FORM 10-K405
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File Number:
III-A: 0-18302; III-B: 0-18636; III-C: 0-18634; III-D: 0-18936
III-E: 0-19010; III-F: 0-19102; III-G: 0-19563
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-A
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-F
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-G
-----------------------------------------------
(Exact name of Registrant as specified in its Articles)
III-A: 73-1352993
III-B: 73-1358666
III-C: 73-1356542
III-D: 73-1357374
III-E: 73-1367188
III-F: 73-1377737
Oklahoma III-G: 73-1377828
- --------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two West Second Street, Tulsa, Oklahoma 74103
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 583-1791
Securities registered pursuant to Section 12(b) of the Act: None Securities
registered pursuant to Section 12(g) of the Act:
Depositary Units of Limited Partnership interest
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to the
filing requirements for the past 90 days. Yes X No
----- -----
-1-
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K405 or any amendment to this Form 10-K405.
X Disclosure is not contained herein.
-----
Disclosure is contained herein.
-----
The Depositary Units are not publicly traded, therefore, Registrant cannot
compute the aggregate market value of the voting units held by non-affiliates of
the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE: None
-2-
<PAGE>
FORM 10-K405
TABLE OF CONTENTS
PART I.........................................................................4
ITEM 1. BUSINESS.......................................................4
ITEM 2. PROPERTIES....................................................10
ITEM 3. LEGAL PROCEEDINGS.............................................25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS...........25
PART II.......................................................................25
ITEM 5. MARKET FOR UNITS AND RELATED LIMITED PARTNER MATTERS..........25
ITEM 6. SELECTED FINANCIAL DATA.......................................28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..........................36
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.............................................59
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................59
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE...........................60
PART III......................................................................60
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER.......60
ITEM 11. EXECUTIVE COMPENSATION........................................61
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT....................................................69
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................71
PART IV.......................................................................72
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K...................................................72
SIGNATURES..............................................................78
-3-
<PAGE>
PART I
ITEM 1. BUSINESS
General
The Geodyne Energy Income Limited Partnership III-A (the "III-A
Partnership"), Geodyne Energy Income Limited Partnership III-B (the "III-B
Partnership"), Geodyne Energy Income Limited Partnership III-C (the "III-C
Partnership"), Geodyne Energy Income Limited Partnership III-D (the "III-D
Partnership"), Geodyne Energy Income Limited Partnership III-E (the "III-E
Partnership"), Geodyne Energy Income Limited Partnership III-F (the "III-F
Partnership"), and Geodyne Energy Income Limited Partnership III-G (the "III-G
Partnership") (collectively, the "Partnerships") are limited partnerships formed
under the Oklahoma Revised Uniform Limited Partnership Act. Each Partnership is
composed of Geodyne Resources, Inc., a Delaware corporation, as general partner
("Geodyne" or the "General Partner"), Geodyne Depositary Company, a Delaware
corporation, as the sole initial limited partner, and public investors as
substitute limited partners (the "Limited Partners"). The Partnerships commenced
operations on the dates set forth below:
Date of
Partnership Activation
----------- ------------------
III-A November 22, 1989
III-B January 24, 1990
III-C February 27, 1990
III-D September 5, 1990
III-E December 26, 1990
III-F March 7, 1991
III-G September 20, 1991
The General Partner currently serves as general partner of 26 limited
partnerships and is a wholly-owned subsidiary of Samson Investment Company.
Samson Investment Company and its various corporate subsidiaries, including the
General Partner (collectively "Samson"), are primarily engaged in the production
and development of and exploration for oil and gas reserves and the acquisition
and operation of producing properties. At December 31, 1999, Samson owned
interests in approximately 14,000 oil and gas wells located in 17 states of the
United States and the countries of Canada, Venezuela, and Russia. At December
31, 1999, Samson operated approximately 3,400 oil and gas wells located in 15
states of the United States as well as Canada, Venezuela, and Russia.
The Partnerships are currently engaged in the business of owning interests
in producing oil and gas properties located in the continental United States.
The Partnerships may also engage
-4-
<PAGE>
to a limited extent in development drilling on producing oil and gas properties
as required for the prudent management of the Partnerships.
As limited partnerships, the Partnerships have no officers, directors, or
employees. They rely instead on the personnel of the General Partner and the
other Samson Companies. As of February 15, 2000, Samson employed approximately
920 persons. No employees are covered by collective bargaining agreements, and
management believes that Samson provides a sound employee relations environment.
For information regarding the executive officers of the General Partner, see
"Item 10. Directors and Executive Officers of the General Partner."
The General Partner's and the Partnerships' principal place of business is
located at Samson Plaza, Two West Second Street, Tulsa, Oklahoma 74103, and
their telephone number is (918) 583-1791 or (888) 436-3963 [(888) GEODYNE].
Pursuant to the terms of the partnership agreements for the Partnerships
(the "Partnership Agreements") the Partnerships will terminate on the dates
indicated in the "Initial Termination Date" column of the following chart.
However, the Partnership Agreements provide that the General Partner may extend
the term of each Partnership for up to five periods of two years each. As of the
date of this Annual Report on Form 10-K405 ("Annual Report"), the General
Partner has extended the terms of the III-A, III-B, and III-C Partnerships for
the first two-year extension period. The General Partner has not determined
whether it intends to (i) further extend the terms of such Partnerships or (ii)
extend the term of any other Partnership. Therefore, the Partnerships are
currently scheduled to terminate on the dates indicated in the "Current
Termination Date" column of the following chart.
Initial Extensions Current
Partnership Termination Date Exercised Termination Date
----------- ------------------ --------- ------------------
III-A November 22, 1999 1 November 22, 2001
III-B January 24, 2000 1 January 24, 2002
III-C February 28, 2000 1 February 28, 2002
III-D September 5, 2000 - September 5, 2000
III-E December 26, 2000 - December 26, 2000
III-F March 7, 2001 - March 7, 2001
III-G September 20, 2001 - September 20, 2001
-5-
<PAGE>
Funding
Although the Partnership Agreements permit the Partnerships to incur
borrowings, operations and expenses are currently funded out of each
Partnership's revenues from oil and gas sales. The General Partner may, but is
not required to, advance funds to a Partnership for the same purposes for which
Partnership borrowings are authorized.
Principal Products Produced and Services Rendered
The Partnerships' sole business is the production of, and related
incidental development of, oil and gas. The Partnerships do not refine or
otherwise process crude oil and condensate. The Partnerships do not hold any
patents, trademarks, licenses, or concessions and are not a party to any
government contracts. The Partnerships have no backlog of orders and do not
participate in research and development activities. The Partnerships are not
presently encountering shortages of oilfield tubular goods, compressors,
production material, or other equipment.
Competition and Marketing
The domestic oil and gas industry is highly competitive, with a large
number of companies and individuals engaged in the exploration and development
of oil and gas properties. The ability of the Partnerships to produce and market
oil and gas profitably depends on a number of factors that are beyond the
control of the Partnerships. These factors include worldwide political
instability (especially in oil-producing regions), United Nations export
embargoes, the supply and price of foreign imports of oil and gas, the level of
consumer product demand (which can be heavily influenced by weather patterns),
government regulations and taxes, the price and availability of alternative
fuels, the overall economic environment, and the availability and capacity of
transportation and processing facilities. The effect of these factors on future
oil and gas industry trends cannot be accurately predicted or anticipated.
The most important variable affecting the Partnerships' revenues is the
prices received for the sale of oil and gas. Predicting future prices is not
possible. Concerning past trends, average yearly wellhead gas prices in the
United States have been volatile for many years. Over the past ten years such
average prices have generally been in the $1.40 to $2.40 per Mcf range. Gas
prices are currently in the upper end of this range.
Substantially all of the Partnerships' gas reserves are being sold on the
"spot market." Prices on the spot market are subject to wide seasonal and
regional pricing fluctuations due to the highly competitive nature of the spot
market. In addition, such spot market sales are generally short-term in nature
and are
-6-
<PAGE>
dependent upon the obtaining of transportation services provided by pipelines.
Spot prices for the Partnerships' gas increased from approximately $2.03 per Mcf
at December 31, 1998 to approximately $2.24 per Mcf at December 31, 1999. Such
prices were on an MMBTU basis and differ from the prices actually received by
the Partnerships due to transportation and marketing costs, BTU adjustments, and
regional price and quality differences.
For the past ten years, average oil prices have generally been in the
$16.00 to $24.00 per barrel range, but have been extremely volatile over the
past two years. Due to global consumption and supply trends as well as a
slowdown in Asian energy demand, oil prices in late 1997 and early 1998 reached
historically low levels, dropping to as low as approximately $9.25 per barrel.
However, production curtailment agreements among major oil producing nations
have caused recent oil prices to climb to over $24.00 per barrel in some
markets. It is not known whether this trend will continue. Prices for the
Partnerships' oil increased from approximately $9.50 per barrel at December 31,
1998 to approximately $22.75 per barrel at December 31, 1999.
Future prices for both oil and gas will likely be different from the
prices in effect on December 31, 1999. Management is unable to predict whether
future oil and gas prices will (i) stabilize, (ii) increase, or (iii) decrease.
Significant Customers
The following customers accounted for ten percent or more of the
Partnerships' oil and gas sales during the year ended December 31, 1999:
-7-
<PAGE>
Partnership Purchaser Percentage
----------- ------------------------ ----------
III-A Valero Industrial Gas L.P.
("Valero") 27.2%
El Paso Energy Marketing
Company ("El Paso") 26.7%
Phibro Energy, Inc.
("Phibro") 22.8%
III-B Phibro 25.4%
Valero 21.4%
El Paso 20.2%
Sun Refining & Marketing
Company 17.0%
III-C El Paso 59.0%
III-D El Paso 58.5%
Eaglwing Trading, Inc.
("Eaglwing") 15.8%
III-E Eaglwing 35.4%
El Paso 12.1%
III-F El Paso 28.2%
Amoco Production Co. 10.6%
III-G El Paso 23.7%
Amoco Production Co. 12.0%
In the event of interruption of purchases by one or more of the
Partnerships' significant customers or the cessation or material change in
availability of open access transportation by the Partnerships' pipeline
transporters, the Partnerships may encounter difficulty in marketing their gas
and in maintaining historic sales levels. Management does not expect any of its
open access transporters to seek authorization to terminate their transportation
services. Even if the services were terminated, management believes that
alternatives would be available whereby the Partnerships would be able to
continue to market their gas.
The Partnerships' principal customers for crude oil production are
refiners and other companies which have pipeline facilities near the producing
properties of the Partnerships. In the event pipeline facilities are not
conveniently available to production areas, crude oil is usually trucked by
purchasers to storage facilities.
-8-
<PAGE>
Oil, Gas, and Environmental Control Regulations
Regulation of Production Operations -- The production of oil and gas is
subject to extensive federal and state laws and regulations governing a wide
variety of matters, including the drilling and spacing of wells, allowable rates
of production, prevention of waste and pollution, and protection of the
environment. In addition to the direct costs borne in complying with such
regulations, operations and revenues may be impacted to the extent that certain
regulations limit oil and gas production to below economic levels.
Regulation of Sales and Transportation of Oil and Gas -- Sales of crude
oil and condensate are made by the Partnerships at market prices and are not
subject to price controls. The sale of gas may be subject to both federal and
state laws and regulations. The provisions of these laws and regulations are
complex and affect all who produce, resell, transport, or purchase gas,
including the Partnerships. Although virtually all of the Partnerships' gas
production is not subject to price regulation, other regulations affect the
availability of gas transportation services and the ability of gas consumers to
continue to purchase or use gas at current levels. Accordingly, such regulations
may have a material effect on the Partnerships' operations and projections of
future oil and gas production and revenues.
Future Legislation -- Legislation affecting the oil and gas industry is
under constant review for amendment or expansion. Because such laws and
regulations are frequently amended or reinterpreted, management is unable to
predict what additional energy legislation may be proposed or enacted or the
future cost and impact of complying with existing or future regulations.
Regulation of the Environment -- The Partnerships' operations are subject
to numerous laws and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection. Compliance with
such laws and regulations, together with any penalties resulting from
noncompliance, may increase the cost of the Partnerships' operations or may
affect the Partnerships' ability to timely complete existing or future
activities. Management anticipates that various local, state, and federal
environmental control agencies will have an increasing impact on oil and gas
operations.
Insurance Coverage
The Partnerships are subject to all of the risks inherent in the
exploration for and production of oil and gas including blowouts, pollution,
fires, and other casualties. The Partnerships maintain insurance coverage as is
customary for entities of a similar size engaged in operations similar to that
of the Partnerships, but losses can occur from uninsurable risks or in amounts
in excess of existing insurance coverage. The
-9-
<PAGE>
occurrence of an event which is not fully covered by insurance could have a
material adverse effect on the Partnerships' financial condition and results of
operations.
ITEM 2. PROPERTIES
Well Statistics
The following table sets forth the number of productive wells of the
Partnerships as of December 31, 1999.
Well Statistics(1)
As of December 31, 1999
Number of Gross Wells(2) Number of Net Wells(3)
--------------------------- ----------------------------
P/ship Total Oil Gas N/A(4) Total Oil Gas N/A(4)
- -------- ----- ----- --- ------ ------ ------ ----- ------
III-A 190 100 90 - 10.51 2.64 7.87 -
III-B 141 70 71 - 6.76 3.09 3.67 -
III-C 170 68 102 - 20.26 11.58 8.68 -
III-D 204 140 62 2 14.67 8.77 5.86 .04
III-E 251 116 133 2 48.08 23.84 23.98 .26
III-F 482 382 100 - 21.55 12.38 9.17 -
III-G 2,034 1,654 380 - 14.46 9.69 4.77 -
- ----------
(1) The designation of a well as an oil well or gas well is made by the
General Partner based on the relative amount of oil and gas reserves for
the well. Regardless of a well's oil or gas designation, it may produce
oil, gas, or both oil and gas.
(2) As used in this Annual Report, "gross well" refers to a well in which a
working interest is owned; accordingly, the number of gross wells is the
total number of wells in which a working interest is owned.
(3) As used in this Annual Report, "net well" refers to the sum of the
fractional working interests owned in gross wells. For example, a 15%
working interest in a well represents one gross well, but 0.15 net well.
(4) Wells which have not been designated as oil or gas.
Drilling Activities
During the year ended December 31, 1999, the III-A, III-B, and III-C
Partnerships indirectly participated in the developmental drilling activities
described below. These Partnerships do not own working interests in any of these
wells; therefore, they did not incur any costs associated with the drilling
activity:
-10-
<PAGE>
County/ Revenue
P/ship Well Name Parish St. Interest Type Status
- ------ --------- ------- --- -------- ---- ---------
III-A Joe No. 1-25 Caddo OK .00489 Gas Unknown
BMT No. 13 Webb TX .00499 Gas Producing
Hachar No. 35 Webb TX .00749 Gas Producing
III-B BMT No. 13 Webb TX .00232 Gas Producing
Hachar No. 35 Webb TX .00348 Gas Producing
III-C Ray No. 3 Custer OK .01368 Gas Producing
Woodward 53 No.1 Pecos TX (1) Unknown (1)
BMT No. 13 Webb TX .00096 Gas Producing
Hachar No. 35 Webb TX .00145 Gas Producing
III-D Woodward 53 No.1 Pecos TX (1) Unknown (1)
Ray No. 3 Custer OK .00195 Gas Producing
III-E Hay Reservoir
Unit No. 67 Sweetwater WY .05256 Gas Producing
Hay Reservoir
Unit No. 74 Sweetwater WY .05256 Gas Producing
III-F Hay Reservoir
Unit No. 67 Sweetwater WY .04413 Gas Producing
Hay Reservoir
Unit No. 74 Sweetwater WY .04413 Gas Producing
III-G Hay Reservoir
Unit No. 67 Sweetwater WY .02194 Gas Producing
Hay Reservoir
Unit No. 74 Sweetwater WY .02194 Gas Producing
- ---------------------
(1) The III-C and III-D Partnerships participated in drilling the Woodward 53
No. 1 well in Pecos County, Texas, but elected to not participate in the
completion attempt on this well. The III-C and III-D Partnerships will receive a
right to production from this well when, if ever, the completion attempt reaches
payout under the terms of the operating agreement governing said well.
Oil and Gas Production, Revenue, and Price History
The following tables set forth certain historical information concerning
the oil (including condensates) and gas production, net of all royalties,
overriding royalties, and other third party interests, of the Partnerships,
revenues attributable to such production, and certain price and cost
information. As used in the following tables, direct operating expenses include
lease operating expenses and production taxes. In addition, gas
-11-
<PAGE>
production is converted to oil equivalents at the rate of six Mcf per barrel,
representing the estimated relative energy content of gas and oil, which rate is
not necessarily indicative of the relationship of oil and gas prices. The
respective prices of oil and gas are affected by market and other factors in
addition to relative energy content.
-12-
<PAGE>
Net Production Data
III-A Partnership
-----------------
Year Ended December 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
Production:
Oil (Bbls) 35,784 34,689 40,468
Gas (Mcf) 665,717 741,990 1,031,152
Oil and gas sales:
Oil $ 605,903 $ 434,592 $ 796,356
Gas 1,466,078 1,595,205 2,532,278
--------- --------- ---------
Total $2,071,981 $2,029,797 $3,328,634
========= ========= =========
Total direct operating
expenses $ 585,757 $ 576,112 $ 719,090
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 28.3% 28.4% 21.6%
Average sales price:
Per barrel of oil $16.93 $12.53 $19.68
Per Mcf of gas 2.20 2.15 2.46
Direct operating expenses
per equivalent Bbl of
oil $ 3.99 $ 3.64 $ 3.39
-13-
<PAGE>
Net Production Data
III-B Partnership
-----------------
Year Ended December 31,
-----------------------------------
1999 1998 1997
---------- ---------- ----------
Production:
Oil (Bbls) 33,676 34,221 37,216
Gas (Mcf) 299,745 355,197 518,891
Oil and gas sales:
Oil $ 598,881 $ 441,820 $ 735,310
Gas 660,854 759,598 1,236,812
--------- --------- ---------
Total $1,259,735 $1,201,418 $1,972,122
========= ========= =========
Total direct operating
expenses $ 346,919 $ 330,107 $ 419,217
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 27.5% 27.5% 21.3%
Average sales price:
Per barrel of oil $17.78 $12.91 $19.76
Per Mcf of gas 2.20 2.14 2.38
Direct operating expenses
per equivalent Bbl of
oil $ 4.15 $ 3.53 $ 3.39
-14-
<PAGE>
Net Production Data
III-C Partnership
-----------------
Year Ended December 31,
-----------------------------------
1999 1998 1997
---------- ---------- ----------
Production:
Oil (Bbls) 23,931 22,980 27,069
Gas (Mcf) 997,209 1,156,387 1,124,237
Oil and gas sales:
Oil $ 428,466 $ 312,050 $ 534,386
Gas 2,018,358 2,134,955 2,537,465
--------- --------- ---------
Total $2,446,824 $2,447,005 $3,071,851
========= ========= =========
Total direct operating
expenses $ 551,030 $ 712,038 $ 749,102
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 22.5% 29.1% 24.4%
Average sales price:
Per barrel of oil $17.90 $13.58 $19.74
Per Mcf of gas 2.02 1.85 2.26
Direct operating expenses
per equivalent Bbl of
oil $ 2.90 $ 3.30 $ 3.49
-15-
<PAGE>
Net Production Data
III-D Partnership
-----------------
Year Ended December 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------
Production:
Oil (Bbls) 36,148 35,908 40,758
Gas (Mcf) 716,804 767,089 708,262
Oil and gas sales:
Oil $ 562,513 $ 413,658 $ 778,978
Gas 1,444,730 1,375,913 1,556,567
--------- --------- ---------
Total $2,007,243 $1,789,571 $2,335,545
========= ========= =========
Total direct operating
expenses $ 704,051 $ 718,656 $ 867,060
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 35.1% 40.2% 37.1%
Average sales price:
Per barrel of oil $15.56 $11.52 $19.11
Per Mcf of gas 2.02 1.79 2.20
Direct operating expenses
per equivalent Bbl of
oil $ 4.52 $ 4.39 $ 5.46
-16-
<PAGE>
Net Production Data
III-E Partnership
-----------------
Year Ended December 31,
-----------------------------------
1999 1998 1997
---------- ---------- ----------
Production:
Oil (Bbls) 205,197 223,936 235,152
Gas (Mcf) 1,856,697 1,974,917 2,189,619
Oil and gas sales:
Oil $3,146,395 $2,542,259 $4,460,740
Gas 3,900,054 3,858,330 4,581,069
--------- --------- ---------
Total $7,046,449 $6,400,589 $9,041,809
========= ========= =========
Total direct operating
expenses $3,957,399 $3,695,174 $4,513,216
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 56.2% 57.7% 49.9%
Average sales price:
Per barrel of oil $15.33 $11.35 $18.97
Per Mcf of gas 2.10 1.95 2.09
Direct operating expenses
per equivalent Bbl of
oil $ 7.69 $ 6.68 $ 7.52
-17-
<PAGE>
Net Production Data
III-F Partnership
-----------------
Year Ended December 31,
-----------------------------------
1999 1998 1997
---------- ---------- ----------
Production:
Oil (Bbls) 55,619 54,002 65,787
Gas (Mcf) 732,832 787,609 898,447
Oil and gas sales:
Oil $ 916,715 $ 678,439 $1,240,058
Gas 1,397,731 1,470,754 1,751,392
--------- --------- ---------
Total $2,314,446 $2,149,193 $2,991,450
========= ========= =========
Total direct operating
expenses $ 926,110 $1,185,467 $1,332,931
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 40.0% 55.2% 44.6%
Average sales price:
Per barrel of oil $16.48 $12.56 $18.85
Per Mcf of gas 1.91 1.87 1.95
Direct operating expenses
per equivalent Bbl of
oil $ 5.21 $ 6.40 $ 6.18
-18-
<PAGE>
Net Production Data
III-G Partnership
-----------------
Year Ended December 31,
-----------------------------------
1999 1998 1997
---------- ---------- ----------
Production:
Oil (Bbls) 40,292 38,858 47,493
Gas (Mcf) 409,664 419,813 500,966
Oil and gas sales:
Oil $ 661,957 $ 487,855 $ 897,536
Gas 777,743 784,720 947,728
--------- --------- ---------
Total $1,439,700 $1,272,575 $1,845,264
========= ========= =========
Total direct operating
expenses $ 593,911 $ 744,443 $ 854,673
========= ========= =========
Direct operating expenses
as a percentage of oil
and gas sales 41.3% 58.5% 46.3%
Average sales price:
Per barrel of oil $16.43 $12.55 $18.90
Per Mcf of gas 1.90 1.87 1.89
Direct operating expenses
per equivalent Bbl of
oil $ 5.47 $ 6.84 $ 6.52
Proved Reserves and Net Present Value
The following table sets forth each Partnership's estimated proved oil and
gas reserves and net present value therefrom as of December 31, 1999. The
schedule of quantities of proved oil and gas reserves was prepared by the
General Partner in accordance with the rules prescribed by the Securities and
Exchange Commission (the "SEC"). Certain reserve information was reviewed by
Ryder Scott Company, L.P. ("Ryder Scott"), an independent petroleum engineering
firm. As used throughout this Annual Report, "proved reserves" refers to those
estimated quantities of crude oil, gas, and gas liquids which geological and
engineering data demonstrate with reasonable certainty to be recoverable in
future years from known oil and gas reservoirs under existing economic and
operating conditions.
Net present value represents estimated future gross cash flow from the
production and sale of proved reserves, net of estimated oil and gas production
costs (including production taxes, ad valorem taxes, and operating expenses) and
estimated future
-19-
<PAGE>
development costs, discounted at 10% per annum. Net present value attributable
to the Partnerships' proved reserves was calculated on the basis of current
costs and prices at December 31, 1999. Such prices were not escalated except in
certain circumstances where escalations were fixed and readily determinable in
accordance with applicable contract provisions. The relatively high oil prices
at December 31, 1999 have caused the estimates of remaining economically
recoverable oil reserves, as well as the value placed on such reserves, to be
higher than in the past several years, particularly considering the impact of
depletion from production over the years. Any decrease in these high oil prices
would result in a corresponding reduction in the estimate of remaining oil
reserves. The prices used in calculating the net present value attributable to
the Partnerships' proved reserves do not necessarily reflect market prices for
oil and gas production subsequent to December 31, 1999. There can be no
assurance that the prices used in calculating the net present value of the
Partnerships' proved reserves at December 31, 1999 will actually be realized for
such production.
The process of estimating oil and gas reserves is complex, requiring
significant subjective decisions in the evaluation of available geological,
engineering, and economic data for each reservoir. The data for a given
reservoir may change substantially over time as a result of, among other things,
additional development activity, production history, and viability of production
under varying economic conditions; consequently, it is reasonably possible that
material revisions to existing reserve estimates may occur in the near future.
Although every reasonable effort has been made to ensure that these reserve
estimates represent the most accurate assessment possible, the significance of
the subjective decisions required and variances in available data for various
reservoirs make these estimates generally less precise than other estimates
presented in connection with financial statement disclosures.
Proved Reserves and
Net Present Values
From Proved Reserves
As of December 31, 1999(1)
III-A Partnership:
-----------------
Estimated proved reserves:
Gas (Mcf) 4,123,320
Oil and liquids (Bbls) 122,055
Net present value (discounted at
10% per annum) $ 6,136,753
-20-
<PAGE>
III-B Partnership:
-----------------
Estimated proved reserves:
Gas (Mcf) 1,910,965
Oil and liquids (Bbls) 122,819
Net present value (discounted at
10% per annum) $ 3,629,503
III-C Partnership:
-----------------
Estimated proved reserves:
Gas (Mcf) 5,373,263
Oil and liquids (Bbls) 148,848
Net present value (discounted at
10% per annum) $ 6,649,976
III-D Partnership:
-----------------
Estimated proved reserves:
Gas (Mcf) 2,799,943
Oil and liquids (Bbls) 376,088
Net present value (discounted at
10% per annum) $ 5,152,539
III-E Partnership:
-----------------
Estimated proved reserves:
Gas (Mcf) 8,080,765
Oil and liquids (Bbls) 2,344,025
Net present value (discounted at
10% per annum) $20,675,722
III-F Partnership:
-----------------
Estimated proved reserves:
Gas (Mcf) 4,164,530
Oil and liquids (Bbls) 389,809
Net present value (discounted at
10% per annum) $ 6,571,735
-21-
<PAGE>
III-G Partnership:
-----------------
Estimated proved reserves:
Gas (Mcf) 2,268,783
Oil and liquids (Bbls) 292,988
Net present value (discounted at
10% per annum) $ 4,074,459
- ----------
(1) Includes certain gas balancing adjustments which cause the gas volumes and
net present values to differ from the reserve reports which were prepared
by the General Partner and reviewed by Ryder Scott.
No estimates of the proved reserves of the Partnerships comparable to
those included herein have been included in reports to any federal agency other
than the SEC. Additional information relating to the Partnerships' proved
reserves is contained in Note 4 to the Partnerships' financial statements,
included in Item 8 of this Annual Report.
Significant Properties
The following tables set forth certain well and reserve information as of
December 31, 1999 for the basins in which the Partnerships own a significant
amount of oil and gas properties. The tables contain the following information
for each significant basin: (i) the number of gross wells and net wells, (ii)
the number of wells in which only a non-working interest is owned, (iii) the
Partnership's total number of wells, (iv) the number of wells operated by the
Partnership's affiliates, (v) estimated proved oil reserves, (vi) estimated
proved gas reserves, and (vii) the present value (discounted at 10% per annum)
of estimated future net cash flow.
The Anadarko Basin is located in western Oklahoma and the Texas panhandle,
while the Arkla Basin is located in southern Arkansas and northern Louisiana.
The Gulf Coast Basin is located in southern Louisiana and southeast Texas, while
the Permian Basin straddles west Texas and southeast New Mexico. Southern
Oklahoma contains the Southern Oklahoma Folded Belt Basin. The Jay-Little
Escambia Creek Field Unit is located in Santa Rosa County, Florida, while the
Green River Basin is located in southern Wyoming and Northwest Colorado. Eastern
Colorado and western Kansas contain the Las Animas Arch basin.
-22-
<PAGE>
<TABLE>
Significant Properties as of December 31, 1999
----------------------------------------------
<CAPTION>
Wells
Operated by
Affiliates Oil Gas
Gross Net Other Total ------------ Reserves Reserves Present
Basin Wells Wells Wells(1) Wells Number % (Bbl) (Mcf) Value
- ------------------ ------ ------- -------- ------ ------ ---- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
III-A Partnership:
Gulf Coast 42 3.27 38 80 11 14% 98,856 2,112,680 $3,902,976
Anadarko 52 2.38 8 60 9 15% 8,221 1,253,051 1,359,291
III-B Partnership:
Gulf Coast 40 1.73 38 78 9 12% 64,481 1,131,336 $2,236,863
Anadarko 37 2.58 6 43 2 5% 53,972 392,777 969,803
III-C Partnership:
Anadarko 53 5.97 57 110 29 26% 61,689 2,725,580 $3,628,891
Southern Okla.
Folded Belt 37 7.09 60 97 21 22% 66,569 1,718,079 1,996,988
III-D Partnership:
Anadarko 31 3.32 57 88 29 33% 4,485 1,963,529 $2,213,016
Jay LEC Field 79 .52 - 79 - - 302,568 43,614 1,629,747
Southern Okla.
Folded Belt 26 2.02 58 84 13 15% 37,037 171,684 612,637
- ---------------------
(1) Wells in which only a non-working (e.g. royalty) interest is owned.
</TABLE>
-23-
<PAGE>
<TABLE>
Significant Properties as of December 31, 1999
----------------------------------------------
<CAPTION>
Wells
Operated by
Affiliates Oil Gas
Gross Net Other Total ------------ Reserves Reserves Present
Basin Wells Wells Wells(1) Wells Number % (Bbl) (Mcf)(2) Value
- ------------------ ------ ------- -------- ------ ------ ---- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
III-E Partnership:
Jay LEC Field 79 3.69 - 79 - - 2,159,360 516,683 $11,923,689
Green River 54 4.18 5 59 - - 22,212 3,008,441 3,188,196
Gulf Coast 62 26.69 5 67 32 48% 44,275 2,046,212 2,487,289
III-F Partnership:
Green River 62 6.32 5 67 8 12% 89,461 2,525,590 $ 2,977,653
Anadarko 27 6.10 1 28 23 82% 47,440 992,983 1,012,047
Las Animas Arch 66 1.73 - 66 - - 91,031 ( 8,577) 810,295
III-G Partnership:
Green River 62 3.61 5 67 8 12% 56,098 1,259,094 $ 1,547,072
Anadarko 48 3.59 6 54 38 70% 31,066 596,281 627,874
Las Animas Arch 66 1.14 - 66 - - 60,198 ( 4,338) 540,681
- --------------------
(1) Wells in which only a non-working (e.g. royalty) interest is owned.
(2) Negative gas reserves in the Las Animas Arch Basin reflect the III-F and
III-G Partnerships' net overproduced gas balancing positions.
</TABLE>
-24-
<PAGE>
Title to Oil and Gas Properties
Management believes that the Partnerships have satisfactory title to their
oil and gas properties. Record title to all of the Partnerships' properties is
held by either the Partnerships or Geodyne Nominee Corporation, an affiliate of
the General Partner.
Title to the Partnerships' properties is subject to customary royalty,
overriding royalty, carried, working, and other similar interests and
contractual arrangements customary in the oil and gas industry, to liens for
current taxes not yet due, and to other encumbrances. Management believes that
such burdens do not materially detract from the value of such properties or from
the Partnerships' interest therein or materially interfere with their use in the
operation of the Partnerships' business.
ITEM 3. LEGAL PROCEEDINGS
To the knowledge of the General Partner, neither the General Partner nor
the Partnerships or their properties are subject to any litigation, the results
of which would have a material effect on the Partnerships' or the General
Partner's financial condition or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS
There were no matters submitted to a vote of the Limited Partners of any
Partnership during 1998.
PART II
ITEM 5. MARKET FOR UNITS AND RELATED LIMITED PARTNER MATTERS
As of February 1, 2000, the number of Units outstanding and the
approximate number of Limited Partners of record in the Partnerships were as
follows:
Number of Number of
Partnership Units Limited Partners
----------- --------- ----------------
III-A 263,976 1,328
III-B 138,336 746
III-C 244,536 1,256
III-D 131,008 660
III-E 418,266 2,103
III-F 221,484 1,107
III-G 121,925 584
-25-
<PAGE>
Units were initially sold for a price of $100. Units are not traded on any
exchange and there is no public trading market for them. The General Partner is
aware of certain transfers of Units between unrelated parties, some of which are
facilitated by secondary trading firms and matching services. In addition, as
further described below, the General Partner is aware of certain "4.9% Tender
Offers" which have been made for the Units. The General Partner believes that
the transfers between unrelated parties have been limited and sporadic in number
and volume. Other than trades facilitated by certain secondary trading firms and
matching services, no organized trading market for Units exists and none is
expected to develop. Due to the nature of these transactions, the General
Partner has no verifiable information regarding prices at which Units have been
transferred. Further, a transferee may not become a substitute Limited Partner
without the consent of the General Partner.
Pursuant to the terms of the Partnership Agreements, the General Partner
is obligated to annually issue a repurchase offer which is based on the
estimated future net revenues from the Partnerships' reserves and is calculated
pursuant to the terms of the Partnership Agreements. Such repurchase offer is
recalculated monthly in order to reflect cash distributions to the Limited
Partners and extraordinary events. The following table sets forth the General
Partner's repurchase offer per Unit as of the periods indicated. For purpose of
this Annual Report, a Unit represents an initial subscription of $100 to a
Partnership.
Repurchase Offer Prices
-----------------------
1998 1999 2000
---------------------- ---------------------- ----
1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st
P/ship Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
- ------ ---- ---- ---- ---- ---- ---- ---- ---- ----
III-A $ 8 $16 $15 $14 $14 $13 $13 $12 $11
III-B 8 15 14 13 12 12 13 12 10
III-C 13 20 18 16 15 14 16 14 12
III-D 20 26 25 23 21 20 18 16 13
III-E 26 31 29 28 27 27 21 20 17
III-F 17 21 20 19 18 18 16 16 13
III-G 20 23 22 21 20 20 18 17 13
In addition to this repurchase offer, some of the Partnerships have been
subject to "4.9% tender offers" from several third parties since 1997. The
General Partner does not know the terms of these offers or the prices received
by the Limited Partners who accepted these offers.
-26-
<PAGE>
Cash Distributions
Cash distributions are primarily dependent upon a Partnership's cash
receipts from the sale of oil and gas production and cash requirements of the
Partnership. Distributable cash is determined by the General Partner at the end
of each calendar quarter and distributed to the Limited Partners within 45 days
after the end of the quarter. Distributions are restricted to cash on hand less
amounts required to be retained out of such cash as determined in the sole
judgment of the General Partner to pay costs, expenses, or other Partnership
obligations whether accrued or anticipated to accrue. In certain instances, the
General Partner may not distribute the full amount of cash receipts which might
otherwise be available for distribution in an effort to equalize or stabilize
the amounts of quarterly distributions. Any available amounts not distributed
are invested and the interest or income thereon is for the accounts of the
Limited Partners.
The following is a summary of cash distributions paid to the Limited
Partners during 1998, 1999, and 2000:
Cash Distributions
-----------------
1998
-------------------------------------
1st 2nd 3rd 4th
P/ship Qtr.(1) Qtr.(2) Qtr.(3) Qtr.(4)
------ ------ --------- ------- -------
III-A $1.83 2.03 1.11 $1.09
III-B 2.15 2.33 1.02 1.32
III-C 2.09 2.62 2.07 1.72
III-D 2.27 1.85 1.80 1.96
III-E 1.70 2.16 1.90 1.59
III-F 1.68 1.85 .94 .87
III-G 2.18 1.94 .98 .85
1999 2000
------------------------------------ ------
1st 2nd 3rd 4th 1st
P/ship Qtr. Qtr. Qtr. Qtr. Qtr.
------ ------ --------- ------- ------- ------
III-A $ .69 $ .68 $ .80 $1.13 $1.01
III-B .73 .61 .76 1.17 1.32
III-C 1.29 1.02 1.17 1.50 1.74
III-D 1.28 1.17 1.47 1.95 2.56
III-E .64 .07 .82 1.09 3.04
III-F .65 .46 .18 .94 2.87
III-G .70 .21 .37 1.22 3.37
-27-
<PAGE>
- -------------------
(1) Amount of cash distribution includes proceeds from the sale of certain oil
and gas properties.
(2) Amount of cash distribution for the III-A, III-C, III-D, III-E, III-F, and
III-G Partnerships includes proceeds from the sale of certain oil and gas
properties.
(3) Amount of cash distribution for the III-A, III-C, and III-D Partnerships
includes proceeds from the sale of certain oil and gas properties.
(4) Amount of cash distribution for the III-B and III-C Partnerships includes
proceeds from the sale of certain oil and gas properties.
ITEM 6. SELECTED FINANCIAL DATA
The following tables present selected financial data for the Partnerships.
This data should be read in conjunction with the financial statements of the
Partnerships and the respective notes thereto, included elsewhere in this Annual
Report. See "Item 8. Financial Statements and Supplementary Data."
-28-
<PAGE>
<TABLE>
Selected Financial Data
III-A Partnership
-----------------
<CAPTION>
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $2,071,891 $2,029,797 $3,328,634 $3,634,004 $3,647,607
Net Income (Loss):
Limited Partners 717,149 628,357 33,066 1,109,284 ( 1,243,800)
General Partner 54,650 53,190 98,919 104,949 76,804
Total 771,799 681,547 131,985 1,214,233 ( 1,166,996)
Limited Partners' Net
Income (Loss) per
Unit 2.72 2.38 .13 4.20 ( 4.71)
Limited Partners' Cash
Distributions per
Unit 3.30 6.06 11.11 9.47 8.19
Total Assets 2,793,806 2,984,008 3,916,891 6,895,159 8,353,918
Partners' Capital
(Deficit):
Limited Partners 2,857,723 3,011,574 3,985,217 6,886,151 8,275,867
General Partner ( 194,823) ( 197,325) ( 198,271) ( 198,911) ( 143,923)
Number of Units
Outstanding 263,976 263,976 263,976 263,976 263,976
</TABLE>
-29-
<PAGE>
<TABLE>
Selected Financial Data
III-B Partnership
-----------------
<CAPTION>
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $1,259,735 $1,201,418 $1,972,122 $2,113,507 $2,063,107
Net Income (Loss):
Limited Partners 417,755 374,539 223,228 712,800 ( 296,132)
General Partner 110,131 108,544 60,762 63,531 48,956
Total 527,886 483,083 283,990 776,331 ( 247,176)
Limited Partners' Net
Income (Loss) per
Unit 3.02 2.71 1.61 5.15 ( 2.14)
Limited Partners' Cash
Distributions per
Unit 3.27 6.82 12.35 10.15 8.86
Total Assets 1,690,316 1,717,863 2,248,586 3,772,912 4,502,744
Partners' Capital
(Deficit):
Limited Partners 1,687,118 1,721,363 2,291,824 3,776,596 4,466,796
General Partner ( 79,362) ( 85,016) ( 97,840) ( 97,092) ( 66,996)
Number of Units
Outstanding 138,336 138,336 138,336 138,336 138,336
</TABLE>
-30-
<PAGE>
<TABLE>
Selected Financial Data
III-C Partnership
-----------------
<CAPTION>
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $2,446,824 $2,447,005 $3,071,851 $3,259,615 $2,760,488
Net Income (Loss):
Limited Partners 1,053,071 1,094,816 ( 196,027) 1,247,672 ( 1,322,234)
General Partner 75,430 87,868 86,436 103,933 53,608
Total 1,128,501 1,182,684 ( 109,591) 1,351,605 ( 1,268,626)
Limited Partners' Net
Income (Loss) per
Unit 4.31 4.48 ( .80) 5.10 ( 5.41)
Limited Partners' Cash
Distributions per
Unit 4.98 8.50 9.06 7.26 5.76
Total Assets 3,447,965 3,572,389 4,567,928 7,009,782 7,572,561
Partners' Capital
(Deficit):
Limited Partners 3,364,883 3,531,812 4,512,996 6,924,023 7,451,351
General Partner ( 168,448) ( 179,285) ( 171,438) ( 143,741) ( 125,913)
Number of Units
Outstanding 244,536 244,536 244,536 244,536 244,536
</TABLE>
-31-
<PAGE>
<TABLE>
Selected Financial Data
<CAPTION>
III-D Partnership
-----------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $2,007,243 $1,789,571 $2,335,545 $2,336,708 $2,087,482
Net Income (Loss):
Limited Partners 870,221 ( 84,498) 35,530 795,298 ( 234,478)
General Partner 55,068 38,462 54,213 59,929 45,966
Total 925,289 ( 46,036) 89,743 855,227 ( 188,512))
Limited Partners' Net
Income (Loss) per
Unit 6.64 ( .64) .27 6.07 ( 1.79)
Limited Partners' Cash
Distributions per
Unit 5.87 7.88 10.33 8.33 6.30
Total Assets 1,810,172 1,687,823 2,890,862 4,241,190 4,463,897
Partners' Capital
(Deficit):
Limited Partners 1,618,456 1,518,235 2,636,733 3,953,203 4,248,905
General Partner ( 66,221) ( 73,501) ( 62,091) ( 50,214) ( 36,176)
Number of Units
Outstanding 131,008 131,008 131,008 131,008 131,008
</TABLE>
-32-
<PAGE>
<TABLE>
Selected Financial Data
<CAPTION>
III-E Partnership
-----------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $7,046,449 $6,400,589 $ 9,041,809 $ 9,030,115 $ 8,676,047
Net Income (Loss):
Limited Partners 2,016,127 ( 3,260,925) ( 219,259) 2,275,698 ( 338,913)
General Partner 124,846 57,256 158,394 191,012 136,202
Total 2,140,973 ( 3,203,669) ( 60,865) 2,466,710 ( 202,711)
Limited Partners' Net
Income (Loss) per
Unit 4.82 ( 7.80) ( .52) 5.44 ( .81)
Limited Partners' Cash
Distributions per
Unit 2.62 7.35 10.29 8.67 6.43
Total Assets 5,742,231 4,621,412 11,397,387 15,918,358 17,113,266
Partners' Capital
(Deficit):
Limited Partners 5,037,429 4,117,302 10,449,227 14,971,486 16,319,788
General Partner ( 259,526) ( 275,783) ( 209,050) ( 187,947) ( 127,750)
Number of Units
Outstanding 418,266 418,266 418,266 418,266 418,266
</TABLE>
-33-
<PAGE>
<TABLE>
Selected Financial Data
<CAPTION>
III-F Partnership
-----------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $2,314,446 $2,149,193 $2,991,450 $3,094,738 $2,697,816
Net Income (Loss):
Limited Partners 801,095 ( 5,324) ( 2,273,148) 483,478 ( 1,521,469)
General Partner 59,101 29,041 32,514 72,299 25,536
Total 860,196 23,717 ( 2,240,634) 555,777 ( 1,495,933)
Limited Partners' Net
Income (Loss)
per Unit 3.62 ( .02) ( 10.26) 2.18 ( 6.87)
Limited Partners' Cash
Distributions per
Unit 2.23 5.34 7.15 5.23 2.05
Total Assets 3,689,702 3,533,814 4,752,817 8,632,813 9,438,169
Partners' Capital
(Deficit):
Limited Partners 3,575,913 3,268,818 4,454,142 8,310,290 8,986,812
General Partner ( 154,318) ( 164,221) ( 146,427) ( 97,523) ( 70,576)
Number of Units
Outstanding 221,484 221,484 221,484 221,484 221,484
</TABLE>
-34-
<PAGE>
<TABLE>
Selected Financial Data
<CAPTION>
III-G Partnership
-----------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Oil and Gas Sales $1,439,700 $1,272,575 $1,845,264 $1,962,555 $1,694,847
Net Income (Loss):
Limited Partners 588,182 ( 308,749) ( 1,136,965) 380,060 ( 1,024,258)
General Partner 39,264 13,093 22,672 47,089 15,638
Total 627,446 ( 295,656) ( 1,114,293) 427,149 ( 1,008,620)
Limited Partners' Net
Income (Loss)
per Unit 4.82 ( 2.53) ( 9.33) 3.12 ( 8.40)
Limited Partners' Cash
Distributions per
Unit 2.50 5.95 7.80 5.92 2.67
Total Assets 2,001,438 1,817,470 2,873,056 4,977,730 5,415,275
Partners' Capital
(Deficit):
Limited Partners 1,956,255 1,672,073 2,707,822 4,795,787 5,136,727
General Partner ( 91,045) ( 99,974) ( 85,608) ( 58,669) ( 26,964)
Number of Units
Outstanding 121,925 121,925 121,925 121,925 121,925
</TABLE>
-35-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Use of Forward-Looking Statements and Estimates
This Annual Report contains certain forward-looking statements. The words
"anticipate," "believe," "expect," "plan," "intend," "estimate," "project,"
"could," "may," and similar expressions are intended to identify forward-looking
statements. Such statements reflect management's current views with respect to
future events and financial performance. This Annual Report also includes
certain information which is, or is based upon, estimates and assumptions. Such
estimates and assumptions are management's efforts to accurately reflect the
condition and operation of the Partnerships.
Use of forward-looking statements and estimates and assumptions involve
risks and uncertainties which include, but are not limited to, the volatility of
oil and gas prices, the uncertainty of reserve information, the operating risk
associated with oil and gas properties (including the risk of personal injury,
death, property damage, damage to the well or producing reservoir, environmental
contamination, and other operating risks), the prospect of changing tax and
regulatory laws, the availability and capacity of processing and transportation
facilities, the general economic climate, the supply and price of foreign
imports of oil and gas, the level of consumer product demand, and the price and
availability of alternative fuels. Should one or more of these risks or
uncertainties occur or should estimates or underlying assumptions prove
incorrect, actual conditions or results may vary materially and adversely from
those stated, anticipated, believed, estimated, or otherwise indicated.
General Discussion
The following general discussion should be read in conjunction with the
analysis of results of operations provided below. The most important variable
affecting the Partnerships' revenues is the prices received for the sale of oil
and gas. Predicting future prices is not possible. Concerning past trends,
average yearly wellhead gas prices in the United States have been volatile for
many years. Over the past ten years such average prices have generally been in
the $1.40 to $2.40 per Mcf range. Gas prices are currently in the upper end of
this range.
Substantially all of the Partnerships' gas reserves are being sold on the
"spot market." Prices on the spot market are subject to wide seasonal and
regional pricing fluctuations due to the highly competitive nature of the spot
market. In addition, such spot market sales are generally short-term in nature
and are dependent upon the obtaining of transportation services provided by
pipelines. Spot prices for the Partnerships' gas increased
-36-
<PAGE>
from approximately $2.03 per Mcf at December 31, 1998 to approximately $2.24 per
Mcf at December 31, 1999. Such prices were on an MMBTU basis and differ from the
prices actually received by the Partnerships due to transportation and marketing
costs, BTU adjustments, and regional price and quality differences.
For the past ten years, average oil prices have generally been in the
$16.00 to $24.00 per barrel range, but have been extremely volatile over the
past two years. Due to global consumption and supply trends as well as a
slowdown in Asian energy demand, oil prices in late 1997 and early 1998 reached
historically low levels, dropping to as low as approximately $9.25 per barrel.
However, production curtailment agreements among major oil producing nations
have caused recent oil prices to climb to over $24.00 per barrel in some
markets. It is not known whether this trend will continue. Prices for the
Partnerships' oil increased from approximately $9.50 per barrel at December 31,
1998 to approximately $22.75 per barrel at December 31, 1999.
Future prices for both oil and gas will likely be different from the
prices in effect on December 31, 1999. Management is unable to predict whether
future oil and gas prices will (i) stabilize, (ii) increase, or (iii) decrease.
As discussed in the "Results of Operations" section below, volumes of oil
and gas sold also significantly affect the Partnerships' revenues. Oil and gas
wells generally produce the most oil or gas in the earlier years of their lives
and, as production continues, the rate of production naturally declines. At some
point, production physically ceases or becomes no longer economic. The
Partnerships are not acquiring additional oil and gas properties, and the
existing properties are not experiencing significant additional production
through drilling or other capital projects. Therefore, volumes of oil and gas
produced naturally decline from year to year. While it is difficult for
management to predict future production from these properties, it is likely that
this general trend of declining production will continue.
Despite this general trend of declining production, several factors can
cause the volumes of oil and gas sold to increase or decrease at an even greater
rate over a given period. These factors include, but are not limited to, (i)
geophysical conditions which cause an acceleration of the decline in production,
(ii) the shutting in of wells (or the opening of previously shut-in wells) due
to low oil and gas prices, mechanical difficulties, loss of a market or
transportation, or performance of workovers, recompletions, or other operations
in the well, (iii) prior period volume adjustments (either positive or negative)
made by purchasers of the production, (iv) ownership adjustments in accordance
with agreements governing the operation or ownership of the well (such as
adjustments that occur at
-37-
<PAGE>
payout), and (v) completion of enhanced recovery projects which increase
production for the well. Many of these factors are very significant as related
to a single well or as related to many wells over a short period of time.
However, due to the large number of wells owned by the Partnerships, these
factors are generally not material as compared to the normal decline in
production experienced on all remaining wells.
Results of Operations
An analysis of the change in net oil and gas operations (oil and gas
sales, less lease operating expenses and production taxes), is presented in the
tables following "Results of Operations" under the heading "Average Sales
Prices, Production Volumes, and Average Production Costs." Following is a
discussion of each Partnerships' results of operations for the year ended
December 31, 1999 as compared to the year ended December 31, 1998, and for the
year ended December 31, 1998 as compared to the year ended December 31, 1997.
III-A Partnership
-----------------
Year Ended December 31, 1999 Compared
to Year Ended December 31, 1998
-------------------------------------
Total oil and gas sales increased $42,184 (2.1%) in 1999 as compared to
1998. Of this increase, approximately $158,000 and $35,000, respectively, were
related to increases in the average prices of oil and gas sold and approximately
$14,000 was related to an increase in volumes of oil sold. These increases were
partially offset by a decrease of approximately $164,000 related to a decrease
in volumes of gas sold. Volumes of oil sold increased 1,095 barrels, while
volumes of gas sold decreased 76,273 Mcf in 1999 as compared to 1998. The
decrease in volumes of gas sold was primarily due to (i) normal declines in
production and (ii) the receipt of a reduced percentage of sales on one
significant well during 1999 due to the III-A Partnership's overproduced gas
balancing position in that well. Average oil and gas prices increased to $16.93
per barrel and $2.20 per Mcf, respectively, in 1999 from $12.53 per barrel and
$2.15 per Mcf, respectively, in 1998.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $9,645 (1.7%) in 1999 as compared to 1998. As a
percentage of oil and gas sales, these expenses remained relatively constant at
28.3% in 1999 and 28.4% in 1998.
Depreciation, depletion, and amortization of oil and gas properties
decreased $84,570 (17.0%) in 1999 as compared to 1998. This decrease was
primarily due to (i) the decrease in volumes of
-38-
<PAGE>
gas sold and (ii) one significant well being fully depleted in 1998 due to the
lack of remaining economically recoverable reserves. These decreases were
partially offset by two significant wells being fully depleted in 1999 due to
the lack of remaining economically recoverable reserves. As a percentage of oil
and gas sales, this expense decreased to 20.0% in 1999 from 24.6% in 1998. This
percentage decrease was primarily due to the increases in the average prices of
oil and gas sold.
General and administrative expenses remained relatively constant in 1999
as compared to 1998. As a percentage of oil and gas sales, these expenses
decreased to 15.0% in 1999 from 15.3% in 1998.
The Limited Partners have received cash distributions through December 31,
1999 totaling $26,037,701 or 98.64% of Limited Partners' capital contributions.
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
-------------------------------------
Total oil and gas sales decreased $1,298,837 (39.0%) in 1998 as compared
to 1997. Of this decrease, approximately $114,000 and $710,000, respectively,
were related to decreases in volumes of oil and gas sold and approximately
$248,000 and $227,000, respectively, were related to decreases in the average
prices of oil and gas sold. Volumes of oil and gas sold decreased 5,779 barrels
and 289,162 Mcf, respectively, in 1998 as compared to 1997. The decrease in the
volumes of oil and gas sold resulted primarily from normal declines in
production and the sale of several wells during both years. Average oil and gas
prices decreased to $12.53 per barrel and $2.15 per Mcf, respectively, in 1998
from $19.68 per barrel and $2.46 per Mcf, respectively, in 1997.
As discussed in "Liquidity and Capital Resources" below, the III-A
Partnership sold certain oil and gas properties during 1998 and recognized a
$21,281 gain on such sales. Sales of oil and gas properties during 1997 resulted
in the III-A Partnership recognizing similar gains totaling $148,602.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $142,978 (19.9%) in 1998 as compared to 1997. This
decrease resulted primarily from decreases in (i) production taxes associated
with the decrease in oil and gas sales and (ii) lease operating expenses
associated with the decreases in volumes of oil and gas sold. These decreases
were partially offset by workover expenses on several wells during 1998. As a
percentage of oil and gas sales, these expenses increased to 28.4% in 1998 from
21.6% in 1997. This percentage increase was primarily due to the decreases in
the average prices of oil and gas sold.
-39-
<PAGE>
Depletion, depreciation, and amortization of oil and gas properties
decreased $226,800 (31.3%) in 1998 as compared to 1997. This decrease resulted
primarily from the decreases in volumes of oil and gas sold. As a percentage of
oil and gas sales, this expense increased to 24.6% in 1998 from 21.8% in 1997.
This percentage increase resulted primarily from the decreases in the average
prices of oil and gas sold.
The III-A Partnership recognized a non-cash charge against earnings of
$1,617,006 in the first quarter of 1997. Of this amount, $184,644 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $1,432,362 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the III-A Partnerships' Partnership Agreement which limit the level of
permissible drilling activity. No similar charge was necessary during 1998.
General and administrative expenses remained relatively constant in 1998
as compared to 1997. As a percentage of oil and gas sales, these expenses
increased to 15.3% in 1998 from 9.4% in 1997, primarily due to the decrease in
oil and gas sales.
III-B Partnership
-----------------
Year Ended December 31, 1999 Compared
to Year Ended December 31, 1998
-------------------------------------
Total oil and gas sales increased $58,317 (4.9%) in 1999 as compared to
1998. Of this increase, approximately $164,000 and $20,000, respectively, were
related to increases in the average prices of oil and gas sold. These increases
were partially offset by decreases of approximately $7,000 and $119,000,
respectively, related to decreases in volumes of oil and gas sold. Volumes of
oil and gas sold decreased 545 barrels and 55,452 Mcf, respectively, in 1999 as
compared to 1998. The decrease in volumes of gas sold was primarily due to (i)
normal declines in production and (ii) the receipt of a reduced percentage of
sales on one significant well during 1999 due to the III-B Partnership's
overproduced gas balancing position in that well. Average oil and gas prices
increased to $17.78 per barrel and $2.20 per Mcf, respectively, in 1999 from
$12.91 per barrel and $2.14 per Mcf, respectively, in 1998.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $16,812 (5.1%) in 1999
-40-
<PAGE>
as compared to 1998. As a percentage of oil and gas sales, these expenses
remained constant at 27.5% in 1999 and 1998.
Depreciation, depletion, and amortization of oil and gas properties
decreased $40,548 (15.2%) in 1999 as compared to 1998. This decrease was
primarily due to the decreases in volumes of oil and gas sold. These decreases
were partially offset by two significant wells being fully depleted in 1999 due
to the lack of remaining economically recoverable reserves. As a percentage of
oil and gas sales, this expense decreased to 18.0% in 1999 from 22.2% in 1998.
This percentage decrease was primarily due to the increases in the average
prices of oil and gas sold.
General and administrative expenses remained relatively constant in 1999
as compared to 1998. As a percentage of oil and gas sales, these expenses
decreased to 13.0% in 1999 from 13.6% in 1998.
The Limited Partners have received cash distributions through December 31,
1999 totaling $15,114,353 or 109.26% of Limited Partners' capital contributions.
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
-------------------------------------
Total oil and gas sales decreased $770,704 (39.1%) in 1998 as compared to
1997. Of this decrease, approximately $390,000 was related to a decrease in
volumes of gas sold and approximately $234,000 and $87,000, respectively, were
related to decreases in the average prices of oil and gas sold. Volumes of oil
and gas sold decreased 2,995 barrels and 163,694 Mcf, respectively, in 1998 as
compared to 1997. The decrease in the volumes of gas sold resulted primarily
from normal declines in production and the sale of several wells in both years.
Average oil and gas prices decreased to $12.91 per barrel and $2.14 per Mcf,
respectively, in 1998 from $19.76 per barrel and $2.38 per Mcf, respectively, in
1997.
As discussed in "Liquidity and Capital Resources" below, the III-B
Partnership sold certain oil and gas properties during 1998 and recognized a
$33,787 gain on such sales. Sales of oil and gas properties during 1997 resulted
in the III-B Partnership recognizing similar gains totaling $62,748.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $89,110 (21.3%) in 1998 as compared to 1997. This
decrease resulted primarily from a decrease in production taxes associated with
the decrease in oil and gas sales and a decrease in lease operating expenses
associated with the decreases in volumes of oil and gas sold. These decreases
were partially offset by workover expenses on several wells during 1998. As a
percentage of oil and gas sales,
-41-
<PAGE>
these expenses increased to 27.5% in 1998 from 21.3% in 1997. This percentage
increase was primarily due to the decreases in the average prices of oil and gas
sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $178,049 (40.0%) in 1998 as compared to 1997. This decrease resulted
primarily from the decreases in volumes of oil and gas sold and upward revisions
in the estimates of remaining oil and gas reserves at December 31, 1998. As a
percentage of oil and gas sales, this expense remained relatively constant at
22.2% in 1998 and 22.6% in 1997.
The III-B Partnership recognized a non-cash charge against earnings of
$738,122 in the first quarter of 1997. Of this amount, $77,653 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $660,469 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the III-B Partnerships' Partnership Agreement which limit the level of
permissible drilling activity. No similar charge was necessary during 1998.
General and administrative expenses remained relatively constant in 1998
as compared to 1997. As a percentage of oil and gas sales, these expenses
increased to 13.6% in 1998 from 8.3% in 1997, primarily due to the decrease in
oil and gas sales.
The III-B Partnership achieved payout in the first quarter of 1998. After
payout, operations and revenues for the III-B Partnership have been and will be
allocated using the after payout percentages included in the III-B Partnership's
Partnership Agreement. After payout percentages allocate operating income and
expenses 15% to the General Partner and 85% to the Limited Partners. Before
payout, operating income and expenses were allocated 5% to the General Partner
and 95% to the Limited Partners.
III-C Partnership
-----------------
Year Ended December 31, 1999 Compared
to Year Ended December 31, 1998
-------------------------------------
Total oil and gas sales remained relatively constant in 1999 as compared
to 1998. A decrease in oil and gas sales of approximately $294,000 related to a
decrease in volumes of gas sold was substantially offset by increases of
approximately $104,000 and $177,000, respectively, related to increases in the
average prices of oil and gas sold and approximately $13,000
-42-
<PAGE>
related to an increase in volumes of oil sold. Volumes of oil sold increased 951
barrels, while volumes of gas sold decreased 159,178 Mcf in 1999 as compared to
1998. The decrease in volumes of gas sold was primarily due to (i) normal
declines in production, (ii) positive prior period volume adjustments made by
the purchasers on two significant wells during 1998, and (iii) a negative prior
period volume adjustment made by the purchaser on another significant well
during 1999. Average oil and gas prices increased to $17.90 per barrel and $2.02
per Mcf, respectively, in 1999 from $13.58 per barrel and $1.85 per Mcf,
respectively, in 1998.
The III-C Partnership sold certain oil and gas properties in 1998 and
recognized a $459,040 gain on such sales. No such gains were recognized in 1999.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $161,008 (22.6%) in 1999 as compared to 1998. This
decrease was primarily due to a negative prior period lease operating expense
adjustment made by the operator on one significant well during 1999. As a
percentage of oil and gas sales, these expenses decreased to 22.5% in 1999 from
29.1% in 1998. This percentage decrease was primarily due to the increases in
the average prices of oil and gas sold and the dollar decrease in oil and gas
production expenses.
Depreciation, depletion, and amortization of oil and gas properties
decreased $251,294 (33.8%) in 1999 as compared to 1998. This decrease was
primarily due to two significant wells being fully depleted in 1998 due to the
lack of remaining economically recoverable reserves. This decrease was partially
offset by several other wells being fully depleted in 1999 due to a lack of
remaining economically recoverable reserves. As a percentage of oil and gas
sales, this expense decreased to 20.1% in 1999 from 30.4% in 1998. This
percentage decrease was primarily due to the increases in average prices of oil
and gas sold and the dollar decrease in depreciation, depletion, and
amortization.
General and administrative expenses remained relatively constant in 1999
as compared to 1998. As a percentage of oil and gas sales, these expenses
remained constant at 11.8% in 1999 and 1998.
The Limited Partners have received cash distributions through December 31,
1999 totaling $18,439,795 or 75.41% of Limited Partners' capital contributions.
-43-
<PAGE>
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
-------------------------------------
Total oil and gas sales decreased $624,846 (20.3%) in 1998 as compared to
1997. Of this decrease, approximately $142,000 and $475,000, respectively, were
related to decreases in the average prices of oil and gas sold and approximately
$81,000 was related to a decrease in volumes of oil sold. These decreases were
partially offset by an increase of approximately $73,000 related to an increase
in volumes of gas sold. Volumes of oil sold decreased 4,089 barrels in 1998 as
compared to 1997. Volumes of gas sold increased 32,150 Mcf in 1998 as compared
to 1997. The decrease in the volumes of oil sold resulted primarily from normal
declines in production and the sale of several wells in both years. Average oil
and gas prices decreased to $13.58 per barrel and $1.85 per Mcf, respectively,
in 1998 from $19.74 per barrel and $2.26 per Mcf, respectively, in 1997.
As discussed in "Liquidity and Capital Resources" below, the III-C
Partnership sold certain oil and gas properties during 1998 and recognized a
$459,040 gain on such sales. Sales of oil and gas properties during 1997
resulted in the III-C Partnership recognizing similar gains totaling $163,836.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $37,064 (4.9%) in 1998 as compared to 1997. As a
percentage of oil and gas sales, these expenses increased to 29.1% in 1998 from
24.4% in 1997. This percentage increase was primarily due to the decreases in
the average prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
increased $116,636 (18.6%) in 1998 as compared to 1997. This increase resulted
primarily from downward revisions in the estimates of remaining oil and gas
reserves at December 31, 1998 on two significant wells. As a percentage of oil
and gas sales, this expense increased to 30.4% in 1998 from 20.4% in 1997. This
percentage increase was primarily due to the dollar increase in depreciation,
depletion, and amortization and the decreases in the average prices of oil and
gas sold.
The III-C Partnership recognized a non-cash charge against earnings of
$1,696,417 in the first quarter of 1997. Of this amount, $234,271 was related to
the decline in oil and gas prices used to determine the recoverability of proved
oil and gas reserves at March 31, 1997 and $1,462,146 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the III-C Partnerships' Partnership Agreement which limit the level of
permissible drilling activity. No similar charge was necessary during 1998.
-44-
<PAGE>
General and administrative expenses decreased $5,256 (1.8%) in 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 11.8% in 1998 from 9.5% in 1997, primarily due to the decrease in oil and gas
sales.
III-D Partnership
-----------------
Year Ended December 31, 1999 Compared
to Year Ended December 31, 1998
-------------------------------------
Total oil and gas sales increased $217,672 (12.2%) in 1999 as compared to
1998. Of this increase, approximately $146,000 and $159,000, respectively, were
related to increases in the average prices of oil and gas sold. These increases
were partially offset by a decrease of approximately $90,000 related to a
decrease in volumes of gas sold. Volumes of oil sold increased 240 barrels,
while volumes of gas sold decreased 50,285 Mcf in 1999 as compared to 1998.
Average oil and gas prices increased to $15.56 per barrel and $2.02 per Mcf,
respectively, in 1999 from $11.52 per barrel and $1.79 per Mcf, respectively, in
1998.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $14,605 (2.0%) in 1999 as compared to 1998. As a
percentage of oil and gas sales, these expenses decreased to 35.1% in 1999 from
40.2% in 1998. This percentage decrease was primarily due to the increases in
the average prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $293,426 (56.0%) in 1999 as compared to 1998. This decrease was
primarily due to (i) a reduction in the depletable base of oil and gas
properties due to an impairment provision recorded during the fourth quarter of
1998 and (ii) one significant well being fully depleted in 1998 due to the lack
of remaining economically recoverable reserves. As a percentage of oil and gas
sales, this expense decreased to 11.5% in 1999 from 29.3% in 1998. This
percentage decrease was primarily due to the dollar decrease in depreciation,
depletion, and amortization and the increases in the average prices of oil and
gas sold.
The III-D Partnership recognized a non-cash charge against earnings of
$506,636 in the fourth quarter of 1998. This charge was related to the decline
in oil and gas prices used to determine recoverability of proved oil and gas
reserves at December 31, 1998. No similar charge was necessary in 1999.
General and administrative expenses remained relatively constant in 1999
as compared to 1998. As a percentage of oil and gas sales, these expenses
decreased to 7.8% in 1999 from 8.7% in
-45-
<PAGE>
1998. This percentage decrease was primarily due to the increase in oil and gas
sales.
The Limited Partners have received cash distributions through December 31,
1999 totaling $9,299,669 or 70.99% of the Limited Partners' capital
contributions
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
-------------------------------------
Total oil and gas sales decreased $545,974 (23.4%) in 1998 as compared to
1997. Of this decrease, approximately $272,000 and $310,000, respectively, were
related to decreases in the average prices of oil and gas sold and approximately
$93,000 was related to a decrease in volumes of oil sold. These decreases were
partially offset by an increase of approximately $129,000 related to an increase
in volumes of gas sold. Volumes of oil sold decreased 4,850 barrels in 1998 as
compared to 1997. Volumes of gas sold increased 58,827 Mcf in 1998 as compared
to 1997. The decrease in volumes of oil sold resulted primarily from normal
declines in production. The increase in volumes of gas sold resulted primarily
from the successful recompletion of one well, which increase was partially
offset by normal declines in production and the sale of several wells in 1998
and 1997. Average oil and gas prices decreased to $11.52 per barrel and $1.79
per Mcf, respectively, in 1998 from $19.11 per barrel and $2.20 per Mcf,
respectively, in 1997.
As discussed in "Liquidity and Capital Resources" below, the III-D
Partnership sold certain oil and gas properties during 1998 and recognized a
$59,491 gain on such sales. Sales of oil and gas properties during 1997 resulted
in the III-D Partnership recognizing similar gains totaling $25,425.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $148,404 (17.1%) in 1998 as compared to 1997. This
decrease resulted primarily from (i) a decreases in (i) production taxes
associated with the decrease in oil and gas sales, (ii) lease operating expenses
associated with the decreases in volumes of oil and gas sold, and (iii) workover
expenses on one multi-well unit during 1998 as compared to 1997. As a percentage
of oil and gas sales, these expenses increased to 40.2% in 1998 from 37.1% in
1997. This increase was primarily due to the decreases in the average prices of
oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
increased $197,979 (60.7%) in 1998 as compared to 1997. This increase resulted
primarily from significant downward revisions in the estimates of remaining oil
and gas reserves at December 31, 1998. As a percentage of oil and gas sales,
this expense increased to 29.3% in 1998 from 14.0% in 1997. This percentage
increase resulted primarily from the dollar increase
-46-
<PAGE>
in depreciation, depletion, and amortization and the decreases in the average
prices of oil and gas sold.
The III-D Partnership recognized a non-cash charge against earnings of
$506,636 in the fourth quarter of 1998. This charge was related to the decline
in oil and gas prices used to determine recoverability of oil and gas reserves
at December 31, 1998. In the first quarter of 1997, a non-cash charge against
earnings of $932,243 was also recognized. Of this amount, $485,820 was related
to the decline in oil and gas prices used to determine the recoverability of
proved oil and gas reserves at March 31, 1997 and $446,423 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the III-D Partnerships' Partnership Agreement which limit the level of
permissible drilling activity.
General and administrative expenses decreased $2,958 (1.9%) in 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 8.7% in 1998 from 6.8% in 1997, primarily due to the decrease in oil and gas
sales.
III-E Partnership
-----------------
Year Ended December 31, 1999 Compared
to Year Ended December 31, 1998
-------------------------------------
Total oil and gas sales increased $645,860 (10.1%) in 1999 as compared to
1998. Of this increase, approximately $817,000 and $273,000, respectively, were
related to increases in the average prices of oil and gas sold. These increases
were partially offset by decreases of approximately $213,000 and $231,000,
respectively, related to decreases in volumes of oil and gas sold. Volumes of
oil and gas sold decreased 18,739 barrels and 118,220 Mcf, respectively, in 1999
as compared to 1998. Average oil and gas prices increased to $15.33 per barrel
and $2.10 per Mcf, respectively, in 1999 from $11.35 per barrel and $1.95 per
Mcf, respectively, in 1998.
Oil and gas production expenses (including lease operating expenses and
production taxes) increased $262,225 (7.1%) in 1999 as compared to 1998. This
increase was primarily due to positive prior period lease operating expense
adjustments made by the operators on two significant wells during 1999. This
increase was partially offset by a decrease in lease operating expenses
associated with the decreases in volumes of oil and gas sold. As a percentage of
oil and gas sales, these expenses decreased to 56.2% in 1999 from 57.7% in 1998.
-47-
<PAGE>
Depreciation, depletion, and amortization of oil and gas properties
decreased $1,505,062 (75.8%) in 1999 as compared to 1998. This decrease was
primarily due to (i) a reduction in the depletable base of oil and gas
properties due to an impairment provision recorded during the fourth quarter of
1998 and (ii) significant upward revisions in estimates of remaining oil and gas
reserves at December 31, 1999. As a percentage of oil and gas sales, this
expense decreased to 6.8% in 1999 from 31.0% in 1998. This percentage decrease
was primarily due to the dollar decrease in depreciation, depletion, and
amortization.
The III-E Partnership recognized a non-cash charge against earnings of
$3,503,400 in the fourth quarter of 1998. This charge was related to the decline
in oil and gas prices used to determine the recoverability of proved oil and gas
reserves at December 31, 1998. No similar charge was necessary in 1999.
General and administrative expenses remained relatively constant in 1999
as compared to 1998. As a percentage of oil and gas sales, these expenses
decreased to 7.0% in 1999 from 7.8% in 1998, primarily due to the increase in
oil and gas sales.
The Limited Partners have received cash distributions through December 31,
1999 totaling $31,317,016 or 74.87% of the Limited Partners' capital
contributions.
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
-------------------------------------
Total oil and gas sales decreased $2,641,220 (29.2%) in 1998 as compared
to 1997. Of this decrease, approximately $1,706,000 and $274,000, respectively,
were related to decreases in the average prices of oil and gas sold and
approximately $449,000 was related to a decrease in the volumes of gas sold.
Volumes of oil and gas sold decreased 11,216 barrels and 214,702 Mcf,
respectively, in 1998 as compared to 1997. Average oil and gas prices decreased
to $11.35 per barrel and $1.95 per Mcf, respectively, in 1998 from $18.97 per
barrel and $2.09 per Mcf, respectively, in 1997.
As discussed in "Liquidity and Capital Resources" below, the III-E
Partnership sold certain oil and gas properties during 1998 and recognized a
$36,219 gain on such sales. Sales of oil and gas properties during 1997 resulted
in the III-E Partnership recognizing a $39,835 loss on such sales.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $818,042 (18.1%) in 1998 as compared to 1997. This
decrease resulted primarily from decreases in (i) production taxes associated
with the decrease in oil and gas sales, (ii) lease operating expenses associated
with
-48-
<PAGE>
the decrease in volumes of oil and gas sold, and (iii) workover expenses on one
significant multi-well unit during 1998 as compared to 1997. As a percentage of
oil and gas sales, these expenses increased to 57.7% in 1998 from 49.9% in 1997.
This percentage increase was primarily due to the decreases in the average
prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
increased $785,736 (65.6%) in 1998 as compared to 1997. This increase resulted
primarily from significant downward revisions in the estimates of remaining oil
and gas reserves at December 31, 1998. As a percentage of oil and gas sales,
this expense increased to 31.0% in 1998 from 13.3% in 1997. This percentage
increase resulted primarily from the dollar increase in depreciation, depletion,
and amortization and the decreases in the average prices of oil and gas sold.
The III-E Partnership recognized a non-cash charge against earnings of
$3,503,400 in the fourth quarter of 1998. This charge was related to the decline
in oil and gas prices used to determine recoverability of oil and gas reserves
at December 31, 1998. In the first quarter of 1997, a non-cash charge against
earnings of $2,893,438 was also recognized. Of this amount, $2,042,775 was
related to the decline in oil and gas prices used to determine the
recoverability of oil and gas reserves at March 31, 1997 and $850,663 was
related to the writing-off of unproved properties. These unproved properties
were written off based on the General Partner's determination that it was
unlikely that such properties would be developed due to low oil and gas prices
and provisions in the III-E Partnership's Partnership Agreement which limit the
level of permissible drilling activity.
General and administrative expenses remained relatively constant in 1998
as compared to 1997. As a percentage of oil and gas sales, these expenses
increased to 7.8% in 1998 from 5.6% in 1997, primarily due to the decrease in
oil and gas sales.
III-F Partnership
-----------------
Year Ended December 31, 1999 Compared
to Year Ended December 31, 1998
-------------------------------------
Total oil and gas sales increased $165,253 (7.7%) in 1999 as compared to
1998. Of this increase, approximately $218,000 and $29,000, respectively, were
related to increases in the average prices of oil and gas sold and approximately
$20,000 was related to an increase in volumes of oil sold. These increases were
partially offset by a decrease of approximately $102,000 related to a decrease
in volumes of gas sold. Volumes of oil sold increased 1,617 barrels, while
volumes of gas sold decreased
-49-
<PAGE>
54,777 Mcf in 1999 as compared to 1998. Average oil and gas prices increased to
$16.48 per barrel and $1.91 per Mcf, respectively, in 1999 from $12.56 per
barrel and $1.87 per Mcf, respectively, in 1998.
The III-F Partnership sold certain oil and gas properties during 1999 and
recognized a $139,094 gain on such sales. Sales of oil and gas properties during
1998 resulted in the III-F Partnership recognizing similar gains of $22,073.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $259,357 (21.9%) in 1999 as compared to 1998. This
decrease was primarily due to (i) a negative prior period lease operating
expense adjustment made by the operator on one significant well during 1999,
(ii) a decrease in lease operating expenses due to the reversal of a litigation
accrual, and (iii) workover expenses and repair and maintenance expenses
incurred on several wells during 1998. As a percentage of oil and gas sales,
these expenses decreased to 40.0% in 1999 from 55.2% in 1998. This percentage
decrease was primarily due to the dollar decrease in oil and gas production
expenses and the increases in the average prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $301,804 (41.8%) in 1999 as compared to 1998. This decrease was
primarily due to several wells being substantially depleted in 1998 due to the
lack of remaining economically recoverable reserves. As a percentage of oil and
gas sales, this expense decreased to 18.1% in 1999 from 33.6% in 1998. This
percentage decrease was primarily due to the dollar decrease in depreciation,
depletion, and amortization.
General and administrative expenses remained relatively constant in 1999
as compared to 1998. As a percentage of oil and gas sales, these expenses
decreased to 11.3% in 1999 from 12.1% in 1998.
The Limited Partners have received cash distributions through December 31,
1999 totaling $11,623,904 or 52.48% of Limited Partners' capital contributions.
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
-------------------------------------
Total oil and gas sales decreased $842,257 (28.2%) for 1998 as compared to
1997. Of this decrease, approximately $222,000 and $216,000, respectively, were
related to decreases in volumes of oil and gas sold and approximately $339,000
and $65,000, respectively, were related to decreases in the average prices of
oil and gas sold. Volumes of oil and gas sold decreased 11,785 barrels and
110,838 Mcf, respectively, for 1998 as compared to 1997. The decrease in volumes
of oil sold resulted primarily
-50-
<PAGE>
from normal declines in production and the sale of several wells during 1998 and
1997. The decrease in volumes of gas sold resulted primarily from (i) normal
declines in production, (ii) the shutting-in of two significant wells during a
portion of 1998 in order to perform a workover on one well and repairs on the
other well, and (iii) the sale of several wells during 1998 and 1997. Average
oil and gas prices decreased to $12.56 per barrel and $1.87 per Mcf,
respectively, for 1998 from $18.85 per barrel and $1.95 per Mcf, respectively,
for 1997.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $147,464 (11.1%) for 1998 as compared to 1997. This
decrease resulted primarily from (i) workover expenses incurred on several wells
during 1997 in order to improve the recovery of reserves and (ii) the sale of
one significant well during 1997. These decreases were partially offset by
workover expenses and repair and maintenance expenses incurred during 1998 on
several wells. As a percentage of oil and gas sales, these expenses increased to
55.2% for 1998 from 44.6% for 1997. This percentage increase was primarily due
to (i) the decreases in the average prices of oil and gas sold during 1998 and
(ii) the workover expenses and repair and maintenance expenses incurred during
1998.
Depreciation, depletion, and amortization of oil and gas properties
decreased $34,359 (4.5%) for 1998 as compared to 1997. This decrease was
primarily due to the decreases in volumes of oil and gas sold, which decrease
was partially offset by downward revisions in the estimates of remaining oil
reserves at December 31, 1998 on two significant wells. As a percentage of oil
and gas sales, this expense increased to 33.6% for 1998 from 25.3% for 1997.
This percentage increase resulted primarily from the decreases in the average
prices of oil and gas sold.
The III-F Partnership recognized a non-cash charge against earnings of
$2,884,405 in the first quarter of 1997. Of this amount, $2,078,019 was related
to the decline in oil and gas prices used to determine the recoverability of
proved oil and gas reserves at March 31, 1997 and $806,386 was related to the
writing-off of unproved properties. These unproved properties were written off
based on the General Partner's determination that it was unlikely that such
properties would be developed due to low oil and gas prices and provisions in
the III-F Partnership's Partnership Agreement which limit the level of
permissible drilling activity. No similar charges were necessary in 1998.
General and administrative expenses decreased $5,087 (1.9%) for 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 12.1% for 1998 from 8.9% for 1997, primarily due to the decrease in oil and
gas sales.
-51-
<PAGE>
III-G Partnership
-----------------
Year Ended December 31, 1999 Compared
to Year Ended December 31, 1998
-------------------------------------
Total oil and gas sales increased $167,125 (13.1%) in 1999 as compared to
1998. Of this increase, approximately $156,000 and $12,000, respectively, were
related to increases in the average prices of oil and gas sold and approximately
$18,000 was related to an increase in volumes of oil sold. These increases were
partially offset by a decrease of approximately $19,000 related to a decrease in
volumes of gas sold. Volumes of oil sold increased 1,434 barrels, while volumes
of gas sold decreased 10,149 Mcf in 1999 as compared to 1998. Average oil and
gas prices increased to $16.43 per barrel and $1.90 per Mcf, respectively, in
1999 from $12.55 per barrel and $1.87 per Mcf, respectively, in 1998.
The III-G Partnership sold certain oil and gas properties during 1999 and
recognized a $124,908 gain on such sales. Sales of oil and gas properties during
1998 resulted in the III-G Partnership recognizing similar gains of $19,340.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $150,532 (20.2%) in 1999 as compared to 1998. This
decrease was primarily due to (i) a negative prior period lease operating
expense adjustment made by the operator on one significant well during 1999,
(ii) a decrease in lease operating expenses due to the reversal of a litigation
accrual, and (iii) workover expenses and repair and maintenance expenses
incurred on several wells during 1998. As a percentage of oil and gas sales,
these expenses decreased to 41.3% in 1999 from 58.5% in 1998. This percentage
decrease was primarily due to the dollar decrease in oil and gas production
expenses and the increases in the average prices of oil and gas sold.
Depreciation, depletion, and amortization of oil and gas properties
decreased $193,387 (48.3%) in 1999 as compared to 1998. This decrease was
primarily due to (i) a reduction in the depletable base of oil and gas
properties due to an impairment provision recorded during the fourth quarter of
1998 and (ii) several wells being substantially depleted in 1998 due to the lack
of remaining economically recoverable reserves. As a percentage of oil and gas
sales, this expense decreased to 14.4% in 1999 from 31.5% in 1998. This
percentage decrease was primarily due to the dollar decrease in depreciation,
depletion, and amortization.
The III-G Partnership recognized a non-cash charge against earnings of
$310,413 in the fourth quarter of 1998. This charge was related to the decline
in oil and gas prices used to determine
-52-
<PAGE>
the recoverability of proved oil and gas reserves at December 31, 1998. No
similar charge was necessary in 1999.
General and administrative expenses remained relatively constant in 1999
as compared to 1998. As a percentage of oil and gas sales, these expenses
decreased to 10.0% in 1999 from 11.3% in 1998. This percentage decrease was
primarily due to the increase in oil and gas sales.
The Limited Partners have received cash distributions through December 31,
1999 totaling $6,151,287 or 50.45% of Limited Partners' capital contributions.
Year Ended December 31, 1998 Compared
to Year Ended December 31, 1997
-------------------------------------
Total oil and gas sales decreased $572,689 (31.0%) for 1998 as compared to
1997. Of this decrease, approximately $163,000 and $154,000, respectively, were
related to decreases in volumes of oil and gas sold and approximately $246,000
was related to a decrease in the average price of oil sold. Volumes of oil and
gas sold decreased 8,635 barrels and 81,153 Mcf, respectively, for 1998 as
compared to 1997. The decrease in volumes of oil sold resulted primarily from
normal declines in production and the sale of several wells during 1998 and
1997. The decrease in volumes of gas sold resulted primarily from (i) normal
declines in production, (ii) the shutting-in of two significant wells during a
portion of 1998 in order to perform a workover on one well and repairs on the
other well, and (iii) the sale of several wells during 1998 and 1997. Average
oil and gas prices decreased to $12.55 per barrel and $1.87 per Mcf,
respectively, for 1998 from $18.90 per barrel and $1.89 per Mcf, respectively,
for 1997.
Oil and gas production expenses (including lease operating expenses and
production taxes) decreased $110,230 (12.9%) for 1998 as compared to 1997. This
decrease resulted primarily from (i) workover expenses incurred on several wells
during 1997 in order to improve the recovery of reserves and (ii) the sale of
one significant well during 1997. These decreases were partially offset by
workover expenses and repair and maintenance expenses incurred during 1998 on
several wells. As a percentage of oil and gas sales, these expenses increased to
58.5% for 1998 from 46.3% for 1997. This percentage increase was primarily due
to (i) the decrease in the average price of oil sold and (ii) the workover
expenses and repair and maintenance expenses incurred during 1998.
Depreciation, depletion, and amortization of oil and gas properties
decreased $25,309 (5.9%) for 1998 as compared to 1997. This decrease was
primarily due to the decreases in volumes of oil and gas sold, which decrease
was partially offset by downward
-53-
<PAGE>
revisions in the estimates of remaining oil reserves at December 31, 1998 on two
significant wells. As a percentage of oil and gas sales, this expense increased
to 31.5% for 1998 from 23.1% for 1997. This percentage increase resulted
primarily from the decrease in the average price of oil sold.
The III-G Partnership recognized a non-cash charge against earnings of
$310,413 in the fourth quarter of 1998. This charge was related to the decline
in oil and gas prices used to determine the recoverability of oil and gas
reserves at December 31, 1998. The III-G Partnership also recognized non-cash
charges against earnings totaling $1,551,780 in 1997. Of this amount, $1,449,404
was recognized in the first quarter of 1997 and $102,376 was recognized in the
fourth quarter of 1997. Of the first quarter charge in 1997, $1,010,738 was
related to the decline in oil and gas prices used to determine the
recoverability of proved oil and gas reserves at March 31, 1997 and $438,666 was
related to the writing-off of unproved properties. These unproved properties
were written off based on the General Partner's determination that it was
unlikely that such properties would be developed due to low oil and gas prices
and provisions in the III-G Partnership's Partnership Agreement which limit the
level of permissible drilling activity. The charge in the fourth quarter of 1997
was related to the decline in oil prices used to determine the recoverability of
proved oil reserves at December 31, 1997.
General and administrative expenses decreased $2,876 (2.0%) for 1998 as
compared to 1997. As a percentage of oil and gas sales, these expenses increased
to 11.3% for 1998 from 7.9% for 1997, primarily due to the decrease in oil and
gas sales.
Average Sale Prices, Production Volumes, and Average Production Costs
The following tables are comparisons of annual average oil and gas sales
prices, production volumes, and average production costs (lease operating
expenses and production taxes) per equivalent unit (one barrel or 6 Mcf of gas)
for 1999, 1998, and 1997.
-54-
<PAGE>
1999 Compared to 1998
---------------------
Average Sales Prices
- ------------------------------------------------------------------
P/ship 1999 1998 % Change
- ------ ---------------- ---------------- ------------
Oil Gas Oil Gas
($/Bbl) ($/Mcf) ($/Bbl) ($/Mcf) Oil Gas
------- ------- ------- ------- ----- ----
III-A $16.93 $2.20 $12.53 $2.15 35% 2%
III-B 17.78 2.20 12.91 2.14 38% 3%
III-C 17.90 2.02 13.58 1.85 32% 9%
III-D 15.56 2.02 11.52 1.79 35% 13%
III-E 15.33 2.10 11.35 1.95 35% 8%
III-F 16.48 1.91 12.56 1.87 31% 2%
III-G 16.43 1.90 12.55 1.87 31% 2%
Production Volumes
- ------------------------------------------------------------------
P/ship 1999 1998 % Change
- ------ ------------------ ------------------ ------------
Oil Gas Oil Gas Oil Gas
(Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf)
------- --------- ------- --------- ------ -----
III-A 35,784 665,717 34,689 741,990 3% (10%)
III-B 33,676 299,745 34,221 355,197 (2%) (16%)
III-C 23,931 997,209 22,980 1,156,387 4% (14%)
III-D 36,148 716,804 35,908 767,089 1% ( 7%)
III-E 205,197 1,856,697 223,936 1,974,917 (8%) ( 6%)
III-F 55,619 732,832 54,002 787,609 3% ( 7%)
III-G 40,292 409,664 38,858 419,813 4% ( 2%)
Average Production Costs
per Equivalent Barrel of Oil
-----------------------------------
P/ship 1999 1998 % Change
------ ----- ----- --------
III-A $3.99 $3.64 10%
III-B 4.15 3.53 18%
III-C 2.90 3.30 12%
III-D 4.52 4.39 3%
III-E 7.69 6.68 15%
III-F 5.21 6.40 19%
III-G 5.47 6.84 20%
-55-
<PAGE>
1998 Compared to 1997
---------------------
Average Sales Prices
- ------------------------------------------------------------------
P/ship 1998 1997 % Change
- ------ ---------------- ---------------- ------------
Oil Gas Oil Gas
($/Bbl) ($/Mcf) ($/Bbl) ($/Mcf) Oil Gas
------- ------- ------- ------- ----- ----
III-A $12.53 $2.15 $19.68 $2.46 (36%) (13%)
III-B 12.91 2.14 19.76 2.38 (35%) (10%)
III-C 13.58 1.85 19.74 2.26 (31%) (18%)
III-D 11.52 1.79 19.11 2.20 (40%) (19%)
III-E 11.35 1.95 18.97 2.09 (40%) ( 7%)
III-F 12.56 1.87 18.85 1.95 (33%) ( 4%)
III-G 12.55 1.87 18.90 1.89 (34%) ( 1%)
Production Volumes
- ------------------------------------------------------------------
P/ship 1998 1997 % Change
- ------ ------------------ ------------------ ------------
Oil Gas Oil Gas Oil Gas
(Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf)
------- --------- ------- --------- ------ -----
III-A 34,689 741,990 40,468 1,031,152 (14%) (28%)
III-B 34,221 355,197 37,216 518,891 ( 8%) (32%)
III-C 22,980 1,156,387 27,069 1,124,237 (15%) 3%
III-D 35,908 767,089 40,758 708,262 (12%) 8%
III-E 223,936 1,974,917 235,152 2,189,619 ( 5%) (10%)
III-F 54,002 787,609 65,787 898,447 (18%) (12%)
III-G 38,858 419,813 47,493 500,966 (18%) (16%)
Average Production Costs
per Equivalent Barrel of Oil
-----------------------------------
P/ship 1998 1997 % Change
------ ----- ----- --------
III-A $3.64 $3.39 7%
III-B 3.53 3.39 4%
III-C 3.30 3.49 ( 5%)
III-D 4.39 5.46 (20%)
III-E 6.68 7.52 (11%)
III-F 6.40 6.18 4%
III-G 6.84 6.52 5%
-56-
<PAGE>
Liquidity and Capital Resources
Net proceeds from operations less necessary operating capital are
distributed to the Limited Partners on a quarterly basis. See "Item 5. Market
for Units and Related Limited Partner Matters." The net proceeds from production
are not reinvested in productive assets, except to the extent that producing
wells are improved, or where methods are employed to permit more efficient
recovery of reserves, thereby resulting in a positive economic impact. Assuming
1999 production levels for future years, the Partnerships' proved reserve
quantities at December 31, 1999 would have the following remaining lives:
Partnership Gas-Years Oil-Years
----------- --------- ---------
III-A 6.2 3.4
III-B 6.4 3.7
III-C 5.4 6.2
III-D 3.9 10.4
III-E 4.4 11.4
III-F 5.7 7.0
III-G 5.5 7.3
These life of reserves estimates are based on the current estimates of remaining
oil and gas reserves. See "Item 2. Properties" for a discussion of these reserve
estimates. In particular, the relatively high oil prices at December 31, 1999
have caused an increase in the estimates of remaining oil reserves which
therefore have increased the estimated life of said reserves.
The Partnerships' available capital from the Limited Partners'
subscriptions has been spent on oil and gas properties and there should be no
further material capital resource commitments in the future. Occasional
expenditures by the Partnerships for new wells or well completions or workovers,
however, may reduce or eliminate cash available for a particular quarterly cash
distribution. The Partnerships have no debt commitments. Cash for operational
purposes will be provided by current oil and gas production.
The Partnerships sold certain oil and gas properties during 1999, 1998,
and 1997. The sale of the Partnerships' properties was made by the General
Partner after giving due consideration to both the offer price and the General
Partner's estimate of the property's remaining proved reserves and future
operating costs. Net proceeds from the sale of such properties were included in
the calculation of the Partnerships' cash distributions for the quarter
immediately following the Partnerships' receipt of the proceeds. The amount of
such proceeds from the sale of oil and gas properties during 1999, 1998, and
1997 were as follows:
-57-
<PAGE>
Partnership 1999 1998 1997
----------- -------- -------- --------
III-A $ 9,479 $ 25,815 $572,237
III-B 515 35,047 278,513
III-C 9,048 501,935 231,006
III-D - 67,181 26,912
III-E 13,825 77,860 38,925
III-F 232,143 56,560 83,156
III-G 153,574 33,830 65,190
The General Partner believes that the sale of these properties will be
beneficial to the Partnerships in the long-term since the properties sold
generally had a higher ratio of future operating expenses as compared to
reserves than the properties not sold.
There can be no assurance as to the amount of the Partnerships' future
cash distributions. The Partnerships' ability to make cash distributions depends
primarily upon the level of available cash flow generated by the Partnerships'
operating activities, which will be affected (either positively or negatively)
by many factors beyond the control of the Partnerships, including the price of
and demand for oil and gas and other market and economic conditions. Even if
prices and costs remain stable, the amount of cash available for distributions
will decline over time (as the volume of production from producing properties
declines) since the Partnerships are not replacing production through
acquisitions of producing properties and drilling. The Partnerships' quantity of
proved reserves has been reduced by the sale of oil and gas properties as
described above; therefore, it is possible that the Partnerships' future cash
distributions will decline as a result of a reduction of the Partnerships'
reserve base.
Pursuant to the terms of the partnership agreements for the Partnerships
(the "Partnership Agreements") the Partnerships will terminate on the dates
indicated in the "Initial Termination Date" column of the following chart.
However, the Partnership Agreements provide that the General Partner may extend
the term of each Partnership for up to five periods of two years each. As of the
date of this Annual Report on Form 10-K405 ("Annual Report"), the General
Partner has extended the terms of the III-A, III-B, and III-C Partnerships for
the first two-year extension period. The General Partner has not determined
whether it intends to (i) further extend the terms of such Partnerships or (ii)
extend the term of any other Partnership. Therefore, the Partnerships are
currently scheduled to terminate on the dates indicated in the "Current
Termination Date" column of the following chart.
-58-
<PAGE>
Initial Extensions Current
Partnership Termination Date Exercised Termination Date
----------- ------------------ --------- ----------------
III-A November 22, 1999 1 November 22, 2001
III-B January 24, 2000 1 January 24, 2002
III-C February 28, 2000 1 February 28, 2002
III-D September 5, 2000 - September 5, 2000
III-E December 26, 2000 - December 26, 2000
III-F March 7, 2001 - March 7, 2001
III-G September 20, 2001 - September 20, 2001
Inflation and Changing Prices
Prices obtained for oil and gas production depend upon numerous factors,
including the extent of domestic and foreign production, foreign imports of oil,
market demand, domestic and foreign economic conditions in general, and
governmental regulations and tax laws. The general level of inflation in the
economy did not have a material effect on the operations of the Partnerships in
1999. Oil and gas prices have fluctuated during recent years and generally have
not followed the same pattern as inflation. See "Item 2. Properties - Oil and
Gas Production, Revenue, and Price History."
Year 2000
The year 2000 issue refers to the inability of computer and other
information technology systems to properly process date and time information,
stemming from the earlier programming practice of using two digits rather than
four to represent the year in a date. To the knowledge of the General Partner,
the Partnerships have not experienced any material effects from the year 2000
issue. Costs incurred by the Partnerships in order to ensure year 2000
compatibility were not material to the Partnerships.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Partnerships do not hold any market risk sensitive instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are indexed in Item 14
hereof.
-59-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER
The Partnerships have no directors or executive officers. The following
individuals are directors and executive officers of the General Partner. The
business address of such director and executive officers is Two West Second
Street, Tulsa, Oklahoma 74103.
Name Age Position with Geodyne
---------------- --- --------------------------------
Dennis R. Neill 47 President and Director
Judy K. Fox 48 Secretary
The director will hold office until the next annual meeting of shareholders of
Geodyne or until his successor has been duly elected and qualified. All
executive officers serve at the discretion of the Board of Directors.
Dennis R. Neill joined Samson in 1981, was named Senior Vice President and
Director of Geodyne on March 3, 1993, and was named President of Geodyne and its
subsidiaries on June 30, 1996. Prior to joining Samson, he was associated with a
Tulsa law firm, Conner and Winters, where his principal practice was in the
securities area. He received a Bachelor of Arts degree in political science from
Oklahoma State University and a Juris Doctorate degree from the University of
Texas. Mr. Neill also serves as Senior Vice President of Samson Investment
Company and as President and Director of Samson Properties Incorporated, Samson
Hydrocarbons Company, Dyco Petroleum Corporation, Berry Gas Company, Circle L
Drilling Company, Snyder Exploration Company, and Compression, Inc.
Judy K. Fox joined Samson in 1990 and was named Secretary of Geodyne and
its subsidiaries on June 30, 1996. Prior to joining Samson, she served as Gas
Contract Manager for Ely Energy Company. Ms. Fox is also Secretary of Berry Gas
Company, Circle L Drilling Company, Compression, Inc., Dyco Petroleum
Corporation, Samson Hydrocarbons Company, Snyder Exploration Company, and Samson
Properties Incorporated.
Section 16(a) Beneficial Ownership Reporting Compliance
To the best knowledge of the Partnerships and the General Partner, there
were no officers, directors, or ten percent owners
-60-
<PAGE>
who were delinquent filers during 1999 of reports required under Section 16 of
the Securities Exchange Act of 1934.
ITEM 11. EXECUTIVE COMPENSATION
The General Partner and its affiliates are reimbursed for actual general
and administrative costs and operating costs incurred and attributable to the
conduct of the business affairs and operations of the Partnerships, computed on
a cost basis, determined in accordance with generally accepted accounting
principles. Such reimbursed costs and expenses allocated to the Partnerships
include office rent, secretarial, employee compensation and benefits, travel and
communication costs, fees for professional services, and other items generally
classified as general or administrative expense. When actual costs incurred
benefit other Partnerships and affiliates, the allocation of costs is based on
the relationship of the Partnerships' reserves to the total reserves owned by
all Partnerships and affiliates. The amount of general and administrative
expense allocated to the General Partner and its affiliates which was charged to
each Partnership during 1999, 1998, and 1997 is set forth in the table below.
Although the actual costs incurred by the General Partner and its affiliates
have fluctuated during the three years presented, the amounts charged to the
Partnerships have not fluctuated due to expense limitations imposed by the
Partnership Agreements.
Partnership 1999 1998 1997
----------- -------- -------- --------
III-A $277,872 $277,872 $277,872
III-B 145,620 145,620 145,620
III-C 257,412 257,412 257,412
III-D 137,904 137,904 137,904
III-E 440,280 440,280 440,280
III-F 233,136 233,136 233,136
III-G 128,340 128,340 128,340
None of the officers or directors of the General Partner receive
compensation directly from the Partnerships. The Partnerships reimburse the
General Partner or its affiliates for that portion of such officers' and
directors' salaries and expenses attributable to time devoted by such
individuals to the Partnerships' activities based on the allocation method
described above. The following tables indicate the approximate amount of general
and administrative expense reimbursement attributable to the salaries of the
directors, officers, and employees of the General Partner and its affiliates
during 1999, 1998, and 1997:
-61-
<PAGE>
<TABLE>
Salary Reimbursements
III-A Partnership
-----------------
Three Years Ended December 31, 1999
<CAPTION>
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis R. Neill,
President(1) 1997 - - - - - - -
1998 - - - - - - -
1999 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(2) 1997 $166,001 - - - - - -
1998 $164,445 - - - - - -
1999 $169,724 - - - - - -
- ----------
(1) The general and administrative expenses paid by the III-A Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Neill.
(2) No officer or director of Geodyne or its affiliates provides full-time
services to the III-A Partnership and no individual's salary or other
compensation reimbursement from the III-A Partnership equals or exceeds
$100,000 per annum.
</TABLE>
-62-
<PAGE>
<TABLE>
Salary Reimbursements
III-B Partnership
-----------------
Three Years Ended December 31, 1999
<CAPTION>
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis R. Neill,
President(1) 1997 - - - - - - -
1998 - - - - - - -
1999 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(2) 1997 $86,993 - - - - - -
1998 $86,178 - - - - - -
1999 $88,945 - - - - - -
- ----------
(1) The general and administrative expenses paid by the III-B Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Neill.
(2) No officer or director of Geodyne or its affiliates provides full-time
services to the III-B Partnership and no individual's salary or other
compensation reimbursement from the III-B Partnership equals or exceeds
$100,000 per annum.
</TABLE>
-63-
<PAGE>
<TABLE>
Salary Reimbursements
III-C Partnership
-----------------
Three Years Ended December 31, 1999
<CAPTION>
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis R. Neill,
President(1) 1997 - - - - - - -
1998 - - - - - - -
1999 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(2) 1997 $153,778 - - - - - -
1998 $152,336 - - - - - -
1999 $157,227 - - - - - -
- ----------
(1) The general and administrative expenses paid by the III-C Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Neill.
(2) No officer or director of Geodyne or its affiliates provides full-time
services to the III-C Partnership and no individual's salary or other
compensation reimbursement from the III-C Partnership equals or exceeds
$100,000 per annum.
</TABLE>
-64-
<PAGE>
<TABLE>
Salary Reimbursements
III-D Partnership
-----------------
Three Years Ended December 31, 1999
<CAPTION>
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis R. Neill,
President(1) 1997 - - - - - - -
1998 - - - - - - -
1999 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(2) 1997 $82,384 - - - - - -
1998 $81,612 - - - - - -
1999 $84,232 - - - - - -
- ----------
(1) The general and administrative expenses paid by the III-D Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Neill.
(2) No officer or director of Geodyne or its affiliates provides full-time
services to the III-D Partnership and no individual's salary or other
compensation reimbursement from the III-D Partnership equals or exceeds
$100,000 per annum.
</TABLE>
-65-
<PAGE>
<TABLE>
Salary Reimbursements
III-E Partnership
-----------------
Three Years Ended December 31, 1999
<CAPTION>
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis R. Neill,
President(1) 1997 - - - - - - -
1998 - - - - - - -
1999 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(2) 1997 $263,023 - - - - - -
1998 $260,558 - - - - - -
1999 $268,923 - - - - - -
- ----------
(1) The general and administrative expenses paid by the III-E Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Neill.
(2) No officer or director of Geodyne or its affiliates provides full-time
services to the III-E Partnership and no individual's salary or other
compensation reimbursement from the III-E Partnership equals or exceeds
$100,000 per annum.
</TABLE>
-66-
<PAGE>
<TABLE>
Salary Reimbursements
<CAPTION>
III-F Partnership
-----------------
Three Years Ended December 31, 1999
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis R. Neill,
President(1) 1997 - - - - - - -
1998 - - - - - - -
1999 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(2) 1997 $139,275 - - - - - -
1998 $137,970 - - - - - -
1999 $142,399 - - - - - -
- ----------
(1) The general and administrative expenses paid by the III-F Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Neill.
(2) No officer or director of Geodyne or its affiliates provides full-time
services to the III-F Partnership and no individual's salary or other
compensation reimbursement from the III-F Partnership equals or exceeds
$100,000 per annum.
</TABLE>
-67-
<PAGE>
<TABLE>
Salary Reimbursements
III-G Partnership
-----------------
Three Years Ended December 31, 1999
<CAPTION>
Long Term Compensation
-------------------------------
Annual Compensation Awards Payouts
------------------------- --------------------- -------
Securi-
Other ties All
Name Annual Restricted Under- Other
and Compen- Stock lying LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- ---- ------- ------- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis R. Neill,
President(1) 1997 - - - - - - -
1998 - - - - - - -
1999 - - - - - - -
All Executive
Officers,
Directors,
and Employees
as a group(2) 1997 $76,670 - - - - - -
1998 $75,952 - - - - - -
1999 $78,390 - - - - - -
- ----------
(1) The general and administrative expenses paid by the III-G Partnership and
attributable to salary reimbursements do not include any salary or other
compensation attributable to Mr. Neill.
(2) No officer or director of Geodyne or its affiliates provides full-time
services to the III-G Partnership and no individual's salary or other
compensation reimbursement from the III-G Partnership equals or exceeds
$100,000 per annum.
</TABLE>
-68-
<PAGE>
Affiliates of the Partnerships serve as operator of some of the
Partnerships' wells. The General Partner contracts with such affiliates for
services as operator of the wells. As operator, such affiliates are compensated
at rates provided in the operating agreements in effect and charged to all
parties to such agreement. Such compensation may occur both prior and subsequent
to the commencement of commercial marketing of production of oil or gas. The
dollar amount of such compensation paid by the Partnerships to the affiliates is
impossible to quantify as of the date of this Annual Report.
Samson maintains necessary inventories of new and used field equipment.
Samson may have provided some of this equipment for wells in which the
Partnerships have an interest. This equipment was provided at prices or rates
equal to or less than those normally charged in the same or comparable
geographic area by unaffiliated persons or companies dealing at arm's length.
The operators of these wells billed the Partnerships for a portion of such costs
based upon the Partnerships' interest in the well.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information as to the beneficial ownership of
the Units as of February 1, 2000 (i) each beneficial owner of more than five
percent of the issued and outstanding Units, (ii) the directors and officers of
the General Partner, and (iii) the General Partner and its affiliates. The
address of each of such persons is Samson Plaza, Two West Second Street, Tulsa,
Oklahoma 74103.
Number of Units
Beneficially
Owned (Percent
Beneficial Owner of Outstanding)
- ------------------------------------ ------------------
III-A Partnership:
- -----------------
Samson Resources Company 38,684 (14.7%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 38,684 (14.7%)
-69-
<PAGE>
III-B Partnership:
- -----------------
Samson Resources Company 23,148 (16.7%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 23,148 (16.7%)
III-C Partnership:
- -----------------
Samson Resources Company 41,472 (17.0%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 41,472 (17.0%)
III-D Partnership:
- -----------------
Samson Resources Company 25,988 (19.8%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 25,988 (19.8%)
III-E Partnership:
- -----------------
Samson Resources Company 81,124 (19.4%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 81,124 (19.4%)
III-F Partnership:
- -----------------
Samson Resources Company 43,903 (19.8%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 43,903 (19.8%)
III-G Partnership:
- -----------------
Samson Resources Company 22,582 (18.5%)
All affiliates, directors,
and officers of the General
Partner as a group and
the General Partner (4 persons) 22,582 (18.5%)
-70-
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner and certain of its affiliates engage in oil and gas
activities independently of the Partnerships which result in conflicts of
interest that cannot be totally eliminated. The allocation of acquisition and
drilling opportunities and the nature of the compensation arrangements between
the Partnerships and the General Partner also create potential conflicts of
interest. An affiliate of the Partnerships owns some of the Partnerships' Units
and therefore has an identity of interest with other Limited Partners with
respect to the operations of the Partnerships.
In order to attempt to assure limited liability for Limited Partners as
well as an orderly conduct of business, management of the Partnerships is
exercised solely by the General Partner. The Partnership Agreements grant the
General Partner broad discretionary authority with respect to the Partnerships'
participation in drilling prospects and expenditure and control of funds,
including borrowings. These provisions are similar to those contained in
prospectuses and partnership agreements for other public oil and gas
partnerships. Broad discretion as to general management of the Partnerships
involves circumstances where the General Partner has conflicts of interest and
where it must allocate costs and expenses, or opportunities, among the
Partnerships and other competing interests.
The General Partner does not devote all of its time, efforts, and
personnel exclusively to the Partnerships. Furthermore, the Partnerships do not
have any employees, but instead rely on the personnel of Samson. The
Partnerships thus compete with Samson (including other oil and gas partnerships)
for the time and resources of such personnel. Samson devotes such time and
personnel to the management of the Partnerships as are indicated by the
circumstances and as are consistent with the General Partner's fiduciary duties.
Affiliates of the Partnerships are solely responsible for the negotiation,
administration, and enforcement of oil and gas sales agreements covering the
Partnerships' leasehold interests. Because affiliates of the Partnerships who
provide services to the Partnerships have fiduciary or other duties to other
members of Samson, contract amendments and negotiating positions taken by them
in their effort to enforce contracts with purchasers may not necessarily
represent the positions that the Partnerships would take if they were to
administer their own contracts without involvement with other members of Samson.
On the other hand, management believes that the Partnerships' negotiating
strength and contractual positions have been enhanced by virtue of their
affiliation with Samson.
-71-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules, and Exhibits.
(1) Financial Statements: The following financial statements for the
Geodyne Energy Income Limited Partnership III-A Geodyne Energy
Income Limited Partnership III-B Geodyne Energy Income Limited
Partnership III-C Geodyne Energy Income Limited Partnership
III-D Geodyne Energy Income Limited Partnership III-E Geodyne
Energy Income Limited Partnership III-F Geodyne Energy Income
Limited Partnership III-G
as of December 31, 1999 and 1998 and for each of the three years
in the period ended December 31, 1999 are filed as part of this
report:
Report of Independent Accountants
Balance Sheets
Statements of Operations
Statements of Changes in Partners' Capital (Deficit)
Statements of Cash Flows
Notes to Financial Statements
(2) Financial Statement Schedules:
None.
(3) Exhibits:
* 4.1 Agreement of Limited Partnership dated November 17, 1989
for Geodyne Energy Income Limited Partnership III-A.
* 4.2 Agreement of Limited Partnership dated January 24, 1990
for Geodyne Energy Income Limited Partnership III-B.
* 4.3 Agreement of Limited Partnership dated February 26, 1990
for Geodyne Energy Income Limited Partnership III-C.
-72-
<PAGE>
4.4 The Agreements of Limited Partnership for the following
Partnerships have been previously filed with the Securities
and Exchange Commission as Exhibit 2.1 to Form 8-A filed by
each Partnership on the dates shown below and are hereby
incorporated by reference.
Partnership Filing Date File No.
----------- ----------- --------
III-D November 14, 1990 0-18936
III-E January 22, 1991 0-19010
III-F March 25, 1991 0-19102
III-G September 30, 1991 0-19563
* 4.5 First Amendment to Certificate of Limited Partnership and
First Amendment to Agreement of Limited Partnership dated
February 24, 1993 for Geodyne Energy Income Limited
Partnership III-A.
* 4.6 First Amendment to Certificate of Limited Partnership and
First Amendmen to Agreement of Limited Partnership dated
February 24, 1993 for Geodyne Energy Income Limited
Partnership III-B.
* 4.7 First Amendment to Certificate of Limited Partnership and
First Amendmen to Agreement of Limited Partnership dated
February 24, 1993 for Geodyne Energy Income Limited
Partnership III-C.
* 4.8 Second Amendment to Agreement of Limited Partnership dated
August 4, 1993 for Geodyne Energy Income Limited Partner-
ship III-A.
* 4.9 Second Amendment to Agreement of Limited Partnership dated
August 4, 1993 for Geodyne Energy Income Limited Partner-
ship III-B.
* 4.10 Second Amendment to Agreement of Limited Partnership dated
August 4, 1993 for Geodyne Energy Income Limited Partner-
ship III-C.
4.11 Second Amendment to Agreement of Limited Partnership dated
August 4, 1993 for Geodyne Energy Income Limited
Partnership III-D, filed as Exhibit 4.4 to Registrant's
Current Report on Form 8-K dated August 2, 1993 filed with
the SEC on August 10, 1993 and is hereby incorporated by
reference.
-73-
<PAGE>
4.12 Second Amendment to Agreement of Limited Partnership dated
August 4, 1993 for Geodyne Energy Income Limited
Partnership III-E, filed as Exhibit 4.5 to Registrant's
Current Report on Form 8-K dated August 2, 1993 filed with
the SEC on August 10, 1993 and is hereby incorporated by
reference.
4.13 Second Amendment to Agreement of Limited Partnership dated
August 4, 1993 for Geodyne Energy Income Limited
Partnership III-F, filed as Exhibit 4.6 to Registrant's
Current Report on Form 8-K dated August 2, 1993 filed with
the SEC on August 10, 1993 and is hereby incorporated by
reference.
4.14 Second Amendment to Agreement of Limited Partnership dated
August 4, 1993 for Geodyne Energy Income Limited
Partnership III-G, filed as Exhibit 4.7 to Registrant's
Current Report on Form 8-K dated August 2, 1993 filed with
the SEC on August 10, 1993 and is hereby incorporated by
reference.
* 4.15 Third Amendment to Agreement of Limited Partnership dated
August 31, 1995 for Geodyne Energy Income Limited Partner-
ship III-A.
* 4.16 Third Amendment to Agreement of Limited Partnership dated
August 31, 1995 for Geodyne Energy Income Limited Partner-
ship III-B.
* 4.17 Third Amendment to Agreement of Limited Partnership dated
August 31, 1995 for Geodyne Energy Income Limited Partner-
ship III-C.
4.18 Third Amendment to Agreement of Limited Partnership dated
August 31, 1995 for Geodyne Energy Income Limited
Partnership III-D, filed as Exhibit 4.13 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995 filed with the SEC on April 1, 1996 and is hereby
incorporated by reference.
4.19 Third Amendment to Agreement of Limited Partnership dated
August 31, 1995 for Geodyne Energy Income Limited
Partnership III-E, filed as Exhibit 4.14 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995 filed with the SEC on April 1, 1996 and is hereby
incorporated by reference.
-74-
<PAGE>
4.20 Third Amendment to Agreement of Limited Partnership dated
August 31, 1995 for Geodyne Energy Income Limited
Partnership III-F, filed as Exhibit 4.15 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995 filed with the SEC on April 1, 1996 and is hereby
incorporated by reference.
4.21 Third Amendment to Agreement of Limited Partnership dated
August 31, 1995 for Geodyne Energy Income Limited
Partnership III-G, filed as Exhibit 4.16 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995 filed with the SEC on April 1, 1996 and is hereby
incorporated by reference.
* 4.22 Fourth Amendment to Agreement of Limited Partnership dated
July 1, 1996 for Geodyne Energy Income Limited Partnership
III-A.
* 4.23 Fourth Amendment to Agreement of Limited Partnership dated
July 1, 1996 for Geodyne Energy Income Limited Partnership
III-B.
* 4.24 Fourth Amendment to Agreement of Limited Partnership dated
July 1, 1996 for Geodyne Energy Income Limited Partnership
III-C.
* 4.25 Fifth Amendment to Agreement of Limited Partnership dated
November 15, 1999 for Geodyne Energy Income Limited Part-
nership III-A.
* 4.26 Fifth Amendment to Agreement of Limited Partnership dated
December 30, 1999 for Geodyne Energy Income Limited Part-
nership III-B.
* 4.27 Fifth Amendment to Agreement of Limited Partnership dated
December 30, 1999 for Geodyne Energy Income Limited Part-
nership III-C.
* 23.1 Consent of Ryder Scott Company, L.P. for Geodyne Energy
Income Limited Partnership III-A.
* 23.2 Consent of Ryder Scott Company, L.P. for Geodyne Energy
Income Limited Partnership III-B.
-75-
<PAGE>
* 23.3 Consent of Ryder Scott Company, L.P. for Geodyne Energy
Income Limited Partnership III-C.
* 23.4 Consent of Ryder Scott Company, L.P. for Geodyne Energy
Income Limited Partnership III-D.
* 23.5 Consent of Ryder Scott Company, L.P. for Geodyne Energy
Income Limited Partnership III-E.
* 23.6 Consent of Ryder Scott Company, L.P. for Geodyne Energy
Income Limited Partnership III-F.
* 23.7 Consent of Ryder Scott Company, L.P. for Geodyne Energy
Income Limited Partnership III-G.
* 27.1 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income
Limited Partnership III-A's financial statements as of
December 31, 1999 and for the year ended December 31, 1999.
* 27.2 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income
Limited Partnership III-B's financial statements as of
December 31, 1999 and for the year ended December 31, 1999.
* 27.3 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income
Limited Partnership III-C's financial statements as of
December 31, 1999 and for the year ended December 31, 1999.
* 27.4 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income
Limited Partnership III-D's financial statements as of
December 31, 1999 and for the year ended December 31, 1999.
* 27.5 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income
Limited Partnership III-E's financial statements as of
December 31, 1999 and for the year ended December 31, 1999.
-76-
<PAGE>
* 27.6 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income
Limited Partnership III-F's financial statements as of
December 31, 1999 and for the year ended December 31, 1999.
* 27.7 Financial Data Schedule containing summary financial
information extracted from the Geodyne Energy Income
Limited Partnership III-G's financial statements as of
December 31, 1999 and for the year ended December 31, 1999.
All other Exhibits are omitted as inapplicable.
----------
*Filed herewith.
(b) Reports on Form 8-K filed during the fourth quarter of 1999:
None.
-77-
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly organized.
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-A
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-F
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-G
By: GEODYNE RESOURCES, INC.
General Partner
February 25, 2000
By: /s/Dennis R. Neill
------------------------------
Dennis R. Neill
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities on the dates indicated.
By: /s/Dennis R. Neill President and February 25, 2000
------------------- Director (Principal
Dennis R. Neill Executive Officer)
/s/Patrick M. Hall (Principal February 25, 2000
------------------- Financial and
Patrick M. Hall Accounting Officer)
/s/Judy K. Fox Secretary February 25, 2000
-------------------
Judy K. Fox
-78-
<PAGE>
Item 8: Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-A
In our opinion, the accompanying balance sheets and the related statements
of operations, changes in partners' capital (deficit) and cash flows present
fairly, in all material respects, the financial position of the Geodyne Energy
Income Limited Partnership III-A, an Oklahoma limited partnership, at December
31, 1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
February 22, 2000
F-1
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-A
Balance Sheets
December 31, 1999 and 1998
ASSETS
------
1999 1998
------------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 379,613 $ 212,695
Accounts receivable:
Oil and gas sales 325,691 282,108
--------- ---------
Total current assets $ 705,304 $ 494,803
NET OIL AND GAS PROPERTIES,
utilizing the successful
efforts method 1,808,851 2,222,673
DEFERRED CHARGE 279,651 266,532
--------- ---------
$2,793,806 $2,984,008
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 49,195 $ 62,011
Gas imbalance payable 31,659 30,903
--------- ---------
Total current liabilities $ 80,854 $ 92,914
ACCRUED LIABILITY $ 50,052 $ 76,845
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 194,823) ($ 197,325)
Limited Partners, issued and
outstanding, 263,976 Units 2,857,723 3,011,574
--------- ---------
Total Partners' capital $2,662,900 $2,814,249
--------- ---------
$2,793,806 $2,984,008
========= =========
The accompanying notes are an integral
part of these financial statements.
F-2
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-A
Statements of Operations
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------ -----------
REVENUES:
Oil and gas sales $2,071,981 $2,029,797 $3,328,634
Interest income 10,120 16,726 27,613
Gain on sale of oil
and gas properties 883 21,281 148,602
--------- --------- ---------
$2,082,984 $2,067,804 $3,504,849
COSTS AND EXPENSES:
Lease operating $ 426,510 $ 412,509 $ 463,734
Production tax 159,247 163,603 255,356
Depreciation, deple-
tion, and amorti-
zation of oil and
gas properties 414,145 498,715 725,515
Impairment provision - - 1,617,006
General and
Administrative 311,283 311,430 311,253
--------- --------- ---------
$1,311,185 $1,386,257 $3,372,864
--------- --------- ---------
NET INCOME $ 771,799 $ 681,547 $ 131,985
========= ========= =========
GENERAL PARTNER - NET
INCOME $ 54,650 $ 53,190 $ 98,919
========= ========= =========
LIMITED PARTNERS - NET
INCOME $ 717,149 $ 628,357 $ 33,066
========= ========= =========
NET INCOME per Unit $ 2.72 $ 2.38 $ .13
========= ========= =========
UNITS OUTSTANDING 263,976 263,976 263,976
========= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-3
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-A
Statements of Partners' Capital (Deficit)
For the Years Ended December 31, 1999, 1998, and 1997
Limited General
Partners Partner Total
------------- ---------- -------------
Balance, Dec. 31, 1996 $ 6,886,151 ($198,911) $6,687,240
Net income 33,066 98,919 131,985
Cash distributions ( 2,934,000) ( 98,279) ( 3,032,279)
---------- ------- ---------
Balance, Dec. 31, 1997 $ 3,985,217 ($198,271) $3,786,946
Net income 628,357 53,190 681,547
Cash distributions ( 1,602,000) ( 52,244) ( 1,654,244)
---------- ------- ---------
Balance, Dec. 31, 1998 $ 3,011,574 ($197,325) $2,814,249
Net income 717,149 54,650 771,799
Cash distributions ( 871,000) ( 52,148) ( 923,148)
---------- ------- ---------
Balance, Dec. 31, 1999 $ 2,857,723 ($194,823) $2,662,900
========== ======= =========
The accompanying notes are an integral
part of these financial statements.
F-4
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-A
Statements of Cash Flows
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 771,799 $ 681,547 $ 131,985
Adjustments to reconcile
net income to
net cash provided by
operating activities:
Depreciation, deple-
tion, and amortiza-
tion of oil and gas
properties 414,145 498,715 725,515
Impairment provision - - 1,617,006
Gain on sale of oil
and gas properties ( 883) ( 21,281) ( 148,602)
(Increase) decrease in
accounts receivable -
oil and gas sales ( 43,583) 242,433 155,626
(Increase) decrease in
accounts receivable -
other - 308 ( 308)
(Increase) decrease in
deferred charge ( 13,119) ( 66,810) 44,498
Increase (decrease) in
accounts payable ( 12,816) 22,389 ( 11,104)
Increase (decrease) in
gas imbalance payable 756 ( 7,515) ( 38,379)
Increase (decrease) in
accrued liability ( 26,793) 24,940 ( 28,491)
--------- --------- ---------
Net cash provided by
operating activities $1,089,506 $1,374,726 $2,447,746
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 8,919) ($ 55,973) ($ 75,449)
Proceeds from sale of oil
and gas properties 9,479 25,815 572,237
--------- --------- ---------
Net cash provided (used)
by investing activities $ 560 ($ 30,158) $ 496,788
--------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($ 923,148) ($1,654,244) ($3,032,279)
--------- --------- ---------
F-5
<PAGE>
Net cash used by
financing activities ($ 923,148) ($1,654,244) ($3,032,279)
--------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 166,918 ($ 309,676) ($ 87,745)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 212,695 522,371 610,116
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 379,613 $ 212,695 $ 522,371
========= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
In our opinion, the accompanying balance sheets and the related statements
of operations, changes in partners' capital (deficit) and cash flows present
fairly, in all material respects, the financial position of the Geodyne Energy
Income Limited Partnership III-B, an Oklahoma limited partnership, at December
31, 1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
February 22, 2000
F-7
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
Balance Sheets
December 31, 1999 and 1998
ASSETS
------
1999 1998
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 227,298 $ 117,355
Accounts receivable:
Oil and gas sales 214,859 164,818
--------- ---------
Total current assets $ 442,157 $ 282,173
NET OIL AND GAS PROPERTIES,
utilizing the successful
efforts method 1,018,525 1,242,380
DEFERRED CHARGE 229,634 193,310
--------- ---------
$1,690,316 $1,717,863
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 32,585 $ 21,658
Gas imbalance payable 16,517 18,422
--------- ---------
Total current liabilities $ 49,102 $ 40,080
ACCRUED LIABILITY $ 33,458 $ 41,436
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 79,362) ($ 85,016)
Limited Partners, issued and
outstanding, 138,336 Units 1,687,118 1,721,363
--------- ---------
Total Partners' capital $1,607,756 $1,636,347
--------- ---------
$1,690,316 $1,717,863
========= =========
The accompanying notes are an integral
part of these financial statements.
F-8
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
Statements of Operations
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------ ----------
REVENUES:
Oil and gas sales $1,259,735 $1,201,418 $1,972,122
Interest income 5,200 8,819 15,422
Gain on sale of oil
and gas properties 372 33,787 62,748
--------- --------- ---------
$1,265,307 $1,244,024 $2,050,292
COSTS AND EXPENSES:
Lease operating $ 252,191 $ 233,081 $ 268,642
Production tax 94,728 97,026 150,575
Depreciation, deple-
tion, and amorti-
zation of oil and
gas properties 226,627 267,175 445,224
Impairment provision - - 738,122
General and
Administrative 163,875 163,659 163,739
--------- --------- ---------
$ 737,421 $ 760,941 $1,766,302
--------- --------- ---------
NET INCOME $ 527,886 $ 483,083 $ 283,990
========= ========= =========
GENERAL PARTNER - NET
INCOME $ 110,131 $ 108,544 $ 60,762
========= ========= =========
LIMITED PARTNERS - NET
INCOME $ 417,755 $ 374,539 $ 223,228
========= ========= =========
NET INCOME per Unit $ 3.02 $ 2.71 $ 1.61
========= ========= =========
UNITS OUTSTANDING 138,336 138,336 138,336
========= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-9
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
Statements of Partners' Capital (Deficit)
For the Years Ended December 31, 1999, 1998, and 1997
Limited General
Partners Partner Total
------------ ---------- -------------
Balance, Dec. 31, 1996 $3,776,596 ($ 97,092) $3,679,504
Net income 223,228 60,762 283,990
Cash distributions ( 1,708,000) ( 61,510) ( 1,769,510)
--------- ------- ---------
Balance, Dec. 31, 1997 $2,291,824 ($ 97,840) $2,193,984
Net income 374,539 108,544 483,083
Cash distributions ( 945,000) ( 95,720) ( 1,040,720)
--------- ------- ---------
Balance, Dec. 31, 1998 $1,721,363 ($ 85,016) $1,636,347
Net income 417,755 110,131 527,886
Cash distributions ( 452,000) ( 104,477) ( 556,477)
--------- ------- ---------
Balance, Dec. 31, 1999 $1,687,118 ($ 79,362) $1,607,756
========= ======= =========
The accompanying notes are an integral
part of these financial statements.
F-10
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
Statements of Cash Flows
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 527,886 $ 483,083 $ 283,990
Adjustments to reconcile
net income to
net cash provided by
operating activities:
Depreciation, deple-
tion, and amortiza-
tion of oil and gas
properties 226,627 267,175 445,224
Impairment provision - - 738,122
Gain on sale of oil
and gas properties ( 372) ( 33,787) ( 62,748)
(Increase) decrease in
accounts receivable -
oil and gas sales ( 50,041) 142,906 89,246
(Increase) decrease in
accounts receivable -
other - 130 ( 130)
(Increase) decrease in
deferred charge ( 36,324) ( 57,014) 8,523
Increase (decrease) in
accounts payable 10,927 2,226 ( 8,551)
Increase (decrease) in
gas imbalance payable ( 1,905) 11,746 ( 20,059)
Increase (decrease) in
accrued liability ( 7,978) 12,942 ( 10,196)
--------- --------- ---------
Net cash provided by
operating activities $ 668,820 $ 829,407 $1,463,421
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 2,915) ($ 11,667) ($ 43,739)
Proceeds from sale of oil
and gas properties 515 35,047 278,513
--------- --------- ---------
Net cash provided (used)
by investing activities ($ 2,400) $ 23,380 $ 234,774
--------- --------- ---------
F-11
<PAGE>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($ 556,477) ($1,040,720) ($1,769,510)
--------- --------- ---------
Net cash used by
financing activities ($ 556,477) ($1,040,720) ($1,769,510)
--------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 109,943 ($ 187,933) ($ 71,315)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 117,355 305,288 376,603
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 227,298 $ 117,355 $ 305,288
========= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
In our opinion, the accompanying balance sheets and the related statements
of operations, changes in partners' capital (deficit) and cash flows present
fairly, in all material respects, the financial position of the Geodyne Energy
Income Limited Partnership III-C, an Oklahoma limited partnership, at December
31, 1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
February 22, 2000
F-13
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
Balance Sheets
December 31, 1999 and 1998
ASSETS
------
1999 1998
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 482,914 $ 340,720
Accounts receivable:
Oil and gas sales 444,436 380,975
--------- ---------
Total current assets $ 927,350 $ 721,695
NET OIL AND GAS PROPERTIES,
utilizing the successful
efforts method 2,323,346 2,779,845
DEFERRED CHARGE 197,269 70,849
--------- ---------
$3,447,965 $3,572,389
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 50,407 $ 42,712
Gas imbalance payable 44,727 25,479
--------- ---------
Total current liabilities $ 95,134 $ 68,191
ACCRUED LIABILITY $ 156,396 $ 151,671
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 168,448) ($ 179,285)
Limited Partners, issued and
outstanding, 244,536 Units 3,364,883 3,531,812
--------- ---------
Total Partners' capital $3,196,435 $3,352,527
--------- ---------
$3,447,965 $3,572,389
========= =========
The accompanying notes are an integral
part of these financial statements.
F-14
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
Statements of Operations
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------ ------------
REVENUES:
Oil and gas sales $2,446,824 $2,447,005 $3,071,851
Interest income 13,260 19,716 19,900
Gain (loss) on sale of
oil and gas properties ( 281) 459,040 163,836
--------- --------- ---------
$2,459,803 $2,925,761 $3,255,587
COSTS AND EXPENSES:
Lease operating $ 379,785 $ 532,167 $ 520,672
Production tax 171,245 179,871 228,430
Depreciation, deple-
tion, and amorti-
zation of oil and
gas properties 491,692 742,986 626,350
Impairment provision - - 1,696,417
General and
Administrative 288,580 288,053 293,309
--------- --------- ---------
$1,331,302 $1,743,077 $3,365,178
--------- --------- ---------
NET INCOME (LOSS) $1,128,501 $1,182,684 ($ 109,591)
========= ========= =========
GENERAL PARTNER - NET
INCOME $ 75,430 $ 87,868 $ 86,436
========= ========= =========
LIMITED PARTNERS - NET
INCOME (LOSS) $1,053,071 $1,094,816 ($ 196,027)
========= ========= =========
NET INCOME (LOSS)
per Unit $ 4.31 $ 4.48 ($ .80)
========= ========= =========
UNITS OUTSTANDING 244,536 244,536 244,536
========= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-15
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
Statements of Partners' Capital (Deficit)
For the Years Ended December 31, 1999, 1998, and 1997
Limited General
Partners Partner Total
------------- ---------- -------------
Balance, Dec. 31, 1996 $6,924,023 ($143,741) $6,780,282
Net income (loss) ( 196,027) 86,436 ( 109,591)
Cash distributions ( 2,215,000) ( 114,133) ( 2,329,133)
---------- ------- ---------
Balance, Dec. 31, 1997 $4,512,996 ($171,438) $4,341,558
Net income 1,094,816 87,868 1,182,684
Cash distributions ( 2,076,000) ( 95,715) ( 2,171,715)
--------- ------- ---------
Balance, Dec. 31, 1998 $3,531,812 ($179,285) $3,352,527
Net income 1,053,071 75,430 1,128,501
Cash distributions ( 1,220,000) ( 64,593) ( 1,284,593)
--------- ------- ---------
Balance, Dec. 31, 1999 $3,364,883 ($168,448) $3,196,435
========= ======= =========
The accompanying notes are an integral
part of these financial statements.
F-16
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
Statements of Cash Flows
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $1,128,501 $1,182,684 ($ 109,591)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation, deple-
tion, and amortiza-
tion of oil and gas
properties 491,692 742,986 626,350
Impairment provision - - 1,696,417
(Gain) loss on sale of
oil and gas properties 281 ( 459,040) ( 163,836)
(Increase) decrease in
accounts receivable -
oil and gas sales ( 63,461) 116,708 130,014
Decrease in accounts
receivable - General
Partner - - 40,940
(Increase) decrease in
accounts receivable -
other - 54 ( 54)
(Increase) decrease in
deferred charge ( 126,420) 15,800 ( 10,635)
Increase (decrease) in
accounts payable 7,695 ( 10,337) ( 4,308)
Increase (decrease) in
gas imbalance payable 19,248 ( 5,014) ( 256)
Increase in
accrued liability 4,725 8,843 1,434
--------- --------- ---------
Net cash provided by
operating activities $1,462,261 $1,592,684 $2,206,475
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 44,522) ($ 123,095) ($ 104,670)
Proceeds from sale of oil
and gas properties 9,048 501,935 231,006
--------- --------- ---------
Net cash provided (used)
by investing activities ($ 35,474) $ 378,840 $ 126,336
--------- --------- ---------
F-17
<PAGE>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($1,284,593) ($2,171,715) ($2,329,133)
--------- --------- ---------
Net cash used by
financing activities ($1,284,593) ($2,171,715) ($2,329,133)
--------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 142,194 ($ 200,191) $ 3,678
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 340,720 540,911 537,233
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 482,914 $ 340,720 $ 540,911
========= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
In our opinion, the accompanying balance sheets and the related statements
of operations, changes in partners' capital (deficit) and cash flows present
fairly, in all material respects, the financial position of the Geodyne Energy
Income Limited Partnership III-D, an Oklahoma limited partnership, at December
31, 1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
February 22, 2000
F-19
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
Balance Sheets
December 31, 1999 and 1998
ASSETS
------
1999 1998
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 338,669 $ 172,776
Accounts receivable:
Oil and gas sales 371,197 268,703
--------- ---------
Total current assets $ 709,866 $ 441,479
NET OIL AND GAS PROPERTIES,
utilizing the successful
efforts method 1,047,894 1,236,882
DEFERRED CHARGE 52,412 9,462
--------- ---------
$1,810,172 $1,687,823
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 74,391 $ 55,996
Gas imbalance payable 2,361 4,454
--------- ---------
Total current liabilities $ 76,752 $ 60,450
ACCRUED LIABILITY $ 181,185 $ 182,639
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 66,221) ($ 73,501)
Limited Partners, issued and
outstanding, 131,008 Units 1,618,456 1,518,235
--------- ---------
Total Partners' capital $1,552,235 $1,444,734
--------- ---------
$1,810,172 $1,687,823
========= =========
The accompanying notes are an integral
part of these financial statements.
F-20
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
Statements of Operations
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------ ------------
REVENUES:
Oil and gas sales $2,007,243 $1,789,571 $2,335,545
Interest income 8,459 9,293 12,154
Gain (loss) on sale of
oil and gas properties ( 16) 59,491 25,425
--------- --------- ---------
$2,015,686 $1,858,355 $2,373,124
COSTS AND EXPENSES:
Lease operating $ 566,376 $ 596,143 $ 699,449
Production tax 137,675 122,513 167,611
Depreciation, deple-
tion, and amorti-
zation of oil and
gas properties 230,648 524,074 326,095
Impairment provision - 506,636 932,243
General and
Administrative 155,698 155,025 157,983
--------- --------- ---------
$1,090,397 $1,904,391 $2,283,381
--------- --------- ---------
NET INCOME (LOSS) $ 925,289 ($ 46,036) $ 89,743
========= ========= =========
GENERAL PARTNER - NET
INCOME $ 55,068 38,462 $ 54,213
========= ========= =========
LIMITED PARTNERS - NET
INCOME (LOSS) $ 870,221 ($ 84,498) $ 35,530
========= ========= =========
NET INCOME (LOSS) per Unit $ 6.64 ($ .64) $ .27
========= ========= =========
UNITS OUTSTANDING 131,008 131,008 131,008
========= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-21
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
Statements of Partners' Capital (Deficit)
For the Years Ended December 31, 1999, 1998, and 1997
Limited General
Partners Partner Total
------------ --------- ------------
Balance, Dec. 31, 1996 $3,953,203 ($50,214) $3,902,989
Net income 35,530 54,213 89,743
Cash distributions ( 1,352,000) ( 66,090) ( 1,418,090)
--------- ------ ---------
Balance, Dec. 31, 1997 $2,636,733 ($62,091) $2,574,642
Net income (loss) ( 84,498) 38,462 ( 46,036)
Cash distributions ( 1,034,000) ( 49,872) ( 1,083,872)
--------- ------ ---------
Balance, Dec. 31, 1998 $1,518,235 ( 73,501) $1,444,734
Net income 870,221 55,068 925,289
Cash distributions ( 770,000) ( 47,788) ( 817,788)
--------- ------ ---------
Balance, Dec. 31, 1999 $1,618,456 ($66,221) $1,552,235
========= ====== =========
The accompanying notes are an integral
part of these financial statements.
F-22
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-D
Statements of Cash Flows
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 925,289 ($ 46,036) $ 89,743
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities:
Depreciation, deple-
tion, and amortiza-
tion of oil and gas
properties 230,648 524,074 326,095
Impairment provision - 506,636 932,243
(Gain) loss on sale of oil
and gas properties 16 ( 59,491) ( 25,425)
(Increase) decrease in
accounts receivable -
oil and gas sales ( 102,494) 93,072 63,537
(Increase) decrease in
deferred charge ( 42,950) 9,413 7,264
Increase (decrease) in
accounts payable 18,395 ( 58,290) 2,065
Increase (decrease) in
gas imbalance payable ( 2,093) 4,454 ( 5,694)
Decrease in accrued
liability ( 1,454) ( 19,295) ( 18,352)
--------- --------- ---------
Net cash provided by
operating activities $1,025,357 $ 954,537 $1,371,476
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 41,676) ($ 64,034) ($ 579)
Proceeds from sale of oil
and gas properties - 67,181 26,912
--------- --------- ---------
Net cash provided (used)
by investing activities ($ 41,676) $ 3,147 $ 26,333
--------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($ 817,788) ($1,083,872) ($1,418,090)
--------- --------- ---------
Net cash used by
financing activities ($ 817,788) ($1,083,872) ($1,418,090)
--------- --------- ---------
F-23
<PAGE>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 165,893 ($ 126,188) ($ 20,281)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 172,776 298,964 319,245
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 338,669 $ 172,776 $ 298,964
========= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
In our opinion, the accompanying balance sheets and the related statements
of operations, changes in partners' capital (deficit) and cash flows present
fairly, in all material respects, the financial position of the Geodyne Energy
Income Limited Partnership III-E, an Oklahoma limited partnership, at December
31, 1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
February 22, 2000
F-25
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
Balance Sheets
December 31, 1999 and 1998
ASSETS
------
1999 1998
------------- -------------
CURRENT ASSETS:
Cash and cash equivalents $1,445,029 $ 483,197
Accounts receivable:
Oil and gas sales 1,403,065 820,078
--------- ---------
Total current assets $2,848,094 $1,303,275
NET OIL AND GAS PROPERTIES,
utilizing the successful
efforts method 2,776,902 3,190,480
DEFERRED CHARGE 117,235 127,657
--------- ---------
$5,742,231 $4,621,412
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 398,764 $ 302,889
Gas imbalance payable 34,902 178,518
--------- ---------
Total current liabilities $ 433,666 $ 481,407
ACCRUED LIABILITY $ 530,662 $ 298,486
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 259,526) ($ 275,783)
Limited Partners, issued and
outstanding, 418,266 Units 5,037,429 4,117,302
--------- ---------
Total Partners' capital $4,777,903 $3,841,519
--------- ---------
$5,742,231 $4,621,412
========= =========
The accompanying notes are an integral
part of these financial statements.
F-26
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
Statements of Operations
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------- -------------
REVENUES:
Oil and gas sales $7,046,449 $6,400,589 $9,041,809
Interest income 27,474 41,408 44,879
Gain (loss) on sale of
oil and gas properties - 36,219 ( 39,835)
--------- --------- ---------
$7,073,923 $6,478,216 $9,046,853
COSTS AND EXPENSES:
Lease operating $3,504,062 $3,253,691 $3,867,517
Production tax 453,337 441,483 645,699
Depreciation, deple-
tion, and amorti-
zation of oil and
gas properties 479,272 1,984,334 1,198,598
Impairment provision - 3,503,400 2,893,438
General and
Administrative 496,279 498,977 502,466
--------- --------- ---------
$4,932,950 $9,681,885 $9,107,718
--------- --------- ---------
NET INCOME (LOSS) $2,140,973 ($3,203,669) ($ 60,865)
========= ========= =========
GENERAL PARTNER - NET
INCOME $ 124,846 $ 57,256 $ 158,394
========= ========= =========
LIMITED PARTNERS - NET
INCOME (LOSS) $2,016,127 ($3,260,925) ($ 219,259)
========= ========= =========
NET INCOME (LOSS)
per Unit $ 4.82 ($ 7.80) ($ .52)
========= ========= =========
UNITS OUTSTANDING 418,266 418,266 418,266
========= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-27
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
Statements of Partners' Capital (Deficit)
For the Years Ended December 31, 1999, 1998, and 1997
Limited General
Partners Partner Total
------------- ---------- -------------
Balance, Dec. 31, 1996 $14,971,486 ($187,947) $14,783,539
Net income (loss) ( 219,259) 158,394 ( 60,865)
Cash distributions ( 4,303,000) ( 179,497) ( 4,482,497)
---------- ------- ----------
Balance, Dec. 31, 1997 $10,449,227 ($209,050) $10,240,177
Net income (loss) ( 3,260,925) 57,256 ( 3,203,669)
Cash distributions ( 3,071,000) ( 123,989) ( 3,194,989)
---------- ------- ----------
Balance, Dec. 31, 1998 $ 4,117,302 ($275,783) $ 3,841,519
Net income 2,016,127 124,846 2,140,973
Cash distributions ( 1,096,000) ( 108,589) ( 1,204,589)
---------- ------- ----------
Balance, Dec. 31, 1999 $ 5,037,429 ($259,526) $ 4,777,903
========== ======= ==========
The accompanying notes are an integral
part of these financial statements.
F-28
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
Statements of Cash Flows
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $2,140,973 ($3,203,669) ($ 60,865)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation, deple-
tion, and amortiza-
tion of oil and gas
properties 479,272 1,984,334 1,198,598
Impairment provision - 3,503,400 2,893,438
(Gain) loss on sale of
oil and gas properties - ( 36,219) 39,835
(Increase) decrease in
accounts receivable -
oil and gas sales ( 582,987) 541,719 192,951
Decrease in deferred charge 10,422 76,430 94,271
Increase (decrease) in
accounts payable 95,875 ( 390,629) 70,431
Increase (decrease) in
gas imbalance payable ( 143,616) 35,769 ( 13,748)
Increase (decrease) in
accrued liability 232,176 ( 22,457) ( 34,292)
--------- --------- ---------
Net cash provided by
operating activities $2,232,115 $2,488,678 $4,380,619
--------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 79,519) ($ 2,926) ($ 65,616)
Proceeds from sale of oil
and gas properties 13,825 77,860 38,925
--------- --------- ---------
Net cash provided (used)
by investing activities ($ 65,694) $ 74,934 ($ 26,691)
--------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($1,204,589) ($3,194,989) ($4,482,497)
--------- --------- ---------
Net cash used by
financing activities ($1,204,589) ($3,194,989) ($4,482,497)
--------- --------- ---------
F-29
<PAGE>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 961,832 ($ 631,377) ($ 128,569)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 483,197 1,114,574 1,243,143
--------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $1,445,029 $ 483,197 $1,114,574
========= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-F
In our opinion, the accompanying balance sheets and the related statements
of operations, changes in partners' capital (deficit) and cash flows present
fairly, in all material respects, the financial position of the Geodyne Energy
Income Limited Partnership III-F, an Oklahoma limited partnership, at December
31, 1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
February 22, 2000
F-31
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-F
Balance Sheets
December 31, 1999 and 1998
ASSETS
------
1999 1998
------------ -------------
CURRENT ASSETS:
Cash and cash equivalents $ 803,913 $ 316,761
Accounts receivable:
Oil and gas sales 424,488 279,590
Other - 9,631
--------- ---------
Total current assets $1,228,401 $ 605,982
NET OIL AND GAS PROPERTIES,
utilizing the successful
efforts method 2,405,074 2,848,735
DEFERRED CHARGE 56,227 79,097
--------- ---------
$3,689,702 $3,533,814
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 77,807 $ 133,841
Gas imbalance payable 55,092 123,641
--------- ---------
Total current liabilities $ 132,899 $ 257,482
ACCRUED LIABILITY $ 135,208 $ 171,735
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 154,318) ($ 164,221)
Limited Partners, issued and
outstanding, 221,484 Units 3,575,913 3,268,818
--------- ---------
Total Partners' capital $3,421,595 $3,104,597
--------- ---------
$3,689,702 $3,533,814
========= =========
The accompanying notes are an integral
part of these financial statements.
F-32
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-F
Statements of Operations
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------- -------------
REVENUES:
Oil and gas sales $2,314,446 $2,149,193 $2,991,450
Interest income 13,888 20,060 21,251
Gain (loss) on sale of
oil and gas properties 139,094 22,073 ( 14,411)
--------- --------- ---------
$2,467,428 $2,191,326 $2,998,290
COSTS AND EXPENSES:
Lease operating $ 818,404 $1,036,153 $1,166,776
Production tax 107,706 149,314 166,155
Depreciation, deple-
tion, and amorti-
zation of oil and
gas properties 419,639 721,443 755,802
Impairment provision - - 2,884,405
General and
Administrative 261,483 260,699 265,786
--------- --------- ---------
$1,607,232 $2,167,609 $5,238,924
--------- --------- ---------
NET INCOME (LOSS) $ 860,196 $ 23,717 ($2,240,634)
========= ========= =========
GENERAL PARTNER - NET
INCOME $ 59,101 $ 29,041 $ 32,514
========= ========= =========
LIMITED PARTNERS - NET
INCOME (LOSS) $ 801,095 ($ 5,324) ($2,273,148)
========= ========= =========
NET INCOME (LOSS)
per Unit $ 3.62 ($ .02) ($ 10.26)
========= ========= =========
UNITS OUTSTANDING 221,484 221,484 221,484
========= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-33
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-F
Statements of Partners' Capital (Deficit)
For the Years Ended December 31, 1999, 1998, and 1997
Limited General
Partners Partner Total
------------- ---------- -------------
Balance, Dec. 31, 1996 $8,310,290 ($ 97,523) $8,212,767
Net income (loss) ( 2,273,148) 32,514 ( 2,240,634)
Cash distributions ( 1,583,000) ( 81,418) ( 1,664,418)
--------- ------- ---------
Balance, Dec. 31, 1997 $4,454,142 ($146,427) $4,307,715
Net income (loss) ( 5,324) 29,041 23,717
Cash distributions ( 1,180,000) ( 46,835) ( 1,226,835)
--------- ------- ---------
Balance, Dec. 31, 1998 $3,268,818 ($164,221) $3,104,597
Net income 801,095 59,101 860,196
Cash distributions ( 494,000) ( 49,198) ( 543,198)
--------- ------- ---------
Balance, Dec. 31, 1999 $3,575,913 ($154,318) $3,421,595
========= ======= =========
The accompanying notes are an integral
part of these financial statements.
F-34
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-F
Statements of Cash Flows
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $860,196 $ 23,717 ($2,240,634)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation, deple-
tion, and amortiza-
tion of oil and gas
properties 419,639 721,443 755,802
Impairment provision - - 2,884,405
(Gain) loss on sale of
oil and gas properties ( 139,094) ( 22,073) 14,411
(Increase) decrease in
accounts receivable -
oil and gas sales ( 144,898) 193,156 188,469
(Increase) decrease in
accounts receivable -
other 9,631 - ( 9,631)
Decrease in
deferred charge 22,870 45,296 35,060
Decrease in
accounts payable ( 56,034) ( 32,122) ( 2,353)
Increase (decrease) in
gas imbalance payable ( 68,549) 3,777 10,820
Increase (decrease) in
accrued liability ( 36,527) 12,460 16,589
------- --------- ---------
Net cash provided by
operating activities $867,234 $ 945,654 $1,652,938
------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 69,027) $ - ($ 34,952)
Proceeds from sale of oil
and gas properties 232,143 56,560 83,156
------- --------- ---------
Net cash provided
by investing activities $163,116 $ 56,560 $ 48,204
------- --------- ---------
F-35
<PAGE>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($543,198) ($1,226,835) ($1,664,418)
------- --------- ---------
Net cash used by
financing activities ($543,198) ($1,226,835) ($1,664,418)
------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $487,152 ($ 224,621) $ 36,724
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 316,761 541,382 504,658
------- --------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $803,913 $ 316,761 $ 541,382
======= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-G
In our opinion, the accompanying balance sheets and the related statements
of operations, changes in partners' capital (deficit) and cash flows present
fairly, in all material respects, the financial position of the Geodyne Energy
Income Limited Partnership III-G, an Oklahoma limited partnership, at December
31, 1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
February 22, 2000
F-37
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-G
Balance Sheets
December 31, 1999 and 1998
ASSETS
------
1999 1998
------------ -------------
CURRENT ASSETS:
Cash and cash equivalents $ 475,226 $ 169,558
Accounts receivable:
Oil and gas sales 259,524 163,801
Other - 6,369
--------- ---------
Total current assets $ 734,750 $ 339,728
NET OIL AND GAS PROPERTIES,
utilizing the successful
efforts method 1,230,211 1,427,362
DEFERRED CHARGE 36,477 50,380
--------- ---------
$2,001,438 $1,817,470
========= =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 48,611 $ 73,835
Gas imbalance payable 7,548 60,315
--------- ---------
Total current liabilities $ 56,159 $ 134,150
ACCRUED LIABILITY $ 80,069 $ 111,221
PARTNERS' CAPITAL (DEFICIT):
General Partner ($ 91,045) ($ 99,974)
Limited Partners, issued and
outstanding, 121,925 Units 1,956,255 1,672,073
--------- ---------
Total Partners' capital $1,865,210 $1,572,099
--------- ---------
$2,001,438 $1,817,470
========= =========
The accompanying notes are an integral
part of these financial statements.
F-38
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-G
Statements of Operations
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ------------ ------------
REVENUES:
Oil and gas sales $1,439,700 $1,272,575 $1,845,264
Interest income 7,733 11,090 14,201
Gain on sale of oil
and gas properties 124,908 19,340 4,685
--------- --------- ---------
$1,572,341 $1,303,005 $1,864,150
COSTS AND EXPENSES:
Lease operating $ 529,060 $ 660,066 $ 755,242
Production tax 64,851 84,377 99,431
Depreciation, deple-
tion, and amorti-
zation of oil and
gas properties 206,953 400,340 425,649
Impairment provision - 310,413 1,551,780
General and
Administrative 144,031 143,465 146,341
--------- --------- ---------
$ 944,895 $1,598,661 $2,978,443
--------- --------- ---------
NET INCOME (LOSS) $ 627,446 ($ 295,656) ($1,114,293)
========= ========= =========
GENERAL PARTNER - NET
INCOME $ 39,264 $ 13,093 $ 22,672
========= ========= =========
LIMITED PARTNERS - NET
INCOME (LOSS) $ 588,182 ($ 308,749) ($1,136,965)
========= ========= =========
NET INCOME (LOSS)
per Unit $ 4.82 ($ 2.53) ($ 9.33)
========= ========= =========
UNITS OUTSTANDING 121,925 121,925 121,925
========= ========= =========
The accompanying notes are an integral
part of these financial statements.
F-39
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-G
Statements of Partners' Capital (Deficit)
For the Years Ended December 31, 1999, 1998, and 1997
Limited General
Partners Partner Total
------------- ---------- ------------
Balance, Dec. 31, 1996 $4,795,787 ($58,669) $4,737,118
Net income (loss) ( 1,136,965) 22,672 ( 1,114,293)
Cash distributions ( 951,000) ( 49,611) ( 1,000,611)
--------- ------ ---------
Balance, Dec. 31, 1997 $2,707,822 ($85,608) $2,622,214
Net income (loss) ( 308,749) 13,093 ( 295,656)
Cash distributions ( 727,000) ( 27,459) ( 754,459)
--------- ------ ---------
Balance, Dec. 31, 1998 $1,672,073 ($99,974) $1,572,099
Net income 588,182 39,264 627,446
Cash distributions ( 304,000) ( 30,335) ( 334,335)
--------- ------ ---------
Balance, Dec. 31, 1999 $1,956,255 ($91,045) $1,865,210
========= ====== =========
The accompanying notes are an integral
part of these financial statements.
F-40
<PAGE>
GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-G
Statements of Cash Flows
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------ ---------- ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $627,446 ($295,656) ($1,114,293)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation, deple-
tion, and amortiza-
tion of oil and gas
properties 206,953 400,340 425,649
Impairment provision - 310,413 1,551,780
Gain on sale of oil and
gas properties ( 124,908) ( 19,340) ( 4,685)
(Increase) decrease in
accounts receivable -
oil and gas sales ( 95,723) 121,888 122,426
(Increase) decrease in
accounts receivable -
General Partner - 13,140 ( 13,140)
(Increase) decrease in
accounts receivable
- other 6,369 - ( 6,369)
Decrease in
deferred charge 13,903 25,026 27,369
Increase (decrease) in
accounts payable ( 25,224) ( 28,090) 2,385
Increase (decrease) in
gas imbalance payable ( 52,767) 708 5,388
Increase (decrease) in
accrued liability ( 31,152) 21,911 2,457
------- ------- ---------
Net cash provided by
operating activities $524,897 $550,340 $ 998,967
------- ------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures ($ 38,468) ($ 11,316) ($ 28,338)
Proceeds from sale of oil
and gas properties 153,574 33,830 65,190
------- ------- ---------
Net cash provided
by investing activities $115,106 $ 22,514 $ 36,852
------- ------- ---------
F-41
<PAGE>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash distributions ($334,335) ($754,459) ($1,000,611)
------- ------- ---------
Net cash used by
financing activities ($334,335) ($754,459) ($1,000,611)
------- ------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $305,668 ($181,605) $ 35,208
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 169,558 351,163 315,955
------- ------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $475,226 $169,558 $ 351,163
======= ======= =========
The accompanying notes are an integral
part of these financial statements.
F-42
<PAGE>
GEODYNE ENERGY INCOME PROGRAM III LIMITED PARTNERSHIPS
Notes to Financial Statements
For the Years Ended December 31, 1999, 1998, and 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The Geodyne Energy Income Limited Partnerships (the "Partnerships") were
formed pursuant to a public offering of depositary units ("Units"). Upon
formation, investors became limited partners (the "Limited Partners") and held
Units issued by each Partnership. Geodyne Resources, Inc. (the "General
Partner") is the general partner of each Partnership. Limited Partner capital
contributions were invested in producing oil and gas properties. The
Partnerships were activated on the following dates with the following Limited
Partner capital contributions.
Limited Partner
Date of Capital
Partnership Activation Contributions
----------- ------------------ ---------------
III-A November 22, 1989 $26,397,600
III-B January 24, 1990 13,833,600
III-C February 27, 1990 24,453,600
III-D September 5, 1990 13,100,800
III-E December 26, 1990 41,826,600
III-F March 7, 1991 22,148,400
III-G September 20, 1991 12,192,500
Pursuant to the terms of the partnership agreements for the Partnerships,
the Partnerships would have terminated or will terminate on the dates indicated
in the "Initial Termination Date" column of the following chart. However, the
General Partner may extend the term of each Partnership for up to five periods
of two years each. As of the date of these financial statements, the General
Partner has extended the terms of the III-A, III-B, and III-C Partnerships for
the first two-year extension. The General Partner has not determined whether it
intends to (i) further extend the terms of such Partnerships or (ii) extend the
term of any other Partnership. Therefore, the Partnerships are currently
scheduled to terminate on the dates indicated in the "Current Termination Date"
column of the following chart.
F-43
<PAGE>
Initial Extensions Current
Partnership Termination Date Exercised Termination Date
----------- ----------------- ---------- ----------------
III-A November 22, 1999 1 November 22, 2001
III-B January 24, 2000 1 January 24, 2002
III-C February 28, 2000 1 February 28, 2002
III-D September 5, 2000 - September 5, 2000
III-E December 26, 2000 - December 26, 2000
III-F March 7, 2001 - March 7, 2001
III-G September 20, 2001 - September 20, 2001
An affiliate of the General Partner owned the following Units at December
31, 1999:
Number of Percent of
Partnership Units Owned Outstanding
----------- ----------- -----------
III-A 38,584 14.6%
III-B 22,998 16.6%
III-C 41,472 17.0%
III-D 25,988 19.8%
III-E 81,044 19.4%
III-F 43,903 19.8%
III-G 22,582 18.5%
The Partnerships' sole business is the development and production of oil
and gas. Substantially all of the Partnerships' gas reserves are being sold
regionally on the "spot market." Due to the highly competitive nature of the
spot market, prices on the spot market are subject to wide seasonal and regional
pricing fluctuations. In addition, such spot market sales are generally short
term in nature and are dependent upon the obtaining of transportation services
provided by pipelines. The Partnerships' oil is sold at or near the
Partnerships' wells under short-term purchase contracts at prevailing
arrangements which are customary in the oil industry. The prices received for
the Partnerships' oil and gas are subject to influences such as global
consumption and supply trends.
Allocation of Costs and Revenues
The terms of each Partnership's Limited Partnership Agreement (the
"Partnership Agreement") allocate costs and income between the Limited Partners
and the General Partner as follows:
F-44
<PAGE>
Before Payout (1) After Payout(1)
------------------ ------------------
General Limited General Limited
Partner Partners Partner Partners
-------- -------- -------- --------
Costs(2)
- ------------------------
Sales commissions, pay-
ment for organization
and offering costs
and management fee 1% 99% - -
Property acquisition
costs 1% 99% 1% 99%
Identified development
drilling 1% 99% 1% 99%
Development drilling(2) 5% 95% 15% 85%
General and administra-
tive costs, direct
administrative costs
and operating costs(2) 5% 95% 15% 85%
Income(2)
- ------------------------
Temporary investments of
Limited Partners'
subscriptions 1% 99% 1% 99%
Income from oil and gas
production(2) 5% 95% 15% 85%
Gain on sale of
producing properties(2) 5% 95% 15% 85%
All other income(2) 5% 95% 15% 85%
- ----------
(1) Payout occurs when total distributions to Limited Partners equal total
original Limited Partner subscriptions.
(2) If, at payout, the Limited Partners have received distributions at an
annual rate less than 12% of their subscriptions, the percentage of income
and costs allocated to the General Partner will increase to only 10% and
the Limited Partners will be allocated 90%. Thereafter, if the
distribution to Limited Partners reaches an average annual rate of 12% the
allocation will change to 15% to the General Partner and 85% to the
Limited Partners.
The III-B Partnership achieved payout during the first quarter of 1998.
Beginning with the first quarter of 1998, operations for the III-B Partnership
were allocated using the 15%/85% after payout percentages as described in
Footnote 2 to the table above.
F-45
<PAGE>
Cash and Cash Equivalents
The Partnerships consider all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash equivalents are
not insured, which cause the Partnerships to be subject to risk.
Credit Risks
Accrued oil and gas sales which are due from a variety of oil and gas
purchasers subject the Partnerships to a concentration of credit risk. Some of
these purchasers are discussed in Note 3 - Major Customers.
Oil and Gas Properties
The Partnerships follow the successful efforts method of accounting for
their oil and gas properties. Under the successful efforts method, the
Partnerships capitalize all property acquisition costs and development costs
incurred in connection with the further development of oil and gas reserves.
Property acquisition costs include costs incurred by the Partnerships or the
General Partner to acquire producing properties, including related title
insurance or examination costs, commissions, engineering, legal and accounting
fees, and similar costs directly related to the acquisitions, plus an allocated
portion of the General Partner's property screening costs. The acquisition cost
to the Partnerships of properties acquired by the General Partner is adjusted to
reflect the net cash results of operations, including interest incurred to
finance the acquisition, for the period of time the properties are held by the
General Partner. Leasehold impairment of unproved properties is recognized based
upon an individual property assessment and exploratory experience. Upon
discovery of commercial reserves, leasehold costs are transferred to producing
properties.
Depletion of the costs of producing oil and gas properties, amortization
of related intangible drilling and development costs, and depreciation of
tangible lease and well equipment are computed on the units-of-production
method. The Partnerships' calculation of depreciation, depletion, and
amortization includes estimated dismantlement and abandonment costs, net of
estimated salvage values. The depreciation, depletion, and amortization rates
per equivalent barrel of oil produced during the years ended December 31, 1999,
1998, and 1997 were as follows:
Partnership 1999 1998 1997
----------- ----- ----- -----
III-A $2.82 $3.15 $3.42
III-B 2.71 2.86 3.60
III-C 2.59 3.44 2.92
F-46
<PAGE>
III-D 1.48 3.20 2.05
III-E .93 3.59 2.00
III-F 2.36 3.89 3.51
III-G 1.91 3.68 3.25
When complete units of depreciable property are retired or sold, the asset
cost and related accumulated depreciation are eliminated with any gain or loss
reflected in income. When less than complete units of depreciable property are
retired or sold, the proceeds are credited to oil and gas properties.
The Partnerships evaluate the recoverability of the carrying costs of
their proved oil and gas properties at the field level. If the unamortized costs
of oil and gas properties within a field exceed the expected undiscounted future
cash flows from such properties, the cost of the properties is written down to
fair value, which is determined by using the discounted future cash flows from
the properties. During 1999, 1998,and 1997, the Partnerships recorded the
following non-cash charges against earnings (impairment provisions):
Partnership 1999 1998 1997
----------- ---------- ---------- ----------
III-A $ - $ - $ 184,644
III-B - - 77,653
III-C - - 234,271
III-D - 506,636 485,820
III-E - 3,503,400 2,042,775
III-F - - 2,078,019
III-G - 310,413 1,113,114
The risk that the Partnerships will be required to record similar impairment
provisions in the future increases as oil and gas prices decrease.
In addition, during 1997 the General Partner determined that the
Partnerships' unproved properties would be uneconomic to develop and, therefore,
of little or no value. This determination was based on an evaluation by the
General Partner that it was unlikely that these unproved properties would be
developed due to low oil and gas prices and provisions in the Partnership
Agreements which limit the level of permissible drilling activity. As a result
of this determination, the Partnership recorded the following noncash charges
against earnings at March 31, 1997 in order to reflect the writing-off of the
Partnerships' unproved properties:
F-47
<PAGE>
Partnerships Amount
----------- ----------
III-A $1,432,362
III-B 660,469
III-C 1,462,146
III-D 446,423
III-E 850,663
III-F 806,386
III-G 438,666
Deferred Charge
Deferred Charge represents costs deferred for lease operating expenses
incurred in connection with the Partnerships' underproduced gas imbalance
positions. The rate used in calculating the deferred charge is the average of
the annual production costs per Mcf. At December 31, 1999 and 1998, cumulative
total gas sales volumes for underproduced wells were less than the Partnerships'
pro-rata share of total gas production from these wells by the following
amounts:
1999 1998
------------------ ------------------
Partnership Mcf Amount Mcf Amount
----------- ------- -------- ------- --------
III-A 399,160 $279,651 435,225 $266,532
III-B 232,141 229,634 247,738 193,310
III-C 392,263 197,269 161,424 70,849
III-D 61,509 52,412 11,977 9,462
III-E 66,740 117,235 78,791 127,657
III-F 49,522 56,227 63,675 79,097
III-G 27,352 36,477 34,495 50,380
Accrued Liability
Accrued liability represents charges accrued for lease operating expenses
incurred in connection with the Partnerships' overproduced gas imbalance
positions. The rate used in calculating the accrued liability is the average of
the annual production costs per Mcf. At December 31, 1999 and 1998, cumulative
total gas sales volumes for overproduced wells exceeded the Partnerships'
pro-rata share of total gas production from these wells by the following
amounts:
F-48
<PAGE>
1999 1998
------------------ ------------------
Partnership Mcf Amount Mcf Amount
----------- ------- -------- ------- --------
III-A 71,441 $ 50,052 125,481 $ 76,845
III-B 33,823 33,458 53,103 41,436
III-C 310,989 156,396 345,570 151,671
III-D 212,633 181,185 231,188 182,639
III-E 302,096 530,662 184,228 298,486
III-F 119,084 135,208 138,251 171,735
III-G 60,040 80,069 76,153 111,221
Oil and Gas Sales and Gas Imbalance Payable
The Partnerships' oil and condensate production is sold, title passed, and
revenue recognized at or near the Partnerships' wells under short-term purchase
contracts at prevailing prices in accordance with arrangements which are
customary in the oil and gas industry. Sales of gas applicable to the
Partnerships' interest in producing oil and gas leases are recorded as revenue
when the gas is metered and title transferred pursuant to the gas sales
contracts covering the Partnerships' interest in gas reserves. During such times
as a Partnership's sales of gas exceed its pro rata ownership in a well, such
sales are recorded as revenue unless total sales from the well have exceeded the
Partnership's share of estimated total gas reserves underlying the property, at
which time such excess is recorded as a liability. The rates per Mcf used to
calculate this liability are based on the average gas prices received for the
volumes at the time the overproduction occurred. This also approximates the
price for which the Partnerships are currently settling this liability. At
December 31, 1999 and 1998 total sales exceeded the Partnerships' share of
estimated total gas reserves as follows:
1999 1998
------------------ ------------------
Partnership Mcf Amount Mcf Amount
----------- ------- -------- ------- --------
III-A 21,106 $31,659 20,602 $ 30,903
III-B 11,011 16,517 12,281 18,422
III-C 29,818 44,727 16,986 25,479
III-D 1,574 2,361 2,969 4,454
III-E 23,268 34,902 119,012 178,518
III-F 36,728 55,092 82,427 123,641
III-G 5,032 7,548 40,210 60,315
These amounts were recorded as gas imbalance payables in accordance with the
sales method. These gas imbalance payables will be settled by either gas
production by the underproduced
F-49
<PAGE>
party in excess of the current estimates of total gas reserves for the well or
by a negotiated or contractual payment to the underproduced party.
General and Administrative Overhead
The General Partner and its affiliates are reimbursed for actual general
and administrative costs incurred and attributable to the conduct of the
business affairs and operations of the Partnerships.
Use of Estimates in Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Further, the
deferred charge, the gas imbalance payable, and the accrued liability all
involve estimates which could materially differ from the actual amounts
ultimately realized or incurred in the near term. Oil and gas reserves (see Note
4) also involve significant estimates which could materially differ from the
actual amounts ultimately realized.
Income Taxes
Income or loss for income tax purposes is includable in the income tax
returns of the partners. Accordingly, no recognition has been given to income
taxes in these financial statements.
2. TRANSACTIONS WITH RELATED PARTIES
The Partnerships reimburse the General Partner for the general and
administrative overhead applicable to the Partnerships, based on an allocation
of actual costs incurred by the General Partner. When actual costs incurred
benefit other Partnerships and affiliates, the allocation of costs is based on
the relationship of the Partnerships' reserves to the total reserves owned by
all Partnerships and affiliates. The General Partner believes this allocation
method is reasonable. Although the actual costs incurred by the General Partner
and its affiliates have fluctuated during the three years presented, the amounts
charged to the Partnerships have not fluctuated due to the expense limitations
imposed by the Partnership Agreement. The following is a summary of payments
made to the General Partner or its affiliates by the Partnerships for general
and
F-50
<PAGE>
administrative overhead costs for the years ended December 31, 1999, 1998, and
1997:
Partnership 1999 1998 1997
----------- -------- -------- --------
III-A $277,872 $277,872 $277,872
III-B 145,620 145,620 145,620
III-C 257,412 257,412 257,412
III-D 137,904 137,904 137,904
III-E 440,280 440,280 440,280
III-F 233,136 233,136 233,136
III-G 128,340 128,340 128,340
Affiliates of the Partnerships operate certain of the Partnerships'
properties and their policy is to bill the Partnerships for all customary
charges and cost reimbursements associated with these activities, together with
any compressor rentals, consulting, or other services provided. Such charges are
comparable to third party charges in the area where the wells are located and
are the same as charged to other working interest owners in the wells.
3. MAJOR CUSTOMERS
The following table sets forth purchasers who individually accounted for
ten percent or more of each Partnership's combined oil and gas sales during
1999, 1998, and 1997:
Partnership Purchaser Percentage
----------- ------------------------ ----------------------
1999 1998 1997
----- ----- -----
III-A Valero Industrial Gas
L.P. ("Valero") 27.2% 30.8% 14.4%
El Paso Energy Marketing
Company ("El Paso") 26.7% 33.9% 47.2%
Phibro Energy, Inc.
("Phibro") 22.8% 17.0% - %
III-B Phibro 25.4% 18.7% 12.7%
Valero 21.4% 23.9% 11.4%
El Paso 20.2% 26.7% 37.9%
Sun Refining & Marketing
Company 17.0% 14.4% 13.1%
III-C El Paso 59.0% 55.5% 49.8%
III-D El Paso 58.5% 54.9% 45.6%
Eaglwing Trading, Inc.
("Eaglwing") 15.8% 15.3% 18.3%
F-51
<PAGE>
III-E Eaglwing 35.4% 30.1% 33.3%
El Paso 12.1% 12.6% 12.4%
III-F El Paso 28.2% 28.3% 28.5%
Amoco Production Co. 10.6% - % - %
III-G El Paso 23.7% 24.5% 23.9%
Amoco Production Co. 11.5% - % - %
In the event of interruption of purchases by one or more of these
significant customers or the cessation or material change in availability of
open access transportation by the Partnerships' pipeline transporters, the
Partnerships may encounter difficulty in marketing their gas and in maintaining
historic sales levels. Alternative purchasers or transporters may not be readily
available.
4. SUPPLEMENTAL OIL AND GAS INFORMATION
The following supplemental information regarding the oil and gas
activities of the Partnerships is presented pursuant to the disclosure
requirements promulgated by the SEC.
Capitalized Costs
Capitalized costs and accumulated depreciation, depletion, amortization,
and valuation allowance at December 31, 1999 and 1998 were as follows:
III-A Partnership
-----------------
1999 1998
------------- -------------
Proved properties $15,787,198 $15,792,267
Less accumulated
depreciation,
depletion, amorti-
zation, and valua-
tion allowance ( 13,978,347) ( 13,569,594)
---------- ----------
Net oil and gas
Properties $ 1,808,851 $ 2,222,673
========== ==========
F-52
<PAGE>
III-B Partnership
-----------------
1999 1998
------------- -------------
Proved properties $ 9,328,173 $ 9,325,381
Less accumulated
depreciation,
depletion, amorti-
zation, and valua-
tion allowance ( 8,309,648) ( 8,083,001)
---------- ----------
Net oil and gas
Properties $ 1,018,525 $ 1,242,380
========== ==========
III-C Partnership
-----------------
1999 1998
------------- -------------
Proved properties $19,173,840 $19,181,561
Less accumulated
depreciation,
depletion, amorti-
zation, and valua-
tion allowance ( 16,850,494) ( 16,401,716)
---------- ----------
Net oil and gas
Properties $ 2,323,346 $ 2,779,845
========== ==========
III-D Partnership
-----------------
1999 1998
------------- -------------
Proved properties $12,080,692 $12,039,032
Less accumulated
depreciation,
depletion, amorti-
zation, and valua-
tion allowance ( 11,032,798) ( 10,802,150)
---------- ----------
Net oil and gas
Properties $ 1,047,894 $ 1,236,882
========== ==========
F-53
<PAGE>
III-E Partnership
-----------------
1999 1998
------------- -------------
Proved properties $34,158,149 $34,096,393
Less accumulated
depreciation,
depletion, amorti-
zation, and valua-
tion allowance ( 31,381,247) ( 30,905,913)
---------- ----------
Net oil and gas
Properties $ 2,776,902 $ 3,190,480
========== ==========
III-F Partnership
-----------------
1999 1998
------------- -------------
Proved properties $15,578,299 $16,559,050
Less accumulated
depreciation,
depletion, amorti-
zation, and valua-
tion allowance ( 13,173,225) ( 13,710,315)
---------- ----------
Net oil and gas
Properties $ 2,405,074 $ 2,848,735
========== ==========
III-G Partnership
-----------------
1999 1998
------------- -------------
Proved properties $ 8,905,525 $ 9,515,195
Less accumulated
depreciation,
depletion, amorti-
zation, and valua-
tion allowance ( 7,675,314) ( 8,087,833)
---------- ----------
Net oil and gas
Properties $ 1,230,211 $ 1,427,362
========== ==========
F-54
<PAGE>
Costs Incurred
The III-A and III-B Partnerships incurred acquisition costs of $35,246 and
$23,248, respectively, during the year ended December 31, 1997 for additional
acreage underlying the Lebleu No. 4 well. The Partnerships incurred no other
costs in connection with oil and gas acquisition or exploration activities
during the years ended December 31, 1999, 1998, and 1997. Costs incurred by the
Partnerships in connection with oil and gas property development activities for
the years ended December 31, 1999, 1998, and 1997 were as follows:
Partnership 1999 1998 1997
----------- -------- -------- --------
III-A $ 8,919 $ 55,973 $ 40,203
III-B 2,915 11,667 20,491
III-C 44,522 123,095 104,670
III-D 41,676 64,034 579
III-E 79,519 2,926 65,616
III-F 69,027 - 34,952
III-G 38,468 11,316 28,338
Quantities of Proved Oil and Gas Reserves - Unaudited
The following tables summarize changes in net quantities of the
Partnerships' proved reserves, all of which are located in the United States,
for the periods indicated. The proved reserves at December 31, 1999, 1998, and
1997 were estimated by petroleum engineers employed by affiliates of the
Partnerships. Certain reserve information was reviewed by Ryder Scott Company,
L.P., an independent petroleum engineering firm. The following information
includes certain gas balancing adjustments which caused the gas volumes to
differ from the reserve reports prepared by the General Partner and reviewed by
Ryder Scott.
F-55
<PAGE>
III-A Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- -----------
Proved reserves, Dec. 31, 1996 153,899 6,182,269
Production ( 40,468) (1,031,152)
Sale of minerals in place ( 4,695) ( 661,004)
Extensions and discoveries 6 915
Revision of previous
estimates 4,121 740,812
------- ---------
Proved reserves, Dec. 31, 1997 112,863 5,231,840
Production ( 34,689) ( 741,990)
Sale of minerals in place ( 170) ( 37,253)
Extensions and discoveries 7,433 175,973
Revision of previous
estimates 6,687 100,845
------- ---------
Proved reserves, Dec. 31, 1998 92,124 4,729,415
Production ( 35,784) ( 665,717)
Revision of previous
estimates 65,715 59,622
------- ---------
Proved reserves, Dec. 31, 1999 122,055 4,123,320
======= =========
PROVED DEVELOPED RESERVES:
December 31, 1997 101,190 5,027,338
======= =========
December 31, 1998 86,204 4,604,490
======= =========
December 31, 1999 116,761 4,061,061
======= =========
F-56
<PAGE>
III-B Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 1996 120,963 2,967,902
Production ( 37,216) ( 518,891)
Sale of minerals in place ( 2,009) ( 285,841)
Revision of previous
estimates 11,805 370,683
------- ---------
Proved reserves, Dec. 31, 1997 93,543 2,533,853
Production ( 34,221) ( 355,197)
Sale of minerals in place ( 98) ( 46,674)
Revision of previous
estimates 31,939 42,054
------- ---------
Proved reserves, Dec. 31, 1998 91,163 2,174,036
Production ( 33,676) ( 299,745)
Revision of previous
estimates 65,332 36,674
------- ---------
Proved reserves, Dec. 31, 1999 122,819 1,910,965
======= =========
PROVED DEVELOPED RESERVES:
December 31, 1997 89,784 2,462,219
======= =========
December 31, 1998 87,403 2,105,919
======= =========
December 31, 1999 119,351 1,872,029
======= =========
F-57
<PAGE>
III-C Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 1996 162,487 7,719,803
Production ( 27,069) (1,124,237)
Sale of minerals in place ( 4,753) ( 197,339)
Extensions and discoveries 447 -
Revision of previous
estimates 22,200 781,366
------- ---------
Proved reserves, Dec. 31, 1997 153,312 7,179,593
Production ( 22,980) (1,156,387)
Sale of minerals in place ( 5,849) ( 322,985)
Extensions and discoveries 444 443,959
Revision of previous
estimates 9,742 ( 375,699)
------- ---------
Proved reserves, Dec. 31, 1998 134,669 5,768,481
Production ( 23,931) ( 997,209)
Sale of minerals in place ( 491) ( 4,139)
Revision of previous
estimates 38,601 606,130
------- ---------
Proved reserves, Dec. 31, 1999 148,848 5,373,263
======= =========
PROVED DEVELOPED RESERVES:
December 31, 1997 153,112 7,157,512
======= =========
December 31, 1998 134,527 5,754,200
======= =========
December 31, 1999 148,826 5,371,134
======= =========
F-58
<PAGE>
III-D Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 1996 430,630 3,769,546
Production ( 40,758) ( 708,262)
Sale of minerals in place ( 396) ( 18,762)
Extensions and discoveries 94 1,797
Revision of previous
estimates 88,825 760,231
------- ---------
Proved reserves, Dec. 31, 1997 478,395 3,804,550
Production ( 35,908) ( 767,089)
Sale of minerals in place ( 1,822) ( 48,776)
Extensions and discoveries 370 361,916
Revision of previous
estimates (315,169) ( 511,711)
------- ---------
Proved reserves, Dec. 31, 1998 125,866 2,838,890
Production ( 36,148) ( 716,804)
Extensions and discoveries 2,478 18,856
Revision of previous
estimates 283,892 659,001
------- ---------
Proved reserves, Dec. 31, 1999 376,088 2,799,943
======= =========
PROVED DEVELOPED RESERVES:
December 31, 1997 478,386 3,803,645
======= =========
December 31, 1998 125,866 2,838,890
======= =========
December 31, 1999 376,088 2,799,943
======= =========
F-59
<PAGE>
III-E Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
----------- ------------
Proved reserves, Dec. 31, 1996 2,617,639 9,775,737
Production ( 235,152) ( 2,189,619)
Sale of minerals in place ( 2,156) ( 245,398)
Extensions and discoveries - 11,997
Revision of previous
estimates 631,209 2,780,432
--------- ----------
Proved reserves, Dec. 31, 1997 3,011,540 10,133,149
Production ( 223,936) ( 1,974,917)
Sale of minerals in place ( 669) ( 57,652)
Revision of previous
estimates (2,185,625) ( 84,105)
--------- ----------
Proved reserves, Dec. 31, 1998 601,310 8,016,475
Production ( 205,197) ( 1,856,697)
Extensions and discoveries 2,322 92,291
Revision of previous
estimates 1,945,590 1,828,696
--------- ----------
Proved reserves, Dec. 31, 1999 2,344,025 8,080,765
========= ==========
PROVED DEVELOPED RESERVES:
December 31, 1997 3,011,540 10,133,149
========= ==========
December 31, 1998 601,310 8,016,475
========= ==========
December 31, 1999 2,344,025 8,080,765
========= ==========
F-60
<PAGE>
III-F Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 1996 491,313 5,666,732
Production ( 65,787) ( 898,447)
Sale of minerals in place ( 5,981) ( 169,022)
Extensions and discoveries 10,573 99,305
Revision of previous
estimates ( 30,372) 905,241
------- ---------
Proved reserves, Dec. 31, 1997 399,746 5,603,809
Production ( 54,002) ( 787,609)
Sale of minerals in place ( 854) ( 49,751)
Revision of previous
estimates (113,008) ( 39,496)
------- ---------
Proved reserves, Dec. 31, 1998 231,882 4,726,953
Production ( 55,619) ( 732,832)
Sale of minerals in place ( 17,463) ( 42,191)
Extensions and discoveries 1,948 77,500
Revision of previous
estimates 229,061 135,100
------- ---------
Proved reserves, Dec. 31, 1999 389,809 4,164,530
======= =========
PROVED DEVELOPED RESERVES:
December 31, 1997 399,746 5,603,809
======= =========
December 31, 1998 231,882 4,726,953
======= =========
December 31, 1999 389,809 4,164,530
======= =========
F-61
<PAGE>
III-G Partnership
-----------------
Crude Natural
Oil Gas
(Barrels) (Mcf)
--------- ------------
Proved reserves, Dec. 31, 1996 369,589 3,037,326
Production ( 47,493) ( 500,966)
Sale of minerals in place ( 6,363) ( 92,435)
Extensions and discoveries 7,164 66,081
Revision of previous
estimates ( 19,969) 486,311
------- ---------
Proved reserves, Dec. 31, 1997 302,928 2,996,317
Production ( 38,858) ( 419,813)
Sale of minerals in place ( 489) ( 29,446)
Extensions and discoveries 693 19,866
Revision of previous
estimates ( 92,484) ( 41,204)
------- ---------
Proved reserves, Dec. 31, 1998 171,790 2,525,720
Production ( 40,292) ( 409,664)
Sale of minerals in place ( 11,547) ( 27,863)
Extensions and discoveries 1,135 38,608
Revision of previous
estimates 171,902 141,982
------- ---------
Proved reserves, Dec. 31, 1999 292,988 2,268,783
======= =========
PROVED DEVELOPED RESERVES:
December 31, 1997 302,928 2,996,317
======= =========
December 31, 1998 171,790 2,525,720
======= =========
December 31, 1999 292,988 2,268,783
======= =========
Standardized Measure of Discounted Future Net Cash Flows of Proved Oil
and Gas Reserves - Unaudited
The following tables set forth each of the Partnerships' estimated future
net cash flows as of December 31, 1999 relating to proved oil and gas reserves
based on the standardized measure as prescribed in SFAS No. 69:
F-62
<PAGE>
Partnership
-----------------------------
III-A III-B
------------- -------------
Future cash inflows $12,455,503 $ 7,256,479
Future production and
development costs ( 3,591,651) ( 2,155,434)
---------- ----------
Future net cash
flows $ 8,863,852 $ 5,101,045
10% discount to
reflect timing of
cash flows ( 2,727,099) ( 1,471,542)
---------- ----------
Standardized measure
of discounted
future net cash
flows $ 6,136,753 $ 3,629,503
========== ==========
Partnership
-----------------------------
III-C III-D
------------- -------------
Future cash inflows $15,089,799 $14,986,364
Future production and
development costs ( 5,035,345) ( 7,339,663)
---------- ----------
Future net cash
flows $10,054,454 $ 7,646,701
10% discount to
reflect timing of
cash flows ( 3,404,478) ( 2,494,162)
---------- ----------
Standardized measure
of discounted
future net cash
flows $ 6,649,976 $ 5,152,539
========== ==========
F-63
<PAGE>
Partnership
-----------------------------
III-E III-F
------------- -------------
Future cash inflows $75,548,554 $18,276,416
Future production and
development costs ( 41,796,852) ( 7,920,270)
---------- ----------
Future net cash
flows $33,751,702 $10,356,146
10% discount to
reflect timing of
cash flows ( 13,075,980) ( 3,784,411)
---------- ----------
Standardized measure
of discounted
future net cash
flows $20,675,722 $ 6,571,735
========== ==========
Partnership
-------------
III-G
-------------
Future cash inflows $11,819,226
Future production and
development costs ( 5,288,633)
----------
Future net cash
flows $ 6,530,593
10% discount to
reflect timing of
cash flows ( 2,456,134)
----------
Standardized measure
of discounted
future net cash
flows $ 4,074,459
==========
The process of estimating oil and gas reserves is complex, requiring significant
subjective decisions in the evaluation of available geological, engineering, and
economic data for each reservoir. The data for a given reservoir may change
substantially over time as a result of, among other things, additional
development activity, production history, and
F-64
<PAGE>
viability of production under varying economic conditions; consequently, it is
reasonably possible that material revisions to existing reserve estimates may
occur in the near future. Although every reasonable effort has been made to
ensure that the reserve estimates reported herein represent the most accurate
assessment possible, the significance of the subjective decisions required and
variances in available data for various reservoirs make these estimates
generally less precise than other estimates presented in connection with
financial statement disclosures. The Partnerships' reserves were determined at
December 31, 1999 using oil and gas prices of $22.75 per barrel and $2.24 per
Mcf, respectively.
F-65
<PAGE>
INDEX TO EXHIBITS
-----------------
Number Description
- ------ -----------
*4.1 Agreement of Limited Partnership dated November 17, 1989 for
Geodyne Energy Income Limited Partnership III-A.
*4.2 Agreement of Limited Partnership dated January 24, 1990 for Geodyne
Energy Income Limited Partnership III-B.
*4.3 Agreement of Limited Partnership dated February 26, 1990 for
Geodyne Energy Income Limited Partnership III-C.
4.4 The Agreements of Limited Partnership for the following Partnerships
have been previously filed with the Securities and Exchange
Commission as Exhibit 2.1 to Form 8-A filed by each Partnership on
the dates shown below and are hereby incorporated by reference.
Partnership Filing Date File No.
----------- ----------- --------
III-D November 14, 1990 0-18936
III-E January 22, 1991 0-19010
III-F March 25, 1991 0-19102
III-G September 30, 1991 0-19563
*4.5 First Amendment to Certificate of Limited Partnership and First
Amendment to Agreement of Limited Partnership dated February 24, 1993
for Geodyne Energy Income Limited Partnership III-A.
*4.6 First Amendment to Certificate of Limited Partnership and First
Amendment to Agreement of Limited Partnership dated February 24, 1993
for Geodyne Energy Income Limited Partnership III-B.
*4.7 First Amendment to Certificate of Limited Partnership and First
Amendment to Agreement of Limited Partnership dated February 24, 1993
for Geodyne Energy Income Limited Partnership III-C.
*4.8 Second Amendment to Agreement of Limited Partnership dated August
4, 1993 for Geodyne Energy Income Limited Partnership III-A.
*4.9 Second Amendment to Agreement of Limited Partnership dated August
4, 1993 for Geodyne Energy Income Limited Partnership III-B.
F-66
<PAGE>
*4.10 Second Amendment to Agreement of Limited Partnership dated August
4, 1993 for Geodyne Energy Income Limited Partnership III-C.
4.11 Second Amendment to Agreement of Limited Partnership dated August 4,
1993 for Geodyne Energy Income Limited Partnership III-D, filed as
Exhibit 4.4 to Registrant's Current Report on Form 8-K dated August
2, 1993 filed with the SEC on August 10, 1993 and is hereby
incorporated by reference.
4.12 Second Amendment to Agreement of Limited Partnership dated August 4,
1993 for Geodyne Energy Income Limited Partnership III-E, filed as
Exhibit 4.5 to Registrant's Current Report on Form 8-K dated August
2, 1993 filed with the SEC on August 10, 1993 and is hereby
incorporated by reference.
4.13 Second Amendment to Agreement of Limited Partnership dated August 4,
1993 for Geodyne Energy Income Limited Partnership III-F, filed as
Exhibit 4.6 to Registrant's Current Report on Form 8-K dated August
2, 1993 filed with the SEC on August 10, 1993 and is hereby
incorporated by reference.
4.14 Second Amendment to Agreement of Limited Partnership dated August 4,
1993 for Geodyne Energy Income Limited Partnership III-G, filed as
Exhibit 4.7 to Registrant's Current Report on Form 8-K dated August
2, 1993 filed with the SEC on August 10, 1993 and is hereby
incorporated by reference.
*4.15 Third Amendment to Agreement of Limited Partnership dated August
31, 1995 for Geodyne Energy Income Limited Partnership III-A.
*4.16 Third Amendment to Agreement of Limited Partnership dated August
31, 1995 for Geodyne Energy Income Limited Partnership III-B.
*4.17 Third Amendment to Agreement of Limited Partnership dated August 31,
1995 for Geodyne Energy Income Limited Partnership III-C, filed as
Exhibit 4.12 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995 filed with the SEC on April 1, 1996 and is
hereby incorporated by reference.
4.18 Third Amendment to Agreement of Limited Partnership dated August 31,
1995 for Geodyne Energy Income Limited Partnership III-D, filed as
Exhibit 4.13 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995 filed with the SEC on April 1, 1996 and is
hereby incorporated by reference.
F-67
<PAGE>
4.19 Third Amendment to Agreement of Limited Partnership dated August 31,
1995 for Geodyne Energy Income Limited Partnership III-E, filed as
Exhibit 4.14 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995 filed with the SEC on April 1, 1996 and is
hereby incorporated by reference.
4.20 Third Amendment to Agreement of Limited Partnership dated August 31,
1995 for Geodyne Energy Income Limited Partnership III-F, filed as
Exhibit 4.15 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995 filed with the SEC on April 1, 1996 and is
hereby incorporated by reference.
4.21 Third Amendment to Agreement of Limited Partnership dated August 31,
1995 for Geodyne Energy Income Limited Partnership III-G, filed as
Exhibit 4.16 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995 filed with the SEC on April 1, 1996 and is
hereby incorporated by reference.
*4.22 Fourth Amendment to Agreement of Limited Partnership dated July 1,
1996 for Geodyne Energy Income Limited Partnership III-A.
*4.23 Fourth Amendment to Agreement of Limited Partnership dated July 1,
1996 for Geodyne Energy Income Limited Partnership III-B.
*4.24 Fourth Amendment to Agreement of Limited Partnership dated July 1,
1996 for Geodyne Energy Income Limited Partnership III-C.
*4.25 Fifth Amendment to Agreement of Limited Partnership dated November
15, 1999 for Geodyne Energy Income Limited Partnership III-A.
*4.26 Fifth Amendment to Agreement of Limited Partnership dated December
30, 1999 for Geodyne Energy Income Limited Partnership III-B.
*4.27 Fifth Amendment to Agreement of Limited Partnership dated December
30, 1999 for Geodyne Energy Income Limited Partnership III-C.
*23.1 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income
Limited Partnership III-A.
*23.2 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income
Limited Partnership III-B.
*23.3 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income
Limited Partnership III-C.
F-68
<PAGE>
*23.4 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income
Limited Partnership III-D.
*23.5 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income
Limited Partnership III-E.
*23.6 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income
Limited Partnership III-F.
*23.7 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income
Limited Partnership III-G.
*27.1 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership III-A's
financial statements as of December 31, 1999 and for the year ended
December 31, 1999.
*27.2 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership III-B's
financial statements as of December 31, 1999 and for the year ended
December 31, 1999.
*27.3 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership III-C's
financial statements as of December 31, 1999 and for the year ended
December 31, 1999.
*27.4 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership III-D's
financial statements as of December 31, 1999 and for the year ended
December 31, 1999.
*27.5 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership III-E's
financial statements as of December 31, 1999 and for the year ended
December 31, 1999.
*27.6 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership III-F's
financial statements as of December 31, 1999 and for the year ended
December 31, 1999.
*27.7 Financial Data Schedule containing summary financial information
extracted from the Geodyne Energy Income Limited Partnership III-G's
financial statements as of December 31, 1999 and for the year ended
December 31, 1999.
F-69
<PAGE>
All other Exhibits are omitted as inapplicable.
----------
* Filed herewith.
F-70
PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-A
AGREEMENT OF LIMITED PARTNERSHIP
Agreement of Limited Partnership, dated as of November 17, 1989, between
Geodyne Production Company, a Delaware corporation, as General Partner, and
Geodyne Depositary Company, a Delaware corporation, as the Limited Partner.
Whereas, the parties hereto wish to form a limited partnership under the
Oklahoma Revised Uniform Limited Partnership Act pursuant to this Agreement of
Limited Partnership;
Now, Therefore, in consideration of the mutual promises and agreements
made herein, the parties, intending to be legally bound, hereby agree as
follows:
ARTICLE ONE
DEFINED TERMS
The defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article One. The
singular shall include the plural and the masculine gender shall include the
feminine, the neuter and vice versa, as the context requires.
"Accountants" shall mean Ernst & Young or such other nationally
recognized firm of independent certified public accountants as shall be engaged
from time to time by the General Partner for the Partnership.
"Acquisition Reserve Report" shall mean a Hydrocarbon reserve report
made available to the Partnership prepared by a qualified petroleum engineering
firm acceptable to the General Partner in connection with the proposed
acquisition of a Producing Property, which shall include statements (i)
identifying reserves of Hydrocarbons referred to in such report as Proved
Developed Producing Reserves, Proved Developed Non-Producing Reserves or Proved
Undeveloped Reserves, as the case may be, and identifying all computations and
determinations made for purposes of such report, including, without limitation,
the present and future prices for Hydrocarbons and the present and future costs
to produce and develop such Hydrocarbons used in such computations and
determinations, (ii) with respect to the determination of the nature and extent
of the reserves of
-1-
<PAGE>
Hydrocarbons reflected in such report, that the collection, analysis and
evaluation of the basic physical data upon which such determination is based
were performed by such qualified petroleum engineering firm or, if such data
were collected by another Person, that such qualified petroleum engineering firm
has made inquiry with respect to the methods employed in such collection, (iii)
specifying the respective amounts of Proved Developed Producing Reserves, Proved
Developed Non-Producing Reserves and Proved Undeveloped Reserves contained
therein, and (iv) indicating such qualified petroleum engineering firm's opinion
as to the respective estimated present values of future net revenues of each
category of reserves contained therein determined in accordance with criteria
satisfactory to the General Partner and otherwise in accordance with sound
engineering and industry practices, including such standards and practices as
may be promulgated by the Society of Petroleum Engineers of the American
Institute of Mining and Metallurgical Engineers. Any such report may state that
such qualified petroleum engineering firm expresses no opinion and makes no
warranty or representation with respect to the proposed acquisition of such
Producing Property and that such qualified petroleum engineering firm is relying
on information furnished by the General Partner as to the historical volumes of
any Hydrocarbons actually produced and as to the proposed ownership interest of
the Partnership in such Producing Property.
"Acquisitions and Operations Fee" shall mean the fee paid by the
Partnership to the General Partner pursuant to Section 4.12B of this Agreement
in connection with the Partnership's acquisition of Producing Properties and the
conduct of its business operations.
"Act" shall mean the Oklahoma Revised Uniform Limited Partnership Act,
as amended from time to time.
"Activation" or "Activated" shall mean the date on which the Certificate
of Limited Partnership is filed with the Oklahoma Secretary of State.
"Affiliate" shall mean, when used with reference to a specified Person:
(a) any Person directly or indirectly owning, controlling, or holding with power
to vote 10% or more of the outstanding voting securities of the specified
Person; (b) any Person 10% or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote by the
specified Person; (c) any Person directly or
-2-
<PAGE>
indirectly controlling, controlled by, or under common control with, the
specified Person; (d) any Person who is an officer, director, partner or trustee
of, or serves in a similar capacity with respect to, the specified Person or of
which the specified Person is an officer, director, partner or trustee, or with
respect to which the specified Person serves in a similar capacity; and (e) the
spouse or any relative of the specified Person sharing the same household.
Notwithstanding the foregoing, no Person shall be deemed to be an Affiliate
solely by reason of its ownership of units or limited partnership interests in a
limited partnership.
"Affiliated Program" shall mean a drilling or income program (whether in
the form of a limited partnership, general partnership, joint venture or
otherwise), whether currently existing or hereafter formed, interests in which
were or are offered to Persons or entities not engaged in a trade or business
within the oil and gas industry (other than by virtue of its participation in an
Affiliated Program) and of which the General Partner or an Affiliate thereof
serves as general partner, venturer, sponsor or manager.
"Agreement" shall mean this Agreement of Limited Partnership as
originally executed and as amended from time to time.
"Capital Account" shall mean, as to any Partner, an account maintained
on the books of the Partnership in accordance with the provisions of Section 5.4
below.
"Capital Contribution" shall mean the cash contribution of a Partner to
the Partnership.
"Certificate of Limited Partnership" shall mean the certificate of
limited partnership, and any and all amendments thereto and restatements
thereof, filed on behalf of the Partnership as required under the Act.
"Code" shall mean the Internal Revenue Code of 1986, as amended (or any
corresponding provisions of succeeding law).
"Commercial Well" shall mean any Partnership Well which is capable of
producing Hydrocarbons in commercial quantities, including those wells which are
shut-in or which have not been abandoned within 60 days following the
commencement of production. For purposes of this definition, production shall
refer to the commencement of the commercial
-3-
<PAGE>
marketing of Hydrocarbons, and shall not include any spot sales of Hydrocarbon
production as a result of testing procedures.
"Commissions" shall mean the cash fees payable to the Dealer Manager and
the Selected Dealers in connection with their participation in the offering of
Units.
"Consent" shall mean the consent of a Person, given as provided in
Section 12.1, to do the act or thing for which the consent is solicited, or the
act of granting such consent, as the context may require.
"Dealer Manager" shall mean PaineWebber Incorporated, a Delaware
corporation.
"Depositary" shall mean Geodyne Depositary Company, a Delaware
corporation, as the sole initial Limited Partner or any Person who at the time
of reference thereto has been admitted to the Partnership with the consent of
the General Partner as a successor to the interest of Geodyne Depositary Company
in the Partnership, which will upon the Activation of the Partnership acquire
and hold on behalf of the Unit Holders the Limited Partner interests
attributable to the Units issued to the Unit Holders.
"Depositary Receipt" shall mean a document issued in registered form by
the Depositary evidencing the ownership of one or more Units.
"Development Drilling" shall mean all drilling and completing, or
plugging and abandoning (after a determination that a well is not a Commercial
Well), of a Partnership Well drilled to the same reservoir from which another
well or other wells on a Lease or an offset Lease are being produced, or the
recompletion of an existing Partnership Well; provided, however, that
Development Drilling shall not include any Identified Development Drilling.
"Direct Administrative Costs" shall mean the actual and necessary direct
costs attributable to services provided to the Partnership by parties other than
the General Partner or its Affiliates, whether incurred by or for the benefit of
the Partnership directly or incurred by the General Partner or its Affiliates,
including the annual audit fees, legal fees and expenses, the cost of reviewing
tax returns and reports, the cost of evaluations prepared by qualified petroleum
engineering firms pursuant to Section l0.4C of this Agreement and all other
-4-
<PAGE>
such costs directly incurred by or for the benefit of the Partnership. Direct
Administrative Costs shall not include any Organization and Offering Costs or
any General and Administrative Costs.
"Eligible Investor" shall mean a person who is qualified to hold an
interest in oil and gas Leases on federal lands, including offshore areas under
federal laws and regulations in effect from time to time. As of the date of this
Agreement, the term "Eligible Investor" means: (i) a citizen of the United
States who has attained the age of majority under the laws of the state in which
he resides, (ii) an association (including a partnership, joint tenancy or
tenancy in common) organized or existing under the laws of the United States or
any state or territory thereof, all of the members of which are citizens of the
United States or (iii) a corporation organized under the laws of the United
States or any state or territory thereof, of which corporation, to the best of
its knowledge, not more than 5% of the voting stock, or of all the stock, is
owned or controlled by citizens of countries that deny to United States citizens
privileges to own stock in corporations holding oil and gas Leases similar to
the privileges of non-United States citizens to own stock in corporations
holding an interest in federal Leases, and, in each case, whose interest, direct
or indirect, in federal oil and gas Leases, applications, offers and options
therefor does not exceed 246,000 acres in the same state, of which no more than
200,000 acres are under option, nor does it exceed 300,000 acres in each of the
northern and southern leasing districts of Alaska, of which no more than 200,000
acres are held under option in each of such districts.
"Engineering Review Letter" shall mean a document prepared by a
qualified petroleum engineering firm acceptable to the General Partner in
connection with the proposed acquisition of a Producing Property, which shall
include statements indicating that (i) such qualified petroleum engineering firm
has reviewed an oil and gas reserve report prepared by the engineering staff of
Geodyne Resources, Inc. or an Affiliate, (ii) in the opinion of such qualified
petroleum engineering firm, the reserve report was prepared in accordance with
sound engineering and industry practices, including such standards and practices
as may be promulgated by the Society of Petroleum Engineers of the American
Institute of Mining and Metallurgical Engineers, and (iii) with respect to the
determination of the nature and extent of the reserves of Hydrocarbons reflected
in such report, such qualified petroleum engineering firm has made inquiry with
respect to the methods employed in the collection, analysis and
-5-
<PAGE>
evaluation of the basic physical data upon which such determination is based.
"Farmout" shall mean an arrangement whereby the owner of a Lease or
Working Interest agrees to assign his interest in certain specific acreage to
the assignee, retaining some interest such as an overriding royalty interest,
oil and gas payment, offset acreage or other type of interest, subject to the
drilling of one or more specific wells or other performance as a condition of
the assignment.
"Fiscal Year" shall mean the calendar year.
"General and Administrative Costs" shall mean all customary and routine
legal, accounting, data processing, depreciation (other than depreciation
relating to real property), geological, engineering, travel, office rent,
telephone, secretarial, employee compensation and benefits, and other items of a
general and administrative nature, whether like or unlike the foregoing, and any
other incidental expenses reasonably necessary to the conduct of the
Partnership's business, and generated by the General Partner or any Affiliate
other than an Affiliated Program computed on a cost basis, determined by the
General Partner in accordance with generally accepted accounting principles and
subject to review by the Accountants in connection with the annual audit of the
Partnership and its Affiliates. General and Administrative Costs shall not
include any Direct Administrative Costs or Organization and Offering Costs of
the Partnership.
"General Partner" shall mean Geodyne Production Company, a Delaware
corporation, acting in such capacity, and any other Person admitted as an
additional or substituted General Partner pursuant to the provisions of Article
Six of this Agreement.
"Hydrocarbons" shall mean crude oil, natural gas, condensate, natural
gas liquids and other liquid or gaseous hydrocarbons and any minerals produced
in association therewith.
"Identified Development Drilling" shall mean all drilling and
completing, or plugging and abandoning (after a determination that a well is not
a Commercial Well), of a Partnership Well drilled by or on behalf of the
Partnership to a reservoir on a Lease or an offset Lease constituting all or a
portion of a Producing Property or the recompletion of an existing Partnership
Well, where (i) the drilling or recompletion of such Partnership Well commences
after the
-6-
<PAGE>
acquisition of such Producing Property by the Partnership and is conducted in
order to commence production of Hydrocarbons from Proved Undeveloped Reserves
identified in the Acquisition Reserve Report or Engineering Review Letter
prepared in connection with such Producing Property, (ii) the costs of
development of the Proved Undeveloped Reserves were taken into account in such
Acquisition Reserve Report or Engineering Review Letter in valuing such Proved
Undeveloped Reserves attributable to such Producing Property, and (iii) a
portion of the cost paid by the Partnership for such Producing Property is
attributed by such Acquisition Reserve Report or Engineering Review Letter to
such Proved Undeveloped Reserves. The term, Identified Development Drilling,
shall also refer to any Partnership Wells drilled or recompleted on a Producing
Property subsequent to the initial Identified Development Drilling conducted on
such Producing Property in order to commence production of Hydrocarbons from
Proved Undeveloped Reserves (in addition to those identified in the related
Acquisition Reserve Report or Engineering Review Letter) which have been
categorized by the General Partner as such by virtue of production obtained from
prior Identified Development Drilling conducted on such Producing Property. Any
reference to costs incurred in connection with Identified Development Drilling
shall include the interest, commitment fees and other financing charges and
expenses of Partnership borrowings incurred to finance Identified Development
Drilling.
"Improved Recovery" shall mean all methods of supplementing natural
forces and mechanisms of primary recovery or otherwise increasing the ultimate
recovery from a Partnership Property, including, but not limited to, water
flooding, pressure maintenance, gas cycling, fluid injection, polymer flooding,
chemical flooding and the use of miscible displacement fluids.
"Incapacity" or "Incapacitated" shall mean the entry of any order for
relief under any bankruptcy law (except that, in the case of the General
Partner, the term "bankruptcy" shall mean only being subject to Chapter 7 of the
Bankruptcy Code of 1984), the adjudication of interdiction, of incompetence, or
of insanity, or the death, dissolution or termination (other than by merger or
consolidation under which the surviving entity agrees to assume all of the
obligations and responsibilities of the merged or consolidated Person set forth
in this Agreement), as the case may be, of any Person.
-7-
<PAGE>
"Independent Petroleum Engineer" shall mean a Person with no material
relationship to the General Partner or its Affiliates who is in the business of
rendering fair market value 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.
"Investment Income" shall mean all interest and dividend income earned
on temporary investments of the Partnership at any time prior to the time at
which an amount equal to the Capital Contributions to the Partnership available
for the acquisition of Producing Properties have been (i) expended or (ii)
returned pursuant to Section 3.4 of this Agreement.
"I/P Partnership" shall mean a partnership formed as a part of the
program captioned "PaineWebber/Geodyne Institutional/Pension Energy Income
Partners" and any subsequent Affiliated Program formed by the General Partner or
any Affiliate for investment primarily by pension and other tax-exempt plans and
accounts.
"Lease" shall mean a lease, mineral interest, royalty or overriding
royalty covering Hydrocarbons (or a contractual right to acquire such an
interest), or an undivided interest therein or portion thereof, together with
all easements, permits, licenses, servitudes and rights-of-way situated upon, or
used or held for future use in connection with, the exploration, development or
operation of such interest.
"Limited Partner" shall mean the Depositary and any Substituted Limited
Partners.
"Net Profits Interest" shall mean an interest in one or more Producing
Properties which entitles the holder thereof to a share of the gross revenues
from the production of Hydrocarbons from the Producing Property or Properties
less all operating, production, development, transportation, transmission and
marketing expenses, and all severance, sales, ad valorem and excise taxes
attributable to such production.
"Notification" shall mean a writing, containing the information required
by this Agreement to be communicated to any Person, hand delivered or sent by
registered or certified mail, return receipt requested, postage prepaid, to such
Person at the last address of such Person reflected on the official
-8-
<PAGE>
records of the Partnership, the date of the certified receipt (or such other
evidence of receipt) therefor being deemed the date of the giving of
Notification; provided, however, that any written communication containing the
information sent or delivered to the Person and actually received by the Person
shall constitute Notification for all purposes of this Agreement.
"Operating Costs" shall mean all expenditures made and costs incurred by
the Partnership with respect to (i) the production and marketing of Hydrocarbons
from completed Partnership Wells, including labor, fuel, repairs, hauling,
materials, supplies, utility charges and other costs incident to or therefrom,
costs of maintaining inventories incidental to the operations of Producing
Properties, costs of making transfers of lease and well equipment to and from
Partnership Wells, ad valorem and severance taxes, insurance and casualty loss
expense, and compensation to well operators or others for services rendered in
conducting such operations; (ii) the interest, commitment fees and other finance
charges and expenses of Partnership borrowings incurred in connection with
Development Drilling and Improved Recovery projects; and (iii) processing
facilities, pipelines, gas sales facilities, Improved Recovery projects, and
other procedures and facilities necessary to produce efficiently and market the
Hydrocarbon reserves from a Producing Property, all to the extent such costs and
expenditures are not Property Acquisition Costs.
"Organization and Offering Costs" shall mean all costs and expenses
incurred by the General Partner and its Affiliates in connection with the
organization and activation of the Partnership, including, without limitation,
the legal, printing, accounting and other direct and indirect costs incurred in
connection with preparing this Agreement and the preparation and filing of a
certificate of limited partnership, the costs incurred with respect to the
registration for offer and sale of the Units under applicable federal and state
securities laws, the wholesale offering and marketing fees and expenses of the
Dealer Manager and a subsidiary of Geodyne Resources, Inc. which is a registered
broker-dealer, and other front-end fees. Organization and Offering Costs shall
not include the Commissions paid to the Dealer Manager or reallowed to the
Selected Dealers, but shall include fees and expenses (including expense
reimbursements) paid to Persons in connection with the offering and issuance of
Units, including due diligence expenses.
-9-
<PAGE>
"Partner" shall mean the General Partner or any Limited Partner of the
Partnership.
"Partnership" shall mean the limited partnership formed hereby.
"Partnership Account" shall mean the bank account or accounts
established by the General Partner pursuant to Section 10.3 of this Agreement.
"Partnership Property" shall mean all interest, property and right of
any type owned by the Partnership.
"Partnership Well" shall mean any well in which the Partnership has an
interest.
"Payout" shall mean that time at which cash distributions have been made
by the Partnership to the Unit Holders (together with their predecessors in
interest) in an aggregate amount equal to $100 for each whole Unit held by each
such Unit Holder.
"Person" shall mean any individual, partnership, corporation, trust or
other entity.
"Prior Limited Partnership" shall mean any limited partnership activated
prior to the Activation of the Partnership of which depositary units or units of
limited partnership interest were offered and sold pursuant to the Prospectus or
pursuant to the prospectus prepared for the PaineWebber/Geodyne Energy Income
Program I, the PaineWebber/Geodyne Energy Income Program II or the
PaineWebber/Geodyne Institutional/Pension Energy Income Partners or any
subsequent Affiliated Programs pursuant to which I/P Partnerships are formed.
"Producing Property" shall mean any property (or interest in such
property) with a well or wells capable of producing Hydrocarbons in commercial
quantities or properties unitized with such properties or properties adjacent to
such properties which are acquired as an incidental part of the acquisition of
such properties. The term also includes well machinery and equipment, gathering
systems, storage facilities or processing installations or other equipment and
property associated with the production of Hydrocarbons. Interests in properties
may include Working Interests, production payments, Royalties and other
nonworking and nonoperating interests.
-10-
<PAGE>
"Property Acquisition Costs" shall mean, without duplication, the sum of
(i) the prices paid by the Partnership or the General Partner or an Affiliate to
acquire a Producing Property ultimately sold to the Partnership, including the
price paid to acquire a purchase option with respect to a Producing Property,
lease bonuses and equipment costs associated therewith; (ii) title insurance or
examination costs, brokers' commissions and finders' fees, filing fees,
recording fees, transfer taxes, if any, and like charges in connection with the
acquisition of Producing Properties; (iii) delay rentals and ad valorem taxes
paid by the buyer with respect to such property to the date of its transfer to
the Partnership; (iv) interest and other financing fees and costs actually
incurred by the General Partner or its Affiliates to acquire or maintain such
Producing Properties prior to their transfer to the Partnership; and (v) all
reasonable, necessary and actual expenses incurred by the General Partner or an
Affiliate in connection with the acquisition of Producing Properties and paid to
third parties who are not Affiliates for geological, geophysical, seismic, land,
engineering, drafting, accounting, auditing, legal and other like services,
including the Partnership's costs incurred (to the extent consistent with
generally accepted industry standards) in connection with the review of proposed
acquisitions of Producing Properties whether or not acquired and the preparation
and review of Acquisition Reserve Reports and Engineering Review Letters, all
allocated to the property in accordance with the allocation procedures used by
the General Partner, any of its Affiliates or a Partnership; provided that the
portion of the General Partner's or Affiliate's expenses allocated to the
property, as set forth in items (iii), (iv) and (v), shall have been incurred
not more than 36 months prior to the property transaction.
"Property Investment Period" shall have the meaning set forth in Section
5.2.
"Prospect" shall mean an area in which the Partnership owns or intends
to own one or more oil and gas interests which is geographically defined on the
basis of geological data by the General Partner and which is reasonably
anticipated by the General Partner to contain at least one reservoir.
"Prospectus" shall mean the prospectus pursuant to which the Units were
offered, including all supplements or amendments thereto delivered in such
offering, if any.
-11-
<PAGE>
"Proved Reserves" shall mean those quantities of Hydrocarbons, which,
upon analysis of geologic and engineering data, appear with reasonable certainty
to be recoverable in the future from known Hydrocarbon reservoirs under existing
economic and operating conditions. Proved Reserves are limited to those
quantities of Hydrocarbons which can be expected, with little doubt, to be
recoverable commercially at current prices and costs, under existing regulatory
practices and with existing conventional equipment and operating methods.
Depending upon their status of development, such Proved Reserves shall be
subdivided into the following classifications and have the following
definitions:
(a) "Proved Developed Reserves" shall mean Proved Reserves which can
be expected to be recovered through existing wells with existing
equipment and operating methods. This classification shall include:
(1) "Proved Developed Producing Reserves" which are Proved
Developed Reserves which are expected to be produced from existing
wells; and
(2) "Proved Developed Non-Producing Reserves" which are Proved
Developed Reserves which exist behind the casing of existing wells,
or at minor depths below the present bottom of such wells, which are
expected to be produced through these wells in the predictable
future, where the cost of making Hydrocarbons available for
production should be relatively small compared to the cost of a new
well.
Additional Hydrocarbons expected to be obtained through the
application of Improved Recovery techniques are included as "Proved
Developed Reserves" only after testing by a pilot project or after the
operation of an installed program has confirmed through production
responses that increased recovery will be achieved.
-12-
<PAGE>
(b) "Proved Undeveloped Reserves" shall mean all 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. Such reserves on undrilled acreage are limited to those
drilling units offsetting productive units which are reasonably certain
of production when drilled; provided that Proved Reserves for other
undrilled units can be claimed where it can be demonstrated with
certainty, based on accepted geological, geophysical and engineering
studies and data, that there is continuity of production from an
existing productive formation. No estimates for Proved Undeveloped
Reserves are attributable to any acreage for which Improved Recovery is
contemplated, unless the techniques to be employed have been proved
effective by actual tests in the same area and reservoir.
"Revenues" are the Partnership's gross revenues from all sources,
including interest income, proceeds from sales of production, the Partnership's
share of revenues from partnerships or joint ventures of which it is a member,
proceeds from sales or other dispositions of Hydrocarbon properties or other
Partnership assets, provided that contributions to Partnership capital by the
Partners and the proceeds of any Partnership borrowings are specifically
excluded.
"Royalty" shall mean an interest, including an overriding royalty but
excluding a Net Profits Interest, in gross production or the proceeds therefrom
which does not require the owner thereof to bear any of the cost of production,
development operation or maintenance.
"Selected Dealer" shall mean a member in good standing of the National
Association of Securities Dealers, Inc. which has been selected by the Dealer
Manager to offer and sell the Units.
"State" shall mean the State of Oklahoma.
"Subscription Agreement" shall mean the Subscription Agreement in the
form attached to the Prospectus as Exhibit B.
"Subsequent Limited Partnership" shall mean any limited partnership
activated after the Activation of the Partnership of which Units are offered and
sold pursuant to the Prospectus.
-13-
<PAGE>
"Substituted Limited Partner" shall mean any Unit Holder admitted to the
Partnership as a Substituted Limited Partner pursuant to Section 7.3 or Sections
8.1 and 8.2 of this Agreement.
"Unit" shall mean an increment of the attributes of the interest as a
Limited Partner that is either (i) assigned to a Unit Holder by the Depositary
and is evidenced by a Depositary Receipt or (ii) unless the context otherwise
requires, is held directly by a Substituted Limited Partner and, in either case,
which increment represents a subscription amount of $100.
"Unit Holders" shall mean any Person who holds Depositary Receipts in
accordance with Section 7.1 or Section 8.1 hereof as reflected in the records of
the Partnership and the Depositary and, unless the context otherwise requires,
any Person who becomes a Substituted Limited Partner.
"Unit Holders' Subscriptions" shall mean the aggregate dollar amount
(initially subscribed for by Unit Holders) determined by multiplying the number
of Units issued to the Unit Holders by $100.
"Working Interest" shall mean the interest (whether held directly or
indirectly) in a Lease which is burdened with the obligation to pay some portion
of the expense of production, development, operation or maintenance. A Working
Interest does not include a Net Profits Interest.
ARTICLE TWO
NAME, PLACE OF BUSINESS AND OFFICE; TERM
Section 2.1 Name, Place of Business and Office, Agent
------------------------------------------------------
The Partnership shall be conducted under the name PaineWebber/ Geodyne
Energy Income Limited Partnership III-A. The business of the Partnership may,
however, be conducted under any other name deemed necessary or desirable by the
General Partner in order to comply with applicable laws. The office and
principal place of business of the Partnership shall be c/o Geodyne Production
Company, 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The
agent for service of process on the Partnership shall be Geodyne Production
Company, 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-
-14-
<PAGE>
3708. The General Partner may change the principal place of business and the
location of such office and may establish such additional offices as it deems
advisable from time to time; provided, however, that in the event the principal
place of business of the Partnership shall be changed, the General Partner shall
provide Notification thereof to the Unit Holders. The General Partner shall not
be obligated to provide a copy of the certificate of limited partnership as
filed with the Oklahoma Secretary of State to the Depositary or Unit Holders. A
Unit Holder may obtain a copy of such certificate of limited partnership by
making a written request therefor to the General Partner.
Section 2.2 Purpose
--------------------
The business and purpose of the Partnership shall be to acquire, own,
hold, operate, explore, develop, trade, sell and exchange Hydrocarbon properties
and interests therein of all kinds onshore and offshore in the continental
United States, including, without limitation, interests in general or limited
partnerships, joint ventures and other entities that hold or are formed to
acquire interests in such properties or interests; to engage in Development
Drilling, Identified Development Drilling or other drilling operations
specifically authorized by this Agreement, and enhanced recovery operations
thereon; to produce, transport, market, purchase and trade Hydrocarbons and
products thereof; to purchase, lease, own, hold, operate, sell and exchange all
equipment, machinery, facilities, systems and plans necessary or appropriate for
such purposes; and to do any and all things necessary or proper in connection
with or incident to the foregoing activities.
Section 2.3 Term
-----------------
The Partnership shall continue in force and effect for a period of ten
(10) years from the date of its Activation, provided that the General Partner
may extend the term of the Partnership for up to five periods of two years each
if it believes each such extension is in the best interests of the Unit Holders,
or until dissolution prior thereto pursuant to the provisions hereof.
-15-
<PAGE>
ARTICLE THREE
PARTNERS AND CAPITAL
Section 3.1 General Partner
---------------------------
A. The name, address and Capital Contribution of the General Partner are
set forth in Schedule A which is attached hereto and incorporated herein by
reference.
B. The General Partner shall not be required to make any additional
Capital Contribution except as set forth in the next sentence and in Sections
3.4 and 9.2C. The General Partner shall contribute an amount of cash sufficient
to pay its share of costs allocated to it pursuant to Section 5.1 of this
Agreement as such costs are incurred to the extent that the amount of Revenues
allocated to it (and/or the amount of Partnership borrowings incurred on its
behalf) is insufficient to pay such costs.
Section 3.2 Limited Partner and Unit Holders
---------------------------------------------
A. The name, address and Capital Contribution of the Depositary as
Limited Partner are set forth in Schedule A which is attached hereto and
incorporated herein by reference.
B. Neither th Depositary nor any Unit Holder shall be required to make
any additional Capital Contribution to the Partnership.
C. The Depositary shall engage in no business activity and shall incur
no liabilities other than acting as Depositary for the Partnership or any other
limited partnership that is an Affiliated Program. The Depositary shall not
amend its Certificate of Incorporation or By-laws without the prior Consent of
the Unit Holders holding a majority of the outstanding Units.
-16-
<PAGE>
Section 3.3 Application of Capital Contributions
-------------------------------------------------
The General Partner shall deposit in the Partnership Account the Capital
Contributions and apply such Capital Contributions to (i) pay to the General
Partner the aggregate amount due pursuant to Section 4.12B in consideration of
the General Partner's payment of Organization and Offering Costs, (ii) pay
Commissions, and (iii) pay to the General Partner the Acquisitions and
Operations Fee. The balance of such Capital Contributions shall be held in the
Partnership Account to be applied to the payment of Property Acquisition Costs
and, to the extent not payable out of Revenues or Investment Income, Operating
Costs, General and Administrative Costs, Direct Administrative Costs and other
Partnership costs; provided, however, that such funds may be temporarily
invested prior to the payment of such costs in accordance with Section 10.3.
Section 3.4 Certain Returns of Capital
---------------------------------------
Any portion of the Capital Contribution of the Partnership (except for
necessary operating capital) that has not been expended or that is not, or in
the determination of the General Partner, will not be committed for expenditure
by the second anniversary of the Activation of the Partnership will promptly be
refunded to the Unit Holders as a return of part of their Capital Contributions
at the earlier of such determination or the second anniversary of the Activation
of the Partnership. In addition, the General Partner shall contribute cash to
the Partnership (with respect to which its Capital Account will be credited) in
an amount equal to that portion of the total of (i) the amount paid to the
General Partner in respect of the Acquisitions and Operations Fee, (ii) the
amount paid to the General Partner in consideration of its payment of the
Organization and Offering Costs, and (iii) the Commissions, which are
attributable (on a proportionate basis) to the unexpended amount of Capital
Contributions so refunded, which cash shall be refunded to the Unit Holders
together with the unexpended Capital Contributions so refunded. All amounts so
refunded to the Unit Holders shall reduce dollar for dollar their Capital
Accounts.
-17-
<PAGE>
Section 3.5 Partnership Capital
--------------------------------
A. No Partner shall be paid interest on any Capital Contribution to the
Partnership or on such Partner's Capital Account, notwithstanding any
disproportion therein as between Partners.
B. Except as provided in Sections 3.4, 6.1 and 9.2 of this Agreement,
neither the General Partner nor any Unit Holder shall have the right to withdraw
from the Partnership or to withdraw or receive any return of its Capital
Contribution. Under circumstances involving a return of any Capital
Contribution, no Unit Holder shall have priority over any other Unit Holder nor
shall any Unit Holder have the right to receive any property other than cash,
except as may otherwise be provided in this Agreement.
Section 3.6 Liability of Partners
----------------------------------
A. Except as provided in the Act, neither the Depositary nor the Unit
Holders shall be personally liable for any debts, liabilities, contracts or
obligations of the Partnership. To the extent that any distribution is deemed to
constitute a return of capital under the Act, the General Partner shall not seek
to recover any distribution unless the General Partner has applied all other
available Partnership assets to the payment of liabilities of the Partnership
and the liabilities of the Partnership, other than to Partners, have not been
fully paid, satisfied, assumed or discharged. The Unit Holders that are not
Substituted Limited Partners shall have no obligation to return any funds
distributed to them by the Partnership that are later determined to be a return
of the Capital Contributions. In no event shall the Depositary or any Unit
Holder be obligated to make any contribution to the Partnership for any purpose
whatsoever other than Capital Contributions of the Depositary representing the
proceeds of the offering of Units.
B. Each of the General Partner and any successor or additional General
Partner subsequently admitted to the Partnership agrees that it shall remain
liable for any obligation or recourse liability of the Partnership incurred
during the period in which it is a General Partner and to the extent the
Partnership has incurred liability.
-18-
<PAGE>
ARTICLE FOUR
MANAGEMENT
Section 4.1 Management and Control of the Partnership
------------------------------------------------------
A. Subject to the Consent of the Unit Holders as and when required by this
Agreement, the General Partner, within the authority granted to it under and in
accordance with the provisions of this Agreement, shall have the full and
exclusive right to manage and control the business and affairs of the
Partnership and to make all decisions regarding the business of the Partnership
and shall have all of the rights, powers and obligations of a general partner of
a limited partnership under the laws of the State.
B. The Depositary and the Unit Holders, as such, shall not participate in
the management of or have any control over the Partnership's business nor shall
the Depositary or the Unit Holders, as such, have the power to represent, act
for, sign for or bind the General Partner or the Partnership. The Depositary and
each of the Unit Holders hereby Consent to the exercise by the General Partner
of the powers conferred on it by this Agreement.
Section 4.2 Authority of the General Partner
---------------------------------------------
A. In addition to any other rights and powers which the General Partner
may possess under this Agreement and the Act, the General Partner shall, except
and subject to the extent otherwise provided or limited in this Agreement, have
all specific rights and powers required or appropriate to its management of the
Partnership's business which, by way of illustration but not by way of
limitation, shall include the following rights and powers to:
(i) expend the Capital Contributions of the Partners and apply
Partnership Revenues in furtherance of the business of the Partnership;
-19-
<PAGE>
(ii) acquire, explore, develop, manage and operate Hydrocarbon
properties and interests therein (including interests in corporations and
partnerships owning Hydrocarbon properties if in the General Partner's
judgment such purchase is a necessary or advisable step in acquiring
interests in Producing Properties held by any such corporation or
partnership, provided, no such purchase will be made for the purpose of
investment in the securities of any such corporation or partnership, the
Partnership will not conduct or participate in a hostile tender offer, and
no such purchase will be made unless there is assurance that sufficient
control of the corporation or partnership can be obtained in the initial
acquisition to liquidate it, and it is determined the purchase would not
thereby render the Partnership an investment company within the meaning of
the Investment Company Act of 1940, and provided further the Partnership's
interest in the underlying assets of any such corporation or partnership
is distributed as soon as practical thereafter to the Partnership in
redemption for the Partnership's interest in such corporation or
partnership) of all kinds and hold all such property, interests and units
in the name of the Partnership; provided, however, that in connection
therewith, the General Partner shall, contemporaneously with the
acquisition of a Producing Property, or as soon as practicable thereafter,
file or cause to be filed for recordation an appropriate conveyance or
agreement evidencing the Partnership's interest in such Producing Property
in the jurisdiction where such Producing Property is located pursuant to
such jurisdiction's Uniform Commercial Code (or comparable law) and/or in
the real property records of the clerk or recorder of the county in which
the Producing Property is situated; and, provided, further, that filings
of such conveyances or agreements shall also be made as the General
Partner believes necessary to establish the Partnership's priority of
interest; and, provided, further, Producing Properties may be held in the
name of a nominee for the Partnership if such action is deemed by the
General Partner to be necessary or beneficial to the Partnership and the
nominee holding title conducts no other business or operations;
-20-
<PAGE>
(iii) execute such instruments and agreements, do such acts, employ
such persons and contract for such services as the General Partner
determines are necessary or appropriate to conduct the Partnership's
business, including the employment of the General Partner or any Affiliate
as an operator, and the entering into management and advisory contracts;
(iv) execute, in the name of the Partnership, contracts for the sale
of Hydrocarbons and division orders and transfer orders as necessary or
incident to the sale of production on behalf of the Partnership;
(v) produce, treat, transport and market Hydrocarbons, execute
processing contracts and transportation contracts and enter into contracts
for the marketing or sale of Hydrocarbons and other marketing agreements
in the name of the Partnership, whether or not extending beyond the term
of the Partnership;
(vi) execute offers for United States and any state Leases on behalf
of the Partnership; execute and file requests for approval of assignments
of interests in United States and any state Leases, together with any and
all contracts for the option, sale or purchase of such Leases or the sale
or purchase of any products therefrom; execute any plans of development
under unit agreements, conveyances, subleases, mortgages, deeds of trust,
affidavits or reports concerning the drilling of wells and production,
designations of operator, Lease bonds, operator's bonds and consents of
surety; and in general do all things necessary or desirable on behalf of
the Partnership regarding any United States or state Leases or offers
therefor;
(vii) enter into any partnership agreement, sharing arrangement or
joint venture with any Person acceptable to the General Partner and which
is engaged in any business or transaction in which the Partnership is
authorized to engage, provided that the Partnership shall not be deemed
thereby to be an "investment company" for purposes of the Investment
Company Act of 1940, as amended;
-21-
<PAGE>
(viii) enter into and execute drilling contracts, Farmout
agreements, operating agreements, unitization agreements, pooling
agreements, unit or pooling designations, recycling contracts, dry hole,
bottom hole and acreage contribution letters and agreements, participation
agreements, agreements and conveyances respecting rights-of-way,
agreements respecting surface and subsurface storage and any other
agreements customarily employed in the oil and gas industry in connection
with the acquisition, exploration, development, operation or abandonment
of any Leases, and any and all other instruments or documents considered
by the General Partner to be necessary or appropriate to conduct the
business of the Partnership;
(ix) pay or elect not to pay delay rentals on Partnership Properties
as appropriate in the judgment of the General Partner, it being understood
that the General Partner will not be liable for failure to make correct or
timely payments of delay rentals if such failure were due to any reason
other than negligence or lack of good faith;
(x) abandon or otherwise dispose of any interest in Hydrocarbon
properties acquired for the Partnership upon such terms and for such
consideration as the General Partner may determine;
(xi) sell production payments payable out of all or any part of any
one or more of the Producing Properties acquired by the Partnership and
devote and expend the proceeds of any such sale for any of the purposes of
the Partnership for which the proceeds of borrowings may be applied;
(xii) borrow monies from time to time, for the purposes and subject
to the limitations stated in Section 4.3C, in the form of recourse or
nonrecourse borrowings, or otherwise draw, make, execute and issue
promissory notes and other negotiable or nonnegotiable instruments and
evidences of indebtedness, and secure the payments of the sums so borrowed
and mortgage, pledge or assign in trust all or any part of Partnership
Property, including Producing Properties, production and proceeds of
production, or assign any monies owing or to be owing to the Partnership,
and engage in any other means of financing customary in the petroleum
industry; provided, however,
-22-
<PAGE>
that a creditor who makes a nonrecourse loan to the Partnership
shall not have or acquire, at any time as a result of making the loan, any
direct or indirect interest in the profits, capital or property of the
Partnership other than as a secured creditor;
(xiii) invest Capital Contributions and other Partnership funds
temporarily in the investments set forth in Section 10.3;
(xiv) employ on behalf of the Partnership agents, employees,
accountants, lawyers, geologists, geophysicists, landpersons, clerical
help and such other assistance and consulting and other services as the
General Partner may deem necessary or convenient and to pay therefor such
remuneration as the General Partner may deem reasonable and appropriate;
(xv) purchase, lease, rent or otherwise acquire or obtain the use of
machinery, equipment, tools, materials, and all other kinds and types of
real or personal property that may in any way be deemed necessary,
convenient or advisable in connection with carrying on the business of the
Partnership, purchase and establish adequate inventories of equipment and
material required or expected to be required in connection with its
operations, dispose of tangible lease and well equipment for use or used
in connection with Partnership Property, and incur expenses for travel,
telephone, telegraph, insurance and for such other things, whether similar
or dissimilar, as may be deemed necessary or appropriate for carrying on
and performing the business of the Partnership;
(xvi) enter into such agreements and contracts with such parties and
give such receipts, releases and discharges with respect to any and all of
the foregoing and any matters incident thereto as the General Partner may
deem advisable or appropriate;
(xvii) guarantee the payment of money or the performance of any
contract or obligation by any person, firm or corporation on behalf of the
Partnership;
-23-
<PAGE>
(xviii) sue and be sued, pursue and participate in arbitration
proceedings, complain and defend and settle and compromise claims or
causes of action in the name and on behalf of the Partnership;
(xix) make such classifications and determinations as the General
Partner deems advisable, having due regard for any relevant generally
accepted accounting principles and oil and gas industry practices;
(xx) purchase insurance, or extend the General Partner's or its
Affiliates' insurance, at the Partnership's expense, to protect the
Partnership Property and the business of the Partnership against loss, and
to protect the General Partner against liability to third parties arising
out of Partnership activities, such insurance to be in such limits, to be
subject to such deductibles and to cover such risks as the General Partner
deems appropriate;
(xxi) pay all ad valorem taxes levied or assessed against the
Partnership Properties, all taxes upon or measured by the production of
Hydrocarbons therefrom and all other taxes (other than income taxes)
directly related to operations conducted by the Partnership;
(xxii) enter into agreements on behalf of the Partnership with
Affiliates;
(xxiii) sell or otherwise dispose of for value all or substantially
all of the properties and other assets of the Partnership to the General
Partner or any of its Affiliates or Affiliated Programs or any other
Person and receive for the Partnership consideration consisting of cash,
securities, other property or any other form of consideration, or any
combination thereof, at such prices and in such forms of consideration as
it deems in the best interests of the Unit Holders; provided, however,
that no such sale shall be consummated without the prior Consent of the
Unit Holders pursuant to the provisions of Section 4.5D of this Agreement.
In the event of the dissolution of the Partnership followed by any such
sale of the Partnership's assets, the General Partner shall, subject to
the provisions of Section 9.2 of this Agreement, be appointed the
Liquidating Agent for the Partnership;
-24-
<PAGE>
(xxiv) make, exercise or deliver any general assignment for the
benefit of the Partnership's creditors, but only upon the prior Consent of
the Unit Holders pursuant to the provisions of Section 4.5D;
(xxv) take such other action and perform such other acts as may be
deemed appropriate to carry out the business of the Partnership;
(xxvi) perform all duties imposed by Sections 6221 through 6232 of
the Code on the General Partner as "tax matters partner" of the
Partnership, including (but not limited to) the following: (a) the power
to conduct all audits and other administrative proceedings with respect to
Partnership tax items; (b) the power to extend the statute of limitations
for all Partners with respect to Partnership tax items; (c) the power to
file a petition with an appropriate federal court for review of a final
Partnership administrative adjustment; and (d) the power to enter into a
settlement with the Internal Revenue Service on behalf of, and binding
upon, each of the Unit Holders having less than a 1% interest in Revenues
unless such Unit Holder notifies the Internal Revenue Service and the
General Partner that the General Partner may not act on its behalf; and
(xxvii) cause the Partnership to redeem or repurchase the Units held
by a Unit Holder at a purchase price determined by the General Partner if
at any time the Partnership or General Partner receives an opinion of
counsel that there exists substantial risks of cancellation or forfeiture
of any property in which the Partnership has an interest because of the
citizenship or other status of that Unit Holder.
B. No person, firm or corporation dealing with the Partnership shall be
required to inquire into the authority of the General Partner to take or refrain
from taking any action or make or refrain from making any decision, but any
person so inquiring shall be entitled to rely upon a certificate of the General
Partner as to its due authorization.
-25-
<PAGE>
Section 4.3 Sales, Purchases and Operation of Producing
Properties; Additional Financing
------------------------------------------------------------
A. Producing Properties whose purchase price exceeds 10% of the Unit
Holders' Subscriptions may be acquired by the Partnership only if an Acquisition
Reserve Report or an Engineering Review Letter has been received and evaluated
by the General Partner with respect thereto.
B. Neither the General Partner, Geodyne Resources, Inc. nor any Person
controlled by Geodyne Resources, Inc. shall sell, transfer or convey any or all
of its interest in Producing Properties to the Partnership or purchase or
acquire any oil and gas properties or interest from the Partnership, directly or
indirectly, except pursuant to transactions that are fair and reasonable to the
Unit Holders under the circumstances at the time any such transaction is
consummated. Except as otherwise provided in Section 4.3E below, such
transactions shall be further subject to the following restrictions:
(i) Prior to the date on which the Partnership has acquired its
final Producing Property, neither the General Partner, Geodyne Resources,
Inc. nor any Person controlled by Geodyne Resources, Inc. (other than an
Affiliated Program) shall acquire any Producing Property after the
Activation of the Partnership unless the General Partner shall have
determined that the acquisition by the Partnership of such Producing
Property, or an interest therein, would not be in the best interests of
the Partnership;
(ii) Any purchase or sale of a Producing Property from or to the
General Partner or any Affiliate shall be made at the Property Acquisition
Cost for such Producing Property as adjusted for intervening operations,
unless the General Partner or such Affiliate has reasonable grounds to
believe that cost is materially more or less than the fair market value of
such property, in which case such sale or purchase shall be made at a
price equal to the fair market value thereof as determined by an
Independent Petroleum Engineer;
-26-
<PAGE>
(iii) If the General Partner sells, transfers or conveys any oil,
gas or other mineral interest or property to the Partnership, it must, at
the same time, sell the Partnership an equal proportionate interest in all
its other property in the same Prospect. A sale, transfer or conveyance to
the Partnership of less than the entire ownership interest of the General
Partner or any Affiliate is only permitted if: (a) the interests retained
or obtained by the General Partner or Affiliate and acquired by the
Partnership are either (x) proportionate, uniform and undivided Working
Interests if the Producing Property acquired by the Partnership is a
Working Interest or (y) proportionate, uniform and undivided Royalty
Interests if the Producing Property acquired by the Partnership is a
Royalty, (b) the respective obligations of the General Partner or
Affiliate and the Partnership are substantially the same, and (c) the
interest of the General Partner or its Affiliate in revenues does not
exceed the amount proportionate to its interest. The General Partner and
its Affiliate may not retain or obtain any overrides or other burdens on
the interest obtained by the Partnership, and may not enter into any
Farmouts with respect to its retained interest, except to nonaffiliated
third parties or to an Affiliated Program;
(iv) In the event the General Partner or any Affiliate proposes
to acquire an interest in a Prospect in which the Partnership has an
interest or in a Prospect abandoned by the Partnership within one year
preceding such proposed acquisition, the General Partner or Affiliate
shall offer the interest to the Partnership; and if cash or financing is
not available to the Partnership to purchase such interest, neither the
General Partner nor Affiliate shall acquire an interest in such Prospect.
The term "abandon" for the purpose of this subparagraph shall mean the
termination, either voluntary or by operation of the Lease or otherwise,
of all of the Partnership's interest in the Prospect. This subsection
shall not apply after the lapse of five years of the Activation of the
Partnership or to any Affiliated Program where the interest of the General
Partner is less than or equal to its interest in the Partnership, there is
no duplication of fees to the General Partner, and the General Partner
does not obtain a greater benefit from purchase of the interest by the
Affiliated Program than it would if the interest were purchased by the
Partnership;
-27-
<PAGE>
(v) During the existence of the Partnership and before it has
ceased operations, neither the General Partner nor any Affiliate
(excluding any Affiliated Program where the interest of the General
Partner is less than or equal to its interest in the Partnership) shall
acquire, retain or drill for its own account any oil and gas interest in
any Prospect upon which the Partnership possesses an interest, except for
transactions which comply with Section 4.3B(iii) or 4.8. In the event the
Partnership abandons its interest in a Prospect, this restriction shall
continue for one year following abandonment. The geological limits of a
Prospect owned by the Partnership shall be enlarged or contracted on the
basis of subsequently acquired geological data to define the productive
limits of a reservoir and must include all of the acreage determined by
the subsequent data to be encompassed by such reservoir. If, during the
period of five years from the Activation of the Partnership, the
geological limits of a Prospect, as so enlarged, encompass any interest
held by the General Partner or an Affiliate of the General Partner
(excluding an Affiliated Program where the interest of the General Partner
is identical to or less than its interest in the Partnership), such
interest shall be sold to the Partnership in accordance with the
provisions of Section 4.3B(iv) and any net income previously received by
the General Partner or Affiliate shall be paid over to the Partnership. If
the General Partner acquires additional acreage or interests in a Prospect
of the Partnership, it must sell such to the Partnership and is prohibited
from retaining any such interest, except as may be permitted by Section
4.3B. Notwithstanding the foregoing, the Partnership will not be required
to expend additional funds to acquire any such interest unless funds are
available from the Capital Contributions of the Partners;
(vi) Producing Properties may be sold, Farmed-out or otherwise
transferred from or to an Affiliated Program only pursuant to transactions
that comply with Sections 4.3B(iii), 4.3B(iv) or 4.8, provided that the
compensation arrangement or any other interest or right of the General
Partner or any Affiliate is the same in the Partnership and Affiliated
Program, or, if different, the compensation of the General Partner does
not exceed the lower of the compensation it would have received in the
Partnership or the Affiliated Program;
-28-
<PAGE>
(vii) Any sale of inventory or other materials by the
Partnership to the General Partner or Affiliate shall be made at the
applicable rates set forth in the standard form of the accounting
procedure then recommended by the Council of Petroleum Accountants
Societies of North America;
(viii) Any operating agreements pursuant to which the General
Partner or any Affiliate acts as operator of Producing Properties shall be
of a nature customary in the industry and payments to the General Partner
or any Affiliate for acting as operator shall not exceed the compensation
which would be paid by unaffiliated third parties in the same geographic
area for similar goods and services. Reimbursement of the General
Partner's overhead pursuant to such operating agreement will not be
duplicative of any reimbursement of General and Administrative Costs made
pursuant to Section 4.12; and
(ix) To the extent the General Partner or any Affiliate acquires
an interest in a Producing Property in which the Partnership acquires an
interest, the General Partner or Affiliate shall pay its allocable portion
of the cost of the preparation of the Acquisition Reserve Report or
Engineering Review Letter, as the case may be, respecting such Producing
Property.
C. The General Partner may not expend any amount of Partnership funds over
the term of the Partnership for the payment of Partnership costs (other than
recompletion costs) incurred in connection with Development Drilling and
Identified Development Drilling in excess of 10% of the sum of: (i) the amount
of the Unit Holders' Subscriptions, plus (ii) the Partnership's permissible
borrowings. If the General Partner determines that funds in addition to the
Capital Contributions are required for the payment of Partnership costs (other
than Property Acquisition Costs), the General Partner may apply or reserve
Revenues or Investment Income for the payment of such Partnership costs and/or
the General Partner may cause the Partnership to borrow funds for the payment of
Partnership costs incurred in connection with Development Drilling, Identified
Development Drilling and Improved Recovery operations; provided, however, that
the aggregate outstanding principal amount of such borrowings shall not at any
one time exceed an amount equal to 20% of the Unit Holders' Subscriptions. No
creditor who makes a nonrecourse loan to the Partnership may
-29-
<PAGE>
have or acquire, at any time as a result of making the loan, any direct or
indirect interest in the profits, capital or property of the Partnership other
than as a secured creditor.
D. The General Partner shall have the authority to secure the payment of
borrowings incurred by it for its own account or for purposes of paying its
allocable share of Partnership costs by assigning to lenders all or part of its
rights to receive distributions of Partnership Revenues, and by granting such
lenders a security interest or mortgage in an undivided interest in any
Partnership Property not to exceed its percentage interest in Revenues;
provided, however, that the General Partner shall retain unencumbered at least a
1% interest in each item of Partnership Property, and each item of Partnership
Revenues, gain, loss, deduction and credit. Notwithstanding anything to the
contrary in this Agreement, in the event of any sale or foreclosure of the
General Partner's interest in full or partial satisfaction of such borrowings,
appropriate adjustments shall be made in the Capital Accounts of the General
Partner and Unit Holders and in the method by which Revenues and costs are
allocated to the General Partner and Unit Holders to assure that the Partnership
will not bear any of the costs attributable to such sold or foreclosed interest
and that the General Partner will not share or participate in any of the
capital, Revenues, costs or distributions attributable to such sold or
foreclosed interest except to the extent of the unencumbered interest retained
by the General Partner. The General Partner shall indemnify the Partnership and
the Unit Holders against any expenses resulting from a sale or foreclosure of
the General Partner's interest.
E. The provisions of Section 4.3B notwithstanding, if the Partnership
intends to acquire Working Interests, acquisitions of Net Profits Interests by
one or more I/P Partnerships may be made in connection with the Partnership's
acquisitions of Working Interests. Net Profits Interests acquired by an I/P
Partnership may either be carved-out of the Working Interests or reserved from
the Working Interests by the sellers of such Working Interests on such basis as
the General Partner determines. The Net Profit Interests acquired by an I/P
Partnership may not exceed 75% of the net profits attributable to the aggregate
Working Interests in all of the Producing Properties acquired by the
Partnerships together. The primary factor in determining the sharing of net
profits between the Working Interests acquired by the Partnership and the Net
Profits Interest acquired by the I/P Partnership will be the amount of money
contributed to each acquisition by each
-30-
<PAGE>
purchaser. In fixing such sharing percentages, the General Partner need not give
special consideration to risks associated with the ownership of the Working
Interests or to costs of equipment which will be owned by the Partnership as a
Working Interest owner if such costs will be amortized against the proceeds of
oil and gas production in arriving at the amount of net profits from which the
I/P Partnership's (as Net Profits Interest holder) share of production is
determined. If the amount of money contributed by each purchaser ever is not the
primary factor in determining such sharing of net profits, then the sharing will
be based upon a valuation of the respective interests made by an Independent
Petroleum Engineer. If the I/P Partnership acquires a Royalty Interest in a
Producing Property in which a Working Interest is acquired by the Partnership,
each participant's portion of the purchase price will be determined on the basis
of an appraisal by an Independent Petroleum Engineer of the fair market values
of the respective interests in the property being acquired (taking into account
the tax consequences applicable to the several participants). If the General
Partner or an Affiliate other than an Affiliated Program acquires an interest in
any such property acquisition, such appraisal will be performed by an
Independent Petroleum Engineer and if the aggregate revenue interest of the
General Partner and its Affiliates in any Affiliated Program participating in
such a property acquisition is greater than their aggregate revenue interest in
the I/P Partnership, then with respect to the property interests so acquired the
greater aggregate revenue interest shall be reduced so as not to exceed the
lesser revenue interest.
F. The General Partner may cause the Partnership to acquire assets which
may otherwise not be considered suitable for investment or operation by the
Partnership if they are acquired as part of a package consisting primarily of
Producing Properties; provided, however, that in the event any such assets are
acquired by the Partnership, the General Partner shall use its best efforts to
sell or otherwise dispose of such assets for value as soon as practical and any
proceeds realized from such sale or disposition shall be allocated among the
General Partner and the Unit Holders in the same proportions as the costs
thereof were charged to their respective accounts.
-31-
<PAGE>
Section 4.4 Prohibited Transactions
------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, the
following transactions are expressly prohibited:
(i) the Partnership shall not make any loans to or purchase a
production payment from the General Partner or any Affiliate;
(ii) neither the General Partner nor any Affiliate shall make any
loans to the Partnership except at a rate of interest not in excess of the
interest cost incurred by the General Partner or Affiliates or the amount
of interest that would be charged to the Partnership (without regard to
the General Partner's or Affiliate's financial abilities or guarantees) by
unrelated banks on comparable loans for the same purpose, whichever is
lower, and the General Partner and Affiliates shall not receive points or
financing charges or fees regardless of the amount;
(iii) except as expressly contemplated hereby, no agent, attorney,
accountant or other independent consultant or contractor who is also
employed on a full-time basis by the General Partner or any Affiliate
shall be compensated by the Partnership for his or her services;
(iv) other than those received for the account of the Partnership,
no rebates may be received by the General Partner or any Affiliate in
connection with Partnership operations or expenditures, nor may the
General Partner or any Affiliate participate in any reciprocal business
arrangement that would circumvent any of the provisions of this Agreement;
(v) on a monthly basis, costs paid and revenues received by the
General Partner or an Affiliate for the account of the Partnership shall
be determined and the net amount resulting from such monthly settlement
shall be deposited into a Partnership Account and no funds which, after
such monthly settlement, are determined to be held for the account of the
Partnership shall be kept in any account other than a Partnership Account,
and the General Partner shall not employ, or permit any other Person to
employ, such funds in any manner except for the benefit of
-32-
<PAGE>
the Partnership; it being understood that the General Partner may invest
Partnership funds temporarily in the investments set forth in Section 10.3
of this Agreement pending their use by the Partnership. After such monthly
settlement, Partnership funds may not be commingled with separate funds of
the General Partner or any other Person; and
(vi) the Partnership shall not make any advance payment to the
General Partner or its Affiliates, except where necessary to secure tax
benefits of prepaid drilling costs.
Section 4.5 Restrictions on the Authority of the General Partner
-----------------------------------------------------------------
A. Anything in this Agreement to the contrary notwithstanding, it is
agreed that:
(i) the General Partner and its Affiliates shall not take any
action with respect to the assets or property of the Partnership which
does not benefit primarily the Partnership, including:
(a) the utilization of Partnership funds as compensating
balances for the benefit of the General Partner or an Affiliate of
the General Partner; and
(b) the commitment of future production from Partnership
Properties;
(ii) 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;
(iii) neither the General Partner nor any Affiliate may profit
itself by Development Drilling, Identified Development Drilling or
Improved Recovery operations in contravention of its fiduciary obligation
to the Partnership; and
-33-
<PAGE>
(iv) neither the General Partner nor any Affiliate shall render
to the Partnership any oil field, equipage, drilling or other services nor
sell or lease to the Partnership any equipment or supplies unless:
(a) such Person is engaged, independently of the
Partnership and as an ordinary and ongoing business, in the
business of rendering such services or selling or leasing such
equipment and supplies to a substantial extent to other Persons in
the oil and gas industry in addition to drilling and income
programs in which the General Partner and its Affiliates have an
interest;
(b) the compensation, price or rental therefor is
competitive with the compensation, price or rental of other Persons
in the area engaged in the business of rendering comparable services
or selling or leasing comparable equipment and supplies which could
reasonably be made available to the Partnership; and
(c) the drilling services are billed on either a per foot,
per day or per hour rate, or some combination thereof; provided
that, if such Person is not engaged in a business within the meaning
of subdivision (a), then such compensation, price or rental shall be
the cost of such services, equipment or supplies to such Person or
the competitive rate which could be obtained in the area, whichever
is less.
B. The General Partner shall not have the authority to:
(i) do any act in contravention of this Agreement or which would
make it impossible to carry on the ordinary business of the Partnership;
(ii) confess a judgment against the Partnership;
(iii) possess Partnership Property or assign, pledge or hypothecate
rights in specific Partnership Property for other than a Partnership
purpose except as otherwise permitted in Section 4.3D;
-34-
<PAGE>
(iv) admit a Person as a General Partner or a Substituted Limited
Partner or permit any transfer of Units except as otherwise provided
herein; or
(v) knowingly perform any act which would result in loss of the
Depositary's or any Substituted Limited Partner's status as a limited
partner under the Act or the laws of the State or the loss of limited
liability under the laws of any other jurisdiction in which the
Partnership is doing business, or would subject the Depositary or any Unit
Holder to liability as a general partner in any jurisdiction including use
of the Depositary's or a Unit Holder's name in conducting the business of
the Partnership.
C. The General Partner shall not lease, sell, abandon or otherwise dispose
of any assets of the Partnership to the General Partner or to any of its
Affiliates, except as otherwise permitted by this Agreement; provided, however,
that if the Partnership should own any inventory or other materials, such
inventory or materials may be transferred to the General Partner or any of its
Affiliates at the applicable rates set forth in the standard form of accounting
procedure then recommended by the Council of Petroleum Accountants Societies of
North America.
D. Notwithstanding any other provision of this Agreement to the contrary,
without the prior Consent of Unit Holders owning 50% or more of the outstanding
Units granted pursuant to the provisions of Article Twelve of this Agreement,
the General Partner shall not:
(i) lease, sell or dispose of all or substantially all of the
Partnership's assets except pursuant to Article Nine of this Agreement;
(ii) make, exercise or deliver any general assignment for the
benefit of the Partnership's creditors; or
(iii) except as set forth in Sections 8.1F or 11.1A, amend any
provision of this Agreement.
-35-
<PAGE>
Section 4.6 Construction of Gas Gathering Lines
------------------------------------------------
The General Partner may cause the Partnership to construct gas gathering
lines if, in the opinion of the General Partner, it would be economically
feasible and otherwise consistent with prudent operating practice to do so. The
costs of any such gathering lines will be deemed to be Operating Costs and shall
be charged to the accounts of the General Partner and Unit Holders as such. The
General Partner may, in its discretion, construct, or cause an Affiliate of the
General Partner or other person to construct, gathering lines from Partnership
Wells to gas transmission systems. Whenever the General Partner constructs, or
causes an Affiliate of the General Partner to construct, a gathering line from a
Partnership Well to a gas transmission system, the Partnership shall pay the
General Partner or such Affiliate an amount that is not greater than the
compensation that an unrelated party could have reasonably charged in an
arm's-length transaction for similar services in the area as a transmission fee
for the transmission of all gas through the gathering system so constructed, and
no other transmission fee shall be paid to the General Partner or to any
Affiliate.
Section 4.7 Contracts with the General Partner and Affiliates
-------------------------------------------------------------
All services (other than services provided pursuant to this Agreement)
provided to the Partnership by the General Partner or any Affiliate for which it
is compensated shall be embodied in a written contract precisely setting forth
the services to be rendered and the compensation to be paid. Each contract
relating to a transaction between the Partnership and the General Partner or any
Affiliate shall contain a provision which shall permit termination of the
contract by the affirmative vote of Unit Holders owning more than 50% of the
outstanding Units without penalty on 30 days' prior written notice.
-36-
<PAGE>
Section 4.8 Farmouts
---------------------
The General Partner may dispose of Producing Properties by sale or Farmout
when it, exercising the standard of a prudent operator, determines that (a) the
Partnership lacks sufficient funds to conduct Development Drilling, Identified
Development Drilling or Improved Recovery operations on the properties and
cannot obtain suitable alternative financing for such Development Drilling,
Identified Development Drilling or Improved Recovery operations; (b) the
properties have been downgraded by events occurring after assignment to the
Partnership to the point that additional Development Drilling, Identified
Development Drilling, Improved Recovery operations or continued production would
no longer be desirable to the Partnership; (c) Development Drilling, Identified
Development Drilling or Improved Recovery operations on the properties would
result in an excessive concentration of Partnership funds on a Producing
Property creating, in the opinion of the General Partner, undue risk to the
Partnership; or (d) the best interests of the Partnership would be served by the
sale or Farmout. The Partnership shall not conduct any drilling of wells other
than Development Drilling and Identified Development Drilling; provided,
however, that the drilling of wells other than Development Drilling and
Identified Development Drilling may be performed on behalf of the Partnership
pursuant to Farmouts or when such drilling may be deemed necessary or
appropriate to preserve or protect the Partnership's interest in or the
production from a Producing Property. Any sale, Farmout or similar agreement
between the Partnership and the General Partner, Affiliate or Affiliated Program
will be permitted under the restrictions set forth in this Article Four and will
be subject to the following conditions:
(i) the General Partner, exercising the standard of a prudent
operator, shall determine that the sale, Farmout or similar agreement is
in the best interests of the Partnership; and
(ii) the terms of the sale, Farmout or similar agreement are
consistent with and in any case no less favorable than those utilized in
the same geographic area for similar arrangements.
-37-
<PAGE>
Except as required by Section 4.3B(iii) or (iv), a Partnership shall acquire
only those Leases that are reasonably required for the operations of the
Partnership, and no Leases shall be acquired for the purpose of subsequent sale
or Farmout, unless such Leases are a part of an acquisition which is sold as a
package only, or unless the acquisition of undeveloped Leases by the Partnership
is made after a well has been drilled nearby by third parties to a depth
sufficient to indicate that such an acquisition is in the best interests of the
Partnership.
Section 4.9 Other Operations
-----------------------------
The General Partner shall devote such time to the Partnership as is
reasonably required to carry on the Partnership business, and the General
Partner and its Affiliates shall at all times be free, subject to any
restrictions contained herein, to engage in all aspects of the Hydrocarbons and
natural resources business for their own accounts and for the accounts of
others. Without limiting the generality of the foregoing, the General Partner
and its Affiliates shall have the right to organize and operate other
partnerships, joint ventures or other oil and gas investment programs whether
similar or dissimilar to the Partnership.
Section 4.10 Prosecution, Defense and Settlement of Claims;
Indemnification
------------------------------------------------------------
A. The General Partner shall arrange to prosecute, defend, settle or
compromise actions at law or in equity at the expense of the Partnership as may
be necessary to enforce or protect the interests of the Partnership. The General
Partner shall satisfy any judgment, decree, decision or settlement, first, out
of any insurance proceeds available therefor, next, out of the Partnership
assets and Revenues, and, finally, out of the assets of the General Partner.
-38-
<PAGE>
B. The General Partner shall have no liability to the Partnership or to
any Partner for any loss suffered by the Partnership which arises out of any
action or inaction of the General Partner if the General Partner, in good faith,
determined that such course of conduct was in the best interests of the
Partnership and such course of conduct did not constitute negligence or
misconduct of the General Partner. The General Partner shall be indemnified by
the Partnership against any losses, judgments, liabilities, expenses and amounts
paid in settlement of any claims sustained by it in connection with the
Partnership, provided that the same were not the result of negligence or
misconduct on the part of the General Partner. Any indemnification under this
Section 4.10 shall be satisfied solely out of the assets and Revenues of the
Partnership. All amounts payable under this Section 4.10 shall be a liability of
the Partnership only and the Unit Holders and the Depositary will not have any
liability therefor.
C. Notwithstanding the above, the General Partner shall not be indemnified
for liabilities arising under federal and state securities laws unless (1) there
has been a successful adjudication on the merits of each count involving
securities law violations and the court approves such indemnification and the
litigation costs thereof; or (2) such claims have been dismissed with prejudice
on the merits by a court of competent jurisdiction and the court approves such
indemnification and the litigation costs thereof. In any such case, the General
Partner shall apprise the court of the current published positions, if any, of
the Securities and Exchange Commission, the Massachusetts State Securities
Administrator and other applicable state securities administrators regarding
indemnification of program sponsors prior to obtaining court approval of any
such indemnification.
D. The Partnership shall not incur the costs of that portion of insurance
which insures the General Partner for any liability as to which the General
Partner is prohibited from being indemnified under this Section 4.10.
-39-
<PAGE>
Section 4.11 Duties and Obligations of the General Partner
-----------------------------------------------------------
The General Partner shall:
(i) use its best efforts to take all actions that may be
necessary or appropriate for the continuation of the Partnership's valid
existence as a limited partnership or partnership in commendam under the
laws of the State and the laws of any other jurisdiction in which the
Partnership is doing business;
(ii) devote to the Partnership the time that it shall deem to be
necessary to conduct the Partnership's business and affairs in the best
interests of the Partnership;
(iii) be under a fiduciary duty and obligation to conduct the
affairs of the Partnership in the best interests of the Partnership,
including the safekeeping and use of all Partnership funds and assets
(whether or not in the immediate possession or control of the General
Partner) and the use thereof for the benefit of the Partnership;
(iv) at all times act with integrity and good faith and exercise
due diligence in all activities relating to the conduct of the business of
the Partnership and in resolving conflicts of interest;
(v) prepare or cause to be prepared and shall file on or before
the due date (or any extension thereof) any federal, state or local tax
returns required to be filed by the Partnership;
(vi) cause the Partnership to pay any taxes payable by the
Partnership;
(vii) use its best efforts to cause the Partnership to be formed,
reformed, qualified to do business, or registered under any applicable
assumed or fictitious name statute or similar law in any state in which
the Partnership then owns property or transacts business, if such
formation, reformation, qualification or registration is necessary or
advisable in its counsel's opinion to protect the limited liability of the
Depositary and the Unit Holders or to permit the Partnership lawfully to
own property or transact business;
-40-
<PAGE>
(viii) cause to be filed the Certificate of Limited Partnership as
required by the Act and any necessary amendments to the Certificate of
Limited Partnership and other similar documents that are required by law
to be filed and recorded for any reason, in the office or offices that are
required under the laws of the State or any other state in which the
Partnership is then formed or qualified;
(ix) do all other acts and things (including making publications
or periodic filings of this Agreement or amendments hereto or other
similar documents without the necessity of mailing or delivering copies of
them to each Unit Holder) that may now or hereafter be deemed by the
General Partner to be necessary,
(a) for the perfection and continued maintenance of the
Partnership as a limited partnership under the laws of the State,
(b) to protect the limited liability of the Depositary and the
Unit Holders under the laws of the State and other jurisdictions in
which the Partnership is doing business, and
(c) to cause this Agreement, certificates or other documents
to reflect accurately the agreement of the Partners and the Unit
Holders, the identity of the Depositary as the sole initial Limited
Partner and the amount of the Capital Contribution made by the
Depositary on behalf of the Unit Holders;
(x) from time to time submit to any appropriate state securities
administrator all documents, papers, statistics and reports required to be
filed with or submitted to such state securities administrator; and
(xi) inform each Unit Holder of all administrative and judicial
proceedings for an adjustment at the Partnership level for partnership tax
items and forward to each Unit Holder within 30 days of receipt all
notices received from the Internal Revenue Service regarding the
commencement of a partnership level audit or a final partnership
administrative adjustment, and perform all other duties imposed by
Sections 6221 through 6232 of the Code on the General Partner as "tax
matters partner" of the Partnership, including those set forth in Section
4.2A (xxvi) of this Agreement.
-41-
<PAGE>
Section 4.12 Compensation of the General Partner
-------------------------------------------------
A. Except as provided in Articles Four and Five, the General Partner shall
not, either in its capacity as General Partner or in its individual capacity,
receive any salary, fees or profits from the Partnership.
B. In consideration of its payment of Organization and Offering Costs, the
General Partner shall be paid by the Partnership an amount equal to the
aggregate of: (i) 3.5% of individual Unit Holders' Subscriptions for less than
10,000 Units, (ii) 2.5% of individual Unit Holders' Subscriptions for 10,000
Units or more but less than 20,000 Units, (iii) 1.5% of individual Unit Holders'
Subscriptions for 20,000 Units or more but less than 30,000 Units, and (iv) 1.0%
of individual Unit Holders' Subscriptions for 30,000 Units or more, and in
consideration of its services rendered in connection with the Partnership's
acquisition of Producing Properties and the conduct of its business operations,
the General Partner shall be paid the Acquisitions and Operations Fee in an
amount equal to 3.5% of the Unit Holders' Subscriptions.
C. The General Partner shall be reimbursed by the Partnership for General
and Administrative Costs and Direct Administrative Costs incurred by it on
behalf of the Partnership, and such costs shall be allocated among the Partners
as set forth in Section 5.1 of this Agreement. The aggregate amount of General
and Administrative Costs allocable to the accounts of the Unit Holders for which
the General Partner will be reimbursed will not, (i) in the first 12 months
following Activation of the Partnership, exceed an amount equal to 2.5% of the
Unit Holders' Subscriptions, and (ii) in any succeeding 12-month period, exceed
an amount equal to 1% of the Unit Holders' Subscriptions; provided, however,
that notwithstanding the foregoing, the amount of such General and
Administrative Costs allocated to the Unit Holders during each of the third and
subsequent 12-month periods of Partnership operations shall not exceed an amount
equal to 15% of Revenues allocable to their accounts. All General and
Administrative Costs allocable to the accounts of the Unit Holders will be paid
solely out of Revenues allocable to the Unit Holders. To the extent that the
General Partner determines that Revenues are insufficient to permit
reimbursement in full of such General and Administrative Costs in the period in
which they are incurred or accrued (or the General Partner elects to receive
less than the
-42-
<PAGE>
full amount payable in order that funds may be available for distribution to
Unit Holders or any other reason) or the amounts actually reimbursed by the
Partnership do not exceed the foregoing limitations, such unpaid or unused
General or Administrative Costs may be carried forward or backwards and increase
the maximum amount of reimbursable General and Administrative Costs for any
other period.
Section 4.13 Dealer Manager
----------------------------
The Dealer Manager shall have no duties, responsibilities or obligations
to the Partnership, the General Partner, the Depositary or any Unit Holder as a
consequence of its right to receive Commissions, except to the extent provided
under the Securities Act of 1933, as amended. The Dealer Manager has not
assumed, and will not assume, any responsibility with respect to the Partnership
nor will it be permitted by the General Partner to assume any duties,
responsibilities or obligations regarding the management, operations or any of
the business affairs of the Partnership subsequent to the date on which the
Partnership is Activated.
ARTICLE FIVE
ALLOCATIONS AND DISTRIBUTIONS
Section 5.1 Allocation of Costs and Expenses
---------------------------------------------
All fees and payments to the General Partner required by Section 4.12B,
Commissions and costs incurred in connection with Identified Development
Drilling (including any interest, commitment fees and other finance charges with
respect to borrowing incurred in connection therewith) and Property Acquisition
Costs will be charged 99% to the Unit Holders and 1% to the General Partner. All
Organization and Offering Costs will be charged entirely to the General Partner
(in consideration of which the General Partner will be paid the amount provided
in the first sentence of Section 4.12B). Except as otherwise provided in this
Article Five, Operating Costs, costs and expenses of Development Drilling,
General and Administrative Costs, Direct Administrative Costs and all other
Partnership costs and expenses will be charged to the accounts of the General
Partner and the Unit Holders in the same proportions that Revenues are being
allocated to them at the
-43-
<PAGE>
time such costs and expenses are incurred. Notwithstanding anything to the
contrary contained herein, if and to the extent the Partnership sells any
Producing Property and applies any portion of the proceeds thereof to the
purchase of any additional Producing Properties, the Property Acquisition Costs
of the additional Producing Properties shall, to the extent of the amount of
such proceeds, be allocated to and borne by the General Partner and the Unit
Holders in the same proportions that such sale proceeds were allocated and
credited to them.
Section 5.2 Allocation of Revenues
-----------------------------------
A. Investment Income will be allocated 99% to the Unit Holders and 1% to
the General Partner. Except as otherwise provided in this Article Five and in
Section 4.3F, until Payout, all other Partnership Revenues will be allocated 95%
to the Unit Holders and 5% to the General Partner. After Payout, Revenues will
be allocated 85% to the Unit Holders and 15% to the General Partner; provided,
however, that if, at Payout, the total amount of cash distributed by the
Partnership to the Unit Holders from the commencement of the Property Investment
Period has averaged on a twelve-month basis an amount that is less than 12% of
the Unit Holders' Subscriptions, the percentage of Revenues allocated to the
General Partner will increase to only 10% and the Unit Holders will be allocated
90% thereof until such time, if ever, that the distributions to the Unit Holders
from the commencement of the Property Investment Period reaches a twelve-month
average equal to at least 12% of the Unit Holders' Subscriptions, at which time
Revenues will thereafter be allocated 15% to the General Partner and 85% to the
Unit Holders. As used herein the "Property Investment Period" shall mean that
period which begins with the first day of the calendar quarter following either
(i) the calendar quarter during which 90% of the Partnership's capital available
for purchasing Producing Properties has been so expended, or (ii) the calendar
quarter in which 50% of the Partnership's capital available for purchasing
Producing Properties has been so expended, as the General Partner shall elect.
Where proceeds from the Sale of all or any part of the Partnership's Producing
Properties are distributed to the Partners and a portion of the distributable
amount attributable to such Sale proceeds is sufficient in amount to cause
Payout to occur in accordance with the allocation percentages in effect until
Payout, Payout shall be deemed to occur such that Revenues attributable to the
distributed portion of such Sale proceeds in excess of the portion of Sales
proceeds sufficient in amount to cause Payout
-44-
<PAGE>
to occur shall be allocated in accordance with the allocation percentages in
effect after Payout.
B. Notwithstanding the other provisions of this Section 5.2 and except as
provided in Section 4.3F, if the allocation of Revenues realized from the sale
of any Hydrocarbon property would result in the recognition of a "simulated
loss", as such term is defined in Treasury Regulation Sec. 1.704-1(b), by the
Partnership, then such Revenues shall, to the extent of the amount of the
"simulated adjusted tax basis", as such term is defined in Treasury Regulation
Sec. 1.704-1(b), of such Hydrocarbon property, be allocated to the General
Partner and the Unit Holders in the same proportions that the aggregate adjusted
tax basis of such property was allocated to them (or their predecessors in
interest) pursuant to Section 5.5(u).
Section 5.3 Allocations Among Unit Holders
-------------------------------------------
A. Allocations of costs, expenses and Revenues to the Unit Holders other
than Substituted Limited Partners herein shall be actually allocated to the
Depositary for the account of the Unit Holders. All profits and losses and each
item of Revenues, gain, loss, cost, deduction or credit allocated to the Unit
Holders, as a class, shall be allocated to each Unit Holder in the ratio that
(i) the number of Units held of record by each Unit Holder as of the first day
of each month during the period ("Monthly Record Date") bears to (ii) the
aggregate number of Units outstanding on each such Monthly Record Date.
Distributions pursuant to Section 5.7 hereof will be made to Unit Holders of
record on the first day of the calendar quarter to which the distribution
relates in the ratio which (x) the number of Units owned of record by each Unit
Holder on such date bears to (y) the aggregate number of Units outstanding on
such date. Such payment shall constitute full payment and satisfaction of the
Partnership's liability in respect of such payment regardless of any claim of
any Person who may have an interest in such payment by reason of an assignment
or otherwise.
B. Except as provided in subsections (i) through (iv) of this Section
5.3B, in the case of a change in a Unit Holder's interest in the Partnership
during a taxable year of the Partnership, all Partnership Revenues, gain, loss,
deduction or credit allocable to the Unit Holders shall be allocated pursuant to
Section 5.3A above to the Persons who were Unit Holders during the period to
which such item is attributable in
-45-
<PAGE>
accordance with the Unit Holders' interests in the Partnership during such
period regardless of when such item is paid or received by the Partnership.
(i) With respect to certain "allocable cash basis items" (as
such term is defined in the Code) of Partnership Revenues, gain, loss,
deduction or credit, if, during any taxable year of the Partnership there
is change in any Unit Holder's interest in the Partnership, then, except
to the extent provided in regulations prescribed under Section 706 of the
Code, each Unit Holder's allocable share of any "allocable cash basis
item" shall be determined by (i) assigning the appropriate portion of each
such item to each day in the period to which it is attributable, and (ii)
allocating the portion assigned to any such day among the Unit Holders in
proportion to their interests in the Partnership at the close of such day.
(ii) If, by adhering to the method of allocation described in the
immediately preceding subsection of this Section 5.3B, a portion of any
"allocable cash basis item" is attributable to any period before the
beginning of the Partnership taxable year in which such item is received
or paid, such portion shall be (a) assigned to the first day of the
taxable year in which it is received or paid, and (b) allocated among the
persons who were Unit Holders in the Partnership during the period to
which such portion is attributable in accordance with their interests in
the Partnership during such period.
(iii) If any portion of any "allocable cash basis item" paid or
received by the Partnership in a taxable year is attributable to a period
after the close of that taxable year, such portion shall be (a) assigned
to the last day of the taxable year in which it is paid or received, and
(b) allocated among the persons who are Unit Holders in proportion to
their interests in the Partnership at the close of such day.
(iv) If any deduction is allocated to a person with respect to
an "allocable cash basis item" attributable to a period before the
beginning of the Partnership taxable year and such person is not a Unit
Holder of the Partnership on the first day of the Partnership taxable
year, such deduction shall be capitalized by the Partnership and treated
in the manner provided for in Section 755 of the Code.
-46-
<PAGE>
Section 5.4 Capital Accounts
-----------------------------
Capital Accounts shall be established and maintained for the General
Partner and each Unit Holder in accordance with tax accounting principles and
with valid regulations issued by the U.S. Treasury Department under subsection
704(b) of the Code (the "704 Regulations"). To the extent that tax accounting
principles and the 704 Regulations may conflict, the latter shall control. In
connection with the establishment and maintenance of such Capital Accounts, the
following provisions shall apply:
(i) The General Partner's or Unit Holder's Capital Account shall
be (x) increased by the amount of cash contributed by or on behalf of the
General Partner or Unit Holder, the fair market value of property
contributed by it or on its behalf to the Partnership (net of liabilities
securing such contributed property that the Partnership is considered to
assume or take subject to under section 752 of the Code) and allocations
to it of income and gain (except to the extent such income or gain has
previously been reflected in its Capital Account by adjustments thereto)
and (y) decreased by the amount of cash distributed to the General Partner
or Unit Holder, the fair market value of property distributed to the
General Partner or Unit Holder by the Partnership (net of liabilities
securing such distributed property that the General Partner or Unit Holder
is considered to assume or take subject to under section 752 of the Code)
and allocations to it of Partnership loss, deduction (except to the extent
such loss or deduction has previously been reflected in its Capital
Account by adjustments thereto) and expenditures described in section
705(a)(2)(B) of the Code.
(ii) In the event Partnership Property is distributed to the
General Partner or Unit Holder, then, before the Capital Account of the
General Partner or Unit Holder is adjusted as required by clause (i) of
this Section 5.4, the Capital Accounts of the General Partner and Unit
Holders shall be adjusted to reflect the manner in which the unrealized
income, gain, loss and deduction inherent in such Partnership Property
(that has not been reflected in such Capital Accounts previously) would be
allocated among the General Partner and Unit Holders if there were a
taxable disposition of such Partnership Property for its fair market value
on the date of distribution.
-47-
<PAGE>
(iii) If, pursuant to this Agreement, Partnership Property is
reflected on the books of the Partnership at a book value that differs
from the adjusted tax basis of such Partnership Property, then the General
Partner's and Unit Holders' Capital Accounts shall be adjusted in
accordance with the 704 Regulations for allocations to the General Partner
and Unit Holders of depreciation, depletion, amortization and gain or
loss, as computed for book purposes, with respect to such Partnership
Property.
(iv) The General Partner's and Unit Holders' Capital Accounts
shall be reduced by a simulated depletion allowance computed on each oil
or gas property using either the cost depletion method or the percentage
depletion method (without regard to the limitations under the Code which
could apply to fewer than all of the General Partner and Unit Holders);
provided, however, that the choice between the cost depletion method and
the percentage depletion method shall be made on a property-by-property
basis and such choices shall be binding for all Partnership taxable years
during which such oil or gas property is held by the Partnership. Such
reductions for depletion shall not exceed the aggregate adjusted basis
allocated to the General Partner and Unit Holders with respect to such oil
or gas property. Such reductions for depletion shall be allocated among
the General Partner's and Unit Holders' Capital Accounts in the same
proportions as the adjusted basis in the particular property is allocated
to the General Partner and each Unit Holder. Upon the taxable disposition
of an oil or gas property by the Partnership, the Partnership's simulated
gain or loss shall be determined by subtracting its simulated adjusted
basis (aggregate adjusted tax basis of the General Partner and the Unit
Holders less simulated depletion allowances) in such property from the
amount realized on such disposition and the General Partner's and Unit
Holders' Capital Accounts shall be increased or reduced, as the case may
be, by the amount of the simulated gain or loss on such disposition in
proportion to the General Partner's and Unit Holders' allocable shares of
the total amount realized on such disposition.
-48-
<PAGE>
(v) For purposes of determining the Capital Account balance of
the General Partner and any Unit Holder as of the end of any Partnership
taxable year, the General Partner's and such Unit Holder's Capital Account
shall be reduced by:
(a) Adjustments that, as of the end of such year,
reasonably are expected to be made to the General Partner's and such
Unit Holder's Capital Account pursuant to paragraph (b)(2)(iv)(k) of
the 704 Regulations for depletion allowances with respect to oil and
gas properties of the Partnership, and
(b) Allocations of loss and deduction that, as of the end
of such year, reasonably are expected to be made to the General
Partner or such Unit Holder pursuant to Code section 704(e) (2),
Code section 706(d), and paragraph (b)(2)(ii) of section 1.751-1 of
regulations promulgated under the Code, and
(c) Distributions that, as of the end of such year,
reasonably are expected to be made to the General Partner or such
Unit Holder to the extent they exceed offsetting increases to the
General Partner's or such Unit Holder's Capital Account that
reasonably are expected to occur during (or prior to) the
Partnership taxable years in which such distributions reasonably are
expected to be made.
(vi) The Capital Accounts of the General Partner and Unit Holders
which are charged with an item of Partnership expense shall be credited
with any portion of that expense which is finally determined, judicially
or administratively, to be nondeductible for federal income tax purposes,
less any amortization or depreciation thereof incurred prior to the date
that the credit is made.
(vii) In allocating income and costs for any Fiscal Year in which
the ratio for sharing and costs changes pursuant to Section 5.2A, the
allocations of income and costs shall be made, and the books of the
Partnership shall be closed, as soon as practicable after the date Payout
occurs, to determine the General Partner's and each Unit Holder's share of
pre-change income and costs and the General Partner's and each Unit
Holder's share of post-change income and costs for that Fiscal Year.
-49-
<PAGE>
(viii) Notwithstanding any other provision of this Agreement to
the contrary, if, under any provision of this Agreement, the Capital
Account of the General Partner or any Unit Holder is adjusted to reflect
the difference between the basis to the Partnership of Partnership
Property and such Partnership Property's fair market value, then all items
of income, gain, loss and deduction with respect to such Partnership
Property shall be allocated among the General Partner and the Unit Holders
so as to take account of the variation between the basis of such
Partnership Property and its fair market value at the time of the
adjustment to the General Partner's or such Unit Holder's Capital Account
in accordance with the requirements of subsection 704(c) of the Code, or
in the same manner as provided under subsection 704(c) of the Code.
(ix) Subject only to the provisions of Subsection 5.4(x),
(a) There shall be allocated to the General Partner, any
item of loss, deduction, credit or allowance that, but for this
Subsection 5.4(ix) would have been allocated to any Unit Holder that
is not obligated to restore any deficit balance in such Unit
Holder's Capital Account and would have thereupon caused or
increased a deficit balance in such Unit Holder's Capital Account as
of the end of the Partnership's taxable year to which such
allocation related (after taking into consideration the provisions
of Subsection 5.4(v) hereof);
(b) Any Unit Holder that is not obligated to restore any
deficit balance in such Unit Holder's Capital Account who
unexpectedly receives an adjustment, allocation or distribution
specified in Subsection 5.4(v) hereof shall be allocated items of
income and gain in an amount and manner sufficient to eliminate such
deficit balance as quickly as possible; and
-50-
<PAGE>
(c) In the event any allocations of loss, deduction,
credit or allowance are made to the General Partner pursuant to
clause (a) of this Subsection 5.4(ix), the General Partner shall be
subsequently allocated all items of income and gain until the
aggregate amount of such allocations of income and gain is equal to
the aggregate amount of any such allocations of loss, deduction,
credit or allowance allocated to the General Partner pursuant to
clause (a) of this Subsection 5.4(ix)
(x) In the event there is a net decrease in the "minimum gain,"
as such term is defined in the 704 Regulations, of the Partnership during
a Partnership taxable year, the General Partner and all Unit Holders with
deficit Capital Account balances at the end of such year shall be
allocated, before any other allocation is made under this Article Five,
income and gain of the Partnership for such taxable year (and, if
necessary, subsequent years) in the amount and in the proportion necessary
to eliminate such deficits as quickly as possible. The allocations
required by this Subsection 5.4(x) shall be made as required by and in
accordance with Section 1.704-1(b)(4)(iv)(e) of the 704 Regulations. It is
intended that the provision set forth in this Subsection 5.4(x) will
constitute a "minimum gain chargeback" as described in Section
1.704-1(b)(4)(iv)(e) of the 704 Regulations. The 704 Regulations shall
control in the case of any conflict between the 704 Regulations and this
Subsection 5.4(x).
Section 5.5 Allocations for Federal Income Tax Purposes
--------------------------------------------------------
With respect to the various allocations of Partnership Revenues, gain,
loss, deduction and credit for federal income tax purposes, it is hereby agreed
as follows:
(i) To the extent permitted by law, all charges, deductions and
losses shall be allocated for federal income tax purposes in the same
manner as the costs in respect of which such charges, deductions and
losses are charged to the General Partner and Unit Holders, respectively.
The General Partner and Unit Holders bearing the costs shall be entitled
to the deductions (including, without limitation, cost recovery
allowances, depreciation and cost depletion) and credits that are
attributable to such costs.
-51-
<PAGE>
(ii) The Partnership shall allocate to the General Partner and
each Unit Holder its portion of the adjusted basis in each depletable
Partnership Property as required by Section 613A(c)(7)(D) of the Code
based upon the interest of the General Partner or such Unit Holder in the
capital of the Partnership as of the time of the acquisition of such
Partnership Property. To the extent permitted by the Code, such allocation
shall be based upon the General Partner's or said Unit Holder's interest
(x) in the Partnership capital used to acquire the property, or (y) in the
adjusted basis of the property if it is contributed to the Partnership. If
such allocation of basis is not permitted under the Code, then basis will
be allocated in the permissible manner which the General Partner deems
will most closely achieve the result intended above.
(iii) Partnership Revenues shall be allocated for federal income
tax purposes in the same manner as they are allocated to the respective
accounts of the General Partner and Unit Holders pursuant to Sections 5.2,
5.3 and 5.4 above.
(iv) Depreciation or cost recovery allowance recapture and
recapture of intangible drilling and development costs, if any, due as a
result of sales or dispositions of assets shall be allocated in the same
proportion that the depreciation, cost recovery allowances or intangible
drilling and development costs being restored or recaptured were
allocated.
Section 5.6 Minimum Interest of General Partner
------------------------------------------------
Notwithstanding anything to the contrary that may be expressed or implied
in this Agreement, the aggregate interest of the General Partner in each
material item of Partnership Revenues, gain, loss, deduction or credit shall be
equal to at least one percent of each such item at all times during the
existence of the Partnership. In determining the General Partner's interest in
such items, Units owned by the General Partner shall not be taken into account.
-52-
<PAGE>
Section 5.7 Distributions
--------------------------
The Partnership's cash available for distribution will be distributed to
the Unit Holders and the General Partner in the same proportions that
Partnership Revenues have been allocated to them after giving effect to previous
distributions and to portions of such Revenues theretofore used or retained to
pay costs incurred or expected to be incurred in conducting Partnership
operations or to repay borrowings theretofore or expected to be thereafter
obtained by the Partnership. Amounts which otherwise would constitute cash
available for distribution and which consist of proceeds from the sale of
Producing Properties may be used or committed to acquire additional Producing
Properties at any time within 36 months of the Activation of the Partnership.
Within 50 days after the end of each calendar quarter, the General Partner will
determine the amount of cash available for distribution and will distribute such
amount, if any, to the Unit Holders and the General Partner as promptly
thereafter as reasonably possible. The General Partner's determination of the
cash available for distribution will be conclusive and binding upon all
Partners. In no event, however, shall funds be advanced or borrowed for purposes
of distributions, if the amount of such distributions would exceed the
Partnership's accrued and received Revenues from the previous four quarters,
less paid and accrued Operating Costs with respect to such Revenues.
ARTICLE SIX
WITHDRAWAL OR REMOVAL OF GENERAL PARTNER
OR GENERAL PARTNER'S INTEREST IN PARTNERSHIP PROPERTIES
Section 6.1 Withdrawal of General Partner or General Partner's
Interest in Partnership Properties
------------------------------------------------------------------
A. The General Partner (including by definition any successor General
Partner) shall have the right to retire or withdraw upon 120 days' Notification
to the Unit Holders, subject to its obligation to pay all costs and expenses
incurred by the Partnership by virtue of such retirement or withdrawal;
provided, however, that no such retirement or withdrawal shall be permitted
before the fifth anniversary of the Activation of
-53-
<PAGE>
the Partnership without the Consent of the Unit Holders owning 50% or more of
the outstanding Units.
B. The General Partner may, from time to time and upon at least 90 days'
Notification to the Unit Holders and without withdrawing from or resigning its
position as General Partner, cause the Partnership to distribute, in partial
liquidation of its interest in the Partnership, to the General Partner
fractional, undivided interests in the Producing Properties of the Partnership
(such interest of the General Partner in a Producing Property distributed is
hereinafter referred to as the "Distributed Interest") up to an aggregate
interest equal in value to 80% of the value of the Producing Properties of the
Partnership that it would have been entitled to upon a hypothetical liquidation
of the Partnership after application of the provisions of Section 9.2 (the
interest in a Producing Property of the General Partner retained in the
Partnership is hereinafter referred to as the "Retained Interest"); provided,
however, that no such distribution shall occur unless the General Partner
obtains an opinion of counsel to the Partnership to the effect that such
distribution will not result in any material adverse tax consequence to the Unit
Holders or the Partnership. Notwithstanding anything to the contrary in this
Agreement, in the event that any such distribution is made, the General Partner
shall:
(1) make appropriate adjustments in the Capital Account of the
General Partner and in the allocation of Partnership Revenues, expenses
and costs to assure that the General Partner will not share or participate
in any of the capital, costs, Revenues or distributions attributable to
the Producing Properties of the Partnership except to the extent of the
Retained Interest of the General Partner;
(2) not voluntarily or otherwise dispose of its Distributed
Interest unless the undivided interest of the Partnership in such
Producing Properties is also sold or disposed of for a proportionately
equivalent consideration;
(3) ensure that the Unit Holders' share of General and
Administrative Costs and Direct Administrative Costs does not increase as
a result of such withdrawal; and
(4) indemnify the Unit Holders against any expenses resulting
from such withdrawal.
-54-
<PAGE>
Section 6.2 Assignment of General Partner Interest
---------------------------------------------------
Subject to Section 12.3 and Section 6.5B, upon obtaining the Consent of
Unit Holders owning more than 50% of the outstanding Units, the General Partner
may assign or transfer its General Partner interest to a Person which shall
become a successor General Partner; provided, however, that no such Consent
shall be required in connection with an assignment or transfer pursuant to the
merger, consolidation or transfer of all or substantially all of the assets of
the General Partner.
Section 6.3 Removal of General Partner
---------------------------------------
A. Subject to Section 12.3, the Unit Holders owning more than 50% of the
outstanding Units, shall have the authority to, and shall, remove the General
Partner.
B. (i) If the Unit Holders elect to remove the General Partner as
permitted under this Section, and further elect to continue the business of the
Partnership with one or more successor General Partners, the removed General
Partner shall not be removed until a successor General Partner has been selected
by the Unit Holders and admitted to the Partnership pursuant to Section 11.2.
(ii) Notwithstanding Section 3.6B, any General Partner who shall withdraw
or be removed shall be released and indemnified by any successor General Partner
from and against all liability for Partnership debts and obligations incurred by
the Partnership prior to the time of such removal.
Section 6.4 Option to Purchase Interest from Former General Partner
--------------------------------------------------------------------
In the event the General Partner withdraws or is removed and a successor
General Partner is selected, the incoming General Partner and the departing
General Partner shall, by mutual agreement, select an independent petroleum
consultant to value the departing General Partner's interest in the Partnership.
The incoming General Partner, or the Partnership, shall have the option to
purchase at least 20% of the interest of the departing General Partner
(including any Distributed Interests distributed to the General Partner pursuant
to Section
-55-
<PAGE>
6.1B) for the value determined by the independent appraisal. The departing
General Partner's interest in the Partnership shall be transferred to the
successor General Partner, and the successor General Partner shall assign to the
departing General Partner a portion of Partnership Revenues, costs and rights to
receive Partnership distributions as and when such items are allocated or
distributed, as the case may be, by the Partnership equal to the percentage
interest of the departing General Partner in the Partnership prior to removal,
less the portion purchased by the successor General Partner or the Partnership.
Section 6.5 Power to Admit Successor General Partner
-----------------------------------------------------
A. If the General Partner has withdrawn or been removed, Unit Holders
owning more than 50% of the outstanding Units shall have the right and authority
to appoint and admit a successor General Partner meeting the requirements of
Section 6.5B to take the place of the departing General Partner.
B. If there is admitted to the Partnership a successor General Partner,
such admission shall not become effective unless (a) the Partnership shall have
received a certificate, duly executed by or on behalf of such proposed successor
General Partner, to the effect that: (i) it is experienced in performing (or
employs sufficient personnel who are experienced in performing) functions of the
type then being performed by the departing General Partner, (ii) it has a net
worth sufficient to satisfy the net worth requirements of the Code, Treasury
Regulations, the Internal Revenue Service or the courts applicable to a general
partner in a limited partnership in order to ensure that the Partnership will
not fail to be classified for federal income tax purposes as a partnership and
(iii) such Person, if other than an individual, has the authority to become a
successor General Partner under the terms of this Agreement; and (b) the
proposed successor General Partner shall have (i) become a party to, and adopted
all of the terms and conditions of this Agreement and (ii) paid all reasonable
legal fees of the Partnership and filing and publication costs in connection
with such Person's becoming a successor General Partner. The Certificate of
Limited Partnership shall be amended to reflect the withdrawal of the former
General Partner and the admission of the successor General Partner.
-56-
<PAGE>
Section 6.6 Incapacity of the General Partner
----------------------------------------------
A. In the event of the Incapacity of the General Partner, the Partnership
shall be dissolved. However, within 90 days thereafter the Unit Holders owning
more than 50% of the outstanding Units may elect to reconstitute the Partnership
prior to application of the liquidation provisions of Section 9.2.
B. Upon the Incapacity of the General Partner, the Person who is its legal
representative shall have all the rights of a General Partner for the purpose of
settling or managing its estate and such power as the Incapacitated General
Partner possessed to assign all or any part of its interest and to join with
such assignee in satisfying conditions precedent to such assignees becoming a
substituted General Partner.
Section 6.7 Termination of Contracts with General Partner
---------------------------------------------------------
Subject to and upon fulfilling the conditions of Section 12.3, the power
shall be vested in the Unit Holders owning more than 50% of the outstanding
Units to terminate any or all contracts between the General Partner or any
Affiliate and the Partnership, and select a replacement Person therefor.
ARTICLE SEVEN
ASSIGNMENT OF LIMITED PARTNER INTERESTS TO UNIT HOLDERS
Section 7.1 Assignments of the Interests of Depositary
-------------------------------------------------------
A. Pursuant to Sections 7.1B and 13.1, the Depositary shall issue to each
Person purchasing one or more Units a Depositary Receipt evidencing such Units.
The Partnership shall recognize as a Unit Holder, for the number of Units for
which the Partnership has received proceeds, each Person to whom the Depositary
issues a Depositary Receipt as of the date provided in Section 13.1 or otherwise
as the General Partner shall determine in accordance with the provisions of this
Agreement.
-57-
<PAGE>
B. The Depositary, by the execution of this Agreement, irrevocably assigns
to the Unit Holders all of the Depositary's beneficial (but not the record)
rights and interest in and to the Partnership, except as otherwise provided
herein, as of the date of Activation of the Partnership. The rights and interest
so transferred and assigned shall include, without limitation, the following:
(i) all rights to receive distributions of uninvested Capital
Contributions pursuant to Section 3.4 and the right to receive rebates of
Commissions and Organization and Offering Costs pursuant to Section 3.4;
(ii) all rights to receive distributions of Partnership funds or
assets under the terms of this Agreement or under the Act;
(iii) all rights in respect of allocations of each item of Revenues,
gain, loss, deduction and credit pursuant to Article Five;
(iv) all rights in respect of allocations to Capital Accounts
pursuant to Section 5.4;
(v) all rights to receive any proceeds of liquidation of the
Partnership pursuant to Section 9.2;
(vi) all rights to inspect books and records and to receive reports
pursuant to Article Ten;
(vii) the right to bring derivative actions pursuant to the Act (in
the event any such action must be brought in the name of the Depositary as
a Limited Partner, the Depositary agrees to bring such action, at the
expense of the Unit Holder(s) requesting such action); and
(viii) all rights which the Depositary has, or may have in the
future, under this Agreement or the Act, except as otherwise provided
herein.
C. The General Partner, by the execution of this Agreement, and any
Substituted Limited Partner, by its adoption of this Agreement, pursuant to
Section 7.3, irrevocably consents to and acknowledges that (i) the foregoing
assignment pursuant to Section 7.1B by the Depositary to the Unit Holders of the
Depositary's beneficial rights and interest in the Partnership
-58-
<PAGE>
is effective and (ii) the Unit Holders are intended to be third-party
beneficiaries of all rights and privileges of the Depositary hereunder. The
General Partner and any Substituted Limited Partner covenant and agree that, in
accordance with the foregoing transfer and assignment, all the Depositary's
beneficial rights and privileges hereunder may be exercised by the Unit Holders,
including, without limitation, those listed in Section 7.lB.
D. The Depositary, by execution of this Agreement, irrevocably commits to
exercise its rights to vote and Consent as a Limited Partner in accordance with
directions it receives from the Unit Holders as provided herein.
E. The Depositary may transfer its interest as the Depositary to another
Person only with the Consent of the General Partner and Unit Holders other than
Substituted Limited Partners owning more than 50% of the outstanding Units.
F. All Persons becoming Unit Holders will by their payment for and
acceptance of Depositary Receipts agree to comply with and be bound by the
terms, conditions and obligations of and will be entitled to all rights of Unit
Holders under this Agreement.
G. Other than pursuant to Sections 7.1B, 7.lE and 7.2, the Depositary
shall not transfer, assign, encumber, pledge or hypothecate any of its interest
in the Partnership.
Section 7.2 Rights of Unit Holders
-----------------------------------
A. In accordance with the transfer and assignment described in Section
7.1B, it is the intention of the parties hereto that, except to the extent set
forth in Section 3.6B, Unit Holders shall have the same rights and obligations
that Limited Partners have under this Agreement and under the Act. The fiduciary
duties and obligations of the General Partner to Limited Partners under the Act
and this Agreement shall extend to the Unit Holders.
B. Without limiting the generality of Section 7.2A, persons who become
Limited Partners pursuant to Section 7.3 below and other Unit Holders shall
share pari passu on the basis of one Limited Partner interest for one Unit, and
shall be considered a single class, with respect to all rights to receive
distributions and allocations pursuant to this Agreement.
-59-
<PAGE>
C. Subject to Section 12.2, Unit Holders shall vote on all matters in
respect of which they are entitled to vote (either in person, by proxy, or by
written consent), as a single class, with each Unit entitled to one vote;
provided, however, that the Depositary shall vote on behalf of and only as
directed by the Unit Holders who are not Substituted Limited Partners.
Section 7.3 Conversion of Units into Limited Partner Interests
-----------------------------------------------------------------
Subject to the consent of the General Partner, which consent may be
granted or withheld in its absolute discretion, any Unit Holder who desires to
convert his Units into an equal number of Limited Partner interests (which shall
be included in the meaning of "Units" as such term is used in this Agreement)
may do so following Activation of the Partnership by delivering to the
Depositary an executed subscription agreement and transfer application (which
are available upon request from the General Partner), accompanied by written
instructions which set forth an intention to become a Substituted Limited
Partner and request admission as such to the Partnership, together with such
other instruments or documents as the General Partner or the Depositary may deem
necessary or desirable, including the written acceptance and adoption by such
Unit Holder of the provisions of this Agreement and the execution,
acknowledgement and delivery to the General Partner of a special power of
attorney, the form and content of which are reasonably satisfactory to the
General Partner. Such executed documents shall be accompanied by a payment to
the Partnership by such Unit Holder of a fee (not to exceed $100) for legal and
administrative costs and recording fees. Unit Holders becoming Substituted
Limited Partners will be admitted to the Partnership quarterly, or as promptly
as possible after the commencement of the next calendar quarter. Persons who
effect such conversion will thereafter be deemed to have an equal number of
Units of interest as a Limited Partner and the Substituted Limited Partner will
not be able to re-exchange such units of Limited Partner interests for Units.
-60-
<PAGE>
ARTICLE EIGHT
TRANSFERABILITY OF UNITS
Section 8.1 Assignments of Units
---------------------------------
A. Subject to the provisions of Section 8.4, no Unit Holder may assign,
sell, transfer or exchange his Units without the approval of the General
Partner. In exercising its obligations under this Section 8.1A, the General
Partner shall use its best effort to ensure that the terms of transfer are not
in contravention of any of the provisions of this Agreement and shall not
approve any transfer:
(i) to a Person who makes a market in the Units;
(ii) which is effected through a matching agent unless the
procedures of such matching agent with respect to the transfer of Units
have been approved by the General Partner as not being incident to a
public trading of such securities within the meaning of Code Sections
7704, 469(k) or 512(c);
(iii) if such sale, assignment, transfer or exchange would be in
violation of any applicable federal or state securities laws (including
any applicable suitability standard and the restrictions on transfer set
forth in Rule 260.141.11 of Title 10 of the California Administrative
Code) or would cause the Partnership to be taxed as an entity other than a
partnership under the Code;
(iv) if such sale, assignment, transfer or exchange, when aggregated
with all other transfers during the same taxable year of the Partnership,
would result in both (a) the transfer of more than 5% of the Units
(excluding Permitted Transfers) and (b) the transfer of more than 2% of
the Units (excluding Permitted Transfers and transfers made through a
Matching Service), unless the General Partner shall have received an
opinion of counsel that such sale, assignment, transfer or exchange may be
made without material adverse tax consequences to the Unit Holders. For
purposes of this subsection, the "Permitted Transfers" shall mean: (1)
transfers in which the basis of the Units in the hands of the transferee
is determined, in whole or in part, by reference to its basis in the hands
of the transferor or is determined under Section 732 of the Code;
-61-
<PAGE>
(2) transfers at death; (3) transfers between members of a family (as
defined in Section 267(c)(4) of the Code); (4) the issuance of Units by or
on behalf of the Partnership in exchange for cash, property or services;
(5) distributions from a retirement plan qualified under Section 401(a) of
the Code; and (6) Block Transfers. The term "Block Transfer" means the
transfer by a Unit Holder in one or more transactions during any thirty
consecutive day period of Units representing in the aggregate more than 5%
of the total interests in Partnership capital or profits. The term
"Matching Service" has the meaning and the conditions to sale ascribed to
it in Internal Revenue Service Notice 88-75. For purposes of the above
limitations, the percentage of Units transferred during a taxable year
shall equal the sum of the monthly percentage of Units transferred. The
monthly percentage of Units transferred in any month shall be the
percentage equal to a fraction the numerator of which is the number of
Units transferred during such month and the denominator of which is the
number of Units outstanding on the last day of such month, provided that
the denominator shall not include Units owned by the General Partner or
any Person related to the General Partner (within the meaning of Section
267(b) or 707(b)(l) of the Code);
(v) except for transfers by gift or inheritance, intra-family
transfers, transfers resulting from family dissolutions, transfers to
Affiliates or transfers of such transferor's entire remaining holding of
Units, any sale, assignment, transfer or exchange of Units that would
result in the transferors' holding less than ten (10) Units;
(vi) except as provided in Section 8.3 unless and until the
transferee has certified to the Partnership that he is an Eligible
Investor; or
(vii) to any entity exempt from federal income tax under Section 501
of the Code, to any Person defined in Section 168(h)(2) of the Code, to
any Individual Retirement Account as defined in Section 408(a) of the
Code, to any Keogh Plan, to any nonresident alien or to any foreign
Entity. The General Partner shall give Notification to all Unit Holders in
the event that sales, exchanges, transfers or assignments have generally
been suspended.
-62-
<PAGE>
B. Any attempted sale, assignment, transfer or exchange in contravention
of the provisions of this Section 8.1 shall, unless otherwise determined by the
General Partner in its sole discretion, be void and deemed ineffectual and shall
not bind or be recognized by the Partnership.
C. The Partnership need not recognize for any purpose any assignment of
Units unless there shall have been filed with the Partnership and recorded on
the Partnership's books a duly executed and acknowledged instrument of
assignment, and such instrument evidences the written acceptance by the assignee
of all of the terms and provisions of this Agreement, represents that such
assignment was made in accordance with all applicable laws and regulations and
in all other respects is satisfactory in form and substance to the General
Partner.
D. The Partnership need not (but, at least in the case of (i) below, may,
in its sole discretion, do so) recognize for any purpose any purported sale,
assignment or transfer of all or part of the Units, if, in the opinion of
counsel:
(i) such sale, assignment or transfer would cause the Partnership to
be treated as an association taxable as a corporation for federal income
tax purposes, or, when added to the total of all other sales or exchanges
of interests within the preceding 12 months, would result in the
Partnership's being considered to have terminated within the meaning of
Section 708 of the Code; and the General Partner is expressly authorized
to enforce this provision by suspending transfers if and when any such
transfer would result in transfers of interests in the Partnership which
represent in the aggregate 50% (or such lower percentage as may be deemed
prudent by the General Partner) or more of all Partnership interests;
(ii) such sale, transfer or assignment would violate any state
securities or "blue sky" laws (including any applicable suitability
standards) applicable to the Partnership or the Units to be transferred or
assigned, except in the case of transfers upon the death of the Unit
Holder (by bequest or inheritance) or by operation of law; or
(iii) such sale, transfer or assignment might cause the Partnership
to be classified as a publicly traded partnership within the meaning of
Code Sections 7702, 469(k) or 512(c).
-63-
<PAGE>
E. Unless otherwise provided by the General Partner, any sale, assignment
or transfer of Units shall be recognized by the Partnership as of the first
business day of the calendar quarter following the approval of such assignment
or transfer by the General Partner, or as soon thereafter as practicable. The
General Partner shall not approve sales, assignments or transfers more
frequently than quarterly unless it receives a written opinion of counsel that
more frequent approvals shall not jeopardize the Partnership's federal income
tax status as a partnership. The Partnership and the General Partner shall be
entitled to treat the assignor of such Units as the absolute owner thereof in
all respects, and shall incur no liability for any allocation of Revenues, costs
or expenses, distribution or transmittal of reports or notice required to be
given to Unit Holders hereunder which is made in good faith to such assignor
until such time as the written instrument of assignment has been received by the
Partnership and recorded on its books.
F. The General Partner may reasonably interpret, and is hereby authorized
to take such action as it deems necessary or desirable to effect, the foregoing
provisions of this Section 8.1. The General Partner may, in its reasonable
discretion and without the approval of the Unit Holders, amend the provisions of
this Agreement in such manner as may be necessary or desirable to (i) preserve
the tax status of the Partnership as a partnership or (ii) avoid a
classification of the Partnership as a publicly traded partnership within the
meaning of Code Sections 7704, 469(k) or 512(c). The General Partner may, in its
reasonable discretion and without the approval of the Unit Holders, also amend
the provisions of this Agreement to include provisions governing the
transferability of interests in the Partnership which may be approved in future
legislation, Treasury Regulations, administrative rulings and other
pronouncements or judicial decisions. The Unit Holders shall be given prompt
Notification of any amendments permitted by this Section 8.1F.
G. No purported sale, assignment or transfer by a transferor of Units
shall be recognized unless (i) the transferor shall have represented that such
transfer (x) was effected through a broker-dealer or matching agent whose
procedures with respect to the transfer of Units have been approved by the
General Partner as not being incident to a public trading market and not through
any other broker-dealer or matching agent or (y) otherwise was not effected
through a broker-dealer or matching agent which makes a market in Units or
-64-
<PAGE>
which provides a readily available, regular and ongoing opportunity to holders
of Units to sell or exchange their Units through a public means of obtaining or
providing information of offers to buy, sell or exchange Units and (ii) the
General Partner determines that the circumstances described in Section 8.1A(iv)
have not occurred and will not occur and that otherwise such sale, assignment or
transfer would not, by itself or together with any other sales, transfers or
assignments, be likely to result in the Partnership's being classified as a
publicly traded partnership.
H. Unit Holders who are residents of the State of California must meet the
restrictions on transfers set forth in Rule 260.141-.11 of Title 10 of the
California Administrative Code.
I. Except as provided in Section 8.4, no transfer of Units will be
recorded or otherwise recognized by the Depositary or Partnership for any
purpose whatsoever unless and until the transferee has certified to the
Depositary that he is an Eligible Investor and, unless the transfer is among
members of the immediate family of the transferor Unit Holder, has paid a
transfer fee to reimburse the Depositary for all actual, reasonable and
necessary expenses (not to exceed $50 per transaction) incurred in connection
with the transfer.
J. A transferee who has accepted an assignment of Units shall be deemed to
have agreed to comply with and be bound by all of the terms and conditions of
this Agreement.
Section 8.2 Substituted Limited Partners
A. The Consent of the General Partner shall be required before the
assignee of any Units shall be admitted as a Substituted Limited Partner, which
Consent may be withheld in the sole and absolute discretion of the General
Partner.
B. No person shall have the right to become a Substituted Limited Partner
in place of his assignor unless all of the following conditions are first
satisfied:
-65-
<PAGE>
(1) a duly executed and acknowledged written instrument of
assignment complying with Section 8.1 shall have been filed with the
Partnership and recorded on its books, which instrument shall specify the
Units being assigned and set forth the intention of the assignor that the
assignee succeed to the assignor's interest as a Substituted Limited
Partner in his place;
(2) the transferor and his assignee shall have executed and
acknowledged such other instruments as the General Partner may deem
necessary or desirable to effect such substitution, including the written
acceptance and adoption by the assignee of the provisions of this
Agreement as the same may be amended, his agreement to be bound by the
terms hereof, and his execution, acknowledgment and delivery to the
General Partner of a special power of attorney, the form and content of
which are reasonably satisfactory to the General Partner; and
(3) a transfer fee sufficient to cover all reasonable expenses
connected with such substitution (not to exceed $50) shall have been paid
to the Partnership.
C. By executing or adopting this Agreement, the Depositary, each
Substituted Limited Partner and, by the purchase of a Unit, each Unit Holder
hereby consents to the admission of Substituted Limited Partners by the General
Partner in accordance with the foregoing.
Section 8.3 Eligible Investors
-------------------------------
A. If the General Partner determines that a Unit Holder is not an Eligible
Investor then the Unit Holder shall immediately be divested of its rights to
Consent on matters submitted to Unit Holders (and no such Units shall be deemed
outstanding for purposes of Consents of Unit Holders under this Agreement). At
any time after it can and does certify that it has become an Eligible Investor,
a Unit Holder may, upon application to the General Partner, retain all of the
rights and benefits attributable to his Units.
B. If at any time (i) the Partnership, the General Partner or the
Depositary receives an opinion of counsel to the effect that the citizenship or
other status of a Unit Holder may result in the forfeiture or cancellation of a
federal Lease or otherwise affects the eligibility of the Partnership to hold
-66-
<PAGE>
federal Leases or (ii) the Partnership or the General Partner is named a party
in any judicial or administrative proceeding that seeks the cancellation or
forfeiture of any property in which the Partnership has an interest because of
the citizenship (or any other status that subjects the Partnership to the risk
of losing its eligibility to acquire or hold interests in federal Leases) of any
one or more Unit Holders, the General Partner may notify the Unit Holder and
purchase the Units of such Unit Holder for its own account, at such time and for
such amount as the General Partner may determine in its sole discretion. Nothing
in this Section 8.3 shall prevent a Unit Holder from transferring his Units
prior to the date set for such purchase by the General Partner.
Section 8.4 Death, Incompetency or Dissolution of a Unit Holder
---------------------------------------------------------------
If a Unit Holder who is an individual dies or a court of competent
jurisdiction adjudges him to be incompetent to manage his person or his
property, such Unit Holder's executor, administrator, guardian, conservator or
other legal representative may exercise all of such Unit Holder's rights for the
purpose of settling his estate or administering his property, including any
power under this Agreement of an assignee to become a Unit Holder or Substituted
Limited Partner. If a Unit Holder is a corporation, trust or other entity and is
dissolved or terminated, the powers of such Unit Holder may be exercised by its
legal representative or successor.
ARTICLE NINE
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP
Section 9.1 Events Causing Dissolution
----------------------------------------
A. The Partnership shall be dissolved upon the happening of any of the
following events:
(i) the expiration of its term, without any continuation thereof as
set forth in Section 2.3;
-67-
<PAGE>
(ii) the Incapacity of the General Partner; provided, however,
within ninety (90) days thereafter the Unit Holders owning more than 50%
of the outstanding Units may elect to reconstitute the Partnership prior
to application of the liquidation provisions of Section 9.2;
(iii) the sale or other disposition at one time of all or
substantially all of the assets of the Partnership existing at the time of
such sale;
(iv) the election to dissolve the Partnership (a) by the General
Partner (which election shall be Consented by the Unit Holders owning more
than 50% of the outstanding Units), or (b) by the Consent of Unit Holders
owning more than 50% of the outstanding Units;
(v) ninety (90) days after the removal or withdrawal of the sole
General Partner (unless a successor is elected pursuant to Section 6.5);
or
(vi) the happening of any other event causing the dissolution of the
Partnership under the laws of the State, except that the Incapacity of the
Depositary or any Unit Holder shall not dissolve the Partnership and the
seizure of the interest of the Depositary shall not dissolve the
Partnership.
B. 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 General Partner has recorded a notice of dissolution of the
Partnership with the office of the Secretary of State of the State and shall
have complied with the laws of the other states in which it does business and
the assets of the Partnership have been distributed as provided in Section 9.2.
C. Nothing contained in this Agreement shall impair, restrict or limit the
rights and powers of the Unit Holders under the laws of the State or any other
jurisdiction in which the Partnership is doing business to reform and
reconstitute themselves as a limited partnership following dissolution of the
Partnership either under provisions identical to those set forth herein or under
any other provisions.
-68-
<PAGE>
D. If the Partnership is dissolved as a result of an event set forth in
Sections 9.1A(ii) or (v), Unit Holders owning more than 50% of the outstanding
Units may appoint an interim manager of the Partnership, who shall have and may
exercise only the rights, powers and duties of a general partner necessary to
preserve Partnership assets, until (i) a successor General Partner is elected
pursuant to Section 6.5, if the Partnership is reconstituted, or (ii) the
Partnership is liquidated pursuant to Section 9.2. The interim manager shall not
be liable as a general partner to the Depositary or Unit Holders and shall,
while acting in such capacity, be entitled to the same indemnification rights as
are set forth in Section 4.10.
Section 9.2 Liquidation
------------------------
A. Subject to Section 9.1, upon dissolution of the Partnership, its
liabilities shall be paid in the order provided herein. The General Partner
shall sell or otherwise dispose of the Partnership's Property and other assets
and shall execute all amendments terminating the Partnership. In connection with
any such sale, the General Partner shall attempt to obtain the best prices for
such property. Pending such sales, the General Partner shall have the right to
continue to operate and otherwise to deal with Partnership property. In the
event the Partnership is dissolved on account of the Incapacity or removal of
the General Partner, the Partnership shall elect, in accordance with the
provisions of Article Twelve, a Person (the "Liquidating Agent") to perform the
function of the General Partner in liquidating the assets of the Partnership and
winding up its affairs, and shall pay to such Liquidating Agent its reasonable
fees and expenses incurred in connection therewith. Gain or loss realized on the
sale or other disposition of the Partnership's assets will be credited to (in
the case of gain) or charged against (in the case of loss) the General Partner's
and each Unit Holder's Capital Account to the extent allocable to the General
Partner and such Unit Holder under Sections 5.1 and 5.2. Any liquidation of the
Partnership shall take place out of court and without application being made
therefor to the Secretary of State of the State.
The Liquidating Agent shall agree not to resign at any time without 15
days' prior Notification and (if other than the General Partner) may be removed
at any time, with or without cause, by Notification of removal approved by Unit
Holders owning more than 50% of the outstanding Units. Upon
-69-
<PAGE>
dissolution, removal or resignation of the Liquidating Agent, a successor and
substitute Liquidating Agent (who shall have and succeed to all rights, powers
and duties of the original Liquidating Agent) shall, within 30 days thereafter,
be selected by Unit Holders owning more than 50% of the outstanding Units. The
right to appoint a successor or substitute Liquidating Agent in the manner
provided herein shall be recurring and continuing for so long as the functions
and services of the Liquidating Agent are authorized to continue under the
provisions hereof, and every reference herein to the Liquidating Agent shall be
deemed to refer also to any such successor or substitute Liquidating Agent
appointed in the manner herein provided. The Liquidating Agent shall have and
may exercise, without further authorization or Consent of any of the parties
hereto, all of the powers conferred upon the General Partner under the terms of
this Agreement (but subject to all of the applicable limitations, contractual
and otherwise, upon the exercise of such powers, other than the limitation on
sales set forth in Section 4.5C) to the extent necessary or desirable in the
good faith judgment of the Liquidating Agent to carry out the duties and
functions of the Liquidating Agent hereunder for and during such period of time
as shall be reasonably required in the good faith judgment of the Liquidating
Agent to complete the winding-up and liquidation of the Limited Partnership as
provided for herein.
Notwithstanding the provisions of Section 9.1 which require the
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth herein, if on dissolution of the Partnership, the General
Partner or Liquidating Agent determines that an immediate sale of part or all of
the Partnership's assets would be impracticable or would cause undue loss to the
Unit Holders, the General Partner or Liquidating Agent may, in its absolute
discretion, defer for a reasonable time the liquidation of any assets except
those necessary to satisfy liabilities of the Partnership (other than those to
the General Partner and Unit Holders) or place those assets in a liquidating
trust to hold until such time as the assets are sold or depleted; provided,
however, that such assets will be transferred to a liquidating trust only if
before the transfer the General Partner or Liquidating Agent shall have received
the opinion of counsel to the Partnership that the operation of such liquidating
trust pursuant to its terms will not result in such liquidating trust being
treated as an association taxable as a corporation for federal income tax
purposes. Furthermore, if the dissolution of the Partnership is effected by
virtue of a merger or combination with another entity or by virtue of a
-70-
<PAGE>
transfer, sale or exchange of all or substantially all of the Partnership's
assets for which at least a portion of the consideration consists of securities
of another entity, such securities may be distributed to the General Partner and
Unit Holders in kind and there shall be no obligation to sell or otherwise
dispose of such securities for cash or to place them in a liquidating trust;
provided, however, that no such securities shall be distributed to the Unit
Holders upon liquidation unless (i) the securities are readily marketable and
(ii) pro rata amounts of such securities (to the extent such securities may be
divided in equal pro rata amounts) are distributed to each Unit Holder.
B. In settling accounts after dissolution, the assets of the Partnership
shall be paid out in the following order: (i) to third-party creditors, in the
order or priority as provided by law; (ii) to the General Partner and any
Liquidating Agent for any expenses of the Partnership paid by or payable to them
to the extent they are entitled to reimbursement therefor pursuant to this
Agreement; (iii) to all of the Unit Holders in the amount equivalent to the
amount of their positive Capital Account balances (as adjusted pursuant to
Section 9.2A) on the date of distribution; (iv) to the General Partner in the
amount equivalent to the amount of its positive Capital Account balance (as
adjusted pursuant to Section 9.2A) on the date of distribution; and (v) the
balance, if any, shall be paid to the General Partner and Unit Holders in the
manner in which Revenues are then being allocated.
C. If the General Partner has a deficit balance in its Capital Account
following the distribution(s) provided for in Section 9.2B above, as determined
after taking into account all adjustments to its Capital Account for the taxable
year of the Partnership during which such distribution(s) occur, it shall
restore the amount of such deficit balance to the Partnership within 90 days and
such amount shall be distributed to the Unit Holders in accordance with their
positive Capital Account balances.
D. Upon the liquidation or partial liquidation of the General Partner's
interest pursuant to Article Six hereof, any distribution to the General Partner
shall be made pro rata in accordance with and to the extent of its positive
Capital Account balance after the General Partner's and Unit Holders' Capital
Accounts are adjusted as if all of the Partnership's Property had been sold at
its fair market value immediately prior to such distribution and the gain or
loss realized on such
-71-
<PAGE>
sale charged or credited to the General Partner's and Unit Holders' Capital
Accounts in accordance with and to the extent of its positive Capital Account
balance after the General Partner's and Unit Holders' Capital Accounts are
adjusted as if all of the Partnership's Property had been sold at its fair
market value immediately prior to such distribution and the gain or loss
realized on such sale charged or credited to the General Partner's and Unit
Holders' Capital Accounts in accordance with the provisions of Article Five
hereof; provided, however, that if the General Partner has a deficit balance in
its Capital Account following such distribution (or adjustment of the General
Partner's Capital Account pursuant to this Section 9.2D), the General Partner
shall restore the amount of such deficit balance to the Partnership by the later
of the end of the Partnership taxable year in which the liquidation of the
General Partner's Interest occurs or 90 days after the date of such liquidation.
E. Notwithstanding anything to the contrary in this Agreement, upon the
dissolution and termination of the Partnership, the General Partner will
contribute to the Partnership the lesser of: (a) the deficit balance in its
Capital Account; or (b) the excess of 1.01 percent of the total Capital
Contributions of the Unit Holders over the capital previously contributed by the
General Partner.
ARTICLE TEN
BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS; ETC.
Section 10.1 Books and Records
-------------------------------
The books and records of the Partnership, including information relating
to the sale by the General Partner or any Affiliates of goods or services to the
Partnership, and a list of the names and addresses and Units of all Unit
Holders, shall be maintained by the General Partner at the principal office of
the Partnership for a period of six years following the close of the Fiscal Year
to which they relate and shall be available for examination there by any Unit
Holder or its duly authorized representatives at any and all reasonable times.
Any Unit Holder or its duly authorized representatives, upon paying the costs of
collection, duplication and mailing, shall be entitled for any proper purpose to
a copy of the list of names and addresses and Units of the Unit Holders. The
Partnership may
-72-
<PAGE>
maintain such other books and records and may provide such financial or other
statements as the General Partner in its discretion deems advisable.
Section 10.2 Accounting Basis for Tax and Reporting Purposes;
Fiscal Year
-------------------------------------------------------------
The books and records of the Partnership for tax purposes, for purposes of
this Agreement and for the purpose of reports to the Partners, shall be kept on
the accrual basis. The Fiscal Year of the Partnership shall be the calendar year
to the extent permissible and the General Partner shall use its best efforts to
obtain any necessary approvals therefor.
Section 10.3 Bank Accounts
---------------------------
The General Partner shall maintain a bank account or accounts on behalf of
the Partnership with any bank in the United States having total assets in excess
of $100,000,000. The General Partner shall not deposit Partnership funds in an
account with any bank in an aggregate amount in excess of 5% of such bank's
total assets. Withdrawals shall be made only in the regular course of the
Partnership's business on such signature or signatures as the General Partner
may determine. All deposits and other funds not needed in the operation of the
business may be deposited in interest-bearing accounts, certificates of deposit,
money market funds (including those managed or marketed by the Dealer Manager or
its Affiliates) or invested in short term United States Government obligations
maturing within one year, commercial paper of corporations organized under the
laws of any state of the United States or the District of Columbia having the
highest credit rating granted by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, or other similar highly liquid investment.
Section 10.4 Reports
---------------------
A. The General Partner shall close the Partnership's books of account
promptly at the close of each Fiscal Year and an annual examination of the
Partnership's financial statements shall be performed at the expense of the
Partnership by the Accountants. The General Partner shall furnish to the Unit
Holders an annual report within 120 days after the close of each
-73-
<PAGE>
Fiscal Year of the Partnership commencing with the Fiscal Year in which the
Partnership was Activated. If requested by a Unit Holder, the General Partner
shall also furnish such Unit Holder with a report within 75 days after the end
of the first six months of the Fiscal Year in which such request was made, or
within 75 days after the request is made, whichever is later. Such report will
contain at least the following information:
(i) Financial statements for the Partnership's accounts,
including a balance sheet, statement of income, statement of changes in
partners' capital and statement of cash flow prepared on an accrual basis
in accordance with generally accepted accounting principles and
accompanied by a report of the Accountants together with their opinion
thereon, except that the semi-annual financial statements need not be
audited;
(ii) A summary itemization, by type and/or classification, of
the total fees and compensation, including any General and Administrative
Cost reimbursement, paid by the Partnership or indirectly on their behalf,
to the General Partner and any Affiliate;
(iii) A description of each Producing Property acquisition,
including the costs therefor, in which the Partnership owns an interest,
except succeeding reports need contain only material changes (including
all material farmouts, development drilling, improved recovery operations
and abandonments), if any, regarding Producing Properties already reported
upon. In the case of wells that have been abandoned after production has
commenced, a statement justifying such abandonment shall be included if
the General Partner or an Affiliate is the operator. With respect to all
material Farmouts, the statement shall include a justification of the
Farmout, location, time, to whom made and a general description of terms;
and
(iv) A schedule reflecting a list of the wells drilled by the
Partnership and the costs thereof.
B. Within 60 days after the end of each fiscal quarter, each Unit Holder
will receive an "investor statement" which summarizes his current quarter and
cumulative cash distributions in the Partnership.
-74-
<PAGE>
C. Within 120 days after the end of the Fiscal Year following the Fiscal
Year in which Activation of the Partnership occurs, and annually thereafter, the
General Partner shall furnish to the Unit Holders a computation as of the end of
the immediately preceding Fiscal Year, based upon engineering reports prepared
by one or more qualified independent petroleum engineering firms with respect to
Producing Properties containing Proved Reserves equal to at least 80% of the
Proved Reserves of the Partnership (with the computation as to any balance of
the Partnership's Proved Reserves being based upon petroleum engineering reports
prepared by the General Partner or an Affiliate), of the total estimated Proved
Developed Producing Reserves, Proved Developed NonProducing Reserves and Proved
Undeveloped Reserves owned by the Partnership, the estimated dollar value
thereof stated in then existing prices and escalated prices (as provided by the
General Partner). In addition, the computation shall include an estimate of the
time required for the extraction of such reserves and the present worth of such
reserves and the estimate shall contain a statement that because of the time
period required to extract such reserves the present value of revenues to be
obtained in the future is less than if immediately receivable.
D. In addition to the report described in Section 10.4C of this Agreement,
if an event occurs to the knowledge of the General Partner or its Affiliates
leading to a reduction or an increase of such Proved Reserves of more than 10%,
excluding reduction as a result of normal production, an additional computation
and estimate similar to that described in Section 10.4C shall be sent to each
Unit Holder as soon as possible.
E. By March 15 of each year, the General Partner will furnish a report to
each Unit Holder containing such information as is pertinent for completion of
his respective federal, state and other income tax returns.
F. The General Partner shall file on a timely basis with the Securities
and Exchange Commission all filings required to be made by the Partnership
pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder. The General Partner shall make
available to any Unit Holder upon the Unit Holder's request, copies of any
report filed by or on behalf of the Partnership with the Securities and Exchange
Commission. The General Partner shall cause a copy of any reports sent to the
Unit Holders under paragraphs A, C, D and E hereof to be sent to the California
Commissioner of Corporations.
-75-
<PAGE>
G. The General Partner agrees to make all relevant financial and
engineering reports available for review by a Unit Holder on request at the
offices of the Partnership.
Section 10.5 Elections
-----------------------
The General Partner shall cause the Partnership to make all elections
required or permitted to be made by the Partnership under the Code and not
otherwise expressly provided for in this Agreement, in the manner that the
General Partner believes will be most advantageous to the Unit Holders, except
that (i) the General Partner shall not be required to make an election under
Section 754 of the Code or corresponding provisions of applicable state income
tax laws, and (ii) the General Partner shall make the election under Section
263(c) of the Code to expense all intangible drilling and development costs in
the initial Partnership federal income tax return filed for the Fiscal Year in
which such costs are incurred.
ARTICLE ELEVEN
AMENDMENTS; MERGER
Section 11.1 Proposal and Adoption of Amendments Generally
-----------------------------------------------------------
A. Notwithstanding anything to the contrary herein, the General Partner
may, without prior notice or Consent of any Unit Holder, amend any provision of
this Agreement (including an amendment to admit an additional General Partner or
a successor General Partner in the event of the withdrawal or removal of the
General Partner) if, in its opinion, such amendment does not have a material
adverse effect upon the Unit Holders or otherwise is permitted by Section 8.lF.
Amendments to this Agreement to reflect the addition or substitution of a
Limited Partner or the admission of a successor General Partner shall be made at
the time and in the manner referred to in Section 11.2. Any other amendment to
this Agreement may be proposed by the General Partner or holders of at least 10%
of the outstanding Units. The Person or Persons proposing such amendment shall
submit a Notification containing (a) the text of such amendment, and (b) a
statement of the purpose of such amendment. The General Partner shall, within 15
days after receipt of any proposal under this Section ll.1A, give Notification
to the Depositary and all Unit Holders of such proposed amendment, of
-76-
<PAGE>
such statement of purpose and of such opinion of counsel, together, in the case
of an amendment proposed by any Unit Holders, with the views, if any, of the
General Partner with respect to such proposed amendment.
B. Amendments to this Agreement shall be adopted if: (i) in the case of
amendments referred to in Section 11.2, the conditions specified in Section 6.5B
shall have been satisfactorily completed and the Partnership shall not have been
furnished with an opinion of counsel to the Partnership to the effect that such
amendment will adversely affect the classification of the Partnership as a
partnership for federal income tax purposes; (ii) in the case of amendments
referred to in Section 8.1F, the conditions specified in said Section shall have
been satisfactorily completed; or (iii) in the case of all other amendments,
such amendment shall have been Consented to by Unit Holders owning more than 50%
of the outstanding Units (unless such Consent is not required pursuant to
Section 11.lA of this Agreement); provided, however, that no such amendment may:
(a) enlarge the obligations of the General Partner or any Unit Holder under this
Agreement or convert the interest of any Unit Holder into the interest of a
General Partner or modify the limited liability of any Unit Holder without the
Consent of such Partner or Unit Holder; (b) modify the method provided in
Article Five of determining and allocating or distributing, as the case may be,
each item of income, gain, loss, cost, deduction or credit without the Consent
of the General Partner if it would be adversely affected by such modification,
and any Unit Holder which may be adversely affected, by such modification; (c)
amend Sections 4.9, 4.10, 6.1, 6.2, 6.3 or 6.4 without the Consent of the
General Partner; or (d) amend Sections 2.3, 4.2, 4.4, 4.5, 4.11, this Article
Eleven or Section 12.3 unless the Consent of the Unit Holders owning at least
two-thirds of the outstanding Units is obtained.
C. Upon the adoption of any amendment to this Agreement, the amendment
shall be executed by the General Partner (both on its own behalf and as
attorney-in-fact for any Substituted Limited Partners) and the Depositary and,
if necessary or appropriate, shall be recorded in the proper records of the
State and any other state in which the Partnership is then doing business.
-77-
<PAGE>
Section 11.2 Amendments on Admission or Removal of Partner
-----------------------------------------------------------
If this Agreement or the Certificate of Limited Partnership shall be
amended to reflect the withdrawal or removal of the General Partner and the
continuation of the business of the Partnership, such amendment shall be signed
by the remaining or successor General Partner and by the removed General
Partner.
Section 11.3 Merger
--------------------
The Partnership may merge or consolidate with or into one or more limited
partnerships, general partnerships, corporations, business trusts or
associations, or unincorporated businesses if (i) Consented to by the General
Partner and by Unit Holders owning more than 50% of the Outstanding Units and
(ii) such merger or consolidation is permitted under the Act or any other
applicable law.
Section 11.4 Exchange Offers
-----------------------------
Neither the General Partner nor its Affiliates will make or cause to be
made any offer to a Unit Holder to exchange his Units for a security unless:
(a) such offer is made after the expiration of two years after the
Partnership commenced operations;
(b) such offer is made to all Unit Holders;
(c) such offer is on a basis no more advantageous to the General
Partner, exchange offeror or underwriter of the offer and their respective
affiliates, than to Unit Holders, provided, however, that the foregoing
clause shall not prohibit, if permitted under applicable state and
self-regulatory organization guidelines: (i) compensation (including the
issuance of securities) to such persons in exchange for such persons'
other balance sheet assets (nonPartnership interests) for inclusion of the
General Partner in the exchange offer or tender of other balance sheet
assets of the General Partner, underwriter or their affiliates, based upon
exchange valuation principles consistent with these guidelines; (ii)
compensation to an underwriter for services in
-78-
<PAGE>
connection with the offer provided, however, that no compensation shall be
payable to an underwriter for the tender of interests by the exchange
offeror, its affiliates or the underwriter; and (iii) compensation that
may be permitted under subparagraph (g) below;
(d) payments for services rendered by any Person in connection with
the exchange are fully supportable, actual and necessary;
(e) in computing the exchange ratio, the value of reserves used is
supported by an appraisal prepared by an independent petroleum consultant
as of the most current feasible date, and the value of all other material
balance sheet assets, including undeveloped acreage, is at fair market
value as determined by an independent qualified appraiser;
(f) the offer is made pursuant to all registration requirements
under both federal and state laws;
(g) if the exchange offeror is a corporation, the offer is made in
compliance with applicable NASAA Guidelines for corporate securities and
may not allow a security with different rights and privileges to be issued
to the General Partner or its Affiliates unless there is justification
therefor;
(h) the offer does not allow for an accelerated reversionary
interest to the General Partner without regard to the existing payout
provisions;
(i) additional shares or units to be issued pursuant to future
reevaluation of properties include reevaluation of similar properties held
by Unit Holders;
(j) there will be no overrides newly established to the General
Partner, exchange offeror, or affiliates on leases to be part of the
exchange and any overrides to be established to non-affiliates on such
leases and the basis therefor are disclosed in detail;
(k) all properties to be exchanged are to be evaluated on the same
basis or standard of evaluation; and
-79-
<PAGE>
(1) material properties of the General Partner or its Affiliates to
be exchanged have complete cost disclosure; provided, however, that the
General Partner may avoid any of such conditions and restrictions for
which waivers or consents are obtained from appropriate state securities
administrators or agencies. Notwithstanding the foregoing, neither the
General Partner nor its Affiliates shall have any obligation to make any
exchange offer to Unit Holders.
ARTICLE TWELVE
CONSENTS, VOTING AND MEETINGS
Section 12.1 Methods of Giving Consent
---------------------------------------
Any Consent of a Unit Holder required by this Agreement may be given by a
Unit Holder as follows: (i) at a meeting, in person, by a written proxy or
signed writing directing the manner in which it desires that its vote be cast,
which writing must be received by the General Partner prior to such meeting, or
(ii) without a meeting, by a signed writing directing the manner in which it
desires that its vote be cast, which writing must be received by the General
Partner prior to the date upon which the votes of Unit Holders are to be
counted. Any Unit Holder may waive notice of or attendance at any meeting of the
Unit Holders and may execute a signed written consent. Only the votes of Unit
Holders of record on the date set by the General Partner (which date shall be
not less than 10 days and not more than 60 days prior to the date set for the
meeting or consent), whether at a meeting or otherwise, shall be counted. Units
held by the General Partner and its Affiliates which, as a result thereof,
cannot be voted, will not be deemed outstanding for purposes of calculating
whether a sufficient number of Units have consented. The laws of the State
pertaining to the validity and use of corporate proxies shall govern the
validity and use of proxies given by the Unit Holders.
-80-
<PAGE>
Section 12.2 Meetings of Unit Holders
--------------------------------------
The General Partner may at any time call a meeting of the Unit Holders or
for a vote, without a meeting, of the Unit Holders on matters upon which the
Unit Holders are entitled to provide their Consent, and shall call for such a
meeting or vote upon receipt by the General Partner of a request therefor made
by Unit Holders owning at least 10% of the outstanding Units as of the date of
receipt of such request. Within 15 days of the receipt of the request, the
General Partner shall notify all Unit Holders of record as of the date set by
the General Partner (which date shall be not less than 10 days and not more than
60 days prior to the date set for the meeting or consent) as to the time and
place of the meeting, if called, and the general nature of the business to be
transacted thereat, or if no such meeting has been called, of the matter or
matters to be voted upon and the date upon which the votes will be counted. The
date of any meeting of Unit Holders or the date upon which such votes, without a
meeting, will be counted (regardless of whether the General Partner has called
for such meeting or vote upon the request of Unit Holders or has initiated such
event without such request) shall be not less than 30 or more than 60 days
following mailing of the Notification thereof by the General Partner. Units held
by the General Partner and its Affiliates may not be voted by them. All expenses
of the meetings, voting and such Notification shall be borne by the Partnership.
Section 12.3 Limitations on Requirements for Consents
------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, the
powers of the Unit Holders set forth in Sections 4.5D, 6.3A, 6.6A, 6.7, 11.1A
and 12.5 shall not be deemed to be granted to the Unit Holders or exercisable by
them if counsel for the Partnership or counsel designated by Unit Holders owning
at least 10% of the outstanding Units renders an opinion to the effect that the
grant or the exercise of those powers or the result thereof is prohibited by the
Act, will impair the limited liability of the Depositary or the Unit Holders or
will affect the classification of the Partnership as a partnership for federal
income tax purposes.
-81-
<PAGE>
Section 12.4 Submissions to Unit Holders
-----------------------------------------
The General Partner shall give all the Unit Holders Notification of any
proposal or other matter required by any provisions of this Agreement or by law
to be submitted for the consideration and approval of the Unit Holders. Such
Notification shall include any information required by the relevant provision of
the Agreement or by law.
Section 12.5 Acting Without Concurrence of General Partner
-----------------------------------------------------------
Except as limited by Sections 12.3 and ll.lB, Unit Holders owning more
than 50% of the outstanding Units, without the necessity for concurrence by the
General Partner may vote to:
(a) amend the Agreement;
(b) dissolve the Partnership;
(c) remove the General Partner and elect a new General Partner;
(d) approve or disapprove the sale of all or substantially all of
the assets of the Partnership; or
(e) cancel or amend the terms of any contract for services with the
General Partner or any Affiliate which shall be without penalty, provided
30 days' written notice is given.
ARTICLE THIRTEEN
THE DEPOSITARY
Section 13.1 Depositary Receipts
---------------------------------
A. Within 45 days of the Activation of the Partnership, the Depositary
will execute and forward to each Unit Holder Depositary Receipts evidencing the
ownership by the Unit Holder as of the date of Activation the Units for which
such Unit Holder subscribed.
-82-
<PAGE>
B. Pursuant to the terms of Section 8.1, upon receipt of a properly
executed application for transfer, the Depositary shall within three business
days execute and forward Depositary Receipts to the respective transferees.
C. Depositary Receipts may be endorsed with, have incorporated in the text
thereof or be accompanied by such legends or recitals, attachments or changes,
not inconsistent with the provisions of this Agreement, as may be required to
comply with any applicable law or regulation, or to conform with any usage with
respect thereto, or to indicate any special limitation or restriction to which
any particular Unit may be subject, or as may for any other reason be required.
Each Depositary Receipt shall be duly executed on behalf of the Depositary by
the manual or facsimile signature of a duly authorized officer of the
Depositary. No Depositary Receipt shall be entitled to any benefit under this
Agreement or be valid for any purpose unless it bears such signature.
D. All Depositary Receipts executed by the Depositary shall be numbered
consecutively. The Unit Holder of each numbered Depositary Receipt shall be
registered on the books of the Depositary maintained pursuant to Section 13.3A.
E. Upon surrender by the Unit Holder in person or by duly authorized
attorney of one or more Depositary Receipts at the Depositary's principal
office, or at any other office it may designate for the purpose, for split-up or
combination, the Depositary shall, subject to the terms and conditions of this
Agreement and the Depositary Receipt, execute and deliver one or more new
Depositary Receipts in authorized denominations as requested, evidencing the
same aggregate number of Units as evidenced by the Depositary Receipt(s)
surrendered.
F. If any Depositary Receipt is mutilated, destroyed, lost or stolen, the
Depositary shall execute and deliver a Depositary Receipt in like form and tenor
in exchange and substitution for the mutilated, destroyed, lost or stolen
Depositary Receipt; provided, that the Depositary may require the Unit Holder to
(i) surrender any mutilated Depositary Receipt, (ii) file with the Depositary,
in a form and manner satisfactory to it, proof of the destruction, loss or
theft, and of such Unit Holder's ownership, of the Depositary Receipt and (iii)
furnish to the Depositary reasonable indemnification (including posting of an
indemnity bond) satisfactory to the Depositary.
-83-
<PAGE>
G. As a condition precedent to the execution and delivery, transfer,
split-up, combination, surrender, conversion or exchange of any Depositary
Receipt, the Depositary may require (i) payment of any fee required hereby and
payment of a sum sufficient for reimbursement of any tax or other governmental
charge with respect thereto, (ii) production of proof satisfactory to it as to
the identity and genuineness of any signature or endorsement or as to the due
authorization of the action, (iii) filing of such information and execution of
such documents by the transferor and/or the transferee as may be required by
this Agreement or the Depositary Receipt or otherwise is deemed necessary or
appropriate by the Depositary and (iv) compliance with such other conditions as
may be imposed under applicable laws and regulations. The Depositary shall be
entitled to rely upon, and shall not have any liability to the Partnership, the
General Partner, any Unit Holder or any other Person with respect to the content
of any proof submitted to it pursuant to this Section 13.lG, and shall have no
obligation to inquire as to the truth and accuracy thereof (except for acts or
omissions resulting from the Depositary's gross negligence).
H. All Depositary Receipts surrendered to the Depositary shall be
canceled. The Depositary shall retain all canceled Depositary Receipts and other
instruments, documents and records in accordance with the policies and
regulations of the Depositary, federal securities laws and the rules and
regulations of any securities exchange or market upon which the Depositary
Receipts may be listed or quoted.
Section 13.2 Depositary or Affiliate as Transfer Agent and Registrar
---------------------------------------------------------------------
The Depositary or an Affiliate shall also be the transfer agent and
registrar for the Depositary Receipts unless prohibited by law, regulation or
any applicable rule of a securities exchange or market. In its capacity as such,
subject to the terms and conditions of this Agreement, the Depositary or such
Affiliate shall transfer record ownership of the Units by bookkeeping entry on
the books and records maintained pursuant to Section 13.3A.
-84-
<PAGE>
Section 13.3 Duties of Depositary
----------------------------------
A. In performing its duties hereunder the Depositary shall:
(i) maintain at its principal office a current list of the full name
and last known home or business address of each Unit Holder, set forth in
alphabetical order which list shall be available during ordinary business
hours for examination and copying at the reasonable request, and at the
expense, of any Unit Holder or his duly authorized representative, or
copies of such list may be requested in writing for any proper purpose by
any Unit Holder or his duly authorized representative; provided that the
reasonable costs of fulfilling such request, including copying expenses,
shall be paid by the Unit Holder making such request. In addition, the
Depositary shall, as required, furnish to the Securities and Exchange
Commission, any report, financial statement or communication received from
the Partnership or the General Partner that is made generally available to
Unit Holders;
(ii) keep all records required to be kept, for the periods
specified, and shall file with the Securities and Exchange Commission all
materials required to be so filed, under the Securities Exchange Act of
1934, by virtue of its status as Depositary. A copy of any material filed
by the Depositary with the Securities and Exchange Commission shall also
be provided to the Partnership within two business days after its filing.
To the extent that any such filing requires information from the
Partnership or the General Partner, such information shall be furnished to
the Depositary by the General Partner in sufficient quantity and a
sufficient time in advance of the date the filing is required to be made
to enable the Depositary to comply with such requirements; and
(iii) keep books at its corporate office for the transfer of
Depositary Receipts. The books shall be open during normal business hours
for inspection by the Unit Holders. The Depositary may, however, close the
transfer books, at any time or from time to time, when deemed expedient by
it in connection with the performance of its duties hereunder.
-85-
<PAGE>
B. Upon the request of the Partnership, the Depositary shall as promptly
as practicable furnish to the Partnership a list, as of the date specified in
such request, of the names, addresses and social security or taxpayer
identification numbers of all Unit Holders.
Section 13.4 Depositary Not a Trustee, Issuer, etc.
----------------------------------------------------
The Depositary is not a trustee and it is intended that the Depositary, in
its capacity as depositary, shall not be deemed to be an "issuer" or
"underwriter" of securities under the federal securities laws or applicable
state securities laws; it being expressly understood and agreed that the
Depositary, in its capacity as a Limited Partner of the Partnership, is acting
only in a ministerial capacity.
Section 13.5 Indemnification of the Depositary
-----------------------------------------------
The Depositary shall be indemnified by the Partnership to the same extent
and subject to the same conditions and restrictions as provided in Section 4.10
of this Agreement with respect to the indemnification of the General Partner.
Section 13.6 Limitation of Expense Reimbursements
--------------------------------------------------
The expenses of the Depositary otherwise reimbursable to it under the
terms of this Agreement and the fees payable to it hereunder shall not exceed
the lesser of (i) an amount equal to 90% of the competitive price which would be
charged by nonaffiliated persons rendering similar services in the same or
comparable geographic location or (ii) the costs and expenses of the Depositary
incurred in rendering such services.
-86-
<PAGE>
ARTICLE FOURTEEN
MISCELLANEOUS PROVISIONS
Section 14.1 Notification to the Partnership or the General Partner
--------------------------------------------------------------------
Any Notification to the Partnership or the General Partner shall be sent
to the principal office of the Partnership, as set forth in this Agreement.
Except as provided herein, any Notification to a Unit Holder shall be sent to
its last known address.
Section 14.2 Binding Provisions
--------------------------------
The covenants and agreements contained herein shall be binding upon and
inure to the benefits of the heirs, executors, administrators, successors and
assigns of the respective parties hereto.
Section 14.3 Applicable Law
----------------------------
This Agreement shall be construed and enforced in accordance with the laws
of the State.
Section 14.4 Separability of Provisions
----------------------------------------
If for any reason any provision or provisions hereof which are not
material to the purposes or business of the Partnership are determined to be
invalid and contrary to any existing or future law, such invalidity shall not
impair the operation of or affect those portions of this Agreement that are
valid.
-87-
<PAGE>
Section 14.5 Appointment of the General Partner as Attorney-in-Fact
-------------------------------------------------------------------
The Depositary, by the execution of this Agreement, irrevocably
constitutes and appoints the General Partner as its true and lawful agent and
attorney-in-fact with full power and authority in its name, place and stead to
execute, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents, instruments and conveyances that may be necessary
or appropriate to carry out the provisions or purposes of this Agreement,
including without limitation: (i) the Certificate of Limited Partnership and
other certificates and instruments (including counterparts of this Agreement),
and any amendment thereof, including any amendment substituting a Limited
Partner pursuant to Section 8.2, that the General Partner deems appropriate to
form, reform, qualify or continue the Partnership (or a new partnership with
substantially the same provisions as the Partnership) as a limited partnership
(or a partnership in which the Partners will have limited liability comparable
to that provided by the Act) in the jurisdiction in which the Partnership may
conduct business; (ii) all amendments to the foregoing and to this Agreement
necessary to admit into the Partnership additional or substituted General
Partners pursuant to Section 11.2; (iii) all instruments that the General
Partner deems appropriate to reflect a change or modification of the Partnership
in accordance with the terms of this Agreement (including those necessary to
reflect additional Capital Contributions); and (iv) all conveyances and other
instruments that the General Partner deems appropriate to reflect the
dissolution and termination of the Partnership.
Section 14.6 Entire Agreement
------------------------------
This Agreement constitutes the entire agreement among the parties. This
Agreement supersedes any prior agreement or understanding among the parties and
may not be modified or amended in any manner other than as set forth herein.
-88-
<PAGE>
Section 14.7 Paragraph Titles
------------------------------
Article and section titles are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the text.
Section 14.8 Counterparts
--------------------------
This Agreement may be executed in several counterparts, all of which
together shall constitute one agreement binding on allparties hereto,
notwithstanding that all the parties have not signed the same counterpart except
that no counterpart shall be binding unless signed by the General Partner.
GEODYNE PRODUCTION COMPANY,
as General Partner
By: // Michael E. Luttrell //
-------------------------
Michael E. Luttrell
Executive Vice President
GEODYNE DEPOSITARY COMPANY,
as the Limited Partner
By: // Michael E. Luttrell //
-------------------------
Michael E. Luttrell
Executive Vice President
-89-
PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-B
AGREEMENT OF LIMITED PARTNERSHIP
Agreement of Limited Partnership, dated as of January 24, 1990, between
Geodyne Production Company, a Delaware corporation, as General Partner, and
Geodyne Depositary Company, a Delaware corporation, as the Limited Partner.
Whereas, the parties hereto wish to form a limited partnership under the
Oklahoma Revised Uniform Limited Partnership Act pursuant to this Agreement of
Limited Partnership;
Now, Therefore, in consideration of the mutual promises and agreements
made herein, the parties, intending to be legally bound, hereby agree as
follows:
ARTICLE ONE
DEFINED TERMS
The defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article One. The
singular shall include the plural and the masculine gender shall include the
feminine, the neuter and vice versa, as the context requires.
"Accountants" shall mean Ernst & Young or such other nationally
recognized firm of independent certified public accountants as shall be engaged
from time to time by the General Partner for the Partnership.
"Acquisition Reserve Report" shall mean a Hydrocarbon reserve report
made available to the Partnership prepared by a qualified petroleum engineering
firm acceptable to the General Partner in connection with the proposed
acquisition of a Producing Property, which shall include statements (i)
identifying reserves of Hydrocarbons referred to in such report as Proved
Developed Producing Reserves, Proved Developed Non-Producing Reserves or Proved
Undeveloped Reserves, as the case may be, and identifying all computations and
determinations made for purposes of such report, including, without limitation,
the present and future prices for Hydrocarbons and the present and future costs
to produce and develop such Hydrocarbons used in such computations and
determinations, (ii) with respect to the determination of the nature and extent
of
-1-
<PAGE>
the reserves of Hydrocarbons reflected in such report, that the collection,
analysis and evaluation of the basic physical data upon which such determination
is based were performed by such qualified petroleum engineering firm or, if such
data were collected by another Person, that such qualified petroleum engineering
firm has made inquiry with respect to the methods employed in such collection,
(iii) specifying the respective amounts of Proved Developed Producing Reserves,
Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves
contained therein, and (iv) indicating such qualified petroleum engineering
firm's opinion as to the respective estimated present values of future net
revenues of each category of reserves contained therein determined in accordance
with criteria satisfactory to the General Partner and otherwise in accordance
with sound engineering and industry practices, including such standards and
practices as may be promulgated by the Society of Petroleum Engineers of the
American Institute of Mining and Metallurgical Engineers. Any such report may
state that such qualified petroleum engineering firm expresses no opinion and
makes no warranty or representation with respect to the proposed acquisition of
such Producing Property and that such qualified petroleum engineering firm is
relying on information furnished by the General Partner as to the historical
volumes of any Hydrocarbons actually produced and as to the proposed ownership
interest of the Partnership in such Producing Property.
"Acquisitions and Operations Fee" shall mean the fee paid by the
Partnership to the General Partner pursuant to Section 4.12B of this Agreement
in connection with the Partnership's acquisition of Producing Properties and the
conduct of its business operations.
"Act" shall mean the Oklahoma Revised Uniform Limited Partnership Act,
as amended from time to time.
"Activation" or "Activated" shall mean the date on which the Certificate
of Limited Partnership is filed with the Oklahoma Secretary of State.
"Affiliate" shall mean, when used with reference to a specified Person:
(a) any Person directly or indirectly owning, controlling, or holding with power
to vote 10% or more of the outstanding voting securities of the specified
Person; (b) any Person 10% or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote by the
specified Person; (c) any Person directly or
-2-
<PAGE>
indirectly controlling, controlled by, or under common control with, the
specified Person; (d) any Person who is an officer, director, partner or trustee
of, or serves in a similar capacity with respect to, the specified Person or of
which the specified Person is an officer, director, partner or trustee, or with
respect to which the specified Person serves in a similar capacity; and (e) the
spouse or any relative of the specified Person sharing the same household.
Notwithstanding the foregoing, no Person shall be deemed to be an Affiliate
solely by reason of its ownership of units or limited partnership interests in a
limited partnership.
"Affiliated Program" shall mean a drilling or income program (whether in
the form of a limited partnership, general partnership, joint venture or
otherwise), whether currently existing or hereafter formed, interests in which
were or are offered to Persons or entities not engaged in a trade or business
within the oil and gas industry (other than by virtue of its participation in an
Affiliated Program) and of which the General Partner or an Affiliate thereof
serves as general partner, venturer, sponsor or manager.
"Agreement" shall mean this Agreement of Limited Partnership as
originally executed and as amended from time to time.
"Capital Account" shall mean, as to any Partner, an account maintained
on the books of the Partnership in accordance with the provisions of Section 5.4
below.
"Capital Contribution" shall mean the cash contribution of a Partner to
the Partnership.
"Certificate of Limited Partnership" shall mean the certificate of
limited partnership, and any and all amendments thereto and restatements
thereof, filed on behalf of the Partnership as required under the Act.
"Code" shall mean the Internal Revenue Code of 1986, as amended (or any
corresponding provisions of succeeding law).
"Commercial Well" shall mean any Partnership Well which is capable of
producing Hydrocarbons in commercial quantities, including those wells which are
shut-in or which have not been abandoned within 60 days following the
commencement of production. For purposes of this definition, production shall
refer to the commencement of the commercial
-3-
<PAGE>
marketing of Hydrocarbons, and shall not include any spot sales of Hydrocarbon
production as a result of testing procedures.
"Commissions" shall mean the cash fees payable to the Dealer Manager and
the Selected Dealers in connection with their participation in the offering of
Units.
"Consent" shall mean the consent of a Person, given as provided in
Section 12.1, to do the act or thing for which the consent is solicited, or the
act of granting such consent, as the context may require.
"Dealer Manager" shall mean PaineWebber Incorporated, a Delaware
corporation.
"Depositary" shall mean Geodyne Depositary Company, a Delaware
corporation, as the sole initial Limited Partner or any Person who at the time
of reference thereto has been admitted to the Partnership with the consent of
the General Partner as a successor to the interest of Geodyne Depositary Company
in the Partnership, which will upon the Activation of the Partnership acquire
and hold on behalf of the Unit Holders the Limited Partner interests
attributable to the Units issued to the Unit Holders.
"Depositary Receipt" shall mean a document issued in registered form by
the Depositary evidencing the ownership of one or more Units.
"Development Drilling" shall mean all drilling and completing, or
plugging and abandoning (after a determination that a well is not a Commercial
Well), of a Partnership Well drilled to the same reservoir from which another
well or other wells on a Lease or an offset Lease are being produced, or the
recompletion of an existing Partnership Well; provided, however, that
Development Drilling shall not include any Identified Development Drilling.
"Direct Administrative Costs" shall mean the actual and necessary direct
costs attributable to services provided to the Partnership by parties other than
the General Partner or its Affiliates, whether incurred by or for the benefit of
the Partnership directly or incurred by the General Partner or its Affiliates,
including the annual audit fees, legal fees and expenses, the cost of reviewing
tax returns and reports, the cost of evaluations prepared by qualified petroleum
engineering firms pursuant to Section l0.4C of this Agreement and all other
-4-
<PAGE>
such costs directly incurred by or for the benefit of the Partnership. Direct
Administrative Costs shall not include any Organization and Offering Costs or
any General and Administrative Costs.
"Eligible Investor" shall mean a person who is qualified to hold an
interest in oil and gas Leases on federal lands, including offshore areas under
federal laws and regulations in effect from time to time. As of the date of this
Agreement, the term "Eligible Investor" means: (i) a citizen of the United
States who has attained the age of majority under the laws of the state in which
he resides, (ii) an association (including a partnership, joint tenancy or
tenancy in common) organized or existing under the laws of the United States or
any state or territory thereof, all of the members of which are citizens of the
United States or (iii) a corporation organized under the laws of the United
States or any state or territory thereof, of which corporation, to the best of
its knowledge, not more than 5% of the voting stock, or of all the stock, is
owned or controlled by citizens of countries that deny to United States citizens
privileges to own stock in corporations holding oil and gas Leases similar to
the privileges of non-United States citizens to own stock in corporations
holding an interest in federal Leases, and, in each case, whose interest, direct
or indirect, in federal oil and gas Leases, applications, offers and options
therefor does not exceed 246,000 acres in the same state, of which no more than
200,000 acres are under option, nor does it exceed 300,000 acres in each of the
northern and southern leasing districts of Alaska, of which no more than 200,000
acres are held under option in each of such districts.
"Engineering Review Letter" shall mean a document prepared by a
qualified petroleum engineering firm acceptable to the General Partner in
connection with the proposed acquisition of a Producing Property, which shall
include statements indicating that (i) such qualified petroleum engineering firm
has reviewed an oil and gas reserve report prepared by the engineering staff of
Geodyne Resources, Inc. or an Affiliate, (ii) in the opinion of such qualified
petroleum engineering firm, the reserve report was prepared in accordance with
sound engineering and industry practices, including such standards and practices
as may be promulgated by the Society of Petroleum Engineers of the American
Institute of Mining and Metallurgical Engineers, and (iii) with respect to the
determination of the nature and extent of the reserves of Hydrocarbons reflected
in such report, such qualified petroleum engineering firm has made inquiry with
respect to the methods employed in the collection, analysis and
-5-
<PAGE>
evaluation of the basic physical data upon which such determination is based.
"Farmout" shall mean an arrangement whereby the owner of a Lease or
Working Interest agrees to assign his interest in certain specific acreage to
the assignee, retaining some interest such as an overriding royalty interest,
oil and gas payment, offset acreage or other type of interest, subject to the
drilling of one or more specific wells or other performance as a condition of
the assignment.
"Fiscal Year" shall mean the calendar year.
"General and Administrative Costs" shall mean all customary and routine
legal, accounting, data processing, depreciation (other than depreciation
relating to real property), geological, engineering, travel, office rent,
telephone, secretarial, employee compensation and benefits, and other items of a
general and administrative nature, whether like or unlike the foregoing, and any
other incidental expenses reasonably necessary to the conduct of the
Partnership's business, and generated by the General Partner or any Affiliate
other than an Affiliated Program computed on a cost basis, determined by the
General Partner in accordance with generally accepted accounting principles and
subject to review by the Accountants in connection with the annual audit of the
Partnership and its Affiliates. General and Administrative Costs shall not
include any Direct Administrative Costs or Organization and Offering Costs of
the Partnership.
"General Partner" shall mean Geodyne Production Company, a Delaware
corporation, acting in such capacity, and any other Person admitted as an
additional or substituted General Partner pursuant to the provisions of Article
Six of this Agreement.
"Hydrocarbons" shall mean crude oil, natural gas, condensate, natural
gas liquids and other liquid or gaseous hydrocarbons and any minerals produced
in association therewith.
"Identified Development Drilling" shall mean all drilling and
completing, or plugging and abandoning (after a determination that a well is not
a Commercial Well), of a Partnership Well drilled by or on behalf of the
Partnership to a reservoir on a Lease or an offset Lease constituting all or a
portion of a Producing Property or the recompletion of an existing Partnership
Well, where (i) the drilling or recompletion of such Partnership Well commences
after the
-6-
<PAGE>
acquisition of such Producing Property by the Partnership and is conducted in
order to commence production of Hydrocarbons from Proved Undeveloped Reserves
identified in the Acquisition Reserve Report or Engineering Review Letter
prepared in connection with such Producing Property, (ii) the costs of
development of the Proved Undeveloped Reserves were taken into account in such
Acquisition Reserve Report or Engineering Review Letter in valuing such Proved
Undeveloped Reserves attributable to such Producing Property, and (iii) a
portion of the cost paid by the Partnership for such Producing Property is
attributed by such Acquisition Reserve Report or Engineering Review Letter to
such Proved Undeveloped Reserves. The term, Identified Development Drilling,
shall also refer to any Partnership Wells drilled or recompleted on a Producing
Property subsequent to the initial Identified Development Drilling conducted on
such Producing Property in order to commence production of Hydrocarbons from
Proved Undeveloped Reserves (in addition to those identified in the related
Acquisition Reserve Report or Engineering Review Letter) which have been
categorized by the General Partner as such by virtue of production obtained from
prior Identified Development Drilling conducted on such Producing Property. Any
reference to costs incurred in connection with Identified Development Drilling
shall include the interest, commitment fees and other financing charges and
expenses of Partnership borrowings incurred to finance Identified Development
Drilling.
"Improved Recovery" shall mean all methods of supplementing natural
forces and mechanisms of primary recovery or otherwise increasing the ultimate
recovery from a Partnership Property, including, but not limited to, water
flooding, pressure maintenance, gas cycling, fluid injection, polymer flooding,
chemical flooding and the use of miscible displacement fluids.
"Incapacity" or "Incapacitated" shall mean the entry of any order for
relief under any bankruptcy law (except that, in the case of the General
Partner, the term "bankruptcy" shall mean only being subject to Chapter 7 of the
Bankruptcy Code of 1984), the adjudication of interdiction, of incompetence, or
of insanity, or the death, dissolution or termination (other than by merger or
consolidation under which the surviving entity agrees to assume all of the
obligations and responsibilities of the merged or consolidated Person set forth
in this Agreement), as the case may be, of any Person.
-7-
<PAGE>
"Independent Petroleum Engineer" shall mean a Person with no material
relationship to the General Partner or its Affiliates who is in the business of
rendering fair market value 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.
"Investment Income" shall mean all interest and dividend income earned
on temporary investments of the Partnership at any time prior to the time at
which an amount equal to the Capital Contributions to the Partnership available
for the acquisition of Producing Properties have been (i) expended or (ii)
returned pursuant to Section 3.4 of this Agreement.
"I/P Partnership" shall mean a partnership formed as a part of the
program captioned "PaineWebber/Geodyne Institutional/Pension Energy Income
Partners" and any subsequent Affiliated Program formed by the General Partner or
any Affiliate for investment primarily by pension and other tax-exempt plans and
accounts.
"Lease" shall mean a lease, mineral interest, royalty or overriding
royalty covering Hydrocarbons (or a contractual right to acquire such an
interest), or an undivided interest therein or portion thereof, together with
all easements, permits, licenses, servitudes and rights-of-way situated upon, or
used or held for future use in connection with, the exploration, development or
operation of such interest.
"Limited Partner" shall mean the Depositary and any Substituted Limited
Partners.
"Net Profits Interest" shall mean an interest in one or more Producing
Properties which entitles the holder thereof to a share of the gross revenues
from the production of Hydrocarbons from the Producing Property or Properties
less all operating, production, development, transportation, transmission and
marketing expenses, and all severance, sales, ad valorem and excise taxes
attributable to such production.
-8-
<PAGE>
"Notification" shall mean a writing, containing the information required
by this Agreement to be communicated to any Person, hand delivered or sent by
registered or certified mail, return receipt requested, postage prepaid, to such
Person at the last address of such Person reflected on the official records of
the Partnership, the date of the certified receipt (or such other evidence of
receipt) therefor being deemed the date of the giving of Notification; provided,
however, that any written communication containing the information sent or
delivered to the Person and actually received by the Person shall constitute
Notification for all purposes of this Agreement.
"Operating Costs" shall mean all expenditures made and costs incurred by
the Partnership with respect to (i) the production and marketing of Hydrocarbons
from completed Partnership Wells, including labor, fuel, repairs, hauling,
materials, supplies, utility charges and other costs incident to or therefrom,
costs of maintaining inventories incidental to the operations of Producing
Properties, costs of making transfers of lease and well equipment to and from
Partnership Wells, ad valorem and severance taxes, insurance and casualty loss
expense, and compensation to well operators or others for services rendered in
conducting such operations; (ii) the interest, commitment fees and other finance
charges and expenses of Partnership borrowings incurred in connection with
Development Drilling and Improved Recovery projects; and (iii) processing
facilities, pipelines, gas sales facilities, Improved Recovery projects, and
other procedures and facilities necessary to produce efficiently and market the
Hydrocarbon reserves from a Producing Property, all to the extent such costs and
expenditures are not Property Acquisition Costs.
"Organization and Offering Costs" shall mean all costs and expenses
incurred by the General Partner and its Affiliates in connection with the
organization and activation of the Partnership, including, without limitation,
the legal, printing, accounting and other direct and indirect costs incurred in
connection with preparing this Agreement and the preparation and filing of a
certificate of limited partnership, the costs incurred with respect to the
registration for offer and sale of the Units under applicable federal and state
securities laws, the wholesale offering and marketing fees and expenses of the
Dealer Manager and a subsidiary of Geodyne Resources, Inc. which is a registered
broker-dealer, and other front-end fees. Organization and Offering Costs shall
not include the
-9-
<PAGE>
Commissions paid to the Dealer Manager or reallowed to the Selected Dealers, but
shall include fees and expenses (including expense reimbursements) paid to
Persons in connection with the offering and issuance of Units, including due
diligence expenses.
"Partner" shall mean the General Partner or any Limited Partner of the
Partnership.
"Partnership" shall mean the limited partnership formed hereby.
"Partnership Account" shall mean the bank account or accounts
established by the General Partner pursuant to Section 10.3 of this Agreement.
"Partnership Property" shall mean all interest, property and right of
any type owned by the Partnership.
"Partnership Well" shall mean any well in which the Partnership has an
interest.
"Payout" shall mean that time at which cash distributions have been made
by the Partnership to the Unit Holders (together with their predecessors in
interest) in an aggregate amount equal to $100 for each whole Unit held by each
such Unit Holder.
"Person" shall mean any individual, partnership, corporation, trust or
other entity.
"Prior Limited Partnership" shall mean any limited partnership activated
prior to the Activation of the Partnership of which depositary units or units of
limited partnership interest were offered and sold pursuant to the Prospectus or
pursuant to the prospectus prepared for the PaineWebber/Geodyne Energy Income
Program I, the PaineWebber/Geodyne Energy Income Program II or the
PaineWebber/Geodyne Institutional/Pension Energy Income Partners or any
subsequent Affiliated Programs pursuant to which I/P Partnerships are formed.
"Producing Property" shall mean any property (or interest in such
property) with a well or wells capable of producing Hydrocarbons in commercial
quantities or properties unitized with such properties or properties adjacent to
such properties which are acquired as an incidental part of the acquisition of
such properties. The term also includes well machinery and equipment, gathering
systems, storage facilities or processing
-10-
<PAGE>
installations or other equipment and property associated with the production of
Hydrocarbons. Interests in properties may include Working Interests, production
payments, Royalties and other nonworking and nonoperating interests.
"Property Acquisition Costs" shall mean, without duplication, the sum of
(i) the prices paid by the Partnership or the General Partner or an Affiliate to
acquire a Producing Property ultimately sold to the Partnership, including the
price paid to acquire a purchase option with respect to a Producing Property,
lease bonuses and equipment costs associated therewith; (ii) title insurance or
examination costs, brokers' commissions and finders' fees, filing fees,
recording fees, transfer taxes, if any, and like charges in connection with the
acquisition of Producing Properties; (iii) delay rentals and ad valorem taxes
paid by the buyer with respect to such property to the date of its transfer to
the Partnership; (iv) interest and other financing fees and costs actually
incurred by the General Partner or its Affiliates to acquire or maintain such
Producing Properties prior to their transfer to the Partnership; and (v) all
reasonable, necessary and actual expenses incurred by the General Partner or an
Affiliate in connection with the acquisition of Producing Properties and paid to
third parties who are not Affiliates for geological, geophysical, seismic, land,
engineering, drafting, accounting, auditing, legal and other like services,
including the Partnership's costs incurred (to the extent consistent with
generally accepted industry standards) in connection with the review of proposed
acquisitions of Producing Properties whether or not acquired and the preparation
and review of Acquisition Reserve Reports and Engineering Review Letters, all
allocated to the property in accordance with the allocation procedures used by
the General Partner, any of its Affiliates or a Partnership; provided that the
portion of the General Partner's or Affiliate's expenses allocated to the
property, as set forth in items (iii), (iv) and (v), shall have been incurred
not more than 36 months prior to the property transaction.
"Property Investment Period" shall have the meaning set forth in Section
5.2.
"Prospect" shall mean an area in which the Partnership owns or intends
to own one or more oil and gas interests which is geographically defined on the
basis of geological data by the General Partner and which is reasonably
anticipated by the General Partner to contain at least one reservoir.
-11-
<PAGE>
"Prospectus" shall mean the prospectus pursuant to which the Units were
offered, including all supplements or amendments thereto delivered in such
offering, if any.
"Proved Reserves" shall mean those quantities of Hydrocarbons, which,
upon analysis of geologic and engineering data, appear with reasonable certainty
to be recoverable in the future from known Hydrocarbon reservoirs under existing
economic and operating conditions. Proved Reserves are limited to those
quantities of Hydrocarbons which can be expected, with little doubt, to be
recoverable commercially at current prices and costs, under existing regulatory
practices and with existing conventional equipment and operating methods.
Depending upon their status of development, such Proved Reserves shall be
subdivided into the following classifications and have the following
definitions:
(a) "Proved Developed Reserves" shall mean Proved Reserves which can
be expected to be recovered through existing wells with existing
equipment and operating methods. This classification shall include:
(1) "Proved Developed Producing Reserves" which are Proved
Developed Reserves which are expected to be produced from existing
wells; and
(2) "Proved Developed Non-Producing Reserves" which are
Proved Developed Reserves which exist behind the casing of existing
wells, or at minor depths below the present bottom of such wells,
which are expected to be produced through these wells in the
predictable future, where the cost of making Hydrocarbons available
for production should be relatively small compared to the cost of a
new well.
Additional Hydrocarbons expected to be obtained through the
application of Improved Recovery techniques are included as "Proved
Developed Reserves" only after testing by a pilot project or after the
operation of an installed program has confirmed through production
responses that increased recovery will be achieved.
-12-
<PAGE>
(b) "Proved Undeveloped Reserves" shall mean all 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. Such reserves on undrilled acreage are limited to those
drilling units offsetting productive units which are reasonably certain
of production when drilled; provided that Proved Reserves for other
undrilled units can be claimed where it can be demonstrated with
certainty, based on accepted geological, geophysical and engineering
studies and data, that there is continuity of production from an
existing productive formation. No estimates for Proved Undeveloped
Reserves are attributable to any acreage for which Improved Recovery is
contemplated, unless the techniques to be employed have been proved
effective by actual tests in the same area and reservoir.
"Revenues" are the Partnership's gross revenues from all sources,
including interest income, proceeds from sales of production, the Partnership's
share of revenues from partnerships or joint ventures of which it is a member,
proceeds from sales or other dispositions of Hydrocarbon properties or other
Partnership assets, provided that contributions to Partnership capital by the
Partners and the proceeds of any Partnership borrowings are specifically
excluded.
"Royalty" shall mean an interest, including an overriding royalty but
excluding a Net Profits Interest, in gross production or the proceeds therefrom
which does not require the owner thereof to bear any of the cost of production,
development operation or maintenance.
"Selected Dealer" shall mean a member in good standing of the National
Association of Securities Dealers, Inc. which has been selected by the Dealer
Manager to offer and sell the Units.
"State" shall mean the State of Oklahoma.
"Subscription Agreement" shall mean the Subscription Agreement in the
form attached to the Prospectus as Exhibit B.
"Subsequent Limited Partnership" shall mean any limited partnership
activated after the Activation of the Partnership of which Units are offered and
sold pursuant to the Prospectus.
-13-
<PAGE>
"Substituted Limited Partner" shall mean any Unit Holder admitted to the
Partnership as a Substituted Limited Partner pursuant to Section 7.3 or Sections
8.1 and 8.2 of this Agreement.
"Unit" shall mean an increment of the attributes of the interest as a
Limited Partner that is either (i) assigned to a Unit Holder by the Depositary
and is evidenced by a Depositary Receipt or (ii) unless the context otherwise
requires, is held directly by a Substituted Limited Partner and, in either case,
which increment represents a subscription amount of $100.
"Unit Holders" shall mean any Person who holds Depositary Receipts in
accordance with Section 7.1 or Section 8.1 hereof as reflected in the records of
the Partnership and the Depositary and, unless the context otherwise requires,
any Person who becomes a Substituted Limited Partner.
"Unit Holders' Subscriptions" shall mean the aggregate dollar amount
(initially subscribed for by Unit Holders) determined by multiplying the number
of Units issued to the Unit Holders by $100.
"Working Interest" shall mean the interest (whether held directly or
indirectly) in a Lease which is burdened with the obligation to pay some portion
of the expense of production, development, operation or maintenance. A Working
Interest does not include a Net Profits Interest.
ARTICLE TWO
NAME, PLACE OF BUSINESS AND OFFICE; TERM
Section 2.1 Name, Place of Business and Office, Agent
------------------------------------------------------
The Partnership shall be conducted under the name PaineWebber/ Geodyne
Energy Income Limited Partnership III-B. The business of the Partnership may,
however, be conducted under any other name deemed necessary or desirable by the
General Partner in order to comply with applicable laws. The office and
principal place of business of the Partnership shall be c/o Geodyne Production
Company, 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The
agent for service of process on the Partnership shall be Geodyne Production
Company, 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-
-14-
<PAGE>
3708. The General Partner may change the principal place of business and the
location of such office and may establish such additional offices as it deems
advisable from time to time; provided, however, that in the event the principal
place of business of the Partnership shall be changed, the General Partner shall
provide Notification thereof to the Unit Holders. The General Partner shall not
be obligated to provide a copy of the certificate of limited partnership as
filed with the Oklahoma Secretary of State to the Depositary or Unit Holders. A
Unit Holder may obtain a copy of such certificate of limited partnership by
making a written request therefor to the General Partner.
Section 2.2 Purpose
--------------------
The business and purpose of the Partnership shall be to acquire, own,
hold, operate, explore, develop, trade, sell and exchange Hydrocarbon properties
and interests therein of all kinds onshore and offshore in the continental
United States, including, without limitation, interests in general or limited
partnerships, joint ventures and other entities that hold or are formed to
acquire interests in such properties or interests; to engage in Development
Drilling, Identified Development Drilling or other drilling operations
specifically authorized by this Agreement, and enhanced recovery operations
thereon; to produce, transport, market, purchase and trade Hydrocarbons and
products thereof; to purchase, lease, own, hold, operate, sell and exchange all
equipment, machinery, facilities, systems and plans necessary or appropriate for
such purposes; and to do any and all things necessary or proper in connection
with or incident to the foregoing activities.
Section 2.3 Term
-----------------
The Partnership shall continue in force and effect for a period of ten
(10) years from the date of its Activation, provided that the General Partner
may extend the term of the Partnership for up to five periods of two years each
if it believes each such extension is in the best interests of the Unit Holders,
or until dissolution prior thereto pursuant to the provisions hereof.
-15-
<PAGE>
ARTICLE THREE
PARTNERS AND CAPITAL
Section 3.1 General Partner
---------------------------
A. The name, address and Capital Contribution of the General Partner are
set forth in Schedule A which is attached hereto and incorporated herein by
reference.
B. The General Partner shall not be required to make any additional
Capital Contribution except as set forth in the next sentence and in Sections
3.4 and 9.2C. The General Partner shall contribute an amount of cash sufficient
to pay its share of costs allocated to it pursuant to Section 5.1 of this
Agreement as such costs are incurred to the extent that the amount of Revenues
allocated to it (and/or the amount of Partnership borrowings incurred on its
behalf) is insufficient to pay such costs.
Section 3.2 Limited Partner and Unit Holders
---------------------------------------------
A. The name, address and Capital Contribution of the Depositary as
Limited Partner are set forth in Schedule A which is attached hereto and
incorporated herein by reference.
B. Neither the Depositary nor any Unit Holder shall be required to make
any additional Capital Contribution to the Partnership.
C. The Depositary shall engage in no business activity and shall incur
no liabilities other than acting as Depositary for the Partnership or any other
limited partnership that is an Affiliated Program. The Depositary shall not
amend its Certificate of Incorporation or By-laws without the prior Consent of
the Unit Holders holding a majority of the outstanding Units.
Section 3.3 Application of Capital Contributions
-------------------------------------------------
The General Partner shall deposit in the Partnership Account the Capital
Contributions and apply such Capital Contributions to (i) pay to the General
Partner the aggregate amount due pursuant to Section 4.12B in consideration of
the
-16-
<PAGE>
General Partner's payment of Organization and Offering Costs, (ii) pay
Commissions, and (iii) pay to the General Partner the Acquisitions and
Operations Fee. The balance of such Capital Contributions shall be held in the
Partnership Account to be applied to the payment of Property Acquisition Costs
and, to the extent not payable out of Revenues or Investment Income, Operating
Costs, General and Administrative Costs, Direct Administrative Costs and other
Partnership costs; provided, however, that such funds may be temporarily
invested prior to the payment of such costs in accordance with Section 10.3.
Section 3.4 Certain Returns of Capital
---------------------------------------
Any portion of the Capital Contribution of the Partnership (except for
necessary operating capital) that has not been expended or that is not, or in
the determination of the General Partner, will not be committed for expenditure
by the second anniversary of the Activation of the Partnership will promptly be
refunded to the Unit Holders as a return of part of their Capital Contributions
at the earlier of such determination or the second anniversary of the Activation
of the Partnership. In addition, the General Partner shall contribute cash to
the Partnership (with respect to which its Capital Account will be credited) in
an amount equal to that portion of the total of (i) the amount paid to the
General Partner in respect of the Acquisitions and Operations Fee, (ii) the
amount paid to the General Partner in consideration of its payment of the
Organization and Offering Costs, and (iii) the Commissions, which are
attributable (on a proportionate basis) to the unexpended amount of Capital
Contributions so refunded, which cash shall be refunded to the Unit Holders
together with the unexpended Capital Contributions so refunded. All amounts so
refunded to the Unit Holders shall reduce dollar for dollar their Capital
Accounts.
Section 3.5 Partnership Capital
--------------------------------
A. No Partner shall be paid interest on any Capital Contribution to the
Partnership or on such Partner's Capital Account, notwithstanding any
disproportion therein as between Partners.
-17-
<PAGE>
B. Except as provided in Sections 3.4, 6.1 and 9.2 of this Agreement,
neither the General Partner nor any Unit Holder shall have the right to withdraw
from the Partnership or to withdraw or receive any return of its Capital
Contribution. Under circumstances involving a return of any Capital
Contribution, no Unit Holder shall have priority over any other Unit Holder nor
shall any Unit Holder have the right to receive any property other than cash,
except as may otherwise be provided in this Agreement.
Section 3.6 Liability of Partners
----------------------------------
A. Except as provided in the Act, neither the Depositary nor the Unit
Holders shall be personally liable for any debts, liabilities, contracts or
obligations of the Partnership. To the extent that any distribution is deemed to
constitute a return of capital under the Act, the General Partner shall not seek
to recover any distribution unless the General Partner has applied all other
available Partnership assets to the payment of liabilities of the Partnership
and the liabilities of the Partnership, other than to Partners, have not been
fully paid, satisfied, assumed or discharged. The Unit Holders that are not
Substituted Limited Partners shall have no obligation to return any funds
distributed to them by the Partnership that are later determined to be a return
of the Capital Contributions. In no event shall the Depositary or any Unit
Holder be obligated to make any contribution to the Partnership for any purpose
whatsoever other than Capital Contributions of the Depositary representing the
proceeds of the offering of Units.
B. Each of the General Partner and any successor or additional General
Partner subsequently admitted to the Partnership agrees that it shall remain
liable for any obligation or recourse liability of the Partnership incurred
during the period in which it is a General Partner and to the extent the
Partnership has incurred liability.
-18-
<PAGE>
ARTICLE FOUR
MANAGEMENT
Section 4.1 Management and Control of the Partnership
------------------------------------------------------
A. Subject to the Consent of the Unit Holders as and when required by this
Agreement, the General Partner, within the authority granted to it under and in
accordance with the provisions of this Agreement, shall have the full and
exclusive right to manage and control the business and affairs of the
Partnership and to make all decisions regarding the business of the Partnership
and shall have all of the rights, powers and obligations of a general partner of
a limited partnership under the laws of the State.
B. The Depositary and the Unit Holders, as such, shall not participate in
the management of or have any control over the Partnership's business nor shall
the Depositary or the Unit Holders, as such, have the power to represent, act
for, sign for or bind the General Partner or the Partnership. The Depositary and
each of the Unit Holders hereby Consent to the exercise by the General Partner
of the powers conferred on it by this Agreement.
Section 4.2 Authority of the General Partner
---------------------------------------------
A. In addition to any other rights and powers which the General Partner
may possess under this Agreement and the Act, the General Partner shall, except
and subject to the extent otherwise provided or limited in this Agreement, have
all specific rights and powers required or appropriate to its management of the
Partnership's business which, by way of illustration but not by way of
limitation, shall include the following rights and powers to:
(i) expend the Capital Contributions of the Partners and apply
Partnership Revenues in furtherance of the business of the Partnership;
-19-
<PAGE>
(ii) acquire, explore, develop, manage and operate Hydrocarbon
properties and interests therein (including interests in corporations and
partnerships owning Hydrocarbon properties if in the General Partner's
judgment such purchase is a necessary or advisable step in acquiring
interests in Producing Properties held by any such corporation or
partnership, provided, no such purchase will be made for the purpose of
investment in the securities of any such corporation or partnership, the
Partnership will not conduct or participate in a hostile tender offer, and
no such purchase will be made unless there is assurance that sufficient
control of the corporation or partnership can be obtained in the initial
acquisition to liquidate it, and it is determined the purchase would not
thereby render the Partnership an investment company within the meaning of
the Investment Company Act of 1940, and provided further the Partnership's
interest in the underlying assets of any such corporation or partnership
is distributed as soon as practical thereafter to the Partnership in
redemption for the Partnership's interest in such corporation or
partnership) of all kinds and hold all such property, interests and units
in the name of the Partnership; provided, however, that in connection
therewith, the General Partner shall, contemporaneously with the
acquisition of a Producing Property, or as soon as practicable thereafter,
file or cause to be filed for recordation an appropriate conveyance or
agreement evidencing the Partnership's interest in such Producing Property
in the jurisdiction where such Producing Property is located pursuant to
such jurisdiction's Uniform Commercial Code (or comparable law) and/or in
the real property records of the clerk or recorder of the county in which
the Producing Property is situated; and, provided, further, that filings
of such conveyances or agreements shall also be made as the General
Partner believes necessary to establish the Partnership's priority of
interest; and, provided, further, Producing Properties may be held in the
name of a nominee for the Partnership if such action is deemed by the
General Partner to be necessary or beneficial to the Partnership and the
nominee holding title conducts no other business or operations;
-20-
<PAGE>
(iii) execute such instruments and agreements, do such acts, employ
such persons and contract for such services as the General Partner
determines are necessary or appropriate to conduct the Partnership's
business, including the employment of the General Partner or any Affiliate
as an operator, and the entering into management and advisory contracts;
(iv) execute, in the name of the Partnership, contracts for the sale
of Hydrocarbons and division orders and transfer orders as necessary or
incident to the sale of production on behalf of the Partnership;
(v) produce, treat, transport and market Hydrocarbons, execute
processing contracts and transportation contracts and enter into contracts
for the marketing or sale of Hydrocarbons and other marketing agreements
in the name of the Partnership, whether or not extending beyond the term
of the Partnership;
(vi) execute offers for United States and any state Leases on behalf
of the Partnership; execute and file requests for approval of assignments
of interests in United States and any state Leases, together with any and
all contracts for the option, sale or purchase of such Leases or the sale
or purchase of any products therefrom; execute any plans of development
under unit agreements, conveyances, subleases, mortgages, deeds of trust,
affidavits or reports concerning the drilling of wells and production,
designations of operator, Lease bonds, operator's bonds and consents of
surety; and in general do all things necessary or desirable on behalf of
the Partnership regarding any United States or state Leases or offers
therefor;
(vii) enter into any partnership agreement, sharing arrangement or
joint venture with any Person acceptable to the General Partner and which
is engaged in any business or transaction in which the Partnership is
authorized to engage, provided that the Partnership shall not be deemed
thereby to be an "investment company" for purposes of the Investment
Company Act of 1940, as amended;
-21-
<PAGE>
(viii) enter into and execute drilling contracts, Farmout
agreements, operating agreements, unitization agreements, pooling
agreements, unit or pooling designations, recycling contracts, dry hole,
bottom hole and acreage contribution letters and agreements, participation
agreements, agreements and conveyances respecting rights-of-way,
agreements respecting surface and subsurface storage and any other
agreements customarily employed in the oil and gas industry in connection
with the acquisition, exploration, development, operation or abandonment
of any Leases, and any and all other instruments or documents considered
by the General Partner to be necessary or appropriate to conduct the
business of the Partnership;
(ix) pay or elect not to pay delay rentals on Partnership Properties
as appropriate in the judgment of the General Partner, it being understood
that the General Partner will not be liable for failure to make correct or
timely payments of delay rentals if such failure were due to any reason
other than negligence or lack of good faith;
(x) abandon or otherwise dispose of any interest in Hydrocarbon
properties acquired for the Partnership upon such terms and for such
consideration as the General Partner may determine;
(xi) sell production payments payable out of all or any part of any
one or more of the Producing Properties acquired by the Partnership and
devote and expend the proceeds of any such sale for any of the purposes of
the Partnership for which the proceeds of borrowings may be applied;
(xii) borrow monies from time to time, for the purposes and subject
to the limitations stated in Section 4.3C, in the form of recourse or
nonrecourse borrowings, or otherwise draw, make, execute and issue
promissory notes and other negotiable or nonnegotiable instruments and
evidences of indebtedness, and secure the payments of the sums so borrowed
and mortgage, pledge or assign in trust all or any part of Partnership
Property, including Producing Properties, production and proceeds of
production, or assign any monies owing or to be owing to the Partnership,
and engage in any other means of financing customary in the petroleum
industry; provided, however,
-22-
<PAGE>
that a creditor who makes a nonrecourse loan to the Partnership shall not
have or acquire, at any time as a result of making the loan, any direct or
indirect interest in the profits, capital or property of the Partnership
other than as a secured creditor;
(xiii) invest Capital Contributions and other Partnership funds
temporarily in the investments set forth in Section 10.3;
(xiv) employ on behalf of the Partnership agents, employees,
accountants, lawyers, geologists, geophysicists, landpersons, clerical
help and such other assistance and consulting and other services as the
General Partner may deem necessary or convenient and to pay therefor such
remuneration as the General Partner may deem reasonable and appropriate;
(xv) purchase, lease, rent or otherwise acquire or obtain the use of
machinery, equipment, tools, materials, and all other kinds and types of
real or personal property that may in any way be deemed necessary,
convenient or advisable in connection with carrying on the business of the
Partnership, purchase and establish adequate inventories of equipment and
material required or expected to be required in connection with its
operations, dispose of tangible lease and well equipment for use or used
in connection with Partnership Property, and incur expenses for travel,
telephone, telegraph, insurance and for such other things, whether similar
or dissimilar, as may be deemed necessary or appropriate for carrying on
and performing the business of the Partnership;
(xvi) enter into such agreements and contracts with such parties and
give such receipts, releases and discharges with respect to any and all of
the foregoing and any matters incident thereto as the General Partner may
deem advisable or appropriate;
(xvii) guarantee the payment of money or the performance of any
contract or obligation by any person, firm or corporation on behalf of the
Partnership;
-23-
<PAGE>
(xviii) sue and be sued, pursue and participate in arbitration
proceedings, complain and defend and settle and compromise claims or
causes of action in the name and on behalf of the Partnership;
(xix) make such classifications and determinations as the General
Partner deems advisable, having due regard for any relevant generally
accepted accounting principles and oil and gas industry practices;
(xx) purchase insurance, or extend the General Partner's or its
Affiliates' insurance, at the Partnership's expense, to protect the
Partnership Property and the business of the Partnership against loss, and
to protect the General Partner against liability to third parties arising
out of Partnership activities, such insurance to be in such limits, to be
subject to such deductibles and to cover such risks as the General Partner
deems appropriate;
(xxi) pay all ad valorem taxes levied or assessed against the
Partnership Properties, all taxes upon or measured by the production of
Hydrocarbons therefrom and all other taxes (other than income taxes)
directly related to operations conducted by the Partnership;
(xxii) enter into agreements on behalf of the Partnership with
Affiliates;
(xxiii) sell or otherwise dispose of for value all or substantially
all of the properties and other assets of the Partnership to the General
Partner or any of its Affiliates or Affiliated Programs or any other
Person and receive for the Partnership consideration consisting of cash,
securities, other property or any other form of consideration, or any
combination thereof, at such prices and in such forms of consideration as
it deems in the best interests of the Unit Holders; provided, however,
that no such sale shall be consummated without the prior Consent of the
Unit Holders pursuant to the provisions of Section 4.5D of this Agreement.
In the event of the dissolution of the Partnership followed by any such
sale of the Partnership's assets, the General Partner shall, subject to
the provisions of Section 9.2 of this Agreement, be appointed the
Liquidating Agent for the Partnership;
-24-
<PAGE>
(xxiv) make, exercise or deliver any general assignment for the
benefit of the Partnership's creditors, but only upon the prior Consent of
the Unit Holders pursuant to the provisions of Section 4.5D;
(xxv) take such other action and perform such other acts as may be
deemed appropriate to carry out the business of the Partnership;
(xxvi) perform all duties imposed by Sections 6221 through 6232 of
the Code on the General Partner as "tax matters partner" of the
Partnership, including (but not limited to) the following: (a) the power
to conduct all audits and other administrative proceedings with respect to
Partnership tax items; (b) the power to extend the statute of limitations
for all Partners with respect to Partnership tax items; (c) the power to
file a petition with an appropriate federal court for review of a final
Partnership administrative adjustment; and (d) the power to enter into a
settlement with the Internal Revenue Service on behalf of, and binding
upon, each of the Unit Holders having less than a 1% interest in Revenues
unless such Unit Holder notifies the Internal Revenue Service and the
General Partner that the General Partner may not act on its behalf; and
(xxvii) cause the Partnership to redeem or repurchase the Units held
by a Unit Holder at a purchase price determined by the General Partner if
at any time the Partnership or General Partner receives an opinion of
counsel that there exists substantial risks of cancellation or forfeiture
of any property in which the Partnership has an interest because of the
citizenship or other status of that Unit Holder.
B. No person, firm or corporation dealing with the Partnership shall be
required to inquire into the authority of the General Partner to take or refrain
from taking any action or make or refrain from making any decision, but any
person so inquiring shall be entitled to rely upon a certificate of the General
Partner as to its due authorization.
-25-
<PAGE>
Section 4.3 Sales, Purchases and Operation of Producing Properties
Additional Financing
-------------------------------------------------------------------
A. Producing Properties whose purchase price exceeds 10% of the Unit
Holders' Subscriptions may be acquired by the Partnership only if an Acquisition
Reserve Report or an Engineering Review Letter has been received and evaluated
by the General Partner with respect thereto.
B. Neither the General Partner, Geodyne Resources, Inc. nor any Person
controlled by Geodyne Resources, Inc. shall sell, transfer or convey any or all
of its interest in Producing Properties to the Partnership or purchase or
acquire any oil and gas properties or interest from the Partnership, directly or
indirectly, except pursuant to transactions that are fair and reasonable to the
Unit Holders under the circumstances at the time any such transaction is
consummated. Except as otherwise provided in Section 4.3E below, such
transactions shall be further subject to the following restrictions:
(i) Prior to the date on which the Partnership has acquired its
final Producing Property, neither the General Partner, Geodyne Resources,
Inc. nor any Person controlled by Geodyne Resources, Inc. (other than an
Affiliated Program) shall acquire any Producing Property after the
Activation of the Partnership unless the General Partner shall have
determined that the acquisition by the Partnership of such Producing
Property, or an interest therein, would not be in the best interests of
the Partnership;
(ii) Any purchase or sale of a Producing Property from or to the
General Partner or any Affiliate shall be made at the Property Acquisition
Cost for such Producing Property as adjusted for intervening operations,
unless the General Partner or such Affiliate has reasonable grounds to
believe that cost is materially more or less than the fair market value of
such property, in which case such sale or purchase shall be made at a
price equal to the fair market value thereof as determined by an
Independent Petroleum Engineer;
-26-
<PAGE>
(iii) If the General Partner sells, transfers or conveys any oil,
gas or other mineral interest or property to the Partnership, it must, at
the same time, sell the Partnership an equal proportionate interest in all
its other property in the same Prospect. A sale, transfer or conveyance to
the Partnership of less than the entire ownership interest of the General
Partner or any Affiliate is only permitted if: (a) the interests retained
or obtained by the General Partner or Affiliate and acquired by the
Partnership are either (x) proportionate, uniform and undivided Working
Interests if the Producing Property acquired by the Partnership is a
Working Interest or (y) proportionate, uniform and undivided Royalty
Interests if the Producing Property acquired by the Partnership is a
Royalty, (b) the respective obligations of the General Partner or
Affiliate and the Partnership are substantially the same, and (c) the
interest of the General Partner or its Affiliate in revenues does not
exceed the amount proportionate to its interest. The General Partner and
its Affiliate may not retain or obtain any overrides or other burdens on
the interest obtained by the Partnership, and may not enter into any
Farmouts with respect to its retained interest, except to nonaffiliated
third parties or to an Affiliated Program;
(iv) In the event the General Partner or any Affiliate proposes
to acquire an interest in a Prospect in which the Partnership has an
interest or in a Prospect abandoned by the Partnership within one year
preceding such proposed acquisition, the General Partner or Affiliate
shall offer the interest to the Partnership; and if cash or financing is
not available to the Partnership to purchase such interest, neither the
General Partner nor Affiliate shall acquire an interest in such Prospect.
The term "abandon" for the purpose of this subparagraph shall mean the
termination, either voluntary or by operation of the Lease or otherwise,
of all of the Partnership's interest in the Prospect. This subsection
shall not apply after the lapse of five years of the Activation of the
Partnership or to any Affiliated Program where the interest of the General
Partner is less than or equal to its interest in the Partnership, there is
no duplication of fees to the General Partner, and the General Partner
does not obtain a greater benefit from purchase of the interest by the
Affiliated Program than it would if the interest were purchased by the
Partnership;
-27-
<PAGE>
(v) During the existence of the Partnership and before it has
ceased operations, neither the General Partner nor any Affiliate
(excluding any Affiliated Program where the interest of the General
Partner is less than or equal to its interest in the Partnership) shall
acquire, retain or drill for its own account any oil and gas interest in
any Prospect upon which the Partnership possesses an interest, except for
transactions which comply with Section 4.3B(iii) or 4.8. In the event the
Partnership abandons its interest in a Prospect, this restriction shall
continue for one year following abandonment. The geological limits of a
Prospect owned by the Partnership shall be enlarged or contracted on the
basis of subsequently acquired geological data to define the productive
limits of a reservoir and must include all of the acreage determined by
the subsequent data to be encompassed by such reservoir. If, during the
period of five years from the Activation of the Partnership, the
geological limits of a Prospect, as so enlarged, encompass any interest
held by the General Partner or an Affiliate of the General Partner
(excluding an Affiliated Program where the interest of the General Partner
is identical to or less than its interest in the Partnership), such
interest shall be sold to the Partnership in accordance with the
provisions of Section 4.3B(iv) and any net income previously received by
the General Partner or Affiliate shall be paid over to the Partnership. If
the General Partner acquires additional acreage or interests in a Prospect
of the Partnership, it must sell such to the Partnership and is prohibited
from retaining any such interest, except as may be permitted by Section
4.3B. Notwithstanding the foregoing, the Partnership will not be required
to expend additional funds to acquire any such interest unless funds are
available from the Capital Contributions of the Partners;
(vi) Producing Properties may be sold, Farmed-out or otherwise
transferred from or to an Affiliated Program only pursuant to transactions
that comply with Sections 4.3B(iii), 4.3B(iv) or 4.8, provided that the
compensation arrangement or any other interest or right of the General
Partner or any Affiliate is the same in the Partnership and Affiliated
Program, or, if different, the compensation of the General Partner does
not exceed the lower of the compensation it would have received in the
Partnership or the Affiliated Program;
-28-
<PAGE>
(vii) Any sale of inventory or other materials by the Partnership
to the General Partner or Affiliate shall be made at the applicable rates
set forth in the standard form of the accounting procedure then
recommended by the Council of Petroleum Accountants Societies of North
America;
(viii) Any operating agreements pursuant to which the General
Partner or any Affiliate acts as operator of Producing Properties shall be
of a nature customary in the industry and payments to the General Partner
or any Affiliate for acting as operator shall not exceed the compensation
which would be paid by unaffiliated third parties in the same geographic
area for similar goods and services. Reimbursement of the General
Partner's overhead pursuant to such operating agreement will not be
duplicative of any reimbursement of General and Administrative Costs made
pursuant to Section 4.12; and
(ix) To the extent the General Partner or any Affiliate acquires
an interest in a Producing Property in which the Partnership acquires an
interest, the General Partner or Affiliate shall pay its allocable portion
of the cost of the preparation of the Acquisition Reserve Report or
Engineering Review Letter, as the case may be, respecting such Producing
Property.
C. The General Partner may not expend any amount of Partnership funds over
the term of the Partnership for the payment of Partnership costs (other than
recompletion costs) incurred in connection with Development Drilling and
Identified Development Drilling in excess of 10% of the sum of: (i) the amount
of the Unit Holders' Subscriptions, plus (ii) the Partnership's permissible
borrowings. If the General Partner determines that funds in addition to the
Capital Contributions are required for the payment of Partnership costs (other
than Property Acquisition Costs), the General Partner may apply or reserve
Revenues or Investment Income for the payment of such Partnership costs and/or
the General Partner may cause the Partnership to borrow funds for the payment of
Partnership costs incurred in connection with Development Drilling, Identified
Development Drilling and Improved Recovery operations; provided, however, that
the aggregate outstanding principal amount of such borrowings shall not at any
one time exceed an amount equal to 20% of the Unit Holders' Subscriptions. No
creditor who makes a nonrecourse loan to the Partnership may
-29-
<PAGE>
have or acquire, at any time as a result of making the loan, any direct or
indirect interest in the profits, capital or property of the Partnership other
than as a secured creditor.
D. The General Partner shall have the authority to secure the payment of
borrowings incurred by it for its own account or for purposes of paying its
allocable share of Partnership costs by assigning to lenders all or part of its
rights to receive distributions of Partnership Revenues, and by granting such
lenders a security interest or mortgage in an undivided interest in any
Partnership Property not to exceed its percentage interest in Revenues;
provided, however, that the General Partner shall retain unencumbered at least a
1% interest in each item of Partnership Property, and each item of Partnership
Revenues, gain, loss, deduction and credit. Notwithstanding anything to the
contrary in this Agreement, in the event of any sale or foreclosure of the
General Partner's interest in full or partial satisfaction of such borrowings,
appropriate adjustments shall be made in the Capital Accounts of the General
Partner and Unit Holders and in the method by which Revenues and costs are
allocated to the General Partner and Unit Holders to assure that the Partnership
will not bear any of the costs attributable to such sold or foreclosed interest
and that the General Partner will not share or participate in any of the
capital, Revenues, costs or distributions attributable to such sold or
foreclosed interest except to the extent of the unencumbered interest retained
by the General Partner. The General Partner shall indemnify the Partnership and
the Unit Holders against any expenses resulting from a sale or foreclosure of
the General Partner's interest.
E. The provisions of Section 4.3B notwithstanding, if the Partnership
intends to acquire Working Interests, acquisitions of Net Profits Interests by
one or more I/P Partnerships may be made in connection with the Partnership's
acquisitions of Working Interests. Net Profits Interests acquired by an I/P
Partnership may either be carved-out of the Working Interests or reserved from
the Working Interests by the sellers of such Working Interests on such basis as
the General Partner determines. The Net Profit Interests acquired by an I/P
Partnership may not exceed 75% of the net profits attributable to the aggregate
Working Interests in all of the Producing Properties acquired by the
Partnerships together. The primary factor in determining the sharing of net
profits between the Working Interests acquired by the Partnership and the Net
Profits Interest acquired by the I/P Partnership will be the amount of money
contributed to each acquisition by each
-30-
<PAGE>
purchaser. In fixing such sharing percentages, the General Partner need not give
special consideration to risks associated with the ownership of the Working
Interests or to costs of equipment which will be owned by the Partnership as a
Working Interest owner if such costs will be amortized against the proceeds of
oil and gas production in arriving at the amount of net profits from which the
I/P Partnership's (as Net Profits Interest holder) share of production is
determined. If the amount of money contributed by each purchaser ever is not the
primary factor in determining such sharing of net profits, then the sharing will
be based upon a valuation of the respective interests made by an Independent
Petroleum Engineer. If the I/P Partnership acquires a Royalty Interest in a
Producing Property in which a Working Interest is acquired by the Partnership,
each participant's portion of the purchase price will be determined on the basis
of an appraisal by an Independent Petroleum Engineer of the fair market values
of the respective interests in the property being acquired (taking into account
the tax consequences applicable to the several participants). If the General
Partner or an Affiliate other than an Affiliated Program acquires an interest in
any such property acquisition, such appraisal will be performed by an
Independent Petroleum Engineer and if the aggregate revenue interest of the
General Partner and its Affiliates in any Affiliated Program participating in
such a property acquisition is greater than their aggregate revenue interest in
the I/P Partnership, then with respect to the property interests so acquired the
greater aggregate revenue interest shall be reduced so as not to exceed the
lesser revenue interest.
F. The General Partner may cause the Partnership to acquire assets which
may otherwise not be considered suitable for investment or operation by the
Partnership if they are acquired as part of a package consisting primarily of
Producing Properties; provided, however, that in the event any such assets are
acquired by the Partnership, the General Partner shall use its best efforts to
sell or otherwise dispose of such assets for value as soon as practical and any
proceeds realized from such sale or disposition shall be allocated among the
General Partner and the Unit Holders in the same proportions as the costs
thereof were charged to their respective accounts.
-31-
<PAGE>
Section 4.4 Prohibited Transactions
------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, the
following transactions are expressly prohibited:
(i) the Partnership shall not make any loans to or purchase a
production payment from the General Partner or any Affiliate;
(ii) neither the General Partner nor any Affiliate shall make any
loans to the Partnership except at a rate of interest not in excess of the
interest cost incurred by the General Partner or Affiliates or the amount
of interest that would be charged to the Partnership (without regard to
the General Partner's or Affiliate's financial abilities or guarantees) by
unrelated banks on comparable loans for the same purpose, whichever is
lower, and the General Partner and Affiliates shall not receive points or
financing charges or fees regardless of the amount;
(iii) except as expressly contemplated hereby, no agent, attorney,
accountant or other independent consultant or contractor who is also
employed on a full-time basis by the General Partner or any Affiliate
shall be compensated by the Partnership for his or her services;
(iv) other than those received for the account of the Partnership,
no rebates may be received by the General Partner or any Affiliate in
connection with Partnership operations or expenditures, nor may the
General Partner or any Affiliate participate in any reciprocal business
arrangement that would circumvent any of the provisions of this Agreement;
(v) on a monthly basis, costs paid and revenues received by the
General Partner or an Affiliate for the account of the Partnership shall
be determined and the net amount resulting from such monthly settlement
shall be deposited into a Partnership Account and no funds which, after
such monthly settlement, are determined to be held for the account of the
Partnership shall be kept in any account other than a Partnership Account,
and the General Partner shall not employ, or permit any other Person to
employ, such funds in any manner except for the benefit of
-32-
<PAGE>
the Partnership; it being understood that the General Partner may invest
Partnership funds temporarily in the investments set forth in Section 10.3
of this Agreement pending their use by the Partnership. After such monthly
settlement, Partnership funds may not be commingled with separate funds of
the General Partner or any other Person; and
(vi) the Partnership shall not make any advance payment to the
General Partner or its Affiliates, except where necessary to secure tax
benefits of prepaid drilling costs.
Section 4.5 Restrictions on the Authority of the General Partner
-----------------------------------------------------------------
A. Anything in this Agreement to the contrary notwithstanding, it is
agreed that:
(i) the General Partner and its Affiliates shall not take any
action with respect to the assets or property of the Partnership which
does not benefit primarily the Partnership, including:
(a) the utilization of Partnership funds as compensating
balances for the benefit of the General Partner or an Affiliate of
the General Partner; and
(b) the commitment of future production from Partnership
Properties;
(ii) 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;
(iii) neither the General Partner nor any Affiliate may profit
itself by Development Drilling, Identified Development Drilling or
Improved Recovery operations in contravention of its fiduciary obligation
to the Partnership; and
-33-
<PAGE>
(iv) neither the General Partner nor any Affiliate shall render
to the Partnership any oil field, equipage, drilling or other services nor
sell or lease to the Partnership any equipment or supplies unless:
(a) such Person is engaged, independently of the
Partnership and as an ordinary and ongoing business, in the business
of rendering such services or selling or leasing such equipment and
supplies to a substantial extent to other Persons in the oil and gas
industry in addition to drilling and income programs in which the
General Partner and its Affiliates have an interest;
(b) the compensation, price or rental therefor is
competitive with the compensation, price or rental of other Persons
in the area engaged in the business of rendering comparable services
or selling or leasing comparable equipment and supplies which could
reasonably be made available to the Partnership; and
(c) the drilling services are billed on either a per
foot, per day or per hour rate, or some combination thereof;
provided that, if such Person is not engaged in a business within
the meaning of subdivision (a), then such compensation, price or
rental shall be the cost of such services, equipment or supplies to
such Person or the competitive rate which could be obtained in the
area, whichever is less.
B. The General Partner shall not have the authority to:
(i) do any act in contravention of this Agreement or which
would make it impossible to carry on the ordinary business of the
Partnership;
(ii) confess a judgment against the Partnership;
(iii) possess Partnership Property or assign, pledge or
hypothecate rights in specific Partnership Property for other than a
Partnership purpose except as otherwise permitted in Section 4.3D;
-34-
<PAGE>
(iv) admit a Person as a General Partner or a Substituted
Limited Partner or permit any transfer of Units except as otherwise
provided herein; or
(v) knowingly perform any act which would result in loss of
the Depositary's or any Substituted Limited Partner's status as a
limited partner under the Act or the laws of the State or the loss
of limited liability under the laws of any other jurisdiction in
which the Partnership is doing business, or would subject the
Depositary or any Unit Holder to liability as a general partner in
any jurisdiction including use of the Depositary's or a Unit
Holder's name in conducting the business of the Partnership.
C. The General Partner shall not lease, sell, abandon or otherwise dispose
of any assets of the Partnership to the General Partner or to any of its
Affiliates, except as otherwise permitted by this Agreement; provided, however,
that if the Partnership should own any inventory or other materials, such
inventory or materials may be transferred to the General Partner or any of its
Affiliates at the applicable rates set forth in the standard form of accounting
procedure then recommended by the Council of Petroleum Accountants Societies of
North America.
D. Notwithstanding any other provision of this Agreement to the contrary,
without the prior Consent of Unit Holders owning 50% or more of the outstanding
Units granted pursuant to the provisions of Article Twelve of this Agreement,
the General Partner shall not:
(i) lease, sell or dispose of all or substantially all of the
Partnership's assets except pursuant to Article Nine of this Agreement;
(ii) make, exercise or deliver any general assignment for the
benefit of the Partnership's creditors; or
(iii) except as set forth in Sections 8.1F or 1l.1A, amend any
provision of this Agreement.
-35-
<PAGE>
Section 4.6 Construction of Gas Gathering Lines
------------------------------------------------
The General Partner may cause the Partnership to construct gas gathering
lines if, in the opinion of the General Partner, it would be economically
feasible and otherwise consistent with prudent operating practice to do so. The
costs of any such gathering lines will be deemed to be Operating Costs and shall
be charged to the accounts of the General Partner and Unit Holders as such. The
General Partner may, in its discretion, construct, or cause an Affiliate of the
General Partner or other person to construct, gathering lines from Partnership
Wells to gas transmission systems. Whenever the General Partner constructs, or
causes an Affiliate of the General Partner to construct, a gathering line from a
Partnership Well to a gas transmission system, the Partnership shall pay the
General Partner or such Affiliate an amount that is not greater than the
compensation that an unrelated party could have reasonably charged in an
arm's-length transaction for similar services in the area as a transmission fee
for the transmission of all gas through the gathering system so constructed, and
no other transmission fee shall be paid to the General Partner or to any
Affiliate.
Section 4.7 Contracts with the General Partner and Affiliates
-------------------------------------------------------------
All services (other than services provided pursuant to this Agreement)
provided to the Partnership by the General Partner or any Affiliate for which it
is compensated shall be embodied in a written contract precisely setting forth
the services to be rendered and the compensation to be paid. Each contract
relating to a transaction between the Partnership and the General Partner or any
Affiliate shall contain a provision which shall permit termination of the
contract by the affirmative vote of Unit Holders owning more than 50% of the
outstanding Units without penalty on 30 days' prior written notice.
-36-
<PAGE>
Section 4.8 Farmouts
---------------------
The General Partner may dispose of Producing Properties by sale or Farmout
when it, exercising the standard of a prudent operator, determines that (a) the
Partnership lacks sufficient funds to conduct Development Drilling, Identified
Development Drilling or Improved Recovery operations on the properties and
cannot obtain suitable alternative financing for such Development Drilling,
Identified Development Drilling or Improved Recovery operations; (b) the
properties have been downgraded by events occurring after assignment to the
Partnership to the point that additional Development Drilling, Identified
Development Drilling, Improved Recovery operations or continued production would
no longer be desirable to the Partnership; (c) Development Drilling, Identified
Development Drilling or Improved Recovery operations on the properties would
result in an excessive concentration of Partnership funds on a Producing
Property creating, in the opinion of the General Partner, undue risk to the
Partnership; or (d) the best interests of the Partnership would be served by the
sale or Farmout. The Partnership shall not conduct any drilling of wells other
than Development Drilling and Identified Development Drilling; provided,
however, that the drilling of wells other than Development Drilling and
Identified Development Drilling may be performed on behalf of the Partnership
pursuant to Farmouts or when such drilling may be deemed necessary or
appropriate to preserve or protect the Partnership's interest in or the
production from a Producing Property. Any sale, Farmout or similar agreement
between the Partnership and the General Partner, Affiliate or Affiliated Program
will be permitted under the restrictions set forth in this Article Four and will
be subject to the following conditions:
(i) the General Partner, exercising the standard of a prudent
operator, shall determine that the sale, Farmout or similar agreement is
in the best interests of the Partnership; and
(ii) the terms of the sale, Farmout or similar agreement are
consistent with and in any case no less favorable than those utilized in
the same geographic area for similar arrangements.
-37-
<PAGE>
Except as required by Section 4.3B(iii) or (iv), a Partnership shall acquire
only those Leases that are reasonably required for the operations of the
Partnership, and no Leases shall be acquired for the purpose of subsequent sale
or Farmout, unless such Leases are a part of an acquisition which is sold as a
package only, or unless the acquisition of undeveloped Leases by the Partnership
is made after a well has been drilled nearby by third parties to a depth
sufficient to indicate that such an acquisition is in the best interests of the
Partnership.
Section 4.9 Other Operations
-----------------------------
The General Partner shall devote such time to the Partnership as is
reasonably required to carry on the Partnership business, and the General
Partner and its Affiliates shall at all times be free, subject to any
restrictions contained herein, to engage in all aspects of the Hydrocarbons and
natural resources business for their own accounts and for the accounts of
others. Without limiting the generality of the foregoing, the General Partner
and its Affiliates shall have the right to organize and operate other
partnerships, joint ventures or other oil and gas investment programs whether
similar or dissimilar to the Partnership.
Section 4.10 Prosecution, Defense and Settlement of Claims;
Indemnification
------------------------------------------------------------
A. The General Partner shall arrange to prosecute, defend, settle or
compromise actions at law or in equity at the expense of the Partnership as may
be necessary to enforce or protect the interests of the Partnership. The General
Partner shall satisfy any judgment, decree, decision or settlement, first, out
of any insurance proceeds available therefor, next, out of the Partnership
assets and Revenues, and, finally, out of the assets of the General Partner.
B. The General Partner shall have no liability to the Partnership or to
any Partner for any loss suffered by the Partnership which arises out of any
action or inaction of the General Partner if the General Partner, in good faith,
determined that such course of conduct was in the best interests of the
Partnership and such course of conduct did not constitute negligence or
misconduct of the General Partner. The General
-38-
<PAGE>
Partner shall be indemnified by the Partnership against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any claims sustained by
it in connection with the Partnership, provided that the same were not the
result of negligence or misconduct on the part of the General Partner. Any
indemnification under this Section 4.10 shall be satisfied solely out of the
assets and Revenues of the Partnership. All amounts payable under this Section
4.10 shall be a liability of the Partnership only and the Unit Holders and the
Depositary will not have any liability therefor.
C. Notwithstanding the above, the General Partner shall not be indemnified
for liabilities arising under federal and state securities laws unless (1) there
has been a successful adjudication on the merits of each count involving
securities law violations and the court approves such indemnification and the
litigation costs thereof; or (2) such claims have been dismissed with prejudice
on the merits by a court of competent jurisdiction and the court approves such
indemnification and the litigation costs thereof. In any such case, the General
Partner shall apprise the court of the current published positions, if any, of
the Securities and Exchange Commission, the Massachusetts State Securities
Administrator and other applicable state securities administrators regarding
indemnification of program sponsors prior to obtaining court approval of any
such indemnification.
D. The Partnership shall not incur the costs of that portion of insurance
which insures the General Partner for any liability as to which the General
Partner is prohibited from being indemnified under this Section 4.10.
Section 4.11 Duties and Obligations of the General Partner
-----------------------------------------------------------
The General Partner shall:
(i) use its best efforts to take all actions that may be
necessary or appropriate for the continuation of the Partnership's valid
existence as a limited partnership or partnership in commendam under the
laws of the State and the laws of any other jurisdiction in which the
Partnership is doing business;
-39-
<PAGE>
(ii) devote to the Partnership the time that it shall deem to be
necessary to conduct the Partnership's business and affairs in the best
interests of the Partnership;
(iii) be under a fiduciary duty and obligation to conduct the
affairs of the Partnership in the best interests of the Partnership,
including the safekeeping and use of all Partnership funds and assets
(whether or not in the immediate possession or control of the General
Partner) and the use thereof for the benefit of the Partnership;
(iv) at all times act with integrity and good faith and exercise
due diligence in all activities relating to the conduct of the business of
the Partnership and in resolving conflicts of interest;
(v) prepare or cause to be prepared and shall file on or before
the due date (or any extension thereof) any federal, state or local tax
returns required to be filed by the Partnership;
(vi) cause the Partnership to pay any taxes payable by the
Partnership;
(vii) use its best efforts to cause the Partnership to be formed,
reformed, qualified to do business, or registered under any applicable
assumed or fictitious name statute or similar law in any state in which
the Partnership then owns property or transacts business, if such
formation, reformation, qualification or registration is necessary or
advisable in its counsel's opinion to protect the limited liability of the
Depositary and the Unit Holders or to permit the Partnership lawfully to
own property or transact business;
(viii) cause to be filed the Certificate of Limited Partnership as
required by the Act and any necessary amendments to the Certificate of
Limited Partnership and other similar documents that are required by law
to be filed and recorded for any reason, in the office or offices that are
required under the laws of the State or any other state in which the
Partnership is then formed or qualified;
-40-
<PAGE>
(ix) do all other acts and things (including making publications or
periodic filings of this Agreement or amendments hereto or other similar
documents without the necessity of mailing or delivering copies of them to
each Unit Holder) that may now or hereafter be deemed by the General
Partner to be necessary,
(a) for the perfection and continued maintenance of the
Partnership as a limited partnership under the laws of the State,
(b) to protect the limited liability of the Depositary and the
Unit Holders under the laws of the State and other jurisdictions in
which the Partnership is doing business, and
(c) to cause this Agreement, certificates or other documents
to reflect accurately the agreement of the Partners and the Unit
Holders, the identity of the Depositary as the sole initial Limited
Partner and the amount of the Capital Contribution made by the
Depositary on behalf of the Unit Holders;
(x) from time to time submit to any appropriate state securities
administrator all documents, papers, statistics and reports required to be
filed with or submitted to such state securities administrator; and
(xi) inform each Unit Holder of all administrative and judicial
proceedings for an adjustment at the Partnership level for partnership tax
items and forward to each Unit Holder within 30 days of receipt all
notices received from the Internal Revenue Service regarding the
commencement of a partnership level audit or a final partnership
administrative adjustment, and perform all other duties imposed by
Sections 6221 through 6232 of the Code on the General Partner as "tax
matters partner" of the Partnership, including those set forth in Section
4.2A (xxvi) of this Agreement.
Section 4.12 Compensation of the General Partner
-------------------------------------------------
A. Except as provided in Articles Four and Five, the General Partner shall
not, either in its capacity as General Partner or in its individual capacity,
receive any salary, fees or profits from the Partnership.
-41-
<PAGE>
B. In consideration of its payment of Organization and Offering Costs, the
General Partner shall be paid by the Partnership an amount equal to the
aggregate of: (i) 3.5% of individual Unit Holders' Subscriptions for less than
10,000 Units, (ii) 2.5% of individual Unit Holders' Subscriptions for 10,000
Units or more but less than 20,000 Units, (iii) 1.5% of individual Unit Holders'
Subscriptions for 20,000 Units or more but less than 30,000 Units, and (iv) 1.0%
of individual Unit Holders' Subscriptions for 30,000 Units or more, and in
consideration of its services rendered in connection with the Partnership's
acquisition of Producing Properties and the conduct of its business operations,
the General Partner shall be paid the Acquisitions and Operations Fee in an
amount equal to 3.5% of the Unit Holders' Subscriptions.
C. The General Partner shall be reimbursed by the Partnership for General
and Administrative Costs and Direct Administrative Costs incurred by it on
behalf of the Partnership, and such costs shall be allocated among the Partners
as set forth in Section 5.1 of this Agreement. The aggregate amount of General
and Administrative Costs allocable to the accounts of the Unit Holders for which
the General Partner will be reimbursed will not, (i) in the first 12 months
following Activation of the Partnership, exceed an amount equal to 2.5% of the
Unit Holders' Subscriptions, and (ii) in any succeeding 12-month period, exceed
an amount equal to 1% of the Unit Holders' Subscriptions; provided, however,
that notwithstanding the foregoing, the amount of such General and
Administrative Costs allocated to the Unit Holders during each of the third and
subsequent 12-month periods of Partnership operations shall not exceed an amount
equal to 15% of Revenues allocable to their accounts. All General and
Administrative Costs allocable to the accounts of the Unit Holders will be paid
solely out of Revenues allocable to the Unit Holders. To the extent that the
General Partner determines that Revenues are insufficient to permit
reimbursement in full of such General and Administrative Costs in the period in
which they are incurred or accrued (or the General Partner elects to receive
less than the full amount payable in order that funds may be available for
distribution to Unit Holders or any other reason) or the amounts actually
reimbursed by the Partnership do not exceed the foregoing limitations, such
unpaid or unused General or Administrative Costs may be carried forward or
backwards and increase the maximum amount of reimbursable General and
Administrative Costs for any other period.
-42-
<PAGE>
Section 4.13 Dealer Manager
----------------------------
The Dealer Manager shall have no duties, responsibilities or obligations
to the Partnership, the General Partner, the Depositary or any Unit Holder as a
consequence of its right to receive Commissions, except to the extent provided
under the Securities Act of 1933, as amended. The Dealer Manager has not
assumed, and will not assume, any responsibility with respect to the Partnership
nor will it be permitted by the General Partner to assume any duties,
responsibilities or obligations regarding the management, operations or any of
the business affairs of the Partnership subsequent to the date on which the
Partnership is Activated.
ARTICLE FIVE
ALLOCATIONS AND DISTRIBUTIONS
Section 5.1 Allocation of Costs and Expenses
---------------------------------------------
All fees and payments to the General Partner required by Section 4.12B,
Commissions and costs incurred in connection with Identified Development
Drilling (including any interest, commitment fees and other finance charges with
respect to borrowing incurred in connection therewith) and Property Acquisition
Costs will be charged 99% to the Unit Holders and 1% to the General Partner. All
Organization and Offering Costs will be charged entirely to the General Partner
(in consideration of which the General Partner will be paid the amount provided
in the first sentence of Section 4.12B). Except as otherwise provided in this
Article Five, Operating Costs, costs and expenses of Development Drilling,
General and Administrative Costs, Direct Administrative Costs and all other
Partnership costs and expenses will be charged to the accounts of the General
Partner and the Unit Holders in the same proportions that Revenues are being
allocated to them at the time such costs and expenses are incurred.
Notwithstanding anything to the contrary contained herein, if and to the extent
the Partnership sells any Producing Property and applies any portion of the
proceeds thereof to the purchase of any additional Producing Properties, the
Property Acquisition Costs of the additional Producing Properties shall, to the
extent of the amount of such proceeds, be allocated to and borne by the General
Partner and the Unit Holders in the same proportions that such sale proceeds
were allocated and credited to them.
-43-
<PAGE>
Section 5.2 Allocation of Revenues
-----------------------------------
A. Investment Income will be allocated 99% to the Unit Holders and 1% to
the General Partner. Except as otherwise provided in this Article Five and in
Section 4.3F, until Payout, all other Partnership Revenues will be allocated 95%
to the Unit Holders and 5% to the General Partner. After Payout, Revenues will
be allocated 85% to the Unit Holders and 15% to the General Partner; provided,
however, that if, at Payout, the total amount of cash distributed by the
Partnership to the Unit Holders from the commencement of the Property Investment
Period has averaged on a twelve-month basis an amount that is less than 12% of
the Unit Holders' Subscriptions, the percentage of Revenues allocated to the
General Partner will increase to only 10% and the Unit Holders will be allocated
90% thereof until such time, if ever, that the distributions to the Unit Holders
from the commencement of the Property Investment Period reaches a twelve-month
average equal to at least 12% of the Unit Holders' Subscriptions, at which time
Revenues will thereafter be allocated 15% to the General Partner and 85% to the
Unit Holders. As used herein the "Property Investment Period" shall mean that
period which begins with the first day of the calendar quarter following either
(i) the calendar quarter during which 90% of the Partnership's capital available
for purchasing Producing Properties has been so expended, or (ii) the calendar
quarter in which 50% of the Partnership's capital available for purchasing
Producing Properties has been so expended, as the General Partner shall elect.
Where proceeds from the Sale of all or any part of the Partnership's Producing
Properties are distributed to the Partners and a portion of the distributable
amount attributable to such Sale proceeds is sufficient in amount to cause
Payout to occur in accordance with the allocation percentages in effect until
Payout, Payout shall be deemed to occur such that Revenues attributable to the
distributed portion of such Sale proceeds in excess of the portion of Sales
proceeds sufficient in amount to cause Payout to occur shall be allocated in
accordance with the allocation percentages in effect after Payout.
B. Notwithstanding the other provisions of this Section 5.2 and except as
provided in Section 4.3F, if the allocation of Revenues realized from the sale
of any Hydrocarbon property would result in the recognition of a "simulated
loss", as such term is defined in Treasury Regulation Sec. 1.704-1(b), by the
Partnership, then such Revenues shall, to the extent of the
-44-
<PAGE>
amount of the "simulated adjusted tax basis", as such term is defined in
Treasury Regulation Sec. 1.704-1(b), of such Hydrocarbon property, be allocated
to the General Partner and the Unit Holders in the same proportions that the
aggregate adjusted tax basis of such property was allocated to them (or their
predecessors in interest) pursuant to Section 5.5(u).
Section 5.3 Allocations Among Unit Holders
-------------------------------------------
A. Allocations of costs, expenses and Revenues to the Unit Holders other
than Substituted Limited Partners herein shall be actually allocated to the
Depositary for the account of the Unit Holders. All profits and losses and each
item of Revenues, gain, loss, cost, deduction or credit allocated to the Unit
Holders, as a class, shall be allocated to each Unit Holder in the ratio that
(i) the number of Units held of record by each Unit Holder as of the first day
of each month during the period ("Monthly Record Date") bears to (ii) the
aggregate number of Units outstanding on each such Monthly Record Date.
Distributions pursuant to Section 5.7 hereof will be made to Unit Holders of
record on the first day of the calendar quarter to which the distribution
relates in the ratio which (x) the number of Units owned of record by each Unit
Holder on such date bears to (y) the aggregate number of Units outstanding on
such date. Such payment shall constitute full payment and satisfaction of the
Partnership's liability in respect of such payment regardless of any claim of
any Person who may have an interest in such payment by reason of an assignment
or otherwise.
B. Except as provided in subsections (i) through (iv) of this Section
5.3B, in the case of a change in a Unit Holder's interest in the Partnership
during a taxable year of the Partnership, all Partnership Revenues, gain, loss,
deduction or credit allocable to the Unit Holders shall be allocated pursuant to
Section 5.3A above to the Persons who were Unit Holders during the period to
which such item is attributable in accordance with the Unit Holders' interests
in the Partnership during such period regardless of when such item is paid or
received by the Partnership.
(i) With respect to certain "allocable cash basis items" (as
such term is defined in the Code) of Partnership Revenues, gain, loss,
deduction or credit, if, during any taxable year of the Partnership there
is change in any Unit Holder's interest in the Partnership, then, except
to the
-45-
<PAGE>
extent provided in regulations prescribed under Section 706 of the Code,
each Unit Holder's allocable share of any "allocable cash basis item"
shall be determined by (i) assigning the appropriate portion of each such
item to each day in the period to which it is attributable, and (ii)
allocating the portion assigned to any such day among the Unit Holders in
proportion to their interests in the Partnership at the close of such day.
(ii) If, by adhering to the method of allocation described in
the immediately preceding subsection of this Section 5.3B, a portion of
any "allocable cash basis item" is attributable to any period before the
beginning of the Partnership taxable year in which such item is received
or paid, such portion shall be (a) assigned to the first day of the
taxable year in which it is received or paid, and (b) allocated among the
persons who were Unit Holders in the Partnership during the period to
which such portion is attributable in accordance with their interests in
the Partnership during such period.
(iii) If any portion of any "allocable cash basis item" paid or
received by the Partnership in a taxable year is attributable to a period
after the close of that taxable year, such portion shall be (a) assigned
to the last day of the taxable year in which it is paid or received, and
(b) allocated among the persons who are Unit Holders in proportion to
their interests in the Partnership at the close of such day.
(iv) If any deduction is allocated to a person with respect to an
"allocable cash basis item" attributable to a period before the beginning
of the Partnership taxable year and such person is not a Unit Holder of
the Partnership on the first day of the Partnership taxable year, such
deduction shall be capitalized by the Partnership and treated in the
manner provided for in Section 755 of the Code.
-46-
<PAGE>
Section 5.4 Capital Accounts
-----------------------------
Capital Accounts shall be established and maintained for the General
Partner and each Unit Holder in accordance with tax accounting principles and
with valid regulations issued by the U.S. Treasury Department under subsection
704(b) of the Code (the "704 Regulations"). To the extent that tax accounting
principles and the 704 Regulations may conflict, the latter shall control. In
connection with the establishment and maintenance of such Capital Accounts, the
following provisions shall apply:
(i) The General Partner's or Unit Holder's Capital Account shall be
(x) increased by the amount of cash contributed by or on behalf of the
General Partner or Unit Holder, the fair market value of property
contributed by it or on its behalf to the Partnership (net of liabilities
securing such contributed property that the Partnership is considered to
assume or take subject to under section 752 of the Code) and allocations
to it of income and gain (except to the extent such income or gain has
previously been reflected in its Capital Account by adjustments thereto)
and (y) decreased by the amount of cash distributed to the General Partner
or Unit Holder, the fair market value of property distributed to the
General Partner or Unit Holder by the Partnership (net of liabilities
securing such distributed property that the General Partner or Unit Holder
is considered to assume or take subject to under section 752 of the Code)
and allocations to it of Partnership loss, deduction (except to the extent
such loss or deduction has previously been reflected in its Capital
Account by adjustments thereto) and expenditures described in section
705(a)(2)(B) of the Code.
(ii) In the event Partnership Property is distributed to the General
Partner or Unit Holder, then, before the Capital Account of the General
Partner or Unit Holder is adjusted as required by clause (i) of this
Section 5.4, the Capital Accounts of the General Partner and Unit Holders
shall be adjusted to reflect the manner in which the unrealized income,
gain, loss and deduction inherent in such Partnership Property (that has
not been reflected in such Capital Accounts previously) would be allocated
among the General Partner and Unit Holders if
-47-
<PAGE>
there were a taxable disposition of such Partnership Property for its fair
market value on the date of distribution.
(iii) If, pursuant to this Agreement, Partnership Property is
reflected on the books of the Partnership at a book value that differs
from the adjusted tax basis of such Partnership Property, then the General
Partner's and Unit Holders' Capital Accounts shall be adjusted in
accordance with the 704 Regulations for allocations to the General Partner
and Unit Holders of depreciation, depletion, amortization and gain or
loss, as computed for book purposes, with respect to such Partnership
Property.
(iv) The General Partner's and Unit Holders' Capital Accounts
shall be reduced by a simulated depletion allowance computed on each oil
or gas property using either the cost depletion method or the percentage
depletion method (without regard to the limitations under the Code which
could apply to fewer than all of the General Partner and Unit Holders);
provided, however, that the choice between the cost depletion method and
the percentage depletion method shall be made on a property-by-property
basis and such choices shall be binding for all Partnership taxable years
during which such oil or gas property is held by the Partnership. Such
reductions for depletion shall not exceed the aggregate adjusted basis
allocated to the General Partner and Unit Holders with respect to such oil
or gas property. Such reductions for depletion shall be allocated among
the General Partner's and Unit Holders' Capital Accounts in the same
proportions as the adjusted basis in the particular property is allocated
to the General Partner and each Unit Holder. Upon the taxable disposition
of an oil or gas property by the Partnership, the Partnership's simulated
gain or loss shall be determined by subtracting its simulated adjusted
basis (aggregate adjusted tax basis of the General Partner and the Unit
Holders less simulated depletion allowances) in such property from the
amount realized on such disposition and the General Partner's and Unit
Holders' Capital Accounts shall be increased or reduced, as the case may
be, by the amount of the simulated gain or loss on such disposition in
proportion to the General Partner's and Unit Holders' allocable shares of
the total amount realized on such disposition.
-48-
<PAGE>
(v) For purposes of determining the Capital Account balance of
the General Partner and any Unit Holder as of the end of any Partnership
taxable year, the General Partner's and such Unit Holder's Capital Account
shall be reduced by:
(a) Adjustments that, as of the end of such year,
reasonably are expected to be made to the General Partner's and such
Unit Holder's Capital Account pursuant to paragraph (b)(2)(iv)(k) of
the 704 Regulations for depletion allowances with respect to oil and
gas properties of the Partnership, and
(b) Allocations of loss and deduction that, as of the end
of such year, reasonably are expected to be made to the General
Partner or such Unit Holder pursuant to Code section 704(e) (2),
Code section 706(d), and paragraph (b)(2)(ii) of section 1.751-1 of
regulations promulgated under the Code, and
(c) Distributions that, as of the end of such year,
reasonably are expected to be made to the General Partner or such
Unit Holder to the extent they exceed offsetting increases to the
General Partner's or such Unit Holder's Capital Account that
reasonably are expected to occur during (or prior to) the
Partnership taxable years in which such distributions reasonably are
expected to be made.
(vi) The Capital Accounts of the General Partner and Unit Holders
which are charged with an item of Partnership expense shall be credited
with any portion of that expense which is finally determined, judicially
or administratively, to be nondeductible for federal income tax purposes,
less any amortization or depreciation thereof incurred prior to the date
that the credit is made.
(vii) In allocating income and costs for any Fiscal Year in which
the ratio for sharing and costs changes pursuant to Section 5.2A, the
allocations of income and costs shall be made, and the books of the
Partnership shall be closed, as soon as practicable after the date Payout
occurs, to determine the General Partner's and each Unit Holder's share of
pre-change income and costs and the General Partner's and each Unit
Holder's share of post-change income and costs for that Fiscal Year.
-49-
<PAGE>
(viii) Notwithstanding any other provision of this Agreement to
the contrary, if, under any provision of this Agreement, the Capital
Account of the General Partner or any Unit Holder is adjusted to reflect
the difference between the basis to the Partnership of Partnership
Property and such Partnership Property's fair market value, then all items
of income, gain, loss and deduction with respect to such Partnership
Property shall be allocated among the General Partner and the Unit Holders
so as to take account of the variation between the basis of such
Partnership Property and its fair market value at the time of the
adjustment to the General Partner's or such Unit Holder's Capital Account
in accordance with the requirements of subsection 704(c) of the Code, or
in the same manner as provided under subsection 704(c) of the Code.
(ix) Subject only to the provisions of Subsection 5.4(x),
(a) There shall be allocated to the General Partner, any
item of loss, deduction, credit or allowance that, but for this
Subsection 5.4(ix) would have been allocated to any Unit Holder that
is not obligated to restore any deficit balance in such Unit
Holder's Capital Account and would have thereupon caused or
increased a deficit balance in such Unit Holder's Capital Account as
of the end of the Partnership's taxable year to which such
allocation related (after taking into consideration the provisions
of Subsection 5.4(v) hereof);
(b) Any Unit Holder that is not obligated to restore any
deficit balance in such Unit Holder's Capital Account who
unexpectedly receives an adjustment, allocation or distribution
specified in Subsection 5.4(v) hereof shall be allocated items of
income and gain in an amount and manner sufficient to eliminate such
deficit balance as quickly as possible; and
(c) In the event any allocations of loss, deduction,
credit or allowance are made to the General Partner pursuant to
clause (a) of this Subsection 5.4(ix), the General Partner shall be
subsequently allocated all items of income and gain until the
-50-
<PAGE>
aggregate amount of such allocations of income and gain is equal to
the aggregate amount of any such allocations of loss, deduction,
credit or allowance allocated to the General Partner pursuant to
clause (a) of this Subsection 5.4(ix).
(x) In the event there is a net decrease in the "minimum gain,"
as such term is defined in the 704 Regulations, of the Partnership during
a Partnership taxable year, the General Partner and all Unit Holders with
deficit Capital Account balances at the end of such year shall be
allocated, before any other allocation is made under this Article Five,
income and gain of the Partnership for such taxable year (and, if
necessary, subsequent years) in the amount and in the proportion necessary
to eliminate such deficits as quickly as possible. The allocations
required by this Subsection 5.4(x) shall be made as required by and in
accordance with Section 1.704-1(b)(4)(iv)(e) of the 704 Regulations. It is
intended that the provision set forth in this Subsection 5.4(x) will
constitute a "minimum gain chargeback" as described in Section
1.704-1(b)(4)(iv)(e) of the 704 Regulations. The 704 Regulations shall
control in the case of any conflict between the 704 Regulations and this
Subsection 5.4(x).
Section 5.5 Allocations for Federal Income Tax Purposes
--------------------------------------------------------
With respect to the various allocations of Partnership Revenues, gain,
loss, deduction and credit for federal income tax purposes, it is hereby agreed
as follows:
(i) To the extent permitted by law, all charges, deductions and
losses shall be allocated for federal income tax purposes in the same
manner as the costs in respect of which such charges, deductions and
losses are charged to the General Partner and Unit Holders, respectively.
The General Partner and Unit Holders bearing the costs shall be entitled
to the deductions (including, without limitation, cost recovery
allowances, depreciation and cost depletion) and credits that are
attributable to such costs.
(ii) The Partnership shall allocate to the General Partner and
each Unit Holder its portion of the adjusted basis in each depletable
Partnership Property as required by Section 613A(c)(7)(D) of the Code
based upon the
-51-
<PAGE>
interest of the General Partner or such Unit Holder in the capital of the
Partnership as of the time of the acquisition of such Partnership
Property. To the extent permitted by the Code, such allocation shall be
based upon the General Partner's or said Unit Holder's interest (x) in the
Partnership capital used to acquire the property, or (y) in the adjusted
basis of the property if it is contributed to the Partnership. If such
allocation of basis is not permitted under the Code, then basis will be
allocated in the permissible manner which the General Partner deems will
most closely achieve the result intended above.
(iii) Partnership Revenues shall be allocated for federal income
tax purposes in the same manner as they are allocated to the respective
accounts of the General Partner and Unit Holders pursuant to Sections 5.2,
5.3 and 5.4 above.
(iv) Depreciation or cost recovery allowance recapture and
recapture of intangible drilling and development costs, if any, due as a
result of sales or dispositions of assets shall be allocated in the same
proportion that the depreciation, cost recovery allowances or intangible
drilling and development costs being restored or recaptured were
allocated.
Section 5.6 Minimum Interest of General Partner
------------------------------------------------
Notwithstanding anything to the contrary that may be expressed or implied
in this Agreement, the aggregate interest of the General Partner in each
material item of Partnership Revenues, gain, loss, deduction or credit shall be
equal to at least one percent of each such item at all times during the
existence of the Partnership. In determining the General Partner's interest in
such items, Units owned by the General Partner shall not be taken into account.
Section 5.7 Distributions
--------------------------
The Partnership's cash available for distribution will be distributed to
the Unit Holders and the General Partner in the same proportions that
Partnership Revenues have been allocated to them after giving effect to previous
distributions and to portions of such Revenues theretofore used or retained to
pay
-52-
<PAGE>
costs incurred or expected to be incurred in conducting Partnership operations
or to repay borrowings theretofore or expected to be thereafter obtained by the
Partnership. Amounts which otherwise would constitute cash available for
distribution and which consist of proceeds from the sale of Producing Properties
may be used or committed to acquire additional Producing Properties at any time
within 36 months of the Activation of the Partnership. Within 50 days after the
end of each calendar quarter, the General Partner will determine the amount of
cash available for distribution and will distribute such amount, if any, to the
Unit Holders and the General Partner as promptly thereafter as reasonably
possible. The General Partner's determination of the cash available for
distribution will be conclusive and binding upon all Partners. In no event,
however, shall funds be advanced or borrowed for purposes of distributions, if
the amount of such distributions would exceed the Partnership's accrued and
received Revenues from the previous four quarters, less paid and accrued
Operating Costs with respect to such Revenues.
ARTICLE SIX
WITHDRAWAL OR REMOVAL OF GENERAL PARTNER
OR GENERAL PARTNER'S INTEREST IN PARTNERSHIP PROPERTIES
Section 6.1 Withdrawal of General Partner or General Partner's
Interest in Partnership Properties
----------------------------------------------------------------
A. The General Partner (including by definition any successor General
Partner) shall have the right to retire or withdraw upon 120 days' Notification
to the Unit Holders, subject to its obligation to pay all costs and expenses
incurred by the Partnership by virtue of such retirement or withdrawal;
provided, however, that no such retirement or withdrawal shall be permitted
before the fifth anniversary of the Activation of the Partnership without the
Consent of the Unit Holders owning 50% or more of the outstanding Units.
B. The General Partner may, from time to time and upon at least 90 days'
Notification to the Unit Holders and without withdrawing from or resigning its
position as General Partner, cause the Partnership to distribute, in partial
liquidation of its interest in the Partnership, to the General Partner
fractional, undivided interests in the Producing Properties of the Partnership
(such interest of the General Partner in a
-53-
<PAGE>
Producing Property distributed is hereinafter referred to as the "Distributed
Interest") up to an aggregate interest equal in value to 80% of the value of the
Producing Properties of the Partnership that it would have been entitled to upon
a hypothetical liquidation of the Partnership after application of the
provisions of Section 9.2 (the interest in a Producing Property of the General
Partner retained in the Partnership is hereinafter referred to as the "Retained
Interest"); provided, however, that no such distribution shall occur unless the
General Partner obtains an opinion of counsel to the Partnership to the effect
that such distribution will not result in any material adverse tax consequence
to the Unit Holders or the Partnership. Notwithstanding anything to the contrary
in this Agreement, in the event that any such distribution is made, the General
Partner shall:
(1) make appropriate adjustments in the Capital Account of the
General Partner and in the allocation of Partnership Revenues, expenses
and costs to assure that the General Partner will not share or participate
in any of the capital, costs, Revenues or distributions attributable to
the Producing Properties of the Partnership except to the extent of the
Retained Interest of the General Partner;
(2) not voluntarily or otherwise dispose of its Distributed
Interest unless the undivided interest of the Partnership in such
Producing Properties is also sold or disposed of for a proportionately
equivalent consideration;
(3) ensure that the Unit Holders' share of General and
Administrative Costs and Direct Administrative Costs does not increase as
a result of such withdrawal; and
(4) indemnify the Unit Holders against any expenses resulting
from such withdrawal.
Section 6.2 Assignment of General Partner Interest
---------------------------------------------------
Subject to Section 12.3 and Section 6.5B, upon obtaining the Consent of
Unit Holders owning more than 50% of the outstanding Units, the General Partner
may assign or transfer its General Partner interest to a Person which shall
become a successor General Partner; provided, however, that no such Consent
shall be required in connection with an assignment or transfer pursuant to the
merger, consolidation or transfer of all or substantially all of the assets of
the General Partner.
-54-
<PAGE>
Section 6.3 Removal of General Partner
---------------------------------------
A. Subject to Section 12.3, the Unit Holders owning more than 50% of the
outstanding Units, shall have the authority to, and shall, remove the General
Partner.
B. (i) If the Unit Holders elect to remove the General Partner as
permitted under this Section, and further elect to continue the business of the
Partnership with one or more successor General Partners, the removed General
Partner shall not be removed until a successor General Partner has been selected
by the Unit Holders and admitted to the Partnership pursuant to Section 11.2.
(ii) Notwithstanding Section 3.6B, any General Partner who shall withdraw
or be removed shall be released and indemnified by any successor General Partner
from and against all liability for Partnership debts and obligations incurred by
the Partnership prior to the time of such removal.
Section 6.4 Option to Purchase Interest from Former General Partner
--------------------------------------------------------------------
In the event the General Partner withdraws or is removed and a successor
General Partner is selected, the incoming General Partner and the departing
General Partner shall, by mutual agreement, select an independent petroleum
consultant to value the departing General Partner's interest in the Partnership.
The incoming General Partner, or the Partnership, shall have the option to
purchase at least 20% of the interest of the departing General Partner
(including any Distributed Interests distributed to the General Partner pursuant
to Section 6.1B) for the value determined by the independent appraisal. The
departing General Partner's interest in the Partnership shall be transferred to
the successor General Partner, and the successor General Partner shall assign to
the departing General Partner a portion of Partnership Revenues, costs and
rights to receive Partnership distributions as and when such items are allocated
or distributed, as the case may be, by the Partnership equal to the percentage
interest of the departing General Partner in the Partnership prior to removal,
less the portion purchased by the successor General Partner or the Partnership.
-55-
<PAGE>
Section 6.5 Power to Admit Successor General Partner
-----------------------------------------------------
A. If the General Partner has withdrawn or been removed, Unit Holders
owning more than 50% of the outstanding Units shall have the right and authority
to appoint and admit a successor General Partner meeting the requirements of
Section 6.5B to take the place of the departing General Partner.
B. If there is admitted to the Partnership a successor General Partner,
such admission shall not become effective unless (a) the Partnership shall have
received a certificate, duly executed by or on behalf of such proposed successor
General Partner, to the effect that: (i) it is experienced in performing (or
employs sufficient personnel who are experienced in performing) functions of the
type then being performed by the departing General Partner, (ii) it has a net
worth sufficient to satisfy the net worth requirements of the Code, Treasury
Regulations, the Internal Revenue Service or the courts applicable to a general
partner in a limited partnership in order to ensure that the Partnership will
not fail to be classified for federal income tax purposes as a partnership and
(iii) such Person, if other than an individual, has the authority to become a
successor General Partner under the terms of this Agreement; and (b) the
proposed successor General Partner shall have (i) become a party to, and adopted
all of the terms and conditions of this Agreement and (ii) paid all reasonable
legal fees of the Partnership and filing and publication costs in connection
with such Person's becoming a successor General Partner. The Certificate of
Limited Partnership shall be amended to reflect the withdrawal of the former
General Partner and the admission of the successor General Partner.
Section 6.6 Incapacity of the General Partner
----------------------------------------------
A. In the event of the Incapacity of the General Partner, the Partnership
shall be dissolved. However, within 90 days thereafter the Unit Holders owning
more than 50% of the outstanding Units may elect to reconstitute the Partnership
prior to application of the liquidation provisions of Section 9.2.
-56-
<PAGE>
B. Upon the Incapacity of the General Partner, the Person who is its legal
representative shall have all the rights of a General Partner for the purpose of
settling or managing its estate and such power as the Incapacitated General
Partner possessed to assign all or any part of its interest and to join with
such assignee in satisfying conditions precedent to such assignees becoming a
substituted General Partner.
Section 6.7 Termination of Contracts with General Partner
----------------------------------------------------------
Subject to and upon fulfilling the conditions of Section 12.3, the power
shall be vested in the Unit Holders owning more than 50% of the outstanding
Units to terminate any or all contracts between the General Partner or any
Affiliate and the Partnership, and select a replacement Person therefor.
ARTICLE SEVEN
ASSIGNMENT OF LIMITED PARTNER INTERESTS TO UNIT HOLDERS
Section 7.1 Assignments of the Interests of Depositary
-------------------------------------------------------
A. Pursuant to Sections 7.lB and 13.1, the Depositary shall issue to each
Person purchasing one or more Units a Depositary Receipt evidencing such Units.
The Partnership shall recognize as a Unit Holder, for the number of Units for
which the Partnership has received proceeds, each Person to whom the Depositary
issues a Depositary Receipt as of the date provided in Section 13.1 or otherwise
as the General Partner shall determine in accordance with the provisions of this
Agreement.
B. The Depositary, by the execution of this Agreement, irrevocably assigns
to the Unit Holders all of the Depositary's beneficial (but not the record)
rights and interest in and to the Partnership, except as otherwise provided
herein, as of the date of Activation of the Partnership. The rights and interest
so transferred and assigned shall include, without limitation, the following:
(i) all rights to receive distributions of uninvested Capital
Contributions pursuant to Section 3.4 and the right to receive rebates of
Commissions and Organization and Offering Costs pursuant to Section 3.4;
-57-
<PAGE>
(ii) all rights to receive distributions of Partnership funds
or assets under the terms of this Agreement or under the Act;
(iii) all rights in respect of allocations of each item of
Revenues, gain, loss, deduction and credit pursuant to Article Five;
(iv) all rights in respect of allocations to Capital Accounts
pursuant to Section 5.4;
(v) all rights to receive any proceeds of liquidation of
the Partnership pursuant to Section 9.2;
(vi) all rights to inspect books and records and to receive
reports pursuant to Article Ten;
(vii) the right to bring derivative actions pursuant to the Act
(in the event any such action must be brought in the name of the
Depositary as a Limited Partner, the Depositary agrees to bring such
action, at the expense of the Unit Holder(s) requesting such action); and
(viii) all rights which the Depositary has, or may have in the
future, under this Agreement or the Act, except as otherwise provided
herein.
C. The General Partner, by the execution of this Agreement, and any
Substituted Limited Partner, by its adoption of this Agreement, pursuant to
Section 7.3, irrevocably consents to and acknowledges that (i) the foregoing
assignment pursuant to Section 7.1B by the Depositary to the Unit Holders of the
Depositary's beneficial rights and interest in the Partnership is effective and
(ii) the Unit Holders are intended to be third-party beneficiaries of all rights
and privileges of the Depositary hereunder. The General Partner and any
Substituted Limited Partner covenant and agree that, in accordance with the
foregoing transfer and assignment, all the Depositary's beneficial rights and
privileges hereunder may be exercised by the Unit Holders, including, without
limitation, those listed in Section 7.1B.
D. The Depositary, by execution of this Agreement, irrevocably commits to
exercise its rights to vote and Consent as a Limited Partner in accordance with
directions it receives from the Unit Holders as provided herein.
-58-
<PAGE>
E. The Depositary may transfer its interest as the Depositary to another
Person only with the Consent of the General Partner and Unit Holders other than
Substituted Limited Partners owning more than 50% of the outstanding Units.
F. All Persons becoming Unit Holders will by their payment for and
acceptance of Depositary Receipts agree to comply with and be bound by the
terms, conditions and obligations of and will be entitled to all rights of Unit
Holders under this Agreement.
G. Other than pursuant to Sections 7.1B, 7.1E and 7.2, the Depositary
shall not transfer, assign, encumber, pledge or hypothecate any of its
interest in the Partnership.
Section 7.2 Rights of Unit Holders
-----------------------------------
A. In accordance with the transfer and assignment described in Section
7.1B, it is the intention of the parties hereto that, except to the extent set
forth in Section 3.6B, Unit Holders shall have the same rights and obligations
that Limited Partners have under this Agreement and under the Act. The fiduciary
duties and obligations of the General Partner to Limited Partners under the Act
and this Agreement shall extend to the Unit Holders.
B. Without limiting the generality of Section 7.2A, persons who become
Limited Partners pursuant to Section 7.3 below and other Unit Holders shall
share pari passu on the basis of one Limited Partner interest for one Unit, and
shall be considered a single class, with respect to all rights to receive
distributions and allocations pursuant to this Agreement.
C. Subject to Section 12.2, Unit Holders shall vote on all matters in
respect of which they are entitled to vote (either in person, by proxy, or by
written consent), as a single class, with each Unit entitled to one vote;
provided, however, that the Depositary shall vote on behalf of and only as
directed by the Unit Holders who are not Substituted Limited Partners.
-59-
<PAGE>
Section 7.3 Conversion of Units into Limited Partner Interests
----------------------------------------------------------------
Subject to the consent of the General Partner, which consent may be
granted or withheld in its absolute discretion, any Unit Holder who desires to
convert his Units into an equal number of Limited Partner interests (which shall
be included in the meaning of "Units" as such term is used in this Agreement)
may do so following Activation of the Partnership by delivering to the
Depositary an executed subscription agreement and transfer application (which
are available upon request from the General Partner), accompanied by written
instructions which set forth an intention to become a Substituted Limited
Partner and request admission as such to the Partnership, together with such
other instruments or documents as the General Partner or the Depositary may deem
necessary or desirable, including the written acceptance and adoption by such
Unit Holder of the provisions of this Agreement and the execution,
acknowledgement and delivery to the General Partner of a special power of
attorney, the form and content of which are reasonably satisfactory to the
General Partner. Such executed documents shall be accompanied by a payment to
the Partnership by such Unit Holder of a fee (not to exceed $100) for legal and
administrative costs and recording fees. Unit Holders becoming Substituted
Limited Partners will be admitted to the Partnership quarterly, or as promptly
as possible after the commencement of the next calendar quarter. Persons who
effect such conversion will thereafter be deemed to have an equal number of
Units of interest as a Limited Partner and the Substituted Limited Partner will
not be able to re-exchange such units of Limited Partner interests for Units.
ARTICLE EIGHT
TRANSFERABILITY OF UNITS
Section 8.1 Assignments of Units
---------------------------------
A. Subject to the provisions of Section 8.4, no Unit Holder may assign,
sell, transfer or exchange his Units without the approval of the General
Partner. In exercising its obligations under this Section 8.1A, the General
Partner shall
-60-
<PAGE>
use its best effort to ensure that the terms of transfer are not in
contravention of any of the provisions of this Agreement and shall not approve
any transfer:
(i) to a Person who makes a market in the Units;
(ii) which is effected through a matching agent unless the
procedures of such matching agent with respect to the transfer of Units
have been approved by the General Partner as not being incident to a
public trading of such securities within the meaning of Code Sections
7704, 469(k) or 512(c);
(iii) if such sale, assignment, transfer or exchange would be in
violation of any applicable federal or state securities laws (including
any applicable suitability standard and the restrictions on transfer set
forth in Rule 260.141.11 of Title 10 of the California Administrative
Code) or would cause the Partnership to be taxed as an entity other than a
partnership under the Code;
(iv) if such sale, assignment, transfer or exchange, when
aggregated with all other transfers during the same taxable year of the
Partnership, would result in both (a) the transfer of more than 5% of the
Units (excluding Permitted Transfers) and (b) the transfer of more than 2%
of the Units (excluding Permitted Transfers and transfers made through a
Matching Service), unless the General Partner shall have received an
opinion of counsel that such sale, assignment, transfer or exchange may be
made without material adverse tax consequences to the Unit Holders. For
purposes of this subsection, the "Permitted Transfers" shall mean: (1)
transfers in which the basis of the Units in the hands of the transferee
is determined, in whole or in part, by reference to its basis in the hands
of the transferor or is determined under Section 732 of the Code; (2)
transfers at death; (3) transfers between members of a family (as defined
in Section 267(c)(4) of the Code); (4) the issuance of Units by or on
behalf of the Partnership in exchange for cash, property or services; (5)
distributions from a retirement plan qualified under Section 401(a) of the
Code; and (6) Block Transfers. The term "Block Transfer" means the
transfer by a Unit Holder in one or more transactions during any thirty
consecutive day period of Units representing in the aggregate more than 5%
of the total interests in Partnership capital or profits. The term
"Matching Service" has the meaning and
-61-
<PAGE>
the conditions to sale ascribed to it in Internal Revenue Service Notice
88-75. For purposes of the above limitations, the percentage of Units
transferred during a taxable year shall equal the sum of the monthly
percentage of Units transferred. The monthly percentage of Units
transferred in any month shall be the percentage equal to a fraction the
numerator of which is the number of Units transferred during such month
and the denominator of which is the number of Units outstanding on the
last day of such month, provided that the denominator shall not include
Units owned by the General Partner or any Person related to the General
Partner (within the meaning of Section 267(b) or 707(b)(1) of the Code);
(v) except for transfers by gift or inheritance, intra-family
transfers, transfers resulting from family dissolutions, transfers to
Affiliates or transfers of such transferor's entire remaining holding of
Units, any sale, assignment, transfer or exchange of Units that would
result in the transferors' holding less than ten (10) Units;
(vi) except as provided in Section 8.3 unless and until the
transferee has certified to the Partnership that he is an Eligible
Investor; or
(vii) to any entity exempt from federal income tax under Section
501 of the Code, to any Person defined in Section 168(h)(2) of the Code,
to any Individual Retirement Account as defined in Section 408(a) of the
Code, to any Keogh Plan, to any nonresident alien or to any foreign
Entity. The General Partner shall give Notification to all Unit Holders in
the event that sales, exchanges, transfers or assignments have generally
been suspended.
B. Any attempted sale, assignment, transfer or exchange in contravention
of the provisions of this Section 8.1 shall, unless otherwise determined by the
General Partner in its sole discretion, be void and deemed ineffectual and shall
not bind or be recognized by the Partnership.
C. The Partnership need not recognize for any purpose any assignment of
Units unless there shall have been filed with the Partnership and recorded on
the Partnership's books a duly executed and acknowledged instrument of
assignment, and such instrument evidences the written acceptance by the assignee
of all of the terms and provisions of this Agreement, represents
-62-
<PAGE>
that such assignment was made in accordance with all applicable laws and
regulations and in all other respects is satisfactory in form and substance to
the General Partner.
D. The Partnership need not (but, at least in the case of (i) below, may,
in its sole discretion, do so) recognize for any purpose any purported sale,
assignment or transfer of all or part of the Units, if, in the opinion of
counsel:
(i) such sale, assignment or transfer would cause the
Partnership to be treated as an association taxable as a corporation for
federal income tax purposes, or, when added to the total of all other
sales or exchanges of interests within the preceding 12 months, would
result in the Partnership's being considered to have terminated within the
meaning of Section 708 of the Code; and the General Partner is expressly
authorized to enforce this provision by suspending transfers if and when
any such transfer would result in transfers of interests in the
Partnership which represent in the aggregate 50% (or such lower percentage
as may be deemed prudent by the General Partner) or more of all
Partnership interests;
(ii) such sale, transfer or assignment would violate any state
securities or "blue sky" laws (including any applicable suitability
standards) applicable to the Partnership or the Units to be transferred or
assigned, except in the case of transfers upon the death of the Unit
Holder (by bequest or inheritance) or by operation of law; or
(iii) such sale, transfer or assignment might cause the
Partnership to be classified as a publicly traded partnership within the
meaning of Code Sections 7702, 469(k) or 512(c).
E. Unless otherwise provided by the General Partner, any sale, assignment
or transfer of Units shall be recognized by the Partnership as of the first
business day of the calendar quarter following the approval of such assignment
or transfer by the General Partner, or as soon thereafter as practicable. The
General Partner shall not approve sales, assignments or transfers more
frequently than quarterly unless it receives a written opinion of counsel that
more frequent approvals shall not jeopardize the Partnership's federal income
tax status as a partnership. The Partnership and the General Partner shall be
entitled to treat the assignor of such Units as the absolute
-63-
<PAGE>
owner thereof in all respects, and shall incur no liability for any allocation
of Revenues, costs or expenses, distribution or transmittal of reports or notice
required to be given to Unit Holders hereunder which is made in good faith to
such assignor until such time as the written instrument of assignment has been
received by the Partnership and recorded on its books.
F. The General Partner may reasonably interpret, and is hereby authorized
to take such action as it deems necessary or desirable to effect, the foregoing
provisions of this Section 8.1. The General Partner may, in its reasonable
discretion and without the approval of the Unit Holders, amend the provisions of
this Agreement in such manner as may be necessary or desirable to (i) preserve
the tax status of the Partnership as a partnership or (ii) avoid a
classification of the Partnership as a publicly traded partnership within the
meaning of Code Sections 7704, 469(k) or 512(c). The General Partner may, in its
reasonable discretion and without the approval of the Unit Holders, also amend
the provisions of this Agreement to include provisions governing the
transferability of interests in the Partnership which may be approved in future
legislation, Treasury Regulations, administrative rulings and other
pronouncements or judicial decisions. The Unit Holders shall be given prompt
Notification of any amendments permitted by this Section 8.1F.
G. No purported sale, assignment or transfer by a transferor of Units
shall be recognized unless (i) the transferor shall have represented that such
transfer (x) was effected through a broker-dealer or matching agent whose
procedures with respect to the transfer of Units have been approved by the
General Partner as not being incident to a public trading market and not through
any other broker-dealer or matching agent or (y) otherwise was not effected
through a broker-dealer or matching agent which makes a market in Units or which
provides a readily available, regular and ongoing opportunity to holders of
Units to sell or exchange their Units through a public means of obtaining or
providing information of offers to buy, sell or exchange Units and (ii) the
General Partner determines that the circumstances described in Section 8.1A(iv)
have not occurred and will not occur and that otherwise such sale, assignment or
transfer would not, by itself or together with any other sales, transfers or
assignments, be likely to result in the Partnership's being classified as a
publicly traded partnership.
-64-
<PAGE>
H. Unit Holders who are residents of the State of California must meet the
restrictions on transfers set forth in Rule 260.141-.11 of Title 10 of the
California Administrative Code.
I. Except as provided in Section 8.4, no transfer of Units will be
recorded or otherwise recognized by the Depositary or Partnership for any
purpose whatsoever unless and until the transferee has certified to the
Depositary that he is an Eligible Investor and, unless the transfer is among
members of the immediate family of the transferor Unit Holder, has paid a
transfer fee to reimburse the Depositary for all actual, reasonable and
necessary expenses (not to exceed $50 per transaction) incurred in connection
with the transfer.
J. A transferee who has accepted an assignment of Units shall be deemed to
have agreed to comply with and be bound by all of the terms and conditions of
this Agreement.
Section 8.2 Substituted Limited Partners
-----------------------------------------
A. The Consent of the General Partner shall be required before the
assignee of any Units shall be admitted as a Substituted Limited Partner, which
Consent may be withheld in the sole and absolute discretion of the General
Partner.
B. No person shall have the right to become a Substituted Limited Partner
in place of his assignor unless all of the following conditions are first
satisfied:
(1) a duly executed and acknowledged written instrument of
assignment complying with Section 8.1 shall have been filed with the
Partnership and recorded on its books, which instrument shall specify the
Units being assigned and set forth the intention of the assignor that the
assignee succeed to the assignor's interest as a Substituted Limited
Partner in his place;
(2) the transferor and his assignee shall have executed and
acknowledged such other instruments as the General Partner may deem
necessary or desirable to effect such substitution, including the written
acceptance and adoption by the assignee of the provisions of this
Agreement as the same may be amended, his agreement to be bound by the
terms hereof, and his execution,
-65-
<PAGE>
acknowledgment and delivery to the General Partner of a special power of
attorney, the form and content of which are reasonably satisfactory to the
General Partner; and
(3) a transfer fee sufficient to cover all reasonable expenses
connected with such substitution (not to exceed $50) shall have been paid
to the Partnership.
C. By executing or adopting this Agreement, the Depositary, each
Substituted Limited Partner and, by the purchase of a Unit, each Unit Holder
hereby consents to the admission of Substituted Limited Partners by the General
Partner in accordance with the foregoing.
Section 8.3 Eligible Investors
-------------------------------
A. If the General Partner determines that a Unit Holder is not an Eligible
Investor then the Unit Holder shall immediately be divested of its rights to
Consent on matters submitted to Unit Holders (and no such Units shall be deemed
outstanding for purposes of Consents of Unit Holders under this Agreement). At
any time after it can and does certify that it has become an Eligible Investor,
a Unit Holder may, upon application to the General Partner, retain all of the
rights and benefits attributable to his Units.
B. If at any time (i) the Partnership, the General Partner or the
Depositary receives an opinion of counsel to the effect that the citizenship or
other status of a Unit Holder may result in the forfeiture or cancellation of a
federal Lease or otherwise affects the eligibility of the Partnership to hold
federal Leases or (ii) the Partnership or the General Partner is named a party
in any judicial or administrative proceeding that seeks the cancellation or
forfeiture of any property in which the Partnership has an interest because of
the citizenship (or any other status that subjects the Partnership to the risk
of losing its eligibility to acquire or hold interests in federal Leases) of any
one or more Unit Holders, the General Partner may notify the Unit Holder and
purchase the Units of such Unit Holder for its own account, at such time and for
such amount as the General Partner may determine in its sole discretion. Nothing
in this Section 8.3 shall prevent a Unit Holder from transferring his Units
prior to the date set for such purchase by the General Partner.
-66-
<PAGE>
Section 8.4 Death, Incompetency or Dissolution of a Unit Holder
-----------------------------------------------------------------
If a Unit Holder who is an individual dies or a court of competent
jurisdiction adjudges him to be incompetent to manage his person or his
property, such Unit Holder's executor, administrator, guardian, conservator or
other legal representative may exercise all of such Unit Holder's rights for the
purpose of settling his estate or administering his property, including any
power under this Agreement of an assignee to become a Unit Holder or Substituted
Limited Partner. If a Unit Holder is a corporation, trust or other entity and is
dissolved or terminated, the powers of such Unit Holder may be exercised by its
legal representative or successor.
ARTICLE NINE
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP
Section 9.1 Events Causing Dissolution
-----------------------------------------
A. The Partnership shall be dissolved upon the happening of any of the
following events:
(i) the expiration of its term, without any continuation thereof as
set forth in Section 2.3;
(ii) the Incapacity of the General Partner; provided, however,
within ninety (90) days thereafter the Unit Holders owning more than 50%
of the outstanding Units may elect to reconstitute the Partnership prior
to application of the liquidation provisions of Section 9.2;
(iii) the sale or other disposition at one time of all or
substantially all of the assets of the Partnership existing at the time of
such sale;
(iv) the election to dissolve the Partnership (a) by the General
Partner (which election shall be Consented by the Unit Holders owning more
than 50% of the outstanding Units), or (b) by the Consent of Unit Holders
owning more than 50% of the outstanding Units;
-67-
<PAGE>
(v) ninety (90) days after the removal or withdrawal of the sole
General Partner (unless a successor is elected pursuant to Section 6.5);
or
(vi) the happening of any other event causing the dissolution of the
Partnership under the laws of the State, except that the Incapacity of the
Depositary or any Unit Holder shall not dissolve the Partnership and the
seizure of the interest of the Depositary shall not dissolve the
Partnership.
B. 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 General Partner has recorded a notice of dissolution of the
Partnership with the office of the Secretary of State of the State and shall
have complied with the laws of the other states in which it does business and
the assets of the Partnership have been distributed as provided in Section 9.2.
C. Nothing contained in this Agreement shall impair, restrict or limit the
rights and powers of the Unit Holders under the laws of the State or any other
jurisdiction in which the Partnership is doing business to reform and
reconstitute themselves as a limited partnership following dissolution of the
Partnership either under provisions identical to those set forth herein or under
any other provisions.
D. If the Partnership is dissolved as a result of an event set forth in
Sections 9.1A(ii) or (v), Unit Holders owning more than 50% of the outstanding
Units may appoint an interim manager of the Partnership, who shall have and may
exercise only the rights, powers and duties of a general partner necessary to
preserve Partnership assets, until (i) a successor General Partner is elected
pursuant to Section 6.5, if the Partnership is reconstituted, or (ii) the
Partnership is liquidated pursuant to Section 9.2. The interim manager shall not
be liable as a general partner to the Depositary or Unit Holders and shall,
while acting in such capacity, be entitled to the same indemnification rights as
are set forth in Section 4.10.
Section 9.2 Liquidation
------------------------
A. Subject to Section 9.1, upon dissolution of the Partnership, its
liabilities shall be paid in the order provided herein. The General Partner
shall sell or otherwise dispose of the Partnership's Property and other assets
and shall execute all amendments terminating the Partnership. In connection with
any such sale, the General Partner shall attempt to obtain the best prices for
such property. Pending such sales, the General Partner shall have the right to
continue to operate and otherwise to deal with Partnership property. In the
event the Partnership is dissolved on account of the Incapacity or removal of
the General Partner, the Partnership shall elect, in accordance with the
-68-
<PAGE>
provisions of Article Twelve, a Person (the "Liquidating Agent") to perform the
function of the General Partner in liquidating the assets of the Partnership and
winding up its affairs, and shall pay to such Liquidating Agent its reasonable
fees and expenses incurred in connection therewith. Gain or loss realized on the
sale or other disposition of the Partnership's assets will be credited to (in
the case of gain) or charged against (in the case of loss) the General Partner's
and each Unit Holder's Capital Account to the extent allocable to the General
Partner and such Unit Holder under Sections 5.1 and 5.2. Any liquidation of the
Partnership shall take place out of court and without application being made
therefor to the Secretary of State of the State.
The Liquidating Agent shall agree not to resign at any time without 15
days' prior Notification and (if other than the General Partner) may be removed
at any time, with or without cause, by Notification of removal approved by Unit
Holders owning more than 50% of the outstanding Units. Upon dissolution, removal
or resignation of the Liquidating Agent, a successor and substitute Liquidating
Agent (who shall have and succeed to all rights, powers and duties of the
original Liquidating Agent) shall, within 30 days thereafter, be selected by
Unit Holders owning more than 50% of the outstanding Units. The right to appoint
a successor or substitute Liquidating Agent in the manner provided herein shall
be recurring and continuing for so long as the functions and services of the
Liquidating Agent are authorized to continue under the provisions hereof, and
every reference herein to the Liquidating Agent shall be deemed to refer also to
any such successor or substitute Liquidating Agent appointed in the manner
herein provided. The Liquidating Agent shall have and may exercise, without
further authorization or Consent of any of the parties hereto, all of the powers
conferred upon the General Partner under the terms of this Agreement (but
subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers, other than the limitation on sales set forth in
Section 4.5C) to the extent necessary or desirable in the good
-69-
<PAGE>
faith judgment of the Liquidating Agent to carry out the duties and functions of
the Liquidating Agent hereunder for and during such period of time as shall be
reasonably required in the good faith judgment of the Liquidating Agent to
complete the winding-up and liquidation of the Limited Partnership as provided
for herein.
Notwithstanding the provisions of Section 9.1 which require the
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth herein, if on dissolution of the Partnership, the General
Partner or Liquidating Agent determines that an immediate sale of part or all of
the Partnership's assets would be impracticable or would cause undue loss to the
Unit Holders, the General Partner or Liquidating Agent may, in its absolute
discretion, defer for a reasonable time the liquidation of any assets except
those necessary to satisfy liabilities of the Partnership (other than those to
the General Partner and Unit Holders) or place those assets in a liquidating
trust to hold until such time as the assets are sold or depleted; provided,
however, that such assets will be transferred to a liquidating trust only if
before the transfer the General Partner or Liquidating Agent shall have received
the opinion of counsel to the Partnership that the operation of such liquidating
trust pursuant to its terms will not result in such liquidating trust being
treated as an association taxable as a corporation for federal income tax
purposes. Furthermore, if the dissolution of the Partnership is effected by
virtue of a merger or combination with another entity or by virtue of a
transfer, sale or exchange of all or substantially all of the Partnership's
assets for which at least a portion of the consideration consists of securities
of another entity, such securities may be distributed to the General Partner and
Unit Holders in kind and there shall be no obligation to sell or otherwise
dispose of such securities for cash or to place them in a liquidating trust;
provided, however, that no such securities shall be distributed to the Unit
Holders upon liquidation unless (i) the securities are readily marketable and
(ii) pro rata amounts of such securities (to the extent such securities may be
divided in equal pro rata amounts) are distributed to each Unit Holder.
B. In settling accounts after dissolution, the assets of the Partnership
shall be paid out in the following order: (i) to third party creditors, in the
order or priority as provided by law; (ii) to the General Partner and any
Liquidating Agent for any expenses of the Partnership paid by or payable to them
to the extent they are entitled to reimbursement therefor pursuant
-70-
<PAGE>
to this Agreement; (iii) to all of the Unit Holders in the amount equivalent to
the amount of their positive Capital Account balances (as adjusted pursuant to
Section 9.2A) on the date of distribution; (iv) to the General Partner in the
amount equivalent to the amount of its positive Capital Account balance (as
adjusted pursuant to Section 9.2A) on the date of distribution; and (v) the
balance, if any, shall be paid to the General Partner and Unit Holders in the
manner in which Revenues are then being allocated.
C. If the General Partner has a deficit balance in its Capital Account
following the distribution(s) provided for in Section 9.2B above, as determined
after taking into account all adjustments to its Capital Account for the taxable
year of the Partnership during which such distribution(s) occur, it shall
restore the amount of such deficit balance to the Partnership within 90 days and
such amount shall be distributed to the Unit Holders in accordance with their
positive Capital Account balances.
D. Upon the liquidation or partial liquidation of the General Partner's
interest pursuant to Article Six hereof, any distribution to the General Partner
shall be made pro rata in accordance with and to the extent of its positive
Capital Account balance after the General Partner's and Unit Holders' Capital
Accounts are adjusted as if all of the Partnership's Property had been sold at
its fair market value immediately prior to such distribution and the gain or
loss realized on such sale charged or credited to the General Partner's and Unit
Holders' Capital Accounts in accordance with and to the extent of its positive
Capital Account balance after the General Partner's and Unit Holders' Capital
Accounts are adjusted as if all of the Partnership's Property had been sold at
its fair market value immediately prior to such distribution and the gain or
loss realized on such sale charged or credited to the General Partner's and Unit
Holders' Capital Accounts in accordance with the provisions of Article Five
hereof; provided, however, that if the General Partner has a deficit balance in
its Capital Account following such distribution (or adjustment of the General
Partner's Capital Account pursuant to this Section 9.2D), the General Partner
shall restore the amount of such deficit balance to the Partnership by the later
of the end of the Partnership taxable year in which the liquidation of the
General Partner's Interest occurs or 90 days after the date of such liquidation.
-71-
<PAGE>
E. Notwithstanding anything to the contrary in this Agreement, upon the
dissolution and termination of the Partnership, the General Partner will
contribute to the Partnership the lesser of: (a) the deficit balance in its
Capital Account; or (b) the excess of 1.01 percent of the total Capital
Contributions of the Unit Holders over the capital previously contributed by the
General Partner.
ARTICLE TEN
BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS; ETC.
Section 10.1 Books and Records
-------------------------------
The books and records of the Partnership, including information relating
to the sale by the General Partner or any Affiliates of goods or services to the
Partnership, and a list of the names and addresses and Units of all Unit
Holders, shall be maintained by the General Partner at the principal office of
the Partnership for a period of six years following the close of the Fiscal Year
to which they relate and shall be available for examination there by any Unit
Holder or its duly authorized representatives at any and all reasonable times.
Any Unit Holder or its duly authorized representatives, upon paying the costs of
collection, duplication and mailing, shall be entitled for any proper purpose to
a copy of the list of names and addresses and Units of the Unit Holders. The
Partnership may maintain such other books and records and may provide such
financial or other statements as the General Partner in its discretion deems
advisable.
Section 10.2 Accounting Basis for Tax and Reporting Purposes;
Fiscal Year
-------------------------------------------------------------
The books and records of the Partnership for tax purposes, for purposes of
this Agreement and for the purpose of reports to the Partners, shall be kept on
the accrual basis. The Fiscal Year of the Partnership shall be the calendar year
to the extent permissible and the General Partner shall use its best efforts to
obtain any necessary approvals therefor.
-72-
<PAGE>
Section 10.3 Bank Accounts
---------------------------
The General Partner shall maintain a bank account or accounts on behalf of
the Partnership with any bank in the United States having total assets in excess
of $100,000,000. The General Partner shall not deposit Partnership funds in an
account with any bank in an aggregate amount in excess of 5% of such bank's
total assets. Withdrawals shall be made only in the regular course of the
Partnership's business on such signature or signatures as the General Partner
may determine. All deposits and other funds not needed in the operation of the
business may be deposited in interest-bearing accounts, certificates of deposit,
money market funds (including those managed or marketed by the Dealer Manager or
its Affiliates) or invested in short term United States Government obligations
maturing within one year, commercial paper of corporations organized under the
laws of any state of the United States or the District of Columbia having the
highest credit rating granted by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, or other similar highly liquid investment.
Section 10.4 Reports
---------------------
A. The General Partner shall close the Partnership's books of account
promptly at the close of each Fiscal Year and an annual examination of the
Partnership's financial statements shall be performed at the expense of the
Partnership by the Accountants. The General Partner shall furnish to the Unit
Holders an annual report within 120 days after the close of each Fiscal Year of
the Partnership commencing with the Fiscal Year in which the Partnership was
Activated. If requested by a Unit Holder, the General Partner shall also furnish
such Unit Holder with a report within 75 days after the end of the first six
months of the Fiscal Year in which such request was made, or within 75 days
after the request is made, whichever is later. Such report will contain at least
the following information:
(i) Financial statements for the Partnership's accounts,
including a balance sheet, statement of income, statement of changes in
partners' capital and statement of cash flow prepared on an accrual basis
in accordance with generally accepted accounting principles and
accompanied by a report of the Accountants together with their opinion
thereon, except that the semi-annual financial statements need not be
audited;
-73-
<PAGE>
(ii) A summary itemization, by type and/or classification, of
the total fees and compensation, including any General and Administrative
Cost reimbursement, paid by the Partnership or indirectly on their behalf,
to the General Partner and any Affiliate;
(iii) A description of each Producing Property acquisition,
including the costs therefor, in which the Partnership owns an interest,
except succeeding reports need contain only material changes (including
all material farmouts, development drilling, improved recovery operations
and abandonments), if any, regarding Producing Properties already reported
upon. In the case of wells that have been abandoned after production has
commenced, a statement justifying such abandonment shall be included if
the General Partner or an Affiliate is the operator. With respect to all
material Farmouts, the statement shall include a justification of the
Farmout, location, time, to whom made and a general description of terms;
and
(iv) A schedule reflecting a list of the wells drilled by the
Partnership and the costs thereof.
B. Within 60 days after the end of each fiscal quarter, each Unit Holder
will receive an "investor statement" which summarizes his current quarter and
cumulative cash distributions in the Partnership.
C. Within 120 days after the end of the Fiscal Year following the Fiscal
Year in which Activation of the Partnership occurs, and annually thereafter, the
General Partner shall furnish to the Unit Holders a computation as of the end of
the immediately preceding Fiscal Year, based upon engineering reports prepared
by one or more qualified independent petroleum engineering firms with respect to
Producing Properties containing Proved Reserves equal to at least 80% of the
Proved Reserves of the Partnership (with the computation as to any balance of
the Partnership's Proved Reserves being based upon petroleum engineering reports
prepared by the General Partner or an Affiliate), of the total estimated Proved
Developed Producing Reserves, Proved Developed NonProducing Reserves and Proved
Undeveloped Reserves owned by the Partnership, the estimated dollar value
thereof stated in then existing prices and escalated prices (as provided by the
General Partner). In addition, the computation shall include an estimate of the
time required for the extraction of such reserves and the present
-74-
<PAGE>
worth of such reserves and the estimate shall contain a statement that because
of the time period required to extract such reserves the present value of
revenues to be obtained in the future is less than if immediately receivable.
D. In addition to the report described in Section 10.4C of this Agreement,
if an event occurs to the knowledge of the General Partner or its Affiliates
leading to a reduction or an increase of such Proved Reserves of more than 10%,
excluding reduction as a result of normal production, an additional computation
and estimate similar to that described in Section 10.4C shall be sent to each
Unit Holder as soon as possible.
E. By March 15 of each year, the General Partner will furnish a report to
each Unit Holder containing such information as is pertinent for completion of
his respective federal, state and other income tax returns.
F. The General Partner shall file on a timely basis with the Securities
and Exchange Commission all filings required to be made by the Partnership
pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder. The General Partner shall make
available to any Unit Holder upon the Unit Holder's request, copies of any
report filed by or on behalf of the Partnership with the Securities and Exchange
Commission. The General Partner shall cause a copy of any reports sent to the
Unit Holders under paragraphs A, C, D and E hereof to be sent to the California
Commissioner of Corporations.
G. The General Partner agrees to make all relevant financial and
engineering reports available for review by a Unit Holder on request at the
offices of the Partnership.
Section 10.5 Elections
-----------------------
The General Partner shall cause the Partnership to make all elections
required or permitted to be made by the Partnership under the Code and not
otherwise expressly provided for in this Agreement, in the manner that the
General Partner believes will be most advantageous to the Unit Holders, except
that (i) the General Partner shall not be required to make an election under
Section 754 of the Code or corresponding provisions of applicable state income
tax laws, and (ii) the General Partner shall make the election under Section
263(c) of the Code to expense all intangible drilling and development costs in
the
-75-
<PAGE>
initial Partnership federal income tax return filed for the Fiscal Year in which
such costs are incurred.
ARTICLE ELEVEN
AMENDMENTS; MERGER
Section 11.1 Proposal and Adoption of Amendments Generally
-----------------------------------------------------------
A. Notwithstanding anything to the contrary herein, the General Partner
may, without prior notice or Consent of any Unit Holder, amend any provision of
this Agreement (including an amendment to admit an additional General Partner or
a successor General Partner in the event of the withdrawal or removal of the
General Partner) if, in its opinion, such amendment does not have a material
adverse effect upon the Unit Holders or otherwise is permitted by Section 8.1F.
Amendments to this Agreement to reflect the addition or substitution of a
Limited Partner or the admission of a successor General Partner shall be made at
the time and in the manner referred to in Section 11.2. Any other amendment to
this Agreement may be proposed by the General Partner or holders of at least 10%
of the outstanding Units. The Person or Persons proposing such amendment shall
submit a Notification containing (a) the text of such amendment, and (b) a
statement of the purpose of such amendment. The General Partner shall, within 15
days after receipt of any proposal under this Section 11.1A, give Notification
to the Depositary and all Unit Holders of such proposed amendment, of such
statement of purpose and of such opinion of counsel, together, in the case of an
amendment proposed by any Unit Holders, with the views, if any, of the General
Partner with respect to such proposed amendment.
B. Amendments to this Agreement shall be adopted if: (i) in the case of
amendments referred to in Section 11.2, the conditions specified in Section 6.5B
shall have been satisfactorily completed and the Partnership shall not have been
furnished with an opinion of counsel to the Partnership to the effect that such
amendment will adversely affect the classification of the Partnership as a
partnership for federal income tax purposes; (ii) in the case of amendments
referred to in Section 8.lF, the conditions specified in said Section shall have
been satisfactorily completed; or (iii) in the case of all other amendments,
such amendment shall have been Consented to by Unit Holders owning more than 50%
of the outstanding Units (unless such Consent is not required pursuant to
Section 11.1A
-76-
<PAGE>
of this Agreement); provided, however, that no such amendment may: (a) enlarge
the obligations of the General Partner or any Unit Holder under this Agreement
or convert the interest of any Unit Holder into the interest of a General
Partner or modify the limited liability of any Unit Holder without the Consent
of such Partner or Unit Holder; (b) modify the method provided in Article Five
of determining and allocating or distributing, as the case may be, each item of
income, gain, loss, cost, deduction or credit without the Consent of the General
Partner if it would be adversely affected by such modification, and any Unit
Holder which may be adversely affected, by such modification; (c) amend Sections
4.9, 4.10, 6.1, 6.2, 6.3 or 6.4 without the Consent of the General Partner; or
(d) amend Sections 2.3, 4.2, 4.4, 4.5, 4.11, this Article Eleven or Section 12.3
unless the Consent of the Unit Holders owning at least two-thirds of the
outstanding Units is obtained.
C. Upon the adoption of any amendment to this Agreement, the amendment
shall be executed by the General Partner (both on its own behalf and as
attorney-in-fact for any Substituted Limited Partners) and the Depositary and,
if necessary or appropriate, shall be recorded in the proper records of the
State and any other state in which the Partnership is then doing business.
Section 11.2 Amendments on Admission or Removal of Partner
-----------------------------------------------------------
If this Agreement or the Certificate of Limited Partnership shall be
amended to reflect the withdrawal or removal of the General Partner and the
continuation of the business of the Partnership, such amendment shall be signed
by the remaining or successor General Partner and by the removed General
Partner.
Section 11.3 Merger
--------------------
The Partnership may merge or consolidate with or into one or more limited
partnerships, general partnerships, corporations, business trusts or
associations, or unincorporated businesses if (i) consented to by the General
Partner and by Unit Holders owning more than 50% of the Outstanding Units and
(ii) such merger or consolidation is permitted under the Act or any other
applicable law.
-77-
<PAGE>
Section 11.4 Exchange Offers
-----------------------------
Neither the General Partner nor its Affiliates will make or cause to be
made any offer to a Unit Holder to exchange his Units for a security unless:
(a) such offer is made after the expiration of two years after the
Partnership commenced operations;
(b) such offer is made to all Unit Holders;
(c) such offer is on a basis no more advantageous to the General
Partner, exchange offeror or underwriter of the offer and their respective
affiliates, than to Unit Holders, provided, however, that the foregoing
clause shall not prohibit, if permitted under applicable state and
self-regulatory organization guidelines: (i) compensation (including the
issuance of securities) to such persons in exchange for such persons'
other balance sheet assets (nonPartnership interests) for inclusion of the
General Partner in the exchange offer or tender of other balance sheet
assets of the General Partner, underwriter or their affiliates, based upon
exchange valuation principles consistent with these guidelines; (ii)
compensation to an underwriter for services in connection with the offer
provided, however, that no compensation shall be payable to an underwriter
for the tender of interests by the exchange offeror, its affiliates or the
underwriter; and (iii) compensation that may be permitted under
subparagraph (g) below;
(d) payments for services rendered by any Person in connection with
the exchange are fully supportable, actual and necessary;
(e) in computing the exchange ratio, the value of reserves used is
supported by an appraisal prepared by an independent petroleum consultant
as of the most current feasible date, and the value of all other material
balance sheet assets, including undeveloped acreage, is at fair market
value as determined by an independent qualified appraiser;
-78-
<PAGE>
(f) the offer is made pursuant to all registration requirements
under both federal and state laws;
(g) if the exchange offeror is a corporation, the offer is made in
compliance with applicable NASAA Guidelines for corporate securities and
may not allow a security with different rights and privileges to be issued
to the General Partner or its Affiliates unless there is justification
therefor;
(h) the offer does not allow for an accelerated reversionary
interest to the General Partner without regard to the existing payout
provisions;
(i) additional shares or units to be issued pursuant to future
reevaluation of properties include reevaluation of similar properties held
by Unit Holders;
(j) there will be no overrides newly established to the General
Partner, exchange offeror, or affiliates on leases to be part of the
exchange and any overrides to be established to non-affiliates on such
leases and the basis therefor are disclosed in detail;
(k) all properties to be exchanged are to be evaluated on the same
basis or standard of evaluation; and
(1) material properties of the General Partner or its Affiliates to
be exchanged have complete cost disclosure; provided, however, that the
General Partner may avoid any of such conditions and restrictions for
which waivers or consents are obtained from appropriate state securities
administrators or agencies. Notwithstanding the foregoing, neither the
General Partner nor its Affiliates shall have any obligation to make any
exchange offer to Unit Holders.
-79-
<PAGE>
ARTICLE TWELVE
CONSENTS, VOTING AND MEETINGS
Section 12.1 Methods of Giving Consent
---------------------------------------
Any Consent of a Unit Holder required by this Agreement may be given by a
Unit Holder as follows: (i) at a meeting, in person, by a written proxy or
signed writing directing the manner in which it desires that its vote be cast,
which writing must be received by the General Partner prior to such meeting, or
(ii) without a meeting, by a signed writing directing the manner in which it
desires that its vote be cast, which writing must be received by the General
Partner prior to the date upon which the votes of Unit Holders are to be
counted. Any Unit Holder may waive notice of or attendance at any meeting of the
Unit Holders and may execute a signed written consent. Only the votes of Unit
Holders of record on the date set by the General Partner (which date shall be
not less than 10 days and not more than 60 days prior to the date set for the
meeting or consent), whether at a meeting or otherwise, shall be counted. Units
held by the General Partner and its Affiliates which, as a result thereof,
cannot be voted, will not be deemed outstanding for purposes of calculating
whether a sufficient number of Units have consented. The laws of the State
pertaining to the validity and use of corporate proxies shall govern the
validity and use of proxies given by the Unit Holders.
Section 12.2 Meetings of Unit Holders
--------------------------------------
The General Partner may at any time call a meeting of the Unit Holders or
for a vote, without a meeting, of the Unit Holders on matters upon which the
Unit Holders are entitled to provide their Consent, and shall call for such a
meeting or vote upon receipt by the General Partner of a request therefor made
by Unit Holders owning at least 10% of the outstanding Units as of the date of
receipt of such request. Within 15 days of the receipt of the request, the
General Partner shall notify all Unit Holders of record as of the date set by
the General Partner (which date shall be not less than 10 days and not more than
60 days prior to the date set for the meeting or consent) as to the time and
place of the meeting, if called, and the general nature of the business to be
transacted thereat, or if no such meeting has been called, of the matter or
matters to be voted upon and
-80-
<PAGE>
the date upon which the votes will be counted. The date of any meeting of Unit
Holders or the date upon which such votes, without a meeting, will be counted
(regardless of whether the General Partner has called for such meeting or vote
upon the request of Unit Holders or has initiated such event without such
request) shall be not less than 30 or more than 60 days following mailing of the
Notification thereof by the General Partner. Units held by the General Partner
and its Affiliates may not be voted by them. All expenses of the meetings,
voting and such Notification shall be borne by the Partnership.
Section 12.3 Limitations on Requirements for Consents
------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, the
powers of the Unit Holders set forth in Sections 4.SD, 6.3A, 6.6A, 6.7, 11.1A
and 12.5 shall not be deemed to be granted to the Unit Holders or exercisable by
them if counsel for the Partnership or counsel designated by Unit Holders owning
at least 10% of the outstanding Units renders an opinion to the effect that the
grant or the exercise of those powers or the result thereof is prohibited by the
Act, will impair the limited liability of the Depositary or the Unit Holders or
will affect the classification of the Partnership as a partnership for federal
income tax purposes.
Section 12.4 Submissions to Unit Holders
-----------------------------------------
The General Partner shall give all the Unit Holders Notification of any
proposal or other matter required by any provisions of this Agreement or by law
to be submitted for the consideration and approval of the Unit Holders. Such
Notification shall include any information required by the relevant provision of
the Agreement or by law.
Section 12.5 Acting Without Concurrence of General Partner
-----------------------------------------------------------
Except as limited by Sections 12.3 and 11.1B, Unit Holders owning more
than 50% of the outstanding Units, without the necessity for concurrence by the
General Partner may vote to:
(a) amend the Agreement;
(b) dissolve the Partnership;
-81-
<PAGE>
(c) remove the General Partner and elect a new General Partner;
(d approve or disapprove the sale of all or substantially
all of the assets of the Partnership; or
(e) cancel or amend the terms of any contract for services with
the General Partner or any Affiliate which shall be without penalty,
provided 30 days' written notice is given.
ARTICLE THIRTEEN
THE DEPOSITARY
Section 13.1 Depositary Receipts
---------------------------------
A. Within 45 days of the Activation of the Partnership, the Depositary
will execute and forward to each Unit Holder Depositary Receipts evidencing the
ownership by the Unit Holder as of the date of Activation the Units for which
such Unit Holder subscribed.
B. Pursuant to the terms of Section 8.1, upon receipt of a properly
executed application for transfer, the Depositary shall within three business
days execute and forward Depositary Receipts to the respective transferees.
C. Depositary Receipts may be endorsed with, have incorporated in the text
thereof or be accompanied by such legends or recitals, attachments or changes,
not inconsistent with the provisions of this Agreement, as may be required to
comply with any applicable law or regulation, or to conform with any usage with
respect thereto, or to indicate any special limitation or restriction to which
any particular Unit may be subject, or as may for any other reason be required.
Each Depositary Receipt shall be duly executed on behalf of the Depositary by
the manual or facsimile signature of a duly authorized officer of the
Depositary. No Depositary Receipt shall be entitled to any benefit under this
Agreement or be valid for any purpose unless it bears such signature.
D. All Depositary Receipts executed by the Depositary shall be numbered
consecutively. The Unit Holder of each numbered Depositary Receipt shall be
registered on the books of the Depositary maintained pursuant to Section 13.3A.
-82-
<PAGE>
E. Upon surrender by the Unit Holder in person or by duly authorized
attorney of one or more Depositary Receipts at the Depositary's principal
office, or at any other office it may designate for the purpose, for split-up or
combination, the Depositary shall, subject to the terms and conditions of this
Agreement and the Depositary Receipt, execute and deliver one or more new
Depositary Receipts in authorized denominations as requested, evidencing the
same aggregate number of Units as evidenced by the Depositary Receipt(s)
surrendered.
F. If any Depositary Receipt is mutilated, destroyed, lost or stolen, the
Depositary shall execute and deliver a Depositary Receipt in like form and tenor
in exchange and substitution for the mutilated, destroyed, lost or stolen
Depositary Receipt; provided, that the Depositary may require the Unit Holder to
(i) surrender any mutilated Depositary Receipt, (ii) file with the Depositary,
in a form and manner satisfactory to it, proof of the destruction, loss or
theft, and of such Unit Holder's ownership, of the Depositary Receipt and (iii)
furnish to the Depositary reasonable indemnification (including posting of an
indemnity bond) satisfactory to the Depositary.
G. As a condition precedent to the execution and delivery, transfer,
split-up, combination, surrender, conversion or exchange of any Depositary
Receipt, the Depositary may require (i) payment of any fee required hereby and
payment of a sum sufficient for reimbursement of any tax or other governmental
charge with respect thereto, (ii) production of proof satisfactory to it as to
the identity and genuineness of any signature or endorsement or as to the due
authorization of the action, (iii) filing of such information and execution of
such documents by the transferor and/or the transferee as may be required by
this Agreement or the Depositary Receipt or otherwise is deemed necessary or
appropriate by the Depositary and (iv) compliance with such other conditions as
may be imposed under applicable laws and regulations. The Depositary shall be
entitled to rely upon, and shall not have any liability to the Partnership, the
General Partner, any Unit Holder or any other Person with respect to the content
of any proof submitted to it pursuant to this Section 13.1G, and shall have no
obligation to inquire as to the truth and accuracy thereof (except for acts or
omissions resulting from the Depositary's gross negligence).
H. All Depositary Receipts surrendered to the Depositary shall be
canceled. The Depositary shall retain all canceled Depositary Receipts and other
instruments, documents and records
-83-
<PAGE>
in accordance with the policies and regulations of the Depositary, federal
securities laws and the rules and regulations of any securities exchange or
market upon which the Depositary Receipts may be listed or quoted.
Section 13.2 Depositary or Affiliate as Transfer Agent and Registrar
---------------------------------------------------------------------
The Depositary or an Affiliate shall also be the transfer agent and
registrar for the Depositary Receipts unless prohibited by law, regulation or
any applicable rule of a securities exchange or market. In its capacity as such,
subject to the terms and conditions of this Agreement, the Depositary or such
Affiliate shall transfer record ownership of the Units by bookkeeping entry on
the books and records maintained pursuant to Section 13.3A.
Section 13.3 Duties of Depositary
----------------------------------
A. In performing its duties hereunder the Depositary shall:
(i) maintain at its principal office a current list of the full
name and last known home or business address of each Unit Holder, set
forth in alphabetical order which list shall be available during ordinary
business hours for examination and copying at the reasonable request, and
at the expense, of any Unit Holder or his duly authorized representative,
or copies of such list may be requested in writing for any proper purpose
by any Unit Holder or his duly authorized representative; provided that
the reasonable costs of fulfilling such request, including copying
expenses, shall be paid by the Unit Holder making such request. In
addition, the Depositary shall, as required, furnish to the Securities and
Exchange Commission, any report, financial statement or communication
received from the Partnership or the General Partner that is made
generally available to Unit Holders;
(ii) keep all records required to be kept, for the periods
specified, and shall file with the Securities and Exchange Commission all
materials required to be so filed, under the Securities Exchange Act of
1934, by virtue
-84-
<PAGE>
of its status as Depositary. A copy of any material filed by the
Depositary with the Securities and Exchange Commission shall also be
provided to the Partnership within two business days after its filing. To
the extent that any such filing requires information from the Partnership
or the General Partner, such information shall be furnished to the
Depositary by the General Partner in sufficient quantity and a sufficient
time in advance of the date the filing is required to be made to enable
the Depositary to comply with such requirements; and
(iii) keep books at its corporate office for the transfer of
Depositary Receipts. The books shall be open during normal business hours
for inspection by the Unit Holders. The Depositary may, however, close the
transfer books, at any time or from time to time, when deemed expedient by
it in connection with the performance of its duties hereunder.
B. Upon the request of the Partnership, the Depositary shall as promptly
as practicable furnish to the Partnership a list, as of the date specified in
such request, of the names, addresses and social security or taxpayer
identification numbers of all Unit Holders.
Section 13.4 Depositary Not a Trustee, Issuer, etc.
----------------------------------------------------
The Depositary is not a trustee and it is intended that the Depositary, in
its capacity as depositary, shall not be deemed to be an "issuer" or
"underwriter" of securities under the federal securities laws or applicable
state securities laws; it being expressly understood and agreed that the
Depositary, in its capacity as a Limited Partner of the Partnership, is acting
only in a ministerial capacity.
Section 13.5 Indemnification of the Depositary
-----------------------------------------------
The Depositary shall be indemnified by the Partnership to the same extent
and subject to the same conditions and restrictions as provided in Section 4.10
of this Agreement with respect to the indemnification of the General Partner.
-85-
<PAGE>
Section 13.6 Limitation of Expense Reimbursements
--------------------------------------------------
The expenses of the Depositary otherwise reimbursable to it under the
terms of this Agreement and the fees payable to it hereunder shall not exceed
the lesser of (i) an amount equal to 90% of the competitive price which would be
charged by nonaffiliated persons rendering similar services in the same or
comparable geographic location or (ii) the costs and expenses of the Depositary
incurred in rendering such services.
ARTICLE FOURTEEN
MISCELLANEOUS PROVISIONS
Section 14.1 Notification to the Partnership or the General Partner
--------------------------------------------------------------------
Any Notification to the Partnership or the General Partner shall be sent
to the principal office of the Partnership, as set forth in this Agreement.
Except as provided herein, any Notification to a Unit Holder shall be sent to
its last known address.
Section 14.2 Binding Provisions
--------------------------------
The covenants and agreements contained herein shall be binding upon and
inure to the benefits of the heirs, executors, administrators, successors and
assigns of the respective parties hereto.
Section 14.3 Applicable Law
----------------------------
This Agreement shall be construed and enforced in accordance with the laws
of the State.
-86-
<PAGE>
Section 14.4 Separability of Provisions
----------------------------------------
If for any reason any provision or provisions hereof which are not
material to the purposes or business of the Partnership are determined to be
invalid and contrary to any existing or future law, such invalidity shall not
impair the operation of or affect those portions of this Agreement that are
valid.
Section 14.5 Appointment of the General Partner as Attorney-in-Fact
-------------------------------------------------------------------
The Depositary, by the execution of this Agreement, irrevocably
constitutes and appoints the General Partner as its true and lawful agent and
attorney-in-fact with full power and authority in its name, place and stead to
execute, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents, instruments and conveyances that may be necessary
or appropriate to carry out the provisions or purposes of this Agreement,
including without limitation: (i) the Certificate of Limited Partnership and
other certificates and instruments (including counterparts of this Agreement),
and any amendment thereof, including any amendment substituting a Limited
Partner pursuant to Section 8.2, that the General Partner deems appropriate to
form, reform, qualify or continue the Partnership (or a new partnership with
substantially the same provisions as the Partnership) as a limited partnership
(or a partnership in which the Partners will have limited liability comparable
to that provided by the Act) in the jurisdiction in which the Partnership may
conduct business; (ii) all amendments to the foregoing and to this Agreement
necessary to admit into the Partnership additional or substituted General
Partners pursuant to Section 11.2; (iii) all instruments that the General
Partner deems appropriate to reflect a change or modification of the Partnership
in accordance with the terms of this Agreement (including those necessary to
reflect additional Capital Contributions); and (iv) all conveyances and other
instruments that the General Partner deems appropriate to reflect the
dissolution and termination of the Partnership.
-87-
<PAGE>
Section 14.6 Entire Agreement
------------------------------
This Agreement constitutes the entire agreement among the parties. This
Agreement supersedes any prior agreement or understanding among the parties and
may not be modified or amended in any manner other than as set forth herein.
Section 14.7 Paragraph Titles
------------------------------
Article and section titles are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the text.
Section 14.8 Counterparts
--------------------------
This Agreement may be executed in several counterparts, all of which
together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the same counterpart except
that no counterpart shall be binding unless signed by the General Partner.
GEODYNE PRODUCTION COMPANY,
as General Partner
By: // Michael E. Luttrell //
-------------------------
Michael E. Luttrell
Executive Vice President
GEODYNE DEPOSITARY COMPANY,
as the Limited Partner
By: // Michael E. Luttrell //
-------------------------
Michael E. Luttrell
Executive Vice President
-88-
PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-C
AGREEMENT OF LIMITED PARTNERSHIP
Agreement of Limited Partnership, dated as of February 26, 1990, between
Geodyne Production Company, a Delaware corporation, as General Partner, and
Geodyne Depositary Company, a Delaware corporation, as the Limited Partner.
Whereas, the parties hereto wish to form a limited partnership under the
Oklahoma Revised Uniform Limited Partnership Act pursuant to this Agreement of
Limited Partnership;
Now, Therefore, in consideration of the mutual promises and agreements
made herein, the parties, intending to be legally bound, hereby agree as
follows:
ARTICLE ONE
DEFINED TERMS
The defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article One. The
singular shall include the plural and the masculine gender shall include the
feminine, the neuter and vice versa, as the context requires.
"Accountants" shall mean Ernst & Young or such other nationally
recognized firm of independent certified public accountants as shall be engaged
from time to time by the General Partner for the Partnership.
"Acquisition Reserve Report" shall mean a Hydrocarbon reserve report
made available to the Partnership prepared by a qualified petroleum engineering
firm acceptable to the General Partner in connection with the proposed
acquisition of a Producing Property, which shall include statements (i)
identifying reserves of Hydrocarbons referred to in such report as Proved
Developed Producing Reserves, Proved Developed Non-Producing Reserves or Proved
Undeveloped Reserves, as the case may be, and identifying all computations and
determinations made for purposes of such report, including, without limitation,
the present and future prices for Hydrocarbons and the present and future costs
to produce and develop such Hydrocarbons used in such computations and
determinations, (ii) with respect to the determination of the nature and extent
of
-1-
<PAGE>
the reserves of Hydrocarbons reflected in such report, that the collection,
analysis and evaluation of the basic physical data upon which such determination
is based were performed by such qualified petroleum engineering firm or, if such
data were collected by another Person, that such qualified petroleum engineering
firm has made inquiry with respect to the methods employed in such collection,
(iii) specifying the respective amounts of Proved Developed Producing Reserves,
Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves
contained therein, and (iv) indicating such qualified petroleum engineering
firm's opinion as to the respective estimated present values of future net
revenues of each category of reserves contained therein determined in accordance
with criteria satisfactory to the General Partner and otherwise in accordance
with sound engineering and industry practices, including such standards and
practices as may be promulgated by the Society of Petroleum Engineers of the
American Institute of Mining and Metallurgical Engineers. Any such report may
state that such qualified petroleum engineering firm expresses no opinion and
makes no warranty or representation with respect to the proposed acquisition of
such Producing Property and that such qualified petroleum engineering firm is
relying on information furnished by the General Partner as to the historical
volumes of any Hydrocarbons actually produced and as to the proposed ownership
interest of the Partnership in such Producing Property.
"Acquisitions and Operations Fee" shall mean the fee paid by the
Partnership to the General Partner pursuant to Section 4.12B of this Agreement
in connection with the Partnership's acquisition of Producing Properties and the
conduct of its business operations.
"Act" shall mean the Oklahoma Revised Uniform Limited Partnership Act,
as amended from time to time.
"Activation" or "Activated" shall mean the date on which the Certificate
of Limited Partnership is filed with the Oklahoma Secretary of State.
"Affiliate" shall mean, when used with reference to a specified Person:
(a) any Person directly or indirectly owning, controlling, or holding with power
to vote 10% or more of the outstanding voting securities of the specified
Person; (b) any Person 10% or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote by the
specified Person; (c) any Person directly or
-2-
<PAGE>
indirectly controlling, controlled by, or under common control with, the
specified Person; (d) any Person who is an officer, director, partner or trustee
of, or serves in a similar capacity with respect to, the specified Person or of
which the specified Person is an officer, director, partner or trustee, or with
respect to which the specified Person serves in a similar capacity; and (e) the
spouse or any relative of the specified Person sharing the same household.
Notwithstanding the foregoing, no Person shall be deemed to be an Affiliate
solely by reason of its ownership of units or limited partnership interests in a
limited partnership.
"Affiliated Program" shall mean a drilling or income program (whether in
the form of a limited partnership, general partnership, joint venture or
otherwise), whether currently existing or hereafter formed, interests in which
were or are offered to Persons or entities not engaged in a trade or business
within the oil and gas industry (other than by virtue of its participation in an
Affiliated Program) and of which the General Partner or an Affiliate thereof
serves as general partner, venturer, sponsor or manager.
"Agreement" shall mean this Agreement of Limited Partnership as
originally executed and as amended from time to time.
"Capital Account" shall mean, as to any Partner, an account maintained
on the books of the Partnership in accordance with the provisions of Section 5.4
below.
"Capital Contribution" shall mean the cash contribution of a Partner to
the Partnership.
"Certificate of Limited Partnership" shall mean the certificate of
limited partnership, and any and all amendments thereto and restatements
thereof, filed on behalf of the Partnership as required under the Act.
"Code" shall mean the Internal Revenue Code of 1986, as amended (or any
corresponding provisions of succeeding law).
"Commercial Well" shall mean any Partnership Well which is capable of
producing Hydrocarbons in commercial quantities, including those wells which are
shut-in or which have not been abandoned within 60 days following the
commencement of production. For purposes of this definition, production shall
refer to the commencement of the commercial
-3-
<PAGE>
marketing of Hydrocarbons, and shall not include any spot sales of Hydrocarbon
production as a result of testing procedures.
"Commissions" shall mean the cash fees payable to the Dealer Manager and
the Selected Dealers in connection with their participation in the offering of
Units.
"Consent" shall mean the consent of a Person, given as provided in
Section 12.1, to do the act or thing for which the consent is solicited, or the
act of granting such consent, as the context may require.
"Dealer Manager" shall mean PaineWebber Incorporated, a Delaware
corporation.
"Depositary" shall mean Geodyne Depositary Company, a Delaware
corporation, as the sole initial Limited Partner or any Person who at the time
of reference thereto has been admitted to the Partnership with the consent of
the General Partner as a successor to the interest of Geodyne Depositary Company
in the Partnership, which will upon the Activation of the Partnership acquire
and hold on behalf of the Unit Holders the Limited Partner interests
attributable to the Units issued to the Unit Holders.
"Depositary Receipt" shall mean a document issued in registered form by
the Depositary evidencing the ownership of one or more Units.
"Development Drilling" shall mean all drilling and completing, or
plugging and abandoning (after a determination that a well is not a Commercial
Well), of a Partnership Well drilled to the same reservoir from which another
well or other wells on a Lease or an offset Lease are being produced, or the
recompletion of an existing Partnership Well; provided, however, that
Development Drilling shall not include any Identified Development Drilling.
"Direct Administrative Costs" shall mean the actual and necessary direct
costs attributable to services provided to the Partnership by parties other than
the General Partner or its Affiliates, whether incurred by or for the benefit of
the Partnership directly or incurred by the General Partner or its Affiliates,
including the annual audit fees, legal fees and expenses, the cost of reviewing
tax returns and reports, the cost of evaluations prepared by qualified petroleum
engineering firms pursuant to Section 10.4C of this Agreement and all other
-4-
<PAGE>
such costs directly incurred by or for the benefit of the Partnership. Direct
Administrative Costs shall not include any Organization and Offering Costs or
any General and Administrative Costs.
"Eligible Investor" shall mean a person who is qualified to hold an
interest in oil and gas Leases on federal lands, including offshore areas under
federal laws and regulations in effect from time to time. As of the date of this
Agreement, the term "Eligible Investor" means: (i) a citizen of the United
States who has attained the age of majority under the laws of the state in which
he resides, (ii) an association (including a partnership, joint tenancy or
tenancy in common) organized or existing under the laws of the United States or
any state or territory thereof, all of the members of which are citizens of the
United States or (iii) a corporation organized under the laws of the United
States or any state or territory thereof, of which corporation, to the best of
its knowledge, not more than 5% of the voting stock, or of all the stock, is
owned or controlled by citizens of countries that deny to United States citizens
privileges to own stock in corporations holding oil and gas Leases similar to
the privileges of non-United States citizens to own stock in corporations
holding an interest in federal Leases, and, in each case, whose interest, direct
or indirect, in federal oil and gas Leases, applications, offers and options
therefor does not exceed 246,000 acres in the same state, of which no more than
200,000 acres are under option, nor does it exceed 300,000 acres in each of the
northern and southern leasing districts of Alaska, of which no more than 200,000
acres are held under option in each of such districts.
"Engineering Review Letter" shall mean a document prepared by a
qualified petroleum engineering firm acceptable to the General Partner in
connection with the proposed acquisition of a Producing Property, which shall
include statements indicating that (i) such qualified petroleum engineering firm
has reviewed an oil and gas reserve report prepared by the engineering staff of
Geodyne Resources, Inc. or an Affiliate, (ii) in the opinion of such qualified
petroleum engineering firm, the reserve report was prepared in accordance with
sound engineering and industry practices, including such standards and practices
as may be promulgated by the Society of Petroleum Engineers of the American
Institute of Mining and Metallurgical Engineers, and (iii) with respect to the
determination of the nature and extent of the reserves of Hydrocarbons reflected
in such report, such qualified petroleum engineering firm has made inquiry with
respect to the methods employed in the collection, analysis and
-5-
<PAGE>
evaluation of the basic physical data upon which such determination is based.
"Farmout" shall mean an arrangement whereby the owner of a Lease or
Working Interest agrees to assign his interest in certain specific acreage to
the assignee, retaining some interest such as an overriding royalty interest,
oil and gas payment, offset acreage or other type of interest, subject to the
drilling of one or more specific wells or other performance as a condition of
the assignment.
"Fiscal Year" shall mean the calendar year.
"General and Administrative Costs" shall mean all customary and routine
legal, accounting, data processing, depreciation (other than depreciation
relating to real property), geological, engineering, travel, office rent,
telephone, secretarial, employee compensation and benefits, and other items of a
general and administrative nature, whether like or unlike the foregoing, and any
other incidental expenses reasonably necessary to the conduct of the
Partnership's business, and generated by the General Partner or any Affiliate
other than an Affiliated Program computed on a cost basis, determined by the
General Partner in accordance with generally accepted accounting principles and
subject to review by the Accountants in connection with the annual audit of the
Partnership and its Affiliates. General and Administrative Costs shall not
include any Direct Administrative Costs or Organization and Offering Costs of
the Partnership.
"General Partner" shall mean Geodyne Production Company, a Delaware
corporation, acting in such capacity, and any other Person admitted as an
additional or substituted General Partner pursuant to the provisions of Article
Six of this Agreement.
"Hydrocarbons" shall mean crude oil, natural gas, condensate, natural
gas liquids and other liquid or gaseous hydrocarbons and any minerals produced
in association therewith.
"Identified Development Drilling" shall mean all drilling and
completing, or plugging and abandoning (after a determination that a well is not
a Commercial Well), of a Partnership Well drilled by or on behalf of the
Partnership to a reservoir on a Lease or an offset Lease constituting all or a
portion of a Producing Property or the recompletion of an existing Partnership
Well, where (i) the drilling or recompletion of such Partnership Well commences
after the
-6-
<PAGE>
acquisition of such Producing Property by the Partnership and is conducted in
order to commence production of Hydrocarbons from Proved Undeveloped Reserves
identified in the Acquisition Reserve Report or Engineering Review Letter
prepared in connection with such Producing Property, (ii) the costs of
development of the Proved Undeveloped Reserves were taken into account in such
Acquisition Reserve Report or Engineering Review Letter in valuing such Proved
Undeveloped Reserves attributable to such Producing Property, and (iii) a
portion of the cost paid by the Partnership for such Producing Property is
attributed by such Acquisition Reserve Report or Engineering Review Letter to
such Proved Undeveloped Reserves. The term, Identified Development Drilling,
shall also refer to any Partnership Wells drilled or recompleted on a Producing
Property subsequent to the initial Identified Development Drilling conducted on
such Producing Property in order to commence production of Hydrocarbons from
Proved Undeveloped Reserves (in addition to those identified in the related
Acquisition Reserve Report or Engineering Review Letter) which have been
categorized by the General Partner as such by virtue of production obtained from
prior Identified Development Drilling conducted on such Producing Property. Any
reference to costs incurred in connection with Identified Development Drilling
shall include the interest, commitment fees and other financing charges and
expenses of Partnership borrowings incurred to finance Identified Development
Drilling.
"Improved Recovery" shall mean all methods of supplementing natural
forces and mechanisms of primary recovery or otherwise increasing the ultimate
recovery from a Partnership Property, including, but not limited to, water
flooding, pressure maintenance, gas cycling, fluid injection, polymer flooding,
chemical flooding and the use of miscible displacement fluids.
"Incapacity" or "Incapacitated" shall mean the entry of any order for
relief under any bankruptcy law (except that, in the case of the General
Partner, the term "bankruptcy" shall mean only being subject to Chapter 7 of the
Bankruptcy Code of 1984), the adjudication of interdiction, of incompetence, or
of insanity, or the death, dissolution or termination (other than by merger or
consolidation under which the surviving entity agrees to assume all of the
obligations and responsibilities of the merged or consolidated Person set forth
in this Agreement), as the case may be, of any Person.
-7-
<PAGE>
"Independent Petroleum Engineer" shall mean a Person with no material
relationship to the General Partner or its Affiliates who is in the business of
rendering fair market value 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.
"Investment Income" shall mean all interest and dividend income earned
on temporary investments of the Partnership at any time prior to the time at
which an amount equal to the Capital Contributions to the Partnership available
for the acquisition of Producing Properties have been (i) expended or (ii)
returned pursuant to Section 3.4 of this Agreement.
"I/P Partnership" shall mean a partnership formed as a part of the
program captioned "PaineWebber/Geodyne Institutional/Pension Energy Income
Partners" and any subsequent Affiliated Program formed by the General Partner or
any Affiliate for investment primarily by pension and other tax-exempt plans and
accounts.
"Lease" shall mean a lease, mineral interest, royalty or overriding
royalty covering Hydrocarbons (or a contractual right to acquire such an
interest), or an undivided interest therein or portion thereof, together with
all easements, permits, licenses, servitudes and rights-of-way situated upon, or
used or held for future use in connection with, the exploration, development or
operation of such interest.
"Limited Partner" shall mean the Depositary and any Substituted Limited
Partners.
"Net Profits Interest" shall mean an interest in one or more Producing
Properties which entitles the holder thereof to a share of the gross revenues
from the production of Hydrocarbons from the Producing Property or Properties
less all operating, production, development, transportation, transmission and
marketing expenses, and all severance, sales, ad valorem and excise taxes
attributable to such production.
"Notification" shall mean a writing, containing the information required
by this Agreement to be communicated to any Person, hand delivered or sent by
registered or certified mail, return receipt requested, postage prepaid, to such
Person at the last address of such Person reflected on the official records of
the Partnership, the date of the certified receipt
-8-
<PAGE>
(or such other evidence of receipt) therefor being deemed the date of the giving
of Notification; provided, however, that any written communication containing
the information sent or delivered to the Person and actually received by the
Person shall constitute Notification for all purposes of this Agreement.
"Operating Costs" shall mean all expenditures made and costs incurred by
the Partnership with respect to (i) the production and marketing of Hydrocarbons
from completed Partnership Wells, including labor, fuel, repairs, hauling,
materials, supplies, utility charges and other costs incident to or therefrom,
costs of maintaining inventories incidental to the operations of Producing
Properties, costs of making transfers of lease and well equipment to and from
Partnership Wells, ad valorem and severance taxes, insurance and casualty loss
expense, and compensation to well operators or others for services rendered in
conducting such operations; (ii) the interest, commitment fees and other finance
charges and expenses of Partnership borrowings incurred in connection with
Development Drilling and Improved Recovery projects; and (iii) processing
facilities, pipelines, gas sales facilities, Improved Recovery projects, and
other procedures and facilities necessary to produce efficiently and market the
Hydrocarbon reserves from a Producing Property, all to the extent such costs and
expenditures are not Property Acquisition Costs.
"Organization and Offering Costs" shall mean all costs and expenses
incurred by the General Partner and its Affiliates in connection with the
organization and activation of the Partnership, including, without limitation,
the legal, printing, accounting and other direct and indirect costs incurred in
connection with preparing this Agreement and the preparation and filing of a
certificate of limited partnership, the costs incurred with respect to the
registration for offer and sale of the Units under applicable federal and state
securities laws, the wholesale offering and marketing fees and expenses of the
Dealer Manager and a subsidiary of Geodyne Resources, Inc. which is a registered
broker-dealer, and other front-end fees. Organization and Offering Costs shall
not include the Commissions paid to the Dealer Manager or reallowed to the
Selected Dealers, but shall include fees and expenses (including expense
reimbursements) paid to Persons in connection with the offering and issuance of
Units, including due diligence expenses.
-9-
<PAGE>
"Partner" shall mean the General Partner or any Limited Partner of the
Partnership.
"Partnership" shall mean the limited partnership formed hereby.
"Partnership Account" shall mean the bank account or accounts
established by the General Partner pursuant to Section 10.3 of this Agreement.
"Partnership Property" shall mean all interest, property and right of
any type owned by the Partnership.
"Partnership Well" shall mean any well in which the Partnership has an
interest.
"Payout" shall mean that time at which cash distributions have been made
by the Partnership to the Unit Holders (together with their predecessors in
interest) in an aggregate amount equal to $100 for each whole Unit held by each
such Unit Holder.
"Person" shall mean any individual, partnership, corporation, trust or
other entity.
"Prior Limited Partnership" shall mean any limited partnership activated
prior to the Activation of the Partnership of which depositary units or units of
limited partnership interest were offered and sold pursuant to the Prospectus or
pursuant to the prospectus prepared for the PaineWebber/Geodyne Energy Income
Program I, the PaineWebber/Geodyne Energy Income Program II or the
PaineWebber/Geodyne Institutional/Pension Energy Income Partners or any
subsequent Affiliated Programs pursuant to which I/P Partnerships are formed.
"Producing Property" shall mean any property (or interest in such
property) with a well or wells capable of producing Hydrocarbons in commercial
quantities or properties unitized with such properties or properties adjacent to
such properties which are acquired as an incidental part of the acquisition of
such properties. The term also includes well machinery and equipment, gathering
systems, storage facilities or processing installations or other equipment and
property associated with the production of Hydrocarbons. Interests in properties
may include Working Interests, production payments, Royalties and other
nonworking and nonoperating interests.
-10-
<PAGE>
"Property Acquisition Costs" shall mean, without duplication, the sum of
(i) the prices paid by the Partnership or the General Partner or an Affiliate to
acquire a Producing Property ultimately sold to the Partnership, including the
price paid to acquire a purchase option with respect to a Producing Property,
lease bonuses and equipment costs associated therewith; (ii) title insurance or
examination costs, brokers' commissions and finders' fees, filing fees,
recording fees, transfer taxes, if any, and like charges in connection with the
acquisition of Producing Properties; (iii) delay rentals and ad valorem taxes
paid by the buyer with respect to such property to the date of its transfer to
the Partnership; (iv) interest and other financing fees and costs actually
incurred by the General Partner or its Affiliates to acquire or maintain such
Producing Properties prior to their transfer to the Partnership; and (v) all
reasonable, necessary and actual expenses incurred by the General Partner or an
Affiliate in connection with the acquisition of Producing Properties and paid to
third parties who are not Affiliates for geological, geophysical, seismic, land,
engineering, drafting, accounting, auditing, legal and other like services,
including the Partnership's costs incurred (to the extent consistent with
generally accepted industry standards) in connection with the review of proposed
acquisitions of Producing Properties whether or not acquired and the preparation
and review of Acquisition Reserve Reports and Engineering Review Letters, all
allocated to the property in accordance with the allocation procedures used by
the General Partner, any of its Affiliates or a Partnership; provided that the
portion of the General Partner's or Affiliate's expenses allocated to the
property, as set forth in items (iii), (iv) and (v), shall have been incurred
not more than 36 months prior to the property transaction.
"Property Investment Period" shall have the meaning set forth in Section
5.2.
"Prospect" shall mean an area in which the Partnership owns or intends
to own one or more oil and gas interests which is geographically defined on the
basis of geological data by the General Partner and which is reasonably
anticipated by the General Partner to contain at least one reservoir.
"Prospectus" shall mean the prospectus pursuant to which the Units were
offered, including all supplements or amendments thereto delivered in such
offering, if any.
-11-
<PAGE>
"Proved Reserves" shall mean those quantities of Hydrocarbons, which,
upon analysis of geologic and engineering data, appear with reasonable certainty
to be recoverable in the future from known Hydrocarbon reservoirs under existing
economic and operating conditions. Proved Reserves are limited to those
quantities of Hydrocarbons which can be expected, with little doubt, to be
recoverable commercially at current prices and costs, under existing regulatory
practices and with existing conventional equipment and operating methods.
Depending upon their status of development, such Proved Reserves shall be
subdivided into the following classifications and have the following
definitions:
(a) "Proved Developed Reserves" shall mean Proved Reserves which
can be expected to be recovered through existing wells with existing
equipment and operating methods. This classification shall include:
(1) "Proved Developed Producing Reserves" which are Proved
Developed Reserves which are expected to be produced from existing
wells; and
(2) "Proved Developed Non-Producing Reserves" which are Proved
Developed Reserves which exist behind the casing of existing
wells, or at minor depths below the present bottom of such wells,
which are expected to be produced through these wells in the
predictable future, where the cost of making Hydrocarbons
available for production should be relatively small compared to
the cost of a new well.
Additional Hydrocarbons expected to be obtained through the
application of Improved Recovery techniques are included as "Proved
Developed Reserves" only after testing by a pilot project or after the
operation of an installed program has confirmed through production
responses that increased recovery will be achieved.
(b) "Proved Undeveloped Reserves" shall mean all reserves which
are expected to be recovered from new wells on undrilled acreage or from
existing wells where a relatively major expenditure is required for
recompletion. Such reserves on undrilled acreage are limited to those
drilling units offsetting productive units which are reasonably certain
of production when drilled; provided that Proved Reserves for other
undrilled units can be
-12-
<PAGE>
claimed where it can be demonstrated with certainty, based on accepted
geological, geophysical and engineering studies and data, that there is
continuity of production from an existing productive formation. No
estimates for Proved Undeveloped Reserves are attributable to any
acreage for which Improved Recovery is contemplated, unless the
techniques to be employed have been proved effective by actual tests in
the same area and reservoir.
"Revenues" are the Partnership's gross revenues from all sources,
including interest income, proceeds from sales of production, the Partnership's
share of revenues from partnerships or joint ventures of which it is a member,
proceeds from sales or other dispositions of Hydrocarbon properties or other
Partnership assets, provided that contributions to Partnership capital by the
Partners and the proceeds of any Partnership borrowings are specifically
excluded.
"Royalty" shall mean an interest, including an overriding royalty but
excluding a Net Profits Interest, in gross production or the proceeds therefrom
which does not require the owner thereof to bear any of the cost of production,
development operation or maintenance.
"Selected Dealer" shall mean a member in good standing of the National
Association of Securities Dealers, Inc. which has been selected by the Dealer
Manager to offer and sell the Units.
"State" shall mean the State of Oklahoma.
"Subscription Agreement" shall mean the Subscription Agreement in the
form attached to the Prospectus as Exhibit B.
"Subsequent Limited Partnership" shall mean any limited partnership
activated after the Activation of the Partnership of which Units are offered and
sold pursuant to the Prospectus.
"Substituted Limited Partner" shall mean any Unit Holder admitted to the
Partnership as a Substituted Limited Partner pursuant to Section 7.3 or Sections
8.1 and 8.2 of this Agreement.
-13-
<PAGE>
"Unit" shall mean an increment of the attributes of the interest as a
Limited Partner that is either (i) assigned to a Unit Holder by the Depositary
and is evidenced by a Depositary Receipt or (ii) unless the context otherwise
requires, is held directly by a Substituted Limited Partner and, in either case,
which increment represents a subscription amount of $100.
"Unit Holders" shall mean any Person who holds Depositary Receipts in
accordance with Section 7.1 or Section 8.1 hereof as reflected in the records of
the Partnership and the Depositary and, unless the context otherwise requires,
any Person who becomes a Substituted Limited Partner.
"Unit Holders' Subscriptions" shall mean the aggregate dollar amount
(initially subscribed for by Unit Holders) determined by multiplying the number
of Units issued to the Unit Holders by $100.
"Working Interest" shall mean the interest (whether held directly or
indirectly) in a Lease which is burdened with the obligation to pay some portion
of the expense of production, development, operation or maintenance. A Working
Interest does not include a Net Profits Interest.
ARTICLE TWO
NAME, PLACE OF BUSINESS AND OFFICE; TERM
Section 2.1 Name, Place of Business and Office, Agent
------------------------------------------------------
The Partnership shall be conducted under the name PaineWebber/ Geodyne
Energy Income Limited Partnership III-C. The business of the Partnership may,
however, be conducted under any other name deemed necessary or desirable by the
General Partner in order to comply with applicable laws. The office and
principal place of business of the Partnership shall be c/o Geodyne Production
Company, 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The
agent for service of process on the Partnership shall be Geodyne Production
Company, 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The
General Partner may change the principal place of business and the location of
such office and may establish such additional offices as it deems advisable from
time to time; provided, however, that in the event the principal place of
business of the Partnership shall be changed, the General
-14-
<PAGE>
Partner shall provide Notification thereof to the Unit Holders. The General
Partner shall not be obligated to provide a copy of the certificate of limited
partnership as filed with the Oklahoma Secretary of State to the Depositary or
Unit Holders. A Unit Holder may obtain a copy of such certificate of limited
partnership by making a written request therefor to the General Partner.
Section 2.2 Purpose
--------------------
The business and purpose of the Partnership shall be to acquire, own,
hold, operate, explore, develop, trade, sell and exchange Hydrocarbon properties
and interests therein of all kinds onshore and offshore in the continental
United States, including, without limitation, interests in general or limited
partnerships, joint ventures and other entities that hold or are formed to
acquire interests in such properties or interests; to engage in Development
Drilling, Identified Development Drilling or other drilling operations
specifically authorized by this Agreement, and enhanced recovery operations
thereon; to produce, transport, market, purchase and trade Hydrocarbons and
products thereof; to purchase, lease, own, hold, operate, sell and exchange all
equipment, machinery, facilities, systems and plans necessary or appropriate for
such purposes; and to do any and all things necessary or proper in connection
with or incident to the foregoing activities.
Section 2.3 Term
-----------------
The Partnership shall continue in force and effect for a period of ten
(10) years from the date of its Activation, provided that the General Partner
may extend the term of the Partnership for up to five periods of two years each
if it believes each such extension is in the best interests of the Unit Holders,
or until dissolution prior thereto pursuant to the provisions hereof.
-15-
<PAGE>
ARTICLE THREE
PARTNERS AND CAPITAL
Section 3.1 General Partner
---------------------------
A. The name, address and Capital Contribution of the General Partner
are set forth in Schedule A which is attached hereto and incorporated herein by
reference.
B. The General Partner shall not be required to make any additional
Capital Contribution except as set forth in the next sentence and in Sections
3.4 and 9.2C. The General Partner shall contribute an amount of cash sufficient
to pay its share of costs allocated to it pursuant to Section 5.1 of this
Agreement as such costs are incurred to the extent that the amount of Revenues
allocated to it (and/or the amount of Partnership borrowings incurred on its
behalf) is insufficient to pay such costs.
Section 3.2 Limited Partner and Unit Holders
---------------------------------------------
A. The name, address and Capital Contribution of the Depositary as
Limited Partner are set forth in Schedule A which is attached hereto and
incorporated herein by reference.
B. Neither the Depositary nor any Unit Holder shall be required to make
any additional Capital Contribution to the Partnership.
C. The Depositary shall engage in no business activity and shall incur
no liabilities other than acting as Depositary for the Partnership or any other
limited partnership that is an Affiliated Program. The Depositary shall not
amend its Certificate of Incorporation or By-laws without the prior Consent of
the Unit Holders holding a majority of the outstanding Units.
Section 3.3 Application of Capital Contributions
-------------------------------------------------
The General Partner shall deposit in the Partnership Account the Capital
Contributions and apply such Capital Contributions to (i) pay to the General
Partner the aggregate
-16-
<PAGE>
amount due pursuant to Section 4.12B in consideration of the General Partner's
payment of Organization and Offering Costs, (ii) pay Commissions, and (iii) pay
to the General Partner the Acquisitions and Operations Fee. The balance of such
Capital Contributions shall be held in the Partnership Account to be applied to
the payment of Property Acquisition Costs and, to the extent not payable out of
Revenues or Investment Income, Operating Costs, General and Administrative
Costs, Direct Administrative Costs and other Partnership costs; provided,
however, that such funds may be temporarily invested prior to the payment of
such costs in accordance with Section 10.3.
Section 3.4 Certain Returns of Capital
---------------------------------------
Any portion of the Capital Contribution of the Partnership (except for
necessary operating capital) that has not been expended or that is not, or in
the determination of the General Partner, will not be committed for expenditure
by the second anniversary of the Activation of the Partnership will promptly be
refunded to the Unit Holders as a return of part of their Capital Contributions
at the earlier of such determination or the second anniversary of the Activation
of the Partnership. In addition, the General Partner shall contribute cash to
the Partnership (with respect to which its Capital Account will be credited) in
an amount equal to that portion of the total of (i) the amount paid to the
General Partner in respect of the Acquisitions and Operations Fee, (ii) the
amount paid to the General Partner in consideration of its payment of the
Organization and Offering Costs, and (iii) the Commissions, which are
attributable (on a proportionate basis) to the unexpended amount of Capital
Contributions so refunded, which cash shall be refunded to the Unit Holders
together with the unexpended Capital Contributions so refunded. All amounts so
refunded to the Unit Holders shall reduce dollar for dollar their Capital
Accounts.
Section 3.5 Partnership Capital
--------------------------------
A. No Partner shall be paid interest on any Capital Contribution to the
Partnership or on such Partner's Capital Account, notwithstanding any
disproportion therein as between Partners.
-17-
<PAGE>
B. Except as provided in Sections 3.4, 6.1 and 9.2 of this Agreement,
neither the General Partner nor any Unit Holder shall have the right to withdraw
from the Partnership or to withdraw or receive any return of its Capital
Contribution. Under circumstances involving a return of any Capital
Contribution, no Unit Holder shall have priority over any other Unit Holder nor
shall any Unit Holder have the right to receive any property other than cash,
except as may otherwise be provided in this Agreement.
Section 3.6 Liability of Partners
----------------------------------
A. Except as provided in the Act, neither the Depositary nor the Unit
Holders shall be personally liable for any debts, liabilities, contracts or
obligations of the Partnership. To the extent that any distribution is deemed to
constitute a return of capital under the Act, the General Partner shall not seek
to recover any distribution unless the General Partner has applied all other
available Partnership assets to the payment of liabilities of the Partnership
and the liabilities of the Partnership, other than to Partners, have not been
fully paid, satisfied, assumed or discharged. The Unit Holders that are not
Substituted Limited Partners shall have no obligation to return any funds
distributed to them by the Partnership that are later determined to be a return
of the Capital Contributions. In no event shall the Depositary or any Unit
Holder be obligated to make any contribution to the Partnership for any purpose
whatsoever other than Capital Contributions of the Depositary representing the
proceeds of the offering of Units.
B. Each of the General Partner and any successor or additional General
Partner subsequently admitted to the Partnership agrees that it shall remain
liable for any obligation or recourse liability of the Partnership incurred
during the period in which it is a General Partner and to the extent the
Partnership has incurred liability.
-18-
<PAGE>
ARTICLE FOUR
MANAGEMENT
Section 4.1 Management and Control of the Partnership
------------------------------------------------------
A. Subject to the Consent of the Unit Holders as and when required by this
Agreement, the General Partner, within the authority granted to it under and in
accordance with the provisions of this Agreement, shall have the full and
exclusive right to manage and control the business and affairs of the
Partnership and to make all decisions regarding the business of the Partnership
and shall have all of the rights, powers and obligations of a general partner of
a limited partnership under the laws of the State.
B. The Depositary and the Unit Holders, as such, shall not participate in
the management of or have any control over the Partnership's business nor shall
the Depositary or the Unit Holders, as such, have the power to represent, act
for, sign for or bind the General Partner or the Partnership. The Depositary and
each of the Unit Holders hereby Consent to the exercise by the General Partner
of the powers conferred on it by this Agreement.
Section 4.2 Authority of the General Partner
---------------------------------------------
A. In addition to any other rights and powers which the General Partner
may possess under this Agreement and the Act, the General Partner shall, except
and subject to the extent otherwise provided or limited in this Agreement, have
all specific rights and powers required or appropriate to its management of the
Partnership's business which, by way of illustration but not by way of
limitation, shall include the following rights and powers to:
(i) expend the Capital Contributions of the Partners and
apply Partnership Revenues in furtherance of the business of the
Partnership;
(ii) acquire, explore, develop, manage and operate Hydrocarbon
properties and interests therein (including interests in corporations and
partnerships
-19-
<PAGE>
owning Hydrocarbon properties if in the General Partner's judgment such
purchase is a necessary or advisable step in acquiring interests in
Producing Properties held by any such corporation or partnership,
provided, no such purchase will be made for the purpose of investment in
the securities of any such corporation or partnership, the Partnership
will not conduct or participate in a hostile tender offer, and no such
purchase will be made unless there is assurance that sufficient control of
the corporation or partnership can be obtained in the initial acquisition
to liquidate it, and it is determined the purchase would not thereby
render the Partnership an investment company within the meaning of the
Investment Company Act of 1940, and provided further the Partnership's
interest in the underlying assets of any such corporation or partnership
is distributed as soon as practical thereafter to the Partnership in
redemption for the Partnership's interest in such corporation or
partnership) of all kinds and hold all such property, interests and units
in the name of the Partnership; provided, however, that in connection
therewith, the General Partner shall, contemporaneously with the
acquisition of a Producing Property, or as soon as practicable thereafter,
file or cause to be filed for recordation an appropriate conveyance or
agreement evidencing the Partnership's interest in such Producing Property
in the jurisdiction where such Producing Property is located pursuant to
such jurisdiction's Uniform Commercial Code (or comparable law) and/or in
the real property records of the clerk or recorder of the county in which
the Producing Property is situated; and, provided, further, that filings
of such conveyances or agreements shall also be made as the General
Partner believes necessary to establish the Partnership's priority of
interest; and, provided, further, Producing Properties may be held in the
name of a nominee for the Partnership if such action is deemed by the
General Partner to be necessary or beneficial to the Partnership and the
nominee holding title conducts no other business or operations;
(iii) execute such instruments and agreements, do such acts,
employ such persons and contract for such services as the General Partner
determines are necessary or appropriate to conduct the Partnership's
business, including the employment of the General Partner or any Affiliate
as an operator, and the entering into management and advisory contracts;
-20-
<PAGE>
(iv) execute, in the name of the Partnership, contracts for the
sale of Hydrocarbons and division orders and transfer orders as necessary
or incident to the sale of production on behalf of the Partnership;
(v) produce, treat, transport and market Hydrocarbons, execute
processing contracts and transportation contracts and enter into contracts
for the marketing or sale of Hydrocarbons and other marketing agreements
in the name of the Partnership, whether or not extending beyond the term
of the Partnership;
(vi) execute offers for United States and any state Leases on
behalf of the Partnership; execute and file requests for approval of
assignments of interests in United States and any state Leases, together
with any and all contracts for the option, sale or purchase of such Leases
or the sale or purchase of any products therefrom; execute any plans of
development under unit agreements, conveyances, subleases, mortgages,
deeds of trust, affidavits or reports concerning the drilling of wells and
production, designations of operator, Lease bonds, operator's bonds and
consents of surety; and in general do all things necessary or desirable on
behalf of the Partnership regarding any United States or state Leases or
offers therefor;
(vii) enter into any partnership agreement, sharing arrangement
or joint venture with any Person acceptable to the General Partner and
which is engaged in any business or transaction in which the Partnership
is authorized to engage, provided that the Partnership shall not be deemed
thereby to be an "investment company" for purposes of the Investment
Company Act of 1940, as amended;
(viii) enter into and execute drilling contracts, Farmout
agreements, operating agreements, unitization agreements, pooling
agreements, unit or pooling designations, recycling contracts, dry hole,
bottom hole and acreage contribution letters and agreements, participation
agreements, agreements and conveyances respecting rights-of-way,
agreements respecting surface and subsurface storage and any other
agreements customarily employed in the oil and gas industry in connection
with the acquisition, exploration, development, operation or abandonment
of any Leases, and any and all other
-21-
<PAGE>
instruments or documents considered by the General Partner to be necessary
or appropriate to conduct the business of the Partnership;
(ix) pay or elect not to pay delay rentals on Partnership
Properties as appropriate in the judgment of the General Partner, it being
understood that the General Partner will not be liable for failure to make
correct or timely payments of delay rentals if such failure were due to
any reason other than negligence or lack of good faith;
(x) abandon or otherwise dispose of any interest in Hydrocarbon
properties acquired for the Partnership upon such terms and for such
consideration as the General Partner may determine;
(xi) sell production payments payable out of all or any part of
any one or more of the Producing Properties acquired by the Partnership
and devote and expend the proceeds of any such sale for any of the
purposes of the Partnership for which the proceeds of borrowings may be
applied;
(xii) borrow monies from time to time, for the purposes and
subject to the limitations stated in Section 4.3C, in the form of recourse
or nonrecourse borrowings, or otherwise draw, make, execute and issue
promissory notes and other negotiable or nonnegotiable instruments and
evidences of indebtedness, and secure the payments of the sums so borrowed
and mortgage, pledge or assign in trust all or any part of Partnership
Property, including Producing Properties, production and proceeds of
production, or assign any monies owing or to be owing to the Partnership,
and engage in any other means of financing customary in the petroleum
industry; provided, however, that a creditor who makes a nonrecourse loan
to the Partnership shall not have or acquire, at any time as a result of
making the loan, any direct or indirect interest in the profits, capital
or property of the Partnership other than as a secured creditor;
(xiii) invest Capital Contributions and other Partnership funds
temporarily in the investments set forth in Section 10.3;
-22-
<PAGE>
(xiv) employ on behalf of the Partnership agents, employees,
accountants, lawyers, geologists, geophysicists, landpersons, clerical
help and such other assistance and consulting and other services as the
General Partner may deem necessary or convenient and to pay therefor such
remuneration as the General Partner may deem reasonable and appropriate;
(xv) purchase, lease, rent or otherwise acquire or obtain the use
of machinery, equipment, tools, materials, and all other kinds and types
of real or personal property that may in any way be deemed necessary,
convenient or advisable in connection with carrying on the business of the
Partnership, purchase and establish adequate inventories of equipment and
material required or expected to be required in connection with its
operations, dispose of tangible lease and well equipment for use or used
in connection with Partnership Property, and incur expenses for travel,
telephone, telegraph, insurance and for such other things, whether similar
or dissimilar, as may be deemed necessary or appropriate for carrying on
and performing the business of the Partnership;
(xvi) enter into such agreements and contracts with such parties
and give such receipts, releases and discharges with respect to any and
all of the foregoing and any matters incident thereto as the General
Partner may deem advisable or appropriate;
(xvii) guarantee the payment of money or the performance of any
contract or obligation by any person, firm or corporation on behalf of the
Partnership;
(xviii) sue and be sued, pursue and participate in arbitration
proceedings, complain and defend and settle and compromise claims or
causes of action in the name and on behalf of the Partnership;
-23-
<PAGE>
(xix) make such classifications and determinations as the General
Partner deems advisable, having due regard for any relevant generally
accepted accounting principles and oil and gas industry practices;
(xx) purchase insurance, or extend the General Partner's or its
Affiliates' insurance, at the Partnership's expense, to protect the
Partnership Property and the business of the Partnership against loss, and
to protect the General Partner against liability to third parties arising
out of Partnership activities, such insurance to be in such limits, to be
subject to such deductibles and to cover such risks as the General Partner
deems appropriate;
(xxi) pay all ad valorem taxes levied or assessed against the
Partnership Properties, all taxes upon or measured by the production of
Hydrocarbons therefrom and all other taxes (other than income taxes)
directly related to operations conducted by the Partnership;
(xxii) enter into agreements on behal of the Partnership with
Affiliates;
(xxiii) sell or otherwise dispose of for value all or substantially
all of the properties and other assets of the Partnership to the General
Partner or any of its Affiliates or Affiliated Programs or any other
Person and receive for the Partnership consideration consisting of cash,
securities, other property or any other form of consideration, or any
combination thereof, at such prices and in such forms of consideration as
it deems in the best interests of the Unit Holders; provided, however,
that no such sale shall be consummated without the prior Consent of the
Unit Holders pursuant to the provisions of Section 4.5D of this Agreement.
In the event of the dissolution of the Partnership followed by any such
sale of the Partnership's assets, the General Partner shall, subject to
the provisions of Section 9.2 of this Agreement, be appointed the
Liquidating Agent for the Partnership;
(xxiv) make, exercise or deliver any general assignment for the
benefit of the Partnership's creditors, but only upon the prior Consent of
the Unit Holders pursuant to the provisions of Section 4.5D;
-24-
<PAGE>
(xxv) take such other action and perform such other acts as may be
deemed appropriate to carry out the business of the Partnership;
(xxvi) perform all duties imposed by Sections 6221 through 6232 of
the Code on the General Partner as "tax matters partner" of the
Partnership, including (but not limited to) the following: (a) the power
to conduct all audits and other administrative proceedings with respect to
Partnership tax items; (b) the power to extend the statute of limitations
for all Partners with respect to Partnership tax items; (c) the power to
file a petition with an appropriate federal court for review of a final
Partnership administrative adjustment; and (d) the power to enter into a
settlement with the Internal Revenue Service on behalf of, and binding
upon, each of the Unit Holders having less than a 1% interest in Revenues
unless such Unit Holder notifies the Internal Revenue Service and the
General Partner that the General Partner may not act on its behalf; and
(xxvii) cause the Partnership to redeem or repurchase the Units held
by a Unit Holder at a purchase price determined by the General Partner if
at any time the Partnership or General Partner receives an opinion of
counsel that there exists substantial risks of cancellation or forfeiture
of any property in which the Partnership has an interest because of the
citizenship or other status of that Unit Holder.
B. No person, firm or corporation dealing with the Partnership shall be
required to inquire into the authority of the General Partner to take or refrain
from taking any action or make or refrain from making any decision, but any
person so inquiring shall be entitled to rely upon a certificate of the General
Partner as to its due authorization.
Section 4.3 Sales, Purchases and Operation of Producing Properties;
Additional Financing
-------------------------------------------------------------------------
A. Producing Properties whose purchase price exceeds 10% of the Unit
Holders' Subscriptions may be acquired by the Partnership only if an Acquisition
Reserve Report or an Engineering Review Letter has been received and evaluated
by the General Partner with respect thereto.
-25-
<PAGE>
B. Neither the General Partner, Geodyne Resources, Inc. nor any Person
controlled by Geodyne Resources, Inc. shall sell, transfer or convey any or all
of its interest in Producing Properties to the Partnership or purchase or
acquire any oil and gas properties or interest from the Partnership, directly or
indirectly, except pursuant to transactions that are fair and reasonable to the
Unit Holders under the circumstances at the time any such transaction is
consummated. Except as otherwise provided in Section 4.3E below, such
transactions shall be further subject to the following restrictions:
(i) Prior to the date on which the Partnership has acquired its
final Producing Property, neither the General Partner, Geodyne Resources,
Inc. nor any Person controlled by Geodyne Resources, Inc. (other than an
Affiliated Program) shall acquire any Producing Property after the
Activation of the Partnership unless the General Partner shall have
determined that the acquisition by the Partnership of such Producing
Property, or an interest therein, would not be in the best interests of
the Partnership;
(ii) Any purchase or sale of a Producing Property from or to the
General Partner or any Affiliate shall be made at the Property Acquisition
Cost for such Producing Property as adjusted for intervening operations,
unless the General Partner or such Affiliate has reasonable grounds to
believe that cost is materially more or less than the fair market value of
such property, in which case such sale or purchase shall be made at a
price equal to the fair market value thereof as determined by an
Independent Petroleum Engineer;
(iii) If the General Partner sells, transfers or conveys any oil,
gas or other mineral interest or property to the Partnership, it must, at
the same time, sell the Partnership an equal proportionate interest in all
its other property in the same Prospect. A sale, transfer or conveyance to
the Partnership of less than the entire ownership interest of the General
Partner or any Affiliate is only permitted if: (a) the interests retained
or obtained by the General Partner or Affiliate and acquired by the
Partnership are either (x) proportionate, uniform and undivided Working
Interests if the Producing Property acquired by the Partnership is a
Working Interest or (y) proportionate, uniform and undivided Royalty
Interests if
-26-
<PAGE>
the Producing Property acquired by the Partnership is a Royalty, (b) the
respective obligations of the General Partner or Affiliate and the
Partnership are substantially the same, and (c) the interest of the
General Partner or its Affiliate in revenues does not exceed the amount
proportionate to its interest. The General Partner and its Affiliate may
not retain or obtain any overrides or other burdens on the interest
obtained by the Partnership, and may not enter into any Farmouts with
respect to its retained interest, except to nonaffiliated third parties or
to an Affiliated Program;
(iv) In the event the General Partner or any Affiliate proposes to
acquire an interest in a Prospect in which the Partnership has an interest
or in a Prospect abandoned by the Partnership within one year preceding
such proposed acquisition, the General Partner or Affiliate shall offer
the interest to the Partnership; and if cash or financing is not available
to the Partnership to purchase such interest, neither the General Partner
nor Affiliate shall acquire an interest in such Prospect. The term
"abandon" for the purpose of this subparagraph shall mean the termination,
either voluntary or by operation of the Lease or otherwise, of all of the
Partnership's interest in the Prospect. This subsection shall not apply
after the lapse of five years of the Activation of the Partnership or to
any Affiliated Program where the interest of the General Partner is less
than or equal to its interest in the Partnership, there is no duplication
of fees to the General Partner, and the General Partner does not obtain a
greater benefit from purchase of the interest by the Affiliated Program
than it would if the interest were purchased by the Partnership;
(v) During the existence of the Partnership and before it has ceased
operations, neither the General Partner nor any Affiliate (excluding any
Affiliated Program where the interest of the General Partner is less than
or equal to its interest in the Partnership) shall acquire, retain or
drill for its own account any oil and gas interest in any Prospect upon
which the Partnership possesses an interest, except for transactions which
comply with Section 4.3B(iii) or 4.8. In the event the Partnership
abandons its interest in a Prospect, this restriction shall continue for
one year following abandonment. The geological limits of a Prospect owned
by the Partnership shall be enlarged or contracted on the basis of
subsequently acquired geological
-27-
<PAGE>
data to define the productive limits of a reservoir and must include all
of the acreage determined by the subsequent data to be encompassed by such
reservoir. If, during the period of five years from the Activation of the
Partnership, the geological limits of a Prospect, as so enlarged,
encompass any interest held by the General Partner or an Affiliate of the
General Partner (excluding an Affiliated Program where the interest of the
General Partner is identical to or less than its interest in the
Partnership), such interest shall be sold to the Partnership in accordance
with the provisions of Section 4.3B(iv) and any net income previously
received by the General Partner or Affiliate shall be paid over to the
Partnership. If the General Partner acquires additional acreage or
interests in a Prospect of the Partnership, it must sell such to the
Partnership and is prohibited from retaining any such interest, except as
may be permitted by Section 4.3B. Notwithstanding the foregoing, the
Partnership will not be required to expend additional funds to acquire any
such interest unless funds are available from the Capital Contributions of
the Partners;
(vi) Producing Properties may be sold, Farmed-out or otherwise
transferred from or to an Affiliated Program only pursuant to transactions
that comply with Sections 4.3B(iii), 4.3B(iv) or 4.8, provided that the
compensation arrangement or any other interest or right of the General
Partner or any Affiliate is the same in the Partnership and Affiliated
Program, or, if different, the compensation of the General Partner does
not exceed the lower of the compensation it would have received in the
Partnership or the Affiliated Program;
(vii) Any sale of inventory or other materials by the
Partnership to the General Partner or Affiliate shall be made at the
applicable rates set forth in the standard form of the accounting
procedure then recommended by the Council of Petroleum Accountants
Societies of North America;
(viii) Any operating agreements pursuant to which the General
Partner or any Affiliate acts as operator of Producing Properties shall be
of a nature customary in the industry and payments to the General Partner
or any Affiliate for acting as operator shall not exceed the compensation
which would be paid by unaffiliated third parties in the same geographic
area for similar goods and
-28-
<PAGE>
services. Reimbursement of the General Partner's overhead pursuant to such
operating agreement will not be duplicative of any reimbursement of
General and Administrative Costs made pursuant to Section 4.12; and
(ix) To the extent the General Partner or any Affiliate acquires an
interest in a Producing Property in which the Partnership acquires an
interest, the General Partner or Affiliate shall pay its allocable portion
of the cost of the preparation of the Acquisition Reserve Report or
Engineering Review Letter, as the case may be, respecting such Producing
Property.
C. The General Partner may not expend any amount of Partnership funds over
the term of the Partnership for the payment of Partnership costs (other than
recompletion costs) incurred in connection with Development Drilling and
Identified Development Drilling in excess of 10% of the sum of: (i) the amount
of the Unit Holders' Subscriptions, plus (ii) the Partnership's permissible
borrowings. If the General Partner determines that funds in addition to the
Capital Contributions are required for the payment of Partnership costs (other
than Property Acquisition Costs), the General Partner may apply or reserve
Revenues or Investment Income for the payment of such Partnership costs and/or
the General Partner may cause the Partnership to borrow funds for the payment of
Partnership costs incurred in connection with Development Drilling, Identified
Development Drilling and Improved Recovery operations; provided, however, that
the aggregate outstanding principal amount of such borrowings shall not at any
one time exceed an amount equal to 20% of the Unit Holders' Subscriptions. No
creditor who makes a nonrecourse loan to the Partnership may have or acquire, at
any time as a result of making the loan, any direct or indirect interest in the
profits, capital or property of the Partnership other than as a secured
creditor.
D. The General Partner shall have the authority to secure the payment of
borrowings incurred by it for its own account or for purposes of paying its
allocable share of Partnership costs by assigning to lenders all or part of its
rights to receive distributions of Partnership Revenues, and by granting such
lenders a security interest or mortgage in an undivided interest in any
Partnership Property not to exceed its percentage interest in Revenues;
provided, however, that the General Partner shall retain unencumbered at least a
1% interest in each item of Partnership Property, and each item of Partnership
Revenues, gain, loss, deduction and credit. Notwithstanding
-29-
<PAGE>
anything to the contrary in this Agreement, in the event of any sale or
foreclosure of the General Partner's interest in full or partial satisfaction of
such borrowings, appropriate adjustments shall be made in the Capital Accounts
of the General Partner and Unit Holders and in the method by which Revenues and
costs are allocated to the General Partner and Unit Holders to assure that the
Partnership will not bear any of the costs attributable to such sold or
foreclosed interest and that the General Partner will not share or participate
in any of the capital, Revenues, costs or distributions attributable to such
sold or foreclosed interest except to the extent of the unencumbered interest
retained by the General Partner. The General Partner shall indemnify the
Partnership and the Unit Holders against any expenses resulting from a sale or
foreclosure of the General Partner's interest.
E. The provisions of Section 4.3B notwithstanding, if the Partnership
intends to acquire Working Interests, acquisitions of Net Profits Interests by
one or more I/P Partnerships may be made in connection with the Partnership's
acquisitions of Working Interests. Net Profits Interests acquired by an I/P
Partnership may either be carved-out of the Working Interests or reserved from
the Working Interests by the sellers of such Working Interests on such basis as
the General Partner determines. The Net Profit Interests acquired by an I/P
Partnership may not exceed 75% of the net profits attributable to the aggregate
Working Interests in all of the Producing Properties acquired by the
Partnerships together. The primary factor in determining the sharing of net
profits between the Working Interests acquired by the Partnership and the Net
Profits Interest acquired by the I/P Partnership will be the amount of money
contributed to each acquisition by each purchaser. In fixing such sharing
percentages, the General Partner need not give special consideration to risks
associated with the ownership of the Working Interests or to costs of equipment
which will be owned by the Partnership as a Working Interest owner if such costs
will be amortized against the proceeds of oil and gas production in arriving at
the amount of net profits from which the I/P Partnership's (as Net Profits
Interest holder) share of production is determined. If the amount of money
contributed by each purchaser ever is not the primary factor in determining such
sharing of net profits, then the sharing will be based upon a valuation of the
respective interests made by an Independent Petroleum Engineer. If the I/P
Partnership acquires a Royalty Interest in a Producing Property in which a
Working Interest is acquired by the Partnership, each participant's portion of
the purchase price will be
-30-
<PAGE>
determined on the basis of an appraisal by an Independent Petroleum Engineer of
the fair market values of the respective interests in the property being
acquired (taking into account the tax consequences applicable to the several
participants). If the General Partner or an Affiliate other than an Affiliated
Program acquires an interest in any such property acquisition, such appraisal
will be performed by an Independent Petroleum Engineer and if the aggregate
revenue interest of the General Partner and its Affiliates in any Affiliated
Program participating in such a property acquisition is greater than their
aggregate revenue interest in the I/P Partnership, then with respect to the
property interests so acquired the greater aggregate revenue interest shall be
reduced so as not to exceed the lesser revenue interest.
F. The General Partner may cause the Partnership to acquire assets which
may otherwise not be considered suitable for investment or operation by the
Partnership if they are acquired as part of a package consisting primarily of
Producing Properties; provided, however, that in the event any such assets are
acquired by the Partnership, the General Partner shall use its best efforts to
sell or otherwise dispose of such assets for value as soon as practical and any
proceeds realized from such sale or disposition shall be allocated among the
General Partner and the Unit Holders in the same proportions as the costs
thereof were charged to their respective accounts.
Section 4.4 Prohibited Transactions
------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, the
following transactions are expressly prohibited:
(i) the Partnership shall not make any loans to or purchase a
production payment from the General Partner or any Affiliate;
(ii) neither the General Partner nor any Affiliate shall make
any loans to the Partnership except at a rate of interest not in excess of
the interest cost incurred by the General Partner or Affiliates or the
amount of interest that would be charged to the Partnership (without
regard to the General Partner's or Affiliate's financial abilities or
guarantees) by unrelated banks on comparable loans for the same purpose,
whichever is lower, and the General Partner and Affiliates shall not
receive
-31-
<PAGE>
points or financing charges or fees regardless of the amount;
(iii) except as expressly contemplated hereby, no agent,
attorney, accountant or other independent consultant or contractor who is
also employed on a full-time basis by the General Partner or any Affiliate
shall be compensated by the Partnership for his or her services;
(iv) other than those received for the account of the
Partnership, no rebates may be received by the General Partner or any
Affiliate in connection with Partnership operations or expenditures, nor
may the General Partner or any Affiliate participate in any reciprocal
business arrangement that would circumvent any of the provisions of this
Agreement;
(v) on a monthly basis, costs paid and revenues received by the
General Partner or an Affiliate for the account of the Partnership shall
be determined and the net amount resulting from such monthly settlement
shall be deposited into a Partnership Account and no funds which, after
such monthly settlement, are determined to be held for the account of the
Partnership shall be kept in any account other than a Partnership Account,
and the General Partner shall not employ, or permit any other Person to
employ, such funds in any manner except for the benefit of the
Partnership; it being understood that the General Partner may invest
Partnership funds temporarily in the investments set forth in Section 10.3
of this Agreement pending their use by the Partnership. After such monthly
settlement, Partnership funds may not be commingled with separate funds of
the General Partner or any other Person; and
(vi) the Partnership shall not make any advance payment to the
General Partner or its Affiliates, except where necessary to secure tax
benefits of prepaid drilling costs.
-32-
<PAGE>
Section 4.5 Restrictions on the Authority of the General Partner
-----------------------------------------------------------------
A. Anything in this Agreement to the contrary notwithstanding, it is
agreed that:
(i) the General Partner and its Affiliates shall not take any action
with respect to the assets or property of the Partnership which does not
benefit primarily the Partnership, including:
(a) the utilization of Partnership funds as compensating
balances for the benefit of the General Partner or an Affiliate of
the General Partner; and
(b) the commitment of future production from Partnership
Properties;
(ii) 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;
(iii) neither the General Partner nor any Affiliate may profit
itself by Development Drilling, Identified Development Drilling or
Improved Recovery operations in contravention of its fiduciary obligation
to the Partnership; and
(iv) neither the General Partner nor any Affiliate shall render
to the Partnership any oil field, equipage, drilling or other services nor
sell or lease to the Partnership any equipment or supplies unless:
(a) such Person is engaged, independently of the Partnership
and as an ordinary and ongoing business, in the business of
rendering such services or selling or leasing such equipment and
supplies to a substantial extent to other Persons in the oil and gas
industry in addition to drilling and income programs in which the
General Partner and its Affiliates have an interest;
-33-
<PAGE>
(b) the compensation, price or rental therefor is competitive
with the compensation, price or rental of other Persons in the area
engaged in the business of rendering comparable services or selling
or leasing comparable equipment and supplies which could reasonably
be made available to the Partnership; and
(c) the drilling services are billed on either a per foot, per
day or per hour rate, or some combination thereof; provided that, if
such Person is not engaged in a business within the meaning of
subdivision (a), then such compensation, price or rental shall be
the cost of such services, equipment or supplies to such Person or
the competitive rate which could be obtained in the area, whichever
is less.
B. The General Partner shall not have the authority to:
(i) do any act in contravention of this Agreement or which
would make it impossible to carry on the ordinary business of the
Partnership;
(ii) confess a judgment against the Partnership;
(iii) possess Partnership Property or assign, pledge or
hypothecate rights in specific Partnership Property for other than a
Partnership purpose except as otherwise permitted in Section 4.3D;
(iv) admit a Person as a General Partner or a Substituted
Limited Partner or permit any transfer of Units except as otherwise
provided herein; or
(v) knowingly perform any act which would result in loss of
the Depositary's or any Substituted Limited Partner's status as a
limited partner under the Act or the laws of the State or the loss
of limited liability under the laws of any other jurisdiction in
which the Partnership is doing business, or would subject the
Depositary or any Unit Holder to liability as a general partner in
any jurisdiction including use of the Depositary's or a Unit
Holder's name in conducting the business of the Partnership.
-34-
<PAGE>
C. The General Partner shall not lease, sell, abandon or otherwise dispose
of any assets of the Partnership to the General Partner or to any of its
Affiliates, except as otherwise permitted by this Agreement; provided, however,
that if the Partnership should own any inventory or other materials, such
inventory or materials may be transferred to the General Partner or any of its
Affiliates at the applicable rates set forth in the standard form of accounting
procedure then recommended by the Council of Petroleum Accountants Societies of
North America.
D. Notwithstanding any other provision of this Agreement to the contrary,
without the prior Consent of Unit Holders owning 50% or more of the outstanding
Units granted pursuant to the provisions of Article Twelve of this Agreement,
the General Partner shall not:
(i) lease, sell or dispose of all or substantially all of the
Partnership's assets except pursuant to Article Nine of this Agreement;
(ii) make, exercise or deliver any general assignment for the
benefit of the Partnership's creditors; or
(iii) except as set forth in Sections 8.1F or 11.lA, amend any
provision of this Agreement.
Section 4.6 Construction of Gas Gathering Lines
------------------------------------------------
The General Partner may cause the Partnership to construct gas gathering
lines if, in the opinion of the General Partner, it would be economically
feasible and otherwise consistent with prudent operating practice to do so. The
costs of any such gathering lines will be deemed to be Operating Costs and shall
be charged to the accounts of the General Partner and Unit Holders as such. The
General Partner may, in its discretion, construct, or cause an Affiliate of the
General Partner or other person to construct, gathering lines from Partnership
Wells to gas transmission systems. Whenever the General Partner constructs, or
causes an Affiliate of the General Partner to construct, a gathering line from a
Partnership Well to a gas transmission system, the Partnership shall pay the
General Partner or such Affiliate an amount that is not greater than the
compensation that an unrelated party could have reasonably
-35-
<PAGE>
charged in an arm's-length transaction for similar services in the area as a
transmission fee for the transmission of all gas through the gathering system so
constructed, and no other transmission fee shall be paid to the General Partner
or to any Affiliate.
Section 4.7 Contracts with the General Partner and Affiliates
-------------------------------------------------------------
All services (other than services provided pursuant to this Agreement)
provided to the Partnership by the General Partner or any Affiliate for which it
is compensated shall be embodied in a written contract precisely setting forth
the services to be rendered and the compensation to be paid. Each contract
relating to a transaction between the Partnership and the General Partner or any
Affiliate shall contain a provision which shall permit termination of the
contract by the affirmative vote of Unit Holders owning more than 50% of the
outstanding Units without penalty on 30 days' prior written notice.
Section 4.8 Farmouts
---------------------
The General Partner may dispose of Producing Properties by sale or Farmout
when it, exercising the standard of a prudent operator, determines that (a) the
Partnership lacks sufficient funds to conduct Development Drilling, Identified
Development Drilling or Improved Recovery operations on the properties and
cannot obtain suitable alternative financing for such Development Drilling,
Identified Development Drilling or Improved Recovery operations; (b) the
properties have been downgraded by events occurring after assignment to the
Partnership to the point that additional Development Drilling, Identified
Development Drilling, Improved Recovery operations or continued production would
no longer be desirable to the Partnership; (c) Development Drilling, Identified
Development Drilling or Improved Recovery operations on the properties would
result in an excessive concentration of Partnership funds on a Producing
Property creating, in the opinion of the General Partner, undue risk to the
Partnership; or (d) the best interests of the Partnership would be served by the
sale or Farmout. The Partnership shall not conduct any drilling of wells other
than Development Drilling and Identified Development Drilling; provided,
however, that the drilling of
-36-
<PAGE>
wells other than Development Drilling and Identified Development Drilling may be
performed on behalf of the Partnership pursuant to Farmouts or when such
drilling may be deemed necessary or appropriate to preserve or protect the
Partnership's interest in or the production from a Producing Property. Any sale,
Farmout or similar agreement between the Partnership and the General Partner,
Affiliate or Affiliated Program will be permitted under the restrictions set
forth in this Article Four and will be subject to the following conditions:
(i) the General Partner, exercising the standard of a prudent
operator, shall determine that the sale, Farmout or similar agreement is
in the best interests of the Partnership; and
(ii) the terms of the sale, Farmout or similar agreement are
consistent with and in any case no less favorable than those utilized in
the same geographic area for similar arrangements.
Except as required by Section 4.3B(iii) or (iv), a Partnership shall acquire
only those Leases that are reasonably required for the operations of the
Partnership, and no Leases shall be acquired for the purpose of subsequent sale
or Farmout, unless such Leases are a part of an acquisition which is sold as a
package only, or unless the acquisition of undeveloped Leases by the Partnership
is made after a well has been drilled nearby by third parties to a depth
sufficient to indicate that such an acquisition is in the best interests of the
Partnership.
Section 4.9 Other Operations
-----------------------------
The General Partner shall devote such time to the Partnership as is
reasonably required to carry on the Partnership business, and the General
Partner and its Affiliates shall at all times be free, subject to any
restrictions contained herein, to engage in all aspects of the Hydrocarbons and
natural resources business for their own accounts and for the accounts of
others. Without limiting the generality of the foregoing, the General Partner
and its Affiliates shall have the right to organize and operate other
partnerships, joint ventures or other oil and gas investment programs whether
similar or dissimilar to the Partnership.
-37-
<PAGE>
Section 4.10 Prosecution, Defense and Settlement of Claims;
Indemnification
------------------------------------------------------------
A. The General Partner shall arrange to prosecute, defend, settle or
compromise actions at law or in equity at the expense of the Partnership as may
be necessary to enforce or protect the interests of the Partnership. The General
Partner shall satisfy any judgment, decree, decision or settlement, first, out
of any insurance proceeds available therefor, next, out of the Partnership
assets and Revenues, and, finally, out of the assets of the General Partner.
B. The General Partner shall have no liability to the Partnership or to
any Partner for any loss suffered by the Partnership which arises out of any
action or inaction of the General Partner if the General Partner, in good faith,
determined that such course of conduct was in the best interests of the
Partnership and such course of conduct did not constitute negligence or
misconduct of the General Partner. The General Partner shall be indemnified by
the Partnership against any losses, judgments, liabilities, expenses and amounts
paid in settlement of any claims sustained by it in connection with the
Partnership, provided that the same were not the result of negligence or
misconduct on the part of the General Partner. Any indemnification under this
Section 4.10 shall be satisfied solely out of the assets and Revenues of the
Partnership. All amounts payable under this Section 4.10 shall be a liability of
the Partnership only and the Unit Holders and the Depositary will not have any
liability therefor.
C. Notwithstanding the above, the General Partner shall not be indemnified
for liabilities arising under federal and state securities laws unless (1) there
has been a successful adjudication on the merits of each count involving
securities law violations and the court approves such indemnification and the
litigation costs thereof; or (2) such claims have been dismissed with prejudice
on the merits by a court of competent jurisdiction and the court approves such
indemnification and the litigation costs thereof. In any such case, the General
Partner shall apprise the court of the current published positions, if any, of
the Securities and Exchange Commission, the Massachusetts State Securities
Administrator and other applicable state securities administrators regarding
indemnification of program sponsors prior to obtaining court approval of any
such indemnification.
-38-
<PAGE>
D. The Partnership shall not incur the costs of that portion of insurance
which insures the General Partner for any liability as to which the General
Partner is prohibited from being indemnified under this Section 4.10.
Section 4.11 Duties and Obligations of the General Partner
-----------------------------------------------------------
The General Partner shall:
(i) use its best efforts to take all actions that may be
necessary or appropriate for the continuation of the Partnership's valid
existence as a limited partnership or partnership in commendam under the
laws of the State and the laws of any other jurisdiction in which the
Partnership is doing business;
(ii) devote to the Partnership the time that it shall deem to be
necessary to conduct the Partnership's business and affairs in the best
interests of the Partnership;
(iii) be under a fiduciary duty and obligation to conduct the
affairs of the Partnership in the best interests of the Partnership,
including the safekeeping and use of all Partnership funds and assets
(whether or not in the immediate possession or control of the General
Partner) and the use thereof for the benefit of the Partnership;
(iv) at all times act with integrity and good faith and exercise
due diligence in all activities relating to the conduct of the business of
the Partnership and in resolving conflicts of interest;
(v) prepare or cause to be prepared and shall file on or before
the due date (or any extension thereof) any federal, state or local tax
returns required to be filed by the Partnership;
(vi) cause the Partnership to pay any taxes payable by the
Partnership;
(vii) use its best efforts to cause the Partnership to be formed,
reformed, qualified to do business, or registered under any applicable
assumed or fictitious name statute or similar law in any state in
-39-
<PAGE>
which the Partnership then owns property or transacts business, if such
formation, reformation, qualification or registration is necessary or
advisable in its counsel's opinion to protect the limited liability of the
Depositary and the Unit Holders or to permit the Partnership lawfully to
own property or transact business;
(viii) cause to be filed the Certificate of Limited Partnership as
required by the Act and any necessary amendments to the Certificate of
Limited Partnership and other similar documents that are required by law
to be filed and recorded for any reason, in the office or offices that are
required under the laws of the State or any other state in which the
Partnership is then formed or qualified;
(ix) do all other acts and things (including making publications
or periodic filings of this Agreement or amendments hereto or other
similar documents without the necessity of mailing or delivering copies of
them to each Unit Holder) that may now or hereafter be deemed by the
General Partner to be necessary,
(a) for the perfection and continued maintenance of the
Partnership as a limited partnership under the laws of the State,
(b) to protect the limited liability of the Depositary and the
Unit Holders under the laws of the State and other jurisdictions in
which the Partnership is doing business, and
(c) to cause this Agreement, certificates or other documents
to reflect accurately the agreement of the Partners and the Unit
Holders, the identity of the Depositary as the sole initial Limited
Partner and the amount of the Capital Contribution made by the
Depositary on behalf of the Unit Holders;
(x) from time to time submit to any appropriate state securities
administrator all documents, papers, statistics and reports required to be
filed with or submitted to such state securities administrator; and
-40-
<PAGE>
(xi) inform each Unit Holder of all administrative and judicial
proceedings for an adjustment at the Partnership level for partnership tax
items and forward to each Unit Holder within 30 days of receipt all
notices received from the Internal Revenue Service regarding the
commencement of a partnership level audit or a final partnership
administrative adjustment, and perform all other duties imposed by
Sections 6221 through 6232 of the Code on the General Partner as "tax
matters partner" of the Partnership, including those set forth in Section
4.2A (xxvi) of this Agreement.
Section 4.12 Compensation of the General Partner
-------------------------------------------------
A. Except as provided in Articles Four and Five, the General Partner shall
not, either in its capacity as General Partner or in its individual capacity,
receive any salary, fees or profits from the Partnership.
B. In consideration of its payment of Organization and Offering Costs, the
General Partner shall be paid by the Partnership an amount equal to the
aggregate of: (i) 3.5% of individual Unit Holders' Subscriptions for less than
10,000 Units, (ii) 2.5% of individual Unit Holders' Subscriptions for 10,000
Units or more but less than 20,000 Units, (iii) 1.5% of individual Unit Holders'
Subscriptions for 20,000 Units or more but less than 30,000 Units, and (iv) 1.0%
of individual Unit Holders' Subscriptions for 30,000 Units or more, and in
consideration of its services rendered in connection with the Partnership's
acquisition of Producing Properties and the conduct of its business operations,
the General Partner shall be paid the Acquisitions and Operations Fee in an
amount equal to 3.5% of the Unit Holders' Subscriptions.
C. The General Partner shall be reimbursed by the Partnership for General
and Administrative Costs and Direct Administrative Costs incurred by it on
behalf of the Partnership, and such costs shall be allocated among the Partners
as set forth in Section 5.1 of this Agreement. The aggregate amount of General
and Administrative Costs allocable to the accounts of the Unit Holders for which
the General Partner will be reimbursed will not, (i) in the first 12 months
following Activation of the Partnership, exceed an amount equal to 2.5% of the
Unit Holders' Subscriptions, and (ii) in any succeeding 12-month period, exceed
an amount equal to 1% of the
-41-
<PAGE>
Unit Holders' Subscriptions; provided, however, that notwithstanding the
foregoing, the amount of such General and Administrative Costs allocated to the
Unit Holders during each of the third and subsequent 12-month periods of
Partnership operations shall not exceed an amount equal to 15% of Revenues
allocable to their accounts. All General and Administrative Costs allocable to
the accounts of the Unit Holders will be paid solely out of Revenues allocable
to the Unit Holders. To the extent that the General Partner determines that
Revenues are insufficient to permit reimbursement in full of such General and
Administrative Costs in the period in which they are incurred or accrued (or the
General Partner elects to receive less than the full amount payable in order
that funds may be available for distribution to Unit Holders or any other
reason) or the amounts actually reimbursed by the Partnership do not exceed the
foregoing limitations, such unpaid or unused General or Administrative Costs may
be carried forward or backwards and increase the maximum amount of reimbursable
General and Administrative Costs for any other period.
Section 4.13 Dealer Manager
----------------------------
The Dealer Manager shall have no duties, responsibilities or obligations
to the Partnership, the General Partner, the Depositary or any Unit Holder as a
consequence of its right to receive Commissions, except to the extent provided
under the Securities Act of 1933, as amended. The Dealer Manager has not
assumed, and will not assume, any responsibility with respect to the Partnership
nor will it be permitted by the General Partner to assume any duties,
responsibilities or obligations regarding the management, operations or any of
the business affairs of the Partnership subsequent to the date on which the
Partnership is Activated.
ARTICLE FIVE
ALLOCATIONS AND DISTRIBUTIONS
Section 5.1 Allocation of Costs and Expenses
---------------------------------------------
All fees and payments to the General Partner required by Section 4.12B,
Commissions and costs incurred in connection with Identified Development
Drilling (including any interest, commitment fees and other finance charges with
respect to
-42-
<PAGE>
borrowing incurred in connection therewith) and Property Acquisition Costs will
be charged 99% to the Unit Holders and 1% to the General Partner. All
Organization and Offering Costs will be charged entirely to the General Partner
(in consideration of which the General Partner will be paid the amount provided
in the first sentence of Section 4.12B). Except as otherwise provided in this
Article Five, Operating Costs, costs and expenses of Development Drilling,
General and Administrative Costs, Direct Administrative Costs and all other
Partnership costs and expenses will be charged to the accounts of the General
Partner and the Unit Holders in the same proportions that Revenues are being
allocated to them at the time such costs and expenses are incurred.
Notwithstanding anything to the contrary contained herein, if and to the extent
the Partnership sells any Producing Property and applies any portion of the
proceeds thereof to the purchase of any additional Producing Properties, the
Property Acquisition Costs of the additional Producing Properties shall, to the
extent of the amount of such proceeds, be allocated to and borne by the General
Partner and the Unit Holders in the same proportions that such sale proceeds
were allocated and credited to them.
Section 5.2 Allocation of Revenues
-----------------------------------
A. Investment Income will be allocated 99% to the Unit Holders and 1% to
the General Partner. Except as otherwise provided in this Article Five and in
Section 4.3F, until Payout, all other Partnership Revenues will be allocated 95%
to the Unit Holders and 5% to the General Partner. After Payout, Revenues will
be allocated 85% to the Unit Holders and 15% to the General Partner; provided,
however, that if, at Payout, the total amount of cash distributed by the
Partnership to the Unit Holders from the commencement of the Property Investment
Period has averaged on a twelve-month basis an amount that is less than 12% of
the Unit Holders' Subscriptions, the percentage of Revenues allocated to the
General Partner will increase to only 10% and the Unit Holders will be allocated
90% thereof until such time, if ever, that the distributions to the Unit Holders
from the commencement of the Property Investment Period reaches a twelve-month
average equal to at least 12% of the Unit Holders' Subscriptions, at which time
Revenues will thereafter be allocated 15% to the General Partner and 85% to the
Unit Holders. As used herein the "Property Investment Period" shall mean that
period which begins with the first day of the calendar quarter following either
(i) the calendar quarter during which 90% of the Partnership's capital available
for purchasing
-43-
<PAGE>
Producing Properties has been so expended, or (ii) the calendar quarter in which
50% of the Partnership's capital available for purchasing Producing Properties
has been so expended, as the General Partner shall elect. Where proceeds from
the Sale of all or any part of the Partnership's Producing Properties are
distributed to the Partners and a portion of the distributable amount
attributable to such Sale proceeds is sufficient in amount to cause Payout to
occur in accordance with the allocation percentages in effect until Payout,
Payout shall be deemed to occur such that Revenues attributable to the
distributed portion of such Sale proceeds in excess of the portion of Sales
proceeds sufficient in amount to cause Payout to occur shall be allocated in
accordance with the allocation percentages in effect after Payout.
B. Notwithstanding the other provisions of this Section 5.2 and except as
provided in Section 4.3F, if the allocation of Revenues realized from the sale
of any Hydrocarbon property would result in the recognition of a "simulated
loss", as such term is defined in Treasury Regulation Sec. 1.704-1(b), by the
Partnership, then such Revenues shall, to the extent of the amount of the
"simulated adjusted tax basis", as such term is defined in Treasury Regulation
Sec. 1.704-1(b), of such Hydrocarbon property, be allocated to the General
Partner and the Unit Holders in the same proportions that the aggregate adjusted
tax basis of such property was allocated to them (or their predecessors in
interest) pursuant to Section 5.5(u).
Section 5.3 Allocations Among Unit Holders
-------------------------------------------
A. Allocations of costs, expenses and Revenues to the Unit Holders other
than Substituted Limited Partners herein shall be actually allocated to the
Depositary for the account of the Unit Holders. All profits and losses and each
item of Revenues, gain, loss, cost, deduction or credit allocated to the Unit
Holders, as a class, shall be allocated to each Unit Holder in the ratio that
(i) the number of Units held of record by each Unit Holder as of the first day
of each month during the period ("Monthly Record Date") bears to (ii) the
aggregate number of Units outstanding on each such Monthly Record Date.
Distributions pursuant to Section 5.7 hereof will be made to Unit Holders of
record on the first day of the calendar quarter to which the distribution
relates in the ratio which (x) the number of Units owned of record by each Unit
Holder on such date bears to (y) the aggregate number of Units outstanding on
such date. Such payment shall constitute full payment and
-44-
<PAGE>
satisfaction of the Partnership's liability in respect of such payment
regardless of any claim of any Person who may have an interest in such payment
by reason of an assignment or otherwise.
B. Except as provided in subsections (i) through (iv) of this Section
5.3B, in the case of a change in a Unit Holder's interest in the Partnership
during a taxable year of the Partnership, all Partnership Revenues, gain, loss,
deduction or credit allocable to the Unit Holders shall be allocated pursuant to
Section 5.3A above to the Persons who were Unit Holders during the period to
which such item is attributable in accordance with the Unit Holders' interests
in the Partnership during such period regardless of when such item is paid or
received by the Partnership.
(i) With respect to certain "allocable cash basis items" (as
such term is defined in the Code) of Partnership Revenues, gain, loss,
deduction or credit, if, during any taxable year of the Partnership there
is change in any Unit Holder's interest in the Partnership, then, except
to the extent provided in regulations prescribed under Section 706 of the
Code, each Unit Holder's allocable share of any "allocable cash basis
item" shall be determined by (i) assigning the appropriate portion of each
such item to each day in the period to which it is attributable, and (ii)
allocating the portion assigned to any such day among the Unit Holders in
proportion to their interests in the Partnership at the close of such day.
(ii) If, by adhering to the method of allocation described in
the immediately preceding subsection of this Section 5.3B, a portion of
any "allocable cash basis item" is attributable to any period before the
beginning of the Partnership taxable year in which such item is received
or paid, such portion shall be (a) assigned to the first day of the
taxable year in which it is received or paid, and (b) allocated among the
persons who were Unit Holders in the Partnership during the period to
which such portion is attributable in accordance with their interests in
the Partnership during such period.
(iii) If any portion of any "allocable cash basis item" paid or
received by the Partnership in a taxable year is attributable to a period
after the close of that taxable year, such portion shall be (a) assigned
to the last day of the taxable year in which it is paid or received, and
(b)
-45-
<PAGE>
allocated among the persons who are Unit Holders in proportion to their
interests in the Partnership at the close of such day.
(iv) If any deduction is allocated to a person with respect to an
"allocable cash basis item" attributable to a period before the beginning
of the Partnership taxable year and such person is not a Unit Holder of
the Partnership on the first day of the Partnership taxable year, such
deduction shall be capitalized by the Partnership and treated in the
manner provided for in Section 755 of the Code.
Section 5.4 Capital Accounts
-----------------------------
Capital Accounts shall be established and maintained for the General
Partner and each Unit Holder in accordance with tax accounting principles and
with valid regulations issued by the U.S. Treasury Department under subsection
704(b) of the Code (the "704 Regulations"). To the extent that tax accounting
principles and the 704 Regulations may conflict, the latter shall control. In
connection with the establishment and maintenance of such Capital Accounts, the
following provisions shall apply:
(i) The General Partner's or Unit Holder's Capital Account shall
be (x) increased by the amount of cash contributed by or on behalf of the
General Partner or Unit Holder, the fair market value of property
contributed by it or on its behalf to the Partnership (net of liabilities
securing such contributed property that the Partnership is considered to
assume or take subject to under section 752 of the Code) and allocations
to it of income and gain (except to the extent such income or gain has
previously been reflected in its Capital Account by adjustments thereto)
and (y) decreased by the amount of cash distributed to the General Partner
or Unit Holder, the fair market value of property distributed to the
General Partner or Unit Holder by the Partnership (net of liabilities
securing such distributed property that the General Partner or Unit Holder
is considered to assume or take subject to under section 752 of the Code)
and allocations to it of Partnership loss, deduction (except to the extent
such loss or deduction has previously been reflected in its Capital
Account by adjustments thereto) and expenditures described in section
705(a)(2)(B) of the Code.
-46-
<PAGE>
(ii) In the event Partnership Property is distributed to the
General Partner or Unit Holder, then, before the Capital Account of the
General Partner or Unit Holder is adjusted as required by clause (i) of
this Section 5.4, the Capital Accounts of the General Partner and Unit
Holders shall be adjusted to reflect the manner in which the unrealized
income, gain, loss and deduction inherent in such Partnership Property
(that has not been reflected in such Capital Accounts previously) would be
allocated among the General Partner and Unit Holders if there were a
taxable disposition of such Partnership Property for its fair market value
on the date of distribution.
(iii) If, pursuant to this Agreement, Partnership Property is
reflected on the books of the Partnership at a book value that differs
from the adjusted tax basis of such Partnership Property, then the General
Partner's and Unit Holders' Capital Accounts shall be adjusted in
accordance with the 704 Regulations for allocations to the General Partner
and Unit Holders of depreciation, depletion, amortization and gain or
loss, as computed for book purposes, with respect to such Partnership
Property.
(iv) The General Partner's and Unit Holders' Capital Accounts
shall be reduced by a simulated depletion allowance computed on each oil
or gas property using either the cost depletion method or the percentage
depletion method (without regard to the limitations under the Code which
could apply to fewer than all of the General Partner and Unit Holders);
provided, however, that the choice between the cost depletion method and
the percentage depletion method shall be made on a property-by-property
basis and such choices shall be binding for all Partnership taxable years
during which such oil or gas property is held by the Partnership. Such
reductions for depletion shall not exceed the aggregate adjusted basis
allocated to the General Partner and Unit Holders with respect to such oil
or gas property. Such reductions for depletion shall be allocated among
the General Partner's and Unit Holders' Capital Accounts in the same
proportions as the adjusted basis in the particular property is allocated
to the General Partner and each Unit Holder. Upon the taxable disposition
of an oil or gas property by the Partnership, the Partnership's simulated
gain or loss shall be determined by subtracting its simulated adjusted
basis
-47-
<PAGE>
(aggregate adjusted tax basis of the General Partner and the Unit Holders
less simulated depletion allowances) in such property from the amount
realized on such disposition and the General Partner's and Unit Holders'
Capital Accounts shall be increased or reduced, as the case may be, by the
amount of the simulated gain or loss on such disposition in proportion to
the General Partner's and Unit Holders' allocable shares of the total
amount realized on such disposition.
(v) For purposes of determining the Capital Account balance of
the General Partner and any Unit Holder as of the end of any Partnership
taxable year, the General Partner's and such Unit Holder's Capital Account
shall be reduced by:
(a) Adjustments that, as of the end of such year,
reasonably are expected to be made to the General Partner's and such
Unit Holder's Capital Account pursuant to paragraph (b)(2)(iv)(k) of
the 704 Regulations for depletion allowances with respect to oil and
gas properties of the Partnership, and
(b) Allocations of loss and deduction that, as of the end
of such year, reasonably are expected to be made to the General
Partner or such Unit Holder pursuant to Code section 704(e) (2),
Code section 706(d), and paragraph (b)(2)(ii) of section 1.751-1 of
regulations promulgated under the Code, and
(c) Distributions that, as of the end of such year,
reasonably are expected to be made to the General Partner or such
Unit Holder to the extent they exceed offsetting increases to the
General Partner's or such Unit Holder's Capital Account that
reasonably are expected to occur during (or prior to) the
Partnership taxable years in which such distributions reasonably are
expected to be made.
(vi) The Capital Accounts of the General Partner and Unit Holders
which are charged with an item of Partnership expense shall be credited
with any portion of that expense which is finally determined, judicially
or administratively, to be nondeductible for federal income tax purposes,
less any amortization or depreciation thereof incurred prior to the date
that the credit is made.
-48-
<PAGE>
(vii) In allocating income and costs for any Fiscal Year in which
the ratio for sharing and costs changes pursuant to Section 5.2A, the
allocations of income and costs shall be made, and the books of the
Partnership shall be closed, as soon as practicable after the date Payout
occurs, to determine the General Partner's and each Unit Holder's share of
pre-change income and costs and the General Partner's and each Unit
Holder's share of post-change income and costs for that Fiscal Year.
(viii) Notwithstanding any other provision of this Agreement to the
contrary, if, under any provision of this Agreement, the Capital Account
of the General Partner or any Unit Holder is adjusted to reflect the
difference between the basis to the Partnership of Partnership Property
and such Partnership Property's fair market value, then all items of
income, gain, loss and deduction with respect to such Partnership Property
shall be allocated among the General Partner and the Unit Holders so as to
take account of the variation between the basis of such Partnership
Property and its fair market value at the time of the adjustment to the
General Partner's or such Unit Holder's Capital Account in accordance with
the requirements of subsection 704(c) of the Code, or in the same manner
as provided under subsection 704(c) of the Code.
(ix) Subject only to the provisions of Subsection 5.4(x),
(a) There shall be allocated to the General Partner, any
item of loss, deduction, credit or allowance that, but for this
Subsection 5.4(ix) would have been allocated to any Unit Holder that
is not obligated to restore any deficit balance in such Unit
Holder's Capital Account and would have thereupon caused or
increased a deficit balance in such Unit Holder's Capital Account as
of the end of the Partnership's taxable year to which such
allocation related (after taking into consideration the provisions
of Subsection 5.4(v) hereof);
-49-
<PAGE>
(b) Any Unit Holder that is not obligated to restore any
deficit balance in such Unit Holder's Capital Account who
unexpectedly receives an adjustment, allocation or distribution
specified in Subsection 5.4(v) hereof shall be allocated items of
income and gain in an amount and manner sufficient to eliminate such
deficit balance as quickly as possible; and
(c) In the event any allocations of loss, deduction,
credit or allowance are made to the General Partner pursuant to
clause (a) of this Subsection 5.4(ix), the General Partner shall be
subsequently allocated all items of income and gain until the
aggregate amount of such allocations of income and gain is equal to
the aggregate amount of any such allocations of loss, deduction,
credit or allowance allocated to the General Partner pursuant to
clause (a) of this Subsection 5.4(ix)
(x) In the event there is a net decrease in the "minimum gain," as
such term is defined in the 704 Regulations, of the Partnership during
a Partnership taxable year, the General Partner and all Unit Holders with
deficit Capital Account balances at the end of such year shall be
allocated, before any other allocation is made under this Article Five,
income and gain of the Partnership for such taxable year (and, if
necessary, subsequent years) in the amount and in the proportion necessary
to eliminate such deficits as quickly as possible. The allocations
required by this Subsection 5.4(x) shall be made as required by and in
accordance with Section l.704-1(b)(4)(iv)(e) of the 704 Regulations. It is
intended that the provision set forth in this Subsection 5.4(x) will
constitute a "minimum gain chargeback" as described in Section
1.704-1(b)(4)(iv)(e) of the 704 Regulations. The 704 Regulations shall
control in the case of any conflict between the 704 Regulations and this
Subsection 5.4(x).
Section 5.5 Allocations for Federal Income Tax Purposes
--------------------------------------------------------
With respect to the various allocations of Partnership Revenues, gain,
loss, deduction and credit for federal income tax purposes, it is hereby agreed
as follows:
-50-
<PAGE>
(i) To the extent permitted by law, all charges, deductions and
losses shall be allocated for federal income tax purposes in the same
manner as the costs in respect of which such charges, deductions and
losses are charged to the General Partner and Unit Holders, respectively.
The General Partner and Unit Holders bearing the costs shall be entitled
to the deductions (including, without limitation, cost recovery
allowances, depreciation and cost depletion) and credits that are
attributable to such costs.
(ii) The Partnership shall allocate to the General Partner and
each Unit Holder its portion of the adjusted basis in each depletable
Partnership Property as required by Section 613A(c)(7)(D) of the Code
based upon the interest of the General Partner or such Unit Holder in the
capital of the Partnership as of the time of the acquisition of such
Partnership Property. To the extent permitted by the Code, such allocation
shall be based upon the General Partner's or said Unit Holder's interest
(x) in the Partnership capital used to acquire the property, or (y) in the
adjusted basis of the property if it is contributed to the Partnership. If
such allocation of basis is not permitted under the Code, then basis will
be allocated in the permissible manner which the General Partner deems
will most closely achieve the result intended above.
(iii) Partnership Revenues shall be allocated for federal income tax
purposes in the same manner as they are allocated to the respective
accounts of the General Partner and Unit Holders pursuant to Sections 5.2,
5.3 and 5.4 above.
(iv) Depreciation or cost recovery allowance recapture and recapture
of intangible drilling and development costs, if any, due as a result of
sales or dispositions of assets shall be allocated in the same proportion
that the depreciation, cost recovery allowances or intangible drilling and
development costs being restored or recaptured were allocated.
-51-
<PAGE>
Section 5.6 Minimum Interest of General Partner
------------------------------------------------
Notwithstanding anything to the contrary that may be expressed or implied
in this Agreement, the aggregate interest of the General Partner in each
material item of Partnership Revenues, gain, loss, deduction or credit shall be
equal to at least one percent of each such item at all times during the
existence of the Partnership. In determining the General Partner's interest in
such items, Units owned by the General Partner shall not be taken into account.
Section 5.7 Distributions
--------------------------
The Partnership's cash available for distribution will be distributed to
the Unit Holders and the General Partner in the same proportions that
Partnership Revenues have been allocated to them after giving effect to previous
distributions and to portions of such Revenues theretofore used or retained to
pay costs incurred or expected to be incurred in conducting Partnership
operations or to repay borrowings theretofore or expected to be thereafter
obtained by the Partnership. Amounts which otherwise would constitute cash
available for distribution and which consist of proceeds from the sale of
Producing Properties may be used or committed to acquire additional Producing
Properties at any time within 36 months of the Activation of the Partnership.
Within 50 days after the end of each calendar quarter, the General Partner will
determine the amount of cash available for distribution and will distribute such
amount, if any, to the Unit Holders and the General Partner as promptly
thereafter as reasonably possible. The General Partner's determination of the
cash available for distribution will be conclusive and binding upon all
Partners. In no event, however, shall funds be advanced or borrowed for purposes
of distributions, if the amount of such distributions would exceed the
Partnership's accrued and received Revenues from the previous four quarters,
less paid and accrued Operating Costs with respect to such Revenues.
-52-
<PAGE>
ARTICLE SIX
WITHDRAWAL OR REMOVAL OF GENERAL PARTNER
OR GENERAL PARTNER'S INTEREST IN PARTNERSHIP PROPERTIES
Section 6.1 Withdrawal of General Partner or General Partner's
Interest in Partnership Properties
----------------------------------------------------------------
A. The General Partner (including by definition any successor General
Partner) shall have the right to retire or withdraw upon 120 days' Notification
to the Unit Holders, subject to its obligation to pay all costs and expenses
incurred by the Partnership by virtue of such retirement or withdrawal;
provided, however, that no such retirement or withdrawal shall be permitted
before the fifth anniversary of the Activation of the Partnership without the
Consent of the Unit Holders owning 50% or more of the outstanding Units.
B. The General Partner may, from time to time and upon at least 90 days'
Notification to the Unit Holders and without withdrawing from or resigning its
position as General Partner, cause the Partnership to distribute, in partial
liquidation of its interest in the Partnership, to the General Partner
fractional, undivided interests in the Producing Properties of the Partnership
(such interest of the General Partner in a Producing Property distributed is
hereinafter referred to as the "Distributed Interest") up to an aggregate
interest equal in value to 80% of the value of the Producing Properties of the
Partnership that it would have been entitled to upon a hypothetical liquidation
of the Partnership after application of the provisions of Section 9.2 (the
interest in a Producing Property of the General Partner retained in the
Partnership is hereinafter referred to as the "Retained Interest"); provided,
however, that no such distribution shall occur unless the General Partner
obtains an opinion of counsel to the Partnership to the effect that such
distribution will not result in any material adverse tax consequence to the Unit
Holders or the Partnership. Notwithstanding anything to the contrary in this
Agreement, in the event that any such distribution is made, the General Partner
shall:
-53-
<PAGE>
(1) make appropriate adjustments in the Capital Account of the
General Partner and in the allocation of Partnership Revenues, expenses
and costs to assure that the General Partner will not share or participate
in any of the capital, costs, Revenues or distributions attributable to
the Producing Properties of the Partnership except to the extent of the
Retained Interest of the General Partner;
(2) not voluntarily or otherwise dispose of its Distributed
Interest unless the undivided interest of the Partnership in such
Producing Properties is also sold or disposed of for a proportionately
equivalent consideration;
(3) ensure that the Unit Holders' share of General and
Administrative Costs and Direct Administrative Costs does not increase as
a result of such withdrawal; and
(4) indemnify the Unit Holders against any expenses resulting
from such withdrawal.
Section 6.2 Assignment of General Partner Interest
---------------------------------------------------
Subject to Section 12.3 and Section 6.5B, upon obtaining the Consent of
Unit Holders owning more than 50% of the outstanding Units, the General Partner
may assign or transfer its General Partner interest to a Person which shall
become a successor General Partner; provided, however, that no such Consent
shall be required in connection with an assignment or transfer pursuant to the
merger, consolidation or transfer of all or substantially all of the assets of
the General Partner.
Section 6.3 Removal of General Partner
---------------------------------------
A. Subject to Section 12.3, the Unit Holders owning more than 50% of the
outstanding Units, shall have the authority to, and shall, remove the General
Partner.
B. (i) If the Unit Holders elect to remove the General Partner as
permitted under this Section, and further elect to continue the business of the
Partnership with one or more successor General Partners, the removed General
Partner shall not be removed until a successor General Partner has been selected
by the Unit Holders and admitted to the Partnership pursuant to Section 11.2.
-54-
<PAGE>
(ii) Notwithstanding Section 3.6B, any General Partner who shall withdraw
or be removed shall be released and indemnified by any successor General Partner
from and against all liability for Partnership debts and obligations incurred by
the Partnership prior to the time of such removal.
Section 6.4 Option to Purchase Interest from Former General Partner
--------------------------------------------------------------------
In the event the General Partner withdraws or is removed and a successor
General Partner is selected, the incoming General Partner and the departing
General Partner shall, by mutual agreement, select an independent petroleum
consultant to value the departing General Partner's interest in the Partnership.
The incoming General Partner, or the Partnership, shall have the option to
purchase at least 20% of the interest of the departing General Partner
(including any Distributed Interests distributed to the General Partner pursuant
to Section 6.1B) for the value determined by the independent appraisal. The
departing General Partner's interest in the Partnership shall be transferred to
the successor General Partner, and the successor General Partner shall assign to
the departing General Partner a portion of Partnership Revenues, costs and
rights to receive Partnership distributions as and when such items are allocated
or distributed, as the case may be, by the Partnership equal to the percentage
interest of the departing General Partner in the Partnership prior to removal,
less the portion purchased by the successor General Partner or the Partnership.
Section 6.5 Power to Admit Successor General Partner
A. If the General Partner has withdrawn or been removed, Unit Holders
owning more than 50% of the outstanding Units shall have the right and authority
to appoint and admit a successor General Partner meeting the requirements of
Section 6.5B to take the place of the departing General Partner.
B. If there is admitted to the Partnership a successor General Partner,
such admission shall not become effective unless (a) the Partnership shall have
received a certificate, duly executed by or on behalf of such proposed successor
General Partner, to the effect that: (i) it is experienced in performing (or
employs sufficient personnel who are experienced in performing) functions of the
type then being performed by the
-55-
<PAGE>
departing General Partner, (ii) it has a net worth sufficient to satisfy the net
worth requirements of the Code, Treasury Regulations, the Internal Revenue
Service or the courts applicable to a general partner in a limited partnership
in order to ensure that the Partnership will not fail to be classified for
federal income tax purposes as a partnership and (iii) such Person, if other
than an individual, has the authority to become a successor General Partner
under the terms of this Agreement; and (b) the proposed successor General
Partner shall have (i) become a party to, and adopted all of the terms and
conditions of this Agreement and (ii) paid all reasonable legal fees of the
Partnership and filing and publication costs in connection with such Person's
becoming a successor General Partner. The Certificate of Limited Partnership
shall be amended to reflect the withdrawal of the former General Partner and the
admission of the successor General Partner.
Section 6.6 Incapacity of the General Partner
----------------------------------------------
A. In the event of the Incapacity of the General Partner, the Partnership
shall be dissolved. However, within 90 days thereafter the Unit Holders owning
more than 50% of the outstanding Units may elect to reconstitute the Partnership
prior to application of the liquidation provisions of Section 9.2.
B. Upon the Incapacity of the General Partner, the Person who is its legal
representative shall have all the rights of a General Partner for the purpose of
settling or managing its estate and such power as the Incapacitated General
Partner possessed to assign all or any part of its interest and to join with
such assignee in satisfying conditions precedent to such assignees becoming a
substituted General Partner.
Section 6.7 Termination of Contracts with General Partner
----------------------------------------------------------
Subject to and upon fulfilling the conditions of Section 12.3, the power
shall be vested in the Unit Holders owning more than 50% of the outstanding
Units to terminate any or all contracts between the General Partner or any
Affiliate and the Partnership, and select a replacement Person therefor.
-56-
<PAGE>
ARTICLE SEVEN
ASSIGNMENT OF LIMITED PARTNER INTERESTS TO UNIT HOLDERS
Section 7.1 Assignments of the Interests of Depositary
-------------------------------------------------------
A. Pursuant to Sections 7.1B and 13.1, the Depositary shall issue to each
Person purchasing one or more Units a Depositary Receipt evidencing such Units.
The Partnership shall recognize as a Unit Holder, for the number of Units for
which the Partnership has received proceeds, each Person to whom the Depositary
issues a Depositary Receipt as of the date provided in Section 13.1 or otherwise
as the General Partner shall determine in accordance with the provisions of this
Agreement.
B. The Depositary, by the execution of this Agreement, irrevocably assigns
to the Unit Holders all of the Depositary's beneficial (but not the record)
rights and interest in and to the Partnership, except as otherwise provided
herein, as of the date of Activation of the Partnership. The rights and interest
so transferred and assigned shall include, without limitation, the following:
(i) all rights to receive distributions of uninvested Capital
Contributions pursuant to Section 3.4 and the right to receive rebates of
Commissions and Organization and Offering Costs pursuant to Section 3.4;
(ii) all rights to receive distributions of Partnership funds or
assets under the terms of this Agreement or under the Act;
(iii) all rights in respect of allocations of each item of Revenues,
gain, loss, deduction and credit pursuant to Article Five;
(iv) all rights in respect of allocations to Capital Accounts
pursuant to Section 5.4;
(v) all rights to receive any proceeds of liquidation of the
Partnership pursuant to Section 9.2;
(vi) all rights to inspect books and records and to receive reports
pursuant to Article Ten;
-57-
<PAGE>
(vii) the right to bring derivative actions pursuant to the Act (in
the event any such action must be brought in the name of the Depositary as
a Limited Partner, the Depositary agrees to bring such action, at the
expense of the Unit Holder(s) requesting such action); and
(viii) all rights which the Depositary has, or may have in the
future, under this Agreement or the Act, except as otherwise provided
herein.
C. The General Partner, by the execution of this Agreement, and any
Substituted Limited Partner, by its adoption of this Agreement, pursuant to
Section 7.3, irrevocably consents to and acknowledges that (i) the foregoing
assignment pursuant to Section 7.lB by the Depositary to the Unit Holders of the
Depositary's beneficial rights and interest in the Partnership is effective and
(ii) the Unit Holders are intended to be third-party beneficiaries of all rights
and privileges of the Depositary hereunder. The General Partner and any
Substituted Limited Partner covenant and agree that, in accordance with the
foregoing transfer and assignment, all the Depositary's beneficial rights and
privileges hereunder may be exercised by the Unit Holders, including, without
limitation, those listed in Section 7.lB.
D. The Depositary, by execution of this Agreement, irrevocably commits to
exercise its rights to vote and Consent as a Limited Partner in accordance with
directions it receives from the Unit Holders as provided herein.
E. The Depositary may transfer its interest as the Depositary to another
Person only with the Consent of the General Partner and Unit Holders other than
Substituted Limited Partners owning more than 50% of the outstanding Units.
F. All Persons becoming Unit Holders will by their payment for and
acceptance of Depositary Receipts agree to comply with and be bound by the
terms, conditions and obligations of and will be entitled to all rights of Unit
Holders under this Agreement.
G. Other than pursuant to Sections 7.lB, 7.lE and 7.2, the Depositary
shall not transfer, assign, encumber, pledge or hypothecate any of its interest
in the Partnership.
-58-
<PAGE>
Section 7.2 Rights of Unit Holders
-----------------------------------
A. In accordance with the transfer and assignment described in Section
7.1B, it is the intention of the parties hereto that, except to the extent set
forth in Section 3.6B, Unit Holders shall have the same rights and obligations
that Limited Partners have under this Agreement and under the Act. The fiduciary
duties and obligations of the General Partner to Limited Partners under the Act
and this Agreement shall extend to the Unit Holders.
B. Without limiting the generality of Section 7.2A, persons who become
Limited Partners pursuant to Section 7.3 below and other Unit Holders shall
share pari passu on the basis of one Limited Partner interest for one Unit, and
shall be considered a single class, with respect to all rights to receive
distributions and allocations pursuant to this Agreement.
C. Subject to Section 12.2, Unit Holders shall vote on all matters in
respect of which they are entitled to vote (either in person, by proxy, or by
written consent), as a single class, with each Unit entitled to one vote;
provided, however, that the Depositary shall vote on behalf of and only as
directed by the Unit Holders who are not Substituted Limited Partners.
Section 7.3 Conversion of Units into Limited Partner Interests
----------------------------------------------------------------
Subject to the consent of the General Partner, which consent may be
granted or withheld in its absolute discretion, any Unit Holder who desires to
convert his Units into an equal number of Limited Partner interests (which shall
be included in the meaning of "Units" as such term is used in this Agreement)
may do so following Activation of the Partnership by delivering to the
Depositary an executed subscription agreement and transfer application (which
are available upon request from the General Partner), accompanied by written
instructions which set forth an intention to become a Substituted Limited
Partner and request admission as such to the Partnership, together with such
other instruments or documents as the General Partner or the Depositary may deem
necessary or desirable, including the written acceptance and adoption by such
Unit Holder of the provisions of this Agreement and the execution,
acknowledgement
-59-
<PAGE>
and delivery to the General Partner of a special power of attorney, the form and
content of which are reasonably satisfactory to the General Partner. Such
executed documents shall be accompanied by a payment to the Partnership by such
Unit Holder of a fee (not to exceed $100) for legal and administrative costs and
recording fees. Unit Holders becoming Substituted Limited Partners will be
admitted to the Partnership quarterly, or as promptly as possible after the
commencement of the next calendar quarter. Persons who effect such conversion
will thereafter be deemed to have an equal number of Units of interest as a
Limited Partner and the Substituted Limited Partner will not be able to
re-exchange such units of Limited Partner interests for Units.
ARTICLE EIGHT
TRANSFERABILITY OF UNITS
Section 8.1 Assignments of Units
---------------------------------
A. Subject to the provisions of Section 8.4, no Unit Holder may assign,
sell, transfer or exchange his Units without the approval of the General
Partner. In exercising its obligations under this Section 8.1A, the General
Partner shall use its best effort to ensure that the terms of transfer are not
in contravention of any of the provisions of this Agreement and shall not
approve any transfer:
(i) to a Person who makes a market in the Units;
(ii) which is effected through a matching agent unless the
procedures of such matching agent with respect to the transfer of Units
have been approved by the General Partner as not being incident to a
public trading of such securities within the meaning of Code Sections
7704, 469(k) or 512(c);
(iii) if such sale, assignment, transfer or exchange would be in
violation of any applicable federal or state securities laws (including
any applicable suitability standard and the restrictions on transfer set
forth in Rule 260.141.ll of Title 10 of the California Administrative
Code) or would cause the Partnership to be taxed as an entity other than a
partnership under the Code;
-60-
<PAGE>
(iv) if such sale, assignment, transfer or exchange, when
aggregated with all other transfers during the same taxable year of the
Partnership, would result in both (a) the transfer of more than 5% of the
Units (excluding Permitted Transfers) and (b) the transfer of more than 2%
of the Units (excluding Permitted Transfers and transfers made through a
Matching Service), unless the General Partner shall have received an
opinion of counsel that such sale, assignment, transfer or exchange may be
made without material adverse tax consequences to the Unit Holders. For
purposes of this subsection, the "Permitted Transfers" shall mean: (1)
transfers in which the basis of the Units in the hands of the transferee
is determined, in whole or in part, by reference to its basis in the hands
of the transferor or is determined under Section 732 of the Code; (2)
transfers at death; (3) transfers between members of a family (as defined
in Section 267(c)(4) of the Code); (4) the issuance of Units by or on
behalf of the Partnership in exchange for cash, property or services; (5)
distributions from a retirement plan qualified under Section 401(a) of the
Code; and (6) Block Transfers. The term "Block Transfer" means the
transfer by a Unit Holder in one or more transactions during any thirty
consecutive day period of Units representing in the aggregate more than 5%
of the total interests in Partnership capital or profits. The term
"Matching Service" has the meaning and the conditions to sale ascribed to
it in Internal Revenue Service Notice 88-75. For purposes of the above
limitations, the percentage of Units transferred during a taxable year
shall equal the sum of the monthly percentage of Units transferred. The
monthly percentage of Units transferred in any month shall be the
percentage equal to a fraction the numerator of which is the number of
Units transferred during such month and the denominator of which is the
number of Units outstanding on the last day of such month, provided that
the denominator shall not include Units owned by the General Partner or
any Person related to the General Partner (within the meaning of Section
267(b) or 707(b)(1) of the Code);
(v) except for transfers by gift or inheritance, intra-family
transfers, transfers resulting from family dissolutions, transfers to
Affiliates or transfers of such transferor's entire remaining holding of
Units, any sale, assignment, transfer or exchange of Units that would
result in the transferors' holding less than ten (10) Units;
-61-
<PAGE>
(vi) except as provided in Section 8.3 unless and until the
transferee has certified to the Partnership that he is an Eligible
Investor; or
(vii) to any entity exempt from federal income tax under Section
501 of the Code, to any Person defined in Section 168(h)(2) of the Code,
to any Individual Retirement Account as defined in Section 408(a) of the
Code, to any Keogh Plan, to any nonresident alien or to any foreign
Entity. The General Partner shall give Notification to all Unit Holders in
the event that sales, exchanges, transfers or assignments have generally
been suspended.
B. Any attempted sale, assignment, transfer or exchange in contravention
of the provisions of this Section 8.1 shall, unless otherwise determined by the
General Partner in its sole discretion, be void and deemed ineffectual and shall
not bind or be recognized by the Partnership.
C. The Partnership need not recognize for any purpose any assignment of
Units unless there shall have been filed with the Partnership and recorded on
the Partnership's books a duly executed and acknowledged instrument of
assignment, and such instrument evidences the written acceptance by the assignee
of all of the terms and provisions of this Agreement, represents that such
assignment was made in accordance with all applicable laws and regulations and
in all other respects is satisfactory in form and substance to the General
Partner.
D. The Partnership need not (but, at least in the case of (i) below, may,
in its sole discretion, do so) recognize for any purpose any purported sale,
assignment or transfer of all or part of the Units, if, in the opinion of
counsel:
(i) such sale, assignment or transfer would cause the
Partnership to be treated as an association taxable as a corporation for
federal income tax purposes, or, when added to the total of all other
sales or exchanges of interests within the preceding 12 months, would
result in the Partnership's being considered to have terminated within the
meaning of Section 708 of the Code; and the General Partner is expressly
authorized to enforce this provision by suspending transfers if and when
any such transfer would result in transfers of interests in the
Partnership which represent in the aggregate 50% (or such lower percentage
as may be deemed prudent by the General Partner) or more of all
Partnership interests;
-62-
<PAGE>
(ii) such sale, transfer or assignment would violate any state
securities or "blue sky" laws (including any applicable suitability
standards) applicable to the Partnership or the Units to be transferred or
assigned, except in the case of transfers upon the death of the Unit
Holder (by bequest or inheritance) or by operation of law; or
(iii) such sale, transfer or assignment might cause the
Partnership to be classified as a publicly traded partnership within the
meaning of Code Sections 7702, 469(k) or 512(c).
E. Unless otherwise provided by the General Partner, any sale, assignment
or transfer of Units shall be recognized by the Partnership as of the first
business day of the calendar quarter following the approval of such assignment
or transfer by the General Partner, or as soon thereafter as practicable. The
General Partner shall not approve sales, assignments or transfers more
frequently than quarterly unless it receives a written opinion of counsel that
more frequent approvals shall not jeopardize the Partnership's federal income
tax status as a partnership. The Partnership and the General Partner shall be
entitled to treat the assignor of such Units as the absolute owner thereof in
all respects, and shall incur no liability for any allocation of Revenues, costs
or expenses, distribution or transmittal of reports or notice required to be
given to Unit Holders hereunder which is made in good faith to such assignor
until such time as the written instrument of assignment has been received by the
Partnership and recorded on its books.
F. The General Partner may reasonably interpret, and is hereby authorized
to take such action as it deems necessary or desirable to effect, the foregoing
provisions of this Section 8.1. The General Partner may, in its reasonable
discretion and without the approval of the Unit Holders, amend the provisions of
this Agreement in such manner as may be necessary or desirable to (i) preserve
the tax status of the Partnership as a partnership or (ii) avoid a
classification of the Partnership as a publicly traded partnership within the
meaning of Code Sections 7704, 469(k) or 512(c). The General Partner may, in its
reasonable discretion and without the approval of the Unit Holders, also amend
the provisions of this Agreement to include provisions governing the
transferability of interests in the Partnership which may be approved in future
legislation, Treasury Regulations, administrative rulings and other
pronouncements or judicial decisions. The Unit Holders shall be
-63-
<PAGE>
given prompt Notification of any amendments permitted by this Section 8.1F.
G. No purported sale, assignment or transfer by a transferor of Units
shall be recognized unless (i) the transferor shall have represented that such
transfer (x) was effected through a broker-dealer or matching agent whose
procedures with respect to the transfer of Units have been approved by the
General Partner as not being incident to a public trading market and not through
any other broker-dealer or matching agent or (y) otherwise was not effected
through a broker-dealer or matching agent which makes a market in Units or which
provides a readily available, regular and ongoing opportunity to holders of
Units to sell or exchange their Units through a public means of obtaining or
providing information of offers to buy, sell or exchange Units and (ii) the
General Partner determines that the circumstances described in Section 8.lA(iv)
have not occurred and will not occur and that otherwise such sale, assignment or
transfer would not, by itself or together with any other sales, transfers or
assignments, be likely to result in the Partnership's being classified as a
publicly traded partnership.
H. Unit Holders who are residents of the State of California must meet the
restrictions on transfers set forth in Rule 260.141-.11 of Title 10 of the
California Administrative Code.
I. Except as provided in Section 8.4, no transfer of Units will be
recorded or otherwise recognized by the Depositary or Partnership for any
purpose whatsoever unless and until the transferee has certified to the
Depositary that he is an Eligible Investor and, unless the transfer is among
members of the immediate family of the transferor Unit Holder, has paid a
transfer fee to reimburse the Depositary for all actual, reasonable and
necessary expenses (not to exceed $50 per transaction) incurred in connection
with the transfer.
J. A transferee who has accepted an assignment of Units shall be deemed
to have agreed to comply with and be bound by all of the terms and conditions of
this Agreement.
-64-
<PAGE>
Section 8.2 Substituted Limited Partners
-----------------------------------------
A. The Consent of the General Partner shall be required before the
assignee of any Units shall be admitted as a Substituted Limited Partner, which
Consent may be withheld in the sole and absolute discretion of the General
Partner.
B. No person shall have the right to become a Substituted Limited Partner
in place of his assignor unless all of the following conditions are first
satisfied:
(1) a duly executed and acknowledged written instrument of
assignment complying with Section 8.1 shall have been filed with the
Partnership and recorded on its books, which instrument shall specify the
Units being assigned and set forth the intention of the assignor that the
assignee succeed to the assignor's interest as a Substituted Limited
Partner in his place;
(2) the transferor and his assignee shall have executed and
acknowledged such other instruments as the General Partner may deem
necessary or desirable to effect such substitution, including the written
acceptance and adoption by the assignee of the provisions of this
Agreement as the same may be amended, his agreement to be bound by the
terms hereof, and his execution, acknowledgment and delivery to the
General Partner of a special power of attorney, the form and content of
which are reasonably satisfactory to the General Partner; and
(3) a transfer fee sufficient to cover all reasonable expenses
connected with such substitution (not to exceed $50) shall have been paid
to the Partnership.
C. By executing or adopting this Agreement, the Depositary, each
Substituted Limited Partner and, by the purchase of a Unit, each Unit Holder
hereby consents to the admission of Substituted Limited Partners by the General
Partner in accordance with the foregoing.
-65-
<PAGE>
Section 8.3 Eligible Investors
-------------------------------
A. If the General Partner determines that a Unit Holder is not an Eligible
Investor then the Unit Holder shall immediately be divested of its rights to
Consent on matters submitted to Unit Holders (and no such Units shall be deemed
outstanding for purposes of Consents of Unit Holders under this Agreement). At
any time after it can and does certify that it has become an Eligible Investor,
a Unit Holder may, upon application to the General Partner, retain all of the
rights and benefits attributable to his Units.
B. If at any time (i) the Partnership, the General Partner or the
Depositary receives an opinion of counsel to the effect that the citizenship or
other status of a Unit Holder may result in the forfeiture or cancellation of a
federal Lease or otherwise affects the eligibility of the Partnership to hold
federal Leases or (ii) the Partnership or the General Partner is named a party
in any judicial or administrative proceeding that seeks the cancellation or
forfeiture of any property in which the Partnership has an interest because of
the citizenship (or any other status that subjects the Partnership to the risk
of losing its eligibility to acquire or hold interests in federal Leases) of any
one or more Unit Holders, the General Partner may notify the Unit Holder and
purchase the Units of such Unit Holder for its own account, at such time and for
such amount as the General Partner may determine in its sole discretion. Nothing
in this Section 8.3 shall prevent a Unit Holder from transferring his Units
prior to the date set for such purchase by the General Partner.
Section 8.4 Death, Incompetency or Dissolution of a Unit Holder
----------------------------------------------------------------
If a Unit Holder who is an individual dies or a court of competent
jurisdiction adjudges him to be incompetent to manage his person or his
property, such Unit Holder's executor, administrator, guardian, conservator or
other legal representative may exercise all of such Unit Holder's rights for the
purpose of settling his estate or administering his property, including any
power under this Agreement of an assignee to become a Unit Holder or Substituted
Limited Partner. If a Unit Holder is a corporation, trust or other
-66-
<PAGE>
entity and is dissolved or terminated, the powers of such Unit Holder may be
exercised by its legal representative or successor.
ARTICLE NINE
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP
Section 9.1 Events Causing Dissolution
-----------------------------------------
A. The Partnership shall be dissolved upon the happening of any of the
following events:
(i) the expiration of its term, without any continuation thereof as
set forth in Section 2.3;
(ii) the Incapacity of the General Partner; provided, however,
within ninety (90) days thereafter the Unit Holders owning more than 50%
of the outstanding Units may elect to reconstitute the Partnership prior
to application of the liquidation provisions of Section 9.2;
(iii) the sale or other disposition at one time of all or
substantially all of the assets of the Partnership existing at the time of
such sale;
(iv) the election to dissolve the Partnership (a) by the General
Partner (which election shall be Consented by the Unit Holders owning more
than 50% of the outstanding Units), or (b) by the Consent of Unit Holders
owning more than 50% of the outstanding Units;
(v) ninety (90) days after the removal or withdrawal of the sole
General Partner (unless a successor is elected pursuant to Section 6.5);
or
(vi) the happening of any other event causing the dissolution of the
Partnership under the laws of the State, except that the Incapacity of the
Depositary or any Unit Holder shall not dissolve the Partnership and the
seizure of the interest of the Depositary shall not dissolve the
Partnership.
-67-
<PAGE>
B. 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 General Partner has recorded a notice of dissolution of the
Partnership with the office of the Secretary of State of the State and shall
have complied with the laws of the other states in which it does business and
the assets of the Partnership have been distributed as provided in Section 9.2.
C. Nothing contained in this Agreement shall impair, restrict or limit the
rights and powers of the Unit Holders under the laws of the State or any other
jurisdiction in which the Partnership is doing business to reform and
reconstitute themselves as a limited partnership following dissolution of the
Partnership either under provisions identical to those set forth herein or under
any other provisions.
D. If the Partnership is dissolved as a result of an event set forth in
Sections 9.1A(ii) or (v), Unit Holders owning more than 50% of the outstanding
Units may appoint an interim manager of the Partnership, who shall have and may
exercise only the rights, powers and duties of a general partner necessary to
preserve Partnership assets, until (i) a successor General Partner is elected
pursuant to Section 6.5, if the Partnership is reconstituted, or (ii) the
Partnership is liquidated pursuant to Section 9.2. The interim manager shall not
be liable as a general partner to the Depositary or Unit Holders and shall,
while acting in such capacity, be entitled to the same indemnification rights as
are set forth in Section 4.10.
Section 9.2 Liquidation
------------------------
A. Subject to Section 9.1, upon dissolution of the Partnership, its
liabilities shall be paid in the order provided herein. The General Partner
shall sell or otherwise dispose of the Partnership's Property and other assets
and shall execute all amendments terminating the Partnership. In connection with
any such sale, the General Partner shall attempt to obtain the best prices for
such property. Pending such sales, the General Partner shall have the right to
continue to operate and otherwise to deal with Partnership property. In the
event the Partnership is dissolved on account of the Incapacity or removal of
the General Partner, the Partnership shall elect, in accordance with the
provisions of Article Twelve, a Person (the "Liquidating Agent") to perform the
-68-
<PAGE>
function of the General Partner in liquidating the assets of the Partnership and
winding up its affairs, and shall pay to such Liquidating Agent its reasonable
fees and expenses incurred in connection therewith. Gain or loss realized on the
sale or other disposition of the Partnership's assets will be credited to (in
the case of gain) or charged against (in the case of loss) the General Partner's
and each Unit Holder's Capital Account to the extent allocable to the General
Partner and such Unit Holder under Sections 5.1 and 5.2. Any liquidation of the
Partnership shall take place out of court and without application being made
therefor to the Secretary of State of the State.
The Liquidating Agent shall agree not to resign at any time without 15
days' prior Notification and (if other than the General Partner) may be removed
at any time, with or without cause, by Notification of removal approved by Unit
Holders owning more than 50% of the outstanding Units. Upon dissolution, removal
or resignation of the Liquidating Agent, a successor and substitute Liquidating
Agent (who shall have and succeed to all rights, powers and duties of the
original Liquidating Agent) shall, within 30 days thereafter, be selected by
Unit Holders owning more than 50% of the outstanding Units. The right to appoint
a successor or substitute Liquidating Agent in the manner provided herein shall
be recurring and continuing for so long as the functions and services of the
Liquidating Agent are authorized to continue under the provisions hereof, and
every reference herein to the Liquidating Agent shall be deemed to refer also to
any such successor or substitute Liquidating Agent appointed in the manner
herein provided. The Liquidating Agent shall have and may exercise, without
further authorization or Consent of any of the parties hereto, all of the powers
conferred upon the General Partner under the terms of this Agreement (but
subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers, other than the limitation on sales set forth in
Section 4.5C) to the extent necessary or desirable in the good faith judgment of
the Liquidating Agent to carry out the duties and functions of the Liquidating
Agent hereunder for and during such period of time as shall be reasonably
required in the good faith judgment of the Liquidating Agent to complete the
winding-up and liquidation of the Limited Partnership as provided for herein.
-69-
<PAGE>
Notwithstanding the provisions of Section 9.1 which require the
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth herein, if on dissolution of the Partnership, the General
Partner or Liquidating Agent determines that an immediate sale of part or all of
the Partnership's assets would be impracticable or would cause undue loss to the
Unit Holders, the General Partner or Liquidating Agent may, in its absolute
discretion, defer for a reasonable time the liquidation of any assets except
those necessary to satisfy liabilities of the Partnership (other than those to
the General Partner and Unit Holders) or place those assets in a liquidating
trust to hold until such time as the assets are sold or depleted; provided,
however, that such assets will be transferred to a liquidating trust only if
before the transfer the General Partner or Liquidating Agent shall have received
the opinion of counsel to the Partnership that the operation of such liquidating
trust pursuant to its terms will not result in such liquidating trust being
treated as an association taxable as a corporation for federal income tax
purposes. Furthermore, if the dissolution of the Partnership is effected by
virtue of a merger or combination with another entity or by virtue of a
transfer, sale or exchange of all or substantially all of the Partnership's
assets for which at least a portion of the consideration consists of securities
of another entity, such securities may be distributed to the General Partner and
Unit Holders in kind and there shall be no obligation to sell or otherwise
dispose of such securities for cash or to place them in a liquidating trust;
provided, however, that no such securities shall be distributed to the Unit
Holders upon liquidation unless (i) the securities are readily marketable and
(ii) pro rata amounts of such securities (to the extent such securities may be
divided in equal pro rata amounts) are distributed to each Unit Holder.
B. In settling accounts after dissolution, the assets of the Partnership
shall be paid out in the following order: (i) to third-party creditors, in the
order or priority as provided by law; (ii) to the General Partner and any
Liquidating Agent for any expenses of the Partnership paid by or payable to them
to the extent they are entitled to reimbursement therefor pursuant to this
Agreement; (iii) to all of the Unit Holders in the amount equivalent to the
amount of their positive Capital Account balances (as adjusted pursuant to
Section 9.2A) on the date of distribution; (iv) to the General Partner in the
amount equivalent to the amount of its positive Capital Account balance (as
adjusted pursuant to Section 9.2A) on the date of
-70-
<PAGE>
distribution; and (v) the balance, if any, shall be paid to the General Partner
and Unit Holders in the manner in which Revenues are then being allocated.
C. If the General Partner has a deficit balance in its Capital Account
following the distribution(s) provided for in Section 9.2B above, as determined
after taking into account all adjustments to its Capital Account for the taxable
year of the Partnership during which such distribution(s) occur, it shall
restore the amount of such deficit balance to the Partnership within 90 days and
such amount shall be distributed to the Unit Holders in accordance with their
positive Capital Account balances.
D. Upon the liquidation or partial liquidation of the General Partner's
interest pursuant to Article Six hereof, any distribution to the General Partner
shall be made pro rata in accordance with and to the extent of its positive
Capital Account balance after the General Partner's and Unit Holders' Capital
Accounts are adjusted as if all of the Partnership's Property had been sold at
its fair market value immediately prior to such distribution and the gain or
loss realized on such sale charged or credited to the General Partner's and Unit
Holders' Capital Accounts in accordance with and to the extent of its positive
Capital Account balance after the General Partner's and Unit Holders' Capital
Accounts are adjusted as if all of the Partnership's Property had been sold at
its fair market value immediately prior to such distribution and the gain or
loss realized on such sale charged or credited to the General Partner's and Unit
Holders' Capital Accounts in accordance with the provisions of Article Five
hereof; provided, however, that if the General Partner has a deficit balance in
its Capital Account following such distribution (or adjustment of the General
Partner's Capital Account pursuant to this Section 9.2D), the General Partner
shall restore the amount of such deficit balance to the Partnership by the later
of the end of the Partnership taxable year in which the liquidation of the
General Partner's Interest occurs or 90 days after the date of such liquidation.
E. Notwithstanding anything to the contrary in this Agreement, upon the
dissolution and termination of the Partnership, the General Partner will
contribute to the Partnership the lesser of: (a) the deficit balance in its
Capital Account; or (b) the excess of 1.01 percent of the total Capital
Contributions of the Unit Holders over the capital previously contributed by the
General Partner.
-71-
<PAGE>
ARTICLE TEN
BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS; ETC.
Section 10.1 Books and Records
-------------------------------
The books and records of the Partnership, including information relating
to the sale by the General Partner or any Affiliates of goods or services to the
Partnership, and a list of the names and addresses and Units of all Unit
Holders, shall be maintained by the General Partner at the principal office of
the Partnership for a period of six years following the close of the Fiscal Year
to which they relate and shall be available for examination there by any Unit
Holder or its duly authorized representatives at any and all reasonable times.
Any Unit Holder or its duly authorized representatives, upon paying the costs of
collection, duplication and mailing, shall be entitled for any proper purpose to
a copy of the list of names and addresses and Units of the Unit Holders. The
Partnership may maintain such other books and records and may provide such
financial or other statements as the General Partner in its discretion deems
advisable.
Section 10.2 Accounting Basis for Tax and Reporting Purposes; Fiscal Year
-------------------------------------------------------------------------
The books and records of the Partnership for tax purposes, for purposes of
this Agreement and for the purpose of reports to the Partners, shall be kept on
the accrual basis. The Fiscal Year of the Partnership shall be the calendar year
to the extent permissible and the General Partner shall use its best efforts to
obtain any necessary approvals therefor.
Section 10.3 Bank Accounts
---------------------------
The General Partner shall maintain a bank account or accounts on behalf of
the Partnership with any bank in the United States having total assets in excess
of $100,000,000. The General Partner shall not deposit Partnership funds in an
account with any bank in an aggregate amount in excess of 5% of such bank's
total assets. Withdrawals shall be made only in the
-72-
<PAGE>
regular course of the Partnership's business on such signature or signatures as
the General Partner may determine. All deposits and other funds not needed in
the operation of the business may be deposited in interest-bearing accounts,
certificates of deposit, money market funds (including those managed or marketed
by the Dealer Manager or its Affiliates) or invested in short term United States
Government obligations maturing within one year, commercial paper of
corporations organized under the laws of any state of the United States or the
District of Columbia having the highest credit rating granted by Moody's
Investors Service, Inc. or Standard & Poor's Corporation, or other similar
highly liquid investment.
Section 10.4 Reports
---------------------
A. The General Partner shall close the Partnership's books of account
promptly at the close of each Fiscal Year and an annual examination of the
Partnership's financial statements shall be performed at the expense of the
Partnership by the Accountants. The General Partner shall furnish to the Unit
Holders an annual report within 120 days after the close of each Fiscal Year of
the Partnership commencing with the Fiscal Year in which the Partnership was
Activated. If requested by a Unit Holder, the General Partner shall also furnish
such Unit Holder with a report within 75 days after the end of the first six
months of the Fiscal Year in which such request was made, or within 75 days
after the request is made, whichever is later. Such report will contain at least
the following information:
(i) Financial statements for the Partnership's accounts,
including a balance sheet, statement of income, statement of changes in
partners' capital and statement of cash flow prepared on an accrual basis
in accordance with generally accepted accounting principles and
accompanied by a report of the Accountants together with their opinion
thereon, except that the semi-annual financial statements need not be
audited;
(ii) A summary itemization, by type and/or classification, of
the total fees and compensation, including any General and Administrative
Cost reimbursement, paid by the Partnership or indirectly on their behalf,
to the General Partner and any Affiliate;
-73-
<PAGE>
(iii) A description of each Producing Property acquisition,
including the costs therefor, in which the Partnership owns an interest,
except succeeding reports need contain only material changes (including
all material farmouts, development drilling, improved recovery operations
and abandonments), if any, regarding Producing Properties already reported
upon. In the case of wells that have been abandoned after production has
commenced, a statement justifying such abandonment shall be included if
the General Partner or an Affiliate is the operator. With respect to all
material Farmouts, the statement shall include a justification of the
Farmout, location, time, to whom made and a general description of terms;
and
(iv) A schedule reflecting a list of the wells drilled by the
Partnership and the costs thereof.
B. Within 60 days after the end of each fiscal quarter, each Unit Holder
will receive an "investor statement" which summarizes his current quarter and
cumulative cash distributions in the Partnership.
C. Within 120 days after the end of the Fiscal Year following the Fiscal
Year in which Activation of the Partnership occurs, and annually thereafter, the
General Partner shall furnish to the Unit Holders a computation as of the end of
the immediately preceding Fiscal Year, based upon engineering reports prepared
by one or more qualified independent petroleum engineering firms with respect to
Producing Properties containing Proved Reserves equal to at least 80% of the
Proved Reserves of the Partnership (with the computation as to any balance of
the Partnership's Proved Reserves being based upon petroleum engineering reports
prepared by the General Partner or an Affiliate), of the total estimated Proved
Developed Producing Reserves, Proved Developed NonProducing Reserves and Proved
Undeveloped Reserves owned by the Partnership, the estimated dollar value
thereof stated in then existing prices and escalated prices (as provided by the
General Partner). In addition, the computation shall include an estimate of the
time required for the extraction of such reserves and the present worth of such
reserves and the estimate shall contain a statement that because of the time
period required to extract such reserves the present value of revenues to be
obtained in the future is less than if immediately receivable.
-74-
<PAGE>
D. In addition to the report described in Section 10.4C of this Agreement,
if an event occurs to the knowledge of the General Partner or its Affiliates
leading to a reduction or an increase of such Proved Reserves of more than 10%,
excluding reduction as a result of normal production, an additional computation
and estimate similar to that described in Section 10.4C shall be sent to each
Unit Holder as soon as possible.
E. By March 15 of each year, the General Partner will furnish a report to
each Unit Holder containing such information as is pertinent for completion of
his respective federal, state and other income tax returns.
F. The General Partner shall file on a timely basis with the Securities
and Exchange Commission all filings required to be made by the Partnership
pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder. The General Partner shall make
available to any Unit Holder upon the Unit Holder's request, copies of any
report filed by or on behalf of the Partnership with the Securities and Exchange
Commission. The General Partner shall cause a copy of any reports sent to the
Unit Holders under paragraphs A, C, D and E hereof to be sent to the California
Commissioner of Corporations.
G. The General Partner agrees to make all relevant financial and
engineering reports available for review by a Unit Holder on request at the
offices of the Partnership.
Section 10.5 Elections
-----------------------
The General Partner shall cause the Partnership to make all elections
required or permitted to be made by the Partnership under the Code and not
otherwise expressly provided for in this Agreement, in the manner that the
General Partner believes will be most advantageous to the Unit Holders, except
that (i) the General Partner shall not be required to make an election under
Section 754 of the Code or corresponding provisions of applicable state income
tax laws, and (ii) the General Partner shall make the election under Section
263(c) of the Code to expense all intangible drilling and development costs in
the initial Partnership federal income tax return filed for the Fiscal Year in
which such costs are incurred.
-75-
<PAGE>
ARTICLE ELEVEN
AMENDMENTS; MERGER
Section 11.1 Proposal and Adoption of Amendments Generally
-----------------------------------------------------------
A. Notwithstanding anything to the contrary herein, the General Partner
may, without prior notice or Consent of any Unit Holder, amend any provision of
this Agreement (including an amendment to admit an additional General Partner or
a successor General Partner in the event of the withdrawal or removal of the
General Partner) if, in its opinion, such amendment does not have a material
adverse effect upon the Unit Holders or otherwise is permitted by Section 8.1F.
Amendments to this Agreement to reflect the addition or substitution of a
Limited Partner or the admission of a successor General Partner shall be made at
the time and in the manner referred to in Section 11.2. Any other amendment to
this Agreement may be proposed by the General Partner or holders of at least 10%
of the outstanding Units. The Person or Persons proposing such amendment shall
submit a Notification containing (a) the text of such amendment, and (b) a
statement of the purpose of such amendment. The General Partner shall, within 15
days after receipt of any proposal under this Section 11.lA, give Notification
to the Depositary and all Unit Holders of such proposed amendment, of such
statement of purpose and of such opinion of counsel, together, in the case of an
amendment proposed by any Unit Holders, with the views, if any, of the General
Partner with respect to such proposed amendment.
B. Amendments to this Agreement shall be adopted if: (i) in the case of
amendments referred to in Section 11.2, the conditions specified in Section 6.5B
shall have been satisfactorily completed and the Partnership shall not have been
furnished with an opinion of counsel to the Partnership to the effect that such
amendment will adversely affect the classification of the Partnership as a
partnership for federal income tax purposes; (ii) in the case of amendments
referred to in Section 8.lF, the conditions specified in said Section shall have
been satisfactorily completed; or (iii) in the case of all other amendments,
such amendment shall have been Consented to by Unit Holders owning more than 50%
of the outstanding Units (unless such Consent is not required pursuant to
Section 1l.1A of this Agreement); provided, however, that no such amendment may:
(a) enlarge the obligations of the General Partner or any
-76-
<PAGE>
Unit Holder under this Agreement or convert the interest of any Unit Holder into
the interest of a General Partner or modify the limited liability of any Unit
Holder without the Consent of such Partner or Unit Holder; (b) modify the method
provided in Article Five of determining and allocating or distributing, as the
case may be, each item of income, gain, loss, cost, deduction or credit without
the Consent of the General Partner if it would be adversely affected by such
modification, and any Unit Holder which may be adversely affected, by such
modification; (c) amend Sections 4.9, 4.10, 6.1, 6.2, 6.3 or 6.4 without the
Consent of the General Partner; or (d) amend Sections 2.3, 4.2, 4.4, 4.5, 4.11,
this Article Eleven or Section 12.3 unless the Consent of the Unit Holders
owning at least two-thirds of the outstanding Units is obtained.
C. Upon the adoption of any amendment to this Agreement, the amendment
shall be executed by the General Partner (both on its own behalf and as
attorney-in-fact for any Substituted Limited Partners) and the Depositary and,
if necessary or appropriate, shall be recorded in the proper records of the
State and any other state in which the Partnership is then doing business.
Section 11.2 Amendments on Admission or Removal of Partner
-----------------------------------------------------------
If this Agreement or the Certificate of Limited Partnership shall be
amended to reflect the withdrawal or removal of the General Partner and the
continuation of the business of the Partnership, such amendment shall be signed
by the remaining or successor General Partner and by the removed General
Partner.
Section 11.3 Merger
--------------------
The Partnership may merge or consolidate with or into one or more limited
partnerships, general partnerships, corporations, business trusts or
associations, or unincorporated businesses if (i) Consented to by the General
Partner and by Unit Holders owning more than 50% of the Outstanding Units and
(ii) such merger or consolidation is permitted under the Act or any other
applicable law.
-77-
<PAGE>
Section 11.4 Exchange Offers
-----------------------------
Neither the General Partner nor its Affiliates will make or cause to be
made any offer to a Unit Holder to exchange his Units for a security unless:
(a) such offer is made after the expiration of two years after the
Partnership commenced operations;
(b) such offer is made to all Unit Holders;
(c) such offer is on a basis no more advantageous to the General
Partner, exchange offeror or underwriter of the offer and their respective
affiliates, than to Unit Holders, provided, however, that the foregoing
clause shall not prohibit, if permitted under applicable state and
self-regulatory organization guidelines: (i) compensation (including the
issuance of securities) to such persons in exchange for such persons'
other balance sheet assets (nonPartnership interests) for inclusion of the
General Partner in the exchange offer or tender of other balance sheet
assets of the General Partner, underwriter or their affiliates, based upon
exchange valuation principles consistent with these guidelines; (ii)
compensation to an underwriter for services in connection with the offer
provided, however, that no compensation shall be payable to an underwriter
for the tender of interests by the exchange offeror, its affiliates or the
underwriter; and (iii) compensation that may be permitted under
subparagraph (g) below;
(d) payments for services rendered by any Person in connection with
the exchange are fully supportable, actual and necessary;
(e) in computing the exchange ratio, the value of reserves used is
supported by an appraisal prepared by an independent petroleum consultant
as of the most current feasible date, and the value of all other material
balance sheet assets, including undeveloped acreage, is at fair market
value as determined by an independent qualified appraiser;
(f) the offer is made pursuant to all registration requirements
under both federal and state laws;
-78-
<PAGE>
(g) if the exchange offeror is a corporation, the offer is made in
compliance with applicable NASAA Guidelines for corporate securities and
may not allow a security with different rights and privileges to be issued
to the General Partner or its Affiliates unless there is justification
therefor;
(h) the offer does not allow for an accelerated reversionary
interest to the General Partner without regard to the existing payout
provisions;
(i) additional shares or units to be issued pursuant to future
reevaluation of properties include reevaluation of similar properties held
by Unit Holders;
(j) there will be no overrides newly established to the General
Partner, exchange offeror, or affiliates on leases to be part of the
exchange and any overrides to be established to non-affiliates on such
leases and the basis therefor are disclosed in detail;
(k) all properties to be exchanged are to be evaluated on the same
basis or standard of evaluation; and
(1) material properties of the General Partner or its Affiliates to
be exchanged have complete cost disclosure; provided, however, that the
General Partner may avoid any of such conditions and restrictions for
which waivers or consents are obtained from appropriate state securities
administrators or agencies. Notwithstanding the foregoing, neither the
General Partner nor its Affiliates shall have any obligation to make any
exchange offer to Unit Holders.
ARTICLE TWELVE
CONSENTS, VOTING AND MEETINGS
Section 12.1 Methods of Giving Consent
---------------------------------------
Any Consent of a Unit Holder required by this Agreement may be given by a
Unit Holder as follows: (i) at a meeting, in person, by a written proxy or
signed writing directing the
-79-
<PAGE>
manner in which it desires that its vote be cast, which writing must be received
by the General Partner prior to such meeting, or (ii) without a meeting, by a
signed writing directing the manner in which it desires that its vote be cast,
which writing must be received by the General Partner prior to the date upon
which the votes of Unit Holders are to be counted. Any Unit Holder may waive
notice of or attendance at any meeting of the Unit Holders and may execute a
signed written consent. Only the votes of Unit Holders of record on the date set
by the General Partner (which date shall be not less than 10 days and not more
than 60 days prior to the date set for the meeting or consent), whether at a
meeting or otherwise, shall be counted. Units held by the General Partner and
its Affiliates which, as a result thereof, cannot be voted, will not be deemed
outstanding for purposes of calculating whether a sufficient number of Units
have consented. The laws of the State pertaining to the validity and use of
corporate proxies shall govern the validity and use of proxies given by the Unit
Holders.
Section 12.2 Meetings of Unit Holders
--------------------------------------
The General Partner may at any time call a meeting of the Unit Holders or
for a vote, without a meeting, of the Unit Holders on matters upon which the
Unit Holders are entitled to provide their Consent, and shall call for such a
meeting or vote upon receipt by the General Partner of a request therefor made
by Unit Holders owning at least 10% of the outstanding Units as of the date of
receipt of such request. Within 15 days of the receipt of the request, the
General Partner shall notify all Unit Holders of record as of the date set by
the General Partner (which date shall be not less than 10 days and not more than
60 days prior to the date set for the meeting or consent) as to the time and
place of the meeting, if called, and the general nature of the business to be
transacted thereat, or if no such meeting has been called, of the matter or
matters to be voted upon and the date upon which the votes will be counted. The
date of any meeting of Unit Holders or the date upon which such votes, without a
meeting, will be counted (regardless of whether the General Partner has called
for such meeting or vote upon the request of Unit Holders or has initiated such
event without such request) shall be not less than 30 or more than 60 days
following mailing of the Notification thereof by the General Partner. Units held
by the General Partner and its Affiliates may not be voted by them. All expenses
of the meetings, voting and such Notification shall be borne by the Partnership.
-80-
<PAGE>
Section 12.3 Limitations on Requirements for Consents
------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, the
powers of the Unit Holders set forth in Sections 4.5D, 6.3A, 6.6A, 6.7, l1.lA
and 12.5 shall not be deemed to be granted to the Unit Holders or exercisable by
them if counsel for the Partnership or counsel designated by Unit Holders owning
at least 10% of the outstanding Units renders an opinion to the effect that the
grant or the exercise of those powers or the result thereof is prohibited by the
Act, will impair the limited liability of the Depositary or the Unit Holders or
will affect the classification of the Partnership as a partnership for federal
income tax purposes.
Section 12.4 Submissions to Unit Holders
-----------------------------------------
The General Partner shall give all the Unit Holders Notification of any
proposal or other matter required by any provisions of this Agreement or by law
to be submitted for the consideration and approval of the Unit Holders. Such
Notification shall include any information required by the relevant provision of
the Agreement or by law.
Section 12.5 Acting Without Concurrence of General Partner
-----------------------------------------------------------
Except as limited by Sections 12.3 and 11.lB, Unit Holders owning more
than 50% of the outstanding Units, without the necessity for concurrence by the
General Partner may vote to:
(a) amend the Agreement;
(b) dissolve the Partnership;
(c) remove the General Partner and elect a new General Partner;
(d) approve or disapprove the sale of all or substantially all of
the assets of the Partnership; or
(e) cancel or amend the terms of any contract for services with the
General Partner or any Affiliate which shall be without penalty, provided
30 days' written notice is given.
-81-
<PAGE>
ARTICLE THIRTEEN
THE DEPOSITARY
Section 13.1 Depositary Receipts
---------------------------------
A. Within 45 days of the Activation of the Partnership, the Depositary
will execute and forward to each Unit Holder Depositary Receipts evidencing the
ownership by the Unit Holder as of the date of Activation the Units for which
such Unit Holder subscribed.
B. Pursuant to the terms of Section 8.1, upon receipt of a properly
executed application for transfer, the Depositary shall within three business
days execute and forward Depositary Receipts to the respective transferees.
C. Depositary Receipts may be endorsed with, have incorporated in the text
thereof or be accompanied by such legends or recitals, attachments or changes,
not inconsistent with the provisions of this Agreement, as may be required to
comply with any applicable law or regulation, or to conform with any usage with
respect thereto, or to indicate any special limitation or restriction to which
any particular Unit may be subject, or as may for any other reason be required.
Each Depositary Receipt shall be duly executed on behalf of the Depositary by
the manual or facsimile signature of a duly authorized officer of the
Depositary. No Depositary Receipt shall be entitled to any benefit under this
Agreement or be valid for any purpose unless it bears such signature.
D. All Depositary Receipts executed by the Depositary shall be numbered
consecutively. The Unit Holder of each numbered Depositary Receipt shall be
registered on the books of the Depositary maintained pursuant to Section 13.3A.
E. Upon surrender by the Unit Holder in person or by duly authorized
attorney of one or more Depositary Receipts at the Depositary's principal
office, or at any other office it may designate for the purpose, for split-up or
combination, the Depositary shall, subject to the terms and conditions of this
Agreement and the Depositary Receipt, execute and deliver one or more new
Depositary Receipts in authorized denominations as requested, evidencing the
same aggregate number of Units as evidenced by the Depositary Receipt(s)
surrendered.
-82-
<PAGE>
F. If any Depositary Receipt is mutilated, destroyed, lost or stolen, the
Depositary shall execute and deliver a Depositary Receipt in like form and tenor
in exchange and substitution for the mutilated, destroyed, lost or stolen
Depositary Receipt; provided, that the Depositary may require the Unit Holder to
(i) surrender any mutilated Depositary Receipt, (ii) file with the Depositary,
in a form and manner satisfactory to it, proof of the destruction, loss or
theft, and of such Unit Holder's ownership, of the Depositary Receipt and (iii)
furnish to the Depositary reasonable indemnification (including posting of an
indemnity bond) satisfactory to the Depositary.
G. As a condition precedent to the execution and delivery, transfer,
split-up, combination, surrender, conversion or exchange of any Depositary
Receipt, the Depositary may require (i) payment of any fee required hereby and
payment of a sum sufficient for reimbursement of any tax or other governmental
charge with respect thereto, (ii) production of proof satisfactory to it as to
the identity and genuineness of any signature or endorsement or as to the due
authorization of the action, (iii) filing of such information and execution of
such documents by the transferor and/or the transferee as may be required by
this Agreement or the Depositary Receipt or otherwise is deemed necessary or
appropriate by the Depositary and (iv) compliance with such other conditions as
may be imposed under applicable laws and regulations. The Depositary shall be
entitled to rely upon, and shall not have any liability to the Partnership, the
General Partner, any Unit Holder or any other Person with respect to the content
of any proof submitted to it pursuant to this Section 13.lG, and shall have no
obligation to inquire as to the truth and accuracy thereof (except for acts or
omissions resulting from the Depositary's gross negligence).
H. All Depositary Receipts surrendered to the Depositary shall be
canceled. The Depositary shall retain all canceled Depositary Receipts and other
instruments, documents and records in accordance with the policies and
regulations of the Depositary, federal securities laws and the rules and
regulations of any securities exchange or market upon which the Depositary
Receipts may be listed or quoted.
-83-
<PAGE>
Section 13.2 Depositary or Affiliate as Transfer Agent and Registrar
---------------------------------------------------------------------
The Depositary or an Affiliate shall also be the transfer agent and
registrar for the Depositary Receipts unless prohibited by law, regulation or
any applicable rule of a securities exchange or market. In its capacity as such,
subject to the terms and conditions of this Agreement, the Depositary or such
Affiliate shall transfer record ownership of the Units by bookkeeping entry on
the books and records maintained pursuant to Section 13.3A.
Section 13.3 Duties of Depositary
----------------------------------
A. In performing its duties hereunder the Depositary shall:
(i) maintain at its principal office a current list of the full
name and last known home or business address of each Unit Holder, set
forth in alphabetical order which list shall be available during ordinary
business hours for examination and copying at the reasonable request, and
at the expense, of any Unit Holder or his duly authorized representative,
or copies of such list may be requested in writing for any proper purpose
by any Unit Holder or his duly authorized representative; provided that
the reasonable costs of fulfilling such request, including copying
expenses, shall be paid by the Unit Holder making such request. In
addition, the Depositary shall, as required, furnish to the Securities and
Exchange Commission, any report, financial statement or communication
received from the Partnership or the General Partner that is made
generally available to Unit Holders;
(ii) keep all records required to be kept, for the periods
specified, and shall file with the Securities and Exchange Commission all
materials required to be so filed, under the Securities Exchange Act of
1934, by virtue of its status as Depositary. A copy of any material filed
by the Depositary with the Securities and Exchange Commission shall also
be provided to the Partnership within two business days after its filing.
To the extent that any such filing requires information from the
Partnership or the
-84-
<PAGE>
General Partner, such information shall be furnished to the Depositary by
the General Partner in sufficient quantity and a sufficient time in
advance of the date the filing is required to be made to enable the
Depositary to comply with such requirements; and
(iii) keep books at its corporate office for the transfer of
Depositary Receipts. The books shall be open during normal business hours
for inspection by the Unit Holders. The Depositary may, however, close the
transfer books, at any time or from time to time, when deemed expedient by
it in connection with the performance of its duties hereunder.
B. Upon the request of the Partnership, the Depositary shall as promptly
as practicable furnish to the Partnership a list, as of the date specified in
such request, of the names, addresses and social security or taxpayer
identification numbers of all Unit Holders.
Section 13.4 Depositary Not a Trustee, Issuer, etc.
----------------------------------------------------
The Depositary is not a trustee and it is intended that the Depositary, in
its capacity as depositary, shall not be deemed to be an "issuer" or
"underwriter" of securities under the federal securities laws or applicable
state securities laws; it being expressly understood and agreed that the
Depositary, in its capacity as a Limited Partner of the Partnership, is acting
only in a ministerial capacity.
Section 13.5 Indemnification of the Depositary
-----------------------------------------------
The Depositary shall be indemnified by the Partnership to the same extent
and subject to the same conditions and restrictions as provided in Section 4.10
of this Agreement with respect to the indemnification of the General Partner.
Section 13.6 Limitation of Expense Reimbursements
--------------------------------------------------
The expenses of the Depositary otherwise reimbursable to it under the
terms of this Agreement and the fees payable to it hereunder shall not exceed
the lesser of (i) an amount equal to 90% of the competitive price which would be
charged by nonaffiliated persons rendering similar services in the same or
-85-
<PAGE>
comparable geographic location or (ii) the costs and expenses of the Depositary
incurred in rendering such services.
ARTICLE FOURTEEN
MISCELLANEOUS PROVISIONS
Section 14.1 Notification to the Partnership or the General Partner
--------------------------------------------------------------------
Any Notification to the Partnership or the General Partner shall be sent
to the principal office of the Partnership, as set forth in this Agreement.
Except as provided herein, any Notification to a Unit Holder shall be sent to
its last known address.
Section 14.2 Binding Provisions
--------------------------------
The covenants and agreements contained herein shall be binding upon and
inure to the benefits of the heirs, executors, administrators, successors and
assigns of the respective parties hereto.
Section 14.3 Applicable Law
----------------------------
This Agreement shall be construed and enforced in accordance with the laws
of the State.
Section 14.4 Separability of Provisions
----------------------------------------
If for any reason any provision or provisions hereof which are not
material to the purposes or business of the Partnership are determined to be
invalid and contrary to any existing or future law, such invalidity shall not
impair the operation of or affect those portions of this Agreement that are
valid.
-86-
<PAGE>
Section 14.5 Appointment of the General Partner as Attorney-in-Fact
-------------------------------------------------------------------
The Depositary, by the execution of this Agreement, irrevocably
constitutes and appoints the General Partner as its true and lawful agent and
attorney-in-fact with full power and authority in its name, place and stead to
execute, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents, instruments and conveyances that may be necessary
or appropriate to carry out the provisions or purposes of this Agreement,
including without limitation: (i) the Certificate of Limited Partnership and
other certificates and instruments (including counterparts of this Agreement),
and any amendment thereof, including any amendment substituting a Limited
Partner pursuant to Section 8.2, that the General Partner deems appropriate to
form, reform, qualify or continue the Partnership (or a new partnership with
substantially the same provisions as the Partnership) as a limited partnership
(or a partnership in which the Partners will have limited liability comparable
to that provided by the Act) in the jurisdiction in which the Partnership may
conduct business; (ii) all amendments to the foregoing and to this Agreement
necessary to admit into the Partnership additional or substituted General
Partners pursuant to Section 11.2; (iii) all instruments that the General
Partner deems appropriate to reflect a change or modification of the Partnership
in accordance with the terms of this Agreement (including those necessary to
reflect additional Capital Contributions); and (iv) all conveyances and other
instruments that the General Partner deems appropriate to reflect the
dissolution and termination of the Partnership.
Section 14.6 Entire Agreement
------------------------------
This Agreement constitutes the entire agreement among the parties. This
Agreement supersedes any prior agreement or understanding among the parties and
may not be modified or amended in any manner other than as set forth herein.
-87-
<PAGE>
Section 14.7 Paragraph Titles
------------------------------
Article and section titles are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the text.
Section 14.8 Counterparts
--------------------------
This Agreement may be executed in several counterparts, all of which
together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the same counterpart except
that no counterpart shall be binding unless signed by the General Partner.
GEODYNE PRODUCTION COMPANY,
as General Partner
By: // Michael E. Luttrell//
---------------------------
Michael E. Luttrell
Executive Vice President
GEODYNE DEPOSITARY COMPANY,
as the Limited Partner
By: // Michael E. Luttrell //
-----------------------------
Michael E. Luttrell
Executive Vice President
FIRST AMENDMENT TO
CERTIFICATE OF LIMITED PARTNERSHIP AND
FIRST AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
PAINEWEBBER/GEODYNE ENERGY INCOME
LIMITED PARTNERSHIP III-A
The undersigned, desiring to amend its certificate of limited partnership
pursuant to the Oklahoma Revised Uniform Limited Partnership Act, as amended,
Okla. Stat., tit. 54, Section 301 et seq. (1991) (the "Act"), do hereby state,
and desiring to amend the Agreement of Limited Partnership of
PaineWebber/Geodyne Energy Income Limited Partnership III-A dated as of November
20, 1989, do hereby agree:
1. The name of the limited partnership is "Painewebber/Geodyne Energy
Income Limited Partnership III-A."
The date of filing of the original Certificate of Limited Partnership is
November 22, 1989.
2. The Certificate of Limited Partnership is hereby revised to change the
name of the Limited Partnership to the following:
Geodyne Energy Income Limited Partnership III-A
3. (a) The Certificate of Limited Partnership is hereby revised to change
the address of the limited partnership, which is the same address where the
records of the limited partnership are kept, to Two West Second Street, Tulsa,
Oklahoma 74103.
(b) The Certificate of Limited Partnership is hereby revised to change
the name and address for the registered agent for service of process to Geodyne
Production Company, Two West Second Street, Tulsa, OK 74103.
4. The Certificate of Limited Partnership is hereby revised to change the
name, mailing address, and business address of the general partner as follows:
Geodyne Production Company
Two West Second Street
Tulsa, OK 74103.
5. The latest day upon which the limited partnership is to dissolve is
November 20, 2009.
-1-
<PAGE>
6. The Agreement of Limited Partnership is hereby revised to replace the
first sentence of Section 2.1 with the following:
The Limited Partnership shall be conducted under the name Geodyne
Energy Income Limited Partnership III-A.
7. The Agreement of Limited Partnership is hereby revised to replace the
third and fourth sentences of Section 2.1 with the following:
The office and principal place of business of the Limited
Partnership shall be c/o Geodyne Production Company, Two West
Second Street, Tulsa, Oklahoma 74103. The agent for service of
process on the Limited Partnership shall be Geodyne Production
Company, Two West Second Street, Tulsa, OK 74103.
8. In all other respects, the Agreement of Limited Partnership is hereby
ratified and confirmed.
DATED: February 24, 1993
GENERAL PARTNER:
Geodyne Production Company
By: // Michael E. Luttrell //
-------------------------
Michael E. Luttrell
Executive Vice President
Geodyne Production Company
Attorney-in-fact for any
Substituted Limited Partners
By: // Michael E. Luttrell //
-------------------------
Michael E. Luttrell
Executive Vice President
LIMITED PARTNER:
Geodyne Depositary Company
By: // Michael E. Luttrell //
-------------------------
Michael E. Luttrell
Executive Vice President
-2-
FIRST AMENDMENT TO
CERTIFICATE OF LIMITED PAPTNERSHIP
AND
FIRST AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
PAINEWEBBER/GEODYNE ENERGY INCOME
LIMITED PARTNERSHIP III-B
The undersigned, desiring to amend its certificate of limited partnership
pursuant to the Oklahoma Revised Uniform Limited Partnership Act, as amended,
Okla. Stat., tit. 54, Section 301 et seq. (1991) (the "Act"), do hereby state,
and desiring to amend the Agreement of Limited Partnership of
PaineWebber/Geodyne Energy Income Limited Partnership III-B dated as of January
24, 1990, do hereby agree:
1. The name of the limited partnership is "PaineWebber/Geodyne Energy
Income Limited Partnership III-B."
The date of filing of the original Certificate of Limited Partnership is January
25, 1990
2. The Certificate of Limited Partnership is hereby revised to change the
name of the Limited Partnership to the following:
Geodyne Energy Income Limited Partnership III-B
3. (a) The Certificate of Limited Partnership is hereby revised to change
the address of the limited partnership, which is the same address where the
records of the limited partnership are kept, to Two West Second Street, Tulsa,
Oklahoma 74103.
(b) The Certificate of Limited Partnership is hereby revised to change
the name and address for the registered agent for service of process to Geodyne
Production Company, Two West Second Street, Tulsa, OK 74103.
4. The Certificate of Limited Partnership is hereby revised to change the
name, mailing address, and business address of the general partner as follows:
-1-
<PAGE>
Geodyne Production Company
Two West Second Street
Tulsa, OK 74103.
5. The latest day upon which the limited partnership is to dissolve is
January 24, 2010.
6. The Agreement of Limited Partnership is hereby revised to replace the
first sentence of Section 2.1 with the following:
The Limited Partnership shall be conducted under the name Geodyne
Energy Income Limited Partnership III-B.
7. The Agreement of Limited Partnership is hereby revised to replace the
third and fourth sentences of Section 2.1 with the following:
The office and principal place of business of the Limited
Partnership shall be c/o Geodyne Production Company, Two West
Second Street, Tulsa, Oklahoma 74103. The agent for service of
process on the Limited Partnership shall be Geodyne Production
Company, Two West Second Street, Tulsa, OK 74103.
8. In all other respects, the Agreement of Limited Partnership is hereby
ratified and confirmed.
DATED: February 24, 1993
GENERAL PARTNER:
Geodyne Production Company
By: // Michael E. Luttrell //
-------------------------
Michael E. Luttrell
Executive Vice President
-2-
<PAGE>
Geodyne Production Company
Attorney-in-fact for any
Substituted Limited Partners
By: // Michael E. Luttrell //
-------------------------
Michael E. Luttrell
Executive Vice President
LIMITED PARTNER:
Geodyne Depositary Company
By: // Michael E Luttrell //
------------------------
Michael E. Luttrell
Executive Vice President
-3-
FIRST AMENDMENT TO
CERTIFICATE OF LIMITED PARTNERSHIP
AND
FIRST AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED
PARTNERSHIP III-C
The undersigned, desiring to amend its certificate of limited partnership
pursuant to the Oklahoma Revised Uniform Limited Partnership Act, as amended,
Okla. Stat., tit. 54, Section 301 et seq. (1991) (the "Act"), do hereby state,
and desiring to amend the Agreement of Limited Partnership of
PaineWebber/Geodyne Energy Income Limited Partnership III-C dated as of February
26, 1990, do hereby agree:
1. The name of the limited partnership is "PaineWebber/Geodyne Energy
Income Limited Partnership III-C."
The date of filing of the original Certificate of Limited Partnership is
February 27, 1990.
2. The Certificate of Limited Partnership is hereby revised to change the
name of the Limited Partnership to the following:
Geodyne Energy Income Limited Partnership III-C
3. (a) The Certificate of Limited Partnership is hereby revised to change
the address of the limited partnership, which is the same address where the
records of the limited partnership are kept, to Two West Second Street, Tulsa,
Oklahoma 74103.
(b) The Certificate of Limited Partnership is hereby revised to change
the name and address for the registered agent for service of process to Geodyne
Production Company, Two West Second Street, Tulsa, OK 74103.
4. The Certificate of Limited Partnership is hereby revised to change the
name, mailing address, and business address of the general partner as follows:
-1-
<PAGE>
Geodyne Production Company
Two West Second Street
Tulsa, OK 74103.
5. The latest day upon which the limited partnership is to dissolve is
February 26, 2010.
6. The Agreement of Limited Partnership is hereby revised to replace the
first sentence of Section 2.1 with the following:
The Limited Partnership shall be conducted under the name Geodyne
Energy Income Limited Partnership III-C.
7. The Agreement of Limited Partnership is hereby revised to replace the
third and fourth sentences of Section 2.1 with the following:
The office and principal place of business of the Limited
Partnership shall be c/o Geodyne Production Company, Two West
Second Street, Tulsa, Oklahoma 74103. The agent for service of
process on the Limited Partnership shall be Geodyne Production
Company, Two West Second Street, Tulsa, OK 74103.
8. In all other respects, the Agreement of Limited Partnership is hereby
ratified and confirmed.
DATED: February 24, 1993
GENERAL PARTNER:
Geodyne Production Company
By: //Michael E. Luttrell //
------------------------
Michael E. Luttrell
Executive Vice President
-2-
<PAGE>
Geodyne Production Company
Attorney-in-fact for any
Substituted Limited Partners
By: // Michael E. Luttrell
----------------------
Michael E. Luttrell
Executive Vice President
LIMITED PARTNER:
Geodyne Depositary Company
By: // Michael E. Luttrell//
------------------------
Michael E. Luttrell
Executive Vice President
-3-
Second Amendment to
Agreement of Limited Partnership of
Geodyne Energy Income Limited Partnership III-A
This Second Amendment to Agreement of Limited Partnership of Geodyne Energy
Income Limited Partnership III-A (the "Partnership") is entered into by and
between Geodyne Production Company ("Production"), a Delaware corporation, as
General Partner, Geodyne Depositary Company ("Depositary"), a Delaware
corporation, as the Limited Partner, and all Substituted Limited Partners
admitted to the Partnership.
WHEREAS, on November 20, 1989, Production and Depositary executed and
entered into that certain Agreement of Limited Partnership of the Partnership
(the "Agreement"); and
WHEREAS, on February 25, 1993, Production executed and entered into that
certain First Amendment to the Agreement whereby it changed (i) the name of the
Partnership from "PaineWebber/Geodyne Energy Income Partnership III-A" to
"Geodyne Energy Income Limited Partnership III-A", (ii) the address of the
Partnership's principal place of business, and (iii) the address for the
Partnership's agent for service of process; and
WHEREAS, Section 11.1 of the Agreement provides that the General Partner
may, without prior notice or consent of any Unit Holder, amend any provision of
this Agreement if, in its opinion, such amendment does not have a material
adverse effect upon the Unit Holders; and
WHEREAS, Production as General Partner desires to amend the Agreement in
order to (i) expedite the method of accepting transfers of Unit Holders' Units
in the Partnership and (ii) provide for an optional right of
repurchase/redemption which may be exercised by the Unit Holders.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
I. The third sentence contained in Section 7.3 of the Agreement is hereby
amended and restated as follows:
Unit Holders becoming Substituted Limited Partners will be admitted
to the Partnership monthly.
-1-
<PAGE>
II. The second sentence contained in Section 7.3 of the Agreement, which
sentence required the payment by Unit Holders of a fee (not to exceed
$100) for legal and administrative costs associated with the transfer of
a Partnership Unit, is hereby deleted.
III. The first sentence contained in Section 8.1E of the Agreement is hereby
amended and restated as follows:
Unless otherwise provided by the General Partner, any sale,
assignment or transfer of Units shall be recognized by the
Partnership as of the first business day of the calendar month
following the approval of such assignment or transfer by the General
Partner, or as soon thereafter as practicable.
IV. The second sentence of Section 8.1E of the Agreement referring to
quarterly approvals of transfers is hereby deleted.
V. Section 8.3I of the Agreement, which section required the payment by Unit
Holders of a fee (not to exceed $50) for expenses associated with a
transfer is hereby deleted.
VI. Section 8.2B(3) of the Agreement, which section required the payment by
Unit Holders of a fee (not to exceed $50) for expenses associated with
the General Partner's acceptance of a Substituted Limited Partner is
hereby deleted.
VII. The first full sentence of Section 8.1(iv) of the Agreement is hereby
amended and restated as follows:
For purposes of this subsection, the "Permitted Transfers" shall
mean: (1) transfers in which the basis of the Units in the hands of
the transferee is determined, in whole or in part, by reference to
its basis in the hands of the transferor or is determined under
Section 732 of the Code; (2) transfers at death; (3) transfers
between members of a family (as defined in Section 267(c)(4) of the
Code); (4) the issuance of Units by or on behalf of the Partnership
in exchange for cash, property or services; (5) distributions from a
retirement plan qualified under Section 401(a) of the Code; (6)
Block Transfers; and (7) transfers pursuant to Article Fifteen of
this Agreement.
-2-
<PAGE>
VIII. The Agreement is hereby amended to provide for a new Article Fifteen. Said
Article Fifteen is hereby stated as follows:
Article Fifteen
Optional Repurchase/Redemption Provisions
Section 15.1. Optional Repurchase Right.
Any Unit Holder or Substituted Limited Partner shall have the
right, at his option, to present his Units to the General Partner or
its designated Affiliate for repurchase on the basis set forth in
this Article Fifteen.
Section 15.2. Procedure for Repurchase.
A. As of December 31, 1992 and annually thereafter (the
"Appraisal Date") the General Partner shall appraise the Proved
Reserves and other assets of the Partnership pursuant to the
provisions set forth herein and shall assign a repurchase price (the
"Repurchase Price") to the Unit Holders' Units in the Partnership in
accordance with the provisions set forth herein.
B. In arriving at the Repurchase Price, the General Partner
shall consider those factors deemed relevant by it including,
without limitation, the following:
(i) the present value of the estimated future net revenues
of the Partnership's Proved Reserves, calculated as
described below; and
(ii) the book value of all other Partnership assets and
liabilities.
Section 15.3. Calculation of Present Value of the
Partnership's Estimated Future Net Revenues.
In calculating the present value of the Partnership's Estimated
Future Net Revenues the General Partner shall use the petroleum
engineering reports and other petroleum reserve information required
to be furnished to the Unit Holders pursuant to Section 10.4C of the
Agreement.
-3-
<PAGE>
Future gross revenues expected to be derived from the production
and sale of the Proved Reserves attributable to the Partnership's
Producing Properties shall be estimated using either (i) escalations
of future sales prices of Hydrocarbons supplied by the General
Partner (the "Escalated Case") or (ii) sales prices of Hydrocarbons
provided by Regulation S-X adopted by the Securities and Exchange
Commission (the "SEC Case"), as the General Partner may determine in
its sole discretion.
Future net revenues shall be calculated by deducting anticipated
expenses (using either (i) escalations of future costs supplied by
the General Partner if the General Partner adopted the Escalated
Case with respect to future sales prices of Hydrocarbons or (ii)
constant future costs if the General Partner adopted the SEC Case
with respect to future sales prices of Hydrocarbons) from estimated
future gross revenues.
The present value of the future net revenues shall be calculated
by discounting the estimated future net revenues at either 10% (if
the General Partner employed future pricing criteria in accordance
with the SEC Case) or that rate per annum which is one percentage
point higher than the prime rate of interest of The Chase Manhattan
Bank, N.A. or any successor bank, as of the Appraisal Date (if the
General Partner employed pricing criteria in accordance with the
Escalated Case, provided, however, that such discount rate will not
exceed 18% per annum and will be no less than 10% per annum).
Section 15.4. Risk Reduction.
In determining the Repurchase Price for Unit Holders pursuant to
this Article Fifteen, the present value of the Partnership's Proved
Developed Producing Reserves shall be reduced by 25% for risk and
the present value of all other categories of Proved Reserves shall
be reduced by 35% for risk. The risk reductions shall be subject to
upward or downward adjustment by the General Partner if, during the
period between the Appraisal Date and the Effective Date (as defined
in Section 15.5), there has been a material increase or decrease in
the current price of oil or gas or in the estimated amount of the
Partnership's Proved Reserves.
-4-
<PAGE>
Section 15.5. Tender Procedure.
Upon completion of the appraisal of the Partnership's assets as
of the Appraisal Date, the General Partner shall notify each Unit
Holder of the Repurchase Price and his proportionate share thereof
and either the General Partner or one of its Affiliates will offer
to purchase such Unit Holder's Units in exchange for such Unit
Holder's proportionate share of the Repurchase Price (a "Repurchase
Offer"). Any Unit Holder desiring to do so may accept such
Repurchase Offer by notifying the General Partner of his election.
Unit Holders so notifying the General Partner shall be referred to
herein as "Electing Unit Holders". The General Partner or its
designated Affiliate shall thereupon promptly pay to each Electing
Unit Holder, his proper share of the Repurchase Price, calculated as
herein set forth, within 30 days from the date which a properly
drawn assignment of such Electing Unit Holder's interest, free and
clear of all liens and encumbrances, is tendered to and accepted by
the General Partner or its designated Affiliate (the "Effective
Date"). Upon the acquisition of an Electing Unit Holder's Units, the
General Partner or its designated Affiliate shall, as of the
Effective Date of such acquisition, succeed to all the rights and
obligations attributable to such interest.
Section 15.6. Monthly Adjustment to Repurchase Price.
The Repurchase Price shall be recalculated monthly with the
Repurchase Price being reduced by the amount of any cash
distributions to Unit Holders during the period from the Appraisal
Date to the date of the payment of the Repurchase Price and shall
otherwise be adjusted to reflect the effect of material operations
during such period, including a material increase or decrease in the
current price of oil or gas or in the estimated amount of the
Partnership's Proved Reserves. In the event the Repurchase Price is
adjusted for any reason other than to reflect the payment of cash
distributions, the General Partner shall provide written
notification of such adjustment to the Unit Holders at least ten
(10) business days prior to acceptance of Units for purchase.
-5-
<PAGE>
Section 15.7. Limitation on Units Repurchased.
A. At the sole discretion of the General Partner, the General
Partner or its designated Affiliate may either (i) limit the time
period in which it will accept tendered Units for repurchase or (ii)
limit the amount of Units to be accepted for repurchase; provided,
however, that in any event the annual repurchase offer will (i)
remain open for at least thirty (30) days and (ii) the General
Partner or its designated Affiliate will offer to annually
repurchase (and will purchase validly presented Units) at least 10%
of the outstanding Units of the Partnership. In the event the
General Partner or its designated Affiliate imposes a limitation,
the General Partner will either (i) specify such limitation(s) in
the annual Repurchase Offer mailed to the Unit Holders or (ii)
provide all Unit Holders with written notification of such
limitation(s) at least thirty (30) days prior to the effective date
of any such limitation(s).
B. In the event the General Partner imposes a limitation upon
the number of Units to be repurchased in the Partnership, and the
amount of Units tendered, but not repurchased, exceeds such
limitation, such tendered Units will be accepted for repurchase by
lot.
C. In addition, in order to avoid certain possible adverse tax
consequences, the General Partner may, in order to comply with the
regulations or procedures under Section 469(k) of the Internal
Revenue Code of 1986, as amended, relating to "publicly traded
partnerships," (i) delay or defer the Effective Date of any
repurchase and (ii) limit the total number of Units of any
Partnership to be repurchased in any 12-month period to the maximum
number provided in such regulations and procedures. In the event of
such delay or deferral, the General Partner shall notify the
Electing Unit Holder of the reasons therefor and shall provide the
Electing Unit Holder with the option to withdraw his tender of Units
for repurchase.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the 4th day of August, 1993.
Geodyne Production Company
as General Partner
By: // C. Philip Tholen //
----------------------
C. Philip Tholen
President
-6-
<PAGE>
Geodyne Depositary Company,
as the Limited Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
Senior Vice President
Geodyne Production Company,
as Attorney-in-Fact for
all Substituted Limited Partners
By: // Drew S. Phillips //
----------------------
Drew S. Phillips
Vice President - Controller
-7-
<PAGE>
Second Amendment to
Agreement of Limited Partnership of
Geodyne Energy Income Limited Partnership III-B
This Second Amendment to Agreement of Limited Partnership of Geodyne Energy
Income Limited Partnership III-B (the "Partnership") is entered into by and
between Geodyne Production Company ("Production"), a Delaware corporation, as
General Partner, Geodyne Depositary Company ("Depositary"), a Delaware
corporation, as the Limited Partner, and all Substituted Limited Partners
admitted to the Partnership.
WHEREAS, on January 24, 1990, Production and Depositary executed and
entered into that certain Agreement of Limited Partnership of the Partnership
(the "Agreement"); and
WHEREAS, on February 25, 1993, Production executed and entered into that
certain First Amendment to the Agreement whereby it changed (i) the name of the
Partnership from "PaineWebber/Geodyne Energy Income Partnership III-B" to
"Geodyne Energy Income Limited Partnership III-B", (ii) the address of the
Partnership's principal place of business, and (iii) the address for the
Partnership's agent for service of process; and
WHEREAS, Section 11.1 of the Agreement provides that the General Partner
may, without prior notice or consent of any Unit Holder, amend any provision of
this Agreement if, in its opinion, such amendment does not have a material
adverse effect upon the Unit Holders; and
WHEREAS, Production as General Partner desires to amend the Agreement in
order to (i) reflect the name change and address changes described above, (ii)
expedite the method of accepting transfers of Unit Holders' Units in the
Partnership and (iii) provide for an optional right of repurchase/redemption
which may be exercised by the Unit Holders.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
I. The third sentence contained in Section 7.3 of the Agreement is hereby
amended and restated as follows:
-1-
<PAGE>
Unit Holders becoming Substituted Limited Partners will be admitted
to the Partnership monthly.
II. The second sentence contained in Section 7.3 of the Agreement, which
sentence required the payment by Unit Holders of a fee (not to exceed
$100) for legal and administrative costs associated with the transfer of a
Partnership Unit, is hereby deleted.
III. The first sentence contained in Section 8.1E of the Agreement is hereby
amended and restated as follows:
Unless otherwise provided by the General Partner, any sale,
assignment or transfer of Units shall be recognized by the
Partnership as of the first business day of the calendar month
following the approval of such assignment or transfer by the General
Partner, or as soon thereafter as practicable.
IV. The second sentence of Section 8.1E of the Agreement referring to
quarterly approvals of transfers is hereby deleted.
V. Section 8.3I of the Agreement, which section required the payment by Unit
Holders of a fee (not to exceed $50) for expenses associated with a
transfer is hereby deleted.
VI. Section 8.2B(3) of the Agreement, which section required the payment by
Unit Holders of a fee (not to exceed $50) for expenses associated with the
General Partner's acceptance of a Substituted Limited Partner is hereby
deleted.
VII. The first full sentence of Section 8.1(iv) of the Agreement is hereby
amended and restated as follows:
For purposes of this subsection, the "Permitted Transfers" shall
mean: (1) transfers in which the basis of the Units in the hands of
the transferee is determined, in whole or in part, by reference to
its basis in the hands of the transferor or is determined under
Section 732 of the Code; (2) transfers at death; (3) transfers
between members of a family (as defined in Section 267(c)(4) of the
Code); (4) the issuance of Units by or on behalf of the Partnership
in exchange for cash, property or services; (5) distributions from a
retirement plan qualified under Section 401(a) of the Code; (6)
Block Transfers; and (7) transfers pursuant to Article Fifteen of
this Agreement.
-2-
<PAGE>
VIII. The Agreement is hereby amended to provide for a new Article Fifteen. Said
Article Fifteen is hereby stated as follows:
Article Fifteen
Optional Repurchase/Redemption Provisions
Section 15.1. Optional Repurchase Right.
----------------------------------------
Any Unit Holder or Substituted Limited Partner shall have the
right, at his option, to present his Units to the General Partner or
its designated Affiliate for repurchase on the basis set forth in
this Article Fifteen.
Section 15.2. Procedure for Repurchase.
---------------------------------------
A. As of December 31, 1992 and annually thereafter (the
"Appraisal Date") the General Partner shall appraise the Proved
Reserves and other assets of the Partnership pursuant to the
provisions set forth herein and shall assign a repurchase price (the
"Repurchase Price") to the Unit Holders' Units in the Partnership in
accordance with the provisions set forth herein.
B. In arriving at the Repurchase Price, the General Partner
shall consider those factors deemed relevant by it including,
without limitation, the following:
(i) the present value of the estimated future net revenues
of the Partnership's Proved Reserves, calculated as
described below; and
(ii) the book value of all other Partnership assets and
liabilities.
Section 15.3. Calculation of Present Value of the
Partnership's Estimated Future Net Revenues.
----------------------------------------------------------
In calculating the present value of the Partnership's Estimated
Future Net Revenues the General Partner shall use the petroleum
engineering reports and other petroleum reserve information required
to be furnished to the Unit Holders pursuant to Section 10.4C of the
Agreement.
-3-
<PAGE>
Future gross revenues expected to be derived from the production
and sale of the Proved Reserves attributable to the Partnership's
Producing Properties shall be estimated using either (i) escalations
of future sales prices of Hydrocarbons supplied by the General
Partner (the "Escalated Case") or (ii) sales prices of Hydrocarbons
provided by Regulation S-X adopted by the Securities and Exchange
Commission (the "SEC Case"), as the General Partner may determine in
its sole discretion.
Future net revenues shall be calculated by deducting anticipated
expenses (using either (i) escalations of future costs supplied by
the General Partner if the General Partner adopted the Escalated
Case with respect to future sales prices of Hydrocarbons or (ii)
constant future costs if the General Partner adopted the SEC Case
with respect to future sales prices of Hydrocarbons) from estimated
future gross revenues.
The present value of the future net revenues shall be calculated
by discounting the estimated future net revenues at either 10% (if
the General Partner employed future pricing criteria in accordance
with the SEC Case) or that rate per annum which is one percentage
point higher than the prime rate of interest of The Chase Manhattan
Bank, N.A. or any successor bank, as of the Appraisal Date (if the
General Partner employed pricing criteria in accordance with the
Escalated Case, provided, however, that such discount rate will not
exceed 18% per annum and will be no less than 10% per annum).
Section 15.4. Risk Reduction.
-----------------------------
In determining the Repurchase Price for Unit Holders pursuant to
this Article Fifteen, the present value of the Partnership's Proved
Developed Producing Reserves shall be reduced by 25% for risk and
the present value of all other categories of Proved Reserves shall
be reduced by 35% for risk. The risk reductions shall be subject to
upward or downward adjustment by the General Partner if, during the
period between the Appraisal Date and the Effective Date (as defined
in Section 15.5), there has been a material increase or decrease in
the current price of oil or gas or in the estimated amount of the
Partnership's Proved Reserves.
-4-
<PAGE>
Section 15.5. Tender Procedure.
-------------------------------
Upon completion of the appraisal of the Partnership's assets as
of the Appraisal Date, the General Partner shall notify each Unit
Holder of the Repurchase Price and his proportionate share thereof
and either the General Partner or one of its Affiliates will offer
to purchase such Unit Holder's Units in exchange for such Unit
Holder's proportionate share of the Repurchase Price (a "Repurchase
Offer"). Any Unit Holder desiring to do so may accept such
Repurchase Offer by notifying the General Partner of his election.
Unit Holders so notifying the General Partner shall be referred to
herein as "Electing Unit Holders". The General Partner or its
designated Affiliate shall thereupon promptly pay to each Electing
Unit Holder, his proper share of the Repurchase Price, calculated as
herein set forth, within 30 days from the date which a properly
drawn assignment of such Electing Unit Holder's interest, free and
clear of all liens and encumbrances, is tendered to and accepted by
the General Partner or its designated Affiliate (the "Effective
Date"). Upon the acquisition of an Electing Unit Holder's Units, the
General Partner or its designated Affiliate shall, as of the
Effective Date of such acquisition, succeed to all the rights and
obligations attributable to such interest.
Section 15.6. Monthly Adjustment to Repurchase Price
-----------------------------------------------------
The Repurchase Price shall be recalculated monthly with the
Repurchase Price being reduced by the amount of any cash
distributions to Unit Holders during the period from the Appraisal
Date to the date of the payment of the Repurchase Price and shall
otherwise be adjusted to reflect the effect of material operations
during such period, including a material increase or decrease in the
current price of oil or gas or in the estimated amount of the
Partnership's Proved Reserves. In the event the Repurchase Price is
adjusted for any reason other than to reflect the payment of cash
distributions, the General Partner shall provide written
notification of such adjustment to the Unit Holders.
-5-
<PAGE>
Section 15.7. Limitation on Units Repurchased.
----------------------------------------------
A. At the sole discretion of the General Partner, the General
Partner or its designated Affiliate may either (i) limit the time
period in which it will accept tendered Units for repurchase or (ii)
limit the amount of Units to be accepted for repurchase; provided,
however, that in any event the annual repurchase offer will (i)
remain open for at least thirty (30) days and (ii) the General
Partner or its designated Affiliate will offer to annually
repurchase (and will purchase validly presented units) at least 10%
of the outstanding Units of the Partnership. In the event the
General Partner or its designated Affiliate imposes a limitation,
the General Partner will either (i) specify such limitation(s) in
the annual Repurchase Offer mailed to the Unit Holders or (ii)
provide all Unit Holders with written notification of such
limitation(s) at least thirty (30) days prior to the effective date
of any such limitation(s).
B. In the event the General Partner imposes a limitation upon
the number of Units to be repurchased in the Partnership, and the
amount of Units tendered, but not repurchased, exceeds such
limitation, such tendered Units will be accepted for repurchase by
lot.
C. In addition, in order to avoid certain possible adverse tax
consequences, the General Partner may, in order to comply with the
regulations or procedures under Section 469(k) of the Internal
Revenue Code of 1986, as amended, relating to "publicly traded
partnerships," (i) delay or defer the Effective Date of any
repurchase and (ii) limit the total number of Units of any
Partnership to be repurchased in any 12-month period to the maximum
number provided in such regulations and procedures. In the event of
such delay or deferral, the General Partner shall notify the
Electing Unit Holder of the reasons therefor and shall provide the
Electing Unit Holder with the option to withdraw his tender of Units
for repurchase.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the 4th day of August, 1993.
Geodyne Production Company
as General Partner
By: // C. Philip Tholen //
----------------------
C. Philip Tholen
President
-6-
<PAGE>
Geodyne Depositary Company,
as the Limited Partner
By: // Dennis R. Neill //
----------------------
Dennis R. Neill
Senior Vice President
Geodyne Production Company,
as Attorney-in-Fact for
all Substituted Limited Partners
By: // Drew S. Phillips //
----------------------
Drew S. Phillips
Vice President - Controller
-7-
Second Amendment to
Agreement of Limited Partnership of
Geodyne Energy Income Limited Partnership III-C
This Second Amendment to Agreement of Limited Partnership of Geodyne Energy
Income Limited Partnership III-C (the "Partnership") is entered into by and
between Geodyne Production Company ("Production"), a Delaware corporation, as
General Partner, Geodyne Depositary Company ("Depositary"), a Delaware
corporation, as the Limited Partner, and all Substituted Limited Partners
admitted to the Partnership.
WHEREAS, on February 26, 1990, Production and Depositary executed and
entered into that certain Agreement of Limited Partnership of the Partnership
(the "Agreement"); and
WHEREAS, on February 25, 1993, Production executed and entered into that
certain First Amendment to the Agreement whereby it changed (i) the name of the
Partnership from "PaineWebber/Geodyne Energy Income Partnership III-C" to
"Geodyne Energy Income Limited Partnership III-C", (ii) the address of the
Partnership's principal place of business, and (iii) the address for the
Partnership's agent for service of process; and
WHEREAS, Section 11.1 of the Agreement provides that the General Partner
may, without prior notice or consent of any Unit Holder, amend any provision of
this Agreement if, in its opinion, such amendment does not have a material
adverse effect upon the Unit Holders; and
WHEREAS, Production as General Partner desires to amend the Agreement in
order to (i) expedite the method of accepting transfers of Unit Holders' Units
in the Partnership and (ii) provide for an optional right of
repurchase/redemption which may be exercised by the Unit Holders.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
I. The third sentence contained in Section 7.3 of the Agreement is hereby
amended and restated as follows:
-1-
<PAGE>
Unit Holders becoming Substituted Limited Partners will be admitted
to the Partnership monthly.
II. The second sentence contained in Section 7.3 of the Agreement, which
sentence required the payment by Unit Holders of a fee (not to exceed
$100) for legal and administrative costs associated with the transfer of
a Partnership Unit, is hereby deleted.
III. The first sentence contained in Section 8.1E of the Agreement is hereby
amended and restated as follows:
Unless otherwise provided by the General Partner, any sale,
assignment or transfer of Units shall be recognized by the
Partnership as of the first business day of the calendar month
following the approval of such assignment or transfer by the General
Partner, or as soon thereafter as practicable.
IV. The second sentence of Section 8.1E of the Agreement referring to
quarterly approvals of transfers is hereby deleted.
V. Section 8.3I of the Agreement, which section required the payment by Unit
Holders of a fee (not to exceed $50) for expenses associated with a
transfer is hereby deleted.
VI. Section 8.2B(3) of the Agreement, which section required the payment by
Unit Holders of a fee (not to exceed $50) for expenses associated with the
General Partner's acceptance of a Substituted Limited Partner is hereby
deleted.
VII. The first full sentence of Section 8.1(iv) of the Agreement is hereby
amended and restated as follows:
For purposes of this subsection, the "Permitted Transfers" shall
mean: (1) transfers in which the basis of the Units in the hands of
the transferee is determined, in whole or in part, by reference to
its basis in the hands of the transferor or is determined under
Section 732 of the Code; (2) transfers at death; (3) transfers
between members of a family (as defined in Section 267(c)(4) of the
Code); (4) the issuance of Units by or on behalf of the Partnership
in exchange for cash, property or services; (5) distributions from a
retirement plan qualified under Section 401(a) of the Code; (6)
Block Transfers; and (7) transfers pursuant to Article Fifteen of
this Agreement.
-2-
<PAGE>
VIII. The Agreement is hereby amended to provide for a new Article Fifteen. Said
Article Fifteen is hereby stated as follows:
Article Fifteen
Optional Repurchase/Redemption Provisions
Section 15.1. Optional Repurchase Right.
----------------------------------------
Any Unit Holder or Substituted Limited Partner shall have the
right, at his option, to present his Units to the General Partner or
its designated Affiliate for repurchase on the basis set forth in
this Article Fifteen.
Section 15.2. Procedure for Repurchase.
---------------------------------------
A. As of December 31, 1992 and annually thereafter (the
"Appraisal Date") the General Partner shall appraise the Proved
Reserves and other assets of the Partnership pursuant to the
provisions set forth herein and shall assign a repurchase price (the
"Repurchase Price") to the Unit Holders' Units in the Partnership in
accordance with the provisions set forth herein.
B. In arriving at the Repurchase Price, the General Partner
shall consider those factors deemed relevant by it including,
without limitation, the following:
(i) the present value of the estimated future net revenues
of the Partnership's Proved Reserves, calculated as
described below; and
(ii) the book value of all other Partnership assets and
liabilities.
Section 15.3. Calculation of Present Value of the
--------------------------------------------------
Partnership's Estimated Future Net Revenues.
-------------------------------------------
In calculating the present value of the Partnership's Estimated
Future Net Revenues the General Partner shall use the petroleum
engineering reports and other petroleum reserve information required
to be furnished to the Unit Holders pursuant to Section 10.4C of the
Agreement.
-3-
<PAGE>
Future gross revenues expected to be derived from the production
and sale of the Proved Reserves attributable to the Partnership's
Producing Properties shall be estimated using either (i) escalations
of future sales prices of Hydrocarbons supplied by the General
Partner (the "Escalated Case") or (ii) sales prices of Hydrocarbons
provided by Regulation S-X adopted by the Securities and Exchange
Commission (the "SEC Case"), as the General Partner may determine in
its sole discretion.
Future net revenues shall be calculated by deducting anticipated
expenses (using either (i) escalations of future costs supplied by
the General Partner if the General Partner adopted the Escalated
Case with respect to future sales prices of Hydrocarbons or (ii)
constant future costs if the General Partner adopted the SEC Case
with respect to future sales prices of Hydrocarbons) from estimated
future gross revenues.
The present value of the future net revenues shall be calculated
by discounting the estimated future net revenues at either 10% (if
the General Partner employed future pricing criteria in accordance
with the SEC Case) or that rate per annum which is one percentage
point higher than the prime rate of interest of The Chase Manhattan
Bank, N.A. or any successor bank, as of the Appraisal Date (if the
General Partner employed pricing criteria in accordance with the
Escalated Case, provided, however, that such discount rate will not
exceed 18% per annum and will be no less than 10% per annum).
Section 15.4. Risk Reduction.
-----------------------------
In determining the Repurchase Price for Unit Holders pursuant to
this Article Fifteen, the present value of the Partnership's Proved
Developed Producing Reserves shall be reduced by 25% for risk and
the present value of all other categories of Proved Reserves shall
be reduced by 35% for risk. The risk reductions shall be subject to
upward or downward adjustment by the General Partner if, during the
period between the Appraisal Date and the Effective Date (as defined
in Section 15.5), there has been a material increase or decrease in
the current price of oil or gas or in the estimated amount of the
Partnership's Proved Reserves.
-4-
<PAGE>
Section 15.5. Tender Procedure.
-------------------------------
Upon completion of the appraisal of the Partnership's assets as
of the Appraisal Date, the General Partner shall notify each Unit
Holder of the Repurchase Price and his proportionate share thereof
and either the General Partner or one of its Affiliates will offer
to purchase such Unit Holder's Units in exchange for such Unit
Holder's proportionate share of the Repurchase Price (a "Repurchase
Offer"). Any Unit Holder desiring to do so may accept such
Repurchase Offer by notifying the General Partner of his election.
Unit Holders so notifying the General Partner shall be referred to
herein as "Electing Unit Holders". The General Partner or its
designated Affiliate shall thereupon promptly pay to each Electing
Unit Holder, his proper share of the Repurchase Price, calculated as
herein set forth, within 30 days from the date which a properly
drawn assignment of such Electing Unit Holder's interest, free and
clear of all liens and encumbrances, is tendered to and accepted by
the General Partner or its designated Affiliate (the "Effective
Date"). Upon the acquisition of an Electing Unit Holder's Units, the
General Partner or its designated Affiliate shall, as of the
Effective Date of such acquisition, succeed to all the rights and
obligations attributable to such interest.
Section 15.6. Monthly Adjustment to Repurchase Price.
----------------------------------------------------
The Repurchase Price shall be recalculated monthly with the
Repurchase Price being reduced by the amount of any cash
distributions to Unit Holders during the period from the Appraisal
Date to the date of the payment of the Repurchase Price and shall
otherwise be adjusted to reflect the effect of material operations
during such period, including a material increase or decrease in the
current price of oil or gas or in the estimated amount of the
Partnership's Proved Reserves. In the event the Repurchase Price is
adjusted for any reason other than to reflect the payment of cash
distributions, the General Partner shall provide written
notification of such adjustment to the Unit Holders at least ten
(10) business days prior to acceptance of Units for purchase.
-5-
<PAGE>
Section 15.7. Limitation on Units Repurchased.
---------------------------------------------
A. At the sole discretion of the General Partner, the General
Partner or its designated Affiliate may either (i) limit the time
period in which it will accept tendered Units for repurchase or (ii)
limit the amount of Units to be accepted for repurchase; provided,
however, that in any event the annual repurchase offer will (i)
remain open for at least thirty (30) days, (ii) the General Partner
or its designated Affiliate will offer to annually repurchase (and
will purchase validly presented Units) at least 10% of the
outstanding Units of the Partnership. In the event the General
Partner or its designated Affiliate imposes a limitation, the
General Partner will either (i) specify such limitation(s) in the
annual Repurchase Offer mailed to the Unit Holders or (ii) provide
all Unit Holders with written notification of such limitation(s) at
least thirty (30) days prior to the effective date of any such
limitation(s).
B. In the event the General Partner imposes a limitation upon
the number of Units to be repurchased in the Partnership, and the
amount of Units tendered, but not repurchased, exceeds such
limitation, such tendered Units will be accepted for repurchase by
lot.
C. In addition, in order to avoid certain possible adverse tax
consequences, the General Partner may, in order to comply with the
regulations or procedures under Section 469(k) of the Internal
Revenue Code of 1986, as amended, relating to "publicly traded
partnerships," (i) delay or defer the Effective Date of any
repurchase and (ii) limit the total number of Units of any
Partnership to be repurchased in any 12-month period to the maximum
number provided in such regulations and procedures. In the event of
such delay or deferral, the General Partner shall notify the
Electing Unit Holder of the reasons therefor and shall provide the
Electing Unit Holder with the option to withdraw his tender of Units
for repurchase.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the 4th day of August, 1993.
Geodyne Production Company
as General Partner
By: // C. Phillip Tholen //
-----------------------
C. Philip Tholen
President
-6-
<PAGE>
Geodyne Depositary Company,
as the Limited Partner
By: // Dennis R. Neill //
-----------------------
Dennis R. Neill
Senior Vice President
Geodyne Production Company,
as Attorney-in-Fact for
all Substituted Limited Partners
By: // Drew S. Phillips //
----------------------
Drew S. Phillips
Vice President - Controller
-7-
Third Amendment to
Agreement of Limited Partnership of
Geodyne Energy Income Limited Partnership III-A
This Third Amendment to Agreement of Limited Partnership of Geodyne Energy
Income Limited Partnership III-A (the "Partnership") is entered into by and
between Geodyne Production Company ("Production"), a Delaware corporation, as
General Partner, Geodyne Depositary Company ("Depositary"), a Delaware
corporation, as the Limited Partner, and all Substituted Limited Partners
admitted to the Partnership.
WHEREAS, on November 20, 1989, Production and Depositary executed and
entered into that certain Agreement of Limited Partnership of the Partnership
(the "Agreement"); and
WHEREAS, on February 25, 1993, Production executed and entered into that
certain First Amendment to the Agreement of Limited Partnership whereby it
changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income
Partnership III-A to "Geodyne Energy Income Limited Partnership III-A, (ii) the
address of the Partnership's principal place of business, and (iii) the address
for the Partnership's agent for service of process; and
WHEREAS, on August 4, 1993, Production executed and entered into that
certain Second Amendment to the Agreement of Limited Partnership in order to (i)
expedite the method of accepting transfers of Unit Holders' Units in the
Partnership and (ii) provide for an optional right of repurchase/redemption
which may be exercised by the Unit Holders; and
WHEREAS, Section 11.1 of the Agreement provides that the General Partner
may, without prior notice or consent of any Unit Holder, amend any provision of
this Agreement if, in its opinion, such amendment does not have a material
adverse effect upon the Unit Holders; and
WHEREAS, Production as General Partner desires to amend the Agreement in
order to allow transfers of Units facilitated through a matching service to the
extent they otherwise comply with Internal Revenue Service transfer regulations
applicable to non-permitted transfers for non-publicly traded limited
partnerships.
NNOW, THEREFORE, in consideration of the covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
I. Section 8.1.A(ii) of the Agreement is hereby deleted.
II. The remaining subsections of Section 8.1A shall be renumbered
accordingly.
-1-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
this 31st day August, 1995.
GEODYNE PRODUCTION COMPANY,
as General Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
Senior Vice President
GEODYNE DEPOSITARY COMPANY,
as the Limited Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
Senior Vice President
GEODYNE PRODUCTION COMPANY,
as Attorney-in-Fact for all
Substituted Limited Partners
By: // Drew S. Phillips //
----------------------
Drew S. Phillips
Vice President-Controller
-2-
Third Amendment to
Agreement of Limited Partnership of
Geodyne Energy Income Limited Partnership III-B
This Third Amendment to Agreement of Limited Partnership of Geodyne Energy
Income Limited Partnership III-B (the "Partnership") is entered into by and
between Geodyne Production Company ("Production"), a Delaware corporation, as
General Partner, Geodyne Depositary Company ("Depositary"), a Delaware
corporation, as the Limited Partner, and all Substituted Limited Partners
admitted to the Partnership.
WHEREAS, on January 24, 1990, Production and Depositary executed and
entered into that certain Agreement of Limited Partnership of the Partnership
(the "Agreement"); and
WHEREAS, on February 25, 1993, Production executed and entered into that
certain First Amendment to the Agreement of Limited Partnership whereby it
changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income
Partnership III-B to "Geodyne Energy Income Limited Partnership III-B, (ii) the
address of the Partnership's principal place of business, and (iii) the address
for the Partnership's agent for service of process; and
WHEREAS, on August 4, 1993, Production executed and entered into that
certain Second Amendment to the Agreement of Limited Partnership in order to (i)
expedite the method of accepting transfers of Unit Holders' Units in the
Partnership and (ii) provide for an optional right of repurchase/redemption
which may be exercised by the Unit Holders; and
WHEREAS, Section 11.1 of the Agreement provides that the General Partner
may, without prior notice or consent of any Unit Holder, amend any provision of
this Agreement if, in its opinion, such amendment does not have a material
adverse effect upon the Unit Holders; and
WHEREAS, Production as General Partner desires to amend the Agreement in
order to allow transfers of Units facilitated through a matching service to the
extent they otherwise comply with Internal Revenue Service transfer regulations
applicable to non-permitted transfers for non-publicly traded limited
partnerships.
NNOW, THEREFORE, in consideration of the covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
I. Section 8.1.A(ii) of the Agreement is hereby deleted.
II. The remaining subsections of Section 8.1A shall be renumbered
accordingly.
-1-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
this 31st day August, 1995.
GEODYNE PRODUCTION COMPANY,
as General Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
Senior Vice President
GEODYNE DEPOSITARY COMPANY,
as the Limited Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
Senior Vice President
GEODYNE PRODUCTION COMPANY,
as Attorney-in-Fact for all
Substituted Limited Partners
By: // Drew S. Phillips //
----------------------
Drew S. Phillips
Vice President-Controller
-2-
Third Amendment to
Agreement of Limited Partnership of
Geodyne Energy Income Limited Partnership III-C
This Third Amendment to Agreement of Limited Partnership of Geodyne Energy
Income Limited Partnership III-C (the "Partnership") is entered into by and
between Geodyne Production Company ("Production"), a Delaware corporation, as
General Partner, Geodyne Depositary Company ("Depositary"), a Delaware
corporation, as the Limited Partner, and all Substituted Limited Partners
admitted to the Partnership.
WHEREAS, on February 26, 1990, Production and Depositary executed and
entered into that certain Agreement of Limited Partnership of the Partnership
(the "Agreement"); and
WHEREAS, on February 25, 1993, Production executed and entered into that
certain First Amendment to the Agreement of Limited Partnership whereby it
changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income
Partnership III-C to "Geodyne Energy Income Limited Partnership III-C, (ii) the
address of the Partnership's principal place of business, and (iii) the address
for the Partnership's agent for service of process; and
WHEREAS, on August 4, 1993, Production executed and entered into that
certain Second Amendment to the Agreement of Limited Partnership in order to (i)
expedite the method of accepting transfers of Unit Holders' Units in the
Partnership and (ii) provide for an optional right of repurchase/redemption
which may be exercised by the Unit Holders; and
WHEREAS, Section 11.1 of the Agreement provides that the General Partner
may, without prior notice or consent of any Unit Holder, amend any provision of
this Agreement if, in its opinion, such amendment does not have a material
adverse effect upon the Unit Holders; and
WHEREAS, Production as General Partner desires to amend the Agreement in
order to allow transfers of Units facilitated through a matching service to the
extent they otherwise comply with Internal Revenue Service transfer regulations
applicable to non-permitted transfers for non-publicly traded limited
partnerships.
NNOW, THEREFORE, in consideration of the covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
I. Section 8.1.A(ii) of the Agreement is hereby deleted.
II. The remaining subsections of Section 8.1A shall be renumbered
accordingly.
-1-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
this 31st day August, 1995.
GEODYNE PRODUCTION COMPANY,
as General Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
Senior Vice President
GEODYNE DEPOSITARY COMPANY,
as the Limited Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
Senior Vice President
GEODYNE PRODUCTION COMPANY,
as Attorney-in-Fact for all
Substituted Limited Partners
By: // Drew S. Phillips //
----------------------
Drew S. Phillips
Vice President-Controller
-2-
Fourth Amendment to
Agreement and Certificate of Limited Partnership of
Geodyne Energy Income Limited Partnership III-A
This Fourth Amendment to Agreement and Certificate of Limited Partnership
of Geodyne Energy Income Limited Partnership III-A (the "Partnership") is
entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware
corporation, as successor General Partner, Geodyne Depositary Company
("Depositary"), a Delaware corporation, as the Limited Partner, and all
Substituted Limited Partners admitted to the Partnership.
WHEREAS, on November 20, 1989, Geodyne Production Company ("Production"),
as General partner, and Depositary executed and entered into that certain
Agreement and Certificate of Limited Partnership of the Partnership (the
"Agreement"); and
WHEREAS, on February 25, 1993, Production executed and entered into that
First Amendment to the Agreement whereby it changed (i) the name of the
Partnership from "PaineWebber/Geodyne Energy Income Limited Partnership III-A"
to "Geodyne Energy Income Limited Partnership III-A", (ii) the address of the
Partnership's principal place of business, and (iii) the address for the
Partnership's agent for service of process; and
WHEREAS, on August 4, 1993, Production executed and entered into that
Second Amendment to the Agreement whereby it amended certain provisions to (i)
expedite the method of accepting transfers of Unit Holders' Units in the
Partnership and (ii) provide for an optional right of repurchase/redemption
which may be exercised by the Unit Holders; and
WHEREAS, on August 31, 1995, Production executed and entered into that
Third Amendment to the Agreement whereby it amended certain provisions to allow
transfers of Units facilitated through a matching service to the extent that
such transfers otherwise comply with Internal Revenue Service transfer
regulations applicable to non-permitted transfers for non-publicly traded
limited partnerships; and
WHEREAS, Section 11.1 of the Agreement provides that the general partner of
the partnership (the "General Partner") may, without prior notice or consent of
any Unit Holder (as defined in the Agreement), amend any provision of this
Agreement if, in its opinion, such amendment does not have a material adverse
effect upon the Unit Holders; and
WHEREAS, Production merged with and into Geodyne Resources, Inc.
("Resources"), its parent corporation, effective June 30, 1996; and
-1-
<PAGE>
WHEREAS, Section 6.2 of the Agreement provides that the General Partner may
assign its General Partner Interest to a Person which shall become a successor
General Partner without the Consent of the Depositary, if such assignment is in
connection with a merger; and
WHEREAS, as a result of the merger of Production with and into Resources,
ownership of the General Partner Interest in the Partnership is assigned to
Resources by operation of law; and
WHEREAS, as a result of the merger of Production with and into Resources,
Resources has now succeeded to the position of General Partner of the
Partnership; and
WHEREAS, Resources, as General Partner, desires to amend the Agreement in
order to reflect Resources as the new General Partner.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
All references in the Agreement to Geodyne Production Company as General
Partner are hereby amended to reflect, instead, Geodyne Resources, Inc. as
General Partner.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the 1st day of July, 1996.
Geodyne Production Company
by Geodyne Resources, Inc.
as successor by merger
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
Geodyne Resources, Inc.
as General Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
Geodyne Depositary Company,
as the Limited Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
-2-
<PAGE>
Geodyne Resources, Inc.,
as Attorney-in-Fact for all
Substituted Limited Partners
By: // Dennis R. Neill
---------------------
Dennis R. Neill
President
-3-
Fourth Amendment to
Agreement and Certificate of Limited Partnership of
Geodyne Energy Income Limited Partnership III-B
This Fourth Amendment to Agreement and Certificate of Limited Partnership
of Geodyne Energy Income Limited Partnership III-B (the "Partnership") is
entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware
corporation, as successor General Partner, Geodyne Depositary Company
("Depositary"), a Delaware corporation, as the Limited Partner, and all
Substituted Limited Partners admitted to the Partnership.
WHEREAS, on February 24, 1990, Geodyne Production Company ("Production"),
as General partner, and Depositary executed and entered into that certain
Agreement and Certificate of Limited Partnership of the Partnership (the
"Agreement"); and
WHEREAS, on February 25, 1993, Production executed and entered into that
First Amendment to the Agreement whereby it changed (i) the name of the
Partnership from "PaineWebber/Geodyne Energy Income Limited Partnership III-B"
to "Geodyne Energy Income Limited Partnership III-B", (ii) the address of the
Partnership's principal place of business, and (iii) the address for the
Partnership's agent for service of process; and
WHEREAS, on August 4, 1993, Production executed and entered into that
Second Amendment to the Agreement whereby it amended certain provisions to (i)
expedite the method of accepting transfers of Unit Holders' Units in the
Partnership and (ii) provide for an optional right of repurchase/redemption
which may be exercised by the Unit Holders; and
WHEREAS, on August 31, 1995, Production executed and entered into that
Third Amendment to the Agreement whereby it amended certain provisions to allow
transfers of Units facilitated through a matching service to the extent that
such transfers otherwise comply with Internal Revenue Service transfer
regulations applicable to non-permitted transfers for non-publicly traded
limited partnerships; and
WHEREAS, Section 11.1 of the Agreement provides that the general partner of
the partnership (the "General Partner") may, without prior notice or consent of
any Unit Holder (as defined in the Agreement), amend any provision of this
Agreement if, in its opinion, such amendment does not have a material adverse
effect upon the Unit Holders; and
WHEREAS, Production merged with and into Geodyne Resources, Inc.
("Resources"), its parent corporation, effective June 30, 1996; and
-1-
<PAGE>
WHEREAS, Section 6.2 of the Agreement provides that the General Partner may
assign its General Partner Interest to a Person which shall become a successor
General Partner without the Consent of the Depositary, if such assignment is in
connection with a merger; and
WHEREAS, as a result of the merger of Production with and into Resources,
ownership of the General Partner Interest in the Partnership is assigned to
Resources by operation of law; and
WHEREAS, as a result of the merger of Production with and into Resources,
Resources has now succeeded to the position of General Partner of the
Partnership; and
WHEREAS, Resources, as General Partner, desires to amend the Agreement in
order to reflect Resources as the new General Partner.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
All references in the Agreement to Geodyne Production Company as General
Partner are hereby amended to reflect, instead, Geodyne Resources, Inc. as
General Partner.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
the 1st day of July, 1996.
Geodyne Production Company
by Geodyne Resources, Inc.
as successor by merger
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
Geodyne Resources, Inc.
as General Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
Geodyne Depositary Company,
as the Limited Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
-2-
<PAGE>
Geodyne Resources, Inc.,
as Attorney-in-Fact for all
Substituted Limited Partners
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
-3-
Fourth Amendment to
Agreement and Certificate of Limited Partnership of
Geodyne Energy Income Limited Partnership III-C
This Fourth Amendment to Agreement and Certificate of Limited Partnership
of Geodyne Energy Income Limited Partnership III-C (the "Partnership") is
entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware
corporation, as successor General Partner, Geodyne Depositary Company
("Depositary"), a Delaware corporation, as the Limited Partner, and all
Substituted Limited Partners admitted to the Partnership.
WHEREAS, on February 26, 1990, Geodyne Production Company ("Production"),
as General partner, and Depositary executed and entered into that certain
Agreement and Certificate of Limited Partnership of the Partnership (the
"Agreement"); and
WHEREAS, on February 25, 1993, Production executed and entered into that
First Amendment to the Agreement whereby it changed (i) the name of the
Partnership from "PaineWebber/Geodyne Energy Income Limited Partnership III-C"
to "Geodyne Energy Income Limited Partnership III-C", (ii) the address of the
Partnership's principal place of business, and (iii) the address for the
Partnership's agent for service of process; and
WHEREAS, on August 4, 1993, Production executed and entered into that
Second Amendment to the Agreement whereby it amended certain provisions to (i)
expedite the method of accepting transfers of Unit Holders' Units in the
Partnership and (ii) provide for an optional right of repurchase/redemption
which may be exercised by the Unit Holders; and
WHEREAS, on August 31, 1995, Production executed and entered into that
Third Amendment to the Agreement whereby it amended certain provisions to allow
transfers of Units facilitated through a matching service to the extent that
such transfers otherwise comply with Internal Revenue Service transfer
regulations applicable to non-permitted transfers for non-publicly traded
limited partnerships; and
WHEREAS, Section 11.1 of the Agreement provides that the general partner of
the partnership (the "General Partner") may, without prior notice or consent of
any Unit Holder (as defined in the Agreement), amend any provision of this
Agreement if, in its opinion, such amendment does not have a material adverse
effect upon the Unit Holders; and
WHEREAS, Production merged with and into Geodyne Resources, Inc.
("Resources"), its parent corporation, effective June 30, 1996; and
WHEREAS, Section 6.2 of the Agreement provides that the General Partner may
assign its General Partner Interest to a Person which shall become a successor
General Partner without the Consent of the Depositary, if such assignment is in
connection with a merger; and
-1-
<PAGE>
WHEREAS, as a result of the merger of Production with and into Resources,
ownership of the General Partner Interest in the Partnership is assigned to
Resources by operation of law; and
WHEREAS, as a result of the merger of Production with and into Resources,
Resources has now succeeded to the position of General Partner of the
Partnership; and
WHEREAS, Resources, as General Partner, desires to amend the Agreement in
order to reflect Resources as the new General Partner.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
All references in the Agreement to Geodyne Production Company as General
Partner are hereby amended to reflect, instead, Geodyne Resources, Inc. as
General Partner.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the 1st day of July, 1996.
Geodyne Production Company
by Geodyne Resources, Inc.
as successor by merger
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
Geodyne Resources, Inc.
as General Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
Geodyne Depositary Company,
as the Limited Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
-2-
<PAGE>
Geodyne Resources, Inc.,
as Attorney-in-Fact for all
Substituted Limited Partners
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
-3-
Fifth Amendment to
Agreement of Limited Partnership of
Geodyne Energy Income Limited Partnership III-A
This Fifth Amendment to Agreement of Limited Partnership of Geodyne Energy
Income Limited Partnership III-A (the "Partnership") is entered into by and
between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as
successor General Partner, Geodyne Depositary Company ("Depositary"), a Delaware
corporation, as the Limited Partner, and all Substituted Limited Partners
admitted to the Partnership.
WHEREAS, on November 17, 1989, Geodyne Production Company ("Geodyne"), as
General Partner and Depositary executed and entered into that certain Agreement
of Limited Partnership of the Partnership (the "Agreement"); and
WHEREAS, on February 25, 1993, Geodyne executed and entered into that
certain First Amendment to the Agreement of Limited Partnership whereby it
changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income
Partnership III-A" to "Geodyne Energy Income Limited Partnership III-A", (ii)
the address of the Partnership's principal place of business, and (iii) the
address for the Partnership's agent for service of process; and
WHEREAS, on August 4, 1993, Geodyne executed and entered into that certain
Second Amendment to the Agreement of Limited Partnership in order to (i)
expedite the method of accepting transfers of Unit Holders' (as defined in the
Agreement) Units in the Partnership and (ii) provide for an optional right of
repurchase/redemption which may be exercised by the Unit Holders; and
WHEREAS, on August 31, 1995, Geodyne executed and entered into that
certain Third Amendment to the Agreement of Limited Partnership whereby Section
8.1.A(ii) of the Agreement was deleted in order to allow transfers of Units
facilitated through a matching service to the extent that they otherwise comply
with Internal Revenue Service transfer regulations applicable to non-permitted
transfers for non-publicly traded limited partnerships; and
WHEREAS, on June 30, 1996, Geodyne merged into Geodyne Resources, Inc.
("Resources"); and
WHEREAS, on July 1, 1996, Resources, as successor via merger to
Properties, executed and entered into, as General Partner, that certain Fourth
Amendment to the Agreement of Limited Partnership whereby it amended the
Agreement to provide that Resources, as successor via merger to Geodyne, is the
General Partner of the Partnership; and
-1-
<PAGE>
WHEREAS, Section 2.3 of the Agreement provides that the Partnership shall
continue in full force and effect for a period of ten (10) years from the date
of its Activation (as defined in the Agreement), provided that the General
Partner may extend the term of the Partnership for up to five periods of two
years each if it believes each such extension is in the best interests of the
Unit Holders or until dissolution prior thereto pursuant to the provisions of
the Agreement, and
WHEREAS, Resources as General Partner has elected to extend the life of
the Partnership an additional two years.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
Section 2.3. is hereby amended and restated as follows:
The Partnership shall continue in force and effect until
November 22, 2001, provided that the General Partner may extend the
term of the Partnership for up to four periods of two years each if
it believes such extension is in the best interests of the Unit
Holders, or until dissolution prior thereto pursuant to the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
this 15th day of November, 1999.
GEODYNE RESOURCES, INC.,
as General Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
GEODYNE DEPOSITARY COMPANY,
as the Limited Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
-2-
<PAGE>
GEODYNE RESOURCES, INC.
as Attorney-in-Fact for all
Substituted Limited Partners
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
-3-
Fifth Amendment to
Agreement of Limited Partnership of
Geodyne Energy Income Limited Partnership III-B
This Fifth Amendment to Agreement of Limited Partnership of Geodyne Energy
Income Limited Partnership III-B (the "Partnership") is entered into by and
between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as
successor General Partner, Geodyne Depositary Company ("Depositary"), a Delaware
corporation, as the Limited Partner, and all Substituted Limited Partners
admitted to the Partnership.
WHEREAS, on January 24, 1990, Geodyne Production Company ("Geodyne"), as
General Partner and Depositary executed and entered into that certain Agreement
of Limited Partnership of the Partnership (the "Agreement"); and
WHEREAS, on February 25, 1993, Geodyne executed and entered into that
certain First Amendment to the Agreement of Limited Partnership whereby it
changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income
Partnership III-B" to "Geodyne Energy Income Limited Partnership III-B", (ii)
the address of the Partnership's principal place of business, and (iii) the
address for the Partnership's agent for service of process; and
WHEREAS, on August 4, 1993, Geodyne executed and entered into that certain
Second Amendment to the Agreement of Limited Partnership in order to (i)
expedite the method of accepting transfers of Unit Holders' (as defined in the
Agreement) Units in the Partnership and (ii) provide for an optional right of
repurchase/redemption which may be exercised by the Unit Holders; and
WHEREAS, on August 31, 1995, Geodyne executed and entered into that
certain Third Amendment to the Agreement of Limited Partnership whereby Section
8.1.A(ii) of the Agreement was deleted in order to allow transfers of Units
facilitated through a matching service to the extent that they otherwise comply
with Internal Revenue Service transfer regulations applicable to non-permitted
transfers for non-publicly traded limited partnerships; and
WHEREAS, on June 30, 1996, Geodyne merged into Geodyne Resources, Inc.
("Resources"); and
WHEREAS, on July 1, 1996, Resources, as successor via merger to
Properties, executed and entered into, as General Partner, that certain Fourth
Amendment to the Agreement of Limited Partnership whereby it amended the
Agreement to provide that Resources, as successor via merger to Geodyne, is the
General Partner of the Partnership; and
-1-
<PAGE>
WHEREAS, Section 2.3 of the Agreement provides that the Partnership shall
continue in full force and effect for a period of ten (10) years from the date
of its Activation (as defined in the Agreement), provided that the General
Partner may extend the term of the Partnership for up to five periods of two
years each if it believes each such extension is in the best interests of the
Unit Holders or until dissolution prior thereto pursuant to the provisions of
the Agreement, and
WHEREAS, Resources as General Partner has elected to extend the life of
the Partnership an additional two years.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
Section 2.3. is hereby amended and restated as follows:
The Partnership shall continue in force and effect until
January 25, 2002, provided that the General Partner may extend the
term of the Partnership for up to four periods of two years each if
it believes such extension is in the best interests of the Unit
Holders, or until dissolution prior thereto pursuant to the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
this 30th day of December, 1999.
GEODYNE RESOURCES, INC.,
as General Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
GEODYNE DEPOSITARY COMPANY,
as the Limited Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
GEODYNE RESOURCES, INC.
as Attorney-in-Fact for all
Substituted Limited Partners
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
-2-
Fifth Amendment to
Agreement of Limited Partnership of
Geodyne Energy Income Limited Partnership III-C
This Fifth Amendment to Agreement of Limited Partnership of Geodyne Energy
Income Limited Partnership III-C (the "Partnership") is entered into by and
between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as
successor General Partner, Geodyne Depositary Company ("Depositary"), a Delaware
corporation, as the Limited Partner, and all Substituted Limited Partners
admitted to the Partnership.
WHEREAS, on February 26, 1990, Geodyne Production Company ("Geodyne"), as
General Partner, and Depositary executed and entered into that certain Agreement
of Limited Partnership of the Partnership (the "Agreement"); and
WHEREAS, on February 25, 1993, Geodyne executed and entered into that
certain First Amendment to the Agreement of Limited Partnership whereby it
changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income
Partnership III-C" to "Geodyne Energy Income Limited Partnership III-C", (ii)
the address of the Partnership's principal place of business, and (iii) the
address for the Partnership's agent for service of process; and
WHEREAS, on August 4, 1993, Geodyne executed and entered into that certain
Second Amendment to the Agreement of Limited Partnership in order to (i)
expedite the method of accepting transfers of Unit Holders' (as defined in the
Agreement) Units in the Partnership and (ii) provide for an optional right of
repurchase/redemption which may be exercised by the Unit Holders; and
WHEREAS, on August 31, 1995, Geodyne executed and entered into that
certain Third Amendment to the Agreement of Limited Partnership whereby Section
8.1.A(ii) of the Agreement was deleted in order to allow transfers of Units
facilitated through a matching service to the extent that they otherwise comply
with Internal Revenue Service transfer regulations applicable to non-permitted
transfers for non-publicly traded limited partnerships; and
WHEREAS, on June 30, 1996, Geodyne merged into Geodyne Resources, Inc.
("Resources"); and
WHEREAS, on July 1, 1996, Resources, as successor via merger to
Properties, executed and entered into, as General Partner, that certain Fourth
Amendment to the Agreement of Limited Partnership whereby it amended the
Agreement to provide that Resources, as successor via merger to Geodyne, is the
General Partner of the Partnership; and
-1-
<PAGE>
WHEREAS, Section 2.3 of the Agreement provides that the Partnership shall
continue in full force and effect for a period of ten (10) years from the date
of its Activation (as defined in the Agreement), provided that the General
Partner may extend the term of the Partnership for up to five periods of two
years each if it believes each such extension is in the best interests of the
Unit Holders or until dissolution prior thereto pursuant to the provisions of
the Agreement, and
WHEREAS, Resources as General Partner has elected to extend the life of
the Partnership an additional two years.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
Section 2.3. is hereby amended and restated as follows:
The Partnership shall continue in force and effect until
February 27, 2002, provided that the General Partner may extend the
term of the Partnership for up to four periods of two years each if
it believes such extension is in the best interests of the Unit
Holders, or until dissolution prior thereto pursuant to the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
this 30th day of December, 1999.
GEODYNE RESOURCES, INC.,
as General Partner
By: // Dennis R. Neill //
--------------------
Dennis R. Neill
President
GEODYNE DEPOSITARY COMPANY,
as the Limited Partner
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
GEODYNE RESOURCES, INC.
as Attorney-in-Fact for all
Substituted Limited Partners
By: // Dennis R. Neill //
---------------------
Dennis R. Neill
President
-2-
RYDER SCOTT COMPANY
PETROLEUM CONSULTANTS Fax (713) 651-0849
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1999 for Geodyne Energy Income Limited
Partnership III-A.
RYDER SCOTT COMPANY, L.P.
Houston, Texas
February 4, 2000
RYDER SCOTT COMPANY
PETROLEUM CONSULTANTS Fax (713) 651-0849
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1999 for Geodyne Energy Income Limited
Partnership III-B.
RYDER SCOTT COMPANY, L.P.
Houston, Texas
February 4, 2000
RYDER SCOTT COMPANY
PETROLEUM CONSULTANTS Fax (713) 651-0849
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1999 for Geodyne Energy Income Limited
Partnership III-C.
RYDER SCOTT COMPANY, L.P.
Houston, Texas
February 4, 2000
RYDER SCOTT COMPANY
PETROLEUM CONSULTANTS Fax (713) 651-0849
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1999 for Geodyne Energy Income Limited
Partnership III-D.
RYDER SCOTT COMPANY, L.P.
Houston, Texas
February 4, 2000
RYDER SCOTT COMPANY
PETROLEUM CONSULTANTS Fax (713) 651-0849
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1999 for Geodyne Energy Income Limited
Partnership III-E.
RYDER SCOTT COMPANY, L.P.
Houston, Texas
February 4, 2000
RYDER SCOTT COMPANY
PETROLEUM CONSULTANTS Fax (713) 651-0849
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1999 for Geodyne Energy Income Limited
Partnership III-F.
RYDER SCOTT COMPANY, L.P.
Houston, Texas
February 4, 2000
RYDER SCOTT COMPANY
PETROLEUM CONSULTANTS Fax (713) 651-0849
1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191
CONSENT OF PETROLEUM ENGINEERING FIRM
We consent to the reference to our name included in this Annual Report on
Form 10-K for the year ended December 31, 1999 for Geodyne Energy Income Limited
Partnership III-G.
RYDER SCOTT COMPANY, L.P.
Houston, Texas
February 4, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000860745
<NAME> GEODYNE ENERGY INCOME LTD PARTNERSHIP III-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 379,613
<SECURITIES> 0
<RECEIVABLES> 325,691
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 705,304
<PP&E> 15,787,198
<DEPRECIATION> 13,978,347
<TOTAL-ASSETS> 2,793,806
<CURRENT-LIABILITIES> 80,854
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,662,900
<TOTAL-LIABILITY-AND-EQUITY> 2,793,806
<SALES> 2,071,981
<TOTAL-REVENUES> 2,082,984
<CGS> 0
<TOTAL-COSTS> 1,311,185
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 771,799
<INCOME-TAX> 0
<INCOME-CONTINUING> 771,799
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 771,799
<EPS-BASIC> 2.72
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000863835
<NAME> GEODYNE ENERGY INCOME LTD PARTNERSHIP III-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 227,298
<SECURITIES> 0
<RECEIVABLES> 214,859
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 442,157
<PP&E> 9,328,173
<DEPRECIATION> 8,309,648
<TOTAL-ASSETS> 1,690,316
<CURRENT-LIABILITIES> 49,102
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,607,756
<TOTAL-LIABILITY-AND-EQUITY> 1,690,316
<SALES> 1,259,735
<TOTAL-REVENUES> 1,265,307
<CGS> 0
<TOTAL-COSTS> 737,421
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 527,886
<INCOME-TAX> 0
<INCOME-CONTINUING> 527,886
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 527,886
<EPS-BASIC> 3.02
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000863837
<NAME> GEODYNE ENERGY INCOME LTD PARTNERSHIP III-C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 482,914
<SECURITIES> 0
<RECEIVABLES> 444,436
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 927,350
<PP&E> 19,173,840
<DEPRECIATION> 16,850,494
<TOTAL-ASSETS> 3,447,965
<CURRENT-LIABILITIES> 95,134
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,196,435
<TOTAL-LIABILITY-AND-EQUITY> 3,447,965
<SALES> 2,446,824
<TOTAL-REVENUES> 2,459,803
<CGS> 0
<TOTAL-COSTS> 1,331,302
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,128,501
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,128,501
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,128,501
<EPS-BASIC> 4.31
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000870229
<NAME> GEODYNE ENERGY INCOME LTD PARTNERSHIP III-D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 338,669
<SECURITIES> 0
<RECEIVABLES> 371,197
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 709,866
<PP&E> 12,080,692
<DEPRECIATION> 11,032,798
<TOTAL-ASSETS> 1,810,172
<CURRENT-LIABILITIES> 76,752
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,552,235
<TOTAL-LIABILITY-AND-EQUITY> 1,810,172
<SALES> 2,007,243
<TOTAL-REVENUES> 2,015,686
<CGS> 0
<TOTAL-COSTS> 1,090,397
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 925,289
<INCOME-TAX> 0
<INCOME-CONTINUING> 925,289
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 925,289
<EPS-BASIC> 6.64
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000872121
<NAME> GEODYNE ENERGY INCOME LTD PARTNERSHIP III-E
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,445,029
<SECURITIES> 0
<RECEIVABLES> 1,403,065
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,848,094
<PP&E> 34,158,149
<DEPRECIATION> 31,381,247
<TOTAL-ASSETS> 5,742,231
<CURRENT-LIABILITIES> 433,666
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,777,903
<TOTAL-LIABILITY-AND-EQUITY> 5,742,231
<SALES> 7,046,449
<TOTAL-REVENUES> 7,073,923
<CGS> 0
<TOTAL-COSTS> 4,932,950
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,140,973
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,140,973
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,140,973
<EPS-BASIC> 4.82
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000873739
<NAME> GEODYNE ENERGY INCOME LTD PARTNERSHIP III-F
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 803,913
<SECURITIES> 0
<RECEIVABLES> 424,488
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,228,401
<PP&E> 15,578,299
<DEPRECIATION> 13,173,225
<TOTAL-ASSETS> 3,689,702
<CURRENT-LIABILITIES> 132,899
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,421,595
<TOTAL-LIABILITY-AND-EQUITY> 3,689,702
<SALES> 2,314,446
<TOTAL-REVENUES> 2,467,428
<CGS> 0
<TOTAL-COSTS> 1,607,232
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 860,196
<INCOME-TAX> 0
<INCOME-CONTINUING> 860,196
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 860,196
<EPS-BASIC> 3.62
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000879815
<NAME> GEODYNE ENERGY INCOME LTD PARTNERSHIP III-G
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 475,226
<SECURITIES> 0
<RECEIVABLES> 259,524
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 734,750
<PP&E> 8,905,525
<DEPRECIATION> 7,675,314
<TOTAL-ASSETS> 2,001,438
<CURRENT-LIABILITIES> 56,159
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,865,210
<TOTAL-LIABILITY-AND-EQUITY> 2,001,438
<SALES> 1,439,700
<TOTAL-REVENUES> 1,572,341
<CGS> 0
<TOTAL-COSTS> 944,895
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 627,446
<INCOME-TAX> 0
<INCOME-CONTINUING> 627,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 627,446
<EPS-BASIC> 4.82
<EPS-DILUTED> 0
</TABLE>
