Document:

Exhibit 10.1

 

Execution Version

 

COMMON UNIT PURCHASE AGREEMENT

 

by and between

 

SANCHEZ PRODUCTION PARTNERS LP

 

and

 

SN UR HOLDINGS, LLC

 

SN UR Holdings, LLC

1000 Main Street, Suite 3000

Houston, Texas, 77002

 

Attention: Antonio R. Sanchez, III

 

Sanchez Production Partners LP, a Delaware limited partnership (the “Partnership”), proposes, subject to the terms and conditions stated in this Common Unit Purchase Agreement (this “Agreement”), to issue and sell to SN UR Holdings, LLC, a Delaware limited liability company (the “Investor”), an aggregate of 2,272,727 common units (the “Investor Units”) representing limited partner interests in the Partnership (the “Common Units”).

 

The Partnership has entered into that certain Underwriting Agreement (the “Underwriting Agreement”), dated as of the date hereof, with Citigroup Global Markets Inc. and RBC Capital Markets, LLC, as Representatives of the underwriters named therein (the “Underwriters”), pursuant to which the Underwriters have agreed to purchase and the Partnership has agreed to sell 6,550,802 Common Units at a price to the public of $11.00 per Common Unit (the “Public Offering”).  On the Closing Date (as defined below), the Partnership and the Investor will enter into a Registration Rights Agreement (the “Registration Rights Agreement”), substantially in the form attached hereto as Annex I, pursuant to which the Partnership will provide the Investor with certain registration rights with respect to the Investor Units.

 

Sanchez Production Partners GP LLC, a Delaware limited liability company, is the general partner of the Partnership (the “General Partner”).  The Significant Subsidiaries (as defined below) of the Partnership are referred to collectively herein as the “Operating Subsidiaries.”  The Partnership, the General Partner and the Operating Subsidiaries are referred to collectively herein as the “Partnership Entities.” The “Subject Documents” shall mean the Organizational Agreements (as defined below), the Underwriting Agreement and the Registration Rights Agreement.  For purposes of this Agreement, the Investor shall not be deemed an affiliate of the Partnership Entities and the Partnership Entities shall not be deemed affiliates of the Investor.

 

This is to confirm the agreement between the Partnership and the Investor concerning the purchase of the Investor Units from the Partnership by the Investor.

 

1.                                The Partnership represents and warrants to, and agrees with, the Investor as follows:

 

(a)                                 No Material Misstatements or Omissions. All SEC Reports (as defined below) when they became effective or were filed with the Securities and Exchange Commission (the “Commission”),

 

 

as the case may be, conformed in all material respects to the requirements of the Securities Act of 1933, as amended (the “Securities Act”) or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as applicable, and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and any further documents so filed or any further amendment or supplement thereto, when such documents become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(b)                                 Independent Accountants. KPMG LLP (“KPMG”), who has certified financial statements and supporting schedules included or incorporated by reference in reports and statements filed by the Partnership since December 31, 2014 under the Exchange Act and registration statements filed by the Partnership since December 31, 2014 under the Securities Act (in the form that became effective), including all amendments, exhibits and schedules thereto (the “SEC Reports”) are independent registered public accountants with respect to the Partnership as required by the Securities Act, the rules and regulations of the Commission thereunder and the Public Company Accounting Oversight Board.

 

(c)                                  Reserve Engineers. Netherland, Sewell & Associates, Inc. (“NSAI”), whose reports are contained or incorporated by reference in the SEC Reports, is, as of the date hereof, an independent reserve engineer and acts as independent reserve engineer with respect to the Partnership.  Ryder Scott Co. LP (“Ryder Scott”), whose reports are referenced in the SEC Reports, was as of the date of such reports, and is, as of the date hereof, an independent reserve engineer and acts as independent reserve engineer with respect to the Partnership.

 

(d)                                 Reserve Information. The oil and natural gas reserve estimates of the Partnership Entities as of December 31, 2015 and December 31, 2014, contained or incorporated by reference in the SEC Reports are derived from reports that have been prepared by NSAI and Ryder Scott, in accordance with customary industry practices, and such estimates fairly reflect, in all material respects, the oil and natural gas reserves of the Partnership Entities at the dates indicated therein and are in accordance, in all material respects, with Commission guidelines, including the applicable requirements of Regulation S-X and Industry Guide 2 under the Securities Act, applied on a consistent basis throughout the periods involved.

 

(e)                                  Financial Statements. The historical financial statements included or incorporated by reference in the SEC Reports, together with the related schedules (if any) and notes, present fairly in all material respects the financial position of the Partnership (including Sanchez Production Partners LLC (predecessor-in-interest by conversion)) and its subsidiaries, at the dates indicated and the results of operations and changes in capital and cash flows of the Partnership Entities for the periods specified; and all such financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis throughout the periods involved and materially comply with all applicable accounting requirements under the Securities Act and the rules and regulations of the Commission thereunder. The supporting schedules, if any, included or

 

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incorporated by reference in the SEC Reports present fairly in all material respects, in accordance with GAAP, the information required to be stated therein.  All other financial information of the Partnership, including “non-GAAP financial measures” (as such term is defined in the rules and regulations of the Commission), if any, contained or incorporated by reference in the SEC Reports comply in all material respects with the  requirements of the Securities Act (including, without limitation, Regulation S-X under the Securities Act) and the Exchange Act (including, without limitation, Regulation G under the Exchange Act) and Item 10 under Regulation S-K, to the extent applicable. The interactive data in eXtensible Business Reporting Language contained or incorporated by reference in the SEC Reports fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto in all material respects. There are no financial statements (historical or pro forma) that are required to be included in the SEC Reports that are not so included as required.

 

(f)                                   Forward-Looking and Supporting Information. Each of the statements made by the Partnership in the SEC Reports and any other materials distributed to the Investor, including (but not limited to) any statements with respect to projected results of operations, estimated cash available for distributions and future cash distributions of the Partnership, and any statements made in support thereof or related thereto, was made or will be made with a reasonable basis and in good faith.

 

(g)                                  No Material Changes. Except as otherwise disclosed in the SEC Reports, none of the Partnership Entities has sustained since the date of the latest audited financial statements included or incorporated by reference in the SEC Reports any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree; since the latest date as of which information is given in the SEC Reports through the date of this Agreement, there has not been any change in the equity interests or long term debt of any of the Partnership Entities or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, unitholders’ equity or results of operations of the Partnership Entities; and, except as otherwise may be disclosed in the SEC Reports, none of the Partnership Entities have (i) issued or granted any securities (other than customary issuances or grants pursuant to employee benefit plans), (ii) incurred any material liability or obligation, direct, indirect or contingent, other than liabilities and obligations that were incurred in the ordinary course of business, (iii) entered into any material transaction not in the ordinary course of business or (iv) declared or paid any distribution.

 

(h)                                 Formation and Good Standing of the Partnership. The Partnership has been duly formed and is validly existing as a limited partnership, and is in good standing under the laws of the State of Delaware, with full partnership power and authority to own, lease and operate its properties and conduct its business as described in the SEC Reports, and (A) to execute and deliver this Agreement and the Subject Documents (other than the Organizational Agreements) and consummate the transactions contemplated hereby and thereby, and (B) to issue, sell and deliver the Investor Units.

 

(i)                                     Foreign Qualification and Registration of the Partnership. The Partnership is duly qualified as a foreign limited partnership to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a material adverse change in (i) the financial condition, results of operations, members’ equity or partners’ capital, business, properties, management

 

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or prospects of the Partnership and the Operating Subsidiaries taken as a whole, whether or not arising in the ordinary course of business, or (ii) the ability of the Partnership and the Operating Subsidiaries to consummate the transactions contemplated by this Agreement or the Subject Documents (other than the Organizational Agreements) (in either case of clause (i) or (ii), a “Material Adverse Effect”).

 

(j)                                    Formation and Good Standing of the Partnership’s Subsidiaries. Each of the Operating Subsidiaries has been duly formed and is validly existing, and is in good standing under the laws of the state where such subsidiary is formed, with full power and authority to own, lease and operate its properties and conduct its business as described in the SEC Reports. Each of the Operating Subsidiaries is duly qualified as a foreign entity, to transact business and is in good standing in the jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not individually or in the aggregate, result in a Material Adverse Effect.

 

(k)                                 Power and Authority of General Partner.  The General Partner has, and after giving effect to the transactions contemplated herein will have, full limited liability company power and authority to serve as general partner of the Partnership in all material respects as disclosed in the SEC Reports.

 

(l)                                     Ownership of the General Partner Interest in the Partnership.  The General Partner is the sole general partner of the Partnership, with a non-economic general partner interest in the Partnership; such general partner interest has been duly authorized and validly issued in accordance with the Second Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of October 14, 2015, and as in effect on the date hereof (collectively and as may be further amended, restated or otherwise modified from time to time, the “Partnership Agreement”); and the General Partner is the record holder of such general partner interest free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity (“Liens”), other than those created or arising under the Partnership Agreement, the Securities Act, the Delaware LP Act (as defined below) or other applicable state securities laws.

 

(m)                             Ownership of Incentive Distribution Rights in the Partnership. SP Holdings, LLC, a Delaware limited liability company (“Holdings”) is the record holder of all of the incentive distribution rights in the Partnership (the “Incentive Distribution Rights”) and such Incentive Distribution Rights have been duly authorized and validly issued in accordance with the Partnership Agreement, and are fully paid (to the extent required under the Partnership Agreement) and non-assessable (except as such non-assessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware Revised Uniform Limited Partnership Act (the “Delaware LP Act”)); and Holdings owns the Incentive Distribution Rights free and clear of all Liens, other than those created or arising under the Partnership Agreement, the Securities Act, the Delaware LP Act or other applicable state securities laws.

 

(n)                                 No Other Subsidiaries. The Partnership does not own, directly or indirectly, an equity interest in, or long-term debt securities of, any corporation, partnership, limited liability company, joint venture, association or other entity that is a “significant subsidiary” (as defined in Article 1-02(w) of Regulation S-X) other than those listed on Schedule I attached hereto (the “Significant Subsidiaries”).

 

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(o)                                 Ownership of the General Partner.  Holdings owns a 100% membership interest in the General Partner; such membership interest has been duly authorized and validly issued in accordance with the limited liability company agreement of the General Partner (such agreement, as may be further amended, restated or otherwise modified from time to time, the “General Partner LLC Agreement”) and are fully paid (to the extent required under the General Partner LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-303, 18-607 and 18-804 of the Delaware Limited Liability Company Act (the “Delaware LLC Act”)); and such membership interest is owned free and clear of all Liens, except for Liens arising under or in connection with the General Partner LLC Agreement, or created or arising under the Delaware LLC Act or applicable securities laws.

 

(p)                                 Ownership of SEP Holdings IV, LLC.  The Partnership owns a 100% membership interest in SEP Holdings IV, LLC, a Delaware limited liability company (“SEP IV”); such membership interest has been duly authorized and validly issued in accordance with the limited liability company agreement of SEP IV (such agreement, as may be further amended, restated or otherwise modified from time to time, the “SEP IV LLC Agreement”) and are fully paid (to the extent required under the SEP IV LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-303, 18-607 and 18-804 of the Delaware LLC Act); and such membership interest is owned free and clear of all Liens, except for (i) Liens arising under or in connection with the SEP IV LLC Agreement, or created or arising under the Delaware LLC Act or applicable securities laws and (ii) Liens permitted or arising under or in connection with the Third Amended and Restated Credit Agreement, dated as of March 31, 2015, as amended, among the Partnership, as borrower, the lenders party thereto and Royal Bank of Canada, as administrative agent, collateral agent and issuing bank (the “Credit Agreement”).

 

(q)                                 Ownership of CEP Mid-Continent LLC.  The Partnership owns a 100% membership interest in CEP Mid-Continent LLC, a Delaware limited liability company (“CEP Mid-Con”); such membership interest has been duly authorized and validly issued in accordance with the limited liability company agreement of CEP Mid-Con (such agreement, as may be further amended, restated or otherwise modified from time to time, the “CEP Mid-Con LLC Agreement”) and are fully paid (to the extent required under the CEP Mid-Con LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-303, 18-607 and 18-804 of the Delaware LLC Act); and such membership interest is owned free and clear of all Liens, except for (i) Liens arising under or in connection with the CEP Mid-Con LLC Agreement, or created or arising under the Delaware LLC Act or applicable securities laws and (ii) Liens permitted or arising under or in connection with the Credit Agreement.

 

(r)                                    Ownership of Mid-Continent Oilfield Supply, L.L.C.  CEP Mid-Con owns a 100% membership interest in Mid-Continent Oilfield Supply, L.L.C., an Oklahoma limited liability company (“MCOS”); such membership interest has been duly authorized and validly issued in accordance with the limited liability company agreement of MCOS (such agreement, as may be further amended, restated or otherwise modified from time to time, the “MCOS LLC Agreement”) and are fully paid (to the extent required under the MCOS LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 2030, 2031 and 2040 of the Oklahoma Limited Liability Company Act (the “Oklahoma LLC Act”)); and such membership interest is owned free and clear of all Liens, except for (i) Liens arising under or in connection with the MCOS LLC Agreement, or created or arising under the Delaware LLC Act or applicable securities laws and (ii) Liens permitted or arising under or in connection with the Credit Agreement.

 

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(s)                                   Ownership of Catarina Midstream, LLC.  The Partnership owns a 100% membership interest in Catarina Midstream, LLC (“Catarina Midstream”); such membership interest has been duly authorized and validly issued in accordance with the limited liability company agreement of Catarina Midstream (such agreement, as may be further amended, restated or otherwise modified from time to time, the “Catarina Midstream LLC Agreement”) and are fully paid (to the extent required under the Catarina Midstream LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-303, 18-607 and 18-804 of the Delaware LLC Act); and such membership interest is owned free and clear of all Liens, except for (i) Liens arising under or in connection with the Catarina Midstream LLC Agreement, or created or arising under the Delaware LLC Act or applicable securities laws and (ii) Liens permitted or arising under or in connection with the Credit Agreement.

 

(t)                                    Ownership of Carnero Gathering, LLC.  The Partnership owns a 50% membership interest in Carnero Gathering, LLC (“Carnero Gathering”); such membership interest has been duly authorized and validly issued in accordance with the limited liability company agreement of Carnero Gathering (such agreement, as may be further amended, restated or otherwise modified from time to time, the “Carnero Gathering LLC Agreement”) and is fully paid (to the extent required under the Carnero Gathering LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 18-303, 18-607 and 18-804 of the Delaware LLC Act); and such membership interest is owned free and clear of all Liens, except for (i) Liens arising under or in connection with the Carnero Gathering LLC Agreement, or created or arising under the Delaware LLC Act or applicable securities laws and (ii) Liens permitted or arising under or in connection with the Credit Agreement.

 

(u)                                 Ownership of Northeast Shelf Energy, L.L.C.  CEP Mid-Con owns a 100% membership interest in Northeast Shelf Energy, L.L.C., an Oklahoma limited liability company (“Northeast”); such membership interest has been duly authorized and validly issued in accordance with the limited liability company agreement of Northeast (such agreement, as may be further amended, restated or otherwise modified from time to time, the “Northeast LLC Agreement”; collectively with the Partnership Agreement, the General Partner LLC Agreement, the SEP IV LLC Agreement, the CEP Mid-Con LLC Agreement, the MCOS LLC Agreement, the Catarina Midstream LLC Agreement and the Carnero Gathering LLC Agreement, the “Organizational Agreements”) and are fully paid (to the extent required under the Northeast LLC Agreement) and nonassessable (except as such nonassessability may be affected by Sections 2030, 2031 and 2040 of the Oklahoma LLC Act); and such membership interest is owned free and clear of all Liens, except for (i) Liens arising under or in connection with the Northeast LLC Agreement, or created or arising under the Oklahoma LLC Act or applicable securities laws and (ii) Liens permitted or arising under or in connection with the Credit Agreement.

 

(v)                                 Authorization, Execution and Delivery of this Agreement.  This Agreement has been duly authorized, executed and delivered by or on behalf of the Partnership and constitutes a valid and legally binding agreement of the Partnership, enforceable against the Partnership in accordance with its terms; provided that the enforceability thereof may be limited by (A) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles (whether considered in a proceeding at law or in equity) relating to enforceability and (B) public policy, applicable law relating to fiduciary duties and indemnification and an implied covenant of good faith and fair dealing (collectively, the “Enforceability Exceptions”).

 

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(w)                               Authorization, Execution and Delivery of the Registration Rights Agreement. On the Closing Date, the Registration Rights Agreement will have been duly authorized and validly executed and delivered by the Partnership and will be a valid and legally binding agreement of the Partnership, enforceable against the Partnership in accordance with its terms, provided that the enforceability thereof may be limited by the Enforceability Exceptions.

 

(x)                                 Enforceability of the Subject Documents. Each of the Subject Documents (other than the Registration Rights Agreement) have been duly authorized, executed and delivered by or on behalf of the Partnership Entities party thereto and, assuming due authorization by the other parties thereto (other than a Partnership Entity), constitute a valid and legally binding agreement of such parties, enforceable against such parties in accordance with their respective terms; provided that the enforceability thereof may be limited by the Enforceability Exceptions.

 

(y)                                 Authority and Authorization. The Investor Units to be sold by the Partnership pursuant to this Agreement, and the limited partner interests represented thereby, have been duly authorized in accordance with the Partnership Agreement and, when issued and delivered by the Partnership pursuant to this Agreement against payment thereof, will be validly issued, fully paid (to the extent required under the Partnership Agreement) and non-assessable (except as such non-assessability may be affected by Sections 17-303, 17-607 or 17-804 of the Delaware LP Act); and except as described in the SEC Reports, the issuance and sale of the Investor Units to be sold by the Partnership pursuant to this Agreement are not subject to any preemptive rights, rights of first refusal or other similar rights of any securityholder of the Partnership or any other person.  On the Closing Date, all corporate, limited partnership and limited liability company action, as the case may be, required to be taken by the Partnership Entities or any of their members, partners or stockholders for the authorization, issuance and sale and delivery of the Investor Units and the consummation of the transactions contemplated by this Agreement to which they are a party shall have been validly taken.

 

(z)                                  Investor Units. The Investor Units to be sold by the Partnership pursuant to this Agreement, when issued and delivered in accordance with the terms of the Partnership Agreement and this Agreement against payment thereof as provided therein and herein, will conform in all material respects to the descriptions thereof contained in the SEC Reports, and such statements conform in all material respects to the rights set forth in the respective instruments and agreements defining the same.

 

(aa)                          Capitalization of the Partnership. As of the date hereof, the issued and outstanding partnership interests of the Partnership consisted of 4,429,915 Common Units, 19,444,445 Class B Preferred Units and the Incentive Distribution Rights. All outstanding Common Units and Class B Preferred Units and the limited partner interests represented thereby have been duly authorized and validly issued in accordance with the Partnership Agreement, and are fully paid (to the extent required under the Partnership Agreement) and nonassessable (except as such non-assessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act).

 

(bb)                          Absence of Defaults. None of the Partnership Entities is in (i) violation of its Organizational Agreements, charter, certificate of limited partnership or formation or conversion or other governing document of any of the Partnership Entities (collectively, the “Organizational Documents”), (ii) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any instruments, agreements and documents filed as exhibits to the SEC Reports pursuant to Rule 601(b)(10) of Regulation S-K of the Commission or any Form 8-K filed after

 

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January 1, 2016 (provided, that if any instrument, agreement or other document filed as an exhibit to the Registration Statement as aforesaid has been redacted or if any portion thereof has been deleted or is otherwise not included as part of such exhibit (whether pursuant to a request for confidential treatment or otherwise), such instrument, agreement or other document, as the case may be, shall be in its entirety, including any portions thereof which shall have been so redacted, deleted or otherwise not filed) (“Subject Instruments”) or (iii) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contracts, indentures, mortgages, deeds of trust, loan or credit agreements, bonds, notes, debentures, evidences of indebtedness, swap agreements, leases or other instruments or agreements to which any of the Partnership Entities is a party or by which any of the Partnership Entities is bound or to which any of the property or assets of any of the Partnership Entities is subject that are material with respect to the Partnership Entities taken as a whole (together with Subject Instruments, the “Partnership Documents”); except in the case of clause (iii) for such defaults that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(cc)                            No Conflicts. Neither (i) the issue and sale of the Investor Units and the compliance by the Partnership with this Agreement and the consummation of the transactions herein contemplated nor (ii) the execution, delivery and performance of the Subject Documents (other than the Organizational Agreements) by the Partnership Entities party thereto and the consummation by the Partnership Entities of the transactions contemplated by the Subject Documents (other than the Organizational Agreements), and compliance by the Partnership Entities with their obligations under the Subject Documents (other than the Organizational Agreements) will conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which any of the Partnership Entities is a party or by which any Partnership Entity is bound or to which any of the property or assets of the Partnership Entities is subject, nor will such action result in any violation of the provisions of the Organizational Documents or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Partnership Entities or any of their properties.

 

(dd)                          Absence of Labor Dispute. No labor dispute with the employees of any Partnership Entity exists or is imminent, and the Partnership is not aware of any existing or imminent labor disturbance by the employees of any of the principal suppliers, manufacturers, customers or contractors of any of the Partnership Entities that would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

 

(ee)                            Absence of Proceedings. There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Partnership, threatened, against or affecting any Partnership Entity that is required to be disclosed in the SEC Reports (other than as indicated therein) or that would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or to materially and adversely affect the consummation by the Partnership of the transactions contemplated in this Agreement or the performance by the Partnership of its obligations under this Agreement.

 

(ff)                              Absence of Further Requirements. (A) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency, domestic or foreign, (B) no authorization, approval, vote or consent of any unitholder, member or creditor of any of the Partnership Entities, (C) no authorization, approval, waiver or consent under any Subject Instrument and (D) no authorization, approval, vote or consent of any other person or

 

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entity, is necessary or required for (x) the execution and delivery of this Agreement and the Subject Documents by the Partnership Entities party thereto and the performance of their respective obligations hereunder and thereunder, (y) the offering, issuance, sale or delivery by the Partnership of the Investor Units to be sold by the Partnership hereunder, or (z) the consummation by the Partnership Entities of any of the other transactions contemplated by this Agreement and the Subject Documents (other than the Organizational Agreements), except such as have already been obtained or will be obtained prior to the Closing Date under the Securities Act, the Exchange Act, the rules and regulations of the Commission thereunder, the rules and regulations of the Financial Industry Regulatory Authority Inc. (“FINRA”) and with the NYSE MKT LLC (the “Exchange”).

 

(gg)                            Possession of Licenses and Permits. Each of the Partnership Entities possesses such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct its business in the manner described in the SEC Reports, except where the failure to possess such Governmental Licenses would not reasonably be expected to result in a Material Adverse Effect; each of the Partnership Entities is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure to so comply would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; none of the Partnership Entities have received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, if the subject of an unfavorable decision, ruling or finding, would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(hh)                          Title to Property.  Each of the Partnership Entities has (A) legal, valid and defensible title to the interests in the oil and natural gas properties supporting the estimates of its net proved reserves contained in the SEC Reports (the “Partnership Properties”), (B) good and indefeasible title in fee simple to all real property owned by them, other than the Partnership Properties covered by clause (A), and (C) good and marketable title to all other property and assets owned by them, in each case free and clear of all Liens, except Liens that do not, individually or in the aggregate, materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Partnership Entities. All assets held under lease or sublease by the Partnership Entities, including real property, buildings and other improvements, and equipment and other property, except the Partnership Properties covered by clause (A) above, are held by it under valid, subsisting and enforceable leases or subleases, as the case may be, subject to exceptions that are not material and do not interfere with the use made or proposed to be made of such assets, except the Partnership Properties covered by clause (A) above, by the Partnership Entities, and all such leases and subleases are in full force and effect. The Partnership Entities have no notice of any claim that has been asserted by anyone adverse to the rights of any of the Partnership Entities under any of the leases or subleases mentioned above or affecting or questioning the rights of any of the Partnership Entities to the continued possession of the leased or subleased premises under any such lease or sublease except for such claims that, if successfully asserted, would not, individually or in the aggregate, have a Material Adverse Effect.

 

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(ii)                                  Rights of Way. Each of the Partnership Entities has such consents, easements, permits, rights-of-way or licenses from any person (collectively, “rights-of-way”) as are necessary to conduct its business in the manner described in the SEC Reports, subject to such qualifications as may be set forth in the SEC Reports, except for such rights-of-way the failure of which to obtain, would not result in, individually or in the aggregate, a Material Adverse Effect; and each of the Partnership Entities has fulfilled and performed all of its obligations with respect to such rights-of-way and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or would result in any impairment of the rights of the holder of any such rights-of-way, except for such failures to perform, revocations, termination and impairments that would not reasonably be expected to have a Material Adverse Effect, subject in each case to such qualifications as may be set forth in the SEC Reports; and none of such rights-of-way contains any restriction that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(jj)                                Investment Company Act. The Partnership is not, and after giving effect to the Public Offering and the issuance and sale of the Investor Units as contemplated in this Agreement and the Underwriting Agreement, the Partnership will not be, an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

(kk)                          Intellectual Property.  Each of the Partnership Entities owns or possesses adequate rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, know-how, software, systems and technology (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of its businesses and has no reason to believe that the conduct of its businesses conflicts with, and has not received any notice of any claim of conflict with, any such rights of others, except in each case as would not reasonably be expected to have a Material Adverse Effect.

 

(ll)                                  Environmental Laws. Except as disclosed in the SEC Reports and except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (A) none of the Partnership Entities is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, “Hazardous Materials”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”), (B) each Partnership Entity has all permits, authorizations and approvals required under any applicable Environmental Laws and are in compliance with their requirements, (C) there are no pending or, to the knowledge of the Partnership, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against any of the Partnership Entities, (D) none of the Partnership Entities has received notice that it has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any comparable state law and (E) there are no events or circumstances that

 

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might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting any of the Partnership Entities relating to Hazardous Materials or any Environmental Laws.

 

(mm)                  Review of Environmental Laws. The Partnership has reviewed the effect of Environmental Laws in effect on the date hereof on the business, operations and properties of the Partnership Entities, in the course of which it identified and evaluated associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with such Environmental Laws, or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Partnership has reasonably concluded that such associated costs and liabilities would not, individually or in the aggregate, have a Material Adverse Effect, except as set forth in or contemplated in the SEC Reports.

 

(nn)                          Absence of Registration Rights. There are no persons with registration rights or other similar rights to have any securities (debt or equity) registered pursuant to a registration statement filed under the Securities Act, and there are no persons with co-sale rights, tag-along rights or other similar rights to have any securities (debt or equity) sold in connection with the sale of the Investor Units, except in each case for such rights contemplated by this Agreement, the Registration Rights Agreement and that have been disclosed in the SEC Reports or the Registration Rights Agreement.

 

(oo)                          Tax Returns. The Partnership Entities have filed all foreign, federal, state and local tax returns that are required to be filed or have requested extensions thereof, except where the failure to so file would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, and have paid all taxes (including, without limitation, any estimated taxes) required to be paid by them and any other assessment, interest, fine or penalty levied against any of them, to the extent that any of the foregoing is due and payable, except for any such tax, assessment, interest, fine or penalty that is currently being contested in good faith by appropriate actions and except for such taxes, assessments, interest, fines or penalties the nonpayment of which would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(pp)                          Insurance. The Partnership Entities are insured by insurers of recognized financial responsibility, or entitled to the benefits of such insurance, against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; all policies of insurance and any fidelity or surety bonds insuring the Partnership Entities or their respective business, assets, employees, properties, officers and directors are in full force and effect; and the Partnership Entities are in compliance with the terms of such policies and instruments in all material respects; there are no claims by any of the Partnership Entities under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; none of the Partnership Entities has been refused any insurance coverage sought or applied for; and the Partnership has no reason to believe that it will not be able to renew any existing coverage as and when such coverage expires or to obtain similar coverage from similar insurers as a cost that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(qq)                          Accounting and Disclosure Controls. The Partnership Entities maintain a system of internal accounting controls that has been designated by the General Partner’s principal executive officer and principal financial officer, or under their supervision sufficient to provide reasonable

 

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assurances that (A) transactions are executed in accordance with management’s general or specific authorizations; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (C) access to assets is permitted only in accordance with management’s general or specific authorization; (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and (E) interactive data in eXtensible Business Reporting Language included or incorporated by reference in the SEC Reports fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto. Except as set forth in the SEC Reports, the Partnership is not aware of (i) any significant deficiencies in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the ability of the Partnership Entities to record, process, summarize and report financial information, or any material weaknesses in internal controls over financial reporting of the Partnership Entities or (ii) any fraud, whether or not material, involving management or other employees who have a role in the Partnership’s internal control over financial reporting. The Partnership maintains “disclosure controls and procedures” (to the extent required by and as such term is defined in Rule 13a-15(e) under the Exchange Act) that have been designed to ensure that material information relating to the Partnership and its subsidiaries is made known to the General Partner’s principal executive officer and principal financial officer by others within those entities; such disclosure controls and procedures are effective in all material respects to perform the functions for which they are established to the extent required by Rule 13a-15 of the Exchange Act.

 

(rr)                                Compliance with Sarbanes-Oxley Act. The Partnership and, to the knowledge of the Partnership, the officers of the General Partner of the Partnership, in their capacities as such, are in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act and the rules and regulations promulgated in connection therewith and with which any of them is required to comply, including Section 402 related to loans.

 

(ss)                              Absence of Manipulation. The Partnership and its controlled affiliates, and to the knowledge of the Partnership, the Partnership’s other affiliates, have not taken and will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Investor Units.

 

(tt)                                Foreign Corrupt Practices Act. None of the Partnership Entities, nor, to the knowledge of the Partnership, any director, officer, agent, employee, affiliate or other person associated with or acting on behalf of the Partnership Entities has (i) used any limited partnership funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from limited partnership funds; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; (iv) violated or is in violation of any provision of the Bribery Act 2010 of the United Kingdom; or (v) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

 

(uu)                          Money Laundering Laws. The operations of the Partnership Entities are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related

 

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or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving any of the Partnership Entities with respect to the Money Laundering Laws is pending or, to the knowledge of the Partnership Entities, threatened.

 

(vv)                          OFAC. (i) None of the Partnership Entities nor, to the knowledge of the Partnership, any director, officer, agent, employee, affiliate or other person acting on behalf of the Partnership is currently the subject or the target of any U.S. sanctions including, without limitation, any administered or enforced by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”), or other relevant sanctions authority (collectively, “Sanctions” and such persons, “Sanctioned Persons”); (ii) the Partnership will not directly or indirectly use any of the proceeds from the sale of Investor Units by the Partnership contemplated by this Agreement, or lend, contribute or otherwise make available any such proceeds to any subsidiary, joint venture partner or other person or entity (A) to fund any activities of or business with any Sanctioned Person or Sanctioned Countries (as defined below) or (B) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions; (iii) none of the Partnership Entities nor, to the knowledge of the Partnership, any director, officer, agent, employee, affiliate or other person acting on behalf of the Partnership is a person that is, or is 50% or more owned or otherwise controlled by a person that is: (A) the subject of any Sanctions; or (B) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions that broadly prohibit dealings with that country or territory (currently, Cuba, Iran, North Korea, Sudan, and Syria) (collectively, “Sanctioned Countries” and each, a “Sanctioned Country”); and (iv) except as has been disclosed to the Investor or is not material to the analysis under any Sanctions, none of the Partnership Entities have engaged in any dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country, in the preceding 3 years, nor do the Partnership Entities have any plans to increase its dealings or transactions with Sanctioned Persons, or with or in Sanctioned Countries.

 

(ww)                      ERISA. (i) Each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) for which the Partnership or any member of its “Controlled Group” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”)) would have any liability (each a “Plan”) has been maintained in material compliance with its terms and with the requirements of all applicable statutes, rules and regulations including ERISA and the Code; (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan excluding transactions effected pursuant to a statutory or administrative exemption; (iii) with respect to each Plan subject to Title IV of ERISA (A) no “reportable event” (within the meaning of Section 4043(c) of ERISA) has occurred or is reasonably expected to occur, excluding any reportable event for which a waiver could apply, (B) no “accumulated funding deficiency” (within the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not waived, has occurred or is reasonably expected to occur that will, individually or in the aggregate, have a Material Adverse Effect and (C) neither the Partnership nor any member of its Controlled Group has incurred, or reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guaranty Corporation in the ordinary course and without default) in respect of a Plan (including a “multiemployer plan,” within the meaning of Section 4001(a)(3) of ERISA) that will,

 

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individually or in the aggregate, have a Material Adverse Effect; and (iv) each Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, to the knowledge of the Partnership or any member of its Controlled Group, whether by action or by failure to act, which would cause the loss of such qualification, except for any such actions or failures to act that would not, individually or in the aggregate, have a Material Adverse Effect.

 

(xx)                          Certain Relationships and Related Party Transactions. No relationship, direct or indirect, exists between or among any of the Partnership Entities, on the one hand, and any “affiliate,” equity holder, director, manager, officer, customer or supplier of any of the Partnership Entities, on the other hand, that is required by the Securities Act to be disclosed in the SEC Reports that is not so disclosed. There are no outstanding personal loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by any Partnership Entity to or for the benefit of any of the executive officers, directors or managers of any Partnership Entity or their respective family members.

 

(yy)                          Brokers. There is not a broker, finder or other party that is entitled to receive from any Partnership Entity any brokerage or finder’s fee or other fee or commission as a result of any of the transactions contemplated by this Agreement.

 

(zz)                            No Restrictions on Distributions. The Partnership is not prohibited, directly or indirectly, from paying or making distributions with respect to its equity securities, except as described in the SEC Reports.

 

(aaa)                   Restrictions on Subsidiary Payments to the Partnership.  No Operating Subsidiary is currently prohibited, directly or indirectly, from paying any dividends to the Partnership, from making any other distribution on such subsidiary’s capital units, from repaying to the Partnership any loans or advances to such subsidiary from the Partnership or from transferring any of such subsidiary’s property or assets to the Partnership or any Operating Subsidiary, except as described in the SEC Reports.

 

(bbb)                   Other Sales. The Partnership has not offered, sold or issued any securities that would be integrated with the offering, issuance and sale of the Investor Units contemplated by this Agreement pursuant to the Securities Act and the rules and regulations of the Commission thereunder or the interpretations thereof by the Commission.

 

(ccc)                      No General Solicitation.  None of the Partnership Entities or any of its controlled affiliates or any other person acting on its or their behalf has solicited offers for, or offered or sold, the Investor Units by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D or in any manner involving a public offering within the meaning of Section 4(a)(2) of the Securities Act.

 

(ddd)                   Securities Law Exemptions.  Assuming the accuracy of the representations and warranties of the Investor and its compliance with its agreements set forth herein, it is not necessary, in connection with the offer, issuance and sale of the Investor Units in the manner contemplated by this Agreement to register the Investor Units under the Securities Act. The Partnership agrees that neither it nor any of its controlled affiliates nor any person acting on its behalf will, directly or indirectly, make offers or sales of any security, or solicit offers to buy any security, under circumstances that would require the registration of the issuance of the Investor Units under the Securities Act.

 

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(eee)                      Securities Law Compliance.  The offer, issuance and sale of the Investor Units, the execution, delivery and performance of the Subject Documents (other than the Organizational Agreements) and all other actions by the Partnership contemplated in this Agreement comply and will comply in all material respects with all applicable requirements of the Securities Act, the Exchange Act, applicable state securities or “blue sky” laws, and other applicable laws, and all applicable rules and regulations of the Commission or any other governmental authority.

 

2.                                The Investor represents and warrants to, and agrees with, the Partnership as follows:

 

(a)                                 Existence. The Investor is duly organized and validly existing and in good standing under Delaware law, with all requisite power and authority to own, lease, use and operate its properties and to conduct its business as currently conducted, except where the failure to have such power or authority would not prevent the consummation of the transactions contemplated by this Agreement and the Registration Rights Agreement.

 

(b)                                 Authorization, Enforceability. The Investor has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement and the Registration Rights Agreement and to consummate the transactions contemplated hereby and thereby, and the execution, delivery and performance by the Investor of this Agreement and the Registration Rights Agreement has been duly authorized by all necessary action on the part of the Investor; and this Agreement and the Registration Rights Agreement constitute the legal, valid and binding obligations of the Investor, enforceable in accordance with their terms, subject to the Enforceability Exceptions.

 

(c)                                  No Breach. The execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Investor and the consummation by the Investor of the transactions contemplated hereby and thereby will not (A) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any material agreement to which the Investor is a party or by which the Investor is bound or to which any of the property or assets of the Investor is subject, (B) conflict with or result in any violation of the provisions of the organizational documents of the Investor, or (C) violate any statute, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Investor or the property or assets of the Investor, except in the cases of clauses (A) and (C), for such conflicts, breaches, violations or defaults as would not prevent the consummation of the transactions contemplated by this Agreement and the Registration Rights Agreement.

 

(d)                                 Brokers. There is not a broker, finder or other party that is entitled to receive from the Investor any brokerage or finder’s fee or other fee or commission as a result of any of the transactions contemplated by this Agreement.

 

(e)                                  Investment. The Investor Units are being acquired for the Investor’s own account or the account of its affiliates, and with no present intention of distributing the Investor Units or any part thereof, and the Investor has no present intention of selling or granting any participation in or otherwise distributing the same in any transaction in violation of the securities laws of the United States of America or any state, without prejudice, however, to the Investor’s right at all times to sell or otherwise dispose of all or any part of the Investor Units under a registration statement under the Securities Act and applicable state securities Laws or under an exemption from such registration available thereunder (including, if available, Rule 144 promulgated thereunder). If the Investor should in the future decide to

 

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dispose of any of the Investor Units, the Investor understands and agrees (A) that it may do so only (i) in compliance with the Securities Act and applicable state securities laws, as then in effect, or pursuant to an exemption therefrom or (ii) in the manner contemplated by any registration statement pursuant to which such securities are being offered, and (B) that stop-transfer instructions to that effect will be in effect with respect to such securities.

 

(f)                                   Accredited Investor. The Investor is an “accredited investor,” as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, and the investment by the Investor in the Partnership is for its own account and not for the account of others. The Investor Units are being acquired for investment and with no intention of distributing or reselling such Investor Units or any portion thereof or interest therein in any transaction which would be a violation of the securities laws of the United States of America or any state or foreign country or jurisdiction.

 

(g)                                  Reasonable Access. The Investor has been given reasonable access to full and fair disclosure of all material information regarding the Partnership and the Investor Units, including reasonable access to the books and records of the Partnership. The Investor acknowledges and agrees that it has been provided, to its full satisfaction, with the opportunity to ask questions concerning the terms and conditions of an investment in the Partnership and has knowingly and voluntarily elected instead to rely solely on its own investigation.

 

(h)                                 Restricted Securities. The Investor understands that the Investor Units are “restricted securities” and have not been registered under the Securities Act or any applicable state securities laws. The Investor acknowledges that the Investor Units will bear a restrictive legend to that effect. The Investor acknowledges and agrees that the Investor must bear the economic risk of this investment indefinitely, that the Investor Units purchased by the Investor hereunder may not be sold or transferred or offered for sale or transfer by it without registration under the Securities Act and any applicable state securities or Blue Sky laws or the availability of exemptions therefrom.

 

(i)                                     Independent Evaluation. The Investor has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Investor Units, and has so evaluated the merits and risks of such investment. The Investor is able to bear the economic risk of an investment in the Investor Units and, at the present time and in the foreseeable future, is able to afford a complete loss of such investment.

 

(j)                                    Exemption from Registration. The Investor understands that the Investor Units are being offered and sold to the Investor in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Partnership is relying upon the truth and accuracy of, and Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings, which are true, correct and complete, of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Investor Units.

 

(k)                                 Pre-Existing Relationship. The Investor has a substantive pre-existing relationship with the Partnership and was directly contacted by the Partnership or its agents. The Investor was not identified or contacted through any marketing by the Partnership.

 

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(l)                                     Short Selling. The Investor represents that it has not entered into any “short sales” (as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act), whether or not against the box, nor any forward sale contracts, options, puts, calls, short sales, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) nor any other similar arrangements, or sales and other transactions through non-U.S. broker dealers or foreign regulated brokers of the Common Units owned by it since the time it first began discussions with the Partnership about the transactions contemplated by this Agreement.

 

3.                                Subject to the terms and conditions herein set forth, the Partnership agrees to issue and sell the Investor Units to the Investor, and the Investor agrees to purchase the Investor Units from the Partnership, at a purchase price per Common Unit of $11.00.

 

4.                                      (a)                                 The Investor Units to be purchased by the Investor hereunder, shall be delivered by the Partnership to the Investor against payment by or on behalf of the Investor of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified by the Partnership to the Investor at least forty-eight hours in advance.  Settlement for the Investor Units shall be effected by free delivery of such Investor Units by the Partnership or its transfer agent to the Investor’s account, or to the account of the Investor’s designee, at The Depository Trust Company through its Deposit and Withdrawal at Custodian System or by such other means of delivery as may be mutually agreed upon by the parties hereto.  The time and date of such delivery and payment shall be, 9:30 a.m., New York City time, on November 22, 2016 or such other time and date as the Investor and the Partnership may agree upon in writing. Such time and date for delivery of the Investor Units is herein called the “Closing Date.”

 

(b)                                 The documents to be delivered on the Closing Date by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross receipt for the Investor Units and any additional documents requested by the Investor pursuant to Section 7(e) hereof, will be delivered at the offices of Andrews Kurth Kenyon LLP, 600 Travis Street, Suite 4200, Houston, Texas 77002 (the “Closing Location”) on the Closing Date.  A meeting will be held at the Closing Location at 5:00 p.m., New York City time, on the New York Business Day next preceding the Closing Date, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto.  For the purposes of this  Section 4, “New York Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close.

 

5.                                The Partnership agrees with the Investor to:

 

(a)                                 use the net proceeds received by it from the sale of the Investor Units for repayment of indebtedness outstanding under the Credit Agreement; and

 

(b)                                 use its best efforts to list, subject to notice of issuance, the Investor Units on the Exchange.

 

6.                                      Each of the parties hereto shall use its commercially reasonable efforts promptly to take or cause to be taken all action and promptly to do or cause to be done all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Without limiting the foregoing, the Partnership and the Investor shall each use its commercially reasonable efforts to make all filings and obtain all Governmental Licenses that may be necessary or, in the

 

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reasonable opinion of the other parties, as the case may be, advisable for the consummation of the transactions contemplated herein. The Partnership shall promptly and accurately respond, and shall use its commercially reasonable efforts to cause its transfer agent to respond, to reasonable requests for information (which is otherwise not publicly available) made by the Investor or its auditors relating to the actual holdings of the Investor or its accounts; provided, that the Partnership shall not be obligated to provide any such information that could reasonably result in a violation of applicable laws or conflict with the Partnership’s insider trading policy or a confidentiality obligation of the Partnership. The Partnership shall use its commercially reasonable efforts to cause its transfer agent to reasonably cooperate with the Investor to ensure that the Investor Units are validly and effectively issued to the Investor and that the Investor’s ownership of the Investor Units following the Closing Date is accurately reflected on the appropriate books and records of the Partnership’s transfer agent.

 

7.                                      The obligations of the Investor hereunder, as to the Investor Units to be issued and sold on the Closing Date, shall be subject, in its discretion, to the condition that all representations and warranties and other statements of the Partnership herein are, as of the date hereof and of the Closing Date, true and correct, the condition that the Partnership shall have performed all of its obligations hereunder theretofore to be performed by it, and the following additional conditions:

 

(a)                                 Andrews Kurth Kenyon LLP, counsel for the Partnership, shall have furnished to the Investor their written opinion, dated as of the Closing Date, in form and substance reasonably satisfactory to the Investor;

 

(b)                                 None of the Partnership Entities shall have sustained since the date of the latest audited financial statements included or incorporated by reference in the SEC Reports any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth SEC Reports, the effect of which, is in the Investor’s judgment so material and adverse as to make it impracticable or inadvisable to proceed with the purchase of the Investor Units on the terms and in the manner contemplated in this Agreement;

 

(c)                                  The Investor Units at the Closing Date shall have been duly listed, subject to notice of issuance, on the Exchange;

 

(d)                                 The conditions to closing the Public Offering under the Underwriting Agreement have been satisfied without the waiver of any such conditions thereunder;

 

(e)                                  The Partnership shall have furnished or caused to be furnished to the Investor, certificates of officers of the General Partner, dated as of the Closing Date, reasonably satisfactory to the Investor as to such matters as the Investor may reasonably request, including, without limitation:

 

(i)                                     the accuracy of the representations and warranties of the Partnership herein at the Closing Date;

 

(ii)                                  the performance by the Partnership of all of its obligations hereunder to be performed at or prior the Closing Date; and

 

(iii)                               the matters set forth in subsection (b) of this Section;

 

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(f)                                   The Partnership shall have executed and delivered to the Investor the Registration Rights Agreement;

 

(g)                                  The Public Offering shall have been consummated; and

 

(h)                                 The acquisitions contemplated by that certain Purchase and Sale Agreement, dated October 6, 2016, by and among Sanchez Energy Corporation, SN Midstream, LLC and the Partnership and that certain Purchase and Sale Agreement, dated October 6, 2016, by and among SN Cotulla Assets, LLC, SN Palmetto, LLC, SEP Holdings IV, LLC and the Partnership shall have been consummated.

 

8.                                      (a)  The Partnership agrees to indemnify and hold harmless the Investor, the directors, officers, employees, affiliates and agents of the Investor and each person who controls the Investor within the meaning of either the Securities Act or the Exchange Act (the “Investor Related Parties”) against any and all losses, claims, damages or liabilities (or actions in respect thereof), joint or several, to which they or any of them may become subject that arise out of or are in any way related to the breach of any representations, warranties or covenants of the Partnership contained herein; provided, however, that such claim for indemnification relating to a breach of the representations or warranties is made prior to the expiration of the survival period for such representations or warranties; and provided, further, that no Investor Related Party shall be entitled to recover special, consequential (including lost profits) or punitive damages other than those of third parties for which Investor is or may be liable. Notwithstanding anything to the contrary, consequential damages shall not be deemed to include diminution in value of the Investor Units, which is specifically included in damages covered by Investor Related Parties’ indemnification above. This indemnity agreement will be in addition to any liability which the Partnership may otherwise have.

 

(b)                                 The Investor agrees to indemnify and hold harmless the Partnership, the General Partner, each of their respective directors, each of their respective officers, and each person who controls the Partnership within the meaning of either the Securities Act or the Exchange Act (the “Partnership Related Parties”), against any and all losses, claims, damages or liabilities (or actions in respect thereof), joint or several, to which they or any of them may become subject that arise out of or are in any way related to the breach of any representations, warranties or covenants of the of the Partnership contained herein; provided, however, such claim for indemnification relating to a breach of the representations or warranties is made prior to the expiration of the survival period for such representations or warranties; and provided, further, that no Partnership Related Party shall be entitled to recover special, consequential (including lost profits) or punitive damages other than those of third parties for which the Partnership is or may be liable.

 

(c)                                  Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above.  The indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified

 

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party or parties except as set forth below); provided, however, that such counsel shall be satisfactory to the indemnified party.  Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party.  An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and (ii) does not include an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.

 

9.                                      The respective indemnities, agreements, representations, warranties and other statements of the Partnership and the Investor, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of the Investor or any controlling person of the Investor, or the Partnership, or any officer or director of the General Partner or controlling person of the Partnership, and shall survive delivery of and payment for the Investor Units.

 

10.                               If for any reason other than a breach of the Investor of any of its representations, warranties and covenants hereunder, any Investor Units are not delivered by or on behalf of the Partnership as provided herein, the Partnership will reimburse the Investor for all out-of-pocket expenses of the Investor, including fees and disbursements of counsel, reasonably incurred by the Investor in making preparations for the purchase, sale and delivery of the Investor Units not so delivered, but the Partnership shall then be under no further liability to the Investor except as provided in Section 8 hereof.

 

11.                               All statements, requests, notices and agreements hereunder shall be in writing, and if to the Investor shall be delivered or sent by mail, telex or facsimile transmission to SN UR Holdings, LLC at 1000 Main Street, Suite 300, Houston, Texas 77002 Attention: President, facsimile number (713) 756-2784; and if to the Partnership shall be delivered or sent by mail, telex or facsimile transmission to Sanchez Production Partners LP at 1000 Main Street, Suite 300, Houston, Texas 77002, Attention: Chief Financial Officer, facsimile number (832) 742-3823.  Any such statements, requests, notices or agreements shall take effect upon receipt thereof.

 

12.                               This Agreement shall be binding upon, and inure solely to the benefit of, the Investor, the Partnership and, to the extent provided in Section 8 hereof, the officers and directors of the General Partner and each person who controls the Partnership or the Investor, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue

 

20

 

of this Agreement.  No purchaser of any of the Investor Units from the Investor shall be deemed a successor or assign by reason merely of such purchase.

 

13.                               Time shall be of the essence of this Agreement.  As used herein, the term “business day” shall mean any day when the Commission’s office in Washington, D.C. is open for business.

 

14.                               This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Partnership and the Investor, or any of them, with respect to the subject matter hereof.

 

15.                               THIS AGREEMENT AND ANY MATTERS RELATED TO THIS TRANSACTION SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS THAT WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAWS OF THE STATE OF TEXAS.  The Partnership and the Investor agree that any suit or proceeding arising in respect of this agreement or our engagement will be tried exclusively in the U.S. District Court for the Southern District of Texas or, if that court does not have subject matter jurisdiction, in any state court located in The City of Houston, Harris County and the Partnership and the Investor agree to submit to the jurisdiction of, and to venue in, such courts.

 

16.                               The Partnership and the Investor hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

21

 

If the foregoing is in accordance with the Investor’s understanding, please sign and return to us counterparts hereof, and upon the acceptance hereof by the Investor, this letter and such acceptance hereof shall constitute a binding agreement between the Investor and the Partnership.

 

	
 
    	
SANCHEZ   PRODUCTION PARTNERS LP
    
	
 
    	
 
    
	
 
    	
By:
    	
Sanchez   Production Partners GP LLC,
    
	
 
    	
 
    	
its general   partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles C.   Ward
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Charles C. Ward
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Chief Financial   Officer
    

 

Signature Page to Common Unit Purchase Agreement

 

 

	
The foregoing Agreement   is hereby
    	
 
    
	
confirmed and accepted   as of the
    	
 
    
	
date first above   written.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
SN UR HOLDINGS, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Antonio R.   Sanchez, III
    	
 
    
	
 
    	
Name: Antonio R.   Sanchez, III
    	
 
    
	
 
    	
Title: Chief Executive   Officer
    	
 
    

 

Signature Page to Common Unit Purchase Agreementxog_Ex10_1

		

			EXHIBIT 10.1

		

		
			AMENDED AND RESTATED
		

		
			EMPLOYMENT AGREEMENT
		

		
			THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made by and between Extraction Oil & Gas, Inc., a Delaware corporation (the “Company”), XOG Services, LLC (the “Employer” and together with the Company, “Extraction”) and Tom L. Brock (“Employee”) effective as of November 1, 2016 (the “Effective Date”), and hereby amends and replaces in its entirety any other employment agreement heretofore entered into between Employee and the Employer or any of its affiliates.  
		

		
			 
		

		
			W I T N E S S E T H: 
		

		
			WHEREAS, the Employer desires to employ Employee as its Chief Accounting Officer on the terms and conditions, and for the consideration, hereinafter set forth and Employee desires to be employed by the Employer on such terms and conditions and for such consideration. 
		

		
			NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, the Company, the Employer, and Employee agree as follows: 
		

		
			Article I

DEFINITIONS 
		

		
			In addition to the terms defined in the body of this Agreement, for purposes of this Agreement, the following capitalized words shall have the meanings indicated below: 
		

		
			1.1  “Board” shall mean the Board of Directors of the Company. 
		

		
			1.2“Cause” shall mean a determination by the Employer that Employee (a) has engaged in gross negligence, gross incompetence or willful misconduct in the performance of Employee’s duties with respect to the Company or any of its affiliates, (b) has failed without proper legal reason to substantially perform Employee’s duties and responsibilities to the Company or any of its affiliates, (c) has materially breached any provision of this Agreement, (d) has committed an act of theft, fraud, embezzlement, misappropriation or willful breach of a fiduciary duty to the Company or any of its affiliates, or (e) has been convicted of, pleaded no contest to or received adjudicated probation or deferred adjudication in connection with a crime involving fraud, dishonesty or moral turpitude or any felony (or a crime of similar import in a foreign jurisdiction). In order to terminate Employee’s employment for Cause, the Employer must provide the Employee with a written notice providing in reasonable detail the specific circumstances alleged to constitute Cause and the Employee must not have cured or remedied the alleged Cause event (if susceptible to cure) in the Employer’s good faith judgment within ten (10) days after his receipt of such notice. 
		

		
			1.3“Change in Control” shall mean:
		

		
			(a)a merger of the Company with another entity, a consolidation involving the Company, or the sale of all or substantially all of the assets of the Company to another entity if, in any such case, (i) the holders of equity securities of the Company immediately 
		

		
			
		

		
			

		 

 

		

		
			prior to such transaction or event do not beneficially own immediately after such transaction or event equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event or (ii) the persons who were members of the Board immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event;
		

		
			(b)the dissolution or liquidation of the Company;
		

		
			(c)when any person or entity, including a “group” as contemplated by section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires or gains ownership or control (including, without limitation, power to vote) of more than 50% of the combined voting power of the outstanding securities of the Company; or
		

		
			(d)as a result of or in connection with a contested election of directors, the persons who were members of the Board immediately before such election shall cease to constitute a majority of the Board.
		

		
			For purposes of the preceding sentence, (i) “resulting entity” in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common stock of the Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, and (ii) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term “Company” shall refer to the resulting entity and the term “Board” shall refer to the board of directors (or comparable governing body) of the resulting entity.
		

		
			1.4“Code” shall mean the Internal Revenue Code of 1986, as amended.
		

		
			1.5“Date of Termination” shall mean the date Employee’s employment with the Employer is considered to have terminated pursuant to Section 3.5.
		

		
			1.6“Good Reason” shall mean the occurrence of any of the following events: 
		

		
			(a)a material diminution in Employee’s Base Salary; or
		

		
			(b)a material diminution in Employee’s authority, duties, or responsibilities; or
		

		
			(c)the involuntary relocation of the geographic location of Employee’s principal place of employment by more than 50 miles from the location of Employee’s principal place of employment as of the Effective Date; or
		

		
			(d)a material breach by the Company or the Employer of this Agreement.
		

		
			
		

		
			

		 

		

			2

		

 

		

		
			Notwithstanding the foregoing provisions of this Section 1.6 or any other provision in this Agreement to the contrary, any assertion by Employee of a termination of employment for “Good Reason” shall not be effective unless all of the following conditions are satisfied: (i) the condition described in Section 1.6(a), (b) or (c) giving rise to Employee’s termination of employment must have arisen without Employee’s consent; (ii) Employee must provide written notice to the Employer of such condition in accordance with Section 11.1 within 45 days of the later of the initial existence of the condition or when Employee first learns of the existence of the condition (provided that such notice, if provided within 45 days of when Employee first learns of the existence of the condition, must in all circumstances be provided no later than 90 days following the initial existence of the condition); (iii) the condition specified in such notice must remain uncorrected for 30 days after receipt of such notice by the Employer; and (iv) the date of Employee’s termination of employment must occur within 90 days after the initial existence of the condition specified in such notice or when Employee first learns of the existence of the condition (provided, however, that such termination may in no circumstance occur later than two years following the initial existence of the condition). 
		

		
			1.7“Notice of Termination” shall mean a written notice delivered to the other party indicating the specific termination provision in this Agreement relied upon for termination of Employee’s employment and the intended Date of Termination and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment under the provision so indicated.  
		

		
			1.8“Section 409A” shall mean section 409A of the Code and the Treasury Regulations and other interpretative guidance issued thereunder.
		

		
			1.9  “Section 409A Payment Date” shall mean the earlier of (a) the date of Employee’s death or (b) the date that is six months after the date of termination of Employee’s employment with the Employer.
		

		
			Article II

EMPLOYMENT AND DUTIES
		

		
			2.1Employment; Effective Date.  The Employer agrees to continue to employ Employee, and Employee agrees to continue to be employed by the Employer, pursuant to the terms of this Agreement beginning as of the Effective Date and continuing for the period of time set forth in Article III of this Agreement, subject to the terms and conditions of this Agreement. 
		

		
			2.2Positions.  From and after the Effective Date, the Employer shall employ Employee in the position of Chief Accounting Officer of the Employer and of the Company or in such other position or positions as the parties may mutually agree, and Employee shall report to the Chief Financial Officer of the Company.    
		

		
			2.3Duties and Services.  Employee agrees to serve in the position referred to in Section 2.2 and to perform diligently and to the best of Employee’s abilities the duties and services appertaining to such position, as well as (a) such additional reasonably specific duties and services that Employee from time to time may be reasonably directed to perform by the Employer that are 
		

		
			
		

		
			

		 

		

			3

		

 

		

		
			reasonably consistent with such position, and (b) such additional duties and services appropriate to such position(s) which the parties mutually agree upon from time to time.  
		

		
			2.4Other Interests.  Employee agrees, during the period of Employee’s employment by the Employer, to devote substantially all of Employee’s business time, energy and best efforts to the business and affairs of the Company and its affiliates.  Notwithstanding the foregoing, the parties acknowledge and agree that Employee may (a) engage in and manage Employee’s passive personal investments and (b) engage in charitable and civic activities; provided, however, that such activities shall be permitted so long as such activities do not materially conflict with the business and affairs of the Company or its affiliates or materially interfere with Employee’s performance of Employee’s duties hereunder. 
		

		
			2.5Duty of Loyalty.  Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act in the best interests of the Company and its affiliates and to do no act that would materially injure the business, interests, or reputation of the Company or any of its affiliates. In keeping with these duties, Employee shall make full disclosure to the Company of all business opportunities pertaining to the Company’s business and shall not appropriate for Employee’s own benefit business opportunities concerning the subject matter of the fiduciary relationship. 
		

		
			Article III
TERM AND TERMINATION OF EMPLOYMENT 
		

		
			3.1Term.  Unless this Agreement is sooner terminated pursuant to other provisions hereof, the Employer agrees to continue to employ Employee for the period beginning on the Effective Date and ending on the third anniversary of the Effective Date (the “Initial Expiration Date”); provided, however, that beginning on the Initial Expiration Date, and on each anniversary of the Initial Expiration Date thereafter, if Employee’s employment under this Agreement has not been terminated pursuant to Section 3.2 or 3.3, then said term of employment under this Agreement shall automatically be extended for successive one-year periods unless on or before the date that is 60 days prior to the first day of any such extension period either party shall give written notice to the other that no such automatic extension shall occur, in which case the term of this Agreement shall terminate as of the end of the current term, and if so provided in such notice, Employee’s employment shall terminate contemporaneously with the expiration of the term of this Agreement. 
		

		
			3.2Employer’s Right to Terminate.  Notwithstanding the provisions of Section 3.1, the Employer may terminate Employee’s employment under this Agreement at any time for any of the following reasons by providing Employee with a Notice of Termination: 
		

		
			(a)upon Employee being unable to perform Employee’s duties or fulfill Employee’s obligations under this Agreement by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months as determined by the Company and certified in writing by a competent medical physician selected by the Company; or
		

		
			(b)Employee’s death; or
		

		
			
		

		
			

		 

		

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			(c)for Cause; or
		

		
			(d)for any other reason whatsoever or for no reason at all, in the sole discretion of the Employer. 
		

		
			3.3Employee’s Right to Terminate.  Notwithstanding the provisions of Section 3.1, Employee shall have the right to terminate Employee’s employment under this Agreement for Good Reason or for any other reason whatsoever or for no reason at all, in the sole discretion of Employee, by providing the Employer with a Notice of Termination.  In the case of a termination of employment by Employee pursuant to this Section 3.3, the Date of Termination specified in the Notice of Termination shall not be less than 15 nor more than 60 days, respectively, from the date such Notice of Termination is given, and the Employer may require a Date of Termination earlier than that specified in the Notice of Termination (and, if such earlier Date of Termination is so required, it shall not change the basis for Employee’s termination nor be construed or interpreted as a termination of employment pursuant to Section 3.1 or Section 3.2).
		

		
			3.4Deemed Resignations.  Unless otherwise agreed to in writing by the Company or the Employer and Employee prior to the termination of Employee’s employment, any termination of Employee’s employment shall constitute (a) an automatic resignation of Employee as an officer of the Company and each affiliate of the Company and (b) an automatic resignation of Employee from the Board (if applicable), from the board of directors of any affiliate of the Company and from the board of directors or similar governing body of any corporation, limited liability entity or other entity in which the Company or any affiliate holds an equity interest and with respect to which board or similar governing body Employee serves as the Company’s or such affiliate’s designee or other representative.
		

		
			3.5Meaning of Termination of Employment.  For all purposes of this Agreement, Employee shall be considered to have terminated employment with the Employer when Employee incurs a “separation from service” with the Employer within the meaning of section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.  
		

		
			Article IV
COMPENSATION AND BENEFITS 
		

		
			4.1Base Salary.  During the term of this Agreement, Employee shall receive a minimum, annualized base salary of $250,000 (the “Base Salary”). Employee’s annualized base salary shall be reviewed periodically by the Board (or a committee thereof) and, in the sole discretion of the Board (or a committee thereof), such annualized base salary may be increased (but not decreased) effective as of any date determined by the Board (or a committee thereof).  Employee’s Base Salary shall be paid in equal installments in accordance with the Employer’s standard policy regarding payment of compensation to employees but no less frequently than monthly.
		

		
			4.2Bonuses.  Employee shall be eligible to receive an annual, calendar-year bonus (payable in a single lump sum) based on criteria determined in the discretion of the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company (the “Annual Bonus”), it being understood that (a) the target Annual Bonus shall equal 
		

		
			
		

		
			

		 

		

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			a minimum of 60% of Employee’s Base Salary and (b) the actual amount of each Annual Bonus shall be determined in the discretion of the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate) of the Company. The Employer shall use commercially reasonable efforts to pay each Annual Bonus with respect to a calendar year on or before March 15 of the following calendar year (and in no event shall an Annual Bonus be paid after December 31 of the following calendar year); provided, however, that Employee will be entitled to receive payment of such Annual Bonus only if Employee is employed by the Employer on such date of payment.  If Employee has not been employed by the Employer since January 1 of the year that includes the Effective Date, then the Annual Bonus for such year shall be prorated based on the ratio of the number of days during such calendar year that Employee was employed by the Employer to the number of days in such calendar year.    
		

		
			4.3Equity Award. Employee shall be eligible to receive an annual equity award grant under the Company’s then existing incentive equity incentive plan based on vesting criteria determined in the discretion of the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate), with an expected target grant date fair value equal to a minimum of 60% of Employee’s Base Salary. The Employee’s entitlement to any equity award remains subject to approval by the Board or a committee thereof after consultation with the Chief Executive Officer (or his delegate).
		

		
			4.4Other Benefits.  During Employee’s employment hereunder, Employee shall be allowed to participate in all benefit plans and programs of Extraction, including improvements or modifications of the same, which are now, or may hereafter be, available to other executive officers of the Employer or the Company.  Extraction shall not, however, by reason of this Section 4.3, be obligated to institute, maintain, or refrain from changing, amending, or discontinuing any such benefit plan or program, so long as such changes are similarly applicable to other executive officers generally. 
		

		
			4.5Expenses.  The Employer shall reimburse Employee for all reasonable business expenses incurred by Employee in performing services hereunder, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Company or the Employer; provided, in each case, that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Employer.  Any such reimbursement of expenses shall be made by the Employer upon or as soon as practicable following receipt of supporting documentation reasonably satisfactory to the Employer (but in any event not later than the close of Employee’s taxable year following the taxable year in which the expense is incurred by Employee); provided, however, that, upon Employee’s termination of employment with Extraction, in no event shall any additional reimbursement be made prior to the Section 409A Payment Date to the extent such payment delay is required under section 409A(a)(2)(B)(i) of the Code.  In no event shall any reimbursement be made to Employee for such fees and expenses after the later of (a) the first anniversary of the date of Employee’s death or (b) the date that is five years after the date of Employee’s termination of employment with the Employer (other than by reason of Employee’s death).
		

		
			4.6Vacation and Sick Leave.  During Employee’s employment hereunder, Employee shall be entitled to sick and vacation leave in accordance with the Employer’s policies applicable to its executive officers, which leave shall accrue and be taken in accordance with the Employer’s 
		

		
			
		

		
			

		 

		

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			sick and vacation policies in effect from time to time.  Employee’s right to carry over unused vacation from one calendar year to the next shall be determined by the Employer’s vacation policy.  
		

		
			4.7Offices.  Subject to Articles II, III, and IV hereof, Employee agrees to serve without additional compensation, if elected or appointed thereto, as a director of the Company or any of the Company’s affiliates and as a member of any committees of the board of directors of any such entities, and in one or more executive positions of any of the Company’s affiliates. 
		

		
			Article V
EFFECT OF TERMINATION OF EMPLOYMENT ON COMPENSATION 
		

		
			5.1For Cause; Without Good Reason; Death; Disability; Non-Renewals.  If Employee’s employment hereunder shall terminate on account of his death or disability pursuant to Section 3.2(a) or (b), at the expiration of the term provided in Section 3.1, pursuant to Section 3.2(c), or pursuant to Employee’s resignation for other than Good Reason, then all compensation and all benefits to Employee hereunder shall terminate contemporaneously with such termination of employment, except that Employee (or Employee’s legal representative, estate, and/or beneficiaries, as the case may be) shall be entitled to (a) payment of all accrued and unpaid Base Salary to the Date of Termination, (b) reimbursement for all incurred but unreimbursed expenses for which Employee is entitled to reimbursement in accordance with Section 4.5, and (c) benefits to which Employee is entitled under the terms of any applicable benefit plan or program (such amounts set forth in (a), (b), and (c) shall be collectively referred to herein as the “Accrued Rights”).    
		

		
			5.2Without Cause; for Good Reason.  If Employee’s employment hereunder shall terminate pursuant to Employee’s resignation for Good Reason, or by action of the Employer pursuant to Section 3.2 for any reason other than those encompassed by Section 3.2(a), 3.2(b), or 3.2(c), then all compensation and all benefits to Employee hereunder shall terminate contemporaneously with such termination of employment, except that Employee shall be entitled to receive the Accrued Rights and, subject to Employee’s delivery, within 50 days after the Date of Termination, and non-revocation of an executed release in a form reasonably satisfactory to the Employer (which shall release and discharge the Company and its affiliates, subsidiaries and benefit plans, and their respective stockholders, officers, directors, members, partners, employees, agents representatives and other affiliated persons from any and all claims or causes of action of any kind or character, including but not limited to all claims or causes of action arising out of Employee’s employment with the Employer or its affiliates or the termination of such employment) (the “Release”), Employee shall receive the following additional compensation and benefits from the Company or the Employer, as applicable, (but no other additional compensation or benefits after such termination):
		

		
			(a)Unpaid Prior Year Annual Bonus: The Employer shall pay to Employee any earned but unpaid Annual Bonus for the calendar year ending prior to the Date of Termination, which amount shall be payable in a lump-sum on or before the date such annual bonuses are paid to employees who have continued employment with the Employer (but in no event earlier than 60 days after the Date of Termination;
		

		
			
		

		
			

		 

		

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			(b)Severance Payment: The Employer shall pay to Employee a severance amount equal to 0.5 times the Employee’s Base Salary as of the Date of Termination, which amount shall be paid in a lump sum payment on the date that is 60 days after the Date of Termination occurs; provided, however, that in the event that Employee’s Date of Termination under this Section 5.2(b) occurs within twelve (12) months following a Change in Control, such severance amount shall equal one times the Employee’s Base Salary; 
		

		
			(c)Post-Employment Health Coverage:  Provided that Employee elects to continue coverage for Employee and Employee’s spouse and eligible dependents, if any, under the Company’s or the Employer’s group health plans under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), and/or sections 601 through 608 of the Employee Retirement Income Security Act of 1974, as amended, during the first six (6) months of such continuation coverage (twelve (12) months if the Employee’s Date of Termination occurs within twelve (12) months following a Change in Control), the Employer shall promptly reimburse Employee on a monthly basis for the difference between the amount Employee pays to effect and continue such coverage and the employee contribution amount that similarly situated active executive employees of the Company pay for the same or similar coverage under such group health plans; provided, however, that in the event that Employee becomes eligible for group health coverage from a subsequent employer, the reimbursements provided by the Employer under this Section 5.2(c) shall immediately cease; and
		

		
			(d)Equity Awards: In the event that Employee’s Date of Termination under this Section 5.2 occurs within twelve (12) months following a Change in Control, notwithstanding anything to the contrary included in any award agreement, 100% of outstanding equity-related awards held by the Employee shall immediately vest with respect to time-based vesting provisions (and any performance-based vesting will vest based on actual performance through the end of the performance period), and all options, stock appreciation rights, or similar awards shall remain exercisable for the full original term of the award.
		

		
			Article VI
PROTECTION OF INFORMATION 
		

		
			6.1Disclosure to and Property of the Company.  For purposes of this Article VI, the term “the Company” shall include the Company and any of its affiliates, and any reference to “employment” or similar terms shall include a director and/or consulting relationship. All information, trade secrets, designs, ideas, concepts, improvements, product developments, discoveries and inventions, whether patentable or not, that are conceived, made, developed, disclosed to or acquired by Employee, individually or in conjunction with others, during the period of Employee’s employment by the Company (whether during business hours or otherwise and whether on the Company’s premises or otherwise) that relate to the Company’s or any of its affiliates’ businesses, trade secrets, products or services (including, without limitation, all such information relating to corporate opportunities, strategies, business plans, product specifications, compositions, manufacturing and distribution methods and processes, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisition prospects, the identity of 
		

		
			
		

		
			

		 

		

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			customers or their requirements, the identity of key contacts within the customer’s organizations or within the organization of acquisition prospects, or production, marketing and merchandising techniques, prospective names and marks) and all writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, “Confidential Information”) shall be disclosed to the Company and are and shall be the sole and exclusive property of the Company or its affiliates, as applicable.  Moreover, all documents, videotapes, written presentations, brochures, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E‐mail, voice mail, electronic databases, maps, drawings, architectural renditions, models and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, “Work Product”) are and shall be the sole and exclusive property of the Company (or its affiliates).  Employee agrees to perform all actions reasonably requested by the Company or its affiliates to establish and confirm such exclusive ownership.  Upon termination of Employee’s employment with the Company, for any reason, Employee promptly shall deliver such Confidential Information and Work Product, and all copies thereof, to the Company.  
		

		
			6.2Disclosure to Employee.  The Company has and will disclose to Employee and place Employee in a position to have access to or develop Confidential Information and Work Product of the Company (or its affiliates); and has and will entrust Employee with business opportunities of the Company (or its affiliates); and has and will place Employee in a position to develop business good will on behalf of the Company (or its affiliates). 
		

		
			6.3No Unauthorized Use or Disclosure.  
		

		
			(a)Employee agrees to preserve and protect the confidentiality of all Confidential Information and Work Product of the Company and its affiliates.  Employee agrees that Employee will not, at any time during or after Employee’s employment with the Company, make any unauthorized disclosure of, and Employee shall not remove from the Company premises, Confidential Information or Work Product of the Company or its affiliates, or make any use thereof, except, in each case, in the carrying out of Employee’s responsibilities hereunder. Employee shall use all reasonable efforts to cause all persons or entities to whom any Confidential Information shall be disclosed by Employee hereunder to preserve and protect the confidentiality of such Confidential Information.  
		

		
			(b)Employee shall have no obligation hereunder to keep confidential any Confidential Information if and to the extent disclosure thereof is specifically required by law; provided, however, that in the event disclosure is required by applicable law, Employee shall provide the Company with prompt notice of such requirement prior to making any such disclosure, so that the Company may seek an appropriate protective order.  
		

		
			(c)At the request of the Company at any time, Employee agrees to deliver to the Company all Confidential Information that Employee may possess or control. Employee agrees that all Confidential Information of the Company (whether now or hereafter existing) conceived, discovered or made by Employee during the period of Employee’s employment by the Company exclusively belongs to the Company (and not to Employee), and upon request by the Company for specified Confidential Information, 
		

		
			
		

		
			

		 

		

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			Employee will promptly disclose such Confidential Information to the Company and perform all actions reasonably requested by the Company to establish and confirm such exclusive ownership. Affiliates of the Company shall be third party beneficiaries of Employee’s obligations under this Article VI.  As a result of Employee’s employment by the Company, Employee may also from time to time have access to, or knowledge of, Confidential Information or Work Product of third parties, such as customers, suppliers, partners, joint venturers, and the like, of the Company and its affiliates. Employee also agrees to preserve and protect the confidentiality of such third party Confidential Information and Work Product. 
		

		
			(d)Nothing herein will prevent Employee from: (i) making a good faith report of possible violations of applicable law to any governmental agency or entity; or (ii) making disclosures that are protected under the whistleblower provisions of applicable law.  For the avoidance of doubt, nothing herein shall prevent Employee from making a disclosure of a trade secret that: (A) is made in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.  Further, an individual who files a lawsuit for retaliation by an employer of reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (X) files any document containing the trade secret under seal; and (Y) does not disclose the trade secret, except pursuant to court order.
		

		
			6.4Ownership by the Company.  If, during Employee’s employment by the Company, Employee creates any work of authorship fixed in any tangible medium of expression that is the subject matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs, E‐mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to the Company’s business, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on the Company’s premises or otherwise), including any Work Product, the Company shall be deemed the author of such work if the work is prepared by Employee in the scope of Employee’s employment; or, if the work relating to the Company’s business, products, or services is not prepared by Employee within the scope of Employee’s employment but is specially ordered by the Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and the Company shall be the author of the work.  If the work relating to the Company’s business, products, or services is neither prepared by Employee within the scope of Employee’s employment nor a work specially ordered that is deemed to be a work made for hire during Employee’s employment by the Company, then Employee hereby agrees to assign, and by these presents does assign, to the Company all of Employee’s worldwide right, title, and interest in and to such work and all rights of copyright therein.
		

		
			6.5Assistance by Employee.  During the period of Employee’s employment by the Company, Employee shall assist the Company and its nominee, at any time, in the protection of the Company’s or its affiliates’ worldwide right, title and interest in and to Confidential 
		

		
			
		

		
			

		 

		

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			Information and Work Product and the execution of all formal assignment documents requested by the Company or its nominee(s) and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries.  For the period of two (2) years after Employee’s employment termination with the Company pursuant to Section 5.2 above, at the request from time to time and expense of the Company or its affiliates, Employee shall assist the Company or its nominee(s) in the protection of the Company’s or its affiliates’ worldwide right, title and interest in and to Confidential Information and Work Product and the execution of all formal assignment documents requested by the Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries. Employee shall assist after Employee’s employment termination with the Company other than pursuant to Section 5.2 above pursuant to mutually agreeable terms between the Employee and the Company. 
		

		
			6.6Remedies.  Employee acknowledges that money damages would not be a sufficient remedy for any breach of this Article VI by Employee, and the Company or its affiliates shall be entitled to enforce the provisions of this Article VI by terminating payments or benefits then owing to Employee under Section 5.2 and to specific performance and injunctive relief as remedies for such breach or any threatened breach; provided, that, to the extent the Company receives monetary damages from the Employee, such amounts shall not exceed the total value Employee received under Section 5.2.  Such remedies shall not be deemed the exclusive remedies for a breach of this Article VI but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Employee and Employee’s agents. However, if it is determined that Employee has not committed a breach of this Article VI, then the Company shall resume the payments and benefits due under this Agreement and pay to Employee and Employee’s spouse, if applicable, all payments and benefits that had been suspended pending such determination. 
		

		
			Article VII
STATEMENTS CONCERNING THE COMPANY 
		

		
			7.1Statements Concerning the Company.  Employee shall refrain, both during and after the termination of the employment relationship, from publishing any oral or written statements about the Company, any of its affiliates or any of the Company’s or such affiliates’ directors, officers, employees, consultants, agents or representatives that (a) are slanderous, libelous or defamatory, (b) disclose Confidential Information of the Company, any of its affiliates or any of the Company’s or any such affiliates’ business affairs, directors, officers, employees, consultants, agents or representatives, or (c) place the Company, any of its affiliates, or any of the Company’s or any such affiliates’ directors, officers, employees, consultants, agents or representatives in a false light before the public.  The foregoing shall not be violated by truthful statements in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings). A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded the Company and its affiliates under this provision are in addition to any and all rights and remedies otherwise afforded by law. 
		

		
			7.2Enforcement Rights.  A violation or threatened violation of this Article VII  may be enjoined by the courts. The rights afforded the Company and its affiliates under this provision are in addition to any and all rights and remedies otherwise afforded by law.
		

		
			
		

		
			

		 

		

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			Article VIII
NON-COMPETITION AGREEMENT 
		

		
			8.1Definitions.  As used in this Article VIII, the following terms shall have the following meanings: 
		

		
			“Business” means (a) during the period of Employee’s employment by the Company, the core products and services provided by the Company and its affiliates during such period and other products and services that are functionally equivalent to the foregoing, and (b) during the portion of the Prohibited Period that begins on the termination of Employee’s employment with the Employer, the products and services provided by the Company and its affiliates at the time of such termination of employment and other products and services that are functionally equivalent to the foregoing.  
		

		
			“Competing Business” means any business, individual, partnership, firm, corporation or other entity which wholly or in any significant part engages in any business competing with the Business in the Restricted Area. In no event will the Company or any of its affiliates be deemed a Competing Business. 
		

		
			“Governmental Authority” means any governmental, quasi-governmental, state, county, city or other political subdivision of the United States or any other country, or any agency, court or instrumentality, foreign or domestic, or statutory or regulatory body thereof. 
		

		
			“Legal Requirement” means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization, or other directional requirement (including, without limitation, any of the foregoing that relates to environmental standards or controls, energy regulations and occupational, safety and health standards or controls including those arising under environmental laws) of any Governmental Authority. 
		

		
			“Prohibited Period” means the period during which Employee is employed by the Employer hereunder and a period of six months (twelve months if Employee’s Date of Termination occurs within twelve (12) months following a Change in Control and Employee receives severance benefits pursuant to Section 5.2 of this Agreement) following the termination of Employee’s employment with the Employer.
		

		
			“Restricted Area” means any geographic area within a 100-mile radius of any location where the Company or its affiliates engages in the Business, and for which Employee has or had responsibilities, during the period of Employee’s employment. 
		

		
			8.2Non-Competition; Non-Solicitation.  Employee and Extraction agree to the non-competition and non-solicitation provisions of this Article VIII in consideration for the Confidential Information provided by Extraction to Employee pursuant to Article VI of this Agreement, to protect the trade secrets and confidential information of the Company or its affiliates disclosed or entrusted to Employee by the Company or its affiliates or created or developed by Employee for the Company or its affiliates, to protect the business goodwill of the Company or its affiliates developed through the efforts of Employee and/or the business opportunities disclosed 
		

		
			
		

		
			

		 

		

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			or entrusted to Employee by the Company or its affiliates and as an additional incentive for Extraction to enter into this Agreement.    
		

		
			(a)Subject to the exceptions set forth in Section 8.2(b) below, Employee expressly covenants and agrees that during the Prohibited Period (i) Employee will refrain from carrying on or engaging in, directly or indirectly, any Competing Business in the Restricted Area and (ii) Employee will not, and Employee will cause Employee’s affiliates not to, directly or indirectly, own, manage, operate, join, become an employee of, partner in, owner or member of (or an independent contractor to), control or participate in, be connected with or loan money to, sell or lease equipment or property to, or otherwise be affiliated with any business, individual, partnership, firm, corporation or other entity which engages in a Competing Business in the Restricted Area.
		

		
			(b)Notwithstanding the restrictions contained in Section 8.2(a), Employee or any of Employee’s affiliates may own an aggregate of not more than 2% of the outstanding stock of any class of any corporation engaged in a Competing Business, if such stock is listed on a national securities exchange or regularly traded in the over-the-counter market by a member of a national securities exchange, without violating the provisions of Section 8.2(a), provided that neither Employee nor any of Employee’s affiliates has the power, directly or indirectly, to control or direct the management or affairs of any such corporation and is not involved in the management of such corporation. 
		

		
			(c)Employee further expressly covenants and agrees that during the Prohibited Period, Employee will not, and Employee will cause Employee’s affiliates not to (i) engage or employ, or solicit or contact with a view to the engagement or employment of, any person who is an officer or employee of the Company or any of its affiliates or (ii) canvass, solicit, approach or entice away or cause to be canvassed, solicited, approached or enticed away from the Company or any of its affiliates any person who or which is a customer of any of such entities during the period during which Employee is employed by the Employer. 
		

		
			(d)The restrictions contained in Section 8.2 shall not apply to any product or service that the Company or the Employer provided during Employee’s employment but that the Company or the Employer no longer provides at the Date of Termination. 
		

		
			(e)Before accepting employment with any other person or entity while employed by the Employer during the Prohibited Period, the Employee will inform such person or entity of the restrictions contained in this Article VIII.
		

		
			8.3Relief.  Employee and Extraction agree and acknowledge that the limitations as to time, geographical area and scope of activity to be restrained as set forth in Section 8.2 are reasonable and do not impose any greater restraint than is necessary to protect the legitimate business interests of Extraction.  Employee and Extraction also acknowledge that money damages would not be sufficient remedy for any breach of this Article VIII by Employee, and the Company or its affiliates shall be entitled to enforce the provisions of this Article VIII by terminating payments or benefits then owing to Employee under Section 5.2 and to specific performance and injunctive relief as remedies for such breach or any threatened breach; provided, that, to the extent 
		

		
			
		

		
			

		 

		

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			the Company or the Employer receives monetary damages from the Employee, such amounts shall not exceed the total value Employee received under Section 5.2.  Such remedies shall not be deemed the exclusive remedies for a breach of this Article VIII but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Employee and Employee’s agents. However, if it is determined that Employee has not committed a breach of this Article VIII, then Extraction shall resume the payments and benefits due under this Agreement and pay to Employee all payments and benefits that had been suspended pending such determination.
		

		
			8.4Reasonableness; Enforcement.  Employee hereby represents to Extraction that Employee has read and understands, and agrees to be bound by, the terms of this Article VIII.  Employee acknowledges that the geographic scope and duration of the covenants contained in this Article VIII are the result of arm’s-length bargaining and are fair and reasonable in light of (a) the nature and wide geographic scope of the operations of the Business, (b) Employee’s level of control over and contact with the Business in all jurisdictions in which it is conducted, (c) the fact that the Business is conducted throughout the Restricted Area and (d) the amount of Confidential Information that Employee is receiving in connection with the performance of Employee’s duties hereunder.  It is the desire and intent of the parties that the provisions of this Article VIII be enforced to the fullest extent permitted under applicable Legal Requirements, whether now or hereafter in effect and therefore, to the extent permitted by applicable Legal Requirements, Employee and Extraction hereby waive any provision of applicable Legal Requirements that would render any provision of this Article VIII invalid or unenforceable. 
		

		
			8.5Reformation.  Extraction and Employee agree that the foregoing restrictions are reasonable under the circumstances and that any breach of the covenants contained in this Article VIII would cause irreparable injury to Extraction.  Employee understands that the foregoing restrictions may limit Employee’s ability to engage in certain businesses anywhere in the Restricted Area during the Prohibited Period, but acknowledges that Employee will receive sufficient consideration from Extraction to justify such restriction.  Further, Employee acknowledges that Employee’s skills are such that Employee can be gainfully employed in non-competitive employment, and that the agreement not to compete will not prevent Employee from earning a living.  Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced.  By agreeing to this contractual modification prospectively at this time, Extraction and Employee intend to make this provision enforceable under the law or laws of all applicable States, Provinces and other jurisdictions so that the entire agreement not to compete and this Agreement as prospectively modified shall remain in full force and effect and shall not be rendered void or illegal.  Such modification shall not affect the payments made to Employee under this Agreement. 
		

		
			Article IX

DISPUTE RESOLUTION
		

		
			9.1Arbitration.  Except as otherwise provided in this Article IX, any and all claims or disputes between Employee and the Company or its parents, subsidiaries and affiliates (including, without limitation, the validity, scope, and enforceability of this Article IX and claims 
		

		
			
		

		
			

		 

		

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			arising under any federal, state or local law prohibiting discrimination in employment or governing the employment relationship in any way) shall be submitted for final and binding arbitration by a single arbitrator in Denver, Colorado, in accordance with the rules for resolution of employment disputes of the American Arbitration Association (“AAA”).  The arbitrator shall have the power to gather such materials, information, testimony, and evidence as he or she deems relevant to the dispute before him or her, and each party will provide such materials, information, testimony, and evidence requested by the arbitrator, except to the extent any information so requested is subject to an attorney-client or other privilege. The arbitrator shall apply the substantive law of the State of Colorado (excluding Colorado choice-of-law principles that might call for the application of some other state’s law), or federal law, or both as applicable to the claims asserted.  The results of the arbitration and the decision of the arbitrator will be final and binding on the parties and each party agrees and acknowledges that these results shall be enforceable in a court of law of competent jurisdiction; provided that the parties agree that the arbitrator and any court enforcing the award of the arbitrator shall not have the right or authority to award punitive or exemplary damages to any disputing party.  No demand for arbitration may be made after the date when the institution of legal or equitable proceedings based on such claim or dispute would be barred by the applicable statute of limitations.  In the event either party must resort to the judicial process to enforce the provisions of this Agreement, the award of an arbitrator, or equitable relief granted by an arbitrator, the party seeking enforcement shall be entitled to recover from the other party all costs of litigation including, but not limited to, reasonable attorney’s fees and court costs.  All proceedings conducted pursuant to this agreement to arbitrate, including any order, decision or award of the arbitrator, shall be kept confidential by all parties.  Employee and Extraction explicitly recognize that no provision of this Article IX shall prevent either party from seeking to resolve any dispute relating to Article VI or Article VIII of this Agreement in a court of law.  Employee and Extraction further acknowledge and agree that a court of competent jurisdiction shall have the power to maintain the status quo pending the arbitration of any dispute under this Article IX, and this Article IX shall not require the arbitration of an application for emergency or temporary injunctive relief by either party pending arbitration; provided, however, that the remainder of any such dispute beyond the application for emergency or temporary injunctive relief shall be subject to arbitration under this Article IX.  EMPLOYEE ACKNOWLEDGES THAT, BY SIGNING THIS AGREEMENT, EMPLOYEE IS WAIVING ANY RIGHT THAT EMPLOYEE MAY HAVE TO A JURY TRIAL OR, EXCEPT AS EXPRESSLY PROVIDED HEREIN, A COURT TRIAL OF ANY CLAIM ALLEGED BY EMPLOYEE.
		

		
			Article X
CERTAIN EXCISE TAXES
		

		
			Notwithstanding anything to the contrary in this Agreement, if Employee is a “disqualified individual” (as defined in section 280G(c) of the Code), and the payments and benefits provided for in this Agreement, together with any other payments and benefits which Employee has the right to receive from the Company or any of its affiliates, would constitute a “parachute payment” (as defined in section 280G(b)(2) of the Code), then the payments and benefits provided for in this Agreement shall be either (a) reduced (but not below zero) so that the present value of such total amounts and benefits received by Employee from the Company and its affiliates will be one dollar ($1.00) less than three times Employee’s “base amount” (as defined in section 280G(b)(3) of the Code) and so that no portion of such amounts and benefits received by Employee shall be subject to the excise tax imposed by section 4999 of the Code, or (b) paid in full, whichever produces the 
		

		
			
		

		
			

		 

		

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			better net after-tax position to Employee (taking into account any applicable excise tax under section 4999 of the Code and any other applicable taxes, including any federal, state, municipal, and local income or employment taxes, and taking into account the phase out of itemized deductions and personal exemptions).  The reduction of payments and benefits hereunder, if applicable, shall be made by reducing, first, payments or benefits to be paid in cash hereunder in the order in which such payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and, then, reducing any benefit to be provided in-kind hereunder in a similar order, in all instances in accordance with Section 409A.  The determination as to whether any such reduction in the amount of the payments and benefits provided hereunder is necessary shall be made by the Company or the Employer in good faith; provided, however, that (a) no portion of Employee’s payments or benefits the receipt or enjoyment of which Employee shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of section 280G(b) of the Code will be taken into account; (b) no portion of Employee’s payments or benefits will be taken into account which, in the opinion of tax counsel (“Tax Counsel”) for the Company does not constitute a parachute payment (including by reason of section 280G(b)(4)(A) of the Code); (c) in calculating the applicable excise tax under section 4999 of the Code, no portion of Employee’s payments or benefits will be taken into account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered, within the meaning of section 280G(b)(4)(B) of the Code, in excess of the base amount that is allocable to such reasonable compensation; and (d) the value of any non-cash benefit or any deferred payment or benefit will be determined by Tax Counsel or the Company’s independent auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code.  At the time that payments are made under this Agreement, the Company will provide Employee with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations, including any opinions or other advice the Company received from Tax Counsel, the Company’s independent auditor, or other advisors or consultants (and any such opinions or advice which are in writing will be attached to the statement).  If a reduced payment or benefit is made or provided, and through error or otherwise, that payment or benefit, when aggregated with other payments and benefits from the Company (or its affiliates) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three times Employee’s base amount, then Employee shall immediately repay such excess to the Company or the applicable affiliate upon notification that an overpayment has been made.  The fact that Employee’s right to payments or benefits may be reduced by reason of the limitations contained in this Article X will not limit or otherwise affect any other rights of Employee under this Agreement or otherwise.  All determinations required by this Article X will be made at the expense of the Company.  However, nothing in this Article X shall require the Company or any affiliate to be responsible for, or have any liability or obligation with respect to, Employee’s excise tax liabilities under section 4999 of the Code. 
		

		
			Article XI

MISCELLANEOUS 
		

		
			11.1Notices.  For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given (a) when received if delivered personally or by courier, (b) on the date receipt is acknowledged if delivered 
		

		
			
		

		
			

		 

		

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			by certified mail, postage prepaid, return receipt requested or (c) one day after transmission if sent by facsimile transmission with confirmation of transmission, as follows: 
		

			
					
						If to Employee, addressed to:

					
					
						Tom L. Brock

				
	
					
						 

					
					
						Extraction Oil & Gas, Inc.

				
	
					
						 

					
					
						370 17th Street, Suite 5300

				
	
					
						 

					
					
						Denver, CO  80202, or the last known 

				
	
					
						 

					
					
						residential address reflected in the Employer’s

				
	
					
						 

					
					
						records

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						Facsimile:

					
					
						(720) 557-8301

				
	
					
						 

					
					
						 

					
					
						Attention: Tom L. Brock

				
	
					
						 

					
					
						E-mail:

					
					
						Per Employer records

				
	
					
						 

					
					
						 

				
	
					
						If to the Company or the Employer, addressed to:

					
					
						Extraction Oil & Gas, Inc.

				
	
					
						 

					
					
						370 17th Street, Suite 5300

				
	
					
						 

					
					
						Denver, CO 80202

				
	
					
						 

					
					
						Attention: General Counsel

				
	
					
						 

					
					
						Facsimile:

					
					
						(720) 557-8301

				
	
					
						 

					
					
						 

					
					
						Attention: General Counsel

				
	
					
						 

					
					
						E-mail:

					
					
						General Counsel’s e-mail address

				

		
			or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt. 
		

		
			11.2Applicable Law; Submission to Jurisdiction.  
		

		
			(a)This Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of Colorado, without regard to conflicts of laws principles thereof. 
		

		
			(b)With respect to any claim or dispute related to or arising under this Agreement, the parties hereto hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts located in the State of Colorado.
		

		
			11.3No Waiver.  No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 
		

		
			11.4Severability.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect. 
		

		
			
		

		
			

		 

		

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			11.5Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 
		

		
			11.6Withholding of Taxes and Other Employee Deductions.  The Employer or the Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other taxes and withholdings as may be required pursuant to any law or governmental regulation or ruling and all other customary deductions made with respect to the Company’s employees generally. 
		

		
			11.7Headings.  The Section headings have been inserted for purposes of convenience and shall not be used for interpretive purposes. 
		

		
			11.8Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely. 
		

		
			11.9Affiliate.  As used in this Agreement, the term “affiliate” as used with respect to a particular person or entity shall mean any other person or entity which owns or controls, is owned or controlled by, or is under common ownership or control with, such particular person or entity. 
		

		
			11.10Successors; Assigns; Third Party Beneficiaries.  This Agreement shall be binding upon and inure to the benefit of the Company and the Employer and any successor of the Company or the Employer.  In addition, the Employer may assign this Agreement and Employee’s employment to any other affiliate of the Company at any time without the consent of Employee, and any assign of the Employer shall be deemed to be the Employer for purposes of this Agreement.  Except as provided in the foregoing sentences of this Section 11.10, this Agreement and the rights and obligations of the parties hereunder are personal, and neither this Agreement nor any right, benefit, or obligation of either party hereto shall be subject to voluntary or involuntary assignment, alienation, or transfer, whether by operation of law or otherwise, without the prior written consent of the other party.  In addition, any payment owed to Employee hereunder after the date of Employee’s death shall be paid to Employee’s estate.  Each affiliate of the Company shall be a third party beneficiary of, and may directly enforce, Employee’s obligations under Article VI, Article VII and Article VIII.
		

		
			11.11Term.  Termination of this Agreement shall not affect any right or obligation of any party which is accrued or vested prior to such termination.  Without limiting the scope of the preceding sentence, the provisions of Articles V, VI, VII, VIII and IX shall survive any termination of the employment relationship and/or of this Agreement.
		

		
			11.12Entire Agreement.  Except as provided in any signed written agreement contemporaneously or hereafter executed by the Company or the Employer and Employee, this Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Employee by the Employer. Without limiting the scope of the preceding sentence, all understandings and agreements preceding the date of execution of this Agreement and relating to the subject matter hereof are hereby null and void and of no further force and effect. 
		

		
			
		

		
			

		 

		

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			11.13Modification; Waiver.  Any modification to or waiver of this Agreement will be effective only if it is in writing and signed by the parties to this Agreement. 
		

		
			11.14Actions by the Board.  Any and all determinations or other actions required of the Board hereunder that relate specifically to Employee’s employment by the Employer or the terms and conditions of such employment shall be made by the members of the Board other than Employee if Employee is a member of the Board, and Employee shall not have any right to vote or decide upon any such matter.  
		

		
			11.15Employee’s Representations and Warranties.  Employee represents and warrants to Extraction that (a) Employee does not have any agreements with any prior employers or other third parties that will prohibit Employee from working for Extraction or fulfilling Employee’s duties and obligations to Extraction pursuant to this Agreement and (b) Employee has complied with all duties imposed on Employee with respect to Employee’s former employer, e.g., Employee does not possess any tangible property belonging to Employee’s former employer. 
		

		
			11.16Section 409A.  The parties hereby agree that this Agreement is intended to satisfy the requirements of Section 409A with respect to amounts, if any, subject thereto and shall be interpreted, construed, and administered consistent with such intent. Each payment made under this Agreement shall be deemed to be a separate payment for purposes of Section 409A. Notwithstanding any provision in this Agreement to the contrary, if Employee is a “specified employee” (as such term is defined in Section 409A and as determined by the Employer in accordance with any method permitted under Section 409A) and any payment or benefit provided for herein would be subject to additional taxes and interest under Section 409A if Employee’s receipt of such payment or benefit is not delayed until the Section 409A Payment Date, then such payment or benefit shall not be provided to Employee (or Employee’s estate, if applicable) until the Section 409A Payment Date.  Notwithstanding anything to the contrary in this Agreement or elsewhere, any payment or benefit under this Agreement or otherwise that is exempt from Section 409A pursuant to Treasury Regulation § 1.409A-l(b)(9)(v)(A) or (C) (relating to certain reimbursements and in-kind benefits) shall be paid or provided only to the extent that the expenses are not incurred, or the benefits are not provided, beyond the last day of the second calendar year following the calendar year in which Employee’s “separation from service” occurs; and provided further that such expenses are reimbursed no later than the last day of the third calendar year following the calendar year in which Employee’s “separation from service” occurs.  To the extent any expense reimbursement or the provision of any in-kind benefit is determined to be subject to Section 409A (and not exempt pursuant to the prior sentence or otherwise) (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of any such expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, and (iii) such payments shall be made on or before the last day of Employee’s taxable year following the taxable year in which the expense occurred. 
		

		
			11.17Clawback.  Notwithstanding any provisions in this Agreement to the contrary, any compensation, payments, or benefits provided hereunder, whether in the form of cash or otherwise, shall be subject to a clawback to the extent necessary to comply with the requirements of any applicable law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 
		

		
			
		

		
			

		 

		

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			2010, section 304 of the Sarbanes Oxley Act of 2002, or any regulations promulgated thereunder, or any policy adopted by the Company pursuant to any such law (whether in existence as of the Effective Date or later adopted).
		

		
			[Signatures begin on next page.] 
		

		
			 
		

		
			 
		

		
			 
		

		
			

		 

		

			20

		

 

		

			EXHIBIT 10.1

		

		

		
			 
		

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

			
					
						 

					
					
						EXTRACTION OIL & GAS, INC.

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						By: 

					
					
						/s/ Mark A. Erickson

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						Name: Mark A. Erickson

				
	
					
						 

					
					
						 

					
					
						Title: Chief Executive Officer

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						XOG SERVICES, LLC

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						By: 

					
					
						/s/ Mark A. Erickson

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						Name:  Mark A. Erickson

				
	
					
						 

					
					
						 

					
					
						Title:  Chief Executive Officer

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						TOM L. BROCK

				
	
					
						 

					
					
						 

				
	
					
						 

					
					
						/s/ Tom L. Brock

					
					
						 

				

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		 

		

			Signature Page to

		

		

			Employment Agreement

		

		

			Tom L. Brock

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