Document:

exv10w1

 

Exhibit 10.1

MANAGEMENT AGREEMENT

     THIS MANAGEMENT AGREEMENT (the “Agreement”) is made as of the _________day of
                    , 2005 by and between Ensource Reserves Management LLC, a Delaware limited liability
company (“Reserves”), and Ensource Energy Company LLC, a Delaware limited liability company
(“Manager”).

R
E C I T
A L S:

     WHEREAS, subject to the terms hereof, Reserves desires to engage Manager, and Manager desires
to be engaged, to (i) manage Reserves’ assets and Business, (ii) provide or cause to be provided
the reports and other information described herein relating Reserves’ assets and Business, and
(iii) provide the other services described herein.

     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 in this Agreement shall have the meanings
ascribed to them in this Section 1.1 or otherwise throughout this Agreement regardless of
whether such terms appear before or after the place where they are defined.

     “Acquisition” means any acquisition by Reserves of (i) all or substantially all of the
interest in any company or business (whether by a purchase of assets, purchase of stock, merger or
otherwise); (ii) any acquisition or series of acquisitions during any Fiscal Year of the interests
in any companies or businesses (whether by a purchase of assets, purchase of stock, merger or
otherwise), even if such acquisition or series of acquisitions involves less than substantially all
of such interests, that involves the payment of consideration with a total value in excess of
$15,000,000; or (iii) any Properties acquired after the date of this Agreement.

     “Agreement” means this Agreement, as it may be amended from time to time.

     “Affiliate” means (a) any Person that directly or indirectly controls, is controlled by, or is
under common control with the Person in question, (b) any Person directly or indirectly owning,
controlling or holding with power to vote ten percent (10%) or more of the outstanding voting
securities of another Person, (c) any Person ten percent (10%) or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held by another Person with power to
vote such securities, (d) any officer, director, member or partner of, or any Person related by
blood or marriage to, another Person or any Person described in subsection (a), (b) or (c) of this
paragraph. As used in the definition of “Affiliate,” the term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by contract or otherwise.

     “Annual Budget” shall have the meaning set forth in Section 2.1(j)(i).

 

 

     
“Base NPI” means an amount calculated as (a) the sum of net revenues received from the sale of
Hydrocarbons produced from or attributable to the Properties pursuant to third-party marketing
agreements, less (b) the sum of (i) severance and ad valorem taxes attributable to the
Properties, (ii) direct operating expenditures attributable to the Properties and (iii) Reserves
G&A.

     
“Base NPI Net Proceeds” means the net proceeds of the Base NPI earned during the quarter in
respect of which the determination is being made.

     “Board” means the Board of Directors of EEP.

     “Business” means the oil and gas exploration, development, production, marketing, sale or
other disposition of Hydrocarbons produced from or attributable to the Properties, in each case as
now or hereafter conducted after the date hereof.

     “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.

     “Confidential Information” means all information furnished to Manager or its representatives
by or on behalf of Reserves or created or developed by Manager or its representatives relating to
the Business, Properties or assets of Reserves (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
Manager or its representatives containing or based in whole or in part on any such furnished
information.

     “Divestiture” means the transfer, sale, lease, farmout, exchange, abandonment or other
disposition (or related series of such transactions) of all or any portion of the Properties.

     “EEP” means Ensource Energy Partners LP.

     “Exchange Offer” shall have the meaning provided in the LP Agreement.

     “Fiscal Year” means the fiscal year of Reserves for US GAAP purposes.

     “Fund” means Ensource Energy Income Fund, LP, a Delaware limited partnership.

     “Governmental Authority” means any nation or government, any state or other political
subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative
tribunal, central bank or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital ownership or otherwise,
by any of the foregoing.

     “Hydrocarbons” means oil, gas, casinghead gas, condensate, distillate, liquid hydrocarbons,
gaseous hydrocarbons and all products refined or extracted therefrom, together with all other
minerals produced in association with these substances.

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     “LLC Agreement” means the Limited Liability Company Agreement of Ensource Reserves Management
LLC dated as of                     , 2005, as amended from time to time.

     “LP Agreement” means the Amended and Restated Agreement of Limited Partnership of Ensource
Energy Partners LP dated as of                     , 2005, as amended from time to time.

     “Manager” has the meaning set forth in the above preamble.

     “Management Incentive Fee” means an amount calculated as a percentage of Base NPI Net Proceeds
as determined from the following table:

	 	•	 	2.0% of Base NPI Net Proceeds of up to an including $25 million,
plus
	 
	 	•	 	1.75% of Base NPI Net Proceeds in excess of $25 million and up to
and including $50 million, plus
	 
	 	•	 	1.0% of Base NPI Net Proceeds in excess of $50 million.

     “Material Decisions” has the meaning provided in Section 3.2.

     “NGT” shall have the meaning provided in the LP Agreement.

     “Permits” means licenses, permits, variances, exemptions, orders, franchises, approvals and
other authorizations of or from any Governmental Authority.

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

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

     “Properties” means the oil and gas properties now owned or hereafter acquired by Reserves,
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.

     “Reserves G&A” means the general and administrative expenses incurred by or on behalf of
Reserves in the operation of the Business, including any expenditures for legal, tax, accounting
and other services provided by any Third Party, but excluding, (i) severance and ad valorem taxes
attributable to the Properties and (ii) direct operating expenditures attributable to the
Properties.

     “Services” means the services and items provided (or to be provided) by Manager pursuant to
this Agreement.

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     “Taxes” means any and all foreign, federal, state, local and municipal taxes, including ad
valorem, property, gross receipts, sales, use, excise, transaction, import duties and charges,
customs broker fees and other costs of importation, non-U.S. value-added taxes, other non-U.S.
taxes or charges, or increases in any of the foregoing, now existing or otherwise applicable, on
any item or service that is the subject of this Agreement, other than taxes (whether foreign,
federal, state, local or municipal) based on net income, net worth, capital or profit.

     “Third Party” means any Person other than Manager or Reserves or any of their respective
Affiliates.

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

     1.2 Other Definitions. Any capitalized term used but not defined herein shall have
the meaning given the term in the LLC Agreement. Words not otherwise defined herein (or by
reference to the LLC Agreement) 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. As used in this Agreement, unless expressly stated otherwise,
references to “includes” and its derivatives mean “includes, but is not limited to,” and
corresponding derivative expressions. Unless otherwise specified, all references in this Agreement
to “Sections” and “Exhibits” are references to the corresponding sections in and exhibits attached
to this Agreement; all such exhibits are incorporated herein by reference.

ARTICLE II

MANAGER SERVICES

     2.1 Services to be provided by Manager. For and in consideration of the Management
Incentive Fee, Manager shall perform all management and administrative services as may be required
by Reserves for the reasonable conduct of the Business as hereafter conducted, including the
including the services listed in Section 2.1(a) — (g). Manager shall cause all Third
Party service providers and employees to be retained and hired, as applicable, by directly by
Reserves or EEP, as Manager deems appropriate, it being understood that any such Third Party or
employee shall not have a contractual or employment relationship with Manager.

          (a) General Administration and Management. Manager shall provide, or subject to Board
approval, will contract with a Third Party on behalf of Reserves to provide in accordance with the
Annual Budget approved by the Board or other express authorization(s) of the Board: (i) services
relating to the sale of Hydrocarbons produced, saved and marketed from the Properties, (ii)
contract administration services in connection with the sale of such production, (iii) contract
administration services regarding contracts and agreements of Reserves, and management supervision
of contractors and vendors of Reserves, relating to the exploration, development, operation,
maintenance and disposition of Reserves’ assets, and (iv) management of the personnel needs, and
administration of any employment and consulting contracts, for any employees and consultants of
Reserves.

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          (b) Land Administration Services. Manager shall provide or, subject to Board approval
arrange to be provided, in accordance with the Annual Budget approved by the Board, all lease,
division order and other land administration services (collectively, “Land Administration
Services”), including the following:

     (i) Administering and maintaining leases and agreements relating to the
Properties;

     (ii) Maintaining and updating lease, ownership, contract and property
records and databases relating to the Properties;

     (iii) Maintaining and updating royalty payment and division order reports
and databases;

     (iv) Generating, verifying, and processing internal and external division
orders and transfer orders required in the normal course of business;

     (v) Identifying, paying and invoicing rentals, rights of way, shut-in
payments and other payments required by the leases or other agreements relating
to the Properties;

     (vi) Maintaining land, contract, division of interest, lease files and
other files relating to the subject land administration functions; and

     (vii) Performing such other reasonable and customary land administration
services as Reserves deems necessary to administer or maintain the leases or
agreements relating to the Properties.

          (c) Accounting Services. Manager shall provide or, subject to Board approval will
contract with a Third Party on behalf of Reserves to provide, in accordance with the Annual Budget
approved by the Board, financial, revenue and expense accounting services relating to the Business
(collectively, “Accounting Services”), including the following:

     (i) On or before forty five (45) days after the end of every calendar
month, Manager shall prepare a settlement statement for Reserves indicating all
cash, checks or other proceeds received and expenses during the previous
calendar month. All remittances shall be deposited into, and all expenses shall
be paid from, the appropriate bank accounts of Reserves, as such bank account
may be designated by Reserves from time to time.

     (ii) Manager shall timely prepare and file on behalf of Reserves applicable
reporting and filing requirements of Governmental Authorities;

     (iii) Manager shall perform expenditure accounting functions relating to
the Properties, including arranging Reserves’ timely payment of invoices;

     (iv) Within forty five (45) days after the end of each month, Manager
shall prepare a hedging report showing Reserves’ hedging positions as of the

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last day of such month, and forecasting the projected amount of production
that is hedged for the three-year period following the date of such report; and

     (v) To the extent Reserves hires any employees, Manager shall timely
perform, or cause to be performed, all payroll and employment benefit
requirements with respect to any of Reserves’ employees.

          (d) Risk Management. Manager shall arrange insurance coverage for the benefit of
Reserves with respect to the Properties in accordance with Reserves’ risk management policies as
established from time to time by the Board or as required by Reserves’ contractual obligations.

          (e) Bonding. Manager shall arrange for Reserves’ production tax withholding, plugging
and abandonment and surface restoration bonds, letters of credit or other surety required under
applicable law or under specified contracts to which Reserves is bound with respect to the
Properties.

          (f) Engineering. Manager shall provide engineering support relating to the
Properties, including reserve evaluations and production forecasting, monitoring of allowables,
monitoring of well profitability, preparation and review of, and making of recommendations and
elections with respect to, proposals for drilling, completion, workovers or other operations with
respect to the Properties and recommendation of opportunities for enhancement of existing
Hydrocarbon production. Other than for specific Acquisitions, the Manager will provide an internal
engineering report on the Properties by October 1st of each Fiscal Year and will deliver an
engineering report prepared by a third party acceptable to the Board and Reserves’ senior lenders,
if any, by March 1st of each Fiscal Year.

          (g) Exploration; Acquisitions and Divestitures. Manager will make recommendations to
Reserves with respect to the exploration and development of the Properties and recommendations for
Acquisitions and Divestitures, including the following:

     (i) Geological and Geophysical. Manager will provide, or arrange
for a Third Party to provide, in accordance with the Annual Budget, services
relating to the acquisition, processing and interpretation of seismic data
(whether internally or externally) and evaluation of internally and externally
developed prospect proposals and review of logs, isopach maps and structure
maps;

     (ii) Prospect Generation; Exploration and Development Proposals.
Manager will provide services relating to the generation of internal, and
evaluation of outside, proposals for the exploration and development of the
Properties, including proposals for exploration, development or other operations
received from other working interest owners under applicable joint operating
agreements, or recommendations to propose exploration, development or other
operations to other working interest owners under applicable joint operating
agreements;

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     (iii) Acquisitions. Manager will make recommendations to the Board
with respect to potential Acquisitions;

     (iv) Divestitures. Manager will make recommendations to the Board
relating to proposed Divestitures, including recommendations with respect to
Divestiture of underperforming or non-core Properties.

          (h) Purchasing. Manager, in accordance with the Annual Budget as approved by the
Board, shall arrange for the procurement of equipment, supplies and other goods and services
reasonably necessary for the efficient day to day operation of the Business.

          (i) Compliance. Manager shall provide or, subject to Board Approval arrange to be
provided, services relating to regulatory compliance, including arranging the application for,
maintenance of and compliance with all required Permits with respect to the Properties or the
Business; preparation and filing of all applications, reports, notices and other regulatory filings
or reports required by any Governmental Authority; and participation in hearings and other
administrative Proceedings on behalf of Reserves.

          (j) Reporting to Reserves. Manager shall prepare and submit, or subject to Board
Approval arrange to be provided, to the Board the following information and reports:

     (i) Annual Budget and Operating Plan. On or before each December
15th during the term of this Agreement with respect to the next, entire Fiscal
Year (e.g., on or before December 15, 2005, with respect to the next entire
Fiscal Year commencing on January 1, 2006), Manager will prepare for the
consideration and adoption of the Board a proposed annual operating, capital
expenditure, maintenance and acquisition budget, and shall from time to time
propose such amendments thereof as the Manager deems necessary and appropriate
(collectively, the “Annual Budget”). Such Annual Budget shall set forth
on a monthly basis the estimated receipts and expenditures (capital, operating
and other) of Reserves in sufficient detail to provide an estimate of net
income, taxable income, cash flow, capital proceeds and other financial
requirements of Reserves for such year. The general and administrative expense
estimates of such Annual Budget will be provided separately and broken out in
detail in a line item format. Each Annual Budget shall also include such other
information or other matters reasonably necessary in order to enable the Board
to make an informed decision with respect to approval of such Annual Budget.
Following any calendar quarter, the Manager may propose changes to any Annual
Budget (or any line item therein) previously submitted to the Board, and the
Board will consider any such proposed changes at its next scheduled meeting.

     (ii) Quarterly Production Reports. Within 45 days after the end of
each calendar quarter, Manager will provide the Board with a production report
containing a summary of production from or attributable to the Properties and a
summary of operations on the Properties, together with a

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summary of any significant issues, including an analysis of any material
variations from the Annual Budget.

     (iii) Quarterly Financial Statements. Within 45 days after the end
of each calendar quarter, Manager will provide the Board with a balance sheet,
income statement and cash statement for the current month and year-to-date for
Reserves setting forth the actual results for the periods presented together
with a comparison to the respective amounts in the Annual Budget approved by the
Board. Except as the Manager and the Board may otherwise agree, such financial
statements shall be prepared in accordance with US GAAP other than footnotes and
subject to year-end audit adjustments, and shall contain a detailed narrative
description of variances to the Annual Budget approved by the Board certified by
Manager’s President to the effect that such financial statements present fairly
in all material respects the financial condition and results of operations of
Reserves. Such financial statements shall also include an analysis of Reserves’
outstanding debt and a calculation of all financial ratios required or relevant
under the terms of such debt documents.

     (iv) Quarterly Capital Investment Reports. Within 30 days after the
end of each calendar quarter, Manager will provide the Board with a report
describing in reasonable detail the progress of all drilling, completion,
reworking, secondary, tertiary or other recovery technique and other capital
investment activities conducted during such quarter with respect to the
Properties, including a statement of the cost of wells completed or abandoned
and an explanation of the abandonment of any well abandoned during such month,
and a forecast of expected capital investment activities during the next three
(3) months. Such report will contain an analysis of material variations from
the Annual Budget and an analysis of the performance of such capital investments
over time as is reasonably necessary for the understanding of the financial and
operating performance of Reserves.

     (v) Audited Financial Statements. Manager will cause to be
prepared and will furnish to the Board within 90 days after the end of each
Fiscal Year (commencing with the Fiscal Year ending December 31, 2005), an
audited balance sheet, audited income statement and audited statement of cash
flows, all prepared in accordance with US GAAP, together with an audit opinion
from a nationally recognized accounting firm that is unqualified; and such
report and opinion shall also include, on an audited basis, a statement of
changes in the member’s equity in Reserves, and certified by Manager’s President
to the effect that such financial statements present fairly in all material
respects the financial condition and results of operations of Reserves. See
comment in EEP Mgt Agreement

     (vi) Forecasted Distributions. Within 45 days after the end of
each calendar quarter, Manager will furnish a forecast of the net cash flow and
the

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NPI proceeds payable by Reserves to the Fund for the remainder of the
Fiscal Year.

     (vii) Income Tax Returns. The Manager shall cause to be prepared
federal and required state income tax returns to be filed by Reserves within 75
days after the end of a Fiscal Year. Contemporaneously with filing by Reserves,
Manager shall distribute copies of such returns and Schedule K-1 (or similar
state schedule) to EEP.

     (viii) Other reports. The Manager shall provide the Board with
copies of (i) all material reports delivered to Reserves and (ii) all material
information related to any pending or, to the knowledge of Manager, threatened
Proceedings, insurance or required permits, together with such other reports and
information relating to the Business or the Services as the Board may reasonably
request, to the extent such information is in the possession of Manager or can
be readily obtained by Manager without undue effort or unreimbursed expense.

     (ix) Meetings. At each meeting of the Board, Manager will provide
information relevant to (a) any Material Decision, together with Manager’s
recommendation with respect thereto and reasons therefor, and a summary of
actions taken pursuant to Material Decisions since the preceding meeting of the
Board, (b) any material Proceedings that are pending or, to the knowledge of
Manager, threatened against Reserves or in connection with the Properties or the
Business and (c) any other material developments with respect to the Properties
or the Business.

          (k) Maintenance of Books and Records. Manager shall maintain the books and records of
Reserves. Manager agrees to retain all such books and records in accordance with all reasonable
records retention policies that may from time to time be adopted by Reserves.

          (l) Other. Manager will perform such other functions as are usually and customarily
performed by an oil and gas exploration and production company not heretofore enumerated in this
Article II.

     2.2 Affect on LLC Agreement. Nothing in this Agreement shall be deemed to modify the
LLC Agreement, affect any of EEP’s obligations under the LLC Agreement, or affect the standard to
which EEP is held in performing its obligations under the LLC Agreement. In connection with the
performance of this Agreement, Manager shall not take any action that would be prohibited or would
otherwise require the approval of the Board under the LLC Agreement. Manager shall not sell all or
substantially all of the Properties, either in a single transaction or series of transactions, or
initiate a winding-up of the Business without approval of the Board.

     2.3 Reserves Information. It is contemplated that during the term of this Agreement,
(a) Reserves will be required to provide certain notices, information and data necessary for
Manager to perform the Services and its obligations under this Agreement, and (b) one or more

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of the officers or individual members of Manager would also be an officer of EEP or a member
of the Board, and would be involved in collecting or providing to Manager certain notices,
information and data necessary for Manager to perform the Services and its obligations under this
Agreement. However, if there is a time during the term of this Agreement when none of the officers
or individual members of Manager are officers of Reserves, or a member of the Board, then, for such
period, Manager shall be permitted to rely on any information or data provided by Reserves to
Manager in connection with the performance of its duties and provision of Services under this
Agreement, except to the extent that Manager has actual knowledge that such information or data is
inaccurate or incomplete.

ARTICLE III

MATTERS RESERVED TO COMPANY

     3.1 Execution of Contracts. Manager is an independent contractor of Reserves.
Manager is authorized hereunder to execute contracts, assignments, certificates, applications,
authorizations, regulatory filings or any other documents or instruments in Reserves’ name as
provided herein.

     3.2 Further Restrictions. Manager shall not undertake any of the following actions
(each a “Material Decision”) with respect to the Properties or the Business without the
prior approval of the Board:

          (a) Entering into any contract, or incurring any other expense or liability (i) with a term of
greater than 36 months that is not included in, and even if within the Annual Budget approved by
the Board within the economic parameters so reflected in, such Annual Budget or other express
authority granted Manager by the Board, or (ii) involves the incurrence of an obligation or
liability by (or for the expense of) Reserves in excess of, individually, $1,000,000, or, in the
aggregate, $5,000,000, unless otherwise previously approved by the Board (and such $5,000,000
amount shall be in the aggregate, taking into account all other contracts, expenses or liabilities
not otherwise expressly approved by the Board or in the Annual Budget approved by the Board). Any
expenses or liabilities incurred by Manager in violation of this Agreement shall be incurred at
Manager’s sole risk and liability.

          (b) Any other actions or restrictions identified or imposed, from time to time, by the Board.

ARTICLE IV

STANDARD OF CARE

     4.1 Standard of Care. Manager shall perform the Services in a good, safe and
workmanlike manner, with due diligence and dispatch, in accordance with good business practice and
in compliance with applicable laws, regulations, contracts, leases, orders, security instruments
and other agreements to which Reserves is a party or by which Reserves or any of its Properties are
bound.

     4.2 Procurement of Goods and Services. To the extent that Manager is permitted to
arrange for contracts with Third Parties for goods and services in connection with the operation of
the Properties, Manager shall use commercially reasonable efforts (i) to obtain such goods and

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

     4.3 Protection from Liens. Manager shall not permit any liens, encumbrances or
charges upon any of the Properties arising from the provision of Services or materials under this
Agreement except as approved, or consented to, by the Board.

     4.4 Commingling of Assets. Manager shall separately maintain and not commingle the
assets of Reserves with those of Manager or any other Person.

     4.5 Insurance. Manager shall obtain and maintain during the term of this Agreement,
from insurers who are reliable and acceptable to Reserves and authorized to do business in the
state or states or jurisdictions in which Services are to be performed by Manager, insurance
coverages in the types and minimum limits set forth on Exhibit A attached hereto. Manager
agrees to provide the Board with certificates of insurance evidencing such insurance coverage and,
upon request of the Board, shall furnish copies of such policies. Except with respect to workers’
compensation coverage, the policies shall name Reserves 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 Reserves. The policies shall provide that they will not be cancelled or reduced
without giving Reserves at least 30 days’ prior written notice of such cancellation or reduction.

     4.6 Intellectual Property Rights. If Manager uses intellectual property owned by
Third Parties in the performance of the Services, Manager shall obtain and maintain any such
licenses and authorizations necessary to authorize its use of such intellectual property in
connection with the Services. Manager shall cause any intellectual property acquired in connection
with the Services or this Agreement to be held in the name of Reserves rather than by Manager.

ARTICLE V

MANAGER’S COMPENSATION; CONTINUING OBLIGATIONS

     5.1 Management Incentive Fee; Continuing Obligations. On the first Business Day of
the second calendar month following each calendar quarter during the term hereof commencing on
___, 2005, Reserves shall pay Manager, in cash, the Management Incentive Fee as a fee for
Services rendered hereunder; provided, however, that a Management Incentive Fee
shall neither be deemed earned, nor shall it be payable, in respect of any calendar quarter during
the term of this Agreement if the Fund has not declared paid in respect of such calendar quarter a
cash distribution payable to its common unitholders in an amount of not less than $0.50 per common
unit (excluding amounts in respect of common unit arrearages and subject to appropriate adjustment
for any split, combination or similar transaction in respect of the common units).

     5.2 Other Expenditures. Manager’s general and administrative costs and similar
overhead costs that are incurred by Manager in conformity to the Annual Budget as approved by

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the Board in performing Services hereunder shall be charged to Reserves without mark-up,
interest or other profit to Manager. Any expenditures not in conformity to the approved Annual
Budget shall not be changed by Manager to Reserves.

     5.3 Cash Advances. On or before the 15th day of each calendar month, Manager may
elect to receive a cash advance from Reserves to cover the estimated costs of Manager in the
following month with respect to the performance of Services. In the event actual expenditures are
less than the amount advanced by Reserves, Manager shall apply any excess advance to the following
month’s estimated expenditures. If the actual expenditures are more than the amount advanced by
Reserves, Manager shall include (and Reserves shall advance) any excess expenses on the following
month’s estimated expenditures.

     5.4 Taxes. Reserves shall be responsible for all applicable Taxes levied on items,
goods or services that are sold, purchased or obtained pursuant to this Agreement, including the
Services, except for Taxes (whether foreign, federal, state, local or municipal taxes) imposed on
the net income, net worth, capital or profits of Manager.

ARTICLE VI

INDEMNIFICATION; LIMITATIONS

     6.1 Indemnification by Manager.

          (a) Employees, Agents and Representatives of Manager. Manager hereby agrees to
DEFEND, INDEMNIFY AND HOLD HARMLESS Reserves and EEP and their respective officers, managers,
members, partners, directors, employees, agents and Affiliates (collectively, the “Reserves
Indemnitees”) 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”), sustained by,
incurred by, arising in favor of or asserted by any Third Parties, employees, agents and
representatives of Manager, or any contractors or subcontractors of Manager, in any way relating to
the performance of Services hereunder (including any claims for personal injury, property loss or
damage, bodily injury, illness or death).

          (b) Manager’s own Property. Manager hereby agrees to RELEASE, DEFEND, INDEMNIFY AND
HOLD HARMLESS each member of Reserves Indemnitees from any and all Liabilities sustained or
incurred by Manager with respect to any damage to or loss of Manager’s property, whether real,
personal or mixed property, in any way relating to the performance of Services hereunder.

     6.2 Negligence; Strict Liability. THE RELEASE, DEFENSE AND INDEMNITY OBLIGATIONS IN
SECTIONS 6.1 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 NO WAY LIMIT OR ALTER ANY
QUALIFICATIONS SET FORTH IN SUCH RELEASE, DEFENSE AND INDEMNITY OBLIGATIONS EXPRESSLY

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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
SECTION HAS PROVISIONS REQUIRING ONE PARTY TO BE RESPONSIBLE FOR THE NEGLIGENCE, STRICT LIABILITY,
OR OTHER FAULT OF ANOTHER PARTY.

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

ARTICLE VII

CONFIDENTIALITY

     Manager shall maintain the confidentiality of all Confidential Information with respect to
Reserves, the Business and the Properties; provided, however, that Manager may
disclose such Confidential Information (i) in any judicial or alternative dispute resolution
Proceeding to resolve disputes between Reserves and Manager arising hereunder; (ii) to the extent
disclosure is legally required under applicable laws (including applicable securities and tax laws)
or any agreement to which Reserves 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, Manager shall, if requested by the Board, seek a protective order
or other relief to prevent or reduce the scope of such disclosure; (iii) to Reserves’ existing or
potential lenders, investors, joint interest owners, purchasers or other parties with whom Reserves
may enter into contractual relationships, to the extent deemed by Manager to be reasonably
necessary or desirable to enable it to perform the Services; provided, however,
that Manager shall require such Third Parties to agree to maintain the confidentiality of the
Confidential Information so disclosed; and (iv) if authorized by the Board. Manager acknowledges
that the Confidential Information is being furnished to Manager for the sole and exclusive purpose
of enabling it to perform the Services, and the Confidential Information may not be used by it for
any other purpose. The provisions of this Article VII shall survive the termination of
this Agreement.

ARTICLE VIII

TERM AND TERMINATION

     8.1 Term.

          (a) Unless sooner terminated in accordance with the provisions of Section 8.1(b), this
Agreement shall remain in force and effect for an initial term ending on December 31, 2010 (the
“Initial Term”), and shall continue on a year-to-year basis after that unless terminated by
either Party by written notice delivered to the other Party at least 60 days prior to the end of
the Initial Term or any such year, as the case may be; provided however, that if less than 51% of
the depository units of NGT accept the Exchange Offer, this Agreement shall terminate on the
expiration of the Exchange Offer.

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          (b) Notwithstanding anything stated herein to the contrary, this Agreement may be terminated
at any time prior to the expiration of the Initial Term, or, as the case may be, prior to the
expiration of any applicable annual term thereafter, upon any of the following:

     (i) upon mutual agreement of the Parties; or

     (ii) By Reserves at its election upon the occurrence of any of the
following:

     (A) Manager’s negligence or willful misconduct in the performance of
the Services; or

     (B) Manager’s material breach of this Agreement, if such (I) breach is
not remedied within 60 days after Manager’s receipt of Reserves’ written
notice thereof, or such longer period as is reasonably required to cure such
breach, provided that Manager commences to cure such breach within such
60-day period and proceeds with due diligence to cure such breach and (II)
such breach is continuing at the time notice of termination is delivered to
Manager; or

     (C) the charging of Manager or any chairman, vice-chairman, president,
chief executive officer, chief operating officer, chief financial officer,
senior vice president or other senior executive officer of Manager of any
felony; or

     (D) Manager’s undertaking of material activities with respect to the
Properties or the Business that are not authorized by the Board or Manager’s
disregard of the Board’s lawful written instructions which undertaking or
disregard continues unabated for 5 business days after Manager’s receipt of
written notice thereof from the Board and is continuing at the time notice
of termination is delivered to Manager; or

     (E) the sale of all or substantially all of the Properties, either in a
single transaction or series of transactions, or a winding-up of the
Business; or

     (F) if cash distributions paid by the Fund to both common and any
subordinated unitholders are less than $0.50 per unit per calendar quarter
for 6 successive calendar quarters (subject to appropriate adjustment for
any split, combination or similar transaction in respect of the common or
subordinated units); or

     (G) at any time after the date that is six (6) months after the
completion of the Exchange Offer, the Board determines, by a vote of not
less than four-fifths of its members, that Manager is not adequately
performing any aspect of the Services; or

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     (H) if Manager, any member of Manager, any Affiliate of the Manager or
any such member, including for such purpose any family member of a member of
the Manager, collectively cease to own the maximum amount ownership
interests in EEP that are ever collectively owned by such person; or

     (I) a change of greater than 50% of the voting control of Manager
(whether by sale, acquisition, voting agreement or otherwise) as such voting
control exists as of the date hereof, or a change by greater than 30% to the
rights to receive distributions from Manager as such rights exist as of the
date hereof, provided, however, that for the purposes of determining the
right to receive distributions hereunder, any transfer by a member of the
Manager as of the date hereof to any Affiliate of such member or any family
member of such member will be ignore; or

     (J) Manager ceases to be the general partner of EEP; or

     (iii) By Manager at its election upon:

     (A) Reserves’ material breach of this Agreement, if (I) such breach is
not remedied within 60 days after the Board’s receipt of Manager’s written
notice thereof, or such longer period as is reasonably required to cure such
breach, provided that Reserves commences to cure such breach within such
60-day period and proceeds with due diligence to cure such breach and (II)
such breach is continuing at the time notice of termination is delivered to
Reserves;

     (B) EEP ceasing to own any member interests in Reserves; or

     (C) Manager ceasing to own any ownership interests in EEP.

(c) If this Agreement is terminated pursuant to Section 8.1(b)(ii)(G) prior
to the second anniversary of the date the first Management Incentive Fee is paid,
upon the execution and delivery of a comprehensive release (including an
indemnification) by Manager and its principals in favor of Reserves, EEP and the
Fund, and their limited partners, Manager shall be entitled to a severance payment
equal to (i) one year’s Management Incentive Fees for the 12 month period
(annualized if the termination occurs before 12 months have passed) immediately
prior to the termination of the Agreement.

     (d) If this Agreement is terminated pursuant to Section 8.1(b)(ii)(G)
after to the second anniversary of the date the first Management Incentive Fee is
paid, upon the execution and delivery of a comprehensive release (including an
indemnification) by Manager and its principals in favor of Reserves, EEP and the
Fund, and their limited partners, Manager shall be entitled to a severance payment
equal to (i) two year’s Management Incentive Fees for the 24 month period
(annualized if the termination occurs before 24 months have passed) immediately
prior to the termination of the Agreement.

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     8.2 Post-Termination Transition. Upon termination of this Agreement, Manager will:

          (a) provide to a successor Manager designated by EEP all files and records in Manager’s
possession or under Manager’s control relating to the Properties or the Services rendered by
Manager hereunder, including all employee records and Third Party agreements (and related
documents);

          (b) to the extent assignable, assign to EEP or its designee all permits, licenses, contracts
and other rights, if any, held by Manager on behalf of Reserves that Reserves deems necessary or
desirable,

          (c) cooperate with EEP’s transfer of the management of the Properties and execute such
instruments and take such further action as EEP may reasonably request to transfer the same;

          (d) at EEP’s request, provide transition services for up to 90 days after termination of this
Agreement in order to facilitate the transfer of operations of the Properties to a new operator
designated by Reserves; provided, however, that during such transition period,
Reserves shall continue to pay Manager the Management Incentive Fee, prorated to the number of days
of transition services provided by Manager and continue to reimburse Manager, as provided in
Section 5.3, for costs and expenses incurred by Manager in connection with transition
services;

          (e) refrain in any way from soliciting any Third Party or employee to cease providing Services
to Reserves or otherwise interfere with Reserve’s relationship with such Third Party or employee;
and

          (f) to the extent that any provider of Services to Reserves has a direct contractual
relationship with Manager, Manager shall, at no cost to Reserves, use its best efforts to transfer
such relationship to Reserves if so requested by Reserves.

ARTICLE IX

AUDIT RIGHTS AND DISPUTE RESOLUTION

     9.1 Audit Rights. At any time during the term of this Agreement, the Board shall have
the right to review and, at Reserves’ expense, to copy the books and records maintained by Manager
relating to the Properties. In addition, to the extent necessary to verify the performance by
Manager of its obligations under this Agreement, the Board shall have the right, at Reserves’
expense, to audit, examine and make copies of or extracts from the books and records of Manager
(the “Audit Right”). The Board may exercise the Audit Right through such auditors as the
Board may determine in its sole discretion. The Board shall (i) exercise the Audit Right only upon
reasonable notice to Manager (which notice could be as short as one business day) and (ii) use
reasonable efforts to conduct the Audit Right in such a manner as to minimize the inconvenience and
disruption to Manager.

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     9.2 Dispute Resolution. The Parties shall use the dispute resolution procedures set
forth in Exhibit B to resolve in good faith any dispute, controversy or claim related to
this Agreement, including any dispute over the payment of indemnification pursuant to the
provisions of Article VI.

ARTICLE X

MISCELLANEOUS PROVISIONS

     10.1 Notices. All notices or advices required or permitted to be given by or pursuant
to this Agreement, shall be given in writing. All such notices and advices shall be (i) delivered
personally, (ii) delivered by facsimile or delivered by U.S. registered or certified mail, return
receipt requested mail, or (iii) delivered for overnight delivery by a nationally recognized
overnight courier service. Such notices and advices shall be deemed to have been given (i) on the
date of delivery if delivered personally or by facsimile, (ii) on the third Business Day following
the date of mailing if mailed by U.S. registered or certified mail, return receipt requested, or
(iii) on the date of receipt if delivered for overnight delivery by a nationally recognized
overnight courier service. All such notices and advices and all other communications related to
this Agreement shall be given as follows:

If to Reserves:

Ensource Reserves Management LLC

7500 San Felipe, Suite 440

Houston, Texas 77063

Telephone: 713-659-1794

Fax: 713-659-1799

If to Manager:

Ensource Energy Company LLC

7500 San Felipe, Suite 440

Houston, Texas 77063

Attn: President

Telephone: 713-659-1794

Fax: 713-659-1799

or to such other address as the party may have furnished to the other parties in accordance
herewith, except that notice of change of addresses shall be effective only upon receipt.

     10.2 Governing Law. This Agreement shall be subject to, and interpreted by and in
accordance with, the laws (excluding conflict of law provisions) of the State of Delaware.

     10.3 Attorneys’ Fees and Expenses. In any action brought by a Party to enforce the
obligations of the other Party, the prevailing Party shall be entitled to collect from the opposing
Party to such action such Party’s reasonable litigation costs and attorneys’ fees and expenses
(including court costs, reasonable fees of accountants and experts and other expenses incidental to
the litigation).

-17-

 

     10.4 Entire Agreement. This Agreement is the entire Agreement of the Parties
respecting the subject matter hereof. There are no other agreements, representations or
warranties, whether oral or written, respecting the subject matter hereof, and this Agreement
supersedes and replaces any such prior agreements, representations or warranties.

     10.5 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.

     10.6 Further Assurances. In connection with this Agreement, each Party shall execute
and deliver any additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this Agreement.

     10.7 Successors and Assigns. This Agreement may not be assigned by either 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.

     10.8 No Third Party Beneficiaries. Nothing in this Agreement (except as provided in
Article VI) 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.

     10.9 Relationship of the Parties. Except as provided in Section 3.1, nothing
in this Agreement shall be construed to create a partnership or joint venture.

     10.10 No Waiver. A Party to this Agreement may decide not to require, or fail to
require, full or timely performance of any obligation arising under this Agreement. The decision
not to require, or failure of a Party to require, full or timely performance of any obligation
arising under this Agreement (whether on a single occasion or on multiple occasions) shall not be
deemed a waiver of any such obligation. No such decisions or failures shall give rise to any claim
of estoppel, laches, course of dealing, amendment of this Agreement by course of dealing or other
defense of any nature to any obligation arising hereunder.

     10.11 Amendments. This Agreement may be amended or modified only in a writing signed
by both Parties that specifically references this Agreement.

     10.12 Time of the Essence. Time is of the essence with respect to each obligation
arising under this Agreement.

     10.13 Unenforceability. In the event any provision of this Agreement, or the
application of such provision to any person or set of circumstances, shall be determined to be
invalid, unlawful or unenforceable to any extent for any reason, the remainder of this Agreement,
and the application of such provision to Persons or circumstances other than those as to which it
is determined to be invalid, unlawful or unenforceable, shall not be affected and shall continue to
be enforceable to the fullest extent permitted by law.

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     10.14 Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which together shall constitute but a single
agreement.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

-19-

 

     IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly adopted by them as of
the date set forth above.

	 	 	 	 	 
	 	 	“MANAGER”
	 
	 	 	 	 
	 	 	ENSOURCE ENERGY COMPANY LLC
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 

	 	Date:	 	 
	 

	 	 	 	 

	t 	 	 	 	 	 	 
	 	 	“RESERVES”
	 
	 	 	 	 	 	 
	 	 	ENSOURCE RESERVES MANAGEMENT LLC
	 
	 	 	 	 	 	 
	 	 		By:	 Ensource Energy Partners LP
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Date:	 	 
	 

	 	 	 	 	 	 

 

 

EXHIBIT A

Manager’s Insurance

     Manager shall at all times, during the term of this Agreement, procure and maintain with
responsible insurance companies, the following minimum types and coverages of insurance, and shall
name as an additional insured (other than with respect to worker’s compensation insurance)
Reserves, together with a full waiver of subrogation against Reserves with respect thereto:

	1.	 	Workers Compensation Insurance and Employers Liability Insurance in compliance with all
applicable federal and state laws where Reserves operates.
	 
	2.	 	Onshore Property Physical Damage Insurance — replacement cost insurance with $7,500
deductible per occurrence. Like kind and quality.
	 
	3.	 	Directors and Officers Liability Insurance with aggregate limit of $10 million, Employment
Practices claims deductible of $75,000, Securities Claims deductible of $150,000, all other
claims deductible of $150,000.
	 
	4.	 	Comprehensive General Liability Insurance with combined single limit of not less than $1
million per occurrence, $2 million in the aggregate and $50,000 deductible. This policy shall
be endorsed to provide coverage for: explosion, collapse and underground damage hazards to
property of others contractual liability, disposal well operations, Louisiana pollutant and
pollutions examples, maritime operations and products and completed operations.
	 
	5.	 	Fidelity insurance with a policy limit of not less than $2.5 million, with a deductible of
not more than $100,000.

EXH-A-1

 

 

EXHIBIT B

Dispute Resolution

1. Mediation. Either Party may initiate non-binding mediation by sending notice in writing
to the other Party identifying the issues in dispute and requesting that they be resolved through
mediation and proposing a neutral mediator. The Party receiving the request for mediation shall
have 7 business days after receipt of the request to accept or reject the mediation request and to
respond to the initiating Party’s suggestion of a mediator.

2. Binding Arbitration.

     (a) Any dispute arising out of or relating to this Agreement, including claims sounding in
contract, tort, statutory or otherwise (a “Dispute”), shall be settled exclusively and
finally by arbitration in accordance with this EXHIBIT B.

     (b) Such arbitration shall be governed by and conducted pursuant to the Commercial Arbitration
Rules of JAMS (collectively, the “Rules”).

     (c) The arbitrator shall permit discovery and rule on matters of confidentiality in accordance
with Delaware law unless otherwise provided in the Rules.

     (d) All arbitration proceedings hereunder shall be conducted in Houston, Texas, San Francisco,
California or such other location as the parties to such Dispute shall mutually agree.

     (e) All arbitration proceedings hereunder shall be before one arbitrator, which arbitrator
will be a retired Texas or California state court judge or a retired Federal district court judge.

     (f) In deciding the substance of the Dispute, the arbitrator shall refer to the substantive
laws of the State of Delaware for guidance (excluding choice-of-law principles that might call for
the application of the laws of another jurisdiction).

     (g) The arbitrator shall conduct an initial hearing as soon as reasonably practicable, and
render a final decision completely disposing of the Dispute that is the subject of such proceedings
as soon as reasonably practicable but in no event later than 15 days after the final hearing.

     (h) Notwithstanding any other provision in this Agreement to the contrary, the arbitrator
shall have absolutely no authority to award consequential, incidental, special, treble, exemplary
or punitive damages of any type under any circumstances regardless of whether such damages may be
available under Delaware law, or any other laws, or under the Rules.

     (i) The parties shall request that final decision of the arbitrator be in writing and set
forth the reasons for such final decision, and if the arbitrator awards monetary damages to a
party, contain a certification by the arbitrator that it has not included any consequential,
incidental, special, treble, exemplary or punitive damages. To the fullest extent permitted by
law, the arbitration proceeding and the arbitrator’s decision and award shall be maintained in
confidence

EXH-B-1

 

 

by the parties and the parties shall instruct the arbitrator to likewise maintain such matters
in confidence.

     (j) The fees and expenses of the arbitrator shall be borne equally by the parties, but the
decision of the arbitrator may include such award of the arbitrator’s expenses and of other costs.

     (k) The decision and award of the arbitrator shall be binding and final and nonappealable to
the maximum extent permitted by law, and judgment thereon may be entered in a court of competent
jurisdiction and enforced by any party as a final judgment of such court.

EXH-B-2exv10w2

 

Exhibit 10.2

MANAGEMENT AGREEMENT

     THIS
MANAGEMENT AGREEMENT (the “Agreement”) is made as of the _________ day of
                    , 2005 by and between Ensource Energy Partners LP, a Delaware limited partnership
(“EEP”), and Ensource Energy Company LLC, a Delaware limited liability company
(“Manager”).

R E C I T A L S:

     WHEREAS, subject to the terms hereof, EEP desires to engage Manager, and Manager desires to be
engaged, to (i) manage EEP’s assets and Business, (ii) provide or cause to be provided the reports
and other information described herein relating EEP’s assets and Business, and (iii) provide the
other services described herein.

     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 in this Agreement shall have the meanings
ascribed to them in this Section 1.1 or otherwise throughout this Agreement regardless of
whether such terms appear before or after the place where they are defined.

     “Agreement” means this Agreement, as it may be amended from time to time.

     “Affiliate” means (a) any Person that directly or indirectly controls, is controlled by, or is
under common control with the Person in question, (b) any Person directly or indirectly owning,
controlling or holding with power to vote ten percent (10%) or more of the outstanding voting
securities of another Person, (c) any Person ten percent (10%) or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held by another Person with power to
vote such securities, (d) any officer, director, member or partner of, or any Person related by
blood or marriage to, another Person or any Person described in subsection (a), (b) or (c) of this
paragraph. As used in the definition of “Affiliate,” the term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by contract or otherwise.

     “Annual
Budget” shall have the meaning provided in Section 2.1(f)(i).

     “Board” means the Board of Directors of EEP.

     “Business” means the operation of EEP’s business, including acting as the general partner of
the Fund and the sole member of Ensource Reserves Management LLC, in each case as now or hereafter
conducted.

 

 

     “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.

     “Confidential Information” means all information furnished to Manager or its representatives
by or on behalf of EEP or the Fund or created or developed by Manager or its representatives
relating to the Business or assets of EEP or the Fund (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
Manager or its representatives containing or based in whole or in part on any such furnished
information.

     “EEP” means Ensource Energy Partners, LP, a Delaware limited partnership.

     “Exchange Offer” shall have the meaning provided in the LP Agreement.

     “Fiscal Year” means the fiscal year of EEP for US GAAP purposes.

     “Fund” means Ensource Energy Income Fund, LP, a Delaware limited partnership.

     “Governmental Authority” means any nation or government, any state or other political
subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative
tribunal, central bank or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital ownership or otherwise,
by any of the foregoing.

     “LP Agreement” means the Amended and Restated Agreement of Limited Partnership of Ensource
Energy Partners, LP dated as of                     , 2005, as amended from time to time.

     “Manager” has the meaning set forth in the above preamble.

     “Management Fee” means the sum of $50,000 payable to Manager pursuant to the terms and
conditions of this Agreement.

     “Material Decisions” has the meaning provided in Section 3.2.

     “NGT” shall have the meaning provided in the LP Agreement.

     “Permits” means licenses, permits, variances, exemptions, orders, franchises, approvals and
other authorizations of or from any Governmental Authority.

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

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

-2-

 

     “Reserves” means Ensource Reserves Management LLC, a Delaware limited liability company.

     “Services” means the services and items provided (or to be provided) by Manager pursuant to
this Agreement.

     “Taxes” means any and all foreign, federal, state, local and municipal taxes, including ad
valorem, property, gross receipts, sales, use, excise, transaction, import duties and charges,
customs broker fees and other costs of importation, non-U.S. value-added taxes, other non-U.S.
taxes or charges, or increases in any of the foregoing, now existing or otherwise applicable, on
any item or service that is the subject of this Agreement, other than taxes (whether foreign,
federal, state, local or municipal) based on net income, net worth, capital or profit.

     “Third Party” means any Person other than Manager or EEP or any of their respective
Affiliates.

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

     1.2 Other Definitions. Any capitalized term used but not defined herein shall have
the meaning given the term in the LP Agreement. Words not otherwise defined herein (or by
reference to the LP Agreement) 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. As used in this Agreement, unless expressly stated otherwise,
references to “includes” and its derivatives mean “includes, but is not limited to,” and
corresponding derivative expressions. Unless otherwise specified, all references in this Agreement
to “Sections” and “Exhibits” are references to the corresponding sections in and exhibits attached
to this Agreement; all such exhibits are incorporated herein by reference.

ARTICLE II

MANAGER SERVICES

     2.1 Services to be provided by Manager. For and in consideration of the Management
Fee and other consideration as set forth herein, Manager shall perform all management and
administrative services as may be required by EEP for the reasonable conduct of the Business as
hereafter conducted, including the services listed in Section 2.1(a) — (g). Manager
shall cause all Third Party service providers and employees to be retained and hired, as
applicable, directly by EEP, it being understood that any such Third Party or employee shall not
have a contractual or employment relationship with Manager.

          (a) General Administration and Management. Manager will provide, or subject to Board
approval will contract with Third Parties on EEP’s behalf to provide, in accordance with the Annual
Budget approved by the Board (or other express authorization(s) of the Board): (i) management and
contract administration services in connection with the administration of EEP, including in its
role as general partner of the Fund, (ii) contract administration services regarding

-3-

 

contracts and agreements of EEP, and management supervision of contractors and vendors of EEP,
relating to the operation of the Business, (iii) management services comprised of reviewing,
approving and paying authorized expenditures and all costs associated with operating the Business,
and (iv) management of the personnel needs, and administration of any employment and consulting
contracts, for any employees and consultants of EEP or the Fund.

          (b) Accounting Services. Manager shall provide or, subject to Board approval will
contract with a Third Party on EEP’s behalf to provide, financial, revenue and expense accounting
services relating to the Business (collectively, “Accounting Services”), including the
following:

     (i) On or before 45 days after the end of every calendar month, Manager
shall prepare a settlement statement for EEP indicating all cash, checks or
other proceeds received and expenses during the previous calendar month. All
remittances shall be deposited into, and all expenses shall be paid from, the
appropriate bank accounts of EEP, as such bank accounts may be designated by
EEP from time to time.

     (ii) Manager shall prepare and timely file on behalf of EEP and the Fund
applicable reporting and filing requirements of Governmental Authorities;

     (iii) Manager shall perform expenditure accounting functions, including
arranging EEP’s timely payment of invoices;

     (iv) Within 45 days after the end of each month, Manager shall prepare a
hedging report showing the Fund’s hedging positions as of the last day of such
month, and forecasting the projected amount of production that is hedged for the
one-year period following the date of such report; and

     (v) To the extent EEP or the Fund hires any employees, Manager shall timely
perform, or cause to be performed, all payroll and employment benefit
requirements with respect to any of EEP’s or the Fund’s employees.

          (c) Risk Management. Manager shall arrange insurance coverage for the benefit of EEP
and the Fund in accordance with EEP’s risk management policies as established from time to time by
the Board or as required by EEP’s or the Fund’s contractual obligations.

          (d) Purchasing. Manager shall arrange for the procurement of equipment, supplies and
other goods and services reasonably necessary for the efficient day to day operation of the
Business.

          (e) Compliance. Manager shall provide or, subject to Board approval arrange to be
provided, services relating to regulatory compliance, including arranging the application for,
maintenance of and compliance with all required Permits with respect to the Business; preparation
and filing of all applications, reports, notices and other regulatory filings or reports required
by any Governmental Authority; and participation in hearings and other administrative Proceedings
on behalf of EEP.

-4-

 

          (f) Reporting to EEP. Manager shall prepare and submit or, subject to Board approval
arrange to be provided, to the Board the following information and reports:

     (i) Annual Budget and Operating Plan. On or before each December
15th during the term of this Agreement with respect to the next, entire Fiscal
Year (e.g., on or before December 15, 2005, with respect to the next entire
Fiscal Year commencing on January 1, 2006), Manager will prepare for the
consideration and adoption of the Board a proposed annual operating budget, and
shall from time to time propose such amendments thereof as the Manager deems
necessary and appropriate (collectively, the “Annual Budget”). Such
Annual Budget shall set forth on a monthly basis the estimated receipts and
expenditures of EEP in sufficient detail to provide an estimate of net income,
taxable income, cash flow and other financial requirements of EEP for such
year. The general and administrative expense estimates of such Annual Budget
will be provided separately and broken out in detail in line item format. Each
Annual Budget shall also include such other information or other matters
reasonably necessary in order to enable the Board to make an informed decision
with respect to approval of such Annual Budget. Following any fiscal quarter,
the Manager may propose changes to any Annual Budget (or any line item therein)
previously submitted to the Board, and the Board will consider any such proposed
changes at the its next scheduled meeting.

     (ii) Quarterly Financial Statements. Within 30 days after the end
of each fiscal quarter, Manager will provide the Board with a balance sheet,
income statement and cash statement for the current month and year-to-date for
EEP setting forth the actual results for the periods presented together with a
comparison to the respective amounts in the Annual Budget approved by the Board.
Except as the Manager and the Board may otherwise agree, such financial
statements shall be prepared in accordance with US GAAP other than footnotes and
subject to year-end audit adjustments, shall contain a detailed narrative
description of variances to the Annual Budget approved by the Board, and shall
be certified by Manager’s President to the effect that such financial statements
present fairly in all material respects the financial condition and results of
operations of EEP.

     (iii)  Audited Financial Statements. Manager will cause to be
prepared and will furnish to the Board within 90 days after the end of each
Fiscal Year (commencing with the Fiscal Year ending December 31, 2005), an
audited balance sheet, audited income statement and audited statement of cash
flows, all prepared in accordance with US GAAP, together with an audit opinion
from a nationally recognized accounting firm that is unqualified; and such
report and opinion shall also include, on an audited basis a statement of
changes in the limited partners’ equity in EEP, all certified by Manager’s
President to the effect that such financial statements present fairly in all
material respects the financial condition and results of operations of EEP.

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     (iv) Forecasted Distributions. Within 45 days after the end of
each fiscal quarter, Manager will furnish a forecast of the cash distributions
payable by the Fund to EEP in respect of any common or subordinated units EEP
may hold and the incentive distribution rights payable to EEP as the general
partner of the Fund, in each case for the remainder of the Fiscal Year.

     (v) Income Tax Returns. The Manager shall prepare accurate
federal and required state income tax returns to be filed by EEP within 75 days
after the end of a Fiscal Year. Contemporaneously with filing by EEP, Manager
shall distribute copies of such returns and Schedule K-1 (or similar state
schedule) to the partners of EEP.

     (vi) Other reports. The Manager shall provide the Board with copies
of (i) all material reports delivered to EEP and (ii) all material information
related to any pending or, to the knowledge of Manager, threatened Proceedings,
insurance or required permits, together with such other reports and information
relating to the Business or the Services as the Board may reasonably request, to
the extent such information is in the possession of Manager or can be readily
obtained by Manager without undue effort or unreimbursed expense.

     (vii) Meetings. At each meeting of the Board, Manager will provide
information relevant to (a) any Material Decision, together with Manager’s
recommendation with respect thereto and reasons therefor, and a summary of
actions taken pursuant to Material Decisions since the preceding meeting of the
Board, (b) any material Proceedings that are pending or, to the knowledge of
Manager, threatened against EEP in connection with the Business and (c) any
other material developments with respect to the Business.

          (g) Maintenance of Books and Records. Manager shall maintain the books and records of
EEP and the Fund. Manager agrees to retain all such books and records in accordance with all
reasonable records retention policies that may from time to time be adopted by EEP.

     2.2 Affect on the LP Agreement. Nothing in this Agreement shall be deemed to modify
the LP Agreement, affect any of EEP’s obligations under the LP Agreement, or affect the standard to
which EEP is held in performing its obligations under the LP Agreement. In connection with the
performance of this Agreement, Manager shall not take any action that would be prohibited or would
otherwise require the approval of the Board under the LP Agreement. Manager shall not sell all or
substantially all of the EEP’s assets, either in a single transaction or series of transactions, or
initiate a winding-up of the Business without approval of the Board.

     2.3 EEP Information. It is contemplated that during the term of this Agreement, (a)
EEP will be required to provide certain notices, information and data necessary for Manager to
perform the Services and its obligations under this Agreement, and (b) one or more of the officers
or individual members of Manager would also be an officer of EEP or a member of the Board, and
would be involved in collecting or providing to Manager certain notices, information

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and data necessary for Manager to perform the Services and its obligations under this
Agreement. However, if there is a time during the term of this Agreement when none of the officers
or individual members of Manager are officers of EEP, or a member of the Board, then, for such
period, Manager shall be permitted to rely on any information or data provided by EEP to Manager in
connection with the performance of its duties and provision of Services under this Agreement,
except to the extent that Manager has actual knowledge that such information or data is inaccurate
or incomplete.

ARTICLE III

MATTERS RESERVED TO COMPANY

     3.1 Execution of Contracts. Manager is an independent contractor of EEP. Manager is
authorized hereunder to execute contracts, assignments, certificates, applications, authorizations,
regulatory filings or any other documents or instruments in EEP’s name as provided herein.

     3.2 Further Restrictions. Manager shall not undertake any of the following actions
(each a “Material Decision”) with respect to the Business without the prior approval of the
Board:

          (a) Entering into any contract, or incurring any other expense or liability (i) with a term of
greater than 36 months that is not included in, and even if within the Annual Budget approved by
the Board within the economic parameters so reflected in, such Annual Budget or other express
authority granted Manager by the Board, or (ii) involves the incurrence of an obligation or
liability by (or for the expense of) EEP or the Fund in excess of, individually, $1,000,000, or, in
the aggregate, $5,000,000, unless permitted in the LP Agreement (and such $5,000,000 amount shall
be in the aggregate, taking into account all other contracts, expenses or liabilities not otherwise
expressly approved by the Board or in the Annual Budget approved by the Board). Any expenses or
liabilities incurred by Manager in violation of this Agreement shall be incurred at Manager’s sole
risk and liability.

          (b) Any other actions or restrictions identified or imposed, from time to time, by the Board.

ARTICLE IV

STANDARD OF CARE

     4.1 Standard of Care. Manager shall perform the Services in a good, safe and
workmanlike manner, with due diligence and dispatch, in accordance with good business practice and
in compliance with applicable laws, regulations, contracts, leases, orders, security instruments
and other agreements to which EEP or the Fund is a party or by which EEP or the Fund or any of
their respective assets are bound.

     4.2 Procurement of Goods and Services. To the extent that Manager is permitted to
arrange for contracts with Third Parties for goods and services in connection with the operation of
the Business, Manager 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 best warranties and guarantees as may be reasonably required with respect to the goods
and services so furnished.

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     4.3 Protection from Liens. Manager shall not permit any liens, encumbrances or
charges upon any of the assets of EEP or the Fund arising from the provision of Services or
materials under this Agreement except as approved, or consented to, by the Board.

     4.4 Commingling of Assets. Manager shall separately maintain and not commingle the
assets of EEP, the Fund, Manager, or any other person.

     4.5 Insurance. Manager shall obtain and maintain during the term of this Agreement,
from insurers who are reliable and acceptable to EEP and authorized to do business in the state or
states or jurisdictions in which Services are to be performed by Manager, insurance coverages in
the types and minimum limits set forth on Exhibit A attached hereto. Manager agrees to
provide the Board with certificates of insurance evidencing such insurance coverage and, upon
request of the Board, shall furnish copies of such policies. Except with respect to workers’
compensation coverage, the policies shall name EEP 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 EEP. The policies shall provide that they will not be cancelled or reduced without
giving EEP at least 30 days’ prior written notice of such cancellation or reduction.

     4.6 Intellectual Property Rights. If Manager uses intellectual property owned by
Third Parties in the performance of the Services, Manager shall obtain and maintain any such
licenses and authorizations necessary to authorize its use of such intellectual property in
connection with the Services.

ARTICLE V

MANAGER’S COMPENSATION; CONTINUING OBLIGATIONS

     5.1 Management Fee; Continuing Obligations. On the first Business Day of each
calendar month following each calendar month during the term hereof commencing on the latter of
(i) October 1, 2005, or (ii) the acceptance of 51% of the NGT depositary units pursuant to the
Exchange Offer contemplated hereunder, EEP shall pay Manager, in cash, the Management Fee as a fee
for Services rendered hereunder.

     5.2 Other Expenditures. Manager’s general and administrative costs and similar
overhead costs that are incurred by Manager in conformity to the Annual Budget approved by the
Board in performing Services hereunder shall be charged to EEP without mark-up, interest or other
profit to Manager. Any expenditures not in conformity with the approved Annual Budget shall not be
charged to EEP.

     5.3 Cash Advances. On or before the 15th day of each calendar month, Manager may
elect to receive a cash advance from EEP to cover the estimated costs of Manager in the following
month with respect to the performance of Services. In the event actual expenditures are less than
the amount advanced by EEP, Manager shall apply any excess advance to the following month’s
estimated expenditures. If the actual expenditures are more than the amount advanced by EEP,
Manager shall include (and EEP shall advance) any excess expenses on the following month’s
estimated expenditures.

     5.4 Taxes. EEP shall be responsible for all applicable Taxes levied on items, goods
or services that are sold, purchased or obtained pursuant to this Agreement, including the
Services,

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except for Taxes (whether foreign, federal, state, local or municipal taxes) imposed on the
net income, net worth, capital or profits of Manager.

ARTICLE VI

INDEMNIFICATION; LIMITATIONS

     6.1 Indemnification by Manager.

          (a) Employees, Agents and Representatives of Manager. Manager hereby agrees to
DEFEND, INDEMNIFY AND HOLD HARMLESS EEP and the Fund and their respective officers, managers,
partners, members, directors, employees, agents and Affiliates (collectively, the “EEP
Indemnitees”) 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”), sustained by,
incurred by, arising in favor of or asserted by any Third Parties, employees, agents and
representatives of Manager, or any contractors or subcontractors of Manager, in any way relating to
the performance of Services hereunder (including any claims for personal injury, property loss or
damage, bodily injury, illness or death).

          (b) Manager’s own Property. Manager hereby agrees to RELEASE, DEFEND, INDEMNIFY AND
HOLD HARMLESS each member of EEP Indemnitees from any and all Liabilities sustained or incurred by
Manager with respect to any damage to or loss of Manager’s property, whether real, personal or
mixed property, in any way relating to the performance of Services hereunder.

     6.2 Negligence; Strict Liability. THE RELEASE, DEFENSE AND INDEMNITY OBLIGATIONS IN
SECTION 6.1 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 NO WAY LIMIT OR ALTER ANY
QUALIFICATIONS SET FORTH IN SUCH RELEASE, 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 SECTION HAS PROVISIONS
REQUIRING ONE PARTY TO BE RESPONSIBLE FOR THE NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF
ANOTHER PARTY.

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

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ARTICLE VII

CONFIDENTIALITY

     Manager shall maintain the confidentiality of all Confidential Information with respect to
EEP, the Fund and the Business; provided, however, that Manager may disclose such
Confidential Information (i) in any judicial or alternative dispute resolution Proceeding to
resolve disputes between EEP and Manager arising hereunder; (ii) to the extent disclosure is
legally required under applicable laws (including applicable securities and tax laws) or any
agreement to which EEP 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, Manager shall, if requested by the Board, seek a protective order or other relief to
prevent or reduce the scope of such disclosure; (iii) to EEP’s or the Fund’s existing or potential
lenders, investors, joint interest owners, purchasers or other parties with whom EEP or the Fund
may enter into contractual relationships, to the extent deemed by Manager to be reasonably
necessary or desirable to enable it to perform the Services; provided, however,
that Manager shall require such Third Parties to agree to maintain the confidentiality of the
Confidential Information so disclosed; and (iv) if authorized by the Board. Manager acknowledges
that the Confidential Information is being furnished to Manager for the sole and exclusive purpose
of enabling it to perform the Services, and the Confidential Information may not be used by it for
any other purpose. The provisions of this Article VII shall survive the termination of
this Agreement.

ARTICLE VIII

TERM AND TERMINATION

     8.1 Term.

          (a) Unless sooner terminated in accordance with the provisions of Section 8.1(b), this
Agreement shall remain in force and effect for an initial term ending on December 31, 2010 (the
“Initial Term”), and shall continue on a year-to-year basis after that unless terminated by
either Party by written notice delivered to the other Party at least 60 days prior to the end of
the Initial Term or any such year, as the case may be, provided however, that if less than 51% of
the depository units of NGT accept the Exchange Offer, this Agreement shall terminate on the
expiration of the Exchange Offer.

          (b) Notwithstanding anything stated herein to the contrary, this Agreement may be terminated
at any time prior to the expiration of the Initial Term, or, as the case may be, prior to the
expiration of any applicable annual term thereafter, upon any of the following:

     (i) upon mutual agreement of the Parties; or

     (ii) By EEP at its election upon the occurrence of any of the following:

     (A) Manager’s negligence or willful misconduct in the performance of
the Services; or

     (B) Manager’s material breach of this Agreement, if such (I)breach is
not remedied within 30 days after Manager’s receipt of EEP’s written

-10-

 

notice thereof, or such longer period as is reasonably required to cure
such breach, provided that Manager commences to cure such breach within such
30-day period and proceeds with due diligence to cure such breach and (II)
such breach is continuing at the time notice of termination is delivered to
Manager; or

     (C) the charging of Manager or any chairman, vice-chairman, president,
chief executive officer, chief operating officer, chief financial officer,
senior vice president or other senior executive officer of Manager of any
felony; or

     (D) Manager’s undertaking of material activities with respect to the
Business that are not authorized by the Board or Manager’s disregard of the
Board’s lawful written instructions which undertaking or disregard continues
unabated for 5 business days after Manager’s receipt of written notice
thereof from the Board and is continuing at the time notice of termination
is delivered to Manager; or

     (E) the sale of all or substantially all of the assets of EEP, either
in a single transaction or series of transactions, or a winding-up of the
Business; or

     (F) if cash distributions paid by the Fund to both common and any
subordinated unitholders are less than $0.50 per unit per calendar quarter
for 6 successive calendar quarters (subject to appropriate adjustment for
any split, combination or similar transaction in respect of the common or
subordinated units); or

     (G) at any time after the date that is six (6) months after the
completion of the Exchange Offer, the Board determines, by a vote of not
less than four-fifths of its members, that Manager is not adequately
performing any aspect of the Services; or

     (H) if Manager, any member of Manager, any Affiliate of the Manager or
any such member, including for such purpose any family member of a member of
the Manager, collectively cease to own the maximum amount ownership
interests in EEP that are ever collectively owned by such person; or

     (I) a change of greater than 50% of the voting control of Manager
(whether by sale, acquisition, voting agreement or otherwise) as such voting
control exists as of the date hereof, or a change by greater than 30% to the
rights to receive distributions from Manager as such rights exist as of the
date hereof, provided, however, that for the purposes of determining the
right to receive distributions hereunder, any transfer by a member of the
Manager as of the date hereof to any Affiliate of such member or any family
member of such member will be ignore; or

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     (J) Manager ceases to be the general partner of EEP; or

     (iii) By Manager at its election upon:

     (A) EEP’s material breach of this Agreement, if (I) such breach is not
remedied within 60 days after the Board’s receipt of Manager’s written
notice thereof, or such longer period as is reasonably required to cure such
breach, provided that EEP commences to cure such breach within such 60-day
period and proceeds with due diligence to cure such breach and (II) such
breach is continuing at the time notice of termination is delivered to EEP;
or

     (B) Manager ceasing to own any ownership interests in EEP.

          (c) If this Agreement is terminated pursuant to Section 8.1(b)(ii)(G) prior to the
second anniversary of the date the first Management Fee is paid, upon the execution and delivery of
a comprehensive release (including an indemnification) by Manager and its principals in favor of
EEP, Reserves and the Fund, and their limited partners, Manager shall be entitled to a severance
payment equal to (i) one year’s Management Fees, plus (ii) an amount equal to the fees earned as
the general partner of EEP (other than the Management Fees or amounts earned from Ensource Energy
Company, LLC) for the 12 month period (annualized if the termination occurs before 12 months have
passed) immediately prior to the termination of the Agreement.

          (d) If this Agreement is terminated pursuant to Section 8.1(b)(ii)(G) after to the
second anniversary of the date the first Management Fee is paid, upon the execution and delivery of
a comprehensive release (including an indemnification) by Manager and its principals in favor of
EEP, Reserves and the Fund, and their limited partners, Manager shall be entitled to a severance
payment equal to (i) two year’s Management Fees, plus (ii) an amount equal to the fees earned as
the general partner of EEP (other than the Management Fees or amounts earned from Ensource Energy
Company, LLC) for the 24 month period (annualized if the termination occurs before 24 months have
passed) immediately prior to the termination of the Agreement.

     8.2 Post-Termination Transition. Upon termination of this Agreement, Manager will:

          (a) provide to a successor Manager designated by EEP all original files and records in
Manager’s possession or under Manager’s control relating to the Services rendered by Manager
hereunder, and all records of Third Party service providers and employees;

          (b) to the extent assignable, assign to EEP or its designee all permits, licenses, contracts
and other rights related to EEP or the Fund, if any, held by Manager on behalf of EEP or the Fund
that EEP deems necessary or desirable;

          (c) cooperate with EEP’s transfer of the management of the Business and execute such
instruments and take such further action as EEP may reasonably request to transfer the same; and

          (d) at EEP’s request, provide transition services for up to 90 days after termination of this
Agreement in order to facilitate the transfer of operations of the
Business to a

-12-

 

new operator designated by EEP; provided, however, that during such transition
period, EEP shall continue to pay Manager the Management Fee, prorated to the number of days of
transition services provided by Manager and continue to reimburse Manager, as provided in
Section 5.3, for costs and expenses incurred by Manager in connection with transition
services;

          (e) refrain in any way from soliciting any Third Party or employee to cease providing Services
to EEP or otherwise interfere with EEP’s relationship with such Third Party or employee; and

          (f) to the extent that any provider of Services to EEP has a direct contractual relationship
with Manager, Manager shall, at no cost to EEO, use its best efforts to transfer such relationship
to EEP if so requested by EEP.

ARTICLE IX

AUDIT RIGHTS AND DISPUTE RESOLUTION

     9.1 Audit Rights. At any time during the term of this Agreement, the Board shall have
the right to review and, at EEP’s expense, to copy the books and records maintained by Manager
relating to the Business. In addition, to the extent necessary to verify the performance by
Manager of its obligations under this Agreement, the Board shall have the right, at EEP’s expense,
to audit, examine and make copies of or extracts from the books and records of Manager (the
“Audit Right”). The Board may exercise the Audit Right through such auditors as the Board
may determine in its sole discretion. The Board shall (i) exercise the Audit Right only upon
reasonable notice to Manager (which notice could be as short as one business day) and (ii) use
reasonable efforts to conduct the Audit Right in such a manner as to minimize the inconvenience and
disruption to Manager.

     9.2 Dispute Resolution. The Parties shall use the dispute resolution procedures set
forth in Exhibit B to resolve in good faith any dispute, controversy or claim related to
this Agreement, including any dispute over the payment of indemnification pursuant to the
provisions of Article VI.

ARTICLE X

MISCELLANEOUS PROVISIONS

     10.1 Notices. All notices or advices required or permitted to be given by or pursuant
to this Agreement, shall be given in writing. All such notices and advices shall be (i) delivered
personally, (ii) delivered by facsimile or delivered by U.S. registered or certified mail, return
receipt requested mail, or (iii) delivered for overnight delivery by a nationally recognized
overnight courier service. Such notices and advices shall be deemed to have been given (i) on the
date of delivery if delivered personally or by facsimile, (ii) on the third Business Day following
the date of mailing if mailed by U.S. registered or certified mail, return receipt requested, or
(iii) on the date of receipt if delivered for overnight delivery by a nationally recognized
overnight courier service. All such notices and advices and all other communications related to
this Agreement shall be given as follows:

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     If to EEP:

Ensource Energy Partners LP

7500 San Felipe, Suite 440

Houston, Texas 77063

Telephone: 713-659-1794

Fax: 713-659-1799

     If to Manager:

Ensource Energy Company LLC

7500 San Felipe, Suite 440

Houston, Texas 77063

Attn: President

Telephone: 713-659-1794

Fax: 713-659-1799

or to such other address as the party may have furnished to the other parties in accordance
herewith, except that notice of change of addresses shall be effective only upon receipt.

     10.2 Governing Law. This Agreement shall be subject to, and interpreted by and in
accordance with, the laws (excluding conflict of law provisions) of the State of Delaware.

     10.3 Attorneys’ Fees and Expenses. In any action brought by a Party to enforce the
obligations of the other Party, the prevailing Party shall be entitled to collect from the opposing
Party to such action such Party’s reasonable litigation costs and attorneys’ fees and expenses
(including court costs, reasonable fees of accountants and experts and other expenses incidental to
the litigation).

     10.4 Entire Agreement. This Agreement is the entire Agreement of the Parties
respecting the subject matter hereof. There are no other agreements, representations or
warranties, whether oral or written, respecting the subject matter hereof, and this Agreement
supersedes and replaces any such prior agreements, representations or warranties.

     10.5 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.

     10.6 Further Assurances. In connection with this Agreement, each Party shall execute
and deliver any additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this Agreement.

     10.7 Successors and Assigns. This Agreement may not be assigned by either 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.

     10.8 No Third Party Beneficiaries. Nothing in this Agreement (except as provided in
Article VI) 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.

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     10.9 Relationship of the Parties. Except as provided in Section 3.1, nothing
in this Agreement shall be construed to create a partnership or joint venture.

     10.10 No Waiver. A Party to this Agreement may decide not to require, or fail to
require, full or timely performance of any obligation arising under this Agreement. The decision
not to require, or failure of a Party to require, full or timely performance of any obligation
arising under this Agreement (whether on a single occasion or on multiple occasions) shall not be
deemed a waiver of any such obligation. No such decisions or failures shall give rise to any claim
of estoppel, laches, course of dealing, amendment of this Agreement by course of dealing or other
defense of any nature to any obligation arising hereunder.

     10.11 Amendments. This Agreement may be amended or modified only in a writing signed
by both Parties that specifically references this Agreement.

     10.12 Time of the Essence. Time is of the essence with respect to each obligation
arising under this Agreement.

     10.13 Unenforceability. In the event any provision of this Agreement, or the
application of such provision to any person or set of circumstances, shall be determined to be
invalid, unlawful or unenforceable to any extent for any reason, the remainder of this Agreement,
and the application of such provision to Persons or circumstances other than those as to which it
is determined to be invalid, unlawful or unenforceable, shall not be affected and shall continue to
be enforceable to the fullest extent permitted by law.

     10.14 Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which together shall constitute but a single
agreement.

[SIGNATURES APPEAR ON FOLLOWING PAGE]

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     IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly adopted by them as of
the date set forth above.

	 	 	 	 	 
	 	 	“MANAGER”
	 
	 	 	 	 
	 	 	ENSOURCE ENERGY COMPANY LLC
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 

	 	Date:	 	 
	 

	 	 	 	 

	 	 	 	 	 	 	 
	 	 	“EEP”
	 
	 	 	 	 	 	 
	 	 	ENSOURCE ENERGY PARTNERS LP
	 
	 	 	 	 	 	 
	 	 		By:	 Ensource Energy Company LLC
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Date:	 	 
	 

	 	 	 	 	 	 

 

 

EXHIBIT A

Manager’s Insurance

     Manager shall at all times, during the term of this Agreement, procure and maintain with
responsible insurance companies, the following minimum types and coverages of insurance, and shall
name as an additional insured (other than with respect to worker’s compensation insurance) EEP and
the Fund, together with a full waiver of subrogation against EEP and the Fund with respect thereto:

	1.	 	Workers Compensation Insurance and Employers Liability Insurance in compliance with all
applicable federal and state laws where EEP operates.

	2.	 	Onshore Property Physical Damage Insurance — replacement cost insurance with $7,500
deductible per occurrence. Like kind and quality.

	3.	 	Directors and Officers Liability Insurance with aggregate limit of $10 million, Employment
Practices claims deductible of $75,000, Securities Claims deductible of $150,000, all other
claims deductible of $150,000.

	4.	 	Comprehensive General Liability Insurance with combined single limit of not less than $1
million per occurrence, $2 million in the aggregate and $50,000 deductible. This policy shall
be endorsed to provide coverage for: explosion, collapse and underground damage hazards to
property of others contractual liability, disposal well operations, Louisiana pollutant and
pollutions examples, maritime operations and products and completed operations.

	5.	 	Fidelity insurance with a policy limit of not less than $2.5 million, with a deductible of
not more than $100,000.

EXH-A-1

 

 

EXHIBIT B

Dispute Resolution

1. Mediation. Either Party may initiate non-binding mediation by sending notice in writing
to the other Party identifying the issues in dispute and requesting that they be resolved through
mediation and proposing a neutral mediator. The Party receiving the request for mediation shall
have 7 business days after receipt of the request to accept or reject the mediation request and to
respond to the initiating Party’s suggestion of a mediator.

2. Binding Arbitration.

     (a) Any dispute arising out of or relating to this Agreement, including claims sounding in
contract, tort, statutory or otherwise (a “Dispute”), shall be settled exclusively and
finally by arbitration in accordance with this EXHIBIT B.

     (b) Such arbitration shall be governed by and conducted pursuant to the Commercial Arbitration
Rules of JAMS (collectively, the “Rules”).

     (c) The arbitrator shall permit discovery and rule on matters of confidentiality in accordance
with Delaware law unless otherwise provided in the Rules.

     (d) All arbitration proceedings hereunder shall be conducted in Houston, Texas, San Francisco,
California or such other location as the parties to such Dispute shall mutually agree.

     (e) All arbitration proceedings hereunder shall be before one arbitrator, which arbitrator
will be a retired Texas or California state court judge or a retired Federal district court judge.

     (f) In deciding the substance of the Dispute, the arbitrator shall refer to the substantive
laws of the State of Delaware for guidance (excluding choice-of-law principles that might call for
the application of the laws of another jurisdiction).

     (g) The arbitrator shall conduct an initial hearing as soon as reasonably practicable, and
render a final decision completely disposing of the Dispute that is the subject of such proceedings
as soon as reasonably practicable but in no event later than 15 days after the final hearing.

     (h) Notwithstanding any other provision in this Agreement to the contrary, the arbitrator
shall have absolutely no authority to award consequential, incidental, special, treble, exemplary
or punitive damages of any type under any circumstances regardless of whether such damages may be
available under Delaware law, or any other laws, or under the Rules.

     (i) The parties shall request that final decision of the arbitrator be in writing and set
forth the reasons for such final decision, and if the arbitrator awards monetary damages to a
party, contain a certification by the arbitrator that it has not included any consequential,
incidental, special, treble, exemplary or punitive damages. To the fullest extent permitted by
law, the arbitration proceeding and the arbitrator’s decision and award shall be maintained in
confidence

EXH-B-1

 

 

by the parties and the parties shall instruct the arbitrator to likewise maintain such matters
in confidence.

     (j) The fees and expenses of the arbitrator shall be borne equally by the parties, but the
decision of the arbitrator may include such award of the arbitrator’s expenses and of other costs.

     (k) The decision and award of the arbitrator shall be binding and final and nonappealable to
the maximum extent permitted by law, and judgment thereon may be entered in a court of competent
jurisdiction and enforced by any party as a final judgment of such court.

EXH-B-2

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