EXHIBIT (A)
AMENDED AND RESTATED CERTIFICATE
AND
AGREEMENT OF LIMITED PARTNERSHIP
ATLAS AMERICA PUBLIC #11-2002 LTD.
TABLE OF CONTENTS
Section
No. Description Page
I. FORMATION
1.01 Formation..................................1
1.02 Certificate of Limited Partnership.........1
1.03 Name, Principal Office and Residence.......1
1.04 Purpose....................................1
II. DEFINITION OF TERMS
2.01 Definitions................................2
III. SUBSCRIPTIONS AND FURTHER CAPITAL CONTRIBUTIONS
3.01 Designation of Managing General Partner and
Participants .............................10
3.02 Participants..............................10
3.03 Subscriptions to the Partnership..........11
3.04 Capital Contributions of the Managing
General Partner ..........................12
3.05 Payment of Subscriptions..................13
3.06 Partnership Funds.........................13
IV. CONDUCT OF OPERATIONS
4.01 Acquisition of Leases.....................14
4.02 Conduct of Operations.....................15
4.03 General Rights and Obligations of the
Participants and Restricted and
Prohibited Transactions ..................20
4.04 Designation, Compensation and
Removal of Managing General
Partner and Removal of Operator.......30
4.05 Indemnification and Exoneration...........32
4.06 Other Activities..........................34
V. PARTICIPATION IN COSTS AND REVENUES, CAPITAL
ACCOUNTS, ELECTIONS AND DISTRIBUTIONS
5.01 Participation in Costs and Revenues.......35
5.02 Capital Accounts and Allocations
Thereto...............................38
5.03 Allocation of Income, Deductions and
Credits...............................40
5.04 Elections.................................41
5.05 Distributions.............................42
VI. TRANSFER OF INTERESTS
6.01 Transferability...........................43
6.02 Special Restrictions on Transfers.........43
6.03 Right of Managing General Partner to
Hypothecate and/or Withdraw Its
Interests.................................45
6.04 Presentment...............................45
VII. DURATION, DISSOLUTION, AND WINDING UP
7.01 Duration..................................47
7.02 Dissolution and Winding Up................48
VIII. MISCELLANEOUS PROVISIONS
8.01 Notices...................................48
8.02 Time......................................49
8.03 Applicable Law............................49
8.04 Agreement in Counterparts.................49
8.05 Amendment.................................49
8.06 Additional Partners.......................50
8.07 Legal Effect..............................50
EXHIBITS
EXHIBIT (I-A) - Managing General Partner Signature Page
EXHIBIT (I-B) - Subscription Agreement
EXHIBIT (II) - Drilling and Operating Agreement
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AMENDED AND RESTATED CERTIFICATE AND
AGREEMENT OF LIMITED PARTNERSHIP
ATLAS AMERICA PUBLIC #11-2002 LTD.
THIS AMENDED AND RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP
("AGREEMENT"), amending and restating the original Certificate of Limited
Partnership, is made and entered into as of _____________________, 2002, by and
among Atlas Resources, Inc., referred to as "Atlas" or the "Managing General
Partner," and the remaining parties from time to time signing a Subscription
Agreement for Limited Partner Units, these parties sometimes referred to as
"Limited Partners," or for Investor General Partner Units, these parties
sometimes referred to as "Investor General Partners."
ARTICLE I
FORMATION
1.01. Formation. The parties have formed a limited partnership under the
Delaware Revised Uniform Limited Partnership Act on the terms and conditions set
forth in this Agreement.
1.02. Certificate of Limited Partnership. This document is not only an agreement
among the parties, but also is the Amended and Restated Certificate and
Agreement of Limited Partnership of the Partnership. This document shall be
filed or recorded in the public offices required under applicable law or deemed
advisable in the discretion of the Managing General Partner. Amendments to the
certificate of limited partnership shall be filed or recorded in the public
offices required under applicable law or deemed advisable in the discretion of
the Managing General Partner.
1.03. Name, Principal Office and Residence.
1.03(a). Name. The name of the Partnership is Atlas America Public #11-2002 Ltd.
1.03(b). Residence. The residence of the Managing General Partner is its
principal place of business at 000 Xxxxxx Xxxx, Xxxx Xxxxxxxx, Xxxxxxxxxxxx
00000, which shall also serve as the principal place of business of the
Partnership.
The residence of each Participant shall be as set forth on the Subscription
Agreement executed by the Participant.
All addresses shall be subject to change on notice to the parties.
1.03(c). Agent for Service of Process. The name and address of the agent for
service of process shall be Xx. Xxxx X. Xxxxxxxxx at Atlas Resources, Inc., 000
Xxxxxx Xxxx, Xxxx Xxxxxxxx, Xxxxxxxxxxxx 00000.
1.04. Purpose. The Partnership shall engage in all phases of the natural gas and
oil business. This includes, without limitation, exploration for, development
and production of natural gas and oil on the terms and conditions set forth
below and any other proper purpose under the Delaware Revised Uniform Limited
Partnership Act.
The Managing General Partner may not, without the affirmative vote of
Participants whose Units equal a majority of the total Units, do the following:
(i) change the investment and business purpose of the Partnership;
or
(ii) cause the Partnership to engage in activities outside the
stated business purposes of the Partnership through joint
ventures with other entities.
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ARTICLE II
DEFINITION OF TERMS
2.01. Definitions. As used in this Agreement, the following terms shall have the
meanings set forth below:
1. "Administrative Costs" means all customary and routine
expenses incurred by the Sponsor for the conduct of
Partnership administration, including: legal, finance,
accounting, secretarial, travel, office rent, telephone, data
processing and other items of a similar nature. Administrative
Costs shall be limited as follows:
(i) no Administrative Costs charged shall be duplicated
under any other category of expense or cost; and
(ii) no portion of the salaries, benefits, compensation or
remuneration of controlling persons of the Managing
General Partner shall be reimbursed by the
Partnership as Administrative Costs. Controlling
persons include directors, executive officers and
those holding 5% or more equity interest in the
Managing General Partner or a person having power to
direct or cause the direction of the Managing General
Partner, whether through the ownership of voting
securities, by contract, or otherwise.
2. "Administrator" means the official or agency administering the
securities laws of a state.
3. "Affiliate" means with respect to a specific person:
(i) any person directly or indirectly owning,
controlling, or holding with power to vote 10% or
more of the outstanding voting securities of the
specified person;
(ii) any person 10% or more of whose outstanding voting
securities are directly or indirectly owned,
controlled, or held with power to vote, by the
specified person;
(iii) any person directly or indirectly controlling,
controlled by, or under common control with the
specified person;
(iv) any officer, director, trustee or partner of the
specified person; and
(v) if the specified person is an officer, director,
trustee or partner, any person for which the person
acts in any such capacity.
4. "Agreement" means this Amended and Restated Certificate and
Agreement of Limited Partnership, including all exhibits to
this Agreement.
5. "Anthem Securities" means Anthem Securities, Inc., whose
principal executive offices are located at 000 Xxxxxx Xxxx,
X.X. Xxx 000, Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000.
6. "Assessments" means additional amounts of capital which may be
mandatorily required of or paid voluntarily by a Participant
beyond his subscription commitment.
7. "Atlas" means Atlas Resources, Inc., a Pennsylvania
corporation, whose principal executive offices are located at
000 Xxxxxx Xxxx, Xxxx Xxxxxxxx, Xxxxxxxxxxxx 00000.
8. "Capital Account" or "account" means the account established
for each party, maintained as provided in ss.5.02 and its
subsections.
9. "Capital Contribution" means the amount agreed to be
contributed to the Partnership by a Partner pursuant to
ss.ss.3.04 and 3.05 and their subsections.
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10. "Carried Interest" means an equity interest in the Partnership
issued to a Person without consideration, in the form of cash
or tangible property, in an amount proportionately equivalent
to that received from the Participants.
11. "Code" means the Internal Revenue Code of 1986, as amended.
12. "Cost," when used with respect to the sale or transfer of
property to the Partnership, means:
(i) the sum of the prices paid by the seller or
transferor to an unaffiliated person for the
property, including bonuses;
(ii) title insurance or examination costs, brokers'
commissions, filing fees, recording costs, transfer
taxes, if any, and like charges in connection with
the acquisition of the property;
(iii) a pro rata portion of the seller's or transferor's
actual necessary and reasonable expenses for seismic
and geophysical services; and
(iv) rentals and ad valorem taxes paid by the seller or
transferor for the property to the date of its
transfer to the buyer, interest and points actually
incurred on funds used to acquire or maintain the
property, and the portion of the seller's or
transferor's reasonable, necessary and actual
expenses for geological, engineering, drafting,
accounting, legal and other like services allocated
to the property cost in conformity with generally
accepted accounting principles and industry
standards, except for expenses in connection with the
past drilling of xxxxx which are not producers of
sufficient quantities of oil or gas to make
commercially reasonable their continued operations,
and provided that the expenses enumerated in this
subsection (iv) shall have been incurred not more
than 36 months before the sale or transfer to the
Partnership.
"Cost," when used with respect to services, means the
reasonable, necessary and actual expense incurred by the
seller on behalf of the Partnership in providing the services,
determined in accordance with generally accepted accounting
principles.
As used elsewhere, "Cost" means the price paid by the seller
in an arm's-length transaction.
13. "Dealer-Manager" means:
(i) Anthem Securities, Inc., an Affiliate of the Managing
General Partner, the broker/dealer which will manage
the offering and sale of the Units in all states
other than Minnesota and New Hampshire; and
(ii) Xxxxx Funding, Inc., the broker/dealer which will
manage the offering and sale of Units in Minnesota
and New Hampshire.
14. "Development Well" means a well drilled within the proved area
of a natural gas or oil reservoir to the depth of a
stratigraphic Horizon known to be productive.
15. "Direct Costs" means all actual and necessary costs directly
incurred for the benefit of the Partnership and generally
attributable to the goods and services provided to the
Partnership by parties other than the Sponsor or its
Affiliates. Direct Costs:
(i) may not include any cost otherwise classified as
Organization and Offering Costs, Administrative
Costs, Intangible Drilling Costs, Tangible Costs,
Operating Costs or costs related to the Leases; but
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(ii) may include the cost of services provided by the
Sponsor or its Affiliates if the services are
provided pursuant to written contracts and in
compliance with ss.4.03(d)(7) or pursuant to the
Managing General Partner's role as Tax Matters
Partner.
16. "Distribution Interest" means an undivided interest in the
Partnership's assets after payments to the Partnership's
creditors or the creation of a reasonable reserve therefor, in
the ratio the positive balance of a party's Capital Account
bears to the aggregate positive balance of the Capital
Accounts of all of the parties determined after taking into
account all Capital Account adjustments for the taxable year
during which liquidation occurs (other than those made
pursuant to liquidating distributions or restoration of
deficit Capital Account balances). Provided, however, after
the Capital Accounts of all of the parties have been reduced
to zero, the interest in the remaining Partnership assets
shall equal a party's interest in the related Partnership
revenues as set forth in ss.5.01 and its subsections of this
Agreement.
17. "Drilling and Operating Agreement" means the proposed Drilling
and Operating Agreement between the Managing General Partner
or an Affiliate as Operator, and the Partnership as Developer,
a copy of the proposed form of which is attached to this
Agreement as Exhibit (II).
18. "Exploratory Well" means a well drilled to:
(i) find commercially productive hydrocarbons in an
unproved area;
(ii) find a new commercially productive Horizon in a field
previously found to be productive of hydrocarbons at
another Horizon; or
(iii) significantly extend a known prospect.
19. "Farmout" means an agreement by the owner of the leasehold or
Working Interest to assign his interest in certain acreage or
well to the assignees, retaining some interest such as an
Overriding Royalty Interest, an oil and gas payment, offset
acreage or other type of interest, subject to the drilling of
one or more specific xxxxx or other performance as a condition
of the assignment.
20. "Final Terminating Event" means any one of the following:
(i) the expiration of the Partnership's fixed term;
(ii) notice to the Participants by the Managing General
Partner of its election to terminate the
Partnership's affairs;
(iii) notice by the Participants to the Managing General
Partner of their similar election through the
affirmative vote of Participants whose Units equal a
majority of the total Units; or
(iv) the termination of the Partnership
under ss.708(b)(1)(A) of the Code or the Partnership
ceases to be a going concern.
21. "Horizon" means a zone of a particular formation; that part of
a formation of sufficient porosity and permeability to form a
petroleum reservoir.
22. "Independent Expert" means a person with no material
relationship to the Sponsor or its Affiliates who is qualified
and in the business of rendering opinions regarding the value
of natural gas and oil properties based on the evaluation of
all pertinent economic, financial, geologic and engineering
information available to the Sponsor or its Affiliates.
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23. "Initial Closing Date" means the date after the minimum amount
of subscription proceeds has been received when subscription
proceeds are first withdrawn from the escrow account.
24. "Intangible Drilling Costs" or "Non-Capital Expenditures"
means those expenditures associated with property acquisition
and the drilling and completion of natural gas and oil xxxxx
that under present law are generally accepted as fully
deductible currently for federal income tax purposes. This
includes all expenditures made for any well before production
in commercial quantities for wages, fuel, repairs, hauling,
supplies and other costs and expenses incident to and
necessary for drilling the well and preparing the well for
production of natural gas or oil, that are currently
deductible pursuant to Section 263(c) of the Code and Treasury
Reg. Section 1.612-4, and are generally termed "intangible
drilling and development costs," including the expense of
plugging and abandoning any well before a completion attempt.
25. "Interim Closing Date" means those date(s) after the Initial
Closing Date, but before the Offering Termination Date, that
the Managing General Partner, in its sole discretion, applies
additional subscription proceeds to additional Partnership
activities, including drilling activities.
26. "Investor General Partners" means:
(i) the persons signing the Subscription Agreement as
Investor General Partners; and
(ii) the Managing General Partner to the extent of any
optional subscription under ss.3.03(b)(2).
All Investor General Partners shall be of the same class and
have the same rights.
27. "Landowner's Royalty Interest" means an interest in
production, or its proceeds, to be received free and clear of
all costs of development, operation, or maintenance, reserved
by a landowner on the creation of a Lease.
28. "Leases" means full or partial interests in natural gas and
oil leases, oil and natural gas mineral rights, fee rights,
licenses, concessions, or other rights under which the holder
is entitled to explore for and produce oil and/or natural gas,
and includes any contractual rights to acquire any such
interest.
29. "Limited Partners" means:
(i) the persons signing the Subscription Agreement as
Limited Partners;
(ii) the Managing General Partner to the extent of any
optional subscription under ss.3.03(b)(2);
(iii) the Investor General Partners on the conversion of
their Investor General Partner Units to Limited
Partner Units pursuant to ss.6.01(b); and
(iv) any other persons who are admitted to the Partnership
as additional or substituted Limited Partners.
Except as provided in ss.3.05(b), with respect to the required
additional Capital Contributions of Investor General Partners,
all Limited Partners shall be of the same class and have the
same rights.
30. "Managing General Partner" means:
(i) Atlas Resources, Inc.; or
(ii) any Person admitted to the Partnership as a general
partner other than as an Investor General Partner who
is designated to exclusively supervise and manage the
operations of the Partnership.
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31. "Managing General Partner Signature Page" means an execution
and subscription instrument in the form attached as Exhibit
(I-A) to this Agreement, which is incorporated in this
Agreement by reference.
32. "Offering Termination Date" means the date after the minimum
amount of subscription proceeds has been received on which the
Managing General Partner determines, in its sole discretion,
the Partnership's subscription period is closed and the
acceptance of subscriptions ceases, which shall not be later
than December 31, 2002.
33. "Operating Costs" means expenditures made and costs incurred
in producing and marketing natural gas or oil from completed
xxxxx. These costs include, but are not limited to:
(i) labor, fuel, repairs, hauling, materials, supplies,
utility charges and other costs incident to or
related to producing and marketing natural gas and
oil;
(ii) ad valorem and severance taxes;
(iii) insurance and casualty loss expense; and
(iv) compensation to well operators or others for services
rendered in conducting these operations.
Operating Costs also include reworking, workover, subsequent
equipping, and similar expenses relating to any well.
34. "Operator" means the Managing General Partner, as operator of
Partnership Xxxxx in Pennsylvania, and the Managing General
Partner or an Affiliate as Operator of Partnership Xxxxx in
other areas of the United States.
35. "Organization and Offering Costs" means all costs of
organizing and selling the offering including, but not limited
to:
(i) total underwriting and brokerage discounts and
commissions (including fees of the underwriters'
attorneys);
(ii) expenses for printing, engraving, mailing, salaries
of employees while engaged in sales activities,
charges of transfer agents, registrars, trustees,
escrow holders, depositaries, engineers and other
experts;
(iii) expenses of qualification of the sale of the
securities under federal and state law, including
taxes and fees, accountants' and attorneys' fees; and
(iv) other front-end fees.
Organization and Offering Costs also includes the 2.5%
Dealer-Manager fee, a 7% Sales Commission, a .5% reimbursement
of marketing expenses, and a .5% reimbursement of the Selling
Agents' bona fide accountable due diligence expenses payable
to the Dealer-Manager.
36. "Organization Costs" means all costs of organizing the
offering including, but not limited to:
(i) expenses for printing, engraving, mailing, salaries
of employees while engaged in sales activities,
charges of transfer agents, registrars, trustees,
escrow holders, depositaries, engineers and other
experts;
(ii) expenses of qualification of the sale of the
securities under federal and state law, including
taxes and fees, accountants' and attorneys' fees; and
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(iii) other front-end fees.
37. "Overriding Royalty Interest" means an interest in the natural
gas and oil produced under a Lease, or the proceeds from the
sale thereof, carved out of the Working Interest, to be
received free and clear of all costs of development,
operation, or maintenance.
38. "Participants" means:
(i) the Managing General Partner to the extent of its
optional subscription under ss.3.03(b)(2);
(ii) the Limited Partners; and
(iii) the Investor General Partners.
39. "Partners" means:
(i) the Managing General Partner;
(ii) the Investor General Partners; and
(iii) the Limited Partners.
40. "Partnership" means Atlas America Public #11-2002 Ltd.
41. "Partnership Net Production Revenues" means gross revenues
after deduction of the related Operating Costs, Direct Costs,
Administrative Costs and all other Partnership costs not
specifically allocated.
42. "Partnership Well" means a well, some portion of the revenues
from which is received by the Partnership.
43. "Person" means a natural person, partnership, corporation,
association, trust or other legal entity.
44. "Production Purchase" or "Income" Program means any program
whose investment objective is to directly acquire, hold,
operate, and/or dispose of producing oil and gas properties.
Such a program may acquire any type of ownership interest in a
producing property, including, but not limited to, working
interests, royalties, or production payments. A program which
spends at least 90% of capital contributions and funds
borrowed (excluding offering and organizational expenses) in
the above described activities is presumed to be a production
purchase or income program.
45. "Program" means one or more limited or general partnerships or
other investment vehicles formed, or to be formed, for the
primary purpose of:
(i) exploring for natural gas, oil and other hydrocarbon
substances; or
(ii) investing in or holding any property interests which
permit the exploration for or production of
hydrocarbons or the receipt of such production or its
proceeds.
46. "Prospect" means an area covering lands which are believed by
the Managing General Partner to contain subsurface structural
or stratigraphic conditions making it susceptible to the
accumulations of hydrocarbons in commercially productive
quantities at one or more Horizons. The area, which may be
different for different Horizons, shall be:
(i) designated by the Managing General Partner in writing
before the conduct of Partnership operations; and
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(ii) enlarged or contracted from time to time on the basis
of subsequently acquired information to define the
anticipated limits of the associated hydrocarbon
reserves and to include all acreage encompassed
therein.
If the well to be drilled by the Partnership is to a Horizon
containing Proved Reserves, then a "Prospect" for a particular
Horizon may be limited to the minimum area permitted by state
law or local practice, whichever is applicable, to protect
against drainage from adjacent xxxxx. Subject to the foregoing
sentence, "Prospect" shall be deemed the drilling or spacing
unit for the Clinton/Xxxxxx geological formation and the
Mississippian and/or Upper Devonian Sandstone reservoirs in
Ohio, Pennsylvania, and New York.
47. "Proved Developed Oil and Gas Reserves" means reserves that
can be expected to be recovered through existing xxxxx with
existing equipment and operating methods. Additional oil and
gas expected to be obtained through the application of fluid
injection or other improved recovery techniques for
supplementing the natural forces and mechanisms of primary
recovery should be included as "proved developed reserves"
only after testing by a pilot project or after the operation
of an installed program has confirmed through production
response that increased recovery will be achieved.
48. "Proved Reserves" means the estimated quantities of crude oil,
natural gas, and natural gas liquids which geological and
engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under
existing economic and operating conditions, i.e., prices and
costs as of the date the estimate is made. Prices include
consideration of changes in existing prices provided only by
contractual arrangements, but not on escalations based upon
future conditions.
(i) Reservoirs are considered proved if economic
producibility is supported by either actual
production or conclusive formation test. The area of
a reservoir considered proved includes:
(a) that portion delineated by drilling and
defined by gas-oil and/or oil-water
contacts, if any; and
(b) the immediately adjoining portions not yet
drilled, but which can be reasonably judged
as economically productive on the basis of
available geological and engineering data.
In the absence of information on fluid contacts, the
lowest known structural occurrence of hydrocarbons
controls the lower proved limit of the reservoir.
(ii) Reserves which can be produced economically through
application of improved recovery techniques (such as
fluid injection) are included in the "proved"
classification when successful testing by a pilot
project, or the operation of an installed program in
the reservoir, provides support for the engineering
analysis on which the project or program was based.
(iii) Estimates of proved reserves do not include the
following:
(a) oil that may become available from known
reservoirs but is classified separately as
"indicated additional reserves";
(b) crude oil, natural gas, and natural gas
liquids, the recovery of which is subject to
reasonable doubt because of uncertainty as
to geology, reservoir characteristics, or
economic factors;
(c) crude oil, natural gas, and natural gas
liquids, that may occur in undrilled
prospects; and
(d) crude oil, natural gas, and natural gas
liquids, that may be recovered from oil
shales, coal, gilsonite and other such
sources.
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49. "Proved Undeveloped Reserves" means reserves that are expected
to be recovered from either:
(i) new xxxxx on undrilled acreage; or
(ii) from existing xxxxx where a relatively major
expenditure is required for recompletion.
Reserves on undrilled acreage shall be limited to those
drilling units offsetting productive units that are reasonably
certain of production when drilled. Proved reserves for other
undrilled units can be claimed only where it can be
demonstrated with certainty that there is continuity of
production from the existing productive formation. Under no
circumstances should estimates for proved undeveloped reserves
be attributable to any acreage for which an application of
fluid injection or other improved recovery technique is
contemplated, unless such techniques have been proved
effective by actual tests in the area and in the same
reservoir.
50. "Roll-Up" means a transaction involving the acquisition,
merger, conversion or consolidation, either directly or
indirectly, of the Partnership and the issuance of securities
of a Roll-Up Entity. The term does not include:
(i) a transaction involving securities of the Partnership
that have been listed for at least 12 months on a
national exchange or traded through the National
Association of Securities Dealers Automated Quotation
National Market System; or
(ii) a transaction involving the conversion to corporate,
trust or association form of only the Partnership if,
as a consequence of the transaction, there will be no
significant adverse change in any of the following:
(a) voting rights;
(b) the Partnership's term of existence;
(c) the Managing General Partner's compensation;
and
(d) the Partnership's investment objectives.
51. "Roll-Up Entity" means a partnership, trust, corporation or
other entity that would be created or survive after the
successful completion of a proposed roll-up transaction.
52. "Sales Commissions" means all underwriting and brokerage
discounts and commissions incurred in the sale of Units
payable to registered broker/dealers, but excluding the
Dealer-Manager fee, a .5% reimbursement of marketing expenses,
and a .5% reimbursement for bona fide accountable due
diligence expenses.
53. "Selling Agents" means those broker/dealers selected by the
Dealer-Manager which will participate in the offer and sale of
the Units.
54. "Sponsor" means any person directly or indirectly instrumental
in organizing, wholly or in part, a program or any person who
will manage or is entitled to manage or participate in the
management or control of a program. The definition includes:
(i) the managing and controlling general partner(s) and
any other person who actually controls or selects the
person who controls 25% or more of the exploratory,
development or producing activities of the program,
or any segment thereof, even if that person has not
entered into a contract at the time of formation of
the program; and
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(ii) whenever the context so requires, the term "sponsor"
shall be deemed to include its affiliates.
"Sponsor" does not include wholly independent third-parties
such as attorneys, accountants, and underwriters whose only
compensation is for professional services rendered in
connection with the offering of units.
55. "Subscription Agreement" means an execution and subscription
instrument in the form attached as Exhibit (I-B) to this
Agreement, which is incorporated in this Agreement by
reference.
56. "Tangible Costs" or "Capital Expenditures" means those costs
associated with drilling and completing natural gas and oil
xxxxx which are generally accepted as capital expenditures
under the Code. This includes all costs of equipment, parts
and items of hardware used in drilling and completing a well,
and those items necessary to deliver acceptable natural gas
and oil production to purchasers to the extent installed
downstream from the wellhead of any well and which are
required to be capitalized under the Code and its regulations.
57. "Tax Matters Partner" means the Managing General Partner.
58. "Units" or "Units of Participation" means up to 40 Limited
Partner interests and up to 3,960 Investor General Partner
interests purchased by Participants in the Partnership under
the provisions of ss.3.03 and its subsections, including any
rights to profits, losses, income, gain, credits, deductions,
cash distributions or returns of capital or other attributes
of the Units.
59. "Working Interest" means an interest in a Lease which is
subject to some portion of the cost of development, operation,
or maintenance of the Lease.
ARTICLE III
SUBSCRIPTIONS AND FURTHER CAPITAL CONTRIBUTIONS
3.01. Designation of Managing General Partner and Participants. Atlas shall
serve as Managing General Partner of the Partnership. Atlas shall further serve
as a Participant to the extent of any subscription made by it pursuant to
ss.3.03(b)(2).
Limited Partners and Investor General Partners, including Affiliates of the
Managing General Partner, shall serve as Participants.
3.02. Participants.
3.02(a). Limited Partner at Formation. Atlas America, Inc., as Original Limited
Partner, has acquired one Unit and has made a Capital Contribution of $100.
On the admission of one or more Limited Partners, the Partnership shall return
to the Original Limited Partner its Capital Contribution and shall reacquire its
Unit. The Original Limited Partner shall then cease to be a Limited Partner in
the Partnership with respect to the Unit.
3.02(b). Offering of Interests. The Partnership is authorized to admit to the
Partnership at the Initial Closing Date, any Interim Closing Date(s), and the
Offering Termination Date additional Participants whose Subscription Agreements
are accepted by the Managing General Partner if, after the admission of the
additional Participants, the total Units do not exceed the maximum number of
Units set forth in ss.3.03(c)(1).
3.02(c). Admission of Participants. No action or consent by the Participants
shall be required for the admission of additional Participants pursuant to this
Agreement.
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All subscribers' funds shall be held by an independent interest bearing escrow
holder and shall not be released to the Partnership until the receipt of the
minimum amount of subscription proceeds set forth in ss.3.03(c)(2). Thereafter,
subscriptions may be paid directly to the Partnership account.
3.03. Subscriptions to the Partnership.
3.03(a). Subscriptions by Participants.
3.03(a)(1). Subscription Price and Minimum Subscription. The subscription price
of a Unit in the Partnership shall be $10,000, except as set forth below, and
shall be designated on each Participant's Subscription Agreement and payable as
set forth in Section 3.05(b). The minimum subscription per Participant shall be
one Unit ($10,000); however, the Managing General Partner, in its discretion,
may accept one-half Unit ($5,000) subscriptions. Larger subscriptions shall be
accepted in $1,000 increments, beginning with $6,000, $7,000, etc.
Notwithstanding the foregoing, the subscription price for:
(i) the Managing General Partner, its officers, directors, and
Affiliates, and Participants who buy Units through the
officers and directors of the Managing General Partner, shall
be reduced by an amount equal to the 2.5% Dealer-Manager fee,
the 7% Sales Commission, the .5% reimbursement of marketing
expenses, and the .5% reimbursement of the Selling Agents'
bona fide accountable due diligence expenses, which shall not
be paid with respect to these sales; and
(ii) the subscription price for Registered Investment Advisors and
their clients, and Selling Agents and their registered
representatives and principals, shall be reduced by an amount
equal to the 7% Sales Commission, which shall not be paid with
respect to these sales.
3.03(a)(2). Effect of Subscription. Execution of a Subscription Agreement shall
serve as an agreement by the Participant to be bound by each and every term of
this Agreement.
3.03(b). Subscriptions by Managing General Partner.
3.03(b)(1). Managing General Partner's Required Subscription. The Managing
General Partner, as a general partner and not as a Participant, shall:
(i) contribute to the Partnership the Leases which will be drilled
by the Partnership on the terms set forth in ss.4.01(a)(4);
and
(ii) pay the costs charged to it under this Agreement.
These Capital Contributions shall be paid by the Managing General Partner at the
time the costs are required to be paid by the Partnership, but no later than
December 31, 2003.
3.03(b)(2). Managing General Partner's Optional Additional Subscription. In
addition to the Managing General Partner's required subscription under
ss.3.03(b)(1), the Managing General Partner may subscribe to up to 10% of the
Units under the provisions of ss.3.03(a) and its subsections, and, subject to
the limitations on voting rights set forth in ss.4.03(c)(3), to that extent
shall be deemed a Participant in the Partnership for all purposes under this
Agreement.
3.03(b)(3). Effect of and Evidencing Subscription. The Managing General Partner
has executed a Managing General Partner Signature Page which:
(i) evidences the Managing General Partner's required subscription
under ss.3.03(b)(1); and
(ii) may be amended to reflect the amount of any optional
subscription under ss.3.03(b)(2).
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Execution of the Managing General Partner Signature Page serves as an agreement
by the Managing General Partner to be bound by each and every term of this
Agreement.
3.03(c). Maximum and Minimum Number of Units.
3.03(c)(1). Maximum Number of Units. The maximum number of Units may not exceed
4,000 Units, which is up to $40,000,000 of cash subscription proceeds excluding
the subscription discounts permitted under ss.3.03(a)(1).
3.03(c)(2). Minimum Number of Units. The minimum number of Units shall equal at
least 100 Units, but in any event not less than that number of Units which
provides the Partnership with cash subscription proceeds of $1,000,000,
excluding the subscription discounts permitted under ss.3.03(a)(1).
If at the Offering Termination Date the minimum number of Units has not been
received and accepted, then all monies deposited by subscribers shall be
promptly returned to them. They shall receive interest earned on their
subscription proceeds from the date the monies were deposited in escrow through
the date of refund.
The partnership may break escrow and begin its drilling activities in the
Managing General Partner's sole discretion on receipt of the minimum
subscriptions.
3.03(d). Acceptance of Subscriptions.
3.03(d)(1). Discretion by the Managing General Partner. Acceptance of
subscriptions is discretionary with the Managing General Partner. The Managing
General Partner may reject any subscription for any reason it deems appropriate.
3.03(d)(2). Time Period in Which to Accept Subscriptions. Subscriptions shall be
accepted or rejected by the Partnership within 30 days of their receipt. If a
subscription is rejected, then all funds shall be returned to the subscriber
promptly.
3.03(d)(3) Admission to the Partnership. The Participants shall be admitted to
the Partnership as follows:
(i) not later than 15 days after the release from escrow of
Participants' funds to the Partnership; and
(ii) after the close of the escrow account not later than the last
day of the calendar month in which their Subscription
Agreements were accepted by the Partnership.
3.04. Capital Contributions of the Managing General Partner.
3.04(a). Minimum Amount of Managing General Partner's Required Contribution. The
Managing General Partner is required to:
(i) make aggregate Capital Contributions to the Partnership,
including Leases contributed under ss.3.03(b)(1)(i), of not
less than 25% of all Capital Contributions to the Partnership;
and
(ii) maintain a minimum Capital Account balance equal to not less
than 1% of total positive Capital Account balances for the
Partnership.
3.04(b). On Liquidation the Managing General Partner Must Contribute Deficit
Balance in Its Capital Account. The Managing General Partner shall contribute to
the Partnership any deficit balance in its Capital Account on the occurrence of
either of the following events:
(i) the liquidation of the Partnership; or
(ii) the liquidation of the Managing General Partner's interest in
the Partnership.
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This shall be determined after taking into account all adjustments for the
Partnership's taxable year during which the liquidation occurs, other than
adjustments made pursuant to this requirement, by the end of the taxable year in
which its interest in the Partnership is liquidated or, if later, within 90 days
after the date of the liquidation.
3.04(c). Interest for Contributions. The interest of the Managing General
Partner in the capital and revenues of the Partnership is in consideration for,
and is the only consideration for, its Capital Contribution to the Partnership.
3.05. Payment of Subscriptions.
3.05(a). Managing General Partner's Subscriptions. The Managing General Partner
shall pay any optional subscription under ss.3.03(b)(2) in the same manner as
the Participants.
3.05(b). Participant Subscriptions and Additional Capital Contributions of the
Investor General Partners.
3.05(b)(1). Payment of Subscription Agreements. A Participant shall pay the
amount designated as the subscription price on the Subscription Agreement
executed by the Participant 100% in cash at the time of subscribing. A
Participant shall receive interest on the amount he pays from the time his
subscription proceeds are deposited in the escrow account, or the Partnership
account after the minimum number of Units have been received as provided in
ss.3.06(b), up until the Offering Termination Date.
3.05(b)(2). Additional Required Capital Contributions of the Investor General
Partners. Investor General Partners must make Capital Contributions to the
Partnership when called by the Managing General Partner, in addition to their
subscriptions, for their pro rata share of any Partnership obligations and
liabilities which are recourse to the Investor General Partners and are
represented by their ownership of Units before the conversion of Investor
General Units to Limited Partner Units under ss.6.01(b).
3.05(b)(3). Default Provisions. The failure of an Investor General Partner to
timely make a required additional Capital Contribution under this section
results in his personal liability to the other Investor General Partners for the
amount in default. The remaining Investor General Partners, pro rata, must pay
the defaulting Investor General Partner's share of Partnership liabilities and
obligations. In that event, the remaining Investor General Partners:
(i) shall have a first and preferred lien on the defaulting
Investor General Partner's interest in the Partnership to
secure payment of the amount in default plus interest at the
legal rate;
(ii) shall be entitled to receive 100% of the defaulting Investor
General Partner's cash distributions directly from the
Partnership until the amount in default is recovered in full
plus interest at the legal rate; and
(iii) may commence legal action to collect the amount due plus
interest at the legal rate.
3.06. Partnership Funds.
3.06(a). Fiduciary Duty. The Managing General Partner has a fiduciary
responsibility for the safekeeping and use of all funds and assets of the
Partnership, whether or not in the Managing General Partner's possession or
control. The Managing General Partner shall not employ, or permit another to
employ, the funds and assets in any manner except for the exclusive benefit of
the Partnership. Neither this Agreement nor any other agreement between the
Managing General Partner and the Partnership shall contractually limit any
fiduciary duty owed to the Participants by the Managing General Partner under
applicable law, except as provided in ss.ss.4.01, 4.02, 4.04, 4.05 and 4.06 of
this Agreement.
3.06(b). Special Account After the Receipt of the Minimum Partnership
Subscriptions. Following the receipt of the minimum number of Units and breaking
escrow, the funds of the Partnership shall be held in a separate
interest-bearing account maintained for the Partnership and shall not be
commingled with funds of any other entity.
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3.06(c). Investment.
3.06(c)(1). Investments in Other Entities. Partnership funds may not be invested
in the securities of another person except in the following instances:
(i) investments in Working Interests or undivided Lease interests
made in the ordinary course of the Partnership's business;
(ii) temporary investments made as set forth in ss.3.06(c)(2);
(iii) multi-tier arrangements meeting the requirements
of ss.4.03(d)(15);
(iv) investments involving less than 5% of the Partnership's
subscription proceeds which are a necessary and incidental
part of a property acquisition transaction; and
(v) investments in entities established solely to limit the
Partnership's liabilities associated with the ownership or
operation of property or equipment, provided that duplicative
fees and expenses shall be prohibited.
3.06(c)(2). Permissible Investments Before Investment in Partnership Activities.
After the Initial Closing Date and until proceeds from the offering are invested
in the Partnership's operations, the proceeds may be temporarily invested in
income producing short-term, highly liquid investments, in which there is
appropriate safety of principal, such as U.S. Treasury Bills.
ARTICLE IV
CONDUCT OF OPERATIONS
4.01. Acquisition of Leases.
4.01(a). Assignment to Partnership.
4.01(a)(1). In General. The Managing General Partner shall select, acquire and
assign or cause to have assigned to the Partnership full or partial interests in
Leases, by any method customary in the natural gas and oil industry, subject to
the terms and conditions set forth below.
The Partnership shall acquire only Leases reasonably expected to meet the stated
purposes of the Partnership. No Leases shall be acquired for the purpose of a
subsequent sale or Farmout unless the acquisition is made after a well has been
drilled to a depth sufficient to indicate that the acquisition would be in the
Partnership's best interest.
4.01(a)(2). Federal and State Leases. The Partnership is authorized to acquire
Leases on federal and state lands.
4.01(a)(3). Managing General Partner's Discretion as to Terms and Burdens of
Acquisition. Subject to the provisions of ss.4.03(d) and its subsections, the
acquisitions of Leases or other property may be made under any terms and
obligations, including:
(i) any limitations as to the Horizons to be assigned to the
Partnership; and
(ii) subject to any burdens as the Managing General Partner deems
necessary in its sole discretion.
4.01(a)(4). Cost of Leases. All Leases shall be:
(i) contributed to the Partnership by the Managing General Partner
or its Affiliates; and
(ii) credited towards the Managing General Partner's required
Capital Contribution set forth in ss.3.03(b)(1) at the Cost of
the Lease, unless the Managing General Partner has cause to
believe that Cost is materially more than the fair market
value of the property, in which case the credit for the
contribution must be made at a price not in excess of the fair
market value.
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A determination of fair market value must be:
(i) supported by an appraisal from an Independent Expert; and
(ii) maintained in the Partnership's records for six years along
with associated supporting information.
4.01(a)(5). The Managing General Partner, Operator or Their Affiliates' Rights
in the Remainder Interests. Subject to the provisions of ss.4.03(d) and its
subsections, to the extent the Partnership does not acquire a full interest in a
Lease from the Managing General Partner or its Affiliates, the remainder of the
interest in the Lease may be held by the Managing General Partner or its
Affiliates. They may either:
(i) retain and exploit the remaining interest for their own
account; or
(ii) sell or otherwise dispose of all or a part of the remaining
interest.
Profits from the exploitation and/or disposition of their retained interests in
the Leases shall be for the benefit of the Managing General Partner or its
Affiliates to the exclusion of the Partnership.
4.01(a)(6). No Breach of Duty. Subject to the provisions of ss.4.03 and its
subsections, acquisition of Leases from the Managing General Partner, the
Operator or their Affiliates shall not be considered a breach of any obligation
owed by them to the Partnership or the Participants.
4.01(b). No Overriding Royalty Interests. Neither the Managing General Partner,
the Operator nor any Affiliate shall retain any Overriding Royalty Interest on
the Leases acquired by the Partnership.
4.01(c). Title and Nominee Arrangements.
4.01(c)(1). Legal Title. Legal title to all Leases acquired by the Partnership
shall be held on a permanent basis in the name of the Partnership. However,
Partnership properties may be held temporarily in the name of:
(i) the Managing General Partner;
(ii) the Operator;
(iii) their Affiliates; or
(iv) in the name of any nominee designated by the Managing General
Partner to facilitate the acquisition of the properties.
4.01(c)(2). Managing General Partner's Discretion. The Managing General Partner
shall take the steps which are necessary in its best judgment to render title to
the Leases to be acquired by the Partnership acceptable for the purposes of the
Partnership. The Managing General Partner shall be free, however, to use its own
best judgment in waiving title requirements.
The Managing General Partner shall not be liable to the Partnership or to the
other parties for any mistakes of judgment; nor shall the Managing General
Partner be deemed to be making any warranties or representations, express or
implied, as to the validity or merchantability of the title to the Leases
assigned to the Partnership or the extent of the interest covered thereby except
as otherwise provided in the Drilling and Operating Agreement.
4.01(c)(3). Commencement of Operations. The Partnership shall not begin
operations on the Leases acquired by the Partnership unless the Managing General
Partner is satisfied that necessary title requirements have been satisfied.
4.02. Conduct of Operations.
4.02(a). In General. The Managing General Partner shall establish a program of
operations for the Partnership. Subject to the limitations contained in Article
III of this Agreement concerning the maximum Capital Contribution which can be
required of a Limited Partner, the Managing General Partner, the Limited
Partners, and the Investor General Partners agree to participate in the program
so established by the Managing General Partner.
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4.02(b). Management. Subject to any restrictions contained in this Agreement,
the Managing General Partner shall exercise full control over all operations of
the Partnership.
4.02(c). General Powers of the Managing General Partner.
4.02(c)(1). In General. Subject to the provisions of ss.4.03 and its
subsections, and to any authority which may be granted the Operator under
ss.4.02(c)(3)(b), the Managing General Partner shall have full authority to do
all things deemed necessary or desirable by it in the conduct of the business of
the Partnership. Without limiting the generality of the foregoing, the Managing
General Partner is expressly authorized to engage in:
(i) the making of all determinations of which Leases, xxxxx and
operations will be participated in by the Partnership, which
includes:
(a) which Leases are developed;
(b) which Leases are abandoned; or
(c) which leases are sold or assigned to other parties,
including other investor ventures organized by the
Managing General Partner, the Operator, or any of
their Affiliates;
(ii) the negotiation and execution on any terms deemed desirable in
its sole discretion of any contracts, conveyances, or other
instruments, considered useful to the conduct of the
operations or the implementation of the powers granted it
under this Agreement, including, without limitation:
(a) the making of agreements for the conduct of
operations, including agreements and financial
instruments relating to hedging the Partnership's
natural gas and oil;
(b) the exercise of any options, elections, or decisions
under any such agreements; and
(c) the furnishing of equipment, facilities, supplies and
material, services, and personnel;
(iii) the exercise, on behalf of the Partnership or the parties, as
the Managing General Partner in its sole judgment deems best,
of all rights, elections and options granted or imposed by any
agreement, statute, rule, regulation, or order;
(iv) the making of all decisions concerning the desirability of
payment, and the payment or supervision of the payment, of all
delay rentals and shut-in and minimum or advance royalty
payments;
(v) the selection of full or part-time employees and outside
consultants and contractors and the determination of their
compensation and other terms of employment or hiring;
(vi) the maintenance of insurance for the benefit of the
Partnership and the parties as it deems necessary, but in no
event less in amount or type than the following:
(a) worker's compensation insurance in full compliance
with the laws of the Commonwealth of Pennsylvania and
any other applicable state laws;
(b) liability insurance, including automobile, which has
a $1,000,000 combined single limit for bodily injury
and property damage in any one accident or occurrence
and in the aggregate; and
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(c) excess liability insurance as to bodily injury and
property damage with combined limits of $50,000,000
during drilling operations and thereafter, per
occurrence or accident and in the aggregate, which
includes $1,000,000 of seepage, pollution and
contamination insurance which protects and defends
the insured against property damage or bodily injury
claims from third-parties, other than a co-owner of
the Working Interest, alleging seepage, pollution or
contamination damage resulting from an accident. The
excess liability insurance shall be in place and
effective no later than the date drilling operations
begin, and the Partnership shall have the benefit of
the Managing General Partner's $51,000,000 liability
insurance on the same basis as the Managing General
Partner and its Affiliates, including the Managing
General Partner's other Programs;
(vii) the use of the funds and revenues of the Partnership, and the
borrowing on behalf of, and the loan of money to, the
Partnership, on any terms it sees fit, for any purpose,
including without limitation:
(a) the conduct or financing, in whole or in part, of the
drilling and other activities of the Partnership;
(b) the conduct of additional operations; and
(c) the repayment of any borrowings or loans used
initially to finance these operations or activities;
(viii) the disposition, hypothecation, sale, exchange, release,
surrender, reassignment or abandonment of any or all assets of
the Partnership, including without limitation, the Leases,
xxxxx, equipment and production therefrom, provided that the
sale of all or substantially all of the assets of the
Partnership shall only be made as provided in ss.4.03(d)(6);
(ix) the formation of any further limited or general partnership,
tax partnership, joint venture, or other relationship which it
deems desirable with any parties who it, in its sole and
absolute discretion, selects, including any of its Affiliates;
(x) the control of any matters affecting the rights and
obligations of the Partnership, including:
(a) the employment of attorneys to advise and otherwise
represent the Partnership;
(b) the conduct of litigation and other incurring of
legal expense; and
(c) the settlement of claims and litigation;
(xi) the operation of producing xxxxx drilled on the Leases or on a
Prospect which includes any part of the Leases;
(xii) the exercise of the rights granted to it under the power of
attorney created under this Agreement; and
(xiii) the incurring of all costs and the making of all expenditures
in any way related to any of the foregoing.
4.02(c)(2). Scope of Powers. The Managing General Partner's powers shall extend
to any operation participated in by the Partnership or affecting its Leases, or
other property or assets, irrespective of whether or not the Managing General
Partner is designated operator of the operation by any outside persons
participating therein.
4.02(c)(3). Delegation of Authority.
4.02(c)(3)(a). In General. The Managing General Partner may subcontract and
delegate all or any part of its duties under this Agreement to any entity chosen
by it, including an entity related to it. The party shall have the same powers
in the conduct of the duties as would the Managing General Partner. The
delegation, however, shall not relieve the Managing General Partner of its
responsibilities under this Agreement.
4.02(c)(3)(b). Delegation to Operator. The Managing General Partner is
specifically authorized to delegate any or all of its duties to the Operator by
executing the Drilling and Operating Agreement. This delegation shall not
relieve the Managing General Partner of its responsibilities under this
Agreement.
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In no event shall any consideration received for operator services be in excess
of competitive rates or duplicative of any consideration or reimbursements
received under this Agreement. The Managing General Partner may not benefit by
interpositioning itself between the Partnership and the actual provider of
operator services.
4.02(c)(4). Related Party Transactions. Subject to the provisions of ss.4.03 and
its subsections, any transaction which the Managing General Partner is
authorized to enter into on behalf of the Partnership under the authority
granted in this section and its subsections, may be entered into by the Managing
General Partner with itself or with any other general partner, the Operator, or
any of their Affiliates.
4.02(d). Additional Powers. In addition to the powers granted the Managing
General Partner under ss.4.02(c) and its subsections or elsewhere in this
Agreement, the Managing General Partner, when specified, shall have the
following additional express powers.
4.02(d)(1). Drilling Contracts. All Partnership Xxxxx shall be drilled under the
Drilling and Operating Agreement on a Cost plus 15% basis. The Managing General
Partner or its Affiliates, as drilling contractor, may not do the following:
(i) receive a rate that is not competitive with the rates charged
by unaffiliated contractors in the same geographic region;
(ii) enter into a turnkey drilling contract with the Partnership;
(iii) profit by drilling in contravention of its fiduciary
obligations to the Partnership; or
(iv) benefit by interpositioning itself between the Partnership and
the actual provider of drilling contractor services.
4.02(d)(2). Power of Attorney.
4.02(d)(2)(a). In General. Each Participant appoints the Managing General
Partner his true and lawful attorney-in-fact for him and in his name, place, and
xxxxx and for his use and benefit, from time to time:
(i) to create, prepare, complete, execute, file, swear to,
deliver, endorse, and record any and all documents,
certificates or other instruments required or necessary to
amend this Agreement as authorized under the terms of this
Agreement, or to qualify the Partnership as a limited
partnership or partnership in commendam and to conduct
business under the laws of any jurisdiction in which the
Managing General Partner elects to qualify the Partnership or
conduct business; and
(ii) to create, prepare, complete, execute, file, swear to,
deliver, endorse and record any and all instruments,
assignments, security agreements, financing statements,
certificates, and other documents as may be necessary from
time to time to implement the borrowing powers granted under
this Agreement.
4.02(d)(2)(b). Further Action. Each Participant authorizes the attorney-in-fact
to take any further action which the attorney-in-fact considers necessary or
advisable in connection with any of the foregoing. Each party acknowledges that
the power of attorney granted under this section:
(i) is a special power of attorney coupled with an interest and
irrevocable; and
(ii) shall survive the assignment by the Participant of the whole
or a portion of his Units; except when the assignment is of
all of the Participant's Units and the purchaser, transferee,
or assignee of the Units, with the consent of the Managing
General Partner, is admitted as a successor Participant, the
power of attorney shall survive the delivery of the assignment
for the sole purpose of enabling the attorney-in-fact to
execute, acknowledge, and file any agreement, certificate,
instrument or document necessary to effect the substitution.
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4.02(d)(2)(c). Power of Attorney to Operator. The Managing General Partner is
hereby authorized to grant a Power of Attorney to the Operator on behalf of the
Partnership.
4.02(e). Borrowings and Use of Partnership Revenues.
4.02(e)(1). Power to Borrow or Use Partnership Revenues.
4.02(e)(1)(a). In General. If additional funds over the Participants' Capital
Contributions are needed for Partnership operations, then the Managing General
Partner may:
(i) use Partnership revenues for such purposes; or
(ii) the Managing General Partner and its Affiliates may advance to
the Partnership the funds necessary under ss.4.03(d)(8)(b),
although they are not obligated to advance the funds to the
Partnership.
4.02(e)(1)(b). Limitation on Borrowing. The borrowings, other than credit
transactions on open account customary in the industry to obtain goods and
services, shall be subject to the following limitations:
(i) the borrowings must be without recourse to the Investor
General Partners and the Limited Partners except as otherwise
provided in this Agreement; and
(ii) the amount that may be borrowed at any one time may not exceed
an amount equal to 5% of the Partnership's subscription
proceeds.
4.02(f). Tax Matters Partner.
4.02(f)(1). Designation of Tax Matters Partner. The Managing General Partner is
hereby designated the Tax Matters Partner of the Partnership under ss.6231(a)(7)
of the Code. The Managing General Partner is authorized to act in this capacity
on behalf of the Partnership and the Participants and to take any action,
including settlement or litigation, which it in its sole discretion deems to be
in the best interest of the Partnership.
4.02(f)(2). Costs Incurred by Tax Matters Partner. Costs incurred by the Tax
Matters Partner shall be considered a Direct Cost of the Partnership.
4.02(f)(3). Notice to Participants of IRS Proceedings. The Tax Matters Partner
shall notify all Participants of any partnership administrative proceedings
commenced by the IRS, and thereafter shall furnish all Participants periodic
reports at least quarterly on the status of the proceedings.
4.02(f)(4). Participant Restrictions. Each Participant agrees as follows:
(i) he will not file the statement described in Section
6224(c)(3)(B) of the Code prohibiting the Managing General
Partner as the Tax Matters Partner for the Partnership from
entering into a settlement on his behalf with respect to
partnership items, as that term is defined in Section
6231(a)(3) of Code, of the Partnership;
(ii) he will not form or become and exercise any rights as a member
of a group of Partners having a 5% or greater interest in the
profits of the Partnership under Section 6223(b)(2) of the
Code; and
(iii) the Managing General Partner is authorized to file a copy of
this Agreement, or pertinent portions of this Agreement, with
the IRS under Section 6224(b) of the Code if necessary to
perfect the waiver of rights under this subsection.
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4.03. General Rights and Obligations of the Participants and Restricted and
Prohibited Transactions.
4.03(a)(1). Limited Liability of Limited Partners. Limited Partners shall not be
bound by the obligations of the Partnership other than as provided under the
Delaware Revised Uniform Limited Partnership Act. Limited Partners shall not be
personally liable for any debts of the Partnership or any of the obligations or
losses of the Partnership beyond the amount of the subscription price designated
on the Subscription Agreement executed by each respective Limited Partner
unless:
(i) they also subscribe to the Partnership as Investor General
Partners; or
(ii) in the case of the Managing General Partner, it purchases
Limited Partner Units.
4.03(a)(2). No Management Authority of Participants. Participants, other than
the Managing General Partner if it buys Units, shall have no power over the
conduct of the affairs of the Partnership. No Participant, other than the
Managing General Partner if it buys Units, shall take part in the management of
the business of the Partnership, or have the power to sign for or to bind the
Partnership.
4.03(b). Reports and Disclosures.
4.03(b)(1). Annual Reports and Financial Statements. Beginning with the 2002
calendar year, the Partnership shall provide each Participant an annual report
within 120 days after the close of the calendar year, and beginning with the
2003 calendar year, a report within 75 days after the end of the first six
months of its calendar year, containing except as otherwise indicated, at least
the information set forth below:
(i) Audited financial statements of the Partnership, including a
balance sheet and statements of income, cash flow, and
Partners' equity, which shall be prepared in accordance with
generally accepted accounting principles and accompanied by an
auditor's report containing an opinion of an independent
public accountant selected by the Managing General Partner
stating that his audit was made in accordance with generally
accepted auditing standards and that in his opinion the
financial statements present fairly the financial position,
results of operations, partners' equity, and cash flows in
accordance with generally accepted accounting principles.
Semiannual reports are not required to be audited.
(ii) A summary itemization, by type and/or classification of the
total fees and compensation including any unaccountable, fixed
payment reimbursements for Administrative Costs and Operating
Costs, paid by the Partnership, or indirectly on behalf of the
Partnership, to the Managing General Partner, the Operator,
and their Affiliates. In addition, Participants shall be
provided the percentage that the annual unaccountable, fixed
fee reimbursement for Administrative Costs bears to annual
Partnership revenues.
(iii) A description of each Prospect in which the Partnership owns
an interest, including:
(a) the cost, location, and number of acres under Lease;
and
(b) the Working Interest owned in the Prospect by the
Partnership. Succeeding reports, however, must only
contain material changes, if any, regarding the
Prospects.
(iv) A list of the xxxxx drilled or abandoned by the Partnership
during the period of the report, indicating whether each of
the xxxxx has or has not been completed, and a statement of
the cost of each well completed or abandoned. Justification
must be included for xxxxx abandoned after production has
begun.
(v) A description of all farmouts, farmins, and joint ventures,
made during the period of the report, including the Managing
General Partner's justification for the arrangement and a
description of the material terms.
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(vi) A schedule reflecting:
(a) the total Partnership costs;
(b) the costs paid by the Managing General Partner and
the costs paid by the Participants;
(c) the total Partnership revenues;
(d) the revenues received or credited to the Managing
General Partner and the revenues received and
credited to the Participants; and
(e) a reconciliation of the expenses and revenues in
accordance with the provisions of Article V.
4.03(b)(2). Tax Information. The Partnership shall, by March 15 of each year,
prepare, or supervise the preparation of, and transmit to each Participant the
information needed for the Participant to file the following:
(i) his federal income tax return;
(ii) any required state income tax return; and
(iii) any other reporting or filing requirements imposed by any
governmental agency or authority.
4.03(b)(3). Reserve Report. Annually, beginning January 1, 2004 the Partnership
shall provide to each Participant the following:
(i) a summary of the computation of the Partnership's total oil
and gas Proved Reserves;
(ii) a summary of the computation of the present worth of the
reserves determined using a discount rate of 10%, a constant
price for the oil, and basing the price of gas on the existing
gas contracts;
(iii) a statement of each Participant's interest in the reserves;
and
(iv) an estimate of the time required for the extraction of the
reserves with a statement that because of the time period
required to extract the reserves the present value of revenues
to be obtained in the future is less than if immediately
receivable.
The reserve computations shall be based on engineering reports prepared by the
Managing General Partner and reviewed by an Independent Expert.
Also, if there is an event that leads to the reduction of the Partnership's
Proved Reserves of 10% or more, excluding reduction as a result of normal
production, sales of reserves, or product price changes, then a computation and
estimate must be sent to each Participant within 90 days.
4.03(b)(4). Cost of Reports. The cost of all reports described in this
ss.4.03(b) shall be paid by the Partnership as Direct Costs.
4.03(b)(5). Participant Access to Records. The Participants and/or their
representatives shall be permitted access to all Partnership records. The
Participant may inspect and copy any of the records after giving adequate notice
to the Managing General Partner at any reasonable time.
Notwithstanding the foregoing, the Managing General Partner may keep logs, well
reports, and other drilling and operating data confidential for reasonable
periods of time. The Managing General Partner may release information concerning
the operations of the Partnership to the sources that are customary in the
industry or required by rule, regulation, or order of any regulatory body.
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4.03(b)(6). Required Length of Time to Hold Records. The Managing General
Partner must maintain and preserve during the term of the Partnership and for
six years thereafter all accounts, books and other relevant documents which
include:
(i) a record that a Participant meets the suitability standards
established in connection with an investment in the
Partnership; and
(ii) any appraisal of the fair market value of the Leases as set
forth in ss.4.01(a)(4) or fair market value of any producing
property as set forth in ss.4.03(d)(3).
4.03(b)(7). Participant Lists. The following provisions apply regarding access
to the list of Participants:
(i) an alphabetical list of the names, addresses, and business
telephone numbers of the Participants along with the number of
Units held by each of them (the "Participant List") must be
maintained as a part of the Partnership's books and records
and be available for inspection by any Participant or his
designated agent at the home office of the Partnership on the
Participant's request;
(ii) the Participant List must be updated at least quarterly to
reflect changes in the information contained in the
Participant List;
(iii) a copy of the Participant List must be mailed to any
Participant requesting the Participant List within 10 days of
the written request, printed in alphabetical order on white
paper, and in a readily readable type size in no event smaller
than 10-point type and a reasonable charge for copy work will
be charged by the Partnership;
(iv) the purposes for which a Participant may request a copy of the
Participant List include, without limitation, matters relating
to Participant's voting rights under this Agreement and the
exercise of Participant's rights under the federal proxy laws;
and
(v) if the Managing General Partner neglects or refuses to
exhibit, produce, or mail a copy of the Participant List as
requested, the Managing General Partner shall be liable to any
Participant requesting the list for the costs, including
attorneys fees, incurred by that Participant for compelling
the production of the Participant List, and for actual damages
suffered by any Participant by reason of the refusal or
neglect. It shall be a defense that the actual purpose and
reason for the request for inspection or for a copy of the
Participant List is to secure the list of Participants or
other information for the purpose of selling the list or
information or copies of the list, or of using the same for a
commercial purpose other than in the interest of the applicant
as a Participant relative to the affairs of the Partnership.
The Managing General Partner will require the Participant
requesting the Participant List to represent in writing that
the list was not requested for a commercial purpose unrelated
to the Participant's interest in the Partnership. The remedies
provided under this subsection to Participants requesting
copies of the Participant List are in addition to, and shall
not in any way limit, other remedies available to Participants
under federal law, or the laws of any state.
4.03(b)(8). State Filings. Concurrently with their transmittal to Participants,
and as required, the Managing General Partner shall file a copy of each report
provided for in this ss.4.03(b) with:
(i) the California Commissioner of Corporations; and
(ii) the securities commissions of other states which request the
report.
4.03(c). Meetings of Participants.
4.03(c)(1). Procedure for a Participant Meeting.
22
4.03(c)(1)(a). Meetings May Be Called by Managing General Partner or
Participants. Meetings of the Participants may be called as follows:
(i) by the Managing General Partner; or
(ii) by Participants whose Units equal 10% or more of the total
Units for any matters for which Participants may vote.
The call for a meeting by Participants shall be deemed to have been made on
receipt by the Managing General Partner of a written request from holders of the
requisite percentage of Units stating the purpose(s) of the meeting.
4.03(c)(1)(b). Notice Requirement. The Managing General Partner shall deposit in
the United States mail within 15 days after the receipt of the request, written
notice to all Participants of the meeting and the purpose of the meeting. The
meeting shall be held on a date not less than 30 days nor more than 60 days
after the date of the mailing of the notice, at a reasonable time and place.
Notwithstanding the foregoing, the date for notice of the meeting may be
extended for a period of up to 60 days if, in the opinion of the Managing
General Partner, the additional time is necessary to permit preparation of proxy
or information statements or other documents required to be delivered in
connection with the meeting by the SEC or other regulatory authorities.
4.03(c)(1)(c). May Vote by Proxy. Participants shall have the right to vote at
any Participant meeting either:
(i) in person; or
(ii) by proxy.
4.03(c)(2). Special Voting Rights. At the request of Participants whose Units
equal 10% or more of the total Units, the Managing General Partner shall call
for a vote by Participants. Each Unit is entitled to one vote on all matters,
and each fractional Unit is entitled to that fraction of one vote equal to the
fractional interest in the Unit. Participants whose Units equal a majority of
the total Units may, without the concurrence of the Managing General Partner or
its Affiliates, vote to:
(i) dissolve the Partnership;
(ii) remove the Managing General Partner and elect a new Managing
General Partner;
(iii) elect a new Managing General Partner if the Managing General
Partner elects to withdraw from the Partnership;
(iv) remove the Operator and elect a new Operator;
(v) approve or disapprove the sale of all or substantially all of
the assets of the Partnership;
(vi) cancel any contract for services with the Managing General
Partner, the Operator, or their Affiliates without penalty on
60 days notice; and
(vii) amend this Agreement; provided however:
(a) any amendment may not increase the duties or
liabilities of any Participant or the Managing
General Partner or increase or decrease the profit or
loss sharing or required Capital Contribution of any
Participant or the Managing General Partner without
the approval of the Participant or the Managing
General Partner; and
(b) any amendment may not affect the classification of
Partnership income and loss for federal income tax
purposes without the unanimous approval of all
Participants.
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4.03(c)(3). Restrictions on Managing General Partner's Voting Rights. With
respect to Units owned by the Managing General Partner or its Affiliates, the
Managing General Partner and its Affiliates may vote or consent on all matters
other than the following:
(i) the matters set forth in ss.4.03(c)(2)(ii) and (iv) above; or
(ii) any transaction between the Partnership and the Managing
General Partner or its Affiliates.
In determining the requisite percentage in interest of Units necessary to
approve any Partnership matter on which the Managing General Partner and its
Affiliates may not vote or consent, any Units owned by the Managing General
Partner and its Affiliates shall not be included.
4.03(c)(4). Restrictions on Limited Partner Voting Rights. The exercise by the
Limited Partners of the rights granted Participants under ss.4.03(c), except for
the special voting rights granted Participants under ss.4.03(c)(2), shall be
subject to the prior legal determination that the grant or exercise of the
powers will not adversely affect the limited liability of Limited Partners.
Notwithstanding the foregoing, if in the opinion of counsel to the Partnership
the legal determination is not necessary under Delaware law to maintain the
limited liability of the Limited Partners, then it shall not be required. A
legal determination under this paragraph may be made either pursuant to:
(i) an opinion of counsel, the counsel being independent of the
Partnership and selected on the vote of Limited Partners whose
Units equal a majority of the total Units held by Limited
Partners; or
(ii) a declaratory judgment issued by a court of competent
jurisdiction.
The Investor General Partners may exercise the rights granted to the
Participants whether or not the Limited Partners can participate in the vote if
the Investor General Partners represent the requisite percentage of Units
necessary to take the action.
4.03(d). Transactions with the Managing General Partner.
4.03(d)(1). Transfer of Equal Proportionate Interest. When the Managing General
Partner or an Affiliate (excluding another Program in which the interest of the
Managing General Partner or its Affiliates is substantially similar to or less
than their interest in the Partnership) sells, transfers or conveys any natural
gas, oil or other mineral interests or property to the Partnership, it must, at
the same time, sell, transfer or convey to the Partnership an equal
proportionate interest in all its other property in the same Prospect.
Notwithstanding, a Prospect shall be deemed to consist of the drilling or
spacing unit on which the well will be drilled by the Partnership, which is the
minimum area permitted by state law or local practice on which one well may be
drilled, if the following conditions are met:
(i) the geological feature to which the well will be drilled
contains Proved Reserves; and
(ii) the drilling or spacing unit protects against drainage.
With respect to a natural gas or oil Prospect located in Ohio, Pennsylvania and
New York on which a well will be drilled by the Partnership to test the
Clinton/Xxxxxx geological formation or the Mississippian and/or Upper Devonian
Sandstone reservoirs, a Prospect shall be deemed to consist of the drilling and
spacing unit if it meets the test in the preceding sentence. Additionally, for a
period of five years after the drilling of the Partnership Well neither the
Managing General Partner nor its Affiliates may drill any well:
(i) in the Clinton/Xxxxxx geological formation within 1,650 feet
of an existing Partnership Well in Pennsylvania or within
1,000 feet of an existing Partnership Well in Ohio; or
24
(ii) in the Mississippian/Upper Devonian Sandstone reservoirs in
Fayette County and Xxxxxx County, Pennsylvania within 1,000
feet of an existing Partnership Well, although existing xxxxx
may be re-entered by parties other than the Partnership even
though they are not 1,000 feet from each other.
If the Partnership abandons its interest in a well, then this restriction will
continue for one year following the abandonment.
If the area constituting the Partnership's Prospect is subsequently enlarged to
encompass any area in which the Managing General Partner or an Affiliate
(excluding another Program in which the interest of the Managing General Partner
or its Affiliates is substantially similar to or less than their interest in the
Partnership) owns a separate property interest and the activities of the
Partnership were material in establishing the existence of Proved Undeveloped
Reserves that are attributable to the separate property interest, then the
separate property interest or a portion thereof must be sold, transferred, or
conveyed to the Partnership as set forth in this section and ss.ss.4.01(a)(4)
and 4.03(d)(2).
Notwithstanding the foregoing, Prospects in the Clinton/Xxxxxx geological
formation, the Mississippian and/or Upper Devonian Sandstone reservoirs, or any
other formation or reservoir shall not be enlarged or contracted if the Prospect
was limited to the drilling or spacing unit because the well was being drilled
to Proved Reserves in the geological formation and the drilling or spacing unit
protected against drainage.
4.03(d)(2). Transfer of Less than the Managing General Partner's and its
Affiliates' Entire Interest. A sale, transfer or a conveyance to the Partnership
of less than all of the ownership of the Managing General Partner or an
Affiliate (excluding another Program in which the interest of the Managing
General Partner or its Affiliates is substantially similar to or less than their
interest in the Partnership) in any Prospect shall not be made unless:
(i) the interest retained by the Managing General Partner or the
Affiliate is a proportionate Working Interest;
(ii) the respective obligations of the Managing General Partner or
its Affiliates and the Partnership are substantially the same
after the sale of the interest by the Managing General Partner
or its Affiliates; and
(iii) the Managing General Partner's interest in revenues does not
exceed the amount proportionate to its retained Working
Interest.
This section does not prevent the Managing General Partner or its Affiliates
from subsequently dealing with their retained interest as they may choose with
unaffiliated parties or Affiliated partnerships.
4.03(d)(3). Sale of Undeveloped Leases to the Managing General Partner and
Limitations on Sales of Developed Leases to the Managing General Partner. Other
than another Program managed by the Managing General Partner and its Affiliates
as set forth in ss.ss.4.03(d)(5) and 4.03(d)(9), the Managing General Partner
and its Affiliates shall not Farmout or purchase any undeveloped Leases from the
Partnership other than at the higher of Cost or fair market value.
The Managing General Partner and its Affiliates, other than an Affiliated Income
Program, may not purchase any producing natural gas or oil property from the
Partnership unless:
(i) the sale is in connection with the liquidation of the
Partnership; or
(ii) the Managing General Partner's well supervision fees under the
Drilling and Operating Agreement for the well have exceeded
the net revenues of the well, determined without regard to the
Managing General Partner's well supervision fees for the well,
for a period of at least three consecutive months.
In both (i) and (ii), the sale must be at fair market value supported by an
appraisal of an Independent Expert selected by the Managing General Partner.
25
4.03(d)(4). Limitations on Activities of the Managing General Partner and its
Affiliates on Leases Acquired by the Partnership. During a period of five years
after the Offering Termination Date of the Partnership, if the Managing General
Partner or any of its Affiliates (excluding another Program in which the
interest of the Managing General Partner or its Affiliates is substantially
similar to or less than their interest in the Partnership) proposes to acquire
an interest from an unaffiliated person in a Prospect in which the Partnership
possesses an interest or in a Prospect in which the Partnership's interest has
been terminated without compensation within one year preceding the proposed
acquisition, then the following conditions shall apply:
(i) if the Managing General Partner or the Affiliate (excluding
another Program in which the interest of the Managing General
Partner or its Affiliates is substantially similar to or less
than their interest in the Partnership) does not currently own
property in the Prospect separately from the Partnership, then
neither the Managing General Partner nor the Affiliate shall
be permitted to purchase an interest in the Prospect; and
(ii) if the Managing General Partner or the Affiliate (excluding
another Program in which the interest of the Managing General
Partner or its Affiliates is substantially similar to or less
than their interest in the Partnership) currently owns a
proportionate interest in the Prospect separately from the
Partnership, then the interest to be acquired shall be divided
between the Partnership and the Managing General Partner or
the Affiliate in the same proportion as is the other property
in the Prospect. Provided, however, if cash or financing is
not available to the Partnership to enable it to complete a
purchase of the additional interest to which it is entitled,
then neither the Managing General Partner nor the Affiliate
shall be permitted to purchase any additional interest in the
Prospect.
4.03(d)(5). Transfer of Leases Between Affiliated Limited Partnerships. The
transfer of an undeveloped Lease from the Partnership to an Affiliated Drilling
Program must be made at fair market value if the undeveloped Lease has been held
for more than two years. Otherwise, if the Managing General Partner deems it to
be in the best interest of the Partnership, the transfer may be made at Cost.
An Affiliated Income Program may purchase a producing natural gas and oil
property from the Partnership at any time at:
(i) fair market value as supported by an appraisal from an
Independent Expert if the property has been held by the
Partnership for more than six months or there have been
significant expenditures made in connection with the property;
or
(ii) Cost as adjusted for intervening operations if the Managing
General Partner deems it to be in the best interest of the
Partnership.
However, these prohibitions shall not apply to joint ventures or Farmouts among
Affiliated partnerships, provided that:
(i) the respective obligations and revenue sharing of all parties
to the transaction are substantially the same; and
(ii) the compensation arrangement or any other interest or right of
either the Managing General Partner or its Affiliates is the
same in each Affiliated partnership or if different, the
aggregate compensation of the Managing General Partner or the
Affiliate is reduced to reflect the lower compensation
arrangement.
4.03(d)(6). Sale of All Assets. The sale of all or substantially all of the
assets of the Partnership, including without limitation, Leases, xxxxx,
equipment and production therefrom, shall be made only with the consent of
Participants whose Units equal a majority of the total Units.
26
4.03(d)(7). Services.
4.03(d)(7)(a). Competitive Rates. The Managing General Partner and any Affiliate
shall not render to the Partnership any oil field, equipage, or other services
nor sell or lease to the Partnership any equipment or related supplies unless:
(i) the person is engaged, independently of the Partnership and as
an ordinary and ongoing business, in the business of rendering
the services or selling or leasing the equipment and supplies
to a substantial extent to other persons in the natural gas
and oil industry in addition to the partnerships in which the
Managing General Partner or an Affiliate has an interest; and
(ii) the compensation, price, or rental therefor is competitive
with the compensation, price, or rental of other persons in
the area engaged in the business of rendering comparable
services or selling or leasing comparable equipment and
supplies which could reasonably be made available to the
Partnership.
If the person is not engaged in such a business, then the compensation, price or
rental shall be the Cost of the services, equipment or supplies to the person or
the competitive rate which could be obtained in the area, whichever is less.
4.03(d)(7)(b). If Not Disclosed in the Prospectus or This Agreement Then
Services by the Managing General Partner Must be Described in a Separate
Contract and Cancelable. Any services for which the Managing General Partner or
an Affiliate is to receive compensation other than those described in this
Agreement or the Prospectus shall be set forth in a written contract which
precisely describes the services to be rendered and all compensation to be paid.
These contracts are cancelable without penalty on 60 days written notice by
Participants whose Units equal a majority of the total Units.
4.03(d)(8). Loans.
4.03(d)(8)(a). No Loans from the Partnership. No loans or advances shall be made
by the Partnership to the Managing General Partner or any Affiliate.
4.03(d)(8)(b). Loans to the Partnership. Neither the Managing General Partner
nor any Affiliate shall loan money to the Partnership if the interest to be
charged exceeds either:
(i) the Managing General Partner's or the Affiliate's interest
cost; or
(ii) that which would be charged to the Partnership, without
reference to the Managing General Partner's or the Affiliate's
financial abilities or guarantees, by unrelated lenders, on
comparable loans for the same purpose.
Neither the Managing General Partner nor any Affiliate shall receive points or
other financing charges or fees, regardless of the amount, although the actual
amount of the charges incurred from third-party lenders may be reimbursed to the
Managing General Partner or the Affiliate.
4.03(d)(9). Farmouts. The Managing General Partner shall not enter into a
Farmout to avoid its paying its share of costs related to drilling an
undeveloped Lease. The Partnership shall not Farmout an undeveloped Lease or
well activity to the Managing General Partner or its Affiliates except as set
forth in ss.4.03(d)(3). Notwithstanding, this restriction shall not apply to
Farmouts between the Partnership and another partnership managed by the Managing
General Partner or its Affiliates, either separately or jointly, provided that
the respective obligations and revenue sharing of all parties to the
transactions are substantially the same and the compensation arrangement or any
other interest or right of the Managing General Partner or its Affiliates is the
same in each partnership, or, if different, the aggregate compensation of the
Managing General Partner and its Affiliates is reduced to reflect the lower
compensation agreement.
The Partnership may Farmout an undeveloped lease or well activity only if the
Managing General Partner, exercising the standard of a prudent operator,
determines that:
o the Partnership lacks the funds to complete the oil and gas
operations on the Lease or well and cannot obtain suitable
financing;
o drilling on the Lease or the intended well activity would
concentrate excessive funds in one location, creating undue
risks to the Partnership;
27
o the Leases or well activity have been downgraded by events
occurring after assignment to the Partnership so that
development of the Leases or well activity would not be
desirable; or
o the best interests of the Partnership would be served.
If the Partnership Farmouts a Lease or well activity, the Managing General
Partner must retain on behalf of the Partnership the economic interests and
concessions as a reasonably prudent oil and gas operator would or could retain
under the circumstances prevailing at the time, consistent with industry
practices.
4.03(d)(10). No Compensating Balances. Neither the Managing General Partner nor
any Affiliate shall use the Partnership's funds as compensating balances for its
own benefit.
4.03(d)(11). Future Production. Neither the Managing General Partner nor any
Affiliate shall commit the future production of a well developed by the
Partnership exclusively for its own benefit.
4.03(d)(12). Marketing Arrangements. Subject to ss.4.06(c), all benefits from
marketing arrangements or other relationships affecting the property of the
Managing General Partner or its Affiliates and the Partnership shall be fairly
and equitably apportioned according to the respective interests of each in the
property. The Managing General Partner shall treat all xxxxx in a geographic
area equally concerning to whom and at what price the Partnership's natural gas
and oil will be sold and to whom and at what price the natural gas and oil of
other natural gas and oil Programs which the Managing General Partner has
sponsored or will sponsor will be sold. For example, the Managing General
Partner calculates a weighted average selling price for all the natural gas and
oil sold in a geographic area by taking all the money received from the sale of
all the natural gas and oil sold to its customers in a geographic area and
dividing by the volume of all natural gas and oil sold from the xxxxx in that
geographic area.
4.03(d)(13). Advance Payments. Advance payments by the Partnership to the
Managing General Partner and its Affiliates are prohibited except when advance
payments are required to secure the tax benefits of prepaid drilling costs and
for a business purpose.
4.03(d)(14). No Rebates. No rebates or give-ups may be received by the Managing
General Partner or any Affiliate nor may the Managing General Partner or any
Affiliate participate in any reciprocal business arrangements which would
circumvent these guidelines.
4.03(d)(15). Participation in Other Partnerships. If the Partnership
participates in other partnerships or joint ventures (multi-tier arrangements),
then the terms of any of these arrangements shall not result in the
circumvention of any of the requirements or prohibitions contained in this
Agreement, including the following:
(i) there shall be no duplication or increase in organization and
offering expenses, the Managing General Partner's
compensation, Partnership expenses or other fees and costs;
(ii) there shall be no substantive alteration in the fiduciary and
contractual relationship between the Managing General Partner
and the Participants; and
(iii) there shall be no diminishment in the voting rights of the
Participants.
4.03(d)(16). Roll-Up Limitations.
4.03(d)(16)(a). Requirement for Appraisal and Its Assumptions. In connection
with a proposed Roll-Up, an appraisal of all Partnership assets shall be
obtained from a competent Independent Expert. If the appraisal will be included
in a prospectus used to offer securities of a Roll-Up Entity, then the appraisal
shall be filed with the SEC and the Administrator as an exhibit to the
registration statement for the offering. Thus, an issuer using the appraisal
shall be subject to liability for violation of Section 11 of the Securities Act
of 1933 and comparable provisions under state law for any material
misrepresentations or material omissions in the appraisal.
28
Partnership assets shall be appraised on a consistent basis. The appraisal shall
be based on all relevant information, including current reserve estimates
prepared by an independent petroleum consultant, and shall indicate the value of
the Partnership's assets as of a date immediately before the announcement of the
proposed Roll-Up transaction. The appraisal shall assume an orderly liquidation
of the Partnership's assets over a 12-month period.
The terms of the engagement of the Independent Expert shall clearly state that
the engagement is for the benefit of the Partnership and the Participants. A
summary of the independent appraisal, indicating all material assumptions
underlying the appraisal, shall be included in a report to the Participants in
connection with a proposed Roll-Up.
4.03(d)(16)(b). Rights of Participants Who Vote Against Proposal. In connection
with a proposed Roll-Up, Participants who vote "no" on the proposal shall be
offered the choice of:
(i) accepting the securities of the Roll-Up Entity offered in the
proposed Roll-Up; or
(ii) one of the following:
o remaining as Participants in the Partnership and
preserving their Units in the Partnership on the same
terms and conditions as existed previously; or
o receiving cash in an amount equal to the
Participants' pro rata share of the appraised value
of the net assets of the Partnership based on their
respective number of Units.
4.03(d)(16)(c). No Roll-Up If Diminishment of Voting Rights. The Partnership
shall not participate in any proposed Roll-Up which, if approved, would result
in the diminishment of any Participant's voting rights under the Roll-Up
Entity's chartering agreement.
In no event shall the democracy rights of Participants in the Roll-Up Entity be
less than those provided for under ss.ss.4.03(c)(1) and 4.03(c)(2) of this
Agreement. If the Roll-Up Entity is a corporation, then the democracy rights of
Participants shall correspond to the democracy rights provided for in this
Agreement to the greatest extent possible.
4.03(d)(16)(d). No Roll-Up If Accumulation of Shares Would be Impeded. The
Partnership shall not participate in any proposed Roll-Up transaction which
includes provisions which would operate to materially impede or frustrate the
accumulation of shares by any purchaser of the securities of the Roll-Up Entity,
except to the minimum extent necessary to preserve the tax status of the Roll-Up
Entity.
The Partnership shall not participate in any proposed Roll-Up transaction which
would limit the ability of a Participant to exercise the voting rights of its
securities of the Roll-Up Entity on the basis of the number of Units held by
that Participant.
4.03(d)(16)(e). No Roll-Up If Access to Records Would Be Limited. The
Partnership shall not participate in a Roll-Up in which Participants' rights of
access to the records of the Roll-Up Entity will be less than those provided for
under ss.ss.4.03(b)(5), 4.03(b)(6) and 4.03(b)(7) of this Agreement.
4.03(d)(16)(f). Cost of Roll-Up. The Partnership shall not participate in any
proposed Roll-Up transaction in which any of the costs of the transaction would
be borne by the Partnership if Participants whose Units equal 75% of the total
Units do not vote to approve the proposed Roll-Up.
4.03(d)(16)(g). Roll-Up Approval. The Partnership shall not participate in a
Roll-Up transaction unless the Roll-Up transaction is approved by Participants
whose Units equal 75% of the total Units.
4.03(d)(17). Disclosure of Binding Agreements. Any agreement or arrangement
which binds the Partnership must be disclosed in the Prospectus.
29
4.03(d)(18). Transactions Must Be Fair and Reasonable. Neither the Managing
General Partner nor any Affiliate shall sell, transfer, or convey any property
to or purchase any property from the Partnership, directly or indirectly,
except:
(i) under transactions that are fair and reasonable; nor
(ii) take any action with respect to the assets or property of the
Partnership which does not primarily benefit the Partnership.
4.04. Designation, Compensation and Removal of Managing General Partner and
Removal of Operator.
4.04(a). Managing General Partner.
4.04(a)(1). Term of Service. Atlas shall serve as the Managing General Partner
of the Partnership until either it:
(i) is removed pursuant to ss.4.04(a)(3); or
(ii) withdraws pursuant to ss.4.04(a)(3)(f).
4.04(a)(2). Compensation of Managing General Partner. In addition to the
compensation set forth in ss.ss.4.01(a)(4) and 4.02(d)(1), the Managing General
Partner shall receive the compensation set forth in ss.ss.4.04(a)(2)(b) through
4.04(a)(2)(g).
4.04(a)(2)(a). Charges Must Be Necessary and Reasonable. Charges by the Managing
General Partner for goods and services must be fully supportable as to:
(i) the necessity of the goods and services; and
(ii) the reasonableness of the amount charged.
All actual and necessary expenses incurred by the Partnership may be paid out of
the Partnership's subscription proceeds and revenues.
4.04(a)(2)(b). Direct Costs. The Managing General Partner and its Affiliates
shall be reimbursed for all Direct Costs. Direct Costs, however, shall be billed
directly to and paid by the Partnership to the extent practicable.
4.04(a)(2)(c). Administrative Costs. The Managing General Partner shall receive
an unaccountable, fixed payment reimbursement for its Administrative Costs of
$75 per well per month. The unaccountable, fixed payment reimbursement of $75
per well per month shall be subject to the following:
(i) it shall not be increased in amount during the term of the
Partnership;
(ii) it shall be proportionately reduced to the extent the
Partnership acquires less than 100% of the Working Interest in
the well;
(iii) it shall be the entire payment to reimburse the Managing
General Partner for the Partnership's Administrative Costs;
and
(iv) it shall not be received for plugged or abandoned xxxxx.
4.04(a)(2)(d). Gas Gathering. The Managing General Partner shall receive a
gathering fee for gathering, compressing and transporting the Partnership's gas
at a competitive rate.
4.04(a)(2)(e). Dealer-Manager Fee. Subject to ss.3.03(a)(1), the Dealer-Manager
shall receive on each Unit sold to investors:
(i) a 2.5% Dealer-Manager fee;
(ii) a 7% Sales Commission;
(iii) a .5% reimbursement of marketing expenses; and
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(iv) a .5% reimbursement of the Selling Agents' bona fide
accountable due diligence expenses.
4.04(a)(2)(f). Drilling and Operating Agreement. The Managing General Partner
and its Affiliates shall receive compensation as set forth in the Drilling and
Operating Agreement.
4.04(a)(2)(g). Other Transactions. The Managing General Partner and its
Affiliates may enter into transactions pursuant to ss.4.03(d)(7) with the
Partnership and shall be entitled to compensation under this section.
4.04(a)(3). Removal of Managing General Partner.
4.04(a)(3)(a). Majority Vote Required to Remove the Managing General Partner.
The Managing General Partner may be removed at any time on 60 days' advance
written notice to the outgoing Managing General Partner by the affirmative vote
of Participants whose Units equal a majority of the total Units. If the
Participants vote to remove the Managing General Partner from the Partnership,
then Participants must elect by an affirmative vote of Participants whose Units
equal a majority of the total Units either to:
(i) terminate, dissolve, and wind up the Partnership; or
(ii) continue as a successor limited partnership under all the
terms of this Partnership Agreement as provided in ss.7.01(c).
If the Participants elect to continue as a successor limited partnership, then
the Managing General Partner shall not be removed until a substituted Managing
General Partner has been selected by an affirmative vote of Participants whose
Units equal a majority of the total Units and installed as such.
4.04(a)(3)(b). Valuation of Managing General Partner's Interest in the
Partnership. If the Managing General Partner is removed, then its interest in
the Partnership shall be determined by appraisal by a qualified Independent
Expert. The Independent Expert shall be selected by mutual agreement between the
removed Managing General Partner and the incoming Managing General Partner. The
appraisal shall take into account an appropriate discount, to reflect the risk
of recovery of natural gas and oil reserves, but not less than that used in the
most recent presentment offer, if any.
The cost of the appraisal shall be borne equally by the removed Managing General
Partner and the Partnership.
4.04(a)(3)(c). Incoming Managing General Partner's Option to Purchase. The
incoming Managing General Partner shall have the option to purchase 20% of the
removed Managing General Partner's interest in the Partnership as Managing
General Partner and not as a Participant for the value determined by the
Independent Expert.
4.04(a)(3)(d). Method of Payment. The method of payment for the removed Managing
General Partner's interest must be fair and protect the solvency and liquidity
of the Partnership. The method of payment shall be as follows:
(i) when the termination is voluntary, the method of payment shall
be a non-interest bearing unsecured promissory note with
principal payable, if at all, from distributions which the
Managing General Partner otherwise would have received under
the Partnership Agreement had the Managing General Partner not
been terminated; and
(ii) when the termination is involuntary, the method of payment
shall be an interest bearing promissory note coming due in no
less than five years with equal installments each year. The
interest rate shall be that charged on comparable loans.
4.04(a)(3)(e). Termination of Contracts. The removed Managing General Partner,
at the time of its removal shall cause, to the extent it is legally possible,
its successor to be transferred or assigned all its rights, obligations and
interests as Managing General Partner of the Partnership in contracts entered
into by it on behalf of the Partnership. In any event, the removed Managing
General Partner shall cause its rights, obligations and interests as Managing
General Partner of the Partnership in any such contract to terminate at the time
of its removal.
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Notwithstanding any other provision in this Agreement, the Partnership or the
successor Managing General Partner shall not:
(i) be a party to any natural gas supply agreement that the
Managing General Partner or its Affiliates enters into with a
third-party;
(ii) have any rights pursuant to such natural gas supply agreement;
or
(iii) receive any interest in the Managing General Partner's and its
Affiliates' pipeline or gathering system or compression
facilities.
4.04(a)(3)(f). The Managing General Partner's Right to Voluntarily Withdraw. At
any time beginning 10 years after the Offering Termination Date and the
Partnership's primary drilling activities, the Managing General Partner may
voluntarily withdraw as Managing General Partner on giving 120 days' written
notice of withdrawal to the Participants. If the Managing General Partner
withdraws, then the following conditions shall apply:
(i) the Managing General Partner's interest in the Partnership
shall be determined as described in ss.4.04(a)(3)(b) above
with respect to removal; and
(ii) the interest shall be distributed to the Managing General
Partner as described in ss.4.04(a)(3)(d)(i) above.
Any successor Managing General Partner shall have the option to purchase 20% of
the withdrawing Managing General Partner's interest in the Partnership at the
value determined as described above with respect to removal.
4.04(a)(3)(g). The Managing General Partner's Right to Withdraw Property
Interest. The Managing General Partner has the right at any time to withdraw a
property interest held by the Partnership in the form of a Working Interest in
the Partnership Xxxxx equal to or less than its respective interest in the
revenues of the Partnership under the conditions set forth in ss.6.03. If the
Managing General Partner withdraws an interest, then the Managing General
Partner shall:
(i) pay the expenses of withdrawing; and
(ii) fully indemnify the Partnership against any additional
expenses which may result from a partial withdrawal of its
interests including insuring that a greater amount of Direct
Costs or Administrative Costs is not allocated to the
Participants.
4.04(a)(4). Removal of Operator. The Operator may be removed and a new Operator
may be substituted at any time on 60 days advance written notice to the outgoing
Operator by the Managing General Partner acting on behalf of the Partnership on
the affirmative vote of Participants whose Units equal a majority of the total
Units.
The Operator shall not be removed until a substituted Operator has been selected
by an affirmative vote of Participants whose Units equal a majority of the total
Units and installed as such.
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4.05. Indemnification and Exoneration.
4.05(a)(1). Standards for the Managing General Partner Not Incurring Liability
to the Partnership or Participants. The Managing General Partner, the Operator,
and their Affiliates shall not have any liability whatsoever to the Partnership
or to any Participant for any loss suffered by the Partnership or Participants
which arises out of any action or inaction of the Managing General Partner, the
Operator, or their Affiliates if:
(i) the Managing General Partner, the Operator, and their
Affiliates determined in good faith that the course of conduct
was in the best interest of the Partnership;
(ii) the Managing General Partner, the Operator, and their
Affiliates were acting on behalf of, or performing services
for, the Partnership; and
(iii) the course of conduct did not constitute negligence or
misconduct of the Managing General Partner, the Operator, or
their Affiliates.
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4.05(a)(2). Standards for Managing General Partner Indemnification. The Managing
General Partner, the Operator, and their Affiliates shall be indemnified by the
Partnership against any losses, judgments, liabilities, expenses, and amounts
paid in settlement of any claims sustained by them in connection with the
Partnership, provided that:
(i) the Managing General Partner, the Operator, and their
Affiliates determined in good faith that the course of conduct
which caused the loss or liability was in the best interest of
the Partnership;
(ii) the Managing General Partner, the Operator, and their
Affiliates were acting on behalf of, or performing services
for, the Partnership; and
(iii) the course of conduct was not the result of negligence or
misconduct of the Managing General Partner, the Operator, or
their Affiliates.
Provided, however, payments arising from such indemnification or agreement to
hold harmless are recoverable only out of the following:
(i) tangible net assets;
(ii) revenues from operations; and
(iii) any insurance proceeds.
4.05(a)(3). Standards for Securities Law Indemnification. Notwithstanding
anything to the contrary contained in the above, the Managing General Partner,
the Operator, and their Affiliates and any person acting as a broker/dealer
shall not be indemnified for any losses, liabilities or expenses arising from or
out of an alleged violation of federal or state securities laws by such party
unless:
(i) there has been a successful adjudication on the merits of each
count involving alleged securities law violations as to the
particular indemnitee;
(ii) the claims have been dismissed with prejudice on the merits by
a court of competent jurisdiction as to the particular
indemnitee; or
(iii) a court of competent jurisdiction approves a settlement of the
claims against a particular indemnitee and finds that
indemnification of the settlement and the related costs should
be made, and the court considering the request for
indemnification has been advised of the position of the SEC,
the Massachusetts Securities Division, and any state
securities regulatory authority in which plaintiffs claim they
were offered or sold Units with respect to the issue of
indemnification for violation of securities laws.
4.05(a)(4). Standards for Advancement of Funds to the Managing General Partner
and Insurance. The advancement of Partnership funds to the Managing General
Partner, the Operator, or their Affiliates for legal expenses and other costs
incurred as a result of any legal action for which indemnification is being
sought is permissible only if the Partnership has adequate funds available and
the following conditions are satisfied:
(i) the legal action relates to acts or omissions with respect to
the performance of duties or services on behalf of the
Partnership;
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(ii) the legal action is initiated by a third-party who is not a
Participant, or the legal action is initiated by a Participant
and a court of competent jurisdiction specifically approves
the advancement; and
(iii) the Managing General Partner or its Affiliates undertake to
repay the advanced funds to the Partnership, together with the
applicable legal rate of interest thereon, in cases in which
such party is found not to be entitled to indemnification.
The Partnership shall not bear the cost of that portion of insurance which
insures the Managing General Partner, the Operator, or their Affiliates for any
liability for which they could not be indemnified pursuant to ss.ss.4.05(a)(1)
and 4.05(a)(2).
4.05(b). Liability of Partners. Under the Delaware Revised Uniform Limited
Partnership Act, the Investor General Partners are liable jointly and severally
for all liabilities and obligations of the Partnership. Notwithstanding the
foregoing, as among themselves, the Investor General Partners agree that each
shall be solely and individually responsible only for his pro rata share of the
liabilities and obligations of the Partnership based on his respective number of
Units.
In addition, the Managing General Partner agrees to use its corporate assets to
indemnify each of the Investor General Partners against all Partnership related
liabilities which exceed the Investor General Partner's interest in the
undistributed net assets of the Partnership and insurance proceeds, if any.
Further, the Managing General Partner agrees to indemnify each Investor General
Partner against any personal liability as a result of the unauthorized acts of
another Investor General Partner.
If the Managing General Partner provides indemnification, then each Investor
General Partner who has been indemnified shall transfer and subrogate his rights
for contribution from or against any other Investor General Partner to the
Managing General Partner.
4.05(c). Order of Payment of Claims. Claims shall be paid as follows:
(i) first, out of any insurance proceeds;
(ii) second, out of Partnership assets and revenues; and
(iii) last, by the Managing General Partner as provided
in ss.ss.3.05(b)(2) and (3) and 4.05(b).
No Limited Partner shall be required to reimburse the Managing General Partner,
the Operator, or their Affiliates or the Investor General Partners for any
liability in excess of his agreed Capital Contribution, except:
(i) for a liability resulting from the Limited Partner's
unauthorized participation in Partnership management; or
(ii) from some other breach by the Limited Partner of this
Agreement.
4.05(d). Authorized Transactions Are Not Deemed to Be a Breach. No transaction
entered into or action taken by the Partnership or the Managing General Partner,
the Operator, or their Affiliates, which is authorized by this Agreement shall
be deemed a breach of any obligation owed by the Managing General Partner, the
Operator, or their Affiliates to the Partnership or the Participants.
4.06. Other Activities.
4.06(a). The Managing General Partner May Pursue Other Natural Gas and Oil
Activities for Its Own Account. The Managing General Partner, the Operator, and
their Affiliates are now engaged, and will engage in the future, for their own
account and for the account of others, including other investors, in all aspects
of the natural gas and oil business. This includes without limitation, the
evaluation, acquisition, and sale of producing and nonproducing Leases, and the
exploration for and production of natural gas, oil and other minerals.
35
The Managing General Partner is required to devote only so much of its time as
is necessary to manage the affairs of the Partnership. Except as expressly
provided to the contrary in this Agreement, and subject to fiduciary duties, the
Managing General Partner, the Operator, and their Affiliates may do the
following:
(i) continue their activities, or initiate further such
activities, individually, jointly with others, or as a part of
any other limited or general partnership, tax partnership,
joint venture, or other entity or activity to which they are
or may become a party, in any locale and in the same fields,
areas of operation or prospects in which the Partnership may
likewise be active;
(ii) reserve partial interests in Leases being assigned to the
Partnership or any other interests not expressly prohibited by
this Agreement;
(iii) deal with the Partnership as independent parties or through
any other entity in which they may be interested;
(iv) conduct business with the Partnership as set forth in this
Agreement; and
(v) participate in such other investor operations, as investors or
otherwise.
The Managing General Partner and its Affiliates shall not be required to permit
the Partnership or the Participants to participate in any of the operations in
which the Managing General Partner and its Affiliates may be interested or share
in any profits or other benefits from the operations. However, except as
otherwise provided in this Agreement, the Managing General Partner and its
Affiliates may pursue business opportunities that are consistent with the
Partnership's investment objectives for their own account only after they have
determined that the opportunity either:
(i) cannot be pursued by the Partnership because of insufficient
funds; or
(ii) it is not appropriate for the Partnership under the existing
circumstances.
4.06(b). Managing General Partner May Manage Multiple Partnerships. The Managing
General Partner or its Affiliates may manage multiple Programs simultaneously.
4.06(c). Partnership Has No Interest in Natural Gas Contracts or Pipelines and
Gathering Systems. Notwithstanding any other provision in this Agreement, the
Partnership shall not:
(i) be a party to any natural gas supply agreement that the
Managing General Partner, the Operator, or their Affiliates
enter into with a third-party or have any rights pursuant to
such natural gas supply agreement; or
(ii) receive any interest in the Managing General Partner's, the
Operator's, and their Affiliates' pipeline or gathering system
or compression facilities
ARTICLE V
PARTICIPATION IN COSTS AND REVENUES,
CAPITAL ACCOUNTS, ELECTIONS AND DISTRIBUTIONS
5.01. Participation in Costs and Revenues. Except as otherwise provided in this
Agreement, costs and revenues shall be charged and credited to the Managing
General Partner and the Participants as set forth in this section and its
subsections.
5.01(a). Costs. Costs shall be charged as set forth below.
5.01(a)(1). Organization and Offering Costs. Organization and Offering Costs
shall be charged 100% to the Managing General Partner. For purposes of sharing
in revenues under ss.5.01(b)(4), the Managing General Partner shall be credited
with Organization and Offering Costs paid by it up to and including 15% of the
Partnership's subscription proceeds. Any Organization and Offering Costs paid by
the Managing General Partner in excess of this amount shall not be credited
towards the Managing General Partner's required Capital Contribution or revenue
share as set forth in ss.5.01(b)(4).
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5.01(a)(2). Intangible Drilling Costs. Intangible Drilling Costs shall be
charged 100% to the Participants.
5.01(a)(3). Tangible Costs. Tangible Costs shall be charged 66% to the Managing
General Partner and 34% to the Participants. However, if the total Tangible
Costs for all of the Partnership's xxxxx that would be charged to the
Participants exceeds an amount equal to 10% of the Partnership's subscription
proceeds, then the excess shall be charged to the Managing General Partner.
5.01(a)(4). Operating Costs, Direct Costs, Administrative Costs and All Other
Costs. Operating Costs, Direct Costs, Administrative Costs, and all other
Partnership costs not specifically allocated shall be charged to the parties in
the same ratio as the related production revenues are being credited.
5.01(a)(5). Allocation of Intangible Drilling Costs and Tangible Costs at
Partnership Closings. Intangible Drilling Costs and the Participants' share of
Tangible Costs of a well or xxxxx to be drilled and completed with the proceeds
of a Partnership closing shall be charged 100% to the Participants who are
admitted to the Partnership in that closing and shall not be reallocated to take
into account other Partnership closings.
Although the proceeds of each Partnership closing will be used to pay the costs
of drilling different xxxxx, not less than 90% of each Participant's
subscription proceeds shall be applied to Intangible Drilling Costs and not more
than 10% of each Participant's subscription proceeds shall be applied to
Tangible Costs regardless of when he subscribes.
5.01(a)(7). Lease Costs. The Leases shall be contributed to the Partnership by
the Managing General Partner as set forth in ss.4.01(a)(4).
5.01(b). Revenues. Revenues shall be credited as set forth below.
5.01(b)(1). Allocation of Revenues on Disposition of Property. If the parties'
Capital Accounts are adjusted to reflect the simulated depletion of a natural
gas or oil property of the Partnership, then the portion of the total amount
realized by the Partnership on the taxable disposition of the property that
represents recovery of its simulated tax basis in the property shall be
allocated to the parties in the same proportion as the aggregate adjusted tax
basis of the property was allocated to the parties or their predecessors in
interest. If the parties' Capital Accounts are adjusted to reflect the actual
depletion of a natural gas or oil property of the Partnership, then the portion
of the total amount realized by the Partnership on the taxable disposition of
the property that equals the parties' aggregate remaining adjusted tax basis in
the property shall be allocated to the parties in proportion to their respective
remaining adjusted tax bases in the property. Thereafter, any excess shall be
allocated to the Managing General Partner in an amount equal to the difference
between the fair market value of the Lease at the time it was contributed to the
Partnership and its simulated or actual adjusted tax basis at that time.
Finally, any excess shall be credited as provided in ss.5.01(b)(4), below.
In the event of a sale of developed natural gas and oil properties with
equipment on the properties, the Managing General Partner may make any
reasonable allocation of proceeds between the equipment and the Leases.
5.01(b)(2). Interest. Interest earned on each Participant's subscription
proceeds before the Offering Termination Date under ss.3.05(b)(1) shall be
credited to the accounts of the respective subscribers who paid the subscription
proceeds to the Partnership. The interest shall be paid to the Participant not
later than the Partnership's first cash distribution from operations.
After the Offering Termination Date and until proceeds from the offering are
invested in the Partnership's natural gas and oil operations, any interest
income from temporary investments shall be allocated pro rata to the
Participants providing the subscription proceeds.
All other interest income, including interest earned on the deposit of
production revenues, shall be credited as provided in ss.5.01(b)(4), below.
5.01(b)(3). Sale or Disposition of Equipment. Proceeds from the sale or
disposition of equipment shall be credited to the parties charged with the costs
of the equipment in the ratio in which the costs were charged.
37
5.01(b)(4). Other Revenues. Subject to ss.5.01(b)(4)(a), the Managing General
Partner and the Participants shall share in all other Partnership revenues in
the same percentage as their respective Capital Contribution bears to the total
Partnership Capital Contributions, except that the Managing General Partner
shall receive an additional 7% of Partnership revenues. However, the Managing
General Partner's total revenue share may not exceed 35% of Partnership
revenues. For example, if the Managing General Partner contributes 25% of the
total Partnership Capital Contributions and the Participants contribute 75% of
the total Partnership Capital Contributions, then the Managing General Partner
shall receive 32% of the Partnership revenues and the Participants shall receive
68% of the Partnership revenues. On the other hand, if the Managing General
Partner contributes 30% of the total Partnership Capital Contributions and the
Participants contribute 70% of the total Partnership Capital Contributions, then
the Managing General Partner shall receive 35% of the Partnership revenues, not
37%, because its revenue share cannot exceed 35% of Partnership revenues, and
the Participants shall receive 65% of Partnership revenues.
5.01(b)(4)(a). Subordination. The Managing General Partner shall subordinate up
to 50% of its share of Partnership Net Production Revenues to the receipt by
Participants of cash distributions from the Partnership equal to $1,000 per Unit
(10%) regardless of their actual subscription price of the Units, in each of the
first five 12-month periods beginning with the Partnership's first cash
distributions from operations. In this regard:
(i) the 60-month subordination period shall begin with the first
cash distribution from operations to the Participants, but no
subordination distributions to the Participants shall be
required until the Partnership's first cash distribution to
the Participants after substantially all Partnership xxxxx
have been drilled, completed, and placed in production in a
sales line;
(ii) subsequent subordination distributions, if any, shall be
determined and made at the time of each subsequent
distribution of revenues to the Participants; and
(iii) the Managing General Partner shall not subordinate more than
50% of its share of Partnership Net Production Revenues in any
subordination period.
The subordination shall be determined by:
(i) carrying forward to subsequent 12-month periods the amount, if
any, by which cumulative cash distributions to Participants,
including any subordination payments, are less than:
(a) $1,000 per Unit (10%) in the first 12-month period;
(b) $2,000 per Unit (20%) in the second 12-month period;
(c) $3,000 per Unit (30%) in the third 12-month period;
or
(d) $4,000 per Unit (40%) in the fourth 12-month period
(no carry forward is required if such distributions
are less than $5,000 per Unit (50%) in the fifth
12-month period because the Managing General
Partner's subordination obligation terminates on the
expiration of the fifth 12-month period); and
(ii) reimbursing the Managing General Partner for any previous
subordination payments to the extent cumulative cash
distributions to Participants, including any subordination
payments, would exceed:
(a) $1,000 per Unit (10%) in the first 12-month period;
(b) $2,000 per Unit (20%) in the second 12-month period;
(c) $3,000 per Unit (30%) in the third 12-month period;
38
(d) $4,000 per Unit (40%) in the fourth 12-month period;
or
(e) $5,000 per Unit (50%) in the fifth 12-month period.
The Managing General Partner's subordination obligation shall be further subject
to the following conditions:
(i) the subordination obligation may be prorated in the Managing
General Partner's discretion (e.g. in the case of a quarterly
distribution, the Managing General Partner will not have any
subordination obligation if the distributions to Participants
equal $250 per Unit (2.5%) or more assuming there is no
subordination owed for any preceding period);
(ii) the Managing General Partner shall not be required to return
Partnership distributions previously received by it, even
though a subordination obligation arises after the
distributions;
(iii) subject to the foregoing provisions of this section, only
Partnership revenues in the current distribution period shall
be debited or credited to the Managing General Partner as may
be necessary to provide, to the extent possible, subordination
distributions to the Participants and reimbursements to the
Managing General Partner; and
(iv) no subordination payments to the Participants or
reimbursements to the Managing General Partner shall be made
after the expiration of the fifth 12-month subordination
period.
5.01(b)(5). Commingling of Revenues From All Partnership Xxxxx. The revenues
from all Partnership xxxxx will be commingled, so regardless of when a
Participant subscribes he will share in the revenues from all xxxxx on the same
basis as the other Participants.
5.01(c). Allocations.
5.01(c)(1). Allocations among Participants. Except as provided otherwise in this
Agreement, costs (other than Intangible Drilling Costs and Tangible Costs) and
revenues charged or credited to the Participants as a group, which includes all
revenue credited to the Participants under ss.5.01(b)(4), shall be allocated
among the Participants, including the Managing General Partner to the extent of
any optional subscription under ss.3.03(b)(2), in the ratio of their respective
Units based on $10,000 per Unit regardless of the actual subscription price for
a Participant's Units.
Intangible Drilling Costs and Tangible Costs charged to the Participants as a
group shall be allocated among the Participants, including the Managing General
Partner to the extent of any optional subscription under ss.3.03(b)(2), in the
ratio of the subscription price designated on their respective Subscription
Agreements rather than the number of their respective Units.
5.01(c)(2). Costs and Revenues Not Directly Allocable to a Partnership Well.
Costs and revenues not directly allocable to a particular Partnership Well or
additional operation shall be allocated among the Partnership Xxxxx or
additional operations in any manner the Managing General Partner in its
reasonable discretion, shall select, and shall then be charged or credited in
the same manner as costs or revenues directly applicable to the Partnership Well
or additional operation are being charged or credited.
5.01(c)(3). Managing General Partner's Discretion in Making Allocations For
Federal Income Tax Purposes. In determining the proper method of allocating
charges or credits among the parties, or in making any other allocations under
this Agreement, the Managing General Partner may adopt any method of allocation
which it, in its reasonable discretion, selects, if, in its sole discretion
based on advice from its legal counsel or accountants, a revision to the
allocations is required for the allocations to be recognized for federal income
tax purposes either because of the promulgation of Treasury Regulations or other
developments in the tax law. Any new allocation provisions shall be provided by
an amendment to this Agreement and shall be made in a manner that would result
in the most favorable aggregate consequences to the Participants as nearly as
possible consistent with the original allocations described in this Agreement.
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5.02. Capital Accounts and Allocations Thereto.
5.02(a). Capital Accounts for Each Party to the Agreement. A single, separate
Capital Account shall be established for each party, regardless of the number of
interests owned by the party, the class of the interests and the time or manner
in which the interests were acquired.
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5.02(b). Charges and Credits.
5.02(b)(1). General Standard. Except as otherwise provided in this Agreement,
the Capital Account of each party shall be determined and maintained in
accordance with Treas. Reg. ss.1.704-l(b)(2)(iv) and shall be increased by:
(i) the amount of money contributed by him to the Partnership;
(ii) the fair market value of property contributed by him, without
regard to ss.7701(g) of the Code, to the Partnership, net of
liabilities secured by the contributed property that the
Partnership is considered to assume or take subject to under
ss.752 of the Code; and
(iii) allocations to him of Partnership income and gain, or items
thereof, including income and gain exempt from tax and income
and gain described in Treas. Reg. ss.1.704-l(b)(2)(iv)(g), but
excluding income and gain described in Treas.
Reg. ss.1.704-l(b)(4)(i);
and shall be decreased by:
(iv) the amount of money distributed to him by the Partnership;
(v) the fair market value of property distributed to him, without
regard to ss.7701(g) of the Code, by the Partnership, net of
liabilities secured by the distributed property that he is
considered to assume or take subject to under ss.752 of the
Code;
(vi) allocations to him of Partnership expenditures described
in ss.705(a)(2)(B) of the Code; and
(vii) allocations to him of Partnership loss and deduction, or items
thereof, including loss and deduction described in Treas.
Reg. ss.1.704-l(b)(2)(iv)(g), but excluding items described in
(vi) above, and loss or deduction described in Treas.
Reg. ss.1.704-l(b)(4)(i) or (iii).
5.02(b)(2). Exception. If Treas. Reg. ss.1.704-l(b)(2)(iv) fails to provide
guidance, Capital Account adjustments shall be made in a manner that:
(i) maintains equality between the aggregate governing Capital
Accounts of the parties and the amount of Partnership capital
reflected on the Partnership's balance sheet, as computed for
book purposes;
(ii) is consistent with the underlying economic arrangement of the
parties; and
(iii) is based, wherever practicable, on federal tax accounting
principles.
5.02(c). Payments to the Managing General Partner. The Capital Account of the
Managing General Partner shall be reduced by payments to it pursuant to
ss.4.04(a)(2) only to the extent of the Managing General Partner's distributive
share of any Partnership deduction, loss, or other downward Capital Account
adjustment resulting from the payments.
5.02(d). Discretion of Managing General Partner in the Method of Maintaining
Capital Accounts. Notwithstanding any other provisions of this Agreement, the
method of maintaining Capital Accounts may be changed from time to time, in the
discretion of the Managing General Partner, to take into consideration ss.704
and other provisions of the Code and the related rules, regulations and
interpretations relating thereto as may exist from time to time.
5.02(e). Revaluations of Property. In the discretion of the Managing General
Partner the Capital Accounts of the parties may be increased or decreased to
reflect a revaluation of Partnership property, including intangible assets such
as goodwill, on a property-by-property basis except as otherwise permitted
under ss.704(c) of the Code and the regulations thereunder, on the Partnership's
books, in accordance with Treas. Reg. ss.1.704-l(b)(2)(iv)(f).
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5.02(f). Amount of Book Items. In cases where ss.704(c) of the Code or
ss.5.02(e) applies, Capital Accounts shall be adjusted in accordance with Treas.
Reg. ss.1.704-l(b)(2)(iv)(g) for allocations of depreciation, depletion,
amortization and gain and loss, as computed for book purposes, with respect to
the property.
5.03. Allocation of Income, Deductions and Credits.
5.03(a). In General.
5.03(a)(1). Deductions Are Allocated to Party Charged with Expenditure. To the
extent permitted by law and except as otherwise provided in this Agreement, all
deductions and credits, including, but not limited to, intangible drilling and
development costs and depreciation, shall be allocated to the party who has been
charged with the expenditure giving rise to the deductions and credits; and to
the extent permitted by law, these parties shall be entitled to the deductions
and credits in computing taxable income or tax liabilities to the exclusion of
any other party. Also, any Partnership deductions that would be nonrecourse
deductions if they were not attributable to a loan made or guaranteed by the
Managing General Partner or its Affiliates shall be allocated to the Managing
General Partner to the extent required by law.
5.03(a)(2). Income and Gain Allocated in Accordance With Revenues. Except as
otherwise provided in this Agreement, all items of income and gain, including
gain on disposition of assets, shall be allocated in accordance with the related
revenue allocations set forth in ss.5.01(b) and its subsections.
5.03(b). Tax Basis of Each Property. Subject to ss.704(c) of the Code, the tax
basis of each oil and gas property for computation of cost depletion and gain or
loss on disposition shall be allocated and reallocated when necessary based on
the capital interest in the Partnership as to the property and the capital
interest in the Partnership for this purpose as to each property shall be
considered to be owned by the parties in the ratio in which the expenditure
giving rise to the tax basis of the property has been charged as of the end of
the year.
5.03(c). Gain or Loss on Oil and Gas Properties. Each party shall separately
compute its gain or loss on the disposition of each natural gas and oil property
in accordance with the provisions of ss.613A(c)(7)D) of the Code, and the
calculation of the gain or loss shall consider the party's adjusted basis in his
property interest computed as provided in ss.5.03(b) and the party's allocable
share of the amount realized from the disposition of the property.
5.03(d). Gain on Depreciable Property. Gain from each sale or other disposition
of depreciable property shall be allocated to each party whose share of the
proceeds from the sale or other disposition exceeds its contribution to the
adjusted basis of the property in the ratio that the excess bears to the sum of
the excesses of all parties having an excess.
5.03(e). Loss on Depreciable Property. Loss from each sale, abandonment or other
disposition of depreciable property shall be allocated to each party whose
contribution to the adjusted basis of the property exceeds its share of the
proceeds from the sale, abandonment or other disposition in the proportion that
the excess bears to the sum of the excesses of all parties having an excess.
5.03(f). Allocation If Recapture Treated As Ordinary Income. Any recapture
treated as an increase in ordinary income by reason of ss.ss.1245, 1250, or 1254
of the Code shall be allocated to the parties in the amounts in which the
recaptured items were previously allocated to them; provided that to the extent
recapture allocated to any party is in excess of the party's gain from the
disposition of the property, the excess shall be allocated to the other parties
but only to the extent of the other parties' gain from the disposition of the
property.
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5.03(g). Tax Credits. As of the date of the Prospectus, tax credits are not
available to the Partnership. If this changes in the future, however, and if a
Partnership expenditure, whether or not deductible, that gives rise to a tax
credit in a Partnership taxable year also gives rise to valid allocations of
Partnership loss or deduction, or other downward Capital Account adjustments,
for the year, then the parties' interests in the Partnership with respect to the
credit, or the cost giving rise thereto, shall be in the same proportion as the
parties' respective distributive shares of the loss or deduction, and
adjustments. Identical principles shall apply in determining the parties'
interests in the Partnership with respect to tax credits that arise from
receipts of the Partnership, whether or not taxable.
5.03(h). Deficit Capital Accounts and Qualified Income Offset. Notwithstanding
any provisions of this Agreement to the contrary, an allocation of loss or
deduction which would result in a party having a deficit Capital Account balance
as of the end of the taxable year to which the allocation relates, if charged to
the party, to the extent the Participant is not required to restore the deficit
to the Partnership, taking into account:
(i) adjustments that, as of the end of the year, reasonably are
expected to be made to the party's Capital Account for
depletion allowances with respect to the Partnership's natural
gas and oil properties;
(ii) allocations of loss and deduction that, as of the end of the
year, reasonably are expected to be made to the party under
ss.ss.704(e)(2) and 706(d) of the Code and Treas. Reg.
ss.1.751-1(b)(2)(ii); and
(iii) distributions that, as of the end of the year, reasonably are
expected to be made to the party to the extent they exceed
offsetting increases to the party's Capital Account, assuming
for this purpose that the fair market value of Partnership
property equals its adjusted tax basis, that reasonably are
expected to occur during or prior to the Partnership taxable
years in which the distributions reasonably are expected to be
made;
shall be charged to the Managing General Partner. Further, the Managing General
Partner shall be credited with an additional amount of Partnership income or
gain equal to the amount of the loss or deduction as quickly as possible to the
extent such chargeback does not cause or increase deficit balances in the
parties' Capital Accounts which are not required to be restored to the
Partnership.
Notwithstanding any provisions of this Agreement to the contrary, if a party
unexpectedly receives an adjustment, allocation, or distribution described in
(i), (ii), or (iii) above, or any other distribution, which causes or increases
a deficit balance in the party's Capital Account which is not required to be
restored to the Partnership, the party shall be allocated items of income and
gain, consisting of a pro rata portion of each item of Partnership income,
including gross income, and gain for the year, in an amount and manner
sufficient to eliminate the deficit balance as quickly as possible.
5.03(i). Minimum Gain Chargeback. To the extent there is a net decrease during a
Partnership taxable year in the minimum gain attributable to a Partner
nonrecourse debt, then any Partner with a share of the minimum gain attributable
to the debt at the beginning of the year shall be allocated items of Partnership
income and gain in accordance with Treas. Reg. ss.1.704-2(i).
5.03(j). Partners' Allocable Shares. Except as otherwise provided in this
Agreement, each party's allocable share of Partnership income, gain, loss,
deductions and credits shall be determined by the use of any method prescribed
or permitted by the Secretary of the Treasury by regulations or other guidelines
and selected by the Managing General Partner which takes into account the
varying interests of the parties in the Partnership during the taxable year. In
the absence of such regulations or guidelines, except as otherwise provided in
this Agreement, the allocable share shall be based on actual income, gain, loss,
deductions and credits economically accrued each day during the taxable year in
proportion to each party's varying interest in the Partnership on each day
during the taxable year.
5.04. Elections.
5.04(a). Election to Deduct Intangible Costs. The Partnership's federal income
tax return shall be made in accordance with an election under the option granted
by the Code to deduct intangible drilling and development costs.
5.04(b). No Election Out of Subchapter K. No election shall be made by the
Partnership, any Partner, or the Operator for the Partnership to be excluded
from the application of the partnership provisions of Subchapter K of the Code.
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5.04(c). Contingent Income. If it is determined that any taxable income results
to any party by reason of its entitlement to a share of profits or revenues of
the Partnership before the profit or revenue has been realized by the
Partnership, the resulting deduction as well as any resulting gain, shall not
enter into Partnership net income or loss but shall be separately allocated to
the party.
5.04(d). ss.754 Election. In the event of the transfer of an interest in the
Partnership, or on the death of an individual party hereto, or in the event of
the distribution of property to any party, the Managing General Partner may
choose for the Partnership to file an election in accordance with the applicable
Treasury Regulations to cause the basis of the Partnership's assets to be
adjusted for federal income tax purposes as provided by ss.ss.734 and 743 of the
Code.
5.05. Distributions.
5.05(a). In General.
5.05(a)(1). Quarterly Review of Accounts. The Managing General Partner shall
review the accounts of the Partnership at least quarterly to determine whether
cash distributions are appropriate and the amount to be distributed, if any.
5.05(a)(2). Distributions. The Partnership shall distribute funds to the
Managing General Partner and the Participants allocated to their accounts which
the Managing General Partner deems unnecessary to retain by the Partnership.
5.05(a)(3). No Borrowings. In no event, however, shall funds be advanced or
borrowed for distributions if the amount of the distributions would exceed the
Partnership's accrued and received revenues for the previous four quarters, less
paid and accrued Operating Costs with respect to the revenues. The determination
of revenues and costs shall be made in accordance with generally accepted
accounting principles, consistently applied.
5.05(a)(4). Distributions to the Managing General Partner. Cash distributions
from the Partnership to the Managing General Partner shall only be made as
follows:
(a) in conjunction with distributions to Participants; and
(b) out of funds properly allocated to the Managing General
Partner's account.
5.05(a)(5). Reserve. At any time after one year from the date each Partnership
Well is placed into production, the Managing General Partner shall have the
right to deduct each month from the Partnership's proceeds of the sale of the
production from the well up to $200 for the purpose of establishing a fund to
cover the estimated costs of plugging and abandoning the well. All of these
funds shall be deposited in a separate interest bearing account for the benefit
of the Partnership, and the total amount so retained and deposited shall not
exceed the Managing General Partner's reasonable estimate of the costs.
5.05(b). Distribution of Uncommitted Subscription Proceeds. Any net subscription
proceeds not expended or committed for expenditure, as evidenced by a written
agreement, by the Partnership within 12 months of the Offering Termination Date,
except necessary operating capital, shall be distributed to the Participants in
the ratio that the subscription price designated on each Participant's
Subscription Agreement bears to the total subscription prices designated on all
of the Participants' Subscription Agreements, as a return of capital. The
Managing General Partner shall reimburse the Participants for the selling or
other offering expenses allocable to the return of capital.
For purposes of this subsection, "committed for expenditure" shall mean
contracted for, actually earmarked for or allocated by the Managing General
Partner to the Partnership's drilling operations, and "necessary operating
capital" shall mean those funds which, in the opinion of the Managing General
Partner, should remain on hand to assure continuing operation of the
Partnership.
5.05(c). Distributions on Winding Up. On the winding up of the Partnership
distributions shall be made as provided in ss.7.02.
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5.05(d). Interest and Return of Capital. No party shall under any circumstances
be entitled to any interest on amounts retained by the Partnership. Each
Participant shall look only to his share of distributions, if any, from the
Partnership for a return of his Capital Contribution.
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ARTICLE VI
TRANSFER OF INTERESTS
6.01. Transferability.
6.01(a). In General.
6.01(a)(1). Consent Required. In addition to other restrictions on
transferability provided in this Agreement, Units shall be nontransferable
except transfers to or with the written consent of the Managing General Partner.
6.01(a)(2). Rights of Assignee. Unless an assignee becomes a substituted
Participant in accordance with the provisions set forth below, he shall not be
entitled to any of the rights granted to a Participant under this Agreement,
other than the right to receive all or part of the share of the profits, losses,
income, gain, credits and cash distributions or returns of capital to which his
assignor would otherwise be entitled.
6.01(b). Conversion of Investor General Partner Units to Limited Partner Units.
6.01(b)(1). Automatic Conversion. After all of the Partnership Xxxxx have been
drilled and completed the Managing General Partner shall file an amended
certificate of limited partnership with the Secretary of State of the State of
Delaware for the purpose of converting the Investor General Partner Units to
Limited Partner Units.
6.01(b)(2). Investor General Partners Shall Have Contingent Liability. On
conversion the Investor General Partners shall be Limited Partners entitled to
limited liability; however, they shall remain liable to the Partnership for any
additional Capital Contribution required for their proportionate share of any
Partnership obligation or liability arising before the conversion of their Units
as provided in ss.3.05(b)(2).
6.01(b)(3). Conversion Shall Not Affect Allocations. The conversion shall not
affect the allocation to any Participant of any item of Partnership income,
gain, loss, deduction or credit or other item of special tax significance other
than Partnership liabilities, if any. Further, the conversion shall not affect
any Participant's interest in the Partnership's natural gas and oil properties
and unrealized receivables.
6.01(b)(4). Right to Convert if Reduction of Insurance. Notwithstanding the
foregoing, the Managing General Partner shall notify all Participants at least
30 days before the effective date of any adverse material change in the
Partnership's insurance coverage. If the insurance coverage is to be materially
reduced, then the Investor General Partners shall have the right to convert
their Units into Limited Partner Units before the reduction by giving written
notice to the Managing General Partner.
6.02. Special Restrictions on Transfers.
6.02(a). In General. Transfers are subject to the following general conditions:
(i) only whole Units may be assigned unless the Participant owns
less than a whole Unit, in which case his entire fractional
interest must be assigned;
(ii) the costs and expenses associated with the assignment must be
paid by the assignor Participant;
(iii) the assignment must be in a form satisfactory to the Managing
General Partner; and
(iv) the terms of the assignment must not contravene those of this
Agreement.
Transfers of Units are subject to the following additional restrictions set
forth in ss.ss.6.02(a)(1) and 6.02(a)(2).
46
6.02(a)(1). Tax Law Restrictions. Subject to transfers permitted by ss.6.04 and
transfers by operation of law, no sale, exchange, transfer, or assignment of a
Unit shall be made which, in the opinion of counsel to the Partnership, would
result in the Partnership being either:
(i) terminated for tax purposes under ss.708 of the Code; or
(ii) treated as a "publicly-traded" partnership for purposes
of ss.469(k) of the Code.
6.02(a)(2). Securities Laws Restriction. Subject to transfers permitted by
ss.6.04 and transfers by operation of law, no Unit shall be sold, assigned,
pledged, hypothecated, or transferred unless there is an opinion of counsel
acceptable to the Managing General Partner that the registration of the Unit is
not required under the Securities Act of 1933, as amended, and would not result
in the violation of any applicable state securities laws.
Transfers are also subject to any conditions contained in the Subscription
Agreement and Exhibit (B) to the Prospectus.
6.02(a)(3). Substitute Participant.
6.02(a)(3)(a). Procedure to Become Substitute Participant. An assignee of a
Participant's Unit shall become a substituted Participant entitled to all the
rights of a Participant if, and only if:
(i) the assignor gives the assignee the right;
(ii) the Managing General Partner consents to the substitution,
which shall be in the Managing General Partner's absolute
discretion;
(iii) the assignee pays to the Partnership all costs and expenses
incurred in connection with the substitution; and
(iv) the assignee executes and delivers the instruments (in form
and substance satisfactory to the Managing General Partner)
necessary or desirable to effect the substitution and to
confirm the agreement of the assignee to be bound by all of
the terms of this Agreement.
6.02(a)(3)(b). Rights of Substitute Participant. A substitute Participant is
entitled to all of the rights attributable to full ownership of the assigned
Units including the right to vote.
6.02(b). Effect of Transfer.
6.02(b)(1). Amendment of Records. The Partnership shall amend its records at
least once each calendar quarter to effect the substitution of substituted
Participants.
Any transfer permitted under this Agreement when the assignee does not become a
substituted Participant shall be effective as follows:
(i) midnight of the last day of the calendar month in which it is
made; or
(ii) at the Managing General Partner's election, 7:00 A.M. of the
following day.
6.02(b)(2). Transfer Does Not Relieve Transferor of Certain Costs. No transfer,
including a transfer of less than all of a Participant's Units or the transfer
of Units to more than one party, shall relieve the transferor of its
responsibility for its proportionate part of any expenses, obligations and
liabilities under this Agreement related to the Units so transferred, whether
arising before or after the transfer.
6.02(b)(3). Transfer Does Not Require An Accounting. No transfer of a Unit shall
require an accounting by the Managing General Partner. Also, no transfer shall
grant rights under this Agreement, including the exercise of any elections, as
between the transferring parties and the remaining parties to this Agreement to
more than one party unanimously designated by the transferees and, if he should
have retained an interest under this Agreement, the transferor.
47
6.02(b)(4). Notice. Until the Managing General Partner receives a proper notice
of designation acceptable to it, the Managing General Partner shall continue to
account only to the person to whom it was furnishing notices before the time
pursuant to ss.8.01 and its subsections. This party shall continue to exercise
all rights applicable to the Units previously owned by the transferor.
6.03. Right of Managing General Partner to Hypothecate and/or Withdraw Its
Interests. The Managing General Partner shall have the authority without the
consent of the Participants and without affecting the allocation of costs and
revenues received or incurred under this Agreement, to hypothecate, pledge, or
otherwise encumber, on any terms it chooses for its own general purposes either:
(i) its Partnership interest; or
(ii) an undivided interest in the assets of the Partnership equal
to or less than its respective interest in the revenues of the
Partnership.
All repayments of these borrowings and costs, interest or other charges related
to the borrowings shall be borne and paid separately by the Managing General
Partner. In no event shall the repayments, costs, interest, or other charges
related to the borrowing be charged to the account of the Participants.
In addition, subject to a required participation of not less than 1% of the
Partnership's subscription proceeds, the Managing General Partner may withdraw a
property interest held by the Partnership in the form of a Working Interest in
the Partnership Xxxxx equal to or less than its respective interest in the
revenues of the Partnership if:
(i) the withdrawal is necessary to satisfy the bona fide request
of its creditors; or
(ii) the withdrawal is approved by Participants whose Units equal a
majority of the total Units.
6.04. Presentment.
6.04(a). In General. Participants shall have the right to present their
interests to the Managing General Partner for purchase subject to the conditions
and limitations set forth in this section. A Participant, however, is not
obligated to present his Units for purchase.
The Managing General Partner shall not be obligated to purchase more than 5% of
the Units in any calendar year and this 5% limit may not be waived. The Managing
General Partner shall not purchase less than one Unit unless the lesser amount
represents the Participant's entire interest in the Partnership, however, the
Managing General Partner may waive this limitation.
A Participant may present his Units in writing to the Managing General Partner
every year beginning in 2007 subject to the following conditions:
(i) the presentment must be made within 120 days of the reserve
report set forth in ss.4.03(b)(3);
(ii) in accordance with Treas. Reg. ss.1.7704-1(f), the purchase
may not be made until at least 60 calendar days after the
Participant notifies the Partnership in writing of the
Participant's intention to exercise the presentment right; and
(iii) the purchase shall not be considered effective until the
presentment price has been paid in cash to the Participant.
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6.04(b). Requirement for Independent Petroleum Consultant. The amount of the
presentment price attributable to Partnership reserves shall be determined based
on the last reserve report of the Partnership prepared by the Managing General
Partner and reviewed by an Independent Expert. The Managing General Partner
shall estimate the present worth of future net revenues attributable to the
Partnership's interest in the Proved Reserves. In making this estimate, the
Managing General Partner shall use the following terms:
(i) a discount rate equal to 10%;
(ii) a constant price for the oil; and
(iii) base the price of natural gas on the existing natural gas
contracts at the time of the purchase.
The calculation of the presentment price shall be as set forth in ss.6.04(c).
6.04(c). Calculation of Presentment Price. The presentment price shall be based
on the Participant's share of the net assets and liabilities of the Partnership
and allocated pro rata to each Participant in the ratio that his number of Units
bears to the total number of Units. The presentment price shall include the sum
of the following Partnership items:
(i) an amount based on 70% of the present worth of future net
revenues from the Proved Reserves determined as described
in ss.6.04(b);
(ii) cash on hand;
(iii) prepaid expenses and accounts receivable less a reasonable
amount for doubtful accounts; and
(iv) the estimated market value of all assets, not separately
specified above, determined in accordance with standard
industry valuation procedures.
There shall be deducted from the foregoing sum the following items:
(i) an amount equal to all debts, obligations, and other
liabilities, including accrued expenses; and
(ii) any distributions made to the Participants between the date of
the request and the actual payment. However, if any cash
distributed was derived from the sale, after the presentment
request, of natural gas, oil or other mineral production, or
of a producing property owned by the Partnership, for purposes
of determining the reduction of the presentment price, the
distributions shall be discounted at the same rate used to
take into account the risk factors employed to determine the
present worth of the Partnership's Proved Reserves.
6.04(d). Further Adjustment May Be Allowed. The presentment price may be further
adjusted by the Managing General Partner for estimated changes therein from the
date of the report to the date of payment of the presentment price to the
Participants because of the following:
(i) the production or sales of, or additions to, reserves and
lease and well equipment, sale or abandonment of Leases, and
similar matters occurring before the request for purchase; and
(ii) any of the following occurring before payment of the
presentment price to the selling Participants:
(a) changes in well performance;
(b) increases or decreases in the market price of natural
gas, oil or other minerals;
(c) revision of regulations relating to the importing of
hydrocarbons;
49
(d) changes in income, ad valorem, and other tax laws
such as material variations in the provisions for
depletion; and
(e) similar matters.
6.04(e). Selection by Lot. If less than all Units presented at any time are to
be purchased, then the Participants whose Units are to be purchased will be
selected by lot.
The Managing General Partner's obligation to purchase Units presented may be
discharged for its benefit by a third-party or an Affiliate. The Units of the
selling Participant will be transferred to the party who pays for it. A selling
Participant will be required to deliver an executed assignment of his Units,
together with any other documentation as the Managing General Partner may
reasonably request.
6.04(f). No Obligation of the Managing General Partner to Establish a Reserve.
The Managing General Partner shall have no obligation to establish any reserve
to satisfy the presentment obligations under this section.
6.04(g). Suspension of Presentment Feature. The Managing General Partner may
suspend this presentment feature by so notifying Participants at any time if it:
(i) does not have sufficient cash flow; or
(ii) is unable to borrow funds for this purpose on terms it deems
reasonable.
In addition, the presentment feature may be conditioned, in the Managing General
Partner's sole discretion, on the Managing General Partner's receipt of an
opinion of counsel that the transfers will not cause the Partnership to be
treated as a "publicly traded partnership" under the Code.
The Managing General Partner shall hold the purchased Units for its own account
and not for resale.
ARTICLE VII
DURATION, DISSOLUTION, AND WINDING UP
7.01. Duration.
7.01(a). Fifty Year Term. The Partnership shall continue in existence for a term
of 50 years from the effective date of this Agreement unless sooner terminated
as set forth below.
7.01(b). Termination. The Partnership shall terminate following the occurrence
of:
(i) a Final Terminating Event; or
(ii) any event which under the Delaware Revised Uniform Limited
Partnership Act causes the dissolution of a limited
partnership.
7.01(c). Continuance of Partnership Except on Final Terminating Event. Other
than the occurrence of a Final Terminating Event, the Partnership or any
successor limited partnership shall not be wound up, but shall be continued by
the parties and their respective successors as a successor limited partnership
under all the terms of this Agreement. The successor limited partnership shall
succeed to all of the assets of the Partnership. As used throughout this
Agreement, the term "Partnership" shall include the successor limited
partnerships and the parties to the successor limited partnerships.
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7.02. Dissolution and Winding Up.
7.02(a). Final Terminating Event. On the occurrence of a Final Terminating Event
the affairs of the Partnership shall be wound up and there shall be distributed
to each of the parties its Distribution Interest in the remaining Partnership
assets.
7.02(b). Time of Liquidating Distribution. To the extent practicable and in
accordance with sound business practices in the judgment of the Managing General
Partner, liquidating distributions shall be made by:
(i) the end of the taxable year in which liquidation occurs,
determined without regard to ss.706(c)(2)(A) of the Code; or
(ii) if later, within 90 days after the date of the liquidation.
Notwithstanding, the following amounts are not required to be distributed within
the foregoing time periods so long as the withheld amounts are distributed as
soon as practical:
(i) amounts withheld for reserves reasonably required for
liabilities of the Partnership; and
(ii) installment obligations owed to the Partnership.
7.02(c). In-Kind Distributions. The Managing General Partner shall not be
obligated to offer in-kind property distributions to the Participants, and shall
do so, in its discretion. Any in-kind property distributions to the Participants
shall be made to a liquidating trust or similar entity for the benefit of the
Participants, unless at the time of the distribution:
(i) the Managing General Partner offers the individual
Participants the election of receiving in-kind property
distributions and the Participants accept the offer after
being advised of the risks associated with direct ownership;
or
(ii) there are alternative arrangements in place which assure the
Participants that they will not, at any time, be responsible
for the operation or disposition of Partnership properties.
If the Managing General Partner has not received a Participant's consent within
30 days after the Managing General Partner mailed the request for consent, then
it shall be presumed that the Participant has refused his consent.
7.02(d). Sale If No Consent. Any Partnership asset which would otherwise be
distributed in-kind to a Participant, except for the failure or refusal of the
Participant to give his written consent to the distribution, may instead be sold
by the Managing General Partner at the best price reasonably obtainable from an
independent third-party, who is not an Affiliate of the Managing General Partner
or to itself or its Affiliates, including an Affiliated Income Program, at fair
market value as determined by an Independent Expert selected by the Managing
General Partner.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01. Notices.
8.01(a). Method. Any notice required under this Agreement shall be:
(i) in writing; and
(ii) given by mail or wire addressed to the party to receive the
notice at the address designated in ss.1.03.
If there is a transfer of Units under this Agreement, no notice to the
transferee shall be required, nor shall the transferee have any rights under
this Agreement, until notice has been given to the Managing General Partner.
51
Any transfer of rights under this Agreement shall not increase the duty to give
notice. If there is a transfer of Units under this Agreement to more than one
party, then notice to any owner of any interest in the Units shall be notice to
all owners of the Units.
8.01(b). Change in Address. The address of any party to this Agreement may be
changed by written notice as follows:
(i) to the Participants if there is a change of address by the
Managing General Partner; or
(ii) to the Managing General Partner if there is a change of
address by a Participant.
8.01(c). Time Notice Deemed Given. If the notice is given by the Managing
General Partner, then the notice shall be considered given, and any applicable
time shall run, from the date the notice is placed in the mail or delivered to
the telegraph company.
If the notice is given by any Participant, then the notice shall be considered
given and any applicable time shall run from the date the notice is received.
8.01(d). Effectiveness of Notice. Any notice to a party other than the Managing
General Partner, including a notice requiring concurrence or nonconcurrence,
shall be effective, and any failure to respond binding, irrespective of the
following:
(i) whether or not the notice is actually received; or
(ii) any disability or death on the part of the noticee, even if
the disability or death is known to the party giving the
notice.
8.01(e). Failure to Respond. Except pursuant to ss.7.02(c) or when this
Agreement expressly requires affirmative approval of a Participant, any
Participant who fails to respond in writing within the time specified to a
request by the Managing General Partner as set forth below, for approval of or
concurrence in a proposed action shall be conclusively deemed to have approved
the action. The Managing General Partner shall send the first request and the
time period shall be not less than 15 business days from the date of mailing of
the request. If the Participant does not respond to the first request, then the
Managing General Partner shall send a second request. If the Participant does
not respond within seven calendar days from the date of the mailing of the
second request, then the Participant shall be conclusively deemed to have
approved the action.
8.02. Time. Time is of the essence of each part of this Agreement.
8.03. Applicable Law. The terms and provisions of this Agreement shall be
construed under the laws of the State of Delaware, provided, however, this
section shall not be deemed to limit causes of action for violations of federal
or state securities law to the laws of the State of Delaware. Neither this
Agreement nor the Subscription Agreement shall require mandatory venue or
mandatory arbitration of any or all claims by Participants against the Sponsor.
8.04. Agreement in Counterparts. This Agreement may be executed in counterpart
and shall be binding on all parties executing this or similar agreements from
and after the date of execution by each party.
8.05. Amendment.
8.05(a). Procedure for Amendment. No changes in this Agreement shall be binding
unless:
(i) proposed in writing by the Managing General Partner, and
adopted with the consent of Participants whose Units equal a
majority of the total Units; or
(ii) proposed in writing by Participants whose Units equal 10% or
more of the total Units and approved by an affirmative vote of
Participants whose Units equal a majority of the total Units.
8.05(b). Circumstances Under Which the Managing General Partner Alone May Amend.
The Managing General Partner is authorized to amend this Agreement and its
exhibits without the consent of Participants in any way deemed necessary or
desirable by it to:
(i) add or substitute in the case of an assigning party additional
Participants;
52
(ii) enhance the tax benefits of the Partnership to the parties;
and
(iii) satisfy any requirements, conditions, guidelines, options, or
elections contained in any opinion, directive, order, ruling,
or regulation of the SEC, the IRS, or any other federal or
state agency, or in any federal or state statute, compliance
with which it deems to be in the best interest of the
Partnership.
Notwithstanding the foregoing, no amendment materially and adversely affecting
the interests or rights of Participants shall be made without the consent of the
Participants whose interests will be so affected.
8.06. Additional Partners. Each Participant hereby consents to the admission to
the Partnership of additional Participants as the Managing General Partner, in
its discretion, chooses to admit.
8.07. Legal Effect. This Agreement shall be binding on and inure to the benefit
of the parties, their heirs, devisees, personal representatives, successors and
assigns, and shall run with the interests subject to this Agreement. The terms
"Partnership," "Limited Partner," "Investor General Partner," "Participant,"
"Partner," "Managing General Partner," "Operator," or "parties" shall equally
apply to any successor limited partnership, and any heir, devisee, personal
representative, successor or assign of a party.
IN WITNESS WHEREOF, the parties hereto set their hands as of the day and year
hereinabove shown.
ATLAS: ATLAS RESOURCES, INC.
Managing General Partner
By:
-------------------------------------
53
EXHIBIT (I-A)
MANAGING GENERAL PARTNER SIGNATURE PAGE
EXHIBIT (I-A)
MANAGING GENERAL PARTNER SIGNATURE PAGE
Attached to and made a part of the AMENDED AND RESTATED CERTIFICATE AND
AGREEMENT OF LIMITED PARTNERSHIP of ATLAS AMERICA PUBLIC #11-2002 LTD.
The undersigned agrees:
1. to serve as the Managing General Partner of ATLAS AMERICA PUBLIC
#11-2002 LTD. (the "Partnership"), and hereby executes, swears to,
and agrees to all the terms of the Partnership Agreement;
2. to pay the required subscription of the Managing General Partner
underss.3.03(b)(1) of the Partnership Agreement; and
3. to subscribe to the Partnership as follows:
(a) $___________________ [________] Unit(s)] under Section
3.03(b)(2) of the Partnership Agreement as a Limited Partner;
or
(b) $___________________ [________] Unit(s)] under Section
3.03(b)(2) of the Partnership Agreement as an Investor General
Partner.
Managing General Partner:
Atlas Resources, Inc. Address:
By: ________________________ 000 Xxxxxx Xxxx
Xxxx Xxxxxxxx, Xxxxxxxxxxxx 00000
ACCEPTED this ____ day of _______ , 2002.
ATLAS RESOURCES, INC.
MANAGING GENERAL PARTNER
By: ______________________________
EXHIBIT (I-B)
SUBSCRIPTION AGREEMENT
ATLAS AMERICA PUBLlC #11-2002 LTD.
--------------------------------------------------------------------------------
SUBSCRIPTION AGREEMENT
--------------------------------------------------------------------------------
I, the undersigned, hereby offer to purchase Units of Atlas America Public
#11-2002 Ltd. in the amount set forth on the Signature Page of this Subscription
Agreement and on the terms described in the current Prospectus for Atlas America
Public #11-2002 Ltd., as supplemented or amended from time to time. I
acknowledge and agree that my execution of this Subscription Agreement also
constitutes my execution of the Amended and Restated Certificate and Agreement
of Limited Partnership (the "Partnership Agreement") the form of which is
attached as Exhibit (A) to the Prospectus and I agree to be bound by all of the
terms and conditions of the Partnership Agreement if my subscription is accepted
by Atlas Resources, Inc., the Managing General Partner. I understand and agree
that I may not assign this offer, nor may it be withdrawn after it has been
accepted by the Managing General Partner. I hereby irrevocably constitute and
appoint the Managing General Partner, and its duly authorized agents, my agent
and attorney-in-fact, in my name, place and xxxxx, to make, execute,
acknowledge, swear to, file, record and deliver the Amended and Restated
Certificate and Agreement of Limited Partnership and any certificates related
thereto.
In order to induce the Managing General Partner to accept this subscription, I
hereby represent, warrant, covenant and agree as follows:
Investor's Initials
_____ I have received the Prospectus.
_____ I, other than if I am a Minnesota or Maine resident, recognize and
understand that:
o before this offering there has been no public market for the Units and
it is unlikely that after the offering there will be any such market;
o the transferability of the Units is restricted; and
o in case of emergency or other change in circumstances I cannot expect
to be able to readily liquidate my investment in the Units.
_____ I am purchasing the Units for the following:
o my own account;
o for investment purposes and not for the account of others; and
o with no present intention of reselling them.
_____ If an individual, I am:
o a citizen of the United States of America; and
o at least twenty-one years of age.
_____ If a partnership, corporation or trust, then the members, stockholders
or beneficiaries thereof are citizens of the United States. I am at least
twenty-one years of age and empowered and duly authorized under a
governing document, trust instrument, charter, certificate of
incorporation, by-law provision or the like to enter into this
Subscription Agreement and to perform the transactions contemplated by the
Prospectus, including its exhibits.
(a) I have either:
_____ o a net worth of at least $225,000, exclusive of home, furnishings and
automobiles; or
1
_____ o a net worth, exclusive of home, furnishings and automobiles, of:
o at least $60,000; and
o had during the last tax year, or estimate that I will have during
the current tax year, "taxable income" as defined in Section 63 of
the Code of at least $60,000, without regard to an investment in
the Partnership.
_____ (b) In addition, if I am a resident of Alabama, Arizona, California,
Indiana, Iowa, Kansas, Kentucky, Maine, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, New Hampshire, New Mexico, North
Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Dakota,
Tennessee, Texas, Vermont or Washington, then I represent that I am
aware of and meet that state's qualifications and suitability
standards set forth in Exhibit (B) to the Prospectus.
_____ (c) If I am a fiduciary, then I am purchasing for a person or entity
having the appropriate income and/or net worth specified in (a) or (b)
above.
_____ I, other than if I am a Minnesota or Maine resident, understand that if I
am an Investor General Partner, then I will have unlimited joint and
several liability for Partnership obligations and liabilities including
amounts in excess of my subscription to the extent the obligations and
liabilities exceed the following:
o the Partnership's insurance proceeds;
o the Partnership's assets; and
o indemnification by the Managing General Partner.
Insurance may be inadequate to cover these liabilities and there is no
insurance coverage for certain claims.
_____ I, other than if I am a Minnesota or Maine resident, understand that if I
am a Limited Partner, then I may only use my Partnership losses to the
extent of my net passive income from passive activities in the year, with
any excess losses being deferred.
_____ I, other than if I am a Minnesota or Maine resident, understand that no
state or federal governmental authority has made any finding or
determination relating to the fairness for public investment of the Units
and no state or federal governmental authority has recommended or endorsed
or will recommend or endorse the Units.
_____ I, other than if I am a Minnesota or Maine resident, understand that the
Selling Agent or registered representative is required to inform me and
the other potential investors of all pertinent facts relating to the
Units, including the following:
o the risks involved in the offering, including the speculative nature
of the investment and the speculative nature of drilling for natural
gas and oil;
o the financial hazards involved in the offering, including the risk of
losing my entire investment;
o the lack of liquidity of my investment;
o the restrictions on transferability of my Units;
o the background of the Managing General Partner and the Operator;
o the tax consequences of my investment; and
o the unlimited joint and several liability of the Investor General
Partners.
The above representations do not constitute a waiver of any rights that I may
have under the Acts administered by the SEC or by any state regulatory agency
administering statutes bearing on the sale of securities.
2
Instructions to Investor
You are required to execute your own Subscription Agreement and the Managing
General Partner will not accept any Subscription Agreement that has been
executed by someone other than you unless the person has been given your legal
power of attorney to sign on your behalf and you meet all of the conditions in
the Prospectus and this Subscription Agreement. In the case of sales to
fiduciary accounts, the minimum standards set forth in the Prospectus and this
Subscription Agreement must be met by the beneficiary, the fiduciary account, or
by the donor or grantor who directly or indirectly supplies the funds to
purchase the Partnership Units if the donor or grantor is the fiduciary.
Your execution of the Subscription Agreement constitutes your binding offer to
buy Units in the Partnership. Once you subscribe you may withdraw your
subscription only by providing the Managing General Partner with written notice
of your withdrawal before your subscription is accepted by the Managing General
Partner. The Managing General Partner has the discretion to refuse to accept
your subscription without liability to you. Subscriptions will be accepted or
rejected by the Partnership within 30 days of their receipt. If your
subscription is rejected, then all of your funds will be returned to you
immediately.
If your subscription is accepted before the first closing, then you will be
admitted as a Participant not later than 15 days after the release from escrow
of the investors' funds to the Partnership. If your subscription is accepted
after the first closing, then you will be admitted into the Partnership not
later than the last day of the calendar month in which your subscription was
accepted by the Partnership.
The Managing General Partner may not complete a sale of Units to you until at
least five business days after the date you receive a final Prospectus. In
addition, the Managing General Partner will send you a confirmation of purchase.
NOTICE TO CALIFORNIA RESIDENTS: This offering deviates in certain respects from
various requirements of Title 10 of the California Administrative Code. These
deviations include, but are not limited to the following: the definition of
Prospect in the Prospectus, unlike Rule 260.140.127.2(b) and Rule
260.140.121(1), does not require enlarging or contracting the size of the area
on the basis of geological data in all cases.
If a resident of California I acknowledge the receipt of California Rule
260.141.11 set forth in Exhibit (B) to the Prospectus.
3
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SIGNATURE PAGE OF SUBSCRIPTION AGREEMENT
----------------------------------------------------------------------------------------------------------------------------------
I, the undersigned, agree to purchase ________ Units at $10,000 per Unit in ATLAS AMERICA PUBLIC #11-2002 LTD. (the "Partnership")
as (check one):
[ ] INVESTOR GENERAL PARTNER Subscription Price
[ ] LIMITED PARTNER $_______________________
(______________________# Units)
Instructions
==================================================================================================================================
Make your check payable to: "Atlas America Public #11-2002 Ltd., Escrow Agent, National City Bank of PA"
Minimum Subscription: one Unit ($10,000), however, the Managing General Partner, in its discretion, may accept one-half
Unit ($5,000) subscriptions. Additional Subscriptions in $1,000 increments. If you are an individual investor you must
personally sign this signature page and provide the information requested below.
==================================================================================================================================
Subscriber (All individual investors must personally My Home Address (Do not use P.O. Box)
sign this Signature Page.)
------------------------------------------------- ---------------------------------------------------
Print Name
------------------------------------------------- ---------------------------------------------------
Signature
------------------------------------------------- ---------------------------------------------------
Print Name
My Address for Distributions if Different from Above
-------------------------------------------------
Signature ---------------------------------------------------
---------------------------------------------------
Date: _______________
My Tax I.D. No. (Social Security No.): _________________ Account No.: ________________________________________
My Telephone No.: Business ___________________ Home ________________________
My E-mail Address: ____________________________________
(CHECK ONE): I am a: [ ] Calendar Year Taxpayer [ ] Fiscal Year Taxpayer
(CHECK ONE): OWNERSHIP OF THE UNITS- [ ] Tenants-in-Common [ ] Partnership
[ ] Joint Tenancy [ ] C Corporation
[ ] Individual [ ] S Corporation
[ ] Trust [ ] Community Property
[ ] Limited Liability Company [ ] Other
NAME OF TRUST, CORPORATION, LLC, PARTNERSHIP: Name ____________________________________________
(Enclose supporting documents.)
1
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TO BE COMPLETED BY REGISTERED REPRESENTATIVE (For Commission and Other Purposes)
----------------------------------------------------------------------------------------------------------------------------------
I hereby represent that I have discharged my affirmative obligations under Rule 2810(b)(2)(B) and (b)(3)(D) of the NASD's Conduct
Rules and specifically have obtained information from the above-named subscriber concerning his/her age, net worth, annual income,
federal income tax bracket, investment objectives, investment portfolio, and other financial information and have determined that
an investment in the Partnership is suitable for such subscriber, that such subscriber is or will be in a financial position to
realize the benefits of this investment, and that such subscriber has a fair market net worth sufficient to sustain the risks for
this investment. I have also informed the subscriber of all pertinent facts relating to the liquidity and marketability of an
investment in the Partnership, of the risks of unlimited liability regarding an investment as an Investor General Partner, and of
the passive loss limitations for tax purposes of an investment as a Limited Partner.
------------------------------------------------- ------------------------------------------------------
Name of Registered Representative and CRD Number Name of Broker/Dealer
------------------------------------------------- ------------------------------------------------------
Signature of Registered Representative Broker/Dealer CRD Number
Registered Representative Office Address: Broker/Dealer E-mail Address:__________________________
-------------------------------------------------
-------------------------------------------------
Phone Number:
-----------------------------------
Facsimile Number:
-------------------------------
E-mail Address:
---------------------------------
-------------------------------------------------
Company Name (if other than Broker/Dealer Name)
NOTICE TO BROKER-DEALER:
Send complete and signed DOCUMENTS and THE CHECK to:
Xx. Xxxx X. Xxxxxx
Anthem Securities, Inc.
000 Xxxxxx Xxxx
X.X. Xxx 000
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
(000) 000-0000
FACSIMILE: (000) 000-0000
EMAIL: xxxxxxx@xxxxxxxxxxxx.xxx
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TO BE COMPLETED BY THE MANAGING GENERAL PARTNER
----------------------------------------------------------------------------------------------------------------------------------
ACCEPTED THIS ______ day ATLAS RESOURCES, INC.,
of _________________ , 2002 MANAGING GENERAL PARTNER
By:
--------------------------------------------
2
EXHIBIT (II)
DRILLING AND OPERATING AGREEMENT
ATLAS AMERICA PUBLIC #11-2002 LTD.
(This Drilling and Operating Agreement Is Written
For a Natural Gas Development Well In
The Clinton/Xxxxxx Geological Formation.
The Drilling and Operating Agreement Will Be Appropriately
Modified for Different Formations or Areas and Oil Xxxxx.)
INDEX
Section Page
1. Assignment of Well Locations; Representations; Designation of Additional Well Locations;
Outside Activities Are Not Restricted.......................................................................1
2. Drilling of Xxxxx; Timing; Depth; Interest of Developer; Right to Substitute Well Locations.................2
3. Operator - Responsibilities in General; Covenants; Term.....................................................3
4. Operator's Charges for Drilling and Completing Xxxxx; Payment; Completion Determination;
Dry Hole Determination; Excess Funds and Cost Overruns - Intangible Drilling Costs; Excess
Funds and Cost Overruns - Tangible Costs....................................................................4
5. Title Examination of Well Locations; Developer's Acceptance and Liability; Additional Well Locations........7
6. Operations Subsequent to Completion of the Xxxxx; Fee Adjustments; Extraordinary Costs;
Pipelines; Price Determinations; Plugging and Abandonment...................................................7
7. Billing and Payment Procedure with Respect to Operation of Xxxxx; Disbursements; Separate Account for Sale
Proceeds; Records and Reports; Additional Information.......................................................9
8. Operator's Lien; Right to Collect From Gas Purchaser.......................................................11
9. Successors and Assigns; Transfers; Appointment of Agent....................................................11
10. Operator's Insurance; Subcontractors' Insurance; Operator's Liability......................................12
11. Internal Revenue Code Election; Relationship of Parties; Right to Take Production in Kind..................13
12. Effect of Force Majeure; Definition of Force Majeure; Limitation...........................................14
13. Term.......................................................................................................14
14. Governing Law; Invalidity..................................................................................14
15. Integration; Written Amendment.............................................................................14
16. Waiver of Default or Breach................................................................................15
17. Notices....................................................................................................15
18. Interpretation.............................................................................................15
19. Counterparts...............................................................................................15
Signature Page.............................................................................................15
Exhibit A Description of Leases and Initial Well Locations
Exhibits A-l through A-___ Maps of Initial Well Locations
Exhibit B Form of Assignment
Exhibit C Form of Addendum
DRILLING AND OPERATING AGREEMENT
THIS AGREEMENT made this ______ day of _______________, 2002, by and between
ATLAS RESOURCES, INC., a Pennsylvania corporation (hereinafter referred to as
"Atlas" or "Operator"),
and
ATLAS AMERICA PUBLIC #11-2002 LTD., a Pennsylvania limited partnership,
(hereinafter referred to as the "Developer").
WITNESSETH THAT:
WHEREAS, the Operator, by virtue of the Oil and Gas Leases (the "Leases")
described on Exhibit A attached to and made a part of this Agreement, has
certain rights to develop the ____________ (______) initial well locations (the
"Initial Well Locations") identified on the maps attached to and made a part of
this Agreement as Exhibits A-l through A-______;
WHEREAS, the Developer, subject to the terms and conditions of this Agreement,
desires to acquire certain of the Operator's rights to develop the Initial Well
Locations and to provide for the development on the terms and conditions set
forth in this Agreement of additional well locations ("Additional Well
Locations") which the parties may from time to time designate; and
WHEREAS, the Operator is in the oil and gas exploration and development
business, and the Developer desires that Operator, as its independent
contractor, perform certain services in connection with its efforts to develop
the aforesaid Initial and Additional Well Locations (collectively the "Well
Locations") and to operate the xxxxx completed on the Well Locations, on the
terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual covenants herein contained and
subject to the terms and conditions hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Assignment of Well Locations; Representations; Designation of Additional
Well Locations; Outside Activities Are Not Restricted.
(a) Assignment of Well Locations. The Operator shall execute an assignment
of an undivided percentage of Working Interest in the Well Location
acreage for each well to the Developer as shown on Exhibit A attached
hereto, which assignment shall be limited to a depth from the surface to
the top of the Queenston formation in Pennsylvania and Ohio when the
primary objective is the Clinton/Xxxxxx geological formation.
The assignment shall be substantially in the form of Exhibit B attached
to and made a part of this Agreement. The amount of acreage included in
each Initial Well Location and the configuration of the Initial Well
Location are indicated on the maps attached as Exhibits A-l through
A-______. The amount of acreage included in each Additional Well
Location and the configuration of the Additional Well Location shall be
indicated on the maps to be attached as exhibits to the applicable
addendum to this Agreement as provided in sub-section (c) below.
(b) Representations. The Operator represents and warrants to the Developer
that:
(i) the Operator is the lawful owner of the Lease and rights and
interest under the Lease and of the personal property on the
Lease or used in connection with the Lease;
(ii) the Operator has good right and authority to sell and convey the
rights, interest, and property;
(iii) the rights, interest, and property are free and clear from all
liens and encumbrances; and
(iv) all rentals and royalties due and payable under the Lease have
been duly paid.
1
These representations and warranties shall also be included in each
recorded assignment of the acreage included in each Initial Well
Location and Additional Well Location designated pursuant to sub-section
(c) below, substantially in the manner set forth in Exhibit B.
The Operator agrees to indemnify, protect and hold the Developer and its
successors and assigns harmless from and against all costs (including
but not limited to reasonable attorneys' fees), liabilities, claims,
penalties, losses, suits, actions, causes of action, judgments or
decrees resulting from the breach of any of the above representations
and warranties. It is understood and agreed that, except as specifically
set forth above, the Operator makes no warranty or representation,
express or implied, as to its title or the title of the lessors in and
to the lands or oil and gas interests covered by said Leases.
(c) Designation of Additional Well Locations. If the parties hereto desire
to designate Additional Well Locations to be developed in accordance
with the terms and conditions of this Agreement, then the parties shall
execute an addendum substantially in the form of Exhibit C attached to
and made a part of this Agreement (Exhibit "C") specifying:
(i) the undivided percentage of Working Interest and the Oil and Gas
Leases to be included as Leases under this Agreement;
(ii) the amount and configuration of acreage included in each
Additional Well Location on maps attached as exhibits to the
addendum; and
(iii) their agreement that the Additional Well Locations shall be
developed in accordance with the terms and conditions of this
Agreement.
(d) Outside Activities Are Not Restricted. It is understood and agreed that
the assignment of rights under the Leases and the oil and gas
development activities contemplated by this Agreement relate only to the
Initial Well Locations and the Additional Well Locations. Nothing
contained in this Agreement shall be interpreted to restrict in any
manner the right of each of the parties to conduct without the
participation of the other party any additional activities relating to
exploration, development, drilling, production, or delivery of oil and
gas on lands adjacent to or in the immediate vicinity of the Well
Locations or elsewhere.
2. Drilling of Xxxxx; Timing; Depth; Interest of Developer; Right to Substitute
Well Locations.
(a) Drilling of Xxxxx. Operator, as Developer's independent contractor,
agrees to drill, complete (or plug) and operate ____________ (_____)
natural gas xxxxx on the ____________ (______) Initial Well Locations in
accordance with the terms and conditions of this Agreement. Developer,
as a minimum commitment, agrees to participate in and pay the Operator's
charges for drilling and completing the xxxxx and any extra costs
pursuant to Section 4 in proportion to the share of the Working Interest
owned by the Developer in the xxxxx with respect to all initial xxxxx.
It is understood and agreed that, subject to sub-section (e) below,
Developer does not reserve the right to decline participation in the
drilling of any of the initial xxxxx to be drilled under this Agreement.
(b) Timing. Operator will use its best efforts to begin drilling the first
well within thirty (30) days after the date of this Agreement and to
begin drilling each of the other initial xxxxx for which payment is made
pursuant to Section 4(b) of this Agreement, on or before March 31, 2003.
Subject to the foregoing time limits, Operator shall determine the
timing of and the order of drilling the Initial Well Locations.
(c) Depth. All of the xxxxx to be drilled under this Agreement (c) shall be:
(i) drilled and completed (or plugged) in accordance with the
generally accepted and customary oil and gas field practices and
techniques then prevailing in the geographical area of the Well
Locations; and
(ii) drilled to a depth sufficient to test thoroughly the objective
formation or the deepest assigned depth, whichever is less.
2
(d) Interest of Developer. Except as otherwise provided in this Agreement,
all costs, expenses, and liabilities incurred in connection with the
drilling and other operations and activities contemplated by this
Agreement shall be borne and paid, and all xxxxx, gathering lines of up
to approximately 2,500 feet on the Well Location, equipment, materials,
and facilities acquired, constructed or installed under this Agreement
shall be owned, by the Developer in proportion to the share of the
Working Interest owned by the Developer in the xxxxx. Subject to the
payment of lessor's royalties and other royalties and overriding
royalties, if any, production of oil and gas from the xxxxx to be
drilled under this Agreement shall be owned by the Developer in
proportion to the share of the Working Interest owned by the Developer
in the xxxxx.
(e) Right to Substitute Well Locations. Notwithstanding the provisions of
sub-section (a) above, if the Operator or Developer determines in good
faith, with respect to any Well Location, before operations begin under
this Agreement on the Well Location, that it would not be in the best
interest of the parties to drill a well on the Well Location, then the
party making the determination shall notify the other party of its
determination and its basis for its determination and, unless otherwise
instructed by Developer, the well shall not be drilled. This
determination may be based on:
(i) the production or failure of production of any other xxxxx which
may have been recently drilled in the immediate area of the Well
Location;
(ii) newly discovered title defects; or
(iii) any other evidence with respect to the Well Location as may be
obtained.
If the well is not drilled, then Operator shall promptly propose a new
well location (including all information for the Well Location as
Developer may reasonably request) within Pennsylvania, Ohio, or other
areas of the United States to be substituted for the original Well
Location. Developer shall then have seven (7) business days to either
reject or accept the proposed new well location. If the new well
location is rejected, then Operator shall promptly propose another
substitute well location pursuant to the provisions of this sub-section.
Once the Developer accepts a substitute well location or does not reject
it within said seven (7) day period, this Agreement shall terminate as
to the original Well Location and the substitute well location shall
become subject to the terms and conditions of this Agreement.
3. Operator - Responsibilities in General; Covenants; Term.
(a) Operator - Responsibilities in General. Atlas shall be the Operator of
the xxxxx and Well Locations subject to this Agreement and, as the
Developer's independent contractor, shall, in addition to its other
obligations under this Agreement do the following:
(i) arrange for drilling and completing the xxxxx and installing the
necessary gas gathering line systems and connection facilities;
(ii) make the technical decisions required in drilling, testing,
completing, and operating the xxxxx;
(iii) manage and conduct all field operations in connection with the
drilling, testing, completing, equipping, operating, and
producing the xxxxx;
(iv) maintain all xxxxx, equipment, gathering lines, and facilities in
good working order during their useful lives; and
(v) perform the necessary administrative and accounting functions.
In performing the work contemplated by this Agreement, Operator is an
independent contractor with authority to control and direct the
performance of the details of the work.
(b) Covenants. Operator covenants and agrees that under this Agreement:
(i) it shall perform and carry on (or cause to be performed and
carried on) its duties and obligations in a good, prudent,
diligent, and workmanlike manner using technically sound,
acceptable oil and gas field practices then prevailing in the
geographical area of the Well Locations;
3
(ii) all drilling and other operations conducted by, for and under the
control of Operator shall conform in all respects to federal,
state and local laws, statutes, ordinances, regulations, and
requirements;
(iii) unless otherwise agreed in writing by the Developer, all work
performed pursuant to a written estimate shall conform to the
technical specifications set forth in the written estimate and
all equipment and materials installed or incorporated in the
xxxxx and facilities shall be new or used and of good quality;
(iv) in the course of conducting operations, it shall comply with all
terms and conditions, other than any minimum drilling
commitments, of the Leases (and any related assignments,
amendments, subleases, modifications and supplements);
(v) it shall keep the Well Locations and all xxxxx, equipment and
facilities located on the Well Locations free and clear of all
labor, materials and other liens or encumbrances arising out of
operations;
(vi) it shall file all reports and obtain all permits and bonds
required to be filed with or obtained from any governmental
authority or agency in connection with the drilling or other
operations and activities; and
(vii) it will provide competent and experienced personnel to supervise
drilling, completing (or plugging), and operating the xxxxx and
use the services of competent and experienced service companies
to provide any third party services necessary or appropriate in
order to perform its duties.
(c) Term. Atlas shall serve as Operator under this Agreement until the
earliest of:
(i) the termination of this Agreement pursuant to Section 13;
(ii) the termination of Atlas as Operator by the Developer at any time
in the Developer's discretion, with or without cause on sixty
(60) days' advance written notice to the Operator; or
(iii) the resignation of Atlas as Operator under this Agreement which
may occur on ninety (90) days' written notice to the Developer at
any time after five (5) years from the date of this Agreement, it
being expressly understood and agreed that Atlas shall have no
right to resign as Operator before the expiration of the
five-year period.
Any successor Operator shall be selected by the Developer. Nothing
contained in this sub-section shall relieve or release Atlas or the
Developer from any liability or obligation under this Agreement which
accrued or occurred before Atlas' removal or resignation as Operator
under this Agreement. On any change in Operator under this provision,
the then present Operator shall deliver to the successor Operator
possession of all records, equipment, materials and appurtenances used
or obtained for use in connection with operations under this Agreement
and owned by the Developer.
4. Operator's Charges for Drilling and Completing Xxxxx; Payment; Completion
Determination; Dry Hole Determination; Excess Funds and Cost
Overruns-Intangible Drilling Costs; Excess Funds and Cost Overruns-Tangible
Costs.
(a) Operator's Charges for Drilling and Completing Xxxxx. All natural gas
xxxxx which are drilled and completed under this Agreement shall be
drilled and completed on a Cost plus 15% basis. "Cost," when used with
respect to services, shall mean the reasonable, necessary, and actual
expenses incurred by Operator on behalf of Developer in providing the
services under this Agreement, determined in accordance with generally
accepted accounting principles. As used elsewhere, "Cost" shall mean the
price paid by Operator in an arm's-length transaction.
The estimated price for each of the xxxxx shall be set forth in an
Authority for Expenditure ("AFE") which shall be attached to this
Agreement as an Exhibit, and shall cover all ordinary costs which may be
incurred in drilling and completing each well for production of natural
gas. This includes without limitation, site preparation, permits and
bonds, roadways, surface damages, power at the site, water, Operator's
overhead and profit, rights-of-way, drilling rigs, equipment and
materials, costs of title examination, logging, cementing, fracturing,
casing, meters (other than utility purchase meters), connection
facilities, salt water collection tanks, separators, siphon string,
rabbit, tubing, an average of 2,500 feet of gathering line per well,
geological and engineering services and completing two (2) zones. The
estimated price shall not include the cost of:
4
(i) completing more than two (2) zones;
(ii) completion procedures, equipment, or any facilities necessary or
appropriate for the production and sale of oil and/or natural gas
liquids; and
(iii) equipment or materials necessary or appropriate to collect, lift,
or dispose of liquids for efficient gas production, except that
the cost of saltwater collection tanks, separators, siphon string
and tubing shall be included in the estimated price.
These extra costs, if any, shall be billed to Developer in proportion to
the share of the Working Interest owned by the Developer in the xxxxx on
a Cost plus 15% basis.
(b) Payment. The Developer shall pay to Operator, in proportion to the share
of the Working Interest owned by the Developer in the xxxxx, one hundred
percent (100%) of the estimated Intangible Drilling Costs and Tangible
Costs as those terms are defined below, for drilling and completing all
initial xxxxx on execution of this Agreement. Notwithstanding, Atlas'
payments for its share of the estimated Tangible Costs as that term is
defined below of drilling and completing all initial xxxxx as the
Managing General Partner of the Developer shall be paid within five (5)
business days of notice from Operator that the costs have been incurred.
The Developer's payment shall be nonrefundable in all events in order to
enable Operator to do the following:
(i) commence site preparation for the initial xxxxx;
(ii) obtain suitable subcontractors for drilling and completing the
xxxxx at currently prevailing prices; and
(iii) insure the availability of equipment and materials.
For purposes of this Agreement, "Intangible Drilling Costs" shall mean
those expenditures associated with property acquisition and the drilling
and completion of oil and gas xxxxx that under present law are generally
accepted as fully deductible currently for federal income tax purposes.
This includes all expenditures made with respect to any well before the
establishment of production in commercial quantities for wages, fuel,
repairs, hauling, supplies and other costs and expenses incident to and
necessary for the drilling of the well and the preparation of the well
for the production of oil or gas, that are currently deductible pursuant
to Section 263(c) of the Internal Revenue Code of 1986, as amended, (the
"Code"), and Treasury Reg. Section 1.612-4, which are generally termed
"intangible drilling and development costs," including the expense of
plugging and abandoning any well before a completion attempt. "Tangible
Costs" shall mean those costs associated with the drilling and
completion of oil and gas xxxxx which are generally accepted as capital
expenditures pursuant to the provisions of the Code. This includes all
costs of equipment, parts and items of hardware used in drilling and
completing a well, and those items necessary to deliver acceptable oil
and gas production to purchasers to the extent installed downstream from
the wellhead of any well and which are required to be capitalized under
the Code and its regulations.
With respect to each additional well drilled on the Additional Well
Locations, if any, Developer shall pay Operator, in proportion to the
share of the Working Interest owned by the Developer in the xxxxx, one
hundred percent (100%) of the estimated Intangible Drilling Costs and
Tangible Costs for the well on execution of the applicable addendum
pursuant to Section l(c) above. Notwithstanding, Atlas' payments for its
share of the estimated Tangible Costs of drilling and completing all
additional xxxxx as the Managing General Partner of the Developer shall
be paid within five (5) business days of notice from Operator that the
costs have been incurred. The Developer's payment shall be nonrefundable
in all events in order to enable Operator to do the following:
5
(i) commence site preparation;
(ii) obtain suitable subcontractors for drilling and completing the
xxxxx at currently prevailing prices; and
(iii) insure the availability of equipment and materials.
Developer shall pay, in proportion to the share of the Working Interest
owned by the Developer in the xxxxx, any extra costs incurred for each
well pursuant to sub-section (a) above within ten (10) business days of
its receipt of Operator's statement for the extra costs.
(c) Completion Determination. Operator shall determine whether or not to run
the production casing for an attempted completion or to plug and abandon
any well drilled under this Agreement. However, a well shall be
completed only if Operator has made a good faith determination that
there is a reasonable possibility of obtaining commercial quantities of
oil and/or gas.
(d) Dry Hole Determination. If Operator determines at any time during the
drilling or attempted completion of any well under this Agreement, in
accordance with the generally accepted and customary oil and gas field
practices and techniques then prevailing in the geographic area of the
Well Location that the well should not be completed, then it shall
promptly and properly plug and abandon the well.
(e) Excess Funds and Cost Overruns-Intangible Drilling Costs. Any estimated
Intangible Drilling Costs paid by Developer with respect to any well
which exceed Operator's price specified in sub-section (a) above for the
Intangible Drilling Costs of the well shall be retained by Operator and
shall be applied to:
(i) the Intangible Drilling Costs for an additional well or xxxxx to
be drilled on the Additional Well Locations; or
(ii) any cost overruns owed by the Developer to Operator for
Intangible Drilling Costs on one or more of the other xxxxx on
the Well Locations in proportion to the share of the Working
Interest owned by the Developer in the xxxxx.
Conversely, if Operator's price specified in sub-section (a) above for
the Intangible Drilling Costs of any well exceeds the estimated
Intangible Drilling Costs paid by Developer for the well, then:
(i) Developer shall pay the additional price to Operator within five
(5) business days after notice from Operator that the additional
amount is due and owing; or
(ii) Developer and Operator may agree to delete or reduce Developer's
Working Interest in one or more xxxxx which have not yet been
spudded to provide funds to pay the additional amounts to
Operator. If doing so results in any excess prepaid Intangible
Drilling Costs, then these funds shall be applied to:
o the Intangible Drilling Costs for an additional well or xxxxx
to be drilled on the Additional Well Locations; or
o any cost overruns owed by Developer to Operator for
Intangible Drilling Costs on one or more of the other xxxxx
on the Well Locations in proportion to the share of the
Working Interest owned by the Developer in the xxxxx.
The Exhibits to this Agreement with respect to the affected xxxxx
shall be amended as appropriate.
6
(f) Excess Funds and Cost Overruns - Tangible Costs. Any estimated Tangible
Costs paid by Developer with respect to any well which exceed Operator's
price specified in sub-section (a) above for the Tangible Costs of the
well shall be retained by Operator and shall be applied to:
(i) the Tangible Costs for an additional well or xxxxx to be drilled
on the Additional Well Locations; or
(ii) any cost overruns owed by Developer to Operator for Tangible
Costs on one or more of the other xxxxx on the Well Locations in
proportion to the share of the Working Interest owned by the
Developer in the xxxxx.
Conversely, if Operator's price specified in sub-section (a) above for
the Tangible Costs of any well exceeds the estimated Tangible Costs paid
by Developer for the well, then:
(i) Developer shall pay the additional price to Operator within ten
(10) business days after notice from Operator that the additional
price is due and owing; or
(ii) Developer and Operator may agree to delete or reduce Developer's
Working Interest in one or more xxxxx which have not yet been
spudded to provide funds to pay the additional price to Operator.
If doing so results in any excess prepaid Tangible Costs, then
these funds shall be applied to:
o the Tangible Costs for an additional well or xxxxx to be
drilled on the Additional Well Locations; or
o any cost overruns owed by Developer to Operator for Tangible
Costs on one or more of the other xxxxx on the Well Locations
in proportion to the share of the Working Interest owed by
the Developer in the xxxxx.
The Exhibits to this Agreement with respect to the affected xxxxx
shall be amended as appropriate.
5. Title Examination of Well Locations, Developer's Acceptance and Liability;
Additional Well Locations.
(a) Title Examination of Well Locations, Developer's Acceptance and
Liability. The Developer acknowledges that Operator has furnished
Developer with the title opinions identified on Exhibit A, and other
documents and information which Developer or its counsel has requested
in order to determine the adequacy of the title to the Initial Well
Locations and leased premises subject to this Agreement. The Developer
accepts the title to the Initial Well Locations and leased premises and
acknowledges and agrees that, except for any loss, expense, cost, or
liability caused by the breach of any of the warranties and
representations made by the Operator in Section l(b), any loss, expense,
cost or liability whatsoever caused by or related to any defect or
failure of the title shall be the sole responsibility of and shall be
borne entirely by the Developer.
(b) Additional Well Locations. Before beginning drilling of any well on any
Additional Well Location, Operator shall conduct, or cause to be
conducted, a title examination of the Additional Well Location, in order
to obtain appropriate abstracts, opinions and certificates and other
information necessary to determine the adequacy of title to both the
applicable Lease and the fee title of the lessor to the premises covered
by the Lease. The results of the title examination and such other
information as is necessary to determine the adequacy of title for
drilling purposes shall be submitted to the Developer for its review and
acceptance. No drilling on the Additional Well Locations shall begin
until the title has been accepted in writing by the Developer. After any
title has been accepted by the Developer, any loss, expense, cost, or
liability whatsoever, caused by or related to any defect or failure of
the title shall be the sole responsibility of and shall be borne
entirely by the Developer, unless such loss, expense, cost, or liability
was caused by the breach of any of the warranties and representations
made by the Operator in Section l(a).
7
6. Operations Subsequent to Completion of the Xxxxx; Fee Adjustments;
Extraordinary Costs; Pipelines; Price Determinations; Plugging and
Abandonment.
(a) Operations Subsequent to Completion of the Xxxxx. Beginning with the
month in which a well drilled under this Agreement begins to produce,
Operator shall be entitled to an operating fee of $275 per month for
each well being operated under this Agreement, proportionately reduced
to the extent the Developer owns less than 100% of the Working Interest
in the xxxxx. This fee shall be in lieu of any direct charges by
Operator for its services or the provision by Operator of its equipment
for normal superintendence and maintenance of the xxxxx and related
pipelines and facilities. Also, this fee shall not be received by
Operator if a third-party serves as the actual operator of the well, in
which case Operator's duties under this Agreement with respect to the
well shall consist of reviewing the costs and expenses charged by the
third-party operator and monitoring the third-party operator's
accounting and production records for the well on behalf of the
Developer.
The operating fees shall cover all normal, regularly recurring operating
expenses for the production, delivery and sale of natural gas, including
without limitation:
(i) well tending, routine maintenance and adjustment;
(ii) reading meters, recording production, pumping, maintaining
appropriate books and records;
(iii) preparing reports to the Developer and government agencies; and
(iv) collecting and disbursing revenues.
The operating fees shall not cover costs and expenses related to the
following:
(i) the production and sale of oil;
(ii) the collection and disposal of salt water or other liquids
produced by the xxxxx;
(iii) the rebuilding of access roads; and
(iv) the purchase of equipment, materials or third party services;
which, subject to the provisions of sub-section (c) of this Section 6,
shall be paid by the Developer in proportion to the share of the Working
Interest owned by the Developer in the xxxxx.
Any well which is temporarily abandoned or shut-in continuously for the
entire month shall not be considered a producing well for purposes of
determining the number of xxxxx in the month subject to the operating
fee.
(b) Fee Adjustments. The monthly operating fee set forth in sub-section (a)
above may in the following manner be adjusted annually as of the first
day of January (the "Adjustment Date") each year beginning January l,
2004. Such adjustment, if any, shall not exceed the percentage increase
in the average weekly earnings of "Crude Petroleum, Natural Gas, and
Natural Gas Liquids" workers, as published by the U.S. Department of
Labor, Bureau of Labor Statistics, and shown in Employment and Earnings
Publication, Monthly Establishment Data, Hours and Earning Statistical
Table C-2, Index Average Weekly Earnings of "Crude Petroleum, Natural
Gas, and Natural Gas Liquids" workers, SIC Code #131-2, or any successor
index thereto, since January l, 2002, in the case of the first
adjustment, and since the previous Adjustment Date, in the case of each
subsequent adjustment.
(c) Extraordinary Costs. Without the prior written consent of the Developer,
pursuant to a written estimate submitted by Operator, Operator shall not
undertake any single project or incur any extraordinary cost with
respect to any well being produced under this Agreement reasonably
estimated to result in an expenditure of more than $5,000, unless the
project or extraordinary cost is necessary for the following:
8
(i) to safeguard persons or property; or
(ii) to protect the well or related facilities in the event of a
sudden emergency.
In no event, however, shall the Developer be required to pay for any
project or extraordinary cost arising from the negligence or misconduct
of Operator, its agents, servants, employees, contractors, licensees, or
invitees.
All extraordinary costs incurred and the cost of projects undertaken
with respect to a well being produced shall be billed at the invoice
cost of third-party services performed or materials purchased together
with a reasonable charge by Operator for services performed directly by
it, in proportion to the share of the Working Interest owned by the
Developer in the xxxxx. Operator shall have the right to require the
Developer to pay in advance of undertaking any project all or a portion
of the estimated costs of the project in proportion to the share of the
Working Interest owned by the Developer in the xxxxx.
(d) Pipelines. Developer shall have no interest in the pipeline gathering
system, which gathering system shall remain the sole property of
Operator or its Affiliates and shall be maintained at their sole cost
and expense.
(e) Price Determinations. Notwithstanding anything herein to the contrary,
the Developer shall have full responsibility for and bear all costs in
proportion to the share of the Working Interest owned by the Developer
in the xxxxx with respect to obtaining price determinations under and
otherwise complying with the Natural Gas Policy Act of 1978 and the
implementing state regulations. This responsibility shall include,
without limitation, preparing, filing, and executing all applications,
affidavits, interim collection notices, reports and other documents
necessary or appropriate to obtain price certification, to effect sales
of natural gas, or otherwise to comply with the Act and the implementing
state regulations.
Operator agrees to furnish the information and render the assistance as
the Developer may reasonably request in order to comply with the Act and
the implementing state regulations without charge for services performed
by its employees.
(f) Plugging and Abandonment. The Developer shall have the right to direct
Operator to plug and abandon any well that has been completed under this
Agreement as a producer. In addition, Operator shall not plug and
abandon any well that has been drilled and completed as a producer
before obtaining the written consent of the Developer. However, if the
Operator in accordance with the generally accepted and customary oil and
gas field practices and techniques then prevailing in the geographic
area of the well location, determines that any well should be plugged
and abandoned and makes a written request to the Developer for authority
to plug and abandon the well and the Developer fails to respond in
writing to the request within forty-five (45) days following the date of
the request, then the Developer shall be deemed to have consented to the
plugging and abandonment of the well. All costs and expenses related to
plugging and abandoning the xxxxx which have been drilled and completed
as producing xxxxx shall be borne and paid by the Developer in
proportion to the share of the Working Interest owned by the Developer
in the xxxxx.
At any time after one (1) year from the date each well drilled and
completed is placed into production, Operator shall have the right to
deduct each month from the proceeds of the sale of the production from
the well up to $200, in proportion to the share of the Working Interest
owned by the Developer in the xxxxx, for the purpose of establishing a
fund to cover the estimated costs of plugging and abandoning the well.
All these funds shall be deposited in a separate interest bearing escrow
account for the account of the Developer, and the total amount so
retained and deposited shall not exceed Operator's reasonable estimate
of the costs.
9
7. Billing and Payment Procedure with Respect to Operation of Xxxxx;
Disbursements; Separate Account for Sale Proceeds; Records and Reports;
Additional Information.
(a) Billing and Payment Procedure with Respect to Operation of Xxxxx.
Operator shall promptly and timely pay and discharge on behalf of the
Developer, in proportion to the share of the Working Interest owned by
the Developer in the xxxxx, all xxxxxxxxx taxes, royalties, overriding
royalties, operating fees, pipeline gathering charges, and other
expenses and liabilities payable and incurred by reason of its operation
of the xxxxx in accordance with this Agreement. Operator shall also pay,
in proportion to the share of the Working Interest owned by the
Developer in the xxxxx, on or before the due date any third-party
invoices rendered to Operator with respect to costs and expenses
incurred in connection with the operation of the xxxxx. Operator,
however, shall not be required to pay and discharge any of the above
costs and expenses which are being contested in good faith by Operator.
Operator shall deduct the foregoing costs and expenses from the
Developer's share of the proceeds of the oil and/or gas sold from the
xxxxx and shall keep an accurate record of the Developer's account,
showing expenses incurred and charges and credits made and received with
respect to each well. If the proceeds are insufficient to pay the costs
and expenses, then Operator shall promptly and timely pay and discharge
the costs and expenses, in proportion to the share of the Working
Interest owned by the Developer in the xxxxx, and prepare and submit an
invoice to the Developer each month for the costs and expenses. The
invoice shall be accompanied by the form of statement specified in
sub-section (b) below, and shall be paid by the Developer within ten
(10) business days of its receipt.
(b) Disbursements. Operator shall disburse to the Developer, on a monthly
basis, the Developer's share of the proceeds received from the sale of
oil and/or gas sold from the xxxxx operated under this Agreement, less:
(i) the amounts charged to the Developer under sub-section (a); and
(ii) the amount, if any, withheld by Operator for future plugging
costs pursuant to sub-section (f) of Section 6.
Each disbursement made and/or invoice submitted pursuant to sub-section
(a) above shall be accompanied by a statement itemizing with respect to
each well:
(i) the total production of oil and/or gas since the date of the last
disbursement or invoice billing period, as the case may be, and
the Developer's share of the production;
(ii) the total proceeds received from any sale of the production, and
the Developer's share of the proceeds;
(iii) the costs and expenses deducted from the proceeds and/or being
billed to the Developer pursuant to sub-section (a) above;
(iv) the amount withheld for future plugging costs; and
(v) any other information as Developer may reasonably request,
including without limitation copies of all third-party invoices
listed on the statement for the period.
(c) Separate Account for Sale Proceeds. Operator agrees to deposit all
proceeds from the sale of oil and/or gas sold from the xxxxx operated
under this Agreement in a separate checking account maintained by
Operator. This account shall be used solely for the purpose of
collecting and disbursing funds constituting proceeds from the sale of
production under this Agreement.
(d) Records and Reports. In addition to the statements required under
sub-section (b) above, Operator, within seventy-five (75) days after the
completion of each well drilled, shall furnish the Developer with a
detailed statement itemizing with respect to the well the total costs
and charges under Section 4(a) and the Developer's share of the costs
and charges, and any information as is necessary to enable the
Developer:
(i) to allocate any extra costs incurred with respect to the well
between Tangible Costs and Intangible Drilling Costs; and
(ii) to determine the amount of investment tax credit, if applicable.
10
(e) Additional Information. On request, Operator shall promptly furnish the
Developer with any additional information as it may reasonably request,
including without limitation geological, technical, and financial
information, in the form as may reasonably be requested, pertaining to
any phase of the operations and activities governed by this Agreement.
The Developer and its authorized employees, agents and consultants,
including independent accountants shall, at Developer's sole cost and
expense:
(i) on at least ten (10) days' written notice have access during
normal business hours to all of Operator's records pertaining to
operations, including without limitation, the right to audit the
books of account of Operator relating to all receipts, costs,
charges, expenses and disbursements under this Agreement
(including information regarding the separate account required
under sub-section (c)); and
(ii) have access, at its sole risk, to any xxxxx drilled by Operator
under this Agreement at all times to inspect and observe any
machinery, equipment and operations.
8. Operator's Lien; Right to Collect From Gas Purchaser.
(a) Operator's Lien. To secure the payment of all sums due from Developer to
Operator under the provisions of this Agreement the Developer grants
Operator a first and preferred lien on and security interest in the
following:
(i) the Developer's interest in the Leases covered by this Agreement;
(ii) the Developer's interest in oil and gas produced under this
Agreement and its proceeds from the sale of the oil and gas; and
(iii) the Developer's interest in materials and equipment under this
Agreement.
(b) Right to Collect From Gas Purchaser. If the Developer fails to timely
pay any amount owing under this Agreement by it to the Operator, then
Operator, without prejudice to other existing remedies, may collect and
retain from any purchaser or purchasers of oil or gas the Developer's
share of the proceeds from the sale of the oil and gas until the amount
owed by the Developer, plus twelve percent (12%) interest on a per annum
basis, and any additional costs (including without limitation actual
attorneys' fees and costs) resulting from the delinquency, has been
paid. Each purchaser of oil or gas shall be entitled to rely on
Operator's written statement concerning the amount of any default.
9. Successors and Assigns; Transfers; Appointment of Agent.
(a) Successors and Assigns. This Agreement shall be binding on and inure to
the benefit of the undersigned parties and their respective successors
and permitted assigns. However, the Operator may not assign, transfer,
pledge, mortgage, hypothecate, sell or otherwise dispose of any of its
interest in this Agreement, or any of the rights or obligations under
this Agreement, without the prior written consent of the Developer.
Notwithstanding, this consent shall not be required in connection with:
(i) the assignment of work to be performed for Operator by
subcontractors, it being understood and agreed, however, that any
assignment to Operator's subcontractors shall not in any manner
relieve or release Operator from any of its obligations and
responsibilities under this Agreement;
(ii) any lien, assignment, security interest, pledge or mortgage
arising under Operator's present or future financing
arrangements; or
(iii) the liquidation, merger, consolidation, or other corporate
reorganization or sale of substantially all of the assets of
Operator.
Further, in order to maintain uniformity of ownership in the xxxxx,
production, equipment, and leasehold interests covered by this
Agreement, and notwithstanding any other provisions to the contrary, the
Developer shall not, without the prior written consent of Operator,
sell, assign, transfer, encumber, mortgage or otherwise dispose of any
of its interest in the xxxxx, production, equipment or leasehold
interests covered by this Agreement unless the disposition encompasses
either:
(i) the entire interest of the Developer in all xxxxx, production,
equipment and leasehold interests subject to this Agreement; or
(ii) an equal undivided interest in all such xxxxx, production,
equipment, and leasehold interests.
(b) Transfers. Subject to the provisions of sub-section (a) above, any sale,
encumbrance, transfer or other disposition made by the Developer of its
interests in the xxxxx, production, equipment, and/or leasehold
interests covered by this Agreement shall be made:
(i) expressly subject to this Agreement;
(ii) without prejudice to the rights of the Operator; and
(iii) in accordance with and subject to the provisions of the Lease.
11
(c) Appointment of Agent. If at any time the interest of the Developer is
divided among or owned by co-owners, Operator may, at its discretion,
require the co-owners to appoint a single trustee or agent with full
authority to do the following:
(i) receive notices, reports and distributions of the proceeds from
production;
(ii) approve expenditures;
(iii) receive xxxxxxxx for and approve and pay all costs, expenses and
liabilities incurred under this Agreement;
(iv) exercise any rights granted to the co-owners under this
Agreement;
(v) grant any approvals or authorizations required or contemplated by
this Agreement;
(vi) sign, execute, certify, acknowledge, file and/or record any
agreements, contracts, instruments, reports, or documents
whatsoever in connection with this Agreement or the activities
contemplated by this Agreement; and
(vii) deal generally with, and with power to bind, the co-owners with
respect to all activities and operations contemplated by this
Agreement.
However, all the co-owners shall continue to have the right to enter
into and execute all contracts or agreements for their respective shares
of the oil and gas produced from the xxxxx drilled under this Agreement
in accordance with sub-section (c) of Section 11.
10. Operator's Insurance; Subcontractors' Insurance; Operator's Liability.
(a) Operator's Insurance. Operator shall obtain and maintain at its own
expense so long as it is Operator under this Agreement all required
Workmen's Compensation Insurance and comprehensive general public
liability insurance in amounts and coverage not less than $1,000,000 per
person per occurrence for personal injury or death and $1,000,000 for
property damage per occurrence, which insurance shall include coverage
for blow-outs and total liability coverage of not less than $10,000,000.
Subject to the above limits, the Operator's general public liability
insurance shall be in all respects comparable to that generally
maintained in the industry with respect to services of the type to be
rendered and activities of the type to be conducted under this
Agreement; Operator's general public liability insurance shall, if
permitted by Operator's insurance carrier:
(i) name the Developer as an additional insured party; and
(ii) provide that at least thirty (30) days' prior notice of
cancellation and any other adverse material change in the policy
shall be given to the Developer.
However, the Developer shall reimburse Operator for the additional cost,
if any, of including it as an additional insured party under the
Operator's insurance.
Current copies of all policies or certificates of the Operator's
insurance coverage shall be delivered to the Developer on request. It is
understood and agreed that Operator's insurance coverage may not
adequately protect the interests of the Developer and that the Developer
shall carry at its expense such excess or additional general public
liability, property damage, and other insurance, if any, as the
Developer deems appropriate.
12
(b) Subcontractors' Insurance. Operator shall require all of its
subcontractors to carry all required Workmen's Compensation Insurance
and to maintain such other insurance, if any, as Operator in its
discretion may require.
(c) Operator's Liability. Operator's liability to the Developer as Operator
under this Agreement shall be limited to, and Operator shall indemnify
the Developer and hold it harmless from, claims, penalties, liabilities,
obligations, charges, losses, costs, damages, or expenses (including but
not limited to reasonable attorneys' fees) relating to, caused by or
arising out of:
(i) the noncompliance with or violation by Operator, its employees,
agents, or subcontractors of any local, state or federal law,
statute, regulation, or ordinance;
(ii) the negligence or misconduct of Operator, its employees, agents
or subcontractors; or
(iii) the breach of or failure to comply with any provisions of this
Agreement.
11. Internal Revenue Code Election; Relationship of Parties; Right to Take
Production in Kind.
(a) Internal Revenue Code Election. With respect to this Agreement, each of
the parties elects under Section 761(a) of the Internal Revenue Code of
1986, as amended, to be excluded from the provisions of Subchapter K of
Chapter 1 of Sub Title A of the Internal Revenue Code of 1986, as
amended. If the income tax laws of the state or states in which the
property covered by this Agreement is located contain, or may
subsequently contain, a similar election, each of the parties agrees
that the election shall be exercised.
Beginning with the first taxable year of operations under this
Agreement, each party agrees that the deemed election provided by
Section 1.761-2(b)(2)(ii) of the Regulations under the Internal Revenue
Code of 1986, as amended, will apply; and no party will file an
application under Section 1.761-2 (b)(3)(i) and (ii) of the Regulations
to revoke the election. Each party agrees to execute the documents and
make the filings with the appropriate governmental authorities as may be
necessary to effect the election.
(b) Relationship of Parties. It is not the intention of the parties to
create, nor shall this Agreement be construed as creating, a mining or
other partnership or association or to render the parties liable as
partners or joint venturers for any purpose. Operator shall be deemed to
be an independent contractor and shall perform its obligations as set
forth in this Agreement or as otherwise directed by the Developer.
(c) Right to Take Production in Kind. Subject to the provisions of Section 8
above, the Developer shall have the exclusive right to sell or dispose
of its proportionate share of all oil and gas produced from the xxxxx to
be drilled under this Agreement, exclusive of production:
(i) that may be used in development and producing operations;
(ii) unavoidably lost; and
(iii) used to fulfill any free gas obligations under the terms of the
applicable Lease or Leases.
Operator shall not have any right to sell or otherwise dispose of the
oil and gas. The Developer shall have the exclusive right to execute all
contracts relating to the sale or disposition of its proportionate share
of the production from the xxxxx drilled under this Agreement.
Developer shall have no interest in any gas supply agreements of
Operator, except the right to receive Developer's share of the proceeds
received from the sale of any gas or oil from xxxxx developed under this
Agreement. The Developer agrees to designate Operator or Operator's
designated bank agent as the Developer's collection agent in any
contracts. On request, Operator shall assist Developer in arranging the
sale or disposition of Developer's oil and gas under this Agreement and
shall promptly provide the Developer with all relevant information which
comes to Operator's attention regarding opportunities for sale of
production.
13
If Developer fails to take in kind or separately dispose of its
proportionate share of the oil and gas produced under this Agreement,
then Operator shall have the right, subject to the revocation at will by
the Developer, but not the obligation, to purchase the oil and gas or
sell it to others at any time and from time to time, for the account of
the Developer at the best price obtainable in the area for the
production. Notwithstanding, Operator shall have no liability to
Developer should Operator fail to market the production.
Any purchase or sale by Operator shall be subject always to the right of
the Developer to exercise at any time its right to take in-kind, or
separately dispose of, its share of oil and gas not previously delivered
to a purchaser. Any purchase or sale by Operator of any other party's
share of oil and gas shall be only for reasonable periods of time as are
consistent with the minimum needs of the oil and gas industry under the
particular circumstances, but in no event for a period in excess of one
(1) year.
12. Effect of Force Majeure; Definition of Force Majeure; Limitation.
(a) Effect of Force Majeure. If Operator is rendered unable, wholly or in
part, by force majeure (as defined below) to carry out its obligations
under this Agreement, the Operator shall give to the Developer prompt
written notice of the force majeure with reasonably full particulars
concerning it. After the notice is given, the obligations of the
Operator, so far as it is affected by the force majeure, shall be
suspended during but no longer than, the continuance of the force
majeure. Operator shall use all reasonable diligence to remove the force
majeure as quickly as possible to the extent the same is within
reasonable control.
(b) Definition of Force Majeure. The term "force majeure" shall mean an act
of God, strike, lockout, or other industrial disturbance, act of the
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, governmental restraint, unavailability of equipment or
materials, plant shut-downs, curtailments by purchasers and any other
causes whether of the kind specifically enumerated above or otherwise,
which directly precludes Operator's performance under this Agreement and
is not reasonably within the control of the Operator.
(c) Limitation. The requirement that any force majeure shall be remedied
with all reasonable dispatch shall not require the settlement of
strikes, lockouts, or other labor difficulty affecting the Operator,
contrary to its wishes. The method of handling these difficulties shall
be entirely within the discretion of the Operator.
13. Term.
This Agreement shall become effective when executed by Operator and the
Developer. Except as provided in sub-section (c) of Section 3, this
Agreement shall continue and remain in full force and effect for the
productive lives of the xxxxx being operated under this Agreement.
14. Governing Law; Invalidity.
(a) Governing Law. This Agreement shall be governed by, construed and
interpreted in accordance with the laws of the Commonwealth of
Pennsylvania.
(b) Invalidity. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions of
this Agreement, and this Agreement shall be construed in all respects as
if the invalid or unenforceable provision were omitted.
15. Integration; Written Amendment.
(a) Integration. This Agreement, including the Exhibits to this Agreement,
constitutes and represents the entire understanding and agreement of the
parties with respect to the subject matter of this Agreement and
supersedes all prior negotiations, understandings, agreements, and
representations relating to the subject matter of this Agreement.
14
(b) Written Amendment. No change, waiver, modification, or amendment of this
Agreement shall be binding or of any effect unless in writing duly
signed by the party against which the change, waiver, modification, or
amendment is sought to be enforced.
16. Waiver of Default or Breach.
No waiver by any party to any default of or breach by any other party
under this Agreement shall operate as a waiver of any future default or
breach, whether of like or different character or nature.
17. Notices.
Unless otherwise provided in this Agreement, all notices, statements,
requests, or demands which are required or contemplated by this
Agreement shall be in writing and shall be hand-delivered or sent by
registered or certified mail, postage prepaid, to the following
addresses until changed by certified or registered letter so addressed
to the other party:
(i) If to the Operator, to:
Atlas Resources, Inc.
000 Xxxxxx Xxxx
Xxxx Xxxxxxxx, Xxxxxxxxxxxx 00000
Attention: President
(ii) If to Developer, to:
Atlas America Public #11-2002 Ltd.
c/o Atlas Resources, Inc.
000 Xxxxxx Xxxx
Xxxx Xxxxxxxx, Xxxxxxxxxxxx 00000
Notices which are served by registered or certified mail on the parties
in the manner provided in this Section shall be deemed sufficiently
served or given for all purposes under this Agreement at the time the
notice is mailed in any post office or branch post office regularly
maintained by the United States Postal Service or any successor. All
payments shall be hand-delivered or sent by United States mail, postage
prepaid to the addresses set forth above until changed by certified or
registered letter so addressed to the other party.
18. Interpretation.
The titles of the Sections in this Agreement are for convenience of
reference only and shall not control or affect the meaning or
construction of any of the terms and provisions of this Agreement. As
used in this Agreement, the plural shall include the singular and the
singular shall include the plural whenever appropriate.
19. Counterparts.
The parties may execute this Agreement in any number of separate
counterparts, each of which, when executed and delivered by the
parties, shall have the force and effect of an original; but all such
counterparts shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ATLAS RESOURCES, INC.
By:
-----------------------------------
XXXXX XXXXXXX XXXXXX #00-0000 LTD.
By its Managing General Partner:
ATLAS RESOURCES, INC.
By:
-----------------------------------
15
DESCRIPTION OF LEASES AND INITIAL WELL LOCATIONS
[To be completed as information becomes available]
1. WELL LOCATION
(a) Oil and Gas Lease from ______________________________________ dated
_____________________ and recorded in Deed Book Volume __________,
Page __________ in the Recorder's Office of County, ____________,
covering approximately _________ acres in
____________________________ Township, ___________________ County,
__________________________.
(b) The portion of the leasehold estate constituting the
____________________________________________ No. __________ Well
Location is described on the map attached hereto as Exhibit A-l.
(c) Title Opinion of _____________________________________________,
____________________________________, _________________________,
________________________________________, dated ___________________,
200___.
(d) The Developer's interest in the leasehold estate constituting this
Well Location is an undivided % Working Interest to those oil and gas
rights from the surface to the bottom of the __________________
Formation, subject to the landowner's royalty interest and overriding
royalty interests.
Exhibit A
Well Name, Twp.
County, State
ASSIGNMENT OF OIL AND GAS LEASE
STATE OF _______________________________
COUNTY OF _____________________________
KNOW ALL MEN BY THESE PRESENTS:
THAT the undersigned _____________ (hereinafter called "Assignor"), for
and in consideration of One Dollar and other valuable consideration ($1.00 ovc),
the receipt whereof is hereby acknowledged, does hereby sell, assign, transfer
and set over unto _________________ (hereinafter called "Assignee"), an
undivided _____________________________ in, and to, the oil and gas lease
described as follows:
together with the rights incident thereto and the personal property thereto,
appurtenant thereto, or used, or obtained, in connection therewith.
And for the same consideration, the assignor covenants with the said
assignee his or its heirs, successors, or assigns that assignor is the lawful
owner of said lease and rights and interest thereunder and of the personal
property thereon or used in connection therewith; that the undersigned has good
right and authority to sell and convey the same, and that said rights, interest
and property are free and clear from all liens and encumbrances, and that all
rentals and royalties due and payable thereunder have been duly paid.
In Witness Whereof, the undersigned owner ______ and assignor ______
ha___ signed and sealed this instrument the ______ day of _______________,
200___.
Signed and acknowledged in the presence of
-------------------------------
------------------------------------------ -------------------------------
------------------------------------------ -------------------------------
Exhibit B
(Page 1)
ACKNOWLEDGMENT BY INDIVIDUAL
STATE OF
-------------------
BEFORE ME, a Notary Public, in and for said
COUNTY OF
------------------
County and State, on this day personally appeared _____________ who
acknowledged to me that ____ he ____ did sign the foregoing instrument and that
the same is _____________ free act and deed.
In testimony whereof, I have hereunto set my hand and official seal, at
_____________________________, this ______ day of _______________, A.D., 200___.
_____________________________
Notary Public
CORPORATION ACKNOWLEDGMENT
STATE OF
-------------------
BEFORE ME, a Notary Public, in and for said
COUNTY OF
------------------
County and State, on this day personally appeared _____________ known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged that the same was the act of the said
______________________________________________, a corporation, and that he
executed the same as the act of such corporation for the purposes and
consideration therein expressed, and in the capacity therein stated.
In testimony whereof, I have hereunto set my hand and official seal, at
_____________________________, this ______ day of _______________, A.D., 200___.
_____________________________
Notary Public
This instrument prepared by:
Atlas Resources, Inc.
000 Xxxxxx Xxxx
X.X. Xxx 000
Xxxx Xxxxxxxx, XX 00000
Exhibit B
(Page 2)
ADDENDUM NO. __________
TO DRILLING AND OPERATING AGREEMENT
DATED ___________________ , 2002
THIS ADDENDUM NO. __________ made and entered into this ______ day of
________________, 2002, by and between ATLAS RESOURCES, INC., a Pennsylvania
corporation (hereinafter referred to as "Operator"),
and
ATLAS AMERICA PUBLIC #11-2002 LTD., a Pennsylvania limited partnership,
(hereinafter referred to as the Developer).
WITNESSETH THAT:
WHEREAS, Operator and the Developer have entered into a Drilling and Operating
Agreement dated ___________________, 2002, (the "Agreement"), which relates to
the drilling and operating of ________________ (______)xxxxx on the
________________ (______) Initial Well Locations identified on the maps attached
as Exhibits A-l through A-______ to the Agreement, and provides for the
development on the terms and conditions set forth in the Agreement of Additional
Well Locations as the parties may from time to time designate; and
WHEREAS, pursuant to Section l(c) of the Agreement, Operator and Developer
presently desire to designate ________________ Additional Well Locations
described below to be developed in accordance with the terms and conditions of
the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Addendum and intending to be legally bound, the parties agree as follows:
1. Pursuant to Section l(c) of the Agreement, the Developer hereby authorizes
Operator to drill, complete (or plug) and operate, on the terms and conditions
set forth in the Agreement and this Addendum No.__________, ________________
additional xxxxx on the ________________ Additional Well Locations described on
Exhibit A to this Addendum and on the maps attached to this Addendum as Exhibits
A-______ through A-______.
2. Operator, as Developer's independent contractor, agrees to drill, complete
(or plug) and operate the additional xxxxx on the Additional Well Locations in
accordance with the terms and conditions of the Agreement and further agrees to
use its best efforts to begin drilling the first additional well within thirty
(30) days after the date of this Addendum and to begin drilling all the
additional xxxxx on or before March 31, 2003.
3. Developer acknowledges that Operator has furnished Developer with the title
opinions identified on Exhibit A to this Addendum, and such other documents and
information which Developer or its counsel has requested in order to determine
the adequacy of the title to the above Additional Well Locations. The Developer
accepts the title to the Additional Well Locations and leased premises in
accordance with the provisions of Section 5 of the Agreement.
4. The drilling and operation of the additional xxxxx on the Additional Well
Locations shall be in accordance with and subject to the terms and conditions
set forth in the Agreement as supplemented by this Addendum No. __________ and
except as previously supplemented, all terms and conditions of the Agreement
shall remain in full force and effect as originally written.
5. This Addendum No. __________ shall be legally binding on, and shall inure to
the benefit of, the parties and their respective successors and permitted
assigns.
Exhibit C
(Page 1)
WITNESS the due execution of this Addendum on the day and year first above
written.
ATLAS RESOURCES, INC.
By ___________________________________
ATLAS AMERICA PUBLIC #11-2002 LTD.
By its Managing General Partner:
ATLAS RESOURCES, INC.
By ___________________________________
Exhibit C
(Page 2)
EXHIBIT (B)
SPECIAL SUITABILITY REQUIREMENTS
AND DISCLOSURES TO INVESTORS
SPECIAL SUITABILITY REQUIREMENTS AND DISCLOSURES TO INVESTORS
If you are a resident of one of the following states, then you must meet that
state's qualification and suitability standards as follows:
Subscribers to Limited Partner Units.
If you are a resident of:
o Michigan; or
o North Carolina;
and you purchase limited partner units, then you must:
o have a net worth of not less than $225,000, exclusive of home,
home furnishings and automobiles; or
o have a net worth of not less than $60,000, exclusive of home,
home furnishings and automobiles, and estimated current year
taxable income as defined in Section 63 of the Internal
Revenue Code of $60,000 or more without regard to an
investment in the partnership.
In addition, if you are a resident of:
o Michigan;
o Ohio; or
o Pennsylvania;
then you must not make an investment in the partnership in excess of 10% of your
net worth, exclusive of home, home furnishings and automobiles.
If you are a resident of California and you purchase limited partners units,
then you must:
o have a net worth of not less than $250,000, exclusive of home,
home furnishings and automobiles, and expect to have gross
income in the current year of $65,000 or more; or
o have a net worth of not less than $500,000, exclusive of home,
home furnishings and automobiles; or
o have a net worth of not less than $1 million; or
o expect to have gross income in the current tax year of not
less than $200,000.
If you are a resident of New Hampshire and you purchase limited partner units,
then you must have:
o a net worth, exclusive of home, home furnishings, and
automobiles of $250,000, or
o a net worth, exclusive of home, home furnishings, and
automobiles of $125,000, and $50,000 of taxable income.
Subscribers to Investor General Partner Units.
If you are a resident of California and you purchase investor general partner
units, then you must:
o have a net worth of not less than $250,000, exclusive of home,
home furnishings and automobiles, and expect to have annual
gross income in the current year of $120,000 or more; or
1
o have a net worth of not less than $500,000, exclusive of home,
home furnishings and automobiles; or
o have a net worth of not less than $1 million; or
o expect to have gross income in the current year of not less
than $200,000.
If you are a resident of:
o Alabama;
o Maine;
o Massachusetts;
o Minnesota;
o North Carolina;
o Ohio;
o Pennsylvania;
o Tennessee;
o Texas; or
o Washington;
and you purchase investor general partner units, then you must:
o have an individual or joint net worth with your spouse of
$225,000 or more, without regard to the investment in the
partnership, exclusive of home, home furnishings and
automobiles, and a combined gross income of $100,000 or more
for the current year and for the two previous years; or
o have an individual or joint net worth with your spouse in
excess of $1 million, inclusive of home, home furnishings and
automobiles; or
o have an individual or joint net worth with your spouse in
excess of $500,000, exclusive of home, home furnishings and
automobiles; or
o have a combined "gross income" as defined in Section 61 of the
Internal Revenue Code of 1986, as amended, in excess of
$200,000 in the current year and the two previous years.
If you are a resident of:
o Arizona;
o Indiana;
o Iowa;
o Kansas;
o Kentucky;
o Michigan;
o Mississippi;
2
o Missouri;
o New Mexico;
o Oklahoma;
o Oregon;
o South Dakota; or
o Vermont;
and you purchase investor general partner units, then you must:
o have an individual or joint net worth with your spouse of
$225,000 or more, without regard to the investment in the
partnership, exclusive of home, home furnishings and
automobiles, and a combined "taxable income" of $60,000 or
more for the previous year and expect to have a combined
"taxable income" of $60,000 or more for the current year and
for the succeeding year; or
o have an individual or joint net worth with your spouse in
excess of $1 million, inclusive of home, home furnishings and
automobiles; or
o have an individual or joint net worth with your spouse in
excess of $500,000, exclusive of home, home furnishings and
automobiles; or
o have a combined "gross income" as defined in Section 61 of the
Internal Revenue Code of 1986, as amended, in excess of
$200,000 in the current year and the two previous years.
If you are a resident of New Hampshire and you purchase investor general partner
units, then you must:
o have a net worth, exclusive of home, home furnishings, and
automobiles of $250,000, or
o have a net worth, exclusive of home, home furnishings, and
automobiles of $125,000, and $50,000 of taxable income.
In addition, if you are a resident of:
o Michigan;
o Ohio; or
o Pennsylvania;
then you must not make an investment in the partnership in excess of 10% of your
net worth, exclusive of home, furnishings and automobiles.
If a resident of Missouri, I am aware that:
THESE SECURITIES ARE NOT ELIGIBLE FOR ANY TRANSACTIONAL
EXEMPTION UNDER THE MISSOURI UNIFORM SECURITIES ACT (SECTION
409.402(b), X.X.XX.(1978). UNLESS THESE SECURITIES ARE AGAIN
REGISTERED UNDER THE ACT, THEY MAY NOT BE REOFFERED FOR SALE
OR RESOLD IN THE STATE OF MISSOURI (SECTION 409.301,
X.X.XX.(1978)).
3
If a resident of California, I am aware that:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
As a condition of qualification of the units for sale in the State of
California, the following rule is hereby delivered to each California purchaser.
California Administrative Code, Title 10, Ch. 3, Rule 260.141.11. Restriction on
transfer.
(a) The issuer of any security upon which a restriction on
transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 and 260.534 shall cause a copy of this section to
be delivered to each issuee or transferee of such security at
the time the certificate evidencing the security is delivered
to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any
interest therein, without the prior written consent of the
Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(i) to the issuer;
(ii) pursuant to the order or process of any court;
(iii) to any person described in Subdivision (i) of Section
25102 of the Code or Section 260.105.14 of these
rules;
(iv) to the transferor's ancestors, descendants or spouse,
or any custodian or trustee for the account of the
transferor's ancestors, descendants or spouse, or to
a transferee by a trustee or custodian for the
account of the transferee or the transferee's
ancestors, descendants or spouse;
(v) to holders of securities of the same class of the
same issuer;
(vi) by way of gift or donation inter vivos or on death;
(vii) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident
of a foreign state, territory or country who is
neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state
if the sale of such securities is not in violation of
any securities law of the foreign state, territory or
country concerned;
(viii) to a broker-dealer licensed under the Code in a
principal transaction, or as an underwriter or member
of an underwriting syndicate or selling group;
(ix) if the interest sold or transferred is a pledge or
other lien given by the purchaser to the seller upon
a sale of the security for which the Commissioner's
written consent is obtained or under this rule not
required;
(x) by way of a sale qualified under Sections 25111,
25112, 25113 or 25121 of the Code, of the securities
to be transferred, provided that no order under
Section 25140 or Subdivision (a) of Section 25143 is
in effect with respect to such qualification;
(xi) by a corporation or wholly-owned subsidiary of such
corporation, or by a wholly-owned subsidiary of a
corporation to such corporation;
(xii) by way of an exchange qualified under Sections 25111,
25112 or 25113 of the Code, provided that no order
under Section 25140 or Subdivision (a) of Section
25143 is in effect with respect to such
qualification;
(xiii) between residents of foreign states, territories or
countries who are neither domiciled nor actually
present in this state;
4
(xiv) to the State Controller pursuant to the Unclaimed
Property Law or to the administrator of the unclaimed
property law of another state;
(xv) by the State Controller pursuant to the Unclaimed
Property Law or by the administrator of the unclaimed
property law of another state if, in either such
case, such person (i) discloses to potential
purchasers at the sale that transfer of the
securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and
(iii) advises the Commissioner of the name of each
purchaser;
(xvi) by a trustee to a successor trustee when such
transfer does not involve a change in the beneficial
ownership of the securities;
(xvii) by way of an offer and sale of outstanding securities
in an issuer transaction that is subject to the
qualification requirement of Section 25110 of the
Code but exempt from that qualification requirement
by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee
shall contain the legend required by this section.
(c) The certificates representing all such securities subject to
such a restriction on transfer, whether upon initial issuance
or upon any transfer thereof, shall bear on their face a
legend, prominently stamped or printed thereon in capital
letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
If a resident of North Carolina, I am aware that:
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR
OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE
SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED
BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PENNSYLVANIA INVESTORS: Because the minimum closing amount is less than
$4,000,000 you are cautioned to carefully evaluate the partnership's ability to
fully accomplish its stated objectives and inquire as to the current dollar
volume of partnership subscriptions.
5
================================================================================
TABLE OF CONTENTS
Page
Summary of the Offering..............................1
Risk Factors.........................................2
Additional Information..............................10
Forward Looking Statements and Associated
Risks............................................10
Investment Objectives...............................11
Actions to be Taken by Managing General
Partner to Reduce Risks of Additional
Payments by Investor General Partners............12
Capitalization and Source of Funds and Use of
Proceeds.........................................13
Compensation........................................17
Terms of the Offering...............................22
Prior Activities....................................26
Management..........................................34
Proposed Activities.................................38
Competition, Markets and Regulation.................51
Participation in Costs and Revenues.................54
Conflicts of Interest...............................59
Fiduciary Responsibility of the Managing
General Partner..................................69
Tax Aspects.........................................70
Summary of Partnership Agreement....................83
Summary of Drilling and Operating Agreement.........85
Reports to Investors................................86
Presentment Feature.................................87
Transferability of Units............................88
Plan of Distribution................................89
Sales Material......................................91
Legal Opinions......................................91
Experts.............................................92
Litigation..........................................92
Financial Information Concerning the Managing
General Partner and the Partnership..............92
APPENDIX A - Information Regarding Currently
Proposed Xxxxx
EXHIBIT (A) - Amended and Restated Certificate
and Agreement of Limited Partnership
EXHIBIT (I-A) - Managing General Partner
Signature Page
EXHIBIT (I-B) - Subscription Agreement
EXHIBIT (II) - Drilling and Operating Agreement
EXHIBIT (B) - Special Suitability Requirements and
Disclosures to Investors
No one has been authorized to give any information or make any representations
other than those contained in this prospectus in connection with this offering.
If given or made, you should not rely on such information or representations as
having been authorized by the managing general partner. The delivery of this
prospectus does not imply that its information is correct as of any time after
its date. This prospectus is not an offer to sell these securities in any state
to any person where the offer and sale is not permitted.
================================================================================
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
XXXXX XXXXXXX
XXXXXX #00-0000 LTD.
-------------
PROSPECTUS
-------------
Until December 31, 2002, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
================================================================================
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The expenses to be incurred in connection with the issuance and distribution of
the securities to be registered, other than underwriting discounts, commissions
and expense allowances, are estimated to be as follows:
Accounting Fees and Expenses.................................$ 15,000.00*
Legal Fees (including Blue Sky) and Expenses................. 75,000.00*
Printing..................................................... 155,000.00*
SEC Registration Fee......................................... 3,680.00
Blue Sky Filing Fees (excluding legal fees).................. 50,000.00*
NASD Filing Fee.............................................. 4,500.00
Miscellaneous................................................ 1,496,820.00*
-------------
Total...................................$ 1,800,000*
=============
----------------
*Estimated
Item 14. Indemnification of Directors and Officers.
Section 1741 et seq. of the Pennsylvania Business Corporation Law provides for
indemnification of officers, directors, employees and agents by a corporation
subject to certain limitations.
Under Section 4.05 of the Amended and Restated Certificate and Agreement of
Limited Partnership, the Participants, within the limits of their Capital
Contributions, and the Partnership, generally agree to indemnify and exonerate
the Managing General Partner, the Operator and their Affiliates from claims of
liability to any third party arising out of operations of the Partnership
provided that:
o they determined in good faith that the course of conduct which
caused the loss or liability was in the best interest of the
Partnership;
o they were acting on behalf of or performing services for the
Partnership; and
o the course of conduct was not the result of their negligence or
misconduct.
Paragraph 11 of the Dealer-Manager Agreement provides for the indemnification of
the Managing General Partner, the Partnership and control persons under
specified conditions by the Dealer-Manager and/or Selling Agent.
Item 15. Recent Sales of Unregistered Securities.
None by the Registrant.
Atlas Resources, Inc. ("Atlas"), an Affiliate of the Registrant, has made sales
of unregistered and registered securities within the last three years. See the
section of the Prospectus captioned "Prior Activities" regarding the sale of
limited and general partner interests. In the opinion of Atlas, the foregoing
unregistered securities in each case have been and/or are being offered and sold
in compliance with exemptions from registration provided by the Securities Act
of 1933, as amended, including the exemptions provided by Section 4(2) of that
Act and certain rules and regulations promulgated thereunder. The securities in
each case have been and/or are being offered and sold to a limited number of
persons who had the sophistication to understand the merits and risks of the
investment and who had the financial ability to bear such risks. The units of
limited and general partner interests were sold to persons who were Accredited
Investors, as that term is defined in Regulation D (17 CFR 230.501(a)), or who
had, at the time of purchase, a net worth of at least $225,000 (exclusive of
home, furnishings and automobiles) or a net worth (exclusive of home,
furnishings and automobiles) of at least $125,000 and gross income of at least
$75,000, or otherwise satisfied Atlas that the investment was suitable.
1
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
1(a) Proposed form of Dealer-Manager Agreement with Anthem
Securities, Inc.
1(b) Proposed form of Dealer-Manager Agreement with Xxxxx
Funding, Inc.
1(c) Proposed form of Agreement with Registered Investment
Advisors.
3(a) Articles of Incorporation of Atlas Resources, Inc.
3(b) Bylaws of Atlas Resources, Inc.
4(a) Certificate of Limited Partnership for Atlas America
Public #11-2002 Ltd.
4(b) Amended and Restated Certificate and Agreement of Limited
Partnership for Atlas America Public #10 Ltd. (See Exhibit
(A) to Prospectus)
5 Opinion of Xxxxxxx & Xxxxxxxxx, Inc. as to the legality of
the Units registered hereby
8 Opinion of Xxxxxxx & Xxxxxxxxx, Inc. as to tax matters
10(a) Proposed Form of Escrow Agreement
10(b) Proposed Form of Drilling and Operating Agreement (See
Exhibit (II) to the Amended and Restated Certificate and
Agreement of Limited Partnership, Exhibit (A) to
Prospectus)
23(a) Consent of Xxxxx Xxxxxxxx, L.L.P.
23(b) Consent of United Energy Development Consultants, Inc.
23(c) Consent of Xxxxxxx & Xxxxxxxxx, Inc. (See Exhibits 5
and 8)
23(d) Consent of Xxxxxx & Company, Inc.
24 Power of Attorney
(b) Financial Statement Schedules
All financial statement schedules are omitted because the information
is not required, is not material or is otherwise included in the financial
statements or related notes thereto.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
Registration Statement:
(i) To include any Prospectus required by Section
10(a)(3) of the Securities Act of 1933.
2
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the
Registration Statement (or of the most recent
Post-Effective Amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
the securities offered would not exceed that which
was registered) and any deviation from the low or
high end of the estimated maximum offering range
may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed
in the Registration Statement or any material
change to such information in the Registration
Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do
not apply if the registration statement is on Form S-3 or
Form S-8 and the information required to be included in a
post-effective amendment by those paragraphs is contained
in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and
the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
The undersigned Registrant hereby undertakes to provide at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
o For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this Registration Statement as of the time
it was declared effective.
o For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf of the undersigned, thereunto duly authorized, in Moon Township,
Pennsylvania on June 10, 0000
XXXXX XXXXXXX PUBLIC #11-2002 LTD.
(Registrant)
By: Atlas Resources, Inc.,
Managing General Partner
Xxxx X. Xxxxxxxxx, pursuant By: /s/ Xxxx X. Xxxxxxxxx
to the Registration Statement, has ---------------------------------
been granted Power of Attorney and is Xxxx X. Xxxxxxxxx, Senior Vice
signing on behalf of the names shown President - Direct Participation
below, in the capacities indicated. Programs
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Xxxxxxx X. Xxxxx President, Chief Executive Officer and Chairman of the Board of Directors June 14, 2002
Xxxxx X. Xxxxxxx Executive Vice President - Land and Geology and a Director June 10, 2002
Xxxxxxx X. Xxxxxxx Executive Vice President - Operations and a Director June 13, 2002
Xxxxx X. XxXxxx Senior Vice President, Chief Financial Officer and Chief Accounting Officer June 13, 2002
Xxxxx Xxxxxx, Xx. Controller and Assistant Secretary June 10, 2002
As filed with the Securities and Exchange Commission on June 21, 2002
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------------------
ATLAS AMERICA PUBLIC #11-2002 LTD.
(Exact name of Registrant as Specified in its Charter)
---------------------------------
Xxxx X. Xxxxxxxxx, Senior Vice President - Direct Participation Programs
Atlas Resources, Inc.
000 Xxxxxx Xxxx, Xxxx Xxxxxxxx, Xxxxxxxxxxxx 00000
(000) 000-0000
(Name, Address and Telephone Number of Agent for Service)
---------------------------------
Copies to:
Xxxxxxx X. Xxxxxxx, Xx., Esq. Xxxx X. Xxxxxxxxx
Xxxxxxx & Xxxxxxxxx, Inc. Atlas Resources, Inc.
0000 X. Xxxxxxxxx, Xxxxx 000 000 Xxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000 Xxxx Xxxxxxxx, Xxxxxxxxxxxx 00000
================================================================================
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
1(a) Proposed form of Dealer-Manager Agreement with Anthem
Securities, Inc.
1(b) Proposed form of Dealer-Manager Agreement with Xxxxx Funding,
Inc.
1(c) Proposed Form of Selected Investment Advisor Agreement
3(a) Articles of Incorporation of Atlas Resources, Inc.
3(b) Bylaws of Atlas Resources, Tile.
4(a) Certificate of Limited Partnership for Atlas America Public
#11-2002 Ltd.
4(b) Amended and Restated Certificate and Agreement of Limited
Partnership for Atlas America Public #11-2002 Ltd. (See
Exhibit (A) to Prospectus)
5 Opinion of Xxxxxxx & Xxxxxxxxx, Inc. as to the legality of the
Units registered hereby
8 Opinion of Xxxxxxx & Xxxxxxxxx, Inc. as to tax matters
10(a) Proposed form of Escrow Agreement
10(b) Proposed form of Drilling and Operating Agreement (See,
Exhibit (11) to the Amended and Restated Certificate and
Agreement of Limited Partnership, Exhibit (A) to Prospectus)
23(a) Consent of Xxxxx Xxxxxxxx, L.L.P.
23(b) Consent of United Energy Development Consultants, Inc.
23(c) Consent of Xxxxxxx & Xxxxxxxxx, Inc. (See Exhibits 5 and 8)
23(d) Consent of Xxxxxx & Company, Inc.
24 Power of Attorney
Exhibit 1(a)
ATLAS AMERICA PUBLIC #11-2002 LTD.
DEALER-MANAGER AGREEMENT
WITH
ANTHEM SECURITIES, INC.
ANTHEM SECURITIES, INC.
DEALER-MANAGER AGREEMENT
TABLE OF CONTENTS
Page
1. Description of Units......................................................1
2. Representations, Warranties and Agreements of the Managing
General Partner...........................................................1
3. Grant of Authority to the Dealer-Manager..................................2
4. Compensation and Fees.....................................................2
5. Covenants of the Managing General Partner.................................4
6. Representations and Warranties of the Dealer-Manager......................4
7. State Securities Registration.............................................8
8. Expense of Sale...........................................................9
9. Conditions of the Dealer-Manager's Duties.................................9
10. Conditions of the Managing General Partner's Duties......................10
11. Indemnification..........................................................10
12. Representations and Agreements to Survive Delivery.......................11
13. Termination..............................................................11
14. Notices..................................................................11
15. Format of Checks/Escrow Agent............................................12
16. Transmittal Procedures...................................................12
17. Parties..................................................................13
18. Relationship.............................................................13
19. Effective Date...........................................................13
20. Entire Agreement, Waiver.................................................13
21. Complaints...............................................................13
22. Privacy..................................................................13
Exhibit A - Escrow Agreement for Atlas America Public #11-2002 Ltd.
Exhibit B - Selling Agent Agreement
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Anthem Securities, Inc.
Dealer-Manager Agreement
ANTHEM SECURITIES, INC.
DEALER-MANAGER AGREEMENT
(Best Efforts)
RE: ATLAS AMERICA PUBLIC #11-2002 LTD.
Anthem Securities, Inc.
X.X. Xxx 000
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Gentlemen:
The undersigned, Atlas Resources, Inc., which is referred to as the
"Managing General Partner," on behalf of Atlas America Public #11-2002 Ltd.,
confirms its agreement with you, as Dealer-Manager, as follows:
1. Description of Units. The Managing General Partner has formed a limited
partnership known as Atlas America Public #11-2002 Ltd., which is
referred to as "the "Partnership," which will issue and sell the Units
in the Partnership, which are referred to as the "Units," at a price of
$10,000 per Unit subject to the discounts set forth in Section 4(c) of
this Agreement for certain investors. Subject to the receipt and
acceptance by the Managing General Partner of the minimum subscription
proceeds of $1,000,000, the Managing General Partner may break escrow
and use the subscription proceeds for the Partnership's drilling
activities, which is referred to as the "Initial Closing Date."
No subscriptions to the Partnership will be accepted after whichever of
the following events occurs first, which is referred to as the
"Offering Termination Date":
o receipt of the maximum subscriptions of $40,000,000; or
o December 31, 2002.
2. Representations, Warranties and Agreements of the Managing General
Partner. The Managing General Partner represents and warrants to and
agrees with you that:
(a) The Partnership has a currently effective registration
statement on Form S-1, including a final prospectus, for the
registration of the Units under the Securities Act of 1933, as
amended, which is referred to as the "Act." Such registration
statement, as it may be amended, and the prospectus and
exhibits on file with the SEC, as well as any post-effective
amendments or supplements to such registration statement or
prospectus after the effective date of registration, which are
respectively referred to as the "Registration Statement" and
the "Prospectus."
(b) The Managing General Partner shall provide to you for delivery
to all offerees and purchasers and their representatives the
information and documents that the Managing General Partner
deems appropriate to comply with the Act and applicable state
securities acts, which are referred to as the "Blue Sky" laws.
(c) The Units when issued will be duly authorized and validly
issued as set forth in the Amended and Restated Certificate
and Agreement of Limited Partnership of the Partnership, which
is referred to as the "Partnership Agreement," included as
Exhibit (A) to the Prospectus, and subject only to the rights
and obligations set forth in the Partnership Agreement or
imposed by the laws of the state of the Partnership's
formation or of any jurisdiction to the laws of which the
Partnership is subject.
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Anthem Securities, Inc.
Dealer-Manager Agreement
(d) The Partnership was duly formed under the laws of the State of
Delaware and is validly existing as a limited partnership in
good standing under the laws of Delaware with full power and
authority to own its properties and conduct its business as
described in the Prospectus. The Partnership will be qualified
to do business as a limited partnership or similar entity
offering limited liability in those jurisdictions where the
Managing General Partner deems the qualification necessary to
assure limited liability of the limited partners.
(e) The Prospectus, as supplemented or amended, does not contain
an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements in the
Prospectus, in the light of the circumstances under which they
are made, not misleading.
3. Grant of Authority to the Dealer-Manager. Based on the representations
and warranties contained in this Agreement, and subject to the terms
and conditions set forth in this Agreement, the Managing General
Partner appoints you as the Dealer-Manager for the Partnership and
gives you the exclusive right to solicit subscriptions for the Units on
a "best efforts" basis in all states other than:
(a) Minnesota; and
(b) New Hampshire.
In all states other than Minnesota and New Hampshire you agree to use
your best efforts to effect sales of the Units and to form and manage a
selling group composed of soliciting broker/dealers, which are referred
to as the "Selling Agents," each of which shall be a member of the
National Association of Securities Dealers, Inc., which is referred as
the "NASD," and shall enter into a "Selling Agent Agreement" in
substantially the form attached to this Agreement as Exhibit "B."
The Managing General Partner shall have three business days after the
receipt of an executed Selling Agent Agreement to refuse that Selling
Agent's participation.
4. Compensation and Fees.
(a) As Dealer-Manager you shall receive from the Managing General
Partner the following compensation, based on each Unit sold to
investors who are situated and/or residents in states other
than Minnesota and New Hampshire and whose subscriptions for
Units are accepted by the Managing General Partner:
(i) a 2.5% Dealer-Manager fee;
(ii) a 7% Sales Commission;
(iii) a .5% nonaccountable reimbursement of marketing
expenses; and
(iv) a .5% reimbursement of the Selling Agents' bona fide
accountable due diligence expenses.
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Anthem Securities, Inc.
Dealer-Manager Agreement
(b) All of the Sales Commissions and the .5% reimbursement of the
Selling Agents' bona fide accountable due diligence expenses
shall be reallowed to the Selling Agents, and all or a portion
of the .5% nonaccountable marketing expense reimbursement
shall be reallowed to the Selling Agents. The 2.5%
Dealer-Manager fee shall be reallowed to the wholesalers for
subscriptions obtained through their efforts. You shall retain
any of the .5% nonaccountable marketing expense reimbursement
not reallowed to the Selling Agents.
(c) Notwithstanding the foregoing:
(i) the Managing General Partner, its officers,
directors, and affiliates, and investors who buy
Units through the officers and directors of the
Managing General Partner may subscribe to Units for a
subscription price reduced by the 2.5% Dealer-Manager
fee, the 7% Sales Commission, the .5% nonaccountable
marketing expense reimbursement, and the .5%
reimbursement of the Selling Agents' bona fide
accountable due diligence expenses which shall not be
paid to you; and
(ii) registered investment advisors and their clients and
Selling Agents and their registered representatives
and principals may subscribe to Units for a
subscription price reduced by the 7% Sales
Commission, which shall not be paid to you, although
their subscription price shall not be reduced by the
2.5% Dealer-Manager fee, the .5% nonaccountable
marketing expense reimbursement, and the .5%
reimbursement of the Selling Agents' bona fide
accountable due diligence expenses which shall be
paid to you.
(d) Pending receipt and acceptance by the Managing General Partner
of the minimum subscription proceeds of $1,000,000, excluding:
(i) any optional subscription of the Managing General
Partner and its Affiliates; and
(ii) the subscription discounts set forth in Section 4(c)
of this Agreement;
all proceeds received by you from the sale of Units shall be
held in a separate interest bearing escrow account as provided
in Section 15 of this Agreement.
Unless at least the minimum subscription proceeds of
$1,000,000 as described above are received on or before the
Offering Termination Date as described in Section 1 of this
Agreement, the offering of Units shall be terminated, in which
event:
(i) the 2.5% Dealer-Manager fee, the 7% Sales Commission,
the .5% nonaccountable marketing expense
reimbursement, and the .5% reimbursement of the
Selling Agents' bona fide accountable due diligence
expenses set forth in Section 4(a) of this Agreement
shall not be payable to you;
(ii) all funds advanced by subscribers shall be returned
to them with interest earned; and
(iii) you shall deliver a termination letter in the form
provided to you by the Managing General Partner to
each of the subscribers and to each of the offerees
previously solicited by you and the Selling Agents in
connection with the offering of the Units.
3
Anthem Securities, Inc.
Dealer-Manager Agreement
(e) Except as otherwise provided below, the fees, reimbursements,
and Sales Commissions set forth in Section 4(a) of this
Agreement shall be paid to you within five business days after
the following:
(i) at least the minimum subscription proceeds of
$1,000,000 as described above have been received by
the Partnership and accepted by the Managing General
Partner; and
(ii) the subscription proceeds have been released from the
escrow account to the Managing General Partner.
You shall reallow to the Selling Agents and the wholesalers
their respective fees, reimbursements, and Sales Commissions
as set forth in Section 4(b) of this Agreement.
Thereafter, your fees, reimbursements, and Sales Commissions
shall be paid to you and shall be reallowed to the Selling
Agents and wholesalers as described above approximately every
two weeks until the Offering Termination Date, and all your
remaining fees, reimbursements, and Sales Commissions shall be
paid by the Managing General Partner no later than fourteen
business days after the Offering Termination Date.
5. Covenants of the Managing General Partner. The Managing General Partner
covenants and agrees that:
(a) The Managing General Partner shall deliver to you ample copies
of the Prospectus and all amendments or supplements to the
Prospectus.
(b) If any event affecting the Partnership or the Managing General
Partner occurs that in the opinion of the Managing General
Partner should be set forth in a supplement or amendment to
the Prospectus, then the Managing General Partner shall
promptly at its expense prepare and furnish to you a
sufficient number of copies of a supplement or amendment to
the Prospectus so that it, as so supplemented or amended, will
not contain an untrue statement of a material fact or omit to
state any material fact necessary in order to make the
statements in the Prospectus, in the light of the
circumstances under which they are made, not misleading.
6. Representations and Warranties of the Dealer-Manager. You, as the
Dealer-Manager, represent and warrant to the Managing General Partner
that:
(a) You are a corporation duly organized, validly existing and in
good standing under the laws of the state of your formation or
of any jurisdiction to the laws of which you are subject, with
all requisite power and authority to enter into this Agreement
and to carry out your obligations under this Agreement.
(b) This Agreement when accepted and approved shall be duly
authorized, executed, and delivered by you and shall be a
valid and binding agreement on your part in accordance with
its terms.
(c) The consummation of the transactions contemplated by this
Agreement and the Prospectus shall not result in the
following:
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Anthem Securities, Inc.
Dealer-Manager Agreement
(i) any breach of any of the terms or conditions of, or a
default under your Articles of Incorporation or
Bylaws, or any other indenture, agreement, or other
instrument to which you are a party; or
(ii) any violation of any order applicable to you of any
court or any federal or state regulatory body or
administrative agency having jurisdiction over you or
your affiliates.
(d) You are duly registered under the provisions of the Securities
Exchange Act of 1934, which is referred to as the "Act of
1934," as a dealer, and you are a member in good standing of
the NASD. You are duly registered as a broker/dealer in the
states where you are required to be registered in order to
carry out your obligations as contemplated by this Agreement
and the Prospectus. You agree to maintain all the foregoing
registrations in good standing throughout the term of the
offer and sale of the Units, and you agree to comply with all
statutes and other requirements applicable to you as a
broker/dealer under those registrations.
(e) Pursuant to your appointment as Dealer-Manager, you shall use
your best efforts to exercise the supervision and control that
you deem necessary and appropriate to the activities of you
and the Selling Agents to comply with all the provisions of
the Act, insofar as the Act applies to your and their
activities under this Agreement. Further, you and the Selling
Agents shall not engage in any activity which would cause the
offer and/or sale of the Units not to comply with the Act, the
Act of 1934, the applicable rules and regulations of the
Commission, the applicable state securities laws and
regulations, this Agreement, and the NASD Conduct Rules
including Rules 2420, 2730, 2740, 2750, and Rule 2810(b)(2)
and (b)(3), which provide as follows:
Sec. (b)(2)
Suitability
(A) A member or person associated with a member shall not
underwrite or participate in a public offering of a
direct participation program unless standards of
suitability have been established by the program for
participants therein and such standards are fully
disclosed in the prospectus and are consistent with
the provisions of subparagraph (B) of this section.
(B) In recommending to a participant the purchase, sale
or exchange of an interest in a direct participation
program, a member or person associated with a member
shall:
(i) have reasonable grounds to believe, on the
basis of information obtained from the
participant concerning his investment
objectives, other investments, financial
situation and needs, and any other
information known by the member or
associated person, that:
(a) the participant is or will be in a
financial position appropriate to
enable him to realize to a
significant extent the benefits
described in the prospectus,
including the tax benefits where
they are a significant aspect of
the program;
(b) the participant has a fair market
net worth sufficient to sustain the
risks inherent in the program,
including loss of investment and
lack of liquidity; and
(c) the program is otherwise suitable
for the participant; and
5
Anthem Securities, Inc.
Dealer-Manager Agreement
(ii) maintain in the files of the member
documents disclosing the basis upon which
the determination of suitability was reached
as to each participant.
(C) Notwithstanding the provisions of subparagraphs (A)
and (B) hereof, no member shall execute any
transaction in a direct participation program in a
discretionary account without prior written approval
of the transaction by the customer.
Sec. (b)(3)
Disclosure
(A) Prior to participating in a public offering of a
direct participation program, a member or person
associated with a member shall have reasonable
grounds to believe, based on information made
available to him by the sponsor through a prospectus
or other materials, that all material facts are
adequately and accurately disclosed and provide a
basis for evaluating the program.
(B) In determining the adequacy of disclosed facts
pursuant to subparagraph (A) hereof, a member or
person associated with a member shall obtain
information on material facts relating at a minimum
to the following, if relevant in view of the nature
of the program:
(i) items of compensation;
(ii) physical properties;
(iii) tax aspects;
(iv) financial stability and experience of the
sponsor;
(v) the program's conflicts and risk factors;
and
(vi) appraisals and other pertinent reports.
(C) For purposes of subparagraphs (A) and (B) hereof, a
member or person associated with a member may rely
upon the results of an inquiry conducted by another
member or members, provided that:
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Anthem Securities, Inc.
Dealer-Manager Agreement
(i) the member or person associated with a
member has reasonable grounds to believe
that such inquiry was conducted with due
care;
(ii) the results of the inquiry were provided to
the member or person associated with a
member with the consent of the member or
members conducting or directing the inquiry;
and
(iii) no member that participated in the inquiry
is a sponsor of the program or an affiliate
of such sponsor.
(D) Prior to executing a purchase transaction in a direct
participation program, a member or person associated
with a member shall inform the prospective
participant of all pertinent facts relating to the
liquidity and marketability of the program during the
term of investment.
(f) You agree to advise the Managing General Partner in writing of
each state in which you and the Selling Agents propose to
offer or sell the Units; and you shall not nor shall you
permit any Selling Agent to offer or sell the Units in any
state until you have been advised in writing by the Managing
General Partner, or the Managing General Partner's special
counsel, that the offer or sale of the Units:
(i) has been qualified in the state;
(ii) is exempt from the qualification requirements imposed
by the state; or
(iii) the qualification is otherwise not required.
(g) You and the Selling Agents have received copies of the
Prospectus relating to the Units and you and the Selling
Agents have relied only on the statements contained in the
Prospectus and not on any other statements whatsoever, either
written or oral, with respect to the details of the offering
of Units.
Also, unless advised otherwise by the Managing General
Partner, you and the Selling Agents may choose to provide each
offeree with a brochure entitled "Atlas America Public
#11-2002 Ltd." which is referred to as the "Sales Literature."
(h) You and the Selling Agents agree that you and the Selling
Agents shall not place any advertisement or other solicitation
with respect to the Units (including without limitation any
material for use in any newspaper, magazine, radio or
television commercial, telephone recording, motion picture, or
other public media) without the prior written approval of the
Managing General Partner, and without the prior written
approval of the form and content thereof by the Commission,
the NASD and the securities authorities of the states where
such advertisement or solicitation is to be circulated. Any
such advertisements or solicitations shall be at your expense.
(i) If a supplement or amendment to the Prospectus is prepared and
delivered to you by the Managing General Partner, you agree
and shall require any Selling Agent to agree as follows:
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Anthem Securities, Inc.
Dealer-Manager Agreement
(1) to distribute each supplement or amendment to the
Prospectus to every person who has previously
received a copy of the Prospectus from you and/or the
Selling Agent; and
(2) to include each supplement or amendment in all future
deliveries of any Prospectus.
(j) In connection with any offer or sale of the Units, you agree
and shall require any Selling Agent to agree to the following:
(1) to comply in all respects with statements set forth
in the Prospectus, the Partnership Agreement, and any
supplements or amendments to the Prospectus;
(2) not to make any statement inconsistent with the
statements in the Prospectus, the Partnership
Agreement, and any supplements or amendments to the
Prospectus;
(3) not to make any untrue or misleading statements of a
material fact in connection with the Units; and
(4) not to provide any written information, statements,
or sales materials other than the Prospectus, the
Sales Literature, and any supplements or amendments
to the Prospectus unless approved in writing by the
Managing General Partner.
(k) You agree to use your best efforts in the solicitation and
sale of the Units and to coordinate and supervise the efforts
of the Selling Agents, and you shall require any Selling Agent
to agree to use its best efforts in the solicitation and sale
of the Units, including that the prospective purchasers meet
the suitability requirements set forth in the Prospectus and
the Subscription Agreement and the prospective purchasers
properly complete and execute the Subscription Agreement,
which has been provided as Exhibit (I-B) to the Partnership
Agreement, Exhibit (A) of the Prospectus, together with any
additional forms provided in any supplement or amendment to
the Prospectus, or otherwise provided to you by the Managing
General Partner to be completed by prospective purchasers.
The Managing General Partner shall have the right to reject
any subscription at any time for any reason without liability
to it. Subscription funds and executed Subscription Agreements
shall be transmitted as set forth in Section 16 of this
Agreement.
(l) Although not anticipated, if you assist in any transfers of
the Units, then you shall comply, and you shall require any
Selling Agent to comply, with the requirements of Rule
2810(b)(2)(B) and (b)(3)(D) of the NASD Conduct Rules.
(m) You agree and covenant that the representations and warranties
you make in this Agreement are and shall be true and correct
at the applicable closing date, and you shall have fulfilled
all your obligations under this Agreement at the applicable
closing date.
7. State Securities Registration. Incident to the offer and sale of the
Units, the Managing General Partner shall use its best efforts either
in taking:
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Anthem Securities, Inc.
Dealer-Manager Agreement
(a) all necessary action and filing all necessary forms and
documents deemed reasonable by it in order to qualify or
register Units for sale under the securities laws of the
states requested by you pursuant to Section 6(f) of this
Agreement; or
(b) any necessary action and filing any necessary forms deemed
reasonable by it in order to obtain an exemption from
qualification or registration in those states.
Notwithstanding, the Managing General Partner may elect not to qualify
or register Units in any state or jurisdiction in which it deems the
qualification or registration is not warranted for any reason in its
sole discretion. The Managing General Partner and its counsel shall
inform you as to the states and jurisdictions in which the Units have
been qualified for sale or are exempt under the respective securities
or Blue Sky laws of those states and jurisdictions. The Managing
General Partner, however, has not assumed and will not assume any
obligation or responsibility as to your right or any Selling Agent's
right to act as a broker/dealer with respect to the Units in any state
or jurisdiction.
The Managing General Partner shall provide to you and the Selling
Agents for delivery to all offerees and purchasers and their
representatives any additional information, documents, and instruments
that the Managing General Partner deems necessary to comply with the
rules, regulations, and judicial and administrative interpretations in
those states and jurisdictions for the offer and sale of the Units in
these states. The Managing General Partner shall file all post-offering
forms, documents, or materials and take all other actions required by
the states and jurisdictions in which the offer and sale of Units have
been qualified, registered, or are exempt. However, the Managing
General Partner shall not be required to take any action, make any
filing, or prepare any document necessary or required in connection
with your status or any Selling Agent's status as a broker/dealer under
the laws of any state or jurisdiction.
The Managing General Partner shall provide you with copies of all
applications, filings, correspondence, orders, other documents, or
instruments relating to any application for qualification,
registration, exemption, or other approval under applicable state or
Federal securities laws for the offering.
8. Expense of Sale. The expenses in connection with the offer and sale of
the Units shall be payable as set forth below.
(a) The Managing General Partner shall pay all expenses incident
to the performance of its obligations under this Agreement,
including the fees and expenses of its attorneys and
accountants and all fees and expenses of registering or
qualifying the Units for offer and sale in the states and
jurisdictions as set forth in Section 7 of this Agreement, or
obtaining exemptions from qualification or registration, even
if this offering is not successfully completed.
(b) You shall pay all expenses incident to the performance of your
obligations under this Agreement, including the formation and
management of the selling group and the fees and expenses of
your own counsel and accountants, even if this offering is not
successfully completed.
9. Conditions of the Dealer-Manager's Duties. Your obligations under this
Agreement shall be subject to the accuracy, as of the date of this
Agreement and at the applicable closing date of the Managing General
Partner's representations and warranties made in this Agreement, and to
the performance by the Managing General Partner of its obligations
under this Agreement.
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Dealer-Manager Agreement
10. Conditions of the Managing General Partner's Duties. The Managing
General Partner's obligations provided under this Agreement, including
the duty to pay compensation to you as set forth in Section 4 of this
Agreement, shall be subject to the following:
(a) the accuracy, as of the date of this Agreement and at the
applicable closing date as if made at the applicable closing
date, of your representations and warranties made in this
Agreement;
(b) the performance by you of your obligations under this
Agreement; and
(c) the Managing General Partner's receipt, at or before the
applicable closing date, of a fully executed Subscription
Agreement for each prospective purchaser as required by
Section 6(k) of this Agreement.
11. Indemnification.
(a) You and the Selling Agents shall indemnify and hold harmless
the Managing General Partner, the Partnership and its
attorneys against any losses, claims, damages or liabilities,
joint or several, to which they may become subject under the
Act, the Act of 1934, or otherwise insofar as the losses,
claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based on your agreements with the
Selling Agents or your breach of any of your duties and
obligations, representations, or warranties under the terms or
provisions of this Agreement, and you and the Selling Agents
shall reimburse them for any legal or other expenses
reasonably incurred in connection with investigating or
defending the losses, claims, damages, liabilities, or
actions.
(b) The Managing General Partner shall indemnify and hold you and
the Selling Agents harmless against any losses, claims,
damages or liabilities, joint or several, to which you and the
Selling Agents may become subject under the Act, the Act of
1934, or otherwise insofar as the losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or
are based on the Managing General Partner's breach of any of
its duties and obligations, representations, or warranties
under the terms or provisions of this Agreement, and the
Managing General Partner shall reimburse you and the Selling
Agents for any legal or other expenses reasonably incurred in
connection with investigating or defending the losses, claims,
damages, liabilities, or actions.
(c) The foregoing indemnity agreements shall extend on the same
terms and conditions to, and shall inure to the benefit of,
each person, if any, who controls each indemnified party
within the meaning of the Act.
(d) Promptly after receipt by an indemnified party of notice of
the commencement of any action, the indemnified party shall,
if a claim in respect of the action is to be made against an
indemnifying party under this Section, notify the indemnifying
party in writing of the commencement of the action; but the
omission to promptly notify the indemnifying party shall not
relieve the indemnifying party from any liability which it may
have to any indemnified party. If any action is brought
against an indemnified party, it shall notify the indemnifying
party of the commencement of the action, and the indemnifying
party shall be entitled to participate in, and, to the extent
that it wishes, jointly with any other indemnifying party
similarly notified, to assume the defense of the action, with
counsel satisfactory to the indemnified and indemnifying
parties. After the indemnified party has received notice from
the agreed on counsel that the defense of the action under
this paragraph has been assumed, the indemnifying party shall
not be responsible for any legal or other expenses
subsequently incurred by the indemnified party in connection
with the defense of the action other than with respect to the
agreed on counsel who assumed the defense of the action.
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Dealer-Manager Agreement
12. Representations and Agreements to Survive Delivery. All
representations, warranties, and agreements of the Managing General
Partner and you in this Agreement, including the indemnity agreements
contained in Section 11 of this Agreement, shall:
(a) survive the delivery, execution and closing of this Agreement;
and
(b) remain operative and in full force and effect regardless of
any investigation made by or on behalf of you or any person
who controls you within the meaning of the Act, by the
Managing General Partner, or any of its officers, directors,
or any person who controls the Managing General Partner within
the meaning of the Act, or any other indemnified party; and
(c) survive delivery of the Units.
13. Termination.
(a) You shall have the right to terminate this Agreement other
than the indemnification provisions of Section 11 of this
Agreement by giving notice as specified below any time at or
before a closing date:
(i) if the Managing General Partner has failed, refused,
or been unable at or before a closing date, to
perform any of its obligations under this Agreement;
or
(ii) there has occurred an event materially and adversely
affecting the value of the Units.
If you elect to terminate this Agreement other than the indemnification
provisions of Section 11 of this Agreement, then the Managing General
Partner shall be promptly notified by you by telephone, e-mail,
facsimile, or telegram, confirmed by letter.
(b) The Managing General Partner may terminate this Agreement
other than the indemnification provisions of Section 11 of
this Agreement, for any reason and at any time, by promptly
giving notice to you by telephone, e-mail, facsimile, or
telegram, confirmed by letter as specified below at or before
a closing date.
14. Notices.
(a) All notices or communications under this Agreement, except as
otherwise specifically provided, shall be in writing.
(b) Any notice or communication sent by the Managing General
Partner to you shall be mailed, delivered, or sent by
facsimile, e-mail or telegraph, and confirmed to you at X.X.
Xxx 000, 000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000.
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Dealer-Manager Agreement
(c) Any notice or communication sent by you to the Managing
General Partner or the Partnership shall be mailed, delivered,
or sent by facsimile, e-mail or telegraph, and confirmed at
000 Xxxxxx Xxxx, Xxxx Xxxxxxxx, Xxxxxxxxxxxx 00000.
15. Format of Checks/Escrow Agent. Pending receipt of the minimum
subscription proceeds of $1,000,000 as set forth in Section 4(d) of
this Agreement, the Managing General Partner and you and the Selling
Agents agree that all subscribers shall be instructed to make their
checks, drafts, or money orders payable solely to "Atlas Public
#11-2002 Ltd., Escrow Agent, PNC Bank," as agent for the Partnership,
and you agree and shall require the Selling Agents to agree to comply
with Rule 15c2-4 adopted under the Act of 1934.
If you receive a check, draft, or money order not conforming to the
foregoing instructions, then you shall return the check, draft, or
money order to the Selling Agent not later than the end of the next
business day following its receipt by you. The Selling Agent shall then
return the check, draft, or money order directly to the subscriber not
later than the end of the next business day following its receipt from
you. Checks, drafts, or money orders received by you or a Selling Agent
which conform to the foregoing instructions shall be transmitted by you
under Section 16 "Transmittal Procedures," below.
You represent that you have executed the Escrow Agreement for the
Partnership and agree that you are bound by the terms of the Escrow
Agreement executed by you, the Partnership, and the Managing General
Partner, a copy of which is attached to this Agreement as Exhibit "A."
16. Transmittal Procedures. You and each Selling Agent shall transmit
received investor funds in accordance with the following procedures.
For purposes of the following, the term "Selling Agent" shall also
include you as Dealer-Manager when you receive subscriptions from
investors.
(a) Pending receipt of the minimum subscription proceeds of
$1,000,000 as set forth in Section 4(d) of this Agreement, the
Selling Agents on receipt of any check, draft, and money order
from a subscriber shall promptly transmit the check, draft,
and money order and the original executed Subscription
Agreement to you, as Dealer-Manager, by the end of the next
business day following receipt of the check, draft, or money
order by the Selling Agent. By the end of the next business
day following your receipt of the check, draft, or money order
and the original executed Subscription Agreement, you, as
Dealer-Manager, shall transmit the check, draft, or money
order and a copy of the executed Subscription Agreement to the
Escrow Agent, and the original executed Subscription Agreement
and a copy of the check, draft, or money order to the Managing
General Partner.
(b) On receipt by you, as Dealer-Manager, of notice from the
Managing General Partner that the minimum subscription
proceeds of $1,000,000 as set forth in Section 4(d) of this
Agreement have been received, the Managing General Partner,
you, and the Selling Agents agree that all subscribers then
may be instructed, in the Managing General Partner's sole
discretion, to make their checks, drafts, or money orders
payable solely to "Atlas Public #11-2002 Ltd."
Thereafter, the Selling Agents shall promptly transmit any and
all checks, drafts, and money orders received from subscribers
and the original executed Subscription Agreement to you, as
Dealer-Manager, by the end of the next business day following
receipt of the check, draft, or money order by the Selling
Agent. By the end of the next business day following your
receipt of the check, draft, or money order and the original
executed Subscription Agreement, you, as Dealer-Manager, shall
transmit the check, draft or money order and the original
executed Subscription Agreement to the Managing General
Partner.
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Dealer-Manager Agreement
17. Parties. This Agreement shall inure to the benefit of and be binding on
you, the Managing General Partner, and any respective successors and
assigns. This Agreement shall also inure to the benefit of the
indemnified parties, their successors and assigns. This Agreement is
intended to be and is for the sole and exclusive benefit of the parties
to this Agreement, including the Partnership, and their respective
successors and assigns, and the indemnified parties and their
successors and assigns, and for the benefit of no other person. No
other person shall have any legal or equitable right, remedy or claim
under or in respect of this Agreement. No purchaser of any of the Units
from you or a Selling Agent shall be construed a successor or assign
merely by reason of the purchase.
18. Relationship. This Agreement shall not constitute you a partner of the
Managing General Partner, the Partnership, or any general partner of
the Partnership, nor render the Managing General Partner, the
Partnership, or any general partner of the Partnership liable for any
of your obligations.
19. Effective Date. This Agreement is made effective between the parties as
of the date accepted by you as indicated by your signature to this
Agreement.
20. Entire Agreement, Waiver.
(a) This Agreement constitutes the entire agreement between the
Managing General Partner and you, and shall not be amended or
modified in any way except by subsequent agreement executed in
writing. Neither party to this Agreement shall be liable or
bound to the other by any agreement except as specifically set
forth in this Agreement.
(b) The Managing General Partner and you may waive, but only in
writing, any term, condition, or requirement under this
Agreement that is intended for its benefit. However, any
written waiver of any term or condition of this Agreement
shall not operate as a waiver of any other breach of that term
or condition of this Agreement. Also, any failure to enforce
any provision of this Agreement shall not operate as a waiver
of that provision or any other provision of this Agreement.
21. Complaints. The Managing General Partner and you, as Dealer-Manager,
agree as follows:
(a) to notify the other if either receives an investor complaint
in connection with the offer or sale of Units by you or a
Selling Agent;
(b) to cooperate with the other in resolving the complaint; and
(c) to cooperate in any regulatory examination of the other to the
extent it involves this Agreement or the offer or sale of
Units by you or a Selling Agent.
22. Privacy. The Managing General Partner and you each acknowledge that
certain information made available to the other under this Agreement
may be deemed nonpublic personal information under the
Xxxxx-Xxxxx-Xxxxxx Act, other federal or state privacy laws (as
amended), and the rules and regulations promulgated thereunder, which
are referred to collectively, as the "Privacy Laws." The Managing
General Partner and you agree as follows:
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Dealer-Manager Agreement
(a) not to disclose or use the information except as required to
carry out each party's respective duties under this Agreement
or as otherwise permitted by law in the ordinary course of
business;
(b) to establish and maintain procedures reasonably designated to
assure the security and privacy of all the information; and
(c) to cooperate with the other and provide reasonable assistance
in ensuring compliance with the Privacy Laws to the extent
applicable to either or both the Managing General Partner and
you.
Very truly yours,
MANAGING GENERAL PARTNER
ATLAS RESOURCES, INC.,
a Pennsylvania corporation
, 2002 By:
---------------------- ---------------------------------
Date Xxxx X. Xxxxxxxxx, Senior Vice
President - Direct
Participation Programs
PARTNERSHIP
ATLAS AMERICA PUBLIC #11-2002 LTD.
By: Atlas Resources, Inc.,
Managing General Partner
, 2002 By:
---------------------- ---------------------------------
Date Xxxx X. Xxxxxxxxx, Senior Vice
President - Direct
Participation Programs
DEALER-MANAGER
ANTHEM SECURITIES, INC.,
a Pennsylvania corporation
, 2002 By:
---------------------- ---------------------------------
Date Xxxx X. Xxxxxx, President
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Dealer-Manager Agreement
EXHIBIT "A"
ATLAS AMERICA PUBLIC #11-2002 LTD.
ESCROW AGREEMENT
THIS AGREEMENT is made to be effective as of June ______, 2002, by and among
Atlas Resources, Inc., a Pennsylvania corporation (the "Managing General
Partner"), Anthem Securities, Inc., a Pennsylvania corporation ("Anthem"), Xxxxx
Funding, Inc., a Pennsylvania corporation ("Xxxxx Funding"), collectively Anthem
and Xxxxx Funding are referred to as the "Dealer-Manager," Atlas America Public
#11-2002 Ltd., a Delaware limited partnership (the "Partnership") and PNC Bank,
Pittsburgh, Pennsylvania, as escrow agent (the "Escrow Agent").
WITNESSETH:
WHEREAS, the Managing General Partner intends to offer publicly for sale
to qualified investors (the "Investors") up to 4,000 limited partnership
interests in the Partnership (the "Units").
WHEREAS, each Investor will be required to pay his subscription in full
on subscribing by check, draft, or money order (the "Subscription Proceeds").
WHEREAS, the cost per Unit will be $10,000 subject to certain discounts
of up to10.5% ($1,050 per Unit) for sales to the Managing General Partner, its
officers, directors and affiliates, registered investment advisors and their
clients, Selling Agents and their registered representatives and principals, and
investors who buy Units through the officers and directors of the Managing
General Partner. Also, the Managing General Partner, in its discretion, may
accept one-half Unit ($5,000) subscriptions, with larger subscriptions permitted
in $1,000 increments.
WHEREAS, the Managing General Partner and Anthem have executed an
agreement ("Anthem Dealer-Manager Agreement") under which Anthem will solicit
subscriptions for Units in all states other than Minnesota and New Hampshire on
a "best efforts" "all or none" basis for Subscription Proceeds of $1,000,000 and
on a "best efforts" basis for the remaining Units on behalf of the Managing
General Partner and the Partnership and under which Anthem has been authorized
to select certain members in good standing of the National Association of
Securities Dealers, Inc. ("NASD") to participate in the offering of the Units
("Selling Agents").
WHEREAS, the Managing General Partner and Xxxxx Funding have executed an
agreement ("Xxxxx Funding Dealer-Manager Agreement") under which Xxxxx Funding
will solicit subscriptions for Units in the states of Minnesota and New
Hampshire on a "best efforts" "all or none" basis for Subscription Proceeds of
$1,000,000 and on a "best efforts" basis for the remaining Units on behalf of
the Managing General Partner and the Partnership and under which Xxxxx Funding
has been authorized to select certain members in good standing of the NASD to
participate in the offering of the Units ("Selling Agents").
WHEREAS, the Anthem Dealer-Manager Agreement and the Xxxxx Funding
Dealer-Manager Agreement, collectively referred to as the "Dealer-Manager
Agreement," provide for compensation to the Dealer-Manager to participate in the
offering of the Units, subject to the discounts set forth above for certain
Investors, which compensation includes, but is not limited to, for each Unit
sold:
1
o a 2.5% Dealer-Manager fee;
o a 7% sales commission;
o a .5% nonaccountable reimbursement of marketing expenses; and
o a .5% reimbursement of the Selling Agents' bona fide
accountable due diligence expenses;
all or a portion of which will be reallowed to the Selling Agents and
wholesalers.
WHEREAS, under the terms of the Dealer-Manager Agreement the Subscription
Proceeds are required to be held in escrow subject to the receipt and acceptance
by the Managing General Partner of the minimum Subscription Proceeds of
$1,000,000, excluding any optional subscription by the Managing General Partner,
its officers, directors, and Affiliates.
WHEREAS, the Units may also be offered and sold by the officers and
directors of the Managing General Partner without receiving a sales commission
or other compensation on their sales.
WHEREAS, no subscriptions to the Partnership will be accepted after the
"Offering Termination Date," which is the first to occur of either:
o receipt of the maximum Subscription Proceeds of $40,000,000;
or
o December 31, 2002.
WHEREAS, to facilitate compliance with the terms of the Dealer-Manager
Agreement and Rule 15c2-4 adopted under the Securities Exchange Act of 1934, the
Managing General Partner and the Dealer-Manager desire to have the Subscription
Proceeds deposited with the Escrow Agent and the Escrow Agent agrees to hold the
Subscription Proceeds under the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained in this Agreement, the parties to this Agreement, intending to be
legally bound, agree as follows:
1. Appointment of Escrow Agent. The Managing General Partner, the
Partnership, and the Dealer-Manager appoint the Escrow Agent as the
escrow agent to receive and to hold the Subscription Proceeds deposited
with the Escrow Agent by the Dealer-Manager and the Managing General
Partner under this Agreement, and the Escrow Agent agrees to serve in
this capacity during the term and based on the provisions of this
Agreement.
2. Deposit of Subscription Proceeds. Pending receipt of the minimum
Subscription Proceeds of $1,000,000, the Dealer-Manager and the
Managing General Partner shall deposit the Subscription Proceeds of
each Investor to whom they sell Units with the Escrow Agent and shall
deliver to the Escrow Agent a copy of the Subscription Agreement of the
Investor. Payment for each subscription for Units shall be in the form
of a check made payable to "Atlas America Public #11-2002 Ltd., Escrow
Agent, PNC Bank." The Escrow Agent shall deliver a receipt to either:
(a) Anthem and the Managing General Partner for each deposit of
Subscription Proceeds made under this Agreement by Anthem;
(b) Xxxxx Funding and the Managing General Partner for each
deposit of Subscription Proceeds made under this Agreement by
Xxxxx Funding; or
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ESCROW AGREEMENT
(c) the Managing General Partner for each deposit of Subscription
Proceeds made under this Agreement by the Managing General
Partner.
3. Investment of Subscription Proceeds. The Subscription Proceeds shall be
deposited in an interest bearing account maintained by the Escrow
Agent. Subscription Proceeds may be temporarily invested by the Escrow
Agent only in income producing short-term, highly liquid investments
secured by the United States government where there is appropriate
safety of principal, such as U.S. Treasury Bills. The interest earned
shall be added to the Subscription Proceeds and disbursed in accordance
with the provisions of Paragraph 4 or 5 of this Agreement, as the case
may be.
4. Distribution of Subscription Proceeds. If the Escrow Agent:
(a) receives written notice from an authorized officer of the
Managing General Partner that at least the minimum
Subscription Proceeds of $1,000,000 have been received and
accepted by the Managing General Partner; and
(b) determines that Subscription Proceeds for at least $1,000,000
have cleared the banking system and are good;
then the Escrow Agent shall promptly release and distribute to the
Managing General Partner the escrowed Subscription Proceeds which have
cleared the banking system and are good plus any interest paid and
investment income earned on the Subscription Proceeds while held by the
Escrow Agent in the escrow account.
Any remaining Subscription Proceeds, plus any interest paid and
investment income earned on the Subscription Proceeds while held by the
Escrow Agent in the escrow account, shall be promptly released and
distributed to the Managing General Partner by the Escrow Agent as the
Subscription Proceeds clear the banking system and become good.
5. Separate Partnership Account. During the continuation of the offering
after the Partnership is funded with cleared Subscription Proceeds of
at least $1,000,000 and the Escrow Agent receives the notice described
in Paragraph 4 of this Agreement, and before the Offering Termination
Date, any additional Subscription Proceeds may be deposited by the
Dealer-Manager and the Managing General Partner directly in a separate
Partnership account which shall not be subject to the terms of this
Agreement.
6. Distributions to Subscribers.
(a) If the Partnership is not funded as contemplated because less
than the minimum Subscription Proceeds of $1,000,000 have been
received and accepted by the Managing General Partner by
twelve p.m. (noon), local time, on the Offering Termination
Date, or for any other reason, then the Managing General
Partner shall notify the Escrow Agent, and the Escrow Agent
promptly shall distribute to each Investor a refund check made
payable to the Investor in an amount equal to the Subscription
Proceeds of the Investor, plus any interest paid or investment
income earned on the Investor's Subscription Proceeds while
held by the Escrow Agent in the escrow account.
(b) If a subscription for Units submitted by an Investor is
rejected by the Managing General Partner for any reason after
the Subscription Proceeds relating to the subscription have
been deposited with the Escrow Agent, then the Managing
General Partner promptly shall notify the Escrow Agent of the
rejection, and the Escrow Agent shall promptly distribute to
the Investor a refund check made payable to the Investor in an
amount equal to the Subscription Proceeds of the Investor,
plus any interest paid or investment income earned on the
Investor's Subscription Proceeds while held by the Escrow
Agent in the escrow account.
3
ESCROW AGREEMENT
7. Compensation and Expenses of Escrow Agent. The Managing General Partner
shall be solely responsible for and shall pay the compensation of the
Escrow Agent for its services under this Agreement, as provided in
Appendix 1 to this Agreement and made a part of this Agreement, and the
charges, expenses (including any reasonable attorneys' fees), and other
out-of-pocket expenses incurred by the Escrow Agent in connection with
the administration of the provisions of this Agreement. The Escrow
Agent shall have no lien on the Subscription Proceeds deposited in the
escrow account unless and until the Partnership is funded with cleared
Subscription Proceeds of at least $1,000,000 and the Escrow Agent
receives the notice described in Paragraph 4 of this Agreement, at
which time the Escrow Agent shall have, and is granted, a prior lien on
any property, cash, or assets held under this Agreement, with respect
to its unpaid compensation and nonreimbursed expenses, superior to the
interests of any other persons or entities.
8. Duties of Escrow Agent. The Escrow Agent shall not be obligated to
accept any notice, make any delivery, or take any other action under
this Agreement unless the notice or request or demand for delivery or
other action is in writing and given or made by the party given the
right or charged with the obligation under this Agreement to give the
notice or to make the request or demand. In no event shall the Escrow
Agent be obligated to accept any notice, request, or demand from anyone
other than the Managing General Partner or the Dealer-Manager.
9. Liability of Escrow Agent. The Escrow Agent shall not be liable for any
damages, or have any obligations other than the duties prescribed in
this Agreement in carrying out or executing the purposes and intent of
this Agreement. However, nothing in this Agreement shall relieve the
Escrow Agent from liability arising out of its own willful misconduct
or gross negligence. The Escrow Agent's duties and obligations under
this Agreement shall be entirely administrative and not discretionary.
The Escrow Agent shall not be liable to any party to this Agreement or
to any third-party as a result of any action or omission taken or made
by the Escrow Agent in good faith. The parties to this Agreement will
indemnify the Escrow Agent, hold the Escrow Agent harmless, and
reimburse the Escrow Agent from, against and for, any and all
liabilities, costs, fees and expenses (including reasonable attorney's
fees) the Escrow Agent may suffer or incur by reason of its execution
and performance of this Agreement. If any legal questions arise
concerning the Escrow Agent's duties and obligations under this
Agreement, then the Escrow Agent may consult with its counsel and rely
without liability on written opinions given to it by its counsel.
The Escrow Agent shall be protected in acting on any written notice,
request, waiver, consent, authorization, or other paper or document
which the Escrow Agent, in good faith, believes to be genuine and what
it purports to be.
If there is any disagreement between any of the parties to this
Agreement, or between them or any other person, resulting in adverse
claims or demands being made in connection with this Agreement, or if
the Escrow Agent, in good faith, is in doubt as to what action it
should take under this Agreement, then the Escrow Agent may, at its
option, refuse to comply with any claims or demands on it or refuse to
take any other action under this Agreement, so long as the disagreement
continues or the doubt exists. In any such event, the Escrow Agent
shall not be or become liable in any way or to any person for its
failure or refusal to act and the Escrow Agent shall be entitled to
continue to so refrain from acting until the dispute is resolved by the
parties involved.
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ESCROW AGREEMENT
PNC Bank is acting solely as the Escrow Agent and is not a party to,
nor has it reviewed or approved any agreement or matter of background
related to this Agreement, other than this Agreement itself, and has
assumed, without investigation, the authority of the individuals
executing this Agreement to be so authorized on behalf of the party or
parties involved.
10. Resignation or Removal of Escrow Agent. The Escrow Agent may resign as
such after giving thirty days' prior written notice to the other
parties to this Agreement. Similarly, the Escrow Agent may be removed
and replaced after giving thirty days' prior written notice to the
Escrow Agent by the other parties to this Agreement. In either event,
the duties of the Escrow Agent shall terminate thirty days after the
date of the notice (or as of an earlier date as may be mutually
agreeable); and the Escrow Agent shall then deliver the balance of the
Subscription Proceeds (and any interest paid or investment income
earned thereon while held by the Escrow Agent in the escrow account) in
its possession to a successor escrow agent appointed by the other
parties to this Agreement as evidenced by a written notice filed with
the Escrow Agent.
If the other parties to this Agreement are unable to agree on a
successor escrow agent or fail to appoint a successor escrow agent
before the expiration of thirty days following the date of the notice
of the Escrow Agent's resignation or removal, then the Escrow Agent may
petition any court of competent jurisdiction for the appointment of a
successor escrow agent or other appropriate relief. Any resulting
appointment shall be binding on all of the parties to this Agreement.
On acknowledgment by any successor escrow agent of the receipt of the
then remaining balance of the Subscription Proceeds (and any interest
paid or investment income earned thereon while held by the Escrow Agent
in the escrow account), the Escrow Agent shall be fully released and
relieved of all duties, responsibilities, and obligations under this
Agreement.
11. Termination. This Agreement shall terminate and the Escrow Agent shall
have no further obligation with respect to this Agreement after the
distribution of all Subscription Proceeds (and any interest paid or
investment income earned thereon while held by the Escrow Agent in the
escrow account) as contemplated by this Agreement or on the written
consent of all the parties to this Agreement.
12. Notice. Any notices or instructions, or both, to be given under this
Agreement shall be validly given if set forth in writing and mailed by
certified mail, return receipt requested, as follows:
If to the Escrow Agent:
PNC Bank
----------------------------------
----------------------------------
Attention:
-----------------------
Phone:
---------------------------
Facsimile:
-----------------------
5
ESCROW AGREEMENT
If to the Managing General Partner:
Atlas Resources, Inc.
000 Xxxxxx Xxxx
X.X. Xxx 000
Xxxx Xxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
If to Anthem:
Anthem Securities, Inc.
000 Xxxxxx Xxxx
X.X. Xxx 000
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Phone: (000) 000-0000
Facsimile: (000) 000-0000
If to Xxxxx Funding:
Xxxxx Funding, Inc.
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Xx.
Phone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may designate any other address to which notices and
instructions shall be sent by notice duly given in accordance with this
Agreement.
13. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
(b) This Agreement shall be binding on and shall inure to the
benefit of the undersigned and their respective successors and
assigns.
(c) This Agreement may be executed in multiple copies, each
executed copy to serve as an original.
6
ESCROW AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the day and year first above written.
PNC BANK
As Escrow Agent
By:
----------------------------------
(Authorized Officer)
ATLAS RESOURCES, INC.
A Pennsylvania corporation
By:
----------------------------------
Xxxx X. Xxxxxxxxx, Senior Vice
President - Direct
Participation Programs
ANTHEM SECURITIES, INC.
A Pennsylvania corporation
By:
----------------------------------
Xxxx X. Xxxxxx, President
XXXXX FUNDING, INC.
A Pennsylvania corporation
By:
----------------------------------
Xxxxxxx X. Xxxxx, Xx., President
ATLAS AMERICA PUBLIC #11-2002 LTD.
By: ATLAS RESOURCES, INC.
Managing General Partner
By:
----------------------------------
Xxxx X. Xxxxxxxxx, Senior Vice
President - Direct
Participation Programs
7
ESCROW AGREEMENT
APPENDIX I TO ESCROW AGREEMENT
Compensation for Services of Escrow Agent
Escrow Agent annual fee per year or any part thereof $____________
8
ESCROW AGREEMENT
EXHIBIT "B"
SELLING AGENT AGREEMENT
WITH ANTHEM SECURITIES, INC.
TO:
-----------------------------------
RE: ATLAS AMERICA PUBLIC #11-2002 LTD.
Gentlemen:
Atlas Resources, Inc. is the Managing General Partner in a Delaware
limited partnership named Atlas America Public #11-2002 Ltd., which is referred
to as the "Partnership." The Units in the Partnership, which are referred to as
the "Units," and the offering are described in the enclosed Prospectus dated
__________________, 2002, which is referred to as the "Prospectus." Prospectuses
relating to the Units have been furnished to you with this Agreement.
Our firm, Anthem Securities, Inc., which is referred to as the
"Dealer-Manager," has entered into a Dealer-Manager Agreement for sales in all
states other than Minnesota and New Hampshire, a copy of which has been
furnished to you and is incorporated in this Agreement by reference, with the
Managing General Partner and the Partnership under which the Dealer-Manager has
agreed to form a group of NASD member firms, which are referred to as the
"Selling Agents." The Selling Agents will obtain subscriptions for Units in all
states other than:
o Minnesota; and
o New Hampshire
on a "best efforts" basis under the Securities Act of 1933, as amended, which is
referred to as the "Act" and the provisions of the Prospectus.
You are invited to become one of the Selling Agents on a non-exclusive
basis. By your acceptance below you agree to act in that capacity and to use
your best efforts, in accordance with the terms and conditions of this
Agreement, to solicit subscriptions in all states other than:
o Minnesota; and
o New Hampshire.
This Agreement, however, shall not be construed to prohibit your participation
as a selling agent in Minnesota and New Hampshire under a duly executed selling
agent agreement entered into by you and any other authorized "Dealer-Manager"
for the Partnership.
1. Representations and Warranties of Selling Agent. You represent and
warrant to the Dealer-Manager that:
(a) You are a corporation duly organized, validly existing, and in
good standing under the laws of the state of your formation or
of any jurisdiction to the laws of which you are subject, with
all requisite power and authority to enter into this Agreement
and to carry out your obligations under this Agreement.
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Anthem Securities, Inc.
Selling Agent Agreement
(b) This Agreement will be duly authorized, executed, and
delivered by you and will be a valid and binding agreement on
your part in accordance with its terms.
(c) The consummation of the transactions contemplated by this
Agreement and the Prospectus will not result in the following:
(i) any breach of any of the terms or conditions of, or
constitute a default under your Articles of
Incorporation or Bylaws, or any other indenture,
agreement, or other instrument to which you are a
party; or
(ii) any violation of any order applicable to you of any
court or any federal or state regulatory body or
administrative agency having jurisdiction over you or
over your affiliates.
(d) You are duly registered under the provisions of the Securities
Exchange Act of 1934, which is referred to as the "Act of
1934," as a dealer, and you are a member in good standing of
the NASD. You are duly registered as a broker/dealer in the
states where you are required to be registered in order to
carry out your obligations as contemplated by this Agreement
and the Prospectus. You agree to maintain all the foregoing
registrations in good standing throughout the term of the
offer and sale of the Units, and you agree to comply with all
statutes and other requirements applicable to you as a
broker/dealer under those registrations.
(e) Pursuant to your appointment as a Selling Agent, you shall
comply with all the provisions of the Act, insofar as the Act
applies to your activities under this Agreement. Further, you
shall not engage in any activity which would cause the offer
and/or sale of the Units not to comply with the Act, the Act
of 1934, the applicable rules and regulations of the
Securities and Exchange Commission, which is referred to as
the "Commission," the applicable state securities laws and
regulations, this Agreement, and the NASD Conduct Rules
including Rules 2420, 2730, 2740, 2750, and 2810(b)(2) and
(b)(3), which provide as follows:
Sec. (b)(2)
Suitability
(A) A member or person associated with a member shall not
underwrite or participate in a public offering of a
direct participation program unless standards of
suitability have been established by the program for
participants therein and such standards are fully
disclosed in the prospectus and are consistent with
the provisions of subparagraph (B) of this section.
(B) In recommending to a participant the purchase, sale
or exchange of an interest in a direct participation
program, a member or person associated with a member
shall:
(i) have reasonable grounds to believe, on the
basis of information obtained from the
participant concerning his investment
objectives, other investments, financial
situation and needs, and any other
information known by the member or
associated person, that:
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Anthem Securities, Inc.
Selling Agent Agreement
(a) the participant is or will be in a
financial position appropriate to
enable him to realize to a
significant extent the benefits
described in the prospectus,
including the tax benefits where
they are a significant aspect of
the program;
(b) the participant has a fair market
net worth sufficient to sustain the
risks inherent in the program,
including loss of investment and
lack of liquidity; and
(c) the program is otherwise suitable
for the participant; and
(ii) maintain in the files of the member
documents disclosing the basis upon which
the determination of suitability was reached
as to each participant.
(C) Notwithstanding the provisions of subparagraphs (A)
and (B) hereof, no member shall execute any
transaction in a direct participation program in a
discretionary account without prior written approval
of the transaction by the customer.
Sec. (b)(3)
Disclosure
(A) Prior to participating in a public offering of a
direct participation program, a member or person
associated with a member shall have reasonable
grounds to believe, based on information made
available to him by the sponsor through a prospectus
or other materials, that all material facts are
adequately and accurately disclosed and provide a
basis for evaluating the program.
(B) In determining the adequacy of disclosed facts
pursuant to subparagraph (A) hereof, a member or
person associated with a member shall obtain
information on material facts relating at a minimum
to the following, if relevant in view of the nature
of the program:
(i) items of compensation;
(ii) physical properties;
(iii) tax aspects;
(iv) financial stability and experience of the
sponsor;
(v) the program's conflicts and risk factors;
and
(vi) appraisals and other pertinent reports.
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Anthem Securities, Inc.
Selling Agent Agreement
(C) For purposes of subparagraphs (A) and (B)
hereof, a member or person associated with a
member may rely upon the results of an
inquiry conducted by another member or
members, provided that:
(i) the member or person associated
with a member has reasonable
grounds to believe that such
inquiry was conducted with due
care;
(ii) the results of the inquiry were
provided to the member or person
associated with a member with the
consent of the member or members
conducting or directing the
inquiry; and
(iii) no member that participated in the
inquiry is a sponsor of the program
or an affiliate of such sponsor.
(D) Prior to executing a purchase transaction in
a direct participation program, a member or
person associated with a member shall inform
the prospective participant of all pertinent
facts relating to the liquidity and
marketability of the program during the term
of investment.
(f) You shall not offer or sell the Units in any state until you
have been advised in writing by the Managing General Partner,
or the Managing General Partner's special counsel, that the
offer or sale of the Units:
(1) has been qualified in the state;
(2) is exempt from the qualification
requirements imposed by the state; or
(3) the qualification is otherwise not required.
(g) You have received copies of the Prospectus relating to the
Units and you have relied only on the statements contained in
the Prospectus and not on any other statements whatsoever,
either written or oral, with respect to the details of the
offering of Units.
(h) You agree that you shall not place any advertisement or other
solicitation with respect to the Units (including without
limitation any material for use in any newspaper, magazine,
radio or television commercial, telephone recording, motion
picture, or other public media) without the prior written
approval of the Managing General Partner, and without the
prior written approval of the form and content thereof by the
Commission, the NASD and the securities authorities of the
states where such advertisement or solicitation is to be
circulated. Any such advertisements or solicitations shall be
at your expense.
(i) If a supplement or amendment to the Prospectus is prepared and
delivered to you by the Managing General Partner or the
Dealer-Manager, you agree as follows:
(i) to distribute each supplement or amendment to the
Prospectus to every person who has previously
received a copy of the Prospectus from you; and
(ii) to include each supplement or amendment in all future
deliveries of any Prospectus.
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Anthem Securities, Inc.
Selling Agent Agreement
(j) In connection with any offer or sale of the Units, you agree
to the following:
(i) to comply in all respects with statements set forth
in the Prospectus, the Partnership Agreement, and any
supplements or amendments to the Prospectus;
(ii) not to make any statement inconsistent with the
statements in the Prospectus, the Partnership
Agreement, and any supplements or amendments to the
Prospectus;
(iii) not to make any untrue or misleading statements of a
material fact in connection with the Units; and
(iv) not to provide any written information, statements,
or sales materials other than the Prospectus, the
Sales Literature, and any supplements or amendments
to the Prospectus unless approved in writing by the
Managing General Partner.
(k) You agree to use your best efforts in the solicitation and
sale of the Units, including that the prospective purchasers
meet the suitability requirements set forth in the Prospectus
and the Subscription Agreement and the prospective purchasers
properly complete and execute the Subscription Agreement ,
which has been provided as Exhibit (I-B) to the Partnership
Agreement, Exhibit (A) of the Prospectus, together with any
additional forms provided in any supplement or amendment to
the Prospectus, or otherwise provided to you by the Managing
General Partner or the Dealer-Manager to be completed by
prospective purchasers.
The Managing General Partner shall have the right to reject
any subscription at any time for any reason without liability
to it. Subscription funds and executed subscription packets
shall be transmitted as set forth in Section 11 of this
Agreement.
(l) You shall comply with the requirements of Rules 2810(b)(2)(B)
and (b)(3)(D) of the NASD Conduct Rules.
(m) You agree and covenant that the representations and warranties
you make in this Agreement are and shall be true and correct
at the applicable closing date, and you shall and have
fulfilled all your obligations under this Agreement at the
applicable closing date.
2. Commissions.
(a) Subject to the receipt of the minimum required subscription
proceeds of $1,000,000 as described in Section 4(d) of the
Dealer-Manager Agreement, and the discounts set forth in
Section 4(c) of the Dealer-Manager Agreement for sales to the
following:
(i) the Managing General Partner, its officers, directors
and affiliates;
(ii) registered investment advisors and their clients;
(iii) Selling Agents and their registered representatives
and principals; and
(iv) investors who buy Units through the officers or
directors of the Managing General Partner;
5
Anthem Securities, Inc.
Selling Agent Agreement
the Dealer-Manager is entitled to receive from the Managing
General Partner a 7% Sales Commission, a .5% nonaccountable
marketing expense reimbursement, and a .5% reimbursement of
the Selling Agents' bona fide accountable due diligence
expenses per Unit, based on the aggregate amount of all Unit
subscriptions to the Partnership secured by the Dealer-Manager
or the selling group formed by the Dealer-Manager and accepted
by the Managing General Partner.
Subject to the terms and conditions set forth in this
Agreement, including the Dealer-Manager's receipt from you of
the documentation required of you in Section 1 of this
Agreement, the Dealer-Manager agrees to pay you a 7% Sales
Commission, a .5% reimbursement of your bona fide accountable
due diligence expenses and, subject to the performance by you
of your obligations under Appendix I to this Agreement, which
is incorporated in this Agreement by reference, a .5%
nonaccountable marketing expense reimbursement per Unit on
Units sold by you and accepted by the Managing General
Partner.
Your Sales Commissions, the .5% reimbursement of your bona
fide accountable due diligence expenses, and the .5%
nonaccountable marketing expense reimbursement, shall be paid
to you within seven business days after the Dealer-Manager has
received the Sales Commissions, the .5% reimbursement of your
bona fide accountable due diligence expenses, and the .5%
nonaccountable marketing expense reimbursement on the
subscriptions.
The Dealer-Manager is entitled to receive its Sales
Commissions, the .5% reimbursement of your bona fide
accountable due diligence expenses, and the .5% nonaccountable
marketing expense reimbursement within five business days
after the conditions described in Section 4(e) of the
Dealer-Manager Agreement are satisfied and approximately every
two weeks thereafter until the Offering Termination Date,
which is the earlier of:
(i) receipt of the maximum subscriptions of $40,000,000;
or
(ii) December 31, 2002;
as described in Section 1 of the Dealer-Manager Agreement. The
balance shall be paid to the Dealer-Manager within fourteen
business days after the Offering Termination Date.
(b) Notwithstanding anything in this Agreement to the contrary,
you agree to waive payment of your Sales Commissions, the .5%
nonaccountable marketing expense reimbursement, and the .5%
reimbursement of your bona fide accountable due diligence
expenses as set forth above in (a) above, until the
Dealer-Manager is in receipt of the related amounts owed to it
under the Dealer-Manager Agreement, and the Dealer-Manager's
liability to pay your compensation under this Agreement shall
be limited solely to the proceeds of the related amounts owed
to it under the Dealer-Manager Agreement.
(c) As provided in Section 4(d) of the Dealer-Manager Agreement,
the Partnership shall not begin operations unless it receives
subscription proceeds for at least $1,000,000 by December 31,
2002. If this amount is not secured by this date, then nothing
shall be payable to you and all funds advanced by subscribers
for Units shall be returned to them with interest earned, if
any.
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Anthem Securities, Inc.
Selling Agent Agreement
3. Blue Sky Qualification. The Managing General Partner may elect not to
qualify or register Units in any state or jurisdiction in which it
deems the qualification or registration is not warranted for any reason
in its sole discretion. On application to the Dealer-Manager you will
be informed as to the states and jurisdictions in which the Units have
been qualified for sale or are exempt under the respective securities
or "Blue Sky" laws of those states and jurisdictions.
Notwithstanding the foregoing, the Dealer-Manager, the Partnership, and
the Managing General Partner have not assumed and will not assume any
obligation or responsibility as to your right to act as a broker/dealer
with respect to the Units in any state or jurisdiction.
4. Expense of Sale. The expenses in connection with the offer and sale of
the Units shall be payable as set forth below.
(a) The Dealer-Manager shall pay all expenses incident to the
performance of its obligations under this Agreement, including
the fees and expenses of its attorneys and accountants, even
if this offering is not successfully completed.
(b) You shall pay all expenses incident to the performance of your
obligations under this Agreement, including the fees and
expenses of your own counsel and accountants, even if this
offering is not successfully completed.
5. Conditions of Your Duties. Your obligations under this Agreement, as of
the date of this Agreement and at the applicable closing date, shall be
subject to the following:
(a) the performance by the Dealer-Manager of its obligations under
this Agreement; and
(b) the performance by the Managing General Partner of its
obligations under the Dealer-Manager Agreement.
6. Conditions of Dealer-Manager's Duties. The Dealer-Manager's obligations
under this Agreement, including the duty to pay compensation to you as
set forth in Section 2 of this Agreement, shall be subject to the
following:
(a) the accuracy, as of the date of this Agreement and at the
applicable closing date as if made at the applicable closing
date, of your representations and warranties made in this
Agreement;
(b) the performance by you of your obligations under this
Agreement; and
(c) the Dealer-Manager's receipt, at or before the applicable
closing date, of a fully executed Subscription Agreement for
each prospective purchaser as required by Section 1(k) of this
Agreement.
7. Indemnification.
(a) You shall indemnify and hold harmless the Dealer-Manager, the
Managing General Partner, the Partnership and its attorneys
against any losses, claims, damages or liabilities, joint or
several, to which they may become subject under the Act, the
Act of 1934, or otherwise insofar as the losses, claims,
damages, or liabilities (or actions in respect thereof) arise
out of or are based on your breach of any of your duties and
obligations, representations, or warranties under the terms or
provisions of this Agreement, and you shall reimburse them for
any legal or other expenses reasonably incurred in connection
with investigating or defending the losses, claims, damages,
liabilities, or actions.
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Anthem Securities, Inc.
Selling Agent Agreement
(b) The Dealer-Manager shall indemnify and hold you harmless
against any losses, claims, damages, or liabilities, joint or
several, to which you may become subject under the Act, the
Act of 1934, or otherwise insofar as the losses, claims,
damages, or liabilities (or actions in respect thereof) arise
out of or are based on the Dealer-Manager's breach of any of
its duties and obligations, representations, or warranties
under the terms or provisions of this Agreement, and the
Dealer-Manager shall reimburse you for any legal or other
expenses reasonably incurred in connection with investigating
or defending the losses, claims, damages, liabilities, or
actions.
(c) The foregoing indemnity agreements shall extend on the same
terms and conditions to, and shall inure to the benefit of,
each person, if any, who controls each indemnified party
within the meaning of the Act.
(d) Promptly after receipt by an indemnified party of notice of
the commencement of any action, the indemnified party shall,
if a claim in respect of the action is to be made against the
indemnifying party under this Section, notify the indemnifying
party in writing of the commencement of the action; but the
omission to promptly notify the indemnifying party shall not
relieve the indemnifying party from any liability which it may
have to the indemnified party. If any action is brought
against an indemnified party, it shall notify the indemnifying
party of the commencement of the action, and the indemnifying
party shall be entitled to participate in, and, to the extent
that it wishes, jointly with any other indemnifying party
similarly notified, to assume the defense of the action, with
counsel satisfactory to the indemnified and indemnifying
parties. After the indemnified party has received notice from
the agreed on counsel that the defense of the action under
this paragraph has been assumed, the indemnifying party shall
not be responsible for any legal or other expenses
subsequently incurred by the indemnified party in connection
with the defense of the action other than with respect to the
agreed on counsel who assumed the defense of the action.
8. Representations and Agreements to Survive Delivery. All
representations, warranties, and agreements of the Dealer-Manager and
you in this Agreement, including the indemnity agreements contained in
Section 7 of this Agreement, shall:
(a) survive the delivery, execution and closing of this Agreement;
(b) remain operative and in full force and effect regardless of
any investigation made by or on behalf of you or any person
who controls you within the meaning of the Act, by the
Dealer-Manager, or any of its officers, directors or any
person who controls the Dealer-Manager within the meaning of
the Act, or any other indemnified party; and
(c) survive delivery of the Units.
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Selling Agent Agreement
9. Termination.
(a) You shall have the right to terminate this Agreement other
than the indemnification provisions of Section 7 of this
Agreement by giving notice as specified in Section 16 of this
Agreement any time at or before a closing date:
(i) if the Dealer-Manager has failed, refused, or been
unable at or before a closing date, to perform any of
its obligations under this Agreement; or
(ii) there has occurred an event materially and adversely
affecting the value of the Units.
If you elect to terminate this Agreement other than the indemnification
provisions of Section 7 of this Agreement, then the Dealer-Manager
shall be promptly notified by you by telephone, e-mail, facsimile, or
telegram, confirmed by letter.
(b) The Dealer-Manager may terminate this Agreement other than the
indemnification provisions of Section 7 of this Agreement, for
any reason and at any time, by promptly giving notice to you
by telephone, e-mail, facsimile or telegram, confirmed by
letter.
10. Format of Checks/Escrow Agent. Pending receipt of the minimum
subscription proceeds of $1,000,000 as set forth in Section 4(d) of the
Dealer-Manager Agreement, the Dealer-Manager and you agree that all
subscribers shall be instructed to make their checks, drafts, or money
orders payable solely "Atlas Public #11-2002 Ltd., Escrow Agent, PNC
Bank," as agent for the Partnership, and you agree to comply with Rule
15c2-4 adopted under the Act of 1934.
If you receive a check, draft, or money order not conforming to the
foregoing instructions, then you shall return the check, draft, or
money order directly to the subscriber not later than the end of the
next business day following its receipt by you from the subscriber. If
the Dealer-Manager receives a check, draft, or money order not
conforming to the foregoing instructions, then the Dealer-Manager shall
return the check, draft, or money order to you not later than the end
of the next business day following its receipt by the Dealer-Manager
and you shall then return the check, draft, or money order directly to
the subscriber not later than the end of the next business day
following its receipt by you from the Dealer-Manager. Checks, drafts,
or money orders received by you which conform to the foregoing
instructions shall be transmitted by you under Section 11 "Transmittal
Procedures," below.
You agree that you are bound by the terms of the Escrow Agreement, a
copy of which is attached to the Dealer-Manager Agreement as Exhibit
"A."
11. Transmittal Procedures. You shall transmit received investor funds in
accordance with the following procedures.
(a) Pending receipt of the minimum subscription proceeds of
$1,000,000 as set forth in Section 4(d) of the Dealer-Manager
Agreement, you shall promptly transmit, any and all checks,
drafts, and money orders received by you from subscribers and
the original executed Subscription Agreement to the
Dealer-Manager by the end of the next business day following
receipt of the check, draft, or money order by you. By the end
of the next business day following its receipt of the check,
draft, or money order and the original executed subscription
documents, the Dealer-Manager shall transmit the check, draft,
or money order and a copy of the executed Subscription
Agreement to the Escrow Agent, and the original executed
Subscription Agreement and a copy of the check, draft, or
money order to the Managing General Partner.
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Selling Agent Agreement
(b) On receipt by you of notice from the Managing General Partner
or the Dealer-Manager that the minimum subscription proceeds
of $1,000,000 as set forth in Section 4(d) of the
Dealer-Manager Agreement have been received, you agree that
all subscribers then may be instructed, in the Managing
General Partner's sole discretion, to make their checks,
drafts, or money orders payable solely "Atlas Public #11-2002
Ltd."
Thereafter, you shall promptly transmit any and all checks,
drafts, and money orders received by you from subscribers and
the original executed Subscription Agreement to the
Dealer-Manager by the end of the next business day following
receipt of the check, draft, or money order by you. By the end
of the next business day following its receipt of the check,
draft, or money order and original Subscription Agreement, the
Dealer-Manager shall transmit the check, draft, or money order
and the original executed Subscription Agreement to the
Managing General Partner.
12. Parties. This Agreement shall inure to the benefit of and be binding on
you, the Dealer-Manager, and any respective successors and assigns.
This Agreement shall also inure to the benefit of the indemnified
parties, their successors and assigns. This Agreement is intended to be
and is for the sole and exclusive benefit of the parties to this
Agreement, and their respective successors and assigns, and the
indemnified parties and their successors and assigns, and for the
benefit of no other person. No other person shall have any legal or
equitable right, remedy or claim under or in respect of this Agreement.
No purchaser of any of the Units from you shall be construed a
successor or assign merely by reason of the purchase.
13. Relationship. You are not authorized to hold yourself out as agent of
the Dealer-Manager, the Managing General Partner, the Partnership or
any other Selling Agent. This Agreement shall not constitute you a
partner of the Managing General Partner, the Dealer-Manager, the
Partnership, any general partner of the Partnership, or any other
Selling Agent, nor render the Managing General Partner, the
Dealer-Manager, the Partnership, any general partner of the
Partnership, or any other Selling Agent, liable for any of your
obligations.
14. Effective Date. This Agreement is made effective between the parties as
of the date accepted by you as indicated by your signature to this
Agreement.
15. Entire Agreement, Waiver.
(a) This Agreement constitutes the entire agreement between the
Dealer-Manager and you, and shall not be amended or modified
in any way except by subsequent agreement executed in writing.
Neither party to this Agreement shall be liable or bound to
the other by any agreement except as specifically set forth in
this Agreement.
(b) The Dealer-Manager and you may waive, but only in writing, any
term, condition, or requirement under this Agreement that is
intended for its benefit. However, any written waiver of any
term or condition of this Agreement shall not operate as a
waiver of any other breach of the term or condition of this
Agreement. Also, any failure to enforce any provision of this
Agreement shall not operate as a waiver of that provision or
any other provision of this Agreement.
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16. Notices.
(a) Any communications from you shall be in writing addressed to
the Dealer-Manager at X.X. Xxx 000, Xxxxxxxxxx, Xxxxxxxxxxxx
00000-0000.
(b) Any notice from the Dealer-Manager to you shall be deemed to
have been duly given if mailed, faxed or telegraphed to you at
your address shown below.
17. Complaints. The Dealer-Manager and you agree as follows:
(a) to notify the other if either receives an investor complaint
in connection with the offer or sale of Units by you;
(b) to cooperate with the other in resolving the complaint; and
(c) to cooperate in any regulatory examination of the other to the
extent it involves this Agreement or the offer or sale of
Units by you.
18. Privacy. The Dealer-Manager and you each acknowledge that certain
information made available to the other under this Agreement may be
deemed nonpublic personal information under the Xxxxx-Xxxxx-Xxxxxx Act,
other federal or state privacy laws (as amended), and the rules and
regulations promulgated thereunder, which are referred to collectively
as the "Privacy Laws." The Dealer-Manager and you agree as follows:
(a) not to disclose or use the information except as required to
carry out each party's respective duties under this Agreement
or as otherwise permitted by law in the ordinary course of
business;
(b) to establish and maintain procedures reasonably designated to
assure the security and privacy of all the information; and
(c) to cooperate with the other and provide reasonable assistance
in ensuring compliance with the Privacy Laws to the extent
applicable to either or both the Dealer-Manager and you.
19. Acceptance. Please confirm your agreement to become a Selling Agent
under the terms and conditions set forth above by signing and returning
the enclosed duplicate copy of this Agreement to us at the address set
forth above.
Sincerely,
, 2002 ANTHEM SECURITIES, INC.
-----------------------------
Date
ATTEST:
By:
---------------------------------- ------------------------------
(SEAL) Secretary Xxxx X. Xxxxxx, President
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Anthem Securities, Inc.
Selling Agent Agreement
ACCEPTANCE:
We accept your invitation to become a Selling Agent under all the terms
and conditions stated in the above Agreement and confirm that all the statements
set forth in the above Agreement are true and correct. We hereby acknowledge
receipt of the Prospectuses and Sales Literature and a copy of the
Dealer-Manager Agreement referred to above.
, 2002 ,
--------------------------- -----------------------------
Date a(n) _______________________ corporation,
ATTEST:
By:
-------------------------------- -------------------------------------
(SEAL) Secretary __________________________, President
(Address)
----------------------------------
----------------------------------
Your CRD Number is
------------------------
Your Tax ID Number is
---------------------
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Anthem Securities, Inc.
Selling Agent Agreement
APPENDIX I TO SELLING AGENT AGREEMENT
In consideration for the payment to you, as Selling Agent, by the Dealer-Manager
of a .5% nonaccountable marketing expense reimbursement as set forth in Section
2(a) of the Selling Agent Agreement, you warrant, represent, covenant, and agree
with the Dealer-Manager that you, as Selling Agent, shall do the following:
o prominently and promptly announce your participation in the
offering as Selling Agent to your registered representatives,
whether by newsletter, e-mail, mail or otherwise, which
announcement also shall advise your registered representatives
to contact our Regional Marketing Director in whose territory
the registered representative is located (the information
concerning our Regional Marketing Directors has been provided
to you by separate correspondence) with a copy of the
announcement provided concurrently to the Dealer-Manager; and
o provide the Dealer-Manager with the names, telephone numbers,
addresses and e-mail addresses of your registered
representatives, which information shall be kept confidential
by the Dealer-Manager and the Managing General Partner and
shall not be used for any purpose other than the marketing of
the offering as set forth in the Dealer-Manager Agreement and
the Selling Agent Agreement. Further, you, as Selling Agent,
agree that the Dealer-Manager and the Managing General Partner
may directly contact your registered representatives, in
person or otherwise, to inform them of the offering, explain
the merits and risks of the offering, and otherwise assist in
your registered representatives' efforts to solicit and sell
Units.
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Anthem Securities, Inc.
Selling Agent Agreement
