Section 2.07(d), excluding for purposes of this determination any
qualification in such representations or warranties of materiality or material
adverse effect therein (other than representations and warranties as of an
earlier specified date, which representations and warranties shall be true and
correct at and as of such date) shall be true and correct at and as of each of
the Anadarko Closing Date and the [redacted] Closing Date, as applicable, except
where the failure of any such representations and warranties to be true and
correct has not had, and is not reasonably likely to have, individually or in
the aggregate, a material and adverse effect on the General Partner and the
Partnership considered as a whole, or the Preferred Unit Purchaser;

 

(e)                                solely with respect to the Anadarko Closing
(whether in a Separate Closing or as part of a Dual Closing), the simultaneous
funding by the Common Unit Purchaser of the Common Unit Funding Amount;

 

(f)                                 solely with respect to the Anadarko Closing
(whether in a Separate Closing or as part of a Dual Closing), the closings of
the Credit Facility and, if applicable, the Senior Debt shall have occurred or
shall occur simultaneous with such Anadarko Closing, and the Partnership shall
have unused availability under the Credit Facility of not less than $100.0
million, provided that, if a [redacted] Election is not made or the [redacted]
Closing will not occur in a Dual Closing, the Partnership shall have unused
availability under the Credit Facility of not less than $65.0 million, in each
case subject to Section 2.01(c);

 

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(g)                                 solely with respect to the [redacted]
Closing (whether in a Separate Closing or as part of a Dual Closing), the
Partnership shall have unused availability under the Credit Facility of not less
than $100.0 million;

 

(h)                                each of the SN Parties shall have performed
in all material respects all of the covenants required to be performed by it
hereunder at or prior to each of the Anadarko Closing (whether in a Separate
Closing or as part of a Dual Closing) and the [redacted] Closing (whether in a
Separate Closing or as part of a Dual Closing), as applicable;

 

(i)                                    solely with respect to the Anadarko
Closing (whether in a Separate Closing or as part of a Dual Closing), if the
Preferred Unit Purchaser together with any of its Affiliates is or would become
an Acquiring Person (as defined in the SN Rights Plan) as of such Anadarko
Closing (taking into account all SN Common Stock issuable upon exercise of the
Warrants and any warrants issued to any Affiliate of the Preferred Unit
Purchaser), then the Board of Directors shall have taken all actions necessary
to cause the SN Rights Plan to be amended, in a form reasonably acceptable to SN
and the Preferred Unit Purchaser, to provide that none of the Preferred Unit
Purchaser or any of its Affiliates shall be deemed an Acquiring Person, by
designating such Persons as an Exempt Person (as defined in the SN Rights Plan)
or otherwise; provided, however, that SN shall be entitled to (i) place a
limitation on the maximum percentage of shares beneficially owned (as defined in
the SN Rights Plan) by the Preferred Unit Purchaser and any of its Affiliates so
long as such limitation is a higher ownership percentage than is represented by
the SN Shares and Warrants issuable at the Anadarko Closing to the Preferred
Unit Purchaser and/or the GSO Funds and/or their Affiliates (including, without
limitation, warrants to purchase SN Shares issued to Affiliates of the Preferred
Unit Purchaser and/or the GSO Funds), including for the avoidance of doubt the
shares of SN Common Stock for which the Warrants (and such warrants issued to
any such Affiliate) may be exercisable by the Preferred Unit Purchaser and/or
the GSO Funds and/or their Affiliates after the Anadarko Closing (provided, that
SN will place separate percentage limits on Affiliates associated with
Blackstone, on the one hand, and Affiliates associated with GSO, on the other
hand) and (ii) provide in such amendment that, (x) at such time as the Preferred
Unit Purchaser together with any of its Affiliates no longer Beneficially Owns
4.9% or more of the SN Common Stock (provided, that SN will place separate
percentage limits on Affiliates associated with Blackstone, on the one hand, and
Affiliates associated with GSO, on the other hand), then such Person may no
longer be an Exempt Person and/or may be an Acquiring Person thereafter, and
(y) Persons not subject to or bound by the Voting Agreement (or substantially
similar agreement with SN) shall not be entitled to the benefits of the
exemptions provided for in such amendment. As used in this clause
(h) “Affiliates” has the meaning ascribed to such term in the SN Rights Plan;
provided, further, that in no event will the amendment to the SN Rights Plan be
structured to prohibit such Exempt Persons from maintaining their respective
then-current percentage ownership in SN or from exercising Rights to acquire SN
Shares to maintain their then- current respective percentage interests;

 

(j)                                   solely with respect to the Anadarko
Closing (whether in a Separate Closing or as part of a Dual Closing), the Board
of Directors of SN shall have reserved for issuance a

 

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number of shares of SN Common Stock equal to the number of shares issuable upon
exercise of the Warrants;

 

(k)                                neither the General Partner nor the
Partnership shall be, and shall not be required to become, a guarantor or a
Restricted Subsidiary under any credit agreement, indenture or other loan
agreement or other material agreement relating to indebtedness of, or guaranteed
by, SN or any of its Subsidiaries (other than the General Partner and the
Partnership); and

 

(l)                                    solely with respect to the Anadarko
Closing (whether in a Separate Closing or as part of a Dual Closing), the SN
Shares and the SN Common Stock subject to issuance upon the exercise of the
Warrants shall be approved for listing on the NYSE, subject to the official
notice of issuance.

 

Section 2.08                     Conditions of the Common Unit Purchaser’s
Obligations at Committed Closing.  The obligation of the Common Unit Purchaser
and SN GP Member to wire funds at the Anadarko Closing pursuant to
Section 2.06(d)(ii) and Section 2.06(d)(iv), and the obligation of SN to
deliver, or cause to be delivered, (a) those Anadarko Closing deliverables set
forth in Section 2.06(a) is subject to the satisfaction (or waiver by the SN
Parties) on or prior to the Anadarko Closing Date and (b) the [redacted] Closing
deliverables set forth in Section 2.06(c) is subject to the satisfaction (or
waiver by the SN Parties) on or prior to the [redacted] Closing Date, of the
following conditions:

 

(a)                                no statute, order, rule, decree or regulation
has been entered by any Governmental Authority having jurisdiction over the
parties hereto or the subject matter of this Agreement that restrains or
prohibits the transactions contemplated by this Agreement and that remains in
effect at the applicable Preferred Unit Closing and there shall not be pending
any suit, action or proceeding by any Governmental Authority or other Person
seeking to restrain, preclude, enjoin or prohibit the transactions contemplated
by this Agreement;

 

(b)                                solely with respect to (i) the Anadarko
Closing (whether in a Separate Closing or as part of a Dual Closing), the
simultaneous “Closing” (as such term is defined in the APC/KM PSA) and (ii) the
[redacted] Closing, if such closing occurs, the simultaneous consummation of the
transactions contemplated by the [redacted] PSA;

 

(c)                                 all of the Fundamental Representations of
the Preferred Unit Purchaser contained in this Agreement shall be true and
correct at and as of each of the Anadarko Closing Date and [redacted] Closing
Date, as applicable, (other than representations and warranties as of an earlier
specified date, which representations and warranties shall be true and correct
on and as of such date) and all of the other representations and warranties of
the Preferred Unit Purchaser contained in Article IV of this Agreement excluding
for purposes of this determination any qualification in such representations or
warranties of materiality or material adverse effect therein shall be true and
correct at and as of each of the Anadarko Closing Date and [redacted] Closing
Date, as applicable, (other than representations and warranties as of an earlier
specified date, which representations and warranties shall be true and correct
at and as of such date) except where the failure of any such representation has
not had, and is not reasonably like to have, individually and in the aggregate,
a material and adverse effect on the General Partner and the Partnership
considered as a whole, or the Common Unit Purchaser;

 

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(d)                                solely with respect to (i) the Anadarko
Closing (whether in a Separate Closing or as part of a Dual Closing), the
simultaneous funding of the Preferred Unit Anadarko Funding Amount and (ii) the
[redacted] Closing (whether in a Separate Closing or as part of a Dual Closing),
the simultaneous funding of the Preferred Unit [redacted] Funding Amount; and

 

(e)                                 the Purchasers shall have performed in all
material respects all of the covenants required to be performed by them
hereunder at or prior to each of the Anadarko Closing Date and [redacted]
Closing Date.

 

Section 2.09                Further Assurances.   From time to time after the
date hereof, without further consideration, each of SN, SN GP Member, the
General Partner, the Partnership, the Common Unit Purchaser, the Preferred Unit
Purchaser and GSO Associates shall use its reasonable best efforts to take, or
cause to be taken, all actions necessary or appropriate to consummate the
transactions contemplated by this Agreement and the other Basic Documents.

 

Section 2.10                UCC Filings After the Effective Date.   As promptly
as commercially practicable after the Effective Date, SN shall cause filings on
UCC Form 1s to be filed on behalf of the Partnership in the States of Delaware
and Texas and in such other locations as the Preferred Unit Purchaser may
reasonably direct with respect to the Liens and security interests of the
Partnership under the Hydrocarbons Marketing Agreement to secure payments that
become due to the Partnership thereunder.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

RELATED TO THE GENERAL PARTNER AND THE PARTNERSHIP

 

Except as otherwise expressly limited to a specific date herein, as of the
Effective Date, the Anadarko Closing Date, and if the [redacted] Closing
(whether in a Separate Closing or as part of a Dual Closing) occurs, the
[redacted] Closing Date, SN represents and warrants to GSO Associates and the
Purchasers as follows:

 

Section 3.01                Existence and Power.

 

(a)                                The General Partner has been duly formed and
is validly existing as a limited liability company in good standing under the
Laws of the State of Delaware, has the full limited liability company power and
authority to own or lease its properties and assets and to conduct its business,
and is duly registered or qualified as a foreign limited liability company, as
the case may be, for the transaction of business under the Laws of each
jurisdiction in which the character of the business conducted by it or the
nature or location of the properties owned or leased by it makes such
registration or qualification necessary, except where the failure to be so
qualified, in good standing or have such power or authority would not,
individually or in the aggregate, have a material adverse effect on the General
Partner. All limited liability company action required to be taken by the
General Partner for the execution and delivery of this Agreement and the other
Basic Documents to which it is or will be a party and the consummation of the
transactions contemplated hereby and thereby have been, or prior to the
applicable Preferred Unit Closing shall have been, duly and validly taken. Upon
the execution and delivery of the GP LLC Agreement by the parties thereto, the
General Partner will have all

 

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requisite power and authority to issue, sell and deliver the Class A Common
Interests and the Class B Common Interests, in accordance with and upon the
terms set forth in this Agreement and the GP LLC Agreement.

 

(b)                                The Partnership has been duly formed and is
validly existing as a limited partnership under the Laws of the jurisdiction of
the State of Delaware, has the full limited partnership power and authority to
own or lease its properties and assets and to conduct its business, and is duly
registered or qualified as a foreign limited partnership, as the case may be,
for the transaction of business under the Laws of each jurisdiction in which the
character of the business conducted by it or the nature or location of the
properties owned or leased by it makes such registration or qualification
necessary, except where the failure to be so qualified, in good standing or have
such power or authority would not, individually or in the aggregate, have a
material adverse effect on the Partnership. All limited partnership action
required to be taken by the Partnership for the execution and delivery by the
Partnership of this Agreement and the other Basic Documents to which it is or
will be a party and the consummation of the transactions contemplated hereby and
thereby have been, or prior to the applicable Preferred Unit Closing shall have
been, duly and validly taken. Upon execution of the Partnership Agreement, the
Partnership will have all requisite power and authority to issue, sell and
deliver the non- economic general partner interest, the Common Units to be
issued to the Common Units Purchaser in accordance with Section 2.01(a) and the
Preferred Units to be issued to the Preferred Unit Purchaser in accordance with
Section 2.01(a) and Section 2.02(a).

 

Section 3.02                Authority; Enforceability.

 

(a)                                The limited liability company agreement of
the General Partner and agreement of limited partnership of the Partnership,
each as of the Effective Date, have been duly authorized, executed and delivered
by (i) in the case of the General Partner, SN GP Member and (ii) in the case of
the Partnership, by Common Unit Purchaser and the General Partner, and
constitute valid and legally binding agreements, enforceable in accordance with
their respective terms, except as the enforceability of such agreements may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws relating to or affecting creditors’ rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).

 

(b)                                Each of the Basic Documents to which the
General Partner or the Partnership is or will be a party have been duly and
validly authorized and executed, or when executed shall be duly and validly
authorized and executed by each of the General Partner or the Partnership, as
the case may be, and constitutes, or will when executed constitute, the legal,
valid and binding obligations of each of the General Partner or the Partnership
that is a party thereto, as the case may be, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors’ rights and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).

 

Section 3.03                Capitalization; Issuance of Units.

 

(a)                                As of the Effective Date:

 

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(i)                                        The General Partner’s authorized
Equity Interests consist of 100 Common Units which membership interests have
been duly authorized and validly issued in accordance with the governing
documents of the General Partner and applicable Law; and

 

(ii)                                     The Partnership’s authorized Equity
Interests consist solely of (A) a non- economic general partner interest held by
the General Partner and (B) 100 common limited partner interests held by Common
Unit Purchaser, which partnership interests have been duly authorized and
validly issued in accordance with the governing documents of the Partnership and
applicable Law.

 

(b)                                Immediately following the Anadarko Closing
(whether in a Separate Closing or as part of a Dual Closing), after giving
effect to the execution of the GP LLC Agreement and the Partnership Agreement by
the parties thereto:

 

(i)                                        The outstanding Equity Interests of
the General Partner, shall consist of the 99 Class A Common Interests issued to
SN GP Member and 1 Class B Common Interest issued to GSO Associates, which
membership interests, when issued, will have been duly authorized and validly
issued in accordance with the GP LLC Agreement and applicable Law, will be free
of any and all Liens and restrictions on transfer, other than restrictions on
transfer under the GP LLC Agreement under or applicable state and federal
securities Laws and will be fully paid and non-assessable (except as such
non-assessability may be affected by Sections 18-607 and 18-804 of the Delaware
Act); and

 

(ii)                                     The outstanding Equity Interests of the
Partnership, shall consist of (A) the non-economic general partner interest held
by the General Partner, (B) the Common Units issued to the Common Unit Purchaser
pursuant to Section 2.01(a) and (C) the Preferred Units issued to the Preferred
Unit Purchaser pursuant to Section 2.01(a), subject to increase in accordance
with Section 2.01(c), which Equity Interests will be duly authorized and validly
issued in accordance with the Partnership Agreement and applicable Law, free and
clear of any and all Liens and restrictions on transfer, other than restrictions
on transfer under the Partnership Agreement or under applicable state and
federal securities Laws, fully paid and the Common Units and Preferred Units
will be non-assessable (except as such non-assessability may be affected by
Sections 17-303, 17-607 and 17-804 of DRULPA).

 

(c)                                 Immediately following the [redacted] Closing
(whether in a Separate Closing or as part of a Dual Closing):

 

(i)                                        The outstanding Equity Interests of
the Partnership, shall consist of (A) the non-economic general partner interest
held by the General Partner, (B) the Common Units issued to the Common Unit
Purchaser pursuant to Section 2.01(a) and (C) the Preferred Units issued to the
Preferred Unit Purchaser pursuant to Section 2.01(a) and Section 2.02(a),
subject to increase in accordance with Section 2.01(c) and, if the [redacted]
Closing occurs in a Separate Closing, Section 2.02(b), respectively, which
partnership interests will be duly authorized and validly issued in accordance
with the Partnership Agreement and applicable Law, free and clear of any and all
Liens and restrictions on transfer, other than restrictions on transfer under
the Partnership Agreement or under applicable state and federal securities Laws,
fully paid and the Common

 

25

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Units and Preferred Units will be non-assessable (except as such
non-assessability may be affected by Sections 17-303, 17-607 and 17-804 of
DRULPA).

 

(d)                               Except as set forth in this Agreement or
(i) with respect to the General Partner, the GP LLC Agreement or (ii) with
respect to the Partnership, the Partnership Agreement, there are no Persons
entitled to preemptive, statutory or other similar contractual rights to
subscribe for any Class A Common Interests, Class B Common Interests, any
general partner interest of the Partnership, Common Units, Preferred Units or
any other Equity Interests of either the General Partner or the Partnership.

 

(e)                                Except for the Class A Common Interests, the
Class B Common Interest, the non-economic interest of the General Partner, the
Common Units and the Preferred Units to be issued pursuant to this Agreement,
there are no options, warrants or other rights to purchase, agreements or other
obligations to issue, or rights to convert any obligations into or exchange any
securities for, membership interest, general partner interest, limited partner
interest or any other ownership interests in the General Partner or the
Partnership, as applicable.

 

Section 3.04                Subsidiaries of the General Partner and the
Partnership.   Except for its non-economic general partnership interest in the
Partnership, the General Partner does not have any Subsidiary and does not own,
directly or indirectly, any Equity Interests in any other Person. The
Partnership does not have any Subsidiaries and does not own, directly or
indirectly, any Equity Interests in any other Person.

 

Section 3.05                Litigation.  As of the Effective Date, there are no,
and as of the Anadarko Closing (whether in a Separate Closing or as part of a
Dual Closing) and, if occurring, the [redacted] Closing (whether in a Separate
Closing or as part of a Dual Closing), there will not be any, legal or
governmental proceedings pending to which the General Partner or the Partnership
is a party or to which any property or asset of the General Partner or the
Partnership is subject or which challenges the validity of any of the Basic
Documents or the right of the General Partner or the Partnership to enter into
any of the Basic Documents to which it is a party or to consummate the
transactions contemplated hereby or thereby and, to the Knowledge of SN, no such
proceedings are threatened by any Governmental Authorities or others.

 

Section 3.06                No Conflicts.    None of (a) the offering, issuance
and sale by (i) the General Partner of the Class A Common Interests or Class B
Common Interests or (ii) the Partnership of the non-economic general partners
interest, the Common Units or the Preferred Units, and, in each case, the
application of the proceeds therefrom, (b) the execution, delivery and
performance by the General Partner or the Partnership of the Basic Documents to
which it is or will be a party, or (c) the consummation of the transactions
contemplated hereby or thereby (i) constitutes or will constitute a violation of
the other organizational documents of the General Partner or the Partnership,
(ii) constitutes or will constitute a breach or violation of, or a default (or
an event which, with notice or lapse of time or both, would constitute such a
default) under, any Contract to which the General Partner or the Partnership is
a party or by which any of them or any of their respective properties may be
bound or (iii) violates or will violate any statute, Law, Permit or regulation
or any order, judgment, decree or injunction of any court or Governmental
Authority or body having jurisdiction over the General Partner or the
Partnership or any of their respective properties in a proceeding to which any
of them or their property is or

 

26

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was a party, except, in cases of clauses (ii) and (iii) above, for any such
conflict, breach, violation or default that would not, individually or in the
aggregate, have a material adverse effect on the Partnership and the General
Partner, taken as a whole.

 

Section 3.07                Approvals.    Except as set forth on Schedule 3.07,
no authorization, consent, approval, waiver, license, qualification or written
exemption from, nor any filing, declaration, qualification or registration with,
any Governmental Authority or any other Person is required in connection with
(a) the execution, delivery or performance by any of the General Partner or the
Partnership of any of the Basic Documents, (b) the General Partner’s issuance at
the Anadarko Closing (whether in a Separate Closing or as part of a Dual
Closing) and sale of the Class A Common Interests or Class B Common Interests,
or (c) the Partnership’s issuance at (i) the Anadarko Closing (whether in a
Separate Closing or as part of a Dual Closing) of the non- economic general
partner interest and the Common Units to be issued to the Common Unit Purchaser
pursuant to Section 2.01(a) (ii) the Anadarko Closing (whether in a Separate
Closing or as part of a Dual Closing) and, if occurring the [redacted] Closing
(whether in a Separate Closing or as part of a Dual Closing), of the Preferred
Units to be issued to the Preferred Unit Purchaser pursuant to
Section 2.01(a) and, if applicable, Section 2.02(a).

 

Section 3.08                No Liabilities. Except (i) as arising under this
Agreement, the APC/KM PSA or, if entered into, the [redacted] PSA, (ii) as set
forth on Schedule 3.08 and (iii) for obligations of the General Partner and the
Partnership arising under any document contemplated (x) hereby, (y) in the
APC/KM PSA or (z) if entered into, the [redacted] PSA, to be entered into by the
Partnership at or prior to the Anadarko Closing (whether in a Separate Closing
or as part of a Dual Closing), as of the Effective Date and as of the time
immediately prior to the Anadarko Closing (whether in a Separate Closing or as
part of a Dual Closing) or, if the [redacted] PSA is entered into, immediately
prior to the [redacted] Closing (whether in a Separate Closing or as part of a
Dual Closing), neither the General Partner or the Partnership is or will be
subject to any liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent or otherwise) nor has
conducted any business other than in connection with the foregoing.

 

Section 3.09                Investment Company Status.     Neither the General
Partners nor the Partnership is, and upon the issuance and sale of the Class A
Common Interests, the Class B Common Interests, the non-economic general partner
interest, the Common Units and the Preferred Units as herein contemplated and
the application of the net proceeds therefrom, neither the General Partner nor
the Partnership will be, an “investment company” or an entity “controlled” by an
“investment company” as such terms are defined in the Investment Company Act of
1940, as amended, and the rules and regulations of the SEC promulgated
thereunder.

 

Section 3.10                No Registration Required.  Assuming the accuracy of
the representations and warranties of the Purchasers contained in this Agreement
and their compliance with the agreements set forth in this Agreement, the sale
and issuance at the Closing of the Class A Common Interests, the Class B Common
Interests, the non-economic general partner interests, the Common Units and the
Preferred Units pursuant to this Agreement is exempt from the registration 
requirements  of  the  Securities  Act,  and  neither  the  General  Partner 
nor  the Partnership nor, to the Knowledge of SN, any authorized representative
acting on behalf of the

 

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General Partner or the Partnership has taken or will take any action hereafter
that would cause the loss of such exemption.

 

Section 3.11                Certain Fees.  Except for fees payable to J.P.
Morgan, Citi and the other lenders in respect of the Credit Facility or Senior
Debt that have been disclosed in writing to the Purchasers prior to the
Effective Date and pursuant to the terms of the Fee Letter, no fees or
commissions are or will be payable by the General Partner or the Partnership,
and the Preferred Unit Purchaser and its Affiliates shall not be subject to any
liability or other obligation with respect, to brokers, finders or investment
bankers in connection with or relating to the issuance of the Class A Common
Interests, the Class B Common Interests, the non-economic general partner
interests, the Common Units, the Preferred Units, the Initial Debt Replacement
Units, the Final Debt Replacement Units, the SN Shares, the Warrants, the
issuance of SN Common Stock upon exercise of the Warrants or the consummation of
the transactions contemplated by this Agreement; provided that, SN shall pay for
any fees payable to J.P. Morgan, Citi and the other lenders that are not
provided for pursuant to the Fee Letter.

 

Section 3.12                No  Integration.    Neither  the  General  Partner 
nor  the  Partnership  has, directly or indirectly through any representative,
made any offers or sales of any security or solicited any offers to buy any
security that is or will be integrated with the issuance and sale of the Class A
Common Interests, the Class B Common Interests, the non-economic general partner
interests, the Common Units or the Preferred Units in a manner that would
require the offer and sale of any of the Class A Common Interests, Class B
Common Interests, the non-economic general partner interests, Common Units or
Preferred Units to be registered under the Securities Act.

 

Section 3.13                No  Restrictions  on  Dividends.    Neither  the 
General  Partner  nor  the Partnership is a party to or otherwise subject to or
bound by any instrument or agreement that limits or prohibits or could limit or
prohibit, directly or indirectly, the General Partner or the Partnership from
(a) redeeming the Preferred Units pursuant to their terms or (b) paying any
dividends or making other distributions on the Preferred Units that may be
issued, except as may be set forth in the GP LLC Agreement, the Partnership
Agreement, the Credit Facility or any documents relating to the Senior Debt, if
applicable.

 

Section 3.14                Springfield Gathering.   At the Closing and assuming
the “Closing” (as such term is defined in the APC/KM PSA) has occurred, the
Partnership shall not have been assigned any interest under the Springfield
Gathering Agreements, and SN and Anadarko shall have executed and delivered at
the Anadarko Closing the Marketing Transition Services Agreement (as such term
is defined in the APC/KM PSA) in accordance with the APC/KM PSA.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PREFERRED UNIT PURCHASER

 

Except as otherwise expressly limited to a specific date herein, as of the
Effective Date, the Anadarko Closing Date, and if the [redacted] Closing
(whether in a Separate Closing or as part of a Dual Closing) occurs, the
[redacted] Closing Date, the Preferred Unit Purchaser represents and warrants to
the SN Parties as follows:

 

Section 4.01                Existence.   GSO Associates is duly organized and
validly existing as a limited liability company and in good standing under the
Laws of its state of formation, with all necessary power and authority to own
properties and to conduct its business as currently conducted.  The Preferred
Unit Purchaser is duly organized and validly existing as a limited partnership
and in good standing under the Laws of its state of formation, with all
necessary power and authority to own properties and to conduct its business as
currently conducted.  Each of the GSO Funds is duly organized as a limited
partnership and in good standing under the Laws of its state of formation, with
all necessary power and authority to own properties and to conduct its business
as currently conducted.

 

Section 4.02                Authorization, Enforceability.  GSO Associates has
all necessary limited liability company, and the Preferred Unit Purchaser and
the GSO Funds have all necessary limited partnership, legal power and authority
to enter into, deliver and perform its obligations (if any) under the Basic
Documents to which it is or will be a party.  The execution, delivery and
performance by each of GSO Associates, the Preferred Unit Purchaser and the GSO
Funds of the Basic Documents to which it is or will be a party and the
consummation by it of the transactions contemplated hereby and thereby have been
or, when executed, will be duly and validly authorized by all necessary legal
action of each of GSO Associates, the Preferred Unit Purchaser and the GSO
Funds, and no further consent or authorization of GSO Associates, the Preferred
Unit Purchaser or the GSO Funds is required.  The Basic Documents to which GSO
Associates, the Preferred Unit Purchaser or the GSO Funds is or will be a party
have been or, prior to the Closing, will be duly executed and delivered by GSO
Associates, the Preferred Unit Purchaser or the GSO Funds, as the case may be,
and constitute or, when executed, will constitute legal, valid and binding
obligations of GSO Associates, the Preferred Unit Purchaser or the GSO Funds, as
the case may be; except as, the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws relating to or affecting creditors’ rights generally and by general
principles of equity and except as the rights to indemnification may be limited
by applicable Law (regardless of whether such enforceability is considered in a
proceeding in equity or at law).

 

Section 4.03                No Breach.   None of the execution, delivery or
performance by GSO Associates, the Preferred Unit Purchaser or the GSO Funds of
the Basic Documents to which it is, or prior to the Anadarko Closing (whether in
a Separate Closing or as part of a Dual Closing) or, as applicable, the
[redacted] Closing (whether in a Separate Closing or as part of a Dual Closing),
will be a party or the consummation by GSO Associates, the Preferred Unit
Purchaser or the GSO Funds of the transactions contemplated hereby or thereby
will (a) conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any material agreement to which
the GSO Associates or Preferred Unit Purchaser is a party or by

 

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which GSO Associates, the Preferred Unit Purchaser or the GSO Funds is bound or
to which any of the property or assets of GSO Associates, the Preferred Unit
Purchaser or the GSO Funds is subject, (b) conflict with or result in any
violation of the provisions of the organizational documents of GSO Associates,
the Preferred Unit Purchaser or the GSO Funds, or (c) violate any statute,
order, rule or regulation of any court or Governmental Authority or body having
jurisdiction over GSO Associates, the Preferred Unit Purchaser or the GSO Funds
or the property or assets of GSO Associates, the Preferred Unit Purchaser or the
GSO Funds, except in the case of clauses (a) and (c), for such conflicts,
breaches, violations or defaults as would not prevent the consummation of the
transactions contemplated by the Basic Documents to which GSO Associates, the
Preferred Unit Purchaser or the GSO Funds, as the case may be, is or, prior to
the Anadarko Closing and if applicable, the [redacted] Closing, will be a party.

 

Section 4.04                Approvals.    Except as set forth on Schedule 4.04,
no authorization, consent, approval, waiver, license, qualification or written
exemption from, nor any filing, declaration, qualification or registration with,
any Governmental Authority or any other Person is required in connection with
the execution, delivery or performance by GSO Associates, the Preferred Unit
Purchaser or the GSO Funds of any of the Basic Documents.

 

Section 4.05                Certain Fees.   No fees or commissions are or will
be payable by GSO Associates, the Preferred Unit Purchaser or the GSO Funds to
brokers, finders or investment bankers with respect to the purchase of the
Class B Common Interest or any of the Purchased Preferred Units, the issuance to
the GSO Funds of the SN Shares and Warrants or the consummation of the
transactions contemplated by this Agreement, in each case, for which an SN Party
may be liable.

 

Section 4.06                Restricted Securities.   Except for possible
permitted transfers subject to the terms of (a) in the case of Class B Common
Interest, the GP LLC Agreement or (b) in the case of the Purchased Preferred
Units, the Partnership Agreement, GSO Associates is acquiring the Class B Common
Interest, the Preferred Unit Purchaser is acquiring the Purchased Preferred
Units, and the GSO Funds are acquiring the SN Shares and the Warrants, and any
SN Common Stock acquired upon exercise of the Warrants, for its own account, for
the purpose of investment only and not with a view to, or for sale in connection
with, any distribution thereof in violation of applicable securities Laws.  Each
of GSO Associates, the Preferred Unit Purchaser and the GSO Funds has such
knowledge, sophistication and experience in financial and business matters so as
to be capable of evaluating the merits and risks of its proposed investment in
(a) in the case of GSO Associates, the Class B Common Interest, (b) in the case
of the Preferred Unit Purchaser, the Purchased Preferred Units, and (c) in the
case of the GSO Funds, the SN Shares, the Warrants and any SN Common Stock
issued upon exercise of the Warrants and is capable of bearing the economic risk
of such investment.  Each of GSO Associates, the Preferred Unit Purchaser, and
the GSO Funds is an “accredited investor” as that term is defined in Rule 501 of
Regulation D (without regard to Rule 501(a)(4)) promulgated under the Securities
Act.   Each of GSO Associates, the Preferred Unit Purchaser and the GSO Funds
acknowledges and understands that the acquisition by (a) GSO Associates of the
Class B Common Interest, (b) the Preferred Unit Purchaser of the Purchased
Preferred Units, and (c) the GSO Funds of the SN Shares and the Warrants has not
been, and prior to the Closing will not be, and any SN Common Stock acquired
upon exercise of the Warrants will not be, registered under the Securities Act
in each case in reliance on an exemption therefrom and that each of SN, the
General Partner and the Partnership

 

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is relying upon the truth and accuracy of, and GSO Associates’, the Preferred
Unit Purchaser’s and the GSO Funds’ compliance with, the representations,
warranties, agreements, acknowledgments and understandings of GSO Associates,
the Preferred Unit Purchaser and the GSO Funds set forth herein in order to
determine the availability of such exemptions and the eligibility of GSO
Associates to acquire the Class B Common Interest, the Preferred Unit Purchaser
to acquire the Purchased Preferred Units, and the GSO Funds to acquire the SN
Shares, the Warrants and any SN Common Stock acquired upon exercise of the
Warrants and the Class B Common Interest, the Purchased Preferred Units, the SN
Shares, the Warrants and any SN Common Stock acquired upon exercise of the
Warrants will, upon such acquisition, be characterized as “restricted
securities” under state and federal securities Laws. GSO Associates, the
Preferred Unit Purchaser and the GSO Funds further acknowledge and understand
that (x) none of the Class B Common Interest, the Purchased Preferred Units, the
SN Shares, the Warrants, any SN Common Stock acquired upon exercise of the
Warrants may be sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of except pursuant to an effective registration statement
under the Securities Act or pursuant to an available exemption from the
registration requirements of the Securities Act, and in compliance with other
applicable state and federal securities Laws and (y) when issued at the Closing,
the Class B Common Interest, the Purchased Preferred Units, the SN Shares and
the Warrants and when issued upon exercise of the Warrants any SN Common Stock
so issued, will bear a legend substantially as set forth below:

 

“These securities have not been registered under the Securities Act of 1933, as
amended (the “Securities Act”), or the securities laws of any state or other
jurisdiction.  These securities may not be sold or offered for sale, pledged or
hypothecated except pursuant to an effective registration statement under the
Securities Act or pursuant to an exemption from registration thereunder, in each
case in accordance with all applicable securities laws of the states or other
jurisdictions, and in the case of a transaction exempt from registration, such
securities may only be transferred if the transfer agent for such securities has
receive documentation satisfactory to it that such transaction does not require
registration under the Securities Act.”

 

Section 4.07                Financing.

 

(a)                                At the Anadarko Closing (whether in a
Separate Closing or as part of a Dual Closing) and, if applicable, the
[redacted] Closing (whether in a Separate Closing or as part of a Dual Closing),
the Preferred Unit Purchaser will have all funds necessary for its payment of
the Preferred Unit Anadarko Funding Amount at the Anadarko Closing (whether in a
Separate Closing or as part of a Dual Closing) and the Preferred Unit [redacted]
Funding Amount at the [redacted] Closing (whether in a Separate Closing or as
part of a Dual Closing), in each case in accordance with this Agreement, and for
all other actions necessary for GSO Associates and the Preferred Unit Purchaser
to consummate the transactions contemplated in this Agreement and to perform its
obligations hereunder. Each of GSO Associates and the Preferred Unit Purchaser
understands that its obligations to consummate the transactions contemplated by
this Agreement (including the payment of all amounts when due) are not subject
to the availability to GSO Associates or the Preferred Unit Purchaser of any
financing or funding.

 

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(b)                                At the Effective Date, the Preferred Unit
Purchaser delivered to SN and the Partnership a true, complete and correct copy
of each of the executed Equity Commitment Letters pursuant to which the
applicable investor party or parties thereto has or have committed, on the terms
and subject to the conditions set forth therein, to invest in Preferred Unit
Purchaser the cash amount set forth therein.

 

(c)                                 Neither of the Equity Commitment Letters has
been modified or amended and no modification or amendment is contemplated, and
the commitment thereunder has not been terminated, reduced, withdrawn or
rescinded in any respect and no such termination, reduction, withdrawal or
recession is contemplated.  There are no side letters or other Contracts or
arrangements related to the funding therein that contradicts or reduces the
obligations of the Affiliates of GSO thereunder to perform subject to the
conditions and on the terms set forth therein.  Each of the Equity Commitment
Letters is in full force and effect and is the legal, valid, binding and
enforceable obligations of Preferred Unit Purchaser and each of the other
parties thereto, as the case may be.  There are no conditions precedent or other
contingencies related to the funding of the full amount (or any portion) except
as set forth in the Equity Commitment Letters and this Agreement.  No event has
occurred which, with or without notice, lapse of time or both, could reasonably
be expected to constitute a default or breach on the part of Preferred Unit
Purchaser or any other party thereto under either of the Equity Commitment
Letters.  The Preferred Unit Purchaser has not incurred any obligation,
commitment, restriction or other liability of any kind, and is not contemplating
or aware of any obligation, commitment, restriction or other liability of any
kind, in either case which would impair or adversely affect such resources,
funds or capabilities.  The Equity Commitment Letters designate SN as an
intended third party beneficiary thereof who may enforce the rights of Preferred
Unit Purchaser pursuant to such Equity Commitment Letter as if each SN was a
party thereto.  All commitments and other fees, if any, required to be paid
under the Equity Commitment Letters prior to the Effective Date have been paid
in full.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SN

 

Except as otherwise expressly limited to a specific date herein, as of the
Effective Date, the Anadarko Closing Date, and if the [redacted] Closing
(whether in a Separate Closing or as part of a Dual Closing) occurs, the
[redacted] Closing Date, SN represents and warrants to the Partnership, the
General Partner, GSO Associates and the Preferred Unit Purchaser as follows:

 

Section 5.01                Existence.

 

(a)                                SN is duly organized and validly existing as
a corporation and in good standing under the Laws of its state of formation,
with all necessary power and authority to own, lease and operate its properties
and to conduct its business as currently conducted, and is duly registered or
qualified as a foreign corporation, as the case may be, for the transaction of
business under the Laws of each jurisdiction in which the character of the
business conducted by it or the nature or location of the properties owned or
leased by it makes such registration or qualification necessary, except where
the failure to be so qualified, in good standing or have such power or authority
would not, individually or in the aggregate, have a material adverse effect on
SN.  SN has all requisite corporate power and authority to execute and deliver
this Agreement

 

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and the other Basic Documents to which it is or will be a party and to perform
its obligations hereunder and thereunder.

 

(b)                                SN GP Member is duly organized and validly
existing as a limited liability company and in good standing under the Laws of
its state of formation, with all necessary power and authority to own properties
and to conduct its business as currently conducted.

 

(c)                                 Common Unit Purchaser is duly organized and
validly existing as a limited liability company and in good standing under the
Laws of its state of formation, with all necessary power and authority to own
properties and to conduct its business as currently conducted.

 

Section 5.02                Authorization, Enforceability.  Each of SN, SN GP
Member and Common Unit Purchaser has all necessary legal power and authority to
enter into, deliver and perform its obligations under the Basic Documents to
which it is or will be a party.  The execution, delivery and performance by SN,
SN GP Member and Common Unit Purchaser of the Basic Documents and the
consummation by it of the transactions contemplated hereby and thereby have been
or, when executed, will be duly and validly authorized by all necessary legal
action, and no further consent or authorization of SN, SN GP Member or Common
Unit Purchaser is required.  The Basic Documents to which SN, SN GP Member or
Common Unit Purchaser, as the case may be, is or will be a party have been or
will be duly executed and delivered by SN, SN GP Member and/or Common Unit
Purchaser, as the case may be, and constitute or, when executed, will constitute
the legal, valid and binding obligations of SN, SN GP Member or Common Unit
Purchaser, as the case may be, except or the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws relating to or affecting creditors’ rights generally
and by general principles of equity and except as the rights to indemnification
may be limited by applicable Law (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

 

Section 5.03                No Conflicts.  None of (a) the execution, delivery
and performance by SN, SN GP Member or Common Unit Purchaser of the Basic
Documents to which it is or will be a party or (b) the consummation of the
transactions contemplated hereby or thereby (i) constitutes or will constitute a
violation of the other organizational documents of SN, SN GP Member or Common
Unit Purchaser, (ii) constitutes or will constitute a breach or violation of, or
a default (or an event which, with notice or lapse of time or both, would
constitute such a default) under, the SN Credit Agreement or any indenture or
any other agreement pertaining to indebtedness to which SN or any of its
Subsidiaries is a party or any Contract to which SN is a party or by which any
of them or any of their respective properties may be bound or (iii) violates or
will violate any statute, Law, Permit or regulation or any order, judgment,
decree or injunction of any court or Governmental Authority or body having
jurisdiction over SN, SN GP Member or Common Unit Purchaser or any of their
respective properties in a proceeding to which any of them or their property is
or was a party, except, in cases of clauses (ii) and (iii) above, for any such
conflict, breach, violation or default that would not, individually or in the
aggregate, have a material adverse effect on SN.

 

Section 5.04                Approvals.    Except as set forth on Schedule 5.04,
no authorization, consent, approval, waiver, license, qualification or written
exemption from, nor any filing,

 

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declaration, qualification or registration with, any Governmental Authority or
any other Person is required in connection with the execution, delivery or
performance by SN, SN GP Member or Common Unit Purchaser of any of the Basic
Documents to which it is a party, other than consents, waivers, licenses,
qualifications, exemptions, filings, declarations, qualifications or
registrations that have been or prior to Closing are obtained or made.  Prior to
the Anadarko Closing, and if applicable, the [redacted] Closing, SN shall use
its commercially reasonable efforts to take, or shall cause the SN Parties to
take, all actions necessary to cause the conditions to Closing set forth in
Section 2.06 to be satisfied at and as of the Closing.

 

Section 5.05                Certain Fees.  No fees or commissions are or will be
payable by SN GP Member or the Common Unit Purchaser to brokers, finders or
investment bankers with respect to the purchase of any of the Common Unit
Purchaser’s Class A Common Interests or the Common Units or the consummation of
the transactions contemplated by this Agreement, in each case, for which any the
General Partner, the Partnership, or the Preferred Unit Purchaser may be liable.

 

Section 5.06                The SN Shares and the Warrants.  When issued to the
GSO Funds at the Anadarko Closing (whether in a Separate Closing or as part of a
Dual Closing), the SN Shares will be duly authorized, validly issued, fully paid
and nonassessable.  The offer and sale by SN of the Warrants to the GSO Funds
has been duly authorized by SN pursuant to its organizational documents and
applicable Law and, when issued and delivered to the GSO Funds in accordance
with the terms of this Agreement and the Warrant Agreement will be validly
issued, fully paid (to the extent required by applicable Law and the Warrant
Agreement), non-assessable and issued in compliance with all applicable Laws,
including securities Laws, and will be free and clear of any and all Liens and
restrictions on transfer, other than restrictions on transfer under the Warrant
Agreement or arising under applicable state and federal securities Laws. Neither
the execution, delivery and performance by SN of the Warrant Agreement or the
issuance of the SN Shares, the Warrants or SN Common Stock upon exercise of the
Warrants and compliances by SN with its objections under the Warrant Agreement
will, whether with or without the giving of notice, the passage of time or both,
require any consent, approval or notice under, or will constitute a breach or
violation of the organization documents of SN, conflict with or constitute a
material breach of, or default under, or result in the creation or imposition of
any Lien upon the property or assets of SN pursuant to any Contract to which SN
is a party, or result in a violation of any applicable material Law, judgment,
order, writ or decree of any Governmental Authority with jurisdiction over SN or
its assets.  The SN Common Stock to be issued upon exercise of the Warrant will,
when issued, be validly issued, fully paid and non-assessable.  The shares of SN
Common Stock subject to issuance upon exercise of the Warrant have been reserved
for issuance by SN and will be so reserved until the exercise in full of the
Warrant.  The holders of the outstanding Equity Interests of SN are not entitled
to subscribe for any of the Warrants or the SN Common Stock to be issued upon
exercise of the Warrants.  The GSO Funds will have the right on the terms and
subject to the conditions set forth in the Registration Rights Agreement to
require SN to register the SN Shares and the SN Common Stock subject to issuance
upon exercise of the warrants for resale on a registration statement to be filed
by SN with the Commission.

 

Section 5.07                Investment Company Status.  SN is not, and upon the
issuance and sale of the SN Shares and Warrants as herein contemplated will not
be, an “investment company” or an entity “controlled” by an “investment company”
as such terms are defined in the Investment

 

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Company Act of 1940, as amended, and the rules and regulations of the SEC
promulgated thereunder.

 

Section 5.08   Stock Exchange Listing and Reporting Requirements.  The SN Common
Stock is registered pursuant to Section 12(b) of the Exchange Act and is listed
on the New York Stock Exchange (the “NYSE”) and SN has taken no action designed
to, or likely to have the effect of, terminating the registration of the SN
Common Stock under the Exchange Act or delisting the SN Common Stock from the
NYSE, and SN has not received any notification that the Commission or the NYSE
is contemplating terminating such registration or listing.  Prior to the
Anadarko Closing, the SN Shares and the SN Common Stock subject to issuance upon
exercise of the Warrants will be approved for listing on the NYSE, subject only
to notice of official issuance.

 

Section 5.09                No Registration Required.  Assuming the accuracy of
the representations and warranties of the Preferred Unit Purchaser contained in
this Agreement and its compliance with the agreements set forth in this
Agreement, the sale and issuance at the Anadarko Closing of the SN Shares and
the Warrants pursuant to this Agreement (and, when issued, the issuance of SN
Common Stock upon exercise of the Warrant) is exempt from the registration
requirements of the Securities Act, and SN has not and, to the Knowledge of SN,
no authorized representative acting on behalf of any of SN has taken or will
take any action hereafter that would cause the loss of such exemption.   The
issuance and sale of the SN Shares and the Warrants and the issuance of SN
Common Stock upon exercise of the Warrants does not contravene the rules and
regulations of the NYSE.

 

Section 5.10                No Integration.      SN has not, directly or
indirectly through any representative, made any offers or sales of any security
or solicited any offers to buy any security that is or will be integrated with
the issuance and sale of the SN Shares or the Warrants in a manner that would
require the offer and sale of the SN Shares or the Warrants to be registered
under the Securities Act.

 

Section 5.11                Restricted Securities.   Except for possible
permitted transfers subject to the terms of (a) in the case of Class A Common
Interest, the GP LLC Agreement or (b) in the case of the Common Units, the
Partnership Agreement, SN GP Member is acquiring the Class A Common Interests
and Common Unit Purchaser is acquiring the Common Units for its own account, for
the purpose of investment only and not with a view to, or for sale in connection
with, any distribution thereof in violation of applicable securities Laws. Each
of SN GP Member and Common Unit Purchaser has such knowledge, sophistication and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment in (a), in the case of SN GP Member, the
Class A Common Interests and (b), in the case of Common Unit Purchaser, the
Common Units and is capable of bearing the economic risk of such investment.
Each of SN GP Member and Common Unit Purchaser is an “accredited investor” as
that term is defined in Rule 501 of Regulation D (without regard to
Rule 501(a)(4)) promulgated under the Securities Act. Each of SN GP Member and
Common Unit Purchaser acknowledges and understands that (a) (i), in the case of
SN GP Member, the acquisition of the Class A Common Interests and (ii), in the
case of Common Unit Purchaser, the acquisition of the Common Units, have not
been registered under the Securities Act in reliance on an exemption therefrom
and that each of the General Partner and the Partnership is relying upon the
truth and accuracy of, and SN

 

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GP Member’s and Common Unit Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of SN GP Member and
Common Unit Purchaser set forth herein in order to determine the availability of
such exemptions and the eligibility of SN GP Member to acquire the Class A
Common Interests and Common Unit Purchaser to acquire the Common Units; (b) the
Class A Common Interests and the Common Units will, upon such acquisition, be
characterized as “restricted securities” under state and federal securities
Laws. Each of SN GP Member and Common Unit Purchaser further acknowledges and
understands that the Class A Common Interests and the Common Units (x) may not
be sold, transferred, offered for sale, pledged, hypothecated or otherwise
disposed of except pursuant to an effective registration statement under the
Securities Act or pursuant to an available exemption from the registration
requirements of the Securities Act, and in compliance with other applicable
state and federal securities Laws and the Warrants and (y) will bear a legend
substantially as set forth below.

 

“These securities have not been registered under the Securities Act of 1933, as
amended (the “Securities Act”), or the securities laws of any state or other
jurisdiction.  These securities may not be sold or offered for sale, pledged or
hypothecated except pursuant to an effective registration statement under the
Securities Act or pursuant to an exemption from registration thereunder, in each
case in accordance with all applicable securities laws of the states or other
jurisdictions, and in the case of a transaction exempt from registration, such
securities may only be transferred if the transfer agent for such securities has
receive documentation satisfactory to it that such transaction does not require
registration under the Securities Act.”

 

Section 5.12                Litigation.  As of the Effective Date, there are no,
and as of the Anadarko Closing (whether in a Separate Closing or as part of a
Dual Closing), and if occurring, the [redacted] Closing (whether in a Separate
Closing or as part of a Dual Closing), there will not be any, legal or
governmental proceedings pending to which SN, SN GP Member or Common Unit
Purchaser is a party that challenges the validity of any of the Basic Documents
or the right of SN, SN GP Member or Common Unit Purchaser to enter into any of
the Basic Documents to which it is or will be a party or to consummate the
transactions contemplated hereby or thereby and, to the Knowledge of SN, no such
proceedings are threatened by any Governmental Authorities or others.

 

Section 5.13                Solvency.   As of the Effective Date and giving pro
forma effect to the “Closing” (as defined in the APC/KM PSA) and the Anadarko
Closing (whether in a Separate Closing or as part of a Dual Closing) and the
consummation of the transactions contemplated by this Agreement and the Basic
Documents and the APC/KM PSA and to the [redacted] Closing (assuming [redacted]
exercises its tag right and delivers the election notice), assuming (a) such
transactions were to occur at or concurrently with the Effective Date and
concurrently with the funding by the Partnership, SN Maverick and Blackstone
Newco of the “Purchase Price” (as defined in the APC/KM PSA) and that
(b) (i) Anadarko and Blackstone Newco have each satisfied the conditions to SN
Maverick and the Partnership’s obligations to consummate the transactions
contemplated by the APC/KM PSA and that the representations and warranties of
Anadarko and Blackstone Newco set forth in the APC/KM PSA are accurate (for such
purposes, such representations and warranties shall be true and correct without
giving effect to any

 

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knowledge, materiality or “material adverse effect” qualification or
expectation), (ii) the Preferred Unit Purchaser, GSO Associates and the GSO
Funds have each satisfied the conditions to the SN Parties’ obligations to
consummate the transactions contemplated by this Agreement and that the
representations and warranties of the Preferred Unit Purchaser, GSO Associates
and the GSO Funds set forth in this Agreement are accurate (for such purposes,
such representations and warranties shall be true and correct without giving
effect to any knowledge, materiality or “material adverse effect” qualification
or expectation) and (iii) each of Anadarko, Blackstone Newco, GSO, the Preferred
Unit Purchaser, GSO Associates and the GSO Funds, as applicable, have complied
with the terms of any other Basic Document to which it is a party and that any
representations or warranties made by Anadarko, Blackstone Newco, GSO, the
Preferred Unit Purchaser, GSO Associates and the GSO Funds, as applicable, set
forth in such Basic Document are accurate (for such purposes, such
representations and warranties shall be true and correct without giving effect
to any knowledge, materiality or “material adverse effect” qualification or
expectation), (x) the amount of the “fair saleable value” of the assets of SN
will, as of such time, exceed the sum of (A) the value of all “liabilities of
such SN, including contingent and other liabilities,” as of such time, as such
quoted terms are generally determined in accordance with applicable laws
governing determinations of the insolvency of debtors, and (B) the amount that
will be required to pay the probable liabilities of SN, as of such date, on its
existing debts (including contingent and other liabilities) as such debts become
absolute and mature, (y) SN will not have, as of such date, an unreasonably
small amount of capital for the operation of the businesses in which it is
engaged or proposed to be engaged following such date, and (z) SN will be able
to pay its liabilities, as of such date, including contingent and other
liabilities, as they mature. For purposes of this definition, “not have an
unreasonably small amount of capital for the operation of the businesses in
which it is engaged or proposed to be engaged” and “able to pay its liabilities,
as of such date, including contingent and other liabilities, as they mature”
means that SN will be able to generate enough cash from operations, asset
dispositions or refinancing, or a combination thereof, to meet its obligations
as they become due.

 

Section 5.14                No Obligation to be Guarantor or Restricted
Subsidiary.    As of the Effective Date, the Anadarko Closing Date and, if
occurring, the [redacted] Closing Date, neither the General Partner nor the
Partnership or any of its Subsidiaries is required, or upon the Anadarko Closing
and if applicable, the [redacted] Closing, the consummation of the transactions
contemplated hereby and by the other Basic Documents and the consummation by the
Partnership of the transactions to be effected in connection with the “Closing”
(as that term is defined in the APC/KM PSA) and if applicable, the consummation
by the Partnership of the transaction to be effected in connection with the
closing of the [redacted] PSA, will be required, to become a guarantor or a
Restricted Subsidiary under the SN Credit Agreement (or any amendment or
replacement thereof), or under any indenture or other agreement pertaining to
indebtedness of SN or any of its Subsidiaries (other than the General Partner or
the Partnership or any of its Subsidiaries).  SN shall have taken, or caused to
be taken, all actions necessary or appropriate to cause each of the General
Partner and the Partnership to constitute an Unrestricted Subsidiary of SN and
its Subsidiaries (other than the General Partner or the Partnership or any of
its Subsidiaries) under the SN Credit Agreement (or any amendment or replacement
thereof), and under any indenture or other agreement pertaining to indebtedness
of SN or any of its Subsidiaries (other than the General Partner or the
Partnership or any of its Subsidiaries).

 

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ARTICLE VI

INDEMNIFICATION, COSTS AND EXPENSES

 

Section 6.01                Indemnification.

 

(a)                                SN agrees to indemnify and hold harmless the
Preferred Unit Purchaser and each of its officers, managers, directors,
employees, Affiliates, members, partners, stockholders, and agents, and the
successors to and permitted assigns of the foregoing (and their respective
officers, managers, directors, employees, Affiliates (including GSO or its
Affiliates or any fund or account managed, advised or sub-advised by GSO or its
Affiliates, members, partners, stockholders, agents and successors and permitted
assigns and solely for purposes of this Section 6.01(a), The Blackstone Group,
L.P. and all private equity funds, portfolio companies, parallel investment
entities, and alternative investment entities owned, managed, or Controlled by
The Blackstone Group, L.P. or its Affiliates and any officer, director,
employee, member, partner or stockholder of The Blackstone Group, L.P. or its
Affiliates that are not part of the credit-related businesses of The Blackstone
Group L.P.) (collectively, the “Purchaser Indemnified Parties”) from and against
any and all Damages incurred or suffered by any of the Purchaser Indemnified
Parties as a result of or arising out of (i) any failure of any representation
or warranty in Article III or Article V to be true and correct and (ii) any
breach of a covenant or agreement, or failure to perform or observe any duty,
made or to be performed by the SN Parties pursuant to this Agreement.  Without
duplication of any Damages paid under the preceding sentence, if this Agreement
is terminated pursuant to Section 7.01(b) or Section 7.01(c), and the
termination of the APC/KM PSA referred to in Section 7.01(b) or the [redacted]
PSA referred to in Section 7.01(c) was not the result of a breach by the
Preferred Unit Purchaser of its obligations under Section 2.01(a),
Section 2.01(b), Section 2.02(a) or Section 7.01(e), as applicable, or the
APC/KM PSA is terminated pursuant to Section 7.1(c) thereof and such termination
of the APC/KM PSA is not the result of a breach by the Preferred Unit Purchaser
of its obligation under Section 2.01(a) or Section 2.01(b) and any Purchaser
Indemnified Parties suffers or incurs Damages (including unreimbursed
out-of-pocket expenses incurred in due diligence or negotiating the Basic
Documents) as a result of a claim brought by a third-party (other than The
Blackstone Group, L.P. and all private equity funds, portfolio companies,
parallel investment entities, and alternative investment entities owned,
managed, or Controlled by The Blackstone Group, L.P. or its Affiliates and any
officer, director, employee, member, partner or stockholder of The Blackstone
Group, L.P. or its Affiliates that are not part of the credit-related businesses
of The Blackstone Group L.P.) against the Purchaser Indemnified Parties in
connection with such termination, then SN shall indemnify and hold harmless the
Purchaser Indemnified Parties for all such Damages, but in no event shall the
aggregate amount payable by SN pursuant to this sentence exceed the Preferred
Unit Commitment Amount; provided that any such payment shall not be in
duplication of any amounts received by The Blackstone Group, L.P. and all
private equity funds, portfolio companies, parallel investment entities, and
alternative investment entities owned, managed, or Controlled by The Blackstone
Group, L.P. or its Affiliates and any officer, director, employee, member,
partner or stockholder of The Blackstone Group, L.P.  or its Affiliates that are
not part of the credit-related businesses of The Blackstone Group L.P.
independently of any Purchaser Indemnified Party’s claims hereunder

 

(b)                                The Preferred Unit Purchaser agrees to
indemnify and hold harmless the SN Parties and each of their respective
officers, managers, directors, employees, Affiliates,

 

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members, partners, stockholders and agents and the successors and permitted
assigns to the foregoing (and their respective officers, managers, directors,
employees, Affiliates, members, partners, stockholders, agents, and successors
and permitted assigns) (collectively, the “Common Indemnified Parties”) from and
against any and all Damages incurred or suffered by a Common Indemnified Party
as a result of or arising out of (i) any failure of any representation or
warranty in Article IV to be true and correct or (ii) any breach of a covenant
or agreement, or failure to perform or observe any duty, made or to be performed
by either Purchaser pursuant to this Agreement.  Without duplication of any
Damages paid under the preceding sentence, if (A) the Preferred Unit Purchaser
breaches its obligation under Section 2.01(a) to contribute the Preferred Unit
Anadarko Funding Amount at the Anadarko Closing (whether in a Separate Closing
or as part of a Dual Closing) and any Common Indemnified Parties suffer or incur
Damages as a result thereof, including, without limitation, the loss of all or
any portion of the Deposit or (B) the Preferred Unit Purchaser breaches its
obligation under Section 2.02(a) to contribute the Preferred Unit [redacted]
Funding Amount at the [redacted] Closing (whether in a Separate Closing or as
part of a Dual Closing) and any Common Indemnified Parties suffer or incur
Damages as a result thereof, including, without limitation, the loss of all or
any portion of any deposit due under the [redacted] PSA, and in the case of
(A) or (B), any Damages actually incurred by the Common Indemnified Parties to
Anadarko or Blackstone Newco pursuant to the APC/KM PSA and/or the [redacted]
PSA, as applicable, and all reasonable, out-of-pocket third-party costs and
expenses incurred by such Common Indemnified Parties in connection with any
resulting breach of the APC/KM PSA and/or [redacted] PSA, as applicable, then
the Preferred Unit Purchaser shall indemnify and hold harmless the Common
Indemnified Parties for all such Damages but in no event shall the aggregate
amount payable by the Preferred Unit Purchaser pursuant to this sentence exceed
the excess, if any, of the Preferred Unit Commitment Amount over any amounts
paid to the Partnership or SN under the Equity Commitment Letter.

 

Section 6.02                Indemnification Procedure.

 

(a)                                A claim for indemnification for any matter
not involving a third-party claim may be asserted by notice from the party that
may be entitled to indemnification pursuant to this Article VI (the “Indemnified
Party”) to the party that may be obligated to provide indemnification pursuant
to this Article VI (the “Indemnifying Party”); provided, however, that failure
to so notify the Indemnifying Party shall not release, waive or otherwise affect
the Indemnifying Party’s obligations with respect thereto, except to the extent
that the Indemnifying Party can demonstrate actual loss and prejudice as a
result of such failure.  The notice of claim shall state in reasonable detail
the basis of the claim for indemnification.

 

(b)                                If any legal proceedings shall be instituted
or any claim or demand shall be asserted by any third party in respect of which
indemnification may be sought under Section 6.01(a) or Section 6.01(b) hereof (a
“Third Party Claim”), the Indemnified Party shall promptly give written notice
of the assertion of the Third Party Claim to the Indemnifying Party; provided,
however, that failure of the Indemnified Party to so notify the Indemnifying
Party shall not release, waive or otherwise affect the Indemnifying Party’s
obligations with respect thereto, except to the extent that the Indemnifying
Party can demonstrate actual loss and prejudice as a result of such failure. 
Subject to the provisions of this Section 6.02, the Indemnifying Party shall
have the right, at its sole expense, to be represented by counsel of its choice,
which must be reasonably satisfactory to the Indemnified Party, and to defend
against, negotiate, settle or

 

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otherwise deal with any Third Party Claim which relates to any losses
indemnified against by it hereunder; provided that, in order to defend against,
negotiate, settle or otherwise deal with any such Third Party Claim, the
Indemnifying Party must first acknowledge in writing to the Indemnified Party
its unqualified obligation to indemnify the Indemnified Party as provided
hereunder and provide to the Indemnified Party reasonable evidence that the
Indemnifying Party has reasonably sufficient financial resources to enable it to
fulfill its obligations under this Article VI.  Notwithstanding the preceding
sentence, the Indemnifying Party shall not have the right to defend against,
negotiate, settle, or otherwise deal with any Third Party Claim (i) if the Third
Party Claim is not solely for monetary damages (except where any non-monetary
relief being sought is merely incidental to a primary claim for monetary
damages), (ii) if the Third Party Claim involves criminal allegations, or
(iii) if the Indemnifying Party fails to prosecute or defend, actively and
diligently, the Third Party Claim.  If the Indemnifying Party elects to defend
against, negotiate, settle or otherwise deal with any Third Party Claim, it
shall within fifteen (15) days of the Indemnified Party’s written notice of the
assertion of such Third Party Claim (or sooner if the nature of the Third Party
Claim so requires) notify the Indemnified Party of its intent to do so; provided
that, the Indemnifying Party must conduct its defense of the Third Party Claim
actively and diligently thereafter in order to preserve its rights in this
regard.  If the Indemnifying Party elects not to defend against, negotiate,
settle, or otherwise deal with any Third Party Claim, fails to notify the
Indemnified Party of its election as herein provided or contests its obligation
to indemnify the Indemnified Party for losses relating to such Third Party Claim
under this Agreement, the Indemnified Party may defend against, negotiate,
settle, or otherwise deal with such Third Party Claim.  If the Indemnified Party
defends any Third Party Claim, then the Indemnifying Party shall reimburse the
Indemnified Party for the expenses of defending such Third Party Claim upon
submission of periodic bills, which reimbursement shall be made within thirty
(30) days of the applicable submission. If the Indemnifying Party shall assume
the defense of any Third Party Claim, the Indemnified Party may participate, at
his, her or its own expense, in the defense of such Third Party Claim; provided,
further, that such Indemnified Party shall be entitled to participate in any
such defense with separate counsel at the expense of the Indemnifying Party if
(i) so requested by the Indemnifying Party to participate or (ii) in the
reasonable opinion of counsel to the Indemnified Party a conflict or potential
conflict exists between the Indemnified Party and the Indemnifying Party that
would make such separate representation advisable; provided further that the
Indemnifying Party shall not be required to pay for more than one such counsel
(plus any appropriate local counsel) for all Indemnified Parties in connection
with any single Third Party Claim.  Each party hereto shall provide reasonable
access to each other party to such documents and information as may reasonably
be requested in connection with the defense, negotiation or settlement of any
Third Party Claim. Notwithstanding anything in this Section 6.02 to the
contrary, the Indemnifying Party shall not enter into any settlement of any
Third Party Claim without the written consent of the Indemnified Party if such
settlement (i) would create any liability of the Indemnified Party for which the
Indemnified Party is not entitled to indemnification hereunder, (ii) would
provide for any injunctive relief or other non-monetary obligation affecting the
Indemnified Party, or (iii) does not include an unconditional release of the
Indemnified Party from all liability in respect of the Third Party Claim.

 

(c)                                 After any final decision, judgment or award
shall have been rendered by a Governmental Authority of competent jurisdiction
and the expiration of the time in which to appeal therefrom, or a settlement
shall have been consummated, or the Indemnified Party and the

 

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Indemnifying Party shall have arrived at a mutually binding agreement, in each
case with respect to a Third Party Claim, the Indemnified Party shall forward to
the Indemnifying Party notice of any sums due and owing by the Indemnifying
Party pursuant to this Agreement with respect to such matter and the
Indemnifying Party shall pay all of such remaining sums so due and owing to the
Indemnified Party by wire transfer of immediately available funds within five
(5) Business Days after the date of such notice.

 

(d)                                Notwithstanding anything to the contrary in
this Agreement, the Preferred Unit Purchaser shall not have any liability in the
aggregate for any Damages arising from or relating to this Agreement that
exceeds the excess, if any, of the Preferred Unit Commitment Amount minus any
amounts funded to the Partnership pursuant to the Equity Commitment Letters.

 

(e)                                 Notwithstanding anything to the contrary in
this Article VI or any other provision of this Agreement, in no event shall the
Preferred Unit Purchaser or SN have any liability or indemnification obligation
to any other party for punitive, consequential, special, indirect, diminution in
value, loss of profit, penalty or other indirect or unforeseen Damages, whether
in law or equity, arising from the performance of this Agreement or the
transactions contemplated hereby; provided that if the Preferred Unit Purchaser
breaches its obligations under Section 2.01(a) and Section 2.06(d)(i) to
contribute the Preferred Unit Anadarko Funding Amount at the Anadarko Closing
and/or the Preferred Unit Purchaser breaches its obligations under
Section 2.02(a) and Section 2.06(d)(v) to contribute the Preferred Unit
[redacted] Funding Amount at the [redacted] Closing, and any Common Indemnified
Parties suffer or incur Damages as a result thereof, including, without
limitation, the loss of all or any portion of the Deposit or the deposit under
the [redacted] PSA, if any, and any damages payable to Anadarko or Blackstone
Newco as a result thereof, then the loss of the Deposit and/or the deposit under
the [redacted] PSA, if any, and any Damages actually incurred by the Common
Indemnified Parties to Anadarko or Blackstone Newco pursuant to the APC/KM PSA
or the [redacted] PSA, as applicable, in respect thereof shall be recoverable by
the Common Indemnified Parties subject to the maximum specified in
Section 6.02(d) above.

 

Section 6.03                Survival.    All of the Fundamental Representations
shall survive the execution and delivery of this Agreement and the consummation
of the Closing for a period equal to the statute of limitations applicable to
breach of contract under Delaware law.  All of the representations and
warranties other than the Fundamental Representations set forth in Articles III,
IV and V shall survive the execution and delivery of this Agreement, and the
consummation of the Closing for a period ending on the one (1) year anniversary
of the Closing; provided that any claim made prior to such date shall survive
the one (1) year anniversary of the Closing until finally determined in
accordance with this Article VI. All covenants contemplated herein to be
performed at or prior to the Closing shall survive the Closing for a period
equal to the statute of limitations applicable to breach of contract under
Delaware law.

 

ARTICLE VII

TERMINATION

 

Section 7.01                Termination.  This Agreement may be terminated at
any time prior to the Closing Date as follows:

 

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(a)                                by mutual written consent of the parties
hereto;

 

(b)                                by any party hereto, if the APC/KM PSA shall
have been validly terminated in accordance with its terms;

 

(c)                                 by any party hereto, solely with respect to
the obligations under this Agreement related to actions to be taken pursuant to
Section 2.02 and Section 2.06(d)(v), if the [redacted] PSA shall have been
validly terminated in accordance with its terms;

 

(d)                                by either Purchaser if the “Closing” (as
defined in the APC/KM PSA) has not occurred on or before March 31, 2017;

 

(e)                                 by the Preferred Unit Purchaser if at any
time the representations and warranties regarding the SN Parties contained in
this Agreement shall fail to be true and correct or an SN Party shall at any
time have failed to perform and comply with all agreements and covenants of such
Person contained in this Agreement requiring performance or compliance prior to
such time, and in either case, such failure (i) shall be such that, if not
cured, the conditions set forth in Section 2.07(d) or Section 2.07(h) would not
be fulfilled prior to or on either the Anadarko Closing Date or the [redacted]
Closing Date and (ii) if capable of being cured, shall not have been cured
within 10 Business Days of the receipt of written notice thereof by such SN
Party from either Purchaser; and

 

(f)                                  by any SN Party if at any time the
representations and warranties regarding the Purchasers contained in this
Agreement shall fail to be true and correct or either Purchaser shall at any
time have failed to perform and comply with all agreements and covenants of such
Person contained in this Agreement requiring performance or compliance prior to
such time, and in either case, such failure (i) shall be such that, if not
cured, the conditions set forth in Section 2.08(c) or Section 2.08(e) would not
be fulfilled prior to or on the Anadarko Closing Date or the [redacted] Closing
Date and (ii) if capable of being cured, shall not have been cured within 10
Business Days of the receipt of written notice thereof by such Purchaser from
any SN Party.

 

Section 7.02                Notice of Termination.     Either Purchaser may
exercise its right to terminate this Agreement by giving written notice thereof
from time to time to the SN Parties specifying the basis for such Purchaser’s
termination.  Each SN Party may exercise its right to terminate this Agreement
by giving written notice thereof from time to time to the Purchasers specifying
the basis for such SN Party’s termination.

 

Section 7.03                Effect of Termination.  If a termination of this
Agreement pursuant to the provisions of this Article VII shall occur, this
Agreement shall become void and have no effect, and there shall be no further
liability on the part of the Preferred Unit Purchaser, the GSO Associates, the
Common Unit Purchaser, the Partnership, the General Partner, the SN GP Member or
SN to any Person in respect hereof, except that Article VIII shall survive any
such termination; provided, however, that no such termination shall relieve any
party of any liability resulting from any breach of this Agreement by such party
prior to the time of such termination. In the event this Agreement is terminated
by any SN Party pursuant to Section 7.01(f), the Preferred Unit Purchaser shall
immediately remit to SN the Commitment Fee by wire transfer of immediately
available funds.

 

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Section 7.04                Termination of Commitment Related to [redacted]
Closing.   If the [redacted] Closing (whether in a Dual Closing or Separate
Closing) has not occurred by midnight, Houston, Texas time on March 31, 2017,
the Preferred Unit Commitment Amount shall be reduced to $500.0 million unless
the Preferred Unit Purchaser elects in its sole discretion for the Preferred
Unit Commitment Amount to remain at $800.0 million for such additional time as
the Preferred Unit Purchaser determines to be appropriate.

 

ARTICLE VIII

MISCELLANEOUS

 

Section 8.01                Expenses.   All costs and expenses, including fees
and disbursements of counsel, financial advisors and accountants, incurred in
connection with the preparation, negotiation and due diligence of this Agreement
or the other Basic Documents and the transactions contemplated thereby shall be
paid by the party incurring such costs and expenses unless otherwise expressly
stated in such Basic Document, provided that (i) if the Anadarko Closing occurs,
then the Partnership shall reimburse GSO and its Affiliates for all of their
reasonable, documented, third-party out-of-pocket costs and expenses incurred in
connection with the transactions contemplated hereby and thereby and (ii) if the
Anadarko Closing does not occur, then SN shall reimburse GSO and its Affiliates
for all of their reasonable, documented, third-party out-of-pocket costs and
expenses incurred in connection with the transactions contemplated hereby and
thereby prior to termination of this Agreement; provided that from and after the
Effective Date GSO shall promptly notify the Partnership and SN at such time as
the costs and expenses for which GSO intends to seek reimbursement pursuant to
this Section 8.01 equal increments of $250,000; and provided further that GSO
and its Affiliates will not entitled to any such reimbursement if this Agreement
is terminated by the Common Unit Purchaser pursuant to Section 7.01(f).

 

Section 8.02                Interpretation.   The provision of a table of
contents, the division of this Agreement into Articles, Sections and other
subdivisions and the insertion of headings are for convenience of reference only
and shall not affect or be utilized in construing or interpreting this
Agreement.  All references in this Agreement to Exhibits, Schedules, Appendices,
Articles, Sections, subsections, clauses and other subdivisions refer to the
corresponding Exhibits, Schedules, Appendices, Articles, Sections, subsections,
clauses and other subdivisions of or to this Agreement unless expressly provided
otherwise.  The words “this Agreement,” “herein,” “hereby,” “hereunder” and
“hereof,” and words of similar import, refer to this Agreement as a whole and
not to any particular Article, Section, subsection, clause or other subdivision
unless expressly so limited.  The words “this Article,” “this Section,” “this
subsection,” “this clause,” and words of similar import, refer only to the
Article, Section, subsection and clause hereof in which such words occur.  The
word “including” (in its various forms) means including without limitation.  All
references to “$” or “dollars” shall be deemed references to the lawful currency
of the United States of America.  Each accounting term not defined herein will
have the meaning given to it under GAAP as interpreted as of the date of this
Agreement.  Unless expressly provided to the contrary, the word “or” is not
exclusive.  Pronouns in masculine, feminine or neuter genders shall be construed
to state and include any other gender, and words, terms and titles (including
terms defined herein) in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise requires.  Appendices,
Exhibits and Schedules referred to herein are attached to and by this reference
incorporated herein for all purposes.

 

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Reference herein to any federal, state, local or foreign Law shall be deemed to
also refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise.  The words “day” or “days” shall mean calendar day,
unless denoted as a Business Day.  The words “will” and “will not” are
expressions of command and not merely expressions of future intent or
expectation.  When used in this Agreement, the word “either” shall be deemed to
mean “one or the other”, not “both”.  Unless otherwise noted, references herein
to a “party” are references to the applicable party to this Agreement.

 

Section 8.03                Amendments and Waivers.

 

(a)                                Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party, or in the case of a waiver,
by the party against whom the waiver is to be effective.  For the purposes of
clarity, no signature or consent of any third-party beneficiary to any provision
of Article VI shall be required in order to amend or waive any provision of
Article VI.

 

(b)                                No failure or delay by any party in
exercising any right, power or privilege hereunder will operate as a waiver
thereof nor will any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies herein provided will be cumulative and not
exclusive of any rights or remedies hereunder, under any other Basic Document,
or at law or in equity; accordingly, no exercise of any right or remedy shall be
construed as an election of remedies by any party.

 

Section 8.04                Binding Effect.   This Agreement shall be binding
upon the parties and their respective successors and permitted assigns, and
shall remain in full force and effect after the Anadarko Closing and if
occurring, the [redacted] Closing.  Except as expressly provided in this
Agreement, this Agreement shall not be construed so as to confer any right or
benefit upon any Person other than the parties to this Agreement and their
respective successors and permitted assigns.

 

Section 8.05                Communications.  All notices and demands provided
for hereunder shall be in writing and shall be given by registered or certified
mail, return receipt requested, telecopy, air courier guaranteeing overnight
delivery or personal delivery to the following addresses

 

(a)                                If to GSO Associates or the Preferred Unit
Purchaser:

 

c/o GSO Capital Partners

GSO ST Holdings LP

1111 Bagby Street, #2050

Houston, Texas  77002

Attention:  Robert Horn

Email:  robert.horn@gsocap.com

 

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

 

44

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c/o GSO Capital Partners

 

345 Park Avenue, 31st Floor

 

New York, New York 10154

 

Email:

GSO Legal@gsocap.com

 

GSOValuationsGroup@gsocap.com

 

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

 

Andrews Kurth Kenyon LLP

600 Travis Street, Suite 4200

Houston, Texas  77002

Attention:  G. Michael O’Leary

Jon Daly

Facsimile: (713) 220-4285

Email:  moleary@akllp.com

jondaly@andrewskurth.com

 

(b)                                If to an SN Party:

 

1000 Main Street, Suite 3000

Houston, Texas 77002

Attention: Gregory Kopel

Email: gkopel@sanchezog.com

 

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

 

Kirkland & Ellis LLP

600 Travis Street, Suite 3300

Houston, Texas  77002

Attention:  John D. Pitts

Email:  john.pitts@kirkland.com

 

or to such other address as the parties hereto may designate in writing.  All
notices and communications shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; upon actual receipt if sent by
certified or registered mail, return receipt requested, or regular mail, if
mailed; upon actual receipt of the overnight courier copy, if sent via
facsimile; and upon actual receipt when delivered to an air courier guaranteeing
overnight delivery.

 

Section 8.06                Entire Agreement; Integrated Transaction.    This
Agreement, the other Basic Documents and the other agreements and documents
expressly referred to herein are intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.  This Agreement, the other Basic Documents
and the other agreements and documents expressly referred to herein or therein
supersede all prior agreements and understandings between the parties with
respect to such subject matter.  Each of the parties hereto acknowledges and
agrees that in executing this Agreement (i) the intent of the

 

45

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parties is this Agreement and the other Basic Documents shall constitute an
unseverable and single agreement of the parties with respect to the transactions
contemplated hereby and thereby, (ii) it waives, on behalf of itself and each of
its Affiliates, any claim or defense based upon the characterization that this
Agreement and the other Basic Documents are anything other than a true single
agreement relating to such matters and (iii) the matters set forth in this
Section 8.06 constitute a material inducement to enter into this Agreement and
the other Basic Documents and to consummate the transactions contemplated hereby
and thereby.  Each of the parties hereto stipulates and agrees (i) not to
challenge the validity, enforceability or characterization of this Agreement and
the other Basic Documents as a single, unseverable instrument pertaining to the
matters that are the subject of such agreements, (ii) this Agreement and the
other Basic Documents shall be treated as a single integrated and indivisible
agreement for all purposes, including the bankruptcy of any party and (iii) not
to assert or take or omit to take any action inconsistent with the agreements
and understandings set forth in this Section 8.06.

 

Section 8.07                Governing Law; Submission to Jurisdiction.   This
Agreement, and all claims or causes of action (whether in contract or tort) that
may be based upon, arise out of or relate to this Agreement or the negotiation,
execution or performance of this Agreement (including any claim or cause of
action based upon, arising out of or related to any representation or warranty
made in or in connection with this Agreement), will be construed in accordance
with and governed by the laws of the State of Delaware without regard to
principles of conflicts of laws.  Any action against any party relating to the
foregoing shall be brought in any federal or state court of competent
jurisdiction located within the State of Delaware, and the parties hereto hereby
irrevocably submit to the non-exclusive jurisdiction of any federal or state
court located within the State of Delaware over any such action.  The parties
hereby irrevocably waive, to the fullest extent permitted by applicable Law, any
objection which they may now or hereafter have to the laying of venue of any
such dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute.  Each of the parties hereto agrees that a judgment
in any such dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Law.

 

Section 8.08                Waiver of Jury Trial.   THE PARTIES TO THIS
AGREEMENT EACH HEREBY WAIVES, AND AGREES TO CAUSE ITS AFFILIATES TO WAIVE, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED
HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE.  THE PARTIES TO THIS AGREEMENT EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT
MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.

 

Section 8.09                Execution in Counterparts.    This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which

 

46

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counterparts, when so executed and delivered, shall be deemed to be an original
and all of which counterparts, taken together, shall constitute but one and the
same agreement.

 

Section 8.10                Successors and Assigns.  The provisions of this
Agreement will be binding upon and inure to the benefit of the parties and their
respective permitted successors and assigns. No party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement
(including any transfer by way of merger or operation of law) without the
consent of each other party, and any such purported assignment in violation of
this Section 8.10 shall be void ab initio.  Notwithstanding the foregoing, the
Preferred Unit Purchaser may assign its rights and obligations under this
Agreement without the prior approval of any other party to this Agreement to any
fund or account managed, advised or sub-advised by GSO or any of its Affiliates;
provided that any such assignment shall not relieve the Preferred Unit Purchaser
of any of its obligations hereunder.

 

Section 8.11                Severability.     Whenever possible, each provision
or portion of any provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable Law, but, if any provision
or portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable Law, such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of any other provision or portion of any provision in such
jurisdiction, and this Agreement shall be reformed, construed and enforced in
such jurisdiction in such manner as will effect as nearly as lawfully possible
the purposes and intent of such invalid, illegal or unenforceable provision.

 

Section 8.12                Interim Actions.

 

(a)                                SN shall consult in good faith with the
Purchasers in connection with any amendment, modification or waiver of any right
under or the satisfaction of any condition in the APC/KM PSA or [redacted] PSA,
as applicable, to be satisfied by Anadarko, it being understood that, except as
specified in the immediately following sentence, the foregoing shall not be
construed to require the consent of the Purchasers in order to effect any such
termination amendment, modification or waiver.  Notwithstanding anything to the
contrary set forth in this Agreement, neither SN nor any of its Affiliates will
take any of the following actions in respect of the APC/KM PSA, without the
prior approval of the Purchasers, such approval not to be unreasonably withheld:

 

(i)                                        Approve any amendment or modification
to any provision of, or waive any right or condition under, the APC/KM PSA or
[redacted] PSA;

 

(ii)                                     Enter into any agreements with any
counterparty in respect of a “Hard Consent” (as such term is defined in the
APC/KM PSA) or a consent required to assign any of the gathering or processing
agreements (including, without limitation, either of the Springfield Gathering
Agreements) included in the “Applicable Agreements” (as such term is defined in
the APC/KM PSA), in order to obtain consents to assignment required to be
obtained under the APC/KM PSA or [redacted] PSA, as applicable, that would
result in a $2,000,000 net cost to the Partnership (and such cost shall be
shared proportionately among SN, Blackstone Newco and the Partnership with the
Partnership bearing a 20% share) or that would have a material and adverse
effect on the Partnership;

 

47

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(iii)                                  Enter into any hedge contracts on behalf
of the Partnership, except to the extent such hedge contracts are consistent
with Section 6.7 of the Partnership Agreement; provided, however, that prior to
the Anadarko Closing SN shall use its commercially reasonable efforts to cause
Anadarko to enter into hedges in respect of the Acquired Properties that are
consistent with the hedge plan set forth in Schedule 11.9(a), Part I of the
APC/KM PSA as such Schedule is in effect on the Effective Date;

 

(iv)                                 Approve any amendment or modification of,
or waive any right under, the Hydrocarbons Marketing Agreement; or

 

(v)                                    Enter into the [redacted] PSA if (A) the
[redacted] PSA is not on substantially the same terms and conditions as the
APC/KM PSA (including, without limitation, the portion of the purchase price to
be paid by the Partnership at the [redacted] Closing and the form of conveyance
of properties to the Partnership by [redacted]) or (B) the unadjusted base
purchase price (which shall correspond to the definition of “Purchase Price”
under the APC/KM PSA) payable to [redacted] thereunder shall not exceed
$1,137,500,000.00.

 

(b)                          SN shall consult in good faith with the Purchasers
in connection with (i) SN’s actions or any of its Affiliates’ actions relating
to each of the title defect and environmental defect process under Articles XIII
and XIV, respectively, of the APC/KM PSA, or any similar provisions under the
[redacted] PSA, as applicable, including reviewing any interim and final defect
notices prior to submission thereof to Anadarko or [redacted], as applicable,
exercise of elections by or on behalf of the Partnership regarding curative
matters, and arbitration and settlement title and environmental disputes and
with respect to the settlement of any defect dispute after the consummation of
the “Closing” (as such term is defined in the APC/KM PSA) contemplated by the
APC/KM PSA or, as applicable, the exercise any analogous right under the
[redacted] PSA; (ii) the submission to Anadarko or [redacted], as applicable, of
preliminary and final accounting settlement statements and agreements with
Anadarko or [redacted], as applicable, on such settlement statements and any
arbitration proceedings to resolve such matters; (iii) SN’s plan to hire any
Anadarko employees or [redacted] employees, as applicable, and the anticipated
impact thereof on general and administrative expenditures and lease operating
expenditures that would be chargeable by SN or its Affiliates to the Partnership
in respect of the Acquired Properties or [redacted] Properties, as applicable,
and operations conducted thereon; and (iv) any public announcements proposed to
be made by Anadarko and SN or its Affiliates regarding the APC/KM PSA;
[redacted] and SN or its Affiliates regarding the [redacted] PSA; the Basic
Documents or the transactions contemplated thereby; in each case to the extent
applicable to either Purchaser and their Affiliates.    Furthermore, SN shall
consult in good faith with the Purchasers in connection with any contemplated
termination of the APC/KM PSA and/or [redacted] PSA, it being understood that
the foregoing shall not be construed to require the consent of the Purchasers in
order to effect any such termination.

 

Section 8.13                No Recourse.  Notwithstanding anything that may be
expressed or implied in this Agreement or any document, agreement, or instrument
delivered contemporaneously herewith, and notwithstanding the fact that any
party may be a partnership or limited liability company, each party hereto, by
its acceptance of the benefits of this Agreement and the other Basic Documents,
covenants, agrees and acknowledges that, except as may be set forth in each of
the Equity Commitment Letters, no Persons other than the parties shall have any
obligation

 

48

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hereunder and that it has no rights of recovery hereunder against, and no
recourse hereunder or under any documents, agreements, or instruments delivered
contemporaneously herewith or in respect of any oral representations made or
alleged to be made in connection herewith or therewith shall be had against, any
former, current or future director, officer, agent, Affiliate, manager,
assignee, incorporator, controlling Person, fiduciary, representative or
employee of any party (or any of their successors or permitted assignees),
against any former, current, or future general or limited partner, manager,
stockholder or member of any party (or any of their successors or permitted
assignees) or any Affiliate thereof or against any former, current or future
director, officer, agent, employee, Affiliate, manager, assignee, incorporator,
controlling Person, fiduciary, representative, general or limited partner,
stockholder, manager or member of any of the foregoing, but in each case not
including the parties, whether by or through attempted piercing of the corporate
veil, by or through a claim (whether in tort, contract or otherwise) by or on
behalf of such party against such Persons and entities, by the enforcement of
any assessment or by any legal or equitable proceeding, or by virtue of any
statute, regulation or other applicable law, or otherwise; it being expressly
agreed and acknowledged that no personal liability whatsoever shall attach to,
be imposed on, or otherwise be incurred by any such Persons, as such, for any
obligations of the applicable party under this Agreement or the transactions
contemplated hereby, under any documents or instruments delivered
contemporaneously herewith, in respect of any oral representations made or
alleged to be made in connection herewith or therewith, or for any claim
(whether in tort, contract or otherwise) based on, in respect of, or by reason
of, such obligations or their creation.

 

Section 8.14                Creditors.   None of the provisions of this
Agreement shall be for the benefit of or enforceable by any creditors of SN or
by any creditors of any Subsidiary or Affiliate of SN.

 

Section 8.15                Public Disclosure; Confidentiality.  Unless required
by Law (or the advice of counsel to an applicable party), no press release or
public announcement related to the Partnership or the General Partner, this
Agreement or the transactions contemplated herein or any other related
announcement or communication shall be issued or made by any party without the
advance approval of each other party, in which case each party shall be provided
a reasonable opportunity to review and provide suggested comments concerning the
disclosure contained in such press release, announcement or communication prior
to issuance, distribution or publication.  In addition, except as required by
Law (or the advice of counsel to an applicable party), no party shall, and each
party shall cause its respective representatives not to, disclose the terms and
conditions of this Agreement to any third party, in each case, without the prior
written consent of each of the parties, except to authorized directors,
managers, officers, legal counsel, accountants and financial advisors of such
party or its Affiliates.  In furtherance of the foregoing, each party shall
treat the terms and conditions of this Agreement as confidential; provided,
however, that Preferred Unit Purchaser and its Affiliates shall be entitled to
disclose the terms contemplated herein and high-level summary information
regarding the General Partner’s and the Partnership’s operations (including
total production volumes, total revenues, etc.) to its limited partners, owners,
co-investors, prospective investors, and existing and potential investors in
funds or accounts managed, advised or sub-advised by GSO, in each case, without
the consent of any Person; provided, further, that nothing in this Section 8.15
shall derogate from the rights of any Purchaser to disclose any information it
is permitted to disclose without the consent of any other Person under
Section 6.6 of the Partnership Agreement.  Notwithstanding anything to

 

49

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the contrary herein, nothing in this Section 8.15 shall limit SN or its
Affiliates from publicly filing this Agreement and making additional disclosures
therewith, in each case as required by applicable Law and securities
regulations.

 

Section 8.16                Time is of the Essence.  Time is of the essence in
the performance of all obligations under this Agreement.

 

Section 8.17                Remedies Generally.  The parties hereto agree that
irreparable damage, for which monetary damages, even if available, would not be
an adequate remedy, would occur in the event that the provisions of this
Agreement were not performed in accordance with its specific terms and that any
remedy at law for any breach of the provisions of this Agreement would be
inadequate.   Accordingly, the parties hereto acknowledge and agree that each
such party shall be entitled to an injunction, specific performance or other
equitable relief to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.  Each party hereby agrees that it
will not oppose the granting of specific performance and other equitable relief
on the basis that the other parties have an adequate remedy at law or that an
award of specific performance is not an appropriate remedy for any reason at law
or equity.  The parties hereto acknowledge and agree that any other party
seeking an injunction to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in accordance with this
Section 8.17 shall not be required to provide any bond or other security in
connection with any such injunction.

 

[signature page follows]

 

50

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IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of
the Effective Date.

 

 

SN:

 

 

 

 

 

SANCHEZ ENERGY CORPORATION

 

 

 

 

 

By:

/s/ Antonio R. Sanchez, III

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

 

 

 

 

SN GP MEMBER:

 

 

 

 

 

SN UR HOLDINGS, LLC

 

 

 

 

 

By:

/s/ Antonio R. Sanchez, III

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

 

 

 

 

PARTNERSHIP:

 

 

 

 

 

SN EF UNSUB, LP

 

 

 

 

 

By:

SN EF UNSUB GP, LLC, its general partner

 

 

 

 

 

 

 

By:

/s/ Antonio R. Sanchez, III

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

 

 

 

 

GENERAL PARTNER:

 

 

 

 

 

SN EF UNSUB GP, LLC

 

 

 

 

 

By:

/s/ Antonio R. Sanchez, III

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

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

 

 

COMMON UNIT PURCHASER:

 

 

 

 

 

SN EF UNSUB HOLDINGS, LLC

 

 

 

 

 

 

 

By:

/s/ Antonio R. Sanchez , III

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

 

 

 

 

GSO ASSOCIATES:

 

 

 

 

 

GSO ST HOLDINGS ASSOCIATES LLC

 

 

 

 

 

By:

/s/ Marisa Beeney

 

Name:

Marisa Beeney

 

Title:

Authorized Signatory

 

 

 

 

 

PREFERRED UNIT PURCHASER:

 

 

 

 

 

GSO ST HOLDINGS LP

 

 

 

 

 

 

 

By:

GSO ST HOLDINGS ASSOCIATES LLC, its General Partner

 

 

 

 

 

 

 

By:

/s/ Marisa Beeney

 

Name:

Marisa Beeney

 

Title:

Authorized Signatory

 

SIGNATURE PAGE TO

SECURITIES PURCHASE AGREEMENT

 

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

 

EXHIBIT A

 

FORM OF AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF SN EF UNSUB, LP

 

[Attached.]

 

EXHIBIT A TO

SECURITIES PURCHASE AGREEMENT

 

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

 

 

 

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

 

SN EF UnSub, LP

 

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

 

AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

 

Dated as of [·], 2017

 

THE UNITS ISSUED UNDER THIS AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS (THE “STATE
ACTS”).   SUCH UNITS MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF
AT ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER THE ACT OR PURSUANT TO AN
EXEMPTION FROM THE ACT AND THE APPLICABLE STATE ACTS, AND COMPLIANCE WITH THE
OTHER RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN, INCLUDING (WITHOUT
LIMITATION) THE PROVISIONS OF ARTICLE IX.

 

 

 

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

 

TABLE OF CONTENTS

 

 

 

Page

 

 

ARTICLE I DEFINITIONS

4

 

 

ARTICLE II ORGANIZATIONAL MATTERS

20

 

 

 

2.1

Continuation of the Partnership

20

2.2

Limited Partnership Agreement

20

2.3

Name

20

2.4

Purpose

20

2.5

Principal Office: Registered Office

20

2.6

Term

21

2.7

Restriction on Jurisdiction of Organization

21

2.8

Foreign Qualification

21

 

 

ARTICLE III UNITS; CAPITAL CONTRIBUTIONS

21

 

 

 

3.1

Units and Capital Contributions

21

3.2

Capital Accounts

24

3.3

Negative Capital Accounts

25

3.4

No Withdrawal

25

3.5

Loans From Partners

25

3.6

Distributions of Property

25

3.7

Transfer of Capital Accounts

25

3.8

Certain Adjustments

26

 

 

 

ARTICLE IV DISTRIBUTIONS AND ALLOCATIONS; REDEMPTION

26

 

 

 

4.1

Distributions

26

4.2

Allocations

28

4.3

Special Allocations

29

4.4

Offsetting Allocations

31

4.5

Tax Allocations

31

4.6

Withholding and Indemnification for Payments on Behalf of a Partner

33

4.7

Order of Redemptions

34

 

 

 

ARTICLE V MANAGEMENT

34

 

 

 

5.1

Generally

34

5.2

Authority of the General Partner

34

5.3

Appointment, Withdrawal and Removal of the General Partner

35

5.4

Discharge of Duties; Reliance on Reports

35

5.5

Compensation and Reimbursements

36

5.6

Outside Activities

36

5.7

Information Rights

36

5.8

Enforcement of Affiliate Contracts

38

5.9

Independent Director; Separateness Covenants

38

 

1

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ARTICLE VI RIGHTS AND OBLIGATIONS OF THE PARTNERS; INDEMNIFICATION;
CONFIDENTIALITY

39

 

 

 

6.1

Limitation of Liability

39

6.2

No Right of Partition

39

6.3

Indemnification

39

6.4

Actions by the Partners

41

6.5

Corporate Opportunities; Conflicts of Interest; Related Matters

41

6.6

Confidentiality

45

6.7

Hedging

46

 

 

 

ARTICLE VII BOOKS, RECORDS, ACCOUNTING AND REPORTS; INSPECTION

46

 

 

 

7.1

Records and Accounting

46

7.2

Reports

47

7.3

Transmission of Communications

47

 

 

 

ARTICLE VIII TAX MATTERS

47

 

 

 

8.1

Preparation of Tax Returns

47

8.2

Tax Elections

48

8.3

Tax Controversies

48

8.4

Unitary/Combined Tax Reporting

49

 

 

 

ARTICLE IX TRANSFER OF UNITS

50

 

 

 

9.1

Transfer Restrictions

50

9.2

Effect of Transfer

51

9.3

Additional Restrictions on Transfer

51

9.4

Legend

52

9.5

Disposition Transaction

52

9.6

Expenses and Transfer Fees

53

9.7

Void Transfers

53

 

 

 

ARTICLE X ADMISSION OF PARTNERS

53

 

 

 

10.1

Substituted Partners

53

10.2

Additional Partners

53

 

 

 

ARTICLE XI WITHDRAWAL AND RESIGNATION OF PARTNERS

54

 

 

 

11.1

Withdrawal and Resignation of Partners

54

 

 

 

ARTICLE XII DISSOLUTION AND LIQUIDATION

54

 

 

 

12.1

Dissolution

54

12.2

Liquidation and Termination

54

12.3

Securityholders Agreement

56

12.4

Cancellation of Certificate

56

12.5

Reasonable Time for Winding Up

56

 

2

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12.6

Return of Capital

56

12.7

Hart-Scott-Rodino

56

 

 

 

ARTICLE XIII VALUATION

56

 

 

 

13.1

Valuation of Units

56

13.2

Valuation of Securities

56

13.3

Valuation of Other Assets

57

13.4

Objection Procedure

57

 

 

 

ARTICLE XIV REDEMPTION AND EXIT PROVISIONS

57

 

 

 

14.1

Optional Redemption of Preferred Units at Election of the Partnership

57

14.2

Optional Redemption of Preferred Units at Election of Required Preferred Holders

58

14.3

Exit Transactions

58

 

 

 

ARTICLE XV GENERAL PROVISIONS

63

 

 

 

15.1

Amendments

63

15.2

Remedies

64

15.3

Successors and Assigns

64

15.4

Severability

64

15.5

Counterparts; Binding Agreement

64

15.6

Applicable Law

64

15.7

Addresses and Notices

64

15.8

Creditors

65

15.9

No Waiver

65

15.10

Further Action

65

15.11

No Offset Against Amounts Payable

65

15.12

Entire Agreement; Integrated Transaction

65

15.13

Delivery by Facsimile

66

15.14

Survival

66

15.15

Consent to Jurisdiction; Waiver of Trial by Jury

66

15.16

Construction; Interpretation

67

15.17

No Third Party Beneficiaries

67

15.18

Outside Counsel

67

15.19

Time is of the Essence

68

15.20

No Recourse

68

15.21

Public Disclosure

68

15.22

Partnership Covenants, Representations and Warranties

69

 

 

EXHIBITS

 

 

 

Exhibit A - Form of Purchase and Sale Agreement

 

 

 

SCHEDULE

 

 

 

Schedule A - Schedule of Limited Partners

 

 

3

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AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF SN EF UNSUB, LP

 

THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF SN EF UNSUB, LP, a
Delaware limited partnership (the “Partnership”) is entered as of [·], 2017 (the
“Effective Date”), by and among SN EF UnSub GP, LLC, a Delaware limited
liability company, as the general partner, and the Limited Partners as limited
partners, together with any other Persons who become Partners in the Partnership
or parties hereto as provided herein. Capitalized terms used but not defined
herein shall have the meaning ascribed to such terms in the Securities Purchase
Agreement.

 

RECITALS:

 

WHEREAS, the Partnership was formed as a limited partnership in accordance with
the Delaware Act on December 21, 2016; and

 

WHEREAS, prior to the Effective Date, the Partnership was governed by the
Agreement of Limited Partnership of the Partnership, dated December 21, 2016
(the “Original Partnership Agreement”); and

 

WHEREAS, Sanchez Parent, SN UR Holdings, LLC, a Delaware limited liability
company, the General Partner, the Partnership, GSO ST Holdings LP, a Delaware
limited partnership (the “Institutional Investor”), GSO ST Holdings Associates
LLC, a Delaware limited liability company, and SN EF UnSub Holdings, LLC a
Delaware limited liability company (the “Sanchez Investor”), are all parties to
that certain Securities Purchase Agreement dated as of January 12, 2017 (the
“Securities Purchase Agreement”); and

 

WHEREAS, pursuant to the Securities Purchase Agreement, (i) the Institutional
Investor has agreed to make capital contributions to the Partnership in exchange
for Preferred Units issued to the Institutional Investor under the Securities
Purchase Agreement and (ii) the Sanchez Investor has agreed to make capital
contributions to the Partnership in exchange for Common Units issued to the
Sanchez Investor under the Securities Purchase Agreement; and

 

WHEREAS, as a condition to, and in connection with, the Institutional Investor
and the Sanchez Investor making the foregoing capital contributions to the
Partnership with respect to the Units to be issued under the Securities Purchase
Agreement and this Agreement, the Partners desire to enter into the mutual
covenants and agreements set forth in this Agreement and to amend and restate
the Original Partnership Agreement as set forth herein.

 

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

 

ARTICLE I

DEFINITIONS

 

The following capitalized terms used herein shall have the following meanings:

 

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“Actual Unitary Tax Liability” has the meaning set forth in Section 8.4(b).

 

“Additional Partner” has the meaning set forth in Section 10.2.

 

“Additional Preferred Units Notice” has the meaning set forth in
Section 3.1(c)(ii).

 

“Additional Sanchez Activities” has the meaning set forth in Section 6.5(a)(v).

 

“Adjusted Capital Account” means, as of the end of any Taxable Year, a Person’s
Capital Account balance (i) reduced for any items described in Treasury
Regulation Section 1.704- l(b)(2)(ii)(d)(4), (5), and (6), and (ii) increased
for any amount such Person is obligated to contribute or is treated as being
obligated to contribute to the Partnership pursuant to Treasury Regulation
Section 1.704-l(b)(2)(ii)(c) (relating to partner liabilities to a partnership)
or Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i) (relating to
minimum gain).

 

“Adjusted Resulting Tax Liability” has the meaning set forth in Section 8.4(d).

 

“Affiliate” of any Person means any other Person, directly or indirectly,
Controlling, Controlled by or under common Control with such particular Person. 
For the purposes of this Agreement, The Blackstone Group, L.P.  and all private
equity funds, portfolio companies, parallel investment entities, and alternative
investment entities owned, managed, or Controlled by The Blackstone Group, L.P.
or its Affiliates that are not part of the credit-related businesses of the
Blackstone Group L.P. shall not be considered or otherwise deemed to be an
“Affiliate” of GSO or its Affiliates that are part of the credit-related
businesses of The Blackstone Group L.P., but any fund or account managed,
advised or subadvised or Controlled by GSO or its Affiliates within the
credit-related businesses of The Blackstone Group L.P.  shall be considered an
Affiliate of GSO.  For the avoidance of doubt, (i) GSO or its Affiliates or any
fund or account managed, advised or subadvised by or Controlled by GSO or its
Affiliates shall not be considered an Affiliate of the Partnership, and
(ii) Affiliates of the Sanchez Investor shall include any member of the Sanchez
Group.

 

“Agreement” means this Amended and Restated Agreement of Limited Partnership, as
it may be amended, modified supplemented or restated from time to time in
accordance with Section 15.1.

 

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

 

“Anadarko Closing” has the meaning set forth in the Securities Purchase
Agreement.

 

“Annual Statements” has the meaning set forth in Section 5.7(b).

 

“APC/KM PSA” means that certain Purchase and Sale Agreement among Anadarko E&P
Onshore LLC, Kerr-McGee Oil and Gas Onshore LP, SN Maverick, the Partnership and
Blackstone Newco, dated January 12, 2017, as it may be amended, modified,
supplemented or restated from time to time.

 

“Approved Counterparty” means any Person that engages as a significant part of
its operations in Hedging Arrangements if, at the time such Person enters into
Hedging

 

5

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Arrangements with the Partnership, such Person or its credit support provider
either (x) has a long term senior unsecured debt rating of at least “BBB-” by
Standard & Poor’s Ratings Group, a division of The McGraw Hill Corporation (or
any successor thereto), and at least “Baa3” by Moody’s Investor Services, Inc.
(or any successor thereto) or (y) is either the “Administrative Agent” (or an
Affiliate thereof) or a “Lender” (or an Affiliate thereof) under the
Partnership’s then existing credit agreement.

 

“Available Cash” means, as of any time of determination, an amount equal to the
difference between the following items, as determined by the General Partner, in
consultation with the Institutional Investor, in its good faith discretion:

 

(a)                          all revenues, net cash proceeds from any
divestitures, available liquidity (including cash on hand and cash available
from committed financing sources), cash amounts received from hedging
arrangements, lease bonus payments and other cash or cash equivalent amounts
collected or received by the Partnership as of such time, less

 

(b)                          the sum of (i) the accrued and projected payments,
costs and expenses of the Partnership to be paid by the Partnership as of such
time, including such payments, costs and expenses in respect of operating and
capital costs and expenses (including payments owed under the MSA), (ii) debt
service costs in respect of the next six months, including, to the extent the
General Partner determines in good faith that it is necessary to reserve cash
therefor, any repayments of the principal amounts of any Indebtedness of the
Partnership (including all fees, penalties or make-wholes in respect thereof)
and losses from hedging arrangements, (iii) other current liabilities incurred
by the Partnership as of such time and (iv) any other amounts in respect of
which the General Partner established as a reserve to cover reasonably
anticipated future payments in respect of the Partnership’s businesses not to
exceed $10,000,000 in the aggregate.

 

“Base Preferred Return Amount” means, at any time of determination, an amount of
cash Distributions that would be required to be made to the Preferred Partners
in respect of each Preferred Unit then outstanding equal to the greater of
(i) the amount required to cause the IRR with respect to each Preferred Unit to
be equal to fourteen percent (14.0%) and (ii) the amount required to cause the
Return on Investment with respect to each such Preferred Unit to be equal to the
product of (x) 1.5 multiplied by (y) the Preferred Unit Purchase Price, each
such figure to be determined inclusive of all cash Distributions previously made
to the Preferred Partners (or if any such Preferred Unit has been Transferred
since the Effective Date by the predecessor owner(s) of such Transferred
Preferred Units) in respect of such Preferred Units, other than Excluded
Amounts.

 

“Basic Documents” has the meaning assigned to such term in the Securities
Purchase Agreement.

 

“Blackstone Newco” means Aguila Production, LLC.

 

“Board” means the board of directors of the General Partner.

 

“Book Value” means, with respect to any asset of the Partnership, the asset’s
adjusted basis for federal income tax purposes, except that the Book Value of
all assets of the Partnership

 

6

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may be adjusted to equal their respective Fair Market Values, in accordance with
the rules set forth in Treasury Regulations
Section 1.704-1(b)(2)(iv)(f) immediately prior to:  (i) the date of the
acquisition of any additional Interest by any new or existing Partner; (ii) the
date of the distribution of more than a de minimis amount of assets of the
Partnership to a Partner; (iii) the date an Interest is relinquished to the
Partnership; provided, however, that adjustments pursuant to clauses (i),
(ii) and (iii) above shall be made only if the General Partner reasonably
determines that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners.  The Book Values of any asset
contributed (or deemed contributed under Treasury Regulations
Section 1.704-l(b)(l)(iv)) by a Partner to the Partnership will be the Fair
Market Value of the asset at the date of its contribution thereto.

 

“Business Day” means any day other than a Saturday, Sunday or a day on which
commercial banks are authorized or required to close in Houston, Texas.

 

“Capital Account” means the capital account maintained for a Limited Partner
pursuant to Section 3.2.

 

“Capital Contributions” means the aggregate dollar amounts of any cash, cash
equivalents, promissory obligations (but only to the extent issued and repaid
prior to the date hereof), or the Fair Market Value of other property which a
Partner contributes or is deemed to have contributed to the Partnership with
respect to any Unit pursuant to Section 3.1.

 

“Certificate of Limited Partnership” means the Certificate of Limited
Partnership of the Partnership as filed with the Secretary of State of the State
of Delaware, as the same may be amended, supplemented or restated from time to
time.

 

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

 

“Change of Control” has the meaning set forth in the Indenture.

 

“Citi” means Citigroup Global Markets Inc., Citibank, N.A., Citicorp USA, Inc.,
Citicorp North America, Inc. or any of their respective affiliates, as may be
applicable.

 

“Class A Member” has the meaning set forth in the GP LLC Agreement.

 

“Class A Units” has the meaning set forth in the GP LLC Agreement.

 

“Class B Member” has the meaning set forth in the GP LLC Agreement.

 

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

 

“Combined Reporting Partner” has the meaning set forth in Section 8.4(a).

 

“Common Partner” means any Partner holding Common Units with regard to such
Person’s particular Interest designated as Common Units.

 

7

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“Common Unit” means all outstanding Units with the rights, preferences, powers,
restrictions, qualifications and limitations ascribed to Common Units as set
forth in this Agreement, which include, for the purposes of clarity, the Common
Units purchased on the Effective Date pursuant to the Securities Purchase
Agreement (it being understood that in no instance shall any Preferred Unit be
designated as a Common Unit).

 

“Confidential Information” has the meaning set forth in Section 6.6.

 

“Consolidated Total Net Leverage Ratio” has the meaning assigned to such term in
the Credit Agreement.

 

“Control” mean the possession, directly or indirectly, of the power to direct,
or cause the direction of, the management and policies of a Person whether
through the ownership of voting securities, by contract or otherwise.  The terms
“Controlled” and “Controlling” shall have correlative meanings.

 

“Credit Agreement” means the credit agreement governing the senior secured,
first-lien, reserve-based revolving credit facility, among the Partnership, as
borrower, and JPMorgan Chase Bank, N.A. and Citi, as joint lead arrangers and
joint book runners, JPMorgan Chase Bank, N.A. as administrative agent, and
JPMorgan Chase Bank, N.A., Citi and the syndicate of banks and financial
institutions named therein as the lenders, as amended or modified from time to
time.

 

“Credit Agreement Agent” means the administrative agent under the Credit
Agreement or a Replacement Credit Agreement.

 

“Delaware Act” means the Delaware Revised Uniform Limited Partnership Act, 6
Del. C. § 17-101, et seq., as it may be amended from time to time, and any
successor to the Delaware Act.

 

“Director” means a Director on the Board.

 

“Disposition Transaction” means: (i) a Transfer of more than fifty percent (50%)
of the Common Units of the Partnership in a single transaction or series of
related transactions; (ii) any consolidation or merger of the Partnership with
or into any other corporation or other entity, or any other reorganization
(including, without limitation, any conversion, transfer, or domestication of
the Partnership) in a single transaction or series of related transactions, in
which the Partners of the Partnership immediately prior to such consolidation,
merger or reorganization own equity of the entity surviving such merger,
consolidation or reorganization representing less than fifty percent (50%) of
the Common Units immediately after such consolidation, merger or reorganization;
or (iii) a sale, lease or other disposition in a single transaction or series of
related transactions of more than fifty percent (50%) of the assets (which, for
the avoidance of doubt, shall include securities of the Partnership’s
Subsidiaries) of the Partnership and its Subsidiaries on a consolidated basis
(measured either by book value in accordance with GAAP or by Fair Market
Value).  For the avoidance of doubt, a Sale Transaction (as such term is defined
in Section 4.5 of the JDA) shall be a Disposition Transaction subject to the
terms of this Agreement and the GP LLC Agreement, including Section 5.7(b) and
Section 9.4 of the GP LLC Agreement.

 

8

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“Distribution” means each distribution made by the Partnership to a Limited
Partner, whether in cash, property or securities of the Partners and whether by
liquidating distribution, redemption, repurchase or otherwise; provided, that
none of the following shall be a Distribution: (i) any pro rata exchange of
outstanding securities of the Partnership for newly issued securities of the
Partnership, and any subdivision (by Unit split or otherwise) or any combination
(by reverse Unit split or otherwise) of any outstanding Units; or (ii) any
issuance of Units or other securities by the Partnership as contemplated by the
Securities Purchase Agreement or this Agreement.

 

“Drilling Commitment Agreement” has the meaning set forth in the Securities
Purchase Agreement.

 

“Dual Closing” has the meaning set forth in the Securities Purchase Agreement.

 

“Effective Date” has the meaning set forth in the preamble to this Agreement.

 

“Elective Redemption Notice” has the meaning set forth in Section 14.1.

 

“Equity Interests” means, with respect to any Person, all shares,
participations, capital stock, partnership or limited liability company
interests, units, participations or similar equity interests issued by such
Person, however designated.

 

“Equity Securities” means (i) Units or other equity interests in the Partnership
or its Subsidiaries, (ii) obligations, evidences of Indebtedness or other
securities or interests convertible or exchangeable into Units or other equity
interests in the Partnership or its Subsidiaries, and (iii) warrants, options or
other rights to purchase or otherwise acquire Units or other equity interests in
the Partnership or its Subsidiaries.

 

“Event of Withdrawal” has the meaning set forth in Section 5.3(a).

 

“Excluded Amounts” means (i) any Distributions on Preferred Units that are
accrued (i.e., any Distributions that increase Unpaid Amounts), (ii) any
payments made to the Institutional Investor or any other Preferred Partner or
any of their respective Affiliates with respect to the Warrants or Sanchez
Shares, (iii) commitment fees, transaction fees, monitoring fees, expense
reimbursements, or management fees received by the Institutional Investor or any
Preferred Partner or any of their respective Affiliates and (iv) the Warrants or
the Sanchez Shares.

 

“Exit Transaction” has the meaning set forth in Section 14.3(a).

 

“Exit Transaction Consideration” has the meaning set forth in Section 14.3(f).

 

“Fair Market Value” means, with respect to any asset or equity interest, its
fair market value determined according to Article XIII.

 

“Family” means (i) an individual, (ii) such individual’s spouse, (iii) any other
natural person who is related to such individual or such individual’s spouse
within the second degree of kinship and (iv) any other natural person who has
been adopted by such individual.

 

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“Final Cash Redemption Amount” has the meaning set forth in Section 14.2.

 

“FIRPTA” means the Foreign Investment in Real Property Tax Act of 1980.

 

“Fiscal Period” means any interim accounting period within a Taxable Year
established by the General Partner and which is permitted or required by Code
Section 706.

 

“Fiscal Quarter” means each calendar quarter ending March 31, June 30,
September 30 and December 31, or such other quarterly accounting period as may
be established by the General Partner.  It is understood and agreed that the
first Fiscal Quarter shall be deemed the period of time commencing on the
Effective Date and concluding on the date that is the last day of the Fiscal
Quarter during which the Effective Date occurs.

 

“Fiscal Year” means the calendar year ending on December 31, or such other
annual accounting period as may be established by the General Partner.

 

“Fund Indemnified Persons” has the meaning set forth in Section 6.3(b).

 

“Fund Indemnitors” has the meaning set forth in Section 6.3(b).

 

“GAAP” means United States generally accepted accounting principles,
consistently applied and as in effect from time to time.

 

“General Partner” means SN EF UnSub GP, LLC, a Delaware limited liability
company, and its successors and permitted assigns that are admitted to the
Partnership as a general partner of the Partnership, in their capacities as
general partner of the Partnership (except as the context otherwise requires).

 

“General Partner Interest” means the non-economic management interest of the
General Partner in the Partnership (in its capacity as a general partner without
reference to any limited partner interest that it may hold) and includes any and
all rights, powers and benefits to which the General Partner is entitled as
provided in this Agreement, together with all obligations of the General Partner
to comply with the terms and provisions of this Agreement.  The General Partner
Interest does not include any rights to profits or losses or any rights to
receive distributions from operations or upon the liquidation or winding-up of
the Partnership.

 

“Governmental Authority” means any federal, state, municipal, national or other
government, governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case whether
associated with a state of the United States of America, the United States of
America or a foreign entity or government.

 

“GP LLC Agreement” means that certain Amended and Restated Limited Liability
Company Agreement of the General Partner, dated as of the Effective Date, by and
among the General Partner, SN UR Holdings, LLC and GSO ST Holdings Associates
LLC, as amended from time to time.

 

10

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“GSO” means GSO Capital Partners LP, a Delaware limited partnership.

 

“GSO Funds” has the meaning assigned to such term in the Securities Purchase
Agreement.

 

“Hedging Arrangement” means any commodity hedging transaction pertaining to
crude oil and natural gas, whether in the form of a swap agreement, option to
acquire or dispose of a futures contract, whether on an organized commodities
exchange or otherwise, or similar type of financial transaction.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended from time to time.

 

“Hydrocarbons Marketing Agreement” means the Hydrocarbons Purchase and Marketing
Agreement dated the date hereof between SN EF Maverick, LLC and the Partnership.

 

“Indebtedness” means, with respect to any specified Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person for a deferred purchase price (other than trade
payables incurred in the ordinary course of such Person’s business, consistent
with past practice), (c) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments, (d) all obligations of such
Person under capital leases, (e) all obligations of such Person, contingent or
otherwise, as an account party or applicant under or in respect of acceptances,
letters of credit, surety bonds or similar arrangements, regardless of whether
drawn, (f) all obligations of such Person created or arising under any
conditional sale or title retention agreement, (g) the liquidation value or
redemption price, as the case may be, of all preferred or redeemable stock of
such Person, (h) all net obligations of such Person payable under any rate,
currency, commodity or other swap, option or derivative agreement, (i) all
obligations secured by (or for which the holder of such obligation has an
existing right, contingent or otherwise, to be secured by) any Lien on property
owned by such Person, regardless of whether such Person has assumed or become
liable for the payment of such obligation and (j) all obligations of others
guaranteed by such Person.

 

“Indenture” means that certain Indenture, dated as of June 27, 2014, among
Sanchez Parent, the subsidiary guarantors named therein and U.S. Bank National
Association, as trustee, as amended or supplemented on or prior to the date
hereof, but without giving effect to any amendment or supplement entered into
after the date hereof and regardless of whether the Indenture remains in effect.

 

“Indemnified Person” has the meaning set forth in Section 6.3(a).

 

“Independent Director” has the meaning assigned to such term in the GP LLC
Agreement.

 

“Initial Reserve Report” has the meaning assigned to such term in the Credit
Agreement.

 

“Institutional Investor” has the meaning set forth in the recitals to this
Agreement.

 

11

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“Interest” means, with respect to any Partner (or other holder of Units if such
holder is not a Partner) as of any time, such Person’s limited partner interest
in the Partnership, such Person’s Capital Account balance, and such Person’s
interest in the income, gains, losses, deductions, tax credits, and
Distributions of the Partnership, and voting rights, if any, as may be affected
by the provisions of this Agreement and as may thereafter be adjusted, from time
to time, as more particularly provided herein.  The Interests are divided into,
designated as, and represented by Units, as provided in this Agreement, and
issued to the Partners, as provided in this Agreement.  For the purposes of
clarity, the Transfer or issuance of a Unit or Interest does not mean that after
giving effect to such Transfer or issuance the Transferee or holder is a Partner
unless all conditions for a Person to become a Partner hereunder and under
applicable law have been satisfied.

 

“Investor Redemption Event” has the meaning set forth in Section 14.3(a).

 

“Investor Representative” means a Preferred Partner that is an Affiliate of GSO
designated by the Required Preferred Holders.

 

“IRR” means, as of any measurement date, the cumulative internal rate of return,
compounded monthly, with respect to a Preferred Unit (i.e., the annual discount
rate for which the net present value of all cash inflows from all Capital
Contributions made to acquire such Preferred Unit (which for this purpose shall
include the entire Preferred Unit Purchase Price), as applicable, and all cash
outflows from all Distributions in respect of such Preferred Unit, as
applicable, are equal to $0), as calculated using the XIRR function in Microsoft
Excel (taking into account the respective dates of each such Capital
Contribution and Distribution, as well as the IRR measurement date) (or if such
program is no longer available, such other software program for calculating IRR
approved by the Investor Representative and the General Partner). IRR shall be
calculated on the basis of the actual number of days elapsed over a 365-day
year.  In calculating IRR for Preferred Units and Return on Investment for
Preferred Units as of any particular date, the aggregate amounts distributed
pursuant to Section 4.1 with respect to any Preferred Unit on such date, and all
amounts previously distributed under the subsections thereof, shall be taken
into account, with the exception of any Excluded Amounts.

 

“Joint Development Agreement” means the Joint Development Agreement, dated as of
the Effective Date, between the Partnership, Blackstone Newco and the SN
Maverick, as it may be amended, modified, supplement or restated from time to
time.

 

“[redacted] Closing” has the meaning set forth in the Securities Purchase
Agreement.

 

“[redacted] PSA” has the meaning set forth in the Securities Purchase Agreement.

 

“Letters of Credit” has the meaning assigned to such term in the Credit
Agreement.

 

“Liens” means any mortgage, pledge, assessment, security interest, lease, lien,
adverse claim, levy, charge, right of first refusal or other encumbrance of any
kind, or any conditional sale contract, title retention contract or other
contract or agreement to give any of the foregoing.

 

“Limited Partner” means each of the Persons listed on the Schedule of Limited
Partners attached as Schedule A hereto, and any Person admitted to the
Partnership as a Substituted

 

12

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Partner or Additional Partner, but only so long as such Person is the owner of
one or more Units, each in such Person’s capacity as a limited partner in the
Partnership.

 

“Liquidation Assets” has the meaning set forth in Section 12.2(b).

 

“Liquidation FMV” has the meaning set forth in Section 12.2(b).

 

“Liquidation Statement” has the meaning set forth in Section 12.2(b).

 

“Losses” means the taxable loss of the Partnership as determined for federal
income tax purposes, as adjusted by Section 3.2(b).  Losses shall be determined
net of any amounts allocable in Section 4.3 or Section 4.4.

 

“Material Contract” means any contract, agreement or series of related contracts
or agreements that (i) is reasonably expected to result in revenue to, or costs
or expenses incurred by, the Partnership or any of its Subsidiaries of more than
$5.0 million during any calendar year or (ii) must be approved by the Board
pursuant to Section 5.7 of the GP LLC Agreement prior to its execution.

 

“Maximum Lawful Rate” means a rate of interest which, when multiplied by the
amount described in this Agreement that remains outstanding from time to time,
and the product thereof is then added to all commitment or other fees or sums
(if any) paid on the amount described in this Agreement which under laws are
deemed to constitute interest, will equal (but will not exceed) the maximum
nonusurious rate of interest which may be contracted for, charged or received
under applicable law.  If there shall be no Maximum Lawful Rate under applicable
law, the Maximum Lawful Rate shall be deemed to be fifteen percent (15.0%) per
annum.

 

“Minimum Hedging Threshold” has the meaning set forth in Section 6.7.

 

“MSA” means the Management Services Agreement, dated as of the Effective Date,
by and between Sanchez Oil & Gas Corporation and the Partnership, as it may be
amended, modified, supplemented or restated from time to time.

 

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

 

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

 

“NYMEX” means the New York Mercantile Exchange.

 

“Operating Agreement” has the meaning given to such term in the Joint
Development Agreement.

 

“Organizational Limited Partner” means the Sanchez Investor, in its capacity as
the organizational limited partner of the Partnership.

 

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

 

“Participating Sellers” has the meaning set forth in Section 14.3(h).

 

“Partner Nonrecourse Debt” has the meaning given to the term “partner
nonrecourse debt” in Treasury Regulation Section 1.704-2(b)(4).

 

“Partner Nonrecourse Debt Minimum Gain” has the meaning given to the term
“partner nonrecourse debt minimum gain” in Treasury Regulation
Section 1.704-2(i)(2).

 

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

 

“Partners” means the General Partner and the Limited Partners.

 

“Partnership” has the meaning set forth in the preamble to this Agreement.

 

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

 

“Partnership Representative” has the meaning set forth in Section 8.3(b).

 

“Permitted Transferee” means, with respect to any Person, (i) any of such
Person’s Affiliates (it being understood that in the case of the Sanchez
Investor, such Affiliate must be wholly owned, directly or indirectly, by
Sanchez Parent for purposes of being deemed a Permitted Transferee), or (ii) any
transferee in connection with an Exit Transaction.

 

“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, association or other entity or a Governmental
Authority.

 

“Preference Accrual” means, with respect to each Preferred Unit at any time of
determination, an amount equal to the excess of (i) the sum of (A) the Preferred
Unit Purchase Price with respect to such Preferred Unit and (B) all Unpaid
Amounts with respect to such Preferred Unit as of such time, over (ii) the
aggregate cash Distributions that have been paid by the Partnership with respect
to such Preferred Unit prior to such time pursuant to Section 4.1 that reduce
Unreturned Capital; provided, that the Preference Accrual shall never be less
than zero dollars ($0). With respect to a Preferred Unit, the Preference Accrual
shall be compounded on a quarterly basis and shall accrue on a quarterly basis
from and after the date on which the Capital Contribution is made in respect of
such Preferred Unit.

 

“Preferred Distribution Rate” means an annual rate of ten percent (10.0%).

 

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“Preferred Partner” means any Partner holding Preferred Units with regard to
such Person’s particular Interest designated by Preferred Units.

 

“Preferred Payment Date” means each of March 31, June 30, September 30 and
December 31 of each year (or if any of the foregoing dates is on a day that is
not a Business Day, the next Business Day immediately following such date).

 

“Preferred Unit Purchase Price” means, with respect to each Preferred Unit,
$1,000.

 

“Preferred Units” means all outstanding Units with the rights, preferences,
powers, restrictions, qualifications and limitations ascribed to Preferred Units
as set forth in this Agreement, which include, for the purposes of clarity, the
Preferred Units purchased on the Effective Date pursuant to the Securities
Purchase Agreement.

 

“Prime Rate” as of a particular date means the prime rate of interest as
published on that date in the Wall Street Journal, and generally defined therein
as “the base rate on corporate loans posted by at least 75% of the nation’s 30
largest banks.” If the Wall Street Journal is not published on a date for which
the Prime Rate must be determined, the Prime Rate shall be the prime rate
published in the Wall Street Journal on the nearest-preceding date on which the
Wall Street Journal was published and if the Wall Street Journal ceases to
publish such rate, then the Preferred Partner shall pick a substitute rate that
most closely approximates such rate, as determined in the Preferred Partner’s
good faith judgment.

 

“Pro Rata Share” means with respect to each Unit, the proportional amount such
Unit would entitle the holder of such Unit to receive of the Total Equity Value
if an amount equal to the Total Equity Value were distributed to all holders of
Units in accordance with Section 4.1(d), and with respect to each holder of a
Unit, such holder’s pro rata share of Total Equity Value represented by all
Units owned by such Person.

 

“Profits” means the taxable income of the Partnership as determined for federal
income tax purposes, as adjusted by Section 3.2(b). Profits shall be determined
net of any amounts allocable in Section 4.3 or Section 4.4.

 

“Proportional Share” means, with respect to each Common Partner, as applicable,
the quotient obtained by dividing (i) the total number of Common Units held by
such Common Partner by (ii) the total number of Common Units held by all Common
Partners.

 

“Proved Developed Producing Reserves” has the meaning adopted by the Board of
Directors, Society of Petroleum Engineers, Inc., March 1997.

 

“Quarterly Distribution Amount” has the meaning set forth in Section 4.1(b).

 

“Quarterly Statements” has the meaning set forth in Section 5.7(a).

 

“Redeemed Preferred Units” has the meaning set forth in Section 14.1.

 

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“Redemption Non-Payment” means the failure of the Partnership to timely pay the
full Final Cash Redemption Amount for the total number of Preferred Units to be
redeemed pursuant to Section 14.2.

 

“Redemption Request Notice” has the meaning set forth in Section 14.2.

 

“Regulatory Allocations” has the meaning set forth in Section 4.3(i).

 

“Reimbursing Partner” has the meaning set forth in Section 8.4(a).

 

“Renounced Business Opportunity” has the meaning set forth in
Section 6.5(a)(ii).

 

“Replacement Credit Agreement” means a credit agreement that provides for
revolving loans to the Partnership and is established among the Partnership and
one or more commercial banks and other commercial lenders in replacement of the
current Credit Agreement, which credit agreement shall be on terms and
conditions that are generally considered market for a company similarly situated
to the Partnership and that, in the aggregate, are at least as favorable to the
Partnership as the Credit Agreement; provided that the financial covenants,
voluntary prepayments, mandatory prepayments, and provisions relating to event
of default, interest costs (including upfront lender fees and discounts), call
protection or costs associated with voluntary or mandatory repayment, and
restricted payments (including restrictions on Distributions) shall each be at
least as favorable to the Partnership as the Credit Agreement; provided,
further, that such credit agreement shall in no way limit or restrict the
payment of distributions or redemption of the Preferred Units other than as
permitted by the terms of the Partnership Agreement as in effect on the
Effective Date.

 

“Required Preferred Holders” means, as of the date of determination, the
Preferred Partners holding a majority of the then issued and outstanding
Preferred Units.

 

“Resulting Tax Liability” has the meaning set forth in Section 8.4(b).

 

“Return on Investment” means an amount equal to (x) the aggregate cash
Distributions made by the Partnership with respect to a Preferred Unit as of the
date of calculation divided by (y) the Preferred Unit Purchase Price. In
calculating Return on Investment as of any particular date, the aggregate
amounts distributed pursuant to Section 4.1 with respect to any Preferred Unit
on such date, and all amounts previously distributed under the subsections
thereof, shall be taken into account, with the exception of any Excluded
Amounts.

 

“Revolving Credit Facility” has the meaning assigned to such term in the Credit
Agreement.

 

“Sanchez Family” means (i) Antonio R. Sanchez, III and A.R. Sanchez, Jr.,
(ii) any spouse or descendant of any individual named in (i), (iii) any other
natural person who is a member of the Family of any such individual referenced
in (i)-(ii) above and (iv) any other natural person who has been adopted by any
such individual referenced in (i)-(iii) above.

 

“Sanchez Group” means (i) any member of the Sanchez Family, (ii) Sanchez Energy
Partners I, LP and SEP Management I, LLC, (iii) Sanchez Parent, (iv) Sanchez
Investor,

 

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(v) Sanchez Production Partners LP, (vi) Sanchez Oil & Gas Corporation,
(vii) Blackstone Newco and (viii) any Person Controlled by any one or more of
the foregoing (other than the General Partner, the Partnership or any of their
respective Subsidiaries).

 

“Sanchez Investor” has the meaning set forth in the recitals to this Agreement.

 

“Sanchez Letter Agreement” has the meaning set forth in the GP LLC Agreement.

 

“Sanchez Parent” means Sanchez Energy Corporation, a Delaware corporation.

 

“Sanchez Shares” means the 1,500,000 shares of common stock, par value $0.01 per
share, of Sanchez Parent issued to the Institutional Investor at the Anadarko
Closing.

 

“Sanchez Shares and Warrants Amount” has the meaning set forth in the Sanchez
Letter Agreement.

 

“Schedule of Limited Partners” means the Schedule of Limited Partners attached
as Schedule A hereto.

 

“Securities Purchase Agreement” has the meaning set forth in the recitals to
this Agreement.

 

“Senior Debt” means credit facilities or issuances, including, but not limited
to, the credit facility provided pursuant to the Credit Agreement.

 

“Senior Debt Agreements” means the Credit Agreement and any other credit
agreement, note Securities Purchase Agreement, indenture or other agreements
evidencing Senior Debt, collectively, and any documents related thereto.

 

“Simulated Basis” means the Book Value of any separate oil and gas property (as
defined in Section 614 of the Code), as adjusted for Simulated Depletion.

 

“Simulated Depletion” means, with respect to each separate oil and gas property
(as defined in Section 614 of the Code), a depletion allowance computed in
accordance with federal income tax principles and in the manner specified in
Treasury Regulation Section 1.704- l(b)(2)(iv)(k)(2). For purposes of computing
Simulated Depletion with respect to any property, the Simulated Basis of such
property shall be deemed to be the Book Value of such property, and in no event
shall the allowance for Simulated Depletion, in the aggregate, exceed such
Simulated Basis. For purposes of computing Simulated Depletion, the Partnership,
as determined by the General Partner, will apply on a property by property basis
the simulated cost depletion method or the simulated percentage depletion method
(without regard to the limitations in Section 613A of the Code) under Treasury
Regulations § 1.704-l(b)(2)(iv)(k)(2).

 

“Simulated Gain” means with respect to each separate oil and gas property (as
defined in Section 614 of the Code), the simulated gain as computed in
accordance with Treasury Regulation Section 1.704-l(b)(2)(iv)(k)(2) (i.e., the
excess of the amount realized from the sale or other disposition of a separate
oil and gas property over the Simulated Basis of such property). If the Book
Value of any property the sale of which would result in Simulated Gain is
increased

 

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as provided in this Agreement, the amount of such adjustment shall be taken into
account as gain from the disposition of such property for purposes of computing
Simulated Gain.

 

“Simulated Loss” means with respect to each separate oil and gas property (as
defined in Section 614 of the Code), the simulated loss as computed in
accordance with Treasury Regulation Section 1.704-l(b)(2)(iv)(k)(2) (i.e., the
excess of the Simulated Basis of a separate oil and gas property over the amount
realized from the sale or other disposition of such property). If the Book Value
of any property the sale of which would result in Simulated Loss is decreased as
provided in this Agreement, the amount of such adjustment shall be taken into
account as loss from the disposition of such property for purposes of computing
Simulated Loss.

 

“SN Maverick” means SN EF Maverick, LLC, a Delaware limited liability company.

 

“Special Approval” has the meaning set forth in the GP LLC Agreement.

 

“Stand-Alone Tax Liability” has the meaning set forth in Section 8.4(b).

 

“Subsidiary” means, with respect to any Person, any corporation, limited
liability company, partnership, association or business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or Controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, (ii) if a limited liability company,
partnership, association or other business entity (other than a corporation), a
majority of limited liability, partnership or other similar ownership interests
thereof with voting rights at the time owned or Controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be deemed to
have a majority ownership interest in a limited liability company, partnership,
association or other business entity (other than a corporation) if such Person
or Persons shall be allocated a majority of limited liability company,
partnership, association or other business entity gains or losses or shall be or
Control, directly or indirectly, the manager, managing member, managing director
(or a board comprised of any of the foregoing) or general partner of such
limited liability company, partnership, association or other business entity.

 

“Substituted Partner” has the meaning set forth in Section 10.1.

 

“Tax” or “Taxes” means any and all taxes and charges of any federal, state,
local or foreign Governmental Authority, including income, profits, gross
receipts, gains, franchise, estimated, alternative minimum, add-on minimum,
sales, harmonized sales, use, transfer, registration, value added, ad valorem,
excise, goods and services, land transfer, other transfer, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, social security,
unemployment, disability, payroll, workers’ compensation, welfare, license,
employee and other withholding taxes, or other tax, fee, duty, levy, custom,
tariff, impost, assessment, obligation, or charge of the same or of a similar
nature to any of the foregoing, of any kind whatsoever, including any transferee
liability and any interest, penalties or additions to tax or additional amounts
in respect of the foregoing.

 

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“Tax Distribution” has the meaning set forth in Section 4.1(a).

 

“Tax Matters Partner” has the meaning set forth in Section 6231 of the Code.

 

“Taxable Year” means the Partnership’s accounting period for federal income tax
purposes determined pursuant to Section 8.2 or such other relevant period.

 

“Third Party Reserve Report” has the meaning set forth in Section 5.7(c).

 

“Total Equity Value” means the aggregate proceeds that would be received by the
Partners if: (i) the assets of the Partnership were sold at their Fair Market
Value; (ii) the Partnership satisfied and paid in full all of its obligations
and liabilities (including all Taxes, costs and expenses incurred in connection
with such transaction and any reasonable amounts representing the General
Partner’s reasonable and good faith estimate of the actual amount that may be
paid with respect to any contingent liabilities); and (iii) such net sale
proceeds were then distributed in accordance with Section 4.1(d), all as
determined by the Board in its reasonable and good faith judgment.

 

“Transfer” means any direct or indirect sale, transfer, assignment, pledge,
mortgage, exchange, hypothecation, gift, grant of a security interest or other
direct or indirect disposition or encumbrance (whether with or without
consideration, whether voluntarily or involuntarily or by operation of law) or
the acts thereof, including derivative or similar transactions or arrangements
whereby a portion or all of the economic interest in, or risk of loss or
opportunity for gain with respect to, Units is transferred or shifted to another
Person; provided that any indirect transfer of Equity Interests in the Sanchez
Investor that does not result in a Change of Control shall not be deemed a
“Transfer” for purposes of this Agreement. The terms “Transferee,”
“Transferred,” and other forms of the word “Transfer” shall have the correlative
meanings.

 

“Treasury Regulations” means the income tax regulations promulgated under the
Code, as amended from time to time.

 

“Unit” means an Interest in the Partnership designated as a Common Unit or a
Preferred Unit held by a Partner or other holder.

 

“Unitary/Combined Tax Report” has the meaning set forth in Section 8.4(a).

 

“Unpaid Amounts” means the aggregate amount of all Distributions (expressed in
dollars) previously accrued but not paid in cash with respect to a Preferred
Unit.

 

“Unreturned Capital” means, as of the date of determination, with respect to
each Preferred Unit, an amount equal to the excess, if any, of (i) the Preferred
Unit Purchase Price over (ii) the aggregate amount of Distributions previously
made by the Partnership that constitute a return of the Capital Contributions
(and not, by way of example, Distributions under Section 4.1(b), payments of
Unpaid Amounts, or Base Preferred Return Amounts in excess of Unreturned
Capital) with respect to such Unit (e.g., payments in respect of Unreturned
Capital pursuant to Section 4.1(c), 4.1(d), 12.2(c), or 14.1).

 

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“Warrant Agreement” means the Warrant Agreement, dated as of the Effective Date,
by and between Sanchez Parent and the GSO Funds.

 

“Warrants” means the warrants to purchase 2,000,000 shares of common stock, par
value $0.01 per share, of Sanchez Parent, subject to adjustment, pursuant to the
Warrant Agreement.

 

ARTICLE II

ORGANIZATIONAL MATTERS

 

2.1                        Continuation of the Partnership.  The General Partner
and the Organizational Limited Partner have previously formed the Partnership as
a limited partnership pursuant to the provisions of the Delaware Act. This
amendment and restatement shall become effective on the date of this Agreement.

 

2.2                        Limited Partnership Agreement.  The Partners hereby
execute this Agreement for the purpose of providing for the affairs of the
Partnership and the conduct of its business in accordance with the provisions of
the Delaware Act. Except as expressly provided to the contrary in this
Agreement, the rights, duties, liabilities and obligations of the Partners and
the administration, dissolution and termination of the Partnership shall be
governed by the Delaware Act.

 

2.3                        Name.  The name of the Partnership shall be “SN EF
UnSub, LP”. The Partnership’s business may be conducted under its name and any
other name or names as determined by the General Partner, including the name of
the General Partner. The General Partner may change the name of the Partnership
at any time and from time to time and shall notify the Limited Partners of such
change in the next regular communication to the Limited Partners.

 

2.4                        Purpose.  The purpose and business of the Partnership
shall be (i) to acquire, hold, maintain, renew, drill, develop, exploit and
operate oil and gas properties and related assets and other properties in the
AMI; (ii) subject to Section 2.4(i), to engage in or perform any other
activities deemed necessary or advisable by the General Partner; and (iii)
subject to Section 2.4(i), to engage in or perform any other lawful acts or
activities that are incident to or in furtherance of the foregoing that the
General Partner deems necessary or advisable.

 

2.5                        Principal Office: Registered Office.  The principal
office of the Partnership shall be located at 1000 Main Street, Suite 3000,
Houston, Texas 77002, or at such other place as the General Partner may from
time to time designate, and all business and activities of the Partnership shall
be deemed to have occurred at its principal office. Notice of any change to the
principal office shall be promptly provided to all Limited Partners. The
Partnership may maintain offices at such other place or places as the General
Partner deems advisable. The address of the registered office of the Partnership
in the State of Delaware shall be the office of the initial registered agent
named in the Certificate of Limited Partnership or such other office (which need
not be a place of business of the Partnership) as the General Partner may
designate from time to time in the manner provided by applicable law, and the
registered agent for service of process on the Partnership in the State of
Delaware at such registered office shall be the registered agent named in the
Certificate of Limited Partnership or such other Person or Persons

 

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as the General Partner may designate from time to time in the manner provided by
applicable law.

 

2.6                        Term.  The term of the Partnership commenced upon the
initial filing of the Certificate of Limited Partnership in accordance with the
Delaware Act and shall continue indefinitely unless sooner terminated as
provided herein. The existence of the Partnership as a separate legal entity
shall continue until the cancellation of the Certificate of Limited Partnership
as provided in the Delaware Act.

 

2.7                        Restriction on Jurisdiction of Organization.  The
Partnership shall at all times be organized under the jurisdiction of the State
of Delaware.

 

2.8                        Foreign Qualification.  The General Partner is
authorized to cause the Partnership to comply, to the extent procedures are
available, with all requirements necessary to qualify the Partnership as a
foreign limited partnership in any jurisdiction in which the Partnership owns
property or transacts business or elsewhere where such qualification may be
necessary or advisable for the protection of the limited liability of the
Limited Partners or to permit the Partnership to lawfully own property or
transact business, and to obtain similar qualifications for the Partnership’s
Subsidiaries. Each officer of the General Partner is authorized, on behalf of
the Partnership, to execute, acknowledge and deliver all certificates and other
instruments as may be necessary or appropriate in connection with the foregoing
qualifications. Further, upon request of the General Partner, each Limited
Partner will execute, acknowledge and deliver all certificates and other
instruments that are reasonably necessary or appropriate to obtain, continue,
modify or terminate such qualifications.

 

ARTICLE III

UNITS; CAPITAL CONTRIBUTIONS

 

3.1                               Units and Capital Contributions.

 

(a)                                 Units. The Units issued by the Partnership
shall consist of Common Units and Preferred Units. The Partnership is authorized
to issue up to 100,000 Common Units and 800,000 Preferred Units or such other
number of Units as may be determined by the General Partner in accordance with
the terms of the GP LLC Agreement or required to be issued pursuant to the
Securities Purchase Agreement; provided, however, that the number of authorized
Common Units shall automatically increase without any action of the General
Partner by an amount equal to the number of Common Units issued, if any,
pursuant to Section 3.1(c)(iii) upon the issuance of such Common Units pursuant
to Section 3.1(c)(iii); provided, further, that the number of authorized
Preferred Units shall automatically increase without any action of the Partners
by an amount equal to the number of Preferred Units issued, if any, pursuant to
Section 3.1(c)(ii) upon the issuance of such Preferred Units pursuant to
Section 3.1(c)(ii) or otherwise as provided for pursuant to the Securities
Purchase Agreement. Subject to the terms and conditions set forth in this
Agreement and the Securities Purchase Agreement, and after giving effect to the
transactions contemplated by the Securities Purchase Agreement, as of the
Effective Date, the Partnership has issued 100,000 Common Units to the Sanchez
Investor in exchange for

 

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$100,000,000 in cash paid by wire transfer of immediately available funds and
has issued [·](1)Preferred Units to the Institutional Investor in exchange for
$[·](2) in cash paid by wire transfer of immediately available funds. For
purposes hereof, the Institutional Investor shall be deemed initially to
contribute $[·] to the Partnership for the Preferred Units and shall be deemed
initially to contribute an amount of cash equal to the Sanchez Shares and
Warrants Amount to Sanchez Parent for the Sanchez Shares and the Warrants.
Thereafter, the Sanchez Investor shall be deemed to make an additional Capital
Contribution of cash in an amount equal to the Sanchez Shares and Warrants
Amount to the Partnership, which amount shall be deemed paid to the
Institutional Investor and thereafter contributed to the Partnership by the
Institutional Investor as an additional Capital Contribution for the Preferred
Units. The Capital Account as reflected on the Schedule of Limited Partners
attached as Schedule A hereto shall reflect the net effect of such transactions
and the provisions of Section 4.3(h)(ii). The Units issued shall be recorded on
the Schedule of Limited Partners attached as Schedule A hereto; provided, that
the Partnership may (if directed by the Board) issue certificates representing
the Units (“Certificated Units”). The General Partner is hereby authorized to
amend the Schedule of Limited Partners to reflect the issuance of additional
Units, the Transfer of Units, the admission of Additional Partners, the
resignation or withdrawal of a Partner or a change or correction to any other
information set forth on the Schedule of Limited Partners, in each case as
provided in this Agreement. The General Partner shall make available to the
Limited Partners copies of any amended or restated Schedule of Limited Partners
from time to time. The Partnership may issue fractional Units. The ownership by
a holder of Units shall entitle such holder to allocations of Profits and Losses
and other items and Distributions of cash and other property as set forth in
Article IV and Article XII. Each of the Limited Partners listed on the Schedule
of Limited Partners attached as of the date hereof as Schedule A hereto is
hereby admitted as a limited partner of the Partnership, and all of the
Interests and Units held by such Limited Partners as of the date hereof, which
collectively constitute all of the Interests and Units in the Partnership, are
hereby authorized and issued.

 

(b)                         Capital Contributions and Schedule of Limited
Partners.  As of the Effective Date, the Limited Partners have made the Capital
Contributions set forth on the Schedule of Limited Partners attached as Schedule
A hereto and each Limited Partner holds the Units specified for such Limited
Partner on the Schedule of Limited Partners attached hereto. Other than the
Capital Contributions made by the Limited Partners on the Effective Date, no
Limited Partner shall be required to make any Capital Contributions to the
Partnership, unless otherwise agreed to in writing by such Limited Partner and
pursuant to the terms of the Securities Purchase Agreement and this Agreement.
Any Capital Contributions following the Effective Date shall require the
approval of the General Partner, subject to the limitations contained in the GP
LLC Agreement. Any reference in this Agreement to the Schedule of Limited
Partners shall be deemed a reference to the Schedule of Limited Partners as
amended and in effect from time to time in accordance with this Agreement.

 

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(1) Note to Draft:  Will be a number of Preferred Units equal to the Preferred
Unit Anadarko Funding Amount and if applicable the Preferred Unit [redacted]
Funding Amount (as defined in the Purchase Agreement) divided by $1,000.

 

(2) Note to Draft:  Will be an amount of cash equal to the Preferred Unit
Anadarko Funding Amount (as defined in the Purchase Agreement) to be reduced by
the Sanchez Shares and Warrants Amount.

 

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(c)                                  Issuance of Additional Units.

 

(i)                                     After the Effective Date, the
Partnership may issue additional Preferred Units to the Institutional Investor,
with a purchase price for each such Preferred Units of $1,000 per Preferred
Unit, as determined by the General Partner and subject to the limitations
contained in the GP LLC Agreement.

 

(ii)                                   If, after the Effective Date, (A) an
event of default or borrowing base deficiency (or analogous term or event) under
any Senior Debt Agreement or any other agreements governing any material
Indebtedness of any of the Partnership or its Subsidiaries (including, without
limitation, any Replacement Credit Agreement) has occurred and such event of
default remains uncured by the Partnership or other Subsidiary, as applicable,
for ten (10) Business Days following receipt by the General Partner of notice of
such event or default or (B) any Senior Debt Agreement, Replacement Credit
Agreement or any other agreements governing any material Indebtedness of any of
the Partnership or its Subsidiaries prohibits the payment by the Partnership of
any Tax Distributions or, following the date that is 12 months following the
Effective Date, Distributions in cash on the Preferred Units pursuant to Section
4.1(b) and such prohibition persists for ten (10) Business Days after the date
such Distribution is due to be paid, then, the Institutional Investors shall
have the right, in its sole discretion, to elect to cause the Partnership to
issue additional Preferred Units, which number of Preferred Units shall be
determined by the Institutional Investor in its sole discretion following
consultation with the Board, to the Institutional Investor on the same terms and
conditions that the Preferred Units were issued to the Institutional Investor on
the Effective Date. In order to exercise such right, the Institutional Investor
shall deliver a written notice (an “Additional Preferred Units Notice”) to the
General Partner setting forth the request and the number of Preferred Units to
be issued by the Partnership. Upon receipt of the Additional Preferred Units
Notice, the General Partner and the Board shall be required to cause the
Partnership (x) to enter into a purchase agreement with the Institutional
Investor in substantially the same form attached hereto as Exhibit A (with any
such changes to the extent the parties thereto may mutually agree) and (y) to
issue the number of Preferred Units set forth in the Additional Preferred Units
Notice within five (5) Business Days of receipt of the Additional Preferred
Units Notice in accordance with such Securities Purchase Agreement. The
Partnership shall use the proceeds from the issuance of such Preferred Units to
the Institutional Investor solely outstanding Indebtedness of the Partnership
and its Subsidiaries under the Senior Debt Agreements or any other agreements
governing any material Indebtedness of the Partnership or any of its
Subsidiaries (including a Replacement Credit Agreement) so as to remedy the
applicable condition(s) described in clauses (A) and (B) of this
Section 3.1(c)(ii).

 

(iii)                              At any time following the Effective Date, the
Partnership may issue Common Units, as determined by the General Partner.

 

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(d)                         General Partner Interest.  On the Effective Date,
the General Partner retained the General Partner Interest in the Partnership,
subject to all of the rights, privileges and duties of the General Partner under
this Agreement.

 

3.2                               Capital Accounts.

 

(a)                         Maintenance of Capital Accounts.  The Partnership
shall maintain a separate Capital Account for each Partner according to the
rules of Treasury Regulation Section 1.704-l(b)(2)(iv).  For this purpose, upon
the occurrence of the events specified in Treasury Regulation
Section 1.704-l(b)(2)(iv)(f) (including a transaction to redeem any Preferred
Unit pursuant to this Agreement), the Capital Account of each Partner and the
Book Value of each asset of the Partnership immediately prior to the occurrence
of such event shall be adjusted upward or downward to reflect any unrealized
gain or unrealized loss attributable to such asset, and any such unrealized gain
or unrealized loss shall be treated, for purposes of maintaining Capital
Accounts, as if it had been recognized on an actual sale of each such property
for an amount equal to its Fair Market Value immediately prior to such event and
had been allocated to the Limited Partners at such time pursuant to
Section 12.2(c); provided, however, that in the event of (i) an issuance of
Units for a de minimis amount of cash or contributed property, (ii) a
Distribution of a de minimis amount of cash or property to a Partner, or
(iii) an issuance of a de minimis amount of Units as consideration for the
provision of services, the General Partner in its reasonable judgment may
determine that such adjustments are unnecessary for the proper administration of
the Partnership; provided further, that with prior approval of the Board and the
Institutional Investor, the General Partner may determine that no adjustments
shall be made pursuant to this Section 3.2(a).

 

(b)                         Computation of Profits and Losses.  For purposes of
computing the Profits or Losses of the Partnership for any period, and any item
of the Partnership’s income, gain, loss or deduction to be allocated pursuant to
Article IV and to be reflected in the Capital Accounts, the determination,
recognition and classification of any such item shall be the same as its
determination, recognition and classification for federal income tax purposes
(including any method of depreciation, cost recovery or amortization used for
this purpose); provided, that:

 

(i)                             the computation of all items of income, gain,
loss and deduction shall include those items described in Code
Section 705(a)(1)(B) or Code Section 705(a)(2)(B)  and  Treasury  Regulation 
Section 1.704-l(b)(2)(iv)(i), without regard to the fact that such items are not
includable in gross income or are not deductible for federal income tax
purposes;

 

(ii)                          if the Book Value of any of the Partnership’s
property is adjusted pursuant to Treasury Regulation
Section 1.704-l(b)(2)(iv)(e) or (f), the amount of such adjustment shall be
taken into account as gain or loss from the disposition of such property;

 

(iii)                       items of income, gain, loss or deduction
attributable to the disposition of the Partnership’s property having a Book
Value that differs from its adjusted basis for tax purposes shall be computed by
reference to the Book Value of such property;

 

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(iv)                      items of depreciation, amortization and other cost
recovery deductions with respect to the Partnership’s property having a Book
Value that differs from its adjusted basis for tax purposes shall be computed by
reference to the property’s Book Value in accordance with Treasury Regulation
Section 1.704- l(b)(2)(iv)(g); and

 

(v)                         to the extent an adjustment to the adjusted tax
basis of any asset of the Partnership pursuant to Code Sections 732(d),
734(b) or 743(b) is required, pursuant to Treasury Regulation
Section 1.704-l(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, 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).

 

3.3                       Negative Capital Accounts.  No Partner shall be
required to pay to any other Partner or the Partnership any deficit or negative
balance that may exist from time to time in such  Partner’s  Capital  Account
 (including  upon  and  after  dissolution,  termination,  or cancellation of
the Partnership).

 

3.4                       No Withdrawal.  No Partner shall be entitled to
withdraw any part of such Partner’s Capital Contributions or Capital Account
balance or to receive any Distribution from the Partnership, except as expressly
provided herein.

 

3.5                       Loans From Partners.   Loans by Partners to the
Partnership shall not be considered Capital Contributions. If any Partner shall
loan funds to the Partnership in excess of the amounts required hereunder to be
contributed by such Partner to the capital of the Partnership, the making of
such loans shall not result in any increase in the amount of the Capital Account
of such Partner. The amount of any such loans shall be a debt of the Partnership
to such Partner and shall be payable or collectible in accordance with the terms
and conditions upon which such loans are made.

 

3.6                       Distributions of Property.  To the extent that the
Partnership distributes property (other than cash and other than the Partnership
making accruals that are added to the Preference Accrual pursuant to
Section 4.1(b)) in kind to the Partners, the Partnership shall be treated as
making a Distribution equal to the Fair Market Value of such property for
purposes of Section 4.1 and such property shall be treated as if it were sold
for an amount equal to its Fair Market Value and any resulting gain or loss
shall be allocated to the Partners’ Capital Accounts in accordance with Sections
4.2 through 4.4.

 

3.7                       Transfer of Capital Accounts.  The original Capital
Account established for each Substituted Partner shall be in the same amount as
the Capital Account of the Partner (or portion thereof) to which such
Substituted Partner succeeds, at the time such Substituted Partner is admitted
as a Partner of the Partnership. The Capital Account of any Partner whose
Interest in the Partnership shall be increased or decreased by means of the
Transfer to it of all or part of the Units of another Partner or the repurchase
of Units shall be appropriately adjusted to reflect such Transfer or repurchase.
 Any reference in this Agreement to a Capital Contribution of or Distribution to
a Partner that has succeeded any other Partner shall include any Capital

 

25

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Contributions or Distributions previously made by or to the former Partner on
account of the Units of such former Partner Transferred to such Partner.

 

3.8                       Certain Adjustments.  If the Partnership at any time
subdivides (by any Unit split or otherwise) any Units, as applicable, into a
greater number of Units, the Partnership shall also subdivide each Common Unit
or Preferred Unit, respectively, outstanding immediately prior to such
subdivision based upon the same ratio, and if the Partnership at any time
combines (by reverse Unit split or otherwise) any Units, as applicable, into a
smaller number of Units, the Partnership shall also combine each Common Unit or
Preferred Unit, respectively, outstanding immediately prior to such combination
based upon the same ratio.

 

ARTICLE IV
DISTRIBUTIONS AND ALLOCATIONS; REDEMPTION

 

4.1                               Distributions.

 

(a)                         Tax Distributions.  To the extent the Partnership
has Available Cash, the Partnership shall distribute to each holder of Preferred
Units with respect to each Fiscal Quarter, an amount of cash (a “Tax
Distribution”) that in the good faith judgment of the General Partner equals the
excess, if any, of (A) the product of (i) the cumulative amount of taxable
income allocable to such holder of Preferred Units (or the predecessor holder of
such Preferred Units) (and (x) including any income treated as a guaranteed
payment or a payment other than in its capacity as a Partner to a holder of
Preferred Units pursuant to Code Section 707, (y) including any amounts arising
from Code Section 704(c) and (z) calculated using actual cost depletion for each
Partner as computed under Section 4.5(d) since the inception of the Partnership
(net of taxable losses allocated to each holder of Units (or the predecessor
holder of such Units) since inception of the Partnership and not previously
taken into account under this clause), multiplied by (ii) the combined maximum
federal, state and local income tax rate to be applied with respect to such
taxable income (calculated for all holders of Preferred Units using the Board’s
determination of the highest maximum combined marginal federal, state and local
income tax rates to which any holder of Preferred Units may be subject and
taking into account the character of such taxable income and the deductibility
of state income tax for federal income tax purposes, subject to any applicable
limitations on deductibility) over (B) the cumulative amount of Distributions in
cash made to such holder of Preferred Units; provided that the amount computed
in clause (A)(i) shall be determined without taking into account any taxable
income allocated to the holder of Preferred Units as a result of such holder
having an initial Capital Account attributable to such Preferred Units that is
less than the initial Base Preferred Return Amount (for the avoidance of doubt,
this “provided” clause shall not apply to and Tax Distributions shall be made
with respect to taxable income allocated as a result of the allocation of
Profits pursuant to Section 4.2(a)). For the purposes of calculating the amounts
payable under Sections 4.1(b), (c), or (d), Tax Distributions shall be treated
as advances of any amounts holders of Preferred Units are entitled to receive
pursuant to Sections 4.1(b), (c), or (d), as applicable, and shall be offset
against any amounts holders of Preferred Units are entitled to receive pursuant
to or in accordance with Sections 4.1(b), (c), or (d), as applicable.

 

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(b)                          Preferred Distributions.  Persons holding Preferred
Units shall be entitled to receive, on each Preferred Payment Date, with respect
to the Fiscal Quarter then ended, a Distribution in cash with respect to each
Preferred Unit in an amount equal to the product of (i) the Preferred
Distribution Rate multiplied by (ii) the Preference Accrual (the “Quarterly
Distribution Amount”); provided, however, that if the Effective Date is a day
other than the first day of a Fiscal Quarter, then the first payment made
hereunder shall be prorated accordingly. The Partnership shall pay such
Distributions on the Preferred Units in cash, unless prohibited by the Senior
Debt Agreements or any Replacement Credit Agreement. If any Distribution (or
portion thereof) contemplated by this Section 4.1(b) is not paid in cash in
accordance with the terms of this Agreement, then such Distribution (or portion
thereof) shall accrue and shall be added to the Unpaid Amounts and thereupon
become part of the Preference Accrual with respect to such Preferred Unit. In
furtherance of the foregoing, all additions to the Preference Accrual resulting
from such Distribution being less than the Quarterly Distribution Amount shall
be deemed made automatically and without any further action by the Partnership,
the General Partner, or any other Person and therefore shall become part of the
Preference Accrual. At least two (2) Business Days prior to any applicable
Preferred Payment Date, the Partnership shall notify the Preferred Partners in
writing as to whether the Partnership has elected to pay the Distribution
contemplated by this Section 4.1(b) in respect of the applicable Fiscal Quarter
in cash on such Preferred Payment Date or has elected instead to defer payment
of such Distribution and have the accrued but unpaid amount of such Distribution
added to the Unpaid Amounts. In addition to the foregoing, the Partnership may
make cash Distributions with respect to any Unpaid Amounts on a date other than
a Preferred Payment Date, as determined by the General Partner.

 

(c)                                  Distributions on Preferred Units;
Distributions on Common Units.

 

(i)                              After the first anniversary of the Effective
Date and prior to the date on which there are no Preferred Units issued and
outstanding, on any Preferred Payment Date, following the payment of all
Distributions under Section 4.1(b), the General Partner may (but shall not be
obligated to) make cash Distributions from Available Cash to the Preferred
Partners, pro rata in proportion to the aggregate number of Preferred Units held
by each such Preferred Partner, with such Distributions being applied toward the
Base Preferred Return Amount for each outstanding Preferred Unit or the
redemption of the Preferred Units held by such Preferred Partners in accordance
with Article XIV. With respect to any redemption of a Preferred Unit under this
Section 4.1(c)(i), it is understood and agreed that the amount paid in respect
of such redemption shall be applied first to the amount by which the Preference
Accrual exceeds the Unreturned Capital in respect of each Preferred Unit until
such excess has been reduced to zero, then to the amount by which the Base
Preferred Return Amount exceeds the Unreturned Capital with respect to such
Preferred Unit until such excess has been reduced to zero, then to the
Unreturned Capital with respect to such Preferred Unit.

 

(ii)                           Each Distribution in accordance with
Section 4.1(d)(iv) and any other Distribution made by the Partnership following
the date on which there are no Preferred Units issued and outstanding shall be
made by the Partnership to the holders of the Common Units (pro rata in
accordance with their Proportional

 

27

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Share). The Partnership shall not make any Distributions on the Common Units
until all Preferred Units are redeemed in full such that there are no Preferred
Units issued and outstanding.

 

(d)                          Distributions upon Change of Control and Certain
Other Transactions.  In the event of a Distribution of assets or properties of
the Partnership in connection with a Change of Control, an Exit Transaction, any
Disposition Transaction, any transaction under Section 14.1 (if all Preferred
Units are redeemed), a transaction under Section 14.2, or a transaction under
Section 14.3 (that does not trigger a dissolution or liquidation of the
Partnership or a Partner’s Interest (within the meaning of Treasure Regulations
Section 1.704-1(b)(2)(ii)(g)) pursuant to Article XII, each Partner shall
receive, after any required payments under the Senior Debt Agreements or
Replacement Credit Agreement, the portion of the aggregate consideration from
such transactions described above, that such Person would have received if such
aggregate consideration paid in connection with such transaction had been
distributed by the Partnership in the following order of priority:

 

(i)                              first, an amount to the holders of Preferred
Units, pro rata in proportion to the Preferred Units held by such holders of
Preferred Units, until the aggregate amount, if any, by which the Preference
Accrual exceeds the Unreturned Capital, with respect to each such holder’s
Preferred Units, has been reduced to zero;

 

(ii)                           second, an amount to the holders of Preferred
Units, pro rata in proportion to the Preferred Units held by such holders of
Preferred Units, until the aggregate amount, if any, by which the Base Preferred
Return Amount exceeds Unreturned Capital, with respect to each such holder’s
Preferred Units, has been reduced to zero;

 

(iii)                        third, to the holders of Preferred Units, pro rata
in proportion to the Preferred Units held by such holders of Preferred Units,
until the aggregate Unreturned Capital with respect to each such holder’s
Preferred Units has been reduced to zero and the Preferred Partners have
received aggregate Distributions in an amount that yields the Base Preferred
Return Amount with respect to each Preferred Unit; and

 

(iv)                       fourth, to the holders of Common Units (pro rata in
accordance with their Proportional Share).

 

4.2                        Allocations.  For purposes of maintaining Capital
Accounts and in determining the Profits and Losses of the Partners among
themselves, Profits and Losses for any Fiscal Year or any Fiscal Period shall be
allocated among the Partners as provided herein below.

 

(a)                                 Profits.                              After
making the allocations required by Section 4.3 and Section 4.4, Profits for any
Fiscal Year or Fiscal Period shall be allocated as follows:

 

(i)                              first, 100% to Preferred Partners, pro rata in
proportion to the aggregate number of Preferred Units held by each such
Preferred Partner, until the aggregate  Profits  allocated  to  the  Preferred
 Partners  pursuant  to  this

 

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Section 4.2(a)(i) for the current and all previous taxable periods is equal to
the aggregate Losses allocated to the Preferred Partners pursuant to
Section 4.2(b)(ii) for the current and all previous taxable periods;

 

(ii)                           second, 100% to the Preferred Partners pro rata
in proportion to the aggregate number of Preferred Units held by each such
Preferred Partner, until the amount  of  Profits  allocated  to  the  Preferred
 Partners  pursuant  to  this Section 4.2(a)(ii) for the current and all
previous taxable periods is equal to the amount of return accruing to each
Preferred Partner sufficient to generate an IRR with respect to each Preferred
Unit held by a Preferred Partner of fourteen percent (14%); provided that, for
the avoidance of doubt, clause (ii) of the definition of Base Preferred Return
Amount shall not be taken into account in making allocations of Profits unless
Preferred Units are redeemed pursuant to Section 14.1 at a time when clause
(ii) of the definition of Base Preferred Return Amount exceeds clause (i) of
such definition; and

 

(iii)                        third, 100% to the holders of Common Units, pro
rata in accordance with their respective Proportional Share.

 

(b)                                 Losses.                             After
making the allocations required by Section 4.3 and Section 4.4, Losses for any
Fiscal Year or Fiscal Period shall be allocated as follows:

 

(i)                              first, 100% to the holders of Common Units, pro
rata in accordance with their respective Proportional Share, until the Adjusted
Capital Account in respect to each Common Unit has been reduced to, but not
below, zero; and

 

(ii)                           second, to the Preferred Partners, pro rata in
proportion to the aggregate number of Preferred Units held by each such
Preferred Partner.

 

4.3                               Special Allocations.

 

(a)                          Partnership Minimum Gain Chargeback.
 Notwithstanding any other provisions of this Section 4.3, if there is a net
decrease during a Taxable Year in Partnership Minimum Gain, items of income or
gain of the Partnership for such Taxable Year (and, if necessary, for subsequent
Taxable Years) shall be allocated to the Partners in the amounts and of such
character as determined according to Treasury Regulation
Section 1.704-2(f)(6) and (g) (2) and Section 1.704-2(j)(2)(i), or any successor
provisions.  This Section 4.3(a) is intended to comply with the Partnership
Minimum Gain chargeback requirement in Treasury Regulation
Section 1.704-2(g) and shall be interpreted consistently therewith.

 

(b)                          Partner Nonrecourse Debt Minimum Chargeback.
 Notwithstanding any other provisions of this Section 4.3 (other than
Section 4.3(a)), except as provided in Treasury Regulation
Section 1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Taxable Year, each Partner with a share of Partner
Nonrecourse Debt Minimum Gain at the beginning of the such Taxable Year shall be
allocated items of income or gain of the Partnership for such Taxable Year (and,
if necessary, for subsequent Taxable Years) in the amounts and of such character
as determined according to Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii), or any successor provisions. This Section 4.3(b) is

 

29

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intended to comply with the chargeback provision that complies with the
requirements of Treasury Regulation Section 1.704-2(i)(4), and shall be
interpreted in a manner consistent therewith.

 

(c)                           Nonrecourse Deductions.  Nonrecourse Deductions
for any Taxable Year shall be allocated to each Partner ratably among such
Partners based upon the manner in which Profits are allocated among the Partners
for such Taxable Year (and if no Profits are allocated in any Taxable Year,
based on the Partners’ Pro Rata Shares).

 

(d)                          Partner Nonrecourse Deductions.  Losses
attributable to Partner Nonrecourse Deductions for any Taxable Year shall be
allocated in the manner required by Treasury Regulation Section 1.704-2(i).

 

(e)                           Qualified Income Offset.  If any Partner that
unexpectedly receives an adjustment,  allocation  or  distribution  described
 in  Treasury  Regulation  Section 1.704- l(b)(2)(ii)(d)(4), (5) and (6) has a
deficit balance in its Adjusted Capital Account as of the end of any Taxable
Year, computed after the application of Section 4.2 but before the application
of any other provision of this Article IV, then items of income or gains of the
Partnership for such Taxable Year shall be allocated to such Partner in
proportion to, and to the extent of, such deficit balance in its Adjusted
Capital Account. This Section 4.3(e) is intended to be a qualified income offset
provision as described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted in a manner consistent therewith.

 

(f)                            Gross Income Allocation.  In the event any
Partner has a deficit balance in its Capital Account at the end of any taxable
period in excess of the sum of (A) the amount such Partner is required to
restore pursuant to the provisions of this Agreement and (B) the amount such
Partner is deemed obligated to restore pursuant to Treasury Regulation Sections
1.704-2(g) and 1.704-2(i)(5), such Partner shall be specially allocated items of
Partnership gross income, gain and Simulated Gain in the amount of such excess
as quickly as possible; provided, that an allocation pursuant to this
Section 4.3(f) shall be made only if and to the extent that such Partner would
have a deficit balance in its Capital Account after all other allocations
provided for in Sections 4.2 and 4.3 have been tentatively made as if
Section 4.3(e) and this Section 4.3(f) were not in this Agreement.

 

(g)                           Allocation of Certain Profits and Losses.  Profits
and Losses described in Section 3.2(b)(v) shall be allocated in a manner
consistent with the manner that the adjustments to the Capital Accounts are
required to be made pursuant to Treasury Regulation Section 1.704-
l(b)(2)(iv)(m).

 

(h)                                 Special Allocations with Respect to the
Preferred Units.

 

(i)                                     Items of gross income shall be allocated
to each Preferred Partner until the cumulative allocations of items of gross
income to each Preferred Partner pursuant to this Section 4.3(h)(i) equal the
cumulative amount of Simulated Depletion allocated to each Preferred Partner
pursuant to Section 4.3(j);

 

(ii)                                  Consistent with Section 3.1(a), the deemed
payment of an amount of cash equal to the Sanchez Shares and Warrants Amount by
the Partnership to

 

30

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the Institutional Investor shall be treated as a guaranteed payment by the
Partnership within the meaning of Code Section 707 and the resulting deduction
shall be allocated to the Sanchez Investor.

 

(i)                              Regulatory Allocations.  The allocations set
forth in Sections 4.3(a)-(d) (the  “Regulatory  Allocations”)  are  intended  to
 comply  with  certain  requirements  of Sections 1.704-1(b) and 1.704-2 of the
Treasury Regulations. The Regulatory Allocations may not be consistent with the
manner in which the Partners intend to allocate Profit and Loss of the
Partnership or make the Partnership’s Distributions. Accordingly,
notwithstanding the other provisions of this Article IV, but subject to the
Regulatory Allocations, income, gain, deduction, and loss shall be reallocated
among the Partners so as to eliminate the effect of the Regulatory Allocations
and thereby cause the respective Capital Accounts of the Partners to be in the
amounts (or as close thereto as possible) they would have been if Profit and
Loss (and such other items of income, gain, deduction and loss) had been
allocated without reference to the Regulatory Allocations. In general, the
Partners anticipate that this will be accomplished by specially allocating other
Profit and Loss (and such other items of income, gain, deduction and loss) among
the Partners so that the net amount of the Regulatory Allocations and such
special allocations to each such Partner is zero.

 

(j)                             Simulated Items.  The Simulated Basis in each
oil and gas property (as defined in Section 614 of the Code) shall be allocated
among the Partners in accordance with the Partners’ Pro Rata Shares at the time
of the acquisition of such property. Simulated Depletion, Simulated Gain, and
Simulated Loss with respect to each oil and gas property (as defined in
Section 614 of the Code) shall be allocated among the Partners in proportion to
the manner in which the Simulated Basis of such property is allocated among the
Partners and the Partnership shall elect the cost method for purposes of
calculating Simulated Depletion with respect to each oil and gas property.

 

4.4                        Offsetting Allocations.  If, and to the extent that,
any Partner is deemed to recognize any item of income, gain, deduction or loss
as a result of any transaction between such Partner and the Partnership pursuant
to Sections 83, 482, or 7872 of the Code or any similar provision now or
hereafter in effect, the General Partner shall allocate any corresponding Profit
or Loss to the other Partners of the Partnership.

 

4.5                               Tax Allocations.

 

(a)                          Allocations Generally. The income, gains, losses,
deductions and credits of the Partnership will be allocated for federal, state
and local income tax purposes among the Partners in accordance with the
allocation of such income, gains, losses, deductions and credits among the
Partners for computing their Capital Accounts; except that if any such
allocation is not permitted by the Code or other applicable law, the
Partnership’s subsequent income, gains, losses, deductions and credits will be
allocated among the Partners so as to reflect as nearly as possible the
allocation set forth herein in computing their Capital Accounts.

 

(b)                          Code Section 704(c) Allocations.  Items of the
Partnership’s taxable income, gain, loss and deduction with respect to any
property contributed to the capital of the Partnership shall be allocated among
the Partners in accordance with Code Section 704(c) so as

 

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to take account of any variation between the adjusted basis of such property to
the Partnership for federal income tax purposes and its Book Value. In addition,
if the Book Value of any of the Partnership’s  asset  is  adjusted  pursuant  to
 the  requirements  of  Treasury  Regulation Section 1.704-l(b)(2)(iv)(e) or
(f), then subsequent allocations of items of taxable income, gain, loss and
deduction with respect to such asset shall take account of any variation between
the adjusted basis of such asset for federal income tax purposes and its Book
Value in the same manner as under Code Section 704(c).  The General Partner
shall determine all allocations pursuant to this Section 4.5(b).

 

(c)                           Allocation of Tax Credits, Tax Credit Recapture,
Etc. Allocations of tax credits, tax credit recapture, and any items related
thereto shall be allocated to the Partners according to their Interests in such
items as determined by the General Partner taking into account the principles of
Treasury Regulation Section 1.704-1(b)(4)(ii).

 

(d)                                 Depletion.

 

(i)                              The deduction for depletion with respect to
each separate oil and gas property (as defined in Section 614 of the Code)
shall, in accordance with Section 613A(c)(7)(D) of the Code, be computed for
federal income tax purposes separately by the Partners rather than the
Partnership. Except as provided in Section 4.5(b), for purposes of such
computation, the proportionate share of the adjusted tax basis of each oil and
gas property shall be allocated among the Partners in accordance with the
Partners’ Pro Rata Shares at the time of the acquisition of such property. Each
Partner, with the assistance of the General Partner, shall separately keep
records of its share of the adjusted tax basis in each separate oil and gas
property, adjust such share of the adjusted tax basis for any cost or percentage
depletion allowable with respect to such property and use such adjusted tax
basis in the computation of its cost depletion or in the computation of its gain
or loss on the disposition of such property by the Partnership. Upon the request
of the General Partner, each Partner shall advise the General Partner of its
adjusted tax basis in each separate oil and gas property and any depletion
computed with respect thereto, both as computed in accordance with the
provisions of this subsection. The General Partner may rely on such information
and, if it is not provided by the Partner, may make such reasonable assumptions
as it shall determine with respect thereto. When reasonably requested by a
Partner, the Partnership shall provide all available information needed by the
Partner to comply with the record keeping requirements of this section.

 

(ii)                           Except as provided in Section 4.5(b), for the
purposes of the separate computation of gain or loss by each Partner on the sale
or disposition of each separate oil and gas property (as defined in Section 614
of the Code), the Partnership’s allocable share of the “amount realized” (as
such term is defined in Section 1001(b) of the Code) from such sale or
disposition shall be allocated for federal income tax purposes among the
Partners as follows:

 

(A)                               first, to the extent such amount realized
constitutes a recovery of the Simulated Basis of the property, to the Partners
in the same

 

32

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percentages as the depletable basis of such property was allocated to the
Partner pursuant to Section 4.5(d)(i); and

 

(B)                       second, the remainder of such amount realized, if any,
to the Partners so that, to the maximum extent possible, the total amount
realized allocated to each Partner under this Section 4.5 will equal such
Partner’s share of the proceeds derived by the Partnership from such sale or
disposition.

 

(iii)                       The Partnership will maintain the books and records
regarding its properties, broken down by property and by Partner, and will
prepare and provide to the Partners documentation and schedules, broken down by
Partner, reasonably necessary and requested by any Partner so that the Partners
can comply with their obligations under this Section 4.5(d).

 

(e)                                  Effect of Allocations. Allocations pursuant
to this Section 4.5 are solely for purposes of federal, state and local taxes
and shall not affect any Partner’s Capital Account.

 

(f)                                   General.                               
For purposes  of maintaining Capital  Accounts  and  for allocations of Profits,
Losses, and Distributions, any Unit holder shall be treated as a Partner.

 

4.6                       Withholding and Indemnification for Payments on Behalf
of a Partner. The Partnership may withhold Distributions with respect to any
Unit or portions thereof if it is required by applicable law to make any payment
to a Governmental Authority that is specifically attributable to a Partner (as
determined by the General Partner) with respect to Units held by such Person
(including, without limitation, federal withholding taxes, state personal
property taxes, state and local severance or extraction taxes, state
unincorporated business taxes, and any taxes arising under Code Sections 6221
through 6241, as amended by the Bipartisan Budget Act of 2015, together with any
guidance issued thereunder or successor provisions and any similar provision of
state or local tax laws, and, in each case, any interest and penalties
attributable thereto) and each such Partner hereby authorizes the Partnership to
withhold from or pay on behalf of or with respect to such Partner any such
payment that the General Partner determines that the Partnership is required to
withhold or pay with respect to any amount distributable or allocable to such
Partner with respect to Units held by such Person pursuant to this Agreement.
Any amounts withheld pursuant to this Section 4.6 will be treated as having been
distributed to such Partner. To the extent that the cumulative amount of such
withholding for any period exceeds the Distributions to which such Partner is
entitled for such period with respect to Units held by such Person, the
Partnership will provide notice to such Partner and (i) such amount will be
treated as having been distributed to such Partner as an advance against the
next Distributions that would otherwise be made to such Partner with respect to
Units held by such Person, and such amount shall be satisfied by offset from
such next Distributions or (ii) if requested in writing by the General Partner,
contributed by such Partner to the Partnership within fifteen (15) days of
demand therefore. Any tax liability paid by the Partnership pursuant to the
Bipartisan Budget Act of 2015 shall be allocated to the Partners in accordance
with a determination of the Board. If a Partner fails to comply with its
obligation to contribute to the Partnership pursuant to clause (ii) above, such
Partner shall indemnify the Partnership in full for the entire amount paid by
the Partnership (including interest, penalties and related expenses). Each
Partner will furnish the General Partner with such information as may reasonably
be requested by the General

 

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Partner from time to time to determine whether withholding is required and the
amount thereof, and each Partner will promptly notify the General Partner if
such Partner determines at any time that it is subject to withholding. A
Partner’s obligation to indemnify and make contributions to the Partnership
under this Section 4.6 shall survive the termination, dissolution, liquidation,
cancellation, and winding up of the Partnership, and for purposes of this
Section 4.6, to the fullest extent permitted by applicable law, the Partnership
shall be treated as continuing in existence. The Partnership may pursue and
enforce all rights and remedies it may have against each Partner under this
Section 4.6 if a Partner does not comply with the provisions in this
Section 4.6, including instituting a lawsuit to collect such contribution and
indemnification amounts required to be paid to the Partnership, with interest
calculated at a rate equal to the lesser of the (i) Maximum Lawful Rate and
(ii) the Prime Rate plus three percentage points per annum (but not in excess of
the highest rate per annum permitted by applicable law), compounded on the last
day of each Fiscal Quarter.

 

4.7                        Order of Redemptions. With respect to any redemption
of Preferred Units contemplated under this Agreement, such redemption shall be
effected first with respect to Preferred Units that were issued on the earliest
issuance date as compared with all Preferred Units then outstanding.

 

ARTICLE V

MANAGEMENT

 

5.1                        Generally.  The General Partner shall conduct, direct
and exercise full control over all activities and operations of the Partnership.
Except as otherwise expressly provided in this Agreement, all management powers
over the business and affairs of the Partnership shall be exclusively vested in
the General Partner, and no Limited Partner shall have any right of control or
management power over the business and affairs of the Partnership. Decisions or
actions taken by the General Partner in accordance with the provisions of this
Agreement shall constitute decisions or actions by the Partnership and shall be
binding on each Partner and employee, if any, of the Partnership. Any Person
dealing with the Partnership, other than a Partner or a Partner’s Affiliate, may
rely on the authority of the General Partner in taking any action in the name of
the Partnership without inquiry into the provisions of this Agreement or
compliance with it, regardless of whether that action actually is taken in
accordance with the provisions of this Agreement. No Limited Partner in its
capacity as a Limited Partner shall have any right or authority to take any
action on behalf of the Partnership or to bind or commit the Partnership to any
agreement, transaction or other arrangement with respect to third parties or
otherwise or to hold itself out as an agent of the Partnership. Notwithstanding
any contrary provisions in this Agreement, (a) in no event shall a Limited
Partner be considered a general partner of the Partnership by agreement,
estoppels, as a result of the performance of its duties or otherwise, and
(b) the Limited Partners shall not be deemed to be participating in the control
of the business of the Partnership within the meaning of the Act as a result of
any actions taken by a Limited Partner hereunder. The General Partner shall
comply with the terms of the GP LLC Agreement in managing the Partnership.

 

5.2                               Authority of the General Partner.  Subject to
Section 2.4, Section 5.1 and Section 5.9, the General Partner shall have the
power, right and authority to take all actions which the

 

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General Partner deems necessary, useful or appropriate for the management and
conduct of the Partnership’s business or to the accomplishment of the purposes
of the Partnership.

 

5.3                               Appointment, Withdrawal and Removal of the
General Partner.

 

(a)                          Withdrawal of the General Partner.  The General
Partner may not withdraw from the Partnership except as set forth in the next
succeeding sentence. The General Partner shall be deemed to have withdrawn from
the Partnership immediately following the occurrence of any of the following
events (each, an “Event of Withdrawal”): (i) if the General Partner Transfers
all of its General Partner Interest in accordance with the terms of this
Agreement, then upon the admission of the successor General Partner; and/or
(ii) if the General Partner is removed in accordance with Section 5.3(b), then
upon the admission of the successor General Partner. If an Event of Withdrawal
occurs, the General Partner shall give written notice thereof to the Limited
Partners within 30 days thereafter. Notwithstanding the foregoing or anything to
the contrary herein, the General Partner shall not withdraw (including by
Transfer of its Interests) without the prior written consent of the Credit
Agreement Agent.

 

(b)                          Removal of the General Partner.  The General
Partner may be removed by the affirmative vote of the Common Partners holding a
majority of the outstanding Common Units, voting together as a single class, and
the affirmative vote of the Preferred Partners holding a majority of the
outstanding Preferred Units, voting together as a single class. Any such action
by the Common Partners and the Preferred Partners must also provide for the
election of a successor General Partner immediately prior to such action by vote
of the Common Partners holding a majority of the outstanding Common Units,
voting together as a single class, and by vote of the Preferred Partners holding
a majority of the outstanding Preferred Units, voting together as a single
class, respectively. Notwithstanding the foregoing or anything to the contrary
herein, the General Partner may not be removed without the prior written consent
of the Credit Agreement Agent.

 

(c)                           Impact of Event of Withdrawal.  Upon the
occurrence of an Event of Withdrawal, the General Partner hereby waives any and
all rights to any and all distributions, payments or other amounts which may
otherwise be payable pursuant to Section 17-604 of the Delaware Act and agrees
that all right, title and interest in and to such General Partner Interest held
by the former General Partner shall immediately be fully vested in the successor
General Partner appointed as set forth in Section 5.3(b) above.

 

5.4                        Discharge of Duties; Reliance on Reports.  The
General Partner may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, or other paper or document
believed by such Person to be genuine and to have been signed or presented to
the General Partner. The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it and any act taken or omitted in reliance
upon the opinion, statement, report or information of such Persons as to matters
that the General Partner reasonably believes to be within such Person’s
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.

 

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5.5                       Compensation and Reimbursements.  The General Partner
shall not receive from the Partnership any compensation for managing the affairs
of the Partnership; provided that the General Partner shall be reimbursed by the
Partnership for all out-of-pocket costs and expenses that the General Partner
incurs or payments it makes on behalf of the Partnership.

 

5.6                       Outside Activities.  The General Partner, for so long
as it is the General Partner of the Partnership, shall not engage in any
business or activity or incur any debts or liabilities except in connection with
or incidental to its performance as general partner or managing member, if any,
of one or more of the Partnership or any of its Subsidiaries.

 

5.7                       Information Rights.  Each holder of Preferred Units
shall have the right to receive all of the following information from the
Partnership, and the Partnership shall, and shall cause each of its Subsidiaries
to, provide to each such Person:

 

(a)                         as soon as available but, in any event within
forty-five (45) days after the end of each of the first three Fiscal Quarters,
unaudited consolidated statements of income and cash flows of the Partnership
and its Subsidiaries for such Fiscal Quarter and for the period from the
beginning of the Fiscal Year to the end of such Fiscal Quarter, and unaudited
consolidated balance sheets of the Partnership and its Subsidiaries as of the
end of such Fiscal Quarter (collectively, the “Quarterly Statements”). All
Quarterly Statements shall be prepared in accordance with GAAP (subject to the
absence of footnote disclosures and to changes resulting from normal year-end
adjustments for recurring accruals) and shall be accompanied by a reasonably
detailed description of the business activities that took place during such
Fiscal Quarter and a summary business plan for the Fiscal Quarter following such
Fiscal Quarter;

 

(b)                         within sixty (60) days after the end of each Fiscal
Year, audited consolidated statements of income and cash flows of the
Partnership and its Subsidiaries for such Fiscal Year, and audited consolidated
balance sheets of the Partnership and its Subsidiaries as of the end of such
Fiscal Year (collectively, the “Annual Statements”). All Annual Statements shall
be prepared in accordance with GAAP and shall be accompanied by (i) with respect
to the consolidated portions of the Annual Statements, an opinion of an
independent accounting firm of recognized national standing acceptable to the
Board, (ii) a copy of such firm’s annual management letter to the Board or the
governing board of directors or managers of any Subsidiary of the Partnership
and (iii) a reasonably detailed description of the business activities that took
place during such Fiscal Year and a summary business plan for the Fiscal Year
following such Fiscal Year;

 

(c)                          promptly upon receipt or preparation thereof, but
in any event within sixty (60) days after the end of each Fiscal Year, an annual
petroleum engineer report prepared by an independent third-party petroleum
engineer, including an ARES or similar database (the “Third Party Reserve
Report”);

 

(d)                         promptly upon completion thereof, a petroleum
engineer report prepared internally as a semi-annual update to the most recent
Third Party Reserve Report, including an ARES or similar database;

 

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(e)                          (i) not later than thirty (30) days prior to the
end of each Fiscal Year, an annual operating and capital budget prepared on a
monthly basis for the Partnership and its Subsidiaries for the following Fiscal
Year, (ii) promptly upon completion thereof, any other significant budgets
prepared by the Partnership or any of its Subsidiaries and any material
revisions of such annual or other budgets and (iii) simultaneously with the
delivery of any Annual Statements or Quarterly Statements, as applicable, a
comparison of (A) such Annual Statements or Quarterly Statements to the annual
budget or quarterly portion thereof for such Fiscal Year or Fiscal Quarter, as
applicable, and (B) the Partnership’s and its Subsidiaries’ capital expenditures
for such Fiscal Year or Fiscal Quarter to the corresponding annual budget or
quarterly portion thereof, as applicable;

 

(f)                           promptly upon completion thereof, but in any event
within forty-five (45) days after the end of each month, monthly operating and
financial reports prepared by or on behalf of the Partnership; statements;

 

(g)                          within sixty (60) days of the end of each Fiscal
Quarter, monthly LOS

 

(h)                         within forty-five (45) days of the end of each
Fiscal Quarter, a list of wells drilled (including, but not limited to, spud
date, completion date, authority for expenditures, actual capital expenditures,
target formation, lateral lengths, completion design issues, location and first
sales), and, if so requested, any seismic, logging and other technical
information acquired by the Partnership;

 

(i)                             within sixty (60) days of the end of each Fiscal
Year, a list of acreage held by the Partnership and the SN Maverick in the AMI,
including, but not limited to, gross and net acres, any material information
regarding leases and a listing of any lease expirations and continuous drilling
obligations in the upcoming year;

 

(j)                            on November 30 and May 31 of each year, a
semi-annual plan of the Partnership, including (i) a forecast for the next six
(6) months that includes anticipated production, NYMEX prices, realized prices,
revenues, operating costs and capital expenditures, and (ii) a capital budget,
including planned locations for new wells;

 

(k)                         promptly upon the reasonable request of any
Preferred Partner, such other reports and information (in any form, electronic
or otherwise) that are customarily provided to a holder of equity in a similar
company, including information requested by a Preferred Partner to file tax
returns and any other information reasonably requested by the Preferred Partners
holding a majority of the Preferred Units;

 

(l)                             simultaneously with the initial delivery
thereto, copies of material notices and reports and other material information
provided by the Partnership to any of its or its Subsidiaries’ lenders;

 

(m)                     (A) copies of any notice provided by SN Maverick or
Blackstone Newco under the Joint Development Agreement and access to any virtual
or electronic data room provided to the working interest owners under the Joint
Development Agreement, (B) copies of information and notices provided to UnSub
or by UnSub under the Hydrocarbon Marketing

 

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Agreement, and (C) copies of information and notices provided to UnSub or by
UnSub under the Sanchez Letter Agreement;

 

(n)                         five (5) Business Days’ advance notice prior to (i)
the Partnership’s execution of any Material Contract or any amendment thereto
accompanied by a copy of such proposed Material Contract or amendment or
(ii) the Partnership’s entry into any contract, arrangement, transaction or
series of transactions with an Affiliate of UnSub in excess of $10 million,
including (A) a description of such transaction, agreement or contract
accompanied by a copy of such contract or agreement and (B) a certification from
a financial officer of UnSub that the transaction meets the criteria set forth
in Section 5.7(b)(xiii) of the GP LLC Agreement; and

 

(o)                         within thirty (30) days of the end of each Fiscal
Quarter, a report describing in reasonable detail sales of any Joint Properties
(as defined in the GP LLC Agreement) by Sanchez Investor, or any of its
Affiliates, since the Partnership’s inception.

 

5.8                       Enforcement of Affiliate Contracts.  Each of the
Partners agree that any term or condition of any arrangement, agreement or
contract between the Partnership or any of its Subsidiaries, on the one hand,
and any Affiliate of a Partner (excluding at any pertinent time, any Subsidiary
of the Partnership), on the other hand, other than the APC/KM PSA, shall be
exercised or enforced pursuant to Section 5.9 of the GP LLC Agreement by the
Class A Member or Class B Member of the General Partner as set forth therein;
provided, however, that any such exercise or enforcement shall not entitle such
non-Affiliated Partner to vary any obligation of the Partnership or of such
Affiliate under such arrangement, agreement or contract. The General Partner
will provide to the non-Affiliated Partner copies of all formal notices or
material correspondence under any of such arrangements, agreements or contracts
at the same time as delivery to any counterparty under such arrangements,
agreements or contracts. For clarity, the foregoing shall not permit the Class B
Member to enforce the rights and obligations of the General Partner, the
Partnership or any of its Subsidiaries under the Joint Development Agreement or
any Operating Agreement to the extent that the term or condition of such
arrangement, agreement or contract relates solely to a party that is not an
Affiliate of a Partner or of the General Partner (provided, for the avoidance of
doubt, the foregoing shall not limit the Class B Member, or its board member’s
rights, under Section 5.7(a) and 5.7(b) of the GP LLC Agreement); provided,
further that for clarity, the Class B Member shall be entitled to direct the
exercise and enforcement by the General Partner, the Partnership or a Subsidiary
of the Partnership under the Joint Development Agreement or any Operating
Agreement to the extent that (i) the term or condition of such arrangement,
agreement or contract relates to a party that is an Affiliate of a Partner or
Affiliate of the Partnership and the Class B Member reasonably determines in
good faith that there is a conflict of interest by the applicable member of the
Sanchez Group in exercising or enforcing such term or condition or (ii) either
the applicable member of the Sanchez Group or the Partnership is then in breach
of the applicable arrangement, agreement or contract.

 

5.9                               Independent Director; Separateness Covenants.

 

(a)                         Notwithstanding anything to the contrary in this
Agreement, at any time during which an Independent Director is required to be
appointed to the Board, none of the General Partner, the Partnership or any
officer or agent of the General Partner on behalf of the

 

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Partnership shall, without the consent of the entire Board, including the
Independent Director, take any action that would result in a Bankruptcy Event
(as defined in the GP LLC Agreement) of the Partnership; adopt a plan of
liquidation of the Partnership; take any action to commence any suit, case,
proceeding or other action under any existing or future Law of any jurisdiction
relating to bankruptcy, insolvency, reorganization or relief of debtors seeking
to have an order for relief entered with respect to the Partnership, or seeking
to adjudicate the Partnership as bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to the Partnership; appoint a receiver,
trustee, custodian or other similar official for Partnership, or for all or any
material portion of the assets of the Partnership; or make a general assignment
for the benefit of the creditors of the Partnership.

 

(b)                         The Partnership shall comply with, and the General
Partner shall cause the Partnership to comply with, the covenants set forth in
Section 5.13 of the GP LLC Agreement, which covenants are deemed incorporated by
reference herein.

 

ARTICLE VI

RIGHTS AND OBLIGATIONS OF THE PARTNERS;

INDEMNIFICATION; CONFIDENTIALITY

 

6.1                       Limitation of Liability.  Except as otherwise provided
by the Delaware Act, the debts, obligations and liabilities of the Partnership,
whether arising in contract, tort or otherwise, shall be solely the debts,
obligations and liabilities of the Partnership, and no Limited Partner shall be
obligated personally for any such debt, obligation or liability of the
Partnership solely by reason of being a Limited Partner of the Partnership.
Except as otherwise provided in this Agreement, a Limited Partner’s liability
(in its capacity as a Limited Partner) for debts, liabilities and losses of the
Partnership shall be limited to such Limited Partner’s Pro Rata Share of the
Partnership’s assets.

 

6.2                       No Right of Partition.  No Partner shall have the
right to seek or obtain partition by court decree or operation of law of any of
the Partnership’s property, or the right to own or use particular or individual
assets of the Partnership.

 

6.3                               Indemnification.

 

(a)                         Generally. Subject to the obligation of a Partner to
indemnify the Partnership in accordance with Section 4.6, the Partnership hereby
agrees to indemnify and hold harmless any Person (each an “Indemnified Person”)
to the fullest extent permitted under the Delaware Act, as the same now exists
or may hereafter be amended, substituted or replaced (but, in the case of any
such amendment, substitution or replacement, only to the extent that such
amendment, substitution or replacement permits the Partnership to provide
broader indemnification rights than the Partnership is providing immediately
prior to such amendment, substitution or replacement), against all documented,
out-of-pocket expenses, liabilities and losses (including attorneys’ fees,
judgments, fines, excise taxes or penalties) reasonably incurred or suffered by
such Person by reason of the fact that such Person (or any of its respective
Affiliates, officers, directors, liquidators, partners, stockholders, managers,
members or employees) is or was serving as a Partner, member, Director or
officer of the Partnership or the

 

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General Partner, as applicable, or is or was serving at the request of the
Partnership or the General Partner as a managing member, manager, officer, or
director of a Subsidiary of the Partnership; provided, that (i) such Indemnified
Person acted in good faith and in a manner such Indemnified Person believed to
be in or not opposed to the best interests of the Partnership and its
Subsidiaries and (ii) with respect to any criminal action or proceeding, such
Indemnified Person had no reasonable cause to believe his conduct was unlawful;
and provided, further that, unless the General Partner (with the consent of the
Investor Representative) otherwise determines, no Person shall be entitled to
indemnification hereunder with respect to a proceeding (A) initiated by such
Person or (B) between such Person, on the one hand, and any of the General
Partner, the Partnership or its Subsidiaries on the other, in each case, other
than a proceeding to enforce such Indemnified Person’s rights under this
Section 6.3. Except for any proceeding described in clauses (A) or (B) of the
preceding sentence (in each case, other than a proceeding to enforce an
Indemnified Person’s rights under this Section 6.3), reasonable, documented out-
of-pocket expenses (including attorneys’ fees and expenses) incurred by any
Indemnified Person in defending a proceeding for which indemnification may be
available under this Section 6.3 shall be paid by the Partnership or its
Subsidiaries in advance of the final disposition of such proceeding upon receipt
of an undertaking by or on behalf of such Indemnified Person to repay such
amount if it shall ultimately be determined by a court of competent jurisdiction
(which determination is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected) that such
Indemnified Person is not entitled to be indemnified by the Partnership or its
Subsidiaries.

 

(b)                         Fund Indemnitors.  The Partnership hereby
acknowledges that certain Indemnified Persons have certain rights to
indemnification, advancement of expenses or insurance provided by The Blackstone
Group L.P. and certain of its Affiliates or GSO and certain of its Affiliates
(collectively, the “Fund Indemnitors,” and the Indemnified Persons benefitting
from such rights to indemnification, and other rights, from the Fund
Indemnitors, the “Fund Indemnified Persons”). The Partnership hereby agrees
(i) that it is the indemnitor of first resort (i.e., its obligations to the Fund
Indemnified Persons are primary and any obligation of the Fund Indemnitors to
advance expenses or to provide indemnification for the same expenses or
liabilities incurred by the Fund Indemnified Persons are secondary), (ii) that
it shall be required to advance the full amount of expenses incurred by an
applicable Fund Indemnified Person and shall be liable for the full amount of
all expenses, judgments, penalties, fines and amounts paid in settlement to the
extent legally permitted and as required by the terms of this Agreement, without
regard to any rights any Fund Indemnified Person may have against the Fund
Indemnitors, and (iii) that it irrevocably waives, relinquishes and releases the
Fund Indemnitors from any and all claims against the Fund Indemnitors for
contribution, subrogation or any other recovery of any kind in respect thereof.
The Partnership further agrees that no advancement or payment by the Fund
Indemnitors on behalf of any Fund Indemnified Person with respect to any claim
for which a Fund Indemnified Person has sought indemnification from the
Partnership shall affect the foregoing and the Fund Indemnitors shall have a
right of contribution or be subrogated to the extent of such advancement or
payment to all of the rights of recovery of a Fund Indemnified Person against
the Partnership. The Partnership acknowledges and agrees, notwithstanding
anything herein to the contrary, that the Fund Indemnitors are express third
party beneficiaries of the terms of this Section 6.3(b).

 

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(c)                           Nonexclusivity of Rights.  The right to
indemnification and the advancement of expenses conferred in this Section 6.3
shall not be exclusive of any other right which any Person may have or hereafter
acquire under any statute, agreement, law, decision of the General Partner or
otherwise.

 

(d)                          Insurance.  The General Partner, on behalf of the
Partnership, may maintain insurance, at the Partnership’s expense, to protect
any Indemnified Person against any expense, liability or loss described in
Section 6.3(a), whether or not the Partnership would have the power to indemnify
such Indemnified Person against such expense, liability or loss under the
provisions of this Section 6.3.

 

(e)                           Limitation.  Notwithstanding anything contained in
this Agreement to the contrary (including in this Section 6.3), any indemnity by
the Partnership relating to the matters covered in this Section 6.3 shall be
provided out of and to the extent of the Partnership’s assets only, and no
Limited Partner (unless such Limited Partner otherwise agrees in writing or is
found in a final decision by a court of competent jurisdiction to have personal
liability on account thereof) shall have personal liability on account thereof
to help satisfy such indemnity by the Partnership (except as expressly provided
herein).

 

(f)                            Indemnification of Employees and Agents.  The
Partnership may, to the extent authorized from time to time by the General
Partner, provide rights to indemnification and the advancement of expenses to
employees and agents of the Partnership or its Subsidiaries similar to those
conferred in this Article VI.

 

(g)                           Savings Clause. If this Section 6.3 or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Partnership shall nevertheless indemnify and hold
harmless each Indemnified Person pursuant to this Section 6.3 to the fullest
extent permitted by any applicable portion of this Section 6.3 that shall not
have been invalidated and to the fullest extent permitted by applicable law.

 

6.4                        Actions by the Partners.  There shall be no required
meetings of the Partners. For situations, if any, in which the consent or
approval of the Partners (or any subset of the Partners) is expressly required
by this Agreement or by applicable law, the Partners may act through written
consents, executed by the Partners whose consent or approval is so required.

 

6.5                               Corporate Opportunities; Conflicts of
Interest; Related Matters.

 

(a)                                 Corporate Opportunities and Conflicts of
Interest.

 

(i)                              Notwithstanding anything in this Agreement to
the contrary, the Partnership and each of the Partners acknowledges and agrees
that certain of the Institutional Investor’s Affiliates (which, solely for
purposes of this Section 6.5(a), shall include The Blackstone Group L.P. and all
private equity funds, portfolio companies, parallel investment entities, and
alternative investment entities owned, managed, or Controlled by The Blackstone
Group L.P. and GSO and its Affiliates and any fund or account managed, advised
or subadvised by GSO and its Affiliates) (x) have made, prior to the date
hereof, and are expected to make, on and after the date hereof, investments (by
way of capital

 

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contributions, loans or otherwise), and (y) have engaged, prior to the date
hereof, and are expected to engage, on and after the date hereof, in other
transactions with and with respect to, in each case, Persons engaged in
businesses that directly or indirectly compete with the business of the
Partnership and its Subsidiaries as conducted from time to time. The Partnership
and the Partners agree that, subject only to the limitations provided in clause
(ii) below, any involvement, engagement or participation of the Institutional
Investor and its Affiliates (including any Director designated to the Board by
the Institutional Investor) in such investments, transactions and businesses,
even if competitive with the Partnership or its Subsidiaries, shall not be
deemed wrongful or improper or to violate any duty express or implied under
applicable law or this Agreement and shall not be deemed a conflict of interest.
For the purposes of clarity, the Institutional Investor shall be deemed not to
violate this Section 6.5 if it or an Affiliate of it shall invest in a fund or
other entity, regardless of whether the Institutional Investor Controls such
fund or entity that makes an investment that directly or indirectly competes
with the Partnership or its Subsidiaries.

 

(ii)                                  Each of the Partnership, the General
Partner and the Sanchez Investor (on behalf of itself and its respective
Affiliates) hereby renounces any co- participation right, expectancy and any
other rights (including information rights) with respect to any business
opportunity in which the Institutional Investor participates or desires or seeks
to participate that either (x) is not within the purposes of the Partnership as
set forth in Section 2.4 or (y) is within such purposes of the Partnership but
is not a business opportunity that (i) the Partnership or the General Partner
presents to a Director solely in such individual’s capacity as a Director or
(ii) is identified to the Director solely through the disclosure of information
by or on behalf of the Partnership or the General Partner to the Director (each
business opportunity other than those referred to in clauses (x), (y)(i) or
(y)(ii) are referred to as a “Renounced Business Opportunity”); for clarity, GSO
and its Affiliates can pursue other opportunities in the AMI. Neither the
Institutional Investor nor any Director appointed by the Institutional Investor
to the Board nor any Affiliate of any of the foregoing shall have any obligation
to communicate or offer any Renounced Business Opportunity to the Partnership or
the Sanchez Investor, and the Institutional Investor may pursue for itself or
direct, sell, assign or transfer to a Person other than the Partnership any
Renounced Business Opportunity, and any such action shall not be deemed a
conflict of interest, a breach of this Agreement, or a breach of any duty.
Notwithstanding anything to the contrary in this Agreement, any business
opportunity that is within the purpose of the Partnership (as set forth in
Section 2.4) and which is presented to the Institutional Investor solely by the
Partnership or the General Partner (as distinguished from opportunities
presented by multiple Persons), will not be pursued by the Institutional
Investor or by GSO unless otherwise agreed to in writing by the Sanchez
Investor.

 

(iii)                               Each of the Partnership and the Partners
hereby agrees that any claims against, actions, rights to sue, other remedies or
other recourse to or against the Institutional Investor or any of its Affiliates
(including any Director

 

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appointed by the Institutional Investor) for or in connection with any such
investment activity or other transaction activity or other matters made in
compliance with Section 6.5(a)(i) or 6.5(a)(ii), or activities related to any of
the foregoing, whether arising in common law or equity or created by rule of
law, statute, constitution, contract (including this Agreement) or otherwise,
are expressly released and waived by the Partnership and each Partner, in each
case to the fullest extent permitted by applicable law; provided, however, that
the foregoing shall not release any claims for actual fraud, willful misconduct,
or a breach of this Agreement.

 

(iv)                                                Notwithstanding anything in
this Agreement to the contrary, each of the Partnership and the Partners
acknowledges and agrees that the Institutional Investor and its Affiliates
(including any Director appointed by the Institutional Investor) have obtained,
prior to the date hereof, and are expected to obtain, on and after the date
hereof, confidential information from other companies in connection with the
activities and transactions described in this Section 6.5 or otherwise. The
Partnership and each of the Partners hereby agree that (x) none of the
Institutional Investor or any of its Affiliates (including any Director
appointed by the Institutional Investor) has any obligation to use in connection
with the business, operations, management or other activities of the Partnership
or to furnish to the Partnership, its Subsidiaries or any Partner any such
confidential information, and (y) any claims against, actions, rights to sue,
other remedies or other recourse to or against the Institutional Investor or any
of its Affiliates (including any Director appointed by the Institutional
Investor) for or in connection with any such failure to use or to furnish such
confidential information, whether arising in common law or equity or created by
rule of law, statute, constitution, contract (including this Agreement) or
otherwise, are expressly released and waived by each of the Partnership and the
Partners to the fullest extent permitted by applicable law.

 

(v)                                                   Notwithstanding anything
in this Agreement to the contrary, (x) the Partnership and each of the Partners
acknowledge and agree that as of the Effective Date, SN Maverick, an Affiliate
of Sanchez Parent, and Blackstone Newco purchased from Anadarko Petroleum
Corporation and Kerr McGee Oil and Gas Onshore LP certain oil, gas and mineral
interests in the AMI, in connection therewith entered into the Joint Development
Agreement and related Operating Agreements and on and after the Effective Date,
Sanchez Investor’s Affiliates (including Sanchez Parent and its Subsidiaries)
will engage in oil and gas activities in the AMI related to such assets and
agreements including, but not limited to, acquiring oil and gas assets, drilling
and completing wells, producing oil and gas, gathering, processing, transporting
and marketing oil and gas (the “Additional Sanchez Activities”) and the
Additional Sanchez Activities may directly or indirectly compete with the
business of the General Partner, the Partnership and any other Subsidiary of the
General Partner or Partnership as conducted from time to time and (y) except as
set forth in the Joint Development Agreement, the Sanchez Letter Agreement or
Section 5.11 of the GP LLC Agreement, the Institutional Investor shall not be
entitled to and hereby renounces

 

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any co-participation right in any business opportunities pursued by SN Maverick
and its Affiliates (other than the Company, the Partnership or any of its
Subsidiaries).

 

(b)                                 Liability Limitation.  The Partnership and
the Partners (in their own names and in the name and on behalf of the
Partnership) hereby:

 

(i)                              agree that (x) the terms of this Section 6.5 to
the extent that they modify, limit or eliminate a duty (including any fiduciary
duty) or other obligation, if any, that any Partner may have to the Partnership
or another Partner under the Delaware Act or other applicable law, rule or
regulation, are reasonable in form, scope and content; and (y) the terms of this
Section 6.5(b) shall control to the fullest extent possible if it is in conflict
with a duty (including any fiduciary duty), if any, that a Partner may have to
the Partnership or another Partner, the Delaware Act or any other applicable
law, rule or regulation;

 

(ii)                           waive any duty (including any fiduciary duty) or
other obligation, if any, that a Partner may have to the Partnership or another
Partner, pursuant to the Delaware Act or any other applicable law, rule or
regulation, to the extent necessary to give effect to the terms of this Section
6.5; and

 

(iii)                        acknowledge, affirm and agree that the execution
and delivery of this Agreement by each Partner is of material benefit to the
Partnership and the other Partners, and each such Partner would not be willing
to (x) execute and deliver this Agreement, and (y) enter into the transactions
contemplated by the Securities Purchase Agreement, in each case, without the
benefit of this Section 6.5, including the liability limitation set forth in
this Section 6.5(b).

 

(c)                           Duties.  The Partners expressly intend,
acknowledge and agree that the provisions of this Agreement, including those in
this Article VI, shall govern the rights, duties and obligations of the Partners
and shall supplant entirely any fiduciary duties of a Partner stated or implied
by applicable law or equity which might otherwise apply. Neither the General
Partner nor any other Partner shall be liable to the Partnership or to any other
Partner for breach of any duty (including fiduciary duties) if such Partner
relied in good faith on the provisions of this Agreement. Whenever in this
Agreement, Partner is permitted or required to make a decision in its discretion
or under a grant of similar authority or latitude, the Partner may do so in its
and their sole discretion and shall be entitled to consider only such interests
and factors as they desire, including their own interests, and shall, to the
maximum extent permitted by applicable law, have no duty (including fiduciary
duties) or obligation to give any consideration to any interest of or factors
affecting any Partner, the Partnership or any other Person. In accordance with
Section 17-1101(d) of the Delaware Act, the Partners hereby acknowledge and
agree that the provisions of this Agreement, including the provisions of this
Section 6.5(c), to the extent they restrict or eliminate the duties (including
fiduciary duties) and liabilities relating thereto otherwise existing at law or
in equity, to the maximum extent not prohibited by applicable law, replace
completely and absolutely such other duties (including fiduciary duties) and
liabilities relating thereto and further acknowledge and agree that the
provisions of this Section 6.5(c) are fundamental elements to the parties’
willingness to enter into this Agreement and without such

 

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provisions the parties hereto would not have entered into this Agreement. For
the avoidance of doubt, nothing in this Agreement shall limit the liability of
any Partner to any other Partner for breach of this Agreement.

 

6.6                       Confidentiality.  Each Partner recognizes and
acknowledges that it has received and may in the future receive certain
confidential and proprietary information and trade secrets of the Partnership
and its Subsidiaries and the Partners (including their respective predecessors)
(the “Confidential Information”). Except as otherwise consented to by the
Partnership in writing, each Partner agrees that it will not, during or after
the term of this Agreement, whether directly or indirectly through an Affiliate
or otherwise, use any Confidential Information for any purposes other than in
connection with its investment in the Partnership or disclose any Confidential
Information for any reason or purpose whatsoever, except for disclosures: (i) to
authorized directors, managers, officers, representatives, agents and employees
of such Partner or its Affiliates (other than portfolio companies of the
Institutional Investor), the Partnership or its Subsidiaries and as otherwise
may be proper in the course of performing such Partner’s obligations, or
enforcing such Partner’s rights, under this Agreement and the agreements
expressly contemplated hereby, provided, that each such Person is informed of
the confidential nature of such Confidential Information, agrees to hold such
Confidential Information confidential and that the disclosing Partner remains
liable for any breach of this provision by such Persons; (ii) made to the
limited partners, owners, co-investors, and prospective investors in funds
managed, advised or sub-advised by the Institutional Investor or its Affiliates;
provided that if such limited partners, owners, co-investors, and prospective
investors are receiving Confidential Information (other than with respect to
high-level summary information regarding the Partnership’s operations (e.g.,
total production volumes, total revenues, etc.)), such receiving Person shall be
subject to confidentiality obligations to the Institutional Investor or its
Affiliates; (iii) to any bona fide prospective purchaser of the equity or assets
of the Partnership or its Affiliates or the Units held by such Partner, to
prospective financing sources, or a prospective merger partner of such Partner,
the Partnership or any of their respective Affiliates and, except in connection
with transactions under Section 14.3 and except as may be precluded by
contractual restrictions or disclosure, following prior written notice of such
disclosure to the Partnership, provided, that such purchaser, financing sources,
or merger partner agrees in writing to be bound by the provisions of this
Section 6.6 or other confidentiality agreement that includes confidentiality and
use provisions at least as restrictive as the provisions herein; (iv) to
attorneys, accountants and other professionals of such Partner or its
Affiliates; and (v) as is required to be disclosed by order of a court of
competent jurisdiction, administrative body or governmental body, or by
subpoena, summons or legal process, or by law, rule or regulation or in
connection with any disclosure to regulatory or Governmental Authority that
regulates the Institutional Investor, provided, that the Partner shall provide
to the Partnership prompt notice of any such requirement to enable the
Partnership to seek an appropriate protective order or confidential treatment
(except no such opportunity shall be afforded in the case of any law, rule or
regulation or a routine audit or examination by, or a blanket document request
from, a governmental or regulatory entity that does not reference the
Partnership or this Agreement or if notifying the Partnership in advance of such
disclosure is prohibited by applicable law) and shall disclose only that portion
of such Confidential Information so required to be disclosed and (vi) by Sanchez
Parent in connection with any publicly filed reports to the extent (A) relating
to the Partnership’s or any of its Subsidiaries’ operations and assets and (B)
the disclosure of such information is required by applicable law or regulation
to be included therein. For purposes of this Section 6.6,

 

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the term “Confidential Information” shall not include any information which (x)
a Person learns from a source other than the Partnership or its Subsidiaries, or
any of their respective representatives, employees, agents or other service
providers (y) is disclosed to the public or is available in the public domain or
(z) was in a Person’s possession prior to disclosure hereunder; provided such
information is not known by such Person to be subject to an obligation of
confidentiality owed to the other Partners. Furthermore, the Partners understand
that Partners and their representatives who have access to the Confidential
Information may retain mental impressions of some aspects of the Confidential
Information and the Partners agree that neither the Partners nor any of their
representatives shall have any liability hereunder for use of such mental
impressions in evaluating other business opportunities, except as otherwise
expressly provided in this Agreement or any ancillary agreement thereto.

 

6.7                        Hedging.  Within sixty (60) days after the Effective
Date, the Partnership shall have entered into Hedging Arrangements with Approved
Counterparties with respect to at least eighty percent (80.0%) of its reasonably
estimated projected crude oil and natural gas production (calculated separately
with respect to natural gas and crude oil) (excluding natural gas liquids) from
the oil and gas properties of the Partnership that constitute Proved Developed
Producing Reserves for the three-year period following the Effective Date (the
“Minimum Hedging Threshold”). Commencing the sixtieth (60th) day after the
Effective Date and thereafter, unless otherwise agreed to by the Institutional
Investor, the Partnership shall maintain Hedging Arrangements with Approved
Counterparties with respect to at least fifty percent (50%) of its reasonably
estimated projected crude oil and natural gas production (calculated separately
with respect to natural gas and crude oil) (excluding natural gas liquids) from
the oil and gas properties of the Partnership that constitute Proved Developed
Producing Reserves (determined as of the last day of each Fiscal Quarter) for
the two-year period following the last day of each Fiscal Quarter. Unless
approved in writing by the Institutional Investor, Hedging Arrangements entered
into by the Partnership or any of its Subsidiaries shall consist of either (i)
fixed price swaps executed at then prevailing NYMEX prices with no upfront
payment or receipt of proceeds, (ii) costless collars (with no upfront payment
or receipt of proceeds) with a floor price not less than eighty-five percent
(85%) of the then-prevailing NYMEX prices, or (iii) put options with a floor
price as may be mutually agreed by the Institutional Investor and the Sanchez
Investor.

 

ARTICLE VII

BOOKS, RECORDS, ACCOUNTING AND REPORTS; INSPECTION

 

7.1                        Records and Accounting.  The General Partner shall
keep, or cause to be kept, appropriate books and records with respect to the
Partnership’s business, including all books and records necessary to provide any
information, lists and copies of documents required to be provided pursuant to
Section 7.2 or pursuant to applicable laws. All matters concerning (i) the
determination of the relative amount of allocations and distributions among the
Partners pursuant to Articles III and IV not specifically and expressly provided
for by the terms of this Agreement, and (ii) accounting procedures and
determinations, and other determinations not specifically and expressly provided
for by the terms of this Agreement, shall be determined by the General Partner,
which determination shall be final and conclusive as to all of the Partners
absent manifest clerical error. Each Partner shall have the same right to
inspect the books and records of the Partnership upon five (5) days’ written
notice and shall have all rights that a shareholder of

 

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a Delaware corporation has to inspect and the books and records of a Delaware
corporation in which such shareholder owns capital stock. In addition, the
Investor Representative shall be entitled to cause the books and records of the
Partnership to be audited by an independent third party; provided, however, that
any such audit shall be conducted during the normal business hours of the
Partnership, shall not substantially interfere with the operations of the
Partnership and shall not cause the Partnership or any of the Directors,
officers or employees of the General Partner to take any actions other than
those reasonably necessary to facilitate such audit; provided further, that in
the event any material noncompliance with GAAP or the Partnership’s stated
accounting policies and procedures are discovered during any such audit or if
such audit uncovers an underpayment to the Preferred Partners or uncovers any
other breach of this Agreement, then the Partnership shall reimburse the
Preferred Partners that requested such audit for all reasonable, documented
out-of-pocket costs incurred by such Preferred Partners as a result of such
audit. The audit rights contemplated by the immediately preceding sentence shall
not be exercisable more than once per year.

 

7.2                               Reports.

 

(a)                         The Partnership shall cause to be delivered to each
Partner, within seventy-five (75) days after the end of each Fiscal Year, an
annual report containing a statement of changes, if any, in the Partner’s equity
and the Partner’s Capital Account balance for such Fiscal Year, if any.

 

(b)                         The Partnership shall cause to be delivered, within
seventy-five (75) days after the end of each Fiscal Year, to each Person who was
a Partner at any time during such Fiscal Year all information necessary for the
preparation of such Person’s United States federal and state income tax returns.

 

(c)                          The Partnership shall use commercially reasonable
efforts to deliver or cause to be delivered, within seventy-five (75) days after
the end of each Fiscal Year, all information requested by a Partner in order for
such Partner to complete its unrelated business taxable income and FIRPTA tax
filings, if any.

 

(d)                         The Partnership shall use commercially reasonable
efforts to deliver or cause to be delivered to each Partner, within sixty (60)
days after the end of each Fiscal Year, estimates of each of the items in
clauses (a)-(c) immediately above to the extent such items have not then been
delivered.

 

7.3                       Transmission of Communications.  Each Person that owns
or Controls Units on behalf of, or for the benefit of, another Person or Persons
shall be responsible for conveying any report, notice or other communication
received from the Partnership to such other Person or Persons.

 

ARTICLE VIII
TAX MATTERS

 

8.1                       Preparation of Tax Returns.  The Partnership shall
cause to be prepared and timely filed all necessary federal, state and local tax
returns for the Partnership. The General Partner shall cause the Partnership to
make the elections described in Section 8.2 (to the extent

 

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applicable). The Partnership shall provide each Partner with (i) drafts of all
income tax returns it is required to prepare at least thirty (30) days prior to
the submission of such tax returns to the applicable Governmental Authority and
shall incorporate all reasonable written comments into such tax returns, (ii)
drafts of estimated annual K-1s no later than sixty (60) days after the end of
the applicable taxable year that provide detailed information reasonably
required by Partners for federal, state and local income tax reporting purposes
including any information requested by a Partner in order for such Partner to
complete its unrelated business taxable income and FIRPTA filings, if any, (iii)
final annual K-1s no later than seventy-five (75) days after the end of the
applicable tax year that provide detailed information reasonably required by
Partners for federal, state and local income tax reporting purposes, including
information requested by a Partner in order for such Partner to complete its
unrelated business taxable income and FIRPTA filings, if any, and (iv)
information reasonably requested by the Partners to allow them to calculate
their federal and state quarterly estimated tax payments for the second, third
and fourth quarter of the applicable taxable year no later than ten (10) days
prior to the due date of the applicable federal quarterly estimated tax payment.
The Partnership shall prepare or cause to be prepared all federal, state and
local tax returns of the Partnership on a timely basis and shall furnish to each
Partner copies of all tax returns of the Partnership that are actually filed
promptly after their filing. Notwithstanding any of the foregoing to the
contrary, the Partnership may delegate its responsibilities under this Section
8.1 to any Person that the General Partner determines is qualified to assume
such responsibilities.

 

8.2                       Tax Elections.  The Taxable Year shall be the Fiscal
Year unless the General Partner shall determine otherwise. Except as provided in
this Section 8.2, the General Partner shall determine whether to make or revoke
any available election pursuant to the Code other than the election to be
treated as a partnership for federal income tax purposes. If a Distribution of
Partnership property as described in Section 734 of the Code occurs or if a
transfer of an “Interest,” as described in Section 743 of the Code, occurs, on
request by notice from the transferring Partner (if a transfer) or any Partner
(if a Distribution), the Partnership will elect, pursuant to Section 754 of the
Code, to adjust the basis of Partnership properties. Each Partner will upon
request supply any information necessary to give proper effect to any elections
made by the Partnership.

 

8.3                               Tax Controversies.

 

(a)                         For any Taxable Year beginning before January 1,
2018, the Sanchez Investor shall be the Tax Matters Partner (subject to
replacement by the General Partner) and, as such, shall be authorized and
required to represent the Partnership (at the Partnership’s expense) in
connection with all examinations of the Partnership’s affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
expend the Partnership’s funds for professional services reasonably incurred in
connection therewith. Each Partner agrees to cooperate with the Partnership and
to do or refrain from doing any or all things reasonably requested by the
Partnership with respect to the conduct of such proceedings. The Tax Matters
Partner shall not (a) settle any tax controversy, (b) file a petition in respect
of a tax controversy (e.g., pursuant to Section 6226 of the Code), (c) agree to
extend the statute of limitations period of the Partnership in respect of any
Taxes (e.g., pursuant to Section 6229(b) of the Code), (d) intervene in any
action as contemplated in Code Section 6226(b)(6), or (e) file any request

 

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contemplated in Code Section 6227, in each case, without first receiving
approval from the Board.

 

(b)                         For any Taxable Year beginning on or after January
1, 2018, the Sanchez Investor shall be the “partnership representative” (subject
to replacement by the General Partner) as that term is defined in Code Section
6223(a), as added by the Bipartisan Budget Act of 2015 (the “Partnership
Representative”), and each Partner shall take all actions necessary to cause
such Person to be so designated in accordance with any procedures prescribed
therefor. The Partnership Representative shall inform the General Partner of all
significant matters that may come to his, her or its attention in his, her or
its capacity as Partnership Representative by giving notice thereof within 30
days after becoming aware thereof and, within that time, shall forward to each
other Partner copies of all significant written communications he, she or it may
receive in that capacity. Any Person who is designated as Partnership
Representative may not take any action contemplated by Code Sections 6222
through 6232 without the consent of the General Partner, and may not in any case
take any action left to the determination of an individual Partner under Code
Sections 6222 through 6231. If an audit results in an imputed underpayment by
the Partnership as determined under Code Section 6225, the Partnership
Representative, with approval of the Board, may make the election under Code
Section 6226(a) within forty-five (45) days after the date of the notice of
final partnership adjustment in the manner provided by the Internal Revenue
Service. If such an election is made, the Partnership shall furnish to each
Partner for the year under audit a statement reflecting the Partner’s share of
the adjusted items as determined in the notice of final partnership adjustment,
and each such Partner shall take such adjustments into account as required under
Code Section 6226(b) and shall be liable for any related interest, penalty,
addition to tax or additional amount.

 

8.4                               Unitary/Combined Tax Reporting.

 

(a)                         In the event the Partnership does not file its own
tax report for any state tax purposes, but instead is part of an affiliated
group engaged in a unitary business which files a combined group report (a
“Unitary/Combined Tax Report”), the methodology set forth in this Section 8.4
shall be used to determine the amount of reimbursement due to the applicable
Partner (the “Combined Reporting Partner”) as a result of having to include the
Partnership in the Unitary/Combined Tax Report of such Partner (or an Affiliate
of such Partner). Any Partner that is not a Combined Reporting Partner shall be
referred to as a “Reimbursing Partner.”

 

(b)                         For each privilege or taxable period, the Combined
Reporting Partner will compute (i) such Combined Reporting Partner’s actual
unitary tax liability (“Actual Unitary Tax Liability”), (ii) such Combined
Reporting Partner’s hypothetical unitary state tax liability excluding any tax
liability arising from such Combined Reporting Partner’s ownership of the
Partnership (“Stand-Alone Tax Liability”), and (iii) difference between the
Actual Unitary Tax Liability and the Stand-Alone Tax Liability (“Resulting Tax
Liability”). The Actual Unitary Tax Liability, Stand-Alone Tax Liability, and
Resulting Tax Liability (along with any supporting workpapers) will be provided
to the Reimbursing Partner for review at least thirty (30) days prior to the due
date (including extensions) of the Unitary/Combined Tax Report of the Combined
Reporting Partner (or its Affiliate) related to the applicable period. The
Reimbursing Partner shall have ten (10) days to review the Resulting Tax
Liability and provide any comments to the Combined Reporting Partner. If the
Partners cannot agree on the Resulting Tax Liability, the

 

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Partners shall engage a national accounting firm to determine the Resulting Tax
Liability. Subject to Section 8.4(d), the determination of the national
accounting firm shall be considered final and binding on the Partners as the
Resulting Tax Liability for purposes of determining reimbursement under this
Section 8.4.All costs associated with the national accounting firm shall be
borne by the Partners on a pro rata basis.

 

(c)                          Within five (5) Business Days of any tax payment
(including estimated tax payments) by the Combined Reporting Partner (or its
Affiliate) with respect to a Unitary/Combined Tax Report, the Partnership shall
reimburse the Combined Reporting Partner in an amount equal to the Resulting Tax
Liability.

 

(d)                         In the event of any tax audit adjustments impacting
the calculation of the Resulting Tax Liability for any privilege or taxable
period, the Resulting Tax Liability for any such period shall be redetermined by
the Combined Reporting Partner and any prior reimbursement under Section 8.4(c)
shall be adjusted consistent with such redetermination (the “Adjusted Resulting
Tax Liability”). The Adjusted Resulting Tax Liability (along with any supporting
workpapers) will be provided to the Reimbursing Partner for review within thirty
(30) days following the final settlement of the applicable audit. The
Reimbursing Partner shall have ten (10) days to review the Adjusted Resulting
Tax Liability and provide any comments to the Combined Reporting Partner. If the
Partners cannot agree on the Adjusted Resulting Tax Liability, the Partners
shall engage a national accounting firm to determine the Adjusted Resulting Tax
Liability. The determination of the national accounting firm shall be considered
final and binding on the Partners as the Adjusted Resulting Tax Liability for
purposes of determining any reimbursement adjustments under this Section 8.4(d).
All costs associated with the national accounting firm shall be borne by the
Partners on a pro rata basis. Any payments due by the Partnership to the
Combined Reporting Partner (or vice-versa) as a result of the determination of
the Adjusted Resulting Tax Liability shall be made within thirty (30) days
following the final determination of the Adjusted Resulting Tax Liability.

 

ARTICLE IX

TRANSFER OF UNITS

 

9.1                               Transfer Restrictions.

 

(a)                         General Transfer Restrictions.  No Partner shall
Transfer any interest in any Units except in accordance with this Article IX.
The Sanchez Investor shall not Transfer any interest in any Common Units in a
single transaction or series of related transactions without the prior written
consent of the Institutional Investor, other than to Permitted Transferees
(provided, that in the case of a Transfer of Units to a Permitted Transferee
that is not already a party hereto, such Permitted Transferee agrees in writing
to be bound by this Agreement). Neither the Institutional Investor nor any other
Preferred Partner shall Transfer (other than to a Permitted Transferee) any
interest in any Preferred Units in a single transaction or series of related
transactions without the prior written consent of the Sanchez Investor (which
such consent shall not be unreasonably withheld, conditioned or delayed), except
that prior to the occurrence of an Investor Redemption Event the Sanchez
Investor may withhold its consent in its sole discretion to any proposed
transfer as a result of which the Institutional Investor and its Permitted
Transferees would own less than fifty percent (50%) of the then-outstanding
Preferred Units;

 

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provided, however, that during the period that commences upon the occurrence of
an Investor Redemption Event and ends when the event giving rise to the Investor
Redemption Event has been cured, the Institutional Investor and any of its
Permitted Transferees may Transfer any interest in any Preferred Units without
the consent of the non-transferring Partners (including the Sanchez Investor) or
the General Partner. Subject to Section 14.3, any Transfers by a Limited
Partner, other than to Permitted Transferees and except as set forth in the
immediately preceding sentence, shall require the prior approval of the
non-transferring Partners.

 

(b)                         Prohibited Transfers.  Notwithstanding anything to
the contrary in this Article IX, no Transfer of Units shall be permitted if such
Transfer would violate any other provision of this Agreement. Any Transfer of
Units in violation of this Agreement or applicable law shall be void ab initio,
and the General Partner has the power to rescind such Transfer.

 

9.2                               Effect of Transfer.

 

(a)                         Termination of Rights.  Any Partner who shall
Transfer any Units or other Interest in the Partnership shall cease to be a
Partner with respect to such Units or other Interest and shall no longer have
any rights or privileges of a Partner with respect to such Units or other
Interest. For the avoidance of doubt, this Section 9.2(a) shall in no way affect
the rights or privileges of a Partner with respect to any Units or other
Interests still held by such Partner.

 

(b)                         Deemed Agreement.  Any Person who acquires in any
manner whatsoever any Units or other interest in the Partnership, irrespective
of whether such Person has accepted and adopted in writing the terms and
provisions of this Agreement, shall be deemed by the acceptance of the benefits
of the acquisition thereof to have agreed to be subject to and bound by all of
the terms and conditions of this Agreement to which any predecessor in such
Units or other interest in the Partnership was subject to or by which such
predecessor was bound.

 

9.3                               Additional Restrictions on Transfer.

 

(a)                         Execution of Counterpart.  Each Transferee of Units
or other Interests who is not already a Partner that has previously signed this
Agreement or a joinder to this Agreement shall, as a condition prior to such
Transfer, execute and deliver to the Partnership a joinder or counterpart to
this Agreement in form and substance acceptable to the General Partner pursuant
to which such Transferee shall agree to be bound by the provisions of this
Agreement.

 

(b)                         Notice.  In connection with the Transfer of any Unit
or other Interest, the holder of such Unit or Interest will deliver written
notice to the Partnership describing in reasonable detail the Transfer or
proposed Transfer.

 

(c)                          No Avoidance of Provisions.  No Partner shall
engage in any action that could facilitate the Transfer of all or any portion of
the direct or indirect equity or beneficial interest in such Partner by any
Person (whether through Transfers or issuances of equity, assignments by
operation of law by merger or consolidation of such holder into another entity
or dissolution or liquidation of such Partner) with the intent to avoid the
provisions of this Agreement.

 

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(d)                          Code Section 7704 Safe Harbor.  In order to permit
the Partnership to qualify for the benefit of a “safe harbor” under Code Section
7704, notwithstanding anything to the contrary in this Agreement, no Transfer of
any Unit or economic interest shall be permitted or recognized by the
Partnership or the General Partner (within the meaning of Treasury Regulation
Section 1.7704-1(d)) if and to the extent that such Transfer would cause the
Partnership to have more than 100 partners (within the meaning of Treasury
Regulation Section 1.7704-1(h), including the look-through rule in Treasury
Regulation Section 1.7704-1(h)(3)).

 

9.4                               Legend.  If Certificated Units are issued,
such Certificated Units will bear the following legend:

 

“THE UNITS REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON [      ],
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”), OR UNDER APPLICABLE STATE SECURITIES LAWS (“STATE ACTS”) AND MAY NOT BE
SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR STATE ACTS OR AN EXEMPTION
FROM REGISTRATION THEREUNDER. THE TRANSFER OF THE UNITS REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP, AS AMENDED, MODIFIED OR RESTATED FROM TIME TO
TIME, OF SN EF UNSUB, LP (THE “PARTNERSHIP”), BY AND AMONG THE PARTNERSHIP AND
CERTAIN INVESTORS, A COPY OF WHICH SHALL BE FURNISHED BY THE PARTNERSHIP UPON
WRITTEN REQUEST AND WITHOUT CHARGE.”

 

9.5                        Disposition Transaction.  In connection with any
Disposition Transaction approved by the General Partner in accordance with the
terms of Section 5.7 of the GP LLC Agreement (including by any consolidation,
conversion, merger or other business combination involving the Partnership in
which Equity Securities are exchanged for or converted into cash, securities of
a corporation or other business organization or other property, and any sale of
all or substantially all of the assets of the Partnership), (i) none of the
Partners, the Partnership or any of its Subsidiaries shall enter into any
definitive documentation relating to such Disposition Transaction unless the
Partnership has delivered to the Preferred Partners a written undertaking that
expressly provides that upon or prior to the closing of such Disposition
Transaction, an amount of cash equal to the Base Preferred Return Amount shall
be paid in respect of each Preferred Unit in redemption or liquidation of all
outstanding Preferred Units, (ii) no Preferred Partner shall be obligated to be
subject to any non-competition, non-solicitation, or similar restrictive
covenants that may be binding on GSO or any of its Affiliates in connection with
any Disposition Transaction and (iii) upon the consummation of any Disposition
Transaction, the Partnership shall have paid or shall concurrently pay an amount
of cash equal to the Base Preferred Return Amount with respect to each Preferred
Unit in redemption in full or liquidation of all outstanding Preferred Units. No
Disposition Transaction may be consummated if the redemption of the outstanding
Preferred Units contemplated by the immediately preceding sentence is not
consummated in accordance with the terms hereof.

 

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9.6                        Expenses and Transfer Fees.  The Transferor and
Transferee of any Units or other interest in the Partnership shall be jointly
and severally obligated to reimburse the Partnership for all reasonable
out-of-pocket expenses (including attorneys’ fees and expenses) incurred by the
Partnership for any Transfer or proposed Transfer, regardless of whether
consummated. In addition, after the Effective Date and prior to the occurrence
of an Investor Redemption Event, the Partnership shall reimburse the holders of
Preferred Units for all documented reasonable out- of-pocket third party
expenses incurred by any such holder (i) in responding to any request for
approval or monitoring its rights hereunder, or in connection with amending this
Agreement, in an amount not to exceed, collectively, $175,000 in any Fiscal Year
in the aggregate unless otherwise approved by the Board. After the occurrence of
an Investor Redemption Event, the Partnership shall reimburse the holders of
Preferred Units for all reasonable out-of-pocket expenses incurred by any such
holder in its capacity as a Preferred Partner that are paid to any unaffiliated
third parties (e.g., payments to third party reserve engineers and other third
party consultants); provided, that the Partnership shall not be required to pay
monitoring or management fees or expenses to GSO or its Affiliates that are not
reimbursements for payments to unaffiliated third parties.

 

9.7                        Void Transfers.  Any Transfer by any Partner of any
Units or other interest in the Partnership in contravention of this Agreement or
which would cause the Partnership to not be treated as a partnership for United
States federal income tax purposes shall be void and ineffectual and shall not
bind or be recognized by the Partnership or any other party, and no purported
assignee thereof shall have any right to any Profits, Losses or Distributions of
the Partnership.

 

ARTICLE X
ADMISSION OF PARTNERS

 

10.1                 Substituted Partners.  In connection with the Transfer of
Units of a Partner permitted under the terms of this Agreement, the Transferee
shall become a Partner (each such Partner, a “Substituted Partner”) on the later
of (i) the effective date of such Transfer and (ii) the date on which the
General Partner and the Sanchez Investor or the Institutional Investor, as
applicable, approves such Transferee as a Substituted Partner, and such
admission shall be shown on the books and records of the Partnership; provided,
however, in connection with the Transfer of Units of a Partner to a Permitted
Transferee permitted under the terms of this Agreement, such Permitted
Transferee shall become a Substituted Partner on the effective date of such
Transfer.

 

10.2                 Additional Partners.  A Person may be admitted to the
Partnership as an additional Partner (each an “Additional Partner”) only upon
furnishing to the Partnership (i) a letter of acceptance, in form satisfactory
to the General Partner, of all the terms and conditions of this Agreement, and
(ii) such other documents or instruments as may be deemed necessary or
appropriate by the General Partner to effect such Person’s admission as a
Partner. Such admission shall become effective on the date on which the General
Partner determines that such conditions have been satisfied, upon any approval
by the Partners required hereby and when any such admission is shown on the
books and records of the Partnership.

 

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ARTICLE XI

WITHDRAWAL AND RESIGNATION OF PARTNERS

 

11.1                Withdrawal and Resignation of Partners.                    
No Partner shall have the power or right to resign or otherwise withdraw from
the Partnership prior to the dissolution and winding up of the Partnership
pursuant to Article XII, except as otherwise expressly permitted by this
Agreement (e.g., upon the redemption of all Units held by a Person as provided
in this Agreement). Upon a Transfer of all of a Partner’s Units in a Transfer
permitted by this Agreement, such Partner shall cease to be a Partner.
Notwithstanding that payment on account of a resignation or other withdrawal may
be made after the effective time of such resignation or other withdrawal, any
completely resigning or otherwise withdrawing Partner will not be considered a
Partner for any purpose after the effective time of such complete resignation or
other withdrawal.

 

ARTICLE XII
DISSOLUTION AND LIQUIDATION

 

12.1                Dissolution.                                 The Partnership
shall not be dissolved by the admission of Additional Partners or Substituted
Partners. The Partnership shall dissolve, and its affairs shall be wound up upon
the first of the following to occur:

 

(a)                         the election of the General Partner to dissolve and
wind up the Partnership subject to Section 5.9 of this Agreement and Sections
5.7(a)(xxiv), 5.7(b)(vi) and 5.7(c) of the GP LLC Agreement;

 

(b)                         a reasonable period of time (as determined by the
General Partner, taking into account, among other matters, the need to
determine, pay or discharge, or make adequate provision for the payment or
discharge of, contingent liabilities) after a Disposition Transaction;

 

(c)                          the entry of a decree of judicial dissolution of
the Partnership pursuant to the provision of the Delaware Act; and

 

(d)                         the occurrence of any other event causing
dissolution of the Partnership under the Delaware Act.

 

Except as otherwise set forth in this Article XII, the Partnership is intended
to have perpetual existence. The death, retirement, resignation, expulsion,
bankruptcy or dissolution of a Partner, or the occurrence of any other event
that terminates the continued partnership of a Partner in the Partnership, shall
not, in and of itself, cause a dissolution of the Partnership.

 

12.2                Liquidation and Termination.  On the dissolution of the
Partnership, the General Partner shall act as liquidator or may appoint one or
more representatives, Partners or other Persons as liquidator(s), and any such
liquidator shall constitute a “liquidating trustee” within the meaning of the
Delaware Act. The liquidator(s) shall proceed diligently to wind up the affairs
of the Partnership and make final Distributions as provided herein and in the
Delaware Act. The costs of liquidation shall be borne as a Partnership expense.
Until final Distribution, the liquidator(s) shall continue to operate the
Partnership’s properties with all of the power and

 

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authority of the General Partner with respect to the asset(s) it is liquidating.
The steps to be accomplished by the liquidator(s) are as follows:

 

(a)                          The liquidator(s) shall pay, satisfy or discharge
from the Partnership’s funds and assets all of the debts, liabilities and
obligations of the Partnership (including all expenses incurred in liquidation)
or otherwise make adequate provision for payment and discharge thereof
(including the establishment of a cash fund for contingent, conditional or
unmatured contractual liabilities in such amount and for such term as the
liquidator(s) may reasonably determine in accordance with the Delaware Act).

 

(b)                          As promptly as practicable after dissolution, the
liquidator(s) shall (i) determine the Fair Market Value (the “Liquidation FMV”)
of the Partnership’s remaining assets (the “Liquidation Assets”) in accordance
with Article XIII, (ii) sell the remaining properties and other assets of the
Partnership for cash as promptly as is practical while using reasonable best
efforts to obtain the best price therefore; provided, however, with the consent
of the Investor Representative, the liquidator may retain properties for
Distribution in kind, and (iii) deliver to each Partner a statement (the
“Liquidation Statement”) setting forth the Liquidation FMV and each Partner’s
Capital Account balance (determined in accordance with this Section 12.2(b)),
which Liquidation Statement shall be final and binding on all Partners unless
(i) a Partner or Partners holding at least twenty five percent (25%) of all
outstanding Units or (ii) the Investor Representative, in each case, delivers a
written objection setting forth the grounds for such objection in reasonable
detail within thirty (30) days after the delivery of the Liquidation Statement
to the liquidators and each Partner that such Liquidation Statement was not
prepared in accordance with this Section 12.2(b), it being understood that no
such Partner shall object to such Liquidation Statement other than on the
grounds that it was not prepared in accordance with this Section 12.2(b).
Notwithstanding anything to the contrary in this Agreement, in the year in which
the Partnership dissolves and winds up pursuant to Article XII and all
subsequent years up to and including the year in which the Partnership’s
existence terminates, all items of income, gain, loss and deduction of the
Partnership, including Simulated Gain, Simulated Loss and Simulated Depletion,
shall be allocated among the Partners in a manner reasonably determined by the
liquidator(s) as shall cause to the nearest extent possible the Capital Account
of each Partner to equal the amount that would be distributed to such Partner
pursuant to Section 4.1(d)(i)-(iv).

 

(c)                           Subject to Sections 5.7(b) and 5.7(c) of the GP
LLC Agreement, after satisfying all the Partnership’s liabilities and
obligations pursuant to Section 12.2(a), the liquidator(s) shall promptly
distribute the Partnership’s Liquidation Assets to the Partners in accordance
with, and to the extent of, the positive balances in the Partners’ Capital
Accounts, as determined after taking all Capital Account adjustments (other than
those made by reason of Distributions pursuant to this Section 12.2(c)) for the
taxable period of the Partnership during which the liquidation of the
Partnership occurs (with such date of occurrence being determined pursuant to
Treasury Regulation Section 1.704-1(b)(2)(ii)(g)), and such Distribution shall
be made by the end of such taxable period (or, if later, within ninety (90) days
after said date of such occurrence). If property is distributed in kind, the
Partner receiving the property shall be deemed for purposes of this
Section 12.2(c) to have received cash equal to the Fair Market Value of such
property. The Distribution of cash and/or property to a Partner in accordance
with the provisions of this Section 12.2 constitutes a complete return to the
Partner of its Capital

 

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Contributions and a complete Distribution to the Partner of its interest in the
Partnership and all the Partnership’s property and constitutes a compromise to
which all Partners have consented within the meaning of the Delaware Act. To the
extent that a Partner returns funds to the Partnership, it has no claim against
any other Partner for those funds.

 

12.3                 Securityholders Agreement.  To the extent that units or
other Equity Securities of any Subsidiary are distributed to any Partners, each
Partner hereby agrees to enter into a securityholders agreement with such
Subsidiary and each other Partner which contains rights and restrictions in form
and substance similar to the provisions and restrictions set forth herein.

 

12.4                 Cancellation of Certificate.  On completion of the
Distribution of the Partnership’s assets as provided herein, the General Partner
(or such other Person or Persons as the Delaware Act may require or permit)
shall file a certificate of cancellation with the Secretary of State of the
State of Delaware, cancel any other filings made pursuant to this Agreement that
are or should be canceled and take such other actions as may be necessary to
terminate the Partnership. The Partnership shall be deemed to continue in
existence for all purposes of this Agreement until the effectiveness of the
certificate of cancellation is filed with the Secretary of State of the State of
Delaware pursuant to this Section 12.4.

 

12.5                 Reasonable Time for Winding Up.  A reasonable time shall be
allowed for the orderly winding up of the business and affairs of the
Partnership and the liquidation of its assets pursuant to Section 12.2 in order
to minimize any losses otherwise attendant upon such winding up.

 

12.6                 Return of Capital.  The liquidator(s) shall not be
personally liable for the return of Capital Contributions or any portion thereof
to the Partners (it being understood that any such return shall be made solely
from the Partnership’s assets).

 

12.7                 Hart-Scott-Rodino.  If the HSR Act is applicable to any
Partner, the dissolution of the Partnership shall not be consummated until such
time as the applicable waiting period (and extensions thereof) under the HSR Act
have expired or otherwise been terminated with respect to each such Partner.

 

ARTICLE XIII

VALUATION

 

13.1                 Valuation of Units.  The “Fair Market Value” of each Unit
shall be the fair value of each such Unit determined in good faith by the Board
based on the portion of the Total Equity Value to which each such Unit would be
entitled as of the date of valuation; provided, however, for the purposes of
clarity, any valuation of the “Fair Market Value” of each Unit shall be
consistent with the priorities and preferences contemplated in Section 4.1(d).

 

13.2                 Valuation of Securities.  The “Fair Market Value” of any
other securities shall mean the fair value thereof as of the date of valuation
as determined by the Board in good faith on the basis of an orderly sale to a
willing, unaffiliated buyer in an arm’s-length transaction, taking into account
all relevant factors determinative of value (giving effect to any transfer taxes
payable or discounts in connection with such sale).

 

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13.3                 Valuation of Other Assets.  The “Fair Market Value” of all
other non-cash assets shall mean the fair value for such assets as between a
willing buyer and a willing seller in an arm’s-length transaction occurring on
the date of valuation as determined by the Board, taking into account all
relevant factors determinative of value (giving effect to any transfer taxes
payable or discounts in connection with such sale).

 

13.4                 Objection Procedure.  If any Partner objects to the Board’s
determination of Fair Market Value, the Board and such Partners shall submit
such objection to a mutually acceptable independent valuation firm to determine
the Fair Market Value of the applicable assets. The Partnership shall bear the
costs of such independent valuation firm if the independent valuation firm
determines the Fair Market Value to be more than ten percent (10%) higher than
the Board’s determination of Fair Market Value; otherwise, the Partner shall
bear the costs of such independent valuation firm.

 

ARTICLE XIV

REDEMPTION AND EXIT PROVISIONS

 

14.1                 Optional Redemption of Preferred Units at Election of the
Partnership.  The Partnership may, from time to time, redeem from the Preferred
Partners such number of Preferred Units as the Partnership may elect (such
Redeemed Preferred Units, the “Redeemed Preferred Units”) on the terms
contemplated by this Section 14.1. The price payable with respect to each
Redeemed Preferred Unit shall be an amount equal to the Base Preferred Return
Amount with respect to each applicable Redeemed Preferred Unit (whether the same
is deemed to be a redemption or payment in liquidation for tax purposes) and
shall be paid in cash by wire transfer of immediately available funds to an
account designated in writing by the applicable Preferred Partners; provided
that, if mutually agreed upon by Sanchez Parent, the indirect owner of Sanchez
Investor, and the Institutional Investor, the Preferred Units held by the
Institutional Investor may be redeemed in exchange for the debt or equity
securities of Sanchez Parent. Any election by the Partnership to redeem
Preferred Units as provided in this Section 14.1 shall be made by written notice
delivered to each Preferred Partner not less than two (2) Business Days before
the date on which the Partnership proposes to effect such redemption or
liquidation (such notice, an “Elective Redemption Notice”). Each Elective
Redemption Notice shall specify (i) the aggregate number of Redeemed Preferred
Units to be redeemed or liquidated with respect to such Elective Redemption
Notice (which shall in no event be less than five thousand (5,000) Preferred
Units), (ii) the number of such Redeemed Preferred Units to be redeemed from
each Preferred Partner, and (iii) the cash purchase price payable in respect of
each Redeemed Preferred Unit and a reasonably detailed calculation thereof,
including a calculation evidencing that such payment shall equal the Base
Preferred Return Amount. The number of Redeemed Preferred Units held by each
Preferred Partner shall be equal to the product of (i) all Redeemed Preferred
Units and (ii) the quotient derived by dividing (A) the number of Preferred
Units held by such Preferred Partner by (B) all Preferred Units issued and
outstanding. For the purposes of clarity, it is acknowledged and agreed that the
price payable with respect to each Redeemed Preferred Unit (whether the same is
deemed to be a redemption or payment in liquidation for tax purposes) shall be
an amount equal to the Base Preferred Return Amount; accordingly, the failure of
any Preferred Partner to object to the purchase price reflected in the Elective
Redemption Notice or the acceptance of any funds tendered to such Preferred
Partner that are less than the Base Preferred Return Amount shall not derogate
from such Preferred Partner’s

 

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right to receive cash equal to the Base Preferred Return Amount (whether the
same is deemed to be a redemption or payment in liquidation for tax purposes)
with respect to each Redeemed Preferred Unit. If the Partnership fails to
deliver an amount of cash equal to the Base Preferred Return Amount, then such
number of Redeemed Preferred Units with a value equal to the difference between
the aggregate Base Preferred Return Amount required to be paid in respect of all
Redeemed Preferred Units and the actual payment shall remain outstanding and
held of record by the applicable Preferred Partner(s). With respect to any
redemption or liquidation of a Preferred Unit under this Section 14.1, it is
understood and agreed that the amount paid in respect of such redemption or
liquidation of a Preferred Unit shall be applied first to the amount by which
the Preference Accrual exceeds the Unreturned Capital in respect of each
Preferred Unit until such excess has been reduced to zero, then to the amount by
which the Base Preferred Return Amount exceeds the Unreturned Capital with
respect to such Preferred Unit until such excess has been reduced to zero, then
to the Unreturned Capital with respect to such Preferred Unit.

 

14.2                Optional Redemption of Preferred Units at Election of
Required Preferred Holders.  At any time after the seventh anniversary of the
Effective Date or upon a Change of Control, if so requested by the Required
Preferred Holders, the Partnership shall redeem all of the issued and
outstanding Preferred Units owned by all holders of Preferred Units by paying an
amount of cash equal to the Base Preferred Return Amount with respect to each
outstanding Preferred Unit in redemption or liquidation of all outstanding
Preferred Units (the “Final Cash Redemption Amount”). In order to exercise such
right, the Investor Representative, upon request of the Required Preferred
Holders, shall deliver a notice (a “Redemption Request Notice”) to the General
Partner setting forth the request that all of the issued and outstanding
Preferred Units be so redeemed. The redemption price contemplated by the first
sentence of this Section 14.2 shall be paid in cash, by wire transfer of
immediately available funds, to an account designated in writing by the Investor
Representative, such payment to be made within five (5) Business Days of the
delivery of the Redemption Request Notice.

 

14.3                        Exit Transactions.

 

(a)                         If (i) a Redemption Non-Payment shall have occurred,
shall not have been cured within fifteen (15) Business Days thereof and shall be
continuing; (ii) after the first anniversary of the Effective Date, the
Partnership shall have failed to pay the Quarterly Distribution Amount in cash
to the Preferred Units in any two quarters, regardless of whether consecutive,
and such failure is continuing, (iii) the Class A Member shall have caused the
General Partner, the Partnership or any Subsidiary thereof to take any action
that requires Special Approval without first obtaining such Special Approval;
provided that such failure has not been cured by the Class A Member within the
earlier of (A) thirty (30) days following receipt of written notice of such
failure from the Class B Member and (B) thirty (30) days after any Officer (as
defined in the GP LLC Agreement) becomes aware of such failure; provided,
further, that such cure period shall not apply if the Class A Member has caused
the General Partner or the Partnership or any Subsidiary thereof to take any
action that requires Special Approval pursuant the following Sections of to the
GP LLC Agreement: 5.7(b)(ii) (provided that such failure relates to an aggregate
amount of Indebtedness that is greater than $10.0 million), 5.7(b)(iii),
5.7(b)(iv) (with respect to the acquisition of any assets outside the Core Area
(as such term is defined in the Joint Development Agreement) of the AMI),
5.7(b)(v), 5.7(b)(vi), 5.7(b)(ix) (provided that such

 

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failure relates to a sale of business or assets at a price that is greater than
$5.0 million), 5.7(b)(x), 5.7(b)(xi) (provided that such failure represents a
variance from the hedging plan established in compliance with Section 6.7 of
greater than five percent (5%) of volumes or relates to derivative transactions
other than those permitted to be entered into pursuant to Section 6.7),
5.7(b)(xv), 5.7(b)(xvi), 5.7(b)(xvii), 5.7(b)(xviii), 5.7(b)(xix), 5.7(b)(xx),
5.7(b)(xxi), 5.7(b)(xxii), 5.7(b)(xxvii) or 5.7(b)(xxix) in connection with the
foregoing; (iv) Sanchez Parent suffers (A) a Specified Event of Default (as such
term is defined in the Joint Development Agreement) under a Specified Credit
Agreement (as such term is defined in the Joint Development Agreement) and such
Specified Event of Default is continuing or (B) an event of default under the
Indenture or other agreement governing any Indebtedness for borrowed money of
Sanchez Parent or any of its Subsidiaries (other than the Partnership and its
Subsidiaries) in an amount greater than $50.0 million and such event of default
has caused the repayment of such Indebtedness to have been accelerated; or
(v) Sanchez Maverick (or any successor operator under the Joint Development
Agreement that is an Affiliate of Sanchez Parent) becomes a Defaulting Operator
(as such term is defined in the Joint Development Agreement) and as such has
been removed as Operator (as such term is defined in the Joint Development
Agreement) or Sanchez Maverick (or any successor operator under the Joint
Development Agreement that is an Affiliate of Sanchez Parent) has resigned as
Operator at any such time as an Operator Default Event (as such term is defined
in the Joint Development Agreement) exists such that such operator can then be
removed as a Defaulting Operator pursuant to the Joint Development Agreement
(any event in clauses (i), (ii), (iii), (iv) or (v) of this Section 14.3, an
“Investor Redemption Event”), then, in each such case, the Investor
Representative shall be entitled to cause (and the Common Partners and the
General Partner agree to facilitate, as reasonably requested by the Investor
Representative):

 

(A)                       a consolidation or merger of the Partnership or any of
its Subsidiaries with or into any other business entity or other corporate
reorganization;

 

(B)                       a sale of all or any portion of the outstanding Units
held by the Partners; or

 

(C)                       a transaction in which all or substantially all of the
assets of the Partnership or any Subsidiary thereof are sold, leased or
otherwise disposed of.

 

(each of the transactions described in Sections 14.3(a)(A), 14.3(a)(B), and
14.3(a)(C) above are referred to herein as an “Exit Transaction”); provided
that, solely with respect to an Investor Redemption Event described in
Section 14.3(a)(ii) (i.e. resulting from the Partnership’s failure to pay the
Quarterly Distribution Amount in cash to the Preferred Units in any two quarters
(regardless of whether consecutive) and such failure is continuing), the
Investor Representative shall only be permitted to cause the Partnership to
enter into a definitive agreement for an Exit Transaction after three months
following the date upon which such Investor Redemption Event in
Section 14.3(a)(ii) occurred.

 

(b)                         If the Investor Representative elects to pursue an
Exit Transaction: (i) following good faith consultation with the General
Partner, the Investor Representative may exclusively identify, negotiate,
structure and otherwise pursue the Exit Transaction, which Exit

 

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Transaction may be structured and accomplished as determined by the Investor
Representative in its sole discretion, whether as a merger, consolidation, sale
of all or any portion of the Units, corporate reorganization, sale of assets or
otherwise; and (ii) the Exit Transaction shall be effected on the terms and
conditions negotiated by the Investor Representative, including any terms
imposing on the Partners obligations with respect to reasonable and customary
indemnities, escrows, holdbacks or other contingent obligations that are
applicable to all Partners equally. In connection with any Exit Transaction,
each of the Common Partners and Preferred Partners shall, if requested by the
Investor Representative, waive any dissenters’ rights, appraisal rights or
similar rights which such Common Partner may have in connection therewith;
provided, however, that the Investor Representative shall use its reasonable
good faith efforts to maximize the Exit Transaction Consideration payable to the
holders of Common Units. In addition, the General Partner and the Partnership
shall, and the Partnership shall cause its Subsidiaries to, take such action as
the Investor Representative may reasonably request in connection with any
proposed Exit Transaction, including engaging an investment banker or other
advisor in connection with such Exit Transaction, providing such financial and
operational information as the Investor Representative may request and causing
employees and other representatives of the Partnership and its Subsidiaries to
cooperate (including by participating in management presentations, preparing
marketing materials and making diligence materials available in an electronic
data room) with the Investor Representative in any marketing process in
connection with any proposed Exit Transaction. Notwithstanding anything to the
contrary herein or in the GP LLC Agreement, the Class A Units of the General
Partner and the general partnership interest in the Partnership may only be sold
for nominal consideration and the holders of the Class A Units shall not be
entitled to receive any consideration in any such Exit Transaction in excess of
the Capital Contributions (as defined in the GP LLC Agreement) made by such
members to the General Partner as of the Effective Date (as defined in the GP
LLC Agreement).

 

(c)                           If the Investor Representative elects to pursue an
Exit Transaction, then the Sanchez Investor shall use its commercially
reasonable efforts to obtain as promptly as practicable: (i) the consents or
amendments required under the applicable contracts and leases to which the
Sanchez Investor or any of its Affiliates is a party that would be necessary to
transfer the assets or properties of the General Partner, any of its
Subsidiaries, or of the Partnership or any of its Subsidiaries (including
Sanchez Parent and its Affiliates’ approval of such transfer under the Joint
Development Agreement or any Operating Agreement); and (ii) the consents or
amendments to, or the direct assignment of, any purchase, marketing,
transportation, storage, processing or sales contract; provided that the Sanchez
Investor and its Affiliates shall not be required to expend any amounts in
connection with the foregoing unless such expenditures will be reimbursed by the
Partnership or any of its Subsidiaries or the potential acquirer in an Exit
Transaction, in each case upon the consummation of such Exit Transaction;
provided further, that the Sanchez Investor and its Affiliates shall have no
liability pursuant to the immediately precedent clause (ii) of this
Section 14.3(c) if a Governmental Authority or Blackstone Newco prevents the
Sanchez Investor or its Affiliates from providing such consents, amendments or
assignments.

 

(d)                          In addition, the Sanchez Investor and its
Affiliates shall use their commercially reasonable efforts in order to provide
any potential acquirer in an Exit Transaction with reasonable access upon at
least five (5) days’ notice to all reasonably necessary information and
properties to permit it to perform due diligence with respect to the proposed
Exit

 

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Transaction, including access to permits, contracts and infrastructure
associated with the properties, but only to the extent that such access is
requested prior to the closing of such Exit Transaction; provided, that, if so
requested by the Sanchez Investor or its Affiliates, such potential acquirer may
be required to enter into customary access agreements prior to being provided
with such access.

 

(e)                          The Investor Representative shall regularly consult
and cooperate with the Board with respect to the status of the sale process for
such Exit Transaction; provided, however, that the Board and Common Partners
shall have no consent, voting or appraisal rights with respect to the final
terms of an Exit Transaction and shall have no right to object to an Exit
Transaction that is completed in a manner consistent with this Section 14.3.

 

(f)                           At least fifteen (15) Business Days prior to
consummating an Exit Transaction, the Investor Representative shall deliver to
each of the Partners written notice that shall state (i) that the Exit
Transaction has been structured in a manner that complies with this
Section 14.3, (ii) the amount and form of consideration to be received by the
Partnership or its Partners in the Exit Transaction (“Exit Transaction
Consideration”) and (iii) all other material terms and conditions of the Exit
Transaction (including the identity of the purchaser) and current drafts of the
definitive documents related thereto.

 

(g)                          Each Partner hereby makes, constitutes and appoints
the Investor Representative, with full power of substitution and
re-substitution, its true and lawful attorney, for it and in its name, place and
stead and for its use and benefit, to act as its proxy in respect of any vote or
approval of Partners required to give effect to this Section 14.3, including any
vote or approval required under Section 17-211 of the Delaware Act and any
waiver contemplated by Section 14.3(b). The proxy granted pursuant to this
Section 14.3(g) is a proxy coupled with an interest and is irrevocable.

 

(h)                         Each of the Common Partners required to participate
in an Exit Transaction (collectively, the “Participating Sellers”), whether in
its capacity as a Participating Seller, Partner or otherwise, and the
Partnership, its Subsidiaries and the General Partner shall take or cause to be
taken all such actions as may be reasonably necessary or desirable in order
expeditiously to consummate such Exit Transaction and any related transactions,
including (i) making reasonable and customary representations and warranties,
(ii) executing, acknowledging and delivering consents, assignments, waivers and
other documents or instruments, (iii) furnishing information and copies of
documents, (iv) filing applications, reports, returns, filings and other
documents or instruments with Governmental Authorities and (v) otherwise using
reasonable best efforts to fully cooperate with the Investor Representative.
Without limiting the generality of the foregoing, each Participating Seller
agrees to execute and deliver such agreements as may be reasonably specified by
the Investor Representative to which all Participating Sellers will also be
party, including agreements to (x) make reasonable and customary individual
representations, warranties, covenants and other agreements as to the
unencumbered title to its Common Units and the power, authority and legal right
to Transfer such Common Units, (y) provide other reasonable and customary
representations, warranties and indemnities, provided that any indemnification
for representations and warranties regarding the Partnership and its assets and
operations shall be limited to any escrow of proceeds that is established in
connection with the Exit Transaction or be limited to the proceeds actually

 

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received by the Participating Sellers in the Exit Transaction, and (z) be
severally (on a pro rata basis in proportion to the related Exit Transaction
Consideration received by each of the Partners) liable (whether by purchase
price adjustment, escrows, holdbacks, indemnity payments, contingent obligations
or otherwise) in respect of representations, warranties, covenants and
agreements in respect of the Partnership and its Subsidiaries; provided,
however, that (i) any escrow of proceeds of any such transaction shall be
withheld on a pro rata basis among all Participating Sellers (in proportion to
the relative Exit Transaction Consideration received by each Partner) (ii) no
Common Partner shall be liable for any amount in excess of its pro rata share of
any indemnification obligations (based on Exit Transaction Consideration) in
excess of any amounts placed in escrow and (iii) no Common Partner shall be
obligated to be subject to any non-competition, non-solicitation or similar
restrictive covenants that may be binding on GSO or any of its Affiliates in
connection with any Exit Transaction.

 

(i)                             The closing of an Exit Transaction shall take
place at such time and place as the Investor Representative shall specify by
notice to each Participating Seller no later than five (5) Business Days prior
to the closing of such Exit Transaction. At the closing of an Exit Transaction,
each Participating Seller shall deliver any documentation evidencing the Units
to be sold (if any) by such Participating Seller and the assignment thereof,
free and clear of any Liens, against delivery of the applicable consideration.

 

(j)                            In connection with any Exit Transaction, the
Participating Sellers shall receive the Exit Transaction Consideration in
accordance with the order of priority specified in Section 4.1(d), after
deduction of the proportionate share of (A) the reasonable, documented,
third-party out-of-pocket expenses associated with such sale or Exit
Transaction, including the reasonable, documented out-of-pocket legal fees of
the Partnership, its Subsidiaries, the Investor Representative and each
Participating Seller, and reasonable, documented out-of-pocket brokers fees and
other commissions and any other expenses incurred by the Investor Representative
in connection with such Exit Transaction, (B) amounts paid into escrow or held
back, in the reasonable determination of the Investor Representative, for
indemnification or post-closing expenses and (C) amounts subject to post-closing
purchase price adjustments; provided, however, that upon the determination of
such purchase price adjustments, indemnification or post-closing expenses and
upon release of any such escrow or hold back, as applicable, the remaining
amount of the Exit Transaction Consideration, if any, shall be distributed to
the Participating Sellers so that the total amount distributed is in accordance
with the order or priority specified in Section 4.1(d).

 

(k)                         Subject to the last sentence of Section 14.3(b), the
consideration to be paid to each Partner in an Exit Transaction shall be
calculated by treating such Exit Transaction as a liquidation of the Partnership
in which all of the assets of the Partnership (including goodwill) were sold in
exchange for the Exit Transaction Consideration (including any deemed assumption
of liabilities), as the case may be, and the proceeds of that sale, together
with the Profits, Losses, items of income, gain, loss and deduction, and
distributions were applied, allocated and distributed in accordance with the
principles and priorities set forth in Section 4.1(d).

 

(l)                             No action may be taken under this
Section 14.3(l) if such action would result in the breach of any Senior Debt
Agreement, Replacement Credit Agreement or any other agreement related to
material Indebtedness of the Partnership or its Subsidiaries; provided,

 

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however, that the Partnership and the Partners shall use their commercially
reasonable efforts to obtain a waiver of any such breach or otherwise amend or
cause to be amended the terms of any such agreement in a manner which permits
such actions; and provided further, however, that this Section 14.3(l) shall not
apply if the proceeds from any Exit Transaction are sufficient to, and are used
to, pay in full any outstanding borrowing under any such applicable agreements.

 

(m)                     Notwithstanding anything to the contrary provided
herein, if an Investor Redemption Event has occurred and given rise to the
Preferred Partner’s rights under this Section 14.3 and (i) has been cured by the
Partnership prior to the earlier of (A) one hundred eighty (180) days following
the first occurrence of such Investor Redemption Event and (B) the execution of
a bona fide binding definitive purchase agreement with a bona fide purchaser or
(ii) all Preferred Units have been redeemed in full for an amount of cash equal
to the Base Preferred Return Amount per Preferred Unit prior to the execution of
a bona fide binding definitive purchase agreement with a bona fide purchaser,
then the provisions of this Section 14.3 will be suspended and the Exit
Transaction process shall terminate, provided that, in such case, the
Partnership shall pay the reasonable and documented fees and expenses of any
investment bank or other advisors (including legal counsel) engaged by the
Investor Representative prior to such suspension and termination.

 

ARTICLE XV

GENERAL PROVISIONS

 

15.1                Amendments.  This Agreement may be amended or modified, or
any provisions hereof waived, only upon approval of the General Partner;
provided, however, that: (i)(A) if there are any Preferred Units outstanding,
any amendment to (x) the definitions of “Affiliate,” “Available Cash,”
“Disposition Transaction,” “Distribution,” “Excluded Amounts,” “Indebtedness,”
“IRR,” “Material Contract,” “Preference Amount,” “Preferred Payment Date,”
“Replacement Credit Agreement,” “Return on Investment,” or “Unreturned Capital”
in Article I, or Sections 2.4, 3.1(a), 3.1(b), 3.1(c), 4.1, 4.2, 4.3(h), 5.1,
5.3(b), 5.7, 5.8, 6.3(b), 6.5, 6.6, 6.7, 7.1. 7.2, 9.1, 9.5, 9.6, 12.2,
Article XIV, 15.1, 15.12, 15.20 or 15.22, or (y) this Agreement that adversely
affects the rights, obligations, privileges or preferences of the Preferred
Units or the holders thereof (it being agreed that any amendment or modification
to, or any waiver of any provisions of, this Agreement that derogates from the
economic rights of a Preferred Partner or the governance or consent rights of a
Preferred Partner or the Investor Representative (including upon the occurrence
of an Investor Redemption Event or the right to elect to pursue an Exit
Transaction) shall be deemed to adversely affect the rights, obligations,
privileges and preferences of the Preferred Units and the holders thereof for
the purposes hereof) must be approved in writing by the Investor Representative,
(B) an amendment or modification redeeming or cancelling a Partner’s Units or
reducing a Partner’s interest in Distributions and (C) an amendment or
modification increasing any other obligation of a Partner to the Partnership
pursuant to this Agreement shall be effective only with such Partner’s consent;
and (ii) the Schedule of Limited Partners attached hereto may be updated by the
General Partner as needed and in compliance with this Agreement; provided
further, however, any modifications, amendments or waivers (including by any
restatement or supplements) (a) effecting the obligations to appoint, and the
rights of, an Independent Director, including without limitation under
Section 5.9(a), and (b) to Sections 5.1, 5.2, 5.3, 5.9, 15.1 and 15.22 shall
require the prior

 

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written consent of the Credit Agreement Agent, and the Credit Agreement Agent
shall be a third party beneficiary hereunder to enforce such provisions.

 

15.2                Remedies.  Each Partner and the Partnership shall have all
rights and remedies set forth in this Agreement and all rights and remedies
which such Person has been granted at any time under any other agreement or
contract and all of the rights which such Person has under any applicable law. 
Any Person having any rights under any provision of this Agreement or any other
agreements contemplated hereby shall be entitled to seek enforcement of such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by applicable law.

 

15.3                Successors and Assigns.    All covenants and agreements
contained in this Agreement shall bind and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors, legal
representatives and permitted assigns, whether so expressed or not.

 

15.4                Severability.  Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein or if such term or provision could be drawn more
narrowly so as not to be illegal, invalid, prohibited or unenforceable in such
jurisdiction, it shall be so narrowly drawn, as to such jurisdiction, without
invalidating the remaining terms and provisions of this Agreement or affecting
the legality, validity or enforceability of such term or provision in any other
jurisdiction.

 

15.5                Counterparts; Binding Agreement.  This Agreement may be
executed in two or more separate counterparts, any one of which need not contain
the signatures of more than one party, but each of which will be an original and
all of which together shall constitute one and the same agreement binding on all
the parties hereto.  This Agreement and all of the provisions hereof shall be
binding upon and effective as to each Person who (i) executes this Agreement in
the appropriate space provided in the signature pages hereto notwithstanding the
fact that other Persons who have not executed this Agreement may be listed on
the signature pages hereto and (ii) may from time to time become a party to this
Agreement by executing a counterpart of or joinder to this Agreement.

 

15.6                Applicable Law.   This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
All claims shall be resolved in accordance with Section 15.15.

 

15.7                Addresses and Notices.    All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and

 

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shall be deemed to have been given or made when (i) delivered personally to the
recipient, (ii) telecopied or sent via electronic mail to the recipient (with
hard copy sent to the recipient by reputable overnight courier service (charges
prepaid) that same day) if telecopied or sent via electronic mail before 5:00
p.m. Houston, Texas time on a Business Day, and otherwise on the next Business
Day, or (iii) one (1) Business Day after being sent to the recipient by
reputable overnight courier service (charges prepaid).  Such notices, demands
and other communications shall be sent to the address for such recipient set
forth in the Partnership’s books and records, or to such other address or to the
attention of such other Person as the recipient party has specified by prior
written notice to the sending party.  Any notice to the General Partner or the
Partnership shall be deemed given if received by the Chief Executive Officer at
the principal office of the Partnership designated pursuant to Section 2.5.

 

15.8                Creditors.  Other than as set forth in Section 15.1, none of
the provisions of this Agreement shall be for the benefit of or enforceable by
any creditors of the Partnership or any of its Affiliates.  No creditor of the
Partnership or any of its Affiliates may, as a result of making a loan to the
Partnership or any of its Affiliates, acquire at any time any direct or indirect
interest in the Partnership’s Profits, Losses, Distributions, capital or
property, other than as a secured creditor (except pursuant to the terms of a
separate agreement executed by the Partnership in favor of such creditor).  For
the purposes of clarity, this Section 15.8 shall not be construed to derogate
from the rights of the Preferred Partners under this Agreement.

 

15.9                No Waiver.  No failure by any party to insist upon the
strict performance of any covenant, duty, agreement or condition of this
Agreement or to exercise any right or remedy consequent upon a breach thereof
shall constitute a waiver of any such breach or any other covenant, duty,
agreement or condition.

 

15.10         Further Action.  The parties agree to execute and deliver all
documents, provide all information and take or refrain from taking such actions
as may be necessary or appropriate to achieve the purposes of this Agreement.

 

15.11         No Offset Against Amounts Payable.  No amounts that any Partner or
any of its Affiliates or related Person owes or is alleged to owe to the
Partnership or any of its Subsidiaries may be offset or deducted against any
payments owed by the Partnership or its Subsidiaries.

 

15.12         Entire Agreement; Integrated Transaction.   This Agreement, the
other Basic Documents and the other agreements and documents expressly referred
to herein are intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein.  This Agreement, the other Basic Documents and the other
agreements and documents expressly referred to herein or therein supersede all
prior agreements and understandings between the parties with respect to such
subject matter, including, without limitation, the Original Partnership
Agreement.  Each of the parties hereto acknowledges and agrees that in executing
this Agreement (i) the intent of the parties in this Agreement and the other
Basic Documents shall constitute an unseverable and single agreement of the
parties with respect to the transactions contemplated hereby and thereby,
(ii) it waives, on behalf of itself and each of its Affiliates, any claim or
defense based upon the true single agreement relating to such matters and
(iii) the matters set forth in this Section 15.12 constitute a material
inducement to

 

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enter into this Agreement and the other Basic Documents and to consummate the
transactions contemplated hereby and thereby.  Each of the parties hereto
stipulates and agrees (i) not to challenge the validity, enforceability or
characterization of this Agreement and the other Basic Documents as a single,
unseverable instrument pertaining to the matters that are the subject of such
agreements, (ii) this Agreement and the other Basic Documents shall be treated
as a single integrated and indivisible agreement for all purposes, including the
bankruptcy of any party and (iii) not to assert or take or omit to take any
action inconsistent with the agreements and understandings set forth in this
Section 15.12.

 

15.13          Delivery by Facsimile.  This Agreement, the agreements referred
to herein, and each other agreement or instrument entered into in connection
herewith or therewith or contemplated hereby or thereby, and any amendments
hereto or thereto, to the extent signed and delivered by means of a facsimile
machine or other electronic means, shall be treated in all manner and respects
as an original agreement or instrument and shall be considered to have the same
binding legal effect as if it were the original signed version thereof delivered
in person.  At the request of any party hereto or to any such agreement or
instrument, each other party hereto or thereto shall reexecute original forms
thereof and deliver them to all other parties.  No party hereto or to any such
agreement or instrument shall raise the use of a facsimile machine or other
electronic means to deliver a signature or the fact that any signature or
agreement or instrument was transmitted or communicated through the use of a
facsimile machine or other electronic means as a defense to the formation or
enforceability of a contract and each such party forever waives any such
defense.

 

15.14          Survival.  Articles I, VIII and XV and Sections 3.3, 4.6, 6.1,
6.3, 6.5, 6.6, 7.1, 12.2 through 12.7, 13.2 and 13.3 of this Agreement shall
survive and continue in full force in accordance with their respective terms
notwithstanding any termination of this Agreement or the dissolution or
cancellation of the Partnership.

 

15.15          Consent to Jurisdiction; Waiver of Trial by Jury.

 

(a)                          Each Partner and the Partnership irrevocably and
unconditionally submits, for itself and its property, to the non-exclusive
jurisdiction of the Court of Chancery of the State of Delaware, and any
appellate court from thereof, in any action or proceeding arising out of or
relating to this Agreement or the agreements delivered in connection herewith or
the transactions contemplated hereby or thereby or for recognition or
enforcement of any judgment relating thereto, and each of the parties hereby
irrevocably and unconditionally (i) agrees not to commence any such action or
proceeding except in such courts, (ii) agrees that any claim in respect of any
such action or proceeding may be heard and determined in the Court of Chancery
of the State of Delaware, (iii) waives, to the fullest extent it may legally and
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such action or proceeding in the Court of Chancery of the
State of Delaware, and (iv) waives, to the fullest extent permitted by
applicable law, the defense of an inconvenient forum to the maintenance of such
action or proceeding in the Court of Chancery of the State of Delaware.  Each
Partner and the Partnership agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.  Each Partner and
the Partnership irrevocably consents to service of process in the manner
provided for notices in Section 15.7.  Nothing in this Agreement will affect the
right

 

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of any Partner or the Partnership to serve process in any other manner permitted
by applicable law.

 

(b)                         EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

15.16         Construction; Interpretation.  The table of contents and the
section and other headings and subheadings contained in this Agreement and the
exhibits hereto are solely for the purpose of reference, are not part of the
agreement of the parties hereto, and shall not in any way affect the meaning or
interpretation of this Agreement or any exhibit hereto.  Whenever required by
the context, any pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns, pronouns
and verbs shall include the plural and vice versa.  Unless otherwise specified,
all references to days or months shall be deemed references to calendar days or
months.  All references to “$” shall be deemed references to United States
dollars.  Unless the context otherwise requires, any reference to a “Section,”
“Exhibit” or “Schedule” shall be deemed to refer to a section of this Agreement,
exhibit to this Agreement or a schedule to this Agreement, as applicable.  The
words “hereof,” “herein” and “hereunder” and words of similar import referring
to this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement.  The word “including” shall mean “including,
without limitation.”   Reference to any agreement, document or instrument means
such agreement, document or instrument as amended or otherwise modified from
time to time in accordance with the terms thereof, and if applicable hereof. 
Whenever required by the context, references to a Fiscal Year shall refer to a
portion thereof.  The use of the words “or,” “either” and “any” shall not be
exclusive.  The parties hereto have participated jointly in the negotiation and
drafting of this Agreement; accordingly, the language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
Person.  If an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.  Wherever a
conflict exists between this Agreement and any other agreement, this Agreement
shall control but solely to the extent of such conflict.

 

15.17         No Third Party Beneficiaries.  Except as set forth in Sections
15.1 and 15.20, the provisions of this Agreement are for the exclusive benefit
of the Partners and the Partnership and their respective successors and
permitted assigns and, solely with respect to Section 6.3, the Indemnified
Persons and, solely with respect to Section 6.3(b), the Fund Indemnitors. 
Except for the foregoing, this Agreement is not intended to benefit or create
rights in any other Person.

 

15.18         Outside Counsel.  Each party to this Agreement acknowledges and
agrees that such party has been represented by separate outside counsel in
connection with the transactions

 

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contemplated hereby and further acknowledges and agrees that (a) Andrews Kurth
Kenyon LLP has acted as counsel solely to GSO in connection with the
transactions contemplated hereby and (b) Kirkland & Ellis LLP has acted as
counsel solely to the Sanchez Investor in connection with the transactions
contemplated hereby.

 

15.19         Time is of the Essence.    Time is of the essence in the
performance of all obligations under this Agreement.

 

15.20         No Recourse.  Notwithstanding anything that may be expressed or
implied in this Agreement or any document, agreement, or instrument delivered
contemporaneously herewith, and notwithstanding the fact that any Partner may be
a partnership or limited liability company, each Partner hereto, by its
acceptance of the benefits of this Agreement, covenants, agrees and acknowledges
that no Persons other than the Partners shall have any obligation hereunder and
that it has no rights of recovery hereunder against, and no recourse hereunder
or under any documents, agreements, or instruments delivered contemporaneously
herewith or in respect of any oral representations made or alleged to be made in
connection herewith or therewith shall be had against, any former, current or
future director, officer, agent, Affiliate, manager, assignee, incorporator,
Controlling Person, fiduciary, representative or employee of any Partner (or any
of their successor or permitted assignees), against any former, current, or
future general or limited partner, manager, stockholder or member of any Partner
(or any of their successors or permitted assignees) or any Affiliate thereof or
against any former, current or future director, officer, agent, employee,
Affiliate, manager, assignee, incorporator, Controlling Person, fiduciary,
representative, general or limited partner, stockholder, manager or member (or,
in each case, any financing source for any of the foregoing) of any of the
foregoing, but in each case not including the Partners, whether by or through
attempted piercing of the corporate veil, by or through a claim (whether in
tort, contract or otherwise) by or on behalf of such party against such Persons,
by the enforcement of any assessment or by any legal or equitable proceeding, or
by virtue of any statute, regulation or other applicable law, or otherwise; it
being expressly agreed and acknowledged that no personal liability whatsoever
shall attach to, be imposed on, or otherwise be incurred by any such Persons, as
such, for any obligations of the applicable party under this Agreement or the
transactions contemplated hereby, under any documents or instruments delivered
contemporaneously herewith or in connection or contemplation hereof, in respect
of any oral representations made or alleged to be made in connection herewith or
therewith, or for any claim (whether in tort, contract or otherwise) based on,
in respect of, or by reason of, such obligations or their creation.

 

15.21         Public Disclosure.  Unless required by law (or the reasonable
opinion of counsel to the Partnership), no press release or public announcement
related to the Partnership, this Agreement or the transactions contemplated
herein or any other announcement or communication shall be issued or made by any
Partner, a Director, or the Partnership without the advance approval of the
General Partner (with the consent of the Investor Representative), in which case
the General Partner and the Investor Representative shall be provided a
reasonable opportunity to review and provide suggested comments concerning the
disclosure contained in such press release, announcement or communication prior
to issuance, distribution or publication.  The foregoing shall not limit the
Sanchez Investor or its Affiliates from publicly filing this Agreement and
making additional disclosures therewith, in each case as required by applicable
law and securities regulations or in connection with filing any publicly filed
reports to

 

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the extent relating to the Partnership’s or any of its Subsidiaries’ operations
and assets (provided that the disclosure of such information in a publicly filed
report is required by applicable law or regulation to be included therein).

 

15.22          Partnership Covenants, Representations and Warranties.

 

(a)                          Notwithstanding anything in this Agreement to the
contrary, for so long as any Preferred Units or any obligation under the Senior
Debt Agreements remain outstanding, the Partnership shall not:

 

(i)                              fail to observe all partnership formalities and
other formalities required by its organizational documents or the laws of the
State of Delaware, or fail to preserve its existence as an entity duly
organized, validly existing and in good standing (if applicable) under the
Delaware Act;

 

(ii)                           commingle its funds or assets with the funds or
assets of any other Person; provided, however, that distributions made by the
Partnership not in violation of this Agreement or any Senior Debt Agreement
shall not be considered assets of the Partnership for purposes of this
subsection (ii);

 

(iii)                        fail to maintain all of its books, records,
financial statements and bank accounts separate from those of any other Person
(including, without limitation, any Affiliates);

 

(iv)                       maintain its assets in such a manner that it will be
costly or difficult to segregate, ascertain or identify its individual assets
from those of any other Person;

 

(v)                          hold itself out to be responsible for the debts of
any other Person or hold out its credit as being available to satisfy the
obligations of any other Person (other than pursuant to the arrangements
provided for in (a) the APC/KM PSA, (b) the [redacted] PSA, (c) the MSA, (d) the
Hydrocarbons Marketing Agreement, (e) the Sanchez Letter Agreement, (f) the
Drilling Commitment Agreement and (g) financing fees paid at the Anadarko
Closing and [redacted] Closing or Dual Closing, as applicable);

 

(vi)                       fail to (A) hold itself out to the public and
identify itself, in each case, as a legal entity separate and distinct from any
other Person and not as a division or part of any other Person, (B) conduct its
business solely in its own name, (C) hold its assets in its own name or
(D) correct any known misunderstanding regarding its separate identity
(provided, the Partnership may authorize agents pursuant to the MSA, in their
own name as agents for the Partnership, to perform management services on behalf
of the Partnership);

 

(vii)                    fail to allocate shared expenses (including, without
limitation, shared office space) or fail to use separate stationery, invoices
and checks;

 

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(viii)                fail to pay its own liabilities from its own funds (other
than pursuant to the arrangements provided for in the (a) the APC/KM PSA,
(b) the [redacted] PSA, (c) the MSA, (d) the Hydrocarbons Marketing Agreement,
(e) the Sanchez Letter Agreement, (f) the Drilling Commitment Agreement and
(g) financing fees paid at the Anadarko Closing and [redacted] Closing or Dual
Closing, as applicable);

 

(ix)                      identify its partners or other Affiliates, as
applicable, as a division or part of it;

 

(x)                         guarantee, or otherwise become a restricted
Subsidiary pursuant to any agreement governing, the Indebtedness of the Sanchez
Investor or any of its Affiliates;

 

(xi)                      fail to be adequately capitalized to engage in its
business separate and apart from the Sanchez Investor and its Affiliates and to
remain solvent; provided the foregoing shall not be construed as imposing an
obligation on any Partner to contribute or loan additional capital, property or
services to the Partnership; or

 

(xii)                   fail to ensure that all material transactions between
the Partnership and its Subsidiaries, on the one hand, and the Sanchez Investor
and its Affiliates on the other hand, whether currently existing or hereafter
entered into, will be only on an arm’s length basis.

 

(b)                         The Partnership’s assets have not and will not be
listed as assets on the financial statement of any other Person; provided,
however, that the General Partner’s and the Partnership’s assets may be
consolidated for financial reporting purposes with Sanchez Parent and its
Subsidiaries, provided that (i) appropriate notation shall be made on such
consolidated financial statements to indicate the separateness of the
Partnership and such Affiliates and to indicate that the Partnership’s assets
and credit are not available to satisfy the debts and other obligations of such
Affiliates or any other Person and (ii) such assets shall be listed on the
Partnership’s own separate balance sheet. Such consolidation shall not affect
the status of the Partnership or the General Partner as a separate legal entity
with its separate assets and separate liabilities. The Partnership has
maintained and will maintain its books, records, resolutions and agreements as
official records.  Failure by the General Partner or the Partnership to comply
with any of the obligations set forth in this Section 15.22 shall not affect the
status of the Partnership as a separate legal entity, with its separate assets
and separate liabilities.

 

(c)                          The Partners acknowledge and agree that Partnership
and each of its Subsidiaries is a special purpose, non-guarantor, unrestricted
indirect Subsidiary of Sanchez Parent and shall be bankruptcy remote from
Sanchez Parent and each of Sanchez Parent’s Affiliates other than the
Partnership and its Subsidiaries.

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on
their behalf this Agreement as of the date first written above.

 

 

SN EF UnSub GP, LLC

 

 

 

 

 

By:

 

 

Name: Patricio D. Sanchez

 

Title: Chief Executive Officer

 

 

 

 

 

SN EF UnSub Holdings, LLC

 

 

 

 

 

By:

 

 

Name: Patricio D. Sanchez

 

Title: Chief Executive Officer

 

 

 

 

 

GSO ST HOLDINGS LP

 

 

 

By:

GSO ST Holdings Associates LLC, its general partner

 

 

 

 

 

 

By:

 

 

Name: [·]

 

Title: [·]

 

Signature Page to the Amended and Restated

Agreement of Limited Partnership of SN EF UnSub, LP

 

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Exhibit A

 

Form of Purchase and Sale Agreement

 

See attached.

 

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Schedule A

 

SCHEDULE OF LIMITED PARTNERS

 

 

 

Preferred Units

 

Common Units

 

Capital Account

SN EF UnSub Holdings, LLC

 

—

 

[·]

 

$

[·]

GSO ST Holdings LP

 

[·]

 

—

 

$

[·]

 

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EXHIBIT B

 

FORM OF AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

SN EF UNSUB GP, LLC

 

[Attached.]

 

EXHIBIT B TO

SECURITIES PURCHASE AGREEMENT

 

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SN EF UnSub GP, LLC

 

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A Delaware Limited Liability Company

 

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AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

 

Dated as of [·], 2017

 

 

 

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TABLE OF CONTENTS

 

 

Page

 

 

ARTICLE I ORGANIZATION

2

1.1

Continuation of the Company

2

1.2

Name

2

1.3

Registered Office; Registered Agent

2

1.4

Principal Place of Business

2

1.5

Fiscal Year

2

1.6

Foreign Qualification

2

1.7

Term

3

1.8

No State-Law Partnership

3

1.9

Purposes

3

 

 

ARTICLE II MEMBERS

3

2.1

Members

3

2.2

No Liability of Members

4

2.3

Representations and Warranties

4

 

 

ARTICLE III UNITS AND CAPITAL CONTRIBUTIONS

5

3.1

Membership Interests

5

3.2

Capital Contributions

5

3.3

Return of Contribution

6

3.4

Withdrawal of Capital

6

3.5

Additional Capital Contributions

6

3.6

Additional Members

6

 

 

ARTICLE IV DISTRIBUTIONS AND ALLOCATIONS

6

4.1

Distributions

6

4.2

Allocations

6

4.3

Capital Accounts

6

 

 

ARTICLE V MANAGEMENT

7

5.1

Management by the Board of Directors

7

5.2

Actions by the Board; Delegation of Authority and Duties; Reliance by Third
Parties

7

5.3

Board Composition

7

5.4

Board Meetings; Quorum; Vote Required

9

5.5

Action by Written Consent

10

5.6

Officers

10

5.7

Actions Requiring Approval

12

5.8

Issuance of Preferred Units and Certain Debt Matters

23

5.9

Enforcement of Affiliate Contracts

23

5.10

Limitation of Duties and Corporate Opportunities

24

5.11

AMI and Participation in Future Acquisitions

27

5.12

Meetings of the Members

28

 

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5.13

Company Covenants, Representations and Warranties

29

5.14

Tag-Rights Control

31

5.15

Certain Workover and Recompletion Operations

31

 

 

ARTICLE VI BOOKS, REPORTS AND COMPANY FUNDS

32

6.1

Records and Accounting

32

6.2

Reports

32

6.3

Inspection by Members

32

6.4

Public Disclosure

33

 

 

ARTICLE VII TAX MATTERS 

33

7.1

Tax Controversies

33

 

 

ARTICLE VIII EXCULPATION AND INDEMNIFICATION 

34

8.1

Performance of Duties; No Liability of Members, Directors and Officers

34

8.2

Right to Indemnification

34

8.3

Advance Payment

35

8.4

Indemnification of Employees and Agents

35

8.5

Appearance as a Witness

35

8.6

Nonexclusivity of Rights

36

8.7

Insurance

36

8.8

Savings Clause

36

8.9

Fund Indemnitors

36

 

 

ARTICLE IX UNITS, TRANSFERS, AND OTHER EVENTS

37

9.1

Unit Certificates

37

9.2

Record Holders

38

9.3

Restrictions on Transfers of Units

38

9.4

Disposition Transactions

39

9.5

Exit Transactions

39

9.6

Expenses

44

9.7

Transfers Generally; Substitute Members

44

9.8

Closing Date

45

9.9

Effect of Incapacity

45

9.10

No Appraisal Rights

45

9.11

Effect of Non-Compliance

46

 

 

ARTICLE X DISSOLUTION, LIQUIDATION AND TERMINATION

46

10.1

Dissolution

46

10.2

Liquidation and Termination

46

 

 

ARTICLE XI DEFINITIONS

48

11.1

Definitions

48

11.2

Construction

60

 

 

ARTICLE XII MISCELLANEOUS 

61

12.1

Notices

61

12.2

Confidential Information

61

 

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12.3

Entire Agreement; Integrated Transaction

62

12.4

Effect of Waiver or Consent

63

12.5

Amendment or Modification

63

12.6

Binding Effect

63

12.7

Consent to Jurisdiction; Waiver of Trial by Jury

63

12.8

Governing Law

64

12.9

Further Assurances

64

12.10

Waiver of Certain Rights

64

12.11

Notice to Members of Provisions

64

12.12

Counterparts

64

12.13

Headings

65

12.14

Remedies

65

12.15

Severability

65

12.16

No Recourse

65

 

EXHIBITS

 

Exhibit A

 

Members, Capital Contributions and Units Held

Exhibit B

 

Board Designations

Exhibit C

 

Officers

Exhibit D

 

Approved Successor Independent Auditors and Independent Reservoir Engineers

Exhibit E

 

Form of Purchase Agreement

Exhibit F

 

LTM EBITDA Levels

 

iii

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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

OF

SN EF UnSub GP, LLC

A Delaware Limited Liability Company

 

This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of SN EF UnSub GP,
LLC, a Delaware limited liability company (the “Company”), effective as of [·],
2017 (the “Effective Date”), is made and entered into by the Company; GSO ST
Holdings Associates LLC, a Delaware limited liability company (the “GSO
Investor”); and SN UR Holdings, LLC, a Delaware limited liability company (the
“Sanchez Investor”), as the initial Members of the Company.

 

R E C I T A L S:

 

WHEREAS, the Company was formed as a limited liability company under the
Delaware Act, pursuant to the filing of the Certificate of Formation of the
Company (the “Delaware Certificate”) filed with the Secretary of State of the
State of Delaware on December 21, 2016; and

 

WHEREAS, the Sanchez Investor, as the sole initial Member, executed the Limited
Liability Company Agreement of SN EF UnSub GP, LLC, effective December 21, 2016
(the “Original LLC Agreement”); and

 

WHEREAS, the Company owns the non-economic general partner interest in, and
serves as the sole general partner of, the Partnership; and

 

WHEREAS, the Company is a party to that certain Securities Purchase Agreement,
dated as of January 12, 2017 (the “Securities Purchase Agreement”), pursuant to
which the Company, the Partnership, the Sanchez Parent, SN EF UnSub Holdings,
LLC, a Delaware limited liability company, the Sanchez Investor, GSO ST Holdings
LP, a Delaware limited partnership, and the GSO Investor agreed, among other
things, that the Original LLC Agreement would be amended and restated by this
Agreement; and

 

WHEREAS, the Company caused the Partnership to enter into each of the Sanchez
Letter Agreement and the Hydrocarbons Marketing Agreement on January 12, 2017;
and

 

WHEREAS, the Sanchez Investor and the GSO Investor deem it advisable to amend
and restate the Original LLC Agreement in its entirety as set forth herein; and

 

WHEREAS, as part of the Anadarko Closing, the Company, in its capacity as the
general partner of the Partnership, shall cause the Partnership to enter into
the MSA and the Joint Development Agreement, and will amend and restate the
agreement of limited partnership of the Partnership by entering into the
Partnership Agreement in the form attached as Exhibit A to the Securities
Purchase Agreement; and

 

WHEREAS, unless the context otherwise requires, capitalized terms used herein
shall have the respective meanings ascribed to them in Section 11.1.

 

1

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NOW, THEREFORE, for and in consideration of the premises, the covenants and the
agreements hereinafter contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Members hereby
amend and restate the Original LLC Agreement in its entirety as follows:

 

ARTICLE I

ORGANIZATION

 

1.1                        Continuation of the Company.  The Company was formed
as a Delaware limited liability company on December 21, 2016 by the filing of
the Delaware Certificate in the office of the Secretary of State of the State of
Delaware pursuant to the Delaware Act.   The Members desire to continue the
Company for the purposes and upon the terms and conditions set forth herein.  As
of the Effective Date, the GSO Investor and the Sanchez Investor constitute the
sole Members of the Company.  Except as provided herein, the rights, duties and
liabilities of each Member will be as provided in the Delaware Act.

 

1.2                        Name.   The name of the Company is “SN EF UnSub GP,
LLC”.   Company business will be conducted in such name or such other names that
comply with applicable Law as the Board may select from time to time.

 

1.3                        Registered Office; Registered Agent.  The registered
office of the Company in the State of Delaware will be the initial registered
office designated in the Delaware Certificate or such other office (which need
not be a place of business of the Company) as the Board may designate from time
to time in the manner provided by law.    The registered agent of the Company in
the State of Delaware will be the initial registered agent designated in the
Delaware Certificate, or such other Person or Persons as the Board may designate
from time to time in the manner provided by law.

 

1.4                        Principal Place of Business.  The principal place of
business of the Company will be at 1000 Main Street, Suite 3000, Houston, Texas
77002, or such other location as the Board may designate from time to time,
which need not be in the State of Delaware.  The Company may have such other
offices as the Board may determine appropriate.

 

1.5                        Fiscal Year.  The fiscal year of the Company (the
“Fiscal Year”) for financial statement and federal and applicable state and
local income tax purposes will end on December 31 unless otherwise determined by
the Board or required under the Code.

 

1.6                        Foreign Qualification.  The Board is authorized to
cause the Company to comply, to the extent procedures are available, with all
requirements necessary to qualify the Company as a foreign limited liability
company in any jurisdiction in which the Company owns property or transacts
business or elsewhere where such qualification may be necessary or advisable for
the protection of the limited liability of the Members or to permit the Company
to lawfully own property or transact business, and to obtain similar
qualifications for the Company’s Subsidiaries.  Each Officer is authorized, on
behalf of the Company, to execute, acknowledge, swear to and deliver all
certificates and other instruments as may be necessary or appropriate in
connection with the foregoing qualifications.  Further, upon request of the
Board, each Member

 

2

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will execute, acknowledge, swear to and deliver all certificates and other
instruments that are reasonably necessary or appropriate to obtain, continue,
modify or terminate such qualifications.

 

1.7                       Term.   The term of the Company commenced on the date
the Delaware Certificate was filed with the office of the Secretary of State of
the State of Delaware and shall continue until the Company is dissolved as
determined under Section 10.1.

 

1.8                       No State-Law Partnership.  Except to the extent
provided in the next sentence, the Members intend that the Company shall not be
a partnership (including, without limitation, a limited partnership) or joint
venture, and that no Member or Officer shall be a partner or joint venturer of
any other Member or Officer, for any purposes, and this Agreement shall not be
construed to the contrary.  Notwithstanding the foregoing, the Members intend
that the Company shall be treated as a partnership for federal and, if
applicable, state and local income tax purposes.  Except to the extent otherwise
provided herein, each Member and the Company shall file all tax returns and
shall otherwise take all tax and financial reporting positions in a manner
consistent with such treatment unless otherwise required by law.

 

1.9                       Purposes.  The nature or purposes of the business to
be conducted or promoted by the Company is to own the non-economic general
partner interest in, and to serve as the general partner of, SN EF UnSub, LP, a
Delaware limited partnership (the “Partnership”), and to engage in the operation
and management of the Partnership in accordance with this Agreement and the
Partnership Agreement, including actions that the Partnership may undertake with
respect to its Subsidiaries (the Partnership and its Subsidiaries, collectively,
the “Partnership Group Companies”) and in any other lawful act or activity
incidental or related thereto authorized by the Board and for which limited
liability companies may be organized under the Delaware Act. The Company may
engage in any and all activities necessary, desirable or incidental to the
accomplishment of the foregoing.  In furtherance of its purpose, (a) the Company
shall have and may exercise all of the powers now or hereafter conferred by
Delaware law on limited liability companies formed under the Delaware Act and
(b) the Company shall have the power to do any and all acts necessary,
appropriate, proper, advisable, incidental or convenient to or for the
protection and benefit of the Company.    Notwithstanding anything herein to the
contrary, nothing set forth herein shall be construed as authorizing the Company
to possess any purpose or power, or to do any act or thing, forbidden by law to
a limited liability company formed under the laws of the State of Delaware.

 

ARTICLE II

MEMBERS

 

2.1                       Members.  The names, addresses, Capital Contribution
balances and Percentage Interests of each Member are set forth on Exhibit A
attached hereto and incorporated herein. The Board, or any appropriate Officer
of the Company, is hereby authorized and directed to complete, supplement,
modify, correct or amend Exhibit A to reflect the creation or issuance of any
Additional Units, the admission of any additional Members, the withdrawal of any
Member, the change of address of any Member, the Capital Contributions of any
Member, the Units held by any Member and other information called for by
Exhibit A in conformity with this Agreement.  Such completion, supplementation,
modification, correction or amendment may be

 

3

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made from time to time as and when the Board or such Officer considers it
appropriate in accordance with this Section 2.1.

 

2.2                        No Liability of Members.  Except as otherwise
required by applicable Law and as expressly set forth in this Agreement, no
Member shall have any personal liability whatsoever in such Member’s capacity as
a Member, whether to the Company, to any of the other Members, to the creditors
of the Company or to any other third party, for the debts, liabilities,
commitments or any other obligations of the Company or for any losses of the
Company.  Each Member shall be liable only to make such Member’s Capital
Contribution to the Company and the other payments and covenants provided
expressly herein.   Except as otherwise provided in this Agreement, a Member’s
liability (in its capacity as a Member) for debts, liabilities and losses of the
Company shall be limited to such Member’s pro rata share of the Company’s assets
in accordance with each Member’s respective Percentage Interests.

 

2.3                        Representations and Warranties.  Each Member hereby
represents and warrants to the Company and each other Member that:

 

(a)                          Power and Authority.  Such Member has full power
and authority to enter into this Agreement and to perform its obligations
hereunder;

 

(b)                          No Conflicts.  The execution, delivery and
performance of this Agreement do not conflict with any other agreement or
arrangement to which such Member is a party or by which it is or its assets are
bound;

 

(c)                           Contributed Property.  All property contributed to
the Company by such Member, and any property thereafter to be contributed to the
Company by such Member, has been or will be duly and lawfully acquired;

 

(d)                          Own Account.    Such Member has acquired or is
acquiring its interest in the Company for investment purposes only for its own
account and not with a view to any distribution, reoffer, resale or other
disposition that is not in compliance with the Securities Act or any applicable
state securities laws;

 

(e)                           Expertise.      Such Member alone, or together
with its representatives, possesses such expertise, knowledge and sophistication
in financial and business matters generally, and in the type of transactions in
which the Company proposes to engage in particular, that such Member is capable
of evaluating the merits and economic risks of acquiring and holding the Units,
and that such Member is able to bear all such economic risks now and in the
future;

 

(f)                            Awareness of Economic Risk.  Such Member is aware
that it must bear the economic risk of such Member’s investment in the Company
for an indefinite period of time because Units have not been registered under
the Securities Act or under the securities laws of any state, and, therefore,
such Units cannot be sold unless they are subsequently registered under the
Securities Act and any applicable state securities laws or an exemption from
registration is available;

 

4

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(g)                           No Registration Rights.   Such Member is aware
that only the Company can take action to register Units in the Company under the
Securities Act and that the Company is under no such obligation and does not
propose or intend to attempt to do so;

 

(h)                          Transfer Restrictions.  Such Member is aware that
this Agreement provides restrictions on the ability of a Member to Transfer
Units, and such Member will not seek to effect any Transfer other than in
accordance with such restrictions; and

 

(i)                              Accredited Investor.   Such Member is, and at
such time that it makes any additional Capital Contributions to the Company,
will be an “accredited investor” within the meaning of Rule 501 under the
Securities Act (an “Accredited Investor”) unless such status as an Accredited
Investor is not required in order for the Transfer of Units to such Member to be
exempt from registration under the Securities Act.

 

ARTICLE III

UNITS AND CAPITAL CONTRIBUTIONS

 

3.1                               Membership Interests.

 

(a)                          The Units issued by the Company shall consist of
Class A Units and Class B Units.  As of the Effective Date, the Company is
authorized to issue up to 99 Class A Units and 1 Class B Unit. Subject to the
terms and conditions set forth in this Agreement and the Securities Purchase
Agreement, and after giving effect to the transactions contemplated by the
Securities Purchase Agreement, as of the Effective Date, the Company has issued
99 Class A Units to the Sanchez Investor and 1 Class B Unit to the GSO
Investor.   Additional Units (or series or classes of Units) or securities
convertible into or exercisable for additional Units or rights to purchase
additional Units (which for purposes of this Agreement shall be “Additional
Units”) may be issued from time to time as may be determined by the Board
pursuant to Sections 5.7(a)(xii) and 5.7(b)(x), with such relative rights,
powers and duties as the Board may determine in accordance with this Agreement. 
The Company may issue fractional Units.

 

(b)                                 Units shall constitute “securities” governed
by Article 8 of the Delaware Uniform Commercial Code, as amended from time to
time after the Effective Date.

 

(c)                           Upon the redemption or liquidation in full of all
outstanding Preferred Units pursuant to the Partnership Agreement, each Unit
then outstanding that is held by any Class B Member, GSO or any of its
Affiliates shall be terminated and extinguished (including all rights and
obligations associated therewith) and, other than the right to indemnification
pursuant to Section 8.2 for the time period in which such Member was a Member of
the Company, such Member shall not have any interest in the Company or any
rights pursuant to this Agreement following such termination.

 

3.2                        Capital Contributions.  All Members acknowledge and
agree that the Capital Contributions set forth on Exhibit A as of the Effective
Date represent the amount of money contributed by the Members to the Company as
of the Effective Date.

 

5

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3.3                       Return of Contribution.   No Member is entitled to the
return of any part of its Capital Contributions or to be paid interest in
respect of either its Capital Account or its Capital Contributions.    Any
Capital Contribution that has not been repaid is not a liability of the Company
or of the other Members.  A Member is not required to contribute or to lend any
cash or property to the Company to enable the Company to return the other
Members’ Capital Contributions.

 

3.4                       Withdrawal of Capital.   No Member has the right to
withdraw any part of its Capital Contribution from the Company or to receive the
return of any part of its Membership Interest in the Company prior to the
Company’s liquidation and termination pursuant to Article X hereof.

 

3.5                       Additional Capital Contributions.  No Class A Member
or Class B Member shall be obligated to make additional Capital Contributions to
the Company, and no Member is obligated to make any Capital Contributions except
as the Members may otherwise expressly agree to in writing.

 

3.6                       Additional Members.  In order for a Person to be
admitted as a Member of the Company with respect to any Additional Units and the
exercise of any rights hereunder relating thereto, such Person shall be required
to have first delivered to the Company a written undertaking to be bound by the
terms and conditions of this Agreement, together with such other documents and
instruments as the Board reasonably determines to be necessary or appropriate in
connection with the issuance of such Additional Units to such Person or to
effect such Person’s admission as a Member.

 

ARTICLE IV

DISTRIBUTIONS AND ALLOCATIONS

 

4.1                       Distributions.    All distributions by the Company
shall be allocated to the Members pro rata in accordance with each Member’s
respective Percentage Interests (at the time the amounts of such distributions
are determined) and in such aggregate amounts and at such times as shall be
determined by the Board.  Subject to the limitations set forth in the Delaware
Act and any other applicable Law, prior to the dissolution, winding-up and
liquidation of the Company, the Board may, in its discretion, direct the Company
to make distributions of cash or other property to the Members.  Notwithstanding
any provision to the contrary contained in this Agreement, neither the Company
nor the Board, on behalf of the Company, shall be required or permitted to make
a distribution to any Member on account of its Membership Interest if such
distribution would violate the Delaware Act or other applicable Law.  Any
distributions pursuant to this Article IV made in error or in violation of
Section 18-607(a) of the Delaware Act will, upon demand by the Board, be
returned to the Company.

 

4.2                       Allocations.  Unless otherwise required by the
Allocation Regulations, all items of income, gain, loss, deduction and credits
will be allocated to the Members pro rata in accordance with their respective
Percentage Interests.

 

4.3                               Capital Accounts.  The Company shall establish
and maintain for each Member a separate capital account (“Capital Account”) in
accordance with the Allocation Regulations.

 

6

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ARTICLE V

MANAGEMENT

 

5.1                        Management by the Board of Directors.  The powers,
business and affairs of the Company and its Subsidiaries, including, without
limitation, the powers, business and affairs of the Company that relate to
management and Control of any of its Subsidiaries or the Partnership Group
Companies, shall be exercised by or under the authority or direction of a board
of directors (the “Board of Directors” or the “Board”), except for cases in
which the approval of the Members is expressly required by non-waivable
provisions of applicable law, including the Delaware Act, or in accordance with
the express provisions of this Agreement.  The Company shall cause the
Partnership Group Companies to comply with contracts and agreements to which
they are a party.

 

5.2                        Actions by the Board; Delegation of Authority and
Duties; Reliance by Third Parties.

 

(a)                          In managing the business and affairs of the Company
and exercising its powers, the Board may act through meetings and written
consents pursuant to Sections 5.4 and 5.5, respectively, and through any Officer
of the Company to whom authority and duties have been delegated pursuant to
Section 5.6.

 

(b)                          Any Person dealing with the Company may rely on the
authority of any Officer in taking any action in the name of the Company
authorized by the Board without inquiry into the provisions of this Agreement or
compliance herewith, regardless of whether that action actually is taken in
accordance with the provisions of this Agreement.

 

5.3                               Board Composition.

 

(a)                                 Composition.

 

(i)                              The Board shall initially be composed of five
(5) directors (or such other number of directors as the Board may unanimously
determine) that are natural persons (each, a “Director” and, collectively, the
“Directors”).   The Directors shall be “managers”  within the meaning of
Section 18-101 of the Delaware Act.   No Director in his or her individual
capacity shall have the authority to manage the Company or approve matters
relating to, or otherwise to bind the Company, such powers being reserved to the
Directors acting through the Board and to such other committees of the Board,
and Officers and agents of the Company, as designated by the Board.   Three
(3) Directors shall be designated from time to time by the Class A Member (any
Director so designated by the Class A Member, a “Sanchez Director”) and, subject
to Section 5.3(d) and Section 5.3(e), two (2) Directors shall be designated from
time to time by the Class B Member (any Director so designated by the Class B
Member, a “GSO Director”).   The Sanchez Directors and the GSO Directors as of
the Effective Date are set forth on Exhibit B.  Notwithstanding anything to the
contrary provided herein and subject to Section 5.3(e), at any time during which
the Class B Member is not entitled to appoint any GSO Directors, the Board does
not

 

7

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include a representative of the GSO Investor or the consent of such
representative is not required for the Company or any Partnership Group Company
to take any act described in Section 5.7(b)(vi), the Class A Member shall
appoint an Independent Director to the Board no later than five (5) Business
Days after the occurrence of such triggering event.   The Independent Director
may only be removed for Cause and no resignation or removal of the Independent
Director shall be effective until (i) the Class A Member has provided the Credit
Agreement Agent with five (5) Business Days’ prior written notice of such
resignation or removal, and (ii) a successor Independent Director is appointed. 
No appointment of a successor Independent Director shall be effective until such
successor shall have accepted his or her appointment as the Independent Director
by a written instrument. In the event of a vacancy in the position of the
Independent Director, the Class A Member shall, as soon as practicable, appoint
a successor Independent Director.

 

(ii)                           Each Member having the right to designate a
Director to the Board hereunder shall also have the right to designate one
natural person to act as its Board observer at all meetings of the Board, which
designation shall be made by written notice to the Company.  No Board observer
shall be entitled to vote on any matter presented to the Board.  After receipt
of each such designation under this Section 5.3(a)(ii), the Company will
(A) give timely advance notice to each such Board observer of all such meetings
of the Board and all proposals to such body for action without a meeting,
(B) allow each such Board observer to attend all such meetings and (C) provide
each such Board observer with copies of all written materials distributed to the
Board, in connection with such meetings or proposals for action without a
meeting, including but not limited to all minutes of previous actions and
proceedings; provided, however, that each such Board observer shall agree to
hold in confidence and trust all information so provided; and provided further,
that the Company reserves the right to withhold any information and to exclude
each such Board observer from any meeting or portion thereof if access to such
information or attendance at such meeting could adversely affect the
attorney-client privilege between the Company and its counsel or result in
disclosure of trade secrets.

 

(b)                          Removal; Vacancies.   Subject to Section 5.3(a)(i),
no Director may be removed from the Board except at the written direction of the
Member(s) entitled to designate such Director, which Member(s) will upon any
such removal be entitled to appoint an alternative Director to fill the
vacancy.  A Director may resign at any time, such resignation to be made in
writing and to take effect immediately or on such later date as may be specified
therein.  Each of the Members may change or replace any of its respective
Directors on the Board upon twenty- four (24) hours’ prior written notice to the
Board and the other Members.  Any vacancy in the Board, whether created by the
removal, resignation, retirement of a Director or otherwise, shall be filled
only by the Member entitled to designate such Director in accordance with this
Section 5.3.

 

(c)                                  Subsidiaries.   To the extent any
Subsidiary of the Company is not a member-managed limited liability company or
partnership of which a Partnership Group

 

8

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Company is the managing general partner, the Company shall take all necessary
action to ensure that the board of directors, board of managers, partnership
committee or similar governing body of such Subsidiary of the Company shall be
comprised of designees of each of the Class A Member(s), the Class B
Member(s) and the Independent Director, if applicable, that, as nearly as is
practicable, are in proportion to the number of their respective designees on
the Board and require the vote, consent or decision (and presence for quorum) of
each such designee to the same extent as would be required for comparable
actions and meetings at the Board.

 

(d)                         Board Restructuring.  Following an Investor
Redemption Event and solely for so long as such Investor Redemption Event
remains uncured, the size and composition of the Board shall automatically, and
without further action by the Board or the Members, be increased in size to
seven (7) Directors such that there shall be two (2) additional Directors that
shall be designated by the Class B Member, and as a result of which there shall
be four (4) GSO Directors in total and three (3) Sanchez Directors in total; 
provided that, once all pending Investor Redemption Events have been cured, the
composition of the Board shall automatically, and without further action by the
Board or the Members, be reconstituted in accordance with Section 5.3(a)(i) and
the Class B Member shall notify the Company which two (2) natural persons will
serve as the GSO Directors, unless Section 5.3(e) would apply at such time.

 

(e)                          Automatic Resignation.      Notwithstanding
anything to the contrary contained herein, upon the redemption or liquidation in
full of all outstanding Preferred Units pursuant to the Partnership Agreement,
(i) all GSO Directors shall automatically be deemed to resign from the Board at
the time of such redemption, (ii) the right of the Class B Member to appoint
Directors pursuant to Section 5.3(a)(i) or Section 5.3(d), as applicable, shall
be null and void and shall be of no further force and effect, (iii) the Class A
Member shall have the right to appoint all members of the Board following such
redemption and (iv) the Class A Member shall designate one natural person to
serve as the Independent Director; provided however, that the Independent
Director shall only vote on matters set forth in Section 5.7(c).

 

5.4                               Board Meetings; Quorum; Vote Required.

 

(a)                         Meetings.  The Board shall meet at least quarterly
at the offices of the Company (or such other place as determined by the Board). 
Special meetings of the Board, to be held at the offices of the Company (or such
other place as shall be determined by the Board), shall be called at the
direction of any one Director, upon reasonable advance notice, but in any event
upon not less than forty-eight (48) hours’ prior written notice, to all
Directors.  Subject to the requirements of the Delaware Act, the Delaware
Certificate or this Agreement for notice of meetings, the Directors may
participate in and hold a meeting of the Board by means of a conference
telephone or similar communications equipment by means of which all Persons
participating in the meeting can hear each other, and participation in such
meeting shall constitute attendance and presence in person at such meeting,
except where a Person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened or is not called or convened in accordance with
this Agreement.  Attendance of a Director at a meeting shall constitute a waiver
of notice of such meeting, except where a Director attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that such meeting is not properly called or convened.  All meetings of the Board
shall be presided over by the chairman of the

 

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meeting, who shall be a Person designated by a majority of the Directors.  The
chairman of the meeting of the Board shall determine the order of business and
the procedure at the meeting, including such regulation of the manner of voting
and the conduct of discussion as determined by him or her to be in order.

 

(b)                          Quorum.  At all meetings of the Board, the presence
of a majority of the number of Directors fixed by this Agreement, including at
least one GSO Director, or for so long as the Board has seven (7) Directors
pursuant to Section 5.3(d), at least one Sanchez Director (such Director, as
applicable, the “Minority Director”), shall be necessary and sufficient to
constitute a quorum for the transaction of business at any meeting of the Board;
provided, however, that if at least one Minority Director is not present at a
meeting of the Board called in accordance with the terms of this Agreement and
is not present at the rescheduled meeting of the Board, then no Minority
Director(s) shall be required in order to establish a quorum at any meeting that
is rescheduled after the initially rescheduled meeting.   Notwithstanding the
foregoing, at any meeting which will require a vote under Section 5.7(c), the
Independent Director must be present to establish a quorum. Participation by a
Director in a meeting in accordance with Section 5.4(a), or pursuant to a valid
written consent pursuant to Section 5.5, shall constitute presence in person at
a meeting.  If a quorum is not present at any meeting of the Board, the
Directors present thereat may adjourn the meeting from time to time for a period
not to exceed sixty (60) days, without notice other than announcement at the
meeting, until a quorum is present.  A Director may be counted as present for
purposes of a quorum of the Board pursuant to a valid written proxy delivered to
another Director who is present at such Board meeting.

 

(c)                           Board Voting.  On all matters requiring the vote
or action of the Board, each Director shall be entitled to one vote.   Subject
to Sections 5.7(b) and 5.7(c), all actions undertaken by the Board must be
authorized by the affirmative vote of a majority of Directors at any meeting at
which a quorum is present.

 

(d)                                 Compensation of Directors.   Directors shall
not be entitled to any compensation unless otherwise determined by the Board,
acting with unanimous consent.

 

5.5                        Action by Written Consent.  Any action permitted or
required by the Delaware Act, the Delaware Certificate or this Agreement to be
taken at a meeting of the Board may be taken without a meeting if a consent in
writing, setting forth the action to be taken, is signed by all the Directors
entitled to vote thereon.  Such consent shall have the same force and effect as
a unanimous vote at a meeting and may be stated as such in any document or
instrument filed with the Secretary of State of the State of Delaware, and the
execution of such consent shall constitute attendance or presence in person at a
meeting of the Board.

 

5.6                               Officers.

 

(a)                          The Officers of the Company shall be appointed as
provided in this Section 5.6 and shall include a President and Chief Executive
Officer (the “CEO”), a Chief Financial Officer and a Chief Operations Officer,
and may include a Secretary, a Treasurer, one or more Vice Presidents
(including, one or more Executive or Senior Vice Presidents), and such other
Officers with such titles and responsibilities as the Board may from time to
time determine. The Board may choose not to fill any office for any period as it
may deem advisable.  Any two

 

10

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or more offices may be held by the same Person and Officers need not be
employees of the Company.  The CEO shall be appointed by the Board.  The CEO
shall nominate all other potential Officers of the Company, subject to the
Board’s confirmation and approval in accordance with Section 5.7(a)(xvii), and
any such potential Officer shall become an Officer of the Company upon receipt
of such Board confirmation and approval.  Each Officer shall hold office until a
successor is duly elected and qualified or until the earlier of his or her
death, resignation or removal as hereinafter provided.  Any Officer of the
Company may be removed at any time by the Board.  Any vacancy occurring in any
office of an Officer because of death, resignation, removal, disqualification or
otherwise, may be filled by the Board then in office.  In the case of the
absence or disability of any Officer of the Company and of any Person hereby
authorized to act in such Officer’s place during such Officer’s absence or
disability, the Board may by resolution delegate the powers and duties of such
Officer to any other Officer, or to any other Person whom it may select. 
Subject to (i) Section 5.7, (ii) any limitations, restrictions or directions
provided for in this Agreement or by the Board and (iii) the general oversight
of the Board, the CEO and other Officers of the Company shall have, in a manner
consistent with the management and control granted to officers of a corporation
under the laws of the state of Delaware, power and authority to manage and
control the day-to-day business, operations and affairs of the Company in the
ordinary course of its business, to make all decisions affecting the day-to-day
business, operations and affairs of the Company in the ordinary course of its
business and to take all such actions as they determine necessary or appropriate
to accomplish the foregoing.

 

(b)                                 The Officers of the Company as of the
Effective Date are set forth on Exhibit C hereto.

 

(c)                                  Except as may otherwise be determined by
the Board, the duties and responsibilities of the Officers of the Company shall
be as follows:

 

(i)                             CEO.  The CEO shall have general and active
management and control of the business and affairs of the Company, subject to
the control of the Board, and shall see that all orders and resolutions of the
Board are carried into effect, and shall perform all other duties incident to
such office.

 

(ii)                          Chief Financial Officer.   The Chief Financial
Officer shall have general and active management and control of the financial
affairs of the Company, including assisting in the preparation of the capital
budget, subject to the control of the CEO and the Board.

 

(iii)                       Chief Operations Officer.  The Chief Operations
Officer shall have general and active management and control of the operations
of the Company, subject to the control of the CEO and the Board.

 

(iv)                      Vice Presidents.  Vice Presidents, if any, in order of
their seniority or in any other order determined by the Board, shall generally
assist the CEO, the Chief Financial Officer and the Chief Operations Officer and
perform such other duties as the Board or the CEO shall prescribe.

 

11

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(v)                         The Secretary.    The Secretary shall, to the extent
practicable, attend all meetings of the Board and all meetings of the Members
and shall record all votes and the minutes of all proceedings in a book to be
kept for that purpose, and shall perform the same duties for any committee of
the Board when so requested by such committee.  The Secretary shall give or
cause to be given notice of all meetings of the Members and of the Board, shall
perform such other duties as may be prescribed by the Board or the CEO and shall
act under the supervision of the CEO and the Chief Operations Officer.  The
Secretary shall keep in safe custody the seal of the Company, if any, and affix
the same to any instrument that requires that the seal be affixed to it and
which shall have been duly authorized for signature in the name of the Company
and, when so affixed, the seal shall be attested by his signature or by the
signature of the Treasurer.  The Secretary shall keep in safe custody the
certificate books and Member records and such other books and records of the
Company as the Board or the CEO may direct and shall perform all other duties
incident to the office of Secretary and such other duties as from time to time
may be assigned by the Board, the CEO or the Chief Operations Officer.

 

(vi)                      The Treasurer.  The Treasurer shall have the care and
custody of all the funds of the Company and shall deposit such funds in such
banks or other depositories as the Board, or any Officer(s) or any Officer and
agent jointly, duly authorized by the Board, shall, from time to time, direct or
approve.   The Treasurer shall disburse the funds of the Company under the
direction of the Board, the CEO, the Chief Financial Officer and the Chief
Operations Officer. The Treasurer shall keep a full and accurate account of all
moneys received and paid on account of the Company and shall render a statement
of accounts whenever the Board, the CEO, the Chief Financial Officer or the
Chief Operations Officer shall so request and shall perform such other duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned by the Board, the CEO, the Chief Financial Officer or the Chief
Operations Officer.

 

(d)                         The Officers, in the performance of their duties as
such, shall owe to the Company duties of loyalty and due care of the type owed
by the officers of a corporation to such corporation and its stockholders under
the laws of the State of Delaware.

 

5.7                               Actions Requiring Approval.

 

(a)                         Board Approval.  In addition to such other matters
as the Board may from time to time by resolution determine, none of the Company,
any of its Subsidiaries, any of the Partnership Group Companies nor any Officer
or agent of the Company on behalf of the Company, any of its Subsidiaries or any
of the Partnership Group Companies, shall take any of the actions described in
this Section 5.7(a) without the approval of the Directors constituting a
majority of the Board (in accordance with Section 5.4), unless the taking of
such action is expressly and specifically contemplated by any capital budget
approved pursuant to this Section 5.7(a):

 

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(i)                                approve, amend, supplement, change or modify
any semi-annual plan or budget of the Company, any of its Subsidiaries or any of
the Partnership Group Companies;

 

(ii)                             incur general and administrative expenses
including “Overhead Costs” as defined in the MSA, (A) in excess of $5.0 million
each year during the two calendar years following the Effective Date and
(B) thereafter, in excess of $10.0 million in any calendar year;

 

(iii)                          other than (A) drawings under the Credit
Agreement or Replacement Credit Agreement for expenditures or other applications
in each case that are items included in the then applicable plan or budget
approved in accordance with Section 5.7(a)(i) above, (B) Indebtedness not to
exceed an aggregate of $15.0 million at any time outstanding for capital leases
and purchase money security interests or (C) the incurrence of trade payables
arising in the ordinary course of business and obligations under Hedge
Agreements, (1) create or incur any Indebtedness, assume any Indebtedness of, or
guarantee or otherwise become responsible for the obligations of, any Person, in
any single transaction or series of transactions, (2) redeem prior to maturity
or refinance any Senior Debt or any other Indebtedness funded or committed at
the date of either Preferred Unit Closing (other than pursuant to the mandatory
prepayment or redemption provisions thereof) or (3) permit, create or suffer to
exist any Lien (other than Permitted Liens) arising from Indebtedness on any
material assets or properties of the Company, any of its Subsidiaries or any of
the Partnership Group Companies;

 

(iv)                         alter, repeal, amend or adopt, or consent to the
waiver of, any provision of this Agreement or the Delaware Certificate or the
governing document of any of the Partnership Group Companies;

 

(v)                           change, amend or otherwise modify, or take action
outside of, the Company’s purpose (as set forth in Section 1.9) or the
Partnership’s purpose (as set forth in Section 2.4 of the Partnership
Agreement), or engage in any business activity outside of the AMI;

 

(vi)                        effect any recapitalization, restructuring or
reorganization or any Unit, Preferred Unit or Common Unit split;

 

(vii)                      dissolve the Company, any of its Subsidiaries or any
of the Partnership Group Companies; take any action that would result in a
Bankruptcy Event; adopt a plan of liquidation of the Company any of its
Subsidiaries or any of the Partnership Group Companies; take any action to
commence any suit, case, proceeding or other action under any existing or future
Law of any jurisdiction relating to bankruptcy, insolvency, reorganization or
relief of debtors seeking to have an order for relief entered with respect to
the Company, any of its Subsidiaries or any of the Partnership Group Companies,
or seeking to adjudicate the Company, any of its Subsidiaries or any of the
Partnership Group Companies as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment,

 

13

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winding-up, liquidation, dissolution, composition or other relief with respect
to the Company, any of its Subsidiaries or any of the Partnership Group
Companies; appoint a receiver, trustee, custodian or other similar official for
the Company, any of its Subsidiaries or any of the Partnership Group Companies,
or for all or any material portion of the assets of the Company, any of its
Subsidiaries or any of the Partnership Group Companies; or make a general
assignment for the benefit of the creditors of the Company, any of its
Subsidiaries or any of the Partnership Group Companies;

 

(viii)                  directly or indirectly purchase or otherwise acquire any
assets or all or any part of the business of, or Equity Interests in, or invest
in or make a capital contribution to, any Person (other than a wholly owned
Subsidiary of the Company), including in connection with the formation of or
participation in any joint venture, partnership or similar arrangement;

 

(ix)                         make a loan or extend credit (other than, in the
ordinary course, trade credit) to any Person;

 

(x)                           enter into any agreement with respect to, or
consummate, any sale of any business or assets, whether by sale, merger,
consolidation, restructuring, conversion, recapitalization, transfer or
disposition of assets (including, without limitation, entry into any contract,
arrangement or other commitment in connection with any volumetric production
payment or forward sale of hydrocarbon production), other than with respect to
the Partnership’s sale of production in the ordinary course of business;

 

(xi)                         effect any merger, consolidation or other similar
business combination of the Company, any of its Subsidiaries or any of the
Partnership Group Companies or any sale of all or substantially all of the
assets of the Company, any of its Subsidiaries or any of the Partnership Group
Companies;

 

(xii)                      except as set forth in Section 5.8 or as set forth in
the Securities Purchase Agreement, issue any Additional Units, Equity Interests
or Equity Securities;

 

(xiii)                   enter into, amend, modify or terminate any commodity,
basis or interest rate hedges or swaps or other derivative transactions,
including, without limitation, any Hedging Activity in effect as of the date of
the Anadarko Closing or required pursuant to Section 6.7 of the Partnership
Agreement;

 

(xiv)                  initiate any litigation or other legal or administrative
proceeding or enter into any settlement agreement with respect to any such
litigation or other legal or administrative proceeding that requires the payment
of any amount greater than $1,000,000 or settle any disputes related to accounts
receivable or accounts payable in excess of $1,000,000;

 

(xv)                     change or modify any accounting policies, except as
required by applicable regulatory authorities or independent accountants;

 

14

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(xvi)                  enter into, terminate, extend, enforce, amend, or modify,
or waive any right under, any contract, agreement, arrangement or transaction
between the Company, any of its Subsidiaries or any of the Partnership Group
Companies, on the one hand, and any Member or any Affiliate of a Member, on the
other hand;

 

(xvii)               approve the appointment, hiring, termination or removal of
any Officer;

 

(xviii)            appoint, remove or terminate the engagement of, or cause the
Company or any Subsidiary of the Company to appoint, remove or terminate the
engagement of, the independent auditors or reserve engineer for the Company or
such Subsidiary;  provided that, as of the date of the Effective Date, the
Company’s independent auditors shall be KPMG LLP and the Company’s reserve
engineer shall be Ryder Scott Company, L.P. and no further Board approval shall
be required under this Section 5.7(a)(xviii) for such initial appointments;

 

(xix)                  (A) change or designate the Tax Matters Member or
Partnership Representative or, except as contemplated by this Agreement, make
any tax election or take, or cause the Company or any Subsidiary of the Company
to take, any other action with respect to taxes, including causing the Company
or any Subsidiary of the Company to be classified as other than a partnership
for federal income tax purposes, or (B) change or designate the Tax Matters
Partner or Partnership Representative (each as defined in the Partnership
Agreement) pursuant to the Partnership Agreement;

 

(xx)                     enter into, terminate or amend any agreement that could
reasonably be expected to result in obligations of more than $10.0 million in
any 12-month period that are not otherwise included in the capital budget;

 

(xxi)                  make or declare any distribution or dividend of the
Company;

 

(xxii)              authorize any Subsidiary to make or declare any distribution
or dividend or determine the amount of Available Cash;

 

(xxiii)           effectuate an initial public offering of any Equity Interests
of the Company or any of its Subsidiaries or any of the Partnership Group
Companies;

 

(xxiv)   enter into an agreement with respect to or consummate any Change of
Control, Disposition Transaction or any liquidation or dissolution pursuant to
Section 12.2 of the Partnership Agreement;

 

(xxv)    approve or disapprove of a transfer of all or any part of the General
Partner Interest (as defined in the Partnership Agreement) in the Partnership;

 

(xxvi)   make any payments or distributions to, or effect any redemptions in
respect of, Common Units, or make any distributions on any Equity Interests
other than in cash;

 

15

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(xxvii)    amend or modify any Senior Debt Agreement, Replacement Credit
Agreement or any agreement governing Indebtedness required to be approved by the
Board or related documents thereto;

 

(xxviii)   enter into, terminate, extend, amend, or modify any midstream or
marketing agreement, including, but not limited to, the Hydrocarbons Marketing
Agreement;

 

(xxix)     create any Subsidiary or invest in any Subsidiary that is not wholly
owned by the Company;

 

(xxx)      appoint the UnSub Representative to the Operating Committee pursuant
to the Joint Development Agreement; or

 

(xxxi)     take any action, authorize or approve, or enter into any binding
agreement with respect to or otherwise commit to do any of the foregoing.

 

(b)                          Full Board and Class B Member Approval. 
Notwithstanding anything to the contrary in this Agreement (including
duplicative provisions in Section 5.7(a)), in addition to such other matters as
the Board may from time to time by resolution determine, so long as there are
any Preferred Units outstanding, none of the Company, any of its Subsidiaries,
any of the Partnership Group Companies nor any Officer or agent of the Company
on behalf of the Company, any of its Subsidiaries or any of the Partnership
Group Companies, shall take any of the following actions without having first
obtained the unanimous approval of the Directors constituting the entire Board
(other than, for the avoidance of doubt, any Independent Director) and the
Class B Member(s) holding a majority of the then-outstanding Preferred Units
(together, “Special Approval”):

 

(i)                              incur general and administrative expenses,
including “Overhead Costs” as defined in the MSA, (A) in excess of $5.0 million
each year during the two calendar years following the Effective Date and
(B) thereafter, in excess of $10.0 million in any calendar year;   provided that
no such general and administrative costs may be incurred without Special
Approval if such general and administrative costs do not constitute actual costs
(on a cost pass-through and no profit basis) incurred by the “Manager” (as such
term is defined under the MSA) or its Affiliates that are incremental costs
(over and above cost structure prior to the Anadarko Closing) incurred in
connection with the businesses of the Company, its Subsidiaries and Partnership
Group Companies, and, to the extent such general and administrative costs relate
to the management of properties or assets in which any of the (x) Partnership
Group Companies and (y) Sanchez Vehicles and/or Blackstone Newco own an
interest, such costs are allocated 60% to the Partnership and 40% to the Sanchez
Vehicles, respectively, after taking into account reimbursements of such costs
from Blackstone Newco, if applicable;

 

(ii)                           other than (A) any drawings under the Senior Debt
Agreement(s) (1) at the time of the [redacted] Closing or Dual Closing, if any,
and for the first year thereafter under the Demand Facility not to exceed an
aggregate of $500.0 million (provided that exchange into a Demand Facility

 

16

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pursuant to the terms of the Fee Letter as of the date hereof with the first
year of the closing shall be permitted hereunder), or (2) at the time of the
Anadarko Closing that occurs in a Separate Closing, and for the first year
thereafter (subject to increase at the [redacted] Closing, if applicable,
pursuant to clause (ii)(A)(1)) under the Demand Facility not to exceed an
aggregate of $330.0 million (provided that exchange into a Demand Facility
pursuant to the terms of the Fee Letter as of the date hereof with the first
year of the closing shall be permitted hereunder), in each case such amount to
be reduced by the value of the Initial Debt Replacement Units, if any, and Final
Debt Replacement Units, if any, funded in accordance with Section 2.01(c) or
Section 2.02(b), respectively, of the Securities Purchase Agreement), (B) any
drawings under the Credit Agreement or Replacement Credit Agreement(s) following
the Anadarko Closing, provided that (I) after giving effect to such drawing(s),
the remaining undrawn committed capacity under the Credit Agreement or
Replacement Credit Agreement(s) is not less than twenty percent (20%) of the
total committed borrowing base then available under the Credit Agreement or
Replacement Credit Agreement(s) and (II) pro forma for such drawing and the
application of such proceeds as approved by the Board, the Partnership will not
have more than $25.0 million of cash on hand;  provided further that total
outstanding Indebtedness under clauses (A) and (B) of this
Section 5.7(b)(ii) shall not exceed $700.0 million if the Tag Right Interests
are transferred or conveyed in connection with the exercise of the Tag Right, or
$466.0 million if the Tag Right Interests are not so transferred or conveyed, at
any time without Special Approval, (C) Indebtedness not to exceed $15.0 million
at any time outstanding for capital leases and purchase money security interests
and (D) the incurrence of trade payables arising in the ordinary course of
business and obligations under Hedge Agreements, (1) create or incur any
Indebtedness, assume any Indebtedness of, or guarantee or otherwise become
responsible for the obligations of, any Person, in any single transaction or
series of transactions, (2) redeem prior to maturity utilizing Indebtedness or
refinance any Senior Debt or any other Indebtedness funded or committed at the
date of either Preferred Unit Closing (other than pursuant to the mandatory
prepayment or redemption provisions thereof) or (3) permit, create or suffer to
exist any Lien (other than Permitted Liens) arising from Indebtedness on any
material assets or properties of the Company, any of its Subsidiaries or any of
the Partnership Group Companies; provided that, notwithstanding anything to the
contrary in this Section 5.7(b)(ii), neither the unanimous approval of the
Directors constituting the entire Board nor the approval of the Class B Member
shall be required in connection with the incurrence of any Indebtedness if the
proceeds of such Indebtedness are used to redeem the outstanding Preferred Units
in full, inclusive of an amount of cash equal to the Base Preferred Return
Amount with respect to each outstanding Preferred Unit, as may be required
pursuant to the Partnership Agreement;

 

(iii)                         amend or modify any Senior Debt Agreement,
Replacement Credit Agreement or any other agreement governing other
Indebtedness, including any document related thereto, other than as relating to
the

 

17

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incurrence of Indebtedness under Section 5.7(a)(iii)(B) or
Section 5.7(b)(ii)(C) that does not require Special Approval;

 

(iv)                        change, amend or otherwise modify, or take action
outside of, the Company’s purpose (as set forth in Section 1.9) or the
Partnership’s purpose (as set forth in Section 2.4 of the Partnership
Agreement), or engage in any business activity outside of the Core Area of the
AMI;

 

(v)                           effect any recapitalization, restructuring or
reorganization or any Unit, Preferred Unit or Common Unit split; provided that
the foregoing shall not restrict the issuance of additional Common Units
pursuant to the terms of the Partnership Agreement;

 

(vi)                        dissolve the Company, any of its Subsidiaries or any
of the Partnership Group Companies; take any action that would result in a
Bankruptcy Event of the Company, any of its Subsidiaries or any of the
Partnership Group Companies; adopt a plan of liquidation of the Company any of
its Subsidiaries or any of the Partnership Group Companies; take any action to
commence any suit, case, proceeding or other action under any existing or future
Law of any jurisdiction relating to bankruptcy, insolvency, reorganization or
relief of debtors seeking to have an order for relief entered with respect to
the Company, any of its Subsidiaries or any of the Partnership Group Companies,
or seeking to adjudicate the Company, any of its Subsidiaries or any of the
Partnership Group Companies as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to the Company, any of its Subsidiaries or any of the
Partnership Group Companies; appoint a receiver, trustee, custodian or other
similar official for the Company, any of its Subsidiaries or any of the
Partnership Group Companies, or for all or any material portion of the assets of
the Company, any of its Subsidiaries or any of the Partnership Group Companies;
or make a general assignment for the benefit of the creditors of the Company,
any of its Subsidiaries or any of the Partnership Group Companies;

 

(vii)                     directly or indirectly purchase or otherwise acquire
any assets or all or any part of the business of, or Equity Interests in, or
invest in or make a capital contribution to, any Person (other than a wholly
owned Subsidiary of the Company), including in connection with the formation of
or participation in any joint venture, partnership or similar arrangement;

 

(viii)                  make a loan or extend credit (other than in the ordinary
course trade credit) to any Person;

 

(ix)                        enter into any agreement with respect to, or
consummate, any sale of any business or assets, whether by sale, merger,
consolidation, restructuring, conversion, recapitalization, transfer or
disposition of assets (including, without limitation, any exercise of tag rights
of the Partnership or the occurrence of a Sale Transaction, in each case, under
the Joint Development Agreement, or entry into

 

18

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any contract, arrangement or other commitment in connection with any volumetric
production payment or forward sale of hydrocarbon production), other than with
respect to the Partnership’s sale of production in the ordinary course of
business or a sale that occurs concurrent with the redemption of the outstanding
Preferred Units in full, inclusive of an amount of cash equal to the Base
Preferred Return Amount with respect to each outstanding Preferred Unit (as may
be required pursuant to the Partnership Agreement);

 

(x)                           (A) create, grant or issue any Additional Units or
Equity Interests of the Company or (B) create, grant or issue (1) a General
Partner Interest (as defined in the Partnership Agreement) or (2) any Equity
Securities of the Partnership that (w) have a liquidation preference or any
rights senior to or on parity with the Preferred Units, (x) require the
Partnership to pay dividends or distributions that will have priority to or
parity with dividends or distributions payable on the Preferred Units, (y) have
rights to dividends or distributions that would reduce the Preferred Units’
distributions under the Partnership Agreement or that would be permitted to
receive cash distributions prior to liquidation or redemption of the outstanding
Preferred Units in full, inclusive of an amount of cash equal to the Base
Preferred Return Amount with respect to each outstanding Preferred Unit (as may
be required pursuant to the Partnership Agreement), or (z) results in Sanchez
Parent and its Affiliates beneficially owning less than 51.0%  of the economic
interest in the Partnership (excluding any economic interest related to the
Preferred Units);

 

(xi)                        enter into, amend, modify or terminate any
commodity, basis or interest rate hedges or swaps or other derivative
transactions other than those permitted to be entered into pursuant to
Section 6.7 of the Partnership Agreement;

 

(xii)                     initiate, compromise or settle any litigation,
administrative proceeding or other dispute involving an amount greater than
$2,500,000;

 

(xiii)                  enter into, terminate, extend, enforce, amend, or
modify, or waive any right under, any contract, agreement, arrangement or
transaction between the Company, any of its Subsidiaries or any of the
Partnership Group Companies, on the one hand, and any Member or any Affiliate of
a Member, on the other hand; provided, that (A) with respect to any contract,
agreement, arrangement or transaction between any of the Partnership Group
Companies, on the one hand, and an Affiliate of a Member (other than, with
respect to the Sanchez Investor, SPP), on the other hand, no such approval shall
be required under this Section 5.7(b)(xiii) if the entry into, termination,
extension, enforcement, amendment or modification of, or waiver of any right
under, such contract, agreement, arrangement or transaction (x) is on terms no
less favorable to the Partnership Group Companies than would be obtained in a
comparable arm’s length transaction with an independent third party and
(y) (I) such action would not be reasonably expected to (and does not
ultimately) result in revenue to, or costs or expenses incurred by, the Company,
any of its Subsidiaries or the Partnership Group Companies of more than $5.0
million or (II) such action together with all prior such action(s) in respect of
any Member or Affiliate of any Member would not be reasonably expected to result
in revenue to, or costs or

 

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expenses incurred by, the Company, any of its Subsidiaries or the Partnership
Group Companies when considered in the aggregate of more than $25.0 million for
any period of time (the immediately preceding clauses (I) and (II) collectively,
the “Affiliate Threshold”) and (B) with respect to any contract, agreement,
arrangement or transaction between any of the Partnership Group Companies, on
the one hand, and SPP, on the other hand, that is in excess of the Affiliate
Threshold, the approval of the Class B Member required under this
Section 5.7(b)(xiii) shall not be unreasonably withheld, conditioned or delayed;
provided that it is expressly acknowledged that the Class B Member may withhold
such approval or consent if the contract, agreement, arrangement or transaction
with SPP (x) is on terms less favorable to the Partnership Group Companies than
would be obtained in a comparable arm’s length transaction with an independent
third party or (y) is not approved in writing by the independent members of the
board of directors of Sanchez Parent, the conflicts committee of the board of
directors of the general partner of SPP and Blackstone Newco, or (z) Sanchez
Parent and its Affiliates and Blackstone Newco, respectively, are not assuming a
proportional share of such contract, agreement, arrangement or transaction,
based on each party’s respective working interests associated with the related
contract or expenditure, on the same terms and conditions as the Partnership; 
provided that, notwithstanding anything to the contrary in this
Section 5.7(b)(xiii), neither the unanimous approval of the Directors
constituting the entire Board nor the approval of the Class B Member shall be
required in connection with any sale of any business or assets to any Member or
any Affiliate of a Member if the proceeds of such sale are used to redeem the
outstanding Preferred Units in full, inclusive of an amount of cash equal to the
Base Preferred Return Amount with respect to each outstanding Preferred Unit, as
may be required pursuant to the Partnership Agreement.

 

(xiv)                 appoint, remove or terminate the engagement of, or cause
the Company or any Subsidiary of the Company or Partnership Group Company to
appoint, remove or terminate the engagement of, the independent auditors or
reserve engineer for the Company or such Subsidiary; provided that, as of the
Effective Date, the Company’s and the Partnership’s independent auditors shall
be KPMG LLP and the Company’s reserve engineer shall be Ryder Scott Company,
L.P.  and no further approval shall be required under this
Section 5.7(b)(xiv) for such initial appointments; provided further, that
following the Effective Date, no approval shall be required under this
Section 5.7(b)(xiv) for the appointment of any entity that is listed in
Exhibit D hereto as a successor of the independent auditor or reserve engineer,
as applicable, provided that the entity designated as the successor independent
auditor or reserve engineer is the then- current independent auditor or
independent reserve engineer for the Class A Member;

 

(xv)                    (A) change or designate the Tax Matters Member or
Partnership Representative or make any tax election or take, or cause the
Company or any Subsidiary of the Company to take, any action with respect to
taxes that would cause the Company or any Subsidiary of the Company to be
classified as other than a partnership for federal income tax purposes, or
(B) change or designate the Tax Matters Partner or Partnership Representative
(each as defined in the

 

20

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Partnership Agreement) pursuant to the Partnership Agreement;

 

(xvi)                 enter into an agreement with respect to or consummate any
Change of Control, Disposition Transaction or any liquidation or dissolution
pursuant to Section 12.2 of the Partnership Agreement unless, upon the
consummation of such Change of Control, Disposition Transaction or liquidation
or dissolution, as the case may be, all outstanding Preferred Units will be
redeemed in full, inclusive of an amount of cash equal to the Base Preferred
Return Amount with respect to each outstanding Preferred Unit (as may be
required pursuant to the Partnership Agreement);

 

(xvii)              transfer all or any part of the General Partner Interest (as
defined in the Partnership Agreement) in the Partnership;

 

(xviii)    make any payments or distributions to, or effect any redemptions in
respect of, Common Units, in each case, prior to the redemption in full of all
Preferred Units by the Partnership, inclusive of an amount of cash equal to the
Base Preferred Return Amount with respect to each outstanding Preferred Units
(as may be required pursuant to the Partnership Agreement), or make any
distributions on any Equity Interests other than in cash;

 

(xix)                 terminate, extend, amend, or modify the Hydrocarbons
Marketing Agreement and the Sanchez Letter Agreement;

 

(xx)                    create any Subsidiary;

 

(xxi)                 make or agree to make any amendment, supplement,
modification or waiver of any provision of the Joint Development Agreement that,
if implemented, would adversely impact the Company, any of its Subsidiaries or
any of the Partnership Group Companies in any material respect, including,
without limitation, the spacing protections set forth in Section 5.3 of the
Joint Development Agreement;

 

(xxii)              make or agree to make any amendment, supplement,
modification or waiver of any provision in either of the Springfield Gathering
Agreements that, if implemented, would adversely impact the Partnership Group
Companies in any material respect, including any increase in fees or extension
of any applicable duration of the demand charge period;

 

(xxiii)           make any election for capital expenditures on behalf of any
Partnership Group Company that is different than the election made by a Sanchez
Vehicle with respect to operations on assets in which the Partnership Group
Companies and Sanchez Vehicles both own an interest (i.e., non-consent for the
Partnership and consent for Sanchez Vehicle, or vice versa);

 

(xxiv)          if, as of the end of a calendar quarter preceding the date of
determination, the PDP PV-10 Ratio is less than the then-effective Test Level,
elect to non-consent for greater than five percent (5%) of the gross wells
proposed by Persons other than the Sanchez Vehicles in any rolling twelve-month
period;

 

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provided that regardless of whether the PDP PV-10 Ratio is equal to or greater
than the then-effective Test Level, except pursuant to the rights of the
Operating Committee under the Joint Development Agreement, Special Approval
shall be required to non-consent to greater than five percent (5%) of gross
wells proposed by Blackstone Newco or its Affiliates (or successor owners of its
working interests) in any rolling twelve-month period;

 

(xxv)             make capital expenditures for drilling and completion of wells
in any quarterly period commencing twenty-four (24) months after the Effective
Date in which as of the end of the calendar quarter preceding the date of
determination the PDP PV-10 Ratio was less than the then-effective Test Level,
provided that if such capital expenditures constitute an “Approved Operation”
(as defined in the Joint Development Agreement) pursuant to the Joint
Development Agreement, then the required approval pursuant to this
Section 5.7(b)(xxv) will only be applicable to an amendment or modification of
such “Approved Operation” or approval of a subsequent “Approved Operation”;

 

(xxvi)          if, as of the end of a calendar quarter preceding the date of
determination, the PDP PV-10 Ratio is less than the then-effective Test Level,
make any elections under the Joint Development Agreement or any Operating
Agreement in respect of the Partnership’s properties with respect to the
operation or series of related operations on Existing Producing Wells in excess
of $25.0 million in any year;

 

(xxvii)       admit or accept any Obligation (as such term is defined in the
APC/KM PSA) contained in any Claim Notice (as such term is defined in the APC/KM
PSA) received pursuant to the APC/KM PSA;

 

(xxviii)    provide consent to any transaction pursuant to Section 4(d) or
Section 4(f) of the Sanchez Letter Agreement; or

 

(xxix)          take any action, authorize or approve, or enter into any binding
agreement with respect to or otherwise commit to do any of the foregoing.

 

(c)                          Notwithstanding anything to the contrary in this
Agreement, at any time during which an Independent Director is required to be
appointed, none of the Company, any of its Subsidiaries, any of the Partnership
Group Companies nor any Officer or agent of the Company on behalf of the
Company, any of its Subsidiaries or any of the Partnership Group Companies,
shall, without the consent of the entire Board, including the Independent
Director, take any action that would result in a Bankruptcy Event of the
Company, any of its Subsidiaries or any of the Partnership Group Companies;
adopt a plan of liquidation of the Company any of its Subsidiaries or any of the
Partnership Group Companies; take any action to commence any suit, case,
proceeding or other action under any existing or future Law of any jurisdiction
relating

 

22

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to bankruptcy, insolvency, reorganization or relief of debtors seeking to have
an order for relief entered with respect to the Company, any of its Subsidiaries
or any of the Partnership Group Companies, or seeking to adjudicate the Company,
any of its Subsidiaries or any of the Partnership Group Companies as bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to the
Company, any of its Subsidiaries or any of the Partnership Group Companies;
appoint a receiver, trustee, custodian or other similar official for the
Company, any of its Subsidiaries or any of the Partnership Group Companies, or
for all or any material portion of the assets of the Company, any of its
Subsidiaries or any of the Partnership Group Companies; or make a general
assignment for the benefit of the creditors of the Company, any of its
Subsidiaries or any of the Partnership Group Companies.

 

5.8                        Issuance of Preferred Units and Certain Debt
Matters.  If after the Effective Date, (a) an event of default or borrowing base
deficiency (or analogous term or event) under any of the Senior Debt Agreements
or any other agreements governing any material Indebtedness of any of the
Partnership Group Companies (including, without limitation, any Replacement
Credit Agreement) has occurred and such event of default remains uncured by the
applicable Partnership Group Company for ten (10) Business Days following
receipt by the Company of notice of such event of default or (b) any of the
Senior Debt Agreements, Replacement Credit Agreements or any other agreements
governing any material Indebtedness of any of the Partnership Group Companies
prohibits the payment by the Partnership of any Tax Distributions (as defined in
the Partnership Agreement) or, following the date that is twelve (12) months
following the Effective Date, Distributions in cash on the Preferred Units
pursuant to Section 4.1(b) of the Partnership Agreement and such prohibition
persists for ten (10) Business Days after the date such distribution is due to
be paid, then, notwithstanding Section 5.7, the Class B Member shall have the
right, in its sole discretion, to cause the Partnership to issue additional
Preferred Units, which number of Preferred Units shall be determined by the
Class B Member, in its sole discretion following consultation with the Board, to
the GSO Partner on the same terms and conditions that the Preferred Units were
issued to the GSO Partner on the Effective Date.  In order to exercise such
right, the Class B Member shall deliver a written notice (an “Additional
Preferred Units Notice”) to the Company setting forth the request and the number
of Preferred Units to be issued by the Partnership.  Notwithstanding
Section 5.7, upon receipt of the Additional Preferred Units Notice, the Company
and the Board shall be required to cause the Partnership (A) to enter into a
purchase agreement with the GSO Partner in substantially the form attached
hereto as Exhibit E (with any such changes to the extent the parties thereto may
mutually agree) and (B) to issue the number of Preferred Units set forth in the
Additional Preferred Units Notice within five (5) Business Days of receipt of
the Additional Preferred Units Notice.  The Partnership shall use the proceeds
from the issuance of such Preferred Units to the GSO Partner solely to repay
outstanding Indebtedness of any of the Partnership Group Companies under any of
the Senior Debt Agreements or any other agreements governing any material
Indebtedness of any of the Partnership Group Companies (including a Replacement
Credit Agreement) so as to remedy the applicable condition(s) described in
clauses (a) and (b) of this Section 5.8.

 

5.9                        Enforcement of Affiliate Contracts.  Notwithstanding
anything to the contrary in Section 5.7, each of the Members agree that any term
or condition of any arrangement, agreement or contract between the Company, any
of its Subsidiaries or any of the Partnership

 

23

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Group Companies, on the one hand, and any Affiliate of a Member or Affiliate of
the Company (excluding at any pertinent time, any Subsidiary of the Company or
Partnership Group Company), on the other hand, other than the APC/KM PSA, shall
be exercised or enforced by the Company, the applicable Subsidiary or the
applicable Partnership Group Company as directed by the non-Affiliated Member,
without the requirement of the approval by the Board or any other Person;
provided, however, that any such exercise or enforcement shall not entitle such
non-Affiliated Member to vary any obligation of the Company or of such Affiliate
under such arrangement, agreement or contract.  The Company will provide to the
non-Affiliated Member copies of all formal notices or material correspondence
under any of such arrangements, agreements or contracts at the same time as
delivery to any counterparty under such arrangements, agreements or contracts. 
For clarity, the foregoing shall not permit the Class B Member to enforce the
rights and obligations of any Partnership Group Company under the Joint
Development Agreement or any Operating Agreement to the extent that the term or
condition of such arrangement, agreement or contract relates solely to a party
that is not an Affiliate of a Member or Affiliate of the Company (provided, for
the avoidance of doubt, the foregoing shall not limit the Class B Member, or the
rights of its designees to the Board, under Sections 5.7(a) and 5.7(b));
provided further that, for clarity, the Class B Member shall be entitled to
direct the exercise and enforcement by the Company, the applicable Subsidiary or
the applicable Partnership Group Company under the Joint Development Agreement
or any Operating Agreement to the extent that (i) the term or condition of such
arrangement, agreement or contract relates to a party that is an Affiliate of a
Member or an Affiliate of the Company and the Class B Member reasonably
determines in good faith that there is a conflict of interest by the applicable
member of the Sanchez Group in exercising or enforcing such term or condition or
(ii) either the applicable member of the Sanchez Group or the Partnership is
then in breach of the applicable arrangement, agreement or contract.

 

5.10                        Limitation of Duties and Corporate Opportunities.

 

(a)                         To the fullest extent permitted by law, the
Directors (each in his or her capacity as a Director) and the UnSub
Representative shall owe no fiduciary or similar duty or obligation whatsoever
to the Company, any Member (other than for a Director (other than the
Independent Director), the Member designating such Director) or the other
Directors, except as required by any provisions of the Delaware Act or other
applicable Law that cannot be waived. Subject to the foregoing, each of the
Company and the Members acknowledge and agree that (i) each Director may decide
or determine any matter subject to the Board’s approval in the sole and absolute
discretion of such Director, it being the intent of all Members that such
Director (other than the Independent Director) shall have the right to make such
determination solely on the basis of the interests of the Member that designated
such Director, (ii) the UnSub Representative shall act at the direction of the
Board and (iii) the Independent Director shall only consider the interests of
the Company, its Subsidiaries and the Partnership Group Companies, as
applicable, when making a determination under Section 5.7(c) and shall not
consider the interests of any Members or partners.  Each of the Company and the
Members hereby agrees that any claims against, actions, rights to sue, other
remedies or other recourse to or against any Director or the UnSub
Representative for or in connection with any such decision or determination, in
each case whether arising in common law or equity or created by rule of law,
statute, constitution, contract (including this Agreement) or otherwise, are in
each case expressly released and waived by the Company and each Member, to the
fullest extent permitted by law, as

 

24

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a condition of, and as part of the consideration for, the execution of this
Agreement and any related agreement, and the incurring by the Members of the
obligations provided in such agreements.

 

(b)                         Each Director and, except as expressly provided
herein, each Member and each of their respective Affiliates, shall be free to
engage or invest in, and devote its and their time to, any other business
venture or activity of any nature and description, regardless of whether such
activities are considered competitive with the Company, and neither the Company
nor any other Person shall have any right by virtue of this Agreement or the
relationship created hereby in or to such other venture or activity of any
Person (or to the income or proceeds derived therefrom), and the pursuit of such
other venture or activity shall not be deemed wrongful or improper.  No notice,
approval or other sharing of any such other opportunity or activity shall be
required and the legal doctrines of “corporate opportunity,” “business
opportunity” and similar doctrines shall not be applied to any such competitive
venture or activity.

 

(c)                          Notwithstanding anything in this Agreement to the
contrary, the Company and each of the Members acknowledges and agrees that
certain of the GSO Investor’s Affiliates (which, solely for purposes of this
Section 5.10(c), shall include The Blackstone Group L.P. and all private equity
funds, portfolio companies, parallel investment entities, and alternative
investment entities owned, managed, or Controlled by The Blackstone Group L.P.)
(x) have made, prior to the date hereof, and are expected to make, on and after
the date hereof, investments (by way of capital contributions, loans or
otherwise), and (y) have engaged, prior to the date hereof, and are expected to
engage, on and after the date hereof, in other transactions with and with
respect to, in each case, Persons engaged in businesses that directly or
indirectly compete with the business of the Company, its Subsidiaries and the
Partnership Group Companies as conducted from time to time.  The Company and the
Members agree that, subject only to the limitations provided in
Section 5.10(d) below, any involvement, engagement or participation of the GSO
Investor and its Affiliates (including any Director designated to the Board by
the GSO Group) in such investments, transactions and businesses, even if
competitive with the Company, its Subsidiaries or the Partnership Group
Companies, shall not be deemed wrongful or improper or to violate any duty
express or implied under applicable Law or this Agreement and shall not be
deemed a conflict of interest.  For the purposes of clarity, the GSO Investor
shall be deemed not to violate this Section 5.10 if it or any of its Affiliates
shall invest in a fund or other entity, whether or not the GSO Investor Controls
such fund or entity that makes an investment that directly or indirectly
competes with the Company, its Subsidiaries or the Partnership Group Companies.

 

(d)                         Each of the Company and the Sanchez Investor (on
behalf of itself and its respective Affiliates) hereby renounces any
co-participation right, expectancy and any other rights (including information
rights) with respect to any business opportunity in which the GSO Investor
participates or desires or seeks to participate that either (x) is not within
the purposes of the Company as set forth in Section 1.9 or (y) is within such
purposes of the Company but is not a business opportunity that (i) the Company
presents to a Director solely in such individual’s capacity as a Director or
(ii) is identified to the Director solely through the disclosure of information
by or on behalf of the Company to the Director (each business opportunity other
than those referred to in clauses (x), (y)(i) or (y)(ii) are referred to as a
“Renounced Business Opportunity”); for clarity, the GSO Investor and any other
member of the GSO Group can

 

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pursue other opportunities in the AMI.  Neither the GSO Investor nor any GSO
Director nor any Affiliate of any of the foregoing (solely for purposes of this
Section 5.10(d), Affiliates of the GSO Investor shall include The Blackstone
Group L.P. and all private equity funds, portfolio companies, parallel
investment entities, and alternative investment entities owned, managed, or
Controlled by The Blackstone Group L.P.) shall have any obligation to
communicate or offer any Renounced Business Opportunity to the Company or the
Sanchez Investor, and the GSO Investor may pursue for itself or direct, sell,
assign or transfer to a Person other than the Company any Renounced Business
Opportunity, and any such action shall not be deemed a conflict of interest, a
breach of this Agreement, or a breach of any duty.  Notwithstanding anything to
the contrary in this Agreement, any business opportunity that is within the
purpose of the Company (as set forth in Section 1.9) and which is presented to
the GSO Investor solely by the Company (as distinguished from opportunities
presented by multiple Persons), will not be pursued by the GSO Investor or by
GSO unless otherwise agreed to in writing by a majority of the Sanchez
Directors.

 

(e)                          Each of the Company and the Members hereby agrees
that any claims against, actions, rights to sue, other remedies or other
recourse to or against the GSO Investor or any of its Affiliates (including any
GSO Director and solely for purposes of this Section 5.10(e), Affiliates of the
GSO Investor shall include The Blackstone Group L.P. and all private equity
funds, portfolio companies, parallel investment entities, and alternative
investment entities owned, managed, or Controlled by The Blackstone Group L.P.)
for or in connection with any such investment activity or other transaction
activity or other matters made in compliance with Section 5.10(c) or
Section 5.10(d)), or activities related to any of the foregoing, whether arising
in common law or equity or created by rule of law, statute, constitution,
contract (including this Agreement) or otherwise, are expressly released and
waived by the Company and each Member, in each case to the fullest extent
permitted by applicable law; provided, however, that the foregoing shall not
release any claims for actual fraud, willful misconduct, or a breach of this
Agreement.

 

(f)                           Notwithstanding anything in this Agreement to the
contrary, each of the Company and the Members acknowledges and agrees that the
GSO Investor and its Affiliates (including any GSO Director and solely for
purposes of this Section 5.10(f), Affiliates of the GSO Investor shall include
The Blackstone Group L.P. and all private equity funds, portfolio companies,
parallel investment entities, and alternative investment entities owned,
managed, or Controlled by The Blackstone Group L.P.) have obtained, prior to the
date hereof, and are expected to obtain, on and after the date hereof,
confidential information from other companies in connection with the activities
and transactions described in this Section 5.10 or otherwise. The Company and
each of the Members hereby agree that (x) none of the GSO Investor or any of its
Affiliates (including any GSO Director and solely for purposes of this
Section 5.10(f), Affiliates of the GSO Investor shall include The Blackstone
Group L.P. and all private equity funds, portfolio companies, parallel
investment entities, and alternative investment entities owned, managed, or
Controlled by The Blackstone Group L.P.) has any obligation to use in connection
with the business, operations, management or other activities of the Company or
to furnish to the Company, its Subsidiaries, the Partnership Group Companies or
any Member any such confidential information, and (y) any claims against,
actions, rights to sue, other remedies or other recourse to or against the GSO
Investor or any of its Affiliates (including any GSO Director and solely for
purposes of this Section 5.10(f), Affiliates of the GSO Investor shall include
The Blackstone Group L.P. and all private equity funds, portfolio companies,
parallel

 

26

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investment entities, and alternative investment entities owned, managed, or
Controlled by The Blackstone Group L.P.) for or in connection with any such
failure to use or to furnish such confidential information, whether arising in
common law or equity or created by rule of law, statute, constitution, contract
(including this Agreement) or otherwise, are expressly released and waived by
each of the Company and the Members to the fullest extent permitted by
applicable law.

 

(g)                                  Notwithstanding anything in this Agreement
to the contrary:

 

(i)                             the Company and each of the Members acknowledge
and agree that as of the Effective Date, SN Maverick, an Affiliate of Sanchez
Parent, and Blackstone Newco purchased from Anadarko Petroleum Corporation and
Kerr McGee Oil and Gas Onshore LP certain oil, gas and mineral interests in the
AMI, in connection therewith entered into the Joint Development Agreement and
related Operating Agreements and on and after the Effective Date, Sanchez
Investor’s Affiliates (including Sanchez Parent and its Subsidiaries) will
engage in oil and gas activities in the AMI related to such assets and
agreements including, but not limited to, acquiring oil and gas assets, drilling
and completing wells, producing oil and gas, gathering, processing, transporting
and marketing oil and gas both for its own account and for the account of
Blackstone Newco (the “Additional Sanchez Activities”) and the Additional
Sanchez Activities may directly or indirectly compete with the business of the
Company, the Partnership Group Companies and any other Subsidiary of the Company
as conducted from time to time; and

 

(ii)                          except as set forth in the Joint Development
Agreement, the Sanchez Letter Agreement or Section 5.11, the GSO Investor shall
not be entitled to and hereby renounces any co-participation right in any
business opportunities pursued by SN Maverick and its Affiliates (other than the
Company or any of the Partnership Group Companies).

 

5.11                AMI and Participation in Future Acquisitions.  Upon receipt
by the Partnership of an offer from Sanchez Parent or any of its Affiliates of
forty percent (40%) of the interest of Sanchez Parent and its Affiliates to be
acquired in an AMI Acquisition or other AMI Participation Opportunity, in each
case, as such offer is required to be so presented under the Joint Development
Agreement or Sanchez Letter Agreement, the Partnership shall automatically,
without the need for any further action by the Board or any Member, be deemed to
have approved such acquisition of the offered portion of such AMI Acquisition or
AMI Participation Opportunity, unless the Class B Member declines such
acquisition pursuant to Section 5.7(b), in which case the Partnership Group
Companies shall be deemed to have irrevocably waived their right to acquire any
properties and assets comprising the AMI Acquisition or other AMI Participation
Opportunity if such acquisition is consummated on the terms and subject to the
conditions presented to the Partnership within one-hundred fifty (150) days from
the date that the Class B Member declines such acquisition.  If the Partnership
has been deemed to approve any AMI Acquisition or other AMI Participation
Opportunity, then (a) the Company shall cause the Partnership to consummate the
AMI Acquisition or other AMI Participation Opportunity on the terms and
conditions required by the Joint Development Agreement or the Sanchez Letter

 

27

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Agreement and such acquisition shall be funded by the Partnership (and the
Members agree to cause their respective Affiliates who are limited partners in
the Partnership to comply with the following) as follows, unless otherwise
mutually determined by the Board acting with unanimous consent: (i) first, with
cash on hand at the Partnership Group Companies, provided that the Partnership
has not then failed to pay when due any Tax Distributions or any quarterly
Distributions to the Preferred Units in cash pursuant to Section 4.1(b) of the
Partnership Agreement and such failure is continuing, (ii) second, by incurring
Indebtedness by drawing upon the Credit Agreement (or any Replacement Credit
Agreement), provided that, with respect to any funding of such acquisition under
either the immediately preceding clause (i) or this clause (ii), (A) the use of
cash on hand at the Partnership Group Companies and any such drawing upon the
Credit Agreement (or any Replacement Credit Agreement) does not result in
undrawn committed borrowing capacity of less than sixty percent (60%) of the
total committed borrowing base to then be available under the Credit Agreement
(or any Replacement Credit Agreement), and (B) the ratio of (x) the sum of
outstanding Indebtedness of the Partnership Group Companies and the Base
Preferred Return Amount to (y) LTM EBITDA (as defined in the Credit Agreement)
shall not exceed the levels set forth on Exhibit F immediately prior to and pro
forma for such acquisition, (iii) third, by causing the Partnership to issue
additional Preferred Units to Affiliates of the Class B Member designated by the
Class B Member in an amount equal to 60% of the remaining purchase price and
additional Common Units to Affiliates of the Class A Member designated by the
Class A Member in an amount equal to 40% of the remaining purchase price;
provided that the Class A Member and its Affiliates shall not be required to
fund any amounts pursuant to this clause (iii) if prohibited from doing so
pursuant to any agreement governing any Indebtedness of such entities and their
Affiliates and (iv) fourth, any remaining amounts shall be satisfied by causing
the Partnership to issue additional Preferred Units to Affiliates of the Class B
Member designated by the Class B Member pursuant to a purchase agreement in
substantially the form attached hereto as Exhibit E (with any such changes to
the extent the parties thereto may mutually agree).

 

5.12                 Meetings of the Members.  Meetings of the Members may be
called by the Board, but shall not otherwise be required for any purpose, except
as may be required by applicable Law.

 

(a)                          Place of Meetings.  The Board may designate any
place as the place of meeting for any meeting of the Members.

 

(b)                          Notice of Meetings.  Written or printed notice
stating the place, day and hour of the meeting and the purposes for which the
meeting is called shall be delivered to each Member entitled to vote thereat not
less than five (5) Business Days (or forty-eight (48) hours in the case of a
telephonic meeting) before the meeting.

 

(c)                           Manner of Acting.   When a vote on any matter is
required by the Members, each Member shall be entitled to one vote for each Unit
held by such Member within a specified class or series of Units entitled to vote
on such matter.  Unless otherwise provided by Law or this Agreement, the
affirmative vote of a majority of the Units having the right to vote on the
matter or action subject to such vote shall constitute the act of the Members
and the affirmative vote of a specified class or series shall constitute the act
of the Members holding that class or series of Units.

 

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(d)                          Proxies.  At any meeting of the Members of a
specified class or series of Units, a Member may vote by proxy executed in
writing by such Member or by its duly authorized representative.

 

(e)                           Written Actions.  Any action required to be, or
which may be, taken by Members may be taken without meeting if consented thereto
in a writing setting forth the action so taken and signed by all of the Members
entitled to vote who are required to take such action.

 

(f)                            Telephonic Participation in Meetings.  Members
may participate in any meeting through telephonic or similar communications
equipment by which all Persons participating in the meeting can hear one
another, and such participation shall constitute presence in person at such
meeting.

 

5.13                        Company Covenants, Representations and Warranties.

 

(a)                          Notwithstanding anything in this Agreement to the
contrary, for so long as any Preferred Units remain outstanding or any
obligations under the Senior Debt Agreements remain outstanding, the Company
shall not, and shall cause each of the Partnership Group Companies not to:

 

(i)                              fail to observe all corporate, limited
liability company or partnership formalities and other formalities required by
their respective organizational documents or the laws of the jurisdiction where
such entity is organized, or fail to preserve its existence as an entity duly
organized, validly existing and in good standing (if applicable) under the
Delaware Act (or such other applicable Law in the jurisdiction where such entity
is organized);

 

(ii)                           commingle its funds or assets with the funds or
assets of any other Person; provided, however, that distributions made by the
Partnership not in violation of the Partnership Agreement or any Senior Debt
Agreement shall not be considered assets of the Partnership for purposes of this
Section 5.13(a)(ii);

 

(iii)                        fail to maintain all of its books, records,
financial statements and bank accounts separate from those of any other Person
(including, without limitation, any Affiliates);

 

(iv)                       maintain its assets in such a manner that it will be
costly or difficult to segregate, ascertain or identify its individual assets
from those of any other Person;

 

(v)                          hold itself out to be responsible for the debts of
any other Person or hold out its credit as being available to satisfy the
obligations of any other Person (other than pursuant to the arrangements
provided for in (A) the APC/KM PSA, (B) the [redacted] PSA, (C) the MSA, (D) the
Hydrocarbons Marketing Agreement, (E) the Sanchez Letter Agreement, (F) the
Drilling Commitment Agreement and (G) financing fees paid at the Anadarko
Closing and [redacted] Closing or Dual Closing, as applicable);

 

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(vi)                       fail to (A) hold itself out to the public and
identify itself, in each case, as a legal entity separate and distinct from any
other Person and not as a division or part of any other Person, (B) conduct its
business solely in its own name, (C) hold its assets in its own name or
(D) correct any known misunderstanding regarding its separate identity
(provided, the Partnership may authorize agents pursuant to the MSA, in their
own name as agents for the Partnership, to perform management services on behalf
of the Partnership);

 

(vii)                    fail to allocate shared expenses (including, without
limitation, shared office space) or fail to use separate stationery, invoices
and checks;

 

(viii)                 fail to pay its own liabilities from its own funds (other
than pursuant to the arrangements provided for in (A) the APC/KM PSA, (B) the
[redacted] PSA, (C) the MSA, (D) the Hydrocarbons Marketing Agreement, (E) the
Sanchez Letter Agreement, (F) the Drilling Commitment Agreement and
(G) financing fees paid at the Anadarko Closing and [redacted] Closing or Dual
Closing, as applicable);

 

(ix)                       identify its partners or other Affiliates, as
applicable, as a division or part of it;

 

(x)                          guarantee, or otherwise become a restricted
subsidiary pursuant to any agreement governing, the Indebtedness of the Sanchez
Investor or any of its Affiliates (other than the Company or the Partnership
Group Companies);

 

(xi)                       fail to be adequately capitalized to engage in its
business separate and apart from Sanchez Parent and its Affiliates and to remain
solvent; provided the foregoing shall not be construed as imposing an obligation
on any Member to contribute or loan additional capital, property or services to
the Company;

 

(xii)                    fail to ensure that all material transactions between
the Company, its Subsidiaries or the Partnership Group Companies, on the one
hand, and any member of the Sanchez Group, on the other hand, whether currently
existing or hereafter entered into, will be on an arm’s length basis; or

 

(xiii)                 have the same slate of Persons serving as officers of
Sanchez Parent or any of its Affiliates (excluding the Company, any of its
Subsidiaries and the Partnership Group Companies) also serve in the same
capacities with the Company, any of its Subsidiaries or any of the Partnership
Group Companies.

 

(b)                          The assets of the Company and its Subsidiaries or
the Partnership Group Companies have not been and will not be listed as assets
on the financial statement of any other Person; provided, however, that the
assets of the Company and its Subsidiaries or the Partnership Group Companies
may be included in a consolidated financial statement of Sanchez Parent and its
Affiliates, provided that (i) appropriate notation shall be made on such
consolidated financial statements to indicate the separateness of the Company
and its Subsidiaries or the Partnership Group Companies and the Members and
their Affiliates and to indicate that the Company’s and its Subsidiaries or the
Partnership Group Companies’ assets and credit are not available to satisfy

 

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the debts and other obligations of the Members and their Affiliates or any other
Person and (ii) such assets shall be listed on the Company’s and its
Subsidiaries or the Partnership Group Company’s own separate balance sheet(s).
Such consolidation shall not affect the status of the Company and its
Subsidiaries or the Partnership Group Companies as separate legal entities with
its separate assets and separate liabilities. The Company (in its capacity as
the general partner of the Partnership) and the Partnership Group Companies have
maintained and will maintain their respective books, records, resolutions and
agreements as official records.  Failure by the Company (in its capacity as the
general partner of the Partnership) or the Partnership Group Companies to comply
with any of the obligations set forth in this Section 5.13(b) shall not affect
the status of the Company, the Partnership and each other Partnership Group
Company as a separate legal entity, each with its separate assets and separate
liabilities.

 

(c)                          The Members acknowledge and agree that the Company
and each of the Partnership Group Companies are special purpose, non-guarantor,
unrestricted Subsidiaries of Sanchez Parent or any Affiliate thereof and shall
be bankruptcy remote from Sanchez Parent or any Affiliate of Sanchez Parent that
is not the Company or is not included in the Partnership Group Companies.

 

5.14                Tag-Rights Control.  With respect to a transfer by
Blackstone Newco, at any time (a) following the fifth anniversary of the
Effective Date or (b) during any calendar quarter in which the PDP PV-10 Ratio
is less than the then-effective Test Level, if any Partnership Group Company
receives a Tag-Along Offer (as such term is defined in the Joint Development
Agreement) pursuant to the Joint Development Agreement, the Class B Member shall
be permitted to cause the Partnership Group Companies to participate in the
subject Tag-Along Transaction (as such term is defined in the Joint Development
Agreement) in accordance with the terms of the Joint Development Agreement. With
respect to a transfer by SN Maverick or any Sanchez Vehicle, the Class B Member
shall be permitted to cause the Partnership Group Companies to participate in
the subject Tag-Along Transaction (as such term is defined in the Joint
Development Agreement and the Sanchez Letter Agreement) pursuant to the Joint
Development Agreement or the Sanchez Letter Agreement.

 

5.15                Certain Workover and Recompletion Operations.  If, as of the
end of any calendar quarter preceding a date of determination, the PDP PV-10
Ratio is less than the then-effective Test Level, the Class B Member shall be
entitled to (a) propose in writing to Sanchez Investor from time to time
workover or recompletion operations relating to the Partnership Group Companies’
assets, in each case pursuant to the terms of the Joint Development Agreement or
any applicable Operating Agreement and (b) cause the Partnership to deliver such
proposal in writing to Sanchez Parent.  Upon receipt of such proposal, the Board
will instruct the UnSub Representative to propose such operations to the
Operating Committee in accordance with the terms of the Joint Development
Agreement and vote in favor of such operations. Notwithstanding anything to the
contrary contained herein, upon compliance with the foregoing terms of this
Section 5.15, there shall be no liability on behalf of the Partnership or the
UnSub Representative if such proposed operations are rejected or otherwise not
approved by the Blackstone Representatives (as defined under the Joint
Development Agreement) of the Operating Committee.

 

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ARTICLE VI

BOOKS, REPORTS AND COMPANY FUNDS

 

6.1                       Records and Accounting.  The Company shall keep or
cause to be kept at the principal office of the Company appropriate books and
records with respect to the Company’s business. The books of the Company shall
be maintained, for financial reporting purposes, on an accrual basis in
accordance with generally accepted accounting principles (“GAAP”).  All
decisions as to accounting matters, except as specifically provided to the
contrary herein, shall be made by the Board.

 

6.2                       Reports.

 

(a)                                   The Company shall use commercially
reasonable efforts to deliver or cause to be delivered to each Member, within
seventy-five (75) days after the end of each Fiscal Year, an annual report
containing a statement of changes, if any, in the Member’s equity and the
Member’s Capital Account balance for such Fiscal Year, if any.

 

(b)                                   The Company shall use commercially
reasonable efforts to deliver or cause to be delivered, within seventy-five (75)
days after the end of each Fiscal Year, to each Person who was a Member at any
time during such Fiscal Year all information necessary for the preparation of
such Person’s United States federal and state income tax returns.

 

(c)                                    The Company shall use commercially
reasonable efforts to deliver or cause to be delivered, within seventy-five (75)
days after the end of each Fiscal Year, all information requested by a Member in
order for such Member to complete its unrelated business taxable income and
FIRPTA tax filings, if any.

 

(d)                                   The Company shall use commercially
reasonable efforts to deliver or cause to be delivered to each Member, within
sixty (60) days after the end of each Fiscal Year, estimates of each of the
items in Sections 6.2(a), 6.2(b) and 6.2(c) to the extent such items have not
then been delivered.

 

(e)                                    The Company shall cause the Partnership
to deliver or cause to be delivered to each of the Members no later than the
time delivered to the Partners (as defined in the Partnership Agreement) those
reports that are required to be delivered to the Partners pursuant to
Section 7.2 of the Partnership Agreement. The Company shall cause the
Partnership to deliver or cause to be delivered to the Class B Member no later
than the time delivered to the holders of Preferred Units the information that
is required to be delivered to such holders pursuant to Section 5.7 of the
Partnership Agreement.

 

6.3                       Inspection by Members.  Except as may be necessary to
preserve attorney-client or similar privilege of the Company, any Member, and
any accountants, attorneys, financial advisors and other representatives of such
Member, may from time to time at such Member’s sole expense for any reasonable
purpose, visit and inspect the respective properties of the Company, any of its
Subsidiaries or any of the Partnership Group Companies, examine (and make copies
and extracts of) the Company’s, any of its Subsidiaries’ or any of the
Partnership Group Companies’ respective books, records and documents of any
kind, and discuss the Company’s, any of its Subsidiaries’ or any of the
Partnership Group Companies’ respective

 

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affairs with its employees or independent accountants, all at such reasonable
times as such Member may request upon reasonable notice.

 

6.4                        Public Disclosure.  Unless required by Law, including
the rules and regulations of any securities exchange (with the advice of counsel
to the Company), no press release or public announcement related to the Company,
any of the Company’s Subsidiaries, any of the Partnership Group Companies, this
Agreement or the transactions contemplated herein or any other announcement or
communication shall be issued or made by any Member, a Director, the Company,
any of its Subsidiaries or any of the Partnership Group Companies without the
advance approval of the Board (including any Directors appointed by the GSO
Group), in which case the Board shall be provided a reasonable opportunity to
review and provide suggested comments concerning the disclosure contained in
such press release, announcement or communication prior to issuance,
distribution or publication. The foregoing shall not limit Sanchez Parent or its
Affiliates from publicly filing the Partnership Agreement and making additional
disclosures in connection therewith, in each case as required by applicable Law
and securities regulations.

 

ARTICLE VII

TAX MATTERS

 

7.1                        Tax Controversies.  Subject to Sections 5.4 and 5.7,
for any taxable year beginning before January 1, 2018, the Class A Member is
designated as the “Tax Matters Member” as defined in Code Section 6231 (the “Tax
Matters Member”) as of the date hereof, and for any taxable year beginning on or
after January 1, 2018, the Class A Member is designated as the “Partnership
Representative” as defined in Code Section 6223(a), as added by the Bipartisan
Budget Act of 2015 (the “Partnership Representative”). The Tax Matters Member or
the Partnership Representative shall cause to be prepared and timely filed (on
behalf of the Company) all federal, state and local tax returns, if any,
required to be filed by the Company. The Company shall bear the costs of the
preparation and filing of its returns.  Subject to Sections 5.4 and 5.7, the Tax
Matters Member or the Partnership Representative shall determine whether to make
any elections on behalf of the Company.  Without consent of the Board, the Tax
Matters Member or the Partnership Representative shall not extend the statute of
limitations, file a request for administrative adjustment, file suit concerning
any tax refund or deficiency relating to any Company administrative adjustment
or enter into any settlement agreement relating to any Company item of income,
gain, loss, deduction or credit for any Fiscal Year. In the event the “TEFRA
audit provisions” of Code Section 6221 et seq. apply by their terms, the Tax
Matters Member shall ensure that each other Member is a notice partner within
the meaning of Section 6231(a)(8) of the Code. Each Member agrees to cooperate
with the Tax Matters Member or the Partnership Representative and to do or
refrain from doing any and all things required by the Tax Matters Member or the
Partnership Representative to conduct such proceedings. Subject to Sections 5.4
and 5.7, the designation of the Tax Matters Member or the Partnership
Representative may be changed from time to time as determined by the Board.

 

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ARTICLE VIII

EXCULPATION AND INDEMNIFICATION

 

8.1                       Performance of Duties; No Liability of Members,
Directors and Officers.  No Member or Director (in their respective capacities
as such) shall have any duty to the Company or any Member of the Company except
as expressly set forth herein or in other agreements to which such Persons are
party or as required by applicable law. No Member, Director or Officer of the
Company (in their respective capacities as such) shall be liable to the Company,
and no Director or Officer of the Company (in their respective capacities as
such) shall be liable to any Member, for any loss or damage sustained by the
Company or such Member (as applicable), unless such loss or damage shall (as
finally determined by a court of competent jurisdiction) have resulted from such
Person’s fraud, intentional misconduct or, in the case of any Member, willful
breach of this Agreement or, in the case of any Director or Officer of the
Company, knowing and intentional breach of this Agreement or, in the case of an
Officer, breach of such Person’s duties pursuant to Section 5.6(d). In
performing such Person’s duties, each such Person shall be entitled to rely in
good faith on the provisions of this Agreement and on information, opinions,
reports or statements (including financial statements and information, opinions,
reports or statements as to the value or amount of the assets, liabilities,
profits or losses of the Company or any facts pertinent to the existence and
amount of assets from which distributions to Members might properly be paid) of
the following other Persons or groups: one or more Officers or employees of the
Company, any attorney, independent accountant, appraiser or other expert or
professional employed or engaged by or on behalf of the Company; or any other
Person who has been selected with reasonable care by or on behalf of the
Company, in each case as to matters which such relying Person reasonably
believes to be within such other Person’s competence. The preceding sentence
shall in no way limit any Person’s right to rely on information to the extent
provided in Section 18-406 of the Delaware Act. No Member, Director or Officer
of the Company shall be personally liable under any judgment of a court, or in
any other manner, for any debt, obligation or liability of the Company, whether
that liability or obligation arises in contract, tort or otherwise, solely by
reason of being a Member, Director or Officer of the Company or any combination
of the foregoing.  Nothing in this Agreement shall limit the liabilities and
obligations of the Members, or entitle any Member to indemnification hereunder
from the Company with respect to any claims made under, when acting in any
capacity for or on behalf of the Company other than those expressly described
above. For the avoidance of doubt, nothing in this Agreement shall limit the
liability of any Member to any other Member for breach of this Agreement.

 

8.2                       Right to Indemnification.  Subject to the limitations
and conditions as provided in this Article VIII, 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 or in the nature of an alternative dispute
resolution in lieu of any of the foregoing (“Proceeding”), or any appeal in such
a Proceeding or any inquiry or investigation that could lead to such a
Proceeding, by reason of the fact that such Person, or a Person of which such
Person is the legal representative, is or was a Member, a Director or Officer
or, in each case, a representative thereof (each, an “Indemnified Person”) 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 said law

 

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permitted the Company to provide prior to such amendment) against judgments,
penalties (including excise and similar taxes and punitive damages), fines,
settlements and reasonable expenses (including, without limitation, reasonable
attorneys’ and experts’ fees) actually incurred by such Person in connection
with such Proceeding, appeal, inquiry or investigation (“Loss”), unless (a) such
Loss shall have been finally determined by a court of competent jurisdiction to
have resulted from such Person’s fraud, intentional misconduct or, in the case
of any Member, willful breach of this Agreement or, in the case of any Director
or Officer, knowing and intentional breach of this Agreement or (b) in the case
of an Officer, such Loss shall have been finally determined by a court of
competent jurisdiction to have resulted from such Person’s failure to act in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the Company or other failure to comply with such Officer’s
duties pursuant to Section 5.6, or such Officer had reasonable cause to believe
his or her conduct was unlawful. Indemnification under this Article VIII 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
Article VIII, including the rights to advancement granted under Section 8.3,
shall be deemed contract rights, and no amendment, modification or repeal of
this Article VIII 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. The
foregoing indemnification is for the benefit of the Persons identified above
acting in the capacities described above and not in any other capacity. For the
avoidance of doubt and notwithstanding anything in this Article VIII to the
contrary, nothing in this Agreement shall provide for any indemnification of any
Member or any legal representative thereof in respect of any Proceeding by any
other Member against such Member for breach of this Agreement.

 

8.3                       Advance Payment.  The right to indemnification
conferred in this Article VIII shall include the right to be paid or reimbursed
by the Company for the reasonable documented, out-of-pocket, third-party
expenses incurred by a Person (other than an Officer of the Company in respect
of claims by the Company against such Officer in such Officer’s capacity as
such) entitled to be indemnified under Section 8.2 who was, or is threatened to
be made a named defendant or respondent in a Proceeding in advance of the final
disposition of the Proceeding and without any determination as to the Person’s
ultimate entitlement to indemnification; provided, however, that the payment of
such expenses incurred by any such Person in advance of the final disposition of
a Proceeding shall be made only upon delivery to the Company of a written
affirmation by such Person of his or her good faith belief that he has met the
standard of conduct necessary for indemnification under this Article VIII and a
written undertaking, by or on behalf of such Person, to repay all amounts so
advanced if it shall ultimately be determined that such Indemnified Person is
not entitled to be indemnified under this Article VIII or otherwise.

 

8.4                       Indemnification of Employees and Agents.  The Company,
at the direction of the Board, may indemnify and advance expenses to an employee
or agent of the Company to the same extent and subject to the same conditions
under which it may indemnify and advance expenses under Sections 8.2 and 8.3.

 

8.5                       Appearance as a Witness.  Notwithstanding any other
provision of this Article VIII, the Company may pay or reimburse reasonable
out-of-pocket expenses incurred by a Director, Member, Officer, employee or
agent in connection with his appearance as a witness or

 

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other participation in a Proceeding at a time when he is not a named defendant
or respondent in the Proceeding.

 

8.6                        Nonexclusivity of Rights.  The right to
indemnification and the advancement and payment of expenses conferred in this
Article VIII shall not be exclusive of any other right that a Member, Director,
Officer or other Person indemnified pursuant to this Article VIII may have or
hereafter acquire under any Law (common or statutory) or provision of this
Agreement.

 

8.7                        Insurance.  The Board may obtain and maintain, at the
Company’s or a Partnership Group Company’s expense, insurance to protect the
Members, Directors, Officers, employees and agents from any expense, liability
or loss arising out of or in connection with such Person’s status and actions as
a Member, Director, Officer, employee or agent. In addition, the Board may cause
the Company to purchase and maintain insurance, at the Company’s expense, to
protect the Company and any other Member, Director, Officer or agent of the
Company who is or was serving at the request of the Company as a manager,
director, officer, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of a foreign or domestic limited liability company,
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise against any expense, liability or loss, whether
or not the Company would have the power to indemnify such Person against such
expense, liability or loss under this Article VIII.

 

8.8                        Savings Clause. If this Article VIII or any portion
hereof shall be invalidated on any ground by any court or other Governmental
Authority of competent jurisdiction, then the Company shall nevertheless
indemnify and hold harmless each Person indemnified pursuant to this
Article VIII as to costs, charges and expenses (including reasonable attorneys’
fees), judgments, fines and amounts paid in settlement with respect to any such
Proceeding, appeal, inquiry or investigation to the full extent permitted by any
applicable portion of this Article VIII that shall not have been invalidated and
to the fullest extent permitted by applicable law.

 

8.9                        Fund Indemnitors.  The Company hereby acknowledges
that certain Indemnified Persons have certain rights to indemnification,
advancement of expenses or insurance provided by The Blackstone Group L.P. and
certain of its Affiliates or GSO and certain of its Affiliates (collectively,
the “Fund Indemnitors”, and the Indemnified Persons benefitting from such rights
to indemnification, and other rights, from the Fund Indemnitors, the “Fund
Indemnified Persons”).  The Company hereby agrees (a) that it is the indemnitor
of first resort (i.e., its obligations to the Fund Indemnified Persons are
primary and any obligation of the Fund Indemnitors to advance expenses or to
provide indemnification for the same expenses or liabilities incurred by the
Fund Indemnified Persons are secondary), (b) that it shall be required to
advance the full amount of expenses incurred by an applicable Fund Indemnified
Person and shall be liable for the full amount of all expenses, judgments,
penalties, fines and amounts paid in settlement to the extent legally permitted
and as required by the terms of this Agreement, without regard to any rights any
Fund Indemnified Person may have against the Fund Indemnitors, and (c) that it
irrevocably waives, relinquishes and releases the Fund Indemnitors from any and
all claims against the Fund Indemnitors for contribution, subrogation or any
other recovery of any kind in respect thereof. The Company further agrees that
no advancement or payment by the Fund Indemnitors on behalf of any Fund
Indemnified Person with respect to any claim for which a Fund Indemnified Person
has sought indemnification from the Company shall

 

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affect the foregoing and the Fund Indemnitors shall have a right of contribution
or be subrogated to the extent of such advancement or payment to all of the
rights of recovery of a Fund Indemnified Person against the Company.  The
Company acknowledges and agrees, notwithstanding anything herein to the
contrary, that the Fund Indemnitors are express third- party beneficiaries of
the terms of this Section 8.9.

 

ARTICLE IX

UNITS, TRANSFERS, AND OTHER EVENTS

 

9.1                               Unit Certificates.

 

(a)                          Units in the Company may be evidenced by
certificates in a form approved by the Board (“Certificates”) but there shall be
no requirement that the Company issue certificates to evidence the Units. Any
Certificate will bear the following legend reflecting the restrictions on the
Transfer of such securities:

 

“THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “33 ACT”), AND MAY NOT BE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE 33 ACT OR IN A TRANSACTION
WHICH, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY,
QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE 33 ACT AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER.

 

THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO THE TERMS OF THAT CERTAIN AMENDED
AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, DATED AS OF [·], 2017, AS
AMENDED FROM TIME TO TIME, BY AND AMONG THE COMPANY AND THE MEMBERS IDENTIFIED
THEREIN, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER.  A COPY OF SUCH LIMITED
LIABILITY COMPANY AGREEMENT HAS BEEN FILED WITH THE SECRETARY OF THE COMPANY AND
IS AVAILABLE UPON REQUEST.”

 

(b)                          If Certificates have been issued, upon any Transfer
of all or a portion of the Units hereunder, the Transferor shall surrender the
Certificate(s) representing the Units so Transferred to the Company for
cancellation. If a Certificate represents a greater portion of the Transferor’s
Units than that intended for Transfer, upon surrender of such certificate for
cancellation the Company shall issue to the Transferor a new Certificate which
represents the Units being retained by such Transferor. Upon a determination by
the Board, the Company shall issue to each Transferee who is Transferred Units
pursuant to this Agreement and who is admitted to the Company as a Substitute
Member in accordance with Section 9.7, a Certificate evidencing the Units held
by such Transferee.  Such Certificate shall indicate the Units then owned by
such Transferee and shall represent the Units owned by such Transferee from time
to time thereafter as set forth in the then effective Exhibit A hereto,
regardless of the Units indicated in the Certificate.  Upon receipt of written
notice or other evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of any Certificate and, in

 

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the case of any such loss, theft or destruction upon receipt of the Member’s
unsecured indemnity agreement, or in the case of any other holder of a
Certificate or Certificates, other indemnity reasonably satisfactory to the
Board or in the case of any such mutilation upon surrender or cancellation of
such Certificate, the Company will make and deliver a new Certificate, of like
tenor, in lieu of the lost, stolen, destroyed or mutilated Certificate.

 

9.2                       Record Holders.  The Company shall keep a register or
other records which reflect the Units and any Certificates. Except as otherwise
required by law, the Company shall be entitled to, and shall only, recognize the
exclusive right of a Person registered on its books as the record holder of a
Unit, whether or not represented by a Certificate, to receive distributions in
respect of such Unit, to vote as the owner of such Unit and to be entitled to
the benefits, and subject to the obligations, of this Agreement with respect to
such Unit.

 

9.3                       Restrictions on Transfers of Units.

 

(a)                                     General Transfer Restrictions.  No
Member shall Transfer any interest in any Units except in accordance with this
Section 9.3. The Class A Member shall not Transfer any interest in any Class A
Units in a single transaction or series of related transactions without the
prior written consent of the Class B Member, other than to Permitted Transferees
(provided, that in the case of a Transfer of Class A Units to a Permitted
Transferee that is not already a party hereto, such Permitted Transferee agrees
in writing to be bound by this Agreement). The Class B Member shall not Transfer
any interest in any Class B Units in a single transaction or series of related
transactions without the prior written consent of the Class A Member (which
consent shall not be unreasonably withheld, conditioned or delayed, provided
that the Class A Member may withhold such consent if any such Transfer would
result in the Class B Member and its Permitted Transferees owning less than a
majority of the outstanding Class B Units), other than to Permitted Transferees,
provided, however, that following the occurrence and during the continuance of
an Investor Redemption Event, the Class B Member may Transfer any interest in
any Units without the consent of the Class A Member or the Board.  Subject to
Section 9.4, any Transfers by a Member, other than to Permitted Transferees and
except as set forth in the provisions of the immediately preceding sentence,
shall require the prior approval of the Board.

 

(b)                                             Prohibited Transfers. 
Notwithstanding anything to the contrary in this Article IX, no Transfer of
Units shall be permitted or made if such Transfer would:

 

(i)                             violate the then applicable federal or state
securities laws or rules and regulations of the Securities Exchange Commission,
any state securities commission or any other Governmental Authority with
jurisdiction over such Transfer;

 

(ii)                          terminate the existence or qualification of the
Company under the laws of the jurisdiction of its formation;

 

(iii)                       cause the Company to be treated as an association
taxable as a corporation or otherwise not to be treated as a partnership for
U.S. federal income tax purposes;

 

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(iv)                       cause the Company to be required to register as an
investment company under the Investment Company Act of 1940, as amended, or
subject the Company , any of its Subsidiaries or any of the Partnership Group
Companies to the Investment Advisers Act of 1940, as amended, or the Employee
Retirement Income Security Act of 1974, as amended; or

 

(v)                                 violate any other provision of this
Agreement.

 

Any Transfer of Units in violation of this Agreement or applicable Law shall be
void ab initio, and the Company has the power to rescind such Transfer.

 

9.4                        Disposition Transactions.  In connection with any
Disposition Transaction (including by any consolidation, conversion, merger or
other business combination involving the Partnership in which Equity Securities
are exchanged for or converted into cash, securities of a corporation or other
business organization or other property, and any sale of all or substantially
all of the assets of the Partnership), (a) none of the Members, the Company or
the Partnership Group Companies shall enter into any definitive documentation
relating to such Disposition Transaction unless the Partnership has delivered to
the Class B Member a written undertaking that expressly provides that upon or
prior to the closing of such Disposition Transaction, an amount of cash equal to
the Base Preferred Return Amount shall be paid in respect of each Preferred Unit
in redemption or liquidation of all outstanding Preferred Units, (b) the Class B
Member shall not be obligated to be subject to any non-competition,
non-solicitation, or similar restrictive covenants that may be binding on GSO or
any of its Affiliates in connection with any Disposition Transaction and
(c) upon the consummation of any Disposition Transaction, the Partnership shall
have paid or shall concurrently pay an amount of cash equal to the Base
Preferred Return Amount with respect to each Preferred Unit in redemption in
full or liquidation of all outstanding Preferred Units. No Disposition
Transaction may be consummated if the redemption of the outstanding Preferred
Units contemplated by the immediately preceding sentence is not consummated in
accordance with the terms hereof.

 

9.5                               Exit Transactions.

 

(a)                          If (i) a Redemption Non-Payment shall have
occurred, shall not have been cured within fifteen (15) Business Days thereof
and shall be continuing; (ii) after the first anniversary of the Effective Date,
the Partnership shall have failed to pay the Quarterly Distribution Amount in
cash to the Preferred Units in any two quarters, regardless of whether
consecutive, and such failure is continuing; (iii) the Class A Member shall have
caused the Company or any Partnership Group Company to take any action that
requires Special Approval without first obtaining such Special Approval,
provided that such failure has not been cured by the Class A Member within the
earlier of (A) thirty (30) days following receipt of written notice of such
failure from the Class B Member and (B) thirty (30) days after any Officer
becomes aware of such failure; provided further that such cure period shall not
apply if the Class A Member has caused the Company or any Partnership Group
Company to take any action that requires Special Approval pursuant to Sections
5.7(b)(ii) (provided that such failure relates to an aggregate amount of
Indebtedness that is greater than $10.0 million), 5.7(b)(iii), 5.7(b)(iv) (with
respect to the acquisition of any assets outside the Core Area of the AMI),
5.7(b)(v), 5.7(b)(vi), 5.7(b)(ix) (provided that such failure relates to a sale
of business or assets at a price that is

 

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greater than $5.0 million), 5.7(b)(x), 5.7(b)(xi) (provided that such failure
represents a variance from the hedging plan established in compliance with
Section 6.7 of the Partnership Agreement of greater than five percent (5%) of
volumes or relates to derivative transactions other than those permitted to be
entered into pursuant to Section 6.7 of the Partnership Agreement), 5.7(b)(xv),
5.7(b)(xvi), 5.7(b)(xvii), 5.7(b)(xviii), 5.7(b)(xix), 5.7(b)(xx), 5.7(b)(xxi),
5.7(b)(xxii), 5.7(b)(xxvii) or 5.7(b)(xxix) in connection with the foregoing;
(iv) Sanchez Parent suffers (A) a Specified Event of Default (as such term is
defined in the Joint Development Agreement) under a Specified Credit Agreement
(as such term is defined in the Joint Development Agreement) and such Specified
Event of Default is continuing or (B) an event of default under the Indenture or
other agreement governing any Indebtedness for borrowed money of Sanchez Parent
and its Subsidiaries (other than the Company and the Partnership Group
Companies) in an amount greater than $50.0 million and such event of default has
caused the repayment of such Indebtedness to have been accelerated or (v) SN
Maverick (or any successor operator under the Joint Development Agreement that
is an Affiliate of Sanchez Parent) becomes a Defaulting Operator (as such term
is defined in the Joint Development Agreement) and as such has been removed as
Operator (as such term is defined in the Joint Development Agreement) pursuant
to the Joint Development Agreement or SN Maverick (or any successor operator
under the Joint Development Agreement that is an Affiliate of Sanchez Parent)
has resigned as Operator at any such time as an Operator Default Event (as such
term is defined in the Joint Development Agreement) exists such that SN Maverick
(or any successor operator under the Joint Development Agreement that is an
Affiliate of Sanchez Parent) can then be removed as a Defaulting Operator
pursuant to the Joint Development Agreement (any event in clauses (i), (ii),
(iii), (iv) or (v) of this Section 9.5(a), an “Investor Redemption Event”),
then, in each such case, the Class B Member shall be entitled to cause (and the
Class A Member and the Company agree to facilitate, as reasonably requested by
the Class B Member):

 

(1)                         a consolidation or merger of the Company, any of its
Subsidiaries or any of the Partnership Group Companies with or into any other
business entity or other corporate reorganization;

 

(2)                     a sale of all or any portion of the outstanding Units
held by the Members; or

 

(3)                         a transaction in which all or substantially all of
the assets of the Company, any of its Subsidiaries or any of the Partnership
Group Companies are sold, leased or otherwise disposed of

 

(each of the transactions described in Sections 9.5(a)(1), 9.5(a)(2) and
9.5(a)(3) are referred to herein as an “Exit Transaction”), provided that,
solely with respect to an Investor Redemption Event described in
Section 9.5(a)(ii) above (i.e. resulting from the Partnership’s failure to pay
the Quarterly Distribution Amount in cash to the Preferred Units in any two
quarters (regardless of whether consecutive) and such failure is continuing),
the Investor Representative (as such term is defined in the Partnership
Agreement) shall only be permitted to cause the Partnership to enter into a
definitive agreement for an Exit Transaction after three months following the
date upon which such Investor Redemption Event in Section 9.5(a)(ii) occurred.

 

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(b)                         If the Class B Member elects to pursue an Exit
Transaction: (i) following good faith consultation with the Board, the Class B
Member may exclusively identify, negotiate, structure and otherwise pursue the
Exit Transaction, which Exit Transaction may be structured and accomplished as
determined by the Class B Member in its sole discretion, whether as a merger,
consolidation, sale of all or any portion of the Units, corporate
reorganization, sale of assets or otherwise; and (ii) the Exit Transaction shall
be effected on the terms and conditions negotiated by the Class B Member,
including any terms imposing on the Members’ obligations with respect to
reasonable and customary indemnities, escrows, holdbacks or other contingent
obligations that are applicable to all Members equally. In connection with any
Exit Transaction, each of the Members shall, if requested by the Class B Member,
waive any dissenters’ rights, appraisal rights or similar rights that such
Member may have in connection therewith; provided, however, that the Class B
Member shall use its reasonable good faith efforts to maximize the Exit
Transaction Consideration payable to the holders of Common Units. In addition,
the Company shall, and the Company shall cause its Subsidiaries and the
Partnership Group Companies to, take such action as the Class B Member may
reasonably request in connection with any proposed Exit Transaction, including
engaging an investment banker or other advisor in connection with such Exit
Transaction, providing such financial and operational information as the Class B
Member may request and causing employees and other representatives of the
Company, its Subsidiaries or the Partnership Group Companies to cooperate
(including by participating in management presentations, preparing marketing
materials and making diligence materials available in an electronic data room)
with the Class B Member in any marketing process in connection with any proposed
Exit Transaction. Notwithstanding anything to the contrary herein or in the
Partnership Agreement, the Units of the Company and the general partnership
interest in the Partnership may only be sold for nominal consideration and the
holders of the Units shall not be entitled to receive any consideration in any
such Exit Transaction in excess of the Capital Contributions made by such
members to the Company as of the Effective Date.

 

(c)                          If the Class B Member elects to pursue an Exit
Transaction, then the Sanchez Investor and its Affiliates shall use their
commercially reasonable efforts to obtain as promptly as practicable: (i) the
consents or amendments required under the applicable contracts and leases to
which the Sanchez Investor or any of its Affiliates is a party that would be
necessary to transfer the assets or properties of the Company, any of its
Subsidiaries or any of the Partnership Group Companies (including the approval
of Sanchez Parent or any of its Affiliates of such transfer under the Joint
Development Agreement or any Operating Agreement); and (ii) the consents or
amendments to, or the direct assignment of, any purchase, marketing,
transportation, storage, processing or sales contract; provided that the Sanchez
Investor and its Affiliates shall not be required to expend any amounts in
connection with the foregoing unless such expenditures will be reimbursed by the
Partnership Group Companies or the potential acquirer in an Exit Transaction, in
each case upon the consummation of such Exit Transaction; provided further, that
the Sanchez Investor and its Affiliates shall have no liability pursuant to the
immediately preceding clause (ii) of this Section 9.5(c) if a Governmental
Authority or Blackstone Newco prevents the Sanchez Investor or its Affiliates
from providing such consents, amendments or assignments.

 

(d)                                 In addition, the Sanchez Investor and its
Affiliates shall use their commercially reasonable efforts in order to provide
any potential acquirer in an Exit Transaction

 

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with reasonable access upon at least five (5) days’ notice to all reasonably
necessary information and properties to permit it to perform due diligence with
respect to the proposed Exit Transaction, including access to permits, contracts
and infrastructure associated with the properties, but only to the extent that
such access is requested prior to the closing of such Exit Transaction;
provided, that, if so requested by the Sanchez Investor or its Affiliates, such
potential acquirer may be required to enter into customary access agreements
prior to being provided with such access.

 

(e)                          The Class B Member shall regularly consult and
cooperate with the Board with respect to the status of the sale process for such
Exit Transaction; provided, however, that the Board and the Class A Member shall
have no consent, voting or appraisal rights with respect to the final terms of
an Exit Transaction and shall have no right to object to an Exit Transaction
that is completed in a manner consistent with this Section 9.5.

 

(f)                           At least fifteen (15) Business Days prior to
consummating an Exit Transaction, the Class B Member shall deliver to each of
the other Members written notice that shall state (i) that the Exit Transaction
has been structured in a manner that complies with this Section 9.5, (ii) the
amount and form of consideration to be received by the Company or its Members in
the Exit Transaction (“Exit Transaction Consideration”) and (iii) all other
material terms and conditions of the Exit Transaction (including the identity of
the purchaser) and current drafts of the definitive documents related thereto.

 

(g)                          Each other Member hereby makes, constitutes and
appoints the Class B Member, with full power of substitution and
re-substitution, its true and lawful attorney, for it and in its name, place and
stead and for its use and benefit, to act as its proxy in respect of any vote or
approval of Members required to give effect to this Section 9.5, including any
vote or approval required under Section 18-209 of the Delaware Act and any
waiver contemplated by Section 9.5(b). The proxy granted pursuant to this
Section 9.5(g) is a proxy coupled with an interest and is irrevocable.

 

(h)                         Each of the Members required to participate in an
Exit Transaction (collectively, the “Participating Sellers”), whether in its
capacity as a Participating Seller, Member or otherwise, and the Company, its
Subsidiaries, the Partnership Group Companies and the Board, shall take or cause
to be taken all such actions as may be reasonably necessary or desirable in
order expeditiously to consummate such Exit Transaction and any related
transactions, including (i) making reasonable and customary representations and
warranties, (ii) executing, acknowledging and delivering consents, assignments,
waivers and other documents or instruments, (iii) furnishing information and
copies of documents, (iv) filing applications, reports, returns, filings and
other documents or instruments with Governmental Authorities and (v) otherwise
using reasonable best efforts to fully cooperate with the Class B Member.
Without limiting the generality of the foregoing, each Participating Seller
agrees to execute and deliver such agreements as may be reasonably specified by
the Class B Member to which all Participating Sellers will also be party,
including agreements to (x) make reasonable and customary individual
representations, warranties, covenants and other agreements as to the
unencumbered title to its Units and the power, authority and legal right to
Transfer such Units, (y) provide other reasonable and customary representations,
warranties and indemnities, provided that any indemnification for
representations and warranties regarding any of the

 

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Partnership Group Companies and their respective assets and operations shall be
limited to any escrow of proceeds that is established in connection with the
Exit Transaction or be limited to the proceeds actually received by the
Participating Sellers in the Exit Transaction, and (z) be severally (on a pro
rata basis in proportion to the related Exit Transaction Consideration to be
received by each Member) liable (whether by purchase price adjustment, escrows,
holdbacks, indemnity payments, contingent obligations or otherwise) in respect
of representations, warranties, covenants and agreements in respect of the
Company, its Subsidiaries and the Partnership Group Companies; provided,
however, that (i) any escrow of proceeds of any such transaction shall be
withheld on a pro rata basis among all Participating Sellers (in proportion to
the relative Exit Transaction Consideration to be received by each Member),
(ii) no Class A Member shall be liable for any amount in excess of its pro rata
share of any indemnification obligation (based on Exit Transaction
Consideration) in excess of any amounts placed in escrow and (iii) no Class A
Member shall be obligated to be subject to any non-competition, non-
solicitation, or similar restrictive covenants that may be binding on GSO or any
of its Affiliates in connection with any Exit Transaction.

 

(i)                             The closing of an Exit Transaction shall take
place at such time and place as the Class B Member shall specify by notice to
each Participating Seller no later than five (5) Business Days prior to the
closing of such Exit Transaction. At the closing of an Exit Transaction, each
Participating Seller shall deliver any documentation evidencing the Units to be
sold (if any) by such Participating Seller and the assignment thereof, free and
clear of any liens, against delivery of the applicable consideration.

 

(j)                            In connection with any Exit Transaction, the
Participating Sellers shall receive the Exit Transaction Consideration in
accordance with the order of priority specified in Section 4.1(d) of the
Partnership Agreement, after any payments required under the Senior Debt
Agreements and deduction of the proportionate share of (A) the reasonable,
documented, third- party out-of-pocket expenses associated with such sale or
Exit Transaction, including the reasonable, documented out-of-pocket legal fees
of the Company, its Subsidiaries, the Partnership Group Companies, the Class B
Member and each Participating Seller, and reasonable, documented out-of-pocket
brokers fees and other commissions and any other expenses incurred by the
Class B Member in connection with such Exit Transaction, (B) amounts paid into
escrow or held back, in the reasonable determination of the Class B Member, for
indemnification or post-closing expenses and (C) amounts subject to post-closing
purchase price adjustments; provided, however, that upon the determination of
such purchase price adjustments, indemnification or post-closing expenses and
upon release of any such escrow or hold back, as applicable, the remaining
amount of the Exit Transaction Consideration, if any, shall be distributed to
the Participating Sellers so that the total amount distributed is in accordance
with the order of priority specified in Section 4.1(d) of the Partnership
Agreement.

 

(k)                         Subject to the last sentence of Section 9.5(b), the
consideration to be paid to each Member in an Exit Transaction shall be
calculated by treating such Exit Transaction as a liquidation of the Company in
which all of the assets of the Company (including goodwill) were sold in
exchange for the Exit Transaction Consideration (including any deemed assumption
of liabilities), as the case may be, and the proceeds of that sale, together
with the profits, losses, items of income, gain, loss and deduction, and
distributions were applied, allocated and

 

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distributed in accordance with the principles and priorities set forth in
Section 4.1(d) of the Partnership Agreement.

 

(l)                             No action may be taken under this Section 9.5 if
such action would result in the breach of any Senior Debt Agreement, Replacement
Credit Agreement or any other agreement relating to material Indebtedness of the
Partnership Group; provided, however, that the Company and the Members shall use
their commercially reasonable efforts to obtain a waiver of any such breach or
otherwise amend or cause to be amended the terms of any such agreement in a
manner which permits such action; and provided further, however, that this
Section 9.5(l) shall not apply if the proceeds from any Exit Transaction are
sufficient to, and are used to, pay in full any outstanding borrowings under any
such applicable agreements.

 

(m)                     Notwithstanding anything to the contrary provided
herein, if an Investor Redemption Event has occurred and given rise to the
Class B Member’s rights under this Section 9.5 and (i) has been cured by the
Company prior to the earlier of (A) one hundred eighty (180) days following the
first occurrence of such Investor Redemption Event and (B) the execution of a
bona fide binding definitive purchase agreement with a bona fide purchaser or
(ii) all Preferred Units have been redeemed in full for an amount of cash equal
to the Base Preferred Return Amount per Preferred Unit prior to the execution of
a bona fide binding definitive purchase agreement with a bona fide purchaser,
then the provisions of this Section 9.5 will be suspended and the Exit
Transaction process shall terminate, provided that, in such case, the
Partnership shall pay the reasonable and documented fees and expenses of any
investment bank or other advisors (including legal counsel) engaged by the
Class B Member prior to such suspension and termination.

 

9.6                                 Expenses. The Transferor and Transferee of
any Units or other interest in the Company shall be jointly and severally
obligated to reimburse the Company for all reasonable out-of-pocket expenses
(including attorneys’ fees and expenses) incurred by the Company for any
Transfer or proposed Transfer, regardless of whether consummated.

 

9.7                               Transfers Generally; Substitute Members.

 

(a)                         Additional Procedural Conditions to Transfers.  
Without limiting Section 9.3(a), any Transfer of Units shall be valid hereunder
only if:

 

(i)                                     The Transferor and the Transferee
execute and deliver to the Company such documents and instruments of conveyance
as may be reasonably requested by the Board to effect such Transfer and to
confirm the agreement of the Transferee to be bound by the provisions of this
Agreement;

 

(ii)                                  The Transferor and the Transferee provide
to the Board the Transferee’s taxpayer identification number and any other
information reasonably necessary to permit the Company to file all required
federal and state tax returns and other legally required information statements
or returns; and

 

(iii)                               The Company is reimbursed by the Transferor
and/or the Transferee for all costs and expenses that the Company reasonably
incurs in connection with the Transfer as required by Section 9.6.

 

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(b)                          Rights and Obligations of Transferees and
Transferors.  Subject to Section 9.7(c), the Transferee of any Transfer
permitted pursuant to this Agreement shall be a Transferee only, and only shall
receive, to the extent Transferred, the Economic Interest associated with the
Units so Transferred, and such Transferee shall not be entitled or enabled to
exercise any other rights or powers of a Member, such other rights, and all
obligations relating to, or in connection with, such Units remaining with the
Transferring Member. The Transferring Member shall remain a Member even if it
has Transferred all of its Units to one or more Transferees until such time as
all such Transferees are admitted to the Company as Substitute Members pursuant
to Section 9.7(c), as applicable. In the event any Transferee desires to make a
further Transfer of all or any portion of its Units, such Transferee shall be
subject to all of the provisions of this Agreement to the same extent and in the
same manner as the Member who initially held such Units.

 

(c)                           Admission of Transferee as Substitute Member. 
Subject to the other provisions of this Article IX, a Transferee shall be
admitted to the Company as a Substitute Member following a Transfer of Units in
accordance with this Article IX upon satisfaction of all of the following
conditions, upon which the Transferee shall have all of the rights and powers,
and be subject to all of the restrictions and liabilities, of a Member under the
Delaware Act and this Agreement with respect to the Units Transferred: (i) the
Transferee shall become a party to this Agreement as a Member by executing a
joinder or counterpart signature page to this Agreement and executing such other
documents and instruments as the Board may reasonably request for the sole
purpose of confirming such Transferee’s admission as a Member and agreement to
be bound by the terms and conditions of this Agreement and (ii) the Transferee
pays or reimburses the Company for all reasonable costs that the Company incurs
in connection with the admission of the Transferee as a Member as required by
Section 9.6.

 

(d)                          Effect on Transferor and Company.  Upon the
admission of a Transferee as a Substitute Member, (i) the Transferor shall
(A) cease to be a Member with respect to the portion of the Units so Transferred
and (B) be released from any obligations arising after the date of such Transfer
with respect to the Units so Transferred and (ii) the Transferee will become a
Member hereunder with respect to such Units with all the rights and obligations
of a Member held by the Transferor in respect of such Units immediately prior to
the time of Transfer.

 

9.8                        Closing Date.  Any Transfer and any related admission
of a Person as a Member in compliance with this Article IX shall be deemed
effective on such date that the Transferee or successor in interest complies
with the requirements of this Agreement.

 

9.9                        Effect of Incapacity.  Except as otherwise provided
herein, the Incapacity of a Member shall not dissolve or terminate the Company.
In the event of such Incapacity, the executor, administrator, guardian, trustee
or other personal representative of the Member that has experienced such
Incapacity shall be deemed to be the assignee of such Member’s Economic Interest
and may, subject to the terms and conditions set forth in this Article IX,
become a Substitute Member.

 

9.10                 No Appraisal Rights.  No Member shall be entitled to any
valuation, appraisal or similar rights with respect to such Member’s Units,
whether individually or as part of any class or group of Members, in the event
of a merger, consolidation, sale of the Company or other

 

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transaction involving the Company or its securities unless such rights are
expressly provided by the agreement of merger, agreement of consolidation or
other document effectuating such transaction.

 

9.11                        Effect of Non-Compliance.

 

(a)                          Improper Transfers Void.  ANY ATTEMPTED TRANSFER
NOT STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF THIS ARTICLE IX WILL BE VOID
AB INITIO AND OF NO FORCE OR EFFECT WHATSOEVER, PROVIDED, THAT ANY SUCH
ATTEMPTED TRANSFER MAY BE A BREACH OF THIS AGREEMENT, NOTWITHSTANDING THAT SUCH
ATTEMPTED TRANSFER IS VOID.

 

(b)                          Other Consequences.  Without limiting the
foregoing, if any Unit or Certificate representing a Unit is purported to be
Transferred in whole or in part in contravention of this Article IX, the Person
to whom such purported Transfer was made shall not be entitled to any rights as
a Member whatsoever, including, without limitation, any of the following rights:

 

(i)                              to participate in the management, business or
affairs of the Company;

 

(ii)                           to receive any reports pursuant to Section 6.2
hereof or obtain information concerning the Company pursuant to Section 6.3 or
any other provision hereof;

 

(iii)                        to inspect or copy the Company’s books or records;

 

(iv)                       to receive any Economic Interest in the Company; or

 

(v)                          to receive upon the dissolution and winding up of
the Company the net amount otherwise distributable to the Transferor pursuant to
Section 10.2(c)(iii) hereof.

 

ARTICLE X

DISSOLUTION, LIQUIDATION AND TERMINATION

 

10.1                 Dissolution.  The Company will dissolve and its affairs
will be wound up only upon the approval of the Board and, if applicable, the
Class B Member in accordance with Section 5.7.

 

10.2                 Liquidation and Termination.  On dissolution of the
Company, a majority of the Board may appoint one or more other Persons as
liquidator(s). The liquidator will proceed diligently to wind up the affairs of
the Company and liquidate the Company’s assets and make final distributions as
provided herein. The costs of liquidation will be borne as a Company’s expense.
Until final distribution, the liquidator will continue to operate the Company
properties with all of the power and authority of the Members. Subject to
Section 18-804 of the Delaware Act, the steps to be accomplished by the
liquidator are as follows:

 

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(a)                           Accounting.  As promptly as possible after
dissolution and again after final liquidation, the liquidator will cause a
proper accounting to be made by a recognized firm of certified public
accountants of the Company’s assets, liabilities and operations through the last
day of the calendar month in which the dissolution occurs or the final
liquidation is completed, as applicable;

 

(b)                           Payments.  The liquidator will pay from Company
funds all of the debts and liabilities of the Company (including all expenses
incurred in liquidation) or otherwise make adequate provision therefor
(including the establishment of a cash escrow fund for contingent liabilities in
such amount and for such term as the liquidator may reasonably determine); and

 

(c)                            Disposition of Assets.  The Company will dispose
of all remaining assets as follows:

 

(i)                                     the liquidator may sell any or all
Company property, and any resulting gain or loss from each sale will be computed
and allocated to the Members pursuant to Section 4.2;

 

(ii)                                  with respect to all Company property that
has not been sold, the fair market value of that property will be determined and
the Capital Accounts of the Members will be adjusted to reflect the manner in
which the unrealized income, gain, loss and deduction inherent in property that
has not been reflected in the Capital Accounts previously would be allocated
among the Members if there were a taxable Transfer of that property for the fair
market value of that property on the date of distribution; and

 

(iii)                               thereafter, Company property will be
distributed among the Members in accordance with Section 4.1. All distributions
made pursuant to this clause (iii) will be made by the end of such taxable year
(or, if later, within ninety (90) days after the date of such liquidation).

 

(d)                           Distributions.  All distributions in kind to the
Members will be made subject to the liability of each distributee for its
allocable share of costs, expenses and liabilities theretofore incurred or for
which the Company has committed prior to the date of termination and those
costs, expenses and liabilities will be allocated to the distributee pursuant to
this Section 10.2.

 

(e)                            Cancellation of Filing.  On completion of the
distribution of Company assets as provided herein, the Company will be
terminated, and the Board (or such other Person or Persons as may be required)
will cause the cancellation of any other filings made as provided in Section 1.6
and will take such other actions as may be necessary to terminate the Company.

 

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ARTICLE XI

DEFINITIONS

 

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

 

“Accredited Investor” has the meaning set forth in Section 2.3(i).

 

“Additional Preferred Units Notice” has the meaning set forth in Section 5.8.

 

“Additional Sanchez Activities” has the meaning set forth in Section 5.10(g)(i).

 

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

 

“Affiliate” of any Person means any other Person, directly or indirectly,
Controlling, Controlled by or under common Control with such particular Person.
For the purposes of this Agreement, The Blackstone Group L.P. and all private
equity funds, portfolio companies, parallel investment entities, and alternative
investment entities owned, managed, or Controlled by The Blackstone Group L.P.
or its Affiliates that are not part of the credit-related businesses of The
Blackstone Group L.P. shall not be considered or otherwise deemed to be an
“Affiliate” of GSO or its Affiliates that are part of the credit- related
businesses of The Blackstone Group L.P., but any fund or account managed,
advised or subadvised by or Controlled by GSO or its Affiliates within the
credit-related businesses of The Blackstone Group L.P. shall be considered an
Affiliate of GSO. For the avoidance of doubt, (i) GSO or its Affiliates or any
fund or account managed, advised or subadvised by or Controlled by GSO or its
Affiliates shall not be considered an Affiliate of the Partnership or the
Company, and (ii) Affiliates of the Sanchez Investor shall include any member of
the Sanchez Group.

 

“Affiliate Threshold” has the meaning set forth in Section 5.7(b)(xiii).

 

“Agreement” means this Amended and Restated Limited Liability Company Agreement,
as it may be amended, modified, supplemented or restated from time to time.

 

“Allocation Regulations” means Treasury Regulation §§1.704-1(b), 1.704-2 and
1.704-3, as such regulations may be amended and are in effect from time to time
and any corresponding provisions of succeeding regulations.

 

“AMI” has the meaning given to such term in the Joint Development Agreement.

 

“AMI Acquisition” has the meaning given to the term “Acquisition” in the Joint
Development Agreement.

 

“AMI Participation Opportunity” has the meaning given to such term in the
Sanchez Letter Agreement.

 

“Anadarko Closing” has the meaning set forth in the Securities Purchase
Agreement.

 

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“APC/KM PSA” means that certain Purchase and Sale Agreement among Anadarko E&P
Onshore LLC, Kerr-McGee Oil and Gas Onshore LP, SN Maverick, the Partnership and
Blackstone Newco, dated January 12, 2017, as it may be amended, modified,
supplemented or restated from time to time.

 

“Available Cash” has the meaning given to such term in the Partnership
Agreement.

 

“Bankruptcy Event” means, with respect to any Person, the occurrence of one or
more of the following events: (a) such Person (i) admits in writing its
inability to pay its debts as they become due, (ii) files, or consents or
acquiesces by answer or otherwise to the filing against it of a petition for
relief or reorganization or rearrangement, readjustment or similar relief or any
other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, dissolution, reorganization, moratorium or other similar
law of any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) is adjudicated as bankrupt or as insolvent
or to be liquidated, (vi) gives notice to any Governmental Authority of
insolvency or pending insolvency, or (vii) takes corporate action for the
purpose of any of the foregoing; or (b) a court of Governmental Authority of
competent jurisdiction enters an order appointing, without consent by such
Person, a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, or
constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of such Person, or a petition or
involuntary case with respect to any of the foregoing shall be filed or
commenced against such Person.

 

“Base Preferred Return Amount” has the meaning given to such term in the
Partnership Agreement.

 

“Basic Documents” has the meaning assigned to such term in the Securities
Purchase Agreement.

 

“Blackstone Newco” means Aguila Production, LLC.

 

“Board of Directors” or “Board” has the meaning set forth in Section 5.1.

 

“Business Day” means any day other than a Saturday, Sunday or a day on which
commercial banks are authorized or required to close in Houston, Texas.

 

“Capital Account” has the meaning set forth in Section 4.3.

 

“Capital Contribution” means, with respect to any Member, the total amount of
money contributed to the capital of the Company by such Member, whether as an
initial Capital Contribution or as an additional Capital Contribution.

 

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“Cause” means, with respect to the Independent Director, (a) acts or omissions
by such Independent Director that constitute willful disregard of such
Independent Director’s duties under this Agreement, bad faith or gross
negligence, (b) that such Independent Director has engaged in or has been
charged with, or has been convicted of, fraud or other acts constituting a crime
under any law applicable to such Independent Director, (c) that such Independent
Director is unable to perform his or her duties as Independent Director due to
disability or incapacity or (d) that such Independent Director no longer meets
the definition of Independent Director.

 

“CEO” has the meaning set forth in Section 5.6.

 

“Certificates” has the meaning set forth in Section 9.1.

 

“Change of Control” has the meaning set forth in the Indenture.

 

“Citi” means Citigroup Global Markets Inc., Citibank, N.A., Citicorp USA, Inc.,
Citicorp North America, Inc. or any of their respective affiliates, as may be
applicable.

 

“Class A Member” means any Member holding Class A Units with regard to such
Person’s particular limited liability company equity interest designated by
Class A Units.

 

“Class A Unit” means a limited liability company Equity Interest in the Company
designated as a “Class A Unit” and which shall provide the holder thereof with
the rights and obligations specified with respect to a Class A Unit in this
Agreement.

 

“Class B Member” means any Member holding Class B Units with regard to such
Person’s particular limited liability company equity interest designated by
Class B Units.

 

“Class B Unit” means a limited liability company Equity Interest in the Company
designated as a “Class B Unit” and which shall provide the holder thereof with
the rights and obligations specified with respect to a Class B Unit in this
Agreement.

 

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

 

“Common Unit” has the meaning given to such term in the Partnership Agreement.

 

“Company” has the meaning set forth in the preamble to this Agreement.

 

“Confidential Information” has the meaning set forth in Section 12.2.

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of, the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise. The terms
“Controlled” and “Controlling” shall have correlative meanings.

 

“Core Area” has the meaning given to such term in the Joint Development
Agreement.

 

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“Credit Agreement” means the credit agreement governing the up to $500 million
senior secured, first-lien, reserve-based revolving credit facility, among the
Partnership, as borrower, and JPMorgan Chase Bank, N.A. and Citi, as joint lead
arrangers and joint book runners, JPMorgan Chase Bank, N.A. as administrative
agent, and JPMorgan Chase Bank, N.A., Citi and the syndicate of banks and
financial institutions named therein as the lenders, as amended or modified from
time to time.

 

“Credit Agreement Agent” means the administrative agent under the Credit
Agreement or a Replacement Credit Agreement.

 

“Delaware Act” means the Delaware Limited Liability Company Act, 6 Del. C. §
18-101 et seq., as it may be amended from time to time, and any successor
statute thereto.

 

“Delaware Certificate” has the meaning set forth in the Recitals hereto.

 

“Demand Facility” has the meaning given to such term in that certain Project
Lightning Fee Letter, dated January 12, 2017, among J.P. Morgan, Citi and the
Partnership, as in effect on the date thereof.

 

“Director” or “Directors” has the meaning set forth in Section 5.3(a)(i).

 

“Disposition Transaction” has the meaning given to such term in the Partnership
Agreement.

 

“Distributions” has the meaning given to such term in the Partnership Agreement.

 

“Drilling Commitment Agreement” has the meaning given to such term in the
Securities Purchase Agreement.

 

“Dual Closing” has the meaning set forth in the Securities Purchase Agreement.

 

“Economic Interest” means a Person’s right to share in the income or loss or
similar items of, and to receive distributions from, the Company, but does not
include any other rights of a Member including, without limitation, the right to
vote, consent or otherwise participate in the management of the Company, the
right to designate Directors to the Board, or, except as specifically provided
in this Agreement or required under the Delaware Act, any right to information
concerning the business and affairs of the Company.

 

“Effective Date” has the meaning set forth in the preamble to this Agreement.

 

“Equity Interests” has the meaning given to such term in the Partnership
Agreement.

 

“Equity Securities” has the meaning given to such term in the Partnership
Agreement.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

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“Existing Producing Wells” has the meaning given to such term in the Joint
Development Agreement.

 

“Exit Transaction” has the meaning set forth in Section 9.5(a)

 

“Exit Transaction Consideration” has the meaning set forth in Section 9.5(f).

 

“FIRPTA” means the Foreign Investment in Real Property Tax Act of 1980.

 

“Fiscal Year” has the meaning set forth in Section 1.5.

 

“Fund Indemnified Persons” has the meaning set forth in Section 8.9.

 

“Fund Indemnitors” has the meaning set forth in Section 8.9.

 

“GAAP” has the meaning set forth in Section 6.1.

 

“Governmental Authority” means any federal, state, municipal, national or other
government, governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case whether
associated with a state of the United States of America, the United States of
America or a foreign entity or government.

 

“GSO” means GSO Capital Partners LP, a Delaware limited partnership.

 

“GSO Director” has the meaning set forth in Section 5.3(a)(i).

 

“GSO Group” means the GSO Investor and its Affiliates, other than the Company,
the Partnership and their respective Subsidiaries.

 

“GSO Investor” has the meaning set forth in the preamble to this Agreement.

 

“GSO Partner” means GSO ST Holdings LP.

 

“Hedge Agreements” has the meaning given to such term in the definition of
“Indebtedness”.

 

“Hedging Activity” has the meaning given to such term in the Partnership
Agreement.

 

“Hydrocarbons Marketing Agreement” means the Hydrocarbons Purchase and Marketing
Agreement, dated as of the Effective Date, by and between SN Maverick and the
Partnership.

 

“Incapacity” means with respect to any Person, the bankruptcy (as defined in the
Delaware Act), liquidation, dissolution or termination of such Person.

 

“Indebtedness” means, with respect to any specified Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all
obligations

 

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of such Person for a deferred purchase price (other than trade payables incurred
in the ordinary course of such Person’s business, consistent with past
practice), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all obligations of such Person
under capital leases, (e) all obligations of such Person, contingent or
otherwise, as an account party or applicant under or in respect of acceptances,
letters of credit, surety bonds or similar arrangements, regardless of whether
drawn, (f) all obligations of such Person created or arising under any
conditional sale or title retention agreement, (g) all net obligations of such
Person payable under any rate, currency, commodity or other swap, option or
derivative agreement (collectively, “Hedge Agreements”), (h) all obligations
secured by (or for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned by such
Person, regardless of whether such Person has assumed or become liable for the
payment of such obligation and (i) all obligations of others guaranteed by such
Person.

 

“Indemnified Person” has the meaning set forth in Section 8.2.

 

“Indenture” means that certain Indenture, dated as of June 27, 2014, among the
Sanchez Parent, the subsidiary guarantors named therein and U.S. Bank National
Association, as trustee, as amended or supplemented on or prior to the date
hereof, but without giving effect to any amendment or supplement entered into
after the date hereof and regardless of whether the Indenture remains in effect.

 

“Independent Director” means an individual who (1) has prior experience as an
independent director, independent manager or independent member with at least
three (3) years of employment experience, (2) is either provided by (x) CT
Corporation, Corporation Service Company, National Registered Agents, Inc.,
Wilmington Trust Company, Stewart Management Company, or Lord Securities
Corporation or (y) if none of those companies is then providing professional
Independent Directors, a nationally recognized company reasonably approved by
the Credit Agreement Agent that provides professional Independent Directors and
other corporate services in the ordinary course of its business, and (3) is duly
appointed as an Independent Director and is not, and has never been, and will
not while serving as Independent Director be, any of the following:

 

(a)                                a member, partner, equityholder, manager,
director, officer or employee of the Company or the Partnership Group Companies
or Affiliates thereof;

 

(b)                                a creditor, supplier or service provider
(including provider of professional services) to the Company, any Partnership
Group Company, the Member or any of their respective equityholders or Affiliates
(other than a nationally-recognized company that routinely provides professional
Independent Directors and other corporate services to the Company, the Member or
any of its Affiliates in the ordinary course of its business);

 

(c)                                  a family member of any such member,
partner, equityholder, manager, director, officer, employee, creditor, supplier
or service provider; or

 

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(d)                                 a Person that controls (whether directly,
indirectly or otherwise) any of (a), (b) or (c) above.

 

“Investor Redemption Event” has the meaning set forth in Section 9.5(a).

 

“Joint Development Agreement” means the Joint Development Agreement, dated as of
the Effective Date, among the Partnership, Blackstone Newco and SN Maverick, as
it may be amended, modified, supplemented or restated from time to time.

 

“Joint Properties” means the properties in which Sanchez Parent and its
Affiliates (other than, for the avoidance of doubt, the Partnership Group
Companies), on the one hand, and any of the Partnership Group Companies, on the
other hand, jointly own working interests.

 

“[redacted] Closing” has the meaning set forth in the Securities Purchase
Agreement.

 

“[redacted] PSA” has the meaning set forth in the Securities Purchase Agreement.

 

“Law” means any federal, state and local statute, law (including common law and
the Delaware Act), rule, regulation, code, order, ordinance, license, writ,
injunction, judgment, award (including awards of any arbitrator) and decree and
other legally enforceable requirement enacted, adopted, issued or promulgated by
any Governmental Authority.

 

“Liens” means any mortgage, pledge, assessment, security interest, lease, lien,
adverse claim, levy, charge, right of first refusal or other encumbrance of any
kind, or any conditional sale contract, title retention contract or other
contract or agreement to give any of the foregoing.

 

“Loss” has the meaning set forth in Section 8.2.

 

“Member” means each Person identified as a holder of Units on Exhibit A hereto
as of the date hereof who has executed this Agreement or a counterpart hereof
and each Person who is hereafter admitted as a Member in accordance with the
terms of this Agreement and the Delaware Act, in each case so long as such
Person is shown on the Company’s books and records as the owner of one or more
Units. The Members shall constitute the “members” (as that term is defined in
the Delaware Act) of the Company.

 

“Membership Interest” means a Member’s ownership interest in the Company, which
may be expressed as one or more Units, including such Member’s right to share in
distributions, profits and losses and the right, if any, to participate in the
management of the business and affairs of the Company, including the right, if
any, to vote on, consent to or otherwise participate in any decision or action
of or by the Members, the right to designate Directors to the Board, and the
right to receive information concerning the business and affairs of the Company,
in each case to the extent expressly providing in this Agreement or otherwise
required by the Delaware Act.

 

“Minority Director” has the meaning set forth in Section 5.4(b).

 

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“MSA” means the Management Services Agreement, dated as of the Effective Date,
by and between Sanchez Oil and Gas Corporation and the Partnership, as it may be
amended, modified, supplemented or restated from time to time.

 

“NYMEX Pricing” means, as of any date of determination with respect to any month
(i) for crude oil, the closing settlement price for the Light, Sweet Crude Oil
futures contract for each month, and (ii) for natural gas, the closing
settlement price for the Henry Hub Natural Gas futures contract for such month,
in each case as published by New York Mercantile Exchange (NYMEX) on its website
currently located at www.nymex.com or any successor thereto (as such pricing may
be corrected or revised from time to time by the NYMEX in accordance with its
rules and regulations).

 

“Officer” means each Person designated as an officer of the Company pursuant to
Section 5.6 for so long as such Person remains an officer pursuant to the
provisions of Section 5.6.

 

“Operating Agreement” has the meaning given to such term in the Joint
Development Agreement.

 

“Operating Committee” has the meaning given to such term in the Joint
Development Agreement.

 

“Original LLC Agreement” has the meaning set forth in the Recitals hereto.

 

“Participating Sellers” has the meaning set forth in Section 9.5(h).

 

“Partnership” has the meaning set forth in Section 1.9.

 

“Partnership Agreement” means the Partnership’s Amended and Restated Agreement
of Limited Partnership, as it may be amended from time to time.

 

“Partnership Fiscal Quarter” means each calendar quarter ending March 31,
June 30, September 30 and December 31, or such other quarterly accounting period
of the Partnership as may be established by the Company. It is understood and
agreed that the first Partnership Fiscal Quarter shall be deemed the period of
time commencing on the Effective Date and concluding on the date that is the
last day of the Fiscal Quarter during which the Effective Date occurs.

 

“Partnership Fiscal Year” means the calendar year ending on December 31, or such
other annual accounting period for the Partnership as may be established by the
Company.

 

“Partnership Group Companies” has the meaning set forth in Section 1.9.

 

“Partnership Representative” has the meaning set forth in Section 7.1.

 

“PDP PV-10” means the net present value, discounted at ten percent (10%) per
annum, of the future net revenues (using NYMEX forward curve pricing for the
next five (5) years as of the date of determination and flat prices from the
fifth calendar year thereafter)

 

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expected to accrue to the Partnership’s collective interest in any Proved
Developed Producing Reserves (as defined in the Partnership Agreement) (in each
case determined as of the last day of the most recent Partnership Fiscal Year or
Partnership Fiscal Quarter for which a reserve report prepared under Section 5.7
of the Partnership Agreement is available) during the remaining expected
economic lives of such reserves. Each calculation of such expected future net
revenues shall take into account the mark-to- market value of all Hedge
Agreement of the Partnership Group Companies relating to the Partnership’s
production and shall be made as of the date requested in accordance with the
then existing standards of the Society of Petroleum Engineers, provided that in
any event (a) appropriate deductions shall be made for severance and ad valorem
taxes, and for operating, gathering, transportation and marketing costs required
for the production and sale of such reserves, (b) the pricing assumptions used
in determining PDP PV-10 for any particular reserves shall be based upon the
Strip Price for the next five (5) years and (c) the cash-flows derived from the
pricing assumptions set forth in clause (b) above shall be further adjusted to
account for the historical basis differential.

 

“PDP PV-10 Ratio” means, as of any date of determination, the ratio of (i) PDP
PV-10 (determined as of the last day of the most recent Partnership Fiscal Year
or Partnership Fiscal Quarter for which a reserve report prepared by an
independent reservoir engineering firm is available) to (ii) the sum of the
outstanding Indebtedness of the Partnership Group Companies and the Base
Preferred Return Amount (as defined in the Partnership Agreement) (disregarding
for purposes of this determination clause (ii) in the definition of Base
Preferred Return Amount), in each case determined as of the last day of the most
recent Partnership Fiscal Year or Partnership Fiscal Quarter (as each are
defined in the Partnership Agreement) for which financial statements of the
Partnership are available.

 

“Percentage Interest” means, as of the date of determination (a) with respect to
any Member and particular class or series of Unit, that percentage corresponding
with the ratio that such Member’s relative number of Units within such class or
series bears to the total outstanding number of Units of such class or series
held by all Members and (b) with respect to any Member and all Units, that
percentage corresponding with the ratio that such Member’s relative Membership
Interests represented by its Units bears to the total Membership Interests of
all Members represented by their outstanding Units, in each case, as set forth
in Exhibit A.

 

“Permitted Lien” means (i) Liens for taxes not yet due and payable or which are
being actively contested in good faith by appropriate proceedings with
appropriate reserves therefor; (ii) mechanics’, materialmens’, carriers’,
workmens’, warehousemens’, repairmens’ or landlords’ Liens or other like Liens
and security obligations that are not delinquent; (iii) matters of record,
zoning, building or other restrictions, variances, covenants, rights of way,
encumbrances, easements and other minor irregularities in title, in each case,
which do not materially interfere with the ordinary conduct of business of the
Company and its Subsidiaries and do not materially detract from the value or use
of the property subject thereto, (iv) Liens securing Indebtedness incurred under
any Senior Debt, including pursuant to the Credit Agreement or Replacement
Credit Agreement or any other Senior Debt Agreement and (v) Liens permitted
under any Senior Debt,

 

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including the Credit Agreement or Replacement Credit Agreement or any other
Senior Debt Agreement or Replacement Credit Agreement.

 

“Permitted Transferee” means, with respect to any Person, (i) any of such
Person’s Affiliates (it being understood that in the case of (a) the GSO
Investor, such Affiliate must be an entity or fund managed, advised or
sub-advised by or Controlled by GSO or its Affiliates, and (b) the Sanchez
Investor, such Affiliate must be wholly owned, directly or indirectly, by
Sanchez Parent for purposes of being deemed a Permitted Transferee), or (ii) any
transferee in connection with an Exit Transaction.

 

“Person” means an individual or a corporation, partnership, limited liability
company, trust, estate, unincorporated organization, association, “group” (as
such term is defined in Section 13(d) of the Exchange Act) or other entity.

 

“Preferred Unit Closings” has the meaning set forth in the Securities Purchase
Agreement.

 

“Preferred Units” has the meaning given to such term in the Partnership
Agreement.

 

“Proceeding” has the meaning set forth in Section 8.2.

 

“Quarterly Distribution Amount” has the meaning given to such term in the
Partnership Agreement.

 

“Redemption Non-Payment” has the meaning given to such term in the Partnership
Agreement.

 

“Renounced Business Opportunity” has the meaning set forth in Section 5.10(d).

 

“Replacement Credit Agreement” means a credit agreement that provides for
revolving loans to the Partnership and is established among the Partnership and
one or more commercial banks and other commercial lenders in replacement of the
current Credit Agreement, which credit agreement shall be on terms and
conditions that are generally considered market for a company similarly situated
to the Partnership and that, in the aggregate, are at least as favorable to the
Partnership as the Credit Agreement; provided that the financial covenants,
voluntary prepayments, mandatory prepayments, and provisions relating to events
of default, interest costs (including upfront lender fees and discounts), call
protection or costs associated with voluntary or mandatory repayment, and
restricted payments (including restrictions on Distributions) shall each be at
least as favorable to the Partnership as the Credit Agreement; provided,
further, that such credit agreement shall in no way limit or restrict the
payment of distributions or redemption of the Preferred Units other than as
permitted by the terms of the Partnership Agreement as in effect on the
Effective Date.

 

“Sale Transaction” has the meaning given to such term in the Joint Development
Agreement.

 

“Sanchez Director” has the meaning set forth in Section 5.3(a)(i).

 

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“Sanchez Group” means the Sanchez Parent and its Affiliates, Sanchez Investor,
SPP, Sanchez Oil & Gas Corporation, Blackstone Newco, and any Person Controlled
by any one or more of the foregoing (other than the Company, the Partnership and
their respective Subsidiaries).

 

“Sanchez Investor” has the meaning set forth in the preamble to this Agreement.

 

“Sanchez Letter Agreement” means that certain Letter Agreement between SN
Maverick, Sanchez Parent and the Partnership, dated as of the Effective Date.

 

“Sanchez Parent” means Sanchez Energy Corporation, a Delaware corporation.

 

“Sanchez Vehicle” means SN Maverick or Sanchez Parent or any of its Affiliates
(other than the Company or its Subsidiaries or any Partnership Group Company)
that holds title to any of the properties acquired by SN Maverick at the
“Closing” (as defined in the APC/KM PSA) pursuant to the APC/KM PSA or any Joint
Properties.

 

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

 

“Securities Purchase Agreement” has the meaning set forth in the Recitals
hereto.

 

“Senior Debt” means credit or other debt facilities or issuances, including, but
not limited to, the credit facility provided pursuant to the Credit Agreement.

 

“Senior Debt Agreements” means the Credit Agreement and any other credit
agreement, note purchase agreement, indenture or other agreements evidencing
Senior Debt, collectively, and any documents related thereto.

 

“Separate Closing” has the meaning set forth in the Securities Purchase
Agreement.

 

“SN Maverick” means SN EF Maverick, LLC, a Delaware limited liability company.

 

“Special Approval” has the meaning set forth in Section 5.7(b).

 

“SPP” means Sanchez Production Partners LP, a Delaware limited partnership.

 

“Springfield Gathering Agreements” means (i) the Amended and Restated Lease
Dedication and Gas Gathering Agreement, dated effective as of January 1, 2016,
between Springfield Pipeline LLC, a Texas limited liability company
(“Springfield”), and Anadarko Onshore (as defined in the Securities Purchase
Agreement) and (ii) the Amended and Restated Lease Dedication and Oil Gathering
Agreement, dated effective as of January 1, 2016, between Springfield and
Anadarko Onshore, of which, to the extent related to the properties acquired by
SN Maverick and the Partnership at the Anadarko Closing or Dual Closing, as
applicable, the rights and obligations of Anadarko Onshore with respect to
operations from and after such Anadarko Closing or Dual Closing, as applicable,
will be assigned by Anadarko Onshore to Sanchez Parent.

 

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“Strip Price” means, at any time, (i) for the remainder of the current calendar
year, the average NYMEX Pricing for the remaining contracts in the current
calendar year, (ii) for each of the succeeding three (3) complete calendar
years, the average NYMEX Pricing for the twelve (12) months in each such
calendar year, and (iii) for the succeeding fourth complete calendar year, and
for each calendar year thereafter, the average NYMEX Pricing for the twelve (12)
months in such fourth calendar year.

 

“Subsidiary” means, with respect to any Person, any corporation, limited
liability company, partnership, association or business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a limited liability company,
partnership, association or other business entity (other than a corporation), a
majority of limited liability, partnership or other similar ownership interests
thereof with voting rights at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be deemed to
have a majority ownership interest in a limited liability company, partnership,
association or other business entity (other than a corporation) if such Person
or Persons shall be allocated a majority of limited liability company,
partnership, association or other business entity gains or losses or shall be or
Control, directly or indirectly, the manager, managing member, managing director
(or a board comprised of any of the foregoing) or general partner of such
limited liability company, partnership, association or other business entity.

 

“Substitute Member” means any Transferee that has been admitted as a Member of
the Company pursuant to Section 9.7(c) by virtue of such Transferee receiving
all or a portion of a Member’s Units from a Member.

 

“Tag Right” has the meaning given to such term in the APC/KM PSA.

 

“Tag Right Interests” has the meaning given to such term in the APC/KM PSA.

 

“Tax Matters Member” has the meaning set forth in Section 7.1.

 

“Test Level” means (i) for any quarter in 2017, 1.0x, (ii) for any quarter in
2018, 1.10x, (iii) for any quarter in the period commencing January 1, 2019 and
ending December 31, 2021, 1.25x, and (iv) for any quarter in the period
commencing January 1, 2022 and ending December 31, 2023, 1.40x.

 

“Transfer” means any direct or indirect sale, transfer, assignment, pledge,
mortgage, exchange, hypothecation, gift, grant of a security interest or other
direct or indirect disposition or encumbrance (whether with or without
consideration, whether voluntarily or involuntarily or by operation of law) or
the acts thereof, including derivative or similar transactions or arrangements
whereby a portion or all of the Economic Interest in, or risk of loss or
opportunity for gain with respect to, Units is transferred or shifted to another
Person; provided that any indirect transfer of Equity Interests in Sanchez
Parent that does

 

59

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not result in a Change of Control shall not be deemed a “Transfer” for purposes
of this Agreement.

 

“Transferee” means a Person that acquires all or any portion of a Member’s Units
as a result of a Transfer.

 

“Transferor” means a Person that Transfers all or any portion of such Person’s
Units as a result of a Transfer.

 

“Unit” means a limited liability company Equity Interest in the Company
comprising a Member’s Membership Interest in the Company and designated as a
Class A Unit, Class B Unit or any other class of Units designated by the Board.

 

“UnSub Representative” has the meaning given to such term in the Joint
Development Agreement.

 

11.2      Construction. Whenever the context requires, (a) the gender of all
words used in this Agreement includes the masculine, feminine, and neuter and
(b) terms “hereof,” “herein,” “hereby” and derivative or similar words refer to
this Agreement, and such words do not refer to the Delaware Act or any
particular section, clause or provision of this Agreement. All references to a
Person include such Person’s successors and permitted assigns. All references to
Articles and Sections refer to articles and sections of this Agreement, and all
references to Exhibits are to exhibits attached hereto, each of which is made a
part hereof for all purposes. The use herein of the word “include” or
“including,” when following any general statement, term or matter, will not be
construed to limit such statement, term or matter to the specific items or
matters set forth following such word or to similar items or matters, whether or
not non-limiting language (such as “without limitation” or “but not limited to”
or words of similar import) is used with reference thereto, but rather will be
deemed to refer to all other items or matters that fall within the broadest
possible scope of such general statement, term or matter. The term “or” is not
exclusive. The definitions set forth or referred to in Section 11.1 will apply
equally to both the singular and plural forms of the terms defined and
derivative forms of defined terms will have correlative meanings. Where any
provision in this Agreement refers to action to be taken by any Person, or which
such Person is prohibited from taking, such provision will be applicable whether
such action is taken directly or indirectly by such Person, including actions
taken by or on behalf of any Affiliate of such Person. All accounting terms used
herein and not otherwise defined herein will have the meanings accorded them in
accordance with GAAP and, except as expressly provided herein, all accounting
determinations will be made in accordance with GAAP. The parties acknowledge
that this Agreement has been negotiated by such parties with the benefit of
counsel and, accordingly, any principle of law that provides that any ambiguity
in a contract or agreement shall be construed against the party that drafted
such contract or agreement shall be disregarded and is expressly waived by all
of the parties hereto.

 

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ARTICLE XII
MISCELLANEOUS

 

12.1                Notices. Except as expressly set forth to the contrary in
this Agreement, all notices, requests or consents provided for or permitted to
be given under this Agreement must be in writing and must be given either by
(a) depositing such writing with a reputable overnight courier for next day
delivery, (b) depositing such writing in the United States mail, addressed to
the recipient, postage paid, and registered or certified with return receipt
requested or (c) delivering such writing to the recipient in person, by courier
or by electronic mail transmission; and a notice, request or consent given under
this Agreement is effective upon receipt against the Person who receives it. All
notices, requests and consents to be sent to a Member must be sent to or made at
the address given for that Member on Exhibit A, or such other address as that
Member may specify by notice to the other Members. Any notice, request or
consent to the Company or the Board must be given to the Board or, if appointed,
the secretary of the Company at the Company’s chief executive offices. Whenever
any notice is required to be given by Law or this Agreement, a written waiver
thereof, signed by the Person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.

 

12.2                Confidential Information. Each Member recognizes and
acknowledges that it has received and may in the future receive certain
confidential and proprietary information and trade secrets of Sanchez Parent and
its Subsidiaries, the Company and its Subsidiaries, the Partnership Group
Companies and the Members (including their respective predecessors) (the
“Confidential Information”). Except as otherwise consented to by the Company in
writing, each Member agrees that it will not, during or after the term of this
Agreement, whether directly or indirectly through an Affiliate or otherwise, use
any Confidential Information for any purposes other than in connection with its
investment in the Company or disclose any Confidential Information for any
reason or purpose whatsoever, except for disclosures: (i) to authorized
directors, managers, officers, representatives, agents and employees of such
Member or its Affiliates (other than portfolio companies of the GSO Investor),
the Company, its Subsidiaries or the Partnership Group Companies and as
otherwise may be proper in the course of performing such Member’s obligations,
or enforcing such Member’s rights, under this Agreement and the agreements
expressly contemplated hereby, provided, that each such Person is informed of
the confidential nature of such Confidential Information, agrees to hold such
Confidential Information confidential and that the disclosing Member remains
liable for any breach of this provision by such Persons; (ii) made to the
limited partners, owners, co-investors, and prospective investors in funds
managed, advised or sub-advised by the Class B Member or its Affiliates;
provided that if such limited partners, owners, co-investors, and prospective
investors are receiving Confidential Information (other than with respect to
high-level summary information regarding the operations of the Company, any of
its Subsidiaries or any of the Partnership Group Companies (e.g., total
production volumes, total revenues, etc.)), such receiving Person shall be
subject to confidentiality obligations to the GSO Investor or its Affiliates;
(iii) to any bona fide prospective purchaser of the equity or assets of the
Company, any of its Subsidiaries, any of the Partnership Group Companies or
their respective Affiliates or the Units held by such Member, to prospective
financing sources, or a prospective merger partner of such Member, the Company,
its Subsidiaries, the Partnership Group Companies or any of their respective
Affiliates and, except in connection with transactions contemplated under
Section 9.5 and except as may be precluded

 

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by contractual restrictions on disclosure, following prior written notice of
such disclosure to the Company or the Partnership, provided, that such
purchaser, financing sources, or merger partner agrees in writing to be bound by
the provisions of this Section 12.2 or other confidentiality agreement that
includes confidentiality and use provisions at least as restrictive as the
provisions herein; (iv) to attorneys, accountants and other professionals of
such Member or its Affiliates; (v) as is required to be disclosed by order of a
court of competent jurisdiction, administrative body or governmental body, or by
subpoena, summons or legal process, or by law, rule or regulation or in
connection with any disclosure to regulatory or Governmental Authority that
regulates the Class B Member, provided, that the Member shall provide to the
Company prompt notice of any such requirement to enable the Company to seek an
appropriate protective order or confidential treatment (except no such
opportunity shall be afforded in the case of any law, rule or regulation or a
routine audit or examination by, or a blanket document request from, a
governmental or regulatory entity that does not reference the Company or this
Agreement or if notifying the Company in advance of such disclosure is
prohibited by applicable law) and shall disclose only that portion of such
Confidential Information so required to be disclosed and (vi) by Sanchez Parent
in connection with any publicly filed reports to the extent (A) relating to the
Partnership Group Companies’ operations and assets and (B) the disclosure of
such information is required by applicable law or regulation to be included
therein. For purposes of this Section 12.2, the term “Confidential Information”
shall not include any information that (x) a Person learns from a source other
than the Company, its Subsidiaries or the Partnership Group Companies, or any of
their respective representatives, employees, agents or other service providers,
(y) is disclosed to the public or is available in the public domain or (z) was
in a Person’s possession prior to disclosure hereunder; provided such
information is not known by such Person to be subject to an obligation of
confidentiality owed to the other Members. Furthermore, the Members understand
that Members and their representatives who have access to the Confidential
Information may retain mental impressions of some aspects of the Confidential
Information and the Members agree that neither the Members nor any of their
representatives shall have any liability hereunder for use of such mental
impressions in evaluating other business opportunities, except as otherwise
expressly provided in this Agreement or any ancillary agreement thereto.

 

12.3                 Entire Agreement; Integrated Transaction.  This Agreement,
the other Basic Documents and the other agreements and documents expressly
referred to herein are intended by the Members as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein and therein. This Agreement, the other Basic Documents and the
other agreements and documents expressly referred to herein or therein supersede
all prior agreements and understandings between the parties with respect to such
subject matter. Each of the Members acknowledges and agrees that in executing
this Agreement (i) the intent of the parties in this Agreement and the other
Basic Documents shall constitute an unseverable and single agreement of the
parties with respect to the transactions contemplated hereby and thereby,
(ii) it waives, on behalf of itself and each of its Affiliates, any claim or
defense based upon the characterization that this Agreement and the other Basic
Documents are anything other than a true single agreement relating to such
matters and (iii)  the matters set forth in this Section 12.3 constitute a
material inducement to enter into this Agreement and the other Basic Documents
and to consummate the transactions contemplated hereby and thereby. Each of the
Members stipulates and agrees (i)  not to challenge the validity, enforceability
or

 

62

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characterization of this Agreement and the other Basic Documents as a single,
unseverable instrument pertaining to the matters that are the subject of such
agreements, (ii) this Agreement and the other Basic Documents shall be treated
as a single integrated and indivisible agreement for all purposes, including the
bankruptcy of any party and (iii) not to assert or take or omit to take any
action inconsistent with the agreements and understandings set forth in this
Section 12.3.

 

12.4                Effect of Waiver or Consent.  A waiver or consent, express
or implied, to or of any breach or default by any Person in the performance by
that Person of its obligations hereunder or with respect to the Company is not a
consent or waiver to or of any other breach or default in the performance by
that Person of the same or any other obligations of that Person hereunder or
with respect to the Company. Failure on the part of a Person to complain of any
act of any Person or to declare any Person in default hereunder or with respect
to the Company, irrespective of how long that failure continues, does not
constitute a waiver by that Person of its rights with respect to that default
until the applicable statute-of-limitations period has run.

 

12.5                Amendment or Modification.  Except for amendments authorized
by Section 2.1, this Agreement and any provision hereof may be amended, waived
(except as otherwise provided herein), or modified from time to time only by a
unanimous written instrument signed by the Members; provided any modifications,
amendments or waivers (including by any restatement or supplements)
(a) effecting the obligations to appoint, and the rights of, an Independent
Director, including without limitation under Sections 5.3(a)(i), 5.3(c), 5.3(e),
5.4(b)  and 5.7(c)  that adversely affect the Lenders (as defined in the Credit
Agreement) under the Credit Agreement, (b) to the definitions of “Independent
Director” and “Cause”, and (c) to Sections 5.13, 12.5 and 12.6 shall require the
prior written consent of the Credit Agreement Agent, and the Credit Agreement
Agent shall be a third party beneficiary hereunder to enforce such provisions.

 

12.6                Binding Effect.  Subject to the restrictions on Transfers
set forth in this Agreement, this Agreement is binding on and shall inure to the
benefit of the Members and their respective heirs, legal representatives,
successors and permitted assigns and all other Persons hereafter holding, having
or receiving an interest in the Company, whether as Transferees, Substitute
Members or otherwise. The terms and provisions of this Agreement are intended
solely for the benefit of each party hereto and their respective successors or
permitted assigns, and it is not the intention of the parties to confer
third-party beneficiary rights upon any other Person other than the Credit
Agreement Agent for the matters described in Section 12.5.

 

12.7                        Consent to Jurisdiction; Waiver of Trial by Jury.

 

(a)                         Each Member and the Company irrevocably and
unconditionally submits, for itself and its property, to the non-exclusive
jurisdiction of the Court of Chancery of the State of Delaware, and any
appellate court thereof, in any action or proceeding arising out of or relating
to this Agreement or the agreements delivered in connection herewith or the
transactions contemplated hereby or thereby or for recognition or enforcement of
any judgment relating thereto, and each of the parties hereby irrevocably and
unconditionally (i) agrees not to commence any such action or proceeding except
in such courts, (ii) agrees that any claim in respect of any such action or
proceeding may be heard and determined in the Court of Chancery of the State of
Delaware, (iii) waives, to the fullest extent it may legally and effectively do
so,

 

63

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any objection that it may now or hereafter have to the laying of venue of any
such action or proceeding in the Court of Chancery of the State of Delaware, and
(iv) waives, to the fullest extent permitted by applicable law, the defense of
an inconvenient forum to the maintenance of such action or proceeding in the
Court of Chancery of the State of Delaware. Each Member and the Company agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Each Member and the Company irrevocably consents to
service of process in the manner provided for notices in Section 12.1. Nothing
in this Agreement will affect the right of any Member or the Company to serve
process in any other manner permitted by applicable law.

 

(b)                          EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF
THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.

 

12.8                 Governing Law.  This Agreement shall be construed in
accordance with and governed by the internal laws of the State of Delaware,
without regard to the principles of conflicts of law (whether of the State of
Delaware or otherwise) that would result in the application of the laws of any
other jurisdiction. In the event of a direct conflict between the provisions of
this Agreement and any provision of the Delaware Certificate or any mandatory
provision of the Delaware Act, the applicable provision of the Delaware
Certificate or the Delaware Act shall control.

 

12.9                 Further Assurances.  In connection with this Agreement and
the transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.

 

12.10          Waiver of Certain Rights.  Each Member irrevocably waives any
right it may have to demand any distributions or withdrawal of property from the
Company except as provided herein or to maintain any action for dissolution
(whether pursuant to Section 18-802 of the Delaware Act or otherwise) of the
Company or for partition of the property of the Company and confirms that such
waivers are a material term of this Agreement.

 

12.11          Notice to Members of Provisions.  By executing this Agreement,
each Member acknowledges that it has actual notice of (a) all of the provisions
hereof (including, without limitation, the restrictions on the transfer set
forth in Article IX) and (b) all of the provisions of the Delaware Certificate.

 

12.12          Counterparts.  This Agreement may be executed in multiple
counterparts, any of which may be delivered via facsimile or PDF, with the same
effect as if all signing parties had

 

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signed the same document. All counterparts shall be construed together and
constitute the same instrument.

 

12.13         Headings.  The headings used in this Agreement are for the purpose
of reference only and will not otherwise affect the meaning or interpretation of
any provision of this Agreement.

 

12.14         Remedies.  The Company and the Members shall be entitled to
enforce their rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement (including costs of
enforcement) and to exercise any and all other rights existing in their favor.
The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that the
Company or any Member may in its or his sole discretion apply to any court of
law or equity of competent jurisdiction for specific performance or injunctive
relief (without posting a bond or other security) in order to enforce or prevent
any violation or threatened violation of the provisions of this Agreement.

 

12.15         Severability.  Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

 

12.16         No Recourse.  Notwithstanding anything that may be expressed or
implied in this Agreement or any document, agreement, or instrument delivered
contemporaneously herewith, and notwithstanding the fact that any Member may be
a partnership or limited liability company, each Member hereto, by its
acceptance of the benefits of this Agreement, covenants, agrees and acknowledges
that no Persons other than the Members shall have any obligation hereunder and
that it has no rights of recovery hereunder against, and no recourse hereunder
or under any documents, agreements, or instruments delivered contemporaneously
herewith or in respect of any oral representations made or alleged to be made in
connection herewith or therewith shall be had against, any former, current or
future director, officer, agent, Affiliate, manager, assignee, incorporator,
controlling Person, fiduciary, representative or employee of any Member (or any
of their successor or permitted assignees), against any former, current, or
future general or limited partner, manager, stockholder or member of any Member
(or any of their successors or permitted assignees) or any Affiliate thereof or
against any former, current or future director, officer, agent, employee,
Affiliate, manager, assignee, incorporator, controlling Person, fiduciary,
representative, general or limited partner, stockholder, manager or member (or,
in each case, any financing source for any of the foregoing) of any of the
foregoing, but in each case not including the Members, whether by or through
attempted piercing of the corporate veil, by or through a claim (whether in
tort, contract or otherwise) by or on behalf of such party against such Persons,
by the enforcement of any assessment or by any legal or equitable proceeding, or
by virtue of any statute, regulation or other applicable law, or otherwise; it
being expressly agreed and acknowledged that no personal liability whatsoever
shall attach to, be imposed on, or otherwise be incurred by any such Persons, as
such, for any obligations of the applicable party under this

 

65

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Agreement or the transactions contemplated hereby, under any documents or
instruments delivered contemporaneously herewith or in connection or
contemplation hereof, in respect of any oral representations made or alleged to
be made in connection herewith or therewith, or for any claim (whether in tort,
contract or otherwise) based on, in respect of, or by reason of, such
obligations or their creation.

 

[Separate Signature Page Attached]

 

66

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

 

 

 

COMPANY:

 

 

 

SN EF UNSUB GP, LLC

 

 

 

 

By:

 

 

Name:

Patricio D. Sanchez

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

MEMBERS:

 

 

 

SN UR HOLDINGS, LLC

 

 

 

 

 

 

 

By:

 

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

GSO ST HOLDINGS ASSOCIATES LLC

 

 

 

 

 

 

 

By:

 

 

Name:

[·]

 

Title:

[·]

 

Signature Page to Amended and Restated

Limited Liability Company Agreement of SN EF UnSub GP, LLC

 

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

 

Exhibit A

 

Members, Capital Contributions and Units Held

 

Member

 

Capital
Contribution

 

Capital Account Balance

 

Units

 

Percentage
Interest

 

Sanchez Investor

 

$

990

 

$

990

 

99 Class A Units

 

99

%

GSO Investor

 

$

10

 

$

10

 

1 Class B Units

 

1

%

Total

 

$

1,000

 

$

1,000

 

100 Units

 

100

%

 

Members’ Address for Notices

 

Sanchez Investor

 

c/o Sanchez Energy Corporation

 

 

SN UR Holdings, LLC

 

 

1000 Main Street, Suite 3000

 

 

Houston, TX 77002

 

 

Attention: Gregory Kopel

 

 

Email: gkopel@sanchezog.com

 

 

 

 

 

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

 

 

 

 

 

Kirkland & Ellis LLP

 

 

600 Travis, Suite 3300

 

 

Houston, TX 77002

 

 

Attn: John D. Pitts

 

 

Email: john.pitts@kirkland.com

 

 

 

GSO Investor

 

GSO ST Holdings Associates LLC

 

 

c/o GSO Capital Partners

 

 

1111 Bagby Street, Suite 2050

 

 

Houston, TX 77002

 

 

Attention: Robert Horn

 

 

Email: Robert.horn@gsocap.com

 

Exhibit A-1

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

 

 

 

With a copy to:

 

 

 

 

 

c/o GSO Capital Partners

 

 

345 Park Avenue, 31st Floor

 

 

New York, NY 10154

 

 

Email: GSO Legal@gsocap.com

 

 

GSOValuationsGroup@gsocap.com

 

 

 

 

 

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

 

 

 

 

 

Andrews Kurth Kenyon LLP

 

 

600 Travis Street, Suite 4200

 

 

Houston, TX 77002

 

 

Attn: G. Michael O’Leary

 

 

Jon W. Daly

 

 

Email: moleary@andrewskurth.com
jondaly@andrewskurth.com

 

Exhibit A-2

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

 

The Company

 

SN EF UnSub GP, LLC

 

 

1000 Main Street, Suite 3000

 

 

Houston, TX 77002

 

 

Attention: Gregory Kopel

 

 

Email: gkopel@sanchezog.com

 

 

 

 

 

With copies to:

 

 

 

 

 

Sanchez Energy Corporation

 

 

1000 Main Street, Suite 3000

 

 

Houston, TX 77002

 

 

Attention: Gregory Kopel

 

 

Email:  gkopel@sanchezog.com

 

 

 

 

 

and

 

 

 

 

 

GSO ST Holdings Associates LLC

 

 

c/o GSO Capital Partners

 

 

1111 Bagby Street, Suite 2050

 

 

Houston, TX 77002

 

 

Attention: Robert Horn

 

 

Email: Robert.horn@gsocap.com

 

Exhibit A-3

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

 

Exhibit B

 

Board Designations

 

Sanchez Directors:

 

Patricio D. Sanchez

Cameron W. George

Daniel Furbee

 

GSO Directors:

 

Robert Horn

Anthony Borreca

 

Exhibit B-1

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

 

Exhibit C

 

Officers

 

President and Chief Executive Officer:  Patricio D. Sanchez

Chief Financial Officer and Treasurer:  Cameron W. George

Chief Operating Officer:  Daniel Furbee

Secretary:  Alfredo Gutierrez

 

Exhibit C-1

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

 

Exhibit D

 

Approved Successor Independent Auditors and

Independent Reservoir Engineers

 

Approved Independent Auditors

 

1.   Pricewaterhouse Coopers, LLP

2.   Deloitte LLP

3.   Ernst & Young Global Limited

 

Approved Independent Reservoir Engineers

 

4.   DeGolyer & MacNaughton

5.   Netherland Sewell & Associates

6.   Cawley, Gillespie & Associates

 

Exhibit D-1

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

 

Exhibit E

 

Form of Purchase Agreement

 

(Attached.)

 

Exhibit E-1

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

 

Exhibit F

 

LTM EBITDA Levels

 

Exhibit F-1

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

 

EXHIBIT C

 

FORM OF WARRANT AGREEMENT

 

[Attached.]

 

EXHIBIT C TO

SECURITIES PURCHASE AGREEMENT

 

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

 

SANCHEZ ENERGY CORPORATION
WARRANT TO PURCHASE COMMON SHARES

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.  THIS WARRANT
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD OR
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION THEREUNDER, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OR OTHER JURISDICTIONS, AND IN THE CASE OF A
TRANSACTION EXEMPT FROM REGISTRATION, SUCH WARRANTS AND THE SECURITIES ISSUABLE
UPON EXERCISE OF SUCH WARRANTS MAY ONLY BE TRANSFERRED IF THE ISSUER AND, IF
APPLICABLE, THE TRANSFER AGENT FOR SUCH WARRANTS AND THE SECURITIES ISSUABLE
UPON EXERCISE OF SUCH WARRANTS HAS RECEIVED DOCUMENTATION SATISFACTORY TO IT
THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT.

 

THIS WARRANT AGREEMENT, dated as of [·], 2017 (this “Agreement”), is by and
between (a) SANCHEZ ENERGY CORPORATION, a Delaware corporation (the
“Corporation”), and (b) the funds specified on the signature pages hereof
(collectively, the “GSO Funds” or the “Holders” and individually, a “GSO Fund”
or a “Holder”).  The Corporation and the Holders are sometimes referred to
herein collectively as the “Parties” or individually as a “Party.”

 

R E C I T A L S:

 

WHEREAS, the Corporation has entered into that certain Securities Purchase
Agreement, dated as of January 12, 2017 (the “Purchase Agreement”), among the
Corporation, SN EF UnSub GP, LLC, a Delaware limited liability company (the
“General Partner”), SN EF UnSub, LP, a Delaware limited partnership (the
“Partnership”), SN UR Holdings, LLC, a Delaware limited liability company, SN EF
UnSub Holdings, LLC, a Delaware limited liability company, GSO ST Holdings
Associates, LLC, a Delaware limited liability company, and GSO ST Holdings, LP,
a Delaware limited partnership (“GSO Holdings”), pursuant to which the parties
thereto have agreed, on the terms and subject to the conditions set forth
therein, that GSO Holdings will contribute from time to time up to $800 million
to the Partnership to purchase from the Partnership, and the Partnership will
issue and sell to GSO Holdings upon such contribution(s), preferred limited
partner interests of the Partnership (“Preferred Units”) having the rights,
privileges, powers and preferences set forth in the amended and restated
agreement of limited partnership of the Partnership of even date herewith; and

 

WHEREAS, the proceeds received by the Partnership from GSO Holdings’
contribution at the Anadarko Closing (as defined in the Purchase Agreement;
which contribution amount will not be less than $500 million) will be used by
the Partnership, together with funds from other

 

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sources, to purchase the Acquired Properties (as defined in the Purchase
Agreement) pursuant to the APC/KM PSA (as defined in the Purchase Agreement);
and

 

WHEREAS, in connection with the contributions to be made at the Anadarko Closing
and that GSO Holdings may make in the future in accordance with the Purchase
Agreement and the issuances by the Partnership to the Investors of Preferred
Units in consideration therefor, the Corporation has agreed to issue to the GSO
Funds warrants to purchase an aggregate of 2,000,000 shares of common stock, par
value $0.01 per share of the Corporation, subject to adjustment as set forth
herein; and

 

WHEREAS, the number of Warrants to be issued to each of the GSO Funds is set
forth on the signature pages of this Agreement opposite the name of such GSO
Fund; and

 

WHEREAS, this Agreement is intended to set forth the terms and conditions of the
Warrants; and

 

WHEREAS, this Agreement is being executed by the Corporation and the GSO Funds
at the Closing.

 

AGREEMENT:

 

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

 

ARTICLE 1

Definitions and References

 

Section 1.01.  Definitions.  As used herein, the following terms have the
respective meanings:

 

“Affiliate” means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person.  For purposes of this definition, “control”
(including, with correlative meanings, the terms “controlling,” “controlled by”
and “under common control with”) with respect to any Person, means the
possession, directly or indirectly, 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.

 

“Aggregate Exercise Price” means an amount equal to the product of (a) the
number of Warrant Shares in respect of which this Warrant is then being
exercised pursuant to Section 2.02, multiplied by (b) the Exercise Price.

 

“Agreement” has the meaning set forth in the preamble.

 

“Basic Documents” has the meaning assigned to such term in the Purchase
Agreement.

 

“Board” means the board of directors of the Corporation.

 

2

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“Business Day” means any day, except a Saturday, Sunday or legal holiday, on
which banking institutions in the city of Houston, Texas are authorized or
obligated by law or executive order to close.

 

“Closing” has the meaning assigned to such term in the Purchase Agreement.

 

“Common Shares” means the shares of Common Stock, par value $0.01 per share, of
the Corporation, including a Right associated with each Common Share.

 

“Corporation” has the meaning set forth in the preamble.

 

“Equity Interests” means shares of capital stock (including, with respect to the
capital stock of the Corporation, Preferred Stock), partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.

 

“Exercise Agreement” has the meaning assigned to such term in Section 3.01(a).

 

“Exercise Date” means, for any given exercise of this Warrant, the date on which
the conditions to such exercise as set forth in Section 3.01 shall have been
satisfied at or prior to 5:00 p.m., Central Time, on a Business Day, including,
without limitation, the receipt by the Corporation of the Exercise Agreement,
the Warrant and the Aggregate Exercise Price.

 

“Exercise Price” means $10.00 per Common Share, subject to adjustment as set
forth in this Agreement.

 

“Expiration Date” means [·], 2032.

 

“Fair Market Value” means, as of any particular date: (a) the VWAP Price of the
Common Shares for such day on all domestic securities exchanges on which the
Common Shares may at the time be listed; (b) if there have been no sales of the
Common Shares on any such exchange on any such day, the average of the highest
bid and lowest asked prices for the Common Shares on all such exchanges at the
end of such day; (c) if on any such day the Common Shares are not listed on a
domestic securities exchange, the VWAP Price of the Common Shares as quoted on
the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or
association for such day; or (d) if there have been no sales of the Common
Shares on the OTC Bulletin Board, the Pink OTC Markets or similar quotation
system or association on such day, the average of the highest bid and lowest
asked prices for Common Shares quoted on the OTC Bulletin Board, the Pink OTC
Markets or similar quotation system or association at the end of the day; in
each case, averaged over the fifteen consecutive Business Days ending on the
Business Day immediately prior to the day as of which “Fair Market Value” is
being determined; provided that, if the Common Shares are listed on any domestic
securities exchange, the term “Business Day” as used in this sentence means
Business Days on which such exchange is open for trading.  If at any time the
Common Shares are not listed on any domestic securities exchange or quoted on
the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or
association, the “Fair Market Value” of the Common Shares shall be the fair
market value per Common Share as determined in good faith by the Board.

 

3

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“GAAP” means generally accepted accounting principles in the United States,
including those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants, the
opinions and pronouncements of the Public Company Accounting Oversight Board and
in the statements and pronouncements of the Financial Accounting Standards
Board, as in effect from time to time.

 

“General Partner” has the meaning set forth in the recitals.

 

“GSO Fund” and “GSO Funds” have the meanings set forth in the preamble.

 

“GSO Holdings” has the meaning set forth in the recitals.

 

“Holder” and “Holders” have the meanings set forth in the preamble.

 

“NYSE” means New York Stock Exchange.

 

“Original Issue Date” means [·], 2017, the date on which this Warrant was issued
by the Corporation pursuant to the Purchase Agreement, which was concurrently
with the Closing.

 

“OTC Bulletin Board” means the Financial Industry Regulatory Authority OTC
Bulletin Board electronic inter-dealer quotation system.

 

“Partnership” has the meaning set forth in the recitals.

 

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

 

“Person” means any individual, sole proprietorship, partnership, limited
liability company, corporation, joint venture, trust, incorporated organization
or government or department or agency thereof.

 

“Pink OTC Markets” means the OTC Markets Group Inc.  electronic inter-dealer
quotation system, including OTCQX, OTCQB and OTC Pink.

 

“Preferred Units” has the meaning set forth in the recitals.

 

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

 

“Right” has the meaning assigned to such term in the Rights Agreement.

 

“Rights Agreement” means that certain Rights Agreement, dated as of July 28,
2015, between the Corporation and Continental Stock Transfer & Trust Company, as
rights agent, including the exhibits attached thereto, as such Rights Agreement
may be amended, modified or supplemented from time to time.

 

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

 

“VWAP Price” as of a particular date means the volume-weighted average trading
price, as adjusted for splits, combinations and other similar transactions, of a
Common Share.

 

4

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“Warrant” means this warrant and all warrants issued upon division or
combination of, or in substitution for, this warrant.

 

“Warrant Register” has the meaning assigned to such term in Section 5.07.

 

“Warrant Shares” means the Common Shares purchasable upon exercise of this
Warrant in accordance with the terms of this Agreement (without taking into
account any limitations or restrictions on the exercisability of this Warrant,
other than with respect to Section 2.02, Section 2.03 or Section 3.01 of this
Warrant).  Each Warrant Share issued upon the exercise in whole or in part, of
this Warrant shall include a Right.

 

Section 1.02.  Rules of Construction. Unless the context otherwise requires or
except as otherwise expressly provided:

 

(i)                             an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;

 

(ii)                          “herein,” “hereof” and other words of similar
import refer to this Agreement as a whole and not to any particular Section,
Article or other subdivision;

 

(iii)                       all references to Sections or Articles or Exhibits
refer to Sections or Articles or Exhibits of or to this Agreement unless
otherwise indicated; and

 

(iv)                      references to agreements or instruments, or to
statutes or regulations, are to such agreements or instruments, or statutes or
regulations, as amended from time to time (or to successor statutes and
regulations).

 

ARTICLE 2

EXERCISE OF WARRANT

 

Section 2.01.  Issuance of Warrant.  Subject to the terms and conditions hereof,
this Warrant shall represent the right to purchase from the Corporation
2,000,000 Warrant Shares (subject to adjustment as provided herein) in whole or
in part.

 

Section 2.02.  Exercise of Warrant. Subject to the terms and conditions hereof,
at any time on any Business Day and from time to time during the period that
begins on the Original Issue Date and ends at 5:00 p.m., Central Time, on the
Expiration Date, any Holder may exercise this Warrant with respect to the
Warrant Shares to which it is entitled (as set forth on the signature pages of
this Agreement) in whole or in part for any number of the Warrant Shares
purchasable hereunder in respect thereof (subject to adjustment as provided
herein) as provided in Section 3.01.

 

Section 2.03.  Expiration of Warrant.  This Warrant shall terminate and become
void as of 5:00 p.m., Central Time, on the Expiration Date.

 

5

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ARTICLE 3

EXERCISE PROCEDURE

 

Section 3.01.  Conditions to Exercise.  Any Holder may exercise this Warrant
only upon:

 

(a)                          surrender of this Warrant to the Corporation at its
then principal executive offices, together with an Exercise Agreement in the
form attached hereto as Exhibit A each, an “Exercise Agreement”), duly completed
(including specifying the number of Warrant Shares to which such Holder is
entitled to purchase hereunder and the number of Warrant Shares to be purchased)
and executed;

 

(b)                                 payment to the Corporation of the Aggregate
Exercise Price in accordance with Section 3.02; and

 

(c)                           to the extent any withholding tax on the exercise
of a Warrant is required, such Holder shall nonetheless be entitled to exercise
the Warrant; provided that such Holder shall make a cash payment to the
Corporation in an amount sufficient to satisfy any such applicable withholding
tax.

 

Section 3.02.  Payment of the Aggregate Exercise Price.  Payment of the
Aggregate Exercise Price shall be made, at the option of the Holder exercising
the Warrant as expressed in the Exercise Agreement, only by the following
methods:

 

(a)                          by delivery to the Corporation of a certified or
official bank check payable to the order of the Corporation or by wire transfer
of immediately available funds to an account designated in writing by the
Corporation, in the amount of such Aggregate Exercise Price;

 

(b)                          by instructing the Corporation to withhold from
such Holder a number of Warrant Shares then issuable upon exercise by such
Holder of this Warrant with an aggregate Fair Market Value as of the Exercise
Date equal to such Aggregate Exercise Price; or

 

(c)                           any combination of the foregoing.

 

In the event of any withholding of Warrant Shares pursuant to clause (b) or
(c) of this Section 3.02 where the number of Common Shares whose Fair Market
Value is equal to the Aggregate Exercise Price is not a whole number, the number
of Common Shares withheld by or surrendered to the Corporation shall be rounded
up to the nearest whole Common Share and the Corporation shall make a cash
payment to such exercising Holder (by delivery of a certified or official bank
check or by wire transfer of immediately available funds) based on the
incremental fraction of a Common Share being so withheld by or surrendered to
the Corporation from such Holder in an amount equal to the product of (x) such
incremental fraction of a Common Share being so withheld or surrendered
multiplied by (y) the Fair Market Value of one whole Warrant Share as of the
Exercise Date.

 

6

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Section 3.03.  Delivery of Certificates.   To the extent any Common Shares of
the Corporation are at the time of exercise represented in certificated form,
then, at the election of a Holder as set forth in the Exercise Agreement, the
Corporation shall, as promptly as practicable, and in any event within three
Business Days thereafter, execute (or cause to be executed) and deliver (or
cause to be delivered) to such Holder a certificate or certificates representing
the Warrant Shares issuable upon such exercise, together with cash in lieu of
any fraction of a Common Share, as provided in Section 3.04 hereof.  Such
certificate(s) shall be delivered to the address specified by such Holder in the
applicable Exercise Agreement.  The certificate or certificates so delivered
shall be, to the extent possible, in such denomination or denominations as the
exercising Holder shall reasonably request in the Exercise Agreement and shall
be registered in the name of such Holder or, subject to compliance with
Section 3.06(f) and Section 5.06, such other Person’s name as shall be
designated in the Exercise Agreement. Upon the exercise of this Warrant by any
Holder, this Warrant shall be deemed to have been exercised by such Holder and
such certificate or certificates for Warrant Shares shall be deemed to have been
issued, and such Holder or any other Person so designated to be named therein in
compliance with Section 3.06(f) and Section 5.06 shall be deemed to have become
a holder of record of such Warrant Shares for all purposes, immediately prior to
5:00 p.m., Central Time, on the Exercise Date.

 

Section 3.04.  Fractional Shares.   The Corporation shall not be required to
issue a fractional Warrant Share upon exercise of any Warrant.  As to any
fraction of a Warrant Share that a Holder would otherwise be entitled to
purchase upon such exercise, the Corporation shall pay to such Holder an amount
in cash (by delivery of a certified or official bank check or by wire transfer
of immediately available funds) equal to the product of (i) such fraction of a
Warrant Share multiplied by (ii) the Fair Market Value of one Warrant Share on
the Exercise Date.

 

Section 3.05.  Delivery of New Warrant. Unless the purchase rights represented
by this Warrant shall have been fully exercised, the Corporation shall, at the
time of delivery of the Warrant Shares being issued in accordance with this
Article 3, provide by notation in the Warrant Register the number, if any, of
Warrant Shares that remain subject to purchase by such Holder upon exercise.

 

Section 3.06.  Valid Issuance of Warrant and Warrant Shares; Payment of Taxes.
With respect to each exercise of this Warrant, the Corporation hereby
represents, covenants and agrees:

 

(a)                         This Warrant is, and any warrant issued in
substitution for or replacement of this Warrant shall be, upon issuance, duly
authorized and validly issued.

 

(b)                         Each Warrant Share (including the Right associated
therewith) issuable upon the exercise of this Warrant pursuant to the terms
hereof shall be, upon issuance, and the Corporation shall take all such actions
as may be necessary or appropriate in order that each Warrant Share is, validly
issued, fully paid and non-assessable, issued without violation of any
preemptive or similar rights of any stockholder of the Corporation and free and
clear of all taxes, liens and charges.

 

7

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(c)                          The Corporation shall take all such actions as may
be necessary to ensure that all such Warrant Shares are issued without violation
by the Corporation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which Common Shares or
other securities constituting Warrant Shares may be listed at the time of such
exercise (except for official notice of issuance which shall be immediately
delivered by the Corporation upon each such issuance).

 

(d)                         The Corporation shall use commercially reasonable
efforts to cause the Warrant Shares, immediately upon such exercise, to be
listed on the NYSE or any domestic securities exchange upon which Common Shares
or other securities constituting Warrant Shares are listed at the time of such
exercise.

 

(e)                          The Corporation has taken such action as is
necessary to reserve for issuance such number of Common Shares as are subject to
issuance upon the exercise in whole of the Warrant.

 

(f)                           The Corporation shall pay all expenses in
connection with, and all taxes (other than income taxes) and other governmental
charges that may be imposed with respect to, the issuance or delivery of Warrant
Shares upon exercise of this Warrant; provided that the Corporation shall not be
required to pay any tax or governmental charge that may be imposed with respect
to any applicable withholding or the issuance or delivery of the Warrant Shares
to any Person other than a Holder, and no such issuance or delivery shall be
made unless and until the Person requesting such issuance has paid to the
Corporation the amount of any such tax, or has established to the satisfaction
of the Corporation that such tax has been paid.

 

Section 3.07.  Conditional Exercise. Notwithstanding any other provision hereof,
if an exercise of any portion of this Warrant by any Holder is to be made in
connection with a sale of the Corporation (pursuant to a merger, sale of Common
Shares, or otherwise), such exercise may at the election of such Holder be
conditioned upon the consummation of such transaction, in which case such
exercise shall not be deemed to be effective until immediately prior to the
consummation of such transaction.

 

ARTICLE 4

ADJUSTMENT TO NUMBER OF WARRANT SHARES

 

Section 4.01.  Adjustment to Number of Warrant Shares. In order to prevent
dilution of the purchase rights granted under this Warrant, the number of
Warrant Shares issuable upon exercise of this Warrant and the Exercise Price
shall be subject to adjustment from time to time as provided in this Article 4
(in each case, after taking into consideration any prior adjustments pursuant to
this Article 4).  If, at any time as a result of the provisions of this
Article 4, the Holders shall become entitled upon subsequent exercise to receive
any shares of Equity Interests of the Corporation other than Common Shares, the
number of such other Equity Interests so receivable upon exercise of this
Warrant shall thereafter be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions contained
herein.

 

8

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Section 4.02.  Adjustment to Number of Warrant Shares Upon Dividend,
Subdivision, Combination or Reclassification of Common Shares.

 

(a)                         If the Corporation shall, at any time or from time
to time after the Original Issue Date and prior to the exercise in whole or
expiration of the Warrant, (i) pay a dividend or make any other distribution
upon the Common Shares or any other capital stock of the Corporation payable in
Common Shares, (ii) subdivide (by any split, recapitalization or otherwise) its
outstanding Common Shares into a greater number of Common Shares, or
(iii) combine (by combination, reverse split or otherwise) its outstanding
Common Shares into a smaller number of Common Shares, then the number of Warrant
Shares issuable upon the exercise of this Warrant immediately prior to any such
dividend, distribution, subdivision or combination shall be proportionately
adjusted so the Holders will thereafter receive upon exercise of this Warrant
the aggregate number and kind of shares of Equity Interests of the Corporation
that the Holders would have owned immediately following such action if the
Warrant had been exercised immediately before the record date for such action. 
Any adjustment under this Section 4.02 shall become effective at the close of
business on the date the dividend, distribution, subdivision or combination
becomes effective.

 

(b)                         If the Corporation shall, at any time or from time
to time after the Original Issue Date and prior to the exercise in whole or
expiration of the Warrant, issue by reclassification of its Common Shares any
shares of its capital stock, then such a reclassification shall be deemed to be
(i) a distribution by the Corporation to the holders of its Common Shares of
such shares of such other class of capital stock for the purposes and within the
meaning of Section 4.04(a) and (ii) if the outstanding Common Shares shall be
changed into a larger or smaller number of Common Shares as part of such
reclassification, such change shall be deemed to be a subdivision or
combination, as the case may be, of the outstanding Common Shares for the
purposes and within in the meaning of Section 4.02(a).

 

Section 4.03.                 Adjustment for Rights Issue.

 

(a)                         If the Corporation, prior to the exercise in whole
or part, or expiration, of this Warrant distributes any rights, options or
warrants (excluding Rights issued under the Rights Agreement) to all holders of
its Common Shares entitling them for a period expiring within 45 days after the
record date specified below to purchase Common Shares or securities convertible
into, or exercisable or exchangeable for, Common Shares, at a price per share
less than the Fair Market Value per share on that record date, then the number
of Warrant Shares issuable upon the exercise of the Warrant shall be adjusted in
accordance with the formula:

 

[g25311ku055i001.gif]

 

where:

 

9

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W’ =                      the adjusted number of Warrant Shares issuable upon
exercise of the Warrant;

 

W =                          the number of Warrant Shares then issuable upon
exercise of the Warrant;

 

O =                             the number of Common Shares outstanding on the
applicable record date;

 

N =                             the number of additional Common Shares issuable
pursuant to such rights, options or warrants;

 

P =                               the aggregate price per share of the
additional Common Shares issuable upon exercise of the rights, options or
warrants; and

 

M =                          the Fair Market Value per Common Share on the
applicable record date.

 

(b)                          The adjustment pursuant to this Section 4.03 shall
be made successively whenever any such rights, options or warrants are issued
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the rights, options or
warrants.  If at the end of the period during which such rights, options or
warrants are exercisable, not all rights, options or warrants shall have been
exercised, the number of Warrant Shares subject to issuance under the Warrant
shall be immediately readjusted to what it would have been if “N” in the above
formula had been the number of shares actually issued.

 

Section 4.04.  Adjustment for Other Distributions.

 

(a)                          If the Corporation, prior to the exercise in whole
or part, or expiration, of this Warrant, pays a cash distribution to all holders
of its Common Shares or distributes to all holders of its Common Shares any
shares of its capital stock, evidences of indebtedness or any of its assets or
any rights, warrants or other securities of the Corporation (other than
distributions to which Section 4.02 or Section 4.03 apply), then the number of
Warrant Shares issuable upon the exercise of this Warrant shall be adjusted in
accordance with the formula:

 

[g25311ku055i002.gif]

 

where:

 

W’ =                      the adjusted number of Warrant Shares issuable upon
exercise of the Warrant;

 

W =                          the number of Warrant Shares then issuable upon
exercise of the Warrant;

 

M =                          the Fair Market Value per Common Share on the
record date specified below; and

 

F =                               the amount of cash or fair market value on the
record date specified below of the evidences of indebtedness, assets, rights,
warrants or other securities to be distributed in respect of one Common Share as
determined in good faith by the Board.

 

10

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(b)                                 The adjustment pursuant to this Section 4.04
shall be made successively whenever any such distribution is made and shall
become effective immediately after the record date for the determination of
holders entitled to receive the distribution.

 

(c)                                  This Section 4.04 does not apply to rights,
options or warrants referred to in Section 4.03 hereof.

 

Section 4.05.  Dissolution, Liquidation or Winding Up.    If,  on or prior to
the Expiration Date, the Corporation (or any other Person controlling the
Corporation) shall propose a voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Corporation, the Holders of this Warrant
shall receive the kind and number of other securities or assets which the
Holders would have been entitled to receive if the Holders had exercised this
Warrant in full and acquired the applicable number of Warrant Shares then
issuable hereunder as a result of such exercise (without taking into account any
limitations or restrictions on the exercisability of this Warrant) immediately
prior to the time of such dissolution, liquidation or winding up and the right
to exercise this Warrant shall terminate on the date on which the holders of
record of Common Shares shall be entitled to exchange their Common Shares for
securities or assets deliverable upon such dissolution, liquidation or winding
up.

 

Section 4.06.  When De Minimis Adjustment May Be Deferred. No adjustment in the
number of Warrant Shares subject to a Warrant need be made unless the adjustment
would require an increase or decrease of at least 1% of the then applicable
number of Warrant Shares subject to a Warrant.  Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this Article 4 shall be made to the nearest
1/10,000th of a whole Common Share, it being understood that no such rounding
shall be made under Section 4.12 (and, in calculations made pursuant to such
paragraph, the adjusted number of Warrant Shares subject to a Warrant shall
refer to such adjusted number before rounding).

 

Section 4.07.  When No Adjustment Required.  No adjustment need be made for a
transaction referred to in Sections 4.02 through 4.04, if each of the Holders is
to participate (without being required to exercise the Warrants) in the
transaction on a basis and with notice that the Board and the Holders of a
majority of the then outstanding Warrants determine to be fair and appropriate
in light of the basis and notice on which holders of Common Shares participate
in the transaction.  No adjustment need be made for rights to purchase Common
Shares pursuant to a Corporation plan for reinvestment of dividends or
interest.  To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.

 

Section 4.08.  Notice of Adjustment. Whenever the number of Warrant Shares
subject to the Warrant is adjusted, the Corporation shall provide the notices
required by Section 5.01.

 

Section 4.09.  Reorganization of Corporation. If, prior to the exercise in whole
or part, or expiration, of this Warrant, the Corporation consolidates or merges
with or into, or transfers or leases all or substantially all its assets to, any
Person, upon consummation of such transaction, the Warrants shall automatically
become exercisable for the kind and amount of securities, cash or other assets
which the Holders of this Warrant would have owned immediately after the

 

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consolidation, merger, transfer or lease if each Holder had exercised the
Warrant immediately before the effective date of the transaction, assuming that
each Holder failed to exercise its rights of election, if any, as to the kind of
amount of securities, cash or other assets receivable upon such a transaction. 
Concurrently with the consummation of such transaction, the Person formed by or
surviving any such consolidation or merger if other than the Corporation, or the
Person to which such transfer or lease shall have been made, shall enter into a
supplemental Agreement so providing and further providing for adjustments that
shall be as nearly equivalent as may be practical to the adjustments provided
for in this Article 4.  The successor to the Corporation shall mail to each
Holder a notice describing the supplemental Agreement.  If the issuer of
securities deliverable upon exercise of Warrants under the supplemental
Agreement is an Affiliate of the formed, surviving, transferee or lessee Person,
that issuer shall join in the supplemental Agreement.  If this Section 4.09
applies to a transaction, Sections 4.02 through 4.04 shall not apply.

 

Section 4.10.  Company Determination Final. Any determination that the
Corporation or the Board must make pursuant to Sections 4.02 through 4.09 hereof
is conclusive in the absence of manifest error or bad faith.

 

Section 4.11.  When Issuance or Payment May Be Deferred.  In any case in which
this Article 4 shall require that an adjustment in number of Warrant Shares
subject to a Warrant be made effective as of a record date for a specified
event, the Corporation may elect to defer until the occurrence of such event
issuing to the Holders of any Warrant exercised after such record date the
Warrant Shares and other Equity Interests of the Corporation, if any, issuable
upon such exercise over and above the Warrant Shares and other Equity Interests
of the Corporation, if any, issuable upon such exercise on the basis of the then
applicable number of Warrant Shares subject to a Warrant; provided that the
Corporation shall deliver to such Holder a due bill or other appropriate
instrument evidencing such Holder’s right to receive such additional Warrant
Shares, other capital stock and cash upon the occurrence of the event requiring
such adjustment.

 

Section 4.12.  Exercise Price in the Event of an Adjustment in Number of Warrant
Shares. Upon any adjustment of the number of Warrant Shares subject to the
Warrant pursuant to this Article 4, the Exercise Price per Warrant Share subject
to issuance upon exercise of the Warrant shall be adjusted concurrently thereto
to equal the product of (a) $10.00 (or if the Exercise Price has been previously
adjusted, then such as adjusted Exercise Price) times (b) a fraction, of which
the numerator is the total number of Warrant Shares subject to issuance upon the
exercise of the Warrant before giving effect to the adjustment, and the
denominator is the total number of Warrant Shares subject to issuance upon the
exercise of the Warrants as so adjusted.

 

ARTICLE 5

NOTICES TO WARRANT HOLDERS

 

Section 5.01.  Notice of Adjustment.  (a) Upon any adjustment of the number of
Warrant Shares subject to a Warrant and the Exercise Price pursuant to Article 4
hereof, the Corporation shall promptly thereafter cause to be given to each of
the Holders written notice of such adjustments by email or by first-class mail,
postage prepaid.   Where appropriate, such

 

12

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notice may be given in advance and included as a part of the notice required to
be mailed under the other provisions of this Section 5.01.

 

(b)                                 In case:

 

(i)                                     the Corporation shall authorize the
issuance to all holders of Common Shares of rights, options or warrants to
subscribe for or purchase shares of Common Shares or of any other subscription
rights or warrants;

 

(ii)                                  the Corporation shall authorize the
distribution to all holders of Common Shares of evidences of its indebtedness or
assets;

 

(iii)                               of any consolidation or merger to which the
Corporation is a party, or of the transfer or lease of all or substantially all
assets of the Corporation, or of any reclassification or change of Common Shares
issuable upon exercise of the Warrants, or any tender offer or exchange offer
for shares of Common Shares by the Corporation;

 

(iv)                              of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation; or

 

(v)                                 the Corporation proposes to take any action
which would require an adjustment of the number of Warrant Shares subject to a
Warrant pursuant to Article 4 hereof;

 

then the Corporation shall cause to be given to each of the Holders, at least 10
days prior to any applicable record date, or promptly in the case of events for
which there is no record date, by first-class mail, postage prepaid, a written
notice stating (x) the date as of which the holders of record of Common Shares
shall be entitled to receive any such rights, options, warrants or distribution
are to be determined, (y) the initial expiration date set forth in any tender
offer or exchange offer for Common Shares, or (z) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of Common Shares shall be entitled to
exchange such shares for securities or other property, if any, deliverable upon
such reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up.  The failure to give the notice required by this
Section 5.01 or any defect therein shall not affect the legality or validity of
any distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.

 

Section 5.02.  Transfer of Warrant. Subject to Section 5.06, this Warrant and
all rights hereunder are transferable, in whole or in part, by each of the
Holders without charge to such Holder, upon surrender of this Warrant to the
Corporation at its then principal executive offices with a properly completed
and duly executed Assignment in the form attached hereto as Exhibit B. 
Notwithstanding the foregoing, any such transferring Holder shall be liable for
any and all taxes, fees and third party expenses incurred by the Corporation as
a result of such transfer and such Holder shall pay the Corporation, in cash or
by wire transfer of immediately available funds any amounts necessary to pay any
such taxes, fees and third party expenses incurred by the Corporation in
connection with the making of such transfer.   Upon such compliance, surrender
and delivery and, if required, such payment, the Corporation shall execute

 

13

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and deliver a new warrant or warrants in the name of the assignee or assignees
and in the denominations specified in such instrument of assignment, and shall
issue to the assignor a new warrant evidencing the portion of this Warrant, if
any, not so assigned and this Warrant shall promptly be cancelled.

 

Section 5.03.  Holder Not Deemed a Stockholder; Limitations on Liability. 
Except as described in the certificate of incorporation or bylaws of the
Corporation, or otherwise specifically provided herein, prior to the issuance to
any Holder of any Warrant Shares upon the due exercise by such Holder of this
Warrant, such Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Shares for any purpose, nor shall anything contained
in this Warrant be construed to confer upon any Holder, as such, any of the
rights of a stockholder of the Corporation or any right to vote, give or
withhold consent to any corporate action (whether any reorganization, issue of
capital stock, reclassification of capital stock, consolidation, merger,
conveyance or otherwise), receive notice of meetings, receive dividends or
subscription rights, or otherwise.  In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on any Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Corporation, whether such liabilities are asserted by the Corporation or
by creditors of the Corporation.   Notwithstanding this Section 5.03, (a) the
Corporation shall provide the Holders with copies of the same notices and other
information given to holders of Common Shares generally, contemporaneously with
the giving thereof to such holders.

 

Section 5.04.  Replacement on Loss; Division and Combination.

 

(a)                          Replacement of Warrant on Loss.     Upon receipt of
evidence reasonably satisfactory to the Corporation of the loss, theft,
destruction or mutilation of this Warrant and upon delivery of an indemnity
reasonably satisfactory to it (it being understood that a written
indemnification agreement with an affidavit of loss of the Holder shall be a
sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant
for cancellation to the Corporation, the Corporation at its own expense shall
execute and deliver to the Holders, in lieu hereof, a new warrant of like tenor
and exercisable for an equivalent number of Warrant Shares as this Warrant so
lost, stolen, mutilated or destroyed; provided that, in the case of mutilation,
no indemnity shall be required if this Warrant in identifiable form is
surrendered to the Corporation for cancellation.

 

(b)                          Division and Combination of Warrant.     Subject to
compliance with the applicable provisions of this Warrant as to any transfer or
other assignment which may be involved in such division or combination, this
Warrant may be divided or, following any such division of this Warrant,
subsequently combined with other Warrants, upon the surrender of this Warrant
and other warrants to the Corporation at its then principal executive offices,
together with a written notice specifying the names and denominations in which
new warrants are to be issued, signed by the respective Holders or their agents
or attorneys.  Subject to compliance with the applicable provisions of this
Warrant as to any transfer or assignment which may be involved in such division
or combination, the Corporation shall at its own expense execute and deliver a
new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered
in accordance with such notice.  Such new Warrant or Warrants shall be of like
tenor to the surrendered Warrant or Warrants and shall be exercisable in the
aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants
so surrendered in accordance with such notice.

 

14

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Section 5.05.  No Impairment.  The Corporation shall not, by amendment of its
certificate of incorporation or bylaws, or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed by it hereunder.

 

Section 5.06.  Agreement to Comply with the Securities Act; Legend.  Each of the
Holders, by acceptance of this Warrant, agrees to comply in all respects with
the provisions of this Section 5.06 and the restrictive legend requirements set
forth on the face of this Warrant and further agrees that such Holder shall not
offer, sell, assign, transfer or otherwise dispose of this Warrant or any
Warrant Shares to be issued upon exercise hereof except under circumstances that
will not result in a violation of the Securities Act.  Each of the Holders will
cause any proposed purchaser, assignee, transferee or pledgee of this Warrant or
any Warrant Shares to agree to take and hold such securities subject to the
provisions of this Section 5.06.  All Warrant Shares issued upon exercise of
this Warrant (unless registered under the Securities Act) shall be stamped or
imprinted with a legend in substantially the following form:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. THESE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER, IN EACH
CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OR OTHER
JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, SUCH
SECURITIES MAY ONLY BE TRANSFERRED IF THE ISSUER AND, IF APPLICABLE, THE
TRANSFER AGENT FOR SUCH SECURITIES HAS RECEIVED DOCUMENTATION SATISFACTORY TO IT
THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT.”

 

Section 5.07.  Warrant Register. The Corporation shall keep and properly
maintain at its principal executive offices books for the registration of this
Warrant and any transfers thereof (the “Warrant Register”).  The Corporation may
deem and treat each Person in whose name this Warrant is registered on the
Warrant Register as a holder thereof for all purposes, and the Corporation shall
not be affected by any notice to the contrary, except any assignment, division,
combination or other transfer of this Warrant effected in accordance with the
provisions of this Warrant.

 

Section 5.08.  Notices.  All notices, requests, consents, claims, demands,
waivers and other communications hereunder shall be in writing and shall be
deemed to have been given: (a) when delivered by hand (with written confirmation
of receipt); (b) when received by the addressee if sent by a nationally
recognized overnight courier (receipt requested); (c) on the date sent by e-mail
of a PDF document (with confirmation of transmission) if sent during normal
business hours of the recipient, and on the next Business Day if sent after
normal business hours

 

15

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

 

of the recipient; or (d) on the third Business Day after the date mailed, by
certified or registered mail, return receipt requested, postage prepaid.  Such
communications must be sent to the respective parties at the addresses indicated
below (or at such other address for a party as shall be specified in a notice
given in accordance with this Section 5.08).

 

If to the Corporation:

Sanchez Energy Corporation

 

1000 Main Street, Suite 3000

 

Houston, Texas 77002

 

Attention: Gregory Kopel

 

Email: gkopel@sanchezog.com

 

 

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

 

 

 

Kirkland & Ellis LLP

 

600 Travis Street, Suite 3300

 

Houston, Texas 77002

 

Attention: Matthew R. Pacey

 

Email:       matt.pacey@kirkland.com

 

 

If to the Holders:

[Insert Name of Applicable GSO Fund]

 

c/o GSO Capital Partners

 

1111 Bagby Street, Suite 2050

 

Houston, Texas 77002

 

Attention: Robert Horn

 

Email:       robert.horn@gsocap.com

 

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

 

 

c/o GSO Capital Partners

 

345 Park Avenue, 31st Floor

 

New York, New York 10154

 

Email:    GSOLegal@gsocap.com

 

               GSOValuationsGroup@gsocap.com

 

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

 

 

Andrews Kurth Kenyon LLP

 

600 Travis Street, Suite 4200

 

Houston, Texas 77002

 

Attention: G. Michael O’Leary

 

                  Jon Daly

 

Email:       moleary@akllp.com

                  jondaly@andrewskurth.com

 

16

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Section 5.09.  Cumulative Remedies. The rights and remedies provided in this
Warrant are cumulative and are not exclusive of, and are in addition to and not
in substitution for, any other rights or remedies available at law, in equity or
otherwise.

 

Section 5.10.  Equitable Relief.  Each of the Corporation and each of the
Holders acknowledges that a breach or threatened breach by such party of any of
its obligations under this Warrant would give rise to irreparable harm to the
other party hereto for which monetary damages would not be an adequate remedy
and hereby agrees that in the event of a breach or a threatened breach by such
party of any such obligations, the other party hereto shall, in addition to any
and all other rights and remedies that may be available to it in respect of such
breach, be entitled to equitable relief, including a restraining order, an
injunction, specific performance and any other relief that may be available from
a court of competent jurisdiction.

 

Section 5.11.  Entire Agreement. This Agreement, the other Basic Documents and
the other agreements and documents expressly referred to herein are intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
This Agreement, the other Basic Documents and the other agreements and documents
expressly referred to herein or therein supersede all prior agreements and
understandings between the parties with respect to such subject matter.

 

Section 5.12.  Successor and Assigns.  This Warrant and the rights evidenced
hereby shall be binding upon and shall inure to the benefit of the parties
hereto and the successors of the Corporation and the successors and permitted
assigns of each of the Holders.  Such successors and/or permitted assigns of a
Holder shall be deemed to be such Holder for all purposes hereunder.

 

Section 5.13.  No Third-Party Beneficiaries. This Warrant is for the sole
benefit of the Corporation and the Holders and their respective successors and,
in the case of each of the Holders, permitted assigns and nothing herein,
express or implied, is intended to or shall confer upon any other Person any
legal or equitable right, benefit or remedy of any nature whatsoever, under or
by reason of this Warrant.

 

Section 5.14.  Headings. The headings in this Warrant are for reference only and
shall not affect the interpretation of this Warrant.

 

Section 5.15.  Amendment and Modification; Waiver.  Except as otherwise provided
herein, this Warrant may only be amended, modified or supplemented by an
agreement in writing signed by each party hereto.  No waiver by the Corporation
or any of the Holders of any of the provisions hereof shall be effective unless
explicitly set forth in writing and signed by the party so waiving. No waiver by
any party shall operate or be construed as a waiver in respect of any failure,
breach or default not expressly identified by such written waiver, whether of a
similar or different character, and whether occurring before or after that
waiver.  No failure to exercise, or delay in exercising, any rights, remedy,
power or privilege arising from this Warrant shall operate or be construed as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.

 

17

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Section 5.16.  Severability. If any term or provision of this Warrant is
invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision of
this Warrant or invalidate or render unenforceable such term or provision in any
other jurisdiction.

 

Section 5.17.  Governing Law.  This Warrant shall be governed by and construed
in accordance with the internal laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of laws
of any jurisdiction other than those of the State of Delaware.

 

Section 5.18.  Submission to Jurisdiction. The parties hereby submit to the
exclusive jurisdiction of any U.S. federal or state court located in the State
of Delaware in any legal suit, action or proceeding arising out of or based upon
this Warrant or the transactions contemplated hereby, and each party irrevocably
submits to the exclusive jurisdiction of such courts in any such suit, action or
proceeding.  Service of process, summons, notice or other document by certified
or registered mail to such party’s address for receipt of notices pursuant to
Section 5.08 shall be effective service of process for any suit, action or other
proceeding brought in any such court.  The parties irrevocably and
unconditionally waive any objection to the laying of venue of any suit, action
or any proceeding in such courts and irrevocably waive and agree not to plead or
claim in any such court that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.

 

Section 5.19.  Waiver of Jury Trial.   Each party acknowledges and agrees that
any controversy which may arise under this Warrant is likely to involve
complicated and difficult issues and, therefore, each such party irrevocably and
unconditionally waives any right it may have to a trial by jury in respect of
any legal action arising out of or relating to this Warrant or the transactions
contemplated hereby.

 

Section 5.20. Counterparts.  This Warrant may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall be deemed
to be one and the same agreement.  A signed copy of this Warrant delivered by
facsimile, e-mail or other means of electronic transmission shall be deemed to
have the same legal effect as delivery of an original signed copy of this
Warrant.

 

Section 5.21.  No Strict Construction. This Warrant shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting an instrument or causing any instrument to be
drafted.

 

[Signature pages follow.]

 

18

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

 

IN  WITNESS WHEREOF, the Corporation has duly executed this Warrant on the
Original Issue Date.

 

 

 

 

SANCHEZ ENERGY CORPORATION

 

 

 

 

 

By:

 

 

 

Name:

Antonio R. Sanchez, III

 

 

Title:

Chief Executive Officer

 

SIGNATURE PAGE

TO

WARRANT AGREEMENT

 

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

 

Accepted and agreed by,

 

Number of Warrant Shares of each GSO Fund

 

 

 

 

 

GSO CAPITAL OPPORTUNITIES FUND III LP

 

 

 

 

 

 

 

 

By:

GSO Capital Opportunities Associates III, LLC,
its general partner

 

 

 

By:

GSO Holdings I L.L.C.,
its member

 

 

 

 

 

 

 

 

By:

 

 

Warrant Shares:

[redacted]

 

Name:

[·]

 

 

 

 

Title:

[·]

 

 

 

 

 

 

 

 

 

 

 

GSO ENERGY SELECT OPPORTUNITIES FUND LP

 

 

 

 

 

 

 

By:

GSO Energy Select Opportunities Associates LLC,
its general partner

 

 

 

By:

GSO Holdings I L.L.C.,
its member

 

 

 

 

 

 

 

 

 

By:

 

 

Warrant Shares:

[redacted]

 

Name:

[·]

 

 

 

 

Title:  

[·]

 

 

 

 

 

 

 

 

 

 

 

GSO ENERGY PARTNERS-A LP

 

 

 

 

 

 

 

 

 

By:

GSO Energy Partners-A Associates LLC,
its general partner

 

 

 

 

 

 

 

 

 

By:

 

 

Warrant Shares:

[redacted]

 

Name:

[·]

 

 

 

 

Title:

[·]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GSO ENERGY PARTNERS-B LP

 

 

 

 

 

 

 

 

 

By:

GSO Energy Partners-B Associates LLC,
its general partner

 

 

 

 

 

 

 

 

 

By:

 

 

Warrant Shares:

[redacted]

 

Name:

[·]

 

 

 

 

Title:

[·]

 

 

 

 

SIGNATURE PAGE

TO

WARRANT AGREEMENT

 

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

 

GSO ENERGY PARTNERS-C LP

 

 

 

 

 

 

 

 

By:

GSO Energy Partners-C Associates LLC,
its general partner

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

Warrant Shares:

[redacted]

 

Name:

[·]

 

 

 

 

Title:

[·]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GSO ENERGY PARTNERS-C II LP

 

 

 

 

 

 

 

 

By:

GSO Energy Partners-C Associates II LLC,
its general partner

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

Warrant Shares:

[redacted]

 

Name:

[·]

 

 

 

 

Title:

[·]

 

 

 

 

 

 

 

 

 

 

 

GSO ENERGY PARTNERS-D LP

 

 

 

 

 

 

 

 

By:

GSO Energy Partners-D Associates LLC,
its General Partner

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

Warrant Shares:

[redacted]

 

Name:

[·]

 

 

 

 

Title:

[·]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GSO CREDIT ALPHA FUND LP

 

 

 

 

 

 

 

 

By:

GSO Capital Partners LP,
its investment manager

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

Warrant Shares:

[redacted]

 

Name:

[·]

 

 

 

 

Title:

[·]

 

 

 

 

SIGNATURE PAGE

TO

WARRANT AGREEMENT

 

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

 

GSO HARRINGTON CREDIT ALPHA FUND (CAYMAN) L.P.

 

 

 

 

 

 

By:

GSO Capital Partners LP,
its investment manager

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

Warrant Shares:

[redacted]

 

Name:

[·]

 

 

 

 

Title:

[·]

 

 

 

 

 

 

 

 

 

 

 

GSO CAPITAL SOLUTIONS FUND II LP

 

 

 

 

 

 

 

 

By:

GSO Capital Solutions Associates II LP,
its general partner

 

 

 

By:

GSO Capital Solutions Associates II (Delaware) LLC,
its general partner

 

 

 

 

 

 

 

 

By:

 

 

Warrant Shares:

[redacted]

 

Name:

[·]

 

 

 

 

Title:

[·]

 

 

 

 

SIGNATURE PAGE

TO

WARRANT AGREEMENT

 

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

 

EXHIBIT A

 

SANCHEZ ENERGY CORPORATION WARRANT EXERCISE AGREEMENT

 

To [Name]:

 

As of the date hereof, the undersigned Holder has the right under the Warrant to
Purchase Common Shares, dated as of [·], 2017, by and between Sanchez Energy
Corporation and the  funds specified on the signature pages thereto (the
“Warrant”) to purchase                                Warrant Shares (as defined
in the Warrant).  Upon payment of the applicable Aggregate Exercise Price (as
defined in the Warrant) and surrender of the Warrant included herewith, the
undersigned Holder hereby irrevocably, except as set forth  in Section 3.07 of
the Warrant, elects to exercise its  right  represented  by  the  Warrant  to 
purchase                                                            Warrant
Shares, and requests that the Warrant Shares be issued in the following name:

 

 

Name

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal Tax Identification or Social Security No.

 

 

 

 

 

 

 

 

 

 

 

and delivered by                 (certified mail to the above address, or

 

 

 

 

 

 

 

                                                 (other                     )
(specify);

 

 

Aggregate Exercise Price

 

 

 

Paid by(check one):

o Certified or official bank check

 

 

 

o Wire transfer

 

A-1

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

 

and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable by the undersigned Holder upon exercise of the Warrant, that the
Corporation make appropriate notation in the Warrant Register (as defined in the
Warrant) to reflect the Warrant Shares that remain subject to purchase upon
exercise of the Warrant after giving effect to this Warrant Exercise Agreement.

 

Yes / No (Please Circle):   The undersigned Holder requests that certificates be
issued for the Warrant Shares.

 

If the undersigned Holder would like more than one certificate, please indicate
the number of certificates and the number of shares to be represented by each
certificate:

 

Number of Certificates:                                                  

 

Number of Warrant Shares to be represented by each certificate:

 

 

 

Certificate 1

 

Certificate 2

 

Certificate 3

 

Certificate 4

Number of Warrant Shares

 

 

 

 

 

 

 

 

 

Dated:                                    ,           

 

 

Note:         The signature must correspond with the name of the Holder as set
forth on the signature page of the Warrant Agreement in every particular,
without alteration or enlargement or any change whatever, unless this Warrant
has been assigned.

 

Signature:

 

 

 

 

 

Name (please print)

 

 

 

 

 

 

 

 

 

 

 

Address

 

 

 

 

 

 

 

 

 

 

 

Federal Tax Identification or Social Security No.

 

 

 

 

 

 

 

 

Assignee:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A-2

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

 

EXHIBIT B

 

SANCHEZ ENERGY CORPORATION

ASSIGNMENT

 

For value received                                hereby sells, assigns and
transfers unto                                   its rights under the Warrant to
Purchase Common Shares, dated as of [·], 2017, by and between Sanchez Energy
Corporation and the funds specified on the signature pages thereto (the
“Warrant”) to purchase Warrant Shares (as defined in the Warrant) on the terms
and subject to the conditions set forth therein(1), together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
attorney, to transfer said rights to purchase Warrant Shares under the Warrant
on the books of the within-named Corporation, with full power of substitution in
the premises.

 

The contact information of the assignee is as follows:

 

[·]

[Address]

[City, State, Zip]

Attention:

[·]

Facsimile:

[·]

Email:

[·]

 

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

 

[·]

[Address]

[City, State, Zip]

Attention:

[·]

Facsimile:

[·]

Email:

[·]

 

 

 

 

Date:

 

 

 

 

 

Signature:

 

 

 

Note:                   The above signature must correspond with the name as
written upon the face of the enclosed Warrant in every particular, without
alteration or enlargement or any change whatever.

 

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

(1) For partial assignment, indicate portion assigned.

 

5-1

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EXHIBIT D

 

FORM OF MANAGEMENT SERVICES AGREEMENT

 

[Attached.]

 

EXHIBIT D TO

SECURITIES PURCHASE AGREEMENT

 

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

 

MANAGEMENT SERVICES AGREEMENT

 

Between

 

Sanchez Oil & Gas Corporation

 

and

 

SN EF UnSub, LP

 

Dated

 

[                          ]

 

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

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

Section 1.

Definitions

1

 

 

 

Section 2.

Management Services

7

 

 

 

Section 3.

Performance and Authority

10

 

 

 

Section 4.

Compensation and Reimbursement

12

 

 

 

Section 5.

Representations and Warranties; Covenants

15

 

 

 

Section 6.

Term; Qualified Foreclosure Transfer; Termination

19

 

 

 

Section 7.

Limitation of Liability; Indemnification

21

 

 

 

Section 8.

Insurance

24

 

 

 

Section 9.

Competition and Corporate Opportunities

25

 

 

 

Section 10.

Confidential Information

25

 

 

 

Section 11.

Obligations Hereunder Not Affected; Waivers

27

 

 

 

Section 12.

Notices

27

 

 

 

Section 13.

Assigns

28

 

 

 

Section 14.

Jointly Drafted

28

 

 

 

Section 15.

Further Assurances

28

 

 

 

Section 16.

No Third-Party Beneficiaries; Subsidiary Obligation

29

 

 

 

Section 17.

Amendment

29

 

 

 

Section 18.

Unenforceability

29

 

 

 

Section 19.

Survival of Agreements

29

 

 

 

Section 20.

Governing Law; Submission to Process

29

 

 

 

Section 21.

Waiver of Jury Trial

30

 

 

 

Section 22.

Entire Agreement

30

 

 

 

Section 23.

Laws and Regulations

30

 

 

 

Section 24.

No Recourse Against Officers, Directors, Managers or Employees

30

 

 

 

Section 25.

Counterparts

30

 

 

 

Section 26.

Conspicuousness of Provisions

30

 

 

 

Section 27.

Force Majeure

31

 

 

 

Section 28.

Entire Agreement; Integrated Transaction

31

 

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MANAGEMENT SERVICES AGREEMENT

 

This Management Services Agreement (this “Agreement”), dated as of
[                ], is made by and between Sanchez Oil & Gas Corporation, a
Delaware corporation (“Manager”), and SN EF UnSub, LP, a Delaware limited
partnership (“Partnership”); provided, that Partnership may be replaced as a
party hereunder by a Qualified Foreclosure Transferee in accordance with
Section 6(b) below and such Qualified Foreclosure Transferee shall be a party
hereunder for all purposes (with all references to “Partnership” being deemed
references to “Qualified Foreclosure Transferee”).

 

RECITALS:

 

WHEREAS, under that certain Purchase and Sale Agreement, dated as of January 12,
2017, by and among Anadarko E&P Onshore LLC, Kerr-McGee Oil & Gas Onshore LP, BX
Newco, SN Maverick and Partnership (together with any purchase agreement entered
into with [redacted] pursuant to certain tag-along rights, the “Purchase
Agreement”), Partnership acquired, directly or indirectly, working interests in
certain developed and undeveloped oil and gas assets in Maverick, Dimmit, Webb,
and LaSalle Counties, Texas (collectively, the “Initial Acquired Assets”);

 

WHEREAS, Partnership wishes for Manager to provide certain management and
general and administrative support services to Partnership with respect to the
Properties and Manager wishes to provide such management and services to
Partnership as provided herein;

 

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

 

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

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, of the premises in the Recitals set forth above, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:

 

Section 1.                                           Definitions. The following
terms shall have the following meaning when used herein:

 

“Administrative Fee” means an administrative fee equal to 2.00% of the
Management Fee, excluding its third party out-of-pocket costs with respect to
non-Affiliates, or such other amount as is approved by Partnership.

 

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly, controls, is controlled by, or is under common control with, such
Person. For the purposes of this Agreement, “control,” when used with respect to
any specified Person, means the power, direct or indirect, to direct or cause
the direction of the management and policies of such Person,

 

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

 

whether through ownership of Voting Securities or partnership or other ownership
interests, by contract or otherwise; and the terms “controlling” and
“controlled” shall have correlative meanings. Notwithstanding the foregoing,
solely for the purposes of this Agreement, Partnership and its Subsidiaries will
be deemed not to be Affiliates of Manager, and vice versa.

 

“Agreement” has the meaning given to it in the Preamble.

 

“Anadarko Closing” has the meaning given to it in the LLC Agreement.

 

“Aguila” means Aguila Production, LLC, a Delaware limited liability company.

 

“Asset Acquisition” means any direct or indirect acquisition or proposed asset
acquisition by Partnership or any of its Subsidiaries.

 

“Asset Disposition” means any direct or indirect disposition or proposed
disposition by Partnership or any of its Subsidiaries.

 

“Basic Documents” has the meaning given to it in the LLC Agreement.

 

“Board” means the board of directors of the General Partner.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act, as amended, state and local analogs, and all rules and
regulations and requirements thereunder in each case as now or hereafter in
effect.

 

“Class B Member” has the meaning set forth in the LLC Agreement.

 

“Confidential Information” has the meaning given to it in Section 10(a).

 

“COPAS” means  the COPAS Accounting  Procedures attached  to  each Operating
Agreement covering operations conducted on the Properties.

 

“Cure Right” has the meaning given to it in Section 6(d)(i).

 

“Development Agreement” has the meaning given to it in the Purchase Agreement.

 

“Drilling Commitment Agreement” has the meaning given to it in the LLC
Agreement.

 

“Dual Closing” has the meaning given to it in the LLC Agreement.

 

“Environment” means (i) the navigable waters, the waters of the contiguous zone,
and the ocean waters of which the natural resources are under the exclusive
management authority of the United States under the Magnuson-Stevens Fishery
Conservation and Management Act 16 U.S.C. 1801 et seq., and (ii) any other
surface water, ground water, drinking water supply, land surface or subsurface
strata, or ambient air within the United States or under the jurisdiction of the
United States.

 

“Environmental Law” means all Legal Requirements or common law theories
applicable to Partnership or its Subsidiaries arising from, relating to, or in
connection with the Environment,

 

2

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health or safety, including without limitation (a) CERCLA; (b) pollution,
contamination, injury, destruction, loss, protection, cleanup, reclamation or
restoration of the air, surface water, groundwater, land surface or subsurface
strata or other natural resources; (c) solid, gaseous or liquid waste
generation, treatment, processing, recycling, reclamation, cleanup, storage,
disposal or transportation; (d) exposure to pollutants, contaminants, hazardous
or toxic substances, materials or wastes; or (e) the manufacture, processing,
handling, transportation, distribution in commerce, use, storage or disposal of
hazardous or toxic substances, materials or wastes.

 

“Environmental Permit” means any permit, license, order, approval, registration
or other authorization under Environmental Law.

 

“Financing” means any form of direct or indirect debt or equity financing
obtained or incurred by Partnership or any of its Subsidiaries.

 

“Force Majeure” has the meaning given to it in Section 27.

 

“General Partner” means SN EF UnSub GP, LLC, a Delaware limited liability
company and the general partner of Partnership.

 

“Governmental Authority” means the government of the United States of America or
any other nation, or of any political subdivision thereof, whether state or
local, and any agency, authority,  instrumentality, regulatory body, court,
central bank or  other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government (including any supra-national bodies).

 

“Hedging Activities” has the meaning provided in the Partnership Agreement.

 

“Hydrocarbons” means oil, gas, coal seam gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate and all other liquid and gaseous
hydrocarbons produced or to be produced in conjunction therewith from a well
bore and all products, by-products and other substances derived therefrom or the
processing thereof, and all other minerals and substances produced in
conjunction with such substances, including, but not limited to, sulfur,
geothermal steam, water, carbon dioxide, helium and any and all minerals, ores
or substances of value and the products and proceeds therefrom.

 

“Initial Acquired Assets” has the meaning given to it in the Recitals.

 

“Inventions” has the meaning given to it in Section 5(f).

 

“JDA” means that certain Joint Development Agreement, dated as of the date
hereof, among Partnership, SN Maverick and Aguila, as such agreement may be
amended from time to time.

 

“JDA Budget and Work Plan” means the Budget and Work Plan (as defined in the
JDA) adopted by the Operating Committee (as defined in the JDA) from time to
time under the JDA.

 

“JDA Records” has the meaning given to such term in Section 2(q).

 

3

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“[redacted] Closing” has the meaning given to it in the LLC Agreement.

 

“Law” has the meaning given to it in the LLC Agreement.

 

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

 

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

 

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

 

“LLC Agreement” means the Amended and Restated Limited Liability Company
Agreement of the General Partner, dated as of the date hereof, as such agreement
may be amended from time to time.

 

“Losses” means losses, liabilities, claims (including, without limitation, third
party claims), demands, suits, causes of action, judgments, awards, damages,
interest, fines, fees, penalties, costs and expenses (including, without
limitation, all reasonable attorneys’ fees and other costs and expenses incurred
in defending any such claims or other matters or in asserting or enforcing any
indemnity obligation under Section 7) of whatsoever kind and nature.

 

“Management Fee” has the meaning set forth in Section 4(a).

 

“Manager” has the meaning given to it in the Preamble.

 

“Manager Confidential Information” means any and all nonpublic information
provided by or on behalf of Manager in the performance of the Services (in each
case irrespective of the form of communication and whether such information is
furnished on or after the date hereof).

 

“Marketing Agreement” means the Hydrocarbons Purchase and Marketing Agreement,
dated as of the date hereof, between Partnership and SN.

 

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

 

“Operating Agreement” has the meaning set forth in the JDA.

 

4

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“Overhead Costs” means the actual costs (on a cost pass-through and no profit
basis) incurred by the Manager or its Affiliates that are incremental costs
(over and above costs incurred prior to the Closing under the Purchase
Agreement) incurred in connection with the businesses of the General Partner,
the Partnership, and their Subsidiaries, and, to the extent such general and
administrative costs relate to the management of properties or assets in which
any of the General Partner, the Partnership, their Subsidiaries, the Sanchez
Vehicles and/or Aguila own an interest, the actual costs shall be allocated 40%
to the Partnership and 60% to the Sanchez Vehicles, respectively, after taking
into account reimbursements from Aguila, if applicable, with such actual costs
including, without limitation, (i) direct costs, (ii) indirect administrative
costs, (iii) the allocable portion of salary, bonus, and incentive compensation,
(iv) severance expenses paid to employees of Manager (or Affiliates of Manager
to the extent such employees provide Services on behalf of Partnership) in
connection with the termination of such employees by Manager or its Affiliates
due to the termination of this Agreement or the reduction in Services performed
under this Agreement and (v) other amounts paid by Manager to any other Person
to provide the Services hereunder; provided, however that “Overhead Costs” shall
exclude (A) amounts disbursed by Manager to third parties from the Partnership
Account to discharge and pay liabilities and obligations of Partnership and
(B) other amounts as set forth in Section 2(r), Section 3(e) or Section 3(g).

 

“parent” has the meaning given to it in the definition of Subsidiary.

 

“Partnership” has the meaning given to it in the Preamble.

 

“Partnership Account” has the meaning given to it in Section 2(o).

 

“Partnership Agreement” means the Amended and Restated Agreement of Limited
Partnership of Partnership, dated as of the date hereof, as such agreement may
be amended from time to time.

 

“Partnership Confidential Information” means all nonpublic information
(i) furnished to Manager or its representatives by or on behalf of Partnership
or (ii) prepared by or at the direction of General Partner on behalf of
Partnership or any of its Subsidiaries (in each case irrespective of the form of
communication and whether such information is furnished on or after the date
hereof).

 

“Partnership’s Records” has the meaning set forth in Section 5(e).

 

“Permit” means any approval, certificate of occupancy, consent, waiver,
exemption, variance, franchise, order, permit, authorization, right or license
of or from any Governmental Authority, including without limitation, an
Environmental Permit.

 

“Permitted Actions” means all actions permitted to be taken by Manager under
this Agreement or by the General Partner on behalf of Partnership and its
Subsidiaries under the Partnership Agreement and the LLC Agreement, including
entering into contracts and agreements on behalf of Partnership, in each case
that do not expressly require approval of the Board or any committee of the
Board or Special Approval, or if such approval is required, which have been so
approved.

 

5

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“Permitted Encumbrances” means and includes: (a) lessor’s royalties, overriding
royalties, production payments, and carried interests; (b) sales contracts
covering oil, gas, or associated liquid or gaseous hydrocarbons that
individually or in the aggregate are not such as to materially detract from the
value of or materially interfere with the ownership of the Properties;
(c) preferential rights to purchase and required third party consents to
assignments and similar agreements (x) with respect to which waivers or consents
are obtained from the appropriate parties or required notices have been given to
the holders of such rights and the appropriate time period for asserting such
rights has expired without an exercise of such rights or (y) which are not
applicable to, or exercisable in connection with, the execution and delivery of
this Agreement and the LLC Agreement or the consummation of the transactions
contemplated hereunder or thereunder; (d) all rights to consent by, required
notices to, filings with, or other actions by any Governmental Authority in
connection with the sale or conveyance of oil and gas leases or interests
therein or sale of production therefrom if the same are customarily obtained
subsequent to such sale or conveyance; (e) liens for taxes or assessments not
due or not delinquent on the date hereof; (f) defects or irregularities of title
arising out of events that have been barred by limitations; and (g) any matter
waived in writing by Partnership.

 

“Person” means an individual, partnership, corporation (including a business
trust), joint stock company, limited liability company, limited liability
partnership, trust, unincorporated association, joint venture or other entity,
or a Governmental Authority or any trustee, receiver, custodian or similar
official.

 

“Preferred Units” has the meaning set forth in the Partnership Agreement.

 

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

 

“Purchase Agreement” has the meaning given to it in the Recitals.

 

“Purchase Agreement Records” means the Records as defined in the Purchase
Agreement.

 

“Qualified Foreclosure Transfer” has the meaning set forth in the JDA.

 

“Qualified Foreclosure Transferee” has the meaning set forth in the JDA.

 

“Redemption Date” means the date of redemption of all outstanding Preferred
Units in cash at the Base Preferred Return Amount under the Partnership
Agreement.

 

“Related Contracts” means any Operating Agreements, contracts or agreements
between Manager, SN or any of their respective Affiliates, on the one hand, and
Partnership (or any Subsidiary of Partnership), on the other, relating to the
operation or development of any of the Properties, the drilling and completion
of wells on the Properties, or the gathering, treating,

 

6

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storage, processing, compressing, transporting, and handling of Hydrocarbons
produced from any of the Properties, or otherwise, including, without
limitation, the JDA.

 

“Required Reports” has the meaning given to such term in Section 2(m).

 

“Sanchez Letter Agreement” has the meaning given to it in the LLC Agreement.

 

“Sanchez Vehicles” means SN Maverick or any other Affiliate of SN (other than
the General Partner, the Partnership or any of their respective Subsidiaries)
that holds title to any of the portion of the Initial Acquired Assets acquired
by SN Maverick at the “Closing” (as defined in the Purchase Agreement) pursuant
to the Purchase Agreement.

 

“Services” has the meaning given to such term in Section 2.

 

“SN” means Sanchez Energy Corporation, a Delaware corporation.

 

“SN Maverick” means SN EF Maverick, LLC, a Delaware limited liability company.

 

“Special Approval” has the meaning given to it in the LLC Agreement.

 

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

 

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

 

“UnSub Agent” has the meaning set forth in the JDA.

 

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

 

Section 2.                                   Management Services.  During the
term hereof, Manager shall, at its own cost and to the extent not directly
provided by Partnership for its own account as mutually agreed by Partnership
and Manager, (i) advise and consult with Partnership regarding all aspects of
the ownership, development, and operation by Partnership of the Properties,

 

7

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(ii) provide (or cause to be provided) management, technical expertise, and
other services necessary to permit Partnership to participate in drilling wells,
installing facilities, and the other activities contemplated by the JDA,
Development Agreement, Operating Agreements, LLC Agreement, and Partnership
Agreement, and (iii) provide (or cause to be provided) administrative support
services to Partnership, including, without limitation, investor relations
services, human resources and benefits administration services and general
executive management, as necessary or useful for the operations of the business
of Partnership and Partnership’s Subsidiaries, as reasonably determined by
Manager (collectively, the “Services”), including, but not limited to, the
following specific Services:

 

(a)                                  Overhead Services.  Manager will provide
all general and administrative overhead materials and services and other general
and administrative materials and services.

 

(b)                          Technical.  Manager will provide in-house
geological, geophysical and reserve engineering services that are required to
determine the optimum exploration, development and operation of the Properties,
including but not limited to, the use and interpretation of any seismic data
owned by, licensed to or otherwise available to Manager or Partnership relating
to the Properties.

 

(c)                           Lease and Land Administration.  Manager will
provide all necessary or useful Lease and land administration services,
including, but not limited to, administering all Leases and division orders, and
maintaining all land, Lease and other related records, providing associated
services, and timely paying rentals, shut-in payments and other Lease payments.

 

(d)                          Elections Under Operating Agreements.  Manager
shall act for and on behalf of Partnership with respect to all approvals,
consents, elections, and votes under the Operating Agreements in a manner that
is consistent with this Agreement and the JDA Budget and Work Plan then in
effect, in each case, subject to compliance with the LLC Agreement and
Partnership Agreement.

 

(e)                           Discharge of Obligations.  Manager shall pay and
discharge, on behalf of Partnership, Partnership’s share of all expenses
incurred under the Operating Agreements, arrange for the timely and proper
payment of severance taxes to any Governmental Authorities, make timely payment
to royalty owners and third party working interest owners, and pay and
discharge, on behalf of Partnership, all other liabilities related to the
Properties and the sale of Hydrocarbons produced therefrom, in the manner as
provided for herein.

 

(f)                            Marketing and Sale of Hydrocarbons.  Manager will
perform the services necessary to market and sell the Hydrocarbons produced from
the Properties on behalf of Partnership and its Subsidiaries and to collect such
proceeds under the Marketing Agreement as the agent of Partnership and its
Subsidiaries in accordance with the Marketing Agreement. Manager shall cause all
proceeds received under the Marketing Agreement to be deposited in the
Partnership Account.

 

(g)                           Accounting.  Manager will perform all revenue and
joint interest accounting functions attributable to the Properties, including
but not limited to:

 

(i)                                     royalty and other lease payments,

 

8

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(ii)                                  payment of accounts payable,

 

(iii)                               collection of production proceeds as
provided in the Marketing Agreement,

 

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

 

(v)                                 gas balancing, and

 

(vi)                              general ledger and financial reporting
activities.

 

(h)                         Operations.  To the extent any Properties subject to
development and operation are not subject to an Operating Agreement, Manager
will enter into an Operating Agreement, or cause (on behalf of Partnership) an
Operating Agreement to be entered into, with respect to such Properties in
accordance with the terms of the JDA.

 

(i)                             Information Systems.  Manager will provide
computer use and/or facilities necessary to manage and operate the Properties
and to conduct the Services and maintain the Partnership’s Records.

 

(j)                            Budgets and Forecasts.  In addition to and
separate from the JDA Budget and Work Plan, Manager will (i) establish a budget
pursuant to which the Services will be provided, subject to approval thereof by
the Board pursuant to the LLC Agreement and (ii) monitor and reconcile the
receipts, income and expenditures to such Services budget.

 

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

 

(l)                             Claims and Actions.  Manager shall take
reasonable steps to defend against any adverse claim or demand, and to pursue
claims of Partnership against third parties with respect to the Properties,
including the use of counsel on behalf of Partnership for the prosecution or
defense of litigation and the contest, settlement, release, or discharge of any
such claim or demand.

 

(m)                             Reports.  Manager will provide the General
Partner and Partnership, as applicable, with the reports and tax information set
forth in Section 6.2 of the LLC Agreement and Sections 5.7, 7.2 and 8.1 of the
Partnership Agreement within the time periods set forth therein along with all
reports and information required to be provided to Partnership under the JDA,
Operating Agreements, and Marketing Agreement (the “Required Reports”).

 

(n)                                 Accounting.  Manager will maintain a general
ledger with respect to the business and attendant accounting matters of
Partnership and its Subsidiaries.

 

9

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(o)                                 Bank Accounts.  Manager will open and
maintain bank accounts (the “Partnership Account”) on behalf of Partnership and
its Subsidiaries.

 

(p)                                 Hedging Activity.  Manager will enter into
Hedging Activities on behalf of Partnership as contemplated by Section 6.7 of
the Partnership Agreement.

 

(q)                                 Receipt of Notices and Other Communication. 
Manager shall review all notices, correspondence, reports, documents, claims,
records, invoices, and other communications (the “JDA Records”) received by
Manager on behalf of Partnership from operators, other non-operators, co-owners,
counterparties to the contracts subject to the Marketing Agreement and Operating
Agreements for Partnership, and from other parties on other matters related to
the Properties, and shall respond in a timely manner to the foregoing as
necessary in the reasonable discretion of Manager on behalf of Partnership and
shall maintain reasonably detailed files regarding the JDA Records.

 

(r)                                    Acquisition, Disposition and Financing
Services.  Manager will assist Partnership in connection with Transactions.  No
Services shall be required to be rendered by Manager in connection with a
Transaction which Manager determines, in its sole discretion, would result in a
violation of Legal Requirements or require a Permit not then in the possession
of Manager. Overhead Costs will include Manager’s costs related to, and
Partnership will be required to reimburse Manager for any third party costs
incurred with respect to, due diligence and negotiations for any Transaction
that the Partnership has approved pursuing under the LLC Agreement, provided,
however, that such costs will not be included in Overhead Costs for any
Transaction that the Partnership has not approved pursuing under the LLC
Agreement.

 

(s)                                   Outside Professionals.  Manager will
manage and supervise the outside accountants and attorneys of Partnership and
coordinate the annual audit of Partnership’s books and records and the
preparation of Partnership’s tax returns (but subject in any event to the
ultimate authority of the Board or the audit committee thereof, as applicable).
It is understood and agreed by Partnership that certain of the Services may be
provided directly or indirectly by other Persons.

 

(t)                                    Protection from Liens.  Manager shall not
place any Liens on the Properties, except for Permitted Encumbrances, or to the
extent Partnership directs Manager to do so or such liens or encumbrances arise
as a result of any contract or agreement entered into or any action or inaction
taken by the Manager at the direction or with the consent of Partnership, such
consent not to be unreasonably withheld, conditioned or delayed.

 

Section 3.                                           Performance and Authority.

 

(a)                                 Standard of Care.  Manager shall provide the
Services acting in good faith, and conduct itself with a degree of care,
diligence, and skill, as the same may change from time to time, but applied in
light of the facts known at the time, of a reasonably prudent operator,
consistent with general industry-standard practices applied or used in
comparable circumstances in the oil and gas industry, and in the geographic
region where the Properties are located, and in compliance with all material
Legal Requirements and the Related Contracts and all other

 

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contracts, Leases, and agreements to which Partnership is a party or to which
the Properties are subject or bound.

 

(b)                                 Prohibited Acts.  In connection with the
performance of the Services and its duties and obligations hereunder and under
the Operating Agreements and Marketing Agreement, neither Manager nor any of its
officers, employees, personnel, or other agents or representatives acting on its
behalf, shall have the authority or be permitted to take any action, in the name
or on behalf of either Partnership or any subsidiary of Partnership (if any)
without the consent of Partnership unless such action is a Permitted Action.

 

(c)                                  Independent Contractor Relationship.  With
respect to its performance of the Services, Manager is an independent
contractor, with the authority to control, oversee and direct the performance of
the details of, and the means and manner of performance of, the Services free of
control and supervision by Partnership, Partnership having contracted herein
solely for the result of such Services.  Neither Manager nor any Person used or
employed by Manager shall be deemed for any purpose to be the employee or
servant of Partnership or any of its Subsidiaries in performance of any work or
services, or any part thereof, under this Agreement.

 

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

 

(e)                                  Performance of Services by Third Parties. 
The parties to this Agreement understand and agree that Manager may, in the
performance of the Services, engage or retain, as agent on Partnership’s behalf,
any necessary third party consultants, advisers, accountants, auditors and
attorneys, including, without limitation:

 

(i)                                     reservoir engineering consultants, and
accountants, auditors and other third parties required for preparation of the
Required Reports; and

 

(ii)                                  attorneys for issues related directly to
the business of Partnership.

 

Partnership shall reimburse Manager for any costs and expenses arising from or
related to such engagement or retention that have been paid with funds of
Manager rather than funds of Partnership or its Subsidiaries, provided that the
costs under this provision shall be shared 40% to Partnership and 60% to SN,
after the benefit of reimbursement from Aguila. Any and all payments made to
Manager for reimbursements incurred pursuant to this Section 3(e) shall be in
addition to, and not considered to be a part of, the Overhead Costs included in
calculating the Management Fee to be paid in accordance with Section 4. For the
avoidance of doubt, payments to Manager, SN and any Affiliate of Manager or SN
in connection with this Agreement or a Related Contract shall not be deemed
incurred pursuant to this Section 3(e).

 

(f)                                   Partnership Information.  It is
contemplated by the parties that, during the term of this Agreement, Partnership
will be required to provide certain notices, information and data necessary for
Manager to perform the Services and its obligations under this Agreement.
Manager shall be permitted to rely on any information or data provided by
Partnership to

 

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Manager in connection with the performance of its duties and provision of
Services under this Agreement.

 

(g)                                  Accounts Receivable.  The parties
understand and agree that Manager or an Affiliate thereof, in the performance of
the Services, may incur accounts receivable in connection with the management of
Properties hereunder or under a Related Contract, to the extent Partnership has
operations thereon and non-working interest owners are billed with respect
thereto. In such event, Partnership shall be billed for such amounts and receive
credit therefor if and to the extent that third parties remit payment for such
amounts to Manager or such Affiliate directly. Manager and its Affiliates shall
use commercially reasonable efforts to collect all known amounts due to
Partnership from third parties; provided, however, that Manager shall not be
liable to Partnership for any failure to collect such amounts due after
exercising such efforts. Any and all payments made to Manager or an Affiliate
thereof for reimbursements incurred pursuant to this Section 3(g) shall be in
addition to, and not considered to be a part of, the Management Fee or
Administrative Fee to be paid in accordance with Section 4(a).

 

(h)                                 Dealing with Partnership Assets.  Without
limiting any other powers or duties of Manager provided in this Agreement,
Manager is hereby authorized to act as agent of Partnership and each Partnership
Subsidiary for the procurement of all Services to be procured for Partnership or
any of its Subsidiaries by Manager pursuant to this Agreement, and to, in
Partnership’s name or in the name of Partnership’s Subsidiaries and on its or
such Subsidiary’s behalf or in the name of Manager but subject to the terms of
this Agreement, to take all Permitted Actions in connection with the performance
of the Services and, to the extent a Permitted Action, to execute, deliver,
accept, assign, amend, extend, terminate, license or release (all of the
foregoing, either manually or electronically):

 

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

 

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

 

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

 

Section 4.                                           Compensation and
Reimbursement.

 

(a)                                 Charge for Services.  Partnership shall
compensate Manager for the provision of the Services by paying Manager an amount
equal to Manager’s Overhead Costs (the “Management Fee”) plus the Administrative
Fee. To the extent costs and expenses described under Section II 3 and II 4 of
COPAS and any overhead charges described under Section III of COPAS have been
allocated to Partnership or any Subsidiary under COPAS and paid by Partnership
pursuant to the terms of the JDA or any Operating Agreement, Manager shall
credit such amounts to Partnership against the Management Fee, but such amounts
shall be subject to

 

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the Administrative Fee. Notwithstanding anything to the contrary contained
herein, Manager shall not be entitled to any Management Fee in each of the two
calendar years following the date hereof in excess of $5,000,000 per calendar
year and thereafter, in excess of $10,000,000 per calendar year and the
Administrative Fee shall not exceed 2.00% of the Management Fee unless the
incurrence of any such excess Management Fee or Administrative Fee has been
approved with Special Approval under Section 5.7(b)(i) of the LLC Agreement.

 

(b)                          Taxes.  In addition to the other sums payable under
this Agreement, Partnership shall pay, and hold Manager harmless against, all
sales, use or other taxes, or other fees or assessments imposed by any Legal
Requirement in connection with the provision of the Services, other than income,
franchise or margin taxes measured by Manager’s net income or margin and other
than any gross receipts or other privilege taxes imposed on Manager. Manager and
Partnership shall cooperate with each other and use commercially reasonable
efforts to assist the other in entering into such arrangements as the other may
reasonably request in order to minimize, to the extent lawful and feasible, the
payment or assessment of any taxes relating to the transactions contemplated by
this Agreement; provided, however, that nothing in this Section 4(b) shall
obligate Manager to cooperate with, or assist, Partnership in any arrangement
proposed by Partnership that would, in Manager’s sole discretion, have a
material detrimental effect on Manager.

 

(c)                           Invoicing and Payment.  Manager will invoice
Partnership from time to time, as determined by Manager in its sole discretion,
including, without limitation, advance requests for the current month’s
estimated costs, fees, and expenses, as determined by Manager in its sole
discretion. Any over or under payments will be reconciled in subsequent invoices
with appropriate credits or deductions, as applicable. Partnership shall pay
invoiced amounts promptly, and in any event within 30 days, after the receipt of
each such invoice. Notwithstanding the foregoing or anything else in this
Agreement to the contrary, Manager may elect to retain proceeds that it receives
on behalf of Partnership to the extent it would otherwise invoice Partnership
for such amounts and in such event it shall show any such retained amounts as a
credit on such invoice. Failure by Manager to submit an invoice for any amounts
due hereunder shall not relieve Partnership of its payment obligations under
this Agreement when due hereunder.

 

(d)                           Disputed Charges.

 

(i)                              PARTNERSHIP (OR ON BEHALF OF THE PARTNERSHIP,
THE BOARD, CLASS B MEMBER, OR THE AUDIT COMMITTEE OF THE BOARD, AS APPLICABLE)
MAY, WITHIN 120 DAYS AFTER THE END OF THE CALENDAR YEAR DURING WHICH PARTNERSHIP
RECEIVED AN INVOICE FROM MANAGER, TAKE WRITTEN EXCEPTION TO ANY CHARGE THEREIN,
ON THE GROUND THAT THE SAME WAS NOT AN ACTUAL (OR, IF APPLICABLE, REASONABLE)
COST, FEE OR EXPENSE INCURRED BY OR DUE TO MANAGER IN CONNECTION WITH THE
PROVISION OF SERVICES, OR ON ACCOUNT OF ANY ERROR OR INACCURACY ON ANY INVOICE.
PARTNERSHIP SHALL NEVERTHELESS PAY MANAGER ANY INVOICED OR OTHER AMOUNT IN FULL
WHEN DUE OR REQUESTED, OR DEPOSIT SUCH AMOUNTS

 

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INTO THE PARTNERSHIP ACCOUNT WHEN SO REQUESTED FOR WITHDRAWAL BY MANAGER. SUCH
PAYMENT OR DEPOSIT SHALL NOT BE DEEMED A WAIVER OF THE RIGHT OF PARTNERSHIP TO
RECOUP OR RECEIVE CREDIT FOR ANY CONTESTED PORTION OF ANY AMOUNT SO PAID. IF THE
AMOUNT AS TO WHICH SUCH WRITTEN EXCEPTION IS TAKEN, OR ANY PART THEREOF,IS
ULTIMATELY DETERMINED NOT TO BE AN ACTUAL (OR,IF APPLICABLE, REASONABLE) COST,
FEE OR EXPENSE INCURRED BY OR DUE TO MANAGER, OR IS OTHERWISE AN ERROR OR
INACCURACY IN CONNECTION WITH THE PROVISION OF SERVICES AND SUCH AMOUNT IS LESS
THAN OR EQUAL TO $100,000, SUCH AMOUNT OR PORTION THEREOF (AS THE CASE MAY BE)
SHALL BE CREDITED AGAINST FUTURE AMOUNTS DUE HEREUNDER OR, UPON EXPIRATION OR
TERMINATION OF THIS AGREEMENT AFTER ALL SUCH CREDITS HAVE BEEN APPLIED OR IF
SUCH AMOUNT EXCEEDS $100,000, PROMPTLY REFUNDED BY MANAGER TO PARTNERSHIP.
PARTNERSHIP SHALL HAVE NO RIGHT TO DISPUTE ANY PAYMENT,INVOICE OR WITHDRAWAL
AFTER SUCH 120 DAY PERIOD AND SHALL BE DEEMED TO HAVE WAIVE ANY CLAIMS OR RIGHTS
WITH RESPECT TO SUCH AMOUNTS TO THE EXTENT NOT DISPUTED WITHIN SUCH PERIOD.

 

(ii)                           If, within 20 days after receipt of any written
exception pursuant to Section 4(d)(i), Partnership (or the Board, the Class B
Member or the audit committee of the Board, as applicable) and Manager have been
unable to resolve any dispute, and if (1) such dispute relates to whether
amounts were properly charged or Services actually performed and (2) the
aggregate amount in dispute exceeds $100,000, either of Partnership (or the
Board or the audit committee of the Board, as applicable) or Manager may submit
the dispute to an independent third party auditing firm that is mutually
agreeable to the Board (or the audit committee of the Board, or the Class B
Member as applicable), on the one hand, and Manager, on the other hand. The
parties shall cooperate with such auditing firm and shall provide such auditing
firm access to such books and records as may be reasonably necessary to permit a
determination by such auditing firm. The resolution by such auditing firm shall
be final and binding on the parties. If the amounts in dispute do not reach the
thresholds to be submitted to an independent third party auditing firm as
provided in this Section 4(d), then at the end of such 20 day period, Manager
shall adjust the invoiced amount as Manager, in good faith, reasonably deems
necessary and such adjustment, if any, shall be final and binding on the
parties.

 

(e)                                         Account Access. In addition to the
foregoing, Manager may pay (i) all costs and expenses incurred in connection
with its performance of the Services and (ii) all financial obligations of
Partnership or its Subsidiaries that may be due and owing either out of the
Partnership Account or out of its own funds; provided, however, that Partnership
shall reimburse Manager for any and all costs and expenses Manager pays out of
its own funds subject to and in accordance with the terms of this Agreement.
Partnership shall ensure Manager is duly

 

14

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authorized to draw upon the Partnership Account (and shall make all necessary
arrangements with its financial institution(s)) for purposes of permitting
Manager to pay (or reimburse itself for) any costs, expenses or fees due and
owing to Manager hereunder, as reasonably determined by Manager. In the event
Manager reasonably anticipates that the funds in the Partnership Account are not
sufficient to pay (or reimburse itself for) any costs, expenses or fees due for
any month or other period, then Manager shall request Partnership to cause
sufficient funds to be deposited in the Partnership Account to cover all such
anticipated costs, expenses and fees and shall provide Partnership with
reasonable documentation to support such request. Partnership shall cause such
funds to be deposited in the Partnership Account within 30 days of Manager’s
request; it being understood that if Partnership fails to make such deposits,
Manager shall not be liable in any manner for any costs, expenses or other
liabilities Partnership, its Subsidiaries or Manager may incur as a result of
Partnership’s failure to timely deposit such funds. Notwithstanding anything to
the contrary contained herein, Manager shall have no obligation to pay any costs
and expenses referenced above out of its own funds (and seek reimbursement from
Partnership), it being intended instead that Partnership, at Manager’s request,
will ensure that the funds to pay such costs and expenses are deposited in the
Partnership Account as described above.

 

Section 5.                                           Representations and
Warranties; Covenants.

 

(a)                                 Partnership Representations. Partnership
represents and warrants to Manager, as of the date hereof, as follows:

 

(i)                              Organization; Requisite Power and Authority.
Partnership (a) is validly existing and in good standing under the laws of the
State of Delaware or other applicable jurisdiction of organization or formation,
as the case may be, (b) has all requisite power and authority, and is duly
authorized, to enter into this Agreement and the Related Contracts and to carry
out the transactions contemplated hereby and thereby, and (c) is qualified to do
business and in good standing in every jurisdiction where necessary to carry out
its business and operations as required by applicable Legal Requirements.

 

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

 

(iii)                        No Conflict. The execution, delivery and
performance by Partnership of this Agreement and by Partnership of the Related
Contracts and the consummation of the transactions contemplated by this
Agreement and the Related Contracts do not (a) violate in any material respect
any provision of any Legal Requirement applicable to Partnership, or violate its
organizational documents or any order, judgment or decree of any court or other
Governmental Authority binding on Partnership; (b) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any material contract or agreement to which Partnership is a party or by
which its assets are bound; (c) result in or require the creation or imposition
of any Lien upon any of

 

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the properties or assets of Partnership or result in the acceleration of any
indebtedness owed by Partnership; (d) result in any default, noncompliance,
suspension, revocation, impairment, forfeiture or nonrenewal of any Permit
material to Partnership’s operations or any of its properties; or (e) require
any approval of equityholders or any approval or consent of any Person under any
contractual obligation or the organizational documents of Partnership, except in
the case of each of the foregoing clauses for such approvals or consents which
have been obtained or are otherwise contemplated by this Agreement.

 

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

 

(b)                                 Manager Representations.  Manager represents
and warrants to Partnership, as of the date hereof, as follows:

 

(i)                              Organization;  Requisite Power and Authority;
Qualification. Manager (a) is validly existing and in good standing under the
laws of the state of Delaware or other applicable jurisdiction of organization
or formation, as the case may be, (b) has all requisite power and authority, and
is duly authorized, to enter into this Agreement and the Related Contracts and
to carry out the transactions contemplated hereby and thereby, including, in the
case of Manager, providing the Services, and (c) is qualified to do business and
in good standing in every jurisdiction where necessary to carry out its business
and operations as required by applicable Legal Requirements.

 

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

 

(iii)                        No Conflict.  The execution, delivery and
performance by Manager of this Agreement and by Manager, if a party thereto, of
the Related Contracts, and the consummation of the transactions contemplated by
this Agreement and the Related Contracts, including providing the Services, do
not, (A) violate in any material respect any provision of any Legal Requirement
applicable to Manager, or violate its organizational documents or any order,
judgment or decree of any court or other Governmental Authority binding Manager;
(B) conflict with, result in a breach of or constitute (with due notice or lapse
of time or both) a default under any material contract or agreement to which
Manager is a party or by which its assets are bound; (C) result in or require
the creation or imposition of any Lien upon any of the properties or assets of
Manager or result in the acceleration of any indebtedness owed by Manager; (D)
result in any default, noncompliance,

 

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suspension, revocation, impairment, forfeiture or nonrenewal of any Permit
material to Manager’s operations or any of its properties; or (E) require any
approval of equity holders or any approval or consent of any Person under any
contractual obligation or the organizational document of Manager, except for
such approvals or consents which have been obtained or otherwise contemplated by
this Agreement.

 

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

 

(c)                                  Compliance with Legal Requirements.
 Manager will comply with applicable Legal Requirements in all material respects
in its provision of the Services.

 

(d)                                 Separateness Covenants.  Notwithstanding
anything in this Agreement to the contrary, for so long as any Preferred Units
or obligations under Senior Debt Agreement (as defined in the LLC Agreement)
remain outstanding, Manager shall not:

 

(i)                              fail to observe all corporate formalities and
other formalities required by its organizational documents or the laws of the
State of Delaware, or fail to preserve its existence as an entity duly
organized, validly existing and in good standing (if applicable) under the
Delaware General Corporation Law;

 

(ii)                              commingle its funds or assets with the funds
or assets of Partnership or any of its Subsidiaries;

 

(iii)                        fail to maintain all of its books, records,
financial statements and bank accounts separate from those of Partnership and
any of its Subsidiaries;

 

(iv)                       maintain its assets in such a manner that it will be
costly or difficult to segregate, ascertain or identify its individual assets
from those of Partnership or its Subsidiaries;

 

(v)                          hold itself out to be responsible for the debts of
the Partnership or its Subsidiaries or hold out its credit as being available to
satisfy the obligations of Partnership or its Subsidiaries (other than pursuant
to the arrangements provided for in (A) the Purchase Agreement, (B) this
Agreement, (C) the Marketing Agreement, (D) the Sanchez Letter Agreement,
(E) the Drilling Commitment Agreement and (F) financing fees paid at the
Anadarko Closing and [redacted] Closing or Dual Closing, as applicable);

 

(vi)                       fail to (A) hold itself out to the public and
identify itself, in each case, as a legal entity separate and distinct from
Partnership and its Subsidiaries and not as a division or part of Partnership or
its Subsidiaries, (B) conduct its

 

17

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business solely in its own name, (C) hold its assets in its own name or
(D) correct any known misunderstanding regarding its separate identity
(provided, Partnership may authorize agents pursuant to this Agreement, in their
own name as agents for Partnership, to perform management services on behalf of
Partnership);

 

(vii)                    fail to allocate shared expenses (including, without
limitation, shared office space) or fail to use separate stationery, invoices
and checks from that of Partnership (except to the extent Manager is permitted
to act on behalf of Partnership pursuant to the terms of this Agreement);

 

(viii)                 fail to pay its own liabilities from its own funds (other
than pursuant to the arrangements provided for in (A) the Purchase Agreement,
(B) this Agreement, (C) the Marketing Agreement, (D) the Sanchez Letter
Agreement, (E) the Drilling Commitment Agreement and (F) financing fees paid at
the Anadarko Closing and [redacted] Closing or Dual Closing, as applicable);

 

(ix)                       identify its partners or other Affiliates, as
applicable, as a division or part of it;

 

(x)                          fail to be adequately capitalized to engage in its
business separate and apart from Partnership and its Affiliates and to remain
solvent;

 

(xi)                       fail to ensure that all material transactions between
Manager, on the one hand, and Partnership and/or its Subsidiaries, on the other
hand, whether currently existing or hereafter entered into, will be on an arm’s
length basis; or

 

(xii)                    have the same slate of Persons serving as officers of
Manager also serve in the same capacities with the General Partner, any of its
Subsidiaries or any of Partnership’s Subsidiaries.

 

The assets of the General Partner or Partnership have not been and will not be
listed as assets on the financial statement of Manager. Manager and Partnership
have maintained and will maintain their respective books, records, resolutions
and agreements as official records. Failure by Manager or Partnership to comply
with any of the obligations set forth in this Section 5(d) shall not affect the
status of Partnership as a separate legal entity, with its separate assets and
separate liabilities.

 

(e)                           Partnership Records; Audit Rights.  At all times
during the term of this Agreement, Manager shall maintain (i) the Purchase
Agreement Records, (ii) the JDA Records, (iii) reasonably detailed records
related to the sale of Partnership’s Hydrocarbons, including those sold under
the Marketing Agreement, and (iv) books of account, receipts, disbursements,
Permits and all other records relating to the Services performed hereunder
(collectively, the “Partnership’s Records”). All accounting records shall be
maintained in all material respects in accordance with generally accepted
accounting principles. Partnership shall have the right, upon 30 days’ prior
notice to Manager, and at reasonable times during usual business hours of
Manager or its Affiliates to, no more than twice per year review and audit the
Partnership’s Records; provided, however, that such review and audit does not
unreasonably interfere with the

 

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operations of Manager or its Affiliates. Partnership shall bear all costs and
expenses incurred in connection with any review or audit. Manager shall, and
shall cause its Affiliates to, subject to the provisions of Section 4(d), review
and respond in a timely manner to any claims or inquiries made by Partnership
regarding matters revealed by any such review or audit. Seismic and other
reserve related data Manager or its Affiliates have access to, solely to the
extent such data is relevant to the Properties, shall be made available to
Partnership subject to and in accordance with the terms of a geophysical seismic
data use license agreement in a form reasonably acceptable to Manager to be
entered into by Manager (or one or more of its Affiliates) and Partnership
(provided such access does not breach, conflict or violate any third party
licensing agreement or other contract). Notwithstanding anything herein to the
contrary, Manager shall not be obligated to disclose or make available to
Partnership any information prohibited by Legal Requirement or restricted by
contractual obligations of confidentiality. The rights under this
Section 5(e) shall survive termination or expiration of this Agreement for a
period of two years.

 

(f)                           Inventions and IP Ownership.  The parties agree
that any inventions, improvements, designs, original works of authorship,
formulas, processes, compositions of matter, computer software programs,
databases, mask works, and trade secrets (whether or not patentable,
copyrightable or protectable as trade secrets or other intellectual property
rights) that, in each case, are conceived, first reduced to practice, or
created, by Manager in connection with providing the Services, either alone or
jointly with others (“Inventions”), will be the sole and exclusive property of
Manager. Partnership hereby assigns, and agrees to assign, to Manager any and
all rights that Partnership may have in any such Inventions and in any
intellectual property rights therein or related thereto. Partnership agrees to
assist Manager and any Manager designee in obtaining, enforcing, and perfecting,
Manager’s rights in the Inventions in any and all countries, including by
executing any intellectual property assignment agreements. Partnership hereby
appoints Manager as Partnership’s attorney-in-fact to execute documents on
Partnership’s behalf for the purposes set forth in this paragraph.

 

(g)                          Certain Actions Prior to Redemption Date.  Until
the Redemption Date, Manager and its Affiliates will not take any action in
performing the Services that is not a Permitted Action or that is inconsistent
with the LLC Agreement, and Manager agrees to, and to cause its Affiliates to,
comply with the LLC Agreement; provided that Manager and its Affiliates shall be
deemed to have acted consistently with the LLC Agreement and to have complied
with the LLC Agreement when following the express directions of the Board or
when clarification is otherwise requested and received from the Board.

 

(h)                         Partnership Account.  Manager agrees to maintain the
Partnership Account and to deposit all revenues and payments received from the
sale of the Partnership’s Hydrocarbons in the Partnership Account. Manager will
direct all purchasers of production of Partnership to pay all revenues due in
respect of the sale of Partnership’s Hydrocarbons directly into the Partnership
Account. If Manger or its Affiliates inadvertently receive any revenues
attributable to Partnership, Manager shall promptly pay and deposit such
revenues into the Partnership Account.

 

Section 6.                                           Term; Qualified Foreclosure
Transfer; Termination.

 

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(a)                                 Term.  The respective rights, duties, and
obligations of the parties hereunder shall commence on the date hereof and,
unless terminated as provided herein, (a) shall continue initially until
[                ], 2024(1) and (b) shall be renewed and shall continue
automatically thereafter for additional one year terms unless either party
provides written notice to the other party hereto of its desire not to renew
this Agreement at least 180 days prior to such anniversary date.

 

(b)                                 Qualified Foreclosure Transfer.  In the
event of a Qualified Foreclosure Transfer, Qualified Foreclosure Transferee
(i) shall provide written notice to Manager and Partnership of such Qualified
Foreclosure Transfer, (ii) shall be bound by, and sign on to and join, this
Agreement and (iii) shall become a party (and replace Partnership as a party
with all references to “Partnership” being deemed references to “Qualified
Foreclosure Transferee”) for all purposes hereof.

 

(c)                                  Termination by Manager and Partnership.
 This Agreement may be terminated at any time by Manager or Partnership on or
after 90 days following any Qualified Foreclosure Transfer by providing written
notice of termination to the other party.

 

(d)                                 Termination by Manager.  This Agreement may
be terminated at any time by Manager by providing written notice of termination
to Partnership:

 

(i)                             upon Partnership’s material breach of this
Agreement (unless such breach is caused by Affiliates of Manager), if (a) such
breach is not remedied within 60 days (or 30 days in the event of a failure to
make any payment hereunder, which shall be deemed a material breach hereunder)
after Partnership’s and UnSub Agent’s receipt of notice thereof, or such longer
period (except for a material breach arising out of a failure to make payment
hereunder) as is reasonably required to cure such breach; provided, however,
that Partnership or UnSub Agent commences to cure such breach within the
applicable period and proceeds with due diligence to cure such breach, and
(b) such breach is continuing at the time notice of termination is delivered to
Partnership; provided, further that UnSub Agent shall also have the right (but
not the obligation) to remedy any such failure to the same extent as Partnership
within the applicable time periods set forth above (the “Cure Right”); and

 

(ii)                          upon the transfer by Partnership of all of
Partnership’s Properties (provided that if such transfer is in connection with a
Qualified Foreclosure Transfer, then this Agreement may only be terminated on or
after 90 days following such Qualified Foreclosure Transfer), in which case
Partnership shall have the option to cause Manager to enter into a transition
services agreement with the transferee of such Properties covering the Services
hereunder for a period not to exceed six (6) months from the effective date of
such transfer and for a fee not to exceed the then current Management Fee,
proportionately reduced for the term of such transition services agreement.

 

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

(1)                                         Note to Form: This date should be
seven years from the Anadarko Closing.

 

20

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(e)                           Termination by Partnership.  This Agreement may be
terminated at any time by Partnership, subject to, prior to a Qualified
Foreclosure Transfer, approval of the Board and the Class B Member of
Partnership by providing written notice of termination to Manager,

 

(i)                              upon Manager’s material breach of this
Agreement, if (A) such breach is not remedied within 60 days after Manager’s
receipt of notice thereof, or such longer period as is reasonably required to
cure such breach; provided, however, that Manager commences to cure such breach
within the applicable period and proceeds with due diligence to cure such
breach, and (B) such breach is continuing at the time notice of termination is
delivered to Manager;

 

(ii)                           upon the transfer by Partnership of all of
Partnership’s Properties (provided that if such transfer is in connection with a
Qualified Foreclosure Transfer, then this Agreement may only be terminated on or
after 90 days following such Qualified Foreclosure Transfer), in which case
Partnership shall have the option to cause Manager to enter into a transition
services agreement with the transferee of such Properties covering the Services
hereunder for a period not to exceed six (6) months from the effective date of
such transfer and for a fee not to exceed the then current Management Fee,
proportionately reduced for the term of such transition services agreement; and

 

(iii)                        at any time following an Investor Redemption Event
(as defined in the LLC Agreement) upon not less than 30 days prior written
notice by Partnership to Manager.

 

(f)                            Return of Records.  Upon the termination or
expiration of this Agreement: (i) Manager shall, as promptly as reasonably
possible, deliver to Partnership all of the Partnership’s Records and other
books and records maintained by Manager on behalf of Partnership or its
Subsidiaries that does not constitute Manager Confidential Information and
(ii) Manager will reasonably cooperate with Partnership, at Partnership’s
expense, to cause an orderly and timely transition of the Services to a
successor manager.

 

(g)                           Termination Payment.  Notwithstanding anything
herein to the contrary, in the event of expiration or termination of this
Agreement for any reason, each party shall pay to the other party any accrued
but unpaid obligations of such party as of the date of termination or
expiration, in addition to any severance costs incurred by Manager and its
Affiliates prior to or after termination or expiration, as provided in the
definition of Overhead Costs, provided such severance payments may not exceed
Partnership’s allocable share of salaries for such terminated employees included
in the Management Fee for the 6-month period prior to such termination.

 

Section 7.                                           Limitation of Liability;
Indemnification.

 

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

 

21

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employees (each, a “Manager Party”) to any Losses whatsoever, except as directly
caused by the bad faith, gross negligence, willful misconduct, or actual fraud
on the part of a Manager Party; provided, however, if any of such Losses are
covered by any insurance policy of Partnership or its Affiliates (to the extent
such insurance policy covers Partnership), the aggregate liability of such
Manager Party with respect to such Losses shall be reduced by the amount
recovered by Partnership under such policy in respect of such Losses.

 

(b)                         Partnership Indemnification.  Except as specifically
set forth in this Agreement, Partnership, on its own behalf and on behalf of its
Subsidiaries, hereby releases, and agrees to indemnify and hold harmless, the
Manager Parties from any and all Losses arising from or relating to (i) the
provision or use of any Service or product provided hereunder to the extent not
directly caused by the bad faith, gross negligence, willful misconduct, or
actual fraud of a Manager Party or (ii) any material breach, violation or
inaccuracy of any covenant, representation or warranty of Partnership or its
Affiliates hereunder.

 

(c)                          Manager Indemnification.  EXCEPT AS SPECIFICALLY
SET FORTH IN THIS AGREEMENT AND SUBJECT TO THE PROVISIONS OF SECTION 7(a) AND
SECTION 7(b), MANAGER HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS PARTNERSHIP
AND ITS SUBSIDIARIES AND AFFILIATES AND EACH OF THEIR RESPECTIVE EQUITY HOLDERS,
MANAGERS, OFFICERS, UNITHOLDERS, AGENTS AND EMPLOYEES FROM ANY AND ALL LOSSES TO
THE EXTENT ARISING FROM, IN CONNECTION WITH, OR RELATING TO A MANAGER PARTY’S
BAD FAITH, GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR ACTUAL FRAUD IN MANAGER’S
PERFORMANCE OF THE SERVICES.

 

(d)                         Negligence; Strict Liability.  EXCEPT AS EXPRESSLY
PROVIDED IN SECTION 7(a) AND SECTION 7(b), THE INDEMNITY OBLIGATION IN
SECTION 7(b) SHALL APPLY REGARDLESS OF CAUSE OR OF ANY NEGLIGENT ACTS OR
OMISSIONS (INCLUDING SOLE NEGLIGENCE, CONCURRENT NEGLIGENCE OR STRICT
LIABILITY), BREACH OF DUTY (STATUTORY OR OTHERWISE), VIOLATION OF LAW OR OTHER
FAULT OF ANY INDEMNIFIED PARTY OR ANY PRE-EXISTING DEFECT; PROVIDED, HOWEVER,
THAT SOLELY WITH RESPECT TO SECTION 7(b) THIS PROVISION SHALL NOT APPLY TO THE
BAD FAITH, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR ACTUAL FRAUD OF ANY
INDEMNIFIED PARTY OR IN ANY WAY LIMIT OR ALTER ANY QUALIFICATIONS SET FORTH IN
SUCH INDEMNITY OBLIGATION EXPRESSLY RELATING TO BAD FAITH, GROSS NEGLIGENCE,
WILLFUL MISCONDUCT, OR ACTUAL FRAUD. BOTH PARTIES AGREE THAT THIS STATEMENT
COMPLIES WITH THE REQUIREMENT KNOWN AS THE “EXPRESS NEGLIGENCE RULE” TO
EXPRESSLY STATE IN A CONSPICUOUS MANNER AND TO AFFORD FAIR AND ADEQUATE NOTICE
THAT THIS AGREEMENT HAS PROVISIONS REQUIRING ONE PARTY TO BE RESPONSIBLE FOR THE
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANOTHER PARTY.

 

(e)                                  Exclusion of Damages; Disclaimers.

 

(i)                                     NO PARTY SHALL BE LIABLE TO ANY OTHER
PARTY HERETO UNDER THIS AGREEMENT OR ANY RELATED CONTRACT

 

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FOR EXEMPLARY, PUNITIVE, CONSEQUENTIAL, SPECIAL, INDIRECT OR INCIDENTAL DAMAGES,
EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND REGARDLESS OF THE FORM IN
WHICH ANY ACTION IS BROUGHT; PROVIDED, HOWEVER, THAT THIS SECTION 7(e)(i) SHALL
NOT LIMIT A PARTY’S RIGHT TO RECOVERY UNDER SECTION 7(b) OR SECTION 7(c) FOR ANY
DAMAGES TO THE EXTENT SUCH PARTY IS REQUIRED TO PAY SUCH DAMAGES TO A THIRD
PARTY IN CONNECTION WITH A MATTER FOR WHICH SUCH PARTY IS OTHERWISE ENTITLED TO
INDEMNIFICATION UNDER SECTION 7(b) OR SECTION 7(c), AS THE CASE MAY BE.

 

(ii)                           OTHER THAN AS SET FORTH IN SECTION 3(a) HEREOF OR
IN THE RELATED CONTRACTS, MANAGER DISCLAIMS ANY AND ALL WARRANTIES, CONDITIONS
OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR WRITTEN) WITH RESPECT TO
SERVICES RENDERED OR PRODUCTS PROCURED FOR PARTNERSHIP OR ITS SUBSIDIARIES, OR
ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OF NON-INFRINGEMENT
MERCHANTABILITY OR FITNESS OR SUITABILITY FOR ANY PURPOSE (WHETHER MANAGER
KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF
ANY SUCH PURPOSE) WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE
IN THE TRADE OR BY COURSE OF DEALING.

 

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

 

23

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(f)                                   Claims; Defense and Settlement.

 

(i)                             Whenever any claim arises for indemnification
hereunder, the indemnified Person shall promptly notify the indemnifying party
of the claim and, when known, the facts constituting the basis for such claim,
except that in the event of any claim for indemnification hereunder resulting
from or in connection with any claim or legal proceedings by a third party,
except as otherwise expressly provided in this Section 7, such notice shall
specify, if known, the amount or an estimate of the amount of the Losses
asserted by such third party.

 

(ii)                          In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a Person who is not a party, the indemnifying party, may, upon
notice to the indemnified Person, assume the defense of any such claim or legal
proceeding. Except with the written consent of the indemnified Person, the
indemnifying party shall not consent to the entry of any judgment or settlement
arising from any such claim or legal proceedings which, in each case, provides
for any non-monetary relief or does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the indemnified Person of a
release from all Losses in respect thereof, unless in the latter case the
indemnifying party has actually paid to the indemnified Person the full amount
of such judgment or settlement. Any indemnified Person shall be entitled to
participate in (but not control) the defense of any such claim or litigation
resulting therefrom. If the indemnifying party does not elect to control the
litigation as provided above, the indemnified Person may defend against such
claim or litigation in such manner as it may deem appropriate, including,
without limitation, settling such claim or litigation, after giving notice of
the same to the indemnifying party, on such terms as such indemnified Person may
deem appropriate, and the indemnifying party shall promptly reimburse the
indemnified Person (subject to Section 7(a)) from time to time as such Losses
are incurred. All indemnification hereunder shall be effected by payment of cash
or delivery of a certified or official bank check in the amount of the
indemnification Losses.

 

(iii)                       Except as provided above, all claims for Losses
brought by third parties against Partnership or any Subsidiary (x) arising out
of or in any way relating to the provision of Services hereunder and (y) not
discharged by insurance required hereunder, shall only be settled or, with
Manager’s concurrence, defended by Manager, at Partnership’s expense.

 

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

 

Section 8.                                   Insurance.  Manager shall obtain
and maintain from insurers who are reliable and reasonably acceptable to
Partnership and authorized to do business in the state or states or
jurisdictions in which Services are to be performed by Manager or other Service
provider, insurance coverages in the types and minimum limits as the Manager
reasonably determines to be appropriate and as is consistent with standard
industry practice and Manager’s

 

24

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past practices. Manager agrees upon Partnership’s reasonable request from time
to time or at any time to provide Partnership with certificates of insurance and
copies of such policies evidencing such insurance coverage. Except with respect
to workers’ compensation coverage, the policies shall name Partnership as an
additional insured and shall contain waivers by the insurers of any and all
rights of subrogation to pursue any claims or causes of action against
Partnership. Manager shall use commercially reasonable efforts to ensure that
the policies shall provide that they will not be cancelled or reduced without
giving Partnership at least 30 days’ prior written notice of such cancellation
or reduction. Manager shall, at Partnership’s expense and as directed by
Partnership from time to time, take reasonable steps to arrange for and obtain
such additional insurance coverages as Partnership may reasonably request for
the Properties owned by Partnership.

 

Section 9.                                   Competition and Corporate
Opportunities.  Subject to Section 10, Manager and its Affiliates are and shall
be free to engage in any business activity whatsoever, including, without
limitation, those that may be in direct competition with Partnership and its
Affiliates. The parties further understand and agree that Manager and its
Affiliates provide or may provide services similar to the Services provided
hereunder to certain of its present and former Affiliates. To the extent of any
conflict of interest between the parties or their Affiliates or in the event of
any other corporate or business opportunity (including, without limitation, a
corporate or business opportunity that might otherwise constitute, an Asset
Acquisition opportunity), the parties agree that Manager and its Affiliates may
resolve any such conflict in a manner and on terms that it deems appropriate, in
its sole discretion and without any further liability to Partnership or any
other Person. Partnership, on its own behalf and on behalf of its Subsidiaries,
hereby waives any interest with respect to any such matter to the same extent as
if such matter had been presented to and rejected by Partnership and its
Subsidiaries and Partnership and its Subsidiaries had then consented to Manager
or any of Manager’s Affiliates acting as it determines in its sole discretion
and whether on behalf of itself or any of its present or former Affiliates.

 

Section 10.                                    Confidential Information.

 

(a)                                 Manager acknowledges that it may receive
Partnership Confidential Information, and Partnership acknowledges that it may
receive Manager Confidential Information (collectively, and as further defined
below in this Section 10(a), “Confidential Information”), the release of which
would be damaging to the parties or Persons with which the parties conduct
business. Each party shall hold in strict confidence any Confidential
Information that such party receives from the other party, and each party shall
not disclose such Confidential Information to any Person, or use such
information for any purpose other than to perform the Services or as
contemplated hereby, except for disclosures (i) to comply with any Laws
(including applicable stock exchange or quotation system requirements),
provided, that, if permitted by applicable Law, a party must notify the other
party promptly of any disclosure of Confidential Information which is required
by Law, and any such disclosure of Confidential Information shall be to the
minimum extent required by Law, (ii) to Affiliates, partners, members,
stockholders, investors, directors, officers, employees, agents, attorneys,
consultants, lenders, professional advisers or representatives of the party or
its Affiliates; provided, that such party shall be responsible for assuring such
Affiliates,’ partners,’ members,’ stockholders,’ investors,’ directors,’
officers,’ employees,’ agents,’ attorneys,’ consultants,’ lenders,’ professional
advisers’ and

 

25

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representatives’ compliance with the terms hereof (and such party shall be
liable for any non- compliance by such Persons as if such Persons were bound as
a party hereto), except to the extent any such Person who is not an Affiliate,
partner, member, stockholder, director, officer or employee has agreed in
writing addressed to the other party to be bound by customary undertakings with
respect to confidential and proprietary information similar to this Section
10(a), (iii) to Persons to which Partnership’s Properties may be transferred,
but only if the recipients of such information have agreed to be bound by
customary confidentiality and non-use undertakings similar to this
Section 10(a), (iv) of information that a party also has received from a source
independent of the other party and that such party reasonably believes such
source obtained such information without breach of any obligation of
confidentiality to the other party or its Affiliates, (v) that have been or
become independently developed by a party or its Affiliates, or on their behalf
without using any of the Confidential Information, (vi) that are or become
generally available to the public (other than as a result of a prohibited
disclosure by such party or Persons for which such party is responsible for
under clause (ii) above), (vii) in connection with any proposed transfer of all
or part the Properties, the proposed sale of all or substantially all of a party
or its direct or indirect parent or the proposed Financing of a party or its
direct or indirect parent, to Persons to which such interest may be directly or
indirectly transferred or which may provide such Financing (and their respective
advisors or representatives), but only if the recipients of such information
have agreed to be bound by customary undertakings with respect to confidential
and proprietary information similar to this Section 10(a) (unless, in the case
of advisors or representatives, such Persons are otherwise bound by a duty of
non-disclosure and non-use with respect to confidential and proprietary
information), (viii) to third parties to the extent necessary for such third
parties to provide the Services hereunder, or (ix) to the extent the
non-disclosing party shall have consented to such disclosure in writing. The
parties agree that breach of the provisions of this Section 10(a) by such party
would cause irreparable injury to the other party for which monetary damages (or
other remedy at Law) would be inadequate in view of (i) the complexities and
uncertainties in measuring the actual damages that would be sustained by reason
of the failure of a party to comply with such provisions and (ii) the uniqueness
of the Services and the confidential nature of the Confidential Information.
Accordingly, the parties agree that the provisions of this Section 10(a) may be
enforced by either party by temporary or permanent injunction (without the need
to post bond or other security, therefor), specific performance or other
equitable remedy and by any other rights or remedies that may be available at
law or in equity. The term “Confidential Information” shall include any
information pertaining to the identity of the parties and the Properties, which
is not available to the public, whether written, oral, electronic, visual form
or in any other media, including, such information that is proprietary,
confidential or concerning the parties’ ownership and operation of the
Properties, provision of the Services, or related matters, including any actual
or proposed operations or development project or strategies, other operations
and business plans, actual or projected revenues and expenses, finances,
contracts and books and records. Notwithstanding anything herein to the
contrary, if a party has approved or been consulted with respect to any
disclosures as required hereunder, the other party or its Affiliates shall be
entitled to make disclosures substantially similar (as to form and content) to
those prior disclosures that the non-disclosing party has approved or been
consulted with respect to, as applicable.

 

(b)                                 The parties acknowledge and agree that
neither of the parties shall furnish or otherwise provide a copy of this
Agreement (or any part hereof) to any Person (other than the

 

26

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parties and their Affiliates, and their respective representative(s) and
adviser(s)), unless (i) otherwise agreed in writing by each of the parties,
(ii) required by applicable Laws (and if required by applicable Laws, a copy of
the applicable portions of this Agreement shall be furnished only to the extent
necessary to comply with such applicable Laws), (iii) by either party, as
required to implement any of the hedging arrangements and financings, and
(iv) in compliance with clauses (i)-(ix) of Section 10(a), as if this Agreement
were Confidential Information.

 

Section 11.                            Obligations Hereunder Not Affected;
Waivers.  No action which a party may take or omit to take in connection with
this Agreement or any Related Contract, no course of dealing by a party, its
Affiliates or any other Person with the other party, its Affiliates or any other
Person, and no change of circumstances shall release or diminish a party’s
obligations, liabilities, agreements or duties hereunder, affect this Agreement
in any way, or afford a party or its Subsidiaries any recourse or setoff against
the other party, regardless of whether any such action or inaction may be
detrimental in any way to such other party, its Affiliates or any of the
Properties.

 

Section 12.                            Notices.  Any notice, request, consent,
payment, demand (other than an invoice) which may be given hereunder shall be
ineffective unless in writing and either delivered by electronic mail or
facsimile or registered or certified mail with return receipt requested to the
addresses set out below or delivered by hand with written acknowledgment of
receipt. The addresses for notice are as follows:

 

If to Partnership:

 

1000 Main Street, Suite 3000

Attention:                                  Antonio R. Sanchez III

Telephone:                            (713) 783-8000

Fax:                                                                (713)
783-0915

Email:                                                     tony@sanchezog.com

 

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

 

Kirkland & Ellis LLP

600 Travis St, Suite 3300

Attention:                                 John D. Pitts

Telephone:                            (713) 835-3542

Email:                                                   
john.pitts@kirkland.com

 

If to Manager:

 

1000 Main Street, Suite 3000

Houston, TX 77002

Attention:                                         Antonio R. Sanchez III

Telephone:                                   (713) 783-8000

Fax:                                                                       (713)
783-0915

Email:                                                           
tony@sanchezog.com

 

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

 

Akin Gump Strauss Hauer & Feld LLP

1111 Louisiana Street, 44th Floor

Houston, TX 77002

Attn:                                                                    David
Elder

Telephone:                                   713-220-5881

Facsimile:                                         713-236-0822

Email:                                                           
delder@akingump.com

 

If to UnSub Agent:

 

[              ]

[               ]

[               ]

Attention: [              ]

Telephone: [              ]

Fax: [              ]

Email: [              ]

 

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

 

Section 13.                            Assigns.  This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, that, other than in connection with
a Qualified Foreclosure Transfer, each of the parties may not assign its rights
hereunder without the prior written consent of the other party, such consent not
to be unreasonably withheld, except that Manager may assign any such rights and
obligations to any of its Affiliates; provided, further, that nothing herein
shall be deemed to prohibit Manager from subcontracting its obligations
hereunder to third parties or delegating the performance of any Services
hereunder to Affiliates or third parties to the extent permitted herein.

 

Section 14.                            Jointly Drafted.  This Agreement, and all
the provisions of this Agreement, shall be deemed drafted by both of the
parties, and shall not be construed against either party on the basis of that
party’s role in drafting this Agreement.

 

Section 15.                            Further Assurances.  In connection with
this Agreement, each party shall execute and deliver any additional documents
and instruments and perform any additional acts that may be reasonably necessary
or appropriate to effectuate and perform the provisions of this Agreement.

 

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Section 16.                            No Third-Party Beneficiaries; Subsidiary
Obligation.  Nothing in this Agreement shall provide any benefit to any third
party (including, for the avoidance of doubt, any Subsidiary of Partnership) or
entitle any third party to any claim, cause of action, remedy or right of any
kind (except for Affiliates of Manager under Section 3(f), indemnitees under
Section 7), it being the intent of the parties that this Agreement shall not be
construed as a third-party beneficiary contract. Notwithstanding the foregoing,
the parties acknowledge that (i) the Class B Member is an express third party
beneficiary under this Agreement, entitled to enforce this Agreement on
Partnership’s behalf and (ii) UnSub Agent is an express third party beneficiary
in respect of the Cure Right. To the extent applicable, Partnership shall cause
its Subsidiaries to comply with each such Subsidiary’s respective obligations,
covenants and agreements hereunder.

 

Section 17.                            Amendment.  No amendment of any provision
of this Agreement shall be effective unless it is in writing and signed by all
parties hereto and no waiver of any provision of this Agreement, and no consent
to any departure by any party hereto therefrom, shall be effective unless it is
in writing and signed by the other parties hereto, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.

 

Section 18.                            Unenforceability.  Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
invalidity without invalidating the remaining portions hereof or thereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

 

Section 19.                            Survival of Agreements.  Partnership’s
and Manager’s various representations, warranties, covenants, agreements and
duties in and under this Agreement shall survive the execution and delivery of
this Agreement and terminate upon termination or expiration of this Agreement,
except for Section 4 and Section 5(a)(ii) (in each case, with respect to any
accrued but unpaid obligations as of the date of termination or expiration (and
including, without limitation, any severance costs incurred prior to or after
termination or expiration, as provided in the definition of Overhead Costs)),
Section 6(d)(i), Section 7, Section 9, Section 10, Section 11, Section 12,
Section 16, Section 20, Section 21, Section 24, and Section 28, which shall
survive termination or expiration of this Agreement.

 

Section 20.                                    Governing Law; Submission to
Process.

 

(a)                         THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.

 

(b)                         EACH OF MANAGER AND PARTNERSHIP (I) SUBMITS ITSELF
TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN HARRIS
COUNTY, TEXAS, (II) AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON
IT IN ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT OR ANY RELATED CONTRACT BY
ANY MEANS ALLOWED UNDER TEXAS OR FEDERAL LAW, AND (III) WAIVES ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH PROCEEDING BEING IN
SUCH A COURT

 

29

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AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.

 

Section 21.                            Waiver of Jury Trial.  EACH OF MANAGER
AND PARTNERSHIP HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY:

 

(a)                         WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LEGAL REQUIREMENTS, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
THEREBY OR ASSOCIATED THEREWITH;

 

(b)                         CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND

 

(c)                          ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.

 

Section 22.                            Entire Agreement.  This Agreement sets
forth the entire agreement of the parties with respect to the subject matter
hereof and thereof and any prior agreements, understandings, negotiations, and
discussions, written or oral, relating thereto are hereby superseded.

 

Section 23.                            Laws and Regulations.  Notwithstanding
any provision of this Agreement to the contrary, no party shall be required to
take any act, or fail to take any act, under this Agreement or any Related
Contract if the effect thereof would be to cause such party to be in violation
of any applicable Legal Requirements.

 

Section 24.                            No Recourse Against Officers, Directors,
Managers or Employees.  For the avoidance of doubt and notwithstanding anything
herein to the contrary, the provisions of this Agreement or any Related Contract
shall not give rise to any right of recourse against any officer, director,
manager or employee of Manager, Partnership or any of their respective
Affiliates.

 

Section 25.                            Counterparts.  This Agreement may be
executed in any number of counterparts with the same effect as if both of the
signatory parties had signed the same document. All counterparts shall be
construed together and shall constitute one and the same instrument.

 

Section 26.                            Conspicuousness of Provisions.  The
parties acknowledge and agree that the provisions contained in this Agreement
that are set out in capital letters or “bold” satisfy the requirement of the
“express negligence rule” and any Legal Requirement or equitable doctrine that
provisions contained in a contract be conspicuously marked or highlighted.

 

30

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Section 27.                            Force Majeure.  If Manager is rendered
unable, wholly or in part, by Force Majeure to carry out its obligations under
this Agreement, the obligations of Manager shall be suspended during, but no
longer than, the continuance of the Force Majeure. Manager shall use
commercially reasonable diligence to remove the Force Majeure as reasonably
promptly as practicable. The requirement that any Force Majeure shall be
remedied as reasonably promptly as practicable shall not require the settlement
of strikes, lockouts, other labor difficulty or a lawsuit by the affected party,
contrary to its wishes; how all such and other difficulties shall be handled
shall be entirely within the discretion of the affected party and shall not
require more than commercially reasonable efforts on the part of Manager. The
term “Force Majeure”, as here employed, shall mean an act of God, strike,
lockout, or other industrial disturbance, act of the public enemy, war,
blockade, public riot, lightning, fire, storm, flood or other act of nature,
explosion, governmental action, governmental delay, restraint or inaction,
unavailability of equipment or personnel (including, without limitation,
Partnership or Subsidiary personnel), acts or omissions of employees of
Partnership and its Subsidiaries and any other cause, whether of the kind
specifically enumerated above or otherwise, which is not reasonably within the
control of the party claiming suspension; such term shall likewise include the
inability of Manager to acquire, or delays on the part of Manager in acquiring
at reasonable cost and by the exercise of reasonable diligence, servitudes,
rights-of-way grants, permits, permissions, licenses, materials, personnel or
supplies which are required to enable Manager to fulfill its obligations
hereunder.

 

Section 28.                            Entire Agreement; Integrated Transaction.
 This Agreement, the other Basic Documents and the other agreements and
documents expressly referred to herein or therein are intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. This Agreement, the
other Basic Documents, and the other agreements and documents expressly referred
to herein or therein supersede all prior agreements and understandings between
the parties with respect to such subject matter. Each of the parties
acknowledges and agrees that in executing this Agreement (i) the intent of the
parties is this Agreement and the other Basic Documents shall constitute an
unseverable and single agreement of the parties with respect to the transactions
contemplated hereby and thereby, (ii) it waives, on behalf of itself and each of
its Affiliates, any claim or defense based upon the characterization that this
Agreement and the other Basic Documents are anything other than a true single
agreement relating to such matters and (iii) the matters set forth in this
Section 28 constitute a material inducement to enter into this Agreement and the
other Basic Documents and to consummate the transactions contemplated hereby and
thereby. Each of the parties stipulates and agrees (i) not to challenge the
validity, enforceability or characterization of this Agreement and the other
Basic Documents as a single, unseverable instrument pertaining to the matters
that are the subject of such agreements, (ii) this Agreement and the other Basic
Documents shall be treated as a single integrated and indivisible agreement for
all purposes, including the bankruptcy of any party and (iii) not to assert or
take or omit to take any action inconsistent with the agreements and
understandings set forth in this Section 28.

 

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

 

31

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

 

MANAGER:

Sanchez Oil & Gas Corporation

 

 

 

 

 

 

 

By:

 

 

Name:

[g25311ku073i001.gif]Antonio R. Sanchez, III

 

Title:

President

 

 

 

 

 

PARTNERSHIP:

SN EF UnSub, LP

 

 

 

By:

SN EF UnSub GP, LLC, its general partner

 

 

 

 

By:

 

 

Name:

[g25311ku073i002.gif]Patricio D. Sanchez

 

Title:

Chief Executive Officer

 

[Signature Page to Management Services Agreement]

 

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

 

EXHIBIT E

 

FORM OF JOINT DEVELOPMENT AGREEMENT

 

[Attached.]

 

EXHIBIT E TO

SECURITIES PURCHASE AGREEMENT

 

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

 

EXHIBIT F

 

APC/KM PSA

 

[Attached.]

 

EXHIBIT F TO

SECURITIES PURCHASE AGREEMENT

 

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

 

EXHIBIT G

 

HYDROCARBON MARKETING AGREEMENT

 

[Attached.]

 

EXHIBIT G TO

SECURITIES PURCHASE AGREEMENT

 

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

 

Execution Version

 

HYDROCARBONS PURCHASE AND MARKETING AGREEMENT

 

Between

 

SN EF MAVERICK, LLC

 

and

 

SN EF UNSUB, LP

 

Dated as of January 12, 2017

 

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

 

TABLE OF CONTENTS

 

 

 

Page

 

 

ARTICLE I DEFINITIONS

1

1.1.

Specific Definitions

1

1.2.

Construction

1

 

 

 

ARTICLE II PURCHASE AND SERVICES

2

2.1.

Purchase by Marketer

2

2.2.

Limitations

2

2.3.

Standard of Care

2

2.4.

Repurchase Right

3

2.5.

Reporting

3

2.6.

Right to Cure

3

 

 

 

ARTICLE III PRICE AND PAYMENT

4

3.1.

Price

4

3.2.

Statements and Payments

4

3.3.

Audit Rights

4

3.4.

Statement Errors

5

3.5.

Setoff and Recoupment

5

3.6.

Deposit of Producer’s Proceeds and Security Interest

5

 

 

 

ARTICLE IV WARRANTY OF TITLE

7

4.1.

Title Warranties

7

4.2.

Title and Risk of Loss

8

 

 

 

ARTICLE V FORCE MAJEURE

8

5.1.

Suspension of Obligations

8

5.2.

Definition of Force Majeure

8

 

 

 

ARTICLE VI TAXES

8

6.1.

Taxes

8

6.2.

Reimbursement

8

 

 

 

ARTICLE VII TERM AND TERMINATION

9

7.1.

Term and Termination

9

7.2.

Early Termination

9

7.3.

Effect of Termination

9

 

 

 

ARTICLE VIII GENERAL PROVISIONS

10

8.1.

Waivers

10

8.2.

Assignment; Binding Effect

10

8.3.

Joinder

10

8.4.

Governing Law; Severability

10

8.5.

Further Assurances

10

8.6.

Counterparts

11

 

i

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8.7.

Notices

11

8.8.

Remedies

12

8.9.

Disputes

12

8.10.

Expenses

13

8.11.

Third Party Beneficiaries

14

8.12.

Conflict

14

8.13.

Subchapter K

14

8.14.

Entire Agreement; Integrated Transaction

14

8.15.

Sanchez Support

15

 

 

 

Annex I

Definitions

 

 

 

 

Exhibit A

Springfield Agreements Allocable Share

 

 

 

 

Exhibit B

Midstream Contracts

 

 

ii

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HYDROCARBONS PURCHASE AND MARKETING AGREEMENT

 

This HYDROCARBONS PURCHASE AND MARKETING AGREEMENT (this “Agreement”), dated as
of January 12, 2017 (the “Effective Date”), is between SN EF Maverick, LLC, a
Delaware limited liability company (“Marketer”), SN EF UnSub, LP, a Delaware
limited partnership (“Producer”), and solely for purposes of Sections 8.15 and
8.16 hereof, Sanchez Energy Corporation, a Delaware corporation (“Sanchez”).
Each of Marketer and Producer is referred to herein individually as a “Party”
and collectively as the “Parties.”

 

RECITALS

 

A.                            The Parties entered into that certain Purchase and
Sale Agreement, dated effective as of July 1, 2016, by and among Anadarko E&P
Onshore LLC and Kerr-McGee Oil & Gas Onshore LP (together, “Anadarko”), Aguila
Production, LLC (“Aguila”), and the Parties, (together with any purchase
agreement that may be entered into with [redacted] (“[redacted]”) pursuant to
certain tag-along rights, the “Purchase Agreement”), pursuant to which Aguila
and the Parties collectively purchased all of the working interests of Anadarko
and [redacted] to the extent that it exercises its tag-along rights,
collectively in certain developed and undeveloped oil and gas assets in
Maverick, Dimmit, Webb, and LaSalle Counties, Texas (collectively, the
“Assets”).

 

B.                            Marketer desires to purchase from Producer, and
Producer desires to sell to Marketer, the oil, gas and other Hydrocarbons
produced from and attributable to the Working Interests in the Assets acquired
by Producer under the Purchase Agreement as well as other Working Interests
acquired by Producer after the Effective Date that are gathered, processed or
transported pursuant to the Midstream Contracts (such interests, “Producer’s
Interests”), which Marketer will gather, process, transport, market and sell, as
applicable, on the terms and conditions set forth in this Agreement and the
Midstream Contracts.

 

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

 

ARTICLE I

DEFINITIONS

 

1.1.                    Specific Definitions. Capitalized terms used in this
Agreement have the meanings assigned to such terms in Annex I.

 

1.2.                    Construction. Unless the context otherwise requires, the
gender of all words used in this Agreement includes the masculine, feminine, and
neuter, the singular includes the plural, and the plural includes the singular.
Any references to Articles and Sections refer to articles and sections of this
Agreement, and all references to Exhibits, Annexes and Schedules are to
exhibits, annexes and schedules attached hereto, each of which is incorporated
herein for all purposes. Article and section titles or headings are for
convenience only, and neither limit nor amplify the provisions of the Agreement
itself, and all references herein to articles, sections or subdivisions thereof
refer to the corresponding article, section or subdivision of this Agreement
unless specific reference is made to articles, sections or subdivisions of
another document or

 

1

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instrument. Unless the context of this Agreement clearly requires otherwise, the
words “include,” “includes” and “including” will be deemed to be followed by the
words “without limitation,” and the words “hereof,” “herein,” “hereunder” and
similar terms in this Agreement shall refer to this Agreement as a whole and not
to any particular section or article in which such words appear.

 

ARTICLE II

PURCHASE AND SERVICES

 

2.1.                     Purchase by Marketer. On each Day during the Term,
Producer shall sell and deliver to Marketer, and Marketer shall purchase and
receive from Producer, at the Receipt Points, all Hydrocarbons produced from and
attributable to Producer’s Interests, in accordance with the terms and
conditions of this Agreement, other than Producer’s Reserved Hydrocarbons.

 

2.2.                     Limitations. Marketer shall not, without Producer’s
prior written consent (such consent not to be unreasonably withheld) and only to
the extent relating to or affecting Producer’s Hydrocarbons, (1) enter into,
terminate, waive any material rights under or amend any Midstream Contract, to
the extent any such actions would (a) (i) materially increase rates and charges
applicable to Producer’s Hydrocarbons, (ii) impose minimum volume, take or pay,
demand charges, reservation fees, or deficiency payments obligations or
extensions thereof, or (iii) fix prices for the resale of Producer’s
Hydrocarbons for a term longer than six months (or that cannot be terminated
without penalty upon six months’ notice or less) or (b) otherwise have an
adverse effect, in any material respect, on Producer, in each case, except to
the extent the items set forth in in clauses (a) or (b) are required by Law,
(2) enter into any contract with an Affiliate of Marketer that is on terms
materially less favorable to Producer than terms that could have been obtained
at the time such contract was entered into in an arm’s length transaction with a
Third Party or that would involve projected liabilities of Producer that are in
excess of $20 million in any calendar year or (3) enter into any Midstream
Contract after the Effective Date if such contract (a) is not also applicable to
Sanchez’s Hydrocarbons and Aguila’s Hydrocarbons on a proportional basis (based
upon reasonable forecasts of anticipated production that pertain to the
Midstream Contract) or (b) has not been expressly approved by the independent
members of the Sanchez board of directors or by the working interest owners that
are subject to production marketing agreements or elections applicable to such
Midstream Contract; provided that, if Producer does not consent or object in
writing to Marketer’s written request to undertake any of the actions described
in preceding clauses (1) through (3) within 10 Business Days of Producer’s
receipt of such written request from Marketer, Producer shall be deemed to have
consented to such action for purposes of this Section 2.2.

 

2.3.                     Standard of Care. Marketer shall purchase and provide
services for Producer’s Hydrocarbons delivered hereunder in accordance with all
applicable Laws and in compliance with the terms of the applicable Midstream
Contracts, and shall use commercially reasonable efforts to (a) obtain market
rates in the area under any new contracts for the resale of Producer’s
Hydrocarbons, and (b) avoid any imbalances or scheduling variances and any
penalty charges associated therewith under the Midstream Contracts. Producer’s
Hydrocarbons must be gathered, processed, transported and sold on terms and
conditions no less favorable to Producer than the terms and conditions
applicable to Sanchez’s Hydrocarbons.

 

2

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2.4.                     Repurchase Right. From and after April 1, 2023, for so
long as the Springfield Agreements are in force and effect, Producer shall have
the right for any Month, exercisable from time to time upon written notice to
Marketer at least ten (10) days prior to the first day of such Month, to
repurchase from Marketer at the applicable Delivery Point (as defined in the
applicable Springfield Agreement) all volumes of Producer’s Hydrocarbons
delivered to Marketer at the Receipt Points in such Month less any LAUF or Line
Fill deducted under the Springfield Agreements. If Producer exercises the
repurchase right for any Month as to all or part of Producer’s Hydrocarbons,
then (a) Marketer shall redeliver, or cause to be redelivered, such volumes of
Producer’s Hydrocarbons to Producer at such applicable Delivery Point and
transfer title to such Producer’s Hydrocarbons to Producer at such applicable
Delivery Point and (b) Producer shall pay Marketer an amount equal to Producer’s
Allocable Share of the Springfield Agreements for that Month attributable to
such Hydrocarbons repurchased by Producer in such month. Notwithstanding the
above, if Marketer has entered into Midstream Contracts that are attributable to
Producer’s Hydrocarbons and such contracts were approved by Producer prior to
the exercise of its repurchase right hereunder, then Producer will not be
entitled to exercise its repurchase rights hereunder for the portion of
Producer’s Hydrocarbons committed to such approved Midstream Contracts during
the term of such Midstream Contracts.

 

2.5.                     Reporting. Marketer shall consult with and provide
reports to Producer on a quarterly basis regarding marketing activities
concerning Producer’s Hydrocarbons. Such reports will contain such information,
details, and supporting documentation as Producer may reasonably request, and
shall include (a) a schedule identifying the markets into which each of
Producer’s Hydrocarbons and Sanchez’s Hydrocarbons are being sold and the
realized net back pricing being received by each, broken down by sales point and
by each Midstream Contract, (b) amendments to any of the Midstream Contracts
pursuant to which Producer’s Hydrocarbons are being gathered, processed,
transported or sold, (c) upon request from Producer, any reports or other
information provided to Marketer under the terms of any of the Midstream
Contracts and (d) any material issues or disputes arising under such agreements.
In addition to the foregoing reporting requirements, and the provisions of
Section 2.6, prior to the Redemption Date, Marketer shall promptly deliver to
GSO copies of all material notices delivered to Marketer under any Marketing
Contract and Midstream Contract by the applicable counterparty with respect to
Producer’s Hydrocarbons.

 

2.6.                     Right to Cure. If Marketer defaults in the performance
of any of its obligations under the Midstream Contracts, or upon the occurrence
or non-occurrence of any event or condition under the Midstream Contracts that
would immediately or with the passage of any applicable grace period or the
giving of notice, or both, enable the applicable counterparty to terminate or
suspend its obligations or exercise any other right or remedy under such
contracts or under applicable Law (a “Marketer Event”), then Marketer shall
(a) promptly notify Producer of such Marketer Event, (b) use its commercially
reasonable efforts to cause the applicable counterparty to allow Producer to
cure such Marketer Event with respect to Producer’s Hydrocarbons, and (c) use
its commercially reasonable efforts to continue to perform each of Marketer’s
other obligations under the Midstream Contracts.

 

3

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

 

ARTICLE III

PRICE AND PAYMENT

 

3.1.                     Price. For each Month, in full consideration for
Marketer’s purchase of Producer’s Hydrocarbons hereunder, Marketer shall pay to
Producer an amount equal to (i) the payments received by Marketer from Third
Parties upon the resale of Producer’s Hydrocarbons and all constituents thereof
(including any residue gas, condensate, and natural gas liquids, as applicable)
during such Month after being gathered, treated, transported, and processed
under the Midstream Contracts less (ii) Producer’s Allocable Share of Midstream
Charges for such Month less any actual or estimated deductions for the amounts
set forth in Section 3.2(c)(ii) and (iii) (such amount, the “Net Amount”).
Positive or negative adjustments to the Net Amount for prior Months shall be
made as soon as practicable following receipt of available information.

 

3.2.                        Statements and Payments.

 

(a)                             Statements and Payments. Marketer shall pay to
Producer the Net Amount for any given Month consistent with Marketer’s normal
business practice under similar circumstances, on or before the date that is 10
days after the date on which Marketer actually receives readily available funds
for Producer’s Hydrocarbons sold by Marketer or its Affiliates for such calendar
Month from the applicable purchasers of such Producer’s Hydrocarbons (such date,
the “Due Date”), along with a detailed statement describing such amounts payable
to Producer hereunder in such Month.

 

(b)                             Late Payments. Any amounts not paid in full by
the Due Date will be deemed delinquent and will accrue interest at the Interest
Rate, such interest to be calculated from and including the Due Date to but
excluding the date the delinquent amount is paid in full.

 

(c)                              Collection and Payment. Marketer shall use
commercially reasonable efforts to (i) collect all production funds from the
purchasers of such Producer’s Hydrocarbons, (ii) arrange for the timely payment
of severance taxes to any Governmental Authorities, (iii) make timely payment to
royalty owners and third party working interest owners, and (iv) remit to
Partnership its net proceeds from the sale of Producer’s Hydrocarbons after
making all necessary or appropriate allocations and distributions in connection
with the receipt of such proceeds in accordance with Section 3.1. The Parties
recognize that the calculation and payment of severance taxes and royalty
payments set forth above may be based upon estimates at the time of the payment
of the Net Amount in accordance with Section 3.1 and that positive or negative
adjustments to the Net Amount for prior Months shall be made as soon as
practicable following receipt of available information regarding actual
severance tax and royalty payments.

 

(d)                             Notices.  Marketer shall provide written notice
to Producer not less than five Business Days prior to entering into, amending,
or terminating any Midstream Contract.

 

3.3.                        Audit Rights. Upon not less than 10 Days’ prior
written notice to the other Party, either Party or its or representative, at
reasonable times during business hours and at its own expense, may audit the
books and records of the other Party to the extent necessary to verify the
accuracy of any statement, charge or computation made under or pursuant to this
Agreement.

 

4

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3.4.                        Statement Errors. If an error is discovered in the
amount shown to be due on any statement rendered by Marketer hereunder, such
error shall be adjusted without interest or penalty as soon as reasonably
possible, but no later than 30 Days after the discovery of the error. If a
dispute arises as to the amount payable in any invoice rendered hereunder, the
disputed statement must nevertheless be paid in full, but payment will not waive
the payor’s right to dispute such statement in accordance with this Section 3.4.
Any invoice dispute or statement adjustment must be in writing and must state
the basis for the dispute or adjustment. Upon the resolution of the dispute, any
required payment must be made within 15 Days after such resolution, along with
interest accrued at the Interest Rate from and including the Due Date to but
excluding the date paid. All undisputed statements rendered hereunder shall be
deemed to be final and not subject to audit two years after the date on which
the statement is rendered. The provisions of Section 3.3 and this Section 3.4
will survive the termination of this Agreement for the later of (a) 24 Months
following the date on which such termination occurred, or (b) until a dispute
initiated within such 24-Month period is finally resolved.

 

3.5.                        Setoff and Recoupment. Upon the occurrence of either
or both of (a) an Event of Default of a Party, or (b) a circumstance under
clauses (a), (b), (c) of Section 3.6(a), either Party may with respect to
Section 3.5(a) and Producer may with respect to Section 3.5(b), in its sole
discretion and without limiting any other rights or remedies, undertake any one
or all of the following actions: (i) such Party may exercise recoupment by
retaining, freezing, holding, and/or liquidating any proceeds that would
otherwise be payable to the other Party to satisfy and apply to any amounts owed
by such other Party under this Agreement or applicable Law as of the time of
such recoupment or at any later time; and/or (ii) such Party may exercise setoff
by retaining, freezing, holding, and liquidating any proceeds that would be
otherwise deliverable or payable to such other Party under this Agreement as a
setoff or offset against any amounts that are due or may become due from such
other Party to the other Party under this Agreement or applicable Law as of the
time of the setoff or offset or at any later time. Should a Party elect to
exercise its rights under this Section 3.5, such Party shall notify the other
Party in writing, within 10 Days of such recoupment, setoff, and/or offset;
provided, however, such Party will not be required to provide such other Party
with any advance notice whatsoever before exercising the rights of recoupment,
setoff, and/or offset as set forth herein. Each Party hereby agrees to (x) a
lifting of the automatic stay in bankruptcy under 11 U.S.C. § 362 and other
applicable Law to the extent necessary to allow for the recoupment, setoff,
and/or offset provided for under this Agreement and (y) not oppose a motion by a
Party seeking authority to do same. Each Party further agrees that, without
limiting the scope of any recoupment that may be exercised under the terms of
this Section 3.5, that any recoupment exercised as provided for herein will be
considered to be within a single transaction. The rights granted to the Parties
pursuant to this Section 3.5 are in addition to any rights of recoupment,
setoff, and/or offset the Parties may be otherwise entitled.

 

3.6.                     Deposit of Producer’s Proceeds and Security Interest.

 

(a)                             Deposit of Producer Proceeds. If (a) an Investor
Redemption Event occurs, (b) Marketer has failed to pay amounts owed to Producer
under this Agreement within five (5) days of the applicable Due Date or
(c) Producer otherwise has reasonable grounds for insecurity regarding the
performance by Marketer of any obligation under this Agreement (with clause
(c) being a “Basis For Requesting Assurance”), then, within 10 Business Days
after written notice from Producer, Marketer and its Affiliates will direct all
purchasers of Producer’s Hydrocarbons

 

5

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

 

to deposit amounts owed by such purchasers for Producer’s Hydrocarbons into
(a) a bank account or accounts designated by Producer (in which case Producer
shall remit to Marketer Producer’s Allocable Share of Midstream Charges or any
other costs owed by Producer to Marketer) or (b) a mutually agreed escrow
account (in which case Producer shall be entitled to receive amounts due each
month under Section 3.1 and Marketer shall be entitled to the remainder of the
amounts from such account). A Basis for Requesting Assurance will include,
without limitation, any reasonable grounds for insecurity with respect to the
performance of Marketer and/or any grounds that might constitute a basis for
requesting adequate assurance of performance under Section 2.609 of the Uniform
Commercial Code.

 

(b)                            Security Interest. Marketer is marketing Producer
Hydrocarbon’s on Producer’s behalf and holding all proceeds from the sale of
Producer’s Hydrocarbons in trust on behalf of Producer. In addition, Producer
retains, and Marketer grants to Producer, a first priority lien and security
interest (subject to Permitted Liens (as defined below)) on (a) all of
Producer’s Hydrocarbons purchased under this Agreement, (b) all proceeds
resulting from the resale of such Producer’s Hydrocarbons by Marketer and
(c) all accounts receivable now or hereafter owing to Marketer upon and by
reason of any such resale by Marketer (the “Collateral”). Marketer shall have
the right to resell all of Producer’s Hydrocarbons without obtaining a release
of the lien or other permission from Producer. Upon the resale of Producer’s
Hydrocarbons, the lien and security interests retained and granted above shall
be completely and automatically released by Producer without the need for
execution of any document or instrument and, in lieu thereof, shall affix to the
proceeds and accounts receivable resulting from the resale of Producer’s
Hydrocarbons to such purchasers. Producer may enforce its lien and security
interest and exercise any and all of the rights and remedies available to a
secured party under the Uniform Commercial Code, in addition to all of the
rights and remedies otherwise provided by Law. Producer may file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Marketer, in each case where
permitted by Law, and may take any and all other actions necessary to secure its
interest in the Collateral. In addition, Marketer agrees that from time to time
it will promptly execute and deliver all instruments and documents, and take all
further actions, that Producer may reasonably request as being necessary or
desirable to perfect and protect the security interest granted or purported to
be granted hereby or to enable Producer to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, Marketer will execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as Producer may request as being necessary or desirable in order to
perfect and preserve the security interests granted or purported to be granted
hereby. The lien and security interest granted herein are in addition to any
statutory or common law liens on Producer’s Hydrocarbons in favor of Producer.
Marketer warrants that, except as set forth in the sentence after this sentence,
it has not consensually granted and will not consensually grant any liens or
security interests on the Collateral to any other Person. Without affecting any
priority of the liens and security interests on the Collateral granted to it
under this Agreement or arising pursuant to Section 9.343 of the Texas Business
and Commerce Code, Producer agrees and acknowledges that Marketer may, as
security for the “Obligations” as defined in the Credit Agreement (defined
below) and any refinancing thereof or as security for any obligations under any
junior lien indebtedness that is subject to a security grant consistent with
such Credit Agreement or the refinancing thereof, grant a security interest over
all of Marketer’s assets, including, without limitation, Producer’s Hydrocarbons
purchased under this

 

6

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Agreement, any deposit account of Marketer in which proceeds resulting from the
resale of such Producer’s Hydrocarbons by Marketer may be deposited and any
accounts receivable now or hereafter owing to Marketer upon and by reason of any
such resale by Marketer. As used in the preceding sentence, “Credit Agreement”
means the Second Amended and Restated Credit Agreement among Sanchez, as
borrower, Royal Bank of Canada, as administrative agent, and others, as amended
to date and as the same may hereafter be amended, modified, refinanced,
replaced, restated or supplemented. As used in this Section 3.6(b), “Permitted
Liens” means (a) liens for taxes, assessments or other governmental charges or
levies which are not delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (b) statutory landlord’s liens, operators’, vendors’,
carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’,
materialmen’s, construction or other like liens arising by operation of law
incident to the exploration, development, operation and maintenance of oil and
gas properties each of which is in respect of obligations that are not
delinquent or which are being contested in good faith by appropriate action and
for which adequate reserves have been maintained in accordance with GAAP,
(c) Liens (as defined in the Credit Agreement) arising solely by virtue of any
statutory or common law provision relating to banker’s liens, rights of set-off
or similar rights and remedies and burdening only deposit accounts or other
funds maintained with a creditor depository institution, provided that no such
deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board (as defined in the Credit Agreement) and no
such deposit account is intended by the Borrower (as defined in the Credit
Agreement) or any of its Subsidiaries (as defined in the Credit Agreement) to
provide collateral to the depository institution and (d) judgment liens.

 

3.7.                       Marketing Transition Services Agreement. Pursuant to
the terms of the Marketing Transition Services Agreement, the Provider (as that
term is defined in such agreement) will provide Marketer certain marketing
transition services, including the purchase and sale of Producer’s Hydrocarbons.
For avoidance of doubt, the Parties agree that the billing and payment
provisions set forth in this Article III will apply during the period in which
the Marketing Transition Services Agreement is in effect, including the payment
of amounts to Producer for the resale of Producer’s Hydrocarbons and the
allocation of demand charges under the Midstream Contracts.

 

ARTICLE IV

WARRANTY OF TITLE

 

4.1.                       Title Warranties.

 

(a)                            Producer represents and warrants to Marketer that
Producer has title to and/or the right to sell and deliver all Producer’s
Hydrocarbons delivered to Marketer hereunder, free and clear of all royalties,
liens, encumbrances and all applicable federal, state and local Taxes, subject
to the performance by the Manager of its obligations under the MSA.

 

(b)                            If Producer elects to repurchase Producer’s
Hydrocarbons under Section 2.4, then Marketer shall represent and warrant to
Producer that Marketer has title to and/or the right to sell

 

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and deliver all Producer’s Hydrocarbons delivered to Producer under Section 2.4,
free and clear of all royalties, liens, encumbrances and all applicable federal,
state and local Taxes.

 

4.2.                       Title and Risk of Loss. Title to and risk of loss of
Producer’s Hydrocarbons purchased by Marketer from Producer hereunder will pass
from Producer to Marketer at the inlet of Springfield’s measurement facilities
at the Receipt Points under the Springfield Agreements or at such other receipt
points as the Parties agree. As between the Parties, title to and risk of loss
of Producer’s Hydrocarbons shall remain with Marketer thereafter unless such
Producer’s Hydrocarbons are repurchased by Producer under Section 2.4, in which
case title to and risk of loss of any such repurchased Producer’s Hydrocarbons
shall pass to Producer at the applicable Delivery Points under the Springfield
Agreements or at such other delivery points as the Parties agree.

 

ARTICLE V

FORCE MAJEURE

 

5.1.                       Suspension of Obligations. If either Producer or
Marketer is rendered unable, wholly or in part, by reason of Force Majeure, from
carrying out its obligations under this Agreement (other than the obligation to
make payment of amounts due hereunder), then upon said Party’s giving written
notice and reasonably full particulars of such Force Majeure to the other Party,
which shall be done as soon as practicable after the occurrence of the cause
relied on, the obligations of the Party giving such notice (other than the
obligation to make payment of amounts due hereunder), so far as they are
affected by such Force Majeure, will be suspended during the continuance of any
inability so caused, but for no longer period, and such cause must be remedied
with all reasonable dispatch.

 

5.2.                       Definition of Force Majeure. The term “Force Majeure”
means any event or circumstance not reasonably within the control of the Party
claiming suspension declared as Force Majeure by a counterparty to any of the
Midstream Contracts.

 

ARTICLE VI

TAXES

 

6.1.                       Taxes. Manager under the MSA shall pay, on behalf of
Producer, to the appropriate taxing authorities severance and other Taxes levied
on Producer’s Hydrocarbons prior to the delivery of such Producer’s Hydrocarbons
to the Receipt Points hereunder. Marketer or its Affiliates shall pay any and
all Taxes levied on Producer’s Hydrocarbons after title to such Hydrocarbons has
transferred to Marketer.

 

6.2.                       Reimbursement. If Marketer or any of its Affiliates
pays or remits any Tax for or on behalf of Producer, including severance Taxes
on production, then Marketer may deduct such amounts in determining the Net
Amount due hereunder as shown on the Monthly statement described in Section 3.2.

 

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ARTICLE VII

TERM AND TERMINATION

 

7.1.                        Term and Termination. The term of this Agreement
will commence on the Effective Date and, unless otherwise agreed by the Parties
or earlier terminated in accordance with this Section 7.2, will continue until
the earlier of (i) the date of termination of both Springfield Agreements and
(ii) December 31, 2034 (the “Term”).

 

7.2.                        Early Termination.

 

(a)                             Either Party may terminate this Agreement
effective immediately upon notice to the other Party if the other Party (or its
Affiliates, with respect to Marketer) (i) makes a general assignment for the
benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes
the subject of an order for relief or is declared insolvent in any federal or
state bankruptcy or insolvency proceeding; (iv) files a petition or answer in a
court of competent jurisdiction seeking a reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under any
Law; (v) files an answer or other pleading admitting or failing to contest the
material allegations of a petition filed in a proceeding of the type described
in subclauses (i) through (iv) of this clause (a); (vi) seeks, consents, or
acquiesces to the appointment of a trustee, receiver, or liquidator of all or
any substantial part of such its assets or properties; or (vii) is liquidated
and dissolved; or

 

(b)                             Either Party may terminate this Agreement upon
notice to the other Party if (i) such other Party is in material breach of this
Agreement and such breach is not remedied within 30 days after such other
Party’s receipt of such notice or (ii) all of the Midstream Contracts are
terminated or otherwise no longer in full force and effect; provided that
Marketer may not terminate this Agreement pursuant to this Section 7.1(b) (x) if
at the time of such breach, Sanchez and its Affiliates hold a majority of the
board of directors of SN EF UnSub, GP or (y) such breach was caused by a breach
of Manager under the MSA; or

 

(c)                              Following an Investor Redemption Event,
Producer may terminate this Agreement in whole or in part by written notice to
Marketer, provided that Producer may not terminate its obligation related to the
Springfield Agreements (including to pay to Marketer Producer’s Allocable Share
of the Springfield Agreements) without Springfield’s prior consent, which the
Parties will cooperate and use commercially reasonable efforts to obtain if
requested by Producer.

 

7.3.                        Effect of Termination. The expiration or termination
of this Agreement, for any reason, will not release either Party from any
obligation or Liability to the other Party, including any payment obligation,
that has already accrued hereunder. Following early termination under Sections
7.2(a), 7.2(b), or 7.2(c) upon Producer’s request, Marketer and its Affiliates
shall use commercially reasonable efforts to work with Producer and the
applicable counterparties to partially assign, or to enter into replacements
for, any of the Midstream Contracts identified by Producer to assist in the
continued delivery of Producer’s Hydrocarbons following the termination of this
Agreement.

 

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ARTICLE VIII

GENERAL PROVISIONS

 

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

 

8.2.                        Assignment; Binding Effect. Neither Party may assign
its rights or interests under this Agreement, or delegate any duties or
obligations hereunder, without the prior written consent of the other Party,
which consent may be withheld by the other Party in its sole discretion;
provided that consent is not required for an assignment of rights or interests
under this Agreement by a Party (a) to an Affiliate of a Party (without
releasing the assigning Party of its obligations under this Agreement) or
(b) subject to obtaining Springfield’s prior consent, which the Parties will
cooperate and use commercially reasonable efforts to obtain, to a Third Party in
connection with a conveyance of all or a part of Producer’s Interests. This
Agreement is binding upon and inures to the benefit of the Parties and their
respective legal representatives, successors, and permitted assigns.

 

8.3.                        Joinder. Marketer shall cause any of its Affiliates
that acquire or own Working Interests in jointly owned properties with Producer
after the Effective Date to ratify and become a party to this Agreement by an
amendment executed and delivered by the Parties and such Affiliate or
Affiliates.

 

8.4.                        Governing Law; Severability.

 

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

 

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

 

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

 

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

 

8.7.                        Notices. Except as otherwise provided in this
Agreement to the contrary, any notice or communication required or permitted to
be given under this Agreement must be in writing and sent to the address of the
Party set forth below, or to such other more recent address of which the sending
Party actually has received written notice. Any notice or communication provided
to Producer pursuant to this Agreement shall be provided concurrently to GSO by
electronic email:

 

(a)                                 if to Marketer, to:

 

SN EF Maverick, LLC

c/o Sanchez Energy Corporation

1000 Main Street, Suite 3000

Houston, Texas 77002

Attn:                    James O’Connor

Tel:                           713.756.2782

Email: joconnor@sanchezog.com

 

(b)                                 if to Producer, to:

 

SN EF UnSub, LP

c/o Sanchez Energy Corporation

1000 Main Street, Suite 3000

Houston, Texas 77002

Attn:                    James O’Connor

Tel:                           713.756.2782

Email: joconnor@sanchezog.com

 

prior to Redemption Date, with a copy to (which shall not constitute notice):

 

GSO ST Holdings LP

1111 Bagby Street, Suite 2050

Houston, TX 77002

Attention: Robert Horn

Electronic Mail: Robert.horn@gsocap.com

 

With a copy to:

 

Hal Haltom

Andrews Kurth Kenyon LLP

600 Travis

Suite 4200

Houston, TX 77002

Electronic Mail: hhaltom@andrewskurth.com

 

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(c)                                  if to Sanchez, to:

 

Sanchez Energy Corporation

1000 Main Street, Suite 3000

Houston, Texas 77002

Attn:                    James O’Connor

Tel:                           713.756.2782

Email: joconnor@sanchezog.com

 

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

 

8.8.                    Remedies. Except as provided herein, the rights,
obligations and remedies created by this Agreement are cumulative and in
addition to any other rights, obligations or remedies otherwise available at Law
or in equity. In addition, any successful Party is entitled to costs related to
enforcing this Agreement, including, reasonable and documented attorneys’ fees
and court costs. Notwithstanding anything herein to the contrary, the Parties
agree that irreparable damage would occur in the event that any provision of
this Agreement was not performed by either Party in accordance with the terms
hereof and that monetary damages, even if available, would not be an adequate
remedy therefor. As a result of the preceding sentence, each Party will be
entitled to specific performance to prevent breaches of this Agreement and the
terms hereof (including the obligation consummate transactions contemplated
herein), without proof of actual damages (and each party hereby waives any
requirement for the securing or posting of any bond in connection with such
remedy) in addition to any other remedy at Law or equity. The Parties shall not
assert that a remedy of specific performance is unenforceable, invalid, contrary
to Law or inequitable for any reason, nor to assert that a remedy of monetary
damages would provide an adequate remedy for any such breach.

 

8.9.                            Disputes.

 

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

 

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

 

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

 

8.10.                     Expenses. Except as otherwise provided in this
Agreement, each of the Parties shall bear its own costs and expenses (including
any legal, accounting and other professional fees and expenses) incurred in
connection with the negotiation and execution of this Agreement and each other
agreement, document and instrument contemplated by this Agreement and the
consummation of the transactions contemplated hereby and thereby.

 

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8.11.                     Third Party Beneficiaries.

 

(a)                                  Prior to the Redemption Date, GSO and its
Affiliates shall be express third party beneficiaries of Producer’s rights under
this Agreement. Other than as set forth in the preceding sentence or in clause
(b) below, the provisions of this Agreement are for the exclusive benefit of the
Parties and their respective successors and permitted assigns, and this
Agreement is not intended to benefit or create rights in any other Person,
including (a) any Person to whom any debts, Liabilities or obligations are owed
by a Party, or (b) any liquidator, trustee or creditor acting on behalf of any
Party, and no such creditor or any other Person will have any rights under this
Agreement.

 

(b)                                  Subject to clause (a) above,
notwithstanding anything that may be expressed or implied in this Agreement or
any document, agreement, or instrument delivered contemporaneously herewith, and
notwithstanding the fact that any Party may be a partnership or limited
liability company, each Party, by its acceptance of the benefits of this
Agreement, covenants, agrees and acknowledges that no Persons other than the
Parties will have any obligation hereunder and that it has no rights of recovery
hereunder against, and no recourse hereunder or under any documents, agreements,
or instruments delivered contemporaneously herewith or in respect of any oral
representations made or alleged to be made in connection herewith or therewith
may be had against, any former, current or future director, officer, agent,
Affiliate, manager, assignee, incorporator, controlling Person, fiduciary,
representative or employee of any Party (or any of their successor or permitted
assignees), against any former, current, or future general or limited partner,
manager, stockholder or member of any Party (or any of their successors or
permitted assignees) or any Affiliate thereof or against any former, current or
future director, officer, agent, employee, Affiliate, manager, assignee,
incorporator, controlling Person, fiduciary, representative, general or limited
partner, stockholder, manager or member of any of the foregoing, but in each
case not including the Parties (each, but excluding for the avoidance of doubt,
the Parties, a “Party Affiliate”), whether by or through attempted piercing of
the corporate veil, by or through a claim (whether in tort, contract or
otherwise) by or on behalf of such Party against the Party Affiliates, by the
enforcement of any assessment or by any legal or equitable proceeding, or by
virtue of any applicable Law, or otherwise; it being expressly agreed and
acknowledged that no personal liability whatsoever shall attach to, be imposed
on, or otherwise be incurred by any Party Affiliate, as such, for any
obligations of the applicable Party under this Agreement or the transactions
contemplated hereby, under any documents or instruments delivered
contemporaneously herewith, in respect of any oral representations made or
alleged to be made in connection herewith or therewith, or for any claim
(whether in tort, contract or otherwise) based on, in respect of, or by reason
of, such obligations or their creation.

 

8.12.                      Conflict. In the event of a conflict between the
terms of this Agreement and the terms of any joint operating agreement
applicable to the Producer Interests, the terms of this Agreement will control
as between the Parties.

 

8.13.                      Subchapter K. The Parties hereby agree that any
arrangement established pursuant to this Agreement be excluded from the
application of Subchapter K of Chapter 1 of the Code.

 

8.14.                      Entire Agreement; Integrated Transaction. This
Agreement, the other Basic Documents and the other agreements and documents
expressly referred to herein or therein are intended by the Parties as a final
expression of their agreement and intended to be a complete

 

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and exclusive statement of the agreement and understanding of the Parties hereto
in respect of the subject matter contained herein and therein. This Agreement,
the other Basic Documents, and the other agreements and documents expressly
referred to herein or therein supersede all prior agreements and understandings
between the parties with respect to such subject matter. Each of the Parties
acknowledges and agrees that in executing this Agreement (i) the intent of the
Parties is this Agreement and the other Basic Documents shall constitute an
unseverable and single agreement of the Parties with respect to the transactions
contemplated hereby and thereby, (ii) it waives, on behalf of itself and each of
its Affiliates, any claim or defense based upon the characterization that this
Agreement and the other Basic Documents are anything other than a true single
agreement relating to such matters and (iii) the matters set forth in this
Section 8.14 constitute a material inducement to enter into this Agreement and
the other Basic Documents and to consummate the transactions contemplated hereby
and thereby. Each of the Parties stipulates and agrees (i) not to challenge the
validity, enforceability or characterization of this Agreement and the other
Basic Documents as a single, unseverable instrument pertaining to the matters
that are the subject of such agreements, (ii) this Agreement and the other Basic
Documents shall be treated as a single integrated and indivisible agreement for
all purposes, including the bankruptcy of any party and (iii) not to assert or
take or omit to take any action inconsistent with the agreements and
understandings set forth in this Section 8.14.

 

8.15.                     Sanchez Support. Sanchez is executing this Agreement
to evidence its agreement to cause Marketer to perform and comply with
Marketer’s obligations under Section 3.1, Section 3.2, Section 3.6, and
Section 8.3. Sanchez hereby guarantees the performance of Marketer under such
provisions and agrees to be directly liable to Producer under such provisions in
the event of any breach by Marketer.

 

8.16.                     Fees to Marketer and Sanchez. In consideration for
(a) certain services provided by Marketer to Producer, Producer hereby agrees to
pay to Marketer an annual fee equal to $50,000 and (b) certain services provided
by Sanchez to Producer, Producer hereby agrees to pay to Sanchez an annual fee
equal to $50,000, which such fees, in the case of preceding clauses (a) and (b),
shall be due and payable by Producer to Marketer and Sanchez, as applicable, on
the Effective Date and each one year anniversary of the Effective Date.

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above.

 

 

SN EF MAVERICK, LLC:

 

 

 

 

 

 

 

By:

 

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

 

 

 

SN EF UNSUB, LP:

 

 

 

 

 

 

 

By: SN EF UnSub GP, LLC, its general partner

 

 

 

 

 

 

 

By:

 

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

Solely for purposes of Sections 8.15 and 8.16,

 

 

 

 

SANCHEZ ENERGY CORPORATION:

 

 

 

 

 

 

 

By:

 

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

Signature Page to Hydrocarbons Purchase and Marketing Agreement

 

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Annex I

 

Defined Terms

 

As used in this Agreement, the following terms have the following meanings:

 

“Affiliate” means, with respect to any Person, any other Person that directly,
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person. The term “control” (including its
derivatives and similar terms) means possessing the power to direct or cause the
direction of the management and policies of a Person, whether through ownership,
by contract, or otherwise. Notwithstanding the foregoing, Marketer and its
Affiliates, on the one hand, and Producer and its Affiliates, on the other hand,
will not be considered Affiliates of one another. For purposes of this
Agreement, Sanchez Oil & Gas Corporation and its Affiliates, including all
member of the Sanchez family, shall be deemed to be Affiliates of Marketer.

 

“Agreement” has the meaning set forth in the preamble.

 

“Aguila” has the meaning set forth in the recitals.

 

“Aguila’s Hydrocarbons” means the Hydrocarbons, including all constituencies
thereof, produced from the interests acquired by Aguila under the Purchase
Agreement.

 

“Anadarko” has the meaning set forth in the recitals.

 

“Assets” has the meaning set forth in the recitals.

 

“Basic Documents” has the meaning given to such term in the Securities Purchase
Agreement.

 

“Basis for Requesting Assurance” has the meaning set forth in Section 3.6(a).

 

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

 

“Central Time” means Central Standard time, as adjusted for Central Daylight
time.

 

“Claims” means all claims, demands and causes of action of any kind and all
losses, damages, liabilities, costs and expenses of whatever nature (including
court costs and reasonable attorneys’ fees).

 

“Collateral” has the meaning given to such term in Section 3.6.

 

“Day” or “Daily” means a period of 24 hours, commencing at 7:00 a.m., Central
Time, on a calendar day and ending at 7:00 a.m., Central Time, on the next
succeeding calendar day.

 

“Delivery Point” means the “Delivery Points” as defined and listed in the
Springfield Agreements, and any future Delivery Point thereunder.

 

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“Due Date” has the meaning set forth in Section 3.2(a).

 

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

 

“Event of Default” means, in respect of any Party, the failure to remedy, within
30 days of receipt of written notice thereof from any other Party, the material
non-performance of or material non-compliance with any agreements, obligations
or undertakings of such Party contained in this Agreement.

 

“Force Majeure” has the meaning set forth in Section 5.2.

 

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

 

“GSO” means GSO ST Holdings LP, a Delaware limited partnership.

 

“Hydrocarbons” means oil, gas, natural gas liquids, condensate, and other
gaseous and liquid hydrocarbons, or any combination of the foregoing.

 

“Interest Rate” means an annual rate of interest equal to 2% above the prime
rate published by The Wall Street Journal from time to time, or the maximum
legal rate, whichever is the lesser.

 

“Investor Redemption Event” has the meaning set forth in the LP Agreement.

 

“Joint Development Agreement” means the Joint Development Agreement to be
entered into, among the Partnership, Aguila, and Marketer at the time of the
closing pursuant to the Purchase Agreement.

 

“[redacted]” has the meaning given to such term in the recitals.

 

“LAUF” means lost, unaccounted for, fuel and other losses of Producer’s
Hydrocarbons in connection with the services provided under an applicable
Midstream Contract, in each case to the extent provided under the applicable
Midstream Contract.

 

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

 

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

 

2

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

 

“Line Fill” means line fill and tank bottom inventory and working tank inventory
requirements, in each case required to be delivered to the applicable
counterparty under a Midstream Contract.

 

“Losses” mean means any liabilities, losses (including first party losses),
fines, penalties, interest, damages, costs, expenses (including expenses of
actions, amounts paid in connection with any assessments, judgments or
settlements relating thereto, interest and penalties recovered by a Third Party
with respect thereto and out-of-pocket expenses and reasonable attorneys’ fees,
experts’ fees and expenses reasonably incurred in defending against any such
action) arising from or related to an injury, illness, death, property damage,
property loss or environmental pollution or contamination, and any other costs
associated with control, removal, restoration and cleanup of pollution or
contamination.

 

“LP Agreement” means the Amended and Restated Agreement of Limited Partnership
of SN EF Unsub, LP to be entered into at the time of the closing pursuant to the
Purchase Agreement, as may be amended.

 

“Manager” means the Manager under the MSA.

 

“Marketer” has the meaning set forth in the preamble.

 

“Marketing Transition Services Agreement” means the Marketing Transition
Services Agreement to be entered into at the time of the closing pursuant to the
Purchase Agreement by and among Marketer, Anadarko Energy Services Company,
Kerr-McGeee Oil & Gas Onshore LP and Anadarko E&P Onshore LLC and Sanchez Energy
Corporation solely for purposes of defined provisions in the agreement, pursuant
to which certain marketing transition services will be provided to Marketer.

 

“Midstream Contracts” means the contracts listed on Exhibit B hereto, including
any amendments thereto, and any gathering, processing, transportation or sales
agreements entered into after the Effective Date, including any amendments
thereto, relating to the Producer’s Interests and the Hydrocarbons produced
therefrom.

 

“Month” or “Monthly” means a period of time beginning at 7:00 a.m., Central Time
on the first Day of a calendar month and ending at 7:00 a.m., Central Time on
the first Day of the next succeeding calendar month.

 

“MSA” means the Management Services Agreement to be entered into at the time of
the closing pursuant to the Purchase Agreement between Sanchez Oil & Gas
Corporation and Producer.

 

“Net Amount” has the meaning set forth in Section 3.1.

 

“Parties” has the meaning set forth in the preamble.

 

“Party” has the meaning set forth in the preamble.

 

“Party Affiliate” has the meaning set forth in Section 8.11(b).

 

3

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

 

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

 

“Producer” has the meaning set forth in the preamble.

 

“Producer’s Allocable Share of Midstream Charges” means the sum of Producer’s
Allocable Share of the Springfield Agreements, plus Producer’s Allocable Share
of the Other Contracts.

 

“Producer’s Allocable Share of the Other Contracts” means, for all Midstream
Contracts other than the Springfield Agreements, a fraction, the numerator of
which is the total volumes of Producer’s Hydrocarbons delivered to the
counterparties under such Midstream Contracts during a Month and the denominator
of which is the total volumes of Hydrocarbons delivered by Marketer and its
Affiliates to the counterparties under such Midstream Contracts during such
Month, multiplied by the sum of (a) any deficiency payments or other similar
fees, payments, or penalties resulting from failure to achieve minimum volume
obligations that are paid by Marketer under such Midstream Contracts, (b) any
commodity charges, and LAUF and Line Fill volumes incurred under such contracts
that are borne by Marketer under such contracts and (c) any other amounts
invoiced to Marketer under such Midstream Contracts. Notwithstanding the
foregoing, (1) other than with respect to the Firm Intrastate Transportation
Agreement dated January 17, 2012 between Eagle Ford Midstream, LP and Anadarko
Energy Services and Transportation Services Agreement dated March 1, 2012
between Enterprise Products Operating LLC and Anadarko Energy Services Company
for the Intrastate Movement of NGLs, Producer shall not be obligated to bear any
deficiency payment or other similar feeds, payments or penalties in (a) above in
an amount greater than 40% of any such payments, fees or penalties that are
attributable to the aggregate volume of Producer’s Hydrocarbons and Marketer’s
and its Affiliates’ Hydrocarbons produced from the Producer Interests and
Sanchez’s Interests and (2) Marketer shall not terminate or amend the obligation
of other producers under producer marketing agreements or elections applicable
to such Midstream Contracts that would increase Producer’s Allocable Share of
the Other Contracts in any material respect without the consent of Producer.

 

“Producer’s Allocable Share of the Springfield Agreements” means, for as long as
Marketer remains a party to the Springfield Agreements, the sum of: (i) the
product of the Allocable Springfield Demand Rate in the applicable Month
multiplied by the Monthly Minimum Volume Commitment (as defined in each of the
Springfield Agreements) under each Springfield Agreement for such Month;
(ii) the product of the Allocable Springfield Commodity Rate in the applicable
Month multiplied by the volumes of Producer’s Hydrocarbons delivered under each
Springfield Agreement during such Month; (iii) any LAUF and Line Fill volumes
retained by Springfield under the terms of the Springfield Agreements that are
attributable to Producer’s Hydrocarbons delivered under the Springfield
Agreements; and (iv) any other amounts invoiced to Marketer under Article VII of
the Springfield Agreements and attributable to Producer’s Hydrocarbons being
delivered under the Springfield Agreements. For purposes of this definition,
(a) “Allocable Springfield Demand Rate” in any Month shall be equal to the
applicable Demand Rate (as defined in each of the Springfield Agreements)
multiplied by a fraction, the numerator of which is the total volumes of
Producer’s Hydrocarbons delivered to

 

4

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

 

Springfield under each applicable Springfield Agreement during such Month and
the denominator of which is the total volumes of Hydrocarbons delivered by
Marketer and its Affiliates to Springfield under each applicable Springfield
Agreement during such Month and (c) the Allocable Springfield Commodity Rate in
any Month shall be equal to the applicable Commodity Rate (as defined in each of
the Springfield Agreements); provided that, in any given Month, if the Total
Allocable Rate for such Month is (x) greater than the “Max Rate” for the
calendar year attributable to such Month as set forth on Exhibit A, then,
notwithstanding the foregoing, Producer’s Allocable Share of the Springfield
Agreements for such Month shall be equal to the product of the “Max Rate”
attributable to such Month as set forth on Exhibit A multiplied by Producer’s
Hydrocarbons delivered under the applicable Springfield Agreement during such
month or (y) less than the “Min Rate” for the calendar year attributable to such
Month as set forth on Exhibit A, then, notwithstanding the foregoing, Producer’s
Allocable Share of the Springfield Agreements for such Month shall be the
product of the “Min Rate” attributable to such Month as set forth on Exhibit A
multiplied by Producer’s Hydrocarbons delivered under the applicable Springfield
Agreement during such month.

 

“Producer’s Hydrocarbons” means the Hydrocarbons produced from and attributable
to Producer’s Interests, including all constituencies thereof.

 

“Producer’s Interests” has the meaning set forth in the recitals.

 

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

 

“Receipt Points” means (i) the “Receipt Points” as defined and listed in the
Springfield Agreements, and any future Receipt Point thereunder and (ii) for
Hydrocarbons that are not delivered to Springfield, the first point at which
Marketer delivers such Hydrocarbons from the wellhead to the facilities of a
counterparty under a Midstream Contract.

 

“Redemption Date” is defined in the MSA.

 

“Representative” means officers, directors, employees, and other representatives
of the referenced entity and its Affiliates.

 

“Reserved Hydrocarbons” means the volumes of Hydrocarbons that Producer does not
deliver under the Springfield Agreements that are associated with field and
other similar uses of Producer that are expressly reserved or excepted from the
definition of Dedicated Production thereunder.

 

“Sanchez” has the meaning set forth in the preamble.

 

“Sanchez’s Hydrocarbons” the Hydrocarbons produced from Sanchez’s Interests,
including all constituencies thereof.

 

“Sanchez’s Interests” means the interests in the Assets acquired by Marketer
under the Purchase Agreement as well as other Working Interests acquired by
Marketer or its Affiliates after the Effective Date that are gathered, processed
or transported pursuant to the Midstream Contracts.

 

5

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

 

“Springfield” means Springfield Pipeline LLC, or its permitted successors or
assigns as party to the Springfield Agreements.

 

“Springfield Agreements” means (1) the Second Amended and Restated Lease
Dedication and Gas Gathering Agreement between Springfield and Sanchez, and
(2) the Second Amended and Restated Lease Dedication and Oil Gathering Agreement
between Springfield and Sanchez, in each case to be entered into at the
termination of the Marketing Transition Services Agreement and as each such
contract may be amended from time to time.

 

“Taxes” means all current or future taxes, fees, levies, charges, assessments
and/or other impositions levied, charged, imposed, assessed or collected by any
Governmental Authority having jurisdiction.

 

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

 

“Third Party” means any Person other than a Party or one of their Affiliates.

 

“Total Allocable Rate” means, for any given Month, the rate calculated
separately for each of the Springfield Agreements equal to (a) the Producer’s
Allocable Share of the Springfield Agreement divided by (b) the total volumes of
Producer’s Hydrocarbons delivered to Springfield under such Springfield
Agreement during such Month.

 

“Securities Purchase Agreement” the Securities Purchase Agreement, dated
January 12, 2017, among Producer, Sanchez Energy Corporation, SN UR Holdings,
LLC, SN EF UnSub GP, LLC, SN EF UnSub Holdings, LLC, GSO ST Holdings Associates
LLC and GSO ST Holdings LP.

 

“Working Interest” means with respect to any lease or well or wellpad, the
fractional interest in and to such lease, well or wellpad that is burdened with
the obligation to bear and pay costs and expenses of maintenance, development
and operations on or in connection with such lease, well, or wellpad.

 

*                  *                   *

 

6

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

 

Exhibit A

 

Springfield Agreements Allocable Share

 

 

 

WES Gas Fee ($/mcf)

 

 

 

Min Rate

 

Max Rate

 

2016

 

1.14

 

1.80

 

2017

 

1.04

 

1.58

 

2018

 

0.94

 

1.37

 

2019

 

0.86

 

1.20

 

2020

 

0.85

 

1.17

 

2021

 

0.87

 

1.21

 

2022

 

0.83

 

1.12

 

2023

 

0.80

 

1.04

 

2024

 

0.77

 

0.98

 

2025

 

0.73

 

0.89

 

2026

 

0.71

 

0.84

 

2027

 

0.69

 

0.79

 

2028

 

0.69

 

0.78

 

2029

 

0.68

 

0.76

 

2030

 

0.68

 

0.75

 

2031

 

0.70

 

0.78

 

2032

 

0.71

 

0.80

 

2033

 

0.72

 

0.81

 

2034

 

0.72

 

0.81

 

 

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

 

 

 

 

WES Oil Fee ($/bbl)

 

 

 

Min Rate

 

Max Rate

 

2016

 

2.41

 

3.67

 

2017

 

2.05

 

2.90

 

2018

 

1.82

 

2.42

 

2019

 

1.71

 

2.18

 

2020

 

1.74

 

2.22

 

2021

 

1.73

 

2.19

 

2022

 

1.73

 

2.15

 

2023

 

1.65

 

1.97

 

2024

 

1.55

 

1.76

 

2025

 

1.54

 

1.71

 

2026

 

1.53

 

1.68

 

2027

 

1.54

 

1.67

 

2028

 

1.53

 

1.64

 

2029

 

1.54

 

1.63

 

2030

 

1.56

 

1.66

 

2031

 

1.59

 

1.70

 

2032

 

1.61

 

1.73

 

2033

 

1.63

 

1.75

 

2034

 

1.64

 

1.76

 

 

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

 

Exhibit B

 

Midstream Contracts

 

First Party

 

Second Party

 

Contract Type

 

Effective Date

Anadarko Energy Services Company

 

Enterprise Texas Pipeline LLC

 

Firm Gas Transportation

 

10/1/2010

Anadarko Energy Services Company

 

Eagle Ford Midstream, LP (NET)

 

Firm NGPA Section 311 Gas
Transportation

 

1/17/2012

Anadarko Energy Services Company

 

Eagle Ford Midstream, LP (NET)

 

Firm Intrastate Gas Transportation

 

1/17/2012

Anadarko E&P Company LP

 

Texas Pipleline LLC (Howard)

 

Firm Transportation (gas)

 

10/5/2010

Anadarko Energy Services Company

 

Enterprise Products Operating LLC

 

Purchase Agreement (at Brasada)

 

3/1/2012

Anadarko Energy Services Company

 

Enterprise Products Operating LLC

 

NGL Transportation Services
Agreement (into Cotulla)

 

3/1/2012

Anadarko Energy Services Company

 

Flint Hills Resources, LP

 

Crude Oil Supply Agreement (Sales
Tranche 1)

 

3/18/2011

Anadarko E&P Company LP

 

Arrowhead Gathering Company, L.P.

 

Crude Oil Throughput and Deficiency Agreement (TPT Tranche 1)

 

3/18/2011

Anadarko E&P Company LP

 

BP Products North America Inc

 

Crude Oil Sales Agreement
(Tranche 2)

 

6/28/2012

Anadarko E&P Company LP

 

TexStar Crude Oil Pipeline, LP

 

Crude Oil T&D (NuStar)(TPT Tranche 2)

 

7/2/2012

Anadarko E&P Onshore LLC

 

BP Products North America Inc

 

Crude Oil Sales Agreement
(Tranche 3)

 

12/13/2013

Anadarko E&P Onshore LLC

 

Double Eagle Pipeline LLC and KinderMorgan
Crude&Condensate LLC

 

Crude Oil T&D (DE)(TPT Tranche 3)

 

12/13/2013

Anadarko E&P Onshore LLC

 

Plains Marketing, LP

 

Crude Oil Purchase Contract

 

4/1/2014

 

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

 

First Party

 

Second Party

 

Contract Type

 

Effective Date

Anadarko E&P Onshore LLC

 

Shell Trading (US) Compnay

 

Crude Sales Contract

 

12/1/2016

Anadarko E&P Onshore LLC

 

Plains Gas Solutions, LLC

 

Condensate Stabilization
Agreement

 

7/1/2014

Anadarko E&P Onshore LLC

 

Plains South Texas Gathering LLC

 

Shipping Agreement

 

5/1/2014

Anadarko E&P Onshore LLC

 

Springfield Pipeline LLC

 

Firm Intrastate Transportation
Service Agmnt

 

3/1/2013

Anadarko E&P Company LP

 

Springfield Pipeline LLC

 

Lease Dedication and Gas
Gathering Agreement

 

3/1/2008

Anadarko E&P Company LP

 

Springfield Pipeline LLC

 

Lease Dedication and Oil
Gathering Agreement

 

3/1/2008

Anadarko E&P Company LP

 

WGR Operating, LP

 

Gas Processing Agreement

 

2/27/2012

Anadarko E&P Company LP

 

Enterprise Hydrocarbons L.P.

 

Gas Processing Agreement
(Tranche 1)

 

9/1/2010

Anadarko E&P Company LP

 

Enterprise Hydrocarbons L.P.

 

Gas Processing Agreement
(Tranche 2)

 

2/1/2011

Anadarko E&P Company LP

 

ETC Texas Pipeline, Ltd

 

Gathering and Processing
Agreement

 

4/1/2011

Anadarko E&P Onshore LLC

 

Enterprise Hydrocarbons L.P.

 

Gas Processing Agreement
(Shoup)

 

3/1/2013

Anadarko E&P Onshore LLC

 

Eagle Ford Gathering LLC (KM)

 

Gas Services Agreement

 

1/1/2017

Anadarko E&P Company LP

 

Eagle Ford Gathering LLC (KM)

 

Gas Services Agreement

 

1/1/2011

Anadarko E&P Onshore LLC

 

Texas Pipeline LLC

 

NGL Bank Service Agreement

 

7/25/2013

Anadarko Energy Services Company

 

Enterprise Texas Pipeline LLC

 

Firm Gas Transportation
Agreement for NGPA Section 311
Service, No. 9138E

 

10/1/2010

 

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

 

First Party

 

Second Party

 

Contract Type

 

Effective Date

Anadarko E&P Onshore LLC

 

JSK Holdings, Inc.

 

Purchase Contract

 

10/13/2016

Anadarko E&P Company LP

 

TexStar Crude Oil Services, LP (succeeded by NuStar
Logistics, L.P.)

 

Master Terminal Services
Agreement

 

7/2/2012

Anadarko E&P Company LP

 

TexStar Crude Oil Services, LP (succeeded by NuStar
Logistics, L.P.)

 

Terminal Services Schedule No. Anadarko E&P Company LP — 001

 

7/2/2012

Anadarko E&P Onshore LLC

 

Endeavor Natural Gas LP

 

Gas Gathering (Clear Springs)

 

5/1/2015

Anadarko E&P Onshore LLC

 

Endeavor Natural Gas LP

 

Interconnection Agreement

 

5/1/2015

Anadarko E&P Onshore LLC

 

Endeavor Natural Gas LP

 

Interconnection Agreement

 

9/9/2015

Anadarko E&P Company LP

 

Enterprise Hydrocarbons L.P

 

Gas Processing Agreement

 

8/1/2012

Anadarko E&P Onshore LLC

 

Plains Gas Solutions, LLC

 

Raw Make (Y-Grade) Purchase and
Sale Agreemment

 

8/1/2015

Anadarko Petroleum Corp.

 

Enterprise South Texas Gathering L.P.

 

Gathering, Processing and Purch.
Agreement

 

9/1/2008

Anadarko E&P Company LP

 

Trimac Transportation Central Inc.

 

Crude Trucking

 

3/1/2012

Anadarko E&P Company LP & Anadarko Energy Services Company

 

[redacted]

 

Maverick Crude Oil Production
Marketing Agreement

 

4/14/2011

Anadarko E&P Company LP & Anadarko Energy Services Company

 

[redacted]

 

Maverick Natural Gas Liquids
Marketing Agreement

 

4/14/2011

Anadarko E&P Company LP & Anadarko Energy Services Company

 

[redacted]

 

Maverick Residue Gas Marketing
Agreement

 

4/14/2011

Anadarko E&P Company LP & Anadarko Energy Services Company

 

Mitsui E&P Texas LP

 

Maverick Natural Gas Liquids
Marketing Agreement

 

1/1/2012

Anadarko E&P Company LP & Anadarko Energy Services Company

 

Mitsui E&P Texas LP

 

Maverick Residue Gas Marketing
Agreement

 

1/1/2012

 

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

 

First Party

 

Second Party

 

Contract Type

 

Effective Date

 

Anadarko E&P Company LP & Anadarko Energy Services Company

 

SM Energy Company

 

Maverick Natural Gas Liquids Marketing Agreement

 

10/1/2010

 

Anadarko E&P Company LP & Anadarko Energy Services Company

 

SM Energy Company

 

Maverick Residue Gas Marketing Agreement

 

10/1/2010

 

Anadarko E&P Onshore LLC

 

JSK Holdings, Inc.

 

NGL Marketing

 

10/13/2016

 

 

NAESB Contract Confirmations

 

Gas Sales

 

Counterparty

 

Volume (MMBtu/d)

 

End Date

 

 

 

Air Liquide (255602)

 

12,500

 

3/31/2017

 

 

 

Air Liquide (255604)

 

12,500

 

3/31/2017

 

 

 

Diamond Shamrock (248974)

 

6,045

 

8/31/2017

 

 

 

Kinder Morgan (255681)

 

10,000

 

3/31/2017

 

 

 

Repsol (244011)

 

25,000

 

3/31/2017

 

 

 

Repsol (255144)

 

10,000

 

3/31/2017

 

 

 

Techgen (221544)

 

30,000

 

9/31/2021

 

 

 

Valero (248973)

 

12,060

 

8/31/2017

 

 

 

Valero (248975)

 

4,020

 

8/31/2017

 

 

 

Wyman Gordon (232520)

 

4,156

 

3/31/2018

 

 

 

Wyman Gordon (233438)

 

1,271

 

3/31/2018

 

 

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

 

EXHIBIT H

 

FORM OF REGISTRATION RIGHTS AGREEMENT

 

[Attached.]

 

EXHIBIT H TO

SECURITIES PURCHASE AGREEMENT

 

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

 

REGISTRATION RIGHTS AGREEMENT

 

BY AND BETWEEN

 

SANCHEZ ENERGY CORPORATION

 

AND

 

THE GSO FUNDS PARTY HERETO

 

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into
as of [·], 2017, by and between Sanchez Energy Corporation, a Delaware
corporation (the “Corporation”), and the funds managed by GSO that are
identified in Exhibit M to the Purchase Agreement (as defined below) and
specified on the signature pages hereof (the “GSO Funds”).

 

WHEREAS, this Agreement is entered into in connection with the closing of the
issuance of the SN Shares (as defined below) and the Warrants (as defined below)
to the GSO Funds pursuant to the Securities Purchase Agreement, dated January
12, 2017 (the “Purchase Agreement”), by and among the Corporation, SN UR
Holdings, LLC, SN EF UnSub Holdings, LLC, SN EF UnSub, LP, SN EF UnSub GP, LLC,
GSO ST Holdings Associates LLC and GSO ST Holdings LP (the “Preferred Unit
Purchaser”); and

 

WHEREAS, the Corporation has agreed to provide the registration and other rights
set forth in this Agreement for the benefit of the GSO Funds pursuant to the
Purchase Agreement; and

 

WHEREAS, it is a condition to the obligations of the Preferred Unit Purchaser
and the Corporation under the Purchase Agreement that this Agreement be executed
and delivered;

 

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each party hereto, the parties hereby agree as
follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.01 Definitions. Capitalized terms used herein without definition shall
have the meanings given to them in the Purchase Agreement. The terms set forth
below are used herein as so defined:

 

“Affiliate” of any Person means any other Person, directly or indirectly,
Controlling, Controlled by or under common Control with such particular Person.
For purposes of this Agreement, (i) The Blackstone Group LP and all private
equity funds, portfolio companies, parallel investment entities, and alternative
investment entities owned, managed, or Controlled by The Blackstone Group LP or
its Affiliates that are not part of the credit-related businesses of The
Blackstone Group LP shall not be considered or otherwise deemed to be an
“Affiliate” of GSO or its Affiliates that are part of the credit-related
businesses of The Blackstone Group LP,

 

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

 

but any fund or account managed, advised or sub-advised, by GSO or its
Affiliates within the credit-related businesses of The Blackstone Group LP shall
constitute an Affiliate of GSO, and (ii) none of GSO or its Affiliates or any
fund or account managed, advised or subadvised by GSO or its Affiliates shall
constitute an Affiliate of the Corporation.

 

“Agreement” has the meaning specified therefor in the introductory paragraph of
this Agreement.

 

“Board” means the Board of Directors of the Corporation.

 

“Business Day” means any day other than a Saturday, Sunday, any federal legal
holiday or day on which banking institutions in the State of New York or State
of Texas are authorized or required by law or other governmental action to
close.

 

“BX Registration Rights Agreement” means the Registration Rights Agreement,
dated as of the date hereof, by and between Sanchez Energy Corporation and
Aguila Production HoldCo, LLC.

 

“Closing Date” means [•], 2017.

 

“Common Share Price” means the volume weighted average closing price of Common
Shares (as reported by the NYSE or, if the NYSE is not the Corporation’s primary
securities exchange or market, such primary securities exchange or market) for
the ten (10) trading days immediately preceding the date on which the
determination is made (or, if such price is not available, as determined in good
faith by the Board).

 

“Common Shares” means the shares of common stock, par value $0.01 per share, of
the Corporation (including the attached Rights).

 

“Control” means the possession, directly or indirectly, of the power to direct,
or cause the direction of, the management and policies of a Person whether
though the ownership of voting securities, by contract or otherwise. The terms
“Controlled” and “Controlling” shall have correlative meanings.

 

“Corporation” has the meaning specified therefor in the introductory paragraph
of this Agreement.

 

“Effective Date” means, with respect to a particular Shelf Registration
Statement, the date of effectiveness of such Shelf Registration Statement.

 

“Effectiveness Deadline” has the meaning specified therefor in Section 2.01 of
this Agreement.

 

“Effectiveness Period” means the period beginning on the Effective Date for the
Registration Statement and ending at the time all Registrable Securities covered
by such Registration Statement have ceased to be Registrable Securities.

 

“Electing Holders” has the meaning specified therefor in Section 2.04 of this
Agreement.

 

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“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.

 

“Existing Registration Rights Agreement” means the Registration Rights
Agreement, dated as of December 19, 2011, by and between the Corporation and
Sanchez Energy Partners I, LP.

 

“Freely Tradable” means, with respect to any security, that such security is no
longer subject to the restrictions on trading under the provisions of Rule 144
under the Securities Act (or any successor rule or regulation to Rule 144 then
in force), including volume and manner of sale restrictions, and the current
public information requirement of Rule 144(c) (or any successor rule or
regulation to Rule 144 then in force) no longer applies.

 

“Governmental Authority” means any federal, state, local or foreign government,
or other governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or judicial or arbitral body.

 

“GSO” means GSO Capital Partners LP, a Delaware limited partnership.

 

“GSO Funds” has the meaning specified therefor in the introductory paragraph of
this Agreement.

 

“Holder” means the record holder of any Registrable Securities.

 

“Included Registrable Securities” has the meaning specified therefor in
Section 2.02(a) of this Agreement.

 

“Law” means any statute, law, ordinance, regulation, rule, order, code,
governmental restriction, decree, injunction or other requirement of law, or any
judicial or administrative interpretation thereof, of any Governmental
Authority.

 

“Losses” has the meaning specified therefor in Section 2.09(a) of this
Agreement.

 

“Managing Underwriter” means, with respect to any Underwritten Offering, the
book- running lead manager of such Underwritten Offering.

 

“NYSE” means The New York Stock Exchange, Inc.

 

“Opt-Out Notice” has the meaning specified therefor in Section 2.02(a) of this
Agreement.

 

“Person” means an individual or a corporation, limited liability company,
corporation, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.

 

“Preferred Unit Purchaser” has the meaning specified therefor in the recitals of
this Agreement.

 

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“Purchase Agreement” has the meaning specified therefor in the recitals of this
Agreement.

 

“Registrable Securities” means the SN Shares (including the attached Rights) and
the Common Shares (including the attached Rights) issued or issuable upon the
exercise of the Warrants, and includes any type of ownership interest issued to
the Holder as a result of Section 3.04 of this Agreement.

 

“Registrable Securities Amount” means the calculation based on the product of
the Common Share Price times the number of applicable Registrable Securities.

 

“Registration Expenses” has the meaning specified therefor in Section 2.08(b) of
this Agreement.

 

“Registration Statement” has the meaning specified therefor in Section 2.01 of
this Agreement.

 

“Required Holders” means Holders of greater than 50% of the Registrable
Securities.

 

“Rights” means the preferred stock purchase rights that automatically attach to
each Common Share pursuant to the SN Rights Plan.

 

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

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.

 

“Selling Expenses” has the meaning specified therefor in Section 2.08(b) of this
Agreement.

 

 “Selling Holder” means a Holder who is selling Registrable Securities under a
registration statement pursuant to the terms of this Agreement.

 

“Selling Holder Indemnified Persons” has the meaning specified therefor in
Section 2.09(a) of this Agreement.

 

“Shelf Registration Statement” means a registration statement under the
Securities Act to permit the public resale of the Registrable Securities from
time to time as permitted by Rule 415 under the Securities Act (or any successor
or similar provision adopted by the SEC then in effect).

 

“SN Rights Plan” means that certain Rights Agreement, dated as of July 28, 2015,
between the Corporation and Continental Stock Transfer & Trust Company, as
rights agent, including the exhibits attached thereto, as such Rights Agreement
may be amended, modified or supplemented from time to time.

 

“SN Shares” means the 1,500,000 Common Shares (including the attached Rights)
issued by the Corporation to the GSO Funds pursuant to the Purchase Agreement.

 

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“Underwritten Offering” means an offering (including an offering pursuant to a
Shelf Registration Statement) in which Registrable Securities are sold to one or
more underwriters on a firm commitment basis for reoffering to the public or an
offering that is a “bought deal” with one or more investment banks.

 

“Underwritten Offering Notice” has the meaning specified therefor in
Section 2.04 of this Agreement.

 

“Warrant” means the warrant, and all warrants issued upon division or
combination of, or in substitution for the warrant, issued pursuant to the
Warrant to Purchase Common Shares, dated as of [·], 2017, between the
Corporation and the GSO Funds.

 

Section 1.02                     Registrable Securities. Any Registrable
Security shall cease to be a Registrable Security at the earliest of the
following: (a) when a registration statement covering such Registrable Security
becomes or has been declared effective by the SEC and such Registrable Security
has been sold or disposed of pursuant to such effective registration statement;
(b) when such Registrable Security has been sold or disposed of (excluding
transfers or assignments by a Holder to an Affiliate) pursuant to Rule 144 under
the Securities Act (or any successor or similar provision adopted by the SEC
then in effect) under circumstances in which all of the applicable conditions of
Rule 144 (as then in effect) are met; (c) when such Registrable Security is held
by the Corporation or one of its Affiliates; or (d) when such Registrable
Security has been sold or disposed of in a private transaction in which the
transferor’s rights under this Agreement are not assigned to the transferee of
such securities pursuant to Section 2.11 hereof. In addition, any Registrable
Security will cease to be a Registrable Security upon the date that such
security is Freely Tradable.

 

ARTICLE II

REGISTRATION RIGHTS

 

Section 2.01                     Shelf Registration. Within eighteen (18) months
of the Closing Date, the Corporation shall use its reasonable best efforts to
prepare and file a Shelf Registration Statement with the SEC to permit the
public resale of all Registrable Securities on the terms and conditions
specified in this Section 2.01 (a “Registration Statement”). The Registration
Statement filed with the SEC pursuant to this Section 2.01 shall be on Form S-3
or, if Form S-3 is not then available to the Corporation, on Form S-1 or such
other form of registration statement as is then available to effect a
registration for resale of the Registrable Securities, covering the Registrable
Securities, and shall contain a prospectus in such form as to permit any Selling
Holder covered by such Registration Statement to sell such Registrable
Securities pursuant to Rule 415 under the Securities Act (or any successor or
similar provision adopted by the SEC then in effect) at any time beginning on
the Effective Date for such Registration Statement. The Corporation shall use
its reasonable best efforts to cause a Registration Statement filed pursuant to
this Section 2.01 to be declared effective no later than two (2) years after the
Closing Date (the “Effectiveness Deadline”). A Registration Statement shall
provide for the resale pursuant to any method or combination of methods legally
available to, and requested by, the Selling Holders, including by way of an
Underwritten Offering, if such an election has been made pursuant to
Section 2.04 of this Agreement. During the Effectiveness Period, the Corporation
shall use its reasonable best efforts to cause a Registration Statement filed
pursuant to this Section 2.01 to remain effective,

 

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and to be supplemented and amended to the extent necessary to ensure that such
Registration Statement is available or, if not available, that another
registration statement is available for the resale of the Registrable Securities
until all Registrable Securities have ceased to be Registrable Securities. The
Corporation shall prepare and file a supplemental listing application with the
NYSE (or such other national securities exchange on which the Registrable
Securities are then listed and traded) to list the Registrable Securities
covered by a Registration Statement and shall use its reasonable best efforts to
have such Registrable Securities approved for listing on the NYSE (or such other
national securities exchange on which the Registrable Securities are then listed
and traded) by the Effective Date of such Registration Statement, subject only
to official notice of issuance. As soon as practicable following the Effective
Date of a Registration Statement, but in any event within three Business Days of
such date, the Corporation shall notify the Holders of the effectiveness of such
Registration Statement.

 

When effective, a Registration Statement (including the documents incorporated
therein by reference) will comply as to form in all material respects with all
applicable requirements of the Securities Act and the Exchange Act and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading (in the case of any prospectus contained in such Registration
Statement, in the light of the circumstances under which a statement is made).
If the Managing Underwriter of any proposed Underwritten Offering of Registrable
Securities advises the Corporation that the inclusion of all of the Selling
Holders’ Registrable Securities that the Selling Holders intend to include in
such offering exceeds the number that can be sold in such offering without being
likely to have an adverse effect on the price, timing or distribution of the
Registrable Securities offered or the market for the Registrable Securities,
then the Registrable Securities to be included in such Underwritten Offering
shall include the number of Registrable Securities that such Managing
Underwriter advises the Corporation can be sold without having such adverse
effect, with such number to be allocated (i) first, to the Selling Holders,
allocated among such Selling Holders pro rata on the basis of the number of
Registrable Securities held by each such Selling Holder or in such other manner
as such Selling Holders may agree, and (ii) second, to any other holder of
securities of the Corporation having rights of registration that are neither
expressly senior nor subordinated to the Holders in respect of the Registrable
Securities.

 

Section 2.02                             Piggyback Rights.

 

(a)                         Participation. So long as a Holder has Registrable
Securities, if the Corporation proposes to file (i) a shelf registration
statement other than a Registration Statement contemplated by Section 2.01 and
other than a registration statement on Forms S-4 or S-8 and any successor forms,
(ii) a prospectus supplement to an effective Shelf Registration Statement
relating to the sale of equity securities of the Corporation, other than a
Registration Statement contemplated by Section 2.01 and Holders may be included
without the filing of a post-effective amendment thereto, or (iii) a
registration statement, other than a shelf registration statement and other than
a registration statement on Forms S-4 or S-8 and any successor forms, in each
case, for the sale of Common Shares in an Underwritten Offering for its own
account or that of another Person, or both, then promptly following the
selection of the Managing Underwriter for such Underwritten Offering, the
Corporation shall give notice of such Underwritten Offering to each Holder and
such notice shall offer the Holders the opportunity to include in such

 

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Underwritten Offering such number of Registrable Securities (the “Included
Registrable Securities”) as each such Holder may request in writing; provided,
however, that if the Corporation has been advised by the Managing Underwriter
that the inclusion of Registrable Securities for sale for the benefit of the
Holders will have an adverse effect on the price, timing or distribution of the
Common Shares in the Underwritten Offering, then (x) if no Registrable
Securities can be included in the Underwritten Offering in the opinion of the
Managing Underwriter, the Corporation shall not be required to offer such
opportunity to the Holders or (y) if any Registrable Securities can be included
in the Underwritten Offering in the opinion of the Managing Underwriter, then
the amount of Registrable Securities to be offered for the accounts of Holders
shall be determined based on the provisions of Section 2.02(b). Any notice
required to be provided in this Section 2.02(a) to Holders shall be provided on
a Business Day and receipt of such notice shall be confirmed by the Holder. Each
such Holder shall then have three Business Days (or two Business Days in
connection with any overnight or bought Underwritten Offering) after notice has
been delivered to request in writing the inclusion of Registrable Securities in
the Underwritten Offering. If no written request for inclusion from a Holder is
received within the specified time, each such Holder shall have no further right
to participate in such Underwritten Offering. If, at any time after giving
written notice of its intention to undertake an Underwritten Offering and prior
to the closing of such Underwritten Offering, the Corporation shall determine
for any reason not to undertake or to delay such Underwritten Offering, the
Corporation may, at its election, give written notice of such determination to
the Selling Holders and, (1) in the case of a determination not to undertake
such Underwritten Offering, shall be relieved of its obligation to sell any
Included Registrable Securities in connection with such terminated Underwritten
Offering, and (2) in the case of a determination to delay such Underwritten
Offering, shall be permitted to delay offering any Included Registrable
Securities as part of such Underwritten Offering for the same period as the
delay in the Underwritten Offering. Any Selling Holder shall have the right to
withdraw such Selling Holder’s request for inclusion of such Selling Holder’s
Registrable Securities in such Underwritten Offering by giving written notice to
the Corporation of such withdrawal at or prior to one Business Day before the
time of pricing of such Underwritten Offering. Any Holder may deliver written
notice (an “Opt-Out Notice”) to the Corporation requesting that such Holder not
receive notice from the Corporation of any proposed Underwritten Offering;
provided, however, that such Holder may later revoke any such Opt-Out Notice in
writing prior to one Business Day before the time of pricing of such
Underwritten Offering. Following receipt of an Opt-Out Notice from a Holder
(unless subsequently revoked), the Corporation shall not be required to deliver
any notice to such Holder pursuant to this Section 2.02(a) and such Holder shall
no longer be entitled to participate in Underwritten Offerings by the
Corporation pursuant to this Section 2.02(a).

 

(b)                          Priority. Other than situations outlined in
Section 2.01 of this Agreement, if the Managing Underwriter of any proposed
Underwritten Offering of Common Shares included in an Underwritten Offering
involving Included Registrable Securities advises the Corporation that the total
amount of Common Shares that the Selling Holders and any other Persons intend to
include in such offering exceeds the number of Common Shares that can be sold in
such offering without being likely to have an adverse effect on the price,
timing or distribution of the Common Shares offered or the market for the Common
Shares, then the Common Shares to be included in such Underwritten Offering
shall include the number of Registrable Securities that such Managing
Underwriter advises the Corporation can be sold without having such adverse
effect,

 

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with such number to be allocated (i) first, to the Corporation or other party or
parties requesting or initiating such registration, (ii) second, by the holders
of Corporation securities that have requested participation in such Underwritten
Offering under the Existing Registration Rights Agreement and (iii) third, by
the Selling Holders who have requested participation in such Underwritten
Offering and by the other holders of Common Shares (other than holders of
Registrable Securities) with registration rights pursuant to the BX Registration
Rights Agreement or otherwise entitling them to participate in such Underwritten
Offering, allocated among such Selling Holders and other holders pro rata on the
basis of the number of Registrable Securities or Common Shares held by each
applicable Selling Holder or other holder or in such manner as they may agree.

 

Section 2.03                             Delay Rights.

 

Notwithstanding anything to the contrary contained herein, the Corporation may,
upon written notice to (i) all Holders, delay the filing of a Registration
Statement required under Section 2.01, or (ii) any Selling Holder whose
Registrable Securities are included in a Registration Statement or other
registration statement contemplated by this Agreement, suspend such Selling
Holder’s use of any prospectus that is a part of such Registration Statement or
other registration statement (in which event the Selling Holder shall
discontinue sales of the Registrable Securities pursuant to such Registration
Statement or other registration statement contemplated by this Agreement but may
settle any previously made sales of Registrable Securities) if the Corporation
(x) is pursuing an acquisition, merger, tender offer, reorganization,
disposition or other similar transaction and the Board determines in good faith
that (A) the Corporation’s ability to pursue or consummate such a transaction
would be materially adversely affected by any required disclosure of such
transaction in such Registration Statement or other registration statement or
(B) such transaction renders the Corporation unable to comply with SEC
requirements, in each case under circumstances that would make it impractical or
inadvisable to cause the Registration Statement (or such filings) to become
effective or to promptly amend or supplement the Registration Statement on a
post-effective basis, as applicable, or (y) has experienced some other material
non-public event the disclosure of which at such time, in the good faith
judgment of the Board, would materially adversely affect the Corporation;
provided, however, in no event shall (A) such filing of such Registration
Statement be delayed under clauses (x) or (y) of this Section 2.03 for a period
that exceeds 90 calendar days or (B) such Selling Holders be suspended under
clauses (x) or (y) of this Section 2.03 from selling Registrable Securities
pursuant to such Registration Statement or other registration statement for a
period that exceeds an aggregate of 90 calendar days in any 365 calendar-day
period, in each case, exclusive of days covered by any lock-up agreement
executed by a Selling Holder in connection with any Underwritten Offering. Upon
disclosure of such information or the termination of the condition described
above, the Corporation shall provide prompt notice, but in any event within one
Business Day of such disclosure or termination, to the Selling Holders whose
Registrable Securities are included in such Registration Statement and shall
promptly terminate any suspension of sales it has put into effect and shall take
such other reasonable actions to permit registered sales of Registrable
Securities as contemplated in this Agreement.

 

Section 2.04                     Underwritten Offerings. In the event that the
Required Holders elect to include, other than pursuant to Section 2.02 of this
Agreement, at least the lesser of

 

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(i) $25.0 million of Registrable Securities in the aggregate (calculated based
on the Registrable Securities Amount) and (ii) 100% of the then outstanding
Registrable Securities held by them under a Registration Statement pursuant to
an Underwritten Offering, the Corporation shall, upon request by the Required
Holders (such request, an “Underwritten Offering Notice” and such electing
Required Holders, the “Electing Holders”), retain underwriters in order to
permit the Electing Holders to effect such sale through an Underwritten
Offering; provided, however, that the Required Holders shall have the option and
right to require the Corporation to effect not more than three Underwritten
Offerings pursuant to and subject to the conditions of this Section 2.04,
subject to a maximum of two Underwritten Offerings during any 12-month period.
Upon delivery of such Underwritten Offering Notice to the Corporation, the
Corporation shall as soon as practicable (but in no event later than one
Business Day following the date of delivery of the Underwritten Offering Notice
to the Corporation) deliver notice of such Underwritten Offering Notice to all
other Holders, who shall then have two Business Days from the date that such
notice is given to them to notify the Corporation in writing of the number of
Registrable Securities held by such Holder that they want to be included in such
Underwritten Offering. For the avoidance of doubt, any Holders notified about an
Underwritten Offering by the Corporation after the Corporation has received the
corresponding Underwritten Offering Notice may participate in such Underwritten
Offering, but shall not count toward the $25.0 million of Registrable Securities
(calculated based on the Registrable Securities Amount) required under clause
(i) of this Section 2.04 to request an Underwritten Offering pursuant to an
Underwritten Offering Notice. In connection with any Underwritten Offering under
this Agreement, the Corporation shall be entitled to select the Managing
Underwriter or Underwriters, but only with the consent of Holders of a majority
of the Registrable Securities being sold in such Underwritten Offering (not to
be unreasonably conditioned, withheld or delayed). In connection with an
Underwritten Offering contemplated by this Agreement in which a Selling Holder
participates, each Selling Holder and the Corporation shall be obligated to
enter into an underwriting agreement that contains such representations,
covenants, indemnities and other rights and obligations as are customary in
underwriting agreements for firm commitment offerings of securities. No Selling
Holder may participate in such Underwritten Offering unless such Selling Holder
agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. Each Selling Holder may, at its option, require
that any or all of the representations and warranties by, and the other
agreements on the part of, the Corporation to and for the benefit of such
underwriters also be made to and for such Selling Holder’s benefit and that any
or all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement also be conditions precedent to its obligations. No
Selling Holder shall be required to make any representations or warranties to or
agreements with the Corporation or the underwriters other than representations,
warranties or agreements regarding such Selling Holder, its authority to enter
into such underwriting agreement and to sell, and its ownership of, the
securities whose offer and resale will be registered, on its behalf, its
intended method of distribution and any other representation required by Law. If
any Selling Holder disapproves of the terms of an underwriting, such Selling
Holder may elect to withdraw therefrom by notice to the Corporation, the
Electing Holders and the Managing Underwriter; provided, however, that any such
withdrawal must be made no later than the time of pricing of such Underwritten
Offering. If all Selling Holders withdraw from an Underwritten Offering prior to
the pricing of

 

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such Underwritten Offering or if the registration statement relating to an
Underwritten Offering is suspended pursuant to Section 2.03, the events will not
be considered an Underwritten Offering and will not decrease the number of
available Underwritten Offerings the Required Holders have the right and option
to request under this Section 2.04. No such withdrawal or abandonment shall
affect the Corporation’s obligation to pay Registration Expenses pursuant to
Section 2.08.

 

Section 2.05                             Sale Procedures.

 

In connection with its obligations under this Article II, the Corporation shall,
as expeditiously as possible:

 

(a)                         use its reasonable best efforts to prepare and file
with the SEC such amendments and supplements to a Registration Statement and the
prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective for the Effectiveness Period and as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities covered by such Registration
Statement;

 

(b)                         if a prospectus supplement will be used in
connection with the marketing of an Underwritten Offering from a Registration
Statement and the Managing Underwriter at any time shall notify the Corporation
in writing that, in the sole judgment of such Managing Underwriter, inclusion of
detailed information to be used in such prospectus supplement is of material
importance to the success of the Underwritten Offering of such Registrable
Securities, the Corporation shall use its reasonable best efforts to include
such information in such prospectus supplement;

 

(c)                          furnish to each Selling Holder (i) as far in
advance as reasonably practicable before filing a Registration Statement or any
other registration statement contemplated by this Agreement or any supplement or
amendment thereto, upon request, copies of reasonably complete drafts of all
such documents proposed to be filed (including exhibits and each document
incorporated by reference therein to the extent then required by the rules and
regulations of the SEC other than annual or quarterly reports on Forms 10-K or
10-Q, respectively, current reports on Form 8-K or proxy statements; provided,
however, that such reports or proxy statements shall be provided at least two
Business Days prior to filing in connection with any Underwritten Offering), and
provide each such Selling Holder the opportunity to object to any information
pertaining to such Selling Holder and its plan of distribution that is contained
therein and make the corrections reasonably requested by such Selling Holder
with respect to such information prior to filing a Registration Statement or
such other registration statement or supplement or amendment thereto, and
(ii) such number of copies of such Registration Statement or such other
registration statement and the prospectus included therein and any supplements
and amendments thereto as such Selling Holder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities
covered by such Registration Statement or other registration statement;

 

(d)                         if applicable, use its reasonable best efforts to
register or qualify the Registrable Securities covered by a Registration
Statement or any other registration statement contemplated by this Agreement
under the securities or blue sky laws of such jurisdictions as the Selling

 

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Holders or, in the case of an Underwritten Offering, the Managing Underwriter,
shall reasonably request; provided, however, that the Corporation shall not be
required to qualify generally to transact business in any jurisdiction where it
is not then required to so qualify or to take any action that would subject it
to general service of process in any such jurisdiction where it is not then so
subject;

 

(e)                          promptly notify each Selling Holder, at any time
when a prospectus relating thereto is required to be delivered by any of them
under the Securities Act, of (i) the filing of a Registration Statement or any
other registration statement contemplated by this Agreement or any prospectus or
prospectus supplement to be used in connection therewith, or any amendment or
supplement thereto, and, with respect to such Registration Statement or any
other registration statement or any post-effective amendment thereto, when the
same has become effective; and (ii) the receipt of any written comments from the
SEC with respect to any filing referred to in clause (i) and any written request
by the SEC for amendments or supplements to such Registration Statement or any
other registration statement or any prospectus or prospectus supplement thereto;

 

(f)                           promptly notify each Selling Holder, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of (i) the happening of any event as a result of which the
prospectus or prospectus supplement contained in a Registration Statement or any
other registration statement contemplated by this Agreement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of any prospectus contained therein, in the light of
the circumstances under which a statement is made); (ii) the issuance or express
threat of issuance by the SEC of any stop order suspending the effectiveness of
such Registration Statement or any other registration statement contemplated by
this Agreement, or the initiation of any proceedings for that purpose; or
(iii) the receipt by the Corporation of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale under the
applicable securities or blue sky laws of any jurisdiction. Following the
provision of such notice, the Corporation agrees to as promptly as practicable
amend or supplement the prospectus or prospectus supplement or take other
appropriate action so that the prospectus or prospectus supplement does not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and to take such
other commercially reasonable action as is necessary to remove a stop order,
suspension, threat thereof or proceedings related thereto;

 

(g)                          upon request and subject to appropriate
confidentiality obligations, furnish to each Selling Holder copies of any and
all transmittal letters or other correspondence with the SEC or any other
governmental agency or self-regulatory body or other body having jurisdiction
(including any domestic or foreign securities exchange) relating to such
offering of Registrable Securities;

 

(h)                         in the case of an Underwritten Offering, use its
reasonable best efforts to furnish to the underwriters upon request, (i) an
opinion of counsel for the Corporation dated the date of the closing under the
underwriting agreement and (ii) a “cold comfort” letter, dated the pricing date
of such Underwritten Offering and a letter of like kind dated the date of the
closing under

 

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the underwriting agreement, in each case, signed by the independent public
accountants who have certified the Corporation’s financial statements included
or incorporated by reference into the applicable registration statement, and
each of the opinion and the “cold comfort” letter shall be in customary form and
covering substantially the same matters with respect to such registration
statement (and the prospectus and any prospectus supplement included therein) as
have been customarily covered in opinions of issuer’s counsel and in
accountants’ letters delivered to the underwriters in Underwritten Offerings of
securities by the Corporation and such other matters as such underwriters and
Selling Holders may reasonably request;

 

(i)                              otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the SEC, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement, covering a period of twelve months beginning within three months
after the Effective Date of such Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 promulgated thereunder;

 

(j)                             make available to the appropriate
representatives of the Managing Underwriter and Selling Holders access to such
information and Corporation personnel as is reasonable and customary to enable
such parties to establish a due diligence defense under the Securities Act;
provided, that the Corporation need not disclose any non-public information to
any such representative unless and until such representative has entered into a
confidentiality agreement with the Corporation;

 

(k)                          use its reasonable best efforts to cause all such
Registrable Securities registered pursuant to this Agreement to be listed on
each securities exchange or nationally recognized quotation system on which the
Common Shares are then listed or quoted;

 

(l)                              use its reasonable best efforts to cause the
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Corporation to enable the Selling Holders to
consummate the disposition of such Registrable Securities;

 

(m)                      provide a transfer agent and registrar for all
Registrable Securities covered by such registration statement not later than the
Effective Date of such registration statement;

 

(n)                          enter into customary agreements and take such other
actions as are reasonably requested by the Selling Holders or the underwriters,
if any, in order to expedite or facilitate the disposition of such Registrable
Securities (including, in the case of Underwritten Offerings of $25.0 million or
greater of Registrable Securities (calculated based on the Registrable
Securities Amount), making appropriate officers of the Corporation available to
participate in any “road show” presentations before analysts, and other
customary marketing activities (including one-on- one meetings with prospective
purchasers of the Registrable Securities)); and

 

(o)                          if requested by a Selling Holder, (i) as soon as
practicable incorporate in a prospectus supplement or post-effective amendment
such information as such Selling Holder reasonably requests to be included
therein relating to the sale and distribution of Registrable Securities,
including information with respect to the number of Registrable Securities being

 

12

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offered or sold, the purchase price being paid therefor and any other terms of
the offering of the Registrable Securities to be sold in such offering, and
(ii) as soon as practicable make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment.

 

The Corporation shall not name a Holder as an underwriter as defined in
Section 2(a)(11) of the Securities Act in any Registration Statement without
such Holder’s consent.

 

Each Selling Holder, upon receipt of notice from the Corporation of the
happening of any event of the kind described in Section 2.05(f), shall forthwith
discontinue offers and sales of the Registrable Securities by means of a
prospectus or prospectus supplement until such Selling Holder’s receipt of the
copies of the supplemented or amended prospectus contemplated by Section
2.05(f) or until it is advised in writing by the Corporation that the use of the
prospectus may be resumed and has received copies of any additional or
supplemental filings incorporated by reference in the prospectus, and, if so
directed by the Corporation, such Selling Holder shall, or shall request the
Managing Underwriter, if any, to deliver to the Corporation (at the
Corporation’s expense) all copies in their possession or control, other than
permanent file copies then in such Selling Holder’s possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.

 

Section 2.06                             Cooperation by Holders.

 

The Corporation shall have no obligation to include Registrable Securities of a
Holder in a registration statement or in an Underwritten Offering pursuant to
Section 2.02(a) who has failed to timely furnish after receipt of a written
request from the Corporation such information that the Corporation determines,
after consultation with its counsel, is reasonably required in order for the
registration statement or prospectus supplement, as applicable, to comply with
the Securities Act.

 

Section 2.07                             Restrictions on Public Sale by Holders
of Registrable Securities.

 

To the extent requested by the Managing Underwriter, each Holder of Registrable
Securities that participates in an Underwritten Offering will enter into a
customary letter agreement with underwriters providing such Holder will not
effect any public sale or distribution of Registrable Securities during the 60
calendar-day period beginning on the date of a prospectus or prospectus
supplement filed with the SEC with respect to the pricing of any Underwritten
Offering, provided that (i) the duration of the foregoing restrictions shall be
no longer than the duration of the shortest restriction generally imposed by the
underwriters on the Corporation or the officers, directors or any other
Affiliate of the Corporation on whom a restriction is imposed and (ii) the
restrictions set forth in this Section 2.07 shall not apply to any Registrable
Securities that are included in such Underwritten Offering by such Holder. In
addition, this Section 2.07 shall not apply to any Holder that is not entitled
to participate in such Underwritten Offering, whether because such Holder
delivered an Opt-Out Notice prior to receiving notice of the Underwritten
Offering or because the Registrable Securities held by such Holder may be
disposed of without restriction pursuant to Rule 144 under the Securities Act
(or any successor or similar provision adopted by the SEC then in effect).

 

13

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Section 2.08                             Expenses.

 

(a)                         Expenses. The Corporation shall pay all reasonable
Registration Expenses as determined in good faith by the Board, including, in
the case of an Underwritten Offering, the Registration Expenses of an
Underwritten Offering, regardless of whether any sale is made pursuant to such
Underwritten Offering. Each Selling Holder shall pay its pro rata share of all
Selling Expenses in connection with any sale of its Registrable Securities
hereunder. For the avoidance of doubt, each Selling Holder’s pro rata allocation
of Selling Expenses shall be the percentage derived by dividing (i) the number
of Registrable Securities sold by such Selling Holder in connection with such
sale by (ii) the aggregate number of Registrable Securities sold by all Selling
Holders in connection with such sale. In addition, except as otherwise provided
in Sections 2.08 and 2.09 hereof, the Corporation shall not be responsible for
legal fees incurred by Holders in connection with the exercise of such Holders’
rights hereunder.

 

(b)                         Certain Definitions. “Registration Expenses” means
all expenses incident to the Corporation’s performance under or compliance with
this Agreement to effect the registration of Registrable Securities on a
Registration Statement pursuant to Section 2.01 or an Underwritten Offering
covered under this Agreement, and the disposition of such Registrable
Securities, including, without limitation, all registration, filing, securities
exchange listing and NYSE fees, all registration, filing, qualification and
other fees and expenses of complying with securities or blue sky laws, fees of
the Financial Industry Regulatory Authority, Inc., fees of transfer agents and
registrars, all word processing, duplicating and printing expenses, any transfer
taxes, and the fees and disbursements of counsel and independent public
accountants for the Corporation, including the expenses of any special audits or
“cold comfort” letters required by or incident to such performance and
compliance, and the reasonable fees and disbursements of one counsel for the
Selling Holders participating in such Registration Statement or Underwritten
Offering to effect the disposition of such Registrable Securities (not to exceed
$75,000 per filing or offering, as applicable), selected by the Holders of a
majority of the Registrable Securities initially being registered under such
Registration Statement or other registration statement as contemplated by this
Agreement, subject to the reasonable consent of the Corporation. “Selling
Expenses” means all underwriting discounts and selling commissions or similar
fees or arrangements allocable to the sale of the Registrable Securities, and
fees and disbursements of counsel to the Selling Holders, except for the
reasonable fees and disbursements of counsel for the Selling Holders required to
be paid by the Corporation pursuant to Sections 2.08 and 2.09.

 

Section 2.09                             Indemnification.

 

(a)                         By the Corporation. In the event of a registration
of any Registrable Securities under the Securities Act pursuant to this
Agreement, the Corporation shall indemnify and hold harmless each Selling Holder
thereunder, its directors, officers, managers, employees, agents and Affiliates
and each Person, if any, who controls such Selling Holder or its Affiliates
within the meaning of the Securities Act and the Exchange Act, and its
directors, officers, employees or agents (collectively, the “Selling Holder
Indemnified Persons”), against any losses, claims, damages, expenses or
liabilities (including reasonable attorneys’ fees and expenses) (collectively,
“Losses”), joint or several, to which such Selling Holder Indemnified Person may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such Losses (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or

 

14

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are based upon any untrue statement or alleged untrue statement of any material
fact (in the case of any prospectus, in light of the circumstances under which
such statement is made) contained in (which, for the avoidance of doubt,
includes documents incorporated by reference in) such registration statement or
any other registration statement contemplated by this Agreement, any preliminary
prospectus, prospectus supplement or final prospectus contained therein, or any
amendment or supplement thereof, or any free writing prospectus relating thereto
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in light of the circumstances
under which they were made) not misleading, and shall reimburse each such
Selling Holder Indemnified Person for any legal or other expenses reasonably
incurred by them in connection with investigating, defending or resolving any
such Loss or actions or proceedings; provided, however, that the Corporation
shall not be liable in any such case if and to the extent that any such Loss
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by such Selling Holder Indemnified Person in writing specifically for use in
such registration statement or such other registration statement, or prospectus
supplement, as applicable. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Selling Holder
Indemnified Person, and shall survive the transfer of such securities by such
Selling Holder.

 

(b)                         By Each Selling Holder. Each Selling Holder agrees
severally and not jointly to indemnify and hold harmless the Corporation, its
directors, officers, employees and agents and each Person, if any, who controls
the Corporation within the meaning of the Securities Act or of the Exchange Act,
and its directors, officers, employees and agents, to the same extent as the
foregoing indemnity from the Corporation to the Selling Holders, but only with
respect to information regarding such Selling Holder furnished in writing by or
on behalf of such Selling Holder expressly for inclusion in such registration
statement or any other registration statement contemplated by this Agreement,
any preliminary prospectus, prospectus supplement or final prospectus contained
therein, or any amendment or supplement thereof, or any free writing prospectus
relating thereto; provided, however, that the liability of each Selling Holder
shall not be greater in amount than the dollar amount of the proceeds (net of
any Selling Expenses) received by such Selling Holder from the sale of the
Registrable Securities giving rise to such indemnification.

 

(c)                          Notice. Promptly after receipt by an indemnified
party hereunder of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission to so notify the indemnifying party shall not relieve it from
any liability that it may have to any indemnified party other than under this
Section 2.09. In any action brought against any indemnified party, it shall
notify the indemnifying party of the commencement thereof. The indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel reasonably satisfactory to
such indemnified party and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 2.09 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that, (i) if the

 

15

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indemnifying party has failed to assume the defense or employ counsel reasonably
acceptable to the indemnified party or (ii) if the defendants in any such action
include both the indemnified party and the indemnifying party and counsel to the
indemnified party shall have concluded that there may be reasonable defenses
available to the indemnified party that are different from or additional to
those available to the indemnifying party, or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, then the indemnified party shall have the right to select a
separate counsel and to assume such legal defense and otherwise to participate
in the defense of such action, with the reasonable expenses and fees of such
separate counsel and other reasonable expenses related to such participation to
be reimbursed by the indemnifying party as incurred. Notwithstanding any other
provision of this Agreement, no indemnifying party shall settle any action
brought against any indemnified party with respect to which such indemnified
party is entitled to indemnification hereunder without the consent of the
indemnified party, unless the settlement thereof imposes no liability or
obligation on, and includes a complete and unconditional release from all
liability of, the indemnified party.

 

(d)                          Contribution. If the indemnification provided for
in this Section 2.09 is held by a court or government agency of competent
jurisdiction to be unavailable to any indemnified party or is insufficient to
hold them harmless in respect of any Losses, then each such indemnifying party,
in lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such Loss in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of such indemnified party on the other in connection
with the statements or omissions that resulted in such Losses, as well as any
other relevant equitable considerations; provided, however, that in no event
shall such Selling Holder be required to contribute an aggregate amount in
excess of the dollar amount of proceeds (net of Selling Expenses) received by
such Selling Holder from the sale of Registrable Securities giving rise to such
indemnification. The relative fault of the indemnifying party on the one hand
and the indemnified party on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact has been made
by, or relates to, information supplied by such party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this paragraph were to be determined
by pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to herein. The amount paid by
an indemnified party as a result of the Losses referred to in the first sentence
of this paragraph shall be deemed to include any legal and other expenses
reasonably incurred by such indemnified party in connection with investigating,
defending or resolving any Loss that is the subject of this paragraph. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who is not
guilty of such fraudulent misrepresentation.

 

(e)                           Other Indemnification. The provisions of this
Section 2.09 shall be in addition to any other rights to indemnification or
contribution that an indemnified party may have pursuant to law, equity,
contract or otherwise.

 

16

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Section 2.10                             Rule 144 Reporting.

 

With a view to making available the benefits of certain rules and regulations of
the SEC that may permit the sale of the Registrable Securities to the public
without registration, the Corporation agrees to use its reasonable best efforts
to:

 

(a)                          make and keep public information regarding the
Corporation available, as those terms are understood and defined in Rule 144
under the Securities Act (or any successor or similar provision adopted by the
SEC then in effect), at all times from and after the date hereof;

 

(b)                          file with the SEC in a timely manner all reports
and other documents required of the Corporation under the Securities Act and the
Exchange Act at all times from and after the date hereof; and

 

(c)                           so long as a Holder owns any Registrable
Securities, furnish, unless otherwise available electronically at no additional
charge via the SEC’s EDGAR system, to such Holder forthwith upon request a copy
of the most recent annual or quarterly report of the Corporation, and such other
reports and documents as such Holder may reasonably request in availing itself
of any rule or regulation of the SEC allowing such Holder to sell any such
securities without registration.

 

Section 2.11                             Transfer or Assignment of Registration
Rights.

 

The rights to cause the Corporation to register Registrable Securities granted
to the GSO Funds by the Corporation under this Article II may be transferred or
assigned by the GSO Funds to one or more transferees or assignees of Registrable
Securities without the consent of the Corporation; provided, however, that,
other than in the case of transfers or assignments to funds or accounts managed,
advised or sub-advised by GSO or its Affiliates, (a) the Corporation is given
written notice prior to any said transfer or assignment, stating the name and
address of each of the transferee or assignee and identifying the Registrable
Securities with respect to which such registration rights are being transferred
or assigned and (b) each such transferee or assignee assumes in writing
responsibility for its portion of the obligations of the GSO Funds under this
Agreement.

 

Section 2.12                             Limitation on Subsequent Registration
Rights.

 

From and after the date hereof, the Corporation shall not, without the prior
written consent of the Required Holders, enter into any agreement with any
current or future holder of any equity securities of the Corporation that would
allow such current or future holder to require the Corporation to include equity
securities in any registration statement filed by the Corporation on a basis
that is superior in any respect to the piggyback rights granted to the Holders
pursuant to Section 2.02.

 

17

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ARTICLE III

MISCELLANEOUS

 

Section 3.01                             Communications.

 

All notices and other communications provided for or permitted hereunder shall
be made in writing by electronic mail, courier service or personal delivery:

 

(a)                                 if to the GSO Funds:

 

c/o GSO Capital Partners

1111 Bagby Street, Suite 2050

Houston, Texas 77002

Attention: Robert Horn

Email: robert.horn@gsocap.com

 

with a copy to:

 

c/o GSO Capital Partners

345 Park Avenue, 31st Floor

New York, New York 10154

Email: GSOLegal@gsocap.com

GSOValuationsGroup@gsocap.com

 

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

 

Andrews Kurth Kenyon LLP

600 Travis Street, Suite 4200

Houston, Texas 77002

Attention: G. Michael O’Leary

Jon W. Daly

Email: moleary@akllp.com

jondaly@akllp.com

 

(b)                                 if to a transferee of a GSO Fund, to such
Holder at the address provided pursuant to Section 2.11 above; and

 

(c)                                  if to the Corporation:

 

Sanchez Energy Corporation

1000 Main Street, Suite 3000

Houston, Texas 77002

Attention: Gregory Kopel

Email: gkopel@sanchezog.com

 

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

 

Kirkland & Ellis LLP

600 Travis Street, Suite 3300

Houston, Texas 77002

Attention: Matthew R. Pacey

Email: matt.pacey@kirkland.com

 

18

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All such notices and communications shall be deemed to have been received at the
time delivered by hand, if personally delivered; when receipt acknowledged, if
sent via electronic mail; and when actually received, if sent by courier service
or any other means.

 

Section 3.02                             Successor and Assigns.

 

This Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of each of the parties, including subsequent Holders of
Registrable Securities to the extent permitted herein.

 

Section 3.03                             Assignment of Rights.

 

All or any portion of the rights and obligations of the GSO Funds under this
Agreement may be transferred or assigned by each such GSO Fund only in
accordance with Section 2.11 hereof.

 

Section 3.04                             Recapitalization, Exchanges, Etc.
Affecting the Common Shares.

 

The provisions of this Agreement shall apply to the full extent set forth herein
with respect to any and all equity interests of the Corporation or any successor
or assign of the Corporation (whether by merger, consolidation, sale of assets
or otherwise) that may be issued in respect of, in exchange for or in
substitution of, the Registrable Securities, and shall be appropriately adjusted
for combinations, share splits, recapitalizations, pro rata distributions of
shares and the like occurring after the date of this Agreement.

 

Section 3.05                             Specific Performance.

 

Damages in the event of breach of this Agreement by a party hereto may be
difficult, if not impossible, to ascertain, and it is therefore agreed that each
such Person, in addition to and without limiting any other remedy or right it
may have, shall have the right to an injunction or other equitable relief in any
court of competent jurisdiction, enjoining any such breach, and enforcing
specifically the terms and provisions hereof, and each of the parties hereto
hereby waives any and all defenses it may have on the ground of lack of
jurisdiction or competence of the court to grant such an injunction or other
equitable relief. The existence of this right shall not preclude any such Person
from pursuing any other rights and remedies at law or in equity that such Person
may have.

 

Section 3.06                             Counterparts.

 

This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, including facsimile or .pdf
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Agreement.

 

19

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Section 3.07                             Headings.

 

The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.

 

Section 3.08                             Governing Law.

 

This Agreement, including all issues and questions concerning its application,
construction, validity, interpretation and enforcement, shall be construed in
accordance with, and governed by, the laws of the State of Delaware.

 

Section 3.09                             Severability of Provisions.

 

Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting or impairing the validity or enforceability of
such provision in any other jurisdiction.

 

Section 3.10                             Entire Agreement.

 

This Agreement is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the rights granted by the Corporation set forth herein. This Agreement and the
Purchase Agreement supersede all prior agreements and understandings between the
parties with respect to such subject matter.

 

Section 3.11                             Amendment.

 

This Agreement may be amended only by means of a written amendment signed by the
Corporation and the Required Holders; provided, however, that no such amendment
shall materially and adversely affect the rights of any Holder hereunder without
the prior written consent of such Holder.

 

Section 3.12                             No Presumption.

 

If any claim is made by a party relating to any conflict, omission or ambiguity
in this Agreement, no presumption or burden of proof or persuasion shall be
implied by virtue of the fact that this Agreement was prepared by or at the
request of a particular party or its counsel.

 

Section 3.13                             Obligations Limited to Parties to
Agreement.

 

Each of the parties hereto covenants, agrees and acknowledges that no Person
other than the GSO Funds (and their respective transferees and assignees) and
the Corporation shall have any obligation hereunder. No recourse under this
Agreement or under any documents or instruments delivered in connection herewith
or therewith shall be had against any former, current or future director,
officer, employee, agent, general or limited partner, manager, member,

 

20

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stockholder or Affiliate of a GSO Fund or any former, current or future
director, officer, employee, agent, general or limited partner, manager, member,
stockholder or Affiliate thereof, whether by the enforcement of any assessment
or by any legal or equitable proceeding, or by virtue of any applicable Law, it
being expressly agreed and acknowledged that no personal liability whatsoever
shall attach to, be imposed on or otherwise be incurred by any former, current
or future director, officer, employee, agent, general or limited partner,
manager, member, stockholder or Affiliate of a GSO Fund or any former, current
or future director, officer, employee, agent, general or limited partner,
manager, member, stockholder or Affiliate thereof, as such, for any obligations
of a GSO Fund under this Agreement or any documents or instruments delivered in
connection herewith or therewith or for any claim based on, in respect of or by
reason of such obligation or its creation, except in each case for any
transferee or assignee of a GSO Fund hereunder.

 

Section 3.14                             Interpretation.

 

Article and Section references are to this Agreement, unless otherwise
specified. All references to instruments, documents, contracts and agreements
are references to such instruments, documents, contracts and agreements as the
same may be amended, supplemented and otherwise modified from time to time,
unless otherwise specified. The words “include,” “includes” and “including” or
words of similar import shall be deemed to be followed by the words “without
limitation.” Whenever any determination, consent or approval is to be made or
given by the GSO Funds (and their respective transferees or assignees) under
this Agreement, such action shall be in each GSO Fund’s (and its respective
transferees’ or assignees’) sole discretion unless otherwise specified. Unless
expressly set forth or qualified otherwise (e.g., by “Business” or “trading”),
all references herein to a “day” are deemed to be a reference to a calendar day.

 

(Signature pages follow)

 

21

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IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of
the date first above written.

 

 

SANCHEZ ENERGY CORPORATION

 

 

 

 

 

By:

 

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

Signature Page to Registration Rights Agreement

 

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

 

 

GSO CAPITAL OPPORTUNITIES FUND III LP

 

 

 

By:

GSO Capital Opportunities Associates III, LLC, its general partner

 

 

 

 

By:

GSO Holdings I L.L.C., its member

 

 

 

By:

 

 

 

Name: [·]

 

 

Title: [·]

 

 

 

 

 

GSO ENERGY SELECT OPPORTUNITIES FUND LP

 

 

 

By:

GSO Energy Select Opportunities Associates LLC, its general partner

 

 

 

 

By:

GSO Holdings I L.L.C., its member

 

 

 

By:

 

 

 

Name: [·]

 

 

Title: [·]

 

 

 

 

 

GSO ENERGY PARTNERS-A LP

 

 

 

By:

GSO Energy Partners-A Associates LLC, its general partner

 

 

 

By:

 

 

 

Name: [·]

 

 

Title: [·]

 

 

 

 

 

GSO ENERGY PARTNERS-B LP

 

 

 

By:

 GSO Energy Partners-B Associates LLC, its general partner

 

 

 

By:

 

 

 

Name: [·]

 

 

Title: [·]

 

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

 

 

GSO ENERGY PARTNERS-C LP

 

 

 

By:

GSO Energy Partners-C Associates LLC, its general partner

 

 

 

 

By:

 

 

 

Name: [·]

 

 

Title: [·]

 

 

 

GSO ENERGY PARTNERS-C II LP

 

 

 

By:

GSO Energy Partners-C Associates II LLC, its general partner

 

 

 

 

By:

 

 

 

Name: [·]

 

 

Title: [·]

 

 

 

GSO ENERGY PARTNERS-D LP

 

 

 

By:

GSO Energy Partners-D Associates LLC, its general partner

 

 

 

By:

 

 

 

Name: [·]

 

 

Title: [·]

 

 

 

GSO CREDIT ALPHA FUND LP

 

 

 

By:

GSO Capital Partners LP, its investment manager

 

 

 

By:

 

 

 

Name: [·]

 

 

Title: [·]

 

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

 

 

GSO HARRINGTON CREDIT ALPHA FUND (CAYMAN) L.P.

 

 

 

By:

GSO Capital Partners LP, its investment manager

 

 

 

 

By:

 

 

 

Name: [·]

 

 

Title: [·]

 

 

 

GSO CAPITAL SOLUTIONS FUND II LP

 

 

 

By:

GSO Capital Solutions Associates II LP, its general partner

 

 

 

 

By:

GSO Capital Solutions Associates II (Delaware) LLC, its general partner

 

 

 

 

By:

 

 

 

Name: [·]

 

 

Title: [·]

 

 

 

GSO COF III CO-INVESTMENT FUND LP

 

 

 

By:

GSO COF III Co-Investment Associates LLC, its general partner

 

 

 

 

By:

GSO Holdings I L.L.C., its member

 

 

 

By:

 

 

 

Name: [·]

 

 

Title: [·]

 

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

 

EXHIBITS I-1 AND I-2

 

OPINION MATTERS

 

[Form of Legal Opinions to be Attached.]

 

EXHIBIT I TO

SECURITIES PURCHASE AGREEMENT

 

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

 

EXHIBITS J-1 AND J-2

 

EQUITY COMMITMENT LETTERS

 

[Attached.]

 

EXHIBITS J-1 AND J-2 TO

SECURITIES PURCHASE AGREEMENT

 

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

 

EXHIBIT K

 

FORM OF NON-SOLICITATION AGREEMENT

 

[Attached.]

 

EXHIBIT K TO

SECURITIES PURCHASE AGREEMENT

 

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

 

NON-SOLICITATION AGREEMENT

 

This NON-SOLICITATION AGREEMENT (this “Agreement”) is made and entered into as
of [              ], 2017, by and among GSO Capital Partners LP, a Delaware
limited partnership (“GSO”), Sanchez Energy Corporation, a Delaware corporation
(“SN”), and Sanchez Oil & Gas Corporation, a Delaware corporation (“SOG” and,
together with SN, the “Sanchez Parties”).

 

For good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged by all, the parties to this Agreement agree as follows:

 

1.                              Non-Solicitation. For a period from and after
the date hereof until the earlier of date that is sixty (60) months after the
date on which GSO and its affiliates no longer own any equity interests in SN EF
UnSub, LP and SN EF UnSub GP, LLC (collectively, the “Operating Companies”),
unless the Sanchez Parties’ provide prior written consent, GSO shall not, and
GSO shall cause its controlled affiliates (including all private equity funds,
portfolio companies, parallel investment entities, and alternative investment
entities owned, managed or controlled by GSO) not to, directly or indirectly,
(i) solicit, induce or encourage any employee or officer of the Sanchez Parties
or any of their respective affiliates to leave their respective positions of
employment with any Sanchez Party or any of their respective affiliates,
(ii) hire or employ any of such employees or officers, whether as a consultant
or otherwise or (iii) hire or employ any such former employee or officer,
whether as a consultant or otherwise, within six (6) months of such person’s
final employment date with a Sanchez Party or any of their respective
affiliates; provided, that the foregoing shall not preclude GSO or any of its
controlled qffiliates from soliciting for employment or hiring any such
employee, agent or contractor who has been terminated (and not rehired) by a
Sanchez Party or any of their respective qffiliates. References to a “controlled
affiliate” of GSO in the first sentence of this Section 1 shall constitute a
reference to affiliates in which GSO or its controlled affiliates have the power
to direct or cause the direction of the management of policies of such
affiliate, whether through the ownership of voting securities, by contract, the
right to designate the majority of the board of directors or managers of such
affiliated entities or otherwise; provided that, for purposes of clarity, GSO
shall not be deemed to control any affiliate (and shall not have any liability
if such affiliate acts in contravention of the foregoing restrictions) if GSO
does not have the right to appoint the majority of the the board of directors or
managers of such affiliate or does not otherwise have the authority, whether by
contract or virtue of its equity ownership in such affiliate, to cause such
affiliate to make decisions regarding the solicitation or hiring of any persons.

 

2.                              Specific Performance. The covenants and
undertakings contained in this Agreement relate to matters which are of a
special, unique and extraordinary character and a violation of any of the terms
of this Agreement may cause irreparable injury to the Sanchez Parties, the
amount of which may be impossible to estimate or determine and which cannot be
adequately compensated. Accordingly, the remedy at law for any breach of this
Agreement may be inadequate. Therefore, the Sanchez Parties will be entitled to
seek a temporary and permanent injunction, restraining order or other equitable
relief from any court of competent jurisdiction in the event of any breach of
this Agreement without the necessity of proving actual

 

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damage. The rights and remedies provided by this Agreement are cumulative and in
addition to any other rights and remedies which the Sanchez Parties may have
hereunder or at law or in equity.

 

3.                              Unenforceability. The parties hereto agree that,
if any court of competent jurisdiction determines that a specified time period
or any other relevant feature of Paragraph 1 hereof is unreasonable, arbitrary
or against public policy, then a lesser period of time or other relevant feature
which is determined by such court to be reasonable, not arbitrary and not
against public policy may be enforced against the applicable party.

 

4.                                      Governing Law; Submission to Process

 

(a)                         THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.

 

(b)                         EACH PARTY HERETO (I) SUBMITS ITSELF TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN HARRIS COUNTY,
TEXAS, (II) AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN
ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT BY ANY MEANS ALLOWED UNDER TEXAS
OR FEDERAL LAW AND (III) WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF ANY SUCH PROCEEDING BEING IN SUCH A COURT AND ANY CLAIM THAT ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.

 

5.                              Waiver of Jury
Trial.                                 EACH PARTY HERETO HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY:

 

(a)                         WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LEGAL REQUIREMENTS, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
THEREBY OR ASSOCIATED THEREWITH;

 

(b)                         CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS; AND

 

(c)                          ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.

 

6.                              Amendment. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by all parties
hereto and no waiver of any provision of this Agreement, and no consent to any
departure by any party hereto therefrom, shall be effective

 

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unless it is in writing and signed by the other parties hereto, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.

 

7.                               Counterparts. This Agreement may be executed in
any number of counterparts with the same effect as if both of the signatory
parties had signed the same document. All counterparts shall be construed
together and shall constitute one and the same instrument. Any facsimile or
electronic copies of this Agreement or signatures on this Agreement shall, for
all purposes, be deemed originals.

 

[SIGNATURES ON THE FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written.

 

 

GSO:

 

 

 

GSO CAPITAL PARTNERS LP

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

 

 

 

 

SANCHEZ PARTIES:

 

 

 

SANCHEZ ENERGY CORPORATION

 

 

 

 

 

By:

 

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

 

 

SANCHEZ OIL & GAS CORPORATION

 

 

 

 

 

By:

 

 

Name:

Antonio R. Sanchez, III

 

Title:

President

 

 

[Signature Page to Non-Solicitation Agreement]

 

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EXHIBIT L

 

FORM OF VOTING AGREEMENT

 

[Attached.]

 

EXHIBIT L TO

SECURITIES PURCHASE AGREEMENT

 

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

 

STANDSTILL AND VOTING AGREEMENT

 

BY AND BETWEEN

 

SANCHEZ ENERGY CORPORATION

 

AND

 

THE GSO FUNDS

 

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STANDSTILL AND VOTING AGREEMENT

 

This STANDSTILL AND VOTING AGREEMENT (this “Agreement”) is made and entered into
as of [  ], 2017, by and between (a) Sanchez Energy Corporation, a Delaware
corporation (the “Company”), and (b) the funds specified on the signature
pages hereof (collectively, the “GSO Funds” and individually, a “GSO Fund”.
Capitalized terms used but not defined herein shall have the meanings assigned
to such terms in Article I.

 

RECITALS:

 

WHEREAS, pursuant to the Securities Purchase Agreement, dated January [12], 2017
(the “SPA”), among the Company, SN EF UnSub GP, LLC, a Delaware limited
liability company and a wholly owned subsidiary of the Company (the “General
Partner”), SN EF UnSub, LP, a Delaware limited partnership of which the General
Partner is the sole general partner (the “Partnership”), SN EF UnSub Holdings,
LLC, a Delaware limited liability company and a wholly owned subsidiary of the
Company (“SN Holdings”), SN UR Holdings, LLC, a Delaware limited liability
company, GSO ST Holdings Associates LLC, a Delaware limited liability company
(“GSO Associates”), and GSO ST Holdings LP, a Delaware limited partnership (“GSO
Holdings”), among other things, at the Anadarko Closing, Sanchez issued to the
GSO Funds the SN Shares and the Warrants in accordance with
Section 2.06(a)(iv) of the SPA; and

 

WHEREAS, the Warrants were issued to the GSO Funds pursuant to the Warrant
Agreement, dated of even date herewith (the “Warrant Agreement”), among the
Company and the GSO Funds; and

 

WHEREAS, as a result of the issuances of the SN Shares and the Warrants to the
GSO Funds, the GSO Funds are as of the date hereof deemed to Beneficially Own
Common Stock representing approximately [·]% of the outstanding Company Voting
Securities; and

 

WHEREAS, the parties hereto believe that it is desirable to establish certain
provisions with respect to the Company Voting Securities that are currently
held, or may be acquired, by the GSO Funds; and

 

WHEREAS, the Board of Directors of the Company has approved this Agreement upon
the terms and subject to the conditions contained herein;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each party hereto, the parties
hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1 Definitions. Capitalized terms used herein without definition shall
have the meanings set forth below:

 

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“Affiliate” means, with respect to any of the GSO Funds, any Person that is
directly or indirectly Controlled by GSO and, with respect to any other
specified Person, any Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by, or is under common Control with,
the Person specified; provided, that no portfolio company directly or indirectly
Controlled by GSO shall be deemed an Affiliate of the the GSO Funds; provided
further, that, for purposes of this Agreement, The Blackstone Group, L.P. and
all private equity funds, portfolio companies, parallel investment entities, and
alternative investment entities owned, managed, or Controlled by The Blackstone
Group, L.P., or its Affiliates that are not part of the credit-related
businesses of The Blackstone Group L.P., shall neither constitute nor be
considered or otherwise deemed to be an “Affiliate” of GSO, the GSO Funds or
their Affiliates or any fund or account managed, advised or sub-advised by or
Controlled by GSO or its Affiliates within the credit-related businesses of The
Blackstone Group L.P. that are part of the credit-related businesses of The
Blackstone Group L.P.

 

“Agreement” has the meaning specified therefor in the introductory paragraph.

 

“Anadarko Closing” has the meaning assigned to such term in the SPA.

 

“Basic Documents” shall have the meaning assigned to such term in the SPA.

 

“Bankruptcy Event” means, with respect to any Person, the occurrence of one or
more of the following events: (a) such Person (i) admits in writing its
inability to pay its debts as they become due, (ii) files, or consents or
acquiesces by answer or otherwise to the filing against it of a petition for
relief or reorganization or rearrangement, readjustment or similar relief or any
other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, dissolution, reorganization, moratorium or other similar
law of any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) is adjudicated as bankrupt or as insolvent
or to be liquidated, (vi) gives notice to any Governmental Authority of
insolvency or pending insolvency, or (vii) takes corporate action for the
purpose of any of the foregoing; or (b) a court of Governmental Authority of
competent jurisdiction enters an order appointing, without consent by such
Person, a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, or
constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of such Person, or a petition or
involuntary case with respect to any of the foregoing shall be filed or
commenced against such Person.

 

“Beneficially Own” has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular “person” (as that term is used in
Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have
beneficial ownership of all securities that such “person” has the right to
acquire by conversion or exercise of other securities, whether such right is
currently exercisable or is exercisable only after the passage of time. For
purposes of this Agreement, none of GSO, the GSO Funds or their Affiliates or
any fund or account managed, advised or sub-advised by or Controlled by GSO or
its Affiliates, shall constitute or be deemed to “Beneficially Own” any

 

2

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Common Stock or Voting Securities that is Beneficially Owned by The Blackstone
Group, L.P. or any private equity funds, portfolio companies, parallel
investment entities, or alternative investment entities owned, managed, or
Controlled by The Blackstone Group, L.P. or its Affiliates that are not part of
the credit-related businesses of The Blackstone Group, L.P.

 

“Beneficial Ownership” has a correlative meaning to Beneficially Own.

 

“Board” means the Board of Directors or similar governing body of any member of
the Company Group, as applicable.

 

“Common Stock” means the common stock, par value $0.01 per share, of the
Company, and any class or classes of stock resulting from any reclassification
or reclassifications thereof and which have no preference in respect of
dividends or of amounts payable in the event of any liquidation, dissolution or
winding up of the Company. For purposes of this Agreement, references to a share
or shares of Common Stock shall be deemed to include the Right(s) associated
with such share or shares that are issued pursuant to the Rights Plan or any
similar successor plan hereafter adopted by the Company.

 

“Company” has the meaning specified therefor in the introductory paragraph of
this Agreement and includes any successor thereto.

 

“Company Group” means the Company and its Affiliates, other than the General
Partner and the Partnership and its subsidiaries, if any.

 

“Control” (including the terms controlling, controlled by and under common
control with) means the possession, directly or indirectly, of the power to
direct, or cause the direction of, the management and policies of a Person
whether through the ownership of voting securities, by contract or otherwise.
The terms “Controlled” and “Controlling” shall have correlative meanings.

 

“Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended
and the rules and regulations of the SEC promulgated thereunder.

 

“General Partner” has the meaning assigned to such term in the SPA.

 

“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

 

“GSO” means GSO Capital Partners LP.

 

“GSO Fund” or “GSO Funds” has the meaning assigned to such term in the preamble
of this Agreement.

 

“Joint Development Agreement” has the meaning assigned to such term in the SPA.

 

3

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“Partnership” means SN EF UnSub, LP, a Delaware limited partnership.

 

“Partnership Agreement” has the meaning assigned to such term in the SPA.

 

“Person” shall mean an individual, corporation, limited liability or unlimited
liability company, association, partnership, trust, estate, joint venture,
business trust or unincorporated organization, or a government or any agency or
political subdivision thereof, or other entity of any kind or nature.

 

“Rights” has the meaning assigned to such term under the Rights Plan.

 

“Rights Plan” means that certain Rights Agreement, dated as of July 28, 2015,
between the Company and Continental Stock Transfer & Trust Company, as rights
agent, including the exhibits attached thereto, as such rights agreement may be
amended, modified or supplemented from time to time.

 

“SEC” means the U.S. Securities and Exchange Commission (or any successor
agency).

 

“Securities” means (i) the warrant to purchase shares of Common Stock issued
pursuant to the Warrant Agreement, (ii) the SN Shares and (iii) Common Stock
issued or issuable pursuant to the Warrant Agreement.

 

“Securities Act” shall mean the U.S. Securities Act of 1933, as amended and the
rules and regulations of the SEC promulgated thereunder.

 

“SN Shares” has the meaning assigned to such term in the SPA.

 

“SPA” has the meaning specified therefor in the recitals of this Agreement.

 

“Standstill Termination Date” means the date on which GSO, the GSO Funds and
their respective Affiliates Beneficially Own less than 1.0% of the outstanding
Voting Securities.

 

“Votes” means votes entitled to be cast generally in the election of members of
the Board.

 

“Voting Power” means, as of any time, the ratio, expressed as a percentage, of
(x) the Votes (with respect to the Board of the Company) represented by the
Voting Securities Beneficially Owned by the Person in question and its
Affiliates to (y) the aggregate (A) Votes (with respect to the Board of the
Company) represented by all then outstanding Voting Securities plus (B) without
duplication the Votes (with respect to the Board of the Company) represented by
the Voting Securities underlying any other interests Beneficially Owned by the
Person in question and its Affiliates.

 

“Voting Securities” means, together, (1) the Common Stock and (2) any shares of
any class of capital stock or other equity interest (or other security or
interest) of any member of the Company Group, other than the Common Stock, that
are entitled to vote generally in the election of members of the Board.

 

4

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“Warrant Agreement” has the meaning specified therefor in the recitals of this
Agreement.

 

“Warrants” has the meaning assigned to such term in the SPA.

 

ARTICLE II

STANDSTILL; VOTING

 

Section 2.1                             Standstill. During the period commencing
on the date hereof and ending on the Standstill Termination Date, without the
prior consent of the Company, each of the GSO Funds agrees that neither it nor
any of its Affiliates will (and such GSO Fund will cause its Affiliates to not),
directly or indirectly:

 

(a)                          other than the acquisition of additional shares of
Common Stock by any of the GSO Funds (i) pursuant to the exercise of the Warrant
Agreement or (ii) pursuant to the exercise of Rights associated with Common
Stock owned by such GSO Fund or its Affiliates, acquire (or propose or agree to
acquire), of record or beneficially, by purchase or otherwise, any of the
Company Group’s corporate loans, debt securities, Voting Securities, other
Company Group securities or all or substantially all of the assets of any member
of the Company Group, or rights or options to acquire interests in any of Voting
Securities or other Company Group securities of any member of the Company Group
or all or substantially all of the assets of any member of the Company Group;

 

(b)                          (i) call a special meeting of the holders of Voting
Securities of any member of the Company Group, including without limitation by
written consent, (ii) seek representation on the Board of any member of the
Company Group, (iii) seek the removal of any member of the Board of any member
of the Company Group, (iv) solicit consents from securityholders or otherwise
act or seek to act by written consent with respect to the Company Group,
(v) conduct a referendum of securityholders of any member of the Company Group
or (vi) make a request for any securityholder list or other Company Group books
and records, whether pursuant to Section 220 of the Delaware General Corporation
Law or otherwise;

 

(c)                           make any statement or proposal to the Board of any
member of the Company Group regarding, or make any public announcement, proposal
or offer (including without limitation any “solicitation” of “proxies” as such
terms are defined or used in Regulation 14A of the Exchange Act) with respect
to, or otherwise solicit, seek or offer to effect (including without limitation,
for the avoidance of doubt, indirectly by means of communication with the press
or media):

 

(i)                              any acquisition of any of the securities or all
or substantially all of the assets of any member of the Company Group, or rights
or options to acquire interests in any of the securities or all or substantially
all of the assets of any member of the Company Group;

 

(ii)                           any business combination, merger, tender offer,
exchange offer, similar transaction or other extraordinary transaction involving
any member of the Company Group;

 

5

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(iii)                        any restructuring, recapitalization, liquidation or
similar transaction involving any member of the Company Group;

 

(iv)                       any proposal to seek representation on the Board of
any member of the Company Group or otherwise seek to control or influence the
management, the Board or policies of any member of the Company Group, including,
without limitation, (A) any plans or proposals to change the number or term of
directors or to fill any vacancies on the Board of any member of the Company
Group, (B) any material change in the capitalization or dividend policy of any
member of the Company Group, (C) any other material change in any member of the
Company Group’s management, business or corporate structure, (D) seeking to have
any member of the Company Group waive or make amendments or modifications to its
organizational documents, or other actions that may impede or facilitate the
acquisition of control of any member of the Company Group by any Person,
(E) causing a class of securities of the Company to be delisted from, or to
cease to be authorized to be quoted on, any securities exchange; or (F) causing
a class of equity securities of the Company to become eligible for termination
of registration pursuant to Section 12(g)(4) of the Exchange Act;

 

(v)                          any request or proposal to waive, terminate or
amend the provisions of this Agreement if such request or proposal would require
GSO, the GSO Funds or any member of the Company Group to make a public
announcement;

 

(vi)                       any proposal, arrangement or other statement that is
inconsistent with the terms of this Agreement, including without limitation this
Section 2.1; or

 

(d)                          knowingly instigate, encourage or assist any third
party (including, without limitation, forming a “group” (within the meaning of
Section 13(d)(3) of the Exchange Act) with any such third party, provided that
the inclusion of GSO, the GSO Funds and any fund or account managed, advised or
sub-advised by or Controlled by GSO or its Affiliates as members of a “group”
(within the meaning of Section 13(d)(3) of the Exchange Act) of which The
Blackstone Group L.P. and its other Affiliates are members shall not constitute
a breach or violation of this Section 2.1(d)) to do, or enter into any
discussions or agreements with any third party with respect to, any of the
actions set forth in Section 2.1(c); or

 

(e)                           take any action which would require any member of
the Company Group to make a public announcement regarding any of the actions set
forth in Section 2.1(c) (provided that any public disclosure by the Company of a
change of Beneficial Ownership of Common Stock by GSO and the GSO Funds or by
any “group” (within the meaning of Section 13(d)(3) of the Exchange Act) of
which GSO and the GSO Funds are members with The Blackstone Group L.P. as a
result of a filing on Schedule 13D or Schedule 13G shall not constitute a breach
or violation of this Section 2.1(e)) .

 

Section 2.2                                    Standstill Exceptions.
Notwithstanding any other provision hereof, the parties hereto agree that the
restrictions contained in Section 2.1 shall:

 

(a)                                 not apply to transactions in any equity or
debt securities of any member of the Company Group by any pension plan, 401(k)
plan or other employee benefit plan or

 

6

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discretionary investment fund administered for the benefit of the directors,
officers or employees of GSO, any GSO Fund or their respective Affiliates;
provided, that such activities are not in connection with any intention, plan or
arrangement to influence or acquire control over any member of the Company
Group’s management, Board or policies;

 

(b)                         not prohibit any of the GSO Funds or their
respective Affiliates from privately communicating with, including without
limitation making any offer or proposal to, the Board of the Company, subject to
Section 2.1(f);

 

(c)                                  not prohibit any transfer which is
otherwise permitted under Section 2.3 and/or Section 2.4; and

 

(d)                                 terminate and be of no further force and
effect on the Standstill Termination Date.

 

Section 2.3                            Transfer Restrictions. Without limiting
the restrictions set forth in Section 2.4, each of the GSO Funds agrees that it
shall not (and such GSO Fund shall cause its Affiliates not to), without the
prior written consent of the Company, transfer any Voting Securities (or any
securities convertible into or exercisable for Voting Securities) directly or
indirectly (by merger, consolidation, operation of law or otherwise):

 

(a)                         to, or in a transaction with, any Person or “group”
(within the meaning of Section 13(d)(3) of the Exchange Act) where any such
Person or “group” would acquire in such transaction or, to the knowledge of such
GSO Fund after reasonable inquiry, owns or would own, following such
transaction, Beneficial Ownership of an aggregate number of Voting Securities
representing 4.9% or more of the Voting Power or 4.9% or more of the issued and
outstanding Common Stock; or

 

(b)                         to, or in a transaction with, any Person, or “group”
(within the meaning of Section 13(d)(3) of the Exchange Act) that, to the
knowledge of the GSO Funds after reasonable inquiry, competes directly or
indirectly with the business of the Company in any material respect;

 

provided that the restrictions in this Section 2.3 shall not apply to (i) any
Voting Securities (or any securities convertible into or exercisable for Voting
Securities) transferred pursuant to a public distribution in compliance with any
applicable requirements of U.S. federal or state securities laws (including
without limitation Rule 144 under the Securities Act) and (ii) in the case of an
investment fund, limited liability company or partnership which is an Affiliate
of such GSO Fund, not apply to the transfer of any Voting Securities (or any
securities convertible into or exercisable for Voting Securities) to a limited
partner of such fund, member of such limited liability company or limited or
general partner of such general or limited partnership, or to any other
Affiliate of a GSO Fund that in each case agrees to be bound by the provisions
contained in this Agreement.

 

Section 2.4                            Lockup. Without the prior written consent
of the Company, except as specifically provided below, each GSO Fund shall not
(and each GSO Fund shall cause its Affiliates not to), (a) during the period
commencing on the date hereof and ending on the second anniversary of the date
of the Anadarko Closing, (x) offer, sell, contract to sell, sell any option or

 

7

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contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any of the Securities or (y) directly or indirectly
engage in any short sales or other derivative or hedging transactions with
respect to the Securities, regardless of whether any transaction described in
clauses (x) or (y) above is to be settled by delivery of Common Stock or other
securities, in cash or otherwise. Notwithstanding the foregoing, and subject to
the conditions below, each GSO Fund and its Affiliates may (a) transfer any
Securities (or any securities convertible into or exercisable for Securities) to
any limited partner of any investment fund, member of any limited liability
company or limited or general partner of any general or limited partnership, in
each case which is an Affiliate of a GSO Fund, or to any other Affiliate of a
GSO Fund, provided, that that in each case such Person agrees to be bound by the
provisions contained in this Agreement, (b) transfer Securities to the Company
pursuant to any net exercise or net settlement of any Common Stock pursuant to
the terms of the Warrant Agreement and (c) transfer Securities in connection
with any foreclosure by a lender of borrowed money which was secured by a bona
fide pledge of the Securities.

 

Section 2.5                                    Voting. During the period
commencing on the date hereof and ending on the Standstill Termination Date:
each of the GSO Funds

 

(a)                         shall (and shall cause its Affiliates to) take such
action (including, without limitation, if applicable, through the execution of
one or more written consents if stockholders of the Company are requested to
vote through the execution of an action by written consent in lieu of any such
annual or special meeting of stockholders of the Company) at each meeting of the
stockholders of the Company as may be required so that all shares of issued and
outstanding Voting Securities of the Company Beneficially Owned, directly or
indirectly, by it and/or by any of its Affiliates are voted in the same manner
(“for,” “against,” “withheld,” “abstain” or otherwise) as recommended by the
Board of the Company to the other holders of Voting Securities (including
without limitation with respect to director elections) of the Company; provided,
that the foregoing shall not apply in the event that the Board of the Company
recommends that the other holders of Voting Securities vote against the
Company’s approval of a “Sale Transaction” (as defined in the Joint Development
Agreement);

 

(b)                         shall (and shall cause its Affiliates to) be
present, in person or by proxy, at all meetings of the stockholders of the
Company so that all shares of issued and outstanding Voting Securities of the
Company Beneficially Owned by it or them from time to time may be counted for
the purposes of determining the presence of a quorum and voted in accordance
with Section 2.5(a) at such meetings (including without limitation at any
adjournments or postponements thereof). The foregoing provision shall also apply
to the execution by such Persons of any written consent in lieu of a meeting of
holders of Voting Securities of the Company; and

 

(c)                          subject to the proviso in Section 2.5(a), shall
(and shall cause their respective Affiliates to) vote (or cause to be voted) or
to act by written consent all securities of the Company Group Beneficially Owned
by it that are not Voting Securities as directed or recommended by the Board of
the Company and shall cause such other securities to be counted as present for
the purposes of establishing a quorum, to the extent applicable.

 

8

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Section 2.6 Exceptions to Transfer Restrictions; Early Termination.
Notwithstanding Section 2.3 and 2.4, each of the GSO Funds and their respective
Affiliates shall be permitted to transfer Securities in any of the following
transactions to the counterparties in such transactions, but not otherwise:

 

(a)                          the Company, with the approval of a majority of the
Board of the Company, enters into an agreement with any Person or group (none of
which is an Affiliate of the GSO Funds) providing for (i) an offer to be made to
purchase 50% or more of the outstanding shares of Common Stock or all or
substantially all of the assets of the Company; or (ii) the merger or
consolidation of the Company with or into any other person in which (A) either
the Company’s outstanding capital stock shall be converted into cash or other
property, or a majority of the outstanding voting stock of the surviving
corporation immediately following such merger or consolidation will not be owned
by Persons who were stockholders of the Company immediately before the merger or
consolidation, and (B) notice of a meeting of shareholders of the Company called
to consider such agreement shall be given by or at the direction of the Board of
the Company;

 

(b)                          any tender offer or exchange offer made to the
holders of the Company’s outstanding Common Stock (so long as such offer is not
made by the GSO Funds or any of their Affiliates) and with respect to which the
Company, with the approval of a majority of the Board of the Company, has
recommended that the Company’s stockholders accept such offer.

 

(c)                           The restrictions in Sections 2.3 and 2.4 shall
terminate (i) upon any transfer in accordance with clause (i) of the proviso of
Section 2.3 or a foreclosure in accordance with clause (c) of the second
sentence of Section 2.4, (ii) on the occurrence of a Bankruptcy Event of the
Company and (iii) with respect to any Securities which are the subject of the
transactions referred to in Sections 2.6(a) or (b) which are transferred in
accordance with the consummation of such transactions.

 

ARTICLE III

MISCELLANEOUS

 

Section 3.1                             Communications. All notices and other
communications provided for hereunder shall be in writing and shall be given by
hand delivery, electronic mail, registered or certified mail, return receipt
requested, regular mail or air courier guaranteeing overnight delivery to the
following addresses:

 

if to the Company to:

 

Sanchez Energy Corporation

 

1000 Main Street

 

Suite 3000

 

Houston, Texas 77002

 

Attention: Gregory Kopel

 

Email:

gkopel@sanchezog.com

 

 

9

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

 

Akin Gump Strauss Hauer & Feld, LLP

1111 Louisiana Street, Suite #44

Houston, TX 77002

Attention: David Elder

Facsimile: 713-236-0822

Email: delder@akingump.com

 

if to the GSO Funds to:

 

c/o GSO Capital Partners

1111 Bagby Street, Suite 2050

Houston, Texas 77002

Attention: Robert Horn

Email: robert.horn@gsocap.com

 

with a copy to :

 

c/o GSO Capital Partners

345 Park Avenue, 31st Floor

New York, New York 10154

Email: GSO Legal@gsocap.com

GSOValuationsGroup@gsocap.com

 

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

 

Andrews Kurth Kenyon LLP

4200 Travis Street

Suite 4200

Houston, Texas 77002

Attention: G. Michael O’Leary

 

Jon Daly

 

or to such other address as may be specified in a notice given pursuant to this
Section 3.1. All notices and communications shall be deemed to have been duly
given: (i) at the time delivered by hand, if personally delivered; (ii) when
notice is sent by the sender and the recipient has read the message, if sent by
electronic mail; (iii) upon actual receipt if sent by registered or certified
mail, return receipt requested, or regular mail, if mailed; or (iv) upon actual
receipt when delivered to an air courier guaranteeing overnight delivery. The
parties may change the address to which notices are to be given by giving five
(5) days’ prior notice of such change in accordance herewith.

 

10

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Section 3.2                            Construction; Interpretation. The
Sections and other headings and subheadings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties hereto, and shall not in any way affect the meaning or interpretation of
this Agreement or any exhibit hereto. Whenever required by the context, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa. Unless otherwise specified, all
references to days or months shall be deemed to refer to a section or subsection
of this Agreement. The words “hereof,” “herein” and “hereunder” and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. The word “including”
shall mean “including, without limitation.” Reference to any agreement, document
or instrument means such agreement, document or instrument as amended or
otherwise modified from time to time in accordance with the terms thereof, and
if applicable hereof. Whenever required by the context, references to a Fiscal
Year shall refer to a portion thereof. The use of the words “or,” “either” and
“any” shall not be exclusive. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement; accordingly, the language used
in this Agreement shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction shall
be applied against any Person. If an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Wherever a conflict exists between this Agreement
and any other agreement, this Agreement shall control but solely to the extent
of such conflict.

 

Section 3.3                            Successors and Assigns. This Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties. All of the terms, covenants and agreements
contained in this Agreement are solely for the benefit of the parties hereto,
and their respective successors and assigns, and no other parties (including,
without limitation, any other Stockholders or creditor of the Company, or any
director, officer or employee of the Company) are intended to be benefitted by,
or entitled to enforce, this Agreement.

 

Section 3.4                            Assignment of Rights. No party hereto may
transfer or assign any portion of its rights and obligations under this
Agreement without the prior written consent of the other party hereto.

 

Section 3.5                            Recapitalization, Exchanges, etc.
Affecting the Stock. The provisions of this Agreement shall apply to the full
extent set forth herein with respect to any and all interests of the Company
Group or any successor or assign of any member of the Company Group (whether by
merger, consolidation, sale of assets or otherwise), which may be issued in
respect of, in exchange for or in substitution of, such interests, and shall be
appropriately adjusted for combinations, stock or other splits,
recapitalizations, pro rata distributions and the like occurring after the date
of this Agreement.

 

Section 3.6                            Aggregation of Securities. All equity
securities of the Company Group held or acquired by Persons who are Affiliates
of one another shall be aggregated together for the

 

11

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purpose of determining the availability of any rights and applicability of any
obligations under this Agreement.

 

Section 3.7                            Specific Performance. Damages in the
event of breach of this Agreement by a party hereto may be difficult, if not
impossible, to ascertain, and it is therefore agreed that each such Person, in
addition to and without limiting any other remedy or right it may have, will
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach, and enforcing specifically
the terms and provisions hereof, and each of the parties hereto hereby waives
any and all defenses it may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable relief.
The existence of this right will not preclude any such Person from pursuing any
other rights and remedies at law or in equity which such Person may have.

 

Section 3.8                            Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement. A signed copy
of this Agreement delivered by facsimile, portable document format (PDF) or
other means of electronic transmission shall be deemed to have the same legal
effect as delivery of an original signed copy of this Agreement. This Agreement
and all of the provisions hereof shall be binding upon and effective as to each
Person who (i) executes this Agreement in the appropriate space provided in the
signature pages hereto notwithstanding the fact that other Persons who have not
executed this Agreement may be listed on the signature pages hereto and (ii) may
from time to time become a party to this Agreement by executing a counterpart of
or joinder to this Agreement.

 

Section 3.9         Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

 

Section 3.10                     Governing Law. This Agreement is governed by
and construed and enforced in accordance with the laws of the State of Delaware,
without giving effect to any conflicts of law principles that would result in
the application of any law other than the law of the State of Delaware.

 

Section 3.11                     Jurisdiction. Each of the parties irrevocably
agrees that any legal action or proceeding with respect to this Agreement and
the rights and obligations arising hereunder shall be brought and determined
exclusively in the Court of Chancery of the State of Delaware or, if such Court
does not have subject matter jurisdiction, to the Superior Court of the State of
Delaware or, if jurisdiction is vested exclusively in the Federal courts of the
United States, the Federal courts of the United States sitting in the State of
Delaware, and any appellate court from any such state or Federal court, and
hereby irrevocably and unconditionally agree that all claims with respect to any
such claim shall be heard and determined in such Delaware court or in such
Federal court, as applicable. The parties agree that a final judgment in any
such claim is conclusive and may be enforced in any other jurisdiction by suit
on the judgment or in any other manner provided by law. In addition, each of the
parties hereby irrevocably and unconditionally agrees (1) that it is and shall
continue to be subject to the jurisdiction of the courts of the State of
Delaware and of the federal courts sitting in the State of Delaware, and
(2)(A) to the extent that such party is not otherwise subject to service of
process in the State of Delaware, to appoint and

 

12

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maintain an agent in the State of Delaware as such party’s agent for acceptance
of legal processes and notify the other parties of the name and address of such
agent, and (B) to the fullest extent permitted by law, that service of process
may also be made on such party by prepaid certified mail with a proof of mailing
receipt validated by the U.S. Postal Service constituting evidence of valid
service, and that, to the fullest extent permitted by applicable law, service
made pursuant to (2)(A) or (B) above shall have the same legal force and effect
as if served upon such party personally within the State of Delaware.

 

Section 3.12                      WAIVER OF JURY TRIAL. TO THE EXTENT NOT
PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTY HEREBY
IRREVOCABLY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF
ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING IN WHOLE OR IN
PART UNDER, RELATED TO, BASED ON, OR IN CONNECTION WITH, THIS AGREEMENT OR THE
SUBJECT MATTER HEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
SOUNDING IN TORT OR CONTRACT OR OTHERWISE. ANY PARTY MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION 3.12 WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

Section 3.13                      Severability of Provisions. Whenever possible,
each provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
is held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or the effectiveness or
validity of any provision in any other jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein or if such
term or provision could be drawn more narrowly so as not to be illegal, invalid,
prohibited or unenforceable in such jurisdiction, it shall be so narrowly drawn,
as to such jurisdiction, without invalidating the remaining terms and provisions
of this Agreement or affecting the legality, validity or enforceability of such
term or provision in any other jurisdiction.

 

Section 3.14                      Entire Agreement; Integrated Transactions.
This Agreement, the other Basic Documents and the other agreements and documents
expressly referred to herein as intended by the parties hereto as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject manner contained herein and therein. This Agreement, the other Basic
Documents and the other agreements and documents expressly referred to herein or
therein supersede all prior agreements and understandings between the parties
with respect to such subject matter. Each of the parties hereto acknowledges and
agrees that in executing this Agreement (i) the intent of the parties in this
Agreement and the other Basic Documents shall constitute an unseverable and
single agreement of the parties with respect to the transactions contemplated
hereby and thereby, (ii) it waives, on behalf of itself and each of its
Affiliates, any claim or defense based upon the characterization that this
Agreement and the other Basic Documents are anything other than a true single
agreement relating to such matters and (iii) the

 

13

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matters set forth in this Section 3.14 constitute a material inducement to enter
into this Agreement and the other Basic Documents and to consummate the
transactions contemplated hereby and thereby. Each of the parties hereto
stipulates and agrees (i) not to challenge the validity, enforceability or
characterization of this Agreement and the other Basic documents as a single,
unseverable instrument pertaining to the matters that are the subject of such
agreements, (ii) this Agreement and the other Basic Documents shall be treated
as a single integrated and indivisible agreement for all purposes, including the
bankruptcy of any party and (iii) not to assert or take or omit to take any
action inconsistent with the agreements and understandings set forth in this
Section 3.14.

 

Section 3.15                      No Partnership. No partnership, joint venture
or joint undertaking is intended to be, or is, formed between the parties hereto
or any of them by reason of this Agreement or the transactions contemplated
herein.

 

Section 3.16                      Amendment. This Agreement may be amended only
by means of a written amendment signed by the Company and the GSO Funds.

 

Section 3.17                      No Presumption. In the event any claim is made
by a party relating to any conflict, omission, or ambiguity in this Agreement,
no presumption or burden of proof or persuasion shall be implied by virtue of
the fact that this Agreement was prepared by or at the request of a particular
party or its counsel.

 

Section 3.18                      Obligations Limited to Parties to Agreement.
Each of the Parties hereto covenants, agrees and acknowledges that no Person
other than the GSO Funds (and their transferees or assignees) and the Company
shall have any obligation hereunder and no recourse under this Agreement shall
be had against any former, current or future director, officer, employee, agent,
general or limited partner, manager, member, securityholder or Affiliate of any
of the GSO Funds or the Company or any former, current or future director,
officer, employee, agent, general or limited partner, manager, member,
securityholder or Affiliate of any of the foregoing, whether by the enforcement
of any assessment or by any legal or equitable proceeding, or by virtue of any
applicable law, it being expressly agreed and acknowledged that no personal
liability whatsoever shall attach to, be imposed on or otherwise be incurred by
any former, current or future director, officer, employee, agent, general or
limited partner, manager, member, securityholder or Affiliate of any of the GSO
Funds or the Company or any former, current or future director, officer,
employee, agent, general or limited partner, manager, member, securityholder or
Affiliate of any of the foregoing, as such, for any obligations of any of the
GSO Funds or the Company under this Agreement or for any claim based on, in
respect of or by reason of such obligation or its creation.

 

Section 3.19                      Further Assurances. The Company and each of
the GSO Funds shall cooperate with each other and shall take such further action
and shall execute and deliver such further documents as may be reasonably
requested by any other party in order to carry out the provisions and purposes
of this Agreement. The GSO Funds agree that they shall not direct any Person to
undermine or breach the terms and conditions set forth herein.

 

Section 3.20                             Cumulative Remedies. The remedies
provided herein are cumulative and not exclusive of any remedies provided by
law.

 

14

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

 

 

COMPANY:

 

 

 

SANCHEZ ENERGY CORPORATION

 

 

 

By:

 

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

 

 

 

 

 

GSO FUNDS:

 

 

 

GSO CAPITAL OPPORTUNITIES FUND III LP

 

By: GSO Capital Opportunities Associates III, LLC, its general partner

 

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

GSO ENERGY SELECT OPPORTUNITIES FUND LP

 

By:

GSO Energy Select Opportunities

 

Associates LLC, its general partner

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

GSO ENERGY PARTNERS-A LP

 

By:

GSO Energy Partners-A Associates LLC,

 

 

its general partner

 

By:

 

 

Name:

 

Title:

 

 

 

GSO ENERGY PARTNERS-B LP

 

By:

GSO Energy Partners-B Associates LLC,

 

 

its general partner

 

By:

 

 

Name:

 

Title:

 

 

 

GSO ENERGY PARTNERS-C LP

 

[Signature Page to Standstill and Voting Agreement]

 

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

 

 

By:

GSO Energy Partners-C Associates LLC,

 

 

its general partner

 

By:

 

 

Name:

 

 

Title:

 

 

 

GSO ENERGY PARTNERS-C II LP

 

By:

GSO Energy Partners-C Associates II LLC,

 

 

its general partner

 

By:

 

 

Name:

 

Title:

 

 

 

GSO ENERGY PARTNERS-D LP

 

By:

GSO Energy Partners-D Associates LLC,

 

 

its general partner

 

By:

 

 

Name:

 

Title:

 

 

 

GSO CREDIT ALPHA FUND LP

 

By:

GSO Capital Partners LP,

 

 

its investment manager

 

By:

 

 

Name:

 

Title:

 

 

 

GSO HARRINGTON CREDIT ALPHA FUND (CAYMAN) L.P.

 

By:

GSO Capital Partners LP,

 

 

its investment manager

 

By:

 

 

Name:

 

Title:

 

 

 

GSO CAPITAL SOLUTIONS FUND II LP

 

By:

GSO Capital Solutions Associates II LP,

 

 

its general partner

 

By:

GSO Capital Solutions Associates II

 

 

(Delaware LLC, its general partner

 

 

 

 

 

By:

 

 

16

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Name:

 

Title:

 

 

 

GSO COF III CO-INVESTMENT FUND LP

 

By:

GSO COF III Co-Investment

 

Associates LLC, its general partner

 

 

 

By:

 

 

Name:

 

 

Title:

 

17

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EXHIBIT M

 

GSO FUNDS

 

EXHIBIT M TO

SECURITIES PURCHASE AGREEMENT

 

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

 

EXHIBIT N

 

SN LETTER AGREEMENT

 

[Attached.]

 

EXHIBIT N TO

SECURITIES PURCHASE AGREEMENT

 

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

 

Execution Version

 

Sanchez Energy Corporation

1000 Main St, Suite 3000

Houston, Texas 77002

 

January 12, 2017

 

SN EF UnSub, LP

1000 Main Street, Suite 3000

Houston, Texas 77002

 

SN EF Maverick, LLC

1000 Main Street, Suite 3000

Houston, Texas 77002

 

Re: Letter Agreement

 

Reference is made to that certain Purchase and Sale Agreement, dated as of
January 12, 2017 (the “APC PSA”), by and among Anadarko E&P Onshore LLC, a
Delaware limited liability company (“AEP”), Kerr-McGee Oil & Gas Onshore LP, a
Delaware limited partnership (“KMOG” and collectively with AEP, “Seller”), SN EF
Maverick, LLC, a Delaware limited liability company (“SN”), SN EF UnSub, LP, a
Delaware limited partnership (“UnSub”), Aguila Production, LLC, a Delaware
limited liability company (“AcqCo” and collectively with SN and UnSub, “Buyer”),
and, solely for the purposes of Section 15.22 and Schedule 13.4(a) of the APC
PSA, Sanchez Energy Corporation, a Delaware corporation (“SN Parent”).
Capitalized terms used but not otherwise defined herein shall have the meaning
assigned to such terms in the APC PSA.

 

The purpose of this letter agreement (this “Letter Agreement”) is to set forth
certain agreements of SN, SN Parent and UnSub.

 

NOW, THEREFORE, for and in consideration of the mutual promises contained
herein, the benefits to be derived by each party hereunder, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by all, SN, SN Parent and UnSub agree as follows:

 

1.                              Purchase Price Adjustment.  At the Closing, the
Purchase Price to be paid by SN and UnSub shall be adjusted pursuant to the
provisions of Section 3.3 and Section 3.5 of the APC PSA (herein referred to as
the “Preliminary Purchase Price Adjustment”). On or before 120 days after the
Closing, the Purchase Price shall be adjusted pursuant to the provisions of
Section 3.6 of the APC PSA (herein referred to as the “Final Purchase Price
Adjustment”). Each of the Preliminary Purchase Price Adjustment and the Final
Purchase Price Adjustment are sometimes hereinafter referred to individually as
a “Purchase Price Adjustment.” Pursuant to the terms of the APC PSA, Seller
(a) will only be adjusting the Purchase Price pursuant to such provisions on an
aggregate basis and (b) will not be providing allocations of such adjustments
between SN and UnSub. The following sets forth the agreement among SN and UnSub
as to allocations of such adjustments between SN and UnSub.

 

(a)                                 Upon receipt of the Preliminary Settlement
Statement or the Final Settlement Statement from APC, on or before (i) three
(3) Business Days prior to Closing (in the case of the Preliminary Settlement
Statement) or (ii) seven (7) calendar days prior to the Final Payment Date (in
the case of the Final Settlement Statement), SN shall use reasonable efforts to
submit to UnSub a statement that allocates the Preliminary Purchase Price
Adjustment or the Final

 

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

 

Purchase Price Adjustment, as applicable, between SN and UnSub attributable to
the undivided interests in the Assets to be acquired by SN and UnSub at Closing.
Prior to Closing or the Final Payment Date, whichever is applicable, SN and
UnSub will in good faith attempt to agree upon such allocations.

 

(b)                                 If SN and UnSub are able to agree upon the
allocation of the Preliminary Purchase Price Adjustment described in clause
(a) above on or before two (2) Business Days prior to the Closing, then SN will
notify Seller of the resulting allocation of the Preliminary Purchase Price
Adjustment as between SN and UnSub prior to Closing. If SN and UnSub are able to
agree upon the allocation of the Final Purchase Price Adjustment described in
clause (a) above on or before two (2) Business Days prior to the Final Payment
Date, then SN will notify Seller of the resulting allocation of the Final
Purchase Price Adjustment as between SN and UnSub prior to the Final Payment
Date.

 

(c)                                  If SN is unable to submit the allocations
of the Preliminary Purchase Price Adjustment or the Final Purchase Price
Adjustment described in clause (a) above to UnSub pursuant to the dates set
forth in clause (a) above or if SN and UnSub are unable to agree upon such
allocations after exercising good faith attempts to do so, then (i) if the
applicable Purchase Price Adjustment would result in a payment from Seller to SN
and UnSub collectively (or net downward adjustment to the Purchase Price), then
such Purchase Price Adjustment shall be allocated 10% to SN and 90% to UnSub at
the Closing or Final Payment Date, as applicable, and (ii) if the applicable
Purchase Price Adjustment would result in a payment from SN and UnSub
collectively to Seller (or net upward adjustment to the Purchase Price), then
such Purchase Price Adjustment shall be allocated 90% to SN and 10% to UnSub at
the Closing or Final Payment Date, as applicable, in each case, pending final
settlement or agreement hereunder. SN and UnSub will continue to attempt in good
faith to agree upon the allocation of the Preliminary Purchase Price Adjustment
or the Final Purchase Price Adjustment for thirty (30) days after the Closing or
the Final Payment Date, as applicable. If SN and UnSub are able to agree upon
such allocations, then appropriate payments between SN and UnSub will be made
within three (3) Business Days to reflect the agreed-upon allocation of such
Purchase Price Adjustments between SN and UnSub. If SN and UnSub are unable to
agree upon the allocation of the Final Purchase Price Adjustment between SN and
UnSub, then SN and UnSub will resolve such disagreement according to the dispute
resolution procedures set forth in Section 3.7 of the APC PSA, which shall apply
mutatis mutandis to this Letter Agreement.

 

(d)                                 SN and UnSub agree that the allocation of
Purchase Price Adjustments between SN and UnSub will be based upon the Purchase
Price adjustment provisions set forth in Section 3.3, Section 3.5 and
Section 3.6 of the APC PSA, which will attempt to the maximum extent practicable
to allocate costs and revenues to the particular undivided interests in the
Assets to be acquired by each of SN and UnSub at Closing, provided, for the
avoidance of doubt, that as between SN and UnSub, Purchase Price Adjustments
pursuant to Section 3.3(a)(vii) or Section 3.3(b)(vii) of the APC PSA will be
allocated 100% to UnSub. If a Purchase Price Adjustment is not directly
attributable to particular Assets transferred to each of SN and UnSub at
Closing, then SN and UnSub agree to allocate such Purchase Price Adjustments 60%
to SN and 40% to UnSub.

 

(e)                                  Subject to Section 1(f) below, Purchase
Price Adjustments for Title Defects and Environmental Defects pursuant to
Section 3.3(b)(ii) and Section 3.3(b)(iii) of the APC PSA will be allocated to
each of SN and UnSub based upon the ratio of (i) the sum of (A) the Title Defect
Amounts for the valid uncured Title Defects attributable to such Party plus
(B) the Remediation Amounts for the valid unremediated Environmental Defects
attributable to such Party, compared

 

2

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to (ii) the sum of (A) all Title Defect Amounts for all valid uncured Title
Defects asserted by all Buyer Parties plus (B) all Remediation Amounts for all
valid unremediated Environmental Defects asserted by all Buyer Parties.

 

(f)                                   Notwithstanding anything to the contrary
in Section 1(e) above, the ratio described therein shall be calculated without
regard to Title Defects or Environmental Defects related to Assets excluded from
the transactions contemplated by the APC PSA, and SN and UnSub acknowledge that
(i) the Purchase Price Adjustments for such excluded Assets will be determined
pursuant to Section 3.3(b)(iv) of the APC PSA, and (ii) SN’s and UnSub’s shares
of such Purchase Price Adjustments shall be based upon the undivided interest in
such excluded Assets that would be acquired by such Party at Closing if such
Asset was not excluded.

 

(g)                                  UnSub’s agreement to the allocations of the
Preliminary Purchase Price Adjustment and Final Purchase Price Adjustment
proposed by SN pursuant to this Letter Agreement shall require the consent of
Preferred Unit Purchaser, which consent shall not be unreasonably withheld,
conditioned or delayed.

 

(h)                                 The provisions of this Section 1 shall apply
mutatis mutandis to any provisions of the [redacted] PSA pertaining to purchase
price adjustment (only if such provisions are substantially identical to
Sections 3.3, 3.5 and 3.6 of the APC PSA).

 

2.                   Reimbursement for Indemnification Expenses.

 

(a)                                 UnSub hereby agrees to reimburse SN and/or
SN Parent for any payments made by SN and/or SN Parent, as applicable, in
respect of any Liabilities incurred by (a) SN pursuant to SN’s Indemnity
Obligations under Section 8.3 of the APC PSA, a comparable provision of the
[redacted] PSA (only if such provision is substantially identical to Section 8.3
of the APC PSA) or pursuant to the Development Agreement or the License, in each
case to the extent that such Liabilities are attributable to UnSub’s acquired
properties thereunder, (b) SN pursuant to Section 15.23 of the APC PSA or a
comparable provision of the [redacted] PSA (only if such provision is
substantially identical to Section 15.23 of the APC PSA) or (c), in the case of
SN Parent, incurred by SN Parent in connection with an Indemnification
Obligation of SN that is paid by SN Parent as a result of the SN Parent Guaranty
given by SN Parent in favor of SN pursuant to Section 15.22 of the APC PSA or a
comparable provision of the [redacted] PSA (only if such provision is
substantially identical to Section 15.22 of the APC PSA), in each case to the
extent that such Liabilities are attributable to UnSub’s acquired properties
thereunder.

 

(b)                                 SN Parent and SN, jointly and severally,
hereby agree to reimburse UnSub for any payments made by UnSub in respect of any
Liabilities incurred by UnSub pursuant to UnSub’s Indemnity Obligations under
Section 8.3 or Schedule 13.4 of the APC PSA, Section 8.3 or a comparable
provision of the [redacted] PSA (only if such provision is substantially
identical to Section 8.3 or Schedule 13.4 of the APC PSA, as applicable) or
pursuant to the Development Agreement or the License, in each case to the extent
that such Liabilities are attributable to SN and/or SN Parent’s acquired
properties thereunder.

 

(c)                                  For the avoidance of doubt, any Indemnity
Obligation incurred by the SN Parties as a result of a joint breach of a
covenant made by both SN and UnSub that cannot otherwise be allocated solely to
either SN or UnSub shall be allocated 60% to SN and 40% to UnSub.

 

(d)                                 Each of SN and SN Parent hereby represents
and warrants to UnSub that it is not a party to, or bound by, any contract or
agreement that prohibits SN or SN Parent from making

 

3

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indemnification payments or reimbursements pursuant to the APC PSA or this
Letter Agreement. Each of SN and SN Parent shall not enter into any contract or
agreement that prohibits SN or SN Parent from making indemnification payments or
reimbursements pursuant to the APC PSA or this Letter Agreement.

 

(e)                                  In consideration for the services provided
by SN and certain of its Affiliates to UnSub, UnSub hereby agrees to pay to SN
an annual fee equal to $400,000, which such fee shall be due and payable in
advance on the date hereof and on each one year anniversary thereafter.

 

3.                                      Credit Support.  If SN is required to
post a letter of credit or surety bond for the benefit of Seller pursuant to
Section 11.11(a)(iv) of the APC PSA or a comparable provision of the [redacted]
PSA (only if such provision is substantially identical to
Section 11.11(a)(iv) of the APC PSA), the costs and expenses of such letter of
credit or surety bond shall be allocated 60% to SN and 40% to UnSub.

 

4.                                      Joint Properties.

 

(a)                                 Spacing Restrictions.  Without the prior
written consent of UnSub, prior to the Redemption Date, SN Parent shall not, and
shall cause its Affiliates (including SN) not to, vote for any successor
operator under any Operating Agreement, resign or attempt to resign as the
operator under any Operating Agreement, or take or omit to take any action with
the intent to effectively or constructively terminate its status as operator
under any Operating Agreement, unless such successor operator has agreed in
writing to abide by the spacing restrictions set forth in Section 5.3 of the
Joint Development Agreement.

 

(b)                                 AMI and Participation in Future
Acquisitions.

 

(i)        If any Sanchez Vehicle or its Affiliate elects to participate in an
AMI Acquisition pursuant to the terms of the Joint Development Agreement or
acquire Oil and Gas Properties within the area of mutual interest in Exhibit A
attached hereto (in either case, an “AMI Participation Opportunity”), then SN
Parent shall cause the applicable Sanchez Vehicle(s) or its Affiliate to offer
in writing forty percent (40%) of the interest to be acquired by the applicable
Sanchez Vehicle(s) or its Affiliate in such acquisition to UnSub on the same
purchase price, terms and conditions as such acquisition and otherwise in
accordance with Section 5.11 of the GP LLC Agreement. In addition, if any party
or parties to an Operating Agreement non-consents to an operation proposed
thereunder, then UnSub shall be offered 40% of the pro rata portion of such
non-consenting party’s interest in such proposed operation that becomes
available to SN Parent, SN or any of their Affiliates.

 

(ii)                                  Notwithstanding anything in the GP LLC
Agreement or Partnership Agreement to the contrary, Preferred Unit Purchaser
shall have the right to act on behalf of, and enforce all rights of, UnSub in
connection with Section 4.5 of the Joint Development Agreement.

 

(c)                                  Non-Consent Properties.

 

(i)                                     After receiving a capital expenditure
request with respect to any property in which any Partnership Group Company, on
the one hand, and any Sanchez Vehicle or any of its Affiliates (other than, for
the avoidance of doubt, any Partnership Group Company), on the other hand, owns
an interest, prior to responding and in no event more than ten days after
receiving such request, UnSub shall or shall cause the applicable

 

4

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Partnership Group Company to notify SN Parent as to whether or not the
applicable Partnership Group Company intends to consent to such request and SN
Parent shall or shall cause the applicable Sanchez Vehicle or its Affiliate to
notify UnSub as to whether or not the applicable Sanchez Vehicle or its
Affiliate intends to consent to such request.

 

(ii)                                  If, following the Closing, (A) UnSub
intends to non-consent to any capital expenditure in respect of any of UnSub’s
properties in which any Sanchez Vehicle also owns an interest, or UnSub intends
to cause any other Partnership Group Company to non-consent to any such capital
expenditure with respect to such properties, and (B) any Sanchez Vehicle intends
to consent to such capital expenditure, then, subject to the terms of any
applicable Operating Agreement, joint development agreement (including the Joint
Development Agreement) or participation agreement or other similar
agreement(s) affecting such property, UnSub shall and shall cause the
Partnership Group Companies, as applicable, and SN Parent shall and shall cause
its designated Affiliate, as applicable, to use their respective commercially
reasonable efforts, subject to the terms of their respective organizational
documents and financing arrangements, to take such actions as may be necessary
or appropriate for the non-consenting Partnership Group Company to convey its
interest in the affected property to SN Parent or its designated Affiliate,
subject to reversion to the conveying Partnership Group Company after SN Parent
or its Affiliates, as applicable, have recovered the applicable non-consent
penalty set forth in the applicable Operating Agreement.

 

(iii)                               If, following the Closing, (A) any Sanchez
Vehicle intends to non-consent to any capital expenditure in respect of any of
its properties in which any Partnership Group Company owns an interest and
(B) UnSub intends to consent to such capital expenditure, or intends to cause
any other Partnership Group Company to consent to such capital expenditures,
then, subject to the terms of the applicable Operating Agreement, joint
development agreement (including the Joint Development Agreement) or
participating agreement(s) or other similar agreement affecting such property,
SN Parent shall cause the applicable Sanchez Vehicle(s), and UnSub shall or
shall cause its designated Partnership Group Company to, use their respective
commercially reasonable efforts, subject to the terms of their respective
organizational documents and financing arrangements, to take such actions as may
be necessary or appropriate for the non-consenting Sanchez Vehicle(s) to convey
their interest in the affected property to UnSub or its designated Partnership
Group Company, subject to reversion to the conveying Sanchez Vehicle after UnSub
or its designated Partnership Group Company, as applicable, has recovered the
applicable non-consent penalty set forth in the applicable Operating Agreement.

 

(d)                                 Certain Restricted Transfers by SN Parent.
SN Parent shall not, and shall cause each Sanchez Vehicle not to, without the
prior written consent of UnSub, sell or transfer any Joint Properties, including
any of the properties acquired by any Sanchez Vehicle pursuant to the APC PSA,
to any third party not affiliated with SN Parent, unless in connection with such
sale all outstanding Preferred Units will be redeemed in full, inclusive of an
amount of cash equal to the Base Preferred Return Amount with respect to each
outstanding Preferred Unit (as may be required pursuant to the Partnership
Agreement); provided, that, the foregoing restrictions shall not apply to any
sale or transfer or series of sales or transfers of such assets by any Sanchez
Vehicle(s) if (i) the buyer or transferee in such sale or transfer is Sanchez
Production Partners LP, a Delaware limited partnership (“SPP”), or (ii)(A) the
aggregate sales proceeds of all such sales (giving pro forma effect to those
currently proposed) does not exceed 45% of the PDP PV-10 of the Joint Properties
owned by the Sanchez Vehicles and (B) the aggregate net acreage conveyed

 

5

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or transferred in all such sales (giving pro forma effect to those currently
proposed) does not exceed 45% of the Sanchez Vehicles’ aggregate net acreage
included in the properties acquired by the Sanchez Vehicle(s) at Closing
pursuant to the APC PSA or any subsequently acquired Joint Properties in any
Type Curve Area (as defined in Exhibit B attached hereto and incorporated
herein) or in the aggregate.

 

(e)                                  Certain Workover and Recompletion
Operations.  Upon receipt of a Workover and Recompletion Proposal from UnSub, SN
Parent shall cause each Sanchez Representative to propose such operations
identified in the Workover and Recompletion Proposal to the Operating Committee
in accordance with the terms of the Joint Development Agreement and vote in
favor of such operations. Notwithstanding anything to the contrary contained
herein, upon compliance with the foregoing terms of this Section 4(e), there
shall be no liability on behalf of SN Parent or any Sanchez Representative if
such proposed operations are rejected or otherwise not approved by Blackstone
Representatives (as defined under the Joint Development Agreement) of the
Operating Committee.

 

(f)                                   Division of Operatorship.  SN Parent shall
not, and shall cause each Sanchez Vehicle not to, agree to any “Equitable
Division” (as defined in the Joint Development Agreement) that would result in a
material adverse effect to “Existing Producing Wells” (as defined in the Joint
Development Agreement) or related offset locations owned by the Partnership
Group Companies without the prior written consent of UnSub.

 

(g)                                          Tag-Rights.  UnSub shall have the
tag-along rights on sales of Joint Properties by SN Parent, SN or any of their
Affiliates as set forth in Exhibit C attached hereto.

 

(h)                                 Fair Market Value.  The Parties agree that,
in determining the Fair Market Value of properties to be sold by UnSub and SN,
respectively, pursuant to Sections 4.2 or 4.5 of the Joint Development
Agreement, SN and UnSub agree that any midstream charges and the allocations set
forth in the Hydrocarbons Marketing Agreement of such midstream charges
(including any minimum and maximum charges contained therein) will be used in
determining the Fair Market Value of such properties. The Parties agree that,
although this provision will not bind Aquila regarding any position it might
take with respect to the Fair Market Value of such properties, as between the
Parties, they will not assert any position in such determinations of Fair Market
Value that is inconsistent with the above.

 

5.                                              Certain Actions.  Until the
Redemption Date, each of SN Parent and SN shall not, and shall cause its
Affiliates not to, take any action that is not consistent with or that violates
or is prohibited by the GP LLC Agreement, and each of SN Parent and SN shall
comply, and shall cause its Affiliates to comply, with the GP LLC Agreement,
including Sections 5.7(b), 5.11, 5.15 and 9.5.

 

6.                                              No Guarantor and Restricted
Subsidiary.  SN Parent shall not, and shall not permit any of its Affiliates to,
take any action that would cause UnSub to become a guarantor or a restricted
subsidiary pursuant to any agreement governing any material indebtedness of SN
Parent, SN or any of their Affiliates.

 

7.                                              Tax Partnership.  In the event
the Tax Partnership is not terminated as contemplated by the provisions of
Section 11.14 of the APC PSA, the parties agree to use commercially reasonable
efforts to cause the partnership agreement of the Tax Partnership to be revised
or a new agreement of tax partnership to be entered into such that all
allocations of income and deduction reflect the economic interests of the
parties in the properties acquired pursuant to the APC PSA and that the parties
will be in

 

6

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the same economic position as would have occurred had the Tax Partnership been
terminated prior to the Closing Date.

 

8.                                              Determination of Sanchez Shares
and Warrants Amount.  Preferred Unit Purchaser shall propose, prior to a date
that is five (5) days prior to the Anadarko Closing Date, the valuation of the
SN Shares as of the Anadarko Closing Date (the “Sanchez Shares Value”) and the
valuation of the Warrants as of the Anadarko Closing Date (the “Warrants
Value”). Preferred Unit Purchaser shall take into account any reasonable
comments received from Common Unit Purchaser within two (2) days after provision
of the proposed valuations. The parties shall cooperate in good faith to resolve
any differences as to the Sanchez Shares Value and the Warrants Value. In the
event Common Unit Purchaser and Preferred Unit Purchaser are nonetheless unable
to reach an agreement as to each of the Sanchez Shares Value and the Warrants
Value prior to the Anadarko Closing Date, then the matter shall be submitted for
resolution and determination to a nationally recognized independent accounting
firm or nationally recognized independent investment banking firm, as determined
by the Preferred Unit Purchaser and reasonably acceptable to Common Unit
Purchaser, in which case the nationally recognized firm will deliver to Common
Unit Purchaser and Preferred Unit Purchaser a written determination of the
Sanchez Shares Value and the Warrants Value no later than one (1) day prior to
the Anadarko Closing Date (the Sanchez Shares Value together with the Warrants
Value, in each case as finally determined pursuant this Section 8, the “Sanchez
Shares and Warrants Amount”). The fees and expenses of the nationally recognized
firm shall be paid fifty percent (50%) by Common Unit Purchaser and fifty
percent (50%) by Preferred Unit Purchaser. Common Unit Purchaser and Preferred
Unit Purchaser agree that they will not take nor will they permit any Affiliate
to take, for Tax purposes, any position inconsistent with such valuation of the
Sanchez Shares and Warrants; provided, that nothing contained herein shall
prevent the Common Unit Purchaser or the Preferred Unit Purchaser from settling
in good faith any proposed deficiency or adjustment by any Governmental
Authority based upon or arising out of the Sanchez Shares and Warrants Amount,
and neither Common Unit Purchaser nor Preferred Unit Purchaser shall be required
to litigate before any court any proposed deficiency or adjustment by any
Governmental Authority challenging such Sanchez Shares and Warrants Amount.
Common Unit Purchaser, on the one hand, or Preferred Unit Purchaser, on the
other hand, shall notify Preferred Unit Purchaser or Common Unit Purchaser,
respectively, within ten (10) days after notice or commencement of an
examination, audit or other proceeding based upon or arising from the Sanchez
Shares and Warrants Amount.

 

9.                                      Certain Definitions. As used in this
Letter Agreement:

 

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

 

“AMI Acquisition” has the meaning given to the term “Acquisition” in the Joint
Development Agreement.

 

“Anadarko Closing Date” has the meaning set forth in the Securities Purchase
Agreement.

 

“Base Preferred Return Amount” has the meaning set forth in the Partnership
Agreement.

 

“Basic Documents” has the meaning set forth in the Securities Purchase
Agreement.

 

7

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“Common Unit Purchaser” has the meaning set forth in the Securities Purchase
Agreement.

 

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

 

“Governmental Authority” has the meaning set forth in the Securities Purchase
Agreement.

 

“GP LLC Agreement” has the meaning set forth in the Securities Purchase
Agreement.

 

“Hydrocarbons” means oil, gas, coal seam gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate and all other liquid and gaseous
hydrocarbons produced or to be produced in conjunction therewith from a well
bore and all products, by-products and other substances derived therefrom or the
processing thereof, and all other minerals and substances produced in
conjunction with such substances, including, but not limited to, sulfur,
geothermal steam, water, carbon dioxide, helium and any and all minerals, ores
or substances of value and the products and proceeds therefrom.

 

“Joint Development Agreement” has the meaning set forth in the Securities
Purchase Agreement. “Joint Properties” has the meaning set forth in the GP LLC
Agreement.

 

“[redacted] PSA” has the meaning set forth in the Securities Purchase Agreement.

 

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

 

“Management Services Agreement” has the meaning set forth in the Securities
Purchase Agreement.

 

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

 

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

 

“Operating Committee” has the meaning set forth in the Joint Development
Agreement.

 

“Partnership Agreement” has the meaning set forth in the Securities Purchase
Agreement.

 

“Partnership Group Companies” has the meaning set forth in the GP LLC Agreement.

 

“PDP PV-10” means the net present value, discounted at ten percent (10%) per
annum, of the future net revenues (using NYMEX forward curve pricing for the
next five (5) years as of the date of determination and flat prices from the
fifth calendar year thereafter) expected to accrue to the Sanchez Vehicle’s
collective interest in any Proved Developed Producing Reserves (as defined in
the Partnership Agreement) in any Joint Properties (in each case determined as
of the last day of the most recent fiscal year or fiscal quarter for which a
reserve report of the Partnership is available) during the remaining expected
economic lives of such reserves. Each calculation of such expected future net
revenues shall be made in accordance with the then existing standards of the
Society of Petroleum Engineers, provided that in any event (a) appropriate
deductions shall be made for severance and ad valorem taxes, and for

 

8

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operating, gathering, transportation and marketing costs required for the
production and sale of such reserves, (b) the pricing assumptions used in
determining PDP PV-10 Proved Reserves (as defined in the GP LLC Agreement) for
any particular reserves shall be based upon the Strip Price (as defined under
the GP LLC Agreement) for the next five (5) years, (c) the cash-flows derived
from the pricing assumptions set forth in clause (b) above shall be further
adjusted to account for the historical basis differential and (d) PDP PV-10
shall be based on the valuation of applicable properties in the Partnership
reserve report as adjusted for the Sanchez Vehicles’ working interest ownership
percentage in such properties.

 

“Preferred Unit Purchaser” has the meaning set forth in the Securities Purchase
Agreement.

 

“Preferred Units” has the meaning set forth in the Partnership Agreement.

 

“Redemption Date” means the date of redemption of all outstanding Preferred
Units in cash at the Base Preferred Return Amount under the Partnership
Agreement.

 

“Sanchez Representative” has the meaning set forth in the Joint Development
Agreement.

 

“SN Shares” has the meaning set forth in the Securities Purchase Agreement.

 

“Sanchez Vehicle” has the meaning set forth in the GP LLC Agreement.

 

“Securities Purchase Agreement” means that certain Securities Purchase
Agreement, dated as of the date hereof, by and among SN Parent, SN UR Holdings,
LLC, a Delaware limited liability company, SN EF UnSub Holdings, LLC, a Delaware
limited liability company, UnSub, SN EF UnSub GP, LLC, a Delaware limited
liability company and the general partner of the Partnership, GSO ST Associates
LLC, a Delaware limited liability company, and Preferred Unit Purchaser.

 

“Warrants” has the meaning set forth in the Securities Purchase Agreement.

 

“Workover and Recompletion Proposal” has the meaning set forth in the GP LLC
Agreement.

 

10.                       Conflict of Law; Jurisdiction; Venue; Jury Waiver.
 The provisions of Section 15.13 of the APC PSA shall apply mutatis mutandis to
this Letter Agreement, as if such provisions were set forth in full herein.

 

11.                       Amendments.  This Letter Agreement may be amended,
restated, modified or changed only by a written instrument signed by SN, SN
Parent and UnSub.

 

12.                       Counterparts.  This Letter Agreement may be executed
in any number of counterparts, all of which will be considered one and the same
agreement and will become effective when counterparts have been signed by each
of the parties hereto and delivered to each of the other parties hereto
(including via facsimile or other electronic transmission), it being understood
that each of the parties need not sign the same counterpart.

 

13.                       Specific Performance.  The parties hereto agree that
irreparable damage, for which monetary damages, even if available, would not be
an adequate remedy, would occur in the event that the provisions of this Letter
Agreement were not performed in accordance with its specific terms and that any
remedy at law for any breach of the provisions of this Letter Agreement would be
inadequate. Accordingly, the parties hereto acknowledge and agree that each such
party shall be entitled to an injunction, specific performance or other
equitable relief to prevent breaches of this Letter Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state

 

9

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having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity. Each party hereby agrees that it will not
oppose the granting of specific performance and other equitable relief on the
basis that the other parties have an adequate remedy at Law or that an award of
specific performance is not an appropriate remedy for any reason at Law or
equity. The parties hereto acknowledge and agree that any other party seeking an
injunction to prevent breaches of this Letter Agreement and to enforce
specifically the terms and provisions of this Letter Agreement in accordance
with this Section 13 shall not be required to provide any bond or other security
in connection with any such injunction. The specific performance or other
equitable relief available pursuant to this Section 13 is not an exclusive
remedy and any non-breaching party to this Letter Agreement may pursue any
remedy at Law or equity available to it.

 

14.                       Entire Agreement; Integrated Transaction. This Letter
Agreement, the Securities Purchase Agreement and the Basic Documents are
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the rights granted by the Company set
forth herein. This Letter Agreement, the Securities Purchase Agreement and the
Basic Documents supersede all prior agreements and understandings between the
parties with respect to such subject matter. Each of the parties hereto
acknowledges and agrees that in executing this Letter Agreement (i) the intent
of the parties is this Letter Agreement, the Securities Purchase Agreement and
the other Basic Documents shall constitute an unseverable and single agreement
of the parties with respect to the transactions contemplated hereby and thereby,
(ii) it waives, on behalf of itself and each of its Affiliates, any claim or
defense based upon the characterization that this Letter Agreement, the
Securities Purchase Agreement and the other Basic Documents are anything other
than a true single agreement relating to such matters and (iii) the matters set
forth in this Section 14 constitute a material inducement to enter into this
Letter Agreement, the Securities Purchase Agreement and the other Basic
Documents and to consummate the transactions contemplated hereby and thereby.
Each of the parties hereto stipulates and agrees (x) not to challenge the
validity, enforceability or characterization of this Letter Agreement, the
Securities Purchase Agreement and the other Basic Documents as a single,
unseverable instrument pertaining to the matters that are the subject of such
agreements, (y) this Letter Agreement, the Securities Purchase Agreement and the
other Basic Documents shall be treated as a single integrated and indivisible
agreement for all purposes, including the bankruptcy of any party and (z) not to
assert or take or omit to take any action inconsistent with the agreements and
understandings set forth in this Section 14.

 

15.                       Notices. All notices and other communications provided
for hereunder shall be in writing and shall be given by hand delivery,
electronic mail, registered or certified mail, return receipt requested, regular
mail or air courier guaranteeing overnight delivery to the following addresses:

 

if to SN or SN Parent to:

 

Sanchez Energy Corporation

1000 Main Street

Suite 3000

Houston, Texas 77002

Attention: Gregory Kopel

Email: gkopel@sanchezog.com

 

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

 

Akin Gump Strauss Hauer & Feld, LLP

 

10

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1111 Louisiana Street, Suite #44

Houston, TX 77002

Attention: David Elder

Facsimile: 713-236-0822

Email: delder@akingump.com

 

if to UnSub to:

 

SN EF UnSub GP, LLC

1000 Main Street, Suite 3000

Houston, TX 77002

Attention:  Gregory Kopel

Email: gkopel@sanchezog.com

 

with a copy to:

 

Sanchez Energy Corporation

1000 Main Street, Suite 3000

Houston, TX 77002

Attention:  Gregory Kopel

Email: gkopel@sanchezog.com

 

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

 

Kirkland & Ellis LLP

600 Travis Street, Suite 3300

Houston, Texas 77002

Attention: John D. Pitts

Email: john.pitts@kirkland.com

 

with a copy to:

 

c/o GSO Capital Partners

1111 Bagby Street, Suite 2050

Houston, TX 77002

Attention:  Robert Horn

Email: Robert.horn@gsocap.com

 

with a copy to :

 

c/o GSO Capital Partners

345 Park Avenue, 31st Floor

New York, New York 10154

Email: GSO Legal@gsocap.com

GSOValuationsGroup@gsocap.com

 

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

 

Andrews Kurth Kenyon LLP

4200 Travis Street

Suite 4200

 

11

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Houston, Texas 77002

Attention:  G. Michael O’Leary

Jon Daly

 

or to such other address as may be specified in a notice given pursuant to this
Section 15.  All notices and communications shall be deemed to have been duly
given: (i) at the time delivered by hand, if personally delivered; (ii) when
notice is sent by the sender and the recipient has read the message, if sent by
electronic mail; (iii) upon actual receipt if sent by registered or certified
mail, return receipt requested, or regular mail, if mailed; or (iv) upon actual
receipt when delivered to an air courier guaranteeing overnight delivery.  The
parties may change the address to which notices are to be given by giving five
(5) days’ prior notice of such change in accordance herewith.

 

[Signature Pages Follow]

 

12

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SANCHEZ ENERGY CORPORATION

 

 

 

 

 

 

 

[g25311ku111i001.gif]By:

 

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

Accepted and Agreed to

as of the date written above

 

SN EF UNSUB, LP

 

By: SN EF UnSub GP, LLC, its general partner

 

By:

 

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

 

SN EF MAVERICK, LLC

 

 

 

By:

 

 

Name:

Antonio R. Sanchez, III

 

Title:

Chief Executive Officer

 

 

[Signature Page to Letter Agreement]

 

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Exhibit A

 

(Attached)

 

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Exhibit B

 

Type Curve Areas

(Attached)

 

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Exhibit C

 

Tag-Along Rights

 

(a)                          If at any time SN Parent, SN or any of their
Affiliates proposes to transfer, directly or indirectly, all or any portion of
its Joint Properties, whether in a single transaction or series of related
transactions to a Third Party purchaser or purchasers (a “Proposed Sale”), such
party seeking to transfer such Joint Properties (the “Transferring Party”) shall
furnish to UnSub a written notice of such Proposed Sale (the “Tag-Along Notice”)
and provide UnSub the opportunity to participate in such Proposed Sale on the
terms described in this Exhibit C to the extent of its respective ownership
interests in the assets to be transferred in such Proposed Sale. The Tag-Along
Notice shall include:

 

(i)                              the material terms and conditions of the
Proposed Sale, including (A) the Joint Properties to be transferred, (B) the
name of the proposed transferee (the “Proposed Transferee”), (C) the proposed
amount and form of consideration (including the proposed price on a per Working
Interest percentage basis based on an allocation of value by applicable Leases,
Wellpads, and other applicable assets, which will include an allocation to
individual producing wells and undeveloped acreage based on the bona fide third
party offer), and (D) the proposed transfer date, if known, which date shall not
be less than thirty (30) Business Days after delivery of such Tag-Along Notice;
and

 

(ii)                           an invitation to UnSub to participate in such
Proposed Sale at the same per Working Interest percentage price per applicable
asset, for the same form of consideration and on the same terms and conditions
as those offered to the Transferring Party in the Proposed Sale. The
Transferring Party shall deliver or cause to be delivered to UnSub copies of all
transaction documents relating to the Proposed Sale as promptly as practicable
after they become available.

 

(b)                          UnSub may exercise the tag-along rights provided by
this Exhibit C within twenty (20) Business Days following delivery of the
Tag-Along Notice by delivering a notice (the “Tag-Along Offer”) to the
Transferring Party indicating UnSub’s desire to exercise its tag-along rights
hereunder. If UnSub does not make a Tag-Along Offer within twenty (20) Business
Days following delivery of the Tag-Along Notice, UnSub shall be deemed to have
waived its rights under this Exhibit C with respect to such Proposed Sale, and
the Transferring Party shall thereafter be free to transfer the applicable Joint
Properties to the Proposed Transferee without the participation of UnSub, for
the same form of consideration set forth in the Tag-Along Notice, at a per
Working Interest percentage price no greater than the per Working Interest
percentage price per applicable asset set forth in the Tag-Along Notice, and on
other terms and conditions which are not more favorable to the Transferring
Party than those set forth in the Tag-Along Notice. If UnSub elects to
participate in the Proposed Sale pursuant to this Exhibit C, (i) the
consideration to be received by the parties in such sale (a “Tag-Along
Transaction”) will be calculated by taking the aggregate proceeds from such
Tag-Along Transaction and allocating such proceeds between the Transferring
Party and UnSub based upon the relative Fair Market Value of the Leases,
Wellpads and other applicable assets and other interests included by such
parties (collectively, the “Tag Interests”), as agreed by the Transferring Party
and UnSub or as otherwise determined pursuant to the valuation process set forth
in paragraph (g) below, taking into account (in either case) the parties’
proportionate ownership of the Working Interests in the properties transferred
pursuant to the Tag-Along Transaction, the allocation of value among the Working
Interests included in the sale as determined with the Third Party purchaser (but
only to the extent that all parties approved in writing such allocation prior to
execution of the applicable

 

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agreement), and any other relevant information, provided that the total Fair
Market Value of the aggregate interests to be sold for purposes hereunder will
be equal to the sale price determined by the purchaser of the interests included
by the Transferring Party and UnSub in the Proposed Sale; and (ii) UnSub shall
agree to make to the Proposed Transferee the same representations and
warranties, covenants and indemnities as the Transferring Party agrees to make
in connection with the Proposed Sale (which may be modified as necessary as to
form to the extent one party is transferring Working Interests and the other
party is transferring equity interests holding Working Interests, and such other
distinctions as may be applicable to the parties or their interests in the
Leases, Wellpads, and other applicable Assets); provided, that (A) no party
shall be liable for the breach of any covenant by any other party, (B) in no
event shall any party be required to make representations and warranties or
provide indemnities as to any other party, and (C) in no event shall UnSub be
responsible for any liabilities or indemnities in connection with such Proposed
Sale in excess of the proceeds received by UnSub in the Proposed Sale.

 

(c)                           In the event that the consideration received in
connection with a Proposed Sale consists of securities that are not registered
under the Securities Act of 1933, as amended, and UnSub exercises its tag-along
rights hereunder in connection with such Proposed Sale, if the Transferring
Party is entitled to registration rights in respect of such securities, the
Transferring Party shall ensure that UnSub will receive pro rata piggy back
registration rights on any registration in which the Transferring Party is
entitled to register such securities (together with a pro rata number of the
total demand registrations granted to the Transferring Party).

 

(d)                          Any offer of UnSub contained in any Tag-Along Offer
shall be irrevocable, and, to the extent such Tag-Along Offer is accepted, UnSub
shall be bound and obligated to Transfer in the Proposed Sale on the same terms
and conditions, with respect to each Oil and Gas Property interest transferred,
as the Transferring Party; provided, however, that if the terms of the Proposed
Sale change with the result that the per Working Interest percentage price shall
be less than the per Working Interest percentage price set forth in the
Tag-Along Notice, the form of consideration shall be different or the other
terms and conditions (other than, for the avoidance of doubt, inside tax basis
associated with such interests, if applicable) shall be materially less
favorable to UnSub than those set forth in the Tag-Along Notice, UnSub shall be
permitted to withdraw the offer contained in the applicable Tag-Along Offer by
written notice to the Transferring Party and upon such withdrawal shall be
released from its obligations.

 

(e)                           If UnSub exercises its rights under this
Exhibit C, the closing of the sale of the Transferring Party’s and UnSub’s Joint
Properties in the Tag-Along Transaction will take place concurrently. If the
closing with the Proposed Transferee (whether or not UnSub has exercised its
rights under this Exhibit C) shall not have occurred by 5:00 p.m. Eastern Time
on the date that is one-hundred and twenty (120) days after the date of the
Tag-Along Notice, as such period may be extended to obtain any required
regulatory approvals, and on terms and conditions not more favorable to the
Transferring Party than those set forth in the Tag-Along Notice, all the
restrictions on transfer contained herein shall again be in effect with respect
to such Oil and Gas Property interest and proposed transfer.

 

(f)                            The costs of any transactions contemplated by
this Exhibit C shall be deducted pro rata from the proceeds to be paid to the
Transferring Party and UnSub in connection with such transaction.

 

(g)                           In the event the Transferring Party and UnSub (for
purposes of this paragraph, collectively, the “Dispute Parties”) disagree as to
the relative Fair Market Value of the Tag Interests included by each party and
cannot resolve such dispute (after good faith negotiations

 

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lasting no more than ten (10) Business Days), then any Dispute Party may elect
for the Dispute Parties to engage one mutually-agreeable reputable national or
regional investment bank or valuation firm with experience in the valuation of
oil and gas interests in Eagle Ford Shale (the “Valuation Firm”) to determine
the relative Fair Market Value (on a percentage basis) of the Tag Interests
included by each party. The Valuation Firm shall be selected by the Dispute
Parties from among the Approved Financial Advisor Arbiters and if the Dispute
Parties are unable to agree then SN Parent shall chose. The Dispute Parties
shall each cooperate fully with the Valuation Firm, including by providing all
reasonably requested information, data and work papers of such Dispute Party and
shall make available personnel and accountants to explain any such information,
data or work papers. The Dispute Parties shall cause the Valuation Firm to
render its determination as soon as reasonably practicable but in no event later
than fifteen (15) Business Days after the Valuation Firm was engaged; provided,
however, the Dispute Parties shall cause the Valuation Firm to render its
determination no later than the second (2nd) Business Day prior to the
expiration of the Tag-Along Offer. The Valuation Firm’s determination of the
relative value of the Tag Interests (the “Final Valuation”) shall be final and
binding on the Dispute Parties, and any proceeds to be received in such indirect
approved sale shall be split between the Dispute Parties based upon the relative
valuation percentages set forth in the Final Valuation. The fees and costs of
the Valuation Firm shall allocated 50% to SN and 50% to UnSub.

 

Terms used in this Exhibit C but not defined elsewhere in this Letter Agreement
shall have the following meanings:

 

“Approved Financial Advisor Arbiters” means the banks or valuation firms listed
on Annex IV to the Joint Development Agreement.

 

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

 

“Fair Market Value” means the value of any specified interest or property, which
shall not in any event be less than zero, 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, conveyance of operatorship associated with any specified
interest or property or a control premium.

 

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

 

“Leases” means, collectively, oil, gas and mineral leases and subleases,
royalties, overriding royalties, net profits interests, carried and convertible
interests, and other oil and gas interests.

 

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

 

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“Third Party” means any Person other than an Affiliate of SN Parent or a
Permitted Holder, provided that for purposes of Section 4(g) and this Exhibit C,
each of SPP and its controlled Affiliates shall be deemed a Third Party of SN
Parent and its Affiliates.

 

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

 

“Working Interest” means with respect to any lease or well or wellpad relating
to the any Joint Properties, the fractional interest in and to such lease, well
or wellpad that is burdened with the obligation to bear and pay costs and
expenses of maintenance, development and operations on or in connection with
such lease or well.

 

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SCHEDULE 3.07

 

Partnership Approvals

 

1.              The approval of (i) the General Partner and (ii) the sole member
of the General Partner is required for the Partnership and General Partner,
respectively, actions specified above, which approvals have been obtained.

 

2.              With respect to such other Basic Documents that are to be
executed at Closing and the performance of which is to occur after Closing, any
authorizations, consents, approvals, waivers, licenses, qualifications,
exemptions, filings, declarations, qualifications or registrations contemplated
by such Basic Documents.

 

SCHEDULE 3.07 TO

SECURITIES PURCHASE AGREEMENT

 

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SCHEDULE 3.08

 

Liabilities

 

1.     Liabilities and obligations of the General Partner arising under its
Limited Liability Company Agreement, dated as of December 21, 2016.

 

2.     Liabilities and obligation of the Partnership arising under its Agreement
of Limited Partnership, dated as of December 21, 2016.

 

SCHEDULE 3.08 TO

SECURITIES PURCHASE AGREEMENT

 

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SCHEDULE 4.04

 

Preferred Unit Purchaser Approvals

 

None.

 

SCHEDULE 4.04 TO

SECURITIES PURCHASE AGREEMENT

 

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SCHEDULE 5.04

 

SN Approvals

 

1.     With respect to the Warrant Agreement and the Registration Rights
Agreement, such of the foregoing as may be required under the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, state and
foreign securities or “blue sky” laws, The New York Stock Exchange or any other
applicable self-regulatory organization.

 

2.     With respect to such other Basic Documents that are to be executed at
Closing and the performance of which is to occur after Closing, any
authorizations, consents, approvals, waivers, licenses, qualifications,
exemptions, filings, declarations, qualifications or registrations contemplated
by such Basic Documents.

 

SCHEDULE 5.04 TO

SECURITIES PURCHASE AGREEMENT

 

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