PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP II-B AGREEMENT
AND CERTIFICATE
OF LIMITED PARTNERSHIP
Agreement and Certificate of Limited Partnership, dated as of October 14,
1987, among Geodyne Properties, Inc., a Delaware corporation, as General
Partner, and Geodyne Depositary Company, a Delaware corporation, the Depositary.
Whereas, the parties hereto wish to form a limited partnership under the
Oklahoma Revised Uniform Limited Partnership Act pursuant to this Agreement and
Certificate of Limited Partnership;
Now, Therefore, in consideration of the mutual promises and agreements
made herein, the parties, intending to be legally bound, hereby agree as
follows:
ARTICLE ONE
Defined Terms
The defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article One. The
singular shall include the plural and the masculine gender shall include the
feminine, the neuter and vice versa, as the context requires. Any terms used in
this Agreement which are defined in the Production Partnership Agreement and are
not otherwise defined herein shall have the respective meanings set forth in the
Production Partnership Agreement.
"Accountants" shall mean ▇▇▇▇▇▇ ▇▇▇▇▇ & Company or such other nationally
recognized firm of independent certified public accountants as shall be engaged
from time to time by the General Partner for the Limited Partnership.
"Act" shall mean the Oklahoma Revised Uniform Limited Partnership Act, as
amended from time to time.
"Activation" or "Activated" shall mean the date on which (i) with respect
to the Limited Partnership, the Limited Partnership is formed and (ii) with
respect to the Production Partnership, the Limited Partnership shall have made
its capital contribution to the Production Partnership.
"Affiliate" shall mean, when used with reference to a specified Person:
(a) any Person directly or indirectly owning, controlling, or holding with power
to vote 10% or more of the outstanding voting securities of the specified
Person; (b) any Person 10% or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote by the
specified Person; (c) any Person directly or indirectly controlling, controlled
by, or under common control with, the specified Person; (d) any Person who is an
officer, director, partner or trustee of, or serves in a similar capacity with
respect to, the specified Person or of which the specified Person is an officer,
director, partner or trustee, or with respect to which the specified Person
serves in a similar
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capacity; and (e) any relative or spouse of the specified Person.
Notwithstanding the foregoing, no Person shall be deemed to be an Affiliate
solely by reason of its ownership of depositary units or limited partnership
interests in a limited partnership.
"Affiliated Program" shall mean a drilling or income program (whether in
the form of a limited partnership, general partnership, joint venture or
otherwise) interests in which were offered to persons or entities not engaged in
a trade or business within the oil and gas industry (other than by virtue of its
participation in an Affiliated Program) and of which the General Partner or
Affiliate serves as general partner, venturer, sponsor or manager.
"Agreement" shall mean this Agreement and Certificate of Limited
Partnership as originally executed and as amended from time to time.
"Capital Account" shall mean, as to any Partner or Unit Holder, an
account maintained on the books of the Limited Partnership in accordance with
the provisions of Section 5.3D below.
"Capital Contribution" shall mean the cash contribution of a Partner to
the Limited Partnership.
"Code" shall mean the Internal Revenue Code of 1986, as amended (or any
corresponding provisions of succeeding law).
"Commissions" shall mean the cash fees payable to the Dealer Manager and
the Selected Dealers in connection with their participation in the offering of
Depositary Units.
"Consent" shall mean the consent of a Person, given as provided in
Section 12.1, to do the act or thing for which the consent is solicited, or the
act of granting such consent, as the context may require.
"Dealer Manager" shall mean PaineWebber Incorporated, a Delaware
corporation.
"Depositary" shall mean Geodyne Depositary Company, a Delaware
corporation and the Limited Partner or any Person who at the time of reference
thereto has been admitted to the Limited Partnership with the consent of the
General Partner as a successor to the Interest of Geodyne Depositary Company in
the Limited Partnership.
"Depositary Receipt" shall mean a certificate issued in registered form
by the Depositary evidencing the ownership of one or more Depositary Units.
"Depositary Unit" shall mean an increment of the attributes of the
Interest of the Depositary as a Limited Partner that is assigned to a Unit
Holder.
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"Direct Administrative Costs" shall mean the actual and necessary direct
costs attributable to services provided to the Limited Partnership by parties
other than the General Partner or its Affiliates, whether incurred by the
Limited Partnership directly or incurred by the General Partner or its
Affiliates, including the annual audit fees, legal fees and expenses, the cost
of reviewing tax returns and reports, the cost of evaluations prepared by
independent petroleum engineers pursuant to Section l0.4C of this Agreement and
all other such costs directly incurred by or for the benefit of the Limited
Partnership.
"Distributable Cash" shall mean, with respect to the Limited
Partnership's operations at any time, the amount of cash assets on hand at such
time less amounts required to be retained out of such cash assets, in the sole
judgment of the General Partner, to pay costs, expenses or other obligations
whether then accrued or anticipated to accrue in the future.
"Eligible Investor" shall mean a person who is an "independent producer"
for purposes of the Crude Oil Windfall Profit Tax Act of 1980 and who is
qualified to hold an interest in oil and gas leases on federal lands, including
offshore areas under federal laws and regulations in effect from time to time.
As of the date hereof, the term "Eligible Investor" means: (a) (i) a citizen of
the United States who has attained the age of majority under the laws of the
state in which he resides, (ii) an association (including a partnership, joint
tenancy or tenancy in common) organized or existing under the laws of the United
States or any state of territory thereof, all of the members of which are
citizens of the United States or (iii) a corporation organized under the laws of
the United States or any state or territory thereof, of which corporation, to
the best of its knowledge, not more then 5% of the voting stock, or of all the
stock, is owned or controlled by citizens of countries that deny to United
States citizens privileges to own stock in corporations holding oil and gas
leases similar to the privileges of non-United States citizens to own stock in
corporations holding an interest in federal leases, and, in each case, whose
interest, direct or indirect, in federal oil and gas leases, applications,
offers and options therefor does not exceed 246,000 acres in the same state, of
which no more than 200,000 acres are under option, nor does it exceed 300,000
acres in each of the northern and southern leasing districts of Alaska, of which
no more than 200,000 acres are held under option in each of such districts; and
(b) any person other than a person who either (i) sells petroleum products,
directly or through "related" persons, through retail outlets, if gross sales of
petroleum products exceed $5,000,000 in any calendar year or (ii) refines, in
conjunction with "related" persons, more than 50,000 barrels of crude oil on any
day during a calendar year. A "related" person includes any person in which a
person has a significant ownership interest (5% or more), or which has such an
interest in the person, or in which a third person having such an interest in
the person also has an interest.
"Fiscal Year" shall mean the calendar year.
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"General and Administrative Costs" shall mean all customary and routine
legal, accounting, data processing, depreciation (other than depreciation
relating to real property), geological, engineering, travel, office rent,
telephone, secretarial, employee compensation and benefits, and other items of a
general and administrative nature, whether like or unlike the foregoing, and any
other incidental expenses reasonably necessary to the conduct of the Limited
Partnership's business, and generated by the General Partner or any Affiliate
(including the Depositary) other than an Affiliated Program computed on a cost
basis, determined by the General Partner in accordance with generally accepted
accounting principles and subject to review by an independent public accountant
or certified public accountant in connection with the annual audit of the
Limited Partnership and its Affiliates. General and Administrative Costs shall
not include any Direct Administrative Costs or costs of the Production
Partnership.
"General Partner" shall mean Geodyne Properties, Inc., a Delaware
corporation, acting in such capacity, and any other Person admitted as an
additional or substituted General Partner pursuant to the provisions of Article
Six of this Agreement.
"Geodyne Properties" shall mean Geodyne Properties, Inc., a Delaware
corporation.
"Hydrocarbons" shall mean crude oil, natural gas, condensate, natural gas
liquids and other liquid or gaseous hydrocarbons.
"Incapacity" or "Incapacitated" shall mean the adjudication of bankruptcy
(except that, in the case of the General Partner, the term "bankruptcy" shall
mean only being subject to Chapter 7 of the Federal Bankruptcy Reform Act of
1978), of interdiction, of incompetence, or of insanity, or the death,
dissolution or termination (other than by merger or consolidation under which
the surviving entity agrees to assume all of the obligations and
responsibilities of the merged or consolidated Person set forth in this
Agreement), as the case may be, of any Person.
"Income" shall mean the gross income of the Limited Partnership or the
Production Partnership (as the context may require) as determined for Federal
income tax purposes, including all capital or Code Section 1231 gains (but not
losses).
"Interest" shall mean the entire ownership interest (which may, either
for a Partner's Capital Account or a Partner's Profits interest, be expressed as
a percentage) of a Partner in the Limited Partnership at any particular time,
including the rights and obligations of such Partner under this Agreement and
the Act.
"Limited Partner" shall mean the Depositary.
"Limited Partnership" shall mean the limited partnership formed hereby.
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"Limited Partnership Account" shall mean the bank account or accounts
established by the General Partner pursuant to Section 10.3 of this Agreement.
"Limited Partnership Property" shall mean all interest, property and
right of any type owned by the Limited Partnership.
"Managing Partner" shall mean Geodyne Production Company, a Delaware
corporation, in such capacity, and any successor acting in such capacity.
"Notification" shall mean a writing, containing the information required
by this Agreement to be communicated to any Person, hand delivered or sent by
registered or certified mail, return receipt requested, postage prepaid, to such
Person at the last known address of such Person, the date of the certified
receipt (or such other evidence of receipt) therefor being deemed the date of
the giving of Notification; provided, however, that any written communication
containing the information sent or delivered to the Person and actually received
by the Person shall constitute Notification for all purposes of this Agreement.
"Organization and Offering Costs" shall mean all costs and expenses
incurred by the General Partner and its Affiliates in connection with the
organization and activation of the Limited Partnership, including, without
limitation, the legal, printing, accounting and other direct and indirect costs
incurred in connection with preparing, filing and recording of this Agreement,
the costs incurred with respect to the registration for offer and sale of the
Depositary Units under applicable federal and state securities laws, the
wholesale offering and marketing fees and expenses of the Dealer Manager and a
subsidiary of the General Partner which is a registered broker--dealer and other
front-end fees (other than any organization and offering costs as defined in the
Production Partnership Agreement). Organization and Offering Costs shall not
include the Commissions paid to the Dealer Manager or reallowed to the Selected
Dealers, but shall include fees and expenses (including expense reimbursements)
paid to persons in connection with the offering of Depositary Units and issuing
Depositary Receipts, including due diligence costs; and, subject to the Dealer
Manager's control, sales incentive items, including but not limited to travel
bonuses, and awards for account executives participating in the offering and
sales incentives and other payments offered to representatives of the Dealer
Manager to promote the solicitation of subscriptions.
"Partner" shall mean the General Partner or any Limited Partner.
"Person" shall mean any individual, partnership, corporation, trust or
other entity.
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"Prior Limited Partnership" shall mean any limited partnership activated
prior to the Activation of the Limited Partnership of which depositary units or
units of limited partnership interest were offered and sold pursuant to the
Prospectus or pursuant to the prospectus prepared for the PaineWebber/Geodyne
Energy Income Program I.
"Production Partnership" shall mean the general partnership of which the
Limited Partnership is a general partner.
"Production Partnership Agreement" shall mean the agreement of general
partnership under which the Production Partnership was formed, as amended from
time to time.
"Production Partnership Well" shall mean any well in which the Production
Partnership has an interest.
"Producing Property" shall mean any property (or interest in such
property) with a well or ▇▇▇▇▇ capable of producing Hydrocarbons in commercial
quantities or properties unitized with such properties or properties adjacent to
such properties which are acquired as an incidental part of the acquisition of
such properties. The term also includes well machinery and equipment, gathering
systems, storage facilities or processing installations or other equipment and
property associated with the production of Hydrocarbons. Interests in properties
may include Working Interests, production payments, Royalties and other
nonworking and nonoperating interests.
"Profits" and "Losses" shall mean the income or losses of the Limited
Partnership for Federal income tax purposes determined as of the close of the
Limited Partnership's Fiscal Year, as well as, when the context requires, any
tax--exempt income and nondeductible expenses.
"Prospectus" shall mean the prospectus pursuant to which the Depositary
Units were offered, including all supplements or amendments thereto delivered in
such offering, if any.
"Proved Reserves" shall mean those quantities of Hydrocarbons, which,
upon analysis of geologic and engineering data, appear with reasonable certainty
to be recoverable in the future from known Hydrocarbon reservoirs under existing
economic and operating conditions. Proved reserves are limited to those
quantities of Hydrocarbons which can be expected, with little doubt, to be
recoverable commercially at current prices and costs, under existing regulatory
practices and with existing conventional equipment and operating methods.
Depending upon their status of development, such proved reserves shall be
subdivided into the following classifications and have the following
definitions:
(a) "Proved Developed Reserves" shall mean proved reserves which
can be expected to be recovered through existing ▇▇▇▇▇ with existing
equipment and operating methods. This classification shall include:
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(1) "Proved Developed Producing Reserves" which are proved
developed reserves which are expected to be produced from existing
▇▇▇▇▇; and
(2) "Proved Developed Non--Producing Reserves" which are
proved developed reserves which exist behind the casing of existing
▇▇▇▇▇, or at minor depths below the present bottom of such ▇▇▇▇▇,
which are expected to be produced through these ▇▇▇▇▇ in the
predictable future, where the cost of making Hydrocarbons available
for production should be relatively small compared to the cost of a
new well.
Additional Hydrocarbons expected to be obtained through the
application of improved recovery techniques are included as "Proved
Developed Reserves" only after testing by a pilot project or after the
operation of an installed program has confirmed through production
responses that increased recovery will be achieved.
(b) "Proved Undeveloped Reserves" shall mean all reserves which are
expected to be recovered from new ▇▇▇▇▇ on undrilled acreage or from
existing ▇▇▇▇▇ where a relatively major expenditure is required for
recompletion. Such reserves on undrilled acreage are limited to those
drilling units offsetting productive units which are reasonably certain
of production when drilled; provided that proved reserves for other
undrilled units can be claimed where it can be demonstrated with
certainty, based on accepted geological, geophysical and engineering
studies and data, that there is continuity of production from an existing
productive formation. No estimates for Proved Undeveloped Reserves are
attributable to any acreage for which improved recovery is contemplated,
unless the techniques to be employed have been proved effective by actual
tests in the same area and reservoir.
"Remove", "Removed" or "Removal" shall mean, with reference to the
removal of the General Partner, the termination of the management powers, duties
and responsibilities of the General Partner pursuant to Section 6.5 of this
Agreement and the removal of the General Partner as a Partner.
"Royalty" shall mean an interest, including an overriding royalty and a
net profits interest, in gross production or the proceeds therefrom which does
not require the owner thereof to bear any of the cost of production,
development, operation or maintenance.
"Sale" shall mean any event or transaction that is, for federal income
tax purposes, considered a sale, exchange or abandonment by the Limited
Partnership of any Limited Partnership Property.
"Selected Dealer" shall mean a member in good standing of the National
Association of Securities Dealers, Inc. which has been selected by the Dealer
Manager to offer and sell the Depositary Units.
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"State" shall mean the State of Oklahoma.
"Subscription Agreement" shall mean the Subscription Agreement in the
form attached to the Prospectus as Exhibit C.
"Subsequent Limited Partnership" shall mean any limited partnership
activated after the Activation of the Limited Partnership of which Depositary
Units are offered and sold pursuant to the Prospectus.
"Substituted Limited Partner" shall mean any Person admitted to the
Limited Partnership as a Partner pursuant to Section 7.3 or Sections 8.1 and 8.2
of this Agreement.
"Unit Holders" shall mean any Person who holds Depositary Receipts in
accordance with Section 7.1 or Section 8.3 hereof as reflected in the records of
the Partnership and the Depositary.
"Unit Holders' Subscription" shall mean the aggregate dollar amount
initially subscribed for by investors to acquire the Depositary Units.
"Working Interest" shall mean the interest (whether held directly or
indirectly) in a lease (as defined in the Production Partnership Agreement)
which is subject to some portion of the expense of production, development,
operation or maintenance.
ARTICLE TWO
Name, Place of Business and Office; Term
Section 2.1. Name, Place of Business and Office, Agent
The Limited Partnership shall be conducted under the name
PaineWebber/Geodyne Energy Income Limited Partnership II-B. The business of the
Limited Partnership may, however, be conducted under any other name deemed
necessary or desirable by the General Partner in order to comply with applicable
laws. The office and principal place of business of the Limited Partnership
shall be c/o Geodyne Properties, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. The agent for service of process on the Limited
Partnership shall be Geodyne Properties, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. The General Partner may change the
principal place of business and the location of such office and may establish
such additional offices as they deem advisable from time to time; provided,
however, that in the event the principal place of business of the Limited
Partnership shall be changed, the General Partner shall provide Notification
thereof to the Unit Holders. The General Partner shall not be obligated to
provide a copy of the Certificate of Limited Partnership as filed with the
Oklahoma Secretary of State to the Limited Partner or Unit Holders.
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Section 2.2. Purpose
The business and purpose of the Limited Partnership shall be to become a
general partner in the Production Partnership. Such business and purpose shall
include the doing of any and all things incident thereto or connected therewith,
including the carrying on of the business of the Production Partnership in the
event of its termination if it is determined by the General Partner to be in the
best interests of the Unit Holders. The Limited Partnership shall not engage in
any other business or activity.
Section 2.3 Term
The Limited Partnership shall continue in force and effect until December
31, 2001, provided that the General Partner shall extend the term of the Limited
Partnership for up to five periods of two years each in the event that the
Production Partnership's term has been so extended, or until dissolution prior
thereto pursuant to the provisions hereof.
ARTICLE THREE
Partners and Capital
Section 3.1. General Partner
The name, address and Capital Contribution of the General Partner are set
forth in Schedule A attached hereto and are incorporated herein.
Section 3.2. Limited Partner
A. The name, address and Capital Contribution of the Depositary as
Limited Partner are set forth in Schedule A hereto and are incorporated
herein.
B. Neither the Depositary nor any Unit Holder shall be required to
make any additional capital contribution to the Limited Partnership.
C. The Depositary shall engage in no business activity and shall incur no
liabilities other than acting as Depositary for the Limited Partnership or any
other limited partnership in which depositary units evidencing assignments of
limited partnership interests are offered by the Prospectus. The Depositary
shall not amend its Certificate of Incorporation or By-laws without the prior
Consent of the Limited Partnership.
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Section 3.3. Certain Returns of Capital
Any portion of the capital contribution of the Limited Partnership to the
Production Partnership which is distributed to the Limited Partnership pursuant
to Section 3.4 of the Production Partnership Agreement shall be distributed
promptly to the Unit Holders in proportion to the Depositary Units held by them
as a return of part of their Subscription. In addition, the General Partner
shall contribute cash to the Limited Partnership (with respect to which its
Capital Account will be credited) in an amount equal to the amounts paid to the
General Partner or its Affiliates from the Unit Holders' Subscriptions in
respect of Commissions and Organization and Offering Costs attributable (on a
proportionate basis) to the amount of the unexpended Unit Holders' Subscriptions
so refunded, which cash shall be refunded pro rata to the Limited Partners
(except that cash representing refunded Commissions shall be distributed to each
Unit Holder in proportion to the manner in which Commissions attributable to its
subscriptions were payable) together with the unexpended Unit Holders'
Subscriptions.
Section 3.4. Limited Partnership Capital
A. No Partner shall be paid interest on any Capital Contribution to the
Limited Partnership or on such Partner's Capital Account, notwithstanding any
disproportion therein as between Partners.
B. Except as provided in Sections 3.2, 3.3, 6.1 and 9.2 of this
Agreement, no Partner or Unit Holder shall have the right to withdraw or receive
any return of the Capital Contribution. Under circumstances involving a return
of any Capital Contribution, no Limited Partner or Unit Holder shall have
priority over any other Limited Partner nor shall any Partner or Unit Holder
have the right to receive any property other than cash, except as may otherwise
be provided in Sections 6.4 and 9.2A of this Agreement.
Section 3.5. Application of Capital Contributions
A. The General Partner shall deposit in the Limited Partnership Account
the Capital Contributions attributable to the Limited Partner and shall apply
such Capital Contributions to (i) pay to the General Partner an amount equal to
3.5% of the Unit Holders' Subscriptions in consideration of the General
Partner's payment of Organization and Offering Costs, (ii) pay Commissions,
(iii) establish a reasonable reserve for working capital, and (iv) contribute
the balance of the Partners' Capital Contributions to the Production Partnership
in exchange for the Limited Partnership's interest therein.
C. The Limited Partnership shall not incur any borrowings; provided,
however, that borrowings may be incurred on its behalf by the Production
Partnership to pay costs of the Production Partnership allocable to the Limited
Partnership.
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Section 3.6. Liability of Partners and Unit Holders
A. Except as provided in the Act, neither the Depositary nor the Unit
Holders shall be personally liable for any debts, liabilities, contracts or
obligations of the Limited Partnership. To the extent that any distribution
pursuant to Sections 5.1 or 9.2 is deemed to constitute a return of capital
under the Act, the General Partner shall not seek to recover any distribution
unless the General Partner has applied all other available Limited Partnership
assets to the payment of liabilities of the Limited Partnership and the
liabilities of the Limited Partnership, other than to Partners, have not been
fully paid, satisfied, assumed or discharged. In no event shall the Depositary
or any Unit Holder be obligated to make any contribution to the Limited
Partnership for any purpose whatsoever other than Capital Contributions of the
Depositary representing the proceeds of the offering of Depositary Units.
B. Geodyne Properties and any General Partner subsequently admitted to
the Limited Partnership agrees that it shall remain generally liable for any
obligation or recourse liability of the Limited Partnership incurred during the
period in which it is a General Partner and to the extent the Limited
Partnership has incurred personal liability.
ARTICLE FOUR
Management
Section 4.1. Management and Control of the Limited Partnership
A. The General Partner, within the authority granted to it under and in
accordance with the provisions of this Agreement, shall have the full and
exclusive right to manage and control the business and affairs of the Limited
Partnership and to make all decisions regarding the business of the Limited
Partnership and shall have all of the rights, powers and obligations of a
general partner of a limited partnership under the laws of the State.
B. Neither the Depositary or any Unit Holder, as such, shall participate
in the management of or have any control over the Limited Partnership's business
nor shall the Depositary or any Unit Holder, as such, have the power to
represent, act for, sign for or bind the General Partner or the Limited
Partnership. The Depositary and the Unit Holders hereby consent to the exercise
by the General Partner of the powers conferred on it by this Agreement.
Section 4.2. Powers of the General Partner
A. In addition to any other rights and powers which the General Partner
may possess under this Agreement and the Act, the General Partner shall have the
power, except and subject to the extent otherwise provided or limited in this
Agreement:
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(i) to contribute the balance (after payment and retention of the
amounts set forth in Section 3.5) of all Capital Contributions to the
Production Partnership as required by the Limited Partnership's interest
therein, and to execute the Production Partnership Agreement (including
any amendment and restatement thereof) on behalf of the Limited
Partnership;
(ii) if the Production Partnership is dissolved, to enter into all
transactions contemplated by the Production Partnership Agreement,
subject to the limitations and provisions contained therein,
notwithstanding anything to the contrary contained herein;
(iii) to maintain the books and records of the Limited
Partnership in accordance with the provisions of Section 10.1;
(iv) subject to Sections 4.5D, 4.5E and 4.5F, to consent to certain
actions on behalf of the Limited Partnership pursuant to the Production
Partnership Agreement;
(v) to engage in any kind of activity and execute, perform and
carry out contracts, agreements and other documents of any kind necessary
or incidental to, or in connection with, the accomplishment of the
purposes of the Limited Partnership; and
(vi) to perform all duties imposed by Sections 6221 through 6232 of
the Code on the General Partner as "tax matters partner" of the Limited
Partnership, including (but not limited to) the following: (a) the power
to conduct all audits and other administrative proceedings (including
windfall profits tax audits) with respect to Limited Partnership tax
items; (b) the power to extend the statute of limitations for all
Partners and Unit Holders with respect to Limited Partnership tax items;
(c) the power to file a petition with an appropriate federal court for
review of a final Limited Partnership administrative adjustment; and (d)
the power to enter into a settlement with the Internal Revenue Service on
behalf of, and binding upon, the Depositary and those Unit Holders having
less than a 1% interest in Profits unless the Depositary or Unit Holder
notifies the Internal Revenue Service and the General Partner that the
General Partner may not act on its behalf.
B. No person, firm or corporation dealing with the Limited Partnership
shall be required to inquire into the authority of the General Partner to take
or refrain from taking any action or make or refrain from making any decision,
but any person so inquiring shall be entitled to rely upon a certificate of the
General Partner as to its due authorization.
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Section 4.3. Prohibited Transactions
A. Notwithstanding any other provision of this Agreement to the
contrary, the following transactions are expressly prohibited:
(i) the Limited Partnership shall not make any loans to the
General Partner or any Affiliate;
(ii) except as expressly contemplated hereby, no agent, attorney,
accountant or other independent consultant or contractor who is also
employed on a full-time basis by the General Partner or any Affiliate
shall be compensated by the Limited Partnership for his services;
(iii) there shall be no commingling of Limited Partnership funds
with funds of any other entity; and
(iv) the Limited Partnership shall not make any advance payment to
the General Partner or its Affiliates, except where necessary to secure
tax benefits of prepaid drilling costs.
Section 4.4. Other Agreements of the General Partner
A. Anything in this Agreement to the contrary notwithstanding, it
is agreed that:
(i) the General Partner and its Affiliates shall not take any
action with respect to the assets or property of the Limited Partnership
which does not benefit primarily the Limited Partnership, including the
utilization of Limited Partnership funds as compensating balances for the
benefit of the General Partner or its Affiliates;
(ii) neither the General Partner nor any Affiliate shall render to
the Limited Partnership any services nor sell or lease to the Limited
Partnership any equipment or supplies unless:
(a) the General Partner or Affiliate is engaged,
independently of the Limited Partnership, in the business of
rendering such services or selling or leasing such equipment and
supplies to other Persons;
(b) 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 Limited Partnership; and
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(c) provided that, if the General Partner or Affiliate is not
engaged in a business within the meaning of subdivision (a), then
such compensation, price or rental shall be the cost of such
services, equipment or supplies to the General Partner or Affiliate
or the competitive rate which could be obtained in the area,
whichever is less.
Section 4.5. Restrictions on the Authority of the General Partner
A. The General Partner shall not have the authority to:
(i) do any act in contravention of this Agreement or which
would make it impossible to carry on the ordinary business of the
Limited Partnership;
(ii) confess a judgment against the Limited Partnership;
(iii) possess Limited Partnership Property or assign, pledge or
hypothecate rights in specific Limited Partnership Property for other
than a Limited Partnership purpose;
(iv) admit a Person as a General Partner or a Limited Partner
except as otherwise provided herein; or
(v) perform any act which would result in loss of the Depositary's
status as a limited partner under the Act or the laws of the State or the
loss of limited liability under the laws of any other jurisdiction in
which the Limited Partnership is doing business, or would subject it or
any Unit Holder to liability as a general partner in any jurisdiction
including use of the Depositary's or any Unit Holder's name in conducting
the business of the Limited Partnership.
B. The General Partner shall not lease, sell, abandon or otherwise
dispose of any assets of the Limited Partnership to the General Partner or to
any of its Affiliates; provided, however, that if the Limited Partnership should
own any inventory or other materials, such inventory or materials may be
transferred to the General Partner or any of its Affiliates at the applicable
rates set forth in the standard form of accounting procedure then recommended by
the Council of Petroleum Accountants Societies of North America.
C. Without the consent of the Depositary, which shall be given upon
receipt of the Consent of Unit Holders owning more than 50% of the outstanding
Depositary Units, the General Partner shall not have the authority to:
(i) lease, sell, or otherwise dispose of at any one time all or
substantially all of the assets of the Limited Partnership other than in
the ordinary course of business;
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(ii) elect to dissolve and wind up the Limited Partnership; or
(iii) except as set forth in Article Ten, adopt any amendment to
this Agreement.
D. The General Partner shall not cause the Limited Partnership to consent
to, or join in, any amendment, or modification of, or supplement to, or waiver
of the terms of, the Production Partnership Agreement unless: (i) in the
judgment of the General Partner such amendment, modification, supplement or
waiver would not materially adversely affect the Limited Partnership's rights
under the then existing Production Partnership Agreement or such amendment,
modification, supplement, or waiver is in the best interests of the Unit
Holders; or (ii) if the conditions of Section 12.3 are satisfied, the Consent of
the Depositary is obtained, which shall be given if the Consent of Unit Holders
owning more than 50% of the outstanding Depositary Units is obtained. If the
conditions of Section 12.3 are satisfied, the General Partner shall propose any
amendment to the Production Partnership Agreement on behalf of the Limited
Partnership which is proposed by Unit Holders owning at least 10% of the
outstanding Depositary Units.
E. Unless the conditions of Section 12.3 are satisfied and the Consent of
the Depositary is obtained, which shall be given if the Consent of Unit Holders
owning more than 50% of the outstanding Depositary Units is obtained, the
General Partner shall not have the authority to consent on behalf of the Limited
Partnership to the:
(i) lease, sale or other disposition at any one time of all or
substantially all of the assets of the Production Partnership; or
(ii) dissolution and winding up of the Production Partnership.
F. Unless the conditions of Section 12.3 are satisfied and the Consent of
the Depositary is obtained, which shall be given if the Consent of Unit Holders
owning more than 50% of the outstanding Depositary Units is obtained, the
General Partner shall not have the authority to cause the Limited Partnership to
(i) remove the Managing Partner, or (ii) appoint a successor Managing Partner
pursuant to Section 6.2 of the Production Partnership Agreement.
G. No creditor who makes a nonrecourse loan to the Limited Partnership
may have or acquire, at any time as a result of making the loan, any direct or
indirect interest in the profits, capital or property of the Limited Partnership
other than as a secured creditor.
Section 4.6. Duties and Obligations of the General Partner
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The General Partner shall:
(i) use its best efforts to take all actions that may be necessary or
appropriate for the continuation of the Limited Partnership's valid existence as
a limited partnership or partnership in commendam under the laws of the State
and the laws of any other jurisdiction in which the Limited Partnership is doing
business, and for the acquisition and holding, in accordance with the provisions
of this Agreement and applicable laws and regulations, of the interest of the
Limited Partnership in the Production Partnership;
(ii) devote to the Limited Partnership the time that it shall deem to be
necessary to conduct the Limited Partnership's business and affairs in the best
interests of the Limited Partnership;
(iii) be under a fiduciary duty and obligation to conduct the affairs of
the Limited Partnership in the best interests of the Limited Partnership,
including the safekeeping and use of all Limited Partnership funds and assets
(whether or not in the immediate possession or control of the General Partner)
and the use thereof for the benefit of the Limited Partnership;
(iv) at all times act with integrity and good faith and exercise due
diligence in all activities relating to the conduct of the business of the
Limited Partnership and in resolving conflicts of interest;
(v) use its best efforts at all times to maintain its aggregate net worth
at a level that is sufficient to meet all present and future requirements set by
statute, Treasury Regulations, the Internal Revenue Service or the courts to
ensure that the Limited Partnership will not fail to be classified for Federal
income tax purposes as a partnership, rather than as an association taxable as a
corporation, on account of the net worth of the General Partner;
(vi) prepare or cause to be prepared and shall file on or before the due
date (or any extension thereof) any Federal, state or local tax returns required
to be filed by the Limited Partnership;
(vii) cause the Limited Partnership to pay any taxes payable by the
Limited Partnership;
(viii) use its best efforts to cause the Limited Partnership to be
formed, reformed, qualified to do business, or registered under any applicable
assumed or fictitious name statute or similar law in any state in which the
Limited Partnership then owns property or transacts business, if such formation,
reformation, qualification or registration is necessary or advisable in its
counsel's opinion to protect the limited liability of the Depositary and the
Unit Holders or to permit the Limited Partnership lawfully to own property or
transact business;
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(ix) from time to time, prepare and file all amendments to this Agreement
and other similar documents that are required by law to be filed and recorded
for any reason, in the office or offices that are required under the laws of the
State or any other state in which the Limited Partnership is then formed or
qualified:
(x) do all other acts and things (including making publications or
periodic filings of this Agreement or amendments hereto or other similar
documents without the necessity of mailing or delivering copies of them to each
Unit Holder) that may now or hereafter be deemed by the General Partner to be
necessary,
(a) for the perfection and continued maintenance of the
Limited Partnership as a limited partnership under the laws of the
State,
(b) to protect the limited liability of the Depositary and the Unit
Holders under the laws of the State and other jurisdictions in which the
Limited Partnership is doing business, and
(c) to cause this Agreement, certificates or other documents to
reflect accurately the agreement of the Partners and the Unit Holders,
the identity of the Depositary as the Limited Partner and the amount of
its Capital Contribution made by the Depositary on behalf of the Unit
Holders;
(xi) monitor the activities of the Production Partnership and keep the
Unit Holders informed of them in the manner provided in this Agreement;
(xii) from time to time submit to any appropriate state securities
administrator all documents, papers, statistics and reports required to be filed
with or submitted to such state securities administrator; and
(xiii) inform each Unit Holder of all administrative and judicial
proceedings for an adjustment at the Limited Partnership or Production
Partnership level for partnership tax items and forward to each Unit Holder
within 30 days of receipt all notices received from the Internal Revenue Service
regarding the commencement of a partnership level audit or a final partnership
administrative adjustment, and to perform all other duties imposed by Sections
6221 through 6232 of the Code on Geodyne Properties as "tax matters partner" of
the Limited Partnership, including (but not limited to) the following: (a) the
power to conduct all audits and other administrative proceedings (including
windfall profit tax audits) with respect to Limited Partnership tax items; (b)
the power to extend the statute of limitations for all Partners with respect to
Limited Partnership tax items; and (c) the power to file a petition with an
appropriate federal court for review of a final partnership administrative
adjustment.
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Section 4.7. Compensation of the General Partner
A. Except as provided in Articles Four and Five, the General Partner
shall not, either in its capacity as General Partner or in its individual
capacity, receive any salary, fees or profits from the Limited Partnership.
B. In consideration of its payment of Organization and Offering Costs,
the General Partner shall be paid by the Limited Partnership an amount equal to
3.5% of the Unit Holders' Subscriptions as provided in Section 3.5. The General
Partner shall be reimbursed by the Limited Partnership for General and
Administrative Costs and Direct Administrative Costs incurred by it on behalf of
the Limited Partnership, and such costs shall be allocated among the Partners as
set forth in Section 5.2 of this Agreement. The aggregate amount of General and
Administrative Costs allocable to the accounts of the Unit Holders for which the
General Partner will be reimbursed by the Limited Partnership and the Managing
Partner by the Production Partnership will not (i) in the first 12 months
following Activation of the Limited Partnership, exceed an amount equal to 2.5%
of the Unit Holders' Subscription, and (ii) in any succeeding 12 month period,
exceed an amount equal to 1% of the Unit Holders' Subscriptions. All General and
Administrative costs allocable to the accounts of the Unit Holders will be paid
solely out of Income allocable to the Unit Holders.
To the extent that Partnership Income is insufficient to permit
reimbursement of such General and Administrative Costs in the period in which
they are incurred or accrued or the amounts actually reimbursed by the
Partnerships do not exceed the forgoing limitations, such unpaid or unused
General and Administrative Costs may be carried forward or backwards and charged
against Income or increase the maximum amount of reimbursable General and
Administrative Costs for any other period. The General Partner shall be paid any
excess of interest income over the costs incurred in connection with the
maintenance of the reinvestment account referred to in Section 5.l(B)(i).
Section 4.8. Contracts with the General Partner and Affiliates
All services provided to the Limited Partnership by the General Partner
or any Affiliate for which it is compensated shall be embodied in a written
contract precisely setting forth the services to be rendered and the
compensation to be paid. Each such contract, other than this Agreement and the
Production Partnership Agreement, shall contain a provision which shall permit
termination of the contract by the Limited Partnership without penalty on 30
days' prior written notice.
Section 4.9. Other Operations
The General Partner and its Affiliates shall at all times be free to
engage in all aspects of the oil, gas and natural resources business for their
own accounts and for the accounts of others. Without limiting the generality of
the foregoing, the
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General Partner and its Affiliates shall have the right to organize and operate
other partnerships, joint ventures or other oil and gas investment programs
similar to the Limited Partnership or the Production Partnership.
Section 4.10. Prosecution, Defense and Settlement of Claims;
Indemnification
A. The General Partner shall arrange to prosecute, defend, settle or
compromise actions at law or in equity at the expense of the Limited Partnership
as may be necessary to enforce or protect the interests of the Limited
Partnership. The General Partner shall satisfy any judgment, decree, decision or
settlement, first, out of any insurance proceeds available there-- for, next,
out of the Limited Partnership assets and income, and, finally, out of the
assets of the General Partner.
B. The General Partner shall have no liability to the Limited Partnership
or to any Unit Holders for any loss suffered by the Limited Partnership which
arises out of any action or inaction of the General Partner if the General
Partner, in good faith, determined that such course of conduct was in the best
interests of the Limited Partnership and such course of conduct did not
constitute negligence or misconduct of the General Partner. The General Partner
shall be indemnified by the Limited Partnership against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any claims sustained by
it in connection with the Limited Partnership, provided that the same were not
the result of negligence or misconduct on the part of the General Partner. Any
indemnification under this Section 4.10 shall be satisfied solely out of the
assets and Income of the Limited Partnership and no Unit Holders or Limited
Partners will have any liability therefor.
C. Notwithstanding the above, the General Partner shall not be
indemnified for liabilities arising under federal and state securities laws
unless (i) there has been a successful adjudication on the merits of each count
involving securities law violations and the court approves such indemnification
and the litigation costs thereof; or (ii) such claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction and the court
approves such indemnification and the litigation costs thereof. In any such
case, the General Partner shall apprise the court of the current published
positions, if any, of the federal and applicable state securities administrators
regarding indemnification of program sponsors prior to obtaining court approval
of any such indemnification.
D. The Limited Partnership shall not incur the cost of the portion of any
insurance which insures any party against any liability as to which such party
is herein prohibited from being indemnified.
Section 4.11. Dealer Manager
The Dealer Manager shall have no duties, responsibilities or obligations
to the Limited Partnership, the General Partner or
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any Limited Partner as a consequence of its right to receive Commissions, except
to the extent provided under the Securities Act of 1933, as amended. The Dealer
Manager has not assumed, and will not assume, any responsibility with respect to
the Limited Partnership nor will it be permitted by the General Partner to
assume any duties, responsibilities or obligations regarding the management,
operations or any of the business affairs of the Limited Partnership subsequent
to the date on which the Limited Partnership is Activated.
ARTICLE FIVE
Distributions, Fees and Allocations
Section 5.1. Distributions of Limited Partnership Funds
A. The Distributable Cash of the Limited Partnership shall be distributed
simultaneously to the Unit Holders for the account of the Depositary (either
directly to such Unit Holders or as they shall direct by their notice to the
General Partner pursuant to the reinvestment option set forth in Section 5.1B)
and the General Partner promptly upon receipt of cash distributions from the
Production Partnership. Each Unit Holder's or Partner's share of each such
distribution shall be determined after giving effect to the allocations set
forth in Sections 5.2 and 5.3, except that (i) any Distributable Cash
attributable to the receipt by the Production Partnership of investment income
(as defined in the Production Partnership Agreement) shall be distributed 100%
to the Unit Holders and, (ii) any Distributable Cash which is attributable to a
return pursuant to Section 3.4 shall be distributed entirely to those Persons
(other than corporate affiliates of Geodyne Resources, Inc. or the Dealer
Manager or any purchasers of Depositary Units therefrom with respect to the
distribution of cash contributed by the Managing Partner to the Production
Partnership pursuant to Section 3.4 of the Production Partnership Agreement or
to the Limited Partnership by the General Partner pursuant to Section 3.4 of
this Agreement) who are, at the time of the distribution, Unit Holders. All
distributions of Distributable Cash shall reduce dollar-for-dollar the balances
of the Partners' and Unit Holders' Capital Accounts.
B.
(i) Prior to the first cash distribution by the Limited
Partnership, each Unit Holder will be given an opportunity to elect to
have all or a portion of such Unit Holder's cash distributions (1) paid
directly to the Unit Holder in cash, or (2) held in a reinvestment
account established for Unit Holders of the Limited Partnership, any
Prior Limited Partnerships and any Subsequent Limited Partnership,
pending the reinvestment of such cash distributions in a minimum amount
of $100 (with reinvestment in excess of such minimum being permitted in
whole
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increments of $100) in Depositary Units of any Subsequent Limited
Partnership. After receipt of the Prospectus with respect to any
Subsequent Limited Partnership, each Unit Holder may revoke such Unit
Holder's prior election to have such Unit Holder's cash distributions held
in the reinvestment account invested in Depositary Units of the Subsequent
Limited Partnership. Such revocation shall be made by the Unit Holder's
delivery to the Limited Partnership of a written notice of revocation. On
or before 30 days prior to the reinvestment of a Unit Holder's cash
distributions in a Subsequent Limited Partnership, the General Partner
shall provide each Unit Holder who has previously elected to have cash
distributions from the Limited Partnership reinvested in Depositary Units
of a Subsequent Limited Partnership, and who has $100 or more held in the
reinvestment account on such Unit Holder's behalf, a form for the Unit
Holder to provide the Limited Partnership such written notice of
revocation. The cash distributions of a Unit Holder held in the
reinvestment account shall at all times be the property of the Unit
Holder, and the Unit Holder may withdraw such cash distributions held in
the reinvestment account on such Unit Holder's behalf upon thirty days'
prior written notice to the Limited Partnership. No interest shall be
payable to Unit Holders on the amount of their cash distributions held in
such reinvestment account; provided, however, that the General Partner
shall hold the Unit Holders harmless against any losses sustained therein
and the General Partner shall deposit into the reinvestment account an
amount equal to any loss suffered by a Unit Holder prior to the earlier of
the time the Unit Holder withdraws the Unit Holder's share or an
investment in a Subsequent Limited Partnership is made on behalf of the
Unit Holder. Prior to investment in Depositary Units of a Subsequent
Limited Partnership or distribution of such funds, monies held in the
reinvestment account may be invested in investments permitted under
Section 10.3 of this Agreement. Any costs and interest income attributable
to the maintenance of the reinvestment account shall be paid or credited,
as the case may be, to Geodyne Properties.
(ii) Cash distributions held in the reinvestment account on behalf
of a Unit Holder will be delivered to such Unit Holder, and no investment
in a Subsequent Limited Partnership will be made on such Unit Holder's
behalf, upon (1) a decision by the General Partner not to offer, or
continue the offering of, Depositary Units of a Subsequent Limited
Partnership or (2) a decision by such Unit Holder not to invest in a
Subsequent Limited Partnership. Subject to the Limited Partnership's
receipt of a Unit Holder's written notice of revocation or withdrawal
referred to in
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Section ▇.▇▇(i), amounts held in the reinvestment account on behalf of a
Unit Holder which are not reinvested in a Subsequent Limited Partnership
(either because such amount is less than $100 or is in excess of a whole
increment of $100) shall remain in such reinvestment account.
(iii) A Unit Holder's cash distribution will be reinvested in
Depositary Units of a Subsequent Limited Partnership only if a
registration statement covering interests in the Subsequent Limited
Partnership is in effect under the Securities act of 1933, the offering
of Depositary Units is qualified for sale under the applicable state
securities laws and the Unit Holder meets the appropriate suitability
standards. The General Partner may terminate its offering of Depositary
Units in a Subsequent Limited Partnership at any time and will have no
obligation to continue to offer Depositary Units or to permit
reinvestment of Distributable Cash therein. In the event the General
Partner or its Affiliates offer limited partnerships other than the
Subsequent Limited Partnerships and provide Unit Holders the opportunity
to reinvest cash distributions from the Limited Partnership in such
Depositary Units of limited partnerships, the terms and conditions of
such reinvestment shall be determined by the General Partner or its
Affiliates in its discretion (which may differ from the terms and
conditions of reinvestment in Depositary Units of Subsequent Limited
Partnerships provided herein).
Section 5.2. Allocation of Profits and Losses
A. The Profits and Losses and each item of Income, gain, loss, cost,
deduction and credit of the Limited Partnership shall be determined and
allocated with respect to each Fiscal Year of the Limited Partnership as of, and
within 75 days after, the end of such Fiscal Year.
B. Direct Administrative Costs and General and Administrative Costs shall
be allocated to, and borne by, the Partners in the same amounts and proportions
as they would be if such costs were incurred or borne by only the Production
Partnership.
C. Except as set forth in Section 5.2B, Profits and Losses and each item
of Income, gain, loss, cost, deduction and credit of the Limited Partnership
shall be allocated between the Partners and credited to or charged against their
Capital Accounts in the following ratio:
Depositary (on behalf of
the Unit Holders as a class) 99%
Geodyne Properties 1%
D. The General Partner may not be required to contribute funds to the
Limited Partnership to pay for Limited Partnership costs allocated to it except
to the extent necessary to pay costs referred to in Section 5.2B.
-▇▇-
▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ anything to the contrary that may be expressed or
implied in this Agreement, the interest of the General Partner in each material
item of Partnership Income, gain, loss, deduction or credit shall be equal to at
least one percent of each such item at all times during the existence of the
Partnership. In determining the General Partner's interest in such items for the
purpose of this Section 5.2E, Depositary Units or units of limited partnership
interest owned by the General Partner shall not be taken into account.
F. Notwithstanding any other provision of this Agreement, if, under any
provision of this Agreement, the Capital Account of any Partner or Unit Holder
is adjusted to reflect the difference between the basis to the Limited
Partnership of Limited Partnership Property and such Limited Partnership
Property's fair market value, then all items of Income, gain, loss, and
deduction with respect to such Limited Partnership Property shall be allocated
among the Partners and Unit Holders so as to take account of the variation
between the basis of such Limited Partnership Property and its fair market value
at the time of the adjustment to such Partner's Capital Account in accordance
with the requirements of subsection 704(c) of the Code, or in the same manner as
provided under subsection 704(c) of the Code.
G. Notwithstanding anything to the contrary stated herein,
(i) There shall be allocated to the General Partner any item of
loss, deduction, credit or allowance that, but for this Section 5.2G,
would have been allocated to any Unit Holder that is not obligated to
restore any deficit balance in such Unit Holder's Capital Account and
would have thereupon caused or increased a deficit balance in such Unit
Holder's Capital Account as of the end of the Limited Partnership's
taxable year to which such allocation rebated (after taking into
consideration the provisions of Section 5.3D(v));
(ii) Any Unit Holder that is not obligated to restore any deficit
balance in such Unit Holder's Capital Account who unexpectedly receives
an adjustment, allocation or distribution specified in Section 5.3D(v)
hereof shall be allocated items of Income and gain in an amount and
manner sufficient to eliminate such deficit balance as quickly as
possible; and
(iii) In the event any allocations of loss, deduction, credit or
allowance are made to the General Partner pursuant to clause (i) of this
Section 5.2G, the General Partner shall be subsequently allocated all
items of Income and gain until the aggregate amount of such allocations
of Income and gain is equal to the aggregate amount of any such
allocations of loss, deduction, credit or allowance allocated to the
General Partner pursuant to clause (i) of this Section 5.2G.
Section 5.3. Determinations of Allocations and Distributions Among
Unit Holders
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A. Except as set forth in Section 5.1A, all Profits and Losses and each
item of Income, gain, loss, cost, deduction or credit allocated to the Unit
Holders, as a class, shall be allocated to each Unit Holder in the ratio that
(i) the number of Depositary Units held of record by each Unit Holder as of the
first day of each month during the period ("Monthly Record Date") bears to (ii)
the aggregate number of Depositary Units outstanding on each such Monthly Record
Date. Distributions of Distributable Cash will be made to Unit Holders of record
on specified record dates determined prior to periodic distributions in the
ratio which (i) the number of Depositary Units owned of record by each Unit
Holder on such record date bears to (ii) the aggregate number of Depositary
Units outstanding on such record date. Unless otherwise designated by the
General Partner, the record date for distributions of Distributable Cash will be
the last day of the calendar quarter to which such distributions are
attributable. Each distribution in respect of Depositary Units shall be paid by
the Limited Partnership only to the Persons who are record holders of Depositary
Units as of the record date set for distribution. Such payment shall constitute
full payment and satisfaction of the Limited Partnership's liability in respect
of such payment regardless of any claim of any Person who may have an interest
in such payment by reason of an assignment or otherwise.
B. The Limited Partnership's share of the Production Partnership's
adjusted basis in each of its Producing Properties (allocated pursuant to the
Managing Partner's and the Limited Partnership's interests in Production
Partnership capital at the date of acquisition of the respective Producing
Properties) shall be allocated pursuant to Section 6l3A(c) (7) (D) of the Code
among the Unit Holders and Partners in proportion to the interest of each in the
Limited Partnership capital ultimately used to acquire that property.
C. All items of Income, gain, loss, deduction and credit allowable for
Federal income tax purposes and all recapture of such deductions and credits
shall be allocated and charged or credited to the Partners and Unit Holders in
the same manner that the revenues, costs or expenses giving rise to such items
of Income, gain, loss, deduction and credit are allocated and charged. Federal
income tax deductions for cost or percentage depletion with respect to any
Producing Property shall be determined at the Partner or Unit Holder level and
shall be determined in the case of percentage depletion on the same basis that
Income from the Producing Property is allocated.
D. Capital Accounts shall be established and maintained for each Partner
and Unit Holder in accordance with tax accounting principles and with valid
regulations issued by the U.S. Treasury Department under subsection 704(b) of
the Code (the "704 Regulations"). To the extent that tax accounting principles
and the 704 Regulations may conflict, the latter shall control. In connection
with the establishment and maintenance of such Capital Accounts, the following
provisions shall apply:
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(i) Each Partner's or Unit Holder's Capital Account shall be (a)
increased by the amount of cash contributed by or on behalf of such
Partner or Unit Holder, the fair market value of property contributed by
it or on its behalf to the Limited Partnership (net of liabilities
securing such contributed property that the Limited Partnership is
considered to assume or take subject to under section 752 of the Code)
and allocations to it of Income and gain (except to the extent such
Income or gain has previously been reflected in its Capital Account by
adjustments thereto) and (b) decreased by the amount of Distributable
Cash distributed to it, the fair market value of property distributed to
it by the Limited Partnership (net of liabilities securing such
distributed property that such Partner or Unit Holder is considered to
assume or take subject to under section 752 of the Code) and allocations
to it of Limited Partnership loss, deduction (except to the extent such
loss or deduction has previously been reflected in its Capital Account by
adjustments thereto) and expenditures described in section 705(a) (2) (B)
of the Code.
(ii) In the event Limited Partnership Property is distributed to a
Partner or Unit Holder, then, before the Capital Account of such Partner
or Unit Holder is adjusted as required by clause (i) of this Section
5.3D, the Capital Accounts of the Partners and Unit Holders shall be
adjusted to reflect the manner in which the unrealized Income, gain, loss
and deduction inherent in such Limited Partnership Property (that has not
been reflected in such Capital Accounts previously) would be allocated
among the Partners and Unit Holders if there were a taxable disposition
of such Limited Partnership Property for its fair market value on the
date of distribution.
(iii) If, pursuant to this Agreement, Limited Partnership Property
is reflected on the books of the Limited Partnership at a book value that
differs from the adjusted tax basis of such Limited Partnership Property,
then the Partners' and Unit Holders' Capital Accounts shall be adjusted
in accordance with the 704 Regulations for allocations to the Partners
and Unit Holders of depreciation, depletion, amortization, and gain or
loss, as computed for book purposes, with respect to such Limited
Partnership Property.
(iv) The Partner's and Unit Holders' Capital Accounts shall be
reduced by a simulated depletion allowance computed on each oil or gas
property using either the cost depletion method or the percentage
depletion method (without regard to the limitations under the Code which
could apply to less than all Partners or Unit Holders); provided,
however, that the choice between the cost depletion method and the
percentage depletion method shall be made by the General Partner on a
property-by-property basis and such choice shall be binding for all
Limited Partnership taxable years during which such oil or gas property
is held by the Limited
-25-
Partnership. Such reductions for depletion shall not exceed the aggregate
adjusted basis allocated to the Partners and Unit Holders with respect to
such oil or gas property. Such reductions for depletion shall be allocated
among the Partners' and Unit Holders' Capital Accounts in the same
proportions as the adjusted basis in the particular property is allocated
to each Partner or Unit Holder. Upon the taxable disposition of an oil or
gas property by the Limited Partnership, the Limited Partnership's
simulated gain or loss shall be determined by subtracting its simulated
adjusted basis (aggregate adjusted tax basis of the Partners and Unit
Holders less simulated depletion allowances) in such property from the
amount realized on such disposition and the Partners' and Unit Holders
Capital Accounts shall be increased or reduced, as the case may be, by the
amount of the simulated gain or loss on such disposition in proportion to
the Partners' and Unit Holders' allocable shares of the total amount
realized on such disposition.
(v) For purposes of determining the Capital Account balance of any
Partner or Unit Holder as of the end of any Limited Partnership taxable year for
purposes of Section 5.2G, such Partner's or Unit Holder's Capital Account shall
be reduced by:
(a) Adjustments that, as of the end of such year, reasonably are
expected to be made to such Partner's or Unit Holder's Capital Account
pursuant to paragraph (b)(2)(iv)(k) of the 704 Regulations for depletion
allowances with respect to oil and gas properties of the Limited
Partnership, and
(b) Allocations of loss and deduction that, as of the end of such
year, reasonably are expected to be made to such Partner or Unit Holder
pursuant to Code section 704(e)(2), Code section 706(d), and paragraph
(b)(2)(ii) of section 1.751--1 of regulations promulgated under the Code,
and
(C) 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 or Unit Holder's Capital Account that
reasonably are expected to occur during (or prior to) the Limited
Partnership taxable years in which such distributions reasonably are
expected to be made.
E. The Capital Accounts of those Partners and Unit Holders which are
charged with an expense shall be credited with any portion of that expense which
is finally determined, judicially or administratively, to be nondeductible for
Federal income tax purposes, less any amortization or depreciation thereof
incurred prior to the date that the credit is made.
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ARTICLE SIX
Withdrawal or Removal of General Partner
Section 6.1. Withdrawal of General Partner
The General Partner (including by definition any successor General
Partner) shall have the right to retire or withdraw, upon 120 days written
notice to the Unit Holders, subject to its obligation to pay all costs and
expenses incurred by the Limited Partnership by virtue of such retirement or
withdrawal.
Section 6.2. Assignment of General Partner Interest
Subject to Section 12.3 and Section 6.5B, upon the Consent of the
Depositary, which shall be given if the Consent of Unit Holders owning more than
50% of the outstanding Depositary Units is obtained, the General Partner may
assign or transfer its General Partner Interest to a person who shall become a
successor General Partner; provided, however, that no such consent shall be
required in connection with an assignment or transfer pursuant to the merger,
consolidation or transfer of all or substantially all of the assets of the
General Partner.
Section 6.3. Removal of General Partner
A. Subject to Section 12.3, upon the Consent of the Depositary, which
shall be given if the Consent of Unit Holders owning more than 50% of the
outstanding Depositary Units is obtained, the power shall be vested in the
Depositary to (a) remove the General Partner and (b) cause the General Partner,
on behalf of the Limited Partnership, to Remove the Managing Partner.
B. (i) If the Unit Holders elect to Remove the General Partner as
permitted under this Section, and further elect to continue the business
of the Limited Partnership with one or more successor General Partners,
the removed General Partner shall not be Removed until a successor
General Partner has been selected by the Unit Holders and admitted to the
Limited Partnership pursuant to Section 11.2.
(ii) Notwithstanding Section 3.7B, any General Partner who shall
withdraw or be Removed from the Limited Partnership shall be released by
any successor General Partner from all liability for Limited Partnership
debts and obligations incurred by the Limited Partnership prior to the
time of such Removal.
6.4 Option to Purchase Interest from Former General Partner
In the event the General Partner withdraws or is Removed and a successor
General Partner selected, the incoming General Partner and the departing General
Partner shall, by mutual agreement, select an independent petroleum consultant
to value the departing General Partner's Interest in the Limited
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Partnership. The incoming General Partner, or the Limited Partnership, shall
have the option to purchase at least 20% of the interests of the departing
General Partner for the value determined by the independent appraisal. The
departing General Partner's Interest in the Limited Partnership shall be
transferred to the successor General Partner, and the successor General Partner
shall assign to the departing General Partner a portion of Limited Partnership
Income, costs and Distributable Cash as and when such items are allocated or
distributed, as the case may be, by the Limited Partnership equal to the
percentage interest of the departing General Partner in the Limited Partnership
prior to Removal, less the portion purchased by the successor General Partner or
the Limited Partnership.
6.5 Power to Admit Successor General Partner
A. If the General Partner has withdrawn or been Removed, the power shall
be vested in the Unit Holders to Consent to the admission of a successor General
Partner meeting the requirements of Section 6.5B to take the place of the
departing General Partner upon the Consent of the Depositary, which shall be
given if the Consent of Unit Holders owning more than 50% of the outstanding
Depositary Units is obtained.
B. If there is admitted to the Limited Partnership a successor General
Partner, such admission shall not become effective unless (a) the Limited
Partnership shall have received a certificate, duly executed by or on behalf of
such proposed successor General Partner, to the effect that: (i) it is
experienced in performing (or employs sufficient personnel who are experienced
in performing) functions of the type then being performed by the departing
General Partner and (ii) it has a net worth sufficient to satisfy the net worth
requirements of the Code, Treasury Regulations, the Internal Revenue Service or
the courts applicable to a general partner in a limited partnership in order to
ensure that the Limited Partnership will not fail to be classified for Federal
income tax purposes as a partnership, and (iii) such Person, if other than an
individual, has the authority to become a successor General Partner under the
terms of this Agreement; and (b) the proposed successor General Partner shall
have (i) become a party to, and adopted all of the terms and conditions of, this
Agreement and (ii) paid all reasonable legal fees of the Limited Partnership and
filing and publication costs in connection with such Person's becoming a
successor General Partner.
Section 6.6. Incapacity of the General Partner
A. In the event of the Incapacity of the General Partner, the Limited
Partnership shall be dissolved. However, within 90 days thereafter the
Depositary, upon the Consent of Unit Holders owning more than 50% of the
outstanding Depositary Units, may elect to reconstitute the Limited Partnership
prior to application of the liquidation provisions of Section 9.2.
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B. Upon the Incapacity of the General Partner, the Person who is its
legal representative shall have all the rights of a General Partner for the
purpose of settling or managing its estate and such power as the Incapacitated
General Partner possessed to assign all or any part of its Interest and to join
with such assignee in satisfying conditions precedent to such assignee becoming
a Substituted Partner.
Section 6.7. Termination of Contracts with General Partner or
Managing Partner
Subject to and upon fulfilling the conditions of Section 12.3, the power
shall be vested in the Unit Holders to terminate any or all contracts between
the General Partner or any Affiliate and the Limited Partnership, or to cause
the General Partner, on behalf of the Limited Partnership, to terminate any
contracts between the Managing Partner or any Affiliate and the Production
Partnership, and select, or cause the General Partner, on behalf of the Limited
Partnership, to select, as the case may be, a replacement Person therefor upon
the Consent of the Depositary, which shall be given if the Consent of Unit
Holders owning more than 50% of the outstanding Depositary Units is obtained.
ARTICLE SEVEN
Assignment of Limited Partner Interests to Unit Holders
Section 7.1 Assignments of the Interests of the Depositary.
A. Pursuant to Sections 7.1B and 13.1, the Depositary shall issue to each
Person purchasing one or more Depositary Units a Depositary Receipt evidencing
such Depositary Units. The Limited Partnership shall recognize as a Unit Holder,
for the number of Depositary Units for which the Limited Partnership has
received proceeds, each Person to whom the Depositary issues a Depositary
Receipt as of the date provided in Section 13.1 or otherwise as the General
Partner shall determine in accordance with the provisions of this Agreement.
B. The Depositary, by the execution of this Agreement, irrevocably
assigns to the Unit Holders all of the Depositary's rights and interest in and
to the Interests, except as otherwise provided herein, as of the date of
Activation of the Limited Partnership. The rights and interest so transferred
and assigned shall include, without limitation, the following:
(i) all rights to receive distributions of uninvested Capital
Contributions pursuant to Section 3.3 and the right to receive rebates of
Commissions and Organization and Offering Costs pursuant to Section 3.3;
(ii) all rights to receive distributions of Distributable Cash
pursuant to Section 5.1;
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(iii) all rights in respect of allocations of Profits, Losses and
each other item of Income, gain, boss, deduction and credit pursuant to
Sections 5.2 and 5.3;
(iv) all rights in respect of allocations to Capital Accounts
pursuant to Section 5.3;
(v) except as provided in Section 7.3B, all rights to receive
any proceeds of liquidation of the Limited Partnership pursuant to
Section 9.2;
(vi) all rights to inspect books and records and to receive
reports pursuant to Article Ten;
(vii) the right to bring derivative actions pursuant to the Act (in
the event any such action must be brought in the name of the Depositary
as a Limited Partner, the Depositary agrees to bring such action, at the
expense of the Unit Holder(s) requesting such action); and
(viii) all rights which limited partners have, or may have in the
future, under this Agreement or the Act, except as otherwise provided
herein.
C. The General Partner, by the execution of this Agreement, irrevocably
consents to and acknowledges that (i) the foregoing assignment pursuant to
Section ▇.▇▇ by the Depositary to the Unit Holders of the Depositary's rights
and interest in the Interests is effective and (ii) the Unit Holders are
intended to be third-party beneficiaries of all rights and privileges of the
Depositary in respect of the Interests. The General Partner covenants and agrees
that, in accordance with the foregoing transfer and assignment, all the
Depositary's rights and privileges in respect of Interests may be exercised by
the Unit Holders, including, without limitation, those listed in Section ▇.▇▇.
D. The Depositary, by execution of this Agreement, irrevocably commits to
exercise its voting rights as the Limited Partner in accordance with directions
it receives from the Unit Holders such that it will vote a proportionate share
of its Interest as the owner, as shown on the books of the Depositary, of a
corresponding Depositary Unit shall direct in writing, by proxy or otherwise.
E. The Depositary may transfer its Interest as the Depositary to another
Person only with the Consent of the General Partner and Unit Holders owning a
majority of the outstanding Depositary Units.
F. All Persons becoming Unit Holders will by their payment for and
acceptance of Depositary Receipts agree to comply with and be bound by the terms
and conditions of and will be entitled to all rights of Unit Holders under this
Agreement.
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G. Other than pursuant to Sections 7.1B, 7.lE and 7.2, the Depositary
shall not transfer, assign, encumber, pledge or hypothecate any of its
Interest.
Section 7.2 Rights of Unit Holders
A. In accordance with the transfer and assignment described in Section
▇.▇▇, it is the intention of the parties hereto that Unit Holders shall have the
same rights and obligations that Limited Partners have under this Agreement and
under the Act. The fiduciary duties and obligations of the General Partner to
the Limited Partner under the Act and this Agreement shall extend to the Unit
Holders.
B. Without limiting the generality of Section 7.2A, persons who become
Limited Partners pursuant to Section 7.3 below and Unit Holders shall share pari
passu on the basis of one Limited Partner Interest for one Depositary Unit, and
shall be considered as a single class, with respect to all rights to receive
distributions and allocations pursuant to this Agreement.
C. Limited Partners (other than the Depositary) and Unit Holders shall
vote on all matters in respect of which they are entitled to vote (either in
person, by proxy, or by written consent), as a single class, with each Limited
Partner Interest and each Depositary Unit entitled to one vote; provided,
however, that the Depositary shall vote on behalf of and only as directed by the
Unit Holders.
Section 7.3. Conversion of Depositary Units into Limited Partner
Interests. Subject to the consent of the General Partner, which consent may be
granted or withheld in its absolute discretion, any Unit Holder who desires to
convert his Depositary Units into an equal number of Limited Partner Interests
may do so following Activation of the Limited Partnership by delivering to the
Depositary all (but no less than all) of his Depositary Receipts (properly
endorsed), an executed subscription agreement and transfer application (which
are available upon request from the General Partner), accompanied by written
instructions which set forth an intention to become a Substituted Limited
Partner and request admission as such to the Limited Partnership, together with
such other instruments or documents as the General Partner or the Depositary may
deem necessary or desirable, including the written acceptance and adoption by
such Unit Holder of the provisions of this Agreement and the execution,
acknowledgment and delivery to the General Partner of a special power of
attorney, the form and content of which are reasonably satisfactory to the
General Partner. Such Depositary Receipts shall be accompanied by a payment to
the Limited Partnership by such Unit Holder of a fee (not to exceed $100) for
legal and administrative costs and recording fees. Unit Holders becoming
Substituted Limited Partners will be admitted to the Limited Partnership
quarterly, or as promptly as possible after the commencement of the next
calendar quarter. Persons who effect such conversion will receive one Limited
Partner Interest for each Depositary Unit they convert and will not be able to
re-exchange their Limited Partner Interests for Depositary Unit. The
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Capital Account of the Depositary shall be reduced by an amount equal to the
Capital Account of such former Unit Holder and such amount will be credited as
the former Unit Holder's new Capital Account as a Substituted Limited Partner.
Depositary Units which have been converted into Limited Partner Interests will
be cancelled and will not be reissued. Except as specifically stated or as the
context otherwise requires, references in all but Articles Seven and Eight of
this Agreement to Unit Holders shall include Substituted Limited Partners and to
Depositary Units shall include Limited Partner Interests of Substituted Limited
Partners.
ARTICLE EIGHT
Transferability of Limited Partner Interests and
Depositary Units
Section 8.1. Assignments of Limited Partner Interests by Limited
Partners Other than the Depositary.
A. Each Substituted Limited Partner may assign his Limited Partner
Interests by a duly exercised, written instrument of assignment, the terms of
which are not in contravention of any of the provisions of this Agreement;
provided that no Substituted Limited Partner may sell, assign, transfer or
exchange any Limited Partner Interests:
(1) if such sale, assignment, transfer or exchange would be in
violation of any applicable federal or state securities laws (including
any applicable suitability standard and the restrictions on transfer set
forth in Rule 260.14l.ll of Title 10 of the California Administrative
Code) or would cause the Limited Partnership to be taxed as an entity
other than a partnership under the Code;
(2) except for transfers by gift or inheritance, intra--family
transfers, transfers resulting from family dissolutions, transfers to
Affiliates or transfers of such transferor's entire remaining holding of
Limited Partner Interests, if the transferor would hold less than ten
(10) Limited Partner Interests.
B. Any attempted sale, assignment, transfer or exchange in contravention
of the provisions of this Section 8.1 shall, unless otherwise determined by the
General Partner in its sole discretion, be void and deemed ineffectual and shall
not bind or be recognized by the Limited Partnership.
C. The Limited Partnership need not recognize for any purpose any
assignment of the Limited Partner Interests of a Substituted Limited Partner
unless there shall have been filed with the Limited Partnership and recorded on
the Limited Partnership's books a duly executed and acknowledged instrument of
assignment, and such instrument evidences the written acceptance by the assignee
of all of the terms and provisions of
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this Agreement, represents that such assignment was made in accordance with all
applicable laws and regulations and in all other respects is satisfactory in
form and substance to the General Partner.
D. An assignment of Limited Partner Interests in accordance with the
terms of this Agreement shall be recognized by the Limited Partnership as
effective only from and after the date on which the Limited Partnership has
received the written instrument of assignment of the Limited Partner Interests.
The Limited Partnership and the General Partner shall be entitled to treat the
assignor of such Limited Partner Interests as the absolute owner thereof in all
respects, and shall incur no liability for any allocation of Profit or Loss,
distribution, or transmittal of reports or notice required to be given to
Limited Partners hereunder which is made in good faith to such assignor until
such time as the written instrument of assignment has been received by the
Limited Partnership and recorded on its books.
Section 8.2. Substituted Limited Partners.
A. The consent of the General Partner shall be required before the
assignee of any Limited Partner Interest shall be admitted as a Substituted
Limited Partner, which consent may be withheld in the sole and absolute
discretion of the General Partner.
B. No person shall have the right to become a Substituted Limited
Partner in place of his assignor unless all of the following conditions are
first satisfied:
(1) a duly executed and acknowledged written instrument of
assignment complying with Section 8.1 shall have been filed with the
Limited Partnership and recorded on its books, which instrument shall
specify the Limited Partner Interests being assigned and set forth the
intention of the assignor that the assignee succeed to the assignor's
interest as a Substituted Limited Partner in his place;
(2) the transferor and his assignee shall have executed and
acknowledged such other instruments as the General Partner may deem
necessary or desirable to effect such substitution, including the written
acceptance and adoption by the assignee of the provisions of this
Agreement, as the same may be amended, and his execution, acknowledgment
and delivery to the General Partner of a special power of attorney, the
form and content of which are reasonably satisfactory to the General
Partner; and
(3) a transfer fee sufficient to cover all reasonable expenses
connected with such substitution (not to exceed $50) shall have been paid
to the Limited Partnership.
C. By executing or adopting this Agreement, each Limited Partner and
Substituted Limited Partner and, by the purchase of a Depositary Unit, each Unit
Holder hereby consents to the admission of Substituted Limited Partners by the
General Partner in accordance with the foregoing.
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Section 8.3 Transferability of Depositary Units.
A. Depositary Units may be transferred only as provided in this
Agreement. The Depositary Units shall be evidenced by Depositary Receipts which
shall be issued in registered form only and shall be transferable subject to the
same restrictions and conditions applicable to transfers of Limited Partner
Interests set forth in Section 8.1A above. The Depositary shall not recognize
transfers of Depositary Units except by a transfer of Depositary Receipts
therefor. Unit Holders who are residents of the State of California must meet
the restrictions on transfers set forth in Rule 260.l41.ll of Title 10 of the
California Administrative Code. Except as provided in Section 8.4, no transfer
of Depositary Receipts will be recorded or otherwise recognized by the
Depositary or Limited Partnership for any purpose whatsoever unless and until
the transferee has certified to the Depositary that it is an Eligible Investor
and, unless the transfer is among members of the immediate family of the
transferor Unit Holder, paid a transfer fee to reimburse the Depositary for all
actual, reasonable and necessary expenses (not to exceed $50 per transaction)
incurred in connection with the transfer.
B. A transferee who has accepted delivery of a Depositary Receipt shall
be deemed to have agreed to comply with and be bound by all of the terms and
conditions of this Agreement.
Section 8.4 Eligible Investors.
A. If the General Partner determines that a Unit Holder or Substituted
Limited Partner is not an Eligible Investor (i) then the Unit Holder shall
immediately be divested of its rights to Consent on matters submitted to Unit
Holders and Substituted Limited Partners (and no such Depositary Units shall be
Consented by the Depositary or otherwise deemed outstanding for purposes of
Consents of Unit Holders under this Agreement), and (ii) if such Person is
subject to a higher rate of windfall profits tax than the rate imposed upon
other Unit Holders and Substituted Limited Partners, the General Partner shall
adjust actual cash distributions payable to such Person in order to reflect
accurately any varying rate of windfall profits tax imposed. Any amounts so
withheld shall be deemed to have been distributed and the tax shall be treated
as paid by the Person.
B. If at any time (i) the Limited Partnership, the General Partner or the
Depositary receives an opinion of counsel to the effect that the citizenship or
other status of a Unit Holder or Substituted Limited Partner may result in the
forfeiture or cancellation of a federal Lease or otherwise affects the
eligibility of the Production Partnership to hold federal Leases or (ii) the
Limited Partnership, the General Partner or the Depositary is named a party in
any judicial or administrative proceeding that seeks the cancellation or
forfeiture of any property in which the Limited Partnership or Production
Partnership has an interest because of the citizenship (or any other status that
subjects the Production Partnership to the risk
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of losing its eligibility to acquire or hold interests in federal Leases) of any
one or more Unit Holders or Substituted Limited Partners, the General Partner
may notify the Unit Holder or Substituted Limited Partner and purchase the
Depositary Units or Limited Partner Interests of such Unit Holder or Substituted
Limited Partner, as the case may be, at such time and for such amount as the
General Partner may determine in its sole discretion. Nothing in this Section
8.4 shall prevent a Unit Holder from transferring its Depositary Units or
Limited Partner Interests prior to the date set for such purchase by the General
Partner. At any time after it can and does certify that it has become an
Eligible Investor a Unit Holder may, upon application to the General Partner,
retain all of the economic benefits attributable to its Depositary Units or
Limited Partner Interests, as the case may be.
ARTICLE NINE
Dissolution, Liquidation and Termination
of the Limited Partnership
Section 9.1. Events Causing Dissolution
A. The Limited Partnership shall be dissolved upon the happening of
any of the following events:
(i) the expiration of its term, without any continuation
thereof as set forth in Section 2.3;
(ii) the Incapacity of the General Partner. However, within
ninety days thereafter the Unit Holders may elect to reconstitute the
Limited Partnership prior to application of the liquidation provisions
of Section 9.2;
(iii) the Sale or other disposition at one time of all or
substantially all of the assets of the Limited Partnership existing at
the time of such Sale (including the liquidation or redemption other than
in kind of its interest in the Production Partnership);
(iv) the election to dissolve the Limited Partnership (a) by the
General Partner (which election shall be Consented to by Unit Holders
owning more than 50% of the outstanding Depositary Units), or (b) by the
Consent of Unit Holders owning more than 50% of the outstanding
Depositary Units;
(v) ninety days after the Removal or withdrawal of the sole General
Partner (unless a successor is elected pursuant to Section 6.5);
(vi) the dissolution and liquidation of the Production
Partnership without the continuance of its business by the Limited
Partnership pursuant to Section 4.2A(ii); or
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(vii) the happening of any other event causing the dissolution of
the Limited Partnership under the laws of the State, except that the
Incapacity of the Depositary or any Unit Holder shall not dissolve the
Limited Partnership and the seizure of the Interest of the Depositary
shall not dissolve the Limited Partnership.
B. Dissolution of the Limited Partnership shall be effective on the day
on which the event occurs giving rise to the dissolution, but the Limited
Partnership shall not terminate until the General Partner has recorded a notice
of dissolution of the Limited Partnership with the office of the Secretary of
State of the State and shall have complied with the laws of the other states in
which its does business and the assets of the Limited Partnership have been
distributed as provided in Section 9.2.
C. Nothing contained in this Agreement shall impair, restrict or limit
the rights and powers of the Partners under the laws of the State or any other
jurisdiction in which the Limited Partnership is doing business to reform and
reconstitute themselves as a limited partnership following dissolution of the
Limited Partnership either under provisions identical to those set forth herein
or under any other provisions.
D. If the Limited Partnership is dissolved as a result of an event set
forth in Sections 9.1A(ii), (v) or (vi), Unit Holders owning a majority of the
outstanding Depositary Units may appoint an interim manager of the Limited
Partnership, who shall have and may exercise only the rights, powers and duties
of a general partner necessary to preserve Limited Partnership assets, until (a)
a successor General Partner is elected pursuant to Section 6.5, if the Limited
Partnership is reconstituted, or (b) the Limited Partnership is liquidated
pursuant to Section 9.2. The interim manager shall not be liable as a general
partner to the Depositary or Unit Holders and shall, while acting in such
capacity, be entitled to the same indemnification rights as are set forth in
Section 4.10.
Section 9.2. Liquidation
A. Upon dissolution of the Limited Partnership, its liabilities shall be
paid in the order provided herein. The General Partner shall sell the Limited
Partnership's property so that such disposition is in the best interests of the
Unit Holders, and shall execute all amendments terminating the Limited
Partnership. In connection with any such Sale, the General Partner shall attempt
to obtain the best prices for such property. Pending such Sales, the General
Partner shall have the right to continue to operate and otherwise to deal with
Limited Partnership property. In the event the Limited Partnership is dissolved
on account of the Incapacity or Removal of the General Partner, the Limited
Partnership shall elect, in accordance with the provisions of Article Twelve, a
person (the "Liquidating Agent") to perform the function of the General Partner
in liquidating the assets of the Limited Partnership and winding up its affairs,
and shall pay to such Liquidating Agent its reasonable fees and expenses
incurred in connection therewith.
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Gain or loss realized on the Sale or other disposition of the Limited
Partnership's assets will be credited to (in the case of gain) or charged
against (in the case of loss) each Partner's or Unit Holder's Capital Account to
the extent allocable to such Partner or Unit Holder under Sections 5.2 and 5.3.
Any liquidation of the Limited Partnership shall take place out of court and
without application being made therefor to the Secretary of State of the State.
The Liquidating Agent shall agree not to resign at any time without 15
days' prior written notice and (if other than the General Partner) may be
removed at any time, with or without cause, by notice of removal approved by
Unit Holders owning a majority of the outstanding Depositary Units. Upon
dissolution, removal, or resignation of the Liquidating Agent, a successor and
substitute Liquidating Agent (who shall have and succeed to all rights, powers
and duties of the original Liquidating Agent) shall, within 30 days thereafter,
be selected by Unit Holders owning a majority of the outstanding Depositary
Units. The right to appoint a successor or substitute Liquidating Agent in the
manner provided herein shall be recurring and continuing for so long as the
functions and services of the Liquidating Agent are authorized to continue under
the provisions hereof, and every reference herein to the Liquidating Agent shall
be deemed to refer also to any such successor substitute Liquidating Agent
appointed in the manner herein provided. The Liquidating Agent shall have and
may exercise, without further authorization or Consent of any of the parties
hereto, all of the powers conferred upon the General Partner under the terms of
this Agreement (but subject to all of the applicable limitations, contractual
and otherwise, upon the exercise of such powers, other than the limitation on
sales set forth in Section 4.5B) to the extent necessary or desirable in the
good faith judgment of the Liquidating Agent to carry out the duties and
functions of the Liquidating Agent hereunder for and during such period of time
as shall be reasonably required in the good faith judgment of the Liquidating
Agent to complete the winding-up and liquidation of the Limited Partnership as
provided for herein.
Notwithstanding the provision of Section 9.1 which require the
liquidation of the assets of the Limited Partnership, but subject to the order
or priorities set forth herein, if on dissolution of the Limited Partnership the
General Partner or Liquidating Agent determines that an immediate sale of part
or all of the Limited Partnership's assets would be impracticable or would cause
undue loss to the Unit Holders, the General Partner or Liquidating Agent may, in
its absolute discretion, defer for a reasonable time the liquidation of any
assets except those necessary to satisfy liabilities of the Limited Partnership
(other than those to Partners).
B. In settling accounts after dissolution, the assets of the Limited
Partnership shall be paid out in the following order: (i) to third party
creditors, in the order or priority as provided by law; (ii) to the General
Partner and any Liquidating Agent for any expenses of the Limited Partnership
paid by or payable to them to the extent they are entitled to reimbursement
therefor
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pursuant to this Agreement; (iii) to all of the Unit Holders in the amount
equivalent to the amount of their positive Capital Account balances (as adjusted
pursuant to Section 9.2A) on the date of distribution; (iv) to the General
Partner in the amount equivalent to the amount of its positive Capital Account
balance (as adjusted pursuant to Section 9.2A) on the date of distribution; and
(v) the balance, if any, shall be paid to the Partners and Unit Holders in the
manner in which Income is then being allocated.
C. If the General Partner has a deficit balance in its Capital Account
following the distribution(s) provided for in Section 9.2B above, as determined
after taking into account all adjustments to its Capital Account for the taxable
year of the Limited Partnership during which such distribution(s) occur, it
shall restore the amount of such deficit balance to the Limited Partnership
within 90 days and such amount shall be distributed to the other Partners and
Unit Holders in accordance with their positive Capital Account balances.
D. Notwithstanding anything to the contrary in this Agreement, upon the
dissolution and termination of the Partnership, the General Partner will
contribute to the Partnership the lesser of: (a) the deficit balance in its
capital account; or (b) the excess of 1.01 percent of the total Capital
Contribution of the Depositary over the capital previously contributed by the
General Partner.
ARTICLE TEN
Books and Records; Accounting; Tax Elections; etc.
Section 10.1. Books and Records
The books and records of the Limited Partnership, including information
relating to the sale by the General Partner or any Affiliates of goods or
services to the Limited Partnership, and a list of the names and addresses and
Depositary Units of all Unit Holders, shall be maintained by the General Partner
at the principal office of the Limited Partnership for a period of five years
following the close of the Fiscal Year to which they relate and shall be
available for examination there by any Partner or Unit Holder or its duly
authorized representatives at any and all reasonable times. Any Partner or Unit
Holder, or its duly authorized representatives, upon paying the costs of
collection, duplication and mailing, shall be entitled for any proper purpose to
a copy of the list of names and addresses and Depositary Units of the Unit
Holders. The Limited Partnership may maintain such other books and records and
may provide such financial or other statements as the General Partner in its
discretion deems advisable.
Section 10.2. Accounting Basis for Tax and Reporting Purposes;
Fiscal Year
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The books and records of the Limited Partnership for tax purposes, for
purposes of this Agreement and for the purpose of reports to the Partners, shall
be kept on the accrual basis. The Fiscal Year of the Limited Partnership shall
be the calendar year to the extent permissible and the General Partner shall use
its best efforts to obtain any necessary approvals therefor.
Section 10.3 Bank Accounts
The General Partner shall maintain a bank account or accounts to be
maintained by the General Partner on behalf of the Limited Partnership with any
bank in the United States having total assets in excess of $100,000,000. The
General Partner shall not deposit Limited Partnership funds in an account with
any bank in an aggregate amount in excess of 5% of such bank's total assets.
Withdrawals shall be made only in the regular course of the Limited
Partnership's business on such signature or signatures as the General Partner
may determine. All deposits and other funds not needed in the operation of the
business may be deposited in interest--bearing accounts, certificates of
deposit, money market funds (including those managed or marketed by the Dealer
Manager or its Affiliates) or invested in short term United States Government
obligations maturing within one year, commercial paper of United States
corporations having the highest credit rating granted by ▇▇▇▇▇'▇ Investors
Services, Inc. or Standard & Poors Corporation, or other similar highly liquid
investments.
Section 10.4. Reports
A. The General Partner shall close the Limited Partnership's books of
account promptly at the close of each Fiscal Year and an annual examination of
the Limited Partnership's financial statements shall be performed at the expense
of the Limited Partnership by the Accountants. The General Partner shall furnish
to the Unit Holders an annual report within 120 days after the close of each
Fiscal Year of the Limited Partnership commencing with the Fiscal Year in which
the Limited Partnership was Activated. If requested by a Unit Holder, the
General Partner shall also furnish such Unit Holder with a report within 75 days
after the end of the first six months of the Fiscal Year in which such request
was made, or within 75 days after the request is made, whichever is later. Such
report will contain at least the following information:
(i) Financial statements for the Limited Partnership's and the
Production Partnership's accounts, including a balance sheet, statement
of income, statement of changes in partners' capital and statement of
changes in financial position prepared on an accrual basis in accordance
with generally accepted accounting principles and accompanied by a report
of the Accountants together with their opinion thereon, except that the
semi-annual financial statements need not be audited;
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(ii) A summary itemization, by type and/or classification, of the
total fees and compensation, including any overhead reimbursement, paid
by the Limited Partnership or Production Partnership or indirectly on
their behalf, to the General Partner or Managing Partner and any
Affiliate;
(iii) A description of each Producing Property acquisition,
including the costs therefor, in which the Production Partnership owns an
interest, except succeeding reports need contain only material changes
(including all farmouts, development drilling, improved recovery
operations and abandonments), if any, regarding Producing Properties
already reported upon. In the case of ▇▇▇▇▇ that have been abandoned
after production has commenced, a statement justifying such abandonment
shall be included if the General Partner or an Affiliate is the operator.
In the case of farmouts, the statement shall include a justification of
the farmout, location, time, to whom made, and a general description of
terms;
(iv) A schedule reflecting a list of the ▇▇▇▇▇ drilled by the
Production Partnership on behalf of the Limited Partnership and the costs
thereof;
B. Within 60 days after the end of each fiscal quarter each Unit Holder
will receive a "participant statement" which summarizes his allocable interest
in the Limited Partnership. The participant statement will detail the Unit
Holder's cash receipts and disbursements for the Unit Holder's Depositary Units.
C. Within 120 days after the end of the Fiscal Year following the Fiscal
Year in which Activation of the Limited Partnership occurs, and annually
thereafter, the General Partner shall furnish to the Unit Holders a computation
as of the end of the immediately preceding Fiscal Year, based upon engineering
reports prepared by one or more qualified independent petroleum engineering
firms with respect to Producing Properties containing Proved Reserves equal to
at least 80% of the Proved Reserves of the Production Partnership (with the
computation as to any balance of the Production Partnership's Proved Reserves
being based upon petroleum engineering reports prepared by the General Partner
or an Affiliate), of the total estimated Proved Developed Producing Reserves,
Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves owned by
the Production Partnership, the estimated dollar value thereof stated in then
existing prices and escalated prices (as provided by the General Partner). In
addition, the computation shall include an estimate of the time required for the
extraction of such reserves and the present worth of such reserves and the
estimate shall contain 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.
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D. In addition to the report described in Section 10.4C of this
Agreement, if an event occurs to the knowledge of the General Partner or its
Affiliates leading to a reduction or an increase of such Reserves of more than
10 percent, excluding reduction as a result of normal production, an additional
computation and estimate similar to that described in Section 10.4C shall be
sent to each Unit Holder as soon as possible.
E. By March 15 of each year, the General Partner will furnish a report to
each Unit Holder containing such information as is pertinent for completion of
his respective Federal, state, and other income tax returns.
F. The General Partner shall file on a timely basis with the Securities
and Exchange Commission all filings required to be made by the Limited
Partnership and Production Partnership pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934, and the rules and regulations promulgated
thereunder. The General Partner shall make available to any Unit Holder upon the
Unit Holder's request, copies of any report filed by or on behalf of the Limited
Partnership or the Production Partnership with the Securities and Exchange
Commission. The General Partner shall cause a copy of the report sent to the
Unit Holders under paragraphs A, C, D and E hereof to be sent to the California
Commissioner of Corporations.
G. The General Partner agrees to make all relevant financial and
engineering reports available for review by a Unit Holder on request at the
offices of the Limited Partnership.
Section 10.5. Elections
The General Partner shall cause the Limited Partnership to make all
elections required or permitted to be made by the Limited Partnership under the
Code and not otherwise expressly provided for in this Agreement, in the manner
that the General Partner believes will be most advantageous to the Unit Holders,
except that (i) the General Partner shall not be required to make an election
under Section 754 of the Code or corresponding provisions of applicable state
income tax laws, and (ii) the General Partner shall make the election under
Section 263(c) of the Code to expense all intangible drilling and development
costs in the initial Limited Partnership Federal income tax return filed for the
Fiscal Year in which such costs are incurred.
ARTICLE ELEVEN
Amendments
Section 11.1. Proposal and Adoption of Amendments Generally
A. Notwithstanding anything to the contrary contained herein, the General
Partner may, without prior notice or consent of any Unit Holder, amend any
provision of this Agreement (including an amendment to admit an additional
General Partner or a successor General Partner in the event of the withdrawal or
Removal of the General Partner) if, in its opinion, such amendment does not have
a material adverse effect upon the Unit
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Holders. Amendments to this Agreement to reflect the addition or substitution of
a Limited Partner or the admission of a successor General Partner shall be made
at the time and in the manner referred to in Section 11.2. Any other amendment
to this Agreement may be proposed by the General Partner or holders of at least
10% of the outstanding Depositary Units. The Unit Holder or Unit Holders
proposing such amendment shall submit a Notification containing (a) the text of
such amendment, (b) a statement of the purpose of such amendment, and (c) an
opinion of counsel obtained by the Unit Holder or Unit Holders proposing such
amendment to the effect that such amendment is permitted by the Act, will not
impair the limited liability of the Unit Holders, and will not adversely affect
the classification of the Limited Partnership as a partnership for federal
income tax purposes. The General Partner shall, within 15 days after receipt of
any proposal under this Section ▇▇.▇▇, give Notification to all Partners and
Unit Holders of such proposed amendment, of such statement of purpose and of
such opinion of counsel, together, in the case of an amendment proposed by other
Partners or Unit Holders, with the views, if any, of the General Partner with
respect to such proposed amendment.
B. Amendments to this Agreement shall be adopted if: (i) in the case of
amendments referred to in Section 11.2, the conditions specified in Section 7.lE
shall have been satisfactorily completed and the Limited Partnership shall not
have been furnished with an opinion of counsel to the Limited Partnership to the
effect that such amendment will adversely affect the classification of the
Limited Partnership as a partnership for Federal income tax purposes; (ii) in
the case of amendments referred to in Section 11.2, the conditions specified in
Section 6.5B shall have been satisfactorily completed; or (iii) in the case of
all other amendments, such amendment shall have been Consented to by the
Depositary, which Consent will be given if the Consent of Unit Holders owning
more than 50% of the outstanding Depositary Units is obtained (unless such
Consent is not required pursuant to Section 11.1A of this Agreement); provided,
however, that no such amendment may: (a) enlarge the obligations of any Partner
or Unit Holder under this Agreement or convert the Interest of any Limited
Partner into the Interest of a General Partner or modify the limited liability
of any Limited Partner without the Consent of such Partner; (b) modify the
method provided in Article Five of determining and allocating or distributing,
as the case may be, Profits, Losses, Distributable Cash and each item of Income,
gain, loss, cost, deduction or credit without the Consent of each Partner or
Unit Holder adversely affected by such modification; (c) amend Sections 4.9,
4.10, 6.1, 6.2, 6.3 or 6.4 without the Consent of the General Partner; or (d)
amend Sections 2.3, 4.3, 4.4, 4.5, 4.6, this Article Eleven or Section 12.3
without the Consent of the Depositary, which Consent will be given if the
Consent of Unit Holders owning at least two-thirds of the outstanding Depositary
Units is obtained.
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C. Upon the adoption of any amendment to this Agreement, the amendment
shall be executed by the General Partner and the Depositary and shall be
recorded in the proper records of the State and any other state in which the
Limited Partnership is then doing business.
Section 11.2. Amendments on Admission or Removal of Partners
If this Agreement shall be amended to reflect the withdrawal or Removal
of the General Partner and the continuation of the business of the Limited
Partnership, such amendment shall be signed by the remaining or successor
General Partner and by the Removed General Partner.
ARTICLE TWELVE
Consents, Voting and Meetings
Section 12.1. Method of Giving Consent
Any Consent of a Unit Holder required by this Agreement may be given by a
Unit Holder as follows: (i) at a meeting, in person, by a written proxy or
signed writing directing the manner in which it desires that its vote be cast,
which writing must be received by the General Partner prior to such meeting, or
(ii) without a meeting, by a signed writing directing the manner in which it
desires that its vote be cast, which writing must be received by the Depositary
prior to the date upon which the vote of Unit Holders are to be counted. Any
Partner or Unit Holder may waive notice of or attendance at any meeting of the
Unit Holders and Partners and may execute a signed written consent. Only the
votes of Unit Holders of record on the date of Notification, whether at a
meeting or otherwise, shall be counted. The laws of the State pertaining to the
validity and use of corporate proxies shall govern the validity and use of
proxies given by Unit Holders.
Section 12.2. Meetings of Partners and Unit Holders
The General Partner may at any time call a meeting of the Unit Holders or
for a vote, without a meeting, of the Unit Holders on matters upon which the
Unit Holders are entitled to provide their Consent, and shall call for such a
meeting or vote upon receipt by the General Partner of a request therefor made
by Unit Holders owning at least 10% of the outstanding Depositary Units as of
the date of receipt of such Notification. Within 15 days of the receipt of the
Notification, the General Partner shall notify all Unit Holders of record as of
the date of the Notification as to the time and place of the meeting, if called,
and the general nature of the business to be transacted thereat, or if no such
meeting has been called, of the matter or matters to be voted upon and the date
upon which the votes will be counted. Any Unit Holders meeting or the date upon
which such votes, without a meeting, will be counted (regardless of whether the
General Partner has called for such meeting or vote upon the request of Unit
Holders or has initiated such event without such request) shall be not less than
30 or more than 60 days following
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mailing of the Notification thereof by the General Partner. All expenses of the
meetings, voting and such Notification shall be borne by the Limited
Partnership.
Section 12.3. Limitations on Requirements for Consents
Notwithstanding anything to the contrary contained in this Agreement, the
powers of the Unit Holders set forth in Sections 4.5D, 4.5E, 4.5F, 6.3A, 6.6A,
6.7 and 12.5 shall not be deemed to be granted to the Unit Holders or
exercisable by them unless and until counsel for the Limited Partnership or
counsel designated by Unit Holders owning at least 10% of the outstanding
Depositary Units shall have delivered to the Depositary an opinion to the effect
that neither the grant nor the exercise of those powers is prohibited by the
Act, will impair the limited liability of the Depositary or the Unit Holders or
will affect the classification of the Limited Partnership as a partnership for
Federal income tax purposes.
Section 12.4. Submissions to Unit Holders
The General Partner shall give all the Unit Holders Notification of any
proposal or other matter required by any provisions of this Agreement or by law
to be submitted for the consideration and approval of the Unit Holders. Such
Notification shall include any information required by the relevant provision of
the Agreement or by law.
Section 12.5. Acting without Concurrence of General Partner
Except as limited by Sections 12.3 and ll.1B, Unit Holders owning more
than 50% of the outstanding Depositary Units, without the necessity for
concurrence by the General Partner, may cause the Depositary to vote to:
(a) amend the Agreement or cause the Production Partnership Agreement
to be amended;
(b) dissolve the Limited Partnership or cause the Production
Partnership to be dissolved;
(c) remove the General Partner or cause the Managing Partner of the
Production Partnership to be removed and elect a new General Partner or cause
the Production Partnership to elect a new Managing Partner;
(d) approve or disapprove the sale of all or substantially all of the
assets of the Limited Partnership or cause the Production Partnership to sell or
not to sell all or substantially all of its assets; or
(e) cancel or amend the terms of any contract for services with the
General Partner or any Affiliate or cause the Production Partnership to do so,
which shall be without penalty, provided 30 days written notice is given.
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ARTICLE THIRTEEN
The Depositary
Section 13.1 Depositary Receipts.
A. Within 45 days of the Activation of the Partnership, the Depositary
shall execute and forward to each Unit Holder Depositary Receipts evidencing the
ownership by the Unit Holder as of the date of Activation the Depositary Units
for which such Unit Holder subscribed.
B. Pursuant to the terms of Section 8.3, upon receipt of a properly
executed application for transfer, the Depositary shall within three business
days execute and forward Depositary Receipts to the respective transferees.
C. Depositary Receipts may be endorsed with, have incorporated in the
text thereof or be accompanied by such legends or recitals, attachments or
changes, not inconsistent with the provisions of this Agreement, as may be
required to comply with any applicable law or regulation or with the rules and
regulations of any securities exchange upon which the Depositary Units may be
listed, or to conform with any usage with respect thereto, or to indicate any
special limitation or restriction to which any particular Depositary Unit may be
subject, or as may for any other reason be required. Each Depositary Receipt
shall bear the Depositary's corporate seal and shall be duly executed on behalf
of the Depositary by the manual or facsimile signature of the duly authorized
officers of the Depositary. No Depositary Receipt shall be entitled to any
benefit under this Agreement or be valid for any purpose unless it bears such
signatures and corporate seal.
C. All Depositary Receipts executed by the Depositary shall be numbered
consecutively. The Unit Holder of each numbered Depositary Receipt shall be
registered on the books of the Depositary maintained pursuant to Section l3.3A.
D. Upon surrender by the Unit Holder in person or by duly authorized
attorney of one or more Depositary Receipts at the Depositary's principal
office, or at any other office it may designate for the purpose, for split-up or
combination, the Depositary shall, subject to the terms and conditions of this
Agreement and the Depositary Receipt, execute and deliver one or more new
Depositary Receipts in authorized denominations as requested, evidencing the
same aggregate number of Depositary Units as evidenced by the Depositary
Receipt(s) surrendered.
E. If any Depositary Receipt is mutilated, destroyed, lost or stolen, the
Depositary shall execute and deliver a Depositary Receipt in like form and tenor
in exchange and substitution for the mutilated, destroyed, lost or stolen
Depositary Receipt; provided, that the Depositary may require the Unit Holder to
(i) surrender any mutilated Depositary Receipt, (ii) file with the Depositary,
in a form and manner satisfactory to it, proof of the destruction, loss or
theft, and of such Unit Holder's ownership, of the Depositary Receipt and (iii)
furnish to the Depositary
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reasonable indemnification (including posting of an indemnity bond)
satisfactory to the Depositary.
F. As a condition precedent to the execution and delivery, transfer,
split--up, combination, surrender, conversion or exchange of any Depositary
Receipt, the Depositary may require (i) payment of a sum sufficient for
reimbursement of any tax or other governmental charge with respect thereto, (ii)
production of proof satisfactory to it as to the identity and genuineness of any
signature or endorsement or as to the due authorization of the action, (iii)
filing of such information and execution of such documents by the transferor
and/or the transferee as may be required by this Agreement or the Depositary
Receipt or otherwise is deemed necessary or appropriate by the Depositary and
(iv) compliance with such other conditions as may be imposed under applicable
laws and regulations. The Depositary shall be entitled to rely upon, and shall
not have any liability to the Limited Partnership, the General Partner, any Unit
Holder or any other Person with respect to the content of any proof submitted to
it pursuant to this Section l3.1F, and shall have no obligation to inquire as to
the truth and accuracy thereof (except for acts or omissions resulting from the
Depositary's gross negligence).
G. All Depositary Receipts surrendered to the Depositary shall be
cancelled. The Depositary shall retain all cancelled Depositary Receipts and
other instruments, documents and records in accordance with the policies and
regulations of the Depositary, federal securities laws and the rules and
regulations of any securities exchange or market upon which the Depositary
Receipts may be listed or quoted.
Section 13.2 Depositary as Transfer Agent and Registrar. The Depositary
shall also be the transfer agent and registrar for the Depositary Receipts
unless prohibited by law, regulation or any applicable rule of a securities
exchange or market. In its capacity as such, subject to the terms and conditions
of this Agreement, the Depositary shall transfer record ownership of the
Depositary Units by bookkeeping entry on the books and records maintained
pursuant to Section l3.3A.
Section 13.3 Duties of Depositary
A. In performing its duties hereunder the Depositary shall:
(i) maintain at its principal office a current list of the full
name and last known home or business address of each Unit Holder, set
forth in alphabetical order which list shall be available during ordinary
business hours for examination and copying at the reasonable request, and
at the expense, of any Unit Holder or his duly authorized representative,
or copies of such list may be requested in writing for any proper purpose
by any Unit Holder or his duly authorized representative; provided that
the reasonable costs of fulfilling such request, including copying
expenses, shall be paid by the Unit Holder making such request. In
addition, the Depositary shall, as required, furnish to the Securities
and Exchange Commission, any report, financial statement or communication
received from the Limited Partnership or the General Partner that is made
generally available to Unit Holders;
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(ii) keep all records required to be kept, for the periods
specified, and shall file with the Securities and Exchange Commission all
materials required to be so filed, under the Securities Exchange Act of
1934, by virtue of its status as Depositary. A copy of any material filed
by the Depositary with the Securities and Exchange Commission shall also
be provided to the Limited Partnership within two business days after its
filing. To the extent that any such filing requires information from the
Limited Partnership or the General Partner, such information shall be
furnished to the Depositary by the General Partner in sufficient quantity
and a sufficient time in advance of the date the filing is required to be
made to enable the Depositary to comply with such requirements; and
(iii) keep books at its corporate office for the transfer of
Depositary Receipts. The books shall be open during normal business hours
for inspection by the Unit Holders. The Depositary may, however, close
the transfer books, at any time or from time to time, when deemed
expedient by it in connection with the performance of its duties
hereunder.
B. Upon the request of the Limited Partnership, the Depositary shall as
promptly as practicable furnish to the Limited Partnership a list, as of the
date specified in such request, of the names, addresses and social security or
taxpayer identification numbers of all Unit Holders.
Section 13.4 Depositary Not a Trustee, Issuer, etc. The Depositary is not
a trustee and it is intended that the Depositary, in its capacity as depositary,
shall not be deemed to be an "issuer" or "underwriter" of securities under the
federal securities laws or applicable state securities laws; it being expressly
understood and agreed that the Depositary, in its capacity as the limited
partner of the Limited Partnership, is acting only in a ministerial capacity.
Section 13.5 Indemnification of the Depositary
The Depositary shall be indemnified by the Limited Partnership to the
same extent and subject to the same conditions and restrictions as provided in
Section 4.10 of this Agreement with respect to the indemnification of the
General Partner.
Section 13.6 Limitation of Expense Reimbursements
The expenses of the Depositary otherwise reimbursable to it under the
terms of this Agreement and the fees payable to it hereunder shall not exceed
the lesser of (1) an amount equal to 90% of the competitive price which would be
charged by non--affiliated persons rendering similar services in the same or
comparable geographic location or (ii) the costs and expenses of the Depositary
incurred in rendering such services.
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ARTICLE FOURTEEN
Miscellaneous Provisions
Section 14.1. Notification to the Limited Partnership or the
General Partner
Any Notification to the Limited Partnership or the General Partner shall
be sent to the principal office of the Limited Partnership, as set forth in this
Agreement. Except as provided herein, any Notification to a Unit Holder shall be
sent to its last known address.
Section 14.2. Binding Provisions
The covenants and agreements contained herein shall be binding upon and
inure to the benefit of the heirs, executors, administrators, successors and
assigns of the respective parties hereto.
Section 14.3. Applicable Law
This Agreement shall be construed and enforced in accordance with the
laws of the State.
Section 14.4. Separability of Provisions
If for any reason any provision or provisions hereof which are not
material to the purposes or business of the Limited Partnership or of the Unit
Holders' Depositary Units are determined to be invalid and contrary to any
existing or future law, such invalidity shall not impair the operation of or
affect those portions of this Agreement that are valid.
Section 14.5. Appointment of the General Partner as
Attorney-in-Fact
The Depositary, by the execution of this Agreement, irrevocably
constitutes and appoints the General Partner, its true and lawful agent and
attorney-in-fact with full power and authority in its name, place and stead to
execute, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents, instruments and conveyances that may be necessary
or appropriate to carry out the provisions or purposes of this Agreement,
including without limitation: (i) all certificates and other instruments
(including counterparts of this Agreement), and any amendment thereof, including
any amendment substituting a Limited Partner pursuant to Section 7.lE and
Section 8.2, that the General Partner deems appropriate to form, reform, qualify
or continue the Limited Partnership (or a new partnership with substantially the
same provisions as the Limited Partnership) as a limited partnership (or a
partnership in which the Partners will have limited liability comparable to that
provided by the Act) in the jurisdiction in which the Limited Partnership may
conduct business; (ii) all amendments and other instruments necessary to admit
into the Limited Partnership
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additional or substituted Partners pursuant to Section 11.2; (iii) all
instruments that the General Partner deems appropriate to reflect a change or
modification of the Limited Partnership in accordance with the terms of this
Agreement (including those necessary to reflect additional Capital
Contributions); and (iv) all conveyances and other instruments that the General
Partner deems appropriate to reflect the dissolution and termination of the
Limited Partnership.
Section 14.6. Entire Agreement
This Agreement constitutes the entire agreement among the parties. This
Agreement supersedes any prior agreement or understanding among the parties and
may not be modified or amended in any manner other than as set forth herein.
Section 14.7. Paragraph Titles
Article and section titles are for descriptive purposes only and shall
not control or alter the meaning of this Agreement as set forth in the text.
Section 14.8. Counterparts
This Agreement may be executed in several counterparts, all of which
together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the same counterpart except
that no counterpart shall be binding unless signed by the General Partner.
GEODYNE PROPERTIES, INC., as
General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President
GEODYNE DEPOSITARY COMPANY, as
the Limited Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President
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SCHEDULE A
General Partner
Name and Address Capital Contribution
---------------- --------------------
Geodyne Properties, Inc. $100
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Limited Partner
Name and Address Capital Contribution
---------------- --------------------
Geodyne Depositary Company $36,171,900
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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