<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
TMBR/Sharp Drilling, Inc.
(Name of Issuer)
Common Stock, $.10 Par Value
(Title of Class of Securities)
87257P 10 1
(CUSIP Number)
Patricia R. Elledge
TMBR/Sharp Drilling, Inc.
4607 W. Industrial
Midland, Texas, 79703
(915) 699-5050
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
May 16, 2000
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d-
1(e), 13d-1(f) or 13d-1(g), check the following box .
Note. Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits.
See Rule 13d-7(b) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a
reporting persons's initial filing on this form with respect to
the subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in
a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following pages)
<PAGE> 2
CUSIP No. 87257P 10 1 13D Page 2 of 41 Pages
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Roper Operations, Inc.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See Instructions)
(a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS (See Instructions)
00
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e)
[ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A. (organized under laws of Texas)
NUMBER OF 7. SOLE VOTING POWER
SHARES 8. SHARED VOTING POWER
BENEFICIALLY
657,854
OWNED BY
9. SOLE DISPOSITIVE POWER
EACH
REPORTING 10. SHARED DISPOSITIVE POWER
PERSON 657,854
WITH
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
657,854
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
[ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.27%
14. TYPE OF REPORTING PERSON (See Instructions)
CO
<PAGE> 3
CUSIP No. 87257P 10 1 13D Page 3 of 41 Pages
1. NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Roper Family Properties, Ltd.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See Instructions)
(a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS (See Instructions)
00
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e)
[ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A. (organized under laws of Texas)
NUMBER OF 7. SOLE VOTING POWER:
SHARES 8. SHARED VOTING POWER
BENEFICIALLY
657,854
OWNED BY
9. SOLE DISPOSITIVE POWER:
EACH
REPORTING 10. SHARED DISPOSITIVE POWER
PERSON 657,854
WITH
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
657,854
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
[ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.27 %
14. TYPE OF REPORTING PERSON (See Instructions)
PN
<PAGE> 4
Item 1. Security and Issuer
The class of securities to which this Schedule 13D
(this "Statement") relates is the common stock, par value
$.10 per share (the "Common Stock"), of TMBR/Sharp
Drilling, Inc., a Texas corporation ("TMBR"), whose address
is 4607 W. Industrial Ave., Midland, Texas 79703.
Item 2. Identity and Background
This Statement is being filed by (1) Roper Family
Properties, Ltd. and (2) Roper Operations, Inc.
(collectively, the "Reporting Persons"), and relates to
shares of TMBR Common Stock owned by Joe G. Roper and his
four adult children, Patricia R. Elledge, Judy Kathleen
Roper, J. Mark Roper and Jeanie Elisabeth Cornelius.
Mr. Roper is the President and a Director of TMBR.
Patricia R. Elledge is the Controller and Treasurer of
TMBR.
The principal executive offices of Roper Operations,
Inc. and Roper Family Properties, Ltd. are located at 4607
W. Industrial Ave., Midland, Texas 79703.
Roper Operations, Inc. is a corporation organized
under the laws of Texas on April 18, 2000. Roper
Operations, Inc. was organized for the purpose of serving
as the sole general partner of Roper Family Properties,
Ltd.
Roper Family Properties, Ltd. is a limited partnership
organized under the laws of Texas on April 18, 2000. Roper
Family Properties, Ltd. was organized by Joe G. Roper and
his children primarily for estate planning purposes for Mr.
Roper.
All of the outstanding shares of capital stock of
Roper Operations, Inc. are owned equally by Patricia R.
Elledge, Judy Kathleen Roper, J. Mark Roper and Jeanie
Elisabeth Cornelius.
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Roper Operations, Inc. owns a 1% general partner
interest in Roper Family Properties, Ltd., Mr. Roper owns
an 83% limited partnership interest, and each of Mr.
Roper's four children own a 4% limited partnership
interest in Roper Family Properties, Ltd.
Roper Family Properties, Ltd. was initially organized
with Roper Operations, Inc., as general partner, owning a
1% interest in the partnership, and Joe G. Roper, as the
sole limited partner, owning a 99% interest in the
partnership. On April 27, 2000, Joe G. Roper conveyed a 4%
limited partnership interest to each of his four children.
The name, business address and principal occupation
and address of employment of each executive officer,
director and controlling person of Roper Operations, Inc.
and Roper Family Properties, Ltd., is set forth in Exhibit
A attached hereto and made a part hereof for all purposes.
Neither Roper Family Properties, Ltd. nor, to its
knowledge, any of the executive officers, directors or
controlling persons of Roper Family Properties, Ltd. has,
during the last five years, been convicted in any criminal
proceeding, excluding traffic violations or similar
misdemeanors.
Neither Roper Operations, Inc. nor, to its knowledge,
any of the executive officers, directors or controlling
persons of Roper Operations, Inc. has, during the last five
years, been convicted in any criminal proceeding, excluding
traffic violations or similar misdemeanors.
Neither Roper Family Properties, Ltd. nor, to its
knowledge, any executive officer, director or controlling
person of Roper Family Properties, Ltd. has, during the
past five years, been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction
as a result of which Roper Family Properties, Ltd. or any
such other person was or is subject to a judgment, decree
or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect
to such laws.
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Neither Roper Operations, Inc. nor, to its knowledge,
any executive officer, director or controlling person of
Roper Operations, Inc. has, during the past five years,
been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result
of which Roper Operations, Inc. or any such other person
was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or
finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
On April 20, 2000 and April 24, 2000, the children
of Joe G. Roper each made a capital contribution to Roper
Operations, Inc. in the form of shares of Common Stock of
TMBR. The name of each person making a capital
contribution to TMBR, the date on which such capital
contribution was made and the number of shares of TMBR
Common Stock contributed by each such person is set forth
in the following table:
Date of Number of
Capital Shares
Name Contribution Contributed
-------------------- -------------- -----------
Patricia R. Elledge April 20, 2000 1,812
Judy Kathleen Roper April 20, 2000 1,812
J. Mark Roper April 20, 2000 1,812
Jeanie Elisabeth Cornelius April 24, 2000 1,812
-----
7,248
=====
On April 20, 2000, Roper Operations, Inc., in its
capacity as the general partner of Roper Family Properties,
Ltd., made a capital contribution to Roper Family
Properties, Ltd. by transferring 5,436 shares of the above
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shares to Roper Family Properties, Ltd., and the remaining
1,812 shares were contributed to the capital of Roper
Family Properties, Ltd. on April 24, 2000.
In addition to the capital contributions described
above, Joe G. Roper made the following additional capital
contributions of TMBR Common Stock to Roper Family
Properties, Ltd.:
Date of Number of Shares
Capital Contribution Contributed
-------------------- ----------------
April 19, 2000 159,354
April 20, 2000 99,586
May 16, 2000 391,666
-------
650,606
=======
Item 4. Purpose of Transaction
On March 1, 2000, TMBR issued a press release advising
that Joe G. Roper was receiving medical treatment for
cancer and that, for estate planning purposes, he may sell
in public and private transactions an undetermined number
of shares of Common Stock. Due to Mr. Roper's medical
condition, Roper Family Properties, Ltd. was organized for
estate planning purposes, including (i) the consolidation
of ownership of certain assets owned by Mr. Roper and his
children, (ii) maintaining a consolidated voting block of
shares of TMBR Common Stock and (iii) providing for a more
efficient means of handling the ownership and management of
the properties.
Roper Family Properties, Ltd. and Roper Operations,
Inc., or either of them, may in the future acquire or
dispose of additional shares of Common Stock for their
respective accounts, either through open market or
privately negotiated transactions. Any such future
decision will be made in light of the then current
financial condition and prospects of TMBR, the market price
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of the Common Stock, general economic conditions, the
securities markets in general, other investment
opportunities, fiduciary considerations, the financial
condition of each Reporting Person, federal gift, income
and estate tax matters applicable to Mr. Roper, Mr. Roper's
health and other relevant factors.
Neither Roper Operations, Inc. nor Roper Family
Properties, Ltd. has any plans or proposals at the present
time which relate to or would result in:
(a) an extraordinary corporate transaction, such as
a merger, reorganization or liquidation involving TMBR;
(b) a sale or transfer of a material amount of TMBR's
assets;
(c) any change in the present board of directors or
management of TMBR, including any plans or proposals to change
the number or term of TMBR's directors;
(d) any material change in TMBR's present capitalization
or dividend policy;
(e) any other material change in TMBR's business or
corporate structure;
(f) changes in TMBR's charter or bylaws or other actions
which may impede the acquisition of control of TMBR by any person;
(g) causing a class of TMBR's securities to cease to be
authorized to be quoted in an inter-dealer quotation system of a
registered national securities association;
(h) a class of TMBR's equity securities becoming eligible
for termination of registration pursuant to Section 12(g)(4) of
the Securities Exchange Act of 1934; or
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(i) any action similar to any of those enumerated above.
All decisions with regard to the investment,
disposition and voting of the TMBR Common Stock
beneficially owned by Roper Family Properties, Ltd. are
made by a majority of the Board of Directors of Roper
Operations, Inc., the general partner.
Item 5. Interest in Securities of the Issuer
TMBR presently has issued and outstanding a total of
4,958,386 shares of Common Stock.
Roper Family Properties, Ltd. holds directly and is
the beneficial owner of 657,854 shares of Common Stock,
which represents approximately 13.27% of TMBR's issued and
outstanding Common Stock. Roper Family Properties, Ltd.
has sole voting and investment powers with respect to such
shares of Common Stock.
By virtue of its position as the general partner of
Roper Family Properties, Ltd., Roper Operations, Inc. may
also be deemed to be the indirect beneficial owner of the
657,854 shares of Common Stock that are owned and held
directly by Roper Family Properties, Ltd. However, Roper
Operations, Inc. disclaims beneficial ownership of all
shares of Common Stock beneficially owned by Roper Family
Properties, Ltd., except for 6,579 shares of Common Stock
which are attributable to the 1% general partner interest
owned by Roper Operations, Inc. in Roper Family Properties,
Ltd. The fact that Roper Operations, Inc. has included all
of the shares of Common Stock owned by Roper Family
Properties, Ltd. in this Statement shall not be deemed an
admission that Roper Operations, Inc. is the beneficial
owner of all such shares.
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Although the number of shares of Common Stock
beneficially owned by the Reporting Persons does not
constitute a majority of the outstanding shares of Common
Stock, the Reporting Persons may nonetheless beneficially
own a sufficient number of shares of Common Stock to
influence control of TMBR.
To the best knowledge of the Reporting Persons, no
executive officer or director of Roper Operations, Inc. or
Roper Family Properties, Ltd. and no associate of Roper
Operations, Inc. or Roper Family Properties, Ltd. owns or
has a right to acquire, directly or indirectly, any shares
of Common Stock, except that (1) Joe G. Roper has the right
to acquire a total of 267,000 shares of Common Stock upon
exercise of employee stock options granted to him by TMBR
and (2) Patricia R. Elledge has (i) direct beneficial
ownership of 9,209 shares of TMBR Common Stock; (ii)
indirect beneficial ownership of 22,816 shares of TMBR
Common Stock held directly by three separate trusts of
which Ms. Elledge is the beneficiary; and (iii) the right
to acquire a total of 32,000 shares of TMBR Common Stock
upon exercise of employee stock options granted to her by
TMBR.
Except as described in this Statement, no transactions
in the Common Stock were effected during the past 60 days
by Roper Operations, Inc. or Roper Family Properties, Ltd.
or, to their best knowledge, by any executive officer,
director or affiliated person of Roper Operations, Inc. or
Roper Family Properties, Ltd., or by any subsidiary of
Roper Operations, Inc. or Roper Family Properties, Ltd. or
by any executive officer, director or affiliated person of
any such subsidiary.
No other person is known to have the right to receive
or the power to direct the receipt of dividends from, or
the proceeds from the sale of, the securities.
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Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the Issuer
Roper Operations, Inc., Joe G. Roper, J. Mark Roper,
Patricia R. Elledge, Judy Kathleen Roper and Jeanie
Elisabeth Cornelius are parties to an agreement of limited
partnership forming Roper Family Properties, Ltd., a copy
of which is filed with this statement as Exhibit B and
incorporated herein by reference.
Item 7. Material to be Filed as Exhibits
Exhibit A Name, residence address and present
principal occupation and address of
employment of each executive officer,
director and controlling person of Roper
Operations, Inc. and Roper Family
Properties, Ltd.
Exhibit B Agreement of Limited Partnership of Roper
Family Properties, Ltd.
Exhibit C Joint Filing Agreement
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Signature
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set
forth in this Statement is true, complete and correct.
ROPER FAMILY PROPERTIES, LTD., a
Texas limited partnership
By: ROPER OPERATIONS, INC., its
General Partner
By:/s/ Patricia R.Elledge
-----------------------------------
Patricia R. Elledge, Vice President
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Signature
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set
forth in this Statement is true, complete and correct.
ROPER OPERATIONS, INC.
By: /s/ Patricia R. Elledge
-----------------------------------
Patricia R. Elledge, Vice President
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EXHIBIT A
The table below sets forth the name, residence
address and present principal occupation and address of
employment of the executive officers, directors and
controlling persons of Roper Operations, Inc. and Roper
Family Properties, Ltd.
<TABLE>
<CAPTION>
Present Position
with Roper
Operations, Inc.
Name and and Roper Family Present Principal Occupation
Business Address Citizenship Properties, Ltd. and Address of Employment
---------------- ----------- ---------------- ----------------------------
<S> <C> <C> <C>
Patricia R. Elledge U. S. Director, Vice Ms. Elledge is the Controller
4607 W. Industrial President and and Treasurer of TMBR/Sharp
Midland, Texas 79703 Stockholder of Drilling, Inc. The address of
Roper Operations, TMBR/Sharp Drilling, Inc. is
Inc.; Limited 4607 W. Industrial, Midland,
Partner of Roper Texas 79703.
Family Propeties,
Ltd.
J. Mark Roper U. S. Director, President President of Roper
8140 N. Mopac, II-240 and Stockholder of Homebuilding, Inc. d/b/a
Austin, Texas 78759 Roper Operations, Roper Interests. The address
Inc.; Limited of Roper Interests is 8140 N.
Partner of Roper Mopac, II-240, Austin, Texas
Family Properties, 78759.
Ltd.
Jeanie Elisabeth Cornelius U. S. Director and School teacher, Weatherford,
1422 Old Rock Road Stockholder of Texas. The address of Ms.
Weatherford, Texas 76088 Roper Operations, Cornelius' employment is
Inc.; Limited Weatherford High School, 1007
Partner of Roper South Main, Weatherford,
Family Properties, Texas 76088.
Ltd.
Judy Kathleen Roper U. S. Director and Secretary at TMBR/Sharp
4607 W. Industrial Stockholder of Drilling, Inc. The address of
Midland, Texas 79703 Roper Operations, TMBR/Sharp Drilling, Inc. is
Inc.; Limited 4607 W. Industrial Blvd.,
Partner of Roper Midland, Texas 79703.
Family Properties,
Ltd.
</TABLE>
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EXHIBIT B
AGREEMENT OF LIMITED PARTNERSHIP
OF
ROPER FAMILY PROPERTIES, LTD.
This Agreement of Limited Partnership of ROPER FAMILY
PROPERTIES, LTD. (the "Agreement") is made and entered into
by and among ROPER OPERATIONS, INC., a Texas corporation
(the "General Partner"), and JOE G. ROPER, as limited
partner (the "Limited Partner"). The General Partner, the
Limited Partner and all future partners shall also be
hereinafter sometimes referred to as a "Partner" in the
singular or the "Partners" in the plural.
Recitations
The Partners desire to form an entity for purposes of
(i) consolidating the ownership of certain properties owned
by the Partners, (ii) maintaining a consolidated voting
block of the shares of common stock of TMBR/Sharp Drilling,
Inc. to be owned by the Partnership, and (iii) providing
for a more efficient means of handling the ownership and
management of such properties in order to enhance the value
of such properties in the future. Also, in order to
provide for the centralized management of the Partnership
and the ongoing management and control of the Partnership
upon the death or incapacity of a family member, the
parties desire to set forth provisions for the appointment
of a successor general partner if the General Partner fails
or ceases to serve as General Partner.
NOW THEREFORE, it is hereby agreed as follows:
ARTICLE 1
FORMATION
1.1. Organization. The parties hereby form a Limited
Partnership, herein called the "Partnership", under and
pursuant to the Texas Revised Limited Partnership Act,
Article 6132a-1 of the Revised Civil Statutes of the State
of Texas ("Act"). The Partnership hereby elects to adopt
the Act and be governed by the provisions thereof.
1.2. Statutory Requirement. The parties shall
immediately execute a Certificate of Limited Partnership and
cause such certificate to be filed with the Secretary of
State of Texas and, thereafter, execute and cause to be
filed and otherwise published, such original or amended
certificates evidencing the formation and operation of this
Limited Partnership whenever the same may be required under
the laws of the State of Texas and of any other states
where the Partnership shall determine to do business. The
General Partner is hereby authorized and empowered by the
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Limited Partners to prepare, file, and publish either the
original or any amended or modified Certificates of Limited
Partnership as may be necessary or desirable and the Limited
Partners specifically designate and appoint the General
Partner, for and on their behalf as their attorney for the
exclusive purposes of signing and attesting to such original
or amended Certificates of Limited Partnership.
1.3. Purposes of Partnership. The Partnership is
hereby formed for the purpose of investing and reinvesting
any of the Partnership assets or income of the Partnership,
whether or not the original purpose for the investment has
been accomplished, in stocks, bonds, certificates of
deposit, money market accounts, mutual funds and other
investments and owning, developing, leasing, managing,
operating, purchasing and selling real property, including
commercial real estate and producing and non-producing oil
and gas properties (with it being understood that, until the
end of the term of the Partnership, the investment
objectives of the Partnership are to continue until the
Partnership is dissolved and wound up), and such other
purposes as may be agreed upon by the Partners from time to
time. The Partnership is also formed for the additional
business purposes which are set forth in the Recitations.
ARTICLE 2
NAMES AND PLACES OF BUSINESS
2.1. Name of Limited Partnership. The name of the
Limited Partnership shall be ROPER FAMILY PROPERTIES, LTD.
The business of the Partnership shall be conducted under
such name. The General Partner shall promptly execute and
duly file with the proper offices in the states in which
the Partnership shall conduct activities, one or more
certificates as required by the Fictitious Name or Assumed
Name Act or similar statute in effect as to the states in
which such activities are so conducted.
2.2. Location of Principal Place of Business. The
principal place of business where records are to be kept
and made available is 4607 W. Industrial Avenue, Midland,
Texas 79703. The registered office is located at 4607 W.
Industrial Avenue, Midland, Texas 79703, and the registered
agent at such address is PATRICIA R. ELLEDGE. The mailing
address of the Partnership is P. O. Box 10970, Midland,
Texas 79702.
2.3. Names, Mailing Addresses and Places of Business of
Partners.
(a) The name, mailing address and principal
place of business of the General Partner of this
Partnership is as follows:
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Mailing Principal Place
Name Address of Business
---- ------- ---------------
Roper Operations, Inc. P.O. Box 10970 4607 W. Industrial Ave.
Midland, Texas 79702 Midland, Texas 79703
There are no other general partners of this
Partnership and no other person or entity has any
right to take part in the active management of the
business affairs of the Partnership.
(b) The name and address or place of residence
of the Limited Partner is set forth on the signature
page of the Limited Partners attached hereto and
made a part hereof.
ARTICLE 3
TERM OF PARTNERSHIP
The Partnership shall commence as of April 19, 2000,
and shall continue in existence until December 31, 2039,
unless it is sooner terminated as hereinafter provided, or
extended by unanimous consent of the Partners.
ARTICLE 4
CONTRIBUTIONS OF CAPITAL
4.1. Initial Capital. The initial capital to be
contributed by each Partner and the agreed value thereof are
set forth in Exhibit A attached hereto.
4.2. Future Contributions. The Partners shall not be
required to make any additional capital contributions. The
Limited Partners and the General Partner may make, but shall
not be obligated to make, such additional cash or non-cash
contributions as approved by the General Partner. At the
time of any additional contributions, the fair market value
of any non-cash contributions shall be determined by the
General Partner, and the Partnership sharing percentages
shown in Exhibit A shall be adjusted as determined by the
General Partner to take into account such additional
contributions (which determinations of fair market value and
adjustments of Partnership sharing percentages, if
reasonable, shall be binding upon all Partners).
Notwithstanding the foregoing, a General Partner is required
to maintain a Partnership sharing percentage as a General
Partner of at least one percent (1%) at all times.
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4.3 Interest on Capital Accounts. No Partner shall
receive any interest on his or her capital contributions to
the Partnership.
ARTICLE 5
ALLOCATION OF
PROFITS AND LOSSES; DISTRIBUTIONS
5.1 Capital Accounts. A capital account ("Capital
Account") shall be established for each Partner and shall
be maintained at all times throughout the existence of the
Partnership in a manner so as to correspond with the
results set forth in the Treasury Regulations promulgated
under Sections 704(b) and 704(e) of the Code (the
"Allocation Regulations"). A Partner's Capital Account
shall be increased by (1) the amount of his capital
contribution to the Partnership, and (2) allocations of
income or gain to the Partner for partnership book purposes
pursuant to this Article 5, and shall be reduced by (1) the
amount of money distributed to the Partner by the
Partnership, (2) the Agreed Value of any property
distributed to the Partner by the Partnership, and (3)
allocations of deduction or loss to the Partner for
partnership book purposes by the Partnership. The Capital
Accounts of the Partners shall not bear interest.
5.2 Adjustment to Capital Accounts. If any additional
partnership interests are to be issued in consideration for
a contribution of property or cash (other than a de minimis
amount) or if any property or cash (other than a de minimis
amount) is to be distributed in liquidation of the
Partnership or a partnership interest, the Capital Accounts
of the Partners and the Carrying Value of all Property
shall, immediately prior to such issuance or distribution,
be adjusted (consistent with the provisions of Section
704(b) of the Code and the Allocation Regulations) upward
or downward to reflect any Unrealized Gain or Unrealized
Loss attributable to all Property (as if the Unrealized Gain
or Unrealized Loss had been recognized upon actual sale of
the Property upon a liquidation of the Partnership
immediately prior to issuance). For purposes of this
Agreement, Carrying Value shall mean the Agreed Value of
the property contributed to the Partnership, reduced as of
the time of determination by all book depreciation, cost
recovery and amortization deductions charged to the Capital
Accounts and an appropriate amount to reflect any sales,
retirements or other dispositions of assets included in such
property and, with regard to other Property, the adjusted
basis of such property for federal income tax purposes as
of the time of determination. The Carrying Values shall be
further adjusted as provided in this Article 5 and, at the
time the Carrying Value of a Property is so adjusted, such
property shall thereafter be deemed to be a property
contributed as of the date of adjustment.
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5.3 Gift of Partnership Interests. If all or any
portion of a partnership interest is transferred to a
permitted transferee as a gift or deemed gift, the Capital
Accounts of the Partners and the Carrying Value of all
Property shall, immediately prior to such transfer, be
adjusted upward or downward to reflect any Unrealized Gain
or Unrealized Loss attributable to such Property in a manner
similar to that set forth in Section 5.2 above. The
Capital Accounts and Carrying Values so determined under
this Section 5.3 shall be referred to as the "Section
704(e) Capital Accounts", and Section 704(e) Carrying Values
shall thereafter be adjusted in the same manner as Capital
Accounts and Carrying Values.
5.4 Capital Accounts of Transferees. Except as
otherwise required by the Allocation Regulations, in the
event any interest in the Partnership is transferred in
accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account and the Section 704(e)
Capital Account of the transferor to the extent it relates
to the transferred interest.
5.5 No Obligation to Restore Deficit in Capital
Accounts. No Partner will be required to restore a deficit
in his Capital Account upon liquidation of the Partnership
or the Partner's partnership interest.
5.6 Capital Account of General Partner. The General
Partner's General Partner Interest will be maintained
separately from any Limited Partnership Interest which it
may have.
5.7 Allocations of Profits and Losses. Except as
otherwise provided in this Article 5 below, for federal
income tax purposes, each item of income, gain, loss and
deduction will be allocated among the Partners in the same
manner as its correlative item of book income, gain, loss
or deduction is allocated pursuant to this Article 5.
5.8 Special Allocations of Profits and Losses. Except
as otherwise provided in this Article 5, profits and losses
shall be allocated as follows:
(a) First, losses shall be allocated to the
Partners in accordance with the Partners' Sharing
Ratios but only to the extent of the Partners'
Capital Accounts.
(b) Second, remaining losses shall be
allocated to the General Partner.
(c) Third, profits shall be allocated to
Partners in accordance with the Partners' Sharing
Ratios.
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(d) Notwithstanding the preceding allocations,
and to the extent the General Partner deems it
necessary to insure that this Agreement and the
allocations hereunder meet the requirements of
Section 704 of the Code and the Allocation
Regulations, allocations of the following type and
in the following priority will be made to the
appropriate Partners in the necessary and required
amounts as set forth in the Regulations before any
other allocations under this Section:
(1) Partner nonrecourse debt minimum
gain charge back under Regulations
Section 1.704-2(i);
(2) Partnership minimum gain
chargeback under Regulations Section
1.704-2(f) (provided that the General
Partner may seek a waiver of such
chargeback in appropriate circumstances
under Regulations Section 1.704-2(f)(4)
in its sole discretion);
(3) In the event any Partners
unexpectedly receive any adjustments,
allocations, or distributions described
in Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5), or (6), items of
Partnership income and gain to such
Partners in an amount and manner
sufficient to eliminate the deficit
balances in their Capital Accounts
(excluding from such deficit balance
amounts Partners are obligated to restore
under this Agreement or are treated as
obligated to restore pursuant to
Regulations Sections 1.704-1(b)(2)(ii)(c),
1.704(b)(2)(ii)(h), 1.704-2(g), or 1.704-
2(i)(5) created by such adjustments,
allocations, or distributions as quickly
as possible and in a manner which
complies with Regulations Section 1.704-
1(b)(2)(ii)(d);
(4) Partner nonrecourse deductions
under Regulations Section 1.704(2)(i)
which will in all cases be allocated to
the Partner which bears economic risk of
loss for the indebtedness to which such
deductions are attributable.
All of the allocations made pursuant to the preceding
provisions of this Section 5.8 will be taken into account
in computing subsequent allocations of profits and losses
and all other items allocated to each Partner pursuant to
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this Section 5.8 will, to the extent possible, be equal to
the net amount that would have been allocated to each such
Partner pursuant to this Section 5.8, if this paragraph (d)
of Section 5.8 had not applied. Pursuant to Regulations
Section 1.752-3(a)(3), solely for purposes of determining
each Partner's proportionate share of the "excess
nonrecourse liabilities" of the Partnership (as defined in
Regulations Section 1.752-3(a)(3)), the Partners' respective
interests in profits will be equal to their Sharing Ratio.
5.9 Transferor - Transferee Allocations; Section 754
Election. Income, gain, loss, deduction or credit
attributable to any interest in the Partnership which has
been transferred shall be allocated between the transferor
and the transferee under any method allowed under Section
706 of the Code as agreed by the transferor and the
transferee. The General Partner, at his discretion, may
make the election provided under Section 754 of the Code
and any corresponding provision of applicable state law.
5.10 Reallocation of Income. After all allocations
under this Article have been made, the General Partner, in
its discretion, shall reallocate income among the Partners
to the least extent necessary to insure that the provisions
of Section 704(e) and the Regulations have been fulfilled,
especially Regulations Section 1.704(e)(3). To the extent
that any Partner was allocated income which the Internal
Revenue Service finally determines should have allocated to
any other Partner under the principles of Section 704(e),
the first Partner intends and does designate the income as
a gift to the second Partner.
5.11 Tax Allocations Under Code Section 704(c).
With regard to income, gain, loss, depreciation, depletion
and cost recovery deductions for federal income tax
purposes, in the case of a Contributed Property, such items
will be allocated among the Partners in the manner provided
in Section 704(c) of the Code to take account of the Built-
in Loss at the time of contribution and, and in the case of
any property the Carrying Value of which has been adjusted,
such items will be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code
to take into account Unrealized Gain or Unrealized Loss
resulting from differences between the Carrying Value and
the adjusted tax basis of such property.
5.12 Distributions. Subject to the remaining
portion of this Section 5.12 and the other provisions of
this Agreement, all or part of Distributable Cash may be
distributed at the sole discretion of the General Partner
at any time and from time to time to the Partners in such
amounts as the General Partner deems advisable.
Distributions to the Partners may, but do not have to be,
distributed in accordance with the Partnership sharing
percentages set forth in Exhibit A, as amended from time to
time. If there is more than one general partner, any
distribution of Distributable Cash to the Partners shall
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require the unanimous consent of the then acting general
partners. "Distributable Cash" means, at the time of
determination, all Partnership cash derived from the conduct
of the Partnership's business, other than (1) capital
contributions with interest earned pending its utilization,
(2) financing proceeds, (3) reserves for working capital,
and (4) other amounts that the General Partner reasonably
determines to be necessary for the proper operation of the
Partnership's business and its eventual winding up and
liquidation.
With regard to Distributable Cash, the General Partner
shall make a determination as to the need for the funds in
the operation of the Partnership business, considering both
current needs for operating capital, prudent reserves for
future operating capital, current investment opportunities,
and prudent reserves for future investment opportunities,
all in keeping with the Partnership purposes. It is the
duty of the General Partner, in determining the amount of
Distributable Cash available for the payment of
distributions, to take into account the purpose of the
Partnership as set forth in Section 1.3, the needs of the
Partnership in its business and sums necessary in the
operation of its business until the income from further
operations is available, the amount of its debts, the
necessity or advisability of paying its debts, or at least
reducing them within the limits of the Partnership's credit,
the preservation of the Partnership's assets, and the
character of its surplus assets. Any contributed property
or borrowed funds by the Partnership shall be considered as
needed for Partnership investment purposes, and any cash
produced from the sale of property contributed to the
Partnership or from the sale of any assets purchased with
borrowed funds, or any reinvestment of any of the assets,
including the portion of the sale proceeds representing
capital appreciation, shall be considered as needed reserves
for Partnership investment purposes. All or part of
Distributable Cash derived from income may, to the extent
deemed unnecessary for Partnership purposes by the General
Partner under the foregoing standard, be distributed in
accordance with this Agreement.
ARTICLE 6
OWNERSHIP OF PARTNERSHIP PROPERTY
All real or personal property, including all
improvements placed or located thereon, acquired by or
contributed to the Partnership shall be owned by the
Partnership, such ownership being subject to the other terms
and provisions of this Agreement. Each Partner hereby
expressly waives the right to require partition of any
Partnership property or any part thereof.
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ARTICLE 7
FISCAL MATTERS
7.1. Partnership Accounting Year. The Partnership's
books and records and all required income tax returns shall
be kept or made on a fiscal year selected by the General
Partner. The General Partner shall determine whether the
cash or accrual method of accounting is to be used in
keeping the Partnership records.
7.2. Books and Records. The General Partner shall
keep at the principal place of business and make available
to all Partners at any time during normal business hours,
just and true books of account and all other Partnership
records. The copying by a Partner, or his designated
agent, of any part of or all of such records, at the
personal expense of that Partner is specifically authorized.
Upon the request of any Limited Partner, the General Partner
shall furnish to such limited Partner a year ending balance
sheet for the Partnership and a full and detailed financial
report on the business operations of the Partnership for and
during the entire preceding year. As soon as practicable
after the end of each fiscal year, the General Partner
shall furnish to all Partners any information needed or
necessary to complete their Federal and State income tax
returns, including statements of the distributable net
income or loss to each Partner from the operations of the
Partnership. All of the above duties and services to be
performed by the General Partner shall be deemed an expense
of the Partnership.
7.3. Partnership Bank Accounts. The General Partner
shall receive all moneys of the Partnership and shall
deposit the same in one or more Partnership bank accounts.
All expenditures by the General Partner shall be made by
checks drawn against the Partnership bank account. Checks
may be signed by the General Partner or any person or
persons designated by the General Partner.
ARTICLE 8
MANAGEMENT OF PARTNERSHIP AFFAIRS
8.1. Control and Management. The General Partner
shall have the sole and exclusive right to manage and
control the Partnership. If there is more than one General
Partner serving at a given time, each General Partner shall
have equal rights in the management and control of the
Partnership, even though the General Partners' interests in
the capital and profits of the Partnership and the
guaranteed payments made to the General Partners pursuant
to Section 8.6 may vary. Subject to any limitations
expressly set forth in this Agreement, the General Partner
shall have the power and authority to take such action from
time to time as the General Partner may deem to be
necessary, appropriate, or convenient in connection with the
management and conduct of the business and affairs of the
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Limited Partnership, including without limitation, the power
to:
(a) Acquire properties (including any
interest therein) for cash, securities, other
property, or any combination thereof, upon such
terms and conditions as such General Partner may,
from time to time determine (including, in
instances where the property is encumbered, on
either an assumption or a "subject to" basis).
(b) Acquire, own, hold, improve, manage,
lease, sublease, sell, trade, exchange or otherwise
dispose of such property.
(c) Make oil, gas and mineral leases, oil,
gas and mineral lease options, seismic exploration
agreements and seismic permits and extensions,
renewals and amendments thereto, covering any lands
or mineral interests at any time owned by the
Partnership; pool or unitize any or all of the
lands, mineral leaseholds, or mineral interests of
the Partnership with lands, mineral leaseholds, or
mineral interests of other persons, corporations,
or trusts for the purpose of developing and
producing oil, gas or other minerals therefrom,
and to make leases, assignments or agreements
granting the right to pool or unitize; enter into
contracts and agreements for or in respect of the
installation or operation of absorption,
repressuring, and other processing plants; drill or
contract for the drilling of wells for oil, gas or
other minerals; make "dry hole" or "bottom hole"
contributions; contract or arrange for any other
act or thing, whether or not the same be now or
hereafter recognized or contemplated as common or
proper practices by or among those engaged in the
business of prospecting for, developing, producing,
processing, transporting, or marketing any such
minerals, which may be deemed by the General
Partner to be advantageous to the Partnership; pay
all reasonable expenses; execute division orders,
transfer orders, letters-in-lieu and such other
instruments as may be necessary to receive
revenues attributable to such oil, gas and mineral
interests; and execute and deliver any deeds,
conveyances, leases, contracts or written
instruments of any character appropriate to any of
such powers or duties.
(d) Borrow money on behalf of the Partnership
in such amounts as the General Partner deems
advisable, and pledge, mortgage and encumber
Partnership property, all upon such terms and
conditions as the General Partner deems advisable.
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(e) Employ, retain, or otherwise secure or
enter into other contracts with personnel or firms
to assist in the acquisition, developing,
improving, managing, and general operation of the
Partnership properties, including, but not limited
to, real estate brokers or agents, supervisory,
development and/or building management agents,
attorneys, accountants, and engineers, all on such
terms and for such consideration as the General
Partner deems advisable.
(f) Take any and all other action which is
permitted under the Texas Revised Limited
Partnership Act and which is customary or
reasonably related to the acquisition, ownership,
development, improvement, management and leasing
Partnership assets.
8.2. Responsibility of General Partner. The General
Partner shall exercise ordinary business judgment in
managing the affairs of the Partnership. The General
Partner shall at all times owe a duty of loyalty and a duty
of care to the Partnership and the other Partners.
However, unless fraud, deceit, or a wrongful taking shall
be involved, the General Partner shall not be liable or
obligated to the Limited Partners for any mistake of fact
or judgment made by the General Partner in operating the
business of the Partnership, which results in any loss to
the Partnership or its Partners. The General Partner does
not, in any way, guarantee the return of any Limited
Partner's capital or profit from the operations of the
Partnership. Notwithstanding the General Partner's duty of
loyalty and duty of care to the Partnership and the other
Partners, the General Partner shall not be responsible to
the Limited Partners because of loss of investment or a
loss in operations, unless it shall have been occasioned by
fraud, deceit, or a wrongful taking by the General Partner.
The General Partner shall devote such attention and business
capacity to the affairs of the Partnership as may be
reasonably necessary. In this connection, the parties
hereby acknowledge that the General Partner may be the
manager or general partner of other partnerships and may
continue to manage other partnerships, and may continue to
engage in other distinct or related businesses.
8.3 Indemnification of General Partners. To the full
extent permitted by law, and to such greater extent as
applicable law may thereafter from time to time permit, the
Partnership shall indemnify the General Partner, and all
agents, officers, directors, shareholders and employees of
any General Partner and the Partnership ("Indemnified
Parties"), and reimburse such Indemnified Parties for any
payments made in respect of, all judgments, penalties,
including excise and similar taxes, fines, settlements, and
reasonable expenses (including attorneys' fees), if such
Indemnified Party was, is or is threatened to be named
defendant or respondent in any proceeding (including, but
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not limited to, a proceeding where it is alleged that an
Indemnified Party committed a negligent act or omission)
whatsoever arising out of the Partnership; provided however,
that the indemnity from the Partnership shall be satisfied
out of Partnership assets only. The foregoing shall,
without limitation, be needed to make mandatory the
indemnification permitted under Section 11.02 of the Act and
authorize advance payment of expenses to the fullest extent
allowed by law. The indemnification rights herein contained
shall be cumulative of, and in addition to, any and all
rights, remedies and recourses to which the Indemnified
Parties described herein shall be entitled, whether pursuant
to some other provision of this Agreement, at law or in
equity, even if such partnerships or other businesses may
be in competition with the Partnership.
8.4. Title to Partnership Property. All assets
acquired on behalf of the Partnership shall be owned in the
name of the Partnership.
8.5. Restrictions on Limited Partners. The Limited
Partners shall not have either the obligation or the right
to take part, directly or indirectly, in the active
management of the business and the Limited Partners are not
authorized to do or perform any act, thing, or deed in the
name of or for or on behalf of either the General Partner
or the Partnership. The Limited Partners are not authorized
to and shall not, directly or indirectly, have a voice in
or take part in the business affairs or business operations
of the Partnership. The Limited Partners are not authorized
to and shall not be permitted to do any act, deed, or thing
which will cause such Limited Partners to be classified as
a General Partner of the Partnership.
8.6 Compensation of General Partner. The General
Partner shall receive, as guaranteed payments from the
Partnership, such amounts as the General Partner shall
determine from time to time as reasonable compensation for
services rendered or to be rendered by the General Partner
to the Partnership.
ARTICLE 9
LIABILITIES AND LOANS
9.1. Liability of Limited Partners. The liability of
the Limited Partners with regard to the Partnership in all
respects is restricted and limited to the amount of the
actual capital contribution that the Limited Partners make,
or agree to make, to the Partnership and any obligations
that they, from time to time, specifically agree to
individually guarantee. The Limited Partners cannot be
assessed to make an additional capital contribution to the
Partnership above that which the Limited Partners agree to
make to the Partnership.
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9.2. Loans to the Partnership. Nothing herein shall
prevent a General Partner or Limited Partner from loaning
money to the Partnership for a promissory note or similar
evidence of indebtedness, at a reasonable rate of interest.
Any Partner loaning money to the Partnership shall have the
same rights regarding the loan as would any person or
entity making the loan who was not a Partner of the
Partnership.
ARTICLE 10
PROHIBITED TRANSACTIONS
Except as otherwise provided in this Agreement, neither
the General Partner nor the Limited Partners shall do any
act or deed with the intention of harming the business
operations of the partnership or do any act contrary to the
limited partnership agreement, without the express approval
of all partners.
ARTICLE 11
RESTRICTIONS ON TRANSFER
OF PARTNERSHIP INTERESTS
11.1 Right of First Refusal to Purchase Limited
Partnership Interest. Except as provided in Section 11.4
below, a Limited Partner (the "offering Partner") may not
sell, transfer, assign, pledge or give (all of the foregoing
being considered a "transfer" for all purposes hereunder)
all or part of his or her Limited Partnership interest (the
"offered interest") without giving the Partnership and then
the other Partners the following right of first refusal:
(a) The offering Partner shall give the
Partnership written notice of his or her intent to
transfer the offered interest. Such notice must
be accompanied by a written agreement between the
offering Partner and the party offering to
purchase the offered interest which contains a
description of the portion of the total interest
that the offering Partner intends to sell, the
proposed sales price, and the proposed sales
terms. For a period of thirty (30) days following
receipt of such written notice, the Partnership
shall have the right to purchase all or any
portion of the offered interest. The Partnership
may exercise such right to purchase by giving the
offering Partner written notice of its election to
exercise such right (including the relative
percentages of cash and debt instruments, and the
duration, interest rate and payment schedule of
any such debt instruments). The Partnership may
exercise this right of first refusal by giving the
offering Partner written notice within thirty (30)
calendar days after receipt of the notice referred
to in this paragraph.
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(b) If the Partnership does not elect to
exercise its right to purchase the offered
interest pursuant to paragraph (a) above, the
offering Partner must give all other Partners
written notice of his or her intent to transfer
the offered interest. Such notice must be
accompanied by a written agreement between the
offering Partner and the party offering to
purchase the offered interest which contains a
description of the portion of the total interest
that the offering Partner intends to sell, the
proposed sales price, and the proposed sales terms
(including the relative percentages of cash and
debt instruments, and the duration, interest rate
and payment schedule of any such debt
instruments).
(c) On the receipt of the offering Partner's
notice, each other Partner may buy a proportionate
share of the offered interest, in the same
proportion to the whole offered interest as his or
her total Partnership interest (based on capital
accounts) bears to those of all Partners (except
the offering Partner). Each Partner may exercise
this right of first refusal by giving the offering
Partner written notice within thirty (30) calendar
days after receipt of the notice referred to in
the preceding paragraph.
(d) If one or more of the other Partners
declines to buy his or her proportionate share of
the offered interest, then that portion of the
offered interest as to which no Partner has
exercised his or her option under the preceding
paragraph will be offered wholly to each Partner
who exercised his or her option under the
preceding paragraph. Each such Partner may exercise
his or her secondary right of first refusal as to
all or part of the remaining offered interest, by
giving the offering Partner written notice within
thirty (30) calendar days after the expiration of
the first thirty (30) day period. The offering
Partner must honor all such notices in full in the
order received.
(e) If the other Partners do not agree to buy
the entire offered interest, the offering Partner
may complete the intended transfer and no other
Partner shall receive any of the purchased
interest. If the transfer is not completed within
thirty (30) calendar days after expiration of the
last exercise period, any attempted transfer will
be deemed pursuant to a new offer and this Section
11.1 shall again apply. If the transfer is
completed within this thirty (30) day period, the
transferee shall be an assignee of the offering
Partner's interest upon the payment of a
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reasonable fee to the Partnership to cover costs
of preparing, executing and recording all pertinent
documents. A transferee who has become an
assignee shall have the right to become a
substitute Limited Partner upon the consent of all
Partners.
(f) Notwithstanding the terms offered by the
transferee for the offered interest, if the
Partnership or any of the other Partners elect to
buy the offered interest, the purchase price shall
be equal to the Fair Market Value (as defined in
Section 11.5) of the offered interest.
(g) The Partnership or the other Partners who
elect to buy the offered interest shall pay the
purchase price as determined under paragraph (f)
above either for cash or, at the purchaser's
election, upon the following terms:
(1) The purchase price shall be
evidenced by a promissory note from the
Partnership or the purchasing Partner or
Partners payable to the offering Partner in
the amount of the purchase price, bearing
interest at a rate of interest equal to the
prime rate of interest announced or published
by Bank of America, N.A. as of the date of
purchase.
(2) The principal of the note shall be
payable in twenty (20) equal quarter-annual
installments commencing on the last day of
the calendar quarter following the closing of
the purchase and continuing on the last day
of each calendar quarter thereafter until the
note is paid in full.
(3) Accrued interest on the note shall
be payable on the same dates as, but in
addition to, the installments of principal.
(4) The note shall be secured by a
security interest in the partnership interest
being sold by the offering Partner.
11.2. Restrictions on Transfer of General Partnership
Interest. A General Partner may not sell, transfer or
assign all or any part of its General Partnership interest
in the Partnership.
11.3. Transfer of Limited Partnership Interest Upon
Death of a Limited Partner. Except as provided in Section
11.4 below, upon the death of a Limited Partner, the
personal representative of a deceased Limited Partner's
estate shall give written notice to the other Limited
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Partners and the General Partner of the deceased Limited
Partner's death. If the heirs, devisees or legatees of the
Limited Partner's entire Limited Partnership interest are
Related Parties (as defined in Section 11.4 below), then the
personal representative of the deceased Limited Partner's
estate may transfer such Limited Partnership interest to
such heirs, devisees or legatees without giving the
Partnership or the other Limited Partners a right of first
refusal to purchase such interest. If any part of the
Limited Partnership interest would otherwise pass to a
person other than a Related Party under the terms of the
Limited Partner's Will or by operation of law, then the
Partnership, and if it declines, the other Limited
Partners, shall have a right of first refusal to purchase
that portion only of the deceased Limited Partner's Limited
Partnership interest upon the following terms:
(a) Upon receipt of written notice of the
deceased Limited Partner's death from the personal
representative of the deceased Limited Partner's
estate, the Partnership shall have the right to
purchase all or any portion of the Limited
Partnership interest of the deceased Limited
Partner. The Partnership may exercise such right
to purchase by giving the personal representative
of the deceased Limited Partner's estate written
notice of its election to exercise such right
within thirty (30) days following receipt of
written notice of the deceased Limited Partner's
death. If the Partnership does not elect to
exercise its right to purchase the deceased
Limited Partner's Limited Partnership interest,
each other Limited Partner may buy a proportionate
share of the Limited Partnership interest of the
deceased Limited Partner, in the same proportion
as his Limited Partnership interest bears to those
of all Limited Partners (except the deceased
Limited Partner). Each Limited Partner may
exercise this right of first refusal by giving the
personal representative of the deceased Limited
Partner's estate written notice within thirty (30)
calendar days after receipt of the notice referred
to in this paragraph.
(b) If one or more of the other Limited
Partners declines to buy his proportionate share
of the Limited Partnership interest of the
deceased Limited Partner, then that portion of the
interest as to which no Limited Partner has
exercised his or her option under the preceding
paragraph will be offered wholly to each Limited
Partner who exercised his option. Each such
Limited Partner may exercise his secondary right
of first refusal as to all or part of the
remaining Limited Partnership interest of the
deceased Limited Partner by giving the personal
representative of the deceased Limited Partner's
estate written notice within thirty (30) calendar
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<PAGE> 31
days after the expiration of the first thirty (30)
day period. The personal representative of the
deceased Limited Partner's estate must honor all
such notices in full in the order received.
(c) If the Partnership or the other Limited
Partners do not elect to buy all of the Limited
Partnership interest of the deceased Limited
Partner pursuant to paragraphs (a) and (b) above,
the personal representative of the deceased Limited
Partner's estate may transfer the entire Limited
Partnership interest of the deceased Limited
Partner to the legatees and devisees entitled to
receive such interest pursuant to the terms of the
deceased Limited Partner's will, or if the
deceased Limited Partner died intestate, to the
heirs at law of the deceased Limited Partner.
(d) If the Partnership or any of the other
Partners elect to purchase the deceased Limited
Partner's Limited Partnership interest in
accordance with this Section 11.3, the purchase
price shall be equal to the Fair Market Value (as
defined in Section 11.5) of such interest.
11.4 Permitted Transfers to Related Party. A
Limited Partner may transfer, assign or convey all or any
part of his or her Limited Partnership Interest at any time
and from time to time during his or her life or upon his or
her death to a Related Party or Related Parties without
giving the other Partners a right of first refusal, provided
that the transferee assumes all of the obligations of the
transferring Limited Partner under this Agreement. The term
Related Party, as used herein, shall mean any member of the
Limited Partner's Immediate Family or any trust,
corporation, partnership or other entity in which the
Limited Partner and members of his or her Immediate Family
own all of the ownership or beneficial interest. The term
Immediate Family, as used herein, shall mean the Limited
Partner's spouse, children (whether naturally born to or
legally adopted by the Limited Partner), descendants
through all generations (whether naturally born to or
legally adopted by their parent), and parents.
For purposes of this Agreement, with respect to any
interest of a Limited Partner ("Transferee Limited Partner")
for which no right of first refusal was required by the
preceding paragraph of this Section 11.4 due to the
Transferee Limited Partner being a Related Party, if at any
time all of the ownership interest of the Transferee Limited
Partner which is a trust, corporation, partnership or other
entity is not owned by the Limited Partner (who transferred
his interest to the Transferee Limited Partner) or members
of his or her Immediate Family, a right of first refusal to
purchase the interest of the Transferee Limited Partner in
accordance with Section 11.1 shall arise.
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11.5 Fair Market Value. For purposes of this
Agreement, the term "Fair Market Value" shall mean the
price at which the interest in the Partnership in question
would transfer between a willing buyer and seller, neither
being under any compulsion to either buy or sell and both
having reasonable knowledge of the facts. The Fair Market
Value of an interest in the Partnership shall be determined
by a competent appraiser mutually agreed upon by (i) the
General Partner and (ii) the selling or transferring partner
or by the persons or parties obligated to sell a Partner's
Partnership interest. In the event an appraiser is not
mutually agreed upon by all parties within thirty (30) days
after the notice of the exercise of the option to purchase
by the Partnership or the other Partners, then each
respective party shall designate an appraiser, and the two
appraisers so designated shall designate a third appraiser
within ten (10) days after they have been appointed. The
three appraisers so designated shall prepare their
respective appraisal reports within forty-five (45) days
thereafter, and the Fair Market Value shall be determined
by taking the average of the values for such interests so
determined by said appraisers. As a condition precedent for
designating a particular appraiser, such party designating
such appraiser must establish and provide appropriate
evidence that such appraiser has at least testified as an
expert valuation witness on behalf of taxpayers in two or
more suits before the U.S. Tax Court, U.S. District Court,
or the U.S. Court of Claims, relative to the valuation of
closely held business interests. Further, it must be
established that any such appraiser shall be competent and
qualified to value such undivided ownership interest in the
Partnership taking into consideration the various valuation
factors pertinent to the valuation of such interest under
the then existing valuation techniques, procedures and
guidelines established for purposes of estate and gift tax
valuations at "fair market value," and taking into
consideration case law and statutory law relative to the
valuation of undivided ownership interests in limited
partnerships.
The partners understand and acknowledge that (i) no
individual or entity owning an interest as a Limited Partner
has the right to withdraw from the Partnership or cause the
Partnership to dissolve and liquidate before the end of the
term of the Partnership, (ii) the only distributions that
will be made to the owner of such interest will be his or
her proportionate share of the cash distributions of the
Partnership which are distributed to the Partners from time
to time in accordance with Section 5.5 and his or her
proportionate share of the properties of the Partnership
when the Partnership terminates and (iii) the Fair Market
Value of an interest in the Partnership will be determined
considering all relevant factors, including those set forth
in (i) and (ii) above.
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Notwithstanding anything contained herein to the
contrary, the party who exercises the option to purchase the
Partnership interest of a Partner pursuant to the foregoing
provisions of this Agreement shall have an additional
fifteen (15) days after the Fair Market Value of such
interest has been determined in accordance with this Section
11.5 to determine if the purchasing party wants to proceed
with the purchase. If the purchasing party elects not to
proceed with the purchase, then the purchasing party shall
give written notice of such election to the selling Partner
within such fifteen (15) day period. If no such notice is
made within such fifteen (15) day period, the parties shall
proceed with the closing of such purchase in accordance with
this Agreement. If the purchasing party elects not to
proceed with the purchase, then the time period for the
exercise of any secondary options to purchase as set forth
in this Agreement shall begin at the expiration of the
fifteen (15) day notice period referred to above.
11.6 Assignees of Limited Partners. This Agreement
shall be fully applicable to all persons or entities which
acquire any interest (community property or otherwise) in
an interest as a Limited Partner (whether as an assignee or
substitute Limited Partner) as if such person were a Limited
Partner. Not in any way limiting the foregoing, an
assignee of an interest as a Limited Partner shall be bound
by the provisions of this Agreement as if such assignee
were a Limited Partner. Unless the assignee becomes a
substitute Limited Partner, any assignee shall have only
those rights of an assignee permitted by the Act. An
assignee shall not become a substitute Limited Partner
without the written consent of the General Partner and
Limited Partners owning a majority in interest of the
capital of the Partnership.
ARTICLE 12
WITHDRAWAL, DISSOLUTION AND LIQUIDATION
12.1. Withdrawal of Partners and Rights of Partners to
Terminate and Liquidate the Partnership.
(a) Termination and Liquidation. The
Partnership may not be terminated or liquidated
for any reason before the end of the term set
forth in Article 3 above without the written
consent of all the Partners.
(b) Withdrawal of Initial General Partner.
The General Partner may withdraw as the general
partner of the Partnership by giving ninety (90)
days written notice to the Limited Partners. Upon
such withdrawal, the Partnership shall not be
terminated and liquidated, but shall be
reconstituted, and Limited Partners owning a
majority in interest of the capital of the
Partnership owned by all Limited Partners shall
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select at least one (1), but no more than three
(3), new general partners to continue the business
of the Partnership and succeed to the rights,
duties and obligations of the withdrawing General
Partner. If the required vote to appoint a
successor general partner is not obtained within
ninety (90) days following the withdrawal of the
General Partner, then upon the application of any
Limited Partner, the District Court of Midland
County, Texas shall appoint at least one (1), but
not more than three (3), new general partners to
succeed to the rights, duties and obligations of
the withdrawing General Partner. In such event,
the withdrawing General Partner's general
partnership interest shall be converted to a
limited partnership interest. The withdrawing
General Partner's limited partnership interest
(including the converted interest) shall be
transferred in accordance with Section 11.3 above.
The withdrawal of a General Partner will never
result in the termination or liquidation of the
Partnership.
(c) Withdrawal of Successor General Partner.
A successor General Partner may withdraw as a
general partner by giving ninety (90) days written
notice to the other successor General Partners and
the Limited Partners. Upon such withdrawal, the
Partnership's business shall be continued by the
remaining successor General Partners. In such
event, the withdrawing successor General Partner's
General Partnership interest shall be converted to
a limited partnership interest, and the withdrawing
General Partner shall become a substitute Limited
Partner hereunder. Upon the withdrawal of the
sole remaining successor General Partner, the
Partnership shall not be terminated and liquidated,
but shall be reconstituted, and Limited Partners
owning a majority in interest of the capital of
the Partnership owned by all Limited Partners
shall name at least one (1), but no more than
three (3), new general partners to continue the
business of the Partnership and succeed to the
rights, duties and obligations of the withdrawing
successor General Partner. If the required vote
to appoint a successor general partner is not
obtained within ninety (90) days following the
withdrawal of the sole remaining successor General
Partner, then upon the application of any Limited
Partner, the District Court of Midland County,
Texas shall appoint at least one (1), but not more
than three (3), new general partners to succeed to
the rights, duties and obligations of the
withdrawing General Partner. Upon the withdrawal of
the sole remaining successor General Partner, the
withdrawing successor General Partner's General
Partnership interest shall be converted to a
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limited partnership interest, and the withdrawing
successor General Partner shall become a substitute
Limited Partner hereunder. The withdrawal of the
sole remaining successor General Partner will never
result in the termination or liquidation of the
Partnership.
(d) Withdrawal of Limited Partner. A Limited
Partner may not withdraw from the Partnership
prior to the end of the term set forth in Article
3 above.
12.2. Death, Incapacity, Bankruptcy or Insolvency of
Limited Partner or Charging Order Against Limited
Partnership Interest. The Partnership shall not dissolve
on the death, incapacity, bankruptcy or insolvency of a
Limited Partner or in the event that a creditor of a
Limited Partner obtains a charging order against the Limited
Partner. Upon the death of a Limited Partner, the transfer
of such Limited Partner's Partnership interest shall be
governed by the provisions of Section 11.3 above. However,
if a creditor of a Limited Partner obtains a charging order
against the Limited Partnership interest of a Limited
Partner, or upon the incapacity, bankruptcy or insolvency
of the Limited Partner, the Partnership shall have the
option to purchase the Limited Partnership interest of such
Limited Partner by giving such Limited Partner written
notice of its election to exercise such right within thirty
(30) days after receipt of written notice of the event
giving rise to such option to purchase. If the Partnership
does not elect to exercise its right to purchase such
Limited Partnership interest, each other Limited Partner
will have the option to purchase a proportionate share of
the Limited Partnership Interest (the "Offered Interest") of
such Limited Partner (the "offering Partner") in the same
proportion that the purchasing Partner's partnership
interest bears to those of all Partners electing to exercise
their option to purchase pursuant to this Section 12.2.
Each other Partner may exercise this option by giving the
offering Limited Partner written notice thirty (30) days
after receipt of written notice of the occurrence of the
event giving rise to such option. If the Partnership or
some or all of the other Partners elect to exercise this
option, the purchase price of the offered interest shall be
equal to the Fair Market Value (as defined in Section 11.5)
of the Limited Partner's partnership interest.
12.3. Death, Incapacity, Dissolution, Bankruptcy or
Insolvency of a General Partner or Charging Order Against
General Partnership Interest.
(a) The dissolution, bankruptcy or insolvency
of the General Partner shall not result in the
termination or liquidation of the Partnership. In
addition, if a creditor of the General Partner
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obtains a charging order against the General
Partnership interest of a General Partner, the
Partnership shall not be terminated or liquidated.
Upon the occurrence of any event described in this
paragraph, the Partnership shall be reconstituted
and its business continued , and Limited Partners
owning a majority in interest of the capital of
the Partnership owned by all Limited Partners
shall select at least one (1), but no more than
three (3), new general partners to continue the
business of the Partnership and succeed to the
rights, duties and obligations of the dissolved,
bankrupt or insolvent General Partner or General
Partner who has a charging order against its
general partnership interest. If the required
vote to appoint a successor general partner is not
obtained within ninety (90) days following the
dissolution, bankruptcy or insolvency of the
General Partner (or General Partner who has a
charging order against its general partnership
interest), then upon the application of any
Limited Partner, the District Court of Midland
County, Texas shall appoint at least one (1), but
not more than three (3), new general partners to
succeed to the rights, duties and obligations of
the General Partner.
(b) The death, incapacity, dissolution, bank-
ruptcy or insolvency of a successor General
Partner shall never result in the termination or
liquidation of the Partnership. In addition, if a
creditor of a successor General Partner obtains a
charging order against the General Partnership
interest of a successor General Partner, the
Partnership shall not be terminated or liquidated.
Upon the occurrence of any such event described in
this paragraph, the business of the Partnership
shall be continued by the other successor General
Partners, if any.
(c) The death, incapacity, dissolution,
bankruptcy or insolvency of the sole remaining
successor General Partner shall not result in the
termination or liquidation of the Partnership. In
addition, if a creditor of the sole remaining
successor General Partner obtains a charging order
against the general partnership interest of the
sole remaining successor General Partner, the
Partnership shall not be terminated or liquidated.
Upon the occurrence of any such event described in
this paragraph, the Partnership shall be
reconstituted, and Limited Partners owning a
majority in interest of the capital of the
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Partnership owned by all Limited Partners shall
name at least one (1), but no more than three
(3), new general partners to continue the business
of the Partnership and succeed to the rights,
duties and obligations of the sole remaining
successor General Partner. If the required vote
to appoint a successor General Partner is not
obtained within ninety (90) days following the
death, incapacity, dissolution, bankruptcy or
insolvency of the sole remaining successor General
Partner (or General Partner who has a charging
order against his, her, or its general partnership
interest), then upon the application of any
Limited Partner, the District Court of Midland
County, Texas shall appoint at least one (1), but
not more than three (3), new general partners to
succeed to the rights, duties and obligations of
the sole remaining successor General Partner.
(d) Upon the occurrence of any event
described in this Section 12.3 above, the General
Partnership interest of the deceased,
incapacitated, dissolved, bankrupt or insolvent
General Partner (or General Partner who has a
charging order against his, her or its General
Partnership interest) shall be converted to a
limited partnership interest, and the Limited
Partners shall have the option to purchase such
interest at a price equal to the Fair Market Value
(as defined in Section 11.5) of such interest.
Each Limited Partner shall have the right to
purchase a proportionate share of such interest in
the same proportion that his or her Limited
Partnership interest bears to those of all Limited
Partners who exercise their option to purchase
such interest.
12.4. Liquidation. Upon termination of the
Partnership for any reason, the assets of the Partnership,
or the proceeds from the sale or liquidation of such
assets, shall be distributed and applied as follows:
(a) First, all debts and liabilities of the
Partnership to persons other than Partners shall
be paid or provided for in the order of priority
provided by law; although an appropriate reserve
may be maintained and the amount determined by the
General Partner for any contingent liability until
said contingent liability is satisfied;
(b) Second, all debts and liabilities to
Partners shall be paid or provided for in the
order of priority provided by law;
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(c) Third, an amount equal to the balance in
each Partner's capital account shall be distributed
to each Partner. If the Partnership does not have
properties having a value equal to or exceeding
the sum of the capital accounts of the Partners,
then the remaining Partnership properties shall be
distributed to the Partners in proportion to their
respective capital account balances.
(d) Fourth, all remaining assets shall be
distributed to the Partners in proportion to the
Partnership sharing percentages set forth in
Exhibit A, as it may be amended from time to time.
The Partners shall continue to share in profits and
losses during the winding-up process in the same manner and
proportion as set forth in Article 5 above for the period
prior to termination of the Partnership. The capital
accounts of the Partners shall be adjusted to reflect all
gains, losses, income and expenses realized or incurred
during the liquidation process.
12.5. No Obligation to Restore Negative Capital
Account Balance. No Partner with a negative balance in his
or her capital account shall be liable to the Partnership
or any other Partner for the amount of such negative
balance upon dissolution or liquidation.
12.6. Distributions in Kind. Except as provided in
Section 12.4(c) above, no Partner shall be entitled to
demand a distribution be made to him in Partnership
property, but the General Partner, in its sole discretion,
may make or direct property distributions to be made, using
the property's Fair Market Value as of the time of
distribution as the basis for making the distribution.
12.7 Termination of Trust or Closing of Estate.
Notwithstanding anything contained herein to the contrary,
the termination of a trust or the closing of an estate
which is a Limited Partner and the distribution of the
Limited Partnership interest to the beneficiaries of such
Limited Partner pursuant to Section 11.4 above shall not
cause a dissolution of the Partnership or trigger a right
of first refusal in favor of the other Partners to purchase
such interest, provided that such beneficiaries are Related
Parties.
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1. Amendment. This Agreement may only be amended
or modified by unanimous written consent of all the
Partners.
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13.2. Notices. Except as may be otherwise
specifically provided in this Agreement, all notices
required or permitted hereunder shall be in writing and
shall be deemed to be delivered when deposited in the
United States mail, postage prepaid, registered or certified
mail, return receipt requested, addressed to the parties at
the respective addresses set forth opposite their signatures
at the end of this Agreement or at such other addresses as
may have been theretofore specified by written notice
delivered in accordance herewith.
13.3. Texas Law to Apply. This Agreement shall be
construed under and in accordance with the laws of the
State of Texas.
13.4. Other Instruments. The parties hereto covenant
and agree that they will execute such other and further
instruments and documents as are or may become necessary or
convenient to effectuate and carry out the Partnership
created by this Agreement.
13.5. Headings. The headings used in this Agreement
are used for administrative purposes only and do not
constitute substantive matter to be considered in construing
the terms of this Agreement.
13.6. Parties Bound. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, legal
representatives, successors and assigns where permitted by
this Agreement.
13.7. Legal Construction. If any one or more of the
provisions contained in this Agreement for any reason are
held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality or unenforceability
shall not affect any other provision thereof and this
Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
13.8. Tax Elections. No election shall be made to
exclude the Partnership from the application of the
provisions of Subchapter K of the Internal Revenue Code of
1986, as amended (the "Code") or from any similar provisions
of state tax laws. If a Partnership interest is
transferred, a Partner dies, or Partnership assets are
distributed to a Partner, the Partnership may elect to cause
the basis of the Partnership's assets to be adjusted for
federal income tax purposes under Code Sections 734 and 743.
13.9. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts
shall for all purposes be deemed to be an original.
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13.10. Gender. Wherever the context shall so require,
all words herein in the male gender shall be deemed to
include the female or neuter gender, all singular words
shall include the plural, and all plural words shall include
the singular.
ARTICLE 14
DISPUTE RESOLUTION PROCEDURE
In the event of any dispute, difference or question
("Dispute") between any of the Partners or assignees of the
Partners or the Partnership ("Disputing Parties"), which
cannot be otherwise informally resolved by the Disputing
Parties themselves, the Disputing Parties will utilize the
procedures specified in this Article 14 (the "Procedure")
to resolve the Dispute. The Disputing Party seeking to
initiate the Procedure (the "Initiating Party") shall give
written notice to the other Partners, assignees of the
Partners and the Partnership, describing in general terms
the nature of the Dispute, the Initiating Party's claim for
relief and identifying one or more individuals with
authority to settle the Dispute on such Party's behalf.
The disputing Parties receiving such notice (the "Responding
Party", whether one or more) shall have five (5) business
days within which to designate by written notice to the
Initiating Party, one or more individuals (which may include
the appointing Partner), with authority to settle the
Dispute on such Party's behalf. The individuals so
designated shall be known as the "Authorized Individuals".
The Authorized Individuals shall be entitled to make
such investigation of the Dispute as they deem appropriate,
but agree to promptly, and in no event later than thirty
(30) days from the date of the Initiating Party's written
notice, meet to discuss resolution of the Dispute. The
Authorized Individuals shall meet at such times and places
and with such frequency as they may agree. The Disputing
Parties agree to participate in good faith in the direct
negotiations to resolve the Dispute. If the Dispute has
not been resolved within thirty (30) days from the date of
their initial meeting, the Disputing Parties shall cease
direct negotiations and shall submit the Dispute to
arbitration in accordance with the following procedure.
The Dispute will be settled by arbitration by an
arbitrator mutually acceptable to the Disputing Parties in
an arbitration proceeding conducted in Midland County, Texas
in accordance with the rules as then in effect of the
American Arbitration Association. If the Disputing Parties
hereto cannot agree on an arbitrator within ten (10)
business days of the initiation of the arbitration
proceeding, an arbitrator shall be selected for the
Disputing Parties by the American Arbitration Association.
The Disputing Parties shall use their best efforts to have
the arbitration proceeding concluded and a judgment rendered
by the arbitrator within forty (40) business days of the
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initiation of the arbitration proceeding. The decision of
such arbitrator shall be final, and judgment upon the award
rendered by the arbitration may be entered in any court
having jurisdiction thereof, and the costs (including,
without limitation, reasonable fees and expenses of counsel
and experts for the Disputing Parties) of such arbitration
(including the costs to enforce or preserve the rights
awarded in the arbitration) shall be borne by the Disputing
Party whom the decision of the arbitrator is against. If
the decision of the arbitrator is not clearly against one
of the Disputing Parties or the decision of the arbitrator
is against more than one Disputing Party on one or more
issues, the costs of such arbitration shall be borne equally
by the Disputing Parties. Notwithstanding anything to the
contrary herein, an arbitrator, pursuant to a proceeding
brought under this Article 14, shall not rule against any
General Partner's exercise of any powers herein given to any
General Partner, or rule against any management decision of
any General Partner, unless that exercise or management
decision did not constitute the exercise of ordinary
business judgment in managing the affairs of the Partnership
at the time of that exercise or management decision and
constituted fraud, deceit or a wrongful taking by such
General Partner.
EXECUTED to be effective as of the 19th day of April,
2000.
GENERAL PARTNER:
ROPER OPERATIONS, INC.
ADDRESS:
4607 W. Industrial Avenue By: /s/ J. Mark Roper
Midland, Texas 79703 ------------------------
J. Mark Roper, President
LIMITED PARTNER:
ADDRESS:
4607 W. Industrial Avenue /s/ Joe G. Roper
Midland, Texas 79703 ---------------------------
Joe G. Roper
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EXHIBIT C
Joint Filing Agreement
In accordance with Rule 13d-1(k) under the
Securities Exchange Act of 1934, as amended, the undersigned
hereby agree to the joint filing with all other Reporting
Persons (as such term is defined in the Schedule 13D
referred to below) on behalf of each of them of a statement
on Schedule 13D (including amendments thereto) with respect
to the Common Stock, par value $0.10 per share, of
TMBR/Sharp Drilling, Inc. and that this Joint Filing
Agreement be included as an Exhibit to such joint filing.
This Joint Filing Agreement may be executed in any number
of counterparts all of which taken together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the undersigned hereby execute
this Joint Filing Agreement this 2nd day of August, 2000.
ROPER OPERATIONS, INC.
By: /s/ Patricia R. Elledge
-----------------------------------
Patricia R. Elledge, Vice President
ROPER FAMILY PROPERTIES, LTD., a
Texas limited partnership
By: ROPER OPERATIONS, INC., its
General Partner
By: /s/ Patricia R. Elledge
-----------------------------------
Patricia R. Elledge, Vice President
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LYNCH, CHAPPELL & ALSUP
A Professional Corporation
The Summit, Suite 700
300 North Marienfeld
Midland, Texas 79701
(915) 683-3351
Telecopier (915) 683-2587
August 10, 2000
Securities and Exchange Commission
Judiciary Plaza Office Building
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: TMBR/Sharp Drilling, Inc.; Schedule 13D
Gentlemen:
Transmitted herewith for filing on behalf of Roper
Operations, Inc. and Roper Family Properties, Ltd. is
Schedule 13D relating to the securities of TMBR/Sharp
Drilling, Inc.
If the Staff has any questions, please contact the
undersigned at (915) 683-3351.
Very truly yours,
/s/ Thomas W. Ortloff
Thomas W. Ortloff
TWO/ds
