Exhibit 10.3
Execution Version
 
 
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ENCORE ENERGY PARTNERS LP
 
 

 

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TABLE OF CONTENTS

             
ARTICLE I        
DEFINITIONS        
 
           
Section 1.1
  Definitions     1  
Section 1.2
  Construction     19  
ARTICLE II        
ORGANIZATION        
 
           
Section 2.1
  Formation     19  
Section 2.2
  Name     19  
Section 2.3
  Registered Office; Registered Agent; Principal Office; Other Offices     20  
Section 2.4
  Purpose and Business     20  
Section 2.5
  Powers     20  
Section 2.6
  Power of Attorney     21  
Section 2.7
  Term     22  
Section 2.8
  Title to Partnership Assets     22  
Section 2.9
  Certain Undertakings Relating to the Separateness of the Partnership     23  
ARTICLE III        
RIGHTS OF LIMITED PARTNERS        
 
           
Section 3.1
  Limitation of Liability     24  
Section 3.2
  Management of Business     24  
Section 3.3
  Outside Activities of the Limited Partners     24  
Section 3.4
  Rights of Limited Partners     24  
ARTICLE IV        
CERTIFICATES; RECORD HOLDERS; TRANSFER OF
PARTNERSHIP INTERESTS; REDEMPTION OF
PARTNERSHIP INTERESTS        
 
           
Section 4.1
  Certificates     25  
Section 4.2
  Mutilated, Destroyed, Lost or Stolen Certificates     26  
Section 4.3
  Record Holders     27  
Section 4.4
  Transfer Generally     27  
Section 4.5
  Registration and Transfer of Limited Partner Interests     28  
Section 4.6
  Transfer of the General Partner’s General Partner Interest     29  
Section 4.7
  Restrictions on Transfers     30  
Section 4.8
  Eligible Holder Certifications; Non-Eligible Holders     31  
Section 4.9
  Redemption of Partnership Interests of Non-Eligible Holders     32  

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ARTICLE V        
CAPITAL CONTRIBUTIONS AND ISSUANCE OF
PARTNERSHIP INTERESTS        
 
           
Section 5.1
  Organizational Contributions; Interim Closing     33  
Section 5.2
  Contributions by the General Partner and its Affiliates     34  
Section 5.3
  Contributions by Initial Limited Partners     34  
Section 5.4
  Interest and Withdrawal     35  
Section 5.5
  Capital Accounts     35  
Section 5.6
  Issuances of Additional Partnership Securities     37  
Section 5.7
  Limited Preemptive Right     38  
Section 5.8
  Splits and Combinations     39  
Section 5.9
  Fully Paid and Non-Assessable Nature of Limited Partner Interests     39  
Section 5.10
  Rights of Holders of Management Incentive Units     39  
ARTICLE VI        
ALLOCATIONS AND DISTRIBUTIONS        
 
           
Section 6.1
  Allocations for Capital Account Purposes     45  
Section 6.2
  Allocations for Tax Purposes     51  
Section 6.3
  Requirement and Characterization of Distributions; Distributions to Record
Holders     54  
Section 6.4
  Special Provisions Relating to the Holders of Management Incentive Units    
55  
ARTICLE VII        
MANAGEMENT AND OPERATION OF BUSINESS        
 
           
Section 7.1
  Management     55  
Section 7.2
  Certificate of Limited Partnership     58  
Section 7.3
  Restrictions on the General Partner’s Authority     58  
Section 7.4
  Reimbursement of the General Partner     58  
Section 7.5
  Outside Activities     59  
Section 7.6
  Loans from the General Partner; Loans or Contributions from the Partnership or
Group Members     61  
Section 7.7
  Indemnification     61  
Section 7.8
  Liability of Indemnitees     63  
Section 7.9
  Resolution of Conflicts of Interest; Standards of Conduct and Modification of
Duties     63  
Section 7.10
  Other Matters Concerning the General Partner     65  
Section 7.11
  Purchase or Sale of Partnership Securities     66  
Section 7.12
  Registration Rights of the General Partner and its Affiliates     66  
Section 7.13
  Reliance by Third Parties     68  

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ARTICLE VIII        
BOOKS, RECORDS, ACCOUNTING AND REPORTS        
 
           
Section 8.1
  Records and Accounting     69  
Section 8.2
  Fiscal Year     69  
Section 8.3
  Reports     69  
ARTICLE IX        
TAX MATTERS        
 
           
Section 9.1
  Tax Returns and Information     70  
Section 9.2
  Tax Elections     70  
Section 9.3
  Tax Controversies     71  
Section 9.4
  Withholding     71  
ARTICLE X        
ADMISSION OF PARTNERS        
 
           
Section 10.1
  Admission of Initial Limited Partners     71  
Section 10.2
  Admission of Substituted Limited Partners     71  
Section 10.3
  Admission of Successor General Partner     72  
Section 10.4
  Admission of Additional Limited Partners     72  
Section 10.5
  Amendment of Agreement and Certificate of Limited Partnership     73  
ARTICLE XI        
WITHDRAWAL OR REMOVAL OF PARTNERS        
 
           
Section 11.1
  Withdrawal of the General Partner     73  
Section 11.2
  Removal of the General Partner     75  
Section 11.3
  Interest of Departing General Partner and Successor General Partner     75  
Section 11.4
  Withdrawal of Limited Partners     77  
ARTICLE XII        
DISSOLUTION AND LIQUIDATION        
 
           
Section 12.1
  Dissolution     77  
Section 12.2
  Continuation of the Business of the Partnership After Dissolution     78  
Section 12.3
  Liquidator     78  
Section 12.4
  Liquidation     79  
Section 12.5
  Cancellation of Certificate of Limited Partnership     79  
Section 12.6
  Return of Contributions     80  
Section 12.7
  Waiver of Partition     80  

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Section 12.8
  Capital Account Restoration     80  
ARTICLE XIII        
AMENDMENT OF PARTNERSHIP AGREEMENT;
MEETINGS; RECORD DATE        
 
           
Section 13.1
  Amendments to be Adopted Solely by the General Partner     80  
Section 13.2
  Amendment Procedures     82  
Section 13.3
  Amendment Requirements     82  
Section 13.4
  Special Meetings     83  
Section 13.5
  Notice of a Meeting     83  
Section 13.6
  Record Date     83  
Section 13.7
  Adjournment     84  
Section 13.8
  Waiver of Notice; Approval of Meeting; Approval of Minutes     84  
Section 13.9
  Quorum and Voting     84  
Section 13.10
  Conduct of a Meeting     85  
Section 13.11
  Action Without a Meeting     85  
Section 13.12
  Right to Vote and Related Matters     86  
ARTICLE XIV        
MERGER OR CONVERSION        
 
           
Section 14.1
  Authority     86  
Section 14.2
  Procedure for Merger, Consolidation or Conversion     86  
Section 14.3
  Approval by Limited Partners     88  
Section 14.4
  Certificate of Merger or Conversion     89  
Section 14.5
  Amendment of Partnership Agreement     89  
Section 14.6
  Effect of Merger, Consolidation or Conversion     89  
ARTICLE XV        
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS        
 
           
Section 15.1
  Right to Acquire Limited Partner Interests     90  
ARTICLE XVI        
GENERAL PROVISIONS        
 
           
Section 16.1
  Addresses and Notices; Written Communications     92  
Section 16.2
  Further Action     93  
Section 16.3
  Binding Effect     93  
Section 16.4
  Integration     93  
Section 16.5
  Creditors     93  
Section 16.6
  Waiver     93  

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Section 16.7
  Counterparts     93  
Section 16.8
  Applicable Law     93  
Section 16.9
  Invalidity of Provisions     93  
Section 16.10
  Consent of Partners     94  
Section 16.11
  Facsimile Signatures     94  
Section 16.12
  Third-Party Beneficiaries     94  

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SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF ENCORE ENERGY PARTNERS LP
     THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF ENCORE
ENERGY PARTNERS LP dated as of September 17, 2007, is entered into by and among
Encore Energy Partners GP LLC, a Delaware limited liability company, as the
General Partner, and the other parties hereto, as limited partners, together
with any other Persons who become Partners in the Partnership or parties hereto
as provided herein, and amends and restates in its entirety the Agreement of
Limited Partnership of Encore Energy Partners LP dated as of February 13, 2007,
as amended and restated by the First Amended and Restated Agreement of Limited
Partnership of Encore Energy Partners LP dated as of May 10, 2007. 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, an allocable portion
of 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
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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.
     “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, (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, a Management Incentive Unit or any other Partnership
Interest shall be the amount that such Adjusted Capital Account would be if such
General Partner Interest, Common Unit, Management Incentive 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, Management Incentive 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.
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     “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 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 among each separate property on a basis proportional to the fair
market value of each Contributed Property.
     “Agreement” means this Second Amended and Restated Agreement of Limited
Partnership of Encore Energy Partners LP, as it may be amended, supplemented or
restated from time to time.
     “Amended and Restated Administrative Services Agreement” means the Amended
and Restated Administrative Services Agreement, dated as of September 17, 2007,
among the General Partner, the Partnership, the Operating Company and Encore
Operating, L.P., as it may be amended, supplemented or restated from time to
time.
     “Anniversary Date” means the first anniversary of the Conversion Date of a
Management Incentive Unit.
     “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, including a Eligible Holder
Certification, as required by this Agreement, 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
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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.
     “Board of Directors” means the board of directors or managers, as
applicable, of a corporation or limited liability company or the board of
directors or board of managers, as applicable, of the general partner of a
limited partnership.
     “Book Basis Derivative Items” means any item of income, deduction, gain,
loss, Simulated Depletion, Simulated Gain or Simulated Loss included in the
determination of Net Income or Net Loss that is computed with reference to the
Carrying Value of an Adjusted Property (e.g., depreciation, Simulated 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 States of New York or 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, a Management Incentive Unit or any
other Partnership Interest shall be the amount that such Capital Account would
be if such General Partner Interest, Common Unit, Management Incentive 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, Management Incentive Unit or other Partnership Interest was first
issued.
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     “Capital Contribution” means any cash, cash equivalents or the Net Agreed
Value of Contributed Property (which, in the case of a Capital Contribution by
the General Partner pursuant to Section 5.2(b) may include Units (other than
General Partner Units) owned by the General Partner) that a Partner contributes
to the Partnership pursuant to this Agreement.
     “Carrying Value” means (a) with respect to a Contributed 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, 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. 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.
     “Change-in-Control” means (a) a “Change in Control” as defined in Parent’s
2000 Incentive Stock Plan, as such plan may be amended, supplemented or restated
from time to time, (b) any Person or group, other than Parent or its Affiliates,
becomes the beneficial owner, by way of merger, consolidation, recapitalization,
reorganization or otherwise, of 50% or more of the combined voting power of the
equity interests in the General Partner or the Partnership, (c) the Limited
Partners approve, in one or a series of transactions, a plan of complete
liquidation of the Partnership, (d) 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, (e) a transaction resulting in a Person other
than Encore Energy Partners GP LLC or one of its Affiliates being the general
partner of the Partnership, or (f) a transaction resulting in the general
partner of the Partnership ceasing to be an Affiliate of Parent.
     “claim” (as used in Section 7.12(c)) has the meaning assigned to such term
in Section 7.12(c).
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     “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 (other than the NASDAQ
Global Select Market) 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 (other than
the NASDAQ Global Select Market), 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 Global Select 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.
     “Common Unit Equivalents” means the number of Common Units which a
Management Incentive Unit is considered to represent under Section 5.10(d) or,
if applicable, under Section 6.3(d).
     “Conflicts Committee” means a committee of the Board of Directors of the
General Partner composed entirely of two or more directors who are not
(a) security holders, officers or employees of the General Partner,
(b) officers, directors or employees of any Affiliate of the General Partner or
(c) holders of any ownership interest in the Partnership Group other than Common
Units and who also meet the independence standards required of directors who
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.
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     “Continuous Employment” means continued employment by Parent (or any
successor), any subsidiary of Parent (or any successor), the Partnership, the
General Partner or any Affiliate of the Partnership or the General Partner.
     “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, Conveyance and
Assumption Agreement, dated as of the Closing Date, among the General Partner,
the Partnership, the Operating Company and certain other parties, together with
the additional conveyance documents and instruments contemplated or referenced
thereunder, as such may be amended, supplemented or restated from time to time.
     “Conversion Date” means the date that a Management Incentive Unit is
converted into Common Units pursuant to Section 5.10(e).
     “Conversion Notice” has the meaning assigned to such term in Section 5.10.
     “Curative Allocation” means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).
     “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 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
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United States or of any state thereof. For the avoidance of doubt, onshore
mineral leases 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.
     “Excess Allocations” has the meaning assigned to such term in
Section 6.1(c)(i)(B).
     “Excess Available Cash” has the meaning assigned to such term in
Section 6.3(d).
     “Executive” means any of I. Jon Brumley, Jon S. Brumley, Robert C. Reeves,
L. Ben Nivens or John W. Arms or their Permitted Transferees.
     “Event of Withdrawal” has the meaning assigned to such term in
Section 11.1(a).
     “Fifth Target Distribution” has the meaning assigned to such term in
Section 5.10(d)(v).
     “First Conversion Milestone” has the meaning assigned to such term in
Section 5.10(e)(i).
     “First Target Distribution” has the meaning assigned to such term in
Section 5.10(d)(i).
     “Fourth Conversion Milestone” has the meaning assigned to such term in
Section 5.10(e)(i).
     “Fourth Target Distribution” has the meaning assigned to such term in
Section 5.10(d)(iv).
     “General Partner” means Encore Energy Partners 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.
     “Grantee” has the meaning assigned to such term in Section 5.10(f)(i).
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     “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 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).
     “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, 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, 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 Partners” means the Organizational Limited Partner, I. Jon
Brumley, Jon S. Brumley, Robert C. Reeves, L. Ben Nivens, John W. Arms, Encore
Operating, L.P., a Texas limited partnership, and 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.
     “Interim Closing Date” means May 10, 2007.
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     “Issuance Date” means any date following the Conversion Date and prior to
the Anniversary Date on which the Partnership issues additional Partnership
Securities.
     “Issue Price” means the price at which a Unit is purchased from the
Partnership, net of any sales commission or underwriting discount charged to the
Partnership.
     “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; provided, however, that when the term “Limited
Partner” is used herein in the context of any vote or other approval, including
Articles XIII and XIV, such term shall not, solely for such purpose, include any
holder of a Management Incentive Unit (solely with respect to its Management
Incentive Units and not with respect to any other Limited Partner Interest held
by such Person) except as may otherwise be required by law or (b) solely for
purposes of Articles V, VI, VII, 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,
Management Incentive 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; provided, however, that when the term
“Limited Partner Interest” is used herein in the context of any vote or other
approval, including Articles XIII and XIV, such term shall not, solely for such
purpose, include a Management Incentive Unit except as may otherwise be required
by law.
     “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.
     “Management Incentive Unit” means a Partnership Security representing a
fractional part of the Partnership Interests of all Limited Partners and having
the rights and obligations specified with respect to Management Incentive Units
in this Agreement.
     “Merger Agreement” has the meaning assigned to such term in Section 14.1.
     “MIU Allocation Limit” has the meaning assigned to such term in
Section 6.1(c)(i)(B).
     “MIU Conversion Limit” has the meaning assigned to such term in
Section 5.10(e).
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     “MIU Distribution Limit” has the meaning assigned to such term in
Section 6.3(d).
     “MIU Limits” has the meaning assigned to such term in Section 5.10(i).
     “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, Simulated Losses and Simulated Depletion, but shall not
include any items specially allocated under Section 6.1(d); 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)(xii) 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, Simulated Losses and Simulated Depletion, but shall not
include any items specially allocated under Section 6.1(d); 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)(xii) 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
after the Liquidation Date. 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, Simulated Losses and Simulated
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Depletion, but shall not include any items of income, gain or loss specially
allocated under Section 6.1(d).
     “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
after the Liquidation Date. 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, Simulated Losses and Simulated Depletion, but shall not
include any items of income, gain or loss specially allocated under
Section 6.1(d).
     “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).
     “Notice of Election to Purchase” has the meaning assigned to such term in
Section 15.1(b).
     “Operating Company” means Encore Energy Partners Operating LLC, a Delaware
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 Limited Partner” means Encore Partners LP Holdings LLC, a
Delaware limited liability company, 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
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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.
     “Parent” means Encore Acquisition Company and its successors and permitted
assigns.
     “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 Encore Energy Partners LP, 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 Section 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,
Management Incentive Units and General Partner Units.
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     “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 Common 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, the number of Common Units held by
such Unitholder or Assignee, or the number of Common Unit Equivalents held or,
if the provisions of Section 6.3(d) apply, deemed to be held by such Unitholder
or Assignee, as the case may be, by (B) the total number of Outstanding Common
Units, the total number of Outstanding Common Unit Equivalents 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; provided, that with respect to the calculations in
Section 5.10(e)(vi) and Section 5.10(e)(vii), in-the-money options, rights,
warrants and appreciation rights relating to Partnership Securities shall be
deemed to be Outstanding in the form of the associated Partnership Securities to
the extent vested.
     “Permitted Transferee” means (i) the Partnership and (ii) an Executive’s
Relatives, any trust of which there are no principal beneficiaries other than
such Executive or one or more of such Executive’s Relatives, or a corporation,
partnership, limited liability company or other Person of which there are no
owners other than such Executive, one or more of such Executive’s Relatives or
another entity of which there are no other owners other than such Executive or
one or more of such Executive’s Relatives (provided that each such transferee
agrees to be bound by the terms of this Agreement as if it were an original
party hereto and further agrees that it shall not thereafter transfer such
Management Incentive Units to any Person to whom such transferor would not be
permitted to transfer such Management Incentive Units pursuant to the terms of
this Agreement).
     “Person” means an individual or a corporation, firm, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other entity.
     “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, (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, and (c) when used with
respect to holders of Management Incentive Units, apportioned equally among all
holders of Management Incentive Units in accordance with the relative number or
percentage of Management Incentive Units held by each such holder.
     “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.
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     “Quarter” means, unless the context requires otherwise, a fiscal quarter of
the Partnership, or, with respect to the fiscal quarter of the Partnership which
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 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.
     “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
(Registration No. 333-142847) 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.
     “Relatives” means, collectively, an Executive’s spouse, parents, children,
grandchildren, siblings, mothers and fathers-in-law, sons and daughters-in-law,
and brothers and sisters-in-law.
     “Remaining Net Positive Adjustments” means as of the end of any taxable
period, (a) with respect to the Unitholders holding Common Units, the excess of
(i) the Net Positive Adjustments of the Unitholders holding Common Units 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, (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, and (c) with respect to the holders of Management Incentive
Units, the excess of (a) the Net Positive Adjustments of the holders of
Management Incentive Units as of the end of such period over (b) the sum of the
Share of Additional Book Basis Derivative Items of the holders of the Management
Incentive Units for each prior taxable period.
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     “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)(iv), 6.1(d)(vii) or 6.1(d)(ix).
     “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 or Simulated
Depletion or Simulated Loss is not allocated pursuant to Section 6.2(d)(i)(A) or
6.2(d)(ii)(A), respectively, to eliminate Book-Tax Disparities.
     “Second Conversion Milestone” has the meaning assigned to such term in
Section 5.10(e)(i).
     “Second Target Distribution” has the meaning assigned to such term in
Section 5.10(d)(ii).
     “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.
     “Seventh Target Distribution” has the meaning assigned to such term in
Section 5.10(d)(vii).
     “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 Common Units, 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,
(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, and (c) with respect to the Partners holding
Management Incentive Units, the amount that bears the same ratio to such
Additional Book Basis Derivative Items as the Remaining Net Positive Adjustments
of the Partners holding the Management Incentive Units as of the end of such
period bears to the Aggregate Remaining Net Positive Adjustments as of that
time.
     “Sharing Percentage” 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 Common 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 Common Units held by
such Unitholder or Assignee, as the case may be, by (B) the total number of
Outstanding Common Units and
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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. The Management Incentive Units will be
disregarded in the computation of “Sharing Percentage.”
     “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 in
accordance with federal income tax principles (as if the Simulated Basis of the
property was its adjusted tax basis) and in the manner specified in Treasury
Regulation § 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 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 of the Carrying Value of an oil or gas
property over the amount realized from the sale or other disposition of such
property.
     “Sixth Target Distribution” has the meaning assigned to such term in
Section 5.10(d)(vi).
     “Special Approval” means approval by a majority of the members of the
Conflicts Committee acting in good faith.
     “Stated Distribution” means $0.35 per Common Unit or such other amount
determined by the Conflicts Committee upon reissuance of a Management Incentive
Unit as contemplated by Section 5.10(f)(iii).
     “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, a general or limited partner of such partnership or
member of such limited liability company, but 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.
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     “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.
     “Surviving Business Entity” has the meaning assigned to such term in
Section 14.2(b)(ii).
     “Target Distribution” means the First Target Distribution, the Second
Target Distribution, the Third Target Distribution, the Fourth Target
Distribution, the Fifth Target Distribution, the Sixth Target Distribution or
the Seventh Target Distribution, as the case may be.
     “Third Conversion Milestone” has the meaning assigned to such term in
Section 5.10(e)(i).
     “Third Target Distribution” has the meaning assigned to such term in
Section 5.10(d)(iii).
     “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 the form set forth on the back of a Certificate or in a form
substantially to the same effect in a separate instrument.
     “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 as
of September 11, 2007, among the Underwriters, the Partnership, the General
Partner, the Operating Company and the other parties thereto, 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 and Management Incentive Units but shall not include
the General Partner Interest.
     “Unitholders” means the holders of Units.
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     “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 Partners have previously
formed the Partnership as a limited partnership pursuant to the provisions of
the Delaware Act and hereby amend and restate the First Amended and Restated
Agreement of Limited Partnership of Encore Energy Partners LP 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.
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     The name of the Partnership shall be “Encore Energy Partners LP” 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,” “LP,” “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, New Castle County, 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 777 Main Street, Suite 1400, Fort Worth,
Texas 76102 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 777 Main Street, Suite 1400, Fort Worth, Texas 76102 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 (a) 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, 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 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 (b) 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 decline to propose or approve, the conduct by the Partnership of any
business free of any fiduciary duty or obligation whatsoever to the Partnership,
any Limited Partner or Assignee and, in declining to so propose or approve,
shall not be required to act in good faith or 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.
Section 2.5 Powers.
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     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 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.
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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
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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. The Partnership shall not (i) pay its own
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
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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 Encore Acquisition 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, 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
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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 Units
being so issued. In addition, (a) 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 (b) upon the request
of any Person owning Management Incentive Units or any other Partnership
Securities other than Common Units, the
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Partnership shall issue to such Person one or more certificates evidencing such
Management Incentive Units or other Partnership Securities other than Common
Units. Certificates shall be executed on behalf of the Partnership by the
Chairman of the Board, 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, the 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. Subject to the requirements
of Section 6.4, the Partners holding Certificates evidencing Management
Incentive Units may exchange such Certificates for Certificates evidencing
Common Units on or after the date on which such Management Incentive Units are
converted into Common Units pursuant to the terms of Section 5.10.
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 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 Units before the General Partner has notice that the Certificate
has 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 Limited Partner Interests
represented by the Certificate is registered before the Partnership,
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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 Units.
          (c) As a condition to the issuance of any new Certificate or
uncertificated 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 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 or by
which a holder of Management Incentive Units assigns its Management Incentive
Units 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 (other
than a Management Incentive Unit) 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
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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. The Partnership shall not recognize transfers of
Certificates evidencing Limited Partner Interests unless such transfers are
effected in the manner described in this Section 4.5. Upon surrender of a
Certificate for registration of transfer of any Limited Partner Interests
evidenced by a Certificate, and subject to the provisions of 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.
          (b) 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 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 has been delivered.
          (c) Upon the receipt of proper transfer instructions from the
registered owner of uncertificated Common Units, such uncertificated Common
Units shall be cancelled, issuance of new equivalent uncertificated Common Units
or Certificates shall be made to the holder of Common Units entitled thereto and
the transaction shall be recorded upon the books of the Partnership.
          (d) Limited Partner Interests may be transferred only in the manner
described in this Section 4.5. 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 Record Holder 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.
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          (f) A transferee of a Limited Partner Interest who has completed and
delivered a Transfer Application 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.
          (h) Notwithstanding the foregoing, no Executive may transfer any
Management Incentive Unit, except to a Permitted Transferee, without the prior
written consent of the General Partner, and any such purported transfer in
conflict with the foregoing is void.
Section 4.6 Transfer of the General Partner’s General Partner Interest.
          (a) Subject to Section 4.6(c) below, prior to June 30, 2017, 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 June 30, 2017, the
General Partner may at its option 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.
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Section 4.7 Restrictions on Transfers.
          (a) Except as provided in Section 4.7(c) below, and 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 ENCORE ENERGY
PARTNERS LP 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 ENCORE ENERGY PARTNERS LP UNDER THE LAWS OF THE STATE OF
DELAWARE, OR (C) CAUSE ENCORE ENERGY PARTNERS LP 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). ENCORE
ENERGY
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PARTNERS GP LLC, THE GENERAL PARTNER OF ENCORE ENERGY PARTNERS LP, 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 ENCORE ENERGY PARTNERS LP 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 in a Transfer Application or
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 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 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 or 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 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
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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 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, redeem
the Limited Partner Interest of such Limited Partner or Assignee as follows:
          (i) 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 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 or, if uncertificated, upon receipt of evidence
satisfactory to the General Partner of the ownership of 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 evidencing
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.
          (ii) The aggregate redemption price for Redeemable Interests shall be
an amount equal to 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 a
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.
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          (iii) 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.
          (iv) After the redemption date, Redeemable Interests shall no longer
constitute issued and Outstanding Limited Partner Interests.
          (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 that he is an Eligible Holder. 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; Interim Closing.
          (a) 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 $12.00 for the General Partner Interest in the
Partnership and has been admitted as the general partner of the Partnership, and
the Organizational Limited Partner made an initial Capital Contribution to the
Partnership in the amount of $588.00 for a 98% Limited Partner Interest in the
Partnership and has been admitted as a limited partner of the Partnership.
          (b) On the Interim Closing Date, the Partnership converted the Limited
Partner Interest of the Organizational Limited Partner into 10,279,639 Common
Units and the General Partner Interest of the General Partner into 221,013
General Partner Units. Also on the Interim Closing Date, the Partnership issued
to the Management Incentive Units as follows:
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      Name   Partnership Interest
I. Jon Brumley
  143,000 Management Incentive Units
Jon S. Brumley
  143,000 Management Incentive Units
Robert C. Reeves
  110,000 Management Incentive Units
L. Ben Nivens
  77,000 Management Incentive Units
John W. Arms
  77,000 Management Incentive Units

Section 5.2 Contributions by the General Partner and its Affiliates.
          (a) On the Closing Date and pursuant to the Contribution Agreement,
(i) Encore Operating, L.P. shall contribute to the Partnership, as a Capital
Contribution, certain oil and natural gas properties located in the Permian
Basin of West Texas in exchange for 4,043,478 Common Units and (ii) the General
Partner shall contribute to the Partnership, as a Capital Contribution, 260,870
Common Units in exchange for 260,870 General Partner Units.
          (b) 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 Article XII, the General Partner shall
not be obligated to make any additional Capital Contributions to the
Partnership.
Section 5.3 Contributions by Initial Limited Partners.
          (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) Upon the exercise 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.
          (c) 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
Section 5.2(a) in aggregate number equal to 4,043,478, (ii) the Common Units
issuable pursuant to subparagraph (a) hereof in aggregate number equal to
9,000,000, and (iii) the “Option Units” as such term is used in the
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Underwriting Agreement in an aggregate number up to 1,350,000 issuable upon
exercise of the Over-Allotment Option pursuant to subparagraph (b) hereof.
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 any other Group Member that is classified as a partnership
for federal income tax purposes and 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.
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          (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 as if the adjusted
basis of such property were equal to the Carrying Value of such property
immediately following such adjustment.
          (vi) If the Partnership’s adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction shall,
solely for purposes hereof, be deemed to be an additional depreciation or cost
recovery deduction in the year such property is placed in service and shall be
allocated among the Partners pursuant to Section 6.1. Any restoration of such
basis pursuant to Section 48(q)(2) of the Code shall, to the extent possible, be
allocated in the same manner to the Partners to whom such deemed deduction was
allocated.
          (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.
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          (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
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 during such period
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 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 in a sale of 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 during such period 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 the 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 Partners.
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          (b) Each additional 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 the
Partnership Security (including sinking fund provisions); (v) whether 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 each 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; and (viii) the right, if
any, of each such Partnership Security to vote on Partnership matters, including
matters relating to the relative rights, preferences and privileges of 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 (represented by General Partner Units) or any
Management Incentive Units into Common Units pursuant to the terms of this
Agreement, (iii) the admission of Additional Limited Partners and (iv) all
additional issuances of Partnership Securities. The General Partner shall
determine the relative rights, powers and duties of the holders of the Units or
other 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 or in connection with the
conversion of the General Partner Interest or any Management Incentive Units
into Common 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 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, no Person shall
have any preemptive, preferential or other similar right with respect to the
issuance of 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 from the Partnership whenever, and on the same terms
that, the Partnership issues 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
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its Affiliates equal to that which existed immediately prior to the issuance of
such Partnership Securities.
Section 5.8 Splits and Combinations.
          (a) Subject to Section 5.6(d), the Partnership may make a Pro Rata
distribution of Partnership Securities to all Record Holders or may effect a
subdivision or combination of Partnership Securities so long as, after any such
event, each Partner shall have the same Percentage Interest in the Partnership
as before such event, 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 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 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 as of the
applicable Record Date representing the new number of 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 Outstanding, the Partnership shall require, as a
condition to the delivery to a Record Holder of such new Certificate or
uncertificated Partnership Securities, the surrender of any Certificate 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 of the Delaware Act.
Section 5.10 Rights of Holders of Management Incentive Units.
          (a) Vesting. If an Executive remains in Continuous Employment, the
Management Incentive Units held by such Executive shall vest in three equal
installments as follows: 33 1/3 percent on each of the Closing Date, the first
anniversary of the Closing Date and the second anniversary of the Closing Date.
If an Executive ceases to be in Continuous Employment, any unvested Management
Incentive Units shall be immediately forfeited to the Partnership, except as
expressly provided otherwise below.
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          (b) Voting and Other Rights. An Executive shall not be entitled to any
voting rights or any Sharing Percentage with respect to a Management Incentive
Unit, but for all other purposes an Executive shall have all of the rights and
obligations of a Limited Partner holding Common Units hereunder.
          (c) Termination of Employment; Forfeiture.
          (i) Upon termination of an Executive’s Continuous Employment as a
result of the death of such Executive, the conditions in Section 5.10(a) shall
be deemed satisfied with respect to the Executive’s Management Incentive Units,
and the restrictions on such units shall lapse and such units shall vest in the
Executive’s legal representative, beneficiary or heir.
          (ii) Upon termination of an Executive’s Continuous Employment as a
result of the disability of such Executive, the Management Incentive Units held
by such Executive shall continue to be subject to the restrictions set forth
herein, which restrictions shall lapse and such units shall vest in the
Executive. The disability of an Executive shall mean (1) the total disability of
the Executive as determined in accordance with Parent’s long-term disability
insurance benefit plan or (2) the total and permanent disability as determined
by the Board of Directors of the General Partner in its sole discretion.
          (iii) Upon termination of an Executive’s Continuous Employment for any
reason other than as described in subsections (i) and (ii) above, all Management
Incentive Units held by such Executive as to which the restrictions thereon
shall not have previously lapsed shall be immediately forfeited to the
Partnership.
          (d) Common Unit Equivalents. For purposes of determining the right of
a Management Incentive Unit to distributions under Section 6.3, each Management
Incentive Unit will be considered to equal a number of Common Unit Equivalents
determined as follows:
          (i) if distributions of Available Cash per Common Unit with respect to
a Quarter are less than the Stated Distribution multiplied by 1.1 (the “First
Target Distribution”), each Management Incentive Unit shall represent 1.0000
Common Unit Equivalents with respect to such Quarter;
          (ii) if distributions of Available Cash per Common Unit with respect
to a Quarter are equal to or greater than the First Target Distribution but less
than the First Target Distribution multiplied by 1.1 (the “Second Target
Distribution”), each Management Incentive Unit shall represent 1.2500 Common
Unit Equivalents with respect to such Quarter;
          (iii) if distributions of Available Cash per Common Unit with respect
to a Quarter are equal to or greater than the Second Target Distribution but
less than the Second Target Distribution multiplied by 1.1 (the “Third Target
Distribution”), each Management Incentive Unit shall represent 1.5625 Common
Unit Equivalents with respect to such Quarter;
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          (iv) if distributions of Available Cash per Common Unit with respect
to a Quarter are equal to or greater than the Third Target Distribution but less
than the Third Target Distribution multiplied by 1.1 (the “Fourth Target
Distribution”), each Management Incentive Unit shall represent 1.9531 Common
Unit Equivalents with respect to such Quarter;
          (v) if distributions of Available Cash per Common Unit with respect to
a Quarter are equal to or greater than the Fourth Target Distribution but less
than the Fourth Target Distribution multiplied by 1.1 (the “Fifth Target
Distribution”), each Management Incentive Unit shall represent 2.4414 Common
Unit Equivalents with respect to such Quarter;
          (vi) if distributions of Available Cash per Common Unit with respect
to a Quarter are equal to or greater than the Fifth Target Distribution but less
than the Fifth Target Distribution multiplied by 1.1 (the “Sixth Target
Distribution”), each Management Incentive Unit shall represent 3.0518 Common
Unit Equivalents with respect to such Quarter;
          (vii) if distributions of Available Cash per Common Unit with respect
to a Quarter are equal to or greater than the Sixth Target Distribution but less
than the Sixth Target Distribution multiplied by 1.1 (the “Seventh Target
Distribution”), each Management Incentive Unit shall represent 3.8147 Common
Unit Equivalents with respect to such Quarter; and
          (viii) if distributions of Available Cash per Common Unit with respect
to a Quarter are equal to or greater than the Seventh Target Distribution, each
Management Incentive Unit shall represent 4.7684 Common Unit Equivalents.
For purposes of this Section 5.10, the determination of Available Cash per
Common Unit will be tentatively determined based upon the number of Common Units
represented by the then Outstanding number of Management Incentive Units under
this Section 5.10(d) with respect to the previous Quarter (as adjusted for any
conversions in the current Quarter). If the computation of the Available Cash
per Common Unit under the previous sentence causes the number of Common Unit
Equivalents to increase or decrease under the terms of this Section 5.10(d), the
Available Cash per Common Unit will be recomputed using the increased or
decreased number of Common Unit Equivalents. If the recomputation of the
Available Cash per Common Unit taking into account the increased or decreased
Common Unit Equivalents is less than (or greater than) the applicable Target
Distribution that caused the Common Unit Equivalents to tentatively increase (or
decrease), the Common Unit Equivalents will be the same as those Outstanding for
the previous Quarter (or, if applicable, the Common Unit Equivalents associated
with the level of Target Distribution which is supported following
recomputation).
          (e) Conversion of Management Incentive Units. Management Incentive
Units shall convert into Common Units as provided in this Section 5.10(e).
Immediately upon the conversion of a Management Incentive Unit into a Common
Unit pursuant to this Section
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5.10(e), the Executive shall possess all of the rights and obligations of a
Unitholder holding a Common Unit hereunder. Common Units received upon
conversion of Management Incentive Units shall be fully vested, regardless of
the vesting schedule set forth in Section 5.10(a). Notwithstanding the
foregoing, a Management Incentive Unit that has converted into a Common Unit
pursuant to this Section 5.10(e) shall be subject to the provisions of
Section 6.1(d)(x) and Section 6.4.
          (i) If the Partnership makes distributions of Available Cash per
Common Unit with respect to four consecutive Quarters in an amount equal to or
greater than the Fourth Target Distribution multiplied by four (the “First
Conversion Milestone”), the Fifth Target Distribution multiplied by four (the
“Second Conversion Milestone”), the Sixth Target Distribution multiplied by four
(the “Third Conversion Milestone”) or the Seventh Target Distribution multiplied
by four (the “Fourth Conversion Milestone”), then, at any time and from time to
time for so long as the Partnership makes distributions of Available Cash per
Common Unit in an amount equal to or greater than the First Conversion
Milestone, the Second Conversion Milestone, the Third Conversion Milestone or
the Fourth Conversion Milestone, an Executive shall be entitled to convert such
Executive’s Management Incentive Units, in whole or in part and whether vested
or unvested, into Common Units at a conversion ratio equal to 2.4414, 3.0518,
3.8147 or 4.7864 Common Units per Management Incentive Unit, respectively. If an
Executive desires to convert Management Incentive Units as provided in the
immediately preceding sentence, then such Executive shall deliver to the General
Partner a written notice of conversion (a “Conversion Notice”) together with any
Certificates representing such Management Incentive Units duly endorsed for
transfer. Upon receipt of the Conversion Notice and any Certificates
representing such Management Incentive Units duly endorsed for transfer, an
Executive shall be deemed to be the holder of record of the number of Common
Units issuable upon conversion, notwithstanding that the Certificates
representing such Common Units shall not then actually be delivered to such
person. Upon conversion, each Management Incentive Unit shall be canceled by the
General Partner, subject to the provisions of Section 5.10(f).
          (ii) [Reserved]
          (iii) If an Executive ceases Continuous Employment other than by
reason of death or disability, then the Board of Directors of the General
Partner may, in its sole discretion, elect to convert all or a portion of the
Management Incentive Units held by such Executive into Common Units at a
conversion ratio equal the number of Common Unit Equivalents then represented by
a Management Incentive Unit pursuant to Section 5.10(d).
          (iv) If an Executive ceases Continuous Employment due to death or
disability (as described in Section 5.10(c)(i) or Section 5.10(c)(ii)), all of
the Management Incentive Units held by such Executive shall be automatically
converted into Common Units at a conversion ratio equal the number of Common
Unit Equivalents then represented by a Management Incentive Unit pursuant to
Section 5.10(d).
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          (v) All Management Incentive Units shall be fully vested and, at the
election of the Executive, shall be convertible into Common Units at any time
and from time to time following a Change-in-Control at a conversion ratio equal
the number of Common Unit Equivalents represented by a Management Incentive Unit
pursuant to Section 5.10(d) at the time of the Executive’s election.
          (vi) Notwithstanding anything in this Section 5.10(e) to the contrary,
in no event shall the Management Incentive Units, in the aggregate, be
convertible into Common Units having a Percentage Interest of more than 5.1%
(after giving effect to the conversion of such Management Incentive Units) (the
“MIU Conversion Limit”). If at any time the Management Incentive Units would be
convertible, except for the preceding sentence, into a number of Common Units
that would exceed the MIU Conversion Limit, then the conversion ratio with
respect to such Management Incentive Units shall be deemed to equal the
conversion ratio that would result in the Management Incentive Units, in the
aggregate, being convertible into Common Units having a Percentage Interest of
5.1% (after giving effect to the conversion of such Management Incentive Units).
Any reduction in the deemed Common Unit Equivalents pursuant to the previous
sentence shall be done on a pro rata basis, such that the Common Unit
Equivalents associated with each Management Incentive Unit is reduced by an
equal amount.
          (vii) If the number of Common Units issued upon conversion of a
Management Incentive Unit is limited by the provisions of Section 5.10(e)(vi)
and the Partnership issues additional Partnership Securities prior to the
Anniversary Date, then the holder who converted such Management Incentive Unit
shall be entitled to receive as of the first distribution of available Cash
after each Issuance Date a number of additional Common Units equal to (A) the
number of Common Units which such holder would have been entitled to receive for
such Management Incentive Unit if such conversion had occurred on the date of
the first distribution of Available Cash after each Issuance Date (after taking
into consideration any limitations in Section 5.10(e)(vi)) less (B) the number
of Common Units which such holder has previously received in respect of such
Management Incentive Unit. The provisions of this Section 5.10(e)(vii) shall be
applied to each successive issuance of Partnership Securities prior to the
Anniversary Date.
          (f) Reissuance of Management Incentive Units. Management Incentive
Units that have been forfeited or converted as provided in this Section 5.10 may
be reissued, with the approval of the Conflicts Committee, as set forth in this
Section 5.10(f):
          (i) In the event any Management Incentive Units are forfeited to the
Partnership as provided in Section 5.10(a) or Section 5.10(c)(iii), then the
General Partner may, with the approval of the Conflicts Committee, reissue such
Management Incentive Units to one or more Persons (a “Grantee”). In the event of
any such reissuance, such Management Incentive Units shall have all of the
rights and obligations under this Agreement as if such Management Incentive
Units had been continuously held by the Grantee, subject to any vesting or other
restrictions imposed by the Conflicts Committee.
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          (ii) In the event any Management Incentive Units are converted to
Common Units as provided in Section 5.10(e)(i), Section 5.10(e)(iii) or
Section 5.10(e)(iv), then the General Partner may, with the approval of the
Conflicts Committee, reissue the Management Incentive Units that were so
converted to one or more Grantees. In the event of any such reissuance, such
Management Incentive Units shall have all of the rights and obligations under
this Agreement as if such Management Incentive Units had been continuously held
by the Grantee, subject to any vesting or other restrictions and restrictions on
conversion privileges imposed by the Conflicts Committee.
          (iii) In the event the Management Incentive Units are converted to
Common Units and distributions of Available Cash per Common Unit with respect to
a Quarter are equal to or greater than the Seventh Target Distribution, then the
General Partner may, with the approval of the Conflicts Committee, reissue the
Management Incentive Units that were so converted to one or more Grantees. In
the event of any such reissuance, (i) the Stated Distribution with respect to
such reissued Management Incentive Units shall be determined by the Conflicts
Committee and (ii) the Management Incentive Units shall be subject to any
vesting or other restrictions imposed by the Conflicts Committee.
          (g) Deemed Distributions; Conversion Ratio Adjustments. For purposes
of this Section 5.10, distributions of Available Cash with respect to a Quarter
shall be deemed to have been made when the Board of Directors of the General
Partner determines that such distributions shall be payable to holders of Common
Units. If a conversion event described in Section 5.10(e) occurs during the
period between the end of a Quarter and the date when the Board of Directors of
the General Partner determines the amount of the distribution of Available Cash
with respect to such Quarter, then the Board of Directors of the General Partner
may determine that Management Incentive Units represent a greater or lesser
number of Common Unit Equivalents based on the expected distribution of
Available Cash with respect to such Quarter.
          (h) Delivery of Certificates. The issuance or delivery of Certificates
representing Common Units upon the conversion of Management Incentive Units
shall be made without charge to an Executive or for any tax in respect of the
issuance or delivery of such Certificates or the securities represented thereby,
and such Certificates shall be issued or delivered in the respective names of,
or in such names as may be directed by, such Executive; provided, however, that
the Partnership shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any such
Certificate in a name other than that of the Executive, and the Partnership
shall not be required to issue or deliver such Certificate unless or until the
Person or Persons requesting the issuance or delivery thereof shall have paid to
the Partnership the amount of such tax or shall have established to the
reasonable satisfaction of the Partnership that such tax has been paid;
provided, further, however, that the Partnership shall not be required to issue
or deliver any such Certificates to the extent such action would be in violation
of federal or state securities laws.
          (i) Adjustment of MIU Conversion Limit, MIU Distribution Limit and MIU
Allocation Limit. In the event that Management Incentive Units are converted
pursuant to Section 5.10(e) or are forfeited pursuant to Section 5.10(c), the
MIU Conversion Limit, the MIU
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Distribution Limit and the MIU Allocation Limit (the “MIU Limits”) shall be
adjusted by reducing each MIU Limit by the aggregate Percentage Interest of the
forfeited or converted Management Incentive Units immediately prior to the
conversion or forfeiture; provided, that if Management Incentive Units are
subsequently reissued after forfeiture or conversion as provided in Section
5.10(f), then the MIU Limits shall again be adjusted by increasing each MIU
Limit (up to a maximum of 5.1%) by the aggregate Percentage Interest of the
Management Incentive Units that were reissued immediately following such
reissuance.
          (j) Fractional Common Units. The Partnership shall not issue
fractional Common Units to a holder of Management Incentive Units upon any
conversion of Management Incentive Units or upon the issuance of additional
Common Units as contemplated by Section 5.10(e)(vii). If the conversion of
Management Incentive Units or the issuance of additional Common Units as
contemplated by Section 5.10(e)(vii), in the aggregate, would result in the
issuance of fractional Common Units to such holder but for the provisions of
this Section 5.10(j), each fractional Common Unit shall be rounded to the
nearest whole Common Unit (and a 0.5 Common Unit shall be rounded to the next
higher Common Unit).
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 Section 6.1(d) and any allocations to other Partnership Securities, Net
Income for each taxable year and all items of income, gain, loss, deduction,
Simulated Depletion, Simulated Gain and Simulated Loss taken into account in
computing Net Income for such taxable year shall be allocated to the Partners in
accordance with their respective Sharing Percentages.
          (b) Net Losses. After giving effect to the special allocations set
forth in Section 6.1(d) and any allocations to other Partnership Securities, Net
Losses for each taxable period and all items of income, gain, loss, deduction,
Simulated Depletion, Simulated Gain and Simulated Loss taken into account in
computing Net Losses for such taxable period shall be allocated to the Partners
in accordance with their respective Sharing Percentages; 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 year (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 Section 6.1(d), all items of income, gain,
loss, deduction, Simulated
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Depletion, Simulated Gain and Simulated Loss 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 Percentage
Interests; provided, however, that in no event shall the holders of Management
Incentive Units be allocated, in the aggregate, Net Termination Gain in an
amount in excess of the amount that, when all such Net Termination Gain is
allocated to all Partners, would cause the Capital Accounts of the holders of
the Management Incentive Units, in the aggregate, to exceed 5.1% of the Capital
Accounts of all Partners immediately following the allocation of Net Termination
Gain (the “MIU Allocation Limit”). If the holders of Management Incentive Units
would be entitled, except for the preceding sentence, to be allocated Net
Termination Gain in an amount in excess of the MIU Allocation Limit (“Excess
Allocations”), then the holders of Management Incentive Units shall be deemed to
hold, in the aggregate, such number of Common Unit Equivalents as would entitle
such holders to an allocation of an amount of Net Termination Gain such that,
when all such Net Termination Gain is allocated to all Partners, the Capital
Accounts of the holders of the Management Incentive Units, in the aggregate,
would equal 5.1% of the Capital Accounts of all Partners immediately following
the allocation of Net Termination Gain, and all Excess Allocations shall instead
be allocated to the Partners in accordance with their respective Percentage
Interests (but ignoring the Percentage Interests of the holders of the Common
Unit Equivalents). Any reduction in the Common Unit Equivalents pursuant to the
previous sentence shall be done on a pro rata basis, such that the Common Unit
Equivalents associated with each Management Incentive Unit is reduced by an
equal amount.
          (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:
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          (A) First, 100% to all Partners in the proportions of their relative
Capital Accounts per Unit and per General Partner Unit, until the Capital
Account in respect of each Common Unit then Outstanding, in respect of each
Management Incentive Unit then Outstanding and each General Partner Unit then
Outstanding have all 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)(vi) and 6.1(d)(vii)). 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)(vi) and 6.1(d)(vii), 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) Priority Allocations. All or any portion of the remaining items
of Partnership gross income or gain for the taxable period, if any, shall be
allocated to the holders of Management Incentive Units in proportion to and to
the extent of the excess of (A) the cumulative amount of all distributions made
to such holder of Management Incentive Units with respect to each Management
Incentive Unit held by such holder
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from the Closing Date to a date 45 days after the end of the current taxable
year, over (B) the aggregate amount of such items allocated with respect to such
Management Incentive Unit held by such holder pursuant to this Section
6.1(d)(iii) for the current taxable year and all previous taxable years.
          (iv) 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 (ii).
          (v) 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
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)(v) 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)(v) were
not in this Agreement.
          (vi) Non-Recourse Deductions. Non-Recourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their respective
Sharing Percentages. 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.
          (vii) 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.
          (viii) 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
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amount of Non-Recourse Built-in Gain shall be allocated among the Partners in
accordance with their respective Sharing Percentages.
          (ix) 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.
          (x) Economic Uniformity. With respect to any taxable period ending
upon, or after, the date a Conversion Notice is given by a holder of Management
Incentive Units pursuant to Section 5.10, items of Partnership income and gain
shall be allocated 100% to each Partner holding such to be converted Management
Incentive Units until each such Partner has been allocated an amount of
Partnership income or gain that increases the Capital Account maintained with
respect to each to be converted Management Incentive Unit to an amount equal to
the product of (1) the number of Common Units into which such to be converted
Management Incentive Units are to be converted and (2) the then existing Capital
Account for each Common Unit. The purpose for this allocation is to establish
uniformity between the Capital Accounts underlying converted Management
Incentive Units and the Capital Accounts underlying Common Units held by Persons
other than the General Partner and its Affiliates other than the Executives
immediately prior to the conversion of Management Incentive Units into Common
Units.
          (xi) 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 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 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)(xi)(A) shall only be made with
respect to Required Allocations to the extent the General Partner determines
that such allocations will otherwise
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be inconsistent with the economic agreement among the Partners. Further,
allocations pursuant to this Section 6.1(d)(xi)(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)(xi)(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)(xi)(A) among the Partners in a manner that is likely to minimize
such economic distortions.
          (xii) Corrective Allocations. In the event of any allocation of
Additional Book Basis Derivative Items or any Book-Down Event or any recognition
of a Net Termination Loss, the following rules shall apply:
          (A) In the case of any allocation of Additional Book Basis Derivative
Items (other than an allocation of Unrealized Gain or Unrealized Loss under
Section 5.5(d) hereof), the General Partner shall allocate additional items of
income and gain away from the holders of Management Incentive Units to the
Unitholders and the General Partner, or additional items of deduction and loss
away from the Unitholders and the General Partner to the holders of Management
Incentive Units, to the extent that the Additional Book Basis Derivative Items
allocated to the Unitholders or the General Partner exceed their Share of
Additional Book Basis Derivative Items. For this purpose, the Unitholders and
the General Partner shall be treated as being allocated Additional Book Basis
Derivative Items to the extent that such Additional Book Basis Derivative Items
have reduced the amount of income that would otherwise have been allocated to
the Unitholders or the General Partner under the Partnership Agreement (e.g.,
Additional Book Basis Derivative Items taken into account in computing cost of
goods sold would reduce the amount of book income otherwise available for
allocation among the Partners). Any allocation made pursuant to this Section
6.1(d)(xii)(A) shall be made after all of the other Agreed Allocations have been
made as if this Section 6.1(d)(xii) were not in this Agreement and, to the
extent necessary, shall require the reallocation of items that have been
allocated pursuant to such other Agreed Allocations.
          (B) 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
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Remaining Net Positive Adjustments shall be allocated pursuant to Section 6.1(c)
hereof.
          (C) In making the allocations required under this Section 6.1(d)(xii),
the General Partner may apply whatever conventions or other methodology it
determines will satisfy the purpose of this Section 6.1(d)(xii). The General
Partner may, in its discretion, amend the provisions of this Section 6.1(d)(xii)
to provide for an alternative mechanism for making special allocations to
holders of Management Incentive Units and Common Units if it determines that
such an alternative mechanism would be administrative convenient.
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 Sharing Percentages.
          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);
          (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
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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
pursuant 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 and 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
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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 Partnership’s
common basis of such property, despite any inconsistency of such approach with
Treasury Regulation Section 1.167(c)-l(a)(6), Treasury
Regulation Section 1.197-2(g)(3), 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) 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
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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), Section 6.3(d) or
Section 6.3(e), within 45 days following the end of each Quarter commencing with
the Quarter ending on September 30, 2007, 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) Notwithstanding anything in this Agreement to the contrary, in no
event shall the holders of Management Incentive Units receive, in the aggregate,
distributions of Available Cash with respect to a Quarter in an amount in excess
of 5.1% of all distributions of Available Cash with respect to such Quarter (the
“MIU Distribution Limit”). If the holders of Management Incentive Units would be
entitled, except for the preceding sentence, to receive distributions of
Available Cash with respect to a Quarter in an amount in excess of the MIU
Distribution Limit (“Excess Available Cash”), then with respect to such Quarter
the holders of Management Incentive Units shall be deemed to hold, in the
aggregate, such number of Common Unit Equivalents as would entitle such holders
to 5.1% of all distributions of Available Cash
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with respect to such Quarter and all Excess Available Cash shall be distributed
by the Partnership to the Partners in accordance with their respective
Percentage Interests (but ignoring the Percentage Interests of the holders of
the Common Unit Equivalents). Any reduction in the deemed Common Unit
Equivalents pursuant to the previous sentence shall be done on a pro rata basis,
such that the Common Unit Equivalents associated with each Management Incentive
Unit is reduced by an equal amount.
          (e) With respect to the distribution for the Quarter in which the
Closing Date occurs, the amount of Available Cash distributed to the Partners in
accordance with Section 6.3(a) shall equal 100% of the Available Cash with
respect to such Quarter multiplied by a fraction of which the numerator is the
number of days in the period commencing on the Closing Date and ending on the
last day of the Quarter in which the Closing Date occurs and of which the
denominator is the number of days in such Quarter. The remaining Available Cash
with respect to such Quarter shall be distributed to the Partners of the
Partnership immediately prior to the closing of the Initial Closing Date Pro
Rata.
Section 6.4 Special Provisions Relating to the Holders of Management Incentive
Units.
     The holder of a Management Incentive Unit that has converted into one or
more Common Units pursuant to Section 5.10 shall not be issued a Certificate
representing Common Units pursuant to Section 4.1 and shall not be permitted to
transfer its converted Management Incentive Units to a Person that is not a
Permitted Transferee until such time as the General Partner determines, based on
advice of counsel, that a converted Management Incentive Unit should have, as a
substantive matter, like intrinsic economic and United States federal income tax
characteristics, in all material respects, to the intrinsic economic and United
States federal income tax characteristics of the Common Units held by Persons
other than the General Partner and its Affiliates immediately prior to the
conversion of such Management Incentive Units into Common Units. In connection
with the condition imposed by this Section 6.4, the General Partner shall take
whatever steps are required to provide economic uniformity to the converted
Management Incentive Units in preparation for a transfer of such converted
Management Incentive Units, including the application of Section 6.1(d)(xii);
provided, however, that, except for the application of Section 6.1(d)(xii), the
General Partner shall not take any such steps which would have a material
adverse effect on the Unitholders holding Common Units.
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
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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, 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 acquisition, 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 this clause (iii) 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 same 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
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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 purchase, sale or other acquisition or disposition of
Partnership Securities, or the issuance of options, rights, warrants,
appreciation rights and tracking and phantom interests 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, the Group Member Agreement of each other Group Member, the
Underwriting Agreement, the Amended and Restated Administrative Services
Agreement, the Contribution Agreement and the other agreements 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 (on its own or through any officer of the Partnership) is
authorized to execute, deliver and perform the agreements 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 Affiliate of any of them of this
Agreement or any agreement 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
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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 any limitations contained in the Amended and Restated
Administrative Services Agreement, the General Partner shall be reimbursed on a
quarterly basis, or such other basis as the General Partner may determine, for
(i) all direct and indirect expenses it incurs or payments it makes on behalf 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
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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
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 to purchase or rights, warrants or
appreciation rights or phantom or tracking interests relating to Partnership
Securities), or cause the Partnership to issue 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 and directors 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 and sell to
the General Partner or any of its Affiliates any Partnership Securities that the
General Partner or such Affiliates are obligated to provide to any employees and
directors pursuant to any such employee benefit plans, employee programs or
employee practices. Expenses incurred by the General Partner in connection with
any such plans, programs and practices (including the net cost to the General
Partner or such Affiliates of 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 as described in or contemplated by the
Registration Statement 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), each Indemnitee (other
than the General Partner) shall have the right 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
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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. None of any Group Member, any
Limited Partner or any other Person shall have any rights by virtue of this
Agreement, any Group Member Agreement, or the partnership relationship
established hereby in any business ventures of any Indemnitee. 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 is hereby approved by the Partnership
and all Partners, (ii) it shall be deemed not to be a 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 and (iii) the Indemnitees shall have no obligation hereunder or
as a result of any duty expressed or implied by law to present business
opportunities to the Partnership.
          (c) Subject to the terms of Section 7.5(a) and Section 7.5(b), but
otherwise notwithstanding anything to the contrary in this Agreement, the
doctrine of corporate opportunity, or any analogous doctrine, shall not apply to
any Indemnitee (including the General Partner) and no Indemnitee (including the
General Partner) who acquires knowledge of a potential transaction, agreement,
arrangement or other matter that may be an opportunity for the Partnership shall
have any duty to communicate or offer such opportunity to the Partnership, 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) pursues or acquires for itself, directs such opportunity to
another Person or does not communicate such opportunity or information to the
Partnership; provided such Indemnitee does not engage in such business or
activity as a result of or using confidential or proprietary information
provided by or on behalf of the Partnership to such Indemnitee.
          (d) The General Partner and each of its Affiliates may acquire Units
or other 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 option, all rights relating to all Units or other 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, 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.
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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 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.
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, 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) with respect
to its or their obligations incurred pursuant to the Underwriting Agreement, the
Amended and Restated Administrative Services Agreement or the Contribution
Agreement (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) 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 defending
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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.
          (c) 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.
          (d) 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.
          (e) 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.
          (f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
          (g) 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.
          (h) 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.
          (i) 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
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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.
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) Subject to its obligations and duties as General Partner set forth
in Section 7.1(a), 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, 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, of any Group
Member Agreement, of any agreement contemplated herein or therein, or of any
duty stated or implied by law or equity, if the resolution or course of action
in respect of such conflict of interest is (i) approved by Special Approval,
(ii) approved by the vote of a majority of the
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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 (including other transactions
that may be particularly favorable or advantageous to the Partnership). The
General Partner shall be authorized but not required in connection with its
resolution of 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. If Special Approval is sought,
then it shall be presumed that, in making its decision, the Conflicts Committee
acted in good faith, and if Special Approval is not sought and the Board of
Directors of the General Partner determines that the resolution or course of
action taken with respect to a conflict of interest satisfies either of the
standards set forth in clauses (iii) or (iv) above, then it shall be presumed
that, in making its decision, the Board of Directors acted in good faith, and in
either case, 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 approval, 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
interest described in the Registration Statement are hereby approved by all
Partners and shall not constitute a breach of this Agreement.
          (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 as opposed to in its
individual capacity, 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. In order for a determination or other action to
be in “good faith” for purposes of this Agreement, the Person or Persons making
such determination or taking or declining to take such other action must believe
that the determination or other action is in the best interests of the
Partnership.
          (c) 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 individual capacity as opposed to 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 the General Partner,
or such Affiliates causing it to do so, are entitled to make such determination
or to take or decline to take such other action free of any fiduciary duty or
obligation whatsoever to the Partnership, any Limited Partner or Assignee, and
the General Partner, or such Affiliates causing it to do so, shall not be
required to act in good faith or 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. By
way of illustration and not of limitation, whenever the phrase, “at the option
of the General Partner,” or some variation of that phrase, is used in this
Agreement, it
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indicates that the General Partner is acting in its individual capacity. For the
avoidance of doubt, whenever the General Partner votes or transfers its General
Partner Interest, to the extent permitted under this Agreement, or refrains from
voting or transferring its General Partner Interest, it shall be acting in its
individual capacity. The General Partner’s organizational documents may provide
that determinations to take or decline to take any action in its individual,
rather than representative, capacity 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, the
General Partner and its Affiliates shall have no duty or obligation, express or
implied, to (i) sell or otherwise dispose of any asset of the Partnership Group
other than in the ordinary course of business or (ii) 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 at its option.
          (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.
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.
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          (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 or any Group Member.
Section 7.11 Purchase or Sale of Partnership Securities.
     The General Partner may cause the Partnership to purchase or otherwise
acquire Partnership Securities. As long as Partnership Securities are held by
any Group Member, such Partnership Securities shall not be considered
Outstanding for any purpose, except as otherwise provided herein. The General
Partner or any Affiliate of the General Partner may also purchase or otherwise
acquire and sell or otherwise dispose of Partnership Securities for its own
account, subject to the provisions of Articles IV and X.
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 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 (including a “shelf” registration statement) registering the
offering and sale of the number of Partnership Securities specified by the
Holder; provided, however, that the Partnership shall not be required to effect
more than three registrations pursuant to this Section 7.12(a); and provided
further, 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 right pursuant to this
Section 7.12(a) not to be utilized more than once in any twelve-month period. 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 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
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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(d), 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 notify all Holders of such
proposal and 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 any 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 adversely and materially affect 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 so adversely and materially
affect 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), or in any summary or
final prospectus or any free writing prospectus or in any amendment or
supplement thereto (if used during the period the Partnership is required to
keep the registration statement current), or
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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 any
free writing 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 Section 7.12(a) and Section 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
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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, 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 or accessible through the Partnership’s or the Commission’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, including a balance
sheet and statements of operations, Partnership equity and cash flows, such
statements to be audited by an independent registered public accounting firm
selected by the General Partner.
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          (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 or accessible through the Partnership’s or the
Commission’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.
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 by the General Partner. In the event the
Partnership is required to use a taxable year other than a year ending on
December 31, the General Partner shall use reasonable efforts to change the
taxable year of the Partnership to a year ending on December 31. 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.
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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.
          (a) The Organizational Limited Partner, I. Jon Brumley, Jon S.
Brumley, Robert C. Reeves, L. Ben Nivens and John W. Arms were admitted to the
Partnership as Initial Limited Partners in respect of the Common Units and
Management Incentive Units issued to them on the Interim Closing Date as
described in Section 5.1(b).
          (b) Upon the issuance by the Partnership of Common Units to Encore
Operating, L.P. and to the Underwriters as described in Section 5.2(a) and
Section 5.3, respectively, 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 shall, however, only have the authority
to convey to a purchaser or other transferee who does not execute and deliver a
Transfer Application (a) the right to negotiate such Certificate to a purchaser
or other transferee and (b) the right to transfer the right to request admission
as a Substituted Limited Partner to
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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 to a
transferee or assist or participate in any way with respect to the completion or
delivery thereof. Each transferee of a Limited Partner Interest (including any
nominee holder or an agent acquiring such Limited Partner Interest for the
account of another Person) who executes and delivers a properly completed
Transfer Application shall, by virtue of such execution and delivery, be an
Assignee. Such 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, 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 with respect to which a
properly completed, duly executed Transfer Application has been received to be
recorded in the books and records of the Partnership. 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. With respect to voting rights attributable to Limited Partner
Interests that are held by Assignees, the General Partner shall be deemed to be
the Limited Partner with respect thereto and shall, in exercising the voting
rights in respect of such Limited Partner Interests on any matter, vote such
Limited Partner Interests at the written direction of the Assignee who is the
Record Holder of such Limited Partner Interests. If no such written direction is
received, such Limited Partner Interests will not be voted. 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
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          (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, 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 the records of the Partnership 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;
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          (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 Central
Time, on June 30, 2017, 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 Central
Time, on June 30, 2017, 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
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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
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continued, prior to the date the business of the Partnership is continued), to
purchase the Combined Interest for such 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, the 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 (x) quotient obtained
by dividing (A) the Sharing
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Percentage of the General Partner Interest of the Departing General Partner by
(B) a percentage equal to 100% less the Sharing Percentage of the General
Partner Interest of the Departing General Partner and (y) 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 Sharing
Percentage and its Percentage Interest, as the case may be, 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 Sharing Percentage or its Percentage
Interest, as the case may be.
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;
          (c) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
          (d) at any time there are no Limited Partners, unless the Partnership
is continued without dissolution in accordance with the Delaware Act.
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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
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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
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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 monies 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
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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 of issuance of any class or
series of 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 the terms of Section 2.4;
          (k) a change that the General Partner determines to be necessary or
advisable to effect the reissuance of the Management Incentive Units as
contemplated by Section 5.10(f) or, to the extent approved by the Conflicts
Committee, a change in the definition of “Change-in-Control” or modification to
other provisions of Section 5.10 relating to the vesting, forfeiture, conversion
or delivery of the Management Incentive Units;
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          (l) a merger or conveyance or conversion pursuant to Section 14.3(d);
or
          (m) any other amendments substantially similar to the foregoing.
Section 13.2 Amendment Procedures.
     Except as provided in Sections 13.1 and 13.3, all amendments to this
Agreement shall be made in accordance with the following requirements.
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 free of any
fiduciary duty or obligation whatsoever to the Partnership, any Limited Partner
or Assignee and, in declining to propose an amendment, to the fullest extent
permitted by law shall not be required to act in good faith or 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 at its option.
          (c) Except as provided in Section 14.3, and without limitation of the
General Partner’s authority to adopt amendments to this Agreement without the
approval of any Partners or Assignees as contemplated in Section 13.1, any
amendment that would have a material adverse effect on the rights or preferences
of any class of Partnership Interests in relation to other
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classes of Partnership Interests must be approved by the holders of not less
than a majority of the Outstanding Partnership Interests of the class affected.
          (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,
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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 which 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.
     The holders of a majority of the Outstanding Units of the class or classes
for which a meeting has been called (including Outstanding Units deemed owned by
the General Partner) 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 be 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
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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 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
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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 free of any
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fiduciary duty or obligation whatsoever to the Partnership, any Limited Partner
or Assignee and, in declining to consent to a merger, consolidation or
conversion, shall not be required to act in good faith or 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 (i) 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) which the
holders of such interests, securities or rights are to receive in exchange for,
or upon conversion of their interests, securities or rights, and (ii) 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, operating agreement 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
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          (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 the 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 the case may be, 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 the case may be, 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 the case may be.
          (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 which 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 (A) 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
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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), (B) 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, (C) the Partnership is the Surviving Business Entity
in such merger or consolidation, (D) 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
(E) the number of 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, Consolidation 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.
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          (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 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,
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exercisable at its option, 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, its Affiliate or the Partnership, as the case may be, on the
record books of the Transfer Agent and the Partnership, and the General Partner
or any Affiliate of the General Partner, 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).
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          (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; Written Communications.
          (a) 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.
          (b) The terms “in writing”, “written communications,” “written notice”
and words of similar import shall be deemed satisfied under this Agreement by
use of e-mail and other forms of electronic communication.
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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 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 or, in the case of a Person acquiring a Unit, upon accepting
the certificate evidencing such Unit or executing and delivering a Transfer
Application as herein described, independently of the signature of any other
party.
Section 16.8 Applicable Law.
     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.
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.
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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.
     Each Partner agrees that any Indemnitee shall be entitled to assert rights
and remedies hereunder as a third-party beneficiary hereto with respect to those
provisions of this Agreement affording a right, benefit or privilege to such
Indemnitee.
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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.

            GENERAL PARTNER:

ENCORE ENERGY PARTNERS GP LLC
      By:   /s/ Jon S. Brumley         Jon S. Brumley        Chief Executive
Officer and President        LIMITED PARTNERS:

ENCORE PARTNERS LP HOLDINGS LLC
      By:   /s/ Jon S. Brumley         Jon S. Brumley        President       
ENCORE OPERATING, L.P.
      By:   EAP OPERATING, INC., its general partner             By:   /s/ Jon
S. Brumley         Jon S. Brumley        President and Chief Executive Officer 
          /s/ I. Jon Brumley       I. Jon Brumley            /s/ Jon S. Brumley
      Jon S. Brumley   

ENCORE ENERGY PARTNERS LP
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            /s/ Robert C. Reeves      Robert C. Reeves            /s/ L. Ben
Nivens       L. Ben Nivens            /s/ John W. Arms       John W. Arms       
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.

ENCORE ENERGY PARTNERS GP LLC
      By:   /s/ Jon S. Brumley         Jon S. Brumley        Chief Executive
Officer and President   

ENCORE ENERGY PARTNERS LP
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EXHIBIT A
to the Second Amended and Restated
Agreement of Limited Partnership of
Encore Energy Partners LP
Certificate Evidencing Common Units
Representing Limited Partner Interests in
Encore Energy Partners LP

No.                                             Common Units

     In accordance with Section 4.1 of the Second Amended and Restated Agreement
of Limited Partnership of Encore Energy Partners LP, as amended, supplemented or
restated from time to time (the “Partnership Agreement”), Encore Energy Partners
LP, 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 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 777 Main Street, Suite 1400,
Fort Worth, Texas 76102. 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 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.
     This Certificate shall be governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to principles of conflicts of
laws thereof.
     THE HOLDER OF THIS SECURITY ACKNOWLEDGES FOR THE BENEFIT OF ENCORE ENERGY
PARTNERS LP 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 ENCORE ENERGY PARTNERS
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LP UNDER THE LAWS OF THE STATE OF DELAWARE, OR (C) CAUSE ENCORE ENERGY PARTNERS
LP 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). ENCORE ENERGY PARTNERS GP LLC, THE GENERAL PARTNER OF ENCORE
ENERGY PARTNERS LP, 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 ENCORE ENERGY PARTNERS LP 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:                                                
Encore Energy Partners LP    
 
                        Countersigned and Registered by:       By:   Encore
Energy Partners GP LLC,
its General Partner    
 
                       
 
          By:                               as Transfer Agent and Registrar    
      Name:        
 
                 
 
   
By:
          By:                                       Authorized Signature        
  Secretary
   

ENCORE ENERGY PARTNERS LP
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

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[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   under
Uniform Gifts to     survivorship and not as   Minors Act              
                        tenants in common                            
       (State)    

     Additional abbreviations, though not in the above list, may also be used.
ASSIGNMENT OF COMMON UNITS
IN
ENCORE ENERGY PARTNERS LP

               FOR VALUE RECEIVED,                      hereby assigns, conveys,
sells and transfers unto
 
       
 
       
(Please print or typewrite name
  (Please insert Social Security or other    
and address of Assignee)
  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 Encore Energy Partners LP.

         
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.

ENCORE ENERGY PARTNERS LP
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

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          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 an Application
for Transfer of Common Units has been executed by a transferee either (a) on the
form set forth below or (b) 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.
ENCORE ENERGY PARTNERS LP
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

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APPLICATION FOR TRANSFER OF COMMON UNITS
     Transferees of Common Units must execute and deliver this application to
Encore Energy Partners LP, c/o Encore Energy Partners GP LLC, 777 Main Street,
Suite 1400, Fort Worth, Texas 76102; Attn: Chief Financial Officer, to be
admitted as limited partners to Encore Energy Partners LP.
     The undersigned (“Assignee”) hereby applies for transfer to the name of the
Assignee of the Common Units evidenced hereby and hereby certifies to Encore
Energy Partners LP (the “Partnership”) that the Assignee (including to the best
of Assignee’s knowledge, any person for whom the Assignee will hold the Common
Units) is an Eligible Holder.1
     The Assignee (a) requests admission as a Substituted Limited Partner and
agrees to comply with and be bound by, and hereby executes, the Second Amended
and Restated Agreement of Limited Partnership of Encore Energy Partners LP, as
amended, supplemented or restated to the date hereof (the “Partnership
Agreement”), (b) represents and warrants that the Assignee has all right, power
and authority and, if an individual, the capacity necessary to enter into the
Partnership Agreement, (c) appoints the General Partner of the Partnership and,
if a Liquidator shall be appointed, the Liquidator of the Partnership as the
Assignee’s attorney-in-fact to execute, swear to, acknowledge and file any
document, including, without limitation, the Partnership Agreement and any
amendment thereto and the Certificate of Limited Partnership of the Partnership
and any amendment thereto, necessary or appropriate for the Assignee’s admission
as a Substituted Limited Partner and as a party to the Partnership Agreement,
(d) gives the powers of attorney provided for in the Partnership Agreement, and
(e) makes the waivers and gives the consents and approvals contained in the
Partnership Agreement. Capitalized terms not defined herein have the meanings
assigned to such terms in the Partnership Agreement.
Date:                                                   

     
 
   
Social Security or other identifying number of Assignee
  Signature of Assignee
 
 
   
 
   
Purchase Price including commissions, if any
  Name and Address of Assignee

Type of Entity (check one):
      o      Individual                     o     Partnership
                     o     Corporation
 

1   The term Eligible Holder means a person or entity qualified to hold an
interest in oil and gas leases on 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 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.

ENCORE ENERGY PARTNERS LP
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

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     o     Trust
  o     Other (specify)
 
   
Nationality (check one):
   
 
         o     U.S. Citizen, Resident or Domestic Entity
 
   
     o     Foreign Corporation
  o     Non-resident Alien

     If the U.S. Citizen, Resident or Domestic Entity box 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 interestholder’s interest in it, the undersigned hereby certifies
the following (or, if applicable, certifies the following on behalf of the
interestholder).
Complete Either A or B:

A.   Individual Interestholder

  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
                                                                             
                         .

B.   Partnership, Corporation or Other Interestholder

  1.                                  is not a foreign corporation, foreign
partnership, foreign trust (Name of Interestholder) or foreign estate (as those
terms are defined in the Code and Treasury Regulations).     2.   The
interestholder’s U.S. employer identification number is                     .  
  3.   The interestholder’s office address and place of incorporation (if
applicable) is                     .

     The interestholder agrees to notify the Partnership within ten (10) days of
the date the interestholder becomes a foreign person.
     The interestholder 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:
ENCORE ENERGY PARTNERS LP
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

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Name of Interestholder
                                                                                
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 Financial Industry Regulatory Authority, 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 the Assignee’s knowledge.
ENCORE ENERGY PARTNERS LP
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

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