exv10w8






Exhibit 10.8




STAKEHOLDERS’ AGREEMENT




     This STAKEHOLDERS’ AGREEMENT (this “Agreement”) is dated as of September 29, 2010, and
is made by and among QR Energy, LP, (“QR Energy”), Quantum Resources A1, LP
(“QRA”), Quantum Resources B, LP (“QRB”), Quantum Resources C, LP (“QRC”
and together with QRA and QRB, the “Funds”), QAB Carried WI, LP (“QAB”) and QAC
Carried WI, LP (“QAC”), each a Delaware limited partnership, and Black Diamond Resources,
LLC a Delaware limited liability company (“Black Diamond” and together with QRA, QRB, QRC,
QAB and QAC, the “Property Contributors”) Terms that are capitalized but not defined shall
have the meanings assigned to such terms in Article I of this Agreement.



PREAMBLE:




     WHEREAS, the Funds were formed by affiliates of Donald D. Wolf (“Wolf”), S. Wil
VanLoh, Jr. (“VanLoh”) and Toby Neugebauer (“Neugebauer”) to make direct
investments in mature, onshore oil and natural gas properties in the United States. The general
partner of each of the Funds is The Quantum Aspect Partnership, LP, a Delaware limited partnership
(“QAP”). The limited partners of the Funds (“Investors”) are principally
significant institutions.



     WHEREAS, QRB and QRC were each formed principally for the benefit of tax-exempt Investors,
with each of QRB and QRC participating in acquisitions by acquiring net profits interests
(“NPIs”) carved out of the working interests purchased by QAB and QAC.



     WHEREAS, Black Diamond was formed by affiliates of QAP to purchase a direct 2% working
interest in properties acquired by the Funds and, together with QAB and QAC, to receive an
additional 2% interest in the properties acquired by QRA1, QRB and QRC.



     WHEREAS, the Property Contributors desire to contribute all of their respective working
interests and NPIs, as applicable, in certain oil and natural gas properties (the
“Contributed Properties”) to QR Energy, in exchange for cash (including assumption
of liabilities secured by the Contributed Properties) and Residual Units in QR Energy, in each
case, in proportion to the Property Contributor Percentages.



     WHEREAS, QR Energy is a limited partnership formed in September 2010 by affiliates of the
Funds to own and acquire producing oil and natural gas properties beginning with the Contributed
Properties. In connection with the contribution of the Contributed Properties to QR Energy, QR
Energy proposes to file a registration statement on Form S-1 (the “Registration Statement”)
with the United States Securities and Exchange Commission (the “SEC”) to effect an initial
public offering of common units of QR Energy (the “Offering”).



     WHEREAS, prior to the initial filing of the Registration Statement, the parties to this
Agreement desire to set forth the following agreements among themselves relating to: (i) with
respect to the Property Contributors, the distribution of cash and the issuance of Residual Units
concurrent with the closing of the Offering (the “Closing”); (ii) with respect to QRE GP,
LLC, a Delaware limited liability company and the general partner of QR Energy (the “General
Partner”), (A) the issuance of General Partner Units in exchange for the GP Capital
Contribution, (B) the receipt of a management incentive fee payable by QR Energy and (C) the right
to convert the management incentive fee into Class B Units and ultimately Common Units; and (iii)
with



 









 




respect to the parties hereto that hold Common Units, whether received in exchange for the
contribution of property, the conversion of Subordinated Units or the conversion of Class B Units,
registration rights with respect to such Units.




     WHEREAS, the contribution of the Contributed Properties to the Partnership is intended to
constitute a tax-free contribution pursuant to Section 721 of the Internal Revenue Code of 1986, as
amended (the “Code”) for federal income tax purposes except to the extent the receipt of
cash or assumption of indebtedness secured by the Contributed Properties may be taxable.



     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and
agreements contained herein, the parties agree as follows:



ARTICLE I

DEFINITIONS




     1.1 Defined Terms. When used in this Agreement, the following terms shall have the respective
meanings set forth below:



     “Adjusted Management Incentive Fee Base” is defined in Section 4.2 of this Agreement.



     “Agreement” is defined in the Preamble of this Agreement.



     “Applicable Conversion Percentage” is defined in Section 4.4 of this Agreement.



     “Black Diamond” is defined in the introductory paragraph of this Agreement.



     “Board of Directors” means the board of directors of the General Partner.



     “Business Day” means any day other than a Saturday, Sunday, or a legal holiday for
commercial banks in Wilmington, Delaware.



     “Calculation Date” is defined in Section 4.3 of this Agreement.



     “Closing” is defined in the Preamble of this Agreement.



     “Code” is defined in the Preamble of this Agreement.



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



     “Contributed Properties” is defined in the Preamble of this Agreement.



     “Conversion Election” is defined in Section 4.4 of this Agreement.



     “Effectiveness Period” is defined in Section 5.3(a) of this Agreement.



     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the SEC promulgated thereunder.



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     “Funds” is defined in the introductory paragraph of this Agreement.



     “General Partner” is defined in the Preamble of this Agreement.



     “General Partner Units” is calculated by multiplying (i) the Total Units Outstanding
by (ii) 0.1%.



     “GP Capital Contribution” is calculated by multiplying (i) the QR Energy Market Value
by (ii) 0.1%.



     “Gross Management Incentive Fee Base” is defined in Section 4.2 of this Agreement.



     “Holders” means the Property Contributors and the General Partner with respect to
Common Units received by them in connection with the transactions contemplated hereby.



     “Included Registrable Securities” is defined in Section 5.4(a) of this Agreement.



     “Initial IPO Proceeds” is equal to (a) the product of (i) the number of IPO Units
multiplied by (ii) the Market Price; plus (b) the aggregate amount of bank indebtedness incurred by
QR Energy and its subsidiaries upon the closing of the IPO minus (c) the amount of any Offering
Expenses (calculated as if the Over-Allotment Option was not exercised).



     “IPO Units” means the total number of Common Units to be sold to the public in
connection with the Offering. For the avoidance of doubt, IPO Units will not include Over-Allotment
Common Units.



     “Losses” is defined in Section 5.10(a) of this Agreement.



     “Managing Underwriter” means, with respect to any Underwritten Offering, the book
running lead manager of such Underwritten Offering.



     “Market Price” means the public offering price per unit of Common Units sold in the
Offering.



     “Neugebauer” is defined in the Preamble of this Agreement.



     “NPIs” is defined in the Preamble of this Agreement.



     “Offering” is defined in the Preamble of this Agreement.



     “Offering Expenses” includes the Underwriter Fees (calculated as if the Over-Allotment
Option was exercised or not exercised, as applicable) and all other fees and expenses of QR Energy
relating to its initial public offering.



     “Over-Allotment Common Units” means fifteen percent (15%) of the IPO Units.



     “Over-Allotment Option” means the option granted to the underwriters in connection
with the Offering to acquire additional Units.



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     “Over-Allotment Option Period” means a period ending thirty (30) after Closing.



     “Over-Allotment Proceeds” is the sum of (a) the cash proceeds received by QR Energy
from the sale of any IPO Units sold by underwriters as part of the Over-Allotment Option less the
additional Offering Expenses (calculated as if the Over-Allotment Option was exercised).



     “Partnership Agreement” means the Amended and Restated Agreement of Limited
Partnership of QR Energy, LP, dated as of the Closing.



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



     “Piggyback Registration” is defined in Section 5.4(a) of this Agreement.



     “Property Contributor Percentage” means (i) with respect to QRA, 91.4262%, (ii) with
respect to QRB, 1.64885%, (iii) with respect to QRC, 2.926868%, (iv) with respect to Black Diamond,
3.9047%, (v) with respect to QAB, 0.03365% and (vi) with respect to QAC, 0.059732%.



     “Property Contributors” is defined in the introductory paragraph of this Agreement.



     “QAB” is defined in the introductory paragraph of this Agreement.



     “QAC” is defined in the introductory paragraph of this Agreement.



     “QAP” is defined in the Preamble of this Agreement.



     “QR Energy” is defined in the introductory paragraph of this Agreement.



     “QR Energy Market Value” is calculated by multiplying (i) the Total Units Outstanding
by (ii) the Market Price.



     “QRA” is defined in the introductory paragraph of this Agreement.



     “QRB” is defined in the introductory paragraph of this Agreement.



     “QRC” is defined in the introductory paragraph of this Agreement.



     “Registrable Security” means the Units until such time as such securities cease to be
Registrable Securities pursuant to Section 5.2 of this Agreement.



     “Registration Expenses” is defined in Section 5.9 of this Agreement.



     “Registration Rights Group” is defined in Section 5.3 of this Agreement.



     “Registration Statement” is defined in the Preamble of this Agreement.



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     “Residual Common Units” is calculated by subtracting from the Total Units Outstanding,
(a) the number of General Partner Units, (b) the number of IPO Units, (c) the number of Residual
Subordinated Units, and (d) Over-Allotment Common Units.



     “Residual Subordinated Units” is calculated by multiplying (i) the Total Units
Outstanding by (ii) twenty percent (20%).



     “Residual Units” is calculated by subtracting (i) the IPO Units and the General
Partner Units from (ii) the Total Outstanding Units.



     “SEC” is defined in the Preamble of this Agreement.



     “Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.



     “Selling Expenses” is defined in Section 5.9 of this Agreement.



     “Shelf Registration” is defined in Section 5.3(a) of this Agreement.



     “Shelf Registration Statement” is defined in Section 5.3(a) of this Agreement.



     “Subordinated Units” means subordinated units representing limited partner interests
in QR Energy.



     “Target Distribution” is defined in Section 4.2 of this Agreement.



     “Total Units Outstanding” is calculated by dividing (i) QR Energy’s announced first 12
months distributable cash flow by (ii) the product of (a) the aggregate minimum quarterly
distributions times (b) four.



     “Underwritten Offering” means an offering (including an offering pursuant to a Shelf
Registration Statement) in which Units are sold to an underwriter on a firm commitment basis for
reoffering to the public (excluding “overnight marketed” transactions) or an offering that is a
“bought deal” with one or more investment banks.



     “Underwriter Fees” means the fees that the underwriters hold from the sale of the IPO
Units.



     “Unitholder” means a holder of equity securities representing partnership interests in
QR Energy.



     “Units” means Common Units and Subordinated Units representing limited partner
interests in QR Energy, and General Partner Units.



     “VanLoh” is defined in the Preamble of this Agreement.



     “Wolf” is defined in the Preamble of this Agreement.



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ARTICLE II

CONDITIONS TO EFFECTIVENESS




     The effectiveness of the provisions of this Agreement is subject to (i) the consummation by QR
Energy of the Offering with no material changes to those Offering terms reflected in the prospectus
included in the initial Registration Statement filed with the SEC and (ii) (A) allocation,
authorization, execution and delivery of the Residual Units to the Property Contributors; and (B)
the distribution of cash (including the assumption of indebtedness secured by the Contributed
Properties or distribution of proceeds from new borrowings, as applicable) to the Property
Contributors, in each case, pursuant to the terms of this Agreement.



ARTICLE III

ALLOCATION OF EQUITY INTERESTS AND PROCEEDS




     3.1 Allocation of Units and IPO Proceeds.



          (a) Allocation of Residual Units. At Closing, each Property Contributor will be
allocated that number of Residual Units derived by multiplying the Residual Units by the applicable
Property Contributor Percentage (rounded down to the nearest whole number of Residual Units). The
Residual Units will be comprised of: (i) Residual Common Units; and (ii) Residual Subordinated
Units.



          (b) Issuance of Common Units. At Closing, each Property Contributor will receive that
number of Residual Common Units (excluding Over-Allotment Common Units) derived by multiplying the
Residual Common Units by the applicable Property Contributor Percentage (rounded down to the
nearest whole number of Residual Common Units), and each Property Contributor will be admitted as a
limited partner of QR Energy with respect to such Common Units. Holders of Residual Common Units
will immediately be entitled to all of the rights (including distribution rights), preferences and
privileges contained in the Partnership Agreement, and such holders will be subject to all of the
conditions and limitations contained in the Partnership Agreement.



          (c) Issuance of Subordinated Units. At Closing, each Property Contributor will receive
that number of Residual Subordinated Units derived by multiplying the Residual Subordinated Units
by the applicable Property Contributor Percentage (rounded down to the nearest whole number of
Residual Subordinated Units), and each Property Contributor will be admitted as a limited partner
of QR Energy with respect to such Subordinated Units. Holders of Residual Subordinated Units will
immediately be entitled to all of the rights (including distribution rights), preferences and
privileges contained in the Partnership Agreement, and such holders will be subjects to all of the
conditions and limitations contained in the Partnership Agreement.



          (d) Distribution of Cash. At Closing, each Property Contributor will be paid cash
equal to the product of (i) the Initial IPO Proceeds multiplied by (ii) the applicable Property
Contributor Percentage. For purposes hereof, in lieu of a distribution of cash, a Property
Contributor may cause QR Energy to assume indebtedness secured by its Contributed Properties in the
same amount and such assumption will be treated as a distribution of cash hereunder.



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     3.2 Allocation of Over-Allotment.



          (a) Allocation of Over-Allotment Common Units. At the expiration of the
Over-Allotment Option Period, each Property Contributor will receive that number of Over-Allotment
Common Units that have not been sold to the public pursuant to the underwriter’s exercise of the
Over-Allotment Option derived by multiplying such remaining Over-Allotment Common Units by the
applicable Property Contributor Percentage (rounded down to the nearest whole number of Residual
Common Units), and each Property Contributor will immediately be entitled to all of the rights
(including distribution rights), preferences and privileges contained in the Partnership Agreement,
and such holders will be subject to all of the conditions and limitations contained in the
Partnership Agreement.



          (b) Allocation of Over-Allotment IPO Proceeds. At the expiration of the
Over-Allotment Option Period, each Property Contributor will be paid cash by QR Energy equal to the
product of (i) the product of (A) the total number of Over-Allotment Common Units multiplied by (B)
the Market Price multiplied by (ii) the applicable Property Contributor Percentage.



     3.3 Issuance of General Partner Units. At the Closing, QR Energy will issue the
General Partner Units to the General Partner, subject to receipt by QR Energy of the GP Capital
Contribution. The General Partner Units will be entitled to all of the rights (including
distribution rights), preferences and privileges contained in the Partnership Agreement, and the
General Partner will be subject to such conditions and limitations in respect to the General
Partner Units as contained in the Partnership Agreement. Pursuant to the terms of the Partnership
Agreement, the General Partner will have sole responsibility for conducting QR Energy’s business
and managing its operations.



     3.4 Waiver of Rights to Contributed Properties. Following receipt of the Residual
Units and the Cash Distributions, (i) none of the Property Contributors shall be entitled to any
further distributions or payments from QR Energy other than with respect to the Residual Units or
any other Units held by them nor any further exercise of rights as working interest owners with
respect to the Contributed Properties and (ii) each Property Contributor shall forfeit, cancel and
relinquish any and all claims and entitlements to Contributed Properties. Nothing set forth in this
Section 3.4 shall preclude the Property Contributors from any rights to any distributions declared
by the Board of Directors with respect to Units.



     3.5 Tax Treatment. The parties hereto agree to (i) report the exchange of the
Contributed Properties for Units pursuant to this Agreement as a tax-free contribution pursuant to
Section 721 of the Code for federal income tax purposes and (ii) take no action to cause such
exchange to fail to so qualify.



     3.6 Rights to Information. In addition to the foregoing, for so long as the Funds are
paying management fees pursuant to their respective partnership agreements, upon request of the
Funds to QR Energy, QR Energy agrees to provide to the Funds all information relating to the
Contributed Properties (and any additions thereto), as may be reasonably required by them to
determine the amount of the management fee that is determinable by reference to the Contributed
Properties (and any additions thereto).



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ARTICLE IV

GENERAL PARTNER INTEREST




     4.1 General Partner Interest. The Partnership Agreement will provide that the General
Partner initially will receive General Partner Units entitling it to 0.1% of all distributions that
QR Energy makes prior to its liquidation. The General Partner has the right, but not the
obligation, to contribute a proportionate amount of capital to QR Energy to maintain its 0.1%
general partner interest if QR Energy issues additional Units. The General Partner’s 0.1% interest
in QR Energy, and the percentage of QR Energy’s cash distributions to which the General Partner is
entitled, will be proportionately reduced if QR Energy issues additional Units in the future and
the General Partner does not contribute a proportionate amount of capital (or equity securities in
lieu of capital) to QR Energy to maintain its 0.1% general partner interest. The General Partner
will be entitled to make a capital contribution to maintain its 0.1% general partner interest in
the form of cash or the contribution to QR Energy of Common Units or Class B units that it may hold
based on the current market value of the contributed Class B Units or Common Units.



     4.2 Management Incentive Fee. Under the Partnership Agreement, for each quarter for
which QR Energy has paid distributions that equal or exceed 115% of the minimum quarterly
distribution (the “Target Distribution”), the General Partner will be entitled to a
quarterly management incentive fee, payable in cash, equal to of 0.25% of the Gross Management
Incentive Fee Base (as defined below), or if a Conversion Election has previously been made, the
“Adjusted Management Incentive Fee Base” as further described in Sections 4.7 4.8, 4.9 and
4.10 below. The “Gross Management Fee Base” is an amount equal to the sum of (i) the
future net revenue of QR Energy’s estimated proved oil and natural gas reserves, discounted to
present value at 10% per annum based on SEC methodology, which is calculated using the unweighted
arithmetic average of the first-day-of-the-month price for each month within the applicable
twelve-month period, adjusted for QR Energy’s commodity derivative contracts, and (ii) the fair
market value of QR Energy’s assets, other QR Energy’s estimated oil and natural gas reserves and
its commodity derivative contracts, that principally produce qualifying income for federal income
tax purposes, at such value as may be agreed upon by the General Partner and the conflicts
committee of the General Partner’s Board of Directors.



     4.3 Calculation Date. Each of the Gross Management Incentive Fee Base and, following
the initial Conversion Election (as defined below), the Adjusted Management Incentive Fee Base,
will be calculated (each, a “Calculation Date”) as of the December 31 (with respect to the
first and second calendar quarters and based on a fully-engineered third-party reserve report) or
June 30 (with respect to the third and fourth calendar quarters and based on an internally
engineered reserve report, unless estimated proved reserves increased by more than 20% since the
previous Calculation Date, in which case a third-party audit of such internal estimates will be
performed) immediately preceding the quarter in respect of which payment of the management
incentive fee is permitted pursuant to Section 4.2.



     4.4 Conversion Rights. From and after the end of the subordination period and subject
to the limitations described below, the General Partner will have the continuing right, from time
to time, at a time when it has received all or any portion of the management incentive fee for each
of the immediately preceding four full consecutive quarters, to convert (a



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“Conversion Election”) into Class B units up to 80% (the “Applicable Conversion
Percentage”) of the management incentive fee for a particular quarter in lieu of receiving a
cash payment for such portion of the management incentive fee.




     4.5 Class B Units. The number of Class B units (rounded to the nearest whole number)
to be issued to the General Partner in connection with a Conversion Election will be equal to:



          (a) the product of:




	 	(i)	 	the Applicable Conversion Percentage; and
	 
	 	(ii)	 	the average of the management incentive fee
paid to the General Partner in the immediately preceding two calendar
quarters, divided by





          (b) the cash distribution per unit made for the most recently
completed quarter .



     4.6 Limitation on Conversion Election. Following a Conversion Election, unless QR
Energy experiences a change of control, the General Partner will not be permitted to exercise the
Conversion Election again until (i) the completion of the fourth full calendar quarter following
the previous Conversion Election and (ii) the Gross Management Incentive Fee Base has increased to
115% of the Gross Management Incentive Fee Base calculated as of the immediately preceding
Conversion Date. The limitations on the General Partner’s right to make a Conversion Election will
immediately lapse if QR Energy experiences a change of control. Any subsequent Conversion Election
made during a quarter will be effective as of the first day of such quarter.



     4.7 Adjusted Management Incentive Fee Base Following Initial Conversion Election.
Immediately following the initial Conversion Election, the Adjusted Management Incentive Fee Base,
until the next Calculation Date, will equal the product of:




	 	(i)	 	the Gross Management Incentive Fee Base then in effect, and
	 
	 	(ii)	 	one minus the Applicable Conversion Percentage.





     Prior to the initial Conversion Election, the Adjusted Management Incentive Fee Base is equal
to the Gross Management Incentive Fee Base.



     4.8 First Calculation Date Following Initial Conversion Election. As of the first
Calculation Date following the initial Conversion Election, the Adjusted Management Incentive Fee
Base will equal the sum of:



          (a) the product of (x) one minus the initial Applicable Conversion Percentage and (y) the
Gross Management Incentive Fee Base in effect at the time of the initial Conversion Election; and



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          (b) the Gross Management Incentive Fee Base as in effect on the current Calculation Date less
the Gross Management Incentive Fee Base in effect at the time of the initial Conversion Election.



     4.9 Adjusted Management Incentive Fee Base Following Subsequent Conversion Elections.
As of the second and each subsequent Conversion Election, the Adjusted Management Incentive Fee
Base will equal the product of (x) one minus the Applicable Conversion Percentage for such
Conversion Election and (y) the Adjusted Management Incentive Fee Base in effect immediately prior
to such Conversion Election.



     4.10 Subsequent Calculation Dates. As of the second and each subsequent Calculation
Date following the initial Conversion Election and subsequent Conversion Elections, the Adjusted
Management Incentive Fee Base will equal the sum of:



          (a) the product of (x) one minus the most recent Applicable Conversion Percentage and (y) the
Adjusted Management Incentive Fee Base in effect immediately prior to the most recent Conversion
Election; and



          (b) the Gross Management Incentive Fee Base as in effect on the current Calculation Date less
the Gross Management Incentive Fee Base as in effect on the Calculation Date immediately preceding
the most recent Conversion Election.



ARTICLE V




REGISTRATION RIGHTS



     5.1 Registration Rights. Following the Closing and subject to the terms and
limitations set forth in this Article V, the Holders, acting as a group, shall be entitled to three
demand registration rights; provided, however, that no demand registration request shall be made
prior to the expiration of 180 days following completion of the Offering unless approved by Wells
Fargo Securities LLC. Each Holder, and each permitted transferee of registration rights pursuant to
Section 5.12, shall have unlimited piggyback registration rights, each as more fully described in
this Article V.



     5.2 Registrable Securities. Any Registrable Security will cease to be a Registrable
Security when (a) a registration statement covering such Registrable Security has been declared
effective by the SEC and such Registrable Security has been sold or disposed of pursuant to such
effective registration statement; (b) such Registrable Security has been disposed of pursuant to
any section of Rule 144 (or any similar provision then in force under the Securities Act); or (c)
such Registrable Security is held by QR Energy or one of its subsidiaries.



     5.3 Shelf Registration.



          (a) Shelf Registration. Within 60 days following receipt of a written request of one or more
of the Holders (each such group, with respect to each request, the “Registration Rights
Group”), QR Energy shall prepare and file a registration statement under the Securities Act to
permit the public resale of the Registrable Securities pursuant to such registration statement,
including a registration statement permitting the public resale of the Registrable



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Securities from time to time pursuant to Rule 415 of the Securities Act (the “Shelf
Registration Statement”). Such written request shall describe the plan of distribution for such
Registrable Securities, which plan may include, without limitation, sales through the facilities of
the principal trading market on which securities of the same class as the Registrable Securities
are then traded, sales pursuant to an Underwritten Offering, or both. QR Energy shall use its
commercially reasonable efforts to cause the Shelf Registration Statement to become effective no
later than 120 days after the date of filing such Shelf Registration Statement (the “Shelf
Registration”). A Shelf Registration Statement filed pursuant to this Section 5.3(a) shall be
on such appropriate registration form of the SEC as shall be selected by QR Energy; provided,
however, that if a prospectus supplement will be used in connection with the marketing of an
Underwritten Offering from the Shelf Registration Statement and the Managing Underwriter at any
time notifies QR Energy in writing that, in the sole judgment of such Managing Underwriter,
inclusion of detailed information to be used in such prospectus supplement is of material
importance to the success of the Underwritten Offering of such Registrable Securities, QR Energy
shall use its commercially reasonable efforts to include such information in the prospectus. QR
Energy will cause the Shelf Registration Statement filed pursuant to this Section 5.3(a) to be
continuously effective under the Securities Act until all Registrable Securities covered by the
Shelf Registration Statement have been distributed in the manner set forth and as contemplated in
the Shelf Registration Statement or there are no longer any Registrable Securities outstanding (the
“Effectiveness Period”). The Shelf Registration Statement when declared effective by the
SEC (including the documents incorporated therein by reference) will comply as to form in all
material respects with all applicable requirements of the Securities Act and the Exchange Act and
will not contain an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.




          (b) Delay Rights. Notwithstanding anything to the contrary contained herein, QR Energy: (i)
may, upon written notice to any Registration Rights Group whose Registrable Securities are to be
included in a Shelf Registration Statement, delay its obligation to file any Shelf Registration
Statement if (A) QR Energy intends to effect a public offering within 60 days following the receipt
of a written request from any Registration Rights Group, provided, that prior to the receipt of
such request, QR Energy has taken affirmative steps in contemplation of such public offering, (B)
QR Energy is pursuing an acquisition, merger, reorganization, disposition or other similar
transaction and QR Energy determines in good faith that QR Energy’s ability to pursue or consummate
such a transaction would be materially adversely affected by any required disclosure of such
transaction in the Shelf Registration Statement, or (C) QR Energy has experienced some other
material non-public event the disclosure of which at such time is not required by law or, in the
good faith judgment of QR Energy, would materially adversely affect QR Energy, then, in each case,
QR Energy may defer filing the Shelf Registration Statement for up to 60 days; provided, however,
that QR Energy shall not exercise its right to delay filing the Shelf Registration Statement more
than once in any 12 month period (excluding any delays in filing a registration statement or
post-effective amendment pursuant to Section 5.12 hereof); (ii) may, upon written notice to any
Registration Rights Group whose Registrable Securities are included in the Shelf Registration
Statement, suspend such Registration Rights Group’s use of any prospectus which is a part of the
Shelf Registration Statement (in which event the Registration Rights Group shall discontinue sales
of the Registrable Securities pursuant to the Shelf Registration Statement) for up to 60 days if
(1) QR



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Energy is pursuing an acquisition, merger, reorganization, disposition or other similar
transaction and QR Energy determines in good faith that QR Energy’s ability to pursue or consummate
such a transaction would be materially adversely affected by any required disclosure of such
transaction in the Shelf Registration Statement or (2) QR Energy has experienced some other
material non-public event the disclosure of which at such time is not required by law or, in the
good faith judgment of QR Energy, would materially adversely affect QR Energy; provided, however,
that QR Energy shall not exercise its right to suspend any Registration Rights Group’s use of any
prospectus more than once in any 12-month period. Upon disclosure of such information or the
termination of the condition described in this Section 5.3(b), QR Energy shall provide prompt
notice to the Registration Rights Group whose Registrable Securities are included in the Shelf
Registration Statement, and shall promptly terminate any suspension of sales it has put into effect
and shall take such other actions to permit registered sales of Registrable Securities as
contemplated in this Agreement.




     5.4 Piggyback Registration.



          (a) Participation. If QR Energy at any time proposes to file a registration statement
(including a Shelf Registration Statement and including any registration statement intended to
satisfy the requirements of Section 5.3(a) of this Agreement) for the sale of Units to the public
for its own account or the account of any Unitholder other than (x) a registration relating solely
to employee benefit plans, (y) a registration relating solely to a Rule 145 transaction, or (z) a
registration on any registration form which does not permit secondary sales, then, as soon as
practicable following the engagement of counsel to QR Energy to prepare the registration statement,
QR Energy shall give notice of such proposed filing for the registration to the Registration Rights
Group and such notice shall offer the Holders the opportunity to include in such registration such
number of Registrable Securities as each such Holder may request in writing (a “Piggyback
Registration”). Each Holder shall have 15 days after receipt of such notice to elect to have
all (or such portion as the Holders shall specify) of its Registrable Securities included in such
registration. In addition, if QR Energy at any time proposes to file a prospectus supplement with
respect to an Underwritten Offering to a Shelf Registration Statement under which the Registration
Rights Group have registered the sale of Registrable Securities, then, as soon as practicable
following the engagement of counsel to QR Energy to prepare the documents to be used in connection
with an Underwritten Offering, QR Energy shall give notice of such proposed Underwritten Offering
to each Selling Registration Rights Group member and such notice shall offer each Selling
Registration Rights Group member the opportunity to include in such Underwritten Offering such
number of Registrable Securities as each such Selling Registration Rights Group member may request
in writing; provided, however, that QR Energy shall not be required to offer such opportunity to
Registration Rights Group if QR Energy has been advised by the Managing Underwriter that the
inclusion of Registrable Securities for sale for the benefit of the Registration Rights Group will
have an adverse effect on the price, timing or distribution of the Units. No Selling Registration
Rights Group member may exercise its right to participate in a Piggyback Registration with respect
to sales to be made from an effective shelf registration on which such Registration Rights Group’
Registrable Securities are not registered for resale, except that if the Board of Directors
determines that it is in the best interest of QR Energy, then QR Energy may use the net proceeds
from any Underwritten Offering to repurchase some or all Registrable Securities from any of the
Registration Rights Group. Subject to the provisions in this Section 5.4(a) and Section 5.4(b), QR
Energy shall include in such



12









 




Underwritten Offering all such Registrable Securities (“Included Registrable
Securities”) with respect to which QR Energy has received requests within (i) one business day
in the event of the filing of a prospectus supplement and (ii) five business days with respect to
the use of a preliminary prospectus supplement after QR Energy’s notice has been delivered in
accordance with Section 5.4. If no request for inclusion from the Registration Rights Group is
received within the specified time, such Selling Registration Rights Group member shall have no
further right to participate in such Piggyback Registration. If, at any time after giving written
notice of its intention to undertake an Underwritten Offering and prior to the closing of such
Underwritten Offering, QR Energy shall determine for any reason not to undertake or to delay such
Underwritten Offering, QR Energy may, at its election, give written notice of such determination to
the selling Registration Rights Group and, (x) in the case of a determination not to undertake such
Underwritten Offering, shall be relieved of its obligation to sell any Included Registrable
Securities in connection with such terminated Underwritten Offering, and (y) in the case of a
determination to delay such Underwritten Offering, shall be permitted to delay offering any
Included Registrable Securities for the same period as the delay in the Underwritten Offering.




          (b) Priority of Piggyback Registration. If the Managing Underwriter or Underwriters of any
proposed Underwritten Offering of Units included in a Piggyback Registration advises QR Energy that
the total amount of Units which the selling Registration Rights Group and any other Persons intend
to include in such Underwritten Offering exceeds the number which can be sold in such offering
without being likely to have an adverse effect on the price, timing or distribution of the Units
offered or the market for the Units, then the Units to be included in such Underwritten Offering
shall include all of the Units that QR Energy intends to include in such Underwritten Offering,
plus the number of Registrable Securities that such Managing Underwriter or Underwriters advises QR
Energy can be sold without having such adverse effect, with such number to be allocated pro rata
among the Registration Rights Group who have requested participation in the Piggyback Registration
(based, for each such selling Selling Registration Rights Group member, on the percentage derived
by dividing (i) the number of Registrable Securities proposed to be sold by such selling Selling
Registration Rights Group member in such offering; by (ii) the aggregate number of Units proposed
to be sold by the selling Registration Rights Group and any other Persons participating in the
Piggyback Registration to be included in such offering). Notwithstanding the foregoing, if the
registration statement was filed to meet the requirements of Section 5.3(a), then the Registration
Rights Group that requested such registration shall have priority over QR Energy and any other
selling Registration Rights Group in determining the number of Units that may be included in such
Underwritten Offering.



     5.5 Underwritten Offerings.



          (a) Shelf Registration. If the Registration Rights Group elects to dispose of Registrable
Securities in an Underwritten Offering, QR Energy shall enter into an underwriting agreement in
customary form with the Managing Underwriter or Underwriters, which shall include, among other
provisions, indemnities to the effect and to the extent provided in Section 5.10, and shall take
all such other reasonable actions as are requested by the Managing Underwriter in order to expedite
or facilitate the registration and disposition of the Registered Securities.



13









 





          (b) General Procedures. In connection with any Underwritten Offering pursuant to a Shelf
Registration Statement filed at the request of a Registration Rights Group pursuant to Section 5.3
hereof, such Registration Rights Group, with the consent of QR Energy, shall be entitled to select
the Managing Underwriter or Underwriters. The consent of QR Energy to the selection of the Managing
Underwriter or Underwriters shall not be unreasonably withheld. In all other cases, QR Energy shall
select the Managing Underwriter or Underwriters. In connection with an Underwritten Offering
pursuant to Section 5.3 or Section 5.4 hereof, each participating Selling Registration Rights Group
member and QR Energy shall be obligated to enter into an underwriting agreement which contains such
representations, covenants, indemnities and other rights and obligations as are customary in
underwriting agreements for firm commitment offerings of securities. No Selling Registration Rights
Group member may participate in such Underwritten Offering unless such Selling Registration Rights
Group member agrees to sell its Registrable Securities on the basis provided in such underwriting
agreement and completes and executes all questionnaires, powers of attorney, indemnities and other
documents reasonably required under the terms of such underwriting agreement. Each Selling
Registration Rights Group member may, at its option, require that any or all of the representations
and warranties by, and the other agreements on the part of, QR Energy to and for the benefit of
such underwriters also be made to and for such Selling Registration Rights Group member’s benefit
and that any or all of the conditions precedent to the obligations of such underwriters under such
underwriting agreement also be conditions precedent to its obligations. If any Selling Registration
Rights Group member disapproves of the terms of an underwriting, such Selling Registration Rights
Group member may elect to withdraw therefrom by notice to QR Energy and the Managing Underwriter;
provided, however, that such withdrawal must be made on or before the pricing of any such
Underwritten Offering. No such withdrawal or abandonment shall affect QR Energy’s obligation to pay
Registration Expenses.



     5.6 Registration Procedures. In connection with its obligations contained in Section
5.3 or Section 5.4 hereof, QR Energy will, as expeditiously as possible:



          (a) prepare and file with the SEC such amendments and supplements to the Shelf Registration
Statement and the prospectus used in connection therewith as may be necessary to keep the Shelf
Registration Statement effective and as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the Shelf Registration
Statement;



          (b) furnish to each Selling Registration Rights Group member (i) as far in advance as
reasonably practicable before filing the Shelf Registration Statement or any other registration
statement contemplated by this Agreement or any supplement or amendment thereto, upon request,
copies of reasonably complete drafts of all such documents proposed to be filed (including exhibits
and each document incorporated by reference therein to the extent then required by the rules and
regulations of the SEC), and provide each such Selling Registration Rights Group member the
opportunity to object to any information pertaining to such Selling Registration Rights Group
member and its plan of distribution that is contained therein and make the corrections reasonably
requested by such Selling Registration Rights Group member with respect to such information prior
to filing the Shelf Registration Statement or such other registration statement or supplement or
amendment thereto, and (ii) such number of copies of the Shelf Registration Statement or such other
registration statement and the prospectus included



14









 




therein and any supplements and amendments thereto as such Persons may reasonably request in
order to facilitate the public sale or other disposition of the Registrable Securities covered by
such Shelf Registration Statement or other registration statement;




          (c) if applicable, use its commercially reasonable efforts to register or qualify the
Registrable Securities covered by the Shelf Registration Statement or any other registration
statement contemplated by this Agreement under the securities or blue sky laws of such
jurisdictions as the Registration Rights Group or, in the case of an Underwritten Offering, the
Managing Underwriter, shall reasonably request, provided that QR Energy will not be required to
qualify generally to transact business in any jurisdiction where it is not then required to so
qualify or to take any action which would subject it to general service of process in any such
jurisdiction where it is not then so subject;



          (d) promptly notify each Selling Registration Rights Group member and each underwriter, at any
time when a prospectus relating thereto is required to be delivered under the Securities Act, of
(i) the filing of the Shelf Registration Statement or any other registration statement contemplated
by this Agreement or any prospectus or prospectus supplement to be used in connection therewith, or
any amendment or supplement thereto, and, with respect to such Shelf Registration Statement or any
other registration statement or any post-effective amendment thereto, when the same has become
effective; and (ii) any written comments from the SEC with respect to any filing referred to in
clause (i) and any written request by the SEC for amendments or supplements to the Shelf
Registration Statement or any other registration statement or any prospectus or prospectus
supplement thereto;



          (e) immediately notify each Selling Registration Rights Group member and each underwriter, at
any time when a prospectus relating thereto is required to be delivered under the Securities Act,
of (i) the happening of any event as a result of which the prospectus or prospectus supplement
contained in the Shelf Registration Statement or any other registration statement contemplated by
this Agreement, as then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing; (ii) the issuance or threat of
issuance by the SEC of any stop order suspending the effectiveness of the Shelf Registration
Statement or any other registration statement contemplated by this Agreement, or the initiation of
any proceedings for that purpose; or (iii) the receipt by QR Energy of any notification with
respect to the suspension of the qualification of any Registrable Securities for sale under the
applicable securities or blue sky laws of any jurisdiction. Following the provision of such notice,
QR Energy agrees to as promptly as practicable amend or supplement the prospectus or prospectus
supplement or take other appropriate action so that the prospectus or prospectus supplement does
not include an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the light of the
circumstances then existing and to take such other action as is necessary to remove a stop order,
suspension, threat thereof or proceedings related thereto;



          (f) furnish to each Selling Registration Rights Group member copies of any and all transmittal
letters or other correspondence with the SEC or any other governmental agency or self-regulatory
body or other body having jurisdiction (including any domestic or foreign securities exchange)
relating to such offering of Registrable Securities;



15









 





          (g) in the case of an Underwritten Offering, furnish upon request, (i) an opinion of counsel
for QR Energy, dated the effective date of the applicable registration statement or the date of any
amendment or supplement thereto, and a letter of like kind dated the date of the closing under the
underwriting agreement, and (ii) a “cold comfort” letter, dated the effective date of the
applicable registration statement or the date of any amendment or supplement thereto and a letter
of like kind dated the date of the closing under the underwriting agreement, in each case, signed
by the independent public accountants who have certified QR Energy’s financial statements included
or incorporated by reference into the applicable registration statement, and each of the opinion
and the “cold comfort” letter shall be in customary form and covering substantially the same
matters with respect to such registration statement (and the prospectus and any prospectus
supplement included therein) as are customarily covered in opinions of issuer’s counsel and in
accountants’ letters delivered to the underwriters in Underwritten Offerings of securities, and
such other matters as such underwriters may reasonably request;



          (h) otherwise use its commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC, and make available to the Registration Rights Group, as soon as reasonably
practicable, an earnings statement covering the period of at least 12 months, but not more than 18
months, beginning with the first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities
Act and Rule 158 promulgated thereunder;



          (i) make available to the appropriate representatives of the Managing Underwriter and
Registration Rights Group access to such information and QR Energy personnel as is reasonable and
customary to enable such parties to establish a due diligence defense under the Securities Act;
provided that QR Energy need not disclose any information to any such representative unless and
until such representative has entered into a confidentiality agreement with QR Energy;



          (j) cause all such Registrable Securities registered pursuant to this Agreement to be listed
on each securities exchange or nationally recognized quotation system on which similar securities
issued by QR Energy are then listed;



          (k) use its commercially reasonable efforts to cause the Registrable Securities to be
registered with or approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of QR Energy to enable the Registration Rights Group to
consummate the disposition of such Registrable Securities;



          (l) provide a transfer agent and registrar for all Registrable Securities covered by such
registration statement not later than the effective date of such registration statement; and



          (m) enter into customary agreements and take such other actions as are reasonably requested by
the Registration Rights Group or the underwriters, if any, in order to expedite or facilitate the
disposition of such Registrable Securities.


Each Selling Registration Rights Group member, upon receipt of notice from QR Energy of the
happening of any event of the kind described in subsection (e) of this Section 5.6, shall forthwith






16









 







discontinue disposition of the Registrable Securities until such Selling Registration Rights Group
member’s receipt of the copies of the supplemented or amended prospectus contemplated by subsection
(e) of this Section 5.6 or until it is advised in writing by QR Energy that the use of the
prospectus may be resumed, and has received copies of any additional or supplemental filings
incorporated by reference in the prospectus, and, if so directed by QR Energy, such Selling
Registration Rights Group member will, or will request the Managing Underwriter or Underwriters, if
any, to deliver to QR Energy (at QR Energy’s expense) all copies in their possession or control,
other than permanent file copies then in such Selling Registration Rights Group member’s
possession, of the prospectus covering such Registrable Securities current at the time of receipt
of such notice.




     5.7 Cooperation by Holders. QR Energy shall have no obligation to include in the
Shelf Registration Statement or in a Piggyback Registration units of a Selling Registration Rights
Group member who has failed to timely furnish such information which, in the opinion of counsel to
QR Energy, is reasonably required in order for the registration statement or prospectus supplement,
as applicable, to comply with the Securities Act.



     5.8 Restrictions on Public Sale by Holders of Registrable Securities. Each Holder
that is a holder of Registrable Securities that are included in a registration statement agrees not
to effect any public sale or distribution of the Registrable Securities, other than in an
Underwritten Offering, during the 90 calendar day period beginning on the date of a prospectus
supplement filed with the SEC with respect to the pricing of such Underwritten Offering, provided
that the duration of the foregoing restrictions shall be no longer than the duration of the
shortest restriction generally imposed by the underwriters on the officers or directors or any
other unitholder of QR Energy on whom a restriction is imposed.



     5.9 Expenses. QR Energy will pay all Registration Expenses in connection with the
Shelf Registration Statement filed pursuant to Section 5.3(a) of this Agreement, and QR Energy will
pay all Registration Expenses in connection with a Piggyback Registration, whether or not the Shelf
Registration Statement becomes effective or any sale is made pursuant to the Shelf Registration
Statement or Piggyback Registration. Each Selling Registration Rights Group member shall pay all
Selling Expenses in connection with any sale of its Registrable Securities hereunder.
“Registration Expenses” means all expenses incident to QR Energy’s performance under or
compliance with this Agreement to effect the registration of Registrable Securities in a Shelf
Registration or a Piggyback Registration, and the disposition of such securities, including,
without limitation, all registration, filing, securities exchange listing and Nasdaq National
Market fees, all registration, filing, qualification and other fees and expenses of complying with
securities or blue sky laws, fees of the National Association of Securities Dealers, Inc., transfer
taxes and fees of transfer agents and registrars, all word processing, duplicating and printing
expenses, and the fees and disbursements of counsel and independent public accountants for QR
Energy, including the expenses of any special audits or “cold comfort” letters required by or
incident to such performance and compliance. Except as otherwise provided in Section 5.10 hereof,
QR Energy shall not be responsible for legal fees incurred by Registration Rights Group in
connection with the exercise of such Registration Rights Group’ rights hereunder. QR Energy shall
not be responsible for any “Selling Expenses,” which means all underwriting fees, discounts
and selling commissions allocable to the sale of the Registrable Securities.



17









 





     5.10 Indemnification.



          (a) By QR Energy. In the event of a registration of any Registrable Securities under the
Securities Act pursuant to this Agreement, QR Energy will indemnify and hold harmless each Selling
Registration Rights Group member thereunder, its directors and officers, and each underwriter,
pursuant to the applicable underwriting agreement with such underwriter, of Registrable Securities
thereunder and each Person, if any, who controls such Selling Registration Rights Group member or
underwriter within the meaning of the Securities Act and the Exchange Act, against any losses,
claims, damages, expenses or liabilities (including reasonable attorneys’ fees and expenses)
(collectively, “Losses”), joint or several, to which such Selling Registration Rights Group
member or underwriter or controlling Person may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Shelf Registration Statement or any other
registration statement contemplated by this Agreement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading, and will reimburse each such Selling
Registration Rights Group member, its directors and officers, each such underwriter and each such
controlling Person for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Loss or actions or proceedings; provided, however, that QR
Energy will not be liable in any such case if and to the extent that any such Loss arises out of or
is based upon an untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such Selling Registration Rights Group member,
such underwriter or such controlling Person in writing specifically for use in the Shelf
Registration Statement or such other registration statement, or prospectus supplement, as
applicable. Such indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Selling Registration Rights Group member or any such director, officer
or controlling Person, and shall survive the transfer of such securities by such Selling
Registration Rights Group member.



          (b) By Each Holder. Each Selling Registration Rights Group member agrees severally and not
jointly to indemnify and hold harmless QR Energy, its directors and officers, each Person, if any,
who controls QR Energy within the meaning of the Securities Act or of the Exchange Act, and each
other Selling Registration Rights Group member, its directors, officers, and controlling Persons
within the meaning of the Securities Act or of the Exchange Act, to the same extent as the
foregoing indemnity from QR Energy to the selling Registration Rights Group, but only with respect
to information regarding such Selling Registration Rights Group member furnished in writing by or
on behalf of such Selling Registration Rights Group member expressly for inclusion in the Shelf
Registration Statement or prospectus supplement relating to the Registrable Securities, or any
amendment or supplement thereto; provided, however, that the liability of each Selling Registration
Rights Group member shall not be greater in amount than the dollar amount of the proceeds (net of
any Selling Expenses) received by such Selling Selling Registration Rights Group member from the
sale of the Registrable Securities giving rise to such indemnification.



18









 





          (c) Notice. Promptly after receipt by an indemnified party hereunder of notice of the
commencement of any action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party other than under this Section 5.10. In any action brought
against any indemnified party, it shall notify the indemnifying party of the commencement thereof.
The indemnifying party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified
party and, after notice from the indemnifying party to such indemnified party of its election so to
assume and undertake the defense thereof, the indemnifying party shall not be liable to such
indemnified party under this Section 5.10 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected; provided, however, that, (i) if the
indemnifying party has failed to assume the defense and employ counsel or (ii) if the defendants in
any such action include both the indemnified party and the indemnifying party and counsel to the
indemnified party shall have concluded that there may be reasonable defenses available to the
indemnified party that are different from or additional to those available to the indemnifying
party, or if the interests of the indemnified party reasonably may be deemed to conflict with the
interests of the indemnifying party, then the indemnified party shall have the right to select a
separate counsel and to assume such legal defense and otherwise to participate in the defense of
such action, with the reasonable expenses and fees of such separate counsel and other reasonable
expenses related to such participation to be reimbursed by the indemnifying party as incurred.
Notwithstanding any other provision of this Agreement, no indemnified party shall settle any action
brought against it with respect to which it is entitled to indemnification hereunder without the
consent of the indemnifying party, unless the settlement thereof imposes no liability or obligation
on, and includes a complete and unconditional release from all liability of, the indemnifying
party.



          (d) Contribution. If the indemnification provided for in this Section 5.10 is held by a court
or government agency of competent jurisdiction to be unavailable to QR Energy or any Selling
Selling Registration Rights Group member or is insufficient to hold them harmless in respect of any
Losses, then each such indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result of such Losses as
between QR Energy on the one hand and such Selling Selling Registration Rights Group member on the
other, in such proportion as is appropriate to reflect the relative fault of QR Energy on the one
hand and of such Selling Selling Registration Rights Group member on the other in connection with
the statements or omissions which resulted in such Losses, as well as any other relevant equitable
considerations; provided, however, that in no event shall such Selling Selling Registration Rights
Group member be required to contribute an aggregate amount in excess of the dollar amount of
proceeds (net of Selling Expenses) received by such Selling Selling Registration Rights Group
member from the sale of Registrable Securities giving rise to such indemnification. The relative
fault of QR Energy on the one hand and each Selling Selling Registration Rights Group member on the
other shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a material fact has been
made by, or relates to, information supplied by such party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such statement or omission.
The parties hereto



19









 




agree that it would not be just and equitable if contributions pursuant to this paragraph were
to be determined by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the first sentence of this paragraph. The
amount paid by an indemnified party as a result of the Losses referred to in the first sentence of
this paragraph shall be deemed to include any legal and other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any Loss which is the subject of
this paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person who is not guilty of
such fraudulent misrepresentation.




          (e) Other Indemnification. The provisions of this Section 5.10 shall be in addition to any
other rights to indemnification or contribution which an indemnified party may have pursuant to
law, equity, contract or otherwise.



     5.11 Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the SEC that may permit the sale of the Registrable Securities to the
public without registration, QR Energy agrees to use its commercially reasonable efforts to:



          (a) Make and keep public information regarding QR Energy available, as those terms are
understood and defined in Rule 144 of the Securities Act, at all times from and after the date
hereof;



          (b) File with the SEC in a timely manner all reports and other documents required of QR Energy
under the Securities Act and the Exchange Act at all times from and after the date hereof; and



          (c) So long as the Registration Rights Group owns any Registrable Securities, furnish to such
Selling Registration Rights Group member forthwith upon request a copy of the most recent annual or
quarterly report of QR Energy, and such other reports and documents so filed as such Selling
Registration Rights Group member may reasonably request in availing itself of any rule or
regulation of the SEC allowing such Selling Registration Rights Group member to sell any such
securities without registration.



     5.12 Transfer or Assignment of Registration Rights. The rights to cause QR Energy to
register Registrable Securities granted to Holders by QR Energy pursuant to Section 5.3 may be
transferred or assigned by each Holder to one or more transferee(s) or assignee(s) of such
Registrable Securities, provided that (i) each such transferee or assignee holds Registrable
Securities representing at least 30% (after giving effect to such transfer) of the Registrable
Securities held by such Holder at the Closing (after giving effect to the redemption of any such
Property Contributor’s Units), (ii) QR Energy is given written notice prior to any said transfer or
assignment, stating the name and address of each such transferee and identifying the securities
with respect to which such registration rights are being transferred or assigned, and (iii) each
such transferee assumes in writing responsibility for its portion of the obligations of the
Registration Rights Group under this Agreement. The rights granted to the Registration Rights Group
by QR Energy pursuant to Section 5.4 with respect to Registrable Securities may be transferred or
assigned by the Registration Rights Group to one or more transferee(s) or assignee(s) of such
Registrable Securities, provided that (a) QR Energy is given written notice



20









 




prior to any said transfer or assignment, stating the name and address of each such transferee
and identifying the securities with respect to which such registration rights are being transferred
or assigned, and (b) each such transferee assumes in writing responsibility for its portion of the
obligations of the Registration Rights Group under this Agreement. In no event shall QR Energy be
required to file a post-effective amendment to a Shelf Registration Statement or a new Shelf
Registration Statement for the benefit of such transferee(s) or assignee(s) unless such
transferring Selling Registration Rights Group member notifies QR Energy in writing that it will
pay all of the additional Registration Expenses incurred by QR Energy in connection with filing a
post-effective amendment to a Shelf Registration Statement or a new Shelf Registration Statement
for the benefit of such transferee(s) or assignee(s); provided, however, that QR Energy shall be
entitled to delay any such filing as provided in Section 5.3(b) hereof.




ARTICLE VI




MISCELLANEOUS



     6.1 Communications. All notices and other communications provided for or permitted
hereunder shall be made in writing by facsimile, courier service or personal delivery:



	 	 	 	 	 	 	 	 	 	 	 

	 	 	(a)	 	if to QR Energy:
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	1401 McKinney Street, Suite 2400
	 	 	 	 	Houston, TX 77010
	 

	 	 	 	Attention:
	 	Chief Executive Officer	 	 	 	 
	 

	 	 	 	Telephone:
	 	(713) 452-2210	 	 	 	 
	 

	 	 	 	Facsimile:
	 	(713) 452-2211	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	(b)	 	if to the Funds or Black Diamond:
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	1401 McKinney Street, Suite 2400
	 	 	 	 	Houston, TX 77010
	 

	 	 	 	Attention:
	 	Chief Executive Officer	 	 	 	 
	 

	 	 	 	Telephone:
	 	(713) 452-2210	 	 	 	 
	 

	 	 	 	Facsimile:
	 	(713) 452-2211	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	With a copy to:
	 	 	 	 	1401 McKinney Street, Suite 2700
	 	 	 	 	Houston, TX 77010
	 

	 	 	 	Attention:
	 	General Counsel	 	 	 	 
	 

	 	 	 	Telephone:
	 	(713) 452-2020	 	 	 	 
	 

	 	 	 	Facsimile:
	 	(713) 452-2021	 	 	 	 






     All such notices and communications shall be deemed to have been received at the time
delivered by hand, if personally delivered; when receipt acknowledged, if sent via facsimile or
sent via Internet electronic mail; and when actually received, if sent by any other means.



21









 





     6.2 Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including subsequent transferees of
Registrable Securities to the extent permitted by Section 5.12 hereof.



     6.3 Limitation of Rights. This Agreement shall not be construed to vest any rights
under this Agreement to any individual or entity other than the Holders and the Holders do not
intend for any portion of this Agreement to confer rights upon any Person other than the Holders.



     6.4 Assignment of Rights. Except as provided in Section 5.12 of this Agreement, none
of the rights and obligations of the Holders under this Agreement may be transferred or assigned by
any Holder.



     6.5 Anti-Dilution. The provisions of this Agreement shall apply to the full extent
set forth herein with respect to any and all units of QR Energy or any successor or assign of QR
Energy (whether by merger, consolidation, sale of assets or otherwise) which may be issued in
respect of, in exchange for or in substitution of, the Registrable Securities, and shall be
appropriately adjusted for combinations, recapitalizations and the like occurring after the date of
this Agreement.



     6.6 Specific Performance. Damages in the event of breach of this Agreement by a party
hereto may be difficult, if not impossible, to ascertain, and it is therefore agreed that each such
Person, in addition to and without limiting any other remedy or right it may have, will have the
right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining
any such breach, and enforcing specifically the terms and provisions hereof, and each of the
parties hereto hereby waives any and all defenses it may have on the ground of lack of jurisdiction
or competence of the court to grant such an injunction or other equitable relief. The existence of
this right will not preclude any such Person from pursuing any other rights and remedies at law or
in equity which such Person may have.



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



     6.8 Headings. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.



     6.9 Governing Law. The laws of the State of Delaware shall govern this Agreement
without regard to principles of conflict of laws.



     6.10 Severability of Provisions. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining provisions hereof or
affecting or impairing the validity or enforceability of such provision in any other jurisdiction.



     6.11 Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject matter contained



22









 




herein. There are no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.




     6.12 Amendment. This Agreement may be amended only by means of a written amendment
signed by all parties to this Agreement.



     6.13 No Presumption. In the event any claim is made by a party relating to any
conflict, omission, or ambiguity in this Agreement, no presumption or burden of proof or persuasion
shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a
particular party or its counsel.



     6.14 Payment of Expenses. QR Energy shall pay or reimburse the Holders, to the extent
such costs have been incurred, for all reasonable third-party out-of-pocket costs and expenses
(including the reasonable fees and expenses of legal counsel) incurred by them in connection with
(i) negotiations leading to the execution of this Agreement and (ii) the review of the Registration
Statement and all amendments thereto and (iii) the Partnership Agreement simultaneous with the
Closing. Nothing set forth herein shall obligate QR Energy to reimburse any Holder with respect to
any other costs or expenses incurred with respect to its investment in QR Energy or the Offering.



[Signature pages follow]




23









 





     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above
set forth.



	 	 	 	 	 	 	 

	 	 	QR ENERGY, LP
	 
	 	 	 	 	 	 
	 

	 	By:
	 	QRE GP, LLC, its general partner	 	 
	 

	 	By:
	 	/s/ John H. Campbell, Jr.	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	John H. Campbell, Jr.	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	QRE GP, LLC
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John H. Campbell, Jr.	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	John H. Campbell, Jr.	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	QUANTUM RESOURCES A1, LP
	 
	 	 	 	 	 	 
	 

	 	By:
	 	The Quantum Aspect Partnership, LP,
its general partner	 	 
	 

	 	By:
	 	QA GP, LLC, its general partner	 	 
	 

	 	By:
	 	QA Holdings, LP, its general partner	 	 
	 

	 	By:
	 	QA Global GP, LLC, its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ John H. Campbell, Jr.	 	 
	 

	 	 
	 	 	 	 
	 

	 	Name:
	 	John H. Campbell, Jr.	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	QUANTUM RESOURCES B, LP
	 
	 	 	 	 	 	 
	 

	 	By:
	 	The Quantum Aspect Partnership, LP,
its general partner	 	 
	 

	 	By:
	 	QA GP, LLC, its general partner	 	 
	 

	 	By:
	 	QA Holdings, LP, its general partner	 	 
	 

	 	By:
	 	QA Global GP, LLC, its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John H. Campbell, Jr.	 	 
	 

	 	 
	 	 	 	 
	 

	 	Name:
	 	John H. Campbell, Jr.	 	 
	 

	 	Title:
	 	President	 	 





Signature Page to Stakeholders’ Agreement













 





	 	 	 	 	 	 	 

	 	 	QUANTUM RESOURCES C, LP
	 
	 	 	 	 	 	 
	 

	 	By:
	 	The Quantum Aspect Partnership, LP,
its general partner	 	 
	 

	 	By:
	 	QA GP, LLC, its general partner	 	 
	 

	 	By:
	 	QA Holdings, LP, its sole member	 	 
	 

	 	By:
	 	QA Global GP, LLC, its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John H. Campbell, Jr.	 	 
	 

	 	 
	 	 	 	 
	 

	 	Name:
	 	John H. Campbell, Jr.	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	BLACK DIAMOND RESOURCES, LLC
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John H. Campbell, Jr.	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	John H. Campbell, Jr.	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	QAB CARRIED WI, LP
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Black Diamond GP, LLC, its general partner	 	 
	 

	 	By:
	 	Black Diamond Resources 2, LLC, its sole member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John H. Campbell, Jr.	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	John H. Campbell, Jr.	 	 
	 

	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	QAC CARRIED WI, LP
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Black Diamond GP, LLC, its general partner	 	 
	 

	 	By:
	 	Black Diamond Resources 2, LLC, its sole member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John H. Campbell, Jr.	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	John H. Campbell, Jr.	 	 
	 

	 	Title:
	 	President	 	 





Signature Page to Stakeholders’ Agreement