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THE INTERESTS IN THIS LIMITED PARTNERSHIP HAVE NOT BEEN REGISTERED UNDER EITHER
THE FEDERAL OR STATE SECURITIES LAWS AND ARE RESTRICTED AS TO TRANSFER. SUCH
RESTRICTIONS INCLUDE PROVIDING EVIDENCE SATISFACTORY TO THE GENERAL PARTNER THAT
ANY TRANSFER IS IN COMPLIANCE WITH FEDERAL AND STATE SECURITIES LAWS.
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AGREEMENT OF LIMITED PARTNERSHIP
OF
CHALK MOUNTAIN EXPLORATION, LTD.
This agreement of limited partnership is made and entered into on January
14, 1997. It is between Midland Resources, Inc. , a Texas corporation, referred
to in this agreement as the "General Partner" or "MRI", and the persons and
entities shown as the Limited Partners on Exhibit "A", attached hereto,
including the initial limited partner, together with any additional or
substituted Limited Partners admitted to the Partnership in accordance with the
terms of this agreement, all of whom are referred to in this agreement as
"Limited Partners".
ARTICLE I
DEFINITIONS
The following terms have the following meanings when used in this
agreement:
"Act" means the Texas Revised Limited Partnership Act.
"Area of Mutual Interest" means that acreage within the boundary on the map
as marked on EXHIBIT "E" attached hereto, in Xxxxxx, Xxxxxxxx and Xxx Xxxxx
Counties, Texas. The Area of Mutual Interest does not include interests in any
geological formation the rights to which are not conveyed in EXHIBIT B
"Affiliate" means any person or entity that controls or is controlled by
the General Partner. In this definition, the term "control" includes the
ownership of more than 50% of the beneficial interest in the person or entity.
"Agreement" or "partnership agreement" means this agreement of limited
partnership, including any amendments that may be made.
"Bankruptcy" means, as to any partner, the partner's taking or acquiescing
in the taking, of any action seeking relief under, or advantage of, any
applicable debtor relief, liquidation, receivership, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization, or similar
law affecting the rights or remedies of creditors generally, as in effect from
time to time. For the purpose of this definition, the term "acquiescing" shall
include, without limitation, the failure to file, within ten
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days after its entry, a petition, answer or motion to vacate or to discharge
any order, judgment or decree providing for any relief under any such law.
"Capital contribution(s)" means the contribution(s) made to the capital of
the Partnership from time to time by a partner in cash or property.
"Certificate" means the certificate of limited partnership to be filed by
the General Partner with the Secretary of State of Texas in accordance with this
agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time.
"Percentage interest" means the interest of a partner in the capital and
profits and losses of the Partnership as initially set forth in EXHIBIT "A",
attached hereto.
"Person" means an individual or a corporation or other entity.
"Prospect Area" means the lease interests in the acreage conveyed by the
Bill of Sale and Assignment of Oil and Gas Leases attached hereto as EXHIBIT
"B".
"Required interest" means one or more of the Limited Partners having among
them more than 50% of the Percentage Interest of all Limited Partners in their
capacity as such.
"Transfer" means the mortgage, pledge, hypothecation, transfer, sale,
assignment or other disposition of any part or all of an interest in the
Partnership by any partner, whether voluntarily, by operation of law or
otherwise.
ARTICLE II
GENERAL
FORMATION
2.01 By this agreement, the General Partner and the Limited Partners form
and establish the Partnership pursuant to the Act. Prior to conducting any
business in any jurisdiction, the General Partner shall promptly file the
Certificate as required by the Act and comply with all other legal
requirements for the formation and operation of the Partnership. Except as
expressly provided in this agreement, the Act shall govern the rights and
liabilities of the partners.
The Partnership shall be formed by the General Partner and the initial
limited partner, who notwithstanding any other provision herein, following
formation shall, (i) not be required to contribute capital to the
Partnership, (ii) shall withdraw from the partnership upon the admission of
the first additional limited partner who shall make a cash capital
contribution, (iii) shall not be entitled to any distribution or
allocation of profits or losses. Any other provision
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contained herein that may be construed as inconsistent with the formation
of the Partnership by the General Partner and the initial limited partner
shall be construed so as to permit such action.
NAME
2.02 The name of the Partnership shall be CHALK MOUNTAIN EXPLORATION, LTD.
The General Partner may change the name of the Partnership or adopt such
trade or fictitious names as it may determine appropriate.
INVESTMENT
2.03 Each of the Limited Partners represents that he (a) understands the
high degree of risk associated with exploration drilling for oil and gas,
development drilling for oil and gas, and producing oil and gas, (b) has to
his satisfaction, had an opportunity to ask questions of the General
Partner and receive whatever information he believes is necessary to make a
decision to invest in the Partnership. (c) has consulted and received a
report by an independent consulting geologist regarding the Prospect Area,
(d) has sufficient resources to withstand the complete loss of his
investment in the Partnership, and (d) is acquiring an interest in the
Partnership for investment for his own account, and not with a view to any
sale or distribution of that interest.
ARTICLE III
COMMENCEMENT DATE; TERM OF PARTNERSHIP
The Partnership shall commence and be effective on the date the Certificate
is filed with the Secretary of State of Texas. The Partnership shall continue
until terminated as provided in this agreement or on December 31, 2046,
whichever occurs first.
ARTICLE IV
PURPOSES
The purposes of the Partnership shall be to explore for oil and gas, drill
for oil and gas, and operate oil and gas xxxxx in the Prospect Area and the Area
of Mutual Interest.
ARTICLE V
GENERAL PARTNER AND PLACE OF BUSINESS
The General Partner of the Partnership is Midland Resources, Inc.,
hereafter sometimes referred to as MRI, with offices at 00000 Xxxxxxxxxxx Xxxx
Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000. The
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address of the General Partner is the principal place of business of the
Partnership. Any requests for information concerning the Partnership shall be
directed to the General Partner at the principal place of business of the
Partnership. Xxxx X. Xxxxxx III shall serve as the registered agent of the
Partnership. The address of the registered agent of the Partnership is 00000
Xxxxxxxxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000. The address and the
name of the registered agent of the Partnership may be changed as the General
Partner may designate by written notice to the Limited Partners and by filing
an amended Certificate with the Secretary of State.
ARTICLE VI
CAPITAL CONTRIBUTIONS
GENERAL PARTNER'S CONTRIBUTION
6.01 At the time of execution of this agreement, the General Partner as
such shall be obligated to contribute such sums to the capital of the
Partnership as may be necessary to complete and equip the initial well to be
drilled on the Prospect Area to produce into the tanks, should such well be
determined to be completed. In exchange for such obligation and the other
obligations of the General Partner contained herein, the General Partner will
have the percentage interest in the Partnership set forth in Exhibit "A".
The General Partner shall fulfill its obligation at such time and in such
manner so as to fully and timely complete and equip such initial well. Upon
the drilling of any additional xxxxx after the initial well, including the
acquisition of additional acreage and related activities, the General
Partner commits to, and will, contribute to the capital of the Partnership
the amount equal to its then percentage interest in the Partnership
multiplied by any AFE cost (as defined and used in Section 6.02).
LIMITED PARTNERS' CONTRIBUTIONS
6.02 (a) The Limited Partners shall contribute to the capital of the
Partnership, as the initial Limited Partner Capital, the sum
of $750,000, in the percentages and amounts shown on Exhibit
"A", attached hereto. In exchange for these contributions,
the Limited Partners will have the respective percentage
interests in the Partnership set forth in Exhibit "A".
(b) The $750,000 amount is the total estimated Prospect Area
land cost, seismic cost, and dry hole cost of the initial
well proposed to be drilled in the Prospect Area plus
contingency funds, all as set forth in the AFE attached
hereto as EXHIBIT "D". If actual costs incurred with
respect to drilling such well should from time to time
exceed such amount, the Limited Partners in proportion
to their percentage interest agree to pay over to the
General Partner as additional Limited Partner Capital an
amount equal to any excess required not later than 10
days after each call is made therefor by the General
Partner.
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(c) The Partnership may drill additional xxxxx on the Prospect
Area as well as acquire land and drill additional xxxxx
in the Area of Mutual Interest. An Authorization for
Expenditures ("AFE") estimating the costs of drilling
any additional well and acquiring any additional acreage
shall be prepared according to standards and procedures
generally accepted within the industry among industry
partners, for each such well and shall be delivered by
the General Partner to each Limited Partner, who,
subject to Section 7.04, agrees not later than 14 days
after receipt of same to contribute to the capital of the
Partnership as additional Partner Capital an amount
equal to his then percentage interest in the Partnership
multiplied by the AFE cost. If actual costs incurred on
behalf of the Partnership with respect to a given well
exceed the estimated costs, the Partners agree to fund
the excess in the manner outlined in this Section 6.02 for
such an excess applicable to the initial well.
LIMITED LIABILITY FOR LIMITED PARTNERS
6.03 The liability of the Limited Partners to the Partnership is limited to
the amount of their respective capital contributions agreed to be made in
paragraph 6.02 plus an additional amount during the calendar year ending
December 31, 1997 equal to the negative cash flow, if any, experienced by
the Partnership in that year requiring an additional infusion of capital by
all Partners for the year. The Limited Partners are entitled to a return of
their respective capital contributions only as provided in this partnership
agreement.
ARTICLE VII
CAPITAL ACCOUNTS
ESTABLISHMENT OF CAPITAL ACCOUNTS
7.01 Separate capital accounts shall be established and maintained for each
partner in accordance with Section 1.704-1 (b) (2) (iv) of the Treasury
Regulations, as amended from time to time.
CREDITS AND DEBITS
7.02 All capital contributions of a partner, its allocable share of
Partnership income and loss, and cash or property distributions made to
such partner shall be credited or charged to such partner's individual
capital account as the case may be. To the extent an allocation or
adjustment is not specifically described by this agreement, that item shall
be reflected in the partners' capital accounts in accordance with Section
1.704-1 (b)(2)(iv) of the Treasury Regulations, as amended from time to
time.
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The capital accounts shall not bear interest.
SPECIAL ALLOCATION OF COST
7.03 Special allocation of costs shall be made as follows:
(a) General Partner: Capital account to be applied in the following
order:
First-Leasehold costs.
Second-Lease and well equipment costs.
Third-Intangible drilling costs.
(b) Limited Partners: Capital accounts are to be applied in the
following order:
First-Intangible drilling costs.
Second-Lease and well equipment cost.
Third-Leasehold costs.
SPECIAL ALLOCATION FOR NON CONSENT
7.04 (a) If any partner fails to make a capital contribution pursuant to
Section 6.02 (c) ("Non Consenting Partner") the General Partner
shall give notice to the remaining partners who shall thereafter
have 7 days within which to notify the General Partner of their
willingness to contribute pro rata (or as they may agree among
themselves) the amount of the Non Consenting Partners capital
contribution. If enough partners agree ("Consenting Partners")
to make the full amount of the Non Consenting Partner's capital
contribution then the General Partner shall so notify the
Consenting Partners and the project which required the Section
6.02 capital call ("Non Consent Project") shall be done.
(b) With respect to a Non Consent Project, the General Partner shall
establish and maintain as reasonably as possible, a separate
accounting of the costs and revenues thereof. The Consenting
Partners shall bear and be specially allocated the entire cost
and risk of conducting such Non Consent Project in proportion to
the Section 6.02(c) capital contribution they made for such Non
Consent Project. The allocation of costs among the Consenting
Partners shall be in the manner set forth in Section 7.03.
(c) If the Non Consent Project results in oil or gas production, then
the Non Consenting Partner shall be deemed to have consented to a
special allocation to the Consenting Partners, of the revenue and
expenses from all production from such Non Consent Project, in
proportion to their capital contributions for such Non Consent
Project. Such special allocation of revenue and expenses
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shall continue until such time as the Consenting Partners
collectively are allocated net proceeds equal to 300% of the
amount of the capital call the Non Consenting Partner did not
make.
(d) If (i) the General Partner determines that not enough Consenting
Partners agreed to fund the entire amount of the Section 6.02(c)
Non Consenting Partner's capital contribution and therefor the
Non Consent Project cannot be accomplished, and (ii) one cost
component of the Non Consent Project consisted of exercising one
or more of the options to acquire acreage contained in EXHIBIT
"B"; then the General Partner shall notify the party to whom the
option shall revert back to (which may be itself) the names of
those partners who did express a willingness to make the capital
contribution required by Section 6.02(c) and the amount such
partners were willing to contribute.
ACCOUNTING FOR PARTNER'S LOANS
7.05 Loans made by a partner to the Partnership shall not be considered
capital contributions.
RETURN OF CAPITAL
7.06 No partner has the right to demand the return of its capital
contribution other than in cash and except as provided in this
agreement.
LIQUIDATION
7.07 When the Partnership is liquidated, each partner with a deficit in its
capital account will be obligated to contribute to the capital of the
Partnership an amount of cash equal to the deficit in the capital
account balance. The cash must be paid within 30 days after the date
of the liquidation, and the amounts so contributed may be paid to the
creditors of the Partnership or distributed to the other partners in
the ratio of the then positive balances in their respective capital
accounts.
PARTITION
7.08 All interests in the property owned by the Partnership shall be deemed
owned by the Partnership as an entity. No partner, individually, shall
have any ownership of such property or interest except as a partner in
the Partnership. Each of the partners irrevocably waives, during the
term of the Partnership and during any period of its liquidation
following any dissolution, any right that it may have to maintain any
action for partition with respect to any of the assets of the
Partnership.
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ARTICLE VIII
TRANSACTIONS WITH GENERAL PARTNER AND CONTROL AND MANAGEMENT
TRANSACTIONS WITH GENERAL PARTNER
8.01 The General Partner will sell to the Partnership its interest in the
Prospect Area, the Area of Mutual Interest and certain related seismic
data pursuant to a Bill of Sale and Assignment of Oil and Gas Leases,
substantially in the form attached hereto as EXHIBIT "B". A
subsidiary of the General Partner will supervise the drilling of all
xxxxx and act as operator of any xxxxx pursuant to the terms of the
A.A.P.L. Form 610 Operating Agreement attached hereto as EXHIBIT "C".
The General Partner is entitled to receive reimbursement of all direct
out of pocket costs incurred on behalf of the Partnership, in addition
to amounts received by its subsidiary pursuant to the Operating
Agreement.
ROLE OF GENERAL PARTNER
8.02 (a) The General Partner has full, exclusive and complete discretion
in the management and control of the Partnership for any of the
purposes set forth in Article IV of this agreement, unless
specifically stated otherwise in this agreement.
(b) The General Partner agrees to conduct the operations
contemplated under this agreement in a careful and prudent
manner, and in accordance with good industry practice.
(c) The General Partner (or any successor to the General Partner)
agrees to serve as general partner of the Partnership until the
Partnership is terminated without reconstitution as provided
below.
GENERAL PARTNER'S AUTHORITY
8.03 Subject to any limitations expressly set forth in this agreement, the
General Partner is expressly authorized to perform any of the following
acts on behalf of the Partnership:
(a) Any and all acts necessary or appropriate to the acquisition and
management of the Partnership and interests in the Partnership;
(b) Maintenance of all necessary Partnership books and records;
(c) Commencement of litigation or defense of litigation, including
settlement of any litigation, involving the Partnership;
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(d) Establishment of bank accounts in which all Partnership funds
shall be deposited and from which payments shall be made;
(e) Procuring and maintaining insurance with responsible companies as
may be available in such amounts and covering such risks as are
deemed appropriate by the General Partner;
(f) Taking and holding all real, personal and mixed property of the
Partnership in the name of the Partnership;
(g) Executing and delivering, on behalf of and in the name of the
Partnership, contracts, agreements and other documents;
(h) Coordinating all accounting and clerical functions of the
Partnership and employing accountants, lawyers, engineers and
other management or service personnel as may from time to time be
required to carry on the business of the Partnership;
(i) Filing tax returns and making elections on behalf of the
Partnership as provided under the Code.
LIMITATIONS
8.04 Notwithstanding the generality of the General Partner' s authority,
the General Partner is not empowered, without the consent of a required
interest, to:
(a) Do any act in contravention of this partnership agreement;
(b) Do any act that would make it impossible to carry out the
ordinary business of the Partnership, except as specifically
permitted by the terms of this agreement;
(c) Confess a judgment against the Partnership;
(d) Possess Partnership property or assign any rights in specific
Partnership property for other than a Partnership purpose;
(e) Require any partner to make any contribution to the capital of
the Partnership not provided for in this agreement;
(f) Mortgage or pledge any assets of the Partnership to secure
Partnership loans exceeding $100,000 in the aggregate;
(g) Amend this partnership agreement.
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OTHER AND COMPETING ACTIVITIES
8.05 Any partner may engage in or possess an interest in other business
ventures of any nature or description, independently or with others,
similar to, or competitive with the business conducted by the Partnership.
Neither the Partnership nor any partner shall have any rights in or to such
independent ventures of the income or profits derived form these other
activities.
LIABILITY OF GENERAL PARTNER
8.06 The General Partner is not liable, responsible or accountable in
damages or otherwise to the Limited Partners or the Partnership for any act
performed by the General Partner in good faith and within the scope of this
agreement. The General Partner is liable to the Limited Partners only for
conduct that involves gross negligence, bad faith or fraud.
INDEMNIFICATION OF GENERAL PARTNER
8.07 The Partnership shall indemnify and hold harmless the General Partner
and its officers, directors, agents and representatives from and against
any loss, damage, liability, cost or expense (including reasonable
attorneys' fees) arising out of any act or failure to act by the General
Partner, specifically including its sole, partial or concurrent negligence
to the greatest extent permitted under the Act.
CONTRACTS WITH AFFILIATES
8.08 Notwithstanding anything in this agreement to the contrary, it is
understood and agreed that the Partnership may employ any partner and any
person affiliated with any partner to render services on behalf of the
Partnership and may compensate the person rendering the services on
customary terms and at competitive rates. Neither the Partnership nor the
other partners shall have any rights in or to any profits derived form any
fees paid by the Partnership for such services.
TAX MATTERS PARTNER
8.09 The General Partner is authorized and required to represent the
Partnership in connection with all examinations of the Partnership affairs
by tax authorities, including administrative and judicial proceedings, and
to expend Partnership funds for professional services and costs in
connection with such examinations.
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ARTICLE IX
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
LIMITED LIABILITY
9.01 Other than as provided in paragraphs 6.03 and 7.05, the Limited
Partners have no personal liability whatsoever, whether to the Partnership,
the General Partner, or any creditor of the Partnership, for any of the
debts or losses of the Partnership beyond their respective capital
contributions to the Partnership.
NO MANAGEMENT RIGHTS
9.02 The Limited Partners may not take part in the management of the
Partnership or transact any business for or on behalf of the Partnership.
All management responsibility is vested in the General Partner, subject to
the approval of the Limited Partners in those specific instances described
in this agreement.
NO AUTHORITY TO BIND PARTNERSHIP
9.03 The Limited Partners have no power or authority to sign for or to bind
the Partnership. All authority to act on behalf of the Partnership is
vested in the General Partner.
ARTICLE X
PERCENTAGE INTERESTS; ALLOCATIONS AND DISTRIBUTIONS
ACCOUNTING PRINCIPLES
10.01 The net income and net loss of the Partnership (and each item of
income, gain, loss, deduction or credit entering into the computation of
net income and net loss) shall be determined on an annual basis in
accordance with the accounting method followed by the Partnership for
federal income tax purposes.
PERCENTAGE INTERESTS
10.02 The phrase "Percentage Interest- of each partner means that
particular partner's interest in the capital, net income, net loss and
distributions of the Partnership as set forth in Exhibit "A", attached
hereto.
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ALLOCATIONS
10.03 All net income, net losses and credits and items of gain or loss of
the Partnership shall be allocated to each given partner from time to time
in accordance with such partner's Percentage Interest, except as modified
by Article VII herein.
DISTRIBUTIONS
10.04 All net cash flow available for distribution to the partners, subject
to the establishment of reasonable reserves, shall be distributed monthly
to the partners in accordance with their respective Percentage Interests,
except as modified by Article VII herein.
COMPLIANCE WITH TREASURY REGULATIONS
10.05 It is intended that the allocation and distribution provisions set
forth in this Article X apply in a manner consistent with the provisions of
Sections 704 and 706 of the Code, and the Treasury Regulations promulgated
for those sections. The General Partner shall have reasonable discretion to
apply the allocation and distribution provisions set forth in this Article
X in any manner consistent with Sections 704 and 706 of the Code and the
Treasury Regulations.
ARTICLE XI
LOANS TO PARTNERSHIP
Pursuant to a written agreement approved by the General Partner, any
partner may lend funds to the Partnership for Partnership business. The amount
of any loan or advance by the partner shall bear interest at the lesser of: (i)
3 % in excess of the base rate as published from time to time by Texas Commerce
Bank, N.A., or (ii) the maximum permissible interest rate allowable under
applicable usury laws. Xxxxx made under this provision of this agreement shall
be deemed an obligation of indebtedness from the Partnership to the partner,
payable prior to any distributions to the partners.
ARTICLE XII
TRANSFERS OF PARTNERSHIP INTERESTS
RESTRICTION ON TRANSFERS BY PARTNERS, LOANS.
12.01 The Limited Partners may not transfer any or all of their respective
interests in the Partnership without the prior written consent of the
General Partner. The General Partner may withhold consent if the terms of
Section 12.02 and 12.03 are not met. By way of exception to the transfer
restriction of this paragraph, any Limited Partner may encumber pursuant to
a bank Uniform Commercial Code security agreement his interest in the
Partnership for the purpose
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of obtaining a loan the proceeds of which are to be delivered to the
Partnership as a capital contribution. Notwithstanding any provision of
this agreement to the contrary, the General Partner may pledge its interest
in the Partnership without restriction to secure borrowings under its bank
or other corporate loan agreements.
TRANSFER BY PARTNERS
12.02 Before any Partner may sell or otherwise transfer all or any part of
his interest in the Partnership to other than an immediate family member if
an individual or a wholly owned subsidiary if a corporation, he must first
notify the Partners in writing in the manner herein provided as to the
Partnership Interest he intends to sell or transfer, giving the name of the
proposed transferee, and the price and terms upon which the sale or
transfer is to be made; and thereupon, the other Partners shall have an
exclusive option for a period of thirty (30) days after the date of such
notice to purchase, at the price and the terms set out in the notice, all
of the Partnership Interest to be disposed of. Such right to purchase shall
be pro rata according to the remaining Partners interest in the
Partnership, or as the Partners may agree among themselves. If the option
is not exercised, the selling partner, subject to the provisions of
paragraph 12.01, may sell his Partnership Interest at the price, on the
terms, and to the transferee stated in the notice at any time within thirty
(30) days after the option expires, but not thereafter unless and until he
gives a new notice to the remaining Limited Partners and they again fail to
exercise their option. At the time of closing, the parties involved shall
execute all assignments and other documents necessary to effectuate the
sale and carry out the terms of the offer under the laws of the State of
Texas.
TRANSFER REQUIREMENTS
12.03 No permitted assignee or transferee of all or part of the interest of
the Limited Partners in the Partnership shall have the right to become a
substitute limited partner unless all of the following occur:
(a) The transferring Limited Partner has stated the intention that
the assignee become a limited partner in his or her own right in
the instrument of assignment;
(b) The assignee has executed an instrument reasonably satisfactory
to the General Partner, accepting and adopting the terms and
provisions of this agreement;
(c) The assignor or assignee pays any reasonable expenses in
connection with the admission of the assignee as a Limited
Partner;
(d) The General Partner reasonably believes the transfer will not
cause the Partnership to be taxed as a corporation;
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(e) The assignor and assignee provides evidence satisfactory to the
General Partner that the transfer will not create liability to
the Partnership under the federal or state securities laws.
(f) The assignment will not cause a dissolution of the Partnership;
and
(g) The General Partner consents to the assignee becoming a
substitute limited partner.
GENERAL PARTNER AS LIMITED PARTNER
12.04 To the extent that the General Partner owns an interest as a Limited
Partner, the General Partner shall, with respect to such interest, enjoy
all the rights and be subject to all the obligations and duties of a
Limited Partner to the extent of such interest.
TRANSFER BY GENERAL PARTNER
12.05 In addition to the requirements of Section 12.02, the General
Partner may not transfer any or all of its interest in the Partnership
without the prior written consent of a Required Interest. If a transfer is
approved, the transferee assumes all of the obligations of the General
Partner and the General Partner shall be relieved of all further
obligations and responsibilities. If a transfer of the General Partner's
interest is approved, the transfer will not cause the dissolution of the
Partnership, which may continue with the transferee as the General Partner
the same as if the transferee had been the initial General Partner.
The restrictions on the transfer of the General Partner's interest in the
Partnership do not apply to a transfer by the General Partner to an affiliate of
the General Partner.
ARTICLE XIII
DISSOLUTION AND TERMINATION
EVENTS OF DISSOLUTION
13.01 The Partnership shall be dissolved and its business wound up on the
earliest occurrence of any one of the following events:
(a) The expiration of the term of the Partnership as set forth in
Article III;
(b) The General Partner's determination, with the Limited Partners'
prior written consent, that the Partnership should be dissolved;
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(c) The dissolution, withdrawal or bankruptcy of the General Partner,
unless the Partnership is reconstituted in the manner prescribed
in paragraph 13.02 of this agreement. The dissolution, withdrawal
or bankruptcy of the General Partner will not result in the
dissolution of the Partnership so long as the successor to the
General Partner's interest in the Partnership, in accordance with
paragraph 13.02, assumes all of the General Partner's obligations
under this agreement. or
(d) The vote of the Required Interest within 30 days following the
date Xxxx X. Xxxxxx III ceases to be the principal executive
officer of the General Partner or the operator designated in
EXHIBIT "C".
ELECTION OF NEW GENERAL PARTNER
13.02 At the time of the dissolution, withdrawal or bankruptcy of the
General Partner, the business of the Partnership shall be continued on the
terms and subject to the conditions of this agreement if, within 30 days
after such event, the Limited Partners unanimously elect that the business
of the Partnership should be continued and, in such election, designate one
or more persons to be substituted as general partner. New General
Partner(s) elected by this procedure will succeed to all of the powers,
privileges and obligations of the then-existing General Partner. The
interest in the Partnership of the General Partner who is succeeded by new
General Partner(s) will become a Limited Partner's interest in the
Partnership. In the event of a dissolution, withdrawal or bankruptcy of the
General Partner and the failure of the Limited Partners to elect to
continue the business of the Partnership, the Partnership shall be
terminated forthwith.
NO RELEASE FROM LIABILITIES
13.03 It is understood and agreed that no dissolution of the Partnership
releases or relieves any of the parties to this agreement of their
contractual obligations under this agreement.
DISTRIBUTIONS IN LIQUIDATION
13.04 If the business of the Partnership is not continued, the General
Partner shall, if possible, act as liquidator. If the General Partner has
itself dissolved, withdrawn from the Partnership or declared or suffered a
bankruptcy, and if the Partnership is not reconstituted with a new General
Partner as provided in this agreement, a Limited Partner shall act as
liquidator. The liquidator shall liquidate the assets of the Partnership,
make appropriate adjustments to the capital accounts of the partners and
distribute the proceeds in the following order of priorities, so far as the
proceeds will go:
(a) To the payment of debts of the Partnership (other than loans made
from the partners to the Partnership), including the expenses of
liquidation;
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(b) To the repayment of any loans that have been made by the partners
to the Partnership, but if the amount available for such
repayment is insufficient, then pro rata up to the amounts
available;
(c) To all partners pro rata in accordance with their respective
capital account balances, as adjusted, up the amounts of those
capital accounts;
(d) To all partners pro rata according to their respective Percentage
Interests in the Partnership.
DISTRIBUTIONS IN KIND
13.05 In the event any or all of the assets of the Partnership cannot be
liquidated, those assets are to be distributed in kind according to the
priorities set forth in paragraph 13.04. Assets of the Partnership
distributed to the partners shall be held and owned by the partners as
tenants in common. In the event of the distribution of the Partnership
properties in kind, the fair market value of such assets shall be
determined by agreement of the partners. The amount of gain or loss which
would have been realized by the Partnership for federal income tax purposes
if the assets had been sold at such fair market value rather than
distributed in kind shall be treated as gain or loss from a disposition of
the assets of the Partnership, and allocated among the partners in
accordance with Article X, such allocations then being reflected in the
partners' respective capital accounts.
ARTICLE XIV
ACCOUNTING
FISCAL YEAR
14.01 The fiscal year of the Partnership shall be the calendar year.
BOOKS AND RECORDS
14.02 The General Partner shall keep or cause to be kept full and accurate
records of all transactions of the Partnership in accordance with
principles and practices generally accepted for the cash or accrual method
of accounting.
INSPECTION OF RECORDS
14.03 Any partner may, for any proper purpose during regular business
hours, inspect and copy any of the Partnership books and records at the
principal place of business of the Partnership as provided in Article V, or
make other reasonable inquiries as the Partnership affairs. Costs
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of reproducing or copying Partnership books and records shall be at the
expense of the requesting partner.
TAX RETURNS
14.04 Within 90 days after the end of each fiscal year, the General Partner
shall prepare, or cause to the prepared, state and federal income tax
returns for the Partnership and in connection with those tax returns, make
any available or necessary elections. The returns shall be filed by the
General Partner on or before the due date (including extensions).
ARTICLE XV
REPORTS AND STATEMENTS
Within 90 days after the end of each fiscal year of the Partnership, the
General Partner will deliver to the Limited partners, at the Partnership's
expense, financial statements setting forth, as of the end of and for that
fiscal year, the following:
(a) A profit and loss statement and a balance sheet of the
Partnership;
(b) The balance in the capital account of each partner;
(c) Any other information that, in the judgment of the General
Partner, is reasonable necessary for the Limited Partner to be
advised of the results of operations of the Partnership.
ARTICLE XVI
BANK ACCOUNTS
The General Partner shall open and maintain a special bank account or
accounts in which all funds of the Partnership shall be deposited. Withdrawals
from this account or these accounts may be made on the signature or signatures
of those persons designated by the General Partner.
The General Partner may not commingle the assets of the Partnership with
the assets of any other entity or person. However, the revenues and other
receipts of the Partnership may be deposited in a central account in the name of
the General Partner or an affiliate of the General Partner so long as separate
entries are made on the books and records of the Partnership and on the books
and records of the affiliate reflecting deposits in the bank account of the
affiliate with respect to amounts received from the Partnership and withdrawals
from the bank accounts made for the purpose of disbursing funds to the
Partnership or for the purpose of paying liabilities of the Partnership.
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ARTICLE XVII
NOTICES
Whenever any notice is required or permitted to be given under this
agreement, the notice must be in writing and signed by or on behalf of the
person giving the notice. The notice will be deemed to have been given when
delivered by personal delivery or deposited in the United States mail, postage
prepaid, certified mail, return receipt requested, properly addressed to the
persons who must receive notice at the addresses listed in this agreement or as
changed by written notice given according to this provision of this agreement.
ARTICLE XVIII
MISCELLANEOUS
COUNTERPARTS
18.01 This partnership agreement may be executed in any number of
counterparts with the same effect as if all parties had all signed the same
document. All counterparts shall be construed together and shall constitute
one agreement.
SIGNATURE PAGES
18.02 Each partner authorizes the General Partner to attach to this
partnership agreement an executed signature page containing the signature
of such partner.
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Executed and dated as follows:
GENERAL PARTNER: MIDLAND RESOURCES, INC.
By:
--------------------------------------
Name Printed: Xxxx X. Xxxxxx III
Title: President
Address: 00000 Xxxxxxxxxxx Xxxx Xx.
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Date:
------------------------------------
INITIAL LIMITED PARTNER: -----------------------------------------
Xxxx X. Xxxxxx III
00000 Xxxxxxxxxxx Xxxx Xx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Date:
------------------------------------
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