Exhibit 10.11

Execution Version

MANAGEMENT SERVICES AGREEMENT

This MANAGEMENT SERVICES AGREEMENT (this “Agreement”), dated March 1, 2017 (the
“Effective Date”), is by and between Gavilan Resources HoldCo, LLC, a Delaware
limited liability company (the “Company”), and SN Comanche Manager, LLC, a
Delaware limited liability company (“Sanchez”), and solely for the purposes
of Section 5.8(d), SN EF Maverick, LLC, a Delaware limited liability company
(“SN”).  Sanchez and the Company are referred to herein separately as a “Party”
and collectively as the “Parties.”

Recitals:

WHEREAS, the Company desires to engage Manager (as defined below) to provide the
comprehensive management services described herein to the Company and all of its
subsidiaries (collectively, the “Company Group”), including the facilitation of
the ownership, operation, finance, maintenance, exploration, production and
development of oil and gas opportunities and investments and other related
rights, assets and interests in Maverick, Dimmit, Webb and LaSalle Counties,
Texas.

WHEREAS, the Manager is willing to undertake such engagement, subject to the
terms and conditions of this Agreement.

Agreements:

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

Article I

Definitions

Capitalized terms used in this Agreement but not expressly defined in this
Agreement shall have the respective meanings ascribed to such terms in the LLC
Agreement (as defined below).  As used in this Agreement, the following terms
shall have the meanings set forth below:

“Administrative Fee” means an administrative fee of two percent (2%) of annual
G&A Costs.

“Affiliates” has the meaning set forth in the LLC Agreement.

“Agreed Rate” means two percent (2%) plus the prime rate on corporate loans at
large U.S. money center commercial banks as set forth in The Wall Street Journal
“Money Rates” table under the heading “Prime Rate,” on the first date of
publication for the month in which payment is due, or the maximum rate of
interest permitted by applicable Laws.

“Agreement” has the meaning set forth in the Preamble.

“Approved Budget” has the meaning set forth in the Joint Development Agreement.

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“Blackstone” has the meaning set forth in the LLC Agreement.

“Blackstone Group” means Blackstone Capital Partners VII L.P. and Blackstone
Energy Partners II L.P.

“Board” has the meaning set forth in the LLC Agreement.

“Change in Control” means, with respect to the Company, any events, transactions
or other circumstances (or any series of the foregoing) resulting in the
Blackstone Group no longer owning (directly or indirectly, individually or
collectively) Equity Interests (i) representing over 50% of the Voting Stock of
the Company or (ii) entitling the Blackstone Group to elect at least a majority
of directors (or Persons with management authority performing similar functions)
of the Company.

“Company” has the meaning set forth in the Preamble.

“Company Bank Accounts” has the meaning set forth in Section 3.1.

“Company Business” means the ownership, operation (including marketing and
hedging activities), finance, maintenance, exploration, production and
development of Hydrocarbon Interests owned by a member of the Company Group.

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

“Company Group” has the meaning set forth in the recitals.

“Company Revenues” has the meaning set forth in Section 3.1.

“Effective Date” has the meaning set forth in the Preamble.

“Equity Interest” means (a) with respect to a corporation, any and all shares of
capital stock and any commitments with respect thereto, (b) with respect to a
partnership, limited liability company, trust or similar Person, any and all
units, equity interests or other partnership/limited liability company
interests, and any commitments with respect thereto, and (c) any other direct or
indirect equity ownership or participation in a Person.

“Excluded Services” has the meaning set forth in Section 2.2(b).

“Financial Records” has the meaning set forth in Section 4.1.

“Force Majeure Events” has the meaning set forth in Section 7.10.

“G&A Costs” means the cost of providing the Services allocated in accordance
with Manager’s (or such other Affiliate’s, including SOG’s) regular and
consistent accounting practices, including (a) the cost of supplies and the
operation and maintenance of equipment used

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in the provision of the Services, (b) the cost of employee wages, bonuses,
severance payments, employment taxes (including social security taxes and
unemployment taxes) and benefits for employees participating in the provision or
support of the provision of the Services, (c) direct costs, (d) indirect
administrative costs and (e) general and overhead costs and equity compensation
expenses, in each case, excluding any Operating Expenses and disbursements paid
to Third Parties under Section 3.2(a);  provided, that G&A Costs for any month
shall be no greater than $500,000 per month to the Company subject to reasonable
adjustments that are consistent with market terms as a result of an increase in
actual G&A Costs incurred by Manager and/or its Affiliates (including SOG) and
based upon a reasonable allocation of such costs among the Company and other
entities for which Manager and/or its Affiliates provides management services as
reasonably agreed upon by the Company and Manager; provided,  further, that
there shall be no duplication with respect to any costs that are treated as G&A
Costs pursuant to this Agreement and the same costs that are charged to the
Company Group by Manager or any of its Affiliates pursuant to any applicable
operating agreement relating to the Company Business pursuant to which Manager
or any of its Affiliates serves as operator; provided, further, that G&A Costs
shall include the Administrative Fee.

“Governmental Authority” has the meaning set forth in the LLC Agreement.

“Hydrocarbon Interests” means (a) all oil, gas and/or mineral leases, oil, gas
or mineral properties, mineral servitudes and/or mineral rights of any kind
(including fee mineral interests, lease interests, farmout interests, overriding
royalty and royalty interests, net profits interests, oil payment interests,
production payment interests and other types of mineral interests), including
any rights to acquire any of the foregoing, and (b) all oil and gas gathering,
treating, compression, storage, processing and handling assets of any kind,
including all pipelines, wells, wellhead equipment, pumping units, flowlines,
tanks, buildings, injection facilities, saltwater disposal facilities,
compression facilities, gathering systems, processing plants, and other related
equipment of any kind.

“Indemnified Manager Persons” has the meaning set forth in Section 5.8(a).

“Inventions” has the meaning set forth in Section 2.8.  

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

“Joint Development Agreement” means that certain Joint Development Agreement by
and among Gavilan Resources, LLC, a Delaware limited liability company, SN EF
Maverick, LLC, a Delaware limited liability company, SN EF UnSub, LP, a Delaware
limited partnership and solely for the purposes of Section 2.2, Section 4.2,
Section 4.5 and Article VII therein, Sanchez Energy Corporation, a Delaware
corporation, in effect as of the Effective Date.

“Laws” has the meaning set forth in the LLC Agreement.

“LLC Agreement” means that certain Amended and Restated Limited Liability
Company Agreement of Gavilan Resources HoldCo, LLC, dated as of the Effective
Date.

“Loss Notice Amount” means $75,000.

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“Losses” means all costs, expenses (including reasonable attorneys’ fees, court
costs, and other costs of suit), demands, damages, suits, judgments, orders,
penalties, liabilities, and other losses, including in connection with seeking
indemnification, whether joint or several.

“Majority Consent” has the meaning set forth in the LLC Agreement.

“Manager” means Sanchez or an Affiliate thereof designated by Sanchez.

“Manager Confidential Information” means any and all nonpublic or confidential
information provided by or on behalf of Manager in the performance of the
Services, including under Section 5.10(c) (in each case irrespective of the form
of communication and whether such information is furnished on or after the date
hereof).

“Marketing Transition Services Agreement” means that certain Marketing
Transition Services Agreement, dated as of the date hereof, by and among SN EF
Maverick, LLC, Anadarko Energy Services Company, Kerr-McGee Oil & Gas Onshore LP
and Anadarko E&P Onshore LLC.

“Notice” has the meaning set forth in Section 7.2.

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

“Operating Expenses” means any reasonable costs and expenses incurred directly
by the Company and paid for out of the Company Bank Accounts.

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

“Out-of-Pocket Expenses” has the meaning set forth in Section 5.6.    

“Party” and “Parties” are defined in the Preamble.

“Payment Reserves” has the meaning set forth in Section 3.3(b). 

“Permitted Actions” means all agreements, contracts and actions permitted to be
taken by Manager under this Agreement or the LLC Agreement or that do not
expressly require approval of the Board, any committee of the Board or any of
Company’s members under Article VI of the LLC Agreement, or which have been so
approved.

“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 assets of the
Company; (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

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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 Effective Date; (f) defects or
irregularities of title arising out of events that have been barred by
limitations; (g) any Liens permitted or contemplated by the terms and conditions
of this Agreement or that are customarily associated with the performance of the
Services hereunder; (h) any Liens resulting or arising from, directly or
indirectly, the failure of any member of the Company Group to pay any amounts
owed by such Person to a Third Party, Manager or any of Manager’s Affiliates or
to deposit funds in the Company Bank Accounts when so required hereunder; (i)
Liens arising under operating agreements, unitization and pooling agreements and
sales contracts in the ordinary course of business; (j) materialman’s,
mechanic’s, repairman’s, contractor’s, operator’s, and other similar Liens or
charges arising in the ordinary course of business and (k) any matter waived in
writing by the Company.

“Person” has the meaning set forth in the LLC Agreement.

“Sanchez” has the meaning set forth in the Preamble.

“Sanchez Credit Agreement” means:

a)   that certain Second Amended and Restated Credit Agreement, dated as of June
30, 2014 among Sanchez Energy Corporation, a Delaware corporation, as borrower,
the lenders party thereto and Royal Bank of Canada as administrative agent, as
amended by that certain First Amendment to Second Amended and Restated Credit
Agreement, dated as of September 9, 2014, as amended by that certain Second
Amendment to Second Amended and Restated Credit Agreement, dated as of March 31,
2015, as amended by that certain Third Amendment to Second Amended and Restated
Credit Agreement, dated as of July 20, 2015, as amended by that certain Fourth
Amendment to Second Amended and Restated Credit Agreement, dated as of September
29, 2015, as amended by that certain Fifth Amendment to Second Amended and
Restated Credit Agreement, dated as of October 30, 2015, as amended by that
certain Sixth Amendment to Second Amended and Restated Credit Agreement, dated
as of January 22, 2016 and as amended by that certain Seventh Amendment to
Second Amended and Restated Credit Agreement, dated as of March 18, 2016;

b)   that certain 6.125% Senior Secured Notes Due 2023 Indenture dated June 27,
2014 among Sanchez Energy Corporation, a Delaware corporation, the guarantors
party thereto, and Delaware Trust Company, as trustee; and

c)   that certain 7.75% Senior Notes Due 2021 Indenture dated June 13, 2013
among Sanchez Energy Corporation, a Delaware corporation, the guarantors party
thereto, and Delaware Trust Company, as trustee, as supplemented by that certain
First Supplemental Indenture, dated as of September 11, 2013 and as further
supplemented by that certain Second Supplemental Indenture, dated as of June 2,
2014, in each of (a), (b) and (c), as amended, restated, supplemented,
refinanced or replaced from time to time.

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“Services” has the meaning set forth in Section 2.2(a).

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

“Successor Manager” has the meaning set forth in Section 6.1(b).

“Third Party” has the meaning set forth in the LLC Agreement.

“Transition Services Agreement” means that certain Transition Services
Agreement, dated as of the date hereof, by and between Anadarko E&P Onshore LLC
and SN EF Maverick, LLC.

“Voting Stock” means, with respect to any Person, Equity Interests in such
Person (and/or, if applicable, such Person’s general partner), the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or Persons with management authority performing similar
functions) of such Person.

“Working Capital Reserves” has the meaning set forth in Section 3.3(a).

Article II

Services Regarding Assets

Section 2.1   Manager.

(a)     Engagement.  Subject to the terms and provisions of this Agreement,
effective as of the Effective Date and continuing for the term set forth in
Article VI, the Company engages and hires Manager, and Manager accepts such
engagement and hiring, to perform the Services.  Subject to Article V, all
services provided, acts performed, and activities conducted (whether by
employees of Manager or by contractors, consultants, accountants, attorneys, or
other Third Parties) under and in accordance with this Agreement shall be for
the account of the Company or other member of the Company Group.

(b)     Role.  Subject to the terms of the LLC Agreement, the Company and
Manager intend that, as of the Effective Date and continuing for the term set
forth in Article VI, Manager shall serve as manager of the Company Business
pursuant to the terms of this Agreement.

Section 2.2   Performance of Services.

(a)     Manager shall provide to the Company Group day-to-day general,
administrative, business and financial services consistent with the purpose of
the Company as specified in Section 2.4 of the LLC Agreement and of a type
customarily provided to a non-operator of Hydrocarbon Interests, which services
shall, to the extent consistent with the foregoing, include (i) the services
listed on Schedule 1 and (ii) the following additional services on behalf of the
Company Group (collectively, the “Services”) but, in all cases, excluding the
Excluded Services or services that do not constitute Permitted Actions:

(i)     Discharge of Obligations.  Manager shall pay and discharge, on behalf of
the Company Group, to the extent the Company has made such funds available to
Manager, all expenses incurred with respect to the Company Business, and, to

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the extent the Company has made such funds available to Manager, shall pay and
discharge, on behalf of the Company Group, all other liabilities related to the
Company Business, in each instance, in the manner provided for in Article III.
Manager shall keep a complete and accurate record (in all material respects) of
the accounts upon which such expenses and liabilities are based, showing charges
and credits made and received, including overriding royalties and other burdens
on the assets of the Company Group in accordance with applicable agreements and
Laws.  Upon reasonable notice to Manager, the Company shall have access to such
records during normal business hours in accordance with, and subject to the
limitations set forth in Section 4.1, as if such records are Financial Records.

(ii)    Protection from Liens.  Manager, solely in its capacity as Manager
acting under this Agreement, shall not place any Liens on the assets, except for
Permitted Encumbrances, or to the extent the Company 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 the Company, such consent not to be unreasonably withheld,
conditioned or delayed.

(iii)   Receipt of Notices and Other Communication.  Manager shall review,
categorize, classify, organize, record, file, and maintain all notices,
correspondence, reports, instruments, writings, agreements, documents, claims,
assertions, demands, records, invoices, and other communications received by
Manager addressed to (or intended for) any member of the Company Group and
pertaining to the Company Group, and shall use commercially reasonable efforts
to respond in a timely manner to the foregoing as necessary on behalf of the
Company Group.  Manager shall promptly deliver Notice to the Company with
respect to any claim or demand received by Manager adversely affecting the
Company Group and the Company Business that could reasonably be expected to
exceed the Loss Notice Amount or otherwise adversely impact the Company Group or
their assets in any material respect.

(iv)   Regulatory Compliance.  Manager shall, on behalf of the Company Group,
prepare, apply for, submit, file, receive, hold, use, abandon, or relinquish, as
appropriate, all permits and licenses required by applicable Laws in connection
with the assets and the conduct of the business of the Company Group.  Such
permits and licenses shall be in the name of the applicable member of the
Company Group and such member shall be financially responsible for all matters
involving or relating to such permits and licenses and any circumstances arising
from or relating to such permits and licenses.

(v)    Claims and Actions.  Subject to Section 5.8, Manager shall, in
cooperation with the Company, protect and defend against any non-material
adverse claim or demand made jointly against any member of the Company  Group
and Manager by, and pursue non-material claims of the Company Group and Manager
made jointly against, Third Parties with respect to the Company Business, and
all interests attributable thereto, including the employment or use of counsel

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for the prosecution or defense of litigation and the contest, settlement,
release, or discharge of any such claim or demand.  Manager shall notify the
Company of (i) every adverse claim or demand made or threatened to be made by
any Person (including any Governmental Authority) involving the Company or
Manager (with respect to the performance of Services hereunder) to which Manager
becomes aware that could reasonably be expected to exceed the Loss Notice Amount
or otherwise adversely impact the Company Group in any material respect and (ii)
any lawsuits or proceedings instituted with respect to the Company Group or
their assets or production attributable thereto to which Manager becomes aware. 
Manager shall have no authority to retain Third Party counsel on the Company
Group’s behalf with respect to any such claim or demand or settle any such claim
or demand on the Company Group’s behalf without the prior written consent of the
Company, such consent not to be unreasonably withheld, conditioned or delayed.

(vi)   Suspense Accounts.  Manager shall maintain, on behalf of the Company, all
suspense accounts related to the Company Business.

(vii)  Performance of Contracts.  Manager shall, on behalf of the Company, use
its commercially reasonable efforts to cause to be performed and observed the
terms and conditions of all agreements to which any member of the Company Group
is a party.

(viii) Environmental Audit.  At the request of the Company, Manager shall
cooperate with and facilitate the Company’s retention of any qualified
environmental consultant to provide such reports to the Company concerning any
Hydrocarbon Interest of the Company Group as the Company shall reasonably
request; provided,  however, that the Company shall timely provide the Company
funds necessary to pay and discharge all costs and expenses associated with the
retention of such environmental consultant.

(b)     Excluded Services.  Notwithstanding anything in this Agreement to the
contrary, in no event shall Manager be required under this Agreement to perform
any functions, duties or services of the Operator (under the Joint Development
Agreement, any Operating Agreement or otherwise) or other operator of the
Hydrocarbon Interests that are or would otherwise customarily be performed by
such Person (collectively, the “Excluded Services”).  Manager’s obligation to
provide the Services shall be conditioned upon and subject to any legal
obligations, prohibitions or restrictions applicable to it, and this Agreement
shall not obligate Manager to violate, modify or eliminate any such obligation,
prohibition or restriction.  Notwithstanding anything herein to the contrary,
the failure of Manager to provide to any member of the Company Group any Service
for which Manager is not entitled to receive full reimbursement under this
Agreement shall not be deemed a breach or violation of (or failure to perform
under) this Agreement.

Section 2.3   Prohibited Acts.  Manager shall not have the authority or be
permitted to take, in the name or on behalf of the Company, any action, unless
and until the Company has the authority and is permitted to take such action
under the LLC Agreement, including the approval of the Board as contemplated by
Section 6.3 of the LLC Agreement, it being agreed to and

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understood that, without limiting any other powers or duties of Manager provided
in this Agreement, Manager is hereby authorized to act as agent of Company and
each other member of the Company Group for the procurement or performance of all
Services to be procured for the Company or any other member of the Company Group
by Manager pursuant to this Agreement, and to, in Company’s name or in the name
of any other member of the Company Group and on its or such other member’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,
including the execution of any agreements or other instruments.

Section 2.4   Insurance Coverage.  Manager shall use commercially reasonable
efforts to either (i) cause the Company Group to obtain and maintain in full
force and effect during the term of this Agreement the coverages set forth on
Schedule 2 (and Company shall be obligated to obtain and maintain such
insurance), which shall name Manager and SOG as an additional insured thereunder
and shall contain waivers by the insurers of any and all rights of subrogation
to pursue any claims or causes of action against Manager and SOG or (ii) name
the Company Group and Manager as an additional insured under an insurance policy
of SOG and cause such insurance policy to be maintained in full force and effect
during the term of this Agreement with coverages equivalent to or greater than
as set forth on Schedule 2 and contain waivers by the insurers of any and all
rights of subrogation to pursue any claims or causes of action against Manager
and SOG. 

Section 2.5   Seismic Agreements.  Seismic and other reserve related data
Sanchez has access to, solely to the extent such data is relevant to the assets
of the Company Group, shall be made available to the Company Group subject to
and in accordance with the terms of a geophysical seismic data use license
agreement in a form reasonably acceptable to Manager and its Affiliates to be
entered into by Manager (or one or more of its Affiliates) and the appropriate
member(s) of the Company Group (provided such access does not breach, conflict
or violate any Third Party licensing agreement or other contract).

Section 2.6   Employees of the Manager.    Manager shall select, employ, pay
compensation (including the payment of all social security taxes, unemployment
taxes and similar payments related thereto) and any applicable severance (which
severance shall be reimbursable by the Company to Manager) to, supervise and
direct all personnel and employees of the Manager necessary for the performance
of the Services.

 

Section 2.7  No Commingling of Assets.  To the extent Manager shall have charge
or possession of any of the Company Group’s assets in connection with the
provision of the Services pursuant to this Agreement, Manager shall (a) hold
such assets in the name and for the benefit of the Company Group and (b)
separately maintain and not commingle such assets with any assets of the Manager
or any other Person.

Section 2.8   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

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of Manager.  Company hereby assigns, and agrees to assign, to Manager any and
all rights that Company may have in any such Inventions and in any intellectual
property rights therein or related thereto.  Company agrees to assist Manager
and any Manager designee in obtaining, enforcing, and perfecting, Manager’s
right in the Inventions in any and all countries, including by executing any
intellectual property assignment agreements.  Company hereby appoints Manager as
Company’s attorney-in-fact to execute documents on Company’s behalf for the
purposes set forth in this paragraph.

Section 2.9  Company Information.  It is contemplated by the Parties that,
during the term of this Agreement, Company will be required to provide certain
notices, information and data necessary for Manager to perform the Services and
its obligations under this Agreement.  Manager shall be permitted to rely on any
information or data provided by Company to Manager in connection with the
performance of its duties and provision of Services under this Agreement.

Article III

Revenues and Disbursements

Section 3.1   Receipt of Revenues.    Manager shall have the authority and duty
to collect on behalf of the Company Group all proceeds and cash attributable to
the Company Group’s assets (the “Company Revenues”) into one or more banks
accounts maintained in the name of the Company or other member of the Company
Group (the “Company Bank Accounts”).  Manager shall use commercially reasonable
efforts to cause all amounts due and owing to the Company Group to be paid on a
timely basis.  Manager shall keep a complete and accurate account (in all
material respects) of all proceeds received on behalf of the Company Group. All
Company Revenues received by the Manager on behalf of the Company Group (other
than in respect of amounts due and owing to Manager or its Affiliates) shall
promptly be deposited in the Company Bank Accounts and shall only be disbursed
therefrom in accordance with this Agreement.  To the extent Manager or any of
its Affiliates receives any Company Revenues (other than in respect of amounts
due and owing to such Person), Manager shall, or shall cause its Affiliate to,
as applicable, promptly deposit such Company Revenues in the Company Bank
Accounts.

Section 3.2   Disbursements.

(a)     Payments.  Manager shall make disbursements of the Company Revenues from
the Company Bank Accounts from time to time necessary to timely discharge all
costs and expenses and other amounts due and owing by the Company Group,
including those costs and expenses attributable to ownership of the assets of
the Company Group and other related business activities (and not discharged out
of gross revenues before such member of the Company Group receives such
revenues), and payment of applicable sales, use, excise, value added and other
similar taxes assessed or imposed on the assets of the Company Group.    

(b)      No Liability.  The disbursement of funds, or the failure to so
disburse, by Manager under this Agreement shall in no event relieve the Company
Group of any liability, except to the extent Manager applies the Company
Revenues against amounts owing to it or its Affiliates.

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Section 3.3   Reserve Accounts.

(a)     Working Capital.  Manager, using its reasonable professional judgment,
shall advise the Board in connection with establishing appropriate working
capital reserves (“Working Capital Reserves”) out of the Company Revenues of
amounts sufficient for the Company Group to timely discharge obligations which
are reasonably anticipated to be incurred in excess of anticipated revenue
receipts.

(b)     Payment Reserves.  Manager, using its reasonable professional judgment,
shall advise the Board in connection with establishing appropriate reserves out
of the Company Revenues of amounts sufficient for the Company Group to timely
pay disputed liabilities of the Company Group or refund disputed proceeds
received by the Company Group, in each instance, as attributable to the assets
of the Company Group (“Payment Reserves”).

(c)     Insufficient Funds.  The inadequacy of any Working Capital Reserves or
Payment Reserves shall in no event relieve the Company Group of any liability
under this Agreement or otherwise.

Section 3.4   Arrangements with Banking Institutions.  Manager and the Company
agree to take all such steps as are reasonably requested by any bank or banks,
solely in respect of the Company Bank Accounts in which the Company Revenues are
deposited, to accord Manager the authority to deposit and disburse funds
therefrom solely as provided herein.

Article IV
Accounting and Reports

Section 4.1   Accounting and Audit.  Manager will maintain the books, records,
and accounts of operations, revenues, and expenditures of the Company Group in
respect of the assets of the Company Group, and shall report all such
information to the Company from time to time as requested by the Company.  All
such records (collectively, the “Financial Records”) shall be maintained at the
principal office of Manager.  All Financial Records shall be available, upon 30
days’ prior notice to Manager, for reasonable audit, inspection, or copying by
the Company or any of its representatives during normal business hours at the
Manager’s principal office no more than twice per calendar year.  If the Company
or any of its members gives Manager Notice of any exception or objection to any
item of accounting for the Company Revenues or disbursements hereunder (in
accordance with the provisions of Article III) within two (2) years after the
end of the calendar year during which such accounting item was entered into the
books maintained by Manager pursuant to this Section 4.1, Manager shall work in
good faith with the Company or such member, as the case may be, to resolve such
exception or objection as soon as reasonably practicable.  Any amount determined
to be owing to the Company Group by Manager (or to Manager by Company Group) in
connection with such exception or objection shall bear interest at the Agreed
Rate from the date such amount should have been distributed to or retained by
the Company Group (or Manager) pursuant to Article III until the date such
amount is paid by Manager to the Company (or to Manager by Company Group).  If
the Company or any member of the Company fails to object or except to any item
of accounting or disbursement within such two-year (2) period, then the books
maintained by Manager for such calendar year shall be deemed to be

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final and no further adjustment shall be made to any accounting items or
disbursements for such calendar year.

Section 4.2   LLC Reports.    Manager shall provide to the Company any
statements, reports, and other information provided for in Section 9.3 of the
LLC Agreement by the dates set forth therein and such other information and
reports as may from time to time be reasonably requested by the Company.

Article V

Standard of Performance; Reimbursement of Costs; Indemnification

Section 5.1   Standard of Conduct.  With respect to the conduct and performance
of all duties, services, and obligations of Manager under this Agreement,
Manager, at a particular time, shall 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 utilized in
comparable circumstances in the oil and gas industry in the geographic region(s)
where the Company Business is conducted.  Notwithstanding the foregoing, Manager
shall not be deemed in breach or violation of (or to have failed to perform) its
obligations under this Section 5.1 unless Manager’s conduct or performance
hereunder constitutes bad faith, gross negligence, willful misconduct, or actual
fraud.

Section 5.2   Compliance with Laws; Conflicts.  In conducting its services and
duties hereunder, Manager shall comply, in all material respects, with all
applicable Laws. 

Section 5.3   Proper Staff.  Manager covenants and agrees that it will use
commercially reasonable efforts to at all times retain and have available to it
a professional staff and outside consultants which together will be reasonably
adequate in size, experience, and competency, as determined by Manager, to
discharge properly the duties and functions of Manager hereunder, including
engineers, geologists, and other technical personnel, accountants, and
secretarial and clerical personnel.  Manager shall devote all such personnel and
time as are necessary to provide the Services hereunder consistent with the
standards set forth in this Article V, as determined by Manager. 

Section 5.4   Budget.  With respect to Manager’s activities under this
Agreement, Manager agrees to use commercially reasonable efforts to operate in a
manner that is consistent with the applicable Approved Budget then in effect or
otherwise pursuant to such budget as is established by the Company and approved
by Manager (such consent not to be unreasonably withheld, conditioned or
delayed).  Notwithstanding the foregoing, Manager shall not be liable for a
breach of this Section 5.4, or any other provision of this Agreement for any
actions performed or omissions made (i) in accordance with directions given by
the Company Group, or (ii) as a result of the failure by the Company to timely
provide to Manager the funds necessary to pay all costs and expenses incurred
(or to be incurred) by Manager in providing the Services.  Notwithstanding
anything to the contrary contained herein, Manager shall have no obligation to
pay any costs and expenses in connection with the Services hereunder (under
Article III, Section 5.6 or otherwise) out of its own funds (and seek
reimbursement from Company), it being required instead that Company, at
Manager’s request, will ensure that the funds to pay such costs and expenses are

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deposited in the Company Bank Accounts and available for withdrawal or use by
Manager or otherwise paid or made available to Manager in advance (and the
Company hereby agrees to the foregoing).

Section 5.5   Contractors; Affiliate Transactions.

(a)     Contractors.  All Services provided hereunder shall be performed by
Manager, by its Affiliates, or by contractors, consultants, accountants,
attorneys, or other Third Parties engaged by Manager.  Manager shall (i) if an
agreement is to be entered into with a Third Party, engage such Third Parties
under such agreements with terms which are customary and reasonable for the type
and character of the Services being provided hereunder and which provide for
such Services to be furnished at rates competitive with those otherwise
generally available in the area in which such Services are performed and (ii)
review and monitor the provision of any such Services by such Third
Parties.  Manager shall not charge the Company any mark-up or other profit over
the actual costs charged Manager by such providers.

(b)     Affiliates.  Other than compensatory, indemnification and similar
arrangements with individuals and arrangements and agreements with SOG and
Sanchez Production Partners LP, Manager will not enter into any agreement or
arrangement with any Affiliate of Manager for the performance of Services
hereunder unless (i) approved by the Company by Majority Consent, such consent
not to be unreasonably withheld, conditioned or delayed (as provided in Section
6.11 of the LLC Agreement) or (ii) the terms of such agreement or arrangement
are on an arm’s-length basis and not materially less favorable, directly or
indirectly, to the Company than would be obtained in a transaction with a Third
Party.

Section 5.6   Third Party Costs.  The Company will pay, or cause to be paid,
directly, or (at Manager’s election) reimburse Manager and its Affiliates for,
their respective Out-of-Pocket Expenses (as defined below) incurred by Manager
or its Affiliates in accordance with Section 5.10; provided, that Manager shall
be entitled to make such payments on the Company’s behalf from the Company Bank
Accounts.  For the purposes of this Agreement, the term “Out-of-Pocket Expenses”
means the out-of-pocket costs and expenses reasonably incurred by Manager and
its Affiliates in connection with providing the Services hereunder, or otherwise
incurred by Manager or its Affiliates from time to time in the future in
connection with their provision of Services hereunder (excluding for the
avoidance of doubt G&A Costs, Operating Expenses or equity compensation expenses
for which Manager and its Affiliates have been paid or reimbursed under Section
5.7 or disbursements which have been paid on behalf of the Company directly
under Section 3.2(a)) including, without limitation, (a) fees and disbursements
of any independent professionals and organizations, including independent
accountants, outside legal counsel or consultants, retained by Manager or any of
its Affiliates, (b) costs of any outside services or independent contractors
such as financial printers, couriers, business publications, on-line financial
services or similar services, retained or used by Manager or any of its
Affiliates, and (c) Third Party transportation, per diem costs, word processing
expenses or any similar expense not associated with Manager or its Affiliates’
ordinary operations.  Notwithstanding the foregoing, Out-of-Pocket Expenses
shall not include expenses incurred by Manager and its Affiliates in connection
with a sale or transfer of Manager’s or any of its Affiliates’ interests in the
Company nor taxes payable by Manager (other than sales and similar taxes payable
to Third Party vendors), subject to Section 5.9. All payments or reimbursements
for Out-of-Pocket Expenses will be made

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by wire transfer in same-day funds promptly upon or as soon as practicable
following request for payment or reimbursement in accordance with this
Agreement, to the bank account indicated to the Company by the relevant payee.

Section 5.7   General and Administrative Costs.  The Company shall reimburse
Manager for the G&A Costs attributable to or allocated to the Services in
accordance with Section 5.10. 

Section 5.8   Indemnification and Exculpation.

(a)     The Company shall indemnify the Manager and its Affiliates (and their
respective directors, officers, employees, managers, members, partners,
controlling Persons and equityholders) (collectively, “Indemnified Manager
Persons”) in respect of, and hold it harmless from and against, any and all
Losses suffered, incurred or sustained by any Indemnified Manager Person or to
which it becomes subject, however so arising whether under tort, contract,
negligence, strict liability or otherwise, to the extent resulting from, arising
out of, or relating to or in connection with (i) any breach of any covenant,
obligation or agreement on the part of any member of the Company Group contained
in this Agreement, (ii) the nonfulfillment of or failure to perform any covenant
or agreement on the part of any member of the Company Group contained in this
Agreement, and (iii) the Services or this Agreement, except to the extent that
any Losses have been caused by the bad faith, gross negligence, willful
misconduct or actual fraud of Manager or any of its Affiliates or
representatives, and for any Losses suffered, incurred, or sustained by an
Indemnified Manager Person as a result of any uncured, intentional, and material
breach by the Manager of any of its covenants or agreements contained in this
Agreement.  The Company will reimburse the Indemnified Manager Persons for all
reasonable costs and expenses (including reasonable attorneys’ fees and expenses
of one counsel for all such Indemnified Manager Persons (and any required local
counsel) and any other litigation-related expenses) as they are incurred in
connection with investigating, preparing, pursuing, defending or assisting in
the defense of any action, claim, suit, investigation or proceeding for which
the Indemnified Manager Persons are entitled to indemnification under the terms
of this Section 5.8(a), or any action or proceeding arising therefrom, whether
or not such Indemnified Manager Person is a party thereto.

(b)     In no event shall either Party or its respective directors, officers,
employees, managers, members, partners, controlling Persons and equityholders
have any liability for any Losses under any provision of this Agreement for any
punitive, consequential, special or indirect damages, whether based on statute,
contract, tort or otherwise, and whether or not arising from the other Party’s
sole, joint, or concurrent negligence, strict liability, criminal liability or
other fault other than punitive, consequential, special or indirect damages
suffered by a Person other than an Indemnified Manager Person for which the
Company has responsibility pursuant to this Article V.

(c)     The Parties acknowledge and agree that the indemnification provisions of
this Article V and any other rights and remedies available to a Party under this
Agreement are cumulative and in addition to, not exclusive of or in substitution
for, any implied rights or remedies provided by law or equity for the breach or
nonfulfillment of any covenant or agreement on the part of the Company and
Manager under this Agreement.

(d)     Notwithstanding Manager’s agreement to perform, or cause to be
performed, the Services in accordance with the provisions hereof, the Company
acknowledges, on its own

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behalf and on behalf of each member of the Company Group, that performance by
Manager or any other Person of Services pursuant to this Agreement will not
subject Manager or any other Indemnified Manager Persons to any Losses
whatsoever, except to the extent resulting from, arising out of or relating to
or in connection with Manager’s bad faith, gross negligence, willful misconduct,
or actual fraud in performing its obligations under this Agreement; provided,
however, that (i) Manager’s and each of its Affiliates (and their respective
directors, officers, employees, managers, members, partners, controlling Persons
and equityholders) aggregate liability, collectively, as a result of such bad
faith, gross negligence, willful misconduct or actual fraud will be limited to
an amount equal to the G&A Costs paid by the Company to Manager over the 24
month period preceding the date of the action or inaction that gave rise to such
liability and (ii) SN shall be liable for the Losses incurred by the Company
described in the preceding clause (i); provided,  further, that any damages
payable pursuant to this (d) shall be subject to the terms and conditions of the
Sanchez Credit Agreement; provided, further, however, that if any of such Losses
are covered by any insurance policy of the Company, the aggregate liability of
such Indemnified Manager Person with respect to such Losses shall be reduced by
the amount recovered by the Company under such policy in respect of such Losses.

(e)     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 5.8, such notice shall specify, if known, the amount or
an estimate of the amount of the Losses asserted by such Third Party.

(f)     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 5.8(b)) 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.

(g)     Except as provided above, all claims for Losses brought by Third Parties
against Company or any subsidiary (x) arising out of or in any way relating to
the provision of Services hereunder and (y) not discharged by insurance required
hereunder, shall only be settled or, with Manager’s concurrence, defended by
Manager, at Company’s expense.

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Section 5.9   Taxes.  In addition to the other sums payable under this
Agreement, the Company shall pay, and hold Manager harmless against, all sales,
use or other taxes, or other fees or assessments imposed by any applicable Laws
in connection with the provision of the Services, other than income, franchise
or margin taxes measured by Manager’s net income or margin and any gross
receipts of other privilege taxes imposed on Manager.  Manager and the Company
shall cooperate with each other and use commercially reasonable efforts to
assist the other in entering into such arrangements as the other may reasonably
request in order to minimize, to the extent lawful and feasible, the payment or
assessment of any taxes relating to the transactions contemplated by this
Agreement; provided, however, that nothing in this Section 5.9 shall obligate
Manager to cooperate with, or assist, the Company in any arrangement proposed by
the Company that would, as determined by Manager in such Party’s sole
discretion, have a detrimental effect on such Party.

Section 5.10  Invoicing and Payment.

(a)      On the Effective Date, the Company will pay to Sanchez an amount equal
to $1,000,000.  Manager will invoice Company on or before the last day of each
month for G&A Costs, Out-of-Pocket Expenses or amounts payable under Article III
incurred during the immediately prior month and, in addition, provide an
estimate of the current month’s G&A Costs (not to exceed the then-current
monthly cap) and Out-of-Pocket Expenses.  The Company shall pay invoiced amounts
within 15 days after the receipt of each such invoice.  Any requests for payment
in subsequent months will include corrections for any variances between
estimated costs and actual costs incurred in prior months and shall reflect
payment for or application of previous months’ variances.  Notwithstanding the
foregoing or anything else in this Agreement to the contrary, Manager may elect
to retain proceeds that it receives on behalf of the Company to the extent it
would otherwise invoice Company for such amounts and in such event it shall show
any such retained amounts as a credit on such invoice.  Failure by Manager to
submit an invoice for any amounts due hereunder shall not relieve Company of its
payment obligations under this Agreement when due hereunder.

(b)      For the term of the Transition Services Agreement and the Marketing
Transition Services Agreement, the Company shall fund into the Company Bank
Accounts the Company’s proportionate share of the fees due under the Transition
Services Agreement and the Marketing Transition Services Agreement at least
three (3) business days before payment under such agreements is due.

(c)      THE COMPANY MAY, WITHIN 120 DAYS AFTER THE END OF THE CALENDAR YEAR
DURING WHICH AN INVOICE WAS RECEIVED FROM MANAGER, TAKE WRITTEN EXCEPTION TO ANY
CHARGE, ON THE GROUND THAT THE SAME WAS NOT AN ACTUAL (OR, IF APPLICABLE,
REASONABLE) COST, FEE OR EXPENSE INCURRED BY OR DUE TO MANAGER IN CONNECTION
WITH THE PROVISION OF SERVICES, OR ON ACCOUNT OF ANY ERROR OR INACCURACY ON ANY
INVOICE.  THE COMPANY SHALL NEVERTHELESS PAY MANAGER ANY INVOICED OR OTHER
AMOUNT IN FULL WHEN DUE OR REQUESTED, OR DEPOSIT SUCH AMOUNTS INTO THE COMPANY
BANK ACCOUNTS WHEN SO REQUESTED FOR WITHDRAWAL BY MANAGER.  SUCH PAYMENT OR
DEPOSIT SHALL NOT BE DEEMED A WAIVER OF THE RIGHT OF THE COMPANY TO RECOUP OR
RECEIVE CREDIT FOR ANY

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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, SUCH AMOUNT OR PORTION THEREOF (AS THE CASE MAY BE) SHALL
BE CREDITED AGAINST FUTURE AMOUNTS DUE HEREUNDER OR, UPON EXPIRATION OR
TERMINATION OF THIS AGREEMENT AFTER ALL SUCH CREDITS HAVE BEEN APPLIED, REFUNDED
BY MANAGER TO COMPANY.  COMPANY SHALL HAVE NO RIGHT TO DISPUTE ANY PAYMENT,
INVOICE OR WITHDRAWAL AFTER SUCH 120 DAY PERIOD, AND SHALL BE DEEMED TO HAVE
WAIVED ANY CLAIMS OR RIGHTS WITH RESPECT TO SUCH AMOUNTS TO THE EXTENT NOT
DISPUTED WITHIN SUCH PERIOD.

(d)      Company shall have the right, upon 30 days’ prior notice to Manager,
and at reasonable times during usual business hours of Manager or its Affiliates
to, no more than twice per year, audit the records of Manager (excluding the
Financial Records) for the purposes of this Section 5.10;  provided, however,
that such audit does not unreasonably interfere with the operations of Manager
or its Affiliates.  Company shall bear all costs and expenses incurred in
connection with any audit.  Notwithstanding anything herein to the contrary,
Manager shall not be obligated to disclose or make available to the Company any
information prohibited by applicable Laws or restricted by contractual
obligations of confidentiality.  This Section 5.10 shall survive termination or
expiration of this Agreement for a period of two years from termination or
expiration with respect to periods prior to such termination or expiration.

(e)      Any amount determined to be owing by one Party to the other Party in
connection with a dispute under Section 5.10(d) shall bear interest at the
Agreed Rate from the date such amount should have been paid to or retained by
the Company until the date such amount is paid by the Party required to make
such payment to the other Party.

Article VI
Term

Section 6.1   Term; Effect of Termination.

(a)     Term.  The term of this Agreement (or with respect to clause (iii)
below, the term of this Agreement solely with respect to any particular Service
so terminated) shall commence on the Effective Date hereof and continue until
the earlier of:

(i)   termination by mutual written agreement of Manager and the Company (by
Majority Consent);

(ii)   by either the Company or the Manager upon the occurrence of an IPO of the
Company or the date on which the Company otherwise ceases to own any interest in
the Company Business or has disposed of, directly or indirectly, all or
substantially all of its assets (provided that the terminating party shall have

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provided at least ninety (90) days written notice of the date of termination
under this Section 6.1(a)(ii));

(iii)   termination by the Company (by Majority Consent) of any particular
Services after the first anniversary of the Effective Date upon thirty (30) days
written notice to Manager or earlier as agreed by the Parties (provided that
such written notice has specified in reasonable detail the Services that the
Company has elected to terminate);

(iv)   termination by the Company (by Majority Consent) if (A) Manager fails to
perform in any material respect any of its material obligations under this
Agreement and (B) such failure is not (x) excused by Force Majeure Events or (y)
cured by Manager within thirty (30) days after Notice thereof by the Company
(unless such failure is not reasonably capable of being cured within such
thirty-day (30) period, in which case Manager shall have commenced remedial
action to cure such failure within such thirty-day (30) period and continued to
diligently and timely pursue the completion of such remedial action and shall
have cured within sixty (60) days after Notice);

(v)   termination by Manager if (A) the Company fails to perform in any material
respect any of its material obligations under this Agreement (including any
payment obligation) and (B) such failure is not cured by the Company within
thirty (30) days after Notice thereof by Manager (unless such failure, other
than a payment failure, is not reasonably capable of being cured within such
thirty-day (30) period, in which case Manager shall have commenced remedial
action to cure such failure within such thirty-day (30) period and continued to
diligently and timely pursue the completion of such remedial action and shall
have cured within sixty (60) days after Notice);

(vi)   termination by Manager following the date on which (i) Blackstone,
together with its Affiliates, first ceases to own, collectively, over 50% of
each class or series of Voting Stock of the Company or (ii) a Change in Control
occurs;

(vii)   termination by Manager following the date on which Manager or an
Affiliate of Manager is no longer a member in the Company or is not the Operator
or a Party to the Joint Development Agreement or no longer entitled to appoint
any Representatives to the Operating Committee (as the latter two terms are
defined in the Joint Development Agreement);

(viii)   termination by a Party if the other Party: (A) makes a general
assignment for the benefit of creditors; (B) files a voluntary bankruptcy
petition; (C) becomes the subject of an order for relief or is declared
insolvent in any federal or state bankruptcy or insolvency proceeding; (D) 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; (E) 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

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subclauses (A) through (D) of this clause (viii); (F) 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 (G) such Party is
liquidated and dissolved; or

(ix)   termination by Manager following the date on which Manager has
determined, in good faith, that all Services for which Manager was engaged under
this Agreement have been terminated by the Company under (iii);  provided, that
Manager delivers written notice to the Company and the Company fails to respond
within fifteen (15) days.

(b)     Effect of Termination.  Upon any termination of this Agreement under
Section 6.1(a) (other than (a)(iii)) and following any transition period under
Section 6.4, all rights and obligations under this Agreement shall cease except
for (i) rights or obligations that are expressly stated to survive a termination
of this Agreement, (ii) liabilities and obligations that have accrued prior to
such termination, including the obligation to pay any amounts that have become
due and payable prior to such termination and provide transition services under
Section 6.4, and (iii) Section 7.16 and those provisions specified therein to
survive termination or expiration of this Agreement.  Manager shall promptly
relinquish its role as manager hereunder and ensure the transition of such role
to such Person as may be designated by the Board by Majority Consent, subject to
Section 6.4 (such Person, the “Successor Manager”).

Section 6.2   No Early Termination.  Except for the events of termination
provided for in Section 6.1(a) or upon the written consent of the Company,
Manager shall not resign as Manager hereunder or otherwise terminate this
Agreement for any reason.  Notwithstanding the events of termination provided
for in Section 6.1(a), neither the Company nor Manager may terminate this
Agreement during the first ninety (90) days after the Effective Date.

Section 6.3   Delivery.  Upon termination of this Agreement under Section 6.1(a)
and the conclusion of any transition period under Section 6.4 and/or appointment
of a Successor Manager (if applicable), Manager shall promptly deliver to the
Successor Manager, or such other person as the Company may designate in writing
upon Majority Consent of the Board or as otherwise specified herein, copies of
all title files, division order files, well files, production records, equipment
inventories, and production, severance and ad valorem tax records pertaining to
the Company Business and other information about the Company Business reasonably
requested by the Company (which are in the possession of Manager) and the
Financial Records (in the case of Section 6.1(a)(iii) solely to the extent
relating to the Services terminated), but in all cases excluding confidential or
proprietary information of Manager or its Affiliates, including seismic and
related data or information.  The Company shall pay all reasonable out-of-pocket
costs incurred by Manager to prepare and deliver such files and records.

Section 6.4   Transition Services.  Upon termination of this Agreement under
Section 6.1(a), other than Section 6.1(a)(iii) and Section 6.1(a)(v), Manager
shall, at the Company’s request (i) continue to provide the Services to the
Company under this Agreement as if this Agreement had not been terminated for up
to 60 days following termination, until such time that the Successor Manager has
been designated pursuant to Section 6.1(b) and engaged by the Company, and (ii)
assist the Company for up to 60 days following termination in identifying and
engaging a Successor Manager capable of providing substantially all of the
Services as were

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provided by the Manager at no greater cost than that charged hereunder.  After
the Successor Manager has been engaged by the Company, Manager, if it is
required to provide the transition assistance pursuant to the first sentence of
this Section 6.4, shall use commercially reasonable efforts to provide the
Successor Manager reasonable assistance for a period of up to 2 months following
the date on which a termination of this Agreement is effective under Section
6.1(a) to transition the Manager’s duties under this Agreement to the Successor
Manager.  In providing the transition services hereunder, Manager shall use the
same degree of care used in performing the Services previously on behalf of the
Company in accordance with this Agreement.  The Company will reimburse Manager
for its reasonable and documented out-of-pocket costs and expenses incurred in
providing transition services hereunder, provided that the Services provided
under clause (i) of the first sentence of this Section 6.4 shall be provided in
accordance with the terms of this Agreement as if such termination had not
occurred.

Article VII

Other Provisions

Section 7.1   Assignment and Binding Effect.  Manager shall not assign its
rights or, except as contemplated by Section 5.5, delegate its duties under this
Agreement without the prior written consent of the Company (it being understood
that Manager shall have the right to delegate any of its duties under this
Agreement to SOG and other Affiliates of Manager).  Subject to the foregoing,
this Agreement shall be binding upon the Parties and their successors and
assigns.

Section 7.2   Notices.  Except as otherwise provided in this Agreement to the
contrary, any notice or communication required or permitted to be given under
this Agreement shall 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 (the “Notice”):

If to the Company:

Gavilan Resources HoldCo, LLC

c/o Blackstone Management Partners L.L.C.

345 Park Avenue, 31st Floor

New York, NY 10154

Attention: Angelo Acconcia

Email: acconcia@blackstone.com 

 

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

Kirkland & Ellis LLP

600 Travis Street, Suite 3300

Houston, Texas 77002

Attention:  Andrew Calder, P.C.

Rhett Van Syoc

Facsimile: (713) 835-3601

Email:       andrew.calder@kirkland.com

rhett.vansyoc@kirkland.com

If to Manager:

SN Comanche Manger, LLC

1000 Main Street, Suite 3000

Houston, Texas 77002

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Attention: Antonio R. Sanchez, III

Email: tony@sanchezog.com

 

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

Akin Gump Strauss Hauer & Feld LLP

1111 Louisiana Street, 44th Floor

Houston, Texas 77002

Attention:     David Elder

Facsimile:    (713) 236-0822

Email:          delder@akingump.com 

 

Each such notice or other communication shall 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
facsimile or electronic mail.

 

Section 7.3   Entire Agreement.  This Agreement and each other document,
agreement, instrument or certificate delivered in connection herewith constitute
the entire agreement of the Parties with respect to subject matter hereof and
shall not be changed or modified except by written agreement executed by all
Parties.

 

Section 7.4   Waivers.  The waiver by a Party of a breach of any provision of
this Agreement by the other Party shall not be construed as a waiver of any
subsequent or other breach by the other Party.

 

Section 7.5  Invalidity.  If any one or more of the provisions contained in this
Agreement shall for any reason be held invalid, illegal, or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect the
remaining provisions of this Agreement and this Agreement shall be construed as
if such invalid, illegal or unenforceable provision or provisions had never been
contained herein.

 

Section 7.6   Applicable Law.  This Agreement shall be construed under and
governed by the laws of the State of Delaware, without regards to any conflict
of laws principles which, if applied, might permit or require the application of
the laws of another jurisdiction.

 

Section 7.7   Consent to Jurisdiction and Service of Process; Appointment of
Agent for Service of Process; Damages.  EACH PARTY 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), SHALL BE LITIGATED IN SUCH
COURT.  EACH PARTY (A) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF
SUCH COURT FOR SUCH ACTIONS OR PROCEEDINGS, (B) 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 (C) AGREES THAT

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IT WILL NOT BRING ANY SUCH ACTION OR PROCEEDING IN ANY COURT OTHER THAN SUCH
COURT.  EACH PARTY HERETO ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE AND IRREVOCABLE
JURISDICTION AND VENUE OF THE AFORESAID COURT 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 HERETO SHALL BE MAILED BY
REGISTERED MAIL TO THE RESPECTIVE PARTY EXCEPT THAT, UNLESS OTHERWISE PROVIDED
BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY
OF SERVICE OF PROCESS.  IF ANY AGENT APPOINTED BY A PARTY HERETO REFUSES TO
ACCEPT SERVICE, EACH PARTY HERETO AGREES THAT SERVICE UPON THE APPROPRIATE PARTY
BY REGISTERED MAIL SHALL CONSTITUTE SUFFICIENT SERVICE.  NOTHING HEREIN SHALL
AFFECT THE RIGHT OF A PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.  IN NO EVENT SHALL ANY PARTY BE LIABLE UNDER THIS AGREEMENT TO
THE OTHER PARTY FOR ANY CONSEQUENTIAL DAMAGES, INCLUDING ANY DAMAGES FOR
BUSINESS INTERRUPTION, LOSS OF USE, DATA, REVENUE OR PROFIT, WHETHER ARISING OUT
OF BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, REGARDLESS OF
WHETHER SUCH DAMAGES WERE FORESEEABLE AND WHETHER OR NOT THE OTHER PARTY WAS
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED,  HOWEVER, THAT A PARTY MAY
RECOVER FROM ANY OTHER PARTY ALL COSTS, EXPENSES OR DAMAGES, INCLUDING LOST
PROFITS, EXEMPLARY, PUNITIVE, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY,
CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES PAID OR OWED TO ANY THIRD PERSON
FOR WHICH SUCH PARTY HAS A RIGHT TO RECOVER FROM SUCH OTHER PARTY UNDER THE
TERMS HEREOF.

 

Section 7.8  Waiver of Jury Trial.    TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES 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 HERETO.  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 WITHOUT LIMITATION, 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 PARTY HERETO HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH PARTY HERETO WILL CONTINUE TO RELY ON THE WAIVER IN
THEIR RELATED FUTURE DEALINGS.  EACH PARTY FURTHER

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WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND THAT EACH PARTY HERETO 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
SHALL 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
MAYBE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

Section 7.9   Relationship of Parties.  In the performance of the Services
hereunder, Manager shall act as an independent contractor for the Company.  The
Parties do not intend to create, nor shall this Agreement be construed as
creating, a partnership or association which might render the Parties liable as
partners.  Manager shall be responsible for the payment of federal income tax,
social security tax, workers’ compensation insurance, unemployment tax, and
other similar payments, if any, relating to Manager’s business and employees,
and the Company shall not be responsible for any such amounts.

Section 7.10 Force Majeure.  Manager shall not be responsible for any loss or
damage to the Company (or be in breach or violation of this Agreement) for
nonperformance or delay in performing any of Manager’s obligations under this
Agreement to the extent resulting from any act of God, fire, lightning,
landslide, earthquake, storm, storm warning, flood, or other adverse weather
condition; strike, lockout, or other industrial disturbance in respect of
Manager’s employees; war, act of terrorism, military operation, or national
emergency; the inability of Manager to acquire at reasonable prices, or the
delay on the part of Manager in acquiring at reasonable prices, materials,
equipment or permits, needed to enable Manager to perform; explosions, breakage
or destruction of or accident or damage to machinery, equipment, facilities, or
lines of pipe, and the repair, maintenance, improvement, or replacement of
equipment, facilities, or lines of pipe; and acts of any Governmental Authority
or any other material disruptive events outside the reasonable control of
Manager (“Force Majeure Events”).  Manager shall use its commercially reasonable
efforts to cure any such Force Majeure Events as soon as reasonably practicable
(other than in the case of a strike or lockout of Manager’s employees), and use
its commercially reasonable efforts to complete, as soon as reasonably
practicable, performance of Manager’s obligations under this Agreement.

Section 7.11 Construction of Agreement.  In construing this Agreement:

(a)   no consideration shall be given to the captions of the articles, sections,
subsections, or clauses, which are inserted for convenience in locating the
provisions of this Agreement and not as an aid in its construction;

(b)   no consideration shall be given to the fact or presumption that one Party
had a greater or lesser hand in drafting this Agreement;

(c)   examples shall not be construed to limit, expressly or by implication, the
matter they illustrate;

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(d)   the word “includes” and its derivatives means “includes, but is not
limited to” and corresponding derivative expressions;

(e)   a defined term has its defined meaning throughout this Agreement and each
exhibit to this Agreement, regardless of whether it appears before or after the
place where it is defined;

(f)   the plural shall be deemed to include the singular, and vice versa;

(g)   each gender shall be deemed to include the other genders; and

(h)   each exhibit to this Agreement is a part of this Agreement, but if there
is any conflict or inconsistency between the main body of this Agreement and any
exhibit, attachment, or schedule, the provisions of the main body of this
Agreement shall prevail.

Section 7.12 Third Party Beneficiaries.  Except as set forth in Section 7.13,
nothing in this Agreement, express or implied, is intended or shall confer upon
any Person other than the Parties or their respective successors and permitted
assigns and the indemnified Persons (for purposes of Section 5.8), any rights,
remedies or liabilities under or by reason of this Agreement.

Section 7.13 No Recourse.  This Agreement may only be enforced against, and any
claims or causes of action that may be based upon, arise out of or relate to
this Agreement, or the negotiation, execution or performance of this Agreement
may only be made against the entities that are expressly identified as Parties
hereto and no Affiliates of any Party (or any other Indemnified Manager Person
or the Company’s Affiliates or their or the Company’s respective directors,
officers, employees, managers, members, partners, controlling Persons and
equityholders, as applicable, other than the Parties hereto) shall have any
liability for any obligations or liabilities of the Parties or for any claim
(whether in tort, contract or otherwise) based on, in respect of, or by reason
of the transactions contemplated hereby or in respect of any oral
representations made or alleged to be made in connection herewith.

Section 7.14 Confidential Information.

(a)   Company Confidential Information.  Manager shall maintain the
confidentiality of all Company Confidential Information; provided, however, that
Manager may disclose such Company Confidential Information (i) to its Affiliates
to the extent deemed by Manager to be reasonably necessary or desirable to
enable it to perform the Services (provided, however, that such Affiliate is
informed of the confidentiality and non use provisions of this Agreement and
agrees to comply with such provisions); (ii) to the extent necessary for Manager
or its Affiliates to provide services for Third Parties that have interests in
the Company Group’s properties; (iii) in any judicial or alternative dispute
resolution proceeding to resolve disputes between Manager or its Affiliates and
Company or its Affiliates arising hereunder; (iv) to the extent disclosure is
legally required under applicable Laws (provided, however, that prior to making
any legally required disclosures in any judicial, regulatory or dispute
resolution proceeding, Manager shall promptly notify the Company and, if
requested by the Company and at the Company’s sole cost and expense, seek a
protective order or other relief to prevent or reduce the scope of such
disclosure) or any agreement existing on the date hereof to which Manager is a

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party or by which it is bound and which have been disclosed to the Company; (v)
to Manager’s or its Affiliates’ existing or potential lenders, investors, joint
interest owners, purchasers or other parties with whom Manager or its Affiliates
may enter into contractual relationships, to the extent deemed by Manager to be
reasonably necessary or desirable to enable it to perform the Services or to
obtain the financing or to pursue such other transaction or contractual
arrangement for which such disclosure is necessary or desirable, as applicable
(provided, however, that Manager shall require such Third Parties to agree to
maintain the confidentiality of the Company Confidential Information so
disclosed); (vi) if authorized by the Company; and (vii) to the extent such
Company Confidential Information was already known to Manager or its Affiliates
(through a source other than the Company or its representatives or Affiliates)
or becomes publicly available other than through a breach by Manager of its
obligations arising under this Section 7.14(a) or is independently made known to
Manager or its Affiliates (by a source not known by Manager or such Affiliate,
as the case may be, to be in breach of a confidentiality obligation with respect
to such disclosure).  Manager acknowledges and agrees that (x) the Company
Confidential Information is being furnished to it for the sole and exclusive
purpose of enabling it to perform the Services and (y) the Company Confidential
Information may not be used by it for any other purposes, unless disclosure is
permitted by clauses (i), (ii), (iii), (iv), (v) and (vi) above, and in such
event may be used solely to the extent contemplated by such clauses, or by
clause (vii).

(b)   Manager Confidential Information.  The Company shall maintain the
confidentiality of all Manager Confidential Information; provided, however,
that the Company may disclose Manager Confidential Information (i) in order to
permit Manager to perform the Services, as determined in advance by Manager in
writing (provided, however, that if Manager does not consent to such disclosure
and, as a result thereof, Manager is not able to perform the Services, the
Company shall not be in breach of this Agreement as a result thereof); (ii) in
any judicial or alternative dispute resolution proceeding to resolve disputes
between the Company or its Affiliates and Manager or its Affiliates arising
hereunder; (iii) to the extent disclosure is legally required under applicable
Laws (provided, however, that prior to making any legally required disclosures
in any judicial, regulatory or dispute resolution proceeding, the Company shall
promptly notify Manager thereof and, if requested by Manager, at Manager’s sole
cost and expense, seek a protective order or other relief to prevent or reduce
the scope of such disclosure); (iv) if authorized by Manager in writing; and
(v) to the extent such Manager Confidential Information was already known to the
Company (through a source other than Manager or its representatives or
Affiliates) or becomes publicly available other than through a breach by the
Company of its obligations arising under this Section 7.14(b) or is
independently made known to the Company or its Affiliates (by a source not known
by the Company or such Affiliate, as the case may be, to be in breach of a
confidentiality obligation with respect to such disclosure).  The Company
acknowledges and agrees that (x) the Manager Confidential Information is being
furnished to it for the sole and exclusive purpose of enabling it to perform the
Services and (y) the Manager Confidential Information may not be used by it for
any other purposes, unless disclosure is permitted by clauses (i), (ii), (iii),
and (iv) above, and in such event may be used solely to the extent contemplated
by such clause, or by clause (v).

(c)   Business Conduct.  Nothing in this Section 7.14 shall prohibit Manager or
any of its Affiliates or other Persons to whom it provides similar services from
conducting business in the areas where the Company Group’s properties are
located or otherwise competing with the Company Group.

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(d)   Remedies and Enforcement.  Manager and the Company each acknowledge and
agree that a breach by it of its obligations under this Section 7.14 would cause
irreparable harm to the other Party and that monetary damages would not be
adequate to compensate the other Party.  Accordingly, Manager and the Company
agree that the other Party shall be entitled to immediate equitable relief,
including a temporary or permanent injunction, to prevent any threatened, likely
or ongoing violation of this Section 7.14, without the necessity of posting bond
or other security.  Manager’s and the Company’s right to equitable relief shall
be in addition to other rights and remedies available to Manager or the Company,
for monetary damages or otherwise.

(e)   This Section 7.14 shall survive termination or expiration of this
Agreement for a period of two years from termination or expiration with respect
to periods prior to such termination or expiration.

Section 7.15 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 7.16 Survival of Agreements.  The 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 Sections
Section 2.8  (Inventions and IP Ownership), Section 5.6 (Third Party Costs),
Section 5.7  (General and Administrative Costs) and Section 5.10  (Invoicing and
Payment) (in each of Section Section 5.6, Section 5.7 and Section 5.10, with
respect to any accrued by 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)), Section 5.8  (Indemnification and
Exculpation), Section 6.3 (Delivery), Section 7.2  (Notices), Section
7.6 (Applicable Law), Section 7.7  (Consent to Jurisdiction and Service of
Process; Appointment of Agent for Service of Process), Section 7.8 (Waiver of
Jury Trial), Section 7.11  (Construction of Agreement), Section 7.12  (Third
Party Beneficiaries), Section 7.13  (No Recourse), Section 7.14  (Confidential
Information), Section 7.16  (Survival of Agreements), Section 7.17  (Competition
and Corporate Opportunities), Section 7.18  (Warranty Disclaimers), Section 7.19
 (Authorizations) and Section 7.21  (Conspicuousness of Provisions), which shall
survive termination or expiration of this Agreement.

Section 7.17 Competition and Corporate Opportunities.  Subject to Section 7.14,
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 the Company and its Affiliates.  The Parties further understand
and agree that Manager and its Affiliates (including SOG) provide or may provide
services similar to the Services provided hereunder to certain of its present
and former Affiliates.  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 the Company or any other Person; provided,  however, that
this Section 7.14 is subject, in all respects, to Section 5.2 of the Joint
Development Agreement.  The Company, on its own

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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 each member of the Company Group and the Company
Group 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 7.18 Warranty Disclaimers.

(a)   OTHER THAN AS EXPRESSLY SET FORTH HEREIN, MANAGER DISCLAIMS ANY AND ALL
WARRANTIES, CONDITIONS OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR WRITTEN)
WITH RESPECT TO SERVICES RENDERED OR PRODUCTS PROCURED FOR THE COMPANY 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.

(b)   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.  THE COMPANY’S AND ITS SUBSIDIARIES’ EXCLUSIVE REMEDIES WITH
RESPECT TO EQUIPMENT, MATERIALS, SUPPLIES OR SERVICES OBTAINED BY MANAGER FROM
VENDORS, SUPPLIERS AND SUBCONTRACTORS SHALL BE THOSE UNDER THE VENDOR, SUPPLIER
AND SUBCONTRACTOR WARRANTIES, IF ANY, AND MANAGER’S ONLY OBLIGATION, ARISING OUT
OF OR IN CONNECTION WITH ANY SUCH WARRANTY OR BREACH THEREOF, SHALL BE TO USE
DILIGENT EFFORTS TO ENFORCE SUCH WARRANTIES ON BEHALF OF THE COMPANY, AND THE
COMPANY (AND ITS SUBSIDIARIES) SHALL HAVE NO OTHER REMEDIES AGAINST MANAGER WITH
RESPECT TO EQUIPMENT, MATERIALS, SUPPLIES OR SERVICES OBTAINED BY MANAGER FROM
ITS VENDORS, SUPPLIERS AND SUBCONTRACTORS.

Section 7.19 Authorizations.  The Company represents and warrants to Manager
that the Company has the right, and that the Company has the right on behalf of
its Affiliates, to make the commitments under this Agreement, including the
appointment of Manager to take any actions permitted under this Agreement and to
perform the Services for each member of the Company Group at any time and from
time to time after the Effective Date.

Section 7.21 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 if the effect thereof would be to cause
such Party to be in violation of any applicable Laws.

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Section 7.22 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 applicable Laws or equitable doctrine that provisions in a contract be
conspicuously marked or highlighted.

Section 7.23 Amendment.  No amendment of any provision of this Agreement shall
be effective unless it is in writing and signed by all Parties and no waiver of
any provision of this Agreement, and no consent to any departure by any Party
therefrom, shall be effective unless it is in writing and signed by the other
Parties, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

 

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
Date.

THE COMPANY:

GAVILAN RESOURCES HOLDCO, LLC

 

By:/s/ Angelo Acconcia

Name:Angelo Acconcia
Title:President

 

MANAGER:

SN COMANCHE MANAGER, LLC

 

By:/s/ Antonio R. Sanchez, III

Name:Antonio R. Sanchez, III
Title:Chief Executive Officer

 

Solely for the purposes of Section 5.8(d):

SN EF MAVERICK, LLC

 

By:/s/ Antonio R. Sanchez, III

Name:Antonio R. Sanchez, III
Title:Chief Executive Officer

 

 

 

 

 

Signature Page to Management Services Agreement

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Schedule 1

Categories of Services

The Services performed by Manager shall include services of a type customarily
performed for a non-operator of Hydrocarbon Interests which may include, to the
extent that Manager or any of its Affiliates is capable of providing such
Services, the items listed below:

(1)Financial and Operational Accounting.

(2)Accounts Payable and Receivables.

(3)Contract Negotiation and Management.

(4)Finance.

(5)Real Property Title and Land Record-Keeping and Similar Services.

(6)Legal Services.

(7)Tax Services.

(8)Treasury Services.

(9)Financial Reporting and Reserve Reporting, as required under Section 9.3 of
the LLC Agreement.

(10)Personnel, Outside Contractors and Consultants.

(11)General and Administrative, including Records Retention.

(12)Government and Public Relations; Permitting and Regulatory Affairs.

(13)Reservoir Engineering and Geology and Geophysics.

 

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Schedule 2

Insurance

 

A.General Liability Insurance:  Commercial General Liability insurance covering
all operations hereunder against claims for bodily injury (including death) and
property damage (including loss of use), including independent contractors
working on the Parties’ behalf, products/completed operations, contractual
liability and sudden and accidental pollution, with a limit of $1,000,000 per
occurrence and in the annual aggregate.

B.   Excess Insurance:  Excess (or Umbrella) Liability insurance following form
of General Liability Insurance above (including sudden and accidental pollution)
with a limit of $50,000,000 per occurrence and in the annual aggregate.

C.   Workers’ Compensation and Employer’s Liability Insurance:  Workers’
Compensation insurance or its’ equivalent, including Occupational Disease
coverage, as required by law for all employees, agents, and
subcontractors.  Employer’s Liability insurance (including Occupational Disease
coverage) in the amount of $1,000,000 per accident.  Such insurance shall
provide coverage in the locations in which the Services are performed.

D.   Automobile Liability Insurance:  Automobile Liability insurance against
claims of bodily injury (including death) and property damage (including loss of
use) covering all owned, non-owned, and hired vehicles used in the performance
of the Services, with a limit of $1,000,000 per accident.

E.   Operator's Extra Expense (Control of Well):  Onshore wells—$25,000,000, any
one accident or occurrence, Combined Single Limit in respect of all
wells.  Care, Custody and Control Endorsement—$25,000,000 any one accident or
occurrence, Combined Single Limit in respect of all wells and $1,000,000
separate additional limit, any one accident or occurrence, in respect of
materials and supplies.

 

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