Document:

8-K Exhibit 103 Class A Preferred Purchase Agreement

		

			Exhibit 10.2

		

		

			 

		

		
			 
		

		
			CLASS A PREFERRED UNIT
		

		
			PURCHASE AGREEMENT
		

		
			among
		

		
			SANCHEZ PRODUCTION PARTNERS LP
		

		
			and
		

		
			THE PURCHASERS PARTY HERETO
		

		
			 
		

		

		

		 

		

			 

		

		

			 

		

 

		

			 

		

		
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		

		

		 

		

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			EXHIBIT A — Form of Opinion of Andrews Kurth LLP
		

		
			 
		

		

		

		 

		

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		CLASS A PREFERRED UNIT PURCHASE AGREEMENT
		

		
			This CLASS A PREFERRED UNIT PURCHASE AGREEMENT, dated as of March 31, 2015 (this “Agreement”), is entered into by and among SANCHEZ PRODUCTION PARTNERS LP, a Delaware limited partnership (“Sanchez”), and the purchasers set forth in Schedule A hereto (the “Purchasers”).
		

		
			WHEREAS, Sanchez desires to issue and sell to the Purchasers, and the Purchasers desire to purchase from Sanchez, certain of Sanchez’s Class A Preferred Units (as defined below), in accordance with the provisions of this Agreement; and
		

		
			WHEREAS, Sanchez has agreed to provide the Purchasers with certain registration rights with respect to the Class A Preferred Units and Common Units underlying the Class A Preferred Units acquired pursuant hereto.
		

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

			
	
			
				Article I
			
DEFINITIONS

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

		
			“Acquisition Agreement” means that certain Purchase and Sale Agreement, dated as of March 31, 2015 between the Partnership, SEP Holdings IV, LLC and SEP Holdings III, LLC.
		

		
			“Affiliate”  means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question.  As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.  For the avoidance of doubt, for purposes of this Agreement, the Partnership Entities, on the one hand, and any Purchaser, on the other, shall not be considered Affiliates.
		

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

		
			“Basic Documents” means, collectively, this Agreement, the Registration Rights Agreement, the Partnership Agreement and any and all other agreements or instruments executed and delivered to the Purchasers by the Partnership Entities hereunder or thereunder.
		

		
			“Business Day” means any day other than a Saturday, Sunday, any federal legal holiday or day on which banking institutions in the State of New York or State of Texas are authorized or required by Law or other governmental action to close.
		

		
			“Class A Preferred Units” means Sanchez’s Class A Preferred Units.
		

		

		

		 

		

			

		

		

			 

		

		

			 

		

 

		

			 

		

		“Closing” has the meaning specified in Section 2.02.
		

		
			“Closing Date” has the meaning specified in Section 2.02.
		

		
			“Code” has the meaning specified in Section 3.10.
		

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

		
			“Common Units” means common units representing limited partner interests in Sanchez.
		

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

		
			“Conversion Units” means the Common Units issuable upon conversion of the Purchased Units.
		

		
			“Delaware LP Act” means the Delaware Revised Uniform Limited Partnership Act.
		

		
			“Environmental Law” means any Law applicable to the Partnership Entities or the operation of their business in any way relating to the protection of human health and safety (to the extent such health and safety relate to exposure to Hazardous Substances), the environment, natural resources, including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. § 5101 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Oil Pollution Act of 1990 (33 U.S.C. § 2701 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.), the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), .
		

		
			“Environmental Permits” means all approvals, authorizations, consents, licenses, permits, variances, waivers, exemptions, registrations of a Governmental Authority required under any Environmental Laws for the operation of the business of the Partnership Entities.
		

		
			 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.
		

		
			“GAAP” means generally accepted accounting principles in the United States of America as of the date hereof; provided that for the Sanchez Financial Statements prepared as of a certain date, GAAP referenced therein shall be GAAP as of the date of such Sanchez Financial Statements.
		

		
			“General Partner” means Sanchez Production Partners GP LLC, a Delaware limited liability company and the general partner of Sanchez.
		

		
			“Governmental Authority” means, with respect to a particular Person, any country, state, county, city and political subdivision in which such Person or such Person’s Property is located or which exercises valid jurisdiction over any such Person or such Person’s Property, and any 
		

		 

		

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		court, agency, department, commission, board, bureau or instrumentality of any of them and any monetary authority which exercises valid jurisdiction over any such Person or such Person’s Property.  Unless otherwise specified, all references to Governmental Authority herein with respect to Sanchez means a Governmental Authority having jurisdiction over Sanchez, its Subsidiaries or any of their respective Properties.
		

		
			“Hazardous Substances” means (a) any “hazardous substance” as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (b) any “hazardous waste” as defined in the Resource Conservation and Recovery Act, as amended, (c) any petroleum, petroleum products, natural gas,  oil and gas waste, and oil and any components or derivatives thereof, (d) any polychlorinated biphenyl and (e) any pollutant, contaminant or hazardous or toxic, material, waste or substance regulated under any other Environmental Law.
		

		
			“Incentive Distribution Rights” has the meaning specified in Section 3.02(a).
		

		
			“Indemnified Party” has the meaning specified in Section 5.03.
		

		
			“Indemnifying Party” has the meaning specified in Section 5.03.
		

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

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

		
			“Material Adverse Effect”  means any change, event or effect that, individually or together with any other changes, events or effects, has a material adverse effect on (i) the condition (financial or otherwise), business, assets or results of operations of the Partnership Entities, taken as a whole, (ii)  the limited partners of Sanchez resulting from any event which subjects them to any material liability or disability, or (iii) the ability of the Partnership Entities to perform their obligations under the Basic Documents; provided,  however, that a Material Adverse Effect shall not include any material and adverse effect on the foregoing to the extent such material and adverse effect results from, arises out of, or relates to (x) a general deterioration in the economy or changes in the general state of the industry in which Sanchez operates, except to the extent that Sanchez, taken as a whole, is adversely affected in a disproportionate manner as compared to other industry participants, (y) the outbreak or escalation of hostilities involving the United States, the declaration by the United States of a national emergency or war or the occurrence of any other calamity or crisis, including acts of terrorism, or (z) any change in accounting requirements or principles imposed upon any Partnership Entity or their respective businesses or any change in applicable Law, or the interpretation thereof, other than a change that would result in Sanchez being treated as a corporation for federal Tax purposes.
		

		
			“NYSE MKT” means the NYSE MKT LLC.
		

		

		

		 

		

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		“Partnership Agreement” means the Agreement of Limited Partnership of Sanchez, dated as of March 6, 2015, as amended, restated or otherwise modified from time to time in accordance with the terms thereof.
		

		
			“Partnership Entities” means Sanchez and its Subsidiaries.
		

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

		
			“Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization, government or any agency, instrumentality or political subdivision thereof or any other form of entity.
		

		
			“Placement Agent” means SunTrust Robinson Humphrey, Inc., which Sanchez has engaged as its exclusive placement agent for the offering of the Class A Preferred Units on a “best efforts” basis.
		

		
			“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible (including intellectual property rights).
		

		
			“Purchase Price” means an amount equal to $1.60 per Class A Preferred Unit, multiplied by the number of Purchased Units to be purchased by the Purchasers on the Closing Date.
		

		
			 “Purchased Units” has the meaning specified in Section 2.01.
		

		
			“Purchaser Related Parties” has the meaning specified in Section 5.01.
		

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

		
			“Registration Rights Agreement” means the Registration Rights Agreement, dated of even date herewith, between Sanchez and the Purchasers.
		

		
			“Representatives” means, with respect to a specified Person, the investors, officers, directors, managers, employees, agents, advisors, counsel, accountants, investment bankers and other representatives of such Person.
		

		
			“Rights-of-Way” has the meaning specified in Section 3.19.
		

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

		
			“Sanchez Financial Statements” has the meaning specified in Section 3.03.
		

		
			“Sanchez Related Parties” has the meaning specified in Section 5.02.
		

		
			“Sanchez SEC Documents” has the meaning specified in Section 3.03.
		

		

		

		 

		

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

		
			“Short Sales” means, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not against the box, and forward sale contracts, options, puts, calls, short sales, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements, and sales and other transactions through non-U.S. broker dealers or foreign regulated brokers.
		

		
			“Subsidiary” means, as to any Person, any corporation or other entity of which:  (i) such Person or a Subsidiary of such Person is a general partner or manager; (ii) at least a majority of the outstanding equity interest having by the terms thereof ordinary voting power to elect a majority of the board of directors or similar governing body of such corporation or other entity (irrespective of whether or not at the time any equity interest of any other class or classes of such corporation or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more of its Subsidiaries; or (iii) any corporation or other entity as to which such Person consolidates for accounting purposes.
		

		
			“Tax Return” has the meaning specified in Section 3.16(b).
		

		
			“Taxes” has the meaning specified in Section 3.16(b).
		

		
			“Third Party Claim” has the meaning specified in Section 5.03(b).
		

		
			Section 1.02     Accounting Procedures and Interpretation.    Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all Sanchez Financial Statements and certificates and reports as to financial matters required to be furnished to the Purchasers hereunder shall be prepared, in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q promulgated by the Commission) and in compliance as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto.
		

			
	
			
				Article II
			
AGREEMENT TO SELL AND PURCHASE

		
			Section 2.01    Purchase.      On the Closing Date, subject to the terms and conditions hereof, each Purchaser hereby agrees to purchase from Sanchez, and Sanchez hereby agrees to issue and sell to each Purchaser, the number of Class A Preferred Units set forth opposite each Purchaser’s name on Schedule A for the Purchase Price per Class A Preferred Unit (collectively, the “Purchased Units”).
		

		
			Section 2.02     Closing.      Subject to the terms and conditions hereof, the consummation of the purchase and sale of the Purchased Units hereunder (the “Closing”) shall take place on the date of this Agreement (the “Closing Date”) at the offices of Andrews Kurth LLP, 600 Travis, Suite 4200, Houston, Texas 77002.  
		

		 

		

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			Section 2.03     Deliveries at the Closing.
		

			
	
			
				 (a)
			Deliveries of Sanchez at the Closing.  At the Closing, Sanchez shall deliver or cause to be delivered (unless waived by the Purchasers) to the Purchasers:

			
	
			
				 (i)
			An opinion from Andrews Kurth LLP, counsel for the Partnership Entities, in substantially the form attached hereto as Exhibit A, which shall be addressed to the Purchasers and the Placement Agent and dated the date of the Closing;

			
	
			
				 (ii)
			Amendment No. 1 to the Partnership Agreement, and the Partnership Agreement, as so amended, shall be in full force and effect;

			
	
			
				 (iii)
			A “Supplemental Listing Application” approving the Conversion Units for listing by the NYSE MKT;

			
	
			
				 (iv)
			Evidence of issuance of the Purchased Units credited to book-entry accounts maintained by the transfer agent, bearing a restrictive notation meeting the requirements of the Partnership Agreement, free and clear of any Liens, other than transfer restrictions under the Partnership Agreement or the Delaware LP Act and applicable federal and state securities laws;

			
	
			
				 (v)
			A certificate of the Secretary or Assistant Secretary of the General Partner, on behalf of Sanchez, certifying as to and attaching (1) the Partnership Agreement, as amended, (2) board resolutions authorizing the execution and delivery of the Basic Documents and the consummation of the transactions contemplated thereby, including the issuance of the Purchased Units, and (3) the incumbency of the officers authorized to execute the Basic Documents on behalf of Sanchez, setting forth the name and title and bearing the signatures of such officers;

			
	
			
				 (vi)
			A cross-receipt executed by Sanchez and delivered to the Purchasers certifying that it has received from the Purchasers an amount in cash equal to the Purchase Price; and

			
	
			
				 (vii)
			The Registration Rights Agreement, which shall have been duly executed by Sanchez.

			
	
			
				 (b)
			Deliveries of Each Purchaser at the Closing.  At the Closing, each Purchaser shall deliver or cause to be delivered (unless waived by Sanchez) to Sanchez:

			
	
			
				 (i)
			The Registration Rights Agreement, which shall have been duly executed by such Purchaser;

			
	
			
				 (ii)
			A cross-receipt executed by such Purchaser and delivered to Sanchez certifying that it has received from Sanchez its Purchased Units; and

			
	
			
				 (iii)
			Payment of such Purchaser’s Purchase Price payable by wire transfer of immediately available funds to an account designated in advance of the Closing Date by Sanchez.

		

		

		 

		

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		Section 2.04     Independent Nature of Purchasers’ Obligations and Rights.     The obligations of each Purchaser under any Basic Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Basic Document.  The failure or waiver of performance under any Basic Document of any Purchaser by Sanchez does not excuse performance by any other Purchaser and the waiver of performance of Sanchez by any Purchaser does not excuse performance by Sanchez with respect to each other Purchaser.  Nothing contained herein or in any other Basic Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Basic Documents.  Each Purchaser shall be entitled to independently protect and enforce its rights, including the rights arising out of this Agreement or out of the other Basic Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.
		

		
			Section 2.05     Further Assurances.     From time to time after the date hereof, without further consideration, Sanchez and each Purchaser shall use their commercially reasonable efforts to take, or cause to be taken, all actions necessary or appropriate to consummate the transactions contemplated by this Agreement.
		

			
	
			
				Article III
			
REPRESENTATIONS AND WARRANTIES AND
COVENANTS RELATED TO SANCHEZ

		
			As of the Closing Date, Sanchez represents and warrants to and covenants with the Purchasers and the Placement Agent as follows:
		

		
			Section 3.01     Existence.
		

			
	
			
				 (a)
			Each of the Partnership Entities has been duly incorporated or formed, as the case may be, and is validly existing as a limited liability company, limited partnership or corporation, as the case may be, in good standing under the Laws of its jurisdiction of incorporation or formation, as the case may be, and has the full limited liability company, limited partnership or corporate, as the case may be, power and authority to own or lease its Properties and assets and to conduct the businesses in all material respects which it is engaged, and is duly registered or qualified as a foreign limited liability company, limited partnership or corporation, as the case may be, for the transaction of business under the laws of each jurisdiction in which the character of the business conducted by it or the nature or location of the properties owned or leased by it makes such registration or qualification necessary, except where the failure to so register or qualify would not reasonably be expected to have a Material Adverse Effect.

			
	
			
				 (b)
			None of the Partnership Entities is in default in the performance, observance or fulfillment of any provision of, in the case of Sanchez, the Partnership Agreement or its certificate of limited partnership, in the case of the General Partner, any provision of its certification of formation, limited liability company agreement or other similar organizational documents, or, in the case of any Subsidiary of Sanchez, its respective certificate of 
		

		 

		

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			incorporation, certification of formation, certificate of limited partnership, bylaws, limited liability company agreement, partnership agreement or other similar organizational documents.  

			
	
			
				 (c)
			The Partnership Agreement has been, and in the case of Amendment No. 1 to the Partnership Agreement at the Closing will be, duly authorized, executed and delivered by the General Partner and is (or, in the case of Amendment No. 1 to the Partnership Agreement, as of the Closing Date will be) a valid and legally binding agreement of the General Partner, enforceable against the General Partner in accordance with its terms; provided that, with respect to the Partnership Agreement, the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and provided further, that the indemnity, contribution and exoneration provisions contained in the Partnership Agreement may be limited by applicable laws and public policy.

			
	
			
				 Section 3.02
			   Capitalization and Valid Issuance of Purchased Units.

			
	
			
				 (a)
			As of March 30, 2015, the issued and outstanding limited partner interests of Sanchez consist of 30,389,941 Common Units and the incentive distribution rights (as defined in the Partnership Agreement, the “Incentive Distribution Rights”).  All outstanding Common Units, Incentive Distribution Rights, Class A 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 nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act).

			
	
			
				 (b)
			The General Partner is the sole general partner of Sanchez with a non-economic general partner interest in Sanchez; such general partner interest has been duly authorized and validly issued in accordance with the Partnership Agreement, and the General Partner owns such interest free and clear of all Liens (except for (A) restrictions on transferability contained in the Partnership Agreement or as disclosed in the Sanchez SEC Documents (B) Liens created, arising under or securing any credit facility to which Sanchez is a party and (C) Liens arising under the Partnership Agreement or the Delaware LP Act).

			
	
			
				 (c)
			The Purchased Units being purchased by the Purchasers hereunder and the limited partner interests represented thereby will be duly authorized by Sanchez pursuant to the Partnership Agreement (as amended by Amendment No. 1 to the Partnership Agreement) prior to the Closing and, when issued and delivered to the Purchasers against payment therefor in accordance with the terms of this Agreement, will be validly issued, fully paid (to the extent required by the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act) and will be free of any and all Liens and restrictions on transfer, other than (i) restrictions on transfer under the Partnership Agreement (as amended by Amendment No. 1 to the Partnership Agreement) or this Agreement and under applicable state and federal securities laws, (ii) such Liens as are created by the Purchasers and (iii) such Liens as arise under the Partnership Agreement (as amended by Amendment No. 1 to the Partnership Agreement) or the Delaware LP Act. Except as disclosed in the Sanchez SEC Documents, there are no persons entitled to 
		

		 

		

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			statutory, preemptive or other similar contractual rights to subscribe for the Purchased Units; and, except for the Purchased Units to be issued pursuant to this Agreement,  as disclosed in the Sanchez SEC Documents or pursuant to the Acquisition Agreement, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for, partnership securities or ownership interests in Sanchez are outstanding.

			
	
			
				 (d)
			Upon issuance in accordance with this Agreement and the terms of the Class A Preferred Units, the Conversion Units will be duly authorized, validly issued, fully paid (to the extent required by the Partnership Agreement) and nonassessable (except as such nonassessability may be affected by matters described in Sections 17-303, 17-607 and 17-804 of the Delaware LP Act) and will be free of any and all Liens and restrictions on transfer, other than (i) restrictions on transfer under the  Basic Documents and under applicable state and federal securities laws, (ii) such Liens as are created by the Purchasers and (iii) such Liens as arise under the Partnership Agreement (as amended by Amendment No. 1 to the Partnership Agreement) or the Delaware LP Act. 

		
			Section 3.03     Sanchez SEC Documents; Sanchez Financial Statements.     Except as disclosed in the Sanchez SEC Documents, since January 1, 2014,  Sanchez’s forms, registration statements, reports, schedules and statements required to be filed by it under the Exchange Act or the Securities Act (all such documents filed prior to the date hereof, collectively the  “Sanchez SEC Documents”) have been filed with the Commission on a timely basis.  The Sanchez SEC Documents, including any audited or unaudited financial statements and any notes thereto or schedules included therein (the “Sanchez Financial Statements”), at the time filed (or in the case of registration statements, solely on the dates of effectiveness) (except to the extent corrected by a subsequent Sanchez SEC Document) (a) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made in the case of any prospectus, not misleading, (b) complied as to form in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, (c) complied as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto, (d) in the case of the Sanchez Financial Statements, were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10‐Q of the Commission), and (e) in the case of the Sanchez Financial Statements, fairly present (subject in the case of unaudited statements to normal and recurring and year-end audit adjustments) in all material respects the consolidated financial position of Sanchez and its consolidated subsidiaries as of the dates thereof and the consolidated results of its operations and cash flows of Sanchez and its Subsidiaries for the periods then ended.  The independent auditor of Sanchez as of the date of the most recent balance sheet of Sanchez is an independent registered public accounting firm with respect to Sanchez and has not resigned or been dismissed as independent registered public accountants of Sanchez as a result of or in connection with any disagreement with Sanchez on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures.  Since the date of the most recent balance sheet of Sanchez reviewed or audited by such auditor, and the audit committee of the board of directors of the General Partner until the Closing Date, (i) the interactive data in eXtensible Business Reporting Language included or incorporated by 
		

		 

		

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		reference in the Sanchez SEC Documents fairly presents the information called for in all material respects and has been prepared in accordance with the Securities and Exchange Commission’s rules and guidelines applicable thereto and (ii) there are no material weaknesses or significant deficiencies in Sanchez’s internal controls.
		

		
			Section 3.04     No Material Adverse Change.   Except as expressly set forth in or contemplated by the Sanchez SEC Documents, since December 31, 2014 through the Closing Date: (a) there has not occurred any adverse change, or any development involving or which may reasonably be expected to involve, individually or in the aggregate, an adverse change, in the condition, financial or otherwise, general affairs, business, operations, prospects, properties, management, partners’ capital, stockholders’ equity, net worth or results of operations of the Partnership Entities, taken as a whole, in each case except as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect; and (b) there is not, to the knowledge of the Partnership Entities, any default or event which, with notice or lapse of time or both, would constitute a default under the any agreement of Sanchez governing material indebtedness for borrowed money, except such events of default and other events as to which requisite waivers or consents have been obtained or which are no longer continuing.
		

		
			 
		

		
			Section 3.05     No Registration Required.   Assuming the accuracy of the representations and warranties of each Purchaser contained in Article IV, the issuance and sale of the Purchased Units pursuant to this Agreement is exempt from registration requirements of the Securities Act, and neither Sanchez nor, to the knowledge of Sanchez, any authorized Representative acting on its behalf has taken or will take any action hereafter that would cause the loss of such exemption
		

		
			Section 3.06     Litigation.      Except as set forth in the Sanchez SEC Documents, there are no legal or governmental proceedings pending to which any Partnership Entity is a party or to which any Property or asset of any Partnership Entity is subject that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or which challenges the validity of any of the Basic Documents or the right of any Partnership Entity to enter into any of the Basic Documents or to consummate the transactions contemplated hereby and thereby and, to the knowledge of Sanchez, no such proceedings are threatened by Governmental Authorities or others.
		

		
			Section 3.07     No Conflicts.     None of (i) the offering, issuance and sale by Sanchez of the Purchased Units and the application of the proceeds therefrom, (ii) the execution, delivery and performance of the Basic Documents, or (iii) the consummation of the transactions contemplated thereby (1) constitutes or will constitute a violation of the Partnership Agreement, the GP LLC Agreement or the other organizational documents of any of Sanchez, the General Partner or the Subsidiaries, (2)  constitutes or will constitute a breach or violation of, or a default (or an event which, with notice or lapse of time or both, would constitute such a default) under, any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which any of Sanchez, the General Partner or the Subsidiaries is a party or by which any of them or any of their respective properties may be bound, (3) violates or will violate any statute, Law, Permit or regulation or any order, judgment, decree or injunction of any court or Governmental Authority or body having jurisdiction over of Sanchez, the General Partner or the Subsidiaries or any of their properties in a proceeding to which any of them or their property is or was a party, or 
		

		 

		

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		(4) results or will result in the creation or imposition of any Lien upon any property or assets of any of Sanchez, the General Partner or the Subsidiaries, which conflicts, breaches, violations, defaults or liens, in the case of clauses (2), (3) or (4), would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
		

		
			Section 3.08     Authority; Enforceability.    Sanchez has all requisite power and authority to issue, sell and deliver the Purchased Units, in accordance with and upon the terms and conditions set forth in this Agreement and the Partnership Agreement. All partnership or limited liability company action, as the case may be, required to be taken by the General Partner and Sanchez for the authorization, issuance, sale and delivery of the Purchased Units, the execution and delivery of the Basic Documents and the consummation of the transactions contemplated thereby shall have been validly taken. No approval from the holders of outstanding Common Units is required under the Partnership Agreement or the rules of the NYSE MKT in connection with Sanchez’s issuance and sale of the Purchased Units to the Purchasers.  Each of the Basic Documents has been duly and validly authorized and has been or, with respect to the Basic Documents to be delivered at the Closing, will be, validly executed and delivered by Sanchez and constitutes, or will constitute, the legal, valid and binding obligations of Sanchez, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights and by general principles of equity.
		

		
			Section 3.09     Approvals.  Except as required by the Commission in connection with Sanchez’s obligations under the Registration Rights Agreement or has already been obtained, no authorization, consent, approval, waiver, license, qualification or written exemption from, nor any filing, declaration, qualification or registration with, any Governmental Authority or any other Person is required in connection with the execution, delivery or performance by Sanchez of any of the Basic Documents or Sanchez’s issuance and sale of the Purchased Units, except (i) as may be required under the state securities or “Blue Sky” Laws, (ii) for the filing of a supplemental listing application with the NYSE MKT seeking approval of the Conversion Units for listing by the NYSE MKT or (iii) where the failure to receive such authorization, consent, approval, waiver, license, qualification or written exemption or to make such filing, declaration, qualification or registration would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
		

		
			Section 3.10     MLP Status.    Sanchez has, for each taxable year beginning after December 31, 2007, during which Sanchez was in existence, met the gross income requirements of Section 7704(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”).  Sanchez expects to meet the gross income requirements of Section 7704(c)(2) of the Code for its taxable year ending December 31, 2015.
		

		
			Section 3.11     Investment Company Status.    None of the Partnership Entities is now, and immediately after the sale of the Purchased Units hereunder and the application of the net proceeds from such sale none of the Partnership Entities will be, an “investment company” or a company controlled by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
		

		

		

		 

		

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		Section 3.12     Certain Fees.   Except for fees to be paid by Sanchez to the Placement Agent, no fees or commissions are or will be payable by Sanchez to brokers, finders or investment bankers with respect to the sale of any of the Purchased Units or the consummation of the transactions contemplated by this Agreement. Sanchez agrees that it will indemnify and hold harmless the Purchasers from and against any and all claims, demands, or liabilities for broker’s, finder’s, placement, or other similar fees or commissions incurred by Sanchez or alleged to have been incurred by Sanchez in connection with the sale of the Purchased Units or the consummation of the transactions contemplated by this Agreement.
		

		
			Section 3.13     Insurance.   The Partnership Entities maintain or are entitled to the benefits of insurance from reputable insurers covering their properties, operations, personnel and businesses against such losses and risks as are reasonably adequate to protect them and their businesses in a commercially reasonable manner. None of the Partnership Entities (i) has received notice from any insurer or agent of such insurer that substantial capital improvements or other expenditures will have to be made in order to continue such insurance or (ii) has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect, except as described in the Sanchez SEC Documents.
		

		
			Section 3.14     Books and Records; Sarbanes-Oxley Compliance.
		

			
	
			
				 (a)
			The Partnership Entities maintain systems of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of the Partnership Entities’ financial statements in conformity with GAAP and to maintain accountability for its assets, (iii) access to the Partnership Entities’ assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for the Partnership Entities’ assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Sanchez is not aware of any failures of such internal accounting controls that are material or that would be required to be disclosed pursuant to any applicable Law.

			
	
			
				 (b)
			Sanchez has established and maintains disclosure controls and procedures (to the extent required by and as defined in Rules 13a- 15(e) and 15d-15(e) under the Exchange Act), which are designed to provide reasonable assurance that information required to be disclosed by Sanchez in reports that it files or submits under the Exchange Act is recorded, processed, summarized and communicated to Sanchez’s management, including its principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Sanchez has carried out evaluations of the effectiveness of its disclosure controls and procedures and such disclosure controls and procedures are effective in all material respects to perform the functions for which they were established.

			
	
			
				 (c)
			There is and has been no failure on the part of Sanchez and, to Sanchez’s knowledge, the General Partner’s directors or officers, in their capacities as such, to comply in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith.

		

		

		 

		

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		Section 3.15     Listing and Maintenance Requirements.    The Common Units are listed on the NYSE MKT, and Sanchez has not received any notice of delisting. The issuance and sale of the Purchased Units and the offer of the Common Units and issuance of such Common Units upon conversion of the Purchased Units does not contravene NYSE MKT rules and regulations.
		

		
			Section 3.16     Taxes.
		

			
	
			
				 (a)
			Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) each of the Partnership Entities has prepared and timely filed (taking into account any extension of time within which to file) all Tax Returns required to be filed by any of them and all such filed Tax Returns are complete and accurate, (ii) each of the Partnership Entities has timely paid all Taxes that are required to be paid by any of them, (iii) there are no audits, examinations, investigations, actions, suits, claims or other proceedings in respect of Taxes pending or threatened in writing nor has any deficiency for any Tax been assessed by any Governmental Authority in writing against any Partnership Entity, and (iv) all Taxes required to be withheld by any Partnership Entity have been withheld and paid over to the appropriate Tax authority (except, in the case of this clause (iv) or clause (i) or (ii) above, with respect to matters contested in good faith and for which adequate reserves have been established on Sanchez’s financial statements in accordance with GAAP).  None of the Partnership Entities has entered into any transaction that, as of the date of this Agreement has been identified by the Internal Revenue Service in published guidance as a “listed transaction” as defined under Section 1.6011-4(b)(2) of the Treasury Regulations promulgated under the Code.

			
	
			
				 (b)
			As used in this Agreement, (i) “Taxes” means any and all domestic or foreign, federal, state, local or other taxes of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority, including taxes on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, unemployment, social security, workers’ compensation or net worth, and taxes in the nature of excise, withholding, ad valorem or value added, and including any liability in respect of any items described above as a transferee or successor, pursuant to Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign Law), or as an indemnitor, guarantor, surety or in a similar capacity under any Contract and (ii) “Tax Return” means any return, report or similar filing (including the attached schedules) filed or required to be filed with respect to Taxes (and any amendments thereto), including any information return, claim for refund or declaration of estimated Taxes.

		
			Section 3.17     Compliance with Laws; Environment Laws; Permits; and Environmental Permits.
		

			
	
			
				 (a)
			Neither Sanchez nor any of its Subsidiaries is in violation of any Law applicable to Sanchez or its Subsidiaries, except as would not, individually or in the aggregate, have a Material Adverse Effect.  Sanchez and its Subsidiaries possess all Permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such Permits would not, individually or in the aggregate, have a Material Adverse Effect, and neither Sanchez nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such Permit, except where such 
		

		 

		

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			potential revocation or modification would not, individually or in the aggregate, have a Material Adverse Effect.

			
	
			
				 b)
			Each of the Partnership Entities has such Permits as are necessary to own its properties and to conduct its business in the manner described in the Sanchez SEC Documents, subject to such qualifications as may be set forth in the Sanchez SEC Documents and except for such Permits which, if not obtained, would not, individually or in the aggregate, have a Material Adverse Effect; each of the Partnership Entities has fulfilled and performed all of its material obligations with respect to such Permits which are due to have been fulfilled and performed and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any impairment of the rights of the holder of any such Permit, except for such revocations, terminations and impairments that would not, individually or in the aggregate, have a Material Adverse Effect, subject in each case to such qualifications as may be set forth in the Sanchez SEC Documents; and, except as described in the Sanchez SEC Documents, none of such Permits contains any restriction that is materially burdensome to the Partnership Entities, taken as a whole.

			
	
			
				 (c)
			The Partnership Entities have timely applied for or obtained and are in  compliance with all such obtained material Environmental Permits required for their operations as currently conducted, except as (i) would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (ii) have been disclosed in Sanchez SEC Documents.  Sanchez has not received written notice of any pending action or proceeding and, to the knowledge of Sanchez, no action or proceeding is threatened, to suspend, revoke, modify or terminate any Environmental Permit held by the Partnership Entities that would have a Material Adverse Effect on the Partnership Entities.  The operations of the Partnership Entities are in compliance with all Environmental Laws and, to the knowledge of Sanchez, no occurrences or conditions currently exist that would reasonably be expected to adversely affect the Partnership Entities’ continued  compliance with Environmental Laws and Environmental Permits, except as (i) would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (ii) have been disclosed in the Sanchez SEC Documents.  There are no present claims under Environmental Law asserted against any of the Partnership Entities, including claims relating to the release, spill or disposal of any Hazardous Substances resulting from the operations of the Partnership Entities, except such claims as (i) would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (ii) have been disclosed in Sanchez SEC Documents.  Notwithstanding any other provision of this Agreement, the representations and warranties set forth in this Section 3.17(c) are the only representations and warranties relating to Environmental Laws or Environmental Permits.

		
			Section 3.18    Title to Property.   Each of the Partnership Entities has good and indefeasible title to all real property (save and except for Rights-of-Way) and good title to all personal property described in the Sanchez SEC Documents as owned by such Partnership Entity, free and clear of all Liens except such (i) as are described in the Sanchez SEC Documents, (ii) as are created, arise under or secure any credit facility to which Sanchez is a party or (iii) as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 
		

		

		

		 

		

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		Section 3.19     Rights of Way.   Each of the Partnership Entities has such consents, easements, rights-of-way or licenses (“Rights-of-Way”) from any person as are necessary to conduct its business in the manner described in the Sanchez SEC Documents, subject to such qualifications as may be set forth in the Sanchez SEC Documents and except for such rights-of-way the failure of which to have obtained would not have, individually or in the aggregate, a Material Adverse Effect.
		

		
			ARTICLE IV
REPRESENTATIONS AND WARRANTIES AND
COVENANTS OF THE PURCHASERS
		

		
			Each of the Purchasers, severally but not jointly, represent and warrant and covenant to Sanchez and the Placement Agent as follows:
		

		
			Section 4.01     Existence.    Such Purchaser is duly organized and validly existing and in good standing under the laws of its state of formation, with all necessary power and authority to own properties and to conduct its business as currently conducted.
		

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

		
			Section 4.03     No Breach.    The execution, delivery and performance of the Basic Documents by such Purchaser and the consummation by such Purchaser of the transactions contemplated 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 such Purchaser is a party or by which such Purchaser is bound or to which any of the property or assets of such Purchaser is subject, (b) conflict with or result in any violation of the provisions of the organizational documents of such Purchaser, or (c) violate any statute, order, rule or regulation of any court or governmental agency or body having jurisdiction over such Purchaser or the property or assets of such Purchaser, except in the case of clauses (a) and (c), for such conflicts, breaches, violations or defaults as would not prevent the consummation of the transactions contemplated by the Basic Documents.
		

		
			Section 4.04     Certain Fees.    No fees or commissions are or will be payable by any Purchaser to brokers, finders or investment bankers with respect to the purchase of any of the Purchased Units or the consummation of the transactions contemplated by this Agreement.  Each Purchaser agrees that it will indemnify and hold harmless Sanchez from and against any and all 
		

		 

		

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		claims, demands or liabilities for broker’s, finder’s, placement, or other similar fees or commissions incurred by such Purchaser or alleged to have been incurred by such Purchaser in connection with the purchase of the Purchased Units or the consummation of the transactions contemplated by this Agreement.
		

		
			Section 4.05     Unregistered Securities.
		

			
	
			
				(a)
			Accredited Investor Status; Sophisticated Purchaser. Such Purchaser is an “accredited investor” within the meaning of Rule 501 under the Securities Act and is able to bear the risk of its investment in Purchased Units and the Conversion Units. Such Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Purchased Units and the Conversion Units.

			
	
			
				(b)
			Information. Such Purchaser and its Representatives have been furnished with all materials relating to the business, finances and operations of Sanchez that have been requested and materials relating to the offer and sale of the Purchased Units and Conversion Units that have been requested by such Purchaser. Such Purchaser and its Representatives have been afforded the opportunity to ask questions of Sanchez.  Neither such inquiries nor any other due diligence investigations conducted at any time by such Purchasers and its Representatives shall modify, amend or affect such Purchasers’ right (i) to rely on Sanchez’s representations and warranties contained in Article III above or (ii) to indemnification or any other remedy based on, or with respect to the accuracy or inaccuracy of, or compliance with, the representations, warranties, covenants and agreements in any Basic Document.  Such Purchaser understands that its purchase of the Purchased Units involves a high degree of risk. Such Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Purchased Units.    Such Purchaser understands that the Placement Agent has acted solely as the agent of Sanchez in this placement of the Class A Preferred Units and such Purchaser has not relied on the business or legal advice of the Placement Agent or any of its agents, counsel or affiliates in making its investment decision hereunder, and confirms that none of such persons has made any representations or warranties to such Purchaser in connection with the transactions contemplated by this Agreement.

		
			 
		

			
	
			
				(c)
			Residency. Such Purchaser shall cooperate reasonably with Sanchez to provide any information necessary for any applicable securities filings.

			
	
			
				(d)
			Legends. Such Purchaser understands that, until such time as the Purchased Units have been registered pursuant to the provisions of the Securities Act, or the Purchased Units are eligible for resale pursuant to Rule 144 promulgated under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Purchased Units will bear a restrictive legend as provided in the Partnership Agreement. Each Purchaser understands that, until such time as the Conversion Units have been registered pursuant to the provisions of the Securities Act, or the Conversion Units are eligible for resale pursuant to Rule 144 promulgated under the Securities Act without any restriction as to the 
		

		 

		

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			number of securities as of a particular date that can then be immediately sold, the Conversion Units will bear a restrictive legend as provided in the Partnership Agreement.

			
	
			
				(e)
			Purchase Representation. Such Purchaser is purchasing the Purchased Units for its own account and not with a view to distribution in violation of any securities laws. Such Purchaser has been advised and understands that neither the Purchased Units nor the Conversion Units have been registered under the Securities Act or under the “blue sky” laws of any jurisdiction and may be resold only if registered pursuant to the provisions of the Securities Act (or if eligible, pursuant to the provisions of Rule 144 promulgated under the Securities Act or pursuant to another available exemption from the registration requirements of the Securities Act). Such Purchaser has been advised and understands that Sanchez, in issuing the Purchased Units, is relying upon, among other things, the representations and warranties of such Purchaser contained in this Article IV in concluding that such issuance is a “private offering” and is exempt from the registration provisions of the Securities Act.

			
	
			
				(f)
			Rule 144. Such Purchaser understands that there is no public trading market for the Purchased Units, that none is expected to develop and that the Purchased Units must be held indefinitely unless and until Purchased Units or Conversion Units received upon conversion thereof are registered under the Securities Act or an exemption from registration is available. Each Purchaser has been advised of and is aware of the provisions of Rule 144 promulgated under the Securities Act.

			
	
			
				(g)
			Reliance by Sanchez. Such Purchaser understands that the Purchased Units are being offered and sold in reliance on a transactional exemption from the registration requirements of federal and state securities laws and that Sanchez is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the applicability of such exemptions and the suitability of such Purchaser to acquire the Purchased Units and the Conversion Units issuable upon conversion thereof.

		
			Section 4.06     Short Selling.    No Purchaser has engaged in any Short Sales involving Common Units owned by it between March 1, 2015 and the date of execution of this Agreement.
		

		
			ARTICLE V
INDEMNIFICATION, COSTS AND EXPENSES
		

		
			Section 5.01    Indemnification by Sanchez.    Sanchez agrees to indemnify each Purchaser and their respective Representatives (collectively, “Purchaser Related Parties”) from costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever, and hold each of them harmless against, any and all actions, suits, proceedings (including any investigations, litigation or inquiries), demands, and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel and all other reasonable expenses incurred in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them), whether or not involving a third party claim, as a result of, arising out of, or in any way related to (i) the failure of any of the representations or warranties made by Sanchez contained 
		

		 

		

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		herein to be true and correct in all material respects as of the date made (except with respect to any provisions including the word “material” or words of similar import, with respect to which such representations and warranties must have been true and correct) or (ii) the breach of any covenants of Sanchez contained herein, provided that, in the case of the immediately preceding clause (i), such claim for indemnification is made prior to the expiration of such representation or warranty; provided,  however, that for purposes of determining when an indemnification claim has been made, the date upon which a Purchaser Related Party shall have given notice (stating in reasonable detail the basis of the claim for indemnification) to Sanchez shall constitute the date upon which such claim has been made;  provided,  further, that the liability of Sanchez shall not be greater in amount than the Purchase Price.  No Purchaser Related Party shall be entitled to recover special, consequential or punitive damages under this Section 5.01.
		

		
			Section 5.02    Indemnification by the Purchasers.    Each Purchaser agrees, severally and not jointly, to indemnify Sanchez, the General Partner and their respective Representatives (collectively, “Sanchez Related Parties”) from, costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever, and hold each of them harmless against, any and all actions, suits, proceedings (including any investigations, litigation or inquiries), demands, and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel and all other reasonable expenses incurred in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them), whether or not involving a third party claim, as a result of, arising out of, or in any way related to (i) the failure of any of the representations or warranties made by such Purchaser contained herein to be true and correct in all material respects as of the date made or (ii) the breach of any of the covenants of such Purchaser contained herein, provided that, in the case of the immediately preceding clause (i), such claim for indemnification relating to a breach of any representation or warranty is made prior to the expiration of such representation or warranty; provided,  however, that for purposes of determining when an indemnification claim has been made, the date upon which a Sanchez Related Party shall have given notice (stating in reasonable detail the basis of the claim for indemnification) to such Purchaser shall constitute the date upon which such claim has been made; provided,  further, that the liability of such Purchasers shall not be greater in amount than the sum of such Purchaser’s Purchase Price.  No Sanchez Related Party shall be entitled to recover special, consequential or punitive damages under this Section 5.02.
		

		
			Section 5.03    Indemnification Procedure.
		

			
	
			
				 (a)
			A claim for indemnification for any matter not involving a third party claim may be asserted by notice to the party from whom indemnification is sought; provided,  however, that failure to so notify the indemnifying party shall not preclude the indemnified party from any indemnification which it may claim in accordance with this Article V, except as otherwise provided in Section 5.01 and Section 5.02.

			
	
			
				 (b)
			Promptly after any Sanchez Related Party or Purchaser Related Party (hereinafter, the “Indemnified Party”) has received notice of any indemnifiable claim hereunder, or the commencement of any action, suit or proceeding by a third person, which the Indemnified Party believes in good faith is an indemnifiable claim under this Agreement (each a “Third Party 
		

		 

		

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			Claim”), the Indemnified Party shall give the indemnitor hereunder (the “Indemnifying Party”) written notice of such Third Party Claim, but failure to so notify the Indemnifying Party will not relieve the Indemnifying Party from any liability it may have to such Indemnified Party hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure. Such notice shall state the nature and the basis of such Third Party Claim to the extent then known.  The Indemnifying Party shall have the right to defend and settle, at its own expense and by its own counsel who shall be reasonably acceptable to the Indemnified Party, any such matter as long as the Indemnifying Party pursues the same diligently and in good faith. If the Indemnifying Party undertakes to defend or settle, it shall promptly, and in no event later than ten (10) days, notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in all commercially reasonable respects in the defense thereof and the settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records and other information reasonably requested by the Indemnifying Party and in the Indemnified Party’s possession or control.  Such cooperation of the Indemnified Party shall be at the cost of the Indemnifying Party.  After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability; provided,  however, that the Indemnified Party shall be entitled (i) at its expense, to participate in the defense of such asserted liability and the negotiations of the settlement thereof and (ii) if (A) the Indemnifying Party has, within ten (10) Business Days of when the Indemnified Party provides written notice of a Third Party Claim, failed (y) to assume the defense or employ counsel reasonably acceptable to the Indemnified Party and (z) notify the Indemnified Party of such assumption or (B) if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and counsel to the Indemnified Party shall have concluded that there may be reasonable defenses available to the Indemnified Party that are different from or in addition to those available to the Indemnifying Party or if the interests of the Indemnified Party reasonably may be deemed to conflict with the interests of the Indemnifying Party, then the Indemnified Party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the Indemnifying Party as incurred.  Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not settle any indemnified claim without the consent of the Indemnified Party, unless the settlement thereof imposes no liability or obligation on, and includes a complete release from liability of, and does not include any admission of wrongdoing or malfeasance by, the Indemnified Party.  The remedies provided for in this Section 5.03 are cumulative and are not exclusive of any remedies that may be available to a party at law or in equity or otherwise.

		
			Section 5.04     Tax Matters.    All indemnification payments under this Article V shall be adjustments to the Purchase Price except as otherwise required by applicable Law.
		

		
			ARTICLE VI
MISCELLANEOUS
		

		

		

		 

		

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		Section 6.01     Expenses.    All costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with the Basic Documents and the transactions contemplated thereby shall be paid by the party incurring such costs and expenses;  provided, however, that, upon written request, the Partnership shall reimburse each Purchaser who acquires $5,000,000 or more of Class A Preferred Units for such Purchaser’s out-of-pocket legal fees and expenses incurred in connection with the negotiation and execution of the Basic Documents, provided that such amount for each such Purchaser shall not exceed $7,500.
		

		
			Section 6.02     Interpretation.    Article, Section, Schedule and Exhibit references in this Agreement are references to the corresponding Article, Section, Schedule or Exhibit to this Agreement, unless otherwise specified.  All Exhibits and Schedules to this Agreement are hereby incorporated and made a part hereof as if set forth in full herein and are an integral part of this Agreement.  All references to instruments, documents, Contracts and agreements are references to such instruments, documents, Contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified.  The word “including” shall mean “including but not limited to” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.  Whenever Sanchez has an obligation under the Basic Documents, the expense of complying with that obligation shall be an expense of Sanchez unless otherwise specified.  Any reference in this Agreement to $ shall mean U.S. dollars.  Whenever any determination, consent or approval is to be made or given by a Purchaser, such action shall be in such Purchaser’s sole discretion, unless otherwise specified in this Agreement.  If any provision in the Basic Documents is held to be illegal, invalid, not binding or unenforceable, (i) such provision shall be fully severable and the Basic Documents shall be construed and enforced as if such illegal, invalid, not binding or unenforceable provision had never comprised a part of the Basic Documents, and the remaining provisions shall remain in full force and effect and (ii) the parties hereto shall negotiate in good faith to modify the Basic Documents so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.  When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to the Basic Documents, the date that is the reference date in calculating such period shall be excluded.  If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.  Any words imparting the singular number only shall include the plural and vice versa.  The words such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.  The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement.
		

		
			Section 6.03     Survival of Provisions.    The representations and warranties set forth in Section 3.01(a),  Section 3.02,  Section 3.04,  Section 3.08,  Section 3.09,  Section 3.11,  Section 3.12,  Section 4.01,  Section 4.02,  Section 4.04 and Section 4.05 hereunder shall survive the execution and delivery of this Agreement indefinitely, the representations and warranties set forth in Section 3.16 shall survive for a period of three (3) years following the Closing Date regardless of any investigation made by or on behalf of Sanchez or the Purchasers, and the other 
		

		 

		

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		representations and warranties set forth herein shall survive for a period of fifteen (15) months following the Closing Date, regardless of any investigation made by or on behalf of Sanchez or the Purchasers.  The covenants made in this Agreement or any other Basic Document shall survive the Closing and remain operative and in full force and effect regardless of acceptance of any of the Purchased Units and payment therefor and repayment, conversion or repurchase thereof.  Regardless of any purported general termination of this Agreement, the provisions of Article V and all indemnification rights and obligations of Sanchez and the Purchasers thereunder, and this Article VI shall remain operative and in full force and effect as between Sanchez and each Purchaser, unless Sanchez and the applicable Purchaser execute a writing that expressly (with specific references to the applicable Section or subsection of this Agreement) terminates such rights and obligations as between Sanchez and such Purchaser.
		

		
			Section 6.04     No Waiver; Modifications in Writing.
		

			
	
			
				(a)
			Delay.  No failure or delay on the part of any party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a party at law or in equity or otherwise.

			
	
			
				(b)
			Specific Waiver.  Except as otherwise provided herein, no amendment, waiver, consent, modification or termination of any provision of any Basic Document (except in the case of the Partnership Agreement for amendments adopted pursuant to Article XIII thereof) shall be effective unless signed by each of the parties thereto affected by such amendment, waiver, consent, modification or termination.  Any amendment, supplement or modification of or to any provision of any Basic Document, any waiver of any provision of any Basic Document and any consent to any departure by Sanchez from the terms of any provision of any Basic Document shall be effective only in the specific instance and for the specific purpose for which made or given.  Except where notice is specifically required by this Agreement, no notice to or demand on Sanchez in any case shall entitle Sanchez to any other or further notice or demand in similar or other circumstances.  Any investigation by or on behalf of any party shall not be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein.

		
			Section 6.05     Binding Effect.    This Agreement shall be binding upon Sanchez, each of the Purchasers and their respective successors and permitted assigns.  Except as expressly provided in this Agreement, this Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and permitted assigns,  except  that the Placement Agent is an intended third party beneficiary of Article III  and Article IV hereof.
		

		
			Section 6.06     Non-Disclosure.
		

			
	
			
				 (a)
			For one year after the Closing Date, no Purchaser shall, directly or indirectly, disclose to any person any information received from Sanchez, in any form, whether acquired prior to or after the Closing Date, relating to the business and operations of the Partnership Entities; provided,  however, that information shall not be deemed confidential information for 
		

		 

		

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			purposes of this Section 6.06, where such information (i) was already known to such Purchaser (or its Representatives) at the time of disclosure, (ii) later becomes known to such Purchaser by having been disclosed to such Purchaser (or its Representatives) by a third party to such Purchaser’s knowledge not subject to any legally binding obligation to keep such information confidential or otherwise prohibited from transmitting such information, (iii) is or becomes publicly known through no wrongful act of such Purchaser (or its Representatives), or (iv) is independently developed by such Purchaser (or its Representatives) without reference to any confidential information disclosed to such Purchaser under this Agreement. Notwithstanding the foregoing, a Purchaser may disclose any information relating to the business and operations of the Partnership Entities (i) to its Representatives, Affiliates, and funding sources and limited partners, investors, and potential investors of such Purchaser and its Affiliates, to whom such disclosure is necessary or convenient and who in each case either (1) acknowledge that they are bound by the confidentiality provisions of this Agreement or (2) are bound by confidentiality obligations to the Purchaser or its Affiliates that are at least as stringent as the confidentiality provisions of this Agreement, and in each case the Purchasers shall use reasonable best efforts to cause such Representatives, Affiliates, and funding sources and limited partners, investors, and potential investors of such Purchaser and its Affiliates to keep any such  information confidential; (ii) to any transferee or proposed transferee of the Purchased Units permitted under the Partnership Agreement; (iii) as required by applicable Law or any securities exchange or market rule; (iv) as may be requested or required by any Governmental Authority (provided that such Purchaser first notifies Sanchez and gives Sanchez the opportunity to contest such request or requirement, in each case as permitted by applicable Law (except no such opportunity shall be afforded in the case of a routine audit or examination by, or a blanket document request from, a governmental or regulatory entity that does not reference the Partnership)); or (v) except with prior notice of such request for disclosure to, and consent of, Sanchez (which consent may be withheld in Sanchez’s sole discretion).

		
			(b)       Other than filings made by Sanchez with the Commission, the Partnership Entities and any of their respective Representatives shall disclose the identity of, or any other information concerning the Purchasers or any of their respective Affiliates only after providing the Purchasers a reasonable opportunity to review and comment on such disclosure (with such comments being incorporated or reflected, to the extent reasonable, in any such disclosure); provided,  however, that nothing in this Section 6.06 shall delay any required filing or other disclosure with the Commission, NYSE MKT or any Governmental Authority or otherwise hinder the Partnership Entities’ or their Representatives’ ability to timely comply with all laws or rules and regulations of the Commission, NYSE MKT or other Governmental Authority.
		

			
	
			
				(a)
			Notwithstanding anything to the contrary in this Section 6.06,  Sanchez agrees that the Purchasers may (i) publicize their ownership in Sanchez, as well as the identity of Sanchez, the size of the investment and its pricing terms with respect to the Class A Preferred Units on its internet site or in marketing materials, press releases, published “tombstone” announcements or any other print or electronic medium and (ii) display Sanchez’s logo in conjunction with any such reference.

			
	
			
				(b)
			By 9:00 a.m., New York City time, on the trading day immediately following the date of this Agreement, Sanchez shall issue a press release (the “Press Release”) reasonably acceptable to the Placement Agent disclosing all material terms of the transactions contemplated 
		

		 

		

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			hereby.  Sanchez shall not publicly disclose the name of any Purchaser or an affiliate of any Purchaser, or include the name of any Purchaser or an affiliate of any Purchaser in any press release or filing with the Commission (other than the registration statement to be filed pursuant to the Registration Rights Agreement) or any regulatory agency or trading market, without the prior written consent of such Purchaser, except (i) as required by federal securities law in connection with (A) the registration statement contemplated by the Registration Rights Agreement and (B) the filing of final transaction documents (including signature pages thereto) with the Commission and (ii) to the extent such disclosure is required by law, request of the Commission or trading market regulations, in which case Sanchez shall provide the Purchasers with prior written notice of such disclosure permitted under this subclause (ii).  

		
			Section 6.07     Communications.    All notices and demands provided for hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, telecopy, air courier guaranteeing overnight delivery or personal delivery to the following addresses
		

			
	
			
				 (a)
			If to a Purchaser, to the address specified on such Purchaser’s signature page hereto.

			
	
			
				 (b)
			If to Sanchez:

		
			Sanchez Production Partners LP
		

		
			1000 Main Street, Suite 3000
		

		
			Houston, TX 77002
		

		
			Attention:  Charles C. Ward 
		

		
			Email: cward@sanchezpp.com;  
		

		
			 
		

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

		
			 
		

		
			Andrews Kurth LLP
		

		
			600 Travis Street, Suite 4200
		

		
			Houston TX 77002
		

		
			Attention: Scott Olson
Facsimile: 713-238-7410
		

		
			Email: solson@andrewskurth.com 
		

		
			 
		

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

		
			Section 6.08     Removal of Legend.    In connection with a sale of the Purchased Units by a Purchaser in reliance on Rule 144, the applicable Purchaser or its broker shall deliver to the transfer agent and Sanchez a broker representation letter providing to the transfer agent and Sanchez any information Sanchez deems necessary to determine that the sale of the Purchased Units is made in compliance with Rule 144, including, as may be appropriate, a certification that 
		

		 

		

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		the Purchaser is not an Affiliate of Sanchez and regarding the length of time the Purchased Units have been held.  Upon receipt of such representation letter, Sanchez shall promptly direct its transfer agent to remove the notation of a restrictive legend in such Purchaser’s or the book-entry account maintained by the transfer agent, including the legend referred to in Section 4.05, and Sanchez shall bear all costs associated therewith.  After a registration statement under the Securities Act permitting the public resale of the Purchased Units has become effective or any Purchaser or its permitted assigns have held the Purchased Units for one year, if the book-entry account of such Purchased Units still bears the notation of the restrictive legend referred to in Section 4.05,  Sanchez agrees, upon request of the Purchaser or permitted assignee, to take all steps necessary to promptly effect the removal of the legend described in Section 4.05 from the Purchased Units, and Sanchez shall bear all costs associated therewith, regardless of whether the request is made in connection with a sale or otherwise, so long as such Purchaser or its permitted assigns provide to Sanchez any information Sanchez deems reasonably necessary to determine that the legend is no longer required under the Securities Act or applicable state laws, including (if there is no such registration statement) a certification that the holder is not an Affiliate of Sanchez and regarding the length of time the Purchased Units have been held.  Sanchez shall cooperate with each Purchaser to effect the removal of the legend referred to in Section 4.05 at any time such legend is no longer appropriate.
		

		
			Section 6.09    Entire Agreement.    This Agreement, the other Basic Documents and the other agreements and documents referred to herein are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or the other Basic Documents with respect to the rights granted by Sanchez or any of its Affiliates or the Purchasers or any of their respective Affiliates set forth herein or therein.  This Agreement, the other Basic Documents and the other agreements and documents referred to herein or therein supersede all prior agreements and understandings between the parties with respect to such subject matter.
		

		
			Section 6.10     Governing Law/ Submission to Jurisdiction.    This Agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement), will be construed in accordance with and governed by the laws of the State of Delaware without regard to principles of conflicts of laws.  Any action against any party relating to the foregoing shall be brought in any federal or state court of competent jurisdiction located within the State of Delaware, and the parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any federal or state court located within the State of Delaware over any such action.  The parties hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute.  Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
		

		

		

		 

		

			24

		

		

			 

		

		

			 

		

 

		

			 

		

		Section 6.11     Waiver of Jury Trial.    THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, AND AGREES TO CAUSE ITS AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
		

		
			Section 6.12     Execution in Counterparts.    This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same agreement.
		

		
			[Remainder of Page Left Intentionally Blank]
		

		
			 
		

		
			 
		

		

		

		 

		

			25

		

		

			 

		

		

			 

		

 

		

			 

		

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

		
			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 Purchase Agreement]

		

		

			 

		

 

		

			 

		

		HITE HEDGE LP
		

		
			 
		

		
			By:  __/s/ James Jampel__________________________
		

		
			Name:  James Jampel
		

		
			Title:  President of HITE Hedge Capital LP, the General Partner of HITE Hedge LP, and President of HITE Hedge Asset Management LLC, its Investment Manager
		

		
			300 Washington Street, Suite 308, Newton, MA 02465
		

		
			Fax:  617 431 4361
		

		
			Email:  jjampel@hitehedge.com
		

		
			 
		

		
			HITE MLP LP
		

		
			 
		

		
			By:  __/s/ James Jampel__________________________
		

		
			Name:  James Jampel
		

		
			Title:  President of HITE Hedge Capital LP, the General Partner of HITE MLP LP, and President of HITE Hedge Asset Management LLC, its Investment Manager
		

		
			300 Washington Street, Suite 308, Newton, MA 02465
		

		
			Fax:  617 431 4361
		

		
			Email:  jjampel@hitehedge.com
		

		
			 
		

		
			HITE hedge qp LP
		

		
			 
		

		
			By:  __/s/ James Jampel__________________________
		

		
			Name:  James Jampel
		

		
			Title:  President of HITE Hedge Capital LP, the General Partner of HITE Hedge QP LP, and President of HITE Hedge Asset Management LLC, its Investment Manager
		

		
			300 Washington Street, Suite 308, Newton, MA 02465
		

		
			Fax:  617 431 4361
		

		
			Email:  jjampel@hitehedge.com
		

		
			 
		

		
			HITE MLP ADVANTAGE LP
		

		
			 
		

		
			By:  __/s/ James Jampel__________________________
		

		
			Name:  James Jampel
		

		
			Title:  President of HITE Hedge Capital LP, the General Partner of HITE MLP Advantage LP, and President of HITE Hedge Asset Management LLC, its Investment Manager
		

		
			300 Washington Street, Suite 308, Newton, MA 02465
		

		
			Fax:  617 431 4361
		

		
			Email:  jjampel@hitehedge.com
		

		

		

		 

		

			[Signature Page to Purchase Agreement]

		

		

			 

		

 

		

			 

		

		
		

		 

		

			[Signature Page to Purchase Agreement]

		

		

			 

		

 

		

			 

		

		Michael Brewster
		

		
			 
		

		
			 
		

		
			By:    /s/ Michael Brewster
		

		
			Address:  269 W. Lake Blvd.
		

		
			     Mahopac, NY 10541
		

		
			Fax:  212-322-1471
		

		
			Email:  Michael.Brewster@credit-suisse.com
		

		
			 
		

		

		

		 

		

			[Signature Page to Purchase Agreement]

		

		

			 

		

 

		

			 

		

		
		

		
			 
		

		

		

		 

		

			Schedule A-1

		

		

			 

		

		

			 

		

 

		

			 

		

		EXHIBIT A
		

		
			FORM OF OPINION OF ANDREWS KURTH LLP
		

		
			
		

		
			See attached.
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		
			 
		

		 

		

			Exhibit C-2

		

		

			 

		

		

			US 2654124v.14Registrationrightsagreement-ExecutioncopyApril1st2015

Execution Copy

REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of April 1, 2015 (this “Agreement”), is made among Coty Inc., a Delaware corporation (the “Company”), and Mousseluxe S.à.r.l., a company organized under the laws of Luxembourg (the “Shareholder”).
A.On March 12, 2015, the Company and Chanel International B.V., a Dutch corporation (“Seller”), entered into a Stock Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company will acquire 100% of the capital stock of the Companies (as defined in the Purchase Agreement) (the “Sale”).
A.    In connection with the Sale and pursuant to the Purchase Agreement, the Shareholder, as Seller’s Designated Affiliate (as defined under the Purchase Agreement), acquired Coty Shares (as defined in the Purchase Agreement) (“Coty Shares”).
B.    In order to induce the Shareholder to accept the Coty Shares as consideration for Seller entering into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. 
C.    Capitalized terms used in this Agreement and set forth in Section 11 are used as defined in Section 11.
Now, therefore, the parties hereto agree as follows:
1.    Mandatory Shelf Registration.
(a)    The Company agrees to file with the SEC as soon as reasonably practicable, but in no event later than 90 calendar days following the date hereof, a shelf Registration Statement on Form S-3 or such other form under the Securities Act then available to the Company providing for the resale pursuant to Rule 415 from time to time by the Shareholder of any and all Registrable Shares, which shelf Registration Statement shall be an “automatic shelf registration statement” as defined under Rule 405, if the Company is eligible to file such an automatic shelf Registration Statement (the “Mandatory Shelf Registration Statement”).  If the Mandatory Shelf Registration Statement is not automatically effective when filed with the SEC, the Company agrees to use its commercially reasonable efforts to cause the Mandatory Shelf Registration Statement to be declared effective by the SEC within three months after the initial date of filing thereof.
(b)    The Company shall use its commercially reasonable efforts to cause the Mandatory Shelf Registration Statement to remain continuously effective until the earliest of (A) the sale pursuant to a registration statement of all of the Registrable Shares covered by the Mandatory Shelf Registration Statement, (B) the sale, transfer or other disposition pursuant to Rule 144 of all of the Registrable Shares covered by the Mandatory Shelf Registration Statement, (C) 

such time as the Registrable Shares covered by the Mandatory Shelf Registration Statement that are not held by Affiliates of the Company are, in the opinion of counsel to the Company, eligible for resale pursuant to Rule 144 so long as the Company is current in its 1934 Act reporting, if so required by Rule 144, (D) such time as all of the Registrable Shares covered by the Mandatory Shelf Registration Statement have been sold to the Company or any of its subsidiaries or (E) the third anniversary of the effective date of the Mandatory Shelf Registration Statement.  The Mandatory Shelf Registration Statement shall provide for the resale of Registrable Securities from time to time, and pursuant to any method or combination of methods legally available to, and requested by, the Shareholder.  The Company will pay all Registration Expenses incurred in connection with any registration pursuant to this Section 1.
2.    Demand Registrations.
(a)    Requests for Registration.  At any time following the six month anniversary of the date hereof, and regardless of the effectiveness of the Mandatory Shelf Registration Statement, the Shareholder shall be entitled to make request(s) in writing that the Company effect the registration of all or any part of the Registrable Securities held by the Shareholder (a “Registration Request”).  The Shareholder shall be entitled to make a total of three such Registration Requests. The Company will use its commercially reasonable efforts to register, in accordance with the provisions of this Agreement, all Registrable Securities that have been requested to be registered by the Shareholder in the Registration Request (a “Demand Registration”); provided, that the Company will not be required to effect a registration pursuant to this Section 2(a) unless (i) the aggregate number of shares proposed to be registered constitutes at least 30% of the total number of Registrable Securities acquired by the Shareholder under the Purchase Agreement or (ii) if the total number of Registrable Securities then outstanding is less than such amount, all of the Registrable Securities then outstanding.  The Company will not be obligated to effect a registration pursuant to this Section 2(a) more than once in any nine month period. Except to the extent prohibited by applicable law, the Company will pay all Registration Expenses incurred in connection with any registration pursuant to this Section 2.
(b)    Limitation on Demand Registrations.  A request for registration will not constitute the use of a Registration Request pursuant to Section 2(a) if (i) the Shareholder determines in good faith to withdraw (prior to the effective date of the Registration Statement relating to such request) the proposed registration, (ii) the Registration Statement relating to such request is not declared effective within 90 days of the date such registration statement is first filed with the SEC, (iii) prior to the sale of at least 90% of the Registrable Securities included in the registration relating to such request, such registration is adversely affected by any stop order, injunction or other order or requirement of the SEC or other governmental agency, quasi-governmental agent or self-regulatory body or court 

2

for any reason other than error or misconduct of the Shareholder and the Company fails to have such stop order, injunction or other order or requirement removed, withdrawn or resolved to the reasonable satisfaction of the holders of a majority of securities included in such registration statement within 30 days of the date of such order, (iv) more than 25% of the Registrable Securities requested by the Shareholder to be included in the registration are not so included pursuant to Section 2(e); provided, that, notwithstanding the foregoing, the Shareholder shall nonetheless be permitted to include the number of Registrable Securities that the underwriter permits to be included in such registration or (v) the conditions to closing specified in any underwriting agreement or purchase agreement entered into in connection with the registration relating to such request are not satisfied (other than as a result of a material breach thereunder by the Shareholder). Notwithstanding the foregoing but except to the extent prohibited by applicable law, the Company will pay all Registration Expenses in connection with any request for registration pursuant to Section 2(a) regardless of the application of this provision.
(c)    Restrictions on Demand Registrations.  The Company may postpone for a reasonable period of time, not to exceed 90 days, the filing or the effectiveness of a Registration Statement for a Demand Registration if, in the good faith judgment of the management of the Company, such Demand Registration is reasonably likely to adversely affect in any material respect any proposal or plan by the Company to engage in any acquisition of assets or any merger, amalgamation, consolidation, tender offer or similar transaction, or otherwise would adversely affect in any material respect the business, assets, operations, prospects or financial condition of the Company; provided, that the Company may not effect such a postponement more than twice in any 360-day period. If the Company so postpones the filing or the effectiveness of a Registration Statement, the Shareholder will be entitled to withdraw such request and, if such request is withdrawn, such registration request will not count as a Registration Request for the purposes of Section 2(a). Except to the extent prohibited by applicable law, the Company will pay all Registration Expenses incurred in connection with any such non-completed registration.
(d)    Selection of Underwriters.  If the Shareholder intends to distribute the Registrable Securities covered by a Registration Request by means of an underwritten offering, the Shareholder will so advise the Company in the Registration Request (and, if so elected by the Shareholder, a Registration Request may specify that the underwritten offering be conducted pursuant to the Mandatory Shelf Registration Statement). In such event, the Company will have the right to select the investment banker(s) and manager(s) to administer the offering, provided that each such investment banker or manager is reasonably satisfactory to the Shareholder. In connection with each underwritten Demand Registration, the Company shall cause there to be Full Cooperation. Regardless of whether the Shareholder elects to specify that the underwritten offering be 

3

conducted pursuant to the Mandatory Shelf Registration Statement or a separate registration statement, the Shareholder shall be entitled to no more than three underwritten offerings; and in no event shall the Shareholder be entitled to request an underwritten offering until after the six month anniversary of the date hereof.
(e)    Priority on Demand Registrations.  If the managing underwriter advises the Company that in its opinion the number of Registrable Securities (and, if permitted hereunder, other securities requested to be included in such offering) exceeds the number of securities that can be sold in such offering without adversely affecting the marketability of the offering, including the price at which the securities can be sold, the Company will include in such offering the maximum number of securities that in the opinion of such underwriters can be sold without adversely affecting the marketability of the offering, including the price at which the securities can be sold, which securities will be so included in the following order of priority:  (i) first, the Registrable Securities requested to be included therein by the Shareholder; and (ii) second, other securities of the Company.  Notwithstanding the foregoing, no employee of the Company or any subsidiary thereof will be entitled to participate, directly or indirectly, in any such registration to the extent that the managing underwriter (or, in the case of an offering that is not underwritten, a nationally recognized investment banking firm) determines in good faith that the participation of such employee in such registration would adversely affect the marketability or offering price of the securities being sold in such registration.
(f)    Future Registration Rights.  Except as provided in this Agreement, the Company will not grant to any holder or prospective holder of any securities of the Company registration rights with respect to such securities which conflict in any material respect with the rights granted pursuant to this Section 2 without the prior written consent of the Shareholder; provided, that the foregoing shall not prevent the Company from granting additional demand or piggy back registration rights ranking equally with the rights set forth in this Agreement, and any dilution of the registration rights herein resulting from any such rights shall not be deemed to conflict with the rights set forth herein.
3.    Piggyback Registrations.
(a)    Right to Piggyback.  At any time after the date hereof, whenever the Company proposes to register Class A Common Stock, $0.01 par value, of the Company (“Common Shares”) (other than pursuant to (i) registrations on Form S-8 or any similar form(s) solely for registration of securities in connection with an employee benefit plan or dividend reinvestment plan, (ii) registrations on Form S-4 or any similar form(s) solely for registration of securities in connection with a business combination, (iii) a Demand Registration pursuant to Section 2 or (iv) a Mandatory Shelf Registration Statement), whether for its own account or for the account of one or more securityholders of the Company, and the registration form to be filed may be used for the registration or qualification for distribution of Registrable Securities, the Company will give prompt written notice to the 

4

Shareholder of its intention to effect such a registration and will include in such registration all Registrable Securities with respect to which the Company has received a written request for inclusion therein within 15 days after the date of the Company’s notice (a “Piggyback Registration”). Once the Shareholder has made such a written request, it may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter, if any, on or before the fifth (5th) day prior to the anticipated effective date of such Piggyback Registration. The Company may terminate or withdraw any registration initiated by it and covered by this Section 3 prior to the effectiveness of such registration, whether or not the Shareholder has elected to include Registrable Securities in such registration, and except for the obligation to pay Registration Expenses pursuant to Section 3(c) the Company will have no liability to the Shareholder in connection with such termination or withdrawal. A Piggyback Registration shall not be considered a Demand Registration for purposes of Section 2 of this Agreement.
(b)    Underwritten Registration.  If the registration referred to in Section 3(a) is proposed to be underwritten, the Company will so advise the Shareholder in the written notice given pursuant to Section 3(a). In such event, the right of the Shareholder to registration pursuant to this Section 3 will be conditioned upon the Shareholder’s participation in such underwriting and the inclusion of the Shareholder’s Registrable Securities in the underwriting, and the Shareholder will (together with the Company and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. If the Shareholder disapproves of the terms of the underwriting, it may elect to withdraw therefrom by written notice to the Company and the managing underwriter. 
(c)    Piggyback Registration Expenses.  Except to the extent prohibited by applicable law, the Company will pay all Registration Expenses in connection with any Piggyback Registration, whether or not any registration or prospectus becomes effective or final.
(d)    Priority on Primary Registrations.  If a Piggyback Registration relates to an underwritten primary offering on behalf of the Company, and the managing underwriters advise the Company that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold without adversely affecting the marketability of the offering, including the price at which such securities can be sold, the Company will include in such registration the maximum number of securities that in the opinion of such underwriters can be sold without adversely affecting the marketability of the offering, including the price at which such securities can be sold, which securities will be so included in the following order of priority: (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration by the Shareholder and (iii) third, other securities requested to be included in such registration. 

5

(e)    Priority on Secondary Registrations.  If a Piggyback Registration relates solely to an underwritten secondary registration on behalf of other holders of the Company’s securities, and the managing underwriters advise the Company that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold without adversely affecting the marketability of the offering, including the price at which such securities can be sold, the Company will include in such registration the maximum number of securities that in the opinion of such underwriters can be sold without adversely affecting the marketability of the offering, including the price at which such securities can be sold, which securities will be so included in the following order of priority:  (i) first, (A) the securities requested to be included therein by the holders requesting such registration and (B) the Registrable Securities requested to be included therein by the Shareholder, pro rata among such holders on the basis of the number of securities so requested to be included therein owned by each such holder or in such other manner as they may agree and (ii) second, other securities requested to be included in such registration. 
4.    Registration Procedures.  Subject to Section 2(c), whenever the Shareholder has requested that any Registrable Securities be registered pursuant to this Agreement (or in connection with the Mandatory Shelf Registration Statement), the Company will use its commercially reasonable efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method of disposition thereof. Without limiting the generality of the foregoing, the Company will, as expeditiously as commercially reasonable:
(a)    prepare and (except with respect to the Mandatory Shelf Registration Statement) file with the SEC a Registration Statement with respect to such Registrable Securities, make all required filings with the National Association of Securities Dealers and thereafter use its commercially reasonable efforts to cause such Registration Statement to become effective; provided, that before filing a Registration Statement or any amendments or supplements thereto, the Company will furnish to one firm of counsel selected by the Shareholder in accordance with Section 5(b) copies of all such documents proposed to be filed. The Company will not file any Registration Statement or amendment or post-effective amendment or supplement to such Registration Statement to which such counsel will have reasonably objected in writing on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the 1933 Act or of the rules or regulations thereunder;
(b)    prepare and file with the SEC such amendments and supplements to such Registration Statement as may be necessary to keep such Registration Statement effective for a period of either (i) not less than six months or, if such Registration Statement relates to an underwritten offering, such longer period as in the opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer or (ii) such shorter period as will terminate when all of the securities 

6

covered by such Registration Statement have been disposed of in accordance with the intended methods of disposition by the Shareholder set forth in such Registration Statement (but in any event not before the expiration of any longer period required under the 1933 Act), and to comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by such Registration Statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the Shareholder set forth in such Registration Statement;
(c)    furnish to the Shareholder such number of copies, without charge, of such Registration Statement, each amendment and supplement thereto, including each preliminary prospectus, final prospectus, all exhibits and other documents filed therewith and such other documents as the Shareholder may reasonably request including in order to facilitate the disposition of the Registrable Securities owned by the Shareholder;
(d)    use its commercially reasonable efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as the Shareholder reasonably requests and do any and all other acts and things that may be necessary or reasonably advisable to enable the Shareholder to consummate the disposition in such jurisdictions of the Registrable Securities owned by the Shareholder (provided, that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subsection, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction);
(e)    use its commercially reasonable efforts to cause all Registrable Securities covered by such Registration Statement to be registered with or approved by such other governmental agencies, authorities or self-regulatory bodies as may be necessary or reasonably advisable in light of the business and operations of the Company to enable the Shareholder to consummate the disposition of such Registrable Securities in accordance with the intended method or methods of disposition thereof;
(f)    immediately notify the Shareholder and any underwriter(s), at any time when a prospectus relating thereto is required to be delivered under the 1933 Act, of the occurrence of any event which will have the result that, the prospectus contains an untrue statement of a material fact or omits to state any fact necessary to make the statements therein not misleading in the light of the circumstances under which they were made;
(g)    notify the Shareholder (i) when the prospectus or any prospectus supplement or post-effective amendment has been filed and, with respect to such Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC for amendments or supplements 

7

to such registration statement or to amend or to supplement such prospectus or for additional information and (iii) of the issuance by the SEC of any stop order suspending the effectiveness of such registration statement or the initiation of any proceedings for any of such purposes;
(h)    use its commercially reasonable efforts to cause all such Registrable Securities to be listed on each securities exchange on which Common Shares are then listed;
(i)    provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such Registration Statement;
(j)    enter into such customary agreements (including underwriting agreements with customary provisions) and take all such other actions as the Shareholder or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including, without limitation, effecting a share split or a combination of shares);
(k)    otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement, which earnings statement will satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
(l)    in the event of the issuance of any stop order suspending the effectiveness of a Registration Statement, or of any order suspending or preventing the use of any related prospectus or ceasing trading of any securities included in such Registration Statement for sale in any jurisdiction, use its commercially reasonable efforts promptly to obtain the withdrawal of such order;
(m)    enter into such agreements and take such other actions as the Shareholder or the underwriters reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, including, without limitation, preparing for and participating in such number of “road shows” and all such other customary selling efforts as the underwriters reasonably request in order to expedite or facilitate such disposition;
(n)    if such registration relates to an underwritten offering, obtain a comfort letter, addressed to the Shareholder (and, if such registration includes an underwritten public offering to the underwriters of such offering), signed by the Company’s independent public accountants in customary form and covering such matters of the type customarily covered by comfort letters;

8

(o)    if such registration relates to an underwritten offering, provide a legal opinion of the Company’s outside counsel, addressed to the underwriters of any underwritten public offering,, with respect to the Registration Statement and prospectus in customary form and covering such matters of the type customarily covered by legal opinions of such nature;
(p)    if such registration relates to an underwritten offering, furnish to the Shareholder such information and assistance as the Shareholder may reasonably request in connection with any “due diligence” effort which the Shareholder deems appropriate; and
(q)    use its commercially reasonable efforts to take or cause to be taken all other actions, and do and cause to be done all other things, necessary or reasonably advisable to effect the registration of such Registrable Securities contemplated hereby. 
The Company agrees not to file or make any amendment to any Registration Statement with respect to any Registrable Securities, or any amendment of or supplement to the prospectus used in connection therewith, that refers to the Shareholder by name, or otherwise identifies the Shareholder as the holder of any securities of the Company, without the consent of the Shareholder, such consent not to be unreasonably withheld or delayed; unless such disclosure is required by law. 
The Company may require the Shareholder to furnish the Company with such information regarding the Shareholder and pertinent to the disclosure requirements relating to the registration and the distribution of such securities as the Company may from time to time reasonably request in writing. 
5.    Registration Expenses.
(a)    Except as otherwise provided for herein, all expenses incidental to the Company’s performance of or compliance with this Agreement, including, without limitation, all registration and filing fees (including SEC registration and National Association of Securities Dealers filing fees), fees and expenses of compliance with securities or blue sky laws, word processing, duplicating and printing expenses, messenger and delivery expenses, transfer agent’s and registrar’s fees, cost of distributing prospectuses in preliminary and final form, as well as any supplements thereto, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters and other Persons retained by the Company (all such expenses, “Registration Expenses”), will be borne by the Company. In addition, the Company will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit or quarterly review, the expenses of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange or automatic quotation system on which similar securities issued by the Company are then listed (including the New York Stock Exchange). Notwithstanding the foregoing, all Selling Expenses will be borne by the holders 

9

of the securities so registered pro rata on the basis of the number of their shares so registered.
(b)    In connection with the Mandatory Shelf Registration Statement, each registration pursuant to Section 1 and each Piggyback Registration, the Company will reimburse the Shareholder for reasonable fees and disbursements of one law firm, chosen by the Shareholder, in an aggregate amount of up to $50,000.
6.    Indemnification.
(a)    The Company agrees to indemnify and hold harmless, and hereby does indemnify and hold harmless, the Shareholder, its affiliates and their respective officers, directors and partners and each Person who controls the Shareholder (within the meaning of the 1933 Act) against, and pay and reimburse such holder, affiliate, director, officer or partner or controlling person for any losses, claims, damages, expenses, liabilities, joint or several, to which such holder or any such affiliate, director, officer or partner or controlling person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue or alleged untrue statement of material fact contained in any Registration Statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto, or any “issuer free writing prospectus” (as defined in 1933 Act Rule 433), (ii) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) any violation or alleged violation by the Company of any rule or regulation promulgated under the 1933 Act, the 1934 Act, the National Association of Securities Dealers or any state securities laws applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, and the Company will pay and reimburse the Shareholder and each such affiliate, director, officer, partner and controlling person for the legal fees and expenses of one counsel, and any other nonlegal expenses, actually and reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, liability, action or proceeding or (iv) the failure to include, at the time of pricing any offering, the information required by Sections 12(a)(2) and 17(a)(2) of the 1933 Act; provided, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, expense, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission, made in such Registration Statement, any such prospectus or preliminary prospectus or any amendment or supplement thereto, or in any application, in reliance upon, and in conformity with, written information prepared and furnished to the Company by the Shareholder expressly for use therein or by the Shareholder’s failure to deliver, to the extent required by law and 

10

except to the extent such failure results from a failure by the Company to comply with Section 4(f), a copy of the Registration Statement or prospectus or any amendments or supplements thereto after the Company has furnished the Shareholder with a sufficient number of copies of the same. In connection with an underwritten offering, the Company, if requested, will indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the 1933 Act) to at least the same extent as provided above with respect to the indemnification of the Shareholder.
(b)    In connection with any Registration Statement in which the Shareholder is participating, it will furnish to the Company in writing such information as the Company reasonably requests for use in connection with any such Registration Statement or prospectus and will indemnify and hold harmless the Company, its directors and officers, each other Person who controls the Company (within the meaning of the 1933 Act) and each underwriter (to the extent required by such underwriter) against any losses, claims, damages, expenses, liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof), joint or several, to which the Company or any such director or officer, any such underwriter or controlling person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages, liabilities, actions or proceedings arise out of or are based upon (i) any untrue or alleged untrue statement of material fact contained in the Registration Statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or in any application or (ii) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is made in such Registration Statement, any such prospectus or preliminary prospectus or any amendment or supplement thereto, or in any application, in reliance upon and in conformity with written information prepared and furnished to the Company by the Shareholder expressly for use therein, and the Shareholder will reimburse the Company and each such director, officer, underwriter and controlling Person for any legal or any other expenses actually and reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, liability, action or proceeding; provided, that the obligation to indemnify and hold harmless will be individual and several to the Shareholder and will be limited to the amount of net proceeds received by the Shareholder from the sale of Registrable Securities pursuant to such Registration Statement. 
(c)    Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying 

11

party will not be subject to any liability for any settlement made by the indemnified party without its prior written consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. Failure to give prompt written notice shall not release the indemnifying party from its obligations hereunder except to the extent that such indemnifying party is materially prejudiced as a result of such failure to give notice.
(d)    The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will survive the registration and sale of any securities by any Person entitled to any indemnification hereunder and the expiration or termination of this Agreement.
(e)    If the indemnification provided for in this Section 6 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, will contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relevant fault of the indemnifying party and the indemnified party will be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding the foregoing, the amount the Shareholder will be obligated to contribute pursuant to this Section 6(e) will be limited to an amount equal to the net proceeds to the Shareholder of the Registrable Securities sold pursuant to the registration statement which gives rise to such obligation to contribute (less the aggregate amount of any damages which the Shareholder has otherwise been required to pay in respect of such loss, claim, damage, expense, liability or action or any substantially similar loss, claim, damage, expense, liability or action arising from the sale of such Registrable Securities).
7.    Participation in Underwritten Registrations.

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(a)    The Shareholder may not participate in any registration hereunder that is underwritten unless it (i) agrees to sell its Registrable Securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements (including, without limitation, pursuant to the terms of any over-allotment or “green shoe” option requested by the managing underwriter(s); provided, that the Shareholder will not be required to sell more than the number of Registrable Securities that it has requested the Company to include in any registration), (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, and (iii) cooperates with the Company’s reasonable requests in connection with such registration or qualification (it being understood that the Company’s failure to perform its obligations hereunder, which failure is caused by the Shareholder’s failure to cooperate, will not constitute a breach by the Company of this Agreement). 
(b)    The Shareholder agrees that, if it is participating in any registration hereunder, upon receipt of any notice from the Company of the happening of any event of the kind described in subsection 4(f) above, the Shareholder will forthwith discontinue the disposition of its Registrable Securities pursuant to the Registration Statement until it receives copies of a supplemented or amended prospectus as contemplated by such Section 4(f). In the event the Company gives any such notice, the applicable time period during which a Registration Statement is to remain effective will be extended by the number of days during the period from and including the date of the giving of such notice pursuant to this Section 7(b) to and including the date when the Shareholder will have received the copies of the supplemented or amended prospectus contemplated by Section 4(f). 
8.    Rule 144; Legend Removal.
(a)    Facilitation of Sales Pursuant to Rule 144.  The Company covenants to the Shareholder that to the extent it shall be required to do so under the 1934 Act, the Company shall use its commercially reasonable efforts to (i) timely file the reports required to be filed by it under the 1934 Act or the 1933 Act (including the reports under Sections 13 and 15(d) of the 1934 Act referred to in subparagraph (c)(1) of Rule 144), and (ii) make and keep public information available as those terms are understood and defined in Rule 144 under the 1933 Act, all to the extent required from time to time to enable the Shareholder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144.  Upon the request of the Shareholder in connection with its sale pursuant to Rule 144, the Company shall deliver to such holder a written statement as to whether it has complied with such requirements.

13

(b)    Availability of Rule 144 Not Excuse for Obligations.  The fact that the Shareholder may become eligible to sell its Registrable Securities pursuant to Rule 144 shall not (i) cause such Securities to cease to be Registrable Securities or (ii) excuse the Company’s obligations set forth in this Agreement.
(c)    Upon request of the Shareholder, upon receipt by the Company of an opinion of counsel reasonably satisfactory to the Company to the effect that such legend is no longer required under the 1933 Act and applicable state laws, the Company shall promptly cause any legend affixed to any Registrable Securities to be removed from any certificate for any Registrable Securities, including by providing any opinion of counsel to the Company that may be required by the transfer agent to effect such removal.
9.    Lock Up Agreements.  
(a)    In consideration for the Company agreeing to its obligations under this Agreement, the Shareholder agrees in connection with any registration of the Company’s securities (whether or not it is participating in such registration) upon the request of the Company and the underwriters managing any underwritten offering of the Company’s securities, not to effect (other than pursuant to such registration) any public sale or distribution of Registrable Securities, including, but not limited to, any sale pursuant to Rule 144, or make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Registrable Securities, any other equity securities of the Company or any securities convertible into or exchangeable or exercisable for any equity securities of the Company without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days) beginning on the effective date of such registration as the Company and the underwriters may specify; provided, that nothing herein will prevent the Shareholder entity that is a partnership or corporation from making a distribution of Registrable Securities to the partners or shareholders thereof that is otherwise in compliance with applicable securities laws, so long as such distributees agree to be so bound; provided, further, that no such restrictions shall in any way limit the Shareholder or any of its Affiliates in engaging in any brokerage, investment advisory, financial advisory, anti-raid advisory, principaling, merger advisory, financing, asset management, trading, market making, arbitrage, investment activity and other similar activities conducted in the ordinary course of its respective business. The Company agrees to use its commercially reasonable efforts to work with the underwriters to limit any lock-up period under this Section 9 to the minimum number of days that the underwriters consider advisable.
10.    Term.  This Agreement will be effective as of the date hereof and will continue in effect thereafter until the earliest of (a) its termination by the consent of the Shareholder or its successor(s) in interest, (b) the date on which no Registrable Securities of the 

14

Shareholder (or any transferee thereof) remain outstanding and (c) the dissolution, liquidation or winding up of the Company.
11.    Defined Terms.  Capitalized terms when used in this Agreement have the following meanings:  
“1933 Act” means the Securities Act of 1933, as amended.
“1934 Act” means the Securities Exchange Act of 1934, as amended.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person, provided that, for purposes of this Agreement, the Company shall not be deemed an Affiliate of the Shareholder, and the Shareholder shall not be deemed an Affiliate of the Company.  For purposes of this definition, when used with respect to any Person, “control” means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have correlative meanings.
“Business Day” means any day, except a Saturday, Sunday or legal holiday on which banking institutions in The City of New York are authorized or obligated to close. 
“Full Cooperation” means, in connection with any underwritten offering, where, in addition to the cooperation otherwise required by this Agreement, (a) members of senior management of the Company (including the chief executive officer and chief financial officer) reasonably cooperate with the underwriter(s) in connection therewith and make themselves reasonably available to participate in “road-shows” and other customary marketing activities in such locations (domestic and foreign) as reasonably recommended by the underwriter(s) (including one-on-one meetings with prospective purchasers of the Registrable Securities) and (b) the Company prepares preliminary and final prospectuses for use in connection therewith containing such additional information as reasonably requested by the underwriter(s) (in additional to the minimum amount of information required by law, rule or regulation). 
“Person” means an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization or a government or department or agency thereof. 
“Register,” “registered” and “registration” refers to a registration effected by preparing and filing a Registration Statement in compliance with the 1933 Act, and the declaration or ordering of the effectiveness of such Registration Statement, and compliance with applicable state securities laws of such states in which the Shareholder notifies the Company of its intention to offer Registrable Securities.
“Registrable Securities” means (i) any Common Shares issued or delivered pursuant to the Purchase Agreement or (ii) any equity securities or warrants issued or issuable with respect to the securities referred to in the foregoing clause (i) by way of conversion, 

15

exercise or exchange thereof or share dividend or share split or in connection with a combination of shares, recapitalization, reclassification, merger, amalgamation, arrangement, consolidation or other reorganization. As to any particular securities constituting Registrable Securities, such securities will cease to be Registrable Securities when (x) they have been effectively registered or qualified for sale by prospectus filed under the 1933 Act and disposed of in accordance with the Registration Statement covering them, (y) subject to Section 8(b), such Registrable Security has been sold by the Shareholder pursuant to Rule 144 under circumstances in which any legend borne by such Registrable Security relating to restrictions on transferability thereof, under the 1933 Act or otherwise, is removed by the Company; or (z) such Registrable Security shall cease to be outstanding. For purposes of this Agreement, a Person will be deemed to be a holder of Registrable Securities whenever such Person has the right to acquire directly or indirectly such Registrable Securities (upon conversion, exercise or exchange in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected. 
“Registration Statement” means the prospectus and other documents filed with the SEC to effect a registration under the 1933 Act.
 “Rule 144” means Rule 144 under the 1933 Act or any successor or similar rule as may be enacted by the SEC from time to time, as in effect from time to time. 
“SEC” means the Securities and Exchange Commission.
“Selling Expenses” means all underwriting discounts, fees, selling commissions and related out-of-pocket expenses of and underwriters and such underwriters’ counsel and transfer taxes applicable to the sale of Registrable Securities hereunder. 
12.    Miscellaneous.
(a)    No Inconsistent Agreements.  Subject to Section 2(f), the Company will not hereafter enter into any agreement with respect to its securities that is more favorable or is inconsistent or conflicts with or violates the rights granted to the Shareholder in this Agreement.
(b)    Adjustments Affecting Registrable Securities.  The Company will not take any action, or permit any change to occur, with respect to its securities which would materially and adversely affect the ability of the Shareholder to include its Registrable Securities in a registration or qualification for sale by prospectus undertaken pursuant to this Agreement or which would adversely affect the marketability of such Registrable Securities in any such registration or qualification (including, without limitation, effecting a share split or a combination of shares).
(c)    Remedies.  The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party hereto will have the right to equitable relief, 

16

including specific performance and injunctive relief, in addition to all of its other rights and remedies at law or in equity, to enforce the provisions of this Agreement.
(d)    Amendments and Waivers.  Except as otherwise provided herein, the provisions of this Agreement may be amended or waived only by the written consent of the Company and the Shareholder.
(e)    Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, that the Shareholder may not assign or otherwise transfer its rights or obligations under this Agreement to any other Person without the prior written consent of the Company; provided, further, that no such prior written consent shall be required for an assignment to an affiliate of the Shareholder.
(f)    Severability.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
(g)    Counterparts.  This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement.
(h)    Descriptive Headings.  The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
(i)    Governing Law.  This Agreement and the rights and duties of the parties hereto hereunder shall be governed by and construed in accordance with laws of the State of New York, without giving effect to its principles or rules of conflict of laws to the extent such principles or rules are not mandatorily applicable by statute and would require or permit the application of the laws of another jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may be brought in any federal or state court located in the County and State of New York, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereinafter have to the laying of the venue of any such suit, action or proceeding which is 

17

brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 12(l) shall be deemed effective service of process on such party. 
EACH OF THE PARTIES HERETO HERBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(j)    Further Assurances.  Each of the parties hereto shall execute such documents and other papers and perform such further acts as may be reasonably required or advisable to carry out the provisions of this Agreement and the transactions contemplated hereby.
(k)    Organizational Documents.  Notwithstanding anything to the contrary herein, all applicable provisions of the Company’s bylaws and certificate of incorporation (the “Organizational Documents”) shall apply to this Agreement and any actions taken hereunder as if set forth herein, and any conflict between the Organizational Documents and this Agreement shall be resolved in favor of the provisions of the Organizational Documents. If any conflict between this Agreement and the Organizational Documents interferes in any material respect with the exercise of any Registration Request or other right or remedy hereunder, the Company shall use its commercially reasonable efforts to facilitate the exercise of such Registration Request or other right or remedy without conflict with the Organizational Documents.
(l)    Notices.  All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and shall be deemed to have been given (a) when personally delivered, (b) the day following the day (except if not a Business Day then the next Business Day) on which the same has been delivered prepaid to a reputable national overnight air courier service, (c) when transmitted via e-mail (including via attached pdf document) to the e-mail address set out below, if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid) or (d) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties as applicable, at the address, facsimile number or e-mail address set forth below:

18

To the Company:
COTY INC.
350 Fifth Avenue, New York, NY 100018
Attention:    Chief Financial Officer – Mr. Patrice de Talhouet
E-mail:    Patrice_deTalhouet@cotyinc.com 
with a copy (which shall not constitute notice to the Company) to:
COTY INC.
350 Fifth Avenue, New York, NY 100018
Attention:    General Counsel – Mr. Jules Kaufman
E-mail:    jules_kaufman@cotyinc.com 

To the Shareholder:
MOUSSELUXE S.à.r.l.
14-16 rue Philippe II, L-2340 Luxembourg
Attention:    Mr. Charles Heilbronn
E-mail:    cheilbronn@moussepartners.com
with a copy (which shall not constitute notice to the Shareholder) to:
CHANEL INTERNATIONAL BV
Boerhaavelaan 22, Zoetermeer 2713 HX, The Netherlands
Attention:    Mr. Lawrence C Maisel
E-mail:    LARRY.MAISEL@chanelusa.com 

; or to such other address as the party to whom notice is given may have previously furnished to the others in writing in the manner set forth above.
(m)    Entire Agreement.  This Agreement, together with the Organizational Documents, contains the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes and replaces all other prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof.
(n)    No Waivers; Third Party Beneficiary Rights.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.  Nothing in this Agreement, express or implied, is intended to confer on any Person (other than the parties hereto and any permitted transferee under Section 12(e) hereof) its heirs, successors, legal 

19

representatives or permitted assigns, any rights, remedies, obligations or liabilities under this Agreement.

[Remainder of this page left intentionally blank.]

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IN WITNESS WHEREOF, the undersigned have set their hands and seals as of the above date. 
Company

COTY INC.

By:    /s/ Jules Kaufman            
Name:    Jules Kaufman
Title:    SVP, General Counsel

Shareholder

MOUSSELUXE S.À.R.L.

By:    /s/ Charles Heilbronn            
Name:    Charles Heilbronn
Title:    Manager and Attorney in Fact

21

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