Exhibit 10.1

SANCHEZ ENERGY CORPORATION

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TABLE OF CONTENTS

 

         Page   Section 1.  

Definitions

     1    Section 2.  

Management Services

     4    Section 3.  

Performance and Authority

     6    Section 4.  

Compensation and Reimbursement

     7    Section 5.  

Representations and Warranties; Covenants

     8    Section 6.  

Term and Termination

     11    Section 7.  

Limitation of Liability; Indemnification

     12    Section 8.  

Insurance

     13    Section 9.  

Competition

     14    Section 10.  

Confidential Information

     14    Section 11.  

Obligations Hereunder Not Affected; Waivers

     15    Section 12.  

Notices

     15    Section 13.  

Assigns

     16    Section 14.  

No Third-Party Beneficiaries

     16    Section 15.  

Amendment

     16    Section 16.  

Unenforceability

     16    Section 17.  

Survival of Agreements

     16    Section 18.  

Governing Law; Submission to Process

     16    Section 19.  

Waiver of Jury Trial

     17    Section 20.  

Entire Agreement

     17    Section 21.  

Laws and Regulations

     17    Section 22.  

No Recourse Against Officers, Directors, Managers or Employees

     17   

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SERVICES AGREEMENT

This Services Agreement (this “Agreement”), dated as of December 19, 2011, is
made by and between Sanchez Oil & Gas Corporation, a Delaware corporation
(“Manager”), and Sanchez Energy Corporation, a Delaware corporation (“Company”).

RECITALS:

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

WHEREAS, Manager owns the general partnership interest in and is a limited
partner of Sanchez Energy Partners I, LP, a Delaware limited partnership (“SEP”)
and the majority stockholder of Company; and

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.

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. In addition to terms defined above, the following terms
shall have the following meaning when used herein:

“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.

“Contractual Obligation” shall have the meaning set forth in Section 5(c).

“Confidential Information” means all information (i) furnished to Manager or its
representatives by or on behalf of Company or (ii) prepared by or at the
direction of Company (in each case irrespective of the form of communication and
whether such information is furnished on or after the date hereof), and all
analyses, compilations, data, studies, notes, interpretations, memoranda or
other documents prepared by Manager or its representatives containing or based
in whole or in part on any such furnished information.

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

“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

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“Environmental Law” means all Legal Requirements or common law theories
applicable to Company or its Subsidiaries arising from, relating to, or in
connection with the Environment, 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.

“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).

“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.

“Intellectual Property” means all intellectual or industrial property and rights
therein, however denominated, throughout the world, whether or not registered,
including all patent applications, patents, trademarks, service marks, trade
styles or dress, mask works, copyrights (including copyrights in computer
programs, software, computer code, documentation, drawings, specifications and
data), works of authorship, moral rights of authorship, rights in designs, trade
secrets, technology, inventions, invention disclosures, discoveries,
improvements, know-how, proprietary rights, formulae, processes, methods,
technical and business information and confidential and proprietary information,
and all other intellectual and industrial property rights, whether or not
subject to statutory registration or protection and, with respect to each of the
foregoing, all registrations and applications for registration, renewals,
extensions, continuations, reexaminations, reissues, divisionals, improvements,
modifications, derivative works, goodwill, and common law rights and causes of
action relating to any of the foregoing.

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

 

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“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 license or
permit issued by, any Governmental Authority.

“License Agreement” means that certain Geophysical Seismic Data Use License
Agreement, dated the date hereof, among Manager, Company and SEP Holdings III,
LLC (as it may be amended, modified or supplemented from time to time).

“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).

“Management Fee” has the meaning set forth in Section 4(a).

“Oil and Gas Properties” means fee mineral interest, 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.

“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.

“Person” means an individual, partnership, corporation (including a business
trust), joint stock company, limited liability corporation or company, limited
liability partnership, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof or any
trustee, receiver, custodian or similar official.

“Properties” means, collectively, all Oil and Gas Properties and all interests
in other real and personal property which are, at the time in question, owned by
Company or any of its Subsidiaries.

“Related Contracts” means any JOAs, contracts or agreements between Manager and
Company (or any Subsidiary of Company) relating to the Properties, whether
relating to the operation or development of any of the Properties, or the
drilling and completion of wells on the Properties, or the gathering, treating,
storage, processing, compressing, transporting, and handling of Hydrocarbons
produced from any of the Properties, or otherwise.

 

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“Services” has the meaning given to such term in Section 2.

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

“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
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 Company for its own account,
(i) advise and consult with Company regarding all aspects of Company’s
development, operations and expansion, (ii) provide (or cause to be provided)
management and technical expertise and consulting services for the development
and implementation of the operational and financial plans of Company and for
strategic planning and decisions of Company, including the exploration and
production activities with respect to the Properties and (iii) provide (or cause
to be provided) administrative support services to Company as necessary or
useful for the operations of the business of Company and Company’s Subsidiaries
(collectively, the “Services”), in each case consistent with the budgets and
forecasts developed under Section 2(h), 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 Company 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 paying rentals,
shut-in payments and other Lease payments.

 

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(d) Marketing. Manager will provide all marketing, gas control and contract
administration services necessary or useful to sell the Hydrocarbons produced
from the Properties.

(e) 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,

(ii) payment of accounts payable,

(iii) collection of production proceeds,

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

(v) gas balancing, and

(vi) general ledger and financial reporting activities.

(f) Operations. To the extent any Properties subject to development and
operation are not subject to a JOA, Manager will enter into, or cause (on behalf
of Company) the entry of, a JOA with respect to such Properties in accordance
with the terms of the Contract Operating Agreement.

(g) Information Systems. Manager will provide computer use and/or facilities
necessary to manage and operate the Properties and maintain the records of
Company and its Subsidiaries.

(h) Budgets and Forecasts. Manager will establish operating and capital budgets
and forecasts for Company and its Subsidiaries, subject to approval thereof by
Company’s board of directors or the audit committee thereof, as applicable, and
monitor their receipts, income and expenditures.

(i) Compliance. Manager will take all actions, file all reports and notices and
obtain all necessary Permits to cause the operations of Company and its
Subsidiaries, including with respect to the Properties, to be in compliance with
all applicable Legal Requirements.

(j) Insurance. Manager will arrange and maintain insurance policies, subject to
the terms hereof and, if applicable, the Contract Operating Agreement.

(k) Accounting. Manager will maintain a general ledger with respect to the
business and attendant accounting matters of Company and its Subsidiaries.

(l) Bank Accounts. Manager will open and maintain bank accounts on behalf of
Company and its Subsidiaries.

 

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(m) Outside Professionals. Manager will manage and supervise the outside
accountants and attorneys of Company and coordinate the annual audit of
Company’s books and records and the preparation of Company’s tax returns (but
subject in any event to the ultimate authority of Company’s board of directors
or the audit committee thereof, as applicable).

Section 3. Performance and Authority.

(a) Standard of Care. Manager shall provide the Services in a timely and current
manner, consistent with management and administrative practices that it would
provide for itself in the performance of services similar to the Services.

(b) 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 the Services.

(c) 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.

(d) Performance of Services by Company. The parties to this Agreement understand
and agree that Company may at its election provide certain Services for its own
account, and to the extent Company does so Manager need not perform such
Services. Manager will, however, remain obligated to perform all Services as
provided herein to the extent Company fails to adequately and timely perform
such Services or requests Manager to provide such Services.

(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 the following third party consultants, advisers, accountants,
auditors and attorneys for the indicated purposes:

(i) reserve engineering consultants or advisers for preparation of reserve
engineering reports;

(ii) accountants and auditors for preparation of financial reporting and
information and tax returns (but subject in any event to the ultimate authority
of Company’s board of directors or the audit committee thereof, as applicable);
and

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

provided, however, Manager shall obtain the prior consent of Company prior to
any such engagement or retention by Manager if such engagement or retention
shall not be terminable within 60 days or shall commit Company to expenditures
of $50,000 or more. The parties further acknowledge and agree that Manager’s
retention of third party consultants, advisers, accountants, auditors and
attorneys shall only be as reasonable and necessary in the performance of the
Services by Manager. Subject to the foregoing, Company shall reimburse Manager
for any costs and expenses arising from or related to such engagement or
retention that have been paid with funds of Manager rather than funds of Company
or its Subsidiaries. Any and all payments made to Manager for reimbursements
incurred pursuant to this Section 3(e) shall be in addition to, and not
considered to be a part of, the Management Fee to be paid in accordance with
Section 4.

 

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Section 4. Compensation and Reimbursement.

(a) Charge for Services. Company shall compensate Manager for the provision of
the Services at a price equal to Manager’s cost of providing the Services,
including all direct costs and indirect administrative and overhead costs
(including the allocable portion of salary, bonus, incentive compensation and
other amounts paid to Persons who provide Services) allocated in accordance with
Manager’s regular and consistent accounting practices (the “Management Fee”).
Upon reasonable request, Manager shall provide Company with financial reports
sufficient to permit verification of Manager’s costs.

(b) Taxes. In addition to the other sums payable under this Agreement, Company
shall pay, and hold Manager harmless against, all sales, use or other taxes, or
other fees or assessments imposed by law 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 of other privilege taxes
imposed on Manager. Manager and Company shall cooperate with each other and use
commercially reasonable efforts to assist the other in entering into such
arrangements as the other may reasonably request in order to minimize, to the
extent lawful and feasible, the payment or assessment of any taxes relating to
the transactions contemplated by this Agreement; provided, however, that nothing
in this subsection (b) shall obligate Manager to cooperate with, or assist,
Company in any arrangement proposed by Company that would, in Manager’s sole
discretion, have a material detrimental effect on Manager.

(c) Invoicing and Payment. Manager will invoice Company from time to time, as
determined by Manager in its sole discretion. Company will pay undisputed
invoiced amounts promptly after the receipt of each such invoice.

(d) Disputed Charges.

(i) COMPANY (OR THE AUDIT COMMITTEE OF COMPANY’S BOARD OF DIRECTORS) MAY, WITHIN
120 DAYS AFTER RECEIPT OF AN INVOICE FROM MANGER, TAKE WRITTEN EXCEPTION TO ANY
CHARGE, ON THE GROUND THAT THE SAME WAS NOT A REASONABLE COST OR EXPENSE
INCURRED BY MANAGER IN CONNECTION WITH THE PROVISION OF SERVICES. IF THE AMOUNT
AS TO WHICH SUCH WRITTEN EXCEPTION IS TAKEN, OR ANY PART THEREOF, IS ULTIMATELY
DETERMINED NOT TO BE A REASONABLE COST OR EXPENSE INCURRED BY MANAGER IN
CONNECTION WITH THE PROVISION OF SERVICES, SUCH AMOUNT OR PORTION THEREOF (AS
THE CASE MAY BE) SHALL BE REFUNDED BY MANAGER TO COMPANY TOGETHER WITH INTEREST
THEREON AT THE LESSER OF (I) THE PRIME RATE PER ANNUM ESTABLISHED BY CITIBANK,
NA AS IN EFFECT ON THE DATE OF PAYMENT BY COMPANY IN RESPECT OF SUCH CONTESTED
INVOICE OR (II) THE MAXIMUM LAWFUL RATE DURING THE PERIOD FROM THE DATE OF
PAYMENT BY COMPANY

 

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TO THE DATE OF REFUND BY MANAGER. NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, COMPANY (OR THE AUDIT COMMITTEE OF COMPANY’S BOARD OF DIRECTORS) MAY
TAKE EXCEPTION TO ANY CHARGE WITHIN THE PERIOD SPECIFIED ABOVE NOTWITHSTANDING
THAT THE RELATED INVOICE WAS PAID IN FULL.

(ii) If, within 20 days after receipt of any written exception pursuant to
Section 4(d)(i), Company (or the audit committee of Company’s board of
directors) 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
Company (or the audit committee of Company’s board of directors) or Manager may
submit the dispute to an independent third party auditing firm that is mutually
agreeable to the audit committee of Company’s board of directors, 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.

Section 5. Representations and Warranties; Covenants.

(a) Organization; Requisite Power and Authority; Qualification. As of the date
hereof, Manager (a) is duly organized, validly existing and in good standing
under the laws of the State of Delaware, (b) has all requisite power and
authority, and the legal right, to own and operate its property, to carry on its
business as now conducted and as proposed to be conducted, to enter into this
Agreement and the Related Contracts and to carry out the transactions
contemplated thereby, including providing the Services, and (c) is qualified to
do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations as
required by applicable Legal Requirements.

(b) 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 or will be, as applicable,
duly authorized by all necessary action on the part of Manager.

(c) No Conflict. The execution, delivery and performance by Manager of this
Agreement and the Related Contracts and the consummation of the transactions
contemplated by this Agreement and the Related Contracts, including providing
the Services, do not and will not, as applicable, (a) violate any provision of
any Legal Requirement applicable to Manager, its certificate of incorporation or
bylaws or any order, judgment or decree of any court or other agency of
government 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
contract or agreement to which Manager is a party or by which its assets are
bound (each a “Contractual Obligation”); (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

 

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default, noncompliance, suspension, revocation, impairment, forfeiture or
nonrenewal of any Permit material to Manager’s operations or any of its
properties; or (e) require any approval of stockholders, members or partners or
any approval or consent of any Person under any Contractual Obligation or the
certificate of incorporation or bylaws of Manager, except for such approvals or
consents which have been or will be, as the case may be, obtained and disclosed
in writing to Company.

(d) Governmental Consents. The execution, delivery and performance by Manager of
this Agreement and the Related Contracts and the consummation of the
transactions contemplated by this Agreement and the Related Contracts, including
providing the Services, do not and will not, as applicable, require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any Governmental Authority, except for such registrations, consents,
approvals, notices or actions which have been or will be, as the case may be,
obtained and disclosed in writing to Company.

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

(f) Licenses, Etc.

(i) Manager owns, or is licensed to use, all Intellectual Property material to
its business, and to Manager’s knowledge the use thereof by Manager in
connection with the Services to be provided hereunder for the benefit and use by
Company with respect to the Properties owned by Company or its Subsidiaries as
of the date hereof does not infringe upon or misappropriate the Intellectual
Property of any other Person. Manager either owns or has valid licenses or other
rights to use all databases, geological data, geophysical data, engineering
data, seismic data, maps, interpretations and other technical information to be
used in connection with the Services to be provided hereunder for the benefit
and use by Company with respect to the Properties owned by Company or its
Subsidiaries as of the date hereof.

(ii) Contemporaneous with this Agreement, Manager is granting to Company and its
Subsidiaries, pursuant to the License Agreement, a license to the unrestricted,
proprietary seismic, geological and geophysical information owned by Manager and
related to the Properties. All seismic, geological and geophysical information
related to the Properties and licensed to or otherwise owned by Manager, and not
otherwise licensed to Company and its Subsidiaries, shall be interpreted and
used by Manager for the benefit of Company and its Subsidiaries in connection
with the Services provided for hereunder.

 

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(iii) TO THE MAXIMUM EXTENT ALLOWED BY LAW, MANAGER AGREES TO DEFEND, INDEMNIFY,
AND HOLD HARMLESS COMPANY FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, SUITS,
CAUSES OF ACTION, SETTLEMENTS, DAMAGES, LOSSES, LIABILITIES, COSTS, EXPENSES,
FINES, AND JUDGMENTS (INCLUDING, WITHOUT LIMITATION, REASONABLE AND NECESSARY
COURT COSTS, EXPERT’S FEES AND ATTORNEY’S FEES), BASED UPON, IN CONNECTION WITH,
RELATING TO OR ARISING OUT OF ANY ASSERTION, ALLEGATION OR CLAIM THAT (A) THE
SERVICES PROVIDED HEREUNDER OR UNDER THE CONTRACT OPERATING AGREEMENT, (B) THE
DATA (AS DEFINED IN THE LICENSE AGREEMENT), (C) THE USE OF THE DATA OR OTHER
SEISMIC, GEOLOGICAL OR GEOPHYSICAL INFORMATION PROVIDED HEREUNDER OR UNDER THE
LICENSE AGREEMENT, (D) THE LICENSE GRANTED PURSUANT TO THE LICENSE AGREEMENT OR
OTHER DISTRIBUTION OF THE DATA OR (E) THE OPERATIONS OF COMPANY BASED ON THE
SERVICES PROVIDED HEREUNDER OR UNDER THE CONTRACT OPERATING AGREEMENT INFRINGE
OR MISAPPROPRIATE THE INTELLECTUAL PROPERTY OF A THIRD PARTY.

(iv) Manager hereby grants to Company a royalty-free, fully paid up,
nonexclusive and nontransferable right and license to use the name “Sanchez
Energy” and the mark attached hereto as Exhibit A solely in connection with the
oil and natural gas exploration and production business of Company. The license
granted hereby will terminate concurrently with the expiration or termination of
this Agreement. Company shall maintain a standard of quality for all goods and
services on which the mark is used that is at least equivalent to the standard
of quality utilized by Manager. Manager shall have the right to inspect and
ensure that the quality standard is maintained for the term of this Agreement.

(g) No Defaults. As of the date hereof, Manager is not in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists which, with the giving of notice or the lapse of time or both, could
constitute such a default, which default would have a material adverse effect on
(i) the ability of Manager to fully and timely perform its obligations under
this Agreement and the Related Contracts, including providing the Services, or
(ii) the legality, validity, binding effect, or enforceability against Manager
of this Agreement or the Related Contracts.

(h) Marketing and Sale of Hydrocarbons. Company and Manager may determine, from
time to time, to allow Manager to market and sell the Hydrocarbons produced from
the Properties on behalf of Company and its Subsidiaries and to collect such
proceeds as the agent of Company and its Subsidiaries. In such event, Manager
shall arrange for the marketing and sale of Hydrocarbons from the Properties and
shall, among other things, (i) collect all production funds from the purchasers
of such Hydrocarbons, (ii) arrange for the timely payment of severance taxes to
any Governmental Authorities, (iii) make timely payment to royalty owners and
third party working interest owners, (iv) pay all required third party marketing
fees and (v) remit to Company and its Subsidiaries their respective net proceeds
from the sale of Hydrocarbons after

 

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making all necessary or appropriate allocations and distributions in connection
with the receipt of such proceeds (including those payments referred to in
clauses (ii), (iii) and (iv) above). Payment of such net proceeds to Company
shall be made by Manager as soon as practicable after revenues are received by
Manager from the purchasers of Hydrocarbons and subsequently processed through
Manager’s revenue allocation system.

(i) Maintenance of Existence and Qualifications. Manager will maintain and
preserve its existence and its rights and franchises in full force and effect
and will qualify to do business in all states or jurisdictions where required by
applicable Legal Requirements to provide the Services.

(j) Separateness Covenants. Except for the transactions described in this
Agreement (including, without limitation, those described in Section 5(h)):

(i) Manager will not commingle its assets with those of Company or any of its
Subsidiaries,

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

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

(iv) Manager will maintain an “arm’s-length” relationship with Company and its
Subsidiaries.

(v) Manager will observe all normal corporate formalities.

(vi) Manager will correct any known misunderstanding regarding its identity as
being separate from Company and its Subsidiaries.

(vii) Manager will maintain adequate capital in light of its contemplated
business operations, including provision of the Services.

(k) Related Contracts. Manager hereby agrees to promptly, completely and fully
perform all of its obligations and undertakings under, by reason of, or pursuant
to the Related Contracts to which it is a party. Manager will at all times
maintain sufficient assets, net worth and personnel to enable it to perform all
of its obligations under this Agreement and the Related Contracts to which it is
a party.

Section 6. Term and Termination.

(a) The respective rights, duties, and obligations of the parties hereunder
shall commence on the date hereof and (a) shall continue initially until
December 19, 2016 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; provided, however, that either
party hereto may terminate this Agreement by giving written notice of
termination to the other party at least 180 days prior to the date as of which
such termination is to be effective.

 

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(b) Upon the termination of this Agreement, subject to the License Agreement,
(i) Manager shall deliver to Company all records, reports, books, data and other
material(s) related to the performance of the Services that are in the
possession of Manager and its affiliates as promptly as reasonably possible and
(ii) Manager will cooperate with Company to cause an orderly and timely
transition of the Services to a successor manager.

Section 7. Limitation of Liability; Indemnification.

(a) Notwithstanding Manager’s agreement to perform, or cause to be performed,
the Services in accordance with the provisions hereof, Company acknowledges that
performance by Manager of the Services pursuant to this Agreement and the
Contract Operating Agreement or other Related Contract will not subject Manager,
its affiliates or their respective stockholders, directors, officers, members,
agents or employees to any liability whatsoever (including, without limitation,
any liabilities arising under a JOA due to the breach or default by a third
party under such JOA), except as directly caused by the gross negligence or
willful misconduct on the part of Manager or such other Persons or as provided
in Section 5(f)(iii); provided, however, that, except as otherwise provided in
Section 5(f)(iii), Manager’s liability as a result of such gross negligence or
willful misconduct will be limited to an amount not to exceed the lesser of
(A) Company’s price paid for the particular Service, (B) Company’s cost of
performing the particular Service itself during the remainder of the term of
this Agreement or (C) Manager’s cost of obtaining the particular Service from a
third party during the remainder of the term of this Agreement; provided
further, that Company will (and will cause its Subsidiaries to) exercise its and
their commercially reasonable efforts to minimize the cost of any such
alternatives to the Services by selecting the most cost effective alternatives
which provide the functional equivalent of the Services replaced.

(b) Except as specifically set forth in this Agreement, Company hereby releases,
and agrees to indemnify and hold harmless, Manager and its affiliates and their
respective stockholders, directors, officers, members, agents or employees from
any and all liabilities arising from or relating to the provision or use of any
Service or product provided hereunder, the Contract Operating Agreement or other
Related Contract (including, without limitation, any liabilities arising under a
JOA due to the breach or default by a third party under such JOA) to the extent
not directly caused by the gross negligence or willful misconduct of Manager or
such other indemnified Persons.

(c) 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 THIS PROVISION SHALL
NOT APPLY TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY INDEMNIFIED PARTY
OR IN ANY WAY LIMIT OR ALTER ANY QUALIFICATIONS SET FORTH IN

 

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SUCH INDEMNITY OBLIGATION EXPRESSLY RELATING TO GROSS NEGLIGENCE OR INTENTIONAL
MISCONDUCT. 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.

(d) Exclusion of Damages; Disclaimers.

(i) NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY HERETO UNDER THIS AGREEMENT OR
RELATED CONTRACT 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(D)(I) SHALL NOT LIMIT A PARTY’S RIGHT TO RECOVERY UNDER SECTION
5(F)(III) OR SECTION 7(B) 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 5(F)(III) OR
SECTION 7(B), AS THE CASE MAY BE.

(ii) OTHER THAN AS SET FORTH IN SECTION 3(A) HEREOF, SECTION 3(A) OF THE
CONTRACT OPERATING AGREEMENT AND THE SECOND SENTENCE OF SECTION 6 OF THE LICENSE
AGREEMENT, MANAGER DISCLAIMS ANY AND ALL WARRANTIES, CONDITIONS OR
REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR WRITTEN) WITH RESPECT TO SERVICES
RENDERED OR PRODUCTS PROCURED FOR COMPANY, 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. HOWEVER, IN THE
CASE OF OUTSOURCED SERVICES PROVIDED SOLELY FOR COMPANY, IF THE THIRD-PARTY
PROVIDER OF SUCH SERVICES MAKES AN EXPRESS WARRANTY TO COMPANY, COMPANY IS
ENTITLED TO CAUSE MANAGER TO RELY ON AND TO ENFORCE SUCH WARRANTY.

Section 8. Insurance. Manager shall obtain and maintain from insurers who are
reliable and acceptable to Company and authorized to do business in the state or
states or jurisdictions in which Services are to be performed by Manager,
insurance coverages in the types and minimum limits as the parties determine to
be appropriate and as is consistent with standard industry practice and
Manager’s past practices. Manager agrees upon Company’s request from time to
time or at any time to provide Company with certificates of insurance evidencing
such

 

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insurance coverage and, upon request of Company, shall furnish copies of such
policies. Except with respect to workers’ compensation coverage, the policies
shall name Company as an additional insured and shall contain waivers by the
insurers of any and all rights of subrogation to pursue any claims or causes of
action against Company. The policies shall provide that they will not be
cancelled or reduced without giving Company at least 30 days’ prior written
notice of such cancellation or reduction. The provisions of this Section 8 shall
be subject to the terms and conditions of the Contract Operating Agreement and
applicable JOA.

Section 9. Competition. Subject to Section 10, Manager and its affiliates is and
shall be free to engage in any business activity whatsoever, including those
that may be in direct competition with Company.

Section 10. Confidential Information.

(a) Non-disclosure. Manager shall maintain the confidentiality of all
Confidential Information; provided, however, that Manager may disclose such
Confidential Information (i) to its affiliates to the extent deemed by Manager
to be reasonably necessary or desirable to enable it to perform the Services;
(ii) to the extent necessary for Manager to provide services for third parties
that have interests in the Properties; (iii) in any judicial or alternative
dispute resolution proceeding to resolve disputes between Manager and Company
arising hereunder; (iv) to the extent disclosure is legally required under
applicable Legal Requirements or any agreement existing on the date hereof to
which Manager is a party or by which it is bound and which have been disclosed
to Company (provided, however, that prior to making any legally required
disclosures in any judicial, regulatory or dispute resolution proceeding,
Manager shall, if requested by Company, seek a protective order or other relief
to prevent or reduce the scope of such disclosure); (v) to Manager’s existing or
potential lenders, investors, joint interest owners, purchasers or other parties
with whom Manager may enter into contractual relationships, to the extent deemed
by Manager to be reasonably necessary or desirable to enable it to perform the
Services (provided, however, that Manager shall require such third parties to
agree to maintain the confidentiality of the Confidential Information so
disclosed); (vi) if authorized by Company; and (vii) to the extent such
Confidential Information becomes publicly available other than through a breach
by Manager of its obligations arising under this Section 10. Manager
acknowledges and agrees that (i) the Confidential Information is being furnished
to it for the sole and exclusive purpose of enabling it to perform the Services
and (ii) the Confidential Information may not be used by it for any other
purposes.

(b) Business Conduct. Nothing in this Section 10 shall prohibit Manager, SEP or
any of their respective affiliates from conducting business in the areas where
the Properties are located.

(c) Remedies and Enforcement. Manager acknowledges and agrees that a breach by
it of its obligations under this Section 10 would cause irreparable harm to
Company and that monetary damages would not be adequate to compensate Company.
Accordingly, Manager agrees that Company shall be entitled to immediate
equitable relief, including a temporary or permanent injunction, to prevent any
threatened, likely or ongoing violation by Manager, without the necessity of
posting bond or other security. Company’s right to equitable relief shall be in
addition to other rights and remedies available to Company, for monetary damages
or otherwise.

 

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Section 11. Obligations Hereunder Not Affected; Waivers. No action which Company
or its Subsidiaries may take or omit to take in connection with this Agreement
or any Related Contract, no course of dealing by Company or its Subsidiaries
with Manager or any other Person and no change of circumstances shall release or
diminish Manager’s obligations, liabilities, agreements or duties hereunder,
affect this Agreement in any way, or afford Manager any recourse or setoff
against Company or its Subsidiaries, regardless of whether any such action or
inaction may be detrimental in any way to Manager, Company or any of its
Subsidiaries, or any of the Properties.

Section 12. Notices. Any notice 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 Company:

 

1111 Bagby, Suite 1600

Houston, TX 77002

Attention:    Antonio R. Sanchez III, President and Chief Executive Officer
Telephone:    (713) 783-8000 Fax:    (713) 756-2784 Email:    tony@sanchezog.com

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

 

1111 Bagby, Suite 1600

Houston, TX 77002

Attention:    Chairman of the Audit Committee of the Board of Directors
Telephone:    (713) 783-8000 Fax:    (713) 756-2784 Email:   
ggarcia@garciahamiltonassociates.com

If to Manager:

 

1111 Bagby, Suite 1600

Houston, TX 77002

Attention:    Steven J. Hendrick, Vice President of Operations Telephone:   
(713) 783-8000 Fax:    (713) 783-9993 Email:    shendrick@sanchezog.com

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

 

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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 (a) Company may not assign its rights hereunder without
the written consent of Manager, and (b) Manager may not assign its rights and
obligations hereunder without the written consent of Company.

Section 14. No Third-Party Beneficiaries. Nothing in this Agreement (except as
specifically provided in Section 7) shall provide any benefit to any third party
or entitle any third party to any claim, cause of action, remedy or right of any
kind, it being the intent of the parties that this Agreement shall not be
construed as a third-party beneficiary contract.

Section 15. Amendment. No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by all parties hereto and approved
by the audit committee of Company’s board of directors 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 approved by the audit committee of Company’s board of
directors, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

Section 16. 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 17. Survival of Agreements. Company’s and Manager’s various
representations, warranties, covenants, agreements and duties in and under this
Agreement shall survive the execution and delivery of this Agreement and
terminate upon termination or expiration of this Agreement, except for Section 4
and Section 5(b) (in each case, with respect to any accrued but unpaid
obligations as of the date of termination or expiration), Section 5(f)(iii),
Section 6(b), Section 7, Section 9, Section 10, Section 11, Section 12,
Section 14, Section 18, Section 19 and Section 22, which shall survive
termination or expiration of this Agreement.

Section 18. 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 COMPANY (I) SUBMITS ITSELF TO THE EXCLUSIVE JURISDICTION
OF THE STATE AND FEDERAL COURTS SITTING IN HARRIS COUNTY, TEXAS, (II) AGREES AND
CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING
RELATING TO THIS AGREEMENT OR 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 AND ANY CLAIM THAT ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.

 

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Section 19. Waiver of Jury Trial. EACH OF MANAGER AND COMPANY 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 20. Entire Agreement. This Agreement, the License Agreement and the
Contract Operating Agreement sets forth the entire agreement of the parties with
respect to the subject matter hereof and thereof and any prior agreements,
written or oral, relating thereto are hereby superseded. In the event of a
conflict between this Agreement and the License Agreement, on the one hand, and
the Contract Operating Agreement, on the other, this Agreement and the License
Agreement shall control. In the event of a conflict between this Agreement and
the License Agreement, this Agreement shall control.

Section 21. 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 the Contract Operating Agreement or
other Related Contract if the effect thereof would be to cause such party to be
in violation of any applicable Legal Requirements.

Section 22. 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 the Contract Operating Agreement or other
Related Contract shall not give rise to any right of recourse against any
officer, director, manager or employee of Manager, Company or any of their
respective affiliates.

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

 

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

 

MANAGER:        SANCHEZ OIL & GAS CORPORATION     By:  

/s/ Antonio R. Sanchez, III

    Name:   Antonio R. Sanchez, III     Title:   President

 

COMPANY:       SANCHEZ ENERGY CORPORATION     By:  

/s/ Antonio R. Sanchez, III

    Name:   Antonio R. Sanchez, III     Title:   President, Chief Executive
Officer and Chairman of the Board of Directors

Signature Page to Services Agreement

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EXHIBIT A

LICENSED MARK

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