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Notary Public

Commission Expires:

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MOn5NUM6Wy2k2Fx4qUGWMxZcalz8dmIWvngFhxIe9djiuM9+NLV//UM1FzVAZtod P5tM3kik4gm91Q8Tkx3jHQ== 0000950134-08-009091.txt : 20080509 0000950134-08-009091.hdr.sgml : 20080509 20080509161322 ACCESSION NUMBER: 0000950134-08-009091 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20080506 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20080509 DATE AS OF CHANGE: 20080509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Pioneer Southwest Energy Partners L.P. CENTRAL INDEX KEY: 0001407463 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 260388421 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-34032 FILM NUMBER: 08818598 BUSINESS ADDRESS: STREET 1: 5205 N. O'CONNOR BLVD., SUITE 200 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: (972) 444-9001 MAIL ADDRESS: STREET 1: 5205 N. O'CONNOR BLVD., SUITE 200 CITY: IRVING STATE: TX ZIP: 75039 8-K 1 d56641e8vk.htm FORM 8-K e8vk

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
May 6, 2008

PIONEER SOUTHWEST ENERGY PARTNERS L.P.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation)	001-34032 (Commission File Number)	26-0388421 (I.R.S. Employer Identification Number)


5205 N. O’Connor Blvd Suite 200 Irving, Texas (Address of principal executive offices)		75039 (Zip code)

Registrant’s telephone number, including area code: (972) 444-9001

Not applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:


o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

General

As previously reported in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “Commission”) on April 30, 2008, Pioneer Southwest Energy Partners L.P. (the “Partnership”), Pioneer Natural Resources GP LLC (the “General Partner”), Pioneer Natural Resources Company (“Pioneer”), Pioneer Natural Resources USA, Inc. (“Pioneer USA”) and Pioneer Southwest Energy Partners USA LLC (the “Operating Company” and, together with the Partnership, the General Partner, Pioneer and Pioneer USA, the “Pioneer Parties”) entered into an Underwriting Agreement (the “Underwriting Agreement”) with Deutsche Bank Securities Inc., Citigroup Global Markets Inc. and UBS Securities LLC, as representatives of the several underwriters identified therein (collectively, the “Underwriters”), providing for the offer and sale in a firm commitment underwritten offering (the “Offering”) of 8,250,000 common units representing limited partner interests in the Partnership (“Common Units”), at a price of $19.00 per Common Unit ($17.67 per Common Unit, net of underwriting discount). Pursuant to the Underwriting Agreement, the Partnership granted the Underwriters a 30-day option to buy up to an aggregate of 1,237,500 additional Common Units at the same price, which was exercised in full by the Underwriters on May 2, 2008. The transactions contemplated by the Underwriting Agreement closed on May 6, 2008.

In the Underwriting Agreement, the Partnership agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”), or to contribute to payments the Underwriters may be required to make because of any of those liabilities.

Contribution Agreement

On May 6, 2008, the Partnership entered into the Contribution Agreement (the “Contribution Agreement”) with the General Partner and Pioneer USA. Following to the closing of the Offering, the following transactions, among others, occurred pursuant to the Contribution Agreement:

(i) Pioneer USA contributed a 0.10295172491645% membership interest in the Operating Company to the General Partner as an additional capital contribution;

(ii) Pioneer USA contributed a 73.3573936581775% membership interest in the Operating Company to the Partnership in exchange for 20,521,200 Common Units representing a 71.254% limited partner interest in the Partnership; and

(iii) the General Partner contributed a 0.10295172491645% membership interest in the Operating Company to the Partnership in exchange for a continuation of the General Partner’s .1% general partner interest in the Partnership.

These contributions were made in a series of steps outlined in the Contribution Agreement. As noted below in this Item 1.01, the Partnership has certain relationships with certain parties to the Contribution Agreement. The amount of consideration paid in connection with the transactions contemplated by the Contribution Agreement was determined through the pricing of the Common Units by the Underwriters in the public market. Pioneer USA and the General Partner made no representations or warranties with respect to the membership interests contributed pursuant to the Contribution Agreement. The foregoing description of the Contribution Agreement is not complete and is qualified in its entirety by reference to the Contribution Agreement, which is filed as Exhibit 2.1 to this Form 8-K and is incorporated by reference into this Item 1.01.

Membership Interest Sale Agreement

On May 6, 2008, the Partnership entered into the Membership Interest Sale Agreement (the “MIS Agreement”) with Pioneer USA. Pursuant to the MIS Agreement, following the closing of the Offering, the Partnership, among other things, acquired a 26.5396546169060% membership interest in the Operating Company for a purchase price of $141,061,250 in cash. The transactions contemplated by the Contribution Agreement and the MIS Agreement occurred as component parts of a single plan, pursuant to which the Partnership acquired all of the membership interests of the Operating Company and became its sole member. As noted below in this Item 1.01, the Partnership has certain relationships with certain parties to the MIS Agreement. The amount of consideration paid in connection with the transactions contemplated by the MIS Agreement was determined through the pricing of the Common Units by the Underwriters in the public market. The source of the funds for the purchase price under the MIS Agreement was the proceeds of the Offering. Pioneer USA made no representations or warranties with respect to the membership interests sold pursuant to the MIS Agreement. The foregoing description of the MIS Agreement is not complete and is qualified in its entirety by reference to the MIS Agreement, which is filed as Exhibit 2.2 to this Form 8-K and is incorporated by reference into this Item 1.01.

Purchase and Sale Agreement

On May 6, 2008, the Operating Company entered into the Purchase and Sale Agreement (the “Purchase Agreement”) with Pioneer USA and Pioneer Retained Properties Company LLC (the “Retained Company”). Following the closing of the transactions contemplated by the Contribution Agreement and the MIS Agreement, the Operating Company acquired certain wellbores and related assets and liabilities held by the Retained Company for a purchase price of $22,007,724 in cash. As noted below in this Item 1.01, the Partnership has certain relationships with certain parties to the Purchase Agreement. The amount of consideration paid in connection with the transactions contemplated by the Purchase Agreement was determined through the pricing of the Common Units by the Underwriters in the public market. The source of funds for the purchase price under the Purchase Agreement was the proceeds obtained from the exercise of the Underwriter’s over-allotment option under the Underwriting Agreement and an additional contribution by the General Partner to the Partnership, all of which was contributed by the Partnership to the Operating Company. Pioneer USA and the Retained Company made no representations or warranties with respect to the assets sold pursuant to the Purchase Agreement. The foregoing description of the Purchase Agreement is not complete and is qualified in its entirety by reference to the Purchase Agreement, which is filed as Exhibit 2.3 to this Form 8-K and is incorporated by reference into this Item 1.01.

Omnibus Agreement

On May 6, 2008, the Partnership entered in an Omnibus Agreement (the “Omnibus Agreement”) with the General Partner, Pioneer, Pioneer USA and the Operating Company. The description of the material terms of the Omnibus Agreement contained in the section entitled “Certain Relationships and Related Party Transactions—Omnibus Agreement” of the Partnership’s final prospectus dated April 30, 2008 (File No. 333-144868) and filed on May 1, 2008 with the Securities Exchange Commission pursuant to Rule 424(b)(4) under the Securities Act of 1933 (the “Prospectus”) is incorporated herein by reference. As noted in the Prospectus and below in this Item 1.01, the Partnership has certain relationships with certain parties to the Omnibus Agreement. The description of the Omnibus Agreement in the Prospectus is not complete and is qualified in its entirety by reference to the Omnibus Agreement, which is filed as Exhibit 2.4 to this Form 8-K and is incorporated by reference into this Item 1.01.

Long-Term Incentive Plan

In connection with the Offering, the board of directors of the General Partner adopted the Pioneer Southwest Energy Partners L.P. 2008 Long-Term Incentive Plan (the “Plan”) for directors, employees and consultants of the General Partner and its affiliates who perform services for the Partnership. The description of the material terms of the Plan contained in the section entitled “Management—Long Term

Incentive Plan” of the Prospectus is incorporated herein by reference. The description of the Plan in the Prospectus is not complete and is qualified in its entirety by reference to the Plan, which is filed as Exhibit 10.1 to this Form 8-K and is incorporated by reference into this Item 1.01.

Administrative Services Agreement

On May 6, 2008, the Partnership entered into an Administrative Services Agreement (the “Administrative Services Agreement”) with the General Partner, the Operating Company and Pioneer USA. The description of the material terms of the Administrative Services Agreement contained in the section entitled “Certain Relationships and Related Party Transactions—Administrative Services Agreement” of the Prospectus is incorporated herein by reference. As noted in the Prospectus and below in this Item 1.01, the Partnership has certain relationships with certain parties to the Administrative Services Agreement. The description of the Administrative Services Agreement in the Prospectus is not complete and is qualified in its entirety by reference to the Administrative Services Agreement, which is filed as Exhibit 10.2 to this Form 8-K and is incorporated by reference into this Item 1.01.

Tax Sharing Agreement

On May 6, 2008, the Partnership entered into a Tax Sharing Agreement (the “Tax Sharing Agreement”) with Pioneer. The description of the material terms of the Tax Sharing Agreement contained in the section entitled “Certain Relationships and Related Party Transactions—Tax Sharing Agreement” of the Prospectus is incorporated herein by reference. As noted in the Prospectus and below in this Item 1.01, the Partnership has certain relationships with certain parties to the Tax Sharing Agreement. The description of the Tax Sharing Agreement in the Prospectus is not complete and is qualified in its entirety by reference to the Tax Sharing Agreement, which is filed as Exhibit 10.3 to this Form 8-K and is incorporated by reference into this Item 1.01.

Omnibus Operating Agreement

On May 6, 2008, the Operating Company entered into an Omnibus Operating Agreement (the “Omnibus Operating Agreement”) with Pioneer USA. The description of the material terms of the Omnibus Operating Agreement contained in the section entitled “Certain Relationships and Related Party Transactions—Omnibus Operating Agreement” of the Prospectus is incorporated herein by reference. As noted in the Prospectus and below in this Item 1.01, the Partnership has certain relationships with certain parties to the Omnibus Operating Agreement. The description of the Omnibus Operating Agreement in the Prospectus is not complete and is qualified in its entirety by reference to the Omnibus Operating Agreement, which is filed as Exhibit 10.4 to this Form 8-K and is incorporated by reference into this Item 1.01.

Relationships

As more fully described in the section entitled “Certain Relationships and Related Party Transactions” of the Prospectus, which is incorporated herein by reference, each of the Partnership, the General Partner, the Operating Company, Pioneer USA and the Retained Company are direct or indirect subsidiaries of Pioneer. As a result, certain individuals, including officers and directors of Pioneer, Pioneer USA and the General Partner, serve as officers and/or directors of more than one of such entities. As described above in this Item 1.01, the General Partner holds a 0.1% general partner interest in the Partnership and Pioneer USA owns a 71.254% limited partner interest in the Partnership. Certain of the Underwriters and their affiliates have performed investment banking, commercial banking and advisory services for the Pioneer Parties for which they have received customary fees and expenses. The Underwriters and their affiliates may in the future perform investment banking and advisory services for the Pioneer Parties from time to time for which they may in the future receive customary fees and expenses. The description of the relationships among the Pioneer Parties and the

Underwriters contained in the section entitled “Underwriting” of the Prospectus is incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets.

Contribution Agreement

The description of the Contribution Agreement described under Item 1.01 is incorporated in this Item 2.01 by reference. A copy of the Contribution Agreement is filed as Exhibit 2.1 to this Form 8-K and is incorporated by reference into this Item 2.01.

Membership Interest Sale Agreement

The description of the MIS Agreement described under Item 1.01 is incorporated in this Item 2.01 by reference. A copy of the MIS Agreement is filed as Exhibit 2.2 to this Form 8-K and is incorporated by reference into this Item 2.01.

Purchase and Sale Agreement

The description of the Purchase Agreement described under Item 1.01 is incorporated in this Item 2.01 by reference. A copy of the Purchase Agreement is filed as Exhibit 2.3 to this Form 8-K and is incorporated by reference into this Item 2.01.

Item 3.02 Unregistered Sales of Equity Securities.

The description in Item 1.01 above of the issuance by the Partnership on May 6, 2008 in connection with the consummation of the transactions contemplated by the Contribution Agreement of 20,521,200 Common Units to Pioneer USA is incorporated herein by reference. The foregoing transaction was undertaken in reliance upon the exemption from the registration requirements of the Securities Act afforded by Section 4(2) thereof.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Changes in Fiscal Year.

First Amended and Restated Agreement of Limited Partnership of Pioneer Southwest Energy Partners L.P.

On May 6, 2008, the Partnership amended and restated its Agreement of Limited Partnership in connection with the closing of the Offering. The description of the First Amended and Restated Agreement of Limited Partnership contained in the section entitled “The Partnership Agreement” of the Prospectus is incorporated herein by reference. A copy of the First Amended and Restated Agreement of Limited Partnership is filed as Exhibit 3.1 to this Form 8-K and is incorporated by reference into this Item 5.03.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits



	2.1			Contribution Agreement, dated May 6, 2008, by and among the Partnership, Pioneer USA and the General Partner.

	2.2			Membership Interest Sale Agreement, dated May 6, 2008, by and among the Partnership and Pioneer USA.



2.3	*	Purchase and Sale Agreement, dated May 6, 2008, by and among Pioneer USA, the Operating Company and the Retained Company.

2.4	*	Omnibus Agreement, dated May 6, 2008, by and among the Partnership, Pioneer USA, Pioneer, the Operating Company and the General Partner.

3.1		First Amended and Restated Agreement of Limited Partnership of Pioneer Southwest Energy Partners L.P., dated May 6, 2008.

10.1		Pioneer Southwest Energy Partners L.P. 2008 Long Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Partnership’s Amendment No. 6 to Registration Statement on Form S-1, File No. 333-144868, filed with the SEC on March 31, 2008).

10.2		Administrative Services Agreement, dated May 6, 2008, by and among the Partnership, Pioneer USA, the Operating Company and the General Partner.

10.3		Tax Sharing Agreement, dated May 6, 2008, by and among the Partnership and Pioneer.

10.4		Omnibus Operating Agreement, dated May 6, 2008, by and among Pioneer USA and the Operating Company.



*		Pursuant to the rules of the Commission, the schedules and similar attachments to the agreement have not been filed herewith. The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	PIONEER	SOUTHWEST ENERGY PARTNERS L.P.

	By:	Pioneer Natural Resources GP LLC,

		its general partner

	By:	/s/ Richard P. Dealy

	Name:	Richard P. Dealy

	Title:	Executive Vice President, Chief Financial Officer and Treasurer

Dated: May 9, 2008

EXHIBIT INDEX


Exhibit
Number		Exhibit Title

2.1		Contribution Agreement, dated May 6, 2008, by and among the Partnership, Pioneer USA and the General Partner.

2.2		Membership Interest Sale Agreement, dated May 6, 2008, by and among the Partnership and Pioneer USA.

2.3*		Purchase and Sale Agreement, dated May 6, 2008, by and among Pioneer USA, the Operating Company and the Retained Company.

2.4*		Omnibus Agreement, dated May 6, 2008, by and among the Partnership, Pioneer USA, Pioneer, the Operating Company and the General Partner.

3.1		First Amended and Restated Agreement of Limited Partnership of Pioneer Southwest Energy Partners L.P., dated May 6, 2008.

10.1		Pioneer Southwest Energy Partners L.P. 2008 Long Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Partnership’s Amendment No. 6 to Registration Statement on Form S-1, File No. 333-144868, filed with the SEC on March 31, 2008).

10.2		Administrative Services Agreement, dated May 6, 2008, by and among the Partnership, Pioneer USA, the Operating Company and the General Partner.

10.3		Tax Sharing Agreement, dated May 6, 2008, by and among the Partnership and Pioneer.

10.4		Omnibus Operating Agreement, dated May 6, 2008, by and among Pioneer USA and the Operating Company.



*		Pursuant to the rules of the Commission, the schedules and similar attachments to the agreement have not been filed herewith. The registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.

EX-2.1 2 d56641exv2w1.htm CONTRIBUTION AGREEMENT exv2w1

EXHIBIT 2.1

EXECUTION VERSION

CONTRIBUTION AGREEMENT
by and among
PIONEER NATURAL RESOURCES USA, INC.
PIONEER NATURAL RESOURCES GP LLC
and
PIONEER SOUTHWEST ENERGY PARTNERS L.P.

May 6, 2008

TABLE OF CONTENTS


	Page
ARTICLE I DEFINITIONS
1.1 Definitions		2
1.2 Construction		3

ARTICLE II CONTRIBUTIONS
2.1 Contribution by Pioneer USA to the General Partner of the GP Contribution Interest in Operating Company		4
2.2 Contributions by Pioneer USA and the General Partner		4
2.3 Redemption of the Initial General Partner Interest and the Initial Limited Partner Interest		4

ARTICLE III MISCELLANEOUS
3.1 Order of Completion of Transactions		5
3.2 Investment Intent		5
3.3 No Representations and Warranties		5
3.4 Choice of Law		5
3.5 Notice		5
3.6 Entire Agreement		6
3.7 Jurisdiction; Service of Process		6
3.8 Further Action		6
3.9 Binding Effect		6
3.10 Effect of Waiver or Consent		6
3.11 Counterparts		6
3.12 Invalidity of Provisions		6
3.13 Assignment		7
3.14 Direct or Indirect Action		7
3.15 Laws and Regulations		7
3.16 No Recourse Against Officers, Directors, Managers or Employees		7
3.17 Arbitration		8

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT, dated as of May 6, 2008, is entered into by and among Pioneer Natural Resources USA, Inc., a Delaware corporation (“Pioneer USA”), Pioneer Natural Resources GP LLC, a Delaware limited liability company (the “General Partner”), and Pioneer Southwest Energy Partners L.P., a Delaware limited partnership (“MLP”). The foregoing parties hereto are referred to in this Agreement individually as a “Party” and collectively as the “Parties.” Each capitalized term used herein that is defined in Section 1.1 shall have the meaning assigned to such term in Section 1.1. Other terms defined herein have the meanings so given them.

RECITALS

A. Pioneer USA and the General Partner have formed MLP pursuant to the Delaware Revised Uniform Limited Partnership Act (the “Delaware Limited Partnership Act”), for the purpose of engaging in any business activity that is approved by the General Partner, and that lawfully may be conducted by a limited partnership organized pursuant to the Delaware Limited Partnership Act.

B. In order to accomplish the objectives and purposes in Recital A, the following actions have been taken prior to the date hereof:

	1.		Pioneer USA formed the General Partner under the terms of the Delaware Limited Liability Company Act and contributed $1,000 in exchange for all of the membership interest in the General Partner.

	2.		Pioneer USA and the General Partner formed MLP under the terms of the Delaware Limited Partnership Act to which the General Partner contributed $1 and Pioneer USA contributed $999 in exchange for a .1% general partner interest (the “Initial General Partner Interest”) and a 99.9% limited partner interest (the “Initial Limited Partnership Interest”) in MLP, respectively.

	3.		Pioneer USA formed Operating Company under the terms of the Texas Limited Liability Company Act and contributed $1,000 in exchange for all of the membership interests in Operating Company.

	4.		The Merger has been consummated.

C. Pioneer USA and MLP desire for MLP, pursuant to the transactions to be effected pursuant to this Agreement and the Membership Interest Sale Agreement, to acquire 100% of the membership interest in the Operating Company (the “Acquisition”).

D. The Acquisition will be consummated immediately after the issuance of the IPO Units by MLP.

NOW, THEREFORE, in consideration of their mutual undertakings and agreements hereunder, the Parties undertake and agree as follows:

ARTICLE I
DEFINITIONS

1.1 Definitions. The following capitalized terms have the meanings given below.

“AAA” means the American Arbitration Association.

“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.

“Agreement” means this Contribution Agreement.

“Assets” means the membership interests in the Operating Company contributed to MLP pursuant to the terms of this Agreement.

“Conflicts Committee” has the meaning assigned to such term in the Partnership Agreement.

“Delaware Limited Partnership Act” has the meaning assigned to such term in Recital A to this Agreement.

“Dispute” has the meaning assigned to such term in Section 3.17 to this Agreement.

“General Partner” has the meaning assigned to such term in the first paragraph of this Agreement.

“GP Contribution Interest” means a 0.10295172491645% membership interest in the Operating Company.

“Initial General Partner Interest” has the meaning assigned to such term in Item 2 of Recital B to this Agreement.

“Initial Limited Partner Interest” has the meaning assigned to such term in Item 2 of Recital B to this Agreement.

“IPO Units” means 8,250,000 common units representing limited partner interests in MLP to be issued by MLP to the underwriters in connection with MLP’s initial public offering of such common units.

“Limited Partners” has the meaning assigned to such term in the Partnership Agreement.

“Membership Interest Sale Agreement” means the Membership Interest Sale Agreement dated May 6, 2008 between Pioneer USA and MLP, which agreement is being entered into simultaneously with the execution of this Agreement.

“Merger” has the meaning assigned to such term in the Merger Agreement.

“Merger Agreement” means the Agreement and Plan of Merger, dated as of May 1, 2008, among Pioneer USA, the Operating Company, Pioneer Retained Properties Company LLC, and Pioneer Limited Natural Resources Properties LLC.

“MLP” has the meaning assigned to such term in the first paragraph of this Agreement.

“Operating Company” means Pioneer Southwest Energy Partners USA LLC, a Texas limited liability company.

“Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of MLP, dated as of May 6, 2008, as the same may be amended or restated from time to time.

“Party” or “Parties” have the meanings assigned to such terms in the first paragraph of this Agreement.

“Person” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity.

“Pioneer USA” has the meaning assigned to such term in the first paragraph of this Agreement.

“Representatives” means, with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.

“Rules” means the Commercial Arbitration Rules of the AAA.

“Units” means 20,521,200 common units representing limited partner interests in MLP.

“Voting Securities” means securities of any class of a Person entitling the holders thereof to vote in the election of, or to appoint, members of the board of directors or other similar governing body of the Person and, with respect to MLP, means common units representing limited partners interests in MLP.

1.2 Construction. Unless the context requires otherwise: (1) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (2) references to Articles and Sections refer to Articles and Sections of this Agreement; (3) the terms “include,”

“includes,” “including” and words of like import shall be deemed to be followed by the words “without limitation”; (4) the terms “hereof,” “herein” and “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; and (5) references to money refer to legal currency of the United States of America. The table of contents and headings contained in this Agreement are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Agreement.

ARTICLE II
CONTRIBUTIONS

2.1 Contribution by Pioneer USA to the General Partner of the GP Contribution Interest in Operating Company. Immediately after the issuance of the IPO Units, and prior to the transactions described in Section 2.2, Pioneer USA hereby grants, contributes, transfers, assigns and conveys to the General Partner, its successors and assigns, for its and their own use forever, all of Pioneer USA’s right, title and interest in and to the GP Contribution Interest, and the General Partner hereby accepts the GP Contribution Interest as an additional contribution to the capital of the General Partner.

2.2 Contributions by Pioneer USA and the General Partner. Immediately after the transaction described in Section 2.1, (a) Pioneer USA hereby grants, contributes, transfers, assigns and conveys to MLP, its successors and assigns, for its and their own use forever, all of Pioneer USA’s right, title and interest in and to a 73.3573936581775% membership interest in Operating Company in exchange for Units representing a 71.254% limited partner interest in MLP and MLP hereby accepts such membership interest as a contribution to the capital of MLP, and (b) the General Partner hereby grants, contributes, transfers, assigns and conveys to MLP, its successors and assigns, for its and their own use forever, all of the General Partner’s right, title and interest in and to the GP Contribution Interest, and MLP hereby accepts the GP Contribution Interest in exchange for a continuation of the General Partner’s .1% general partner interest in MLP. MLP hereby accepts the membership interests in the Operating Company conveyed to it pursuant to this Section 2.2 and assumes the obligations attributable to such interests that arise on and after the date of this Agreement. The transactions described in this Section 2.2 and the sale by Pioneer USA of a 26.5396546169060% interest in the Operating Company to MLP pursuant to the Membership Interest Sale Agreement shall all occur simultaneously and as component parts of a single plan.

2.3 Refund to General Partner and Redemption of the Initial Limited Partner Interest. MLP hereby (a) refunds the $1 to the General Partner that was contributed to MLP by the General Partner for the Initial General Partner Interest, and (b) redeems the Initial Limited Partner Interest from Pioneer USA and retires the Initial Limited Partner Interest in exchange for a payment in cash to Pioneer USA equal to an aggregate $999.

ARTICLE III
MISCELLANEOUS

3.1 Order of Completion of Transactions. The transactions provided for in Article II of this Agreement shall be deemed completed on the date of this Agreement in the order set forth in Article II (the completion of each such succeeding transaction being conditioned on the concurrent completion of the prior transactions).

3.2 Investment Intent. The membership interest in the Operating Company to be acquired by MLP is being acquired for its own account, for investment and with no intention of distributing or reselling such membership interest or any part thereof or interest therein in any transaction which would be a violation of the securities laws of the United States of America or any state or foreign country or jurisdiction. The Units to be acquired by Pioneer USA are being acquired for its own account, for investment and with no intention of distributing or reselling such Units or any part thereof or interest therein in any transaction which would be a violation of the securities laws of the United States of America or any state or foreign country or jurisdiction.

3.3 No Representations and Warranties. Pioneer USA and the General Partner make no representations or warranties whatsoever, and disclaim all liability and responsibility for any representation, warranty, statement, or information made or communicated (orally or in writing) to MLP (including any opinion, information, or advice which may have been provided to MLP by any Affiliate or Representative of Pioneer USA and the General Partner or by any investment bank or investment banking firm, any petroleum engineer or engineering firm, Pioneer USA’s and the General Partner’s counsel, or any other agent, consultant, or representative) regarding the Assets or the assets, liabilities or operations of the Operating Company.

3.4 Choice of Law. This Agreement shall be subject to and governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state.

3.5 Notice. All notices, requests or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be given by depositing same in the United States mail, addressed to the Person to be notified, postpaid, and registered or certified with return receipt requested or by delivering such notice in person or by telecopier or telegram to such Party. Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by telegram or telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours. All notices to be sent to a Party pursuant to this Agreement shall be sent to or made to the attention of such Party at the address set forth below or at such other address as such Party may stipulate to the other Parties in the manner provided in this Section 3.5.

5205 N. O’Connor Blvd., Suite 200
Irving, Texas 75039
Phone: (972) 444-9001
Fax: (972) 969-3587
Attention: General Counsel

3.6 Entire Agreement. This Agreement constitutes the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein.

3.7 Jurisdiction; Service of Process. Without limiting the Parties’ agreement to arbitrate in Section 3.17, any action or proceeding seeking a temporary or preliminary injunction to enforce any provision of, or based on any right arising out of, this Agreement must be brought against any of the Parties in the courts of the State of Texas, County of Dallas, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Texas (Dallas Division), and each of the Parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) for such limited purpose in any such action or proceeding and waives any objection to venue laid therein for such limited purpose. Process in any action or proceeding referred to in the preceding sentence may be served on any Party anywhere in the world.

3.8 Further Action. In connection with this Agreement and all transactions contemplated by this Agreement, each Party agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.

3.9 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns, as well as any Persons asserting rights or claims on behalf of any of the foregoing Persons.

3.10 Effect of Waiver or Consent. No waiver or consent, express or implied, by any Party to or of any breach or default by any Party in the performance by such Party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such Party of the same or any other obligations of such Party hereunder. Failure on the part of a Party to complain of any act of any Party or to declare any Party in default, irrespective of how long such failure continues, shall not constitute a waiver by such Party of its rights hereunder until the applicable statute of limitations period has run.

3.11 Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the Parties hereto, notwithstanding that all such Parties are not signatories to the original or the same counterpart. Each Party shall become bound by this Agreement immediately upon affixing its signature hereto.

3.12 Invalidity of Provisions. If any provision of this Agreement or the application thereof to any Party or circumstance shall be held invalid or unenforceable to any extent, the

remainder of this Agreement and the application of such provision to other Parties or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

3.13 Assignment. No Party shall have the right to assign its rights or obligations under this Agreement without the prior written consent of the other Parties; provided, however, a merger shall not be deemed to be an assignment and a transfer of the rights and an assumption of the obligations under this Agreement; provided further, however, that the transfer of all or substantially all of the assets of a Party shall not be deemed an assignment of such rights or obligations of such Party to this Agreement if the assignee assumes all of the obligations under this Agreement.

3.14 Direct or Indirect Action. Where any provision of this Agreement refers to action to be taken by any Party, or which such Party is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Party, including actions taken by or on behalf of any Affiliate of such Party.

3.15 Laws and Regulations. Notwithstanding any provision of this Agreement to the contrary, no Party shall be required to take any act, or fail to take any act, under this Agreement if the effect thereof would be to cause such Party to be in violation of any applicable law, statute, rule or regulation.

3.16 No Recourse Against Officers, Directors, Managers or Employees. For the avoidance of doubt, the provisions of this Agreement shall not give rise to any right of recourse against any officer, director, manager or employee of any Party or any officer, director, manager or employee of any Affiliate of any Party.

3.17 Arbitration. Any claim, counterclaim, demand, cause of action, dispute, or any other controversy arising out of or relating in any way to this Agreement or to the subject matter of this Agreement or to any relationship created thereby (each a “Dispute”) shall be resolved by binding arbitration. A Dispute must be resolved through arbitration regardless of whether the Dispute involves claims that this Agreement is unlawful, unenforceable, void or voidable or involves claims sounding in tort, contract, statute or common law. This Section 3.17 shall be binding on and shall inure to the benefit of the Parties and their Affiliates. The validity, construction and interpretation of this Agreement to arbitrate, and all other procedural aspects of the arbitration conducted pursuant hereto, shall be decided by the arbitral tribunal. Any arbitration under this Agreement shall be administered by the AAA and conducted in accordance with the Rules of the AAA in existence at the time of the arbitration. In resolving any Dispute, the arbitral tribunal shall refer to the governing law as specified in Section 3.4 of this Agreement. The arbitral tribunal shall not be empowered to award exemplary, punitive, indirect, consequential, remote, speculative, treble, multiple or special damages, and the Parties and their Affiliates waive any right they may have to recover such damages from one another. The arbitral tribunal shall not be empowered to decide any dispute ex aequo et bono or amiable compositeur. The seat (or legal place) and venue of the arbitration shall be in Dallas, Texas. The arbitration shall be conducted in the English language.

The Dispute shall be decided by a panel of three neutral arbitrators. The claimant or claimants shall nominate an arbitrator at the time of service of a request for arbitration. The respondent or respondents shall nominate an arbitrator at the time of service of the response to the request for arbitration. If the claimant(s) or respondent(s) fail to appoint an arbitrator, then that arbitrator shall be appointed in accordance with the Rules. The two appointed arbitrators shall together agree upon a third arbitrator to recommend to the AAA to chair the arbitration. If the two party-appointed arbitrators are unable to agree upon an arbitrator within fifteen (15) days of the respondent’s appointment of an arbitrator, then the chairman shall be chosen according to the Rules. Notwithstanding the foregoing, if two or more respondents have interests with regard to a Dispute that are not completely common, then all arbitrators shall be appointed in accordance with the Rules and not by nomination or appointment by the Parties. Any arbitration award may be enforced by the courts sitting in Dallas, Texas or any other court of competent subject matter jurisdiction (including any jurisdiction in which a Party holds or keeps assets). Any action to challenge, vacate or set aside the award in whole or in part must be brought in the courts sitting in Dallas, Texas. The Parties and their Affiliates agree to waive any objections they may have to personal jurisdiction, venue or forum non-conveniens for any action brought to enforce the award in the courts sitting in Dallas, Texas or any other jurisdiction where a party against which enforcement of the award is sought holds or keeps assets.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first above written.


PIONEER NATURAL RESOURCES USA, INC.

By:		/s/ Richard P. Dealy
Name:		Richard P. Dealy
Title:		Executive Vice President and Chief Financial Officer

PIONEER NATURAL RESOURCES GP LLC

By:		/s/ Richard P. Dealy
Name:		Richard P. Dealy
Title:		Executive Vice President and Chief Financial Officer

PIONEER SOUTHWEST ENERGY PARTNERS L.P.

By Pioneer Natural Resources GP LLC, Its general partner

By:		/s/ Richard P. Dealy
Name:		Richard P. Dealy
Title:		Executive Vice President and Chief Financial Officer

Signature page to Contribution Agreement

EX-2.2 3 d56641exv2w2.htm MEMBERSHIP INTEREST SALE AGREEMENT exv2w2

EXHIBIT 2.2

EXECUTION VERSION

MEMBERSHIP INTEREST SALE AGREEMENT

This Membership Interest Sale Agreement (the “Agreement”) is executed as of May 6, 2008 between Pioneer Natural Resources USA, Inc., a Delaware corporation (“Pioneer USA”), and Pioneer Southwest Energy Partners L.P., a Delaware limited partnership (“MLP”, and together with Pioneer USA, being sometimes collectively referred to as the “Parties” and individually as a “Party”).

RECITALS:

A. Pioneer USA is the sole member and holds 100% of the membership interest in Pioneer Southwest Energy Partners USA LLC, a Texas limited liability company (the “Operating Company”), pursuant to that certain Limited Liability Company Agreement dated October 7, 2007.

B. The Merger has been consummated.

C. Pioneer USA and MLP desire for MLP, pursuant to the transactions to be effected pursuant to this Agreement and the Contribution Agreement, to acquire 100% of the membership interest in the Operating Company (the “Acquisition”).

D. The Acquisition will be consummated immediately after the issuance of the IPO Units by MLP.

E. MLP wishes to be admitted to the Operating Company as the sole member of the Operating Company.

DEFINITIONS

The following capitalized terms have the meanings given below:

“AAA” means the American Arbitration Association.

“Agreement” has the meaning assigned to such term in the first paragraph of this Agreement.

“Assignment and Assumption Agreement” means the form of Assignment and Assumption Agreement attached hereto as Exhibit A.

“Closing” means the closing of the purchase and sale of the Interest.

“Contribution Agreement” means the Contribution Agreement by and among Pioneer USA, Pioneer Natural Resources GP LLC and MLP dated May 6, 2008, which agreement is being entered into simultaneously with the execution of this Agreement.

“Dispute” has the meaning assigned to such term in Section 20 of this Agreement.

“Interest” means a 26.5396546169060% membership interest in the Operating Company.

“Merger” has the meaning assigned to such term in the Merger Agreement.

“MLP” has the meaning assigned to such term in the first paragraph of this Agreement.

“Operating Company” has the meaning assigned to such term in Recital A of this Agreement.

“Party” or “Parties” have the meanings assigned to such terms in the first paragraph of this Agreement.

“Pioneer USA” has the meaning assigned to such term in the first paragraph of this Agreement.

“Rules” means the Commercial Arbitration Rules of the AAA.

AGREEMENTS

For valuable consideration, whose receipt and sufficiency are hereby acknowledged, the Parties agree as follows:

1. Purchase and Sale; Assumption. Pursuant to the terms of this Agreement, Pioneer USA hereby agrees to sell to MLP, and MLP hereby agrees to purchase from Pioneer USA, all of Pioneer USA’s right, title, and interest in and to the Interest. Pursuant to the terms of this Agreement, MLP hereby agrees to assume the obligations attributable to the Interest that arise on and after the Closing. At the Closing, Pioneer USA and MLP agree to execute and deliver to each other the Assignment and Assumption Agreement.

2. Payment and Closing. In consideration of the sale of the Interest by Pioneer USA to MLP, MLP, at the Closing, shall pay to Pioneer USA $141,061,250 in cash by wire transfer to an account designated by Pioneer USA. The Closing will occur on the date of this Agreement. The Closing and the transactions described in Section 2.2 of the Contribution Agreement shall all occur simultaneously and as component parts of a single plan.

3. Admission. Pursuant to the Assignment and Assumption Agreement, MLP shall be admitted as the sole member and owner of 100% of the membership interest in the Operating Company, and MLP’s admission as the sole member of the Operating Company shall be reflected in the books and records of the Operating Company.

4. Tax Deferred Exchange. If Pioneer USA so requests, MLP agrees to cooperate with Pioneer USA in a tax-deferred exchange described in Section 1031 of the Internal Revenue Code of 1986, as amended, with respect to the transaction described in this Agreement. In that case, the Assignment and Assumption Agreement will be executed by Pioneer USA’s assignee unless such assignee directs Pioneer USA to execute the Assignment and Assumption Agreement. Notwithstanding the foregoing, MLP shall not be obligated to enter into any agreement or to consent to an assignment of Pioneer USA’s rights or obligations hereunder which may have the effect of (i) impairing the title to the Interest, (ii) increasing MLP’s obligations or liability hereunder or resulting in any additional cost, expense, or liability to MLP, or (iii) requiring MLP to execute a purchase agreement for the purchase of the exchange property or to take record title to the exchange property. Pioneer USA hereby agrees to indemnify, defend, and hold MLP harmless from and against any and all costs, expenses, claims, damages, losses, or liabilities (including reasonable attorney fees and costs) incurred by MLP in connection with any exchange transaction or transactions or the performance by MLP of its obligations pursuant to this Section 4.

5. Investment Intent. The Interest to be acquired by MLP is being acquired for its own account, for investment and with no intention of distributing or reselling such Interest or any part thereof or interest therein in any transaction which would be a violation of the securities laws of the United States of America or any state or foreign country or jurisdiction.

6. No Representations and Warranties. Pioneer USA makes no representations or warranties whatsoever, and disclaims all liability and responsibility for any representation, warranty, statement, or information made or communicated (orally or in writing) to MLP

(including any opinion, information, or advice which may have been provided to MLP by any Affiliate or Representative of Pioneer USA or by any investment bank or investment banking firm, any petroleum engineer or engineering firm, Pioneer USA’s counsel, or any other agent, consultant, or representative) regarding the Interest or the assets, liabilities or operations of the Operating Company.

7. Choice of Law. This Agreement shall be subject to and governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state.

8. Notice. All notices, requests or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be given by depositing same in the United States mail, addressed to the Person to be notified, postpaid, and registered or certified with return receipt requested or by delivering such notice in person or by telecopier or telegram to such Party. Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by telegram or telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours. All notices to be sent to a Party pursuant to this Agreement shall be sent to or made to the attention of such Party at the address set forth below or at such other address as such Party may stipulate to the other Party in the manner provided in this Section 8.

5205 N. O’Connor Blvd., Suite 200
Irving, Texas 75039
Phone: (972) 444-9001
Fax: (972) 969-3587
Attention: General Counsel

9. Entire Agreement. This Agreement and the Assignment and Assumption Agreement constitute the entire agreement of the Parties relating to the matters contained herein and therein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein and therein.

10. Jurisdiction; Service of Process. Without limiting the Parties’ agreement to arbitrate in Section 20, any action or proceeding seeking a temporary or preliminary injunction to enforce any provision of, or based on any right arising out of, this Agreement must be brought against any of the Parties in the courts of the State of Texas, County of Dallas, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Texas (Dallas Division), and each of the Parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) for such limited purpose in any such action or proceeding and waives any objection to venue laid therein for such limited purpose. Process in any action or proceeding referred to in the preceding sentence may be served on any Party anywhere in the world.

11. Further Action. In connection with this Agreement and all transactions contemplated by this Agreement, each Party agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or

appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.

12. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns, as well as any Persons asserting rights or claims on behalf of any of the foregoing Persons.

13. Effect of Waiver or Consent. No waiver or consent, express or implied, by any Party to or of any breach or default by any Party in the performance by such Party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such Party of the same or any other obligations of such Party hereunder. Failure on the part of a Party to complain of any act of any Party or to declare any Party in default, irrespective of how long such failure continues, shall not constitute a waiver by such Party of its rights hereunder until the applicable statute of limitations period has run.

14. Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the Parties hereto, notwithstanding that all such Parties are not signatories to the original or the same counterpart. Each Party shall become bound by this Agreement immediately upon affixing its signature hereto.

15. Invalidity of Provisions. If any provision of this Agreement or the application thereof to any Party or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Parties or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

16. Assignment. Except as provided in Section 4 of this Agreement, no Party shall have the right to assign its rights or obligations under this Agreement without the prior written consent of the other Party; provided, however, a merger shall not be deemed to be an assignment and a transfer of the rights and an assumption of the obligations under this Agreement; provided further, however, that the transfer of all or substantially all of the assets of a Party shall not be deemed an assignment of such rights or obligations of such Party to this Agreement if the assignee assumes all of the obligations under this Agreement.

17. Direct or Indirect Action. Where any provision of this Agreement refers to action to be taken by any Party, or which such Party is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Party, including actions taken by or on behalf of any Affiliate of such Party.

18. Laws and Regulations. Notwithstanding any provision of this Agreement to the contrary, no Party shall be required to take any act, or fail to take any act, under this Agreement if the effect thereof would be to cause such Party to be in violation of any applicable law, statute, rule or regulation.

19. No Recourse Against Officers, Directors, Managers or Employees. For the avoidance of doubt, the provisions of this Agreement shall not give rise to any right of recourse

against any officer, director, manager or employee of any Party or any officer, director, manager or employee of any Affiliate of any Party.

20. Arbitration. Any claim, counterclaim, demand, cause of action, dispute, or any other controversy arising out of or relating in any way to this Agreement or to the subject matter of this Agreement or to any relationship created thereby (each a “Dispute”) shall be resolved by binding arbitration. A Dispute must be resolved through arbitration regardless of whether the Dispute involves claims that this Agreement is unlawful, unenforceable, void or voidable or involves claims sounding in tort, contract, statute or common law. This Section 20 shall be binding on and shall inure to the benefit of the Parties and their Affiliates. The validity, construction and interpretation of this Agreement to arbitrate, and all other procedural aspects of the arbitration conducted pursuant hereto, shall be decided by the arbitral tribunal. Any arbitration under this Agreement shall be administered by the AAA and conducted in accordance with the Rules of the AAA in existence at the time of the arbitration. In resolving any Dispute, the arbitral tribunal shall refer to the governing law as specified in Section 7 of this Agreement. The arbitral tribunal shall not be empowered to award exemplary, punitive, indirect, consequential, remote, speculative, treble, multiple or special damages, and the Parties and their Affiliates waive any right they may have to recover such damages from one another. The arbitral tribunal shall not be empowered to decide any dispute ex aequo et bono or amiable compositeur. The seat (or legal place) and venue of the arbitration shall be in Dallas, Texas. The arbitration shall be conducted in the English language.

21. Construction. Unless the context requires otherwise: (1) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (2) references to Articles and Sections refer to Articles and Sections of this Agreement; (3) references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made a part hereof for all purposes; (4) the terms “include,” “includes,” “including” and words of like import shall be

deemed to be followed by the words “without limitation”; (5) the terms “hereof,” “herein” and “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; and (6) references to money refer to legal currency of the United States of America. The headings contained in this Agreement are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Agreement.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first written above.

PIONEER NATURAL RESOURCES USA, INC.


By:		/s/ Richard P. Dealy

Name:		Richard P. Dealy
Title:		Executive Vice President and Chief Financial Officer


PIONEER SOUTHWEST ENERGY PARTNERS L.P.

By Pioneer Natural Resources GP LLC, Its general partner

By:		/s/ Richard P. Dealy

Name:		Richard P. Dealy
Title:		Executive Vice President and Chief Financial Officer

EXHIBIT A

ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption Agreement (the “Agreement”) is executed as of May 6, 2008 between Pioneer Natural Resources USA, Inc., a Delaware corporation (“Pioneer USA”), and Pioneer Southwest Energy Partners L.P., a Delaware limited partnership (“MLP”, and together with Pioneer USA, being sometimes collectively referred to as the “Parties” and individually as a “Party”).

RECITALS:

B. Through a conveyance pursuant to that certain Contribution Agreement by and among Pioneer USA, Pioneer Natural Resources GP LLC and MLP, to be effected as of the date hereof and simultaneously with the assignment pursuant to this Agreement, MLP will acquire 73.46034538309400% of the membership interest in the Operating Company (the “Contribution”).

C. Pioneer USA wishes to assign the remaining 26.5396546169060% membership interest in the Operating Company held by Pioneer USA (the “Interest”) to MLP simultaneously with the Contribution pursuant to the terms of that certain Membership Interest Sale Agreement between Pioneer USA and MLP, dated the date hereof.

D. MLP wishes to accept the assignment of the Interest and to be admitted to the Operating Company as the sole member of the Operating Company.

AGREEMENTS

For valuable consideration, whose receipt and sufficiency are hereby acknowledged, the Parties agree as follows:

1. Assignment. Simultaneously with the Contribution, Pioneer USA hereby sells, transfers, assigns and conveys to MLP all of Pioneer USA’s right, title, and interest in and to the Interest. MLP hereby accepts the Interest and assumes the obligations attributable to the Interest that arise on and after the date of this Agreement.

2. Admission. MLP is hereby admitted as the sole member and owner of 100% of the membership interest in the Operating Company, and MLP’s admission as the sole member of the Operating Company shall be reflected in the books and records of the Operating Company. Pioneer USA hereby withdraws as the sole member in the Operating Company. Pioneer USA and MLP agree to restate the LLC Agreement to reflect MLP’s admission as the sole member of the Operating Company.

A-1

3. Joinder. In consideration of the admission of MLP as the sole member of the Operating Company, MLP hereby joins the LLC Agreement, the terms of which are incorporated herein by reference, and hereby agrees to be bound by the terms of the LLC Agreement and to abide by all of its provisions.

4. Investment Intent. The Interest to be acquired by MLP is being acquired for its own account, for investment and with no intention of distributing or reselling such Interest or any part thereof or interest therein in any transaction which would be a violation of the securities laws of the United States of America or any state or foreign country or jurisdiction.

5. Choice of Law. This Agreement shall be subject to and governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state.

6. Further Action. In connection with this Agreement and all transactions contemplated by this Agreement, each Party agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.

7. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

8. Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the Parties hereto, notwithstanding that all such Parties are not signatories to the original or the same counterpart. Each Party shall become bound by this Agreement immediately upon affixing its signature hereto.

9. Laws and Regulations. Notwithstanding any provision of this Agreement to the contrary, no Party shall be required to take any act, or fail to take any act, under this Agreement if the effect thereof would be to cause such Party to be in violation of any applicable law, statute, rule or regulation.

[Remainder of page intentionally left blank]

A-2

IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first above written.

PIONEER NATURAL RESOURCES USA, INC.


By:

Name:		Richard P. Dealy
Title:		Executive Vice President and Chief Financial Officer


PIONEER SOUTHWEST ENERGY PARTNERS L.P.

By Pioneer Natural Resources GP LLC, Its general partner

By:

Name:		Richard P. Dealy
Title:		Executive Vice President and Chief Financial Officer

A-3

EX-2.3 4 d56641exv2w3.htm PURCHASE AND SALE AGREEMENT exv2w3

EXHIBIT 2.3

EXECUTION VERSION

Purchase and Sale Agreement

By and Between

Pioneer Natural Resources USA, Inc. and Pioneer Retained
Properties Company LLC,
as Seller,

and

Pioneer Southwest Energy Partners USA LLC
As Buyer

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

TABLE OF CONTENTS


ARTICLE 1 DEFINITIONS			1

ARTICLE 2 SALE AND TRANSFER OF ASSETS; CLOSING			9

2.01 Assets			9
2.02 Purchase Price			9
2.03 Closing			9
2.04 Closing Obligations			9
2.05 Allocations and Adjustments			9
2.06 Assumption			12
2.07 Limitation on conveyance of Mineral Interests			12

ARTICLE 3 GENERAL PROVISIONS			13

3.01 Asset Records			13
3.02 Notices			13
3.03 Entire Agreement			14
3.04 Jurisdiction; Service of Process			14
3.05 Further Action			14
3.06 Binding Effect			14
3.07 Effect of Waiver or Consent			14
3.08 Counterparts			15
3.09 Invalidity of Provisions			15
3.10 Amendment or Restatement			15
3.11 Assignment			15
3.12 Withholding or Granting of Consent			15
3.13 Direct or Indirect Action			15
3.14 Laws and Regulations			15
3.15 No Recourse Against Officers, Directors, Managers, or Employees			15
3.16 Negation of Rights of Third Parties			16
3.17 Construction			16
3.18 No Representations and Warranties			16
3.19 Governing Law			16
3.20 Waiver of Texas Deceptive Trade Practices — Consumer Protection Act			17
3.21 Arbitration			17
3.22 Tax Deferred Exchange			18

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

EXHIBITS AND SCHEDULES


Exhibit A-1		Schedule of Producing Wells

Exhibit A-2		Schedule of Saltwater Wells

Exhibit B		Schedule of Leases

Exhibit C		Schedule of Mineral Deeds

Exhibit D		Form of Assignment, Conveyance, and Bill of Sale of Interests in Wellbores, Minerals, and Oil and Gas Leases

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (this “Agreement”) is made as of May 6, 2008, by and among Pioneer Natural Resources USA, Inc., a Delaware corporation (“Pioneer USA”), Pioneer Retained Properties Company LLC, a Texas limited liability company (“Retainco,” and together with Pioneer USA, collectively, “Seller”), and Pioneer Southwest Energy Partners USA LLC, a Texas limited liability company (“Buyer”). The above-named entities are sometimes referred to in this Agreement each as a “Party” and collectively as the “Parties.”

RECITALS

Seller desires to sell, and Buyer desires to purchase, a portion of Seller’s undivided interests in certain oil, gas, and mineral properties and related assets and contracts, for the consideration and on the terms set forth in this Agreement.

AGREEMENT

For and in consideration of the promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

ARTICLE 1

DEFINITIONS

For purposes of this Agreement, in addition to other capitalized terms defined in this Agreement, the following terms have the meanings specified or referred to in this Article 1 when capitalized:

“AAA” – the American Arbitration Association.

“Affiliate” – 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.

“Agreed Interest Rate” – LIBOR plus two percent (2%) per annum.

“Asset Records” – all lease files, land files, well files, oil, gas and natural gas liquids sales contract files, gas processing files, division order files, abstracts, title opinions, land surveys, cores, logs, geological and geophysical information, maps, hazard surveys, engineering data and reports, production records, reserve studies and evaluations, and other books, records, data, files, maps, and accounting records, in each case only to the extent related to the Assets, or used or held for use in connection with the ownership, use, maintenance, or operation thereof.

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

“Assets” – (i) the Assigned Percentage of Seller’s right, title, and interest in and to the following assets with respect to the Wellbores, Leases and Mineral Interests contained on Exhibits A-1, B and C, respectively, and (ii) with respect to the Wellbores listed on Exhibit A-2, the respective percentage set forth for each such Wellbore on Exhibit A-2 multiplied by the Assigned Percentage of all (8/8ths) right, title, and interest in and to only those assets described in subsections (b), (e), (f), (h), and (i) of this definition below, except (in both cases (i) and (ii)) to the extent constituting Excluded Assets:

	(a)		the Wellbores listed on Exhibit A-1, together with all rights to operate, maintain, and produce, receive, sell, or dispose of production from such Wellbores, insofar and only insofar as to the Assigned Depths, together with a vertical easement extending an additional one hundred feet (100´) beyond the Assigned Depths for operating purposes only;

	(b)		the Wellbores listed on Exhibit A-2, together with all rights to operate, maintain, and dispose of water in such Wellbores;

	(c)		the Leases, insofar and only insofar as such Leases cover rights in the Wellbores located thereon, including both leasehold interests and overriding royalty interests in the Leases;

	(d)		subject to the term limitations set forth in Section 2.07, the Mineral Interests, insofar and only insofar as such Mineral Interests cover rights in the Wellbores located thereon;

	(e)		the Contracts, insofar and only insofar as they may be useful to Buyer to operate and maintain the Wellbores from the Assigned Depths, and to produce, receive, sell, or dispose of all Hydrocarbons produced from the Assigned Depths, through each Wellbore listed on Exhibit A-1, and to dispose of water in each Wellbore listed on Exhibit A-2;

	(f)		the Equipment (it being understood that for purposes of this definition of Assets, with respect to the Wellbores listed on Exhibit A-1, the interests of Seller in the Equipment prior to the Effective Time shall be equal to the proportions paid by each of them of the costs of such Equipment);

	(g)		Hydrocarbons produced from the Assigned Depths through each Wellbore listed on Exhibit A-1 after the Effective Time;

	(h)		the Surface Rights, insofar and only insofar as they may be useful to Buyer to operate and maintain the Wellbores from the Assigned Depths, and to produce, receive, sell, or dispose of all Hydrocarbons produced from the Assigned Depths, through each Wellbore listed on Exhibit A-1, and to dispose of water in each Wellbore listed on Exhibit A-2; and

	(i)		subject to Section 3.01, the Asset Records.

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

“Assigned Depths” – as to each Wellbore listed on Exhibits A-1, those rights from the surface to the base of the Producing Interval, and as to each Wellbore listed on Exhibit A-2, all depths owned by Seller.

“Assigned Percentage” – the undivided percentage obtained by multiplying twenty seven and 430/1000ths percent (27.430%) by the Over-Allotment Fraction.

“Assumed Liabilities” – as defined in Section 2.06.

“Business Day” – any day other than a Saturday, Sunday, or any other day on which commercial banks in the United States of America are authorized or required by law or executive order to close.

“Closing” – as defined in Section 2.03.

“Closing Amount” – as defined in Section 2.02.

“Closing Date” – as defined in Section 2.03.

“Common Units” – as defined in the Partnership Agreement.

“Contemplated Transactions” – all of the transactions contemplated by this Agreement, including:

	(a)		the sale of the Assets by Seller to Buyer;

	(b)		the execution, delivery, and performance of the Instruments of Conveyance and all other instruments and documents required under this Agreement;

	(c)		the performance by Buyer and Seller of their respective covenants and obligations under this Agreement; and

	(d)		Buyer’s acquisition, ownership, and exercise of control over the Assets.

“Contract” – any valid and subsisting contract, agreement, or instrument by which any of the Wellbores are bound, or that directly relates to or is otherwise directly applicable to any of the Wellbores, including operating agreements, unitization, pooling and communitization agreements, declarations, and orders, joint venture agreements, farmin and farmout agreements, production handling agreements, exploration agreements, participation agreements, exchange agreements, transportation or gathering agreements, agreements for the sale and purchase of Hydrocarbons, processing agreements, or saltwater disposal agreements, to the extent applicable to the Wellbores, the production of Hydrocarbons from the Wellbores listed on Exhibit A-1, or the disposal of water in the Wellbores listed on Exhibit A-2.

“Dispute” – as defined in Section 3.20.

“DTPA” – as defined in Section 3.19.

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

“Effective Time” – May 1, 2008, at 7:00 a.m., Central Time.

“Environmental Laws” – all federal, state, and local laws, statutes, rules, regulations, orders, and ordinances, legally enforceable requirements, and rules of common law, now or hereafter in effect, relating to the protection of the environment (including any natural resource damages, any generation, use, storage, treatment, Release, or threatened Release of Hazardous Substances, into the indoor or outdoor environment, and any exposure of any Person or property to Hazardous Substances), including the federal Comprehensive Environmental Response, Compensation, and Liability Act, the Superfund Amendments Reauthorization Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Federal Water Pollution Control Act, the Toxic Substances Control Act, the Oil Pollution Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act and all other environmental conservation and protection laws, each as amended from time to time.

“Equipment” – with respect to each Wellbore, all subsurface (but only insofar as to the Assigned Depths) and surface tangible personal property, fixtures, and equipment used in connection with the operation of such Wellbore, and, in connection with each Wellbore listed on Exhibit A-1, the production of Hydrocarbons from such Wellbore, or the separating, storing, handling, compressing, dehydrating, treating, and delivery of Hydrocarbons or water produced from such Wellbore, or otherwise associated with production from such Wellbore and, in connection with each Wellbore listed on Exhibit A-2, the disposal of water in such Wellbore, or otherwise associated with such Wellbore; but excluding any personal property, fixtures, or equipment that (a) in connection with each Wellbore listed on Exhibit A-1, is used after or located beyond the point of sale of Hydrocarbons produced from such Wellbore, or (b) as of the Effective Time, has not been charged to the owner(s) of the working interest in such Wellbore.

“Excluded Assets” – the following assets, which are not included in the Contemplated Transactions:

	(a)		(i) all trade credits, accounts receivable, notes receivable, and other receivables attributable to the Assets with respect to any period of time prior to the Effective Time, and (ii) all deposits, cash, checks in process of collection, cash equivalents, and funds attributable to the Assets with respect to any period of time prior to the Effective Time;

	(b)		all corporate, financial, legal, personnel, and tax records of Seller, and records subject to a legal privilege;

	(c)		all claims and causes of action of Seller arising from acts, omissions, events, or damage to or destruction of property occurring prior to the Effective Time;

	(d)		all rights, titles, claims, and interests of Seller arising prior to the Effective Time (i) under any policy or agreement of insurance or indemnity, (ii) under any bond, or (iii) to any insurance proceeds or awards;

	(e)		all Hydrocarbons produced from or attributable to the Wellbores with respect to all periods prior to the Effective Time, excluding all rights and

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

			interests with respect to Imbalances as of the Effective Time, together with all proceeds from or attributable to such Hydrocarbons;

	(f)		claims of Seller for refund of, or loss carry forwards with respect to, (i) production, ad valorem, or any other taxes attributable to any period prior to the Effective Time, or (ii) income or franchise taxes or any other taxes attributable to any of the other Excluded Assets;

	(g)		all amounts due or payable to Seller as adjustments or refunds under any Contracts with respect to periods prior to the Effective Time, specifically including amounts recoverable from audits under operating agreements, but excluding all rights and interests with respect to Imbalances as of the Effective Time;

	(h)		all amounts due or payable to Seller as adjustments to insurance premiums related to any period prior to the Effective Time;

	(i)		all proceeds, benefits, income, revenues accruing (and any security or other deposits made), and similar rights (tangible and intangible) with respect to (i) the Assets prior to the Effective Time, but excluding all rights and interests with respect to Imbalances as of the Effective Time; and (ii) any of the other Excluded Assets;

	(j)		any seismic, geochemical, and geophysical information and data licensed by unaffiliated third parties to Seller;

	(k)		all of Seller’s and its Affiliates’ intellectual property, including proprietary computer software, patents, trade secrets, copyrights, names, marks, and logos, but not including proprietary seismic, geochemical, and geophysical information and data;

	(l)		any Contract the transfer of which to Buyer is prohibited by any bona fide third party restriction or Legal Requirement and the necessary consents to transfer are not obtained or waived; provided, however, that Seller shall use its best efforts to make arrangements agreeable to Buyer whereby Buyer will receive substantially the same economic benefits in connection with such Contract as if all such necessary waivers and consents had been obtained;

	(m)		any Surface Right the transfer of which to Buyer is restricted by any Legal Requirement and the necessary authorizations or consents to transfer under such Legal Requirement are not obtained or waived; provided, however, that Seller shall use its best efforts to make arrangements agreeable to Buyer whereby Buyer will receive substantially the same economic benefits in connection with such Surface Right as if all such necessary waivers and consents had been obtained; and

	(n)		all rights below the Assigned Depths.

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

“Final Amount” – as defined in Section 2.05(c).

“Final Settlement Date” – as defined in Section 2.05(c).

“Final Settlement Statement” – as defined in Section 2.05(c).

“Governmental Authorization” – any approval, consent, license, permit, registration, variance, exemption, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

“Governmental Body” – any:

	(a)		nation, state, county, city, town, village, district, or other jurisdiction of any nature;

	(b)		federal, state, local, municipal, foreign, or other government;

	(c)		governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal);

	(d)		multi-national organization or body; or

	(e)		body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

“Hazardous Substances” – any (a) substance that is designated, defined, or classified as a solid waste, hazardous waste, hazardous material, pollutant, contaminant, or toxic or hazardous substance or words of similar meaning or impact, or that is otherwise regulated or as to which liability may arise under any Environmental Law, including any hazardous substance as such term is defined under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, (b) petroleum, petroleum products, crude oil, oil, gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel, and other petroleum hydrocarbons, whether refined or unrefined, or (c) asbestos, whether in a friable or non-friable condition, polychlorinated biphenyls, or radon.

“Hydrocarbons” – oil, gas, minerals, and other gaseous and liquid hydrocarbons or any combination of the foregoing, produced from and attributable to the Wellbores.

“Imbalances” – over-production or under-production or over-deliveries or under-deliveries with respect to Hydrocarbons produced from or allocated to the Wellbores, regardless of whether such over-production or under-production or over-deliveries or under-deliveries arise at the wellhead, pipeline, gathering system, transportation system, processing plant, or other location, including any imbalances under gas balancing or similar agreements, production handling agreements, processing agreements, or gathering or transportation agreements.

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

“Instrument of Conveyance” – the instrument of conveyance transferring title to the Assets. The Instrument of Conveyance shall be without warranty of title – express, implied, statutory, or otherwise, and shall be in the form attached hereto as Exhibit D.

“IRC” – the Internal Revenue Code of 1986 or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law.

“IRS” – the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury.

“Leases” – the oil, gas, and mineral leases described on Exhibit B, and all tenements, hereditaments, and appurtenances belonging to such leases.

“Legal Requirement” – any federal, state, local, municipal, foreign, international, or multinational law, Order, constitution, ordinance, or rule, including rules of common law, regulation, statute, treaty, or other legally enforceable directive or requirement.

“LIBOR” – for the day in question or the previous banking day if the day in question is not a banking day, the interest rate per annum (rounded upward to the nearest whole multiple of 1/16 of 1% per annum if such rate is not such a multiple) equal to the rate per annum at which six (6) months deposits in U.S. Dollars are offered by the principal office of JPMorgan Chase Bank, N.A., in London, England, to prime banks in the London interbank market at 11:00 A.M. (London time) on such day.

“MCF” – one thousand cubic feet of gas and is a measure of gas volume.

“Mineral Interests” – the mineral interests conveyed to Pioneer USA or its predecessors under the mineral deeds described on Exhibit C, and all tenements, hereditaments, and appurtenances belonging to such mineral interests.

“Operating Agreement” – that certain operating agreement entered into on the date of this Agreement by Pioneer USA and Buyer in connection with those Wellbores for which operating agreements with third parties are not already then in place.

“Option Closing Date” – as defined in the Partnership Agreement.

“Order” – any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator.

“Over-Allotment Fraction” – a fraction, the numerator of which is the number of Common Units issued in connection with the exercise of the Over-Allotment Option, and the denominator of which is 1,237,500.

“Over-Allotment Option” – as defined in the Partnership Agreement.

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

“Partnership Agreement” – that certain First Amended and Restated Agreement of Limited Partnership of Pioneer Southwest Energy Partners L.P., a Delaware limited partnership, as may be amended or restated from time to time.

“Paying Quantities” – quantities sufficient to yield a return to the holders of the operating interest in excess of operating and equipping expenses and costs and severance taxes, including such overhead, depreciation, and other costs and expenses that are legally recognized by Texas law as chargeable against revenues for purposes of determining whether production is in paying quantities, such return to be measured over each calendar quarter.

“Person” – an individual, corporation, partnership, joint venture, trust, limited liability company, unincorporated organization, or any other entity.

“Post-Closing Date” – as defined in Section 2.05(c).

“Proceeding” – any action, arbitration, audit, hearing, investigation, request for information, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

“Producing Interval” – with respect to each Wellbore, the interval between and including the shallowest and deepest perforations in such Wellbore that are producing or capable of producing Hydrocarbons in Paying Quantities at the Effective Time.

“Property Costs” – as defined in Section 2.05(a).

“Purchase Price” – as defined in Section 2.02.

“Release” – any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dumping, or disposing.

“Retained Assets” – Seller’s retained undivided interests in (a) the Wellbores, (b) the Leases, (c) the Mineral Interests, (d) the Equipment, (e) Hydrocarbons produced from the Assigned Depths after the Effective Time through each Wellbore listed on Exhibit A-1, (f) the Contracts, (g) the Surface Rights, and (h) the Asset Records.

“Rules” – the Commercial Arbitration Rules of the AAA.

“Surface Rights” – All easements, permits, licenses, servitudes, rights-of-way, surface leases, and other surface rights appurtenant to, and used or held for use in connection with, the Wellbores.

“Voting Securities” – securities of any class of a Person entitling the holders thereof to vote in the election of, or to appoint, members of the board of directors or other similar governing body of the Person and, with respect to Pioneer Southwest Energy Partners L.P., means Common Units.

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

“Wellbores” – the wellbores of the wells identified on Exhibits A-1 and A-2.

ARTICLE 2

SALE AND TRANSFER OF ASSETS; CLOSING

2.01 Assets. Subject to the terms and conditions of this Agreement, at the Closing, Seller shall sell and transfer the Assets to Buyer.

2.02 Purchase Price. Subject to any adjustments that may be made under Section 2.05, the amount paid by Buyer to Seller at the Closing for the Assets (the “Closing Amount”) will be an amount equal to Twenty Two Million Seven Thousand Seven Hundred and Twenty Four Dollars ($22,007,724) multiplied by the Over-Allotment Fraction. The Closing Amount, as adjusted pursuant to Section 2.05, is hereinafter referred to as the “Purchase Price.”

2.03 Closing. The closing of the purchase and sale provided for in this Agreement (the “Closing”) shall take place at the offices of Seller at 10:00 a.m. (local time) on the Option Closing Date (the “Closing Date”).

2.04 Closing Obligations. At the Closing:

(a)

Seller shall deliver (and execute, as appropriate), or cause to be delivered (and executed, as appropriate), to Buyer:

	(i)		the Instrument of Conveyance;

	(ii)		possession of the Assets (except the Asset Records, which shall remain in the possession and custody of Seller pursuant to Section 3.01); and

	(iii)		such documents as Buyer or counsel for Buyer may reasonably request.

(b)

Buyer shall deliver (and execute, as appropriate) to Seller:

	(i)		the Closing Amount by wire transfer to the account(s) specified by Seller in written notice given by Seller to Buyer prior to the Closing;

	(ii)		the Instrument of Conveyance; and

	(iii)		such other documents as Seller or counsel for Seller may reasonably request.

2.05 Allocations and Adjustments. The following allocations and adjustments shall be made:

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

	(a)		Notwithstanding the effective time of the Instrument of Conveyance, Buyer shall be entitled to all revenues, production, proceeds, income, and products from or attributable to the Assets on and after the Effective Time, and to all other income, proceeds, receipts, and credits earned with respect to the Assets on or after the Effective Time, and shall be responsible for (and entitled to any refunds with respect to) all Property Costs attributable to the Assets and incurred on and after the Effective Time. Seller shall be entitled to all revenues, production, proceeds, income, accounts receivable, and products from or attributable to the Assets prior to the Effective Time, and shall be responsible for (and entitled to any refunds with respect to) all Property Costs attributable to the Assets and incurred on or prior to the Effective Time. “Earned” and “incurred,” as used in this Agreement, shall be interpreted in accordance with generally accepted accounting principles. “Property Costs” shall mean all amounts attributable to the operation and ownership of the Assets reasonably incurred in the ordinary course of business. For purposes of allocating revenues, production, proceeds, income, accounts receivable, and products under this Section, (i) liquid hydrocarbons produced into storage facilities will be deemed to be “from or attributable to” the Wellbores when they pass through the pipeline connecting into the storage facilities into which they are run, and (ii) gaseous hydrocarbons and liquid hydrocarbons produced into pipelines will be deemed to be “from or attributable to” the Wellbores when they pass through the delivery point sales meters on the pipelines through which they are transported. In order to accomplish the foregoing allocation of production, the Parties shall rely upon gauging, metering, and strapping procedures conducted by Pioneer USA on or about the Effective Time to the extent possible, and, unless demonstrated to be inaccurate, shall utilize reasonable interpolating procedures to arrive at an allocation of production when exact gauging, metering, and strapping data is not available on hand as of the Effective Time. Ad valorem taxes for 2008 shall be prorated on a daily basis, with Buyer liable for the portion allocated to the period on and after the Effective Time and Seller liable for the portion allocated to the period before the Effective Time. Proration of taxes shall be made on the basis of taxes assessed in the previous year, with a subsequent cash adjustment of such proration to be made between Seller and Buyer when actual tax figures are available.

	(b)		The Purchase Price shall be, without duplication,

(i)

increased by the following amounts:

(A)

the aggregate amount of all non-reimbursed Property Costs which are attributable to the period from and after the Effective Time and which have been incurred and paid by Seller with respect to the Wellbores;

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

	(B)		any other upward adjustment mutually agreed upon by the Parties; and

	(C)		the amount Seller is underproduced with respect to the Assets as of the Effective Time times $6.50 per MCF (or, with respect to oil Imbalances, $70.00 per barrel).

(ii)

decreased by the following amounts:

	(A)		the aggregate amount of (1) proceeds received by Seller from the sale of Hydrocarbons produced from and attributable to the Assets from and after the Effective Time for which Buyer is entitled under Section 2.05(a) and (2) other proceeds received with respect to the Assets for which Buyer would otherwise be entitled under Section 2.05(a);

	(B)		Seller’s share of estimated ad valorem taxes through the Effective Time;

	(C)		the amount of any other downward adjustment mutually agreed upon by the Parties; and

	(D)		the amount Seller is overproduced with respect to the Assets as of the Effective Time times $6.50 per MCF (or, with respect to oil Imbalances, $70.00 per barrel).

(c)

As soon as practicable after Closing, but no later than ninety (90) days following the Closing Date, Seller shall prepare and submit to Buyer a statement (the “Final Settlement Statement”) setting forth each adjustment or payment and showing the values used to determine such adjustments to reflect the final adjusted Purchase Price. On or before sixty (60) days after receipt of the Final Settlement Statement, Buyer shall deliver to Seller a written report containing any changes that Buyer proposes be made to the Final Settlement Statement. During this sixty (60) day period, Buyer shall be given reasonable access to Seller’s books and records relating to the matters required to be accounted for in the Final Settlement Statement, permitted to review the working papers of Seller relating to the Final Settlement Statement, and given reasonable access to the employees of Seller primarily responsible for the preparation of the Final Settlement Statement. Seller and Buyer shall undertake to agree with respect to the amounts due pursuant to the post-closing adjustment no later than one hundred eighty (180) days after the Closing Date (the “Post-Closing Date”). For those matters as to which Seller and Buyer are unable to reach agreement by the Post-Closing Date, PriceWaterhouseCoopers shall determine the Purchase Price adjustment or payment amount in accordance with the terms and conditions set forth in

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

this Agreement. The decision of such independent accounting firm shall be binding on Seller and Buyer, and the fees and expenses of such independent accounting firm shall be borne one-half (1/2) by Seller and one-half (1/2) by Buyer. The date upon which the Purchase Price is established, as provided in the preceding sentence, shall be called the “Final Settlement Date,” and the final adjusted Purchase Price shall be called the “Final Amount.” If (i) the Final Amount is more than the Closing Amount, Buyer shall pay to Seller the amount of the difference; or (ii) the Final Amount is less than the Closing Amount, Seller shall pay to Buyer the amount of the difference. Such payment, together with interest at the Agreed Interest Rate from and including the Effective Time to and excluding the date of such payment, shall be made within five (5) Business Days after the Final Settlement Date by wire transfer to accounts specified by Seller or Buyer, as appropriate.

2.06 Assumption. From and after the Closing Date, Buyer shall assume, pay, and discharge the following liabilities insofar as allocable to the Assets (“Assumed Liabilities”):

Any and all duties, claims, damages, expenses, fines, penalties, costs (including attorneys’ fees and expenses), liabilities, and obligations (i) attributable to or resulting from the ownership or operation of the Assets from and after the Effective Time under any Contract, Governmental Authorization, or Lease; (ii) imposed by any Legal Requirement relating to the Assets, other than any violations of any Legal Requirement prior to the Closing Date, and other than as set forth in clause (v) below, (iii) for plugging, abandonment, and surface restoration of the Wellbores, (iv) from any act, omission, event, condition, or occurrence accruing subsequent to the Effective Time relating to the Assets, other than any violation of any Legal Requirement prior to the Closing Date, and (v) attributable to all liabilities under Environmental Laws relating to the Assets.

Liabilities which constitute both liabilities attributable to the Excluded Assets and/or Retained Assets, and Assumed Liabilities attributable to the Assets, shall be reasonably and fairly apportioned between Assumed Liabilities for which Buyer is responsible and liabilities with respect to the Excluded Assets and/or Retained Assets for which Seller is responsible.

2.07 Limitation on conveyance of Mineral Interests. With respect to each Wellbore listed on Exhibit A-1, and subject to the remainder of this Section 2.07, the rights, titles, and interests in the Mineral Interests to be conveyed to Buyer shall be limited in duration to a term commencing on the Closing Date and continuing for so long as Hydrocarbons are produced in Paying Quantities from the Assigned Depths in such Wellbore. If, at any time or times after the Closing, the production of Hydrocarbons in Paying Quantities from the Assigned Depths in any such Wellbore should cease from any cause, then Buyer’s rights in the Mineral Interests applicable to such Wellbore shall nevertheless continue in force and effect if drilling or reworking operations in an attempt to restore production in Paying Quantities from the Assigned Depths in such Wellbore are commenced within sixty (60) days after such cessation of production, and remain in force and effect for so long as such drilling or reworking operations are diligently prosecuted with no cessation of more than thirty (30) consecutive days; and if such drilling or

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

reworking operations result in the production of Hydrocarbons in Paying Quantities from the Assigned Depths in such Wellbore, then Buyer’s rights in the Mineral Interests applicable to such Wellbore shall remain in force and effect for so long thereafter as such Hydrocarbons are produced in Paying Quantities. Further, if the interests in any Wellbore conveyed to Buyer at Closing include both one or more Mineral Interests and one or more Leases, then the Mineral Interest(s) applicable to such Wellbore shall remain in force and effect for so long as any Lease applicable to such Wellbore remains in force and effect or is renewed in such time and manner as to remain subject to the applicable operating agreement for such Wellbore.

ARTICLE 3

GENERAL PROVISIONS

3.01 Asset Records. For so long as Pioneer USA continues as operator of the Wellbores, Pioneer USA shall retain custody of the Asset Records. After Closing, Buyer, at Buyer’s expense, shall be entitled to obtain copies of such Asset Records as Buyer may desire, at reasonable business hours and upon prior notice to Seller. If Pioneer USA resigns as operator of any Wellbore, or is no longer the operator for any reason, Pioneer USA shall promptly deliver the Asset Records attributable to such Wellbore to Buyer, unless (a) an Asset Record applicable to such Wellbore is also applicable to any other Wellbore or Excluded Asset, or (b) Pioneer USA is retaining an interest in such Wellbore, in which case Pioneer USA shall promptly deliver either the Asset Record or a copy thereof to Buyer, at Pioneer USA’s option. Pioneer USA may, at its own expense, retain copies of all Asset Records delivered to Buyer. After the delivery of any Asset Record to Buyer, Seller, at Seller’s expense, shall be entitled to obtain from Buyer, at reasonable business hours and upon prior notice to Buyer, copies of such records as reasonable and necessary for tax purposes or in connection with any Proceeding or threatened Proceeding against Seller.

3.02 Notices. All notices, requests, or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be given by depositing same in the United States mail, addressed to the Person to be notified, postpaid, and registered or certified with return receipt requested, or by delivering such notice in person or by telecopier or telegram to such Person. Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by telegram or telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours. All notices to be sent to a Party pursuant to this Agreement shall be sent to or made to the attention of such Party at the address set forth below or at such other address as such Party may stipulate to the other Parties in the manner provided in this Section 3.02.


Pioneer USA:		5205 N. O’Connor Blvd., Suite 200
		Irving, Texas 75039
		Phone: (972) 444-9001
		Fax: (972) 969-3587
		Attention: General Counsel

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer


Retainco:		c/o Pioneer USA
		5205 N. O’Connor Blvd., Suite 200
		Irving, Texas 75039
		Phone: (972) 444-9001
		Fax: (972) 969-3587
		Attention: General Counsel

Buyer:		c/o Pioneer Natural Resources GP LLC
		5205 N. O’Connor Blvd., Suite 200
		Irving, Texas 75039
		Phone: (972) 444-9001
		Fax: (972) 969-3587
		Attention: General Counsel

3.03 Entire Agreement. This Agreement and the Instrument of Conveyance constitute the entire agreement of the Parties relating to the matters contained herein and therein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein and therein.

3.04 Jurisdiction; Service of Process. Without limiting the Parties’ agreement to arbitrate in Section 3.21, any action or proceeding seeking a temporary or preliminary injunction to enforce any provision of, or based on any right arising out of, this Agreement or the Contemplated Transactions must be brought against any of the Parties in the courts of the State of Texas, County of Dallas, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Texas (Dallas Division), and each of the Parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) for such limited purpose in any such action or proceeding and waives any objection to venue laid therein for such limited purpose. Process in any action or proceeding referred to in the preceding sentence may be served on any Party anywhere in the world.

3.05 Further Action. In connection with this Agreement and the Contemplated Transactions, each Party agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out, and perform all of the terms, provisions, and conditions of this Agreement and all of the Contemplated Transactions.

3.06 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their heirs, executors, administrators, successors, legal representatives, and permitted assigns, as well as any Persons asserting rights or claims on behalf of any of the foregoing Persons.

3.07 Effect of Waiver or Consent. No waiver or consent, express or implied, by any Party to or of any breach or default by any Party in the performance by such Party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such Party of the same or any other obligations of such Party hereunder. Failure on the part of a Party to complain of any act of any Party or to declare

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

any Party in default, irrespective of how long such failure continues, shall not constitute a waiver by such Party of its rights hereunder until the applicable statute of limitations period has run.

3.08 Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the Parties, notwithstanding that all such Parties are not signatories to the original or the same counterpart. Each Party shall become bound by this Agreement immediately upon affixing its signature hereto.

3.09 Invalidity of Provisions. If any provision of this Agreement or the application thereof to any Party or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Parties or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

3.10 Amendment or Restatement. This Agreement may be amended or restated only by a written instrument executed by Buyer and each Seller; provided, however, that after the completion of the initial public offering of units by Pioneer Southwest Energy Partners L.P., Buyer may not, without the prior approval of the conflicts committee of the board of directors of Pioneer Natural Resources GP LLC, or, if there is no such committee, the independent members of such board of directors, agree to any amendment or modification of this Agreement that Pioneer Natural Resources GP LLC determines will adversely affect the holders of such units.

3.11 Assignment. Except as provided in Section 3.22, no Party shall have the right to assign its rights or obligations under this Agreement without the prior written consent of the other Parties; provided, however, a merger shall not be deemed to be an assignment and a transfer of the rights and an assumption of the obligations under this Agreement; provided further, however, that the transfer of all or substantially all of the assets of a Party shall not be deemed an assignment of such rights or obligations of such Party to this Agreement if the assignee assumes all of the obligations under this Agreement.

3.12 Withholding or Granting of Consent. Each Party may, with respect to any consent or approval that it is entitled to grant pursuant to this Agreement, grant or withhold such consent or approval in its sole and uncontrolled discretion, with or without cause, and subject to such conditions as it shall deem appropriate.

3.13 Direct or Indirect Action. Where any provision of this Agreement refers to action to be taken by any Party, or which such Party is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Party, including actions taken by or on behalf of any Affiliate of such Party.

3.14 Laws and Regulations. Notwithstanding any provision of this Agreement to the contrary, no Party shall be required to take any act, or fail to take any act, under this Agreement if the effect thereof would be to cause such Party to be in violation of any applicable Legal Requirement.

3.15 No Recourse Against Officers, Directors, Managers, or Employees. For the avoidance of doubt, the provisions of this Agreement shall not give rise to any right of recourse

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

against any officer, director, manager, or employee of any Party or any officer, director, manager, or employee of any Affiliate of any Party.

3.16 Negation of Rights of Third Parties. The provisions of this Agreement are enforceable solely by the Parties, and no limited partner, member, or assignee of any Party shall have the right, separate and apart from such Party, to enforce any provision of this Agreement or to compel any Party to comply with the terms of this Agreement.

3.17 Construction. Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) references to Exhibits and Schedules refer to the Exhibits and Schedules attached to this Agreement, each of which is made a part hereof for all purposes; (d) the terms “include,” “includes,” “including” and words of like import shall be deemed to be followed by the words “without limitation”; (e) the terms “hereof,” “herein” and “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; and (f) references to money refer to legal currency of the United States of America. The table of contents and headings contained in this Agreement are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Agreement.

3.18 No Representations and Warranties. Seller makes no representations or warranties whatsoever, and disclaims all liability and responsibility for any representation, warranty, statement, or information made or communicated (orally or in writing) to Buyer (including any opinion, information, or advice which may have been provided to Buyer by any Affiliate or Representative of Seller or by any investment bank or investment banking firm, any petroleum engineer or engineering firm, Seller’s counsel or any other agent, consultant or representative). Without limiting the generality of the foregoing, Seller expressly disclaims and negates any representation or warranty, express, implied, at common law, by statute, or otherwise relating to (a) the title to any of the Assets, (b) the condition of the Assets (including any implied or express warranty of merchantability, of fitness for a particular purpose, or of conformity to models or samples of materials), it being distinctly understood the Assets are being sold “As Is,” “Where Is,” and “With All Faults As To All Matters,” (c) any infringement by Seller of any patent or proprietary right of any third party, (d) any information, data, or other materials (written or oral) furnished to Buyer by or on behalf of Seller (including in respect of geological and engineering data, the existence or extent of oil, gas, or the mineral reserves, the recoverability of such reserves, any product pricing assumptions, and the ability to sell oil or gas production after Closing), and (e) the environmental condition and other condition of the Assets and any potential liability arising from or related to the Assets.

3.19 Governing Law. This Agreement and the relationship of the Parties with respect to the Contemplated Transactions shall be governed by the laws of the State of Texas excluding any conflicts-of-laws rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state, except that the law of another jurisdiction shall apply to this Agreement and the Contemplated Transactions insofar as this Agreement and the Contemplated Transactions cover or relate to a part of the Assets for which it is mandatory that

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

the law of another jurisdiction, wherein or adjacent to which such part of the Assets are located, shall apply.

3.20 Waiver of Texas Deceptive Trade Practices — Consumer Protection Act. Buyer’s rights and remedies with respect to this Agreement and the Contemplated Transactions and with respect to all acts or practices of Seller, past, present, or future, in connection with this Agreement and the Contemplated Transactions shall be governed by legal principles other than the Texas Deceptive Trade Practices — Consumer Protection Act, V.C.T.A. BUS & COMM Ann. § 17.41 et seq. (the “DTPA”), or any similar statute of any jurisdiction that may be applicable to this Agreement and the Contemplated Transactions. Buyer hereby unconditionally waives the applicability of the DTPA, or any similar statute, to this Agreement and the Contemplated Transactions, and any and all rights, duties, or remedies that might be imposed by the DTPA, or any similar statute, provided, however, Buyer does not waive Section 17.555 of the DTPA. Buyer represents, warrants, and acknowledges that it is purchasing the Assets for commercial or business use. Buyer further acknowledges, represents, and warrants that Buyer has knowledge and experience in financial and business matters that enables it to evaluate the merits and the risks of a transaction such as this Agreement and the Contemplated Transactions, and that Buyer is not in a significantly disparate bargaining position with Seller. Buyer expressly acknowledges and recognizes that the price for which Seller has agreed to sell the Assets and perform its obligations under the terms of this Agreement has been predicated upon the inapplicability of the DTPA, or any similar statute, and this waiver of the DTPA, and any similar statute, by Buyer. Buyer further recognizes that Seller, in determining to proceed with entering into this Agreement, has expressly relied on the provisions of this Section 3.20.

3.21 Arbitration. Any disputes under Section 2.05(c) shall be resolved as provided in such section. It is agreed, as a severable and independent arbitration agreement separately enforceable from the remainder of this Agreement, that any other claim, counterclaim, demand, cause of action, dispute, or any other controversy arising out of or relating in any way to this Agreement or to the subject matter of this Agreement or to any relationship created thereby (each a “Dispute”) shall be resolved by binding arbitration. A Dispute must be resolved through arbitration regardless of whether the Dispute involves claims that this Agreement is unlawful, unenforceable, void, or voidable, or involves claims sounding in tort, contract, statute, or common law. This Section 3.21 shall be binding on and shall inure to the benefit of the Parties and their respective Affiliates and subsidiaries. The validity, construction, and interpretation of this agreement to arbitrate, and all other procedural aspects of the arbitration conducted pursuant hereto, shall be decided by the arbitral tribunal. Any arbitration under this Agreement shall be administered by the AAA and conducted in accordance with the Rules in existence at the time of the arbitration. In resolving any Dispute, the arbitral tribunal shall refer to the governing law as specified in Section 3.19 of this Agreement. The arbitral tribunal shall not be empowered to award exemplary, punitive, indirect, consequential, remote, speculative, treble, multiple, or special damages, and the Parties and their affiliates and subsidiaries waive any right they may have to recover such damages from one another. The arbitral tribunal shall not be empowered to decide any dispute ex aequo et bono or amiable compositeur. The seat (or legal place) and venue of the arbitration shall be in Dallas, Texas. The arbitration shall be conducted in the English language. The Dispute shall be decided by a panel of three neutral arbitrators. The claimant or claimants shall nominate an arbitrator at the time of service of a request for arbitration. The respondent or respondents shall nominate an arbitrator at the time of service of the response to the

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

request for arbitration. If the claimant(s) or respondent(s) fail to appoint an arbitrator, then that arbitrator shall be appointed in accordance with the Rules. The two appointed arbitrators shall together agree upon a third arbitrator to recommend to the AAA to chair the arbitration. If the two party-appointed arbitrators are unable to agree upon an arbitrator within fifteen (15) days of the respondent’s appointment of an arbitrator, then the chairman shall be chosen according to the Rules. Notwithstanding the foregoing, if two or more respondents have interests with regard to a Dispute that are not completely common, then all arbitrators shall be appointed in accordance with the Rules and not by nomination or appointment by the Parties. Any arbitration award may be enforced by the courts sitting in Dallas, Texas, or any other court of competent subject matter jurisdiction (including any jurisdiction in which a party holds or keeps assets). Any action to challenge, vacate, or set aside the award in whole or in part must be brought in the courts sitting in Dallas, Texas. The Parties and their Affiliates and subsidiaries agree to waive any objections they may have to personal jurisdiction, venue, or forum non-conveniens for any action brought to enforce the award in the courts sitting in Dallas, Texas, or any other jurisdiction where a party against which enforcement of the award is sought holds or keeps assets.

3.22 Tax Deferred Exchange. If Seller so requests, Buyer agrees to cooperate with Seller in a tax-deferred exchange described in Section 1031 of the IRC, as amended, with respect to the Contemplated Transactions. In that case, the Instrument of Conveyance will be executed by Seller’s assignee unless such assignee directs Seller to execute the Instrument of Conveyance. Notwithstanding the foregoing, Buyer shall not be obligated to enter into any agreement or to consent to an assignment of Seller’s rights or obligations hereunder which may have the effect of (a) impairing the title to the Assets, (b) increasing Buyer’s obligations or liability hereunder or resulting in any additional cost, expense, or liability to Buyer; or (c) requiring Buyer to execute a purchase agreement for the purchase of the exchange property or to take record title to the exchange property. Seller hereby agrees to indemnify, defend, and hold Buyer harmless from and against any and all costs, expenses, claims, damages, losses, or liabilities (including reasonable attorney fees and costs) incurred by Buyer in connection with any exchange transaction or transactions or the performance by Buyer of its obligations pursuant to this Section.

[Signature Page Follows]

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

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


		SELLER:

		PIONEER NATURAL RESOURCES USA, INC.

		By:		/s/ Richard P. Dealy

		Name:		Richard P. Dealy
		Title:		Executive Vice President and Chief Financial Officer

		PIONEER RETAINED PROPERTIES COMPANY LLC

		By:		Pioneer Natural Resources USA, Inc., its sole member

		By:		/s/ Richard P. Dealy

		Name:		Richard P. Dealy
		Title:		Executive Vice President and Chief Financial Officer

		BUYER:

		PIONEER SOUTHWEST ENERGY PARTNERS USA LLC

		By:		Pioneer Natural Resources USA, Inc., its sole member

		By:		/s/ Richard P. Dealy

		Name:		Richard P. Dealy
		Title:		Executive Vice President and Chief Financial Officer

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

S-1

Exhibit D
(Form of Assignment, Conveyance, and Bill of Sale of Interests
in Wellbores, Minerals, and Oil and Gas Leases)

Purchase and Sale Agreement By and Between
Pioneer Natural Resources U.S.A., Inc. and Pioneer Retained Properties Company
LLC, as Seller, and Pioneer Southwest Energy Partners USA LLC, as Buyer

Exhibit D-1

EXHIBIT “D”

ATTACHED TO AND MADE A PART OF THAT CERTAIN PURCHASE AND SALE AGREEMENT DATED MAY 6, 2008, BY AND BETWEEN PIONEER NATURAL RESOURCES USA, INC. AND PIONEER RETAINED PROPERTIES COMPANY, LLC, AS SELLER, AND PIONEER SOUTHWEST ENERGY PARTNERS USA LLC, AS BUYER

ASSIGNMENT, CONVEYANCE, AND BILL OF SALE OF INTERESTS
IN WELLBORES, MINERALS, AND OIL AND GAS LEASES

This Assignment, Conveyance, and Bill of Sale of Interests in Wellbores, Minerals, and Oil and Gas Leases (this “Assignment”) is effective as of 7:00 a.m. Central Time on May 1, 2008 (the “Effective Time”), by and between Pioneer Natural Resources USA, Inc., a Delaware corporation, and Pioneer Retained Properties Company, LLC, a Texas limited liability company, each of whose address is 5205 N. O’Connor Blvd., Suite 200, Irving, Texas 75039 (collectively, “Assignor”), and Pioneer Southwest Energy Partners USA LLC, a Texas limited liability company, whose address is 5205 N. O’Connor Blvd., Suite 200, Irving, Texas 75039 (“Assignee”). Assignor and Assignee are hereinafter sometimes referred to individually as a “Party,” and collectively as the “Parties.”

For and in consideration of the mutual benefits to be derived herefrom and Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor has GRANTED, CONVEYED, TRANSFERRED, ASSIGNED, SET OVER, AND DELIVERED, and hereby GRANTS, CONVEYS, TRANSFERS, ASSIGNS, SETS OVER, AND DELIVERS unto Assignee, its successors and assigns, the following (the “Assets”):

An (i) undivided [ ] percent ([ ]%) of Assignor’s right, title, and interest in and to the following assets with respect to the Producing Wellbores (as defined below), Leases (as defined below) and Mineral Interests (as defined below) contained on Exhibits A-1, B and C, respectively, and (ii) with respect to the Saltwater Wellbores (as defined below) listed on Exhibit A-2, the respective percentage set forth for each such Saltwater Wellbore of all (8/8ths) right, title, and interest in and to only those assets described in subsections (b), (e), (f), (h), and (i) below, except (in both cases (i) and (ii)) to the extent constituting “Excluded Assets,” as hereinafter defined:

(a)

The wellbores of the wells identified on Exhibit A-1 hereto (the “Producing Wellbores”) together with all rights to operate, maintain, and produce, receive, sell, or dispose of production from such Producing Wellbores, insofar and only insofar as to rights from the surface to and including the deepest perforation in each Producing Wellbore that is producing or capable of producing Hydrocarbons in Paying Quantities at the Effective Time (the “Producing Assigned Depths”), together with a vertical easement extending an additional one hundred feet (100’) beyond the Producing Assigned Depths for operating purposes only;

Form of Assignment, Conveyance, and Bill of Sale
of Interests in Wellbores, Minerals, and Oil and Gas Leases

D - i

	(b)		The wellbores of the wells identified on Exhibit A-2 hereto (the “Saltwater Wellbores” and, together with the Producing Wellbores, the “Wellbores”) together with all rights to operate, maintain, and dispose of water in such Wellbores as to all depths owned by Assignor (collectively, with the Producing Assigned Depths, the “Assigned Depths”);

	(c)		The oil, gas, and mineral leases described on Exhibit B, and all tenements, hereditaments, and appurtenances belonging to such leases (the “Leases”), insofar and only insofar as such Leases cover rights in the Wellbores located thereon, including both leasehold interests and overriding royalty interests in the Leases;

	(d)		Subject to the term limitations set forth in Section 2 below, the mineral interests conveyed under the mineral deeds described on Exhibit C, and all tenements, hereditaments, and appurtenances belonging to such mineral interests (the “Mineral Interests”), insofar and only insofar as such Mineral Interests cover rights in the Wellbores located thereon,

	(e)		All valid and subsisting contracts, agreements, or instruments by which any of the Wellbores are bound, or that directly relate to or are otherwise directly applicable to any of the Wellbores, including but not limited to, operating agreements, unitization, pooling and communitization agreements, declarations, and orders, joint venture agreements, farmin and farmout agreements, production handling agreements, exploration agreements, participation agreements, exchange agreements, transportation or gathering agreements, agreements for the sale and purchase of oil, gas, minerals, and other gaseous and liquid hydrocarbons or any combination of the foregoing, produced from and attributable to the Wellbores (“Hydrocarbons”), or processing agreements, or saltwater disposal agreements, to the extent applicable to the Wellbores, or the production of Hydrocarbons from the Producing Wellbores, or the disposal of water in the Saltwater Wellbores (the “Contracts”), insofar and only insofar as they may be useful to Assignee to operate and maintain the Wellbores from the Assigned Depths, and to produce, receive, sell, or dispose of Hydrocarbons produced from the Assigned Depths, through each Producing Wellbore, and to dispose of water in each Saltwater Wellbore;

	(f)		With respect to each Wellbore, all subsurface (but only insofar as to the Assigned Depths) and surface tangible personal property, fixtures, and equipment used in connection with the operation of such Wellbore, and, in connection with each Producing Wellbore, the production of Hydrocarbons from such Producing Wellbore, or the separating, storing, handling, compressing, dehydrating, treating, and delivery of Hydrocarbons or water produced from such Producing Wellbore, or otherwise associated with production from such Producing Wellbore, and,

Form of Assignment, Conveyance, and Bill of Sale
of Interests in Wellbores, Minerals, and Oil and Gas Leases

D - ii

in connection with each Saltwater Wellbore, the disposal of water in such Saltwater Wellbore, or otherwise associated with such Saltwater Wellbore; but excluding any personal property, fixtures, or equipment that (a) in connection with each Producing Wellbore is used after or located beyond the point of sale of Hydrocarbons produced from such Producing Wellbore, or (b) as of the Effective Time, had not been charged to the owner(s) of the working interest in such Wellbore (the “Equipment”) (it being understood that, with respect to the Producing Wellbores, the interests of Assignor in the Equipment prior to the Effective Time shall be equal to the proportions paid by each of them of the costs of such Equipment);

	(g)		Hydrocarbons produced from the Assigned Depths through each Producing Wellbore as of the Effective Time;

	(h)		All easements, permits, licenses, servitudes, rights-of-way, surface leases, and other surface rights appurtenant to, and used or held for use in connection with, the Wellbores (the “Surface Rights”), insofar and only insofar as they may be useful to Assignee to operate and maintain the Wellbores from the Assigned Depths, and to produce, receive, sell, or dispose of all Hydrocarbons produced from the Assigned Depths, through each Producing Wellbore, and to dispose of water in each Saltwater Wellbore; and

	(i)		All lease files, land files, well files, oil, gas and natural gas liquids sales contract files, gas processing files, division order files, abstracts, title opinions, land surveys, cores, logs, geological and geophysical information, maps, hazard surveys, engineering data and reports, production records, reserve studies and evaluations, and other books, records, data, files, maps, and accounting records, in each case only to the extent related to the Assets, or used or held for use in connection with the ownership, use, maintenance, or operation thereof.

SAVING, EXCEPTING, AND RESERVING to Assignor, however, all of the following assets (the “Excluded Assets”):

	(a)		(i) all trade credits, accounts receivable, notes receivable, and other receivables attributable to the Assets with respect to any period of time prior to the Effective Time, and (ii) all deposits, cash, checks in process of collection, cash equivalents, and funds attributable to the Assets with respect to any period of time prior to the Effective Time;

	(b)		all corporate, financial, legal, personnel, and tax records of Assignor, and records subject to a legal privilege;

Form of Assignment, Conveyance, and Bill of Sale
of Interests in Wellbores, Minerals, and Oil and Gas Leases

D - iii

	(c)		all claims and causes of action of Assignor arising from acts, omissions, events, or damage to or destruction of property occurring prior to the Effective Time;

	(d)		all rights, titles, claims, and interests of Assignor arising prior to the Effective Time (i) under any policy or agreement of insurance or indemnity, (ii) under any bond, or (iii) to any insurance proceeds or awards;

	(e)		all Hydrocarbons produced from or attributable to the Wellbores with respect to all periods prior to the Effective Time, excluding all rights and interests with respect to over-production or under-production or over-deliveries or under-deliveries with respect to Hydrocarbons produced from or allocated to the Wellbores, regardless of whether such over-production or under-production or over-deliveries or under-deliveries arise at the wellhead, pipeline, gathering system, transportation system, processing plant, or other location, including, without limitation, any imbalances under gas balancing or similar agreements, production handling agreements, processing agreements, or gathering or transportation agreements (“Imbalances”) as of the Effective Time, together with all proceeds from or attributable to such Hydrocarbons;

	(f)		claims of Assignor for refund of, or loss carry forwards with respect to (i) production, ad valorem, or any other taxes attributable to any period prior to the Effective Time, or (ii) income or franchise taxes or any other taxes attributable to any of the other Excluded Assets;

	(g)		all amounts due or payable to Assignor as adjustments or refunds under any Contracts with respect to periods prior to the Effective Time, specifically including, without limitation, amounts recoverable from audits under operating agreements, but excluding all rights and interests with respect to Imbalances as of the Effective Time;

	(h)		all amounts due or payable to Assignor as adjustments to insurance premiums related to any period prior to the Effective Time;

	(i)		all proceeds, benefits, income, revenues accruing (and any security or other deposits made), and similar rights (tangible and intangible) with respect to (i) the Assets prior to the Effective Time, but excluding all rights and interests with respect to

Form of Assignment, Conveyance, and Bill of Sale
of Interests in Wellbores, Minerals, and Oil and Gas Leases

D - iv

			Imbalances as of the Effective Time; and (ii) any of the other Excluded Assets;

	(j)		any seismic, geochemical, and geophysical information and data licensed by unaffiliated third parties to Assignor;

	(k)		all of Assignor’s and its affiliates’ intellectual property, including but not limited to proprietary computer software, patents, trade secrets, copyrights, names, marks, and logos, but not including proprietary seismic, geochemical, and geophysical information and data;

	(l)		any Contract the transfer of which to Assignee is prohibited by any bona fide third party restriction or Legal Requirement and the necessary consents to transfer are not obtained or waived; provided, however, that Assignor shall use its best efforts to make arrangements agreeable to Assignee whereby Assignor will receive substantially the same economic benefits in connection with such Contract as if all such necessary waivers and consents had been obtained;

	(m)		any Surface Right the transfer of which to Assignee is restricted by any Legal Requirement and the necessary authorizations or consents to transfer under such Legal Requirement are not obtained or waived; provided, however, that Assignor shall use its best efforts to make arrangements agreeable to Assignee whereby Assignee will receive substantially the same economic benefits in connection with such Surface Right as if all such necessary waivers and consents had been obtained;

	(n)		all rights below the Assigned Depths; and

	(o)		all right, title, and interest in and to the Leases, the Mineral Interests, and the Wellbores, except to the extent assigned to Assignee hereinabove.

TO HAVE AND TO HOLD all and singular the Assets together with all rights, titles, interests, estates, remedies, powers, and privileges thereto appertaining unto Assignee and its successors, legal representatives and assigns forever, subject to the following:

This Assignment is subject to that certain Purchase and Sale Agreement dated May 6, 2008, as amended (but providing for the purchase and sale of the Assets effective as of May 1, 2008), by and between Assignor and Assignee (the “Agreement”), and

Form of Assignment, Conveyance, and Bill of Sale
of Interests in Wellbores, Minerals, and Oil and Gas Leases

D - v

nothing in this Assignment shall operate to limit, release, or impair any of Assignor’s or Assignee’s respective rights, obligations, remedies, or indemnities in the Agreement. Capitalized terms used in this Assignment shall have the meanings prescribed in this Assignment where such capitalized terms are defined; provided, however, that capitalized terms used in this Assignment and not otherwise defined shall have the meanings given to such terms in the Agreement. Each defined term shall be equally applicable both to the singular and the plural forms of the term so defined. To the extent the terms and provisions of this Assignment are in conflict, or inconsistent, with the terms and provisions of the Agreement, the terms and provisions of the Agreement shall control.

With respect to each Producing Wellbore, and subject to the remainder of this Section 2, the rights, titles, and interests in the Mineral Interests conveyed to Buyer hereunder shall continue in force and effect for so long, and only for so long, as Hydrocarbons are produced in Paying Quantities from the Assigned Depths in such Wellbore. If, at any time or times, the production of Hydrocarbons in Paying Quantities from the Assigned Depths in any such Wellbore should cease from any cause, then Assignee’s rights in the Mineral Interests applicable to such Wellbore shall nevertheless continue in force and effect if drilling or reworking operations in an attempt to restore production in Paying Quantities from the Assigned Depths in such Wellbore are commenced within sixty (60) days after such cessation of production, and shall remain in force and effect for so long as such drilling or reworking operations are diligently prosecuted with no cessation of more than thirty (30) consecutive days; and if such drilling or reworking operations result in the production of Hydrocarbons in Paying Quantities from the Assigned Depths in such Wellbore, then Assignee’s rights in the Mineral Interests applicable to such Wellbore shall remain in force and effect for so long thereafter as such Hydrocarbons are produced in Paying Quantities. Further, if the interests in any Wellbore conveyed to Assignee hereunder include both one or more Mineral Interests and one or more Leases, then the Mineral Interest(s) applicable to such Wellbore shall remain in force and effect for so long as any Lease applicable to such Wellbore remains in force and effect or is renewed in such time and manner as to remain subject to the applicable operating agreement for such Wellbore.

This Assignment is made subject to all depth limitations, contracts, agreements, encumbrances, and burdens (including but not limited to any royalty or overriding royalty interest) (i) described in this Assignment or the Agreement, (ii) provided for in any instrument, contract or agreement described in this Assignment or the Agreement, (iii) filed in the public records, or (iv) known to Assignee at the time this Assignment was executed by Assignee; and, to the extent that same are in force and effect, Assignee specifically accepts its undivided share thereof as to the Assets.

This Assignment shall extend to, be binding upon, and inure to the benefit of Assignor and Assignee and their respective successors and assigns.

Form of Assignment, Conveyance, and Bill of Sale
of Interests in Wellbores, Minerals, and Oil and Gas Leases

D - vi

To the extent required by the Agreement or applicable law, Assignee expressly assumes the Assumed Liabilities.

THIS ASSIGNMENT IS MADE WITHOUT ANY WARRANTY OR REPRESENTATION OF TITLE, EITHER EXPRESS, IMPLIED, OR STATUTORY, AND WITHOUT ANY RECOURSE AGAINST ASSIGNOR IN THE EVENT OF ANY FAILURE OF TITLE; PROVIDED ONLY THAT ASSIGNOR WARRANTS THAT IT HAS NOT HERETOFORE GRANTED OR CONVEYED TO ANY OTHER PARTY ANY INTEREST IN OR ANY LIEN OR ENCUMBRANCE ON THE ASSIGNED INTERESTS EXCEPT AS DESCRIBED IN THIS ASSIGNMENT. THIS ASSIGNMENT IS MADE WITHOUT ANY EXPRESS, IMPLIED, OR STATUTORY WARRANTY OR REPRESENTATION AS TO THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE OR ANY PURPOSE, FREEDOM FROM DEFECTS, OR MERCHANTABILITY OF ANY OF THE WELLS, FACILITIES, PIPELINES, FLOWLINES, PLATFORMS, OR EQUIPMENT. FURTHERMORE, ASSIGNEE ACCEPTS THE WELLS, FACILITIES, PIPELINES, FLOWLINES, PLATFORMS, AND EQUIPMENT “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS,” AND ASSIGNEE RELEASES ASSIGNOR FROM ANY AND ALL LIABILITY FOR LOSS ARISING FROM USE OF THE WELLS, FACILITIES, PIPELINES, FLOWLINES, PLATFORMS, OR EQUIPMENT PERTAINING TO THE ASSETS. ASSIGNEE AND ASSIGNOR AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED IN THIS ASSIGNMENT ARE “CONSPICUOUS” DISCLAIMERS.

Each Party agrees to execute such further agreements, stipulations, and/or conveyances as may be necessary to accomplish the intents and purposes of this Assignment.

Exhibit A-1, Exhibit A-2, Exhibit B, and Exhibit C to this Assignment are hereby incorporated by reference and constitute a part of this Assignment.

This Assignment may be executed in any number of counterparts, each of which shall be deemed valid and binding with respect to the signatories thereto, and all of which together shall constitute one and the same conveyance. For recording purposes, (a) the signature and acknowledgment pages may be detached from separate counterparts and attached to a single counterpart, and (b) any counterpart of this Assignment filed in any particular county may omit any pages of Exhibit A-1, Exhibit A-2, Exhibit B, and/or Exhibit C that do not describe or otherwise apply to property located in that particular county.

Form of Assignment, Conveyance, and Bill of Sale
of Interests in Wellbores, Minerals, and Oil and Gas Leases

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Executed as of the date of the acknowledgment of each Party’s signature hereto; however, effective as of the Effective Time.


		ASSIGNOR:

		Pioneer Natural Resources USA, Inc.

		By:

		Name:		Richard P. Dealy
		Title:		Executive Vice President and
				Chief Financial Officer

		Pioneer Retained Properties Company, LLC

		By:		Pioneer Natural Resources USA, Inc., its sole member

		By:

		Name:		Richard P. Dealy
		Title:		Executive Vice President and Chief Financial Officer

		ASSIGNEE:

		Pioneer Southwest Energy Partners USA LLC

		By:		Pioneer Natural Resources USA, Inc., its sole member

		By:

		Name:		Richard P. Dealy
		Title:		Executive Vice President and Chief Financial Officer

Form of Assignment, Conveyance, and Bill of Sale
of Interests in Wellbores, Minerals, and Oil and Gas Leases

D - viii

ACKNOWLEDGMENTS


THE STATE OF TEXAS		§
		§
COUNTY OF DALLAS		§

This instrument was acknowledged before me this [ ]th day of [ ], 2008, by , known to me to be the of Pioneer Natural Resources USA, Inc., a Delaware corporation, who affirmed that the foregoing instrument was signed on behalf of such corporation by authority of its Board of Directors and that the execution of this instrument was the free act and deed of such corporation.


THE STATE OF TEXAS		§
		§
COUNTY OF DALLAS		§

This instrument was acknowledged before me this [ ]th day of [ ], 2008, by , known to me to be the of Pioneer Retained Properties Company, LLC, a Texas limited liability company, who affirmed that the foregoing instrument was signed on behalf of such limited liability company by authority of its members and that the execution of this instrument was the free act and deed of such limited liability company.

Form of Assignment, Conveyance, and Bill of Sale
of Interests in Wellbores, Minerals, and Oil and Gas Leases

D - ix


THE STATE OF TEXAS		§
		§
COUNTY OF DALLAS		§

This instrument was acknowledged before me this [ ]th day of [ ], 2008, by , known to me to be the of Pioneer Southwest Energy Partners USA LLC, a Texas limited liability company, who affirmed that the foregoing instrument was signed on behalf of such limited liability company by authority of its members and that the execution of this instrument was the free act and deed of such limited liability company.

Form of Assignment, Conveyance, and Bill of Sale
of Interests in Wellbores, Minerals, and Oil and Gas Leases

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EX-2.4 5 d56641exv2w4.htm OMNIBUS AGREEMENT exv2w4

EXHIBIT 2.4

EXECUTION VERSION

OMNIBUS AGREEMENT

AMONG

PIONEER SOUTHWEST ENERGY PARTNERS L.P.,

PIONEER NATURAL RESOURCES GP LLC,

PIONEER NATURAL RESOURCES COMPANY,

PIONEER NATURAL RESOURCES USA, INC.,

AND

PIONEER SOUTHWEST ENERGY PARTNERS USA LLC

TABLE OF CONTENTS


ARTICLE I
Definitions

Section 1.1 Definitions			1
Section 1.2 Construction			12

ARTICLE II
Geographic Limitations
Section 2.1 Geographic Limitations			12

ARTICLE III
VPP Obligation

Section 3.1 VPP Obligation			12

ARTICLE IV
Indemnification

Section 4.1 Indemnification and Payment of Damages by Pioneer USA			13
Section 4.2 Limitations on Amount			14
Section 4.3 Procedure for Indemnification – Third Party Claims			14
Section 4.4 Extent of Indemnity			15
Section 4.5 Limitations of Liability			15

ARTICLE V
Miscellaneous

Section 5.1 Choice of Law			16
Section 5.2 Notice			16
Section 5.3 Entire Agreement			16
Section 5.4 Jurisdiction; Service of Process			16
Section 5.5 Further Action			17
Section 5.6 Binding Effect			17
Section 5.7 Creditors			17
Section 5.8 Termination			17
Section 5.9 Effect of Waiver or Consent			17
Section 5.10 Counterparts			17
Section 5.11 Invalidity of Provisions			17
Section 5.12 Amendment or Restatement			17
Section 5.13 Assignment; Third Party Beneficiaries			18
Section 5.14 Withholding or Granting of Consent			18
Section 5.15 Direct or Indirect Action			18
Section 5.16 Laws and Regulations			18
Section 5.17 Negation of Rights of Limited Partners, Assignees and Third Parties			18
Section 5.18 No Recourse Against Officers, Directors, Managers or Employees			18
Section 5.19 Arbitration			19
Section 5.20 Asset Records			19
Section 5.21 Limitation on Mineral Interests			20

OMNIBUS AGREEMENT

THIS OMNIBUS AGREEMENT (“Agreement”) is entered into on, and effective as of, May 6, 2008 (as defined herein), and is by and among Pioneer Southwest Energy Partners L.P., a Delaware limited partnership (the “Partnership”), Pioneer Natural Resources Company, a Delaware corporation (“Pioneer”), Pioneer Natural Resources USA, Inc., a Delaware corporation (“Pioneer USA”), Pioneer Natural Resources GP LLC, a Delaware limited liability company (the “General Partner”), and Pioneer Southwest Energy Partners USA LLC, a Texas limited liability company (“Buyer”). The above-named entities are sometimes referred to in this Agreement each as a “Party” and collectively as the “Parties.”

In consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I
Definitions

Section 1.1 Definitions.

(a) Capitalized terms used herein but not defined shall have the meanings given them in the Partnership Agreement.

(b) As used in this Agreement, the following terms shall have the respective meanings set forth below:

“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 purposes of clause (k) of the definition of Excluded Assets and Article IV, the Pioneer Entities, on the one hand, and the Partnership Entities, on the other hand, shall not be considered Affiliates of each other.

“Agreement” means this Omnibus Agreement, as it may be amended, modified or supplemented from time to time in accordance with the terms hereof.

“Area of Operations” means onshore Texas and the southeast region of New Mexico, comprising Chaves, Curry, De Baca, Eddy, Lincoln, Lea, Otero and Roosevelt counties.

“Asset Records” means all lease files, land files, well files, oil, gas and natural gas liquids sales contract files, gas processing files, division order files, abstracts, title opinions, land surveys, cores, logs, geological and geophysical information, maps, hazard surveys, engineering data and reports, production records, reserve studies and

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evaluations, and other books, records, data, files, maps, and accounting records, in each case only to the extent related to the Assets, or used or held for use in connection with the ownership, use, maintenance, or operation thereof.

“Assets” means Buyer’s right, title, and interest in and to the following, except to the extent constituting Excluded Assets, included in the Contemplated Transactions:

(a) the Wellbores listed on Exhibit A-1, together with all rights to operate, maintain, and produce, receive, sell, or dispose of production from such Wellbores, insofar and only insofar as to the Assigned Depths, together with a vertical easement extending an additional one hundred feet (100’) beyond the Assigned Depths for operating purposes only;

(b) the Wellbores listed on Exhibit A-2, together with all rights to operate, maintain, and dispose of water in such Wellbores;

(c) the Leases, insofar and only insofar as such Leases cover rights in the Wellbores located thereon, including both leasehold interests and overriding royalty interests in the Leases;

(d) subject to the term limitations set forth in Section 5.21, the Mineral Interests, insofar and only insofar as such Mineral Interests cover rights in the Wellbores located thereon;

(e) the Contracts, insofar and only insofar as they may be useful to Buyer to operate and maintain the Wellbores from the Assigned Depths, and to produce, receive, sell, or dispose of all Hydrocarbons produced from the Assigned Depths, through each Wellbore listed on Exhibit A-1, and to dispose of water in each Wellbore listed on Exhibit A-2;

(f) the Equipment (it being understood that for purposes of this definition of Assets, with respect to the Wellbores listed on Exhibit A-1, the interests of the owners of such Equipment immediately prior to the consummation of the Contemplated Transactions shall be equal to the proportions paid by each of such owners of the costs of such Equipment);

(g) Hydrocarbons produced from the Assigned Depths through each Wellbore listed on Exhibit A-1 after the Effective Time;

(h) the Surface Rights, insofar and only insofar as they may be useful to Buyer to operate and maintain the Wellbores from the Assigned Depths, and to produce, receive, sell, or dispose of all Hydrocarbons produced from the Assigned Depths, through each Wellbore listed on Exhibit A-1, and to dispose of water in each Wellbore listed on Exhibit A-2; and

(i) subject to Section 5.20, the Asset Records.

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“Assigned Depths” means, as to each Wellbore listed on Exhibit A-1, those rights from the surface to the base of the Producing Interval, and as to each Wellbore listed on Exhibit A-2, all depths allocated or conveyed to, or vested in Buyer pursuant to the Merger Agreement and the Purchase and Sale Agreement.

“Assumed Liabilities” means any and all duties, claims, damages, expenses, fines, penalties, costs (including attorneys’ fees and expenses), liabilities, and obligations (i) attributable to or resulting from the ownership or operation of the Assets from and after the Effective Time under any Contract, Governmental Authorization, or Lease; (ii) imposed by any Legal Requirement relating to the Assets, other than any violations of any Legal Requirement prior to the Closing Date and other than as set forth in clause (v) below, (iii) for plugging, abandonment, and surface restoration of the Wellbores, (iv) from any act, omission, event, condition, or occurrence accruing subsequent to the Effective Time relating to the Assets, other than any violations of any Legal Requirement prior to the Closing Date, and (v) attributable to all liabilities under Environmental Laws relating to the Assets. Liabilities which constitute both liabilities attributable to the Excluded Assets and/or Retained Assets, and Assumed Liabilities attributable to the Assets, shall be reasonably and fairly apportioned between Assumed Liabilities for which Buyer is responsible and liabilities with respect to the Excluded Assets and/or Retained Assets for which Pioneer USA and Retained Company are responsible.

“Buyer” has the meaning given such term in the introduction to this Agreement.

“Cause” has the meaning given such term in the Partnership Agreement.

“Change of Control” means, and shall be deemed to have occurred upon, one or more of the following events: (i) any transaction resulting in the Partnership (or its successor or survivor by way of merger, consolidation, or some other transaction, or a parent or subsidiary thereof) ceasing to be an Affiliate of Pioneer (or its successor or survivor by way of merger, consolidation, or some other transaction, or a parent or subsidiary thereof); (ii) the limited partners of the Partnership approve, in one transaction or a series of transactions, a plan of complete liquidation of the Partnership; (iii) the sale or other disposition by either the General Partner or the Partnership of all or substantially all of its assets in one or more transactions to any Person other than the General Partner or an Affiliate of the General Partner; or (iv) a transaction resulting in a Person other than Pioneer (or its successor or survivor by way of merger, consolidation, or some other transaction, or a parent or subsidiary thereof) or an Affiliate thereof being the general partner of the Partnership (or its successor or survivor by way of merger, consolidation, or some other transaction, or a parent or subsidiary thereof).

“Closing Date” means the First Closing Date, and if the underwriters exercise the Over-Allotment Option and the closing of the Over-Allotment Option does not occur on the First Closing Date, the Closing Date also means the closing date of the issuance of Common Units pursuant to the exercise of the Over-Allotment Option.

“Common Unit” has the meaning given such term in the Partnership Agreement.

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“Conflicts Committee” has the meaning given such term in the Partnership Agreement.

“Consent” means any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization) from any Person which was required to be obtained in connection with the consummation of the Contemplated Transactions.

“Contemplated Transactions” means the allocation of the Assets to, and the vesting of the Assets in, the Partnership Group in connection with the formation of the Partnership Group pursuant to the Merger Agreement, including any Assets conveyed pursuant to the Purchase and Sale Agreement.

“Contract” means any valid and subsisting contract, agreement, or instrument by which any of the Wellbores are bound, or that directly relates to or is otherwise directly applicable to any of the Wellbores, including operating agreements, unitization, pooling and communitization agreements, declarations, and orders, joint venture agreements, farmin and farmout agreements, production handling agreements, exploration agreements, participation agreements, exchange agreements, transportation or gathering agreements, agreements for the sale and purchase of Hydrocarbons, processing agreements, or salt water disposal agreements, to the extent applicable to the Wellbores, or the production of Hydrocarbons from the Wellbores listed on Exhibit A-1, or the disposal of water in the Wellbores listed on Exhibit A-2.

“Covered Environmental Losses” has the meaning given such term in Section 4.1(a).

“Damages” has the meaning given such term in Section 4.1.

“Defensible Title” means, as to the Assets, that title which is filed, recorded, or otherwise referenced of record in the records of the applicable Governmental Body in a manner which under applicable Legal Requirements constitutes constructive notice of ownership of such Asset to third parties acquiring an interest in or an encumbrance against such Asset, and which:

(a) Entitles Buyer, as to the Producing Interval in each Wellbore, to receive and retain without suspension, reduction, or termination, not less than the Net Revenue Interest set forth for such Wellbore in Exhibit A-1, through the plugging, abandonment, and salvage of such Wellbore, except for any decrease (i) caused by orders of the appropriate Governmental Body having jurisdiction over the Wellbore that are promulgated after the Effective Time that concern pooling, unitization, communitization, or spacing matters; or (ii) caused by Buyer, its successors or assigns;

(b) Obligates Buyer, as to the Producing Interval in each Wellbore set forth in Exhibit A-1 and the injection interval in each Wellbore set forth in Exhibit A-2, to bear not more than the Working Interest set forth for such Wellbore in Exhibits A-1 or A-2, as applicable, through the plugging, abandonment, and salvage of such Wellbore, except for

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any increase (i) caused by Buyer, its successors or assigns; (ii) that also results in the Net Revenue Interest associated with the Wellbore being proportionately increased; or (iii) caused by orders of the appropriate Governmental Body having jurisdiction over the Wellbore that are promulgated after the Effective Time that concern pooling, unitization, communitization, or spacing matters; and

“Effective Time” means May 1, 2008, at 7:00 a.m., Central Time.

“Encumbrance” means any charge, equitable interest, privilege, lien, mortgage, deed of trust, production payment, option, pledge, collateral assignment, or security interest.

“Environmental Laws” means all federal, state, and local laws, statutes, rules, regulations, orders, and ordinances, legally enforceable requirements, and rules of common law, now or hereafter in effect, relating to the protection of the environment (including any natural resource damages, any generation, use, storage, treatment, Release, or threatened Release of Hazardous Substances, into the indoor or outdoor environment, and any exposure of any Person or property to Hazardous Substances), including the federal Comprehensive Environmental Response, Compensation, and Liability Act, the Superfund Amendments Reauthorization Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Federal Water Pollution Control Act, the Toxic Substances Control Act, the Oil Pollution Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act and all other environmental conservation and protection laws, each as amended from time to time.

“Equipment” means, with respect to each Wellbore, all subsurface (but only insofar as to the Assigned Depths) and surface tangible personal property, fixtures, and equipment used in connection with the operation of such Wellbore, and, in connection with each Wellbore listed on Exhibit A-1, the production of Hydrocarbons from such Wellbore, or the separating, storing, handling, compressing, dehydrating, treating, and delivery of Hydrocarbons or water produced from such Wellbore, or otherwise associated with production from such Wellbore, and, in connection with each Wellbore listed on Exhibit A-2, the disposal of water in such Wellbore, or otherwise associated with such Wellbore; but excluding any personal property, fixtures, or equipment that (a) in connection with each Wellbore listed on Exhibit A-1, is used after or located beyond the point of sale of Hydrocarbons produced from such Wellbore, or (b) as of the Effective Time, has not been charged to the owner(s) of the working interest in such Wellbore.

“Excluded Assets” means the following assets, which are not included in the Contemplated Transactions:

(a) (i) all trade credits, accounts receivable, notes receivable, and other receivables attributable to the Assets with respect to any period of time prior to the Effective Time, and (ii) all deposits, cash, checks in process of collection, cash

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equivalents, and funds attributable to the Assets with respect to any period of time prior to the Effective Time;

(b) all corporate, financial, legal, personnel, and tax records of Pioneer USA or Retained Company, and records subject to a legal privilege;

(c) all claims and causes of action of Pioneer USA or Retained Company arising from acts, omissions, events, or damage to or destruction of property occurring prior to the Effective Time;

(d) all rights, titles, claims, and interests of Pioneer USA or Retained Company arising prior to the Effective Time (i) under any policy or agreement of insurance or indemnity, (ii) under any bond, or (iii) to any insurance proceeds or awards;

(e) all Hydrocarbons produced from or attributable to the Wellbores with respect to all periods prior to the Effective Time, excluding all rights and interests with respect to Imbalances as of the Effective Time, together with all proceeds from or attributable to such Hydrocarbons;

(f) claims of Pioneer USA or Retained Company for refund of, or loss carry forwards with respect to, (i) production, ad valorem, or any other taxes attributable to any period prior to the Effective Time, or (ii) income or franchise taxes or any other taxes attributable to any of the other Excluded Assets;

(g) all amounts due or payable to Pioneer USA or Retained Company as adjustments or refunds under any Contracts with respect to periods prior to the Effective Time, specifically including amounts recoverable from audits under operating agreements, but excluding all rights and interests with respect to Imbalances as of the Effective Time;

(h) all amounts due or payable to Pioneer USA or Retained Company as adjustments to insurance premiums related to any period prior to the Effective Time;

(i) all proceeds, benefits, income, revenues accruing (and any security or other deposits made), and similar rights (tangible and intangible) with respect to (i) the Assets prior to the Effective Time, but excluding all rights and interests with respect to Imbalances as of the Effective Time; and (ii) any of the other Excluded Assets;

(j) any seismic, geochemical, and geophysical information and data licensed by unaffiliated third parties to Pioneer USA or Retained Company;

(k) all of Pioneer USA’s, Retained Company’s or their Affiliates’ intellectual property, including proprietary computer software, patents, trade secrets, copyrights, names, marks, and logos, but not including proprietary seismic, geochemical, and geophysical information and data;

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(l) any Contract the transfer of which pursuant to the Purchase and Sale Agreement to Buyer is prohibited by any bona fide third party restriction or Legal Requirement and the necessary consents to transfer are not obtained;

(m) any Surface Rights the transfer of which pursuant to the Purchase and Sale Agreement to Buyer is restricted by any Legal Requirement and the necessary authorizations or consents to transfer under such Legal Requirement are not obtained; and

(n) all rights below the Assigned Depths.

“First Closing Date” means the date of the closing of the initial public offering of Common Units.

“General Partner” has the meaning given such term in the introduction to this Agreement.

“Governmental Body” means any:

(a) nation, state, county, city, town, village, district, or other jurisdiction of any nature;

(b) federal, state, local, municipal, foreign, or other government;

(c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal);

(d) multi-national organization or body; or

(e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

“Hazardous Substances” means any (a) substance that is designated, defined, or classified as a solid waste, hazardous waste, hazardous material, pollutant, contaminant, or toxic or hazardous substance or words of similar meaning or impact, or that is otherwise regulated or as to which liability may arise under any Environmental Law, including any hazardous substance as such term is defined under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, (b) petroleum, petroleum products, crude oil, oil, gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel, and other petroleum hydrocarbons, whether refined or unrefined, or (c) asbestos, whether in a friable or non-friable condition, polychlorinated biphenyls, or radon.

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“Hydrocarbons” means oil, gas, minerals, and other gaseous and liquid hydrocarbons or any combination of the foregoing, produced from and attributable to the Wellbores.

“Imbalances” means over-production or under-production or over-deliveries or under-deliveries with respect to Hydrocarbons produced from or allocated to the Wellbores, regardless of whether such over-production or under-production or over-deliveries or under-deliveries arise at the wellhead, pipeline, gathering system, transportation system, processing plant, or other location, including any imbalances under gas balancing or similar agreements, production handling agreements, processing agreements, or gathering or transportation agreements.

“Leases” means the oil, gas, and mineral leases described on Exhibit B, and all tenements, hereditaments, and appurtenances belonging to such leases.

“Legal Requirement” means any federal, state, local, municipal, foreign, international, or multinational law, Order, constitution, ordinance, or rule, including rules of common law, regulation, statute, treaty, or other legally enforceable directive or requirement.

“Merger Agreement” means the Agreement and Plan of Merger, dated as of May 1, 2008, among Pioneer USA, Buyer, Retained Company, and Pioneer Limited Natural Resources Properties LLC.

“Mineral Interests” means the mineral interests conveyed to Pioneer USA or its predecessors under the mineral deeds described on Exhibit C, and all tenements, hereditaments, and appurtenances belonging to such mineral interests.

“Net Revenue Interest” means, for any Wellbore (or the specified zone(s) therein) set forth on Exhibit A-1, Buyer’s share of the Hydrocarbons produced, saved, and marketed therefrom (after satisfaction of all third party royalties, overriding royalties, nonparticipating royalties, net profits interests, or other similar burdens on or measured by production of Hydrocarbons).

“Order” means any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator.

“Over-Allotment Option” has the meaning given such term in the Partnership Agreement.

“Partnership” has the meaning given such term in the introduction to this Agreement.

“Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of the First Closing Date, as such agreement is in effect on the First Closing Date, to which reference is hereby made for all

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purposes of this Agreement. An amendment or modification to the Partnership Agreement subsequent to the First Closing Date shall be given effect for the purposes of this Agreement only if it has received the approval of the Conflicts Committee that would be required, if any, pursuant to Section 5.12 hereof if such amendment or modification were an amendment or modification of this Agreement.

“Partnership Entities” means the General Partner and each member of the Partnership Group.

“Partnership Group” means the Partnership and any Subsidiary of the Partnership.

“Party” or “Parties” have the meaning given such terms in the introduction to this Agreement.

“Paying Quantities” means quantities sufficient to yield a return to the holders of the operating interest in excess of operating and equipping expenses and costs and severance taxes, including such overhead, depreciation, and other costs and expenses that are legally recognized by Texas law as chargeable against revenues for purposes of determining whether production is in paying quantities, such return to be measured over each calendar quarter.

“Permitted Encumbrances” means any of the following:

(a) any obligations or duties reserved to or vested in any municipality or other Governmental Body to regulate any Asset in any manner including all applicable Legal Requirements, except to the extent any of the same have been applied or exercised, individually or in the aggregate, in a manner which operates to reduce Buyer’s Net Revenue Interest in a Wellbore below that shown in Exhibit A-1 or increase Buyer’s Working Interest in a Wellbore above that shown in Exhibits A-1 and A-2 without a proportionate increase in the Net Revenue Interest;

(b) the terms and conditions of all leases, options, servitudes, contracts for sale, purchase, exchange, refining or processing of Hydrocarbons, operating agreements, construction agreements, construction and operation agreements, participation agreements, exploration agreements, partnership agreements, processing agreements, plant agreements, pipeline, gathering, exchange, and transportation agreements, disposal agreements, permits, licenses, and any other agreements affecting the Assets;

(c) with respect to the Purchase and Sale Agreement, any Consents with respect to which prior to the Closing Date, (i) waivers or consents have been obtained from the appropriate Person, (ii) the applicable period of time for asserting such rights has expired without any exercise of such rights, or (iii) mutually agreed upon arrangements have been made by the parties to allow Buyer to receive substantially the same economic benefits as if all such waivers and consents had been obtained;

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(d) easements, rights-of-way, servitudes, permits, surface leases, and other similar rights on, over, or in respect of any of the Wellbores;

(e) lessor’s royalties, overriding royalties, production payments, net profits interests, reversionary interests, and similar burdens with respect to a Wellbore if the net cumulative effect of such burdens does not operate to reduce Buyer’s Net Revenue Interest in such Wellbore below that shown in Exhibit A-1 or increase Buyer’s Working Interest in such Wellbore above that shown in Exhibits A-1 or A-2 without a proportionate increase in the Net Revenue Interest;

(f) conventional rights of reassignment obligating Pioneer USA to reassign its interests in any portion of the Leases to a third party in the event Buyer intends to release or abandon such interest prior to the expiration of the primary term or other termination of such interest;

(g) inchoate and unperfected liens;

(h) tax liens being contested in good faith;

(i) the VPP; and

(j) such other defects or irregularities of title or Encumbrances as Buyer may have waived in writing.

“Person” means an individual, corporation, partnership, joint venture, trust, limited liability company, unincorporated organization or any other entity.

“Pioneer” has the meaning given such term in the introduction to this Agreement.

“Pioneer Entities” means Pioneer and each of its Subsidiaries excluding the Partnership Entities.

“Pioneer USA” has the meaning given such term in the introduction to this Agreement.

“Pioneer Volumes” has the meaning given such term in Section 3.1.

“Proceeding” means any action, arbitration, audit, hearing, investigation, request for information, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

“Producing Interval” means, with respect to each Wellbore, the interval between and including the shallowest and deepest perforations in such Wellbore that are producing or capable of producing Hydrocarbons in Paying Quantities at the Effective Time.

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“Purchase and Sale Agreement” means the agreement dated as of May 6, 2008 pursuant to which Pioneer USA and Retained Company may sell assets to Buyer for cash to be paid for from proceeds received from the exercise of the Over-Allotment Option.

“Release” means any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dumping, or disposing.

“Representatives” means, with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.

“Retained Assets” means Pioneer USA’s and Retained Company’s retained undivided interests in (a) the Wellbores, (b) the Leases, (c) the Mineral Interests, (d) the Equipment, (e) Hydrocarbons produced from the Assigned Depths after the Effective Time through each Wellbore listed on Exhibit A-1, (f) the Contracts, (g) the Surface Rights, and (h) the Asset Records.

“Retained Company” means Pioneer Retained Properties Company LLC, a Texas limited liability company.

“Risk-Based Cleanup Criteria” means risk-based cleanup criteria authorized under applicable Environmental Law for remediation of a particular property, taking into consideration the use of the property being remediated and any relevant contractual or other requirements.

“Subsidiary” has the meaning given such term in the Partnership Agreement.

“Surface Rights” means all easements, permits, licenses, servitudes, rights-of-way, surface leases, and other surface rights appurtenant to, and used or held for use in connection with, the Wellbores.

“Voluntary Cleanup Program” means a program of the United States or a state of the United States enacted pursuant to Environmental Laws that provides for a mechanism for the written approval of, or authorization to conduct, voluntary remedial action for the clean-up, removal, or remediation of contamination that exceeds actionable levels established pursuant to Environmental Laws.

“Voting Securities” means securities of any class of a Person entitling the holders thereof to vote in the election of, or to appoint, members of the board of directors or other similar governing body of the Person and, with respect to the Partnership, means Common Units.

“VPP” means a volumetric production payment agreement, pursuant to which Pioneer USA sold 7.3 million barrels of oil equivalent of proved reserves in the Spraberry field, and which requires the delivery by Pioneer USA of specified quantities of gas through December 2007 and specified quantities of oil through December 2010.

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“Wellbores” means the wellbores of the wells identified on Exhibits A-1 and A-2 attached hereto.

“Working Interest” means, for any Wellbore, that share of costs and expenses associated with the exploration, maintenance, development, and operation of such Wellbore that Buyer is required to bear and pay.

Section 1.2 Construction. Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made a part hereof for all purposes; (d) the terms “include,” “includes,” “including” and words of like import shall be deemed to be followed by the words “without limitation”; (e) the terms “hereof,” “herein” and “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; and (f) references to money refer to legal currency of the United States of America. The table of contents and headings contained in this Agreement are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Agreement.

ARTICLE II
Geographic Limitations

Section 2.1 Geographic Limitations. Beginning with the First Closing Date, the operations of the Partnership Group will be limited to the geographic area within the Area of Operations. If Pioneer forms another publicly-traded limited partnership or limited liability company, as long as both the Partnership Group and such other entity are Affiliates of Pioneer, Pioneer will prohibit it from competing with the Partnership Group in the Area of Operations, and the Partnership Group will be prohibited from competing with such entity in its area of operations.

ARTICLE III
VPP Obligation

Section 3.1 VPP Obligation. Certain of the Assets are subject to the VPP and will remain subject to the VPP after the Closing Date but it is the intent of the Parties that Pioneer USA shall bear the full economic burden of the VPP with respect to such Assets or any other Assets acquired after the date of this Agreement that are subject to the VPP. Accordingly, the Parties agree that the obligations arising under the VPP shall first be satisfied by the delivery of volumes produced from the interests and properties of Pioneer USA (the “Pioneer Volumes”), prior to any delivery of volumes produced from the Assets. If the Pioneer Volumes are at any time insufficient to satisfy the obligations under the VPP, volumes produced from the Assets subject to the VPP shall be delivered in satisfaction thereof, and Pioneer USA will make a cash payment to the Partnership Group equal to the value of the volumes delivered pursuant to the VPP obligation as if the volumes were sold in the ordinary course of business on the date delivered pursuant to the VPP. Such cash payment will be made (i) within 30 days after the last day of the month in which the volumes were delivered to the extent such volumes consisted of oil or (ii) within 60 days after the last day of the month in which the volumes were delivered to

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the extent such volumes consisted of natural gas. To the extent that the Partnership Entities incur any out-of-pocket expenses in connection with the delivery of any volumes pursuant to this Section 3.1 or incur any other expenses or losses, including legal claims, with respect to the VPP, Pioneer USA will reimburse the Partnership Entities for such expenses within 10 days upon receipt of an invoice therefor.

ARTICLE IV
Indemnification

Section 4.1 Indemnification and Payment of Damages by Pioneer USA. Except as otherwise limited in this Article IV, Pioneer USA shall defend, indemnify, and hold harmless the Partnership Entities for, and shall pay to the Partnership Entities the amount of, any loss, liability, demand, judgment, settlement, fine, penalty, expense, cost, remediation cost or expense, attorneys fees and expenses, claim, or damage, whether or not involving a third-party claim (collectively, “Damages”), arising from:

(a) any violation, or correction of any violation, of Environmental Laws associated with the ownership or operation of the Assets; or any event or condition associated with the ownership or operation of the Assets (including the presence of Hazardous Substances on, under, or about or Releasing to or from the Assets or any Releases of Hazardous Substances generated by the operation of the Assets), including (A) the cost and expense of any investigation, assessment, evaluation, monitoring, containment, cleanup, abatement, repair, restoration, remediation, or other corrective action required or necessary under Environmental Laws, using Risk-Based Cleanup Criteria, if applicable, or to satisfy any applicable Voluntary Cleanup Program, using Risk-Based Cleanup Criteria, if applicable, (B) the cost or expense of the preparation and implementation of any closure, remedial, corrective action, or other plans required or necessary under Environmental Laws, using Risk-Based Cleanup Criteria, if applicable, or to satisfy any applicable Voluntary Cleanup Program, using Risk-Based Cleanup Criteria, if applicable, and (C) the cost and expense for any environmental pre-trial, trial, or appellate legal or litigation support work; but only to the extent that such violation, event, or condition occurred or existed on or before the Closing Date (collectively, “Covered Environmental Losses”). Covered Environmental Losses shall not include any claim, loss, or expense arising from or related to the plugging and abandonment of Wellbores upon the determination that such Wellbore(s) have reached its or their useful economic life. The term “plugging and abandonment” as used herein shall mean all plugging, replugging, and abandonment associated with the Assets, or any portion thereof, and including all plugging and abandonment, associated removal, disposal, or restoration of the surface, site clearance, and disposal of the wells, structures and personal property located on or associated with the Assets, the removal or capping and burying of all associated flowlines, the recontouring of the surface in accordance with applicable Legal Requirements or the terms and conditions of applicable leases, licenses, franchises, or contracts, site clearance and any disposal of related waste materials or Hazardous Substances of the type ordinarily encountered in oil and gas operations, but “plugging and abandonment” shall not include investigation or remediation of soil, groundwater, or surface water contamination (requiring remediation or response action under applicable Environmental Laws) exceeding the level of site restoration typically required for normal plugging and abandonment activities;

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(b) any failure to allocate or convey to, or vest in, Buyer Defensible Title to the Assets;

(c) all federal, state, and local tax liabilities attributable to the operation of the Assets prior to the Effective Time, including any such liabilities arising from the Contemplated Transactions; or

(d) the use, ownership, or operation of the Assets by Pioneer USA or any Affiliate of Pioneer USA prior to the Effective Time, except to the extent assumed by Buyer as Assumed Liabilities.

The remedies provided in this Article IV are the Partnership Entities’ exclusive remedies in connection with any Damages or liabilities incurred or suffered by the Partnership Entities in connection with the Contemplated Transactions. The indemnification obligations of Pioneer USA shall terminate (i) in the case of clause (a) above, on the first anniversary of the Closing Date, (ii) in the case of clauses (b) and (d) above, on the third anniversary of the Closing Date, and (iii) in the case of clause (c) above, after the expiration of all applicable statutes of limitation. If a claim for Damages could be brought under either clause (a) or (d) above, such claim must be brought under clause (a) and shall be subject to the limitations on indemnification of a claim brought under clause (a) as provided in this Article IV.

Section 4.2 Limitations on Amount. The aggregate liability of Pioneer USA in respect of all Covered Environmental Losses under Section 4.1(a) and all claims for Damages under Section 4.1(d) shall not exceed $10.0 million in the aggregate, and Pioneer USA shall not have any obligation to indemnify any Partnership Entity under Section 4.1(a) or Section 4.1(d) until the total of all Damages under such sections exceed $500,000 in the aggregate, and then only to the extent such Damages exceed $500,000 in the aggregate. Notwithstanding anything herein to the contrary, in no event shall Pioneer USA have any indemnification obligations under Section 4.1(a) for claims made as a result of additions to or modifications of Environmental Laws promulgated after the Closing Date.

Section 4.3 Procedure for Indemnification – Third Party Claims.

(a) The Partnership Entities agree that promptly after any such entity becomes aware of facts giving rise to a claim for indemnification under this Article IV, it will provide notice thereof in writing to Pioneer USA, specifying the nature of and specific basis for such claim.

(b) Pioneer USA shall have the right to control all aspects of the defense of (and any counterclaims with respect to) any claims brought against the Partnership Entities that are covered by the indemnification under this Article IV, including the selection of counsel, determination of whether to appeal any decision of any court and the settling of any such matter or any issues relating thereto; provided, however, that no such settlement shall be entered into without the consent of the Partnership Entity to be indemnified unless it includes a full release of such Partnership Entity from such matter or issues, as the case may be, and does not include the admission of fault, culpability or a failure to act, by or on behalf of such Partnership Entity.

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(c) The Partnership Entities agree to cooperate fully with Pioneer USA, with respect to all aspects of the defense of any claims covered by the indemnification under this Article IV, including the prompt furnishing to Pioneer USA of any correspondence or other notice relating thereto that the Partnership Entities may receive, permitting the name of the Partnership Entities to be utilized in connection with such defense, the making available to Pioneer USA of any files, records or other information of the Partnership Entities that Pioneer USA considers relevant to such defense and the making available to Pioneer USA of any employees of the Partnership Entities; provided, however, that in connection therewith Pioneer USA agrees to use reasonable efforts to minimize the impact thereof on the operations of the Partnership Entities. In no event shall the obligation of the Partnership Entities to cooperate with Pioneer USA as set forth in the immediately preceding sentence be construed as imposing upon the Partnership Entities an obligation to hire and pay for counsel in connection with the defense of any claims covered by the indemnification set forth in this Article IV; provided, however, that the Partnership Entities may, at their own option, cost and expense, hire and pay for counsel in connection with any such defense. Pioneer USA agrees to keep any such counsel hired by the Partnership Entities informed as to the status of any such defense, but Pioneer USA shall have the right to retain sole control over such defense.

(d) In determining the amount of any loss, cost, damage or expense for which the Partnership Entities are entitled to indemnification under this Agreement, the gross amount of the indemnification will be reduced by (i) any insurance proceeds realized by the Partnership Entities and (ii) all amounts recovered by the Partnership Entities under contractual indemnities from third Persons. For purposes of calculating the aggregate liability of Pioneer USA under Sections 4.1(a) and (d), Pioneer USA will be deemed to have incurred any such liability when incurred or paid (and such liability shall be applied toward the $10.0 million limitation on liability set forth in Section 4.2), regardless of the status of any insurance claims in respect thereof, and such liability (and the application thereof toward the $10.0 million limitation on liability set forth in Section 4.2) will be reduced when any insurance proceeds in respect thereof are actually received by Pioneer USA to the extent that Pioneer USA is not required to pay such proceeds over to any Partnership Entity.

(e) The indemnification obligations under this Article IV shall continue with respect to any claim for indemnification pursuant to this Article IV that is pending as of the end of the applicable survival period notwithstanding the expiration of such survival period.

Section 4.4 Extent of Indemnity. Without prejudice to the indemnity and other obligations of Pioneer USA hereunder, Pioneer USA makes no representations or warranties whatsoever, and disclaims all liability and responsibility for any representation, warranty, statement, or information made or communicated (orally or in writing) to Buyer (including any opinion, information, or advice which may have been provided to Buyer by any Affiliate or Representative of Pioneer USA or by any investment bank or investment banking firm, any petroleum engineer or engineering firm, Pioneer USA’s counsel, or any other agent, consultant, or representative) regarding the Assets or the liabilities or operations of Buyer.

Section 4.5 Limitations of Liability. In no event shall Pioneer USA ever be liable to the Partnership Entities for any exemplary, punitive, indirect, consequential, remote, speculative,

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treble, multiple or special damages relating to or arising out of the Contemplated Transactions; provided, however, that any exemplary, punitive, indirect, consequential, remote, speculative, treble, multiple or special damages recovered by a third party (including a Governmental Body, but excluding any Affiliate of any Party) against a party entitled to indemnity pursuant to this Article IV shall be included in the Damages recoverable under such indemnity. For purposes of Section 4.4 and this Section 4.5, the term Pioneer USA means Pioneer USA and any of its Affiliates.

ARTICLE V
Miscellaneous

Section 5.1 Choice of Law. This Agreement shall be subject to and governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state.

Section 5.2 Notice. All notices, requests or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be given by depositing same in the United States mail, addressed to the Person to be notified, postpaid, and registered or certified with return receipt requested or by delivering such notice in person or by telecopier or telegram to such Party. Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by telegram or telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours. All notices to be sent to a Party pursuant to this Agreement shall be sent to or made to the attention of such Party at the address set forth below or at such other address as such Party may stipulate to the other Parties in the manner provided in this Section 5.2.

5205 N. O’Connor Blvd., Suite 200
Irving, Texas 75039
Phone: (972) 444-9001
Fax: (972) 969-3587
Attention: General Counsel

Section 5.3 Entire Agreement. This Agreement constitutes the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein. No representation, promise, inducement, or statement of intention with respect to the subject matter of this Agreement has been made by any Party which is not embodied in this Agreement together with the documents, instruments, and writings that are delivered pursuant hereto, and none of the Parties shall be bound by or liable for any alleged representation, promise, inducement, or statement of intention not so set forth.

Section 5.4 Jurisdiction; Service of Process. Without limiting the Parties’ agreement to arbitrate in Section 5.19, any action or proceeding seeking a temporary or preliminary injunction to enforce any provision of, or based on any right arising out of, this Agreement must be brought against any of the Parties in the courts of the State of Texas, County of Dallas, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of

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Texas (Dallas Division), and each of the Parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) for such limited purpose in any such action or proceeding and waives any objection to venue laid therein for such limited purpose. Process in any action or proceeding referred to in the preceding sentence may be served on any Party anywhere in the world.

Section 5.5 Further Action. In connection with this Agreement and all transactions contemplated by this Agreement, each Party agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.

Section 5.6 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns, as well as any Persons asserting rights or claims on behalf of any of the foregoing Persons.

Section 5.7 Creditors. None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership.

Section 5.8 Termination. Notwithstanding any other provision of this Agreement, if the General Partner is removed as general partner of the Partnership under circumstances where Cause does not exist and Common Units held by the General Partner and its Affiliates are not voted in favor of such removal, Article II may immediately thereupon be terminated by Pioneer USA. Article II of this Agreement shall also immediately terminate upon a Change of Control.

Section 5.9 Effect of Waiver or Consent. No waiver or consent, express or implied, by any Party to or of any breach or default by any Party in the performance by such Party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such Party of the same or any other obligations of such Party hereunder. Failure on the part of a Party to complain of any act of any Party or to declare any Party in default, irrespective of how long such failure continues, shall not constitute a waiver by such Party of its rights hereunder until the applicable statute of limitations period has run.

Section 5.10 Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the Parties hereto, notwithstanding that all such Parties are not signatories to the original or the same counterpart. Each Party shall become bound by this Agreement immediately upon affixing its signature hereto.

Section 5.11 Invalidity of Provisions. If any provision of this Agreement or the application thereof to any Party or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Parties or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

Section 5.12 Amendment or Restatement. This Agreement may be amended or restated only by a written instrument executed by each of the Parties; provided, however, that after the

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First Closing Date, the Partnership may not, without the prior approval of the Conflicts Committee or, if there is no such committee, the independent members of such board of directors, agree to any amendment or modification of this Agreement that the General Partner determines will adversely affect the holders of such Common Units. Without the consent of any Party, Pioneer shall be entitled to amend this Agreement to delete Article II or to amend the definition of “Area of Operations” in a manner that would expand the geographical scope of such term.

Section 5.13 Assignment; Third Party Beneficiaries. No Party shall have the right to assign its rights or obligations under this Agreement without the prior written consent of the other Parties; provided, however, a merger shall not be deemed to be an assignment and a transfer of the rights and an assumption of the obligations under this Agreement; provided further, however, that the transfer of all or substantially all of the assets of a Party shall not be deemed an assignment of such rights or obligations of such Party to this Agreement if the assignee assumes all of the obligations under this Agreement. Each of the Parties hereto specifically intends that each entity comprising the Partnership Entities, as applicable, whether or not a Party to this Agreement, shall be entitled to assert rights and remedies hereunder as third- party beneficiaries hereto with respect to those provisions of this Agreement affording a right, benefit or privilege to any such entity.

Section 5.14 Withholding or Granting of Consent. Each Party may, with respect to any consent or approval that it is entitled to grant pursuant to this Agreement, grant or withhold such consent or approval in its sole and uncontrolled discretion, with or without cause, and subject to such conditions as it shall deem appropriate.

Section 5.15 Direct or Indirect Action. Where any provision of this Agreement refers to action to be taken by any Party, or which such Party is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Party, including actions taken by or on behalf of any Affiliate of such Party.

Section 5.16 Laws and Regulations. Notwithstanding any provision of this Agreement to the contrary, no Party shall be required to take any act, or fail to take any act, under this Agreement if the effect thereof would be to cause such Party to be in violation of any applicable Legal Requirement.

Section 5.17 Negation of Rights of Limited Partners, Assignees and Third Parties. Except as set forth in Section 5.13, the provisions of this Agreement are enforceable solely by the Parties, and no limited partner, member, or assignee of the Partnership or other Person shall have the right, separate and apart from the Partnership, to enforce any provision of this Agreement or to compel any Party to comply with the terms of this Agreement.

Section 5.18 No Recourse Against Officers, Directors, Managers or Employees. For the avoidance of doubt, the provisions of this Agreement shall not give rise to any right of recourse against any officer, director, manager or employee of any Party or any officer, director, manager or employee of any Affiliate of any Party.

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Section 5.19 Arbitration. Any claim, counterclaim, demand, cause of action, dispute, or any other controversy arising out of or relating in any way to this Agreement or to the subject matter of this Agreement or to any relationship created thereby (each a “Dispute”) shall be resolved by binding arbitration. A Dispute must be resolved through arbitration regardless of whether the Dispute involves claims that this Agreement is unlawful, unenforceable, void or voidable or involves claims sounding in tort, contract, statute or common law. This Section 5.19 shall be binding on and shall inure to the benefit of the Parties and their Affiliates and the Partnership Entities. The validity, construction and interpretation of this agreement to arbitrate, and all other procedural aspects of the arbitration conducted pursuant hereto, shall be decided by the arbitral tribunal. Any arbitration under this Agreement shall be administered by the American Arbitration Association (“AAA”) and conducted in accordance with the Commercial Arbitration Rules (the “Rules”) of the AAA in existence at the time of the arbitration. In resolving any Dispute, the arbitral tribunal shall refer to the governing law as specified in Section 5.1 of this Agreement. Except for any exemplary, punitive, indirect, consequential, remote, speculative, treble, multiple or special damages recovered by a third party pursuant to Section 4.5, the arbitral tribunal shall not be empowered to award exemplary, punitive, indirect, consequential, remote, speculative, treble, multiple or special damages, and the Parties and their Affiliates and the Partnership Entities waive any right they may have to recover such damages from one another. The arbitral tribunal shall not be empowered to decide any dispute ex aequo et bono or amiable compositeur. The seat (or legal place) and venue of the arbitration shall be in Dallas, Texas. The arbitration shall be conducted in the English language.

The Dispute shall be decided by a panel of three neutral arbitrators. The claimant or claimants shall nominate an arbitrator at the time of service of a request for arbitration. The respondent or respondents shall nominate an arbitrator at the time of service of the response to the request for arbitration. If the claimant(s) or respondent(s) fail to appoint an arbitrator, then that arbitrator shall be appointed in accordance with the Rules. The two appointed arbitrators shall together agree upon a third arbitrator to recommend to the AAA to chair the arbitration. If the two party-appointed arbitrators are unable to agree upon an arbitrator within fifteen (15) days of the respondent’s appointment of an arbitrator, then the chairman shall be chosen according to the Rules. Notwithstanding the foregoing, if two or more respondents have interests with regard to a Dispute that are not completely common, then all arbitrators shall be appointed in accordance with the Rules and not by nomination or appointment by the Parties. Any arbitration award may be enforced by the courts sitting in Dallas, Texas or any other court of competent subject matter jurisdiction (including any jurisdiction in which a Party holds or keeps assets). Any action to challenge, vacate or set aside the award in whole or in part must be brought in the courts sitting in Dallas, Texas. The Parties and their Affiliates and the Partnership Entities agree to waive any objections they may have to personal jurisdiction, venue or forum non-conveniens for any action brought to enforce the award in the courts sitting in Dallas, Texas or any other jurisdiction where a party against which enforcement of the award is sought holds or keeps assets.

Section 5.20 Asset Records. For so long as Pioneer USA continues as operator of the Wellbores, Pioneer USA shall retain custody of the Asset Records. Buyer, at Buyer’s expense, shall be entitled to obtain copies of the Asset Records as Buyer may desire, at reasonable business hours and upon prior notice to Pioneer USA. Pioneer USA will give Buyer reasonable

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notice prior to destroying any of the Asset Records. If Pioneer USA resigns as operator of any Wellbore, or is no longer the operator for any reason, Pioneer USA shall promptly deliver the Asset Records attributable to such Wellbore to Buyer, unless (a) an Asset Record applicable to such Wellbore is also applicable to any other Wellbore or Excluded Asset, or (b) Pioneer USA is retaining an interest in such Wellbore, in which case Pioneer USA shall promptly deliver either the Asset Record or a copy thereof to Buyer, at Pioneer USA’s option. Pioneer USA may, at its own expense, retain copies of all Asset Records delivered to Buyer. After the delivery of any Asset Record to Buyer, Pioneer USA, at Pioneer USA’s expense, shall be entitled to obtain from Buyer, at reasonable business hours and upon prior notice to Buyer, copies of such records as reasonable and necessary for tax purposes or in connection with any Proceeding or threatened Proceeding against Pioneer USA.

Section 5.21 Limitation on Mineral Interests. With respect to each Wellbore, and subject to the remainder of this Section 5.21, the rights, titles, and interests in the Mineral Interests shall be limited in duration to a term commencing on the Closing Date and continuing for so long as Hydrocarbons are produced in Paying Quantities from the Assigned Depths in such Wellbore. If, at any time or times after the Closing Date, the production of Hydrocarbons in Paying Quantities from the Assigned Depths in any Wellbore should cease from any cause, then Buyer’s rights in the Mineral Interests applicable to such Wellbore shall nevertheless continue in force and effect if drilling or reworking operations in an attempt to restore production in Paying Quantities from the Assigned Depths in such Wellbore are commenced within sixty (60) days after such cessation of production, and remain in force and effect for so long as such drilling or reworking operations are diligently prosecuted with no cessation of more than thirty (30) consecutive days; and if such drilling or reworking operations result in the production of Hydrocarbons in Paying Quantities from the Assigned Depths in such Wellbore, then Buyer’s rights in the Mineral Interests applicable to such Wellbore shall remain in force and effect for so long thereafter as such Hydrocarbons are produced in Paying Quantities. Further, if the interests in any Wellbore allocated or conveyed to, or vested in, Buyer on the Closing Date include both one or more Mineral Interests and one or more Leases, then the Mineral Interest(s) applicable to such Wellbore shall remain in force and effect for so long as any Lease applicable to such Wellbore remains in force and effect or is renewed in such time and manner as to remain subject to the applicable operating agreement for such Wellbore.

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IN WITNESS WHEREOF, the Parties have executed this Agreement on, and effective as of, the First Closing Date.


PIONEER SOUTHWEST ENERGY PARTNERS L.P.

By:	PIONEER NATURAL RESOURCES GP LLC, its general partner

	By:		/s/ Richard P. Dealy

		Name:	Richard P. Dealy
		Title:	Executive Vice President and
			Chief Financial Officer

PIONEER NATURAL RESOURCES GP LLC

	By:		/s/ Richard P. Dealy

		Name:	Richard P. Dealy
		Title:	Executive Vice President and
			Chief Financial Officer

PIONEER NATURAL RESOURCES COMPANY

	By:		/s/ Richard P. Dealy

		Name:	Richard P. Dealy
		Title:	Executive Vice President and
			Chief Financial Officer

PIONEER NATURAL RESOURCES USA, INC.

	By:		/s/ Richard P. Dealy

		Name:	Richard P. Dealy
		Title:	Executive Vice President and
			Chief Financial Officer

Signature Page to
Pioneer Southwest Energy Partners L.P.
Omnibus Agreement


PIONEER SOUTHWEST ENERGY PARTNERS USA LLC

By:	PIONEER NATURAL RESOURCES USA, its sole member

	By:		/s/ Richard P. Dealy

		Name:	Richard P. Dealy
		Title:	Executive Vice President and
			Chief Financial Officer

Signature Page to
Pioneer Southwest Energy Partners L.P.
Omnibus Agreement

EX-3.1 6 d56641exv3w1.htm FIRST AMENDED AND RESTATED AGREEMENT exv3w1

EXHIBIT 3.1

Execution Version

FIRST AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

PIONEER SOUTHWEST ENERGY PARTNERS L.P.

TABLE OF CONTENTS


ARTICLE I
DEFINITIONS

Section 1.1 Definitions			1
Section 1.2 Construction			17

ARTICLE II
ORGANIZATION

Section 2.1 Formation			17
Section 2.2 Name			17
Section 2.3 Registered Office; Registered Agent; Principal Office; Other Offices			18
Section 2.4 Purpose and Business			18
Section 2.5 Powers			18
Section 2.6 Power of Attorney			19
Section 2.7 Term			20
Section 2.8 Title to Partnership Assets			20
Section 2.9 Certain Undertakings Relating to the Separateness of the Partnership			21

ARTICLE III
RIGHTS OF LIMITED PARTNERS

Section 3.1 Limitation of Liability			22
Section 3.2 Management of Business			22
Section 3.3 Outside Activities of the Limited Partners			22
Section 3.4 Rights of Limited Partners			22

ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS

Section 4.1 Certificates			23
Section 4.2 Mutilated, Destroyed, Lost or Stolen Certificates			24
Section 4.3 Record Holders			25
Section 4.4 Transfer Generally			25
Section 4.5 Registration and Transfer of Limited Partner Interests			25
Section 4.6 Transfer of the General Partner’s General Partner Interest			27
Section 4.7 Restrictions on Transfers			27
Section 4.8 Eligible Holder Certifications; Non-Eligible Holders			29
Section 4.9 Redemption of Partnership Interests of Non-Eligible Holders			30

ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS

Section 5.1 Organizational Contributions			31
Section 5.2 Contributions by the General Partner and Pioneer USA			32
Section 5.3 Contributions by the Underwriters; Sale of Operating Company Interest			32
Section 5.4 Interest and Withdrawal			33
Section 5.5 Capital Accounts			33


Section 5.6 Issuances of Additional Partnership Securities			36
Section 5.7 Limited Preemptive Right			37
Section 5.8 Splits and Combinations			37
Section 5.9 Fully Paid and Non-Assessable Nature of Limited Partner Interests			38

ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS

Section 6.1 Allocations for Capital Account Purposes			38
Section 6.2 Allocations for Tax Purposes			43
Section 6.3 Requirement and Characterization of Distributions; Distributions to Record Holders			46

ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS

Section 7.1 Management			46
Section 7.2 Certificate of Limited Partnership			49
Section 7.3 Restrictions on the General Partner’s Authority			49
Section 7.4 Reimbursement of the General Partner			49
Section 7.5 Outside Activities			50
Section 7.6 Loans from the General Partner; Loans or Contributions from the Partnership or Group Members			52
Section 7.7 Indemnification			52
Section 7.8 Liability of Indemnitees			54
Section 7.9 Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties			55
Section 7.10 Other Matters Concerning the General Partner			59
Section 7.11 Purchase or Sale of Partnership Securities			59
Section 7.12 Registration Rights of the General Partner and its Affiliates			60
Section 7.13 Reliance by Third Parties			62

ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 8.1 Records and Accounting			63
Section 8.2 Fiscal Year			63
Section 8.3 Reports			63

ARTICLE IX
TAX MATTERS

Section 9.1 Tax Returns and Information			64
Section 9.2 Tax Elections			64
Section 9.3 Tax Controversies			64
Section 9.4 Withholding			64

ARTICLE X
ADMISSION OF PARTNERS

Section 10.1 Admission of Initial Limited Partners			65
Section 10.2 Admission of Substituted Limited Partners			65


Section 10.3 Admission of Successor General Partner			65
Section 10.4 Admission of Additional Limited Partners			66
Section 10.5 Amendment of Agreement and Certificate of Limited Partnership			66

ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS

Section 11.1 Withdrawal of the General Partner			66
Section 11.2 Removal of the General Partner			68
Section 11.3 Interest of Departing General Partner and Successor General Partner			68
Section 11.4 Withdrawal of Limited Partners			70

ARTICLE XII
DISSOLUTION AND LIQUIDATION

Section 12.1 Dissolution			70
Section 12.2 Continuation of the Business of the Partnership After Dissolution			71
Section 12.3 Liquidator			71
Section 12.4 Liquidation			72
Section 12.5 Cancellation of Certificate of Limited Partnership			73
Section 12.6 Return of Contributions			73
Section 12.7 Waiver of Partition			73
Section 12.8 Capital Account Restoration			73

ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE

Section 13.1 Amendments to be Adopted Solely by the General Partner			73
Section 13.2 Amendment Procedures			75
Section 13.3 Amendment Requirements			75
Section 13.4 Special Meetings			76
Section 13.5 Notice of a Meeting			76
Section 13.6 Record Date			76
Section 13.7 Adjournment			77
Section 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes			77
Section 13.9 Quorum and Voting			77
Section 13.10 Conduct of a Meeting			78
Section 13.11 Action Without a Meeting			78
Section 13.12 Right to Vote and Related Matters			79

ARTICLE XIV
MERGER OR CONVERSION

Section 14.1 Authority.			79
Section 14.2 Procedure for Merger, Consolidation or Conversion			79
Section 14.3 Approval by Limited Partners			81
Section 14.4 Certificate of Merger or Conversion			82
Section 14.5 Amendment of Partnership Agreement			82
Section 14.6 Effect of Merger or Conversion			82

iii



ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS

Section 15.1 Right to Acquire Limited Partner Interests			83

ARTICLE XVI
GENERAL PROVISIONS

Section 16.1 Addresses and Notices			85
Section 16.2 Further Action			85
Section 16.3 Binding Effect			85
Section 16.4 Integration			85
Section 16.5 Creditors			86
Section 16.6 Waiver			86
Section 16.7 Counterparts			86
Section 16.8 Applicable Law; Forum, Venue and Jurisdiction			86
Section 16.9 Invalidity of Provisions			87
Section 16.10 Consent of Partners			87
Section 16.11 Facsimile Signatures			87
Section 16.12 Third-Party Beneficiaries			87

FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PIONEER SOUTHWEST ENERGY PARTNERS L.P.

THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF PIONEER SOUTHWEST ENERGY PARTNERS L.P., dated May 6, 2008, is entered into by and between Pioneer Natural Resources GP LLC, a Delaware limited liability company, as the General Partner, and Pioneer Natural Resources USA, Inc., a Delaware corporation, as the Organizational Limited Partner, together with any other Persons who become Partners in the Partnership or parties hereto as provided herein. In consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1 Definitions.

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

“Additional Book Basis” means the portion of any remaining Carrying Value of an Adjusted Property that is attributable to positive adjustments made to such Carrying Value as a result of Book-Up Events. For purposes of determining the extent that Carrying Value constitutes Additional Book Basis:

(a) Any negative adjustment made to the Carrying Value of an Adjusted Property as a result of either a Book-Down Event or a Book-Up Event shall first be deemed to offset or decrease that portion of the Carrying Value of such Adjusted Property that is attributable to any prior positive adjustments made thereto pursuant to a Book-Up Event or Book-Down Event.

(b) If Carrying Value that constitutes Additional Book Basis is reduced as a result of a Book-Down Event and the Carrying Value of other property is increased as a result of such Book-Down Event, any such increase in Carrying Value shall be treated as Additional Book Basis; provided, that the amount treated as Additional Book Basis pursuant hereto as a result of such Book-Down Event shall not exceed the amount by which the Aggregate Remaining Net Positive Adjustments after such Book-Down Event exceeds the remaining Additional Book Basis attributable to all of the Partnership’s Adjusted Property after such Book-Down Event (determined without regard to the application of this clause (b) to such Book-Down Event).

“Additional Book Basis Derivative Items” means any Book Basis Derivative Items that are computed with reference to Additional Book Basis. To the extent that the Additional Book Basis attributable to all of the Partnership’s Adjusted Property as of the beginning of any taxable period exceeds the Aggregate Remaining Net Positive Adjustments as of the beginning of such period (the “Excess Additional Book Basis”), the Additional Book Basis Derivative Items for such period shall be reduced by the amount that bears the same ratio to the amount of Additional Book Basis Derivative Items determined without regard to this sentence as the Excess Additional Book Basis bears to the Additional Book Basis as of the beginning of such period.

“Additional Limited Partner” means a Person admitted to the Partnership as a Limited Partner pursuant to Section 10.4 and who is shown as such on the books and records of the Partnership or the books and records of the Transfer Agent.

“Adjusted Capital Account” means the Capital Account maintained for each Partner as of the end of each fiscal year of the Partnership, (a) increased by any amounts that such Partner is obligated to restore under the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b) decreased by (i) the amount of all deductions in respect of depletion that, as of the end of such fiscal year, are reasonably expected to be made to such Partner’s Capital Account in respect of the oil and gas properties of the Partnership Group, (ii) the amount of all losses and deductions that, as of the end of such fiscal year, are reasonably expected to be allocated to such Partner in subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and (iii) the amount of all distributions that, as of the end of such fiscal year, are reasonably expected to be made to such Partner in subsequent years in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Partner’s Capital Account that are reasonably expected to occur during (or prior to) the year in which such distributions are reasonably expected to be made (other than increases as a result of a minimum gain chargeback pursuant to Section 6.1(d)(i) or 6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. The “Adjusted Capital Account” of a Partner in respect of the General Partner Interest, a Common Unit or any other Partnership Interest shall be the amount that such Adjusted Capital Account would be if such General Partner Interest, Common Unit or other Partnership Interest were the only interest in the Partnership held by such Partner from and after the date on which such General Partner Interest, Common Unit or other Partnership Interest was first issued.

“Adjusted Property” means any property the Carrying Value of which has been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).

“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.

“Aggregate Remaining Net Positive Adjustments” means, as of the end of any taxable period, the sum of the Remaining Net Positive Adjustments of all the Partners.

“Agreed Allocation” means any allocation, other than a Required Allocation, of an item of income, gain, loss or deduction pursuant to the provisions of Section 6.1, including a Curative Allocation (if appropriate to the context in which the term “Agreed Allocation” is used).

“Agreed Value” of any Contributed Property means the fair market value of such property or other consideration at the time of contribution and in the case of an Adjusted Property, the fair market value of such Adjusted Property on the date of the revaluation event as described in Section 5.5(d), in both cases as determined by the General Partner. The General Partner shall use such method as it determines to be appropriate to allocate the aggregate Agreed

Value of Contributed Properties contributed to the Partnership in a single or integrated transaction or of Adjusted Properties among each separate property on a basis proportional to the fair market value of each such property.

“Agreement” means this First Amended and Restated Agreement of Limited Partnership of Pioneer Southwest Energy Partners L.P., as it may be amended, supplemented or restated from time to time.

“Assignee” means a Person to whom one or more Limited Partner Interests have been transferred in a manner permitted under this Agreement and who has executed and delivered a Transfer Application, if a Transfer Application Notice has previously been given, including an Eligible Holder Certification, if a Certification Notice has previously been given, but who has not been admitted as a Substituted Limited Partner.

“Associate” means, when used to indicate a relationship with any Person, (a) any corporation or organization of which such Person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock or other voting interest, (b) any trust or other estate in which such Person has at least a 20% beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity, and (c) any relative or spouse of such Person, or any relative of such spouse, who has the same principal residence as such Person.

“Available Cash” means, with respect to any Quarter ending prior to the Liquidation Date:

(a) all cash and cash equivalents of the Partnership Group on hand on the date of determination of Available Cash with respect to such Quarter, less

(b) the amount of any cash reserves established by the General Partner to (i) provide for the proper conduct of the business of the Partnership Group (including reserves for future capital expenditures and for anticipated future credit needs of the Partnership Group) subsequent to such Quarter, (ii) comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which any Group Member is a party or by which it is bound or its assets are subject or (iii) provide funds for distributions under Section 6.3 in respect of any one or more of the next four Quarters; provided, however, that disbursements made by a Group Member or cash reserves established, increased or reduced after the end of such Quarter but on or before the date of determination of Available Cash with respect to such Quarter shall be deemed to have been made, established, increased or reduced, for purposes of determining Available Cash, within such Quarter if the General Partner so determines.

Notwithstanding the foregoing, “Available Cash” with respect to the Quarter in which the Liquidation Date occurs and any subsequent Quarter shall equal zero.

“beneficial ownership” shall have the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Securities Exchange Act (and “beneficially,” “beneficial owner,” “beneficial interest,” “beneficially owned” and “beneficially own” shall have a correlative meaning).

“Board of Directors” means (a) the board of directors or managers of the General Partner, as applicable, if the General Partner is a corporation or limited liability company, or (b) if the General Partner is a limited partnership, the board of directors or board of managers, as applicable, of the general partner of the General Partner.

“Book Basis Derivative Items” means any item of income, deduction, gain, loss, Simulated Gain or Simulated Loss that is computed with reference to the Carrying Value of an Adjusted Property (e.g., depreciation, depletion, or gain, loss, Simulated Gain or Simulated Loss, with respect to an Adjusted Property).

“Book-Down Event” means an event that triggers a negative adjustment to the Capital Accounts of the Partners pursuant to Section 5.5(d).

“Book-Tax Disparity” means with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Partner’s share of the Partnership’s Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner’s Capital Account balance as maintained pursuant to Section 5.5 and the hypothetical balance of such Partner’s Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles.

“Book-Up Event” means an event that triggers a positive adjustment to the Capital Accounts of the Partners pursuant to Section 5.5(d).

“Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the state of Texas shall not be regarded as a Business Day.

“Capital Account” means the capital account maintained for a Partner pursuant to Section 5.5. The “Capital Account” of a Partner in respect of a General Partner Interest, a Common Unit or any other Partnership Interest shall be the amount that such Capital Account would be if such General Partner Interest, Common Unit or other Partnership Interest were the only interest in the Partnership held by such Partner from and after the date on which such General Partner Interest, Common Unit or other Partnership Interest was first issued.

“Capital Contribution” means any cash, cash equivalents or the Net Agreed Value of Contributed Property that a Partner contributes to the Partnership pursuant to this Agreement.

“Carrying Value” means (a) with respect to a Contributed Property or Adjusted Property, the Agreed Value of such property reduced (but not below zero) by all depreciation, depletion (including Simulated Depletion), amortization and cost recovery deductions charged to the Partners’ and Assignees’ Capital Accounts in respect of such Contributed Property, but taking into account Simulated Depletion in lieu of depletion with respect to Oil and Gas Properties, and (b) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination; provided that the Carrying Value of any property shall be adjusted from time to time in accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner.

“Cause” means a court of competent jurisdiction has entered a final, non-appealable judgment finding the General Partner liable for actual fraud or willful misconduct in its capacity as a general partner of the Partnership.

“Certificate” means (a) a certificate (i) substantially in the form of Exhibit A to this Agreement, (ii) issued in global form in accordance with the rules and regulations of the Depositary or (iii) in such other form as may be adopted by the General Partner, issued by the Partnership evidencing ownership of one or more Common Units or (b) a certificate, in such form as may be adopted by the General Partner, issued by the Partnership evidencing ownership of one or more other Partnership Securities.

“Certificate of Limited Partnership” means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of the State of Delaware as referenced in Section 7.2, as such Certificate of Limited Partnership may be amended, supplemented or restated from time to time.

“Certification Notice” means the giving of notice by the Partnership to the Limited Partners in the manner specified in Section 16.1 that the Partnership is implementing procedures pursuant to this Agreement to require a Limited Partner or a transferee of a Limited Partner Interest to certify that such Person is an Eligible Holder.

“claim” (as used in Section 7.12(c)) has the meaning assigned to such term in Section 7.12(c).

“Closing Date” means the first date on which Common Units are sold by the Partnership to the Underwriters pursuant to the provisions of the Underwriting Agreement.

“Closing Price” means, in respect of any class of Limited Partner Interests, as of the date of determination, the last sale price on such day, regular way, or in case no such sale takes place on such day, the average of the closing bid and asked prices on such day, regular way, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal National Securities Exchange on which the respective Limited Partner Interests are listed or admitted to trading or, if such Limited Partner Interests are not listed or admitted to trading on any National Securities Exchange, the last quoted price on such day or, if not so quoted, the average of the high bid and low asked prices on such day in the over-the-counter market, as reported by the Nasdaq Stock Market or such other system then in use, or, if on any such day such Limited Partner Interests of such class are not quoted by any such organization, the average of the closing bid and asked prices on such day as furnished by a professional market maker making a market in such Limited Partner Interests of such class selected by the General Partner, or if on any such day no market maker is making a market in such Limited Partner Interests of such class, the fair value of such Limited Partner Interests on such day as determined by the General Partner.

“Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of any successor law.

“Combined Interest” has the meaning assigned to such term in Section 11.3(a).

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

“Common Unit” means a Partnership Interest representing a fractional part of the Partnership Interests of all Limited Partners and Assignees, and having the rights and obligations specified with respect to Common Units in this Agreement.

“Conflicts Committee” means a committee of the Board of Directors of the General Partner composed entirely of two or more directors (a) who are not (i) security holders, officers or employees of the General Partner or any of its Affiliates (other than as permitted by clause (a)(iii)), (ii) directors of any Affiliate of the General Partner, or (iii) holders of any ownership interest in the Partnership Group other than Common Units, (b) who meet the independence standards required to serve on an audit committee of a board of directors established by the Securities Exchange Act and the rules and regulations of the Commission thereunder and by the National Securities Exchange on which the Common Units are listed or admitted to trading and (c) who do not have any relationship that would be required to be disclosed by the General Partner pursuant to Item 404(a) of Regulation S-K if the General Partner were subject to the provisions of the Securities Exchange Act.

“Contributed Property” means each property or other asset, in such form as may be permitted by the Delaware Act, but excluding cash, contributed to the Partnership. Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 5.5(d), such property shall no longer constitute a Contributed Property, but shall be deemed an Adjusted Property.

“Contribution Agreement” means that certain Contribution Agreement, dated as of the Closing Date, among the General Partner, the Partnership and Pioneer USA, as such may be amended, supplemented or restated from time to time.

“Counterparty” has the meaning assigned to such term in Section 7.9(j).

“Curative Allocation” means any allocation of an item of income, gain, deduction, loss or credit pursuant to the provisions of Section 6.1(d)(ix).

“Current Market Price” means, in respect of any class of Limited Partner Interests, as of the date of determination, the average of the daily Closing Prices per Limited Partner Interest of such class for the 20 consecutive Trading Days immediately prior to such date.

“Delaware Act” means the Delaware Revised Uniform Limited Partnership Act, 6 Del C. Section 17-101, et seq., as amended, supplemented or restated from time to time, and any successor to such statute.

“Departing General Partner” means a former General Partner from and after the effective date of any withdrawal or removal of such former General Partner pursuant to Section 11.1 or 11.2.

“Depositary” means, with respect to any Units issued in global form, The Depository Trust Company and its successors and permitted assigns.

“Economic Risk of Loss” has the meaning set forth in Treasury Regulation Section 1.752-2(a).

“Eligible Holder” means a person or entity qualified to hold an interest in oil and gas leases on United States federal lands. As of the date hereof, Eligible Holder means: (1) a citizen of the United States; (2) a corporation organized under the laws of the United States or of any state thereof; (3) a public body, including a municipality; or (4) an association of United States citizens, such as a partnership or limited liability company, organized under the laws of the United States or of any state thereof, but only if such association does not have any direct or indirect foreign ownership, other than foreign ownership of stock in a parent corporation organized under the laws of the United States or of any state thereof. For the avoidance of doubt, onshore mineral leases on United States federal lands or any direct or indirect interest therein may be acquired and held by aliens only through stock ownership, holding or control in a corporation organized under the laws of the United States or of any state thereof.

“Eligible Holder Certification” means a properly completed certificate in such form as may be specified by the General Partner by which an Assignee or a Limited Partner certifies that he (and if he is a nominee holding for the account of another Person, that to the best of his knowledge such other Person) is an Eligible Holder.

“Event of Withdrawal” has the meaning assigned to such term in Section 11.1(a).

“Formation Merger Agreement” means the Agreement and Plan of Merger, dated as of May 1, 2008, by and among Pioneer USA, the Operating Company, Pioneer Retained Properties Company LLC, and Pioneer Limited Natural Resources Properties LLC.

“General Partner” means Pioneer Natural Resources GP LLC, a Delaware limited liability company, and its successors and permitted assigns that are admitted to the Partnership as general partner of the Partnership, in its capacity as general partner of the Partnership (except as the context otherwise requires).

“General Partner Interest” means the ownership interest of the General Partner in the Partnership (in its capacity as a general partner without reference to any Limited Partner Interest held by it), which is evidenced by General Partner Units, and includes any and all benefits to which the General Partner is entitled as provided in this Agreement, together with all obligations of the General Partner to comply with the terms and provisions of this Agreement.

“General Partner Unit” means a fractional part of the General Partner Interest having the rights and obligations specified with respect to the General Partner Interest. A General Partner Unit is not a Unit.

“Gross Liability Value” means, with respect to any Liability of the Partnership described in Treasury Regulation Section 1.752-7(b)(3)(i), the amount of cash that a willing assignor would pay to a willing assignee to assume such Liability in an arm’s-length transaction. The Gross Liability Value of each Liability of the Partnership described in Treasury Regulation Section 1.752-7(b)(3)(i) shall be adjusted at such times as provided in this Agreement for an adjustment to Carrying Values.

“Group” means a Person that with or through any of its Affiliates or Associates has any agreement, contract, arrangement, understanding or relationship for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent given to such Person in response to a proxy or consent solicitation made to 10 or more Persons), exercising investment

power or disposing of any Partnership Interests with any other Person that beneficially owns, or whose Affiliates or Associates beneficially own, directly or indirectly, Partnership Interests.

“Group Member” means a member of the Partnership Group.

“Group Member Agreement” means the partnership agreement of any Group Member, other than the Partnership, that is a limited or general partnership, the limited liability company agreement or similar organizational documents of any Group Member that is a limited liability company, the certificate of incorporation and bylaws or similar organizational documents of any Group Member that is a corporation, the joint venture agreement or similar governing document of any Group Member that is a joint venture and the governing or organizational or similar documents of any other Group Member that is a Person other than a limited or general partnership, limited liability company, corporation or joint venture, as such may be amended, supplemented or restated from time to time.

“Holder” as used in Section 7.12, has the meaning assigned to such term in Section 7.12(a).

“Indemnification Agreement” means any indemnification agreement by and between the Partnership and any officer or director of the General Partner, as any of such may be amended, supplemented or restated from time to time.

“Indemnified Persons” has the meaning assigned to such term in Section 7.12(c).

“Indemnitee” means (a) the General Partner, (b) any Departing General Partner, (c) any Person who is or was an Affiliate of the General Partner or any Departing General Partner, (d) any Person who is or was a member, manager, partner, director, officer, fiduciary or trustee of any Group Member, the General Partner or any Departing General Partner or any Affiliate of any Group Member, the General Partner or any Departing General Partner, (e) any Person who is or was serving at the request of the General Partner or any Departing General Partner or any Affiliate of the General Partner or any Departing General Partner as an officer, director, member, manager, partner, fiduciary or trustee of another Person; provided that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services, and (f) any Person the General Partner designates as an “Indemnitee” for purposes of this Agreement.

“Initial Common Units” means the Common Units sold in the Initial Offering.

“Initial Limited Partner” means Pioneer USA and each of the Underwriters, in each case upon being admitted to the Partnership in accordance with Section 10.1.

“Initial Offering” means the initial offering and sale of Common Units to the public, as described in the Registration Statement.

“Initial Unit Price” means (a) with respect to the Common Units, the initial public offering price per Common Unit at which the Underwriters offered the Common Units to the public for sale as set forth on the cover page of the prospectus included as part of the Registration Statement and first issued at or after the time the Registration Statement first becomes effective or (b) with respect to any other class or series of Units, the price per Unit at

which such class or series of Units is initially sold by the Partnership, as determined by the General Partner, in each case adjusted as the General Partner determines to be appropriate to give effect to any distribution, subdivision or combination of Units.

“Issue Price” means the price at which a Unit is purchased from the Partnership, after taking into account any sales commission or underwriting discount charged to the Partnership.

“Liability” means any liability or obligation of any nature, whether accrued, contingent or otherwise.

“Limited Partner” means, unless the context otherwise requires, (a) the Organizational Limited Partner, each Initial Limited Partner, each Substituted Limited Partner, each Additional Limited Partner and any Departing General Partner upon the change of its status from General Partner to Limited Partner pursuant to Section 11.3, in each case, in such Person’s capacity as a limited partner of the Partnership or (b) solely for purposes of Articles V, VI, IX and XII, each Assignee.

“Limited Partner Interest” means the ownership interest of a Limited Partner or Assignee in the Partnership, which may be evidenced by Common Units or other Partnership Securities or a combination thereof or interest therein, and includes any and all benefits to which such Limited Partner or Assignee is entitled as provided in this Agreement, together with all obligations of such Limited Partner or Assignee to comply with the terms and provisions of this Agreement.

“Liquidation Date” means (a) in the case of an event giving rise to the dissolution of the Partnership of the type described in clauses (a) and (b) of the first sentence of Section 12.2, the date on which the applicable time period during which the holders of Outstanding Units have the right to elect to continue the business of the Partnership has expired without such an election being made and (b) in the case of any other event giving rise to the dissolution of the Partnership, the date on which such event occurs.

“Liquidator” means one or more Persons selected by the General Partner to perform the functions described in Section 12.4 as liquidating trustee of the Partnership within the meaning of the Delaware Act.

“LLC Interest Sale Agreement” means that certain Membership Interest Sale Agreement, dated as of the Closing Date, between the Partnership and Pioneer USA, as such may be amended, supplemented or restated from time to time.

“Merger Agreement” has the meaning assigned to such term in Section 14.1.

“National Securities Exchange” means an exchange registered with the Commission under Section 6(a) of the Securities Exchange Act, and any successor to such statute.

“Net Agreed Value” means (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed and (b) in the case of any property distributed to a Partner or Assignee by the Partnership, the Partnership’s Carrying Value of such property (as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is distributed, reduced by any indebtedness either assumed by such Partner or Assignee upon such

distribution or to which such property is subject at the time of distribution, in either case, as determined under Section 752 of the Code.

“Net Income” means, for any taxable year, the excess, if any, of the Partnership’s items of income and gain (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) for such taxable year over the Partnership’s items of loss and deduction (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) for such taxable year. The items included in the calculation of Net Income shall be determined in accordance with Section 5.5(b) and shall include Simulated Gains, but shall not include any items specially allocated under Sections 6.1(d) and 6.1(e); provided, that the determination of the items that have been specially allocated under Section 6.1(d) shall be made as if Section 6.1(d)(x) were not in this Agreement.

“Net Loss” means, for any taxable year, the excess, if any, of the Partnership’s items of loss and deduction (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) for such taxable year over the Partnership’s items of income and gain (other than those items taken into account in the computation of Net Termination Gain or Net Termination Loss) for such taxable year. The items included in the calculation of Net Loss shall be determined in accordance with Section 5.5(b) and shall include Simulated Gains, but shall not include any items specially allocated under Sections 6.1(d) and 6.1(e); provided, that the determination of the items that have been specially allocated under Section 6.1(d) shall be made as if Section 6.1(d)(x) were not in this Agreement.

“Net Positive Adjustments” means, with respect to any Partner, the excess, if any, of the total positive adjustments over the total negative adjustments made to the Capital Account of such Partner pursuant to Book-Up Events and Book-Down Events.

“Net Termination Gain” means, for any taxable year, the sum, if positive, of all items of income, gain, loss or deduction recognized by the Partnership (a) after the Liquidation Date or (b) upon the sale, exchange or other disposition of all or substantially all of the assets of the Partnership Group, taken as a whole, in a single transaction or a series of related transactions (excluding any disposition to a member of the Partnership Group). The items included in the determination of Net Termination Gain shall be determined in accordance with Section 5.5(b) and shall include Simulated Gains, but shall not include any items of income, gain or loss specially allocated under Section 6.1(d) or Section 6.1(e).

“Net Termination Loss” means, for any taxable year, the sum, if negative, of all items of income, gain, loss or deduction recognized by the Partnership (a) after the Liquidation Date r (b) upon the sale, exchange or other disposition of all or substantially all of the assets of the Partnership Group, taken as a whole, in a single transaction or a series of related transactions (excluding any disposition to a member of the Partnership Group). The items included in the determination of Net Termination Loss shall be determined in accordance with Section 5.5(b) and shall include Simulated Gains, but shall not include any items of income, gain or loss specially allocated under Section 6.1(d) or Section 6.1(e).

“Non-Eligible Holder” means a Person whom the General Partner has determined does not constitute an Eligible Holder and as to whose Partnership Interest the General Partner has become the Substituted Limited Partner pursuant to Section 4.8.

“Non-Recourse Built-in Gain” means, with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or pledge securing a Non-Recourse Liability, the amount of any taxable gain that would be allocated to the Partners pursuant to Sections 6.2(d)(i)(A), 6.2(d)(ii)(A) and 6.2(d)(iii) if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration.

“Non-Recourse Deductions” means any and all items of loss, deduction or expenditure (including any expenditure described in Section 705(a)(2)(B) of the Code), Simulated Depletion or Simulated Loss that, in accordance with the principles of Treasury Regulation Section 1.704-2(b), are attributable to a Non-Recourse Liability.

“Non-Recourse Liability” has the meaning set forth in Treasury Regulation Section 1.752-1(a)(2) or Treasury Regulation Section 1.752-7.

“Notice of Election to Purchase” has the meaning assigned to such term in Section 15.1(b).

“Omnibus Agreement” means the Omnibus Agreement, dated as of the Closing Date, among the General Partner, the Partnership, Pioneer USA, the Operating Company and Pioneer Natural Resources Company, as such may be amended, supplemented or restated from time to time.

“Omnibus Operating Agreement” means the Omnibus Operating Agreement, dated as of the Closing Date, between the Operating Company and Pioneer USA, as such may be amended, supplemented or restated from time to time.

“Operating Agreements” means any operating agreements entered into, or to which the Operating Company otherwise becomes subject, as of the initial Closing Date among Pioneer USA, the Operating Company and any other party thereto relating to assets and properties of the Partnership Group, as any of such may be amended, supplemented or restated from time to time.

“Operating Company” means Pioneer Southwest Energy Partners USA LLC, a Texas limited liability company, and any successors thereto.

“Opinion of Counsel” means a written opinion of counsel (who may be regular counsel to the Partnership or the General Partner or any of its Affiliates) acceptable to the General Partner.

“Option Closing Date” means the date or dates on which any Common Units are sold by the Partnership to the Underwriters upon exercise of the Over-Allotment Option.

“Organizational GP Contribution Amount” has the meaning assigned to such term in Section 5.1.

“Organizational Limited Partner” means Pioneer USA, in its capacity as the organizational limited partner of the Partnership pursuant to this Agreement.

“Outstanding” means, with respect to Partnership Securities, all Partnership Securities that are issued by the Partnership and reflected as outstanding on the Partnership’s books and records as of the date of determination; provided, however, that if at any time any Person or Group (other than the General Partner or its Affiliates) beneficially owns 20% or more of the

Outstanding Partnership Securities of any class then Outstanding, all Partnership Securities owned by such Person or Group shall not be voted on any matter and shall not be considered to be Outstanding when sending notices of a meeting of Limited Partners to vote on any matter (unless otherwise required by law), calculating required votes, determining the presence of a quorum or for other similar purposes under this Agreement, except that Units so owned shall be considered to be Outstanding for purposes of Section 11.1(b)(iv) (such Units shall not, however, be treated as a separate class of Partnership Securities for purposes of this Agreement); provided, further, that the foregoing limitation shall not apply to (i) any Person or Group who acquired 20% or more of the Outstanding Partnership Securities of any class then Outstanding directly from the General Partner or its Affiliates, (ii) any Person or Group who acquired 20% or more of the Outstanding Partnership Securities of any class then Outstanding directly or indirectly from a Person or Group described in clause (i) provided that the General Partner shall have notified such Person or Group in writing that such limitation shall not apply, or (iii) any Person or Group who acquired 20% or more of any Partnership Securities issued by the Partnership with the prior approval of the Board of Directors of the General Partner.

“Over-Allotment Option” means the over-allotment option granted to the Underwriters by the Partnership pursuant to the Underwriting Agreement.

“Partner Non-Recourse Debt” has the meaning set forth in Treasury Regulation Section 1.704-2(b)(4).

“Partner Non-Recourse Debt Minimum Gain” has the meaning set forth in Treasury Regulation Section 1.704-2(i)(2).

“Partner Non-Recourse Deductions” means any and all items of loss, deduction or expenditure (including any expenditure described in Section 705(a)(2)(B) of the Code), Simulated Depletion or Simulated Loss that, in accordance with the principles of Treasury Regulation Section 1.704-2(i), are attributable to a Partner Non-Recourse Debt.

“Partners” means the General Partner and the Limited Partners.

“Partnership” means Pioneer Southwest Energy Partners L.P., a Delaware limited partnership.

“Partnership Group” means the Partnership and its Subsidiaries treated as a single consolidated entity.

“Partnership Interest” means an interest in the Partnership, which shall include the General Partner Interest and Limited Partner Interests.

“Partnership Minimum Gain” means that amount determined in accordance with the principles of Treasury Regulation Sections 1.704-2(b)(2) and 1.704-2(d).

“Partnership Security” means any class or series of equity interest in the Partnership (but excluding any options, rights, warrants and appreciation rights relating to an equity interest in the Partnership), including Common Units and General Partner Units.

“Percentage Interest” means as of any date of determination (a) as to the General Partner (in its capacity as General Partner without reference to any Limited Partner Interests held by it) with respect to General Partner Units and as to any Unitholder or Assignee with respect to Units, the product obtained by multiplying (i) 100% less the percentage applicable to clause (b) below by (ii) the quotient obtained by dividing (A) the number of General Partner Units held by the General Partner or the number of Units held by such Unitholder or Assignee, as the case may be, by (B) the total number of Outstanding Units and General Partner Units and (b) as to the holders of other Partnership Securities issued by the Partnership in accordance with Section 5.6, the percentage established as a part of such issuance.

“Pioneer USA” means Pioneer Natural Resources USA, Inc., a Delaware corporation, and any successors thereto.

“Plan of Conversion” has the meaning assigned to such term in Section 14.1.

“Pro Rata” means (a) when used with respect to Units or any class thereof, apportioned equally among all designated Units in accordance with their relative Percentage Interests and (b) when used with respect to Partners and Assignees or Record Holders, apportioned among all Partners and Assignees or Record Holders in accordance with their relative Percentage Interests.

“Proposed Transaction” has the meaning assigned to such term in Section 7.9(j).

“Purchase Agreement” means the Purchase and Sale Agreement, dated as of the Closing Date, among Pioneer USA, the Operating Company and Pioneer Retained Properties Company LLC, as such may be amended, supplemented or restated from time to time, pursuant to which, if the Over-Allotment Option is exercised after the initial Closing Date, the Operating Company will purchase additional properties as described in the Registration Statement.

“Purchase Date” means the date determined by the General Partner as the date for purchase of all Outstanding Limited Partner Interests of a certain class (other than Limited Partner Interests owned by the General Partner and its Affiliates) pursuant to Article XV.

“Quarter” means, unless the context requires otherwise, a fiscal quarter of the Partnership, or, with respect to the fiscal quarter of the Partnership that includes the Closing Date, the portion of such fiscal quarter after the Closing Date.

“Recapture Income” means any gain recognized by the Partnership (computed without regard to any adjustment required by Section 734 or Section 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset.

“Record Date” means the date established by the General Partner or otherwise in accordance with this Agreement for determining (a) the identity of the Record Holders entitled to notice of, or to vote at, any meeting of Limited Partners or entitled to vote by ballot or give

approval of Partnership action in writing without a meeting or entitled to exercise rights in respect of any lawful action of Limited Partners or (b) the identity of Record Holders entitled to receive any report, notice or distribution or to participate in any offer.

“Record Holder” means (a) the Person in whose name a Common Unit is registered on the books of the Transfer Agent as of the opening of business on a particular Business Day or (b) with respect to other Partnership Interests, the Person in whose name any such other Partnership Interest is registered on the books that the General Partner has caused to be kept as of the opening of business on such Business Day.

“Recusal Conflict” has the meaning assigned to such term in Section 7.9(j).

“Redeemable Interests” means any Partnership Interests for which a redemption notice has been given, and has not been withdrawn, pursuant to Section 4.9.

“Registration Statement” means the Registration Statement on Form S-1 (File No. 333-144868) as it has been or as it may be amended or supplemented from time to time, filed by the Partnership with the Commission under the Securities Act to register the offering and sale of the Common Units in the Initial Offering.

“Remaining Net Positive Adjustments” means as of the end of any taxable period, (a) with respect to the Unitholders, the excess of (i) the Net Positive Adjustments of the Unitholders as of the end of such period over (ii) the sum of those Partners’ Share of Additional Book Basis Derivative Items for each prior taxable period and (b) with respect to the General Partner (as holder of the General Partner Interest), the excess of (i) the Net Positive Adjustments of the General Partner as of the end of such period over (ii) the sum of the General Partner’s Share of Additional Book Basis Derivative Items with respect to the General Partner Interest for each prior taxable period.

“Required Allocations” means (a) any limitation imposed on any allocation of Net Losses or Net Termination Losses under Section 6.1(b) or 6.1(c)(ii) and (b) any allocation of an item of income, gain, loss, deduction, Simulated Depletion or Simulated Loss pursuant to Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iii), 6.1(d)(iv), 6.1(d)(v), 6.1(d)(vi), 6.1(d)(viii) or Section 6.1(e).

“Residual Gain” or “Residual Loss” means any item of gain or loss, as the case may be, of the Partnership recognized for federal income tax purposes resulting from a sale, exchange or other disposition of a Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 6.2(d)(i)(A) or 6.2(d)(ii)(A), respectively, to eliminate Book-Tax Disparities.

“Securities Act” means the Securities Act of 1933, as amended, supplemented or restated from time to time and any successor to such statute.

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time and any successor to such statute.

“Services Agreement” means the Administrative Services Agreement, dated as of the Closing Date, among the General Partner, the Operating Company, the Partnership and Pioneer USA, as such may be amended, supplemented or restated from time to time.

“Share of Additional Book Basis Derivative Items” means in connection with any allocation of Additional Book Basis Derivative Items for any taxable period, (a) with respect to the Unitholders holding Limited Partner Interests, the amount that bears the same ratio to such Additional Book Basis Derivative Items as the Unitholders’ Remaining Net Positive Adjustments as of the end of such period bears to the Aggregate Remaining Net Positive Adjustments as of that time, and (b) with respect to the General Partner (as holder of the General Partner Interest), the amount that bears the same ratio to such Additional Book Basis Derivative Items as the General Partner’s Remaining Net Positive Adjustments as of the end of such period bears to the Aggregate Remaining Net Positive Adjustment as of that time.

“Simulated Basis” means the Carrying Value of any oil and gas property (as defined in Section 614 of the Code).

“Simulated Depletion” means, with respect to an oil and gas property (as defined in Section 614 of the Code), a depletion allowance computed solely for the purposes of maintaining Capital Accounts in accordance with Section 5.5(b)(v) and in the manner specified in Treasury Regulation Section 1.704-1(b)(2)(iv)(k)(2). For purposes of computing Simulated Depletion with respect to any property, the Simulated Basis of such property shall be deemed to be the Carrying Value of such property, and in no event shall such allowance for Simulated Depletion, in the aggregate, exceed such Simulated Basis.

“Simulated Gain” means the excess, if any, of the amount realized from the sale or other disposition of an oil or gas property over the Carrying Value of such property.

“Simulated Loss” means the excess, if any, of the Carrying Value of an oil or gas property over the amount realized from the sale or other disposition of such property.

“Special Approval” means approval by a majority of the members of the Conflicts Committee acting in good faith or approval as contemplated by Section 7.9(i).

“Subsidiary” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) or limited liability company in which such Person or a Subsidiary of such Person is, at the date of determination (i) the general partner or (ii) a limited partner of such partnership or member of such limited liability company, but, in the case of clause (ii), only if more than 50% of the partnership interests of such partnership or membership interests of such limited liability company (considering all of the partnership interests or membership interests as a single class) is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof, or (c) any other Person (other than a corporation, a partnership or a limited liability company) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors or other governing body of such Person.

“Substituted Limited Partner” means a Person who is admitted as a Limited Partner to the Partnership pursuant to Section 10.2 in place of and with all the rights of a Limited Partner and who is shown as a Limited Partner on the books and records of the Partnership or the books and records of the Transfer Agent.

“Surviving Business Entity” has the meaning assigned to such term in Section 14.2(b)(ii).

“Tax Sharing Agreement” means the Tax Sharing Agreement, dated as of the Closing Date, between Pioneer Natural Resources Company and the Partnership, as such may be amended, supplemented or restated from time to time.

“Trading Day” means, for the purpose of determining the Current Market Price of any class of Limited Partner Interests, a day on which the principal National Securities Exchange on which such class of Limited Partner Interests is listed is open for the transaction of business or, if Limited Partner Interests of a class are not listed on any National Securities Exchange, a day on which banking institutions in New York City generally are open.

“transfer” has the meaning assigned to such term in Section 4.4(a).

“Transfer Agent” means such bank, trust company or other Person (including the General Partner or one of its Affiliates) as shall be appointed from time to time by the General Partner to act as registrar and transfer agent for the Common Units; provided, that if no Transfer Agent is specifically designated for any other Partnership Securities, the General Partner shall act in such capacity.

“Transfer Application” means an application and agreement for transfer of Units in a form set forth on the back of a Certificate, if applicable, or in a form substantially to the same effect in a separate instrument.

“Transfer Application Notice” means the giving of notice by the Partnership to the Limited Partners in the manner specified in Section 16.1 that the Partnership is implementing procedures pursuant to this Agreement to require a Limited Partner or a transferee of a Limited Partner Interest to complete a Transfer Application in connection with the transfer of such Limited Partner Interest.

“Underwriter” means each Person named as an underwriter in Schedule I to the Underwriting Agreement who purchases Common Units pursuant thereto.

“Underwriting Agreement” means that certain Underwriting Agreement dated April 30, 2008, among the Underwriters, Pioneer Natural Resources Company, Pioneer USA, the Operating Company, the Partnership and the General Partner, providing for the purchase of Common Units by the Underwriters.

“Unit” means a Partnership Security that is designated as a “Unit” and shall include Common Units but shall not include the General Partner Interest.

“Unitholders” means the holders of Units.

“Unit Majority” means at least a majority of the Outstanding Common Units.

“Unrealized Gain” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the fair market value of such property as of such date (as determined under Section 5.5(d)) over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 5.5(d) as of such date).

“Unrealized Loss” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 5.5(d) as of such date) over (b) the fair market value of such property as of such date (as determined under Section 5.5(d)).

“U.S. GAAP” means United States generally accepted accounting principles consistently applied.

“Withdrawal Opinion of Counsel” has the meaning assigned to such term in Section 11.1(b).

Section 1.2 Construction.

Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) the terms “include”, “includes”, “including” and words of like import shall be deemed to be followed by the words “without limitation”; and (d) the terms “hereof”, “herein” and “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement. The table of contents and headings contained in this Agreement are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Agreement.

ARTICLE II
ORGANIZATION

Section 2.1 Formation.

The General Partner and the Organizational Limited Partner have previously formed the Partnership as a limited partnership pursuant to the provisions of the Delaware Act and hereby amend and restate the original Agreement of Limited Partnership of Pioneer Southwest Energy Partners L.P. in its entirety. This amendment and restatement shall become effective on the date of this Agreement. Except as expressly provided to the contrary in this Agreement, the rights, duties (including fiduciary duties), liabilities and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be governed by the Delaware Act. All Partnership Interests shall constitute personal property of the owner thereof for all purposes.

Section 2.2 Name.

The name of the Partnership shall be “Pioneer Southwest Energy Partners L.P.” The Partnership’s business may be conducted under any other name or names as determined by the General Partner, including the name of the General Partner. The words “Limited Partnership,” “L.P.,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where

necessary for the purpose of complying with the laws of any jurisdiction that so requires. The General Partner may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.

Section 2.3 Registered Office; Registered Agent; Principal Office; Other Offices.

Unless and until changed by the General Partner, the registered office of the Partnership in the State of Delaware shall be located at 1209 Orange Street, Wilmington, Delaware 19801 and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be The Corporation Trust Company. The principal office of the Partnership shall be located at 5205 N. O’Connor Blvd., Suite 200, Irving, Texas 75039 or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner shall determine necessary or appropriate. The address of the General Partner shall be 5205 N. O’Connor Blvd., Suite 200, Irving, Texas 75039 or such other place as the General Partner may from time to time designate by notice to the Limited Partners.

Section 2.4 Purpose and Business.

The purpose and nature of the business to be conducted by the Partnership shall be to engage directly in, or enter into or form, hold and dispose of any corporation, partnership, joint venture, limited liability company or other arrangement to engage indirectly in, the business activities described in the Registration Statement including pursuing the business strategy set forth in the Registration Statement and any other business activity that is approved by the General Partner and that lawfully may be conducted by a limited partnership organized pursuant to the Delaware Act, and, in connection therewith, to exercise all of the rights and powers conferred upon the Partnership pursuant to the agreements relating to such business activity, and do anything necessary or appropriate to the foregoing, including the making of capital contributions or loans to a Group Member; provided, however, that the General Partner shall not cause the Partnership to engage, directly or indirectly, in any business activity that the General Partner determines would cause the Partnership to be treated as an association taxable as a corporation or otherwise taxable as an entity for federal income tax purposes. To the fullest extent permitted by law, the General Partner shall have no duty or obligation to propose or approve, and may in its sole discretion decline to propose or approve, the conduct by the Partnership of any business, other than the business activities described in the Registration Statement to be conducted by the Partnership as of the Closing Date, and, in declining to so propose or approve, shall not be required to fulfill any other standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity.

Section 2.5 Powers.

The Partnership shall be empowered to do any and all acts and things necessary or appropriate for the furtherance and accomplishment of the purposes and business described in Section 2.4 and for the protection and benefit of the Partnership.

Section 2.6 Power of Attorney.

(a) Each Limited Partner and each Assignee hereby constitutes and appoints the General Partner and, if a Liquidator shall have been selected pursuant to Section 12.3, the Liquidator (and any successor to the Liquidator by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, as the case may be, with full power of substitution, as his true and lawful agent and attorney-in-fact, with full power and authority in his name, place and stead, to:

(i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including this Agreement and the Certificate of Limited Partnership and all amendments or restatements hereof or thereof) that the General Partner or the Liquidator determines to be necessary or appropriate to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (B) all certificates, documents and other instruments that the General Partner or the Liquidator determines to be necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; (C) all certificates, documents and other instruments (including conveyances and a certificate of cancellation) that the General Partner or the Liquidator determines to be necessary or appropriate to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement; (D) all certificates, documents and other instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article IV, X, XI or XII; (E) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class or series of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities, issued pursuant to Section 5.6; and (F) all certificates, documents and other instruments (including agreements and a certificate of merger) relating to a merger, consolidation or conversion of the Partnership pursuant to Article XIV; and

(ii) execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates, documents and other instruments that the General Partner or the Liquidator determines to be necessary or appropriate to (A) make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Partners hereunder or is consistent with the terms of this Agreement or (B) effectuate the terms or intent of this Agreement; provided, that when required by Section 13.3 or any other provision of this Agreement that establishes a percentage of the Limited Partners or of the Limited Partners of any class or series required to take any action, the General Partner and the Liquidator may exercise the power of attorney made in this Section 2.6(a)(ii) only after the necessary vote, consent or approval of the Limited Partners or of the Limited Partners of such class or series, as applicable.

Nothing contained in this Section 2.6(a) shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article XIII or as may be otherwise expressly provided for in this Agreement.

(b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and, to the maximum extent permitted by law, not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Limited Partner or Assignee and the transfer of all or any portion of such Limited Partner’s or Assignee’s Partnership Interest and shall extend to such Limited Partner’s or Assignee’s heirs, successors, assigns and personal representatives. Each such Limited Partner or Assignee hereby agrees to be bound by any representation made by the General Partner or the Liquidator acting in good faith pursuant to such power of attorney; and each such Limited Partner or Assignee, to the maximum extent permitted by law, hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the General Partner or the Liquidator taken in good faith under such power of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or the Liquidator, within 15 days after receipt of the request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator may request in order to effectuate this Agreement and the purposes of the Partnership.

Section 2.7 Term.

The term of the Partnership commenced upon the filing of the Certificate of Limited Partnership in accordance with the Delaware Act and shall continue in existence until the dissolution of the Partnership in accordance with the provisions of Article XII. The existence of the Partnership as a separate legal entity shall continue until the cancellation of the Certificate of Limited Partnership as provided in the Delaware Act.

Section 2.8 Title to Partnership Assets.

Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner or Assignee, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner, one or more of its Affiliates or one or more nominees, as the General Partner may determine. The General Partner hereby declares and warrants that any Partnership assets for which record title is held in the name of the General Partner or one or more of its Affiliates or one or more nominees shall be held by the General Partner or such Affiliate or nominee for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use reasonable efforts to cause record title to such assets (other than those assets in respect of which the General Partner determines that the expense and difficulty of conveyancing makes transfer of record title to the Partnership impracticable) to be vested in the Partnership as soon as reasonably practicable; provided, further, that, prior to the withdrawal or removal of the General Partner or as soon thereafter as practicable, the General Partner shall use reasonable efforts to effect the transfer of record title to the Partnership and, prior to any such transfer, will provide for the use of such assets in a manner satisfactory to the General Partner. All Partnership assets shall be

recorded as the property of the Partnership in its books and records, irrespective of the name in which record title to such Partnership assets is held.

Section 2.9 Certain Undertakings Relating to the Separateness of the Partnership.

(a) Separateness Generally. The Partnership shall conduct its business and operations separate and apart from those of any other Person (other than the General Partner) in accordance with this Section 2.9.

(b) Separate Records. The Partnership shall maintain (i) its books and records, (ii) its accounts, and (iii) its financial statements, separate from those of any other Person, except its consolidated Subsidiaries.

(c) Separate Assets. The Partnership shall not commingle or pool its funds or other assets with those of any other Person, except its consolidated Subsidiaries, and shall maintain its assets in a manner that is not costly or difficult to segregate, ascertain or otherwise identify as separate from those of any other Person.

(d) Separate Name. The Partnership shall (i) conduct its business in its own name, (ii) use separate stationery, invoices, and checks, (iii) correct any known misunderstanding regarding its separate identity, and (iv) generally hold itself out as a separate entity.

(e) Separate Credit. Except as permitted by this Agreement, the Partnership shall not (i) pay its liabilities from a source other than its own funds, (ii) guarantee or become obligated for the debts of any other Person, except its Subsidiaries, (iii) hold out its credit as being available to satisfy the obligations of any other Person, except its Subsidiaries, (iv) acquire obligations or debt securities of the General Partner or its Affiliates (other than the Partnership or its Subsidiaries), or (v) pledge its assets for the benefit of any Person or make loans or advances to any Person, except its Subsidiaries; provided that the Partnership may engage in any transaction described in clauses (ii)-(v) of this Section 2.9(e) if prior Special Approval has been obtained for such transaction and either (A) the Conflicts Committee has determined, or has obtained reasonable written assurance from a nationally recognized firm of independent public accountants or a nationally recognized investment banking or valuation firm, that the borrower or recipient of the credit extension is not then insolvent and will not be rendered insolvent as a result of such transaction or (B) in the case of transactions described in clause (iv), such transaction is completed through a public auction or a National Securities Exchange.

(f) Separate Formalities. The Partnership shall (i) observe all partnership formalities and other formalities required by its organizational documents, the laws of the jurisdiction of its formation, or other laws, rules, regulations and orders of governmental authorities exercising jurisdiction over it, (ii) engage in transactions with the General Partner and its Affiliates (other than another Group Member) in conformity with the requirements of Section 7.9, and (iii) promptly pay, from its own funds, and on a current basis, its allocable share of general and administrative expenses, capital expenditures, and costs for shared services performed by Affiliates of the General Partner (other than another Group Member). Each material contract between the Partnership or another Group Member, on the one hand, and the Affiliates of the General Partner (other than a Group Member), on the other hand, shall be in writing.

(g) No Effect. Failure by the General Partner or the Partnership to comply with any of the obligations set forth above shall not affect the status of the Partnership as a separate legal entity, with its separate assets and separate liabilities. The General Partner and the Partnership may be consolidated for financial reporting purposes with Pioneer Natural Resources Company and its subsidiaries; provided, however, that such consolidation shall not affect the status of the Partnership as a separate legal entity with its separate assets and separate liabilities.

ARTICLE III
RIGHTS OF LIMITED PARTNERS

Section 3.1 Limitation of Liability.

The Limited Partners and the Assignees shall have no liability under this Agreement except as expressly provided in this Agreement or the Delaware Act.

Section 3.2 Management of Business.

No Limited Partner or Assignee, in its capacity as such, shall participate in the operation, management or control (within the meaning of the Delaware Act) of the Partnership’s business, transact any business in the Partnership’s name or have the power to sign documents for or otherwise bind the Partnership. Any action taken by any Affiliate of the General Partner or any officer, director, employee, manager, member, general partner, agent or trustee of the General Partner or any of its Affiliates, or any officer, director, employee, manager, member, general partner, agent or trustee of a Group Member, in its capacity as such, shall not be deemed to be participation in the control of the business of the Partnership by a limited partner of the Partnership (within the meaning of Section 17-303(a) of the Delaware Act) and shall not affect, impair or eliminate the limitations on the liability of the Limited Partners or Assignees under this Agreement.

Section 3.3 Outside Activities of the Limited Partners.

Subject to the provisions of Section 7.5 and the Omnibus Agreement, which shall continue to be applicable to the Persons referred to therein, regardless of whether such Persons shall also be Limited Partners or Assignees, any Limited Partner or Assignee shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct competition with the Partnership Group. Neither the Partnership nor any of the other Partners or Assignees shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner or Assignee.

Section 3.4 Rights of Limited Partners.

(a) In addition to other rights provided by this Agreement or by applicable law, and except as limited by Section 3.4(b), each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner’s interest as a Limited Partner in the Partnership, upon reasonable written demand stating the purpose of such demand, and at such Limited Partner’s own expense:

(i) to obtain true and full information regarding the status of the business and financial condition of the Partnership;

(ii) promptly after its becoming available, to obtain a copy of the Partnership’s federal, state and local income tax returns for each year;

(iii) to obtain a current list of the name and last known business, residence or mailing address of each Partner;

(iv) to obtain a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto, together with copies of the executed copies of all powers of attorney pursuant to which this Agreement, the Certificate of Limited Partnership and all amendments thereto have been executed;

(v) to obtain true and full information regarding the amount of cash and a description and statement of the Net Agreed Value of any other Capital Contribution by each Partner and that each Partner has agreed to contribute in the future, and the date on which each became a Partner; and

(vi) to obtain such other information regarding the affairs of the Partnership as is just and reasonable.

(b) The General Partner may keep confidential from the Limited Partners and Assignees, for such period of time as the General Partner deems reasonable, (i) any information that the General Partner reasonably believes to be in the nature of trade secrets or (ii) other information the disclosure of which the General Partner in good faith believes (A) is not in the best interests of the Partnership Group, (B) could damage the Partnership Group or its business or (C) that any Group Member is required by law or by agreement with any third party to keep confidential (other than agreements with Affiliates of the Partnership the primary purpose of which is to circumvent the obligations set forth in this Section 3.4).

ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS

Section 4.1 Certificates.

Upon the Partnership’s issuance of Common Units to any Person, the Partnership shall issue, upon the request of such Person, one or more Certificates in the name of such Person evidencing the number of such Common Units being so issued. In addition, upon the General Partner’s request, the Partnership shall issue to it one or more Certificates in the name of the General Partner evidencing its General Partner Interest and upon the request of any Person owning any other Partnership Securities, other than Common Units, or options, rights, warrants and appreciation rights relating to such Partnership Securities that are to be evidenced by certificates, the Partnership shall issue to such Person one or more certificates evidencing such other Partnership Securities, other than Common Units, or options, rights, warrants and appreciation rights relating to such Partnership Securities. Certificates shall be executed on behalf of the Partnership by the Chief Executive Officer, President or any Executive Vice

President, Senior Vice President or Vice President and the Chief Financial Officer or the Secretary or any Assistant Secretary of the General Partner. No Common Unit Certificate shall be valid for any purpose until it has been countersigned by the Transfer Agent; provided, however, that the Common Units may be certificated or uncertificated as provided in the Delaware Act; provided, further, that if the General Partner elects to issue Common Units in global form, the Common Unit Certificates shall be valid upon receipt of a certificate from the Transfer Agent certifying that the Common Units have been duly registered in accordance with the directions of the Partnership.

Section 4.2 Mutilated, Destroyed, Lost or Stolen Certificates.

(a) If any mutilated Certificate is surrendered to the Transfer Agent, the appropriate officers of the General Partner on behalf of the Partnership shall execute, and the Transfer Agent shall countersign and deliver in exchange therefor, a new Certificate evidencing the same number and type of Partnership Securities as the Certificate so surrendered.

(b) The appropriate officers of the General Partner on behalf of the Partnership shall execute and deliver, and the Transfer Agent shall countersign, a new Certificate in place of any Certificate previously issued, or issue uncertificated Common Units, if the Record Holder of the Certificate:

(i) makes proof by affidavit, in form and substance satisfactory to the General Partner, that a previously issued Certificate has been lost, destroyed or stolen;

(ii) requests the issuance of a new Certificate or the issuance of uncertificated Common Units, as the case may be, before the General Partner has notice that the Partnership Securities represented by the Certificate have been acquired by a purchaser for value in good faith and without notice of an adverse claim;

(iii) if requested by the General Partner, delivers to the General Partner a bond, in form and substance satisfactory to the General Partner, with surety or sureties and with fixed or open penalty as the General Partner may direct to indemnify the Partnership, the Partners, the General Partner and the Transfer Agent against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate; and

(iv) satisfies any other reasonable requirements imposed by the General Partner.

If a Limited Partner or Assignee fails to notify the General Partner within a reasonable period of time after he has notice of the loss, destruction or theft of a Certificate, and a transfer of the Partnership Securities represented by the Certificate is registered before the Partnership, the General Partner or the Transfer Agent receives such notification, the Limited Partner or Assignee shall be precluded from making any claim against the Partnership, the General Partner or the Transfer Agent for such transfer or for a new Certificate or uncertificated Common Units.

(c) As a condition to the issuance of any new Certificate or uncertificated Common Units under this Section 4.2, the General Partner may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any

other expenses (including the fees and expenses of the Transfer Agent) reasonably connected therewith.

Section 4.3 Record Holders.

The Partnership shall be entitled to recognize the Record Holder as the Partner or Assignee with respect to any Partnership Interest and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such Partnership Interest on the part of any other Person, regardless of whether the Partnership shall have actual or other notice thereof, except as otherwise provided by law or any applicable rule, regulation, guideline or requirement of any National Securities Exchange on which such Partnership Interests are listed or admitted to trading. Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring and/or holding Partnership Interests, as between the Partnership on the one hand, and such other Persons on the other, such representative Person (a) shall be the Partner or Assignee (as the case may be) of record and beneficially, (b) must execute and deliver a Transfer Application, if a Transfer Application Notice has previously been given, and (c) shall be bound by this Agreement and shall have the rights and obligations of a Partner or Assignee (as the case may be) hereunder and as, and to the extent, provided for herein.

Section 4.4 Transfer Generally.

(a) The term “transfer,” when used in this Agreement with respect to a Partnership Interest, shall be deemed to refer to a transaction (i) by which the General Partner assigns its General Partner Interest to another Person, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise or (ii) by which the holder of a Limited Partner Interest assigns such Limited Partner Interest to another Person who is or becomes a Limited Partner or an Assignee, and includes a sale, assignment, gift, exchange or any other disposition by law or otherwise, including any transfer upon foreclosure of any pledge, encumbrance, hypothecation or mortgage.

(b) No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article IV. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article IV shall be null and void.

(c) Nothing contained in this Agreement shall be construed to prevent a disposition by any stockholder, member, partner or other owner of the General Partner of any or all of the shares of stock, membership interests, partnership interests or other ownership interests in the General Partner.

Section 4.5 Registration and Transfer of Limited Partner Interests.

(a) The General Partner shall keep or cause to be kept on behalf of the Partnership a register in which, subject to such reasonable regulations as it may prescribe and subject to the provisions of Section 4.5(b), the Partnership will provide for the registration and transfer of Limited Partner Interests. The Transfer Agent is hereby appointed registrar and transfer agent

for the purpose of registering Common Units and transfers of such Common Units as herein provided. Limited Partner Interests may be transferred only in the manner described in this Section 4.5 and the Partnership shall not recognize transfers of Certificates evidencing Limited Partner Interests or uncertificated Limited Partner Interests unless such transfers are effected in the manner described in this Section 4.5.

(b) Upon surrender of a Certificate for registration of transfer of any Limited Partner Interests evidenced by a Certificate, and subject to the provisions of this Section 4.5(b), the appropriate officers of the General Partner on behalf of the Partnership shall execute and deliver, and in the case of Common Units, the Transfer Agent shall countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder’s instructions, one or more new Certificates evidencing the same aggregate number and type of Limited Partner Interests as was evidenced by the Certificate so surrendered. Except as otherwise provided in Section 4.8, the General Partner shall not recognize any transfer of Limited Partner Interests until the Certificates evidencing such Limited Partner Interests are surrendered for registration of transfer and such Certificates are accompanied by a Transfer Application, if a Transfer Application Notice has previously been given, properly completed and duly executed by the transferee (or the transferee’s attorney-in-fact duly authorized in writing). No charge shall be imposed by the General Partner for such transfer; provided, that as a condition to the issuance of any new Certificate under this Section 4.5, the General Partner may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed with respect thereto. No distributions or allocations will be made in respect of the Limited Partner Interests until a properly completed Transfer Application, if a Transfer Application Notice has previously been given, has been delivered.

(c) Upon the receipt of proper transfer instructions from the registered owner of uncertificated Limited Partner Interests, and, if a Transfer Application Notice has previously been given, a Transfer Application, properly completed and duly executed by the transferee (or the transferee’s attorney-in-fact duly authorized in writing), such uncertificated Limited Partner Interests shall be cancelled, issuance of new equivalent uncertificated Limited Partner Interests or Certificates shall be made to the holder of Limited Partner Interests entitled thereto and the transaction shall be recorded upon the books and records of the Partnership or the books and records of the Transfer Agent.

(d) The transfer of any Limited Partner Interests and the admission of any new Limited Partner shall not constitute an amendment to this Agreement.

(e) Until admitted as a Substituted Limited Partner pursuant to Section 10.2, the transferee of a Limited Partner Interest shall be an Assignee in respect of such Limited Partner Interest. Limited Partners may include custodians, nominees or any other individual or entity in its own or any representative capacity.

(f) A transferee of a Limited Partner Interest shall be deemed to have (i) requested admission as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and to have executed this Agreement, (iii) represented and warranted that such transferee has the right, power and authority and, if an individual, the capacity to enter into this Agreement, (iv) granted

the powers of attorney set forth in this Agreement and (v) given the consents and approvals and made the waivers contained in this Agreement.

(g) The General Partner and its Affiliates shall have the right at any time to transfer their Common Units to one or more Persons.

Section 4.6 Transfer of the General Partner’s General Partner Interest.

(a) Subject to Section 4.6(c) below, prior to March 31, 2018, the General Partner shall not transfer all or any part of its General Partner Interest to a Person unless such transfer (i) has been approved by the prior written consent or vote of the holders of at least a majority of the Outstanding Common Units (excluding Common Units held by the General Partner and its Affiliates) or (ii) is of all, but not less than all, of its General Partner Interest to (A) an Affiliate of the General Partner (other than an individual) or (B) another Person (other than an individual) in connection with the merger or consolidation of the General Partner with or into such other Person or the transfer by the General Partner of all or substantially all of its assets to such other Person.

(b) Subject to Section 4.6(c) below, on or after March 31, 2018, the General Partner may in its sole discretion transfer all or any of its General Partner Interest without Unitholder approval.

(c) Notwithstanding anything herein to the contrary, no transfer by the General Partner of all or any part of its General Partner Interest to another Person shall be permitted unless (i) the transferee agrees to assume the rights and duties of the General Partner under this Agreement and to be bound by the provisions of this Agreement, (ii) the Partnership receives an Opinion of Counsel that such transfer would not result in the loss of limited liability under Delaware law of any Limited Partner or cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not already so treated or taxed) and (iii) such transferee also agrees to purchase all (or the appropriate portion thereof, if applicable) of the partnership or membership interest of the General Partner as the general partner or managing member, if any, of each other Group Member. In the case of a transfer pursuant to and in compliance with this Section 4.6, the transferee or successor (as the case may be) shall, subject to compliance with the terms of Section 10.3, be admitted to the Partnership as the General Partner immediately prior to the transfer of the General Partner Interest, and the business of the Partnership shall continue without dissolution.

Section 4.7 Restrictions on Transfers.

(a) Except as provided in Section 4.7(c) below, but notwithstanding the other provisions of this Article IV, no transfer of any Partnership Interests shall be made if such transfer would (i) violate the then applicable federal or state securities laws or rules and regulations of the Commission, any state securities commission or any other governmental authority with jurisdiction over such transfer, (ii) terminate the existence or qualification of the Partnership under the laws of the jurisdiction of its formation, or (iii) cause the Partnership to be

treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not already so treated or taxed).

(b) The General Partner may impose restrictions on the transfer of Partnership Interests if it receives an Opinion of Counsel that such restrictions are necessary to avoid a significant risk of the Partnership becoming taxable as a corporation or otherwise becoming taxable as an entity for federal income tax purposes. The General Partner may impose such restrictions by amending this Agreement; provided, however, that any amendment that would result in the delisting or suspension of trading of any class of Limited Partner Interests on the principal National Securities Exchange on which such class of Limited Partner Interests is then listed or admitted to trading must be approved, prior to such amendment being effected, by the holders of at least a majority of the Outstanding Limited Partner Interests of such class.

(c) Nothing contained in this Article IV, or elsewhere in this Agreement, shall preclude the settlement of any transactions involving Partnership Interests entered into through the facilities of any National Securities Exchange on which such Partnership Interests are listed or admitted to trading.

(d) Each certificate evidencing Partnership Interests shall bear a conspicuous legend in substantially the following form:

THE HOLDER OF THIS SECURITY ACKNOWLEDGES FOR THE BENEFIT OF PIONEER SOUTHWEST ENERGY PARTNERS L.P. THAT THIS SECURITY MAY NOT BE SOLD, OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED IF SUCH TRANSFER WOULD (A) VIOLATE THE THEN APPLICABLE FEDERAL OR STATE SECURITIES LAWS OR RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL AUTHORITY WITH JURISDICTION OVER SUCH TRANSFER, (B) TERMINATE THE EXISTENCE OR QUALIFICATION OF PIONEER SOUTHWEST ENERGY PARTNERS L.P. UNDER THE LAWS OF THE STATE OF DELAWARE, OR (C) CAUSE PIONEER SOUTHWEST ENERGY PARTNERS L.P. TO BE TREATED AS AN ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE TO BE TAXED AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED). PIONEER NATURAL RESOURCES GP LLC, THE GENERAL PARTNER OF PIONEER SOUTHWEST ENERGY PARTNERS L.P., MAY IMPOSE ADDITIONAL RESTRICTIONS ON THE TRANSFER OF THIS SECURITY IF IT RECEIVES AN OPINION OF COUNSEL THAT SUCH RESTRICTIONS ARE NECESSARY TO AVOID A SIGNIFICANT RISK OF PIONEER SOUTHWEST ENERGY PARTNERS L.P. BECOMING TAXABLE AS A CORPORATION OR OTHERWISE BECOMING TAXABLE AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES. THE RESTRICTIONS SET FORTH ABOVE SHALL NOT PRECLUDE THE SETTLEMENT OF ANY TRANSACTIONS INVOLVING THIS SECURITY ENTERED INTO THROUGH THE FACILITIES OF ANY NATIONAL SECURITIES EXCHANGE ON WHICH THIS SECURITY IS LISTED OR ADMITTED TO TRADING.

Section 4.8 Eligible Holder Certifications; Non-Eligible Holders.

(a) If a transferee of a Limited Partner Interest fails to furnish a properly completed Eligible Holder Certification, if a Certification Notice has previously been given, the Limited Partner Interests owned by such transferee shall be subject to (i) a withholding of distributions or (ii) redemption, each in accordance with the provisions of Section 4.9. If, upon receipt of such Eligible Holder Certification or otherwise, the General Partner determines that such transferee is not an Eligible Holder, the Limited Partner Interests owned by such transferee shall also be subject to redemption in accordance with the provisions of Section 4.9.

(b) The General Partner may request any Limited Partner or Assignee to furnish to the General Partner, within 30 days after receipt of such request, an executed Eligible Holder Certification or such other information concerning his nationality, citizenship or other related status (or, if the Limited Partner or Assignee is a nominee holding for the account of another Person, the nationality, citizenship or other related status of such other Person) as the General Partner may request. If a Limited Partner or Assignee fails to furnish to the General Partner within the aforementioned 30-day period such Eligible Holder Certification or other requested information, the Limited Partner Interests owned by such Limited Partner or Assignee shall be subject to (i) a withholding of distributions or (ii) redemption, each in accordance with the provisions of Section 4.9. If upon receipt of such Eligible Holder Certification or other requested information the General Partner determines that a Limited Partner or Assignee is not an Eligible Holder, the Limited Partner Interests owned by such Limited Partner or Assignee shall also be subject to redemption in accordance with the provisions of Section 4.9. In addition, the General Partner may require that the status of any such Limited Partner or Assignee be changed to that of a Non-Eligible Holder and, thereupon, the General Partner shall be substituted for such Non-Eligible Holder as the Limited Partner in respect of the Non-Eligible Holder’s Limited Partner Interests.

(c) The General Partner shall, in exercising voting rights in respect of Limited Partner Interests held by it on behalf of Non-Eligible Holders, distribute the votes in the same ratios as the votes of Partners (including the General Partner) in respect of Limited Partner Interests other than those of Non-Eligible Holders are cast, either for, against or abstaining as to the matter.

(d) Upon dissolution of the Partnership, a Non-Eligible Holder shall have no right to receive a distribution in kind pursuant to Section 12.4 but shall be entitled to the cash equivalent thereof, and the Partnership shall provide cash in exchange for an assignment of the Non-Eligible Holder’s share of any distribution in kind. Such payment and assignment shall be treated for Partnership purposes as a purchase by the Partnership from the Non-Eligible Holder of its Limited Partner Interest (representing its right to receive its share of such distribution in kind).

(e) At any time after a Non-Eligible Holder can and does certify that it has become an Eligible Holder, a Non-Eligible Holder may, upon application to the General Partner, request admission as a Substituted Limited Partner with respect to any Limited Partner Interests of such Non-Eligible Holder not redeemed pursuant to Section 4.9, and upon admission of such Non-Eligible Holder pursuant to Section 10.2, the General Partner shall cease to be deemed to be the Limited Partner in respect of the Non-Eligible Holder’s Limited Partner Interests.

Section 4.9 Redemption of Partnership Interests of Non-Eligible Holders.

(a) If at any time a Limited Partner or Assignee fails to furnish an Eligible Holder Certification, if a Certification Notice has previously been given, or other information requested within the 30-day period specified in Section 4.8(b), or if upon receipt of such Eligible Holder Certification or other information the General Partner determines, with the advice of counsel, that a Limited Partner or Assignee is not an Eligible Holder, the Partnership may, unless the Limited Partner or Assignee establishes to the satisfaction of the General Partner that such Limited Partner or Assignee is an Eligible Holder or has transferred his Partnership Interests to a Person who is an Eligible Holder and who furnishes an Eligible Holder Certification to the General Partner prior to the date fixed for redemption as provided below,

(i) Redeem the Limited Partner Interest of such Limited Partner or Assignee as follows:

(A) The General Partner shall, not later than the 30th day before the date fixed for redemption, give notice of redemption to the Limited Partner or Assignee, at his last address designated on the records of the Partnership or the records of the Transfer Agent, by registered or certified mail, postage prepaid. The notice shall be deemed to have been given when so mailed. The notice shall specify the Redeemable Interests, the date fixed for redemption, the place of payment, that payment of the redemption price will be made upon surrender of the Certificate, if such Redeemable Interests are certificated, evidencing the Redeemable Interests or, if uncertificated, upon receipt of evidence satisfactory to the General Partner of the ownership of the Redeemable Interests, and that on and after the date fixed for redemption no further allocations or distributions to which the Limited Partner or Assignee would otherwise be entitled in respect of the Redeemable Interests will accrue or be made;

(B) The aggregate redemption price for Redeemable Interests shall be an amount equal to the lower of (1) the original purchase price for such Redeemable Interests or (2) the Current Market Price (the date of determination of which shall be the date fixed for redemption) of Limited Partner Interests of the class to be so redeemed multiplied by the number of Limited Partner Interests of each such class included among the Redeemable Interests. The redemption price shall be paid, as determined by the General Partner, in cash or by delivery of an unsecured promissory note of the Partnership in the principal amount of the redemption price, bearing interest at the rate of 5% annually and payable in three equal annual installments of principal together with accrued interest, commencing one year after the redemption date, which promissory note shall be subordinated to the extent required by any applicable existing credit agreement, indenture or similar agreement;

(C) Upon surrender by or on behalf of the Limited Partner or Assignee, at the place specified in the notice of redemption, of (x) if certificated, the Certificate evidencing the Redeemable Interests, duly endorsed in blank or accompanied by an assignment duly executed in blank, or (y) if uncertificated,

upon receipt of evidence satisfactory to the General Partner of the ownership of the Redeemable Interests, the Limited Partner or Assignee or his duly authorized representative shall be entitled to receive the payment therefor;

(D) After the redemption date, Redeemable Interests shall no longer constitute issued and Outstanding Limited Partner Interests; or

(ii) Withhold from such Limited Partner or Assignee any distributions payable pursuant to Section 6.3(a) in respect of the Limited Partner Interests held by such Limited Partner or Assignee, such withheld distributions to remain part of the Partnership’s assets. Upon the earlier of (A) the receipt by the General Partner of the required Eligible Holder Certification from such Limited Partner or Assignee or (B) the transfer of such Limited Partner Interests by such Limited Partner, any previously withheld distributions shall be paid to such Limited Partner (without interest).

(b) The provisions of this Section 4.9 shall also be applicable to Limited Partner Interests held by a Limited Partner or Assignee as nominee of a Person determined to be other than an Eligible Holder.

(c) Nothing in this Section 4.9 shall prevent the recipient of a notice of redemption from transferring his Limited Partner Interest before the redemption date if such transfer is otherwise permitted under this Agreement. Upon receipt of notice of such a transfer, the General Partner shall withdraw the notice of redemption, provided the transferee of such Limited Partner Interest certifies to the satisfaction of the General Partner in a Transfer Application, if a Transfer Application Notice has previously been given, that he is an Eligible Holder, if a Certification Notice has previously been given. If the transferee fails to make such certification, such redemption shall be effected from the transferee on the original redemption date.

ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS

Section 5.1 Organizational Contributions.

In connection with the formation of the Partnership under the Delaware Act, the General Partner made an initial Capital Contribution to the Partnership in the amount of $1.00 (the “Organizational GP Contribution Amount”) and agreed to render all services necessary for the management of the Partnership Group in exchange for the 0.1% General Partner Interest and has been admitted as the General Partner of the Partnership. The Organizational Limited Partner made an initial Capital Contribution to the Partnership in the amount of $999.00 for a 99.9% Limited Partner Interest in the Partnership and has been admitted as a Limited Partner of the Partnership. As of the Closing Date, as provided in the Contribution Agreement, (i) the interest of the Organizational Limited Partner shall be redeemed as provided in the Contribution Agreement; and (ii) the Organizational GP Contribution Amount shall be refunded to the General Partner. Ninety Nine and 9/10ths percent of any interest or other profit that may have resulted from the investment or other use of such initial Capital Contributions shall be allocated and distributed to the Organizational Limited Partner, and the balance thereof shall be allocated and distributed to the General Partner.

Section 5.2 Contributions by the General Partner and Pioneer USA.

(a) On the Closing Date and pursuant to the Contribution Agreement, Pioneer USA shall contribute to the General Partner, as a Capital Contribution, 0.10295172491645% of the ownership interests in the Operating Company, and the General Partner shall convey such interests to the Partnership in exchange for a continuation of the 0.1% General Partner Interest.

(b) On the Closing Date and pursuant to the Contribution Agreement, Pioneer USA shall contribute to the Partnership, as a Capital Contribution, 73.3573936581775% of the ownership interests in the Operating Company in exchange for 20,521,200 Common Units.

(c) Upon the issuance of any additional Limited Partner Interests by the Partnership at any time after the Closing Date pursuant to the Over-Allotment Option, the General Partner shall, in exchange for a proportionate number of General Partner Units, make additional Capital Contributions in an amount equal to the product obtained by multiplying (i) the quotient determined by dividing (A) the General Partner’s Percentage Interest by (B) 100 less the General Partner’s Percentage Interest times (ii) the amount contributed to the Partnership by the Limited Partners in exchange for such additional Limited Partner Interests. Except as set forth in this Section 5.2(c) (upon the issue of additional Limited Partner Interests in respect of the exercise of the Over-Allotment Option) and Article XII, the General Partner shall not be obligated to make any additional Capital Contributions to the Partnership.

(d) Upon the issuance of any additional Limited Partner Interests by the Partnership, the General Partner may, in exchange for a proportionate number of General Partner Units, make additional Capital Contributions in an amount equal to the product obtained by multiplying (i) the quotient determined by dividing (A) the General Partner’s Percentage Interest by (B) 100 less the General Partner’s Percentage Interest times (ii) the amount contributed to the Partnership by the Limited Partners in exchange for such additional Limited Partner Interests. Except as set forth in this Section 5.2 or Article XII, the General Partner shall not be obligated to make any additional Capital Contributions to the Partnership.

(e) The sequencing of transactions set forth in this Section 5.2 and Section 5.3 shall be consummated in the order set forth in the Contribution Agreement and the LLC Interests Sale Agreement.

Section 5.3 Contributions by the Underwriters; Sale of Operating Company Interest.

(a) On the Closing Date and pursuant to the Underwriting Agreement, each Underwriter shall contribute to the Partnership cash in an amount equal to the Issue Price per Initial Common Unit, multiplied by the number of Common Units specified in the Underwriting Agreement to be purchased by such Underwriter at the Closing Date. In exchange for such Capital Contributions by the Underwriters, the Partnership shall issue Common Units to each Underwriter on whose behalf such Capital Contribution is made in an amount equal to the quotient obtained by dividing (i) the cash contribution to the Partnership by or on behalf of such Underwriter by (ii) the Issue Price per Initial Common Unit.

(b) On the Closing Date and pursuant to the LLC Interest Sale Agreement, Pioneer USA shall sell to the Partnership a 26.5396546169060% interest in the Operating Company in exchange for payment by the Partnership of $141,061,250 in cash.

(c) Upon the exercise, if any, of the Over-Allotment Option, each Underwriter shall contribute to the Partnership cash in an amount equal to the Issue Price per Initial Common Unit, multiplied by the number of Common Units to be purchased by such Underwriter at the Option Closing Date. In exchange for such Capital Contributions by the Underwriters, the Partnership shall issue Common Units to each Underwriter on whose behalf such Capital Contribution is made in an amount equal to the quotient obtained by dividing (i) the cash contributions to the Partnership by or on behalf of such Underwriter by (ii) the Issue Price per Initial Common Unit.

(d) The net proceeds, if any, from the Capital Contributions made in respect of an exercise of the Over-Allotment Option pursuant to Section 5.2(c) (if applicable) and Section 5.3(c) shall be contributed by the Partnership to the Operating Company, which shall use such Capital Contributions to acquire additional oil and gas properties and related assets from Pioneer USA or its subsidiaries pursuant to the Purchase Agreement and as more fully described in the Registration Statement.

(e) No Limited Partner Interests will be issued or issuable as of or at the Closing Date other than (i) the Common Units issuable pursuant to subparagraph (a) hereof in aggregate number equal to 8,250,000, (ii) the “Option Units” as such term is used in the Underwriting Agreement in an aggregate number up to 1,237,500 issuable upon exercise of the Over-Allotment Option pursuant to subparagraph (c) hereof, (iii) the Common Units issuable pursuant to Section 5.2(b) and (iv) pursuant to Section 7.4(c).

Section 5.4 Interest and Withdrawal.

No interest shall be paid by the Partnership on Capital Contributions. No Partner or Assignee shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon termination of the Partnership may be considered as such by law and then only to the extent provided for in this Agreement. Except to the extent expressly provided in this Agreement, no Partner or Assignee shall have priority over any other Partner or Assignee either as to the return of Capital Contributions or as to profits, losses or distributions. Any such return shall be a compromise to which all Partners and Assignees agree within the meaning of Section 17-502(b) of the Delaware Act.

Section 5.5 Capital Accounts.

(a) The Partnership shall maintain for each Partner (or a beneficial owner of Partnership Interests held by a nominee in any case in which the nominee has furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method acceptable to the General Partner) owning a Partnership Interest a separate Capital Account with respect to such Partnership Interest in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made to the Partnership with respect to such Partnership Interest and (ii) all items of Partnership income and gain (including Simulated Gain and income and gain

exempt from tax) computed in accordance with Section 5.5(b) and allocated with respect to such Partnership Interest pursuant to Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed distributions of cash or property made with respect to such Partnership Interest and (y) all items of Partnership deduction and loss (including Simulated Depletion and Simulated Loss) computed in accordance with Section 5.5(b) and allocated with respect to such Partnership Interest pursuant to Section 6.1.

(b) For purposes of computing the amount of any item of income, gain, loss, deduction, Simulated Depletion, Simulated Gain or Simulated Loss which is to be allocated pursuant to Article VI and is to be reflected in the Partners’ Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes (including any method of depreciation, cost recovery or amortization used for that purpose), provided, that:

(i) Solely for purposes of this Section 5.5, the Partnership shall be treated as owning directly its proportionate share (as determined by the General Partner based upon the provisions of the applicable Group Member Agreement) of all property owned by (x) any other Group Member that is classified as a partnership for federal income tax purposes and (y) any other partnership, limited liability company, unincorporated business or other entity classified as a partnership for federal income tax purposes of which a Group Member is, directly or indirectly, a partner.

(ii) All fees and other expenses incurred by the Partnership to promote the sale of (or to sell) a Partnership Interest that can neither be deducted nor amortized under Section 709 of the Code, if any, shall, for purposes of Capital Account maintenance, be treated as an item of deduction at the time such fees and other expenses are incurred and shall be allocated among the Partners pursuant to Section 6.1.

(iii) Except as otherwise provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss, deduction, Simulated Depletion, Simulated Gain and Simulated Loss shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership and, as to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment in the Capital Accounts shall be treated as an item of gain or loss.

(iv) Any income, gain, loss, Simulated Gain or Simulated Loss attributable to the taxable disposition of any Partnership property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Partnership’s Carrying Value with respect to such property as of such date.

(v) In accordance with the requirements of Section 704(b) of the Code, any deductions for depreciation, cost recovery, amortization or Simulated Depletion

attributable to any Contributed Property shall be determined as if the adjusted basis of such property on the date it was acquired by the Partnership were equal to the Agreed Value of such property. Upon an adjustment pursuant to Section 5.5(d) to the Carrying Value of any Partnership property subject to depreciation, cost recovery, amortization or Simulated Depletion, any further deductions for such depreciation, cost recovery, amortization or Simulated Depletion attributable to such property shall be determined under the rules prescribed by Treasury Regulation Section 1.704-3(d) as if the adjusted basis of such property were equal to the Carrying Value of such property immediately following such adjustment.

(vi) In the event the Gross Liability Value of any Liability of the Partnership described in Treasury Regulation Section 1.752-7(b)(3)(i) is adjusted as required by this Agreement, the amount of such adjustment shall be treated as an item of loss (if the adjustment increases the Carrying Value of such Liability of the Partnership) or an item of gain (if the adjustment decreases the Carrying Value of such Liability of the Partnership) and shall be taken into account for purposes of computing Net Income or Net Loss.

(c) A transferee of a Partnership Interest shall succeed to a pro rata portion of the Capital Account of the transferor relating to the Partnership Interest so transferred.

(d) (i) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or Contributed Property, the issuance of Partnership Interests as consideration for the provision of services or the conversion of the General Partner’s Combined Interest to Common Units pursuant to Section 11.3(b), the Capital Account of all Partners and the Carrying Value of each Partnership property immediately prior to such issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property for an amount equal to its fair market value immediately prior to such issuance and had been allocated to the Partners at such time pursuant to Section 6.1(c) in the same manner as any item of gain, loss, Simulated Gain or Simulated Loss actually recognized following an event giving rise to the liquidation of the Partnership would have been allocated. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market value of all Partnership assets (including cash or cash equivalents) immediately prior to the issuance of additional Partnership Interests shall be determined by the General Partner using such reasonable method of valuation as it may adopt; provided, however, that the General Partner, in arriving at such valuation, must take fully into account the fair market value of the Partnership Interests of all Partners at such time. The General Partner shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines) to arrive at a fair market value for individual properties.

(ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a Partner of any Partnership property (other than a distribution of cash that is not in redemption or retirement of a Partnership Interest), the Capital Accounts of all Partners and the Carrying Value of all

Partnership property shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such distribution for an amount equal to its fair market value, and had been allocated to the Partners, at such time, pursuant to Section 6.1(c) in the same manner as any item of gain, loss, Simulated Gain or Simulated Loss actually recognized following an event giving rise to the liquidation of the Partnership would have been allocated. In determining such Unrealized Gain or Unrealized Loss the aggregate cash amount and fair market value of all Partnership assets (including cash or cash equivalents) immediately prior to a distribution shall (A) in the case of an actual distribution that is not made pursuant to Section 12.4 or in the case of a deemed distribution, be determined and allocated in the same manner as that provided in Section 5.5(d)(i) or (B) in the case of a liquidating distribution pursuant to Section 12.4, be determined and allocated by the Liquidator using such method of valuation as it may adopt.

Section 5.6 Issuances of Additional Partnership Securities.

(a) The Partnership may issue additional Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities for any Partnership purpose at any time and from time to time to such Persons for such consideration and on such terms and conditions as the General Partner shall determine, all without the approval of any Limited Partner.

(b) Each additional Partnership Security or option, right, warrant or appreciation right relating to such Partnership Security authorized to be issued by the Partnership pursuant to Section 5.6(a) may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of Partnership Securities), as shall be fixed by the General Partner, including (i) the right to share in Partnership profits and losses or items thereof; (ii) the right to share in Partnership distributions; (iii) the rights upon dissolution and liquidation of the Partnership; (iv) whether, and the terms and conditions upon which, the Partnership may or shall be required to redeem such Partnership Security or option, right, warrant or appreciation right relating to such Partnership Security (including sinking fund provisions); (v) whether such Partnership Security or option, right, warrant and appreciation right relating to such Partnership Security is issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which such Partnership Security or option, right, warrant and appreciation right relating to such Partnership Security will be issued, evidenced by certificates and assigned or transferred; (vii) the method for determining the Percentage Interest as to such Partnership Security or option, right, warrant and appreciation right relating to such Partnership Security; and (viii) the right, if any, of such Partnership Security or option, right, warrant and appreciation right relating to such Partnership Security to vote on Partnership matters, including matters relating to the relative rights, preferences and privileges of such Partnership Security or option, right, warrant and appreciation right relating to such Partnership Security.

(c) The General Partner shall take all actions that it determines to be necessary or appropriate in connection with (i) each issuance of Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities pursuant to this Section 5.6, (ii) the conversion of the General Partner Interest into Units pursuant to the terms of this Agreement, (iii) the admission of Additional Limited Partners and (iv) all additional issuances of Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities. The General Partner shall determine the relative rights, powers and duties of the holders of the Units or other Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities being so issued. The General Partner shall do all things necessary to comply with the Delaware Act and is authorized and directed to do all things that it determines to be necessary or appropriate in connection with any future issuance of Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities or in connection with the conversion of the General Partner Interest into Units pursuant to the terms of this Agreement, including compliance with any statute, rule, regulation or guideline of any federal, state or other governmental agency or any National Securities Exchange on which the Units or other Partnership Securities or options, rights, warrants and appreciation rights relating to Partnership Securities are listed or admitted to trading.

(d) The Partnership shall not issue fractional Units upon any distribution, subdivision or combination of Units. If a distribution, subdivision or combination of Units would result in the issuance of fractional Units but for the provisions of this Section 5.6(d), each fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to the next higher Unit).

Section 5.7 Limited Preemptive Right.

Except as provided in this Section 5.7 and in Section 5.2 or as provided pursuant to the terms of any securities issued, or agreements entered into in connection with the issuance of any securities issued, pursuant to Section 5.6, no Person shall have any preemptive, preferential or other similar right with respect to the issuance of any Partnership Security or option, right, warrant and appreciation right relating to any Partnership Security, whether unissued, held in the treasury or hereafter created. The General Partner shall have the right, which it may from time to time assign in whole or in part to any of its Affiliates, to purchase Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities from the Partnership whenever, and on the same terms that, the Partnership issues Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities to Persons other than the General Partner and its Affiliates, to the extent necessary to maintain the Percentage Interests of the General Partner and its Affiliates equal to that which existed immediately prior to the issuance of such Partnership Securities or options, rights, warrants and appreciation rights relating to Partnership Securities.

Section 5.8 Splits and Combinations.

(a) The Partnership may make a Pro Rata distribution of Partnership Securities or options, rights, warrants and appreciation rights relating to Partnership Securities to all Record Holders or may effect a subdivision or combination of Partnership Securities or options, rights, warrants and appreciation rights relating to Partnership Securities so long as, after any such

event, each Partner shall have the same Percentage Interest in the Partnership as before such event, subject to Section 5.6(d), and any amounts calculated on a per Unit basis or stated as a number of Units are proportionately adjusted.

(b) Whenever such a distribution, subdivision or combination of Partnership Securities or options, rights, warrants and appreciation rights relating to Partnership Securities is declared, the General Partner shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall send notice thereof at least 20 days prior to such Record Date to each Record Holder as of a date not less than 10 days prior to the date of such notice. The General Partner also may cause a firm of independent public accountants selected by it to calculate the number of Partnership Securities or options, rights, warrants and appreciation rights relating to Partnership Securities to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The General Partner shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation.

(c) Promptly following any such distribution, subdivision or combination, the Partnership may issue Certificates or uncertificated Partnership Securities to the Record Holders of Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities as of the applicable Record Date representing the new number of Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities held by such Record Holders, or the General Partner may adopt such other procedures that it determines to be necessary or appropriate to reflect such changes. If any such combination results in a smaller total number of Partnership Securities and options, rights, warrants and appreciation rights relating to Partnership Securities Outstanding, the Partnership shall require, as a condition to the delivery to a Record Holder of such new Certificate, the surrender of any Certificate, if such securities are certificated, held by such Record Holder immediately prior to such Record Date.

Section 5.9 Fully Paid and Non-Assessable Nature of Limited Partner Interests.

All Limited Partner Interests issued pursuant to, and in accordance with the requirements of, this Article V shall be fully paid and non-assessable Limited Partner Interests in the Partnership, except as such non-assessability may be affected by Section 17-607 or Section 17-804 of the Delaware Act.

ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS

Section 6.1 Allocations for Capital Account Purposes.

For purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the Partnership’s items of income, gain, loss, deduction, Simulated Depletion, Simulated Gain and Simulated Loss (computed in accordance with Section 5.5(b)) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below.

(a) Net Income. After giving effect to the special allocations set forth in Sections 6.1(d) and (e) and any allocations to other Partnership Securities, Net Income for each taxable

period and all items of income, gain, loss, deduction and Simulated Gain taken into account in computing Net Income for such taxable period shall be allocated to the Partners in accordance with their respective Percentage Interests.

(b) Net Losses. After giving effect to the special allocations set forth in Sections 6.1(d) and (e) and any allocations to other Partnership Securities, Net Losses for each taxable period and all items of income, gain, loss, deduction and Simulated Gain taken into account in computing Net Losses for such taxable period shall be allocated to the Partners in accordance with their respective Percentage Interests; provided that Net Losses shall not be allocated pursuant to this Section 6.1(b) to the extent that such allocation would cause any Limited Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable period (or increase any existing deficit balance in its Adjusted Capital Account), instead any such Net Losses shall be allocated to the General Partner.

(c) Net Termination Gains and Losses. After giving effect to the special allocations set forth in Sections 6.1(d) and (e), all items of income, gain, loss, deduction and Simulated Gain taken into account in computing Net Termination Gain or Net Termination Loss for such taxable period shall be allocated in the same manner as such Net Termination Gain or Net Termination Loss is allocated hereunder. All allocations under this Section 6.1(c) shall be made after Capital Account balances have been adjusted by all other allocations provided under this Section 6.1 and after all distributions of Available Cash provided under Section 6.3 have been made; provided, however, that solely for purposes of this Section 6.1(c), Capital Accounts shall not be adjusted for distributions made pursuant to Section 12.4.

(i) If a Net Termination Gain is recognized (or deemed recognized pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated among the Partners in the following manner (and the Capital Accounts of the Partners shall be increased by the amount so allocated in each of the following subclauses, in the order listed, before an allocation is made pursuant to the next succeeding subclause):

(A) First, to each Partner having a deficit balance in its Capital Account, in the proportion that such deficit balance bears to the total deficit balances in the Capital Accounts of all Partners, until each such Partner has been allocated Net Termination Gain equal to any such deficit balance in its Capital Account; and

(B) Second, 100% to all Partners in accordance with their respective Percentage Interests.

(ii) If a Net Termination Loss is recognized (or deemed recognized pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated among the Partners in the following manner:

(A) First, 100% to all Partners in accordance with their respective Percentage Interests, until the Capital Account in respect of each Common Unit then Outstanding has been reduced to zero; and

(B) Second, the balance, if any, 100% to the General Partner.

(d) Special Allocations. Notwithstanding any other provision of this Section 6.1, the following special allocations shall be made for such taxable period:

(i) Partnership Minimum Gain Chargeback. Notwithstanding any other provision of this Section 6.1, if there is a net decrease in Partnership Minimum Gain during any Partnership taxable period, each Partner shall be allocated items of Partnership income, gain and Simulated Gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor provision. For purposes of this Section 6.1(d), each Partner’s Adjusted Capital Account balance shall be determined, and the allocation of income, gain and Simulated Gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 6.1(d) with respect to such taxable period (other than an allocation pursuant to Sections 6.1(d)(v) and 6.1(d)(vi)). This Section 6.1(d)(i) is intended to comply with the Partnership Minimum Gain chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith.

(ii) Chargeback of Partner Non-Recourse Debt Minimum Gain. Notwithstanding the other provisions of this Section 6.1 (other than Section 6.1(d)(i)), except as provided in Treasury Regulation Section 1.704-2(i)(4), if there is a net decrease in Partner Non-Recourse Debt Minimum Gain during any Partnership taxable period, any Partner with a share of Partner Non-Recourse Debt Minimum Gain at the beginning of such taxable period shall be allocated items of Partnership income, gain and Simulated Gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provisions. For purposes of this Section 6.1(d), each Partner’s Adjusted Capital Account balance shall be determined, and the allocation of income, gain and Simulated Gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 6.1(d), other than Section 6.1(d)(i) and other than an allocation pursuant to Sections 6.1(d)(v) and 6.1(d)(vi), with respect to such taxable period. This Section 6.1(d)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

(iii) Qualified Income Offset. In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income, gain and Simulated Gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations promulgated under Section 704(b) of the Code, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible unless such deficit balance is otherwise eliminated pursuant to Section 6.1(d)(i) or Section 6.1(d)(ii).

(iv) Gross Income Allocations. In the event any Partner has a deficit balance in its Capital Account at the end of any Partnership taxable period in excess of the sum of (A) the amount such Partner is required to restore pursuant to the provisions of this

Agreement and (B) the amount such Partner is deemed obligated to restore pursuant to Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be specially allocated items of Partnership gross income, gain and Simulated Gain in the amount of such excess as quickly as possible; provided, that an allocation pursuant to this Section 6.1(d)(iv) shall be made only if and to the extent that such Partner would have a deficit balance in its Capital Account as adjusted after all other allocations provided for in this Section 6.1 have been tentatively made as if this Section 6.1(d)(iv) were not in this Agreement.

(v) Non-Recourse Deductions. Non-Recourse Deductions for any taxable period shall be allocated to the Partners in accordance with their respective Percentage Interests. If the General Partner determines that the Partnership’s Non-Recourse Deductions should be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury Regulations promulgated under Section 704(b) of the Code, the General Partner is authorized, upon notice to the other Partners, to revise the prescribed ratio to the numerically closest ratio that does satisfy such requirements.

(vi) Partner Non-Recourse Deductions. Partner Non-Recourse Deductions for any taxable period shall be allocated 100% to the Partner that bears the Economic Risk of Loss with respect to the Partner Non-Recourse Debt to which such Partner Non-Recourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i). If more than one Partner bears the Economic Risk of Loss with respect to a Partner Non-Recourse Debt, such Partner Non-Recourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share such Economic Risk of Loss.

(vii) Non-Recourse Liabilities. For purposes of Treasury Regulation Section 1.752-3(a)(3), the Partners agree that Non-Recourse Liabilities of the Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain and (B) the total amount of Non-Recourse Built-in Gain shall be allocated among the Partners in accordance with their respective Percentage Interests.

(viii) Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain or Simulated Gain (if the adjustment increases the basis of the asset) or loss or Simulated Loss (if the adjustment decreases such basis), and such item of gain, loss, Simulated Gain or Simulated Loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations.

(ix) Curative Allocation.

(A) Notwithstanding any other provision of this Section 6.1, other than the Required Allocations, the Required Allocations shall be taken into account in

making the Agreed Allocations so that, to the extent possible, the net amount of items of income, gain, loss, deduction, Simulated Depletion, Simulated Gain and Simulated Loss allocated to each Partner pursuant to the Required Allocations and the Agreed Allocations, together, shall be equal to the net amount of such items that would have been allocated to each such Partner under the Agreed Allocations had the Required Allocations and the related Curative Allocation not otherwise been provided in this Section 6.1. Notwithstanding the preceding sentence, Required Allocations relating to (1) Non-Recourse Deductions shall not be taken into account for the purposes of this Section 6.1(d)(ix) except to the extent that there has been a decrease in Partnership Minimum Gain and (2) Partner Non-Recourse Deductions shall not be taken into account for the purposes of this Section 6.1(d)(ix) except to the extent that there has been a decrease in Partner Non-Recourse Debt Minimum Gain. Allocations pursuant to this Section 6.1(d)(ix)(A) shall only be made with respect to Required Allocations to the extent the General Partner determines that such Required Allocations will otherwise be inconsistent with the economic agreement among the Partners. Further, allocations pursuant to this Section 6.1(d)(ix)(A) shall be deferred with respect to allocations pursuant to clauses (1) and (2) hereof to the extent the General Partner determines that such allocations are likely to be offset by subsequent Required Allocations.

(B) The General Partner shall, with respect to each taxable period, (1) apply the provisions of Section 6.1(d)(ix)(A) in whatever order is most likely to minimize the economic distortions that might otherwise result from the Required Allocations and (2) divide all allocations pursuant to Section 6.1(d)(ix)(A) among the Partners in a manner that is likely to minimize such economic distortions.

(x) Corrective Allocations. In the event of any Book-Down Event or any recognition of a Net Termination Loss, the following rules shall apply:

(A) In the case of any negative adjustments to the Capital Accounts of the Partners resulting from a Book-Down Event or from the recognition of a Net Termination Loss, such negative adjustment (1) shall first be allocated, to the extent of the Aggregate Remaining Net Positive Adjustments, in such a manner, as determined by the General Partner, that to the extent possible the aggregate Capital Accounts of the Partners will equal the amount that would have been the Capital Account balance of the Partners if no prior Book-Up Events had occurred, and (2) any negative adjustment in excess of the Aggregate Remaining Net Positive Adjustments shall be allocated pursuant to Section 6.1(c).

(B) In making the allocations required under this Section 6.1(d)(x), the General Partner may apply whatever conventions or other methodology it determines will satisfy the purpose of this Section 6.1(d)(x).

(e) Simulated Basis, Simulated Depletion and Simulated Loss.

(i) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(i), Simulated Depletion with respect to each Oil and Gas Property shall be allocated among the Partners in accordance with their respective Percentage Interests.

(ii) Simulated Loss with respect to the disposition of an Oil and Gas Property shall be allocated among the Partners in proportion to their allocable share of total amount realized from such disposition under Section 6.2(c)(i).

Section 6.2 Allocations for Tax Purposes.

(a) Except as otherwise provided herein, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Section 6.1.

(b) The deduction for depletion with respect to each separate oil and gas property (as defined in Section 614 of the Code) shall be computed for federal income tax purposes separately by the Partners rather than by the Partnership in accordance with Section 613A(c)(7)(D) of the Code. Except as provided in Section 6.2(c)(iii), for purposes of such computation (before taking into account any adjustments resulting from an election made by the Partnership under Section 754 of the Code), the adjusted tax basis of each oil and gas property (as defined in Section 614 of the Code) shall be allocated among the Partners in accordance with their respective Percentage Interests.

Each Partner shall separately keep records of his share of the adjusted tax basis in each oil and gas property, allocated as provided above, adjust such share of the adjusted tax basis for any cost or percentage depletion allowable with respect to such property, and use such adjusted tax basis in the computation of its cost depletion or in the computation of his gain or loss on the disposition of such property by the Partnership.

(c) Except as provided in Section 6.2(c)(iii), for the purposes of the separate computation of gain or loss by each Partner on the sale or disposition of each separate oil and gas property (as defined in Section 614 of the Code), the Partnership’s allocable share of the “amount realized” (as such term is defined in Section 1001(b) of the Code) from such sale or disposition shall be allocated for federal income tax purposes among the Partners as follows:

(i) first, to the extent such amount realized constitutes a recovery of the Simulated Basis of the property, to the Partners in the same proportion as the depletable basis of such property was allocated to the Partners pursuant to Section 6.2(b) (without regard to any special allocation of basis under Section 6.2(c)(iii)); and

(ii) second, the remainder of such amount realized, if any, to the Partners so that, to the maximum extent possible, the amount realized allocated to each Partner under this Section 6.2(c)(ii) will equal such Partner’s share of the Simulated Gain recognized by the Partnership from such sale or disposition.

(iii) The Partners recognize that with respect to Contributed Property and Adjusted Property there will be a difference between the Carrying Value of such property at the time of contribution or revaluation, as the case may be, and the adjusted tax basis of such property at that time. All items of tax depreciation, cost recovery, amortization, adjusted tax basis of depletable properties, amount realized and gain or loss with respect to such Contributed Property and Adjusted Property shall be allocated among the Partners to take into account the disparities between the Carrying Values and the adjusted tax basis with respect to such properties in accordance with the principles of Treasury Regulation Section 1.704-3(d).

(iv) Any elections or other decisions relating to such allocations shall be made by the Board of Directors in any manner that reasonably reflects the purpose and intention of the Agreement.

(d) In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, other than oil and gas properties subject to Section 6.2(c), items of income, gain, loss, depreciation, amortization and cost recovery deductions shall be allocated for federal income tax purposes among the Partners as follows:

(i) (A) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Partners in the manner provided under Section 704(c) of the Code that takes into account the variation between the Agreed Value of such property and its adjusted basis at the time of contribution; and (B) any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Partners in the same manner as its correlative item of “book” gain or loss is allocated pursuant to Section 6.1.

(ii) (A) In the case of an Adjusted Property, such items shall (1) first, be allocated among the Partners in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2) second, in the event such property was originally a Contributed Property, be allocated among the Partners in a manner consistent with Section 6.2(d)(i)(A); and (B) any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Partners in the same manner as its correlative item of “book” gain or loss is allocated pursuant to Section 6.1.

(iii) The General Partner shall apply the principles of Treasury Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.

(e) For the proper administration of the Partnership or for the preservation of uniformity of the Limited Partner Interests (or any class or classes thereof), the General Partner shall (i) adopt such conventions as it deems appropriate in determining the amount of depreciation, amortization and cost recovery deductions; (ii) make special allocations for federal income tax purposes of income (including gross income) or deductions; and (iii) amend the provisions of this Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise to

preserve or achieve uniformity of the Limited Partner Interests (or any class or classes thereof). The General Partner may adopt such conventions, make such allocations and make such amendments to this Agreement as provided in this Section 6.2(e) only if such conventions, allocations or amendments would not have a material adverse effect on the Partners, the holders of any class or classes of Limited Partner Interests issued and Outstanding or the Partnership, and if such allocations are consistent with the principles of Section 704 of the Code.

(f) The General Partner may determine to depreciate or amortize the portion of an adjustment under Section 743(b) of the Code attributable to unrealized appreciation in any Adjusted Property (to the extent of the unamortized Book-Tax Disparity) using a predetermined rate derived from the depreciation or amortization method and useful life applied to the unamortized Book-Tax Disparity of such property, despite any inconsistency of such approach with Treasury Regulation Section 1.167(c)-l(a)(6), the legislative history of Section 743 of the Code or any successor regulations thereto. If the General Partner determines that such reporting position cannot reasonably be taken, the General Partner may adopt depreciation and amortization conventions under which all purchasers acquiring Limited Partner Interests in the same month would receive depreciation and amortization deductions, based upon the same applicable rate as if they had purchased a direct interest in the Partnership’s property. If the General Partner chooses not to utilize such aggregate method, the General Partner may use any other depreciation and amortization conventions to preserve the uniformity of the intrinsic tax characteristics of any Limited Partner Interests, so long as such conventions would not have a material adverse effect on the Limited Partners or the Record Holders of any class or classes of Limited Partner Interests.

(g) In accordance with Treasury Regulation Section 1.1245-1(e) and Treasury Regulation Section 1.1250-1(f), any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible, after taking into account other required allocations of gain pursuant to this Section 6.2, be characterized as Recapture Income in the same proportions and to the same extent as such Partners (or their predecessors in interest) have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income.

(h) All items of income, gain, loss, deduction and credit recognized by the Partnership for federal income tax purposes and allocated to the Partners in accordance with the provisions hereof shall be determined without regard to any election under Section 754 of the Code that may be made by the Partnership; provided, however, that such allocations, once made, shall be adjusted (in the manner determined by the General Partner) to take into account those adjustments permitted or required by Sections 734 and 743 of the Code.

(i) Each item of Partnership income, gain, loss and deduction, for federal income tax purposes, shall be determined on an annual basis and prorated on a monthly basis and shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of each month; provided, however, that such items for the period beginning on the Closing Date and ending on the last day of the month in which the Option Closing Date or the expiration of the Over-Allotment Option occurs shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of the next succeeding month; and provided, further, that gain or loss on a sale or other disposition of any assets of the Partnership

or any other extraordinary item of income or loss realized and recognized other than in the ordinary course of business, as determined by the General Partner, shall be allocated to the Partners as of the opening of the New York Stock Exchange on the first Business Day of the month in which such gain or loss is recognized for federal income tax purposes. The General Partner may revise, alter or otherwise modify such methods of allocation to the extent permitted or required by Section 706 of the Code and the regulations or rulings promulgated thereunder.

(j) Allocations that would otherwise be made to a Limited Partner under the provisions of this Article VI shall instead be made to the beneficial owner of Limited Partner Interests held by a nominee in any case in which the nominee has furnished the identity of such owner to the Partnership in accordance with Section 6031(c) of the Code or any other method determined by the General Partner.

Section 6.3 Requirement and Characterization of Distributions; Distributions to Record Holders.

(a) Except as described in Section 6.3(b), within 45 days following the end of each Quarter commencing with the Quarter ending on June 30, 2008, an amount equal to 100% of Available Cash with respect to such Quarter shall, subject to Section 17-607 of the Delaware Act, be distributed to the Partners in accordance with this Article VI by the Partnership to the Partners in accordance with their respective Percentage Interests as of the Record Date selected by the General Partner. All distributions required to be made under this Agreement shall be made subject to Section 17-607 of the Delaware Act.

(b) The General Partner may treat taxes paid by the Partnership on behalf of, or amounts withheld with respect to, all or less than all of the Partners, as a distribution of Available Cash to such Partners.

(c) Each distribution in respect of a Partnership Interest shall be paid by the Partnership, directly or through the Transfer Agent or through any other Person or agent, only to the Record Holder of such Partnership Interest as of the Record Date set for such distribution. Such payment shall constitute full payment and satisfaction of the Partnership’s liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise.

(d) Any distribution that would otherwise be a fraction of one cent based on all Partnership Interests owned by a Record Holder shall be rounded down to the nearest whole cent, unless otherwise required pursuant to the rules or regulations of the National Stock Exchange on which any Units are listed for trading.

ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS

Section 7.1 Management.

(a) The General Partner shall conduct, direct and manage all activities of the Partnership. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner,

and no Limited Partner or Assignee shall have any management power over the business and affairs of the Partnership. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or that are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 7.3, shall have full power and authority to do all things and on such terms as it determines to be necessary or appropriate to conduct the business of the Partnership, to exercise all powers set forth in Section 2.5 and to effectuate the purposes set forth in Section 2.4, including the following:

(i) the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness, including indebtedness that is convertible into Partnership Securities or any options, rights, warrants or appreciation rights relating to Partnership Securities, and the incurring of any other obligations;

(ii) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership;

(iii) the (A) acquisition of assets from third parties or the General Partner and its Affiliates or (B) disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Partnership or the merger or other combination of the Partnership with or into another Person (the matters described in clause (iii)(B) being subject, however, to any prior approval that may be required by Section 7.3 and Article XIV);

(iv) the use of the assets of the Partnership (including cash on hand) for any purpose consistent with the terms of this Agreement, including the financing of the conduct of the operations of the Partnership Group; subject to Section 7.6(a), the lending of funds to other Persons (including other Group Members); the repayment or guarantee of obligations of any Group Member; and the making of capital contributions to any Group Member;

(v) the negotiation, execution and performance of any contracts, conveyances or other instruments (including instruments that limit the liability of the Partnership under contractual arrangements to all or particular assets of the Partnership, with the other party to the contract to have no recourse against the General Partner or its assets other than its interest in the Partnership, even if that results in the terms of the transaction being less favorable to the Partnership than would otherwise be the case);

(vi) the distribution of Partnership cash;

(vii) the selection and dismissal of employees (including employees having titles such as “president,” “vice president,” “secretary” and “treasurer”) and agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring;

(viii) the maintenance of insurance for the benefit of the Partnership Group, the Partners and Indemnitees;

(ix) the formation of, or acquisition of an interest in, and the contribution of property and the making of loans to, any further limited or general partnerships, joint ventures, corporations, limited liability companies or other relationships (including the acquisition of interests in, and the contributions of property to, any Group Member from time to time) subject to the restrictions set forth in Section 2.4;

(x) the control of any matters affecting the rights and obligations of the Partnership, including the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation, arbitration or mediation and the incurring of legal expense and the settlement of claims and litigation;

(xi) the indemnification of any Person against liabilities and contingencies to the extent permitted by law;

(xii) the entering into of listing agreements with any National Securities Exchange and the delisting of some or all of the Limited Partner Interests from, or requesting that trading be suspended on, any such exchange (subject to any prior approval that may be required under Section 4.7);

(xiii) the issuance, purchase, sale or other acquisition or disposition of Partnership Securities, or the issuance, purchase, sale or other acquisition or disposition of options, rights, warrants and appreciation rights relating to Partnership Securities;

(xiv) the undertaking of any action in connection with the Partnership’s participation in any Group Member; and

(xv) the entering into of agreements with any of its Affiliates to render services to a Group Member or to itself in the discharge of its duties as General Partner of the Partnership.

(b) Notwithstanding any other provision of this Agreement, any Group Member Agreement, the Delaware Act or any applicable law, rule or regulation, each of the Partners and the Assignees and each other Person who may acquire an interest in Partnership Securities hereby (i) approves, ratifies and confirms the execution, delivery and performance by the parties thereto of this Agreement and the Group Member Agreement of each other Group Member, the Underwriting Agreement, the Contribution Agreement, the Services Agreement, the Omnibus Agreement, the Tax Sharing Agreement, the Purchase Agreement, the Indemnification Agreements, the LLC Interest Sale Agreement, the Operating Agreements, the Omnibus Operating Agreement, the Formation Date Merger Agreement and the other agreements or employment benefit plans or arrangements described in or filed as exhibits to the Registration Statement that are related to the transactions contemplated by the Registration Statement; (ii) agrees that the General Partner or any member of the Partnership Group is authorized to execute, deliver and perform the agreements or employment benefit plans or arrangements referred to in clause (i) of this sentence and the other agreements, acts, transactions and matters described in or contemplated by the Registration Statement on behalf of the Partnership without any further act, approval or vote of the Partners or the Assignees or the other Persons who may acquire an interest in Partnership Securities; and (iii) agrees that the execution, delivery or performance by

the General Partner, any Group Member or any of their respective Affiliates of this Agreement or any agreement or employment benefit plan or arrangement authorized or permitted under this Agreement (including the exercise by the General Partner or any Affiliate of the General Partner of the rights accorded pursuant to Article XV) shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement (or any other agreements) or of any duty stated or implied by law or equity.

Section 7.2 Certificate of Limited Partnership.

The General Partner has caused the Certificate of Limited Partnership to be filed with the Secretary of State of the State of Delaware as required by the Delaware Act. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents that the General Partner determines to be necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware or any other state in which the Partnership may elect to do business or own property. To the extent the General Partner determines such action to be necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate of Limited Partnership and do all things to maintain the Partnership as a limited partnership (or a partnership or other entity in which the limited partners have limited liability) under the laws of the State of Delaware or of any other state in which the Partnership may elect to do business or own property. Subject to the terms of Section 3.4(a), the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership, any qualification document or any amendment thereto to any Limited Partner.

Section 7.3 Restrictions on the General Partner’s Authority.

Except as provided in Articles XII and XIV, the General Partner may not sell, exchange or otherwise dispose of all or substantially all of the assets of the Partnership Group, taken as a whole, in a single transaction or a series of related transactions (including by way of merger, consolidation, other combination or sale of ownership interests of the Partnership’s Subsidiaries) without the approval of holders of a Unit Majority; provided, however, that this provision shall not preclude or limit the General Partner’s ability to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of the assets of the Partnership Group and shall not apply to any forced sale of any or all of the assets of the Partnership Group pursuant to the foreclosure of, or other realization upon, any such encumbrance. Without the approval of holders of a Unit Majority, the General Partner shall not, on behalf of the Partnership, except as permitted under Sections 4.6, 11.1 and 11.2, elect or cause the Partnership to elect a successor general partner of the Partnership.

Section 7.4 Reimbursement of the General Partner.

(a) Except as provided in this Section 7.4 and elsewhere in this Agreement, the General Partner shall not be compensated for its services as a general partner or managing member of any Group Member.

(b) Subject to the limitations contained in the Services Agreement, the General Partner and its Affiliates shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine, for (i) all direct and indirect expenses the General Partner or its Affiliates incur or payments any of them make on behalf of the General Partner or any member of the Partnership Group (including salary, bonus, incentive compensation and other amounts paid to any Person, including Affiliates of the General Partner, to perform services for the Partnership Group or for the General Partner in the discharge of its duties to the Partnership Group), and (ii) all other expenses allocable to the Partnership Group or otherwise incurred by the General Partner and its Affiliates in connection with operating the Partnership Group’s business (including expenses allocated to the General Partner by its Affiliates). The General Partner shall determine the expenses that are allocable to the Partnership Group. Reimbursements pursuant to this Section 7.4 shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to Section 7.7.

(c) The General Partner, without the approval of the Limited Partners (who shall have no right to vote in respect thereof), may propose and adopt on behalf of the Partnership employee benefit plans, employee programs and employee practices (including plans, programs and practices involving the issuance of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities), or cause the Partnership to issue Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities in connection with, or pursuant to, any employee benefit plan, employee program or employee practice maintained or sponsored by the General Partner or any of its Affiliates, in each case for the benefit of employees of the General Partner or its Affiliates, or any Group Member or its Affiliates, or any of them, in respect of services performed, directly or indirectly, for the benefit of the Partnership Group. The Partnership agrees to issue to the General Partner or any of its Affiliates any Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities that the General Partner or such Affiliates are obligated to provide to any employees pursuant to any such employee benefit plans, employee programs or employee practices. The General Partner may cause the Partnership to acquire and to deliver to the beneficiary under an employee benefit plan, employee plan or employee practice any Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities. Expenses incurred by the General Partner or its Affiliates in connection with any such plans, programs and practices (including the net cost to the General Partner or such Affiliates of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities purchased by the General Partner or such Affiliates from the Partnership to fulfill options or awards under such plans, programs and practices) shall be reimbursed in accordance with Section 7.4(b). Any and all obligations of the General Partner under any employee benefit plans, employee programs or employee practices adopted by the General Partner as permitted by this Section 7.4(c) shall constitute obligations of the General Partner hereunder and shall be assumed by any successor General Partner approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to all of the General Partner’s General Partner Interest pursuant to Section 4.6.

Section 7.5 Outside Activities.

(a) After the Closing Date, the General Partner, for so long as it is the General Partner of the Partnership, (i) agrees that its sole business will be to act as a general partner or

managing member, as the case may be, of the Partnership and any other partnership or limited liability company of which the Partnership is, directly or indirectly, a partner or member and to undertake activities that are ancillary or related thereto (including being a limited partner in the Partnership) and (ii) shall not engage in any business or activity or incur any debts or liabilities except in connection with or incidental to (A) its performance as general partner or managing member, if any, of one or more Group Members or (B) the acquiring, owning or disposing of debt or equity securities in any Group Member.

(b) Subject to the terms of Section 7.5(a) and, if applicable, the Omnibus Agreement, each Indemnitee (other than the General Partner) shall have the right, directly or indirectly, to engage in businesses of every type and description and other activities for profit and to engage in and possess an interest in other business ventures of any and every type or description, whether in businesses engaged in or anticipated to be engaged in by any Group Member, independently or with others, including business interests and activities in direct competition with the business and activities of any Group Member, and none of the same shall constitute a breach of this Agreement or any duty expressed or implied by law to any Group Member or any Partner or Assignee. Notwithstanding anything to the contrary in this Agreement, (i) the engaging in competitive activities by any Indemnitees (other than the General Partner) in accordance with the provisions of this Section 7.5 and the Omnibus Agreement is hereby approved by the Partnership and all Partners and (ii) it shall be deemed not to be breach of any fiduciary duty or any other obligation of any type whatsoever of the General Partner or of any Indemnitee for the Indemnitees (other than the General Partner) to engage in such business interests and activities in preference to or to the exclusion of the Partnership.

(c) Subject to the terms of Sections 7.5(a) and 7.5(b) and the Omnibus Agreement, but otherwise notwithstanding anything to the contrary in this Agreement, the doctrine of corporate opportunity, or any analogous doctrine, shall not apply to an Indemnitee (including the General Partner) and no Indemnitee (including the General Partner) who acquires knowledge of a potential transaction, agreement, arrangement or other matter (including any potential acquisition opportunities from third parties or otherwise) that may be an opportunity for the Partnership shall have any duty to communicate or offer such opportunity to the Partnership or to allow the Partnership to participate in any such potential transaction, agreement, arrangement or other matter (including any potential acquisitions opportunities from third parties or otherwise), and such Indemnitee (including the General Partner) shall not be liable to the Partnership, to any Limited Partner or any other Person for breach of any fiduciary or other duty by reason of the fact that such Indemnitee (including the General Partner) directs such opportunity to another Person or does not communicate such opportunity or information to the Partnership or, subject to Section 7.5(a) in the case of the General Partner only, pursues such opportunity or acquires it for itself.

(d) The General Partner and each of its Affiliates may acquire Units or other Partnership Securities or options, rights, warrants or appreciation rights relating to such Partnership Securities in addition to those acquired on the Closing Date and, except as otherwise provided in this Agreement, shall be entitled to exercise, at their sole discretion, all rights relating to all Units or other Partnership Securities or options, rights, warrants or appreciation rights relating to such Partnership Securities acquired by them. The term “Affiliates” when used in this Section 7.5(d) with respect to the General Partner shall not include any Group Member.

(e) Notwithstanding anything to the contrary in this Agreement or at law or equity, to the extent that any provision of this Section 7.5 purports or is interpreted to have the effect of restricting, eliminating or otherwise modifying the fiduciary duties that might otherwise, as a result of Delaware or other applicable law, be owed by the General Partner to the Partnership and its Limited Partners, or to constitute a waiver or consent by the Limited Partners to any such fiduciary duty, such provisions in this Section 7.5 shall be deemed to have been approved by the Partners.

Section 7.6 Loans from the General Partner; Loans or Contributions from the Partnership or Group Members.

(a) The General Partner or any of its Affiliates may, but shall be under no obligation to, lend to any Group Member, and any Group Member may borrow from the General Partner or any of its Affiliates, funds needed or desired by the Group Member for such periods of time and in such amounts as the General Partner may determine; provided, however, that in any such case the lending party may not charge the borrowing party interest at a rate greater than the rate that would be charged the borrowing party or impose terms less favorable to the borrowing party than would be charged or imposed on the borrowing party by unrelated lenders on comparable loans made on an arm’s-length basis (without reference to the lending party’s financial abilities or guarantees), all as determined by the General Partner. Any loan to any Group Member made by the General Partner or any of its Affiliates the terms of which are approved by Special Approval shall be deemed for all purposes to meet the requirements of this Section 7.6(a). The borrowing party shall reimburse the lending party for any costs (other than any additional interest costs) incurred by the lending party in connection with the borrowing of such funds. For purposes of this Section 7.6(a) and Section 7.6(b), the term “Group Member” shall include any Affiliate of a Group Member that is controlled by the Group Member.

(b) The Partnership may lend or contribute to any Group Member, and any Group Member may borrow from the Partnership, funds on terms and conditions determined by the General Partner. No Group Member may lend funds to the General Partner or any of its Affiliates (other than another Group Member).

Section 7.7 Indemnification.

(a) To the fullest extent permitted by law but subject to the limitations expressly provided in this Agreement, all Indemnitees shall be indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative and whether formal or informal and including appeals, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as an Indemnitee; provided, that the Indemnitee shall not be indemnified and held harmless if there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter for which the Indemnitee is seeking indemnification pursuant to this Section 7.7, the Indemnitee acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was unlawful; provided, further, no indemnification

pursuant to this Section 7.7 shall be available to the General Partner or its Affiliates (other than a Group Member) (i) with respect to its or their obligations incurred pursuant to the Underwriting Agreement, (ii) with respect to any matter for which the General Partner or its Affiliates (other than a Group Member) have agreed to indemnify a Group Member pursuant to any agreement with a Group Member to which it is subject or (iii) with respect to any liability incurred by any Affiliate of the General Partner (other than a Group Member) as a result of any breach by such party of any agreement with a Group Member to which it is subject (in the case of clause (i) and (ii), other than obligations incurred by the General Partner on behalf of the Partnership). Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, it being agreed that the General Partner shall not be personally liable for such indemnification and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate such indemnification.

(b) Each of the parties to this Agreement hereby agrees and acknowledges that the foregoing indemnity shall be applicable to any losses, claims, damages, liabilities, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts that have resulted from or are alleged to have resulted from the active or passive or the sole, joint or concurrent ordinary or, to the fullest extent permitted by law, gross negligence of an Indemnitee.

(c) To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee who is indemnified pursuant to Section 7.7(a) in appearing at, participating in or defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to a determination that the Indemnitee is not entitled to be indemnified upon receipt by the Partnership of any undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as authorized in this Section 7.7.

(d) The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, pursuant to any vote of the holders of Outstanding Limited Partner Interests, as a matter of law or otherwise, both as to actions in the Indemnitee’s capacity as an Indemnitee and as to actions in any other capacity (including any capacity under the Underwriting Agreement), and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee.

(e) The Partnership may purchase and maintain (or reimburse the General Partner or its Affiliates for the cost of) insurance, on behalf of the General Partner, its Affiliates and such other Persons as the General Partner shall determine, against any liability that may be asserted against, or expense that may be incurred by, such Person in connection with the Partnership’s activities or such Person’s activities on behalf of the Partnership, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.

(f) For purposes of this Section 7.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves

services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute “fines” within the meaning of Section 7.7(a); and action taken or omitted by it with respect to any employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the best interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose that is in the best interests of the Partnership.

(g) In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.

(h) An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

(i) The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.

(j) No amendment, modification or repeal of this Section 7.7 or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Partnership, nor the obligations of the Partnership to indemnify any such Indemnitee under and in accordance with the provisions of this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

(k) If an Affiliate of the Partnership advances expenses to or indemnifies an Indemnitee with respect to a matter for which such Indemnitee was entitled to seek advances or indemnification under Section 7.7, then the Partnership’s obligations to indemnify hereunder shall include reimbursement of such Affiliate and such Affiliate shall be deemed an Indemnitee hereunder for purposes of its entitlement to such reimbursement.

Section 7.8 Liability of Indemnitees.

(a) Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable for monetary damages to the Partnership, the Limited Partners, the Assignees or any other Persons who have acquired interests in the Partnership Securities, for losses sustained or liabilities incurred as a result of any act or omission of an Indemnitee unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter in question, the Indemnitee acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was criminal.

(b) The General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents, and the General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith.

(c) To the extent that, at law or in equity, an Indemnitee has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to the Partners, the General Partner and any other Indemnitee acting in connection with the Partnership’s business or affairs shall not be liable to the Partnership or to any Partner for its good faith reliance on the provisions of this Agreement.

(d) Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the Indemnitees under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

Section 7.9 Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties.

(a) Unless otherwise expressly provided in this Agreement or any Group Member Agreement, whenever a potential conflict of interest exists or arises between the General Partner or any of its Affiliates, on the one hand, and the Partnership, any Group Member, any Partner or any Assignee, on the other hand, any resolution or course of action by the General Partner or its Affiliates in respect of such conflict of interest shall be permitted and deemed approved by all Partners, and shall not constitute a breach of this Agreement, any Group Member Agreement or of any agreement contemplated herein or therein, or of any duty expressed or implied by law or equity, if the resolution or course of action in respect of such conflict of interest is or, by operation of this Agreement, is deemed to be, fair and reasonable to the Partnership; provided that, any conflict of interest and any resolution of such conflict of interest shall be deemed fair and reasonable to the Partnership if such conflict of interest or resolution is (i) approved by Special Approval, (ii) approved by the vote of a majority of the Common Units (excluding Common Units owned by the General Partner and its Affiliates), (iii) on terms no less favorable to the Partnership than those generally being provided to or available from unrelated third parties or (iv) fair and reasonable to the Partnership, taking into account the totality of the relationships between the parties involved. The General Partner and the Conflicts Committee (in connection with a Special Approval) each shall be authorized in connection with its resolution of any conflict of interest to consider (i) the relative interests of any party to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interest; (ii) the totality of the relationships between the parties involved (including other transactions that may be or have been particularly favorable or advantageous to the Partnership); (iii) any customary or accepted industry practices and any customary or historical dealings with a particular Person; (iv) any applicable engineering practices or applicable generally accepted accounting practices or principles; and (v) the relative cost of capital of the parties and the consequent rates of return to the equity holders of the parties. In addition, the Conflicts Committee (in connection with a Special Approval) shall be authorized in connection with its resolution of any conflict of interest to consider such additional factors as the Conflicts Committee determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances. Nothing contained in this Agreement, however, is intended to nor shall it be construed to require the Conflicts Committee to consider the interests of any Person other than the Partnership. The General Partner shall be authorized but not required in connection with its resolution of any such conflict of interest to

seek Special Approval of such resolution, and the General Partner may also adopt a resolution or course of action that has not received Special Approval. Any resolution, action or terms made, taken or provided (including granting Special Approval) in good faith by the Conflicts Committee or the General Partner with respect to any matter shall be conclusive and binding on all Persons (including all Partners) and shall not constitute a breach of this Agreement, of any Group Member Agreement, of any agreement contemplated herein or therein, or of any duty imposed, stated or implied herein or therein or at law or equity. It shall be presumed that the resolution, action or terms made, taken or provided by the Conflicts Committee or the General Partner was made, taken or provided in good faith, and in any proceeding brought by any Limited Partner or Assignee or by or on behalf of such Limited Partner or Assignee or any other Limited Partner or Assignee or the Partnership challenging such resolution, action or terms, the Person bringing or prosecuting such proceeding shall have the burden of overcoming such presumption. Notwithstanding anything to the contrary in this Agreement or any duty otherwise existing at law or equity, the existence of the conflicts of interests described in the Registration Statement are hereby approved by all Partners and shall not constitute a breach of this Agreement or any duty otherwise existing at law or equity.

(b) Whenever the General Partner makes a determination or takes or declines to take any other action, or any of its Affiliates causes it to do so, in its capacity as the general partner of the Partnership, whether under this Agreement, any Group Member Agreement or any other agreement contemplated hereby or otherwise, then, unless another express standard is provided for in this Agreement, the General Partner, or such Affiliates causing it to do so, shall make such determination or take or decline to take such other action in good faith and shall not be subject to any other or different standards imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity. Whenever the Conflicts Committee makes a determination or takes or declines to take any other action, it shall make such determination or take or decline to take such other action in good faith and shall not be subject to any other or different standards imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity. Any determination or other action will conclusively be deemed to be in “good faith” for all purposes of this Agreement, if the Person or Persons making such determination or taking or declining to take such other action subjectively believes that the decision or action made or taken (or not made or not taken) is in the best interests of the Partnership; provided, that if the General Partner is making a determination or taking or declining to take an action pursuant to clause (iii) or clause (iv) of the first sentence of Section 7.9(a), then in lieu thereof, such determination or other action will conclusively be deemed to be in good faith for all purposes of this Agreement if the General Partner subjectively believes that the decision or action made or taken (or not made or not taken) meets the standard set forth in clause (iii) or clause (iv) of the first sentence of Section 7.9(a), as applicable; provided, further, that in making any determination or taking or declining to take any other action with respect to a conflict of interest transaction (or a potential conflict of interest) pursuant to Section 7.9(a), the General Partner and the Conflicts Committee (in connection with a Special Approval) shall be entitled to consider the factors enumerated in the second sentence of Section 7.9(a), and the Conflicts Committee (in connection with a Special Approval) shall also be entitled to consider such additional factors as it may determine pursuant to the third sentence of Section 7.9(a).

(c) Whenever this Agreement, any Group Member Agreement or any other agreement contemplated herein or therein provides that the General Partner or any of its Affiliates is permitted or required to make a decision in its “sole discretion” or “discretion,” that it deems “necessary or appropriate” or under a grant of similar authority or latitude, the General Partner or such Affiliate (i) shall be entitled to consider only such interests and factors as it desires (including its own), (ii) shall have no duty or obligation to give any consideration to any interest of, or factors affecting, the Partnership, any Group Member, any Limited Partner or any Assignee and (iii) shall not be required to fulfill any other standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity. For the avoidance of doubt, whenever the General Partner votes or transfers its Units or General Partner Interest, to the extent permitted under this Agreement, or refrains from voting or transferring its Units or General Partner Interest, as appropriate, or exercising its registration rights pursuant to Section 7.12, such action shall be deemed to have been taken in its sole discretion. The General Partner’s organizational documents may provide that determinations to take or decline to take any action in its discretion or sole discretion may or shall be determined by its members, if the General Partner is a limited liability company, stockholders, if the General Partner is a corporation, or the members or stockholders of the General Partner’s general partner, if the General Partner is a limited partnership.

(d) Notwithstanding anything to the contrary in this Agreement or at law or equity, the General Partner and its Affiliates shall have no duty or obligation, express or implied, to (i) offer to sell or otherwise contribute any assets to the Partnership (whether those assets are owned by the General Partner or any Affiliate of the General Partner or whether those assets are being acquired by the General Partner or any Affiliate of the General Partner from a third party), except where required by any applicable preferential rights existing under any applicable operating agreements, (ii) sell or otherwise dispose of any asset of the Partnership Group other than in the ordinary course of business or (iii) permit any Group Member to use any facilities or assets of the General Partner and its Affiliates, except as may be provided in contracts entered into from time to time specifically dealing with such use. Any determination by the General Partner or any of its Affiliates to enter into such contracts shall be in their respective sole discretion.

(e) Except as expressly set forth in this Agreement, neither the General Partner nor any other Indemnitee shall have any duties or liabilities, including fiduciary duties, to the Partnership or any Limited Partner or Assignee, and the provisions of this Agreement, to the extent that they restrict, eliminate or otherwise modify the duties and liabilities, including fiduciary duties, of the General Partner or any other Indemnitee otherwise existing at law or in equity, are agreed by the Partners to replace such other duties and liabilities of the General Partner or such other Indemnitee.

(f) The Unitholders hereby authorize the General Partner, on behalf of the Partnership as a partner or member of a Group Member, to approve of actions by the general partner or managing member of such Group Member similar to those actions permitted to be taken by the General Partner pursuant to this Section 7.9.

(g) Neither the General Partner nor any of its Affiliates shall be obligated to allow the Partnership to participate in any exploration, production or drilling opportunities with the General Partner or any of its Affiliates.

(h) The Limited Partners expressly acknowledge that the General Partner is under no obligation to consider the separate interests of the individual Limited Partners (including, without limitation, the individual tax consequences to Limited Partners), as opposed to the Limited Partners taken as a whole, in deciding whether to cause the Partnership to take (or decline or take) any actions, and that the General Partner shall not be liable for monetary damages for losses sustained, liabilities incurred or benefits not derived by Limited Partners in connection with such decisions.

(i) The Conflicts Committee may establish guidelines and procedures by which conflict matters within criteria or parameters identified or established by the Conflicts Committee are referred for review, analysis, negotiation and/or decision to an officer or officers of the General Partner (who may also be an officer or officers of Pioneer Natural Resources Company and/or any of its Subsidiaries). Such officer or officers shall operate under conflict of interest rules and procedures approved by the Conflicts Committee (which rules and procedures may be contained in the Services Agreement). The resolution of any such conflict matter by such officer or officers shall be deemed for all purposes of this Agreement to constitute, and shall have the effect of, a Special Approval. The Conflicts Committee, on a periodic basis established by the Conflicts Committee, shall review determinations made by the officer or officers of the General Partner in accordance with the provisions of this Section 7.9(i).

(j) Except with respect to any member of the Conflicts Committee that has a “Recusal Conflict” (as defined below), members of the Conflicts Committee meeting the requirements set forth in the definition of “Conflicts Committee” in Section 1.1 hereof shall be deemed for all purposes to be independent and disinterested and no action by the Conflicts Committee (including, without limitation, any Special Approval) shall be subject to challenge by or on behalf of any Partner, the Partnership or any Assignee on the grounds that any member of the Conflicts Committee was not independent or disinterested so long as such member met the requirements of the definition of “Conflicts Committee” set forth in Section 1.1 hereof at the time of the challenged action.

Without limiting the generality of the foregoing, no member of the Conflicts Committee shall be deemed not to be independent and disinterested as a result of (i) such member’s receiving compensation for service as a member of the Conflicts Committee, which compensation is determined by the Board of Directors and may be increased from time to time or (ii) such member’s having any relationship other than a Recusal Conflict with any Person that is a party to any transaction with the Partnership or any other Group Member (such Person, a “Counterparty”) which transaction is being reviewed by the Conflicts Committee (the “Proposed Transaction”). For purposes of this Section 7.9(j), a member of the Conflicts Committee shall only be deemed to have a Recusal Conflict with respect to a Proposed Transaction in the event that such member of the Conflicts Committee (w) is an officer of the Counterparty, (x) is an employee of the Counterparty, (y) has a material financial interest in the Counterparty (it being understood and agreed that for purposes of this Section 7.9(j) a member of the Conflicts Committee shall not be deemed to have a material financial interest in the Counterparty based on an ownership interest

in the Counterparty so long as such interest represents less than 1% of the outstanding equity of the Counterparty) or the Proposed Transaction (other than by reason of the ownership of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities) or (z) is involved on behalf of the Counterparty in connection with the structuring or negotiation of the Proposed Transaction. For the avoidance of doubt, the fact that a member of the Conflicts Committee sits on the board of directors (or comparable body) of the Counterparty to any Proposed Transaction shall not, in and of itself, constitute a Recusal Conflict and shall not affect (or be deemed to affect) for any purpose the independence and disinterestedness of such member of the Conflicts Committee. In the event any member of the Conflicts Committee has a Recusal Conflict with respect to any Proposed Transaction, such member of the Conflicts Committee shall disclose such Recusal Conflict and shall recuse himself or herself from, and not participate in, the decision of the Conflicts Committee with respect to such Proposed Transaction. Notwithstanding anything to the contrary in this Agreement or at law or equity, the fact that any one or more members of the Conflicts Committee has a Recusal Conflict with respect to any Proposed Transaction shall not affect (or be deemed to affect) for any purpose the independence and disinterestedness of any other member of the Conflicts Committee and the Conflicts Committee, acting by any member or members who do not have a Recusal Conflict with respect to the Proposed Transaction (including any member appointed by the Board of Directors of the General Partner in order to consider such Proposed Transaction), shall operate as provided in this Agreement and shall be entitled to the benefits of this Agreement including, without limitation, this Section 7.9.

Section 7.10 Other Matters Concerning the General Partner.

(a) The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.

(b) The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the advice or opinion (including an Opinion of Counsel) of such Persons as to matters that the General Partner reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such advice or opinion.

(c) The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers, a duly appointed attorney or attorneys-in-fact or the duly authorized officers of the Partnership.

Section 7.11 Purchase or Sale of Partnership Securities.

The General Partner may cause any Group Member to purchase or otherwise acquire Partnership Securities or any options, rights, warrants or appreciation rights relating to Partnership Securities. As long as Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities are held by any Group Member, such Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership

Securities shall not be considered Outstanding for any purpose, except as otherwise provided herein.

Section 7.12 Registration Rights of the General Partner and its Affiliates.

(a) If (i) the General Partner or any Affiliate of the General Partner (including for purposes of this Section 7.12, any Person that is an Affiliate of the General Partner at the date hereof notwithstanding that it may later cease to be an Affiliate of the General Partner) (the “Holder”) holds Partnership Securities that it desires to sell and (ii) Rule 144 of the Securities Act (or any successor rule or regulation to Rule 144) or another exemption from registration is not available to enable the Holder to dispose of the number of Partnership Securities it desires to sell at the time it desires to do so without registration under the Securities Act, then at the option and upon the request of the Holder, the Partnership shall file with the Commission as promptly as practicable after receiving such request, and use all commercially reasonable efforts to cause to become effective and remain effective for a period of not less than six months following its effective date or such shorter period as shall terminate when all Partnership Securities covered by such registration statement have been sold, a registration statement under the Securities Act registering the offering and sale of the number of Partnership Securities specified by the Holder; however, that if the Conflicts Committee determines in good faith that the requested registration would be materially detrimental to the Partnership and its Partners because such registration would (x) materially interfere with a significant acquisition, reorganization or other similar transaction involving the Partnership, (y) require premature disclosure of material information that the Partnership has a bona fide business purpose for preserving as confidential or (z) render the Partnership unable to comply with requirements under applicable securities laws, then the Partnership shall have the right to postpone such requested registration for a period of not more than six months after receipt of the Holder’s request, such postponement right pursuant to this Section 7.12(a) not to be utilized more than once in any twelve-month period. Except as provided in the preceding sentence, the Partnership shall be deemed not to have used all commercially reasonable efforts to keep the registration statement effective during the applicable period if it voluntarily takes any action that would result in Holders of Partnership Securities covered thereby not being able to offer and sell such Partnership Securities at any time during such period, unless such action is required by applicable law. In connection with any registration pursuant to the first sentence of this Section 7.12(a), the Partnership shall (i) promptly prepare and file (A) such documents as may be necessary to register or qualify the securities subject to such registration under the securities laws of such states as the Holder shall reasonably request; provided, however, that no such registration or qualification shall be required in any jurisdiction where, as a result thereof, the Partnership would become subject to general service of process or to taxation or qualification to do business as a foreign corporation or partnership doing business in such jurisdiction solely as a result of such registration, and (B) such documents as may be necessary to apply for listing or to list the Partnership Securities subject to such registration on such National Securities Exchange as the Holder shall reasonably request, and (ii) do any and all other acts and things that may be necessary or appropriate to enable the Holder to consummate a public sale of such Partnership Securities in such states. Except as set forth in Section 7.12(c), all costs and expenses of any such registration and offering (other than the underwriting discounts and commissions) shall be paid by the Partnership, without reimbursement by the Holder.

(b) If the Partnership shall at any time propose to file a registration statement under the Securities Act for an offering of equity securities of the Partnership for cash (other than an offering relating solely to an employee benefit plan), the Partnership shall use all commercially reasonable efforts to include such number or amount of securities held by any Holder in such registration statement as the Holder shall request; provided, that the Partnership is not required to make any effort or take an action to so include the securities of the Holder once the registration statement becomes or is declared effective by the Commission, including any registration statement providing for the offering from time to time of securities pursuant to Rule 415 of the Securities Act. If the proposed offering pursuant to this Section 7.12(b) shall be an underwritten offering, then, in the event that the managing underwriter or managing underwriters of such offering advise the Partnership and the Holder in writing that in their opinion the inclusion of all or some of the Holder’s Partnership Securities would have a material adverse effect on the success of the offering, the Partnership shall include in such offering only that number or amount, if any, of securities held by the Holder that, in the opinion of the managing underwriter or managing underwriters, will not have a material adverse effect on the offering. Except as set forth in Section 7.12(c), all costs and expenses of any such registration and offering (other than the underwriting discounts and commissions) shall be paid by the Partnership, without reimbursement by the Holder.

(c) If underwriters are engaged in connection with any registration referred to in this Section 7.12, the Partnership shall provide indemnification, representations, covenants, opinions and other assurance to the underwriters in form and substance reasonably satisfactory to such underwriters. Further, in addition to and not in limitation of the Partnership’s obligation under Section 7.7, the Partnership shall, to the fullest extent permitted by law, indemnify and hold harmless the Holder, its officers, directors and each Person who controls the Holder (within the meaning of the Securities Act) and any agent thereof (collectively, “Indemnified Persons”) from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnified Person may be involved, or is threatened to be involved, as a party or otherwise, under the Securities Act or otherwise (hereinafter referred to in this Section 7.12(c) as a “claim” and in the plural as “claims”) based upon, arising out of or resulting from any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which any Partnership Securities were registered under the Securities Act or any state securities or Blue Sky laws, in any preliminary prospectus (if used prior to the effective date of such registration statement), in any free writing prospectus, or in any summary or final prospectus or in any amendment or supplement thereto (if used during the period the Partnership is required to keep the registration statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein not misleading; provided, however, that the Partnership shall not be liable to any Indemnified Person to the extent that any such claim arises out of, is based upon or results from an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, such preliminary, summary or final prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Partnership by or on behalf of such Indemnified Person specifically for use in the preparation thereof.

(d) The provisions of Sections 7.12(a) and 7.12(b) shall continue to be applicable with respect to the General Partner (and any of the General Partner’s Affiliates) after it ceases to be a general partner of the Partnership, during a period of two years subsequent to the effective date of such cessation and for so long thereafter as is required for the Holder to sell all of the Partnership Securities with respect to which it has requested during such two-year period inclusion in a registration statement otherwise filed or that a registration statement be filed; provided, however, that the Partnership shall not be required to file successive registration statements covering the same Partnership Securities for which registration was demanded during such two-year period. The provisions of Section 7.12(c) shall continue in effect thereafter.

(e) The rights to cause the Partnership to register Partnership Securities pursuant to this Section 7.12 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such Partnership Securities, provided (i) the Partnership is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the Partnership Securities with respect to which such registration rights are being assigned and (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms set forth in this Section 7.12.

(f) Any request to register Partnership Securities pursuant to this Section 7.12 shall (i) specify the Partnership Securities intended to be offered and sold by the Person making the request, (ii) express such Person’s present intent to offer such Partnership Securities for distribution, (iii) describe the nature or method of the proposed offer and sale of Partnership Securities, and (iv) contain the undertaking of such Person to provide all such information and materials and take all action as may be required in order to permit the Partnership to comply with all applicable requirements in connection with the registration of such Partnership Securities.

Section 7.13 Reliance by Third Parties.

Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner and any officer of the General Partner authorized by the General Partner to act on behalf of and in the name of the Partnership has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any authorized contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner or any such officer as if it were the Partnership’s sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner or any such officer in connection with any such dealing. In no event shall any Person dealing with the General Partner or any such officer or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or any such officer or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and

delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.

ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 8.1 Records and Accounting.

The General Partner shall keep or cause to be kept at the principal office of the Partnership appropriate books and records with respect to the Partnership’s business, including all books and records necessary to provide to the Limited Partners any information required to be provided pursuant to Section 3.4(a). Any books and records maintained by or on behalf of the Partnership in the regular course of its business, including the record of the Record Holders and Assignees of Units or other Partnership Securities or any options, rights, warrants or appreciation rights relating to Partnership Securities, books of account and records of Partnership proceedings, may be kept on, or be in the form of, computer disks, hard drives, punch cards, magnetic tape, photographs, micrographics or any other information storage device; provided, that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with U.S. GAAP.

Section 8.2 Fiscal Year.

The fiscal year of the Partnership shall be a fiscal year ending December 31.

Section 8.3 Reports.

(a) As soon as practicable, but in no event later than 120 days after the close of each fiscal year of the Partnership, the General Partner shall cause to be mailed or made available, by any reasonable means (including posting on the Partnership’s website), to each Record Holder of a Unit as of a date selected by the General Partner, an annual report containing financial statements of the Partnership for such fiscal year of the Partnership, presented in accordance with U.S. GAAP, such statements to be audited by a firm of independent public accountants selected by the General Partner in its sole discretion.

(b) As soon as practicable, but in no event later than 90 days after the close of each Quarter except the last Quarter of each fiscal year, the General Partner shall cause to be mailed or made available, by any reasonable means (including posting on the Partnership’s website), to each Record Holder of a Unit, as of a date selected by the General Partner, a report containing unaudited financial statements of the Partnership and such other information as may be required by applicable law, regulation or rule of any National Securities Exchange on which the Units are listed or admitted to trading, or as the General Partner determines to be necessary or appropriate.

(c) The General Partner shall not be required to make available or mail any report referred to in Section 8.3(a) or Section 8.3(b) unless and until any consent, opinion or review of or by the Partnership’s independent registered public accounting firm requested, or deemed necessary or desirable, by the General Partner has been obtained.

ARTICLE IX
TAX MATTERS

Section 9.1 Tax Returns and Information.

The Partnership shall timely file all returns of the Partnership that are required for federal, state and local income tax purposes on the basis of the accrual method and the taxable year or years that it is required by law to adopt, from time to time, as determined in good faith by the General Partner. The tax information reasonably required by Record Holders for federal and state income tax reporting purposes with respect to a taxable year shall be furnished to them within 90 days of the close of the calendar year in which the Partnership’s taxable year ends. The classification, realization and recognition of income, gain, losses and deductions and other items shall be on the accrual method of accounting for federal income tax purposes.

Section 9.2 Tax Elections.

(a) The Partnership shall make the election under Section 754 of the Code in accordance with applicable regulations thereunder, subject to the reservation of the right to seek to revoke any such election upon the General Partner’s determination that such revocation is in the best interests of the Limited Partners. Notwithstanding any other provision herein contained, for the purposes of computing the adjustments under Section 743(b) of the Code, the General Partner shall be authorized (but not required) to adopt a convention whereby the price paid by a transferee of a Limited Partner Interest will be deemed to be the lowest quoted closing price of the Limited Partner Interests on any National Securities Exchange on which such Limited Partner Interests are listed or admitted to trading during the calendar month in which such transfer is deemed to occur pursuant to Section 6.2(i) without regard to the actual price paid by such transferee.

(b) Except as otherwise provided herein, the General Partner shall determine whether the Partnership should make any other elections permitted by the Code.

Section 9.3 Tax Controversies.

Subject to the provisions hereof, the General Partner is designated as the Tax Matters Partner (as defined in the Code) and is authorized and required to represent the Partnership (at the Partnership’s expense) in connection with all examinations of the Partnership’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Partner agrees to cooperate with the General Partner and to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings.

Section 9.4 Withholding.

Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that may be required to cause the Partnership and other Group Members to comply with any withholding requirements established under the Code or any other federal, state or local law including pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required or elects to withhold and pay over to any taxing authority

any amount resulting from the allocation or distribution of income to any Partner or Assignee (including by reason of Section 1446 of the Code), the General Partner may treat the amount withheld as a distribution of cash pursuant to Section 6.3 in the amount of such withholding from such Partner.

ARTICLE X
ADMISSION OF PARTNERS

Section 10.1 Admission of Initial Limited Partners.

Upon the issuance by the Partnership of Common Units to Pioneer USA and the Underwriters as described in Sections 5.2 and 5.3 in connection with the Initial Offering, the General Partner shall admit such parties to the Partnership as Initial Limited Partners in respect of the Common Units issued to them.

Section 10.2 Admission of Substituted Limited Partners.

By transfer of a Limited Partner Interest in accordance with Article IV, the transferor shall be deemed to have given the transferee the right to seek admission as a Substituted Limited Partner subject to the conditions of, and in the manner permitted under, this Agreement. A transferor of a Certificate representing a Limited Partner Interest or of an uncertificated Limited Partner Interest shall, however, only have the authority to convey to a purchaser or other transferee who does not execute and deliver a Transfer Application, if a Transfer Application Notice has previously been given, (a) the right to negotiate such Certificate or transfer of such uncertificated Limited Partner Interest to a purchaser or other transferee and (b) the right to transfer the right to request admission as a Substituted Limited Partner to such purchaser or other transferee in respect of the transferred Limited Partner Interests. No transferor of a Limited Partner Interest or other Person shall have any obligation or responsibility to provide a Transfer Application, if a Transfer Application Notice has previously been given, to a transferee or assist or participate in any way with respect to the completion or delivery thereof. An Assignee shall automatically be admitted to the Partnership as a Substituted Limited Partner with respect to the Limited Partner Interests so transferred to such Person at such time as such transfer is recorded in the books and records of the Partnership or the books and records of the Transfer Agent, and until so recorded, such transferee shall be an Assignee. The General Partner shall periodically, but no less frequently than on the first Business Day of each calendar quarter, cause any unrecorded transfers of Limited Partner Interests to be recorded in the books and records of the Partnership or the books and records of the Transfer Agent. An Assignee shall have an interest in the Partnership equivalent to that of a Limited Partner with respect to allocations and distributions, including liquidating distributions, of the Partnership. An Assignee shall have no other rights of a Limited Partner.

Section 10.3 Admission of Successor General Partner.

A successor General Partner approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to all of the General Partner Interest pursuant to Section 4.6 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective immediately prior to the withdrawal or removal of the predecessor or transferring General Partner, pursuant to Section 11.1 or 11.2 or the transfer of the General

Partner Interest pursuant to Section 4.6, provided, however, that no such successor shall be admitted to the Partnership until compliance with the terms of Section 4.6 has occurred and such successor has executed and delivered such other documents or instruments as may be required to effect such admission. Any such successor shall, subject to the terms hereof, carry on the business of the members of the Partnership Group without dissolution.

Section 10.4 Admission of Additional Limited Partners.

(a) A Person (other than the General Partner, an Initial Limited Partner or a Substituted Limited Partner) who makes a Capital Contribution to the Partnership in accordance with this Agreement shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the General Partner:

(i) evidence of acceptance in form satisfactory to the General Partner of all of the terms and conditions of this Agreement, including the power of attorney granted in Section 2.6, and

(ii) such other documents or instruments as may be required by the General Partner to effect such Person’s admission as an Additional Limited Partner.

(b) Notwithstanding anything to the contrary in this Section 10.4, no Person shall be admitted as an Additional Limited Partner without the consent of the General Partner. The admission of any Person as an Additional Limited Partner shall become effective on the date upon which the name of such Person is recorded as such in the books and records of the Partnership or the books and records of the Transfer Agent, following the consent of the General Partner to such admission.

Section 10.5 Amendment of Agreement and Certificate of Limited Partnership.

To effect the admission to the Partnership of any Partner, the General Partner shall take all steps necessary or appropriate under the Delaware Act to amend or cause to be amended the records of the Partnership or the records of the Transfer Agent to reflect such admission and, if necessary, to prepare as soon as practicable an amendment to this Agreement and, if required by law, the General Partner shall prepare and file an amendment to the Certificate of Limited Partnership, and the General Partner may for this purpose, among others, exercise the power of attorney granted pursuant to Section 2.6.

ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS

Section 11.1 Withdrawal of the General Partner.

(a) The General Partner shall be deemed to have withdrawn from the Partnership upon the occurrence of any one of the following events (each such event herein referred to as an “Event of Withdrawal”);

(i) The General Partner voluntarily withdraws from the Partnership by giving written notice to the other Partners;

(ii) The General Partner transfers all of its rights as General Partner pursuant to Section 4.6;

(iii) The General Partner is removed pursuant to Section 11.2;

(iv) The General Partner (A) makes a general assignment for the benefit of creditors; (B) files a voluntary bankruptcy petition for relief under Chapter 7 of the United States Bankruptcy Code; (C) files a petition or answer seeking for itself a liquidation, dissolution or similar relief (but not a reorganization) under any law; (D) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the General Partner in a proceeding of the type described in clauses (A)-(C) of this Section 11.1(a)(iv); or (E) seeks, consents to or acquiesces in the appointment of a trustee (but not a debtor-in-possession), receiver or liquidator of the General Partner or of all or any substantial part of its properties;

(v) A final and non-appealable order of relief under Chapter 7 of the United States Bankruptcy Code is entered by a court with appropriate jurisdiction pursuant to a voluntary or involuntary petition by or against the General Partner; or

(vi) (A) in the event the General Partner is a corporation, a certificate of dissolution or its equivalent is filed for the General Partner, or 90 days expire after the date of notice to the General Partner of revocation of its charter without a reinstatement of its charter, under the laws of its state of incorporation; (B) in the event the General Partner is a partnership or a limited liability company, the dissolution and commencement of winding up of the General Partner; (C) in the event the General Partner is acting in such capacity by virtue of being a trustee of a trust, the termination of the trust; (D) in the event the General Partner is a natural person, his death or adjudication of incompetency; and (E) otherwise in the event of the termination of the General Partner.

If an Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A), (B), (C) or (E) occurs, the withdrawing General Partner shall give notice to the Limited Partners within 30 days after such occurrence. The Partners hereby agree that only the Events of Withdrawal described in this Section 11.1 shall result in the withdrawal of the General Partner from the Partnership.

(b) Withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall not constitute a breach of this Agreement under the following circumstances: (i) at any time during the period beginning on the Closing Date and ending at 12:00 midnight, prevailing Eastern Time, on March 31, 2018, the General Partner voluntarily withdraws by giving at least 90 days’ advance notice of its intention to withdraw to the Limited Partners; provided, that prior to the effective date of such withdrawal, the withdrawal is approved by Unitholders holding at least a majority of the Outstanding Common Units (excluding Common Units held by the General Partner and its Affiliates) and the General Partner delivers to the Partnership an Opinion of Counsel (“Withdrawal Opinion of Counsel”) that such withdrawal (following the selection of the successor General Partner) would not result in the loss of the limited liability of any Limited Partner or any Group Member or cause any Group Member to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal

income tax purposes (to the extent not already so treated or taxed); (ii) at any time after 12:00 midnight, prevailing Eastern Time, on March 31, 2018, the General Partner voluntarily withdraws by giving at least 90 days’ advance notice to the Unitholders, such withdrawal to take effect on the date specified in such notice; (iii) at any time that the General Partner ceases to be the General Partner pursuant to Section 11.1(a)(ii) or is removed pursuant to Section 11.2; or (iv) notwithstanding clause (i) of this sentence, at any time that the General Partner voluntarily withdraws by giving at least 90 days’ advance notice of its intention to withdraw to the Limited Partners, such withdrawal to take effect on the date specified in the notice, if at the time such notice is given one Person and its Affiliates (other than the General Partner and its Affiliates) own beneficially or of record or control at least 50% of the Outstanding Units. The withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall also constitute the withdrawal of the General Partner as general partner or managing member, if any, to the extent applicable, of the other Group Members. If the General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i), the holders of a Unit Majority, may, prior to the effective date of such withdrawal, elect a successor General Partner. The Person so elected as successor General Partner shall automatically become the successor general partner or managing member, to the extent applicable, of the other Group Members of which the General Partner is a general partner or a managing member. If, prior to the effective date of the General Partner’s withdrawal, a successor is not selected by the Unitholders as provided herein or the Partnership does not receive a Withdrawal Opinion of Counsel, the Partnership shall be dissolved in accordance with Section 12.1. Any successor General Partner elected in accordance with the terms of this Section 11.1 shall be subject to the provisions of Section 10.3.

Section 11.2 Removal of the General Partner.

The General Partner may be removed if such removal is approved by the Unitholders holding at least 66 2/3% of the Outstanding Units (including Units held by the General Partner and its Affiliates) voting as a single class. Any such action by such holders for removal of the General Partner must also provide for the election of a successor General Partner by the Unitholders of a Unit Majority. Such removal shall be effective immediately following the admission of a successor General Partner pursuant to Section 10.3. The removal of the General Partner shall also automatically constitute the removal of the General Partner as general partner or managing member, to the extent applicable, of the other Group Members of which the General Partner is a general partner or a managing member. If a Person is elected as a successor General Partner in accordance with the terms of this Section 11.2, such Person shall, upon admission pursuant to Section 10.3, automatically become a successor general partner or managing member, to the extent applicable, of the other Group Members of which the General Partner is a general partner or a managing member. The right of the holders of Outstanding Units to remove the General Partner shall not exist or be exercised unless the Partnership has received an opinion opining as to the matters covered by a Withdrawal Opinion of Counsel. Any successor General Partner elected in accordance with the terms of this Section 11.2 shall be subject to the provisions of Section 10.3.

Section 11.3 Interest of Departing General Partner and Successor General Partner.

(a) In the event of (i) withdrawal of the General Partner under circumstances where such withdrawal does not violate this Agreement or (ii) removal of the General Partner by the

holders of Outstanding Units under circumstances where Cause does not exist, if the successor General Partner is elected in accordance with the terms of Section 11.1 or 11.2, the Departing General Partner shall have the option, exercisable prior to the effective date of the departure of such Departing General Partner, to require its successor to purchase its General Partner Interest and its general partner interest (or equivalent interest), if any, in the other Group Members (collectively, the “Combined Interest”) in exchange for an amount in cash equal to the fair market value of such Combined Interest, such amount to be determined and payable as of the effective date of its departure. If the General Partner is removed by the Unitholders under circumstances where Cause exists or if the General Partner withdraws under circumstances where such withdrawal violates this Agreement, and if a successor General Partner is elected in accordance with the terms of Section 11.1 or 11.2 (or if the business of the Partnership is continued pursuant to Section 12.2 and the successor General Partner is not the former General Partner), such successor shall have the option, exercisable prior to the effective date of the departure of such Departing General Partner (or, in the event the business of the Partnership is continued, prior to the date the business of the Partnership is continued), to purchase the Combined Interest in exchange for an amount in cash equal to the fair market value of such Combined Interest of the Departing General Partner. In either event, the Departing General Partner shall be entitled to receive all reimbursements due such Departing General Partner pursuant to Section 7.4, including any employee-related liabilities (including severance liabilities), incurred in connection with the termination of any employees employed by the Departing General Partner or its Affiliates (other than any Group Member) for the benefit of the Partnership or the other Group Members.

For purposes of this Section 11.3(a), the fair market value of the Departing General Partner’s Combined Interest shall be determined by agreement between the Departing General Partner and its successor or, failing agreement within 30 days after the effective date of such Departing General Partner’s departure, by an independent investment banking firm or other independent expert selected by the Departing General Partner and its successor, which, in turn, may rely on other experts, and the determination of which shall be conclusive as to such matter. If such parties cannot agree upon one independent investment banking firm or other independent expert within 45 days after the effective date of such departure, then the Departing General Partner shall designate an independent investment banking firm or other independent expert, the Departing General Partner’s successor shall designate an independent investment banking firm or other independent expert, and such firms or experts shall mutually select a third independent investment banking firm or independent expert, which third independent investment banking firm or other independent expert shall determine the fair market value of the Combined Interest of the Departing General Partner. In making its determination, such third independent investment banking firm or other independent expert may consider the then current trading price of Units on any National Securities Exchange on which Units are then listed or admitted to trading, the value of the Partnership’s assets, the rights and obligations of the Departing General Partner and other factors it may deem relevant.

(b) If the Combined Interest is not purchased in the manner set forth in Section 11.3(a), the Departing General Partner (or its transferee) shall become a Limited Partner and its Combined Interest shall be converted into Common Units pursuant to a valuation made by an investment banking firm or other independent expert selected pursuant to Section 11.3(a), without reduction in such Partnership Interest (but subject to proportionate dilution by reason of

the admission of its successor). Any successor General Partner shall indemnify the Departing General Partner (or its transferee) as to all debts and liabilities of the Partnership arising on or after the date on which the Departing General Partner (or its transferee) becomes a Limited Partner. For purposes of this Agreement, conversion of the Combined Interest of the Departing General Partner to Common Units will be characterized as if the Departing General Partner (or its transferee) contributed its Combined Interest to the Partnership in exchange for the newly issued Common Units.

(c) If a successor General Partner is elected in accordance with the terms of Section 11.1 or 11.2 (or if the business of the Partnership is continued pursuant to Section 12.2 and the successor General Partner is not the former General Partner) and the option described in Section 11.3(a) is not exercised by the party entitled to do so, such successor General Partner shall, at the effective date of its admission to the Partnership, contribute to the Partnership cash in the amount equal to the product of the (i) quotient obtained by dividing (A) the Percentage Interest of the General Partner Interest of the Departing General Partner by (B) a percentage equal to 100% less the Percentage Interest of the General Partner Interest of the Departing General Partner and (ii) the Net Agreed Value of the Partnership’s assets on such date. In such event, such successor General Partner shall, subject to the following sentence, be entitled to its Percentage Interest of all Partnership allocations and distributions to which the Departing General Partner was entitled. In addition, the successor General Partner shall cause this Agreement to be amended to reflect that, from and after the date of such successor General Partner’s admission, the successor General Partner’s interest in all Partnership distributions and allocations shall be its Percentage Interest.

Section 11.4 Withdrawal of Limited Partners.

No Limited Partner shall have any right to withdraw from the Partnership; provided, however, that when a transferee of a Limited Partner’s Limited Partner Interest becomes a Record Holder of the Limited Partner Interest so transferred, such transferring Limited Partner shall cease to be a Limited Partner with respect to the Limited Partner Interest so transferred.

ARTICLE XII
DISSOLUTION AND LIQUIDATION

Section 12.1 Dissolution.

The Partnership shall not be dissolved by the admission of Substituted Limited Partners or Additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the removal or withdrawal of the General Partner, if a successor General Partner is elected pursuant to Section 11.1 or 11.2, the Partnership shall not be dissolved and such successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its affairs shall be wound up, upon:

(a) an Event of Withdrawal of the General Partner as provided in Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected and an Opinion of Counsel is received as provided in Section 11.1(b) or 11.2 and such successor is admitted to the Partnership pursuant to Section 10.3;

(b) an election to dissolve the Partnership by the General Partner that is approved by the holders of a Unit Majority;

(d) at any time there are no Limited Partners, unless the Partnership is continued without dissolution in accordance with the Delaware Act.

Section 12.2 Continuation of the Business of the Partnership After Dissolution.

Upon (a) dissolution of the Partnership following an Event of Withdrawal caused by the withdrawal or removal of the General Partner as provided in Section 11.1(a)(i) or (iii) and the failure of the Partners to select a successor to such Departing General Partner pursuant to Section 11.1 or 11.2, then within 90 days thereafter, or (b) dissolution of the Partnership upon an event constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or (vi), then, to the maximum extent permitted by law, within 180 days thereafter, the holders of a Unit Majority may elect to continue the business of the Partnership on the same terms and conditions set forth in this Agreement by appointing as a successor General Partner a Person approved by the holders of a Unit Majority. Unless such an election is made within the applicable time period as set forth above, the Partnership shall conduct only activities necessary to wind up its affairs. If such an election is so made, then:

(i) the Partnership shall continue without dissolution unless earlier dissolved in accordance with this Article XII;

(ii) if the successor General Partner is not the former General Partner, then the interest of the former General Partner shall be treated in the manner provided in Section 11.3; and

(iii) the successor General Partner shall be admitted to the Partnership as General Partner, effective as of the Event of Withdrawal, by agreeing in writing to be bound by this Agreement; provided, that the right of the holders of a Unit Majority to approve a successor General Partner and to continue the business of the Partnership shall not exist and may not be exercised unless the Partnership has received an Opinion of Counsel that (x) the exercise of the right would not result in the loss of limited liability of any Limited Partner and (y) neither the Partnership nor any Group Member would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of such right to continue (to the extent not already so treated or taxed).

Section 12.3 Liquidator.

Upon dissolution of the Partnership, unless the business of the Partnership is continued pursuant to Section 12.2, the General Partner shall select one or more Persons to act as Liquidator. The Liquidator (if other than the General Partner) shall be entitled to receive such compensation for its services as may be approved by holders of a Unit Majority. The Liquidator (if other than the General Partner) shall agree not to resign at any time without 15 days’ prior

notice and may be removed at any time, with or without cause, by notice of removal approved by holders of a Unit Majority. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by holders of a Unit Majority. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Article XII, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the General Partner under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, other than the limitation on sale set forth in Section 7.3) necessary or appropriate to carry out the duties and functions of the Liquidator hereunder for and during the period of time required to complete the winding up and liquidation of the Partnership as provided for herein.

Section 12.4 Liquidation.

The Liquidator shall proceed to dispose of the assets of the Partnership, discharge its liabilities, and otherwise wind up its affairs in such manner and over such period as determined by the Liquidator, subject to Section 17-804 of the Delaware Act and the following:

(a) The assets may be disposed of by public or private sale or by distribution in kind to one or more Partners on such terms as the Liquidator and such Partner or Partners may agree. If any property is distributed in kind, the Partner receiving the property shall be deemed for purposes of Section 12.4(c) to have received cash equal to its fair market value; and contemporaneously therewith, appropriate cash distributions must be made to the other Partners. The Liquidator may defer liquidation or distribution of the Partnership’s assets for a reasonable time if it determines that an immediate sale or distribution of all or some of the Partnership’s assets would be impractical or would cause undue loss to the Partners. The Liquidator may distribute the Partnership’s assets, in whole or in part, in kind if it determines that a sale would be impractical or would cause undue loss to the Partners.

(b) Liabilities of the Partnership include amounts owed to the Liquidator as compensation for serving in such capacity (subject to the terms of Section 12.3) and amounts to Partners otherwise than in respect of their distribution rights under Article VI. With respect to any liability that is contingent, conditional or unmatured or is otherwise not yet due and payable, the Liquidator shall either settle such claim for such amount as it thinks appropriate or establish a reserve of cash or other assets to provide for its payment. When paid, any unused portion of the reserve shall be distributed as additional liquidation proceeds.

(c) All property and all cash in excess of that required to discharge liabilities as provided in Section 12.4(b) shall be distributed to the Partners in accordance with, and to the extent of, the positive balances in their respective Capital Accounts, as determined after taking into account all Capital Account adjustments (other than those made by reason of distributions pursuant to this Section 12.4(c)) for the taxable year of the Partnership during which the liquidation of the Partnership occurs (with such date of occurrence being determined pursuant to

Treasury Regulation Section 1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such taxable year (or, if later, within 90 days after said date of such occurrence).

Section 12.5 Cancellation of Certificate of Limited Partnership.

Upon the completion of the distribution of Partnership cash and property as provided in Section 12.4 in connection with the liquidation of the Partnership, the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Partnership shall be taken.

Section 12.6 Return of Contributions.

The General Partner shall not be personally liable for, and shall have no obligation to contribute or loan any money or property to the Partnership to enable it to effectuate, the return of the Capital Contributions of the Limited Partners or Unitholders, or any portion thereof, it being expressly understood that any such return shall be made solely from Partnership assets.

Section 12.7 Waiver of Partition.

To the maximum extent permitted by law, each Partner hereby waives any right to partition of the Partnership property.

Section 12.8 Capital Account Restoration.

No Limited Partner shall have any obligation to restore any negative balance in its Capital Account upon liquidation of the Partnership. The General Partner shall be obligated to restore any negative balance in its Capital Account upon liquidation of its interest in the Partnership by the end of the taxable year of the Partnership during which such liquidation occurs, or, if later, within 90 days after the date of such liquidation.

ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE

Section 13.1 Amendments to be Adopted Solely by the General Partner.

Each Partner agrees that the General Partner, without the approval of any Partner or Assignee, may amend any provision of this Agreement and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect:

(a) a change in the name of the Partnership, the location of the principal place of business of the Partnership, the registered agent of the Partnership or the registered office of the Partnership;

(b) admission, substitution, withdrawal or removal of Partners in accordance with this Agreement;

(c) a change that the General Partner determines to be necessary or advisable to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in

which the Limited Partners have limited liability under the laws of any state or to ensure that the Group Members will not be treated as associations taxable as corporations or otherwise taxed as entities for federal income tax purposes;

(d) a change that the General Partner determines, (i) does not adversely affect the Limited Partners (including any particular class of Partnership Interests as compared to other classes of Partnership Interests) in any material respect, (ii) to be necessary or appropriate to (A) satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute (including the Delaware Act) or (B) facilitate the trading of the Units (including the division of any class or classes of Outstanding Units into different classes to facilitate uniformity of tax consequences within such classes of Units) or comply with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are or will be listed or admitted to trading, (iii) to be necessary or advisable in connection with action taken by the General Partner pursuant to Section 5.8 or (iv) is required to effect the intent expressed in the Registration Statement or the intent of the provisions of this Agreement or is otherwise contemplated by this Agreement;

(e) a change in the fiscal year or taxable year of the Partnership and any other changes that the General Partner determines to be necessary or appropriate as a result of a change in the fiscal year or taxable year of the Partnership including, if the General Partner shall so determine, a change in the definition of “Quarter” and the dates on which distributions are to be made by the Partnership;

(f) an amendment that is necessary, in the Opinion of Counsel, to prevent the Partnership, or the General Partner or its directors, officers, trustees or agents from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, regardless of whether such are substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor;

(g) an amendment that the General Partner determines to be necessary or appropriate in connection with the authorization or issuance of any class or series of Partnership Securities or any options, rights, warrants or appreciation rights relating to Partnership Securities pursuant to Section 5.6;

(h) any amendment expressly permitted in this Agreement to be made by the General Partner acting alone;

(i) an amendment effected, necessitated or contemplated by a Merger Agreement or Plan of Conversion approved in accordance with Section 14.3;

(j) an amendment that the General Partner determines to be necessary or appropriate to reflect and account for the formation by the Partnership of, or investment by the Partnership in, any corporation, partnership, joint venture, limited liability company or other entity, in connection with the conduct by the Partnership of activities permitted by Section 2.4;

(k) a merger or conveyance or conversion pursuant to Section 14.3(d); or

(l) any other amendments substantially similar to the foregoing.

Section 13.2 Amendment Procedures.

Except as provided in Sections 13.1 and Section 13.3, all amendments to this Agreement shall be made in accordance with this Section 13.2: Amendments to this Agreement may be proposed only by the General Partner; provided, however, that the General Partner shall have no duty or obligation to propose any amendment to this Agreement and may decline to do so in its sole discretion and, in declining to propose an amendment, to the fullest extent permitted by law shall not be required to act pursuant to any other standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity. A proposed amendment shall be effective upon its approval by the General Partner and the holders of a Unit Majority, unless a greater or different percentage is required under this Agreement or by Delaware law. Each proposed amendment that requires the approval of the holders of a specified percentage of Outstanding Units shall be set forth in a writing that contains the text of the proposed amendment. If such an amendment is proposed, the General Partner shall seek the written approval of the requisite percentage of Outstanding Units or call a meeting of the Unitholders to consider and vote on such proposed amendment. The General Partner shall notify all Record Holders upon final adoption of any such proposed amendments.

Section 13.3 Amendment Requirements.

(a) Notwithstanding the provisions of Sections 13.1 and 13.2, no provision of this Agreement that establishes a percentage of Outstanding Units (including Units deemed owned by the General Partner and its Affiliates) required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of reducing such voting percentage unless such amendment is approved by the written consent or the affirmative vote of holders of Outstanding Units whose aggregate Outstanding Units constitute not less than the voting requirement sought to be reduced.

(b) Notwithstanding the provisions of Sections 13.1 and 13.2, no amendment to this Agreement may (i) enlarge the obligations of any Limited Partner without its consent, unless such shall be deemed to have occurred as a result of an amendment approved pursuant to Section 13.3(c) or (ii) enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable to, the General Partner or any of its Affiliates without its consent, which consent may be given or withheld in their respective sole discretion.

(c) Any amendment that would have a material adverse effect on the rights or preferences of any class of Partnership Interests in relation to other classes of Partnership Interests must be approved by the holders of not less than a majority of the Outstanding Partnership Interests of the class so affected; provided, however, that this Section 13.3(c) shall not prohibit any amendment permitted by (i) Section 14.3 or (ii) the General Partner’s power to adopt amendments to this Agreement without the approval of Limited Partners as contemplated in Section 13.1.

(d) Notwithstanding any other provision of this Agreement, except for amendments pursuant to Section 13.1 and except as otherwise provided by Section 14.3(b), no amendments shall become effective without the approval of the holders of at least 90% of the Outstanding Units voting as a single class unless the Partnership obtains an Opinion of Counsel to the effect that such amendment will not affect the limited liability of any Limited Partner under applicable law.

(e) Except as provided in Section 13.1, this Section 13.3 shall only be amended with the approval of the holders of at least 90% of the Outstanding Units.

Section 13.4 Special Meetings.

All acts of Limited Partners to be taken pursuant to this Agreement shall be taken in the manner provided in this Article XIII. Special meetings of the Limited Partners may be called by the General Partner or by Limited Partners owning 20% or more of the Outstanding Units of the class or classes for which a meeting is proposed. Limited Partners shall call a special meeting by delivering to the General Partner one or more requests in writing stating that the signing Limited Partners wish to call a special meeting and indicating the general or specific purposes for which the special meeting is to be called. Within 60 days after receipt of such a call from Limited Partners or within such greater time as may be reasonably necessary for the Partnership to comply with any statutes, rules, regulations, listing agreements or similar requirements governing the holding of a meeting or the solicitation of proxies for use at such a meeting, the General Partner shall send a notice of the meeting to the Limited Partners either directly or indirectly through the Transfer Agent. A meeting shall be held at a time and place determined by the General Partner on a date not less than 10 days nor more than 60 days after the mailing of notice of the meeting. Limited Partners shall not vote on matters that would cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners’ limited liability under the Delaware Act or the law of any other state in which the Partnership is qualified to do business.

Section 13.5 Notice of a Meeting.

Notice of a meeting called pursuant to Section 13.4 shall be given to the Record Holders of the class or classes of Units for which a meeting is proposed in writing by mail or other means of written communication in accordance with Section 16.1. The notice shall be deemed to have been given at the time when deposited in the mail or sent by other means of written communication.

Section 13.6 Record Date.

For purposes of determining the Limited Partners entitled to notice of or to vote at a meeting of the Limited Partners or to give approvals without a meeting as provided in Section 13.11 the General Partner may set a Record Date, which shall not be less than 10 nor more than 60 days before (a) the date of the meeting (unless such requirement conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are listed or admitted to trading, in which case the rule, regulation, guideline or requirement of such National Securities Exchange shall govern) or (b) in the event that approvals are sought without a meeting, the date by which Limited Partners are requested in writing by the General Partner to

give such approvals. If the General Partner does not set a Record Date, then (a) the Record Date for determining the Limited Partners entitled to notice of or to vote at a meeting of the Limited Partners shall be the close of business on the day next preceding the day on which notice is given and (b) the Record Date for determining the Limited Partners entitled to give approvals without a meeting shall be the date the first written approval is deposited with the Partnership in care of the General Partner in accordance with Section 13.11.

Section 13.7 Adjournment.

When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting and a new Record Date need not be fixed, if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than 45 days. At the adjourned meeting, the Partnership may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 45 days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with this Article XIII.

Section 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.

The transactions of any meeting of Limited Partners, however called and noticed, and whenever held, shall be as valid as if it had occurred at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy. Attendance of a Limited Partner at a meeting shall constitute a waiver of notice of the meeting, except when the Limited Partner attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened; and except that attendance at a meeting is not a waiver of any right to disapprove the consideration of matters required to be included in the notice of the meeting, but not so included, if the disapproval is expressly made at the meeting.

Section 13.9 Quorum and Voting.

Unless otherwise set forth in this Agreement, whenever an action is to be approved or consented to by the holders of Outstanding Units or outstanding Common Units, all Outstanding Units or Outstanding Common Units, as the case may be, held or deemed to be held by the General Partner and its Affiliates shall be entitled to vote on the approval or consent to such action. The holders of a majority of the Outstanding Units of the class or classes for which a meeting has been called represented in person or by proxy shall constitute a quorum at a meeting of Limited Partners of such class or classes unless any such action by the Limited Partners requires approval by holders of a greater percentage of such Units, in which case the quorum shall be such greater percentage. At any meeting of the Limited Partners duly called and held in accordance with this Agreement at which a quorum is present, the act of Limited Partners holding Outstanding Units that in the aggregate represent a majority of the Outstanding Units entitled to vote and that are present in person or by proxy at such meeting shall be deemed to constitute the act of all Limited Partners, unless a greater or different percentage is required with respect to such action under the provisions of this Agreement, in which case the act of the Limited Partners holding Outstanding Units that in the aggregate represent at least such greater or different percentage shall be required. The Limited Partners present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment,

notwithstanding the withdrawal of enough Limited Partners to leave less than a quorum, if any action taken (other than adjournment) is approved by the required percentage of Outstanding Units specified in this Agreement (including Outstanding Units deemed owned by the General Partner). In the absence of a quorum any meeting of Limited Partners may be adjourned from time to time by the affirmative vote of holders of at least a majority of the Outstanding Units entitled to vote and that are present at such meeting (including Outstanding Units deemed owned by the General Partner) represented either in person or by proxy, but no other business may be transacted, except as provided in Section 13.7.

Section 13.10 Conduct of a Meeting.

The General Partner shall have full power and authority concerning the manner of conducting any meeting of the Limited Partners or solicitation of approvals in writing, including the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of Section 13.4, the conduct of voting, the validity and effect of any proxies and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The General Partner shall designate a Person to serve as chairman of any meeting and shall further designate a Person to take the minutes of any meeting. All minutes shall be kept with the records of the Partnership maintained by the General Partner. The General Partner may make such other regulations consistent with applicable law and this Agreement as it may deem advisable concerning the conduct of any meeting of the Limited Partners or solicitation of approvals in writing, including regulations in regard to the appointment of proxies, the appointment and duties of inspectors of votes and approvals, the submission and examination of proxies and other evidence of the right to vote, and the revocation of approvals in writing.

Section 13.11 Action Without a Meeting.

If authorized by the General Partner, any action that may be taken at a meeting of the Limited Partners may be taken without a meeting if an approval in writing setting forth the action so taken is signed by Limited Partners owning not less than the minimum percentage of the Outstanding Units (including Units deemed owned by the General Partner) that would be necessary to authorize or take such action at a meeting at which all the Limited Partners were present and voted (unless such provision conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are listed or admitted to trading, in which case the rule, regulation, guideline or requirement of such National Securities Exchange shall govern). Prompt notice of the taking of action without a meeting shall be given to the Limited Partners who have not approved in writing. The General Partner may specify that any written ballot submitted to Limited Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within the time period, which shall be not less than 20 days, specified by the General Partner. If a ballot returned to the Partnership does not vote all of the Units held by the Limited Partners, the Partnership shall be deemed to have failed to receive a ballot for the Units that were not voted. If approval of the taking of any action by the Limited Partners is solicited by any Person other than by or on behalf of the General Partner, the written approvals shall have no force and effect unless and until (a) they are deposited with the Partnership in care of the General Partner, (b) approvals sufficient to take the action proposed are dated as of a date not more than 90 days prior to the date sufficient approvals are deposited with the Partnership and (c) an Opinion of Counsel is delivered to the General Partner to the effect

that the exercise of such right and the action proposed to be taken with respect to any particular matter (i) will not cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners’ limited liability and (ii) is otherwise permissible under the state statutes then governing the rights, duties and liabilities of the Partnership and the Partners.

Section 13.12 Right to Vote and Related Matters.

(a) Only those Record Holders of the Units on the Record Date set pursuant to Section 13.6 (and also subject to the limitations contained in the definition of “Outstanding”) shall be entitled to notice of, and to vote at, a meeting of Limited Partners or to act with respect to matters as to which the holders of the Outstanding Units have the right to vote or to act. All references in this Agreement to votes of, or other acts that may be taken by, the Outstanding Units shall be deemed to be references to the votes or acts of the Record Holders of such Outstanding Units.

(b) With respect to Units that are held for a Person’s account by another Person (such as a broker, dealer, bank, trust company or clearing corporation, or an agent of any of the foregoing), in whose name such Units are registered, such other Person shall, in exercising the voting rights in respect of such Units on any matter, and unless the arrangement between such Persons provides otherwise, vote such Units in favor of, and at the direction of, the Person who is the beneficial owner, and the Partnership shall be entitled to assume it is so acting without further inquiry. The provisions of this Section 13.12(b) (as well as all other provisions of this Agreement) are subject to the provisions of Section 4.3.

ARTICLE XIV
MERGER OR CONVERSION

Section 14.1 Authority.

The Partnership may merge or consolidate with or into one or more corporations, limited liability companies, statutory trusts or associations, real estate investment trusts, common law trusts or unincorporated businesses, including a partnership (whether general or limited (including a limited liability partnership)), or convert into any such entity, whether such entity is formed under the laws of the State of Delaware or any other state of the United States of America, pursuant to a written agreement of merger or consolidation (“Merger Agreement”), or a written plan of conversion (“Plan of Conversion”), as the case may be, in accordance with this Article XIV.

Section 14.2 Procedure for Merger, Consolidation or Conversion.

(a) Merger, consolidation or conversion of the Partnership pursuant to this Article XIV requires the prior consent of the General Partner; provided, however, that, to the fullest extent permitted by law, the General Partner shall have no duty or obligation to consent to any merger, consolidation or conversion of the Partnership and may decline to do so in its sole discretion and, in declining to consent to a merger, consolidation or conversion, shall not be required to act pursuant to any other standard imposed by this Agreement, any Group Member

Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity.

(b) If the General Partner shall determine to consent to the merger or consolidation, the General Partner shall approve the Merger Agreement, which shall set forth:

(i) the names and jurisdictions of formation or organization of each of the business entities proposing to merge or consolidate;

(ii) the name and jurisdiction of formation or organization of the business entity that is to survive the proposed merger or consolidation (the “Surviving Business Entity”);

(iii) the terms and conditions of the proposed merger or consolidation;

(iv) the manner and basis of exchanging or converting the equity securities of each constituent business entity for, or into, cash, property or interests, rights, securities or obligations of the Surviving Business Entity; and (A) if any general or limited partner interests, securities or rights of any constituent business entity are not to be exchanged or converted solely for, or into, cash, property or interests, rights, securities or obligations of the Surviving Business Entity, the cash, property or general or limited partner interests, rights, securities or obligations of any general or limited partnership, corporation, trust, limited liability company, unincorporated business or other entity (other than the Surviving Business Entity) that the holders of such interests, securities or rights are to receive in exchange for, or upon conversion of their interests, securities or rights and (B) in the case of securities represented by certificates, upon the surrender of such certificates, which cash, property or interests, rights, securities or obligations of the Surviving Business Entity or any general or limited partnership, corporation, trust, limited liability company, unincorporated business or other entity (other than the Surviving Business Entity), or evidences thereof, are to be delivered;

(v) a statement of any changes in the constituent documents or the adoption of new constituent documents (the articles or certificate of incorporation, articles of trust, declaration of trust, certificate or agreement of limited partnership or other similar charter or governing document) of the Surviving Business Entity to be effected by such merger or consolidation;

(vi) the effective time of the merger, which may be the date of the filing of the certificate of merger pursuant to Section 14.4 or a later date specified in or determinable in accordance with the Merger Agreement (provided, that if the effective time of the merger is to be later than the date of the filing of such certificate of merger, the effective time shall be fixed at a date or time certain at or prior to the time of the filing of such certificate of merger and stated therein); and

(vii) such other provisions with respect to the proposed merger or consolidation that the General Partner determines to be necessary or appropriate.

(c) If the General Partner shall determine to consent to the conversion, the General Partner may approve and adopt a Plan of Conversion containing such terms and conditions that the General Partner determines to be necessary or appropriate.

Section 14.3 Approval by Limited Partners.

(a) Except as provided in Sections 14.3(d) and 14.3(e), the General Partner, upon its approval of the Merger Agreement or Plan of Conversion, as the case may be, shall direct that the Merger Agreement or the Plan of Conversion, as applicable, be submitted to a vote of Limited Partners, whether at a special meeting or by written consent, in either case in accordance with the requirements of Article XIII. A copy or a summary of the Merger Agreement or the Plan of Conversion, as applicable, shall be included in or enclosed with the notice of a special meeting or the written consent.

(b) Except as provided in Sections 14.3(d) and 14.3(e), the Merger Agreement or the Plan of Conversion, as applicable, shall be approved upon receiving the affirmative vote or consent of the holders of a Unit Majority.

(c) Except as provided in Sections 14.3(d) and 14.3(e), after such approval by vote or consent of the Limited Partners, and at any time prior to the filing of the certificate of merger or certificate of conversion pursuant to Section 14.4, the merger, consolidation or conversion may be abandoned pursuant to provisions therefor, if any, set forth in the Merger Agreement or the Plan of Conversion, as applicable.

(d) Notwithstanding anything else contained in this Article XIV or in this Agreement, the General Partner is permitted, without Limited Partner approval, to convert the Partnership or any Group Member into a new limited liability entity, to merge the Partnership or any Group Member into, or convey all of the Partnership’s assets to, another limited liability entity that shall be newly formed and shall have no assets, liabilities or operations at the time of such conversion, merger or conveyance other than those it receives from the Partnership or other Group Member if (i) the General Partner has received an Opinion of Counsel that the conversion, merger or conveyance, as the case may be, would not result in the loss of the limited liability of any Limited Partner or cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not previously treated as such), (ii) the sole purpose of such conversion, merger or conveyance is to effect a mere change in the legal form of the Partnership into another limited liability entity and (iii) the governing instruments of the new entity provide the Limited Partners and the General Partner with the same rights and obligations as are herein contained.

(e) Additionally, notwithstanding anything else contained in this Article XIV or in this Agreement, the General Partner is permitted, without Limited Partner approval, to merge or consolidate the Partnership with or into another entity if (i) the General Partner has received an Opinion of Counsel that the merger or consolidation, as the case may be, would not result in the loss of the limited liability of any Limited Partner or cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not previously treated as such), (ii) the merger or consolidation would not result in an amendment to the Partnership Agreement, other than any amendments that could be

adopted pursuant to Section 13.1, (iii) the Partnership is the Surviving Business Entity in such merger or consolidation, (iv) each Unit outstanding immediately prior to the effective date of the merger or consolidation is to be an identical Unit of the Partnership after the effective date of the merger or consolidation, and (v) the number of Partnership Securities or options, rights, warrants or appreciation rights relating to Partnership Securities to be issued by the Partnership in such merger or consolidation do not exceed 20% of the Partnership Securities Outstanding immediately prior to the effective date of such merger or consolidation.

Section 14.4 Certificate of Merger or Conversion.

Upon the required approval by the General Partner and the Unitholders of a Merger Agreement or a Plan of Conversion, as the case may be, a certificate of merger or certificate of conversion, as applicable, shall be executed and filed with the Secretary of State of the State of Delaware in conformity with the requirements of the Delaware Act.

Section 14.5 Amendment of Partnership Agreement.

Pursuant to Section 17-211(g) of the Delaware Act, an agreement of merger or consolidation approved in accordance with this Article XIV may (a) effect any amendment to this Agreement or (b) effect the adoption of a new partnership agreement for the Partnership if it is the Surviving Business Entity. Any such amendment or adoption made pursuant to this Section 14.5 shall be effective at the effective time or date of the merger or consolidation.

Section 14.6 Effect of Merger or Conversion.

(a) At the effective time of the certificate of merger:

(i) all of the rights, privileges and powers of each of the business entities that has merged or consolidated, and all property, real, personal and mixed, and all debts due to any of those business entities and all other things and causes of action belonging to each of those business entities, shall be vested in the Surviving Business Entity and after the merger or consolidation shall be the property of the Surviving Business Entity to the extent they were of each constituent business entity;

(ii) the title to any real property vested by deed or otherwise in any of those constituent business entities shall not revert and is not in any way impaired because of the merger or consolidation;

(iii) all rights of creditors and all liens on or security interests in property of any of those constituent business entities shall be preserved unimpaired; and

(iv) all debts, liabilities and duties of those constituent business entities shall attach to the Surviving Business Entity and may be enforced against it to the same extent as if the debts, liabilities and duties had been incurred or contracted by it.

(b) At the effective time of the certificate of conversion:

(i) the Partnership shall continue to exist, without interruption, but in the organizational form of the converted entity rather than in its prior organizational form;

(ii) all rights, title, and interests to all real estate and other property owned by the Partnership shall continue to be owned by the converted entity in its new organizational form without reversion or impairment, without further act or deed, and without any transfer or assignment having occurred, but subject to any existing liens or other encumbrances thereon;

(iii) all liabilities and obligations of the Partnership shall continue to be liabilities and obligations of the converted entity in its new organizational form without impairment or diminution by reason of the conversion;

(iv) all rights of creditors or other parties with respect to or against the prior interest holders or other owners of the Partnership in their capacities as such in existence as of the effective time of the conversion will continue in existence as to those liabilities and obligations and may be pursued by such creditors and obligees as if the conversion did not occur;

(v) a proceeding pending by or against the Partnership or by or against any of Partners in their capacities as such may be continued by or against the converted entity in its new organizational form and by or against the prior partners without any need for substitution of parties; and

(vi) the Partnership Securities that are to be converted into partnership interests, shares, evidences of ownership, or other securities in the converted entity as provided in the Plan of Conversion or certificate of conversion shall be so converted, and Partners shall be entitled only to the rights provided in the Plan of Conversion or certificate of conversion.

(c) A merger, consolidation or conversion effected pursuant to this Article XIV shall not be deemed to result in a transfer or assignment of assets or liabilities from one entity to another.

ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS

Section 15.1 Right to Acquire Limited Partner Interests.

(a) Notwithstanding any other provision of this Agreement, if at any time the General Partner and its Affiliates hold more than 80% of the total Limited Partner Interests of any class then Outstanding, the General Partner shall then have the right, which right it may assign and transfer in whole or in part to the Partnership or any Affiliate of the General Partner, exercisable in its sole discretion, to purchase all, but not less than all, of such Limited Partner Interests of such class then Outstanding held by Persons other than the General Partner and its Affiliates, at the greater of (x) the Current Market Price as of the date three days prior to the date that the

notice described in Section 15.1(b) is mailed and (y) the highest price paid by the General Partner or any of its Affiliates for any such Limited Partner Interest of such class purchased during the 90-day period preceding the date that the notice described in Section 15.1(b) is mailed.

(b) If the General Partner, any Affiliate of the General Partner or the Partnership elects to exercise the right to purchase Limited Partner Interests granted pursuant to Section 15.1(a), the General Partner shall deliver to the Transfer Agent notice of such election to purchase (the “Notice of Election to Purchase”) and shall cause the Transfer Agent to mail a copy of such Notice of Election to Purchase to the Record Holders of Limited Partner Interests of such class (as of a Record Date selected by the General Partner) at least 10, but not more than 60, days prior to the Purchase Date. Such Notice of Election to Purchase shall also be published for a period of at least three consecutive days in at least two daily newspapers of general circulation printed in the English language and published in the Borough of Manhattan, New York. The Notice of Election to Purchase shall specify the Purchase Date and the price (determined in accordance with Section 15.1(a)) at which Limited Partner Interests will be purchased and state that the General Partner, its Affiliate or the Partnership, as the case may be, elects to purchase such Limited Partner Interests, upon surrender of Certificates representing such Limited Partner Interests in exchange for payment, at such office or offices of the Transfer Agent as the Transfer Agent may specify, or as may be required by any National Securities Exchange on which such Limited Partner Interests are listed. Any such Notice of Election to Purchase mailed to a Record Holder of Limited Partner Interests at his address as reflected in the records of the Transfer Agent shall be conclusively presumed to have been given regardless of whether the owner receives such notice. On or prior to the Purchase Date, the General Partner, its Affiliate or the Partnership, as the case may be, shall deposit with the Transfer Agent cash in an amount sufficient to pay the aggregate purchase price of all of such Limited Partner Interests to be purchased in accordance with this Section 15.1. If the Notice of Election to Purchase shall have been duly given as aforesaid at least 10 days prior to the Purchase Date, and if on or prior to the Purchase Date the deposit described in the preceding sentence has been made for the benefit of the holders of Limited Partner Interests subject to purchase as provided herein, then from and after the Purchase Date, notwithstanding that any Certificate shall not have been surrendered for purchase, all rights of the holders of such Limited Partner Interests (including any rights pursuant to Articles IV, V, VI, and XII) shall thereupon cease, except the right to receive the purchase price (determined in accordance with Section 15.1(a)) for Limited Partner Interests therefor, without interest, upon surrender to the Transfer Agent of the Certificates representing such Limited Partner Interests, and such Limited Partner Interests shall thereupon be deemed to be transferred to the General Partner, such Affiliate or the Partnership, as the case may be, on the record books of the Transfer Agent and the Partnership, and the General Partner, such Affiliate or the Partnership, as the case may be, shall be deemed to be the owner of all such Limited Partner Interests from and after the Purchase Date and shall have all rights as the owner of such Limited Partner Interests (including all rights as owner of such Limited Partner Interests pursuant to Articles IV, V, VI and XII).

(c) At any time from and after the Purchase Date, a holder of an Outstanding Limited Partner Interest subject to purchase as provided in this Section 15.1 may surrender his Certificate evidencing such Limited Partner Interest to the Transfer Agent in exchange for payment of the amount described in Section 15.1(a), therefor, without interest thereon.

ARTICLE XVI
GENERAL PROVISIONS

Section 16.1 Addresses and Notices.

Any notice, demand, request, report or proxy materials required or permitted to be given or made to a Partner or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Partner or Assignee at the address described below. Any notice, payment or report to be given or made to a Partner or Assignee hereunder shall be deemed conclusively to have been given or made, and the obligation to give such notice or report or to make such payment shall be deemed conclusively to have been fully satisfied, upon sending of such notice, payment or report to the Record Holder of such Partnership Securities at his address as shown on the records of the Transfer Agent or as otherwise shown on the records of the Partnership, regardless of any claim of any Person who may have an interest in such Partnership Securities by reason of any assignment or otherwise. An affidavit or certificate of making of any notice, payment or report in accordance with the provisions of this Section 16.1 executed by the General Partner, the Transfer Agent or the mailing organization shall be prima facie evidence of the giving or making of such notice, payment or report. If any notice, payment or report addressed to a Record Holder at the address of such Record Holder appearing on the books and records of the Transfer Agent or the Partnership is returned by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver it, such notice, payment or report and any subsequent notices, payments and reports shall be deemed to have been duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Transfer Agent or the Partnership of a change in his address) if they are available for the Partner or Assignee at the principal office of the Partnership for a period of one year from the date of the giving or making of such notice, payment or report to the other Partners and Assignees. Any notice to the Partnership shall be deemed given if received by the General Partner at the principal office of the Partnership designated pursuant to Section 2.3. The General Partner may rely and shall be protected in relying on any notice or other document from a Partner, Assignee or other Person if believed by it to be genuine.

Section 16.2 Further Action.

The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

Section 16.3 Binding Effect.

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

Section 16.4 Integration.

This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.

Section 16.5 Creditors.

None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership.

Section 16.6 Waiver.

No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.

Section 16.7 Counterparts.

This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or, in the case of a Person acquiring a Unit, upon accepting the certificate evidencing such Unit or executing and delivering a Transfer Application, if a Transfer Application Notice has previously been given, as herein described, independently of the signature of any other party.

Section 16.8 Applicable Law; Forum, Venue and Jurisdiction.

(a) This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.

(b) Each of the Partners, each Assignee and each Person holding any beneficial interest in the Partnership (whether through a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing or otherwise) (i) irrevocably agrees that any claims, suits, actions or proceedings arising out of or relating in any way to this Agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of this Agreement or the duties, obligations or liabilities among Partners or Assignees or of Partners or Assignees to the Partnership, or the rights or powers of, or restrictions on, the Partners, Assignees or the Partnership (regardless of whether such claims, suits, actions or proceedings (A) sound in contract, tort, fraud or otherwise, (B) are based on common law, statutory, equitable, legal or other grounds, or (C) are derivative or direct claims)), shall be exclusively brought in the Court of Chancery of the State of Delaware, (ii) irrevocably submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware in connection with any such claim, suit, action or proceeding, (iii) agrees not to, and waives any right to, assert in any such claim, suit, action or proceeding that (A) it is not personally subject to the jurisdiction of the Court of Chancery of the State of Delaware or of any other court to which proceedings in the Court of Chancery of the State of Delaware may be appealed, (B) such claim, suit, action or proceeding is brought in an inconvenient forum, or (C) the venue of such claim, suit, action or proceeding is improper, (iv) expressly waives any requirement for the posting of a bond by a party bringing such claim, suit, action or proceeding, and (v) consents to process being served in any such claim, suit, action or proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at the address in effect for notices hereunder, and agrees that such

services shall constitute good and sufficient service of process and notice thereof; provided, nothing in clause (v) hereof shall affect or limit any right to serve process in any other manner permitted by law.

Section 16.9 Invalidity of Provisions.

If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

Section 16.10 Consent of Partners.

Each Partner hereby expressly consents and agrees that, whenever in this Agreement it is specified that an action may be taken upon the affirmative vote or consent of less than all of the Partners, such action may be so taken upon the concurrence of less than all of the Partners and each Partner shall be bound by the results of such action.

Section 16.11 Facsimile Signatures.

The use of facsimile signatures affixed in the name and on behalf of the transfer agent and registrar of the Partnership on certificates representing Common Units is expressly permitted by this Agreement.

Section 16.12 Third-Party Beneficiaries.

No party shall be a third-party beneficiary hereto except that any Indemnitee shall be entitled to assert rights and remedies hereunder as a third party beneficiary with respect to those provisions of this Agreement affording a right, benefit or privilege to such Indemnitee.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]

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


		GENERAL PARTNER:

		PIONEER NATURAL RESOURCES GP LLC

		By:		/s/ Richard P. Dealy

		Name:		Richard P. Dealy
		Title:		Executive Vice President and Chief
				Financial Officer

		ORGANIZATIONAL LIMITED PARTNER:

		PIONEER NATURAL RESOURCES USA, INC.

		By:		/s/ Richard P. Dealy

		Name:		Richard P. Dealy
		Title:		Executive Vice President and Chief
				Financial Officer

		LIMITED PARTNERS:

		All Limited Partners now and hereafter admitted as Limited Partners of the Partnership, pursuant to powers of attorney now and hereafter executed in favor of, and granted and delivered to the General Partner.

		PIONEER NATURAL RESOURCES USA, INC.

		By:		/s/ Richard P. Dealy

		Name:		Richard P. Dealy
		Title:		Executive Vice President and Chief
				Financial Officer

EXHIBIT A
to the First Amended and Restated
Agreement of Limited Partnership of
Pioneer Southwest Energy Partners L.P.

Certificate Evidencing Common Units
Representing Limited Partner Interests in
Pioneer Southwest Energy Partners L.P.



CU.		Common Units

In accordance with Section 4.1 of the First Amended and Restated Agreement of Limited Partnership of Pioneer Southwest Energy Partners L.P., as amended, supplemented or restated from time to time (the “Partnership Agreement”), Pioneer Southwest Energy Partners L.P., a Delaware limited partnership (the “Partnership”), hereby certifies that ___(the “Holder”) is the registered owner of ___Common Units representing limited partner interests in the Partnership (the “Common Units”) transferable on the books of the Partnership, in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed and, if required by the Partnership Agreement, accompanied by a properly executed application for transfer of the Common Units represented by this Certificate. The rights, preferences and limitations of the Common Units are set forth in, and this Certificate and the Common Units represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Partnership Agreement. Copies of the Partnership Agreement are on file at, and will be furnished without charge on delivery of written request to the Partnership at, the principal office of the Partnership located at 5205 N. O’Connor Blvd., Suite 200, Irving, Texas 75039. Capitalized terms used herein but not defined shall have the meanings given them in the Partnership Agreement.

The Holder, by accepting this Certificate, is deemed to have (i) requested admission as, and agreed to become, a Limited Partner and to have agreed to comply with and be bound by and to have executed the Partnership Agreement, (ii) represented and warranted that the Holder has all right, power and authority and, if an individual, the capacity necessary to enter into the Partnership Agreement and, if a Certification Notice has previously been given, is an Eligible Holder, (iii) granted the powers of attorney provided for in the Partnership Agreement and (iv) made the waivers and given the consents and approvals contained in the Partnership Agreement.

ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE TO BE TAXED AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED). PIONEER NATURAL RESOURCES GP LLC, THE GENERAL PARTNER OF PIONEER SOUTHWEST ENERGY PARTNERS L.P., MAY IMPOSE ADDITIONAL RESTRICTIONS ON THE TRANSFER OF THIS SECURITY IF IT RECEIVES AN OPINION OF COUNSEL THAT SUCH RESTRICTIONS ARE NECESSARY TO AVOID A SIGNIFICANT RISK OF PIONEER SOUTHWEST ENERGY PARTNERS L.P. BECOMING TAXABLE AS A CORPORATION OR OTHERWISE BECOMING TAXABLE AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES. THE RESTRICTIONS SET FORTH ABOVE SHALL NOT PRECLUDE THE SETTLEMENT OF ANY TRANSACTIONS INVOLVING THIS SECURITY ENTERED INTO THROUGH THE FACILITIES OF ANY NATIONAL SECURITIES EXCHANGE ON WHICH THIS SECURITY IS LISTED OR ADMITTED TO TRADING.

This Certificate shall not be valid for any purpose unless it has been countersigned and registered by the Transfer Agent and Registrar.


Dated:		Pioneer Southwest Energy Partners L.P.,


Countersigned and Registered by:		By:	Pioneer Natural Resources GP LLC, its General Partner

		By:

as Transfer Agent and Registrar			Chief Executive Officer

By:		By:

	Authorized Signature		Executive Vice President and Chief Financial Officer

[Reverse of Certificate]

ABBREVIATIONS

The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as follows according to applicable laws or regulations:


TEN COM -	as tenants in common	UNIF GIFT MIN ACT
TEN ENT -	as tenants by the entireties		Custodian

		(Cust)		(Minor)
JT TEN -	as joint tenants with right of survivorship and not as tenants in common	under Uniform Gifts to Minors Act (State)

Additional abbreviations, though not in the above list, may also be used.

ASSIGNMENT OF COMMON UNITS
IN
PIONEER SOUTHWEST ENERGY PARTNERS L.P.

FOR VALUE RECEIVED, ___ hereby assigns, conveys, sells and transfers unto



(Please print or typewrite name and address of Assignee)		(Please insert Social Security or other identifying number of Assignee)

__________ Common Units representing limited partner interests evidenced by this Certificate, subject to the Partnership Agreement, and does hereby irrevocably constitute and appoint __________ as its attorney-in-fact with full power of substitution to transfer the same on the books of Pioneer Southwest Energy Partners L.P.

Date:	NOTE	The signature to any endorsement hereon must correspond with the name as written upon the face of this Certificate in every particular, without alteration, enlargement or change.


THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17A(d)-15				(Signature) (Signature)

No transfer of the Common Units evidenced hereby will be registered on the books of the Partnership unless the Certificate evidencing the Common Units to be transferred is surrendered for registration or transfer and, if a Transfer Notice has previously been given, a Transfer Application has been executed by a transferee on a separate application that the Partnership will furnish on request without charge. A transferor of the Common Units shall have no duty to the transferee with respect to execution of the Transfer Application in order for such transferee to obtain registration of the transfer of the Common Units.

ASSIGNEE CERTIFICATION

Type of Entity (check one):


	¨ Individual	¨ Partnership	¨ Corporation
	¨ Trust	¨ Other (specify)

Nationality (check one):

	¨ U.S. Citizen, Resident or Domestic Entity
	¨ Foreign Corporation	¨ Non-resident Alien

If the U.S. Citizen, Resident or Domestic Entity is checked, the following certification must be completed:

Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the “Code”), the Partnership must withhold tax with respect to certain transfers of property if a holder of an interest in the Partnership is a foreign person. To inform the Partnership that no withholding is required with respect to the undersigned Holder’s Interest in it, the undersigned hereby certifies the following (or, if applicable, certifies the following on behalf of the Holder).

Complete either A or B:

Individual Holder

	1.		I am not a non-resident alien for purposes of U.S. income taxation;

	2.		My U.S. taxpayer identification number (social security number) is

	3.		My home address is

Partnership, Corporation or Other Holder

	1.		is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Code and Treasury Regulations)

	2.		The Holder’s U.S. employer identification number is

	3.		The Holder’s office address and place of incorporation (if applicable) is

The Holder agrees to notify the Partnership within sixty (60) days of the date the Holder becomes a foreign person.

The Holder understands that this certificate may be disclosed to the Internal Revenue Service by the Partnership and that any false statement contained herein could be punishable by fine, imprisonment or both.

Under penalties of perjury, I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete and, if applicable, I further declare that I have authority to sign this document on behalf of:

Name of Holder

Signature and Date

Title (if applicable)

Note: If the Assignee is a broker, dealer, bank, trust company, clearing corporation, other nominee holder or an agent of any of the foregoing, and is holding for the account of any other person, this application should be completed by an officer thereof or, in the case of a broker or dealer, by a registered representative who is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or, in the case of any other nominee holder, a person performing a similar function. If the Assignee is a broker, dealer, bank, trust company, clearing corporation, other nominee owner or an agent of any of the foregoing, the above certification as to any person for whom the Assignee will hold the Common Units shall be made to the best of Assignee’s knowledge.

EX-10.2 7 d56641exv10w2.htm ADMINISTRATIVE SERVICES AGREEMENT exv10w2

EXHIBIT 10.2

EXECUTION VERSION

ADMINISTRATIVE SERVICES AGREEMENT

among

PIONEER SOUTHWEST ENERGY PARTNERS L.P.,

PIONEER NATURAL RESOURCES GP LLC,

PIONEER SOUTHWEST ENERGY PARTNERS USA LLC,

and

PIONEER NATURAL RESOURCES USA, INC.

dated effective as of

May 6, 2008

TABLE OF CONTENTS


ARTICLE I
DEFINITIONS

Section 1.1 Definitions			1
Section 1.2 Construction			4

ARTICLE II
RETENTION OF PIONEER USA; SCOPE OF SERVICES

Section 2.1 Retention of Pioneer USA			4
Section 2.2 Scope of Services			5
Section 2.3 Exclusion of Services			5
Section 2.4 Performance of Services by Affiliates and Third Parties			5
Section 2.5 Intellectual Property			5
Section 2.6 Appointment of Independent Accounting Firm and Independent Petroleum Engineer			5

ARTICLE III
BOOKS, RECORDS AND REPORTING

Section 3.1 Books and Records			5
Section 3.2 Audits			6
Section 3.3 Reports			6

ARTICLE IV
PAYMENT AMOUNT

Section 4.1 Administrative Fee			6
Section 4.2 Direct Costs			7
Section 4.3 COPAS Fee			7
Section 4.4 Payment Terms			8
Section 4.5 Disputed Charges			8
Section 4.6 Set Off			8
Section 4.7 Pioneer USA’s Employees			8
Section 4.8 Approval of Expenses			9

ARTICLE V
FORCE MAJEURE

Section 5.1 Force Majeure			9

ARTICLE VI
ASSIGNMENTS AND SUBCONTRACTS

Section 6.1 Assignments			9
Section 6.2 Other Requirements			10

ARTICLE VII
TERMINATION

Section 7.1 Termination.			10
Section 7.2 Effect of Termination			10


ARTICLE VIII
LIMITATION OF LIABILITY; INDEMNIFICATION

Section 8.1 Limitation of Liability			10
Section 8.2 Partnership’s Indemnity			11
Section 8.3 Limitation of Damages			11
Section 8.4 Affiliate; Third Parties			11

ARTICLE IX
GENERAL PROVISIONS

Section 9.1 Choice of Law			12
Section 9.2 Notice			12
Section 9.3 Entire Agreement			12
Section 9.4 Jurisdiction; Service of Process			12
Section 9.5 Further Action			12
Section 9.6 Binding Effect			13
Section 9.7 Creditors			13
Section 9.8 Effect of Waiver or Consent			13
Section 9.9 Counterparts			13
Section 9.10 Invalidity of Provisions			13
Section 9.11 Amendment or Restatement			13
Section 9.12 Withholding or Granting of Consent			13
Section 9.13 Directly or Indirectly			13
Section 9.14 Laws and Regulations			14
Section 9.15 Negation of Rights of Limited Partners, Assignees and Third Parties			14
Section 9.16 No Recourse Against Officers, Directors or Employees			14
Section 9.17 Arbitration			14

ADMINISTRATIVE SERVICES AGREEMENT

THIS ADMINISTRATIVE SERVICES AGREEMENT is entered into on, and effective as of May 6, 2008, among Pioneer Natural Resources GP LLC, a Delaware limited liability company (the “General Partner”), Pioneer Southwest Energy Partners L.P., a Delaware limited partnership (the “Partnership”), Pioneer Southwest Energy Partners USA LLC, a Texas limited liability company (the “Operating Company”), and Pioneer Natural Resources USA, Inc., a Delaware corporation (“Pioneer USA,” and collectively with the General Partner, the Partnership and the Operating Company, the “Parties” and each, a “Party”).

RECITALS

A. The Partnership is the owner, directly or indirectly, of interests in the Business (as hereinafter defined);

B. The Partnership Entities (as hereinafter defined) require certain services to operate the Business and to fulfill other general and administrative functions relating to the Business; and

C. The Partnership Entities desire that Pioneer USA provide such services, and Pioneer USA is willing to undertake such engagement, subject to the terms and conditions of this Agreement;

NOW, THEREFORE, the General Partner, the Partnership, the Operating Company and Pioneer USA agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1 Definitions. The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

“AAA” is defined in Section 9.17.

“Administrative Fee” is defined in Section 4.1.

“Agreement” means this Administrative Services Agreement, as it may be amended, modified or supplemented from time to time in accordance with the terms hereof.

“Bbl” means a standard barrel containing 42 United States gallons.

“BOE” means a barrel of oil equivalent and is a standard convention used to express oil and gas volumes on a comparable oil equivalent basis. Gas equivalents are determined under the

relative energy content method by using the ratio of 6.0 Mcf of gas to 1.0 Bbl of oil or natural gas liquid.

“Business” means the business of the Partnership Entities.

“Cause” has the meaning given such term in the Partnership Agreement.

“Common Unit” has the meaning given such term in the Partnership Agreement.

“Conflicts Committee” has the meaning given such term in the Partnership Agreement.

“COPAS” means the Council of Petroleum Accountants Societies.

“Damages” is defined in Section 8.1.

“Default Rate” means an interest rate (which shall in no event be higher than the rate permitted by applicable Legal Requirement) equal to the prime interest rate of the Partnership’s principal lender or if there is no such lender, the prime rate of Bank of America, N.A. Any interest to be charged in this Agreement shall be calculated based upon a 365 day calendar year.

“Direct Costs” is defined in Section 4.2.

“Dispute” is defined in Section 9.17.

“Effective Date” means May 1, 2008 at 7:00 a.m., Central Time.

“Force Majeure” means any cause beyond the reasonable control of a Party, including the following causes (unless they are in such Party’s reasonable control): acts of God, strikes, lockouts, acts of the public enemy, wars or warlike action (whether actual or impending), arrests and other restraints of government (civil or military), blockades, embargoes, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, sabotage, tornadoes, named tropical storms and hurricanes, floods, civil disturbances, terrorism, mechanical breakdown of machinery or equipment, explosions, confiscation or seizure by any government or other public authority and any Order.

“G&A Services” means the services set forth on Schedule I hereto.

“Governmental Authorization” means any approval, consent, license, permit, registration, variance, exemption, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement that is necessary for the construction, ownership and operation of the Business in accordance with applicable Legal Requirements.

“Governmental Body” means any:

(a) nation, state, county, city, town, village, district, or other jurisdiction of any nature;

(b) federal, state, local, municipal, foreign, or other government;

(c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal);

(d) multi-national organization or body; or

(e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

“Interest” is defined in Section 4.1(c).

“Mcf” means one thousand cubic feet and is a measure of natural gas volume.

“Parties” is defined in the introductory paragraph.

“Partnership” is defined in the introductory paragraph.

“Partnership Agreement” means the First Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of the date hereof, as such agreement is in effect on the date hereof, to which reference is hereby made for all purposes of this Agreement. An amendment or modification to the Partnership Agreement subsequent to the date hereof shall be given effect for the purposes of this Agreement only if it has received the approval of the Conflicts Committee that would be required, if any, pursuant to Section 9.11 hereof if such amendment or modification were an amendment or modification of this Agreement.

“Partnership Entities” means the General Partner, the Partnership, the Operating Company and all of their respective Subsidiaries.

“Person” means an individual, corporation, partnership, joint venture, trust, limited liability company, unincorporated organization or any other entity.

“Pioneer” means Pioneer Natural Resources Company, a Delaware corporation.

“Pioneer Indemnified Party” means Pioneer, each Affiliate of Pioneer (excluding any of the Partnership Entities) and each of Pioneer’s and each such Affiliate’s controlling persons, directors, officers, employees, agents and permitted assigns.

“Rules” is defined in Section 9.17.

“Services” is defined in Section 2.2.

“Subsidiary” has the meaning given such term in the Partnership Agreement.

“VPP” means each of the volumetric production payment agreements pursuant to which Pioneer USA has sold or will sell proved reserves and which require or will require the delivery by Pioneer USA of specified quantities of oil and gas.

Other terms defined herein have the meanings so given them.

Section 1.2 Construction. Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made a part hereof for all purposes; (d) the terms “include”, “includes”, “including” and words of like import shall be deemed to be followed by the words “without limitation”; (e) the terms “hereof,” “herein” and “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; and (f) references to money refer to legal currency of the United States of America. The table of contents and headings contained in this Agreement are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Agreement.

ARTICLE II
RETENTION OF PIONEER USA; SCOPE OF SERVICES

Section 2.1 Retention of Pioneer USA. The Partnership hereby engages Pioneer USA to perform the Services, as directed by the General Partner, and to provide all personnel and any facilities, goods and equipment not otherwise provided by the Partnership Entities necessary to perform the Services. Pioneer USA hereby accepts such engagement and agrees to perform the Services requested by the General Partner and to provide any personnel, facilities, goods and

equipment not otherwise provided by the Partnership Entities, and to provide all employees as may be reasonable and necessary to perform the Services.

Section 2.2 Scope of Services. The “Services” shall consist of such general and administrative services the General Partner determines may be reasonable and necessary to operate the Business, including any G&A Services. Pioneer USA hereby covenants and agrees that the Services will be performed in accordance with (i) applicable material Governmental Authorizations and Legal Requirements and (ii) industry standards.

Section 2.3 Exclusion of Services. The General Partner may temporarily or permanently exclude any particular service from the scope of the Services upon ninety (90) days’ prior notice to Pioneer USA. With respect to any such excluded Services, the Parties agree to negotiate in good faith to determine if a reduction in the Administrative Fee is appropriate under the circumstances. If, within 60 days after excluding a Service, the Parties have not agreed upon the amount of the reduction in the Administrative Fee, if any, the Parties may submit such dispute to arbitration in accordance with the provisions of Section 9.17.

Section 2.4 Performance of Services by Affiliates and Third Parties. The Parties hereby agree that in discharging its obligations hereunder, Pioneer USA may engage any of its Affiliates or any qualified third party to perform the Services (or any part of the Services) on its behalf and that the performance of the Services (or any part of the Services) by any such Affiliate or third party shall be treated as if Pioneer USA performed such Services itself. Notwithstanding the foregoing, nothing contained herein shall relieve Pioneer USA of its obligations hereunder.

Section 2.5 Intellectual Property. The Partnership Entities hereby grant to Pioneer USA and its Affiliates an irrevocable, royalty-free, non-exclusive and non-transferable right and license to use, during the term of this Agreement, any intellectual property provided by the Partnership Entities to Pioneer USA or its Affiliates, but only to the extent such use is necessary for the performance of the Services. Pioneer USA agrees that it and its Affiliates will utilize such intellectual property solely in connection with the performance of the Services.

Section 2.6 Appointment of Independent Accounting Firm and Independent Petroleum Engineer. Notwithstanding anything to the contrary in this Agreement, the Parties hereby acknowledge and agree that the General Partner shall have the exclusive authority to appoint an independent registered public accounting firm to audit the financial statements of the Partnership and an independent petroleum engineer to provide reports to the Partnership relating to estimates of proved reserves for Securities and Exchange Commission and other reporting purposes. Such independent registered public accounting firm or independent petroleum engineer may also be the independent registered public accounting firm or independent petroleum engineer retained by Pioneer to perform the same or other services for Pioneer.

ARTICLE III
BOOKS, RECORDS AND REPORTING

Section 3.1 Books and Records. Pioneer USA shall maintain accurate books and records regarding the performance of the Services and its calculation of the Administrative Fee

and any Direct Costs, and shall maintain such books and records for the period required by applicable accounting practices or Legal Requirement.

Section 3.2 Audits. The Partnership shall have the right, upon reasonable notice, and at all reasonable times during usual business hours, to audit, examine and make copies of the books and records referred to in Section 3.1. Such right may be exercised through any agent or employee of the Partnership Entities designated in writing by it or by an independent public accountant, engineer, attorney or other agent so designated. The Partnership shall bear all costs and expenses incurred in any inspection, examination or audit. Pioneer USA shall review and respond in a timely manner to any claims or inquiries made by the Partnership regarding matters revealed by any such inspection, examination or audit.

Section 3.3 Reports. Pioneer USA shall prepare and deliver to the Partnership any reports provided for in this Agreement and such other reports as the Partnership may reasonably request from time to time regarding the performance of the Services.

ARTICLE IV
PAYMENT AMOUNT

Section 4.1 Administrative Fee.

(a)

The Partnership shall on a quarterly basis reimburse Pioneer USA and its Affiliates for their costs in providing the Services (the “Administrative Fee”), pursuant to any methodology determined in accordance with this Section 4.1. Initially and until changed as provided in this Section 4.1, the Administrative Fee will be based on a methodology of determining the Partnership Entities’ share, on a per BOE basis, of certain of the general and administrative costs incurred by Pioneer USA and its Affiliates (excluding the Partnership Entities). Under this initial methodology, the per BOE cost for Services during any period will be determined by dividing (i) the aggregate general and administrative costs, determined in accordance with U.S. generally accepted accounting principles, of Pioneer USA and its Affiliates (excluding the Partnership Entities) for their onshore and offshore operations in the United States during such period, excluding such costs directly attributable to Pioneer USA’s and its Affiliates’ Alaska operations, by (ii) the sum of (x) the United States production during such period of Pioneer USA and its Affiliates (including the production of the Partnership Entities) for their onshore and offshore operations in the United States during such period, excluding any production attributable to Pioneer USA’s and its Affiliates’ Alaska operations, plus (y) the volumes delivered under all VPPs during such period. The Administrative Fee will then be determined by multiplying the per BOE costs by the total production (including volumes, if any, delivered by the Partnership Entities pursuant to volumetric production payment agreements) of the Partnership Entities during such period. The Administrative Fee may be based on amounts estimated by Pioneer USA if actual amounts are not available as determined by Pioneer USA. The

			Administrative Fee for the quarter containing the Effective Date shall equal the Administrative Fee that would have been payable for the full quarter had the Partnership’s initial public offering of common units representing limited partner interests been consummated on the first day of such quarter multiplied by a fraction the numerator of which is equal to the number of days from the Effective Date until the end of such quarter and the denominator of which is equal to the number of days in such quarter.

	(b)		From time to time, Pioneer USA may propose changes to the methodology of calculating the Administrative Fee. Any change in the methodology of calculation will take effect when the General Partner, on behalf of the Partnership Entities, consents to such change. The consent of the General Partner will not be unreasonably withheld, delayed or conditioned, so long as the methodology proposed reasonably reimburses Pioneer USA and its Affiliates for their costs in providing the Services.

	(c)		On an annual basis, Pioneer USA will review the Administrative Fee for the previous 12-month period. The first review will be with respect to the 12-month period ending December 31, 2008. The purpose of the review of the previous 12-month period shall be to compare the actual general and administrative cost and production amounts to any estimated general and administrative cost and production amounts used pursuant to Section 4.1(a) in calculating the Administrative Fee for the previous 12-month period in order to determine if the Partnership was overcharged or undercharged. Any such overcharged or undercharged amounts will bear interest at the Default Rate (the “Interest”) beginning from and including the date the Administrative Fee was originally paid for such quarter in which the Partnership was overcharged or undercharged and ending on and excluding the date the Administrative Fee reflecting such overcharged or undercharged amounts and the Interest (as provided in the next sentence) is paid by the Partnership. Any overcharged or undercharged amounts as well as the Interest will be reflected as a decrease or increase, as the case may be, to the Administrative Fee for the then current fiscal quarter.

Section 4.2 Direct Costs. The Partnership shall be responsible for paying all third party expenses that the Partnership incurs in connection with services provided by third parties to the Partnership (“Direct Costs”), and the Partnership shall reimburse Pioneer USA and its Affiliates with respect to any Direct Costs paid by any of them.

Section 4.3 COPAS Fee. Pioneer USA shall be entitled to retain any COPAS overhead charges associated with drilling and operating wells billed in accordance with operating agreements to the extent that it is the operator of such wells. The Partnership Entities will pay their proportionate share of all expenses that are directly chargeable to wells in which they own an interest pursuant to the terms of the applicable operating agreements.

Section 4.4 Payment Terms.

	(a)		Pioneer USA shall invoice the Partnership within twenty-five (25) days after the close of each quarter for the actual or estimated amount of the Administrative Fee, plus or minus any adjustments necessary to correct any prior estimated billings to actual amounts due. Subject to Section 4.5, all invoices shall be due and payable in immediately available funds within fifteen (15) days after receipt of each invoice. Upon the request of the Partnership, Pioneer USA shall furnish a reasonable detail of the calculation of the Administrative Fee during any quarter. Pioneer USA has the right to charge the Partnership interest on all past due invoices at the Default Rate.

	(b)		The Partnership shall reimburse Pioneer USA or its Affiliates, within five (5) days after receipt of an invoice and related support, for Direct Costs incurred by Pioneer USA and its Affiliates. Pioneer USA has the right to charge the Partnership interest on all past due invoices at the Default Rate.

Section 4.5 Disputed Charges. THE PARTNERSHIP MAY, WITHIN 120 DAYS AFTER RECEIPT OF A CHARGE FROM PIONEER USA, TAKE WRITTEN EXCEPTION TO SUCH CHARGE, ON THE GROUND THAT THE CHARGE WAS NOT A CORRECT CALCULATION OF THE ADMINISTRATIVE FEE AND/OR A REASONABLE COST INCURRED BY PIONEER USA OR ITS AFFILIATES IN CONNECTION WITH THE SERVICES. THE PARTNERSHIP SHALL NEVERTHELESS PAY PIONEER USA IN FULL WHEN DUE THE FULL ADMINISTRATIVE FEE AND ANY DIRECT COSTS CHARGED TO PIONEER USA. SUCH PAYMENT SHALL NOT BE DEEMED A WAIVER OF THE RIGHT OF THE PARTNERSHIP TO RECOUP ANY CONTESTED PORTION OF ANY AMOUNT SO PAID. HOWEVER, IF THE AMOUNT AS TO WHICH SUCH WRITTEN EXCEPTION IS TAKEN, OR ANY PART THEREOF, IS ULTIMATELY DETERMINED PURSUANT TO THE TERMS OF THIS AGREEMENT NOT TO BE A CORRECT CALCULATION OF THE ADMINISTRATIVE FEE AND/OR A REASONABLE COST INCURRED BY PIONEER USA OR ITS AFFILIATES IN CONNECTION WITH ITS PROVIDING THE SERVICES HEREUNDER, SUCH AMOUNT OR PORTION THEREOF (AS THE CASE MAY BE) SHALL BE REFUNDED BY PIONEER USA TO THE PARTNERSHIP TOGETHER WITH INTEREST THEREON AT THE DEFAULT RATE DURING THE PERIOD FROM THE DATE OF PAYMENT BY THE PARTNERSHIP TO THE DATE OF REFUND BY PIONEER USA.

Section 4.6 Set Off. In the event that Pioneer USA owes the Partnership a sum certain in an uncontested amount under any other agreement, then any such amounts may be aggregated and the Partnership and Pioneer USA may discharge their obligations by netting those amounts against any amounts owed by the Partnership to Pioneer USA under this Agreement. If the Partnership or Pioneer USA owes the other party a greater aggregate amount, that Party may pay to the other Party the difference between the amounts owed.

Section 4.7 Pioneer USA’s Employees. The Partnership shall not be obligated to pay to Pioneer USA’s or its Affiliates’ employees directly any compensation, salaries, wages,

bonuses, benefits, social security taxes, workers’ compensation insurance, retirement and insurance benefits, training and other such expenses; provided, however, that any Partnership Entity may, at its option, compensate such employees under one or more equity-based incentive compensation plans for the provision of Services hereunder and the Partnership will reimburse such Partnership Entity for the cost incurred for such compensation.

Section 4.8 Approval of Expenses. Pioneer USA acknowledges that the Audit Committee of the Board of Directors of the General Partner, or if there is no Audit Committee, the entire Board of Directors of the General Partner, may at any time review the Administrative Fee, any Direct Costs and the levels of Services and, as a result, may direct the Partnership to decrease the level of Services or to dispute a prior invoice pursuant to Section 4.5. In addition to the information Pioneer USA is obligated to provide pursuant to Section 4.4(a), Pioneer USA shall provide such other information as reasonably necessary to determine the veracity or appropriateness of any Administrative Fee or Direct Costs hereunder.

ARTICLE V
FORCE MAJEURE

Section 5.1 Force Majeure. A Party’s obligation under this Agreement shall be excused when and to the extent its performance of that obligation is prevented due to Force Majeure; provided, however, that a Party shall not be excused by Force Majeure from any obligation to pay money. The Party that is prevented from performing its obligation by reason of Force Majeure shall promptly notify the other Parties of that fact and shall exercise due diligence to end its inability to perform as promptly as practicable. Notwithstanding the foregoing, a Party is not required to settle any strike, lockout or other labor dispute in which it may be involved; provided, however, that, in the event of a strike, lockout or other labor dispute affecting Pioneer USA, Pioneer USA shall use reasonable efforts to continue to perform all obligations hereunder by utilizing its management personnel and that of its Affiliates.

ARTICLE VI
ASSIGNMENTS AND SUBCONTRACTS

Section 6.1 Assignments.

	(a)		Without the prior consent of Pioneer USA, none of the Partnership or the other members or the Partnership Entities may sell, assign, transfer or convey any of its rights, or delegate any of its obligations, under this Agreement to any Person.

	(b)		Without the prior consent of the Partnership, Pioneer USA may not sell, assign, transfer or convey any of its rights, or delegate any of its obligations, under this Agreement to any Person, other than the delegation of performance of Services to an Affiliate of Pioneer USA or a qualified third party as permitted by Section 2.4 and the sale, assignment, transfer or conveyance of its rights hereunder to any such Affiliate.

(c)

Notwithstanding the foregoing, a merger of a Party shall not be deemed to be an assignment or transfer of its rights or a delegation of its obligations under this Agreement. Furthermore, the transfer of all or substantially all of the assets of a Party shall not be deemed an assignment or transfer of its rights or a delegation of its obligations under this Agreement if the assignee assumes all of the obligations under this Agreement.

Section 6.2 Other Requirements. Subject to the other provisions hereof, all materials and workmanship used or provided in performing the Services shall be in accordance with applicable specifications and standards.

ARTICLE VII
TERMINATION

Section 7.1 Termination.

(a) Notwithstanding any other provision of this Agreement, if the General Partner is removed as general partner of the Partnership under circumstances where Cause does not exist and Common Units held by the General Partner and its Affiliates are not voted in favor of such removal, this Agreement may immediately thereupon be terminated by Pioneer USA. This Agreement may also be terminated immediately by any Party upon a Change of Control. Any termination under this Section 7.1(a) shall become effective immediately upon delivery of notice thereof.

(b) In addition to Section 7.1(a), either Party may terminate this Agreement at any time by giving notice of such termination to the other Party. Any termination under this Section 7.1(b) shall become effective ninety (90) days after delivery of such notice, or such later time (not to exceed the first anniversary of the delivery of such notice) as may be specified by the terminating Party.

Section 7.2 Effect of Termination. If this Agreement is terminated in accordance with Section 7.1(a) or 7.1(b), all rights and obligations under this Agreement shall cease except for (a) obligations that expressly survive termination of this Agreement, (b) liabilities and obligations that have accrued prior to such termination, including the obligation to pay any amounts that have become due and payable prior to such termination, (c) the obligation to pay any portion of the Administrative Fee, any Direct Costs or amounts payable under Section 4.7 that have accrued prior to such termination, even if such amounts have not become due and payable at that time, and (d) Articles VIII and IX of this Agreement, which shall survive any termination of this Agreement.

ARTICLE VIII
LIMITATION OF LIABILITY; INDEMNIFICATION

Section 8.1 Limitation of Liability. No Pioneer Indemnified Party shall have any liability to the Partnership Entities for any losses, damages, claims, demands, causes of action, judgments, settlements, fines, penalties, injury, liability, cost or expense, including court costs and reasonable attorney’s fees

and expert fees and expenses (“Damages”), arising out of or relating in any way to this Agreement, whether such Damages arise on account of the furnishing of Services hereunder, the failure to furnish Services hereunder, or otherwise, and whether or not such Damages were caused by the negligence or gross negligence of such Pioneer Indemnified Party, including such Pioneer Indemnified Party’s sole negligence or sole gross negligence and whether sounding in contract, tort, statute or otherwise; provided, however, that the foregoing limitation shall not apply to Damages caused by a Pioneer Indemnified Party if there has been a final decision pursuant to the terms of this Agreement determining that such Pioneer Indemnified Party acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was unlawful.

Section 8.2 Partnership’s Indemnity. The Partnership agrees to indemnify, defend and hold harmless each Pioneer Indemnified Party from and against any and all Damages arising out of or relating in any way to this Agreement, whether such Damages arise on account of the furnishing of Services hereunder, the failure to furnish Services hereunder, or otherwise, and whether or not such Damages were caused by the negligence or gross negligence of any Pioneer Indemnified Party, including the Pioneer Indemnified Party’s sole negligence or sole gross negligence; provided, however, that the foregoing indemnification shall not apply to Damages caused by a Pioneer Indemnified Party if there has been a final decision determining that such Pioneer Indemnified Party acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was unlawful.

Section 8.3 Limitation of Damages. Notwithstanding anything to the contrary contained herein or at law and in equity, in no event shall any Pioneer Indemnified Party be liable for exemplary, punitive, indirect, consequential, remote, speculative, treble, multiple or special damages (including damages for loss of business profits, business interruption or any other loss) arising from or relating in any way to any claim made under this Agreement or regarding the provision of or the failure to provide Services, even if any Pioneer Indemnified Party had been advised or was aware of the possibility of such damages; provided, however, that any exemplary, punitive, indirect, consequential, remote, speculative, treble, multiple or special damages recovered by a third party (including a Governmental Body, but excluding any Affiliate of any Party) against a party entitled to indemnity pursuant to this Article VIII shall be included in the Damages recoverable under such indemnity.

Section 8.4 Affiliate; Third Parties. If Pioneer USA uses the personnel of its Affiliates to provide Services, Pioneer USA, and not such personnel or such Affiliates, shall be responsible for the acts and omissions of such personnel to the extent provided in this Agreement; provided, however, that Pioneer USA will not be responsible unless it has been determined by a final decision pursuant to the terms of this Agreement that such personnel acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was unlawful.

ARTICLE IX
GENERAL PROVISIONS

Section 9.1 Choice of Law. This Agreement shall be subject to and governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state.

Section 9.2 Notice. All notices, requests or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be given by depositing same in the United States mail, addressed to the Person to be notified, postpaid, and registered or certified with return receipt requested or by delivering such notice in person or by telecopier or telegram to such Party. Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by telegram or telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours. All notices to be sent to a Party pursuant to this Agreement shall be sent to or made to the attention of such Party at the address set forth below or at such other address as such Party may stipulate to the other Parties in the manner provided in this Section 9.2.

5205 N. O’Connor Blvd., Suite 200
Irving, Texas 75039
Phone: (972) 444-9001
Fax: (972) 969-3587
Attention: General Counsel

Section 9.3 Entire Agreement. This Agreement constitutes the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein.

Section 9.4 Jurisdiction; Service of Process. Without limiting the Parties’ agreement to arbitrate in Section 9.17, any action or proceeding seeking a temporary or preliminary injunction to enforce any provision of, or based on any right arising out of, this Agreement must be brought against any of the Parties in the courts of the State of Texas, County of Dallas, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Texas (Dallas Division), and each of the Parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) for such limited purpose in any such action or proceeding and waives any objection to venue laid therein for such limited purpose. Process in any action or proceeding referred to in the preceding sentence may be served on any Party anywhere in the world.

Section 9.5 Further Action. In connection with this Agreement and all transactions contemplated by this Agreement, each Party agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions.

Section 9.6 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns, as well as any Persons asserting rights or claims on behalf of any of the foregoing Persons.

Section 9.7 Creditors. None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership.

Section 9.8 Effect of Waiver or Consent. No waiver or consent, express or implied, by any Party to or of any breach or default by any Party in the performance by such Party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such Party of the same or any other obligations of such Party hereunder. Failure on the part of a Party to complain of any act of any Party or to declare any Party in default, irrespective of how long such failure continues, shall not constitute a waiver by such Party of its rights hereunder until the applicable statute of limitations period has run.

Section 9.9 Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the Parties hereto, notwithstanding that all such Parties are not signatories to the original or the same counterpart. Each Party shall become bound by this Agreement immediately upon affixing its signature hereto.

Section 9.10 Invalidity of Provisions. If any provision of this Agreement or the application thereof to any Person or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other Parties or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

Section 9.11 Amendment or Restatement. This Agreement may be amended or restated only by a written instrument executed by each of the Parties; provided, however, that after the completion of the Partnership’s initial public offering of Common Units representing limited partner interests, the Partnership may not, without the prior approval of the Conflicts Committee or, if there is no such committee, the independent members of such board of directors, agree to any amendment or modification of this Agreement that the General Partner determines will adversely affect the holders of such Common Units. The Parties hereto agree that, for purposes of this Section 9.11, any material change in the nature, quantity or duration of the Services to be provided under this Agreement shall constitute a modification of this Agreement.

Section 9.12 Withholding or Granting of Consent. Except to the extent expressly provided for otherwise in this Agreement, each Party may, with respect to any consent or approval that it is entitled to grant pursuant to this Agreement, grant or withhold such consent or approval in its sole and uncontrolled discretion, with or without cause, and subject to such conditions as it shall deem appropriate.

Section 9.13 Directly or Indirectly. Where any provision of this Agreement refers to action to be taken by any Party, or which such Party is prohibited from taking, such provision

shall be applicable whether such action is taken directly or indirectly by such Party, including actions taken by or on behalf of any Affiliate of such Party.

Section 9.14 Laws and Regulations. Notwithstanding any provision of this Agreement to the contrary, no Party shall be required to take any act, or fail to take any act, under this Agreement if the effect thereof would be to cause such Party to be in violation of any applicable Legal Requirement.

Section 9.15 Negation of Rights of Limited Partners, Assignees and Third Parties. Except as set forth in Article VIII, the provisions of this Agreement are enforceable solely by the Parties, and no limited partner, member, or assignee of the Partnership or other Person shall have the right, separate and apart from the Partnership, to enforce any provision of this Agreement or to compel any Party to comply with the terms of this Agreement.

Section 9.16 No Recourse Against Officers, Directors, Managers or Employees. For the avoidance of doubt, the provisions of this Agreement shall not give rise to any right of recourse against any officer, director, manager or employee of any Party or any officer, director, manager or employee of any Affiliate of any Party.

Section 9.17 Arbitration. Any claim, counterclaim, demand, cause of action, dispute, or any other controversy arising out of or relating in any way to this Agreement or to the subject matter of this Agreement or to any relationship created thereby (each a “Dispute”) shall be resolved by binding arbitration. A Dispute must be resolved through arbitration regardless of whether the Dispute involves claims that this Agreement is unlawful, unenforceable, void or voidable or involves claims sounding in tort, contract, statute or common law. This Section 9.17 shall be binding on and shall inure to the benefit of the Parties and their Affiliates, the Partnership Entities and the Pioneer Indemnified Parties. The validity, construction and interpretation of this agreement to arbitrate, and all other procedural aspects of the arbitration conducted pursuant hereto, shall be decided by the arbitral tribunal. Any arbitration under this Agreement shall be administered by the American Arbitration Association (“AAA”) and conducted in accordance with the Commercial Arbitration Rules (the “Rules”) of the AAA in existence at the time of the arbitration. In resolving any Dispute, the arbitral tribunal shall refer to the governing law as specified in Section 9.1 of this Agreement. Except for any exemplary, punitive, indirect, consequential, remote, speculative, treble, multiple or special damages recovered by a third party pursuant to Section 8.3, the arbitral tribunal shall not be empowered to award exemplary, punitive, indirect, consequential, remote, speculative, treble, multiple or special damages, and the Parties and their Affiliates, the Partnership Entities and the Pioneer Indemnified Parties waive any right they may have to recover such damages from one another. The arbitral tribunal shall not be empowered to decide any dispute ex aequo et bono or amiable compositeur. The seat (or legal place) and venue of the arbitration shall be in Dallas, Texas. The arbitration shall be conducted in the English language.

shall together agree upon a third arbitrator to recommend to the AAA to chair the arbitration. If the two party-appointed arbitrators are unable to agree upon an arbitrator within fifteen (15) days of the respondent’s appointment of an arbitrator, then the chairman shall be chosen according to the Rules. Notwithstanding the foregoing, if two or more respondents have interests with regard to a Dispute that are not completely common, then all arbitrators shall be appointed in accordance with the Rules and not by nomination or appointment by the Parties. Any arbitration award may be enforced by the courts sitting in Dallas, Texas or any other court of competent subject matter jurisdiction (including any jurisdiction in which a Party holds or keeps assets). Any action to challenge, vacate or set aside the award in whole or in part must be brought in the courts sitting in Dallas, Texas. The Parties and their Affiliates, the Partnership Entities and the Pioneer Indemnified Parties agree to waive any objections they may have to personal jurisdiction, venue or forum non-conveniens for any action brought to enforce the award in the courts sitting in Dallas, Texas or any other jurisdiction where a party against which enforcement of the award is sought holds or keeps assets.

IN WITNESS WHEREOF, the Parties have executed this Agreement on, and effective as of, the day and year first written above.


PIONEER NATURAL RESOURCES GP LLC

By:		/s/ Richard P. Dealy

	Name:	Richard P. Dealy
	Title:	Executive Vice President and
		Chief Financial Officer

PIONEER SOUTHWEST ENERGY PARTNERS L.P.

By:	Pioneer Natural Resources GP LLC, its General Partner

By:		/s/ Richard P. Dealy

	Name:	Richard P. Dealy
	Title:	Executive Vice President and
		Chief Financial Officer

PIONEER SOUTHWEST ENERGY PARTNERS USA LLC

By:	Pioneer Natural Resources USA, Inc., its sole member

By:		/s/ Richard P. Dealy

	Name:	Richard P. Dealy
	Title:	Executive Vice President and
		Chief Financial Officer

PIONEER NATURAL RESOURCES USA, INC.

By:		/s/ Richard P. Dealy

	Name:	Richard P. Dealy
	Title:	Executive Vice President and
		Chief Financial Officer

[Signature page to Administrative Services Agreement]

Schedule I

Services Provided by Pioneer USA
to the Partnership Entities

1. Accounting

2. Audit

3. Business Development

4. Financial Services

5. Real Property

6. Legal

7. Operations/Reservoir Engineering/Geology/Geophysics

8. Investor Relations

9. Management and Corporate Development

10. Risk Management

11. Commercial and Marketing (if applicable)

12. Information Technology

13. Insurance Services

14. Government Regulations Compliance

15. Securities and Exchange Commission Reporting

16. Sarbanes-Oxley Compliance

17. Treasury

18. Tax

19. Communications

20. Human Resources

21. Administrative Services

22. Regulatory

23. Environmental

Schedule I-1

EX-10.3 8 d56641exv10w3.htm TAX SHARING AGREEMENT exv10w3

EXHIBIT 10.3

EXECUTION VERSION

TAX SHARING AGREEMENT

BY AND AMONG

PIONEER NATURAL RESOURCES COMPANY

AND

PIONEER SOUTHWEST ENERGY PARTNERS L.P.

May 6, 2008

TAX SHARING AGREEMENT
BY AND AMONG
PIONEER NATURAL RESOURCES COMPANY AND
PIONEER SOUTHWEST ENERGY PARTNERS L.P.

Tax Sharing Agreement (the “Agreement”), dated this 6^th day of May, 2008, by and among PIONEER NATURAL RESOURCES COMPANY (“Pioneer”), a Delaware corporation, and PIONEER SOUTHWEST ENERGY PARTNERS L.P. (the “Partnership”), a Delaware limited partnership.

RECITALS

WHEREAS, Pioneer is the common parent of an affiliated group of corporations within the meaning of Section 1504(a) of the Code (as defined below), which currently files a consolidated federal income tax return;

WHEREAS, the Partnership Group (as defined below) includes various entities that may be required to join with Pioneer in the filing of a consolidated, combined or unitary state tax return;

WHEREAS, the Parties wish to set forth the general principles under which they will allocate and share various Taxes (as defined below) and related liabilities;

WHEREAS, Pioneer, on behalf of itself and its present and future subsidiaries other than the Partnership Group (“Pioneer Group”), and the Partnership, on behalf of itself and its present and future subsidiaries (the “Partnership Group”), are entering into this Agreement to provide for the allocation among the Pioneer Group and the Partnership Group of all responsibilities, liabilities and benefits relating to any Tax for which a Combined Return (as defined herein) is filed for a taxable period including or beginning on or after the Effective Date (as defined herein) and to provide for certain other matters;

NOW, THEREFORE, in consideration of the mutual agreements, provisions, and covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions. The following terms shall have the following meanings (such meanings to be equally applicable to both the singular and the plural forms of the terms defined):

“Accounting Referee” is defined in Section 6.11 herein.

“Code” means the Internal Revenue Code of 1986, as amended, or any successor thereto, as in effect for the taxable period in question.

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“Combined Group” means a group of corporations or other entities that files a Combined Return.

“Combined Return” means any Tax Return (other than a Tax Return for Federal income taxes) filed on a consolidated, combined (including nexus combination, worldwide combination, domestic combination, line of business combination or any other form of combination), or unitary basis that includes activities of any member of the Pioneer Group and any member of the Partnership Group.

“Effective Date” means 7:00 a.m. on May 1, 2008.

“Final Determination” means the final resolution of any Tax (or other matter) for a taxable period, including related interest or penalties, that, under applicable law, is not subject to further appeal, review or modification through proceedings or otherwise, including (i) by the expiration of a statute of limitations or a period for the filing of claims for refunds, amending Tax Returns, appealing from adverse determinations, or recovering any refund (including by offset), (ii) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable, (iii) by a closing agreement, an accepted offer in compromise, or a comparable agreement under laws of the particular Tax Authority, (iv) by execution of a form under the laws of a Tax Authority that is comparable to an Internal Revenue Service Form 870 or 870-AD (excluding, however, with respect to a particular Tax Item for a particular taxable period any such form that reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund and/or the right of the Tax Authority to assert a further deficiency with respect to such Tax Item for such period), or (v) by any allowance of a refund or credit, but only after the expiration of all periods during which such refund may be adjusted.

“Notice” is defined in Section 6.01 herein.

“Partnership Group” is defined in the Recitals to this Agreement.

“Partnership Group Combined Tax Liability” means, with respect to any Tax, the Partnership Group’s liability for such Tax owed with respect to a Combined Return for a taxable period, as determined under Section 3.02 of this Agreement.

“Partnership Group Deposit” is defined in Section 3.04 herein.

“Partnership Group Members” means those entities included in the Partnership Group.

“Partnership Group Pro Forma Combined Return” means a pro forma Combined Return or other schedule prepared pursuant to Section 3.02 of this Agreement.

“Party” means each of Pioneer and the Partnership, and solely for purposes of this definition, “Pioneer” includes the Pioneer Group and the “Partnership” includes the Partnership Group. Each of Pioneer and the Partnership shall cause the Pioneer Group and the Partnership Group, respectively, to comply with this Agreement.

“Pioneer Group” is defined in the Recitals to this Agreement.

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“Tax” means any of the Taxes.

“Tax Attribute” means a Tax Item of a member of the Partnership Group reflected on a Combined Return that is comparable to one or more of the following attributes with respect to a Federal income tax consolidated tax return: a net operating loss, a net capital loss, an unused investment credit, an unused foreign tax credit, an excess charitable contribution, a U.S. federal minimum tax credit or a U.S. federal general business credit (but not tax basis or earnings and profits).

“Tax Authority” means a domestic governmental authority (other than the United States) or any subdivision, agency, commission or authority thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (excluding the U.S. Internal Revenue Service).

“Tax Controversy” means any audit, examination, dispute, suit, action, litigation or other judicial or administrative proceeding initiated by Pioneer or the Partnership or any Tax Authority.

“Tax Item” means any item of income, gain, loss, deduction or credit, or other item reflected on a Tax Return or any Tax Attribute.

“Tax Return” means any return, report, certificate, form or similar statement or document (including any related or supporting information or schedule attached thereto and any information return, amended Tax Return, claim for refund or declaration of estimated tax) required to be supplied to, or filed with, a Tax Authority in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.

“Taxes” means all forms of taxation, whenever created or imposed, and whether imposed by a domestic, local, municipal, governmental, state, federation or other body, but excluding taxes imposed by the United States, and without limiting the generality of the foregoing, shall include net income, alternative or add-on minimum, gross income, sales, use, ad valorem, gross receipts, value added, franchise, profits, license, transfer, recording, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profit, custom duty, or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any related interest, penalties, or other additions to tax, or additional amounts imposed by any such Tax Authority.

Any term used but not capitalized herein that is defined in the Code or in the Treasury Regulations thereunder shall, to the extent required by the context of the provision at issue, have the meaning assigned to it in the Code or such regulation.

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ARTICLE II

PREPARATION AND FILING OF TAX RETURNS

Section 2.01 Manner of Filing.

(a) For periods that include the Effective Date and periods after the Effective Date, Pioneer shall have the sole and exclusive responsibility for the preparation and filing of, and shall prepare and file, all Combined Returns or cause to be prepared and filed all Combined Returns. Pioneer shall be authorized to take any and all action necessary or incidental to the preparation and filing of a Combined Return, including, without limitation, (i) making elections and adopting accounting methods, (ii) filing all extensions of time, including extensions of time for payment of tax, (iii) filing claims for refund or credit, or (iv) giving waivers or bonds.

(b) For periods that include the Effective Date and periods after the Effective Date, the Partnership Group shall have the sole and exclusive responsibility for the preparation and filing of, and shall prepare and file or cause to be prepared and filed, all Tax Returns of the Partnership Group Members that are not Combined Returns.

(c) Pioneer shall have sole discretion to include, or cause to be included, in a Combined Return for any Tax any member of the Partnership Group for which inclusion in such Combined Return is elective; provided, however, that the Partnership Group Combined Tax Liability for any period shall not exceed the aggregate of (x) each such elective Partnership Group Member’s liability for such Tax for such period, computed as if such Partnership Group Member were not included in such Combined Return and (y) the Partnership Group Combined Tax Liability calculated for the Partnership Group Members for which inclusion is not elective. Pioneer shall provide pro forma Tax Returns pursuant to Section 3.05 of this Agreement to support the calculation of the amount of any decrease in the Partnership Group Combined Tax Liability pursuant to this Section 2.01(c).

Section 2.02 Franchise Tax Taxable Period. References to “taxable period” for any franchise or other doing business Tax shall mean the taxable period during which the income, operations, assets or capital comprising the base of such Tax is measured, regardless of whether the right to do business for another taxable period is obtained by the payment of such franchise Tax.

ARTICLE III

ALLOCATION OF TAXES

Section 3.01 Liability of the Partnership Group for Combined Taxes. For each Tax for each taxable period that includes or begins on or after the Effective Date and for which a Combined Return is filed, the Partnership Group Members included in such Combined Return shall be liable to Pioneer for an amount equal to the Partnership Group Combined Tax Liability in respect of such Tax.

Section 3.02 Partnership Group Combined Tax Liability. With respect to each Tax for each taxable period that includes or begins on or after the Effective Date and for which a

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member of the Partnership Group is included in a Combined Return, the Partnership Group Combined Tax Liability for such Tax for such taxable period shall be the Tax for such taxable period as determined on a Partnership Group Pro Forma Combined Return prepared:

(a) by including only the Tax Items of the members of the Partnership Group that are included in the Combined Return and computing the liability of the Partnership Group Members for such Tax as if such Partnership Group Members were included in a separate consolidated or unitary group;

(b) except as provided in Section 3.02(e) hereof, using all elections, accounting methods and conventions used on the Combined Return for such period;

(d) assuming that the Partnership Group elects not to carry back any net operating losses; and

(e) assuming that the Partnership Group’s utilization of any Tax Attribute carryforward or carryback is limited to the Tax Attributes of the Partnership Group that would be available if the Partnership Group Combined Tax Liability for each taxable period ending after January 1, 2008 were determined in accordance with this Section 3.02.

Section 3.03 Preparation and Delivery of Pro Forma Tax Returns. Not later than 90 days following the date on which a Combined Return is filed with the appropriate Tax Authority, Pioneer shall prepare and deliver to the Partnership the related Partnership Group Pro Forma Combined Return calculating the Partnership Group Combined Tax Liability attributable to the period covered by such filed Combined Return.

Section 3.04 Payment of Tax. Pioneer shall timely pay (or shall cause to be timely paid) any Tax reflected on a Combined Return and hold harmless the Partnership for all liability for such Tax. In the event Pioneer is required to make an estimated payment or deposit of any Tax of any Combined Group which includes any member of the Partnership Group, Pioneer shall calculate the portion, if any, of such estimated payment or deposit attributable to the Partnership Group using a methodology similar to that described in Section 3.02 (the “Partnership Group Deposit”) and shall present such calculation to the Partnership. Within 5 days thereafter, the Partnership shall pay the Partnership Group Deposit to Pioneer. Within 30 days after delivery by Pioneer of a Partnership Group Pro Forma Combined Return to the Partnership calculating the Partnership Group Combined Tax Liability with respect to a Combined Return, the Partnership shall pay to Pioneer such Partnership Group Combined Tax Liability less the amount of any Partnership Group Deposit relating to the same Combined Return.

Section 3.05 Subsequent Changes in Treatment of Tax Items. With respect to any Combined Return for any taxable period beginning on or after the Effective Date, in the event of a change in the treatment of any Tax Item of any member of a Combined Group as a result of a Final Determination, within 30 days following such Final Determination (i) Pioneer shall calculate the change, if any, to the Partnership Group Combined Tax Liability resulting from such change, (ii) Pioneer shall pay any decrease in the Partnership Group Combined Tax

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Liability to the Partnership, and (iii) the Partnership shall pay any increase in the Partnership Group Combined Tax Liability to Pioneer.

ARTICLE IV

CONTROL OF TAX PROCEEDINGS; COOPERATION AND EXCHANGE OF INFORMATION

Section 4.01 Control of Proceedings. Except as provided in this Article IV, Pioneer shall have full responsibility and discretion in handling, settling or contesting any Tax Controversy involving a Tax Return for which it has filing responsibility under this Agreement as well as all Tax Returns for all taxable periods ending before the Effective Date. The Partnership shall have full responsibility and discretion in handling, settling or contesting any Tax Controversy involving a Tax Return for which it has filing responsibility under this Agreement. Except as otherwise provided in this Article IV, any costs incurred in handling, settling or contesting any Tax Controversy shall be borne by the Party having full responsibility and discretion thereof.

Section 4.02 Cooperation and Exchange of Information.

(a) Each Party shall cooperate fully at such time and to the extent reasonably requested by any other Party in connection with the preparation and filing of any Tax Return or claim for refund, or the conduct of any audit, dispute, proceeding, suit or action concerning any issues or other matters considered in this Agreement. Such cooperation shall include, without limitation, the following: (i) the retention and provision on demand of Tax Returns, books, records (including those concerning ownership and Tax basis of property which a Party may possess), documentation or other information relating to the Tax Returns, including accompanying schedules, related workpapers, and documents relating to rulings or other determinations by Taxing Authorities, until the expiration of the applicable statute of limitations (giving effect to any extension, waiver or mitigation thereof); (ii) the provision of additional information, including an explanation of material provided under clause (i) of this Section 4.02(a), to the extent such information is necessary or reasonably helpful in connection with the foregoing; (iii) the execution of any document that may be necessary or reasonably helpful in connection with the filing of a Tax Return by Pioneer, the Partnership or of their respective subsidiaries, or in connection with any audit, dispute, proceeding, suit or action; and (iv) such Party’s commercially reasonable efforts to obtain any documentation from a governmental authority or a third party that may be necessary or reasonably helpful in connection with any of the foregoing.

(b) Each Party shall make its employees and facilities available on a reasonable and mutually convenient basis in connection with any of the foregoing matters.

(c) If any Party fails to provide any information requested pursuant to Section 4.02 hereof within a reasonable period, as determined in good faith by the Party requesting the information, then the requesting Party shall have the right to engage a public accounting firm to gather such information, provided that 30 days’ prior written notice is given to the unresponsive Party. If the unresponsive Party fails to provide the requested information within 30 days of

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receipt of such notice, then such unresponsive Party shall permit the requesting Party’s public accounting firm full access to all appropriate records or other information as reasonably necessary to comply with this Section 4.02 and shall reimburse the requesting Party or pay directly all costs connected with the requesting Party’s engagement of the public accounting firm.

ARTICLE V

WARRANTIES AND REPRESENTATIONS; PAYMENT OBLIGATIONS

Section 5.01 Warranties and Representations Relating to Actions of Pioneer and the Partnership. Each of Pioneer and the Partnership warrants and represents to the other that:

(a) in the case of Pioneer, it is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power to carry out the transactions contemplated by this Agreement;

(b) in the case of the Partnership, it is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power to carry out the transactions contemplated by this Agreement;

(c) it has duly and validly taken all action necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby;

(d) this Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligation enforceable in accordance with its terms subject, as to the enforcement of remedies, to (i) applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally from time to time in effect and (ii) to general principles of equity, whether enforcement is sought in a proceeding at law or in equity; and

(e) the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, or the compliance with any of the provisions of this Agreement will not (i) conflict with or result in a breach of any provision of its certificate of incorporation, by-laws, certificate of limited partnership, limited partnership agreement or general partnership agreement, (ii) breach, violate or result in a default under any of the terms of any agreement or other instrument or obligation to which it is a party or by which it or any of its properties or assets may be bound, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to it or affecting any of its properties or assets.

Section 5.02 Calculation of Payment Obligations. Except as otherwise provided under this Agreement, to the extent that the payor Party has a payment obligation to the payee Party pursuant to this Agreement, the payee Party shall provide the payor Party with its calculation of the amount of such obligation. The documentation of such calculation shall provide sufficient detail to permit the payor Party to reasonably understand the calculation. All payment obligations shall be made to the payee Party or to the appropriate Tax Authority as specified by the payee Party within 30 days after delivery by the payee Party to the payor Party of written

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notice of a payment obligation. Any disputes with respect to payment obligations shall be resolved in accordance with Section 6.11 below.

Section 5.03 Prompt Performance. All actions required to be taken by any Party under this Agreement shall be performed within the time prescribed for performance in this Agreement, or if no period is prescribed, such actions shall be performed promptly.

Section 5.04 Interest. Payments pursuant to this Agreement that are not made within the period prescribed therefor in this Agreement shall bear interest (compounded daily) from and including the date immediately following the last date of such period through and including the date of payment at a rate equal to the Federal short-term rate or rates established pursuant to Section 6621 of the Code for the period during which such payment is due but unpaid.

Section 5.05 Tax Records. The Parties to this Agreement hereby agree to retain and provide on proper demand by any Tax Authority (subject to any applicable privileges) the books, records, documentation and other information relating to any Tax Return until the later of (a) the expiration of the applicable statute of limitations (giving effect to any extension, waiver or mitigation thereof), (b) the date specified in an applicable records retention agreement entered into with a Tax Authority, (c) a Final Determination made with respect to such Tax Return and (d) the final resolution of any claim made under this Agreement for which such information is relevant.

Section 5.06 Continuing Covenants. Each Party agrees (1) not to take any action reasonably expected to result in a new or changed Tax Item that is detrimental to any other Party and (2) to take any action reasonably requested by any other Party that would reasonably be expected to result in a new or changed Tax Item that produces a benefit or avoids a detriment to such other Party; provided that such action does not result in any additional cost not fully compensated for by the requesting Party. The Parties hereby acknowledge that the preceding sentence is not intended to limit, and therefore shall not apply to, the rights of the Parties with respect to matters otherwise covered by this Agreement.

ARTICLE VI

MISCELLANEOUS PROVISIONS

Section 6.01 Notice. Any notice, demand, claim, or other communication required or permitted to be given under this Agreement (a “Notice”) shall be in writing and may be personally served provided a receipt is obtained therefor, or may be sent by certified mail return receipt requested postage prepaid, to the Parties at the following addresses (or at such other address as one Party may specify by notice to any other Party):


		Pioneer at:		Pioneer Natural Resources Company
				5205 N. O’Connor Blvd., Suite 200
				Irving, Texas 75039
				Phone: (972) 444-9001
				Fax: (972) 969-3587
				Attention: General Counsel

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		Partnership at:		Pioneer Southwest Energy Partners L.P.
				c/o Pioneer Natural Resources GP LLC
				5205 North O’Connor Blvd., Suite 200
				Irving, Texas 75039-3746
				Phone: (972) 444-9001
				Facsimile: (972) 969-3552
				Attention: Secretary

A Notice which is delivered personally shall be deemed given as of the date specified on the written receipt therefor. A Notice mailed as provided herein shall be deemed given on the third business day following the date so mailed. Notification of a change of address may be given by any Party to another in the manner provided in this Section 6.01 for providing a Notice.

Section 6.02 Required Payments. Unless otherwise provided in this Agreement, any payment of Tax required shall be due within 30 days of a Final Determination of the amount of such Tax.

Section 6.03 Injunctions. The Parties acknowledge that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or were otherwise breached. The Parties hereto shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court having jurisdiction, such remedy being in addition to any other remedy to which they may be entitled at law or in equity.

Section 6.04 Further Assurances. Subject to the provisions hereof, the Parties hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions, as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. Subject to the provisions hereof, each of the Parties shall, in connection with entering into this Agreement, perform its obligations hereunder and take any and all actions relating hereto, comply with all applicable laws, regulations, orders, and decrees, obtain all required consents and approvals and make all required filings with any governmental agency, other regulatory or administrative agency, commission or similar authority and promptly provide the other Parties with all such information as such Parties may reasonably request in order to be able to comply with the provisions of this sentence.

Section 6.05 Parties in Interest. Except as herein otherwise specifically provided, nothing in this Agreement expressed or implied is intended to confer any right or benefit upon any person, firm or corporation other than the Parties and their respective successors and permitted assigns.

Section 6.06 Setoff. Except as provided by Section 2.01(c) of this Agreement, all payments to be made under this Agreement shall be made without setoff, counterclaim or withholding, all of which are expressly waived.

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Section 6.07 Change of Law. If, due to any change in applicable law or regulations or the interpretation thereof by any court of law or other governing body having jurisdiction subsequent to the date of this Agreement, performance of any provision of this Agreement or any transaction contemplated hereby shall become impracticable or impossible, the Parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision.

Section 6.08 Termination and Survival. Notwithstanding anything in this Agreement to the contrary, this Agreement shall remain in effect and its provisions shall survive for the full period of all applicable statutes of limitation (giving effect to any extension, waiver or mitigation thereof) or until otherwise agreed to in writing by Pioneer and the Partnership, or their successors.

Section 6.09 Amendments; No Waivers.

(a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Pioneer and the Partnership, or in the case of a waiver, by the Party against whom the waiver is to be effective.

(b) 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.

Section 6.10 Governing Law and Interpretation. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed in the State of Delaware.

Section 6.11 Resolution of Certain Disputes. Any disagreement between the Parties with respect to any matter that is the subject of this Agreement, including, without limitation, any disagreement with respect to any calculation or other determinations by Pioneer hereunder, which is not resolved by mutual agreement of the Parties, shall be resolved by a nationally recognized independent accounting firm chosen by and mutually acceptable to the Parties hereto (an “Accounting Referee”). Such Accounting Referee shall be chosen by the Parties within fifteen (15) business days from the date on which one Party serves written notice on another Party requesting the appointment of an Accounting Referee, provided that such notice specifically describes the calculations to be considered and resolved by the Accounting Referee. In the event the Parties cannot agree on the selection of an Accounting Referee, then the Accounting Referee shall be any office or branch of the public accounting firm of PricewaterhouseCoopers. The Accounting Referee shall resolve any such disagreements as specified in the notice within 30 days of appointment; provided, however, that no Party shall be required to deliver any document or take any other action pursuant to this Section 6.11 if it determines that such action would result in the waiver of any legal privilege or any detriment to its business. Any resolution of an issue submitted to the Accounting Referee shall be final and binding on the Parties hereto without further recourse. The Parties shall share the costs and fees of the Accounting Referee equally.

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Section 6.12 Confidentiality. Except to the extent required to protect a Party’s interests in a Tax Controversy, each Party shall hold and shall cause its consultants and advisors to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information (other than any such information relating solely to the business or affairs of such Party) concerning another Party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (i) previously known by the Party to which it was furnished, (ii) in the public domain through no fault of such Party, or (iii) later lawfully acquired from other sources by the Party to which it was furnished), and each Party shall not release or disclose such information to any other person, except its auditors, attorneys, financial advisors, bankers and other consultants and advisors who shall be advised of the provisions of this Agreement. Each Party shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by another Party if it exercises the same care as it takes to preserve confidentiality for its own similar information.

Section 6.13 Costs, Expenses and Attorneys’ Fees. Except as expressly set forth in this Agreement, each Party shall bear its own costs and expenses incurred pursuant to this Agreement. In the event a Party to this Agreement brings an action or proceeding for the breach or enforcement of this Agreement, the prevailing party in such action, proceeding, or appeal, whether or not such action, proceeding or appeal proceeds to final judgment, shall be entitled to recover as an element of its costs, and not as damages, such reasonable attorneys’ fees as may be awarded in the action, proceeding or appeal in addition to whatever other relief the prevailing party may be entitled. For purposes of this Section 6.13, the “prevailing party” shall be the Party who is entitled to recover its costs; a Party not entitled to recover its costs shall not recover attorneys’ fees. No sum for attorneys’ fees shall be counted in calculating the amount of the judgment for purposes of determining whether a Party is entitled to recover its costs or attorneys’ fees.

Section 6.14 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

Section 6.15 Severability. The Parties hereby agree that, if any provision of this Agreement should be adjudicated to be invalid or unenforceable, such provision shall be deemed deleted herefrom with respect, and only with respect, to the operation of such provision in the particular jurisdiction in which such adjudication was made, and only to the extent of the invalidity, and any such invalidity or unenforceability in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. All other remaining provisions of this Agreement shall remain in full force and effect for the particular jurisdiction and all other jurisdictions.

Section 6.16 Entire Agreement.

(a) This Agreement contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes all other agreements, whether or not written, in respect of any Tax between the Pioneer Group and the Partnership Group.

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(b) In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of any other agreement between the Pioneer Group and the Partnership Group the provisions of this Agreement shall take precedence and to such extent shall be deemed to supersede such conflicting provisions under the other agreement.

Section 6.17 Assignment. This Agreement is being entered into by Pioneer and the Partnership on behalf of themselves and each member of the Pioneer Group and the Partnership Group. This Agreement shall constitute a direct obligation of each such member and shall be deemed to have been readopted and affirmed on behalf of any entity that becomes a member of the Pioneer Group or the Partnership Group in the future. Each of Pioneer and the Partnership hereby guarantee the performance of all actions, agreements and obligations provided for under this Agreement of each member of the Pioneer Group and the Partnership Group, respectively. Each of Pioneer and the Partnership shall, upon the written request of the other, cause any of their respective group members to formally execute this Agreement. This Agreement shall be binding upon, and shall inure to the benefit of, the successors, assigns and persons controlling any of the entities bound hereby for so long as such successors, assigns or controlling persons are members of the Pioneer Group or the Partnership Group or their successors and assigns.

Section 6.18 Fair Meaning. This Agreement shall be construed in accordance with its fair meaning and shall not be construed strictly against the drafter.

Section 6.19 Titles and Headings. Titles and headings to sections herein are inserted for the convenience of reference only and are not intended to be a part or to affect the meaning or interpretation of this Agreement.

Section 6.20 Construction. In this Agreement, unless the context otherwise requires the terms “herein,” “hereof,” and “hereunder” refer to this Agreement.

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IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Agreement as of the day and year first above written.


		PIONEER NATURAL RESOURCES COMPANY

		By: Name:		/s/ Richard P. Dealy Richard P. Dealy
		Title:		Executive Vice President and
				Chief Financial Officer

		PIONEER SOUTHWEST ENERGY PARTNERS L.P.

		By:		Pioneer Natural Resources GP LLC, its
				general partner

		By: Name:		/s/ Richard P. Dealy Richard P. Dealy
		Title:		Executive Vice President and
				Chief Financial Officer

EX-10.4 9 d56641exv10w4.htm OMNIBUS OPERATING AGREEMENT exv10w4

EXHIBIT 10.4

EXECUTION VERSION

OMNIBUS OPERATING AGREEMENT

This Omnibus Operating Agreement (this “Agreement”) is made and entered into this 6th day of May, 2008, by and between Pioneer Natural Resources USA, Inc., a Delaware corporation (“Pioneer USA”), and Pioneer Southwest Energy Partners USA LLC, a Texas limited liability company (“PSE USA”). Pioneer USA and PSE USA are sometimes hereinafter referred to individually as a “Party” and collectively as the “Parties.”

In consideration of the premises, the covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I
DEFINITIONS

As used in this Agreement, the following terms shall have the respective meanings set forth below:

“AAA” means the American Arbitration Association.

“Applicable Wellbore” means (a) with respect to a Replacement Well, the Wellbore in replacement of which such Replacement Well was drilled, as described below in the definition of “Replacement Well,” and (b) with respect to a Down-Spaced Well, the previously existing Wellbore associated with such Down-Spaced Well, as described below in the definition of “Down-Spaced Well.”

“Boundary Line Down-Spaced Well” means a Down-Spaced Well having a bottom-hole location on or within one hundred feet (100’) of a boundary line of an Existing Wellbore Tract.

“Down-Spaced Well” means an additional well authorized or permitted by the Texas Railroad Commission to be drilled and produced from a bottom hole location within, or on a boundary of, an Existing Wellbore Tract, or outside of an Existing Wellbore Tract but within one hundred feet (100’) of a boundary line of such Existing Wellbore Tract. In no event shall PSE USA propose a Down-Spaced Well to be drilled, deepened, sidetracked, or completed to a depth below the deepest perforation producing in the Applicable Wellbore.

“Dual Boundary Down-Spaced Well” means a Down-Spaced Well having a bottom-hole location on or within one hundred feet (100’) of two (2) boundary lines of an Existing Wellbore Tract.

“Existing Production Facility” means any Production Facility currently handling production from one or more Wellbores.

“Expanded Production Facility” means an Existing Production Facility which has been expanded to increase capacity in order to accommodate production from Pioneer Wells, as more particularly described in Section 6.06.

“Existing Wellbore Tract” means the forty (40) acre, quarter-quarter section of land within which is located the bottom hole of a Wellbore or Replacement Well which is then completed in and producing from the interval defined in the Spraberry (Trend Area) special field rules.

“Governmental Body” – any:

	(a)		nation, state, county, city, town, village, district, or other jurisdiction of any nature;

	(b)		federal, state, local, municipal, foreign, or other government;

	(c)		governmental or quasi-governmental authority of any nature (including any Governmental Body, branch, department, official, or entity and any court or other tribunal);

	(d)		multi-national organization or body; or

	(e)		body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

“New Production Test Equipment” means the test separator(s), production separator, header, pumps, and lines or such other equipment added at an Existing Production Facility solely to measure, separate, and allocate/transfer production to/from the Pioneer Wells, as more particularly described in Section 6.06(a).

“Offsetting Tract” means (a) with respect to a Single Boundary Down-Spaced Well, that certain forty (40) acre, quarter-quarter section of land that adjoins that certain boundary line of the Existing Wellbore Tract with respect to which the proposed Single Boundary Down-Spaced Well is to be bottom-holed within one hundred feet (100’), and (b) with respect to a Dual Boundary Down-Spaced Well, those certain three (3) forty (40) acre, quarter-quarter sections of land that touch that certain corner of the Existing Wellbore Tract with respect to which the proposed Dual Boundary Down-Spaced Well is to be bottom-holed on or within one hundred feet (100’).

“Omnibus Agreement” means that certain Omnibus Agreement dated May 6, 2008, by and among Pioneer Southwest Energy Partners L.P., Pioneer Natural Resources GP LLC, Pioneer Natural Resources Company, Pioneer USA, and Pioneer Southwest Energy Partners USA LLC.

“Person” means an individual, corporation, partnership, joint venture, trust, limited liability company, unincorporated organization, or any other entity.

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“Pioneer Operating Agreement” has the meaning assigned thereto in Section 2.03.

“Pioneer Wells” means both (a) wells operated by Pioneer USA, and (b) wells that Pioneer USA owns a working interest in but does not operate, other than (in both cases (a) and (b)) the Wellbores, Replacement Wells, and Down-Spaced Wells.

“Production Facility” means the surface equipment beyond the wellhead connections, including stock tanks, separators, treaters, pumping equipment, saltwater disposal wells (excluding salt water disposal facilities jointly owned by Pioneer USA and third party(ies)), and associated equipment, handling the production from one or more Wellbores.

“Replacement Well” means any well proposed to be drilled to a bottom hole location within the same forty (40) acre, quarter-quarter section of land upon which the bottom hole location of a Wellbore or Down-Spaced Well is physically located or within one hundred feet (100’) of the surface location in the event such bottom hole location or quarter-quarter section cannot be reasonably determined, and which is drilled in replacement of such Wellbore or Down-Spaced Well as a result of the temporary or permanent plugging and abandonment of such Wellbore or Down-Spaced Well due to mechanical failure and not due to depletion in the then producing perforations. In no event shall PSE USA propose a Replacement Well to be drilled, deepened, sidetracked, or completed to a depth below the deepest perforation producing in the Applicable Wellbore immediately prior to the mechanical failure of the Applicable Wellbore. Within the same limitations, a Replacement Well may also be drilled in replacement of a previously drilled Replacement Well.

“Rules” means the Commercial Arbitration Rules of the AAA.

“Single Boundary Down-Spaced Well” means a Down-Spaced Well having a bottom-hole location on or within one hundred feet (100’) of only a single boundary line of an Existing Wellbore Tract.

“Third Party Operating Agreement” has the meaning assigned thereto in Section 2.02.

“Wellbores” means all of those certain wellbores described in the Omnibus Agreement.

ARTICLE II
RECITALS

2.01. Pursuant to the transactions referred to in the Omnibus Agreement, PSE USA has acquired, or is or will be acquiring, an undivided interest in and to the Wellbores.

2.02. With respect to certain Wellbores, operating agreements between Pioneer USA, as operator, and third parties, as non-operators (the “Third Party Operating Agreements”), are already in place.

2.03 With respect to those Wellbores that are not presently subject to a Third Party Operating Agreement, the Parties are entering into an operating agreement of even date herewith,

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with Pioneer USA as operator and PSE USA as non-operator (the “Pioneer Operating Agreement”).

2.04. The Parties desire to enter into this Agreement to set forth their understanding and agreement with respect to certain restrictions and limitations on the rights of PSE USA and the further rights of the Parties under the Pioneer Operating Agreement and the Third Party Operating Agreements.

ARTICLE III
TERM

This Agreement shall remain in effect until the earlier to occur of the following: (a) the termination of the Pioneer Operating Agreement and all Third Party Operating Agreements; or (b) the termination of this Agreement by the mutual written consent of the Parties. In addition, if Pioneer USA resigns as operator under the Pioneer Operating Agreement or any Third Party Operating Agreement (or is no longer the operator under any Third Party Operating Agreement for any reason), this Agreement shall terminate, insofar and only insofar as it applies to any then-existing Wellbores, Replacement Wells, and Down-Spaced Wells covered by such operating agreement(s) under which Pioneer USA has resigned as or is no longer operator, when such resignation or other termination of operatorship becomes effective; however, this Agreement shall continue in effect insofar as it applies to any subsequently proposed Replacement Wells or Down-Spaced Wells for the Applicable Wellbores. Notwithstanding the termination of this Agreement: (a) Pioneer USA shall continue to have the rights set forth below in Section 6.06 for so long as necessary, in its sole discretion, to utilize Existing Production Facilities or Expanded Production Facilities for the delivery and handling of production from Pioneer Wells; (b) PSE USA shall continue to have the right to propose, participate, and/or go non-consent in Replacement Wells and Down-Spaced Wells indefinitely; and (c) Pioneer USA shall continue to have the rights set forth below in Section 6.07 indefinitely.

ARTICLE IV
SPECIAL PROVISIONS REGARDING THE PIONEER OPERATING AGREEMENT

Notwithstanding anything to the contrary contained in the Pioneer Operating Agreement, the Parties agree as follows:

4.01. PSE USA shall not have the right to remove Pioneer USA as the operator under the Pioneer Operating Agreement; however, if Pioneer USA resigns as the operator, or sells all of its interest in the area covered by the Pioneer Operating Agreement to a third party, PSE USA shall have the right to vote for the selection of a successor operator pursuant to the terms and conditions of Article V.B.2 of the Pioneer Operating Agreement.

4.02. PSE USA shall have the right, along with Pioneer USA, to propose (subject to the limitation in the following sentence), participate, and/or go non-consent in subsequent operations in the Wellbores and the drilling of Replacement Wells and/or Down-Spaced Wells pursuant to the terms and conditions of Article VI.B of the Pioneer Operating Agreement; however, if a subsequent operation proposal by PSE USA conflicts with a subsequent operation proposal by

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Pioneer USA (regardless of which proposal preceded the other), PSE USA shall withdraw its proposal in favor of Pioneer USA’s proposal. PSE USA shall not propose the drilling of a Down-Spaced Well with less than twenty (20) acre density.

4.03. With respect to any Replacement Well or Down-Spaced Well for which the Applicable Wellbore is subject to the Pioneer Operating Agreement:

(a) PSE USA shall not propose any Replacement Well or Down-Spaced Well to a depth below the deepest producing perforation in the Applicable Wellbore.

(b) If Pioneer USA proposes a Replacement Well or Down-Spaced Well to be both (i) drilled and completed in an objective depth and/or interval that is deeper than the deepest producing perforation in the Applicable Wellbore, and (ii) dually completed in or commingled with production from a producing perforation in the Applicable Wellbore, PSE USA shall have the right to participate in such proposal.

(c) If PSE USA participates in the drilling of any Replacement Well or Down-Spaced Well, then, following the completion of such Replacement Well or Down-Spaced Well, Pioneer USA shall execute and deliver (or cause to be executed and delivered) to PSE USA a recordable assignment and bill of sale and such other documents (comparable to those executed in conjunction with the Wellbores, and containing a comparable title indemnity) as necessary to convey to PSE USA an undivided interest in the wellbore of the Replacement Well or Down-Spaced Well from the surface to the deepest producing perforation in the Replacement Well or Down-Spaced Well, as the case may be (together with an easement for operating purposes extending an additional one hundred feet (100’) in depth), which undivided interest shall be in such amount that the ratio of PSE USA’s interest to Pioneer USA’s interest is the same in the Replacement Well or Down-Spaced Well as it is in the Applicable Wellbore. Prior to the spudding of any Replacement Well or Down-Spaced Well that is proposed under Section 4.03(b) to be drilled and completed in a deeper objective depth and/or interval than the deepest producing perforation in the Applicable Wellbore, and in consideration of the rights to participate in such well and to receive such assignment and bill of sale, PSE USA shall pay to Pioneer USA its working interest share of the fair market value of such objective depth and/or interval that is deeper than the deepest producing perforation in the Applicable Wellbore, as mutually agreed by Pioneer USA and PSE USA. If the Parties are unable to reach an agreement on the fair market value of such objective depth and/or interval, then the Parties shall select an independent appraiser to make such determination. If the Parties are unable to agree on an independent appraiser, each Party shall select one independent appraiser, and the two appraisers so selected shall select a third independent appraiser, who shall make the determination of fair market value. The independent appraiser’s determination will be binding on the Parties.

(d) If no Replacement Well is proposed by Pioneer USA or PSE USA, but Pioneer USA subsequently drills and completes a well in which PSE USA does not have the right to participate as a producer or a dry hole at a deeper depth than the deepest existing perforation in the Applicable Wellbore within the applicable Existing Wellbore Tract, and Pioneer USA thereafter proposes a plugback of such subsequent well as a Replacement Well or Down-Spaced Well, PSE USA shall have the right to participate in

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such plugback attempt, subject to a well cost adjustment to be calculated in a manner consistent with the well cost adjustment mechanisms set forth in Article VI.B.4(a) or VI.B.4(b) of the Pioneer Operating Agreement, as applicable. If PSE USA participates in such plugback attempt, Pioneer USA shall execute and deliver (or cause to be executed and delivered) to PSE USA a recordable assignment and bill of sale conveying to PSE USA an undivided interest in the Replacement Well or Down-Spaced Well from the surface to the deepest producing perforation in such well (together with an easement for operating purposes extending an additional one hundred feet (100’) in depth), which undivided interest shall be in such amount that the ratio of PSE USA’s interest to Pioneer USA’s interest is the same in the Replacement Well and Down-Spaced Well as it is in the Applicable Wellbore.

(e) Following each transaction described in subsection 4.03(c) or (d) above, the Parties shall amend Exhibit A-1 to the Pioneer Operating Agreement to reflect the Parties’ respective interests in the Replacement Well or Down-Spaced Well from the surface to the deepest producing perforation in such Replacement Well or Down-Spaced Well.

4.04 Pioneer USA shall have the right to take over Wellbores, Replacement Wells, and Down-Spaced Wells agreed to be permanently plugged and abandoned by the Parties for Pioneer USA’s exclusive use. If Pioneer USA elects to exercise such right, it shall pay PSE USA for its pro-rata share of the value of the salvable material and equipment, less its pro-rata shares of the estimated costs of salvaging, plugging and abandoning, and restoring the surface. If, however, such plugging and restoration costs are higher than the salvage value, PSE USA shall tender its pro-rata share of such excess to Pioneer USA. If Pioneer USA exercises this right to take over a Wellbore, Replacement Well, or Down-Spaced Well, PSE USA shall execute and deliver (or cause to be executed and delivered) to Pioneer USA a recordable assignment and bill of sale conveying to Pioneer USA all of PSE USA’s interest in such Wellbore, Replacement Well, or Down-Spaced Well. Pioneer USA shall fully protect, defend, indemnify, and hold PSE USA harmless from and against all losses, costs, claims, demands, expenses, damages, liabilities, suits, actions, judgments, and decrees arising out of, attributable to, or resulting from Pioneer USA’s subsequent operations on and in such Wellbore, Replacement Well, or Down-Spaced Well.

ARTICLE V
SPECIAL PROVISIONS REGARDING THE THIRD PARTY OPERATING AGREEMENTS

Notwithstanding anything to the contrary contained in any Third Party Operating Agreement, the Parties agree as follows:

5.01. PSE USA shall never vote to remove Pioneer USA as operator.

5.02 PSE USA shall have the right (along with other parties to the Third Party Operating Agreements) to propose, participate, and/or go non-consent in subsequent operations in the Wellbores and the drilling of Replacement Wells and/or Down-Spaced Wells, pursuant to the terms of such applicable Third Party Operating Agreement, subject to the following restrictions:

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(a) If a subsequent operation proposal by PSE USA conflicts with a subsequent operation proposal by Pioneer USA (regardless of which proposal preceded the other), PSE USA shall withdraw its proposal in favor of Pioneer USA’s proposal.

(b) If a subsequent operation proposal by Pioneer USA conflicts with a subsequent operation proposal by a third party Non-Operator, PSE USA shall vote in favor of Pioneer USA’s proposal.

5.03 With respect to any Replacement Well or Down-Spaced Well for which the Applicable Wellbore is subject to a Third Party Operating Agreement:

(a) PSE USA shall not propose any Replacement Well or Down-Spaced Well to a depth below the deepest producing perforation in the Applicable Wellbore.

(b) If Pioneer USA or any third party non-operator proposes a Replacement Well or Down-Spaced Well to be both (i) drilled and completed in an objective depth and/or interval that is deeper than the deepest producing perforation in the Applicable Wellbore, and (ii) dually completed in or commingled with production from a producing perforation in the Applicable Wellbore, then PSE USA shall have the right to participate in such proposal.

(c) If PSE USA participates in any proposal to drill a Replacement Well or Down-Spaced Well, then, following the completion of such Replacement Well or Down-Spaced Well, the Parties shall prepare and execute (or cause to be executed) such documents (comparable to those executed in conjunction with the Wellbores, and containing a comparable title indemnity) as are necessary for PSE USA to acquire an undivided interest in the wellbore of the Replacement Well or Down-Spaced Well from the surface to the deepest producing perforation in the Replacement Well or Down-Spaced Well, as the case may be (together with an easement for operating purposes extending an additional one hundred feet (100’) in depth), which undivided interest shall be in such amount that the ratio of PSE USA’s interest to Pioneer USA’s interest is the same in the Replacement Well and Down-Spaced Well as it is in the Applicable Wellbore. Prior to the spudding of any Replacement Well or Down-Spaced Well that is proposed to be drilled and completed in a deeper objective depth and/or interval than the deepest producing perforation in the Applicable Wellbore, and in consideration of the rights to participate in such well and to acquire such interest, PSE USA shall pay to Pioneer USA its working interest share of the fair market value of such objective depth and/or interval that is deeper than the deepest producing perforation in the Applicable Wellbore, as mutually agreed by Pioneer USA and PSE USA. If the Parties are unable to reach an agreement on the fair market value of such objective depth and/or interval, then the fair market value shall be determined by an independent appraiser as described above in Section 4.03(c).

(d) If no Replacement Well is proposed by any party, but Pioneer USA or any other party to a Third Party Operating Agreement subsequently drills and completes a well in which PSE USA does not have the right to participate as a producer or a dry hole at a deeper depth than the deepest existing perforation in the Applicable Wellbore within

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the applicable Existing Wellbore Tract, and Pioneer USA or any other party to such Third Party Operating Agreement thereafter proposes a plugback of such subsequent well as a Replacement Well or Down-Spaced Well, PSE USA shall have the right to participate in such plugback attempt, subject to (i) the approval of the other parties to such Third Party Operating Agreement, (ii) a well cost adjustment to be calculated in a manner consistent with the well cost adjustment mechanisms set forth in such Third Party Operating Agreement, as applicable, and (iii) if applicable, recovery of the nonconsent penalty under such Third Party Operating Agreement. If PSE USA participates in such plugback attempt, the Parties shall prepare and execute (or cause to be executed) such documents as are necessary for PSE USA to acquire an undivided interest in the Replacement Well or Down-Spaced Well from the surface to the deepest producing perforation in such well (together with an easement for operating purposes extending an additional one hundred feet (100’) in depth), which undivided interest shall be in such amount that the ratio of PSE USA’s interest to Pioneer USA’s interest is the same in the Replacement Well or Down-Spaced Well as it is in the Applicable Wellbore.

(e) Following each transaction described in subsection 5.03(c) or (d) above, Pioneer USA shall prepare and circulate to the other parties to the applicable Third Party Operating Agreement an amended Exhibit “A-1” (or other applicable exhibit) to such Third Party Operating Agreement to reflect the respective interests of the Parties and the other parties to such Third Party Operating Agreement in the Replacement Well or Down-Spaced Well from the surface to the deepest producing perforation in such Replacement Well or Down-Spaced Well.

ARTICLE VI

SPECIAL PROVISIONS REGARDING BOTH THE PIONEER OPERATING AGREEMENT AND THE THIRD
PARTY OPERATING AGREEMENTS

Notwithstanding anything to the contrary contained in either the Pioneer Operating Agreement or any Third Party Operating Agreement, the Parties agree as follows:

6.01. PSE USA shall have the right to take its share of production under any Third Party Operating Agreement in kind pursuant to terms and conditions substantially similar to those applicable to PSE USA in Article VI.G of the Pioneer Operating Agreement.

6.02 Subject to PSE USA’s right to take in kind as set forth above in Section 6.01 and in Article VI.G of the Pioneer Operating Agreement, for so long as Pioneer USA owns an interest in the Wellbores, Replacement Wells, and/or Down-Spaced Wells, Pioneer USA shall market all of PSE USA’s production on behalf of PSE USA from such Wellbores, Replacement Wells, and/or Down-Spaced Wells under the same terms and conditions as Pioneer USA markets its own production. While this right to market may include arrangements for processing gas, PSE USA shall be responsible for all applicable processing fees and charges and shall not share in plant revenues, discounts, or benefits derived from or attributable to Pioneer USA’s ownership in any such processing plant or facilities. Pioneer USA shall disburse (or cause to be disbursed) revenues to PSE USA and the other owners of production, including the royalty owners. Pioneer USA shall not have any liability to PSE USA for the failure to timely or properly pay any such disbursements to the other owners of production, or for any penalties and/or interest resulting therefrom.

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6.03. If a lease is lost due to title failure or by operation of its terms, PSE USA shall be allowed to participate under the renewal provision but INSOFAR AND ONLY INSOFAR as to the productive interval or behind-pipe intervals in the existing Wellbores, Replacement Wells, or Down-Spaced Wells, as the case may be. PSE USA shall reimburse Pioneer USA for its pro-rata share (being equal to its working interest in the well affected by the failure, or its weighted working interest, if more than one well is affected) of the actual leasing costs incurred by Pioneer USA.

6.04. PSE USA shall neither (a) make any application before a Governmental Body, including applications regarding spacing, down-spacing, density, special field rules, or allowables, except as hereinafter provided in this Section 6.04, nor (b) object to any such application made by Pioneer USA. Further, upon the request of Pioneer USA, PSE USA will affirmatively waive any objections to any such application by Pioneer USA. Notwithstanding anything in this paragraph to the contrary, PSE USA shall have the right to make application before a Governmental Body for exceptions to the Spraberry (Trend Area) special field rules for down-spacing to no less than twenty (20) acre density. If revised proration unit plats, Railroad Commission of Texas Forms P-15, and/or similar filings are needed in Pioneer USA’s sole judgment for any purpose, Pioneer USA shall prepare such proration unit plats, Railroad Commission of Texas Forms P-15, and/or similar filings for the Parties and submit same to the appropriate Governmental Body.

6.05. Pioneer USA shall tender all lease maintenance payments, if any, on behalf of PSE USA, subject to reimbursement from PSE USA. Pioneer USA shall retain and maintain all division of interest and revenue decks, and all well, lease, and contract files. Pioneer USA shall not have any liability to PSE USA for the failure to timely or properly tender any such lease maintenance payments, unless such failure results from the gross negligence or willful misconduct of Pioneer USA.

6.06. Subject to the further terms and conditions set forth below, PSE USA authorizes Pioneer USA to utilize the Existing Production Facilities as necessary in Pioneer USA’s sole discretion for separating, storing, handling, compressing, dehydrating, treating, and delivering oil, gas, and water from Pioneer Wells. Pioneer USA recognizes, however, that the Existing Production Facilities may be limited by physical restrictions from accepting some or all of the production from the Pioneer Wells, such that Pioneer USA may be required to construct its own Production Facilities.

(a) If Pioneer USA, as operator of the Existing Production Facilities, determines, in its sole discretion, that there is sufficient capacity (physical and contractual) at an Existing Production Facility to accommodate separately metered production from Pioneer Wells, Pioneer USA is authorized to construct, maintain, and operate gathering lines to deliver production from the Pioneer Wells to such Existing Production Facility. If the production from the Pioneer Wells will not be metered prior to being delivered to the Existing Production Facility, Pioneer USA shall install New Production Test Equipment to measure the production from the Pioneer Well(s). Pioneer USA shall pay for one hundred percent (100%) where no third party owners exist, and its pro-rata share (which shall include PSE USA’s share) where third party owners exist, of the costs of connecting the Pioneer Wells to the Existing Production Facility, including

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all costs associated with the installation of the New Production Test Equipment. Pioneer USA shall have no liability to PSE USA if the connection of a Pioneer Well to an Existing Production Facility requires or results in the temporary interruption of production delivered from other Wellbores, Replacement Wells, or Down-Spaced Wells connected to such Existing Production Facility. Further, Pioneer USA shall bear its proportionate share of the cost of maintaining and operating each Existing Production Facility, including any New Production Test Equipment – such proportionate share to be determined by dividing the total number of Pioneer Wells utilizing the Existing Production Facility by the total number of all wells utilizing such Existing Production Facility. After installation, the New Production Test Equipment shall be owned by the then-current owners and maintained and operated by the then-current operator of the Existing Production Facility.

(b) If Pioneer USA determines, in its sole discretion, that there is insufficient capacity (physical or contractual) at an Existing Production Facility to handle production from any Pioneer Well, Pioneer USA may elect to expand an Existing Production Facility to increase its capacity in order to handle such production. Pioneer USA shall pay for one hundred percent (100%) where no third party owners exist, and its pro-rata share (which shall include PSE USA’s share) where third party owners exist, of the expansion costs and the costs to subsequently connect the Pioneer Wells to the Expanded Production Facility. Pioneer USA shall have no liability to PSE USA if the expansion of an Existing Production Facility results in the temporary interruption of production from other Wellbores, Replacement Wells, or Down-Spaced Wells connected to such Existing Production Facility. Further, Pioneer USA shall bear its proportionate share of the cost of maintaining and operating the Expanded Production Facility – such proportionate share to be determined by dividing the total number of Pioneer Wells utilizing the Expanded Production Facility by the total number of all wells utilizing such Expanded Production Facility. After installation, the Expanded Production Facility shall be owned by the then-current owners and maintained and operated by the then-current operator of the applicable Existing Production Facility.

(c) Nothing herein shall be construed to impart, transfer, or convey any additional ownership or liability in an Existing Production Facility or Expanded Production Facility to Pioneer USA.

6.07 If Pioneer USA resigns as operator under the Pioneer Operating Agreement or any Third Party Operating Agreement (or is no longer the operator under any Third Party Operating Agreement for any reason), then any successor operator shall, upon the request of Pioneer USA, prepare and file with the appropriate Governmental Body such revised proration unit plats, Railroad Commission of Texas Forms P-15, and/or similar filings as may be necessary in Pioneer USA’s sole judgment for any purpose.

6.08 If (a) either Party proposes a Boundary Line Down-Spaced Well to be bottomed under or on the boundary line of an Existing Wellbore Tract, or (b) Pioneer USA, as the owner of a working interest in an Offsetting Tract, proposes a Boundary Line Down-Spaced Well to be bottomed under such Offsetting Tract, then Pioneer USA shall be authorized to negotiate an operating agreement for such well among the working interest owners in the Existing Wellbore

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Tract and the Offsetting Tract(s) to provide for the allocation of the working and net revenue interests among the working interest owners in the Existing Wellbore Tract and the working interest owners in the Offsetting Tract(s) who participate in such well; provided, however, that the participating working interest owners in the Existing Wellbore Tract, collectively, and the participating working interest owners in each Offsetting Tract, collectively, shall be allocated exactly fifty percent (50%) of such interests in the case of a Single Boundary Down-Spaced Well and exactly twenty-five percent (25%) of such interests in the case of a Dual Boundary Down-Spaced Well. PSE USA agrees to ratify any operating agreement that meets the foregoing conditions.

ARTICLE VII
MISCELLANEOUS PROVISIONS

7.01. Notices. All notices, requests, or consents provided for or permitted to be given pursuant to this Agreement must be in writing and must be given by depositing same in the United States mail, addressed to the Party to be notified, postpaid, and registered or certified with return receipt requested, or by delivering such notice in person or by telecopier or telegram to such Party. Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by telegram or telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours. All notices to be sent to a Party pursuant to this Agreement shall be sent to or made to the attention of such Party at the address set forth below or at such other address as such Party may stipulate to the other Parties in the manner provided in this Section 7.01.

PIONEER USA:

5205 N. O’Connor Blvd., Suite 200
Irving, Texas 75039
Phone: (972) 444-9001
Fax: (972) 969-3587
Attention: General Counsel

PSE USA:

c/o Pioneer Natural Resources GP LLC
5205 N. O’Connor Blvd., Suite 200
Irving, Texas 75039
Phone: (972) 444-9001
Fax: (972) 969-3587
Attention: General Counsel

7.02. Additional Properties. If the Parties acquire additional properties that they desire to be subject to this Agreement, they agree that Pioneer USA shall be the operator of such properties (unless the properties are subject to an operating agreement under which a third party is operator and will continue as operator), and agree to make such amendments to this Agreement (and, if applicable, the Pioneer Operating Agreement) as are necessary for this

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Agreement (and, if applicable, the Pioneer Operating Agreement) to apply to such additional properties.

7.03. Jurisdiction; Service of Process. Without limiting the Parties’ agreement to arbitrate in Section 7.17, any action or proceeding seeking a temporary or preliminary injunction to enforce any provision of, or based on any right arising out of, this Agreement must be brought against any of the Parties in the courts of the State of Texas, County of Dallas, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Texas (Dallas Division), and each of the Parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) for such limited purpose in any such action or proceeding and waives any objection to venue laid therein for such limited purpose. Process in any action or proceeding referred to in the preceding sentence may be served on any Party anywhere in the world.

7.04. Further Action. In connection with this Agreement and all transactions contemplated by this Agreement, each Party agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out, and perform all of the terms, provisions, and conditions of this Agreement and all such transactions.

7.05. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their heirs, executors, administrators, successors, legal representatives, and permitted assigns, as well as any Persons asserting rights or claims on behalf of any of the foregoing Persons. Without limiting the preceding sentence, if Pioneer USA resigns as operator under the Pioneer Operating Agreement or any Third Party Operating Agreement (or is no longer the operator under any Third Party Operating Agreement for any reason), the Parties shall cause the successor operator to be subject to and bound by the terms of this Agreement.

7.06. Effect of Waiver or Consent. No waiver or consent, express or implied, by any Party to or of any breach or default by the other Party in the performance by such Party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such Party of the same or any other obligations of such Party hereunder. Failure on the part of a Party to complain of any act of the other Party or to declare any Party in default, irrespective of how long such failure continues, shall not constitute a waiver by such Party of its rights hereunder until the applicable statute of limitations period has run.

7.07. Counterparts. This Agreement may be executed in counterparts, each of which together shall constitute an agreement binding on both Parties, notwithstanding that both Parties are not signatories to the original or the same counterpart. Each Party shall become bound by this Agreement immediately upon affixing its signature hereto.

7.08. Invalidity of Provisions. If any provision of this Agreement or the application thereof to any Party or circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to the other Party or other circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

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7.09. Amendment or Restatements. This Agreement may be amended or restated only by a written instrument executed by each of the Parties; provided, however, that after the completion of the initial public offering of units by Pioneer Southwest Energy Partners L.P., PSE USA may not, without the prior approval of the conflicts committee of the board of directors of Pioneer Natural Resources GP LLC, or, if there is no such committee, the independent members of such board of directors, agree to any amendment or modification of this Agreement that Pioneer Natural Resources GP LLC determines will adversely affect the holders of such units .

7.10. Assignment. Neither Party may assign all or any portion of its rights, nor delegate all nor any portion of its duties, hereunder, unless it continues to remain liable for the performance of its obligations hereunder, and obtains the prior written consent of the other Party, which consent shall not be unreasonably withheld; provided, however, a merger shall not be deemed to be an assignment and a transfer of the rights and an assumption of the obligations under this Agreement; provided further, however, that the transfer of all or substantially all of the assets of a Party shall not be deemed an assignment of such rights or obligations of such Party to this Agreement if the assignee assumes all of the obligations under this Agreement. Nothing contained in this Agreement, express or implied, shall confer on any person other than the Parties or their respective successors and permitted assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement. If PSE USA makes a permitted conveyance of interests in a Wellbore, Replacement Well, or Down-Spaced Well, it shall, at Pioneer USA’s request, take such actions as necessary to bind the assignee of such conveyance to this Agreement.

7.11. Direct or Indirect Action. Where any provision of this Agreement refers to action to be taken by any Party, or which such Party is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Party, including actions taken by or on behalf of any affiliate of such Party.

7.12. Laws and Regulations. Notwithstanding any provision of this Agreement to the contrary, no Party shall be required to take any act, or fail to take any act, under this Agreement if the effect thereof would be to cause such Party to be in violation of any applicable law, statute, rule or regulation.

7.13. No Recourse Against Officers, Directors, Managers, or Employees. For the avoidance of doubt, the provisions of this Agreement shall not give rise to any right of recourse against any officer, director, manager, or employee of any Party or any officer, director or employee of any affiliate of any Party.

7.14. Negation of Rights of Third Parties. The provisions of this Agreement are enforceable solely by the Parties, and no shareholder, member, or assignee of any Party shall have the right, separate and apart from such Party, to enforce any provision of this Agreement or to compel any Party to comply with the terms of this Agreement.

7.15. Construction. Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made a part hereof for all purposes; (d) the terms “include,” “includes,” “including” and words of like import shall be

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deemed to be followed by the words “without limitation”; (e) the terms “hereof,” “herein” and “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; and (f) references to money refer to legal currency of the United States of America. The table of contents and headings contained in this Agreement are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Agreement.

7.16. Choice of Law. This Agreement shall be subject to and governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state, except that the law of another jurisdiction shall apply to this Agreement insofar as this Agreement covers or relates to additional properties that become subject to this Agreement under Section 7.02 above for which it is mandatory that the law of another jurisdiction, wherein or adjacent to which such part of the Assets are located, shall apply.

7.17. Arbitration. Any disputes regarding fair market value under Sections 4.03(c) and 5.03(c) shall be resolved as provided in such sections. Any other claim, counterclaim, demand, cause of action, dispute, or any other controversy arising out of or relating in any way to this Agreement or to the subject matter of this Agreement or to any relationship created thereby (each a “Dispute”) shall be resolved by binding arbitration. A Dispute must be resolved through arbitration regardless of whether the Dispute involves claims that this Agreement is unlawful, unenforceable, void, or voidable, or involves claims sounding in tort, contract, statute, or common law. This Section 7.17 shall be binding on and shall inure to the benefit of the Parties and their respective affiliates and subsidiaries. The validity, construction, and interpretation of this agreement to arbitrate, and all other procedural aspects of the arbitration conducted pursuant hereto, shall be decided by the arbitral tribunal. Any arbitration under this Agreement shall be administered by the AAA and conducted in accordance with the Rules in existence at the time of the arbitration. In resolving any Dispute, the arbitral tribunal shall refer to the governing law as specified in Section 7.16 of this Agreement. The arbitral tribunal shall not be empowered to award exemplary, punitive, indirect, consequential, remote, speculative, treble, multiple, or special damages, and the Parties and their affiliates and subsidiaries waive any right they may have to recover such damages from one another. The arbitral tribunal shall not be empowered to decide any dispute ex aequo et bono or amiable compositeur. The seat (or legal place) and venue of the arbitration shall be in Dallas, Texas. The arbitration shall be conducted in the English language. The Dispute shall be decided by a panel of three neutral arbitrators. The claimant or claimants shall nominate an arbitrator at the time of service of a request for arbitration. The respondent or respondents shall nominate an arbitrator at the time of service of the response to the request for arbitration. If the claimant(s) or respondent(s) fail to appoint an arbitrator, then that arbitrator shall be appointed in accordance with the Rules. The two appointed arbitrators shall together agree upon a third arbitrator to recommend to the AAA to chair the arbitration. If the two party-appointed arbitrators are unable to agree upon an arbitrator within fifteen (15) days of the respondent’s appointment of an arbitrator, then the chairman shall be chosen according to the Rules. Notwithstanding the foregoing, if two or more respondents have interests with regard to a Dispute that are not completely common, then all arbitrators shall be appointed in accordance with the Rules and not by nomination or appointment by the Parties. Any arbitration award may be enforced by the courts sitting in Dallas, Texas, or any other court of competent subject matter jurisdiction (including any jurisdiction in which a Party holds or keeps assets).

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Any action to challenge, vacate, or set aside the award in whole or in part must be brought in the courts sitting in Dallas, Texas. The Parties and their affiliates and subsidiaries agree to waive any objections they may have to personal jurisdiction, venue, or forum non-conveniens for any action brought to enforce the award in the courts sitting in Dallas, Texas, or any other jurisdiction where a party against which enforcement of the award is sought holds or keeps assets.

7.18. Entire Agreement. This Agreement constitutes the entire agreement of the Parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, relating to the matters contained herein. No representation, promise, inducement, or statement of intention with respect to the subject matter of this Agreement has been made by either Party which is not embodied in this Agreement together with the documents, instruments, and writings that are delivered pursuant hereto, and neither Party shall be bound by or liable for any alleged representation, promise, inducement, or statement of intention not so set forth.

7.19. No Partnership Intended. If, for federal income tax purposes, this Agreement and the operations hereunder are regarded as a partnership, each Party elects to be excluded from the application of all of the provisions of Subchapter “K,” Chapter 1, Subtitle “A,” of the Internal Revenue Code of 1986, as amended (“Code”), as permitted and authorized by Section 761 of the Code and the regulations promulgated thereunder. Pioneer USA is authorized and directed to execute on behalf of each Party such evidence of this election as may be required by the Secretary of the Treasury of the United States or the Federal Internal Revenue Service, including specifically all of the returns, statements, and the data required by Treasury Regulation § 1.761. Should there be any requirement that each Party give further evidence of this election, each Party shall execute such documents and furnish such other evidence as may be required by the Federal Internal Revenue Service or as may be necessary to evidence this election. Neither Party shall give any notices or take any other action inconsistent with the election made hereby. If any present or future income tax laws of the state or states in which any Wellbore, Down-Spaced Well, or Replacement Well is located or any future income tax laws of the United States contain provisions similar to those in Subchapter “K,” Chapter 1, Subtitle “A,” of the Code, under which an election similar to that provided by Section 761 of the Code is permitted, each Party shall make such election as may be permitted or required by such laws. In making the foregoing election, each party states that the income derived by such party from operations hereunder can be adequately determined without the computation of partnership taxable income.

7.20. Rule Against Perpetuities. It is not the intent of the Parties that any provision herein violate any applicable law regarding the rule against perpetuities, and this Agreement shall be construed as not violating such rule to the extent the same can be construed consistent with the expressed intent of the Parties as set forth in this Agreement. In the event, however, that any provision of this Agreement is determined to violate such rule, then such provision shall nevertheless be effective for the maximum period (but not longer than the maximum period) permitted by such rule that will result in no such violation. To the extent such maximum period is permitted to be determined by reference to lives in being, the Parties agree that “lives in being” shall refer to the lifetime of the last to die of the now living lineal descendants of the late Joseph P. Kennedy, father of the late John F. Kennedy, the 35th President of the United States of America.

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[Signature Page Follows]

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EXECUTED as of the date hereof.


		Pioneer Natural Resources, USA, Inc.

		By:		/s/ Richard P. Dealy
		Name:		Richard P. Dealy
		Title:		Executive Vice President and Chief Financial Officer

		Pioneer Southwest Energy Partners USA LLC

		By:		Pioneer Natural Resources USA, Inc.,
				its sole member

		By:		/s/ Richard P. Dealy
		Name:		Richard P. Dealy
		Title:		Executive Vice President and Chief Financial Officer

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