EXHIBIT 4(b)
AMENDED AND RESTATED CERTIFICATE
AND
AGREEMENT OF LIMITED PARTNERSHIP
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #5 LTD.
TABLE OF CONTENTS
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SECTION NO. DESCRIPTION PAGE
I. FORMATION
1.01 Formation 1
1.02 Certificate of Limited
Partnership 1
1.03 Name, Principal Office
and Residence 1
1.04 Purpose 1
II. DEFINITION OF TERMS
2.01 Definitions 1
III. SUBSCRIPTIONS AND FURTHER
CAPITAL CONTRIBUTIONS
3.01 Designation of Managing
General Partner and
Participants 7
3.02 Participants 7
3.03 Subscriptions to the
Partnership 7
3.04 Capital Contributions 8
3.05 Payment of Subscriptions
9
3.06 Partnership Funds 9
IV. CONDUCT OF OPERATIONS
4.01 Acquisition of Leases 10
4.02 Conduct of Operations 11
4.03 General Rights and
Obligations of the
Participants and
Restricted and
Prohibited Transactions
14
4.04 Designation,
Compensation and
Removal
of Managing General
Partner and Removal of
Operator 20
4.05 Indemnification and
Exoneration 21
4.06 Other Activities 22
V. PARTICIPATION IN COSTS AND
REVENUES, CAPITAL ACCOUNTS,
ELECTIONS AND DISTRIBUTIONS
5.01 Participation in Costs
and Revenues 23
5.02 Capital Accounts and
Allocations
Thereto 24
5.03 Allocation of Income,
Deductions and
Credits 25
5.04 Elections 26
5.05 Distributions 26
VI. TRANSFER OF INTERESTS
6.01 Transferability 27
6.02 Special Restrictions on
Transfers 28
6.03 Right of Managing
General Partner to
Hypothecate and/or
Withdraw Its Interests
28
6.04 Repurchase Obligation 29
VII. DURATION, DISSOLUTION, AND
WINDING
UP
7.01 Duration 30
7.02 Dissolution and Winding
Up 30
VIII. MISCELLANEOUS PROVISIONS
8.01 Notices 31
8.02 Time 31
8.03 Applicable Law 31
8.04 Agreement in Counterparts
31
8.05 Amendment 31
8.06 Additional Partners 31
8.07 Legal Effect 32
EXHIBITS
EXHIBIT (I-A) - Managing General Partner Signature Page
EXHIBIT (I-B) - Subscription Agreement
EXHIBIT (II) - Drilling and Operating Agreement
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AMENDED AND RESTATED CERTIFICATE AND
AGREEMENT OF LIMITED PARTNERSHIP
ATLAS-ENERGY FOR THE NINETIES-PUBLIC #5 LTD.
THIS AMENDED AND RESTATED CERTIFICATE AND AGREEMENT OF LIMITED
PARTNERSHIP ("AGREEMENT"), amending and restating the original
Certificate of Limited Partnership, is made and entered into as of
December 31, 1996, by and among Atlas Resources, Inc., hereinafter
referred to as "Atlas" or the "Managing General Partner", and the
remaining parties from time to time signing a Subscription Agreement for
Limited Partner Units, such parties hereinafter sometimes referred to as
"Limited Partners," or for Investor General Partner Units, such parties
hereinafter sometimes referred to as "Investor General Partners".
ARTICLE I
FORMATION
1.01. FORMATION. The parties hereto form a limited partnership pursuant
to the Pennsylvania Revised Uniform Limited Partnership Act, upon the
terms and conditions set forth herein.
1.02. CERTIFICATE OF LIMITED PARTNERSHIP. This document shall constitute
not only the agreement among the parties hereto, but also shall
constitute the Amended and Restated Certificate and Agreement of Limited
Partnership of the Partnership and shall be filed or recorded in such
public offices as is required under applicable law or deemed advisable in
the discretion of the Managing General Partner. Amendments to the
certificate of limited partnership shall be filed or recorded in such
public offices as required under applicable law or deemed advisable in
the discretion of the Managing General Partner.
1.03. NAME, PRINCIPAL OFFICE AND RESIDENCE. The name of the Partnership is
Atlas-Energy for the Nineties-Public #5 Ltd. The residence of Atlas shall
be its principal place of business at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, which shall also serve as the principal place of
business of the Partnership. The residence of each Participant shall be
as set forth on the Subscription Agreement executed by each such party.
All such addresses shall be subject to change upon notice to the parties.
The name and address of the agent for service of process shall be Mr.
J.R. O'Mara at Atlas Resources, Inc., ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
1.04. PURPOSE. The Partnership shall engage in all phases of the oil
and gas business, including, without limitation, exploration for,
development and production of oil and gas upon the terms and conditions
hereinafter set forth and any other proper purpose under the Pennsylvania
Revised Uniform Limited Partnership Act. The Managing General Partner may
not, without the affirmative vote of Participants whose Agreed
Subscriptions equal a majority of the Partnership Subscription, change
the investment and business purpose of the Partnership or cause the
Partnership to engage in activities outside the stated business purposes
of the Partnership through joint ventures with other entities. No
operations of the Partnership shall be commenced until the receipt of the
minimum Partnership Subscription set forth in .3.02(d) and the Offering
Termination Date.
ARTICLE II
DEFINITION OF TERMS
2.01. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings hereinafter set forth:
1. "Administrative Costs" shall mean all customary and routine
expenses incurred by the Sponsor for the conduct of Partnership
administration, including: legal, finance, accounting,
secretarial, travel, office rent, telephone, data processing and
other items of a similar nature. No Administrative Costs charged
shall be duplicated under any other category of expense or cost.
No portion of the salaries, benefits, compensation or
remuneration of controlling persons of Atlas will be reimbursed
by the Partnership as Administrative Costs. Controlling persons
include directors, executive officers and those holding five
percent or more equity interest in the Managing General Partner
or a person having power to direct or cause the direction of the
Managing General Partner, whether through the ownership of voting
securities, by contract, or otherwise.
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2. "Administrator" shall mean the official or agency administering
the securities laws of a state.
3. "AEGH" shall mean AEG Holdings, Inc., a Pennsylvania corporation
whose principal executive offices are located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
4. "Affiliate" shall mean with respect to a specific person (a) any
person directly or indirectly owning, controlling, or holding
with power to vote 10 per cent or more of the outstanding voting
securities of such specified person; (b) any person 10 per cent
or more of whose outstanding voting securities are directly or
indirectly owned, controlled, or held with power to vote, by such
specified person; (c) any person directly or indirectly
controlling, controlled by, or under common control with such
specified person; (d) any officer, director, trustee or partner
of such specified person; and (e) if such specified person is an
officer, director, trustee or partner, any person for which such
person acts in any such capacity.
5. "Agreed Subscription" shall mean that amount so designated on the
Subscription Agreement executed by the Participant, or, in the
case of the Managing General Partner, its subscription under
.3.03(b) and its subsections.
6. "Agreement" shall mean this Amended and Restated Certificate and
Agreement of Limited Partnership, including all exhibits hereto.
7. "Assessments" shall mean additional amounts of capital which may
be mandatorily required of or paid voluntarily by a Participant
beyond his subscription commitment.
8. "Atlas" shall mean Atlas Resources, Inc., a Pennsylvania
corporation, whose principal executive offices are located at ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
9. "Atlas Energy" shall mean Atlas Energy Group, Inc., an Ohio
corporation, whose principal executive offices are located at ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
10. "Capital Account" or "account" shall mean the account established
for each party hereto, maintained as provided in .5.02 and its
subsections.
11. "Capital Contribution" shall mean the amount agreed to be
contributed to the Partnership by a party pursuant to ..3.04 and
3.05 and their subsections.
12. "Carried Interest" shall mean an equity interest in the
Partnership issued to a Person without consideration, in the form
of cash or tangible property, in an amount proportionately
equivalent to that received from the Participants.
13. "Code" shall mean the Internal Revenue Code of 1986, as amended.
14. "Cost", when used with respect to the sale of property to the
Partnership, shall mean (a) the sum of the prices paid by the
seller to an unaffiliated person for such property, including
bonuses; (b) title insurance or examination costs, brokers'
commissions, filing fees, recording costs, transfer taxes, if
any, and like charges in connection with the acquisition of such
property; (c) a pro rata portion of the seller's actual necessary
and reasonable expenses for seismic and geophysical services; and
(d) rentals and ad valorem taxes paid by the seller with respect
to such property to the date of its transfer to the buyer,
interest and points actually incurred on funds used to acquire or
maintain such property, and such portion of the seller's
reasonable, necessary and actual expenses for geological,
engineering, drafting, accounting, legal and other like services
allocated to the property cost in conformity with generally
accepted accounting principles and industry standards, except for
expenses in connection with the past drilling of ▇▇▇▇▇ which are
not producers of sufficient quantities of oil or gas to make
commercially reasonable their continued operations, and provided
that the expenses enumerated in this subsection (d) hereof shall
have been incurred not more than 36 months prior to the purchase
by the Partnership. When used with respect to services, "cost"
shall mean the reasonable, necessary and actual expense incurred
by the seller on behalf of the Partnership in providing such
services, determined in accordance with generally accepted
accounting principles. As used elsewhere, "cost" shall mean the
price paid by the seller in an arm's-length transaction.
15. "Development Well" shall mean a well drilled within the proved
area of an oil or gas reservoir to the depth of a stratigraphic
Horizon known to be productive.
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16. "Direct Costs" shall mean all actual and necessary costs directly
incurred for the benefit of the Partnership and generally
attributable to the goods and services provided to the
Partnership by parties other than the Sponsor or its Affiliates.
Direct Costs shall not include any cost otherwise classified as
Organization and Offering Costs, Administrative Costs, Intangible
Drilling Costs, Tangible Costs, Operating Costs or costs related
to the Leases. Direct Costs may include the cost of services
provided by the Sponsor or its Affiliates if such services are
provided pursuant to written contracts and in compliance with
.4.03(d)(7).
17. "Distribution Interest" shall mean an undivided interest in the
assets of the Partnership after payments to creditors of the
Partnership or the creation of a reasonable reserve therefor, in
the ratio the positive balance of a party's Capital Account bears
to the aggregate positive balance of the Capital Accounts of all
of the parties determined after taking into account all Capital
Account adjustments for the taxable year during which liquidation
occurs (other than those made pursuant to liquidating
distributions or restoration of deficit Capital Account
balances); provided, however, after the Capital Accounts of all
of the parties have been reduced to zero, such interest in the
remaining assets of the Partnership shall equal a party's
interest in the related revenues of the Partnership as set forth
in .5.01 and its subsections of this Agreement.
18. "Drilling and Operating Agreement" shall mean the proposed
Drilling and Operating Agreement between Atlas, Atlas Energy or
Atlas Energy Corporation as Operator, and the Partnership as
Developer, a copy of the proposed form of which is attached
hereto as Exhibit (II).
19. "Exploratory Well" shall mean a well drilled to find commercially
productive hydrocarbons in an unproved area, to find a new
commercially productive Horizon in a field previously found to be
productive of hydrocarbons at another Horizon, or to
significantly extend a known prospect.
20. "Farmout" shall mean an agreement whereby the owner of the
leasehold or Working Interest agrees to assign his interest in
certain specific acreage to the assignees, retaining some
interest such as an Overriding Royalty Interest, an oil and gas
payment, offset acreage or other type of interest, subject to the
drilling of one or more specific ▇▇▇▇▇ or other performance as a
condition of the assignment.
21. "Final Terminating Event" shall mean any one of the following:
(i) the expiration of the fixed term of the Partnership; (ii) the
giving of notice to the Participants by the Managing General
Partner of its election to terminate the affairs of the
Partnership; (iii) the giving of notice by the Participants to
the Managing General Partner of their similar election through
the affirmative vote of Participants whose Agreed Subscriptions
equal a majority of the Partnership Subscription; or (iv) the
termination of the Partnership under .708(b)(1)(A) of the Code or
the Partnership ceases to be a going concern.
22. "Horizon" shall mean a zone of a particular formation; that part
of a formation of sufficient porosity and permeability to form a
petroleum reservoir.
23. "Independent Expert" shall mean a person with no material
relationship to the Sponsor or its Affiliates who is qualified
and who is in the business of rendering opinions regarding the
value of oil and gas properties based upon the evaluation of all
pertinent economic, financial, geologic and engineering
information available to the Sponsor or its Affiliates.
24. "Intangible Drilling Costs"or "Non-Capital Expenditures" shall
mean those expenditures associated with property acquisition and
the drilling and completion of oil and gas ▇▇▇▇▇ that under
present law are generally accepted as fully deductible currently
for federal income tax purposes; and includes all expenditures
made with respect to any well prior to the establishment of
production in commercial quantities for wages, fuel, repairs,
hauling, supplies and other costs and expenses incident to and
necessary for the drilling of such well and the preparation
thereof for the production of oil or gas, that are currently
deductible pursuant to Section 263(c) of the Code and Treasury
Reg. Section 1.612-4, which are generally termed "intangible
drilling and development costs," including the expense of
plugging and abandoning any well prior to a completion attempt.
25. "Investor General Partners" shall mean the persons signing the
Subscription Agreement as Investor General Partners and the
Managing General Partner to the extent of any optional
subscription under .3.03(b)(2). All Investor General Partners
shall be of the same class and have the same rights.
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26. "Landowner's Royalty Interest" shall mean an interest in
production, or the proceeds therefrom, to be received free and
clear of all costs of development, operation, or maintenance,
reserved by a landowner upon the creation of an oil and gas
Lease.
27. "Leases" shall mean full or partial interests in oil and gas
leases, oil and gas mineral rights, fee rights, licenses,
concessions, or other rights under which the holder is entitled
to explore for and produce oil and/or gas, and further includes
any contractual rights to acquire any such interest.
28. "Limited Partners" shall mean the persons signing the
Subscription Agreement as Limited Partners, the Managing General
Partner to the extent of any optional subscription under
.3.03(b)(2), the Investor General Partners upon the conversion of
their Investor General Partner Units to Limited Partner interests
pursuant to .6.01(c), and any other persons who are admitted to
the Partnership as additional or substituted Limited Partners.
Except as provided in .3.05(b), with respect to the required
additional Capital Contributions of Investor General Partners,
all Limited Partners shall be of the same class and have the same
rights.
29. "Managing General Partner" shall mean Atlas Resources, Inc. or
any Person admitted to the Partnership as a general partner other
than as an Investor General Partner pursuant to this Agreement
who is designated to exclusively supervise and manage the
operations of the Partnership.
30. "Managing General Partner Signature Page" shall mean an execution
and subscription instrument in the form attached as Exhibit (I-A)
to this Agreement, which is incorporated herein by reference.
31. "Offering Termination Date" shall mean the date after the minimum
Partnership Subscription has been received on which the Managing
General Partner determines, in its sole discretion, the
Partnership's subscription period is closed and the acceptance of
subscriptions ceases, which shall not be later than December 31,
1996.
32. "Operating Costs" shall mean expenditures made and costs incurred
in producing and marketing oil or gas from completed ▇▇▇▇▇,
including, in addition to labor, fuel, repairs, hauling,
materials, supplies, utility charges and other costs incident to
or therefrom, ad valorem and severance taxes, insurance and
casualty loss expense, and compensation to well operators or
others for services rendered in conducting such operations.
Subject to the foregoing, Operating Costs also include reworking,
workover, subsequent equipping and similar expenses relating to
any well.
33. "Operator" shall mean Atlas, as operator of Partnership ▇▇▇▇▇ in
Pennsylvania, Atlas Energy as operator of Partnership ▇▇▇▇▇ in
Ohio and Atlas Energy Corporation as Operator of Partnership
▇▇▇▇▇ in West Virginia.
34. "Organization and Offering Costs" shall mean all costs of
organizing and selling the offering including, but not limited
to, total underwriting and brokerage discounts and commissions
(including fees of the underwriters' attorneys), expenses for
printing, engraving, mailing, salaries of employees while engaged
in sales activities, charges of transfer agents, registrars,
trustees, escrow holders, depositaries, engineers and other
experts, expenses of qualification of the sale of the securities
under federal and state law, including taxes and fees,
accountants' and attorneys' fees and other front-end fees.
35. "Overriding Royalty Interest" shall mean an interest in the oil
and gas produced pursuant to a specified oil and gas lease or
leases, or the proceeds from the sale thereof, carved out of the
working interest, to be received free and clear of all costs of
development, operation, or maintenance.
36. "Participants" shall mean the Managing General Partner to the
extent of its optional subscription under .3.03(b)(2); the
Limited Partners, and the Investor General Partners.
37. "Partners" shall mean the Managing General Partner, the Investor
General Partners and the Limited Partners.
38. "Partnership" shall mean Atlas-Energy for the Nineties-Public #5
Ltd., the Pennsylvania limited partnership formed pursuant to
this Agreement.
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39. "Partnership Net Production Revenues" shall mean gross revenues
after deduction of the related Operating Costs, Direct Costs,
Administrative Costs and all other Partnership costs not
specifically allocated.
40. "Partnership Subscription" shall mean the aggregate Agreed
Subscriptions of the parties to this Agreement; provided,
however, with respect to Participant voting rights under this
Agreement, the term "Partnership Subscription" shall be deemed
not to include the Managing General Partner's required
subscription under .3.03(b)(1).
41. "Partnership Well" shall mean a well, some portion of the
revenues from which is received by the Partnership.
42. "Person" shall mean a natural person, partnership, corporation,
association, trust or other legal entity.
43. "Program" shall mean one or more limited or general partnerships
or other investment vehicles formed, or to be formed, for the
primary purpose of exploring for oil, gas and other hydrocarbon
substances or investing in or holding any property interests
which permit the exploration for or production of hydrocarbons or
the receipt of such production or the proceeds thereof.
44. "Prospect" shall mean an area covering lands which are believed
by the Managing General Partner to contain subsurface structural
or stratigraphic conditions making it susceptible to the
accumulations of hydrocarbons in commercially productive
quantities at one or more Horizons. The area, which may be
different for different Horizons, shall be designated by the
Managing General Partner in writing prior to the conduct of
Partnership operations and shall be enlarged or contracted from
time to time on the basis of subsequently acquired information to
define the anticipated limits of the associated hydrocarbon
reserves and to include all acreage encompassed therein. A
"Prospect" with respect to a particular Horizon may be limited to
the minimum area permitted by state law or local practice,
whichever is applicable, to protect against drainage from
adjacent ▇▇▇▇▇ if the well to be drilled by the Partnership is to
a Horizon containing Proved Reserves. Subject to the foregoing
sentence, with respect to the Clinton/Medina geological formation
in Ohio and Pennsylvania "Prospect"shall be deemed the drilling
or spacing unit.
45. "Proved Reserves" shall mean the estimated quantities of crude
oil, natural gas, and natural gas liquids which geological and
engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing
economic and operating conditions, i.e., prices and costs as of
the date the estimate is made. Prices include consideration of
changes in existing prices provided only by contractual
arrangements, but not on escalations based upon future
conditions.
(i) Reservoirs are considered proved if economic producibility is
supported by either actual production or conclusive formation
test. The area of a reservoir considered proved includes (a)
that portion delineated by drilling and defined by gas-oil
and/or oil-water contacts, if any; and (b) the immediately
adjoining portions not yet drilled, but which can be
reasonably judged as economically productive on the basis of
available geological and engineering data. In the absence of
information on fluid contacts, the lowest known structural
occurrence of hydrocarbons controls the lower proved limit of
the reservoir.
(ii) Reserves which can be produced economically through
application of improved recovery techniques (such as fluid
injection) are included in the "proved" classification when
successful testing by a pilot project, or the operation of an
installed program in the reservoir, provides support for the
engineering analysis on which the project or program was
based.
(iii) Estimates of proved reserves do not include the following:
(a) oil that may become available from known reservoirs but
is classified separately as "indicated additional reserves";
(b) crude oil, natural gas, and natural gas liquids, the
recovery of which is subject to reasonable doubt because of
uncertainty as to geology, reservoir characteristics, or
economic factors; (c) crude oil, natural gas, and natural gas
liquids, that may occur in undrilled prospects; and (d) crude
oil, natural gas, and natural gas liquids, that may be
recovered from oil shales, coal, gilsonite and other such
sources.
46. "Proved Developed Oil and Gas Reserves" shall mean reserves that
can be expected to be recovered through existing ▇▇▇▇▇ with
existing equipment and operating methods. Additional oil and gas
expected to be obtained through the application of fluid
injection or other improved recovery techniques for supplementing
the natural forces and
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Pg.33
mechanisms of primary recovery should be
included as "proved developed reserves" only after testing by a
pilot project or after the operation of an installed program has
confirmed through production response that increased recovery
will be achieved.
47. "Proved Undeveloped Reserves" shall mean reserves that are
expected to be recovered from new ▇▇▇▇▇ on undrilled acreage, or
from existing ▇▇▇▇▇ where a relatively major expenditure is
required for recompletion. Reserves on undrilled acreage shall be
limited to those drilling units offsetting productive units that
are reasonably certain of production when drilled. Proved
reserves for other undrilled units can be claimed only where it
can be demonstrated with certainty that there is continuity of
production from the existing productive formation. Under no
circumstances should estimates for proved undeveloped reserves be
attributable to any acreage for which an application of fluid
injection or other improved recovery technique is contemplated,
unless such techniques have been proved effective by actual tests
in the area and in the same reservoir.
48. "Roll-Up" shall mean a transaction involving the acquisition,
merger, conversion or consolidation, either directly or
indirectly, of the Partnership and the issuance of securities of
a Roll-Up Entity. Such term does not include: (a) a transaction
involving securities of the Partnership that have been listed for
at least twelve months on a national exchange or traded through
the National Association of Securities Dealers Automated
Quotation National Market System; or (b) a transaction involving
the conversion to corporate, trust or association form of only
the Partnership if, as a consequence of the transaction, there
will be no significant adverse change in any of the following:
voting rights; the term of existence of the Partnership; the
Managing General Partner's compensation; and the Partnership's
investment objectives.
49. "Roll-Up Entity" shall mean a partnership, trust, corporation or
other entity that would be created or survive after the
successful completion of a proposed roll-up transaction.
50. "Sales Commissions" shall mean all underwriting and brokerage
discounts and commissions incurred in the sale of Units in the
Partnership payable to registered broker-dealers, excluding
reimbursement for bona fide accountable due diligence expenses
and wholesaling fees.
51. "Sponsor" shall mean any person directly or indirectly
instrumental in organizing, wholly or in part, a program or any
person who will manage or is entitled to manage or participate in
the management or control of a program. "Sponsor" includes the
managing and controlling general partner(s) and any other person
who actually controls or selects the person who controls 25% or
more of the exploratory, development or producing activities of
the program, or any segment thereof, even if that person has not
entered into a contract at the time of formation of the program.
"Sponsor" does not include wholly independent third parties such
as attorneys, accountants, and underwriters whose only
compensation is for professional services rendered in connection
with the offering of units. Whenever the context so requires, the
term "sponsor" shall be deemed to include its affiliates.
52. "Subscription Agreement" shall mean an execution and subscription
instrument in the form attached as Exhibit (I-B) to this
Agreement, which is incorporated herein by reference.
53. "Tangible Costs"or "Capital Expenditures" shall mean those costs
associated with the drilling and completion of oil and gas ▇▇▇▇▇
which are generally accepted as capital expenditures pursuant to
the provisions of the Internal Revenue Code; and includes all
costs of equipment, parts and items of hardware used in drilling
and completing a well, and those items necessary to deliver
acceptable oil and gas production to purchasers to the extent
installed downstream from the wellhead of any well and which are
required to be capitalized pursuant to applicable provisions of
the Code and regulations promulgated thereunder.
54. "Tax Matters Partner" shall mean the Managing General Partner.
55. "Units" or "Units of Participation" shall mean the Limited
Partner interests and the Investor General Partner interests
purchased by Participants in the Partnership under the provisions
of .3.03 and its subsections.
56. "Working Interest" shall mean an interest in an oil and gas
leasehold which is subject to some portion of the Cost of
development, operation, or maintenance.
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ARTICLE III
SUBSCRIPTIONS AND FURTHER CAPITAL CONTRIBUTIONS
3.01. DESIGNATION OF MANAGING GENERAL PARTNER AND PARTICIPANTS. Atlas
shall serve as Managing General Partner of the Partnership. Atlas shall
further serve as a Participant to the extent of any subscription made by
it pursuant to .3.03(b)(2). Limited Partners and Investor General
Partners, including Affiliates of the Managing General Partner, shall
serve as Participants; and except as provided under the Pennsylvania
Revised Uniform Limited Partnership Act, the Limited Partners shall not
be bound by the obligations of the Partnership.
3.02. PARTICIPANTS.
3.02(a). LIMITED PARTNER AT FORMATION. Atlas Energy Group, Inc., as
Original Limited Partner, has acquired one Unit and has made a Capital
Contribution of $100. Upon the admission of Limited Partners and
Investor General Partners pursuant to .3.02(c) below, the Partnership
shall return to such Original Limited Partner its Capital Contribution
and shall reacquire its Unit and such Original Limited Partner shall
cease to be a Limited Partner in the Partnership with respect to such
Unit.
3.02(b). OFFERING OF INTERESTS. The Partnership is authorized to admit to
the Partnership at or prior to the Offering Termination Date additional
Limited Partners and Investor General Partners whose Agreed Subscriptions
for Units are accepted by the Managing General Partner if, after the
admission of such additional Limited Partners and Investor General
Partners, the Agreed Subscriptions of all Limited Partners and Investor
General Partners do not exceed the number of Units set forth in
.3.03(c)(1). The Managing General Partner may refuse to admit any person
as a Limited Partner or Investor General Partner for any reason
whatsoever pursuant to .3.03(d).
3.02(c). ADMISSION OF LIMITED PARTNERS AND/OR INVESTOR GENERAL PARTNERS. No
action or consent by the Participants shall be required for the admission
of additional Limited Partners and Investor General Partners pursuant to
.3.02(b). All subscribers' funds shall be held by an independent interest
bearing escrow holder and shall not be released to the Partnership until
the receipt of the minimum Partnership Subscription in .3.03(c)(2).
Thereafter, subscriptions may be paid directly to the Partnership
Account.
3.02(d). MINIMUM CAPITALIZATION AND DURATION OF OFFERING. The offering of
Units shall be terminated not later than the earlier of (i) December 31,
1996; or (ii) at such time as Agreed Subscriptions for the maximum
Partnership Subscription set forth in .3.03(c)(1) shall have been
received and accepted by the Managing General Partner. The offering may
be terminated earlier at the option of the Managing General Partner. If
at the time of termination Agreed Subscriptions for fewer than 100 Units
have been received and accepted, all monies deposited by subscribers
shall be promptly returned to them with the interest earned thereon from
the date such monies were deposited in escrow through the date of refund.
3.03. SUBSCRIPTIONS TO THE PARTNERSHIP.
3.03(a). SUBSCRIPTIONS BY PARTICIPANTS.
3.03(a)(1). AGREED SUBSCRIPTION. A Participant's Agreed Subscription to
the Partnership shall be the amount so designated on his Subscription
Agreement.
3.03(a)(2). SUBSCRIPTION PRICE AND MINIMUM AGREED SUBSCRIPTION. The
subscription price of a Unit in the Partnership shall be $10,000, payable
as set forth herein. The minimum Agreed Subscription per Participant
shall be one Unit ($10,000); however, the Managing General Partner, in
its discretion, may accept one-half Unit ($5,000) subscriptions. Larger
Agreed Subscriptions shall be accepted in $1,000 increments.
3.03(a)(3). EFFECT OF SUBSCRIPTION. Execution of a Subscription Agreement
shall serve as an agreement by such Limited Partner or Investor General
Partner to be bound by each and every term of this Agreement.
3.03(b). SUBSCRIPTIONS BY MANAGING GENERAL PARTNER.
3.03(b)(1). MANAGING GENERAL PARTNER'S REQUIRED SUBSCRIPTION. The Managing
General Partner, as a general partner and not as a Limited Partner or
Investor General Partner, shall contribute to the Partnership the Leases
which will be drilled by the Partnership
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Pg.35
on the terms set forth in
.4.01(a)(3) and shall pay the costs charged to it pursuant to .5.01(a).
Such amounts shall be paid as set forth in .3.05(a).
3.03(b)(2). MANAGING GENERAL PARTNER'S OPTIONAL ADDITIONAL SUBSCRIPTION.
In addition to the Managing General Partner's required subscription under
.3.03(b)(1), the Managing General Partner may subscribe to up to 10% of
the Units on the same basis as a Participant may subscribe to Units under
the provisions of .3.03(a) and its subsections, and, subject to the
limitations on voting rights set forth in .4.03(c)(1), to that extent
shall be deemed a Participant in the Partnership for all purposes under
this Agreement. Notwithstanding the foregoing, broker-dealers and the
Managing General Partner and its officers and directors shall not be
required to pay any Sales Commission, accountable due diligence expense
or wholesaling fee.
3.03(b)(3). EFFECT OF AND EVIDENCING SUBSCRIPTION. The Managing General
Partner has executed a Managing General Partner Signature Page which
evidences the Managing General Partner's required subscription under
.3.03(b)(1) and which may be amended to reflect the amount of any
optional subscription under .3.03(b)(2). Execution of the Managing
General Partner Signature Page serves as an agreement by the Managing
General Partner to be bound by each and every term of this Agreement.
3.03(c). MAXIMUM AND MINIMUM PARTNERSHIP SUBSCRIPTION.
3.03(c)(1). MAXIMUM PARTNERSHIP SUBSCRIPTION. The maximum Partnership
Subscription excluding the Managing General Partner's required
subscription under .3.03(b)(1) may not exceed $7,000,000 (700 Units).
However, if subscriptions for all 700 Units being offered are obtained,
the Managing General Partner, in its sole discretion, may offer not more
than 100 additional Units and increase the maximum aggregate
subscriptions with which the Partnership may be funded to not more than
800 Units ($8,000,000).
3.03(c)(2). MINIMUM PARTNERSHIP SUBSCRIPTION. The minimum Partnership
Subscription shall equal at least $1,000,000 (100 Units). The Managing
General Partner and its Affiliates may purchase up to 10% of the
Partnership Subscription, none of which shall be applied to satisfy the
$1,000,000 minimum.
3.03(d). ACCEPTANCE OF SUBSCRIPTIONS. Acceptance of subscriptions shall
be discretionary with Atlas and Atlas may reject any subscription for any
reason it deems appropriate. A Participant's subscription to the
Partnership and Atlas' acceptance thereof shall be evidenced by the
execution of a Subscription Agreement by the Limited Partner or the
Investor General Partner and by Atlas. Agreed Subscriptions shall be
accepted or rejected by the Partnership within thirty days of their
receipt; if rejected, all funds shall be returned to the subscriber
immediately. The subscriber must be admitted as a Partner in the
Partnership within 150 days after the date on which the Subscription
Agreement is received by the escrow agent. Upon the original sale of
Units, the Participants shall be admitted as Partners not later than
fifteen days after the release from escrow of Participants' funds to the
Partnership, and thereafter Participants shall be admitted into the
Partnership not later than the last day of the calendar month in which
their Agreed Subscriptions were accepted by the Partnership.
3.04. CAPITAL CONTRIBUTIONS.
3.04(a). CAPITAL CONTRIBUTIONS. Each Participant shall make a Capital
Contribution to the Partnership equal to the sum of: (i) the Agreed
Subscription of such Participant; and (ii) in the case of Investor
General Partners, but not the Limited Partners, the additional Capital
Contributions required in .3.05(b). Participants shall not be required to
restore any deficit balances in their Capital Accounts except as set
forth in .5.03(h).
3.04(b). ADDITIONAL MANAGING GENERAL PARTNER CAPITAL CONTRIBUTIONS.
3.04(b)(1). ADDITIONAL CAPITAL CONTRIBUTIONS OF THE MANAGING GENERAL
PARTNER. In addition to any Capital Contribution required of the
Managing General Partner as provided in .3.03(b)(1) and any optional
Capital Contribution as a Participant as provided in .3.03(b)(2), the
Managing General Partner shall further contribute cash sufficient to pay
all costs charged to it under this Agreement to the extent such costs
exceed: (i) its Capital Contribution pursuant to .3.03(b); and (ii) its
share of undistributed revenues. In any event, the Managing General
Partner's aggregate Capital Contributions to the Partnership (including
Leases contributed pursuant to .3.03(b)(1)) shall not be less than 15% of
all Capital Contributions to the Partnership. Any payments by the
Managing General Partner in excess of the costs set forth in .3.03(b)(1)
shall be used to pay Partnership costs which would otherwise be charged
to the Participants. Such Capital Contributions shall be paid by the
Managing General Partner at the time such costs are required to be paid
by the Partnership, but, in no event, later than December 31, 1997. Upon
liquidation of the Partnership or its interest in the Partnership, the
Managing General Partner shall contribute to the Partnership any deficit
balance in its Capital Account, determined
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Pg.36
after taking into account all
adjustments for the Partnership's taxable year during which such
liquidation occurs (other than adjustments made pursuant to this
requirement), by the end of the taxable year in which its interest in the
Partnership is liquidated (or, if later, within 90 days after the date of
such liquidation), to be paid to creditors of the Partnership or
distributed to the other parties hereto in accordance with .7.02 upon
liquidation of the Partnership. The Managing General Partner shall
maintain a minimum Capital Account balance equal to 1% of total positive
Capital Account balances for the Partnership.
3.04(b)(2). INTEREST FOR CONTRIBUTIONS. The interest of the Managing
General Partner in the capital and revenues of the Partnership is in
consideration for, and is the only consideration for, its Capital
Contribution to the Partnership.
3.04(c). LIMITATION ON AMOUNT OF REQUIRED CAPITAL CONTRIBUTIONS OF LIMITED
PARTNERS. In no event shall a Limited Partner be required to make
contributions to the Partnership greater than his required Capital
Contribution under .3.04(a).
3.05. PAYMENT OF SUBSCRIPTIONS.
3.05(a). MANAGING GENERAL PARTNER'S SUBSCRIPTIONS. The Managing General
Partner shall contribute to the Partnership the Leases pursuant to
.3.03(b)(1) and pay the costs charged to it when incurred by the
Partnership, subject to .3.04(b)(1). Any optional subscription under
.3.03(b)(2) shall be paid by the Managing General Partner in the same
manner as provided for the payment of Participant subscriptions under
.3.05(b).
3.05(b). PARTICIPANT SUBSCRIPTIONS AND ADDITIONAL CAPITAL CONTRIBUTIONS OF
THE INVESTOR GENERAL PARTNERS. A Participant shall pay his Agreed
Subscription 100% in cash at the time of subscribing. A Participant shall
receive interest on his Agreed Subscription up until the Offering
Termination Date.
Investor General Partners are obligated to make Capital Contributions to
the Partnership when called by the Managing General Partner, in addition
to their Agreed Subscriptions, for their pro rata share of any
Partnership obligations and liabilities which are recourse to the
Investor General Partners and are represented by their ownership of Units
prior to the conversion of Investor General Units to Limited Partner
interests pursuant to .6.01(c). The failure of an Investor General
Partner to timely make a required additional Capital Contribution
pursuant to this section results in his personal liability to the other
Investor General Partners for the amount in default. The remaining
Investor General Partners, pro rata, must pay such defaulting Investor
General Partner's share of Partnership liabilities and obligations. In
that event, the remaining Investor General Partners shall have a first
and preferred lien on the defaulting Investor General Partner's interest
in the Partnership to secure payment of the amount in default plus
interest at the legal rate; shall be entitled to receive 100% of the
defaulting Investor General Partner's cash distributions directly from
the Partnership until the amount in default is recovered in full plus
interest at the legal rate; and may commence legal action to collect the
amount due plus interest at the legal rate.
3.06. PARTNERSHIP FUNDS.
3.06(a). FIDUCIARY DUTY. The Managing General Partner shall have a
fiduciary responsibility for the safekeeping and use of all funds and
assets of the Partnership, whether or not in the Managing General
Partner's possession or control, and the Managing General Partner shall
not employ, or permit another to employ, such funds and assets in any
manner except for the exclusive benefit of the Partnership. Neither this
Agreement nor any other agreement between the Sponsor and the Partnership
shall contractually limit any fiduciary duty owed to the Participants by
the Sponsor under applicable law, except as provided in ..4.01, 4.02,
4.04, 4.05 and 4.06 of this Agreement.
3.06(b). SPECIAL ACCOUNT AFTER THE RECEIPT OF THE MINIMUM PARTNERSHIP
SUBSCRIPTION. Following the receipt of the minimum Partnership
Subscription, the funds of the Partnership shall be held in a separate
interest-bearing account maintained for the Partnership and shall not be
commingled with funds of any other entity.
3.06(c). INVESTMENT. Partnership funds may not be invested in the
securities of another person except in the following instances: (1)
investments in Working Interests or undivided Lease interests made in the
ordinary course of the Partnership's business; (2) temporary investments
made as set forth below; (3) multi-tier arrangements meeting the
requirements of .4.03(d)(15); (4) investments involving less than 5% of
the Partnership Subscription which are a necessary and incidental part of
a property acquisition transaction; and (5) investments in entities
established solely to limit the Partnership's liabilities associated with
the ownership or operation of property or equipment, provided, in such
instances duplicative fees and expenses shall be prohibited. After the
Offering Termination Date and until proceeds from the public offering are
invested in the Partnership's operations, such proceeds may be
temporarily invested in income producing short-term, highly liquid
investments, where there is appropriate safety of principal, such as U.S.
Treasury Bills.
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Pg.37
ARTICLE IV
CONDUCT OF OPERATIONS
4.01. ACQUISITION OF LEASES.
4.01(a). ASSIGNMENT TO PARTNERSHIP.
4.01(a)(1). GENERAL. The Managing General Partner shall select, acquire
and assign or cause to have assigned to the Partnership full or partial
interests in Leases, by any method customary in the oil and gas industry,
subject to the terms and conditions set forth below. The Partnership
shall acquire only Leases reasonably expected to meet the stated purposes
of the Partnership. No Leases shall be acquired for the purpose of a
subsequent sale unless the acquisition is made after a well has been
drilled to a depth sufficient to indicate that such an acquisition would
be in the Partnership's best interest.
4.01(a)(2). FEDERAL AND STATE LEASES. The Partnership is authorized to
acquire Leases on federal and state lands.
4.01(a)(3). TERMS AND OBLIGATIONS. Subject to the provisions of .4.03(d)
and its subsections, such acquisitions of Leases or other property may be
made under any terms and obligations, including any limitations as to the
Horizons to be assigned to the Partnership, and subject to any burdens,
as the Managing General Partner deems necessary in its sole discretion.
Provided, however, that any Lease acquired from the Managing General
Partner, the Operator or their Affiliates shall be credited towards the
Managing General Partner's required Capital Contribution set forth in
.3.03(b)(1) at the Cost of such Lease, unless the Managing General
Partner shall have cause to believe that Cost is materially more than the
market value of such property, in which case the credit for such
contribution will be made at a price not in excess of the fair market
value. A determination of fair market value must be supported by an
appraisal from an Independent Expert. Such opinion and any associated
supporting information must be maintained in the Partnership's records
for six years. To the extent the Partnership does not acquire a full
interest in a Lease from the Managing General Partner, the remainder of
the interest in such Lease may be held by the Managing General Partner
which may either retain and exploit it for its own account or sell or
otherwise dispose of all or a part of such remaining interest. Profits
from such exploitation and/or disposition shall be for the benefit of the
Managing General Partner to the exclusion of the Partnership.
4.01(a)(4). NO BREACH OF DUTY. Subject to the provisions of .4.03 and
its subsections, acquisition of Leases from the Managing General Partner,
the Operator or their Affiliates shall not be considered a breach of any
obligation owed by the Managing General Partner, the Operator, or their
Affiliates to the Partnership or the Participants.
4.01(b). OVERRIDING ROYALTY INTERESTS. Neither the Managing General
Partner nor any Affiliate shall acquire or retain any Overriding Royalty
Interest on the Lease interests acquired by the Partnership.
4.01(c). TITLE AND NOMINEE ARRANGEMENTS.
4.01(c)(1). LEGAL TITLE. Legal title to all Leases acquired by the
Partnership shall be held on a permanent basis in the name of the
Partnership. However, Partnership properties may be held temporarily in
the name of the Managing General Partner, the Operator or their
Affiliates or in the name of any nominee designated by the Managing
General Partner to facilitate the acquisition of the properties.
4.01(c)(2). TITLE. The Managing General Partner shall take such steps as
are necessary in its best judgment to render title to the Leases to be
acquired by the Partnership acceptable for the purposes of the
Partnership. No operation shall be commenced on Leases acquired by the
Partnership unless the Managing General Partner is satisfied that
necessary title requirements have been satisfied. The Managing General
Partner shall be free, however, to use its own best judgment in waiving
title requirements and shall not be liable to the Partnership or to the
other parties for any mistakes of judgment; nor shall the Managing
General Partner be deemed to be making any warranties or representations,
express or implied, as to the validity or merchantability of the title to
the Leases assigned to the Partnership or the extent of the interest
covered thereby except as otherwise may be provided in the Drilling and
Operating Agreement.
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Pg.38
4.02. CONDUCT OF OPERATIONS.
4.02(a). IN GENERAL. The Managing General Partner shall establish a
program of operations for the Partnership. Subject to the limitations
contained in Article III of this Agreement concerning the maximum Capital
Contribution which can be required of a Limited Partner, the Managing
General Partner, the Limited Partners and the Investor General Partners
agree to participate in the program so established by the Managing
General Partner.
4.02(b). MANAGEMENT. Subject to any restrictions contained in this
Agreement, the Managing General Partner shall exercise full control over
all operations of the Partnership.
4.02(c). GENERAL POWERS OF THE MANAGING GENERAL PARTNER.
4.02(c)(1). IN GENERAL. Subject to the provisions of .4.03 and its
subsections, and to any authority which may be granted the Operator under
.4.02(c)(3)(b), the Managing General Partner shall have full authority to
do all things deemed necessary or desirable by it in the conduct of the
business of the Partnership. Without limiting the generality of the
foregoing, the Managing General Partner is expressly authorized to engage
in:
(i) the making of all determinations of which Leases, ▇▇▇▇▇ and
operations will be participated in by the Partnership, which
Leases are developed and which Leases are abandoned, or at its
sole discretion, sold or assigned to other parties, including
other investor ventures organized by the Managing General
Partner, the Operator or any of their Affiliates;
(ii) the negotiation and execution on any terms deemed desirable in
its sole discretion of any contracts, conveyances, or other
instruments, considered useful to the conduct of such operations
or the implementation of the powers granted it under this
Agreement, including, without limitation, the making of
agreements for the conduct of operations or the furnishing of
equipment, facilities, supplies and material, services, and
personnel and the exercise of any options, elections, or
decisions under any such agreements;
(iii) the exercise, on behalf of the Partnership or the parties, in
such manner as the Managing General Partner in its sole judgment
deems best, of all rights, elections and options granted or
imposed by any agreement, statute, rule, regulation, or order;
(iv) the making of all decisions concerning the desirability of
payment, and the payment or supervision of the payment, of all
delay rentals and shut-in and minimum or advance royalty
payments;
(v) the selection of full or part-time employees and outside
consultants and contractors and the determination of their
compensation and other terms of employment or hiring;
(vi) the maintenance of such insurance for the benefit of the
Partnership and the parties as it deems necessary, but, subject
to .6.01(c), in no event less in amount or type than the
following: worker's compensation insurance in full compliance
with the laws of the states of Pennsylvania, Ohio and West
Virginia and any other applicable state laws; liability insurance
(including automobile) which has a $1,000,000 combined single
limit for bodily injury and property damage in any one accident
or occurrence and in the aggregate; and such excess liability
insurance as to bodily injury and property damage with combined
limits of $20,000,000, per occurrence or accident and in the
aggregate, which includes $250,000 of seepage, pollution and
contamination insurance which protects and defends the insured
against property damage or bodily injury claims from third
parties (other than a co-owner of the Working Interest) alleging
seepage, pollution or contamination damage resulting from an
accident. Such excess liability insurance shall be in place and
effective no later than the Offering Termination Date and shall
be for the sole benefit of the Partnership and no other Program
in which Atlas serves as Managing General Partner until the
Investor General Partners are converted to Limited Partners, at
which time coverage for the exclusive benefit of the Partnership
will lapse. The Partnership shall continue to enjoy the non-
exclusive benefit of Atlas' $11,000,000 liability insurance on
the same basis as Atlas and its Affiliates, including other
Programs in which Atlas serves as Managing General Partner;
(vii) the use of the funds and revenues of the Partnership, and the
borrowing on behalf of, and the loan of money to, the
Partnership, on any terms it sees fit, for any purpose, including
without limitation the conduct or financing, in whole or in part,
of the drilling and other activities of the Partnership or the
conduct of additional operations, and the repayment of any such
borrowings or loans used initially to finance such operations or
activities;
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Pg.39
(viii) the disposition, hypothecation, sale, exchange, release,
surrender, reassignment or abandonment of any or all assets of
the Partnership (including, without limitation, the Leases,
▇▇▇▇▇, equipment and production therefrom) provided that the sale
of all or substantially all of the assets of the Partnership
shall only be made as provided in .4.03(d)(6);
(ix) the formation of any further limited or general partnership, tax
partnership, joint venture, or other relationship which it deems
desirable with any parties who it, in its sole and absolute
discretion, selects, including any of its Affiliates;
(x) the control of any matters affecting the rights and obligations
of the Partnership, including the employment of attorneys to
advise and otherwise represent the Partnership, the conduct of
litigation and other incurring of legal expense, and the
settlement of claims and litigation;
(xi) the operation of producing ▇▇▇▇▇ drilled on the Leases owned by
the Partnership, or on a Prospect which includes any part of the
Leases;
(xii) the exercise of the rights granted to it under the power of
attorney created pursuant to this Agreement; and
(xiii) the incurring of all costs and the making of all expenditures
in any way related to any of the foregoing.
4.02(c)(2). SCOPE OF POWERS. The Managing General Partner's powers shall
extend to any operation participated in by the Partnership or affecting
its Leases, or other property or assets, irrespective of whether or not
the Managing General Partner is designated operator of such operation by
any outside persons participating therein.
4.02(c)(3). DELEGATION OF AUTHORITY.
4.02(c)(3)(a). IN GENERAL. The Managing General Partner may subcontract
and delegate all or any part of its duties hereunder to any entity chosen
by it, including an entity related to it, and such party shall have the
same powers in the conduct of such duties as would the Managing General
Partner; but such delegation shall not relieve the Managing General
Partner of its responsibilities hereunder.
4.02(c)(3)(b). DELEGATION TO OPERATOR. The Managing General Partner is
specifically authorized to delegate any or all of its duties to the
Operator by executing the Drilling and Operating Agreement, but such
delegation shall not relieve the Managing General Partner of its
responsibilities hereunder. In no event shall any consideration received
for operator services be in excess of the competitive rates or
duplicative of any consideration or reimbursements received pursuant to
this Agreement. The Managing General Partner may not benefit by
interpositioning itself between the Partnership and the actual provider
of operator services.
4.02(c)(4). RELATED PARTY TRANSACTIONS. Subject to the provisions of
.4.03 and its subsections, any transaction which the Managing General
Partner is authorized to enter into on behalf of the Partnership under
the authority granted in this section and its subsections, may be entered
into by the Managing General Partner with itself or with any other
general partner, the Operator or any of their Affiliates.
4.02(d). ADDITIONAL POWERS. In addition to the powers granted the
Managing General Partner under .4.02(c) and its subsections or elsewhere
in this Agreement, the Managing General Partner, where specified, shall
have the following additional express powers.
4.02(d)(1). DRILLING CONTRACTS. Partnership ▇▇▇▇▇ drilled in
Pennsylvania, Ohio, West Virginia and other areas of the Appalachian
Basin may be drilled pursuant to the Drilling and Operating Agreement on
a per-foot basis with Atlas or its Affiliates based on $37.39 per foot
or, with respect to a well which the Partnership elects not to complete,
$20.60 per foot. In no event shall Atlas or its Affiliates, as drilling
contractor, receive a per foot rate which is not competitive with the
rates charged by unaffiliated contractors in the same geographic region.
No turnkey drilling contracts shall be made between the Managing General
Partner or its Affiliates and the Partnership. Neither the Managing
General Partner nor its Affiliates shall profit by drilling in
contravention of its fiduciary obligations to the Partnership. The
Managing General Partner may not benefit by interpositioning itself
between the Partnership and the actual provider of drilling contractor
services.
4.02(d)(2). POWER OF ATTORNEY.
4.02(d)(2)(a). IN GENERAL. Each party hereto hereby makes, constitutes
and appoints the Managing General Partner his true and lawful
attorney-in-fact for him and in his name, place and ▇▇▇▇▇ and for his use
and benefit, from time to time:
1. to create, prepare, complete, execute, file, swear to, deliver,
endorse and record any and all documents, certificates or other
instruments required or necessary to amend this Agreement as
authorized under the terms of this Agreement,
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Pg.40
or to qualify the
Partnership as a limited partnership or partnership in commendam
and to conduct business under the laws of any jurisdiction in
which the Managing General Partner elects to qualify the
Partnership or conduct business; and
2. to create, prepare, complete, execute, file, swear to, deliver,
endorse and record any and all instruments, assignments, security
agreements, financing statements, certificates and other
documents as may be necessary from time to time to implement the
borrowing powers granted under this Agreement.
4.02(d)(2)(b). FURTHER ACTION. Each party hereto hereby authorizes such
attorney-in-fact to take any further action which such attorney-in-fact
shall consider necessary or advisable in connection with any of the
foregoing and acknowledges that the power of attorney granted under this
section is a special power of attorney coupled with an interest and is
irrevocable and shall survive the assignment by a party of the whole or a
portion of his interest in the Partnership; except that where such
assignment is of such party's entire interest in the Partnership and the
purchaser, transferee or assignee thereof, with the consent of the
Managing General Partner, is admitted as a successor Limited Partner or
Investor General Partner, the power of attorney shall survive the
delivery of such assignment for the sole purpose of enabling such
attorney-in-fact to execute, acknowledge and file any such agreement,
certificate, instrument or document necessary to effect such
substitution.
4.02(d)(2)(c). POWER OF ATTORNEY TO OPERATOR. The Managing General
Partner is hereby authorized to grant a Power of Attorney to the Operator
on behalf of the Partnership.
4.02(e). BORROWINGS AND USE OF PARTNERSHIP REVENUES.
4.02(e)(1). POWER TO BORROW OR USE PARTNERSHIP REVENUES. If additional
funds over the Partners' Capital Contributions are needed for Partnership
operations, the Managing General Partner may: (i) use Partnership
revenues allocable to the accounts of the Partners on whose behalf such
Partnership revenues are expended for such purposes; or (ii) the Managing
General Partner and its Affiliates may advance to the Partnership the
funds necessary pursuant to .4.03(d)(8)(b) which borrowings (other than
credit transactions on open account customary in the industry to obtain
goods and services) shall be without recourse to the Investor General
Partners and the Limited Partners except as otherwise provided herein.
Also, the amount that may be borrowed at any one time (other than credit
transactions on open account customary in the industry to obtain goods
and services) shall not exceed an amount equal to 5% of the Partnership
Subscription. Notwithstanding, the Managing General Partner and it
Affiliates shall not be obligated to advance the funds to the
Partnership.
4.02(e)(2). IMPLEMENTATION OF BORROWING PROVISIONS.
4.02(e)(2)(a). INDEMNIFICATION AND HOLD HARMLESS. Each party hereto for
whose account an interest in Partnership assets is mortgaged, pledged or
otherwise encumbered hereby indemnifies and agrees to hold harmless every
other party from any loss resulting from such mortgage, pledge or
encumbrance, limited to the amount of his agreed Capital Contribution.
4.02(e)(2)(b). FORECLOSURE. Should a foreclosure of a mortgage, pledge
or security interest permitted hereunder occur, any revenues, proceeds
and all taxable gain or loss resulting from such foreclosure shall be
allocated entirely to the party for whose account such interest was
pledged; and such party's interest in the remaining revenues of the
Partnership shall be reduced to take into account the foreclosure of the
interests foreclosed.
4.02(f). DESIGNATION OF TAX MATTERS PARTNER. Atlas is hereby designated
the Tax Matters Partner of the Partnership pursuant to .6231(a)(7) of the
Code and is authorized to act in such capacity on behalf of the
Partnership and the Participants and to take such action, including
settlement or litigation, as it in its sole discretion deems to be in the
best interest of the Partnership. Costs incurred by the Tax Matters
Partner shall be considered a Direct Cost of the Partnership. The Tax
Matters Partner shall notify all Participants of any partnership
administrative proceedings commenced by the Internal Revenue Service, and
thereafter shall furnish all Participants periodic reports at least
quarterly on the status of such proceedings. Each Partner agrees as
follows: (1) he will not file the statement described in Section
6224(c)(3)(B) of the Code prohibiting the Managing General Partner as the
Tax Matters Partner for the Partnership from entering into a settlement
on his behalf with respect to partnership items (as such term is defined
in Section 6231(a)(3) of Code) of the Partnership; (2) he will not form
or become and exercise any rights as a member of a group of Partners
having a 5% or greater interest in the profits of the Partnership under
Section 6223(b)(2) of the Code; and (3) the Managing General Partner is
authorized to file a copy of this Agreement (or pertinent portions
hereof) with the Internal Revenue Service pursuant to Section 6224(b) of
the Code if necessary to perfect the waiver of rights under this
Subsection 4.02(f).
4.03. GENERAL RIGHTS AND OBLIGATIONS OF THE PARTICIPANTS AND RESTRICTED AND
PROHIBITED TRANSACTIONS.
4.03(a)(1). LIMITED LIABILITY OF LIMITED PARTNERS. Limited Partners shall
not be bound by the obligations of the Partnership and shall not be
personally liable for any debts of the Partnership or any of the
obligations or losses thereof beyond the amount of their agreed Capital
Contributions, except to the extent such parties also subscribe to the
Partnership as Investor General Partners, or, in the case of Atlas, as
Managing General Partner.
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Pg.41
4.03(a)(2). NO MANAGEMENT AUTHORITY OF PARTICIPANTS. Participants, as
such, shall have no power over the conduct of the affairs of the
Partnership; and no Participant, as such, shall take part in the
management of the business of the Partnership, or have the power to sign
for or to bind the Partnership.
4.03(b). REPORTS AND DISCLOSURES.
(1) Commencing with the 1996 calendar year, the Partnership shall
provide each Participant an annual report within 120 days after
the close of the calendar year, and commencing with the 1997
calendar year, a report within 75 days after the end of the first
six months of its calendar year, containing, except as otherwise
indicated, at least the information set forth below:
(a) Audited financial statements of the Partnership, including a
balance sheet and statements of income, cash flow and
Partners' equity, all of which shall be prepared in
accordance with generally accepted accounting principles and
accompanied by an auditor's report containing an opinion of
an independent public accountant selected by the Managing
General Partner stating that his audit was made in accordance
with generally accepted auditing standards and that in his
opinion such financial statements present fairly the
financial position, results of operations, partners' equity
and cash flows in accordance with generally accepted
accounting principles. Semiannual reports need not be
audited.
(b) A summary itemization, by type and/or classification of the total
fees and compensation including any unaccountable, fixed
payment reimbursements for Administrative Costs and Operating
Costs, paid by the Partnership, or indirectly on behalf of
the Partnership, to the Managing General Partner, the
Operator and their Affiliates. In addition, Participants
shall be provided the percentage that the annual
unaccountable, fixed fee reimbursement for Administrative
Costs bears to annual Partnership revenues.
(c) A description of each Prospect in which the Partnership owns an
interest, including the Cost, location, number of acres under
lease and the Working Interest owned therein by the
Partnership, except succeeding reports need contain only
material changes, if any, regarding such Prospects.
(d) A list of the ▇▇▇▇▇ drilled or abandoned by the Partnership
during the period of the report (indicating whether each of
such ▇▇▇▇▇ has or has not been completed), and a statement of
the Cost of each well completed or abandoned. Justification
shall be included for ▇▇▇▇▇ abandoned after production has
commenced.
(e) A description of all farmins and joint ventures, made during
the period of the report, including the Managing General
Partner's justification for the arrangement and a description
of the material terms.
(f) A schedule reflecting the total Partnership costs, the costs
paid by the Managing General Partner and the costs paid by
the Participants, the total Partnership revenues, the
revenues received or credited to the Managing General Partner
and the revenues received and credited to the Participants
and a reconciliation of such expenses and revenues in
accordance with the provisions of Article V.
(2) The Partnership shall, by March 15 of each year, prepare, or
supervise the preparation of, and transmit to each Partner such
information as may be needed to enable such Partner to file his
federal income tax return, any required state income tax return
and any other reporting or filing requirements imposed by any
governmental agency or authority.
(3) Annually, beginning January 1, 1998, a computation of the total
oil and gas Proved Reserves of the Partnership and the present
worth of such reserves determined using a discount rate of 10%, a
constant price for the oil and basing the price of gas upon the
existing gas contracts shall be provided to each Participant
along with each Participant's interest therein.
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Pg.42
The reserve
computations shall be based upon engineering reports prepared by
the Partnership and reviewed by an Independent Expert. There
shall also be included an estimate of the time required for the
extraction of such reserves and a statement that because of the
time period required to extract such reserves the present value
of revenues to be obtained in the future is less than if
immediately receivable. In addition to the foregoing computation
and required estimate, as soon as possible, and in no event more
than ninety days after the occurrence of an event leading to
reduction of such reserves of the Partnership of 10% or more,
excluding reduction as a result of normal production, sales of
reserves or product price changes, a computation and estimate
shall be sent to each Participant.
(4) The cost of all such reports described in this .4.03(b) shall be
paid by the Partnership as Direct Costs.
(5) The Participants and/or their representatives shall be permitted
access to all records of the Partnership, after adequate notice,
at any reasonable time and may inspect and copy any of them. The
Managing General Partner will provide a copy of this Agreement or
other documents to the Participants after the Partnership's
documents have been filed with the Commonwealth of Pennsylvania
upon request. The Managing General Partner shall maintain and
preserve during the term of the Partnership and for six years
thereafter all accounts, books and other relevant documents,
including a record that a Participant meets the suitability
standards established in connection with an investment in the
Partnership and of fair market value as set forth in .4.01(a)(3).
Notwithstanding the foregoing, the Managing General Partner may
keep logs, well reports and other drilling and operating data
confidential for reasonable periods of time. The Managing General
Partner may release information concerning the operations of the
Partnership to such sources as are customary in the industry or
required by rule, regulation, or order of any regulatory body.
(6) The following provisions apply regarding access to the list of
Participants: (a) an alphabetical list of the names, addresses
and business telephone numbers of the Participants along with the
number of Units held by each of them (the "Participant List")
shall be maintained as a part of the books and records of the
Partnership and shall be available for inspection by any
Participant or its designated agent at the home office of the
Partnership upon the request of the Participant; (b) the
Participant List shall be updated at least quarterly to reflect
changes in the information contained therein; (c) a copy of the
Participant List shall be mailed to any Participant requesting
the Participant List within ten days of the written request. The
copy of the Participant List shall be printed in alphabetical
order, on white paper, and in a readily readable type size (in no
event smaller than 10-point type). A reasonable charge for copy
work shall be charged by the Partnership; (d) the purposes for
which a Participant may request a copy of the Participant List
include, without limitation, matters relating to Participant's
voting rights under this Agreement and the exercise of
Participant's rights under the federal proxy laws; and (e) if the
Managing General Partner neglects or refuses to exhibit, produce,
or mail a copy of the Participant List as requested, the Managing
General Partner shall be liable to any Participant requesting the
list for the costs, including attorneys fees, incurred by that
Participant for compelling the production of the Participant
List, and for actual damages suffered by any Participant by
reason of such refusal or neglect. It shall be a defense that the
actual purpose and reason for the requests for inspection or for
a copy of the Participant List is to secure the list of
Participants or other information for the purpose of selling such
list or information or copies thereof, or of using the same for a
commercial purpose other than in the interest of the applicant as
a Participant relative to the affairs of the Partnership. The
Managing General Partner shall require the Participant requesting
the Participant List to represent in writing that the list was
not requested for a commercial purpose unrelated to the
Participant's interest in the Partnership. The remedies provided
hereunder to Participants requesting copies of the Participant
List are in addition to, and shall not in any way limit, other
remedies available to Participants under federal law, or the laws
of any state.
(7) Concurrently with their transmittal to Participants, and as
required, the Managing General Partner shall file a copy of each
report provided for in this .4.03(b) with the Arkansas Securities
Department, the California Commissioner of Corporations, the
Kentucky Department of Financial Institutions, the Virginia State
Corporation Commission and with the securities commissions of
other states which request the report.
4.03(c). MEETINGS OF PARTICIPANTS. Meetings of the Participants may be
called by the Managing General Partner or by Participants whose Agreed
Subscriptions equal 10% or more of the Partnership Subscription for any
matters for which Participants may vote. Such call for a meeting shall be
deemed to have been made upon receipt by the Managing General Partner of
a written request from holders of the requisite percentage of Agreed
Subscriptions stating the purpose(s) of the meeting. The Managing General
Partner shall deposit in the United States mail within fifteen days after
the receipt of said request, written notice to all Participants of the
meeting and the purpose of such meeting, which shall be held on a date
not less than thirty days nor more than sixty days after the date of the
mailing
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Pg43
of said notice, at a reasonable time and place. Provided,
however, that the date for notice of such a meeting may be extended for a
period of up to sixty days, if in the opinion of the Managing General
Partner such additional time is necessary to permit preparation of proxy
or information statements or other documents required to be delivered in
connection with such meeting by the Securities and Exchange Commission or
other regulatory authorities. Participants shall have the right to vote
in person or by proxy at any meetings of the Participants.
4.03(c)(1). SPECIAL VOTING RIGHTS. At the request of Participants whose
Agreed Subscriptions equal 10% or more of the Partnership Subscription,
the Managing General Partner shall call for a vote by Participants. Each
Unit is entitled to one vote on all matters; each fractional Unit is
entitled to that fraction of one vote equal to the fractional interest in
the Unit. Participants whose Agreed Subscriptions equal a majority of the
Partnership Subscription may, without the concurrence of the Managing
General Partner or its Affiliates, vote to:
(a) amend this Agreement; provided however, any such amendment may
not increase the duties or liabilities of any Participant or the
Managing General Partner or increase or decrease the profit or
loss sharing or required Capital Contribution of any Participant
or the Managing General Partner without the approval of such
Participant or the Managing General Partner. Furthermore, any
such amendment may not affect the classification of Partnership
income and loss for federal income tax purposes without the
unanimous approval of all Participants;
(b) dissolve the Partnership;
(c) remove the Managing General Partner and elect a new Managing General
Partner;
(d) elect a new Managing General Partner if the Managing General Partner
elects to withdraw from the Partnership;
(e) remove the Operator and elect a new Operator;
(f) approve or disapprove the sale of all or substantially all of the
assets of the Partnership; and
(g) cancel any contract for services with the Managing General Partner,
or the Operator or their Affiliates, except services described in
the Prospectus without penalty upon sixty days notice.
With respect to Units owned by the Managing General Partner or its
Affiliates, the Managing General Partner and its Affiliates may not vote
or consent on the matters set forth in (c) or (e) above, or regarding any
transaction between the Partnership and the Managing General Partner or
its Affiliates. In determining the requisite percentage in interest of
Units necessary to approve any Partnership matter on which the Managing
General Partner and its Affiliates may not vote or consent, any Units
owned by the Managing General Partner and its Affiliates shall not be
included.
4.03(c)(2). RESTRICTIONS ON LIMITED PARTNER VOTING RIGHTS. The exercise by
the Limited Partners of the rights granted Participants under .4.03(c),
except for the special voting rights granted Participants under
.4.03(c)(1), shall be subject to the prior legal determination that the
grant or exercise of such powers will not adversely affect the limited
liability of Limited Partners, unless in the opinion of counsel to the
Partnership, such legal determination is not necessary under Pennsylvania
law to maintain the limited liability of the Limited Partners. A legal
determination under this paragraph may be made either pursuant to an
opinion of counsel, such counsel being independent of the Partnership and
selected upon the vote of Limited Partners whose Agreed Subscriptions
equal a majority of the Agreed Subscriptions held by Limited Partners, or
a declaratory judgment issued by a court of competent jurisdiction. The
Investor General Partners may exercise the rights granted to the
Participants whether or not the Limited Partners can participate in such
vote if the Investor General Partners represent the requisite percentage
of the Participants necessary to take such action.
4.03(d). RESTRICTED AND PROHIBITED TRANSACTIONS.
4.03(d)(1). EQUAL PROPORTIONATE INTEREST. If the Managing General
Partner or an Affiliate, excluding another program in which the interest
of the Managing General Partner or its Affiliates is substantially
similar to or less than their interest in the Partnership, sells,
transfers or conveys any oil, gas or other mineral interests or property
to the Partnership, it must, at the same time, sell to the Partnership an
equal proportionate interest in all its other property in the same
Prospect. Notwithstanding, a Prospect shall be deemed to consist of the
drilling or spacing unit on which such well will be drilled by the
Partnership if the geological feature to which such well will be drilled
contains Proved Reserves and the drilling or spacing unit protects
against drainage. With respect to an oil and gas Prospect located in Ohio
and Pennsylvania on which a well will be drilled by the Partnership to
test the Clinton/▇▇▇▇▇▇ geologic formation a Prospect shall be deemed to
consist of the drilling and spacing unit if it meets the test in the
preceding sentence. Neither the Managing General Partner nor its
Affiliates may drill any well within 1,650 feet of an existing
Partnership Well in the
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Pg.44 (Page 17)
Clinton/▇▇▇▇▇▇ formation in Pennsylvania or
within 1,100 feet of an existing Partnership Well in Ohio within five
years of the drilling of the Partnership Well. In the event the
Partnership abandons its interest in a well, this restriction will
continue for one year following the abandonment.
If the area constituting the Partnership's Prospect is subsequently
enlarged to encompass any area wherein the Managing General Partner or an
Affiliate, excluding another Program in which the interest of the
Managing General Partner or its Affiliates is substantially similar to or
less than their interest in the Partnership, owns a separate property
interest, such separate property interest or a portion thereof shall be
sold, transferred or conveyed to the Partnership as set forth in
..4.01(a)(3), 4.03(d)(1) and 4.03(d)(2) if the activities of the
Partnership were material in establishing the existence of Proved
Undeveloped Reserves which are attributable to such separate property
interest. Notwithstanding, Prospects in the Clinton/▇▇▇▇▇▇ geological
formation shall not be enlarged or contracted if the Prospect was limited
to the drilling or spacing unit because the well was being drilled to
Proved Reserves in the Clinton/▇▇▇▇▇▇ geological formation and the
drilling or spacing unit protected against drainage.
4.03(d)(2). TRANSFER OF LESS THAN THE MANAGING GENERAL PARTNER'S AND ITS
AFFILIATES' ENTIRE INTEREST. A sale, transfer or a conveyance to the
Partnership of less than all of the ownership of the Managing General
Partner or an Affiliate, excluding another Program in which the interest
of the Managing General Partner or its Affiliates is substantially
similar to or less than their interest in the Partnership, in any
Prospect shall not be made unless the interest retained by the Managing
General Partner or the Affiliate is a proportionate Working Interest, the
respective obligations of the Managing General Partner or its Affiliates
and the Partnership are substantially the same after the sale of the
interest by the Managing General Partner or its Affiliates, and the
Managing General Partner's interest in revenues does not exceed the
amount proportionate to its retained Working Interest. Neither the
Managing General Partner nor any Affiliate will retain any Overriding
Royalty Interests or other burdens on an interest sold by it to the
Partnership. With respect to its retained interest the Managing General
Partner shall not Farmout a Lease for the primary purpose of avoiding
payment of its costs relating to drilling the Lease. This section does
not prevent the Managing General Partner or its Affiliates from
subsequently dealing with their retained interest as they may choose with
unaffiliated parties or Affiliated partnerships.
4.03(d)(3). TRANSFER OF LEASES TO THE MANAGING GENERAL PARTNER. The
Managing General Partner and its Affiliates shall not purchase any
producing or non-producing oil and gas properties from the Partnership.
4.03(d)(4). LIMITATIONS ON ACTIVITIES OF THE MANAGING GENERAL PARTNER AND
ITS AFFILIATES ON LEASES ACQUIRED BY THE PARTNERSHIP. During a period of five
years from the Offering Termination Date of the Partnership, if the
Managing General Partner or any of its Affiliates, excluding another
Program in which the interest of the Managing General Partner or its
Affiliates is substantially similar to or less than their interest in the
Partnership, proposes to acquire an interest, from an unaffiliated
person, in a Prospect in which the Partnership possesses an interest or
in a Prospect in which the Partnership's interest has been terminated
without compensation within one year preceding such proposed acquisition,
the following conditions shall apply:
(a) if the Managing General Partner or the Affiliate, excluding
another Program in which the interest of the Managing General
Partner or its Affiliates is substantially similar to or less
than their interest in the Partnership, does not currently own
property in the Prospect separately from the Partnership, then
neither the Managing General Partner nor the Affiliate shall be
permitted to purchase an interest in the Prospect; and
(b) if the Managing General Partner or the Affiliate, excluding
another Program in which the interest of the Managing General
Partner or its Affiliates is substantially similar to or less
than their interest in the Partnership, currently own a
proportionate interest in the Prospect separately from the
Partnership, then the interest to be acquired shall be divided
between the Partnership and the Managing General Partner or the
Affiliate in the same proportion as is the other property in the
Prospect; provided, however, if cash or financing is not
available to the Partnership to enable it to consummate a
purchase of the additional interest to which it is entitled, then
neither the Managing General Partner nor the Affiliate shall be
permitted to purchase any additional interest in the Prospect.
4.03(d)(5). TRANSFER OF LEASES BETWEEN AFFILIATED LIMITED PARTNERSHIPS. The
Partnership shall not purchase properties from or sell properties to any
other affiliated partnership. This prohibition, however, shall not apply
to joint ventures among such affiliated partnerships, provided that the
respective obligations and revenue sharing of all parties to the
transaction are substantially the same and the compensation arrangement
or any other interest or right of either the Managing General Partner or
its Affiliates is the same in each affiliated partnership, or, if
different, the aggregate compensation of the Managing General Partner or
the Affiliate is reduced to reflect the lower compensation arrangement.
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Pg.45 (Page 18)
4.03(d)(6). SALE OF ALL ASSETS. The sale of all or substantially all of
the assets of the Partnership (including, without limitation, Leases,
▇▇▇▇▇, equipment and production therefrom) shall be made only with the
consent of Participants whose Agreed Subscriptions equal a majority of
the Partnership Subscription.
4.03(d)(7). SERVICES. The Managing General Partner and any Affiliate
shall not render to the Partnership any oil field, equipage or other
services nor sell or lease to the Partnership any equipment or related
supplies unless such person is engaged, independently of the Partnership
and as an ordinary and ongoing business, in the business of rendering
such services or selling or leasing such equipment and supplies to a
substantial extent to other persons in the oil and gas industry in
addition to the partnerships in which the Managing General Partner or an
Affiliate has an interest; and the compensation, price or rental therefor
is competitive with the compensation, price or rental of other persons in
the area engaged in the business of rendering comparable services or
selling or leasing comparable equipment and supplies which could
reasonably be made available to the Partnership. If such person is not
engaged in such a business then such compensation, price or rental will
be the Cost of such services, equipment or supplies to such person or the
competitive rate which could be obtained in the area, whichever is less.
Any such services for which the Managing General Partner or an Affiliate
is to receive compensation other than those described in this Prospectus
shall be embodied in a written contract which precisely describes the
services to be rendered and all compensation to be paid. Such contracts
are cancellable without penalty upon sixty days written notice by
Participants whose Agreed Subscriptions equal a majority of the
Partnership Subscription.
4.03(d)(8). LOANS.
4.03(d)(8)(a). LOANS FROM THE PARTNERSHIP. No loans or advances shall be
made by the Partnership to the Managing General Partner or any Affiliate.
4.03(d)(8)(b). LOANS TO THE PARTNERSHIP. Neither the Managing General
Partner nor any Affiliate shall loan money to the Partnership where the
interest to be charged exceeds the Managing General Partner's or the
Affiliate's interest cost or where the interest to be charged exceeds
that which would be charged to the Partnership (without reference to the
Managing General Partner's or the Affiliate's financial abilities or
guarantees) by unrelated lenders, on comparable loans for the same
purpose, and neither the Managing General Partner nor any Affiliate shall
receive points or other financing charges or fees, regardless of the
amount, although the actual amount of such charges incurred from
third-party lenders may be reimbursed to the Managing General Partner or
the Affiliate.
4.03(d)(9). FARMOUTS. The Partnership shall not Farmout its Leases.
4.03(d)(10). COMPENSATING BALANCES. Neither the Managing General
Partner nor any Affiliate shall use the Partnership's funds as
compensating balances for its own benefit.
4.03(d)(11). FUTURE PRODUCTION. Neither the Managing General Partner
nor any Affiliate shall commit the future production of a well developed
by the Partnership exclusively for its own benefit.
4.03(d)(12). MARKETING ARRANGEMENTS. All benefits from marketing
arrangements or other relationships affecting property of the Managing
General Partner or its Affiliates and the Partnership shall be fairly and
equitably apportioned according to the respective interests of each in
such property. The Managing General Partner shall treat all ▇▇▇▇▇ in a
geographic area equally concerning to whom and at what price the
Partnership's gas will be sold and to whom and at what price the gas of
other oil and gas Programs which the Managing General Partner has
sponsored or will sponsor will be sold. The Managing General Partner
calculates a weighted average selling price for all of the gas sold in a
geographic area by taking all money received from the sale of all of the
gas sold to its customers in a geographic area and dividing by the volume
of all gas sold from the ▇▇▇▇▇ in that geographic area. Notwithstanding,
the Managing General Partner and its Affiliates are parties to, and
contract for, the sale of natural gas with industrial end-users and will
continue to enter into such contracts on their own behalf, and the
Partnership will not be a party to such contracts. The Managing General
Partner and its Affiliates also have a substantial interest in certain
pipeline facilities and compression facilities which access interstate
pipeline systems, which it is anticipated will be used to transport the
Partnership's gas production as well as Affiliated partnership and
third-party gas production, and the Partnership will not receive any
interest in the Managing General Partner's and its Affiliates' pipeline
or gathering system or compression facilities.
4.03(d)(13). ADVANCE PAYMENTS. Advance payments by the Partnership to
the Managing General Partner and its Affiliates are prohibited, except
where advance payments are required to secure the tax benefits of prepaid
drilling costs and for a business purpose. These advance payments, if
any, shall not include nonrefundable payments for completion costs prior
to the time that a decision was made that the well or ▇▇▇▇▇ warrant a
completion attempt.
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Pg.46 (Page 19)
4.03(d)(14). NO REBATES. No rebates or give-ups may be received by the
Managing General Partner or any Affiliate nor may the Managing General
Partner or any Affiliate participate in any reciprocal business
arrangements which would circumvent these guidelines.
4.03(d)(15). PARTICIPATION IN OTHER PARTNERSHIPS. If the Partnership
participates in other partnerships or joint ventures (multi-tier
arrangements), the terms of any such arrangements shall not result in the
circumvention of any of the requirements or prohibitions contained in
this Agreement, including the following: (i) there shall be no
duplication or increase in organization and offering expenses, the
Managing General Partner's compensation, Partnership expenses or other
fees and costs; (ii) there shall be no substantive alteration in the
fiduciary and contractual relationship between the Managing General
Partner and the Participants; and (iii) there shall be no diminishment in
the voting rights of the Participants.
4.03(d)(16). ROLL-UP LIMITATIONS. In connection with a proposed Roll-Up,
the following shall apply:
(a) An appraisal of all Partnership assets shall be obtained from a
competent Independent Expert. If the appraisal will be included
in a prospectus used to offer securities of a Roll-Up Entity, the
appraisal shall be filed with the Securities and Exchange
Commission and the Administrator as an exhibit to the
registration statement for the offering. Accordingly, an issuer
using the appraisal shall be subject to liability for violation
of Section 11 of the Securities Act of 1933 and comparable
provisions under state law for any material misrepresentations or
material omissions in the appraisal. Partnership assets shall be
appraised on a consistent basis. The appraisal shall be based on
all relevant information, including current reserve estimates
prepared by an independent petroleum consultant, and shall
indicate the value of the Partnership's assets as of a date
immediately prior to the announcement of the proposed Roll-Up
transaction. The appraisal shall assume an orderly liquidation of
the Partnership's assets over a twelve month period. The terms of
the engagement of the Independent Expert shall clearly state that
the engagement is for the benefit of the Partnership and the
Participants. A summary of the independent appraisal, indicating
all material assumptions underlying the appraisal, shall be
included in a report to the Participants in connection with a
proposed Roll-Up.
(b) In connection with a proposed Roll-Up, Participants who vote "no"
on the proposal shall be offered the choice of:
(1) accepting the securities of the Roll-Up Entity offered in the
proposed Roll-Up;
(2) remaining as Participants in the Partnership and preserving
their interests therein on the same terms and conditions as
existed previously; or
(3) receiving cash in an amount equal to the Participants' pro
rata share of the appraised value of the net assets of the
Partnership.
(c) The Partnership shall not participate in any proposed Roll-Up
which, if approved, would result in the diminishment of any
Participant's voting rights under the Roll-Up Entity's chartering
agreement. In no event shall the democracy rights of Participants
in the Roll-Up Entity be less than those provided for under
..4.03(c) and 4.03(c)(1) of this Agreement. If the Roll-Up Entity
is a corporation, the democracy rights of Participants shall
correspond to the democracy rights provided for in this Agreement
to the greatest extent possible.
(d) The Partnership shall not participate in any proposed Roll-Up
transaction which includes provisions which would operate to
materially impede or frustrate the accumulation of shares by any
purchaser of the securities of the Roll-Up Entity (except to the
minimum extent necessary to preserve the tax status of the
Roll-Up Entity); nor shall the Partnership participate in any
proposed Roll-Up transaction which would limit the ability of a
Participant to exercise the voting rights of its securities of
the Roll-Up Entity on the basis of the number of Units held by
that Participant.
(e) The Partnership shall not participate in a Roll-Up in which
Participants' rights of access to the records of the Roll-Up
Entity will be less than those provided for under ..4.03(b)(5)
and 4.03(b)(6) of this Agreement.
(f) The Partnership shall not participate in any proposed Roll-Up
transaction in which any of the costs of the transaction would be
borne by the Partnership if less than 75% in interest of the
Participants vote to approve the proposed Roll-Up.
(g) The Partnership shall not participate in a Roll-Up transaction
unless the Roll-Up transaction is approved by Participants whose
Agreed Subscriptions equal 75% of the Partnership Subscription.
4.03(d)(17). DISCLOSURE OF BINDING AGREEMENTS. Any agreement or
arrangement which binds the Partnership must be disclosed in the
Prospectus.
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Pg.47(Page 20)
4.03(d)(18) FAIR AND REASONABLE. Neither the Managing General Partner
nor any Affiliate will sell, transfer, or convey any property to or
purchase any property from the Partnership, directly or indirectly,
except pursuant to transactions that are fair and reasonable, nor take
any action with respect to the assets or property of the Partnership
which does not primarily benefit the Partnership.
4.04. DESIGNATION, COMPENSATION AND REMOVAL OF MANAGING GENERAL PARTNER
AND REMOVAL OF OPERATOR.
4.04(a). MANAGING GENERAL PARTNER.
4.04(a)(1). TERM OF SERVICE. Atlas shall serve as the Managing General
Partner of the Partnership until it is removed pursuant to .4.04(a)(3).
4.04(a)(2). COMPENSATION OF MANAGING GENERAL PARTNER. Charges by the
Managing General Partner for goods and services must be fully supportable
as to the necessity thereof and the reasonableness of the amount charged.
All actual and necessary expenses incurred by the Partnership may be paid
out of the Partnership Subscription and out of Partnership revenues.
In addition to the compensation set forth in ..4.01(a)(3) and 4.02(d)(1)
Atlas, as Managing General Partner and its Affiliates shall be reimbursed
for all Direct Costs and credited pursuant to .5.01(a) for Organization
and Offering Costs not exceeding 15% of the Partnership Subscription;
provided, however, Direct Costs shall be billed directly to and paid by
the Partnership to the extent practicable. In addition, subject to the
above paragraph, Atlas shall receive an unaccountable, fixed payment
reimbursement for its Administrative Costs of $75 per well per month,
which shall be proportionately reduced to the extent the Partnership
acquires less than 100% of the Working Interest in the well. The
unaccountable, fixed payment reimbursement of $75 per well per month
shall not be increased in amount during the term of the Partnership.
Further, Atlas, as Managing General Partner, shall not be reimbursed for
any additional Partnership Administrative Costs and the unaccountable,
fixed payment reimbursement of $75 per well per month shall be the entire
payment to reimburse Atlas for the Partnership's Administrative Costs.
Finally, Atlas, as Managing General Partner, shall not receive the
unaccountable, fixed payment reimbursement of $75 per well per month for
plugged or abandoned ▇▇▇▇▇.
Atlas and its Affiliates shall also receive a combined transportation and
marketing fee at a competitive rate for transporting and marketing the
Partnership's gas.
The Managing General Partner and its Affiliates may enter into
transactions pursuant to .4.03(d)(7) and shall be entitled to
compensation pursuant to such section. In addition, the Managing General
Partner and its Affiliates shall receive compensation as set forth in the
Drilling and Operating Agreement.
4.04(a)(3). REMOVAL OF MANAGING GENERAL PARTNER. The Managing General
Partner may be removed and a new Managing General Partner or Managing
General Partners may be substituted at any time upon sixty days advance
written notice to the outgoing Managing General Partner, by the
affirmative vote of Participants whose Agreed Subscriptions equal a
majority of the Partnership Subscription. Should Participants vote to
remove the Managing General Partner from the Partnership, Participants
must elect by an affirmative vote of Participants whose Agreed
Subscriptions equal a majority of the Partnership Subscription either to
terminate, dissolve and wind up the Partnership or to continue as a
successor limited partnership under all the terms of this Partnership
Agreement, as provided in .7.01(c). If the Participants elect to continue
as a successor limited partnership, the Managing General Partner shall
not be removed until a substituted Managing General Partner has been
selected by an affirmative vote of Participants whose Agreed
Subscriptions equal a majority of the Partnership Subscription and
installed as such.
In the event the Managing General Partner is removed, the Managing
General Partner's interest in the Partnership shall be determined by
appraisal by a qualified Independent Expert selected by mutual agreement
between the removed Managing General Partner and the incoming Managing
General Partner, such appraisal to take into account an appropriate
discount, to reflect the risk of recovery of oil and gas reserves, but
not less than that utilized in the most recent repurchase offer, if any.
The cost of such appraisal shall be borne equally by the removed Managing
General Partner and the Partnership. The incoming Managing General
Partner shall have the option to purchase 20% of the removed Managing
General Partner's interest for the value determined by the Independent
Expert.
The method of payment for such interest must be fair and must protect the
solvency and liquidity of the Partnership. Where the termination is
voluntary, the method of payment shall be a non-interest bearing
unsecured promissory note with principal payable, if at all, from
distributions which the Managing General Partner otherwise would have
received under the Partnership Agreement had the Managing General Partner
not been terminated. Where the termination is involuntary, the method of
payment shall be an interest bearing promissory note coming due in no
less than five years with equal installments each year. The interest rate
shall be that charged
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Pg.48(Page 21)
on comparable loans. The removed Managing General
Partner, at the time of its removal shall cause, to the extent it is
legally possible, its successor to be transferred or assigned all its
rights, obligations and interests as Managing General Partner of the
Partnership in contracts entered into by it on behalf of the Partnership.
In any event, the removed Managing General Partner shall cause its
rights, obligations and interests as Managing General Partner of the
Partnership in any such contract to terminate at the time of its removal.
Notwithstanding any other provision in this Agreement, the Partnership or
the successor Managing General Partner shall not be a party to any gas
purchase agreement that Atlas or its Affiliates enters into with a third
party and shall not have any rights pursuant to such gas purchase
agreement. Further, the Partnership or the successor Managing General
Partner shall not receive any interest in Atlas' and its Affiliates'
pipeline or gathering system or compression facilities.
At any time commencing ten years after the Offering Termination Date of
the Partnership and the Partnership's primary drilling activities, the
Managing General Partner may voluntarily withdraw as Managing General
Partner upon giving 120 days' written notice of withdrawal to the
Participants and its interest in the Partnership shall be determined as
provided above with respect to removal. Such interest shall be
distributed to the Managing General Partner as described above with
respect to voluntary removal, subject to the option of any successor
Managing General Partner to purchase 20% of such interest at the value
determined as described above with respect to removal.
The Managing General Partner has the right at any time to withdraw a
property interest held by the Partnership in the form of a Working
Interest in the Partnership ▇▇▇▇▇ equal to or less than its respective
interest in the revenues of the Partnership pursuant to the conditions
set forth in .6.03. The Managing General Partner shall fully indemnify
the Partnership against any additional expenses which may result from a
partial withdrawal of its interests and such withdrawal may not result in
a greater amount of Direct Costs or Administrative Costs being allocated
to the Participants. The expenses of withdrawing shall be borne by the
withdrawing Managing General Partner.
4.04(a)(4). REMOVAL OF OPERATOR. The Operator may be removed and a new
Operator may be substituted at any time upon 60 days advance written
notice to the outgoing Operator by the Managing General Partner acting on
behalf of the Partnership upon the affirmative vote of Participants whose
Agreed Subscriptions equal a majority of the Partnership Subscription.
The Operator shall not be removed until a substituted Operator has been
selected by an affirmative vote of Participants whose Agreed
Subscriptions equal a majority of the Partnership Subscription and
installed as such.
4.05. INDEMNIFICATION AND EXONERATION.
4.05(a). GENERAL STANDARDS. The Managing General Partner, the Operator
and their Affiliates shall have no liability whatsoever to the
Partnership or to any Participant for any loss suffered by the
Partnership or Participants which arises out of any action or inaction of
the Managing General Partner, the Operator or their Affiliates if the
Managing General Partner, the Operator and their Affiliates, determined
in good faith that such course of conduct was in the best interest of the
Partnership, the Managing General Partner, the Operator and their
Affiliates were acting on behalf of or performing services for the
Partnership and such course of conduct did not constitute negligence or
misconduct of the Managing General Partner, the Operator or their
Affiliates.
The Managing General Partner, the Operator and their Affiliates shall be
indemnified by the Partnership against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any claims
sustained by them in connection with the Partnership, provided that the
Managing General Partner, the Operator and their Affiliates determined in
good faith that the course of conduct which caused the loss or liability
was in the best interest of the Partnership, the Managing General
Partner, the Operator and their Affiliates were acting on behalf of or
performing services for the Partnership and such course of conduct was
not the result of negligence or misconduct of the Managing General
Partner, the Operator or their Affiliates.
Provided, however, payments arising from such indemnification or
agreement to hold harmless are recoverable only out of the tangible net
assets of the Partnership, including any insurance proceeds.
Notwithstanding anything to the contrary contained in the above, the
Managing General Partner, the Operator and their Affiliates and any
person acting as a broker-dealer shall not be indemnified for any losses,
liabilities or expenses arising from or out of an alleged violation of
federal or state securities laws by such party unless (1) there has been
a successful adjudication on the merits of each count involving alleged
securities law violations as to the particular indemnitee; (2) such
claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee, or (3) a court of
competent jurisdiction approves a settlement of the claims against a
particular indemnitee and finds that indemnification of the settlement
and the related costs should be made, and the court considering the
request for indemnification has been advised of the position of the
Securities and Exchange Commission,
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Pg.49(Page 22)
the Massachusetts Securities
Division, and the position of any state securities regulatory authority
in which plaintiffs claim they were offered or sold Partnership Units,
with respect to the issue of indemnification for violation of securities
laws.
The advancement of Partnership funds to the Managing General Partner or
its Affiliates for legal expenses and other costs incurred as a result of
any legal action for which indemnification is being sought is permissible
only if the Partnership has adequate funds available and the following
conditions are satisfied: (1) the legal action relates to acts or
omissions with respect to the performance of duties or services on behalf
of the Partnership; (2) the legal action is initiated by a third party
who is not a Participant, or the legal action is initiated by a
Participant and a court of competent jurisdiction specifically approves
such advancement; and (3) the Managing General Partner or its Affiliates
undertake to repay the advanced funds to the Partnership, together with
the applicable legal rate of interest thereon, in cases in which such
party is found not to be entitled to indemnification.
The Partnership shall not bear the cost of that portion of insurance
which insures the Managing General Partner, the Operator or their
Affiliates for any liability for which the Managing General Partner, the
Operator or their Affiliates could not be indemnified pursuant to the
first two paragraphs of this .4.05(a).
4.05(b). LIABILITY OF PARTNERS. Pursuant to the Pennsylvania Revised
Uniform Limited Partnership Act the Investor General Partners are liable
jointly and severally for all liabilities and obligations of the
Partnership. Notwithstanding the foregoing, as among themselves, the
Investor General Partners hereby agree that each shall be solely and
individually responsible only for his pro rata share of the liabilities
and obligations of the Partnership. In addition, Atlas and AEGH agree to
use their corporate assets and not the assets of the Partnership to
indemnify each of the Investor General Partners against all Partnership
related liabilities which exceed such Investor General Partner's interest
in the undistributed net assets of the Partnership and insurance
proceeds, if any. Further, Atlas and AEGH agree to indemnify each
Investor General Partner against any personal liability as a result of
the unauthorized acts of another Investor General Partner. Upon such
indemnification by Atlas and AEGH, each Investor General Partner who has
been indemnified shall and does hereby transfer and subrogate his rights
for contribution from or against any other Investor General Partner to
Atlas and/or AEGH.
4.05(c). ORDER OF PAYMENT. Claims shall be paid first out of any
insurance proceeds, next out of the assets and revenues of the
Partnership, and finally by the Managing General Partner as provided in
..3.05(b) and 4.05(b). No Limited Partner shall be required to reimburse
the Managing General Partner, the Operator or their Affiliates or the
Investor General Partners for any liability in excess of his agreed
Capital Contribution, except for a liability resulting from such Limited
Partner's unauthorized participation in Partnership management, or from
some other breach by such Limited Partner of this Agreement.
4.05(d). AUTHORIZED TRANSACTIONS. No transaction entered into or action
taken by the Partnership or the Managing General Partner, the Operator or
their Affiliates, which is authorized by this Agreement to be entered
into or taken with such party shall be deemed a breach of any obligation
owed by the Managing General Partner, the Operator or their Affiliates to
the Partnership or the Participants.
4.06. OTHER ACTIVITIES. The Managing General Partner, the Operator and
their Affiliates are now engaged, and will engage in the future, for
their own account and for the account of others, including other
investors, in all aspects of the oil and gas business, including, without
limitation, the evaluation, acquisition and sale of producing and
nonproducing Leases, and the exploration for and production of oil, gas,
and other minerals. The Managing General Partner is required to devote
only so much of its time as is necessary to manage the affairs of the
Partnership. Except as expressly provided to the contrary in this
Agreement, and subject to fiduciary duties, such parties may continue
such activities, or initiate further such activities, individually,
jointly with others, or as a part of any other limited or general
partnership, tax partnership, joint venture, or other entity or activity
to which they are or may become a party, in any locale and in the same
fields, areas of operation or prospects in which the Partnership may
likewise be active; may reserve partial interests in Leases being
assigned to the Partnership or any other interests not expressly
prohibited by this Agreement; may deal with the Partnership as
independent parties or through any other entity in which they may be
interested; may conduct business with the Partnership as set forth
herein; may participate in such other investor operations, as investors
or otherwise; and shall not be required to permit the Partnership or the
Participants to participate in any such operations in which they may be
interested or share in any profits or other benefits therefrom. However,
except as otherwise provided herein, the Managing General Partner and any
of its Affiliates may pursue business opportunities that are consistent
with the Partnership's investment objectives for their own account only
after they have determined that such opportunity either cannot be pursued
by the Partnership because of insufficient funds or because it is not
appropriate for the Partnership under the existing circumstances. Atlas
or its Affiliates may manage multiple programs simultaneously.
Notwithstanding any other provision in this Agreement, the Partnership
shall not be a party to any gas supply agreement that Atlas or its
Affiliates enters into with a third party and shall not have any rights
pursuant to such gas supply agreement. Further, the Partnership shall not
receive any interest in Atlas' and its Affiliates' pipeline or gathering
system or compression facilities.
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Pg.50 (Page 23)
ARTICLE V
PARTICIPATION IN COSTS AND REVENUES,
CAPITAL ACCOUNTS, ELECTIONS AND DISTRIBUTIONS
5.01. PARTICIPATION IN COSTS AND REVENUES. Except as otherwise provided in
this Agreement, costs and revenues shall be charged and credited to the
Managing General Partner and the Participants as set forth in this .5.01
and its subsections.
5.01(a). COSTS. Costs shall be charged as follows:
(1) Organization and Offering Costs shall be charged 100% to the
Managing General Partner. For purposes of sharing in revenues,
pursuant to .5.01(b)(4), the Managing General Partner shall be
credited with Organization and Offering Costs up to and including
15% of the Partnership Subscription which were paid by the
Managing General Partner. Notwithstanding, Organization and
Offering Costs in excess of 15% of the Partnership Subscription
shall be charged 100% to the Managing General Partner without
recourse to the Partnership and the Managing General Partner
shall not be credited with such amounts towards its required
Capital Contribution.
(2) Intangible Drilling Costs shall be charged 100% to the
Participants.
(3) Tangible Costs shall be charged 14% to the Managing General
Partner and 86% to the Participants.
(4) Operating Costs, Direct Costs, Administrative Costs and all other
Partnership costs not specifically allocated shall be charged 75%
to the Participants and 25% to the Managing General Partner.
Provided, however, in the event a portion of the Managing General
Partner's Partnership Net Production Revenues are subordinated
pursuant to .5.01(b)(4), all such Operating Costs, Direct Costs,
Administrative Costs and all other Partnership costs not
specifically allocated shall be charged between the Managing
General Partner and the Participants in the same ratio as the
related production revenues are being credited.
5.01(b). REVENUES. Revenues of the Partnership from all sources and
▇▇▇▇▇ shall be commingled and credited as follows:
(1) If the Partners' Capital Accounts are adjusted to reflect the
simulated depletion of an oil or gas property of the Partnership,
the portion of the total amount realized by the Partnership upon
the taxable disposition of such property that represents recovery
of its simulated tax basis therein shall be allocated to the
Partners in the same proportion as the aggregate adjusted tax
basis of such property was allocated to such Partners (or their
predecessors in interest). lf the Partners' Capital Accounts are
adjusted to reflect the actual depletion of an oil or gas
property of the Partnership, the portion of the total amount
realized by the Partnership upon the taxable disposition of such
property that equals the Partners' aggregate remaining adjusted
tax basis therein shall be allocated to the Partners in
proportion to their respective remaining adjusted tax bases in
such property. Thereafter, any excess shall be allocated to Atlas
in an amount equal to the difference between the fair market
value of the Lease at the time it was contributed to the
Partnership and its simulated or actual adjusted tax basis at
such time. Finally, any excess shall be credited to the parties
in accordance with the sharing ratios provided in (4), below. In
the event of a sale of developed oil and gas properties with
equipment thereon, the Managing General Partner may make any
reasonable allocation of proceeds between the equipment and the
Leases.
(2) Interest earned on Agreed Subscriptions before the Offering
Termination Date pursuant to .3.05(b) shall be credited to the
accounts of the respective subscribers who paid such
subscriptions to the Partnership and paid approximately six weeks
after the Offering Termination Date. After the Offering
Termination Date and until proceeds from the offering are
invested in the Partnership's oil and gas operations, any
interest income from temporary investments shall be allocated pro
rata to the Participants providing such Agreed Subscriptions. All
other interest income, including interest earned on the deposit
of production revenues, shall be credited as provided in (4),
below.
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Pg.51(Page 24)
(3) Proceeds from the sale or disposition of equipment shall be
credited to the parties charged with the costs of such equipment
in the ratio in which such costs were charged.
(4) All other revenues of the Partnership shall be credited 75% to
the Participants and 25% to the Managing General Partner.
Notwithstanding, the Managing General Partner shall subordinate a
part of its Partnership production revenues in an amount up to
10% of the Partnership's Net Production Revenues net of the
related costs as provided in .5.01(a)(4), to the receipt by
Participants of cash distributions from the Partnership equal to
10% of their Agreed Subscriptions in each of the first five
twelve-month periods of Partnership operations. The subordination
shall be determined on a cumulative basis throughout the entire
subordination period commencing with the first distribution of
revenues to the Participants by debiting or crediting current
period Partnership revenues to the Managing General Partner as
may be necessary to provide such distributions to the
Participants.
5.01(c). ALLOCATIONS.
5.01(c)(1). ALLOCATIONS AMONG PARTICIPANTS. Except as provided otherwise
in this Agreement, costs and revenues shared or credited to the
Participants as a group shall be allocated among the Participants
(including the Managing General Partner to the extent of any optional
subscription pursuant to .3.03(b)(2)) in the ratio of their respective
Agreed Subscriptions.
5.01(c)(2). COSTS AND REVENUES NOT DIRECTLY ALLOCABLE TO A PARTNERSHIP
WELL. Costs and revenues not directly allocable to a particular
Partnership Well or additional operation shall be allocated among the
Partnership ▇▇▇▇▇ or additional operations in any manner the Managing
General Partner in its reasonable discretion, shall select, and shall
then be charged or credited in the same manner as costs or revenues
directly applicable to such Partnership Well or additional operation are
being charged or credited.
5.01(c)(3). DISCRETION IN MAKING ALLOCATIONS. In determining the proper
method of allocating charges or credits among the parties, or in making
any other allocations hereunder, the Managing General Partner may adopt
any method of allocation which it, in its reasonable discretion, selects,
if, in its sole discretion based on advice from its legal counsel or
accountants, a revision to such allocations is required for such
allocations to be recognized for federal income tax purposes either
because of the promulgation of Treasury Regulations or other developments
in the tax law. Any new allocation provisions shall be provided by an
amendment to this Agreement and shall be made in a manner that would
result in the most favorable aggregate consequences to the Participants
as nearly as possible consistent with the original allocations described
herein.
5.02. CAPITAL ACCOUNTS AND ALLOCATIONS THERETO.
5.02(a). CAPITAL ACCOUNTS. A single, separate Capital Account shall be
established for each party to this Agreement, regardless of the number of
interests owned by such party, the class of the interests and the time or
manner in which such interests were acquired.
5.02(b). CHARGES AND CREDITS. Except as otherwise provided in this
Agreement, the Capital Account of each party shall be determined and
maintained in accordance with Treas. Reg. .1.704-l(b)(2)(iv) and shall be
increased by: (i) the amount of money contributed by him to the
Partnership; (ii) the fair market value of property contributed by him
(without regard to .7701(g) of the Code) to the Partnership (net of
liabilities secured by the contributed property that the Partnership is
considered to assume or take subject to under .752 of the Code); and
(iii) allocations to him of Partnership income and gain (or items
thereof), including income and gain exempt from tax and income and gain
described in Treas. Reg. .1.704-l(b)(2)(iv)(g), but excluding income and
gain described in Treas. Reg. .1.704-l(b)(4)(i); and shall be decreased
by (iv) the amount of money distributed to him by the Partnership; (v)
the fair market value of property distributed to him (without regard to
.7701(g) of the Code) by the Partnership (net of liabilities secured by
the distributed property that he is considered to assume or take subject
to under .752 of the Code); (vi) allocations to him of Partnership
expenditures described in .705(a)(2)(B) of the Code; and (vii)
allocations to him of Partnership loss and deduction (or items thereof),
including loss and deduction described in Treas. Reg.
.1.704-l(b)(2)(iv)(g), but excluding items described in (vi) above, and
loss or deduction described in Treas. Reg. .1.704-l(b)(4)(i) or (iii). If
Treas. Reg. .1.704-l(b)(2)(iv)fails to provide guidance, Capital Account
adjustments shall be made in a manner that: (i) maintains equality
between the aggregate governing Capital Accounts of the Partners and the
amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes; (ii) is consistent with the
underlying economic arrangement of the Partners; and (iii) is based,
wherever practicable, on federal tax accounting principles.
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Pg.52(Page 25)
5.02(c). PAYMENTS TO THE MANAGING GENERAL PARTNER. The Capital Account
of the Managing General Partner shall be reduced by payments to it
pursuant to .4.04(a)(2) only to the extent of the Managing General
Partner's distributive share of any Partnership deduction, loss, or other
downward Capital Account adjustment resulting from such payments.
5.02(d). DISCRETION OF MANAGING GENERAL PARTNER. Notwithstanding any
other provisions of this Agreement, the method of maintaining Capital
Accounts may be changed from time to time, in the discretion of the
Managing General Partner, to take into consideration .704 and other
provisions of the Code and such rules, regulations and interpretations
relating thereto as may exist from time to time.
5.02(e). REVALUATIONS OF PROPERTY. In the discretion of the Managing
General Partner the Capital Accounts of the Partners may be increased or
decreased to reflect a revaluation of Partnership property, including
intangible assets such as goodwill, (on a property-by-property basis
except as otherwise permitted under .704(c) of the Code and the
regulations thereunder) on the Partnership's books, in accordance with
Treas. Reg. .1.704-l(b)(2)(iv)(f).
5.02(f). AMOUNT OF BOOK ITEMS. In cases where .704(c) of the Code or
.5.02(e) applies, Capital Accounts shall be adjusted in accordance with
Treas. Reg. .1.704-l(b)(2)(iv)(g) for allocations of depreciation,
depletion, amortization and gain and loss, as computed for book purposes,
with respect to such property.
5.03. ALLOCATION OF INCOME, DEDUCTIONS AND CREDITS.
5.03(a). IN GENERAL. To the extent permitted by law and except as
otherwise provided in this Agreement, nonrecourse deductions shall be
allocated among the Partners in the ratio in which income and gain (other
than minimum gain recognized by the Partnership) attributable to the
property securing the nonrecourse liabilities are allocated among the
Partners during the period in question. All other deductions and credits,
including, but not limited to, intangible drilling and development costs
and depreciation, shall be allocated to the party who has been charged
with the expenditure giving rise to such deductions and credits; and to
the extent permitted by law, such parties shall be entitled to such
deductions and credits in computing taxable income or tax liabilities to
the exclusion of any other party. Except as otherwise provided in this
Agreement, all items of income and gain, including gain on disposition of
assets, shall be allocated in accordance with the related revenue
allocations set forth in .5.01(b) and its subsections.
5.03(b). TAX BASIS. Subject to .704(c) of the Code, the tax basis of each
oil and gas property for computation of cost depletion and gain or loss
on disposition shall be allocated and reallocated when necessary based
upon the capital interest in the Partnership as to such property and the
capital interest in the Partnership for such purpose as to each property
shall be considered to be owned by the parties hereto in the ratio in
which the expenditure giving rise to the tax basis of such property has
been charged as of the end of the year.
5.03(c). GAIN OR LOSS ON OIL AND GAS PROPERTIES. Each party shall
separately compute its gain or loss on the disposition of each oil and
gas property in accordance with the provisions of .613A(c)(7)D) of the
Code, and the calculation of such gain or loss shall consider the party's
adjusted basis in his property interest computed as provided in .5.03(b)
and the party's allocable share of the amount realized from the
disposition of the property.
5.03(d). GAIN ON DEPRECIABLE PROPERTY. Gain from each sale or other
disposition of depreciable property shall be allocated to each party
whose share of the proceeds from such sale or other disposition exceeds
its contribution to the adjusted basis of the property in the ratio that
such excess bears to the sum of the excesses of all parties having such
an excess.
5.03(e). LOSS ON DEPRECIABLE PROPERTY. Loss from each sale, abandonment
or other disposition of depreciable property shall be allocated to each
party whose contribution to the adjusted basis of the property exceeds
its share of the proceeds from such sale, abandonment or other
disposition in the proportion that such excess bears to the sum of the
excesses of all parties having such an excess.
5.03(f). RECAPTURE. Any recapture treated as an increase in ordinary
income by reason of ..1245, 1250, or 1254 of the Code shall be allocated
to the parties in the amounts in which such recaptured items were
previously allocated to them; provided that to the extent recapture
allocated to any party is in excess of such party's gain from the
disposition of the property, such excess shall be allocated to the other
parties but only to the extent of such other parties' gain from the
disposition of the property.
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Pg53
(Page 26)
5.03(g). TAX CREDITS. If a Partnership expenditure (whether or not
deductible) that gives rise to a tax credit in a Partnership taxable year
also gives rise to valid allocations of Partnership loss or deduction (or
other downward Capital Account adjustments) for such year, then the
Partners' interests in the Partnership with respect to such credit (or
the cost giving rise thereto) shall be in the same proportion as such
Partners' respective distributive shares of such loss or deduction (and
adjustments). Identical principles shall apply in determining the
Partners' interests in the Partnership with respect to tax credits that
arise from receipts of the Partnership (whether or not taxable).
5.03(h). DEFICIT CAPITAL ACCOUNTS AND QUALIFIED INCOME OFFSET.
Notwithstanding any provisions of this Agreement to the contrary, an
allocation of loss or deduction which would result in a Partner having a
deficit Capital Account balance as of the end of the taxable year to
which such allocation relates, if charged to such Partner, (to the extent
such Partner is not required to restore such deficit to the Partnership),
taking into account: (i) adjustments that, as of the end of such year,
reasonably are expected to be made to such Partner's Capital Account for
depletion allowances with respect to the Partnership's oil and gas
properties; (ii) allocations of loss and deduction that, as of the end of
such year, reasonably are expected to be made to such Partner pursuant to
..704(e)(2) and 706(d) of the Code and Treas. Reg. .1.751-1(b)(2)(ii);
and (iii) distributions that, as of the end of such year, reasonably are
expected to be made to such Partner to the extent they exceed offsetting
increases to such Partner's Capital Account (assuming for this purpose
that the fair market value of Partnership property equals its adjusted
tax basis) that reasonably are expected to occur during (or prior to) the
Partnership taxable years in which such distributions reasonably are
expected to be made, shall be charged to the Managing General Partner;
provided further, the Managing General Partner shall be credited with an
additional amount of Partnership income or gain equal to the amount of
such loss or deduction as quickly as possible (to the extent such
chargeback does not cause or increase deficit balances in the Partners'
Capital Accounts which are not required to be restored to the
Partnership). Notwithstanding any provisions of this Agreement to the
contrary, if such Partner unexpectedly receives an adjustment,
allocation, or distribution described in (i), (ii), or (iii) above, or
any other distribution, which causes or increases a deficit balance in
such Partner's Capital Account which is not required to be restored to
the Partnership, such Partner shall be allocated items of income and gain
(consisting of a pro rata portion of each item of Partnership income,
including gross income, and gain for such year) in an amount and manner
sufficient to eliminate such deficit balance as quickly as possible.
5.03(i). PARTNERS' ALLOCABLE SHARES. Except as otherwise provided in this
Agreement, each Partner's allocable share of Partnership income, gain,
loss, deductions and credits shall be determined by the use of any method
prescribed or permitted by the Secretary of the Treasury by regulations
or other guidelines and selected by the Managing General Partner which
takes into account the varying interests of the Partners in the
Partnership during the taxable year. In the absence of such regulations
or guidelines, except as otherwise provided in this Agreement, such
allocable share shall be based on actual income, gain, loss, deductions
and credits economically accrued each day during the taxable year in
proportion to each Partner's varying interest in the Partnership on each
day during the taxable year.
5.04. ELECTIONS.
5.04(a). INTANGIBLES ELECTION. The Partnership's federal income tax
return shall be made in accordance with an election under the option
granted by the Code to deduct intangible drilling and development costs.
5.04(b). NO ELECTION OUT OF SUBCHAPTER K. No election shall be made by
the Partnership, any Partner, or the Operator for the Partnership to be
excluded from the application of the provisions of Subchapter K of the
Code.
5.04(c). CONTINGENT INCOME. If it is determined that any taxable income
results to any party by reason of its entitlement to a share of profits
or revenues of the Partnership before such profit or revenue has been
realized by the Partnership, the resulting deduction as well as any
resulting gain, shall not enter into Partnership net income or loss but
shall be separately allocated to such party.
5.04(d). .754 ELECTION. In the event of the transfer of an interest in
the Partnership, or upon the death of an individual party hereto, or in
the event of the distribution of property to any party hereto, the
Managing General Partner may choose for the Partnership to file an
election in accordance with the applicable Treasury Regulations to cause
the basis of the Partnership's assets to be adjusted for federal income
tax purposes as provided by ..734 and 743 of the Code.
5.05. DISTRIBUTIONS.
5.05(a). IN GENERAL. The Managing General Partner shall review the
accounts of the Partnership at least quarterly to determine whether cash
distributions are appropriate and the amount to be distributed, if any.
The Partnership shall distribute funds to the Managing General Partner
and the Participants allocated to their accounts which the Managing
General Partner deems unnecessary to retain by the Partnership. In no
event, however, shall funds be advanced or borrowed for purposes of
distributions, if the amount of such distributions would exceed the
Partnership's accrued and received revenues for the previous four
quarters, less paid and accrued Operating Costs with respect to such
revenues. The determination of such revenues and costs shall be made in
accordance with generally accepted accounting principles, consistently
applied. Cash distributions from the Partnership to the Managing General
Partner shall only be made in conjunction with distributions to
Participants and only out of funds properly allocated to the Managing
General Partner's account.
At any time after three years from the date each Partnership Well is
placed into production, the Managing General Partner shall have the right
to deduct each month from the Partnership's proceeds of the sale of the
production from the well up to $200 for the purpose of establishing a
fund to cover the estimated costs of plugging and abandoning said well.
All such funds shall be deposited in a separate interest bearing account
for the benefit of the Partnership, and the total amount so retained and
deposited shall not exceed the Managing General Partner's reasonable
estimate of such costs.
5.05(b). DISTRIBUTION OF UNCOMMITTED SUBSCRIPTION PROCEEDS. Any net
subscription proceeds not expended or committed for expenditure, as
evidenced by a written agreement, by the Partnership within twelve months
of the Offering Termination Date of the Partnership, except necessary
operating capital, shall be distributed pro rata to the Participants in
the ratio of their Agreed Subscriptions to the Partnership, as a return
of capital and the Managing General Partner shall reimburse the
Participants for the selling or other offering expenses allocable to the
return of capital. For purposes of this subsection, "committed for
expenditure" shall mean contracted for, actually earmarked for or
allocated by the Managing General Partner to the Partnership's drilling
operations, and "necessary operating capital" shall mean those funds
which, in the opinion of the Managing General Partner, should remain on
hand to assure continuing operation of the Partnership.
5.05(c). DISTRIBUTIONS ON WINDING UP. Upon the winding up of the
Partnership distributions shall be made as provided in .7.02.
5.05(d). INTEREST AND RETURN OF CAPITAL. It is agreed among the parties
hereto that no party shall under any circumstances be entitled to any
interest on amounts retained by the Partnership, and that each
Participant shall look only to his share of distributions, if any, from
the Partnership for a return of his Capital Contribution.
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Pg.55(Page 28)
ARTICLE VI
TRANSFER OF INTERESTS
6.01. TRANSFERABILITY.
6.01(a). IN GENERAL. In addition to other restrictions on
transferability provided in this Agreement, interests in the Partnership
(and any rights to income or other attributes of Units in the
Partnership) shall be nontransferable except transfers to or with the
consent of the Managing General Partner where the transfer of a
Participant's interest is involved, and, except as otherwise provided in
this Agreement, the consent of Participants whose Agreed Subscriptions
equal a majority of the Partnership Subscription where a transfer by the
Managing General Partner is involved. Unless an assignee becomes a
substituted Partner in accordance with the provisions set forth below, he
shall not be entitled to any of the rights granted to a Partner
hereunder, other than the right to receive all or part of the share of
the profits, losses, income, gain, credits and cash distributions or
returns of capital to which his assignor would otherwise be entitled.
6.01(b). OBJECTIONS TO TRANSFER. Failure to notify the transferring
party of an objection to any proposed or completed transfer of the
transferor's interest hereunder within thirty days following the receipt
of notice thereof shall conclusively serve as a consent to such transfer.
6.01(c). CONVERSION OF INVESTOR GENERAL PARTNER UNITS TO LIMITED PARTNER
INTERESTS. After substantially all of the Partnership ▇▇▇▇▇ have been
drilled and completed the Managing General Partner shall file an amended
certificate of limited partnership with the Secretary of State of the
Commonwealth of Pennsylvania for the purpose of converting the Investor
General Partner Units to Limited Partner interests. Upon such conversion
the Investor General Partners shall be Limited Partners entitled to
limited liability; however, they shall remain liable to the Partnership
for any additional Capital Contribution required for their proportionate
share of any Partnership obligation or liability arising prior to the
conversion of their Units as provided in .3.05(b). Such conversion shall
not affect the allocation to any Partner of any item of Partnership
income, gain, loss, deduction or credit or other item of special tax
significance (other than Partnership liabilities, if any) and shall not
affect any Partner's interest in the Partnership's oil and gas properties
and unrealized receivables.
Notwithstanding the foregoing, the Managing General Partner shall notify
all Participants at least thirty days prior to the effective date of any
adverse material change in the Partnership's insurance coverage. If the
insurance coverage is to be materially reduced, the Investor General
Partners shall have the right to convert their Units into Limited Partner
interests prior to such reduction by giving written notice to the
Managing General Partner.
6.02. SPECIAL RESTRICTIONS ON TRANSFERS.
6.02(a). IN GENERAL. Only whole Units may be assigned unless the
Participant owns less than a whole Unit, in which case his entire
fractional interest must be assigned. The costs and expenses associated
with the assignment must be paid by the assignor Partner and the
assignment must be in a form satisfactory to the Managing General
Partner. The terms of the assignment must not contravene those of this
Agreement. Transfers of interest in the Partnership are subject to the
following additional restrictions.
6.02(a)(1). SECURITIES LAWS RESTRICTION. Subject to transfers permitted
by .6.04 and transfers by operation of law, no interest in the
Partnership shall be sold, assigned, pledged, hypothecated or transferred
in the absence of an effective registration of the Units under the
Securities Act of 1933, as amended and qualification under applicable
state securities laws or an opinion of counsel acceptable to the Managing
General Partner that such registration and qualification are not
required. Transfers are also subject to any conditions contained in the
Subscription Agreement and Exhibit (B) to the Prospectus.
6.02(a)(2). TAX LAW RESTRICTIONS. No sale, exchange, transfer or
assignment shall be made which, in the opinion of counsel to the
Partnership, would result in the Partnership being considered to have
been terminated for purposes of Section 708 of the Code or would result
in materially adverse tax consequences to the Partnership or the
Partners.
6.02(a)(3). SUBSTITUTE PARTNER. An assignee of a Limited Partner's or
Investor General Partner's interest in the Partnership shall become a
substituted Limited Partner or Investor General Partner entitled to all
the rights of a Limited Partner or Investor General Partner, as the case
may be, if, and only if: (i) the assignor gives the assignee such right;
(ii) the Managing General Partner consents to such substitution, which
consent shall be in the Managing General Partner's absolute discretion;
(iii) the assignee pays to the Partnership all costs and expenses
incurred in connection with such substitution; and (iv) the assignee
executes and delivers such instruments, in form and substance
satisfactory to the Managing General Partner, necessary or desirable to
effect such substitution and to confirm the agreement of the assignee to
be bound by all of the terms and provisions of this Agreement. A
substitute Limited Partner or Investor General Partner is entitled to all
of the rights attributable to full ownership of the assigned Units
including the right to vote.
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Pg.56(Page 29)
6.02(b). EFFECT OF TRANSFER. The Partnership shall amend its records at
least once each calendar quarter to effect the substitution of
substituted Participants. Any transfer permitted hereunder where the
assignee does not become a substituted Limited Partner or Investor
General Partner shall be effective as of midnight of the last day of the
calendar month in which it is made, or, at the Managing General Partner's
election, 7:00 A.M. of the following day. No such transfer, including a
transfer of less than all of a party's rights hereunder or the transfer
of rights hereunder to more than one party, shall relieve the transferor
of its responsibility for its proportionate part of any expenses,
obligations and liabilities hereunder related to the interest so
transferred, whether arising prior or subsequent to such transfer, nor
shall any such transfer require an accounting by the Managing General
Partner, or the granting of rights hereunder as between such parties and
the remaining parties hereto, including the exercise of any elections
hereunder, to more than one party unanimously designated by the
transferees and, if he should have retained an interest hereunder, the
transferor.
Until a proper designation acceptable to it is received by the Managing
General Partner, it shall continue to account only to the person to whom
it was furnishing notices prior to such time pursuant to .8.01 and its
subsections; and such party shall continue to exercise all rights
applicable to the entire interest previously owned by the transferor.
6.03. RIGHT OF MANAGING GENERAL PARTNER TO HYPOTHECATE AND/OR WITHDRAW
ITS INTERESTS. The Managing General Partner shall have the authority
(without the consent of the Participants and without affecting the
allocation of costs and revenues received or incurred hereunder), to
hypothecate, pledge, or otherwise encumber, on any terms it sees fit, its
Partnership interest (or an undivided interest in the assets of the
Partnership equal to or less than its respective interest in the revenues
of the Partnership) to obtain funds for use by it for its own general
purposes. All repayments of such borrowings and costs and interest or
other charges related thereto shall be borne and paid separately by the
Managing General Partner; and in no event shall such repayments, costs,
interest, or other
charges be charged to the account of the Participants.
In addition, subject to a required participation of not less than 1% of
the Partnership Subscription, the Managing General Partner may withdraw a
property interest held by the Partnership in the form of a Working
Interest in the Partnership ▇▇▇▇▇ equal to or less than its respective
interest in the revenues of the Partnership if such withdrawal is
necessary to satisfy the bona fide request of its creditors or approved
by Participants whose Agreed Subscriptions equal a majority of the
Partnership Subscription.
6.04. REPURCHASE OBLIGATION.
6.04(a). IN GENERAL. Participants shall have the right to present their
interests to the Managing General Partner subject to the conditions and
limitations set forth in this section. The Managing General Partner shall
not purchase more than 10% of the Units in any calendar year and shall
not purchase less than one Unit of a Participant's interests in the
Partnership unless such lesser amount represents the entire amount of the
Participant's interest. The Managing General Partner may waive these
limitations in its sole discretion other than the limitation that it
shall not purchase more than 10% of the Units in any calendar year. The
Participant is not obligated to accept such repurchase offer.
The Managing General Partner shall offer to repurchase a Participant's
interest in cash in the second quarter of every year beginning in 2000.
The commencement of the offer must be made within 120 days of the reserve
report set forth in .4.03(b)(3). A Participant may accept the repurchase
offer by a written acceptance. No repurchase shall be considered
effective until after the payment has been made to the Participant in
cash. In addition, in accordance with Treas. Reg. .1.7704-1(f), no
repurchase shall occur until at least 60 calendar days after the
Participant notifies the Partnership in writing of the Participant's
intention to exercise the repurchase right.
6.04(b). INDEPENDENT PETROLEUM CONSULTANT. The amount attributable to
Partnership reserves shall be determined based upon the last reserve
report of the Partnership reviewed by the Independent Expert. The
Partnership and the Independent Expert shall estimate the present worth
of future net revenues attributable to the Partnership's interest in the
Proved Reserves, and in making this estimate, they shall employ a
discount rate equal to 10%, use a constant price for the oil and base the
price of gas upon the existing gas contracts at the time of the
repurchase. The calculation of the repurchase price shall be as set forth
in .6.04(c).
6.04(c). CALCULATION OF REPURCHASE PRICE. The purchase price shall be
based upon the Participant's share of the net assets and liabilities of
the Partnership and allocated pro rata to each Participant based upon his
Agreed Subscription. The repurchase price shall include the sum of the
following items:
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Pg57(Page30)
(i) an amount based on 70% of the present worth of future net
revenues from the Partnership's Proved Reserves determined as
described in .6.04(b);
(ii) Partnership cash on hand;
(iii) prepaid expenses and accounts receivable of the Partnership,
less a reasonable amount for doubtful accounts; and
(iv) the estimated market value of all assets of the Partnership, not
separately specified above, determined in accordance with
standard industry valuation procedures.
There shall be deducted from the foregoing sum the following items:
(i) an amount equal to all Partnership debts, obligations, and other
liabilities, including accrued expenses; and
(ii) any distributions made to the Participants between the date of
the request and the actual payment; provided, however, that if
any cash distributed was derived from the sale, subsequent to the
request, of oil, gas or other mineral production, or of a
producing property owned by the Partnership, for purposes of
determining the reduction of the purchase price, such
distributions shall be discounted at the same rate used to take
into account the risk factors employed to determine the present
worth of the Partnership's Proved Reserves.
The purchase price may be further adjusted by the Managing General
Partner for estimated changes therein from the date of such report to the
date of payment of the purchase price to the Participants: (i) by reason
of production or sales of, or additions to, reserves and lease and well
equipment, sale or abandonment of Leases, and similar matters occurring
prior to the request for repurchase, and (ii) by reason of any of the
following occurring prior to payment of the purchase price to the selling
Participants: changes in well performance, increases or decreases in the
market price of oil, gas, or other minerals, revision of regulations
relating to the importing of hydrocarbons, changes in income, ad valorem,
and other tax laws (e.g. material variations in the provisions for
depletion) and similar matters.
6.04(d). SELECTION BY LOT. If less than all interests presented at any
time are to be purchased, the Participants whose interests are to be
purchased will be selected by lot. The Managing General Partner's
obligation to purchase such interests may be discharged for the benefit
of the Managing General Partner by a third party or an Affiliate. The
interests of the selling Participant will be transferred to the party who
pays for it. A selling Participant will be required to deliver an
executed assignment of his interest, together with such other
documentation as the Managing General Partner may reasonably request.
6.04(e). NO OBLIGATION OF THE MANAGING GENERAL PARTNER TO ESTABLISH A
RESERVE. The Managing General Partner shall have no obligation to
establish any reserve to satisfy the repurchase obligations under this
section.
6.04(f). SUSPENSION OF REPURCHASE OBLIGATION. The Managing General
Partner may suspend its repurchase obligation at any time if it does not
have sufficient cash flow or is unable to borrow funds for such purpose
on terms it deems reasonable, by so notifying the Participants. In
addition, the Managing General Partner's repurchase obligation may be
conditioned, in the Managing General Partner's sole discretion, on the
Managing General Partner's receipt of an opinion of counsel that such
transfers will not cause the Partnership to be treated as a "publicly
traded partnership" under the Code. The Managing General Partner shall
hold such repurchased Units for its own account and not for resale.
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ARTICLE VII
DURATION, DISSOLUTION, AND WINDING UP
7.01. DURATION.
7.01(a). FIFTY YEAR TERM. The Partnership shall continue in existence for
a term of fifty years from the effective date of this Agreement unless
sooner terminated as hereinafter set forth.
7.01(b). TERMINATION. The Partnership shall terminate following the
occurrence of a Final Terminating Event, or upon the occurrence of any
event which under the Pennsylvania Revised Uniform Limited Partnership
Act causes the dissolution of a limited partnership.
7.01(c). CONTINUANCE OF PARTNERSHIP. Except upon the occurrence of a
Final Terminating Event, the Partnership or any successor limited
partnership shall not be wound up, but shall be continued by the parties
and their respective successors as a successor limited partnership under
all the terms of this Agreement. Such successor limited partnership shall
succeed to all of the assets of the Partnership. As used throughout this
Agreement, the term "Partnership" shall include such successor limited
partnerships and the parties thereto.
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Pg.58
7.02. DISSOLUTION AND WINDING UP. Upon the occurrence of a Final
Terminating Event, the affairs of the Partnership shall be wound up and
there shall be distributed to each of the parties its Distribution
Interest in the remaining assets of the Partnership. To the extent
practicable and in accordance with sound business practices in the
judgment of the Managing General Partner, liquidating distributions shall
be made by the end of the taxable year in which liquidation occurs
(determined without regard to .706(c)(2)(A) of the Code) or, if later,
within ninety days after the date of such liquidation. Provided, however,
amounts withheld for reserves reasonably required for liabilities of the
Partnership and installment obligations owed to the Partnership need not
be distributed within the foregoing time period so long as such withheld
amounts are distributed as soon as practicable. Any in kind property
distributions to the Participants shall be made to a liquidating trust or
similar entity for the benefit of the Participants, unless at the time of
the distribution:
(1) the Managing General Partner shall offer the individual
Participants the election of receiving in kind property
distributions and the Participants accept such offer after being
advised of the risks associated with such direct ownership; or
(2) there are alternative arrangements in place which assure the
Participants that they will not, at any time, be responsible for
the operation or disposition of Partnership properties.
It shall be presumed that a Participant has refused such consent if the
Managing General Partner has not received such consent within thirty days
after the Managing General Partner mailed the request for such consent.
Any Partnership asset which would otherwise be distributed in kind to a
Participant, but for the failure or refusal of such Participant to give
his written consent to such distribution, may instead be sold by the
Managing General Partner at the best price reasonably obtainable from an
independent third party who is not an Affiliate of the Managing General
Partner.
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(Page 31)
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01. NOTICES.
8.01(a). METHOD. Any notice required hereunder shall be in writing,
and given by mail or wire addressed to the party to receive such notice
at the address designated in .1.03.
8.01(b). CHANGE IN ADDRESS. The address of any party hereto may be
changed by written notice to the other parties hereto in the event of a
change of address by the Managing General Partner or to the Managing
General Partner in the event of a change of address by a Participant;
provided, however, that in the event of a transfer of rights hereunder,
no notice to any such transferee shall be required, nor shall such
transferee have any rights hereunder, until notice thereof shall have
been given to the Managing General Partner. Any transfer of rights
hereunder shall not increase the duty to give notice, and in the event of
a transfer of rights hereunder to more than one party, notice to any
owner of any interest in such rights shall be notice to all owners
thereof.
8.01(c). TIME NOTICE DEEMED GIVEN. Any notice shall be considered given,
and any applicable time shall run, from the date such notice is placed in
the mails or delivered to the telegraph company as to any notice given by
the Managing General Partner and when received as to any notice given by
any Participant.
8.01(d). EFFECTIVENESS OF NOTICE. Any notice to a party other than the
Managing General Partner, including a notice requiring concurrence or
nonconcurrence, shall be effective, and any failure to respond binding,
irrespective of whether or not such notice is actually received, and
irrespective of any disability or death on the part of the noticee,
whether or not known to the party giving such notice.
8.01(e). FAILURE TO RESPOND. Except where this Agreement expressly
requires affirmative approval of a Participant, any Participant who fails
to respond in writing within the time specified for such response (which
time shall be not less than fifteen business days from the date of
mailing of such request) to a request by the Managing General Partner for
approval of or concurrence in a proposed action shall be conclusively
deemed to have approved such action.
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Pg59 (Page32)
8.02. TIME. Time is of the essence of each part of this Agreement.
8.03. APPLICABLE LAW. The terms and provisions hereof shall be construed
under the laws of the Commonwealth of Pennsylvania, provided, however,
this .8.03 shall not be deemed to limit causes of action for violations
of federal or state securities law to the laws of the Commonwealth of
Pennsylvania. Neither this Agreement nor the Subscription Agreement shall
require mandatory venue or mandatory arbitration of any or all claims by
Participants against the Sponsor.
8.04. AGREEMENT IN COUNTERPARTS. This Agreement may be executed in
counterpart and shall be binding upon all parties executing this or
similar agreements from and after the date of execution by each party.
8.05. AMENDMENT. No changes herein shall be binding unless proposed in
writing by the Managing General Partner, and adopted with the consent of
Participants whose Agreed Subscriptions equal a majority of the
Partnership Subscription; or unless proposed in writing by Participants
whose Agreed Subscriptions equal 10% or more of the Partnership
Subscription and approved by an affirmative vote of Participants whose
Agreed Subscriptions equal a majority of the Partnership Subscription;
provided, however, that the Managing General Partner is authorized to
amend this Agreement and its exhibits without such consent in any way
deemed necessary or desirable by it: (i) to add or substitute (in the
case of an assigning party) additional Limited Partners or Investor
General Partners; (ii) to enhance the tax benefits of the Partnership to
the parties; and (iii) to satisfy any requirements, conditions,
guidelines, options, or elections contained in any opinion, directive,
order, ruling, or regulation of the Securities and Exchange Commission,
the Internal Revenue Service, or any other federal or state agency, or in
any federal or state statute, compliance with which it deems to be in the
best interest of the Partnership. Notwithstanding the foregoing, no
amendment materially and adversely affecting the interests or rights of
Participants shall be made without the consent of the Participants whose
interests will be so affected.
8.06. ADDITIONAL PARTNERS. Each Participant hereby consents to the
admission to the Partnership of such additional Limited Partners or
Investor General Partners as the Managing General Partner, in its
discretion, chooses to admit.
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(Page 32)
8.07. LEGAL EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties, their heirs, devisees, personal
representatives, successors and assigns, and shall run with the interests
subject hereto. The terms "Partnership," "Limited Partner," "Investor
General Partner," "Participant," "Partner," "Managing General Partner,"
"Operator," or "parties" shall equally apply to any successor limited
partnership, and any heir, devisee, personal representative, successor or
assign of a party.
IN WITNESS WHEREOF, the parties hereto set their hands and seal as of the
day and year hereinabove shown.
ATLAS:
Attest:
By:/s/▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇ (SEAL) Secretary
ATLAS RESOURCES, INC.
Managing General Partner
By:/s/J.R. O'Mara
▇▇▇▇▇ ▇. ▇'▇▇▇▇, President