As filed with the Securities and Exchange Commission on August 21, 1997.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
August 21, 1997 (June 30, 1997)
ENEX CONSOLIDATED PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
New Jersey 000-22983 76-0508488
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
c/o Enex Resources Corporation, 800 Richmond Drive
Three Kingwood Place, Suite 200, Kingwood, Texas 77339
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (281) 358-8401
Not Applicable
(Former name or former address, if changed since last report)
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ENEX CONSOLIDATED PARTNERS, L.P.
TABLE OF CONTENTS
FOR
CURRENT REPORT ON FORM 8-K
Item 2. Acquisition or Disposition of Assets ........ 3
Item 7. Financial Statements and Exhibits............ 3
Signature ............................................. 4
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Item 2. Acquisition or Disposition of Assets
On June 30, 1997, Enex Consolidated Partners, L.P. (the
"Consolidated Partnership") consummated the acquisition (the "Acquisition") of
all the assets and certain liabilities of thirty-four partnerships (the
"Partnerships") managed by Enex Resources Corporation ("Enex" or the "General
Partner"), pursuant to a consolidation (the "Consolidation") of the Partnerships
approved by the limited partners of each Partnership. Information with respect
to, inter alia, the assets involved in the Acquisition and the Consolidation,
the nature and amount of consideration given therefor, the principle followed in
determining the amount of such consideration, the identity of the Partnerships
and the nature of the relationship between the Partnerships and the Consolidated
Partnership or any of its affiliates, any officer of the Consolidated
Partnership or any associate of any such officer, the nature of the business in
which the assets were used by the Partnerships and the Consolidated
Partnership's intent to continue such use, is hereby incorporated by reference
to the Prospectus/Proxy Statement dated April 7, 1997, (the "Prospectus/Proxy
Statement"), filed with the Securities and Exchange Commission (the "SEC") on
April 7, 1997 (File No. 33-09953).
In connection with the Acquisition, the General Partner
acquired 580,268.13 units of limited partnership interest ("Units") of the
Consolidated Partnership out of a total of 1,102,630.9 issued and outstanding
Units as of June 30, 1997, representing 52.625% of the total issued and
outstanding Units as of such date. Limited partners owning 0.9356% of the total
aggregate exchange value of Partnership interests eligible to participate in the
Consolidation exercised the dissenters' rights provided in connection therewith.
218798_1
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired. The financial statements
required pursuant to subsection (a) of Item 7 are not included in this initial
report on Form 8-K and will be filed on or before September 13, 1997.
(b) Pro Forma Financial Information. The pro forma financial information
required pursuant to subsection (b) of Item 7 is not included in this initial
report on Form 8-K and will be filed on or before September 13, 1997.
(c) Exhibits. The following material is filed as an exhibit to this Current
Report on Form 8-K:
Exhibit
Number Description of Exhibit
2 Plan of Consolidation. See Apendix C to Prospectus/Proxy Statement.
4 Amended Articles of Limited Partnership of the Consolidated Partnership.
23 Consent of H.J. Gruy and Associates, Inc. (incorporated by reference to
Exhibit 23.4 to Amendment No. 3 to the Registration Statement on S-4 filed
by the Consolidated Partnership on February 26, 1997 (File No. 33-09953)).
99 Reports of H.J. Gruy and Associates, Inc. (incorporated by reference to
Exhibit 99.2 to Amendment No. 3 to the Registration Statement on S-4 filed
by the Consolidated Partnership on February 26, 1997 (File No. 33-09953)).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ENEX CONSOLIDATED PARTNERS, L.P.
By: ENEX RESOURCES CORPORATION
General Partner
Date: August 21, 1997 By:/s/Gerald B. Eckley
Gerald B. Eckley
President
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EXHIBIT INDEX
Exhibit Page
Number Description Number
2 Plan of Consolidation. See Appendix C to
Prospectus/Proxy Statement.
4 Amended Articles of Limited Partnership of the
Consolidated Partnership.
23 Consent of H.J. Gruy and Associates, Inc.
(incorporated by reference to Exhibit 23.4 to
Amendment No. 3 to the Registration Statement on S-
4 filed by the Consolidated Partnership on February
26, 1997 (File No. 33-09953)).
99 Reports of H.J. Gruy and Associates, Inc.
(incorporated by reference to Exhibit 99.2 to
Amendment No. 3 to the Registration Statement on S-
4 filed by the Consolidated Partnership on February
26, 1997 (File No. 33-09953)).
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APPENDIX B
ARTICLES OF LIMITED PARTNERSHIP
TABLE OF CONTENTS
Article Page No.
------- --------
ARTICLE 1 -- Certain Definitions ........................................ B-1
ARTICLE 2 -- Status and Business of Partnership.......................... B-6
ARTICLE 3 -- Contributions of the Partners............................... B-8
ARTICLE 4 -- Allocation of Costs and Revenues; Distributions............. B-9
ARTICLE 5 -- Tax Matters................................................. B-13
ARTICLE 6 -- Right to Present Units for Purchase......................... B-16
ARTICLE 7 -- Books of Account, Fiscal Year and Reports................... B-18
ARTICLE 8 -- Rights and Obligations of the Unitholders................... B-22
ARTICLE 9 -- Rights and Obligations of the General Partner............... B-28
ARTICLE 10-- Representations and Warranties of the Partners and Power of
Attorney................................................... B-35
ARTICLE 11-- Dissolution, Liquidation and Termination of the Partnership. B-38
ARTICLE 12-- Right of the General Partner to Conduct Similar Operations.. B-41
ARTICLE 13-- Amendments.................................................. B-41
ARTICLE 14-- Miscellaneous Provisions.................................... B-43
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AMENDED ARTICLES OF LIMITED PARTNERSHIP
OF
ENEX CONSOLIDATED PARTNERS, L.P.
(A New Jersey Limited Partnership)
AMENDED ARTICLES OF LIMITED PARTNERSHIP ("Articles"), made by and among
ENEX RESOURCES CORPORATION, a Delaware corporation ("Enex" or the "General
Partner"), the "Original Limited Partner" (as hereinafter defined) and the
"Limited Partners" (as hereinafter defined) amending and restating in its
entirety the Certificate (as hereinafter defined) filed under the Act (as
hereinafter defined) of ENEX CONSOLIDATED PARTNERS, L.P. (the "Partnership") in
order, among other things, to admit to the Partnership as additional limited
partners those certain persons whose names are set forth on Schedule A hereto
(who are the "Limited Partners" referred to above); to reflect the withdrawal
from the Partnership of the Original Limited Partner and the assignment of the
Original Limited Partner's interest in the Partnership to Enex; and to reflect
the fact that the Partnership has commenced operations.
ARTICLE 1
Certain Definitions
Section 1.1. Defined Terms:
"Act" means The New Jersey Uniform Limited Partnership Law (1976).
"Administrative Costs" means all customary and routine expenses
incurred by the General Partner for the conduct of Partnership administration,
including; legal, finance, accounting, secretarial, travel, office rent,
telephone, data processing and other items of a similar nature.
With respect to the General Partner, "affiliate" means (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities of the General Partner; (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 General Partner; (c) any
Person directly or indirectly controlling, controlled by or under common control
with the General Partner; (d) any officer, director or partner of the General
Partner; and (e) if the General Partner is an officer, director or partner, any
company for which the General Partner acts in such capacity. Notwithstanding the
foregoing, for the purposes of Section 9.3 below, the term "affiliates" shall
include only those persons performing services on behalf of the Partnership.
"Affiliated limited partnership" means a limited partnership or other
entity that is an affiliate of the General Partner.
"Capital Account" means the separate capital account maintained for
each Partner and Unitholder pursuant to Article 7.
"Capital Contributions" means, with respect to a Predecessor
Partnership, the total capital invested in such Predecessor Partnership by the
general and limited partners thereof.
"Certificate" refers to the Partnership's certificate of limited
partnership filed with the Secretary of State of the State of New Jersey, as the
same may be amended from time to time.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time.
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"Consolidation" means the consolidation of the Predecessor Partnerships
described in the Prospectus/Proxy Statement of the Partnership dated April 7,
1996.
"Cost", when used with respect to Partnership property, means the cost
of such property on the books of the entity owning it. With respect to property
acquired from the General Partner or its affiliates (excluding affiliated
limited partnerships when the interest of the General Partner is identical to or
less than its interest in the Partnership), Cost includes (1) the sum of the
prices paid by the General Partner or its affiliates to an unaffiliated person
for such property, including bonuses; (2) title insurance or examination costs,
brokers' commissions, filing fees, recording costs, transfer taxes, if any, and
like charges in connection with the acquisition of such property; (3) a pro rata
portion of the General Partner's or its affiliates' actual, necessary and
reasonable expenses for seismic and geophysical services; (4) rentals and ad
valorem taxes paid by the General Partner or its affiliates to the date of
transfer, and income taxes incurred in connection with the transactions, if any;
(5) interest and points actually incurred on funds used by the General Partner
or its affiliates to acquire or maintain such property; and (6) such portion of
the reasonable, necessary and actual expenses for geological, geophysical,
engineering, drafting, accounting, legal and other like services allocated to
the property cost in accordance with generally accepted accounting principles
and industry standards. Cost will not include expenses of the General Partner or
its affiliates in connection with the past drilling of wells which, in the
opinion of the General Partner, are not producers of sufficient quantities of
oil or gas to make commercially reasonable their continued operations, and will
not include any expenses set forth in (4), (5) and (6) above incurred more than
36 months prior to the purchase of the property by the Partnership. When used
with reference to services, Cost means the reasonable, necessary and actual
expense incurred by the General Partner or its affiliates on behalf of the
Partnership in providing such services, determined in accordance with generally
accepted accounting principles. When used with respect to property acquired
from, or services provided by, a party other than the General Partner or its
affiliates, the term "Cost" means the price paid for such property or services
in an arm's length transaction.
"Development well" refers to a well drilled as an additional well to
the same reservoir as other producing wells on a lease, or drilled on an offset
lease usually not more than one location away from a well producing from the
same reservoir. "Development drilling" refers to the drilling of development
wells.
"Direct Costs" means all actual and necessary costs directly incurred
for the benefit of the Partnership and generally attributable to the goods and
services provided to the Partnership by parties other than the General Partner
or its affiliates. Direct Costs shall not include any cost otherwise classified
as Administrative Costs, Operating Costs or property costs. Direct Costs may
include the cost of services provided by the General Partner or its affiliates
(other than the President of the General Partner) if such services are provided
pursuant to written contracts and in compliance with Article 9 of this
Agreement. Direct Costs will be billed directly to and paid by the Partnership
to the extent practicable.
A "farmout" is an agreement whereby the owner of a leasehold or working
interest agrees to assign his interest in specific acreage to an assignee,
retaining some interest such as an overriding royalty interest, an oil and gas
payment, offsetting acreage or other type of interest, subject to the drilling
of one or more specific wells or other performance by the assignee as a
condition of the assignment.
The "fiscal year" of the Partnership is the twelve month period ending
December 31.
"General Partner" refers to ENEX RESOURCES CORPORATION, a Delaware
corporation, the sponsor of the Partnership, and any successor to it in that
capacity. A "sponsor" is any person directly or indirectly instrumental in
organizing the Partnership or any person who will manage or participate in the
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management of the Partnership, including the General Partner and any other
person who regularly performs or selects the person who performs 25% or more of
the exploratory, developmental or producing activities of the Partnership, or
segment thereof. "Sponsor" does not include wholly independent third parties
such as attorneys, accountants, placement agents and underwriters whose only
compensation is for professional services rendered in connection with the
offering of Interests.
"Horizon" means a zone of a particular formation; that part of a
formation of sufficient porosity and permeability to forma a petroleum
reservoir.
"Independent Expert" means a Person with no material relationship to
the General Partner who is qualified and who is in the business of rendering
opinions regarding the value of oil and gas properties based upon the evaluation
of all pertinent economic, financial, geologic and engineering information
available to the General Partner.
A "lease" is a full or partial interest in an oil and gas lease,
license, concession, or other right authorizing the owner to explore for and
produce oil and gas, and any contractual right to acquire any of such interests.
"Limited Partners" are Unitholders who have been admitted to the
Partnership as limited partners in accordance with these Articles and the Act.
Partnership "net revenues" refers to the excess of aggregate
Partnership revenues, income and gains in any particular time period over the
aggregate Operating Costs, Direct Costs and Administrative Costs and other
Partnership costs and expenses (including the repayment of Partnership
borrowings, but excluding the costs of acquiring Partnership properties), in
such time period.
"Operating Costs" refers to expenditures made and costs incurred in
producing and marketing oil or gas from completed wells, including, in addition
to labor, fuel, repairs, hauling, materials, supplies, utility charges and other
costs incident thereto or therefrom, ad valorem and severance taxes, insurance
and casualty loss expense, and compensation to well operators or others for
services rendered in conducting such operations. Operating Costs include that
portion of the Direct Costs and Administrative Costs which is allocable to the
working interest in an oil and gas property.
"Original Limited Partner" refers to the Person who, as a limited
partner, executed the Partnership's Certificate as originally filed with the
Secretary of State of the State of New Jersey.
An "overriding royalty" is a royalty interest created from a lease
which does not survive the termination of such lease.
"Partners" refers to the General Partner and the Limited Partners,
collectively.
"Partnership" means Enex Consolidated Partners, L.P., the limited
partnership formed pursuant to the Act and organized pursuant to these Articles.
"Partnership property(ies)" includes all interests, properties and
rights of any type owned by the Partnership and includes well machinery and
equipment, gathering systems, storage facilities, pipelines, refining,
processing and other downstream facilities, and any other equipment and property
associated with the production, processing or marketing of oil and gas, other
than oil, gas and other minerals produced by the Partnership. Interests in oil
and gas properties may include working interests, production payments, royalties
or overriding royalties and other non-working and non-operating interests.
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"Person" means any individual, partnership, corporation, trust or other
entity.
"Predecessor Partnership" means a limited partnership of which the
General Partner was the general partner which dissolved and terminated following
the transfer of its assets to the Partnership.
"Producing property" is property producing oil and gas in commercial
quantities or property with shut-in wells deemed capable by the General Partner
of producing oil or gas in commercial quantities.
A "production payment" is an interest which entitles the holder to
receive a specified share of gross production of oil, gas or other minerals, or
the proceeds from the sale of such share of production (which proceeds may, in
some cases, be measured by a percentage of the net profits realized by the
holder of the underlying working interest), free of the costs of production,
having an expected economic life (at time of creation) of shorter duration than
the economic life of one or more of the mineral properties burdened thereby.
A "production purchase partnership" is any partnership whose investment
objective is to directly acquire, hold, operate, and/or dispose of producing oil
and gas properties. Such a partnership may acquire any type of ownership
interest in a producing property, including, but not limited to, working
interests, royalties or production payments. A partnership which spends at least
90% of capital contributions and funds borrowed (excluding organization and
offering costs) in the above-described activities is presumed to be a production
purchase partnership.
A "prospect" is an area covering lands which are believed by the
General Partner to contain subsurface structural or stratigraphic conditions
making it susceptible to the accumulations of hydrocarbons in commercially
productive quantities at one or more horizons. The area, which may be different
for different horizons, shall be designated by the General Partner in writing
prior to the conduct of Partnership operations and shall be enlarged or
contracted from time to time on the basis of subsequently acquired information
to define the anticipated limits of the associated hydrocarbon reserves and to
include all acreage encompassed therein. A "prospect" with respect to a
particular horizon may be limited to the minimum area permitted by state law or
local practice, whichever is applicable, to protect against drainage from
adjacent wells if the well to be drilled by the program is to a horizon
containing proved reserves.
"Proved reserves" are those quantities of crude oil, natural gas and
natural gas liquids which upon analysis of geologic and engineering data appear
with reasonable certainty to be recoverable in the future from known oil and gas
reservoirs under existing economic and operating conditions. Proved reserves are
limited to those quantities of oil and gas 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. Proved reserves includes both proved developed reserves,
which can be expected, with little doubt, to be recovered from existing wells
using existing equipment and operating methods and proved undeveloped reserves,
which are reserves which are expected to be recovered from new wells on
undrilled acreage or from existing wells where a relatively major expenditure is
required for recompletion. Reserves on undrilled acreage shall be limited to
those drilling units offsetting productive units, which are virtually certain of
production when drilled and, for other undrilled units, only where it can be
demonstrated with certainty that there is continuity of production from existing
productive formation. Proved developed reserves also includes two subcategories:
proved developed producing reserves, which are expected to be produced from one
or more existing completion zones now open for production in an existing well,
and proved developed non-producing reserves, which exist behind the casing or at
minor depths below the present depth of an existing well, which are expected to
be produced through these wells in the predictable future, where the cost of
making such oil and gas available for production is relatively small compared to
the cost of a new well. Additional oil and gas expected to be obtained
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through the application of fluid injection or other improved recovery techniques
for supplementing the natural forces and mechanisms of primary recovery will be
included as "proved developed reserves" only after testing by a pilot project or
after the operation of an installed program has confirmed through production
response that increased recovery will be achieved. Under no circumstances will
estimates for proved undeveloped reserves be attributable to any acreage for
which an application of fluid injection or other improved recovery technique is
contemplated, unless such techniques have been proved effective by actual tests
in the area and in the same reservoir.
"Roll-up" means a transaction involving the acquisition, merger,
conversion, or consolidation, either directly or indirectly, of the Partnership
and the issuance of securities of a roll-up entity. The term roll-up does not
include: (a) a transaction involving securities of the Partnership that have
been listed for at least 12 months on a national exchange or traded through the
National Association of Securities Dealers Automated Quotation National Market
System; or (b) a transaction involving the conversion to corporate, trust or
association form of only the Partnership if, as a consequence of the
transaction, there will be no significant adverse change in any of the
following: (1) voting rights; (2) the term of existence of the Partnership; (3)
the General Partner's compensation; or (4) the Partnership's investment
objectives.
"Roll-up entity" means a partnership, trust, corporation or other
entity that would be created or survive after the successful completion of a
proposed roll-up transaction.
A "royalty" or "royalty interest" is an interest entitling the holder
to receive a share of gross production of oil, gas or other minerals, or the
proceeds from the sale of such share of production (which proceeds may, in some
cases, be measured by a percentage of the net profits realized by the holder of
the underlying working interest), to be received free and clear of all costs of
development, operation or maintenance, and having no control over drilling and
production activities. The term "royalty" or "royalty interest" includes
landowner's royalties and overriding royalties (including net profits
royalties).
"Sharing ratio" means, with respect to a Unitholder, the ratio between
the number of Units owned by such Unitholder and the aggregate number of Units
owned by all Unitholders of the Partnership as at the time of determination.
"Units" are limited partnership interests in the Partnership, to each
of which is allocable a share of the profits and losses of the Partnership and
the right to receive distributions of the Partnership's assets.
"Unitholders" refers to Persons who hold Units.
"Undeveloped leasehold interests" refers to all interests in oil, gas
and other mineral leases except those portions of such leases included within
the governmentally designated spacing or conservation unit in which a producing
well is located; or, if no spacing unit has been designated, in the case of a
producing oil well, within the regularly surveyed quarter-quarter section (40
acres) or substantially equivalent lots or tracts in which it is located; or, in
the case of a producing gas well, within the regularly surveyed quarter section
(160 acres) or substantially equivalent lots or tracts in which it is located.
A "working interest" is the operating interest under an oil and gas
lease or unleased mineral interest the owner of which has the right to explore
for, develop and produce oil and gas from and to operate the properties subject
to such interest and to receive his pro rata share of the oil, gas and minerals
produced from such properties or the proceeds from the sale thereof, and the
obligation to pay his pro rata share of all costs, including costs of
development, operation and maintenance associated therewith.
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Section 1.2 Cross-References
References in these Articles to particular Paragraphs, Sections and
Articles are, except as otherwise expressly indicated therein, references to
paragraphs, sections and articles of these Articles.
ARTICLE 2
Status and Business of Partnership
Section 2.1. Status
The parties to these Articles intend hereby to be members of a limited
partnership pursuant to the Act. The General Partner shall not be required to
deliver or mail a copy of the Certificate or any amendment thereto to any
Unitholder.
Section 2.2. Partnership Name and Title to Properties
The name of the Partnership shall be the name set forth above. However,
the business of the Partnership may be conducted under any name deemed necessary
or desirable by the General Partner. Title to Partnership properties will be
held in the name of the Partnership or in the name of a special nominee entity
organized for the sole purpose of holding record title to oil and gas
properties. The nominee entity will engage in no other business and incur no
other liabilities. If properties are held in the name of a special nominee,
either a ruling from the Internal Revenue Service or an opinion of qualified tax
counsel shall be obtained to the effect that such arrangement shall not change
the ownership status of the Partnership for federal income tax purposes.
Section 2.3. Purposes and Business
(a) The purposes and business of the Partnership shall be to accept the
assets and liabilities of the Predecessor Partnerships and to acquire, own,
hold, operate, develop and sell and exchange oil, gas and other mineral
properties and direct and indirect interests therein of all kinds; to process,
refine, transport and sell and market oil, gas and other minerals and the
products thereof; to purchase, lease, own, hold, operate, sell and exchange all
equipment, machinery, facilities, systems and plants appropriate for such
purposes; and to engage in or perform any and all other acts or activities
customary in connection with or incident, related or similar to the foregoing,
including, without limitation, the drilling of development wells or the
reworking, recompleting, deepening or sidetracking of existing wells on
producing properties. The Partnership may not engage in exploratory drilling
activities but may drill replacement, secondary or tertiary recovery,
acceleration or other similar wells and may engage in development drilling
projects as well. To the extent not specifically set forth in this Section 2.3,
the purposes and business of the Partnership shall also include all of the
rights and powers of the Partnership and the General Partner described in these
Articles.
(b) Partnership revenues from the sale of oil and gas (except as may be
required by Paragraph (d) of this Section 2.3) may not be used for producing
property acquisitions. Partnership revenues may, however, be mortgaged,
encumbered or assigned to secure payment of loans used to purchase property
interests and may be applied to pay such loans. Partnership revenues may also be
applied to the purchase of Units of Limited Partners under certain
circumstances, as provided in Paragraph (d) of this Section 2.3. Proceeds from
the sale or disposition of producing oil and gas properties shall not be used
for subsequent producing property acquisitions unless property is sold for the
purpose of providing funds to acquire other properties and, prior to the closing
for the sale of such property, the General Partner has earmarked the
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property to be sold for such purpose. Partnership revenues may be used for all
other proper Partnership purposes.
(c) Additional producing properties will be purchased only if the
property is located on the same geological feature as other properties acquired
by the Partnership and only if acquisition of the additional property is
necessary to protect or enhance the Partnership's holdings.
(d) The Partnership may purchase a portion of the General Partner's
interest in the Partnership under the circumstances described in Paragraph (d)
of Section 11.1.
(e) The Partnership generally will conduct its business in the United
States but may conduct business in any other country.
Section 2.4. Offices
(a) The registered office of the Partnership shall be at Enex Resources
Corporation, c/o Satterlee Stephens Burke & Burke, 47 Maple Street, Summit, New
Jersey 07901, or at such other place within the State of New Jersey as the
General Partner may choose from time to time upon written notice of such change
to the Unitholders. The registered agent of the Partnership is Enex Resources
Corporation, which maintains a business office at the same address as the
registered office. The Partnership may maintain other offices at places deemed
advisable by the General Partner.
(b) The principal office of the Partnership shall be at the executive
office of the General Partner at 800 Rockmead Drive, Three Kingwood Place, Suite
200, Kingwood, Texas 77339 or at such other place within or without the States
of New Jersey, Delaware and Texas as the General Partner may choose from time to
time upon written notice of such change to the Unitholders.
Section 2.5. Term
The Partnership term commenced on the date of the original filing of
the Partnership's Certificate. The Partnership shall continue, unless sooner
terminated, for so long as the Partnership holds any property, but in no event
beyond December 31, 2015.
Section 2.6. Certification
The parties to these Articles shall from time to time execute or cause
to be executed all certificates and other documents and do or cause to be done
all such filing, recording, publishing and other acts as may be deemed necessary
or appropriate by the General Partner in order to comply with the requirements
of law for the formation and operation of a limited partnership in New Jersey
and for the operation of a limited partnership in all other jurisdictions where
the Partnership shall conduct business.
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ARTICLE 3
Contributions of the Partners
Section 3.1. General Partner
(a) The General Partner's contribution to the capital of the
Partnership, as general partner, shall consist of its share, as general partner,
of the assets net of liabilities transferred to the Partnership by each
Predecessor Partnership. The General Partner will make cash contributions to the
capital of the Partnership from time to time to the extent necessary to enable
the Partnership to pay those Partnership costs chargeable to the account of the
General Partner as provided in these Articles. The direct payment by the General
Partner of a cost chargeable to its account shall be deemed to be a contribution
to the capital of the Partnership.
(b) The General Partner also may purchase Units pursuant to Article 6.
The General Partner will participate to the extent of its purchase of such Units
in the same manner as if the General Partner were a Substituted Limited Partner
(as described in Section 8.5) holding such Units.
(c) The General Partner shall make additional Capital Contributions as
required so that its Capital Account balance shall, at all times during the term
of the Partnership, equal the lesser of one (1) percent of total positive
Capital Account balances of the Partnership or $500,000. To the extent that any
such additional capital contributions are required, the General Partner shall
receive Units in consideration therefor.
Section 3.2. Unitholders
A Unitholder's contribution to the capital of the Partnership
(including the General Partner's contribution as a Unitholder) shall consist of
his share, as a limited partner or the holder of a limited partnership interest,
of the assets net of liabilities transferred to the Partnership by the
Predecessor Partnership of which he was a limited partner or the holder of a
limited partnership interest and the amount of any liabilities of a Predecessor
Partnership contributed to the Partnership in exchange for Units.
Section 3.3. Partnership Capital
(a) No Partner or Unitholder shall be entitled to be paid interest on
any capital contributed to the Partnership or to withdraw his contribution, or
to receive any return of any portion of his contribution, except as otherwise
provided in these Articles.
(b) All contributions to the capital of the Partnership may be used for
all the purposes of the Partnership and as otherwise provided in these Articles.
Section 3.4. Liability of Partners; Loans
(a) The liability of the Unitholders shall be limited as set forth in
the Act and no Unitholder shall be required to make any contribution to the
capital of the Partnership except his contribution as set forth in the
Partnership's Certificate.
(b) Nothing in these Articles shall prevent a Unitholder from making
any loan to the Partnership by agreement with the Partnership; provided,
however, that no Unitholder shall receive or hold as collateral security any
Partnership property.
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Section 3.5. Status of Non-Limited Partner Unitholders
(a) Unitholders who are not Limited Partners shall have the status of
assignees of limited partnership interests under the Act.
(b) Except as otherwise provided in Section 8.5 with respect to the
transfer of Units, the General Partner shall be the Limited Partner of record
with respect to all Units held by Unitholders who are not admitted to the
Partnership as Limited Partners; provided, however, that any voting rights to
which such Unitholders would be entitled were they Limited Partners will be
exercised by the General Partner in proportion to the votes cast by Limited
Partners.
(c) A Unitholder who is not a Limited Partner may request admission to
the Partnership as a Limited Partner at any time; and upon such Unitholder's (i)
satisfaction of the obligation to make the representations, warranties and
covenants contained in Section 10.1 and (ii) execution and delivery of the power
of attorney contained in Section 10.3, he shall be so admitted to the
Partnership by the General Partner.
ARTICLE 4
Allocation of Costs and Revenues; Distributions
Section 4.1. Allocation Among Unitholders
The Unitholders (which term includes, for all purposes under this
Article 4, the General Partner with respect to Units owned by it) shall share
the Partnership's revenues, gains, costs, expenses, losses and other charges and
liabilities allocated to them pursuant to the subsequent sections of this
Article 4 pro rata in accordance with their respective sharing ratios.
Section 4.2. Allocation of Costs and Revenues Between Unitholders and General
Partner
(a) Except as otherwise provided in subsequent sections of this Article
4, all Partnership costs (including, without limitation, Direct Costs,
Administrative Costs, the costs of planning and developing the Consolidation and
presenting it to the equity owners of the Predecessor Partnerships, as well as
the costs of organizing the Partnership and the costs of the consolidation
itself) and revenues shall be allocated 3.03% to the General Partner and 96.97%
to the Unitholders.
(b) The General Partner will be entitled to reimbursement from the
Partnership for the Unitholders' allocable portion of all costs and expenses
incurred in connection with the Partnership's business and paid by the General
Partner, and for the Unitholders' allocable portion of all Direct Costs and
Administrative Costs; provided, however, that reimbursement of Administrative
Costs shall be limited to an annual maximum reimbursable amount equal to 2% of
aggregate Capital Contributions to the Predecessor Partnerships; and provided
further, that reimbursement as Direct Costs of salaries of executive officers of
the General Partner for professional services shall be limited to an annual
maximum reimbursable amount equal to .4% of aggregate Capital Contributions to
the Predecessor Partnerships.
(c) Anything to the contrary in these Articles notwithstanding, with
the exception of Paragraph (c) of Section 4.3, the General Partner may reduce
its revenue interest and correspondingly increase the revenue interest of the
Limited Partners if required by law in order for the General Partner or its
affiliates
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to participate in transactions with the Partnership or its Limited Partners or
for the Partnership to participate in transactions with affiliates of the
General Partner or their limited partners.
Section 4.3. Special Allocations
The following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Treasury Regulations, and notwithstanding any other provision
of this Article 4, if there is a net decrease in Partnership Minimum Gain during
any fiscal year, each Partner shall be specially allocated items of Partnership
income and gain for such fiscal year (and, if necessary, subsequent Fiscal
Years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, determined in accordance with Treasury Regulations
Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made
in proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations. This
Section 4.3(a) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-1(f) of the Treasury Regulations and shall be
interpreted consistently therewith.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-1(I)(4) of the Treasury Regulations, and notwithstanding any other
provision of this Article 4, if there is a net decrease in Partner Nonrecourse
Debt Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal
year, each Partner who has a share of the Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Section 1.704-2(I)(5) of the Treasury Regulations, shall be specially allocated
items of Partnership income and gain for such fiscal year (and, if necessary,
subsequent fiscal years) in an amount equal to such Partner's share of the net
decrease in Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(I)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(I)(4) and 1.704-2(j)(2) of the Treasury Regulations. This
Section 4.3(b) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(I)(4) of the Treasury Regulations and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. In the event that any Unitholder
unexpectedly receives any adjustments, allocations, or distributions described
in Treasury Regulation Section 1.704-1(b)(2)(ii(d)(4), (5), or (6), which would
cause the negative balance in such Unitholder's Capital Account to exceed the
sum of (i) his obligation to restore a Capital Account deficit upon liquidation
of the Partnership, plus (ii) his distributive share of Minimum Gain, items of
Partnership income and gain shall be specially allocated to such Unitholder in
an amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, such excess negative balance in his Capital Account as
quickly as possible, provided that an allocation pursuant to this Section 4.3(c)
shall be made only if and only to the extent that such Unitholder would have a
negative balance in his Capital Account after all allocations provided for in
this Article 4 have been tentatively made as if this Section 4.3(c) were not in
these Articles. This Section 4.3(c) is intended to comply with the alternative
test for economic effect in Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted consistently therewith.
(d) Gross Income Allocation. In the event any Unitholder has a deficit
Capital Account at the end of any fiscal year that is in excess of the sum of
(i) the amount such Unitholder is obligated to restore pursuant to any provision
of this Agreement, and (ii) the amount such Unitholder is deemed to be obligated
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to restore pursuant to the Sections 1.704-2(g)(1) and 1.704-2(I)(5) of the
Treasury Regulations, such Unitholder shall be specially allocated items of
Partnership income and gain in the amount of such excess as quickly as possible,
provided that an allocation pursuant to this section 4.3(d) shall be made only
if and to the extent that such Unitholder would have a deficit Capital Account
in excess of such sum after all other allocations provided for in this Article 4
have been tentatively made as if Section 4.3(c) hereof and this section 4.3(d)
were not in these Articles.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year
shall be allocated pursuant to Sections 4.1 and 4.2.
(f) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
for any fiscal year shall be specially allocated to the Partner who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable in accordance with Treasury
Regulations Section 1.704-2(I)(1).
For the purposes of this Section 4.3 and Section 4.4 the term Partner
shall include Unitholders to the extent necessary for allocations to comply with
the Treasury Regulations.
Section 4.4. Curative Allocations
The allocations set forth in Sections 4.3(a), 4.3(b), 4.3(c), 4.3(d),
4.3(e), and 4.3(f) and hereof (the "Regulatory Allocations") are intended to
comply with certain requirements of the Treasury Regulations. It is the intent
of the Partners that, to the extent possible, all Regulatory Allocations shall
be offset either with other Regulatory Allocations or with special allocations
of other items of Partnership income, gain, loss, or deduction pursuant to this
Section 4.4. Therefore, notwithstanding any other provision of this Article 4
(other than the Regulatory Allocations), the General Partner shall make such
offsetting special allocations of Partnership income, gain, loss or deduction in
whatever manner it determines appropriate so that, after such offsetting
allocations are made, each Partner's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Partner would have had if
the Regulatory Allocations were not part of these Articles and all Partnership
items were allocated pursuant to Sections 4.1 and 4.2 hereof. In exercising its
discretion under this Section 4.4, the General Partner shall take into account
future Regulatory Allocations under Sections 4.3(a) and 4.3(b) that, although
not yet made, are likely to offset other Regulatory Allocations previously made
under Sections 4.3(e) and 4.3(f).
Section 4.5. Repayment of Partnership Borrowings
Anything to the contrary in these Articles notwithstanding, the
repayment of Partnership borrowings (exclusive of interest) assumed by the
Partnership upon the acceptance of the assets and liabilities of the Predecessor
Partnerships and Partnership borrowings (exclusive of interest) the proceeds of
which are used to acquire either producing properties or Units, shall be made
out of the Unitholders' share of net revenues as set forth in this Article 4.
Section 4.6. Proceeds from the Sale of Property
In the event any Partnership property is sold or exchanged other than
in a transaction described in Section 4.8, then the net proceeds of such sale or
exchange (with net proceeds meaning gross proceeds less selling expenses and
other costs associated with such transaction, if any) shall first be tentatively
allocated to the Unitholders and the General Partner as if such net proceeds
were revenues allocated pursuant to Section 4.2 (the amount so allocated to the
General Partner being referred to in this Section 4.6 as its "tentative
allocation"). Such net proceeds shall then be allocated as follows:
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(i) The Unitholders shall be credited with such portion of the
net proceeds as equals the amount at which the property sold or
exchanged is carried on the books of the Partnership if it was
purchased by the Partnership or, if contributed to the Partnership, its
adjusted basis at the time of contribution, less accumulated cost
recovery deductions with respect thereto, in proportion to their
interests in such amount. (For purposes of this paragraph, the
Unitholders' interests in such amount shall correspond to their
respective shares of the cost or adjusted basis of such property as
reflected on the Partnership's books, less the cost recovery deductions
attributable to such property charged to their respective capital
accounts.)
(ii) The General Partner shall then be allocated such portion
of any remaining net proceeds as equals the sum of the General
Partner's tentative allocation and an amount equal to the excess of the
sum of the General Partner's tentative allocations of the proceeds of
all sales or exchanges of Partnership property over the sum of the
General Partner's actual shares of the proceeds of such sales or
exchanges.
(iii) Any net proceeds then remaining shall be allocated to
the Unitholders.
Section 4.7. Reinvestment in Properties
Notwithstanding the provisions of Section 4.6, if property is sold for
the purpose of providing funds to acquire other properties and, prior to the
closing for the sale of such property, the General Partner has earmarked the
property to be sold for such purpose, then the gain resulting from the sale of
such property (i.e., the amounts that would otherwise be allocated pursuant to
Subparagraphs (ii) and (iii) of Section 4.6) shall be allocated to the
Unitholders.
Section 4.8. Adjustments
(a) If a transferee of Units is permitted to exchange such Units for a
pro rata share of Partnership net assets pursuant to Section 8.8, the General
Partner's and Unitholders' shares of costs and revenues shall be correspondingly
adjusted so that their sum shall equal 100%, to take into account the share of
such costs and revenues attributable to the distributed Partnership assets.
(b) If the Partnership purchases Units pursuant to Article 6 and the
General Partner determines that the Partnership should cancel such Units, the
General Partner's and Unitholders' shares of costs and revenues shall be
correspondingly adjusted so that their sum shall equal 100%, to take into
account the share of costs and revenues attributable to the canceled Units.
(c) If at any time it is determined that the allocation provisions set
forth in this Article 4 do not result in the General Partner being allocated at
least 1% of each material item of Partnership income, gain, loss, deduction or
credit, then this paragraph shall become operative and cause the General Partner
to be allocated so much more of each of those items as will cause it to be
allocated at all times 1% of each such material item of Partnership income,
gain, loss, deduction or credit. To the extent that additional cost items are
allocated to the General Partner pursuant to the preceding sentence, it will
contribute to the Partnership sufficient additional funds as are necessary to
pay the additionally allocated items; provided, however, that any special
allocations made pursuant to this paragraph shall be offset by future
allocations so as to place the General Partner in the same position as if no
special allocations had been made pursuant to this paragraph, and any funds
contributed by the General Partner to fund cost items allocated to it shall be
distributed at such time as the offsetting income allocation is made to the
General Partner.
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Section 4.9. Distributions
(a) Not less often than quarterly, the General Partner will review the
Partnership's accounts to determine whether cash distributions are appropriate.
The Partnership will distribute such cash funds as the General Partner deems
unnecessary to retain in the Partnership to the Unitholders in their sharing
ratios. Cash distributions from the Partnership to the General Partner shall be
made only out of funds properly allocated to its account.
(b) Anything to the contrary in these Articles notwithstanding, if
withholding of tax is required with regard to any income attributable to some
Partners or Unitholders and not to others, then distributions of such income to
the Partners or Unitholders will be made to take the difference into account. In
addition, appropriate adjustments shall be made to the Partners' or Unitholders'
capital accounts if and to the extent required to give effect to the foregoing.
ARTICLE 5
Tax Matters
Section 5.1. Tax Accounting and Allocations
(a) With respect to the allocations set forth in Article 4, to the
extent permitted by law and except as provided below, (i) all income and gains
shall be allocated to the Partners (which term, for the purposes of this Article
5, includes the General Partner and the Unitholders) to whom the revenues
resulting in the realization of such income and gains are allocated, (ii) all
losses shall be allocated to the Partners in the same proportion as the losses
are actually borne by such Partners, (iii) all deductions and credits shall be
allocated to the Partners charged with the expenditure giving rise to such
deductions or credits, and (iv) all items of tax preference for federal
alternative minimum tax purposes shall be allocated to the Partners credited
with the revenues resulting in the realization of the income, gains or losses
giving rise to such items of tax preference or charged with the expenditure
giving rise to the deductions or credits to which such items of tax preference
are attributable. To the extent permitted by law, each Partner shall be entitled
to his distributive share of Partnership income, gain, loss, deduction or
credit, or items of tax preference, in computing his taxable income or tax
liability, to the exclusion of any other Partner.
(b) Anything to the contrary in these Articles notwithstanding, but
except as provided in Paragraph (c) of this Section 5.1, to the extent permitted
by law, the adjusted basis of each Partnership oil and gas property (as defined
in Section 614 of the Code) shall be allocated among the Partners in the same
proportion as such Partners contributed to the cost of each such oil and gas
property. Each Partner shall separately report and keep records of its share
(determined under Section 4.2) of the adjusted basis of, depletion with respect
to, and gains (including recapture) or losses from the disposition of, each
Partnership oil and gas property, with appropriate adjustments thereto for
depletion taken by such Partner; expenditures made which increase the basis of
any Partnership oil and gas property shall be allocated to the Partners in
proportion to their contributions to such expenditures. Such records shall be
furnished to the Partnership upon request.
(c) Anything to the contrary in these Articles notwithstanding, in the
case of property contributed to the Partnership by any Partner pursuant to
Article 3, income, gain, losses and deductions will be allocated among the
Partners so as to take into account, pursuant to Section 704(c) of the Code, the
variation between the fair market value and adjusted basis of property at the
time of its contribution to the Partnership. In the event that Capital Accounts
are revalued pursuant to Article 7 to reflect the admission of a new Partner or
withdrawal of a Partner, subsequent allocations of Partnership income, gain,
loss, and
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deduction with respect to Partnership assets reflected in the Capital Accounts
shall take into account any variation between the adjusted basis of such assets
and the fair market value of such assets at the date such revaluation occurred.
Allocations made pursuant to this paragraph shall be in accordance with Section
1.704-3 of the Treasury Regulations and the General Partner shall be authorized
to make curative or remedial allocations, as provided in the Treasury
Regulations, as necessary to cause such allocations to comply with Section
1.704-3. Adjusted basis of properties contributed to the Partnership that are
subject to depletion shall be allocated among the Partners in accordance with
Sections 1.613A-3(e), 1.704- 1(b)(4)(v), and 1.704-3 to take into account the
difference between the adjusted basis of the contributed property and its fair
market value on the date of contribution. Similar allocations shall be made in
the event that Capital Accounts are revalued pursuant to Article 7.
(d) In the event of a sale or assignment of Units (other than by reason
of a Unitholder's death), except to the extent that pursuant to a valid Treasury
Department Regulation a different method is required, the income, gains, losses,
deductions and credits of the Partnership for the fiscal year in which such sale
or assignment is recognized as provided in Section 8.2 shall be allocated
pro-rata between the assignor and assignee of such Units based on the periods of
time during such fiscal year that such Units were owned by each, without regard
to the periods during such fiscal year in which such income, losses, deductions
and credits of the Partnership were actually realized; provided, however, that
with respect to certain "cash basis items", including, for this purpose,
Partnership items of interest, taxes, payments for services, payments for the
use of property, and any other items designated as "cash basis items" under
Section 706 of the Code and the regulations promulgated thereunder, such items
shall be assigned to the appropriate period to which they are attributable and
by allocating such assigned portion based upon the interest owned by a
Unitholder during each such period.
(e) For the purposes of computing the Partners' capital accounts, all
cost recovery deductions taken into account for purposes of computing
Partnership income or loss shall be allocated to the Unitholders. For this
purpose, cost recovery deductions include the Partnership's deductions for cost
depletion, percentage depletion to the extent of the cost basis of the property,
depreciation, amortization and the like. Cost recovery deductions do not include
that portion of the cost of Partnership property that is taken into account in
computing gain or loss from sales or exchanges.
Section 5.2. Compensation Income
The parties hereby acknowledge and agree that each Partner's interest
in the profits and losses of the Partnership is attributable solely to each
Partner's contributions to the capital of the Predecessor Partnerships,
including, with respect to the General Partner, but without limitation, its
personal liability with respect to certain liabilities of the Predecessor
Partnerships. In the event, however, that any of the Partners is determined for
income tax purposes to have received all or any part of its interest in the
profits and losses of the Partnership (as distinguished from its interest in the
capital of the Partnership) as compensation for services, and, as a result of
such determination, is required to recognize compensation income for federal
and/or state income tax purposes with respect to such interest in the
Partnership, then, anything to the contrary in these Articles notwithstanding,
any corresponding federal and/or state income tax benefit inuring to the
Partnership as a result of such determination, whether in the form of a
deduction for compensation paid, a deduction for depreciation or amortization of
any of its assets, or otherwise, shall be allocated for income tax purposes
solely to the Partners required to recognize such compensation income in an
amount which bears the same ratio to any such income tax benefit as the amount
of such compensation income required to be recognized by such Partners bears to
the total amount of such compensation income required to be recognized by all of
such Partners.
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Section 5.3. Tax Elections
(a) The General Partner shall on the first federal income tax
information return filed on behalf of the Partnership make a proper election to
treat as an expense all intangible drilling and development costs in accordance
with the option granted by Section 263(c) of the Code and, in its discretion,
make any necessary election to treat as an expense any other amounts that may be
so treated under applicable provisions of the Code and the regulations
promulgated thereunder.
(b) The General Partner will make the election at the time and in the
manner set forth under Treas. Reg. ss. 1.704-1(b)(2)(iv)(k)(2) to compute
simulated depletion on a property-by-property basis under the cost or percentage
method.
(c) No election shall be made by the Partnership, the General Partner
or any Unitholder to be excluded from the application of the provisions of
Subchapter K of the Code, or from any similar provision of state or local income
tax laws.
(d) Upon the transfer of all or part of a Unitholder's interest, the
death of an individual Unitholder, or the distribution of any Partnership
property to any party to these Articles, the Partnership, at the General
Partner's option, may make any available election to cause the basis of the
Partnership properties to be adjusted for federal income tax purposes as
provided by Sections 734, 743 and 754, respectively, of the Code; similar
elections under provisions of state and local income tax laws may be made at the
General Partner's option.
Section 5.4. Administrative Matters
(a) Federal, state and local income (and other) tax returns shall be
prepared and filed by the General Partner covering operations reportable by the
Partnership. The General Partner shall use its best efforts in the preparation
and filing of such tax returns, in the manner that the General Partner believes
will be most advantageous to individual taxpayers who are not "dealers" in oil
and gas properties for federal income tax purposes. The General Partner shall
also cause to be prepared and distributed to all the Unitholders a Schedule K-1,
including such reports or computations necessary to compute depletion deductions
and gains and losses from dispositions of Partnership properties in respect of
each Unitholder.
(b) The General Partner shall be the tax matters partner of the
Partnership (within the meaning of Section 6231(a)(7) of the Code) empowered to
resolve the appropriate tax treatment of Partnership items of income, deduction
or credit and to serve as the primary liaison between the Internal Revenue
Service and the Partnership and its Unitholders.
(c) In the event the Partnership is required to register as a "tax
shelter" under Section 6111 of the Code, the General Partner will complete and
file the appropriate registration documents with the Internal Revenue Service.
In addition, the General Partner will maintain a list of investors in accordance
with Section 6112 of the Code, and the regulations promulgated thereunder, and
shall be the person designated by the Partners to maintain a master list,
including the identity of Unitholder-transferees, as reported to the General
Partner by Unitholder-transferors.
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ARTICLE 6
Right to Present Units for Purchase
Section 6.1. Right of Presentment
Unless the Units are listed on a stock exchange or included for
quotation on NASDAQ or a trading market for the Units otherwise develops, within
90 days after the completion of the Consolidation and within 120 days after the
end of each calendar year thereafter, the General Partner will evaluate Units as
of the preceding December 31 and mail a notice setting forth a purchase price
for the Units, determined in the manner set forth in Section 6.3, to each
Limited Partner who has, since the previous January 1st, notified the General
Partner of a desire to present his Units to the General Partner for purchase
provided, however, that the initial mailing will be sent to all Limited
Partners. Each such notice from the General Partner will include a summary of
the reports of the Independent Experts referred to in Section 6.3, the asset and
liability items considered in determining the purchase price and an explanation
of how the purchase price was calculated, and will include a form of assignment
of Units to be presented for purchase. If, for any reason, less than all Units
presented at any one time are to be purchased, the Units to be purchased will be
selected by lot. Unitholders who are not Limited Partners will not have the
right to present their Units to the General Partner pursuant to this Article 6.
Section 6.2. Manner of Exercise; Rescission
Limited Partners desiring to present their Units for purchase must so
elect by returning the form of assignment, duly executed and completed, by mail,
postage prepaid, to the General Partner within thirty (30) days after the
notification of the purchase price has been mailed by the General Partner. As a
general rule, the General Partner will not purchase less than all of a Limited
Partner's Units, but the General Partner may waive this requirement in its sole
discretion. The effective date of a sale of presented Units shall be the date
upon which the General Partner mails the purchase price to the presenting
Limited Partner, which shall be no later than sixty (60) days after the receipt
by the General Partner of such Limited Partner's duly completed and executed
form of assignment. No purchase will be considered effective until after a cash
payment has been made to the Limited Partner presenting the Units for purchase.
A presenting Limited Partner may rescind the sale of his Units by giving written
notice to the General Partner within 15 days after mailing of his form of
assignment.
Section 6.3. Determination of Purchase Price
(a) The purchase price for Units presented for purchase pursuant to
this Article 6 will be based upon the presenting Limited Partner's indirect
interest in a share of the net assets and liabilities of the Partnership,
calculated as of the preceding December 31 (the "Determination Date"), which
will include the sum of the following items:
(i) an amount based on the discounted present worth of future
net revenues from the Partnership's proved developed reserves and
proved undeveloped reserves, as determined in accordance with Paragraph
(b) of this Section 6.3;
(ii) cash on hand;
(iii) prepaid expenses and accounts receivable (discounted, if
appropriate), less a reasonable amount for doubtful accounts; and
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(iv) the estimated market value of all assets not separately
specified above, determined in accordance with standard industry
valuation procedures.
There will be deducted from the foregoing sum an amount equal to all debts,
obligations and other liabilities, including accrued expenses, of the
Partnership, attributable to the capital accounts of the Unitholders and any
distributions to Unitholders between the Determination Date and the date of the
calculation; provided, however, that if any cash distributed was derived from
the sale of oil and gas production or a producing property subsequent to the
determination date, such distributions shall be discounted at the same rate used
to take into account the risk factors employed to determine the value of the
Partnership's proved reserves as set forth in Paragraph (b) of this Section 6.3.
(b) The Partnership will engage an Independent Expert selected by the
General Partner to estimate the future net revenues attributable to the
Partnership's interest in proved developed reserves and proved undeveloped
reserves. In making this estimate, the Independent Expert may employ price and
cost data and assumptions furnished by the General Partner. Costs will include
"windfall" or excess profits taxes, if any. Such independently prepared estimate
will evaluate those Partnership properties generating substantially all of the
Partnership's aggregate revenues. Engineers on the General Partner's staff will
estimate such future net revenues from the balance of the Partnership's
properties employing the same parameters as are employed by the Independent
Expert. The amount attributable to Partnership reserves will be deemed to be 70%
of such estimated future net revenues in the case of proved developed producing
reserves and, in the case of all other proved reserves, their "appraised value".
With respect to such other proved reserves, a discount for risk as the
Independent Expert shall reasonably determine, after taking into account the
nature and quality of such oil and gas interests and as reviewed and approved by
the General Partner, will be applied to the Partnership's proved developed
non-producing reserves and proved undeveloped reserves in arriving at "appraised
value". The amount so determined based upon the last report of the Independent
Expert will be adjusted by the General Partner for estimated changes therein
from the Determination Date to the date of the calculation of the purchase
price, (a) by reason of production, sales of or additions to reserves and lease
and well equipment, the sale or abandonment of leases and similar matters
occurring after the Determination Date, and (b) by reason of any of the
following occurring prior to the date of the calculation: changes in well
performance, increases or decreases in the market price of oil or gas, revision
of regulations relating to oil imports, changes in income, ad valorem and other
tax laws (e.g., material variations in the provisions for depletion or minimum
tax payments) and similar matters. The share of the amount attributable to
Partnership future net revenues allocable to a particular Unitholder's Units
will then be determined, taking into account the changes in the allocation of
Partnership costs and revenues described in Article 4. The result will then be
discounted to present worth using an interest rate not in excess of 1% over the
then prime interest rate announced by Texas Commerce Bank of Houston, Houston,
Texas to its most preferred commercial customers. If, at the time of
determination, the prevailing prime rate of Texas Commerce Bank of Houston is
14% or more, the valuation shall, for comparative purposes only, state the
amount that would have been the purchase price if it had been computed using a
10% annual discount rate.
Section 6.4. Other Purchasers
The General Partner's obligation to purchase Units pursuant to this
Article 6 may be discharged by payment of the purchase price to a presenting
Limited Partner by an affiliate of the General Partner or by a broker-dealer or
other person selected by the General Partner. The Units of the presenting
Limited Partner will be transferred to the party who pays for them. Only the
General Partner, however, is obligated to purchase Units presented by Limited
Partners pursuant to this Article 6.
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Section 6.5. Legal Restrictions
Notwithstanding anything to the contrary set forth in this Article 6,
in the event the General Partner's obligation to purchase Units from Limited
Partners is found to violate any existing or future laws or legislation or to
jeopardize the classification of the Partnership under federal tax laws, such
obligation shall be eliminated to the extent inconsistent therewith.
ARTICLE 7
Books of Account and Reports
Section 7.1. Capital Accounts
(a) The Partnership shall maintain accounts on the accrual basis of
accounting, which method shall also be adopted for federal income tax purposes.
The Partnership shall maintain a separate Capital Account for each Partner
(which term, for the purposes of this Section 7.1, includes the General Partner
and the Unitholders). The amount credited to the Capital Account of each Partner
at the inception of the Partnership shall be an amount equal to the fair market
value of the assets net of liabilities contributed by such Partner pursuant to
Sections 3.1 and 3.2. The Capital Account of each Partner shall also be credited
with the fair market value of any other contributions to Partnership capital and
his distributive share of Partnership income (including income exempt from tax)
and gains (or items thereof), and shall be charged with (a) his distributive
share of Partnership losses and deductions (or items thereof), (b) allocations
to him of expenditures of the Partnership described in Section 705(a)(2)(B) of
the Code, and (c) the amount of any cash or the fair market value of any
property (net of any liabilities assumed by such Partner or to which such
distributed property is subject) distributed to him. Partnership Capital
Accounts shall be maintained in accordance with Section 1.704-1(b)(2)(iv) of the
Treasury Regulations and the provisions of this Section shall be interpreted in
accordance therewith. A Partner's distributive share shall be determined in
accordance with Section 702 of the Code and Article 5, except as provided below.
(b) For purposes of computing the Partners' Capital Accounts, simulated
depletion deductions, simulated gains, and simulated losses (as such terms are
defined in Section 1.704 - 1(b)(2)(iv)(k)(2) of the Treasury Regulations) shall
be allocated among the Partners as they (or their predecessors in interest) were
allocated the basis of Partnership oil and gas properties pursuant to Code
Section 613A(c)(7)(D), the Treasury Regulations thereunder, and Section
1.704-1(b)(4)(v) of the Regulations. In accordance with Code Section
613(A)(c)(7)(D) and the Treasury Regulations thereunder and Section
1.704-1(b)(4)(v) of the Regulations, the adjusted basis for all oil and gas
properties shall be shared by the Partners in the same proportions as they share
Partnership income pursuant to Article 4.
(c) If an adjustment is made in a Partner's distributive share of
Partnership income, gain, loss, or deduction (or any items thereof), and such
adjustment is reflected in an amended return filed by the Partnership or is
reflected in an agreement between the Internal Revenue Service and the
Partnership, then the capital account of each Partner shall be recomputed to
reflect such adjustment. Capital accounts shall be adjusted in accordance with
Treas. Reg. ss. 1.704-1(b)(2)(iv)(m) to reflect any adjustment to the basis of
Partnership property attributable to an election made pursuant to Sections 743
and 754 of the Code.
(d) The General Partner shall have the authority to make appropriate
adjustments to the capital accounts as necessary to reflect any changes to the
Partners' capital accounts occurring pursuant to the provisions of these
Articles.
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(e) Upon the sale or other disposition of an interest in the
Partnership, the capital account of the transferor Partner which is attributable
to such interest shall carry over to the transferee of such interest; provided
that if a sale or other disposition of an interest in the Partnership causes a
termination of the Partnership within the meaning of Section 708(b)(1)(B) of the
Code, the capital accounts of the Partners shall govern the constructive
liquidation of the Partnership pursuant to Treas. Reg. ss. 1.708- 1(b)(1)(iv)
and upon the constructive reformation of the Partnership the capital account
balance of each Partner shall be redetermined in accordance with this Section
7.1.
(f) The books and records of the Partnership shall include such other
separate and additional accounts for each Partner as shall be necessary to
reflect accurately the rights and interests of the respective Partners and shall
specifically indicate the name and address of each Partner and the amount of
Units held by him.
Section 7.2. Books of Account and Annual Financial Reports
The General Partner shall maintain adequate books and records of
account which shall reflect all Partnership transactions and be appropriate and
adequate to record truly and fully all information regarding the state of the
Partnership's business and financial condition. After commencement of the
Partnership's operations, the books of the Partnership will be audited annually
by such firm of independent certified public accountants as the General Partner
shall designate. Within 120 days after the close of the Partnership's fiscal
year, the General Partner shall furnish each Unitholder such financial
statements as are considered necessary or advisable by the General Partner to
advise all Unitholders about their investment in the Partnership. The annual
reports shall contain such financial information prepared in accordance with
generally accepted accounting principles as may be required from time to time by
the United States Securities and Exchange Commission, including in the
following:
(a) Financial statements, including a balance sheet and statements of
operations, partners' capital and cash flows prepared in accordance with
generally accepted accounting principals and accompanied by a report of an
independent certified public accountant stating that his audit was made in
accordance with generally accepted auditing standards and that in his opinion
such financial statements present fairly, in all material respects, the
financial position, results of operations, capital and cash flows in conformity
with generally accepted accounting principals;
(b) a summary itemization, by type and/or classification of the total
fees and compensation, including any administrative cost reimbursements and
operating fees, paid by the Partnership, or indirectly on behalf of the
Partnership, or indirectly on behalf of the Partnership, to the General Partner
and affiliates of the General Partner, together with the accountant's
attestation referred to in Section 7.3;
(c) a description of each property in which the Partnership owns an
interest, including the cost, location, number of acres under lease and the
interest owned therein by the Partnership, except succeeding reports need
contain only material changes, if any, regarding such property;
(d) a description of all material farmouts, farmins and joint ventures
made during the period of the report, including the General Partner's
justification for the arrangement and a description of the material terms;
(e) the computation of oil and gas proved reserves described in
Paragraph (c) of Section 7.5.
The General Partner shall also deliver necessary income tax reporting
information to the Unitholders within 75 days after the close of the
Partnership's fiscal year, which information shall include a separate section
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specifying those items necessary for a Unitholder to determine the amount of his
depletion allowance with respect to Partnership properties.
Section 7.3. Annual Reports of Operations
The General Partner shall furnish the Unitholders with (i) annual
reports of the Partnership's operations which shall include, to the extent not
provided in the annual report described in Section 7.2, a detailed statement of
all transactions between the Partnership and the General Partner and its
affiliates during the preceding fiscal year, showing the amounts and the
consideration and reimbursements involved and (ii) a written attestation from
the Partnership's independent public accountants that the method used to
allocate Direct Costs and Administrative Costs was consistent with the method
described in these Articles and that the total amount of such Costs allocated
did not materially exceed the amounts actually incurred by the General Partner.
Section 7.4. Other Reports
(a) The General Partner will furnish the Unitholders with quarterly
Partnership cash receipts and disbursement statements.
(b) The General Partner will make available to the Unitholders, upon
request, copies of reports filed by the Partnership with the Securities and
Exchange Commission pursuant to the requirements of the Securities Exchange Act
of 1934, as amended.
(c) The General Partner will furnish the Unitholders with, and
concurrently therewith file with the Office of the Commissioner of Corporations
of the State of California, annual and semi-annual reports meeting the
requirements of Section 260.140.128.3 of Title 10 of the California Code of
Regulations.
Section 7.5. Access To and Preservation of Records
(a) The General Partner shall permit access to all records of the
Partnership for inspection and copying at the Partnership's office, upon
reasonable notice, during normal business hours, to any Limited Partner and/or
his accredited representatives. Notwithstanding the foregoing, the General
Partner may keep logs, well reports and other drilling data confidential for a
reasonable period of time.
(b) The General Partner shall maintain and preserve all accounts, books
and other relevant Partnership documents during the term of the Partnership and
for four years thereafter.
(c) The General Partner will compute the Partnerships' total proved
reserves of oil and gas, the dollar value thereof at then existing prices and
each Unitholder's interest in such reserve value annually. The reserve
computations will be based primarily upon engineering reports prepared by
qualified independent petroleum consultants or engineers selected by the General
Partner. They will include, where practicable, an estimate of the time required
for the extraction of such reserves and the present worth of such reserves, with
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. The General Partner will provide to the Unitholders a
computation and estimate of reserves of the Partnership as soon as possible and
in no event more than 90 days after the occurrence of an event other than normal
production leading to a reduction of such reserves of more than 10%.
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(d) The Partnership shall keep and maintain at its principal office,
and upon five days written request by any Partner shall make available for
inspection and copying (at the cost of the requesting Partner) at the
Partnership's registered office during ordinary business hours, each of the
following:
(i) An alphabetical list, updated at least quarterly, of the
full name, last known business address or home address, business or
home telephone number and the Partnership interest of each Partner and
the rights of each Partner to vote. On request, a copy of such list
will be furnished to any limited partner or his representative within
10 days of the request and upon payment of reasonable reproduction and
mailing costs. The purpose for which a Partner may request a copy of
the list include, without limitation, matters relating to Partners'
voting rights under the Partnership and the exercise of Partners'
rights under Federal proxy laws. If the General Partner neglects or
refuses to exhibit, produce, or mail a copy of the list as requested,
the General Partner shall be liable to any Partner requesting the list
for the costs, including attorneys fees, incurred by that Partner for
compelling the production of the list, and for actual damages suffered
by any Partner by reason of such refusal or neglect. It shall be a
defense to any such claim that the actual purpose and reason for the
request for inspection or for a copy of the list is to secure the list
of Partner or other information for the purpose of selling such list or
information or copies thereof, or of using the same for a commercial
purpose other than in the interest of the applicant as a Partner in
connection with the affairs of the Partnership. The General Partner may
require the Partner requesting the list to represent that the list is
not requested for a commercial purpose unrelated to the Partner's
interest in the Partnership. The remedies provided by this Section 7.5
to Partners requesting copies of the list are in addition to, and shall
not in any way limit, other remedies available to Partners under
Federal law, or the laws of any state;
(ii) A copy of the Certificate and all amendments thereto,
together with executed copies of any powers of attorney pursuant to
which the Certificate or any amendment has been executed;
(iii) Copies of the Partnership's federal, state and local
income tax returns and reports, if any, for the three (3) most recent
years; and
(iv) Copies of any then effective written partnership
agreement and of any financial statements of the Partnership for the
three (3) most recent years.
(e) The General Partner shall cause to be maintained records of the
information upon which was based the determination of the suitability of a
Unitholder to invest in each Predecessor Partnership that commenced operations
on or after September 11, 1990 of which he or she was a limited partner, for a
period of six years from the commencement of operations of each such Predecessor
Partnership.
Section 7.6. Additional Information Regarding Tax Basis
To the extent the General Partner is required to determine the adjusted
tax basis of any Partnership property with respect to which the Code requires
that records of such adjusted tax basis be kept and maintained by the
Unitholders, the General Partner may request information regarding such adjusted
tax basis from the Unitholders, in writing, and each Unitholder shall furnish
such information to the General Partner within 90 days after said request is
mailed by the General Partner.
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ARTICLE 8
Rights and Obligations of the Unitholders
Section 8.1. Liability of Unitholders
Except as may otherwise be provided under applicable state law, no
Unitholder shall be personally liable for any of the debts of the Partnership or
any of the losses thereof in excess of his capital investment and his share of
the undistributed net profits of the Partnership, anything to the contrary in
these Articles notwithstanding. No Unitholder shall (i) take part in the
management of the business or transact any business for the Partnership; (ii)
have the power to sign for or to bind the Partnership; or (iii) be paid any
salary or have a drawing account.
Section 8.2. Transfer of Units
FOR CALIFORNIA INVESTORS ONLY: "IT IS UNLAWFUL TO CONSUMMATE A SALE OR
TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S RULES."
(a) Except as otherwise provided in these Articles, a Unitholder may
assign, pledge or transfer his Units, but no such assignment, pledge or transfer
shall be made or given effect unless it is in compliance with applicable
securities laws, and no such assignment, pledge or transfer shall release a
Limited Partner from his obligations under these Articles.
(b) No assignment or transfer may be made, other than to the General
Partner or by operation of law, unless the transferor assigns all of his Units
in the Partnership or after such transfer the transferor will own at least
$2,500 of Units ($2,000 for Individual Retirement Accounts or Keogh Plans) and
the transferee will own at least $2,500 of Units ($2,000 for Individual
Retirement Accounts or Keogh Plans). In addition, no assignment or transfer may
be made unless the transferor has first reported to the General Partner the
name, address and taxpayer identification number of the transferee; the amount
of Units to be acquired by the transferee; the date on which the Units are to be
acquired; the transferee's name; and whether or not the transferee is (i) an
individual citizen of the United States over 21 years of age or (ii) a
corporation organized under the laws of the United States or a partnership or
other association all of the members of which are such citizens of such age,
which corporation or association is authorized and otherwise duly qualified to
hold federal and other oil and gas leases, other real and personal property and
interests therein or (iii) a fiduciary that would qualify under (i) or (ii)
above and that is acting for beneficiaries that would so qualify or are
non-alien minors.
(c) The General Partner shall have the right to refuse to recognize any
sale, exchange, or other transfer of Units if it believes that such transfer
occurred on a secondary market or the substantial equivalent thereof within the
meaning of Section 7704 of the Code.
(d) Subject to the foregoing restrictions, the General Partner shall
recognize the assignment of Units as of the last day of the calendar quarter
following receipt of notice of such assignment and all documentation required by
Section 8.3.
(e) For purposes of these Articles, any transfer of Units or any rights
attributable thereto, whether voluntary or by operation of law, shall be
considered an assignment of Units.
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(f) The General Partner shall be the Limited Partner of record with
respect to all Units held by Unitholders who are not admitted to the Partnership
as Limited Partners; provided, however, that any voting rights to which such
Unitholders would be entitled were they Limited Partners will be exercised by
the General Partner in proportion to the votes cast by Unitholders who are
Limited Partners.
Section 8.3. Transfer Documents Required
(a) The sale or assignment of Units by a Unitholder shall not be
effective until the assignor and assignee execute all such certificates and
other documents and perform all such acts as the General Partner may deem
appropriate to preserve the limited liability of the Unitholders and the tax
status of the Partnership after the completion of such sale or assignment. The
assignor and assignee of Units shall each represent to the General Partner that
the sale, exchange, or other transfer of Units did not, to the best of their
knowledge, occur on a secondary market or the substantial equivalent thereof
(within the meaning of Section 7704 of the Code), unless the General Partner, in
its sole discretion, waives such requirement. Upon the request of any
Unitholder, the General Partner will provide appropriate forms for the
assignment of Units, including a copy of the statement such Unitholder is
required to provide to an assignee under ss. 6112 of the Code and the
regulations promulgated thereunder, if applicable, to inform such assignee of
the requirement that such assignee either maintain a list of subsequent
transferees or designate the General Partner to do so on his behalf.
(b) A Person who is the assignee of Units of a Unitholder, but who does
not become a "Substituted Limited Partner", as described in Section 8.5, and
desires to make a further assignment of such Units, shall be subject to all the
provisions of this Article 8 to the same extent and in the same manner as any
Limited Partner desiring to make an assignment of Units held by him.
Section 8.4. Death or Incapacity of Unitholders
If a Unitholder dies, his executor, administrator or trustee, or, if he
is adjudicated incompetent, his committee, guardian or conservator, or, if he
becomes bankrupt, the trustee or receiver of his estate, shall have all the
rights and obligations of a Unitholder for the purpose of settling or managing
his estate and such power as the incapacitated Unitholder possessed to assign
all or any part of the Units held by him and to join with such assignee in
satisfying conditions precedent to such assignee becoming a Substituted Limited
Partner. The death or incapacity or bankruptcy of a Unitholder shall not
dissolve the Partnership.
Section 8.5. Substituted Limited Partners
(a) Subject to receipt of the consent of the General Partner, each
Limited Partner shall have the right to substitute a purchaser, assignee,
transferee, donee, heir, legatee or other recipient of his Units as a Limited
Partner in his place. The General Partner's consent may be withheld in the
General Partner's sole discretion, but only if the transfer occurred on a
secondary market or the substantial equivalent thereof (within the meaning of
Section 7704 of the Code), would jeopardize the status of the Partnership as a
partnership for federal income tax purposes, would cause a termination of the
Partnership within the meaning of Section 708(b) of the Code, or would violate,
or cause the Partnership to violate, any applicable law or governmental rule or
regulation. The General Partner shall be entitled to rely on the advice of
counsel in making such a determination. In addition, the General Partner's
consent may be withheld in the event the new Unitholder does not agree or is
unable to make the representations, warranties, certifications, covenants,
agreements and designations set forth and referred to in Section 10.1. Any such
consent by the General Partner shall be binding and conclusive. When the
substitution of a Limited Partner becomes effective, the assigning Limited
Partner shall be relieved of his obligations under these Articles to the extent
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permitted by law with respect to the assigned Units. The Substituted Limited
Partner must reimburse the Partnership for filing fees and other expenses of the
substitution or addition.
(b) By executing these Articles, each Limited Partner shall be deemed
to have consented to any substitution to which the General Partner consents.
(c) A Limited Partner may assign all or any undivided portion of his
right to receive distributions (including distributions of capital) from the
Partnership without having his assignee substituted as a Limited Partner in his
place, provided (i) the transfer did not occur on a secondary market or the
substantial equivalent thereof (within the meaning of Section 7704 of the Code)
or the General Partner, in its sole discretion, waives such requirement, (ii)
the transfer would not cause a termination of the Partnership under Section
708(b) of the Code, jeopardize the tax status of the Partnership as a
partnership, or violate or cause the Partnership to violate any law or
governmental regulation; (iii) such assignment shall not release the assigning
Limited Partner from any of his liabilities under these Articles; (iv) if two or
more persons are to receive such distributions, such persons, if the General
Partner so requests, shall jointly designate one agent to whom such
distributions are to be made for their account; (v) the requirements of
Paragraph (b) of Section 8.2 have been met; and (vi) the General Partner has
received a certified copy of such assignment.
(d) The General Partner shall amend its records at least once each
calendar quarter to effect the substitution of Limited Partners, if any.
Section 8.6. Voting Rights
(a) By vote of a majority in interest of the Limited Partners, the
Limited Partners may (i) amend these Articles pursuant to Section 13.1; (ii)
dissolve the Partnership; (iii) approve or disapprove a Roll-up or the sale of
all or substantially all of the assets of the Partnership other than in the
ordinary course of the Partnership's business; (iv) remove the General Partner;
(v) provided that in the opinion of counsel for the Limited Partners such action
will not violate the Act, result in the loss of any Unitholder's limited
liability or adversely affect the federal income tax status of the Partnership,
cancel any contract described in Paragraph (h) of Section 9.2 without penalty
upon 60 days notice and (vi) elect a liquidator in the event of the dissolution
of the Partnership by reason of an event of withdrawal (as defined in the Act)
of the General Partner.
(b) By a vote of two-thirds in interest of the Limited Partners, the
Limited Partners may approve or disapprove the selection of an additional or
successor general partner.
(c) The General Partner will abstain from voting its Units in
connection with any vote of the Limited Partners pursuant to clauses (iv) or (v)
of Paragraph (a) of this Section 8.6. Notwithstanding anything to the contrary
contained herein, in determining the requisite percentage in interest of the
Units necessary to approve a matter in which the General Partner may not vote,
any Units owned by the General Partner shall not be included. The General
Partner will also abstain from voting on any matter whatsoever, those Units it
acquired as a Limited Partner in liquidation of limited partnership interests in
a Predecessor Partnership that were acquired by the General Partner within two
years from the date of the commencement of operations of such Predecessor
Partnership, if the agreement of limited partnership of such Predecessor
Partnership included a provision to such effect.
(d) Within ninety (90) days after an event of withdrawal of the General
Partner, two-thirds in interest of the Limited Partners or more may, in lieu of
electing a liquidator, agree in writing to continue the Partnership's business
and to the appointment of a successor General Partner pursuant to Section 11.1.
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(e) If any approval of action by vote of a majority or two-thirds in
interest of the Limited Partners would violate the Act or adversely affect the
Limited Partners' limited liability or the Partnership's tax status but, in the
opinion of the aforementioned counsel, the same approval upon unanimous consent
would not, such action may be taken upon receipt of such unanimous approval.
(f) The General Partner, as general partner, will concur in any vote of
the Limited Partners taken under this Section 8.6 and shall execute an amendment
to the Certificate and any other documents required to give effect to such
action unless the effect of the action would be to increase the liability or
obligations of the General Partner or affect its rights and interests in
profits, losses and capital of the Partnership or alter federal income tax
allocations under these Articles.
(g) In connection with any vote of the Limited Partners to approve or
disapprove a Roll-up pursuant to paragraph (a) of this Section 8.6, if a
majority of the Limited Partners who vote on the matter, other than the General
Partner, vote to disapprove the Roll-up, the Roll-up will not be approved.
(h) Any opinion of counsel required pursuant to Paragraphs (a)(v) or
(e) of this Section 8.6 shall be paid for by the Partnership.
Section 8.7. Consents, Meetings and Submissions to Limited Partners
(a) Any vote or consent required by these Articles may be given (i) by
a written consent of the consenting Partner prior to, at the time of, or after
the doing of the act or thing for which the consent is solicited, or (ii) by the
affirmative vote by the consenting Partner to the doing of the act or thing for
which the consent is solicited at any meeting called and held pursuant to
Paragraph (b) of this Section 8.7 to consider the doing of such act or thing.
(b) Any matter, including those matters referred to in Section 8.6,
with respect to which the consent of the Limited Partners is solicited may be
considered at a meeting of the Partners at which a quorum consisting of at least
a majority in interest of all Limited Partners is present in person or by proxy,
provided such meeting is held not less than 30 nor more than 60 days after
notification thereof shall have been given by the General Partner to all
Partners; provided, however, that the date for notice of such a meeting may be
extended for a period of up to 60 days, if in the opinion of the General Partner
such additional time is necessary to permit preparation of proxy or information
statements or other documents required to be delivered in connection with such
meeting by the Securities and Exchange Commission or other regulatory
authorities. Such notice (i) may be given by the General Partner, in its
discretion, at any time, and (ii) shall be given by the General Partner within
15 days after receipt by it of a request for a meeting to consider a matter
referred to in Section 8.6 endorsed in writing by not less than 10% in interest
of the Limited Partners. Any request so endorsed and submitted to the Limited
Partners by the General Partner may be accompanied by the recommendations of the
General Partner as to adoption of the proposed action and/or the opinion of
counsel referred to in Section 8.6 and such other information as the General
Partner deems appropriate. Such meeting shall be held either at the principal
office of the Partnership or the General Partner or such other location as shall
be specified by the General Partner.
(c) The General Partner shall give all the Limited Partners notice of
any proposal or other matter required by any provision of these Articles or by
law to be submitted for the consideration and approval of the Limited Partners.
Such notice shall include any information required by the relevant provisions of
these Articles or by law.
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(d) The General Partner may, in accordance with the provisions of the Act,
fix, in advance, a date as the record date for determining the Partnership's
Limited Partners with regard to any Partnership action or event and, in
particular, for determining the Limited Partners entitled:
(i) to be notified of or to vote at any meeting of the Partners or any
adjournment thereof or to consent in writing to any action without a meeting; or
(ii) to receive payment of any distribution or allotment of any right.
(e) On any matter requiring a vote by or the consent of the Limited
Partners, the Limited Partners' respective interests shall be determined in
accordance with their sharing ratios; provided, however, that if the General
Partner is required to abstain from voting any of its Units pursuant to
Paragraph (b) of Section 8.6 on any matter, then for the purpose of determining
the Limited Partners' respective interests for that matter, the Limited
Partners' sharing ratios shall be determined by treating such Units as though
they were not owned by any Partner of the Partnership.
Section 8.8. Exchange for Assets
(a) Transferees of Units that have been presented by a Limited Partner
pursuant to Article 6 will have the right, at the sole option of the General
Partner and at such time as the General Partner shall approve, to surrender such
Units in exchange for the pro rata share of Partnership net assets attributable
to such Units. The pro rata share of Partnership net assets attributable to
Units shall be assigned subject to a pro rata share of all liens and other
encumbrances burdening such assets. Such pro rata share shall be that percentage
of Partnership net assets which would have been distributed to the holder of
such Units if the Partnership had been liquidated pursuant to the provisions of
Article 11 immediately prior to the exchange.
(b) If 25% or more of the Units in the Partnership are exchanged for a
pro rata share of Partnership net assets pursuant to Paragraph (a) of this
Section 8.8, then the General Partner will submit to a vote of the Limited
Partners a proposal to dissolve the Partnership and liquidate pursuant to
Section 11.2.
Section 8.9. Purchase of Units by General Partner
If at any time the General Partner determines that any representation,
warranty, certification, covenant, agreement or designation made by or requested
of a Unitholder to the General Partner was false when made, has been breached,
or would be false if made at a later time, or that a Unitholder is otherwise not
qualified to hold interests in federal oil and gas leases, or otherwise
jeopardizes the Partnership's tax status or the limited liability of other
Unitholders, then the General Partner, or any person designated by the General
Partner, shall have the right, but not the obligation, to purchase the Units of
such Unitholder at a price equal to the most recent purchase price therefor
determined in accordance with Article 6, or, such purchase occurs prior to the
first determination of a purchase price pursuant to Article 6, at a price equal
to the "exchange value" of such Units in the Consolidation, or if a trading
market for the Units has developed such that no such price has been determined
as of the preceding December 31, at the then current market price for such
Units.
Section 8.10. Appraisal and Compensation
(a) In connection with a proposed roll-up, the appraised value of all
Partnership properties and other assets will be determined by an Independent
Expert selected by the General Partner as of a date
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immediately prior to the announcement of the proposed roll-up transaction. If
the appraisal is to be included in a prospectus used to offer the securities of
a roll-up entity, the appraisal will be filed with the Securities and Exchange
Commission as an exhibit to the Registration Statement for such offering. The
appraisal of such properties and other assets will assume an orderly liquidation
of Partnership assets over a 12 month period. The terms of the engagement of the
Independent Expert will clearly state that the engagement is for the benefit of
the Partnership and its Partners. A summary of the appraisal, indicating all
material assumptions underlying the appraisal, will be included in a report to
the Limited Partners in connection with the proposed roll-up.
(b) In connection with a proposed roll-up, the person sponsoring the
roll-up shall offer the Limited Partners who vote "no" on the proposal the
choice of (1) accepting the securities of the roll-up entity offered in the
proposed roll-up; or (2) one of the following: (A) remaining as a Limited
Partner in the Partnership on the same terms and conditions as existed
previously; or (B) receiving cash in an amount equal to the Limited Partner's
pro-rata share of the appraised value determined under Paragraph (a) of this
Section 8.10, except that in the event that any Partnership Properties or other
assets are sold to provide cash to pay such Limited Partners, there shall be
made such adjustments to the appraised value as may be necessary to give effect
to the prices actually received in lieu of the appraised value of the
Partnership properties and other assets that are sold.
(c) The Partnership will not participate in any proposed roll-up which
would result in the Limited Partners having fewer democracy rights in the
roll-up entity than those provided for in these Articles. If the roll-up entity
is not a limited partnership, the democracy rights of the equity owners in the
roll-up entity will correspond to the democracy rights provided for in these
Articles to the greatest extent possible.
(d) The Partnership will not participate in any proposed roll-up which
includes provisions which would operate to materially impede or frustrate the
accumulation by any purchaser of the securities of the roll-up entity (except to
the minimum extent necessary to preserve the tax status of the roll-up entity).
The Partnership will not participate in any proposed roll-up which would limit
the ability of the equity owners of the roll-up entity to exercise the voting
rights of their securities of the roll-up entity on the basis of the share of
the total equity of the roll-up entity held by such equity owners.
(e) The Partnership will not participate in any proposed roll-up in
which the equity owners of the roll-up entity will have rights of access to the
records of the roll-up entity less extensive that those provided for in these
Articles.
(f) The Partnership will not participate in any proposed roll-up in
which any of the costs of the transaction will be borne by the Partnership if
the roll-up is not approved by the Limited Partners.
ARTICLE 9
Rights and Obligations of the General Partner
Section 9.1. Powers of the General Partner
The General Partner shall have full, exclusive and complete discretion
to manage and control the business and operations of the Partnership and shall
have power and authority to do all things necessary or advisable for such
purpose. By way of illustration and not by way of limitation, the General
Partner shall have full power and authority to acquire, sell, exchange, transfer
and abandon properties, products and facilities in the ordinary course of the
Partnership's business, to invest Partnership funds temporarily
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in investments having a prudently obtainable yield, to borrow money and to grant
security interests in Partnership assets, to procure and maintain such insurance
as may be available, in such amounts and covering such risks as are, in its sole
judgment, appropriate, to cause the Partnership to purchase Units as provided in
Article 6, to cause the Partnership to become a participant or a general or
limited partner in one or more joint ventures, partnerships or other enterprises
formed to conduct business of the sort in which the Partnership may engage, and,
if not in the ordinary course of the Partnership's business, then with the
approval of a majority in interest of the Limited Partners, to sell or otherwise
dispose of all or substantially all of the assets of the Partnership.
Section 9.2. Certain Transactions
The General Partner may engage in the following kinds of transactions
on behalf of the Partnership and the Unitholders with any Person, whether or not
such Person is the General Partner or is an affiliate of the General Partner,
subject to the following limitations:
(a) The General Partner may enter into operating agreements covering
Partnership properties pursuant to a model form operating agreement issued by
the American Association of Petroleum Landmen and an accounting procedure for
joint operations issued by the Council of Petroleum Accountants Societies of
North America customary and usual for the geographic area in which the
properties are located. The consideration to be received by the General Partner
or any Person that is an affiliate of the General Partner for acting as operator
shall include a charge for Direct Costs and Administrative Costs, but may not be
in excess of the competitive rate or duplicative of any consideration or
reimbursement received pursuant to the other provisions of these Articles. The
General Partner may not benefit itself by interpositioning itself between the
Partnership and the actual provider of operator services.
(b) Neither the General Partner nor its affiliates shall sell, transfer
or convey any property to or purchase any property from the Partnership,
directly or indirectly, except pursuant to transactions that are fair and
reasonable to the Unitholders. Any purchase from the General Partner or its
affiliates (other than an affiliated limited partnership, in which the economic
interest of the General Partner is substantially similar to or less than its
economic interest in the Partnership) must be consistent with the objectives of
the Partnership.
(i) If the property to be sold to the Partnership by the
General Partner or any of its affiliates has been held for less than
two (2) years and there have not been significant expenditures made in
connection with the property, any such purchase (other than from an
affiliated limited partnership in which the economic interest of the
General Partner is substantially similar to or less than its economic
interest in the Partnership) must be made at Cost, as adjusted for
intervening operations, unless the General Partner has reason to
believe that such adjusted Cost is materially more than the fair market
value of such property, in which case such purchase shall be made at
fair market value.
(ii) If the property to be sold to the Partnership by the
General Partner or any of its affiliates has been held for less than
six (6) months and there have not been significant expenditures made in
connection with the property, any purchase from an affiliated limited
partnership in which the economic interest of the General Partner is
substantially similar to or less than its economic interest in the
Partnership will be at Cost, as adjusted for intervening operations,
unless the General Partner has reason to believe that such adjusted
Cost is materially more than the fair market value of such property, in
which case such purchase shall be made at fair market value.
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(iii) Any other purchase from the General Partner or its
affiliates (including limited partnership affiliates) will be at not
more than fair market value.
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(iv) Any sale, transfer or conveyance of an undeveloped
leasehold interest from the Partnership to the General Partner or an
affiliate of the General Partner, other than an affiliated limited
partnership, must be made at the higher of Cost or fair market value.
(v) Other than a transfer in connection with farmouts or joint
ventures made in compliance with this Section 9.2, any sale, transfer
or conveyance of an undeveloped leasehold interest to an affiliated
limited partnership formed for the purpose of drilling on undeveloped
leasehold interests must be made at Cost, unless the General Partner
has cause to believe that Cost is materially more than the fair market
value of such property, in which case such transfer should be made for
a price not in excess of its fair market value; provided however, if
the Partnership has held the property for more than two years and the
economic interest of the General Partner in the affiliated limited
partnership is substantially similar to, or less than, its economic
interest in the Partnership, the transfer may be made at fair market
value.
(vi) Any sale, transfer, or conveyance of a producing property
from the Partnership to the General Partner or an affiliate, other than
an affiliated limited partnership in which the economic interest of the
General Partner is substantially similar to or less than its economic
interest in the Partnership, shall not be permitted except in
connection with the liquidation of the Partnership and then only at
fair market value.
(vii) Except in connection with farmouts or joint ventures
made in compliance with this Section 9.2, a transfer of any type of
property from the Partnership to an affiliated production purchase or
income program limited partnership must be made at fair market value if
the property has been held for more than six (6) months or there have
been significant expenditures made in connection with the property.
Otherwise, if the General Partner deems it to be in the best interest
of the Partnership, the transfer may be made at Cost, as adjusted for
intervening operations.
Except as provided in the preceding sentence, any determination of fair market
value as required by the provisions of this Paragraph (b) of Section 9.2 must be
supported by an appraisal from an Independent Expert selected by the General
Partner on behalf of the Partnership. Such opinion and any associated supporting
information must be maintained in the records of the Partnership for at least
six (6) years.
(c) A development well may be drilled on undeveloped leasehold
interests acquired by the Partnership in the vicinity of producing properties
purchased by the Partnership when, in the opinion of the General Partner, the
drilling of such a well is warranted. Undeveloped leasehold interests not in the
vicinity of producing properties purchased by the Partnership subsequently may
be sold.
(d) Except as provided in this Section 9.2 (in particular Paragraph
(b)), the Partnership shall not purchase properties from or sell properties to
any other affiliated limited partnership. This prohibition, however, shall not
apply to purchase of property through participation in joint ventures with the
General Partner and/or such affiliated limited partnerships, provided that the
respective obligations and revenue sharing of all parties to the transaction are
substantially proportionate to their respective participation in the joint
venture and the compensation arrangement or any other interest or right of
either the General Partner or its affiliates is substantially similar in each
affiliated limited partnership, or, if different, the aggregate compensation of
the General Partner and its affiliates associated with the property and any
direct and indirect ownership interest in the property may not exceed the lower
of the compensation and ownership interest the General Partner and/or its
affiliates could receive if the property were separately owned or retained by
either one of the limited partnership affiliates. In addition, there will be no
duplication or increase in organization and offering expenses, compensation to
the General Partner,
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Partnership expenses or other fees and costs; there will be no substantive
alteration in the fiduciary and contractual relationship between the General
Partner and the Unitholders; and there will be no diminishment in the voting
rights of the Limited Partners.
(e) The General Partner may farm out the Partnership's interests in
oil, gas and other properties. However, the General Partner may not farm out any
well for the primary purpose of avoiding payment of costs relating to such well
allocable to the General Partner pursuant to these Articles or unless the
General Partner exercising the standard of a prudent operator, determines that
(i) the Partnership lacks sufficient funds to drill the well and cannot obtain
suitable alternative financing for such drilling; (ii) the property has been
downgraded by events occurring after its acquisition by the Partnership so that
drilling would no longer be desirable for the Partnership; (iii) drilling on the
property would result in an excessive concentration of Partnership funds
creating in the General Partner's opinion undue risks to the Partnership; or
(iv) the best interests of the Partnership would be served by the farmout. If
the drilling of a Partnership well is farmed out, the Partnership will obtain or
retain such economic interests and concessions as a reasonably prudent operator
would or could obtain or retain under the circumstances.
(f) The General Partner may, on behalf of the Partnership, borrow
money, either unsecured or secured by Partnership assets and income. Any loan to
the Partnership by the General Partner or an affiliate of the General Partner
will bear interest in an amount which shall not exceed the lesser of (i) the
General Partner's or such affiliate's interest cost from time to time during the
term of such loan, (ii) the rate which would be charged to the Partnership
(without reference to the General Partner's financial abilities or guarantees)
by unrelated banks on comparable loans for the same purposes or (iii) the
maximum lawful rate. The General Partner may not receive points or other
financing charges or fees, regardless of amount, on any loans it may make to the
Partnership. When two or more Partnerships participate in the same transaction
and financing is obtained for the benefit of all of the participants, the
Partnership shall become liable to pay only its pro rata share of the loan, and
its interest in the properties purchased shall be mortgaged only as security for
the share of the loan for which it becomes liable. Notwithstanding the
provisions of this Paragraph, no creditor of the Partnership shall have or
acquire as a result of making any nonrecourse loan to the Partnership any direct
or indirect interest in the profits, capital or property of the Partnership
other than as a secured party. The Partnership shall not make loans or advance
payments to the General Partner or any of its affiliates except that affiliates
may make advance payments where necessary to secure tax benefits of prepaid
drilling costs. These payments, if any, shall not include nonrefundable payments
for completion costs prior to the time that a decision is made that the well or
wells warrant a completion attempt. The General Partner may not pledge any
Partnership properties as security for loans to the General Partner or its
affiliates.
(g) The General Partner may render or obtain geological, geophysical,
engineering, land, legal, operating and other technical services, studies,
evaluations, bookkeeping, accounting, data processing, reporting and similar
services relating to the conduct of the Partnership's operations and the
business affairs of the Unitholders. If any such service, study or evaluation is
rendered by the General Partner or obtained from an affiliate of the General
Partner, the price paid by the Partnership therefor shall not exceed the Cost
incurred in providing the service, study or evaluation.
(h) Each contract other than these Articles relating to a transaction
between the Partnership and the General Partner or an affiliate of the General
Partner other than an affiliated limited partnership shall contain a provision
which shall permit cancellation of the contract by the Partnership without
penalty, on not less than 60 days prior written notice, upon the vote in favor
of termination by a majority in interest of the Limited Partners. Any contract
terminated by the General Partner or an affiliate shall require 60 days advance
notice in writing to the Limited Partners.
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(i) In the event natural gas or oil produced by the Partnership is
transported through a pipeline or other transportation facility owned by the
General Partner or an affiliate of the General Partner, the General Partner or
such affiliate will transport such natural gas or oil for the Partnership on the
best terms made available to any third party. If the General Partner or an
affiliate renders any oil field or other services or sells or leases to the
Partnership any equipment or related supplies, then, if the General Partner or
such affiliate is engaged, independently of the Partnership and as an ordinary
and ongoing business, in the business of rendering such services or selling or
leasing such equipment or supplies to a substantial extent to other persons in
the oil and gas industry, the compensation, price or rental therefor paid by the
Partnership shall be competitive with the compensation, price or rental of other
persons in the area engaged in the business of rendering comparable services or
selling or leasing comparable equipment and supplies which could reasonably be
made available to the Partnership, and if the General Partner or such affiliate
is not so independently engaged in such business, then the compensation, price
or rental paid by the Partnership shall be the Cost of such services, equipment
or supplies to the General Partner or such affiliates or the competitive rate
which could be obtained in the area, whichever is less.
(j) The General Partner will not take any action with respect to the
assets or property of the Partnership which does not benefit primarily the
Partnership as a whole, including the utilization of funds of the Partnership as
compensating balances for the benefit of the General Partner and future
commitments of production. No rebates or give-ups may be received by the General
Partner or any of its affiliates nor may the General Partner or any of its
affiliates participate in any reciprocal business arrangements which would
circumvent this Section 9.2. The General Partner shall have a fiduciary
responsibility for the safekeeping and use of all funds and assets of the
Partnership, whether or not in the General Partner's possession or control, and
the General Partner shall not employ, or permit another to employ, such funds or
assets in any manner except for the exclusive benefit of the Partnership.
(k) The General Partner will not use Partnership funds to prove up
properties in the geological prospect areas belonging to the General Partner or
its affiliates.
(l) All benefits from marketing arrangements or other relationships
affecting property of the General Partner or its affiliates and the Partnership
shall be fairly and equitably apportioned according to the respective interests
of each. Partnership funds will not be commingled with the funds of any other
entity. Notwithstanding the foregoing, the General Partner may establish a
master fiduciary account pursuant to which separate subtrust accounts are
maintained for the benefit of affiliated limited partnerships, provided the
Partnership's funds are protected from the claims of such other limited
partnerships and their creditors. The General Partner will not make any advances
to the Partnership nor will the Partnership borrow any funds for the purpose of
sustaining a regular pattern of distribution even though loan payment
requirements, unusual Operating Costs or other expenses or temporary reductions
in Partnership revenues may reduce funds available for distribution.
(m) In connection with the participation by the Partnership in any
other partnership or joint venture (multi-tier arrangement), there will not be
any (i) duplication or increase in organization and offering expenses, the
General Partner's compensation, Partnership expenses or other fees and costs;
(ii) substantive alteration in the fiduciary and contractual relationship
between the General Partner and the Unitholders; or (iii) diminishment in the
voting rights of the Limited Partners.
Section 9.3. Indemnification
(a) The General Partner and its affiliates shall be indemnified by the
Partnership under the following circumstances and in the manner and to the
extent set forth below:
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(i) The General Partner and its affiliates shall be
indemnified against the reasonable expenses, including attorneys' fees,
actually and necessarily incurred by the General Partner and its
affiliates in connection with the defense of an action in the right of
the Partnership to procure a judgement in its favor by reason of the
General Partner being or having been a general partner in the
Partnership, or in connection with an appeal therein if the General
Partner or such affiliate acted in good faith and in a manner the
General Partner or such affiliate reasonably believed to be in or not
opposed to the best interests of the Partnership; provided, however,
that no indemnification shall be provided in respect of any claim,
issue or matter as to which the General Partner or its affiliates shall
have been adjudged to be liable for negligence or misconduct, unless
and only to the extent that the Superior Court of the State of New
Jersey or the court in which the proceeding was brought shall determine
upon application that despite the adjudication of liability, but in
view of all circumstances of the case, the General Partner or such
affiliate is fairly and reasonably entitled to indemnity for the
expenses as the Superior Court or any other court shall deem proper.
The indemnification provided for under this Paragraph (a) shall in no
case include amounts paid in settling or otherwise disposing of a
threatened action, or pending action with or without court approval but
shall include expenses incurred in a threatened action or pending
action which is settled or otherwise disposed of without court
approval, provided there is a determination upon application to the
Superior Court of the State of New Jersey that in view of all
circumstances of the case, the General Partner or its affiliate is
fairly and reasonably entitled to indemnity for the expenses as the
Superior Court shall deem proper.
(ii) In all cases other than actions in the right of the
Partnership brought by reason of the General Partner being or having
been a general partner in the Partnership, the General Partner and its
affiliates shall be indemnified by the Partnership against any losses,
judgments, liabilities, expenses, including reasonable attorneys' fees,
and amounts paid in settlement of or incurred in connection with any
claims sustained by them in connection with the Partnership provided
that the same were not the result of negligence, a failure to act in
good faith or misconduct on the part of the General Partner or its
affiliates.
(iii) Notwithstanding the foregoing, the General Partner and
its affiliates and any person acting as a broker-dealer shall not be
indemnified for any losses, liabilities or expenses arising from or out
of an alleged violation of Federal or state securities laws unless (1)
there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular
indemnitee and the court approves indemnification of litigation costs,
or (2) such claims have been dismissed with prejudice on the merits by
a court of competent jurisdiction as to the particular indemnitee and
the court approves indemnification of litigation costs, or (3) a court
of competent jurisdiction approves a settlement of the claims against a
particular indemnitee and the court finds that indemnification of the
settlement and related costs should be made.
(iv) The indemnification set forth in this Paragraph (a) shall
in no event cause a Unitholder to incur any liability beyond the
balance in his capital account, including his share of any
undistributed profits of the Partnership, nor shall it result in any
liability of the Unitholders to any third party.
The other provisions of this Paragraph (a) to the contrary
notwithstanding, for so long as the same shall be prohibited by the Act, the
General Partner shall not be indemnified against (1) amounts paid in settling or
otherwise disposing of a threatened action, or pending action in the right of
the Partnership to procure a judgment in its favor to which the General Partner
has been made a party by reason of being or having been a general partner of the
Partnership, or (2) the reasonable expenses, including attorney's fees, actually
and necessarily incurred in connection with the defense of such action, or in
connection with an
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appeal therein, unless the General Partner acted in good faith and in a manner
the General Partner reasonably believed to be in or not opposed to the best
interests of the Partnership; provided, however, that no indemnification shall
be provided with respect to expenses incurred in such an action which is settled
or otherwise disposed of without court approval unless there is a determination
upon application to the Superior Court of the State of New Jersey that in view
of all circumstances of the case, the General Partner is fairly and reasonably
entitled to indemnity for the expenses as the Superior Court shall deem proper.
(b) In any claim for indemnification for federal or state securities
law violations, the party seeking indemnification shall place before the court
the position of the Securities and Exchange Commission, the Massachusetts
Securities Division and any other applicable regulatory authority (including, in
the case where a Unitholder has filed the claim as plaintiff, the applicable
regulatory authority of the state in which such plaintiff was offered or sold
Units) with respect to the issue of indemnification for securities law
violations.
(c) Any amounts payable pursuant to this Section 9.3 are recoverable
only out of the assets of the Partnership and not from the Unitholders. The
Partnership shall not incur the cost of that portion of any insurance which
insures any party against any liability the indemnification of which is
prohibited by this Section 9.3 provided, however, that nothing contained in
these Articles shall preclude the Partnership from purchasing and paying for
such types of insurance, including extended coverage liability and casualty and
workers' compensation, as would be customary for any person owning comparable
assets and engaged in a similar business, or from naming the General Partner and
its affiliates as additional insured parties thereunder, provided that such
addition does not add to the premiums payable by the Partnership.
(d) The advancement of Partnership funds to the General Partner or its
affiliates for legal expenses and other costs incurred as a result of any legal
action for which indemnification is being sought is permissible only if the
Partnership has adequate funds available and the following are satisfied:
(i) The legal action relates to acts or omissions with respect
to the performance of duties or services on behalf of the Partnership,
and
(ii) the legal action is initiated by a person who is not a
Limited Partner, or the legal action is initiated by a Limited Partner
and a court of competent jurisdiction specifically approves such
advancement, and
(iii) the General Partner or its affiliates undertake to repay
the advanced funds to the Partnership, together with the applicable
legal rate of interest thereon, in cases in which such party is found
not to be entitled to indemnification.
(e) For purposes of this Section 9.3 only, the term "affiliates" shall
include only those affiliates who are performing services on behalf of the
General Partner within the scope of the General Partner's authority as set forth
in these Articles ("Qualified Affiliates"); provided, however, that an affiliate
that is not a Qualified Affiliate whose liability is solely attributable to the
nature of its relationship to the General Partner or a Qualified Affiliate
(e.g., "controlling person" liability under the federal securities laws) shall
be indemnified to the same extent as a Qualified Affiliate.
Section 9.4. Transfer of General Partner's Interest
The interest of the General Partner may not be voluntarily assigned nor
another General Partner admitted without the consent of a majority in interest
of the Limited Partners; provided, however, that the General Partner may assign
its interest in the Partnership without such consent and substitute as General
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Partner (i) another corporation in connection with a merger or consolidation or
a transfer of all or substantially all of the assets of the General Partner with
or to such corporation, provided that such corporation assumes all of the
obligations of the General Partner with regard to the Partnership and has, after
consummation of such transaction, a net worth equal to or in excess of the
General Partner's net worth; or (ii) a parent or subsidiary of the General
Partner; provided, further, that in the opinion of counsel to the Partnership,
such transfer as contemplated by (i) and (ii) above would not jeopardize the
status of the Partnership as a partnership for federal income tax purposes. In
the event the Act is interpreted or construed to require the consent of the
Limited Partners with respect to any transfer and substitution as contemplated
by (i) and (ii) above, each Limited Partner shall be deemed to have consented to
such transfer and substitution by becoming a party to these Articles. Nothing
contained in these Articles shall be deemed to prohibit or restrict the right of
the General Partner to assign its right to receive revenues from the Partnership
or its right to pledge or grant a security interest in its general partner's
interest in the Partnership and/or any Units it owns as security for any
indebtedness or other obligation or liability or to prohibit or restrict the
ability of any secured party to assert its interest in such security.
Section 9.5. Withdrawal of General Partner
The General Partner shall have the right to withdraw voluntarily as
general partner upon 120 days prior written notice to the Unitholders. The
General Partner shall pay all expenses incurred by the Partnership with respect
to such withdrawal, but shall have no other liability on account of such
withdrawal. Upon the sending of notice of withdrawal by the General Partner,
which notice will include information concerning the General Partner's nominee
for election as substituted general partner, the Limited Partners shall have the
right to continue the business of the Partnership in accordance with Section
11.1; otherwise the Partnership shall dissolve pursuant to Subparagraph (a)(i)
of Section 11.1, and the General Partner shall remain as general partner for the
purpose of winding up the affairs of the Partnership.
Section 9.6. Resolution of Conflicts of Interest
(a) Unless otherwise expressly provided in these Articles, whenever a
potential conflict of interest exists or arises between the General Partner or
any of its affiliates, on the one hand, and the Partnership or any Unitholder,
on the other hand, any resolution or course of action in respect of such
conflict of interest shall be permitted and deemed approved by all Partners, and
shall not constitute a breach of these Articles, of any agreement contemplated
in these Articles, or of any duty stated or implied by law or equity, if the
resolution or course of action is, or by operation of these Articles is deemed
to be, fair and reasonable to the Partnership. The General Partner shall be
authorized in connection with its resolution of any conflict of interest to
consider (i) the relative interests of any party to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such interest;
(ii) any customary or accepted industry practices and any customary or
historical dealings with a particular Person; (iii) any applicable generally
accepted accounting or engineering practices or principles; and (iv) such
additional factors as the General Partner determines in its sole discretion to
be relevant, reasonable or appropriate under the circumstances. Nothing
contained in these Articles, however, is intended to nor shall it be construed
to require the General Partner to consider the interests of any Person other
than the Partnership. In the absence of bad faith by the General Partner, the
resolution, action or terms so made, taken or provided by the General Partner
with respect to such matter shall not constitute a breach of these Articles or
any other agreement contemplated in these Articles or a breach of any standard
of care or duty imposed in these Articles or such other agreement or under the
Act or any other law, rule or regulation.
(b) Whenever these Articles or any other agreement contemplated hereby
provides that the General Partner or any of its affiliates is permitted or
required to make a decision in "good faith" or under another express standard,
the General Partner or such affiliate shall act under such express standard and
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shall not be subject to any other or different standards imposed by these
Articles, any other agreement contemplated hereby or under the Act or any other
law, rule or regulation.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under these Articles to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
ARTICLE 10
Representations and Warranties of the Partners and Power of Attorney
Section 10.1. Representations of the Limited Partners
Each Limited Partner has made the representations, warranties,
certifications, covenants, designations and agreements set forth in the
subscription agreement or agreements or the assignment or assignments of limited
partnership interest pursuant to which he acquired limited partnership interests
in one or more of the Predecessor Partnerships (the "acquisition
instrument(s)"), which representations, warranties, certifications, covenants,
designations and agreements, including without limitation the designation of the
General Partner (and its duly authorized agents) as the Limited Partner's
attorney-in-fact for the purposes and to the full extent provided in the
acquisition instrument(s), are hereby incorporated into these Articles.
Each Limited Partner represents, warrants, covenants and agrees as
follows:
(a) His direct and indirect interests in federal oil and gas leases,
applications and offers therefor and options do not exceed 246,080 acres in any
state, of which no more than 200,000 acres are under option, nor do they 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 either leasing
district.
(b) He is (i) an individual citizen of the United States over 21 years
of age or (ii) a corporation organized under the laws of the United States or of
any state or territory thereof or a partnership or other association organized
under such laws all of the members of which are such citizens of such age, which
corporation or association is authorized and otherwise duly qualified to hold
federal and other oil and gas leases, other real and personal property and
interests therein or (iii) a fiduciary that would qualify under (i) or (ii)
above and that is acting for beneficiaries that would so qualify or are
non-alien minors. A corporate Limited Partner further certifies that to the best
of its knowledge, not more than 10% of the voting stock, and of all the stock,
is owned or controlled by citizens or countries that deny to U.S. citizens
privileges to own stock in corporations holding oil and gas leases similar to
the privileges of non-U.S. citizens to own stock in corporations holding an
interest in federal oil and gas leases.
(c) Except as disclosed in a separate schedule previously delivered to
the General Partner, he does not hold or own, within the meaning of ss. 318 of
the Code, any Enex Resources Corporation common stock, warrants or any other
securities convertible into common stock. He further covenants that he shall
not, directly or indirectly, acquire any more of such stock or other securities
of the General Partner or any of its affiliates without the General Partner's
prior written consent and agrees to advise the General Partner in writing
promptly after the disposition of any stock or securities listed in the
aforementioned schedule or thereafter acquired with the prior written consent of
the General Partner.
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(d) He certifies under penalty of perjury that (1) the Social Security
or taxpayer Identification Number previously reported to the General Partner is
his true, correct and complete Social Security or Taxpayer Identification Number
and (2) he is not subject to backup withholding as a result of a failure to
report all interest or dividends, or the Internal Revenue Service has notified
him that he is no longer subject to backup withholding.
(e) He will not file a statement under Code Section 6224(c)(3)(B)
prohibiting the tax matters partner from entering into a settlement on his
behalf with respect to partnership items and the General Partner is authorized
to file with the Internal Revenue Service pursuant to Code ss. 6224(b) a copy of
these Articles and any other document necessary to perfect the Limited Partner's
waiver of rights hereunder. In addition, he hereby agrees that the General
Partner shall be the person designated to maintain a master list of investors
pursuant to Code ss. 6112.
(f) He will not take any action or acquire interests that would cause
any of the representations, warranties, certifications, covenants, agreements
and designations made in these Articles to be false if they were made at a later
time.
Section 10.2. Representations of the General Partner
The General Partner represents and warrants to the Partnership and to each
Limited Partner that:
(a) based upon the representations of the Unitholders made pursuant to
Section 10.1, the Unitholders do not own, directly or indirectly within the
meaning of ss. 318 of the Code, individually or in the aggregate, more than 20%
of the stock of the General Partner or any of its affiliates as defined in ss.
1504(a) of the Code;
(b) it has a net worth which is substantial, based upon the fair market
value of its assets, and will use its best efforts to maintain such net worth;
(c) the purchase of Units by the Limited Partners does not entail
either a mandatory or discretionary purchase of, or option to purchase, any type
of security of the General Partner or any of its affiliates as defined in
Section 1504(a) of the Code; and that it has no present plan or intention to
offer any of its securities (or those of such affiliates) in exchange for the
Units of any Limited Partner;
(d) the organization and operation of the Partnership will be in
accordance with these Articles and all applicable limited partnership laws;
(e) the interest of the General Partner (or of all general partners
taken together if more than one) in each material item of Partnership income,
gain, loss, deduction or credit will be equal to at least one percent of each
such item at all times during the existence of the Partnership; and
(f) a creditor who makes a nonrecourse loan to a Partnership will not
have or acquire at any time as a result of making such loan any direct or
indirect interest in the profits, capital, or property of the Partnership other
than as a secured creditor.
Section 10.3. Power of Attorney
Each Unitholder hereby constitutes and appoints Enex (and its duly
authorized agents) his true and lawful agent and attorney-in-fact (with full
power to substitute another attorney in its place and to revoke such
substitution) to make, execute, swear to and acknowledge, amend, file, record,
deliver and publish
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in his name, place and stead in any way which he could do if personally present
to the extent permitted by law:
(a) the Certificate or any amendment of the Certificate
required or permitted to be filed on behalf of the Partnership pursuant
to the Act or any similar instrument required or permitted to be filed
or recorded under the statutes relating to limited partnerships under
the laws of any jurisdiction in which the Partnership shall engage in
business;
(b) a counterpart of these Articles executed for the purposes
of adding a Limited Partner or Partners or a general partner or
substituting as a Limited Partner an assignee or assignees of a Limited
Partner pursuant to Article 8;
(c) all certificates, documents and other instruments
necessary to qualify or continue the Partnership as a limited
partnership (or partnership or partnership in commendam wherein the
Unitholders have limited liability) in the jurisdictions where the
Partnership may be doing business, including, but not limited to, any
fictitious or assumed name certificate required or permitted to be
filed by or on behalf of the Partnership and any amendments to such
certificates, documents or instruments which shall be appropriate in
such jurisdiction;
(d) any other instrument which is now or which may hereafter
be required by law to be filed for or on behalf of the Partnership;
(e) any offers to lease, leases, assignments and requests for
approval of assignment, statement of citizenship, interest and holding,
and any other instruments or communications now or hereafter required
or permitted to be filed on behalf of the Partnership or the Partners
in their capacities as such under any law relating to oil, gas or other
mineral exploration or production interests in government lands;
(f) all assignments, conveyances and other certificates or
other instruments evidencing the dissolution, termination or
liquidation of the Partnership when such shall be appropriate, in each
jurisdiction in which the Partnership shall do business;
(g) all certifications, requests for withholding adjustments,
requests for credits or refunds and return of tax liability that the
Partnership may be required or permitted to execute, acknowledge, swear
to or file pursuant to the provisions of the Code;
(h) all documents for and agreements with the Internal Revenue
Service to keep open the statute of limitations with respect to any
Partnership items under examination by the Internal Revenue Service and
to take any and all other action necessary or desirable to establish
each Unitholder's liability for tax or withholding of tax, entitlement
to a credit or refund of tax; and
(i) all instruments which the General Partner deems
appropriate to reflect any amendment to these Articles, or modification
of the Partnership, made in accordance with the terms of this Agreement
or to carry out the purposes and business of the Partnership.
The existence of this Power of Attorney shall not preclude execution of
any such instrument by a Unitholder individually on any such matter. This is a
limited Power of Attorney which may not be revoked and shall survive the
assignment or transfer by a Unitholder of all or part of his Units in the
Partnership and, being coupled with an interest, shall survive the death,
dissolution, bankruptcy, incompetency or legal disability of a Unitholder to the
extent that he may legally contract for such survival. This power may be
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<PAGE>
exercised by a facsimile signature of one officer of the General Partner or any
successors thereto or by listing all Unitholders for whom action is being taken
pursuant to like Powers of Attorney next to the single signature of such
officer. Any person dealing with the Partnership may conclusively presume and
rely upon the fact that any such instrument executed by such agent and
attorney-in-fact is authorized, regular and binding without further inquiry and
each Unitholder hereby agrees to be bound by any representations made by the
General Partner acting in good faith pursuant to this Power of Attorney. Each
Unitholder shall execute and deliver to the General Partner or any successor
general partner of the Partnership within five days after the receipt of a
request therefor by the General Partner or any such successor general partner
such further designations, powers of attorney and other instruments as the
General Partner or any such successor general partner shall reasonably deem
necessary.
ARTICLE 11
Dissolution, Liquidation and Termination of the Partnership
Section 11.1. Events Causing Dissolution
(a) The happening of any one of the following events shall work an
immediate dissolution of the Partnership:
(i) the withdrawal of the General Partner pursuant to Section 9.5;
(ii) the removal of the General Partner pursuant to Section 8.6;
(iii) any other event of withdrawal (as defined in the Act) of
the General Partner;
(iv) the sale of all or substantially all the assets of the Partnership;
(v) the affirmative vote of a majority in interest of the Limited
Partners to dissolve the Partnership;
(vi) the expiration of the term of the Partnership as provided in Section
2.5;
(vii) the entry of a court order or judgment of dissolution;
or
(viii) any other event which would cause a dissolution under the Act;
provided, however, that the Partnership shall not be dissolved (and shall not be
required to be wound up pursuant to Section 11.2) by reason of an event
described in clauses (i), (ii) or (iii) above (each, an "Event of Withdrawal")
if, (A) at the time of the Event of Withdrawal there is at least one other
general partner who agrees to carry on the business of the Partnership or (B)
within ninety (90) days following the Event of Withdrawal, all the remaining
Partners agree in writing to continue the business of the Partnership and to the
appointment of a successor General Partner pursuant to Paragraph (b) of this
Section 11.1.
(b) Upon the happening of an Event of Withdrawal at a time when there
is no other general partner who agrees to carry on the business of the
Partnership, the Limited Partners shall have the right, exercisable in
accordance with the provisions of Sections 8.6 and 8.7, but only within ninety
(90) days after the Event of Withdrawal, to agree in writing to continue the
Partnership's business and to the appointment of a successor General Partner.
Such successor General Partner shall be considered appointed upon payment to the
Partnership of the contribution to the capital of the Partnership designated by
the Limited
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<PAGE>
Partners and execution of an appropriate amendment to the Certificate. If the
requisite agreement is not obtained within such time period, the Partnership
shall be wound up and terminated pursuant to Section 11.2.
(c) The selection of a successor General Partner pursuant to Paragraph
(b) of this Section 11.1 shall relieve Enex of the responsibilities of General
Partner and the successor General Partner shall be required to make arrangements
satisfactory to Enex to remove Enex from personal liability on any existing or
future Partnership liabilities or to indemnify Enex against any such liabilities
and these Articles and the Certificate shall be amended to name the successor
General Partner as General Partner.
(d) Anything to the contrary in these Articles notwithstanding, a
successor General Partner selected by the Limited Partners pursuant to the
provisions of Paragraph (b) of this Section 11.1 shall not acquire any interest
in the Partnership's profits, losses, deductions or credits, or any distributive
interest in the Partnership's properties on dissolution, solely by reason of
becoming a successor General Partner. In the event that a successor General
Partner is selected, Enex may retain all of its Units and, as its general
partner's interest, that portion of Partnership revenues (net of allocable
Operating Costs) represented by a fraction not to exceed Enex's percentage
interest in Partnership revenues having as its numerator the total funds
expended by the Partnership and the Predecessor Partnerships and allocated to
the General Partner and as its denominator the total funds expended by the
Partnership and the Predecessor Partnerships. The remainder of Enex's original
general partner's interest in the Partnership but in any event not less than 20%
of such interest, shall be offered for sale first to the successor General
Partner and, to the extent such offer is not accepted by the successor General
Partner, to the Partnership. The purchase price shall be based upon an
evaluation by an Independent Expert, which shall be selected by mutual agreement
of both Enex and the successor General Partner. In the event they are unable so
to agree, a member of the American Arbitration Association designated by Enex
shall select the firm, which selection shall be binding on both parties. The
purchase price of the interest to be sold shall be determined by such firm on
the same basis as that used in determining the purchase price for Units pursuant
to Article 6.
(e) If the successor General Partner or the Partnership or either of
them have not purchased any portion of Enex's general partner's interest within
sixty (60) days after the successor General Partner's appointment, then promptly
thereafter there shall be distributed to Enex in lieu of its general partner's
interest in the Partnership:
(i) a fractional undivided share of all of the Partnership's
working interests and other Partnership properties equal to its
percentage interest in Partnership revenues, subject to its allocable
portion of the mortgages or other burdens, if any, on such properties;
and
(ii) an amount in cash equal to its percentage interest in
Partnership revenues, multiplied by the value of all other Partnership
assets then on hand, less a proportionate share of unsecured
Partnership indebtedness, if any, with the value of such assets being
determined on the same basis as the purchase price of Units pursuant to
Article 6.
In the event the successor General Partner or the Partnership or either of them
has purchased a portion of Enex's general partner's interest, then the
percentage share of other properties and of cash distributable to Enex pursuant
to this Paragraph (e) shall be reduced proportionately.
(f) Dissolution of the Partnership shall be effective on the day on
which the event occurs giving rise to the dissolution, but the Partnership shall
not terminate until the Partnership's Certificate has been canceled and the
assets of the Partnership have been distributed as provided in Section 11.2.
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<PAGE>
(g) Except for the right of this Partnership to use the present
Partnership name, the right to use or grant the use of the name "Enex", "Enex
Resources" or derivations thereof shall remain exclusively that of Enex
Resources Corporation.
Section 11.2. Liquidation
(a) If the Partnership shall be dissolved for any reason, no further
business shall be conducted by the Partnership except for the taking of such
action as shall be necessary for the preservation of Partnership property, to
conduct an accounting of the Partnership's assets, liabilities and operations to
the date of dissolution, for the winding up of the affairs of the Partnership
and for the distribution of its assets to the Unitholders pursuant to the
provisions of this Section. Upon such dissolution, the General Partner, or, if
the Partnership be dissolved by reason of an Event of Withdrawal of the General
Partner, such other Person as may be elected by the Limited Partners in
accordance with the provisions of Sections 8.6 and 8.7, shall act as liquidator.
The liquidator, whether the General Partner or another Person, may be paid a
reasonable fee for acting as such. The liquidator shall have full power to sell,
assign and encumber any or all of the Partnership assets.
(b) Upon the winding up and termination of the business and affairs of
the Partnership, its assets shall, to the extent practicable, be sold, the
proceeds allocated to the Partners in accordance with Article 4 hereof and the
Partners' capital accounts adjusted accordingly. Such proceeds and remaining
assets shall be subsequently distributed as follows:
(i) all of the Partnership's debts and liabilities to Persons
other than the Partners and Unitholders shall be paid and discharged in
their order of priority, as provided by law;
(ii) all of the Partnership's debts and liabilities to the
Partners and Unitholders shall be paid and discharged;
(iii) any unused contributions to the capital of the
Partnership shall be distributed to the contributing Partners and
Unitholders; and
(iv) any remaining cash and other assets of the Partnership
shall be distributed to the Partners and Unitholders in proportion to
and in payment of the positive balances in their respective capital
accounts, with the effect of bringing such capital accounts to zero. If
the General Partner has a deficit in its capital account, it shall be
required to restore such account to a zero balance. The restoration of
any such deficit must be made by the end of the taxable year in which
the liquidation occurs or, if later, within 90 days after the date of
such liquidation.
(c) A Unitholder shall look solely to the assets of the Partnership for
the return of his capital investment, and if Partnership properties and other
Partnership assets remaining after the payment or discharge of the debts and
liabilities of the Partnership are insufficient to return his capital
investment, he shall have no recourse against the General Partner or any
liquidator or other Unitholder. The General Partner may, if it so desires,
purchase Partnership properties or other Partnership assets upon liquidation at
the greater of the highest possible bona fide offer received therefor or the
value thereof as determined by an Independent Expert and/or other appropriate
independent appraiser(s) selected by the General Partner or other liquidator, as
the case may be, in its sole discretion; provided at least 15 days advance
notice of such proposed sale has been given to the Unitholders.
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<PAGE>
ARTICLE 12
Right of The General Partner to Conduct Similar Operations
Neither the General Partner nor any of its affiliates is required to
devote its exclusive efforts toward activities in which the Partnership
participates. Subject to the provisions of Section 9.2, the General Partner or
its affiliates shall have the right to acquire, explore, develop and produce
oil, gas and other mineral properties and to develop and manage and operate
additional oil, gas and other mineral properties acquired at any time.
Furthermore, the General Partner is not prevented from engaging in other
business transactions with purchasers of Partnership production, which
transactions may be facilitated by such sales.
ARTICLE 13
Amendments
Section 13.1. Proposal and Adoption of Amendments Generally
(a) Proposed amendments to these Articles shall be adopted pursuant to
the provisions of Sections 8.6 and 8.7; provided, however, that no amendment
may, without the prior written approval of all Partners, (i) enlarge the
obligations of any Partner under these Articles, (ii) enlarge the liability of
the General Partner to the Unitholders, (iii) result in the loss of any Limited
Partner's limited liability, (iv) amend this Article 13 or Articles 4, 5, 6 or 7
of these Articles, or (v) adversely affect the Partnership's status as a
"partnership" for federal income tax purposes. The date of adoption of an
amendment pursuant to this Article 13 shall be the date on which the General
Partner shall have received the requisite consent of the Limited Partners. Any
proposed amendment which is not adopted may be resubmitted. In the event any
proposed amendment is not adopted, any written consent received with respect
thereto shall become void and shall not be effective with respect to any
resubmission of the proposed amendment.
(b) The General Partner shall, within a reasonable time after the
adoption of any amendment to these Articles, make any filings or publications
required or desirable to reflect such amendment, including any required filing
for recordation of any amendment to the Partnership's Certificate or other
instrument or similar document.
Section 13.2. Amendments on Admission or Withdrawal of Partners
(a) If these Articles or the Certificate shall be amended to reflect
the admission, substitution or withdrawal of a Limited Partner, the amendment
shall be signed by the General Partner and the person to be substituted or added
or his attorney-in-fact.
(b) If these Articles or the Certificate shall be amended to reflect
the removal or withdrawal of the General Partner and the continuation of the
business of the Partnership and the admission of a successor General Partner or
the admission of a substituted general partner, such amendment shall be signed
by the original General Partner, the Limited Partners or their
attorney(s)-in-fact and the successor General Partner or substituted General
Partner.
(c) If the Certificate shall be amended to reflect the withdrawal or
admission of a Partner, such amendment shall be signed by the party or parties
required by the Act.
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<PAGE>
Section 13.3. Amendments Relating to Preservation of Limited Liability
(a) The General Partner shall have the authority to amend these
Articles without any vote or other action by the Limited Partners for the sole
purpose of forming, qualifying or continuing the Partnership as a limited
partnership (or a partnership or partnership in commendam in which the
Unitholders have limited liability) in all jurisdictions in which the
Partnership conducts or plans to conduct business.
(b) The General Partner shall have the power and authority to amend
Article 8 to provide for and allow the automatic substitution of a deceased
Limited Partner's heirs or devisees as Substituted Limited Partners in
accordance with the Act and Article 2882 of the Civil Code of the State of
Louisiana; provided, however, the General Partner's power and authority to make
such amendment is conditioned upon the Partnership having first received a
ruling from the Internal Revenue Service or an opinion of tax counsel,
acceptable to the General Partner, that such amendment will not cause the
Partnership to lose its classification as a partnership for federal income tax
purposes. The General Partner may elect to cause or not to cause the Partnership
to be qualified as a partnership in commendam if the Partnership does not
receive the ruling from the Internal Revenue Service or such opinion of tax
counsel required above. If such a ruling or opinion is obtained, the General
Partner will proceed to effect the above stated amendment to these Articles
pursuant to the power of attorney contained in these Articles prior to causing
the Partnership to conduct business in the State of Louisiana. If such a ruling
or opinion is not obtained, the General Partner will not amend these Articles
but, in its discretion, may cause the Partnership to be qualified as a
partnership in commendam if the General Partner determines the potential risk to
the Partnership to be acceptable.
Section 13.4. Amendments Without Approval by Limited Partners
In addition to any amendments otherwise authorized in these Articles,
these Articles may be amended from time to time by the General Partner without
the consent of any of the Limited Partners (i) to add to the representations,
duties or obligations of the General Partner, or to surrender any right or power
granted to the General Partner, for the benefit of the Limited Partners, (ii) to
cure any ambiguity, to correct or supplement any provision which may be
inconsistent with any other provision, to correct any typographical errors or to
make any other provisions with respect to matters or questions arising under
these Articles which will not be inconsistent with the provisions of these
Articles, and (iii) to delete or add any provisions from or to these Articles
required to be so deleted or added by the Securities and Exchange Commission or
any other federal agency or by a state "blue sky" commissioner or similar
official, which addition or deletion is deemed by the Commission, or such agency
or official to be for the benefit or protection of the Unitholders; provided,
however, that no amendment shall be adopted pursuant to this Section 13.4 unless
the adoption thereof (i) is for the benefit of or not adverse to the interests
of the Limited Partners, (ii) is consistent with Article 9, (iii) does not alter
the respective aggregate interest of the General Partner or the Limited Partners
in profits or losses or in cash distributions of the Partnership; and (iv) does
not, in the opinion of counsel to the Partnership, by its terms, adversely
affect the limited liability of the Limited Partners or the status of the
Partnership as a partnership for federal income tax purposes.
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<PAGE>
ARTICLE 14
Miscellaneous Provisions
Section 14.1. Notices
All notices or other communications required or permitted to be given
pursuant to these Articles shall be in writing and shall be considered as
properly given or made if mailed from within the United States by first class
mail, postage prepaid, or if telegraphed, by prepaid telegram, and addressed, if
to the General Partner, to Enex Resources Corporation, 800 Rockmead Drive, Suite
200, Three Kingwood Place, Kingwood, Texas 77339, and if to a Unitholder, to the
address set forth in the records of the Partnership. Any Unitholder may change
his address by giving notice in writing to the General Partner, and the General
Partner may change its address by giving such notice to all Partners. Any such
newly designated address shall be such Partner's or Unitholder's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to these Articles ten days after notice is given.
Section 14.2. Exchange Offers
Any offer made by, or at the direction of, the General Partner or any
of its Affiliates to Limited Partners to exchange their interests in the
Partnership for another security shall be governed by (i) the provisions of the
North American Securities Administrators Association, Inc. Guidelines for the
Registration of Oil and Gas Programs or comparable regulations or guidelines
adopted by state securities administrators as in effect at the time of such
offer and (ii) any other federal or state registration requirements in effect at
the time of such offer.
Section 14.3. Binding Provisions
The covenants and agreements contained in these Articles shall be
binding upon and inure to the benefit of the heirs, executors, administrators,
successors and assigns of the respective parties hereto.
Section 14.4. Applicable Law
These Articles shall be construed and enforced in accordance with the
laws of the State of New Jersey without reference to the principles of conflicts
of laws; provided, however, that causes of action for violations of federal or
state securities laws shall not be governed by this Section 14.4.
Section 14.5. Execution and Counterparts
Subject to acceptance by the General Partner, execution of any
instrument the execution of which, by its terms, is intended to constitute
execution of these Articles (an "Execution Instrument"), shall constitute
execution of these Articles for all purposes. These Articles and each such
Execution Instrument (all of which are hereby expressly incorporated by
reference with the same effect as if set forth at length herein) may be executed
in several counterparts, all of which together shall constitute one binding
agreement on all parties hereto, notwithstanding that all parties have not
signed the same counterpart, except that no counterpart shall be binding unless
signed by the General Partner. Any signature may be by an attorney-in-fact.
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<PAGE>
Section 14.6. Severability of Provisions
If for any reason any provision of these Articles which is not material
to the purpose or business of the Partnership is determined to be invalid and
contrary to any existing or future law or governmental regulation, such
invalidity shall not impair the operation of or affect those portions of these
Articles that are valid.
Section 14.7. Entire Agreement
These Articles and the aforementioned Execution Instruments constitute
the entire agreement among the parties relating to the Partnership. These
Articles supersede any prior agreement or understanding among the parties and
may not be modified or amended in any manner other than as set forth in these
Articles.
Section 14.8. Gender and Number
The gender and number used in these Articles are used as a reference
term only and shall apply with the same effect whether the parties are of the
masculine or feminine gender, or are corporate or other form, and the singular
shall likewise include the plural.
Section 14.9. Headings
Article and Section titles are for descriptive purposes only and shall
not control or alter the meaning of these Articles as set forth in the text.
Section 14.10. Partition
Each party waives the benefit of any provisions of law which may
provide for partition of real or personal property and agrees that he will not
resort to any action at law or in equity to partition any property subject to
these Articles.
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<PAGE>
IN WITNESS WHEREOF, these Amended Articles of Limited Partnership have
been executed on this _____ day of ______________, 199___.
GENERAL PARTNER
Enex Resources Corporation
ATTEST:
By
(Assistant) Secretary
(Vice) President
ADDITIONAL LIMITED PARTNERS
By Enex Resources Corporation, as attorney-in-fact
for each of the Limited Partners pursuant to
a power of attorney in its possession which
authorizes it to execute the foregoing instrument.
ATTEST:
By
(Assistant) Secretary
(Vice) President
WITHDRAWING (ORIGINAL) LIMITED
PARTNER
Enex L.P. Corp.
ATTEST:
By
(Assistant) Secretary
(Vice) President
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<PAGE>
OATHS AND ACKNOWLEDGMENTS
}
STATE OF TEXAS
SS.:
COUNTY OF MONTGOMERY
On this _____ day of ___________, 198__, before me, a Notary Public in and
for the jurisdiction aforesaid, personally appeared _____________________ who
resides at ___________ _____________________ to me known and known to me to be
[a Vice] President of Enex Resources Corporation ("Enex") and who, being first
duly sworn, upon his oath stated and acknowledged to me that the foregoing
Amended Articles of Limited Partnership ("Articles") were executed by him before
me in such capacity for and on behalf of Enex, that the statements made in the
Articles are true to the best of his knowledge, information and belief, that the
Articles are the free act and deed of Enex and that execution thereof was by
virtue of the authority duly vested in or granted to him by Enex.
This day sworn to and subscribed before me, and in witness whereof I have
hereunto set my hand and affixed my official seal on the day, month and year
first above written.
[Notarial Seal]
----------------------------------------------
Notary Public
My Commission Expires:
B-47
<PAGE>
}
STATE OF TEXAS
SS.:
COUNTY OF MONTGOMERY
On this _____ day of ___________, 198__, before me, a Notary Public in and
for the jurisdiction aforesaid, personally appeared _____________________ who
resides at ___________ _____________________ to me known and known to me to be
[a Vice] President of Enex Resources Corporation ("Enex") and who, being first
duly sworn, upon his oath stated and acknowledged to me that the foregoing
Amended Articles of Limited Partnership ("Articles") were executed by him before
me in such capacity for and on behalf of Enex, which executed the Articles as
attorney-in-fact for each limited partner whose name is set forth on Schedule A
to the Articles pursuant to each such limited partner's power of attorney, that
the statements made in the Articles are true to the best of his knowledge,
information and belief, that the Articles are the free act and deed of Enex and
that execution thereof was by virtue of the authority duly vested in or granted
to him by Enex.
This day sworn to and subscribed before me, and in witness whereof I have
hereunto set my hand and affixed my official seal on the day, month and year
first above written.
[Notarial Seal]
----------------------------------------------
Notary Public
My Commission Expires:
}
STATE OF TEXAS
SS.:
COUNTY OF MONTGOMERY
On this _____ day of ___________, 198__, before me, a Notary Public in and
for the jurisdiction aforesaid, personally appeared _____________________ who
resides at ___________ _____________________ to me known and known to me to be
[a Vice] President of Enex L.P. Corp. ("Enex") and who, being first duly sworn,
upon his oath stated and acknowledged to me that the foregoing Articles of
Limited Partnership ("Articles") were executed by him before me in such capacity
for and on behalf of Enex, that the statements made in the Articles are true to
the best of his knowledge, information and belief, that the Articles are the
free act and deed of Enex and that execution thereof was by virtue of the
authority duly vested in or granted to him by Enex.
This day sworn to and subscribed before me, and in witness whereof I have
hereunto set my hand and affixed my official seal on the day, month and year
first above written.
[Notarial Seal]
----------------------------------------------
Notary Public
My Commission Expires:
B-48
