Common use of Allocations for Capital Account and Tax Purposes Clause in Contracts

Allocations for Capital Account and Tax Purposes. Subject to Section 7.02 of the Agreement and except as otherwise provided herein, for purposes of any applicable federal, state or local income tax law, rule or regulation items of income, gain, deduction, loss, credit and amount realized shall be allocated to the Parties as follows: (a) Income from the sale of oil or gas production and any credits allowed by Section 29 of the Code relating thereto shall be allocated in the same manner as proceeds therefrom are allocated and credited pursuant to Section 5.02 of the Agreement. (b) Cost and percentage depletion deductions and the gain or loss on the sale or other disposition of property the production from which is subject to depletion (herein sometimes called “Depletable Property”) as computed for tax purposes shall be taken into account separately by the Parties rather than the Tax Partnership and, except to the extent and in the manner provided in Section 5.01(b) of this Exhibit D, shall not affect any Party’s Capital Account. For purposes of Section 613A(c)(7)(D) of the Code, the Tax Partnership’s adjusted basis in each Depletable Property shall be allocated to the Parties in proportion to each Party’s respective share of the costs and expenses which entered into the Tax Partnership’s adjusted basis for each Depletable Property, and the amount realized on the sale or other disposition of each Depletable Property shall be allocated to the Parties in proportion to each Party’s respective share of the proceeds from the sale or other disposition of such property provided for in Section 5.02 of the Agreement. For purposes of allocating amounts realized upon any such sale or disposition which are deemed to be received for federal or state income tax purposes and are attributable to Tax Partnership indebtedness or indebtedness to which the Depletable Property is subject at the time of such sale or disposition, such amounts shall be allocated in the same manner as Partnership proceeds used for the repayment of such indebtedness would have been allocated under Section 5.02 of the Agreement. (c) Items of deduction, loss and credit not specifically provided for above (other than loss from the sale or other disposition of Designated Property), including depreciation, cost recovery and amortization deductions, shall be allocated to the Parties in the same manner that the costs and expenses of the Tax Partnership that gave rise to such items of deduction, loss and credit were allocated pursuant to Section 5.01 of the Agreement. (d) Gain from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the revenue from the sale of the Designated Property provided for in Section 5.02 of the Agreement, and loss from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the costs and expenses of the Designated Property provided for in Section 5.01 of the Agreement. (e) All recapture of income tax deductions resulting from the sale or other disposition of Designated Property shall be allocated to the Party to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Party is allocated any gain from the sale or other disposition of such property. (f) Any other items of Tax Partnership income or gain not specifically provided for above shall be allocated in the same manner as the revenue that resulted in such income or gain is allocated and credited pursuant to Section 5.02 of the Agreement. (g) Notwithstanding any of the foregoing provisions of this Section 3.01 to the contrary: (i) If during any fiscal year of the Tax Partnership there is a net increase in Minimum Gain attributable to a Partner Nonrecourse Debt that gives rise to Partner Nonrecourse Deductions, each Party bearing the economic risk of loss for such Partner Nonrecourse Debt shall be allocated items of Partnership deductions and losses for such year (consisting first of cost recovery or depreciation deductions with respect to property that is subject to such Partner Nonrecourse Debt and then, if necessary, a pro rata portion of the Tax Partnership’s other items of deductions and losses, with any remainder being treated as an increase in Minimum Gain attributable to Partner Nonrecourse Debt in the subsequent year) equal to such Party’s share of Partner Nonrecourse Deductions, as determined in accordance with applicable Regulations. (ii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to Partnership Nonrecourse Liabilities, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to one or more Partnership Nonrecourse Liabilities and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure with such Party commencing to bear the economic risk of loss as to all or part of any Partnership Nonrecourse Liability or by such Party contributing capital to the Tax Partnership that the Tax Partnership uses to repay a Partnership Nonrecourse Liability), as determined in accordance with applicable Regulations. (iii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to a Partner Nonrecourse Debt, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to Partner Nonrecourse Debt, and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure or by the Tax Partnership’s use of capital contributed by such Party to repay Partner Nonrecourse Debt) as determined in accordance with applicable Regulations. (h) CWEI shall use all reasonable efforts to prevent any allocation or distribution from causing a negative balance in a Party’s Adjusted Capital Account. Consistent therewith, and notwithstanding any of the foregoing provisions of this Section 3.01 of this Exhibit D to the contrary, if for any fiscal year of the Tax Partnership the allocation of any loss or deduction (net of any income or gain) to any Party would cause or increase a negative balance in such Party’s Adjusted Capital Account as of the end of such fiscal year (the “Deficit Party”) after taking into account the provisions of Section 3.01(g) of this Exhibit D, only the amount of such loss or deduction that reduces the balance to zero shall be allocated to such Deficit Party and the remaining loss or deduction shall be allocated to the Parties whose Adjusted Capital Accounts have a positive balance remaining at such time (each, a “Positive Party”). After any such allocation, any Tax Partnership income or gain (including Simulated Gain) that would otherwise be allocated to the Deficit Party shall be allocated instead to the Positive Parties up to an amount equal to the Tax Partnership loss or deduction allocated to each Positive Party under the preceding sentence; provided, however, that no allocation of income or gain realized shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of the Deficit Party to be less than zero. If, after taking into account the allocation in the first sentence of this Section 3.01(h), the Adjusted Capital Account balance of the Deficit Party remains less than zero at the end of a fiscal year, a pro rata portion of each item of Tax Partnership income or gain (including Simulated Gain) otherwise allocable to the Positive Parties for such fiscal year (or if there is no such income or gain allocable to the Positive Parties for such fiscal year, all such income or gain (including Simulated Gain) so allocable in the succeeding fiscal year or years) shall be allocated to the Deficit Party in an amount necessary to cause its Adjusted Capital Account balance to equal zero; provided, that no allocation under this sentence shall have the effect of causing the Positive Party’s Adjusted Capital Account to be less than zero. After any such allocation, any Tax Partnership gain (including Simulated Gain) resulting from the sale or other disposition of Designated Property that would otherwise be allocated to the Deficit Party for any fiscal year under this Section 3.01 shall be allocated instead to the Positive Parties until the amount of gain so allocated equals the amount of gain (including Simulated Gain) previously allocated to such Deficit Party under the preceding sentence of this Section 3.01(h); provided, however, that no allocation of gain (including Simulated Gain) shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of a Deficit Party to be less than zero.

Allocations for Capital Account and Tax Purposes. Subject to Section 7.02 of the Agreement and except as otherwise provided herein, for purposes of any applicable federal, state or local income tax law, rule or regulation items of income, gain, deduction, loss, credit and amount realized shall be allocated to the Parties as follows: (a) Income from the sale of oil or gas production and any credits allowed by Section 29 of the Code relating thereto shall be allocated in the same manner as proceeds therefrom are allocated and credited pursuant to Section 5.02 of the Agreement. (b) Cost and percentage depletion deductions and the gain or loss on the sale or other disposition of property the production from which is subject to depletion (herein sometimes called “"Depletable Property”") as computed for tax purposes shall be taken into account separately by the Parties rather than the Tax Partnership and, except to the extent and in the manner provided in Section 5.01(b) of this Exhibit D, shall not affect any Party’s 's Capital Account. For purposes of Section 613A(c)(7)(D) of the Code, the Tax Partnership’s 's adjusted basis in each Depletable Property shall be allocated to the Parties in proportion to each Party’s 's respective share of the costs and expenses which entered into the Tax Partnership’s 's adjusted basis for each Depletable Property, and the amount realized on the sale or other disposition of each Depletable Property shall be allocated to the Parties in proportion to each Party’s 's respective share of the proceeds from the sale or other disposition of such property provided for in Section 5.02 of the Agreement. For purposes of allocating amounts realized upon any such sale or disposition which are deemed to be received for federal or state income tax purposes and are attributable to Tax Partnership indebtedness or indebtedness to which the Depletable Property is subject at the time of such sale or disposition, such amounts shall be allocated in the same manner as Partnership proceeds used for the repayment of such indebtedness would have been allocated under Section 5.02 of the Agreement. (c) Items of deduction, loss and credit not specifically provided for above (other than loss from the sale or other disposition of Designated Property), including depreciation, cost recovery and amortization deductions, shall be allocated to the Parties in the same manner that the costs and expenses of the Tax Partnership that gave rise to such items of deduction, loss and credit were allocated pursuant to Section 5.01 of the Agreement. (d) Gain from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the revenue from the sale of the Designated Property provided for in Section 5.02 of the Agreement, and loss from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the costs and expenses of the Designated Property provided for in Section 5.01 of the Agreement. (e) All recapture of income tax deductions resulting from the sale or other disposition of Designated Property shall be allocated to the Party to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Party is allocated any gain from the sale or other disposition of such property. (f) Any other items of Tax Partnership income or gain not specifically provided for above shall be allocated in the same manner as the revenue that resulted in such income or gain is allocated and credited pursuant to Section 5.02 of the Agreement. (g) Notwithstanding any of the foregoing provisions of this Section 3.01 to the contrary: (i) If during any fiscal year of the Tax Partnership there is a net increase in Minimum Gain attributable to a Partner Nonrecourse Debt that gives rise to Partner Nonrecourse Deductions, each Party bearing the economic risk of loss for such Partner Nonrecourse Debt shall be allocated items of Partnership deductions and losses for such year (consisting first of cost recovery or depreciation deductions with respect to property that is subject to such Partner Nonrecourse Debt and then, if necessary, a pro rata portion of the Tax Partnership’s other items of deductions and losses, with any remainder being treated as an increase in Minimum Gain attributable to Partner Nonrecourse Debt in the subsequent year) equal to such Party’s share of Partner Nonrecourse Deductions, as determined in accordance with applicable Regulations. (ii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to Partnership Nonrecourse Liabilities, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to one or more Partnership Nonrecourse Liabilities and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure with such Party commencing to bear the economic risk of loss as to all or part of any Partnership Nonrecourse Liability or by such Party contributing capital to the Tax Partnership that the Tax Partnership uses to repay a Partnership Nonrecourse Liability), as determined in accordance with applicable Regulations. (iii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to a Partner Nonrecourse Debt, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to Partner Nonrecourse Debt, and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure or by the Tax Partnership’s use of capital contributed by such Party to repay Partner Nonrecourse Debt) as determined in accordance with applicable Regulations. (h) CWEI shall use all reasonable efforts to prevent any allocation or distribution from causing a negative balance in a Party’s Adjusted Capital Account. Consistent therewith, and notwithstanding any of the foregoing provisions of this Section 3.01 of this Exhibit D to the contrary, if for any fiscal year of the Tax Partnership the allocation of any loss or deduction (net of any income or gain) to any Party would cause or increase a negative balance in such Party’s Adjusted Capital Account as of the end of such fiscal year (the “Deficit Party”) after taking into account the provisions of Section 3.01(g) of this Exhibit D, only the amount of such loss or deduction that reduces the balance to zero shall be allocated to such Deficit Party and the remaining loss or deduction shall be allocated to the Parties whose Adjusted Capital Accounts have a positive balance remaining at such time (each, a “Positive Party”). After any such allocation, any Tax Partnership income or gain (including Simulated Gain) that would otherwise be allocated to the Deficit Party shall be allocated instead to the Positive Parties up to an amount equal to the Tax Partnership loss or deduction allocated to each Positive Party under the preceding sentence; provided, however, that no allocation of income or gain realized shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of the Deficit Party to be less than zero. If, after taking into account the allocation in the first sentence of this Section 3.01(h), the Adjusted Capital Account balance of the Deficit Party remains less than zero at the end of a fiscal year, a pro rata portion of each item of Tax Partnership income or gain (including Simulated Gain) otherwise allocable to the Positive Parties for such fiscal year (or if there is no such income or gain allocable to the Positive Parties for such fiscal year, all such income or gain (including Simulated Gain) so allocable in the succeeding fiscal year or years) shall be allocated to the Deficit Party in an amount necessary to cause its Adjusted Capital Account balance to equal zero; provided, that no allocation under this sentence shall have the effect of causing the Positive Party’s Adjusted Capital Account to be less than zero. After any such allocation, any Tax Partnership gain (including Simulated Gain) resulting from the sale or other disposition of Designated Property that would otherwise be allocated to the Deficit Party for any fiscal year under this Section 3.01 shall be allocated instead to the Positive Parties until the amount of gain so allocated equals the amount of gain (including Simulated Gain) previously allocated to such Deficit Party under the preceding sentence of this Section 3.01(h); provided, however, that no allocation of gain (including Simulated Gain) shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of a Deficit Party to be less than zero.

Allocations for Capital Account and Tax Purposes. Subject to Section 7.02 of the Agreement and except as otherwise provided herein, for purposes of any applicable federal, state or local income tax law, rule or regulation items of income, gain, deduction, loss, credit and amount realized shall be allocated to the Parties as follows: (a) Income from the sale of oil or gas production and any credits allowed by Section 29 of the Code relating thereto shall be allocated in the same manner as proceeds therefrom are allocated and credited pursuant to Section 5.02 of the Agreement. (b) Cost and percentage depletion deductions and the gain or loss on the sale or other disposition of property the production from which is subject to depletion (herein sometimes called “Depletable Property”) as computed for tax purposes shall be taken into account separately by the Parties rather than the Tax Partnership and, except to the extent and in the manner provided in Section 5.01(b) of this Exhibit D, shall not affect any Party’s Capital Account. For purposes of Section 613A(c)(7)(D) of the Code, the Tax Partnership’s adjusted basis in each Depletable Property shall be allocated to the Parties in proportion to each Party’s respective share of the costs and expenses which entered into the Tax Partnership’s adjusted basis for each Depletable Property, and the amount realized on the sale or other disposition of each Depletable Property shall be allocated to the Parties in proportion to each Party’s N LA Bossier III Participation Agreement.doc respective share of the proceeds from the sale or other disposition of such property provided for in Section 5.02 of the Agreement. For purposes of allocating amounts realized upon any such sale or disposition which are deemed to be received for federal or state income tax purposes and are attributable to Tax Partnership indebtedness or indebtedness to which the Depletable Property is subject at the time of such sale or disposition, such amounts shall be allocated in the same manner as Partnership proceeds used for the repayment of such indebtedness would have been allocated under Section 5.02 of the Agreement. (c) Items of deduction, loss and credit not specifically provided for above (other than loss from the sale or other disposition of Designated Property), including depreciation, cost recovery and amortization deductions, shall be allocated to the Parties in the same manner that the costs and expenses of the Tax Partnership that gave rise to such items of deduction, loss and credit were allocated pursuant to Section 5.01 of the Agreement. (d) Gain from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the revenue from the sale of the Designated Property provided for in Section 5.02 of the Agreement, and loss from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the costs and expenses of the Designated Property provided for in Section 5.01 of the Agreement. (e) All recapture of income tax deductions resulting from the sale or other disposition of Designated Property shall be allocated to the Party to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Party is allocated any gain from the sale or other disposition of such property. (f) Any other items of Tax Partnership income or gain not specifically provided for above shall be allocated in the same manner as the revenue that resulted in such income or gain is allocated and credited pursuant to Section 5.02 of the Agreement. (g) Notwithstanding any of the foregoing provisions of this Section 3.01 to the contrary: (i) If during any fiscal year of the Tax Partnership there is a net increase in Minimum Gain attributable to a Partner Nonrecourse Debt that gives rise to Partner Nonrecourse Deductions, each Party bearing the economic risk of loss for such Partner Nonrecourse Debt shall be allocated items of Partnership deductions and losses for such year (consisting first of cost recovery or depreciation deductions with respect to property that is subject to such Partner Nonrecourse Debt and then, if necessary, a pro rata portion of the Tax Partnership’s other items of deductions and losses, with any remainder being treated as an increase in Minimum Gain attributable to Partner Nonrecourse Debt in the subsequent year) equal to such Party’s share of Partner Nonrecourse Deductions, as determined in accordance with applicable Regulations. (ii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to Partnership Nonrecourse Liabilities, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to one or more Partnership Nonrecourse Liabilities and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure with such Party commencing to bear the economic risk of loss as to all or part of any Partnership Nonrecourse Liability or by such Party contributing capital to the Tax N LA Bossier III Participation Agreement.doc Partnership that the Tax Partnership uses to repay a Partnership Nonrecourse Liability), as determined in accordance with applicable Regulations. (iii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to a Partner Nonrecourse Debt, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to Partner Nonrecourse Debt, and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure or by the Tax Partnership’s use of capital contributed by such Party to repay Partner Nonrecourse Debt) as determined in accordance with applicable Regulations. (h) CWEI shall use all reasonable efforts to prevent any allocation or distribution from causing a negative balance in a Party’s Adjusted Capital Account. Consistent therewith, and notwithstanding any of the foregoing provisions of this Section 3.01 of this Exhibit D to the contrary, if for any fiscal year of the Tax Partnership the allocation of any loss or deduction (net of any income or gain) to any Party would cause or increase a negative balance in such Party’s Adjusted Capital Account as of the end of such fiscal year (the “Deficit Party”) after taking into account the provisions of Section 3.01(g) of this Exhibit D, only the amount of such loss or deduction that reduces the balance to zero shall be allocated to such Deficit Party and the remaining loss or deduction shall be allocated to the Parties whose Adjusted Capital Accounts have a positive balance remaining at such time (each, a “Positive Party”). After any such allocation, any Tax Partnership income or gain (including Simulated Gain) that would otherwise be allocated to the Deficit Party shall be allocated instead to the Positive Parties up to an amount equal to the Tax Partnership loss or deduction allocated to each Positive Party under the preceding sentence; provided, however, that no allocation of income or gain realized shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of the Deficit Party to be less than zero. If, after taking into account the allocation in the first sentence of this Section 3.01(h), the Adjusted Capital Account balance of the Deficit Party remains less than zero at the end of a fiscal year, a pro rata portion of each item of Tax Partnership income or gain (including Simulated Gain) otherwise allocable to the Positive Parties for such fiscal year (or if there is no such income or gain allocable to the Positive Parties for such fiscal year, all such income or gain (including Simulated Gain) so allocable in the succeeding fiscal year or years) shall be allocated to the Deficit Party in an amount necessary to cause its Adjusted Capital Account balance to equal zero; provided, that no allocation under this sentence shall have the effect of causing the Positive Party’s Adjusted Capital Account to be less than zero. After any such allocation, any Tax Partnership gain (including Simulated Gain) resulting from the sale or other disposition of Designated Property that would otherwise be allocated to the Deficit Party for any fiscal year under this Section 3.01 shall be allocated instead to the Positive Parties until the amount of gain so allocated equals the amount of gain (including Simulated Gain) previously allocated to such Deficit Party under the preceding sentence of this Section 3.01(h); provided, however, that no allocation of gain (including Simulated Gain) shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of a Deficit Party to be less than zero.

Allocations for Capital Account and Tax Purposes. Subject to Section 7.02 of the Agreement and except as otherwise provided herein, for purposes of any applicable federal, state or local income tax law, rule or regulation items of income, gain, deduction, loss, credit and amount realized shall be allocated to the Parties as follows: (a) Income from the sale of oil or gas production and any credits allowed by Section 29 of the Code relating thereto shall be allocated in the same manner as proceeds therefrom are allocated and credited pursuant to Section 5.02 of the Agreement. (b) Cost and percentage depletion deductions and the gain or loss on the sale or other disposition of property the production from which is subject to depletion (herein sometimes called “Depletable Property”) as computed for tax purposes shall be taken into account separately by the Parties rather than the Tax Partnership and, except to the extent and in the manner provided in Section 5.01(b) of this Exhibit D, shall not affect any Party’s Capital Account. For purposes of Section 613A(c)(7)(D) of the Code, the Tax Partnership’s adjusted basis in each Depletable Property shall be allocated to the Parties in proportion to each Party’s respective share of the costs and expenses which entered into the Tax Partnership’s adjusted basis for each Depletable Property, and the amount realized on the sale or other disposition of each Depletable Property shall be allocated to the Parties in proportion to each Party’s Xxxxxxx Area Participation Agreement.doc respective share of the proceeds from the sale or other disposition of such property provided for in Section 5.02 of the Agreement. For purposes of allocating amounts realized upon any such sale or disposition which are deemed to be received for federal or state income tax purposes and are attributable to Tax Partnership indebtedness or indebtedness to which the Depletable Property is subject at the time of such sale or disposition, such amounts shall be allocated in the same manner as Partnership proceeds used for the repayment of such indebtedness would have been allocated under Section 5.02 of the Agreement. (c) Items of deduction, loss and credit not specifically provided for above (other than loss from the sale or other disposition of Designated Property), including depreciation, cost recovery and amortization deductions, shall be allocated to the Parties in the same manner that the costs and expenses of the Tax Partnership that gave rise to such items of deduction, loss and credit were allocated pursuant to Section 5.01 of the Agreement. (d) Gain from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the revenue from the sale of the Designated Property provided for in Section 5.02 of the Agreement, and loss from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the costs and expenses of the Designated Property provided for in Section 5.01 of the Agreement. (e) All recapture of income tax deductions resulting from the sale or other disposition of Designated Property shall be allocated to the Party to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Party is allocated any gain from the sale or other disposition of such property. (f) Any other items of Tax Partnership income or gain not specifically provided for above shall be allocated in the same manner as the revenue that resulted in such income or gain is allocated and credited pursuant to Section 5.02 of the Agreement. (g) Notwithstanding any of the foregoing provisions of this Section 3.01 to the contrary: (i) If during any fiscal year of the Tax Partnership there is a net increase in Minimum Gain attributable to a Partner Nonrecourse Debt that gives rise to Partner Nonrecourse Deductions, each Party bearing the economic risk of loss for such Partner Nonrecourse Debt shall be allocated items of Partnership deductions and losses for such year (consisting first of cost recovery or depreciation deductions with respect to property that is subject to such Partner Nonrecourse Debt and then, if necessary, a pro rata portion of the Tax Partnership’s other items of deductions and losses, with any remainder being treated as an increase in Minimum Gain attributable to Partner Nonrecourse Debt in the subsequent year) equal to such Party’s share of Partner Nonrecourse Deductions, as determined in accordance with applicable Regulations. (ii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to Partnership Nonrecourse Liabilities, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to one or more Partnership Nonrecourse Liabilities and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure with such Party commencing to bear the economic risk of loss as to all or part of any Partnership Nonrecourse Liability or by such Party contributing capital to the Tax Xxxxxxx Area Participation Agreement.doc Partnership that the Tax Partnership uses to repay a Partnership Nonrecourse Liability), as determined in accordance with applicable Regulations. (iii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to a Partner Nonrecourse Debt, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to Partner Nonrecourse Debt, and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure or by the Tax Partnership’s use of capital contributed by such Party to repay Partner Nonrecourse Debt) as determined in accordance with applicable Regulations. (h) CWEI shall use all reasonable efforts to prevent any allocation or distribution from causing a negative balance in a Party’s Adjusted Capital Account. Consistent therewith, and notwithstanding any of the foregoing provisions of this Section 3.01 of this Exhibit D to the contrary, if for any fiscal year of the Tax Partnership the allocation of any loss or deduction (net of any income or gain) to any Party would cause or increase a negative balance in such Party’s Adjusted Capital Account as of the end of such fiscal year (the “Deficit Party”) after taking into account the provisions of Section 3.01(g) of this Exhibit D, only the amount of such loss or deduction that reduces the balance to zero shall be allocated to such Deficit Party and the remaining loss or deduction shall be allocated to the Parties whose Adjusted Capital Accounts have a positive balance remaining at such time (each, a “Positive Party”). After any such allocation, any Tax Partnership income or gain (including Simulated Gain) that would otherwise be allocated to the Deficit Party shall be allocated instead to the Positive Parties up to an amount equal to the Tax Partnership loss or deduction allocated to each Positive Party under the preceding sentence; provided, however, that no allocation of income or gain realized shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of the Deficit Party to be less than zero. If, after taking into account the allocation in the first sentence of this Section 3.01(h), the Adjusted Capital Account balance of the Deficit Party remains less than zero at the end of a fiscal year, a pro rata portion of each item of Tax Partnership income or gain (including Simulated Gain) otherwise allocable to the Positive Parties for such fiscal year (or if there is no such income or gain allocable to the Positive Parties for such fiscal year, all such income or gain (including Simulated Gain) so allocable in the succeeding fiscal year or years) shall be allocated to the Deficit Party in an amount necessary to cause its Adjusted Capital Account balance to equal zero; provided, that no allocation under this sentence shall have the effect of causing the Positive Party’s Adjusted Capital Account to be less than zero. After any such allocation, any Tax Partnership gain (including Simulated Gain) resulting from the sale or other disposition of Designated Property that would otherwise be allocated to the Deficit Party for any fiscal year under this Section 3.01 shall be allocated instead to the Positive Parties until the amount of gain so allocated equals the amount of gain (including Simulated Gain) previously allocated to such Deficit Party under the preceding sentence of this Section 3.01(h); provided, however, that no allocation of gain (including Simulated Gain) shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of a Deficit Party to be less than zero.

Allocations for Capital Account and Tax Purposes. Subject to Section 7.02 of the Agreement and except as otherwise provided herein, for purposes of any applicable federal, state or local income tax law, rule or regulation items of income, gain, deduction, loss, credit and amount realized shall be allocated to the Parties as follows: (a) Income from the sale of oil or gas production and any credits allowed by Section 29 of the Code relating thereto shall be allocated in the same manner as proceeds therefrom are allocated and credited pursuant to Section 5.02 of the Agreement. (b) Cost and percentage depletion deductions and the gain or loss on the sale or other disposition of property the production from which is subject to depletion (herein sometimes called “Depletable Property”) as computed for tax purposes shall be taken into account separately by the Parties rather than the Tax Partnership and, except to the extent and in the manner provided in Section 5.01(b) of this Exhibit D, shall not affect any Party’s Capital Account. For purposes of Section 613A(c)(7)(D) of the Code, the Tax Partnership’s adjusted basis in each Depletable Property shall be allocated to the Parties in proportion to each Party’s respective share of the costs and expenses which entered into the Tax Partnership’s adjusted basis for each Depletable Property, and the amount realized on the sale or other disposition of each Depletable Property shall be allocated to the Parties in proportion to each Party’s Xxxxxxxx Co Area Participation Agreement.doc respective share of the proceeds from the sale or other disposition of such property provided for in Section 5.02 of the Agreement. For purposes of allocating amounts realized upon any such sale or disposition which are deemed to be received for federal or state income tax purposes and are attributable to Tax Partnership indebtedness or indebtedness to which the Depletable Property is subject at the time of such sale or disposition, such amounts shall be allocated in the same manner as Partnership proceeds used for the repayment of such indebtedness would have been allocated under Section 5.02 of the Agreement. (c) Items of deduction, loss and credit not specifically provided for above (other than loss from the sale or other disposition of Designated Property), including depreciation, cost recovery and amortization deductions, shall be allocated to the Parties in the same manner that the costs and expenses of the Tax Partnership that gave rise to such items of deduction, loss and credit were allocated pursuant to Section 5.01 of the Agreement. (d) Gain from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the revenue from the sale of the Designated Property provided for in Section 5.02 of the Agreement, and loss from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the costs and expenses of the Designated Property provided for in Section 5.01 of the Agreement. (e) All recapture of income tax deductions resulting from the sale or other disposition of Designated Property shall be allocated to the Party to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Party is allocated any gain from the sale or other disposition of such property. (f) Any other items of Tax Partnership income or gain not specifically provided for above shall be allocated in the same manner as the revenue that resulted in such income or gain is allocated and credited pursuant to Section 5.02 of the Agreement. (g) Notwithstanding any of the foregoing provisions of this Section 3.01 to the contrary: (i) If during any fiscal year of the Tax Partnership there is a net increase in Minimum Gain attributable to a Partner Nonrecourse Debt that gives rise to Partner Nonrecourse Deductions, each Party bearing the economic risk of loss for such Partner Nonrecourse Debt shall be allocated items of Partnership deductions and losses for such year (consisting first of cost recovery or depreciation deductions with respect to property that is subject to such Partner Nonrecourse Debt and then, if necessary, a pro rata portion of the Tax Partnership’s other items of deductions and losses, with any remainder being treated as an increase in Minimum Gain attributable to Partner Nonrecourse Debt in the subsequent year) equal to such Party’s share of Partner Nonrecourse Deductions, as determined in accordance with applicable Regulations. (ii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to Partnership Nonrecourse Liabilities, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to one or more Partnership Nonrecourse Liabilities and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure with such Party commencing to bear the economic risk of loss as to all or part of any Partnership Nonrecourse Liability or by such Party contributing capital to the Tax Xxxxxxxx Co Area Participation Agreement.doc Partnership that the Tax Partnership uses to repay a Partnership Nonrecourse Liability), as determined in accordance with applicable Regulations. (iii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to a Partner Nonrecourse Debt, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to Partner Nonrecourse Debt, and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure or by the Tax Partnership’s use of capital contributed by such Party to repay Partner Nonrecourse Debt) as determined in accordance with applicable Regulations. (h) CWEI shall use all reasonable efforts to prevent any allocation or distribution from causing a negative balance in a Party’s Adjusted Capital Account. Consistent therewith, and notwithstanding any of the foregoing provisions of this Section 3.01 of this Exhibit D to the contrary, if for any fiscal year of the Tax Partnership the allocation of any loss or deduction (net of any income or gain) to any Party would cause or increase a negative balance in such Party’s Adjusted Capital Account as of the end of such fiscal year (the “Deficit Party”) after taking into account the provisions of Section 3.01(g) of this Exhibit D, only the amount of such loss or deduction that reduces the balance to zero shall be allocated to such Deficit Party and the remaining loss or deduction shall be allocated to the Parties whose Adjusted Capital Accounts have a positive balance remaining at such time (each, a “Positive Party”). After any such allocation, any Tax Partnership income or gain (including Simulated Gain) that would otherwise be allocated to the Deficit Party shall be allocated instead to the Positive Parties up to an amount equal to the Tax Partnership loss or deduction allocated to each Positive Party under the preceding sentence; provided, however, that no allocation of income or gain realized shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of the Deficit Party to be less than zero. If, after taking into account the allocation in the first sentence of this Section 3.01(h), the Adjusted Capital Account balance of the Deficit Party remains less than zero at the end of a fiscal year, a pro rata portion of each item of Tax Partnership income or gain (including Simulated Gain) otherwise allocable to the Positive Parties for such fiscal year (or if there is no such income or gain allocable to the Positive Parties for such fiscal year, all such income or gain (including Simulated Gain) so allocable in the succeeding fiscal year or years) shall be allocated to the Deficit Party in an amount necessary to cause its Adjusted Capital Account balance to equal zero; provided, that no allocation under this sentence shall have the effect of causing the Positive Party’s Adjusted Capital Account to be less than zero. After any such allocation, any Tax Partnership gain (including Simulated Gain) resulting from the sale or other disposition of Designated Property that would otherwise be allocated to the Deficit Party for any fiscal year under this Section 3.01 shall be allocated instead to the Positive Parties until the amount of gain so allocated equals the amount of gain (including Simulated Gain) previously allocated to such Deficit Party under the preceding sentence of this Section 3.01(h); provided, however, that no allocation of gain (including Simulated Gain) shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of a Deficit Party to be less than zero.

Allocations for Capital Account and Tax Purposes. Subject to Section 7.02 of the Agreement and except as otherwise provided herein, for purposes of any applicable H:\DOCS\26639\60\SacBasI\PRTAGR08.DOC D-2 federal, state or local income tax law, rule or regulation items of income, gain, deduction, loss, credit and amount realized shall be allocated to the Parties as follows: (a) Income from the sale of oil or gas production and any credits allowed by Section 29 of the Code relating thereto shall be allocated in the same manner as proceeds therefrom are allocated and credited pursuant to Section 5.02 of the Agreement. (b) Cost and percentage depletion deductions and the gain or loss on the sale or other disposition of property the production from which is subject to depletion (herein sometimes called “Depletable Property”) as computed for tax purposes shall be taken into account separately by the Parties rather than the Tax Partnership and, except to the extent and in the manner provided in Section 5.01(b) of this Exhibit D, shall not affect any Party’s Capital Account. For purposes of Section 613A(c)(7)(D) of the Code, the Tax Partnership’s adjusted basis in each Depletable Property shall be allocated to the Parties in proportion to each Party’s respective share of the costs and expenses which entered into the Tax Partnership’s adjusted basis for each Depletable Property, and the amount realized on the sale or other disposition of each Depletable Property shall be allocated to the Parties in proportion to each Party’s respective share of the proceeds from the sale or other disposition of such property provided for in Section 5.02 of the Agreement. For purposes of allocating amounts realized upon any such sale or disposition which are deemed to be received for federal or state income tax purposes and are attributable to Tax Partnership indebtedness or indebtedness to which the Depletable Property is subject at the time of such sale or disposition, such amounts shall be allocated in the same manner as Partnership proceeds used for the repayment of such indebtedness would have been allocated under Section 5.02 of the Agreement. (c) Items of deduction, loss and credit not specifically provided for above (other than loss from the sale or other disposition of Designated Property), including depreciation, cost recovery and amortization deductions, shall be allocated to the Parties in the same manner that the costs and expenses of the Tax Partnership that gave rise to such items of deduction, loss and credit were allocated pursuant to Section 5.01 of the Agreement. (d) Gain from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the revenue from the sale of the Designated Property provided for in Section 5.02 of the Agreement, and loss from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the costs and expenses of the Designated Property provided for in Section 5.01 of the Agreement. (e) All recapture of income tax deductions resulting from the sale or other disposition of Designated Property shall be allocated to the Party to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Party is allocated any gain from the sale or other disposition of such property. (f) Any other items of Tax Partnership income or gain not specifically provided for above shall be allocated in the same manner as the revenue that resulted in such income or gain is allocated and credited pursuant to Section 5.02 of the Agreement. (g) Notwithstanding any of the foregoing provisions of this Section 3.01 to the contrary: (i) If during any fiscal year of the Tax Partnership there is a net increase in Minimum Gain attributable to a Partner Nonrecourse Debt that gives rise to Partner Nonrecourse Deductions, each Party bearing the economic risk of loss for such Partner Nonrecourse Debt shall be allocated items of Partnership deductions and losses for such year (consisting first of cost recovery or depreciation deductions with respect to property that is subject to such Partner Nonrecourse Debt and then, if necessary, a pro rata portion of the Tax Partnership’s other items of deductions and losses, with any remainder being treated as an increase in Minimum Gain attributable to Partner Nonrecourse Debt in the subsequent year) equal to such Party’s share of Partner Nonrecourse Deductions, as determined in accordance with applicable Regulations. (ii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to Partnership Nonrecourse Liabilities, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to one or more Partnership Nonrecourse Liabilities and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure with such Party commencing to bear the economic risk of loss as to all or part of any Partnership Nonrecourse Liability or by such Party contributing capital to the Tax Partnership that the Tax Partnership uses to repay a Partnership Nonrecourse Liability), as determined in accordance with applicable Regulations. (iii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to a Partner Nonrecourse Debt, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to Partner Nonrecourse Debt, and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure or by the Tax Partnership’s use of capital contributed by such Party to repay Partner Nonrecourse Debt) as determined in accordance with applicable Regulations. (h) CWEI shall use all reasonable efforts to prevent any allocation or distribution from causing a negative balance in a Party’s Adjusted Capital Account. Consistent therewith, and notwithstanding any of the foregoing provisions of this Section 3.01 of this Exhibit D to the contrary, if for any fiscal year of the Tax Partnership the allocation of any loss or deduction (net of any income or gain) to any Party would cause or increase a negative balance in such Party’s Adjusted Capital Account as of the end of such fiscal year (the “Deficit Party”) after taking into account the provisions of Section 3.01(g) of this Exhibit D, only the amount of such loss or deduction that reduces the balance to zero shall be allocated to such Deficit Party and the remaining loss or deduction shall be allocated to the Parties whose Adjusted Capital Accounts have a positive balance remaining at such time (each, a “Positive Party”). After any such allocation, any Tax Partnership income or gain (including Simulated Gain) that would otherwise be allocated to the Deficit Party shall be allocated instead to the Positive Parties up to an amount equal to the Tax Partnership loss or deduction allocated to each Positive Party under the preceding sentence; provided, however, that no allocation of income or gain realized shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of the Deficit Party to be less than zero. If, after taking into account the allocation in the first sentence of this Section 3.01(h), the Adjusted Capital Account balance of the Deficit Party remains less than zero at the end of a fiscal year, a pro rata portion of each item of Tax Partnership income or gain (including Simulated Gain) otherwise allocable to the Positive Parties for such fiscal year (or if there is no such income or gain allocable to the Positive Parties for such fiscal year, all such income or gain (including Simulated Gain) so allocable in the succeeding fiscal year or years) shall be allocated to the Deficit Party in an amount necessary to cause its Adjusted Capital Account balance to equal zero; provided, that no allocation under this sentence shall have the effect of causing the Positive Party’s Adjusted Capital Account to be less than zero. After any such allocation, any Tax Partnership gain (including Simulated Gain) resulting from the sale or other disposition of Designated Property that would otherwise be allocated to the Deficit Party for any fiscal year under this Section 3.01 shall be allocated instead to the Positive Parties until the amount of gain so allocated equals the amount of gain (including Simulated Gain) previously allocated to such Deficit Party under the preceding sentence of this Section 3.01(h); provided, however, that no allocation of gain (including Simulated Gain) shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of a Deficit Party to be less than zero.

Allocations for Capital Account and Tax Purposes. Subject to Section 7.02 of the Agreement and except Except as otherwise provided herein, for purposes of any applicable federal, state or local income tax law, rule or regulation items of income, gain, deduction, loss, credit and amount realized (including the distributive share of such items allocated to the Tax Partnership by West Coast Partnership) shall be allocated to the Parties as follows: (a) Income from the sale of oil or gas production and any credits allowed by Section 29 of the Code relating thereto shall be allocated in the same manner as proceeds therefrom are allocated and credited pursuant to Section 5.02 of the Agreement. (b) Cost and percentage depletion deductions and the gain or loss on the sale or other disposition of property the production from which is subject to depletion (herein sometimes called “"Depletable Property”") as computed for tax purposes shall be taken into account separately by the Parties rather than the Tax Partnership and, except to the extent and in the manner provided in Section 5.01(b) of this Exhibit DB, shall not affect any Party’s 's Capital Account. For purposes of Section 613A(c)(7)(D) of the Code, the Tax Partnership’s 's adjusted basis in each Depletable Property shall be allocated to the Parties in proportion to each Party’s 's respective share of the costs and expenses which entered into the Tax Partnership’s 's adjusted basis for each Depletable Property, and the amount realized on the sale or other disposition of each Depletable Property shall be allocated to the Parties in proportion to each Party’s 's respective share of the proceeds from the sale or other disposition of such property provided for in Section 5.02 of the Agreement. For purposes of allocating amounts realized upon any such sale or disposition which are deemed to be received for federal or state income tax purposes and are attributable to Tax Partnership indebtedness or indebtedness to which the Depletable Property is subject at the time of such sale or disposition, such amounts shall be allocated in the same manner as Partnership proceeds used for the repayment of such indebtedness would have been allocated under Section 5.02 of the Agreement. (c) Items of deduction, loss and credit not specifically provided for above (other than loss from the sale or other disposition of Designated Property), including depreciation, cost recovery and amortization deductions, shall be allocated to the Parties in the same manner that the costs and expenses of the Tax Partnership that gave rise to such items of deduction, loss and credit were allocated pursuant to Section 5.01 of the Agreement. (d) Gain from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s 's allocable share of the revenue proceeds from the sale of the Designated Property provided for in Section 5.02 of the Agreement, and loss from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s 's allocable share of the costs and expenses of the Designated Property provided for in Section 5.01 of the Agreement. (e) All recapture of income tax deductions resulting from the sale or other disposition of Designated Property shall be allocated to the Party to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Party is allocated any gain from the sale or other disposition of such property. (f) Any other items of Tax Partnership income or gain not specifically provided for above shall be allocated in the same manner as the revenue proceeds that resulted in such income or gain is are allocated and credited pursuant to Section 5.02 of the Agreement. (g) Notwithstanding any of the foregoing provisions of this Section 3.01 to the contrary: (i) If during any fiscal year of the Tax Partnership there is a net increase in Minimum Gain attributable to a Partner Nonrecourse Debt that gives rise to Partner Nonrecourse Deductions, each Party bearing the economic risk of loss for such Partner Nonrecourse Debt shall be allocated items of Partnership deductions and losses for such year (consisting first of cost recovery or depreciation deductions with respect to property that is subject to such Partner Nonrecourse Debt and then, if necessary, a pro rata portion of the Tax Partnership’s other items of deductions and losses, with any remainder being treated as an increase in Minimum Gain attributable to Partner Nonrecourse Debt in the subsequent year) equal to such Party’s share of Partner Nonrecourse Deductions, as determined in accordance with applicable Regulations. (ii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to Partnership Nonrecourse Liabilities, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to one or more Partnership Nonrecourse Liabilities and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure with such Party commencing to bear the economic risk of loss as to all or part of any Partnership Nonrecourse Liability or by such Party contributing capital to the Tax Partnership that the Tax Partnership uses to repay a Partnership Nonrecourse Liability), as determined in accordance with applicable Regulations. (iii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to a Partner Nonrecourse Debt, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to Partner Nonrecourse Debt, and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure or by the Tax Partnership’s use of capital contributed by such Party to repay Partner Nonrecourse Debt) as determined in accordance with applicable Regulations. (h) CWEI shall use all reasonable efforts to prevent any allocation or distribution from causing a negative balance in a Party’s Adjusted Capital Account. Consistent therewith, and notwithstanding any of the foregoing provisions of this Section 3.01 of this Exhibit D to the contrary, if for any fiscal year of the Tax Partnership the allocation of any loss or deduction (net of any income or gain) to any Party would cause or increase a negative balance in such Party’s Adjusted Capital Account as of the end of such fiscal year (the “Deficit Party”) after taking into account the provisions of Section 3.01(g) of this Exhibit D, only the amount of such loss or deduction that reduces the balance to zero shall be allocated to such Deficit Party and the remaining loss or deduction shall be allocated to the Parties whose Adjusted Capital Accounts have a positive balance remaining at such time (each, a “Positive Party”). After any such allocation, any Tax Partnership income or gain (including Simulated Gain) that would otherwise be allocated to the Deficit Party shall be allocated instead to the Positive Parties up to an amount equal to the Tax Partnership loss or deduction allocated to each Positive Party under the preceding sentence; provided, however, that no allocation of income or gain realized shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of the Deficit Party to be less than zero. If, after taking into account the allocation in the first sentence of this Section 3.01(h), the Adjusted Capital Account balance of the Deficit Party remains less than zero at the end of a fiscal year, a pro rata portion of each item of Tax Partnership income or gain (including Simulated Gain) otherwise allocable to the Positive Parties for such fiscal year (or if there is no such income or gain allocable to the Positive Parties for such fiscal year, all such income or gain (including Simulated Gain) so allocable in the succeeding fiscal year or years) shall be allocated to the Deficit Party in an amount necessary to cause its Adjusted Capital Account balance to equal zero; provided, that no allocation under this sentence shall have the effect of causing the Positive Party’s Adjusted Capital Account to be less than zero. After any such allocation, any Tax Partnership gain (including Simulated Gain) resulting from the sale or other disposition of Designated Property that would otherwise be allocated to the Deficit Party for any fiscal year under this Section 3.01 shall be allocated instead to the Positive Parties until the amount of gain so allocated equals the amount of gain (including Simulated Gain) previously allocated to such Deficit Party under the preceding sentence of this Section 3.01(h); provided, however, that no allocation of gain (including Simulated Gain) shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of a Deficit Party to be less than zero.3.01

Allocations for Capital Account and Tax Purposes. Subject to Section 7.02 of the Agreement and except as otherwise provided herein, for purposes of any applicable federal, state or local income tax law, rule or regulation items of income, gain, deduction, loss, credit and amount realized shall be allocated to the Parties as follows: (a) Income from the sale of oil or gas production and any credits allowed by Section 29 of the Code relating thereto shall be allocated in the same manner as proceeds therefrom are allocated and credited pursuant to Section 5.02 of the Agreement. (b) Cost and percentage depletion deductions and the gain or loss on the sale or other disposition of property the production from which is subject to depletion (herein sometimes called “Depletable Property”) as computed for tax purposes shall be taken into account separately by the Parties rather than the Tax Partnership and, except to the extent and in the manner provided in Section 5.01(b) of this Exhibit D, shall not affect any Party’s Capital Account. For purposes of Section 613A(c)(7)(D) of the Code, the Tax Partnership’s adjusted basis in each Depletable Property shall be allocated to the Parties in proportion to each Party’s respective share of the costs and expenses which entered into the Tax Partnership’s adjusted basis for each Depletable Property, and the amount realized on the sale or other disposition of each Depletable Property shall be allocated to the Parties in proportion to each Party’s N LA Hosston-CV III Participation Agreement.doc respective share of the proceeds from the sale or other disposition of such property provided for in Section 5.02 0 of the Agreement. For purposes of allocating amounts realized upon any such sale or disposition which are deemed to be received for federal or state income tax purposes and are attributable to Tax Partnership indebtedness or indebtedness to which the Depletable Property is subject at the time of such sale or disposition, such amounts shall be allocated in the same manner as Partnership proceeds used for the repayment of such indebtedness would have been allocated under Section 5.02 of the Agreement. (c) Items of deduction, loss and credit not specifically provided for above (other than loss from the sale or other disposition of Designated Property), including depreciation, cost recovery and amortization deductions, shall be allocated to the Parties in the same manner that the costs and expenses of the Tax Partnership that gave rise to such items of deduction, loss and credit were allocated pursuant to Section 5.01 of the Agreement. (d) Gain from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the revenue from the sale of the Designated Property provided for in Section 5.02 of the Agreement, and loss from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the costs and expenses of the Designated Property provided for in Section 5.01 of the Agreement. (e) All recapture of income tax deductions resulting from the sale or other disposition of Designated Property shall be allocated to the Party to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Party is allocated any gain from the sale or other disposition of such property. (f) Any other items of Tax Partnership income or gain not specifically provided for above shall be allocated in the same manner as the revenue that resulted in such income or gain is allocated and credited pursuant to Section 5.02 of the Agreement. (g) Notwithstanding any of the foregoing provisions of this Section 3.01 to the contrary: (i) If during any fiscal year of the Tax Partnership there is a net increase in Minimum Gain attributable to a Partner Nonrecourse Debt that gives rise to Partner Nonrecourse Deductions, each Party bearing the economic risk of loss for such Partner Nonrecourse Debt shall be allocated items of Partnership deductions and losses for such year (consisting first of cost recovery or depreciation deductions with respect to property that is subject to such Partner Nonrecourse Debt and then, if necessary, a pro rata portion of the Tax Partnership’s other items of deductions and losses, with any remainder being treated as an increase in Minimum Gain attributable to Partner Nonrecourse Debt in the subsequent year) equal to such Party’s share of Partner Nonrecourse Deductions, as determined in accordance with applicable Regulations. (ii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to Partnership Nonrecourse Liabilities, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to one or more Partnership Nonrecourse Liabilities and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure with such Party commencing to bear the economic risk of loss as to all or part of any Partnership Nonrecourse Liability or by such Party contributing capital to the Tax N LA Hosston-CV III Participation Agreement.doc Partnership that the Tax Partnership uses to repay a Partnership Nonrecourse Liability), as determined in accordance with applicable Regulations. (iii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to a Partner Nonrecourse Debt, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to Partner Nonrecourse Debt, and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure or by the Tax Partnership’s use of capital contributed by such Party to repay Partner Nonrecourse Debt) as determined in accordance with applicable Regulations. (h) CWEI shall use all reasonable efforts to prevent any allocation or distribution from causing a negative balance in a Party’s Adjusted Capital Account. Consistent therewith, and notwithstanding any of the foregoing provisions of this Section 3.01 of this Exhibit D to the contrary, if for any fiscal year of the Tax Partnership the allocation of any loss or deduction (net of any income or gain) to any Party would cause or increase a negative balance in such Party’s Adjusted Capital Account as of the end of such fiscal year (the “Deficit Party”) after taking into account the provisions of Section 3.01(g) of this Exhibit D, only the amount of such loss or deduction that reduces the balance to zero shall be allocated to such Deficit Party and the remaining loss or deduction shall be allocated to the Parties whose Adjusted Capital Accounts have a positive balance remaining at such time (each, a “Positive Party”). After any such allocation, any Tax Partnership income or gain (including Simulated Gain) that would otherwise be allocated to the Deficit Party shall be allocated instead to the Positive Parties up to an amount equal to the Tax Partnership loss or deduction allocated to each Positive Party under the preceding sentence; provided, however, that no allocation of income or gain realized shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of the Deficit Party to be less than zero. If, after taking into account the allocation in the first sentence of this Section 3.01(h), the Adjusted Capital Account balance of the Deficit Party remains less than zero at the end of a fiscal year, a pro rata portion of each item of Tax Partnership income or gain (including Simulated Gain) otherwise allocable to the Positive Parties for such fiscal year (or if there is no such income or gain allocable to the Positive Parties for such fiscal year, all such income or gain (including Simulated Gain) so allocable in the succeeding fiscal year or years) shall be allocated to the Deficit Party in an amount necessary to cause its Adjusted Capital Account balance to equal zero; provided, that no allocation under this sentence shall have the effect of causing the Positive Party’s Adjusted Capital Account to be less than zero. After any such allocation, any Tax Partnership gain (including Simulated Gain) resulting from the sale or other disposition of Designated Property that would otherwise be allocated to the Deficit Party for any fiscal year under this Section 3.01 shall be allocated instead to the Positive Parties until the amount of gain so allocated equals the amount of gain (including Simulated Gain) previously allocated to such Deficit Party under the preceding sentence of this Section 3.01(h); provided, however, that no allocation of gain (including Simulated Gain) shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of a Deficit Party to be less than zero.

Allocations for Capital Account and Tax Purposes. Subject to Section 7.02 of the Agreement and except as otherwise provided herein, for purposes of any applicable federal, state or local income tax law, rule or regulation items of income, gain, deduction, loss, credit and amount realized shall be allocated to the Parties as follows:: Participation Agreement - East Texas Bossier - Sunny#.DOC (a) Income from the sale of oil or gas production and any credits allowed by Section 29 of the Code relating thereto shall be allocated in the same manner as proceeds therefrom are allocated and credited pursuant to Section 5.02 of the Agreement. (b) Cost and percentage depletion deductions and the gain or loss on the sale or other disposition of property the production from which is subject to depletion (herein sometimes called “Depletable Property”) as computed for tax purposes shall be taken into account separately by the Parties rather than the Tax Partnership and, except to the extent and in the manner provided in Section 5.01(b) of this Exhibit D, shall not affect any Party’s Capital Account. For purposes of Section 613A(c)(7)(D) of the Code, the Tax Partnership’s adjusted basis in each Depletable Property shall be allocated to the Parties in proportion to each Party’s respective share of the costs and expenses which entered into the Tax Partnership’s adjusted basis for each Depletable Property, and the amount realized on the sale or other disposition of each Depletable Property shall be allocated to the Parties in proportion to each Party’s respective share of the proceeds from the sale or other disposition of such property provided for in Section 5.02 of the Agreement. For purposes of allocating amounts realized upon any such sale or disposition which are deemed to be received for federal or state income tax purposes and are attributable to Tax Partnership indebtedness or indebtedness to which the Depletable Property is subject at the time of such sale or disposition, such amounts shall be allocated in the same manner as Partnership proceeds used for the repayment of such indebtedness would have been allocated under Section 5.02 of the Agreement. (c) Items of deduction, loss and credit not specifically provided for above (other than loss from the sale or other disposition of Designated Property), including depreciation, cost recovery and amortization deductions, shall be allocated to the Parties in the same manner that the costs and expenses of the Tax Partnership that gave rise to such items of deduction, loss and credit were allocated pursuant to Section 5.01 of the Agreement. (d) Gain from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the revenue from the sale of the Designated Property provided for in Section 5.02 of the Agreement, and loss from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the costs and expenses of the Designated Property provided for in Section 5.01 of the Agreement. (e) All recapture of income tax deductions resulting from the sale or other disposition of Designated Property shall be allocated to the Party to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Party is allocated any gain from the sale or other disposition of such property. (f) Any other items of Tax Partnership income or gain not specifically provided for above shall be allocated in the same manner as the revenue that resulted in such income or gain is allocated and credited pursuant to Section 5.02 of the Agreement.. Participation Agreement - East Texas Bossier - Sunny#.DOC (g) Notwithstanding any of the foregoing provisions of this Section 3.01 to the contrary: (i) If during any fiscal year of the Tax Partnership there is a net increase in Minimum Gain attributable to a Partner Nonrecourse Debt that gives rise to Partner Nonrecourse Deductions, each Party bearing the economic risk of loss for such Partner Nonrecourse Debt shall be allocated items of Partnership deductions and losses for such year (consisting first of cost recovery or depreciation deductions with respect to property that is subject to such Partner Nonrecourse Debt and then, if necessary, a pro rata portion of the Tax Partnership’s other items of deductions and losses, with any remainder being treated as an increase in Minimum Gain attributable to Partner Nonrecourse Debt in the subsequent year) equal to such Party’s share of Partner Nonrecourse Deductions, as determined in accordance with applicable Regulations. (ii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to Partnership Nonrecourse Liabilities, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to one or more Partnership Nonrecourse Liabilities and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure with such Party commencing to bear the economic risk of loss as to all or part of any Partnership Nonrecourse Liability or by such Party contributing capital to the Tax Partnership that the Tax Partnership uses to repay a Partnership Nonrecourse Liability), as determined in accordance with applicable Regulations. (iii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to a Partner Nonrecourse Debt, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to Partner Nonrecourse Debt, and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure or by the Tax Partnership’s use of capital contributed by such Party to repay Partner Nonrecourse Debt) as determined in accordance with applicable Regulations. (h) CWEI shall use all reasonable efforts to prevent any allocation or distribution from causing a negative balance in a Party’s Adjusted Capital Account. Consistent therewith, and notwithstanding any of the foregoing provisions of this Section 3.01 of this Exhibit D to the contrary, if for any fiscal year of the Tax Partnership the allocation of any loss or deduction (net of any income or gain) to any Party would cause or increase a negative balance in such Party’s Adjusted Capital Account as of the end of such fiscal year (the “Deficit Party”) after taking into account the provisions of Section 3.01(g) of this Exhibit D, only the amount of such loss or deduction that reduces the balance to zero shall be allocated to such Deficit Party and the Participation Agreement - East Texas Bossier - Sunny#.DOC remaining loss or deduction shall be allocated to the Parties whose Adjusted Capital Accounts have a positive balance remaining at such time (each, a “Positive Party”). After any such allocation, any Tax Partnership income or gain (including Simulated Gain) that would otherwise be allocated to the Deficit Party shall be allocated instead to the Positive Parties up to an amount equal to the Tax Partnership loss or deduction allocated to each Positive Party under the preceding sentence; provided, however, that no allocation of income or gain realized shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of the Deficit Party to be less than zero. If, after taking into account the allocation in the first sentence of this Section 3.01(h), the Adjusted Capital Account balance of the Deficit Party remains less than zero at the end of a fiscal year, a pro rata portion of each item of Tax Partnership income or gain (including Simulated Gain) otherwise allocable to the Positive Parties for such fiscal year (or if there is no such income or gain allocable to the Positive Parties for such fiscal year, all such income or gain (including Simulated Gain) so allocable in the succeeding fiscal year or years) shall be allocated to the Deficit Party in an amount necessary to cause its Adjusted Capital Account balance to equal zero; provided, that no allocation under this sentence shall have the effect of causing the Positive Party’s Adjusted Capital Account to be less than zero. After any such allocation, any Tax Partnership gain (including Simulated Gain) resulting from the sale or other disposition of Designated Property that would otherwise be allocated to the Deficit Party for any fiscal year under this Section 3.01 shall be allocated instead to the Positive Parties until the amount of gain so allocated equals the amount of gain (including Simulated Gain) previously allocated to such Deficit Party under the preceding sentence of this Section 3.01(h); provided, however, that no allocation of gain (including Simulated Gain) shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of a Deficit Party to be less than zero.

Allocations for Capital Account and Tax Purposes. Subject to Section 7.02 of the Agreement and except as otherwise provided herein, for purposes of any applicable federal, state or local income tax law, rule or regulation items of income, gain, deduction, loss, credit and amount realized shall be allocated to the Parties as follows: (a) Income from the sale of oil or gas production and any credits allowed by Section 29 of the Code relating thereto shall be allocated in the same manner as proceeds therefrom are allocated and credited pursuant to Section 5.02 of the Agreement. (b) Cost and percentage depletion deductions and the gain or loss on the sale or other disposition of property the production from which is subject to depletion (herein sometimes called “Depletable Property”) as computed for tax purposes shall be taken into account separately by the Parties rather than the Tax Partnership and, except to the extent and in the manner provided in Section 5.01(b) of this Exhibit D, shall not affect any Party’s Capital Account. For purposes of Section 613A(c)(7)(D) of the Code, the Tax Partnership’s adjusted basis in each Depletable Property shall be allocated to the Parties in proportion to each Party’s respective share of the costs and expenses which entered into the Tax Partnership’s adjusted basis for each Depletable Property, and the amount realized on the sale or other disposition of each Depletable Property shall be allocated to the Parties in proportion to each Party’s Utah Participation Agreement.doc respective share of the proceeds from the sale or other disposition of such property provided for in Section 5.02 of the Agreement. For purposes of allocating amounts realized upon any such sale or disposition which are deemed to be received for federal or state income tax purposes and are attributable to Tax Partnership indebtedness or indebtedness to which the Depletable Property is subject at the time of such sale or disposition, such amounts shall be allocated in the same manner as Partnership proceeds used for the repayment of such indebtedness would have been allocated under Section 5.02 of the Agreement. (c) Items of deduction, loss and credit not specifically provided for above (other than loss from the sale or other disposition of Designated Property), including depreciation, cost recovery and amortization deductions, shall be allocated to the Parties in the same manner that the costs and expenses of the Tax Partnership that gave rise to such items of deduction, loss and credit were allocated pursuant to Section 5.01 of the Agreement. (d) Gain from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the revenue from the sale of the Designated Property provided for in Section 5.02 of the Agreement, and loss from the sale or other disposition of Designated Property that is not specifically provided for above shall be allocated to the Parties in a manner which reflects each Party’s allocable share of the costs and expenses of the Designated Property provided for in Section 5.01 of the Agreement. (e) All recapture of income tax deductions resulting from the sale or other disposition of Designated Property shall be allocated to the Party to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Party is allocated any gain from the sale or other disposition of such property. (f) Any other items of Tax Partnership income or gain not specifically provided for above shall be allocated in the same manner as the revenue that resulted in such income or gain is allocated and credited pursuant to Section 5.02 of the Agreement. (g) Notwithstanding any of the foregoing provisions of this Section 3.01 to the contrary: (i) If during any fiscal year of the Tax Partnership there is a net increase in Minimum Gain attributable to a Partner Nonrecourse Debt that gives rise to Partner Nonrecourse Deductions, each Party bearing the economic risk of loss for such Partner Nonrecourse Debt shall be allocated items of Partnership deductions and losses for such year (consisting first of cost recovery or depreciation deductions with respect to property that is subject to such Partner Nonrecourse Debt and then, if necessary, a pro rata portion of the Tax Partnership’s other items of deductions and losses, with any remainder being treated as an increase in Minimum Gain attributable to Partner Nonrecourse Debt in the subsequent year) equal to such Party’s share of Partner Nonrecourse Deductions, as determined in accordance with applicable Regulations. (ii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to Partnership Nonrecourse Liabilities, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to one or more Partnership Nonrecourse Liabilities and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure with such Party commencing to bear the economic risk of loss as to all or part of any Partnership Nonrecourse Liability or by such Party contributing capital to the Tax Utah Participation Agreement.doc Partnership that the Tax Partnership uses to repay a Partnership Nonrecourse Liability), as determined in accordance with applicable Regulations. (iii) If for any fiscal year of the Tax Partnership there is a net decrease in Minimum Gain attributable to a Partner Nonrecourse Debt, each Party shall be allocated items of Tax Partnership income and gain for such year (consisting first of gain recognized, including Simulated Gain, from the disposition of Designated Property subject to Partner Nonrecourse Debt, and then, if necessary, a pro rata portion of the Tax Partnership’s other items of income and gain, and if necessary, for subsequent years) equal to such Party’s share of such net decrease (except to the extent such Party’s share of such net decrease is caused by a change in debt structure or by the Tax Partnership’s use of capital contributed by such Party to repay Partner Nonrecourse Debt) as determined in accordance with applicable Regulations. (h) CWEI shall use all reasonable efforts to prevent any allocation or distribution from causing a negative balance in a Party’s Adjusted Capital Account. Consistent therewith, and notwithstanding any of the foregoing provisions of this Section 3.01 of this Exhibit D to the contrary, if for any fiscal year of the Tax Partnership the allocation of any loss or deduction (net of any income or gain) to any Party would cause or increase a negative balance in such Party’s Adjusted Capital Account as of the end of such fiscal year (the “Deficit Party”) after taking into account the provisions of Section 3.01(g) of this Exhibit D, only the amount of such loss or deduction that reduces the balance to zero shall be allocated to such Deficit Party and the remaining loss or deduction shall be allocated to the Parties whose Adjusted Capital Accounts have a positive balance remaining at such time (each, a “Positive Party”). After any such allocation, any Tax Partnership income or gain (including Simulated Gain) that would otherwise be allocated to the Deficit Party shall be allocated instead to the Positive Parties up to an amount equal to the Tax Partnership loss or deduction allocated to each Positive Party under the preceding sentence; provided, however, that no allocation of income or gain realized shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of the Deficit Party to be less than zero. If, after taking into account the allocation in the first sentence of this Section 3.01(h), the Adjusted Capital Account balance of the Deficit Party remains less than zero at the end of a fiscal year, a pro rata portion of each item of Tax Partnership income or gain (including Simulated Gain) otherwise allocable to the Positive Parties for such fiscal year (or if there is no such income or gain allocable to the Positive Parties for such fiscal year, all such income or gain (including Simulated Gain) so allocable in the succeeding fiscal year or years) shall be allocated to the Deficit Party in an amount necessary to cause its Adjusted Capital Account balance to equal zero; provided, that no allocation under this sentence shall have the effect of causing the Positive Party’s Adjusted Capital Account to be less than zero. After any such allocation, any Tax Partnership gain (including Simulated Gain) resulting from the sale or other disposition of Designated Property that would otherwise be allocated to the Deficit Party for any fiscal year under this Section 3.01 shall be allocated instead to the Positive Parties until the amount of gain so allocated equals the amount of gain (including Simulated Gain) previously allocated to such Deficit Party under the preceding sentence of this Section 3.01(h); provided, however, that no allocation of gain (including Simulated Gain) shall be made under this sentence if the effect of such allocation would be to cause the Adjusted Capital Account of a Deficit Party to be less than zero.