exv10w5






Exhibit 10.5




Execution Copy




AMENDED AND RESTATED




ADMINISTRATIVE SERVICES AGREEMENT



AMONG



ENCORE ENERGY PARTNERS GP LLC,



ENCORE ENERGY PARTNERS LP,



ENCORE ENERGY PARTNERS OPERATING LLC,



ENCORE OPERATING, L.P.



AND



ENCORE ACQUISITION COMPANY



 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 

	ARTICLE I DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 
	Section 1.1
	 	Definitions	 	 	1	 
	Section 1.2
	 	Construction	 	 	4	 
	 
	 	 	 	 	 	 
	ARTICLE II RETENTION OF ENCORE OPERATING; SCOPE OF SERVICES	 	 	5	 
	 
	 	 	 	 	 	 
	Section 2.1
	 	Retention of Encore Operating	 	 	5	 
	Section 2.2
	 	Scope of Services	 	 	5	 
	Section 2.3
	 	Exclusion of Services	 	 	5	 
	Section 2.4
	 	Performance of Services by Affiliates and Third Parties	 	 	5	 
	Section 2.5
	 	Intellectual Property	 	 	5	 
	Section 2.6
	 	Appointment of Independent Accounting Firm and Independent Petroleum Engineer	 	 	6	 
	 
	 	 	 	 	 	 
	ARTICLE III BOOKS, RECORDS AND REPORTING	 	 	6	 
	 
	 	 	 	 	 	 
	Section 3.1
	 	Books and Records	 	 	6	 
	Section 3.2
	 	Audits	 	 	6	 
	Section 3.3
	 	Reports	 	 	6	 
	 
	 	 	 	 	 	 
	ARTICLE IV PAYMENT AMOUNT	 	 	6	 
	 
	 	 	 	 	 	 
	Section 4.1
	 	Payment Amount	 	 	6	 
	Section 4.2
	 	Payment of Payment Amount	 	 	7	 
	Section 4.3
	 	Disputed Charges	 	 	7	 
	Section 4.4
	 	Set Off	 	 	8	 
	Section 4.5
	 	Encore Operating’s Employees	 	 	8	 
	Section 4.6
	 	Approval of Expenses	 	 	8	 
	Section 4.7
	 	Tax Reimbursement	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE V FORCE MAJEURE	 	 	9	 
	 
	 	 	 	 	 	 
	ARTICLE VI ASSIGNMENTS AND SUBCONTRACTS	 	 	9	 
	 
	 	 	 	 	 	 
	Section 6.1
	 	Assignments	 	 	9	 
	Section 6.2
	 	Other Requirements	 	 	9	 
	 
	 	 	 	 	 	 
	ARTICLE VII TERMINATION	 	 	10	 
	 
	 	 	 	 	 	 
	Section 7.1
	 	Termination by the Partnership on behalf of the Partnership Group	 	 	10	 
	Section 7.2
	 	Termination by Encore Operating	 	 	10	 
	Section 7.3
	 	Effect of Termination	 	 	11	 
	 
	 	 	 	 	 	 
	ARTICLE VIII CONFIDENTIAL INFORMATION	 	 	11	 
	 
	 	 	 	 	 	 
	Section 8.1
	 	Nondisclosure	 	 	11	 
	Section 8.2
	 	Permitted Disclosure	 	 	11	 






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	ARTICLE IX LIMITATION OF LIABILITY; INDEMNIFICATION	 	 	11	 
	 
	 	 	 	 	 	 
	Section 9.1
	 	Limitation of Encore Operating’s Liability	 	 	11	 
	Section 9.2
	 	Partnership’s Indemnity	 	 	12	 
	Section 9.3
	 	Limitation of Damages	 	 	12	 
	Section 9.4
	 	Affiliate; Third Parties	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE X DISPUTE RESOLUTION	 	 	12	 
	 
	 	 	 	 	 	 
	ARTICLE XI GENERAL PROVISIONS	 	 	13	 
	 
	 	 	 	 	 	 
	Section 11.1
	 	Notices	 	 	13	 
	Section 11.2
	 	Further Action	 	 	13	 
	Section 11.3
	 	Binding Effect	 	 	13	 
	Section 11.4
	 	Integration	 	 	14	 
	Section 11.5
	 	Creditors	 	 	14	 
	Section 11.6
	 	Waiver	 	 	14	 
	Section 11.7
	 	Counterparts	 	 	14	 
	Section 11.8
	 	Applicable Law	 	 	14	 
	Section 11.9
	 	Invalidity of Provisions	 	 	14	 
	Section 11.10
	 	Amendment or Restatement	 	 	14	 
	Section 11.11
	 	Directly or Indirectly	 	 	14	 
	Section 11.12
	 	Power of Attorney	 	 	14	 







ii











 





AMENDED AND RESTATED

ADMINISTRATIVE SERVICES AGREEMENT




     THIS AMENDED AND RESTATED ADMINISTRATIVE SERVICES AGREEMENT is entered into on September 17,
2007, and effective as of March 7, 2007 (the “Effective Date”), among Encore Energy Partners GP
LLC, a Delaware limited liability company (the “General Partner”), Encore Energy Partners LP, a
Delaware limited partnership (the “Partnership”), Encore Energy Partners Operating LLC, a Delaware
limited liability company (the “Operating Company”), Encore Operating, L.P., a Texas limited
partnership (“Encore Operating”), and Encore Acquisition Company, a Delaware corporation (“EAC” and
collectively with the General Partner, the Partnership, the Operating Company and Encore Operating,
the “Parties” and each, a “Party”), and amends and restates in its entirety the Administrative
Services Agreement dated as of March 7, 2007.



RECITALS




     A. The Partnership is the owner, directly or indirectly, of interests in the Business (as
hereinafter defined);



     B. The Partnership Group (as hereinafter defined) requires certain services to operate the
Business and to fulfill other general and administrative functions relating to the Business; and



     C. The Partnership Group desires that Encore Operating provide such services, and Encore
Operating is willing to undertake such engagement, subject to the terms and conditions of this
Agreement;



     NOW, THEREFORE, the General Partner, the Partnership, the Operating Company and
Encore Operating 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.



     “Administrative Fee” is defined in Section 4.1.



     “Affiliate” means, with respect to any Person, any other Person that directly or indirectly
through one or more intermediaries controls, is controlled by or is under common control with, the
Person in question. As used herein, the term “control” means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.



     “Agreement” means this Amended and Restated Administrative Services Agreement, as it may be
amended, supplemented or restated from time to time.



 









 





     “Bankrupt” with respect to any Person means such Person shall generally be unable to pay its
debts as such debts become due, or shall so admit in writing or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against such Person seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property and, in the case of any such proceeding instituted against
it (but not instituted by it), shall remain undismissed or unstayed for a period of 30 days; or
such Person shall take any action to authorize any of the actions set forth above.



     “BOE” means one barrel of oil equivalent, calculated by converting natural gas to oil
equivalent barrels at a ratio of six thousand cubic feet of natural gas to one stock tank barrel,
or 42 U.S. gallons liquid volume, of oil.



     “Business” means the business of the Partnership Group.



     “Confidential Information” means non-public information about the disclosing Party’s or any of
its Affiliates’ business or activities that is proprietary and confidential, which shall include,
without limitation, all business, financial, technical and other information, including software
(source and object code) and programming code, of a Party or its Affiliates marked or designated
“confidential” or “proprietary” or by its nature or the circumstances surrounding its disclosure it
should reasonably be regarded as confidential. Confidential Information includes not only written
or other tangible information, but also information transferred orally, visually, electronically or
by any other means. Confidential Information does not include information that (i) is in or enters
the public domain without breach of this Agreement, or (ii) the receiving Party lawfully receives
from a third party without restriction on disclosure and to the receiving Party’s knowledge without
breach of a nondisclosure obligation.



     “COPAS” means the Council of Petroleum Accountants
Societies.



     “Damages” is defined in Section 9.1.



     “Default Rate” means an interest rate (which shall in no event be higher than the rate
permitted by applicable law) equal to the prime interest rate of the Operating Company’s principal
lender.



     “EAC” is defined in the introductory paragraph.



     “Effective Date” is defined in the introductory paragraph.



     “Encore Group” means EAC and is Affiliates (other than any member of the Partnership
Group).



     “Encore Operating” is defined in the introductory paragraph.



     “Encore Operating Party” is defined in Section 9.1.



2









 





     “Environmental Law” means current local, county, state, federal, and/or foreign law (including
common law), statute, code, ordinance, rule, order, judgment, decree, regulation or other legal
obligation relating to the protection of health, safety or the environment or natural resources,
including, without limitation, the Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. section 9601 et seq.), as amended, the Resource Conservation and Recovery Act (42
U.S.C. section 6901 et seq.), as amended, the Federal Water Pollution Control Act (33 U.S.C.
section 1251 et seq.), as amended, the Clean Air Act (42 U.S.C. section 7401 et seq.), as amended,
the Toxic Substances Control Act (15 U.S.C. section 2601 et seq.), as amended, the Occupational
Safety and Health Act (29 U.S.C. section 651 et seq.), as amended, the Safe Drinking Water Act (42
U.S.C. section 300(f) et seq.), as amended, analogous state, tribal or local laws, and any similar,
implementing or successor law, and any amendment, rule, regulation, or directive issued thereunder,
including any determination by, or interpretation of any of the foregoing by any Governmental
Authority that has the force of law.



     “Force Majeure” means any cause beyond the reasonable control of a Party, including the
following causes (unless they are within such Party’s reasonable control): acts of God, strikes,
lockouts, acts of the public enemy, wars or warlike action (whether actual or impending), arrests
and other restraints of government (civil or military), blockades, embargoes, insurrections, riots,
epidemics, landslides, lightning, earthquakes, fires, sabotage, tornadoes, named tropical storms
and hurricanes, floods, civil disturbances, terrorism, mechanical breakdown of machinery or
equipment, explosions, confiscation or seizure by any government or other public authority and any
order of any court of competent jurisdiction, regulatory agency or governmental body having
jurisdiction.



     “G&A Services” means those general and administrative services necessary or useful for the
conduct of the business of the Partnership Group, including, but not limited to, accounting,
corporate development, finance, land, marketing, legal and engineering.



     “General Partner” is defined in the introductory paragraph.



     “Governmental Approval” means any material consent, authorization, certificate, permit,
right-of-way grant or approval of any Governmental Authority that is necessary for the
construction, ownership and operation of the Business in accordance with applicable Laws.



     “Governmental Authority” means any court or tribunal in any jurisdiction or any federal,
state, tribal, municipal or local government or other governmental body, agency, authority,
department, commission, board, bureau, instrumentality, arbitrator or arbitral body or any
quasi-governmental or private body lawfully exercising any regulatory or taxing authority.


     “Laws” means any applicable statute, Environmental Law, common law, rule, regulation, judgment,
order, ordinance, writ, injunction or decree issued or promulgated by any Governmental Authority.



     “Operating Company” is defined in the introductory
paragraph.



     “Parties” is defined in the introductory
paragraph.



     “Partnership” is defined in the introductory paragraph.



3









 





     “Partnership Agreement” means the Second Amended and Restated Agreement of Limited Partnership
of the Partnership, as may be amended or restated from time to time.



     “Partnership Group” means the General Partner, the Partnership, the Operating Company and all
of their respective Subsidiaries.



     “Partnership Group Party” is defined in Section
9.1.



     “Payment Amount” is defined in Section
4.1.



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



     “Services” is defined in Section 2.2.



     “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) in which such
Person or a Subsidiary of such Person is, at the date of determination, a general or limited
partner of such partnership, but only if more than 50% of the partnership interests of such
partnership (considering all of the partnership interests of the partnership 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 or a partnership) 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.



     Other terms defined herein have the meanings so
given them.



     Section 1.2 Construction.



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



4









 





ARTICLE
II

RETENTION OF ENCORE OPERATING; SCOPE OF SERVICES




     Section 2.1 Retention of Encore Operating. The Partnership hereby engages Encore Operating to
perform the Services, as directed by the General Partner, and to provide all personnel and any
facilities, goods and equipment not otherwise provided by the Partnership Group necessary to
perform the Services. Encore Operating hereby accepts such engagement and agrees to perform the
Services requested by the General Partner and to provide any personnel, facilities, goods and
equipment not otherwise provided by the Partnership Group, and to provide all employees as may be
reasonable and necessary to perform the Services.



     Section 2.2 Scope of Services. The “Services” shall consist of such services the General
Partner determines may be reasonable and necessary to operate the Business, including, without
limitation, any G&A Services and those services described on Schedule I hereto. Encore Operating
hereby covenants and agrees that the Services will be performed in accordance with (i) applicable
material Governmental Approvals and Laws and (ii) industry standards.



     Section 2.3 Exclusion of Services. The General Partner may temporarily or permanently exclude
any particular service from the scope of the Services upon 90 days’ notice to Encore Operating.



     Section 2.4 Performance of Services by Affiliates and Third Parties. The Parties hereby agree
that in discharging its obligations hereunder, Encore Operating may engage any of its Affiliates or
any qualified third party to perform the Services (or any part of the Services) on its behalf and
that the performance of the Services (or any part of the Services) by any such Affiliate or third
party shall be treated as if Encore Operating performed such Services itself. Notwithstanding the
foregoing, nothing contained herein shall relieve Encore Operating of its obligations hereunder.



     Section 2.5 Intellectual Property.




     (a) Any (i) inventions, whether patentable or not, developed or invented, or (ii)
copyrightable material (and the intangible rights of copyright therein) developed, by Encore
Operating, its Affiliates or its or their employees in connection with the performance of the
Services shall be the property of Encore Operating; provided, however, that the Partnership Group
shall be granted an irrevocable, royalty-free, non-exclusive and non-transferable right and
license to use such inventions or material; and further provided, however, that the Partnership
Group shall only be granted such a right and license to the extent such grant does not conflict
with, or result in a breach, default, or violation of a right or license to use such inventions
or material granted to Encore Operating by any Person other than an Affiliate of Encore
Operating. Notwithstanding the foregoing, Encore Operating will use all commercially reasonable
efforts to grant such right and license to the Partnership Group.




     (b) The General Partner, the Partnership and the Operating Company hereby grant to Encore
Operating and its Affiliates an irrevocable, royalty-free, non-exclusive



5









 







and non-transferable right and license to use, during the term of this Agreement, any
intellectual property provided by the Partnership Group to Encore Operating or its Affiliates,
but only to the extent such use is necessary for the performance of the Services. Encore
Operating agrees that it and its Affiliates will utilize such intellectual property solely in
connection with the performance of the Services.



     Section 2.6 Appointment of Independent Accounting Firm and Independent Petroleum Engineer.
Notwithstanding anything to the contrary in this Agreement, the Parties hereby acknowledge and
agree that the General Partner shall have the exclusive authority to appoint an independent
registered public accounting firm to audit the financial statements of the Partnership and an
independent petroleum engineer to provide reports to the Partnership relating to estimates of
proved reserves for Securities and Exchange Commission and other reporting purposes.



ARTICLE
III

BOOKS, RECORDS AND REPORTING




     Section 3.1 Books and Records. Encore Operating shall maintain accurate books and records
regarding the performance of the Services and its calculation of the Payment Amount, and shall
maintain such books and records for the period required by applicable accounting practices or Law.



     Section 3.2 Audits. The Partnership shall have the right, upon reasonable notice, and at all
reasonable times during usual business hours, to audit, examine and make copies of the books and
records referred to in Section 3.1. Such right may be exercised through any agent or employee of
the Partnership Group designated in writing by it or by an independent public accountant, engineer,
attorney or other agent so designated. The Partnership shall bear all costs and expenses incurred
in any inspection, examination or audit. Encore Operating shall review and respond in a timely
manner to any claims or inquiries made by the Partnership regarding matters revealed by any such
inspection, examination or audit.



     Section 3.3 Reports. Encore Operating shall prepare and deliver to the Partnership any reports
provided for in this Agreement and such other reports as the Partnership may reasonably request
from time to time regarding the performance of the Services.



ARTICLE
IV

PAYMENT AMOUNT




     Section 4.1 Payment Amount.




     (a) The Partnership shall on a quarterly basis (i) pay Encore Operating a fixed fee of $1.75
per BOE of the Partnership Group’s total net oil and gas production for the then completed
quarter (the “Administrative Fee”) and (ii) reimburse Encore Operating for all third-party
expenses that Encore Operating incurs on behalf of the Partnership Group (collectively with the
Administrative Fee, the “Payment Amount”). In addition to the Payment Amount, Encore Operating
shall be entitled to retain any COPAS overhead charges associated with drilling and operating
wells that would otherwise be paid by third



6









 







parties to the operator of a well. For the avoidance of doubt, the Partnership will pay all
expenses that are directly chargeable to wells under their respective joint operating agreements.




     (b) The Administrative Fee shall increase in the following circumstances:




     (i) Beginning on the first day of April in each year beginning with April 1, 2008, the
Administrative Fee shall increase by an amount equal to the product of the then-current
Administrative Fee multiplied by COPAS Wage Index Adjustment for the current year.




     (ii) If the Partnership or any other member of the Partnership Group acquires additional
assets, then Encore Operating may propose a revised Administrative Fee that covers the
provision of Services for such additional assets. If the General Partner, on behalf of the
Partnership Group and with the concurrence of the conflicts committee of the board of directors
of the General Partner, agrees to such revised Administrative Fee, Encore Operating shall
provide Services for the additional assets pursuant to the terms set forth herein.




     (iii) If the Partnership and Encore Operating otherwise agree to increase the
Administrative Fee; provided, however, that any such increase shall be approved by the board of
directors of the General Partner with the concurrence of the conflicts committee of such board.



     Section 4.2 Payment of Payment Amount. Encore Operating shall invoice the Partnership within
25 days after the close of each quarter for the estimated Payment Amount, plus or minus any
adjustment necessary to correct prior estimated billings to actual billings. Subject to Section
4.3, all invoices shall be due and payable, in immediately available funds, within thirty days
after receipt of each invoice. Upon the request of the Partnership, Encore Operating shall furnish
a reasonable detail of the Services provided and charges assessed during any quarter.



     Section 4.3 Disputed Charges. THE PARTNERSHIP MAY, WITHIN 120 DAYS AFTER RECEIPT OF A CHARGE
FROM ENCORE OPERATING, TAKE WRITTEN EXCEPTION TO SUCH CHARGE, ON THE GROUND THAT THE SAME WAS NOT A
CORRECT CALCULATION OF THE ADMINISTRATIVE FEE AND/OR A REASONABLE COST INCURRED BY ENCORE OPERATING
OR ITS AFFILIATES IN CONNECTION WITH THE SERVICES. THE PARTNERSHIP SHALL NEVERTHELESS PAY ENCORE
OPERATING IN FULL WHEN DUE THE FULL PAYMENT AMOUNT OWED TO ENCORE OPERATING. SUCH PAYMENT SHALL NOT
BE DEEMED A WAIVER OF THE RIGHT OF THE PARTNERSHIP TO RECOUP ANY CONTESTED PORTION OF ANY AMOUNT SO
PAID.
HOWEVER, IF THE AMOUNT AS TO WHICH SUCH WRITTEN EXCEPTION IS TAKEN, OR ANY PART THEREOF, IS
ULTIMATELY DETERMINED NOT TO BE A CORRECT CALCULATION OF THE ADMINISTRATIVE FEE AND/OR A REASONABLE
COST INCURRED BY ENCORE OPERATING OR ITS AFFILIATES IN CONNECTION WITH ITS PROVIDING THE SERVICES
HEREUNDER, SUCH AMOUNT OR PORTION THEREOF (AS THE CASE MAY BE) SHALL BE REFUNDED BY ENCORE



7









 




OPERATING TO THE PARTNERSHIP TOGETHER WITH INTEREST THEREON AT THE DEFAULT RATE DURING THE PERIOD
FROM THE DATE OF PAYMENT BY THE PARTNERSHIP TO THE DATE OF REFUND BY ENCORE OPERATING.




     Section 4.4 Set Off. In the event that Encore Operating owes the Partnership a sum certain in
an uncontested amount under any other agreement, then any such amounts may be aggregated and the
Partnership and Encore Operating may discharge their obligations by netting those amounts against
any amounts owed by the Partnership to Encore Operating under this Agreement. If the Partnership or
Encore Operating owes the other party a greater aggregate amount, that Party may pay to the other
Party the difference between the amounts owed.



     Section 4.5 Encore Operating’s Employees. The obligations under Sections 4.1 and 4.2, to the
extent they relate to Services provided by employees of Encore Operating or its Affiliates, shall
be limited to payment to Encore Operating for expenses in connection with its or its Affiliates’
employees engaged in the provision of Services hereunder, and the Partnership shall not be
obligated to pay to Encore Operating’s or its Affiliates’ employees directly any compensation,
salaries, wages, bonuses, benefits, social security taxes, workers’ compensation insurance,
retirement and insurance benefits, training and other such expenses; provided, however, that the
Partnership may, at its option, compensate such employees under one or more equity-based incentive
compensation plans for the provision of Services hereunder; and provided further, however, that if
Encore Operating fails to pay any employee, with the exception of employee claims for amounts owed
that Encore Operating disputes in good faith, within 30 days of the date such employee’s payment is
due:




     (a) The Partnership may (i) pay such employee directly, (ii) employ such employee
directly, (iii) notify Encore Operating and begin to pay all employees providing service to the
Partnership directly, or (iv) notify Encore Operating that this Agreement is terminated and employ
all employees directly; and




     (b) Encore Operating shall reimburse the Partnership, as the case
may be, the amount the Partnership paid to Encore Operating for employee services that Encore
Operating did not pay to any such employee.



     Section 4.6 Approval of Expenses. Encore Operating acknowledges that all charges for Services
assessed by Encore Operating and included in the Payment Amount must be approved by the persons
authorized to approve such Payment Amount pursuant to the Partnership’s governance and
delegation-of-authority process. Additionally, Encore Operating acknowledges that the Audit
Committee of the Board of Directors of the General Partner, or if there is no Audit Committee, the
entire Board of Directors of the General Partner, may at any time review the Payment Amounts and
the levels of Services and, as a result, may direct the Partnership to decrease the level of
Services or to dispute a prior invoice pursuant to Section 4.3. In addition to the information
Encore Operating is obligated to provide pursuant to Section 4.2, Encore Operating shall provide
such other information as reasonably necessary to determine the veracity or appropriateness of any
Payment Amount hereunder.



     Section 4.7 Tax Reimbursement. The Partnership shall reimburse EAC for any additional state
income, franchise or similar tax paid by EAC resulting from EAC’s inclusion of



8









 




one or more members of the Partnership Group with EAC in a combined state income, franchise or
similar tax report. With respect to any such combined state income, franchise or other tax report,
the amount of the Partnership’s reimbursement to EAC shall be equal to the tax that those
Partnership Group members included with EAC on such tax report would have paid had such Partnership
Group members not been included on such report. Any reimbursement payment required under this
provision will be due within 45 days after EAC makes the tax payment giving rise to such
reimbursement.




ARTICLE
V

FORCE MAJEURE




     A Party’s obligation under this Agreement shall be excused when and to the extent its
performance of that obligation is prevented due to Force Majeure; provided, however, that a Party
shall not be excused by Force Majeure from any obligation to pay money. The Party that is prevented
from performing its obligation by reason of Force Majeure shall promptly notify the other Parties
of that fact and shall exercise due diligence to end its inability to perform as promptly as
practicable. Notwithstanding the foregoing, a Party is not required to settle any strike, lockout
or other labor dispute in which it may be involved; provided, however, that, in the event of a
strike, lockout or other labor dispute affecting Encore Operating, Encore Operating shall use
reasonable efforts to continue to perform all obligations hereunder by utilizing its management
personnel and that of its Affiliates.



ARTICLE
VI

ASSIGNMENTS AND SUBCONTRACTS




     Section 6.1 Assignments.




     (a) Without the prior consent of Encore Operating, none of the Partnership or the other
members or the Partnership Group may sell, assign, transfer or convey any of its rights, or
delegate any of its obligations, under this Agreement to any Person.




     (b) Without the prior consent of the Partnership, Encore Operating may not sell, assign,
transfer or convey any of its rights, or delegate any of its obligations, under this Agreement to
any Person, other than the delegation of performance of Services to an Affiliate of Encore
Operating or a qualified third party as permitted by Section 2.4 and the sale, assignment,
transfer or conveyance of its rights hereunder to any such Affiliate.



     Section 6.2 Other Requirements. Subject to the other provisions hereof:




     (a) All materials and workmanship used or provided in performing the Services shall be in
accordance with applicable specifications and standards.




     (b) Encore Operating shall exercise reasonable diligence to obtain the most favorable terms or
warranties available from vendors, suppliers and other third parties, and where appropriate, Encore
Operating shall assign such warranties to the Partnership.



9









 






     (c) In rendering the Services, Encore Operating shall not discriminate against any employee or
applicant for employment because of race, creed, color, religion, sex, national origin, age or
handicap, and shall comply with all applicable provisions of Executive Order 11246 of September 24,
1965, and any successor order thereto. Subject to the above, Encore Operating shall, to the extent
practicable, engage employees who reside in or whose businesses are located in the local area or
state where the Services are performed.




     (d) Encore Operating agrees to exercise reasonable diligence to ensure that, during the term
of this Agreement, it shall not employ unauthorized aliens as defined in the Immigration Reform and
Control Act of 1986, or any successor law.



ARTICLE
VII

TERMINATION




     Section 7.1 Termination by the Partnership on behalf of the Partnership Group.




     (a) Upon the occurrence of any of the following events, the Partnership, on behalf of the
Partnership Group, may terminate this Agreement by giving written notice of such termination to
Encore Operating:




     (i) EAC and its Affiliates cease to maintain a direct or indirect
controlling interest in the General Partner or Encore Operating; or




     (ii) Encore Operating’s
failure to pay any employee within thirty (30) days of the date such employee’s payment is due,
subject to the limitations described in Section 4.5.




Any termination under this Section 7.1(a) shall become effective immediately upon delivery of the
notice first described in this Section 7.1(a), or such later time (not to exceed the first
anniversary of the delivery of such notice) as may be specified by the Partnership.




     (b) In addition to its rights under Section 7.1(a), the Partnership may terminate this
Agreement at any time by giving notice of such termination to Encore Operating. Any termination
under this Section 7.1(b) shall become effective 90 days after delivery of such notice, or such
later time (not to exceed the first anniversary of the delivery of such notice) as may be
specified by the Partnership.




     (c) In the event that Encore Operating becomes Bankrupt or dissolves and commences
liquidation or winding-up, this Agreement shall automatically terminate without notice to Encore
Operating.



     Section 7.2 Termination by Encore Operating.




     (a) Encore Operating may terminate this Agreement by giving written notice of such
termination to the Partnership in the event that EAC and its Affiliates cease to



10









 







maintain a direct or indirect controlling interest in the General Partner or Encore Operating.




Any termination under this Section 7.2(a) shall become effective immediately upon delivery of the
notice first described in this Section 7.2(a).




     (b) In addition to its rights under Section 7.2(a), Encore Operating may terminate this
Agreement at any time by giving notice of such termination to the Partnership. Any termination
under this Section 7.2(b) shall become effective 90 days after delivery of such notice, or such
later time (not to exceed the first anniversary of the delivery of such notice) as may be
specified by Encore Operating.



     Section 7.3 Effect of Termination. If this Agreement is terminated in accordance with Section
7.1 or 7.2, all rights and obligations under this Agreement shall cease except for (a) obligations
that expressly survive termination of this Agreement; (b) liabilities and obligations that have
accrued prior to such termination, including the obligation to pay any amounts that have become due
and payable prior to such termination, and (c) the obligation to pay any portion of the Payment
Amount that has accrued prior to such termination, even if such portion has not become due and
payable at that time.



ARTICLE
VIII

CONFIDENTIAL INFORMATION




     Section 8.1 Nondisclosure. Each of Encore Operating and the Partnership Group agrees that (i)
it will not disclose to any third party or use any Confidential Information disclosed to it by the
other except as expressly permitted in this Agreement, and (ii) it will take all reasonable
measures to maintain the confidentiality of all Confidential Information of the other Party in its
possession or control, which will in no event be less than the measures it uses to maintain the
confidentiality of its own information of similar type and importance.



     Section 8.2 Permitted Disclosure. Notwithstanding the foregoing, each Party may disclose
Confidential Information (i) to the extent required by a court of competent jurisdiction or other
governmental authority or otherwise as required by law, including without limitation disclosure
obligations imposed under the federal securities laws, provided that such Party has given the other
Party prior notice of such requirement when legally permissible to permit the other Party to take
such legal action to prevent the disclosure as it deems reasonable, appropriate or necessary, or
(ii) to its consultants, legal counsel, Affiliates, accountants, banks and other financing sources
and their advisors.



ARTICLE
IX

LIMITATION OF LIABILITY; INDEMNIFICATION




     Section 9.1 Limitation of Encore Operating’s Liability. Neither Encore Operating nor any of
its controlling persons, directors, officers, employees, agents and permitted assigns (each, an
“Encore Operating Party”) shall have any liability to the Partnership Group for any losses, damages
(including, but not limited to, special, indirect, punitive and/or consequential damages),



11









 




claims, injury, liability, cost or expense (“Damages”) arising out of this Agreement, whether such
Damages arise on account of the furnishing of Services hereunder, the failure to furnish Services
hereunder, or otherwise, and whether or not such Damages were caused by the negligence of the
Encore Operating Party, including the Encore Operating Party’s sole negligence; provided, however,
that the foregoing limitation shall not apply to Damages caused by the Encore Operating Party’s
gross negligence or willful, intentional misconduct.




     Section 9.2 Partnership’s Indemnity. The Partnership agrees to indemnify, defend and hold
harmless each Encore Operating Party from and against any and all Damages arising out of this
Agreement, whether such Damages arise on account of the furnishing of Services hereunder, the
failure to furnish Services hereunder, or otherwise, and whether or not such Damages were caused by
the negligence of any Encore Operating Party, including the Encore Operating Party’s sole
negligence; provided, however, that the foregoing limitation shall not apply to Damages caused by
the Encore Operating Party’s gross negligence or willful, intentional misconduct.



     Section 9.3 Limitation of Damages. If the Partnership Group suffers Damages arising out of
this Agreement, which Damages were caused by the gross negligence or willful, intentional
misconduct of Encore Operating, Encore Operating’s sole liability to the Partnership Group shall be
to properly perform the Services in question at no additional cost to the Partnership Group and to
pay the Partnership Group for any and all direct damages suffered by the Partnership Group.
Notwithstanding anything to the contrary contained herein or at Law and in equity, in no event
shall Encore Operating be liable for punitive, special, indirect, incidental or consequential
damages (including, without limitation, damages for loss of business profits, business interruption
or any other loss) arising from or relating to any claim made under this Agreement or regarding the
provision of or the failure to provide Services, even if Encore Operating had been advised or was
aware of the possibility of such damages.



     Section 9.4 Affiliate; Third Parties. If Encore Operating uses the personnel of its Affiliates
or third parties to provide Services, Encore Operating shall be responsible for the acts and
omissions of such personnel and third parties to the extent provided in this Agreement, and no
Affiliate of Encore Operating or third party shall have any liability to the Partnership Group on
account of any Damages suffered by the Partnership Group arising out of this Agreement, whether or
not such Damages were caused by their negligence and/or gross negligence, including their sole
negligence and/or sole gross negligence, or their willful, intentional misconduct.



ARTICLE
X

DISPUTE RESOLUTION




     If the Parties are unable to resolve any dispute regarding the validity or terms of this
Agreement or its termination, service or performance issues, there is a material breach of this
Agreement that has not been corrected within thirty (30) days of receipt of notice of such breach
or any other dispute between the parties related to this Agreement, either party hereto may refer
the matter to an arbitrator selected in accordance with the rules of JAMS in Tarrant County, Texas
as the exclusive remedy for any such dispute, and in lieu of any court action, which is hereby
waived. The only exception shall be a claim by either Party for injunctive relief pending
arbitration.



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ARTICLE
XI

GENERAL PROVISIONS




     Section 11.1 Notices. All notices or other communications required or permitted under, or
otherwise in connection with, this Agreement must be in writing and must be given by (1) depositing
same in the mail, addressed to the Person to be notified, postpaid and registered or certified with
return receipt requested, (2) transmitting by national overnight courier, (3) delivery in person or
(4) facsimile to such Party. Notice given by mail, national overnight courier or personal delivery
shall be effective upon actual receipt. Notice given by facsimile shall be effective upon
confirmation of a successful transmission. All notices to be sent to a Party pursuant to this
Agreement shall be sent to or made at the address, in each case as follows:


if to the General Partner or the Partnership:



Encore Energy Partners GP LLC

777 Main Street, Suite 1400

Fort Worth, TX 76102

Attention: President

Fax: (817) 877-1655



if to the Operating Company:



Encore Energy Partners Operating LLC

777 Main Street, Suite 1400

Fort Worth, TX 76102

Attention: President

Fax: (817) 877-1655



if to Encore Operating:



EAP Operating, Inc., its general partner

777 Main Street, Suite 1400

Fort Worth, TX 76102

Attention: President

Fax: (817) 877-1655




     Section 11.2 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 11.3 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.



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     Section 11.4 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 11.5 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 11.6 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 11.7 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.



     Section 11.8 Applicable Law. This Agreement shall be construed in accordance with and governed by the laws of
the State of Texas, without regard to the principles of conflicts of law.



     Section 11.9 Invalidity of Provisions. If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.



     Section 11.10 Amendment or Restatement. This Agreement may be amended or restated only by a
written instrument executed by each of the Parties; provided, however, that after the completion of
the Partnership’s initial public offering of common units representing limited partner interests,
the Partnership may not, without the prior approval of the conflicts committee of the board of
directors of the General Partner or, if there is no such committee, the independent members of such
board of directors, agree to any amendment or modification of this Agreement that the General
Partner determines will adversely affect the holders of such common units. The Parties hereto agree
that, for purposes of this Section 11.10, any material change in the nature, quantity or duration
of the Services to be provided under this Agreement shall constitute a modification of this
Agreement.



     Section 11.11 Directly or Indirectly. Where any provision of this Agreement refers to action
to be taken by any Party, or which such Party is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Party, including actions
taken by or on behalf of any Affiliate of such Party.



     Section 11.12 Power of Attorney. EAC hereby appoints Encore Operating to act on its behalf
under this Agreement.



14









 





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



	 	 	 	 	 
	 	ENCORE ENERGY PARTNERS GP LLC

 	 
	 	By:  	/s/ Robert C. Reeves
 	 
	 	 	Name:  	Robert C. Reeves 	 
	 	 	Title:  	Senior Vice President, Chief Financial Officer and Treasurer 	 
	 
	 	ENCORE ENERGY PARTNERS LP

 	 
	 	By:  	Encore Energy Partners GP LLC, its General Partner
 	 
	 	 	 
	 	By:  	                                     /s/ Robert C. Reeves
 	 
	 	 	Name:  	Robert C. Reeves 	 
	 	 	Title:  	Senior Vice President, Chief Financial Officer and Treasurer 	 
	 
	 	ENCORE ENERGY PARTNERS OPERATING LLC

 	 
	 	By:  	/s/ Robert C. Reeves
 	 
	 	 	Name:  	Robert C. Reeves 	 
	 	 	Title:  	Vice President, Chief Financial Officer, Treasurer and Secretary 	 
	 
	 	ENCORE OPERATING, L.P.



By: EAP Operating, Inc., its General Partner

 	 
	 	By:  	/s/ Robert C. Reeves
 	 
	 	 	Name:  	Robert C. Reeves 	 
	 	 	Title:  	Senior Vice President, Chief Financial Officer and Treasurer 	 
	 
	 	ENCORE ACQUISITION COMPANY

 	 
	 	By:  	/s/ Robert C. Reeves
 	 
	 	 	Name:  	Robert C. Reeves 	 
	 	 	Title:  	Senior Vice President, Chief Financial Officer and Treasurer 	 



15









 






	 	 	 	 	 



SCHEDULE I




SERVICES PROVIDED BY ENCORE OPERATING

TO THE PARTNERSHIP GROUP





	1.	 	Accounting
	 
	2.	 	Information Technology
	 
	3.	 	Real Property
	 
	4.	 	Legal
	 
	5.	 	Securities and Exchange Commission Reporting
	 
	6.	 	Operations/Reservoir Engineering/Geology/Geophysics
	 
	7.	 	Administrative Services
	 
	8.	 	Financial Services
	 
	9.	 	Insurance Services
	 
	10.	 	Risk Management
	 
	11.	 	Corporate Development
	 
	12.	 	Commercial and Marketing
	 
	13.	 	Treasury
	 
	14.	 	Tax
	 
	15.	 	Audit
	 
	16.	 	Sarbanes-Oxley Compliance
	 
	17.	 	Investor Relations






I-1