EXHIBIT A
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PARTNERSHIP AGREEMENT
BY AND AMONG
XXXXXXX OIL AND GAS, INC.
AND
XXXX X. XXXXXXX
EFFECTIVE JUNE 29, 1994
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TABLE OF CONTENTS
Article I
Formation of Partnership
Section 1.1 Formation of Partnership.................................... 1
Section 1.2 Name of Partnership......................................... 1
Section 1.3 Purpose of the Partnership.................................. 1
Section 1.4 Term........................................................ 1
Section 1.5 Statutory Compliance........................................ 1
Section 1.6 Title to Property........................................... 2
Section 1.7 Payments of Individual Obligations.......................... 2
Section 1.8 Independent Activities; Transactions With Affiliates........ 2
Section 1.9 Place of Business........................................... 2
Article II
Definitions
Section 2.1 "Act"....................................................... 2
Section 2.2 "Adjusted Capital Account Deficit".......................... 3
Section 2.3 "Agreement"................................................. 3
Section 2.4 "Bankruptcy"................................................ 3
Section 2.5 "Xxxxxxx"................................................... 3
Section 2.6 "Xxxxxxx Assets"............................................ 3
Section 2.7 "Capital Account"........................................... 3
Section 2.8 "Capital Contribution"...................................... 4
Section 2.9 "Code" or "Internal Revenue Code"........................... 4
Section 2.10 "Company"................................................... 4
Section 2.11 "Depreciation".............................................. 4
Section 2.12 "Edge Stock"................................................ 5
Section 2.13 "Fiscal Year"............................................... 5
Section 2.14 "Gross Asset Value"......................................... 5
Section 2.15 "Involuntary Bankruptcy".................................... 6
Section 2.16 "Partner" or "Partners"..................................... 6
Section 2.17 "Partnership"............................................... 6
Section 2.18 "Net Cash Flow"............................................. 6
Section 2.19 "Person".................................................... 6
Section 2.20 "Profits" or "Losses"....................................... 6
Section 2.21 "Regulations"............................................... 7
Section 2.22 "Sharing Ratio"............................................. 7
Section 2.23 "Transfer".................................................. 7
Section 2.24 "Voluntary Bankruptcy"...................................... 7
Section 2.25 "Wholly Owned Affiliate".................................... 7
(i)
Article II
Capital Contributions
Section 3.1 Initial Capital Contributions............................... 8
Section 3.2 Additional Capital Contributions............................ 8
Section 3.3 Return on Contributions..................................... 8
Section 3.4 Additional Partners......................................... 8
Article IV
Allocations
Section 4.1 Profits and Losses.......................................... 8
Section 4.2 Special Allocations......................................... 9
Section 4.3 Curative Allocations........................................ 9
Section 4.4 Tax Allocations: Code Section 704(c)........................ 10
Article V
Distributions
Section 5.1 Net Cash Flow............................................... 10
Section 5.2 Amounts Withheld............................................ 10
Article VI
Management
Section 6.1 General Authority of Partners............................... 11
Section 6.2 Specific Authority of Partners.............................. 11
Section 6.3 Compensation and Expenses................................... 11
Article VII
Indemnification of Partners
Section 7.1 General..................................................... 11
Section 7.2 Unauthorized Acts........................................... 12
Section 7.3 Limitations................................................. 12
Article VIII
Accounting, Books and Records
Section 8.1 Accounting, Books and Records............................... 12
Section 8.2 Tax Returns; Information.................................... 12
Section 8.3 Tax Elections............................................... 12
Section 8.4 Tax Matters Person.......................................... 12
(ii)
Article IX
Amendments and Meetings
Section 9.1 Amendments.................................................. 13
Section 9.2 Meetings of the Partners.................................... 13
Section 9.3 Unanimous Consent in Lieu of Meeting........................ 13
Article X
Transfers
Section 10.1 Restrictions on Transfers................................... 14
Section 10.2 Permitted Transfers......................................... 14
Section 10.3 Right of First Refusal...................................... 16
Section 10.4 Distribution Among Partners................................. 17
Article XI
Withdrawals; Action for Partition; Breaches
Section 11.1 Waiver of Partition......................................... 18
Section 11.2 Covenant Not to Withdraw or Dissolve........................ 18
Section 11.3 Consequences of Violation of Covenants...................... 18
Section 11.4 Breach Payments............................................. 19
Section 11.5 No Bonding.................................................. 20
Article XII
Dissolution and Winding Up
Section 12.1 Liquidating Events.......................................... 20
Section 12.2 Winding Up.................................................. 21
Section 12.3 Deemed Distribution and Recontribution...................... 21
Section 12.4 Rights of Partners.......................................... 21
Article XIII
Miscellaneous
Section 13.1 Binding Arbitration......................................... 22
Section 13.2 Notices..................................................... 22
Section 13.3 Binding Effect.............................................. 22
Section 13.4 Headings.................................................... 22
Section 13.5 Severability................................................ 23
Section 13.6 Further Action.............................................. 23
Section 13.7 Variation of Pronouns....................................... 23
Section 13.8 Governing Law............................................... 23
Section 13.9 Counterpart Execution....................................... 23
Section 13.10 Specific Performance........................................ 24
(iii)
Section 13.11 Set-off..................................................... 24
Section 13.12 Loans....................................................... 24
(iv)
PARTNERSHIP AGREEMENT
FOR
XXXXXXX PARTNERS
This Partnership Agreement (this "Agreement") is made and entered into
by and between Xxxxxxx Oil & Gas Corporation, a Texas corporation ("Company"),
and Xxxx X. Xxxxxxx, a resident of Xxxxxx County, Texas ("Xxxxxxx"). Xxxxxxx and
the Company are sometimes referred to herein collectively as the "Partners" and
individually as a "Partner".
ARTICLE I
FORMATION OF PARTNERSHIP
SECTION 1.1 FORMATION OF PARTNERSHIP. The Company and Xxxxxxx hereby
form, pursuant to the provisions of the Act, a partnership (the "Partnership")
for the purposes and scope hereinafter set forth. Except as provided to the
contrary in this Agreement, the rights, duties, status, and liabilities of the
Partners, and the formation, administration, dissolution, and continuation or
termination of the Partnership, shall be as provided in the Act.
SECTION 1.2 NAME OF PARTNERSHIP. The name of the Partnership shall be
"Xxxxxxx Partners" and all business of the Partnership shall be conducted in
such name. The Partnership shall hold all of its property in the name of the
Partnership and not in the name of any Partner.
SECTION 1.3 PURPOSE OF THE PARTNERSHIP.
(a) Subject to the terms of this Agreement, the purpose of the
Partnership is to acquire, own, mortgage, encumber, hypothecate, lease,
sell, maintain, improve, alter, remodel, expand, manage and otherwise
operate and deal with the property being contributed to the Partnership
and any property subsequently acquired by the Partnership.
(b) The Partnership shall be a partnership only for the purpose
specified in this Section 1.3. Except as otherwise provided in this
Agreement, the Partnership shall not engage in any other activity or
business and no Partner shall have any authority to hold himself out as
a general agent of another Partner in any other business or activity.
SECTION 1.4 TERM. The term of the Partnership shall commence on the date
hereof and shall continue until the winding up and liquidation of the
Partnership and its business is completed following a "Liquidating Event," as
provided in Article XII hereof.
SECTION 1.5 STATUTORY COMPLIANCE. The Partnership shall exist under and
be governed by, and this Agreement shall be construed in accordance with, the
applicable laws of the State of Texas. The Partners shall make all filings and
disclosures required by, and shall otherwise comply with, all such laws. The
Partners shall execute and file in the appropriate records any assumed or
fictitious name certificates and other documents and
instruments as may be necessary or appropriate with respect to the formation of,
and conduct of business by, the Partnership.
SECTION 1.6 TITLE TO PROPERTY. All real and personal property owned by
the Partnership shall be owned by the Partnership as an entity and no Partner
shall have any ownership interest in such property in its individual name or
right, and each Partners's interest in the Partnership shall be personal
property for all purposes.
SECTION 1.7 PAYMENTS OF INDIVIDUAL OBLIGATIONS. The Partnership's credit
and assets shall be used solely for the benefit of the Partnership, and no asset
of the Partnership shall be transferred or encumbered for or in payment of any
individual obligation of a Partner.
SECTION 1.8 INDEPENDENT ACTIVITIES; TRANSACTIONS WITH AFFILIATES.
(a) The Company and any of its affiliates shall be required to
devote only such time to the affairs of the Partnership as the Company
determines in its sole discretion may be necessary to manage and operate
the Partnership, and each such Person shall be free to serve any other
Person or enterprise in any capacity that it may deem appropriate in its
discretion. Xxxxxxx shall not be required to devote any time to the
affairs of the Partnership.
(b) Insofar as permitted by applicable law, each Partner (acting
on his own behalf) and its affiliates may, notwithstanding this
Agreement, engage in whatever activities they choose, whether the same
are competitive with the Partnership or otherwise, without having or
incurring any obligation to offer any interest in such activities to the
Partnership or any Partner and neither this Agreement nor any activity
undertaken pursuant hereto shall prevent any Partner or his affiliates
from engaging in such activities, or require any Partner to permit the
Partnership or any Partner or his affiliates to participate in any such
activities, and as a material part of the consideration for the
execution of this Agreement by each Partner, each Partner hereby waives,
relinquishes, and renounces any such right or claim of participation.
SECTION 1.9 PLACE OF BUSINESS. The principal office of the Partnership
shall be the office of Xxxxxxx, which is now 0000 Xxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxx 00000.
ARTICLE II
DEFINITIONS
As used in this Agreement, the following terms shall have the respective
meanings indicated.
SECTION 2.1 "ACT" means the Texas Revised Partnership Act, Article
6132b-1.01, et seq., of the Texas Revised Civil Statutes Annotated, as amended
from time to time.
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SECTION 2.2 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to
any Partner, the deficit balance, if any, in such Partner's Capital Account as
of the end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(a) Credit to such Capital Account any amounts which such
Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-
1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted and applied consistently therewith.
SECTION 2.3 "AGREEMENT" means this Partnership Agreement of Xxxxxxx
Partners.
SECTION 2.4 "BANKRUPTCY" means, with respect to any Person, a Voluntary
Bankruptcy or an Involuntary Bankruptcy.
SECTION 2.5 "XXXXXXX" means Xxxx X. Xxxxxxx and his heirs, legal
representatives and permitted assigns.
SECTION 2.6 "XXXXXXX ASSETS" means those assets being contributed to the
Partnership by Xxxxxxx in accordance with Section 3.1(b) hereof and any assets
purchased with the proceeds from any Transfer of the Xxxxxxx Assets.
SECTION 2.7 "CAPITAL ACCOUNT" means, with respect to any Partner, the
Capital Account maintained for such Person in accordance with following
provisions:
(a) To each Person's Capital Account there shall be credited
such Person's Capital Contributions, such Person's distributive share of
Profits and any items in the nature of income or gain which are
specially allocated pursuant to Section 4.2 or Section 4.3 hereof, and
the amount of any Partnership liabilities which are assumed by such
Person or which are secured by any assets of the Partnership distributed
to such Person.
(b) To each Person's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any assets of the
Partnership distributed to such Person pursuant to any provision of this
Agreement, such Person's distributive share of Losses and any items in
the nature of expenses or losses which are specially allocated pursuant
to Section 4.2 or Section 4.3 hereof, and the amount of any liabilities
of such Person which are assumed by the Partnership or which are secured
by any property contributed by such Person to the Partnership.
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(c) In the event all or a portion of an interest in the
Partnership is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred interest.
(d) In determining the amount of any liability for purposes of
Sections 2.7(a) and 2.7(b) hereof, there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Section 1.704-1(b) of the Regulations, and shall be interpreted and applied in a
manner consistent with such Regulations. In the event the Partners shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Partnership or the Partners), are computed
in order to comply with such Regulations, the Partners may make such
modification, provided that it is not likely to have a material effect on the
amounts distributable to any Person pursuant to Article XII hereof upon the
dissolution of the Partnership. The Partners also shall (i) make any adjustments
that are necessary or appropriate to maintain equality between the Capital
Accounts of the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance with
Section 1.704-1(b)(2)(iv)(q) of the Regulations, and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Section 1.704-1(b) of the Regulations.
SECTION 2.8 "CAPITAL CONTRIBUTION" means, with respect to any Partner,
the amount of money and the initial Gross Asset Value of any property (other
than money) contributed to the Partnership with respect to the interest in the
Partnership held by such Partner pursuant to the terms of this Agreement.
SECTION 2.9 "CODE" or "INTERNAL REVENUE CODE" means the Internal Revenue
Code of 1986, as amended from time to time.
SECTION 2.10 "COMPANY" means Xxxxxxx Oil & Gas Corporation and its
successors and permitted assigns.
SECTION 2.11 "DEPRECIATION" means, for each Fiscal Year or other period,
an amount equal to the depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year or other period;
provided, however, that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis; provided, further that if the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year is zero, Depreciation shall be
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determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Partners.
SECTION 2.12 "EDGE STOCK" means 8,172 shares of the common stock, $.01
par value per share, of Edge Petroleum Corporation, which stock is being
contributed to the Partnership by the Company in accordance with Section 3.1(a)
hereof, and any assets purchased with the proceeds from any Transfer of the Edge
Stock.
SECTION 2.13 "FISCAL YEAR" means (i) the period commencing on the
effective date of this Agreement and ending on December 31, 1994, (ii) any
subsequent twelve (12) month period commencing on January 1 and ending on
December 31, or (iii) any portion of the period described in clause (ii) for
which the Partnership is required to allocate Profits, Losses and other items of
Partnership income, gain, less or deduction pursuant to Article IV hereof.
SECTION 2.14 "GROSS ASSET VALUE" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the Partnership;
(b) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
determined by the Partners, as of the following times: (a) the
acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Partnership to a Partner of
more than a de minimis amount of Partnership assets as consideration for
an interest in the Partnership; and (c) the liquidation of the
Partnership within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations; provided, however, that adjustments pursuant to clauses (a)
and (b) above shall be made only if the Partners reasonably determines
that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the Partnership;
(c) The Gross Asset Value of any Partnership asset distributed
to any Partner shall be the gross fair market value of such asset on the
date of distribution; and
(d) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Section 1.704-
1(b)(2)(iv)(m) of the Regulations and Section 4.2(c) hereof; provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
Section 2.14 to the extent the Partners determines that an adjustment
pursuant to Section 2.14(b) hereof is necessary or appropriate in
connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 2.14(d).
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If the Gross Asset Value of an asset has been determined or adjusted pursuant to
Section 2.14(a), 2.14(b), or 2.14(d) hereof, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Profit and Losses.
SECTION 2.15 "INVOLUNTARY BANKRUPTCY" means, with respect to any Person,
without the consent or acquiescence of such Person, the entering of an order for
relief or approving a petition for relief or reorganization or any other
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or other similar relief under any present or future
bankruptcy, insolvency, or similar statute, law, or regulation, or the filing of
any such petition against such Person, which petition shall not be dismissed
within 90 days, or, without the consent or acquiescence of such Person, the
entering of an order appointing a trustee, custodian, receiver, or liquidator of
such Person or of all or any substantial part of the property of such Person,
which order shall not be dismissed within 60 days.
SECTION 2.16 "PARTNER" OR "PARTNERS" means Xxxxxxx and the Company,
together with each other Person (if any) that subsequently becomes an additional
or substituted Partner in accordance with this Agreement, but excluding any such
Person that subsequently ceases to be a Partner pursuant to the provisions of
this Agreement. "Partners" means all such Persons. All references in this
Agreement to a majority or a specified percentage in interest of the Partners
shall mean Partners holding Sharing Ratios more than 50% or such specified
percentage, respectively, of the Sharing Ratios then held by all of the
Partners.
SECTION 2.17 "PARTNERSHIP" has the meaning attributed to it in
Section 1.1.
SECTION 2.18 "NET CASH FLOW" means the gross cash proceeds of the
Partnership less the portion thereof used to pay or establish reserves for all
Partnership expenses, debt payments, capital improvements, replacements, and
contingencies, all as determined by the Partners. Net Cash Flow shall not be
reduced by depreciation, amortization, cost recovery deductions, or similar
allowances, but shall be increased by any reductions of reserves previously
established.
SECTION 2.19 "PERSON" means an individual, partnership, corporation,
trust, unincorporated association, or other entity or association.
SECTION 2.20 "PROFITS" OR "LOSSES" means, for each Fiscal Year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Section 2.20 shall be added to such taxable income or loss;
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(b) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations
and not otherwise taken into account in computing Profits or Losses
pursuant to this Section 2.20 shall be subtracted from such taxable
income or loss;
(c) In the event the Gross Asset Value of any Partnership asset
is adjusted pursuant to Section 2.14(b) or Section 2.14(d) hereof, the
amount of such adjustment shall be taken into account as gain or loss
from the disposition of such asset for purposes of computing Profits or
Losses; and
(d) Gain or loss resulting from any disposition of Partnership
assets with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding that the adjusted tax
basis of such property differs from its Gross Asset Value.
SECTION 2.21 "REGULATIONS" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
SECTION 2.22 "SHARING RATIO" means, at all times, the ratio that such
Partner's interest in the Partnership bears to the interest in the Partnership
of all Partners. Xxxxxxx and the Company shall each have an initial Sharing
Ratio of 50%.
SECTION 2.23 "TRANSFER" means, as a noun, any voluntary or involuntary
transfer, sale, pledge, hypothecation, or other disposition and, as a verb,
voluntarily or involuntarily to transfer, sell, pledge, hypothecate, or
otherwise dispose of.
SECTION 2.24 "VOLUNTARY BANKRUPTCY" means, with respect to any Person,
the inability of such Person generally to pay its debts as such debts become
due, or an admission in writing by such Person of its inability to pay its debts
generally or a general assignment by such Person for the benefit of creditors;
the filing of any petition or answer by such Person seeking to adjudicate it a
bankrupt or insolvent, or seeking for itself any liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
such Person or its debts under any law relating to bankruptcy, insolvency, or
reorganization or relief of debtors, or seeking, consenting to, or acquiescing
in the entry of an order for relief or the appointment of a receiver, trustee,
custodian, or other similar official for such Person or for any substantial
part of its property; or corporate action taken by such Person to authorize any
of the actions set forth above.
SECTION 2.25 "WHOLLY OWNED AFFILIATE" of any Person shall mean (i) any
partnership, corporation, trust, or other entity or association at least 90% of
the voting interests or beneficial ownership of which is owned, directly or
indirectly, by such Person, or (ii) any Person who, directly or indirectly, owns
at least 90% of the voting stock or beneficial ownership of such Person.
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ARTICLE III
CAPITAL CONTRIBUTIONS
SECTION 3.1 INITIAL CAPITAL CONTRIBUTIONS.
(a) COMPANY. The Company shall contribute to the capital of the
Partnership the Edge Stock, free and clear of any lien, claim, security
interest, charge, pledge, encumbrance, call, commitment, option,
conversion right or privilege of any character whatsoever. SEE APPENDIX
B FOR RETENTION OF VOTING RIGHTS AND RIGHT OF FIRST REFUSAL.
(b) XXXXXXX. Xxxxxxx shall contribute to the capital of the
Partnership the building and land, subject to the liens and
encumbrances, identified on Appendix A attached hereto.
SECTION 3.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Without the unanimous
consent of the Partners, no Partner shall be required to contribute additional
cash or capital to the Partnership or pay to the Partnership or any other
Partner any deficit or negative balance that may exist from time to time in such
Partner's Capital Account; provided, however, that the Company shall be required
to contribute any cash or capital required by the Partnership to fund any taxes
or other expenses associated with the Xxxxxxx Assets.
SECTION 3.3 RETURN OF CONTRIBUTIONS. Except as may expressly be provided
herein, no Partner shall be entitled to the return of its Capital Contribution
or any other contribution to the Partnership nor entitled to be paid any
interest, salary or drawing in respect of either its Capital Account or an
Capital Contribution made by it to the Partnership. No unrepaid Capital
Contribution shall be deemed or considered to be a liability of the Partnership
or of any Partner. Except as expressly provided herein, no Partner shall be
required to contribute or loan any cash or property to the Partnership to enable
the Partnership to return any Partner's contributions to the Partnership or to
balance Capital Accounts.
SECTION 3.4 ADDITIONAL PARTNERS. No additional Partners shall be
admitted to the Partnership without the unanimous consent of the Partners.
ARTICLE IV
ALLOCATIONS
SECTION 4.1 PROFITS AND LOSSES. After giving effect, to the special
allocations set forth in Sections 4.2 and 4.3 hereof, Profits or Losses for any
Fiscal Year shall be allocated among the Partners as follows:
(a) if attributable to the Edge Stock, 99% to Xxxxxxx and 1% to
the Company;
(b) if attributable to the Xxxxxxx Assets, 99% to the Company
and 1% to Xxxxxxx; and
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(c) all other Profits or Losses shall be allocated among the
Partners in proportion to their Sharing Ratios.
SECTION 4.2 SPECIAL ALLOCATIONS. The following special allocations shall
be made in the following order:
(a) QUALIFIED INCOME OFFSET. In the event any Partner
unexpectedly receives any adjustments, allocations, or distributions
described in Section 1.704-1(b)(2)(ii)(d)(4), Section 1.704-
1(b)(2)(ii)(d)(5), or Section 1.704-1(b)(2)(ii)(d)(6) of the
Regulations, items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of such Partner as quickly as possible, provided
that an allocation pursuant to this Section 4.2(a) shall be made only if
and to the extent that such Partner has an Adjusted Capital Account
Deficit after all other allocations provided for in this Article IV have
been tentatively made as if this Section 4.2(a) were not in this
Agreement.
(b) GROSS INCOME ALLOCATION. In the event any Partner has a
deficit Capital Account at the end of any Partnership Fiscal Year which
is in excess of the sum of (i) the amount such Partner is obligated to
restore pursuant to any provision of this Agreement and (ii) the amount
such Partner is deemed to be obligated to restore pursuant to the
penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Regulations, each such Partner shall be specially allocated items of
Partnership income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 4.2(b)
shall be made only if and to the extent that such Partner has a deficit
Capital Account in excess of such sum after all other allocations
provided for in this Article IV have been tentatively made as if Section
4.2(a) hereof and this Section 4.2(b) were not in this Agreement.
(c) SECTION 754 ADJUSTMENTS. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Section 1.704-
1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations,
to be taken into account in determining Capital Accounts, the amount of
such adjustment to Capital Accounts shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Partners in accordance with their interest in
the Partnership in the event Section 1.704-1(b)(2)(iv)(m)(2) of the
Regulations applies, or to the Partner to whom such distribution was
made in the event Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations
applies.
SECTION 4.3 CURATIVE ALLOCATIONS. The allocations set forth in Section
4.2 hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Partners that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Partnership
income, gain, loss, or deduction pursuant to this
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Section 4.3 Therefore, notwithstanding any other provision of this Article IV
(other than the Regulatory Allocations), the Partners shall make such offsetting
special allocations of Partnership income, gain, loss, or deduction in whatever
manner it determines appropriate so that, after such offsetting allocations are
made, each Partner's Capital Account balance is, to the extent possible, equal
to the Capital Account balance such Partner would have had if the Regulatory
Allocations were not part of this Agreement and all Partnership items were
allocated pursuant to Section 4.1 hereof.
SECTION 4.4 TAX ALLOCATIONS: CODE SECTION 704(C). In accordance with
Code Section 704(c) and the Regulations thereunder, income, gain, loss, and
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with Section 2.14(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 2.14(b) hereof, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the Partners in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section 4.4 are solely
for purposes of federal, state, and local taxes and shall not affect, or in any
way be taken into account in computing, any Person's Capital Account or share of
Profits, Losses, other items, or distributions pursuant to any provision of this
Agreement.
ARTICLE V
DISTRIBUTIONS
SECTION 5.1 NET CASH FLOW. Except as otherwise provided in Article XII
hereof, Net Cash Flow shall be distributed as follows:
(a) if attributable to the Edge Stock, 100% to Xxxxxxx;
(b) if attributable to the Xxxxxxx Assets, 100% to the Company;
and
(c) all other Net Cash Flow shall be allocated among the
Partners in proportion to their Sharing Ratios.
SECTION 5.2 AMOUNTS WITHHELD. All amounts withheld pursuant to the Code
or any provision of any state or local tax law with respect to any payment,
distribution, or allocation to the Partnership or the Partners shall be treated
as amounts distributed to the Partners pursuant to this Article V for all
purposes under this Agreement. The Partners are authorized to withhold from
distributions, and to pay over to any federal, state, or local government, any
amounts required to be so withheld pursuant to the Code or any provisions
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of any other federal, state, or local law, and may allocate any such amounts
among the Partners in any manner that is in accordance with applicable law.
ARTICLE VI
MANAGEMENT
SECTION 6.1 GENERAL AUTHORITY OF PARTNERS. Subject to any provision in
this Agreement to the contrary, any actions by the Partnership shall require the
agreement of a majority in interest of the Partners. Thus, if the Partnership
has only two Partners (each having a 50% Sharing Ratio), actions by the
Partnership shall require the unanimous agreement of the Partners. If the
Partners are unable to agree on the proper course of action for the Partnership
to take with respect to any matter, the matter shall be submitted to arbitration
in accordance with Section 13.1 hereof.
SECTION 6.2 SPECIFIC AUTHORITY OF PARTNERS. Notwithstanding the
provisions of Section 6.1:
(a) Xxxxxxx shall have the authority to cause a disposition of
the Edge Stock without the consent or agreement of the Company and the
Company shall have the authority to cause a disposition of the Xxxxxxx
Assets without the consent or agreement of Xxxxxxx. Prior to either
Partner causing a Transfer of the Edge Stock or the Xxxxxxx Assets in
accordance with the foregoing sentence, the Partner who has authority to
cause a disposition of such asset shall first offer to sell the Edge
Stock or Xxxxxxx Asset, as the case may be, to the other Partners
upon terms no less favorable than those being contemplated or negotiated
with a third party. Any subsequent disposition of the Edge Stock or the
Xxxxxxx Asset, as the case may be, to a third party shall be on terms
substantially similar to those offered to the other Partners.
(b) The Company shall have the exclusive authority to cause the
Partnership to vote the Edge Stock in any manner that the Company shall
determine.
SECTION 6.3 COMPENSATION AND EXPENSES. No Partner shall receive any
salary, fee, or draw for services rendered to or on behalf of the Partnership,
nor shall any Partner be reimbursed for any expenses incurred by such Partner on
behalf of the Partnership.
ARTICLE VII
INDEMNIFICATION OF PARTNERS
SECTION 7.1 GENERAL. The Partnership shall indemnify, save harmless, and
pay all judgments and claims against each Partner or any officers or directors
of such Partner relating to any liability or damage incurred by reason of any
act performed or omitted to be performed by such Partner, officer or director in
connection with the business of the Partnership, including attorneys' fees
incurred by such Partner, officer or director in connection with the defense of
any action based on any such act or omission, which
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attorneys' fees may be paid as incurred, including all such liabilities under
federal and state securities laws (including the Securities Act of 1933, as
amended) as permitted by law.
SECTION 7.2 UNAUTHORIZED ACTS. If any Partner purports to do any act on
behalf of the Partnership or to bind the Partnership, in violation of the
Provisions of this Agreement or takes any actions which are outside the
authority of such Partner as established under this Agreement, then such Partner
shall, at his or its cost and expense, indemnify and hold harmless the other
Partners and the Partnership from all claims, causes of action, costs, expenses,
obligations and liabilities thereby arising, and, without limiting the
generality of the foregoing, shall cause the release and discharge of all
mechanic's and materialmen's liens or other liens, arising as a result of such
unauthorized acts and which shall have cast a cloud on the title of the
Partnership to any property.
SECTION 7.3 LIMITATIONS. Notwithstanding anything to the contrary in any
of Sections 7.1 and 7.2 above, no Partner shall be indemnified from any
liability for fraud, bad faith, willful misconduct, or gross negligence.
ARTICLE VIII
ACCOUNTING, BOOKS AND RECORDS
SECTION 8.1 ACCOUNTING, BOOKS AND RECORDS. The Partnership shall
maintain at its principal place of business separate books of account for the
Partnership which shall show a true and accurate record of all costs and
expenses incurred, all charges made, all credits made and received, and all
income derived in connection with the operation of the Partnership business in
accordance with generally accepted accounting principles consistently applied
and, to the extent inconsistent therewith, in accordance with this Agreement.
The Partnership shall use the cash or accrual method of accounting, as the
Partners shall determine, in preparation of its annual reports and for tax
purposes and shall keep its books accordingly. Each Partner shall, at his sole
expense, have the right, at any time without notice to any other Partner, to
examine, copy, and audit the Partnership's books and records during the normal
business hours.
SECTION 8.2 TAX RETURNS; INFORMATION. The Partners shall cause the
Partnership's accountants to prepare all income and other tax returns of the
Partnership and shall cause the same to be filed in an timely manner. Each
Partner shall be provided with a copy of each such return, together with any
schedules or other information which may be required in connection with such
Partners' own tax affairs.
SECTION 8.3 TAX ELECTIONS. In connection with any Permitted Transfer
(as such term is defined in Article X) of an interest in the Partnership, the
Partners shall cause the Partnership, at the written request of the transferor
or the transferee, to make an election to adjust the basis of the Partnership's
property in the manner provided in Code Sections 734(b) and 743(b) and Section
1.754-1(b) of the Regulations.
SECTION 8.4 TAX MATTERS PERSON. The Company is specially authorized to
act as the "Tax Matters Person" under the Code and in any similar capacity under
state or local law.
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ARTICLE IX
AMENDMENTS AND MEETINGS
SECTION 9.1 AMENDMENTS.
(a) Amendments to this Agreement may be proposed by any Partner
submitting to the other Partners a verbatim statement of any proposed
amendment. The proposing Partner shall seek the written vote of the
Partners on the proposed amendment or shall call a meeting to vote
thereon and to transact any other business that it may deem appropriate.
For purposes of obtaining a written vote, the proposing Partner may
require response within a reasonable specified time, but not less than
15 business days, and failure to respond in such time period shall
constitute a vote in favor of the proposed amendment. A proposed
amendment shall be adopted and be effective as an amendment hereto if it
receives the affirmative vote of a majority in interest of the Partners.
(b) Notwithstanding Section 9.1(a) hereof, this Agreement shall
not be amended without the consent of each Person adversely affected if
such amendment would alter the interest of a Partner in Profits, Losses,
other items, or any Partnership distributions.
SECTION 9.2 MEETINGS OF THE PARTNERS.
(a) Meetings of the Partners may be called by any Partner.
Notice of any such meeting shall be given to all Partners not less than
7 business days nor more than 30 business days prior to the date of such
meeting and shall state the nature of any business to be transacted
thereof. Partners may vote in person or by proxy at such meeting.
Whenever the vote or consent of Partners is permitted or required under
this Agreement, such vote or consent may be given at a meeting of
Partners or may be given in accordance with the procedure prescribed in
Section 9.3 hereof. Except as otherwise expressly provided in this
Agreement, the vote of a majority in interest of the Partners shall
control.
(b) Each Partner may authorize any Person or Persons to act for
it by proxy on all matters in which a Partner is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Partner or
its attorney-in-fact. No proxy shall be valid after the expiration of 11
months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Partner executing
it.
(c) Each meeting of the Partners shall be conducted by the
Partner who called the meeting.
SECTION 9.3 UNANIMOUS CONSENT IN LIEU OF MEETING. The Partnership may
take any action contemplated under this Agreement if approved by the unanimous
consent of the Partners acting without a meeting, such consent to be provided in
writing, or by telephone or facsimile, if such telephone conversation or
facsimile is followed by a hard copy of the
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telephone conversation or facsimilied communication sent by registered or
certified mail, postage and charges prepaid, addressed as described in Section
13.2, or to such other address as such Person may from time to time specify by
notice to the Partners.
ARTICLE X
TRANSFERS
SECTION 10.1 RESTRICTIONS ON TRANSFERS. Except as expressly permitted or
required by this Agreement, no Partner shall Transfer all or any portion of his
interest in the Partnership or any rights therein without the unanimous consent
of the Partners. Any Transfer or attempted Transfer by any Partner in violation
of the preceding sentence shall be null and void and of no force or effect
whatever. Each Partner hereby acknowledges the reasonableness of the
restrictions on Transfer imposed by this Agreement in view of the Partnership
purposes and the relationship of the Partners. Accordingly, the restrictions on
Transfer contained herein shall be specifically enforceable. Each Partner hereby
further agrees to hold the Partnership and each Partner (and each Partner's
successors and assigns) wholly and completely harmless from any cost, liability,
or damage (including, without limitation, liabilities for income taxes and costs
of enforcing this indemnity) incurred by any of such indemnified Persons as a
result of a Transfer or an attempted Transfer in violation of this Agreement.
SECTION 10.2 PERMITTED TRANSFERS.
(a) GENERAL. Subject to the conditions and restrictions set
forth in this Section 10.2, a Partner shall have the right to Transfer
all or any portion of his interest in the Partnership by means of a
Permitted Transfer.
(b) DEFINITION OF PERMITTED TRANSFER; PERMITTED TRANSFEREES.
(i) A "Permitted Transfer" is any Transfer by a Partner of
all or any portion of his interest in the Partnership to a
Permitted Transferee, provided that such Transfer otherwise
complies with the conditions and restrictions of this Section
10.2.
(ii) A "Permitted Transferee" of a Partner is any Person
who is (1) a Wholly Owned Affiliate of such Partner, (2) a
member of such Partner's Family, (3) any other Partner, (4) a
Personal Representative of such Partner, (5) any Purchaser in
accordance with Section 10.3 hereof, or (6) any Person approved
as a Permitted Transferee by the unanimous consent of the
Partners.
(iii) A Partner's "Family" includes only any Person who, at
the time of the Permitted Transfer, is such Partner's spouse
(which in the case of Xxxxxxx shall specifically include Xxxx
Xxxxxxx, notwithstanding any pending divorce proceeding),
natural or adoptive lineal ancestors or descendants, and trusts
for his or their exclusive benefit.
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(iv) A Partner's "Personal Representative" includes only any
Person who succeeds to such Partner's estate as a result of such
Partner's death, legal incompetence, or Bankruptcy and any transferee
of such Partner's interest from any such Person.
(C) CONDITIONS TO PERMITTED TRANSFERS. A Transfer otherwise permitted
under this Section 10.2 shall not be a Permitted Transfer and any attempted
Transfer of a Partner's interest to a Permitted Transferee shall be null
and void and of no force or effect whatever unless and until the following
conditions are satisfied or waived by the other Partners:
(i) Except in the case of a Permitted Transfer to a Partner's
Personal Representative, the transferor and transferee shall execute
such documents and instruments of conveyance and assumption as may be
necessary or appropriate in the opinion of counsel to the Partnership
to effect such Transfer and to confirm the Permitted Transferee's
agreement to be bound by the provisions of this Article X and
assumption of all monetary obligations of the transferor Partner with
respect to the interest being transferred and the transferor Partner's
agreement to guarantee the prompt payment and performance of such
assumed obligations.
(ii) In the case of a Permitted Transfer to a Partner's Personal
Representative, the Permitted Transferee shall deliver such assurances
as may be necessary or appropriate in the opinion of counsel to the
Partnership to confirm such Transfer and that such transferor Partner
(and/or his estate) remains liable to perform all monetary obligations
with respect to such interest.
(iii) Except in the case of a Permitted Transfer to a Partner's
Personal Representative, the Partnership shall receive, prior to such
Transfer, an opinion of counsel satisfactory to the Partnership
confirming that such Transfer will not terminate the Partnership for
federal income tax purposes.
(iv) The transferor and transferee shall furnish the Partnership
with the transferee's taxpayer identification number, sufficient
information to determine the transferee's initial tax basis in the
interest transferred, and any other information reasonably necessary
to permit the Partnership to file all required federal and state tax
returns and other legally required information statements or returns.
Without limiting the generality of the foregoing, the Partnership
shall not be required to make any distribution otherwise provided for
in this Agreement with respect to any transferred interest until it
has received such information.
(v) A Partner making a Permitted Transfer of all or a portion of
his Partnership interest and the Permitted Transferee thereof shall
pay all reasonable costs and expenses incurred by the Partnership in
connection with such Transfer.
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(d) ADMISSION OF PERMITTED TRANSFEREE AS A PARTNER. A Permitted
Transferee (other than a Partner's Personal Representative) of an interest
in the Partnership will be admitted as a Partner in the Partnership. A
Permitted Transferee who is a Partner's Personal Representative shall be
admitted as a Partner in the Partnership only upon the unanimous consent of
the Partners. The rights of a Permitted Transferee who is not admitted as a
Partner shall be limited to the right to receive allocations and
distributions from the Partnership with respect to the interest
transferred, as provided by this Agreement. The transferor of such interest
shall not be a partner with respect to such interest, and, without limiting
the foregoing, shall not have the right to inspect the Partnership's books,
act for or bind the Partnership, or otherwise interfere in its operations.
(e) EFFECT OF PERMITTED TRANSFER ON PARTNERSHIP. The Partners intend
that the Permitted Transfer of an interest in the Partnership shall not
cause the dissolution of the Partnership under the Act; however,
notwithstanding any such dissolution, the Partners shall continue to hold
the Partnership's assets and operate its business in Partnership form under
this Agreement as if no such dissolution had occurred.
SECTION 10.3 RIGHT OF FIRST REFUSAL. Except as permitted by Section 10.2
hereof, no Partner shall Transfer all or any portion of its interest in the
Partnership (the "Offered Interest") unless such Partner (the "Seller") first
offers to sell the Offered Interest pursuant to the terms of this Section 10.3.
(a) LIMITATION ON TRANSFERS. No Transfer may be made under this
Section 10.3 unless the Seller has received a bona fide written offer (the
"Purchase Offer") from a Person (the "Purchaser") to purchase the Offered
Interest for a purchase price (the "Offer Price") denominated and payable
in United States dollars at closing or according to specified terms, with
or without interest, which offer shall be in writing signed by the
Purchaser and shall be irrevocable for a period ending no sooner than the
business day following the end of the Offer Period, as hereinafter defined.
(b) OFFER NOTICE. Prior to making any Transfer that is subject to the
terms of this Section 10.3, the Seller shall give to each other Partner
written notice (the "Offer Notice") which shall include a copy of the
Purchase Offer and an offer (the "First Offer") to sell the Offered
Interest to the other Partners (the "Offerees") for the Offer Price,
payable according to the same terms as (or more favorable terms than) those
contained in the Purchase Offer, provided that the First Offer shall be
made without regard to the requirement of any xxxxxxx money or similar
deposit required of the Purchaser prior to closing, and without regard to
any security (other than the Offered Interest) to be provided by the
Purchaser for any deferred portion of the Offer Price.
(c) OFFER PERIOD. The First Offer shall be irrevocable for a period
(the "Offer Period") ending at 11:59 p.m. (local time at the Partnership's
principal office) on the 30th day following the day of the Offer Notice.
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(d) ACCEPTANCE OF FIRST OFFER. Any Offeree may accept the First Offer
as to that portion of the Offered Interest that corresponds to the ratio of
its Sharing Ratio to the total Sharing Ratio held by all Offerees by giving
written notice of such acceptance to the Seller on or before the expiration
of the Offer Period. In the event that the Offerees ("Accepting Offerees"),
in the aggregate, accept the First Offer with respect to all of the Offered
Interest, the First Offer shall be deemed to be accepted. If the Offerees
do not accept the First Offer as to all of the Offered Interest during the
Offer Period, the First Offer shall be deemed to be rejected in its
entirety.
(e) CLOSING OF PURCHASE PURSUANT TO FIRST OFFER. In the event that the
First Offer is accepted, the closing of the sale of the Offered Interest
shall take place within 30 days after the First Offer is accepted or, if
later, the date of closing set forth in the Purchase Offer. The Seller and
all Accepting Offerees shall execute such documents and instruments as may
be necessary or appropriate to effect the sale of the Offered Interest
pursuant to the terms of the First Offer and this Article X.
(f) SALE PURSUANT TO PURCHASE OFFER IF FIRST OFFER REJECTED. If the
First Offer is not accepted in the manner provided hereinabove, the Seller
may sell the Offered Interest to the Purchaser at any time within 60 days
after the last day of the Offer Period, provided that such sale shall be
made on terms no more favorable to the Purchaser than the terms contained
in the Purchase Offer and provided further that such sale complies with
conditions of Section 10.2(c) hereof. In the event that the Offered
Interest is not sold in accordance with the terms of the preceding
sentence, the Offered Interest shall again become subject to all of the
conditions and restrictions of this Section 10.3.
SECTION 10.4 DISTRIBUTION AMONG PARTNERS. If a Permitted Transfer of an
interest in the Partnership occurs during any Fiscal Year, Profits, Losses, each
item thereof, and all other items attributable to such interest for such Fiscal
Year shall be divided and allocated between the transferor and the transferee by
taking into account their varying interests during the Fiscal Year in accordance
with Code Section 706(d), using any conventions permitted by law and selected by
the Partners. All distributions on or before the date of a Permitted Transfer
shall be made to the transferor, and all distributions thereafter shall be made
to the transferee. Solely for purposes of making such allocations and
distributions, the Partnership shall recognize a Permitted Transfer not later
than the end of the calendar month during which it is given notice stating the
date such interest was transferred and such other information as the Partners
may reasonably require. If a Transfer is not a Permitted Transfer then all of
such items shall be allocated, and all distributions shall be made, to the
Person who, according to the books and records of the Partnership, on the last
day of the Fiscal Year during which the Transfer occurs, was the owner of the
Partnership interest. The Partners and the Partnership shall incur no liability
for making allocations and distributions in accordance with the provisions of
this Section 10.4, whether or not the Partners or the Partnership have knowledge
of any Transfer of ownership of any interest in the Partnership.
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ARTICLE XI
WITHDRAWALS; ACTION FOR PARTITION; BREACHES
SECTION 11.1 WAIVER OF PARTITION. No Partner shall, either directly or
indirectly, take any action to require partition, file a xxxx for Partnership
accounting or appraisement of the Partnership or of any of its assets or
properties or cause the sale of any Partnership property, and notwithstanding
any provisions of applicable law to the contrary, each Partner (and each of his
legal representatives, successors, or assigns) hereby irrevocably waives any and
all rights it may have to maintain any action for partition or to compel any
sale with respect to his Partnership interest, or with respect to any assets or
properties of the Partnership, except as expressly provided in this Agreement.
SECTION 11.2 COVENANT NOT TO WITHDRAW OR DISSOLVE. Notwithstanding any
provision of the Act, each Partner hereby covenants and agrees that the Partners
have entered into this Agreement based on their mutual expectation that all
Partners will continue as Partners and carry out the duties and obligations
undertaken by them hereunder and that, except as otherwise expressly required or
permitted hereby, each Partner hereby covenants and agrees not to (a) take any
action to file a certificate of dissolution or its equivalent with respect to
itself, (b) take any action that would cause a Voluntary Bankruptcy of such
Partner, (c) withdraw or attempt to withdraw from the Partnership, (d) exercise
any power under the Act to dissolve the Partnership, (e) transfer all or any
portion of his interest in the Partnership, (f) petition for judicial
dissolution of the Partnership, or (g) demand a return of such Partner's
contributions or profits (or a bond or other security for the return of such
contributions or profits) without the unanimous consent of the Partners.
SECTION 11.3 CONSEQUENCES OF VIOLATION OF COVENANTS. Notwithstanding
anything to the contrary in the Act, if a Partner (a "Breaching Partner")
attempts to (i) cause a partition in breach of Section 11.1 hereof or (ii)
withdraw from the Partnership or dissolve the Partnership to take any action in
breach of Section 11.2 hereof, the Partnership shall continue and such Breaching
Partner shall be subject to this Section 11.3. In such event, the following
shall occur:
(a) The Breaching Partner shall immediately cease to be a Partner and
shall have no further power to act for or bind the Partnership;
(b) The other Partners shall continue to have the right to possess the
Partnership's property and goodwill and to conduct its business and
affairs;
(c) The Breaching Partner shall be liable in damages, without
requirement of a prior accounting, to the Partnership for all costs and
liabilities that the Partnership or any Partner may incur as a result of
such breach;
(d) The Partnership shall have no obligation to pay to the Breaching
Partner his contributions, capital, or profits, but may, by notice to the
Breaching Partner within 30 days of his withdrawal, elect to make Breach
Payments (as
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hereinafter defined) to the Breaching Partner in complete satisfaction of
the Breaching Partner's interest in the Partnership;
(e) If the Partnership does not elect to make Breach Payments pursuant
to Section 11.3(d) hereof, the Partnership shall treat the Breaching
Partner as if he were an unadmitted assignee of the interest of the
Breaching Partner and shall make distributions to the Breaching Partner
only of those amounts otherwise payable with respect to such interest
hereunder;
(f) The Partnership may apply any distributions otherwise payable with
respect to such interest (including Breach Payments) to satisfy any claims
it may have against the Breaching Partner;
(g) The Breaching Partner shall have no right to inspect the
Partnership's books or records or obtain other information concerning the
Partnership's operations;
(h) The Breaching Partner shall continue to be liable to the
Partnership for any unpaid Capital Contributions required hereunder with
respect to such interest and to be jointly and severally liable with the
other Partners for any debts and liabilities (whether actual or contingent,
known or unknown) of the Partnership existing at the time the Breaching
Partner withdraws or dissolves; and
(i) Notwithstanding anything to the contrary hereinabove provided,
unless the Partnership has elected to make Breach Payments to the Breaching
Partner in satisfaction of his interest, the Partnership may offer and sell
(on any terms that are not manifestly unreasonable) the interest of the
Breaching Partner to any other Partners or other Persons on the Breaching
Partner's behalf, provided that any Person acquiring such interest becomes
a Partner with respect to such interest and agrees to perform the duties
and obligations imposed by this Agreement on the Breaching Partner.
SECTION 11.4 BREACH PAYMENTS.
(a) For purposes hereof, "Breach Payments" shall mean payments made in
four annual installments, each equal to one-fourth of the Breach Amount,
payable on the next four (4) consecutive anniversaries of the breach by the
Breaching Partner, with simple interest accrued from the date of such
breach through the date each such installment is paid on the unpaid balance
of such Breach Amount at the prime rate then in effect as Texas Commerce
Bank or its successor. The "Breach Amount" shall be an amount equal to the
greater of $1 or the Net Equity of the Breaching Partner's interest on the
day of such breach, computed in accordance with Section 11.4(b) hereof. The
Partnership may, at its sole election, prepay all or any portion of the
Breach Payments or interest accrued thereon at any time without penalty.
(b) NET EQUITY. The "Net Equity" of a Partner's interest in the
Partnership, as of any day, shall be the amount that would be distributed
to such Partner in
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liquidation of the Partnership pursuant to Section 12.2 hereof if (1) all
of the Partnership's assets were sold for their Gross Asset Values, (2) the
Partnership paid its accrued, but unpaid, liabilities and established
reserves for the payment of reasonably anticipated contingent or unknown
liabilities, and (3) the Partnership distributed the remaining proceeds to
the Partners in liquidation, all as of such day.
The Net Equity of a Partner's interest in the Partnership shall be
determined, without audit or certification, from the books and records of
the Partnership by the firm of independent certified public accountants
regularly employed by the Partnership. The Net Equity of a Partner's
interest shall be determined within 30 days of the day upon which such
accountants are apprised in writing of the Gross Asset Value of the
Partnership's assets, and the amount of such Net Equity shall be disclosed
to the Partnership and each of the Partners by written notice. The Net
Equity determination of such accountants shall be final and binding in the
absence of a showing of gross negligence or willful misconduct.
SECTION 11.5 NO BONDING. Notwithstanding anything to the contrary in the
Act, the Partnership shall not be obligated to secure the value of the Breaching
Partner's interest by bond or otherwise; provided, however, that if a court of
competent jurisdiction determines that, in order to continue the business of the
Partnership such value must be so secured, the Partnership may provide such
security. If the Partnership provides such security, the Breaching Partner shall
not have any right to participate in Partnership profits or distributions during
the term of the Partnership, or to receive any interest on the value of such
interest. For this purpose, the value of the interest of the Breaching Partner
shall be the greater of $1 or the Net Equity of such interest as of the
effective date of the Breaching Partner's withdrawal.
ARTICLE XII
DISSOLUTION AND WINDING UP
SECTION 12.1 LIQUIDATING EVENTS. The Partnership shall dissolve and
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(a) December 31, 2000;
(b) The unanimous vote of the Partners to dissolve, wind up, and
liquidate the Partnership;
(c) The happening of any other event that makes it unlawful or
impossible to carry on the business of the Partnership; or
(d) Any event which causes there to be only one Partner.
The Partners hereby agree that, notwithstanding any provision of the Act, the
Partnership shall not dissolve prior to the occurrence of a Liquidating Event.
If it is determined, by a court of competent jurisdiction, that the Partnership
has dissolved prior to the occurrence
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of a Liquidating Event, the Partners hereby agree to continue the business of
the Partnership without a winding up or liquidation.
SECTION 12.2 WINDING UP. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purpose of winding up its affairs in
an orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners and no Partner shall take any action that is inconsistent
with, or not necessary to or appropriate for, winding up the Partnership's
business and affairs. To the extent not inconsistent with the foregoing, all
covenants and obligations in this Agreement shall continue in full force and
effect until such time as the Partnership assets have been distributed pursuant
to this Section 12.2 and the Partnership has terminated. The Partners shall be
responsible for overseeing the winding up and liquidation of the Partnership,
shall take full account of the Partnership's assets and liabilities, shall cause
the Partnership assets to be liquidated as promptly as is consistent with
obtaining the fair market value thereof, and shall cause the proceeds therefrom,
to the extent sufficient therefor, to be applied and distributed in the
following order:
(a) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors (including any of the Partners);
(b) The balance, if any, to the Partners in accordance with their
Capital Accounts, after giving effect to all contributions, distributions,
and allocations for all periods.
The Partners shall not receive any additional compensation for any services
performed pursuant to this Article XII. Each Partner understands and agrees that
by accepting the provisions of this Section 12.2 setting forth the priority of
the distribution of the assets of the Partnership to be made upon its
liquidation, such Partner expressly waives any right which it, as a creditor of
the Partnership, might otherwise have under the Act to receive distributions of
assets pari passu with the other creditors of the Partnership in connection with
a distribution of assets of the Partnership in satisfaction of any liability of
the Partnership, and hereby subordinates to said creditors any such right.
SECTION 12.3 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any
other provisions of this Article XII, in the event the Partnership is liquidated
within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations but no
Liquidating Event has occurred, the Partnership assets shall not be liquidated,
the Partnership's liabilities shall not be paid or discharged, and the
Partnership's affairs shall not be wound up. Instead, the Partnership shall be
deemed to have distributed the Partnership assets in kind to the Partners, who
shall be deemed to have assumed and taken such property subject to all
Partnership liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the Partners shall be deemed to have
recontributed the Partnership assets in kind to the Partnership, which shall be
deemed to have assumed and taken such property subject to all such liabilities.
SECTION 12.4 RIGHTS OF PARTNERS. Except as otherwise provided in this
Agreement, (a) each Partner shall look solely to the assets of the Partnership
for the return of his
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Capital Contributions and shall have no right or power to demand or receive
property other than cash from the Partnership and (b) no Partner shall have
priority over any other Partner as to the return of his Capital Contributions,
or any distribution, or allocations.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 BINDING ARBITRATION. Upon the request of any party (whether
made before or after the institution of any legal proceeding), any action,
dispute, claim, or controversy of any kind (including, but not limited to,
actions in contract or in tort, statutory or common law, legal or equitable) now
existing or hereafter arising between any of the parties hereto in any way
arising out of, pertaining to or in connection with this Agreement shall be
resolved by binding arbitration. All arbitration proceedings between the parties
shall be conducted in Houston, Texas and shall be administered by the American
Arbitration Association, in accordance with the Commercial Arbitration Rules of
the American Arbitration Association and, to the maximum extent applicable, the
Federal Arbitration Act (Title 9 of the United States Code). The decision
rendered in the arbitration proceeding shall be final and conclusive upon the
parties and may be enforced by any court of competent jurisdiction.
SECTION 13.2 NOTICES. Any and all notices, requests, consents or other
communications permitted or required to be given under the terms of this
Agreement shall be in writing and shall be deemed received (a) if given by
telecopier, when transmitted and the appropriate telephonic confirmation
received if transmitted on a business day and during normal business hours of
the recipient, and otherwise on the next business day following transmission,
(b) if given by certified mail, return receipt requested, postage prepaid, three
business days after being deposited in the United States mails, and (c) if given
by Federal Express service or other means, when received or personally
delivered. The mailing address and facsimile number of each of the parties is as
follows or at such other addresses as may be provided to the other parties by
notice given in accordance with the foregoing:
(a) If to the Partnership or the Company, to the address set forth in
Section 1.9 or facsimile number (000) 000-0000; and
(b) If to Calaway, 0000 Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000.
Any Person may from time to time specify a different address or facsimile
number by notice given in the manner provided in this Section 13.2.
SECTION 13.3 BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Partners and their respective
heirs, legal representatives, successors, transferees, and assigns.
SECTION 13.4 HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
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SECTION 13.5 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable; and this Agreement
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom. Furthermore,
in lieu of such illegal, invalid, or unenforceable provisions there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable and that shall not be more restrictive than the
one severed herefrom.
SECTION 13.6 FURTHER ACTION. Each Partner, upon the request of the
Partners, agrees to perform all further acts and execute, acknowledge, and
deliver any documents which may be reasonably necessary, appropriate, or
desirable to carry out the provisions of this Agreement.
SECTION 13.7 VARIATION OF PRONOUNS. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 13.8 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Texas (regardless of the laws that might otherwise govern under
applicable Texas principles of conflicts of law) and the parties agree to bring
any legal proceeding arising out of or under this Agreement only in one of the
courts specified herein. All actions or proceedings with respect to this
Agreement or any other instrument or document executed in connection herewith or
as security herefor may be instituted in either the courts of Xxxxxx County,
Texas or the United States District Court for the Southern District of the State
of Texas, and by execution and delivery of this Agreement, the parties hereto
each unconditionally submit to the jurisdiction (both subject matter and
personal) of each such court, and irrevocably and unconditionally waive (i) any
objection they may now or hereafter have to the laying of venue in any such
courts, and (ii) any claim that any action or proceeding brought in any of such
courts has been brought in an inconvenient forum. In addition to all other
agents of service, each Partner hereby appoints the Secretary of State of the
State of Texas as their agent for service of process for any suit brought in any
court of proper jurisdiction in the State of Texas under or by reason of this
Agreement, provided that the foregoing shall be in addition to and not in
limitation of any other means of service of process in the State of Texas or
hereunder. Service of the foregoing may be made by registered letter with a copy
of the Petition or Complaint attached thereto addressed to the Secretary of
State for forwarding to the parties in the manner provided in Section 13.2
hereof. The parties hereto further agree that the mailing to their last known
address by certified or registered mail of any process shall constitute lawful
and valid process and service thereof.
SECTION 13.9 COUNTERPART EXECUTION. This Agreement may be executed in any
number of counterparts with the same effect as if all of the Partners had signed
the same document. All counterparts shall be construed together and shall
constitute one and the same agreement.
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SECTION 13.10 SPECIFIC PERFORMANCE. Each Partner agrees with the other
Partners that the other Partners will be irreparably damaged if any of the
provisions of this Agreement are not performed in accordance with their specific
terms and that monetary damages will not provide an adequate remedy in such
event. Accordingly, it is agreed that in addition to any other remedy to which
the nonbreaching Partners may be entitled, at law or in equity, the nonbreaching
Partners shall be entitled to injunctive relief to prevent breaches of the
provisions of this Agreement and specifically to enforce the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction thereof.
SECTION 13.11 SET-OFF. In the event that any sum is payable to any Partner
pursuant to this Agreement, any amounts owed by such Partner to the Partnership
shall be deducted from said sum before payment to such Partner.
SECTION 13.12 LOANS. Any Partner may, with the approval of the Partners,
lend or advance money to the Partnership. If any Partner shall make any loan or
loans to the Partnership or advance money on its behalf, the amount of any such
loan or advance shall not be treated as a contribution to the capital of the
Partnership but shall be a debt due from the Partnership. The amount of any such
loan or advance by a lending Partner shall be repayable out of the Partnership's
cash and shall bear interest at the rate agreed between the Partnership and the
lending Partner. None of the Partners shall be obligated to make any loan or
advance to the Partnership.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, this Agreement has been executed as of the date
indicated below each Partner's signature.
COMPANY:
Xxxxxxx Oil & Gas Corporation
By: /s/ Xxxx X. Xxxxxxx
--------------------------------
Xxxx X. Xxxxxxx, President
Dated: 6/29/94
XXXXXXX:
/s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx
Dated: 6/29/94
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APPENDIX A
TO PARTNERSHIP AGREEMENT
BY AND AMONG
XXXXXXX OIL AND GAS CORPORATION
AND
XXXX X. XXXXXXX
Xxxxxxx shall contribute to the capital of the Partnership the real property
located at 0000 Xxxxxxxx, Xxxxxxx, Xxxxxx Xxxxxx, Xxxxx, more particularly
described as follows: Being TRS 0, 0 & 0, xxxxx xxxxx-xxx (00), XXXX 00 XX
Xxxxxxxx Xxxxxx Xxxxxx Xxxxxx, Xxxxx, Tax Appraisal Number 000-000-000-0000.
Said real property is subject only to the following described liens, claims,
security interests, charges, pledges, encumbrances, calls, commitments, options,
conversion rights or privileges of any character whatsoever:
1. 2409 Commerce-Xxxxxxxx Note. The balance due, including principal, interest,
tax and insurance escrow, and all other charges, on that certain promissory
note executed by Xxxx X. and Xxxx X. Xxxxxxx, in the original principal sum
of $51,750.00, dated April 18, 1989, payable to Xxxx Xxxxxxxx, Houston,
Texas, and secured by deed of trust on the real property located at 0000
Xxxxxxxx, Xxxxxxx, Xxxxx, recorded in the Real Property Records of Xxxxxx
County, Texas.
2. 2409 Commerce-Southwest Minerals, Inc. Note. The balance due, including
principal, interest and all other charges, on that certain promissory note
executed by Xxxx X. Xxxxxxx, in the original principal amount of $75,383.56,
dated October 1, 1993, payable to Southwest Minerals, Inc., secured by a
second lien on the real property located at 0000 Xxxxxxxx, Xxxxxxx, Xxxxx,
recorded in the Real Property Records of Xxxxxx County, Texas.
APPENDIX B
TO PARTNERSHIP AGREEMENT
BY AND AMONG
XXXXXXX OIL AND GAS CORPORATION
AND
XXXX X. XXXXXXX
Notwithstanding anything herein to the contrary, the Company is perpetually
retaining 100% of the voting rights with respect to the Edge Stock, subject to
all existing voting agreements. This reservation of voting rights will survive
liquidation, dissolution or termination of this Agreement. The Company is also
retaining a Right of First Refusal to purchase the Edge Stock on the same terms
and conditions as any bona fide third party offer for a period of five (5)
business days after receiving notice in accordance with the terms of this
agreement of the terms of any proposed sale. The Partnership and Xxxx X. Xxxxxxx
will give such notice to the Company within three (3) business days of receipt
of any such offer they desire to accept.
ASSIGNMENT OF PARTNERSHIP INTEREST
This Assignment of Partnership Interest (the "Agreement") is made and
entered into this 29th of June, 1994, by and among Xxxx X. Xxxxxxx ("Assignor"),
Xxxx Xxxxxxx ("Assignee"), and Xxxxxxx Oil & Gas Corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company and Assignor entered into that Partnership Agreement,
dated June 29, 1994 (the "Partnership Agreement"), forming Xxxxxxx Partners, a
Texas general partnership (the "Partnership");
WHEREAS, incident to their divorce, Assignor has agreed to convey his
interest in the Partnership to Assignee; and
WHEREAS, as a condition of Assignee's acceptance of the assignment and her
agreement to the divorce decree, Assignor, on his own behalf and on behalf of
the Company (of which he is the sole shareholder), has agreed that Assignee will
have certain rights to require the Partnership to redeem her interest therein
with certain of the Partnership's assets; and
WHEREAS, the parties hereto wish to confirm such conveyance, assignment,
and assumption by Assignee of Assignor's right, title, and interest under the
Partnership Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein contained
and as a gift without other consideration, the parties hereby agree as follows:
ARTICLE I
CONVEYANCE, ASSIGNMENT, AND ASSUMPTION
SECTION 1.1 Assignor hereby unconditionally and irrevocably assigns,
conveys, transfers and delivers to Assignee and Assignee hereby accepts from
Assignor, at and as of the date hereof, Assignor's entire right, title, and
interest as a partner of the Partnership (the "Transferred Interest").
SECTION 1.2 Assignee hereby unconditionally and irrevocably (i) accepts and
assumes, at and as of the date hereof, all of the liabilities and obligations of
Assignor now or hereafter existing under or in connection with the Partnership
Agreement and attributable to the Transferred Interest, and (ii) agrees to be
bound by the terms and conditions of the Partnership Agreement, a copy of which
is attached hereto as Exhibit "A".
SECTION 1.3 The parties hereby agree that from and after the date hereof
and for all purposes under the Partnership Agreement, Assignee shall become and
be a substituted Partner of the Partnership, and all references to the Partners
in the Partnership Agreement
shall be deemed to refer to Assignee as a Partner, and Assignee shall be
entitled to the full benefits and be bound thereby as a Partner to the same
extent as if an original party thereto.
ARTICLE II
CONSENT TO ASSIGNMENT
SECTION 2.1 The Company acknowledges and agrees that the assignment
contemplated by this Agreement is a Permitted Transfer within the meaning of
Section 10.2(b)(i) of the Partnership Agreement and that all actions or
deliveries required by Section 10.2(c) of the Partnership Agreement have been
satisfied or are hereby waived.
SECTION 2.2 The Company hereby consents to the conveyance, assignment, and
assumption contemplated herein, and acknowledges and agrees that Assignee shall
be admitted as a substituted Partner in the Partnership.
ARTICLE III
RIGHT OF REDEMPTION
SECTION 3.1 At any time after June 30, 1999 and prior to a Liquidating
Event (as such term is defined in Section 13.1 of the Partnership Agreement),
Assignee shall have the option to cause the Partnership to distribute the Edge
Stock (as such term is defined in the Partnership Agreement) to Assignee in
complete redemption of her interest in the Partnership. Assignee's option to
cause a redemption of her interest pursuant to this Article III shall be
exercised by delivering written notice to the Partnership and the other partners
of her desire to cause such a redemption. The Edge Stock shall be delivered to
Assignee within ten business days of the Partnership's receipt of such notice
and Assignee's interest in the Partnership and her rights under the Partnership
Agreement shall completely terminate upon her receipt of the Edge Stock.
SECTION 3.2 The Company hereby consents to Assignee's right of redemption
hereunder and agrees that it shall cause the Partnership to distribute the Edge
Stock to Assignee if Assignee exercises the option set forth in Section 3.1
hereof.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas, without regard to principles of
conflicts of law.
SECTION 4.2 This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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SECTION 4.3 This Agreement and the rights and obligations hereunder shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
IN WITNESS WHEREOF, this Agreement has been executed and shall take effect
as of the date first above written.
ASSIGNEE:
/s/ Xxxx Xxxxxxx
----------------------------------
Xxxx Xxxxxxx
ASSIGNOR:
/s/ Xxxx X. Xxxxxxx
----------------------------------
Xxxx X. Xxxxxxx, Individually and
on behalf of Xxxxxxx Partners, as
a Partner thereof
COMPANY:
Xxxxxxx Oil & Gas Corporation,
Individually and on behalf of
Xxxxxxx Partners, as a Partner
thereof
By: /s/ Xxxx X. Xxxxxxx
-------------------------------
Xxxx X. Xxxxxxx, President
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