Document:

exv10w5

Exhibit 10.5

SERVICES AGREEMENT

BY AND BETWEEN

QUANTUM RESOURCES MANAGEMENT, LLC

QRE GP, LLC

QR ENERGY PARTNERS, LP

AND

QRE OPERATING, LLC

 

 

SERVICES AGREEMENT

     THIS SERVICES AGREEMENT
(the “Agreement”), made as of the         day of
                    , 2010 (the
“Closing Date”), is by and between QUANTUM RESOURCES MANAGEMENT, LLC, a Delaware limited
liability company (“QRM”), QRE GP, LLC, a Delaware limited liability company (the
“General Partner”), QR ENERGY, LP, a Delaware limited partnership (the “MLP”), and
QRE OPERATING, LLC, a Delaware limited liability company (the “OLLC”).

     WHEREAS, the General Partner is the general partner of the MLP; and

     WHEREAS, subject to the terms hereof, the General Partner desires to engage QRM, and QRM
desires to be engaged, to provide or cause to be provided the services described herein relating to
the management of the MLP’s business.

     NOW, THEREFORE, in consideration of the mutual covenants herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
(each, a “Party” and together, the “Parties”) agree as follows:

ARTICLE I

DEFINITIONS

     1.1 Defined Terms. Capitalized terms used, but not defined, herein shall have the
meanings given them in the MLP Agreement. As used in this Agreement, the following terms shall
have the respective meanings set forth below:

     “Acquisition” means any acquisition or divestiture or series of acquisitions or
divestitures by the MLP Group of (i) of the interest in any company or business (whether by a
purchase of assets, purchase of stock, merger or otherwise); or (ii) any oil or natural gas
properties or interests, including any related assets; in each case acquired after the date of this
Agreement.

     “Acquisition Information” means any and all information provided by or on behalf of
QRM to the General Partner in the performance of the Services relating to potential Acquisitions.

     “Acquisition Services” means those Services in respect of potential and consummated
Acquisitions.

     “Adjusted EBITDA” means, for any period, the sum of Consolidated Net Income for the
MLP Group for such period, plus the following to the extent deducted from Consolidated Net Income
in such period: interest expense; depreciation, depletion and amortization; accretion of asset
retirement obligations; unrealized losses on derivative instruments; impairments; general and
administrative expenses that are allocated to the MLP in accordance with US GAAP in excess of the
administrative services fee paid to QRM and reimbursed by the MLP; amounts reimbursed by the MLP
Group to the General Partner paid by the General Partner pursuant to Section 4.1 hereof; and other
similar non-cash charges; and less the following: interest income and unrealized gains on
derivative instruments.

     “Affiliate” has the meaning given such term in the MLP Agreement.

 

 

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

     “Audit Right” has the meaning given that term in Article VIII.

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

     “Business Day” means any day that is not a Saturday, Sunday or day on which banks are
authorized by law to close in the State of Texas.

     “Closing Date” has the meaning given such term in the above preamble.

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

     “Confidential Information” means all information (i) furnished to QRM or its
representatives by or on behalf of the General Partner or (ii) prepared by or at the direction of
the General Partner (in each case irrespective of the form of communication and whether such
information is furnished before, on or after the date hereof), and all analyses, compilations,
data, studies, notes, interpretations, memoranda or other documents prepared by QRM or its
representatives containing or based in whole or in part on any such furnished information.

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

     “Consolidated Net Income” means with respect to the MLP and the Consolidated
Subsidiaries, for any period, the aggregate of the net income (or loss) of the MLP and the
Consolidated Subsidiaries after allowances for taxes for such period determined on a consolidated
basis in accordance with US GAAP; provided, however, that there shall be excluded
from such net income (to the extent otherwise included therein) the following (all determined in
accordance with US GAAP): (a) the net income of any Person in which the MLP or a Consolidated
Subsidiary has an interest (which interest does not cause the net income of such other Person to be
consolidated with the net income of the MLP and the Consolidated Subsidiaries), except to the
extent of the amount of dividends or distributions actually paid in cash during such period by such
other Person to the MLP or to a Consolidated Subsidiary, as the case may be; (b) the net income
(but not loss) during such period of any Consolidated Subsidiary to the extent that the declaration
or payment of dividends or similar distributions or transfers or loans by that Consolidated
Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement,
instrument or Governmental Requirement applicable to such Consolidated Subsidiary or is otherwise
restricted or prohibited; (c) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such transaction; (d) any
extraordinary gains or losses during such period; (e) non-cash gains, losses or adjustments under
FASB Statement No. 133 as a result of changes in the fair market value of derivatives; (f) any
gains or losses attributable to writeups or writedowns of assets, including ceiling test
writedowns; (g) non-cash share-based payments under FASB Statement No. 123R.

     “Consolidated Subsidiaries” means each Subsidiary of the MLP (whether now existing or
hereafter created or acquired) the financial statements of which shall be (or should have been)
consolidated with the financial statements of the MLP in accordance with US GAAP.

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     “General Partner” has the meaning given such term in the above preamble.

     “Governmental Authority” means the United States, any foreign country, state, county,
city or other incorporated or unincorporated political subdivision, agency or instrumentality
thereof.

     “Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other directive or requirement, whether now or hereinafter in effect,
including environmental laws, energy regulations and occupational, safety and health standards or
controls, of any Governmental Authority.

     “Indemnified Party” has the meaning given that term in Section 5.2.

     “Initial Term” means the period from the Closing Date until December 31, 2012.

     “Liabilities” has the meaning given that term in Section 5.1.

     “MLP” has the meaning given such term in the above preamble.

     “MLP Agreement” means the First Amended and Restated Agreement of Limited Partnership
of QR Energy, LP, dated as of the Closing Date, as such agreement is in effect on the Closing Date,
to which reference is hereby made for all purposes of this Agreement. An amendment or modification
to the MLP Agreement subsequent to the Closing Date shall be given effect for the purposes of this
Agreement; provided, however, if such amendment, in the reasonable discretion of the
General Partner (i) would have a material adverse effect on the holders of Common Units; or (ii)
would materially limit or impair the rights or reduce the obligations of the Parties under this
Agreement, then such amendment shall not be given effect for purposes of this Agreement unless it
has been approved by the Conflicts Committee.

     “MLP Assets” means the oil and natural gas properties, processing and treatment plants
or related equipment or assets, or portions thereof, owned or leased by any member of the MLP Group
as of the Closing Date.

     “MLP Group” means the MLP, the General Partner and the OLLC.

     “MLP Indemnified Party” has the meaning given that term in Section 5.1.

     “OLLC” has the meaning given such term in the above preamble.

     “Person” means an individual, corporation, partnership, joint venture, trust, limited
liability company, unincorporated organization or any other entity (but shall not include any
Governmental Authority).

     “Proceedings” means all proceedings, actions, claims, suits and notices of
investigations by or before any arbitrator or Governmental Authority.

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     “Properties” means the oil and natural gas properties now owned or hereafter acquired
by the MLP Group, including oil and gas leases, mineral interests, royalty interests, overriding
royalty interests, pipelines, flow lines, gathering lines, gathering systems, compressors,
dehydration units, separators, meters, injection facilities, salt water disposal wells and
facilities, plants, wells, downhole and surface equipment, fixtures, improvements, easements,
rights-of-way, surface leases, licenses, permits and other surface rights, and other real or
personal property appurtenant thereto or used in conjunction therewith, including the MLP Assets.

     “QRM” has the meaning given such term in the above preamble.

     “QRM Indemnified Party” has the meaning given that term in Section 5.2.

     “Services” means the services provided (or to be provided) by or on behalf of QRM to
the General Partner for the benefit of the MLP Group pursuant to this Agreement as set forth in
Exhibit A to this Agreement.

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

     “Tax Authority” means any Governmental Authority having jurisdiction over the
assessment, determination, collection or imposition of any Tax.

     “Tax Return” means any report, return, election, document, estimated tax filing,
declaration or other filing provided to any Tax Authority, including any amendments thereto.

     “Tax” or “Taxes” means (i) all taxes, assessments, charges, duties, levies,
imposts or other similar charges imposed by a Tax Authority, including all income, franchise,
profits, capital gains, capital stock, transfer, gross receipts, sales, use, transfer, service,
occupation, excise, severance, windfall profits, premium, stamp, license, payroll, employment,
social security, unemployment, disability, environmental (including taxes under Code section 59A),
alternative minimum, add-on, value-added, withholding and other taxes, assessments, charges,
duties, levies, imposts or other similar charges of any kind whatsoever (whether payable directly
or by withholding and whether or not requiring the filing of a Tax Return), and all estimated
taxes, deficiency assessments, additions to tax, additional amounts imposed by any Tax Authority,
penalties and interest, but excluding any and all taxes based on net income, net worth, capital or
profit; (ii) any liability for the payment of any amount of the type described in the immediately
preceding clause (i) as a result of being a member of a consolidated, affiliated, unitary,
combined, or similar group with any other corporation or entity at any time on or prior to the
Closing Date; and (iii) any liability for the payment of any amount of the type described in the
preceding clauses (i) or (ii) whether as a result of contractual obligations to any other Person or
by operation of law.

     “Term” means the period commencing with the Closing Date and ending on the date of
termination of this Agreement pursuant to Section 7.1.

     “US GAAP” means those generally accepted accounting principles and practices in the
United States that are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor).

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     1.2 Other Definitions. Words not otherwise defined herein that have well-known and
generally accepted technical or trade meanings in the oil and gas industry are used herein in
accordance with such recognized meanings.

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

ARTICLE II

PROVISION OF SERVICES

     2.1 Services. During the Term, QRM shall provide, or, with the approval of the Board,
cause another Person to provide, the Services to the General Partner for the benefit of the MLP
Group. QRM is authorized to enter into and act on the General Partner’s behalf, as agent, in
connection with any agreement necessary with third parties, including, without limitation, any
agreements with purchasers of hydrocarbon products produced from the Properties or providers of
transportation services for such production.

     2.2 QRM Information. It is contemplated by the Parties that, during the Term, the
General Partner will be required to provide certain notices, information and data necessary for QRM
to perform the Services and its obligations under this Agreement. QRM shall be permitted to rely
on any information or data provided by the General Partner to QRM in connection with the
performance of its duties and provision of Services under this Agreement, except to the extent that
QRM has actual knowledge that such information or data is inaccurate or incomplete.

ARTICLE III

STANDARD OF CARE

     3.1 Standard of Performance. QRM shall provide Services (i) using at least the same
level of care, quality, timeliness and skill in providing the Services as it employs for itself and
QA Holdings, LP and its Affiliates and no less than the same degree of care, quality, timeliness,
and skill as QRM’s past practice in performing like services for itself and QA Holdings, LP and its
Affiliates in connection with the ownership or operation of the MLP Assets during the one-year
period prior to the Closing Date, and (ii) in any event, using no less than a reasonable level of
care in accordance with industry standards, in compliance with all applicable Laws.

     3.2 Procurement of Goods and Services. To the extent that QRM is permitted to arrange
for contracts with third parties for goods and services in connection with the provision of the
Services, QRM shall use commercially reasonable efforts (i) to obtain such goods and services at
rates competitive with those otherwise generally available in the area in which services or
materials are to be furnished, and (ii) to obtain from such third parties such customary

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warranties and guarantees as may be reasonably required with respect to the goods and services
so furnished.

     3.3 Protection from Liens. QRM shall not permit any liens, encumbrances or charges
upon or against any of the Properties arising from the provision of Services or materials under
this Agreement except as approved, or consented to, by the General Partner.

     3.4 Commingling of Assets. To the extent QRM shall have charge or possession of any
of the General Partner’s or the MLP Group’s assets in connection with the provision of the
Services, QRM shall separately maintain, and not commingle, the assets of the General Partner or
the MLP Group with those of QRM or any other Person.

     3.5 Insurance. QRM shall obtain and maintain during the Term from insurers who are
reliable and acceptable to the General Partner and authorized to do business in the state or states
or jurisdictions in which Services are to be performed by QRM, insurance coverages in the types and
minimum limits as the Parties determine to be appropriate and as is consistent with standard
industry practice and QRM’s past practices. QRM agrees upon the General Partner’s request from
time to time or at any time to provide the General Partner with certificates of insurance
evidencing such insurance coverage and, upon request of the General Partner, shall furnish copies
of such policies. Except with respect to workers’ compensation coverage, the policies shall name
the General Partner as an additional insured and shall contain waivers by the insurers of any and
all rights of subrogation to pursue any claims or causes of action against the General Partner.
The policies shall provide that they will not be cancelled or reduced without giving the General
Partner at least 30 days’ prior written notice of such cancellation or reduction. The insurance
policies and coverages shall be reviewed with the Board at least annually, beginning with the first
Board meeting following the Closing Date.

     3.6 Third-Party Intellectual Property. If QRM uses or licenses intellectual property
owned by third parties in the performance of the Services, QRM shall obtain and maintain any such
licenses and authorizations necessary to authorize its use of such intellectual property in
connection with the Services.

     3.7 Competition. Subject to Article VI, each of QRM and its Affiliates is and
shall be free to engage in any business activity whatsoever, including those that may be in direct
competition with the General Partner and the MLP Group.

ARTICLE IV

QRM REIMBURSEMENT; CONTINUING OBLIGATIONS

     4.1 QRM Reimbursement During the Initial Term. During the Initial Term, on or before
the 45th day following the end of each calendar quarter, the General Partner shall pay
QRM, with respect to any Services provided by QRM for the benefit of the MLP Group during such
calendar quarter, an amount equal to 3.5% of the Adjusted EBITDA generated by the MLP Group during
the calendar quarter immediately preceding the calendar quarter for which payment is due; provided,
however, that for the first such quarter following the Closing Date, the payment amount shall be
prorated based on the ratio that the number of days between the Closing Date and the end of such
quarter bears to ninety).

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     4.2 QRM Reimbursement After the Initial Term. After the Initial Term:

          (a) On or before the 45th day following the end of each calendar quarter, the
General Partner shall pay QRM, with respect to any Services provided by QRM during such calendar
quarter, an amount equal to the sum of:

               (i) the costs and expenses incurred by QRM that are directly attributable to the General
Partner for the benefit of the MLP Group, including costs for engaging third parties such as
consultants, reservoir engineers, attorneys and accountants; and

               (ii) a proportionate amount of all general, administrative, overhead and other indirect costs
and expenses (including the allocable portion of salary, bonus, incentive compensation and other
amounts paid to Persons who provide Services, certain of whom will provide Services solely for the
benefit of the MLP Group) incurred by QRM or its Affiliates in providing or causing to be provided
Services for the benefit of the MLP Group reasonably allocable to the provision of such Services.

          (b) QRM shall have discretion to determine in good faith the proper allocation of costs and
expenses to the General Partner pursuant to Section 4.2(a).

          (c) On or before the 15th day following the end of each calendar quarter, QRM shall
provide the General Partner with an invoice for the costs and expenses described in Section
4.2(a) relating to such calendar quarter. QRM’s invoice therefor shall provide reasonably
detailed documentation supporting such costs and expenses.

     4.3 Taxes. The General Partner shall be responsible for all applicable Taxes levied
on items, goods or services that are sold, purchased or obtained for the provision of Services
under this Agreement, including any Taxes in respect of the Services.

     4.4 Disputed Charges.

          (a) THE GENERAL PARTNER MAY, WITHIN ONE HUNDRED AND TWENTY (120) DAYS AFTER RECEIPT OF AN
INVOICE FROM QRM, TAKE WRITTEN EXCEPTION TO ANY CHARGE, ON THE GROUND THAT THE SAME WAS NOT A
REASONABLE COST OR EXPENSE INCURRED BY QRM IN CONNECTION WITH THE PROVISION OF SERVICES. THE
GENERAL PARTNER SHALL NEVERTHELESS PAY QRM IN FULL WHEN DUE THE INVOICED AMOUNT. SUCH PAYMENT
SHALL NOT BE DEEMED A WAIVER OF THE RIGHT OF THE GENERAL PARTNER 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 REASONABLE COST OR EXPENSE INCURRED BY QRM IN
CONNECTION WITH THE PROVISION OF SERVICES, SUCH AMOUNT OR PORTION THEREOF (AS THE CASE MAY BE)
SHALL BE REFUNDED BY QRM TO THE GENERAL PARTNER TOGETHER WITH INTEREST THEREON AT THE LESSER OF (I)
THE PRIME RATE PER ANNUM ESTABLISHED BY CITIBANK, NA AS IN EFFECT ON THE DATE OF PAYMENT BY THE
GENERAL PARTNER IN RESPECT OF SUCH CONTESTED INVOICE OR (II) THE MAXIMUM LAWFUL RATE DURING THE

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PERIOD FROM THE DATE OF PAYMENT BY THE GENERAL PARTNER TO THE DATE OF REFUND BY QRM.

          (b) If, within twenty (20) days after receipt of any written exception pursuant to Section
4.4(a), the General Partner and QRM have been unable to resolve any dispute, and if (i) such
dispute relates to whether amounts were properly charged or Services actually performed and (ii)
the aggregate amount in dispute exceeds $100,000, either of the General Partner or QRM may submit the
dispute to an independent third party auditing firm that is mutually agreeable to the MLP Group, on
the one hand, and QRM, on the other hand. The Parties shall cooperate with such auditing firm and
shall provide such auditing firm access to such books and records as may be reasonably necessary to
permit a determination by such auditing firm. The resolution by such auditing firm shall be final
and binding on the Parties.

ARTICLE V

INDEMNIFICATION; LIMITATIONS

     5.1 Indemnification by QRM. QRM hereby agrees to DEFEND, INDEMNIFY AND HOLD HARMLESS
each member of the MLP Group and their respective members, partners and Affiliates and each of
their respective officers, managers, directors, employees and agents (each, an “MLP Indemnified
Party”) from any and all threatened or actual claims, demands, causes of action, suits,
proceedings, losses, damages, fines, penalties, liabilities, costs and expenses of any nature,
including attorneys’ fees and court costs (collectively, “Liabilities”), incurred by,
imposed upon or rendered against one or more of the MLP Indemnified Parties, whether based on
contract, or tort, or pursuant to any statute, rule or regulation, and regardless of whether the
Liabilities are foreseeable or unforeseeable, all to the extent that such Liabilities are in
respect of or arise from (i) the gross negligence or willful misconduct in QRM acting or omitting
to act in providing Services or (ii) any and all direct or indirect claims, demands, actions,
causes of action, suits, right of recovery for any relief or damages, debts, accounts, damages,
costs, losses, liabilities, and expenses (including interest, court costs, attorneys’ fees and
expenses, and other costs of defense), of any kind or nature (each, a “Claim”), by a third
party (excluding limited partners of the MLP) relating to the gross negligence or willful
misconduct of QRM in acting or omitting to act in providing Services, PROVIDED THAT QRM SHALL NOT
BE OBLIGATED TO INDEMNIFY OR HOLD HARMLESS THE MLP INDEMNIFIED PARTIES FROM AND AGAINST ANY CLAIMS
TO THE EXTENT THEY RESULT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY MLP INDEMNIFIED
PARTY.

     5.2 Indemnification by the MLP Group. Each member of the MLP Group hereby agrees to
DEFEND, INDEMNIFY AND HOLD HARMLESS QRM and its members, partners and Affiliates and its officers,
managers, directors, employees and agents (each, a “QRM Indemnified Party” and,
collectively with the MLP Indemnified Parties, each an “Indemnified Party”) from any and
all Liabilities, incurred by, imposed upon or rendered against one or more of the QRM Indemnified
Parties, whether based on contract, or tort, or pursuant to any statute, rule or regulation, and
regardless of whether the Liabilities are foreseeable or unforeseeable, all to the extent that such
Liabilities are in respect of or arise from Claims by a third party relating to (a) any acts or
omissions of the QRM Indemnified Parties in connection with acting or omitting to act in providing
Services, solely to the extent that (i) in the case of Mandatory Services, such

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acts or omissions were performed for the benefit of any member of the MLP Group, or in the
case of Optional Services, such acts or omissions were performed or omitted at the direction or
election of any member of the MLP Group, and (ii) such Services were performed in accordance with
the standard of performance set forth in Section 3.1, or (b) the MLP Group’s gross
negligence or willful misconduct, PROVIDED THAT THE MLP GROUP SHALL NOT BE OBLIGATED TO INDEMNIFY
OR HOLD HARMLESS THE QRM INDEMNIFIED PARTIES FROM AND AGAINST ANY CLAIMS TO THE EXTENT THEY RESULT
FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY QRM INDEMNIFIED PARTY.

     5.3 Negligence; Strict Liability. EXCEPT AS EXPRESSLY PROVIDED IN SECTION 5.1
AND SECTION 5.2, THE DEFENSE AND INDEMNITY OBLIGATION IN SECTION 5.1 AND
SECTION 5.2 SHALL APPLY REGARDLESS OF CAUSE OR OF ANY NEGLIGENT ACTS OR OMISSIONS
(INCLUDING SOLE NEGLIGENCE, CONCURRENT NEGLIGENCE OR STRICT LIABILITY), BREACH OF DUTY (STATUTORY
OR OTHERWISE), VIOLATION OF LAW OR OTHER FAULT OF ANY INDEMNIFIED PARTY, OR ANY PRE-EXISTING
DEFECT; PROVIDED, HOWEVER, THAT THIS PROVISION SHALL IN NOT APPLY TO THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY INDEMNIFIED PARTY OR IN ANY WAY LIMIT OR ALTER ANY
QUALIFICATIONS SET FORTH IN SUCH DEFENSE AND INDEMNITY OBLIGATIONS EXPRESSLY RELATING TO GROSS
NEGLIGENCE, INTENTIONAL MISCONDUCT OR BREACH OF THIS AGREEMENT. BOTH PARTIES AGREE THAT THIS
STATEMENT COMPLIES WITH THE REQUIREMENT KNOWN AS THE ‘EXPRESS NEGLIGENCE RULE’ TO EXPRESSLY STATE
IN A CONSPICUOUS MANNER AND TO AFFORD FAIR AND ADEQUATE NOTICE THAT THIS ARTICLE HAS PROVISIONS
REQUIRING ONE PARTY TO BE RESPONSIBLE FOR THE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF
ANOTHER PARTY.

     5.4 Exclusion of Damages; Disclaimers.

          (a) NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY HERETO FOR EXEMPLARY, PUNITIVE, CONSEQUENTIAL,
SPECIAL, INDIRECT OR INCIDENTAL DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
REGARDLESS OF THE FORM IN WHICH ANY ACTION IS BROUGHT; PROVIDED, HOWEVER, THAT THIS SECTION 5.4(A) SHALL NOT LIMIT A PARTY’S RIGHT TO RECOVERY UNDER SECTION 5.1 OR
SECTION 5.2 FOR ANY SUCH DAMAGES TO THE EXTENT SUCH PARTY IS REQUIRED TO PAY SUCH DAMAGES
TO A THIRD PARTY IN CONNECTION WITH A MATTER FOR WHICH SUCH PARTY IS OTHERWISE ENTITLED TO
INDEMNIFICATION UNDER  SECTION 5.1 OR SECTION 5.2.

          (b) OTHER THAN AS SET FORTH IN SECTION 3.1, QRM DISCLAIMS ANY AND ALL WARRANTIES,
CONDITIONS OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR WRITTEN) WITH RESPECT TO SERVICES
RENDERED OR PRODUCTS PROCURED FOR THE GENERAL PARTNER FOR THE BENEFIT OF THE MLP GROUP, OR ANY PART
THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OF NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS
OR

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SUITABILITY FOR ANY PURPOSE (WHETHER QRM KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS
OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE) WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM
OR USAGE IN THE TRADE OR BY COURSE OF DEALING. HOWEVER, IN THE CASE OF OUTSOURCED SERVICES
PROVIDED SOLELY FOR THE GENERAL PARTNER, IF THE THIRD-PARTY PROVIDER OF SUCH SERVICES MAKES AN
EXPRESS WARRANTY TO THE GENERAL PARTNER, THE GENERAL PARTNER IS ENTITLED TO CAUSE QRM TO RELY ON
AND TO ENFORCE SUCH WARRANTY.

     5.5 Survival. The provisions of this Article V shall survive the termination
of this Agreement.

ARTICLE VI

CONFIDENTIALITY

     6.1 Confidential Information.

          (a) Non-disclosure. QRM shall maintain the confidentiality of all Confidential
Information; provided, however, that QRM may disclose such Confidential Information
(i) to its Affiliates to the extent deemed by QRM to be reasonably necessary or desirable to enable
it to perform the Services; (ii) in any judicial or alternative dispute resolution Proceeding to
resolve disputes between QRM and the MLP Group arising hereunder; (iii) to the extent disclosure is
legally required under applicable laws (including applicable securities and tax laws) or any
agreement existing on the date hereof to which QRM is a party or by which it is bound;
provided, however, that prior to making any legally required disclosures in any
judicial, regulatory or dispute resolution Proceeding, QRM shall, if requested by the General
Partner, seek a protective order or other relief to prevent or reduce the scope of such disclosure;
(iv) to QRM’s existing or potential lenders, investors, joint interest owners, purchasers or other
parties with whom QRM may enter into contractual relationships, to the extent deemed by QRM to be
reasonably necessary or desirable to enable it to perform the Services; provided,
however, that QRM shall require such third parties to agree to maintain the confidentiality
of the Confidential Information so disclosed; (v) if authorized by the General Partner; and (vi) to
the extent such Confidential Information becomes publicly available other than through a breach by
QRM of its obligation arising under this Section 6.1(a). QRM acknowledges and agrees that
(i) the Confidential Information is being furnished to QRM for the sole and exclusive purpose of
enabling it to perform the Services and (ii) the Confidential Information may not be used by it for
any other purpose.

          (b) Remedies and Enforcement. QRM acknowledges and agrees that a breach by it of its
obligations under this Article VI would cause irreparable harm to the General Partner and
that monetary damages would not be adequate to compensate the General Partner. Accordingly, QRM
agrees that the General Partner shall be entitled to immediate equitable relief, including a
temporary or permanent injunction, to prevent any threatened, likely or ongoing violation by QRM,
without the necessity of posting bond or other security. The General Partner’s right to equitable
relief shall be in addition to other rights and remedies available to the General Partner, for
monetary damages or otherwise.

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     6.2 Acquisition Information.

          (a) Non-disclosure. Except as provided in Section 6.2(b), the General Partner
shall maintain the confidentiality of all Acquisition Information. The General Partner
acknowledges and agrees that (i) the Acquisition Information is being furnished to the General
Partner for the sole and exclusive purpose of enabling it to make Acquisitions and (ii) the
Acquisition Information may not be used by it for any other purpose.

          (b) Exceptions. The General Partner may disclose Acquisition Information (i) to
third-party advisors of the General Partner to the extent deemed by the General Partner to be
reasonably necessary or desirable to enable it to evaluate or consummate an Acquisition; (ii) in
any judicial or alternative dispute resolution Proceeding to resolve disputes between the General
Partner or the MLP Group and QRM arising hereunder; (iii) to the extent disclosure is legally
required under applicable laws (including applicable securities and tax laws) or any agreement to
which the General Partner is a party or by which it is bound; provided, however,
that prior to making any legally required disclosures in any judicial, regulatory or dispute
resolution Proceeding, the General Partner shall, if requested by QRM, seek a protective order or
other relief to prevent or reduce the scope of such disclosure; (iv) to the General Partner’s and
the MLP Group’s existing or potential lenders, investors, joint interest owners, purchasers or
other parties with whom the General Partner or MLP Group may enter into contractual relationships,
to the extent deemed by the General Partner to be reasonably necessary or desirable to enable it to
evaluate or cause the consummation of the related Acquisition; provided, however,
that the General Partner shall require such Person to agree to maintain the confidentiality of the
Acquisition Information so disclosed; (v) if authorized by QRM; and (vi) to the extent such
Acquisition Information becomes publicly available other than through a breach by the General
Partner of its obligation arising under Section 6.2(a).

          (c) Remedies and Enforcement. The General Partner acknowledges and agrees that a
breach by it of its obligations under this Article VI would cause irreparable harm to QRM
and that monetary damages would not be adequate to compensate QRM. Accordingly, the General
Partner agrees that QRM shall be entitled to immediate equitable relief, including a temporary or
permanent injunction, to prevent any threatened, likely or ongoing violation by the General
Partner, without the necessity of posting bond or other security. QRM’s right to equitable relief
shall be in addition to other rights and remedies available to QRM, for monetary damages or
otherwise.

     6.3 Survival. The provisions of this Article VI shall survive the termination
of this Agreement.

ARTICLE VII

TERM AND TERMINATION

     7.1 Term.

          (a) This Agreement shall remain in force and effect through the end of the Initial Term, and
shall thereafter continue on a year-to-year basis, in each case unless terminated pursuant to
Section 7.2.

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     7.2 Termination.

          (a) After the end of the Initial Term, this Agreement may be terminated by either Party prior
to the expiration of any applicable annual term thereafter, upon six months’ notice to the other
Party;

          (b) This Agreement may be terminated at any time by QRM upon the General Partner’s material
breach of this Agreement, if (a) such breach is not remedied within 60 days (or 30 days in the
event of material breach arising out of a failure to make payment hereunder) after the General
Partner’s receipt of written notice thereof, or such longer period as is reasonably required to
cure such breach, provided that the General Partner commences to cure such breach within the
applicable period and proceeds with due diligence to cure such breach, and (b) such breach is
continuing at the time notice of termination is delivered to the General Partner; or

          (c) This Agreement may be terminated at any time by the General Partner upon QRM’s material
breach of this Agreement, if (a) such breach is not remedied within 60 days after QRM’s receipt of
the General Partner’s written notice thereof, or such longer period as is reasonably required to
cure such breach, provided that QRM commences to cure such breach within such 60-day period and
proceeds with due diligence to cure such breach, and (b) such breach is continuing at the time
notice of termination is delivered to QRM.

     7.3 Survival. The provisions of Article IV (with respect to unpaid amounts
due hereunder), Section 4.4, Article V, Article VI, Article VIII
and Article IX shall survive any termination of this Agreement.

ARTICLE VIII

AUDIT RIGHTS

     At any time during the Term and for one year thereafter, the General Partner shall have the
right to review and, at the General Partner’s expense, to copy, the books and records maintained by
QRM relating to the provision of the Services. In addition, to the extent necessary to verify the
performance by QRM of its obligations under this Agreement, the General Partner shall have the
right, at the General Partner’s expense, to audit, examine and make copies of or extracts from the
books and records of QRM (the “Audit Right”). The General Partner may exercise the Audit
Right through such auditors as the General Partner may determine in its sole discretion. The
General Partner shall (i) exercise the Audit Right only upon reasonable written notice to QRM and
during normal business hours and (ii) use its reasonable efforts to conduct the Audit Right in such
a manner as to minimize the inconvenience and disruption to QRM.

ARTICLE IX

MISCELLANEOUS PROVISIONS

     9.1 Notices. All notices, requests or consents provided for or permitted to be given
pursuant to this Agreement must be in writing and must be given (a) by depositing same in the
United States mail, addressed to the Person to be notified, postpaid and registered or certified
with return receipt requested, (b) by delivering such notice in person, (c) or by telecopier or
telegram to such Party. Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual receipt if received

-13-

 

during the recipient’s normal business hours, or at the beginning of the recipient’s next
business day after receipt if not received during the recipient’s normal business hours. All
notices to be sent to a Party pursuant to this Agreement shall be sent to or made at the address
set forth below or at such other address as such Party may stipulate to the other Parties in the
manner provided in this Section 9.1.

If to QRM:

Quantum Resources Management, LLC

Attn: Legal Department

1401 McKinney Street

Suite 2400

Houston, Texas 77010

Telephone: (713) 452-2230

Fax: (713) 452-2231

If to any member of the MLP Group:

c/o QRP GP, LLC

Attn: Legal Department

1401 McKinney Street

Suite 2400

Houston, Texas 77010

Telephone: (713) 452-2230

Fax: (713) 452-2231

     9.2 Choice of Law; Submission to Jurisdiction. This Agreement shall be subject to and
governed by the laws of the State of Texas, excluding any conflicts-of-law rule or principle that
might refer the construction or interpretation of this Agreement to the laws of another state.
Each Party hereby submits to the jurisdiction of the state and federal courts in the State of Texas
and to venue in Houston, Texas.

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

     9.4 Jointly Drafted. This Agreement, and all the provisions of this Agreement, shall
be deemed drafted by both of the Parties, and shall not be construed against either Party on the
basis of that Party’s role in drafting this Agreement.

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

-14-

 

     9.6 Assignment. This Agreement may not be assigned by any Party without the prior
written consent of the other Party. This Agreement shall be binding upon and shall inure to the
benefit of the Parties and their respective successors and permitted assigns.

     9.7 No Third-Party Beneficiaries. Except with respect to the members MLP Group not
party hereto, which are intended by the Parties to be third-party beneficiaries of this Agreement,
nothing in this Agreement (except as specifically provided in Article V) shall provide any
benefit to any third party or entitle any third party to any claim, cause of action, remedy or
right of any kind, it being the intent of the Parties that this Agreement shall not be construed as
a third-party beneficiary contract.

     9.8 Relationship of the Parties. Nothing in this Agreement shall be construed to
create a partnership or joint venture or give rise to any fiduciary or similar relationship of any
kind.

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

     9.10 Amendment or Modification. This Agreement may be amended, restated or modified
from time to time only by the written agreement of both of the Parties; provided,
however, that the MLP may not, without the prior approval of the Conflicts Committee, agree
to any amendment or modification of this Agreement that, in the reasonable discretion of the
General Partner (i) would have a material adverse effect on the holders of Common Units or (ii)
materially limit or impair the rights or reduce the obligations of the Parties under this
Agreement. Each such instrument shall be reduced to writing and shall be designated on its face an
“Amendment,” “Addendum” or a “Restatement” to this Agreement.

     9.11 Severability. If any provision of this Agreement or the application thereof to
any Person or circumstance shall be held invalid or unenforceable to any extent, the remainder of
this Agreement and the application of such provision to other Persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.

     9.12 Counterparts. This Agreement may be executed in any number of counterparts with
the same effect as if all signatory Parties had signed the same document. All counterparts shall
be construed together and shall constitute one and the same instrument.

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

-15-

 

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

     9.15 No Recourse Against Officers, Directors, Managers or Employees. For the avoidance
of doubt, the provisions of this Agreement shall not give rise to any right of recourse against any
officer, director, manager or employee of QRM, the General Partner or any of their respective
Affiliates.

[SIGNATURES ON THE FOLLOWING PAGE]

-16-

 

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

	 	 	 	 	 	 	 

	 	 	“QRM”	 	 
	 
	 	 	 	 	 	 
	 	 	QUANTUM RESOURCES MANAGEMENT, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	“GENERAL PARTNER”	 	 
	 
	 	 	 	 	 	 
	 	 	QRE GP, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	“MLP”	 	 
	 
	 	 	 	 	 	 
	 	 	QR ENERGY, LP	 	 
	 	 	By its general partner, QRE GP, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	“OLLC”	 	 
	 
	 	 	 	 	 	 
	 	 	QRE OPERATING, LLC	 	 
	 	 	By its sole member, QR ENERGY, LP	 	 
	 	 	By its general partner, QRE GP, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

[SIGNATURES ON THE FOLLOWING PAGE]

-17-

 

EXHIBIT A

Description of Services

SERVICES

The following services to be provided by QRM or its designee:

	 	 	 

	 
	 	 
	(a)

	 	Accounting;
	 
	 	 
	(b)

	 	Audit;
	 
	 	 
	(c)

	 	Benefits, Compensation and Human Resources Administration;
	 
	 	 
	(d)

	 	Bonds (performance, appeal, environmental and surety);
	 
	 	 
	(e)

	 	Budget;
	 
	 	 
	(f)

	 	Cash Management;
	 
	 	 
	(g)

	 	Consulting;
	 
	 	 
	(h)

	 	Corporate Finance;
	 
	 	 
	(i)

	 	Corporate Governance Support;
	 
	 	 
	(j)

	 	Credit and Debt Administration;
	 
	 	 
	(k)

	 	Drilling;
	 
	 	 
	(l)

	 	Employee Health and Safety;
	 
	 	 
	(m)

	 	Engineering;
	 
	 	 
	(n)

	 	Environmental;
	 
	 	 
	(o)

	 	Financial, Planning and Analysis;
	 
	 	 
	(p)

	 	Geological and Geophysical;
	 
	 	 
	(q)

	 	Government and Public Relations;
	 
	 	 
	(r)

	 	Hedging and Derivatives;
	 
	 	 
	(s)

	 	Information Technology;
	 
	 	 
	(t)

	 	Insurance;
	 
	 	 
	(u)

	 	Investor Relations;
	 
	 	 
	(v)

	 	Legal;
	 
	 	 
	(w)

	 	Land Administration;
	 
	 	 
	(x)

	 	Marketing;
	 
	 	 
	(y)

	 	Operations;
	 
	 	 
	(z)

	 	Payroll;
	 
	 	 
	(aa)

	 	Property Management;
	 
	 	 
	(bb)

	 	Purchasing and Materials Management;
	 
	 	 
	(cc)

	 	Regulatory Management;
	 
	 	 
	(dd)

	 	Reservoir Engineering;
	 
	 	 
	(ee)

	 	Risk Management;
	 
	 	 
	(ff)

	 	Security;
	 
	 	 
	(gg)

	 	Support for SEC reporting;
	 
	 	 
	(hh)

	 	Tax;
	 
	 	 
	(ii)

	 	Technical;
	 
	 	 
	(jj)

	 	Travel;
	 
	 	 
	(kk)

	 	Treasury; and
	 
	 	 
	(ll)

	 	Acquisition Services.

EXHIBIT Aexv10w6

Exhibit 10.6

FORM OF DIRECTOR INDEMNIFICATION AGREEMENT

     This Indemnification Agreement (this “Agreement”) is made and entered into as of this
[Insert Day] day of [Insert Month], 20      , by and among QRE GP, LLC, a Delaware limited liability
company (the “General Partner”); QR Energy, LP, a Delaware limited partnership (the
“Partnership,” and together with the General Partner, the “Companies” and each a
“Company”); and [Insert Director Name] (“Indemnitee”). Each of the defined terms
used in this Agreement shall have the definition set forth in Section 14 of this Agreement.

     WHEREAS, in light of the litigation costs and risks to directors and officers resulting from
their service to companies and the desire of the Companies to attract and retain qualified
individuals to serve as directors and officers, it is reasonable, prudent and necessary for the
Companies to indemnify and advance expenses on behalf of the directors (including directors that
also serve as officers) of the General Partner to the extent permitted by applicable law so that
they will serve or continue to serve the Companies free from undue concern regarding such risks;

     WHEREAS, the Companies have requested that Indemnitee serve or continue to serve as a director
(and officer, as applicable) of the General Partner and may have requested or may in the future
request that Indemnitee serve one or more Enterprises as a director or in other capacities;

     WHEREAS, in order to induce Indemnitee to serve, or to continue to serve, as a director of the
General Partner, and to agree to serve, from time to time, as any Company may request, in any other
Corporate Status, the Companies are executing this Agreement;

     WHEREAS, Indemnitee is willing to serve as a director of the General Partner or in any other
Corporate Status on the condition that Indemnitee be so indemnified;

     WHEREAS, the indemnification provisions of this Agreement are a supplement to and in
furtherance of the Certificate of Limited Partnership of the Partnership, as amended from time to
time after the date hereof (the “Partnership Certificate”), the First Amended and Restated
Agreement of Limited Partnership of the Partnership, as amended from time to time after the date
hereof in accordance with the terms thereof (the “Partnership Agreement”), the Certificate
of Formation of the General Partner, as amended from time to time after the date hereof (the
“General Partner Certificate”), and the Amended and Restated Limited Liability Company
Agreement of the General Partner, as amended from time to time after the date hereof in accordance
with the terms thereof (the “General Partner Agreement” and, together with the Partnership
Certificate, the Partnership Agreement and the General Partner Certificate, the “Company
Organizational Documents”), any organizational documents of any other Enterprise (collectively,
the “Enterprise Organizational Documents”) and any resolutions adopted by the Board of
Directors (pursuant to the General Partner Agreement or the Partnership Agreement) or similar
governing body of any other Enterprise, and shall not be deemed to be a substitute therefor nor to
diminish or abrogate any rights of Indemnitee thereunder; and

     WHEREAS, to the extent Indemnitee is employed by a Sponsor Company, Indemnitee may have
certain rights to indemnification, advancement of expenses or insurance provided by

- 1 -

 

the Designating Partners (or their affiliates), which Indemnitee, the Companies and the
Designating Partners (or their affiliates) intend to be secondary to the primary obligation of the
Enterprise Entities to indemnify Indemnitee as provided herein or as provided in the Company
Organizational Documents or other Enterprise Organizational Documents, with the Companies’
acknowledgement of and agreement to the foregoing being a material condition to Indemnitee’s
willingness to serve as a director of the General Partner or in any other Corporate Status.

     NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the
Companies and Indemnitee do hereby covenant and agree as follows:

1. Services by Indemnitee. Indemnitee will serve or continue to serve as a director of the
General Partner (and an officer, if applicable), for so long as Indemnitee is duly elected or
appointed or until Indemnitee tenders Indemnitee’s resignation or is removed in accordance with the
General Partner Agreement. Indemnitee may from time to time also agree to serve, as any Company
may request from time to time, in any other Corporate Status. Indemnitee and each Company each
acknowledge that they have entered into this Agreement as a means of inducing Indemnitee to serve,
or continue to serve, the Companies and any Enterprise in such capacities. Indemnitee may at any
time and for any reason resign from such position or positions (subject to any other contractual
obligation or any obligation imposed by operation of law).

2. Indemnification—General. On the terms and subject to the conditions of this Agreement,
the Companies shall, to the fullest extent permitted under applicable law and so long as Indemnitee
has not engaged in Disabling Conduct, indemnify Indemnitee with respect to, and hold Indemnitee
harmless from and against, all losses, liabilities, judgments, fines, penalties, costs, Expenses
and other amounts that Indemnitee reasonably incurs and that result from, arise in connection with
or are by reason of Indemnitee’s Corporate Status and shall advance Expenses to Indemnitee. The
obligations of the Companies under this Agreement (a) are joint and several obligations of each
Company, (b) shall continue after such time as Indemnitee ceases to serve as a director of the
General Partner or in any other Corporate Status and (c) include, without limitation, claims for
monetary damages against Indemnitee in respect of any actual or alleged liability or other loss of
Indemnitee, to the fullest extent permitted under applicable law as in existence on the date hereof
(and to such greater extent as applicable law may hereafter from time to time permit) provided that
Indemnitee has not engaged in Disabling Conduct. The other provisions in this Agreement are
provided in addition to and as a means of furtherance and implementation of, and not in limitation
of, the obligations expressed in this Section 2.

3. Proceedings Other Than Proceedings by or in the Right of the Companies. If, in
connection with or by reason of Indemnitee’s Corporate Status, Indemnitee was, is, or is threatened
to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the
right of any of the Companies to procure a judgment in its favor, the Companies shall, to the
fullest extent permitted under applicable law and so long as Indemnitee has not engaged in
Disabling Conduct, indemnify Indemnitee with respect to, and hold Indemnitee harmless from and
against, all Expenses, liabilities, judgments, penalties, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in connection with or in
respect of such liabilities, judgments, penalties, fines and amounts paid in settlement) reasonably
incurred by Indemnitee or on behalf of Indemnitee in connection with such Proceeding or any claim,
issue or matter therein.

- 2 -

 

4. Proceedings by or in the Right of the Companies. If, by reason of Indemnitee’s
Corporate Status, Indemnitee was, is, or is threatened to be made, a party to or a participant in
any Proceeding by or in the right of any of the Companies to procure a judgment in its favor, the
Companies shall, to the fullest extent permitted under applicable law and so long as Indemnitee has
not engaged in Disabling Conduct, indemnify Indemnitee with respect to, and hold Indemnitee
harmless from and against, all Expenses reasonably incurred by Indemnitee or on behalf of
Indemnitee in connection with such Proceeding; provided, however, that
indemnification against such Expenses shall be made in respect of any claim, issue or matter in
such Proceeding as to which Indemnitee shall have been adjudged by a court of competent
jurisdiction to be liable to the applicable Company only if (and only to the extent that) the court
in which such Proceeding shall have been brought or is pending shall determine that, despite such
adjudication of liability and in view of all circumstances, Indemnitee is fairly and reasonably
entitled to indemnity for such Expenses which the court shall deem proper.

5. Mandatory Indemnification in Case of Successful Defense. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate
Status, a party to (or a participant in) and is successful, on the merits or otherwise, in defense
of any Proceeding (including, without limitation, any Proceeding brought by or in the right of any
Company), the Companies shall, to the fullest extent permitted under applicable law and so long as
Indemnitee has not engaged in Disabling Conduct, indemnify Indemnitee with respect to, and hold
Indemnitee harmless from and against, all Expenses reasonably incurred by Indemnitee or on behalf
of Indemnitee in connection therewith. If Indemnitee is not wholly successful in defense of such
Proceeding but is successful, on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, the Companies shall, to the fullest extent permitted
under applicable law and so long as Indemnitee has not engaged in Disabling Conduct, indemnify
Indemnitee against all Expenses reasonably incurred by Indemnitee or on behalf of Indemnitee in
connection with each successfully resolved claim, issue or matter. For purposes of this
Section 5 and without limitation, the termination of any claim, issue or matter in such a
Proceeding by dismissal, with or without prejudice, on substantive or procedural grounds, shall be
deemed to be a successful result as to such claim, issue or matter.

6. Partial Indemnification. If Indemnitee is entitled under any provision of this
Agreement or otherwise to indemnification by any of the Companies for some or a portion of the
Expenses, liabilities, judgments, penalties, fines and amounts paid in settlement (including all
interest, assessments and other charges paid or payable in connection with or in respect of such
liabilities, judgments, penalties, fines and amounts paid in settlement) incurred by Indemnitee or
on behalf of Indemnitee in connection with a Proceeding or any claim, issue or matter therein, in
whole or in part, the Companies shall, to the fullest extent permitted under applicable law and so
long as Indemnitee has not engaged in Disabling Conduct, indemnify Indemnitee to the fullest extent
to which Indemnitee is entitled to such indemnification.

7. Indemnification for Additional Expenses Incurred to Secure Recovery or as Witness.

	 	(a)	 	The Companies shall, to the fullest extent permitted under applicable law and
so long as Indemnitee has not engaged in Disabling Conduct, indemnify Indemnitee with
respect to, and hold Indemnitee harmless from and against, any and all Expenses and, if
requested by Indemnitee, shall advance on an as-incurred basis

- 3 -

 

	 	 	 	(as provided in Section 8 of this Agreement) such Expenses to Indemnitee,
which are reasonably incurred by Indemnitee in connection with any action or
proceeding or part thereof brought by Indemnitee for (i) indemnification or advance
payment of Expenses by the Companies under this Agreement, the Company
Organizational Documents or other Enterprise Organizational Document, or any other
agreement; or (ii) recovery under any director and officer liability insurance
policies maintained by any Company or other Enterprise.

	 	(b)	 	To the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a
witness (or is forced or asked to respond to discovery requests) in any Proceeding to
which Indemnitee is not a party, the Companies shall, to the fullest extent permitted
under applicable law and so long as Indemnitee has not engaged in Disabling Conduct,
indemnify Indemnitee with respect to, and hold Indemnitee harmless from and against,
and the Companies will advance on an as-incurred basis (as provided in Section
8 of this Agreement), all Expenses reasonably incurred by Indemnitee or on behalf
of Indemnitee in connection therewith.

8. Advancement of Expenses. The Companies shall, to the fullest extent permitted under
applicable law, pay on a current and as-incurred basis all Expenses incurred by Indemnitee in
connection with any Proceeding in any way connected with, resulting from or relating to
Indemnitee’s Corporate Status. The advancement of such Expenses shall be paid within ten (10) days
after receipt by any Company of a properly submitted written request for advancement from
Indemnitee pursuant to Section 9(c)(i) of this Agreement, without regard to whether an Adverse
Determination has been or may be made, except as contemplated by the last sentence of Section
9(f) of this Agreement. Upon submission of a request for advancement of Expenses pursuant to
Section 9(c)of this Agreement, Indemnitee shall be entitled to advancement of Expenses as
provided in this Section 8, and such advancement of Expenses shall continue until such time
(if any) as there is a final non-appealable judicial determination that Indemnitee is not entitled
to indemnification or that Indemnitee engaged in Disabling Conduct. Indemnitee shall repay all
such amounts advanced if and to the extent that it shall ultimately be determined in a decision by
a court of competent jurisdiction from which no appeal can be taken that Indemnitee is not entitled
to be indemnified by the Companies for such Expenses or that Indemnitee engaged in Disabling
Conduct. Such repayment obligation shall be unsecured and shall not bear interest. The Companies
shall not impose on Indemnitee additional conditions to advancement or require from Indemnitee
additional undertakings regarding repayment, except as set forth in this Agreement.

9. Indemnification Procedures.

	 	(a)	 	Notice of Proceeding. Indemnitee agrees to notify the Companies promptly upon
being served with any summons, citation, subpoena, complaint, indictment, information
or other document relating to any Proceeding or matter which may be subject to
indemnification or advancement of Expenses hereunder. Any failure by Indemnitee to
notify any Company will relieve such Company of its advancement or indemnification
obligations under this Agreement only to the extent such Company can establish that
such omission to notify resulted in actual prejudice to it, and the omission to notify
such Company will, in any event, not relieve any

- 4 -

 

	 	 	 	Company from any liability which it may have to indemnify Indemnitee or advance
Expenses to Indemnitee otherwise than under this Agreement. If, at the time of
receipt of any such notice, the Companies have director and officer insurance
policies in effect, the Companies will promptly notify the relevant insurers in
accordance with the procedures and requirements of such policies.

	 	(b)	 	Defense; Settlement.

	 	(i)	 	The Companies shall not, without the prior written consent of
Indemnitee, which may be provided or withheld in Indemnitee’s sole discretion,
effect any settlement of any Proceeding against Indemnitee, or any proceeding
which could have been brought against Indemnitee or which potentially or
actually imposes any cost, liability, exposure or burden on Indemnitee, unless
such settlement solely involves the payment of money or performance of any
obligation by Persons other than Indemnitee and includes an unconditional
release of Indemnitee from all liability on any matters that are the subject of
such Proceeding and an acknowledgment that Indemnitee denies all wrongdoing in
connection with such matters. The Companies shall not be obligated to
indemnify Indemnitee for amounts paid in settlement of a Proceeding against
Indemnitee if such settlement is effected by Indemnitee without the Companies’
prior written consent, which consent shall not be unreasonably withheld.
	 
	 	(ii)	 	In any Proceeding in connection with which Indemnitee has
submitted a Company with a written request for advancement and/or
indemnification of Expenses pursuant to Section 9(c) of this Agreement,
such Company shall be entitled to assume the defense of such Proceeding, with
counsel approved by Indemnitee, which approval shall not be unreasonably
withheld, upon the delivery to Indemnitee of written notice of such Company’s
election to do so. After delivery of such notice, approval of such counsel by
Indemnitee, and retention of such counsel by such Company, Indemnitee shall
nevertheless be entitled to employ or continue to employ his own counsel in
such Proceeding. Employment of such counsel by Indemnitee shall be at the cost
and expense of the Companies unless and until the Companies shall have
demonstrated to the reasonable satisfaction of Indemnitee and Indemnitee’s
counsel that there is no conflict of interest between the Company and
Indemnitee in such Proceeding, after which time, further employment of such
counsel by the Indemnitee shall be at the cost and expense of Indemnitee.

	 	(c)	 	Request for Advancement; Request for Indemnification.

	 	(i)	 	To obtain advancement of Expenses under this Agreement,
Indemnitee shall submit to the Companies a written request therefor, together
with such invoices or other supporting information as may be reasonably

- 5 -

 

	 	 	 	requested by the Companies and reasonably available to Indemnitee, and, only
to the extent required by applicable law which cannot be waived, an
unsecured written undertaking to repay amounts advanced. The Companies
shall make advance payment of Expenses to Indemnitee no later than ten (10)
days after receipt of the written request for advancement (and each
subsequent request for advancement) by Indemnitee. If, at the time of
receipt of any such written request for advancement of Expenses, the
Companies have director and officer insurance policies in effect, the
Companies will promptly notify the relevant insurers in accordance with the
procedures and requirements of such policies.

	 	(ii)	 	To obtain indemnification under this Agreement, Indemnitee
shall submit a written request therefor. The time at which Indemnitee submits
a written request for indemnification shall be determined by the Indemnitee in
the Indemnitee’s sole discretion. Once Indemnitee submits such a written
request for indemnification (and only at such time that Indemnitee submits such
a written request for indemnification), a Determination shall thereafter be
made, as provided in and only to the extent required by Section 9(d) of
this Agreement. In no event shall a Determination be made, or required to be
made, as a condition to or otherwise in connection with any advancement of
Expenses pursuant to Section 8 and Section 9(c)(i) of this
Agreement. If, at the time of receipt of any such request for indemnification,
the Companies have director and officer insurance policies in effect, the
Companies will promptly notify the relevant insurers in accordance with the
procedures and requirements of such policies.

	 	(d)	 	Determination. Any Determination shall be made within thirty (30) days after
receipt of Indemnitee’s written request for indemnification pursuant to Section
9(c)(ii) (or in the case of a Determination to be made by Independent Counsel within
thirty (30) days of the selection of Independent Counsel) and such Determination shall
be made, subject to Section 9(g), in the specific case as follows:

	 	(i)	 	If a Potential Change in Control or a Change in Control shall
have occurred, by Independent Counsel (selected in accordance with Section
9(e)) in a written opinion to the Board of Directors, a copy of which opinion
shall be delivered to Indemnitee, unless Indemnitee shall request that such
Determination be made by the Board of Directors, or a committee of the Board of
Directors, in which case the Determination shall be made by the Persons and in
the manners provided for in clauses (x) or (y) of Section 9(d)(ii) below; or
	 
	 	(ii)	 	If a Potential Change in Control or a Change in Control shall
not have occurred, (x) by the Board of Directors by a majority vote of the
Disinterested Directors even though less than a quorum of the Board of
Directors, (y) by a majority vote of a committee consisting solely of one or
more Disinterested Directors designated to act in the matter by a majority

- 6 -

 

	 	 	 	vote of all Disinterested Directors, even though less than a quorum of the
Board of Directors, or (z) if there are no Disinterested Directors or, if
such Disinterested Directors so direct, by Independent Counsel in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee, with Independent Counsel being selected by a vote of the
Disinterested Directors as set forth in clauses (x) or (y) of this Section
9(d)(ii), or if such vote is not obtainable or such a committee of
Disinterested Directors cannot be established, by a majority vote of the
Board of Directors.

	 	 	 	If a Determination is made that Indemnitee is entitled to indemnification, payment
to Indemnitee shall be made within ten (10) days after such Determination.
Indemnitee shall reasonably cooperate with the Persons making such Determination,
including providing to such Persons upon reasonable advance request any
documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and reasonably necessary
to the making of such Determination. Any Expenses incurred by Indemnitee in so
cooperating with the Persons making such Determination shall be advanced and borne
by the Companies (irrespective of the Determination as to Indemnitee’s entitlement
to indemnification), and each Company shall indemnify and hold Indemnitee harmless
therefrom.
	 
	 	(e)	 	Independent Counsel. If a Potential Change in Control or a Change in Control
shall not have occurred and the Determination is to be made by Independent Counsel, the
Independent Counsel shall be selected by (i) a majority vote of the Disinterested
Directors, even though less than a quorum of the Board or (ii) if there are no
Disinterested Directors, a majority vote of the Board, and the General Partner shall
give written notice to Indemnitee, within ten (10) days after receipt by the General
Partner of Indemnitee’s request for indemnification, specifying the identity and
address of the Independent Counsel so selected. If a Potential Change in Control or a
Change in Control shall have occurred and the Determination is to be made by
Independent Counsel, the Independent Counsel shall be selected by Indemnitee, and
Indemnitee shall give written notice to the General Partner, within ten (10) days after
submission of Indemnitee’s request for indemnification, specifying the identity and
address of the Independent Counsel so selected (unless Indemnitee shall request that
such selection be made by (i) a majority vote of the Disinterested Directors, even
though less than a quorum of the Board, or (ii) if there are no Disinterested
Directors, a majority vote of the Board, in which event the General Partner shall give
written notice to Indemnitee within ten (10) days after receipt of Indemnitee’s request
that such selection be made by a majority vote of the Disinterested Directors or the
Board, as applicable, specifying the identity and address of the Independent Counsel so
selected). In either event, (A) such notice to Indemnitee or the General Partner, as
the case may be, shall be accompanied by a written affirmation of the Independent
Counsel so selected that it satisfies the requirements of the definition of
“Independent Counsel” in Section 14 of this Agreement and that it agrees to serve in
such capacity and (B) Indemnitee or the General Partner, as the case may be, may,

- 7 -

 

	 	 	 	within seven (7) days after such written notice of selection shall have been given,
deliver to the General Partner or to Indemnitee, as the case may be, a written
objection to such selection. Any objection to the selection of Independent Counsel
pursuant to this Section 9(e) may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of the definition of
“Independent Counsel” in Section 14 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. If such written
objection is timely made, the Independent Counsel so selected may not serve as
Independent Counsel unless and until a court of competent jurisdiction (a “Court”)
has determined that such objection is without merit. In the event of a timely
written objection to a choice of Independent Counsel, the party originally selecting
the Independent Counsel shall have seven (7) days to make an alternate selection of
Independent Counsel and to give written notice of such selection to the other party,
after which time such other party shall have five (5) days to make a written
objection to such alternate selection. If, within thirty (30) days after submission
of Indemnitee’s request for indemnification pursuant to Section 9(c)(ii), no
Independent Counsel shall have been selected and not objected to, either the General
Partner or Indemnitee may petition the Court for resolution of any objection that
shall have been made by the General Partner or Indemnitee to the other’s selection
of Independent Counsel or for the appointment as Independent Counsel of a Person
selected by the Court or by such other Person as the Court shall designate, and the
Person with respect to whom an objection is so resolved or the Person so appointed
shall act as Independent Counsel under Section 9(d). The Companies shall pay any
and all fees and expenses reasonably incurred by such Independent Counsel in
connection with acting pursuant to Section 9(d), and the Companies shall pay all
fees and expenses reasonably incurred incident to the procedures of this Section
9(e), regardless of the manner in which such Independent Counsel was selected or
appointed. Upon the due commencement of any Proceeding or arbitration pursuant to
Section 9(f) of this Agreement, Independent Counsel shall be discharged and relieved
of any further responsibility in such capacity, pending final disposition of such
Proceeding or arbitration and subject to the applicable standards of professional
conduct then prevailing.

	 	(f)	 	Consequences of Determination; Remedies of Indemnitee. The Companies shall be
bound by and shall have no right to challenge a Favorable Determination. If an Adverse
Determination is made, or if for any other reason the Companies do not make timely
indemnification payments or advances of Expenses, Indemnitee shall have the right to
commence a Proceeding before a Court to challenge such Adverse Determination or to
require the Companies to make such payments or advances (and the Companies shall have
the right to defend their position in such Proceeding and to appeal any adverse
judgment in such Proceeding). Indemnitee shall be entitled to be indemnified for all
Expenses incurred in connection with such a Proceeding and to have such Expenses
advanced by the Companies in accordance with Section 8 of this Agreement. If
Indemnitee fails to challenge an Adverse Determination, or if Indemnitee challenges an
Adverse Determination and such Adverse Determination has been upheld by a final
judgment of a Court

- 8 -

 

	 	 	 	from which no appeal can be taken, then, to the extent and only to the extent
required by such Adverse Determination or final judgment, the Companies shall not be
obligated to indemnify Indemnitee under this Agreement.

	 	(g)	 	Presumptions; Burden and Standard of Proof. The parties intend and agree that,
to the extent permitted by law, in connection with any Determination by any Person,
including a Court:

	 	(i)	 	it will be presumed that Indemnitee is entitled to
indemnification under this Agreement, and the Enterprise or any other Person
challenging such right will have the burden of proof to overcome that
presumption in connection with any Determination contrary to that presumption;
	 
	 	(ii)	 	the termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that Indemnitee did not
act in good faith and in a manner which Indemnitee reasonably believed to be in
or not opposed to the best interests of the applicable Enterprise, or, with
respect to any criminal action or proceeding, that Indemnitee had reasonable
cause to believe that Indemnitee’s conduct was unlawful, or that Indemnitee did
not act in accordance with any other applicable standard of conduct imposed by
contract, applicable law or otherwise;
	 
	 	(iii)	 	Indemnitee will be deemed to have acted in good faith if it is
determined by a majority of the board of directors or other governing body of
the applicable Enterprise or by Independent Counsel, as applicable, that
Indemnitee’s action is based on the records or books of account of the
applicable Enterprise, including financial statements, or on information
supplied to Indemnitee by the officers, employees, or committees of the board
of directors or other governing body of the applicable Enterprise, or on the
advice of legal counsel for the applicable Enterprise or on information or
records given in reports made to the applicable Enterprise by an independent
certified public accountant or by an appraiser or other expert or advisor
selected by the applicable Enterprise; and
	 
	 	(iv)	 	the knowledge and actions, or failure to act, of any director,
officer, manager, representative, agent or employee of any Enterprise or other
relevant enterprises will not be imputed to Indemnitee in a manner that limits
or otherwise adversely affects Indemnitee’s rights hereunder.

     The provisions of this Section 9(g) shall not be deemed to be exclusive or to limit in
any way the other circumstances in which Indemnitee may be deemed to have met the applicable
standard of conduct set forth in this Agreement.

10. Insurance; Subrogation; Other Rights of Recovery, Etc.

	 	(a)	 	Each Company shall use its reasonable best efforts to purchase and maintain a
policy or policies of insurance with reputable insurance companies with A.M.

- 9 -

 

	 	 	 	Best ratings of “A” or better, providing Indemnitee with coverage for any liability
asserted against, and incurred by, Indemnitee or on Indemnitee’s behalf by reason of
Indemnitee’s Corporate Status, or arising out of Indemnitee’s status as such,
whether or not any such Company would have the power to indemnify Indemnitee against
such liability. Such insurance policies shall have coverage terms and policy limits
at least as favorable to Indemnitee as the insurance coverage provided to any other
current or former officer or director of the General Partner. If a Company has such
insurance in effect at the time it receives from Indemnitee any notice of the
commencement of an action, suit, proceeding or other claim, such Company shall give
prompt notice of the commencement of such action, suit, proceeding or other claim to
the insurers in accordance with the procedures set forth in the policy. The
Companies shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such
action, suit, proceeding or other claim in accordance with the terms of such policy,
provided that the Companies shall not be liable to pay or advance to Indemnitee any
amounts otherwise indemnifiable under this Agreement or under any other
indemnification agreement if and to the extent that Indemnitee has otherwise
actually received such payment under any insurance policy, contract, agreement or
otherwise. The Companies shall continue to provide such insurance coverage to
Indemnitee for a period of at least [six (6)] years after Indemnitee ceases to serve
as a director or any other Corporate Status.
	 
	 	(b)	 	Subject to Section 10(d), in the event of any payment by any Company
under this Agreement, such Company shall be subrogated to the extent of such payment to
all of the rights of recovery of Indemnitee against any other Enterprise, and
Indemnitee hereby agrees, as a condition to obtaining any advancement or
indemnification from the Companies, to assign to such Company all of Indemnitee’s
rights to obtain from such other Enterprise such amounts to the extent that they have
been paid by such Company to or for the benefit of Indemnitee as advancement or
indemnification under this Agreement and are adequate to indemnify Indemnitee with
respect to the costs, Expenses or other items to the full extent that Indemnitee is
entitled to indemnification or other payment hereunder; and Indemnitee will (upon
request by the Companies) execute all papers required and take all action necessary to
secure such rights, including execution of such documents as are necessary to enable
such Company to bring suit or enforce such rights. In addition, if the General
Partner, on behalf of itself, pays or causes to be paid (including advancement of
Expenses), for any reason, any amounts otherwise indemnifiable or payable hereunder or
under any other indemnification agreement or arrangement (whether pursuant to contract,
Company Organizational Documents or other Enterprise Organizational Documents or
otherwise) with Indemnitee, then the Partnership shall fully indemnify, reimburse and
hold harmless the General Partner for all such payments actually made by the General
Partner.
	 
	 	(c)	 	Each of the Companies hereby unconditionally and irrevocably waives,
relinquishes and releases, and covenants and agrees not to exercise (and to cause

- 10 -

 

	 	 	 	each of the other Enterprises not to exercise), any rights that such Company or
other Enterprise, as the case may be, may now have or hereafter acquire against any
Designating Partner (or former Designating Partner) or any of their respective
affiliates that arise from or relate to the existence, payment, performance or
enforcement of the Companies’ obligations under this Agreement or under any other
indemnification agreement or arrangement (whether pursuant to contract, Company
Organizational Documents or other Enterprise Organizational Documents or otherwise)
with any Person, including, without limitation, any right of subrogation (whether
pursuant to contract or common law), reimbursement, exoneration, contribution or
indemnification, or to be held harmless, and any right to participate in any claim
or remedy of Indemnitee against any Designating Partner (or former Designating
Partner) or any of their respective affiliates, whether or not such claim, remedy or
right arises in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from any Designating Partner (or former
Designating Partner) or any of their respective affiliates, directly or indirectly,
in cash or other property or by set-off or in any other manner, payment or security
on account of such claim, remedy or right.

	 	(d)	 	The Companies shall not be liable to pay or advance to Indemnitee any amounts
otherwise indemnifiable under this Agreement or under any other indemnification
agreement if and to the extent that Indemnitee has otherwise actually received such
payment under any insurance policy, contract, agreement or otherwise; provided,
however, that (i) the Companies hereby agree on behalf of themselves and each
other Enterprise Entity, that, irrespective of whether Indemnitee is employed by a
Sponsor Company and therefore may have certain rights to indemnification, advancement
of expenses or insurance provided by the Designating Partners or their affiliates, the
Enterprise Entities are the indemnitors of first resort under this Agreement, the
Company Organizational Documents or other Enterprise Organizational Documents or any
other indemnification agreement, arrangement or undertaking (i.e., the
Enterprise Entities’ obligations to Indemnitee under this Agreement or any other
agreement or undertaking to provide advancement of Expenses and indemnification to
Indemnitee are primary without regard to any rights Indemnitee may have to seek or
obtain indemnification or advancement of Expenses from any Designating Partner or any
of its affiliates other than an Enterprise Entity (or any former Designating Partner or
any of its affiliates other than an Enterprise Entity) or from any insurance policy for
the benefit of such Indemnitee (other than any directors’ and officers’ insurance
policy for the benefit of such Indemnitee maintained or paid for by any Enterprise),
and any obligation of any Designating Partner (or any affiliate thereof other than any
Enterprise) to provide advancement or indemnification for all or any portion of the
same Expenses, liabilities, judgments, penalties, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in connection
with or in respect of such Expenses, liabilities, judgments, penalties, fines and
amounts paid in settlement) incurred by Indemnitee and any rights of recovery of
Indemnitee under any insurance policy for the benefit of such Indemnitee (other than
any directors’ and officers’

- 11 -

 

	 	 	 	insurance policy for the benefit of such Indemnitee maintained or paid for by any
Enterprise) are secondary), and (ii) if any Designating Partner or any of its
affiliates other than an Enterprise Entity (or any former Designating Partner or any
of its affiliates other than an Enterprise Entity) pays or causes to be paid, for
any reason, or if Indemnitee collects under any insurance policy for the benefit of
such Indemnitee (other than any directors’ and officers’ insurance policy for the
benefit of such Indemnitee maintained or paid for by any Enterprise), any amounts
otherwise payable or indemnifiable hereunder or under any other indemnification
agreement, arrangement or undertaking (whether pursuant to contract, organizational
document or otherwise) with Indemnitee, then (x) such Designating Partner, former
Designating Partner (or affiliate, as the case may be) or insurer, as applicable,
shall be fully subrogated to all rights of Indemnitee with respect to such payment
and (y) the Companies shall fully indemnify, reimburse and hold harmless such
Designating Partner, former Designating Partner (or such affiliate) or insurer, as
applicable, for all such payments actually made by such Designating Partner, former
Designating Partner (or such affiliate) or insurer.

	 	(e)	 	Subject to Section 10(d), the Companies’ obligation to indemnify or
advance Expenses hereunder to Indemnitee in respect of or relating to Indemnitee’s
Corporate Status shall be reduced by any amount Indemnitee has actually received as
payment of indemnification or advancement of Expenses from such other Enterprise,
except to the extent that such indemnification payments and advance payment of Expenses
when taken together with any such amount actually received from other Enterprises or
under director and officer insurance policies maintained by one or more Enterprises are
inadequate to fully pay all costs, Expenses or other items to the full extent that
Indemnitee is otherwise entitled to indemnification or other payment hereunder.
	 
	 	(f)	 	Except for the rights set forth in Sections 10(c), 10(d) and
10(e) of this Agreement, the rights to indemnification and advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any other
rights to which Indemnitee may at any time, whenever conferred or arising, be entitled
under applicable law, the Company Organizational Documents or other Enterprise
Organizational Documents or any other agreement, resolution of directors (or similar
governing body) of any Enterprise, or otherwise. Indemnitee’s rights under this
Agreement are present contractual rights that fully vest upon Indemnitee’s first
service as a director (and officer, if applicable) of the General Partner. The Parties
hereby agree that Sections 10(c), 10(d) and 10(e) of this
Agreement shall be deemed exclusive and shall be deemed to modify, amend and clarify
any right to indemnification or advancement provided to Indemnitee under any other
contract, agreement or document with any Enterprise relating to advancement or
indemnification.
	 
	 	(g)	 	No amendment, alteration or repeal of this Agreement or of any provision hereof
shall limit or restrict any right of Indemnitee under this Agreement in respect of any
action taken or omitted by such Indemnitee in Indemnitee’s Corporate Status prior to
such amendment, alteration or repeal. The assertion or employment of

- 12 -

 

	 	 	 	any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other right or remedy.

11. Employment Rights; Successors; Third Party Beneficiaries.

	 	(a)	 	Nothing contained in this Agreement shall be construed as giving Indemnitee any
right to be, or to be retained, in the employment of any of the Enterprise Entities.
This Agreement shall continue in force as provided above after Indemnitee has ceased to
serve as a director of the General Partner or in any other Corporate Status.
	 
	 	(b)	 	This Agreement shall be binding upon each of the Companies and their successors
and assigns and shall inure to the benefit of Indemnitee and Indemnitee’s heirs,
executors and administrators.
	 
	 	(c)	 	The Designating Partners are express third party beneficiaries of this
Agreement, are entitled to rely upon this Agreement, and may specifically enforce the
Companies’ obligations hereunder (including but not limited to the obligations
specified in Section 10 of this Agreement) as though a party hereunder.

12. Severability. If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and
enforceability of the remaining provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to be invalid, illegal
or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby; (b) such provision or provisions shall be deemed reformed to the
extent necessary to conform to applicable law and to give the maximum effect to the intent of the
parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested thereby.

13. Exceptions to Right of Indemnification or Advancement of Expenses. Notwithstanding any
other provision of this Agreement and except as provided in Section 7(a) of this Agreement
or as may otherwise be agreed by any Company, Indemnitee shall not be entitled to indemnification
or advancement of Expenses under this Agreement with respect to any Proceeding initiated by
Indemnitee (other than a Proceeding by Indemnitee (i) to enforce Indemnitee’s rights under this
Agreement or (ii) to enforce any other rights of Indemnitee to indemnification, advancement or
contribution from the Companies under any other contract, Company Organizational Document,
Enterprise Organizational Document or under statute or other law), unless the initiation of such
Proceeding or making of such claim shall have been approved by the Board of Directors of the
General Partner. In addition, notwithstanding any other provision of this Agreement to the
contrary, to the extent that Indemnitee is an officer of a Company or any Enterprise, Indemnitee
shall not be entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding if it is determined by a majority of the board of directors or other
governing body of the applicable Enterprise or by Independent Counsel, as applicable, that
Indemnitee did not act in good faith and in a manner

- 13 -

 

Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Companies or
any such Enterprise.

14. Definitions. For purposes of this Agreement:

	 	(a)	 	“Adverse Determination” shall have the meaning set forth in the
definition of Determination.
	 
	 	(b)	 	“Beneficial Owner” shall have the meanings set forth in Rule 13d-3
promulgated under the Exchange Act as in effect on the date hereof.
	 
	 	(c)	 	“Board of Directors” or “Board” means the board of directors of
the General Partner.
	 
	 	(d)	 	“Change of Control” shall be deemed to have occurred with respect to
the General Partner or the Partnership if any change in control or similar event,
however denominated, shall occur under and as defined in the General Partner Agreement.
	 
	 	(e)	 	“Corporate Status” describes the status of a person by reason of such
person’s past, present or future service as a director or officer or in any capacity
for any Enterprise at the request of a Company.
	 
	 	(f)	 	“Designating Partners” means any of the Sponsors Companies, in each
case so long as an individual employed by a Sponsor Company, or any of their respective
affiliates, serves as a director of the General Partner or in any other Corporate
Status.
	 
	 	(g)	 	“Determination” means a determination that either (x) indemnification
of Indemnitee is proper in the circumstances because Indemnitee met a particular
standard of conduct (a “Favorable Determination”) or (y) indemnification of
Indemnitee is not proper in the circumstances because Indemnitee failed to meet a
particular standard of conduct (an “Adverse Determination”). An Adverse
Determination shall include the decision that a Determination was required in
connection with indemnification and the decision as to the applicable standard of
conduct.
	 
	 	(h)	 	“Disabling Conduct” means, with respect to Indemnitee, any act or
omission resulting from fraud, gross negligence, willful breach of any Company
Organizational Document or other Enterprise Organizational Document or a willful
illegal act (other than an act or omission treated as a criminal violation in a foreign
country that is not a criminal violation in the United States).
	 
	 	(i)	 	“Disinterested Director” means, with respect to any request by
Indemnitee for indemnification hereunder, a director of the General Partner who at the
time of the vote is not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee.

- 14 -

 

	 	(j)	 	“Enterprise” shall mean each of the Companies and their respective
subsidiaries and any other entity, constituent entity (including any constituent of a
constituent) absorbed in a consolidation or merger to which any Company (or any of its
subsidiaries) is a party, limited liability company, partnership, joint venture, trust,
employee benefit plan, or other enterprise of which Indemnitee is or was serving at the
request of a Company as a director, officer, trustee, manager, venturer, proprietor,
partner, member, employee, agent, fiduciary or similar functionary.
	 
	 	(k)	 	“Enterprise Entity” means any Enterprise.
	 
	 	(l)	 	“Equity Interests” means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial interests in
a trust or other equity ownership interests in a Person, and any warrants, options or
other rights entitling the holder thereof to purchase or acquire any such equity
interest.
	 
	 	(m)	 	“Exchange Act” means the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder.
	 
	 	(n)	 	“Expenses” shall mean all reasonable direct and indirect costs, fees
and expenses of any type or nature whatsoever and shall specifically include, without
limitation, all reasonable attorneys’ fees, retainers, court costs, transcript costs,
fees and costs of experts, witness fees, travel expenses, duplicating costs, printing
and binding costs, telephone charges, postage, delivery service fees, and all other
disbursements or expenses of the types customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend, investigating, being or
preparing to be a witness in, or otherwise participating in, a Proceeding, including,
but not limited to, the premium for appeal bonds, attachment bonds or similar bonds and
all interest, assessments and other charges paid or payable in connection with or in
respect of any such Expenses, and shall also specifically include, without limitation,
all reasonable attorneys’ fees and all other expenses incurred by or on behalf of
Indemnitee in connection with preparing and submitting any requests or statements for
indemnification, advancement, contribution or any other right provided by this
Agreement. “Expenses,” however, shall not include amounts paid in settlement by
Indemnitee or the amounts of judgments or fines against Indemnitee.
	 
	 	(o)	 	“Favorable Determination” shall have the meaning set forth in the
definition of Determination.

	 	(p)	 	“Independent Counsel” means, at any time, any law firm, or a member of
a law firm, that (a) is experienced in matters of limited partnership, limited
liability company or corporation law, as applicable, and (b) is not, at such time, or
has not been in the three years prior to such time, retained to represent: (i) any
Enterprise or Indemnitee in any matter material to either such party (other than with
respect to matters concerning Indemnitee under this Agreement, or of other indemnities
under similar indemnification agreements), (ii) any other party to the Proceeding
giving rise to a claim for indemnification hereunder or (iii) the Beneficial Owner,

- 15 -

 

	 	 	 	directly or indirectly, of securities of any Company representing 5% or more of the
ownership interests or the voting power of such Company’s then outstanding ownership
interests or voting securities, respectively. Notwithstanding the foregoing, the
term “Independent Counsel” shall not include any Person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of interest
in representing any of the Companies or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement. The Companies agree to pay the reasonable
fees and expenses of the Independent Counsel referred to above and to fully
indemnify such counsel against any and all Expenses, claims, liabilities and damages
arising out of or relating to this Agreement or its engagement pursuant hereto and
to be jointly and severally liable therefor.

	 	(q)	 	“Person” means any individual, entity or group (within the meaning of
Rule 13d-5 of the Exchange Act but excluding any employee benefit plan of such person
and its subsidiaries, and any person or entity acting in its capacity as trustee, agent
or other fiduciary or administrator of any such plan).
	 
	 	(r)	 	“Potential Change in Control” shall be deemed to have occurred if (i)
any Person shall have announced publicly an intention to take actions to effect a
Change in Control, or commenced any action that, if successful, would reasonably be
expected to result in the occurrence of a Change in Control; (ii) the General Partner
enters into an agreement or arrangement on behalf of itself or the Partnership, the
consummation of which would result in the occurrence of a Change in Control; or (iii)
any other event occurs that the Board declares to be a Potential Change of Control.
	 
	 	(s)	 	“Proceeding” includes any actual, threatened, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism, investigation,
inquiry, administrative hearing or any other actual, threatened, pending or completed
proceeding, whether brought by or in the right of any Enterprise or otherwise and
whether civil, criminal, administrative or investigative in nature, in which Indemnitee
was, is, may be or will be involved as a party, witness or otherwise, by reason of
Indemnitee’s Corporate Status or by reason of any action taken by Indemnitee or of any
inaction on Indemnitee’s part while acting as director (or officer, as applicable) of
the General Partner or serving any other Enterprise (in each case whether or not he is
acting or serving in any such capacity or has such status at the time any liability or
expense is incurred for which indemnification or advancement of Expenses can be
provided under this Agreement).
	 
	 	(t)	 	“Sponsor Companies” means The Quantum Aspect Partnership, LP, a
Delaware limited partnership, QA GP, LLC, a Delaware limited liability company, and any
other investment fund or related management company or general partner (i) that is an
affiliate of The Quantum Aspect Partnership, LP (other than the Companies) or (ii) that
is advised by the same investment adviser as any of the foregoing entities or by an
affiliate of such investment adviser.

- 16 -

 

15. Construction. Whenever required by the context, as used in this Agreement the singular
number shall include the plural, the plural shall include the singular, and all words herein in any
gender shall be deemed to include (as appropriate) the masculine, feminine and neuter genders.

16. Reliance. The Companies expressly confirm and agree that they have entered into this
Agreement and assumed the obligations imposed on each of them hereby in order to induce Indemnitee
to serve as a director (and officer, as applicable) of the General Partner, and the Companies
acknowledge that Indemnitee is relying upon this Agreement in serving as a director (and officer,
as applicable) of the General Partner or in any other Corporate Status.

17. Modification and Waiver. No supplement, modification or amendment of this Agreement
shall be binding unless executed in a writing identified as such by all of the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.

18. Notice Mechanics. All notices, requests, demands or other communications hereunder
shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and
receipted for by the party to whom said notice or other communication shall have been direct, or
(ii) mailed by certified or registered mail with postage prepaid, on the third business day after
the date on which it is so mailed:

	 	(a)	 	If to Indemnitee to:

[                    ]

[                    ]

[                    ]

Attn: [Name of Indemnitee]

	 	(b)	 	If to any Company, to:

QRE GP, LLC

5 Houston Center

1401 McKinney Street, Suite 2400

Houston, Texas 77010

or to such other address as may have been furnished (in the manner prescribed above) as follows:
(a) in the case of a change in address for notices to Indemnitee, furnished by Indemnitee to the
Companies and (b) in the case of a change in address for notices to any Company, furnished by the
Companies to Indemnitee.

19. Contribution. To the fullest extent permitted under applicable law and so long as
Indemnitee has not engaged in Disabling Conduct, if the indemnification provided for in this
Agreement is unavailable to Indemnitee for any reason whatsoever, the Companies, in lieu of
indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for
judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement or for

- 17 -

 

reasonably incurred Expenses, in connection with any claim relating to an indemnifiable event under
this Agreement, in such proportion as is deemed fair and reasonable in light of all of the
circumstances of such Proceeding in order to reflect (i) the relative benefits received by the
Companies and Indemnitee as a result of the event(s) or transaction(s) giving cause to such
Proceeding; or (ii) the relative fault of the Companies (and their other directors, officers,
employees and agents) and Indemnitee in connection with such event(s) or transaction(s).

20. Governing Law; Submission to Jurisdiction; Appointment of Agent for Service of Process.
This Agreement and the legal relations among the parties shall, to the fullest extent permitted by
law, be governed by, and construed and enforced in accordance with, the laws of the State of
Delaware, without regard to its conflict of laws rules. The Companies and Indemnitee hereby
irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in
connection with this Agreement shall be brought only in the Court of Chancery of the State of
Delaware (the “Trial Court”), and not in any other state or federal court in the United
States of America or any court in any other country, (ii) consent to submit to the exclusive
jurisdiction of the Trial Court for purposes of any action or proceeding arising out of or in
connection with this Agreement, (iii) waive any objection to the laying of venue of any such action
or proceeding in the Trial Court and (iv) waive, and agree not to plead or to make, any claim that
any such action or proceeding brought in the Trial Court has been brought in an improper or
otherwise inconvenient forum.

21. Headings. The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or to affect the
construction thereof.

22. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original but all of which together shall constitute
one and the same Agreement.

[Remainder of Page Intentionally Blank]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first
above written.

	 	 	 	 	 	 	 

	General Partner:	 	QRE GP, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	Partnership:	 	QR Energy, LP	 	 
	 
	 	 	 	 	 	 
	 	 	By: QRE GP, LLC, its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	Indemnitee:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 

Signature Page to Director Indemnification Agreement—[Name of Indemnitee]

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