Document:

Exhibit 10.4

 

COASTWAY COMMUNITY BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

WHEREAS, this Supplemental Executive Retirement Plan (the “Plan”) is adopted effective July 1, 2013, by Coastway Community Bank (the “Bank”); and

 

WHEREAS, this Plan is intended to be a defined benefit, non-qualified deferred compensation plan that complies with Code Section 409A and the regulations thereunder; and

 

WHEREAS, this Plan is also intended to be a “top hat” pension plan that is established and maintained for a select group of management or highly compensated employees, all within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

 

ARTICLE I
  DEFINITIONS

 

When used herein, the following words shall have the meanings below unless the context clearly indicates otherwise:

 

1.1          “Accrued Benefit” means the amount of the aggregate liability recorded by the Bank from time to time on its internal financial statements with respect to the benefit payable to each Participant under this Plan, such that each Participant shall have his or her own Accrued Benefit.

 

1.2          “Beneficiary” means the person(s) designated by Participant from time to time, using the Beneficiary Designation Form set forth as Appendix B, as the beneficiary(ies) to whom the deceased Participant’s death benefit is payable per Section 4.3 below. If no beneficiary is so designated, then the Participant’s estate will be the Beneficiary.

 

1.3          “Benefit Schedule” means the personalized description of the Plan’s operational provisions that pertain to each Participant, including (a) the date of the Participant’s participation in the Plan; (b) the Participant’s Normal Retirement Age; and (c) the Participant’s Retirement Benefit, in the form set forth as Appendix A.  All Benefit Schedules shall be treated as being an integral part of this Plan, but no Participant shall have the right to receive any information about any other Participant’s Benefit Schedule.

 

1.4          “Board” means the Bank’s Board of Directors.

 

1.5          “Cause” means termination of employment because of the Participant’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, material breach of the Bank’s Code of Ethics, willfully engaging in actions that in the reasonable opinion of the Committee will likely cause substantial financial harm or substantial injury to the reputation of the Bank, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than routine traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the Participant’s employment or change in control agreement (if any) with the Bank.

 

 

1.6          “Change in Control” shall mean any of the following events: (i) a change in the ownership of the Bank or any holding company of the Bank (the “Company”); (ii) a change in the effective control of the Bank or the Company; or (iii) a change in the ownership of a substantial portion of the assets of the Bank or the Company, as described below; provided however, that a Change in Control shall not be deemed to have occurred upon the conversion of the Bank from a mutual to stock form or in connection with any reorganization used to effect such a conversion, including, but not limited to, the formation of the Company and an initial public offering of the Bank or Company stock.  The definition of Change in Control shall be construed to be consistent with the requirements of Treasury Regulations section 1.409A-3(i)(5), except to the extent that such regulations are superseded by subsequent guidance.

 

(a)           A change in ownership occurs on the date that any one person, or more than one person acting as a group (as defined in Treasury Regulations section 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Bank or the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Bank or the Company.

 

(b)           A change in the effective control of the Bank or the Company occurs on the date that either (A) any one person, or more than one person acting as a group (as defined in Treasury Regulations section 1.409A-3(i)(5)(vi)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Bank or the Company possessing 30% or more of the total voting power of the stock of the Bank or the Company, or (B) a majority of the members of the Bank’s or the Company’s Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Bank’s or the Company’s Board of Directors prior to the date of the appointment or election, provided that this subsection is inapplicable where a majority shareholder of the Bank or the Company is another corporation.

 

(c)           A change in the ownership of a substantial portion of the Bank’s or the Company’s assets occurs on the date that any one person or more than one person acting as a group (as defined in Treasury Regulations section 1.409A-3(i)(5)(vii)(C)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Bank or the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company.  For purposes of this Agreement, “gross fair market value” means the value of the assets of the Bank or the Company, or the value of the assets being disposed of, without regard to any liabilities associated with such assets.

 

1.7          “Committee” means the Executive Committee of the Board, who shall be responsible for administering the Plan.

 

1.8          “Disabled” or “Disability” means that the Participant: (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (b) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less 

 

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than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the participant’s employer; or (c) is determined to be disabled by the Social Security Administration.  A Participant shall be treated as Disabled if the Participant satisfies any one of these requirements.

 

1.9          “Good Reason” shall have the following meaning. Within 180 days following the initial existence of one or more of the following conditions (to which the Participant has not consented), the Participant voluntarily Separates from Service with the Bank, after having first given at least 90 days advance written notice to the Committee of the existence of such a condition and providing the Bank with at least 30 days to remedy the condition:

 

(a)           a material diminution in the Participant’s base compensation;

 

(b)           a material diminution in the Participant’s authority, duties, or responsibilities, including in connection with a sale, merger or acquisition of the Bank (including a merger of equals) or otherwise;

 

(c)           a material diminution in the budget over which the Participant retains authority;

 

(d)           a material change in the geographic location at which the Participant must perform the services; or

 

(e)           any other action or inaction that constitutes a material breach by the Bank of any employment or other agreement under which the Participant provides services to the Bank.

 

1.10        “Normal Retirement Age” means the later of (i) the Participant’s attainment of the age specified on the Participant’s Benefit Schedule; or (ii) the Participant’s Separation from Service.  In event a Participant desires to modify his or her Normal Retirement Age, which, pursuant to Code Section 409A, would be a change in the time of his or her payments hereunder, the Participant may do so by delivering an amended Benefits Schedule to the Bank, provided that (a) the new Normal Retirement Age shall not take effect until at least 12 months after the date on which the amended Benefits Schedule is executed; (b) the change to the Normal Retirement Age is made not less than 12 months prior to the Normal Retirement Age that is currently specified on the Participant’s Benefits Schedule; and (c) the new Normal Retirement Age is at least 5 years later than the Normal Retirement Age that is currently specified on the Participant’s Benefits Schedule.

 

1.11        “Normal Retirement Date” means the first day of the month after the Participant’s attainment of Normal Retirement Age.

 

1.12        “Plan Year” means the calendar year.

 

1.13        “Separation from Service” or “Separates from Service” has the meaning set forth in Code Section 409A and Treasury Regulations Section 1.409A-1(h).

 

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1.14        “Retirement Benefit” means the amount stated in the Participant’s Benefit Schedule, provided, however, that (i) the Retirement Benefit shall be calculated on the basis of the Participant’s completion of twenty (20) Years of Service with the Bank, and (ii) such Retirement Benefit shall be reduced if the Participant has completed less than twenty (20) Years of Service with the Bank at the time the Retirement Benefit is payable to the Participant (and such reduction shall be applied even in the event of death, Disability or Change of Control).

 

1.15        “Year of Service” shall have the following meaning (i.e., years of employment before the Executive’s participation in the Plan counts as “Years of Service” for purposes of the 20-year offset but not for vesting purposes):

 

(a)           For vesting purposes, “Years of Service” means the 12-month period of employment from the date of the Executive’s participation in the Plan, and each 12-month period of employment thereafter.

 

(b)           For purposes of determining the 20-year offset that is used to calculate each Participant’s Retirement Benefit, , “Years of Service” means the 12- month period of employment from the Executive’s date of hire with the Bank, and each consecutive 12- month period of employment thereafter.

 

ARTICLE II
  ELIGIBILITY AND VESTING

 

2.1          Eligibility.  The Plan is available to a select group of management and/or highly compensated employees of the Bank, determined from time to time by the Committee. Each Participant shall receive a copy of this Plan and a personalized Benefits Schedule at the time he or she joins the Plan.

 

2.2          Vesting.  Each Participant shall become fully vested in his or her Accrued Benefit upon the earliest to occur of (i) death; (ii) Disability; (iii) Change in Control; or (iv) attainment of Normal Retirement Age; or (v) completion of ten (10) Years of Service, as follows:

 

	
Completed
   Years of Service
    	
 
    	
%
   Vested
    	
 
    
	
1
    	
 
    	
10
    	
%
    
	
2
    	
 
    	
20
    	
%
    
	
3
    	
 
    	
30
    	
%
    
	
4
    	
 
    	
40
    	
%
    
	
5
    	
 
    	
50
    	
%
    
	
6
    	
 
    	
60
    	
%
    
	
7
    	
 
    	
70
    	
%
    
	
8
    	
 
    	
80
    	
%
    
	
9
    	
 
    	
90
    	
%
    
	
10
    	
 
    	
100
    	
%
    

 

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If a Participant has a Separation from Service before becoming fully vested, the Participant shall forfeit the unvested portion of his or her Accrued Benefit.  Years of Service earned before the Effective Date of this Plan shall count for vesting purposes.

 

ARTICLE III
  FUNDING

 

3.1          Type of Plan.  The Plan is a defined benefit, non-account balance, non-qualified deferred compensation plan, where the Bank expenses amounts annually in order to reflect the accrued liability for the future Retirement Benefit for each Participant.  The benefits provided under this Plan are not based on any salary reduction by the Participants.  Participants do not have the option of receiving any current payment or bonus in lieu of the benefits provided under this Plan.

 

3.2          Funding.

 

(a)           The Bank shall account for the Plan benefits using applicable GAAP and bank regulatory accounting principles.  The Bank shall maintain an Accrued Benefit for each Participant until the Participant has received payment of all benefits owed under this Plan.

 

(b)           Notwithstanding the preceding sentence, each Participant, his Beneficiaries or any successor in interest to him shall be and remain simply a general creditor of the Bank in the same manner as any other creditor having a general claim for unpaid compensation. Each Participant, his Beneficiaries, or any other person claiming through Participant, shall only have the right to receive from the Bank those payments as specified under this Plan.  The Bank reserves the absolute right, at its sole discretion, to earmark specific assets to be used to provide benefits under this Plan or to refrain from such earmarking and to determine the extent, nature, and method of such informal funding. Should the Bank elect to informally fund this Plan, in whole or in part, through the purchase of life insurance products, annuity products, equities, bond or other such funding vehicle as may be deemed appropriate by the Bank.  The Bank reserves the absolute right, in its sole discretion, to terminate such informal funding at any time, in whole or in part.

 

(c)           At no time shall any Participant be deemed to have any lien nor right, title or interest in or to any funding investment or to any assets of the Bank. Any asset used or acquired by the Bank in connection with the liabilities it has assumed under this Plan shall not be deemed to be held under any trust for the benefit of Participant or his Beneficiaries, nor shall it be considered security for the performance of the obligations of the Bank. It shall be, and remain, a general, unpledged, and unrestricted asset of the Bank. No Participant nor any Beneficiary under this Plan shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify or otherwise encumber in advance any of the benefits payable hereunder, nor shall any of said benefits be subject to seizure for the payment of any debts, judgments, alimony or separate maintenance owed by Participant or his Beneficiary, nor be transferable by operation of law in the event of bankruptcy, insolvency or otherwise. In the event Participant or any Beneficiary attempts assignment, communication, hypothecation, transfer or disposal of the benefits hereunder, the Bank’s liabilities shall forthwith cease and terminate.

 

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ARTICLE IV
  BENEFITS

 

4.1          Normal Retirement Benefit.  The Bank shall pay the Participant’s vested Retirement Benefit starting on the Participant’s Normal Retirement Date in the form elected by the Participant on his or her Benefits Schedule, as either (i) cash lump sum; (ii) monthly installments over five (5) years; or (iii) monthly installments for life, with fifteen (15) years of guaranteed payments.  If the Participant fails to timely make a proper election of the time and form of payment, then the Retirement Benefit shall be paid in a cash lump sum on the Participant’s Normal Retirement Date.  For purposes of determining the lump sum amount or any other actuarial equivalence, (i) unless the Committee determines otherwise, the discount rate shall be 120% of the long term applicable federal rate, compounded semi-annually, as published by the Internal Revenue Service for the month of December in the year in which the benefit payments are to begin, and (ii) reasonable mortality assumptions shall be used by the Plan’s actuary.  If the Retirement Benefit is paid in installments, each installment shall be treated as a separate payment for purposes of Code Section 409A.

 

4.2          Disability.  If a Participant becomes Disabled before reaching his Normal Retirement Date, the Participant shall be entitled to a cash lump sum payment of the Participant’s Accrued Benefit, determined as of the date the Participant became Disabled.  Such payment shall be made no later than thirty (30) days after the date the Participant became Disabled.

 

4.3          Death Before Normal Retirement Date.  If a Participant dies either before reaching his Normal Retirement Date or after reaching his Normal Retirement Date but before his/her vested benefit has been distributed, the Participant’s Beneficiaries shall be entitled to a cash lump sum payment of the Participant’s Accrued Benefit, determined as of the date the Participant died.  Such payment shall be made no later than thirty (30) days after the date the Participant died.

 

4.4          Termination for Cause.  If the Participant’s employment is terminated at any time for Cause, the Participant shall forfeit all unpaid benefits under this Plan, even if such benefits are otherwise vested.

 

4.5          Separation from Service Before Normal Retirement Age.

 

(a)           In the event of the Participant’s Separation from Service prior to Normal Retirement Age for reasons other than (i) death; (ii) Disability; (iii) involuntary termination without Cause; or (iv) voluntary termination for Good Reason, the Participant shall be entitled to a cash lump sum payment of the Participant’s vested Accrued Benefit, determined as of the date of the Separation from Service.  The Participant shall forfeit all unvested benefits that would otherwise be payable hereunder (i.e., a voluntary quit without Good Reason results in forfeiture of all unvested benefits).

 

(b)           In the event of the Participant’s Separation from Service prior to Normal Retirement Age, the Bank shall pay the Participant’s vested Accrued Benefit, determined as of the date of the Participant’s Separation from Service, in the form specified by the Participant on his or her Benefits 

 

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Schedule as either (i) cash lump sum; (ii) monthly installments over five (5) years; or (iii) monthly installments for life, with fifteen (15) years of guaranteed payments.  If the Participant fails to timely make a proper election of the time and form of payment, then the vested Accrued Benefit shall be paid in a cash lump sum.  Such payment shall begin no later than thirty (30) days after the date of the Participant’s Separation from Service.

 

ARTICLE V
  ADMINISTRATION

 

5.1          Committee. The Committee shall be the named fiduciary and administrator of this Plan.  As administrator, the Committee shall be responsible for the management, control and administration of the Plan as established herein. The Committee may delegate to others certain aspects of the management and operational responsibilities of the Plan, including the employment of advisors and the delegation of ministerial duties to qualified individuals.

 

5.2          Claims Procedures.  Any Participant or Beneficiary under the Plan may file a written claim for a Plan benefit with the Committee.

 

(a)           In the event of a denial or limitation of any benefit or payment due to or requested by any Participant or Beneficiary under the Plan (“claimant”), the claimant shall be given a written notification containing specific reasons for the denial or limitation of the benefit. The written notification shall contain specific reference to the pertinent Plan provisions on which the denial or limitation of the benefit is based. In addition, it shall contain a description of any other material or information necessary for the claimant to perfect a claim, and an explanation of why such material or information is necessary. The notification shall further provide appropriate information as to the steps to be taken if the claimant wishes to appeal the denial or limitation of benefit and submit a claim for review. This written notification shall be given to a claimant within ninety (90) days after receipt of the claim by the Committee unless special circumstances require an extension of time to process the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the 90-day period, and such notice shall indicate the special circumstances which make the postponement appropriate.

 

(b)           In the event of a denial or limitation of the claimant’s benefit, the claimant or the claimant’s duly authorized representative shall be permitted to review pertinent documents free of charge upon request and to submit to the Committee issues and comments in writing. In addition, the claimant or the claimant’s duly authorized representative may make a written request for a full and fair review of the claim and its denial by the Committee; provided, however, that such written request must be received by the Committee within sixty (60) days after receipt by the claimant of written notification or the denial or limitation of the claim. The 60-day requirement may be waived by the Committee in appropriate cases.  A decision shall be tendered by the Committee within sixty (60) days after the receipt of the request for review, provided that where special circumstances require an extension of time for processing the decision, it may be postponed on written notice to the claimant (before the expiration of the initial 60-day period) for an additional sixty (60) days, but in no event shall the decision be rendered more than one hundred and twenty days (120) days after the receipt of such request for review. Any decision by the Committee shall be furnished to the claimant in writing 

 

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and shall set forth the specific reasons for the decision and the specific plan provisions on which the decision is based.

 

ARTICLE VI

AMENDMENT OR TERMINATION

 

6.1          Amendment.  The Committee reserves the right to amend this Plan at any time.  However, to the extent any such amendment would adversely impact the Accrued Benefits of any Participant, the amendment shall require the written consent of such Participant, even if the Participant is no longer employed by the Bank.

 

6.2          Termination. The Committee reserves the right to terminate the Plan at any time.  Upon Plan termination, the Committee shall determine whether (i) payment of benefits shall be made in accordance with the normal distribution schedule set forth under the Plan; or (ii) benefits shall become fully vested as of the Plan termination date (provided that the Participant is employed by the Bank on such date) and shall be paid on the distribution date specified below.  Any acceleration of the payment of such benefits due to Plan termination shall comply with the following, provided that the termination of the Plan is not proximate to a downturn in the financial health of the Bank, in accordance with Treasury Regulations Section 1.409A-3(j)(4)(ix):

 

(a)           all arrangements sponsored by the Bank that would be aggregated with this Plan under Treasury Regulations Section 1.409A-1(c)(2) if any Participant covered by this Plan was also covered by any of those other arrangements are also terminated;

 

(b)           no payments other than payments that would be payable under the terms of the arrangement if the termination had not occurred are made within 12 months of the termination of the arrangement;

 

(c)           all payments are made within 24 months of the termination of the arrangements; and

 

(d)           the Bank does not adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations Section 1.409A-1(c)(2) if the same Participant participated in both arrangements, at any time within three years following the date of termination of the arrangement.

 

ARTICLE VII
  MISCELLANEOUS

 

7.1          No Effect on Employment Rights.  Nothing contained herein shall confer upon any Participant the right to be retained in the service of the Bank nor limit the right of the Bank to discharge or otherwise deal with Participant without regard to the existence of this Plan.

 

7.2          Governing Law.  The Plan is established under, and will be construed according to, the laws of the State of Rhode Island, to the extent that such laws are not preempted by ERISA.

 

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7.3          Severability.  In the event that any provision of this Plan is held to be inoperative or invalid by any court of competent jurisdiction, then: (1) insofar as is reasonable, effect will be given to the intent manifested in such provision, and (2) the validity and enforceability of the remaining provisions will not be affected thereby.

 

7.4          Establishment of Rabbi Trust.  The Bank may, but is not obligated to, establish a rabbi trust into which the Bank may contribute assets which shall be held therein, subject to the claims of the Bank’s creditors in the event of the Bank’s insolvency, until the contributed assets are paid to Participants and their Beneficiaries in such manner and at such times as specified in this Plan.

 

7.5          Tax Withholding.  The Bank may withhold from any benefit payable under this Plan all federal, state, city, income, employment or other taxes as shall be required pursuant to any law or governmental regulation then in effect.

 

7.6          Entire Agreement.  This Plan sets forth the entire understanding of the parties hereto with respect to the transactions contemplated hereby, and any previous understanding or agreement between the parties hereto regarding the subject matter hereof are merged into and superseded by this Plan.

 

IN WITNESS WHEREOF, the Bank has caused this Plan to be executed on the date written below.

 

	
 
    	
COASTWAY   COMMUNITY BANK
    
	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
8/8/2013
    	
 
    	
By:
    	
/s/   Mark E. Crevier
    
	
 
    	
 
    	
 
    	
 
    	
Chairman of the Board of Directors
    

 

9Exhibit 10.1

 

EXECUTION

 

THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Third Amendment”), dated as of September 11,  2013, is entered into by and among SANCHEZ ENERGY CORPORATION, a Delaware corporation (“Sanchez”), SEP HOLDINGS III, LLC, a Delaware limited liability company (“SEP”), SN MARQUIS LLC, a Delaware limited liability company (“SN Marquis”), and SN COTULLA ASSETS, LLC, a Texas limited liability company (“SN Cotulla”; together with Sanchez, SEP and SN Marquis, collectively, the “Borrowers” and each, a “Borrower”), the Lenders party hereto, and ROYAL BANK OF CANADA, as Administrative Agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”).

 

RECITALS

 

A.            The Borrowers, the Lenders and the Administrative Agent previously entered into that certain Amended and Restated Credit Agreement dated as of May 31, 2013, as amended by that certain First Amendment to Amended and Restated Credit Agreement dated as of June 30, 2013 and as amended by that certain waiver letter and amendment dated July 30, 2013 (as amended, restated, supplemented or modified from time to time, the “Credit Agreement”) and certain other Loan Documents (as defined in the Credit Agreement) in connection therewith.

 

B.            The Borrowers have requested that the Administrative Agent and the Required Lenders amend the Credit Agreement to (i) increase the maximum permitted amount of Senior Unsecured Notes to $600,000,000, (ii) amend the definition of “Issuance Related Borrowing Base Adjustment Amount” to provide (1) that the 25% Borrowing Base multiplier is applied to the principal amount of Issuance Related Debt and (2) a temporary amendment of the definition of Issuance Related Borrowing Base Adjustment Amount until the next quarterly Borrowing Base redetermination based on the September 30, 2013 Reserve Report, and (iii) permit the Borrowers, upon the consummation of the proposed acquisition of certain Oil and Gas Properties, to hedge incremental Proved Reserves by treating the Proved Reserves included in such Oil and Gas Properties as if they were included in the June 30, 2013 Reserve Report and the Administrative Agent and the Lenders party hereto are willing to amend the Credit Agreement on the terms and conditions contained in this Third Amendment.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants set forth in this Third Amendment and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the parties hereto, the Borrowers, the Required Lenders and the Administrative Agent agree as follows:

 

1.             Defined Terms.  Unless otherwise defined herein, capitalized terms used herein have the meanings assigned to them in the Credit Agreement.

 

Third Amendment to Sanchez

Amended and Restated Credit Agreement

 

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2.             Specific Amendments to Credit Agreement.  The Credit Agreement is hereby amended as follows:

 

(i)            The following defined terms are hereby added to Section 1.02 of the Credit Agreement in the proper alphabetical order:

 

“’Rock Oil Properties’ means Oil and Gas Properties located in McMullen County, Texas which may be acquired by a Borrower or Subsidiary of a Borrower from Rock Oil Company, LLC.”

 

“’Second Amendment’ means that certain waiver letter and amendment dated July 30, 2013 among the Borrowers, the Lenders and the Administrative Agent.”

 

“’Third Amendment’ means that certain Third Amendment to Amended and Restated Credit Agreement dated the Third Amendment Effective Date among the Borrowers, the Required Lenders and the Administrative Agent.”

 

“’Third Amendment Effective Date’ means September 11,  2013.”

 

(ii)           The defined term “Agreement” in Section 1.02 of the Credit Agreement is hereby deleted and the following is substituted therefor:

 

“’Agreement’ means this Credit Agreement, as amended by the First Amendment, Second Amendment and Third Amendment, and as the same may from time to time be amended, modified, supplemented or restated.”

 

(iii)          The defined term “Issuance Related Borrowing Base Adjustment Amount” in Section 1.02 of the Credit Agreement is hereby deleted and the following is substituted therefor:

 

“’Issuance Related Borrowing Base Adjustment Amount’ means (i) zero, in the case of the issuance of any Senior Unsecured Notes after September 1, 2013 and on or before the earlier of (y) January 1, 2014 and (z) the effective date of the Borrowing Base redetermined in connection with the Scheduled Quarterly Redetermination for the fourth quarter of 2013 and (ii) an amount equal to 25% of the net increase in Issuance Related Debt upon the Borrowers’ or any of their Subsidiaries’ incurrence of Issuance Related Debt whether comprised of a Second Lien Loan in excess of $50,000,000, a Bridge Loan, a Bridge Securities or Takeout Loan or the issuance of Senior Unsecured Notes (other than as described in clause (i)) after giving effect to any repayment of the Second Lien Loan and/or the Bridge Loan out of the proceeds thereof in accordance with Section 9.02(b)(ii), Section 9.02(b)(iv) or Section 9.02(b)(v) if and as applicable.  By way of example with respect to the incurrence of Issuance Related Debt other than as described in clause (i) of the preceding sentence: (a) if

 

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the Borrowing Base was $175 million, the outstanding principal amount of the Second Lien Loan was $50 million, the Bridge Loan had not been funded, no Senior Unsecured Notes had been issued and the Borrowers borrowed an additional $20 million principal from the funding of a Second Lien Loan, the Issuance Related Borrowing Base Adjustment Amount would be $5 million (or 0.25 times the $20 million incremental principal amount of Second Lien Loans in excess of $50 million) and the resulting Borrowing Base would be $170 million (or $175 million minus $5 million); (b) if the Borrowing Base was $175 million, the outstanding principal amount of the Second Lien Loan was $50 million, and the Borrowers borrowed $150 million principal amount of the Bridge Loan, the Issuance Related Borrowing Base Adjustment Amount would be $25 million (or 0.25 times the quantity equal to the excess of the $150 million principal funded over the $50 million of Second Lien Loan repaid) and the resulting Borrowing Base would be $150 million (or $175 million minus $25 million); and (c) if the Borrowing Base was $150 million, the Second Lien Loan had been repaid in full, the outstanding principal amount of the Bridge Loan was $150 million and the Borrowers issued $350 million principal amount of Senior Unsecured Notes, the Issuance Related Borrowing Base Adjustment Amount would be $50,000,000 (or 0.25 times the quantity equal to the excess of the $350 million principal of Senior Secured Notes over the $150 million of Bridge Loan repaid) resulting in a Borrowing Base of $100 million (or $150 million minus $50 million).”

 

(iv)          The defined term “Senior Unsecured Notes in Section 1.02 of the Credit Agreement is hereby deleted and the following is substituted therefor:

 

“‘Senior Unsecured Notes’ means senior unsecured notes in an aggregate principal amount not to exceed $600,000,000 issued or to be issued by Sanchez, and guaranteed by the other Borrowers and their Subsidiaries, in one or more Rule 144A or other private placement offerings.”

 

(v)                                 Section 9.02(b)(v) of the Credit Agreement is hereby amended in its entirety to read as follows:

 

“(v)  Debt of Borrowers and their respective Subsidiaries with respect to the Senior Unsecured Notes; provided that (A) the principal amount outstanding under the Senior Unsecured Notes, shall not, at any time, exceed $600,000,000, (B) the Senior Unsecured Notes are unsecured, (C) proceeds of the Senior Unsecured Notes are used to prepay the Second Lien Loan (if then outstanding) in full or if no Second Lien Loan is then outstanding, to prepay the Bridge Loan in full and to repay other Debt of the Borrowers and to finance general corporate purposes including financing transaction costs, and (D) the Borrowing Base shall be adjusted as of the date of the issuance of the Senior Unsecured Notes by the Issuance Related Borrowing Base Adjustment Amount, if any, and if the

 

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total Credit Exposures exceeds the Borrowing Base as adjusted, the Borrowers shall comply with Section 3.04(c)(i);”

 

(vi)                              Section 9.17 of the Credit Agreement is hereby amended by deleting all of clause (b) preceding clause (b)(ii) in its entirety and substituting therefor the following:

 

“(b) Swap Agreements (other than floor or put options) in respect of commodities with an Approved Counterparty that are limited to notional quantities at any time no more than (i) during the first two years following such time the greater of (x) ninety percent (90%) of the value of proved developed producing reserves included in the then most recently delivered Reserve Report (plus, if the Borrowers (or one of their Subsidiaries) acquire the Rock Oil Properties, for purposes of determinations of compliance with this Section 9.17(b) based on the Reserve Report preceding the acquisition of the Rock Oil Properties, ninety percent (90%) of the value of proved developed producing reserves included in the reserve report for the Rock Oil Properties, as calculated by the Borrowers’ chief petroleum engineer) and (y) fifty percent (50%) of Borrowers’ total Proved Reserves (plus, if the Borrowers (or one of their Subsidiaries) acquire the Rock Oil Properties, for purposes of determinations based on the Reserve Report preceding the acquisition of the Rock Oil Properties, fifty percent (50%) of the value of total Proved Reserves included in the reserve report for the Rock Oil Properties, as calculated by the Borrowers’ chief petroleum engineer) (such amounts computed on a semi-annual basis and calculated on a product-by-product basis),”

 

3.             Borrowers’ Ratification.  Each of the Borrowers hereby ratifies all of its Obligations under the Credit Agreement and each of the Loan Documents to which it is a party, and agrees and acknowledges that the Credit Agreement and each of the Loan Documents to which it is a party are and shall continue to be in full force and effect. Nothing in this Third Amendment extinguishes, novates or releases any right, claim, Lien, security interest or entitlement of any of the Lenders, the Issuing Bank or the Administrative Agent created by or contained in any of such documents nor is any Borrower released from any covenant, warranty or obligation created by or contained herein or therein.

 

4.             Guarantors’ Ratification.  Each Guarantor by its execution in the space provided below under “ACKNOWLEDGED for purposes of Section 4” hereby ratifies, confirms, acknowledges and agrees that its obligations under the Guaranty are in full force and effect and that such Guarantor continues to unconditionally and irrevocably guarantee the full and punctual payment, when due, whether at stated maturity or earlier by acceleration or otherwise, of the Obligations, and its execution and delivery of this Third Amendment does not indicate or establish an approval or consent requirement by any Guarantor under the Guaranty in connection with the execution and delivery of amendments to the Credit Agreement, the Notes or any of the other Loan Documents (other than the Guaranty or any other Loan Document to which a Guarantor is a party).

 

4

 

5.             Conditions to Effectiveness of Third Amendment.  This Third Amendment shall be effective upon the satisfaction, in the Administrative Agent’s sole discretion, of the following conditions precedent:

 

(i)            The Administrative Agent shall have executed, and shall have received from each of the Borrowers and the Required Lenders duly executed signature pages to, this Third Amendment, and shall have received a duly executed acknowledgement of Section 4 of this Third Amendment from each Guarantor;

 

(ii)           the Administrative Agent shall have received such other documents as the Administrative Agent or its counsel may reasonably request; and

 

(iii)          the Administrative Agent and the Lenders shall have received all fees and other amounts due and payable, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder.

 

6.             No Implied Amendment, Waiver or Consent. This Third Amendment shall not constitute an amendment or waiver of any provision not expressly referred to herein and shall not be construed as a consent to any action on the part of the Borrowers that would require a waiver or consent of the Lenders or Required Lenders, as applicable, or an amendment or modification to any term of the Loan Documents except as expressly stated herein.

 

7.             Miscellaneous.  This Third Amendment is a Loan Document.  Except as affected by this Third Amendment, the Loan Documents are unchanged and continue in full force and effect.  However, in the event of any inconsistency between the terms of the Credit Agreement, as amended by this Third Amendment, and any other Loan Document, the terms of the Credit Agreement will control and the other document will be deemed to be amended to conform to the terms of the Credit Agreement.  All references to the Credit Agreement will refer to the Credit Agreement as amended by this Third Amendment and any other amendments properly executed among the parties.  Borrowers agree that all Loan Documents to which they are a party (whether as an original signatory or by assumption of the Obligations) remain in full force and effect and continue to evidence their respective legal, valid and binding obligations enforceable in accordance with their terms (as the same are affected by this Third Amendment or are amended in connection with this Third Amendment).  AS A MATERIAL INDUCEMENT TO THE ADMINISTRATIVE AGENT AND LENDERS PARTY HERETO TO ENTER INTO THIS THIRD AMENDMENT, BORROWERS RELEASE THE ADMINISTRATIVE AGENT, THE ISSUING BANK, THE LENDERS AND THEIR RESPECTIVE PREDECESSORS, SUCCESSORS, ASSIGNS, DIRECTORS, OFFICERS, EMPLOYEES, TRUSTEES, AGENTS AND ATTORNEYS FROM ANY LIABILITY FOR ACTIONS OR FAILURES TO ACT IN CONNECTION WITH THE LOAN DOCUMENTS PRIOR TO THE THIRD AMENDMENT EFFECTIVE DATE.  NO COURSE OF DEALING BETWEEN BORROWERS OR ANY OTHER PERSON, ON THE ONE HAND, AND THE ADMINISTRATIVE AGENT, ISSUING BANK AND THE LENDERS, ON THE OTHER, WILL BE DEEMED TO HAVE ALTERED OR AMENDED THE CREDIT AGREEMENT OR AFFECTED EITHER BORROWERS’,

 

5

 

THE ADMINISTRATIVE AGENT’S, THE ISSUING BANK’S OR THE LENDERS’ RIGHT TO ENFORCE THE CREDIT AGREEMENT AS WRITTEN.  This Third Amendment will be binding upon and inure to the benefit of each of the undersigned and their respective successors and permitted assigns.

 

8.             Form.  Each agreement, document, instrument or other writing to be furnished to the Administrative Agent and/or the Lenders under any provision of this instrument must be in form and substance satisfactory to the Administrative Agent and its counsel.

 

9.             Headings. The headings and captions used in this Third Amendment are for convenience only and will not be deemed to limit, amplify or modify the terms of this Third Amendment, the Credit Agreement, or the other Loan Documents.

 

10.          Interpretation. Wherever possible each provision of this Third Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Third Amendment shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Third Amendment.

 

11.          Multiple Counterparts.  This Third Amendment may be separately executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same agreement.  This Third Amendment shall become effective when it shall have been executed by Administrative Agent and when Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the Loan Parties and Required Lenders.  This Third Amendment may be transmitted and/or signed by facsimile, telecopy or electronic mail.  The effectiveness of any such documents and signatures shall, subject to applicable law, have the same force and effect as manually-signed originals and shall be binding on all Loan Parties, all Lenders, the Administrative Agent and the Issuing Bank.  The Administrative Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature.

 

12.          Governing Law.  THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CHOICE-OF-LAW PROVISIONS THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION.

 

[Signature Pages Follow]

 

6

 

IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be executed by their respective officers thereunto duly authorized as of the date first above written.

 

	
 
    	
BORROWERS:
    
	
 
    	
 
    
	
 
    	
SANCHEZ   ENERGY CORPORATION,
    
	
 
    	
a   Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Kirsten A. Hink
    
	
 
    	
Name:
    	
Kirsten   A. Hink
    
	
 
    	
Title:
    	
Vice   President and Principal
    
	
 
    	
 
    	
Accounting   Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SEP   HOLDINGS III, LLC,
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Kirsten A. Hink
    
	
 
    	
Name:
    	
Kirsten   A. Hink
    
	
 
    	
Title:
    	
Vice   President and Principal
    
	
 
    	
 
    	
Accounting   Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SN   MARQUIS LLC,
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Kirsten A. Hink
    
	
 
    	
Name:
    	
Kirsten   A. Hink
    
	
 
    	
Title:
    	
Vice   President and Principal
    
	
 
    	
 
    	
Accounting   Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SN   COTULLA ASSETS, LLC,
    
	
 
    	
a   Texas limited liability company
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Kirsten A. Hink
    
	
 
    	
Name:
    	
Kirsten   A. Hink
    
	
 
    	
Title:
    	
Vice   President and Principal
    
	
 
    	
 
    	
Accounting   Officer
    

 

Signature Page 1  to Third Amendment

 

 

	
 
    	
ACKNOWLEDGED   for the purposes stated in Section 4:
    
	
 
    	
 
    
	
 
    	
GUARANTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SN   OPERATING, LLC,
    
	
 
    	
a   Texas limited liability company
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Kirsten A. Hink
    
	
 
    	
Name:
    	
Kirsten   A. Hink
    
	
 
    	
Title:
    	
Vice   President and Principal
    
	
 
    	
 
    	
Accounting   Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SN   TMS, LLC,
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Kirsten A. Hink
    
	
 
    	
Name:
    	
Kirsten   A. Hink
    
	
 
    	
Title:
    	
Vice   President and Principal
    
	
 
    	
 
    	
Accounting   Officer
    

 

Signature Page 2  to Third Amendment

 

 

	
 
    	
ADMINISTRATIVE AGENT:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ROYAL   BANK OF CANADA, as
    
	
 
    	
Administrative   Agent
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Ann Hurley
    
	
 
    	
Name:
    	
Ann   Hurley
    
	
 
    	
Title:
    	
Manager,   Agency
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LENDERS:
    
	
 
    	
 
    
	
 
    	
ISSUING BANK AND LENDER:
    
	
 
    	
 
    
	
 
    	
ROYAL BANK OF CANADA
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark Lumpkin, Jr.
    
	
 
    	
Name:
    	
Mark   Lumpkin, Jr.
    
	
 
    	
Title:
    	
Authorized   Signatory
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CAPITAL   ONE, NATIONAL ASSOCIATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Michael Higgins
    
	
 
    	
Name:
    	
Michael   Higgins
    
	
 
    	
Title:
    	
Vice   President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Doreen Barr
    
	
 
    	
Name:
    	
Doreen   Barr
    
	
 
    	
Title:
    	
Authorized   Signatory
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Michael Spaight
    
	
 
    	
Name:
    	
Michael   Spaight
    
	
 
    	
Title:
    	
Authorized   Signatory
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
COMPASS   BANK
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Dorothy Marchand
    
	
 
    	
Name:
    	
Dorothy   Marchand
    
	
 
    	
Title:
    	
Executive   Vice President
    

 

Signature Page 3  to Third Amendment

 

 

	
 
    	
SUNTRUST BANK
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Yann Pirio
    
	
 
    	
Name:
    	
Yann   Pirio
    
	
 
    	
Title:
    	
Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ING   CAPITAL LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles Hall
    
	
 
    	
Name:
    	
Charles   Hall
    
	
 
    	
Title:
    	
Managing   Director
    
	
 
    	
 
    
	
 
    	
BRANCH BANKING AND TRUST COMPANY
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Ryan K. Michael
    
	
 
    	
Name:
    	
Ryan   K. Michael
    
	
 
    	
Title:
    	
Senior   Vice President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
IBERIABANK
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   W. Bryan Chapman
    
	
 
    	
Name:
    	
W.   Bryan Chapman
    
	
 
    	
Title:
    	
Executive   Vice President
    

 

Signature Page 4  to Third Amendment

 

 

	
 
    	
UNION BANK, N.A.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Haylee Dallas
    
	
 
    	
Name:
    	
Haylee   Dallas
    
	
 
    	
Title:
    	
Vice   President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SOCIÉTÉ   GENÉRALÉ
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Graeme Bullen
    
	
 
    	
Name:
    	
Graeme   Bullen
    
	
 
    	
Title:
    	
Managing   Director
    

 

Signature Page 5  to Third Amendment

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