EX-3.3(B) 5 d15719exv3w3xby.txt LTD. PARTNERSHIP AGREEMENT: ENCORE OPERATING LP Exhibit 3.3(b) LIMITED PARTNERSHIP AGREEMENT OF ENCORE OPERATING, L.P. This Limited Partnership Agreement ("Agreement") of Encore Operating, L.P. is made and entered into effective as of the 2nd day of March, 1999 (the "Effective Date"), by and between EAP Operating, Inc., a Delaware corporation ("Operating"), as the general partner, and EAP Properties, Inc., a Delaware corporation ("Properties"), as the limited partner. The general partner and the limited partner are sometimes referred to herein individually as a "Partner" and collectively as the "Partners". WITNESSETH: For and in consideration of the mutual covenants set forth herein and for other good and valuable consideration, the adequacy, receipt, and sufficiency of which are hereby acknowledged the Partners hereby agree as follows: ARTICLE I ORGANIZATION AND PURPOSE Section 1.01 Formation of Limited Partnership. The Partners hereby agree to become partners and to form a limited partnership (the "Partnership") pursuant to Article 6132a-1 Tex. Rev. Civ. Stat. Ann., known as the Texas Revised Limited Partnership Act (the "Act"), which shall be governed by, and operated pursuant to, the terms and provisions of this Agreement. Operating shall be the general partner of the Partnership and is hereinafter sometimes referred to as the "General Partner". Properties shall be the limited partner and is hereinafter sometimes referred to individually as the "Limited Partner". Section 1.02 Name. The name of the Partnership shall be Encore Operating, L.P. All business and affairs of the Partnership shall be conducted solely under, and all Partnership Assets (as that term is defined in Section 1.04) shall be held solely in, such name unless otherwise determined by the General Partner. Section 1.03 Effective Date and Term. The Partnership shall be in effect for a term beginning on the Effective Date and shall continue under this Agreement (as amended from time to time) until dissolved upon the occurrence of an event that causes the dissolution of the Partnership in accordance with the provisions of this Agreement (unless reconstituted as provided herein), and thereafter to the extent provided by applicable law, until wound up and terminated as provided herein. Section 1.04 Purposes and Scope of Business. The business and purposes of the Partnership are to conduct any and all lawful activities and to engage in any and all lawful businesses or investments which are permitted under the Act, including, without limitation, to acquire, own, hold, develop, divide, lease, sell, exchange, dispose of, make improvements to, or otherwise deal with interests in real property, including interests in oil, gas, and other minerals. Subject to the terms and conditions of this Agreement, the Partnership shall have the power and authority to do all such other acts and things as may be necessary, desirable, expedient, 1 convenient for, or incidental to, the furtherance and accomplishment of the foregoing objectives and purposes and for the protection and benefit of the Partnership. The assets of the Partnership, whether now or hereafter owned, are sometimes referred to as the "Partnership Assets". Section 1.05 Documents. The General Partner, or anyone designated by the General Partner, is hereby authorized to execute a certificate of limited partnership of the Partnership ("Certificate of Limited Partnership") in accordance with the Act and cause the same to be filed in the office of the Secretary of State of the State of Texas in accordance with the provisions of the Act. The Partnership shall promptly execute and duly file with the proper offices in each state in which the Partnership may conduct the activities hereinafter authorized, one or more certificates as required by the laws of each such state in order that the Partnership may lawfully conduct the business, purposes, and activities herein authorized in each such state, and the Partnership shall take any other action or measures necessary in such state or states for the Partnership to conduct such activities. Section 1.06 Principal Place of Business. The principal place of business of the Partnership shall be 201 Main Street, Suite 1455, Fort Worth, Texas 76102 or at such other place or places as may be approved by the General Partner. The General Partner shall be responsible for maintaining at the Partnership's principal place of business those records required by the Act to be maintained there. Section 1.07 Registered Agent and Office. The Registered Agent (as defined in the Act) for the Partnership shall be Bruce B. Selkirk, III. The Registered Office (as defined in the Act) of the Partnership shall be 201 Main Street, Suite 1455, Fort Worth, Texas 76102. Section 1.08 Certain Definitions. (a) "Accounting Date" shall mean the close of business on (i) the date any Additional Capital Contributions are made by the Partners in a manner other than in accordance with their then existing Percentage Interests and (ii) the last day of each fiscal year of the Partnership. (b) "Accounting Period" shall mean the period at the opening of business on the day following any Accounting Date (or the Effective Date of this Agreement, in the case of the first Accounting Period) and continuing until the close of business on the next succeeding Accounting Date. ARTICLE II OPERATIONS Section 2.01 Management of Partnership. The right to manage, control, and conduct the business and affairs of the Partnership shall be vested solely in the General Partner. The Limited Partners shall not take part in the management of the affairs of the Partnership and under no circumstances may any Limited Partner control the Partnership business or sign for or bind the Partnership. Without limiting the generality of the foregoing, and notwithstanding anything to the contrary contained in this Agreement, the General Partner shall have the exclusive authority to act for and on behalf of the Partnership, and no third party shall ever be required to inquire into the authority of the General Partner to take such action on behalf of the Partnership. 2 Section 2.02 Expenses. The Partnership shall pay or reimburse the General Partner and the Tax Matters Partner (as defined in Section 2.04) for all direct, out-of-pocket expenses incurred by it with respect to its duties under Sections 2.01 2.04 to the Partnership, including, without limitation, accounting expenses, insurance premiums attributable directly to the Partnership, legal fees, and other direct costs associated with the formation and operation of the Partnership. Section 2.03 EXCULPATIONS; INDEMNITIES. (a) NEITHER THE PARTNERS, THE TAX MATTERS PARTNER, THEIR AFFILIATES NOR ANY OF THEIR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS, PARTNERS, MEMBERS, MANAGERS, EMPLOYEES OR AGENTS (INDIVIDUALLY A "COVERED PERSON") SHALL BE LIABLE TO THE PARTNERSHIP, ANY PARTNER, OR ANY OTHER PERSON FOR ANY ACT OR OMISSION TAKEN OR SUFFERED BY SUCH COVERED PERSON IN GOOD FAITH AND IN THE BELIEF THAT SUCH ACT OR OMISSION IS IN OR IS NOT OPPOSED TO THE BEST INTERESTS OF THE PARTNERSHIP, PROVIDED, THAT SUCH ACT OR OMISSION IS NOT FRAUD, WILLFUL MISCONDUCT, OR A KNOWING MATERIAL VIOLATION OF THIS AGREEMENT BY SUCH COVERED PERSON. NO COVERED PERSON SHALL BE LIABLE TO THE PARTNERSHIP, ANY PARTNER, OR ANY OTHER PERSON FOR ANY ACTION TAKEN BY ANY OTHER PARTNER, NOR SHALL ANY COVERED PERSON BE LIABLE TO THE PARTNERSHIP, ANY OTHER PARTNER, OR ANY OTHER PERSON FOR ANY ACTION OF ANY EMPLOYEE OR AGENT OF THE COVERED PERSON, PROVIDED, SUCH ACTION IS WITHIN THE SCOPE OF THE PURPOSES OF THE PARTNERSHIP AND THE COVERED PERSON SEEKING EXCULPATION SATISFIES THE PARAMETERS OF THE PRECEDING SENTENCE. (b) TO THE FULLEST EXTENT ALLOWED OR PERMITTED UNDER ANY PROVISION OF APPLICABLE LAW, INCLUDING, WITHOUT LIMITATION, THE ACT, THE PARTNERSHIP SHALL INDEMNIFY, DEFEND, AND HOLD HARMLESS EACH PARTNER, ITS AFFILIATES AND THEIR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS, PARTNERS, MEMBERS, MANAGERS, EMPLOYEES OR AGENTS (INDIVIDUALLY AN "INDEMNITEE") TO THE EXTENT OF THE PARTNERSHIP ASSETS, FROM AND AGAINST ANY LOSSES, EXPENSES, JUDGMENTS, FINES, SETTLEMENTS, AND DAMAGES INCURRED BY THE PARTNERSHIP OR SUCH INDEMNITEE ARISING OUT OF ANY CLAIM BASED UPON ACTS (INCLUDING, WITHOUT LIMITATION, NEGLIGENT ACTS) PERFORMED OR OMITTED TO BE PERFORMED BY THE PARTNERSHIP OR SUCH INDEMNITEE IN CONNECTION WITH THE BUSINESS OF THE PARTNERSHIP, INCLUDING, WITHOUT LIMITATION, COSTS, EXPENSES, AND ATTORNEYS' FEES EXPENDED IN THE SETTLEMENT OR DEFENSE OF ANY SUCH CLAIM. ALL DECISIONS OF THE PARTNERSHIP CONCERNING ANY ACTION ALLOWED OR PERMITTED UNDER APPLICABLE LAW CONCERNING THE INDEMNITY OF ANY PERSON OR ENTITY BY THE PARTNERSHIP SHALL BE MADE AS DETERMINED BY THE GENERAL PARTNER. Section 2.04 Tax Matters Partner. The General Partner shall act as the "Tax Matters Partner" for federal income tax purposes. The Tax Matters Partner shall mean the Partner (a) designated as the "tax matters partner" within the meaning of Section 6231(a)(7) of the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law, collectively the "Code") and (b) whose responsibilities as Tax Matters Partner include, where appropriate, commencing on behalf of the Partnership certain judicial proceedings regarding Partnership federal income tax items and informing all Partners of any administrative or judicial proceeding involving federal income taxes. In exercising its responsibilities as Tax Matters Partner, the General Partner shall have the final decision making authority with respect to all federal income tax matters involving the Partnership. Any direct 3 out-of-pocket expense incurred by the Tax Matters Partner in carrying out its responsibilities and duties under this Agreement shall be allocated to and charged to the Partnership as an expense of the Partnership for which the Tax Matters Partner shall be reimbursed. ARTICLE III FINANCING Section 3.01 Capital Contributions. (a) On the Effective Date, each Partner agrees to contribute (the "Initial Capital Contributions") to the capital of the Partnership the amount in cash set forth on such Partner's signature page attached hereto. (b) If at any time the General Partner determines, in its sole discretion, that additional funds are needed for (i) any direct out-of-pocket costs and expenses incurred by the Partnership in connection with the formation, financing, and operation of the Partnership or (ii) the normal day-to-day business and affairs of the Partnership or for any other Partnership purpose as determined in the sole discretion of the General Partner, then from time to time the General Partner may make a written call for such funds ("Call"). Within thirty (30) days after the General Partner gives written notice of the Call, the Partners shall be obligated to make additional capital contributions to the Partnership, pro rata in accordance with their Percentage Interests (with each such contribution being referred to as an "Additional Capital Contribution"). If any Partner does not to deliver (the "Non-Contributing Partner") to the General Partner for the use of the Partnership his or its pro rata portion of any Call (with such portion not being contributed being referred to herein as the "Default Amount") within the time prescribed above, each of the other Partners shall have the right, but not the obligation, without further notice, to advance for his or its own capital account all or a portion of the Default Amount (with any Partner contributing a portion of the Default Amount being referred to as a "Contributing Partner"); provided, however; that if more than one Partner desires to be a Contributing Partner and to advance a portion of the Default Amount, each such Contributing Partner shall only advance his or its pro rata portion of the Default Amount as among all Contributing Partners. Section 3.02 Capital Accounts. The amount of a Partner's capital account ("Capital Account") in the Partnership shall be determined in accordance with Regulations Section 1.704-1 (b)(2)(iv), including by: (a) crediting to such account (i) all contributions to the Partnership made by or on behalf of such Partner or his or its predecessor in interest at their fair market value and (ii) all gains and income of the Partnership allocated to such Partner or his or its predecessor in interest; and (b) debiting to such account (i) all distributions from the Partnership made to or on behalf of such Partner or his or its predecessor in interest, including the fair market value of any property distributed (less any liabilities assumed by the Partner or to which any property may be subject) and (ii) all losses and deductions of the Partnership allocated to such Partner or his or its predecessor in interest. 4 Section 3.03 Limited Liability of Limited Partners. Notwithstanding anything contained in this Agreement to the contrary, the liability of each Limited Partner for any of the debts, losses, or obligations of the Partnership shall be limited to the amount of such Limited Partner's capital contributions pursuant to Section 3.01 hereof. Accordingly, no Limited Partner shall be obligated to provide additional capital to the Partnership or its creditors by way of contribution, loan, or otherwise beyond the amount of the capital contributions required of such Limited Partner pursuant to Section 3.01 hereof. Except as provided in the Act, no Limited Partner shall have any personal liability whatsoever, whether to the Partnership or any third party, for the debts of the Partnership or any of its losses beyond the amount of the Limited Partner's capital contributions. Section 3.04 Treatment of Capital Contributions. Except as provided in this Agreement to the contrary, no Partner shall be entitled to interest on his or its contributions to the capital of the Partnership nor shall any Partner be entitled to demand the return of all or any part of such contributions to the capital of the Partnership. Section 3.05 Benefits of Agreement. Nothing in this Agreement, and, without limiting the generality of the foregoing, in this Article III, expressed or implied, is intended or shall be construed to give to any creditor of the Partnership or to any creditor of any Partner or any other person or entity whatsoever, other than the Partners and the Partnership, any legal or equitable right, remedy, or claim under or in respect of this Agreement or any covenant, condition, or provision herein contained, and such provisions are and shall be held to be for the sole and exclusive benefit of the Partners and the Partnership. ARTICLE IV ACCOUNTING, ALLOCATIONS, AND CURRENT DISTRIBUTIONS Section 4.01 Percentage Interests. Except as adjusted pursuant to Section 4.02, for purposes of allocating profits and losses in accordance with Section 4.03, and for purposes of distributions under Section 4.08, each Partner shall have the percentage interest in the Partnership (collectively the "Percentage Interests" and individually, a "Percentage Interest") set forth on such Partner's signature page attached hereto. Section 4.02 Adjustments to Percentage Interests. As of each date that Additional Capital Contribution are made by the Partners pursuant to Section 3.01(b) in a ratio other than in accordance with their then existing Percentage Interests, then the Percentage Interests of the Partners shall be immediately adjusted such that the Percentage Interest of each Partner equals a fraction, expressed as a percentage, in which the numerator equals the aggregate capital contributions made by such Partner to such date, and the denominator equals the aggregate capital contributions made to the Partnership by the Partners to such date. If the Percentage Interests of any Partners are adjusted pursuant to this Section 4.02, no Partner shall have the right to modify, rectify, or undo such adjustments thereafter, and such adjustments shall be made without the need for any further act or writing to effect any such adjustment. Each Partner hereby appoints the General Partner as his or its duly authorized agent and attorney-in-fact for purposes of preparing and executing any amendments to this Agreement necessary or desirable to reflect any adjustment of Percentage Interests under this Section 4.02. The rights granted to 5 any Partner under this Section 4.02 shall be in addition to any Partner's rights and remedy pursuant to this Agreement, at law, or in equity with respect to any Additional Capital Contribution made other than in accordance with then existing Percentage Interests. Section 4.03 Tax Status, Reports, and Allocations. (a) Notwithstanding any provision contained in this Agreement to the contrary, each of the Partners hereby recognizes that the Partnership will be classified as a partnership for federal income tax purposes and, therefore, will be subject to all provisions of Subchapter K of the Code; provided, however, that the filing of United States Partnership Returns of Income shall not be construed to extend the purposes of the Partnership or expand the obligations or liabilities of the Partners. (b) The General Partner or, at its discretion, an accountant ("Accountant") selected by the General Partner shall prepare or cause to be prepared all tax returns and statements, if any, that must be filed on behalf of the Partnership with any taxing authority and shall timely file such returns or statements. (c) For accounting and federal and state (if any) income tax purposes, all income, gains, losses, deductions, and credits of the Partnership for each Accounting Period shall be allocated among the Partners pro rata in accordance with their respective Percentage Interests. (d) The tax allocations made in accordance with Sections 4.03(e), 4.04, 4.05(b), and 4.05(c) (collectively, the "Regulatory Allocations") shall be taken into account in allocating, for tax purposes, items of income, gain, loss, deduction, and credit among the Partners so that, to the extent possible, the net amount, when taken together, of such allocations of income, gain, loss, deduction, and credit and the Regulatory Allocations made to each Partner shall be equal to the amount that would have been allocated to each such Partner if the Regulatory Allocations had not occurred. (e) Any loss or deductions attributable to any Partnership recourse liability (as defined in Regulations Section 1.752-1(a)(i)) ("Recourse Debt") must be specially allocated to any Partner who bears the economic risk of loss with respect to the Recourse Debt to which such loss or deductions are attributable. If any allocations are made to any Partner pursuant to the foregoing sentence, then after any allocations required by Section 4.05 hereof have been made but prior to allocations pursuant to Section 4.03(b), income shall be allocated to such Partner until on a cumulative basis an aggregate amount of income equal to such cumulative deductions and losses has been allocated to each such Partner. Section 4.04 Certain Fair Market Value/Tax Basis Differences. In accordance with Section 704(c) of the Code and the applicable IRS Regulations thereunder, income, gain, loss, deduction, and tax depreciation with respect to any property contributed to the capital of the Partnership which had a fair market value different than its adjusted tax basis as of the date of contribution, shall, solely for income tax purposes, be allocated among the Partners so as to take into account such variation between the adjusted tax basis of such property to the Partnership and the fair market value of such property as of the date of contribution. 6 Section 4.05 Minimum Gain and Income Offsets. (a) Definitions. (i) "Partner Minimum Gain" shall be "partner nonrecourse debt minimum gain," as defined in Regulations Section 1.704-2(i)(2) and determined in accordance with Regulations Sections 1.704-2(i)(3) and 1.704-2(k). (ii) "Partner Nonrecourse Debt" has the meaning set forth in Regulations Sections 1.704-2(b)(4) and 1.704-2(i). (iii) "Partner Nonrecourse Deduction" has the meaning set forth in Regulations Section 1.704-2(i). (iv) "Partnership Minimum Gain" has the meaning set forth in Regulations Section 1.704-2(d) and shall be determined in accordance with the provisions of Regulations Section 1.704-2(k). (v) "Regulations" means the temporary and permanent Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding Regulations). (b) Minimum Gain. (i) Notwithstanding any other provision of this Agreement to the contrary, if the Partnership Minimum Gain on the last day of any fiscal year is less than the Partnership Minimum Gain on the last day of the immediately preceding fiscal year, then (before any other allocation of Partnership items for such year under this Agreement, other than as provided in paragraph (ii) below) there shall be specially allocated to each Partner items of Partnership income and gain for such year (and, if necessary, subsequent fiscal years) in an amount equal to such Partner's share of the net decrease in Partnership Minimum Gain (determined in accordance with Regulations Section 1.704-2(g)). The items to be so allocated shall be determined in accordance with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2)(i) and (iii). This Section 4.05(b)(i) is intended to comply with the minimum gain chargeback requirement in Regulations Section 1.704-2(f) and shall be interpreted consistently therewith. (ii) Subsequent to any allocations under Section 4.05(b)(i) above, other than allocations of gain from the disposition of property subject to Partner Nonrecourse Debt, if Partner Minimum Gain on the last day of any fiscal year is less than the Partner Minimum Gain on the last day of the immediately preceding fiscal year, then, except as provided herein, each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent fiscal years) in an amount equal to that Partner's share, if any, (determined in accordance with Regulations Section 1.704-2(i)(4)) of the net decrease in Partner Minimum Gain (such net decrease to be determined in a manner consistent with the provisions of Regulations Sections 1.704-2(d) and 1.704-2(g)(3)). The items to be so allocated shall be determined in accordance with the provisions of Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii) and (iii). Notwithstanding the foregoing, no such special allocations of income and gain shall be made to the extent that the net decrease in Partner Minimum Gain described above arises 7 because the liability ceases to be Partner Nonrecourse Debt due to a conversion, refinancing, or other change in the debt instrument that causes it to become partially or wholly a nonrecourse liability within the meaning of Regulations Section 1.752-1(a)(2). This Section 4.05(b)(ii) is intended to comply with the chargeback and other provisions of Regulations Section 1.704-2(i) and shall be interpreted consistently therewith. (c) Qualified Income Offset. Notwithstanding any other provision of this Agreement, if during any fiscal year any Partner (i) is allocated pursuant to Code Section 706(d) or Regulations Section 1.751-1(b)(2)(ii) any Net Loss, loss, items of loss, deductions, or Code Section 705(a)(2)(B) expenditures, (ii) is distributed any cash or property from the Partnership and such distributions exceed offsetting increases to such Partner's Capital Account that are reasonably expected to occur during such year, or (iii) receives any other adjustment, allocation, or distribution described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5), or (6) and, as a result of such adjustment, allocation, or distribution, such Partner has a Qualified Income Offset Amount (as hereinafter defined), then items of income and gain (including gross income) for such fiscal year or other period (and, if necessary, subsequent fiscal years) shall (prior to any allocation pursuant to Section 4.03 hereof) be allocated to such Partner in an amount equal to his Qualified Income Offset Amount; provided , however, that any allocation of income or gain shall be required under this sentence only if and to the extent that such Partner would have a Qualified Income Offset Amount after all other allocations provided for in this Agreement have been tentatively made as if Sections 4.05(b) and (c) were not contained herein. As used herein, the term "Qualified Income Offset Amount" for a Partner means the excess, if any, of (x) the negative balance a Partner has in its Capital Account following the adjustment, allocation, or distribution described in the preceding sentence, over (y) the maximum amount that it is obligated (or is deemed to be obligated) to restore to the Partnership upon liquidation as determined in accordance with Regulations Sections 1.704-2(f), (g), and (i). This Section 4.05(c) is intended to satisfy the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. (d) All elections, decisions, and other matters concerning the allocation of profits, gains, and losses among the Partners as well as other accounting procedures not specifically and expressly provided for by the terms of this Agreement, shall be determined, in good faith, by the General Partner. Section 4.06 Accounting. (a) The fiscal year of the Partnership shall end on the last day of December of each year. (b) The books of account of the Partnership shall be kept and maintained at all times at the principal place of business of the Partnership or at such other place or places approved by the General Partner. The books of account shall be maintained according to federal income tax principles using the accrual method of accounting, consistently applied, and shall show all items of income and expense. (c) The General Partner shall cause a balance sheet of the Partnership dated as of the end of the fiscal year and a related statement of income or loss for the Partnership for such fiscal 8 year to be prepared by the Accountant and furnished, at the expense of the Partnership, to each of the Partners on an annual basis, within ninety (90) days after the close of each fiscal year. (d) The General Partner shall forward to the Partners all reports provided to the Partnership by the Master Company within ten (10) days of the Partnership's receipt of such reports. (e) Each Partner shall have the right at reasonable times and upon reasonable advance notice during usual business hours to audit, examine, and make copies of or extracts from the books of account of the Partnership. Such right may be exercised through any agent or employee of such Partner designated by him or it or by an independent certified public accountant designated by such Partner. Each Partner shall bear all expenses incurred in any examination made on behalf of such Partner. Section 4.07 Bank Accounts. Funds of the Partnership shall be deposited in a Partnership account or accounts in the bank or banks as selected by the General Partner. Withdrawals from bank accounts shall only be made by the General Partner or such other parties as may be approved by the General Partner. Section 4.08 Distributions to Partners. Except as provided in Section 6.05 in connection with the termination and liquidation of the Partnership, the General Partner may distribute cash funds to the Partners at such times and in such amounts as the General Partner determines, in its sole discretion, except that such funds shall be distributed by the General Partner to the Partners pro rata in accordance with their respective Percentage Interests at the time of the distribution. In determining the amount of funds to distribute pursuant to this Section 4.08, the General Partner may consider such factors as the need to allocate funds to any reserves for Partnership contingencies or any other Partnership purposes that the General Partner deems necessary or appropriate. Section 4.09 Changes in Percentage Interests. If a Partner's Percentage Interest changes during any fiscal year, the allocations to be made pursuant to this Agreement shall be made in accordance with Section 706 of the Code, using any convention permitted by Section 706 of the Code and the Regulations promulgated thereunder and selected by the General Partner so as to equitably effectuate the allocations of this Article IV. ARTICLE V ASSIGNMENT Section 5.01 Prohibited and Permitted Transfers. Except as specifically provided in this Article V, no Limited Partner may sell, transfer, assign, mortgage, hypothecate, or otherwise encumber or permit or suffer any encumbrance of all or any part of his or its interest in the Partnership without the approval of the General Partner and the General Partner may not sell, transfer, assign, mortgage, hypothecate, or otherwise encumber or permit or suffer any encumbrance of all or any part of its interest in the Partnership. Any attempt so to transfer or encumber any such interest shall be null and void, ab initio. The Partners will be excused from accepting the performance of and rendering performance to any person other than the Limited 9 Partner hereunder (including any trustee or assignee of or for such Partner) as to whom such requisite approval of the General Partner has not been rendered. Section 5.02 Further Restrictions on Transfer. (a) In the event of any assignment or transfer permitted under this Article, the interest so assigned or transferred shall remain subject to all terms and provisions of this Agreement; the assignee or transferee shall be deemed, by accepting the interest so assigned or transferred, to have assumed all the obligations hereunder relating to the interests or rights so assigned or transferred and shall agree in writing to the foregoing if requested by the General Partner. Any transferee or assignee of the interest of a Partner shall be entitled only to receive distributions hereunder until such transferee or assignee has been admitted as a Substituted Partner (as defined in Section 5.03). Until such transferee or assignee (other than an existing Partner) is admitted to the Partnership as a Substituted Partner, the Partner transferring all or any portion of his or its interest to such assignee or transferee shall remain primarily and directly liable for the performance of all his or its obligations under this Agreement. After the admission of such assignee or transferee as a Substituted Partner, such transferor Partner shall only be primarily and directly liable under this Agreement or otherwise for any obligations or liabilities accruing prior to the effective time of the admission of such Substituted Partner, unless such transferor Partner is released in writing from such obligations or liabilities by the General Partner. (b) Any Partner making or offering to make a transfer of all or any part of his or its interest in the Partnership shall indemnify and hold harmless the Partnership and all other Partners from and against any costs, damages, claims, suits, or fees suffered or incurred by the Partnership or any such other Partner arising out of or resulting from any claims by the transferee of such Partnership interest or any offerees of such Partnership interest in connection with such transfer or offer. Section 5.03 Substituted Partner. An assignee or transferee (other than an existing Partner) of the interest of a Partner may be admitted as a substitute partner ("Substituted Partner") only with the approval of the General Partner. Unless the assignee is already a General Partner, any assignee of a Partnership interest to whose admission such consent is given shall become and shall have only the rights and duties of a Limited Partner and the assigned Partnership interest shall thereafter be a Limited Partner's interest. Upon the receipt by the General Partner of an appropriate supplement to this Agreement pursuant to which such Substituted Partner agrees to be bound by all the terms and provisions of this Agreement, the General Partner shall reflect the admission of a Substituted Partner and the withdrawal of the transferring Partner, if appropriate, by preparing a supplemental exhibit, dated as of the date of such admission and withdrawal, and by filing it with the records of the Partnership. Any Substituted Partner shall, if required by the General Partner, prior to such admission, also execute any other documents requested by the General Partner, including, without limitation, an irrevocable power of attorney in form satisfactory to the General Partner appointing the General Partner as such person's attorney-in-fact with full power to execute, swear to, acknowledge, and file all certificates and other instruments necessary to carry out the provisions of this Agreement, including, without limitation, such undertakings as the General Partner may require for the payment of all fees and costs necessary to effect any such transfer and admission. The transferor and transferee of the transferred interest shall be responsible for the costs associated with the 10 transfer of the interest, including, without limitation, reasonable attorneys fees. Upon admission, such Substituted Partner shall be subject to all provisions of this Agreement in the place and stead of his assignor as if the Substituted Partner originally was a party to this Agreement. Section 5.04 Basis Adjustment. The Tax Matters Partner may cause, in its sole and absolute discretion, the Partnership to elect pursuant to Section 754 of the Code and the Regulations thereunder to adjust the basis of the Partnership Assets as provided by Sections 743 or 734 of the Code and the Regulations thereunder. Section 5.05 Other Restricted Transfers. Notwithstanding any other provision herein to the contrary, unless prior written consent is given by the General Partner, no transfer of any interest in the Partnership may be made to any person who is related (within the meaning of Regulations Section 1.752-4(b)) to any lender of the Partnership whose loan constitutes a nonrecourse liability of the Partnership. ARTICLE VI WITHDRAWAL, DISSOLUTION, TERMINATION, AND LIQUIDATION Section 6.01 Withdrawal. No Limited Partner shall at any time retire or withdraw from the Partnership without obtaining the approval of the General Partner, and the General Partner shall not retire or withdraw from the Partnership at any time. Retirement or withdrawal by any Partner in contravention of this Section 6.01 shall subject such Partner to liability for all damages caused any other Partner (other than a Partner who is, at the time of such withdrawal, in default under this Agreement) by such retirement or withdrawal and the consequential dissolution of the Partnership. Any notice of withdrawal must be in writing. Section 6.02 Dissolution of the Partnership. The Partnership shall be dissolved upon the occurrence of any of the following: (a) The withdrawal, as defined in the Act, of a General Partner, unless: (i) the remaining General Partner, if any, elects in writing within ninety (90) days after such event to reconstitute the Partnership, to continue as the General Partner, and to continue the Partnership and its business, or (ii) there is no remaining General Partner, then within ninety (90) days after such event, all of the Limited Partners agree to appoint in writing a successor General Partner, as of the date of the withdrawal of the General Partner, and agree to reconstitute the Partnership and continue the business of the Partnership, and such successor General Partner agrees in writing to accept such election; or (b) The sale or other disposition, not including an exchange, of substantially all of the assets of the Partnership (except under circumstances where all or a portion of the purchase price is payable after the closing of the sale or other disposition); (c) December 31, 2049, unless extended by the consent of all Partners; or 11 (d) Subject to any obligations of the Partnership, when approved by all of the Partners. Nothing contained in this Section 6.02 is intended to grant to any Partner the right to dissolve the Partnership at will (by retirement, resignation, withdrawal, or otherwise) or to exonerate any Partner from liability to the Partnership and the remaining Partners if he or it dissolves the Partnership at will. Section 6.03 Continuation of Partnership. If the Partnership is continued as provided in Section 6.02(a)(i) or (ii), then, as of the date of withdrawal, the General Partner with respect to which an event of withdrawal under Section 6.02 has occurred (or his or its estate or successor in interest) (the "Withdrawing General Partner") shall have none of the powers of a General Partner under this Agreement or applicable law and shall have only the rights and powers of an assignee of a Partner hereunder to share in any Partnership profits, losses, gains, and distributions in accordance with his or its Percentage Interest and shall have no other rights or powers of a Partner hereunder. Section 6.04 Withdrawal, etc. of a Limited Partner. The withdrawal, termination (in the case of a Limited Partner that is a trust), dissolution and termination (in the case of a Limited Partner that is a partnership), dissolution (in the case of a Limited Partner that is a corporation or limited liability company), retirement, or adjudication as a bankrupt of a Limited Partner (the "Withdrawing Limited Partner") shall not dissolve the Partnership, but the rights of such Withdrawing Limited Partner to share in the profits and losses of the Partnership and to receive distributions of Partnership funds shall, upon the happening of such an event, pass to the Withdrawing Limited Partner's successors in interest subject to this Agreement, and the Partnership shall continue as a limited partnership. Section 6.05 Termination and Liquidation of the Partnership. (a) Upon dissolution of the Partnership unless continued pursuant to Section 6.03, the Partnership shall be terminated as rapidly as business circumstances will permit. At the direction of the General Partner, or a Partner approved by the Limited Partners if the dissolution of the Partnership is caused by the withdrawal of the General Partner (the General Partner or the other Partner, as the case may be, being herein called the "Terminating Partner"), a full accounting of the assets and liabilities of the Partnership shall be taken and a statement of the Partnership Assets and a statement of each Partner's Capital Account shall be furnished to all Partners as soon as is reasonably practicable. The Terminating Partner shall take such action as is necessary so that the Partnership's business shall be terminated, its liabilities discharged, and its assets distributed as hereinafter described. The Terminating Partner may, in his or its sole discretion, either sell all or a part of the Partnership Assets, distribute all or a part of the Partnership Assets in kind to the Partners, or sell part and distribute part of the Partnership Assets in kind to the Partners (i.e., a combination of the two approaches); provided, however, that the Terminating Partner shall ascertain the fair market value of the Partnership Assets by appraisal or other reasonable means of all Partnership Assets remaining unsold and each Partner's Capital Account shall be charged or credited, as the case may be, as if such Partnership Assets had been sold at their fair market value and the income, gains, losses, deductions, and credits realized thereby had been allocated to the Partners in accordance with Article IV hereof. A reasonable period of time 12 shall be allowed for the orderly termination of the Partnership to minimize the normal losses of a liquidation process. (b) After the payment of all expenses of liquidation and of all debts and liabilities of the Partnership in such order or priority as provided by law (including any debts or liabilities to Partners, who shall be treated as secured or unsecured creditors, as may be the case, to the extent permitted by law, for sums loaned to the Partnership, if any, as distinguished from capital contributions) and after all resulting items of Partnership income, gain, credit, loss, or deduction are credited or debited to the Capital Accounts of the Partners in accordance with Articles III and IV hereof, all remaining Partnership Assets shall then be distributed among the Partners in accordance with their relative positive Capital Account balances. Upon termination, a Partner may not demand and receive cash in return for such Partner's capital contributions and no Partner shall have any obligation to restore any deficit that may then exist in that Partner's Capital Account. Distribution on termination may be made by the distribution to each Partner of an undivided interest in any asset of the Partnership that has not been sold at the time of termination of the Partnership. Section 6.06 General Partners Not Personally Liable. No General Partner nor any affiliate of any General Partner shall be personally liable for the return of the Capital Contributions of any Partner, and such return shall be made solely from available Partnership Assets, if any, and each Limited Partner hereby waives any and all claims it may have against any General Partner or any such affiliate in this regard. Section 6.07 Provisions Cumulative. All provisions of this Agreement relating to the dissolution, liquidation, and termination of the Partnership shall be cumulative to the extent not inconsistent with other provisions herein; that is, the exercise or use of one of the provisions hereof shall not preclude the exercise or use of any other provision of this Agreement to the extent not inconsistent therewith. ARTICLE VII GENERAL Section 7.01 Competing Business. Notwithstanding anything to the contrary contained in or inferable from this Agreement, the Act, or any other statute or principle of law, neither the Partners nor any of their shareholders, directors, officers, employees, partners, agents, family members, or affiliates (each a "Partner Affiliate") shall be prohibited or restricted in any way from investing in or conducting, either directly or indirectly, and may invest in and/or conduct, either directly or indirectly, businesses of any nature whatsoever, including the ownership and operation of businesses or properties similar to or in the same geographical area as those held by the Partnership. Any investment in or conduct of any such businesses by a Partner or any Partner Affiliate shall not give rise to any claim for an accounting by the other Partners or the Partnership or any right to claim any interest therein or the profits therefrom. Section 7.02 LIMITED PARTNER REPRESENTATIONS. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, EACH LIMITED PARTNER HEREBY REPRESENTS AND WARRANTS TO THE PARTNERSHIP, THE 13 GENERAL PARTNER, AND TO EACH OFFICER, DIRECTOR, SHAREHOLDER, MEMBER, PARTNER, CONTROLLING PERSON, AND AGENT OF THE GENERAL PARTNER THAT: (a) THE INTEREST IN THE PARTNERSHIP OF SUCH LIMITED PARTNER IS ACQUIRED FOR INVESTMENT PURPOSES ONLY FOR HIS OR ITS OWN ACCOUNT AND NOT WITH A VIEW TO OR IN CONNECTION WITH ANY DISTRIBUTION, REOFFER, RESALE, OR OTHER DISPOSITION NOT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER (THE "1933 ACT") AND APPLICABLE STATE SECURITIES LAWS; (b) SUCH LIMITED PARTNER, ALONE OR TOGETHER WITH HIS OR ITS REPRESENTATIVES, POSSESSES SUCH EXPERTISE, KNOWLEDGE, AND SOPHISTICATION IN FINANCIAL AND BUSINESS MATTERS GENERALLY, AND IN THE TYPE OF TRANSACTIONS IN WHICH THE PARTNERSHIP PROPOSES TO ENGAGE IN PARTICULAR, THAT HE OR IT IS CAPABLE OF EVALUATING THE MERITS AND ECONOMIC RISKS OF ACQUIRING AND HOLDING HIS OR ITS PARTNERSHIP INTEREST, AND THAT HE OR IT IS ABLE TO BEAR ALL SUCH ECONOMIC RISKS NOW AND IN THE FUTURE; (c) SUCH LIMITED PARTNER HAS HAD ACCESS TO ALL OF THE INFORMATION WITH RESPECT TO THE INTEREST ACQUIRED BY HIM OR IT UNDER THIS AGREEMENT THAT HE OR IT DEEMS NECESSARY TO MAKE A COMPLETE EVALUATION THEREOF AND HAS HAD THE OPPORTUNITY TO QUESTION THE GENERAL PARTNER CONCERNING SUCH INTEREST; (d) SUCH LIMITED PARTNER'S DECISION TO ACQUIRE HIS OR ITS INTEREST FOR INVESTMENT HAS BEEN BASED SOLELY UPON THE EVALUATION MADE BY HIM OR IT; (e) SUCH LIMITED PARTNER IS AWARE THAT HE OR IT MUST BEAR THE ECONOMIC RISK OF HIS OR ITS INVESTMENT IN THE PARTNERSHIP FOR AN INDEFINITE PERIOD OF TIME BECAUSE INTERESTS IN THE PARTNERSHIP HAVE NOT BEEN REGISTERED UNDER THE 1933 ACT OR UNDER THE SECURITIES LAWS OF ANY STATES, AND, THEREFORE, CANNOT BE SOLD UNLESS SUCH INTERESTS ARE SUBSEQUENTLY REGISTERED UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE; (f) SUCH LIMITED PARTNER IS AWARE THAT ONLY THE PARTNERSHIP CAN TAKE ACTION TO REGISTER SUCH INTEREST IN THE PARTNERSHIP AND THE PARTNERSHIP IS UNDER NO SUCH OBLIGATION AND DOES NOT PROPOSE TO ATTEMPT TO DO SO; AND (g) SUCH LIMITED PARTNER IS AWARE THAT THIS AGREEMENT PROVIDES RESTRICTIONS ON THE ABILITY OF A LIMITED PARTNER TO SELL, TRANSFER, ASSIGN, MORTGAGE, HYPOTHECATE, OR OTHERWISE ENCUMBER HIS OR ITS INTEREST IN THE PARTNERSHIP. Section 7.03 Notice. (a) All notices, demands, or requests provided for or permitted to be given pursuant to this Agreement must be in writing. (b) All notices, demands, and requests to be sent to a Partner, any Distributee(s) (or their Agent) of the interest of a Partner, or any Substituted Partner pursuant to this Agreement shall be deemed to have been properly given or served if: (i) personally delivered, (ii) deposited prepaid for next day delivery by Federal Express, or other similar overnight courier services, addressed to such Partner, (iii) deposited in the United States mail, addressed to such Partner, 14 prepaid and registered or certified with return receipt requested, or (iv) transmitted via telecopier or other similar device to the attention of such Partner, all at the address or telecopy number for such Partner set forth on such Partner's signature page attached hereto (as may be changed in accordance with subsection (d) below). (c) All notices, demands, and requests so given shall be deemed received: (i) when personally delivered, (ii) twenty-four (24) hours after being deposited for next day delivery with an overnight courier, (iii) forty-eight (48) hours after being deposited in the United States mail, or (iv) twelve (12) hours after being telecopied or otherwise transmitted and receipt has been confirmed. (d) The Partners, any Substituted Partners, and their respective Distributee(s)(or their Agent) shall have the right from time to time, and at any time during the term of this Agreement, to change their respective addresses and each shall have the right to specify as his or its address any other address within the United States of America by giving to the other parties at least thirty (30) days written notice thereof, in the manner prescribed in Section 7.03(b); provided however, that to be effective, any such notice must be actually received (as evidenced by a return receipt). (e) All distributions to any Partner shall be made at the address to which notices are to be sent unless otherwise specified in writing by such Partner. Section 7.04 Amendments. No amendments and/or supplements may be made to or restatements made of this Agreement or the Certificate of Limited Partnership (or any exhibits or schedules attached to any of them), without the consent of all of the Partners. Section 7.05 GOVERNING LAWS AND VENUE. THIS AGREEMENT IS MADE IN FORT WORTH, TARRANT COUNTY, TEXAS, AND THE RIGHTS AND OBLIGATIONS OF THE PARTNERS HEREUNDER SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. ALL MATTERS LITIGATED BY, AMONG, OR BETWEEN ANY OF THE PARTNERS THAT INVOLVE THIS AGREEMENT, THE RELATIONSHIP OF THE PARTNERS, OR ANY RELATED DOCUMENTS OR MATTERS HEREUNDER SHALL BE BROUGHT ONLY IN FORT WORTH, TARRANT COUNTY, TEXAS. Section 7.06 Rule of Construction. The general rule of construction for interpreting a contract, which provides that the provisions of a contract should be construed against the party preparing the contract, is waived by the parties. Each party acknowledges that he or it was represented by separate legal counsel in this matter who participated in the preparation of this Agreement or he or it had the opportunity to retain counsel to participate in the preparation of this Agreement but chose not to do so. Section 7.07 Entire Agreement. This Agreement, including all exhibits to this Agreement and, if any, exhibits to such exhibits, contains the entire agreement among the parties relative to the matters contained in this Agreement. Section 7.08 Waiver. No consent or waiver, express or implied, by any Partner to or for any breach or default by any other Partner in the performance by such other Partner of his or its obligations under this Agreement shall be deemed or construed to be a consent or waiver to or 15 of any other breach or default in the performance by such other Partner of the same or any other obligations of such other Partner under this Agreement. Failure on the part of any Partner to complain of any act or failure to act of any of the other Partners or to declare any of the other Partners in default, regardless of how long such failure continues, shall not constitute a waiver by such Partner of his or its rights hereunder. Section 7.09 Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to other persons or circumstances shall not be affected thereby, and the intent of this Agreement shall be enforced to the greatest extent permitted by law. Section 7.10 Binding Agreement. Subject to the restrictions on transfers and encumbrances set forth in this Agreement, this Agreement shall inure to the benefit of and be binding upon the undersigned Partners and their respective legal representatives, successors, and assigns. Whenever, in this Agreement, a reference to any party or Partner is made, such reference shall be deemed to include a reference to the legal representatives, successors, and assigns of such party or Partner. Section 7.11 Tense and Gender. Unless the context clearly indicates otherwise, the singular shall include the plural and vice versa. Whenever the masculine, feminine, or neuter gender is used inappropriately in this Agreement, this Agreement shall be read as if the appropriate gender was used. Section 7.12 Captions. Captions are included solely for convenience of reference and if there is any conflict between captions and the text of this Agreement, the text shall control. Section 7.13 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original for all purposes and all of which when taken together shall constitute a single counterpart instrument. Executed signature pages to any counterpart instrument may be detached and affixed to a single counterpart, which single counterpart with multiple executed signature pages affixed thereto constitutes the original counterpart instrument. All of these counterpart pages shall be read as though one and they shall have the same force and effect as if all of the parties had executed a single signature page. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 16 The undersigned has executed and delivered this Limited Partnership Agreement of Encore Operating, L.P. in Fort Worth, Texas, to be effective as of the Effective Date. GENERAL PARTNER EAP OPERATING, INC., a Delaware corporation By: /s/ Bruce B. Selkirk, III ----------------------------------------------- Bruce B. Selkirk, III, Executive Vice President Initial Capital Contribution: $176,777.78 Percentage Interest: 1.00% 17 The undersigned has executed and delivered this Limited Partnership Agreement of Encore Operating, L.P. in Fort Worth, Texas, to be effective as of the Effective Date. LIMITED PARTNER EAP PROPERTIES, INC., a Delaware corporation By: /s/ Bruce B. Selkirk, III ----------------------------------------------- Bruce B. Selkirk, III- Executive Vice President Initial Capital Contribution: $17,500,999.92 Percentage Interest: 99.00% 18