-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VzK9dSO6+ikoWo7FoZZm8GPCsywoRmsv8FzMuJEl2uljvfWODlxlKAbCGyfDuB6Y hzlr+xusvpbNldSGrVvosw== 0000850427-00-000029.txt : 20000225 0000850427-00-000029.hdr.sgml : 20000225 ACCESSION NUMBER: 0000850427-00-000029 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 34 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEODYNE ENERGY INCOME LTD PARTNERSHIP I-D CENTRAL INDEX KEY: 0000799178 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731265223 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-15831 FILM NUMBER: 552126 BUSINESS ADDRESS: STREET 1: TWO W SECOND ST CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9185831791 MAIL ADDRESS: STREET 1: SAMSON PLAZA STREET 2: TWO WEST SECOND ST CITY: TULSA STATE: OK ZIP: 74103 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LTD PARTNERSHIP I-D DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D DATE OF NAME CHANGE: 19900620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEODYNE ENERGY INCOME LTD PARTNERSHIP I-E CENTRAL INDEX KEY: 0000806613 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731270116 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-15832 FILM NUMBER: 552127 BUSINESS ADDRESS: STREET 1: TWO WEST SECOND ST CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9185831791 MAIL ADDRESS: STREET 1: SAMSON PLAZA STREET 2: TWO WEST SECOND ST CITY: TULSA STATE: OK ZIP: 74103 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LTD PARTNERSHIP I-E DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E DATE OF NAME CHANGE: 19900620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEODYNE ENERGY INCOME LTD PARTNERSHIP I-F CENTRAL INDEX KEY: 0000811031 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731292669 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-15833 FILM NUMBER: 552128 BUSINESS ADDRESS: STREET 1: TWO W SECOND ST CITY: TULSA STATE: OK ZIP: 74103 BUSINESS PHONE: 9185831791 MAIL ADDRESS: STREET 1: SAMSON PLAZA STREET 2: TWO WEST SECOND ST CITY: TULSA STATE: OK ZIP: 74103 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LTD PARTNERSHIP I-F DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: PAINEWEBBER GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F DATE OF NAME CHANGE: 19900620 10-K405 1 ANNUAL REPORT FORM 10-K405 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 Commission File Number: I-D: 0-15831 I-E: 0-15832 I-F: 0-15833 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F --------------------------------------------- (Exact name of Registrant as specified in its Articles) I-D 73-1265223 I-E 73-1270110 Oklahoma I-F 73-1292669 - --------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Two West Second Street, Tulsa, Oklahoma 74103 --------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (918) 583-1791 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Depositary Units in Geodyne Energy Income Limited Partnerships I-D through I-F Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to the filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K405 or any amendment to this Form 10-K405. X Disclosure is not contained herein. ----- -1- Disclosure is contained herein. ----- The Registrants are limited partnerships and there is no public market for trading in the partnership interests. DOCUMENTS INCORPORATED BY REFERENCE: None -2- FORM 10-K405 TABLE OF CONTENTS PART I........................................................................4 ITEM 1. BUSINESS......................................................4 ITEM 2. PROPERTIES....................................................9 ITEM 3. LEGAL PROCEEDINGS............................................18 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS..........18 PART II......................................................................18 ITEM 5. MARKET FOR UNITS AND RELATED LIMITED PARTNER MATTERS.........18 ITEM 6. SELECTED FINANCIAL DATA......................................21 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................25 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................................40 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................40 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..........................40 PART III.....................................................................40 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER..... 40 ITEM 11. EXECUTIVE COMPENSATION.......................................41 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............................................46 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............47 PART IV......................................................................49 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K..........................................49 SIGNATURES...................................................................54 -3- PART I. ITEM 1. BUSINESS General The Geodyne Energy Income Limited Partnership I-D (the "I-D Partnership"), Geodyne Energy Income Limited Partnership I-E (the "I-E Partnership"), and Geodyne Energy Income Limited Partnership I-F (the "I-F Partnership") (collectively, the "Partnerships") are limited partnerships formed under the Oklahoma Revised Uniform Limited Partnership Act. Each Partnership is composed of public investors as limited partners (the "Limited Partners") and Geodyne Resources, Inc. ("Geodyne"), a Delaware corporation, as the general partner. The Partnerships commenced operations on the dates set forth below: Date of Partnership Activation ----------- ------------------ I-D March 4, 1986 I-E September 10, 1986 I-F December 16, 1986 Immediately following activation, each Partnership invested as a general partner in a separate Oklahoma general partnership which actually conducts the Partnerships' production operations. Geodyne serves as managing partner of such general partnerships. Unless the context indicates otherwise, all references to any single Partnership or all of the Partnerships in this Annual Report on Form 10-K405 ("Annual Report") are references to the Partnership and its related general partnership, collectively. In addition, unless the context indicates otherwise, all references to the "General Partner" in this Annual Report are references to Geodyne as the general partner of the Partnerships, and as the managing partner of the related general partnerships. The General Partner currently serves as general partner of 26 limited partnerships, including the Partnerships. The General Partner is a wholly-owned subsidiary of Samson Investment Company. Samson Investment Company and its various corporate subsidiaries, including the General Partner (collectively "Samson"), are primarily engaged in the production and development of and exploration for oil and gas reserves and the acquisition and operation of producing properties. At December 31, 1999, Samson owned interests in approximately 14,000 oil and gas wells located in 17 states of the United States and the countries of Canada, Venezuela, and Russia. At December 31, 1999, Samson operated approximately 3,400 oil and gas wells located in 15 states of the United States, as well as Canada, Venezuela, and Russia. -4- The Partnerships are currently engaged in the business of owning interests in producing oil and gas properties located in the continental United States. The Partnerships may also engage to a limited extent in development drilling on producing oil and gas properties as required for the prudent management of the Partnerships. As limited partnerships, the Partnerships have no officers, directors, or employees. They rely instead on the personnel of the General Partner and the other Samson Companies. As of February 15, 2000, Samson employed approximately 920 persons. No employees are covered by collective bargaining agreements, and management believes that Samson provides a sound employee relations environment. For information regarding the executive officers of the General Partner, see "Item 10. Directors and Executive Officers of the General Partner." The General Partner's and the Partnerships' principal place of business is located at Samson Plaza, Two West Second Street, Tulsa, Oklahoma 74103, and their telephone number is (918) 583-1791 or (888) 436-3963 [(888) GEODYNE]. Pursuant to the terms of the partnership agreements for the Partnerships (the "Partnership Agreements"), the Partnerships would have terminated on December 31, 1999. However, the Partnership Agreements provide that the General Partner may extend the term of each Partnership for up to five periods of two years each. The General Partner has extended the terms of Partnerships for the first two year extension period to December 31, 2001. Funding Although the Partnership Agreements permit each Partnership to incur borrowings, operations and expenses are currently funded out of each Partnership's revenues from oil and gas sales. The General Partner may, but is not required to, advance funds to a Partnership for the same purposes for which Partnership borrowings are authorized. Principal Products Produced and Services Rendered The Partnerships' sole business is the production of, and related incidental development of, oil and gas. The Partnerships do not refine or otherwise process crude oil and condensate. The Partnerships do not hold any patents, trademarks, licenses, or concessions and are not a party to any government contracts. The Partnerships have no backlog of orders and do not participate in research and development activities. The Partnerships are not presently encountering shortages of oilfield tubular goods, compressors, production material, or other equipment. -5- Competition and Marketing The domestic oil and gas industry is highly competitive, with a large number of companies and individuals engaged in the exploration and development of oil and gas properties. The ability of the Partnerships to produce and market oil and gas profitably depends on a number of factors that are beyond the control of the Partnerships. These factors include worldwide political instability (especially in oil-producing regions), United Nations export embargoes, the supply and price of foreign imports of oil and gas, the level of consumer product demand (which can be heavily influenced by weather patterns), government regulations and taxes, the price and availability of alternative fuels, the overall economic environment, and the availability and capacity of transportation and processing facilities. The effect of these factors on future oil and gas industry trends cannot be accurately predicted or anticipated. The most important variable affecting the Partnerships' revenues is the prices received for the sale of oil and gas. Predicting future prices is not possible. Concerning past trends, average yearly wellhead gas prices in the United States have been volatile for many years. Over the past ten years such average prices have generally been in the $1.40 to $2.40 per Mcf range. Gas prices are currently in the upper end of this range. Substantially all of the Partnerships' gas reserves are being sold on the "spot market." Prices on the spot market are subject to wide seasonal and regional pricing fluctuations due to the highly competitive nature of the spot market. In addition, such spot market sales are generally short-term in nature and are dependent upon the obtaining of transportation services provided by pipelines. Spot prices for the Partnerships' gas increased from approximately $2.03 per Mcf at December 31, 1998 to approximately $2.24 per Mcf at December 31, 1999. Such prices were on an MMBTU basis and differ from the prices actually received by the Partnerships due to transportation and marketing costs, BTU adjustments, and regional price and quality differences. For the past ten years, average oil prices have generally been in the $16.00 to $24.00 per barrel range, but have been extremely volatile over the past two years. Due to global consumption and supply trends as well as a slowdown in Asian energy demand, oil prices in late 1997 and early 1998 reached historically low levels, dropping to as low as approximately $9.25 per barrel. However, production curtailment agreements among major oil producing nations have caused recent oil prices to climb to over $24.00 per barrel in some markets. It is not known whether this trend will continue. Prices for the Partnerships' oil increased from approximately $9.50 per barrel at December 31, 1998 to approximately $22.75 per barrel at December 31, 1999. -6- Future prices for both oil and gas will likely be different from the prices in effect on December 31, 1999. Management is unable to predict whether future oil and gas prices will (i) stabilize, (ii) increase, or (iii) decrease. Significant Customers The following customers accounted for ten percent or more of the Partnerships' oil and gas sales during the year ended December 31, 1999: Partnership Customer Percentage ----------- -------- ---------- I-D El Paso Energy Marketing Company ("El Paso") 48.4% Conoco, Inc. 18.8% Hallwood Petroleum 11.7% I-E El Paso 54.6% I-F El Paso 30.7% Amoco Production Co. 11.7% Conoco, Inc. 10.8% In the event of interruption of purchases by one or more of the Partnerships' significant customers or the cessation or material change in availability of open access transportation by the Partnerships' pipeline transporters, the Partnerships may encounter difficulty in marketing their gas and in maintaining historic sales levels. Management does not expect any of its open access transporters to seek authorization to terminate their transportation services. Even if the services were terminated, management believes that alternatives would be available whereby the Partnerships would be able to continue to market their gas. The Partnerships' principal customers for crude oil production are refiners and other companies which have pipeline facilities near the producing properties of the Partnerships. In the event pipeline facilities are not conveniently available to production areas, crude oil is usually trucked by purchasers to storage facilities. -7- Oil, Gas, and Environmental Control Regulations Regulation of Production Operations -- The production of oil and gas is subject to extensive federal and state laws and regulations governing a wide variety of matters, including the drilling and spacing of wells, allowable rates of production, prevention of waste and pollution, and protection of the environment. In addition to the direct costs borne in complying with such regulations, operations and revenues may be impacted to the extent that certain regulations limit oil and gas production to below economic levels. Regulation of Sales and Transportation of Oil and Gas -- Sales of crude oil and condensate are made by the Partnerships at market prices and are not subject to price controls. The sale of gas may be subject to both federal and state laws and regulations. The provisions of these laws and regulations are complex and affect all who produce, resell, transport, or purchase gas, including the Partnerships. Although virtually all of the Partnerships' gas production is not subject to price regulation, other regulations affect the availability of gas transportation services and the ability of gas consumers to continue to purchase or use gas at current levels. Accordingly, such regulations may have a material effect on the Partnerships' operations and projections of future oil and gas production and revenues. Future Legislation -- Legislation affecting the oil and gas industry is under constant review for amendment or expansion. Because such laws and regulations are frequently amended or reinterpreted, management is unable to predict what additional energy legislation may be proposed or enacted or the future cost and impact of complying with existing or future regulations. Regulation of the Environment -- The Partnerships' operations are subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Compliance with such laws and regulations, together with any penalties resulting from noncompliance may increase the cost of the Partnerships' operations or may affect the Partnerships' ability to timely complete existing or future activities. Management anticipates that various local, state, and federal environmental control agencies will have an increasing impact on oil and gas operations. -8- Insurance Coverage The Partnerships are subject to all of the risks inherent in the exploration for and production of oil and gas, including blowouts, pollution, fires, and other casualties. The Partnerships maintain insurance coverage as is customary for entities of a similar size engaged in operations similar to that of the Partnerships, but losses can occur from uninsurable risks or in amounts in excess of existing insurance coverage. The occurrence of an event which is not fully covered by insurance could have a material adverse effect on the Partnerships' financial condition and results of operations. ITEM 2. PROPERTIES Well Statistics The following table sets forth the number of productive wells of the Partnerships as of December 31, 1999. Well Statistics(1) As of December 31, 1999 P/ship Number of Gross Wells(2) Number of Net Wells(3) - ------ ------------------------- -------------------------- Total Oil Gas Total Oil Gas ----- ----- ----- ----- ----- ----- I-D 508 403 105 3.35 .69 2.66 I-E 789 640 149 29.17 13.46 15.71 I-F 781 644 137 12.85 5.86 6.99 - ---------- (1) The designation of a well as an oil well or gas well is made by the General Partner based on the relative amount of oil and gas reserves for the well. Regardless of a well's oil or gas designation, it may produce oil, gas, or both oil and gas. (2) As used in this Annual Report, "gross well" refers to a well in which a working interest is owned, accordingly, the number of gross wells is the total number of wells in which a working interest is owned. (3) As used in this Annual Report, "net well" refers to the sum of the fractional working interests owned in gross wells. For example, a 15% working interest in a well represents one gross well, but 0.15 net well. -9- Drilling Activities During the year ended December 31, 1999, the Partnerships indirectly participated in the drilling of the following wells. The Partnerships do not own working interests in any of the wells; therefore, they did not incur any costs associated with the drilling activity: Revenue P/ship Well Name County St. Interest Type Status - ------ --------- ------ --- -------- ---- ------ I-D Flynn No. 1-18 Grady OK .00004 Gas Unknown I-E Flynn No. 1-18 Grady OK .00015 Gas Unknown I-F Flynn No. 1-18 Grady OK .00005 Gas Unknown Oil and Gas Production, Revenue, and Price History The following tables set forth certain historical information concerning the oil (including condensates) and gas production, net of all royalties, overriding royalties, and other third party interests, of the Partnerships, revenues attributable to such production, and certain price and cost information. As used in the following tables, direct operating expenses include lease operating expenses and production taxes. In addition, gas production is converted to oil equivalents at the rate of six Mcf per barrel, representing the estimated relative energy content of gas and oil, which rate is not necessarily indicative of the relationship of oil and gas prices. The respective prices of oil and gas are affected by market and other factors in addition to relative energy content. -10- Net Production Data I-D Partnership --------------- Year Ended December 31, ----------------------------------- 1999 1998 1997 --------- ---------- ---------- Production: Oil (Bbls) 8,482 11,249 18,760 Gas (Mcf) 314,010 456,195 510,113 Oil and gas sales: Oil $ 118,848 $ 141,203 $ 355,605 Gas 652,470 920,032 1,189,492 --------- --------- --------- Total $ 771,318 $1,061,235 $1,545,097 ========= ========= ========= Total direct operating Expenses $ 159,552 $ 234,481 $ 294,350 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 20.7% 22.1% 19.1% Average sales price: Per barrel of oil $14.01 $12.55 $18.96 Per Mcf of gas 2.08 2.02 2.33 Direct operating expenses per equivalent Bbl of oil $ 2.62 $ 2.69 $ 2.84 -11- Net Production Data I-E Partnership --------------- Year Ended December 31, ---------------------------------- 1999 1998 1997 ---------- ---------- ---------- Production: Oil (Bbls) 58,465 64,346 77,648 Gas (Mcf) 1,540,061 2,016,034 2,139,704 Oil and gas sales: Oil $ 972,427 $ 770,895 $1,462,528 Gas 3,189,103 3,840,340 4,541,724 --------- --------- --------- Total $4,161,530 $4,611,235 $6,004,252 ========= ========= ========= Total direct operating Expenses $1,153,937 $1,506,844 $1,771,150 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 27.7% 32.7% 29.5% Average sales price: Per barrel of oil $16.63 $11.98 $18.84 Per Mcf of gas 2.07 1.90 2.12 Direct operating expenses per equivalent Bbl of oil $ 3.66 $ 3.76 $ 4.08 -12- Net Production Data I-F Partnership --------------- Year Ended December 31, ------------------------------------ 1999 1998 1997 ---------- ---------- ---------- Production: Oil (Bbls) 27,794 30,203 38,725 Gas (Mcf) 381,318 530,040 571,101 Oil and gas sales: Oil $ 463,545 $ 365,340 $ 730,010 Gas 828,532 1,077,378 1,291,795 --------- --------- --------- Total $1,292,077 $1,442,718 $2,021,805 ========= ========= ========= Total direct operating Expenses $ 425,046 $ 668,016 $ 683,800 ========= ========= ========= Direct operating expenses as a percentage of oil and gas sales 32.9% 46.3% 33.8% Average sales price: Per barrel of oil $16.68 $12.10 $18.85 Per Mcf of gas 2.17 2.03 2.26 Direct operating expenses per equivalent Bbl of oil $ 4.65 $ 5.64 $ 5.11 Proved Reserves and Net Present Value The following table sets forth each Partnership's estimated proved oil and gas reserves and net present value therefrom as of December 31, 1999. The schedule of quantities of proved oil and gas reserves was prepared by the General Partner in accordance with the rules prescribed by the Securities and Exchange Commission (the "SEC"). Certain reserve information was reviewed by Ryder Scott Company, L.P. ("Ryder Scott"), an independent petroleum engineering firm. As used throughout this Annual Report, "proved reserves" refers to those estimated quantities of crude oil, gas, and gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known oil and gas reservoirs under existing economic and operating conditions. -13- Net present value represents estimated future gross cash flow from the production and sale of proved reserves, net of estimated oil and gas production costs (including production taxes, ad valorem taxes, and operating expenses) and estimated future development costs, discounted at 10% per annum. Net present value attributable to the Partnerships' proved reserves was calculated on the basis of current costs and prices at December 31, 1999. Such prices were not escalated except in certain circumstances where escalations were fixed and readily determinable in accordance with applicable contract provisions. The relatively high oil prices at December 31, 1999 have caused the estimates of remaining economically recoverable oil reserves, as well as the value placed on said reserves, to be significantly higher than in the past several years. Any decrease in these high oil prices would result in a corresponding reduction in the estimate of remaining oil reserves. The prices used in calculating the net present value attributable to the Partnerships' proved reserves do not necessarily reflect market prices for oil and gas production subsequent to December 31, 1999. There can be no assurance that the prices used in calculating the net present value of the Partnerships' proved reserves at December 31, 1999 will actually be realized for such production, and the General Partner believes that it is unlikely that oil prices will remain at their current high level. The process of estimating oil and gas reserves is complex, requiring significant subjective decisions in the evaluation of available geological, engineering, and economic data for each reservoir. The data for a given reservoir may change substantially over time as a result of, among other things, additional development activity, production history, and viability of production under varying economic conditions; consequently, it is reasonably possible that material revisions to existing reserve estimates may occur in the near future. Although every reasonable effort has been made to ensure that these reserve estimates represent the most accurate assessment possible, the significance of the subjective decisions required and variances in available data for various reservoirs make these estimates generally less precise than other estimates presented in connection with financial statement disclosures. -14- Proved Reserves and Net Present Values From Proved Reserves As of December 31, 1999(1) I-D Partnership: - --------------- Estimated proved reserves: Gas (Mcf) 1,593,815 Oil and liquids (Bbls) 110,189 Net present value (discounted at 10% per annum) $ 2,348,651 I-E Partnership: - --------------- Estimated proved reserves: Gas (Mcf) 8,291,562 Oil and liquids (Bbls) 727,816 Net present value (discounted at 10% per annum) $12,967,095 I-F Partnership: - --------------- Estimated proved reserves: Gas (Mcf) 2,770,339 Oil and liquids (Bbls) 351,651 Net present value (discounted at 10% per annum) $ 4,595,308 - ---------- (1) Includes certain gas balancing adjustments which cause the gas volumes and net present values to differ from the reserve reports prepared by the General Partner and reviewed by Ryder Scott. No estimates of the proved reserves of the Partnerships comparable to those included herein have been included in reports to any federal agency other than the SEC. Additional information relating to the Partnerships' proved reserves is contained in Note 4 to the Partnerships' financial statements, included in Item 8 of this Annual Report. Significant Properties The following table sets forth certain well and reserves information as of December 31, 1999 for the basins in which the Partnerships own a significant amount of properties. The table contains the following information for each significant basin: (i) the number of gross and net wells, (ii) the number of wells in which only a non-working interest is owned, (iii) the Partnership's total number of wells, (iv) the number and percentage of wells operated by the Partnership's affiliates, (v) -15- estimated proved oil reserves, (vi) estimated proved gas reserves, and (vii) the present value (discounted at 10% per annum) of estimated future net cash flow. The Anadarko Basin is located in western Oklahoma and the Texas Panhandle, while the Gulf Coast Basin is located in southern Louisiana and southeast Texas. The Permian Basin straddles west Texas and southeast New Mexico. -16- Significant Properties as of December 31, 1999 ----------------------------------------------
Wells Operated by Affiliates Oil Gas Gross Net Other Total ------------ Reserves Reserves Present Basin Wells Wells Wells(1) Wells Number % (Bbl) (Mcf) Value - ------------------ ------ ------- ------ ------ ------ ---- -------- ---------- ---------- I-D Partnership: Anadarko 72 1.88 34 106 20 19% 12,848 913,886 $1,055,249 Permian 407 .66 1 408 - - 90,063 451,504 913,861 I-E Partnership: Permian 418 4.24 1 419 6 1% 425,003 2,599,222 $5,062,354 Anadarko 88 10.08 34 122 23 19% 69,274 4,137,537 4,608,506 Gulf Coast 235 9.87 - 235 - - 131,579 424,229 1,471,765 I-F Partnership: Anadarko 88 4.60 34 122 23 19% 31,129 1,780,427 $1,947,032 Permian 410 2.01 - 410 6 1% 206,274 190,181 1,044,973 Gulf Coast 235 3.51 - 235 - - 46,268 177,653 551,896 - --------------------- (1) Wells in which only a non-working (e.g. royalty) interest is owned.
-17- Title to Oil and Gas Properties Management believes that the Partnerships have satisfactory title to their oil and gas properties. Record title to all of the Partnerships' properties is held by either the Partnerships or Geodyne Nominee Corporation, an affiliate of the General Partner. Title to the Partnerships' properties is subject to customary royalty, overriding royalty, carried, working, and other similar interests and contractual arrangements customary in the oil and gas industry, to liens for current taxes not yet due, and to other encumbrances. Management believes that such burdens do not materially detract from the value of such properties or from the Partnerships' interest therein or materially interfere with their use in the operation of the Partnerships' business. ITEM 3. LEGAL PROCEEDINGS To the knowledge of the General Partner, neither the General Partner nor the Partnerships or their properties are subject to any litigation, the results of which would have a material effect on the Partnerships' or the General Partner's financial condition or operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS There were no matters submitted to a vote of the Limited Partners of any Partnership during 1999. PART II. ITEM 5. MARKET FOR UNITS AND RELATED LIMITED PARTNER MATTERS As of February 1, 2000, the number of Units outstanding and the approximate number of Limited Partners of record in the Partnerships were as follows: Number of Number of Limited Partnership Units Partners ----------- --------- ------------ I-D 7,195 720 I-E 41,839 2,646 I-F 14,321 835 Units were initially sold for a price of $1,000. The Units are not traded on any exchange and there is no public trading market for them. The General Partner is aware of certain transfers of Units between unrelated parties, some of which are -18- facilitated by secondary trading firms and matching services. In addition, as further described below, the General Partner is aware of certain "4.9% tender offers" which have been made for the Units. The General Partner believes that the transfers between unrelated parties have been limited and sporadic in number and volume. Other than trades facilitated by certain secondary trading firms and matching services, no organized trading market for Units exists and none is expected to develop. Due to the nature of these transactions, the General Partner has no verifiable information regarding prices at which Units have been transferred. Further, a transferee may not become a substitute Limited Partner without the consent of the General Partner. Pursuant to the terms of the Partnership Agreements, the General Partner is obligated to annually issue a repurchase offer which is based on the estimated future net revenues from the Partnerships' reserves and is calculated pursuant to the terms of the Partnership Agreements. Such repurchase offer is recalculated monthly in order to reflect cash distributions to the Limited Partners and extraordinary events. The following table sets forth the General Partner's repurchase offer per Unit as of the periods indicated. For purpose of this Annual Report, a Unit represents an initial subscription of $1,000 to a Partnership. Repurchase Offer Prices ----------------------- 1998 1999 2000 ---------------------- ---------------------- ---- 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st P/ship Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. - ------ ---- ---- ---- ---- ---- ---- ---- ---- ---- I-D $122 $193 $157 $122 $104 $ 93 $160 $140 $119 I-E 134 181 157 137 137 135 151 137 119 I-F 133 168 152 135 135 135 131 122 108 The Partnership Agreements also provide for a right of presentment ("Right of Presentment") whereby the General Partner is required, upon request, to purchase up to 10% of a Partnership's outstanding Units at a price calculated pursuant to the terms of the Partnership Agreements and based on the liquidation value of the limited partnership interest, with a reduction for 70% of cash distributions that have been received prior to the transfer of the partnership interest. The following table sets forth the Right of Presentment price per Unit as of the periods indicated. -19- Right of Presentment Prices --------------------------- 1998 1999 2000 ---------------------- ---------------------- ---- 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st P/ship Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. - ------ ---- ---- ---- ---- ---- ---- ---- ---- ---- I-D $168 $208 $183 $158 $145 $137 $170 $156 $141 I-E 156 187 170 156 156 155 156 146 134 I-F 155 176 165 153 153 153 134 128 119 In addition to the repurchase offer and Right of Presentment described above, some of the Partnerships have been subject to "4.9% tender offers" from several third parties since 1997. The General Partner does not know the terms of these offers or the prices received by the Limited Partners who accepted these offers. Cash Distributions Cash distributions are primarily dependent upon a Partnership's cash receipts from the sale of oil and gas production and cash requirements of the Partnership. Distributable cash is determined by the General Partner at the end of each calendar quarter and distributed to the Limited Partners within 45 days after the end of the quarter. Distributions are restricted to cash on hand less amounts required to be retained out of such cash as determined in the sole judgment of the General Partner to pay costs, expenses, or other Partnership obligations whether accrued or anticipated to accrue. In certain instances, the General Partner may not distribute the full amount of cash receipts which might otherwise be available for distribution in an effort to equalize or stabilize the amounts of quarterly distributions. Any available amounts not distributed are invested and the interest or income thereon is for the accounts of the Limited Partners. -20- The following is a summary of cash distributions paid to the Limited Partners during 1998 and 1999 and the first quarter of 2000: Cash Distributions ------------------ 1998 ------------------------------------ 1st 2nd 3rd 4th P/ship Qtr.(1) Qtr.(1) Qtr.(1) Qtr. ------ -------- -------- --------- --------- I-D $33.22 $47.67 $35.72 $35.44 I-E 16.92 32.34 24.14 20.58 I-F 14.66 37.71 16.41 16.69 1999 2000 ------------------------------------ --------- 1st 2nd 3rd 4th 1st P/ship Qtr. Qtr. Qtr. Qtr. Qtr. ------ -------- -------- --------- --------- --------- I-D $18.07 $11.12 $13.34 $20.01 $21.13 I-E - 1.51 26.55 13.65 17.73 I-F - - 18.78 8.80 13.62 - -------------------------- (1) Amount of cash distribution includes proceeds from the sale of certain oil and gas properties. ITEM 6. SELECTED FINANCIAL DATA The following tables present selected financial data for the Partnerships. This data should be read in conjunction with the financial statements of the Partnerships, and the respective notes thereto, included elsewhere in this Annual Report. See "Item 8. Financial Statements and Supplementary Data." -21- Selected Financial Data
I-D Partnership --------------- 1999 1998 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ Oil and Gas Sales $ 771,318 $1,061,235 $1,545,097 $1,812,568 $1,237,419 Net Income: Limited Partners 365,028 762,614 845,470 1,114,924 516,300 General Partner 77,422 148,669 173,924 219,180 135,487 Total 442,450 911,283 1,019,394 1,334,104 651,787 Limited Partners' Net Income per Unit 50.73 105.99 117.51 154.96 71.76 Limited Partners' Cash Distributions per Unit 62.54 152.05 155.18 143.86 100.77 Total Assets 922,668 973,693 1,349,059 1,605,063 1,594,441 Partners' Capital (Deficit): Limited Partners 874,635 959,607 1,290,993 1,540,523 1,460,599 General Partner ( 31,152) ( 53,161) ( 27,560) ( 4,248) 17,993 Number of Units Outstanding 7,195 7,195 7,195 7,195 7,195
-22- Selected Financial Data
I-E Partnership --------------- 1999 1998 1997 1996 1995 ------------- ------------- ------------- ------------- ------------- Oil and Gas Sales $4,161,530 $4,611,235 $6,004,252 $6,006,431 $4,777,881 Net Income: Limited Partners 2,061,313 1,929,509 2,342,934 2,660,067 316,558 General Partner 468,089 548,239 568,504 602,481 368,023 Total 2,529,402 2,477,748 2,911,438 3,262,548 684,581 Limited Partners' Net Income per Unit 49.27 46.12 56.00 63.58 7.57 Limited Partners' Cash Distributions per Unit 41.71 93.98 82.69 68.19 51.15 Total Assets 5,859,238 5,425,656 7,486,793 8,572,514 8,957,340 Partners' Capital (Deficit): Limited Partners 5,497,285 5,180,972 7,183,463 8,300,529 8,493,462 General Partner ( 106,782) ( 232,100) ( 228,434) ( 113,140) ( 54,687) Number of Units Outstanding 41,839 41,839 41,839 41,839 41,839
-23- Selected Financial Data
I-F Partnership --------------- 1999 1998 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ Oil and Gas Sales $1,292,077 $1,442,718 $2,021,805 $2,121,336 $1,762,969 Net Income: Limited Partners 771,304 212,910 737,319 883,367 37,379 General Partner 171,987 140,360 183,677 198,724 117,455 Total 943,291 353,270 920,996 1,082,091 154,834 Limited Partners' Net Income per Unit 53.86 14.87 51.49 61.68 2.61 Limited Partners' Cash Distributions per Unit 27.58 85.47 81.91 67.10 55.51 Total Assets 1,990,904 1,858,973 2,566,820 2,982,983 3,124,394 Partners' Capital (Deficit): Limited Partners 1,775,193 1,398,889 2,409,979 2,845,660 2,923,293 General Partner ( 9,232) ( 94,547) ( 59,811) ( 59,110) ( 25,679) Number of Units Outstanding 14,321 14,321 14,321 14,321 14,321
-24- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Use of Forward-Looking Statements and Estimates This Annual Report contains certain forward-looking statements. The words "anticipate," "believe," "expect," "plan," "intend," "estimate," "project," "could," "may," and similar expressions are intended to identify forward-looking statements. Such statements reflect management's current views with respect to future events and financial performance. This Annual Report also includes certain information which is, or is based upon, estimates and assumptions. Such estimates and assumptions are management's efforts to accurately reflect the condition and operation of the Partnerships. Use of forward-looking statements and estimates and assumptions involve risks and uncertainties which include, but are not limited to, the volatility of oil and gas prices, the uncertainty of reserve information, the operating risk associated with oil and gas properties (including the risk of personal injury, death, property damage, damage to the well or producing reservoir, environmental contamination, and other operating risks), the prospect of changing tax and regulatory laws, the availability and capacity of processing and transportation facilities, the general economic climate, the supply and price of foreign imports of oil and gas, the level of consumer product demand, and the price and availability of alternative fuels. Should one or more of these risks or uncertainties occur or should estimates or underlying assumptions prove incorrect, actual conditions or results may vary materially and adversely from those stated, anticipated, believed, estimated, or otherwise indicated. General Discussion The following general discussion should be read in conjunction with the analysis of results of operations provided below. The most important variable affecting the Partnerships' revenues is the prices received for the sale of oil and gas. Predicting future prices is not possible. Concerning past trends, average yearly wellhead gas prices in the United States have been volatile for many years. Over the past ten years such average prices have generally been in the $1.40 to $2.40 per Mcf range. Gas prices are currently in the upper end of this range. Substantially all of the Partnerships' gas reserves are being sold on the "spot market." Prices on the spot market are subject to wide seasonal and regional pricing fluctuations due to the highly competitive nature of the spot market. In addition, such spot market sales are generally short-term in nature and are dependent upon the obtaining of transportation services provided by pipelines. Spot prices for the Partnerships' gas increased from approximately $2.03 per Mcf at December 31, 1998 to -25- approximately $2.24 per Mcf at December 31, 1999. Such prices were on an MMBTU basis and differ from the prices actually received by the Partnerships due to transportation and marketing costs, BTU adjustments, and regional price and quality differences. For the past ten years, average oil prices have generally been in the $16.00 to $24.00 per barrel range, but have been extremely volatile over the past two years. Due to global consumption and supply trends as well as a slowdown in Asian energy demand, oil prices in late 1997 and early 1998 reached historically low levels, dropping to as low as approximately $9.25 per barrel. However, production curtailment agreements among major oil producing nations have caused recent oil prices to climb to over $24.00 per barrel in some markets. It is not known whether this trend will continue. Prices for the Partnerships' oil increased from approximately $9.50 per barrel at December 31, 1998 to approximately $22.75 per barrel at December 31, 1999. Future prices for both oil and gas will likely be different from the prices in effect on December 31, 1999. Management is unable to predict whether future oil and gas prices will (i) stabilize, (ii) increase, or (iii) decrease. As discussed in the "Results of Operations" section below, volumes of oil and gas sold also significantly affect the Partnerships' revenues. Oil and gas wells generally produce the most oil or gas in the earlier years of their lives and, as production continues, the rate of production naturally declines. At some point, production physically ceases or becomes no longer economic. The Partnerships are not acquiring additional oil and gas properties, and the existing properties are not experiencing significant additional production through drilling or other capital projects. Therefore, volumes of oil and gas produced naturally decline from year to year. While it is difficult for management to predict future production from these properties, it is likely that this general trend of declining production will continue. Despite this general trend of declining production, several factors can cause the volumes of oil and gas sold to increase or decrease at an even greater rate over a given period. These factors include, but are not limited to, (i) geophysical conditions which cause an acceleration of the decline in production, (ii) the shutting in of wells (or the opening of previously shut-in wells) due to low oil and gas prices, mechanical difficulties, loss of a market or transportation, or performance of workovers, recompletions, or other operations in the well, (iii) prior period volume adjustments (either positive or negative) made by purchasers of the production, (iv) ownership adjustments in accordance with agreements governing the operation or ownership of the well (such as adjustments that occur at payout), and (v) completion of enhanced recovery projects which -26- increase production for the well. Many of these factors are very significant as related to a single well or as related to many wells over a short period of time. However, due to the large number of wells owned by the Partnerships, these factors are generally not material as compared to the normal decline in production experienced on all remaining wells. Results of Operations An analysis of the change in net oil and gas operations (oil and gas sales, less lease operating expenses and production taxes) is presented in the tables following "Results of Operations" under the heading "Average Sales Prices, Production Volumes, and Average Production Costs." Following is a discussion of each Partnership's results of operations for the year ended December 31, 1999 as compared to the year ended December 31, 1998 and for the year ended December 31, 1998 as compared to the year ended December 31, 1997. I-D Partnership --------------- Year Ended December 31, 1999 Compared to Year Ended December 31, 1998 ------------------------------------- Total oil and gas sales decreased $289,917 (27.3%) in 1999 as compared to 1998. Of this decrease, approximately $35,000 and $287,000, respectively, were related to decreases in volumes of oil and gas sold. Volumes of oil and gas sold decreased 2,767 barrels and 142,185 Mcf, respectively, in 1999 as compared to 1998. The decrease in volumes of oil sold was primarily due to production difficulties on one significant well during 1999. The decrease in volumes of gas sold was primarily due to (i) production difficulties on one significant well during 1999, (ii) positive prior period volume adjustments made by the operators on two significant wells during 1998, and (iii) normal declines in production. Average oil and gas prices increased to $14.01 per barrel and $2.08 per Mcf, respectively, in 1999 from $12.55 per barrel and $2.02 per Mcf, respectively, in 1998. The I-D Partnership sold certain oil and gas properties during 1999 and recognized a $494 gain on such sales. Sales of oil and gas properties during 1998 resulted in the I-D Partnership recognizing similar gains totaling $260,624. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $74,929 (32.0%) in 1999 as compared to 1998. This decrease was primarily due to (i) a decrease in production taxes associated with the decrease in oil and gas sales, (ii) a decrease in lease operating expenses -27- associated with the decreases in volumes of oil and gas sold, and (iii) a negative prior period lease operating expense adjustment made by the operator on one significant well during 1999. As a percentage of oil and gas sales, these expenses decreased to 20.7% in 1999 from 22.1% in 1998. Depreciation, depletion, and amortization of oil and gas properties decreased $12,444 (12.7%) in 1999 as compared to 1998. This decrease was primarily due to (i) the decreases in volumes of oil and gas sold and (ii) upward revisions in the estimates of remaining oil and gas reserves at December 31, 1999. These decreases were partially offset by one significant well being fully depleted in 1999 due to the lack of remaining economically recoverable reserves. As a percentage of oil and gas sales, this expense increased to 11.1% in 1999 from 9.2% in 1998. This percentage increase was primarily due to the depreciation, depletion, and amortization expense on the well fully depleted in 1999. General and administrative expenses remained relatively constant in 1999 as compared to 1998. As a percentage of oil and gas sales, these expenses increased to 11.7% in 1999 from 8.5% in 1998. This percentage increase was primarily due to the decrease in oil and gas sales. The Limited Partners have received cash distributions through December 31, 1999 totaling $14,458,175 or 200.96% of the Limited Partners' capital contributions. Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 ------------------------------------- Total oil and gas sales decreased $483,862 (31.3%) in 1998 as compared to 1997. Of this decrease, approximately $142,000 and $126,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $72,000 and $144,000, respectively, were related to decreases in the average prices of oil and gas sold. Volumes of oil and gas sold decreased 7,511 barrels and 53,918 Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of oil sold resulted primarily from (i) the sale of several wells during 1997 and 1998 and (ii) normal declines in production. The decrease in volumes of gas sold resulted primarily from (i) normal declines in production and (ii) positive prior period volume adjustments made by the purchasers during 1997 on several wells. Average oil and gas prices decreased to $12.55 per barrel and $2.02 per Mcf, respectively, in 1998 from $18.96 per barrel and $2.33 per Mcf, respectively, in 1997. As discussed in "Liquidity and Capital Resources" below, the I-D Partnership sold certain oil and gas properties in 1998 and -28- recognized a $260,624 gain on such sales. Sales of oil and gas properties during 1997 resulted in the I-D Partnership recognizing similar gains totaling $24,113. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $59,869 (20.3%) in 1998 as compared to 1997. This decrease resulted primarily from (i) workover expenses incurred on two significant wells during 1997 in order to improve the recovery of reserves and (ii) a decrease in production taxes associated with the decrease in oil and gas sales. As a percentage of oil and gas sales, these expenses increased to 22.1% in 1998 from 19.1% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold, partially offset by the 1997 workover expenses. Depreciation, depletion, and amortization of oil and gas properties decreased $14,888 (13.2%) in 1998 as compared to 1997. This decrease resulted primarily from the decreases in volumes of oil and gas sold. As a percentage of oil and gas sales, this expense increased to 9.2% in 1998 from 7.3% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. The I-D Partnership recognized a non-cash charge against earnings of $61,790 in the first quarter of 1997. Of this amount, $12,290 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $49,500 was related to the writing off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the I-D Partnership's Partnership Agreement which limit the level of permissible drilling activity. No similar charges were necessary in 1998. General and administrative expenses decreased $1,650 (1.8%) in 1998 as compared to 1997. As a percentage of oil and gas sales, these expenses increased to 8.5% in 1998 from 5.9% in 1997. This percentage increase was primarily due to the decrease in oil and gas sales. I-E Partnership --------------- Year Ended December 31, 1999 Compared to Year Ended December 31, 1998 ------------------------------------- Total oil and gas sales decreased $449,705 (9.8%) in 1999 as compared to 1998. Of this decrease, approximately $70,000 and $907,000, respectively, were related to decreases in volumes of -29- oil and gas sold. These decreases were partially offset by increases of approximately $272,000 and $255,000, respectively, related to increases in the average prices of oil and gas sold. Volumes of oil and gas sold decreased 5,881 barrels and 475,973 Mcf, respectively, in 1999 as compared to 1998. The decrease in volumes of gas sold was primarily due to (i) positive prior period volume adjustments made by the purchasers on several wells during 1998 and (ii) normal declines in production. Average oil and gas prices increased to $16.63 per barrel and $2.07 per Mcf, respectively, in 1999 from $11.98 per barrel and $1.90 per Mcf, respectively, in 1998. The I-E Partnership sold certain oil and gas properties during 1999 and recognized a $1,587 gain on such sales. Sales of oil and gas properties during 1998 resulted in the I-E Partnership recognizing similar gains totaling $1,154,155. As discussed in "Liquidity and Capital Resources" below, the I-E Partnership recognized an insurance settlement in the amount of $675,000 during 1999. No similar settlements occurred during 1998. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $352,907 (23.4%) in 1999 as compared to 1998. This decrease was primarily due to (i) a decrease in lease operating expenses associated with the decreases in volumes of oil and gas sold, (ii) a decrease in production taxes associated with the decrease in oil and gas sales, and (iii) workover expenses incurred on one significant well during 1998 in order to improve the recovery of reserves. As a percentage of oil and gas sales, these expenses decreased to 27.7% in 1999 from 32.7% in 1998. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold. Depreciation, depletion, and amortization of oil and gas properties decreased $104,218 (13.8%) in 1999 as compared to 1998. This decrease was primarily due to the decreases in volumes of oil and gas sold, which decrease was partially offset by several wells being fully depleted in 1999 due to a lack of remaining economically recoverable reserves. As a percentage of oil and gas sales, this expense decreased to 15.7% in 1999 from 16.4% in 1998. The I-E Partnership recognized a non-cash charge against earnings of $547,048 in the fourth quarter of 1998. This charge was necessary due to the unamortized costs of one field exceeding the expected future cash flows from that field. No similar charge was necessary in 1999. General and administrative expenses remained relatively constant in 1999 as compared to 1998. As a percentage of oil and gas sales, these expenses increased to 12.5% in 1999 from -30- 11.2% in 1998. This percentage increase was primarily due to the decrease in oil and gas sales. The Limited Partners have received cash distributions through December 31, 1999 totaling $55,413,552 or 132.44% of Limited Partners' capital contributions. Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 ------------------------------------- Total oil and gas sales decreased $1,393,017 (23.2%) in 1998 as compared to 1997. Of this decrease, approximately $251,000 and $262,000, respectively, were related to decreases in the volumes of oil and gas sold and approximately $441,000 and $439,000, respectively, were related to decreases in the average prices of oil and gas sold. Volumes of oil and gas sold decreased 13,302 barrels and 123,670 Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of oil sold resulted primarily from (i) the sale of several wells during 1997 and 1998 and (ii) normal declines in production. Average oil and gas prices decreased to $11.98 per barrel and $1.90 per Mcf, respectively, in 1998 from $18.84 per barrel and $2.12 per Mcf, respectively, in 1997. As discussed in "Liquidity and Capital Resources" below, the I-E Partnership sold certain oil and gas properties in 1998 and recognized a $1,154,155 gain on such sales. Sales of oil and gas properties during 1997 resulted in the I-E Partnership recognizing similar gains totaling $120,840. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $264,306 (14.9%) in 1998 as compared to 1997. This decrease resulted primarily from (i) a decrease in lease operating expenses associated with the decreases in volumes of oil and gas sold, (ii) a decrease in production taxes associated with the decrease in oil and gas sales, and (iii) workover expenses incurred on several wells during 1997 in order to improve the recovery of reserves. These decreases were partially offset by workover expenses incurred on one significant well during 1998. As a percentage of oil and gas sales, these expenses increased to 32.7% in 1998 from 29.5% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. Depreciation, depletion, and amortization of oil and gas properties increased $27,597 (3.8%) in 1998 as compared to 1997. This increase resulted primarily from downward revisions in the estimates of remaining oil and gas reserves at December 31, 1998 on several significant wells, which increase was partially offset by the decreases in volumes of oil and gas sold. As a percentage of oil and gas sales, this expense increased to 16.4% in 1998 -31- from 12.1% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. The I-E Partnership recognized a non-cash charge against earnings of $547,048 in the fourth quarter of 1998. This charge was necessary due to the unamortized costs of one field exceeding the expected future cash flows from that field. During the first quarter of 1997, a non-cash charge of $291,690 was also recognized. Of this amount, $59,728 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $231,962 was related to the writing-off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the I-E Partnership's Partnership Agreement which limit the level of permissible drilling activity. General and administrative expenses decreased $9,384 (1.8%) in 1998 as compared to 1997. As a percentage of oil and gas sales, these expenses increased to 11.2% in 1998 from 8.8% in 1997. This percentage increase was primarily due to the decrease in oil and gas sales. I-F Partnership --------------- Year Ended December 31, 1999 Compared to Year Ended December 31, 1998 ------------------------------------- Total oil and gas sales decreased $150,641 (10.4%) in 1999 as compared to 1998. Of this decrease, approximately $29,000 and $302,000, respectively, were related to decreases in volumes of oil and gas sold. These decreases were partially offset by increases of approximately $127,000 and $53,000, respectively, related to increases in the average prices of oil and gas sold. Volumes of oil and gas sold decreased 2,409 barrels and 148,722 Mcf, respectively, in 1999 as compared to 1998. The decrease in volumes of gas sold was primarily due to (i) positive prior period volume adjustments made by the purchasers on several wells during 1998 and (ii) normal declines in production. Average oil and gas prices increased to $16.68 per barrel and $2.17 per Mcf, respectively, in 1999 from $12.10 per barrel and $2.03 per Mcf, respectively, in 1998. The I-F Partnership sold certain oil and gas properties during 1999 and recognized a $546 gain on such sales. Sales of oil and gas properties during 1998 resulted in the I-F Partnership recognizing similar gains totaling $380,920. -32- As discussed in "Liquidity and Capital Resources" below, the I-F Partnership recognized an insurance settlement in the amount of $472,500 during 1999. No similar settlements occurred during 1998. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $242,970 (36.4%) in 1999 as compared to 1998. This decrease was primarily due to (i) a decrease in lease operating expenses associated with the decreases in volumes of oil and gas sold, (ii) a decrease in production taxes associated with the decrease in oil and gas sales, and (iii) workover expenses incurred on several wells during 1998 in order to improve the recovery of reserves. As a percentage of oil and gas sales, these expenses decreased to 32.9% in 1999 from 46.3% in 1998. This percentage decrease was primarily due to the increases in the average prices of oil and gas sold and the 1998 workover expenses. Depreciation, depletion, and amortization of oil and gas properties decreased $32,683 (12.8%) in 1999 as compared to 1998. This decrease was primarily due to the decreases in volumes of oil and gas sold, which decrease was partially offset by several wells being fully depleted in 1999 due to a lack of remaining economically recoverable reserves. As a percentage of oil and gas sales, this expense decreased to 17.2% in 1999 from 17.7% in 1998. The I-F Partnership recognized a non-cash charge against earnings of $382,925 in the fourth quarter of 1998. This charge was necessary due to the unamortized costs of one field exceeding the expected future cash flows from that field. No similar charge was necessary in 1999. General and administrative expenses remained relatively constant in 1999 as compared to 1998. As a percentage of oil and gas sales, these expenses increased to 13.8% in 1999 from 12.3% in 1998. This percentage increase was primarily due to the decrease in oil and gas sales. The Limited Partners have received cash distributions through December 31, 1999 totaling $18,381,664 or 128.36% of Limited Partners' capital contributions. Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 ------------------------------------- Total oil and gas sales decreased $579,087 (28.6%) in 1998 as compared to 1997. Of this decrease, approximately $161,000 and $93,000, respectively, were related to decreases in volumes of oil and gas sold and approximately $204,000 and $122,000, respectively, were related to decreases in the average prices of -33- oil and gas sold. Volumes of oil and gas sold decreased 8,522 barrels and 41,061 Mcf, respectively, in 1998 as compared to 1997. The decrease in volumes of oil sold resulted primarily from (i) normal declines in production, (ii) the sale of several wells during 1997 and 1998, and (iii) the shutting-in of one significant well during 1998 for repairs. Average oil and gas prices decreased to $12.10 per barrel and $2.03 per Mcf, respectively, in 1998 from $18.85 per barrel and $2.26 per Mcf, respectively, in 1997. As discussed in "Liquidity and Capital Resources" below, the I-F Partnership sold certain oil and gas properties in 1998 and recognized a $380,920 gain on such sales. Sales of oil and gas properties during 1997 resulted in the I-F Partnership recognizing similar gains totaling $76,108. Oil and gas production expenses (including lease operating expenses and production taxes) decreased $15,784 (2.3%) in 1998 as compared to 1997. This decrease resulted primarily from (i) a decrease in lease operating expenses associated with the decreases in volumes of oil and gas sold and (ii) a decrease in production taxes associated with the decrease in oil and gas sales, which decreases were partially offset by workover expenses incurred on several wells during 1998 in order to improve the recovery of reserves. As a percentage of oil and gas sales, these expenses increased to 46.3% in 1998 from 33.8% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. Depreciation, depletion, and amortization of oil and gas properties decreased $3,146 (1.2%) in 1998 as compared to 1997. This decrease resulted primarily from the decreases in volumes of oil and gas sold, which decrease was partially offset by downward revisions in the estimates of remaining oil and gas reserves at December 31, 1998 on several significant wells. As a percentage of oil and gas sales, this expense increased to 17.7% in 1998 from 12.8% in 1997. This percentage increase was primarily due to the decreases in the average prices of oil and gas sold. The I-F Partnership recognized a non-cash charge against earnings of $382,925 in the fourth quarter of 1998. This charge was necessary due to the unamortized costs of one field exceeding the expected future cash flows from that field. During the first quarter of 1997, a non-cash charge of $114,631 was also recognized. Of this amount, $20,908 was related to the decline in oil and gas prices used to determine the recoverability of proved oil and gas reserves at March 31, 1997 and $93,723 was related to the writing off of unproved properties. These unproved properties were written off based on the General Partner's determination that it was unlikely that such properties would be developed due to low oil and gas prices and provisions in the I-F Partnership's Partnership Agreement which limit the level of permissible drilling activity. -34- General and administrative expenses decreased $3,477 (1.9%) in 1998 as compared to 1997. As a percentage of oil and gas sales, these expenses increased to 12.3% in 1998 from 8.9% in 1997. This percentage increase was primarily due to the decrease in oil and gas sales. Average Sales Prices, Production Volumes and Average Production Costs The following tables are comparisons of the annual average oil and gas sales prices, production volumes, and average production costs (lease operating expenses and production taxes) per equivalent unit (one barrel of oil or six Mcf of gas) for 1999, 1998, and 1997. -35- 1999 Compared to 1998 --------------------- Average Sales Prices - ---------------------------------------------------------------- P/ship 1999 1998 % Change - ------ ---------------- ---------------- ---------- Oil Gas Oil Gas ($/Bbl) ($/Mcf) ($/Bbl) ($/Mcf) Oil Gas ------- ------- ------- ------- --- ----- I-D $14.01 $2.08 $12.55 $2.02 12% 3% I-E 16.63 2.07 11.98 1.90 39% 9% I-F 16.68 2.17 12.10 2.03 38% 7% Production Volumes - ---------------------------------------------------------------- P/ship 1999 1998 % Change - -------- ------------------ ------------------ ------------- Oil Gas Oil Gas Oil Gas (Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf) ------- --------- ------- --------- ------ ----- I-D 8,482 314,010 11,249 456,195 (25%) (31%) I-E 58,465 1,540,061 64,346 2,016,034 ( 9%) (24%) I-F 27,794 381,318 30,203 530,040 ( 8%) (28%) Average Production Costs per Equivalent Barrel of Oil --------------------------------- P/ship 1999 1998 % Change ------ ----- ----- -------- I-D 2.62 $2.69 ( 3%) I-E 3.66 3.76 ( 3%) I-F 4.65 5.64 (18%) -36- 1998 Compared to 1997 --------------------- Average Sales Prices - ----------------------------------------------------------------- P/ship 1998 1997 % Change - ------ ---------------- ---------------- ---------- Oil Gas Oil Gas ($/Bbl) ($/Mcf) ($/Bbl) ($/Mcf) Oil Gas ------- ------- ------- ------- --- ----- I-D $12.55 $2.02 $18.96 $2.33 (34%)(13%) I-E 11.98 1.90 18.84 2.12 (36%)(10%) I-F 12.10 2.03 18.85 2.26 (36%)(10%) Production Volumes - ----------------------------------------------------------------- P/ship 1998 1997 % Change - -------- ------------------ ------------------ ------------- Oil Gas Oil Gas Oil Gas (Bbls) (Mcf) (Bbls) (Mcf) (Bbls) (Mcf) ------- --------- ------- --------- ------ ----- I-D 11,249 456,195 18,760 510,113 (40%) (11%) I-E 64,346 2,016,034 77,648 2,139,704 (17%) ( 6%) I-F 30,203 530,040 38,725 571,101 (22%) ( 7%) Average Production Costs per Equivalent Barrel of Oil --------------------------------- P/ship 1998 1997 % Change ------ ----- ----- -------- I-D $2.69 $2.84 ( 5%) I-E 3.76 4.08 ( 8%) I-F 5.64 5.11 10% Liquidity and Capital Resources Net proceeds from operations less necessary operating capital are distributed to the Limited Partners on a quarterly basis. See "Item 5. Market for Units and Related Limited Partner Matters." The net proceeds from production are not reinvested in productive assets, except to the extent that producing wells are improved, or where methods are employed to permit more efficient recovery of reserves, thereby resulting in a positive economic impact. Assuming 1999 production levels for future years, the -37- Partnerships' proved reserve quantities at December 31, 1999 would have the following remaining lives: Partnership Gas-Years Oil-Years ----------- --------- --------- I-D 5.1 13.0 I-E 5.4 12.4 I-F 7.3 12.7 These life of reserves estimates are based on the current estimates of remaining oil and gas reserves. See "Item 2. Properties" for a discussion of these reserve estimates. In particular, the relatively high oil prices at December 31, 1999 have caused an increase in the estimates of remaining oil reserves which therefore have increased the estimated life of said reserves. The Partnerships' available capital from the Limited Partners' subscriptions has been spent on oil and gas properties and there should be no further material capital resource commitments for any of the Partnerships in the future. Occasional expenditures by the Partnerships for new wells or well completions or workovers, however, may reduce or eliminate cash available for a particular quarterly cash distribution. The Partnerships have no debt commitments. Cash for operational purposes will be provided by current oil and gas production. The Partnerships sold certain oil and gas properties during 1999, 1998, and 1997. The sale of the Partnerships' properties was made by the General Partner after giving due consideration to both the offer price and the General Partner's estimate of the property's remaining proved reserves and future operating costs. Net proceeds from the sale of any such properties were included in the calculation of the Partnerships' cash distributions for the quarter immediately following the Partnerships' receipt of the proceeds. The amount of such proceeds from the sale of oil and gas properties during 1999, 1998, and 1997 were as follows: Partnership 1999 1998 1997 ----------- ------ ---------- -------- I-D $ 494 $ 272,824 $ 25,350 I-E 2,695 1,265,357 156,744 I-F 2,732 438,200 97,288 The General Partner believes that the sale of these properties will be beneficial to the Partnerships in the long-term since the properties sold generally had a higher ratio of future operating expenses as compared to reserves than the properties not sold. -38- In August 1999, the I-E and I-F Partnerships received insurance settlement proceeds in the amounts of $675,000 and $472,500, respectively, for the costs incurred to drill the State Lease 8191 No. 4 well in St. Bernard Parish, Louisiana for the purpose of relieving pressure in another well which suffered a blowout during a workover attempt. This new well was completed as a producing gas well in 1998. The insurance proceeds amounts were included in the Partnerships' August 1999 cash distribution. There can be no assurance as to the amount of the Partnerships' future cash distributions. The Partnerships' ability to make cash distributions depends primarily upon the level of available cash flow generated by the Partnerships' operating activities, which will be affected (either positively or negatively) by many factors beyond the control of the Partnerships, including the price of and demand for oil and gas and other market and economic conditions. Even if prices and costs remain stable, the amount of cash available for distributions will decline over time (as the volume of production from producing properties declines) since the Partnerships are not replacing production through acquisitions of producing properties and drilling. The Partnerships' quantity of proved reserves has been reduced by the sale of oil and gas properties as described above; therefore, it is possible that the Partnerships' future cash distributions will decline as a result of a reduction of the Partnerships' reserve base. Pursuant to the terms of the Partnership Agreements, the Partnerships would have terminated on December 31, 1999. However, the Partnership Agreements provide that the General Partner may extend the term of each Partnership for up to five periods of two years each. The General Partner has extended the terms of the Partnerships for the first two year extension period to December 31, 2001. Inflation and Changing Prices Prices obtained for oil and gas production depend upon numerous factors, including the extent of domestic and foreign production, foreign imports of oil, market demand, domestic and foreign economic conditions in general, and governmental regulations and tax laws. The general level of inflation in the economy did not have a material effect on the operations of the Partnerships in 1999. Oil and gas prices have fluctuated during recent years and generally have not followed the same pattern as inflation. See "Item 2. Properties - Oil and Gas Production, Revenue, and Price History." -39- Year 2000 The year 2000 issue refers to the inability of computer and other information technology systems to properly process date and time information, stemming from the earlier programming practice of using two digits rather than four to represent the year in a date. To the knowledge of the General Partner, the Partnerships have not experienced any material effects from the year 2000 issue. Costs incurred by the Partnerships in order to ensure year 2000 compatibility were not material to the Partnerships. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Partnerships do not hold any market risk sensitive instruments. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data are indexed in Item 14 hereof. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER The Partnerships have no directors or executive officers. The following individuals are directors and executive officers of the General Partner. The business address of such director and executive officers is Two West Second Street, Tulsa, Oklahoma 74103. Name Age Position with Geodyne ---------------- --- -------------------------------- Dennis R. Neill 47 President and Director Judy K. Fox 48 Secretary The director will hold office until the next annual meeting of shareholders of Geodyne or until his successor has been duly elected and qualified. All executive officers serve at the discretion of the Board of Directors. Dennis R. Neill joined Samson in 1981, was named Senior Vice President and Director of Geodyne on March 3, 1993, and was named -40- President of Geodyne and its subsidiaries on June 30, 1996. Prior to joining Samson, he was associated with a Tulsa law firm, Conner and Winters, where his principal practice was in the securities area. He received a Bachelor of Arts degree in political science from Oklahoma State University and a Juris Doctorate degree from the University of Texas. Mr. Neill also serves as Senior Vice President of Samson Investment Company and as President and Director of Samson Properties Incorporated, Samson Hydrocarbons Company, Dyco Petroleum Corporation, Berry Gas Company, Circle L Drilling Company, Snyder Exploration Company, and Compression, Inc. Judy K. Fox joined Samson in 1990 and was named Secretary of Geodyne and its subsidiaries on June 30, 1996. Prior to joining Samson, she served as Gas Contract Manager for Ely Energy Company. Ms. Fox is also Secretary of Berry Gas Company, Circle L Drilling Company, Compression, Inc., Dyco Petroleum Corporation, Samson Hydrocarbons Company, Snyder Exploration Company, and Samson Properties Incorporated. Section 16(a) Beneficial Ownership Reporting Compliance To the knowledge of the Partnerships and the General Partner, there were no officers, directors, or ten percent owners who were delinquent filers during 1999 of reports required under Section 16 of the Securities Exchange Act of 1934. ITEM 11. EXECUTIVE COMPENSATION The General Partner and its affiliates are reimbursed for actual general and administrative costs and operating costs incurred and attributable to the conduct of the business affairs and operations of the Partnerships, computed on a cost basis, determined in accordance with generally accepted accounting principles. Such reimbursed costs and expenses allocated to the Partnerships include office rent, secretarial, employee compensation and benefits, travel and communication costs, fees for professional services, and other items generally classified as general or administrative expense. When actual costs incurred benefit other Partnerships and affiliates, the allocation of costs is based on the relationship of the Partnerships' reserves to the total reserves owned by all Partnerships and affiliates. The amount of general and administrative expense allocated to the General Partner and its affiliates which was charged to each Partnership for 1999, 1998, and 1997 is set forth in the table below. Although the actual costs incurred by the General Partner and its affiliates have fluctuated during the three years presented, the amount charged to the Partnerships have not fluctuated every year due to expense limitations imposed by the Partnership Agreements. -41- Partnership 1999 1998 1997 ----------- -------- -------- -------- I-D $ 79,944 $ 79,944 $ 79,944 I-E 464,880 464,880 464,880 I-F 159,120 159,120 159,120 None of the officers or directors of the General Partner receive compensation directly from the Partnerships. The Partnerships reimburse the General Partner or its affiliates for that portion of such officers' and directors' salaries and expenses attributable to time devoted by such individuals to the Partnerships' activities based on the allocation method described above. The following tables indicate the approximate amount of general and administrative expense reimbursement attributable to the salaries of the directors, officers, and employees of the General Partner and its affiliates during 1999, 1998, and 1997: -42- Salary Reimbursement I-D Partnership --------------- Three Years Ended December 31, 1999
Long Term Compensation -------------------------------- Annual Compensation Awards Payouts -------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- Dennis R. Neill, President(1) 1997 - - - - - - - 1998 - - - - - - - 1999 - - - - - - - All Executive Officers, Directors, and Employees as a group(2) 1997 $47,759 - - - - - - 1998 $47,311 - - - - - - 1999 $48,830 - - - - - - - ---------- (1) The general and administrative expenses paid by the I-D Partnership and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Neill. (2) No officer or director of Geodyne or its affiliates provides full-time services to the I-D Partnership and no individual's salary or other compensation reimbursement from the I-D Partnership equals or exceeds $100,000 per annum.
-43- Salary Reimbursement I-E Partnership --------------- Three Years Ended December 31, 1999
Long Term Compensation ------------------------------- Annual Compensation Awards Payouts -------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- Dennis R. Neill, President(1) 1997 - - - - - - - 1998 - - - - - - - 1999 - - - - - - - All Executive Officers, Directors, and Employees as a group(2) 1997 $277,719 - - - - - - 1998 $275,116 - - - - - - 1999 $283,949 - - - - - - - ---------- (1) The general and administrative expenses paid by the I-E Partnership and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Neill. (2) No officer or director of Geodyne or its affiliates provides full-time services to the I-E Partnership and no individual's salary or other compensation reimbursement from the I-E Partnership equals or exceeds $100,000 per annum.
-44- Salary Reimbursement I-F Partnership --------------- Three Years Ended December 31, 1999
Long Term Compensation -------------------------------- Annual Compensation Awards Payouts -------------------------- --------------------- ------- Securi- Other ties All Name Annual Restricted Under- Other and Compen- Stock lying LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------------- ---- ------- ------- ------- ---------- -------- ------- ------- Dennis R. Neill, President(1) 1997 - - - - - - - 1998 - - - - - - - 1999 - - - - - - - All Executive Officers, Directors, and Employees as a group(2) 1997 $95,058 - - - - - - 1998 $94,167 - - - - - - 1999 $97,190 - - - - - - - ---------- (1) The general and administrative expenses paid by the I-F Partnership and attributable to salary reimbursements do not include any salary or other compensation attributable to Mr. Neill. (2) No officer or director of Geodyne or its affiliates provides full-time services to the I-F Partnership and no individual's salary or other compensation reimbursement from the I-F Partnership equals or exceeds $100,000 per annum.
-45- Affiliates of the Partnerships serve as operator of some of the Partnerships' wells. The General Partner contracts with such affiliates for services as operator of the wells. As operator, such affiliates are compensated at rates provided in the operating agreements in effect and charged to all parties to such agreement. Such compensation may occur both prior and subsequent to the commencement of commercial marketing of production of oil or gas. The dollar amount of such compensation paid by the Partnerships to the affiliates is impossible to quantify as of the date of this Annual Report. Samson maintains necessary inventories of new and used field equipment. Samson may have provided some of this equipment for wells in which the Partnerships have an interest. This equipment was provided at prices or rates equal to or less than those normally charged in the same or comparable geographic area by unaffiliated persons or companies dealing at arm's length. The operators of these wells billed the Partnerships for a portion of such costs based upon the Partnerships' interest in the well. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table provides information as to the beneficial ownership of the Units as of February 1, 2000 by (i) each beneficial owner of more than five percent of the issued and outstanding Units, (ii) the directors and officers of the General Partner, and (iii) the General Partner and its affiliates. The address of each of such persons is Samson Plaza, Two West Second Street, Tulsa, Oklahoma 74103. Number of Units Beneficially Owned (Percent Beneficial Owner of Outstanding) - ------------------------------------ ------------------ I-D Partnership: - --------------- Samson Resources Company 1,077 (15.0%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 1,077 (15.0%) I-E Partnership: - --------------- Samson Resources Company 8,334 (19.9%) -46- All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 8,334 (19.9%) I-F Partnership: - --------------- Samson Resources Company 3,391 (23.7%) All affiliates, directors, and officers of the General Partner as a group and the General Partner (4 persons) 3,391 (23.7%) ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The General Partner and certain of its affiliates engage in oil and gas activities independently of the Partnerships which result in conflicts of interest that cannot be totally eliminated. The allocation of acquisition and drilling opportunities and the nature of the compensation arrangements between the Partnerships and the General Partner also create potential conflicts of interest. An affiliate of the Partnerships owns some of the Partnerships' Units and therefore has an identity of interest with other Limited Partners with respect to the operations of the Partnerships. In order to attempt to assure limited liability for Limited Partners as well as an orderly conduct of business, management of the Partnerships is exercised solely by the General Partner. The Partnership Agreements grant the General Partner broad discretionary authority with respect to the Partnerships' participation in drilling prospects and expenditure and control of funds, including borrowings. These provisions are similar to those contained in prospectuses and partnership agreements for other public oil and gas partnerships. Broad discretion as to general management of the Partnerships involves circumstances where the General Partner has conflicts of interest and where it must allocate costs and expenses, or opportunities, among the Partnerships and other competing interests. The General Partner does not devote all of its time, efforts, and personnel exclusively to the Partnerships. Furthermore, the Partnerships do not have any employees, but instead rely on the personnel of Samson. The Partnerships thus compete with Samson (including other oil and gas partnerships) for the time and resources of such personnel. Samson devotes such time and personnel to the management of the Partnerships as are indicated by the circumstances and as are consistent with the General Partner's fiduciary duties. -47- Affiliates of the Partnerships are solely responsible for the negotiation, administration, and enforcement of oil and gas sales agreements covering the Partnerships' leasehold interests. Because affiliates of the Partnerships who provide services to the Partnerships have fiduciary or other duties to other members of Samson, contract amendments and negotiating positions taken by them in their effort to enforce contracts with purchasers may not necessarily represent the positions that the Partnerships would take if they were to administer their own contracts without involvement with other members of Samson. On the other hand, management believes that the Partnerships' negotiating strength and contractual positions have been enhanced by virtue of their affiliation with Samson. -48- PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial Statements, Financial Statement Schedules, and Exhibits. (1) Financial Statements: The following financial statements for the Geodyne Energy Income Limited Partnership I-D Geodyne Energy Income Limited Partnership I-E Geodyne Energy Income Limited Partnership I-F as of December 31, 1999 and 1998 and for each of the three years in the period ended December 31, 1999 are filed as part of this report: Report of Independent Accountants Combined Balance Sheets Combined Statements of Operations Combined Statements of Changes in Partners' Capital (Deficit) Combined Statements of Cash Flows Notes to Combined Financial Statements (2) Financial Statement Schedules: None. (3) Exhibits: * 4.1 Amended and Restated Agreement and Certificate of Limited Partnership dated March 4, 1986 for Geodyne Energy Income Limited Partnership I-D. * 4.2 Amended and Restated Agreement and Certificate of Limited Partnership dated September 10, 1986 for Geodyne Energy Income Limited Partnership I-E. * 4.3 Amended and Restated Agreement and Certificate of Limited Partnership dated December 17, 1986 for Geodyne Energy Income Limited Partnership I-F. * 4.4 First Amendment to Amended and Restated Certificate of Limited Partnership and First Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated February 24, 1993 for Geodyne Energy Income Limited Partnership I-D. -49- * 4.5 First Amendment to Amended and Restated Certificate of Limited Partnership and First Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated February 24, 1993 for Geodyne Energy Income Limited Partnership I-E. * 4.6 First Amendment to Amended and Restated Certificate of Limited Partnership and First Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated February 24, 1993 for Geodyne Energy Income Limited Partnership I-F. * 4.7 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated August 4, 1993 for Geodyne Energy Income Limited Partnership I-D. * 4.8 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated August 4, 1993 for Geodyne Energy Income Limited Partnership I-E. * 4.9 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated August 4, 1993 for Geodyne Energy Income Limited Partnership I-F. * 4.10 Third Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated July 1, 1996 for Geodyne Energy Income Limited Partnership I-D. * 4.11 Third Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated July 1, 1996 for Geodyne Energy Income Limited Partnership I-E. * 4.12 Third Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated July 1, 1996 for Geodyne Energy Income Limited Partnership I-F. * 4.13 Fourth Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated December 23, 1999 for Geodyne Energy Income Limited Partnership I-D. -50- * 4.14 Fourth Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated December 23, 1999 for Geodyne Energy Income Limited Partnership I-E. * 4.15 Fourth Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated December 23, 1999 for Geodyne Energy Income Limited Partnership I-F. * 10.1 Amended and Restated Agreement of Partnership dated March 4, 1986 for Geodyne Energy Income Production Partnership I-D. * 10.2 Amended and Restated Agreement of Partnership dated September 10, 1986 for Geodyne Energy Income Production Partnership I-E. * 10.3 Amended and Restated Agreement of Partnership dated December 17, 1986 for Geodyne Energy Income Production Partnership I-F. * 10.4 First Amendment to Amended and Restated Agreement of Partnership dated February 26, 1993 for Geodyne Energy Income Production Partnership I-D. * 10.5 First Amendment to Amended and Restated Agreement of Partnership dated February 26, 1993 for Geodyne Energy Income Production Partnership I-E. * 10.6 First Amendment to Amended and Restated Agreement of Partnership dated February 26, 1993 for Geodyne Energy Income Production Partnership I-F. * 10.7 Second Amendment to Amended and Restated Agreement of Partnership dated July 1, 1996 for Geodyne Energy Income Production Partnership I-D. * 10.8 Second Amendment to Amended and Restated Agreement of Partnership dated July 1, 1996 for Geodyne Energy Income Production Partnership I-E. * 10.9 Second Amendment to Amended and Restated Agreement of Partnership dated July 1, 1996 for Geodyne Energy Income Production Partnership I-F. -51- * 10.10 Third Amendment to Amended and Restated Agreement of Partnership dated December 30, 1999 for Geodyne Energy Income Production Partnership I-D. * 10.11 Third Amendment to Amended and Restated Agreement of Partnership dated December 30, 1999 for Geodyne Energy Income Production Partnership I-E. * 10.12 Third Amendment to Amended and Restated Agreement of Partnership dated December 30, 1999 for Geodyne Energy Income Production Partnership I-F. * 23.1 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income Limited Partnership I-D. * 23.2 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income Limited Partnership I-E. * 23.3 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income Limited Partnership I-F. * 27.1 Financial Data Schedule containing summary financial information extracted from Geodyne Energy Income Limited Partnership I-D's financial statements as of December 31, 1999 and for the year ended December 31, 1999. * 27.2 Financial Data Schedule containing summary financial information extracted from Geodyne Energy Income Limited Partnership I-E's financial statements as of December 31, 1999 and for the year ended December 31, 1999. * 27.3 Financial Data Schedule containing summary financial information extracted from Geodyne Energy Income Limited Partnership I-F's financial statements as of December 31, 1999 and for the year ended December 31, 1999. All other Exhibits are omitted as inapplicable. ---------------------- *Filed herewith. -52- (b) Reports on Form 8-K filed during the fourth quarter of 1999: None. -53- SIGNATURES Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly organized. GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F By: GEODYNE RESOURCES, INC. General Partner February 24, 2000 By: /s/Dennis R. Neill ------------------------------ Dennis R. Neill President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. By: /s/Dennis R. Neill President and February 24, 2000 ------------------- Director (Principal Dennis R. Neill Executive Officer) /s/Patrick M. Hall (Principal February 24, 2000 ------------------- Financial and Patrick M. Hall Accounting Officer) /s/Judy K. Fox Secretary February 24, 2000 ------------------- Judy K. Fox -54- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D GEODYNE PRODUCTION PARTNERSHIP I-D In our opinion, the accompanying combined balance sheets and the related combined statements of operations, changes in partners' capital (deficit) and cash flows present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership I-D, an Oklahoma limited partnership, and Geodyne Production Partnership I-D, an Oklahoma general partnership, at December 31, 1999 and 1998, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Partnerships' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Tulsa, Oklahoma February 18, 2000 F-1 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-D Combined Balance Sheets December 31, 1999 and 1998 ASSETS ------ 1999 1998 ----------- ---------- CURRENT ASSETS: Cash and cash equivalents $183,942 $167,361 Accounts receivable: Oil and gas sales 130,579 134,477 ------- ------- Total current assets $314,521 $301,838 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 522,300 605,793 DEFERRED CHARGE 85,847 66,062 ------- ------- $922,668 $973,693 ======= ======= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 16,194 $ 9,270 Gas imbalance payable 36,593 43,521 ------- ------- Total current liabilities $ 52,787 $ 52,791 ACCRUED LIABILITY $ 26,398 $ 14,456 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 31,152) ($ 53,161) Limited Partners, issued and outstanding, 7,195 Units 874,635 959,607 ------- ------- Total Partners' capital $843,483 $906,446 ------- ------- $922,668 $973,693 ======= ======= The accompanying notes are an integral part of these combined financial statements. F-2 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-D Combined Statements of Operations For the Years Ended December 31, 1999, 1998, and 1997 1999 1998 1997 ---------- ---------- ---------- REVENUES: Oil and gas sales $ 771,318 $1,061,235 $1,545,097 Interest income 6,129 11,601 10,558 Gain on sale of oil and gas properties 494 260,624 24,113 --------- --------- --------- $ 777,941 $1,333,460 $1,579,768 COSTS AND EXPENSES: Lease operating $ 107,635 $ 162,006 $ 183,675 Production tax 51,917 72,475 110,675 Depreciation, depletion, and amortization of oil and gas properties 85,530 97,974 112,862 Impairment provision - - 61,790 General and administrative 90,409 89,722 91,372 --------- ---------- --------- $ 335,491 $ 422,177 $ 560,374 --------- --------- --------- NET INCOME $ 442,450 $ 911,283 $1,019,394 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 77,422 $ 148,669 $ 173,924 ========= ========= ========= LIMITED PARTNERS - NET INCOME $ 365,028 $ 762,614 $ 845,470 ========= ========= ========= NET INCOME per Unit $ 50.73 $ 105.99 $ 117.51 ========= ========= ========= UNITS OUTSTANDING 7,195 7,195 7,195 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-3 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-D Combined Statements of Changes in Partners' Capital (Deficit) For the Years Ended December 31, 1999, 1998, and 1997 Limited General Partners Partner Total ------------ ---------- ------------ Balance, Dec. 31, 1996 $1,540,523 ($ 4,248) $1,536,275 Net income 845,470 173,924 1,019,394 Cash distributions ( 1,095,000) ( 197,236) ( 1,292,236) --------- ------- --------- Balance, Dec. 31, 1997 $1,290,993 ($ 27,560) $1,263,433 Net income 762,614 148,669 911,283 Cash distributions ( 1,094,000) ( 174,270) ( 1,268,270) --------- ------- --------- Balance, Dec. 31, 1998 $ 959,607 ($ 53,161) $ 906,446 Net income 365,028 77,422 442,450 Cash distributions ( 450,000) ( 55,413) ( 505,413) --------- ------- --------- Balance, Dec. 31, 1999 $ 874,635 ($ 31,152) $ 843,483 ========= ======= ========= The accompanying notes are an integral part of these combined financial statements. F-4 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-D Combined Statements of Cash Flows For the Years Ended December 31, 1999, 1998, and 1997 1999 1998 1997 ----------- ---------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $442,450 $ 911,283 $1,019,394 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 85,530 97,974 112,862 Impairment provision - - 61,790 Gain on sale of oil and gas properties ( 494) ( 260,624) ( 24,113) Decrease in accounts receivable - oil and gas sales 3,898 121,524 50,856 (Increase) decrease in deferred charge ( 19,785) 38,731 ( 6,778) Increase (decrease) in accounts payable 6,924 ( 22,040) 16,025 Increase (decrease) in gas imbalance payable ( 6,928) 3,550 3,284 Increase (decrease) in accrued liability 11,942 111 ( 2,471) ------- --------- --------- Net cash provided by operating activities $523,537 $ 890,509 $1,230,849 ------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 2,037) ($ 1,811) ($ 34,805) Proceeds from sale of oil and gas properties 494 272,824 25,350 ------- --------- --------- Net cash provided (used) by investing activities ($ 1,543) $ 271,013 ($ 9,455) ------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($505,413) ($1,268,270) ($1,292,236) ------- --------- --------- Net cash used by financing activities ($505,413) ($1,268,270) ($1,292,236) ------- --------- --------- F-5 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 16,581 ($ 106,748) ($ 70,842) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 167,361 274,109 344,951 ------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $183,942 $ 167,361 $ 274,109 ======= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-6 REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E GEODYNE PRODUCTION PARTNERSHIP I-E In our opinion, the accompanying combined balance sheets and the related combined statements of operations, changes in partners' capital (deficit) and cash flows present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership I-E, an Oklahoma limited partnership, and Geodyne Production Partnership I-E, an Oklahoma general partnership, at December 31, 1999 and 1998, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Partnerships' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Tulsa, Oklahoma February 18, 2000 F-7 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E Combined Balance Sheets December 31, 1999 and 1998 ASSETS ------ 1999 1998 ----------- ------------ CURRENT ASSETS: Cash and cash equivalents $ 891,310 $ 12,003 Accounts receivable: Oil and gas sales 772,416 651,445 --------- --------- Total current assets $1,663,726 $ 663,448 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 3,573,231 4,191,663 DEFERRED CHARGE 622,281 570,545 --------- --------- $5,859,238 $5,425,656 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 104,132 $ 209,486 Gas imbalance payable 174,639 115,808 --------- --------- Total current liabilities $ 278,771 $ 325,294 ACCRUED LIABILITY $ 189,964 $ 151,490 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 106,782) ($ 232,100) Limited Partners, issued and outstanding, 41,839 Units 5,497,285 5,180,972 --------- --------- Total Partners' capital $5,390,503 $4,948,872 --------- --------- $5,859,238 $5,425,656 ========= ========= The accompanying notes are an integral part of these combined financial statements. F-8 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E Combined Statements of Operations For the Years Ended December 31, 1999, 1998, and 1997 1999 1998 1997 ---------- ---------- --------- REVENUES: Oil and gas sales $4,161,530 $4,611,235 $6,004,252 Interest income 18,059 39,917 34,723 Gain on sale of oil and gas properties 1,587 1,154,155 120,840 Insurance settlement 675,000 - - Other income - - 69,917 --------- --------- --------- $4,856,176 $5,805,307 $6,229,732 COSTS AND EXPENSES: Lease operating $ 884,151 $1,182,851 $1,337,863 Production tax 269,786 323,993 433,287 Depreciation, depletion, and amortization of oil and gas properties 652,767 756,985 729,388 Impairment provision - 547,048 291,690 General and administrative 520,070 516,682 526,066 --------- --------- --------- $2,326,774 $3,327,559 $3,318,294 --------- --------- --------- NET INCOME $2,529,402 $2,477,748 $2,911,438 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 468,089 $ 548,239 $ 568,504 ========= ========= ========= LIMITED PARTNERS - NET INCOME $2,061,313 $1,929,509 $2,342,934 ========= ========= ========= NET INCOME per Unit $ 49.27 $ 46.12 $ 56.00 ========= ========= ========= UNITS OUTSTANDING 41,839 41,839 41,839 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-9 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E Combined Statements of Changes in Partners' Capital (Deficit) For the Years Ended December 31, 1999, 1998, and 1997 Limited General Partners Partner Total ------------ ---------- ------------- Balance, Dec. 31, 1996 $8,300,529 ($113,140) $8,187,389 Net income 2,342,934 568,504 2,911,438 Cash distributions ( 3,460,000) ( 683,798) ( 4,143,798) --------- ------- --------- Balance, Dec. 31, 1997 $7,183,463 ($228,434) $6,955,029 Net income 1,929,509 548,239 2,477,748 Cash distributions ( 3,932,000) ( 551,905) ( 4,483,905) --------- ------- --------- Balance, Dec. 31, 1998 $5,180,972 ($232,100) $4,948,872 Net income 2,061,313 468,089 2,529,402 Cash distributions ( 1,745,000) ( 342,771) ( 2,087,771) --------- ------- --------- Balance, Dec. 31, 1999 $5,497,285 ($106,782) $5,390,503 ========= ======= ========= The accompanying notes are an integral part of these combined financial statements. F-10 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E Combined Statements of Cash Flows For the Years Ended December 31, 1999, 1998, and 1997 1999 1998 1997 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $2,529,402 $2,477,748 $2,911,438 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 652,767 756,985 729,388 Impairment provision - 547,048 291,690 Gain on sale of oil and gas properties ( 1,587) ( 1,154,155) ( 120,840) (Increase) decrease in accounts receivable - oil and gas sales ( 120,971) 342,909 238,720 (Increase) decrease in accounts receivable - other - 69,917 ( 69,917) (Increase) decrease in deferred charge ( 51,736) 179,824 72,455 Increase (decrease) in accounts payable ( 105,354) ( 48,038) 139,262 Increase (decrease) in gas imbalance payable 58,831 ( 20,076) 11,684 Increase (decrease) in accrued liability 38,474 13,134 ( 4,307) --------- --------- --------- Net cash provided by operating activities $2,999,826 $3,165,296 $4,199,573 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 35,443) ($ 762,520) ($ 279,631) Proceeds from sale of oil and gas properties 2,695 1,265,357 156,744 --------- --------- --------- Net cash provided (used) by investing activities ($ 32,748) $ 502,837 ($ 122,887) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($2,087,771) ($4,483,905) ($4,143,798) --------- --------- --------- F-11 Net cash used by financing activities ($2,087,771) ($4,483,905) ($4,143,798) --------- --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS ($ 879,307) ($ 815,772) ($ 67,112) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,003 827,775 894,887 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 891,310 $ 12,003 $ 827,775 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-12 REPORT OF INDEPENDENT ACCOUNTANTS TO THE PARTNERS GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F GEODYNE PRODUCTION PARTNERSHIP I-F In our opinion, the accompanying combined balance sheets and the related combined statements of operations, changes in partners' capital (deficit) and cash flows present fairly, in all material respects, the combined financial position of the Geodyne Energy Income Limited Partnership I-F, an Oklahoma limited partnership, and Geodyne Production Partnership I-F, an Oklahoma general partnership, at December 31, 1999 and 1998, and the combined results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Partnerships' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Tulsa, Oklahoma February 18, 2000 F-13 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F Combined Balance Sheets December 31, 1999 and 1998 ASSETS ------ 1999 1998 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 254,500 $ 5,457 Accounts receivable: Oil and gas sales 250,188 195,444 --------- --------- Total current assets $ 504,688 $ 200,901 NET OIL AND GAS PROPERTIES, utilizing the successful efforts method 1,110,525 1,311,368 DEFERRED CHARGE 375,691 346,704 --------- --------- $1,990,904 $1,858,973 ========= ========= LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) ------------------------------------------- CURRENT LIABILITIES: Accounts payable $ 33,956 $ 406,740 Gas imbalance payable 68,901 38,738 --------- --------- Total current liabilities $ 102,857 $ 445,478 ACCRUED LIABILITY $ 122,086 $ 109,153 PARTNERS' CAPITAL (DEFICIT): General Partner ($ 9,232) ($ 94,547) Limited Partners, issued and outstanding, 14,321 Units 1,775,193 1,398,889 --------- --------- Total Partners' capital $1,765,961 $1,304,342 --------- --------- $1,990,904 $1,858,973 ========= ========= The accompanying notes are an integral part of these combined financial statements. F-14 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F Combined Statements of Operations For the Years Ended December 31, 1999, 1998, and 1997 1999 1998 1997 ---------- ---------- ---------- REVENUES: Oil and gas sales $1,292,077 $1,442,718 $2,021,805 Interest income 3,902 12,630 11,252 Gain on sale of oil and gas properties 546 380,920 76,108 Insurance settlement 472,500 - - Other income - - 48,942 --------- --------- --------- $1,769,025 $1,836,268 $2,158,107 COSTS AND EXPENSES: Lease operating $ 345,710 $ 571,401 $ 540,388 Production tax 79,336 96,615 143,412 Depreciation, depletion, and amortization of oil and gas properties 221,991 254,674 257,820 Impairment provision - 382,925 114,631 General and administrative 178,697 177,383 180,860 --------- --------- --------- $ 825,734 $1,482,998 $1,237,111 --------- --------- --------- NET INCOME $ 943,291 $ 353,270 $ 920,996 ========= ========= ========= GENERAL PARTNER - NET INCOME $ 171,987 $ 140,360 $ 183,677 ========= ========= ========= LIMITED PARTNERS - NET INCOME $ 771,304 $ 212,910 $ 737,319 ========= ========= ========= NET INCOME per Unit $ 53.86 $ 14.87 $ 51.49 ========= ========= ========= UNITS OUTSTANDING 14,321 14,321 14,321 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-15 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F Combined Statements of Changes in Partners' Capital (Deficit) For the Years Ended December 31, 1999, 1998, and 1997 Limited General Partners Partner Total ------------ ---------- ------------ Balance, Dec. 31, 1996 $2,845,660 ($ 59,110) $2,786,550 Net income 737,319 183,677 920,996 Cash distributions ( 1,173,000) ( 184,378) ( 1,357,378) --------- ------- --------- Balance, Dec. 31, 1997 $2,409,979 ($ 59,811) $2,350,168 Net income 212,910 140,360 353,270 Cash distributions ( 1,224,000) ( 175,096) ( 1,399,096) --------- ------- --------- Balance, Dec. 31, 1998 $1,398,889 ($ 94,547) $1,304,342 Net income 771,304 171,987 943,291 Cash distributions ( 395,000) ( 86,672) ( 481,672) --------- ------- --------- Balance, Dec. 31, 1999 $1,775,193 ($ 9,232) $1,765,961 ========= ======= ========= The accompanying notes are an integral part of these combined financial statements. F-16 GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F Combined Statements of Cash Flows For the Years Ended December 31, 1999, 1998, and 1997 1999 1998 1997 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 943,291 $ 353,270 $ 920,996 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization of oil and gas properties 221,991 254,674 257,820 Impairment provision - 382,925 114,631 Gain on sale of oil and gas properties ( 546) ( 380,920) ( 76,108) (Increase) decrease in accounts receivable - oil and gas sales ( 54,744) 112,290 124,154 (Increase) decrease in accounts receivable - other - 48,942 ( 48,942) (Increase) decrease in deferred charge ( 28,987) 154,312 ( 35,815) Increase (decrease) in accounts payable ( 372,784) 353,535 5,841 Increase (decrease) in gas imbalance payable 30,163 ( 8,308) 1,767 Increase (decrease) in accrued liability 12,933 ( 7,248) 12,611 --------- --------- --------- Net cash provided by operating activities $ 751,317 $1,263,472 $1,276,955 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ($ 23,334) ($ 548,339) ($ 104,709) Proceeds from sale of oil and gas properties 2,732 438,200 97,288 --------- --------- --------- Net cash used by investing activities ($ 20,602) ($ 110,139) ($ 7,421) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash distributions ($ 481,672) ($1,399,096) ($1,357,378) --------- --------- --------- F-17 Net cash used by financing activities ($ 481,672) ($1,399,096) ($1,357,378) --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 249,043 ($ 245,763) ($ 87,844) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,457 251,220 339,064 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 254,500 $ 5,457 $ 251,220 ========= ========= ========= The accompanying notes are an integral part of these combined financial statements. F-18 GEODYNE ENERGY INCOME PROGRAM I LIMITED PARTNERSHIPS Notes to the Combined Financial Statements For the Years Ended December 31, 1999, 1998, and 1997 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations The Geodyne Energy Income Limited Partnerships (the "Partnerships") were formed pursuant to a public offering of depositary units ("Units"). Upon formation, investors became limited partners (the "Limited Partners") and held Units issued by each Partnership. Geodyne Resources, Inc. is the general partner of the Partnerships. Each Partnership is a general partner in the related Geodyne Energy Income Production Partnership (collectively, the "Production Partnership") in which Geodyne Resources, Inc. serves as the managing partner. Limited Partner capital contributions were contributed to the related Production Partnerships for investment in producing oil and gas properties. The Partnerships were activated on the following dates with the following Limited Partner capital contributions: Limited Partner Date of Capital Partnership Activation Contributions ----------- ------------------ -------------- I-D March 4, 1986 7,194,700 I-E September 10, 1986 41,839,400 I-F December 16, 1986 14,320,900 The Partnerships would have terminated on December 31, 1999. However, the General Partner has extended the terms of the Partnerships for the first two year extension period to December 31, 2001 pursuant to its right to extend the term of each Partnership for up to five periods of two years each. For purposes of these financial statements, the Partnerships and Production Partnerships are collectively referred to as the "Partnerships" and the general partner and managing partner are collectively referred to as the "General Partner." An affiliate of the General Partner owned the following Units at December 31, 1999: Number of Percent of Partnership Units Owned Outstanding Units ----------- ----------- ----------------- I-D 1,077 15.0% I-E 8,306 19.9% I-F 3,384 23.6% F-19 The Partnerships' sole business is the development and production of oil and gas. Substantially all of the Partnerships' gas reserves are being sold regionally on the "spot market." Due to the highly competitive nature of the spot market, prices on the spot market are subject to wide seasonal and regional pricing fluctuations. In addition, such spot market sales are generally short-term in nature and are dependent upon the obtaining of transportation services provided by pipelines. The Partnerships' oil is sold at or near the Partnerships' wells under short-term purchase contracts at prevailing arrangements which are customary in the oil industry. The prices received for the Partnerships' oil and gas are subject to influences such as global consumption and supply trends. Allocation of Costs and Revenues The combination of the allocation provisions in each Partnership's limited partnership agreement and each Production Partnership's partnership agreement (collectively, the "Partnership Agreement") results in allocations of costs and income between the Limited Partners and General Partner as follows: Before Payout(1) After Payout(1) ------------------ ------------------ General Limited General Limited Partner Partners Partner Partners -------- -------- -------- -------- Costs(2) - ------------------------ Sales commissions, pay- ment for organization and offering costs and management fee 1% 99% - - Property acquisition costs 1% 99% 1% 99% Identified development drilling 1% 99% 1% 99% Development drilling 10% 90% 15% 85% General and administra- tive costs, direct administrative costs and operating costs(3) 10% 90% 15% 85% Income(2) - ------------------------ Temporary investments of Limited Partners' capital contributions 1% 99% 1% 99% Income from oil and gas production(3) 10% 90% 15% 85% Sale of producing pro- perties (3) 10% 90% 15% 85% F-20 All other income 10% 90% 15% 85% - ---------- (1) Payout occurs when total distributions to Limited Partners equal total original Limited Partner subscriptions. (2) The allocations in the table result generally from the combined effect of the allocation provisions in the Partnership Agreements. For example, the costs incurred in development drilling are allocated 90.9091% to the limited partnership and 9.0909% to the managing partner. The 90.9091% portion of these costs allocated to the limited partnership, when passed through the limited partnership, is further allocated 99% to the limited partners and 1% to the general partner. In this manner the Limited Partners are allocated 90% of such costs and the General Partner is allocated 10% of such costs. (3) Distributions of cash and the above allocation of income and costs of the General Partner are subject to subordination during the first two twelve-month "allocation periods". The first twelve-month "allocation period" commenced on the last day of the first full fiscal quarter after the earlier of (i) the date on which 90% of a limited partnership's capital contribution to a Production Partnership has been expended or (ii) two years after activation of a Production Partnership. The second twelve-month "allocation period" commenced at the end of the first allocation period. To the extent that the amount of cash distributed in the allocation periods is insufficient to permit the Limited Partners to receive a 15% cumulative (but not compounded) twelve-month return on their capital contributions, up to one-half of the managing partners' share of distributable cash after each such allocation period, and a corresponding amount of their allocable share of income and costs, shall thereafter be allocated to permit the Limited Partners to receive, to the extent available, the aggregate amount of such deficiency. After the allocation periods, the managing partner may recoup amounts previously allocated to the Limited Partners pursuant to this subordination provision to the extent income is otherwise sufficient to permit Limited Partners to receive at least a 15% cumulative (but not compounded) twelve-month return since the commencement of the allocation periods. The I-D Partnership achieved payout in late 1991 and the I-E and I-F Partnerships achieved payout during the second quarter of 1995. After payout, operations were allocated using the after payout percentages set forth in the table above. Basis of Presentation These financial statements reflect the combined accounts of each Partnership after the elimination of all inter-partnership transactions and balances. F-21 Cash and Cash Equivalents The Partnerships consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are not insured, which cause the Partnerships to be subject to risk. Credit Risk Accrued oil and gas sales which are due from a variety of oil and gas purchasers subject the Partnerships to a concentration of credit risk. Some of these purchasers are discussed in Note 3 - Major Customers. Oil and Gas Properties The Partnerships follow the successful efforts method of accounting for their oil and gas properties. Under the successful efforts method, the Partnerships capitalize all property acquisition costs and development costs incurred in connection with the further development of oil and gas reserves. Property acquisition costs include costs incurred by the Partnerships or the General Partner to acquire producing properties, including related title insurance or examination costs, commissions, engineering, legal and accounting fees, and similar costs directly related to the acquisitions, plus an allocated portion of the General Partner's property screening costs. The acquisition cost to the Partnerships of properties acquired by the General Partner is adjusted to reflect the net cash results of operations, including interest incurred to finance the acquisition, for the period of time the properties are held by the General Partner. Leasehold impairment of unproved properties is recognized based upon an individual property assessment and exploratory experience. Upon discovery of commercial reserves, leasehold costs are transferred to producing properties. Depletion of the cost of producing oil and gas properties, amortization of related intangible drilling and development costs, and depreciation of tangible lease and well equipment are computed on the units-of-production method. The Partnerships' depletion, depreciation, and amortization includes dismantlement and abandonment costs, net of estimated salvage value. The depreciation, depletion, and amortization rates per equivalent barrel of oil produced during the years ended December 31, 1999, 1998, and 1997 were as follows: F-22 Partnership 1999 1998 1997 ----------- ------ ------ ------ I-D $1.41 $1.12 $1.09 I-E 2.07 1.89 1.68 I-F 2.43 2.15 1.93 When complete units of depreciable property are retired or sold, the asset cost and related accumulated depreciation are eliminated with any gain or loss reflected in income. When less than complete units of depreciable property are retired or sold, the proceeds are credited to oil and gas properties. The Partnerships evaluate the recoverability of the carrying costs of their proved oil and gas properties at the field level. If the unamortized costs of oil and gas properties within a field exceed the expected undiscounted future cash flows from such properties, the cost of the properties is written down to fair value, which is determined by using the discounted future cash flows from the properties. During 1999, 1998, and 1997, the Partnerships recorded the following non-cash charges against earnings (impairment provisions): Partnership 1999 1998 1997 ----------- --------- ------- --------- I-D $ - $ - $12,290 I-E - 547,048 59,728 I-F - 382,925 20,908 The risk that the Partnerships will be required to record similar impairment provisions in the future increases as oil and gas prices decrease. In addition, during 1997 the General Partner determined that the Partnerships' unproved properties would be uneconomic to develop and, therefore, of little or no value. This determination was based on an evaluation by the General Partner that it was unlikely that these unproved properties would be developed due to low oil and gas prices and provisions in the Partnership Agreements which limit the level of permissible drilling activity. As a result of this determination, the Partnerships recorded the following non-cash charges against earnings at March 31, 1997 in order to reflect the writing-off of the Partnerships' unproved properties: Partnership Amount ----------- -------- I-D $ 49,500 I-E 231,962 I-F 93,723 F-23 Deferred Charge The Deferred Charge represents costs deferred for lease operating expenses incurred in connection with the Partnerships' underproduced gas imbalance positions. The rate used in calculating the deferred charge is the average of the annual production costs per Mcf. At December 31, 1999 and 1998, cumulative total gas sales volumes for underproduced wells were less than the Partnerships' pro-rata share of total gas production from these wells by the following amounts: 1999 1998 ------------------- ------------------- Partnership Mcf Amount Mcf Amount ----------- --------- -------- --------- -------- I-D 233,407 $ 85,847 244,675 $ 66,062 I-E 1,067,927 622,281 1,162,007 570,545 I-F 396,006 375,691 433,055 346,704 Accrued Liability The Accrued Liability represents charges accrued for lease operating expenses incurred in connection with the Partnerships' overproduced gas imbalance positions. The rate used in calculating the accrued liability is the average of the annual production costs per Mcf. At December 31, 1999 and 1998, cumulative total gas sales volumes for overproduced wells exceeded the Partnerships' pro-rata share of total gas production from these wells by the following amounts: 1999 1998 ------------------- ----------------- Partnership Mcf Amount Mcf Amount ----------- ------- -------- ------- -------- I-D 71,772 $ 26,398 53,542 $ 14,456 I-E 326,006 189,964 308,534 151,490 I-F 128,688 122,086 136,339 109,153 Oil and Gas Sales and Gas Imbalance Payable The Partnerships' oil and condensate production is sold, title passed, and revenue recognized at or near the Partnerships' wells under short-term purchase contracts at prevailing prices in accordance with arrangements which are customary in the oil industry. Sales of gas applicable to the Partnerships' interest in producing oil and gas leases are recorded as revenue when the gas is metered and title transferred pursuant to the gas sales contracts covering the Partnerships' interest in gas reserves. F-24 During such times as a Partnership's sales of gas exceed its pro rata ownership in a well, such sales are recorded as revenue unless total sales from the well have exceeded the Partnership's share of estimated total gas reserves underlying the property, at which time such excess is recorded as a liability. The rates per Mcf used to calculate this liability are based on the average gas prices received for the volumes at the time the overproduction occurred. This also approximates the price for which the Partnerships are currently settling this liability. At December 31, 1999 and 1998 total sales exceeded the Partnerships' share of estimated total gas reserves as follows: 1999 1998 ----------------- ----------------- Partnership Mcf Amount Mcf Amount ----------- ------- ------- ------- -------- I-D 24,395 $ 36,593 29,014 $ 43,521 I-E 116,426 174,639 77,205 115,808 I-F 45,934 68,901 25,825 38,738 These amounts were recorded as gas imbalance payables in accordance with the sales method. These gas imbalance payables will be settled by either gas production by the underproduced party in excess of current estimates of total gas reserves for the well or by a negotiated or contractual payment to the underproduced party. General and Administrative Overhead The General Partner and its affiliates are reimbursed for actual general and administrative costs incurred and attributable to the conduct of the business affairs and operations of the Partnerships. Use of Estimates in Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Further, the deferred charge, the gas imbalance payable, and the accrued liability all involve estimates which could materially differ from the actual amounts ultimately realized or incurred in the near term. Oil and gas reserves (see Note 4) also involve significant estimates which could materially differ from the actual amounts ultimately realized. F-25 Income Taxes Income or loss for income tax purposes is includable in the income tax returns of the partners. Accordingly, no recognition has been given to income taxes in these financial statements. 2. TRANSACTIONS WITH RELATED PARTIES The Partnerships reimburse the General Partner for the general and administrative overhead applicable to the Partnerships, based on an allocation of actual costs incurred by the General Partner. When actual costs incurred benefit other Partnerships and affiliates, the allocation of costs is based on the relationship of the Partnerships' reserves to the total reserves owned by all Partnerships and affiliates. The General Partner believes this allocation method is reasonable. Although the actual costs incurred by the General Partner and its affiliates have fluctuated during the three years presented, the amounts charged to the Partnerships have not fluctuated every year due to expense limitations imposed by the Partnership Agreements. The following is a summary of payments made to the General Partner or its affiliates by the Partnerships for general and administrative overhead costs for the years ended December 31, 1999, 1998, and 1997: Partnership 1999 1998 1997 ----------- -------- -------- -------- I-D $ 79,944 $ 79,944 $ 79,944 I-E 464,880 464,880 464,880 I-F 159,120 159,120 159,120 Affiliates of the Partnerships operate certain of the Partnerships' properties and their policy is to bill the Partnerships for all customary charges and cost reimbursements associated with these activities, together with any compressor rentals, consulting, or other services provided. Such charges are comparable to third party charges in the area where the wells are located and are the same as charged to other working interest owners in the wells. 3. MAJOR CUSTOMERS The following table sets forth purchasers who individually accounted for ten percent or more of each Partnership's combined oil and gas sales for the years ended December 31, 1999, 1998, and 1997: F-26 Partnership Purchaser Percentage - ----------- --------------------- ----------------------- 1999 1998 1997 ----- ----- ----- I-D El Paso Energy Marketing Company ("El Paso") 48.4% 41.5% 35.5% Conoco, Inc. 18.8% - 19.6% Hallwood Petroleum 11.7% 20.0% 24.9% I-E El Paso 54.6% 55.5% 51.3% I-F El Paso 30.7% 35.6% 33.9% Amoco Production Co. 11.7% - - Conoco, Inc. 10.8% - - In the event of interruption of purchases by one or more of these significant customers or the cessation or material change in availability of open-access transportation by the Partnerships' pipeline transporters, the Partnerships may encounter difficulty in marketing their gas and in maintaining historic sales levels. Alternative purchasers or transporters may not be readily available. 4. SUPPLEMENTAL OIL AND GAS INFORMATION The following supplemental information regarding the oil and gas activities of the Partnerships is presented pursuant to the disclosure requirements promulgated by the SEC. Capitalized Costs Capitalized costs and accumulated depreciation, depletion, amortization, and valuation allowance at December 31, 1999 and 1998 were as follows: F-27 I-D Partnership --------------- 1999 1998 ------------ ------------ Proved properties $4,607,189 $4,604,726 Less accumulated depreciation, depletion, amorti- zation, and valua- tion allowance ( 4,084,889) ( 3,998,933) --------- --------- Net oil and gas properties $ 522,300 $ 605,793 ========= ========= I-E Partnership --------------- 1999 1998 ------------ ------------ Proved properties $26,692,096 $26,655,665 Less accumulated depreciation, depletion, amorti- zation, and valua- tion allowance ( 23,118,865) ( 22,464,002) ---------- ---------- Net oil and gas properties $ 3,573,231 $ 4,191,663 ========== ========== F-28 I-F Partnership --------------- 1999 1998 ------------ ----------- Proved properties $8,044,032 $8,022,333 Less accumulated depreciation, depletion, amorti- zation, and valua- tion allowance ( 6,933,507) ( 6,710,965) --------- --------- Net oil and gas properties $1,110,525 $1,311,368 ========= ========= Costs Incurred The Partnerships incurred no costs in connection with oil and gas acquisition or exploration activities during 1999, 1998, and 1997. Costs incurred by the Partnerships in connection with oil and gas property development activities during 1999, 1998, and 1997 were as follows: Partnership 1999 1998 1997 ----------- -------- -------- ------- I-D $ 2,037 $ 1,811 $ 34,805 I-E 35,443 762,520 279,631 I-F 23,334 548,339 104,709 Quantities of Proved Oil and Gas Reserves - Unaudited The following tables summarize changes in net quantities of the Partnerships' proved reserves, all of which are located in the United States, for the periods indicated. The proved reserves at December 31, 1999, 1998, and 1997 were estimated by petroleum engineers employed by affiliates of the Partnerships. Certain reserve information was reviewed by Ryder Scott Company, L.P., an independent petroleum engineering firm. The following information includes certain gas balancing adjustments which cause the gas volume to differ from the reserve reports prepared by the General Partner and reviewed by Ryder Scott. F-29 I-D Partnership --------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ----------- Proved reserves, Dec. 31, 1996 55,577 2,297,923 Production ( 18,760) ( 510,113) Sales of minerals in place ( 168) ( 5,510) Revisions of previous estimates 4,349 156,947 ------- --------- Proved reserves, Dec. 31, 1997 40,998 1,939,247 Production ( 11,249) ( 456,195) Sales of minerals in place ( 1,568) ( 134,605) Extensions and discoveries 7,889 76,181 Revisions of previous estimates 1,706 210,269 ------- --------- Proved reserves, Dec. 31, 1998 37,776 1,634,897 Production ( 8,482) ( 314,010) Revisions of previous estimates 80,895 272,928 ------- --------- Proved reserves, Dec. 31, 1999 110,189 1,593,815 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1997 40,875 1,925,548 ======= ========= December 31, 1998 37,776 1,634,897 ======= ========= December 31, 1999 110,166 1,593,084 ======= ========= F-30 I-E Partnership --------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ------------ Proved reserves, Dec. 31, 1996 520,835 11,752,987 Production ( 77,648) ( 2,139,704) Sales of minerals in place ( 14,619) ( 66,444) Extensions and discoveries 29,604 18,612 Revisions of previous estimates ( 58,499) 985,558 ------- ---------- Proved reserves, Dec. 31, 1997 399,673 10,551,009 Production ( 64,346) ( 2,016,034) Sales of minerals in place ( 6,928) ( 687,223) Extensions and discoveries 35,494 491,481 Revisions of previous estimates ( 45,323) 1,040,638 ------- ---------- Proved reserves, Dec. 31, 1998 318,570 9,379,871 Production ( 58,465) ( 1,540,061) Extensions and discoveries 67 16,189 Revisions of previous estimates 467,644 435,563 ------- ---------- Proved reserves, Dec. 31, 1999 727,816 8,291,562 ======= ========== PROVED DEVELOPED RESERVES: December 31, 1997 399,277 10,506,977 ======= ========== December 31, 1998 318,570 9,379,871 ======= ========== December 31, 1999 727,565 8,283,990 ======= ========== F-31 I-F Partnership --------------- Crude Natural Oil Gas (Barrels) (Mcf) --------- ----------- Proved reserves, Dec. 31, 1996 269,162 3,556,285 Production ( 38,725) ( 571,101) Sales of minerals in place ( 8,673) ( 38,629) Extensions and discoveries 10,361 6,514 Revisions of previous estimates ( 34,694) 377,552 ------- --------- Proved reserves, Dec. 31, 1997 197,431 3,330,621 Production ( 30,203) ( 530,040) Sales of minerals in place ( 2,473) ( 248,611) Extensions and discoveries 16,858 262,256 Revisions of previous estimates ( 32,096) 220,951 ------- --------- Proved reserves, Dec. 31,1998 149,517 3,035,177 Production ( 27,794) ( 381,318) Extensions and discoveries 46 11,332 Revisions of previous estimates 229,882 105,148 ------- --------- Proved reserves, Dec. 31,1999 351,651 2,770,339 ======= ========= PROVED DEVELOPED RESERVES: December 31, 1997 197,297 3,315,478 ======= ========= December 31, 1998 149,517 3,035,177 ======= ========= December 31, 1999 351,522 2,766,466 ======= ========= Standardized Measure of Discounted Future Net Cash Flows of Proved Oil and Gas Reserves - Unaudited The following tables set forth each of the Partnerships' estimated future net cash flows as of December 31, 1999 relating to proved oil and gas reserves based on the standardized measure as prescribed in SFAS No. 69: F-32 Partnership ------------------------------ I-D I-E ------------ ------------- Future cash inflows $6,049,512 $34,501,519 Future production and development costs ( 1,601,710) ( 10,869,334) --------- ---------- Future net cash flows $4,447,802 $23,632,185 10% discount to reflect timing of cash flows ( 2,099,151) ( 10,665,090) --------- ---------- Standardized measure of discounted future net cash flows $2,348,651 $12,967,095 ========= ========== I-F Partnership --------------- Future cash inflows $14,269,566 Future production and development costs ( 4,996,858) --------- Future net cash flows $ 9,272,708 10% discount to reflect timing of cash flows ( 4,677,400) --------- Standardized measure of discounted future net cash flow $ 4,595,308 ========= The process of estimating oil and gas reserves is complex, requiring significant subjective decisions in the evaluation of available geological, engineering, and economic data for each reservoir. The data for a given reservoir may change substantially over time as a result of, among other things, F-33 additional development activity, production history, and viability of production under varying economic conditions; consequently, it is reasonably possible that material revisions to existing reserve estimates may occur in the near future. Although every reasonable effort has been made to ensure that the reserve estimates reported herein represent the most accurate assessment possible, the significance of the subjective decisions required and variances in available data for various reservoirs make these estimates generally less precise than other estimates presented in connection with financial statement disclosures. The Partnerships' reserves were determined at December 31, 1999 using oil and gas prices of approximately $22.75 per barrel and $2.24 per Mcf, respectively. F-34 INDEX TO EXHIBITS ----------------- Number Description - ------ ----------- *4.1 Amended and Restated Agreement and Certificate of Limited Partnership dated March 4, 1986 for Geodyne Energy Income Limited Partnership I-D. *4.2 Amended and Restated Agreement and Certificate of Limited Partnership dated September 10, 1986 for Geodyne Energy Income Limited Partnership I-E. *4.3 Amended and Restated Agreement and Certificate of Limited Partnership dated December 17, 1986 for Geodyne Energy Income Limited Partnership I-F. *4.4 First Amendment to Amended and Restated Certificate of Limited Partnership and First Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated February 24, 1993 for Geodyne Energy Income Limited Partnership I-D. *4.5 First Amendment to Amended and Restated Certificate of Limited Partnership and First Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated February 24, 1993 for Geodyne Energy Income Limited Partnership I-E. *4.6 First Amendment to Amended and Restated Certificate of Limited Partnership and First Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated February 24, 1993 for Geodyne Energy Income Limited Partnership I-F. *4.7 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated August 4, 1993 for Geodyne Energy Income Limited Partnership I-D. *4.8 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated August 4, 1993 for Geodyne Energy Income Limited Partnership I-E. *4.9 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated August 4, 1993 for Geodyne Energy Income Limited Partnership I-F. *4.10 Third Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated July 1, 1996 for Geodyne Energy Income Limited Partnership I-D. *4.11 Third Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated July 1, 1996 for Geodyne Energy Income Limited Partnership I-E. F-35 *4.12 Third Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated July 1, 1996 for Geodyne Energy Income Limited Partnership I-F. *4.13 Fourth Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated December 23, 1999 for Geodyne Energy Income Limited Partnership I-D. *4.14 Fourth Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated December 23, 1999 for Geodyne Energy Income Limited Partnership I-E. *4.15 Fourth Amendment to Amended and Restated Agreement and Certificate of Limited Partnership dated December 23, 1999 for Geodyne Energy Income Limited Partnership I-F. *10.1 Amended and Restated Agreement of Partnership dated March 4, 1986 for Geodyne Energy Income Production Partnership I-D. *10.2 Amended and Restated Agreement of Partnership dated September 10, 1986 for Geodyne Energy Income Production Partnership I-E. *10.3 Amended and Restated Agreement of Partnership dated December 17, 1986 for Geodyne Energy Income Production Partnership I-F. *10.4 First Amendment to Amended and Restated Agreement of Partnership dated February 26, 1993 for Geodyne Energy Income Production Partnership I-D. *10.5 First Amendment to Amended and Restated Agreement of Partnership dated February 26, 1993 for Geodyne Energy Income Production Partnership I-E. *10.6 First Amendment to Amended and Restated Agreement of Partnership dated February 26, 1993 for Geodyne Energy Income Production Partnership I-F. *10.7 Second Amendment to Amended and Restated Agreement of Partnership dated July 1, 1996 for Geodyne Energy Income Production Partnership I-D. *10.8 Second Amendment to Amended and Restated Agreement of Partnership dated July 1, 1996 for Geodyne Energy Income Production Partnership I-E. *10.9 Second Amendment to Amended and Restated Agreement of Partnership dated July 1, 1996 for Geodyne Energy Income Production Partnership I-F. F-36 *10.10 Third Amendment to Amended and Restated Agreement of Partnership dated December 30, 1999 for Geodyne Energy Income Production Partnership I-D. *10.11 Third Amendment to Amended and Restated Agreement of Partnership dated December 30, 1999 for Geodyne Energy Income Production Partnership I-E. *10.12 Third Amendment to Amended and Restated Agreement of Partnership dated December 30, 1999 for Geodyne Energy Income Production Partnership I-F. *23.1 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income Limited Partnership I-D. *23.2 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income Limited Partnership I-E. *23.3 Consent of Ryder Scott Company, L.P. for Geodyne Energy Income Limited Partnership I-F. *27.1 Financial Data Schedule containing summary financial information extracted from Geodyne Energy Income Limited Partnership I-D's financial statements as of December 31, 1999 and for the year ended December 31, 1999. *27.2 Financial Data Schedule containing summary financial information extracted from Geodyne Energy Income Limited Partnership I-E's financial statements as of December 31, 1999 and for the year ended December 31, 1999. *27.3 Financial Data Schedule containing summary financial information extracted from Geodyne Energy Income Limited Partnership I-F's financial statements as of December 31, 1999 and for the year ended December 31, 1999. All other Exhibits are omitted as inapplicable. ---------- * Filed herewith. F-37 EX-4.1 2 I-D AGREEMENT AND CERTIFICATE OF LTD. PSHIP PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D AMENDED AND RESTATED AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP Amended and Restated Agreement and Certificate of Limited Partnership, dated as of March 4, 1986, among Geodyne Properties, Inc., a Delaware corporation, and PW Energy Inc., a Delaware corporation, as General Partners, Susan Layman as the Initial Limited Partner, and those persons named in Schedule A attached hereto as Additional Limited Partners. Whereas, PaineWebber/Geodyne Energy Income Limited Partnership I-D has heretofore been formed as a limited partnership under the Oklahoma Revised Uniform Limited Partnership Act pursuant to an Agreement and Certificate of Limited Partnership dated as of December 10, 1985, and filed for recordation in the office of the Secretary of State of the State of Oklahoma on December 20, 1985; and Whereas, the parties hereto desire to amend the Certificate and Agreement of Limited Partnership of the Limited Partnership and to restate said Agreement in its entirety; Now, Therefore, in consideration of the mutual promises and agreements made herein, the parties, intending to be legally bound, hereby agree as follows: ARTICLE ONE Defined Terms -------------- The defined terms used in this Agreement shall, unless the context otherwise requires, have the meanings specified in this Article One. The singular shall include the plural and the masculine gender shall include the feminine, the neuter and vice versa, as the context requires. Any terms used in this Agreement which are defined in the Production Partnership Agreement and are not otherwise defined herein shall have the respective meanings set forth in the Production Partnership Agreement. "Accountants" shall mean Arthur Young & Company or such other nationally recognized firm of independent certified public accountants as shall be engaged from time to time by the General Partners for the Limited Partnership. -1- "Act" shall mean the Oklahoma Revised Uniform Limited Partnership Act, as amended from time to time. "Activation" or "Activated" shall mean the date on which (i) with respect to the Limited Partnership, the subscribers for Units shall have been admitted to the Limited Partnership as Limited Partners, and (ii) with respect to the Production Partnership, the Limited Partnership shall have made its capital contribution to the Production Partnership. "Additional Limited Partner" shall mean any person admitted to the Limited Partnership pursuant to Section 3.3A of this Agreement. "Affiliate" shall mean, when used with reference to a specified Person: (a) any Person directly or indirectly owning, controlling, or holding with power to vote 10% or more of the outstanding voting securities of the specified Person; (b) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the specified Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with, the specified Person; (d) any Person who is an officer, director, partner or trustee of, or serves in a similar capacity with respect to, the specified Person or of which the specified Person is an officer, director, partner or trustee, or with respect to which the specified Person serves in a similar capacity; and (e) any relative or spouse of the specified Person. A reference to an Affiliate of the General Partners shall include an Affiliate of either or both of the General Partners. Notwithstanding the foregoing, no Person shall be deemed to be an Affiliate solely by reason of its ownership of limited partnership interests in a limited partnership. "Affiliated Program" shall mean a drilling or income program (whether in the form of a limited partnership, general partnership, joint venture or otherwise) interests in which were offered to persons or entities not engaged in a trade or business within the oil and gas industry (other than by virtue of its participation in an Affiliated Program) and of which any General Partner or Affiliate serves as general partner or venturer. "Agreement" shall mean this Amended and Restated Agreement and Certificate of Limited Partnership as originally executed and as amended from time to time. -2- "Capital Account" shall mean, as to any Partner, the sum of the Capital Contribution by such Partner, plus his share of any Profits (including, with respect to Limited Partners, his share of any interest earned on funds held by the escrow agent and paid to the Limited Partnership, as set forth in the Prospectus), reduced by his share of any Losses (including such Partner's deduction for depletion to the extent such deduction does not exceed the amount of cost depletion such Partner would be allowed) and distributions of Limited Partnership cash or assets to such Partner or on behalf of such Partner in payment of any taxes or other expenses allocable to such Partner. "Capital Contribution" of a Limited Partner shall mean the cash contribution of a Limited Partner paid with respect to such Limited Partner's subscription and any cash distributions from a Prior Limited Partnership reinvested on behalf of a Limited Partner in the Limited Partnership, net of any refunds made pursuant to Section 3.4 of this Agreement. "Code" shall mean the Internal Revenue Code of 1954, as amended (or any corresponding provisions of succeeding law). "Commissions" shall mean the cash fees payable to the Dealer Manager and the Selected Dealers upon the Activation of the Limited Partnership. "Consent" shall mean the consent of a Person, given as provided in Section 11.1, to do the act or thing for which the consent is solicited, or the act of granting such consent, as the context may require. "Dealer Manager" shall mean PaineWebber Incorporated, a Delaware corporation. "Direct Administrative Costs" shall mean the actual and necessary direct costs attributable to services provided to the Limited Partnership by parties other than the General Partner or their Affiliates, whether incurred by the Limited Partnership directly or incurred by any of the General Partners or their Affiliates, including the annual audit fees, legal fees and expenses, the cost of reviewing tax returns and reports, the cost of evaluations prepared by independent petroleum engineers pursuant to Section 9.4C of this Agreement and all other such costs directly incurred by or for the benefit of the Limited Partnership. -3- "Distributable Cash" shall mean, with respect to the Limited Partnership's operations at any time, the amount of cash assets on hand at such time less amounts required to be retained out of such cash assets, in the sole judgment of the General Partners, to pay costs, expenses or other obligations whether then accrued or anticipated to accrue in the future. "Fiscal Year" shall mean the calendar year. "General and Administrative Costs" shall mean all customary and routine legal, accounting, data processing, depreciation, geological, engineering, travel, office rent, telephone, secretarial, employee compensation and benefits, and other items of a general and administrative nature, whether like or unlike the foregoing, and any other incidental reasonable expenses reasonably necessary to the conduct of the Limited Partnership's business, and generated by the General Partners or any Affiliate other than an Affiliated Program computed on a cost basis, determined by the General Partners in accordance with generally accepted accounting principles and reviewed by an independent public accountant or certified public accountant. General and Administrative Costs shall not include any Direct Administrative Costs or costs of the Production Partnership. "General Partners" shall mean Geodyne Properties, Inc., a Delaware corporation, and PW Energy Inc., a Delaware corporation, acting in such capacity, and any other Person admitted as an additional or substituted General Partner pursuant to the provisions of Article Six of this Agreement. "Geodyne Properties" shall mean Geodyne Properties, Inc., a Delaware corporation. "Hydrocarbons" shall mean crude oil, natural gas, condensate, natural gas liquids and other liquid or gaseous hydrocarbons. "Incapacity" or "Incapacitated" shall mean the adjudication of bankruptcy (except that, in the case of a General Partner, the term "bankruptcy" shall mean only being subject to Chapter 7 of the Federal Bankruptcy Reform Act of 1978), of interdiction, of incompetence, or of insanity, or the death, dissolution or termination (other than by merger or consolidation under which the surviving entity agrees to assume all of the obligations and responsibilities of the merged or consolidated Person set forth in this Agreement), as the case may be, of any Person. -4- "Income" shall mean the gross income of the Limited Partnership or the Production Partnership (as the context may require) as determined for Federal income tax purposes, including all capital or Code Section 1231 gains (but not losses). "Initial Limited Partner" shall mean Susan Layman. "Interest" shall mean the entire ownership interest (which may, either for a Partner's Capital Account or a Partner's Profits interest, be expressed as a percentage) of a Partner in the Limited Partnership at any particular time, including the rights and obligations of such Partner under this Agreement and the Act. "Limited Partners" shall mean the limited partners of the Limited Partnership or any substituted limited partner including the General Partners to the extent they purchase Units. "Limited Partnership" shall mean the limited partnership continued hereby. "Limited Partnership Account" shall mean the bank account or accounts established by the General Partners pursuant to Section 9.3 of this Agreement. "Limited Partnership Property" shall mean all interest, property and right of any type owned by the Limited Partnership. "Managing Partners" shall mean Geodyne Production Company, a Delaware corporation, and PW Production, Inc., a Delaware corporation, acting in such capacity, and any successor acting in such capacity. "Notification" shall mean a writing, containing the information required by this Agreement to be communicated to any Person, hand delivered or sent by registered or certified mail, return receipt requested, postage prepaid, to such Person at the last known address of such Person, the date of the certified receipt (or such other evidence of receipt) therefor being deemed the date of the giving of Notification; provided, however, that any written communication containing the information sent or delivered to the Person and actually received by the Person shall constitute Notification for all purposes of this Agreement. -5- "Organization and Offering Costs" shall mean all costs and expenses incurred by the General Partners and their Affiliates in connection with the organization of the Limited Partnership, including, without limitation, the legal, printing, accounting and other costs incurred in connection with the registration for offer and sale of the Units under applicable federal and state securities laws (other than any organization and offering costs as defined in the Production Partnership Agreement). Organization and Offering Costs shall not include the Commissions paid to the Dealer Manager or reallowed to the Selected Dealers. "Partner" shall mean any General Partner or any Limited Partner. "Person" shall mean any individual, partnership, corporation, trust or other entity. "Prior Limited Partnership" shall mean any limited partnership activated prior to the Activation of the Limited Partnership of which units of limited partnership interest were offered and sold pursuant to the Prospectus. "Production Partnership" shall mean the general partnership of which the Limited Partnership is a general partner. "Production Partnership Agreement" shall mean the agreement of general partnership under which the Production Partnership was formed, as amended from time to time. "Production Partnership Well" shall mean any well in which the Production Partnership has an interest. "Producing Property" shall mean any property (or interest in such property) with a well or wells capable of producing Hydrocarbons in commercial quantities or properties unitized with such properties or properties adjacent to such properties which are acquired as an incidental part of the acquisition of such properties. The term also includes well machinery and equipment, gathering systems, storage facilities or processing installations or other equipment and property associated with the production of Hydrocarbons. Interests in properties may include Working Interests, production payments, Royalties and other nonworking and nonoperating interests. -6- "Profits" and "Losses" shall mean the income or losses of the Limited Partnership for Federal income tax purposes determined as of the close of the Limited Partnership's Fiscal Year, as well as, when the context requires, any tax-exempt income and nondeductible expenses. "Prospectus" shall mean the prospectus pursuant to which the Units were offered, and all supplements or amendments thereto, if any. "Proved Reserves" shall mean those quantities of Hydrocarbons, which, upon analysis of geologic and engineering data, appear with reasonable certainty to be recoverable in the future from known Hydrocarbon reservoirs under existing economic and operating conditions. Proved reserves are limited to those quantities of Hydrocarbons which can be expected, with little doubt, to be recoverable commercially at current prices and costs, under existing regulatory practices and with existing conventional equipment and operating methods. Depending upon their status of development, such proved reserves shall be subdivided into the following classifications and have the following definitions: (a) "Proved Developed Reserves" shall mean proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. This classification shall include: (1) "Proved Developed Producing Reserves" which are proved developed reserves which are expected to be produced from existing wells; and (2) "Proved Developed Non-Producing Reserves" which are proved developed reserves which exist behind the casing of existing wells, or at minor depths below the present bottom of such wells, which are expected to be produced through these wells in the predictable future, where the cost of making Hydrocarbons available for production should be relatively small compared to the cost of a new well. Additional Hydrocarbons expected to be obtained through the application of improved recovery techniques are included as "Proved Developed Reserves" only after testing by a pilot project or after the operation of an installed program has confirmed through production responses that increased recovery will be achieved. -7- (b) "Proved Undeveloped Reserves" shall mean all reserves which are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Such reserves on undrilled acreage are limited to those drilling units offsetting productive units which are reasonably certain of production when drilled. Proved reserves for other undrilled units are claimed only where it can be demonstrated with reasonable certainty, based on accepted geological, geophysical and engineering studies and data, that there is continuity of production from an existing productive formation. No estimates for Proved Undeveloped Reserves are attributable to any acreage for which improved recovery is contemplated, unless the techniques to be employed have been proved effective by actual tests in the same area and reservoir. "PW Energy" shall mean PW Energy Inc., a Delaware corporation. "Remove", "Removed" or "Removal" shall mean, with reference to the removal of a General Partner, the termination of the management powers, duties and responsibilities of such General Partner pursuant to Section 6.2 of this Agreement and the removal of such General Partner as a Partner. "Right of Presentment" shall mean the acquisition by a purchaser of a Limited Partner's Interest pursuant to Section 7.5 of this Agreement. "Royalty" shall mean an interest, including an overriding royalty and a net profits interest, in gross production or the proceeds therefrom which does not require the owner thereof to bear any of the cost of production, development, operation or maintenance. "Sale" shall mean any event or transaction that is, for Federal income tax purposes, considered a sale, exchange or abandonment by the Limited Partnership of any Limited Partnership Property. "Selected Dealer" shall mean a member in good standing of the National Association of Securities Dealers, Inc. which has been selected by the Dealer Manager to offer and sell the Units. "State" shall mean the State of Oklahoma. -8- "Subscription Agreement and Power of Attorney" shall mean the Subscription Agreement and Power of Attorney in the form attached to the Prospectus. "Subsequent Limited Partnership" shall mean any limited partnership activated after the Activation of the Limited Partnership of which units of limited partnership interest are offered and sold pursuant to the Prospectus. "Substituted Partner" shall mean any Person admitted to the Limited Partnership as a Partner pursuant to Section 7.3 and 10.2 of this Agreement. "Unit" shall mean a $1,000 investment in the Limited Partnership by a Limited Partner pursuant to the terms of a Subscription Agreement and Power of Attorney; provided, however, that fractional Units may be acquired to the extent provided under Section 5.lB in whole increments of $100. "Working Interest" shall mean the interest (whether held directly or indirectly) in a lease (as defined in the Production Partnership Agreement) which is subject to some portion of the expense of production, development, operation or maintenance. ARTICLE TWO Continuation; Name, Place of Business and Office; Term ------------------------------------------------------ Section 2.1. Continuation -------------------------- The parties hereto hereby continue the limited partnership heretofore formed pursuant to the provisions of the Oklahoma Revised Uniform Limited Partnership Act, and the rights and liabilities of the Partners shall be as provided in the Act, except as otherwise expressly provided in this Agreement. Section 2.2. Name, Place of Business and Office, Agent ------------------------------------------------------- The Limited Partnership shall be conducted under the name PaineWebber/Geodyne Energy Income Limited Partnership I-D. The business of the Limited Partnership may, however, be conducted under any other name deemed necessary or desirable by the General Partners in order to comply with applicable laws. The office and principal place of business of the Limited -9- Partnership shall be c/o Geodyne Properties, Inc., 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The agent for service of process on the Limited Partnership shall be Geodyne Properties, Inc., 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The General Partners may change the principal place of business and the location of such office and may establish such additional offices as they deem advisable from time to time; provided, however, that in the event the principal place of business of the Limited Partnership shall be changed, the General Partners shall provide Notification thereof to the Limited Partners. Section 2.3. Purpose --------------------- The business and purpose of the Limited Partnership shall be to become a general partner in the Production Partnership. Such business and purpose shall include the doing of any and all things incident thereto or connected therewith, including the carrying on of the business of the Production Partnership in the event of its termination if it is determined by the General Partners to be in the best interests of the Limited Partners. The Limited Partnership shall not engage in any other business or activity. Section 2.4. Term ------------------ The Limited Partnership shall continue in force and effect until December 31, 1999, provided that the General Partners shall extend the term of the Limited Partnership for up to five periods of two years each in the event that the Production Partnership's term has been so extended, or until dissolution prior thereto pursuant to the provisions hereof. ARTICLE THREE Partners and Capital -------------------- Section 3.1. General Partners ------------------------------ A. The names, addresses and Capital Contributions of the General Partners are set forth in Schedule A attached hereto and are incorporated herein. -10- B. Each General Partner represents to each Additional Limited Partner, severally, that: (i) neither it nor any of its Affiliates is a "party in interest," as defined in Section 3(14) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a "disqualified person," as defined in Section 4975(e) (2) of the Code, with respect to any Additional Limited Partner, the assets of which are being used, in whole or in part, to acquire an Interest in the Limited Partnership; and (ii) neither the acquisition by such Limited Partners of their Interests nor any transactions contemplated by the Prospectus involving the use of amounts constituting such Limited Partners' Capital Contributions will constitute or result in a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. In making such representations, the General Partners have each received and relied upon information from Additional Limited Partners pursuant to subscription agreements, in the form attached as Exhibit C to the Prospectus, executed by such Limited Partners. Section 3.2. Initial Limited Partner ------------------------------------- Upon admission of the Additional Limited Partners to the Limited Partnership pursuant to Section 3.3A of this Agreement, the Initial Limited Partner shall withdraw from the Limited Partnership and shall be entitled to receive an amount of money equal to her Capital Contribution. Section 3.3. Additional Limited Partners ----------------------------------------- A. The General Partners are authorized to admit Additional Limited Partners to the Limited Partnership if, after the admission of such Additional Limited Partners, the Capital Contributions of all Additional Limited Partners would be not less than $5,000,000 and not more than $90,000,00 less the aggregate subscription amount of units of limited partnership interest subscribed to any Prior Limited Partnership. The Capital Contributions of the Additional Limited Partners shall be made in cash. -11- The manner of the offering of the Units, the terms and conditions under which subscriptions for such Units will be accepted (including the minimum subscription amounts applicable to various categories of subscribers), the manner of and conditions to the sale of Units to subscribers therefor, the terms of the reinvestment in the Limited Partnership of cash distributions from a Prior Limited Partnership and the admission of subscribers for Units and Persons who reinvest in the Limited Partnership cash distributions from a Prior Limited Partnership as Additional Limited Partners will be as provided in the Prospectus and subject to any provisions thereof. B. The names, addresses and Capital Contributions of the Additional Limited Partners are set forth in Schedule A hereto, as amended from time to time. C. No Limited Partner shall be required to make any additional capital contribution to the Limited Partnership. Section 3.4. Certain Returns of Capital ---------------------------------------- Any portion of the capital contribution of the Limited Partnership to the Production Partnership which is distributed to the Limited Partnership pursuant to Section 3.4 of the Production Partnership Agreement shall be distributed promptly to the Limited Partners in proportion to their Capital Contributions as a return of part of their Capital Contributions. In addition, the General Partners shall contribute cash to the Limited Partnership (with respect to which their Capital Accounts will be credited) in an amount equal to the amounts paid to the General Partners or their Affiliates from the Limited Partners' Capital Contributions in respect of Commissions and Organization and Offering Costs attributable (on a proportionate basis) to the amount of the unexpended Capital Contributions so refunded, which cash shall be refunded pro rata to the Limited Partners (except that cash representing refunded Commissions shall be distributed to Limited Partners in proportion to the manner in which Commissions attributable to their subscriptions were payable) together with the unexpended Capital Contributions. Geodyne Properties and PW Energy shall be responsible for 40% and 60%, respectively, of the obligation of the General Partners to contribute cash to the Limited Partnership in connection with a return of the Limited Partners' Capital Contributions pursuant to this Section 3.4. -12- Section 3.5. Limited Partnership Capital ----------------------------------------- A. No Partner shall be paid interest on any Capital Contribution to the Limited Partnership or on such Partner's Capital Account, notwithstanding any disproportion therein as between Partners. B. Except as provided in Sections 3.2, 3.4, 6.2 and 8.2 of this Agreement, no Partner shall have the right to withdraw or receive any return of the Capital Contribution. Under circumstances involving a return of any Capital Contribution, no Limited Partner shall have priority over any other Limited Partner nor shall any Partner have the right to receive any property other than cash, except as may otherwise be provided in Sections 6.2 and 8.2A of this Agreement. Section 3.6. Application of Capital Contributions -------------------------------------------------- A. The General Partners shall deposit in the Limited Partnership Account the Capital Contributions of the Additional Limited Partners and shall apply such Capital Contributions to (i) pay to the General Partners an amount equal to 3% of the Limited Partners' Capital Contributions in consideration of the General Partners' payment of Organization and Offering Costs, (ii) pay Commissions, (iii) establish a reasonable reserve for working capital, and (iv) contribute the balance of the Partners' Capital Contributions to the Production Partnership in exchange for the Limited Partnership's interest therein. B. PW Energy and Geodyne Properties shall be responsible for the payment of 60% and 40%, respectively, of Organization and Offering Costs. The General Partners shall allocate between themselves the payment received in Section 3.6A(i) (hereinafter referred to in this Section 3.6B as the "Fee") as follows: (i) to the extent of the amount of actual Organization and Offering Costs incurred by the General Partners plus Unreimbursed Prior Organization and Offering Costs (as defined below), the Fee shall be paid 60% to PW Energy and 40% to Geodyne Properties; (ii) to the extent the Fee is in excess of the actual Organization and Offering Costs plus Unreimbursed Prior Organization and Offering Costs (as defined below) but such excess amount does not exceed 2% of the Limited Partners' Capital Contributions, 75% shall be paid to PW Energy and 25% shall be paid to Geodyne Properties; and (ii) any excess of the -13- Fee over the amounts of such Fee paid to the General Partners pursuant to (i) and (ii) of this Section 3.6B shall be paid 50% each to PW Energy and Geodyne Properties. "Unreimbursed Prior Organization and Offering Costs" shall mean the actual organization and offering costs of any Prior Limited Partnerships and any Prior Production Partnerships (as defined in the Production Partnership Agreement) for which the General Partners and Managing Partners are not reimbursed by the payment to them of the fee referred to in Section 3.6A(i) of the limited partnership agreements of the respective Prior Limited Partnerships and by the payment to them of the management fee of the Prior Production Partnerships. C. The Limited Partnership shall not incur any borrowings; provided, however, that borrowings may be incurred on its behalf by the Production Partnership to pay costs of the Production Partnership allocable to the Limited Partnership. Section 3.7. Liability of Partners ----------------------------------- A. No Limited Partner shall be liable for the debts, liabilities, contracts or other obligations of the Limited Partnership (except to the extent of (i) the Limited Partner's Capital Contribution, (ii) money or property wrongfully paid or conveyed to the Limited Partner on account of the Limited Partner's Capital Contribution, and (iii) amounts, together with interest thereon, properly distributed to the Limited Partner which represent a return of capital and which are necessary to discharge the Limited Partnership's liability to creditors which arose prior to such distribution) or for the debts and liabilities of any other Partner. B. Geodyne Properties, PW Energy and any General Partner subsequently admitted to the Limited Partnership each agrees that it shall remain generally liable for any obligation or recourse liability of the Limited Partnership incurred during the period in which it is a General Partner. However, all present and future General Partners hereby agree among themselves to contribute to each other the amount of funds necessary to effectuate a sharing of Limited Partnership obligations and recourse liabilities in proportion to each General Partner's share of such obligations and liabilities. -14- Section 3.8. General Partner as Limited Partner ------------------------------------------------ A. General Partner shall also be a Limited Partner to the extent that it purchases or becomes a transferee of all or any part of the Interest of a Limited Partner, provided that a General Partner shall not thereby (i) acquire any power to vote, as a Limited Partner, with respect to any action requiring the Consent of any specified percentage of Limited Partners, and (ii) be deemed to have limited its liability for any obligation or recourse liability of the Limited Partnership as set forth under Section 3.7B. ARTICLE FOUR Management ----------- Section 4.1. Management and Control of the Limited Partnership --------------------------------------------------------------- A. The General Partners, within the authority granted to them under and in accordance with the provisions of this Agreement, shall have the full and exclusive right to manage and control the business and affairs of the Limited Partnership and to make all decisions regarding the business of the Limited Partnership and shall have all of the rights, powers and obligations of general partners of a limited partnership under the laws of the State. B. No Limited Partner, as such, shall participate in the management of or have any control over the Limited Partnership's business nor shall any Limited Partner, as such, have the power to represent, act for, sign for or bind the General Partners or the Limited Partnership. The Limited Partners hereby consent to the exercise by the General Partners of the powers conferred on them by this Agreement. -15- C. The General Partners' management authority with respect to significant Limited Partnership actions shall be exercised jointly by both General Partners, including without limitation such actions as the determination of the amount of Distributable Cash to distribute to the Partners. The General Partners' management authority respecting all other actions which are in the ordinary course of the Limited Partnership's operations (and any "significant" Limited Partnership action delegated to a General Partner under Section 4.lC(iii)) may be exercised by either General Partner without the concurrence of the other General Partner, provided that the General Partner exercising such management authority shall, upon inquiry by the other General Partner, notify the inquiring General Partner of the nature of such actions undertaken without the concurrence of the inquiring General Partner. The General Partners shall have the authority to (i) determine that the "significant" action specified herein shall no longer be a "significant" action for purposes of this Section 4.lC and to amend this Agreement pursuant to Section l0.lA of this Agreement to reflect such determination, (ii) to determine which other Limited Partnership actions, other than that specified herein, are "significant" actions for purposes of this Section 4.1C, and (iii) delegate their management authority to a single General Partner with respect to "significant" Limited Partnership actions at such times and under such conditions as they may mutually agree upon. Section 4.2. Powers of the General Partners -------------------------------------------- A. In addition to any other rights and powers which the General Partners may possess under this Agreement and the Act, the General Partners shall have the power, except and subject to the extent otherwise provided or limited in this Agreement: (i) to contribute the balance (after payment and retention of the amounts set forth in Section 3.6) of the Capital Contributions of the Limited Partners to the Production Partnership as required by the Limited Partnership's interest therein, and to execute the Production Partnership Agreement (including any amendment and restatement thereof) on behalf of the Limited Partnership; -16- (ii) if the Production Partnership is dissolved, to enter into all transactions contemplated by the Production Partnership Agreement, subject to the limitations and provisions contained therein, notwithstanding anything to the contrary contained herein; (iii) to maintain the books and records of the Limited Partnership in accordance with the provisions of Section 9.1; and (iv) subject to Sections 4.5E, 4.5F and 4.5G, to consent to certain actions on behalf of the Limited Partnership pursuant to the Production Partnership Agreement. B. Reliance by Third Parties on General Partners' Authority. No person, firm or corporation dealing with the Limited Partnership shall be required to inquire into the authority of any General Partner to take or refrain from taking any action or make or refrain from making any decision, but any person so inquiring shall be entitled to rely upon a certificate of a General Partner as to its due authorization. Section 4.3. Prohibited Transactions ------------------------------------- A. Notwithstanding any other provision of this Agreement to the contrary, the following transactions are expressly prohibited: (i) the Limited Partnership shall not make any loans to a General Partner or any Affiliate; (ii) except as expressly contemplated hereby, no agent, attorney, accountant or other independent consultant or contractor who is also employed on a full-time basis by any General Partner or any Affiliate shall be compensated by the Limited Partnership for his services; (iii) there shall be no commingling of Limited Partnership funds with funds of any other entity; and (iv) the Limited Partnership shall not make any advance payment to the General Partners or their Affiliates, except where necessary to secure tax benefits of prepaid drilling costs. -17- Section 4.4. Other Agreements of the General Partners ------------------------------------------------------ A. Anything in this Agreement to the contrary notwithstanding, it is agreed that: (i) the General Partners and their Affiliates shall not take any action with respect to the assets or property of the Limited Partnership which does not benefit primarily the Limited Partnership, including the utilization of Limited Partnership funds as compensating balances for the benefit of any General Partner or Affiliate; (ii) neither the General Partners nor any Affiliate shall render to the Limited Partnership any services nor sell or lease to the Limited Partnership any equipment or supplies unless: (a) such General Partner or Affiliate is engaged, independently of the Limited Partnership and as an ordinary and ongoing business, in the business of rendering such services or selling or leasing such equipment and supplies to a substantial extent to other Persons in the oil and gas industry in addition to programs in which such General Partner or Affiliate has an interest; (b) the compensation, price or rental therefor is competitive with the compensation, price or rental of other Persons in the area engaged in the business of rendering comparable services or selling or leasing comparable equipment and supplies which could reasonably be made available to the Limited Partnership; and (c) provided that, if such General Partner or Affiliate is not engaged in a business within the meaning of subdivision (a), then such compensation, price or rental shall be the cost of such services, equipment or supplies to such General Partner or Affiliate or the competitive rate which could be obtained in the area, whichever is less. -18- Section 4.5. Restrictions on the Authority of the General Partners ------------------------------------------------------------------- A. The General Partners shall not have the authority to: (i) do any act in contravention of this Agreement or which would make it impossible to carry on the ordinary business of the Limited Partnership; (ii) confess a judgment against the Limited Partnership; (iii) possess Limited Partnership Property or assign, pledge or hypothecate rights in specific Limited Partnership Property for other than a Limited Partnership purpose; (iv) admit a Person as a General Partner or a Limited Partner except as otherwise provided herein; or (v) perform any act which would result in loss of any Limited Partner's status as a limited partner under the laws of the State or of limited liability under the laws of any other jurisdiction in which the Limited Partnership is doing business, including use of any Limited Partner's name in conducting the business of the Limited Partnership. B. The General Partners shall not lease, sell, abandon or otherwise dispose of any assets of the Limited Partnership to the General Partners or to any of their Affiliates; provided, however, that if the Limited Partnership should own any inventory or other materials, such inventory or materials may be transferred to the General Partners or any of their Affiliates at the applicable rates set forth in the standard form of accounting procedure then recommended by the Council of Petroleum Accountants Societies of North America. C. The General Partners shall not perform any act that would subject any Limited Partner to liability as a general partner in any jurisdiction. D. Without the consent of more than 50% in Interest of the Limited Partners, the General Partners shall not have the authority to: -19- (i) lease, sell, or otherwise dispose of at any one time all or substantially all of the assets of the Limited Partnership other than in the ordinary course of business; (ii) elect to dissolve and wind up the Limited Partnership; or (iii) except as set forth in Article 10, adopt any amendment to this Agreement. E. The General Partners shall not cause the Limited Partnership to consent to, or join in, any amendment, or modification of, or supplement to, or waiver of the terms of, the Production Partnership Agreement unless: (i) in the judgment of the General Partners such amendment, modification, supplement or waiver would not materially adversely affect the Limited Partnership's rights under the then existing Production Partnership Agreement or such amendment, modification, supplement, or waiver is in the best interests of the Limited Partners; or (ii) if the conditions of Section 11.3 are satisfied, the consent of more than 50% in Interest of the Limited Partners is obtained. If the conditions of Section 11.3 are satisfied, the General Partners shall propose any amendment to the Production Partnership Agreement on behalf of the Limited Partnership which is proposed by at least 10% in Interest (as to capital and Profits and Losses) of the Limited Partners. F. Unless the conditions of Section 11.3 are satisfied and the consent of more than 50% in Interest of the Limited Partners is obtained, the General Partners shall not have the authority to consent on behalf of the Limited Partnership to the: (i) lease, sale or other disposition at any one time of all or substantially all of the assets of the Production Partnership; or (ii) dissolution and winding up of the Production Partnership. G. Unless the conditions of Section 11.3 are satisfied and the consent of more than 50% in Interest of the Limited Partners is obtained, the General Partners shall not have the authority to cause the Limited Partnership to (i) remove a Managing Partner, or (ii) appoint a successor Managing Partner pursuant to Section 6.2 of the Production Partnership Agreement. -20- H. No creditor who makes a nonrecourse loan to the Limited Partnership may have or acquire, at any time as a result of making the loan, any direct or indirect interest in the profits, capital or property of the Limited Partnership other than as a secured creditor. Section 4.6. Duties and Obligations of the General Partners ------------------------------------------------------------ The General Partners shall: (i) use their best efforts to take all actions that may be necessary or appropriate for the continuation of the Limited Partnership's valid existence as a limited partnership or partnership in commendam under the laws of the State and the laws of any other jurisdiction in which the Limited Partnership is doing business, and for the acquisition and holding, in accordance with the provisions of this Agreement and applicable laws and regulations, of the interest of the Limited Partnership in the Production Partnership; (ii) devote to the Limited Partnership the time that they shall deem to be necessary to conduct the Limited Partnership's business and affairs in the best interests of the Limited Partnership; (iii) be under a fiduciary duty and obligation to conduct the affairs of the Limited Partnership in the best interests of the Limited Partnership, including the safekeeping and use of all Limited Partnership funds and assets (whether or not in the immediate possession or control of the General Partners) and the use thereof for the benefit of the Limited Partnership; (iv) at all times act with integrity and good faith and exercise due diligence in all activities relating to the conduct of the business of the Limited Partnership and in resolving conflicts of interest; -21- (v) use their best efforts at all times to maintain their aggregate net worth at a level that is sufficient to meet all present and future requirements set by statute, Treasury Regulations, the Internal Revenue Service or the courts to ensure that the Limited Partnership will not fail to be classified for Federal income tax purposes as a partnership, rather than as an association taxable as a corporation, on account of the net worth of the General Partners; (vi) prepare or cause to be prepared and shall file on or before the due date (or any extension thereof) any Federal, state or local tax returns required to be filed by the Limited Partnership; (vii) cause the Limited Partnership to pay any taxes payable by the Limited Partnership; (viii) use their best efforts to cause the Limited Partnership (or a new limited partnership having the same provisions as the Limited Partnership) to be formed, reformed, qualified to do business, or registered under any applicable assumed or fictitious name statute or similar law in any state in which the Limited Partnership then owns property or transacts business, if such formation, reformation, qualification or registration is necessary or advisable in its counsel's opinion to protect the limited liability of the Limited Partners or to permit the Limited Partnership lawfully to own property or transact business; (ix) from time to time, prepare and file all amendments to this Agreement and other similar documents that are required by law to be filed and recorded for any reason, in the office or offices that are required under the laws of the State or any other state in which the Limited Partnership is then formed or qualified; (x) do all other acts and things (including making publications or periodic filings of this Agreement or amendments hereto or other similar documents without the necessity of mailing or delivering copies of them to each Limited Partner) that may now or hereafter be deemed by the General Partners to be necessary, -22- (a) for the perfection and continued maintenance of the Limited Partnership as a limited partnership under the laws of the State, (b) to protect the limited liability of the Limited Partners under the laws of the State and other jurisdictions in which the Limited Partnership is doing business, and (c) subject to Section 7.3G of this Agreement, to cause this Agreement, certificates or other documents to reflect accurately the agreement of the Partners, the identity of the Limited Partners and the General Partners and the amounts of their respective Capital Contributions; (xi) monitor the activities of the Production Partnership and keep the Limited Partners informed of them in the manner provided in this Agreement; (xii) from time to time submit to any appropriate state securities administrator all documents, papers, statistics and reports required to be filed with or submitted to such state securities administrator; and (xiii) inform each Limited Partner of all administrative and judicial proceedings for an adjustment at the Limited Partnership or Production Partnership level for partnership tax items and forward to each Limited Partner within 30 days of receipt all notices received from the Internal Revenue Service regarding the commencement of a partnership level audit or a final partnership administrative adjustment, and to perform all other duties imposed by Sections 6221 through 6232 of the Code on Geodyne Properties as "tax matters partner" of the Limited Partnership, including (but not limited to) the following: (a) the power to conduct all audits and other administrative proceedings (including windfall profit tax audits) with respect to Limited Partnership tax items; (b) the power to extend the statute of limitations for all Partners with respect to Limited Partnership tax items; and (c) the power to file a petition with an appropriate federal court for review of a final partnership administrative adjustment. Geodyne Properties, as "tax matters partner," shall consult with PW Energy with respect to the performance of all its duties in such capacity. -23- Section 4.7. Compensation of the General Partners -------------------------------------------------- A. Except as provided in Articles Four and Five, the General Partners shall not, either in their capacity as General Partners or in their individual capacity, receive any salary, fees or profits from the Limited Partnership. B. In consideration of their payment of Organization and Offering Costs, the General Partners shall be paid by the Limited Partnership an amount equal to 3% of the Limited Partners' Capital Contributions which the General Partners shall allocate between them as provided in Section 3.6. The General Partners shall be reimbursed by the Limited Partnership for General and Administrative Costs and Direct Administrative Costs incurred by them on behalf of the Limited Partnership, and such costs shall be allocated among the Partners as set forth in Section 5.2 of this Agreement. The General Partners shall be paid any excess of interest income over the costs incurred in connection with the maintenance of the reinvestment account referred to in Section 5.1(B)(i). Section 4.8. Contracts with the General Partners and Affiliates ---------------------------------------------------------------- All services provided to the Limited Partnership by a General Partner or any Affiliate for which it is compensated shall be embodied in a written contract precisely setting forth the services to be rendered and the compensation to be paid. Each contract relating to a transaction between the Limited Partnership and any General Partner or any Affiliate shall contain a provision which shall permit termination of the contract by the Limited Partnership without penalty on 30 days' prior written notice. Section 4.9. Other Operations ------------------------------ The General Partners and their Affiliates shall at all times be free to engage in all aspects of the oil, gas and natural resources business for their own accounts and for the accounts of others. Without limiting the generality of the foregoing, the General Partners and their Affiliates shall have the right to organize and operate other partnerships, joint ventures or other oil and gas investment programs similar to the Limited Partnership or the Production Partnership. -24- Section 4.10. Prosecution, Defense and Settlement of Claims; Indemnification ------------------------------------------------------------- A. The General Partners shall arrange to prosecute, defend, settle or compromise actions at law or in equity at the expense of the Limited Partnership as may be necessary to enforce or protect the interests of the Limited Partnership. The General Partners shall satisfy any judgment, decree, decision or settlement, first, out of any insurance proceeds available therefor, next, out of the Limited Partnership assets and income, and, finally, out of the assets of the General Partners. B. In any threatened, pending or completed action, suit or proceeding to which the General Partners are a party or are threatened to be made a party by reason of the fact that they are the General Partners of the Limited Partnership (other than an action by or in the right of the Limited Partnership) involving an alleged cause of action for damages arising from the performance of their duties under this Agreement or other activities relative to the management of the Limited Partnership, the Limited Partnership shall indemnify the General Partners against expenses, including attorneys' fees, judgments and amounts paid in settlement, actually and reasonably incurred by them in connection with such action, suit or proceeding if they acted in good faith and in a manner they reasonably believed to be in the best interests of the Limited Partnership, and provided that their conduct does not constitute negligence or misconduct. The termination of any action, suit or proceeding by judgment, order or settlement shall not of itself create a presumption that the General Partners did not act in good faith and in a manner which they reasonably believed to be in the best interests of the Limited Partnership. C. In any threatened, pending or completed action or suit by or in the right of the Limited Partnership, to which the General Partners are a party or are threatened to be made a party, involving an alleged cause of action by a Limited Partner or Limited Partners for damages arising from the activities of the General Partners in the performance of management of the internal affairs of the Limited Partnership as prescribed in this Agreement or by law, or both, the Limited Partnership shall indemnify the General Partners against expenses, including attorneys' fees, actually and reasonably incurred by them in -25- connection with the defense or settlement of such action or suit if they acted in good faith and in a manner they reasonably believed to be in the best interests of the Limited Partnership as specified in this subsection, except that no indemnification shall be made in respect of any claim, issue or matter as to which the General Partners' course of conduct constituted negligence or misconduct. D. To the extent that the General Partners have been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 4.1OB or 4.1OC of this Agreement, or in defense of any claim, issue or matter therein, the Limited Partnership shall indemnify them against the expenses, including attorneys' fees, actually and reasonably incurred by them in connection therewith. E. Any indemnification under Section 4.1OB and 4.1OC of this Agreement, unless ordered by a court, shall be made by the Limited Partnership only as authorized in the specific case and only upon a determination by independent legal counsel in a written opinion that indemnification of the General Partners is proper in the circumstances because they have met the applicable standard of conduct set forth in Sections 4.1OB or 4.1OC of this Agreement. F. The Limited Partnership shall not incur the costs of that portion of insurance which insures the General Partners for any liability as to which the General Partners are prohibited from being indemnified under Section 4.10. Section 4.11. Dealer Manager ----------------------------- The Dealer Manager shall have no duties, responsibilities or obligations to the Limited Partnership, the General Partners or any Limited Partner as a consequence of its right to receive Commissions, except to the extent provided under the Securities Act of 1933, as amended. The Dealer Manager has not assumed, and will not assume, any responsibility with respect to the Limited Partnership nor will it be permitted by the General Partners to assume any duties, responsibilities or obligations regarding the management, operations or any of the business affairs of the Limited Partnership subsequent to the date on which the Limited Partnership is Activated. -26- ARTICLE FIVE Distributions, Fees and Allocations ----------------------------------- Section 5.1. Distributions of Limited Partnership Funds -------------------------------------------------------- A. The Distributable Cash of the Limited Partnership shall be distributed simultaneously to the Limited Partners (either directly to such Limited Partners or as they shall direct by their notice to the General Partners pursuant to the reinvestment option set forth in Section 5.lB of this Agreement) and the General Partners promptly upon receipt of cash distributions from the Production Partnership. Each Partner's share of each such distribution shall be determined after giving effect to the allocations set forth in Sections 5.2 and 5.3 of this Agreement, except that (i) any Distributable Cash attributable to the receipt by the Production Partnership of investment income (as defined in the Production Partnership Agreement) shall be distributed 100% to the Limited Partners and, (ii) any Distributable Cash which is attributable to a return pursuant to Section 3.4 shall be distributed entirely to those Limited Partners (other than corporate affiliates of Geodyne Resources, Inc. or the Dealer Manager or any purchasers of Units therefrom with respect to the distribution of cash contributed by the Managing Partners to the Production Partnership pursuant to Section 3.4 of the Production Partnership Agreement or to the Limited Partnership by the General Partners pursuant to Section 3.4) who are, at the time of the distribution, Limited Partners. All distributions of Distributable Cash shall reduce dollar-for-dollar the balances of the Partners' Capital Accounts. B. (i) Except in North Carolina and Texas, prior to the first cash distribution by the Limited Partnership, each Limited Partner will be given an opportunity to elect to have all or a portion of such Limited Partner's cash distributions (1) paid directly to the Limited Partner in cash, or (2) held in a reinvestment account established for Limited Partners of the Limited Partnership, any Prior Limited Partnerships and any Subsequent Limited Partnership, any Prior Limited Partnerships and any Subsequent Limited Partnerships pending the reinvestment of such cash distributions in a minimum amount of $100 -27- (with reinvestment in excess of such minimum being permitted in whole increments of $100) in any Subsequent Limited Partnership. After receipt of the Prospectus with respect to any Subsequent Limited Partnership, each Limited Partner may revoke such Limited Partner's prior election to have such Limited Partner's cash distributions held in the reinvestment account invested in the Subsequent Limited Partnership. Such revocation shall be made by the Limited Partner's delivery to the Limited Partnership of a written notice of revocation. On or before 30 days prior to the reinvestment of a Limited Partner's cash distributions in a Subsequent Limited Partnership, the General Partners shall provide each Limited Partner who has previously elected to have cash distributions from the Limited Partnership reinvested in a Subsequent Limited Partnership, and who has $100 or more held in the reinvestment account on such Limited Partner's behalf, a form for the Limited Partner to provide the Limited Partnership such written notice of revocation. The cash distributions of a Limited Partner held in the reinvestment account shall at all times be the property of the Limited Partner, and the Limited Partner may withdraw such cash distributions held in the reinvestment account on such Limited Partner's behalf upon thirty days' prior written notice to the Limited Partnership. No interest shall be payable to Limited Partners on the amount of their cash distributions held in such reinvestment account; provided, however, that the General Partners shall hold the Limited Partners harmless against any losses sustained therein and the General Partners shall deposit into the reinvestment account an amount equal to any loss suffered by a Limited Partner prior to the earlier of the time the Limited Partner withdraws the Limited Partner's share or an investment in a Subsequent Limited Partnership is made on behalf of the Limited Partner. Prior to investment in a Subsequent Limited Partnership or distribution of such funds, monies held in the reinvestment account may be invested in investments permitted under Section 9.3 of this Agreement. Any costs and interest income attributable to the maintenance of the reinvestment account shall be charged or paid, as the case may be, 50% to PW Energy and 50% to Geodyne Properties. (ii) Cash distributions held in the reinvestment account on behalf of a Limited Partner will be delivered to such Limited Partner, and no investment in a Subsequent Limited Partnership will be made on such Limited Partner's -28- behalf, upon (1) a decision by the General Partners not to offer, or continue the offering of, a Subsequent Limited Partnership or (2) a decision by such Limited Partner not to invest in a Subsequent Limited Partnership. Subject to the Limited Partnership's receipt of a Limited Partner's written notice of revocation or withdrawal referred to in Section 5.1B(i), amounts held in the reinvestment account on behalf of a Limited Partner which are not reinvested in a Subsequent Limited Partnership (either because such amount is less than $100 or is in excess of a whole increment of $100) shall remain in such reinvestment account. (iii) A Limited Partner's cash distribution will be reinvested in a Subsequent Limited Partnership only if a registration statement covering interests in the Subsequent Limited Partnership is in effect under the Securities act of 1933, the offering of interests is qualified for sale under the applicable state securities laws and the Limited Partner meets the appropriate suitability standards. The General Partners may terminate their offering of interests in a Subsequent Limited Partnership at any time and will have no obligation to continue to offer interests or to permit reinvestment of Distributable Cash therein. In the event the General Partners or their Affiliates offer limited partnership interests in limited partnerships other than the Subsequent Limited Partnerships and provide Limited Partners the opportunity to reinvest cash distributions from the Limited Partnership in such limited partnerships, the terms and conditions of such reinvestment shall be determined by the General Partners or their Affiliates in their discretion (which may differ from the terms and conditions of reinvestment in Subsequent Limited Partnerships provided herein). Section 5.2. Allocation of Profits and Losses ---------------------------------------------- A. The Profits and Losses and each item of Income, gain, loss, cost, deduction and credit of the Limited Partnership shall be determined and allocated with respect to each Fiscal Year of the Limited Partnership as of, and within 75 days after, the end of such Fiscal Year. -29- B. Direct Administrative Costs and General and Administrative Costs shall be allocated to, and borne by, the Partners as follows: 90% to the Limited Partners and 10% to the General Partners prior to, and 85% to the Limited Partners and 15% to the General Partners after, Payout (as defined in the Production Partnership Agreement). C. Except as set forth in Section 5.2B, Profits and Losses and each item of Income, gain, loss, cost, deduction and credit of the Limited Partnership shall be allocated between the Partners and credited to or charged against their Capital Accounts in the following ratio: Limited Partners (including the General Partners to the extent they purchase Units) 99% Geodyne Properties and PW Energy (in the aggregate) 1% The General Partners shall allocate between themselves their aggregate Interest in a manner such that PW Energy shall be allocated a percentage equal to PW Production's percentage sharing ratio in the Production Partnership determined under Section 5.3B(i) of the Production Partnership Agreement, and the remaining amount shall be allocated to Geodyne Properties. The General Partners may amend this Agreement to provide for any different allocation between themselves at their discretion. D. The General Partners may not be required to contribute funds to the Limited Partnership to pay for Limited Partnership costs allocated to them except to the extent necessary to pay costs referred to in Section 5.2B. E. Notwithstanding anything to the contrary that may be expressed or implied in this Agreement, the interest of the General Partners in each material item of Partnership Income, gain, loss, deduction or credit shall be equal to at least one percent of each such item at all times during the existence of the Partnership. In determining the General Partners' interest in such items for the purpose of this Section 5.2E, units of limited partnership interest owned by the General Partners shall not be taken into account. -30- Section 5.3. Determinations of Allocations and Distributions Among Partners ------------------------------------------------------------- A. Except as set forth in Section 5.lA, all Distributable Cash distributed to the Limited Partners, as a class, and all Profits and Losses and each item of Income, gain, loss, cost, deduction or credit allocated to the Limited Partners, as a class, shall be distributed or allocated, as the case may be, to each Limited Partner in the ratio that the Capital Contribution of such Limited Partner bears to the total Capital Contributions of all Limited Partners. B. Distributable Cash, Profits and Losses and each item of Income, gain, loss, cost, deduction or credit distributed or allocated to the Partners shall be distributed or allocated, as the case may be, to the Persons who were Partners, subject to the provisions of Section 10.2 of this Agreement, as of the last day of the fiscal period for which the distribution or allocation is to be made, except that in any fiscal period in which a Partner sells, assigns or transfers all or any part of such Partner's Interest to any Person who during the fiscal period is admitted as a Substituted Partner, the Distributable Cash, Profits and Losses and each item of Income, gain, loss, cost, deduction or credit attributable to the Interest so sold, assigned or transferred shall be allocated between the transferor and the transferee on the basis of the number of days in the fiscal period before the admission, and on and after the admission, of the transferee as a Substituted Partner; provided, however, that the Distributable Cash attributable to a Sale of a Producing Property by the Production Partnership shall be distributed to those Partners who are Partners on the day the distribution of such Distributable Cash occurs. The General Partners shall inform the Limited Partners of the occurrence and terms of any such Sale by the Production Partnership as soon as practicable after such Sale has been consummated. C. The Limited Partnership's share of the Production Partnership's adjusted basis in each of its Producing Properties (allocated pursuant to the Managing Partners' and the Limited Partnership's interests in Production Partnership capital at the date of acquisition of the respective Producing Properties) shall be allocated pursuant to Section 613A(c) (7) (D) of the Code among the Partners in proportion to the interest of each in the Limited Partnership capital ultimately used to acquire that property. -31- D. All items of Income, gain, loss, deduction and credit allowable for Federal income tax purposes and all recapture of such deductions and credits shall be allocated and charged or credited to the Partners in the same manner that the revenues, costs or expenses giving rise to such items of Income, gain, loss, deduction and credit are allocated and charged. Federal income tax deductions for cost or percentage depletion with respect to any Producing Property shall be determined at the Partner level and shall be determined in the case of percentage depletion on the same basis that Income from the Producing Property is allocated. E. The Capital Account of each Partner shall be credited or debited with its Capital Contribution and distributions of Distributable Cash, by the adjusted basis of partnership property distributed in kind and with its share of Income, gain, loss, and deductions of the Limited Partnership. Solely for purposes of making adjustments to Capital Accounts, the Limited Partnership shall compute a simulated depletion allowance on each oil and gas property using that method, as between the cost depletion method or the percentage depletion method (without regard to limitations which could apply to less than all the Partners such as the quantity limitations of Code Section 613A(c)(3)) which results in the greatest simulated depletion allowance. The Limited Partnership's simulated depletion allowance shall reduce each Partner's Capital Account in the same proportion as such Partner's share of the adjusted basis of such property as determined in Section 5.3C above. In no event shall the Limited Partnership's aggregate simulated depletion allowances with respect to a property exceed the Limited Partnership's adjusted basis in such property (maintained solely for Capital Account purposes). Upon the taxable disposition of all oil or gas property by the Limited Partnership, the Limited Partnership's gain or loss shall be determined (solely for Capital Account purposes) by subtracting its adjusted basis in such property (maintained solely for Capita1 Account purposes) from the amount realized from such disposition. Any resultant simulated gain shall be allocated to the Partners in the same manner as that portion of the amount realized from such disposition which exceeds the Limited Partnership's adjusted basis in such property (maintained solely for Capital Account purposes) is allocated to the Partners and shall increase such Partners' Capital Accounts accordingly. Any resultant simulated loss shall be allocated to the Partners in the same proportion as such Partners (or their predecessors in interest) were allocated adjusted basis under Section 5.3C with respect to such property and shall reduce such Partners' Capital Accounts accordingly. -32- F. The Capital Accounts of those Partners which are charged with an expense shall be credited with any portion of that expense which is finally determined, judicially or administratively, to be nondeductible for Federal income tax purposes, less any amortization or depreciation thereof incurred prior to the date that the credit is made. ARTICLE SIX Non-Transferability of General Partner Interest ----------------------------------------------- Section 6.1. Non-Transferability of General Partner Interest ------------------------------------------------------------- Except as provided in Section 6.2B, a General Partner (including by definition any successor General Partner) shall not have the right to retire, withdraw, transfer or assign its General Partner Interest, except that there may be substituted in its stead as General Partner any entity that has, by merger, consolidation or otherwise, acquired substantially all of its assets or capital stock and continued its business. Section 6.2. Removal of General Partners ----------------------------------------- A. Subject to Section 11.3 of this Agreement, upon the Consent of more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners (i) the power shall be vested in the Limited Partners to (a) remove any or all General Partners and (b) cause the General Partners, on behalf of the Limited Partnership, to Remove any Managing Partner. (ii) (a) The power shall be vested in each General Partner to Remove the other General Partner, and pursuant to Section l0.1A of this Agreement admit a successor general partner, for "Cause" as defined in Section 6.2A(ii)(b), but for no other reason. -33- (b) "Cause" for purposes of Section 6.2A(ii)(a) shall be deemed to exist only (i) when a court of competent jurisdiction shall have made a final determination (which determination is not successfully appealed) that a General Partner has been guilty of gross negligence, fraud, intentional misconduct or similar breach of fiduciary responsibility in carrying out its duties as a General Partner, or (ii) a General Partner is dissolved or liquidated on account of insolvency or any other event occurs resulting in the appointment of a trustee or receiver who acquires control of the affairs of such General Partner for the purpose of dissolution or liquidation on account of insolvency, and such trustee or receiver is not dismissed within 90 days after appointment of such trustee or receiver, or (iii) (a) a report on the audited financial statements of a General Partner and its consolidated corporate affiliates is issued by the independent accountants for such General Partner that is qualified on a going concern basis, or (b) either General Partner requests an audit to be performed of the other General Partner and its consolidated corporate affiliates by the independent accountants for the other General Partner (the expense of such audit being paid by the General Partner requesting the audit), and such audit results in the issuance of an opinion with respect to the financial statements of the other General Partner and its consolidated corporate affiliates for the period ending, and as of, the most recent date feasible, that is qualified on a going concern basis. B. (i) In the event that a General Partner is Removed by the Limited Partners or the other General Partner, the Removed General Partner's Interest in the Limited Partnership shall be transferred to the other General Partner, and the other General Partner shall assign to the Removed General Partner a portion of Limited Partnership Income, costs and Distributable Cash as and when such items are allocated or distributed, as the case may be, by the Limited Partnership equal to the percentage interest of the Removed General Partner in the Limited Partnership prior to its Removal. -34- (ii) If the Limited Partners elect to Remove a sole General Partner as permitted under this Section, and further elect to continue the business of the Limited Partnership with one or more successor General Partners, the removed General Partner shall not be Removed until a successor General Partner has been selected by the Limited Partners and admitted to the Limited Partnership pursuant to Section 10.2 of this Agreement. (iii) In the event the sole General Partner is Removed by the Limited Partners and a successor General Partner selected, the incoming General Partner and the Removed General Partner shall, by mutual agreement, select an independent petroleum consultant to value the Removed General Partner's Interest in the Limited Partnership. In determining the value of the General Partner's Interest, the independent consultant will take into account appropriate discount factors in light of the risk of recovery of oil and gas reserves, and, in any event, will utilize a "risk factor" discount no less than that utilized in the most recent offer extended pursuant to Section 7.5 of the Agreement, if any. The incoming General Partner, or the Limited Partnership, shall have the option to purchase at least 20% of the interests of the Removed General Partner for the value determined by the independent appraisal. The Removed General Partner's Interest in the Limited Partnership shall be transferred to the successor General Partner, and the successor General Partner shall assign to the Removed General Partner a portion of Limited Partnership Income, costs and Distributable Cash as and when such items are allocated or distributed, as the case may be, by the Limited Partnership equal to the percentage interest of the Removed General Partner in the Limited Partnership prior to Removal, less the portion purchased by the successor General Partner or the Limited Partnership. (iv) If the Limited Partners have Removed a General Partner, the power shall be vested in the Limited Partners to Consent to the admission of a successor General Partner meeting the requirements of Section 6.2B(v) of this Agreement to take the place of a Removed General Partner upon the consent of more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners. -35- (v) If there is admitted to the Limited Partnership a successor General Partner, such admission shall not become effective unless the Limited Partnership shall have received a certificate, duly executed by or on behalf of such proposed successor General Partner, to the effect that: (a) it is experienced in performing (or employs sufficient personnel who are experienced in performing) functions of the type then being performed by the Removed General Partner and (b) it has a net worth, together with the net worth of any remaining General Partner, sufficient to satisfy the net worth requirements of the Code, Treasury Regulations, the Internal Revenue Service or the courts applicable to a general partner in a limited partnership in order to ensure that the Limited Partnership will not fail to be classified for Federal income tax purposes as a partnership. (vi) Notwithstanding Section 3.7B, any General Partner who shall be Removed from the Limited Partnership shall be released by the remaining General Partner and any successor General Partner from all liability for Limited Partnership debts and obligations incurred by the Limited Partnership prior to the time of such Removal. Section 6.3. Incapacity of a General Partner --------------------------------------------- A. In the event of the Incapacity of a sole General Partner, the Limited Partnership shall be dissolved. However, within 90 days thereafter the remaining Partners may elect to reconstitute the Limited Partnership prior to application of the liquidation provisions of Section 8.2. B. Upon the Incapacity of a General Partner, the Person who is its legal representative shall have all the rights of a General Partner for the purpose of settling or managing its estate and such power as the Incapacitated General Partner possessed to assign all or any part of its Interest and to join with such assignee in satisfying conditions precedent to such assignee becoming a Substituted Partner. -36- Section 6.4. Termination of Contracts with General Partners or Managing Partners --------------------------------------------------------------- Subject to and upon fulfilling the conditions of Section 11.3, the power shall be vested in the Limited Partners to terminate any or all contracts between the General Partners or any Affiliate and the Limited Partnership, or to cause the General Partners, on behalf of the Limited Partnership, to terminate any contracts between the Managing Partners or any Affiliate and the Production Partnership, and select, or cause the General Partners, on behalf of the Limited Partnership, to select, as the case may be, a replacement Person therefor upon the Consent of more than 50% in Interest of the Limited Partners. ARTICLE SEVEN Transferability of Limited Partner's Interest --------------------------------------------- Section 7.1. Transferability of Limited Partner's Interest ----------------------------------------------------------- A. A Limited Partner shall not have the right to retire or withdraw from the Limited Partnership. Except as provided in this Section 7.1, a Limited Partner's Interest shall be transferable so long as the transfer is made in accordance with all applicable laws. B. In no event shall all or any part of a Limited Partner's Interest be assigned or transferred to a minor or an incompetent except in trust or by will or intestate succession or to any Person not qualified to hold interests in federal leases. C. No purported sale, assignment or transfer by a transferor after which the transferor would continue to hold an Interest representing a Capital Contribution of less than $1,000 will be permitted or recognized for any purpose without the Consent of the General Partners, which Consent shall be granted only for good cause shown. -37- D. No sale, exchange, transfer or assignment of a Limited Partner's Interest shall be made if in the opinion of counsel to the Limited Partnership, such sale, exchange, transfer or assignment, would (i) cause the Limited Partnership to lose its status as a partnership for Federal income tax purposes, or (ii) violate the Securities Act of 1933, as amended, or any state securities or "blue sky" laws (including any investor suitability standard applicable to the Limited Partnership or the Interest to be sold, exchanged, transferred or assigned). Section 7.2. Incapacity of Limited Partners -------------------------------------------- If a Limited Partner becomes Incapacitated, the Person who is its legal representative shall have all the rights of a Limited Partner for the purpose of settling or managing its estate and such power as the Incapacitated Limited Partner possessed to assign all or any part of its Interest and to join with such assignee in satisfying conditions precedent to such assignee becoming a Substituted Limited Partner. The Incapacity of a Limited Partner shall not dissolve the Limited Partnership. Section 7.3. Assignees and Substituted Limited Partners -------------------------------------------------------- A. The Limited Partnership shall not recognize for any purpose any purported sale, assignment or transfer of all or any fraction of the Interest of a Limited Partner unless the provisions of Section 7.1 shall have been complied with and there shall have been filed with the Limited Partnership a dated Notification of such sale, assignment or transfer, executed and acknowledged by both the seller, assignor or transferor and the purchaser, assignee or transferee and such Notification (i) contains the acceptance by the purchaser, assignee or transferee of all of the terms and provisions of this Agreement and (ii) represents that such sale, assignment or transfer was made in accordance with all applicable laws and regulations. Any sale, assignment or transfer shall be recognized by the Limited Partnership as effective on the date of such Notification if the date of such Notification is within 30 days of the date on which such Notification is filed with the Limited Partnership, and otherwise shall be recognized as effective on the date such Notification is filed with the Limited Partnership. -38- B. Any Limited Partner which shall assign all of its Interest shall cease to be a Limited Partner, except that, unless and until a Substituted Limited Partner is admitted in its stead, such assigning Limited Partner shall retain the statutory rights and obligations of a Limited Partner under the Act. C. A Person who is the assignee of all or any fraction of the Interest of a Limited Partner shall be subject to all the provisions of this Article Seven to the same extent and in the same manner as any Limited Partner desiring to make an assignment of its Interest. D. Any purchaser, assignee, transferee, donee, heir, legatee or other recipient of an Interest shall be admitted to the Limited Partnership as a Substituted Limited Partner only with the Consent of the General Partners, which Consent may be granted or withheld by the General Partners at their sole and absolute discretion. The admission of such Person as a substituted Partner shall be evidenced by the execution by a General Partner of a certificate evidencing the admission of such Person as a Limited Partner and an amendment to this Agreement executed by a General Partner on its own behalf, as well as on behalf of each other Limited Partner, pursuant to the power of attorney granted pursuant to Section 12.5 of this Agreement and recorded or filed in the proper records of the State. E. No Person shall become a Substituted Limited Partner until such Person shall have satisfied the requirements of Section 10.2; provided, however, that for the purpose of allocating Profits, Losses, and items of income, gain, loss, cost, deductions, credits and Distributable Cash, a Person shall be treated as having become, and as appearing in the records of the Limited Partnership as, a Limited Partner on such date as the sale, assignment or transfer to such Person was recognized by the Limited Partnership pursuant to Section 7.3A. F. Each Limited Partner shall indemnify and hold harmless the Limited Partnership, the General Partners and their Affiliates and every Limited Partner who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of or arising from any actual or alleged misrepresentation or misstatement of facts -39- or omission to state facts made (or omitted to be made) by such Limited Partner in connection with any assignment, transfer, encumbrance or other disposition of all or any part of an Interest, or the admission of a Substituted Limited Partner to the Limited Partnership, against expenses for which the Limited Partnership or such other Person has not otherwise been reimbursed (including attorneys' fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by it in connection with such action, suit or proceeding. G. At the end of each calendar quarter in which (i) a Substituted Limited Partner has been approved for admission by the General Partners or (ii) there has been any return of the Capital Contributions of the Limited Partners, the General Partners shall file an amended certificate of limited partnership with the appropriate authorities of each state in which the Limited Partnership transacts business for the purpose of adding as Substituted Limited Partners all assignees of Interests previously approved by the General Partners for admission as Substituted Limited Partners and for reflecting accurately the Capital Contributions of the Limited Partners. H. (i) Each Limited Partner represents and warrants that such person does not own, directly or indirectly, more than 20% of the outstanding stock of the General Partners or any of their Affiliates as defined in Section 1504(a) of the Code. (ii) Each Limited Partner further represents and warrants that the following statements are true: (a) if such Limited Partner is an individual, such Limited Partner is a U.S. citizen, and is 21 years of age or older; if such Limited Partner is a partnership or an association, all of its members are of such citizenship; if such Limited Partner is a corporation, it is authorized and otherwise duly qualified to hold an Interest in the Limited Partnership; (b) such Limited Partner has thoroughly read the Prospectus and this Agreement and understands the nature of the risks involved in the proposed investment; (c) such Limited Partner is experienced in investment and business matters; (d) such Limited Partner, or in the case of an IRA or Employee Benefit Plan (as those terms are defined in the Prospectus), each beneficiary of such Limited Partner has (x) a net worth, exclusive of home, furnishings and automobiles of at least $25,000 and had during the last tax year, or estimates that such Limited Partner will have during the current year, "taxable income" -40- as defined in Section 63 of the Code, of $25,000 or more (income of $20,000 in California), or (y) a net worth, exclusive of home, furnishings and automobiles of at least $90,000 ($75,000 in California) or (z) satisfies any more restrictive suitability requirements imposed by applicable Blue Sky laws; (e) such Limited Partner recognizes that the Limited Partnership will be newly organized and will have no history of operations or earnings and is a speculative venture; (f) such Limited Partner understands that the transferability of such Limited Partner's Interest(s) in the Limited Partnership is restricted pursuant to the provisions of the Agreement and that such Limited Partner cannot expect to be able to liquidate such Limited Partner's investment readily in case of emergency; and (g) unless otherwise indicated in such Limited Partner's Subscription Agreement and Power of Attorney, such Limited Partner is the sole party in interest in such Limited Partner's Interest and, as such, is vested with all legal and equitable rights in such Interest. (iii) In the event that the General Partners believe any of the representations made by a Limited Partner in Section 7.3H were untrue at the time of such Limited Partner's acquisition of an Interest or if the General Partners believe any of the representations made in Section 7.3H(i) and (ii)(a) become untrue at any time during the time that such Limited Partner is a Limited Partner, the General Partners shall have the right, exercisable at their sole discretion, within 60 days after the receipt of knowledge of such untruth or the recognition of such belief, to buy such Limited Partner's Interest in the Limited Partnership at a purchase price calculated in a manner identical to the manner set forth in Section 7.5 of this Agreement. In the event that the General Partners believe the representation contained in Section 7.3H(ii) (g) has become untrue at any time with respect to a Limited Partner, such Limited Partner shall immediately file with the General Partners (i) a statement signed by the Limited Partner and the other interested parties setting forth the nature and the extent of the interest of each, and the nature of the agreement between them, and (ii) such other information, statements, and grants of powers of attorney as may be requested by the General Partners. -41- The effective date of any purchase made pursuant to this Section shall be the first day of the calendar month during which the General Partners give notice to the Limited Partner of their desire to exercise their rights of purchase hereunder. Section 7.4. Incapacity of a Limited Partner --------------------------------------------- Upon the Incapacity of a Limited Partner or upon the seizure of a Limited Partner's Interest in the Limited Partnership, the successor to such Limited Partner's Interest ("Successor") shall be deemed an assignee of such Limited Partner's Interest in the Limited Partnership and neither the Limited Partner nor the Successor shall have the right to demand immediate valuation and payment of such Limited Partner's Interest. Section 7.5. Right of Presentment ---------------------------------- A. Each Limited Partner who has subscribed for Units will have the option subject to the terms and conditions set forth in this Section 7.5 to require the General Partners to purchase all of such Limited Partner's Interest in the Limited Partnership, provided that the option may not be exercised after the date of any notice that will effect a dissolution and termination of the Limited Partnership pursuant to Section 8.1 of this Agreement. The obligation of each of PW Energy and Geodyne Properties to purchase Units shall be joint and several and shall be limited to an aggregate amount during any four consecutive fiscal quarters equal to 1% of the Limited Partners' Capital Contributions (exclusive of Capital Contributions made by either General Partner or an Affiliate in its capacity as a Limited Partner). The obligations of the General Partners hereunder shall be satisfied to the extent an Affiliate of a General Partner or an partnership sponsored by the General Partners or their Affiliates acquires tendered Units. A Limited Partner may exercise the Limited Partner's option only with respect to all of the Limited Partner's Interest. Any such exercise shall be effected by a Notification thereof to the General Partners. Prior to the expiration of twelve months after the date on which 90% of the Limited Partners' Capital Contributions have been expended by the Production Partnership, such latter date being the "Valuation Date," such Limited Partner may, subject to the terms and conditions of this Section 7.5, sell such Limited Partner's Interest to the General Partners at a purchase price equal to 75% of the Subscription amount therefor, less the -42- amount of any distributions of Distributable Cash to such Limited Partner. Thereafter, each such Limited Partner may, subject to the terms and conditions of this Section 7.5, tender such Limited Partner's Interest to the General Partners for purchase at a price determined in accordance with Section 7.5C of this Agreement. B. Each Limited Partner tendering an Interest who does not revoke such Limited Partner's election pursuant to Section 7.5D shall assign such Interest to the purchaser thereof pursuant to the power of attorney granted the General Partners in the Subscription Agreement and Power of Attorney executed by such Limited Partner. The purchase price for such Interests will be determined, as of the close of business of the last day of the calendar quarter (the "Effective Date"), with respect to all Interests tendered to the General Partners during each such calendar quarter after the Valuation Date. C. The purchase price to be paid for the Interest of any Limited Partner who tenders an Interest pursuant to this Section 7.5 after the Valuation Date will be determined by assuming the sale of all Production Partnership Property and the subsequent liquidation of the Production Partnership pursuant to Section 8.2 of the Production Partnership Agreement and the liquidation of the Limited Partnership pursuant to Section 8.2 of this Agreement. The hypothetical credit balance in a Limited Partner's Capital Account shall be the purchase price for such Limited Partner's Interest; provided, however, that such purchase price shall be reduced by an amount equal to 70% of the distributions of Distributable Cash received by such Limited Partner on or before the date the Limited Partner receives a check in payment for the Limited Partner's tendered Interest which is attributable to sales of Production Partnership Hydrocarbon production attributable to Proved Reserves since the date as of which the Production Partnership's Proved Reserves are calculated for purposes of this Section 7.5C. In order to value the sale proceeds to be received upon such assumed sale, the General Partners shall employ the petroleum engineering reports and other petroleum reserve information referred to in Section 9.4C of this Agreement for the end of the Fiscal Year preceding the applicable Effective Date. First, future gross revenues expected to be derived from the production and sale of the Proved Reserves attributable to the Production Partnership Producing Properties will be estimated using either (i) escalations of future sales prices of Hydrocarbons supplied by the General Partners (the "Escalated Case") or (ii) only escalations of such future sales prices of Hydrocarbons -43- permitted by Regulation S-X adopted by the Securities and Exchange Commission (the "SEC Case"), as the General Partners may determine in their discretion. Next, future net revenues will be calculated by deducting anticipated expenses (including operating expenses and other costs that will be incurred in producing and marketing such reserves and any gross production, excise, windfall profit or other taxes, other than Federal income taxes, based on the Hydrocarbon production of the Production Partnership or sales thereof) (using either (i) escalations of future costs supplied by the General Partners in the event the General Partners adopted the Escalated Case with respect to future sales prices of Hydrocarbons or (ii) constant future costs in the event the General Partners adopted the SEC Case with respect to future sales prices of Hydrocarbons) from estimated future gross revenues. Then the present worth of the future net revenues will be calculated by discounting the estimated future net revenues at either 10% (in the event the General Partners employed pricing criteria in accordance with the SEC case) or that rate per annum which is one (1) percentage point higher than the prime rate of interest of The Chase Manhattan Bank, N.A. or any successor bank, as such prime rate of interest is announced by said bank from time to time (in the event the General Partners employed pricing criteria in accordance with the Escalated Case). If the latter interest rate is used and exceeds 11% per annum, the General Partners will provide, for comparative purposes only, the repurchase price if computed based upon a 10% per annum discount rate. This amount will be reduced by an additional 30% to take into account the uncertainties attendant to the production and sale of Hydrocarbon reserves and other unforeseen contingencies. This reduced amount is subject to upward or downward adjustment by the General Partners, in the event that during the period between the end of the Fiscal Year preceding the applicable Effective Date and such Effective Date, there has occurred any material increase or decrease in the current price of oil or gas or in the estimated amount of Production Partnership Proved Reserves thereof from the current oil and gas prices or the estimated Proved Reserves used in the above calculation of the present worth of the future net revenues. Salvage value of tangible equipment installed on the Production Partnership Wells and costs of plugging and abandoning the productive Production Partnership Wells, both discounted at the applicable aforementioned rate from the expected date of abandonment, will be estimated, and the Production Partnership's Producing Properties which do not have Proved Reserves attributable to them but which have not been condemned will have such reserves valued at their then fair value as determined by an independent -44- petroleum engineering firm. The Production Partnership's cash on hand, prepaid expenses, accounts receivable (less a reasonable reserve for doubtful accounts) and the market value of its other assets as determined by a qualified independent appraiser will be added to the value of the Production Partnership's Producing Properties thus determined, to arrive at the Production Partnership's hypothetical sale proceeds for purposes of this Section 7.5C. D. Within sixty (60) days after the applicable Effective Date, the General Partners will deliver to each Limited Partner who has tendered such Limited Partner's Interest to the General Partners during the calendar quarter ending on such Effective Date a check in the amount of the purchase price for such Interest together with a statement evidencing that such price has been determined in accordance with the provisions of Section 7.5C. The statement will show which portion of the purchase price is represented by the value of the Proved Reserves and by each of the other classes of Production Partnership assets and liabilities attributable to the account of the Limited Partnership and, by virtue of a Limited Partner's Interest in the Limited Partnership, attributable to the account of the Limited Partner. The Limited Partner will then have thirty (30) days after receipt of payment for such Interest from a General Partner to revoke, by notice to the General Partners and return of such check, the sale of such Limited Partner's Interest. If the Limited Partner does not timely revoke such Limited Partner's intention to sell, the assignment of such Limited Partner's Interest to the purchaser of such Interest will be executed on such Limited Partner's behalf by a General Partner as attorney in fact; provided, however, that the obligation of the General Partners to purchase the Interests tendered by the Limited Partners shall be limited during any four consecutive fiscal quarters to an amount not in excess of 1% of the Limited Partners' Capital Contributions (exclusive of Capital Contributions made by the General Partners or their Affiliates as Limited Partners). Moreover, the General Partners will not be obligated to buy any Units pursuant to such right if such purchase, when added to the total of all other Sales or other dispositions of Interest within the preceding 12 months, would result in the Limited Partnership being considered to have terminated within the meaning of Section 708 of the Internal Revenue Code of 1954, as amended, or would cause the Limited Partnership to lose its status as a partnership for Federal income tax purposes. If less than all of the Interests tendered are purchased, the Interests purchased will be selected by lot. The Limited Partners whose tendered Interests were rejected by -45- reason of the foregoing limitations shall not be entitled to priority in the following quarter. Contemporaneously with the closing of any such sale, which shall not be earlier than 30 days after tender of the purchase price for an Interest to a Limited Partner, a General Partner, as attorney in fact for such Limited Partner, will execute such certificates or other documents and perform such acts as the General Partners deem necessary to effect the sale and transfer of the liquidating Limited Partner's Interest to the purchaser and to preserve the limited liability status of the Limited Partnership under the laws of the jurisdictions in which it is doing business. ARTICLE EIGHT Dissolution, Liquidation and Termination ----------------------------------------- of the Limited Partnership --------------------------- Section 8.1. Events Causing Dissolution ---------------------------------------- A. The Limited Partnership shall be dissolved upon the happening of any of the following events: (i) the expiration of its term, without any continuation thereof as set forth in Section 2.4 of this Agreement; (ii) the Incapacity of the sole General Partner. However, within ninety days thereafter the remaining Partners may elect to reconstitute the Limited Partnership prior to application of the liquidation provisions of Section 8.2; (iii) the Sale or other disposition at one time of all or substantially all of the assets of the Limited Partnership existing at the time of such Sale (including the liquidation or redemption other than in kind of its interest in the Production Partnership); (iv) the election to dissolve the Limited Partnership (a) by the General Partners (which election shall be Consented to by more than 50% in Interest of the Limited Partners), or (b) by the Consent of more than 50% in Interest of the Limited Partners; -46- (v) ninety days after the Removal of the sole General Partner (unless a successor is elected pursuant to Section 6.2 of this Agreement); (vi) the dissolution and liquidation of the Production Partnership without the continuance of its business by the Limited Partnership pursuant to Section 4.2A(ii) of this Agreement; or (vii) the happening of any other event causing the dissolution of the Limited Partnership under the laws of the State, except that the Incapacity of any Limited Partner shall not dissolve the Limited Partnership and the seizure of the Interest of any Partner shall not dissolve the Limited Partnership. B. Dissolution of the Limited Partnership shall be effective on the day on which the event occurs giving rise to the dissolution, but the Limited Partnership shall not terminate until the General Partners have recorded a notice of dissolution of the Limited Partnership with the office of the Secretary of State of the State and shall have complied with the laws of the other states in which its does business and the assets of the Limited Partnership have been distributed as provided in Section 8.2. C. Nothing contained in this Agreement shall impair, restrict or limit the rights and powers of the Partners under the laws of the State or any other jurisdiction in which the Limited Partnership is doing business to reform and reconstitute themselves as a limited partnership following dissolution of the Limited Partnership either under provisions identical to those set forth herein or under any other provisions. Section 8.2. Liquidation ------------------------- A. Upon dissolution of the Limited Partnership, its liabilities shall be paid in the order provided herein. The General Partners shall either distribute in kind or sell the Limited Partnership's property so that such disposition is in the best interests of the Limited Partners, and shall execute all amendments terminating the Limited Partnership. In connection with any such Sale, the General Partners shall attempt to obtain the best prices for such property. Pending such Sales, the General Partners shall have the right to -47- continue to operate and otherwise to deal with Limited Partnership property. In the event the Limited Partnership is dissolved on account of the Incapacity or Removal of the sole General Partner, the Limited Partnership shall elect, in accordance with the provisions of Article Eleven, a person (the "Liquidating Agent") to perform the function of a General Partner in liquidating the assets of the Limited Partnership and winding up its affairs, and shall pay to such Liquidating Agent its reasonable fees and expenses incurred in connection therewith. Gain or loss realized on the Sale or other disposition of the Limited Partnership's assets will be credited to (in the case of gain) or charged against (in the case of loss) each Partner's Capital Account to the extent allocable to such Partner under Sections 5.2 and 5.3 of this Agreement. In the event of a distribution in kind of (a) any property other than an interest in a Producing Property, each Partner's Capital Account shall be debited with the portion of the Limited Partnership's adjusted basis thereof attributable to the interest therein distributed to it and (b) any Producing Property or an interest in any Producing Property, each Partner's Capital Account shall first be credited or debited with its share of the unrealized appreciation or depreciation in the fair market value of said Producing Property or interest in said Producing Property. Each Partner's share of said unrealized appreciation or depreciation shall be equivalent to its share (allocated pursuant to Sections 5.2 and 5.3 of this Agreement) of the gain or loss on an actual Sale of such Producing Property or interest therein. The Capital Account of each Partner to whom a Producing Property or an interest in a Producing Property is distributed shall be debited with the fair market value of the Producing Property distributed to it. No Partner shall be distributed an interest in any asset if the distribution would result in a deficit balance or increase the deficit balance in its Capital Account (after making the adjustments referred to in this Section 8.2A relating to distribution in kind). Any liquidation of the Limited Partnership shall take place out of court and without application being made therefor to the Secretary of State of the State. B. In settling accounts after dissolution, the assets of the Limited Partnership shall be paid out in the following order: (i) to third party creditors, in the order or priority as provided by law; (ii) to the General Partners and any Liquidating Agent for any expenses of the Limited Partnership paid by or payable to them to the extent they are entitled to reimbursement therefor pursuant to this Agreement; (iii) to all -48- of the Limited Partners in the amount equivalent to the amount of their positive Capital Account balances (as adjusted pursuant to Section 8.2A of this Agreement) on the date of distribution; (iv) to the General Partners in the amount equivalent to the amount of their positive Capital Account balances (as adjusted pursuant to Section 8.2A of this Agreement) on the date of distribution; and (v) the balance shall be paid to the Partners in the manner provided for by Sections 5.2 and 5.3 of this Agreement with respect to Distributable Cash. C. In the event that following the final distribution under Section 8.2B the General Partners have a deficit balance in their Capital Account balances, they shall contribute cash to the Limited Partnership necessary to eliminate said deficit balance, which amount shall be distributed to the other Partners to the extent of their remaining positive Capital Account balances. D. Notwithstanding anything to the contrary in this Agreement, upon the dissolution and termination of the Partnership, the General Partners will contribute to the Partnership the lesser of: (a) the deficit balances in their capital accounts; or (b) the excess of 1.01 percent of the total Capital Contributions of the Limited Partners over the capital previously contributed by the General Partners. ARTICLE NINE Books and Records; Accounting; Tax Elections; etc. -------------------------------------------------- Section 9.1. Books and Records ------------------------------- The books and records of the Limited Partnership, including information relating to the sale by the General Partners or any Affiliates of goods or services to the Limited Partnership, and a list of the names and addresses and Interests of all Limited Partners, shall be maintained by the General Partners at the principal office of the Limited Partnership for a period of five years following the close of the Fiscal Year to which they relate and shall be available for examination there by any Partner or its duly authorized representatives at any and all reasonable times. Any Partner, or its duly authorized representatives, upon paying the costs of collection, duplication and mailing, shall be entitled for any proper purpose to a copy of the list of names and addresses and -49- Interests of the Limited Partners. The Limited Partnership may maintain such other books and records and may provide such financial or other statements as the General Partners in their discretion deem advisable. Section 9.2. Accounting Basis for Tax and Reporting Purposes; Fiscal Year ---------------------------------------------------- The books and records of the Limited Partnership for tax purposes, for purposes of this Agreement and for the purpose of reports to the Partners, shall be kept on the cash or accrual basis, as the General Partners shall determine. The Fiscal Year of the Limited Partnership shall be the calendar year to the extent permissible and the General Partners shall use their best efforts to obtain any necessary approvals therefor. Section 9.3. Bank Accounts --------------------------- The General Partners shall maintain a bank account or accounts to be maintained by the General Partners on behalf of the Limited Partnership with any bank in the United States having total assets in excess of $100,000,000. The General Partners shall not deposit Limited Partnership funds in an account with any bank in an aggregate amount in excess of 5% of such bank's total assets. Withdrawals shall be made only in the regular course of the Limited Partnership's business on such signature or signatures as the General Partners may determine. All deposits and other funds not needed in the operation of the business may be deposited in interest-bearing accounts, certificates of deposit, money market funds (including those managed or marketed by the Dealer Manager or its Affiliates) or invested in short-term United States Government obligations maturing within one year, commercial paper of United States corporations having the highest credit rating granted by Moody's Investors Services, Inc. or Standard & Poors Corporation, or other similar highly liquid investments. Section 9.4. Reports --------------------- A. The General Partners shall close the Limited Partnership's books of account promptly at the close of each Fiscal Year and an annual examination of the Limited Partnership's financial statements shall be performed at the -50- expense of the Limited Partnership by the Accountants. The General Partners shall furnish to the Limited Partners an annual report within 90 days after the close of each Fiscal Year of the Limited Partnership commencing with the Fiscal Year in which the Limited Partnership was Activated. If requested by a Limited Partner, the General Partners shall also furnish such Partner with a report within 60 days after the end of the first six months of the Fiscal Year in which such request was made, or within 60 days after the request is made, whichever is later. Such report will contain at least the following information: (i) Financial statements for the Limited Partner-ship's and the Production Partnership's accounts, including a balance sheet, statement of income, statement of changes in partners' capital and statement of changes in financial position prepared on an accrual basis in accordance with generally accepted accounting principles and accompanied by a report of the Accountants together with their opinion thereon, except that the semiannual financial statements need not be audited; (ii) A summary itemization, by type and/or classification, of the total fees and compensation, including any overhead reimbursement, paid by the Limited Partnership or Production Partnership or indirectly on their behalf, to any General Partner or Managing Partner and any Affiliate; (iii) A description of each Producing Property acquisition, including the costs therefor, in which the Production Partnership owns an interest, except succeeding reports need contain only material changes (including all farmouts, development drilling, improved recovery operations and abandonments), if any, regarding Producing Properties already reported upon. In the case of wells that have been abandoned after production has commenced, a statement justifying such abandonment shall be included if a General Partner or an Affiliate is the operator. In the case of farmouts, the statement shall include a justification of the farmout, location, time, to whom made, and a general description of terms; (iv) A schedule reflecting a list of the wells drilled by the Production Partnership on behalf of the Limited Partnership and the costs thereof; -51- B. Within 60 days after the end of each fiscal quarter each Limited Partner will receive a "participant statement" which summarizes his interest in the Limited Partnership. The participant statement will detail the Limited Partner's cash receipts and disbursements for the Limited Partner's Interest in the Limited Partnership. C. Within 90 days after the end of the Fiscal Year following the Fiscal Year in which Activation of the Limited Partnership occurs, and annually thereafter, the General Partners shall furnish to the Limited Partners a computation as of the end of the immediately preceding Fiscal Year, based upon engineering reports prepared by one or more qualified independent petroleum engineering firms with respect to Producing Properties containing Proved Reserves equal to at least 80% of the Proved Reserves of the Production Partnership (with the computation as to any balance of the Production Partnership's Proved Reserves being based upon petroleum engineering reports prepared by a General Partner or an Affiliate), of the total estimated Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves owned by the Production Partnership, the estimated dollar value thereof stated in then existing prices and escalated prices (as provided by the General Partners). In addition, the computation shall include an estimate of the time required for the extraction of such reserves and the present worth of such reserves and the estimate shall contain a statement that because of the time period required to extract such reserves the present value of revenues to be obtained in the future is less than if immediately receivable. D. In addition to the report described in Section 9.4C of this Agreement, if an event occurs to the knowledge of the General Partners or their Affiliates leading to a reduction or an increase of such Reserves of more than 10 percent, excluding reduction as a result of normal production, an additional computation and estimate similar to that described in Section 9.4C shall be sent to each Limited Partner as soon as possible. E. By March 15 of each year, the General Partners will furnish a report to each Limited Partner containing such information as is pertinent for completion of its respective Federal, state, and other income tax returns. -52- F. The General Partners shall file on a timely basis with the Securities and Exchange Commission all filings required to be made by the Limited Partnership and Production Partnership pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder. The General Partners shall make available to any Limited Partner upon the Limited Partner's request, copies of any report filed by or on behalf of the Limited Partnership or the Production Partnership with the Securities and Exchange Commission. The General Partners shall cause a copy of the report sent to the Limited Partners under paragraphs A, C, D and E hereof to be sent to the California Commissioner of Corporations. G. The General Partners agree to make all relevant financial and engineering reports available for review by a Limited Partner on request at the offices of the Limited Partnership. Section 9.5. Elections ----------------------- The General Partners shall cause the Limited Partnership to make all elections required or permitted to be made by the Limited Partnership under the Code and not otherwise expressly provided for in this Agreement, in the manner that the General Partners believe will be most advantageous to Limited Partners, except that (i) the General Partners shall not be required to make an election under Section 754 of the Code or corresponding provisions of applicable state income tax laws, and (ii) the General Partners shall make the election under Section 263(c) of the Code to expense all intangible drilling and development costs in the initial Limited Partnership Federal income tax return filed for the Fiscal Year in which such costs are incurred. -53- ARTICLE TEN Amendments ----------- Section 10.1. Proposal and Adoption of Amendments Generally ------------------------------------------------------------ A. Notwithstanding anything to the contrary contained herein, the General Partners may, without prior notice or consent of any Limited Partner, amend any provision of this Agreement (including an amendment to admit an additional General Partner or a successor General Partner in the event of the Removal of a General Partner by the other General Partner) if, in their opinion, such amendment does not have a material adverse effect upon the Limited Partners. Each Limited Partner hereby consents in advance to the admittance of such additional or successor General Partner for purposes of Section 10 of the Act. Such amendment shall thereafter be disclosed to the Limited Partners within a reasonable time thereafter. Amendments to this Agreement to reflect the addition or substitution of a Limited Partner or the admission of a successor General Partner shall be made at the time and in the manner referred to in Section 10.2. Any other amendment to this Agreement may be proposed by the General Partners or at least 10% in interest (as to capital and Profits and Losses) of the Limited Partners. The Partner or Partners proposing such amendment shall submit a Notification containing (a) the text of such amendment, (b) a statement of the purpose of such amendment, and (c) an opinion of counsel obtained by the Partner or Partners proposing such amendment to the effect that such amendment is permitted by the Act, will not impair the limited liability of the Limited Partners, and will not adversely affect the classification of the Limited Partnership as a partnership for Federal income tax purposes. The General Partners shall, within 15 days after receipt of any proposal under this Section l0.lA, give Notification to all Partners of such proposed amendment, of such statement of purpose and of such opinion of counsel, together, in the case of an amendment proposed by other Partners, with the views, if any, of the General Partners with respect to such proposed amendment. B. Amendments to this Agreement shall be adopted if: (i) in the case of amendments referred to in Section l0.2A, the conditions specified in Section 7.3 shall have been satisfactorily completed and the Limited Partnership shall not have been furnished with an opinion of counsel to the Limited Partnership to the effect that such amendment will adversely affect the classification of the Limited Partnership as a partnership for Federal income tax purposes; (ii) in the case of amendments referred to in Section l0.2B, the conditions specified in Section 6.2 shall have been satisfactorily completed; or (iii) in the case of all other amendments, such amendment shall have been Consented to by more than 50% in -54- Interest (as to capital and Profits and Losses) of the Limited Partners (unless such Consent is not required pursuant to Section l0.lA of this Agreement); provided, however, that no such amendment may: (a) enlarge the obligations of any Partner under this Agreement or convert the Interest of any Limited Partner into the Interest of a General Partner or modify the limited liability of any Limited Partner without the Consent of such Partner; (b) modify the method provided in Article Five of determining and allocating or distributing, as the case may be, Profits, Losses, Distributable Cash and each item of Income, gain, loss, cost, deduction or credit without the Consent of each Partner adversely affected by such modification; (c) amend Sections 4.9, 4.10, 6.1 or 6.2 without the Consent of the General Partners; or (d) amend Sections 2.3, 4.3, 4.4, 4.5, 4.6, this Article Ten or Section 11.3 without the Consent of at least 66% in Interest of the Limited Partners. C. Upon the adoption of any amendment to this Agreement, the amendment shall be executed by the General Partners, on their own behalf and as attorney-in-fact for all of the Limited Partners pursuant to the power of attorney granted in Section 12.5 of this Agreement, and shall be recorded in the proper records of the State and any other state in which the Limited Partnership is then doing business. Section 10.2. Amendments on Admission or Removal of Partners ------------------------------------------------------------- A. If this Agreement shall be amended to reflect the admission or substitution of a Limited Partner, the amendment to this Agreement may be adopted by either of the General Partners, the Person to be substituted or added, and the assigning Limited Partner. Any such amendment shall be executed on behalf of all Partners but may be executed by the substituted or added Partner, the assigning Partner, and either of the General Partners, individually and on behalf of all of the other Partners pursuant to the power of attorney granted in Section 12.5 of this Agreement. B. If this Agreement shall be amended to reflect the Removal of a General Partner and the continuation of the business of the Limited Partnership, such amendment shall be signed by the remaining or successor General Partner and by the Removed General Partner. Any such amendment which reflects the -55- admission of a successor General Partner shall be executed on behalf of all other Partners pursuant to the power of attorney granted in Section 12.5 of this Agreement. C. No Person shall become a Partner, except the Initial Limited Partner and an Additional Limited Partner, unless such Person shall have: (i) become a party to, and adopted all of the terms and conditions of, this Agreement; (ii) if such Person is other than an individual, provided upon request the General Partners with evidence satisfactory to counsel for the Limited Partnership of such Person's authority to become a Partner under the terms and provisions of this Agreement; and (iii) if requested, paid all reasonable legal fees of the Limited Partnership and the General Partners and filing and publication costs in connection with such Person's becoming a Partner. ARTICLE ELEVEN Consents, Voting and Meetings ----------------------------- Section 11.1. Method of Giving Consent --------------------------------------- Any Consent required by this Agreement may be given by a Limited Partner as follows: (i) at a meeting, in person, by a written proxy or signed writing directing the manner in which it desires that its vote be cast, which writing must be received by the General Partners prior to such meeting, or (ii) without a meeting, by a signed writing directing the manner in which it desires that its vote be cast, which writing must be received by the General Partners prior to the date upon which the vote of Limited Partners are to be counted. Any Partner may waive notice of or attendance at any meeting of the Partners and may execute a signed written consent. Only the votes of Limited Partners of record on the date of Notification, whether at a meeting or otherwise, shall be counted. The laws of the State pertaining to the validity and use of corporate proxies shall govern the validity and use of proxies given by Limited Partners. -56- Section 11.2. Meetings of Partners ----------------------------------- The General Partners may at any time call a meeting of the Limited Partners or for a vote, without a meeting, of the Limited Partners on matters upon which the Limited Partners are entitled to provide their Consent, and shall call for such a meeting or vote upon receipt by the General Partners of a request therefor made by at least 10% in Interest (as to capital, Profits and Losses) of the Limited Partners as of the date of receipt of such Notification. Within 15 days of the receipt of the Notification, the General Partners shall notify all Limited Partners of record as of the date of the Notification as to the time and place of the meeting, if called, and the general nature of the business to be transacted thereat, or if no such meeting has been called, of the matter or matters to be voted upon and the date upon which the votes will be counted. Any Limited Partnership meeting or the date upon which such votes, without a meeting, will be counted (regardless of whether the General Partners have called for such meeting or vote upon the request of Limited Partners or have initiated such event without such request) shall be not less than 30 or more than 60 days following mailing of the Notification thereof by the General Partners. All expenses of the meetings, voting and such Notification shall be borne by the Limited Partnership. Section 11.3. Limitations on Requirements for Consents Notwithstanding anything to the contrary contained in this Agreement, the powers of the Limited Partners set forth in Sections 4.5E, 4.5F, 4.5G, 6.2A, 6.4 and 11.5 shall not be deemed to be granted to the Limited Partners or exercisable by them unless and until counsel for the Limited Partnership or counsel designated by at least 10% in Interest (as to capital and Profits and Losses) of the Limited Partners shall have delivered to the Limited Partnership an opinion to the effect that neither the grant nor the exercise of those powers is prohibited by the Act, will impair the limited liability of the Limited Partners or will affect the classification of the Limited Partnership as a partnership for Federal income tax purposes. -57- Section 11.4. Submissions to Limited Partners ---------------------------------------------- The General Partners shall give all the Limited Partners Notification of any proposal or other matter required by any provisions of this Agreement or by law to be submitted for the consideration and approval of the Limited Partners. Such Notification shall include any information required by the relevant provision of the Agreement or by law. Section 11.5. Acting without Concurrence of General Partners ------------------------------------------------------------- Except as limited by Section 11.3 and 10.1(B), more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners, without the necessity for concurrence by the General Partners, may vote to: (a) amend the Agreement or cause the Production Partnership Agreement to be amended; (b) dissolve the Limited Partnership or cause the Production Partnership to be dissolved; (c) remove either of the General Partners or both or cause the Managing Partners of the Production Partnership to be removed and elect new General Partners or cause the Production Partnership to elect new Managing Partners; (d) approve or disapprove the sale of all or substantially all of the assets of the Limited Partnership or cause the Production Partnership to sell or not to sell all or substantially all of its assets; or (e) cancel or amend the terms of any contract for services with the General Partners or any Affiliate or cause the Production Partnership to do so, which shall be without penalty, provided 30 days written notice is given. -58- ARTICLE TWELVE Miscellaneous Provisions ------------------------- Section 12.1. Notification to the Limited Partnership or the General Partners --------------------------------------------------------- Any Notification to the Limited Partnership or the General Partners shall be sent to the principal office of the Limited Partnership, as set forth in this Agreement. Except as provided herein, any Notification to a Limited Partner shall be sent to its last known address. Section 12.2. Binding Provisions --------------------------------- The covenants and agreements contained herein shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the respective parties hereto. Section 12.3. Applicable Law ----------------------------- This Agreement shall be construed and enforced in accordance with the laws of the State. Section 12.4. Separability of Provisions ----------------------------------------- If for any reason any provision or provisions hereof which are not material to the purposes or business of the Limited Partnership or of the Limited Partners' Interests are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement that are valid. -59- Section 12.5. Appointment of the General Partners as Attorney-in-Fact ------------------------------------------------------- A. Each Limited Partner, by the execution of this Agreement by a General Partner on such Limited Partner's behalf pursuant to a power of attorney granted by such Limited Partner by means of such Limited Partner's execution of a Subscription Agreement and Power of Attorney, irrevocably constitutes and appoints each of the General Partners, its true and lawful agent and attorney-in-fact with full power and authority in its name, place and stead to execute, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents, instruments and conveyances that may be necessary or appropriate to carry out the provisions or purposes of this Agreement, including without limitation: (i) all certificates and other instruments (including counterparts of this Agreement), and any amendment thereof, including any amendment substituting a Limited Partner pursuant to Section 7.3, that the General Partners deem appropriate to form, reform, qualify or continue the Limited Partnership (or a new partnership with substantially the same provisions as the Limited Partnership) as a limited partnership (or a partnership in which the Partners will have limited liability comparable to that provided by the Act) in the jurisdiction in which the Limited Partnership may conduct business; (ii) all amendments and other instruments necessary to admit into the Limited Partnership additional or substituted Partners pursuant to Section 10.2; (iii) all instruments that the General Partners deem appropriate to reflect a change or modification of the Limited Partnership in accordance with the terms of this Agreement (including those necessary to reflect additional Capital Contributions); and (iv) all conveyances and other instruments that the General Partners deem appropriate to reflect the dissolution and termination of the Limited Partnership. B. The appointment by all Limited Partners of each of the General Partners, as agent and attorney-in-fact, shall be deemed irrevocable and to be a power coupled with an interest, in recognition of the fact that each of the Partners under this Agreement will be relying upon the power of the General Partners to act as contemplated by this Agreement in any filing and other action by it on behalf of the Limited Partnership, and shall survive the Incapacity of any Person hereby giving such power and the transfer or assignment of all or any part of the -60- Interest of such person; provided, however, that in the event of the transfer by a Limited Partner of all of its Interest, the foregoing powers of attorney of the transferor Partner shall survive such transfer only until such time as the transferee shall have been admitted to the Limited Partnership as a Substituted Limited Partner and all required documents and instruments shall have been duly executed, filed and recorded to effect such substitution. Section 12.6. Entire Agreement ------------------------------- This Agreement constitutes the entire agreement among the parties. This Agreement supersedes any prior agreement or understanding among the parties and may not be modified or amended in any manner other than as set forth herein. Section 12.7. Paragraph Titles ------------------------------- Article and section titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text. Section 12.8. Counterparts --------------------------- This Agreement may be executed in several counterparts, all of which together shall constitute one agreement binding on all parties hereto, notwithstanding that all the parties have not signed the same counterpart except that no counterpart shall be binding unless signed by the General Partners. GEODYNE PROPERTIES, INC. By: // Thomas W. Kitchin // ----------------------- Thomas W. Kitchin President PW ENERGY INC. By: // R. Joseph Davis // --------------------- R. Joseph Davis -61- WITHDRAWING AND INITIAL LIMITED PARTNER // Susan Layman // ------------------ Susan Layman ADDITIONAL LIMITED PARTNERS. All those Additional Limited Partners whose names, places of residence and Capital Contributions appear on Schedule A, which is attached hereto and incorporated herein by reference, by Geodyne Properties, Inc. and PW Energy Inc. pursuant to a duly granted power of attorney. GEODYNE PROPERTIES, INC. By: // Thomas W. Kitchin // ----------------------- Thomas W. Kitchin PW ENERGY INC. By: // R. Joseph Davis // --------------------- R. Joseph Davis ACKNOWLEDGEMENTS STATE OF OKLAHOMA ) ) COUNTY OF TULSA ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Thomas W. Kitchin who, after being duly sworn by me, did declare that he is the identical person who executed the foregoing Amended and Restated Agreement and Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-D, that he is the President of Geodyne Properties, Inc. and that by and with the authority of the Board of Directors of Geodyne Properties, Inc. and as -62- attorney-in-fact for each Limited Partner he executed such Amended and Restated Agreement and Certificate as the free and voluntary act and deed of Geodyne Properties, Inc. and as attorney-in-fact for each Limited Partner for the purposes therein set forth and that he is familiar with statements contained therein and such statements are true. Subscribed, sworn to and acknowledged by said Thomas W. Kitchin on this 4th day of March, 1986. // Cindy Hays // ---------------------------- Notary Public My Commission Expires: 8/19/87 STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared R. Joseph Davis who, after being duly sworn by me, did declare that he is the identical person who executed the foregoing Amended and Restated Agreement and Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-D, that he is the President of PW Energy Inc. and that by and with the authority of the Board of Directors of PW Energy Inc. and as attorney-in-fact for each Limited Partner he executed such Amended and Restated Agreement and Certificate as the free and voluntary act and deed of PW Energy Inc. and as attorney-in-fact for each Limited Partner he executed such Amended and Restated Agreement and Certificate as the free and voluntary act and deed of PW Energy Inc. and as attorney-in-fact for each Limited Partner for the purposes therein set forth and that he is familiar with statements contained therein and such statements are true. Subscribed, sworn to and acknowledged by said R. Joseph Davis on this 24th day of February, 1986. // Phyllis Sullivan // ----------------------- Notary Public My Commission expires: 3/30/86 -63- STATE OF OKLAHOMA ) ) ss. COUNTY OF TULSA ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Susan Layman who, after being duly sworn by me, did declare that she is the identical person who executed the foregoing Amended and Restated Agreement and Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-D, that she executed such Agreement and Certificate as her free and voluntary act and deed for the purposes therein set forth and that she is familiar with the statements contained therein and such statements are true. Subscribed, sworn to and acknowledged by said Susan Layman on this 4th day of March, 1986. // Cindy Hays // --------------------- Notary Public My Commission Expires: 8/19/87 -64- EX-4.2 3 I-E AGREEMENT AND CERTIFICATE OF LTD. PSHP. PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E AMENDED AND RESTATED AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP Amended and Restated Agreement and Certificate of Limited Partnership, dated as of September 10, 1986, among Geodyne Properties, Inc., a Delaware corporation, and PW Energy Inc., a Delaware corporation, as General Partners, Susan Layman as the Initial Limited Partner, and those persons named in Schedule A attached hereto as Additional Limited Partners. Whereas, PaineWebber/Geodyne Energy Income Limited Partnership I-E has heretofore been formed as a limited partnership under the Oklahoma Revised Uniform Limited Partnership Act pursuant to an Agreement and Certificate of Limited Partnership dated as of March 3, 1986, and filed for recordation in the office of the Secretary of State of the State of Oklahoma on March 11, 1986; and Whereas, the parties hereto desire to amend the Certificate and Agreement of Limited Partnership of the Limited Partnership and to restate said Agreement in its entirety; Now, Therefore, in consideration of the mutual promises and agreements made herein, the parties, intending to be legally bound, hereby agree as follows: ARTICLE ONE Defined Terms ------------- The defined terms used in this Agreement shall, unless the context otherwise requires, have the meanings specified in this Article One. The singular shall include the plural and the masculine gender shall include the feminine, the neuter and vice versa, as the context requires. Any terms used in this Agreement which are defined in the Production Partnership Agreement and are not otherwise defined herein shall have the respective meanings set forth in the Production Partnership Agreement. "Accountants" shall mean Arthur Young & Company or such other nationally recognized firm of independent certified public accountants as shall be engaged from time to time by the General Partners for the Limited Partnership. "Act" shall mean the Oklahoma Revised Uniform Limited Partnership Act, as amended from time to time. -1- "Activation" or "Activated" shall mean the date on which (i) with respect to the Limited Partnership, the subscribers for Units shall have been admitted to the Limited Partnership as Limited Partners, and (ii) with respect to the Production Partnership, the Limited Partnership shall have made its capital contribution to the Production Partnership. "Additional Limited Partner" shall mean any person admitted to the Limited Partnership pursuant to Section 3.3A of this Agreement. "Affiliate" shall mean, when used with reference to a specified Person: (a) any Person directly or indirectly owning, controlling, or holding with power to vote 10% or more of the outstanding voting securities of the specified Person; (b) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the specified Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with, the specified Person; (d) any Person who is an officer, director, partner or trustee of, or serves in a similar capacity with respect to, the specified Person or of which the specified Person is an officer, director, partner or trustee, or with respect to which the specified Person serves in a similar capacity; and (e) any relative or spouse of the specified Person. A reference to an Affiliate of the General Partners shall include an Affiliate of either or both of the General Partners. Notwithstanding the foregoing, no Person shall be deemed to be an Affiliate solely by reason of its ownership of limited partnership interests in a limited partnership. "Affiliated Program" shall mean a drilling or income program (whether in the form of a limited partnership, general partnership, joint venture or otherwise) interests in which were offered to persons or entities not engaged in a trade or business within the oil and gas industry (other than by virtue of its participation in an Affiliated Program) and of which any General Partner or Affiliate serves as general partner or venturer. "Agreement" shall mean this Amended and Restated Agreement and Certificate of Limited Partnership as originally executed and as amended from time to time. "Capital Account" shall mean, as to any Partner, the sum of the Capital Contribution by such Partner, plus his share of any Profits (including, with respect to Limited Partners, his share of any interest earned on funds held by the escrow agent and paid to the Limited Partnership, as set forth in the Prospectus), reduced by his share of any Losses (including such Partner's -2- deduction for depletion to the extent such deduction does not exceed the amount of cost depletion such Partner would be allowed) and distributions of Limited Partnership cash or assets to such Partner or on behalf of such Partner in payment of any taxes or other expenses allocable to such Partner. "Capital Contribution" of a Limited Partner shall mean the cash contribution of a Limited Partner paid with respect to such Limited Partner's subscription and any cash distributions from a Prior Limited Partnership reinvested on behalf of a Limited Partner in the Limited Partnership, net of any refunds made pursuant to Section 3.4 of this Agreement. "Code" shall mean the Internal Revenue Code of 1954, as amended (or any corresponding provisions of succeeding law). "Commissions" shall mean the cash fees payable to the Dealer Manager and the Selected Dealers upon the Activation of the Limited Partnership. "Consent" shall mean the consent of a Person, given as provided in Section 11.1, to do the act or thing for which the consent is solicited, or the act of granting such consent, as the context may require. "Dealer Manager" shall mean PaineWebber Incorporated, a Delaware corporation. "Direct Administrative Costs" shall mean the actual and necessary direct costs attributable to services provided to the Limited Partnership by parties other than the General Partner or their Affiliates, whether incurred by the Limited Partnership directly or incurred by any of the General Partners or their Affiliates, including the annual audit fees, legal fees and expenses, the cost of reviewing tax returns and reports, the cost of evaluations prepared by independent petroleum engineers pursuant to Section 9.4C of this Agreement and all other such costs directly incurred by or for the benefit of the Limited Partnership. "Distributable Cash" shall mean, with respect to the Limited Partnership's operations at any time, the amount of cash assets on hand at such time less amounts required to be retained out of such cash assets, in the sole judgment of the General Partners, to pay costs, expenses or other obligations whether then accrued or anticipated to accrue in the future. "Fiscal Year" shall mean the calendar year. -3- "General and Administrative Costs" shall mean all customary and routine legal, accounting, data processing, depreciation, geological, engineering, travel, office rent, telephone, secretarial, employee compensation and benefits, and other items of a general and administrative nature, whether like or unlike the foregoing, and any other incidental reasonable expenses reasonably necessary to the conduct of the Limited Partnership's business, and generated by the General Partners or any Affiliate other than an Affiliated Program computed on a cost basis, determined by the General Partners in accordance with generally accepted accounting principles and reviewed by an independent public accountant or certified public accountant. General and Administrative Costs shall not include any Direct Administrative Costs or costs of the Production Partnership. "General Partners" shall mean Geodyne Properties, Inc., a Delaware corporation, and PW Energy Inc., a Delaware corporation, acting in such capacity, and any other Person admitted as an additional or substituted General Partner pursuant to the provisions of Article Six of this Agreement. "Geodyne Properties" shall mean Geodyne Properties, Inc., a Delaware corporation. "Hydrocarbons" shall mean crude oil, natural gas, condensate, natural gas liquids and other liquid or gaseous hydrocarbons. "Incapacity" or "Incapacitated" shall mean the adjudication of bankruptcy (except that, in the case of a General Partner, the term "bankruptcy" shall mean only being subject to Chapter 7 of the Federal Bankruptcy Reform Act of 1978), of interdiction, of incompetence, or of insanity, or the death, dissolution or termination (other than by merger or consolidation under which the surviving entity agrees to assume all of the obligations and responsibilities of the merged or consolidated Person set forth in this Agreement), as the case may be, of any Person. "Income" shall mean the gross income of the Limited Partnership or the Production Partnership (as the context may require) as determined for Federal income tax purposes, including all capital or Code Section 1231 gains (but not losses). "Initial Limited Partner" shall mean Susan Layman. -4- "Interest" shall mean the entire ownership interest (which may, either for a Partner's Capital Account or a Partner's Profits interest, be expressed as a percentage) of a Partner in the Limited Partnership at any particular time, including the rights and obligations of such Partner under this Agreement and the Act. "Limited Partners" shall mean the limited partners of the Limited Partnership or any substituted limited partner including the General Partners to the extent they purchase Units. "Limited Partnership" shall mean the limited partnership continued hereby. "Limited Partnership Account" shall mean the bank account or accounts established by the General Partners pursuant to Section 9.3 of this Agreement. "Limited Partnership Property" shall mean all interest, property and right of any type owned by the Limited Partnership. "Managing Partners" shall mean Geodyne Production Company, a Delaware corporation, and PW Production, Inc., a Delaware corporation, acting in such capacity, and any successor acting in such capacity. "Notification" shall mean a writing, containing the information required by this Agreement to be communicated to any Person, hand delivered or sent by registered or certified mail, return receipt requested, postage prepaid, to such Person at the last known address of such Person, the date of the certified receipt (or such other evidence of receipt) therefor being deemed the date of the giving of Notification; provided, however, that any written communication containing the information sent or delivered to the Person and actually received by the Person shall constitute Notification for all purposes of this Agreement. "Organization and Offering Costs" shall mean all costs and expenses incurred by the General Partners and their Affiliates in connection with the organization of the Limited Partnership, including, without limitation, the legal, printing, accounting and other costs incurred in connection with the registration for offer and sale of the Units under applicable federal and state securities laws (other than any organization and offering costs as defined in the Production Partnership Agreement). Organization and Offering Costs shall not include the Commissions paid to the Dealer Manager or reallowed to the Selected Dealers. -5- "Partner" shall mean any General Partner or any Limited Partner. "Person" shall mean any individual, partnership, corporation, trust or other entity. "Prior Limited Partnership" shall mean any limited partnership activated prior to the Activation of the Limited Partnership of which units of limited partnership interest were offered and sold pursuant to the Prospectus. "Production Partnership" shall mean the general partnership of which the Limited Partnership is a general partner. "Production Partnership Agreement" shall mean the agreement of general partnership under which the Production Partnership was formed, as amended from time to time. "Production Partnership Well" shall mean any well in which the Production Partnership has an interest. "Producing Property" shall mean any property (or interest in such property) with a well or wells capable of producing Hydrocarbons in commercial quantities or properties unitized with such properties or properties adjacent to such properties which are acquired as an incidental part of the acquisition of such properties. The term also includes well machinery and equipment, gathering systems, storage facilities or processing installations or other equipment and property associated with the production of Hydrocarbons. Interests in properties may include Working Interests, production payments, Royalties and other nonworking and nonoperating interests. "Profits" and "Losses" shall mean the income or losses of the Limited Partnership for Federal income tax purposes determined as of the close of the Limited Partnership's Fiscal Year, as well as, when the context requires, any tax-exempt income and nondeductible expenses. "Prospectus" shall mean the prospectus pursuant to which the Units were offered, and all supplements or amendments thereto, if any. "Proved Reserves" shall mean those quantities of Hydrocarbons, which, upon analysis of geologic and engineering data, appear with reasonable certainty to be recoverable in the future from known Hydrocarbon reservoirs under existing economic and operating conditions. Proved reserves are limited to those quantities of Hydrocarbons which can be expected, with little -6- doubt, to be recoverable commercially at current prices and costs, under existing regulatory practices and with existing conventional equipment and operating methods. Depending upon their status of development, such proved reserves shall be subdivided into the following classifications and have the following definitions: (a) "Proved Developed Reserves" shall mean proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. This classification shall include: (1) "Proved Developed Producing Reserves" which are proved developed reserves which are expected to be produced from existing wells; and (2) "Proved Developed Non-Producing Reserves" which are proved developed reserves which exist behind the casing of existing wells, or at minor depths below the present bottom of such wells, which are expected to be produced through these wells in the predictable future, where the cost of making Hydrocarbons available for production should be relatively small compared to the cost of a new well. Additional Hydrocarbons expected to be obtained through the application of improved recovery techniques are included as "Proved Developed Reserves" only after testing by a pilot project or after the operation of an installed program has confirmed through production responses that increased recovery will be achieved. (b) "Proved Undeveloped Reserves" shall mean all reserves which are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Such reserves on undrilled acreage are limited to those drilling units offsetting productive units which are reasonably certain of production when drilled. Proved reserves for other undrilled units are claimed only where it can be demonstrated with reasonable certainty, based on accepted geological, geophysical and engineering studies and data, that there is continuity of production from an existing productive formation. No estimates for Proved Undeveloped Reserves are attributable to any acreage for which improved recovery is contemplated, unless the techniques to be employed have been proved effective by actual tests in the same area and reservoir. -7- "PW Energy" shall mean PW Energy Inc., a Delaware corporation. "Remove", "Removed" or "Removal" shall mean, with reference to the removal of a General Partner, the termination of the management powers, duties and responsibilities of such General Partner pursuant to Section 6.2 of this Agreement and the removal of such General Partner as a Partner. "Right of Presentment" shall mean the acquisition by a purchaser of a Limited Partner's Interest pursuant to Section 7.5 of this Agreement. "Royalty" shall mean an interest, including an overriding royalty and a net profits interest, in gross production or the proceeds therefrom which does not require the owner thereof to bear any of the cost of production, development, operation or maintenance. "Sale" shall mean any event or transaction that is, for Federal income tax purposes, considered a sale, exchange or abandonment by the Limited Partnership of any Limited Partnership Property. "Selected Dealer" shall mean a member in good standing of the National Association of Securities Dealers, Inc. which has been selected by the Dealer Manager to offer and sell the Units. "State" shall mean the State of Oklahoma. "Subscription Agreement and Power of Attorney" shall mean the Subscription Agreement and Power of Attorney in the form attached to the Prospectus. "Subsequent Limited Partnership" shall mean any limited partnership activated after the Activation of the Limited Partnership of which units of limited partnership interest are offered and sold pursuant to the Prospectus. "Substituted Partner" shall mean any Person admitted to the Limited Partnership as a Partner pursuant to Section 7.3 and 10.2 of this Agreement. "Unit" shall mean a $1,000 investment in the Limited Partnership by a Limited Partner pursuant to the terms of a Subscription Agreement and Power of Attorney; provided, however, that fractional Units may be acquired to the extent provided under Section 5.lB in whole increments of $100. -8- "Working Interest" shall mean the interest (whether held directly or indirectly) in a lease (as defined in the Production Partnership Agreement) which is subject to some portion of the expense of production, development, operation or maintenance. ARTICLE TWO Continuation; Name, Place of Business and Office; Term ------------------------------------------------------ Section 2.1. Continuation -------------------------- The parties hereto hereby continue the limited partnership heretofore formed pursuant to the provisions of the Oklahoma Revised Uniform Limited Partnership Act, and the rights and liabilities of the Partners shall be as provided in the Act, except as otherwise expressly provided in this Agreement. Section 2.2. Name, Place of Business and Office, Agent ------------------------------------------------------- The Limited Partnership shall be conducted under the name PaineWebber/Geodyne Energy Income Limited Partnership I-E. The business of the Limited Partnership may, however, be conducted under any other name deemed necessary or desirable by the General Partners in order to comply with applicable laws. The office and principal place of business of the Limited Partnership shall be c/o Geodyne Properties, Inc., 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The agent for service of process on the Limited Partnership shall be Geodyne Properties, Inc., 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The General Partners may change the principal place of business and the location of such office and may establish such additional offices as they deem advisable from time to time; provided, however, that in the event the principal place of business of the Limited Partnership shall be changed, the General Partners shall provide Notification thereof to the Limited Partners. Section 2.3. Purpose --------------------- The business and purpose of the Limited Partnership shall be to become a general partner in the Production Partnership. Such business and purpose shall include the doing of any and all things incident thereto or connected therewith, including the carrying on of the business of the Production Partnership in the event of its termination if it is determined by the General Partners to be in the best interests of the Limited Partners. -9- The Limited Partnership shall not engage in any other business or activity. Section 2.4. Term ------------------ The Limited Partnership shall continue in force and effect until December 31, 1999, provided that the General Partners shall extend the term of the Limited Partnership for up to five periods of two years each in the event that the Production Partnership's term has been so extended, or until dissolution prior thereto pursuant to the provisions hereof. ARTICLE THREE Partners and Capital -------------------- Section 3.1. General Partners ------------------------------ A. The names, addresses and Capital Contributions of the General Partners are set forth in Schedule A attached hereto and are incorporated herein. B. Each General Partner represents to each Additional Limited Partner, severally, that: (i) neither it nor any of its Affiliates is a "party in interest," as defined in Section 3(14) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a "disqualified person," as defined in Section 4975(e) (2) of the Code, with respect to any Additional Limited Partner, the assets of which are being used, in whole or in part, to acquire an Interest in the Limited Partnership; and (ii) neither the acquisition by such Limited Partners of their Interests nor any transactions contemplated by the Prospectus involving the use of amounts constituting such Limited Partners' Capital Contributions will constitute or result in a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. In making such representations, the General Partners have each received and relied upon information from Additional Limited Partners pursuant to subscription agreements, in the form attached as Exhibit C to the Prospectus, executed by such Limited Partners. -10- Section 3.2. Initial Limited Partner ------------------------------------- Upon admission of the Additional Limited Partners to the Limited Partnership pursuant to Section 3.3A of this Agreement, the Initial Limited Partner shall withdraw from the Limited Partnership and shall be entitled to receive an amount of money equal to her Capital Contribution. Section 3.3. Additional Limited Partners ----------------------------------------- A. The General Partners are authorized to admit Additional Limited Partners to the Limited Partnership if, after the admission of such Additional Limited Partners, the Capital Contributions of all Additional Limited Partners would be not less than $5,000,000 and not more than $90,000,00 less the aggregate subscription amount of units of limited partnership interest subscribed to any Prior Limited Partnership. The Capital Contributions of the Additional Limited Partners shall be made in cash. The manner of the offering of the Units, the terms and conditions under which subscriptions for such Units will be accepted (including the minimum subscription amounts applicable to various categories of subscribers), the manner of and conditions to the sale of Units to subscribers therefor, the terms of the reinvestment in the Limited Partnership of cash distributions from a Prior Limited Partnership and the admission of subscribers for Units and Persons who reinvest in the Limited Partnership cash distributions from a Prior Limited Partnership as Additional Limited Partners will be as provided in the Prospectus and subject to any provisions thereof. B. The names, addresses and Capital Contributions of the Additional Limited Partners are set forth in Schedule A hereto, as amended from time to time. C. No Limited Partner shall be required to make any additional capital contribution to the Limited Partnership. Section 3.4. Certain Returns of Capital ---------------------------------------- Any portion of the capital contribution of the Limited Partnership to the Production Partnership which is distributed to the Limited Partnership pursuant to Section 3.4 of the Production Partnership Agreement shall be distributed promptly to the Limited Partners in proportion to their Capital Contributions as a return of part of their Capital Contributions. In addition, the General Partners shall contribute cash to the Limited Partnership (with respect to which their Capital Accounts will be -11- credited) in an amount equal to the amounts paid to the General Partners or their Affiliates from the Limited Partners' Capital Contributions in respect of Commissions and Organization and Offering Costs attributable (on a proportionate basis) to the amount of the unexpended Capital Contributions so refunded, which cash shall be refunded pro rata to the Limited Partners (except that cash representing refunded Commissions shall be distributed to Limited Partners in proportion to the manner in which Commissions attributable to their subscriptions were payable) together with the unexpended Capital Contributions. Geodyne Properties and PW Energy shall be responsible for 40% and 60%, respectively, of the obligation of the General Partners to contribute cash to the Limited Partnership in connection with a return of the Limited Partners' Capital Contributions pursuant to this Section 3.4. Section 3.5. Limited Partnership Capital ----------------------------------------- A. No Partner shall be paid interest on any Capital Contribution to the Limited Partnership or on such Partner's Capital Account, notwithstanding any disproportion therein as between Partners. B. Except as provided in Sections 3.2, 3.4, 6.2 and 8.2 of this Agreement, no Partner shall have the right to withdraw or receive any return of the Capital Contribution. Under circumstances involving a return of any Capital Contribution, no Limited Partner shall have priority over any other Limited Partner nor shall any Partner have the right to receive any property other than cash, except as may otherwise be provided in Sections 6.2 and 8.2A of this Agreement. Section 3.6. Application of Capital Contributions -------------------------------------------------- A. The General Partners shall deposit in the Limited Partnership Account the Capital Contributions of the Additional Limited Partners and shall apply such Capital Contributions to (i) pay to the General Partners an amount equal to 3% of the Limited Partners' Capital Contributions in consideration of the General Partners' payment of Organization and Offering Costs, (ii) pay Commissions, (iii) establish a reasonable reserve for working capital, and (iv) contribute the balance of the Partners' Capital Contributions to the Production Partnership in exchange for the Limited Partnership's interest therein. -12- B. PW Energy and Geodyne Properties shall be responsible for the payment of 60% and 40%, respectively, of Organization and Offering Costs. The General Partners shall allocate between themselves the payment received in Section 3.6A(i) (hereinafter referred to in this Section 3.6B as the "Fee") as follows: (i) to the extent of the amount of actual Organization and Offering Costs incurred by the General Partners plus Unreimbursed Prior Organization and Offering Costs (as defined below), the Fee shall be paid 60% to PW Energy and 40% to Geodyne Properties; (ii) to the extent the Fee is in excess of the actual Organization and Offering Costs plus Unreimbursed Prior Organization and Offering Costs (as defined below) but such excess amount does not exceed 2% of the Limited Partners' Capital Contributions, 75% shall be paid to PW Energy and 25% shall be paid to Geodyne Properties; and (ii) any excess of the Fee over the amounts of such Fee paid to the General Partners pursuant to (i) and (ii) of this Section 3.6B shall be paid 50% each to PW Energy and Geodyne Properties. "Unreimbursed Prior Organization and Offering Costs" shall mean the actual organization and offering costs of any Prior Limited Partnerships and any Prior Production Partnerships (as defined in the Production Partnership Agreement) for which the General Partners and Managing Partners are not reimbursed by the payment to them of the fee referred to in Section 3.6A(i) of the limited partnership agreements of the respective Prior Limited Partnerships and by the payment to them of the management fee of the Prior Production Partnerships. C. The Limited Partnership shall not incur any borrowings; provided, however, that borrowings may be incurred on its behalf by the Production Partnership to pay costs of the Production Partnership allocable to the Limited Partnership. Section 3.7. Liability of Partners ----------------------------------- A. No Limited Partner shall be liable for the debts, liabilities, contracts or other obligations of the Limited Partnership (except to the extent of (i) the Limited Partner's Capital Contribution, (ii) money or property wrongfully paid or conveyed to the Limited Partner on account of the Limited Partner's Capital Contribution, and (iii) amounts, together with interest thereon, properly distributed to the Limited Partner which represent a return of capital and which are necessary to discharge the Limited Partnership's liability to creditors which arose prior to such distribution) or for the debts and liabilities of any other Partner. -13- B. Geodyne Properties, PW Energy and any General Partner subsequently admitted to the Limited Partnership each agrees that it shall remain generally liable for any obligation or recourse liability of the Limited Partnership incurred during the period in which it is a General Partner. However, all present and future General Partners hereby agree among themselves to contribute to each other the amount of funds necessary to effectuate a sharing of Limited Partnership obligations and recourse liabilities in proportion to each General Partner's share of such obligations and liabilities. Section 3.8. General Partner as Limited Partner ------------------------------------------------ A. General Partner shall also be a Limited Partner to the extent that it purchases or becomes a transferee of all or any part of the Interest of a Limited Partner, provided that a General Partner shall not thereby (i) acquire any power to vote, as a Limited Partner, with respect to any action requiring the Consent of any specified percentage of Limited Partners, and (ii) be deemed to have limited its liability for any obligation or recourse liability of the Limited Partnership as set forth under Section 3.7B. ARTICLE FOUR Management ---------- Section 4.1. Management and Control of the Limited Partnership --------------------------------------------------------------- A. The General Partners, within the authority granted to them under and in accordance with the provisions of this Agreement, shall have the full and exclusive right to manage and control the business and affairs of the Limited Partnership and to make all decisions regarding the business of the Limited Partnership and shall have all of the rights, powers and obligations of general partners of a limited partnership under the laws of the State. B. No Limited Partner, as such, shall participate in the management of or have any control over the Limited Partnership's business nor shall any Limited Partner, as such, have the power to represent, act for, sign for or bind the General Partners or the Limited Partnership. The Limited Partners hereby consent to the exercise by the General Partners of the powers conferred on them by this Agreement. -14- C. The General Partners' management authority with respect to significant Limited Partnership actions shall be exercised jointly by both General Partners, including without limitation such actions as the determination of the amount of Distributable Cash to distribute to the Partners. The General Partners' management authority respecting all other actions which are in the ordinary course of the Limited Partnership's operations (and any "significant" Limited Partnership action delegated to a General Partner under Section 4.lC(iii)) may be exercised by either General Partner without the concurrence of the other General Partner, provided that the General Partner exercising such management authority shall, upon inquiry by the other General Partner, notify the inquiring General Partner of the nature of such actions undertaken without the concurrence of the inquiring General Partner. The General Partners shall have the authority to (i) determine that the "significant" action specified herein shall no longer be a "significant" action for purposes of this Section 4.lC and to amend this Agreement pursuant to Section l0.lA of this Agreement to reflect such determination, (ii) to determine which other Limited Partnership actions, other than that specified herein, are "significant" actions for purposes of this Section 4.1C, and (iii) delegate their management authority to a single General Partner with respect to "significant" Limited Partnership actions at such times and under such conditions as they may mutually agree upon. Section 4.2. Powers of the General Partners -------------------------------------------- A. In addition to any other rights and powers which the General Partners may possess under this Agreement and the Act, the General Partners shall have the power, except and subject to the extent otherwise provided or limited in this Agreement: (i) to contribute the balance (after payment and retention of the amounts set forth in Section 3.6) of the Capital Contributions of the Limited Partners to the Production Partnership as required by the Limited Partnership's interest therein, and to execute the Production Partnership Agreement (including any amendment and restatement thereof) on behalf of the Limited Partnership; (ii) if the Production Partnership is dissolved, to enter into all transactions contemplated by the Production Partnership Agreement, subject to the limitations and provisions contained therein, notwithstanding anything to the contrary contained herein; -15- (iii) to maintain the books and records of the Limited Partnership in accordance with the provisions of Section 9.1; and (iv) subject to Sections 4.5E, 4.5F and 4.5G, to consent to certain actions on behalf of the Limited Partnership pursuant to the Production Partnership Agreement. B. Reliance by Third Parties on General Partners' Authority. No person, firm or corporation dealing with the Limited Partnership shall be required to inquire into the authority of any General Partner to take or refrain from taking any action or make or refrain from making any decision, but any person so inquiring shall be entitled to rely upon a certificate of a General Partner as to its due authorization. Section 4.3. Prohibited Transactions ------------------------------------- A. Notwithstanding any other provision of this Agreement to the contrary, the following transactions are expressly prohibited: (i) the Limited Partnership shall not make any loans to a General Partner or any Affiliate; (ii) except as expressly contemplated hereby, no agent, attorney, accountant or other independent consultant or contractor who is also employed on a full-time basis by any General Partner or any Affiliate shall be compensated by the Limited Partnership for his services; (iii) there shall be no commingling of Limited Partnership funds with funds of any other entity; and (iv) the Limited Partnership shall not make any advance payment to the General Partners or their Affiliates, except where necessary to secure tax benefits of prepaid drilling costs. Section 4.4. Other Agreements of the General Partners ------------------------------------------------------ A. Anything in this Agreement to the contrary notwithstanding, it is agreed that: -16- (i) the General Partners and their Affiliates shall not take any action with respect to the assets or property of the Limited Partnership which does not benefit primarily the Limited Partnership, including the utilization of Limited Partnership funds as compensating balances for the benefit of any General Partner or Affiliate; (ii) neither the General Partners nor any Affiliate shall render to the Limited Partnership any services nor sell or lease to the Limited Partnership any equipment or supplies unless: (a) such General Partner or Affiliate is engaged, independently of the Limited Partnership and as an ordinary and ongoing business, in the business of rendering such services or selling or leasing such equipment and supplies to a substantial extent to other Persons in the oil and gas industry in addition to programs in which such General Partner or Affiliate has an interest; (b) the compensation, price or rental therefor is competitive with the compensation, price or rental of other Persons in the area engaged in the business of rendering comparable services or selling or leasing comparable equipment and supplies which could reasonably be made available to the Limited Partnership; and (c) provided that, if such General Partner or Affiliate is not engaged in a business within the meaning of subdivision (a), then such compensation, price or rental shall be the cost of such services, equipment or supplies to such General Partner or Affiliate or the competitive rate which could be obtained in the area, whichever is less. Section 4.5. Restrictions on the Authority of the General Partners ------------------------------------------------------------------- A. The General Partners shall not have the authority to: (i) do any act in contravention of this Agreement or which would make it impossible to carry on the ordinary business of the Limited Partnership; -17- (ii) confess a judgment against the Limited Partnership; (iii) possess Limited Partnership Property or assign, pledge or hypothecate rights in specific Limited Partnership Property for other than a Limited Partnership purpose; (iv) admit a Person as a General Partner or a Limited Partner except as otherwise provided herein; or (v) perform any act which would result in loss of any Limited Partner's status as a limited partner under the laws of the State or of limited liability under the laws of any other jurisdiction in which the Limited Partnership is doing business, including use of any Limited Partner's name in conducting the business of the Limited Partnership. B. The General Partners shall not lease, sell, abandon or otherwise dispose of any assets of the Limited Partnership to the General Partners or to any of their Affiliates; provided, however, that if the Limited Partnership should own any inventory or other materials, such inventory or materials may be transferred to the General Partners or any of their Affiliates at the applicable rates set forth in the standard form of accounting procedure then recommended by the Council of Petroleum Accountants Societies of North America. C. The General Partners shall not perform any act that would subject any Limited Partner to liability as a general partner in any jurisdiction. D. Without the consent of more than 50% in Interest of the Limited Partners, the General Partners shall not have the authority to: (i) lease, sell, or otherwise dispose of at any one time all or substantially all of the assets of the Limited Partnership other than in the ordinary course of business; (ii) elect to dissolve and wind up the Limited Partnership; or (iii) except as set forth in Article 10, adopt any amendment to this Agreement. E. The General Partners shall not cause the Limited Partnership to consent to, or join in, any amendment, or modification of, or supplement to, or waiver of the terms of, the Production Partnership Agreement unless: (i) in the judgment of -18- the General Partners such amendment, modification, supplement or waiver would not materially adversely affect the Limited Partnership's rights under the then existing Production Partnership Agreement or such amendment, modification, supplement, or waiver is in the best interests of the Limited Partners; or (ii) if the conditions of Section 11.3 are satisfied, the consent of more than 50% in Interest of the Limited Partners is obtained. If the conditions of Section 11.3 are satisfied, the General Partners shall propose any amendment to the Production Partnership Agreement on behalf of the Limited Partnership which is proposed by at least 10% in Interest (as to capital and Profits and Losses) of the Limited Partners. F. Unless the conditions of Section 11.3 are satisfied and the consent of more than 50% in Interest of the Limited Partners is obtained, the General Partners shall not have the authority to consent on behalf of the Limited Partnership to the: (i) lease, sale or other disposition at any one time of all or substantially all of the assets of the Production Partnership; or (ii) dissolution and winding up of the Production Partnership. G. Unless the conditions of Section 11.3 are satisfied and the consent of more than 50% in Interest of the Limited Partners is obtained, the General Partners shall not have the authority to cause the Limited Partnership to (i) remove a Managing Partner, or (ii) appoint a successor Managing Partner pursuant to Section 6.2 of the Production Partnership Agreement. H. No creditor who makes a nonrecourse loan to the Limited Partnership may have or acquire, at any time as a result of making the loan, any direct or indirect interest in the profits, capital or property of the Limited Partnership other than as a secured creditor. -19- Section 4.6. Duties and Obligations of the General Partners ------------------------------------------------------------ The General Partners shall: (i) use their best efforts to take all actions that may be necessary or appropriate for the continuation of the Limited Partnership's valid existence as a limited partnership or partnership in commendam under the laws of the State and the laws of any other jurisdiction in which the Limited Partnership is doing business, and for the acquisition and holding, in accordance with the provisions of this Agreement and applicable laws and regulations, of the interest of the Limited Partnership in the Production Partnership; (ii) devote to the Limited Partnership the time that they shall deem to be necessary to conduct the Limited Partnership's business and affairs in the best interests of the Limited Partnership; (iii) be under a fiduciary duty and obligation to conduct the affairs of the Limited Partnership in the best interests of the Limited Partnership, including the safekeeping and use of all Limited Partnership funds and assets (whether or not in the immediate possession or control of the General Partners) and the use thereof for the benefit of the Limited Partnership; (iv) at all times act with integrity and good faith and exercise due diligence in all activities relating to the conduct of the business of the Limited Partnership and in resolving conflicts of interest; (v) use their best efforts at all times to maintain their aggregate net worth at a level that is sufficient to meet all present and future requirements set by statute, Treasury Regulations, the Internal Revenue Service or the courts to ensure that the Limited Partnership will not fail to be classified for Federal income tax purposes as a partnership, rather than as an association taxable as a corporation, on account of the net worth of the General Partners; -20- (vi) prepare or cause to be prepared and shall file on or before the due date (or any extension thereof) any Federal, state or local tax returns required to be filed by the Limited Partnership; (vii) cause the Limited Partnership to pay any taxes payable by the Limited Partnership; (viii) use their best efforts to cause the Limited Partnership (or a new limited partnership having the same provisions as the Limited Partnership) to be formed, reformed, qualified to do business, or registered under any applicable assumed or fictitious name statute or similar law in any state in which the Limited Partnership then owns property or transacts business, if such formation, reformation, qualification or registration is necessary or advisable in its counsel's opinion to protect the limited liability of the Limited Partners or to permit the Limited Partnership lawfully to own property or transact business; (ix) from time to time, prepare and file all amendments to this Agreement and other similar documents that are required by law to be filed and recorded for any reason, in the office or offices that are required under the laws of the State or any other state in which the Limited Partnership is then formed or qualified; (x) do all other acts and things (including making publications or periodic filings of this Agreement or amendments hereto or other similar documents without the necessity of mailing or delivering copies of them to each Limited Partner) that may now or hereafter be deemed by the General Partners to be necessary, (a) for the perfection and continued maintenance of the Limited Partnership as a limited partnership under the laws of the State, (b) to protect the limited liability of the Limited Partners under the laws of the State and other jurisdictions in which the Limited Partnership is doing business, and (c) subject to Section 7.3G of this Agreement, to cause this Agreement, certificates or other documents to reflect accurately the agreement of the Partners, the identity of the Limited Partners and the General Partners and the amounts of their respective Capital Contributions; -21- (xi) monitor the activities of the Production Partnership and keep the Limited Partners informed of them in the manner provided in this Agreement; (xii) from time to time submit to any appropriate state securities administrator all documents, papers, statistics and reports required to be filed with or submitted to such state securities administrator; and (xiii) inform each Limited Partner of all administrative and judicial proceedings for an adjustment at the Limited Partnership or Production Partnership level for partnership tax items and forward to each Limited Partner within 30 days of receipt all notices received from the Internal Revenue Service regarding the commencement of a partnership level audit or a final partnership administrative adjustment, and to perform all other duties imposed by Sections 6221 through 6232 of the Code on Geodyne Properties as "tax matters partner" of the Limited Partnership, including (but not limited to) the following: (a) the power to conduct all audits and other administrative proceedings (including windfall profit tax audits) with respect to Limited Partnership tax items; (b) the power to extend the statute of limitations for all Partners with respect to Limited Partnership tax items; and (c) the power to file a petition with an appropriate federal court for review of a final partnership administrative adjustment. Geodyne Properties, as "tax matters partner," shall consult with PW Energy with respect to the performance of all its duties in such capacity. Section 4.7. Compensation of the General Partners -------------------------------------------------- A. Except as provided in Articles Four and Five, the General Partners shall not, either in their capacity as General Partners or in their individual capacity, receive any salary, fees or profits from the Limited Partnership. B. In consideration of their payment of Organization and Offering Costs, the General Partners shall be paid by the Limited Partnership an amount equal to 3% of the Limited Partners' Capital Contributions which the General Partners shall allocate between them as provided in Section 3.6. The General Partners shall be reimbursed by the Limited Partnership for General and Administrative Costs and Direct Administrative Costs incurred by them on behalf of the Limited Partnership, and such costs shall be allocated among the Partners as set forth in Section 5.2 of this Agreement. The General Partners shall be paid any excess -22- of interest income over the costs incurred in connection with the maintenance of the reinvestment account referred to in Section 5.1(B)(i). Section 4.8. Contracts with the General Partners and Affiliates ---------------------------------------------------------------- All services provided to the Limited Partnership by a General Partner or any Affiliate for which it is compensated shall be embodied in a written contract precisely setting forth the services to be rendered and the compensation to be paid. Each contract relating to a transaction between the Limited Partnership and any General Partner or any Affiliate shall contain a provision which shall permit termination of the contract by the Limited Partnership without penalty on 30 days' prior written notice. Section 4.9. Other Operations ------------------------------ The General Partners and their Affiliates shall at all times be free to engage in all aspects of the oil, gas and natural resources business for their own accounts and for the accounts of others. Without limiting the generality of the foregoing, the General Partners and their Affiliates shall have the right to organize and operate other partnerships, joint ventures or other oil and gas investment programs similar to the Limited Partnership or the Production Partnership. Section 4.10. Prosecution, Defense and Settlement of Claims; Indemnification ------------------------------------------------------------ A. The General Partners shall arrange to prosecute, defend, settle or compromise actions at law or in equity at the expense of the Limited Partnership as may be necessary to enforce or protect the interests of the Limited Partnership. The General Partners shall satisfy any judgment, decree, decision or settlement, first, out of any insurance proceeds available therefor, next, out of the Limited Partnership assets and income, and, finally, out of the assets of the General Partners. B. In any threatened, pending or completed action, suit or proceeding to which the General Partners are a party or are threatened to be made a party by reason of the fact that they are the General Partners of the Limited Partnership (other than an action by or in the right of the Limited Partnership) involving -23- an alleged cause of action for damages arising from the performance of their duties under this Agreement or other activities relative to the management of the Limited Partnership, the Limited Partnership shall indemnify the General Partners against expenses, including attorneys' fees, judgments and amounts paid in settlement, actually and reasonably incurred by them in connection with such action, suit or proceeding if they acted in good faith and in a manner they reasonably believed to be in the best interests of the Limited Partnership, and provided that their conduct does not constitute negligence or misconduct. The termination of any action, suit or proceeding by judgment, order or settlement shall not of itself create a presumption that the General Partners did not act in good faith and in a manner which they reasonably believed to be in the best interests of the Limited Partnership. C. In any threatened, pending or completed action or suit by or in the right of the Limited Partnership, to which the General Partners are a party or are threatened to be made a party, involving an alleged cause of action by a Limited Partner or Limited Partners for damages arising from the activities of the General Partners in the performance of management of the internal affairs of the Limited Partnership as prescribed in this Agreement or by law, or both, the Limited Partnership shall indemnify the General Partners against expenses, including attorneys' fees, actually and reasonably incurred by them in connection with the defense or settlement of such action or suit if they acted in good faith and in a manner they reasonably believed to be in the best interests of the Limited Partnership as specified in this subsection, except that no indemnification shall be made in respect of any claim, issue or matter as to which the General Partners' course of conduct constituted negligence or misconduct. D. To the extent that the General Partners have been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 4.1OB or 4.1OC of this Agreement, or in defense of any claim, issue or matter therein, the Limited Partnership shall indemnify them against the expenses, including attorneys' fees, actually and reasonably incurred by them in connection therewith. E. Any indemnification under Section 4.1OB and 4.1OC of this Agreement, unless ordered by a court, shall be made by the Limited Partnership only as authorized in the specific case and only upon a determination by independent legal counsel in a written opinion that indemnification of the General Partners is proper in the circumstances because they have met the applicable standard of conduct set forth in Sections 4.1OB or 4.1OC of this Agreement. -24- F. The Limited Partnership shall not incur the costs of that portion of insurance which insures the General Partners for any liability as to which the General Partners are prohibited from being indemnified under Section 4.10. Section 4.11. Dealer Manager ----------------------------- The Dealer Manager shall have no duties, responsibilities or obligations to the Limited Partnership, the General Partners or any Limited Partner as a consequence of its right to receive Commissions, except to the extent provided under the Securities Act of 1933, as amended. The Dealer Manager has not assumed, and will not assume, any responsibility with respect to the Limited Partnership nor will it be permitted by the General Partners to assume any duties, responsibilities or obligations regarding the management, operations or any of the business affairs of the Limited Partnership subsequent to the date on which the Limited Partnership is Activated. ARTICLE FIVE Distributions, Fees and Allocations ----------------------------------- Section 5.1. Distributions of Limited Partnership Funds -------------------------------------------------------- A. The Distributable Cash of the Limited Partnership shall be distributed simultaneously to the Limited Partners (either directly to such Limited Partners or as they shall direct by their notice to the General Partners pursuant to the reinvestment option set forth in Section 5.lB of this Agreement) and the General Partners promptly upon receipt of cash distributions from the Production Partnership. Each Partner's share of each such distribution shall be determined after giving effect to the allocations set forth in Sections 5.2 and 5.3 of this Agreement, except that (i) any Distributable Cash attributable to the receipt by the Production Partnership of investment income (as defined in the Production Partnership Agreement) shall be distributed 100% to the Limited Partners and, (ii) any Distributable Cash which is attributable to a return pursuant to Section 3.4 shall be distributed entirely to those Limited Partners (other than corporate affiliates of Geodyne Resources, Inc. or the Dealer Manager or any purchasers of Units therefrom with respect to the distribution of cash contributed by the Managing Partners to the Production Partnership pursuant to Section 3.4 of the Production Partnership Agreement or to the Limited Partnership by the General Partners pursuant to Section -25- 3.4) who are, at the time of the distribution, Limited Partners. All distributions of Distributable Cash shall reduce dollar-for-dollar the balances of the Partners' Capital Accounts. B. (i) Except in North Carolina and Texas, prior to the first cash distribution by the Limited Partnership, each Limited Partner will be given an opportunity to elect to have all or a portion of such Limited Partner's cash distributions (1) paid directly to the Limited Partner in cash, or (2) held in a reinvestment account established for Limited Partners of the Limited Partnership, any Prior Limited Partnerships and any Subsequent Limited Partnership, any Prior Limited Partnerships and any Subsequent Limited Partnerships pending the reinvestment of such cash distributions in a minimum amount of $100 (with reinvestment in excess of such minimum being permitted in whole increments of $100) in any Subsequent Limited Partnership. After receipt of the Prospectus with respect to any Subsequent Limited Partnership, each Limited Partner may revoke such Limited Partner's prior election to have such Limited Partner's cash distributions held in the reinvestment account invested in the Subsequent Limited Partnership. Such revocation shall be made by the Limited Partner's delivery to the Limited Partnership of a written notice of revocation. On or before 30 days prior to the reinvestment of a Limited Partner's cash distributions in a Subsequent Limited Partnership, the General Partners shall provide each Limited Partner who has previously elected to have cash distributions from the Limited Partnership reinvested in a Subsequent Limited Partnership, and who has $100 or more held in the reinvestment account on such Limited Partner's behalf, a form for the Limited Partner to provide the Limited Partnership such written notice of revocation. The cash distributions of a Limited Partner held in the reinvestment account shall at all times be the property of the Limited Partner, and the Limited Partner may withdraw such cash distributions held in the reinvestment account on such Limited Partner's behalf upon thirty days' prior written notice to the Limited Partnership. No interest shall be payable to Limited Partners on the amount of their cash distributions held in such reinvestment account; provided, however, that the General Partners shall hold the Limited Partners harmless against any losses sustained therein and the General Partners shall deposit into the reinvestment account an amount equal to any loss suffered by a Limited Partner prior to the earlier of the time the Limited Partner withdraws the Limited Partner's share or an investment in a -26- Subsequent Limited Partnership is made on behalf of the Limited Partner. Prior to investment in a Subsequent Limited Partnership or distribution of such funds, monies held in the reinvestment account may be invested in investments permitted under Section 9.3 of this Agreement. Any costs and interest income attributable to the maintenance of the reinvestment account shall be charged or paid, as the case may be, 50% to PW Energy and 50% to Geodyne Properties. (ii) Cash distributions held in the reinvestment account on behalf of a Limited Partner will be delivered to such Limited Partner, and no investment in a Subsequent Limited Partnership will be made on such Limited Partner's behalf, upon (1) a decision by the General Partners not to offer, or continue the offering of, a Subsequent Limited Partnership or (2) a decision by such Limited Partner not to invest in a Subsequent Limited Partnership. Subject to the Limited Partnership's receipt of a Limited Partner's written notice of revocation or withdrawal referred to in Section 5.1B(i), amounts held in the reinvestment account on behalf of a Limited Partner which are not reinvested in a Subsequent Limited Partnership (either because such amount is less than $100 or is in excess of a whole increment of $100) shall remain in such reinvestment account. (iii) A Limited Partner's cash distribution will be reinvested in a Subsequent Limited Partnership only if a registration statement covering interests in the Subsequent Limited Partnership is in effect under the Securities act of 1933, the offering of interests is qualified for sale under the applicable state securities laws and the Limited Partner meets the appropriate suitability standards. The General Partners may terminate their offering of interests in a Subsequent Limited Partnership at any time and will have no obligation to continue to offer interests or to permit reinvestment of Distributable Cash therein. In the event the General Partners or their Affiliates offer limited partnership interests in limited partnerships other than the Subsequent Limited Partnerships and provide Limited Partners the opportunity to reinvest cash distributions from the Limited Partnership in such limited partnerships, the terms and conditions of such reinvestment shall be determined by the General Partners or their Affiliates in their discretion (which may differ from the terms and conditions of reinvestment in Subsequent Limited Partnerships provided herein). -27- Section 5.2. Allocation of Profits and Losses ---------------------------------------------- A. The Profits and Losses and each item of Income, gain, loss, cost, deduction and credit of the Limited Partnership shall be determined and allocated with respect to each Fiscal Year of the Limited Partnership as of, and within 75 days after, the end of such Fiscal Year. B. Direct Administrative Costs and General and Administrative Costs shall be allocated to, and borne by, the Partners as follows: 90% to the Limited Partners and 10% to the General Partners prior to, and 85% to the Limited Partners and 15% to the General Partners after, Payout (as defined in the Production Partnership Agreement). C. Except as set forth in Section 5.2B, Profits and Losses and each item of Income, gain, loss, cost, deduction and credit of the Limited Partnership shall be allocated between the Partners and credited to or charged against their Capital Accounts in the following ratio: Limited Partners (including the General Partners to the extent they purchase Units) 99% Geodyne Properties and PW Energy (in the aggregate) 1% The General Partners shall allocate between themselves their aggregate Interest in a manner such that PW Energy shall be allocated a percentage equal to PW Production's percentage sharing ratio in the Production Partnership determined under Section 5.3B(i) of the Production Partnership Agreement, and the remaining amount shall be allocated to Geodyne Properties. The General Partners may amend this Agreement to provide for any different allocation between themselves at their discretion. D. The General Partners may not be required to contribute funds to the Limited Partnership to pay for Limited Partnership costs allocated to them except to the extent necessary to pay costs referred to in Section 5.2B. E. Notwithstanding anything to the contrary that may be expressed or implied in this Agreement, the interest of the General Partners in each material item of Partnership Income, gain, loss, deduction or credit shall be equal to at least one percent of each such item at all times during the existence of -28- the Partnership. In determining the General Partners' interest in such items for the purpose of this Section 5.2E, units of limited partnership interest owned by the General Partners shall not be taken into account. Section 5.3. Determinations of Allocations and Distributions Among Partners ------------------------------------------------------------------- A. Except as set forth in Section 5.lA, all Distributable Cash distributed to the Limited Partners, as a class, and all Profits and Losses and each item of Income, gain, loss, cost, deduction or credit allocated to the Limited Partners, as a class, shall be distributed or allocated, as the case may be, to each Limited Partner in the ratio that the Capital Contribution of such Limited Partner bears to the total Capital Contributions of all Limited Partners. B. Distributable Cash, Profits and Losses and each item of Income, gain, loss, cost, deduction or credit distributed or allocated to the Partners shall be distributed or allocated, as the case may be, to the Persons who were Partners, subject to the provisions of Section 10.2 of this Agreement, as of the last day of the fiscal period for which the distribution or allocation is to be made, except that in any fiscal period in which a Partner sells, assigns or transfers all or any part of such Partner's Interest to any Person who during the fiscal period is admitted as a Substituted Partner, the Distributable Cash, Profits and Losses and each item of Income, gain, loss, cost, deduction or credit attributable to the Interest so sold, assigned or transferred shall be allocated between the transferor and the transferee on the basis of the number of days in the fiscal period before the admission, and on and after the admission, of the transferee as a Substituted Partner; provided, however, that the Distributable Cash attributable to a Sale of a Producing Property by the Production Partnership shall be distributed to those Partners who are Partners on the day the distribution of such Distributable Cash occurs. The General Partners shall inform the Limited Partners of the occurrence and terms of any such Sale by the Production Partnership as soon as practicable after such Sale has been consummated. C. The Limited Partnership's share of the Production Partnership's adjusted basis in each of its Producing Properties (allocated pursuant to the Managing Partners' and the Limited Partnership's interests in Production Partnership capital at the date of acquisition of the respective Producing Properties) shall be allocated pursuant to Section 613A(c) (7) (D) of the Code among the Partners in proportion to the interest of each in the -29- Limited Partnership capital ultimately used to acquire that property. D. All items of Income, gain, loss, deduction and credit allowable for Federal income tax purposes and all recapture of such deductions and credits shall be allocated and charged or credited to the Partners in the same manner that the revenues, costs or expenses giving rise to such items of Income, gain, loss, deduction and credit are allocated and charged. Federal income tax deductions for cost or percentage depletion with respect to any Producing Property shall be determined at the Partner level and shall be determined in the case of percentage depletion on the same basis that Income from the Producing Property is allocated. E. The Capital Account of each Partner shall be credited or debited with its Capital Contribution and distributions of Distributable Cash, by the adjusted basis of partnership property distributed in kind and with its share of Income, gain, loss, and deductions of the Limited Partnership. Solely for purposes of making adjustments to Capital Accounts, the Limited Partnership shall compute a simulated depletion allowance on each oil and gas property using that method, as between the cost depletion method or the percentage depletion method (without regard to limitations which could apply to less than all the Partners such as the quantity limitations of Code Section 613A(c)(3)) which results in the greatest simulated depletion allowance. The Limited Partnership's simulated depletion allowance shall reduce each Partner's Capital Account in the same proportion as such Partner's share of the adjusted basis of such property as determined in Section 5.3C above. In no event shall the Limited Partnership's aggregate simulated depletion allowances with respect to a property exceed the Limited Partnership's adjusted basis in such property (maintained solely for Capital Account purposes). Upon the taxable disposition of all oil or gas property by the Limited Partnership, the Limited Partnership's gain or loss shall be determined (solely for Capital Account purposes) by subtracting its adjusted basis in such property (maintained solely for Capita1 Account purposes) from the amount realized from such disposition. Any resultant simulated gain shall be allocated to the Partners in the same manner as that portion of the amount realized from such disposition which exceeds the Limited Partnership's adjusted basis in such property (maintained solely for Capital Account purposes) is allocated to the Partners and shall increase such Partners' Capital Accounts accordingly. Any resultant simulated loss shall be allocated to the Partners in the same proportion as such Partners (or their predecessors in interest) were allocated adjusted basis under Section 5.3C with respect to such property and shall reduce such Partners' Capital Accounts accordingly. -30- F. The Capital Accounts of those Partners which are charged with an expense shall be credited with any portion of that expense which is finally determined, judicially or administratively, to be nondeductible for Federal income tax purposes, less any amortization or depreciation thereof incurred prior to the date that the credit is made. ARTICLE SIX Non-Transferability of General Partner Interest ----------------------------------------------- Section 6.1. Non-Transferability of General Partner Interest ------------------------------------------------------------- Except as provided in Section 6.2B, a General Partner (including by definition any successor General Partner) shall not have the right to retire, withdraw, transfer or assign its General Partner Interest, except that there may be substituted in its stead as General Partner any entity that has, by merger, consolidation or otherwise, acquired substantially all of its assets or capital stock and continued its business. Section 6.2. Removal of General Partners ----------------------------------------- A. Subject to Section 11.3 of this Agreement, upon the Consent of more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners (i) the power shall be vested in the Limited Partners to (a) remove any or all General Partners and (b) cause the General Partners, on behalf of the Limited Partnership, to Remove any Managing Partner. (ii) (a) The power shall be vested in each General Partner to Remove the other General Partner, and pursuant to Section l0.1A of this Agreement admit a successor general partner, for "Cause" as defined in Section 6.2A(ii)(b), but for no other reason. (b) "Cause" for purposes of Section 6.2A(ii)(a) shall be deemed to exist only (i) when a court of competent jurisdiction shall have made a final determination (which determination is not successfully appealed) that a General Partner has been guilty of gross negligence, fraud, intentional misconduct or similar breach of fiduciary responsibility in carrying -31- out its duties as a General Partner, or (ii) a General Partner is dissolved or liquidated on account of insolvency or any other event occurs resulting in the appointment of a trustee or receiver who acquires control of the affairs of such General Partner for the purpose of dissolution or liquidation on account of insolvency, and such trustee or receiver is not dismissed within 90 days after appointment of such trustee or receiver, or (iii) (a) a report on the audited financial statements of a General Partner and its consolidated corporate affiliates is issued by the independent accountants for such General Partner that is qualified on a going concern basis, or (b) either General Partner requests an audit to be performed of the other General Partner and its consolidated corporate affiliates by the independent accountants for the other General Partner (the expense of such audit being paid by the General Partner requesting the audit), and such audit results in the issuance of an opinion with respect to the financial statements of the other General Partner and its consolidated corporate affiliates for the period ending, and as of, the most recent date feasible, that is qualified on a going concern basis. B. (i) In the event that a General Partner is Removed by the Limited Partners or the other General Partner, the Removed General Partner's Interest in the Limited Partnership shall be transferred to the other General Partner, and the other General Partner shall assign to the Removed General Partner a portion of Limited Partnership Income, costs and Distributable Cash as and when such items are allocated or distributed, as the case may be, by the Limited Partnership equal to the percentage interest of the Removed General Partner in the Limited Partnership prior to its Removal. (ii) If the Limited Partners elect to Remove a sole General Partner as permitted under this Section, and further elect to continue the business of the Limited Partnership with one or more successor General Partners, the removed General Partner shall not be Removed until a successor General Partner has been selected by the Limited Partners and admitted to the Limited Partnership pursuant to Section 10.2 of this Agreement. (iii) In the event the sole General Partner is Removed by the Limited Partners and a successor General Partner selected, the incoming General Partner and the Removed General Partner shall, by mutual agreement, select an -32- independent petroleum consultant to value the Removed General Partner's Interest in the Limited Partnership. In determining the value of the General Partner's Interest, the independent consultant will take into account appropriate discount factors in light of the risk of recovery of oil and gas reserves, and, in any event, will utilize a "risk factor" discount no less than that utilized in the most recent offer extended pursuant to Section 7.5 of the Agreement, if any. The incoming General Partner, or the Limited Partnership, shall have the option to purchase at least 20% of the interests of the Removed General Partner for the value determined by the independent appraisal. The Removed General Partner's Interest in the Limited Partnership shall be transferred to the successor General Partner, and the successor General Partner shall assign to the Removed General Partner a portion of Limited Partnership Income, costs and Distributable Cash as and when such items are allocated or distributed, as the case may be, by the Limited Partnership equal to the percentage interest of the Removed General Partner in the Limited Partnership prior to Removal, less the portion purchased by the successor General Partner or the Limited Partnership. (iv) If the Limited Partners have Removed a General Partner, the power shall be vested in the Limited Partners to Consent to the admission of a successor General Partner meeting the requirements of Section 6.2B(v) of this Agreement to take the place of a Removed General Partner upon the consent of more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners. (v) If there is admitted to the Limited Partnership a successor General Partner, such admission shall not become effective unless the Limited Partnership shall have received a certificate, duly executed by or on behalf of such proposed successor General Partner, to the effect that: (a) it is experienced in performing (or employs sufficient personnel who are experienced in performing) functions of the type then being performed by the Removed General Partner and (b) it has a net worth, together with the net worth of any remaining General Partner, sufficient to satisfy the net worth requirements of the Code, Treasury Regulations, the Internal Revenue Service or the courts applicable to a general partner in a limited partnership in order to ensure that the Limited Partnership will not fail to be classified for Federal income tax purposes as a partnership. -33- (vi) Notwithstanding Section 3.7B, any General Partner who shall be Removed from the Limited Partnership shall be released by the remaining General Partner and any successor General Partner from all liability for Limited Partnership debts and obligations incurred by the Limited Partnership prior to the time of such Removal. Section 6.3. Incapacity of a General Partner --------------------------------------------- A. In the event of the Incapacity of a sole General Partner, the Limited Partnership shall be dissolved. However, within 90 days thereafter the remaining Partners may elect to reconstitute the Limited Partnership prior to application of the liquidation provisions of Section 8.2. B. Upon the Incapacity of a General Partner, the Person who is its legal representative shall have all the rights of a General Partner for the purpose of settling or managing its estate and such power as the Incapacitated General Partner possessed to assign all or any part of its Interest and to join with such assignee in satisfying conditions precedent to such assignee becoming a Substituted Partner. Section 6.4. Termination of Contracts with General Partner or Managing Partners -------------------------------------------------------------- Subject to and upon fulfilling the conditions of Section 11.3, the power shall be vested in the Limited Partners to terminate any or all contracts between the General Partners or any Affiliate and the Limited Partnership, or to cause the General Partners, on behalf of the Limited Partnership, to terminate any contracts between the Managing Partners or any Affiliate and the Production Partnership, and select, or cause the General Partners, on behalf of the Limited Partnership, to select, as the case may be, a replacement Person therefor upon the Consent of more than 50% in Interest of the Limited Partners. -34- ARTICLE SEVEN Transferability of Limited Partner's Interest --------------------------------------------- Section 7.1. Transferability of Limited Partner's Interest ----------------------------------------------------------- A. A Limited Partner shall not have the right to retire or withdraw from the Limited Partnership. Except as provided in this Section 7.1, a Limited Partner's Interest shall be transferable so long as the transfer is made in accordance with all applicable laws. B. In no event shall all or any part of a Limited Partner's Interest be assigned or transferred to a minor or an incompetent except in trust or by will or intestate succession or to any Person not qualified to hold interests in federal leases. C. No purported sale, assignment or transfer by a transferor after which the transferor would continue to hold an Interest representing a Capital Contribution of less than $1,000 will be permitted or recognized for any purpose without the Consent of the General Partners, which Consent shall be granted only for good cause shown. D. No sale, exchange, transfer or assignment of a Limited Partner's Interest shall be made if in the opinion of counsel to the Limited Partnership, such sale, exchange, transfer or assignment, would (i) cause the Limited Partnership to lose its status as a partnership for Federal income tax purposes, or (ii) violate the Securities Act of 1933, as amended, or any state securities or "blue sky" laws (including any investor suitability standard applicable to the Limited Partnership or the Interest to be sold, exchanged, transferred or assigned). Section 7.2. Incapacity of Limited Partners -------------------------------------------- If a Limited Partner becomes Incapacitated, the Person who is its legal representative shall have all the rights of a Limited Partner for the purpose of settling or managing its estate and such power as the Incapacitated Limited Partner possessed to assign all or any part of its Interest and to join with such assignee in satisfying conditions precedent to such assignee becoming a Substituted Limited Partner. The Incapacity of a Limited Partner shall not dissolve the Limited Partnership. -35- Section 7.3. Assignees and Substituted Limited Partners -------------------------------------------------------- A. The Limited Partnership shall not recognize for any purpose any purported sale, assignment or transfer of all or any fraction of the Interest of a Limited Partner unless the provisions of Section 7.1 shall have been complied with and there shall have been filed with the Limited Partnership a dated Notification of such sale, assignment or transfer, executed and acknowledged by both the seller, assignor or transferor and the purchaser, assignee or transferee and such Notification (i) contains the acceptance by the purchaser, assignee or transferee of all of the terms and provisions of this Agreement and (ii) represents that such sale, assignment or transfer was made in accordance with all applicable laws and regulations. Any sale, assignment or transfer shall be recognized by the Limited Partnership as effective on the date of such Notification if the date of such Notification is within 30 days of the date on which such Notification is filed with the Limited Partnership, and otherwise shall be recognized as effective on the date such Notification is filed with the Limited Partnership. B. Any Limited Partner which shall assign all of its Interest shall cease to be a Limited Partner, except that, unless and until a Substituted Limited Partner is admitted in its stead, such assigning Limited Partner shall retain the statutory rights and obligations of a Limited Partner under the Act. C. A Person who is the assignee of all or any fraction of the Interest of a Limited Partner shall be subject to all the provisions of this Article Seven to the same extent and in the same manner as any Limited Partner desiring to make an assignment of its Interest. D. Any purchaser, assignee, transferee, donee, heir, legatee or other recipient of an Interest shall be admitted to the Limited Partnership as a Substituted Limited Partner only with the Consent of the General Partners, which Consent may be granted or withheld by the General Partners at their sole and absolute discretion. The admission of such Person as a substituted Partner shall be evidenced by the execution by a General Partner of a certificate evidencing the admission of such Person as a Limited Partner and an amendment to this Agreement executed by a General Partner on its own behalf, as well as on behalf of each other Limited Partner, pursuant to the power of attorney granted pursuant to Section 12.5 of this Agreement and recorded or filed in the proper records of the State. -36- E. No Person shall become a Substituted Limited Partner until such Person shall have satisfied the requirements of Section 10.2; provided, however, that for the purpose of allocating Profits, Losses, and items of income, gain, loss, cost, deductions, credits and Distributable Cash, a Person shall be treated as having become, and as appearing in the records of the Limited Partnership as, a Limited Partner on such date as the sale, assignment or transfer to such Person was recognized by the Limited Partnership pursuant to Section 7.3A. F. Each Limited Partner shall indemnify and hold harmless the Limited Partnership, the General Partners and their Affiliates and every Limited Partner who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of or arising from any actual or alleged misrepresentation or misstatement of facts or omission to state facts made (or omitted to be made) by such Limited Partner in connection with any assignment, transfer, encumbrance or other disposition of all or any part of an Interest, or the admission of a Substituted Limited Partner to the Limited Partnership, against expenses for which the Limited Partnership or such other Person has not otherwise been reimbursed (including attorneys' fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by it in connection with such action, suit or proceeding. G. At the end of each calendar quarter in which (i) a Substituted Limited Partner has been approved for admission by the General Partners or (ii) there has been any return of the Capital Contributions of the Limited Partners, the General Partners shall file an amended certificate of limited partnership with the appropriate authorities of each state in which the Limited Partnership transacts business for the purpose of adding as Substituted Limited Partners all assignees of Interests previously approved by the General Partners for admission as Substituted Limited Partners and for reflecting accurately the Capital Contributions of the Limited Partners. H. (i) Each Limited Partner represents and warrants that such person does not own, directly or indirectly, more than 20% of the outstanding stock of the General Partners or any of their Affiliates as defined in Section 1504(a) of the Code. -37- (ii) Each Limited Partner further represents and warrants that the following statements are true: (a) if such Limited Partner is an individual, such Limited Partner is a U.S. citizen, and is 21 years of age or older; if such Limited Partner is a partnership or an association, all of its members are of such citizenship; if such Limited Partner is a corporation, it is authorized and otherwise duly qualified to hold an Interest in the Limited Partnership; (b) such Limited Partner has thoroughly read the Prospectus and this Agreement and understands the nature of the risks involved in the proposed investment; (c) such Limited Partner is experienced in investment and business matters; (d) such Limited Partner, or in the case of an IRA or Employee Benefit Plan (as those terms are defined in the Prospectus), each beneficiary of such Limited Partner has (x) a net worth, exclusive of home, furnishings and automobiles of at least $25,000 and had during the last tax year, or estimates that such Limited Partner will have during the current year, "taxable income" as defined in Section 63 of the Code, of $25,000 or more (income of $20,000 in California), or (y) a net worth, exclusive of home, furnishings and automobiles of at least $90,000 ($75,000 in California) or (z) satisfies any more restrictive suitability requirements imposed by applicable Blue Sky laws; (e) such Limited Partner recognizes that the Limited Partnership will be newly organized and will have no history of operations or earnings and is a speculative venture; (f) such Limited Partner understands that the transferability of such Limited Partner's Interest(s) in the Limited Partnership is restricted pursuant to the provisions of the Agreement and that such Limited Partner cannot expect to be able to liquidate such Limited Partner's investment readily in case of emergency; and (g) unless otherwise indicated in such Limited Partner's Subscription Agreement and Power of Attorney, such Limited Partner is the sole party in interest in such Limited Partner's Interest and, as such, is vested with all legal and equitable rights in such Interest. (iii) In the event that the General Partners believe any of the representations made by a Limited Partner in Section 7.3H were untrue at the time of such Limited Partner's acquisition of an Interest or if the General Partners believe any of the representations made in Section 7.3H(i) and (ii)(a) become untrue at any time during the time that such Limited Partner is a Limited Partner, the General Partners shall have the right, exercisable at their sole discretion, within 60 days after the receipt of knowledge of such untruth or the recognition of such belief, -38- to buy such Limited Partner's Interest in the Limited Partnership at a purchase price calculated in a manner identical to the manner set forth in Section 7.5 of this Agreement. In the event that the General Partners believe the representation contained in Section 7.3H(ii) (g) has become untrue at any time with respect to a Limited Partner, such Limited Partner shall immediately file with the General Partners (i) a statement signed by the Limited Partner and the other interested parties setting forth the nature and the extent of the interest of each, and the nature of the agreement between them, and (ii) such other information, statements, and grants of powers of attorney as may be requested by the General Partners. The effective date of any purchase made pursuant to this Section shall be the first day of the calendar month during which the General Partners give notice to the Limited Partner of their desire to exercise their rights of purchase hereunder. Section 7.4. Incapacity of a Limited Partner --------------------------------------------- Upon the Incapacity of a Limited Partner or upon the seizure of a Limited Partner's Interest in the Limited Partnership, the successor to such Limited Partner's Interest ("Successor") shall be deemed an assignee of such Limited Partner's Interest in the Limited Partnership and neither the Limited Partner nor the Successor shall have the right to demand immediate valuation and payment of such Limited Partner's Interest. Section 7.5. Right of Presentment ---------------------------------- A. Each Limited Partner who has subscribed for Units will have the option subject to the terms and conditions set forth in this Section 7.5 to require the General Partners to purchase all of such Limited Partner's Interest in the Limited Partnership, provided that the option may not be exercised after the date of any notice that will effect a dissolution and termination of the Limited Partnership pursuant to Section 8.1 of this Agreement. The obligation of each of PW Energy and Geodyne Properties to purchase Units shall be joint and several and shall be limited to an aggregate amount during any four consecutive fiscal quarters equal to 1% of the Limited Partners' Capital Contributions (exclusive of Capital Contributions made by either General Partner or an Affiliate in its capacity as a Limited Partner). The obligations of the General Partners hereunder shall be satisfied to the extent an Affiliate of a General Partner or an partnership sponsored by the General Partners or their Affiliates acquires tendered Units. A Limited Partner may exercise the Limited Partner's option only with respect to all of the Limited -39- Partner's Interest. Any such exercise shall be effected by a Notification thereof to the General Partners. Prior to the expiration of twelve months after the date on which 90% of the Limited Partners' Capital Contributions have been expended by the Production Partnership, such latter date being the "Valuation Date," such Limited Partner may, subject to the terms and conditions of this Section 7.5, sell such Limited Partner's Interest to the General Partners at a purchase price equal to 75% of the Subscription amount therefor, less the amount of any distributions of Distributable Cash to such Limited Partner. Thereafter, each such Limited Partner may, subject to the terms and conditions of this Section 7.5, tender such Limited Partner's Interest to the General Partners for purchase at a price determined in accordance with Section 7.5C of this Agreement. B. Each Limited Partner tendering an Interest who does not revoke such Limited Partner's election pursuant to Section 7.5D shall assign such Interest to the purchaser thereof pursuant to the power of attorney granted the General Partners in the Subscription Agreement and Power of Attorney executed by such Limited Partner. The purchase price for such Interests will be determined, as of the close of business of the last day of the calendar quarter (the "Effective Date"), with respect to all Interests tendered to the General Partners during each such calendar quarter after the Valuation Date. C. The purchase price to be paid for the Interest of any Limited Partner who tenders an Interest pursuant to this Section 7.5 after the Valuation Date will be determined by assuming the sale of all Production Partnership Property and the subsequent liquidation of the Production Partnership pursuant to Section 8.2 of the Production Partnership Agreement and the liquidation of the Limited Partnership pursuant to Section 8.2 of this Agreement. The hypothetical credit balance in a Limited Partner's Capital Account shall be the purchase price for such Limited Partner's Interest; provided, however, that such purchase price shall be reduced by an amount equal to 70% of the distributions of Distributable Cash received by such Limited Partner on or before the date the Limited Partner receives a check in payment for the Limited Partner's tendered Interest which is attributable to sales of Production Partnership Hydrocarbon production attributable to Proved Reserves since the date as of which the Production Partnership's Proved Reserves are calculated for purposes of this Section 7.5C. In order to value the sale proceeds to be received upon such assumed sale, the General Partners shall employ the petroleum engineering reports and other petroleum reserve information referred to in Section 9.4C of this Agreement for the end of the Fiscal Year preceding the applicable Effective Date. First, future gross revenues expected to be derived from the production and sale of the Proved -40- Reserves attributable to the Production Partnership Producing Properties will be estimated using either (i) escalations of future sales prices of Hydrocarbons supplied by the General Partners (the "Escalated Case") or (ii) only escalations of such future sales prices of Hydrocarbons permitted by Regulation S-X adopted by the Securities and Exchange Commission (the "SEC Case"), as the General Partners may determine in their discretion. Next, future net revenues will be calculated by deducting anticipated expenses (including operating expenses and other costs that will be incurred in producing and marketing such reserves and any gross production, excise, windfall profit or other taxes, other than Federal income taxes, based on the Hydrocarbon production of the Production Partnership or sales thereof) (using either (i) escalations of future costs supplied by the General Partners in the event the General Partners adopted the Escalated Case with respect to future sales prices of Hydrocarbons or (ii) constant future costs in the event the General Partners adopted the SEC Case with respect to future sales prices of Hydrocarbons) from estimated future gross revenues. Then the present worth of the future net revenues will be calculated by discounting the estimated future net revenues at either 10% (in the event the General Partners employed pricing criteria in accordance with the SEC case) or that rate per annum which is one (1) percentage point higher than the prime rate of interest of The Chase Manhattan Bank, N.A. or any successor bank, as such prime rate of interest is announced by said bank from time to time (in the event the General Partners employed pricing criteria in accordance with the Escalated Case). If the latter interest rate is used and exceeds 11% per annum, the General Partners will provide, for comparative purposes only, the repurchase price if computed based upon a 10% per annum discount rate. This amount will be reduced by an additional 30% to take into account the uncertainties attendant to the production and sale of Hydrocarbon reserves and other unforeseen contingencies. This reduced amount is subject to upward or downward adjustment by the General Partners, in the event that during the period between the end of the Fiscal Year preceding the applicable Effective Date and such Effective Date, there has occurred any material increase or decrease in the current price of oil or gas or in the estimated amount of Production Partnership Proved Reserves thereof from the current oil and gas prices or the estimated Proved Reserves used in the above calculation of the present worth of the future net revenues. Salvage value of tangible equipment installed on the Production Partnership Wells and costs of plugging and abandoning the productive Production Partnership Wells, both discounted at the applicable aforementioned rate from the expected date of abandonment, will be estimated, and the Production Partnership's Producing Properties which do not have Proved Reserves attributable to them but which have not been condemned will have such reserves valued -41- at their then fair value as determined by an independent petroleum engineering firm. The Production Partnership's cash on hand, prepaid expenses, accounts receivable (less a reasonable reserve for doubtful accounts) and the market value of its other assets as determined by a qualified independent appraiser will be added to the value of the Production Partnership's Producing Properties thus determined, to arrive at the Production Partnership's hypothetical sale proceeds for purposes of this Section 7.5C. D. Within sixty (60) days after the applicable Effective Date, the General Partners will deliver to each Limited Partner who has tendered such Limited Partner's Interest to the General Partners during the calendar quarter ending on such Effective Date a check in the amount of the purchase price for such Interest together with a statement evidencing that such price has been determined in accordance with the provisions of Section 7.5C. The statement will show which portion of the purchase price is represented by the value of the Proved Reserves and by each of the other classes of Production Partnership assets and liabilities attributable to the account of the Limited Partnership and, by virtue of a Limited Partner's Interest in the Limited Partnership, attributable to the account of the Limited Partner. The Limited Partner will then have thirty (30) days after receipt of payment for such Interest from a General Partner to revoke, by notice to the General Partners and return of such check, the sale of such Limited Partner's Interest. If the Limited Partner does not timely revoke such Limited Partner's intention to sell, the assignment of such Limited Partner's Interest to the purchaser of such Interest will be executed on such Limited Partner's behalf by a General Partner as attorney in fact; provided, however, that the obligation of the General Partners to purchase the Interests tendered by the Limited Partners shall be limited during any four consecutive fiscal quarters to an amount not in excess of 1% of the Limited Partners' Capital Contributions (exclusive of Capital Contributions made by the General Partners or their Affiliates as Limited Partners). Moreover, the General Partners will not be obligated to buy any Units pursuant to such right if such purchase, when added to the total of all other Sales or other dispositions of Interest within the preceding 12 months, would result in the Limited Partnership being considered to have terminated within the meaning of Section 708 of the Internal Revenue Code of 1954, as amended, or would cause the Limited Partnership to lose its status as a partnership for Federal income tax purposes. If less than all of the Interests tendered are purchased, the Interests purchased will be selected by lot. The Limited Partners whose tendered Interests were rejected by reason of the foregoing limitations shall not be entitled to priority in the following quarter. Contemporaneously with the -42- closing of any such sale, which shall not be earlier than 30 days after tender of the purchase price for an Interest to a Limited Partner, a General Partner, as attorney in fact for such Limited Partner, will execute such certificates or other documents and perform such acts as the General Partners deem necessary to effect the sale and transfer of the liquidating Limited Partner's Interest to the purchaser and to preserve the limited liability status of the Limited Partnership under the laws of the jurisdictions in which it is doing business. ARTICLE EIGHT Dissolution, Liquidation and Termination ---------------------------------------- of the Limited Partnership -------------------------- Section 8.1. Events Causing Dissolution ---------------------------------------- A. The Limited Partnership shall be dissolved upon the happening of any of the following events: (i) the expiration of its term, without any continuation thereof as set forth in Section 2.4 of this Agreement; (ii) the Incapacity of the sole General Partner. However, within ninety days thereafter the remaining Partners may elect to reconstitute the Limited Partnership prior to application of the liquidation provisions of Section 8.2; (iii) the Sale or other disposition at one time of all or substantially all of the assets of the Limited Partnership existing at the time of such Sale (including the liquidation or redemption other than in kind of its interest in the Production Partnership); (iv) the election to dissolve the Limited Partnership (a) by the General Partners (which election shall be Consented to by more than 50% in Interest of the Limited Partners), or (b) by the Consent of more than 50% in Interest of the Limited Partners; (v) ninety days after the Removal of the sole General Partner (unless a successor is elected pursuant to Section 6.2 of this Agreement); -43- (vi) the dissolution and liquidation of the Production Partnership without the continuance of its business by the Limited Partnership pursuant to Section 4.2A(ii) of this Agreement; or (vii) the happening of any other event causing the dissolution of the Limited Partnership under the laws of the State, except that the Incapacity of any Limited Partner shall not dissolve the Limited Partnership and the seizure of the Interest of any Partner shall not dissolve the Limited Partnership. B. Dissolution of the Limited Partnership shall be effective on the day on which the event occurs giving rise to the dissolution, but the Limited Partnership shall not terminate until the General Partners have recorded a notice of dissolution of the Limited Partnership with the office of the Secretary of State of the State and shall have complied with the laws of the other states in which its does business and the assets of the Limited Partnership have been distributed as provided in Section 8.2. C. Nothing contained in this Agreement shall impair, restrict or limit the rights and powers of the Partners under the laws of the State or any other jurisdiction in which the Limited Partnership is doing business to reform and reconstitute themselves as a limited partnership following dissolution of the Limited Partnership either under provisions identical to those set forth herein or under any other provisions. Section 8.2. Liquidation ------------------------- A. Upon dissolution of the Limited Partnership, its liabilities shall be paid in the order provided herein. The General Partners shall either distribute in kind or sell the Limited Partnership's property so that such disposition is in the best interests of the Limited Partners, and shall execute all amendments terminating the Limited Partnership. In connection with any such Sale, the General Partners shall attempt to obtain the best prices for such property. Pending such Sales, the General Partners shall have the right to continue to operate and otherwise to deal with Limited Partnership property. In the event the Limited Partnership is dissolved on account of the Incapacity or Removal of the sole General Partner, the Limited Partnership shall elect, in accordance with the provisions of Article Eleven, a person (the "Liquidating Agent") to perform the function of a General Partner in liquidating the assets of the Limited Partnership and winding up its affairs, and shall pay to -44- such Liquidating Agent its reasonable fees and expenses incurred in connection therewith. Gain or loss realized on the Sale or other disposition of the Limited Partnership's assets will be credited to (in the case of gain) or charged against (in the case of loss) each Partner's Capital Account to the extent allocable to such Partner under Sections 5.2 and 5.3 of this Agreement. In the event of a distribution in kind of (a) any property other than an interest in a Producing Property, each Partner's Capital Account shall be debited with the portion of the Limited Partnership's adjusted basis thereof attributable to the interest therein distributed to it and (b) any Producing Property or an interest in any Producing Property, each Partner's Capital Account shall first be credited or debited with its share of the unrealized appreciation or depreciation in the fair market value of said Producing Property or interest in said Producing Property. Each Partner's share of said unrealized appreciation or depreciation shall be equivalent to its share (allocated pursuant to Sections 5.2 and 5.3 of this Agreement) of the gain or loss on an actual Sale of such Producing Property or interest therein. The Capital Account of each Partner to whom a Producing Property or an interest in a Producing Property is distributed shall be debited with the fair market value of the Producing Property distributed to it. No Partner shall be distributed an interest in any asset if the distribution would result in a deficit balance or increase the deficit balance in its Capital Account (after making the adjustments referred to in this Section 8.2A relating to distribution in kind). Any liquidation of the Limited Partnership shall take place out of court and without application being made therefor to the Secretary of State of the State. B. In settling accounts after dissolution, the assets of the Limited Partnership shall be paid out in the following order: (i) to third party creditors, in the order or priority as provided by law; (ii) to the General Partners and any Liquidating Agent for any expenses of the Limited Partnership paid by or payable to them to the extent they are entitled to reimbursement therefor pursuant to this Agreement; (iii) to all of the Limited Partners in the amount equivalent to the amount of their positive Capital Account balances (as adjusted pursuant to Section 8.2A of this Agreement) on the date of distribution; (iv) to the General Partners in the amount equivalent to the amount of their positive Capital Account balances (as adjusted pursuant to Section 8.2A of this Agreement) on the date of distribution; and (v) the balance shall be paid to the Partners in the manner provided for by Sections 5.2 and 5.3 of this Agreement with respect to Distributable Cash. -45- C. In the event that following the final distribution under Section 8.2B the General Partners have a deficit balance in their Capital Account balances, they shall contribute cash to the Limited Partnership necessary to eliminate said deficit balance, which amount shall be distributed to the other Partners to the extent of their remaining positive Capital Account balances. D. Notwithstanding anything to the contrary in this Agreement, upon the dissolution and termination of the Partnership, the General Partners will contribute to the Partnership the lesser of: (a) the deficit balances in their capital accounts; or (b) the excess of 1.01 percent of the total Capital Contributions of the Limited Partners over the capital previously contributed by the General Partners. ARTICLE NINE Books and Records; Accounting; Tax Elections; etc. -------------------------------------------------- Section 9.1. Books and Records ------------------------------- The books and records of the Limited Partnership, including information relating to the sale by the General Partners or any Affiliates of goods or services to the Limited Partnership, and a list of the names and addresses and Interests of all Limited Partners, shall be maintained by the General Partners at the principal office of the Limited Partnership for a period of five years following the close of the Fiscal Year to which they relate and shall be available for examination there by any Partner or its duly authorized representatives at any and all reasonable times. Any Partner, or its duly authorized representatives, upon paying the costs of collection, duplication and mailing, shall be entitled for any proper purpose to a copy of the list of names and addresses and Interests of the Limited Partners. The Limited Partnership may maintain such other books and records and may provide such financial or other statements as the General Partners in their discretion deem advisable. Section 9.2. Accounting Basis for Tax and Reporting Purposes; Fiscal Year -------------------------------------------------------------- The books and records of the Limited Partnership for tax purposes, for purposes of this Agreement and for the purpose of reports to the Partners, shall be kept on the cash or accrual basis, as the General Partners shall determine. The Fiscal Year -46- of the Limited Partnership shall be the calendar year to the extent permissible and the General Partners shall use their best efforts to obtain any necessary approvals therefor. Section 9.3. Bank Accounts --------------------------- The General Partners shall maintain a bank account or accounts to be maintained by the General Partners on behalf of the Limited Partnership with any bank in the United States having total assets in excess of $100,000,000. The General Partners shall not deposit Limited Partnership funds in an account with any bank in an aggregate amount in excess of 5% of such bank's total assets. Withdrawals shall be made only in the regular course of the Limited Partnership's business on such signature or signatures as the General Partners may determine. All deposits and other funds not needed in the operation of the business may be deposited in interest-bearing accounts, certificates of deposit, money market funds (including those managed or marketed by the Dealer Manager or its Affiliates) or invested in short-term United States Government obligations maturing within one year, commercial paper of United States corporations having the highest credit rating granted by Moody's Investors Services, Inc. or Standard & Poors Corporation, or other similar highly liquid investments. Section 9.4. Reports --------------------- A. The General Partners shall close the Limited Partnership's books of account promptly at the close of each Fiscal Year and an annual examination of the Limited Partnership's financial statements shall be performed at the expense of the Limited Partnership by the Accountants. The General Partners shall furnish to the Limited Partners an annual report within 90 days after the close of each Fiscal Year of the Limited Partnership commencing with the Fiscal Year in which the Limited Partnership was Activated. If requested by a Limited Partner, the General Partners shall also furnish such Partner with a report within 60 days after the end of the first six months of the Fiscal Year in which such request was made, or within 60 days after the request is made, whichever is later. Such report will contain at least the following information: (i) Financial statements for the Limited Partner-ship's and the Production Partnership's accounts, including a balance sheet, statement of income, statement of changes in partners' capital and statement of changes in financial position prepared on an accrual basis in accordance with generally accepted accounting principles and accompanied by -47- a report of the Accountants together with their opinion thereon, except that the semiannual financial statements need not be audited; (ii) A summary itemization, by type and/or classification, of the total fees and compensation, including any overhead reimbursement, paid by the Limited Partnership or Production Partnership or indirectly on their behalf, to any General Partner or Managing Partner and any Affiliate; (iii) A description of each Producing Property acquisition, including the costs therefor, in which the Production Partnership owns an interest, except succeeding reports need contain only material changes (including all farmouts, development drilling, improved recovery operations and abandonments), if any, regarding Producing Properties already reported upon. In the case of wells that have been abandoned after production has commenced, a statement justifying such abandonment shall be included if a General Partner or an Affiliate is the operator. In the case of farmouts, the statement shall include a justification of the farmout, location, time, to whom made, and a general description of terms; (iv) A schedule reflecting a list of the wells drilled by the Production Partnership on behalf of the Limited Partnership and the costs thereof; B. Within 60 days after the end of each fiscal quarter each Limited Partner will receive a "participant statement" which summarizes his interest in the Limited Partnership. The participant statement will detail the Limited Partner's cash receipts and disbursements for the Limited Partner's Interest in the Limited Partnership. C. Within 90 days after the end of the Fiscal Year following the Fiscal Year in which Activation of the Limited Partnership occurs, and annually thereafter, the General Partners shall furnish to the Limited Partners a computation as of the end of the immediately preceding Fiscal Year, based upon engineering reports prepared by one or more qualified independent petroleum engineering firms with respect to Producing Properties containing Proved Reserves equal to at least 80% of the Proved Reserves of the Production Partnership (with the computation as to any balance of the Production Partnership's Proved Reserves being based upon petroleum engineering reports prepared by a General Partner or an Affiliate), of the total estimated Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves owned by the Production Partnership, -48- the estimated dollar value thereof stated in then existing prices and escalated prices (as provided by the General Partners). In addition, the computation shall include an estimate of the time required for the extraction of such reserves and the present worth of such reserves and the estimate shall contain a statement that because of the time period required to extract such reserves the present value of revenues to be obtained in the future is less than if immediately receivable. D. In addition to the report described in Section 9.4C of this Agreement, if an event occurs to the knowledge of the General Partners or their Affiliates leading to a reduction or an increase of such Reserves of more than 10 percent, excluding reduction as a result of normal production, an additional computation and estimate similar to that described in Section 9.4C shall be sent to each Limited Partner as soon as possible. E. By March 15 of each year, the General Partners will furnish a report to each Limited Partner containing such information as is pertinent for completion of its respective Federal, state, and other income tax returns. F. The General Partners shall file on a timely basis with the Securities and Exchange Commission all filings required to be made by the Limited Partnership and Production Partnership pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder. The General Partners shall make available to any Limited Partner upon the Limited Partner's request, copies of any report filed by or on behalf of the Limited Partnership or the Production Partnership with the Securities and Exchange Commission. The General Partners shall cause a copy of the report sent to the Limited Partners under paragraphs A, C, D and E hereof to be sent to the California Commissioner of Corporations. G. The General Partners agree to make all relevant financial and engineering reports available for review by a Limited Partner on request at the offices of the Limited Partnership. Section 9.5. Elections ----------------------- The General Partners shall cause the Limited Partnership to make all elections required or permitted to be made by the Limited Partnership under the Code and not otherwise expressly provided for in this Agreement, in the manner that the General Partners believe will be most advantageous to Limited Partners, except that (i) the General Partners shall not be required to make an election under Section 754 of the Code or corresponding -49- provisions of applicable state income tax laws, and (ii) the General Partners shall make the election under Section 263(c) of the Code to expense all intangible drilling and development costs in the initial Limited Partnership Federal income tax return filed for the Fiscal Year in which such costs are incurred. ARTICLE TEN Amendments ---------- Section 10.1. Proposal and Adoption of Amendments Generally ------------------------------------------------------------ A. Notwithstanding anything to the contrary contained herein, the General Partners may, without prior notice or consent of any Limited Partner, amend any provision of this Agreement (including an amendment to admit an additional General Partner or a successor General Partner in the event of the Removal of a General Partner by the other General Partner) if, in their opinion, such amendment does not have a material adverse effect upon the Limited Partners. Each Limited Partner hereby consents in advance to the admittance of such additional or successor General Partner for purposes of Section 10 of the Act. Such amendment shall thereafter be disclosed to the Limited Partners within a reasonable time thereafter. Amendments to this Agreement to reflect the addition or substitution of a Limited Partner or the admission of a successor General Partner shall be made at the time and in the manner referred to in Section 10.2. Any other amendment to this Agreement may be proposed by the General Partners or at least 10% in interest (as to capital and Profits and Losses) of the Limited Partners. The Partner or Partners proposing such amendment shall submit a Notification containing (a) the text of such amendment, (b) a statement of the purpose of such amendment, and (c) an opinion of counsel obtained by the Partner or Partners proposing such amendment to the effect that such amendment is permitted by the Act, will not impair the limited liability of the Limited Partners, and will not adversely affect the classification of the Limited Partnership as a partnership for Federal income tax purposes. The General Partners shall, within 15 days after receipt of any proposal under this Section l0.lA, give Notification to all Partners of such proposed amendment, of such statement of purpose and of such opinion of counsel, together, in the case of an amendment proposed by other Partners, with the views, if any, of the General Partners with respect to such proposed amendment. -50- B. Amendments to this Agreement shall be adopted if: (i) in the case of amendments referred to in Section l0.2A, the conditions specified in Section 7.3 shall have been satisfactorily completed and the Limited Partnership shall not have been furnished with an opinion of counsel to the Limited Partnership to the effect that such amendment will adversely affect the classification of the Limited Partnership as a partnership for Federal income tax purposes; (ii) in the case of amendments referred to in Section l0.2B, the conditions specified in Section 6.2 shall have been satisfactorily completed; or (iii) in the case of all other amendments, such amendment shall have been Consented to by more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners (unless such Consent is not required pursuant to Section l0.lA of this Agreement); provided, however, that no such amendment may: (a) enlarge the obligations of any Partner under this Agreement or convert the Interest of any Limited Partner into the Interest of a General Partner or modify the limited liability of any Limited Partner without the Consent of such Partner; (b) modify the method provided in Article Five of determining and allocating or distributing, as the case may be, Profits, Losses, Distributable Cash and each item of Income, gain, loss, cost, deduction or credit without the Consent of each Partner adversely affected by such modification; (c) amend Sections 4.9, 4.10, 6.1 or 6.2 without the Consent of the General Partners; or (d) amend Sections 2.3, 4.3, 4.4, 4.5, 4.6, this Article Ten or Section 11.3 without the Consent of at least 66% in Interest of the Limited Partners. C. Upon the adoption of any amendment to this Agreement, the amendment shall be executed by the General Partners, on their own behalf and as attorney-in-fact for all of the Limited Partners pursuant to the power of attorney granted in Section 12.5 of this Agreement, and shall be recorded in the proper records of the State and any other state in which the Limited Partnership is then doing business. Section 10.2. Amendments on Admission or Removal of Partners ------------------------------------------------------------- A. If this Agreement shall be amended to reflect the admission or substitution of a Limited Partner, the amendment to this Agreement may be adopted by either of the General Partners, the Person to be substituted or added, and the assigning Limited Partner. Any such amendment shall be executed on behalf of all Partners but may be executed by the substituted or added Partner, -51- the assigning Partner, and either of the General Partners, individually and on behalf of all of the other Partners pursuant to the power of attorney granted in Section 12.5 of this Agreement. B. If this Agreement shall be amended to reflect the Removal of a General Partner and the continuation of the business of the Limited Partnership, such amendment shall be signed by the remaining or successor General Partner and by the Removed General Partner. Any such amendment which reflects the admission of a successor General Partner shall be executed on behalf of all other Partners pursuant to the power of attorney granted in Section 12.5 of this Agreement. C. No Person shall become a Partner, except the Initial Limited Partner and an Additional Limited Partner, unless such Person shall have: (i) become a party to, and adopted all of the terms and conditions of, this Agreement; (ii) if such Person is other than an individual, provided upon request the General Partners with evidence satisfactory to counsel for the Limited Partnership of such Person's authority to become a Partner under the terms and provisions of this Agreement; and (iii) if requested, paid all reasonable legal fees of the Limited Partnership and the General Partners and filing and publication costs in connection with such Person's becoming a Partner. ARTICLE ELEVEN Consents, Voting and Meetings ----------------------------- Section 11.1. Method of Giving Consent --------------------------------------- Any Consent required by this Agreement may be given by a Limited Partner as follows: (i) at a meeting, in person, by a written proxy or signed writing directing the manner in which it desires that its vote be cast, which writing must be received by the General Partners prior to such meeting, or (ii) without a meeting, by a signed writing directing the manner in which it desires that its vote be cast, which writing must be received by the General Partners prior to the date upon which the vote of Limited Partners are to be counted. Any Partner may waive notice of or attendance at any meeting of the Partners and may execute a signed written consent. Only the votes of Limited Partners of record on the date of Notification, whether at a meeting or otherwise, shall be counted. The laws of the State pertaining to the validity and use of corporate proxies shall govern the validity and use of proxies given by Limited Partners. -52- Section 11.2. Meetings of Partners ----------------------------------- The General Partners may at any time call a meeting of the Limited Partners or for a vote, without a meeting, of the Limited Partners on matters upon which the Limited Partners are entitled to provide their Consent, and shall call for such a meeting or vote upon receipt by the General Partners of a request therefor made by at least 10% in Interest (as to capital, Profits and Losses) of the Limited Partners as of the date of receipt of such Notification. Within 15 days of the receipt of the Notification, the General Partners shall notify all Limited Partners of record as of the date of the Notification as to the time and place of the meeting, if called, and the general nature of the business to be transacted thereat, or if no such meeting has been called, of the matter or matters to be voted upon and the date upon which the votes will be counted. Any Limited Partnership meeting or the date upon which such votes, without a meeting, will be counted (regardless of whether the General Partners have called for such meeting or vote upon the request of Limited Partners or have initiated such event without such request) shall be not less than 30 or more than 60 days following mailing of the Notification thereof by the General Partners. All expenses of the meetings, voting and such Notification shall be borne by the Limited Partnership. Section 11.3. Limitations on Requirements for Consents ------------------------------------------------------- Notwithstanding anything to the contrary contained in this Agreement, the powers of the Limited Partners set forth in Sections 4.5E, 4.5F, 4.5G, 6.2A, 6.4 and 11.5 shall not be deemed to be granted to the Limited Partners or exercisable by them unless and until counsel for the Limited Partnership or counsel designated by at least 10% in Interest (as to capital and Profits and Losses) of the Limited Partners shall have delivered to the Limited Partnership an opinion to the effect that neither the grant nor the exercise of those powers is prohibited by the Act, will impair the limited liability of the Limited Partners or will affect the classification of the Limited Partnership as a partnership for Federal income tax purposes. Section 11.4. Submissions to Limited Partners ---------------------------------------------- The General Partners shall give all the Limited Partners Notification of any proposal or other matter required by any provisions of this Agreement or by law to be submitted for the consideration and approval of the Limited Partners. Such -53- Notification shall include any information required by the relevant provision of the Agreement or by law. Section 11.5. Acting without Concurrence of General Partners ------------------------------------------------------------- Except as limited by Section 11.3 and 10.1(B), more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners, without the necessity for concurrence by the General Partners, may vote to: (a) amend the Agreement or cause the Production Partnership Agreement to be amended; (b) dissolve the Limited Partnership or cause the Production Partnership to be dissolved; (c) remove either of the General Partners or both or cause the Managing Partners of the Production Partnership to be removed and elect new General Partners or cause the Production Partnership to elect new Managing Partners; (d) approve or disapprove the sale of all or substantially all of the assets of the Limited Partnership or cause the Production Partnership to sell or not to sell all or substantially all of its assets; or (e) cancel or amend the terms of any contract for services with the General Partners or any Affiliate or cause the Production Partnership to do so, which shall be without penalty, provided 30 days written notice is given. ARTICLE TWELVE Miscellaneous Provisions ------------------------ Section 12.1. Notification to the Limited Partnership or the General Partner --------------------------------------------------------- Any Notification to the Limited Partnership or the General Partners shall be sent to the principal office of the Limited Partnership, as set forth in this Agreement. Except as provided herein, any Notification to a Limited Partner shall be sent to its last known address. -54- Section 12.2. Binding Provisions --------------------------------- The covenants and agreements contained herein shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the respective parties hereto. Section 12.3. Applicable Law ----------------------------- This Agreement shall be construed and enforced in accordance with the laws of the State. Section 12.4. Separability of Provisions ----------------------------------------- If for any reason any provision or provisions hereof which are not material to the purposes or business of the Limited Partnership or of the Limited Partners' Interests are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement that are valid. Section 12.5. Appointment of the General Partners as Attorney-in-Fact ---------------------------------------------------------------------- A. Each Limited Partner, by the execution of this Agreement by a General Partner on such Limited Partner's behalf pursuant to a power of attorney granted by such Limited Partner by means of such Limited Partner's execution of a Subscription Agreement and Power of Attorney, irrevocably constitutes and appoints each of the General Partners, its true and lawful agent and attorney-in-fact with full power and authority in its name, place and stead to execute, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents, instruments and conveyances that may be necessary or appropriate to carry out the provisions or purposes of this Agreement, including without limitation: (i) all certificates and other instruments (including counterparts of this Agreement), and any amendment thereof, including any amendment substituting a Limited Partner pursuant to Section 7.3, that the General Partners deem appropriate to form, reform, qualify or continue the Limited Partnership (or a new partnership with substantially the same provisions as the Limited Partnership) as a limited partnership (or a partnership in which the Partners will have limited liability comparable to that provided by the Act) in the -55- jurisdiction in which the Limited Partnership may conduct business; (ii) all amendments and other instruments necessary to admit into the Limited Partnership additional or substituted Partners pursuant to Section 10.2; (iii) all instruments that the General Partners deem appropriate to reflect a change or modification of the Limited Partnership in accordance with the terms of this Agreement (including those necessary to reflect additional Capital Contributions); and (iv) all conveyances and other instruments that the General Partners deem appropriate to reflect the dissolution and termination of the Limited Partnership. B. The appointment by all Limited Partners of each of the General Partners, as agent and attorney-in-fact, shall be deemed irrevocable and to be a power coupled with an interest, in recognition of the fact that each of the Partners under this Agreement will be relying upon the power of the General Partners to act as contemplated by this Agreement in any filing and other action by it on behalf of the Limited Partnership, and shall survive the Incapacity of any Person hereby giving such power and the transfer or assignment of all or any part of the Interest of such person; provided, however, that in the event of the transfer by a Limited Partner of all of its Interest, the foregoing powers of attorney of the transferor Partner shall survive such transfer only until such time as the transferee shall have been admitted to the Limited Partnership as a Substituted Limited Partner and all required documents and instruments shall have been duly executed, filed and recorded to effect such substitution. Section 12.6. Entire Agreement ------------------------------- This Agreement constitutes the entire agreement among the parties. This Agreement supersedes any prior agreement or understanding among the parties and may not be modified or amended in any manner other than as set forth herein. Section 12.7. Paragraph Titles ------------------------------- Article and section titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text. -56- Section 12.8. Counterparts --------------------------- This Agreement may be executed in several counterparts, all of which together shall constitute one agreement binding on all parties hereto, notwithstanding that all the parties have not signed the same counterpart except that no counterpart shall be binding unless signed by the General Partners. GEODYNE PROPERTIES, INC. By: // Thomas W. Kitchin // ----------------------- Thomas W. Kitchin, President PW ENERGY INC. By: // Lawrence S. Kash // --------------------- Lawrence S. Kash, President WITHDRAWING AND INITIAL LIMITED PARTNER // Susan Layman // ------------------ Susan Layman ADDITIONAL LIMITED PARTNERS. All those Additional Limited Partners whose names, places of residence and Capital Contributions appear on Schedule A, which is attached hereto and incorporated herein by reference, by Geodyne Properties, Inc. and PW Energy Inc. pursuant to a duly granted power of attorney. GEODYNE PROPERTIES, INC. By: // Thomas W. Kitchin // ----------------------- Thomas W. Kitchin, President PW ENERGY INC. By: // Lawrence S. Kash // ---------------------- Lawrence S. Kash, President -57- ACKNOWLEDGEMENTS STATE OF OKLAHOMA ) ) COUNTY OF TULSA ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Thomas W. Kitchin who, after being duly sworn by me, did declare that he is the identical person who executed the foregoing Amended and Restated Agreement and Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-E, that he is the President of Geodyne Properties, Inc. and that by and with the authority of the Board of Directors of Geodyne Properties, Inc. and as attorney-in-fact for each Limited Partner he executed such Amended and Restated Agreement and Certificate as the free and voluntary act and deed of Geodyne Properties, Inc. and as attorney-in-fact for each Limited Partner for the purposes therein set forth and that he is familiar with statements contained therein and such statements are true. Subscribed, sworn to and acknowledged by said Thomas W. Kitchin on this 10th day of September, 1986. // Glenda Devore // ---------------------------- Notary Public My Commission Expires: 7/16/90 STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Lawrence S. Kash who, after being duly sworn by me, did declare that he is the identical person who executed the foregoing Amended and Restated Agreement and Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-E, that he is the President of PW Energy Inc. and that by and with the authority of the Board of Directors of PW Energy Inc. and as attorney-in-fact for each Limited Partner he executed such Amended and Restated Agreement and Certificate as the free and voluntary act and deed of PW Energy Inc. and as attorney-in-fact for each Limited Partner he executed such Amended and Restated Agreement and Certificate as -58- the free and voluntary act and deed of PW Energy Inc. and as attorney-in-fact for each Limited Partner for the purposes therein set forth and that he is familiar with statements contained therein and such statements are true. Subscribed, sworn to and acknowledged by said Lawrence s. Kash on this 9th day of September, 1986. // Christa M. Bowen // ----------------------- Notary Public My Commission expires: August 31, 1988 STATE OF OKLAHOMA ) ) ss. COUNTY OF TULSA ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Susan Layman who, after being duly sworn by me, did declare that she is the identical person who executed the foregoing Amended and Restated Agreement and Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-E, that she executed such Agreement and Certificate as her free and voluntary act and deed for the purposes therein set forth and that she is familiar with the statements contained therein and such statements are true. Subscribed, sworn to and acknowledged by said Susan Layman on this 10th day of September, 1986. // Glenda Devore // --------------------- Notary Public My Commission Expires: 7/16/90 -59- EX-4.3 4 I-F AGREEMENT AND CERTIFICATE OF LTD. PSHIP. PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F AMENDED AND RESTATED AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP Amended and Restated Agreement and Certificate of Limited Partnership, dated as of December 17, 1986, among Geodyne Properties, Inc., a Delaware corporation, and PW Energy Inc., a Delaware corporation, as General Partners, Susan Layman as the Initial Limited Partner, and those persons named in Schedule A attached hereto as Additional Limited Partners. Whereas, PaineWebber/Geodyne Energy Income Limited Partnership I-F has heretofore been formed as a limited partnership under the Oklahoma Revised Uniform Limited Partnership Act pursuant to an Agreement and Certificate of Limited Partnership dated as of September 10, 1986, and filed for recordation in the office of the Secretary of State of the State of Oklahoma on September 11, 1986; and Whereas, the parties hereto desire to amend the Certificate and Agreement of Limited Partnership of the Limited Partnership and to restate said Agreement in its entirety; Now, Therefore, in consideration of the mutual promises and agreements made herein, the parties, intending to be legally bound, hereby agree as follows: ARTICLE ONE Defined Terms ------------- The defined terms used in this Agreement shall, unless the context otherwise requires, have the meanings specified in this Article One. The singular shall include the plural and the masculine gender shall include the feminine, the neuter and vice versa, as the context requires. Any terms used in this Agreement which are defined in the Production Partnership Agreement and are not otherwise defined herein shall have the respective meanings set forth in the Production Partnership Agreement. "Accountants" shall mean Arthur Young & Company or such other nationally recognized firm of independent certified public accountants as shall be engaged from time to time by the General Partners for the Limited Partnership. "Act" shall mean the Oklahoma Revised Uniform Limited Partnership Act, as amended from time to time. -1- "Activation" or "Activated" shall mean the date on which (i) with respect to the Limited Partnership, the subscribers for Units shall have been admitted to the Limited Partnership as Limited Partners, and (ii) with respect to the Production Partnership, the Limited Partnership shall have made its capital contribution to the Production Partnership. "Additional Limited Partner" shall mean any person admitted to the Limited Partnership pursuant to Section 3.3A of this Agreement. "Affiliate" shall mean, when used with reference to a specified Person: (a) any Person directly or indirectly owning, controlling, or holding with power to vote 10% or more of the outstanding voting securities of the specified Person; (b) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the specified Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with, the specified Person; (d) any Person who is an officer, director, partner or trustee of, or serves in a similar capacity with respect to, the specified Person or of which the specified Person is an officer, director, partner or trustee, or with respect to which the specified Person serves in a similar capacity; and (e) any relative or spouse of the specified Person. A reference to an Affiliate of the General Partners shall include an Affiliate of either or both of the General Partners. Notwithstanding the foregoing, no Person shall be deemed to be an Affiliate solely by reason of its ownership of limited partnership interests in a limited partnership. "Affiliated Program" shall mean a drilling or income program (whether in the form of a limited partnership, general partnership, joint venture or otherwise) interests in which were offered to persons or entities not engaged in a trade or business within the oil and gas industry (other than by virtue of its participation in an Affiliated Program) and of which any General Partner or Affiliate serves as general partner or venturer. "Agreement" shall mean this Amended and Restated Agreement and Certificate of Limited Partnership as originally executed and as amended from time to time. -2- "Capital Account" shall mean, as to any Partner, the sum of the Capital Contribution by such Partner, plus his share of any Profits (including, with respect to Limited Partners, his share of any interest earned on funds held by the escrow agent and paid to the Limited Partnership, as set forth in the Prospectus), reduced by his share of any Losses (including such Partner's deduction for depletion to the extent such deduction does not exceed the amount of cost depletion such Partner would be allowed) and distributions of Limited Partnership cash or assets to such Partner or on behalf of such Partner in payment of any taxes or other expenses allocable to such Partner. "Capital Contribution" of a Limited Partner shall mean the cash contribution of a Limited Partner paid with respect to such Limited Partner's subscription and any cash distributions from a Prior Limited Partnership reinvested on behalf of a Limited Partner in the Limited Partnership, net of any refunds made pursuant to Section 3.4 of this Agreement. "Code" shall mean the Internal Revenue Code of 1954, as amended (or any corresponding provisions of succeeding law). "Commissions" shall mean the cash fees payable to the Dealer Manager and the Selected Dealers upon the Activation of the Limited Partnership. "Consent" shall mean the consent of a Person, given as provided in Section 11.1, to do the act or thing for which the consent is solicited, or the act of granting such consent, as the context may require. "Dealer Manager" shall mean PaineWebber Incorporated, a Delaware corporation. "Direct Administrative Costs" shall mean the actual and necessary direct costs attributable to services provided to the Limited Partnership by parties other than the General Partner or their Affiliates, whether incurred by the Limited Partnership directly or incurred by any of the General Partners or their Affiliates, including the annual audit fees, legal fees and expenses, the cost of reviewing tax returns and reports, the cost of evaluations prepared by independent petroleum engineers pursuant to Section 9.4C of this Agreement and all other such costs directly incurred by or for the benefit of the Limited Partnership. -3- "Distributable Cash" shall mean, with respect to the Limited Partnership's operations at any time, the amount of cash assets on hand at such time less amounts required to be retained out of such cash assets, in the sole judgment of the General Partners, to pay costs, expenses or other obligations whether then accrued or anticipated to accrue in the future. "Fiscal Year" shall mean the calendar year. "General and Administrative Costs" shall mean all customary and routine legal, accounting, data processing, depreciation, geological, engineering, travel, office rent, telephone, secretarial, employee compensation and benefits, and other items of a general and administrative nature, whether like or unlike the foregoing, and any other incidental reasonable expenses reasonably necessary to the conduct of the Limited Partnership's business, and generated by the General Partners or any Affiliate other than an Affiliated Program computed on a cost basis, determined by the General Partners in accordance with generally accepted accounting principles and reviewed by an independent public accountant or certified public accountant. General and Administrative Costs shall not include any Direct Administrative Costs or costs of the Production Partnership. "General Partners" shall mean Geodyne Properties, Inc., a Delaware corporation, and PW Energy Inc., a Delaware corporation, acting in such capacity, and any other Person admitted as an additional or substituted General Partner pursuant to the provisions of Article Six of this Agreement. "Geodyne Properties" shall mean Geodyne Properties, Inc., a Delaware corporation. "Hydrocarbons" shall mean crude oil, natural gas, condensate, natural gas liquids and other liquid or gaseous hydrocarbons. "Incapacity" or "Incapacitated" shall mean the adjudication of bankruptcy (except that, in the case of a General Partner, the term "bankruptcy" shall mean only being subject to Chapter 7 of the Federal Bankruptcy Reform Act of 1978), of interdiction, of incompetence, or of insanity, or the death, dissolution or termination (other than by merger or consolidation under which the surviving entity agrees to assume all of the obligations and responsibilities of the merged or consolidated Person set forth in this Agreement), as the case may be, of any Person. -4- "Income" shall mean the gross income of the Limited Partnership or the Production Partnership (as the context may require) as determined for Federal income tax purposes, including all capital or Code Section 1231 gains (but not losses). "Initial Limited Partner" shall mean Susan Layman. "Interest" shall mean the entire ownership interest (which may, either for a Partner's Capital Account or a Partner's Profits interest, be expressed as a percentage) of a Partner in the Limited Partnership at any particular time, including the rights and obligations of such Partner under this Agreement and the Act. "Limited Partners" shall mean the limited partners of the Limited Partnership or any substituted limited partner including the General Partners to the extent they purchase Units. "Limited Partnership" shall mean the limited partnership continued hereby. "Limited Partnership Account" shall mean the bank account or accounts established by the General Partners pursuant to Section 9.3 of this Agreement. "Limited Partnership Property" shall mean all interest, property and right of any type owned by the Limited Partnership. "Managing Partners" shall mean Geodyne Production Company, a Delaware corporation, and PW Production, Inc., a Delaware corporation, acting in such capacity, and any successor acting in such capacity. "Notification" shall mean a writing, containing the information required by this Agreement to be communicated to any Person, hand delivered or sent by registered or certified mail, return receipt requested, postage prepaid, to such Person at the last known address of such Person, the date of the certified receipt (or such other evidence of receipt) therefor being deemed the date of the giving of Notification; provided, however, that any written communication containing the information sent or delivered to the Person and actually received by the Person shall constitute Notification for all purposes of this Agreement. -5- "Organization and Offering Costs" shall mean all costs and expenses incurred by the General Partners and their Affiliates in connection with the organization of the Limited Partnership, including, without limitation, the legal, printing, accounting and other costs incurred in connection with the registration for offer and sale of the Units under applicable federal and state securities laws (other than any organization and offering costs as defined in the Production Partnership Agreement). Organization and Offering Costs shall not include the Commissions paid to the Dealer Manager or reallowed to the Selected Dealers. "Partner" shall mean any General Partner or any Limited Partner. "Person" shall mean any individual, partnership, corporation, trust or other entity. "Prior Limited Partnership" shall mean any limited partnership activated prior to the Activation of the Limited Partnership of which units of limited partnership interest were offered and sold pursuant to the Prospectus. "Production Partnership" shall mean the general partnership of which the Limited Partnership is a general partner. "Production Partnership Agreement" shall mean the agreement of general partnership under which the Production Partnership was formed, as amended from time to time. "Production Partnership Well" shall mean any well in which the Production Partnership has an interest. "Producing Property" shall mean any property (or interest in such property) with a well or wells capable of producing Hydrocarbons in commercial quantities or properties unitized with such properties or properties adjacent to such properties which are acquired as an incidental part of the acquisition of such properties. The term also includes well machinery and equipment, gathering systems, storage facilities or processing installations or other equipment and property associated with the production of Hydrocarbons. Interests in properties may include Working Interests, production payments, Royalties and other nonworking and nonoperating interests. "Profits" and "Losses" shall mean the income or losses of the Limited Partnership for Federal income tax purposes determined as of the close of the Limited Partnership's Fiscal Year, as well as, when the context requires, any tax-exempt income and nondeductible expenses. -6- "Prospectus" shall mean the prospectus pursuant to which the Units were offered, and all supplements or amendments thereto, if any. "Proved Reserves" shall mean those quantities of Hydrocarbons, which, upon analysis of geologic and engineering data, appear with reasonable certainty to be recoverable in the future from known Hydrocarbon reservoirs under existing economic and operating conditions. Proved reserves are limited to those quantities of Hydrocarbons which can be expected, with little doubt, to be recoverable commercially at current prices and costs, under existing regulatory practices and with existing conventional equipment and operating methods. Depending upon their status of development, such proved reserves shall be subdivided into the following classifications and have the following definitions: (a) "Proved Developed Reserves" shall mean proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. This classification shall include: (1) "Proved Developed Producing Reserves" which are proved developed reserves which are expected to be produced from existing wells; and (2) "Proved Developed Non-Producing Reserves" which are proved developed reserves which exist behind the casing of existing wells, or at minor depths below the present bottom of such wells, which are expected to be produced through these wells in the predictable future, where the cost of making Hydrocarbons available for production should be relatively small compared to the cost of a new well. Additional Hydrocarbons expected to be obtained through the application of improved recovery techniques are included as "Proved Developed Reserves" only after testing by a pilot project or after the operation of an installed program has confirmed through production responses that increased recovery will be achieved. (b) "Proved Undeveloped Reserves" shall mean all reserves which are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Such reserves on undrilled acreage are limited to those drilling units offsetting productive units which are reasonably certain of production when drilled. Proved -7- reserves for other undrilled units are claimed only where it can be demonstrated with reasonable certainty, based on accepted geological, geophysical and engineering studies and data, that there is continuity of production from an existing productive formation. No estimates for Proved Undeveloped Reserves are attributable to any acreage for which improved recovery is contemplated, unless the techniques to be employed have been proved effective by actual tests in the same area and reservoir. "PW Energy" shall mean PW Energy Inc., a Delaware corporation. "Remove", "Removed" or "Removal" shall mean, with reference to the removal of a General Partner, the termination of the management powers, duties and responsibilities of such General Partner pursuant to Section 6.2 of this Agreement and the removal of such General Partner as a Partner. "Right of Presentment" shall mean the acquisition by a purchaser of a Limited Partner's Interest pursuant to Section 7.5 of this Agreement. "Royalty" shall mean an interest, including an overriding royalty and a net profits interest, in gross production or the proceeds therefrom which does not require the owner thereof to bear any of the cost of production, development, operation or maintenance. "Sale" shall mean any event or transaction that is, for Federal income tax purposes, considered a sale, exchange or abandonment by the Limited Partnership of any Limited Partnership Property. "Selected Dealer" shall mean a member in good standing of the National Association of Securities Dealers, Inc. which has been selected by the Dealer Manager to offer and sell the Units. "State" shall mean the State of Oklahoma. "Subscription Agreement and Power of Attorney" shall mean the Subscription Agreement and Power of Attorney in the form attached to the Prospectus. "Subsequent Limited Partnership" shall mean any limited partnership activated after the Activation of the Limited Partnership of which units of limited partnership interest are offered and sold pursuant to the Prospectus. -8- "Substituted Partner" shall mean any Person admitted to the Limited Partnership as a Partner pursuant to Section 7.3 and 10.2 of this Agreement. "Unit" shall mean a $1,000 investment in the Limited Partnership by a Limited Partner pursuant to the terms of a Subscription Agreement and Power of Attorney; provided, however, that fractional Units may be acquired to the extent provided under Section 5.lB in whole increments of $100. "Working Interest" shall mean the interest (whether held directly or indirectly) in a lease (as defined in the Production Partnership Agreement) which is subject to some portion of the expense of production, development, operation or maintenance. ARTICLE TWO Continuation; Name, Place of Business and Office; Term ------------------------------------------------------ Section 2.1. Continuation -------------------------- The parties hereto hereby continue the limited partnership heretofore formed pursuant to the provisions of the Oklahoma Revised Uniform Limited Partnership Act, and the rights and liabilities of the Partners shall be as provided in the Act, except as otherwise expressly provided in this Agreement. Section 2.2. Name, Place of Business and Office, Agent ------------------------------------------------------- The Limited Partnership shall be conducted under the name PaineWebber/Geodyne Energy Income Limited Partnership I-F. The business of the Limited Partnership may, however, be conducted under any other name deemed necessary or desirable by the General Partners in order to comply with applicable laws. The office and principal place of business of the Limited Partnership shall be c/o Geodyne Properties, Inc., 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The agent for service of process on the Limited Partnership shall be Geodyne Properties, Inc., 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The General Partners may change the principal place of business and the location of such office and may establish such additional offices as they deem advisable from time to time; provided, however, that in the event the principal place of business of the Limited Partnership shall be changed, the General Partners shall provide Notification thereof to the Limited Partners. -9- Section 2.3. Purpose --------------------- The business and purpose of the Limited Partnership shall be to become a general partner in the Production Partnership. Such business and purpose shall include the doing of any and all things incident thereto or connected therewith, including the carrying on of the business of the Production Partnership in the event of its termination if it is determined by the General Partners to be in the best interests of the Limited Partners. The Limited Partnership shall not engage in any other business or activity. Section 2.4. Term ------------------ The Limited Partnership shall continue in force and effect until December 31, 1999, provided that the General Partners shall extend the term of the Limited Partnership for up to five periods of two years each in the event that the Production Partnership's term has been so extended, or until dissolution prior thereto pursuant to the provisions hereof. ARTICLE THREE Partners and Capital -------------------- Section 3.1. General Partners ------------------------------ A. The names, addresses and Capital Contributions of the General Partners are set forth in Schedule A attached hereto and are incorporated herein. B. Each General Partner represents to each Additional Limited Partner, severally, that: (i) neither it nor any of its Affiliates is a "party in interest," as defined in Section 3(14) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a "disqualified person," as defined in Section 4975(e) (2) of the Code, with respect to any Additional Limited Partner, the assets of which are being used, in whole or in part, to acquire an Interest in the Limited Partnership; and (ii) neither the acquisition by such Limited Partners of their Interests nor any transactions contemplated by the Prospectus involving the use of amounts constituting such Limited Partners' Capital Contributions will constitute or result in a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. In making such representations, the General -10- Partners have each received and relied upon information from Additional Limited Partners pursuant to subscription agreements, in the form attached as Exhibit C to the Prospectus, executed by such Limited Partners. Section 3.2. Initial Limited Partner ------------------------------------- Upon admission of the Additional Limited Partners to the Limited Partnership pursuant to Section 3.3A of this Agreement, the Initial Limited Partner shall withdraw from the Limited Partnership and shall be entitled to receive an amount of money equal to her Capital Contribution. Section 3.3. Additional Limited Partners ----------------------------------------- A. The General Partners are authorized to admit Additional Limited Partners to the Limited Partnership if, after the admission of such Additional Limited Partners, the Capital Contributions of all Additional Limited Partners would be not less than $5,000,000 and not more than $90,000,00 less the aggregate subscription amount of units of limited partnership interest subscribed to any Prior Limited Partnership. The Capital Contributions of the Additional Limited Partners shall be made in cash. The manner of the offering of the Units, the terms and conditions under which subscriptions for such Units will be accepted (including the minimum subscription amounts applicable to various categories of subscribers), the manner of and conditions to the sale of Units to subscribers therefor, the terms of the reinvestment in the Limited Partnership of cash distributions from a Prior Limited Partnership and the admission of subscribers for Units and Persons who reinvest in the Limited Partnership cash distributions from a Prior Limited Partnership as Additional Limited Partners will be as provided in the Prospectus and subject to any provisions thereof. B. The names, addresses and Capital Contributions of the Additional Limited Partners are set forth in Schedule A hereto, as amended from time to time. C. No Limited Partner shall be required to make any additional capital contribution to the Limited Partnership. -11- Section 3.4. Certain Returns of Capital ---------------------------------------- Any portion of the capital contribution of the Limited Partnership to the Production Partnership which is distributed to the Limited Partnership pursuant to Section 3.4 of the Production Partnership Agreement shall be distributed promptly to the Limited Partners in proportion to their Capital Contributions as a return of part of their Capital Contributions. In addition, the General Partners shall contribute cash to the Limited Partnership (with respect to which their Capital Accounts will be credited) in an amount equal to the amounts paid to the General Partners or their Affiliates from the Limited Partners' Capital Contributions in respect of Commissions and Organization and Offering Costs attributable (on a proportionate basis) to the amount of the unexpended Capital Contributions so refunded, which cash shall be refunded pro rata to the Limited Partners (except that cash representing refunded Commissions shall be distributed to Limited Partners in proportion to the manner in which Commissions attributable to their subscriptions were payable) together with the unexpended Capital Contributions. Geodyne Properties and PW Energy shall be responsible for 40% and 60%, respectively, of the obligation of the General Partners to contribute cash to the Limited Partnership in connection with a return of the Limited Partners' Capital Contributions pursuant to this Section 3.4. Section 3.5. Limited Partnership Capital ----------------------------------------- A. No Partner shall be paid interest on any Capital Contribution to the Limited Partnership or on such Partner's Capital Account, notwithstanding any disproportion therein as between Partners. B. Except as provided in Sections 3.2, 3.4, 6.2 and 8.2 of this Agreement, no Partner shall have the right to withdraw or receive any return of the Capital Contribution. Under circumstances involving a return of any Capital Contribution, no Limited Partner shall have priority over any other Limited Partner nor shall any Partner have the right to receive any property other than cash, except as may otherwise be provided in Sections 6.2 and 8.2A of this Agreement. -12- Section 3.6. Application of Capital Contributions -------------------------------------------------- A. The General Partners shall deposit in the Limited Partnership Account the Capital Contributions of the Additional Limited Partners and shall apply such Capital Contributions to (i) pay to the General Partners an amount equal to 3% of the Limited Partners' Capital Contributions in consideration of the General Partners' payment of Organization and Offering Costs, (ii) pay Commissions, (iii) establish a reasonable reserve for working capital, and (iv) contribute the balance of the Partners' Capital Contributions to the Production Partnership in exchange for the Limited Partnership's interest therein. B. PW Energy and Geodyne Properties shall be responsible for the payment of 60% and 40%, respectively, of Organization and Offering Costs. The General Partners shall allocate between themselves the payment received in Section 3.6A(i) (hereinafter referred to in this Section 3.6B as the "Fee") as follows: (i) to the extent of the amount of actual Organization and Offering Costs incurred by the General Partners plus Unreimbursed Prior Organization and Offering Costs (as defined below), the Fee shall be paid 60% to PW Energy and 40% to Geodyne Properties; (ii) to the extent the Fee is in excess of the actual Organization and Offering Costs plus Unreimbursed Prior Organization and Offering Costs (as defined below) but such excess amount does not exceed 2% of the Limited Partners' Capital Contributions, 75% shall be paid to PW Energy and 25% shall be paid to Geodyne Properties; and (ii) any excess of the Fee over the amounts of such Fee paid to the General Partners pursuant to (i) and (ii) of this Section 3.6B shall be paid 50% each to PW Energy and Geodyne Properties. "Unreimbursed Prior Organization and Offering Costs" shall mean the actual organization and offering costs of any Prior Limited Partnerships and any Prior Production Partnerships (as defined in the Production Partnership Agreement) for which the General Partners and Managing Partners are not reimbursed by the payment to them of the fee referred to in Section 3.6A(i) of the limited partnership agreements of the respective Prior Limited Partnerships and by the payment to them of the management fee of the Prior Production Partnerships. C. The Limited Partnership shall not incur any borrowings; provided, however, that borrowings may be incurred on its behalf by the Production Partnership to pay costs of the Production Partnership allocable to the Limited Partnership. -13- Section 3.7. Liability of Partners ----------------------------------- A. No Limited Partner shall be liable for the debts, liabilities, contracts or other obligations of the Limited Partnership (except to the extent of (i) the Limited Partner's Capital Contribution, (ii) money or property wrongfully paid or conveyed to the Limited Partner on account of the Limited Partner's Capital Contribution, and (iii) amounts, together with interest thereon, properly distributed to the Limited Partner which represent a return of capital and which are necessary to discharge the Limited Partnership's liability to creditors which arose prior to such distribution) or for the debts and liabilities of any other Partner. B. Geodyne Properties, PW Energy and any General Partner subsequently admitted to the Limited Partnership each agrees that it shall remain generally liable for any obligation or recourse liability of the Limited Partnership incurred during the period in which it is a General Partner. However, all present and future General Partners hereby agree among themselves to contribute to each other the amount of funds necessary to effectuate a sharing of Limited Partnership obligations and recourse liabilities in proportion to each General Partner's share of such obligations and liabilities. Section 3.8. General Partner as Limited Partner ------------------------------------------------ A. General Partner shall also be a Limited Partner to the extent that it purchases or becomes a transferee of all or any part of the Interest of a Limited Partner, provided that a General Partner shall not thereby (i) acquire any power to vote, as a Limited Partner, with respect to any action requiring the Consent of any specified percentage of Limited Partners, and (ii) be deemed to have limited its liability for any obligation or recourse liability of the Limited Partnership as set forth under Section 3.7B. -14- ARTICLE FOUR Management ---------- Section 4.1. Management and Control of the Limited Partnership --------------------------------------------------------------- A. The General Partners, within the authority granted to them under and in accordance with the provisions of this Agreement, shall have the full and exclusive right to manage and control the business and affairs of the Limited Partnership and to make all decisions regarding the business of the Limited Partnership and shall have all of the rights, powers and obligations of general partners of a limited partnership under the laws of the State. B. No Limited Partner, as such, shall participate in the management of or have any control over the Limited Partnership's business nor shall any Limited Partner, as such, have the power to represent, act for, sign for or bind the General Partners or the Limited Partnership. The Limited Partners hereby consent to the exercise by the General Partners of the powers conferred on them by this Agreement. C. The General Partners' management authority with respect to significant Limited Partnership actions shall be exercised jointly by both General Partners, including without limitation such actions as the determination of the amount of Distributable Cash to distribute to the Partners. The General Partners' management authority respecting all other actions which are in the ordinary course of the Limited Partnership's operations (and any "significant" Limited Partnership action delegated to a General Partner under Section 4.lC(iii)) may be exercised by either General Partner without the concurrence of the other General Partner, provided that the General Partner exercising such management authority shall, upon inquiry by the other General Partner, notify the inquiring General Partner of the nature of such actions undertaken without the concurrence of the inquiring General Partner. The General Partners shall have the authority to (i) determine that the "significant" action specified herein shall no longer be a "significant" action for purposes of this Section 4.lC and to amend this Agreement pursuant to Section l0.lA of this Agreement to reflect such determination, (ii) to determine which other Limited Partnership actions, other than that specified herein, are "significant" actions for purposes of this Section 4.1C, and (iii) delegate their management authority to a single General Partner with -15- respect to "significant" Limited Partnership actions at such times and under such conditions as they may mutually agree upon. Section 4.2. Powers of the General Partners -------------------------------------------- A. In addition to any other rights and powers which the General Partners may possess under this Agreement and the Act, the General Partners shall have the power, except and subject to the extent otherwise provided or limited in this Agreement: (i) to contribute the balance (after payment and retention of the amounts set forth in Section 3.6) of the Capital Contributions of the Limited Partners to the Production Partnership as required by the Limited Partnership's interest therein, and to execute the Production Partnership Agreement (including any amendment and restatement thereof) on behalf of the Limited Partnership; (ii) if the Production Partnership is dissolved, to enter into all transactions contemplated by the Production Partnership Agreement, subject to the limitations and provisions contained therein, notwithstanding anything to the contrary contained herein; (iii) to maintain the books and records of the Limited Partnership in accordance with the provisions of Section 9.1; and (iv) subject to Sections 4.5E, 4.5F and 4.5G, to consent to certain actions on behalf of the Limited Partnership pursuant to the Production Partnership Agreement. B. Reliance by Third Parties on General Partners' Authority. No person, firm or corporation dealing with the Limited Partnership shall be required to inquire into the authority of any General Partner to take or refrain from taking any action or make or refrain from making any decision, but any person so inquiring shall be entitled to rely upon a certificate of a General Partner as to its due authorization. Section 4.3. Prohibited Transactions ------------------------------------- A. Notwithstanding any other provision of this Agreement to the contrary, the following transactions are expressly prohibited: -16- (i) the Limited Partnership shall not make any loans to a General Partner or any Affiliate; (ii) except as expressly contemplated hereby, no agent, attorney, accountant or other independent consultant or contractor who is also employed on a full-time basis by any General Partner or any Affiliate shall be compensated by the Limited Partnership for his services; (iii) there shall be no commingling of Limited Partnership funds with funds of any other entity; and (iv) the Limited Partnership shall not make any advance payment to the General Partners or their Affiliates, except where necessary to secure tax benefits of prepaid drilling costs. Section 4.4. Other Agreements of the General Partners ------------------------------------------------------ A. Anything in this Agreement to the contrary notwithstanding, it is agreed that: (i) the General Partners and their Affiliates shall not take any action with respect to the assets or property of the Limited Partnership which does not benefit primarily the Limited Partnership, including the utilization of Limited Partnership funds as compensating balances for the benefit of any General Partner or Affiliate; (ii) neither the General Partners nor any Affiliate shall render to the Limited Partnership any services nor sell or lease to the Limited Partnership any equipment or supplies unless: (a) such General Partner or Affiliate is engaged, independently of the Limited Partnership and as an ordinary and ongoing business, in the business of rendering such services or selling or leasing such equipment and supplies to a substantial extent to other Persons in the oil and gas industry in addition to programs in which such General Partner or Affiliate has an interest; -17- (b) the compensation, price or rental therefor is competitive with the compensation, price or rental of other Persons in the area engaged in the business of rendering comparable services or selling or leasing comparable equipment and supplies which could reasonably be made available to the Limited Partnership; and (c) provided that, if such General Partner or Affiliate is not engaged in a business within the meaning of subdivision (a), then such compensation, price or rental shall be the cost of such services, equipment or supplies to such General Partner or Affiliate or the competitive rate which could be obtained in the area, whichever is less. Section 4.5. Restrictions on the Authority of the General Partners ------------------------------------------------------------------- A. The General Partners shall not have the authority to: (i) do any act in contravention of this Agreement or which would make it impossible to carry on the ordinary business of the Limited Partnership; (ii) confess a judgment against the Limited Partnership; (iii) possess Limited Partnership Property or assign, pledge or hypothecate rights in specific Limited Partnership Property for other than a Limited Partnership purpose; (iv) admit a Person as a General Partner or a Limited Partner except as otherwise provided herein; or (v) perform any act which would result in loss of any Limited Partner's status as a limited partner under the laws of the State or of limited liability under the laws of any other jurisdiction in which the Limited Partnership is doing business, including use of any Limited Partner's name in conducting the business of the Limited Partnership. -18- B. The General Partners shall not lease, sell, abandon or otherwise dispose of any assets of the Limited Partnership to the General Partners or to any of their Affiliates; provided, however, that if the Limited Partnership should own any inventory or other materials, such inventory or materials may be transferred to the General Partners or any of their Affiliates at the applicable rates set forth in the standard form of accounting procedure then recommended by the Council of Petroleum Accountants Societies of North America. C. The General Partners shall not perform any act that would subject any Limited Partner to liability as a general partner in any jurisdiction. D. Without the consent of more than 50% in Interest of the Limited Partners, the General Partners shall not have the authority to: (i) lease, sell, or otherwise dispose of at any one time all or substantially all of the assets of the Limited Partnership other than in the ordinary course of business; (ii) elect to dissolve and wind up the Limited Partnership; or (iii) except as set forth in Article 10, adopt any amendment to this Agreement. E. The General Partners shall not cause the Limited Partnership to consent to, or join in, any amendment, or modification of, or supplement to, or waiver of the terms of, the Production Partnership Agreement unless: (i) in the judgment of the General Partners such amendment, modification, supplement or waiver would not materially adversely affect the Limited Partnership's rights under the then existing Production Partnership Agreement or such amendment, modification, supplement, or waiver is in the best interests of the Limited Partners; or (ii) if the conditions of Section 11.3 are satisfied, the consent of more than 50% in Interest of the Limited Partners is obtained. If the conditions of Section 11.3 are satisfied, the General Partners shall propose any amendment to the Production Partnership Agreement on behalf of the Limited Partnership which is proposed by at least 10% in Interest (as to capital and Profits and Losses) of the Limited Partners. F. Unless the conditions of Section 11.3 are satisfied and the consent of more than 50% in Interest of the Limited Partners is obtained, the General Partners shall not have the authority to consent on behalf of the Limited Partnership to the: -19- (i) lease, sale or other disposition at any one time of all or substantially all of the assets of the Production Partnership; or (ii) dissolution and winding up of the Production Partnership. G. Unless the conditions of Section 11.3 are satisfied and the consent of more than 50% in Interest of the Limited Partners is obtained, the General Partners shall not have the authority to cause the Limited Partnership to (i) remove a Managing Partner, or (ii) appoint a successor Managing Partner pursuant to Section 6.2 of the Production Partnership Agreement. H. No creditor who makes a nonrecourse loan to the Limited Partnership may have or acquire, at any time as a result of making the loan, any direct or indirect interest in the profits, capital or property of the Limited Partnership other than as a secured creditor. Section 4.6. Duties and Obligations of the General Partners ------------------------------------------------------------ The General Partners shall: (i) use their best efforts to take all actions that may be necessary or appropriate for the continuation of the Limited Partnership's valid existence as a limited partnership or partnership in commendam under the laws of the State and the laws of any other jurisdiction in which the Limited Partnership is doing business, and for the acquisition and holding, in accordance with the provisions of this Agreement and applicable laws and regulations, of the interest of the Limited Partnership in the Production Partnership; (ii) devote to the Limited Partnership the time that they shall deem to be necessary to conduct the Limited Partnership's business and affairs in the best interests of the Limited Partnership; (iii) be under a fiduciary duty and obligation to conduct the affairs of the Limited Partnership in the best interests of the Limited Partnership, including the safekeeping and use of all Limited Partnership funds and assets (whether or not in the immediate possession or -20- control of the General Partners) and the use thereof for the benefit of the Limited Partnership; (iv) at all times act with integrity and good faith and exercise due diligence in all activities relating to the conduct of the business of the Limited Partnership and in resolving conflicts of interest; (v) use their best efforts at all times to maintain their aggregate net worth at a level that is sufficient to meet all present and future requirements set by statute, Treasury Regulations, the Internal Revenue Service or the courts to ensure that the Limited Partnership will not fail to be classified for Federal income tax purposes as a partnership, rather than as an association taxable as a corporation, on account of the net worth of the General Partners; (vi) prepare or cause to be prepared and shall file on or before the due date (or any extension thereof) any Federal, state or local tax returns required to be filed by the Limited Partnership; (vii) cause the Limited Partnership to pay any taxes payable by the Limited Partnership; (viii) use their best efforts to cause the Limited Partnership (or a new limited partnership having the same provisions as the Limited Partnership) to be formed, reformed, qualified to do business, or registered under any applicable assumed or fictitious name statute or similar law in any state in which the Limited Partnership then owns property or transacts business, if such formation, reformation, qualification or registration is necessary or advisable in its counsel's opinion to protect the limited liability of the Limited Partners or to permit the Limited Partnership lawfully to own property or transact business; (ix) from time to time, prepare and file all amendments to this Agreement and other similar documents that are required by law to be filed and recorded for any reason, in the office or offices that are required under the laws of the State or any other state in which the Limited Partnership is then formed or qualified; -21- (x) do all other acts and things (including making publications or periodic filings of this Agreement or amendments hereto or other similar documents without the necessity of mailing or delivering copies of them to each Limited Partner) that may now or hereafter be deemed by the General Partners to be necessary, (a) for the perfection and continued maintenance of the Limited Partnership as a limited partnership under the laws of the State, (b) to protect the limited liability of the Limited Partners under the laws of the State and other jurisdictions in which the Limited Partnership is doing business, and (c) subject to Section 7.3G of this Agreement, to cause this Agreement, certificates or other documents to reflect accurately the agreement of the Partners, the identity of the Limited Partners and the General Partners and the amounts of their respective Capital Contributions; (xi) monitor the activities of the Production Partnership and keep the Limited Partners informed of them in the manner provided in this Agreement; (xii) from time to time submit to any appropriate state securities administrator all documents, papers, statistics and reports required to be filed with or submitted to such state securities administrator; and (xiii) inform each Limited Partner of all administrative and judicial proceedings for an adjustment at the Limited Partnership or Production Partnership level for partnership tax items and forward to each Limited Partner within 30 days of receipt all notices received from the Internal Revenue Service regarding the commencement of a partnership level audit or a final partnership administrative adjustment, and to perform all other duties imposed by Sections 6221 through 6232 of the Code on Geodyne Properties as "tax matters partner" of the Limited Partnership, including (but not limited to) the following: (a) the power to conduct all audits and other administrative proceedings (including windfall profit tax audits) with respect to Limited Partnership tax items; (b) the power to extend the statute of limitations for all Partners with respect to Limited Partnership tax items; and (c) the power to file a petition with an appropriate federal court for -22- review of a final partnership administrative adjustment. Geodyne Properties, as "tax matters partner," shall consult with PW Energy with respect to the performance of all its duties in such capacity. Section 4.7. Compensation of the General Partners -------------------------------------------------- A. Except as provided in Articles Four and Five, the General Partners shall not, either in their capacity as General Partners or in their individual capacity, receive any salary, fees or profits from the Limited Partnership. B. In consideration of their payment of Organization and Offering Costs, the General Partners shall be paid by the Limited Partnership an amount equal to 3% of the Limited Partners' Capital Contributions which the General Partners shall allocate between them as provided in Section 3.6. The General Partners shall be reimbursed by the Limited Partnership for General and Administrative Costs and Direct Administrative Costs incurred by them on behalf of the Limited Partnership, and such costs shall be allocated among the Partners as set forth in Section 5.2 of this Agreement. The General Partners shall be paid any excess of interest income over the costs incurred in connection with the maintenance of the reinvestment account referred to in Section 5.1(B)(i). Section 4.8. Contracts with the General Partners and Affiliates ---------------------------------------------------------------- All services provided to the Limited Partnership by a General Partner or any Affiliate for which it is compensated shall be embodied in a written contract precisely setting forth the services to be rendered and the compensation to be paid. Each contract relating to a transaction between the Limited Partnership and any General Partner or any Affiliate shall contain a provision which shall permit termination of the contract by the Limited Partnership without penalty on 30 days' prior written notice. Section 4.9. Other Operations ------------------------------ The General Partners and their Affiliates shall at all times be free to engage in all aspects of the oil, gas and natural resources business for their own accounts and for the accounts of others. Without limiting the generality of the foregoing, the General Partners and their Affiliates shall have the right to -23- organize and operate other partnerships, joint ventures or other oil and gas investment programs similar to the Limited Partnership or the Production Partnership. Section 4.10. Prosecution, Defense and Settlement of Claims; Indemnification ------------------------------------------------------------ A. The General Partners shall arrange to prosecute, defend, settle or compromise actions at law or in equity at the expense of the Limited Partnership as may be necessary to enforce or protect the interests of the Limited Partnership. The General Partners shall satisfy any judgment, decree, decision or settlement, first, out of any insurance proceeds available therefor, next, out of the Limited Partnership assets and income, and, finally, out of the assets of the General Partners. B. In any threatened, pending or completed action, suit or proceeding to which the General Partners are a party or are threatened to be made a party by reason of the fact that they are the General Partners of the Limited Partnership (other than an action by or in the right of the Limited Partnership) involving an alleged cause of action for damages arising from the performance of their duties under this Agreement or other activities relative to the management of the Limited Partnership, the Limited Partnership shall indemnify the General Partners against expenses, including attorneys' fees, judgments and amounts paid in settlement, actually and reasonably incurred by them in connection with such action, suit or proceeding if they acted in good faith and in a manner they reasonably believed to be in the best interests of the Limited Partnership, and provided that their conduct does not constitute negligence or misconduct. The termination of any action, suit or proceeding by judgment, order or settlement shall not of itself create a presumption that the General Partners did not act in good faith and in a manner which they reasonably believed to be in the best interests of the Limited Partnership. C. In any threatened, pending or completed action or suit by or in the right of the Limited Partnership, to which the General Partners are a party or are threatened to be made a party, involving an alleged cause of action by a Limited Partner or Limited Partners for damages arising from the activities of the General Partners in the performance of management of the internal affairs of the Limited Partnership as prescribed in this Agreement or by law, or both, the Limited Partnership shall indemnify the General Partners against expenses, including attorneys' fees, actually and reasonably incurred by them in connection with the defense or settlement of such action or suit -24- if they acted in good faith and in a manner they reasonably believed to be in the best interests of the Limited Partnership as specified in this subsection, except that no indemnification shall be made in respect of any claim, issue or matter as to which the General Partners' course of conduct constituted negligence or misconduct. D. To the extent that the General Partners have been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 4.1OB or 4.1OC of this Agreement, or in defense of any claim, issue or matter therein, the Limited Partnership shall indemnify them against the expenses, including attorneys' fees, actually and reasonably incurred by them in connection therewith. E. Any indemnification under Section 4.1OB and 4.1OC of this Agreement, unless ordered by a court, shall be made by the Limited Partnership only as authorized in the specific case and only upon a determination by independent legal counsel in a written opinion that indemnification of the General Partners is proper in the circumstances because they have met the applicable standard of conduct set forth in Sections 4.1OB or 4.1OC of this Agreement. F. The Limited Partnership shall not incur the costs of that portion of insurance which insures the General Partners for any liability as to which the General Partners are prohibited from being indemnified under Section 4.10. Section 4.11. Dealer Manager ----------------------------- The Dealer Manager shall have no duties, responsibilities or obligations to the Limited Partnership, the General Partners or any Limited Partner as a consequence of its right to receive Commissions, except to the extent provided under the Securities Act of 1933, as amended. The Dealer Manager has not assumed, and will not assume, any responsibility with respect to the Limited Partnership nor will it be permitted by the General Partners to assume any duties, responsibilities or obligations regarding the management, operations or any of the business affairs of the Limited Partnership subsequent to the date on which the Limited Partnership is Activated. -25- ARTICLE FIVE Distributions, Fees and Allocations ----------------------------------- Section 5.1. Distributions of Limited Partnership Funds -------------------------------------------------------- A. The Distributable Cash of the Limited Partnership shall be distributed simultaneously to the Limited Partners (either directly to such Limited Partners or as they shall direct by their notice to the General Partners pursuant to the reinvestment option set forth in Section 5.lB of this Agreement) and the General Partners promptly upon receipt of cash distributions from the Production Partnership. Each Partner's share of each such distribution shall be determined after giving effect to the allocations set forth in Sections 5.2 and 5.3 of this Agreement, except that (i) any Distributable Cash attributable to the receipt by the Production Partnership of investment income (as defined in the Production Partnership Agreement) shall be distributed 100% to the Limited Partners and, (ii) any Distributable Cash which is attributable to a return pursuant to Section 3.4 shall be distributed entirely to those Limited Partners (other than corporate affiliates of Geodyne Resources, Inc. or the Dealer Manager or any purchasers of Units therefrom with respect to the distribution of cash contributed by the Managing Partners to the Production Partnership pursuant to Section 3.4 of the Production Partnership Agreement or to the Limited Partnership by the General Partners pursuant to Section 3.4) who are, at the time of the distribution, Limited Partners. All distributions of Distributable Cash shall reduce dollar-for-dollar the balances of the Partners' Capital Accounts. B. (i) Except in North Carolina and Texas, prior to the first cash distribution by the Limited Partnership, each Limited Partner will be given an opportunity to elect to have all or a portion of such Limited Partner's cash distributions (1) paid directly to the Limited Partner in cash, or (2) held in a reinvestment account established for Limited Partners of the Limited Partnership, any Prior Limited Partnerships and any Subsequent Limited Partnership, any Prior Limited Partnerships and any Subsequent Limited Partnerships pending the reinvestment of such cash distributions in a minimum amount of $100 (with reinvestment in excess of such minimum being permitted in whole increments of $100) in any Subsequent Limited Partnership. After receipt of the Prospectus with respect to any Subsequent Limited Partnership, each Limited Partner -26- may revoke such Limited Partner's prior election to have such Limited Partner's cash distributions held in the reinvestment account invested in the Subsequent Limited Partnership. Such revocation shall be made by the Limited Partner's delivery to the Limited Partnership of a written notice of revocation. On or before 30 days prior to the reinvestment of a Limited Partner's cash distributions in a Subsequent Limited Partnership, the General Partners shall provide each Limited Partner who has previously elected to have cash distributions from the Limited Partnership reinvested in a Subsequent Limited Partnership, and who has $100 or more held in the reinvestment account on such Limited Partner's behalf, a form for the Limited Partner to provide the Limited Partnership such written notice of revocation. The cash distributions of a Limited Partner held in the reinvestment account shall at all times be the property of the Limited Partner, and the Limited Partner may withdraw such cash distributions held in the reinvestment account on such Limited Partner's behalf upon thirty days' prior written notice to the Limited Partnership. No interest shall be payable to Limited Partners on the amount of their cash distributions held in such reinvestment account; provided, however, that the General Partners shall hold the Limited Partners harmless against any losses sustained therein and the General Partners shall deposit into the reinvestment account an amount equal to any loss suffered by a Limited Partner prior to the earlier of the time the Limited Partner withdraws the Limited Partner's share or an investment in a Subsequent Limited Partnership is made on behalf of the Limited Partner. Prior to investment in a Subsequent Limited Partnership or distribution of such funds, monies held in the reinvestment account may be invested in investments permitted under Section 9.3 of this Agreement. Any costs and interest income attributable to the maintenance of the reinvestment account shall be charged or paid, as the case may be, 50% to PW Energy and 50% to Geodyne Properties. (ii) Cash distributions held in the reinvestment account on behalf of a Limited Partner will be delivered to such Limited Partner, and no investment in a Subsequent Limited Partnership will be made on such Limited Partner's behalf, upon (1) a decision by the General Partners not to offer, or continue the offering of, a Subsequent Limited Partnership or (2) a decision by such Limited Partner not to invest in a Subsequent Limited Partnership. Subject to the Limited Partnership's receipt of a Limited Partner's written notice of revocation or withdrawal referred to in Section 5.1B(i), amounts held in the reinvestment account -27- on behalf of a Limited Partner which are not reinvested in a Subsequent Limited Partnership (either because such amount is less than $100 or is in excess of a whole increment of $100) shall remain in such reinvestment account. (iii) A Limited Partner's cash distribution will be reinvested in a Subsequent Limited Partnership only if a registration statement covering interests in the Subsequent Limited Partnership is in effect under the Securities act of 1933, the offering of interests is qualified for sale under the applicable state securities laws and the Limited Partner meets the appropriate suitability standards. The General Partners may terminate their offering of interests in a Subsequent Limited Partnership at any time and will have no obligation to continue to offer interests or to permit reinvestment of Distributable Cash therein. In the event the General Partners or their Affiliates offer limited partnership interests in limited partnerships other than the Subsequent Limited Partnerships and provide Limited Partners the opportunity to reinvest cash distributions from the Limited Partnership in such limited partnerships, the terms and conditions of such reinvestment shall be determined by the General Partners or their Affiliates in their discretion (which may differ from the terms and conditions of reinvestment in Subsequent Limited Partnerships provided herein). Section 5.2. Allocation of Profits and Losses ---------------------------------------------- A. The Profits and Losses and each item of Income, gain, loss, cost, deduction and credit of the Limited Partnership shall be determined and allocated with respect to each Fiscal Year of the Limited Partnership as of, and within 75 days after, the end of such Fiscal Year. B. Direct Administrative Costs and General and Administrative Costs shall be allocated to, and borne by, the Partners as follows: 90% to the Limited Partners and 10% to the General Partners prior to, and 85% to the Limited Partners and 15% to the General Partners after, Payout (as defined in the Production Partnership Agreement). C. Except as set forth in Section 5.2B, Profits and Losses and each item of Income, gain, loss, cost, deduction and credit of the Limited Partnership shall be allocated between the Partners and credited to or charged against their Capital Accounts in the following ratio: -28- Limited Partners (including the General Partners to the extent they purchase Units) 99% Geodyne Properties and PW Energy (in the aggregate) 1% The General Partners shall allocate between themselves their aggregate Interest in a manner such that PW Energy shall be allocated a percentage equal to PW Production's percentage sharing ratio in the Production Partnership determined under Section 5.3B(i) of the Production Partnership Agreement, and the remaining amount shall be allocated to Geodyne Properties. The General Partners may amend this Agreement to provide for any different allocation between themselves at their discretion. D. The General Partners may not be required to contribute funds to the Limited Partnership to pay for Limited Partnership costs allocated to them except to the extent necessary to pay costs referred to in Section 5.2B. E. Notwithstanding anything to the contrary that may be expressed or implied in this Agreement, the interest of the General Partners in each material item of Partnership Income, gain, loss, deduction or credit shall be equal to at least one percent of each such item at all times during the existence of the Partnership. In determining the General Partners' interest in such items for the purpose of this Section 5.2E, units of limited partnership interest owned by the General Partners shall not be taken into account. Section 5.3. Determinations of Allocations and Distributions Among Partners ------------------------------------------------------------------- A. Except as set forth in Section 5.lA, all Distributable Cash distributed to the Limited Partners, as a class, and all Profits and Losses and each item of Income, gain, loss, cost, deduction or credit allocated to the Limited Partners, as a class, shall be distributed or allocated, as the case may be, to each Limited Partner in the ratio that the Capital Contribution of such Limited Partner bears to the total Capital Contributions of all Limited Partners. -29- B. Distributable Cash, Profits and Losses and each item of Income, gain, loss, cost, deduction or credit distributed or allocated to the Partners shall be distributed or allocated, as the case may be, to the Persons who were Partners, subject to the provisions of Section 10.2 of this Agreement, as of the last day of the fiscal period for which the distribution or allocation is to be made, except that in any fiscal period in which a Partner sells, assigns or transfers all or any part of such Partner's Interest to any Person who during the fiscal period is admitted as a Substituted Partner, the Distributable Cash, Profits and Losses and each item of Income, gain, loss, cost, deduction or credit attributable to the Interest so sold, assigned or transferred shall be allocated between the transferor and the transferee on the basis of the number of days in the fiscal period before the admission, and on and after the admission, of the transferee as a Substituted Partner; provided, however, that the Distributable Cash attributable to a Sale of a Producing Property by the Production Partnership shall be distributed to those Partners who are Partners on the day the distribution of such Distributable Cash occurs. The General Partners shall inform the Limited Partners of the occurrence and terms of any such Sale by the Production Partnership as soon as practicable after such Sale has been consummated. C. The Limited Partnership's share of the Production Partnership's adjusted basis in each of its Producing Properties (allocated pursuant to the Managing Partners' and the Limited Partnership's interests in Production Partnership capital at the date of acquisition of the respective Producing Properties) shall be allocated pursuant to Section 613A(c) (7) (D) of the Code among the Partners in proportion to the interest of each in the Limited Partnership capital ultimately used to acquire that property. D. All items of Income, gain, loss, deduction and credit allowable for Federal income tax purposes and all recapture of such deductions and credits shall be allocated and charged or credited to the Partners in the same manner that the revenues, costs or expenses giving rise to such items of Income, gain, loss, deduction and credit are allocated and charged. Federal income tax deductions for cost or percentage depletion with respect to any Producing Property shall be determined at the Partner level and shall be determined in the case of percentage depletion on the same basis that Income from the Producing Property is allocated. -30- E. The Capital Account of each Partner shall be credited or debited with its Capital Contribution and distributions of Distributable Cash, by the adjusted basis of partnership property distributed in kind and with its share of Income, gain, loss, and deductions of the Limited Partnership. Solely for purposes of making adjustments to Capital Accounts, the Limited Partnership shall compute a simulated depletion allowance on each oil and gas property using that method, as between the cost depletion method or the percentage depletion method (without regard to limitations which could apply to less than all the Partners such as the quantity limitations of Code Section 613A(c)(3)) which results in the greatest simulated depletion allowance. The Limited Partnership's simulated depletion allowance shall reduce each Partner's Capital Account in the same proportion as such Partner's share of the adjusted basis of such property as determined in Section 5.3C above. In no event shall the Limited Partnership's aggregate simulated depletion allowances with respect to a property exceed the Limited Partnership's adjusted basis in such property (maintained solely for Capital Account purposes). Upon the taxable disposition of all oil or gas property by the Limited Partnership, the Limited Partnership's gain or loss shall be determined (solely for Capital Account purposes) by subtracting its adjusted basis in such property (maintained solely for Capita1 Account purposes) from the amount realized from such disposition. Any resultant simulated gain shall be allocated to the Partners in the same manner as that portion of the amount realized from such disposition which exceeds the Limited Partnership's adjusted basis in such property (maintained solely for Capital Account purposes) is allocated to the Partners and shall increase such Partners' Capital Accounts accordingly. Any resultant simulated loss shall be allocated to the Partners in the same proportion as such Partners (or their predecessors in interest) were allocated adjusted basis under Section 5.3C with respect to such property and shall reduce such Partners' Capital Accounts accordingly. F. The Capital Accounts of those Partners which are charged with an expense shall be credited with any portion of that expense which is finally determined, judicially or administratively, to be nondeductible for Federal income tax purposes, less any amortization or depreciation thereof incurred prior to the date that the credit is made. -31- ARTICLE SIX Non-Transferability of General Partner Interest ----------------------------------------------- Section 6.1. Non-Transferability of General Partner Interest ------------------------------------------------------------- Except as provided in Section 6.2B, a General Partner (including by definition any successor General Partner) shall not have the right to retire, withdraw, transfer or assign its General Partner Interest, except that there may be substituted in its stead as General Partner any entity that has, by merger, consolidation or otherwise, acquired substantially all of its assets or capital stock and continued its business. Section 6.2. Removal of General Partners ----------------------------------------- A. Subject to Section 11.3 of this Agreement, upon the Consent of more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners (i) the power shall be vested in the Limited Partners to (a) remove any or all General Partners and (b) cause the General Partners, on behalf of the Limited Partnership, to Remove any Managing Partner. (ii) (a) The power shall be vested in each General Partner to Remove the other General Partner, and pursuant to Section l0.1A of this Agreement admit a successor general partner, for "Cause" as defined in Section 6.2A(ii)(b), but for no other reason. (b) "Cause" for purposes of Section 6.2A(ii)(a) shall be deemed to exist only (i) when a court of competent jurisdiction shall have made a final determination (which determination is not successfully appealed) that a General Partner has been guilty of gross negligence, fraud, intentional misconduct or similar breach of fiduciary responsibility in carrying out its duties as a General Partner, or (ii) a General Partner is dissolved or liquidated on account of insolvency or any other event occurs resulting in the appointment of a trustee or receiver who acquires control of the affairs of such General Partner for the purpose of dissolution or liquidation on account of -32- insolvency, and such trustee or receiver is not dismissed within 90 days after appointment of such trustee or receiver, or (iii) (a) a report on the audited financial statements of a General Partner and its consolidated corporate affiliates is issued by the independent accountants for such General Partner that is qualified on a going concern basis, or (b) either General Partner requests an audit to be performed of the other General Partner and its consolidated corporate affiliates by the independent accountants for the other General Partner (the expense of such audit being paid by the General Partner requesting the audit), and such audit results in the issuance of an opinion with respect to the financial statements of the other General Partner and its consolidated corporate affiliates for the period ending, and as of, the most recent date feasible, that is qualified on a going concern basis. B. (i) In the event that a General Partner is Removed by the Limited Partners or the other General Partner, the Removed General Partner's Interest in the Limited Partnership shall be transferred to the other General Partner, and the other General Partner shall assign to the Removed General Partner a portion of Limited Partnership Income, costs and Distributable Cash as and when such items are allocated or distributed, as the case may be, by the Limited Partnership equal to the percentage interest of the Removed General Partner in the Limited Partnership prior to its Removal. (ii) If the Limited Partners elect to Remove a sole General Partner as permitted under this Section, and further elect to continue the business of the Limited Partnership with one or more successor General Partners, the removed General Partner shall not be Removed until a successor General Partner has been selected by the Limited Partners and admitted to the Limited Partnership pursuant to Section 10.2 of this Agreement. (iii) In the event the sole General Partner is Removed by the Limited Partners and a successor General Partner selected, the incoming General Partner and the Removed General Partner shall, by mutual agreement, select an independent petroleum consultant to value the Removed General Partner's Interest in the Limited Partnership. In determining the value of the General Partner's Interest, the independent consultant will take into account appropriate discount factors in light of the risk of recovery of oil and gas reserves, and, in any event, will utilize a "risk -33- factor" discount no less than that utilized in the most recent offer extended pursuant to Section 7.5 of the Agreement, if any. The incoming General Partner, or the Limited Partnership, shall have the option to purchase at least 20% of the interests of the Removed General Partner for the value determined by the independent appraisal. The Removed General Partner's Interest in the Limited Partnership shall be transferred to the successor General Partner, and the successor General Partner shall assign to the Removed General Partner a portion of Limited Partnership Income, costs and Distributable Cash as and when such items are allocated or distributed, as the case may be, by the Limited Partnership equal to the percentage interest of the Removed General Partner in the Limited Partnership prior to Removal, less the portion purchased by the successor General Partner or the Limited Partnership. (iv) If the Limited Partners have Removed a General Partner, the power shall be vested in the Limited Partners to Consent to the admission of a successor General Partner meeting the requirements of Section 6.2B(v) of this Agreement to take the place of a Removed General Partner upon the consent of more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners. (v) If there is admitted to the Limited Partnership a successor General Partner, such admission shall not become effective unless the Limited Partnership shall have received a certificate, duly executed by or on behalf of such proposed successor General Partner, to the effect that: (a) it is experienced in performing (or employs sufficient personnel who are experienced in performing) functions of the type then being performed by the Removed General Partner and (b) it has a net worth, together with the net worth of any remaining General Partner, sufficient to satisfy the net worth requirements of the Code, Treasury Regulations, the Internal Revenue Service or the courts applicable to a general partner in a limited partnership in order to ensure that the Limited Partnership will not fail to be classified for Federal income tax purposes as a partnership. (vi) Notwithstanding Section 3.7B, any General Partner who shall be Removed from the Limited Partnership shall be released by the remaining General Partner and any successor General Partner from all liability for Limited Partnership debts and obligations incurred by the Limited Partnership prior to the time of such Removal. -34- Section 6.3. Incapacity of a General Partner --------------------------------------------- A. In the event of the Incapacity of a sole General Partner, the Limited Partnership shall be dissolved. However, within 90 days thereafter the remaining Partners may elect to reconstitute the Limited Partnership prior to application of the liquidation provisions of Section 8.2. B. Upon the Incapacity of a General Partner, the Person who is its legal representative shall have all the rights of a General Partner for the purpose of settling or managing its estate and such power as the Incapacitated General Partner possessed to assign all or any part of its Interest and to join with such assignee in satisfying conditions precedent to such assignee becoming a Substituted Partner. Section 6.4. Termination of Contracts with General Partners or Managing Partners --------------------------------------------------------------- Subject to and upon fulfilling the conditions of Section 11.3, the power shall be vested in the Limited Partners to terminate any or all contracts between the General Partners or any Affiliate and the Limited Partnership, or to cause the General Partners, on behalf of the Limited Partnership, to terminate any contracts between the Managing Partners or any Affiliate and the Production Partnership, and select, or cause the General Partners, on behalf of the Limited Partnership, to select, as the case may be, a replacement Person therefor upon the Consent of more than 50% in Interest of the Limited Partners. ARTICLE SEVEN Transferability of Limited Partner's Interest --------------------------------------------- Section 7.1. Transferability of Limited Partner's Interest ----------------------------------------------------------- A. A Limited Partner shall not have the right to retire or withdraw from the Limited Partnership. Except as provided in this Section 7.1, a Limited Partner's Interest shall be transferable so long as the transfer is made in accordance with all applicable laws. -35- B. In no event shall all or any part of a Limited Partner's Interest be assigned or transferred to a minor or an incompetent except in trust or by will or intestate succession or to any Person not qualified to hold interests in federal leases. C. No purported sale, assignment or transfer by a transferor after which the transferor would continue to hold an Interest representing a Capital Contribution of less than $1,000 will be permitted or recognized for any purpose without the Consent of the General Partners, which Consent shall be granted only for good cause shown. D. No sale, exchange, transfer or assignment of a Limited Partner's Interest shall be made if in the opinion of counsel to the Limited Partnership, such sale, exchange, transfer or assignment, would (i) cause the Limited Partnership to lose its status as a partnership for Federal income tax purposes, or (ii) violate the Securities Act of 1933, as amended, or any state securities or "blue sky" laws (including any investor suitability standard applicable to the Limited Partnership or the Interest to be sold, exchanged, transferred or assigned). Section 7.2. Incapacity of Limited Partners -------------------------------------------- If a Limited Partner becomes Incapacitated, the Person who is its legal representative shall have all the rights of a Limited Partner for the purpose of settling or managing its estate and such power as the Incapacitated Limited Partner possessed to assign all or any part of its Interest and to join with such assignee in satisfying conditions precedent to such assignee becoming a Substituted Limited Partner. The Incapacity of a Limited Partner shall not dissolve the Limited Partnership. Section 7.3. Assignees and Substituted Limited Partners -------------------------------------------------------- A. The Limited Partnership shall not recognize for any purpose any purported sale, assignment or transfer of all or any fraction of the Interest of a Limited Partner unless the provisions of Section 7.1 shall have been complied with and there shall have been filed with the Limited Partnership a dated Notification of such sale, assignment or transfer, executed and acknowledged by both the seller, assignor or transferor and the purchaser, assignee or transferee and such Notification (i) contains the acceptance by the purchaser, assignee or transferee of all of the terms and provisions of this Agreement and (ii) represents that such sale, assignment or transfer was made in accordance with all applicable laws and regulations. Any sale, -36- assignment or transfer shall be recognized by the Limited Partnership as effective on the date of such Notification if the date of such Notification is within 30 days of the date on which such Notification is filed with the Limited Partnership, and otherwise shall be recognized as effective on the date such Notification is filed with the Limited Partnership. B. Any Limited Partner which shall assign all of its Interest shall cease to be a Limited Partner, except that, unless and until a Substituted Limited Partner is admitted in its stead, such assigning Limited Partner shall retain the statutory rights and obligations of a Limited Partner under the Act. C. A Person who is the assignee of all or any fraction of the Interest of a Limited Partner shall be subject to all the provisions of this Article Seven to the same extent and in the same manner as any Limited Partner desiring to make an assignment of its Interest. D. Any purchaser, assignee, transferee, donee, heir, legatee or other recipient of an Interest shall be admitted to the Limited Partnership as a Substituted Limited Partner only with the Consent of the General Partners, which Consent may be granted or withheld by the General Partners at their sole and absolute discretion. The admission of such Person as a substituted Partner shall be evidenced by the execution by a General Partner of a certificate evidencing the admission of such Person as a Limited Partner and an amendment to this Agreement executed by a General Partner on its own behalf, as well as on behalf of each other Limited Partner, pursuant to the power of attorney granted pursuant to Section 12.5 of this Agreement and recorded or filed in the proper records of the State. E. No Person shall become a Substituted Limited Partner until such Person shall have satisfied the requirements of Section 10.2; provided, however, that for the purpose of allocating Profits, Losses, and items of income, gain, loss, cost, deductions, credits and Distributable Cash, a Person shall be treated as having become, and as appearing in the records of the Limited Partnership as, a Limited Partner on such date as the sale, assignment or transfer to such Person was recognized by the Limited Partnership pursuant to Section 7.3A. -37- F. Each Limited Partner shall indemnify and hold harmless the Limited Partnership, the General Partners and their Affiliates and every Limited Partner who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of or arising from any actual or alleged misrepresentation or misstatement of facts or omission to state facts made (or omitted to be made) by such Limited Partner in connection with any assignment, transfer, encumbrance or other disposition of all or any part of an Interest, or the admission of a Substituted Limited Partner to the Limited Partnership, against expenses for which the Limited Partnership or such other Person has not otherwise been reimbursed (including attorneys' fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by it in connection with such action, suit or proceeding. G. At the end of each calendar quarter in which (i) a Substituted Limited Partner has been approved for admission by the General Partners or (ii) there has been any return of the Capital Contributions of the Limited Partners, the General Partners shall file an amended certificate of limited partnership with the appropriate authorities of each state in which the Limited Partnership transacts business for the purpose of adding as Substituted Limited Partners all assignees of Interests previously approved by the General Partners for admission as Substituted Limited Partners and for reflecting accurately the Capital Contributions of the Limited Partners. H. (i) Each Limited Partner represents and warrants that such person does not own, directly or indirectly, more than 20% of the outstanding stock of the General Partners or any of their Affiliates as defined in Section 1504(a) of the Code. (ii) Each Limited Partner further represents and warrants that the following statements are true: (a) if such Limited Partner is an individual, such Limited Partner is a U.S. citizen, and is 21 years of age or older; if such Limited Partner is a partnership or an association, all of its members are of such citizenship; if such Limited Partner is a corporation, it is authorized and otherwise duly qualified to hold an Interest in the Limited Partnership; (b) such Limited Partner has thoroughly read the Prospectus and this Agreement and understands the nature of the risks involved in the proposed investment; (c) such Limited Partner is experienced in investment and business matters; (d) such Limited Partner, or in the case of an IRA or Employee Benefit Plan (as those terms are defined in the -38- Prospectus), each beneficiary of such Limited Partner has (x) a net worth, exclusive of home, furnishings and automobiles of at least $25,000 and had during the last tax year, or estimates that such Limited Partner will have during the current year, "taxable income" as defined in Section 63 of the Code, of $25,000 or more (income of $20,000 in California), or (y) a net worth, exclusive of home, furnishings and automobiles of at least $90,000 ($75,000 in California) or (z) satisfies any more restrictive suitability requirements imposed by applicable Blue Sky laws; (e) such Limited Partner recognizes that the Limited Partnership will be newly organized and will have no history of operations or earnings and is a speculative venture; (f) such Limited Partner understands that the transferability of such Limited Partner's Interest(s) in the Limited Partnership is restricted pursuant to the provisions of the Agreement and that such Limited Partner cannot expect to be able to liquidate such Limited Partner's investment readily in case of emergency; and (g) unless otherwise indicated in such Limited Partner's Subscription Agreement and Power of Attorney, such Limited Partner is the sole party in interest in such Limited Partner's Interest and, as such, is vested with all legal and equitable rights in such Interest. (iii) In the event that the General Partners believe any of the representations made by a Limited Partner in Section 7.3H were untrue at the time of such Limited Partner's acquisition of an Interest or if the General Partners believe any of the representations made in Section 7.3H(i) and (ii)(a) become untrue at any time during the time that such Limited Partner is a Limited Partner, the General Partners shall have the right, exercisable at their sole discretion, within 60 days after the receipt of knowledge of such untruth or the recognition of such belief, to buy such Limited Partner's Interest in the Limited Partnership at a purchase price calculated in a manner identical to the manner set forth in Section 7.5 of this Agreement. In the event that the General Partners believe the representation contained in Section 7.3H(ii) (g) has become untrue at any time with respect to a Limited Partner, such Limited Partner shall immediately file with the General Partners (i) a statement signed by the Limited Partner and the other interested parties setting forth the nature and the extent of the interest of each, and the nature of the agreement between them, and (ii) such other information, statements, and grants of powers of attorney as may be requested by the General Partners. -39- The effective date of any purchase made pursuant to this Section shall be the first day of the calendar month during which the General Partners give notice to the Limited Partner of their desire to exercise their rights of purchase hereunder. Section 7.4. Incapacity of a Limited Partner --------------------------------------------- Upon the Incapacity of a Limited Partner or upon the seizure of a Limited Partner's Interest in the Limited Partnership, the successor to such Limited Partner's Interest ("Successor") shall be deemed an assignee of such Limited Partner's Interest in the Limited Partnership and neither the Limited Partner nor the Successor shall have the right to demand immediate valuation and payment of such Limited Partner's Interest. Section 7.5. Right of Presentment ---------------------------------- A. Each Limited Partner who has subscribed for Units will have the option subject to the terms and conditions set forth in this Section 7.5 to require the General Partners to purchase all of such Limited Partner's Interest in the Limited Partnership, provided that the option may not be exercised after the date of any notice that will effect a dissolution and termination of the Limited Partnership pursuant to Section 8.1 of this Agreement. The obligation of each of PW Energy and Geodyne Properties to purchase Units shall be joint and several and shall be limited to an aggregate amount during any four consecutive fiscal quarters equal to 1% of the Limited Partners' Capital Contributions (exclusive of Capital Contributions made by either General Partner or an Affiliate in its capacity as a Limited Partner). The obligations of the General Partners hereunder shall be satisfied to the extent an Affiliate of a General Partner or an partnership sponsored by the General Partners or their Affiliates acquires tendered Units. A Limited Partner may exercise the Limited Partner's option only with respect to all of the Limited Partner's Interest. Any such exercise shall be effected by a Notification thereof to the General Partners. Prior to the expiration of twelve months after the date on which 90% of the Limited Partners' Capital Contributions have been expended by the Production Partnership, such latter date being the "Valuation Date," such Limited Partner may, subject to the terms and conditions of this Section 7.5, sell such Limited Partner's Interest to the General Partners at a purchase price equal to 75% of the Subscription amount therefor, less the amount of any distributions of Distributable Cash to such Limited Partner. Thereafter, each such Limited Partner may, subject to the terms and conditions of this Section 7.5, tender such Limited Partner's Interest to the General Partners for purchase at a price determined in accordance with Section 7.5C of this Agreement. -40- B. Each Limited Partner tendering an Interest who does not revoke such Limited Partner's election pursuant to Section 7.5D shall assign such Interest to the purchaser thereof pursuant to the power of attorney granted the General Partners in the Subscription Agreement and Power of Attorney executed by such Limited Partner. The purchase price for such Interests will be determined, as of the close of business of the last day of the calendar quarter (the "Effective Date"), with respect to all Interests tendered to the General Partners during each such calendar quarter after the Valuation Date. C. The purchase price to be paid for the Interest of any Limited Partner who tenders an Interest pursuant to this Section 7.5 after the Valuation Date will be determined by assuming the sale of all Production Partnership Property and the subsequent liquidation of the Production Partnership pursuant to Section 8.2 of the Production Partnership Agreement and the liquidation of the Limited Partnership pursuant to Section 8.2 of this Agreement. The hypothetical credit balance in a Limited Partner's Capital Account shall be the purchase price for such Limited Partner's Interest; provided, however, that such purchase price shall be reduced by an amount equal to 70% of the distributions of Distributable Cash received by such Limited Partner on or before the date the Limited Partner receives a check in payment for the Limited Partner's tendered Interest which is attributable to sales of Production Partnership Hydrocarbon production attributable to Proved Reserves since the date as of which the Production Partnership's Proved Reserves are calculated for purposes of this Section 7.5C. In order to value the sale proceeds to be received upon such assumed sale, the General Partners shall employ the petroleum engineering reports and other petroleum reserve information referred to in Section 9.4C of this Agreement for the end of the Fiscal Year preceding the applicable Effective Date. First, future gross revenues expected to be derived from the production and sale of the Proved Reserves attributable to the Production Partnership Producing Properties will be estimated using either (i) escalations of future sales prices of Hydrocarbons supplied by the General Partners (the "Escalated Case") or (ii) only escalations of such future sales prices of Hydrocarbons permitted by Regulation S-X adopted by the Securities and Exchange Commission (the "SEC Case"), as the General Partners may determine in their discretion. Next, future net revenues will be calculated by deducting anticipated expenses (including operating expenses and other costs that will be incurred in producing and marketing such reserves and any gross production, excise, windfall profit or other taxes, other than Federal income taxes, based on the Hydrocarbon production of the Production Partnership or sales thereof) (using either (i) escalations of future costs supplied -41- by the General Partners in the event the General Partners adopted the Escalated Case with respect to future sales prices of Hydrocarbons or (ii) constant future costs in the event the General Partners adopted the SEC Case with respect to future sales prices of Hydrocarbons) from estimated future gross revenues. Then the present worth of the future net revenues will be calculated by discounting the estimated future net revenues at either 10% (in the event the General Partners employed pricing criteria in accordance with the SEC case) or that rate per annum which is one (1) percentage point higher than the prime rate of interest of The Chase Manhattan Bank, N.A. or any successor bank, as such prime rate of interest is announced by said bank from time to time (in the event the General Partners employed pricing criteria in accordance with the Escalated Case). If the latter interest rate is used and exceeds 11% per annum, the General Partners will provide, for comparative purposes only, the repurchase price if computed based upon a 10% per annum discount rate. This amount will be reduced by an additional 30% to take into account the uncertainties attendant to the production and sale of Hydrocarbon reserves and other unforeseen contingencies. This reduced amount is subject to upward or downward adjustment by the General Partners, in the event that during the period between the end of the Fiscal Year preceding the applicable Effective Date and such Effective Date, there has occurred any material increase or decrease in the current price of oil or gas or in the estimated amount of Production Partnership Proved Reserves thereof from the current oil and gas prices or the estimated Proved Reserves used in the above calculation of the present worth of the future net revenues. Salvage value of tangible equipment installed on the Production Partnership Wells and costs of plugging and abandoning the productive Production Partnership Wells, both discounted at the applicable aforementioned rate from the expected date of abandonment, will be estimated, and the Production Partnership's Producing Properties which do not have Proved Reserves attributable to them but which have not been condemned will have such reserves valued at their then fair value as determined by an independent petroleum engineering firm. The Production Partnership's cash on hand, prepaid expenses, accounts receivable (less a reasonable reserve for doubtful accounts) and the market value of its other assets as determined by a qualified independent appraiser will be added to the value of the Production Partnership's Producing Properties thus determined, to arrive at the Production Partnership's hypothetical sale proceeds for purposes of this Section 7.5C. -42- D. Within sixty (60) days after the applicable Effective Date, the General Partners will deliver to each Limited Partner who has tendered such Limited Partner's Interest to the General Partners during the calendar quarter ending on such Effective Date a check in the amount of the purchase price for such Interest together with a statement evidencing that such price has been determined in accordance with the provisions of Section 7.5C. The statement will show which portion of the purchase price is represented by the value of the Proved Reserves and by each of the other classes of Production Partnership assets and liabilities attributable to the account of the Limited Partnership and, by virtue of a Limited Partner's Interest in the Limited Partnership, attributable to the account of the Limited Partner. The Limited Partner will then have thirty (30) days after receipt of payment for such Interest from a General Partner to revoke, by notice to the General Partners and return of such check, the sale of such Limited Partner's Interest. If the Limited Partner does not timely revoke such Limited Partner's intention to sell, the assignment of such Limited Partner's Interest to the purchaser of such Interest will be executed on such Limited Partner's behalf by a General Partner as attorney in fact; provided, however, that the obligation of the General Partners to purchase the Interests tendered by the Limited Partners shall be limited during any four consecutive fiscal quarters to an amount not in excess of 1% of the Limited Partners' Capital Contributions (exclusive of Capital Contributions made by the General Partners or their Affiliates as Limited Partners). Moreover, the General Partners will not be obligated to buy any Units pursuant to such right if such purchase, when added to the total of all other Sales or other dispositions of Interest within the preceding 12 months, would result in the Limited Partnership being considered to have terminated within the meaning of Section 708 of the Internal Revenue Code of 1954, as amended, or would cause the Limited Partnership to lose its status as a partnership for Federal income tax purposes. If less than all of the Interests tendered are purchased, the Interests purchased will be selected by lot. The Limited Partners whose tendered Interests were rejected by reason of the foregoing limitations shall not be entitled to priority in the following quarter. Contemporaneously with the closing of any such sale, which shall not be earlier than 30 days after tender of the purchase price for an Interest to a Limited Partner, a General Partner, as attorney in fact for such Limited Partner, will execute such certificates or other documents and perform such acts as the General Partners deem necessary to effect the sale and transfer of the liquidating Limited Partner's Interest to the purchaser and to preserve the limited liability status of the Limited Partnership under the laws of the jurisdictions in which it is doing business. -43- ARTICLE EIGHT Dissolution, Liquidation and Termination ---------------------------------------- of the Limited Partnership -------------------------- Section 8.1. Events Causing Dissolution ---------------------------------------- A. The Limited Partnership shall be dissolved upon the happening of any of the following events: (i) the expiration of its term, without any continuation thereof as set forth in Section 2.4 of this Agreement; (ii) the Incapacity of the sole General Partner. However, within ninety days thereafter the remaining Partners may elect to reconstitute the Limited Partnership prior to application of the liquidation provisions of Section 8.2; (iii) the Sale or other disposition at one time of all or substantially all of the assets of the Limited Partnership existing at the time of such Sale (including the liquidation or redemption other than in kind of its interest in the Production Partnership); (iv) the election to dissolve the Limited Partnership (a) by the General Partners (which election shall be Consented to by more than 50% in Interest of the Limited Partners), or (b) by the Consent of more than 50% in Interest of the Limited Partners; (v) ninety days after the Removal of the sole General Partner (unless a successor is elected pursuant to Section 6.2 of this Agreement); (vi) the dissolution and liquidation of the Production Partnership without the continuance of its business by the Limited Partnership pursuant to Section 4.2A(ii) of this Agreement; or (vii) the happening of any other event causing the dissolution of the Limited Partnership under the laws of the State, except that the Incapacity of any Limited Partner shall not dissolve the Limited Partnership and the seizure of the Interest of any Partner shall not dissolve the Limited Partnership. -44- B. Dissolution of the Limited Partnership shall be effective on the day on which the event occurs giving rise to the dissolution, but the Limited Partnership shall not terminate until the General Partners have recorded a notice of dissolution of the Limited Partnership with the office of the Secretary of State of the State and shall have complied with the laws of the other states in which its does business and the assets of the Limited Partnership have been distributed as provided in Section 8.2. C. Nothing contained in this Agreement shall impair, restrict or limit the rights and powers of the Partners under the laws of the State or any other jurisdiction in which the Limited Partnership is doing business to reform and reconstitute themselves as a limited partnership following dissolution of the Limited Partnership either under provisions identical to those set forth herein or under any other provisions. Section 8.2. Liquidation ------------------------- A. Upon dissolution of the Limited Partnership, its liabilities shall be paid in the order provided herein. The General Partners shall either distribute in kind or sell the Limited Partnership's property so that such disposition is in the best interests of the Limited Partners, and shall execute all amendments terminating the Limited Partnership. In connection with any such Sale, the General Partners shall attempt to obtain the best prices for such property. Pending such Sales, the General Partners shall have the right to continue to operate and otherwise to deal with Limited Partnership property. In the event the Limited Partnership is dissolved on account of the Incapacity or Removal of the sole General Partner, the Limited Partnership shall elect, in accordance with the provisions of Article Eleven, a person (the "Liquidating Agent") to perform the function of a General Partner in liquidating the assets of the Limited Partnership and winding up its affairs, and shall pay to such Liquidating Agent its reasonable fees and expenses incurred in connection therewith. Gain or loss realized on the Sale or other disposition of the Limited Partnership's assets will be credited to (in the case of gain) or charged against (in the case of loss) each Partner's Capital Account to the extent allocable to such Partner under Sections 5.2 and 5.3 of this Agreement. In the event of a distribution in kind of (a) any property other than an interest in a Producing Property, each Partner's Capital Account shall be debited with the portion of the Limited Partnership's adjusted basis thereof attributable to the interest therein distributed to it and (b) any Producing Property or an interest in any Producing Property, each Partner's Capital -45- Account shall first be credited or debited with its share of the unrealized appreciation or depreciation in the fair market value of said Producing Property or interest in said Producing Property. Each Partner's share of said unrealized appreciation or depreciation shall be equivalent to its share (allocated pursuant to Sections 5.2 and 5.3 of this Agreement) of the gain or loss on an actual Sale of such Producing Property or interest therein. The Capital Account of each Partner to whom a Producing Property or an interest in a Producing Property is distributed shall be debited with the fair market value of the Producing Property distributed to it. No Partner shall be distributed an interest in any asset if the distribution would result in a deficit balance or increase the deficit balance in its Capital Account (after making the adjustments referred to in this Section 8.2A relating to distribution in kind). Any liquidation of the Limited Partnership shall take place out of court and without application being made therefor to the Secretary of State of the State. B. In settling accounts after dissolution, the assets of the Limited Partnership shall be paid out in the following order: (i) to third party creditors, in the order or priority as provided by law; (ii) to the General Partners and any Liquidating Agent for any expenses of the Limited Partnership paid by or payable to them to the extent they are entitled to reimbursement therefor pursuant to this Agreement; (iii) to all of the Limited Partners in the amount equivalent to the amount of their positive Capital Account balances (as adjusted pursuant to Section 8.2A of this Agreement) on the date of distribution; (iv) to the General Partners in the amount equivalent to the amount of their positive Capital Account balances (as adjusted pursuant to Section 8.2A of this Agreement) on the date of distribution; and (v) the balance shall be paid to the Partners in the manner provided for by Sections 5.2 and 5.3 of this Agreement with respect to Distributable Cash. C. In the event that following the final distribution under Section 8.2B the General Partners have a deficit balance in their Capital Account balances, they shall contribute cash to the Limited Partnership necessary to eliminate said deficit balance, which amount shall be distributed to the other Partners to the extent of their remaining positive Capital Account balances. D. Notwithstanding anything to the contrary in this Agreement, upon the dissolution and termination of the Partnership, the General Partners will contribute to the Partnership the lesser of: (a) the deficit balances in their capital accounts; or (b) the excess of 1.01 percent of the total Capital Contributions of the Limited Partners over the capital previously contributed by the General Partners. -46- ARTICLE NINE Books and Records; Accounting; Tax Elections; etc. -------------------------------------------------- Section 9.1. Books and Records ------------------------------- The books and records of the Limited Partnership, including information relating to the sale by the General Partners or any Affiliates of goods or services to the Limited Partnership, and a list of the names and addresses and Interests of all Limited Partners, shall be maintained by the General Partners at the principal office of the Limited Partnership for a period of five years following the close of the Fiscal Year to which they relate and shall be available for examination there by any Partner or its duly authorized representatives at any and all reasonable times. Any Partner, or its duly authorized representatives, upon paying the costs of collection, duplication and mailing, shall be entitled for any proper purpose to a copy of the list of names and addresses and Interests of the Limited Partners. The Limited Partnership may maintain such other books and records and may provide such financial or other statements as the General Partners in their discretion deem advisable. Section 9.2. Accounting Basis for Tax and Reporting Purposes; Fiscal Year -------------------------------------------------------------- The books and records of the Limited Partnership for tax purposes, for purposes of this Agreement and for the purpose of reports to the Partners, shall be kept on the cash or accrual basis, as the General Partners shall determine. The Fiscal Year of the Limited Partnership shall be the calendar year to the extent permissible and the General Partners shall use their best efforts to obtain any necessary approvals therefor. Section 9.3. Bank Accounts --------------------------- The General Partners shall maintain a bank account or accounts to be maintained by the General Partners on behalf of the Limited Partnership with any bank in the United States having total assets in excess of $100,000,000. The General Partners shall not deposit Limited Partnership funds in an account with any bank in an aggregate amount in excess of 5% of such bank's total assets. Withdrawals shall be made only in the regular course of the Limited Partnership's business on such signature or -47- signatures as the General Partners may determine. All deposits and other funds not needed in the operation of the business may be deposited in interest-bearing accounts, certificates of deposit, money market funds (including those managed or marketed by the Dealer Manager or its Affiliates) or invested in short-term United States Government obligations maturing within one year, commercial paper of United States corporations having the highest credit rating granted by Moody's Investors Services, Inc. or Standard & Poors Corporation, or other similar highly liquid investments. Section 9.4. Reports --------------------- A. The General Partners shall close the Limited Partnership's books of account promptly at the close of each Fiscal Year and an annual examination of the Limited Partnership's financial statements shall be performed at the expense of the Limited Partnership by the Accountants. The General Partners shall furnish to the Limited Partners an annual report within 90 days after the close of each Fiscal Year of the Limited Partnership commencing with the Fiscal Year in which the Limited Partnership was Activated. If requested by a Limited Partner, the General Partners shall also furnish such Partner with a report within 60 days after the end of the first six months of the Fiscal Year in which such request was made, or within 60 days after the request is made, whichever is later. Such report will contain at least the following information: (i) Financial statements for the Limited Partner-ship's and the Production Partnership's accounts, including a balance sheet, statement of income, statement of changes in partners' capital and statement of changes in financial position prepared on an accrual basis in accordance with generally accepted accounting principles and accompanied by a report of the Accountants together with their opinion thereon, except that the semiannual financial statements need not be audited; (ii) A summary itemization, by type and/or classification, of the total fees and compensation, including any overhead reimbursement, paid by the Limited Partnership or Production Partnership or indirectly on their behalf, to any General Partner or Managing Partner and any Affiliate; -48- (iii) A description of each Producing Property acquisition, including the costs therefor, in which the Production Partnership owns an interest, except succeeding reports need contain only material changes (including all farmouts, development drilling, improved recovery operations and abandonments), if any, regarding Producing Properties already reported upon. In the case of wells that have been abandoned after production has commenced, a statement justifying such abandonment shall be included if a General Partner or an Affiliate is the operator. In the case of farmouts, the statement shall include a justification of the farmout, location, time, to whom made, and a general description of terms; (iv) A schedule reflecting a list of the wells drilled by the Production Partnership on behalf of the Limited Partnership and the costs thereof; B. Within 60 days after the end of each fiscal quarter each Limited Partner will receive a "participant statement" which summarizes his interest in the Limited Partnership. The participant statement will detail the Limited Partner's cash receipts and disbursements for the Limited Partner's Interest in the Limited Partnership. C. Within 90 days after the end of the Fiscal Year following the Fiscal Year in which Activation of the Limited Partnership occurs, and annually thereafter, the General Partners shall furnish to the Limited Partners a computation as of the end of the immediately preceding Fiscal Year, based upon engineering reports prepared by one or more qualified independent petroleum engineering firms with respect to Producing Properties containing Proved Reserves equal to at least 80% of the Proved Reserves of the Production Partnership (with the computation as to any balance of the Production Partnership's Proved Reserves being based upon petroleum engineering reports prepared by a General Partner or an Affiliate), of the total estimated Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves owned by the Production Partnership, the estimated dollar value thereof stated in then existing prices and escalated prices (as provided by the General Partners). In addition, the computation shall include an estimate of the time required for the extraction of such reserves and the present worth of such reserves and the estimate shall contain a statement that because of the time period required to extract such reserves the present value of revenues to be obtained in the future is less than if immediately receivable. -49- D. In addition to the report described in Section 9.4C of this Agreement, if an event occurs to the knowledge of the General Partners or their Affiliates leading to a reduction or an increase of such Reserves of more than 10 percent, excluding reduction as a result of normal production, an additional computation and estimate similar to that described in Section 9.4C shall be sent to each Limited Partner as soon as possible. E. By March 15 of each year, the General Partners will furnish a report to each Limited Partner containing such information as is pertinent for completion of its respective Federal, state, and other income tax returns. F. The General Partners shall file on a timely basis with the Securities and Exchange Commission all filings required to be made by the Limited Partnership and Production Partnership pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder. The General Partners shall make available to any Limited Partner upon the Limited Partner's request, copies of any report filed by or on behalf of the Limited Partnership or the Production Partnership with the Securities and Exchange Commission. The General Partners shall cause a copy of the report sent to the Limited Partners under paragraphs A, C, D and E hereof to be sent to the California Commissioner of Corporations. G. The General Partners agree to make all relevant financial and engineering reports available for review by a Limited Partner on request at the offices of the Limited Partnership. Section 9.5. Elections ----------------------- The General Partners shall cause the Limited Partnership to make all elections required or permitted to be made by the Limited Partnership under the Code and not otherwise expressly provided for in this Agreement, in the manner that the General Partners believe will be most advantageous to Limited Partners, except that (i) the General Partners shall not be required to make an election under Section 754 of the Code or corresponding provisions of applicable state income tax laws, and (ii) the General Partners shall make the election under Section 263(c) of the Code to expense all intangible drilling and development costs in the initial Limited Partnership Federal income tax return filed for the Fiscal Year in which such costs are incurred. -50- ARTICLE TEN Amendments ---------- Section 10.1. Proposal and Adoption of Amendments Generally ------------------------------------------------------------ A. Notwithstanding anything to the contrary contained herein, the General Partners may, without prior notice or consent of any Limited Partner, amend any provision of this Agreement (including an amendment to admit an additional General Partner or a successor General Partner in the event of the Removal of a General Partner by the other General Partner) if, in their opinion, such amendment does not have a material adverse effect upon the Limited Partners. Each Limited Partner hereby consents in advance to the admittance of such additional or successor General Partner for purposes of Section 10 of the Act. Such amendment shall thereafter be disclosed to the Limited Partners within a reasonable time thereafter. Amendments to this Agreement to reflect the addition or substitution of a Limited Partner or the admission of a successor General Partner shall be made at the time and in the manner referred to in Section 10.2. Any other amendment to this Agreement may be proposed by the General Partners or at least 10% in interest (as to capital and Profits and Losses) of the Limited Partners. The Partner or Partners proposing such amendment shall submit a Notification containing (a) the text of such amendment, (b) a statement of the purpose of such amendment, and (c) an opinion of counsel obtained by the Partner or Partners proposing such amendment to the effect that such amendment is permitted by the Act, will not impair the limited liability of the Limited Partners, and will not adversely affect the classification of the Limited Partnership as a partnership for Federal income tax purposes. The General Partners shall, within 15 days after receipt of any proposal under this Section l0.lA, give Notification to all Partners of such proposed amendment, of such statement of purpose and of such opinion of counsel, together, in the case of an amendment proposed by other Partners, with the views, if any, of the General Partners with respect to such proposed amendment. -51- B. Amendments to this Agreement shall be adopted if: (i) in the case of amendments referred to in Section l0.2A, the conditions specified in Section 7.3 shall have been satisfactorily completed and the Limited Partnership shall not have been furnished with an opinion of counsel to the Limited Partnership to the effect that such amendment will adversely affect the classification of the Limited Partnership as a partnership for Federal income tax purposes; (ii) in the case of amendments referred to in Section l0.2B, the conditions specified in Section 6.2 shall have been satisfactorily completed; or (iii) in the case of all other amendments, such amendment shall have been Consented to by more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners (unless such Consent is not required pursuant to Section l0.lA of this Agreement); provided, however, that no such amendment may: (a) enlarge the obligations of any Partner under this Agreement or convert the Interest of any Limited Partner into the Interest of a General Partner or modify the limited liability of any Limited Partner without the Consent of such Partner; (b) modify the method provided in Article Five of determining and allocating or distributing, as the case may be, Profits, Losses, Distributable Cash and each item of Income, gain, loss, cost, deduction or credit without the Consent of each Partner adversely affected by such modification; (c) amend Sections 4.9, 4.10, 6.1 or 6.2 without the Consent of the General Partners; or (d) amend Sections 2.3, 4.3, 4.4, 4.5, 4.6, this Article Ten or Section 11.3 without the Consent of at least 66% in Interest of the Limited Partners. C. Upon the adoption of any amendment to this Agreement, the amendment shall be executed by the General Partners, on their own behalf and as attorney-in-fact for all of the Limited Partners pursuant to the power of attorney granted in Section 12.5 of this Agreement, and shall be recorded in the proper records of the State and any other state in which the Limited Partnership is then doing business. Section 10.2. Amendments on Admission or Removal of Partners ------------------------------------------------------------- A. If this Agreement shall be amended to reflect the admission or substitution of a Limited Partner, the amendment to this Agreement may be adopted by either of the General Partners, the Person to be substituted or added, and the assigning Limited Partner. Any such amendment shall be executed on behalf of all Partners but may be executed by the substituted or added Partner, -52- the assigning Partner, and either of the General Partners, individually and on behalf of all of the other Partners pursuant to the power of attorney granted in Section 12.5 of this Agreement. B. If this Agreement shall be amended to reflect the Removal of a General Partner and the continuation of the business of the Limited Partnership, such amendment shall be signed by the remaining or successor General Partner and by the Removed General Partner. Any such amendment which reflects the admission of a successor General Partner shall be executed on behalf of all other Partners pursuant to the power of attorney granted in Section 12.5 of this Agreement. C. No Person shall become a Partner, except the Initial Limited Partner and an Additional Limited Partner, unless such Person shall have: (i) become a party to, and adopted all of the terms and conditions of, this Agreement; (ii) if such Person is other than an individual, provided upon request the General Partners with evidence satisfactory to counsel for the Limited Partnership of such Person's authority to become a Partner under the terms and provisions of this Agreement; and (iii) if requested, paid all reasonable legal fees of the Limited Partnership and the General Partners and filing and publication costs in connection with such Person's becoming a Partner. ARTICLE ELEVEN Consents, Voting and Meetings ----------------------------- Section 11.1. Method of Giving Consent --------------------------------------- Any Consent required by this Agreement may be given by a Limited Partner as follows: (i) at a meeting, in person, by a written proxy or signed writing directing the manner in which it desires that its vote be cast, which writing must be received by the General Partners prior to such meeting, or (ii) without a meeting, by a signed writing directing the manner in which it desires that its vote be cast, which writing must be received by the General Partners prior to the date upon which the vote of Limited Partners are to be counted. Any Partner may waive notice of or attendance at any meeting of the Partners and may execute a signed written consent. Only the votes of Limited Partners of record on the date of Notification, whether at a meeting or otherwise, shall be counted. The laws of the State pertaining to the validity and use of corporate proxies shall govern the validity and use of proxies given by Limited Partners. -53- Section 11.2. Meetings of Partners ----------------------------------- The General Partners may at any time call a meeting of the Limited Partners or for a vote, without a meeting, of the Limited Partners on matters upon which the Limited Partners are entitled to provide their Consent, and shall call for such a meeting or vote upon receipt by the General Partners of a request therefor made by at least 10% in Interest (as to capital, Profits and Losses) of the Limited Partners as of the date of receipt of such Notification. Within 15 days of the receipt of the Notification, the General Partners shall notify all Limited Partners of record as of the date of the Notification as to the time and place of the meeting, if called, and the general nature of the business to be transacted thereat, or if no such meeting has been called, of the matter or matters to be voted upon and the date upon which the votes will be counted. Any Limited Partnership meeting or the date upon which such votes, without a meeting, will be counted (regardless of whether the General Partners have called for such meeting or vote upon the request of Limited Partners or have initiated such event without such request) shall be not less than 30 or more than 60 days following mailing of the Notification thereof by the General Partners. All expenses of the meetings, voting and such Notification shall be borne by the Limited Partnership. Section 11.3. Limitations on Requirements for Consents ------------------------------------------------------- Notwithstanding anything to the contrary contained in this Agreement, the powers of the Limited Partners set forth in Sections 4.5E, 4.5F, 4.5G, 6.2A, 6.4 and 11.5 shall not be deemed to be granted to the Limited Partners or exercisable by them unless and until counsel for the Limited Partnership or counsel designated by at least 10% in Interest (as to capital and Profits and Losses) of the Limited Partners shall have delivered to the Limited Partnership an opinion to the effect that neither the grant nor the exercise of those powers is prohibited by the Act, will impair the limited liability of the Limited Partners or will affect the classification of the Limited Partnership as a partnership for Federal income tax purposes. -54- Section 11.4. Submissions to Limited Partners ---------------------------------------------- The General Partners shall give all the Limited Partners Notification of any proposal or other matter required by any provisions of this Agreement or by law to be submitted for the consideration and approval of the Limited Partners. Such Notification shall include any information required by the relevant provision of the Agreement or by law. Section 11.5. Acting without Concurrence of General Partners ------------------------------------------------------------- Except as limited by Section 11.3 and 10.1(B), more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners, without the necessity for concurrence by the General Partners, may vote to: (a) amend the Agreement or cause the Production Partnership Agreement to be amended; (b) dissolve the Limited Partnership or cause the Production Partnership to be dissolved; (c) remove either of the General Partners or both or cause the Managing Partners of the Production Partnership to be removed and elect new General Partners or cause the Production Partnership to elect new Managing Partners; (d) approve or disapprove the sale of all or substantially all of the assets of the Limited Partnership or cause the Production Partnership to sell or not to sell all or substantially all of its assets; or (e) cancel or amend the terms of any contract for services with the General Partners or any Affiliate or cause the Production Partnership to do so, which shall be without penalty, provided 30 days written notice is given. -55- ARTICLE TWELVE Miscellaneous Provisions ------------------------ Section 12.1. Notification to the Limited Partnership or the General Partners --------------------------------------------------------------------- Any Notification to the Limited Partnership or the General Partners shall be sent to the principal office of the Limited Partnership, as set forth in this Agreement. Except as provided herein, any Notification to a Limited Partner shall be sent to its last known address. Section 12.2. Binding Provisions --------------------------------- The covenants and agreements contained herein shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the respective parties hereto. Section 12.3. Applicable Law ----------------------------- This Agreement shall be construed and enforced in accordance with the laws of the State. Section 12.4. Separability of Provisions ----------------------------------------- If for any reason any provision or provisions hereof which are not material to the purposes or business of the Limited Partnership or of the Limited Partners' Interests are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement that are valid. Section 12.5. Appointment of the General Partners as Attorney-in-Fact ---------------------------------------------------------------------- -56- A. Each Limited Partner, by the execution of this Agreement by a General Partner on such Limited Partner's behalf pursuant to a power of attorney granted by such Limited Partner by means of such Limited Partner's execution of a Subscription Agreement and Power of Attorney, irrevocably constitutes and appoints each of the General Partners, its true and lawful agent and attorney-in-fact with full power and authority in its name, place and stead to execute, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents, instruments and conveyances that may be necessary or appropriate to carry out the provisions or purposes of this Agreement, including without limitation: (i) all certificates and other instruments (including counterparts of this Agreement), and any amendment thereof, including any amendment substituting a Limited Partner pursuant to Section 7.3, that the General Partners deem appropriate to form, reform, qualify or continue the Limited Partnership (or a new partnership with substantially the same provisions as the Limited Partnership) as a limited partnership (or a partnership in which the Partners will have limited liability comparable to that provided by the Act) in the jurisdiction in which the Limited Partnership may conduct business; (ii) all amendments and other instruments necessary to admit into the Limited Partnership additional or substituted Partners pursuant to Section 10.2; (iii) all instruments that the General Partners deem appropriate to reflect a change or modification of the Limited Partnership in accordance with the terms of this Agreement (including those necessary to reflect additional Capital Contributions); and (iv) all conveyances and other instruments that the General Partners deem appropriate to reflect the dissolution and termination of the Limited Partnership. B. The appointment by all Limited Partners of each of the General Partners, as agent and attorney-in-fact, shall be deemed irrevocable and to be a power coupled with an interest, in recognition of the fact that each of the Partners under this Agreement will be relying upon the power of the General Partners to act as contemplated by this Agreement in any filing and other action by it on behalf of the Limited Partnership, and shall survive the Incapacity of any Person hereby giving such power and the transfer or assignment of all or any part of the Interest of such person; provided, however, that in the event of the transfer by a Limited Partner of all of its Interest, the foregoing powers of attorney of the transferor Partner shall survive such transfer only until such time as the transferee shall have been admitted to the Limited Partnership as a Substituted Limited Partner and all required documents and instruments shall have been duly executed, filed and recorded to effect such substitution. -57- Section 12.6. Entire Agreement ------------------------------- This Agreement constitutes the entire agreement among the parties. This Agreement supersedes any prior agreement or understanding among the parties and may not be modified or amended in any manner other than as set forth herein. Section 12.7. Paragraph Titles ------------------------------- Article and section titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text. Section 12.8. Counterparts --------------------------- This Agreement may be executed in several counterparts, all of which together shall constitute one agreement binding on all parties hereto, notwithstanding that all the parties have not signed the same counterpart except that no counterpart shall be binding unless signed by the General Partners. GEODYNE PROPERTIES, INC. By: // Thomas W. Kitchin // ----------------------- Thomas W. Kitchin President PW ENERGY INC. By: // Lawrence S. Kash // --------------------- Lawrence S. Kash WITHDRAWING AND INITIAL LIMITED PARTNER // Susan Layman // ------------------ Susan Layman -58- ADDITIONAL LIMITED PARTNERS. All those Additional Limited Partners whose names, places of residence and Capital Contributions appear on Schedule A, which is attached hereto and incorporated herein by reference, by Geodyne Properties, Inc. and PW Energy Inc. pursuant to a duly granted power of attorney. GEODYNE PROPERTIES, INC. By: // Thomas W. Kitchin // ----------------------- Thomas W. Kitchin, President PW ENERGY INC. By: // Lawrence S. Kash // ---------------------- Lawrence S. Kash, President ACKNOWLEDGEMENTS STATE OF OKLAHOMA ) ) COUNTY OF TULSA ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Thomas W. Kitchin who, after being duly sworn by me, did declare that he is the identical person who executed the foregoing Amended and Restated Agreement and Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-F, that he is the President of Geodyne Properties, Inc. and that by and with the authority of the Board of Directors of Geodyne Properties, Inc. and as attorney-in-fact for each Limited Partner he executed such Amended and Restated Agreement and Certificate as the free and voluntary act and deed of Geodyne Properties, Inc. and as attorney-in-fact for each Limited Partner for the purposes therein set forth and that he is familiar with statements contained therein and such statements are true. -59- Subscribed, sworn to and acknowledged by said Thomas W. Kitchin on this 10th day of September, 1986. // Glenda Devore // ---------------------------- Notary Public My Commission Expires: 7/16/90 STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Lawrence S. Kash who, after being duly sworn by me, did declare that he is the identical person who executed the foregoing Amended and Restated Agreement and Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-F, that he is the President of PW Energy Inc. and that by and with the authority of the Board of Directors of PW Energy Inc. and as attorney-in-fact for each Limited Partner he executed such Amended and Restated Agreement and Certificate as the free and voluntary act and deed of PW Energy Inc. and as attorney-in-fact for each Limited Partner he executed such Amended and Restated Agreement and Certificate as the free and voluntary act and deed of PW Energy Inc. and as attorney-in-fact for each Limited Partner for the purposes therein set forth and that he is familiar with statements contained therein and such statements are true. Subscribed, sworn to and acknowledged by said Lawrence s. Kash on this 9th day of September, 1986. // Christa M. Bowen // ----------------------- Notary Public My Commission expires: August 31, 1988 -60- STATE OF OKLAHOMA ) ) ss. COUNTY OF TULSA ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Susan Layman who, after being duly sworn by me, did declare that she is the identical person who executed the foregoing Amended and Restated Agreement and Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-F, that she executed such Agreement and Certificate as her free and voluntary act and deed for the purposes therein set forth and that she is familiar with the statements contained therein and such statements are true. Subscribed, sworn to and acknowledged by said Susan Layman on this 10th day of September, 1986. // Glenda Devore // --------------------- Notary Public My Commission Expires: 7/16/90 -61- EX-4.4 5 I-D, AMENDMENT 1 TO LTD. PSHP. AGREEMENT FIRST AMENDMENT TO AMENDED AND RESTATED CERTTFICATE OF LIMITED PARTNERSHIP AND FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP OF PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D The undersigned, desiring to amend its amended and restated certificate of limited partnership pursuant to the Oklahoma Revised Uniform Limited Partnership Act, as amended, Okla. Stat., tit. 54, Section 301 et seq. (1991) (the "Act"), do hereby state, and desiring to amend the Amended and Restated Agreement and Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-D dated as of March 4, 1986, as amended do hereby agree: 1. The name of the limited partnership is "PaineWebber/Geodyne Energy Income Limited Partnership I-D." The date of filing of the Original Certificate and Agreement of Limited Partnership was December 10, 1985, as amended by the Amended and Restated Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-D filed on March 10, 1989. 2. The Amended and Restated Certificate of Limited Partnership is hereby revised to change the name of the Limited Partnership to the following: Geodyne Energy Income Limited Partnership I-D 3. (a) The Amended and Restated Certificate of Limited Partnership is hereby revised to change the address of the limited partnership, which is the same address where the records of the limited partnership are kept, to Two West Second Street, Tulsa, Oklahoma 74103. (b) The Amended and Restated Certificate of Limited Partnership is hereby revised to change the name and address for the registered agent for service of process to Geodyne Properties, Inc., Two West Second Street, Tulsa, OK 74103. -1- 4. The Amended and Restated Certificate of Limited Partnership is hereby revised to change the name, mailing address, and business address of the general partner as follows: Geodyne Properties, Inc. Two West Second Street Tulsa, OK 74103. 5. The latest date upon which the limited partnership is to dissolve is December 31, 1999. 6. The Amended and Restated Agreement and Certificate of Limited Partnership is hereby revised to replace the first sentence of Section 2.2 with the following: The Limited Partnership shall be conducted under the name Geodyne Energy Income Limited Partnership I-D. 7. The Amended and Restated Agreement and Certificate of Limited Partnership is hereby revised to replace the third and fourth sentences of Section 2.2 with the following: The office and principal place of business of the Limited Partnership shall be c/o Geodyne Properties, Inc., Two West Second Street, Tulsa, Oklahoma 74103. The agent for service of process on the Limited Partnership shall be Geodyne Properties, Inc., Two West Second Street, Tulsa, OK 74103. 8. On December 18, 1986, PW Energy Inc., a Delaware corporation, was merged with and into Geodyne Properties, Inc. under the name Geodyne Properties, Inc. ("Geodyne"), as evidenced by a Certificate of Merger of PW Energy Inc. into Geodyne Properties, Inc. filed of record on such date in the office of the Secretary of State of Delaware in Book 466 at Page 609. Geodyne survived the merger as the sole general partner of the PaineWebber/Geodyne Energy Income Limited Partnership I-D. 9. In all other respects, the Amended and Restated Agreement and Certificate of Limited Partnership is hereby ratified and confirmed. -2- DATED: February 24, 1993 By: Geodyne Properties, Inc., General Partner By: // Michael E. Luttrell // ------------------------ Michael E. Luttrell Executive Vice President By: Geodyne Properties, Inc., Attorney-in-fact for all Limited Partners By: // Michael E. Luttrell // ------------------------- Michael E. Luttrell Executive Vice President -3- EX-4.5 6 I-E, AMENDMENT 1 TO LTD. PSHP. AGREEMENT FIRST AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF LIMITED PARTNERSHIP AND FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP OF PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E The undersigned, desiring to amend its amended and restated certificate of limited partnership pursuant to the Oklahoma Revised Uniform Limited Partnership Act, as amended, Okla. Stat., tit. 54, Section 30l et seq. (1991) (the "Act"), do hereby state, and desiring to amend the Amended and Restated Agreement and Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-E dated as of September 10, 1986, as amended do hereby agree: 1. The name of the limited partnership is "PaineWebber/Geodyne Energy Income Limited Partnership I-E." The date of filing of the Original Certificate and Agreement of Limited Partnership was March 5, 1986, as amended by the Amended and Restated Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-E filed on March 10, 1989. 2. The Amended and Restated Certificate of Limited Partnership is hereby revised to change the name of the Limited Partnership to the following: Geodyne Energy Income Limited Partnership I-E 3. (a) The Amended and Restated Certificate of Limited Partnership is hereby revised to change the address of the limited partnership, which is the same address where the records of the limited partnership are kept, to Two West Second Street, Tulsa, Oklahoma 74103. (b) The Amended and Restated Certificate of Limited Partnership is hereby revised to change the name and address for the registered agent for service of process to Geodyne Properties, Inc., Two West Second Street, Tulsa, OK 74103. -1- 4. The Amended and Restated Certificate of Limited Partnership is hereby revised to change the name, mailing address, and business address of the general partner as follows: Geodyne Properties, Inc. Two West Second Street Tulsa, OK 74103. 5. The latest date upon which the limited partnership is to dissolve is December 31, 1999. 6. The Amended and Restated Agreement and Certificate of Limited Partnership is hereby revised to replace the first sentence of Section 2.2 with the following: The Limited Partnership shall be conducted under the name Geodyne Energy Income Limited Partnership I-E. 7. The Amended and Restated Agreement and Certificate of Limited Partnership is hereby revised to replace the third and fourth sentences of Section 2.2 with the following: The office and principal place of business of the Limited Partnership shall be c/o Geodyne Properties, Inc., Two West Second Street, Tulsa, Oklahoma 74103. The agent for service of process on the Limited Partnership shall be Geodyne Properties, Inc., Two West Second Street, Tulsa, OK 74103. 8. On December 18, 1986, PW Energy Inc. , a Delaware corporation, was merged with and into Geodyne Properties, Inc. under the name Geodyne Properties, Inc. ("Geodyne"), as evidenced by a Certificate of Merger of PW Energy Inc. into Geodyne Properties, Inc. filed of record on such date in the office of the Secretary of State of Delaware in Book 466 at Page 609. Geodyne survived the merger as the sole general partner of the PaineWebber/Geodyne Energy Income Limited Partnership I-E. 9. In all other respects, the Amended and Restated Agreement and Certificate of Limited Partnership is hereby ratified and confirmed. -2- DATED: February 24, 1993 By: Geodyne Properties, Inc., General Partner By: // Michael E. Luttrell // ------------------------- Michael E. Luttrell Executive Vice President By: Geodyne Properties, Inc., Attorney-in-fact for all Limited Partners By: // Michael E. Luttrell // ------------------------- Michael E. Luttrell Executive Vice President -3- EX-4.6 7 I-F, AMENDMENT 1 TO LTD. PSHP. AGREEMENT FIRST AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF LIMITED PARTNERSHIP AND FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP OF PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F The undersigned, desiring to amend its amended and restated certificate of limited partnership pursuant to the Oklahoma Revised Uniform Limited Partnership Act, as amended, Okla. Stat., tit. 54, Section 301 et seq. (1991) (the "Act"), do hereby state, and desiring to amend the Amended and Restated Agreement and Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-F dated as of December 17, 1986, as amended do hereby agree: 1. The name of the limited partnership is "PaineWebber/Geodyne Energy Income Limited Partnership I-F." The date of filing of the Original Certificate and Agreement of Limited Partnership was September 10, 1986, as amended by the Amended and Restated Certificate of Limited Partnership of PaineWebber/Geodyne Energy Income Limited Partnership I-F filed on March 10, 1989. 2. The Amended and Restated Certificate of Limited Partnership is hereby revised to change the name of the Limited Partnership to the following: Geodyne Energy Income Limited Partnership I-F 3. (a) The Amended and Restated Certificate of Limited Partnership is hereby revised to change the address of the limited partnership, which is the same address where the records of the limited partnership are kept, to Two West Second Street, Tulsa, Oklahoma 74103. (b) The Amended and Restated Certificate of Limited Partnership is hereby revised to change the name and address for the registered agent for service of process to Geodyne Properties, Inc., Two West Second Street, Tulsa, OK 74103. -1- 4. The Amended and Restated Certificate of Limited Partnership is hereby revised to change the name, mailing address, and business address of the general partner as follows: Geodyne Properties, Inc. Two West Second Street Tulsa, OK 74103. 5. The latest date upon which the limited partnership is to dissolve is December 31, 1999. 6. The Amended and Restated Agreement and Certificate of Limited Partnership is hereby revised to replace the first sentence of Section 2.2 with the following: The Limited Partnership shall be conducted under the name Geodyne Energy Income Limited Partnership I-F. 7. The Amended and Restated Agreement and Certificate of Limited Partnership is hereby revised to replace the third and fourth sentences of Section 2.2 with the following: The office and principal place of business of the Limited Partnership shall be c/o Geodyne Properties, Inc., Two West Second Street, Tulsa, Oklahoma 74103. The agent for service of process on the Limited Partnership shall be Geodyne Properties, Inc., Two West Second Street, Tulsa, OK 74103. 8. On December 18, 1986, PW Energy Inc., a Delaware corporation, was merged with and into Geodyne Properties, Inc. under the name Geodyne Properties, Inc. ("Geodyne"), as evidenced by a Certificate of Merger of PW Energy Inc. into Geodyne Properties, Inc. filed of record on such date in the office of the Secretary of State of Delaware in Book 466 at Page 609. Geodyne survived the merger as the sole general partner of the PaineWebber/Geodyne Energy Income Limited Partnership I-F. 9. In all other respects, the Amended and Restated Agreement and Certificate of Limited Partnership is hereby ratified and confirmed. -2- DATED: February 24, 1993 By: Geodyne Properties, Inc., General Partner By: // Michael E. Luttrell // ------------------------- Michael E. Luttrell Executive Vice President By: Geodyne Properties, Inc., Attorney-in-fact for all Limited Partners By: // Michael E. Luttrell // ------------------------- Michael E. Luttrell Executive Vice President -3- EX-4.7 8 I-D, AMENDMENT 2 TO LTD. PSHP. AGREEMENT Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-D This Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-D (the "Partnership") is entered into by and between Geodyne Properties, Inc. ("Properties"), a Delaware corporation, as General Partner, and all Additional and Substituted Limited Partners admitted to the Partnership. WHEREAS, on December 20, 1985, Properties and the Initial Limited Partner executed and entered into that certain PaineWebber/Geodyne Energy Income Limited Partnership I-D Agreement and Certificate of Limited Partnership (the "Preformation Agreement"); and WHEREAS, on March 4, 1986, Properties executed and entered into that certain Amended and Restated Agreement and Certificate of Limited Partnership (the "Amended Agreement"); and WHEREAS, on February 25, 1993, Properties executed and entered into that certain First Amendment to the Amended Agreement whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Partnership I-D" to "Geodyne Energy Income Limited Partnership I-D", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, Section 10.1 of the Amended Agreement provides that the General Partner may, without prior notice or consent of any Limited Partner, amend any provision of this Amended Agreement and Certificate if, in its opinion, such amendment does not have a material adverse effect upon the Limited Partners; and WHEREAS, Properties as General Partner desires to amend the Amended Agreement in order to (i) expedite the method of accepting transfers of Limited Partners' Interests in the Partnership and (ii) revise the terms of the optional right of presentment which may be exercised by the Limited Partners. NOW, THEREFORE, in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: I. The last sentence contained in Section 7.3A of the Amended Agreement is hereby amended and restated as follows: Any sale, assignment or transfer shall be recognized by the Limited Partnership as effective on the first business day of the month following the General Partner's receipt of such notification. -1- II. The Amended Agreement is hereby amended to provide for a new Article 15. Said Article is hereby stated as follows: Article 15 Section 15.1. Optional Repurchase Right ----------------------------------------- Any Limited Partner shall have the right, at his option, to present his Interests to the General Partner or its designated Affiliate for repurchase on the basis set forth in this Article 15. Section 15.2. Procedure for Repurchase ---------------------------------------- A. As of December 31, 1992 and annually thereafter (the "Appraisal Date") the General Partner shall appraise the Proved Reserves and other assets of the Partnership pursuant to the provisions set forth herein and shall assign a repurchase price (the "Repurchase Price") to the Limited Partners' Interests in the Partnership in accordance with the provisions set forth herein. B. In arriving at the Repurchase Price, the General Partner shall consider those factors deemed relevant by it including, without limitation, the following: (i) the present value of the estimated future net revenues of the Production Partnership's Proved Reserves, calculated as described below; and (ii) the book value of all other Partnership assets and liabilities. Section 15.3. Calculation of Present Value of the Partnership's Estimated Future Net Revenues. -------------------------------------------- In calculating the present value of the Partnership's Estimated Future Net Revenues the General Partner shall use the petroleum engineering reports and other petroleum reserve information required to be furnished to the Limited Partners pursuant to Section 9.4C of the Agreement. -2- Future gross revenues expected to be derived from the production and sale of the Proved Reserves attributable to the Production Partnership's Producing Properties shall be estimated using either (i) escalations of future sales prices of Hydrocarbons supplied by the General Partner (the "Escalated Case") or (ii) sales prices of Hydrocarbons provided by Regulation S-X adopted by the Securities and Exchange Commission (the "SEC Case"), as the General Partner may determine in its sole discretion. Future net revenues shall be calculated by deducting anticipated expenses (using either (i) escalations of future costs supplied by the General Partner if the General Partner adopted the Escalated Case with respect to future sales prices of Hydrocarbons or (ii) constant future costs if the General Partner adopted the SEC Case with respect to future sales prices of Hydrocarbons) from estimated future gross revenues. The present value of the future net revenues shall be calculated by discounting the estimated future net revenues at either 10% (if the General Partner employed future pricing criteria in accordance with the SEC Case) or that rate per annum which is one percentage point higher than the prime rate of interest of The Chase Manhattan Bank, N.A. or any successor bank, as of the Appraisal Date (if the General Partner employed pricing criteria in accordance with the Escalated Case, provided, however, that such discount rate will not exceed 18% per annum and will be no less than 10% per annum). Section 15.4. Risk Reduction. ------------------------------ In determining the Repurchase Price for Limited Partners pursuant to this Section 15, the present value of the Partnership's Proved Developed Producing Reserves shall be reduced by 25% for risk and the present value of all other categories of Proved Reserves shall be reduced by 35% for risk. The risk reductions shall be subject to upward or downward adjustment by the General Partner if, during the period between the Appraisal Date and the Effective Date (as defined in Section 15.5), there has been a material increase or decrease in the current price of oil or gas or in the estimated amount of the Partnership's Proved Reserves. -3- Section 15.5. Tender Procedure. --------------------------------- Upon completion of the appraisal of the Partnership's assets as of the Appraisal Date, the General Partner shall notify each Limited Partner of the Repurchase Price and his proportionate share thereof and either the General Partner or one of its Affiliates will offer to purchase such Limited Partner's Interests in exchange for such Unit Holder's proportionate share of the Repurchase Price (a "Repurchase Offer"). Any Limited Partner desiring to do so may accept such Repurchase Offer by notifying the General Partner of his election. Limited Partners so notifying the General Partner shall be referred to herein as "Electing Limited Partners". The General Partner or its designated Affiliate shall thereupon promptly pay to each Electing Limited Partner, his proper share of the Repurchase Price, calculated as herein set forth, within 30 days from the date which a properly drawn assignment of such Electing Limited Partner's interest, free and clear of all liens and encumbrances, is tendered to and accepted by the General Partner or its designated Affiliate (the "Effective Date"). Upon the acquisition of an Electing Limited Partner's Interests, the General Partner or its designated Affiliate shall, as of the Effective Date of such acquisition, succeed to all the rights and obligations attributable to such interest. Section 15.6. Monthly Adjustment to Repurchase Price ----------------------------------------------------- The Repurchase Price shall be recalculated monthly with the Repurchase Price being reduced by the amount of any cash distributions to Limited Partners during the period from the Appraisal Date to the date of the payment of the Repurchase Price and shall otherwise be adjusted to reflect the effect of material operations during such period, including a material increase or decrease in the current price of oil or gas or in the estimated amount of the Partnership's Proved Reserves. In the event the Repurchase Price is adjusted for any reason other than to reflect the payment of cash distributions, the General Partner shall provide written notification of such adjustment to the Limited Partners at least ten (10) business days prior to acceptance of Units for purchase. -4- Section 15.7. Limitation on Units Repurchased. ----------------------------------------------- A. At the sole discretion of the General Partner, the General Partner or its designated Affiliate may either (i) limit the time period in which it will accept tendered Units for repurchase or (ii) limit the amount of Units to be accepted for repurchase; provided, however, that in any event the annual repurchase offer will (i) remain open for at least thirty (30) days and (ii) the General Partner or its designated Affiliate will offer to annually repurchase (and will purchase validly presented Units) at least 10% of the outstanding Units of the Partnership. In the event the General Partner or its designated Affiliate imposes a limitation, the General Partner will either (i) specify such limitation(s) in the annual Repurchase Offer mailed to the Limited Partners or (ii) provide all Limited Partners with written notification of such limitation(s) at least thirty (30) days prior to the effective date of any such limitation(s). B. In the event the General Partner imposes a limitation upon the number of Interests to be repurchased in the Partnership, and the amount of Interests tendered, but not repurchased, exceeds such limitation, such tendered Interests will be accepted for repurchase by lot. C. In addition, in order to avoid certain possible adverse tax consequences, the General Partner may, in order to comply with the regulations or procedures under Section 469(k) of the Internal Revenue Code of 1986, as amended, relating to "publicly traded partnerships," (i) delay or defer the Effective Date of any repurchase and (ii) limit the total number of Interests of any Partnership to be repurchased in any 12-month period to the maximum number provided in such regulations and procedures. In the event of such delay or deferral, the General Partner shall notify the Electing Limited Partner of the reasons therefor and shall provide the Electing Limited Partner with the option to withdraw his tender of Interests for repurchase. -5- IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 4th day of August, 1993. Geodyne Properties, Inc. as General Partner By: // C. Philip Tholen // ---------------------- C. Philip Tholen President Geodyne Properties, Inc., as Attorney-in-Fact for the Limited Partners By: // Dennis R. Neill // --------------------- Dennis R. Neill Sr. Vice President -6- EX-4.8 9 I-E, AMENDMENT 2 TO LTD. PSHP. AGREEMENT Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-E This Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-E (the "Partnership") is entered into by and between Geodyne Properties, Inc. ("Properties"), a Delaware corporation, as General Partner, and all Additional and Substituted Limited Partners admitted to the Partnership. WHEREAS, on March 5, 1986, Properties and the Initial Limited Partner executed and entered into that certain PaineWebber/Geodyne Energy Income Limited Partnership I-E Agreement and Certificate of Limited Partnership (the "Preformation Agreement"); and WHEREAS, on September 10, 1986, Properties executed and entered into that certain Amended and Restated Agreement and Certificate of Limited Partnership (the "Amended Agreement"); and WHEREAS, on February 25, 1993, Properties executed and entered into that certain First Amendment to the Amended Agreement whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Partnership I-E" to "Geodyne Energy Income Limited Partnership I-E", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, Section 10.1 of the Amended Agreement provides that the General Partner may, without prior notice or consent of any Limited Partner, amend any provision of this Amended Agreement and Certificate if, in its opinion, such amendment does not have a material adverse effect upon the Limited Partners; and WHEREAS, Properties as General Partner desires to amend the Amended Agreement in order to (i) expedite the method of accepting transfers of Limited Partners' Interests in the Partnership and (ii) revise the terms of the optional right of presentment which may be exercised by the Limited Partners. NOW, THEREFORE, in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: I. The last sentence contained in Section 7.3A of the Amended Agreement is hereby amended and restated as follows: Any sale, assignment or transfer shall be recognized by the Limited Partnership as effective on the first business day of the month following the General Partner's receipt of such notification. -1- II. The Amended Agreement is hereby amended to provide for a new Article 15. Said Article is hereby stated as follows: Article 15 Section 15.1. Optional Repurchase Right --------------------------------------- Any Limited Partner shall have the right, at his option, to present his Interests to the General Partner or its designated Affiliate for repurchase on the basis set forth in this Article 15. Section 15.2. Procedure for Repurchase -------------------------------------- A. As of December 31, 1992 and annually thereafter (the "Appraisal Date") the General Partner shall appraise the Proved Reserves and other assets of the Partnership pursuant to the provisions set forth herein and shall assign a repurchase price (the "Repurchase Price") to the Limited Partners' Interests in the Partnership in accordance with the provisions set forth herein. B. In arriving at the Repurchase Price, the General Partner shall consider those factors deemed relevant by it including, without limitation, the following: (i) the present value of the estimated future net revenues of the Production Partnership's Proved Reserves, calculated as described below; and (ii) the book value of all other Partnership assets and liabilities. Section 15.3. Calculation of Present Value of the Partnership's Estimated Future Net Revenues. ------------------------------------------------------------ In calculating the present value of the Partnership's Estimated Future Net Revenues the General Partner shall use the petroleum engineering reports and other petroleum reserve information required to be furnished to the Limited Partners pursuant to Section 9.4C of the Agreement. -2- Future gross revenues expected to be derived from the production and sale of the Proved Reserves attributable to the Production Partnership's Producing Properties shall be estimated using either (i) escalations of future sales prices of Hydrocarbons supplied by the General Partner (the "Escalated Case") or (ii) sales prices of Hydrocarbons provided by Regulation S-X adopted by the Securities and Exchange Commission (the "SEC Case"), as the General Partner may determine in its sole discretion. Future net revenues shall be calculated by deducting anticipated expenses (using either (i) escalations of future costs supplied by the General Partner if the General Partner adopted the Escalated Case with respect to future sales prices of Hydrocarbons or (ii) constant future costs if the General Partner adopted the SEC Case with respect to future sales prices of Hydrocarbons) from estimated future gross revenues. The present value of the future net revenues shall be calculated by discounting the estimated future net revenues at either 10% (if the General Partner employed future pricing criteria in accordance with the SEC Case) or that rate per annum which is one percentage point higher than the prime rate of interest of The Chase Manhattan Bank, N.A. or any successor bank, as of the Appraisal Date (if the General Partner employed pricing criteria in accordance with the Escalated Case, provided, however, that such discount rate will not exceed 18% per annum and will be no less than 10% per annum). Section 15.4. Risk Reduction. ----------------------------- In determining the Repurchase Price for Limited Partners pursuant to this Section 15, the present value of the Partnership's Proved Developed Producing Reserves shall be reduced by 25% for risk and the present value of all other categories of Proved Reserves shall be reduced by 35% for risk. The risk reductions shall be subject to upward or downward adjustment by the General Partner if, during the period between the Appraisal Date and the Effective Date (as defined in Section 15.5), there has been a material increase or decrease in the current price of oil or gas or in the estimated amount of the Partnership's Proved Reserves. -3- Section 15.5. Tender Procedure. --------------------------------- Upon completion of the appraisal of the Partnership's assets as of the Appraisal Date, the General Partner shall notify each Limited Partner of the Repurchase Price and his proportionate share thereof and either the General Partner or one of its Affiliates will offer to purchase such Limited Partner's Interests in exchange for such Unit Holder's proportionate share of the Repurchase Price (a "Repurchase Offer"). Any Limited Partner desiring to do so may accept such Repurchase Offer by notifying the General Partner of his election. Limited Partners so notifying the General Partner shall be referred to herein as "Electing Limited Partners". The General Partner or its designated Affiliate shall thereupon promptly pay to each Electing Limited Partner, his proper share of the Repurchase Price, calculated as herein set forth, within 30 days from the date which a properly drawn assignment of such Electing Limited Partner's interest, free and clear of all liens and encumbrances, is tendered to and accepted by the General Partner or its designated Affiliate (the "Effective Date"). Upon the acquisition of an Electing Limited Partner's Interests, the General Partner or its designated Affiliate shall, as of the Effective Date of such acquisition, succeed to all the rights and obligations attributable to such interest. Section 15.6. Monthly Adjustment to Repurchase Price ----------------------------------------------------- The Repurchase Price shall be recalculated monthly with the Repurchase Price being reduced by the amount of any cash distributions to Limited Partners during the period from the Appraisal Date to the date of the payment of the Repurchase Price and shall otherwise be adjusted to reflect the effect of material operations during such period, including a material increase or decrease in the current price of oil or gas or in the estimated amount of the Partnership's Proved Reserves. In the event the Repurchase Price is adjusted for any reason other than to reflect the payment of cash distributions, the General Partner shall provide written notification of such adjustment to the Limited Partners at least ten (10) business days prior to acceptance of Units for purchase. -4- Section 15.7. Limitation on Units Repurchased. ---------------------------------------------- A. At the sole discretion of the General Partner, the General Partner or its designated Affiliate may either (i) limit the time period in which it will accept tendered Units for repurchase or (ii) limit the amount of Units to be accepted for repurchase; provided, however, that in any event the annual repurchase offer will (i) remain open for at least thirty (30) days and (ii) the General Partner or its designated Affiliate will offer to annually repurchase (and will purchase validly presented Units) at least 10% of the outstanding Units of the Partnership. In the event the General Partner or its designated Affiliate imposes a limitation, the General Partner will either (i) specify such limitation(s) in the annual Repurchase Offer mailed to the Limited Partners or (ii) provide all Limited Partners with written notification of such limitation(s) at least thirty (30) days prior to the effective date of any such limitation(s). B. In the event the General Partner imposes a limitation upon the number of Interests to be repurchased in the Partnership, and the amount of Interests tendered, but not repurchased, exceeds such limitation, such tendered Interests will be accepted for repurchase by lot. C. In addition, in order to avoid certain possible adverse tax consequences, the General Partner may, in order to comply with the regulations or procedures under Section 469(k) of the Internal Revenue Code of 1986, as amended, relating to "publicly traded partnerships," (i) delay or defer the Effective Date of any repurchase and (ii) limit the total number of Interests of any Partnership to be repurchased in any 12-month period to the maximum number provided in such regulations and procedures. In the event of such delay or deferral, the General Partner shall notify the Electing Limited Partner of the reasons therefor and shall provide the Electing Limited Partner with the option to withdraw his tender of Interests for repurchase. -5- IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 4th day of August, 1993. Geodyne Properties, Inc. as General Partner By: // C. Philip Tholen // ---------------------- C. Philip Tholen President Geodyne Properties, Inc., as Attorney-in-Fact for the Limited Partners By: // Dennis R. Neill // --------------------- Dennis R. Neill Sr. Vice President -6- EX-4.9 10 I-F, AMENDMENT 2 TO LTD. PSHP. AGREEMENT Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-F This Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-F (the "Partnership") is entered into by and between Geodyne Properties, Inc. ("Properties"), a Delaware corporation, as General Partner, and all Additional and Substituted Limited Partners admitted to the Partnership. WHEREAS, on September 10, 1986, Properties and the Initial Limited Partner executed and entered into that certain PaineWebber/Geodyne Energy Income Limited Partnership I-F Agreement and Certificate of Limited Partnership (the "Preformation Agreement"); and WHEREAS, on December 17, 1986, Properties executed and entered into that certain Amended and Restated Agreement and Certificate of Limited Partnership (the "Amended Agreement"); and WHEREAS, on February 25, 1993, Properties executed and entered into that certain First Amendment to the Amended Agreement of Limited Partnership whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Partnership I-F" to "Geodyne Energy Income Limited Partnership I-F", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, Section 10.1 of the Amended Agreement provides that the General Partner may, without prior notice or consent of any Limited Partner, amend any provision of this Amended Agreement and Certificate if, in its opinion, such amendment does not have a material adverse effect upon the Limited Partners; and WHEREAS, Properties as General Partner desires to amend the Amended Agreement in order to (i) expedite the method of accepting transfers of Limited Partners' Interests in the Partnership and (ii) revise the terms of the optional right of presentment which may be exercised by the Limited Partners. NOW, THEREFORE, in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: I. The last sentence contained in Section 7.3A of the Amended Agreement is hereby amended and restated as follows: -1- Any sale, assignment or transfer shall be recognized by the Limited Partnership as effective on the first business day of the month following the General Partner's receipt of such notification. II. The Amended Agreement is hereby amended to provide for a new Article 15. Said Article is hereby stated as follows: Article 15 Section 15.1. Optional Repurchase Right -------------------------------------- Any Limited Partner shall have the right, at his option, to present his Interests to the General Partner or its designated Affiliate for repurchase on the basis set forth in this Article 15. Section 15.2. Procedure for Repurchase ------------------------------------- A. As of December 31, 1992 and annually thereafter (the "Appraisal Date") the General Partner shall appraise the Proved Reserves and other assets of the Partnership pursuant to the provisions set forth herein and shall assign a repurchase price (the "Repurchase Price") to the Limited Partners' Interests in the Partnership in accordance with the provisions set forth herein. B. In arriving at the Repurchase Price, the General Partner shall consider those factors deemed relevant by it including, without limitation, the following: (i) the present value of the estimated future net revenues of the Production Partnership's Proved Reserves, calculated as described below; and (ii) the book value of all other Partnership assets and liabilities. -2- Section 15.3. Calculation of Present Value of the Partnership's Estimated Future Net Revenues ----------------------------------------------------------- In calculating the present value of the Partnership's Estimated Future Net Revenues the General Partner shall use the petroleum engineering reports and other petroleum reserve information required to be furnished to the Limited Partners pursuant to Section 9.4C of the Agreement. Future gross revenues expected to be derived from the production and sale of the Proved Reserves attributable to the Production Partnership's Producing Properties shall be estimated using either (i) escalations of future sales prices of Hydrocarbons supplied by the General Partner (the "Escalated Case") or (ii) sales prices of Hydrocarbons provided by Regulation S-X adopted by the Securities and Exchange Commission (the "SEC Case"), as the General Partner may determine in its sole discretion. Future net revenues shall be calculated by deducting anticipated expenses (using either (i) escalations of future costs supplied by the General Partner if the General Partner adopted the Escalated Case with respect to future sales prices of Hydrocarbons or (ii) constant future costs if the General Partner adopted the SEC Case with respect to future sales prices of Hydrocarbons) from estimated future gross revenues. The present value of the future net revenues shall be calculated by discounting the estimated future net revenues at either 10% (if the General Partner employed future pricing criteria in accordance with the SEC Case) or that rate per annum which is one percentage point higher than the prime rate of interest of The Chase Manhattan Bank, N.A. or any successor bank, as of the Appraisal Date (if the General Partner employed pricing criteria in accordance with the Escalated Case, provided, however, that such discount rate will not exceed 18% per annum and will be no less than 10% per annum). -3- Section 15.4. Risk Reduction. ----------------------------- In determining the Repurchase Price for Limited Partners pursuant to this Section 15, the present value of the Partnership's Proved Developed Producing Reserves shall be reduced by 25% for risk and the present value of all other categories of Proved Reserves shall be reduced by 35% for risk. The risk reductions shall be subject to upward or downward adjustment by the General Partner if, during the period between the Appraisal Date and the Effective Date (as defined in Section 15.5), there has been a material increase or decrease in the current price of oil or gas or in the estimated amount of the Partnership's Proved Reserves. Section 15.5. Tender Procedure ------------------------------ Upon completion of the appraisal of the Partnership's assets as of the Appraisal Date, the General Partner shall notify each Limited Partner of the Repurchase Price and his proportionate share thereof and either the General Partner or one of its Affiliates will offer to purchase such Limited Partner's Interests in exchange for such Unit Holder's proportionate share of the Repurchase Price (a "Repurchase Offer"). Any Limited Partner desiring to do so may accept such Repurchase Offer by notifying the General Partner of his election. Limited Partners so notifying the General Partner shall be referred to herein as "Electing Limited Partners". The General Partner or its designated Affiliate shall thereupon promptly pay to each Electing Limited Partner, his proper share of the Repurchase Price, calculated as herein set forth, within 30 days from the date which a properly drawn assignment of such Electing Limited Partner's interest, free and clear of all liens and encumbrances, is tendered to and accepted by the General Partner or its designated Affiliate (the "Effective Date"). Upon the acquisition of an Electing Limited Partner's Interests, the General Partner or its designated Affiliate shall, as of the Effective Date of such acquisition, succeed to all the rights and obligations attributable to such interest. -4- Section 15.6. Monthly Adjustment to Repurchase Price ---------------------------------------------------- The Repurchase Price shall be recalculated monthly with the Repurchase Price being reduced by the amount of any cash distributions to Limited Partners during the period from the Appraisal Date to the date of the payment of the Repurchase Price and shall otherwise be adjusted to reflect the effect of material operations during such period, including a material increase or decrease in the current price of oil or gas or in the estimated amount of the Partnership's Proved Reserves. In the event the Repurchase Price is adjusted for any reason other than to reflect the payment of cash distributions, the General Partner shall provide written notification of such adjustment to the Limited Partners at least ten (10) business days prior to acceptance of Units for purchase. Section 15.7. Limitation on Units Repurchased ---------------------------------------------- A. At the sole discretion of the General Partner, the General Partner or its designated Affiliate may either (i) limit the time period in which it will accept tendered Units for repurchase or (ii) limit the amount of Units to be accepted for repurchase; provided, however, that in any event the annual repurchase offer will (i) remain open for at least thirty (30) days and (ii) the General Partner or its designated Affiliate will offer to annually repurchase (and will purchase validly presented Units) at least 10% of the outstanding Units of the Partnership. In the event the General Partner or its designated Affiliate imposes a limitation, the General Partner will either (i) specify such limitation(s) in the annual Repurchase Offer mailed to the Limited Partners or (ii) provide all Limited Partners with written notification of such limitation(s) at least thirty (30) days prior to the effective date of any such limitation(s). B. In the event the General Partner imposes a limitation upon the number of Interests to be repurchased in the Partnership, and the amount of Interests tendered, but not repurchased, exceeds such limitation, such tendered Interests will be accepted for repurchase by lot. -5- C. In addition, in order to avoid certain possible adverse tax consequences, the General Partner may, in order to comply with the regulations or procedures under Section 469(k) of the Internal Revenue Code of 1986, as amended, relating to "publicly traded partnerships," (i) delay or defer the Effective Date of any repurchase and (ii) limit the total number of Interests of any Partnership to be repurchased in any 12-month period to the maximum number provided in such regulations and procedures. In the event of such delay or deferral, the General Partner shall notify the Electing Limited Partner of the reasons therefor and shall provide the Electing Limited Partner with the option to withdraw his tender of Interests for repurchase. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 4th day of August, 1993. Geodyne Properties, Inc. as General Partner By: // C. Philip Tholen // ---------------------- C. Philip Tholen President Geodyne Properties, Inc., as Attorney-in-Fact for the Limited Partners By: // Dennis R. Neill // --------------------- Dennis R. Neill Sr. Vice President EX-4.10 11 I-D, AMENDMENT 3 TO LTD. PSHP. AGREEMENT Third Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-D This Third Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-D (the "Partnership") is entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as successor General Partner, and all Substituted Limited Partners admitted to the Partnership. WHEREAS, on December 20, 1985, Geodyne Properties, Inc. ("Properties"), as General Partner, and the Initial Limited Partner executed and entered into that certain PaineWebber/Geodyne Energy Income Limited Partnership I-D Agreement and Certificate of Limited Partnership (the "Preformation Agreement"); and WHEREAS, on March 4, 1986, Properties executed and entered into that certain Amended and Restated Agreement and Certificate of Limited Partnership (the "Agreement"); and WHEREAS, on February 25, 1993, Properties executed and entered into that First Amendment to the Agreement whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Limited Partnership I-D" to "Geodyne Energy Income Limited Partnership I-D", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, on August 4th, 1993, Properties executed and entered into that Second Amendment to the Agreement whereby it amended certain provisions to (i) expedite the method of accepting transfers of Unit Holders' Units in the Partnership and (ii) provide for an optional right of repurchase/redemption which may be exercised by the Unit Holders; and WHEREAS, Section 10.1 of the Agreement provides that the general partner of the partnership (the "General Partner") may, without prior notice or consent of any Limited Partner (as defined in the Agreement), amend any provision of this Agreement if, in its opinion, such amendment does not have a material adverse effect upon the Limited Partners; and WHEREAS, Properties merged with and into Geodyne Resources, Inc. ("Resources"), its parent corporation, effective June 30, 1996; and WHEREAS, Section 6.1 of the Agreement provides that the General Partner may assign its General Partner Interest to a Person which shall become a successor General Partner, if such assignment is in connection with a merger; and -1- WHEREAS, as a result of the merger of Properties with and into Resources, ownership of the General Partner Interest in the Partnership is assigned to Resources by operation of law; and WHEREAS, as a result of the merger of Properties with and into Resources, Resources has now succeeded to the position of General Partner of the Partnership; and WHEREAS, Resources, as General Partner, desires to amend the Agreement in order to reflect Resources as the new General Partner. NOW, THEREFORE, in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: All references in the Agreement to Geodyne Properties, Inc. as General Partner are hereby amended to reflect, instead, Geodyne Resources, Inc. as General Partner. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 1st day of July, 1996. Geodyne Properties, Inc. by Geodyne Resources, Inc. as successor by merger By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Resources, Inc. as General Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Resources, Inc., as Attorney-in-Fact for all Substituted Limited Partners By: // Dennis R. Neill // --------------------- Dennis R. Neill President -2- EX-4.11 12 I-E, AMENDMENT 3 TO LTD. PSHP. AGREEMENT Third Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-E This Third Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-E (the "Partnership") is entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as successor General Partner, and all Substituted Limited Partners admitted to the Partnership. WHEREAS, on March 5, 1986, Geodyne Properties, Inc. ("Properties"), as General Partner, and the Initial Limited Partner executed and entered into that certain PaineWebber/Geodyne Energy Income Limited Partnership I-E Agreement and Certificate of Limited Partnership (the "Preformation Agreement"); and WHEREAS, on September 10, 1986, Properties executed and entered into that certain Amended and Restated Agreement and Certificate of Limited Partnership (the "Agreement"); and WHEREAS, on February 25, 1993, Properties executed and entered into that First Amendment to the Agreement whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Limited Partnership I-E" to "Geodyne Energy Income Limited Partnership I-E", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, on August 4th, 1993, Properties executed and entered into that Second Amendment to the Agreement whereby it amended certain provisions to (i) expedite the method of accepting transfers of Unit Holders' Units in the Partnership and (ii) provide for an optional right of repurchase/redemption which may be exercised by the Unit Holders; and WHEREAS, Section 10.1 of the Agreement provides that the general partner of the partnership (the "General Partner") may, without prior notice or consent of any Limited Partner (as defined in the Agreement), amend any provision of this Agreement if, in its opinion, such amendment does not have a material adverse effect upon the Limited Partners; and WHEREAS, Properties merged with and into Geodyne Resources, Inc. ("Resources"), its parent corporation, effective June 30, 1996; and -1- WHEREAS, Section 6.1 of the Agreement provides that the General Partner may assign its General Partner Interest to a Person which shall become a successor General Partner, if such assignment is in connection with a merger; and WHEREAS, as a result of the merger of Properties with and into Resources, ownership of the General Partner Interest in the Partnership is assigned to Resources by operation of law; and WHEREAS, as a result of the merger of Properties with and into Resources, Resources has now succeeded to the position of General Partner of the Partnership; and WHEREAS, Resources, as General Partner, desires to amend the Agreement in order to reflect Resources as the new General Partner. NOW, THEREFORE, in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: All references in the Agreement to Geodyne Properties, Inc. as General Partner are hereby amended to reflect, instead, Geodyne Resources, Inc. as General Partner. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 1st day of July, 1996. Geodyne Properties, Inc. by Geodyne Resources, Inc. as successor by merger By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Resources, Inc. as General Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President -2- Geodyne Resources, Inc., as Attorney-in-Fact for all Substituted Limited Partners By: // Dennis R. Neill // --------------------- Dennis R. Neill President -3- EX-4.12 13 I-F, AMENDMENT 3 TO LTD. PSHP. AGREEMENT Third Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-F This Third Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-F (the "Partnership") is entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as successor General Partner, and all Substituted Limited Partners admitted to the Partnership. WHEREAS, on September 10, 1986, Geodyne Properties, Inc. ("Properties"), as General Partner, and the Initial Limited Partner executed and entered into that certain PaineWebber/Geodyne Energy Income Limited Partnership I-F Agreement and Certificate of Limited Partnership (the "Preformation Agreement"); and WHEREAS, on December 17, 1986, Properties executed and entered into that certain Amended and Restated Agreement and Certificate of Limited Partnership (the "Agreement"); and WHEREAS, on February 25, 1993, Properties executed and entered into that First Amendment to the Agreement whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Limited Partnership I-F" to "Geodyne Energy Income Limited Partnership I-F", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, on August 4th, 1993, Properties executed and entered into that Second Amendment to the Agreement whereby it amended certain provisions to (i) expedite the method of accepting transfers of Unit Holders' Units in the Partnership and (ii) provide for an optional right of repurchase/redemption which may be exercised by the Unit Holders; and WHEREAS, Section 10.1 of the Agreement provides that the general partner of the partnership (the "General Partner") may, without prior notice or consent of any Limited Partner (as defined in the Agreement), amend any provision of this Agreement if, in its opinion, such amendment does not have a material adverse effect upon the Limited Partners; and WHEREAS, Properties merged with and into Geodyne Resources, Inc. ("Resources"), its parent corporation, effective June 30, 1996; and WHEREAS, Section 6.1 of the Agreement provides that the General Partner may assign its General Partner Interest to a Person which shall become a successor General Partner, if such assignment is in connection with a merger; and WHEREAS, as a result of the merger of Properties with and into Resources, ownership of the General Partner Interest in the Partnership is assigned to Resources by operation of law; and -1- WHEREAS, as a result of the merger of Properties with and into Resources, Resources has now succeeded to the position of General Partner of the Partnership; and WHEREAS, Resources, as General Partner, desires to amend the Agreement in order to reflect Resources as the new General Partner. NOW, THEREFORE, in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: All references in the Agreement to Geodyne Properties, Inc. as General Partner are hereby amended to reflect, instead, Geodyne Resources, Inc. as General Partner. NOW, THEREFORE, the parties hereto have hereunto set their hands as of the 1st day of July, 1996. Geodyne Properties, Inc. by Geodyne Resources, Inc. as successor by merger By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Resources, Inc. as General Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Resources, Inc., as Attorney-in-Fact for all Substituted Limited Partners By: // Dennis R. Neill // --------------------- Dennis R. Neill President -2- EX-4.13 14 I-D, AMENDMENT 4 TO LTD. PSHP. AGREEMENT Fourth Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-D This Fourth Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-D (the "Partnership") is entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as successor General Partner, and all Substituted Limited Partners admitted to the Partnership. WHEREAS, on December 20, 1985, Geodyne Properties, Inc. ("Properties"), as General Partner, and the Initial Limited Partner, Susan Layman, executed and entered into that certain PaineWebber/Geodyne Energy Income Limited Partnership I-D Agreement and Certificate of Limited Partnership (the "Preformation Agreement"); and WHEREAS, on March 4, 1986, Properties as General Partner executed and entered into that certain Amended and Restated Agreement and Certificate of Limited Partnership for the Partnership (the "Agreement"); and WHEREAS, on February 25, 1993, Properties as General Partner executed and entered into that First Amendment to the Agreement whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Limited Partnership I-D" to "Geodyne Energy Income Limited Partnership I-D", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, on August 4, 1993, Properties as General Partner executed and entered into that Second Amendment to the Agreement whereby it amended certain provisions of the Agreement to (i) expedite the method of accepting transfers of Limited Partners' Units in the Partnership and (ii) provide for an optional right of repurchase/redemption which may be exercised by the Limited Partners; and WHEREAS, on June 30, 1997, Properties merged into Resources; and, WHEREAS, on July 1, 1997, Resources as successor via merger to Properties executed and entered into that Third Amendment to the Agreement whereby it amended the Agreement to provide that Geodyne Resources, Inc., as successor via merger with Properties, is the General Partner of the Partnership; and -1- WHEREAS, Section 2.4 of the Agreement provides that the Partnership shall continue in full force and effect until December 31, 1999, provided that the General Partner may extend the term of the Partnership for up to five periods of two years each if it believes each such extension is in the best interests of the Limited Partners or until dissolution prior thereto pursuant to the provisions of the Agreement, and WHEREAS, Resources as General Partner has elected to extend the life of the Partnership an additional two years. Now, Therefore, in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: Section 2.4. is hereby amended and restated as follows: The Partnership shall continue in force and effect until December 31, 2001, provided that the General Partner may extend the term of the Partnership for up to four periods of two years each if it believes such extension is in the best interests of the Limited Partners, or until dissolution prior thereto pursuant to the provisions hereof. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 23rd day of December, 1999. Geodyne Resources, Inc. as General Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Resources, Inc., as Attorney-in-Fact for all Substituted Limited Partners By: // Dennis R. Neill // --------------------- Dennis R. Neill President -2- EX-4.14 15 I-E, AMENDMENT 4 TO LTD. PSHP. AGREEMENT Fourth Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-E This Fourth Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-E (the "Partnership") is entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as successor General Partner, and all Substituted Limited Partners admitted to the Partnership. WHEREAS, on March 5, 1986, Geodyne Properties, Inc. ("Properties"), as General Partner, and the Initial Limited Partner, Susan Layman, executed and entered into that certain PaineWebber/Geodyne Energy Income Limited Partnership I-E Agreement and Certificate of Limited Partnership (the "Preformation Agreement"); and WHEREAS, on September 10, 1986, Properties as General Partner executed and entered into that certain Amended and Restated Agreement and Certificate of Limited Partnership (the "Agreement"); and WHEREAS, on February 25, 1993, Properties as General Partner executed and entered into that First Amendment to the Agreement whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Limited Partnership I-E" to "Geodyne Energy Income Limited Partnership I-E", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, on August 4th, 1993, Properties as General Partner executed and entered into that Second Amendment to the Agreement whereby it amended certain provisions of the Agreement to (i) expedite the method of accepting transfers of Limited Partners' Units in the Partnership and (ii) provide for an optional right of repurchase/redemption which may be exercised by the Limited Partners; and WHEREAS, on June 30, 1997, Properties merged into Resources; and WHEREAS, on July 1st, 1997, Resources as successor via merger to Properties executed and entered into that Third Amendment to the Agreement whereby it amended the Agreement to provide that Geodyne Resources, Inc., as successor via merger with Properties, is the General Partner of the Partnership; and -1- WHEREAS, Section 2.4 of the Agreement provides that the Partnership shall continue in full force and effect until December 31, 1999, provided that the General Partner may extend the term of the Partnership for up to five periods of two years each if it believes each such extension is in the best interests of the Limited Partners or until dissolution prior thereto pursuant to the provisions of the Agreement, and WHEREAS, Resources as General Partner has elected to extend the life of the Partnership an additional two years. NOW, THEREFORE, in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: Section 2.4. is hereby amended and restated as follows: The Partnership shall continue in force and effect until December 31, 2001, provided that the General Partner may extend the term of the Partnership for up to four periods of two years each if it believes such extension is in the best interests of the Limited Partners, or until dissolution prior thereto pursuant to the provisions hereof. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 23rd day of December, 1999. Geodyne Resources, Inc. as General Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Resources, Inc., as Attorney-in-Fact for all Substituted Limited Partners By: // Dennis R. Neill // --------------------- Dennis R. Neill President -2- EX-4.15 16 I-F, AMENDMENT 4 TO LTD. PSHP. AGREEMENT Fourth Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-F This Fourth Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Geodyne Energy Income Limited Partnership I-F (the "Partnership") is entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as successor General Partner, and all Substituted Limited Partners admitted to the Partnership. WHEREAS, on September 10, 1986, Geodyne Properties, Inc. ("Properties"), as General Partner, and the Initial Limited Partner, Susan Layman, executed and entered into that certain PaineWebber/Geodyne Energy Income Limited Partnership I-F Agreement and Certificate of Limited Partnership (the "Preformation Agreement"); and WHEREAS, on December 17, 1986, Properties as General Partner executed and entered into that certain Amended and Restated Agreement and Certificate of Limited Partnership (the "Agreement"); and WHEREAS, on February 25, 1993, Properties as General Partner executed and entered into that First Amendment to the Agreement whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Limited Partnership I-F" to "Geodyne Energy Income Limited Partnership I-F", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, on August 4th, 1993, Properties as General Partner executed and entered into that Second Amendment to the Agreement whereby it amended certain provisions to the Agreement to (i) expedite the method of accepting transfers of Limited Partners' Units in the Partnership and (ii) provide for an optional right of repurchase/redemption which may be exercised by the Limited Partners; and WHEREAS, on June 30, 1997, Properties merged into Resources; and WHEREAS, on July 1st, 1997, Resources as successor via merger to Properties executed and entered into that Third Amendment to the Agreement whereby it amended the Agreement to provide that Geodyne Resources, Inc., as successor via merger with Properties, is the General Partner of the Partnership; and -1- WHEREAS, Section 2.4 of the Agreement provides that the Partnership shall continue in full force and effect until December 31, 1999, provided that the General Partner may extend the term of the Partnership for up to five periods of two years each if it believes each such extension is in the best interests of the Limited Partners or until dissolution prior thereto pursuant to the provisions of the Agreement, and WHEREAS, Resources as General Partner has elected to extend the life of the Partnership an additional two years. NOW, THEREFORE, in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: Section 2.4. is hereby amended and restated as follows: The Partnership shall continue in force and effect until December 31, 2001, provided that the General Partner may extend the term of the Partnership for up to four periods of two years each if it believes such extension is in the best interests of the Limited Partners, or until dissolution prior thereto pursuant to the provisions hereof. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 23rd day of December, 1999. Geodyne Resources, Inc. as General Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Resources, Inc., as Attorney-in-Fact for all Substituted Limited Partners By: // Dennis R. Neill // --------------------- Dennis R. Neill President EX-10.1 17 I-D, PRODUCTION PARTNERSHIP AGREEMENT PAINEWEBBER/GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-D AMENDED AND RESTATED AGREEMENT OF PARTNERSHIP Amended and Restated Agreement of Partnership, dated as of March 4, 1986, among Geodyne Production Company, a Delaware corporation, and PW Production Inc., a Delaware corporation, as Managing Partners, and PaineWebber/Geodyne Energy Income Limited Partnership I-D, an Oklahoma limited partnership, as General Partner. Whereas, PaineWebber/Geodyne Energy Income Production Partnership I-D has heretofore been formed as a general partnership under the Uniform Partnership Act of the State of Oklahoma pursuant to an Agreement of Partnership dated as of December 10, 1985; and Whereas, the parties hereto desire to amend the Agreement of Partnership of the Production Partnership and to restate said Agreement in its entirety; Now, Therefore, in consideration of the mutual promises and agreements made herein, the parties, intending to be legally bound, hereby agree as follows: ARTICLE ONE Defined Terms -------------- The defined terms used in this Agreement shall, unless the context otherwise requires, have the meanings specified in this Article One. The singular shall include the plural and the masculine gender shall include the feminine, the neuter and vice versa, as the context requires. Any terms used in this Agreement which are defined in the Limited Partnership Agreement and are not otherwise defined herein shall have the respective meanings set forth in the Limited Partnership Agreement. "Accountants" shall mean Arthur Young & Company or such other nationally recognized firm of independent certified public accountants as shall be engaged from time to time by the Managing Partners for the Production Partnership. "Acquisition Reserve Report" shall mean a Hydrocarbon reserve report made available to the Production Partnership prepared by a qualified petroleum engineering firm acceptable to -1- the Managing Partners in connection with the proposed acquisition of a Producing Property, which shall include statements (i) identifying reserves of Hydrocarbons referred to in such report as Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves or Proved Undeveloped Reserves, as the case may be, and identifying all computations and determinations made for purposes of such report, including, without limitation, the present and future prices for Hydrocarbons and the present and future costs to produce and develop such Hydrocarbons used in such computations and determinations, (ii) with respect to the determination of the nature and extent of the reserves of Hydrocarbons reflected in such report, that the collection, analysis and evaluation of the basic physical data upon which such determination is based were performed by such qualified petroleum engineering firm or if such data were collected by another Person, that such qualified petroleum engineering firm has made reasonable inquiry with respect to the methods employed in such collection and is satisfied that the data so collected may be reasonably relied upon for the purpose of making the determination reflected in such report, (iii) specifying the respective amounts of Proved Developed Producing Reserves, Proved Developed Nonproducing Reserves, or Proved Undeveloped Reserves contained therein, and (iv) indicating such qualified petroleum engineering firm's opinion as to the respective estimated present values of future net revenues of each category of reserves contained therein determined in accordance with criteria satisfactory to the Managing Partners and otherwise in accordance with sound engineering and industry practices, including such standards and practices as may be promulgated by the Society of Petroleum Engineers of the American Institute of Mining and Metallurgical Engineers. Any such report may state that such qualified petroleum engineering firm expresses no opinion and makes no warranty or representation with respect to the proposed acquisition of such Producing Property and that such qualified petroleum engineering firm is relying on information furnished by the Managing Partners as to the historical volumes of any Hydrocarbons actually produced and as to the proposed ownership interest of the Production Partnership in such Producing Property. "Act" shall mean the Oklahoma Uniform Partnership Act, as amended from time to time. "Activation" or "Activated" shall mean the date on which (i) with respect to the Limited Partnership, the subscribers for Units shall have been admitted to the Limited Partnership as -2- Limited Partners, and (ii) with respect to the Production Partnership, the Limited Partnership shall have made its Capital Contribution to the Production Partnership. "Affiliate" shall mean, when used with reference to a specified Person: (a) any Person directly or indirectly owning, controlling, or holding with power to vote 10% or more of the outstanding voting securities of the specified Person; (b) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the specified Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with, the specified Person; (d) any Person who is an officer, director, partner or trustee of, or serves in a similar capacity with respect to, the specified Person or of which the specified Person is an officer, director, partner or trustee, or with respect to which the specified Person serves in a similar capacity; and (e) any relative or spouse of the specified Person. A reference to an Affiliate of the Managing Partners shall include an Affiliate of either or both of the Managing Partners. Notwithstanding the foregoing, no Person shall be deemed to be an Affiliate solely by reason of its ownership of limited partnership interests in a limited partnership. "Affiliated Program" shall mean a drilling or income program (whether in the form of a limited partnership, general partnership, joint venture or otherwise) interests in which were offered to persons or entities not engaged in a trade or business within the oil and gas industry (other than by virtue of its participation in an Affiliated Program) and of which a Managing Partner or Affiliate thereof serves as general partner or venturer. "Agreement" shall mean this Amended and Restated Agreement of Partnership as amended from time to time. "Capital Account" shall mean, as to any Partner, the sum of the Capital Contribution by such Partner, plus its share of any Profits (including such Partner's deduction for depletion to the extent such deduction does not exceed the amount of cost depletion such Partner would be allowed) and distributions of Production Partnership cash or assets to such Partner or on behalf of such Partner in payment of any taxes or other expenses allocable to such Partner. "Capital Contribution" shall mean the total amount of money contributed to the Production Partnership by all Partners -3- or any class of Partners or any one Partner (or the predecessor holders of the Interests of such Partner or Partners), as the context requires, net of any refunds pursuant to Section 3.4 of this Agreement. "Code" shall mean the Internal Revenue Code of 1954, as amended (or any corresponding provisions of succeeding law). "Commercial Well" shall mean any Production Partnership Well which is capable of producing Hydrocarbons in commercial quantities, including those wells which are shut-in or which have not been abandoned within 60 days following the commencement of production. For purposes of this definition, production shall refer to the commencement of the commercial marketing of Hydrocarbons, and shall not include any spot sales of Hydrocarbon production as a result of testing procedures. "Consent" shall mean the consent of a Person, given as provided in Section 11.1, to do the act or thing for which the consent is solicited, or the act of granting such consent, as the context may require. "Development Drilling" shall mean all drilling and completing, or plugging and abandoning (after a determination that a well is not a Commercial Well), of a Production Partnership Well to a reservoir on a Lease or an offset Lease, from which reservoir production is being obtained or, as determined by an independent petroleum engineering firm, is anticipated to be obtainable in commercial quantities, or the recompletion of an existing Production Partnership Well; provided, however, that Development Drilling shall not include any Identified Development Drilling. "Direct Administrative Costs" shall mean the actual and necessary direct costs attributable to services provided to the Production Partnership by parties other than the Managing Partners or their Affiliates, whether incurred by the Production Partnership directly or incurred by any of the Managing Partners or their Affiliates, including the annual audit fees, legal fees and expenses, the costs of reviewing tax returns and reports, the cost of reserve reports (other than the cost of Acquisition Reserve Reports, Engineering Audit Letters and evaluations thereof conducted on behalf of a Production Partnership) prepared by independent petroleum engineering firms, and all other such costs directly incurred by or for the benefit of the Production Partnership. -4- "Distributable Cash" shall mean, with respect to the Production Partnership's operations at any time, the amount of cash assets on hand at such time less amounts required to be retained out of such cash assets, in the sole judgment of the Managing Partners, to pay costs, expenses or other obligations whether then accrued or anticipated to accrue in the future. "Engineering Audit Letter" shall mean a document prepared by a qualified petroleum engineering firm acceptable to the Managing Partners in connection with the proposed acquisition of a Producing Property, which shall include statements indicating that (i) such qualified petroleum engineering firm has reviewed an oil and gas reserve report prepared by the engineering staff of Geodyne Resources, Inc. or an Affiliate, (ii) in the opinion of such qualified petroleum engineering firm, the reserve report was prepared in accordance with sound engineering and industry practices, including such standards and practices as may be promulgated by the Society of Petroleum Engineers of the American Institute of Mining and Metallurgical Engineers, and (iii) with respect to the determination of the nature and extent of the reserves of Hydrocarbons reflected in such report, such qualified petroleum engineering firm has made reasonable inquiry with respect to the methods employed in the collection, analysis and evaluation of the basic physical data upon which such determination is based and is satisfied that the data so collected may be reasonably relied upon for the purpose of making the determination reflected in such report. "Farmout" shall mean an arrangement whereby the owner of a Lease or Working Interest agrees to assign his interest in certain specific acreage to the assignee, retaining some interest such as an overriding royalty interest, oil and gas payment, offset acreage or other type of interest, subject to the drilling of one or more specific wells or other performance as a condition of the assignment. "Fiscal Year" shall mean the calendar year. "General and Administrative Costs" shall mean all customary and routine legal, accounting, data processing, depreciation, geological, engineering, travel, office rent, telephone, secretarial, expense reimbursements of members of the Management Committee when acting on Production Partnership business, employee compensation and benefits, and other items of a general and administrative nature, whether like or unlike the foregoing, and any other incidental reasonable expenses reasonably necessary to the conduct of the Production -5- Partnership's business, computed on a cost basis, determined by the Managing Partners in accordance with generally accepted accounting principles and reviewed by an independent public accountant or certified public accountant. General and Administrative Costs shall not include any costs includable under the foregoing but which are included as Property Acquisition Costs, Direct Administrative Costs, cost incurred in connection with Development Drilling, Identified Development Drilling and Improved Recovery projects, or Operating Costs. "General Partner" shall mean PaineWebber/Geodyne Energy Income Limited Partnership I-D, an Oklahoma limited partnership, acting in such capacity, any successor in that capacity, and any other General Partner admitted to the Production Partnership pursuant to the provisions of this Agreement subsequent to the Activation of the Production Partnership. "Geodyne Production" shall mean Geodyne Production Company, a Delaware corporation. "Hydrocarbons" shall mean crude oil, natural gas, condensate, natural gas liquids and other liquid or gaseous hydrocarbons. "Identified Development Drilling" shall mean all drilling and completing, or plugging and abandoning (after a determination that a well is not a Commercial Well), of a Production Partnership Well drilled by or on behalf of the Production Partnership to a reservoir on a Lease or an offset Lease constituting all or a portion of a Producing Property or the recompletion of an existing Production Partnership Well, where (i) the drilling or recompletion of such Production Partnership Well commences after the acquisition of such Producing Property by the Production Partnership and is conducted in order to commence production of Hydrocarbons from Proved Undeveloped Reserves identified in the Acquisition Reserve Report or Engineering Audit Letter prepared in connection with such Producing Property, (ii) the costs of development of the Proved Undeveloped Reserves were taken into account in such Acquisition Reserve Report or Engineering Audit Letter in valuing such Proved Undeveloped Reserves attributable to such Producing Property, and (iii) a portion of the cost paid by the Production Partnership for such Producing Property is attributed by such Acquisition Reserve Report or Engineering Audit Letter to such Proved Undeveloped Reserves. The term, Identified Development Drilling, shall also refer to any Production Partnership Wells drilled or recompleted on a -6- Producing Property subsequent to the initial Identified Development Drilling conducted on such Producing Property in order to commence production of Hydrocarbons from Proved Undeveloped Reserves (in addition to those identified in the related Acquisition Reserve Report or Engineering Audit Letter) which have been categorized by the Managing Partners as Proved Undeveloped Reserves by virtue of production obtained from prior Identified Development Drilling conducted on such Producing Property. Any reference to costs incurred in connection with Identified Development Drilling shall include the interest, commitment fees and other financing charges and expenses of Production Partnership borrowings incurred to finance Identified Development Drilling. "Improved Recovery" shall mean all methods of supplementing natural forces and mechanisms of primary recovery or otherwise increasing the ultimate recovery from a Production Partnership Well, including, but not limited to, water flooding, pressure maintenance, gas cycling, fluid injection, polymer flooding, chemical flooding, and the use of miscible displacement fluids. "Incapacity" or "Incapacitated" shall mean the adjudication of bankruptcy (except that, in the case of a Managing Partner, the term "bankruptcy" shall mean only being subject to Chapter 7 of the Federal Bankruptcy Reform Act of 1978), of interdiction, of incompetence, or of insanity, or the death, dissolution or termination (other than by merger or consolidation under which the surviving entity agrees to assume all of the obligations and responsibilities of the merged or consolidated Person set forth in this Agreement), as the case may be, of any Person. "Income" shall mean the gross income of the Production Partnership (other than Investment Income) as determined for Federal income tax purposes, including all capital or Code Section 1231 gains (but not losses) of the Production Partnership. "Interest" shall mean the entire ownership interest (which may, either for a Partner's Capital Account or a Partner's Profits interest, be expressed as a percentage) of a Partner in the Production Partnership at any particular time, including the rights and obligations of such Partner under this Agreement and the Act. "Investment Income" shall mean all interest and dividend -7- income earned on temporary investments of the Production Partnership at any time prior to the time at which an amount equal to the Capital Contributions to the Production Partnership available for the acquisition of Producing Properties have been (i) expended or (ii) returned pursuant to Section 3.4 of this Agreement. "Lease" shall mean a lease, mineral interest, royalty or overriding royalty covering Hydrocarbons (or a contractual right to acquire such an interest), or an undivided interest therein or portion thereof, together with all easements, permits, licenses, servitudes and rights-of-way situated upon, or used or held for future use in connection with, the exploration, development or operation of such interest. "Limited Partners" shall mean the limited partners of the Limited Partnership or any substituted limited partners thereof. "Limited Partnership" shall mean the PaineWebber/Geodyne Energy Income Limited Partnership I-D, an Oklahoma limited partnership. "Limited Partnership Agreement" shall mean the agreement under which the Limited Partnership was formed, as amended and restated. "Management Committee" shall mean the committee, composed of two representatives from each Managing Partner, established for the purposes set forth in Sections 4.lC and 4.2A(iii) of this Agreement. "Management Fee" shall mean the fee paid by the Production Partnership to the Managing Partners pursuant to Section 5.2(l) of this Agreement in connection with their management of the affairs of the Production Partnership. "Managing Partners" shall mean Geodyne Production Company, a Delaware corporation, and PW Production, Inc., a Delaware corporation, and any other Person admitted as additional or Substituted Managing Partner pursuant to Article Six of this Agreement. "Notification" shall mean a writing, containing the information required by this Agreement to be communicated to any Person, hand delivered or sent by registered or certified mail, return receipt requested, postage prepaid, to such Person at the last known address of such Person, the date of the certified -8- receipt (or such other evidence of receipt) therefor being deemed the date of the giving of Notification; provided, however, that any written communication containing the information sent or delivered to the Person and actually received by the Person shall constitute Notification for all purposes of this Agreement. "Operating Costs" shall mean all expenditures made and costs incurred by the Production Partnership with respect to (i) the production and marketing of Hydrocarbons from completed Production Partnership Wells, including labor, fuel, repairs, hauling, materials, supplies, utility charges and other costs incident to or therefrom, costs of maintaining inventories incidental to the operations of Producing Properties, costs of making transfers of lease and well equipment to and from Production Partnership Wells, ad valorem and severance taxes, insurance and casualty loss expense, and compensation to well operators or others for services rendered in conducting such operations; (ii) the interest, commitment fees and other finance charges and expenses of Production Partnership borrowings incurred in connection with Development Drilling and Improved Recovery Projects; and (iii) processing facilities, pipelines, gas sales facilities, Improved Recovery projects, and other procedures and facilities necessary to produce efficiently the Hydrocarbon reserves from a Producing Property, all to the extent such costs and expenditures are not Property Acquisition Costs. "Organization and Offering Costs" shall mean all costs and expenses incurred by the Managing Partners in connection with the organization of the Production Partnership, including, without limitation, the legal, printing, accounting and other costs incurred in connection with the organization of the Production Partnership, including, without limitation, the legal, printing, accounting and other costs incurred in connection with preparing, filing and recording this Agreement. "Partner" shall mean any Managing Partner or any General Partner of the Production Partnership. "Payout" shall mean that time at which cash distributions have been made by the Limited Partnership to the Limited Partners pursuant to Section 5.1 of the Limited Partnership Agreement (together with any distributions to such Limited Partners pursuant to Section 3.4 of the Limited Partnership Agreement), in an aggregate amount equal to the Limited Partners' Capital Contributions to the Limited Partnership. -9- "Person" shall mean any individual, partnership, corporation, trust or other entity. "Prior Production Partnership" shall mean a general partnership of which PW Production and Geodyne Production are managing partners, and a limited partnership, of which units of limited partnership interest were offered pursuant to the Prospectus, is the other general partner, formed prior to the Activation of the Production Partnership. "Producing Property" shall mean any property (or interest in such property) with a well or wells capable of producing Hydrocarbons in commercial quantities or properties unitized with such properties or properties adjacent to such properties which are acquired as an incidental part of the acquisition of such properties. The term also includes well machinery and equipment, gathering systems, storage facilities or processing installations or other equipment and property associated with the production of Hydrocarbons. Interests in properties may include Working Interests, production payments, Royalties and other nonworking and nonoperating interests. "Production Partnership" shall mean the general partnership governed under and pursuant to this Agreement, as said general partnership may from time to time be constituted. "Production Partnership Account" shall mean the bank account or accounts maintained by the Managing Partners pursuant to Section 9.3. "Production Partnership Property" shall mean any interest, property and right of any type owned by the Production Partnership. "Production Partnership Well" shall mean any well in which the Production Partnership has an interest. "Profits" and "Losses" shall mean the income or losses of the Production Partnership for Federal income tax purposes determined as of the close of the Production Partnership's Fiscal Year, as well as, when the context requires, any tax-exempt income and nondeductible expenses. "Property Acquisition Costs" shall mean, without duplication, the sum of (1) the prices paid by the Production Partnership or a Managing Partner or an Affiliate to acquire a -10- Producing Property ultimately sold to the Production Partnership, including the price paid to acquire a purchase option with respect to a Producing Property, lease bonuses and equipment costs associated therewith; (2) title insurance or examination costs, transfer taxes, if any, and like charges in connection with the acquisition of Producing Properties; (3) delay rentals and ad valorem taxes paid by the seller with respect to such property to the date of its transfer to the buyer; (4) interest actually incurred by the Managing Partners or their Affiliates to acquire or maintain such Producing Properties prior to their transfer to the Production Partnership; and (5) such portion of the Managing Partners' or Affiliates' reasonable, necessary and actual expenses for geological, geophysical, seismic, land, engineering, drafting, accounting, auditing, legal and other like services, including the Production Partnership's costs incurred (to the extent consistent with generally accepted industry standards) in connection with the Production Partnership's review of proposed acquisitions of Producing Properties, Reports and Engineering Audit Letters, all allocated to the property in accordance with the allocation procedures used by the Managing Partners, any of their Affiliates or the Production Partnership; provided that the portion of the Managing Partner's or Affiliates' expenses allocated to the property, as set forth in items (3), (4) and (5), shall have been incurred not more than 36 months prior to the property transaction. "Prospect" shall mean an area in which the Production Partnership owns or intends to own one or more oil and gas interests, which is geographically defined on the basis of geological data by the Managing Partners and which is reasonably anticipated by the Managing Partners to contain at least one reservoir. "Prospectus" shall mean the prospectus pursuant to which the Units were offered, and all supplements or amendments thereto, if any. "Proved Reserves" shall mean those quantities of Hydrocarbons, which, upon analysis of geologic and engineering data, appear with reasonable certainty to be recoverable in the future from known Hydrocarbon reservoirs under existing economic and operating conditions. Proved reserves are limited to those quantities of Hydrocarbons which can be expected, with little doubt, to be recoverable commercially at current prices and costs, under existing regulatory practices and with existing conventional equipment and operating methods. Depending upon -11- their status of development, such proved reserves shall be subdivided into the following classifications and have the following definitions: (a) "Proved Developed Reserves" shall mean proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. This classification shall include: (1) "Proved Developed Producing Reserves" which are proved developed reserves which are expected to be produced from existing wells; and (2) "Proved Developed Nonproducing Reserves" which are proved developed reserves which exist behind the casing of existing wells, or at minor depths below the present bottom of such wells, which are expected to be produced through these wells in the predictable future, where the cost of making Hydrocarbons available for production should be relatively small compared to the cost of a new well. Additional Hydrocarbons expected to be obtained through the application of improved recovery techniques are included as "Proved Developed Reserves" only after testing by a pilot project or after the operation of an installed program has confirmed through production responses that increased recovery will be achieved. (b) "Proved Undeveloped Reserves" shall mean all reserves which are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Such reserves on undrilled acreage are limited to those drilling units offsetting productive units which are reasonably certain of production when drilled. Proved reserves for other undrilled units are claimed only where it can be demonstrated with reasonable certainty, based on accepted geological, geophysical and engineering studies and data, that there is continuity of production from an existing productive formation. No estimates for Proved Undeveloped Reserves are attributable to any acreage for which improved recovery is contemplated, unless the techniques to be employed have been proved effective by actual tests in the same area and reservoir. -12- "PW Production" shall mean PW Production Inc., a Delaware corporation. "Remove", "Removed" or "Removal" shall mean, with reference to the removal of a Managing Partner, the termination of the management powers, duties and responsibilities of such Managing Partner pursuant to Section 6.2 of this Agreement and the removal of such Managing Partner as a Partner. "Royalty" shall mean an interest, including an overriding royalty and a net profits interest, in gross production or the proceeds therefrom which does not require the owner thereof to bear any of the cost of production, development, operation or maintenance. "Sale" shall mean any event or transaction that is, for Federal income tax purposes, considered a sale, exchange or abandonment by the Production Partnership of any Production Partnership Property. "State" shall mean the State of Oklahoma. "Subscription Agreement and Power of Attorney" shall mean the Subscription Agreement and Power of Attorney in the form attached to the Prospectus. "Substituted Partner" shall mean any Person admitted to the Production Partnership as a Partner pursuant to Sections 7.3 and 10.2 of this Agreement. "Unit" shall mean a $1,000 investment in the Limited Partnership by a Limited Partner pursuant to the terms of a Subscription Agreement and Power of Attorney; provided, however, that fractional Units may be acquired to the extent provided under Section 5.lB of the Limited Partnership Agreement. "Working Interest" shall mean the interest (whether held directly or indirectly) in a Lease which is subject to some portion of the expense of production, development, operation or maintenance. -13- ARTICLE TWO Continuation; Name, Place of Business and Office; Term ------------------------------------------------------ Section 2.1. Continuation -------------------------- The parties hereto hereby continue the general partnership heretofore formed pursuant to the provisions of the Act and the rights and liabilities of the Partners shall be as provided in the Act, except as otherwise expressly provided in this Agreement. Section 2.2. Name, Place of Business and Office, Agent ------------------------------------------------------- The Production Partnership shall be conducted under the name PaineWebber/Geodyne Energy Income Production Partnership I-D. The business of the Production Partnership may, however, be conducted under any other name deemed necessary or desirable by the Managing Partners in order to comply with applicable laws. The office and principal place of business of the Production Partnership shall be c/o Geodyne Production Company, 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The Managing Partners shall record an assumed name or fictitious name certificate in the State and in each state in which it owns property or transacts business when deemed necessary by the Managing Partners. The Managing Partners may change the principal place of business and the location of such office and may establish such additional offices as they deem advisable from time to time; provided, however, that in the event the principal place of business of the Production Partnership shall be changed, the Managing Partners shall give written notice thereof to the Limited Partners. Section 2.3 Purpose -------------------- The business and purpose of the Production Partnership shall be to acquire, own, hold, operate, explore, develop, trade, sell and exchange Hydrocarbon properties and interests therein of all kinds onshore and offshore in the continental United States, including, without limitation, interests in general or limited partnerships, joint ventures and other entities that hold or are formed to acquire interests in such -14- properties or interests; to engage in development drilling and enhanced recovery operations thereon, to produce, transport, market, purchase and trade Hydrocarbons and products thereof; to purchase, lease, own, hold, operate, sell and exchange all equipment, machinery, facilities, systems and plans necessary or appropriate for such purposes; and to do any and all things necessary or proper in connection with or incident to the foregoing activities. Section 2.4. Term ------------------ The Production Partnership shall continue in force and effect until December 31, 1999, provided that the Management Committee may extend such term for up to five periods of two years each, or until dissolution prior thereto pursuant to the provisions hereof. ARTICLE THREE Partners and Capital -------------------- Section 3.1. Managing Partners ------------------------------- A. The names, addresses and Capital Contributions of the Managing Partners are set forth in Schedule A attached hereto and are incorporated herein. The Managing Partners shall not be required to make any Capital Contribution except as set forth in Sections 3.lB, 3.4 and 8.2C. B. The Managing Partners shall also contribute an amount of cash sufficient to pay their share of costs allocated to them pursuant to Section 5.3 of this Agreement to the extent that the amount of Income allocated to them (and/or the amount of Production Partnership borrowings incurred on their behalf) is insufficient to pay such costs. Section 3.2. Other General Partner ----------------------------------- The name, address and Capital Contribution of the Limited Partnership are set forth in Schedule A attached hereto and are hereby incorporated herein. -15- Section 3.3. Application of Capital Contributions -------------------------------------------------- The Managing Partners shall deposit in the Production Partnership Account the Capital Contributions of the Limited Partnership and the Managing Partners and apply such Capital Contributions to the payment of Organization and Offering Costs and the Management Fee. The balance of such Capital Contributions shall be held in the Production Partnership Account to be applied to the payment of Property Acquisition Costs and, to the extent not payable out of Income or Investment Income, Operating Costs, General and Administrative Costs, Direct Administrative Costs and other Production Partnership costs; provided, however, that such funds may be temporarily invested prior to the payment of such costs in accordance with Section 9.3 of this Agreement. Section 3.4. Certain Returns of Capital ---------------------------------------- Any portion of the Capital Contribution of the Limited Partnership (except for necessary operating capital) that has not been expended or that is not, or in the determination of the Managing Partners, will not be committed for expenditure by the second anniversary of the Activation of the Production Partnership will promptly be refunded to the Limited Partnership as a return of part of its Capital Contribution at the earlier of such determination or the second anniversary of the Activation of the Production Partnership. Such funds will be deemed to have been committed for expenditure by such date to the extent they are payable under contractual agreements or understandings in effect on such date, or have been applied to a reasonable working capital reserve or have been set aside as a condition to obtaining any financing in the form of a compensating balance or similar arrangement. In addition, the Managing Partners shall contribute cash to the Production Partnership (with respect to which their Capital Accounts will be credited) in an amount equal to the amount paid to the Managing Partners in respect of the Management Fee attributable (on a proportionate basis) to the unexpended amount of Capital Contributions so refunded, which cash shall be refunded to the Limited Partnership together with the unexpended Capital Contributions so refunded. Geodyne Production and PW Production shall be responsible for the obligation of the Managing Partners to contribute cash to the Production Partnership pursuant to this Section 3.4 in the relative percentages which they allocated between themselves the payment of the Management Fee -16- pursuant to Section 5.2. All amounts so refunded to the Limited Partnership shall reduce dollar for dollar its Capital Account. Section 3.5. Production Partnership Capital -------------------------------------------- A. No Partner shall be paid interest on any Capital Contribution to the Production Partnership or on such Partner's Capital Account, notwithstanding any disproportion therein as between Partners. B. The Production Partnership shall not redeem any Partner's Interest. Except as provided in Sections 3.4, 6.1, 6.2 and 8.2 of this Agreement, no Partner shall have the right to withdraw or receive any return of the Capital Contribution. Under circumstances involving a return of any Capital Contribution, no Partner shall have the right to receive any property other than cash, except as may otherwise be provided in Sections 6.1, 6.2 and 8.2 of this Agreement. Section 3.6. Liability of Partners ----------------------------------- Each Partner signatory hereto or subsequently admitted to the Production Partnership agrees that it shall remain generally liable for any obligation or recourse liability of the Production Partnership incurred during the period in which it is a Partner. However, all present and future Partners hereby agree among themselves to contribute to each other the amount of funds necessary to effectuate a sharing of such Production Partnership obligations and recourse liabilities in proportion to each Partner's share of such obligations and liabilities at the time of their accrual. -17- ARTICLE FOUR Rights, Powers and Duties of ---------------------------- The Managing Partners --------------------- Section 4.1. Management and Control of the Production Partnership ------------------------------------------------------------------ A. Subject to Section 4.lC of this Agreement and to the Consent of the Limited Partnership as and when required by this Agreement, the Managing Partners, within the authority granted to them under and in accordance with the provisions of this Agreement, shall have the full and exclusive right to manage and control the business and affairs of the Production Partnership and to make all decisions regarding the business of the Production Partnership and shall have all of the rights, powers and obligations of managing general partners of a general partnership under the laws of the State. The Managing Partners shall exercise those powers as a fiduciary to the Limited Partnership. B. No other Partner shall participate in the management of or have any control over the Production Partnership's business nor shall any other Partner have the power to represent, act for, sign for or bind the Managing Partners or the Production Partnership. The Limited Partnership hereby Consents to the exercise by the Managing Partners of the powers conferred on them by this Agreement. C. The Managing Partners' management authority with respect to significant Production Partnership actions shall be exercised by the Management Committee, including without limitation such actions as: (i) the acquisition of a Producing Property or an option to purchase a Producing Property, provided that Geodyne Production shall have the authority to acquire Producing Properties and options to acquire Producing Properties without the approval of the Management Committee, provided further that (a) Geodyne Production does not expend an aggregate amount of Production Partnership funds with respect to the acquisition of Producing Properties whose aggregate acquisition price, together with the anticipated aggregate acquisition price of Producing Properties subject to such purchase options, is in excess of 20% of the Limited Partnership's Capital Contribution, and (b) no single acquisition of Producing Properties by Geodyne -18- Production pursuant to this proviso shall exceed 10% of the Limited Partners' capital contributions to the Limited Partnership; (ii) the incurrence of indebtedness; (iii) the determination of the amount of and the distribution of Distributable Cash to the Partners; (iv) the engaging in and making decisions with respect to any Development Drilling, Identified Development Drilling and Improved Recovery operations; (v) the sale or other transfer of any Producing Property that constitutes a significant portion of the assets of the Production Partnership; and (vi) the determination not to extend the term of the Production Partnership as set forth in Section 2.4 of this Agreement. The Management Committee shall have the power to delegate its management authority with respect to any "significant" action to a Managing Partner at such times and under such conditions as it may decide in its own discretion. The Managing Partners' management authority respecting all other actions which are in the ordinary course of the Production Partnership's operations may be exercised by either Managing Partner without the concurrence of the other Managing Partner, provided that the Managing Partner exercising such management authority shall, upon inquiry by the other Managing Partner, notify the inquiring Managing Partner of the nature of such actions undertaken without the concurrence of the inquiring Managing Partner. The Management Committee shall have the authority (i) to determine that the "significant" actions specified herein shall no longer be "significant" actions for the purposes of this Section 4.1C and to amend this Agreement pursuant to Section l0.1A of this Agreement to reflect such determination, and (ii) to determine which other Production Partnership operations, other than those specified herein, are "significant" actions for purposes of this Section 4.1C. Section 4.2. Authority of the Managing Partners ------------------------------------------------ A. In addition to any other rights and powers which the Managing Partners may possess under this Agreement and the Act, the Managing Partners shall, except and subject to the extent otherwise provided or limited in this Agreement, have all specific rights and powers required or appropriate to their management of the Production Partnership's business which, by way of illustration but not by way of limitation, shall include the following rights and powers to: -19- (i) expend the Capital Contributions of the Partners and apply Production Partnership revenues, subject to Section 4.3C of this Agreement, in furtherance of the business of the Production Partnership; (ii) acquire, explore, develop, manage and operate Hydrocarbon properties and interests therein (including interests in corporations and partnerships owning Hydrocarbon properties if in the Managing Partners' judgment such purchase is a necessary or advisable step in acquiring interests in producing properties held by any such corporation or partnership, provided, no such purchase will be made for the purpose of investment in the securities of any such corporation or partnership, the Production Partnership will not conduct or participate in a hostile tender offer, and no such purchase will be made unless there is assurance that sufficient control of the corporation or partnership can be obtained in the initial acquisition to liquidate it, and it is determined the purchase would not thereby render the Production Partnership an investment company within the meaning of the Investment Company Act of 1940, and provided further the Production Partnership's interest in the underlying assets of any such corporation or partnership is distributed as soon as practical thereafter to the Production Partnership in redemption for the Production Partnership's interest in such corporation or partnership) of all kinds and acquire units of limited partnership interest tendered to the General Partners pursuant to the terms of any right of presentment of a Prior Limited Partnership (as defined in the Limited Partnership Agreement) (provided that the Production Partnership shall not expend an aggregate amount in excess of 10% of the Limited Partnership's Capital Contribution to acquire such units) and hold all such property, interests and units in the name of the Production Partnership; provided, however, that in connection therewith, the Managing Partners shall, contemporaneously with the acquisition of a Producing Property, or as soon as practicable thereafter, file or cause to be filed for recordation an appropriate conveyance or agreement evidencing the Production Partnership's interest in such Producing Property in the jurisdiction where such Producing Property is located pursuant to such jurisdiction's Uniform Commercial Code and/or in the real property records of the clerk or recorder of the county in which the Producing Property is situated; and, provided, further, that filings of such conveyances or agreements shall also be made as the -20- Managing Partners believe necessary to establish the Production Partnership's priority of interest; and, provided, further, Producing Properties may be held temporarily in the name of a nominee for the Production Partnership if such action is deemed necessary by the Managing Partners to facilitate acquisition; (iii) execute such instruments and agreements, to do such acts, to employ such persons and to contract for such services as the Managing Partners determine are necessary or appropriate to conduct the Production Partnership's business, including (x) the employment of any Managing Partner or any Affiliate as an operator, (y) the entering into management and advisory contracts, and (z) the establishment of the Management Committee to exercise, pursuant to Section 4.lC of this Agreement, or supervise the exercise of the Managing Partners' powers set forth in this Agreement, subject to any restrictions contained in the Act and in this Agreement, and to provide for any reasonable compensation to be paid to the Persons comprising the Management Committee pursuant to such contracts as the Managing Partners shall deem necessary and appropriate; (iv) execute, in the name of the Production Partnership, contracts for the sale of Hydrocarbons and division orders and transfer orders as necessary or incident to the sale of production on behalf of the Production Partnership; (v) produce, treat, transport and market Hydrocarbons, execute processing contracts, transportation contracts, and enter into contracts for the marketing or sale of Hydrocarbons and other marketing agreements in the name of the Production Partnership, whether or not extending beyond the term of the Production Partnership; (vi) execute offers for United States and any state Leases on behalf of the Production Partnership; execute and file requests for approval of assignments of interests in United States and any state Leases, together with any and all contracts for the option, sale or purchase of such Leases or the sale or purchase of any products therefrom; to execute any plans of development under unit agreements, conveyances, subleases, mortgages, deeds of trust, affidavits or reports concerning the drilling of wells and production, designations of operator, Lease bonds, -21- operator's bonds and consents of surety; and in general to do all things necessary or desirable on behalf of the Production Partnership regarding any United States or state Leases or offers therefor; provided, however, that the Production Partnership shall have the authority to acquire or otherwise deal with any such interests respecting Leases located in "offshore waters" (as that term is generally understood in the oil and gas industry) only on the condition that the Production Partnership shall not participate in any Development Drilling or Identified Development Drilling in "offshore waters" which are not state-owned waters; (vii) enter into any partnership agreement, sharing arrangement, or joint venture with any Person acceptable to the Managing Partners and which is engaged in any business or transaction in which the Production Partnership is authorized to engage, provided that the Production Partnership shall not be deemed thereby to be an "investment company" for purposes of the Investment Company Act of 1940, as amended; (viii) enter into and execute drilling contracts, Farmout agreements, operating agreements, unitization agreements, pooling agreements, unit or pooling designations, recycling contracts, dry hole, bottom hole and acreage contribution letters and agreements, participation agreements, agreements and conveyances respecting rights-of-way, agreements respecting surface and subsurface storage and any other agreements customarily employed in the oil and gas industry in connection with the acquisition, exploration, development, operation, or abandonment of any Leases, and any and all other instruments or documents considered by the Managing Partners to be necessary or appropriate to conduct the business of the Production Partnership; (ix) pay or elect not to pay delay rentals on Production Partnership Properties as appropriate in the judgment of the Managing Partners, it being understood that the Managing Partners will not be liable for failure to make correct or timely payments of delay rentals if such failure was due to any reason other than negligence or lack of good faith; (x) subject to Section 4.3B of this Agreement, abandon or otherwise dispose of any interest in Hydrocarbon -22- properties acquired for the Production Partnership upon such terms and for such consideration as the Managing Partners may determine; (xi) sell production payments payable out of all or any part of any one or more of the Producing Properties acquired by the Production Partnership and to devote and expend the proceeds of any such sale for any of the purposes of the Production Partnership for which the proceeds of borrowings may be applied; (xii) borrow monies from time to time, for the purpose and subject to the limitations stated in Section 4.3C of this Agreement, in the form of recourse or nonrecourse borrowings, or otherwise to draw, make, execute and issue promissory notes and other negotiable or nonnegotiable instruments and evidences of indebtedness, and to secure the payments of the sums so borrowed and to mortgage, pledge, or assign in trust all or any part of Production Partnership Property, including Producing Properties, production and proceeds of production, or to assign any monies owing or to be owing to the Production Partnership, and to engage in any other means of financing customary in the petroleum industry; provided, however, that a creditor who makes a nonrecourse loan to the Production Partnership shall not have or acquire, at any time as a result of making the loan, any direct or indirect interest in the profits, capital, or property of the Production Partnership other than as a secured creditor; (xiv) invest Capital Contributions temporarily in the investments set forth in Section 9.3 of this Agreement; (xv) employ on behalf of the Production Partnership agents, employees, accountants, lawyers, geologists, geophysicists, landpersons, clerical help, and such other assistance and consulting and other services as may deem necessary or convenient and to pay therefor such remuneration as the Managing Partners may deem reasonable and appropriate; (xvi) purchase, lease, rent, or otherwise acquire or obtain the use of machinery, equipment, tools, materials, and all other kinds and types of real or personal property that may in any way be deemed necessary, convenient, or advisable in connection with carrying on the business of the Production Partnership, purchase and -23- establish adequate inventories of equipment and material required or expected to be required in connection with its operations, dispose of tangible lease and well equipment for use or used in connection with Production Partnership Property, and to incur expenses for travel, telephone, telegraph, insurance, and for such other things, whether similar or dissimilar, as may be deemed necessary or appropriate for carrying on and performing the business of the Production Partnership; (xvii) enter into such agreements and contracts with such parties and to give such receipts, releases, and discharges with respect to any and all of the foregoing and any matters incident thereto as the Managing Partners may deem advisable or appropriate; (xviii) guarantee the payment of money or the performance of any contract or obligation by any person, firm, or corporation on behalf of the Production Partnership; (xix) sue and be sued, complain and defend in the name and on behalf of the Production Partnership; (xx) make such classifications and determinations as the Managing Partners deem advisable, having due regard for any relevant generally accepted accounting principles and oil and gas industry practices; (xxi) purchase insurance, or extend the Managing Partners' or their Affiliates' insurance, at the Production Partnership's expense, to protect the Production Partnership Property and the business of the Production Partnership against loss, and to protect the Managing Partners against liability to third parties arising out of Production Partnership activities, such insurance to be in such limits, to be subject to such deductibles and to cover such risks as the Managing Partners deem appropriate; (xxii) pay all ad valorem taxes levied or assessed against the Production Partnership Properties, all taxes upon or measured by the production of Hydrocarbons therefrom, and all other taxes (other than income taxes) directly related to operations conducted by the Production Partnership; -24- (xxiii) enter into agreements on behalf of the Production Partnership with Affiliates subject to the limitations set forth in Section 4.3B of this Agreement; (xxiv) sell all or substantially all of the properties and other assets of the Production Partnership to themselves, or any of their Affiliates or any other person and to receive for the Production Partnership consideration consisting of cash, securities, other property or any other form of consideration, or any combination thereof, at such prices and for such forms of consideration as they deem in the best interests of the Limited Partners; provided, however, that no such sale shall be consummated without the prior Consent of the Limited Partnership pursuant to the provisions of Section 4.4B of this Agreement. In the event of the dissolution of the Production Partnership followed by any such sale of the Production Partnership's assets, the Managing Partners shall, subject to the provisions of Section 8.2 of this Agreement, be appointed the liquidating agents for the Production Partnership; (xxv) make, exercise or deliver any general assignment for the benefit of the Production Partnership's creditors, but only upon the prior Consent of the Limited Partnership pursuant to the provisions of Section 4.4B of this Agreement; (xxvi) take such other action and perform such other acts as may be deemed appropriate to carry out the business of the Production Partnership; and (xxvii) inform each other Partner of all administrative and judicial proceedings for an adjustment at the Production Partnership level for partnership tax items and forward to each other Partner within 30 days of receipt all notices received from the Internal Revenue Service regarding the commencement of a partnership level audit or a final partnership administrative judgment, and Geodyne Production shall perform all duties imposed by Sections 6221 through 6232 of the Code as the "tax matters partner" of the Production Partnership, including, but not limited to, the following: (a) the power to conduct all audits and other administrative proceedings (including windfall profit tax audits) with respect to Production Partnership items; the power to extend the statute of -25- limitations for all Partners with respect to Production Partnership tax items; and (b) the power to file a petition with an appropriate federal court for review of a final partnership administrative adjustment. Geodyne Production shall consult with PW Production with respect to the performance of its duties as "tax matters partner." B. Reliance by Third Parties on Managing Partners' Authority. No person, firm or corporation dealing with the Production Partnership shall be required to inquire into the authority of the Managing Partners to take or refrain from taking any action or make or refrain from making any decision, but any person so inquiring shall be entitled to rely upon a certificate of the Managing Partners as to their due authorization. Section 4.3. Sales, Purchases and Operation of Producing --------------------------------------------------------- Properties; Additional Financing -------------------------------- A. Except with respect to Producing Properties whose aggregate purchase price does not exceed 10% of the Limited Partners' capital contributions to the Limited Partnership, no Producing Property shall be acquired by the Production Partnership unless there has been prepared and evaluated with respect thereto either an Acquisition Reserve Report or an Engineering Audit Letter acceptable to the Management Committee; B. Neither the Managing Partners nor any Affiliate shall sell, transfer or convey any or all of their interest in Producing Properties to the Production Partnership or purchase or acquire any oil and gas properties or interest from the Production Partnership, directly or indirectly, except pursuant to transactions that are fair and reasonable to the Limited Partnership under the circumstances at the time such transaction is consummated. Such transactions shall be further subject to the following restrictions: (i) Prior to the date on which the Production Partnership has acquired its final Producing Property, neither the Managing Partners nor any Affiliate of a Managing Partner (other than an Affiliated Program) shall acquire any Producing Property after the Activation of the Production Partnership unless prior thereto the Production Partnership shall have been offered the right to acquire -26- such Producing Property, or an interest therein, and the Management Committee shall have determined that the acquisition of such Producing Property, or an interest therein, is not in the best interests of the Production Partnership; (ii) Any purchase or sale of a Producing Property from or to a Managing Partner or any Affiliate shall be made at the Property Acquisition Cost for such Producing Property as adjusted for intervening operations, unless the Managing Partner or such Affiliate has reasonable grounds to believe that cost is materially more or less than the fair market value of such property, in which case such sale or purchase shall be made at a price equal to the fair market value thereof as determined by an independent petroleum engineer; (iii) If a Managing Partner sells, transfers or conveys any oil, gas or other mineral interests or property to the Production Partnership, it must, at the same time, sell to the Production Partnership an equal proportionate interest in all its other property in the same Prospect. A Sale or conveyance to the Production Partnership of less than the entire ownership interest of a Managing Partner or any Affiliate is only permitted if: (a) the interests retained or obtained by the Managing Partners or Affiliate and acquired by the Production Partnership are either (x) proportionate, uniform and undivided Working Interests if the Producing Property acquired by the Production Partnership is a Working Interest or (y) proportionate, uniform and undivided Royalty Interests if the Producing Property acquired by the Production Partnership is a Royalty, (b) the respective obligations of the Managing Partners or Affiliate and the Production Partnership are substantially the same, and (c) the interest of the Managing Partners or their Affiliates in revenues does not exceed the amount proportionate to their interest. The Managing Partners and their Affiliates may not retain or obtain any overrides or other burdens on the interest obtained by the Production Partnership, and may not enter into any Farmouts with respect to their retained interest, except to nonaffiliated third parties or to an Affiliated Program; (iv) In the event a Managing Partner or any Affiliate proposes to acquire an interest in a Producing Property in which the Production Partnership has an interest or in a -27- Producing Property abandoned by the Production Partnership within one year preceding such proposed acquisition, such Managing Partner or Affiliate shall offer the interest to the Production Partnership; and if cash or financing is not available to the Production Partnership to purchase such interest, neither such Managing Partner nor Affiliate shall acquire an interest in such Producing Property. The term "abandon" for the purpose of this subparagraph shall mean the termination, either voluntary or by operation of the Lease or otherwise, of all of the Production Partnership's interest in the Producing Property. This subsection shall not apply after the lapse of five years of the Activation of the Production Partnership or to any Affiliated Program where the interest of such Managing Partner is less than or equal to its interest in the Production Partnership, there are no duplication of fees to the Managing Partners, and the Managing Partners do not obtain a greater benefit from purchase of the interest by the Affiliated Program than they would if the interest were purchased by the Production Partnership; (v) During the existence of the Production Partnership and before it has ceased operations, neither Managing Partner nor any Affiliate (excluding any Affiliated Program where the interest of such Managing Partner is less than or equal to its interest in the Production Partnership) shall acquire, retain or drill for its own account any oil and gas interest in any Prospect upon which the Production Partnership possesses an interest, except for transactions which comply with Section 4.3B(iii) or 4.8 of this Agreement. The geological limits of a Producing Property owned by the Production Partnership shall be enlarged or contracted on the basis of subsequently acquired geological data to define the productive limits of a reservoir and must include all of the acreage determined by the subsequent data to be encompassed by such reservoir. If the geological limits of a Producing Property, as so enlarged, encompass any interest held by either a Managing Partner or an Affiliate of a Managing Partner (excluding an Affiliated Program where the interest of such Managing Partner is identical to or less than its interest in the Production Partnership), such interest shall be sold to the Production Partnership in accordance with the provisions of Section 4.3B(iv) of this Agreement and any net income previously received by the Managing Partner or Affiliate shall be paid over to the Production Partnership. If a Managing Partner acquires -28- additional acreage or interests in a Prospect of the Production Partnership, it must sell such to the Production Partnership and is prohibited from retaining any such interest, except as may be permitted by Section 4.3B of this Agreement. Notwithstanding the foregoing, the Production Partnership will not be required to expend additional funds to acquire any such interest unless funds are available from the Capital Contributions of the Partners; (vi) Producing Properties may be sold, Farmed-out or otherwise transferred from or to an Affiliated Program only pursuant to transactions that (a) comply with Sections 4.3B(iii) and 4.3B(iv) of this Agreement, and (b) are in exchange for the transferee's obligation to conduct exploratory drilling, Development Drilling, Identified Development Drilling or Improved Recovery operations on such properties or in connection with the formation of a joint venture among the Production Partnership and such Affiliated Program, provided that the compensation arrangement or any other interest or right of the Managing Partners or any Affiliate is the same in the Production Partnership and Affiliated Program, or, if different, the aggregate compensation of the Managing Partners does not exceed the lower of the compensation they would have received in the Production Partnership or the Affiliated Program, and the terms of such Sale, Farmout or transfer comply with the provisions of Section 4.8 of this Agreement; (vii) Any Sale of inventory or other materials by the Production Partnership to any Managing Partner or Affiliate shall be made at the applicable rates set forth in the standard form of the accounting procedure then recommended by the Council of Petroleum Accountants Societies of North America; (viii) Any operating agreements pursuant to which any Managing Partner or any Affiliate acts as operator of Producing Properties shall be of a nature customary in the industry and payments to any Managing Partner or any Affiliate for acting as operator shall not exceed the compensation which would be paid by unaffiliated third parties in the same geographic area for similar goods and services. Reimbursement of the Managing Partner's overhead pursuant to such operating agreement will not be duplicative of any reimbursement of General and -29- Administrative Costs made pursuant to Section 5.2 of this Agreement; and (ix) To the extent a Managing Partner or any Affiliate acquires an interest in a Producing Property in which the Production Partnership acquires an interest, such Managing Partner or Affiliate shall pay its allocable portion of the cost of the preparation of the Acquisition Reserve Report or Engineering Audit Letter, as the case may be, respecting such Producing Property. C. The Managing Partners may not expend any amount of Production Partnership funds over the term of the Production Partnership for the payment of Production Partnership costs (other than recompletion costs) incurred in connection with Development Drilling and Identified Development Drilling in excess of 10% of the amount of the Limited Partners' capital contributions to the Limited Partnership and the Production Partnership borrowings. If the Managing Partners determine that funds in addition to the Capital Contributions to the Production Partnership are required for the payment of Production Partnership costs (other than Property Acquisition Costs), the Managing Partners may apply or reserve Income or Investment Income for the payment of such Production Partnership costs and/or the Managing Partners may cause the Production Partnership to borrow funds for the payment of Production Partnership costs incurred in connection with Development Drilling, Identified Development Drilling and Improved Recovery operations; provided, however, that the aggregate outstanding principal amount of such borrowings shall not at any one time exceed an amount equal to 20% of the Limited Partners' capital contributions to the Limited Partnership. D. Each Managing Partner shall have the authority to secure the payment of borrowings incurred by it for its own account or for purposes of paying its allocable share of Production Partnership costs by assigning to lenders all or part of its Managing Partner's interest in Profits and Distributable Cash, and by granting such lenders a security interest or mortgage in an undivided interest in any Production Partnership Property not to exceed its Managing Partner's percentage interest in Income; provided, however, that the Managing Partners, in the aggregate, shall retain unencumbered at least a 1% interest in each of Production Partnership Property, Profits and Distributable Cash. Notwithstanding anything to the contrary in this Agreement, in the event of any sale or foreclosure of a Managing Partner's interest in full or partial -30- satisfaction of such borrowings, appropriate adjustments shall be made in the Capital Accounts of the Partners and in the method by which Income and costs are allocated to the Partners to assure that the Limited Partnership and the other Managing Partner will not bear any of the costs attributable to such sold or foreclosed interest and that such Managing Partner will not share or participate in any of the capital, Income, costs or distributions attributable to such sold or foreclosed interest except to the extent of the unencumbered interest retained by such Managing Partner. Section 4.4. Prohibited Transactions ------------------------------------- A. Notwithstanding any other provision of this Agreement to the contrary, the following transactions are expressly prohibited: (i) the Production Partnership shall not make any loans to a Managing Partner or any Affiliate; (ii) neither the Managing Partners nor any Affiliate shall make any loans to the Production Partnership except at a rate of interest not in excess of the interest cost incurred by the Managing Partners or Affiliates or the amount of interest that would be charged to the Production Partnership (without regard to the Managing Partner's or Affiliate's financial abilities or guarantees) by unrelated banks on comparable loans for the same purpose, whichever is lower, and the Managing Partners and Affiliates shall not receive points or financing charges or fees regardless of the amount; (iii) except as expressly contemplated hereby, no agent, attorney, accountant or other independent consultant or contractor who is also employed on a full-time basis by any Managing Partner or any Affiliate shall be compensated by the Production Partnership for his or her services; (iv) other than those received for the account of the Production Partnership, no rebates may be received by any Managing Partner or any Affiliate in connection with Production Partnership operations or expenditures, nor may any Managing Partner or any Affiliate participate in any reciprocal business arrangement that would circumvent any of the provisions of this Agreement; -31- (v) on a monthly basis, costs paid and revenues received by a Managing Partner or an Affiliate for the account of the Production Partnership shall be determined and the net amount resulting from such monthly settlement shall be deposited into a Production Partnership Account and no funds which, after such monthly settlement, are determined to be held for the account of the Production Partnership shall be kept in any account other than a Production Partnership Account, and the Managing Partners shall not employ, or permit any other Person to employ, such funds in any manner except for the benefit of the Production Partnership; it being understood that the Managing Partners may invest Production Partnership funds temporarily in the investments set forth in Section 9.3 of this Agreement pending their use by the Production Partnership. After such monthly settlement, Production Partnership funds may not be commingled with separate funds of either Managing Partner or any other entity; and (vi) the Limited Partnership shall not make any advance payment to the Managing Partners or their Affiliates, except where necessary to secure tax benefits of prepaid drilling costs. B. Notwithstanding any other provision of this Agreement to the contrary, without the prior Consent of the Limited Partnership granted pursuant to the provisions of Article Eleven of this Agreement and the provisions of the Limited Partnership Agreement, the Managing Partners shall not: (i) lease, sell, or dispose of all or substantially all of the Production Partnership's assets; (ii) make, exercise or deliver any general assignment for the benefit of the Production Partnership's creditors; (iii) except as set forth in Section l0.1A, amend any provision of this Agreement; or (iv) dissolve the Production Partnership. Section 4.5. Other Agreements of the Managing Partners ------------------------------------------------------- A. Anything in this Agreement to the contrary notwithstanding, it is agreed that: -32- (i) the Managing Partners and their Affiliates shall not take any action with respect to the assets or property of the Production Partnership which does not benefit exclusively the Production Partnership, including: (a) the utilization of Production Partnership funds as compensating balances for the benefit of the Managing Partners or an Affiliate of a Managing Partner; and (b) the commitment of future production; (ii) all benefits from marketing arrangements or other relationships affecting property of any Managing Partner or its Affiliate and the Production Partnership shall be fairly and equitably apportioned according to the respective interests of each; (iii) the Managing Partners may never profit themselves nor any Affiliate by Development Drilling, Identified Development Drilling or Improved Recovery operations in contravention of their fiduciary obligation to the Limited Partnership; and (iv) neither the Managing Partners nor any Affiliate shall render to the Production Partnership any oil field, equipage or drilling services nor sell or lease to the Production Partnership any equipment or related supplies unless: (a) such Person is engaged, independently of the Production Partnership and as an ordinary and ongoing business, in the business of rendering such services or selling or leasing such equipment and supplies to a substantial extent to other Persons in the oil and gas industry in addition to drilling and income programs in which such Person has an interest; (b) the compensation, price or rental therefor is competitive with the compensation, price or rental of other Persons in the area engaged in the business of rendering comparable services or selling or leasing comparable equipment and supplies which could reasonably be made available to the Production Partnership; -33- (c) the drilling services are billed on either a per foot, per day or per hour rate, or some combination thereof; and (d) provided that, if such Person is not engaged in a business within the meaning of subdivision (a), then such compensation, price or rental shall be the cost of such services, equipment or supplies to such Person or the competitive rate which could be obtained in the area, whichever is less. Section 4.6. Construction of Gas Gathering Lines ------------------------------------------------- The Managing Partners may cause the Production Partnership to construct gas gathering lines if, in the opinion of the Managing Partners, it would be economically feasible and otherwise consistent with prudent operating practice to do so. The costs of any such gathering lines will be deemed to be Operating Costs and shall be charged to the accounts of the Partners as such. The Managing Partners may, in their discretion, construct, or cause an Affiliate of a Managing Partner or other person to construct, gathering lines from Production Partnership Wells to gas transmission systems. Whenever the Managing Partners construct, or cause an Affiliate of a Managing Partner to construct, a gathering line from a Production Partnership Well to a gas transmission system, the Production Partnership shall pay the Managing Partners or such Affiliate an amount that is not greater than the compensation that an unrelated party could have reasonably charged in an arm's-length transaction for similar services in the area as a transmission fee for the transmission of all gas through the gathering system so constructed, and no other transmission fee shall be paid to the Managing Partners or to any Affiliate. Section 4.7. Contracts with the Managing Partners and Affiliates ----------------------------------------------------------------- All services provided to the Production Partnership by a Managing Partner or any Affiliate for which it is compensated shall be embodied in a written contract precisely setting forth the services to be rendered and the compensation to be paid. Each contract relating to a transaction between the Production Partnership and any Managing Partner or any Affiliate shall contain a provision which shall permit termination of the -34- contract by the Production Partnership without penalty on 30 days' prior written notice. The Limited Partnership shall have the power to terminate, without cause or penalty, any such contract on behalf of the Production Partnership. Section 4.8. Farmouts ---------------------- The Management Committee may dispose of Producing Properties by Sale or Farmout when the Management Committee, exercising the standard of a prudent operator, determines that (a) the Production Partnership lacks sufficient funds to conduct Development Drilling, Identified Development Drilling or Improved Recovery operations on the properties and cannot obtain suitable alternative financing for such Development Drilling, Identified Development Drilling or Improved Recovery operations; (b) the properties have been downgraded by events occurring after assignment to the Production Partnership to the point that additional Development Drilling, Identified Development Drilling, Improved Recovery operations or continued production would no longer be desirable to the Production Partnership; (c) Development Drilling, Identified Development Drilling or Improved Recovery operations on the properties would result in an excessive concentration of Production Partnership funds on a Producing Property creating, in the opinion of the Management Committee, undue risk to the Production Partnership; or (d) the best interests of the Production Partnership would be served by the Sale or Farmout. The Production Partnership shall not conduct any drilling of wells other than Development Drilling and Identified Development Drilling; provided, however, that the drilling of wells other than Development Drilling and Identified Development Drilling may be performed on behalf of the Production Partnership pursuant to Farmouts. Neither the Managing Partners nor any Affiliate shall enter into any Farmout or other agreement with the Production Partnership where in consideration for services to be rendered, an interest in production is payable to the Managing Partners or any Affiliate, unless the Production Partnership has previously expended or committed to expend the maximum amount that is authorized to use for Development Drilling or Identified Development Drilling. Any Sale, Farmout or similar agreement between the Production Partnership and a Managing Partner, Affiliate or Affiliated Program will be permitted under the restrictions set forth in this Article Four and will be subject to the following conditions: -35- (i) the Management Committee (or a Managing Partner, if management authority of the Production Partnership with respect thereto has been delegated to it by the Management Committee) exercising the standard of a prudent operator, shall determine that the Sale, Farmout or similar agreement is in the best interests of the Production Partnership; and (ii) the terms of the Sale, Farmout or similar agreement are consistent with and in any case no less favorable than those utilized in the same geographic area for similar arrangements. Section 4.9. Other Operations ------------------------------ The Managing Partners and the Management Committee shall devote such time to the Production Partnership as is reasonably required to carry on the Production Partnership business, and the Managing Partners, members of the Management Committee and their Affiliates shall at all times be free, subject to any restrictions contained herein, to engage in all aspects of the Hydrocarbons and natural resources business for their own accounts and for the accounts of others. Without limiting the generality of the foregoing, the Managing Partners and their Affiliates shall have the right to organize and operate other partnerships, joint ventures or other oil and gas investment programs similar to the Limited Partnership and the Production Partnership. Section 4.10. Prosecution, Defense and Settlement of Claims, ----------------------------------------------------- Indemnification --------------- A. The Managing Partners shall arrange to prosecute, defend, settle or compromise actions at law or in equity at the expense of the Production Partnership as may be necessary to enforce or protect the interests of the Production Partnership. The Managing Partners shall satisfy any judgment, decree, decision or settlement, first, out of any insurance proceeds available therefor, next, out of the Production Partnership assets and Income, and, finally, out of the assets of the Managing Partners and the general partners of the Limited Partnership. -36- B. In any threatened, pending or completed action, suit or proceeding to which the Managing Partners are a party or are threatened to be made a party by reason of the fact that they are the Managing Partners of the Production Partnership (other than an action by or in the right of the Production Partnership) involving an alleged cause of action for damages arising from the performance of their duties under this Agreement or other activities relative to the management and disposition of Producing Properties or production from such properties, the Production Partnership shall indemnify the Managing Partners against expenses, including attorneys' fees, judgments and amounts paid in settlement, actually and reasonably incurred by them in connection with such action, suit or proceeding if they acted in good faith and in a manner they reasonably believed to be in the best interests of the Production Partnership, and provided that their conduct does not constitute negligence or misconduct. The termination of any action, suit or proceeding by judgment, order or settlement shall not of itself create a presumption that the Managing Partners did not act in good faith and in a manner which they reasonably believed to be in the best interests of the Production Partnership. C. In any threatened, pending or completed action or suit by or in the right of the Production Partnership, to which the Managing Partners are a party or are threatened to be made a party, involving an alleged cause of action by the Limited Partnership for damages arising from the activities of the Managing Partners in the management of the internal affairs of the Production Partnership as prescribed in this Agreement or by law, or both, the Production Partnership shall indemnify the Managing Partners against expenses, including attorneys' fees, actually and reasonably incurred by them in connection with the defense or settlement of such action or suit if they acted in good faith and in a manner they reasonably believed to be in the best interests of the Production Partnership as specified in this subsection, except that no indemnification shall be made in respect of any claim, issue or matter as to which the Managing Partners' course of conduct constituted negligence or misconduct. D. To the extent that a Managing Partner has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 4.l0B or 4.l0C of this Agreement, or in defense of any claim, issue or matter therein, the Production Partnership shall indemnify it against the expenses, including attorneys' fees, actually and reasonably incurred by it in connection therewith. -37- E. Any indemnification under Section 4.l0B and 4.10C of this Agreement, unless ordered by a court, shall be made by the Production Partnership only as authorized in the specific case and only upon a determination by independent legal counsel in a written opinion that such indemnification is proper in the circumstances because the indemnified party has met the applicable standard of conduct set forth in Sections 4.l0B or 4.l0C of this Agreement. F. The Production Partnership shall not incur the costs of that portion of insurance which insures the Managing Partners for any liability as to which the Managing Partners are prohibited from being indemnified under Section 4.10. ARTICLE FIVE Distributions, Fees and Allocations ----------------------------------- Section 5.1. Distributions of Production Partnership Funds ----------------------------------------------------------- The Distributable Cash of the Production Partnership shall be distributed simultaneously to the Limited Partnership and the Managing Partners within 45 days after the close of each calendar quarter. Each Partner's share of each such distribution of Distributable Cash shall be determined after giving effect to the allocations set forth in Sections 5.3 and 5.4 of this Agreement for such period. All distributions of Distributable Cash shall reduce dollar-for-dollar the balances of the Partners' Capital Accounts. Section 5.2. Fees and Reimbursement of Expenses to the Managing Partners ---------------------------------------------------------------- Geodyne Production and PW Production shall receive as Managing Partners (1) on a nonrecurring basis, the Management Fee in an amount equal to 1-1/2% of the Limited Partners' capital contributions to the Limited Partnership; and (2) reimbursement for Direct Administrative Costs billed directly to the Managing Partners and General and Administrative Costs incurred by the Managing Partners or their Affiliates allocable to the Production Partnership, except to the extent that the Managing Partners or their Affiliates are otherwise reimbursed -38- for such costs through the payment of Property Acquisition Costs, Operating Costs or otherwise. Geodyne Production and PW Production shall allocate between themselves the payment of the Management Fee as follows: in the event the Fee (as defined in the Limited Partnership Agreement) (hereinafter referred to as the "Limited Partnership Fee") is less than the actual organization and offering costs of the Limited Partnership plus Unreimbursed Prior Organization and Offering Costs (as defined in the Limited Partnership Agreement), then the Management Fee shall be paid 60% to PW Production and 40% to Geodyne Production to the extent of such deficiency, 60% to PW Production and 40% to Geodyne Production to the extent of organization and offering costs and the remainder of the Management Fee shall be paid 75% to PW Production and 25% to Geodyne Production. In the event the Limited Partnership Fee is equal to or greater than the actual organization and offering costs of the Limited Partnership plus Unreimbursed Prior Organization and Offering Costs (as defined in the Limited Partnership Agreement), then the Management Fee shall be paid 60% to PW Production and 40% to Geodyne Production to the extent of organization and offering costs and the remainder shall be paid as follows: in the event the payment referred to in Section 3.6B(i) of the Limited Partnership Agreement has been made (but the payments in Section 3.6B(ii) and (iii) have not been made) to the general partners of the Limited Partnership, the Management Fee shall be paid 75% to PW Production and 25% to Geodyne Production; in the event the payment referred to in Section 3.6B(ii) of the Limited Partnership Agreement has been made (but the payment in Section 3.6B(iii) has not been made) to the general partners of the Limited Partnership, the excess of the Management Fee over the amount paid to the general partners of the Limited Partnership pursuant to Section 3.6B(ii) of the Limited Partnership Agreement shall be paid 75% to PW Production and 25% to Geodyne Production, the balance of the Management Fee, but not in excess of 1% of the Limited Partners' capital contributions to the Limited Partnership, shall be paid 50% to PW Production and 50% to Geodyne Production, and any remaining balance of the Management Fee shall be paid 70% to PW Production and 30% to Geodyne Production; and in the event the payment referred to in Section 3.6B(iii) of the Limited Partnership Agreement has been made to the general partners of the Limited Partnership, the excess of the Management Fee over the amount paid to the general partners of the Limited Partnership pursuant to Section 3.6B(iii) of the Limited Partnership Agreement, but not in excess of 1% of the Limited Partners' capital contributions to the Limited Partnership, shall be paid 50% to PW Production and 50% to Geodyne Production, and the balance of the Management Fee -39- shall be paid 70% to PW Production and 30% to Geodyne Production. Section 5.3. Allocation of Income, Investment Income, Costs and Deductions ------------------------------------------------------ A. The Income, Investment Income, Profits, Production Partnership costs and losses of the Production Partnership shall be determined and allocated with respect to each Fiscal Year of the Production Partnership as of and within 75 days after the end of such Fiscal Year. B. (i) 100% of Investment Income, Property Acquisition Costs, costs incurred in connection with Identified Development Drilling (including any interest, commitment fees and other finance charges with respect to borrowings incurred in connection therewith) and the Management Fee referred to in Section 5.2(1) of this Agreement shall all be allocated to, and borne by, the Limited Partnership. 100% of Organization and Offering Costs shall be allocated to, and borne by, the Managing Partners as follows: 60% to PW Production and 40% to Geodyne Production. Except as otherwise provided in Sections 5.3B(ii) and 5.3B(iii), Income, General and Administrative Costs, Operating Costs, costs incurred in connection with Development Drilling and Direct Administrative Costs shall be allocated among, and borne by, the Partners in the following percentages: (a) Until Payout: Limited Partnership 90.9091% PW Production and Geodyne Production (in the aggregate) 9.0909% (b) After Payout: Limited Partnership 85.8586% PW Production and Geodyne Production (in the aggregate) 14.1414% The Managing Partners shall allocate between themselves their aggregate Interest before and after Payout as follows: 70% to PW Production and 30% to Geodyne Production if the Production Partnership is Activated within twelve months after the date on which the -40- registration statement filed with the Securities and Exchange Commission with respect to the Units is declared effective (the "Effective Date"), and 60% to PW Production and 40% to Geodyne Production if the Production Partnership is Activated during the twelve month period ending twenty-four months after the Effective Date; provided, however, that if the Production Partnership was Activated more than twelve months after the Effective Date and the immediately preceding Prior Production Partnership was activated (as defined in the partnership agreement respecting such Prior Production Partnership) within twelve months after the Effective Date, then PW Production shall be allocated that percentage of the aggregate Managing Partners' Interest represented by a fraction, the numerator of which is equal to the sum of (i) 70 multiplied by the number of days from the activation of the immediately preceding Prior Production Partnership through the date that is 12 months after the Effective Date, and (ii) 60 multiplied by the number of days from the date that is 12 months after the Effective Date through the date of the Activation of the Production Partnership, and the denominator of which is the total number of days that has elapsed from the activation of the immediately preceding Prior Production Partnership to the Activation of the Production Partnership, and Geodyne Production shall be allocated the balance of the aggregate Managing Partners' Interest (such allocation between the Managing Partners of their aggregate Interest being their "Sharing Ratios"). The Managing Partners shall have the authority to amend this Agreement to provide for any different allocation between themselves at their discretion. (ii) As used in this subsection, the "Measuring Date" shall be the earlier of the date on which 90% of the Limited Partnership's Capital Contribution has been expended or the second anniversary of the Activation of the Production Partnership; the first "Allocation Period" shall be the twelve month period beginning on the last day of the first full Fiscal Year quarter after the Measuring Date; and each twelve month period following the end of the first Allocation Period shall also be referred to as an "Allocation Period". Notwithstanding anything to the contrary contained herein, if during each of the first two Allocation Periods the amount of cash distributed to the Limited Partnership that is attributable to the allocations set forth in Section 5.3B(i) is less than a 15.1515% cumulative (but not compounded) twelve-month return on the -41- Limited Partners' capital contributions to the Limited Partnership, then there shall be distributed to the Limited Partnership thereafter (in addition to the amount of Distributable Cash distributed to the Limited Partnership resulting from the allocations to the Limited Partnership set forth in Section 5.3B(i)) an amount of cash up to 50% of the cash otherwise distributable to the Managing Partners thereafter pursuant to the allocations set forth in Section 5.3B(i) not to exceed the amount of any such deficiency (the amount of such cash distribution being a "Transfer Amount"), and Income and costs sufficient to yield an amount of Distributable Cash equal to the Transfer Amount and otherwise allocable to the Managing Partners during the Fiscal Year in which such Allocation Period ends and, to the extent necessary, each Fiscal Year thereafter pursuant to Section 5.3B(i) shall be allocated to the Limited Partnership. If during any Allocation Period after the initial two Allocation Periods, the Limited Partnership is being allocated Income and costs pursuant to Section 5.3B(i) such that there is distributed to the Limited Partnership an amount of cash in excess of a 15.1515% cumulative (but not compounded) twelve-month return on the Limited Partners' capital contributions to the Limited Partnership since the beginning of the first two Allocation Periods (such excess amount of cash being the "Surplus"), and there has been distributed to the Limited Partnership a Transfer Amount, then there shall be distributed to the Managing Partners thereafter an aggregate amount of cash otherwise distributable to the Limited Partnership pursuant to the allocations set forth in Section 5.3B(i) equal to the amount of any Surplus (the amount of such cash distribution being a "Reverse Transfer Amount"), and Income and costs sufficient to yield an amount of Distributable Cash equal to the Reverse Transfer Amount and otherwise allocable to the Limited Partnership during the Fiscal Year in which such Allocation Period ends and, to the extent necessary, each Fiscal Year thereafter pursuant to Section 5.3B(i) shall be allocated to the Managing Partners; provided, however, that the amount of any Reverse Transfer Amount distributed to the Managing Partners shall not exceed an amount equal to the aggregate of the Transfer Amounts distributed to the Limited Partnership less the aggregate of all Reverse Transfer Amounts previously distributed to the Managing Partners. -42- (iii) Notwithstanding anything to the contrary contained herein, if on the seventh anniversary of the last day of the Fiscal Year in which the Production Partnership commences Development Drilling, or Identified Development Drilling, and in each Fiscal Year thereafter, (a) the aggregate amount of Income less the aggregate amount of direct lease operating expenses and severance, ad valorem, windfall profits, excise and other taxes (but not income taxes) allocated to the Limited Partnership pursuant to Section 5.3(B)(i) attributable to production resulting from Development Drilling and Identified Development Drilling on Producing Properties is less than (b) the aggregate amount of costs allocated to the Limited Partnership pursuant to Section 5.3(B)(i) incurred in connection with Development Drilling and Identified Development Drilling on Producing Properties during each Fiscal Year ending seven or more years prior thereto, then Income and costs otherwise allocable to the Managing Partners pursuant to Section 5.3B(i) shall thereafter be allocated to the Limited Partnership until such deficiency in Income is eliminated. (iv) For purposes of the allocations set forth in Section 5.3B(ii) of this Agreement, the amount of cash distributed to the Limited Partnership for purposes of determining the return on the Limited Partners' capital contributions to the Limited Partnership shall not include any amounts attributable to the Production Partnership's payment of any windfall profits tax. C. All items of Income, gain, loss, deduction and credit allowable for Federal income tax purposes and all recapture of any such deductions and credits shall be allocated and charged or credited to the Partners in the same manner that the revenues, costs or expenses giving rise to such items of income, gain, loss, deduction and credit are allocated and charged. Federal income tax deductions for cost or percentage depletion with respect to any Producing Property shall be determined at the Partner level and shall be determined in the case of percentage depletion on the same basis that the Income from the Producing Property is allocated; and the Production Partnership shall allocate, under Section 612A(c)(7)(D) of the Code, its adjusted basis in each Producing Property to the Partners in proportion to the interest of each in the Production Partnership capital ultimately used to acquire that property. If such allocation of basis is not permitted under the Code, the basis -43- of each such property shall be allocated in the manner which the Managing Partners deem will most closely achieve the result intended above. D. The Capital Account of each Partner shall be credited or debited with its Capital Contribution and distributions of Distributable Cash, by the adjusted basis of partnership property distributed in kind and with its share of Income, gain, loss, and deduction of the Production Partnership. Solely for purposes of making adjustments to Capital Accounts, the Production Partnership shall compute a simulated depletion allowance on each oil and gas property using that method, as between the cost depletion method or the percentage depletion method (without regard to limitations which could apply to less than all the Partners such as the quantity limitations of Code Section 613A(c)(3)) which results in the greatest simulated depletion allowance. The Production Partnership's simulated depletion allowance shall reduce each Partner's Capital Account in the same proportion as such Partner's share of the adjusted basis of such property as determined in Section 5.3C above. In no event shall the Production Partnership's aggregate simulated depletion allowances with respect to a property exceed the Production Partnership's adjusted basis in such property (maintained solely for Capital Account purposes). Upon the taxable disposition of an oil or gas property by the Production Partnership, the Production Partnership's gain or loss shall be determined (solely for Capital Account purposes) by subtracting its adjusted basis in such property (maintained solely for Capital Account purposes) from the amount realized from such disposition. Any resultant simulated gain shall be allocated to the Partners in the same manner as that portion of the amount realized from such disposition which exceeds the Production Partnership's adjusted basis in such property (maintained solely for Capital Account purposes) is allocated to the Partners and shall increase such Partners' Capital Accounts accordingly. Any resultant simulated loss shall be allocated to the Partners in the same proportion as such Partners (or their predecessors in interest) were allocated adjusted basis under Section 5.3C with respect to such property and shall reduce such Partners' Capital Accounts accordingly. E. The Capital Accounts of those Partners which are charged with an expense of the Production Partnership shall be credited with any portion of that expense which is finally determined, judicially or administratively, to be nondeductible for Federal income tax purposes, less any amortization or depreciation thereof incurred prior to the date that the credit is made. -44- F. In allocating Income and costs for any Fiscal Year in which the ratio for sharing Income and costs changes pursuant to Section 5.3B(i), the allocations of Income and costs shall be made, and the books of the Production Partnership shall be closed, as soon as practicable after the date Payout occurs, to determine each Partner's share of pre-change Income and costs and each Partner's share of post-change Income and costs for that Fiscal Year. G. Proceeds received from the Sale or transfer of all or any part of the Production Partnership's Producing Properties shall be allocated to the Limited Partnership and the Managing Partners to the extent of their adjusted basis in such sold or transferred Production Partnership Property. Proceeds in excess of said amount shall be allocated in accordance with the percentages set forth in Section 5.3B(i) , except that, notwithstanding the provisions of Section 5.3F and solely for purposes of this Section 5.3G, where the proceeds from such Sale are distributed to the Partners and a portion of the Distributable Cash attributable to such Sale proceeds is sufficient in amount to cause Payout to occur in accordance with the allocation percentages in effect until Payout, Payout shall be deemed to occur such that Income and Distributable Cash attributable to the portion of such Sale proceeds in excess of the portion of Sales proceeds sufficient in amount to cause Payout to occur shall be allocated in accordance with the allocation percentages in effect after Payout. Section 5.4. Determinations of Allocations and Distributions ------------------------------------------------------------- Distributable Cash, Income, Investment Income, costs, deductions, Profits and Losses allocable to the Partners shall be distributed or allocated, as the case may be, to the Persons who were Partners, as of the last day of the fiscal period for which the distribution or allocation is to be made, except that in any fiscal period in which a Partner sells, assigns or transfers all or any part of such Partner's Interest to any Person who during the fiscal period is admitted as a Substituted Partner, the Distributable Cash, Income, Investment Income, costs, deductions, Profits and Losses attributable to the Interest so sold, assigned or transferred shall, subject to the provisions of Section 10.2 of this Agreement, be allocated between the transferor and the transferee on the basis of the number of days in the fiscal period before the admission, and on -45- and after the admission, of the transferee as a Substituted Partner; provided, however, that the Distributable Cash attributable to a Sale of a Producing Property shall be distributed to those Partners who are Partners on the day the distribution of such Distributable Cash occurs. The Managing Partners shall inform the other Partners of the occurrence and terms of any such Sale by the Production Partnership as soon as practicable after such Sale has been consummated. ARTICLE SIX Transferability of Managing Partner's Interests ----------------------------------------------- Section 6.1. Transferability of Managing Partner's Interest ------------------------------------------------------------ A. Except as provided in Sections 6.lB and 6.2B, each of the Managing Partners shall not have the right to retire, withdraw, transfer or assign its Managing Partner Interest, except that there may be substituted in its stead as Managing Partner any entity that has, by merger, consolidation or otherwise, acquired substantially all of its assets or capital stock and continued its business. B. Each Managing Partner may, upon at least ninety days' written notice to the Limited Partnership and the other Managing Partner, cause the Production Partnership to distribute, in partial liquidation of its Interest in the Production Partnership, to such Managing Partner fractional, undivided interests in the Producing Properties of the Production Partnership (such interest of a Managing Partner in a Producing Property distributed is hereinafter referred to as the "Distributed Interest") up to an aggregate interest equal in value to 75% of the value of the Producing Properties of the Production Partnership that it would have been entitled to upon a hypothetical liquidation of the Production Partnership after application of the provisions of Section 8.2 of this Agreement (the interest in a Producing Property of a Managing Partner retained in the Production Partnership is hereinafter referred to as the "Retained Interest") provided, however, that no such distribution shall occur (i) more than once with respect to a Managing Partner, (ii) prior to seven years after the Activation of the Production Partnership and (iii) unless such Managing Partner obtains an opinion of counsel to the Production -46- Partnership to the effect that such distribution will not result in any material adverse tax consequence to the other Managing Partner or to the Limited Partners. Notwithstanding anything to the contrary in this Agreement, in the event that any such distribution is made, appropriate adjustments shall be made in the Capital Accounts of the Partners and in the allocation of Production Partnership Income and costs to assure that the other Managing Partner will not share or participate in any of the capital, costs, Income, or distributions attributable to the Producing Properties of the Production Partnership except to the extent of the Retained Interest of such Managing Partner. Section 6.2. Removal of Managing Partners ------------------------------------------ A. (i) The power shall be vested in the Limited Partnership to remove at any time any Managing Partner. The power shall be vested in the Limited Partnership to consent to the admission of a successor Managing Partner following the Removal of any Managing Partner by the Limited Partnership. A successor Managing Partner shall be selected pursuant to the provisions of Section 6.2D of this Agreement. (ii) (a) A Managing Partner shall have the power to Remove the other Managing Partner, and pursuant to Section l0.lA of this Agreement, admit a successor Managing Partner, for "Cause" as defined in Section 6.2A(ii)(b), but for no other reason. (b) "Cause" for purposes of Section 6.2A(ii)(a) shall be deemed to exist only (i) when a court of competent jurisdiction shall have made a final determination (which determination is not successfully appealed) that a Managing Partner has been guilty of gross negligence, fraud, intentional misconduct or similar breach of fiduciary responsibility in carrying out its duties as a Managing Partner, or (ii) a Managing Partner is dissolved or liquidated on account of insolvency or any other event occurs resulting in the appointment of a trustee or receiver who acquires control of the affairs of such Managing Partner for the purpose of dissolution or liquidation on account of insolvency, and such trustee or receiver is not dismissed within 90 days after appointment of such trustee or receiver, or (iii) (a) a report on the audited financial statements of a Managing Partner and -47- its consolidated corporate affiliates is issued by the independent accountants for such Managing Partner that is qualified on a going concern basis, or (b) either Managing Partner requests an audit to be performed of the other Managing Partner and its consolidated corporate affiliates by the independent accountants for the other Managing Partner (the expense of such audit being paid by the Managing Partner requesting the audit) , and such audit results in the issuance of an opinion with respect to the financial statements of the other Managing Partner and its consolidated corporate affiliates for the period ending, and as of, the most recent date feasible, that is qualified on a going concern basis. B. (i) In the event that a Managing Partner is Removed, the Removed Managing Partner's Interest in the Production Partnership shall be transferred to the other Managing Partner, and the other Managing Partner shall assign to the Removed Managing Partner a portion of Production Partnership Income, costs and Distributable Cash as and when such items are allocated or distributed, as the case may be, by the Production Partnership equal to the percentage interest of the Removed Managing Partner in the Production Partnership prior to its Removal; provided, however, that such assignment shall be reduced proportionately in the event of a foreclosure or sale referred to in Section 4.3D with respect to the Removed Managing Partner's interest transferred to the other Managing Partner to the extent of the foreclosed or sold interest. (ii) If a sole Managing Partner is Removed and a successor Managing Partner is to be admitted to the Production Partnership, the removed Managing Partner shall not be Removed until a successor Managing Partner has been admitted to the Production Partnership pursuant to Article 10 of this Agreement. (iii) In the event a sole Managing Partner is Removed by the Limited Partnership and a successor Managing Partner is to be admitted, the incoming Managing Partner and the Removed Managing Partner shall, by mutual agreement, select an independent petroleum consultant to value the Removed Managing Partner's Interest in the Production Partnership. In -48- determining the value of the Managing Partner's Interest, the independent consultant will take into account appropriate discount factors in light of the risk of recovery of oil and gas reserves, and, in any event, will utilize a "risk factor" discount no less than that utilized in the most recent offer extended pursuant to Section 7.5 of the Limited Partnership Agreement, if any. The incoming Managing Partner, or the Production Partnership, shall have the option to purchase at least 20% of the Interest of the Removed Managing Partner for the value determined by the independent appraisal. The Removed Managing Partner's Interest in the Production Partnership shall be transferred to the successor Managing Partner, and the successor Managing Partner shall assign to the Removed Managing Partner a portion of Production Partnership Income, costs and Distributable Cash as and when such items are allocated or distributed, as the case may be, by the Production Partnership equal to the percentage interest of the Removed Managing Partner in the Production Partnership prior to Removal, less the portion purchased by the successor Managing Partner or the Production Partnership. C. Notwithstanding Section 3.6, any Managing Partner who shall be Removed pursuant to the provisions of Section 6.2 shall be released by the other Partners from all liability for Production Partnership debts and obligations incurred by the Production Partnership prior to the date of such Removal. D. Under circumstances in which the Limited Partnership Consents to the admission of a successor Managing Partner, such admission shall not become effective unless the Production Partnership shall have received a certificate, duly executed by or on behalf of such proposed successor Managing Partner to the effect that it is experienced in the performance (or employs sufficient personnel who are experienced in performing) of functions of the type then being performed by the Removed Managing Partner. -49- ARTICLE SEVEN Transferability of Limited Partnership's Interest -------------------------------------------------- Section 7.1. Transferability of Limited Partnership's Interest --------------------------------------------------------------- No Sale, exchange, transfer or assignment of the Limited Partnership's Interest may be made if in the opinion of counsel to the Production Partnership, such Sale, exchange, transfer or assignment, would (i) result in the Production Partnership being considered to have terminated within the meaning of Section 708 of the Code, or (ii) cause the Production Partnership to lose its status as a partnership for Federal income tax purposes. In addition, the Managing Partners may require an opinion of the transferor's counsel, satisfactory to the Managing Partners, that such Sale, exchange, transfer or assignment would not violate the Securities Act of 1933, as amended, or any state securities or "blue sky" laws. Section 7.2. Incapacity of Partners ------------------------------------ If a Partner (including a Managing Partner) becomes Incapacitated, the Person who is its legal representative shall have all the rights of a Partner for the purpose of settling or managing its estate and such power as the Incapacitated Partner possessed to assign all or any part of its Interest and to join with such assignee in satisfying conditions precedent to such assignee becoming a Substituted Partner. The Incapacity of a Partner shall not dissolve the Production Partnership. Section 7.3. Assignees and Substituted Partners ------------------------------------------------ A. The Production Partnership shall not recognize for any purpose any purported sale, assignment or transfer of all or any fraction of the Interest of the Limited Partnership unless the provisions of Section 7.1 shall have been complied with and there shall have been filed with the Production Partnership a dated Notification of such sale, assignment or transfer, executed and acknowledged by both the seller, assignor or transferor and the purchaser, assignee or transferee and such -50- Notification (i) contains the acceptance by the purchaser, assignee or transferee of all of the terms and provisions of this Agreement and (ii) represents that such sale, assignment or transfer was made in accordance with all applicable laws and regulations. Any sale, assignment or transfer shall be recognized by the Production Partnership as effective on the date of such Notification if the date of such Notification is within 30 days of the date on which such Notification is filed with the Production Partnership, and otherwise shall be recognized as effective on the date such Notification is filed with the Production Partnership. B. If the Limited Partnership assigns all of its Interest to an assignee, the Limited Partnership shall cease to be a Partner. C. A Person who is the assignee of all or any fraction of the Interest of the Limited Partnership shall be subject to all the provisions of this Article Seven to the same extent and in the same manner as the Limited Partnership desiring to make an assignment of its Interest. D. Any purchaser, assignee, transferee, donee, heir, legatee or other recipient of an Interest shall be admitted to the Production Partnership as a Substituted Partner only with the Consent of the other Partners, which Consent may be granted or withheld by such Partners at their sole and absolute discretion. The admission of such Person as a Substituted Partner shall be evidenced by the execution by the Partners of a certificate evidencing the admission of such Person as a Partner and an amendment to this Agreement executed by the Managing Partners on their own behalf, as well as on behalf of each other Partner, pursuant to the power of attorney granted pursuant to Section 12.5 of this Agreement. E. No Person shall become a Substituted Partner until such Person shall have satisfied the requirements of Section 10.2; provided, however, that for the purpose of allocating Income, Investment Income, Profits, Losses, costs, and Distributable Cash, a Person shall be treated as having become, and as appearing in the records of the Production Partnership as, a Partner on such date as the sale, assignment or transfer to such Person was recognized by the Production Partnership pursuant to Section 7.3A. -51- Section 7.4. Incapacity of the Limited Partnership --------------------------------------------------- Upon the Incapacity of the Limited Partnership or upon the seizure of a Limited Partnership's Interest in the Production Partnership, the successor to such Limited Partnership's Interest ("Successor") shall be deemed an assignee of such Limited Partnership's Interest in the Production Partnership and neither the Production Partnership nor the Successor shall have the right to demand immediate valuation and payment of such Limited Partnership's Interest. ARTICLE EIGHT Dissolution, Liquidation and Termination of the Production Partnership ----------------------------- Section 8.1. Events Causing Dissolution ---------------------------------------- A. The Production Partnership shall be dissolved upon the happening of any of the following events: (i) the expiration of its term, unless its term shall have been extended by the Management Committee pursuant to Section 2.4 of this Agreement; (ii) the Incapacity of the sole Managing Partner. However, within ninety days thereafter the remaining Partners may elect to reconstitute the Production Partnership prior to application of the liquidation provisions of Section 8.2; (iii) the Sale or other disposition at one time of all or substantially all of the assets of the Production Partnership existing at the time of such Sale; (iv) the election to dissolve the Production Partnership (a) by the Managing Partners (which election shall be Consented to by the Limited Partnership), or (b) by the Consent of all Partners; (v) ninety days after the Removal (unless the Limited Partnership Consents to a Successor pursuant to Section 6.2 of this Agreement) of the sole Managing Partner; -52- (vi) the happening of any other event causing the dissolution of the Production Partnership under the laws of the State, except that the Incapacity of any Partner (other than the sole Managing Partner) shall not dissolve the Production Partnership and the seizure of the Interest of any Partner shall not dissolve the Production Partnership. B. Dissolution of the Production Partnership shall be effective on the day on which the event occurs giving rise to the dissolution, but the Production Partnership shall not terminate until the Managing Partners have recorded a notice of dissolution of the Production Partnership in the proper records of any jurisdiction in which this Agreement has been recorded and shall have complied with the laws of the states in which its does business and the assets of the Production Partnership have been distributed as provided in Section 8.2. C. Nothing contained in this Agreement shall impair, restrict or limit the rights and powers of the Partners under the laws of the State or any other jurisdiction in which the Production Partnership is doing business to reform and reconstitute themselves as a general partnership following dissolution of the Production Partnership either under provisions identical to those set forth herein or under any other provisions. Section 8.2. Liquidation ------------------------- A. Upon dissolution of the Production Partnership, its liabilities shall be paid in the order provided herein. The Managing Partners shall either distribute in kind or sell the Production Partnership's property so that such disposition is in the best interests of the Limited Partnership, and shall execute all amendments terminating the Production Partnership. In connection with any such Sale, the Managing Partners shall attempt to obtain the best prices for such property. Pending such Sales, the Managing Partners shall have the right to continue to operate and otherwise to deal with Production Partnership property. In the event the Production Partnership is dissolved on account of the Incapacity or Removal of the sole Managing Partner, the Production Partnership shall elect, in accordance with the provisions of Article Eleven, a person (the "Liquidating Agent") to perform the function of a Managing Partner in liquidating the assets of the Production Partnership and winding up its affairs, and shall pay to such Liquidating -53- Agent its reasonable fees and expenses incurred in connection therewith. Gain or loss realized on the Sale or other disposition of the Production Partnership's assets will be credited to (in the case of gain) or charged against (in the case of loss) each Partner's Capital Account to the extent allocable to it under Sections 5.3 and 5.4 of this Agreement. In the event of a distribution in kind of (a) any property other than an interest in a Producing Property, each Partner's Capital Account shall be debited with the portion of the Production Partnership's adjusted basis thereof attributable to the interest therein distributed to it and (b) any Producing Property or an interest in any Producing Property, each Partner's Capital Account shall first be credited or debited with its share of the unrealized appreciation or depreciation in the fair market value of said Producing Property or interest in said Producing Property. Each Partner's share of said unrealized appreciation or depreciation shall be equivalent to its share (allocated pursuant to Sections 5.3 and 5.4 of this Agreement) of the gain or loss on an actual Sale of such Producing Property or interest therein. The Capital Account of each Partner to whom a Producing Property or an interest in a Producing Property is distributed shall be debited with the fair market value of the Producing Property distributed to it. Any liquidation of the Production Partnership shall take place out of court and without application being made therefor to the Secretary of State of the State of Oklahoma. B. In settling accounts after dissolution, the assets of the Production Partnership shall be paid out in the following order: (i) to third party creditors, in the order or priority as provided by law; (ii) to the Managing Partners and any Liquidating Agent for any expenses of the Production Partnership paid by or payable to them to the extent they are entitled to reimbursement therefor pursuant to this Agreement; (iii) to the Limited Partnership in the amount equivalent to the amount of its positive Capital Account balances (as adjusted pursuant to Section 8.2A) on the date of distribution; (iv) to the Managing Partners in the amount equivalent to the amount of their positive Capital Account balances (as adjusted pursuant to Section 8.2A) on the date of distribution; and (v) the balance shall be paid to the Partners in the manner provided for by Sections 5.1, 5.3 and 5.4 of this Agreement with respect to Distributable Cash. -54- C. In the event that following the final distribution under Section 8.2B the Managing Partners have a deficit balance in their Capital Account balances, they shall contribute cash to the Production Partnership necessary to eliminate said deficit balances, which amount shall be distributed to the other Partners to the extent of their remaining positive Capital Account balances. ARTICLE NINE Books and Records; Accounting; Tax Elections; etc. -------------------------------------------------- Section 9.1. Books and Records ------------------------------- The books and records of the Production Partnership, including information relating to the sale by the Managing Partners or any Affiliates of goods or services to the Production Partnership, and a list of the names and addresses and Interests of all Partners, shall be maintained by the Managing Partners at the principal office of the Production Partnership for a period of five years following the close of the Fiscal Year to which they relate and shall be available for examination there by any Partner or its duly authorized representatives at any and all reasonable times. Any Partner, or its duly authorized representatives, upon paying the costs of collection, duplication and mailing, shall be entitled for any proper purpose to a copy of the list of names and addresses and Interests of the Partners. The Production Partnership may maintain such other books and records and may provide such financial or other statements as the Managing Partners in their discretion deem advisable. Section 9.2. Accounting Basis for Tax and Reporting Purposes; Fiscal Year -------------------------------------------------------------- The books and records of the Production Partnership for tax purposes, for purposes of this agreement and for the purpose of reports to the Partners shall be kept on the cash or accrual basis, as the Managing Partners shall determine. The Fiscal Year of the Production Partnership shall be the calendar year to the extent permissible and the Managing Partners shall use their best efforts to obtain any necessary approvals therefor. -55- Section 9.3. Bank Accounts --------------------------- The General Partners shall maintain a bank account or accounts to be maintained by the Managing Partners on behalf of the Production Partnership with any bank in the United States having total assets in excess of $100,000,000. The Managing Partners shall not deposit Production Partnership funds in an account with any bank in an aggregate amount in excess of 5% of such bank's total assets. Withdrawals shall be made only in the regular course of the Production Partnership's business on such signature or signatures as the Managing Partners may determine. All deposits and other funds not needed in the operation of the business may be deposited in interest-bearing accounts, certificates of deposit, money market funds (including those managed or marketed by the Dealer Manager or its Affiliates) or invested in short-term United States Government obligations maturing within one year, commercial paper of United States corporations having the highest credit rating granted by Moody's Investors Services, Inc. or Standard & Poors Corporation, or other similar highly liquid investments. Section 9.4. Reports --------------------- A. The Managing Partners shall furnish to the Limited Partnership sufficient information and data with respect to the properties and operations of the Production Partnership in order to permit the Limited Partnership to satisfy its reporting obligations under Section 9.4 of the Limited Partnership Agreement. B. The Managing Partners shall file on a timely basis with the Securities and Exchange Commission all filings required to be made by the Production Partnership pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder. Section 9.5. Elections ----------------------- The Managing Partners shall cause the Production Partnership to make all elections required or permitted to be made by the Production Partnership under the Code and not otherwise expressly provided for in this Agreement, in the manner that the Managing Partners believe will be most -56- advantageous to Limited Partnership, except that (i) the Managing Partners shall not be required to make an election under Section 754 of the Code or corresponding provisions of applicable state income tax laws, and (ii) the Managing Partners shall make the election under Section 263(c) of the Code to expense all intangible drilling and development costs in the initial Production Partnership Federal income tax return filed for the Fiscal Year in which such costs are incurred. ARTICLE TEN Amendments ---------- Section 10.1. Proposal and Adoption of Amendments Generally ------------------------------------------------------------ A. Notwithstanding anything to the contrary contained herein, the Managing Partners may, without prior notice or consent of any other Partner, amend any provision of this Agreement (including an amendment to admit an additional Managing Partner) if, in their opinion, such amendment does not have a material adverse effect upon the Limited Partnership. Such amendment shall thereafter be disclosed to the Limited Partners within a reasonable time thereafter. Amendments to this Agreement to reflect the addition or substitution of a Partner or the admission of a successor Managing Partner shall be made at the time and in the manner referred to in Section 10.2. Any other amendment to this Agreement may be proposed by the Managing Partners or the Limited Partnership. The Partner or Partners proposing such amendment shall submit a Notification containing (a) the text of such amendment, (b) a statement of the purpose of such amendment, and (c) an opinion of counsel obtained by the Partner or Partners proposing such amendment to the effect that such amendment is permitted by the Act, will not impair the limited liability of the Limited Partners, and will not adversely affect the classification of the Limited Partnership or the Production Partnership as partnerships for Federal income tax purposes. The Managing Partners shall, within 15 days after receipt of any proposal under this Section l0.lA, give Notification to all Partners of such proposed amendment, of such statement of purpose and of such opinion of counsel, together, in the case of an amendment proposed by other Partners, with the views, if any, of the Managing Partners with respect to such proposed amendment. -57- B. Amendments to this Agreement shall be adopted if: (i) in the case of amendments referred to in Section l0.2A, the conditions specified in Section 7.3 shall have been satisfactorily completed and the Production Partnership shall not have been furnished with an opinion of counsel to the Production Partnership to the effect that such amendment will adversely affect the classification of the Limited Partnership or the Production Partnership as partnerships for Federal income tax purposes; (ii) in the case of amendments referred to in Section l0.2B, the conditions specified in Section 6.2 shall have been satisfactorily completed; or (iii) in the case of all other amendments, such amendment shall have been Consented to by the Limited Partnership (unless such Consent is not required pursuant to Section l0.lA); provided, however, that no such amendment may: (a) enlarge the obligations of any Partner under this Agreement without the Consent of such Partner; (b) modify the method provided in Article Five of determining and allocating or distributing, as the case may be, Income, Investment Income, Profits, Losses, Distributable Cash or costs and expenses without the Consent of each Partner adversely affected by such modification; (c) amend Sections 6.1 or 6.2 without the Consent of all the Partners; or (d) amend Sections 2.3, 4.3A, 4.3B, 4.3C, 4.3D, 4.4A, 4.4B, 4.5A, 4.9, 4.10 or this Article Ten without the Consent of all the Partners. C. Upon the adoption of any amendment to this Agreement, the amendment shall be executed by the Managing Partners and all other Partners, and shall be recorded in the proper records of the State and any other state in which the Production Partnership is then doing business. Section 10.2. Amendments on Admission or Removal of Partners ------------------------------------------------------------- A. If this Agreement shall be amended to reflect the admission or substitution of a Partner, the amendment to this Agreement may be adopted by either of the Managing Partners, the Person to be substituted or added, and the assigning Partner. Any such amendment shall be executed on behalf of all Partners but may be executed by the substituted or added Partner, the assigning Partner, and either of the Managing Partners, individually and on behalf of all of the other Partners pursuant to the power of attorney granted in Section 12.5. -58- B. If this Agreement shall be amended to reflect the Removal of a Managing Partner and the continuation of the business of the Production Partnership, such amendment shall be signed by the remaining or successor Managing Partner and by the Removed Managing Partner. C. No Person shall become a Partner, unless such Person shall have: (i) become a party to, and adopted all of the terms and conditions of, this Agreement; (ii) if such Person is other than an individual, provided upon request the Managing Partners with evidence satisfactory to counsel for the Production Partnership of such Person's authority to become a Partner under the terms and provisions of this Agreement; and (iii) paid all reasonable legal fees of the Production Partnership and the Managing Partners and filing and publication costs in connection with such Person's becoming a Partner. ARTICLE ELEVEN Consents, Voting and Meetings ----------------------------- Section 11.1. Method of Giving Consent --------------------------------------- Any Consent required by this Agreement may be given by a Partner as follows: (i) at a meeting, in person, by a written proxy or signed writing directing the manner in which it desires that its vote be cast, which writing must be received by the Managing Partners prior to such meeting, or (ii) without a meeting, by a signed writing directing the manner in which it desires that its vote be cast, which writing must be received by the Managing Partners prior to the date upon which the vote of Partners are to be counted. Any Partner may waive notice of or attendance at any meeting of the Partners and may execute a signed written consent. Only the votes of Partners of record on the date of Notification, whether at a meeting or otherwise, shall be counted. The laws of the State pertaining to the validity and use of corporate proxies shall govern the validity and use of proxies given by Partners. Section 11.2. Meetings of Partners ----------------------------------- The Managing Partners may at any time call a meeting of the Partners or for a vote, without a meeting, of the Partners on matters upon which the Partners are entitled to vote, and shall -59- call for such a meeting or vote upon receipt of a Notification therefor of the Limited Partnership. Within 15 days of the receipt of the Notification, the Managing Partners shall notify all Partners of record as of the date of the Notification as to the time and place of the meeting, if called, and the general nature of the business to be transacted thereat, or if no such meeting has been called, of the matter or matters to be voted upon and the date upon which the votes will be counted. Any Production Partnership meeting or the date upon which such votes, without a meeting, will be counted (regardless of whether the Managing Partners have called for such meeting or vote upon the request of Limited Partnership or have initiated such event without such request) shall be not less than 30 or more than 60 days following mailing of the Notification thereof by the Managing Partners. All expenses of the meetings, voting and such Notification shall be borne by the Production Partnership. Section 11.3. Submissions to Other Partners -------------------------------------------- The Managing Partners shall give all the other Partners Notification of any proposal or other matter required by any provisions of this Agreement or by law to be submitted for the consideration and approval of the other Partners. Such Notification shall include any information required by the relevant provision of the Agreement or by law. Section 11.4. Limited Partnership Consent ------------------------------------------ To the extent allowed in the Limited Partnership Agreement and subject to Section 10.1, the Limited Partnership, by and through more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners, may without the concurrence of the Managing Partners: (a) amend the Production Partnership Agreement; (b) dissolve the Production Partnership; (c) remove either or both Managing Partners and elect new ones; (d) approve or disapprove the sale of all or substantially all of the assets of the Production Partnership; and -60- (e) cancel or amend the terms of any contract for services with a Managing Partner or any Affiliate thereof without penalty upon 30 days' notice. ARTICLE TWELVE Miscellaneous Provisions ------------------------ Section 12.1. Notification to the Production Partnership or the Managing Partners --------------------------------------------------------- Any Notification to the Production Partnership or the Managing Partners shall be sent to the principal office of the Production Partnership, as set forth in this Agreement. Except as provided herein, any Notification to a Partner shall be sent to its last known address. Section 12.2. Binding Provisions --------------------------------- The covenants and agreements contained herein shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the respective parties hereto. Section 12.3. Applicable Law ----------------------------- This Agreement shall be construed and enforced in accordance with the laws of the State applicable to contracts made and to be performed wholly within the State. Section 12.4. Separability of Provisions ----------------------------------------- If for any reason any provision or provisions hereof which are not material to the purposes or business of the Production Partnership or of the Partners' Interests are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement that are valid. -61- Section 12.5. Appointment of the Managing Partners as Attorney-in-Fact ----------------------------------------------------------------------- A. Each Partner, by the execution of this Agreement, irrevocably constitutes and appoints each of the Managing Partners, its true and lawful agent and attorney-in-fact with full power and authority in its name, place and stead to execute, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents, instruments and conveyances that may be necessary or appropriate to carry out the provisions or purposes of this Agreement, including without limitation: (i) all certificates and other instruments (including counterparts of this Agreement), and any amendment thereof, including any amendment substituting a Partner, that the Managing Partners deem appropriate to form, reform, qualify or continue the Production Partnership (or a new partnership with substantially the same provisions as the Production Partnership) as a partnership in the jurisdiction in which the Production Partnership may conduct business; (ii) all amendments and other instruments necessary to admit into the Production Partnership additional or substituted Partners pursuant to Section 10.2; (iii) all instruments that the Managing Partners deem appropriate to reflect a change or modification of the Production Partnership in accordance with the terms of this Agreement (including those necessary to reflect any additional Capital Contributions); and (iv) all conveyances and other instruments that the Managing Partners deem appropriate to reflect the dissolution and termination of the Production Partnership. B. The appointment by all Partners of each of the Managing Partners as agent and attorney-in-fact shall be deemed irrevocable and to be a power coupled with an interest, in recognition of the fact that each of the Partners under this Agreement will be relying upon the power of the Managing Partners to act as contemplated by this Agreement in any filing and other action by it on behalf of the Production Partnership, and shall survive the Incapacity of any Person hereby giving such power and the transfer or assignment of all or any part of the Interest of such person; provided, however, that in the event of the transfer by a Partner of all of its Interest, the foregoing powers of attorney of the transferor Partner shall survive such transfer only until such time as the transferee shall have been admitted to the Production Partnership as a -62- Substituted Partner and all required documents and instruments shall have been duly executed, filed and recorded to effect such substitution. Section 12.6. Entire Agreement ------------------------------- This Agreement constitutes the entire agreement among the parties. This Agreement supersedes any prior agreement or understanding among the parties and may not be modified or amended in any manner other than as set forth herein. Section 12.7. Paragraph Titles ------------------------------- Article and section titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text. Section 12.8. Counterparts --------------------------- This Agreement may be executed in several counterparts, all of which together shall constitute one agreement binding on all parties hereto, notwithstanding that all the parties have not signed the same counterpart except that no counterpart shall be binding unless signed by the General Partners. GEODYNE PRODUCTION COMPANY PW PRODUCTION INC. By: // Thomas W. Kitchin // By: // R. Joseph Davis // ----------------------- --------------------- Thomas W. Kitchin, R. Joseph Davis, President President PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-D By: GEODYNE PROPERTIES, INC. General Partner By: // Thomas W. Kitchin // ----------------------- Thomas W. Kitchin, President -63- BY: PW ENERGY INC. General Partner By: // R. Joseph Davis // --------------------- R. Joseph Davis, President -64- EX-10.2 18 I-E, PRODUCTION PARTNERSHIP AGREEMENT PAINEWEBBER/GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E AMENDED AND RESTATED AGREEMENT OF PARTNERSHIP Amended and Restated Agreement of Partnership, dated as of September 10, 1986, among Geodyne Production Company, a Delaware corporation, and PW Production Inc., a Delaware corporation, as Managing Partners, and PaineWebber/Geodyne Energy Income Limited Partnership I-E, an Oklahoma limited partnership, as General Partner. Whereas, PaineWebber/Geodyne Energy Income Production Partnership I-E has heretofore been formed as a general partnership under the Uniform Partnership Act of the State of Oklahoma pursuant to an Agreement of Partnership dated as of March 5, 1986; and Whereas, the parties hereto desire to amend the Agreement of Partnership of the Production Partnership and to restate said Agreement in its entirety; Now, Therefore, in consideration of the mutual promises and agreements made herein, the parties, intending to be legally bound, hereby agree as follows: ARTICLE ONE Defined Terms -------------- The defined terms used in this Agreement shall, unless the context otherwise requires, have the meanings specified in this Article One. The singular shall include the plural and the masculine gender shall include the feminine, the neuter and vice versa, as the context requires. Any terms used in this Agreement which are defined in the Limited Partnership Agreement and are not otherwise defined herein shall have the respective meanings set forth in the Limited Partnership Agreement. "Accountants" shall mean Arthur Young & Company or such other nationally recognized firm of independent certified public accountants as shall be engaged from time to time by the Managing Partners for the Production Partnership. "Acquisition Reserve Report" shall mean a Hydrocarbon reserve report made available to the Production Partnership prepared by a qualified petroleum engineering firm acceptable to -1- the Managing Partners in connection with the proposed acquisition of a Producing Property, which shall include statements (i) identifying reserves of Hydrocarbons referred to in such report as Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves or Proved Undeveloped Reserves, as the case may be, and identifying all computations and determinations made for purposes of such report, including, without limitation, the present and future prices for Hydrocarbons and the present and future costs to produce and develop such Hydrocarbons used in such computations and determinations, (ii) with respect to the determination of the nature and extent of the reserves of Hydrocarbons reflected in such report, that the collection, analysis and evaluation of the basic physical data upon which such determination is based were performed by such qualified petroleum engineering firm or if such data were collected by another Person, that such qualified petroleum engineering firm has made reasonable inquiry with respect to the methods employed in such collection and is satisfied that the data so collected may be reasonably relied upon for the purpose of making the determination reflected in such report, (iii) specifying the respective amounts of Proved Developed Producing Reserves, Proved Developed Nonproducing Reserves, or Proved Undeveloped Reserves contained therein, and (iv) indicating such qualified petroleum engineering firm's opinion as to the respective estimated present values of future net revenues of each category of reserves contained therein determined in accordance with criteria satisfactory to the Managing Partners and otherwise in accordance with sound engineering and industry practices, including such standards and practices as may be promulgated by the Society of Petroleum Engineers of the American Institute of Mining and Metallurgical Engineers. Any such report may state that such qualified petroleum engineering firm expresses no opinion and makes no warranty or representation with respect to the proposed acquisition of such Producing Property and that such qualified petroleum engineering firm is relying on information furnished by the Managing Partners as to the historical volumes of any Hydrocarbons actually produced and as to the proposed ownership interest of the Production Partnership in such Producing Property. "Act" shall mean the Oklahoma Uniform Partnership Act, as amended from time to time. "Activation" or "Activated" shall mean the date on which (i) with respect to the Limited Partnership, the subscribers for Units shall have been admitted to the Limited Partnership as -2- Limited Partners, and (ii) with respect to the Production Partnership, the Limited Partnership shall have made its Capital Contribution to the Production Partnership. "Affiliate" shall mean, when used with reference to a specified Person: (a) any Person directly or indirectly owning, controlling, or holding with power to vote 10% or more of the outstanding voting securities of the specified Person; (b) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the specified Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with, the specified Person; (d) any Person who is an officer, director, partner or trustee of, or serves in a similar capacity with respect to, the specified Person or of which the specified Person is an officer, director, partner or trustee, or with respect to which the specified Person serves in a similar capacity; and (e) any relative or spouse of the specified Person. A reference to an Affiliate of the Managing Partners shall include an Affiliate of either or both of the Managing Partners. Notwithstanding the foregoing, no Person shall be deemed to be an Affiliate solely by reason of its ownership of limited partnership interests in a limited partnership. "Affiliated Program" shall mean a drilling or income program (whether in the form of a limited partnership, general partnership, joint venture or otherwise) interests in which were offered to persons or entities not engaged in a trade or business within the oil and gas industry (other than by virtue of its participation in an Affiliated Program) and of which a Managing Partner or Affiliate thereof serves as general partner or venturer. "Agreement" shall mean this Amended and Restated Agreement of Partnership as amended from time to time. "Capital Account" shall mean, as to any Partner, an account maintained on the books of the Production Partnership in accordance with the provisions of Section 5.3D below. "Capital Contribution" shall mean the total amount of money contributed to the Production Partnership by all Partners or any class of Partners or any one Partner (or the predecessor holders of the Interests of such Partner or Partners), as the context requires, net of any refunds pursuant to Section 3.4 of this Agreement. -3- "Code" shall mean the Internal Revenue Code of 1954, as amended (or any corresponding provisions of succeeding law). "Commercial Well" shall mean any Production Partnership Well which is capable of producing Hydrocarbons in commercial quantities, including those wells which are shut-in or which have not been abandoned within 60 days following the commencement of production. For purposes of this definition, production shall refer to the commencement of the commercial marketing of Hydrocarbons, and shall not include any spot sales of Hydrocarbon production as a result of testing procedures. "Consent" shall mean the consent of a Person, given as provided in Section 11.1, to do the act or thing for which the consent is solicited, or the act of granting such consent, as the context may require. "Development Drilling" shall mean all drilling and completing, or plugging and abandoning (after a determination that a well is not a Commercial Well), of a Production Partnership Well to a reservoir on a Lease or an offset Lease, from which reservoir production is being obtained or, as determined by an independent petroleum engineering firm, is anticipated to be obtainable in commercial quantities, or the recompletion of an existing Production Partnership Well; provided, however, that Development Drilling shall not include any Identified Development Drilling. "Direct Administrative Costs" shall mean the actual and necessary direct costs attributable to services provided to the Production Partnership by parties other than the Managing Partners or their Affiliates, whether incurred by the Production Partnership directly or incurred by any of the Managing Partners or their Affiliates, including the annual audit fees, legal fees and expenses, the costs of reviewing tax returns and reports, the cost of reserve reports (other than the cost of Acquisition Reserve Reports, Engineering Audit Letters and evaluations thereof conducted on behalf of a Production Partnership) prepared by independent petroleum engineering firms, and all other such costs directly incurred by or for the benefit of the Production Partnership. "Distributable Cash" shall mean, with respect to the Production Partnership's operations at any time, the amount of cash assets on hand at such time less amounts required to be retained out of such cash assets, in the sole judgment of the -4- Managing Partners, to pay costs, expenses or other obligations whether then accrued or anticipated to accrue in the future. "Engineering Audit Letter" shall mean a document prepared by a qualified petroleum engineering firm acceptable to the Managing Partners in connection with the proposed acquisition of a Producing Property, which shall include statements indicating that (i) such qualified petroleum engineering firm has reviewed an oil and gas reserve report prepared by the engineering staff of Geodyne Resources, Inc. or an Affiliate, (ii) in the opinion of such qualified petroleum engineering firm, the reserve report was prepared in accordance with sound engineering and industry practices, including such standards and practices as may be promulgated by the Society of Petroleum Engineers of the American Institute of Mining and Metallurgical Engineers, and (iii) with respect to the determination of the nature and extent of the reserves of Hydrocarbons reflected in such report, such qualified petroleum engineering firm has made reasonable inquiry with respect to the methods employed in the collection, analysis and evaluation of the basic physical data upon which such determination is based and is satisfied that the data so collected may be reasonably relied upon for the purpose of making the determination reflected in such report. "Farmout" shall mean an arrangement whereby the owner of a Lease or Working Interest agrees to assign his interest in certain specific acreage to the assignee, retaining some interest such as an overriding royalty interest, oil and gas payment, offset acreage or other type of interest, subject to the drilling of one or more specific wells or other performance as a condition of the assignment. "Fiscal Year" shall mean the calendar year. "General and Administrative Costs" shall mean all customary and routine legal, accounting, data processing, depreciation, geological, engineering, travel, office rent, telephone, secretarial, expense reimbursements of members of the Management Committee when acting on Production Partnership business, employee compensation and benefits, and other items of a general and administrative nature, whether like or unlike the foregoing, and any other incidental reasonable expenses reasonably necessary to the conduct of the Production Partnership's business, computed on a cost basis, determined by the Managing Partners in accordance with generally accepted accounting principles and reviewed by an independent public accountant or certified public accountant. General and -5- Administrative Costs shall not include any costs includable under the foregoing but which are included as Property Acquisition Costs, Direct Administrative Costs, cost incurred in connection with Development Drilling, Identified Development Drilling and Improved Recovery projects, or Operating Costs. "General Partner" shall mean PaineWebber/Geodyne Energy Income Limited Partnership I-E, an Oklahoma limited partnership, acting in such capacity, any successor in that capacity, and any other General Partner admitted to the Production Partnership pursuant to the provisions of this Agreement subsequent to the Activation of the Production Partnership. "Geodyne Production" shall mean Geodyne Production Company, a Delaware corporation. "Hydrocarbons" shall mean crude oil, natural gas, condensate, natural gas liquids and other liquid or gaseous hydrocarbons. "Identified Development Drilling" shall mean all drilling and completing, or plugging and abandoning (after a determination that a well is not a Commercial Well), of a Production Partnership Well drilled by or on behalf of the Production Partnership to a reservoir on a Lease or an offset Lease constituting all or a portion of a Producing Property or the recompletion of an existing Production Partnership Well, where (i) the drilling or recompletion of such Production Partnership Well commences after the acquisition of such Producing Property by the Production Partnership and is conducted in order to commence production of Hydrocarbons from Proved Undeveloped Reserves identified in the Acquisition Reserve Report or Engineering Audit Letter prepared in connection with such Producing Property, (ii) the costs of development of the Proved Undeveloped Reserves were taken into account in such Acquisition Reserve Report or Engineering Audit Letter in valuing such Proved Undeveloped Reserves attributable to such Producing Property, and (iii) a portion of the cost paid by the Production Partnership for such Producing Property is attributed by such Acquisition Reserve Report or Engineering Audit Letter to such Proved Undeveloped Reserves. The term, Identified Development Drilling, shall also refer to any Production Partnership Wells drilled or recompleted on a Producing Property subsequent to the initial Identified Development Drilling conducted on such Producing Property in order to commence production of Hydrocarbons from Proved Undeveloped Reserves (in addition to those identified in the -6- related Acquisition Reserve Report or Engineering Audit Letter) which have been categorized by the Managing Partners as Proved Undeveloped Reserves by virtue of production obtained from prior Identified Development Drilling conducted on such Producing Property. Any reference to costs incurred in connection with Identified Development Drilling shall include the interest, commitment fees and other financing charges and expenses of Production Partnership borrowings incurred to finance Identified Development Drilling. "Improved Recovery" shall mean all methods of supplementing natural forces and mechanisms of primary recovery or otherwise increasing the ultimate recovery from a Production Partnership Well, including, but not limited to, water flooding, pressure maintenance, gas cycling, fluid injection, polymer flooding, chemical flooding, and the use of miscible displacement fluids. "Incapacity" or "Incapacitated" shall mean the adjudication of bankruptcy (except that, in the case of a Managing Partner, the term "bankruptcy" shall mean only being subject to Chapter 7 of the Federal Bankruptcy Reform Act of 1978), of interdiction, of incompetence, or of insanity, or the death, dissolution or termination (other than by merger or consolidation under which the surviving entity agrees to assume all of the obligations and responsibilities of the merged or consolidated Person set forth in this Agreement), as the case may be, of any Person. "Income" shall mean the gross income of the Production Partnership (other than Investment Income) as determined for Federal income tax purposes, including all capital or Code Section 1231 gains (but not losses) of the Production Partnership. "Interest" shall mean the entire ownership interest (which may, either for a Partner's Capital Account or a Partner's Profits interest, be expressed as a percentage) of a Partner in the Production Partnership at any particular time, including the rights and obligations of such Partner under this Agreement and the Act. "Investment Income" shall mean all interest and dividend income earned on temporary investments of the Production Partnership at any time prior to the time at which an amount equal to the Capital Contributions to the Production Partnership available for the acquisition of Producing Properties have been -7- (i) expended or (ii) returned pursuant to Section 3.4 of this Agreement. "Lease" shall mean a lease, mineral interest, royalty or overriding royalty covering Hydrocarbons (or a contractual right to acquire such an interest), or an undivided interest therein or portion thereof, together with all easements, permits, licenses, servitudes and rights-of-way situated upon, or used or held for future use in connection with, the exploration, development or operation of such interest. "Limited Partners" shall mean the limited partners of the Limited Partnership or any substituted limited partners thereof. "Limited Partnership" shall mean the PaineWebber/Geodyne Energy Income Limited Partnership I-E, an Oklahoma limited partnership. "Limited Partnership Agreement" shall mean the agreement under which the Limited Partnership was formed, as amended and restated. "Management Committee" shall mean the committee, composed of two representatives from each Managing Partner, established for the purposes set forth in Sections 4.lC and 4.2A(iii) of this Agreement. "Management Fee" shall mean the fee paid by the Production Partnership to the Managing Partners pursuant to Section 5.2(l) of this Agreement in connection with their management of the affairs of the Production Partnership. "Managing Partners" shall mean Geodyne Production Company, a Delaware corporation, and PW Production, Inc., a Delaware corporation, and any other Person admitted as additional or Substituted Managing Partner pursuant to Article Six of this Agreement. "Notification" shall mean a writing, containing the information required by this Agreement to be communicated to any Person, hand delivered or sent by registered or certified mail, return receipt requested, postage prepaid, to such Person at the last known address of such Person, the date of the certified receipt (or such other evidence of receipt) therefor being deemed the date of the giving of Notification; provided, however, that any written communication containing the information sent or delivered to the Person and actually -8- received by the Person shall constitute Notification for all purposes of this Agreement. "Operating Costs" shall mean all expenditures made and costs incurred by the Production Partnership with respect to (i) the production and marketing of Hydrocarbons from completed Production Partnership Wells, including labor, fuel, repairs, hauling, materials, supplies, utility charges and other costs incident to or therefrom, costs of maintaining inventories incidental to the operations of Producing Properties, costs of making transfers of lease and well equipment to and from Production Partnership Wells, ad valorem and severance taxes, insurance and casualty loss expense, and compensation to well operators or others for services rendered in conducting such operations; (ii) the interest, commitment fees and other finance charges and expenses of Production Partnership borrowings incurred in connection with Development Drilling and Improved Recovery Projects; and (iii) processing facilities, pipelines, gas sales facilities, Improved Recovery projects, and other procedures and facilities necessary to produce efficiently the Hydrocarbon reserves from a Producing Property, all to the extent such costs and expenditures are not Property Acquisition Costs. "Organization and Offering Costs" shall mean all costs and expenses incurred by the Managing Partners in connection with the organization of the Production Partnership, including, without limitation, the legal, printing, accounting and other costs incurred in connection with the organization of the Production Partnership, including, without limitation, the legal, printing, accounting and other costs incurred in connection with preparing, filing and recording this Agreement. "Partner" shall mean any Managing Partner or any General Partner of the Production Partnership. "Payout" shall mean that time at which cash distributions have been made by the Limited Partnership to the Limited Partners pursuant to Section 5.1 of the Limited Partnership Agreement (together with any distributions to such Limited Partners pursuant to Section 3.4 of the Limited Partnership Agreement), in an aggregate amount equal to the Limited Partners' Capital Contributions to the Limited Partnership. "Person" shall mean any individual, partnership, corporation, trust or other entity. -9- "Prior Production Partnership" shall mean a general partnership of which PW Production and Geodyne Production are managing partners, and a limited partnership, of which units of limited partnership interest were offered pursuant to the Prospectus, is the other general partner, formed prior to the Activation of the Production Partnership. "Producing Property" shall mean any property (or interest in such property) with a well or wells capable of producing Hydrocarbons in commercial quantities or properties unitized with such properties or properties adjacent to such properties which are acquired as an incidental part of the acquisition of such properties. The term also includes well machinery and equipment, gathering systems, storage facilities or processing installations or other equipment and property associated with the production of Hydrocarbons. Interests in properties may include Working Interests, production payments, Royalties and other nonworking and nonoperating interests. "Production Partnership" shall mean the general partnership governed under and pursuant to this Agreement, as said general partnership may from time to time be constituted. "Production Partnership Account" shall mean the bank account or accounts maintained by the Managing Partners pursuant to Section 9.3. "Production Partnership Property" shall mean any interest, property and right of any type owned by the Production Partnership. "Production Partnership Well" shall mean any well in which the Production Partnership has an interest. "Profits" and "Losses" shall mean the income or losses of the Production Partnership for Federal income tax purposes determined as of the close of the Production Partnership's Fiscal Year, as well as, when the context requires, any tax-exempt income and nondeductible expenses. "Property Acquisition Costs" shall mean, without duplication, the sum of (1) the prices paid by the Production Partnership or a Managing Partner or an Affiliate to acquire a Producing Property ultimately sold to the Production Partnership, including the price paid to acquire a purchase option with respect to a Producing Property, lease bonuses and -10- equipment costs associated therewith; (2) title insurance or examination costs, transfer taxes, if any, and like charges in connection with the acquisition of Producing Properties; (3) delay rentals and ad valorem taxes paid by the seller with respect to such property to the date of its transfer to the buyer; (4) interest actually incurred by the Managing Partners or their Affiliates to acquire or maintain such Producing Properties prior to their transfer to the Production Partnership; and (5) such portion of the Managing Partners' or Affiliates' reasonable, necessary and actual expenses for geological, geophysical, seismic, land, engineering, drafting, accounting, auditing, legal and other like services, including the Production Partnership's costs incurred (to the extent consistent with generally accepted industry standards) in connection with the Production Partnership's review of proposed acquisitions of Producing Properties, Reports and Engineering Audit Letters, all allocated to the property in accordance with the allocation procedures used by the Managing Partners, any of their Affiliates or the Production Partnership; provided that the portion of the Managing Partner's or Affiliates' expenses allocated to the property, as set forth in items (3), (4) and (5), shall have been incurred not more than 36 months prior to the property transaction. "Prospect" shall mean an area in which the Production Partnership owns or intends to own one or more oil and gas interests, which is geographically defined on the basis of geological data by the Managing Partners and which is reasonably anticipated by the Managing Partners to contain at least one reservoir. "Prospectus" shall mean the prospectus pursuant to which the Units were offered, and all supplements or amendments thereto, if any. "Proved Reserves" shall mean those quantities of Hydrocarbons, which, upon analysis of geologic and engineering data, appear with reasonable certainty to be recoverable in the future from known Hydrocarbon reservoirs under existing economic and operating conditions. Proved reserves are limited to those quantities of Hydrocarbons which can be expected, with little doubt, to be recoverable commercially at current prices and costs, under existing regulatory practices and with existing conventional equipment and operating methods. Depending upon their status of development, such proved reserves shall be subdivided into the following classifications and have the following definitions: -11- (a) "Proved Developed Reserves" shall mean proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. This classification shall include: (1) "Proved Developed Producing Reserves" which are proved developed reserves which are expected to be produced from existing wells; and (2) "Proved Developed Nonproducing Reserves" which are proved developed reserves which exist behind the casing of existing wells, or at minor depths below the present bottom of such wells, which are expected to be produced through these wells in the predictable future, where the cost of making Hydrocarbons available for production should be relatively small compared to the cost of a new well. Additional Hydrocarbons expected to be obtained through the application of improved recovery techniques are included as "Proved Developed Reserves" only after testing by a pilot project or after the operation of an installed program has confirmed through production responses that increased recovery will be achieved. (b) "Proved Undeveloped Reserves" shall mean all reserves which are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Such reserves on undrilled acreage are limited to those drilling units offsetting productive units which are reasonably certain of production when drilled. Proved reserves for other undrilled units are claimed only where it can be demonstrated with reasonable certainty, based on accepted geological, geophysical and engineering studies and data, that there is continuity of production from an existing productive formation. No estimates for Proved Undeveloped Reserves are attributable to any acreage for which improved recovery is contemplated, unless the techniques to be employed have been proved effective by actual tests in the same area and reservoir. "PW Production" shall mean PW Production Inc., a Delaware corporation. -12- "Remove", "Removed" or "Removal" shall mean, with reference to the removal of a Managing Partner, the termination of the management powers, duties and responsibilities of such Managing Partner pursuant to Section 6.2 of this Agreement and the removal of such Managing Partner as a Partner. "Royalty" shall mean an interest, including an overriding royalty and a net profits interest, in gross production or the proceeds therefrom which does not require the owner thereof to bear any of the cost of production, development, operation or maintenance. "Sale" shall mean any event or transaction that is, for Federal income tax purposes, considered a sale, exchange or abandonment by the Production Partnership of any Production Partnership Property. "State" shall mean the State of Oklahoma. "Subscription Agreement and Power of Attorney" shall mean the Subscription Agreement and Power of Attorney in the form attached to the Prospectus. "Substituted Partner" shall mean any Person admitted to the Production Partnership as a Partner pursuant to Sections 7.3 and 10.2 of this Agreement. "Unit" shall mean a $1,000 investment in the Limited Partnership by a Limited Partner pursuant to the terms of a Subscription Agreement and Power of Attorney; provided, however, that fractional Units may be acquired to the extent provided under Section 5.lB of the Limited Partnership Agreement. "Working Interest" shall mean the interest (whether held directly or indirectly) in a Lease which is subject to some portion of the expense of production, development, operation or maintenance. -13- ARTICLE TWO Continuation; Name, Place of Business and Office; Term ------------------------------------------------------ Section 2.1. Continuation -------------------------- The parties hereto hereby continue the general partnership heretofore formed pursuant to the provisions of the Act and the rights and liabilities of the Partners shall be as provided in the Act, except as otherwise expressly provided in this Agreement. Section 2.2. Name, Place of Business and Office, Agent ------------------------------------------------------- The Production Partnership shall be conducted under the name PaineWebber/Geodyne Energy Income Production Partnership I-E. The business of the Production Partnership may, however, be conducted under any other name deemed necessary or desirable by the Managing Partners in order to comply with applicable laws. The office and principal place of business of the Production Partnership shall be c/o Geodyne Production Company, 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The Managing Partners shall record an assumed name or fictitious name certificate in the State and in each state in which it owns property or transacts business when deemed necessary by the Managing Partners. The Managing Partners may change the principal place of business and the location of such office and may establish such additional offices as they deem advisable from time to time; provided, however, that in the event the principal place of business of the Production Partnership shall be changed, the Managing Partners shall give written notice thereof to the Limited Partners. Section 2.3 Purpose --------------------- The business and purpose of the Production Partnership shall be to acquire, own, hold, operate, explore, develop, trade, sell and exchange Hydrocarbon properties and interests therein of all kinds onshore and offshore in the continental United States, including, without limitation, interests in general or limited partnerships, joint ventures and other -14- entities that hold or are formed to acquire interests in such properties or interests; to engage in development drilling and enhanced recovery operations thereon, to produce, transport, market, purchase and trade Hydrocarbons and products thereof; to purchase, lease, own, hold, operate, sell and exchange all equipment, machinery, facilities, systems and plans necessary or appropriate for such purposes; and to do any and all things necessary or proper in connection with or incident to the foregoing activities. Section 2.4. Term ------------------ The Production Partnership shall continue in force and effect until December 31, 1999, provided that the Management Committee may extend such term for up to five periods of two years each, or until dissolution prior thereto pursuant to the provisions hereof. ARTICLE THREE Partners and Capital -------------------- Section 3.1. Managing Partners ------------------------------- A. The names, addresses and Capital Contributions of the Managing Partners are set forth in Schedule A attached hereto and are incorporated herein. The Managing Partners shall not be required to make any Capital Contribution except as set forth in Sections 3.lB, 3.4 and 8.2C. B. The Managing Partners shall also contribute an amount of cash sufficient to pay their share of costs allocated to them pursuant to Section 5.3 of this Agreement to the extent that the amount of Income allocated to them (and/or the amount of Production Partnership borrowings incurred on their behalf) is insufficient to pay such costs. Section 3.2. Other General Partner ----------------------------------- The name, address and Capital Contribution of the Limited Partnership are set forth in Schedule A attached hereto and are hereby incorporated herein. -15- Section 3.3. Application of Capital Contributions -------------------------------------------------- The Managing Partners shall deposit in the Production Partnership Account the Capital Contributions of the Limited Partnership and the Managing Partners and apply such Capital Contributions to the payment of Organization and Offering Costs and the Management Fee. The balance of such Capital Contributions shall be held in the Production Partnership Account to be applied to the payment of Property Acquisition Costs and, to the extent not payable out of Income or Investment Income, Operating Costs, General and Administrative Costs, Direct Administrative Costs and other Production Partnership costs; provided, however, that such funds may be temporarily invested prior to the payment of such costs in accordance with Section 9.3 of this Agreement. Section 3.4. Certain Returns of Capital ---------------------------------------- Any portion of the Capital Contribution of the Limited Partnership (except for necessary operating capital) that has not been expended or that is not, or in the determination of the Managing Partners, will not be committed for expenditure by the second anniversary of the Activation of the Production Partnership will promptly be refunded to the Limited Partnership as a return of part of its Capital Contribution at the earlier of such determination or the second anniversary of the Activation of the Production Partnership. Such funds will be deemed to have been committed for expenditure by such date to the extent they are payable under contractual agreements or understandings in effect on such date, or have been applied to a reasonable working capital reserve or have been set aside as a condition to obtaining any financing in the form of a compensating balance or similar arrangement. In addition, the Managing Partners shall contribute cash to the Production Partnership (with respect to which their Capital Accounts will be credited) in an amount equal to the amount paid to the Managing Partners in respect of the Management Fee attributable (on a proportionate basis) to the unexpended amount of Capital Contributions so refunded, which cash shall be refunded to the Limited Partnership together with the unexpended Capital Contributions so refunded. Geodyne Production and PW Production shall be responsible for the obligation of the Managing Partners to contribute cash to the Production Partnership pursuant to this Section 3.4 in the relative percentages which they -16- allocated between themselves the payment of the Management Fee pursuant to Section 5.2. All amounts so refunded to the Limited Partnership shall reduce dollar for dollar its Capital Account. Section 3.5. Production Partnership Capital -------------------------------------------- A. No Partner shall be paid interest on any Capital Contribution to the Production Partnership or on such Partner's Capital Account, notwithstanding any disproportion therein as between Partners. B. The Production Partnership shall not redeem any Partner's Interest. Except as provided in Sections 3.4, 6.1, 6.2 and 8.2 of this Agreement, no Partner shall have the right to withdraw or receive any return of the Capital Contribution. Under circumstances involving a return of any Capital Contribution, no Partner shall have the right to receive any property other than cash, except as may otherwise be provided in Sections 6.1, 6.2 and 8.2 of this Agreement. Section 3.6. Liability of Partners ----------------------------------- Each Partner signatory hereto or subsequently admitted to the Production Partnership agrees that it shall remain generally liable for any obligation or recourse liability of the Production Partnership incurred during the period in which it is a Partner. However, all present and future Partners hereby agree among themselves to contribute to each other the amount of funds necessary to effectuate a sharing of such Production Partnership obligations and recourse liabilities in proportion to each Partner's share of such obligations and liabilities at the time of their accrual. -17- ARTICLE FOUR Rights, Powers and Duties of The Managing Partners --------------------- Section 4.1. Management and Control of the Production Partnership ------------------------------------------------------------------ A. Subject to Section 4.lC of this Agreement and to the Consent of the Limited Partnership as and when required by this Agreement, the Managing Partners, within the authority granted to them under and in accordance with the provisions of this Agreement, shall have the full and exclusive right to manage and control the business and affairs of the Production Partnership and to make all decisions regarding the business of the Production Partnership and shall have all of the rights, powers and obligations of managing general partners of a general partnership under the laws of the State. The Managing Partners shall exercise those powers as a fiduciary to the Limited Partnership. B. No other Partner shall participate in the management of or have any control over the Production Partnership's business nor shall any other Partner have the power to represent, act for, sign for or bind the Managing Partners or the Production Partnership. The Limited Partnership hereby Consents to the exercise by the Managing Partners of the powers conferred on them by this Agreement. C. The Managing Partners' management authority with respect to significant Production Partnership actions shall be exercised by the Management Committee, including without limitation such actions as: (i) the acquisition of a Producing Property or an option to purchase a Producing Property, provided that Geodyne Production shall have the authority to acquire Producing Properties and options to acquire Producing Properties without the approval of the Management Committee, provided further that (a) Geodyne Production does not expend an aggregate amount of Production Partnership funds with respect to the acquisition of Producing Properties whose aggregate acquisition price, together with the anticipated aggregate acquisition price of Producing Properties subject to such purchase options, is in excess of 20% of the Limited Partnership's Capital Contribution, -18- and (b) no single acquisition of Producing Properties by Geodyne Production pursuant to this proviso shall exceed 10% of the Limited Partners' capital contributions to the Limited Partnership; (ii) the incurrence of indebtedness; (iii) the determination of the amount of and the distribution of Distributable Cash to the Partners; (iv) the engaging in and making decisions with respect to any Development Drilling, Identified Development Drilling and Improved Recovery operations; (v) the sale or other transfer of any Producing Property that constitutes a significant portion of the assets of the Production Partnership; and (vi) the determination not to extend the term of the Production Partnership as set forth in Section 2.4 of this Agreement. The Management Committee shall have the power to delegate its management authority with respect to any "significant" action to a Managing Partner at such times and under such conditions as it may decide in its own discretion. The Managing Partners' management authority respecting all other actions which are in the ordinary course of the Production Partnership's operations may be exercised by either Managing Partner without the concurrence of the other Managing Partner, provided that the Managing Partner exercising such management authority shall, upon inquiry by the other Managing Partner, notify the inquiring Managing Partner of the nature of such actions undertaken without the concurrence of the inquiring Managing Partner. The Management Committee shall have the authority (i) to determine that the "significant" actions specified herein shall no longer be "significant" actions for the purposes of this Section 4.1C and to amend this Agreement pursuant to Section l0.1A of this Agreement to reflect such determination, and (ii) to determine which other Production Partnership operations, other than those specified herein, are "significant" actions for purposes of this Section 4.1C. Section 4.2. Authority of the Managing Partners ------------------------------------------------ A. In addition to any other rights and powers which the Managing Partners may possess under this Agreement and the Act, the Managing Partners shall, except and subject to the extent otherwise provided or limited in this Agreement, have all specific rights and powers required or appropriate to their management of the Production Partnership's business which, by way of illustration but not by way of limitation, shall include the following rights and powers to: -19- (i) expend the Capital Contributions of the Partners and apply Production Partnership revenues, subject to Section 4.3C of this Agreement, in furtherance of the business of the Production Partnership; (ii) acquire, explore, develop, manage and operate Hydrocarbon properties and interests therein (including interests in corporations and partnerships owning Hydrocarbon properties if in the Managing Partners' judgment such purchase is a necessary or advisable step in acquiring interests in producing properties held by any such corporation or partnership, provided, no such purchase will be made for the purpose of investment in the securities of any such corporation or partnership, the Production Partnership will not conduct or participate in a hostile tender offer, and no such purchase will be made unless there is assurance that sufficient control of the corporation or partnership can be obtained in the initial acquisition to liquidate it, and it is determined the purchase would not thereby render the Production Partnership an investment company within the meaning of the Investment Company Act of 1940, and provided further the Production Partnership's interest in the underlying assets of any such corporation or partnership is distributed as soon as practical thereafter to the Production Partnership in redemption for the Production Partnership's interest in such corporation or partnership) of all kinds and acquire units of limited partnership interest tendered to the General Partners pursuant to the terms of any right of presentment of a Prior Limited Partnership (as defined in the Limited Partnership Agreement) (provided that the Production Partnership shall not expend an aggregate amount in excess of 10% of the Limited Partnership's Capital Contribution to acquire such units) and hold all such property, interests and units in the name of the Production Partnership; provided, however, that in connection therewith, the Managing Partners shall, contemporaneously with the acquisition of a Producing Property, or as soon as practicable thereafter, file or cause to be filed for recordation an appropriate conveyance or agreement evidencing the Production Partnership's interest in such Producing Property in the jurisdiction where such Producing Property is located pursuant to such jurisdiction's Uniform Commercial Code and/or in the real property records of the clerk or recorder of the county in which the Producing Property is -20- situated; and, provided, further, that filings of such conveyances or agreements shall also be made as the Managing Partners believe necessary to establish the Production Partnership's priority of interest; and, provided, further, Producing Properties may be held temporarily in the name of a nominee for the Production Partnership if such action is deemed necessary by the Managing Partners to facilitate acquisition; (iii) execute such instruments and agreements, to do such acts, to employ such persons and to contract for such services as the Managing Partners determine are necessary or appropriate to conduct the Production Partnership's business, including (x) the employment of any Managing Partner or any Affiliate as an operator, (y) the entering into management and advisory contracts, and (z) the establishment of the Management Committee to exercise, pursuant to Section 4.lC of this Agreement, or supervise the exercise of the Managing Partners' powers set forth in this Agreement, subject to any restrictions contained in the Act and in this Agreement, and to provide for any reasonable compensation to be paid to the Persons comprising the Management Committee pursuant to such contracts as the Managing Partners shall deem necessary and appropriate; (iv) execute, in the name of the Production Partnership, contracts for the sale of Hydrocarbons and division orders and transfer orders as necessary or incident to the sale of production on behalf of the Production Partnership; (v) produce, treat, transport and market Hydrocarbons, execute processing contracts, transportation contracts, and enter into contracts for the marketing or sale of Hydrocarbons and other marketing agreements in the name of the Production Partnership, whether or not extending beyond the term of the Production Partnership; (vi)execute offers for United States and any state Leases on behalf of the Production Partnership; execute and file requests for approval of assignments of interests in United States and any state Leases, together with any and all contracts for the option, sale or purchase of such Leases or the sale or purchase of any products therefrom; to execute any plans of development under unit agreements, conveyances, subleases, mortgages, -21- deeds of trust, affidavits or reports concerning the drilling of wells and production, designations of operator, Lease bonds, operator's bonds and consents of surety; and in general to do all things necessary or desirable on behalf of the Production Partnership regarding any United States or state Leases or offers therefor; provided, however, that the Production Partnership shall have the authority to acquire or otherwise deal with any such interests respecting Leases located in "offshore waters" (as that term is generally understood in the oil and gas industry) only on the condition that the Production Partnership shall not participate in any Development Drilling or Identified Development Drilling in "offshore waters" which are not state-owned waters; (vii) enter into any partnership agreement, sharing arrangement, or joint venture with any Person acceptable to the Managing Partners and which is engaged in any business or transaction in which the Production Partnership is authorized to engage, provided that the Production Partnership shall not be deemed thereby to be an "investment company" for purposes of the Investment Company Act of 1940, as amended; (viii) enter into and execute drilling contracts, Farmout agreements, operating agreements, unitization agreements, pooling agreements, unit or pooling designations, recycling contracts, dry hole, bottom hole and acreage contribution letters and agreements, participation agreements, agreements and conveyances respecting rights-of-way, agreements respecting surface and subsurface storage and any other agreements customarily employed in the oil and gas industry in connection with the acquisition, exploration, development, operation, or abandonment of any Leases, and any and all other instruments or documents considered by the Managing Partners to be necessary or appropriate to conduct the business of the Production Partnership; (ix)pay or elect not to pay delay rentals on Production Partnership Properties as appropriate in the judgment of the Managing Partners, it being understood that the Managing Partners will not be liable for failure to make correct or timely payments of delay rentals if such failure was due to any reason other than negligence or lack of good faith; -22- (x) subject to Section 4.3B of this Agreement, abandon or otherwise dispose of any interest in Hydrocarbon properties acquired for the Production Partnership upon such terms and for such consideration as the Managing Partners may determine; (xi)sell production payments payable out of all or any part of any one or more of the Producing Properties acquired by the Production Partnership and to devote and expend the proceeds of any such sale for any of the purposes of the Production Partnership for which the proceeds of borrowings may be applied; (xii) borrow monies from time to time, for the purpose and subject to the limitations stated in Section 4.3C of this Agreement, in the form of recourse or nonrecourse borrowings, or otherwise to draw, make, execute and issue promissory notes and other negotiable or nonnegotiable instruments and evidences of indebtedness, and to secure the payments of the sums so borrowed and to mortgage, pledge, or assign in trust all or any part of Production Partnership Property, including Producing Properties, production and proceeds of production, or to assign any monies owing or to be owing to the Production Partnership, and to engage in any other means of financing customary in the petroleum industry; provided, however, that a creditor who makes a nonrecourse loan to the Production Partnership shall not have or acquire, at any time as a result of making the loan, any direct or indirect interest in the profits, capital, or property of the Production Partnership other than as a secured creditor; (xiv) invest Capital Contributions temporarily in the investments set forth in Section 9.3 of this Agreement; (xv)employ on behalf of the Production Partnership agents, employees, accountants, lawyers, geologists, geophysicists, landpersons, clerical help, and such other assistance and consulting and other services as may deem necessary or convenient and to pay therefor such remuneration as the Managing Partners may deem reasonable and appropriate; -23- (xvi) purchase, lease, rent, or otherwise acquire or obtain the use of machinery, equipment, tools, materials, and all other kinds and types of real or personal property that may in any way be deemed necessary, convenient, or advisable in connection with carrying on the business of the Production Partnership, purchase and establish adequate inventories of equipment and material required or expected to be required in connection with its operations, dispose of tangible lease and well equipment for use or used in connection with Production Partnership Property, and to incur expenses for travel, telephone, telegraph, insurance, and for such other things, whether similar or dissimilar, as may be deemed necessary or appropriate for carrying on and performing the business of the Production Partnership; (xvii) enter into such agreements and contracts with such parties and to give such receipts, releases, and discharges with respect to any and all of the foregoing and any matters incident thereto as the Managing Partners may deem advisable or appropriate; (xviii) guarantee the payment of money or the performance of any contract or obligation by any person, firm, or corporation on behalf of the Production Partnership; (xix) sue and be sued, complain and defend in the name and on behalf of the Production Partnership; (xx) make such classifications and determinations as the Managing Partners deem advisable, having due regard for any relevant generally accepted accounting principles and oil and gas industry practices; (xxi) purchase insurance, or extend the Managing Partners' or their Affiliates' insurance, at the Production Partnership's expense, to protect the Production Partnership Property and the business of the Production Partnership against loss, and to protect the Managing Partners against liability to third parties arising out of Production Partnership activities, such insurance to be in such limits, to be subject to such deductibles and to cover such risks as the Managing Partners deem appropriate; -24- (xxii) pay all ad valorem taxes levied or assessed against the Production Partnership Properties, all taxes upon or measured by the production of Hydrocarbons therefrom, and all other taxes (other than income taxes) directly related to operations conducted by the Production Partnership; (xxiii) enter into agreements on behalf of the Production Partnership with Affiliates subject to the limitations set forth in Section 4.3B of this Agreement; (xxiv) sell all or substantially all of the properties and other assets of the Production Partnership to themselves, or any of their Affiliates or any other person and to receive for the Production Partnership consideration consisting of cash, securities, other property or any other form of consideration, or any combination thereof, at such prices and for such forms of consideration as they deem in the best interests of the Limited Partners; provided, however, that no such sale shall be consummated without the prior Consent of the Limited Partnership pursuant to the provisions of Section 4.4B of this Agreement. In the event of the dissolution of the Production Partnership followed by any such sale of the Production Partnership's assets, the Managing Partners shall, subject to the provisions of Section 8.2 of this Agreement, be appointed the liquidating agents for the Production Partnership; (xxv) make, exercise or deliver any general assignment for the benefit of the Production Partnership's creditors, but only upon the prior Consent of the Limited Partnership pursuant to the provisions of Section 4.4B of this Agreement; (xxvi) take such other action and perform such other acts as may be deemed appropriate to carry out the business of the Production Partnership; and (xxvii) inform each other Partner of all administrative and judicial proceedings for an adjustment at the Production Partnership level for partnership tax items and forward to each other Partner within 30 days of receipt all notices received from the Internal Revenue Service regarding the commencement of a partnership level audit or a final partnership administrative judgment, and -25- Geodyne Production shall perform all duties imposed by Sections 6221 through 6232 of the Code as the "tax matters partner" of the Production Partnership, including, but not limited to, the following: (a) the power to conduct all audits and other administrative proceedings (including windfall profit tax audits) with respect to Production Partnership items; the power to extend the statute of limitations for all Partners with respect to Production Partnership tax items; and (b) the power to file a petition with an appropriate federal court for review of a final partnership administrative adjustment. Geodyne Production shall consult with PW Production with respect to the performance of its duties as "tax matters partner." B. Reliance by Third Parties on Managing Partners' Authority. No person, firm or corporation dealing with the Production Partnership shall be required to inquire into the authority of the Managing Partners to take or refrain from taking any action or make or refrain from making any decision, but any person so inquiring shall be entitled to rely upon a certificate of the Managing Partners as to their due authorization. Section 4.3. Sales, Purchases and Operation of Producing Properties; Additional Financing --------------------------------------------------------------------- A. Except with respect to Producing Properties whose aggregate purchase price does not exceed 10% of the Limited Partners' capital contributions to the Limited Partnership, no Producing Property shall be acquired by the Production Partnership unless there has been prepared and evaluated with respect thereto either an Acquisition Reserve Report or an Engineering Audit Letter acceptable to the Management Committee; B. Neither the Managing Partners nor any Affiliate shall sell, transfer or convey any or all of their interest in Producing Properties to the Production Partnership or purchase or acquire any oil and gas properties or interest from the Production Partnership, directly or indirectly, except pursuant to transactions that are fair and reasonable to the Limited Partnership under the circumstances at the time such transaction is consummated. Such transactions shall be further subject to the following restrictions: -26- (i) Prior to the date on which the Production Partnership has acquired its final Producing Property, neither the Managing Partners nor any Affiliate of a Managing Partner (other than an Affiliated Program) shall acquire any Producing Property after the Activation of the Production Partnership unless prior thereto the Production Partnership shall have been offered the right to acquire such Producing Property, or an interest therein, and the Management Committee shall have determined that the acquisition of such Producing Property, or an interest therein, is not in the best interests of the Production Partnership; (ii) Any purchase or sale of a Producing Property from or to a Managing Partner or any Affiliate shall be made at the Property Acquisition Cost for such Producing Property as adjusted for intervening operations, unless the Managing Partner or such Affiliate has reasonable grounds to believe that cost is materially more or less than the fair market value of such property, in which case such sale or purchase shall be made at a price equal to the fair market value thereof as determined by an independent petroleum engineer; (iii) If a Managing Partner sells, transfers or conveys any oil, gas or other mineral interests or property to the Production Partnership, it must, at the same time, sell to the Production Partnership an equal proportionate interest in all its other property in the same Prospect. A Sale or conveyance to the Production Partnership of less than the entire ownership interest of a Managing Partner or any Affiliate is only permitted if: (a) the interests retained or obtained by the Managing Partners or Affiliate and acquired by the Production Partnership are either (x) proportionate, uniform and undivided Working Interests if the Producing Property acquired by the Production Partnership is a Working Interest or (y) proportionate, uniform and undivided Royalty Interests if the Producing Property acquired by the Production Partnership is a Royalty, (b) the respective obligations of the Managing Partners or Affiliate and the Production Partnership are substantially the same, and (c) the interest of the Managing Partners or their Affiliates in revenues does not exceed the amount proportionate to their interest. The Managing Partners and their Affiliates may not retain or obtain any -27- overrides or other burdens on the interest obtained by the Production Partnership, and may not enter into any Farmouts with respect to their retained interest, except to nonaffiliated third parties or to an Affiliated Program; (iv)In the event a Managing Partner or any Affiliate proposes to acquire an interest in a Producing Property in which the Production Partnership has an interest or in a Producing Property abandoned by the Production Partnership within one year preceding such proposed acquisition, such Managing Partner or Affiliate shall offer the interest to the Production Partnership; and if cash or financing is not available to the Production Partnership to purchase such interest, neither such Managing Partner nor Affiliate shall acquire an interest in such Producing Property. The term "abandon" for the purpose of this subparagraph shall mean the termination, either voluntary or by operation of the Lease or otherwise, of all of the Production Partnership's interest in the Producing Property. This subsection shall not apply after the lapse of five years of the Activation of the Production Partnership or to any Affiliated Program where the interest of such Managing Partner is less than or equal to its interest in the Production Partnership, there are no duplication of fees to the Managing Partners, and the Managing Partners do not obtain a greater benefit from purchase of the interest by the Affiliated Program than they would if the interest were purchased by the Production Partnership; (v) During the existence of the Production Partnership and before it has ceased operations, neither Managing Partner nor any Affiliate (excluding any Affiliated Program where the interest of such Managing Partner is less than or equal to its interest in the Production Partnership) shall acquire, retain or drill for its own account any oil and gas interest in any Prospect upon which the Production Partnership possesses an interest, except for transactions which comply with Section 4.3B(iii) or 4.8 of this Agreement. The geological limits of a Producing Property owned by the Production Partnership shall be enlarged or contracted on the basis of subsequently acquired geological data to define the productive limits of a reservoir and must include all of the acreage determined by the subsequent data to be encompassed by such reservoir. If the -28- geological limits of a Producing Property, as so enlarged, encompass any interest held by either a Managing Partner or an Affiliate of a Managing Partner (excluding an Affiliated Program where the interest of such Managing Partner is identical to or less than its interest in the Production Partnership), such interest shall be sold to the Production Partnership in accordance with the provisions of Section 4.3B(iv) of this Agreement and any net income previously received by the Managing Partner or Affiliate shall be paid over to the Production Partnership. If a Managing Partner acquires additional acreage or interests in a Prospect of the Production Partnership, it must sell such to the Production Partnership and is prohibited from retaining any such interest, except as may be permitted by Section 4.3B of this Agreement. Notwithstanding the foregoing, the Production Partnership will not be required to expend additional funds to acquire any such interest unless funds are available from the Capital Contributions of the Partners; (vi)Producing Properties may be sold, Farmed-out or otherwise transferred from or to an Affiliated Program only pursuant to transactions that (a) comply with Sections 4.3B(iii) and 4.3B(iv) of this Agreement, and (b) are in exchange for the transferee's obligation to conduct exploratory drilling, Development Drilling, Identified Development Drilling or Improved Recovery operations on such properties or in connection with the formation of a joint venture among the Production Partnership and such Affiliated Program, provided that the compensation arrangement or any other interest or right of the Managing Partners or any Affiliate is the same in the Production Partnership and Affiliated Program, or, if different, the aggregate compensation of the Managing Partners does not exceed the lower of the compensation they would have received in the Production Partnership or the Affiliated Program, and the terms of such Sale, Farmout or transfer comply with the provisions of Section 4.8 of this Agreement; (vii) Any Sale of inventory or other materials by the Production Partnership to any Managing Partner or Affiliate shall be made at the applicable rates set forth in the standard form of the accounting procedure then recommended by the Council of Petroleum Accountants Societies of North America; -29- (viii) Any operating agreements pursuant to which any Managing Partner or any Affiliate acts as operator of Producing Properties shall be of a nature customary in the industry and payments to any Managing Partner or any Affiliate for acting as operator shall not exceed the compensation which would be paid by unaffiliated third parties in the same geographic area for similar goods and services. Reimbursement of the Managing Partner's overhead pursuant to such operating agreement will not be duplicative of any reimbursement of General and Administrative Costs made pursuant to Section 5.2 of this Agreement; and (ix)To the extent a Managing Partner or any Affiliate acquires an interest in a Producing Property in which the Production Partnership acquires an interest, such Managing Partner or Affiliate shall pay its allocable portion of the cost of the preparation of the Acquisition Reserve Report or Engineering Audit Letter, as the case may be, respecting such Producing Property. C. The Managing Partners may not expend any amount of Production Partnership funds over the term of the Production Partnership for the payment of Production Partnership costs (other than recompletion costs) incurred in connection with Development Drilling and Identified Development Drilling in excess of 10% of the amount of the Limited Partners' capital contributions to the Limited Partnership and the Production Partnership borrowings. If the Managing Partners determine that funds in addition to the Capital Contributions to the Production Partnership are required for the payment of Production Partnership costs (other than Property Acquisition Costs), the Managing Partners may apply or reserve Income or Investment Income for the payment of such Production Partnership costs and/or the Managing Partners may cause the Production Partnership to borrow funds for the payment of Production Partnership costs incurred in connection with Development Drilling, Identified Development Drilling and Improved Recovery operations; provided, however, that the aggregate outstanding principal amount of such borrowings shall not at any one time exceed an amount equal to 20% of the Limited Partners' capital contributions to the Limited Partnership. -30- D. Each Managing Partner shall have the authority to secure the payment of borrowings incurred by it for its own account or for purposes of paying its allocable share of Production Partnership costs by assigning to lenders all or part of its Managing Partner's interest in Profits and Distributable Cash, and by granting such lenders a security interest or mortgage in an undivided interest in any Production Partnership Property not to exceed its Managing Partner's percentage interest in Income; provided, however, that the Managing Partners, in the aggregate, shall retain unencumbered at least a 1% interest in each of Production Partnership Property, Profits and Distributable Cash. Notwithstanding anything to the contrary in this Agreement, in the event of any sale or foreclosure of a Managing Partner's interest in full or partial satisfaction of such borrowings, appropriate adjustments shall be made in the Capital Accounts of the Partners and in the method by which Income and costs are allocated to the Partners to assure that the Limited Partnership and the other Managing Partner will not bear any of the costs attributable to such sold or foreclosed interest and that such Managing Partner will not share or participate in any of the capital, Income, costs or distributions attributable to such sold or foreclosed interest except to the extent of the unencumbered interest retained by such Managing Partner. Section 4.4. Prohibited Transactions ------------------------------------- A. Notwithstanding any other provision of this Agreement to the contrary, the following transactions are expressly prohibited: (i) the Production Partnership shall not make any loans to a Managing Partner or any Affiliate; (ii) neither the Managing Partners nor any Affiliate shall make any loans to the Production Partnership except at a rate of interest not in excess of the interest cost incurred by the Managing Partners or Affiliates or the amount of interest that would be charged to the Production Partnership (without regard to the Managing Partner's or Affiliate's financial abilities or guarantees) by unrelated banks on comparable loans for the same purpose, whichever is lower, and the Managing Partners and Affiliates shall not receive points or financing charges or fees regardless of the amount; -31- (iii) except as expressly contemplated hereby, no agent, attorney, accountant or other independent consultant or contractor who is also employed on a full-time basis by any Managing Partner or any Affiliate shall be compensated by the Production Partnership for his or her services; (iv)other than those received for the account of the Production Partnership, no rebates may be received by any Managing Partner or any Affiliate in connection with Production Partnership operations or expenditures, nor may any Managing Partner or any Affiliate participate in any reciprocal business arrangement that would circumvent any of the provisions of this Agreement; (v) on a monthly basis, costs paid and revenues received by a Managing Partner or an Affiliate for the account of the Production Partnership shall be determined and the net amount resulting from such monthly settlement shall be deposited into a Production Partnership Account and no funds which, after such monthly settlement, are determined to be held for the account of the Production Partnership shall be kept in any account other than a Production Partnership Account, and the Managing Partners shall not employ, or permit any other Person to employ, such funds in any manner except for the benefit of the Production Partnership; it being understood that the Managing Partners may invest Production Partnership funds temporarily in the investments set forth in Section 9.3 of this Agreement pending their use by the Production Partnership. After such monthly settlement, Production Partnership funds may not be commingled with separate funds of either Managing Partner or any other entity; and (vi) the Limited Partnership shall not make any advance payment to the Managing Partners or their Affiliates, except where necessary to secure tax benefits of prepaid drilling costs. B. Notwithstanding any other provision of this Agreement to the contrary, without the prior Consent of the Limited Partnership granted pursuant to the provisions of Article Eleven of this Agreement and the provisions of the Limited Partnership Agreement, the Managing Partners shall not: -32- (i) lease, sell, or dispose of all or substantially all of the Production Partnership's assets; (ii) make, exercise or deliver any general assignment for the benefit of the Production Partnership's creditors; (iii) except as set forth in Section l0.1A, amend any provision of this Agreement; or (iv) dissolve the Production Partnership. Section 4.5. Other Agreements of the Managing Partners ------------------------------------------------------- A. Anything in this Agreement to the contrary notwithstanding, it is agreed that: (i) the Managing Partners and their Affiliates shall not take any action with respect to the assets or property of the Production Partnership which does not benefit exclusively the Production Partnership, including: (a) the utilization of Production Partnership funds as compensating balances for the benefit of the Managing Partners or an Affiliate of a Managing Partner; and (b) the commitment of future production; (ii) all benefits from marketing arrangements or other relationships affecting property of any Managing Partner or its Affiliate and the Production Partnership shall be fairly and equitably apportioned according to the respective interests of each; (iii) the Managing Partners may never profit themselves nor any Affiliate by Development Drilling, Identified Development Drilling or Improved Recovery operations in contravention of their fiduciary obligation to the Limited Partnership; and (iv) neither the Managing Partners nor any Affiliate shall render to the Production Partnership any oil field, equipage or drilling services nor sell or lease to the Production Partnership any equipment or related supplies unless: -33- (a) such Person is engaged, independently of the Production Partnership and as an ordinary and ongoing business, in the business of rendering such services or selling or leasing such equipment and supplies to a substantial extent to other Persons in the oil and gas industry in addition to drilling and income programs in which such Person has an interest; (b) the compensation, price or rental therefor is competitive with the compensation, price or rental of other Persons in the area engaged in the business of rendering comparable services or selling or leasing comparable equipment and supplies which could reasonably be made available to the Production Partnership; (c) the drilling services are billed on either a per foot, per day or per hour rate, or some combination thereof; and (d) provided that, if such Person is not engaged in a business within the meaning of subdivision (a), then such compensation, price or rental shall be the cost of such services, equipment or supplies to such Person or the competitive rate which could be obtained in the area, whichever is less. Section 4.6. Construction of Gas Gathering Lines ------------------------------------------------- The Managing Partners may cause the Production Partnership to construct gas gathering lines if, in the opinion of the Managing Partners, it would be economically feasible and otherwise consistent with prudent operating practice to do so. The costs of any such gathering lines will be deemed to be Operating Costs and shall be charged to the accounts of the Partners as such. The Managing Partners may, in their discretion, construct, or cause an Affiliate of a Managing Partner or other person to construct, gathering lines from Production Partnership Wells to gas transmission systems. Whenever the Managing Partners construct, or cause an Affiliate of a Managing Partner to construct, a gathering line from a Production Partnership Well to a gas transmission system, the Production Partnership shall pay the Managing Partners or such Affiliate an amount that is not greater than the compensation that an unrelated party could have reasonably charged in an -34- arm's-length transaction for similar services in the area as a transmission fee for the transmission of all gas through the gathering system so constructed, and no other transmission fee shall be paid to the Managing Partners or to any Affiliate. Section 4.7. Contracts with the Managing Partners and Affiliates ----------------------------------------------------------------- All services provided to the Production Partnership by a Managing Partner or any Affiliate for which it is compensated shall be embodied in a written contract precisely setting forth the services to be rendered and the compensation to be paid. Each contract relating to a transaction between the Production Partnership and any Managing Partner or any Affiliate shall contain a provision which shall permit termination of the contract by the Production Partnership without penalty on 30 days' prior written notice. The Limited Partnership shall have the power to terminate, without cause or penalty, any such contract on behalf of the Production Partnership. Section 4.8. Farmouts ---------------------- The Management Committee may dispose of Producing Properties by Sale or Farmout when the Management Committee, exercising the standard of a prudent operator, determines that (a) the Production Partnership lacks sufficient funds to conduct Development Drilling, Identified Development Drilling or Improved Recovery operations on the properties and cannot obtain suitable alternative financing for such Development Drilling, Identified Development Drilling or Improved Recovery operations; (b) the properties have been downgraded by events occurring after assignment to the Production Partnership to the point that additional Development Drilling, Identified Development Drilling, Improved Recovery operations or continued production would no longer be desirable to the Production Partnership; (c) Development Drilling, Identified Development Drilling or Improved Recovery operations on the properties would result in an excessive concentration of Production Partnership funds on a Producing Property creating, in the opinion of the Management Committee, undue risk to the Production Partnership; or (d) the best interests of the Production Partnership would be served by the Sale or Farmout. The Production Partnership shall not conduct any drilling of wells other than Development Drilling and Identified Development Drilling; provided, however, that the -35- drilling of wells other than Development Drilling and Identified Development Drilling may be performed on behalf of the Production Partnership pursuant to Farmouts. Neither the Managing Partners nor any Affiliate shall enter into any Farmout or other agreement with the Production Partnership where in consideration for services to be rendered, an interest in production is payable to the Managing Partners or any Affiliate, unless the Production Partnership has previously expended or committed to expend the maximum amount that is authorized to use for Development Drilling or Identified Development Drilling. Any Sale, Farmout or similar agreement between the Production Partnership and a Managing Partner, Affiliate or Affiliated Program will be permitted under the restrictions set forth in this Article Four and will be subject to the following conditions: (i) the Management Committee (or a Managing Partner, if management authority of the Production Partnership with respect thereto has been delegated to it by the Management Committee) exercising the standard of a prudent operator, shall determine that the Sale, Farmout or similar agreement is in the best interests of the Production Partnership; and (ii) the terms of the Sale, Farmout or similar agreement are consistent with and in any case no less favorable than those utilized in the same geographic area for similar arrangements. Section 4.9. Other Operations ------------------------------ The Managing Partners and the Management Committee shall devote such time to the Production Partnership as is reasonably required to carry on the Production Partnership business, and the Managing Partners, members of the Management Committee and their Affiliates shall at all times be free, subject to any restrictions contained herein, to engage in all aspects of the Hydrocarbons and natural resources business for their own accounts and for the accounts of others. Without limiting the generality of the foregoing, the Managing Partners and their Affiliates shall have the right to organize and operate other partnerships, joint ventures or other oil and gas investment programs similar to the Limited Partnership and the Production Partnership. -36- Section 4.10. Prosecution, Defense and Settlement of Claims; Indemnification ------------------------------------------------------------- A. The Managing Partners shall arrange to prosecute, defend, settle or compromise actions at law or in equity at the expense of the Production Partnership as may be necessary to enforce or protect the interests of the Production Partnership. The Managing Partners shall satisfy any judgment, decree, decision or settlement, first, out of any insurance proceeds available therefor, next, out of the Production Partnership assets and Income, and, finally, out of the assets of the Managing Partners and the general partners of the Limited Partnership. B. In any threatened, pending or completed action, suit or proceeding to which the Managing Partners are a party or are threatened to be made a party by reason of the fact that they are the Managing Partners of the Production Partnership (other than an action by or in the right of the Production Partnership) involving an alleged cause of action for damages arising from the performance of their duties under this Agreement or other activities relative to the management and disposition of Producing Properties or production from such properties, the Production Partnership shall indemnify the Managing Partners against expenses, including attorneys' fees, judgments and amounts paid in settlement, actually and reasonably incurred by them in connection with such action, suit or proceeding if they acted in good faith and in a manner they reasonably believed to be in the best interests of the Production Partnership, and provided that their conduct does not constitute negligence or misconduct. The termination of any action, suit or proceeding by judgment, order or settlement shall not of itself create a presumption that the Managing Partners did not act in good faith and in a manner which they reasonably believed to be in the best interests of the Production Partnership. C. In any threatened, pending or completed action or suit by or in the right of the Production Partnership, to which the Managing Partners are a party or are threatened to be made a party, involving an alleged cause of action by the Limited Partnership for damages arising from the activities of the Managing Partners in the management of the internal affairs of the Production Partnership as prescribed in this Agreement or by law, or both, the Production Partnership shall indemnify the -37- Managing Partners against expenses, including attorneys' fees, actually and reasonably incurred by them in connection with the defense or settlement of such action or suit if they acted in good faith and in a manner they reasonably believed to be in the best interests of the Production Partnership as specified in this subsection, except that no indemnification shall be made in respect of any claim, issue or matter as to which the Managing Partners' course of conduct constituted negligence or misconduct. D. To the extent that a Managing Partner has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 4.l0B or 4.l0C of this Agreement, or in defense of any claim, issue or matter therein, the Production Partnership shall indemnify it against the expenses, including attorneys' fees, actually and reasonably incurred by it in connection therewith. E. Any indemnification under Section 4.l0B and 4.10C of this Agreement, unless ordered by a court, shall be made by the Production Partnership only as authorized in the specific case and only upon a determination by independent legal counsel in a written opinion that such indemnification is proper in the circumstances because the indemnified party has met the applicable standard of conduct set forth in Sections 4.l0B or 4.l0C of this Agreement. F. The Production Partnership shall not incur the costs of that portion of insurance which insures the Managing Partners for any liability as to which the Managing Partners are prohibited from being indemnified under Section 4.10. ARTICLE FIVE Distributions, Fees and Allocations ----------------------------------- Section 5.1. Distributions of Production Partnership Funds ----------------------------------------------------------- The Distributable Cash of the Production Partnership shall be distributed simultaneously to the Limited Partnership and the Managing Partners within 45 days after the close of each calendar quarter. Each Partner's share of each such distribution of Distributable Cash shall be determined after giving effect to the allocations set forth in Sections 5.3 and 5.4 of this Agreement for such period. All distributions of -38- Distributable Cash shall reduce dollar-for-dollar the balances of the Partners' Capital Accounts. Section 5.2. Fees and Reimbursement of Expenses to the Managing Partners ------------------------------------------------------------------------- Geodyne Production and PW Production shall receive as Managing Partners (1) on a nonrecurring basis, the Management Fee in an amount equal to 1-1/2% of the Limited Partners' capital contributions to the Limited Partnership; and (2) reimbursement for Direct Administrative Costs billed directly to the Managing Partners and General and Administrative Costs incurred by the Managing Partners or their Affiliates allocable to the Production Partnership, except to the extent that the Managing Partners or their Affiliates are otherwise reimbursed for such costs through the payment of Property Acquisition Costs, Operating Costs or otherwise. Geodyne Production and PW Production shall allocate between themselves the payment of the Management Fee as follows: in the event the Fee (as defined in the Limited Partnership Agreement) (hereinafter referred to as the "Limited Partnership Fee") is less than the actual organization and offering costs of the Limited Partnership plus Unreimbursed Prior Organization and Offering Costs (as defined in the Limited Partnership Agreement), then the Management Fee shall be paid 60% to PW Production and 40% to Geodyne Production to the extent of such deficiency, 60% to PW Production and 40% to Geodyne Production to the extent of organization and offering costs and the remainder of the Management Fee shall be paid 75% to PW Production and 25% to Geodyne Production. In the event the Limited Partnership Fee is equal to or greater than the actual organization and offering costs of the Limited Partnership plus Unreimbursed Prior Organization and Offering Costs (as defined in the Limited Partnership Agreement), then the Management Fee shall be paid 60% to PW Production and 40% to Geodyne Production to the extent of organization and offering costs and the remainder shall be paid as follows: in the event the payment referred to in Section 3.6B(i) of the Limited Partnership Agreement has been made (but the payments in Section 3.6B(ii) and (iii) have not been made) to the general partners of the Limited Partnership, the Management Fee shall be paid 75% to PW Production and 25% to Geodyne Production; in the event the payment referred to in Section 3.6B(ii) of the Limited Partnership Agreement has been made (but the payment in Section 3.6B(iii) has not been made) to the general partners of the Limited Partnership, the excess of the Management Fee over the -39- amount paid to the general partners of the Limited Partnership pursuant to Section 3.6B(ii) of the Limited Partnership Agreement shall be paid 75% to PW Production and 25% to Geodyne Production, the balance of the Management Fee, but not in excess of 1% of the Limited Partners' capital contributions to the Limited Partnership, shall be paid 50% to PW Production and 50% to Geodyne Production, and any remaining balance of the Management Fee shall be paid 70% to PW Production and 30% to Geodyne Production; and in the event the payment referred to in Section 3.6B(iii) of the Limited Partnership Agreement has been made to the general partners of the Limited Partnership, the excess of the Management Fee over the amount paid to the general partners of the Limited Partnership pursuant to Section 3.6B(iii) of the Limited Partnership Agreement, but not in excess of 1% of the Limited Partners' capital contributions to the Limited Partnership, shall be paid 50% to PW Production and 50% to Geodyne Production, and the balance of the Management Fee shall be paid 70% to PW Production and 30% to Geodyne Production. Section 5.3. Allocation of Income, Investment Income, Costs and Deductions ---------------------------------------------------------------- A. The Income, Investment Income, Profits, Production Partnership costs and losses of the Production Partnership shall be determined and allocated with respect to each Fiscal Year of the Production Partnership as of and within 75 days after the end of such Fiscal Year. B. (i) 100% of Investment Income, Property Acquisition Costs, costs incurred in connection with Identified Development Drilling (including any interest, commitment fees and other finance charges with respect to borrowings incurred in connection therewith) and the Management Fee referred to in Section 5.2(1) of this Agreement shall all be allocated to, and borne by, the Limited Partnership. 100% of Organization and Offering Costs shall be allocated to, and borne by, the Managing Partners as follows: 60% to PW Production and 40% to Geodyne Production. Except as otherwise provided in Sections 5.3B(ii) and 5.3B(iii), Income, General and Administrative Costs, Operating Costs, costs incurred in connection with Development Drilling and Direct Administrative Costs shall be allocated among, and borne by, the Partners in the following percentages: -40- (a) Until Payout: Limited Partnership 90.9091% PW Production and Geodyne Production (in the aggregate) 9.0909% (b) After Payout: Limited Partnership 85.8586% PW Production and Geodyne Production (in the aggregate) 14.1414% The Managing Partners shall allocate between themselves their aggregate Interest before and after Payout as follows: 70% to PW Production and 30% to Geodyne Production if the Production Partnership is Activated within twelve months after the date on which the registration statement filed with the Securities and Exchange Commission with respect to the Units is declared effective (the "Effective Date"), and 60% to PW Production and 40% to Geodyne Production if the Production Partnership is Activated during the twelve month period ending twenty-four months after the Effective Date; provided, however, that if the Production Partnership was Activated more than twelve months after the Effective Date and the immediately preceding Prior Production Partnership was activated (as defined in the partnership agreement respecting such Prior Production Partnership) within twelve months after the Effective Date, then PW Production shall be allocated that percentage of the aggregate Managing Partners' Interest represented by a fraction, the numerator of which is equal to the sum of (i) 70 multiplied by the number of days from the activation of the immediately preceding Prior Production Partnership through the date that is 12 months after the Effective Date, and (ii) 60 multiplied by the number of days from the date that is 12 months after the Effective Date through the date of the Activation of the Production Partnership, and the denominator of which is the total number of days that has elapsed from the activation of the immediately preceding Prior Production Partnership to the Activation of the Production Partnership, and Geodyne Production shall be allocated the balance of the aggregate Managing Partners' Interest (such allocation between the Managing Partners of their aggregate Interest being their "Sharing Ratios"). The Managing Partners shall have the authority to amend this Agreement to provide for -41- any different allocation between themselves at their discretion. (ii) As used in this subsection, the "Measuring Date" shall be the earlier of the date on which 90% of the Limited Partnership's Capital Contribution has been expended or the second anniversary of the Activation of the Production Partnership; the first "Allocation Period" shall be the twelve month period beginning on the last day of the first full Fiscal Year quarter after the Measuring Date; and each twelve month period following the end of the first Allocation Period shall also be referred to as an "Allocation Period". Notwithstanding anything to the contrary contained herein, if during each of the first two Allocation Periods the amount of cash distributed to the Limited Partnership that is attributable to the allocations set forth in Section 5.3B(i) is less than a 15.1515% cumulative (but not compounded) twelve-month return on the Limited Partners' capital contributions to the Limited Partnership, then there shall be distributed to the Limited Partnership thereafter (in addition to the amount of Distributable Cash distributed to the Limited Partnership resulting from the allocations to the Limited Partnership set forth in Section 5.3B(i)) an amount of cash up to 50% of the cash otherwise distributable to the Managing Partners thereafter pursuant to the allocations set forth in Section 5.3B(i) not to exceed the amount of any such deficiency (the amount of such cash distribution being a "Transfer Amount"), and Income and costs sufficient to yield an amount of Distributable Cash equal to the Transfer Amount and otherwise allocable to the Managing Partners during the Fiscal Year in which such Allocation Period ends and, to the extent necessary, each Fiscal Year thereafter pursuant to Section 5.3B(i) shall be allocated to the Limited Partnership. If during any Allocation Period after the initial two Allocation Periods, the Limited Partnership is being allocated Income and costs pursuant to Section 5.3B(i) such that there is distributed to the Limited Partnership an amount of cash in excess of a 15.1515% cumulative (but not compounded) twelve-month return on the Limited Partners' capital contributions to the Limited Partnership since the beginning of the first two Allocation Periods (such excess amount of cash being the "Surplus"), and there has been distributed to the Limited Partnership a Transfer Amount, then there shall be distributed to the Managing Partners thereafter an aggregate amount of cash otherwise distributable to the Limited Partnership pursuant -42- to the allocations set forth in Section 5.3B(i) equal to the amount of any Surplus (the amount of such cash distribution being a "Reverse Transfer Amount"), and Income and costs sufficient to yield an amount of Distributable Cash equal to the Reverse Transfer Amount and otherwise allocable to the Limited Partnership during the Fiscal Year in which such Allocation Period ends and, to the extent necessary, each Fiscal Year thereafter pursuant to Section 5.3B(i) shall be allocated to the Managing Partners; provided, however, that the amount of any Reverse Transfer Amount distributed to the Managing Partners shall not exceed an amount equal to the aggregate of the Transfer Amounts distributed to the Limited Partnership less the aggregate of all Reverse Transfer Amounts previously distributed to the Managing Partners. (iii) Notwithstanding anything to the contrary contained herein, if on the seventh anniversary of the last day of the Fiscal Year in which the Production Partnership commences Development Drilling, or Identified Development Drilling, and in each Fiscal Year thereafter, (a) the aggregate amount of Income less the aggregate amount of direct lease operating expenses and severance, ad valorem, windfall profits, excise and other taxes (but not income taxes) allocated to the Limited Partnership pursuant to Section 5.3(B)(i) attributable to production resulting from Development Drilling and Identified Development Drilling on Producing Properties is less than (b) the aggregate amount of costs allocated to the Limited Partnership pursuant to Section 5.3(B)(i) incurred in connection with Development Drilling and Identified Development Drilling on Producing Properties during each Fiscal Year ending seven or more years prior thereto, then Income and costs otherwise allocable to the Managing Partners pursuant to Section 5.3B(i) shall thereafter be allocated to the Limited Partnership until such deficiency in Income is eliminated. (iv) For purposes of the allocations set forth in Section 5.3B(ii) of this Agreement, the amount of cash distributed to the Limited Partnership for purposes of determining the return on the Limited Partners' capital contributions to the Limited Partnership shall not include any amounts attributable to the Production Partnership's payment of any windfall profits tax. -43- C. All items of Income, gain, loss, deduction and credit allowable for Federal income tax purposes and all recapture of any such deductions and credits shall be allocated and charged or credited to the Partners in the same manner that the revenues, costs or expenses giving rise to such items of income, gain, loss, deduction and credit are allocated and charged. Federal income tax deductions for cost or percentage depletion with respect to any Producing Property shall be determined at the Partner level and shall be determined in the case of percentage depletion on the same basis that the Income from the Producing Property is allocated; and the Production Partnership shall allocate, under Section 612A(c)(7)(D) of the Code, its adjusted basis in each Producing Property to the Partners in proportion to the interest of each in the Production Partnership capital ultimately used to acquire that property. If such allocation of basis is not permitted under the Code, the basis of each such property shall be allocated in the manner which the Managing Partners deem will most closely achieve the result intended above. D. Capital Accounts shall be established and maintained for each Partner in accordance with tax accounting principles and with valid regulations issued by the U.S. Treasury Department under subsection 704(b) of the Code (the "704 Regulations"). To the extent that tax accounting principles and the 704 Regulations may conflict, the latter shall control. In connection with the establishment and maintenance of such Capital Accounts, the following provisions shall apply: (1) Each Partner's Capital Account shall be (i) increased by the amount of its Capital Contribution, the fair market value of property contributed by it to the Production Partnership (net of liabilities securing such contributed property that the Production Partnership is considered to assume or take subject to under section 752 of the Code) and allocations to it of Income and gain (except to the extent such Income or gain has previously been reflected in its Capital Account by adjustments thereto) and (ii) decreased by the amount of Distributable Cash distributed to it, the fair market value of property distributed to it by the Production Partnership (net of liabilities securing such distributed property that such Partner is considered to assume or take subject to under section 752 of the Code) and allocations to it of Production Partnership loss, deduction (except to the extent such loss or deduction has previously been reflected -44- in its Capital Account by adjustments thereto) and expenditures described in section 705(a)(2)(B) of the Code. (ii) In the event Production Partnership Property is distributed to a Partner, then, before the Capital Account of such Partner is adjusted as required by clause (i) of this Section 5.3D, the Capital Accounts of the Partners shall be adjusted to reflect the manner in which the unrealized Income, gain, loss and deduction inherent in such Production Partnership Property (that has not been reflected in such Capital Accounts previously) would be allocated among the Partners if there were a taxable disposition of such Production Partnership Property for its fair market value on the date of distribution. (iii) If, pursuant to this Agreement, Production Partnership Property is reflected on the books of the Production Partnership at a book value that differs from the adjusted tax basis of such Production Partnership Property, then the Partners' Capital Accounts shall be adjusted in accordance with the 704 Regulations for allocations to the Partners of depreciation, depletion, amortization, and gain or loss, as computed for book purposes, with respect to such Production Partnership Property. (iv) The Partner's Capital Accounts shall be adjusted for depletion and gain or loss with respect to the Production Partnership's oil or gas properties in whichever of the following manners the Managing Partners determine is in the best interests of the Partners: (a) The Partners' Capital Accounts shall be reduced by a simulated depletion allowance computed on each oil or gas property using either the cost depletion method or the percentage depletion method (without regard to the limitations under the Code which could apply to less than all Partners); provided, however, that the choice between the cost depletion method and the percentage depletion method shall be made on a property-by-property basis and such choices shall be binding for all Production Partnership taxable years during which such oil or gas property is held by the Production Partnership. Such reductions for depletion shall be allocated among the Partners' Capital Accounts in the same proportions as the adjusted basis in the particular property is -45- allocated to each Partner. Upon the taxable disposition of an oil or gas property by the Production Partnership, the Production Partnership's simulated gain or loss shall be determined by subtracting its simulated adjusted basis (aggregate adjusted tax basis of the Partners less simulated depletion allowances) in such property from the amount realized on such disposition and the Partners' Capital Accounts shall be increased or reduced, as the case may be, by the amount of the simulated gain or loss on such disposition in proportion to the Partners' allocable shares of the total amount realized on such disposition, or (b) The Production Partnership shall reduce the Capital Account of each Partner in an amount equal to such Partner's depletion allowance with respect to each oil or gas property of the Production Partnership (for the Partner's taxable year that ends within the Production Partnership's taxable year), but such reductions for depletion shall not exceed the adjusted basis allocated to such Partner with respect to such property. Upon the taxable disposition of an oil or gas property by the Production Partnership, the Capital Account of each Partner shall be reduced or increased, as the case may be, by the amount of the difference between such Partner's allocable share of the total amount realized on such disposition and such Partner's remaining adjusted tax basis in such property. (v) For purposes of determining the Capital Account balance of any Partner as of the end of any Production Partnership taxable year for purposes of Subsection 5.3I hereto, such Partner's Capital Account shall be reduced by: (a) Adjustments that, as of the end of such year, reasonably are expected to be made to such Partner's Capital Account pursuant to paragraph (b)(2)(iv)(k) of the 704 Regulations for depletion allowances with respect to oil and gas properties of the Production Partnership, and -46- (b) Distributions that, as of the end of such year, reasonably are expected to be made to such Partner pursuant to Code section 704(e)(2), Code section 706(d), and paragraph (b)(2)(ii) of section 1.751-1 of regulations promulgated under the Code, and (c) Distributions that, as of the end of such year, reasonably are expected to be made to such Partner to the extent they exceed offsetting increases to such Partner's Capital Account that reasonably are expected to occur during (or prior to) the Production Partnership taxable years in which such distributions are expected to be made. E. The Capital Accounts of those Partners which are charged with an expense of the Production Partnership shall be credited with any portion of that expense which is finally determined, judicially or administratively, to be nondeductible for Federal income tax purposes, less any amortization or depreciation thereof incurred prior to the date that the credit is made. F. In allocating Income and costs for any Fiscal Year in which the ratio for sharing Income and costs changes pursuant to Section 5.3B(i), the allocations of Income and costs shall be made, and the books of the Production Partnership shall be closed, as soon as practicable after the date Payout occurs, to determine each Partner's share of pre-change Income and costs and each Partner's share of post-change Income and costs for that Fiscal Year. G. Proceeds received from the Sale or transfer of all or any part of the Production Partnership's Producing Properties shall be allocated to the Limited Partnership and the Managing Partners to the extent of their adjusted basis in such sold or transferred Production Partnership Property. Proceeds in excess of said amount shall be allocated in accordance with the percentages set forth in Section 5.3B(i) , except that, notwithstanding the provisions of Section 5.3F and solely for purposes of this Section 5.3G, where the proceeds from such Sale are distributed to the Partners and a portion of the Distributable Cash attributable to such Sale proceeds is sufficient in amount to cause Payout to occur in accordance with the allocation percentages in effect until Payout, Payout shall be deemed to occur such that Income and Distributable Cash attributable to the portion of such Sale proceeds in excess of -47- the portion of Sales proceeds sufficient in amount to cause Payout to occur shall be allocated in accordance with the allocation percentages in effect after Payout. H. Notwithstanding any other provision of this Agreement, if, under any provision of this Agreement, the Capital Account of any Partner is adjusted to reflect the difference between the basis to the Production Partnership of Production Partnership Property and such Production Partnership Property's fair market value, then all items of Income, gain, loss, and deduction with respect to such Production Partnership Property shall be allocated among the Partners so as to take account of the variation between the basis of such Production Partnership Property and its fair market value at the time of the adjustment to such Partner's Capital Account in accordance with the requirements of subsection 704(c) of the Code, or in the same manner as provided under subsection 704(c) of the Code. I. Notwithstanding anything to the contrary stated herein, (a) There shall be allocated to the Managing Partners, pro rata, any item of loss, deduction, credit or allowance that, but for this Section 5.3I, would have been allocated to the other General Partner that is not obligated to restore any deficit balance in such Partner's Capital Account and would have thereupon caused or increased a deficit balance in such Partner's Capital Account as of the end of the Production Partnership's taxable year to which such allocation related (after taking into consideration the provisions of Subsection 5.3D(v) hereof); (b) Any General Partner that is not obligated to restore any deficit balance in such Partner's Capital Account who unexpectedly receives an adjustment, allocation or distribution specified in Subsection 5.3D(v) hereof shall be allocated items of Income and gain in an amount and manner sufficient to eliminate such deficit balance as quickly as possible; and (c) In the event any allocations of loss, deduction, credit or allowance are made to the Managing Partners pursuant to clause (a) of this Subsection 5.3I, the Managing Partners shall be subsequently allocated all items of Income and gain until the aggregate amount of such allocations of Income and gain is equal to the aggregate -48- amount of any such allocations of loss, deduction, credit or allowance allocated to such Partners pursuant to clause (a) of this Subsection 5.3I. Section 5.4. Determinations of Allocations and Distributions ------------------------------------------------------------- Distributable Cash, Income, Investment Income, costs, deductions, Profits and Losses allocable to the Partners shall be distributed or allocated, as the case may be, to the Persons who were Partners, as of the last day of the fiscal period for which the distribution or allocation is to be made, except that in any fiscal period in which a Partner sells, assigns or transfers all or any part of such Partner's Interest to any Person who during the fiscal period is admitted as a Substituted Partner, the Distributable Cash, Income, Investment Income, costs, deductions, Profits and Losses attributable to the Interest so sold, assigned or transferred shall, subject to the provisions of Section 10.2 of this Agreement, be allocated between the transferor and the transferee on the basis of the number of days in the fiscal period before the admission, and on and after the admission, of the transferee as a Substituted Partner; provided, however, that the Distributable Cash attributable to a Sale of a Producing Property shall be distributed to those Partners who are Partners on the day the distribution of such Distributable Cash occurs. The Managing Partners shall inform the other Partners of the occurrence and terms of any such Sale by the Production Partnership as soon as practicable after such Sale has been consummated. ARTICLE SIX Transferability of Managing Partner's Interests ----------------------------------------------- Section 6.1. Transferability of Managing Partner's Interest ------------------------------------------------------------ A. Except as provided in Sections 6.lB and 6.2B, each of the Managing Partners shall not have the right to retire, withdraw, transfer or assign its Managing Partner Interest, except that there may be substituted in its stead as Managing Partner any entity that has, by merger, consolidation or otherwise, acquired substantially all of its assets or capital stock and continued its business. -49- B. Each Managing Partner may, upon at least ninety days' written notice to the Limited Partnership and the other Managing Partner, cause the Production Partnership to distribute, in partial liquidation of its Interest in the Production Partnership, to such Managing Partner fractional, undivided interests in the Producing Properties of the Production Partnership (such interest of a Managing Partner in a Producing Property distributed is hereinafter referred to as the "Distributed Interest") up to an aggregate interest equal in value to 75% of the value of the Producing Properties of the Production Partnership that it would have been entitled to upon a hypothetical liquidation of the Production Partnership after application of the provisions of Section 8.2 of this Agreement (the interest in a Producing Property of a Managing Partner retained in the Production Partnership is hereinafter referred to as the "Retained Interest") provided, however, that no such distribution shall occur (i) more than once with respect to a Managing Partner, (ii) prior to seven years after the Activation of the Production Partnership and (iii) unless such Managing Partner obtains an opinion of counsel to the Production Partnership to the effect that such distribution will not result in any material adverse tax consequence to the other Managing Partner or to the Limited Partners. Notwithstanding anything to the contrary in this Agreement, in the event that any such distribution is made, appropriate adjustments shall be made in the Capital Accounts of the Partners and in the allocation of Production Partnership Income and costs to assure that the other Managing Partner will not share or participate in any of the capital, costs, Income, or distributions attributable to the Producing Properties of the Production Partnership except to the extent of the Retained Interest of such Managing Partner. Section 6.2. Removal of Managing Partners ------------------------------------------ A. (i) The power shall be vested in the Limited Partnership to remove at any time any Managing Partner. The power shall be vested in the Limited Partnership to consent to the admission of a successor Managing Partner following the Removal of any Managing Partner by the Limited Partnership. A successor Managing Partner shall be selected pursuant to the provisions of Section 6.2D of this Agreement. -50- (ii) (a) A Managing Partner shall have the power to Remove the other Managing Partner, and pursuant to Section l0.lA of this Agreement, admit a successor Managing Partner, for "Cause" as defined in Section 6.2A(ii)(b), but for no other reason. (b) "Cause" for purposes of Section 6.2A(ii)(a) shall be deemed to exist only (i) when a court of competent jurisdiction shall have made a final determination (which determination is not successfully appealed) that a Managing Partner has been guilty of gross negligence, fraud, intentional misconduct or similar breach of fiduciary responsibility in carrying out its duties as a Managing Partner, or (ii) a Managing Partner is dissolved or liquidated on account of insolvency or any other event occurs resulting in the appointment of a trustee or receiver who acquires control of the affairs of such Managing Partner for the purpose of dissolution or liquidation on account of insolvency, and such trustee or receiver is not dismissed within 90 days after appointment of such trustee or receiver, or (iii) (a) a report on the audited financial statements of a Managing Partner and its consolidated corporate affiliates is issued by the independent accountants for such Managing Partner that is qualified on a going concern basis, or (b) either Managing Partner requests an audit to be performed of the other Managing Partner and its consolidated corporate affiliates by the independent accountants for the other Managing Partner (the expense of such audit being paid by the Managing Partner requesting the audit) , and such audit results in the issuance of an opinion with respect to the financial statements of the other Managing Partner and its consolidated corporate affiliates for the period ending, and as of, the most recent date feasible, that is qualified on a going concern basis. B. (i) In the event that a Managing Partner is Removed, the Removed Managing Partner's Interest in the Production Partnership shall be transferred to the other Managing Partner, and the other Managing Partner shall assign to the Removed Managing Partner a portion of Production Partnership Income, costs and Distributable Cash as and when such items are allocated or distributed, as the case may be, by the -51- Production Partnership equal to the percentage interest of the Removed Managing Partner in the Production Partnership prior to its Removal; provided, however, that such assignment shall be reduced proportionately in the event of a foreclosure or sale referred to in Section 4.3D with respect to the Removed Managing Partner's interest transferred to the other Managing Partner to the extent of the foreclosed or sold interest. (ii) If a sole Managing Partner is Removed and a successor Managing Partner is to be admitted to the Production Partnership, the removed Managing Partner shall not be Removed until a successor Managing Partner has been admitted to the Production Partnership pursuant to Article 10 of this Agreement. (iii) In the event a sole Managing Partner is Removed by the Limited Partnership and a successor Managing Partner is to be admitted, the incoming Managing Partner and the Removed Managing Partner shall, by mutual agreement, select an independent petroleum consultant to value the Removed Managing Partner's Interest in the Production Partnership. In determining the value of the Managing Partner's Interest, the independent consultant will take into account appropriate discount factors in light of the risk of recovery of oil and gas reserves, and, in any event, will utilize a "risk factor" discount no less than that utilized in the most recent offer extended pursuant to Section 7.5 of the Limited Partnership Agreement, if any. The incoming Managing Partner, or the Production Partnership, shall have the option to purchase at least 20% of the Interest of the Removed Managing Partner for the value determined by the independent appraisal. The Removed Managing Partner's Interest in the Production Partnership shall be transferred to the successor Managing Partner, and the successor Managing Partner shall assign to the Removed Managing Partner a portion of Production Partnership Income, costs and Distributable Cash as and when such items are allocated or distributed, as the case may be, by the Production Partnership equal to the percentage interest of the Removed Managing Partner in the Production Partnership prior to Removal, less the portion purchased by the successor Managing Partner or the Production Partnership. -52- C. Notwithstanding Section 3.6, any Managing Partner who shall be Removed pursuant to the provisions of Section 6.2 shall be released by the other Partners from all liability for Production Partnership debts and obligations incurred by the Production Partnership prior to the date of such Removal. D. Under circumstances in which the Limited Partnership Consents to the admission of a successor Managing Partner, such admission shall not become effective unless the Production Partnership shall have received a certificate, duly executed by or on behalf of such proposed successor Managing Partner to the effect that it is experienced in the performance (or employs sufficient personnel who are experienced in performing) of functions of the type then being performed by the Removed Managing Partner. ARTICLE SEVEN Transferability of Limited Partnership's Interest -------------------------------------------------- Section 7.1. Transferability of Limited Partnership's Interest --------------------------------------------------------------- No Sale, exchange, transfer or assignment of the Limited Partnership's Interest may be made if in the opinion of counsel to the Production Partnership, such Sale, exchange, transfer or assignment, would (i) result in the Production Partnership being considered to have terminated within the meaning of Section 708 of the Code, or (ii) cause the Production Partnership to lose its status as a partnership for Federal income tax purposes. In addition, the Managing Partners may require an opinion of the transferor's counsel, satisfactory to the Managing Partners, that such Sale, exchange, transfer or assignment would not violate the Securities Act of 1933, as amended, or any state securities or "blue sky" laws. Section 7.2. Incapacity of Partners ------------------------------------ If a Partner (including a Managing Partner) becomes Incapacitated, the Person who is its legal representative shall have all the rights of a Partner for the purpose of settling or -53- managing its estate and such power as the Incapacitated Partner possessed to assign all or any part of its Interest and to join with such assignee in satisfying conditions precedent to such assignee becoming a Substituted Partner. The Incapacity of a Partner shall not dissolve the Production Partnership. Section 7.3. Assignees and Substituted Partners ------------------------------------------------ A. The Production Partnership shall not recognize for any purpose any purported sale, assignment or transfer of all or any fraction of the Interest of the Limited Partnership unless the provisions of Section 7.1 shall have been complied with and there shall have been filed with the Production Partnership a dated Notification of such sale, assignment or transfer, executed and acknowledged by both the seller, assignor or transferor and the purchaser, assignee or transferee and such Notification (i) contains the acceptance by the purchaser, assignee or transferee of all of the terms and provisions of this Agreement and (ii) represents that such sale, assignment or transfer was made in accordance with all applicable laws and regulations. Any sale, assignment or transfer shall be recognized by the Production Partnership as effective on the date of such Notification if the date of such Notification is within 30 days of the date on which such Notification is filed with the Production Partnership, and otherwise shall be recognized as effective on the date such Notification is filed with the Production Partnership. B. If the Limited Partnership assigns all of its Interest to an assignee, the Limited Partnership shall cease to be a Partner. C. A Person who is the assignee of all or any fraction of the Interest of the Limited Partnership shall be subject to all the provisions of this Article Seven to the same extent and in the same manner as the Limited Partnership desiring to make an assignment of its Interest. D. Any purchaser, assignee, transferee, donee, heir, legatee or other recipient of an Interest shall be admitted to the Production Partnership as a Substituted Partner only with the Consent of the other Partners, which Consent may be granted or withheld by such Partners at their sole and absolute discretion. The admission of such Person as a Substituted Partner shall be evidenced by the execution by the Partners of a certificate evidencing the admission of such Person as a Partner -54- and an amendment to this Agreement executed by the Managing Partners on their own behalf, as well as on behalf of each other Partner, pursuant to the power of attorney granted pursuant to Section 12.5 of this Agreement. E. No Person shall become a Substituted Partner until such Person shall have satisfied the requirements of Section 10.2; provided, however, that for the purpose of allocating Income, Investment Income, Profits, Losses, costs, and Distributable Cash, a Person shall be treated as having become, and as appearing in the records of the Production Partnership as, a Partner on such date as the sale, assignment or transfer to such Person was recognized by the Production Partnership pursuant to Section 7.3A. Section 7.4. Incapacity of the Limited Partnership --------------------------------------------------- Upon the Incapacity of the Limited Partnership or upon the seizure of a Limited Partnership's Interest in the Production Partnership, the successor to such Limited Partnership's Interest ("Successor") shall be deemed an assignee of such Limited Partnership's Interest in the Production Partnership and neither the Production Partnership nor the Successor shall have the right to demand immediate valuation and payment of such Limited Partnership's Interest. ARTICLE EIGHT Dissolution, Liquidation and Termination of the Production Partnership ----------------------------- Section 8.1. Events Causing Dissolution ---------------------------------------- A. The Production Partnership shall be dissolved upon the happening of any of the following events: -55- (i) the expiration of its term, unless its term shall have been extended by the Management Committee pursuant to Section 2.4 of this Agreement; (ii) the Incapacity of the sole Managing Partner. However, within ninety days thereafter the remaining Partners may elect to reconstitute the Production Partnership prior to application of the liquidation provisions of Section 8.2; (iii) the Sale or other disposition at one time of all or substantially all of the assets of the Production Partnership existing at the time of such Sale; (iv) the election to dissolve the Production Partnership (a) by the Managing Partners (which election shall be Consented to by the Limited Partnership), or (b) by the Consent of all Partners; (v) ninety days after the Removal (unless the Limited Partnership Consents to a Successor pursuant to Section 6.2 of this Agreement) of the sole Managing Partner; (vi) the happening of any other event causing the dissolution of the Production Partnership under the laws of the State, except that the Incapacity of any Partner (other than the sole Managing Partner) shall not dissolve the Production Partnership and the seizure of the Interest of any Partner shall not dissolve the Production Partnership. B. Dissolution of the Production Partnership shall be effective on the day on which the event occurs giving rise to the dissolution, but the Production Partnership shall not terminate until the Managing Partners have recorded a notice of dissolution of the Production Partnership in the proper records of any jurisdiction in which this Agreement has been recorded and shall have complied with the laws of the states in which its does business and the assets of the Production Partnership have been distributed as provided in Section 8.2. C. Nothing contained in this Agreement shall impair, restrict or limit the rights and powers of the Partners under the laws of the State or any other jurisdiction in which the Production Partnership is doing business to reform and reconstitute themselves as a general partnership following dissolution of the Production Partnership either under -56- provisions identical to those set forth herein or under any other provisions. Section 8.2. Liquidation ------------------------- A. Upon dissolution of the Production Partnership, its liabilities shall be paid in the order provided herein. The Managing Partners shall either distribute in kind or sell the Production Partnership's property so that such disposition is in the best interests of the Limited Partnership, and shall execute all amendments terminating the Production Partnership. In connection with any such Sale, the Managing Partners shall attempt to obtain the best prices for such property. Pending such Sales, the Managing Partners shall have the right to continue to operate and otherwise to deal with Production Partnership property. In the event the Production Partnership is dissolved on account of the Incapacity or Removal of the sole Managing Partner, the Production Partnership shall elect, in accordance with the provisions of Article Eleven, a person (the "Liquidating Agent") to perform the function of a Managing Partner in liquidating the assets of the Production Partnership and winding up its affairs, and shall pay to such Liquidating Agent its reasonable fees and expenses incurred in connection therewith. Gain or loss realized on the Sale or other disposition of the Production Partnership's assets will be credited to (in the case of gain) or charged against (in the case of loss) each Partner's Capital Account to the extent allocable to it under Sections 5.3 and 5.4 of this Agreement. In the event of a distribution in kind of (a) any property other than an interest in a Producing Property, each Partner's Capital Account shall be debited with the portion of the Production Partnership's adjusted basis thereof attributable to the interest therein distributed to it and (b) any Producing Property or an interest in any Producing Property, each Partner's Capital Account shall first be credited or debited with its share of the unrealized appreciation or depreciation in the fair market value of said Producing Property or interest in said Producing Property. Each Partner's share of said unrealized appreciation or depreciation shall be equivalent to its share (allocated pursuant to Sections 5.3 and 5.4 of this Agreement) of the gain or loss on an actual Sale of such Producing Property or interest therein. The Capital Account of each Partner to whom a Producing Property or an interest in a Producing Property is distributed shall be debited with the fair market value of the Producing Property distributed to it. Any liquidation of the Production Partnership shall take place out -57- of court and without application being made therefor to the Secretary of State of the State of Oklahoma. B. In settling accounts after dissolution, the assets of the Production Partnership shall be paid out in the following order: (i) to third party creditors, in the order or priority as provided by law; (ii) to the Managing Partners and any Liquidating Agent for any expenses of the Production Partnership paid by or payable to them to the extent they are entitled to reimbursement therefor pursuant to this Agreement; (iii) to the Limited Partnership in the amount equivalent to the amount of its positive Capital Account balances (as adjusted pursuant to Section 8.2A) on the date of distribution; (iv) to the Managing Partners in the amount equivalent to the amount of their positive Capital Account balances (as adjusted pursuant to Section 8.2A) on the date of distribution; and (v) the balance shall be paid to the Partners in the manner provided for by Sections 5.1, 5.3 and 5.4 of this Agreement with respect to Distributable Cash. C. If any Managing Partner has a deficit balance in its Capital Account following the distribution(s) provided for in Section 8.2B above, as determined after taking into account all adjustments to its Capital Account for the taxable year of the Production Partnership during which such distribution(s) occur, it shall restore the amount of such deficit balance to the Production Partnership within 90 days and such account shall be distributed to the other Parties in accordance with their positive Capital Account balances. D. Upon the liquidation or partial liquidation of any Managing Partner's Interest pursuant to Article 6 hereof, distribution to the Managing Partner whose Interest is being liquidated shall be made pro rata to such Partner in accordance with and to the extent of such Partner's positive Capital Account balance after the Partners' Capital Accounts are adjusted as if all of the Production Partnership's property had been sold at its fair market value immediately prior to such distribution and the gain or loss realized on such sale charged or credited to the Partners' Capital Accounts in accordance with the provisions of Article 5 hereof, provided, however, that if such Partner has a deficit balance in its Capital Account following such distribution (or adjustment of such Partner's Capital Account pursuant to this Section 8.2D), such Partner shall restore the amount of such deficit balance to the Production Partnership by the later of the end of the Production Partnership taxable year in which the liquidation of such Partner's Interest occurs or 90 days after the date of such liquidation. -58- ARTICLE NINE Books and Records; Accounting; Tax Elections; etc. -------------------------------------------------- Section 9.1. Books and Records ------------------------------- The books and records of the Production Partnership, including information relating to the sale by the Managing Partners or any Affiliates of goods or services to the Production Partnership, and a list of the names and addresses and Interests of all Partners, shall be maintained by the Managing Partners at the principal office of the Production Partnership for a period of five years following the close of the Fiscal Year to which they relate and shall be available for examination there by any Partner or its duly authorized representatives at any and all reasonable times. Any Partner, or its duly authorized representatives, upon paying the costs of collection, duplication and mailing, shall be entitled for any proper purpose to a copy of the list of names and addresses and Interests of the Partners. The Production Partnership may maintain such other books and records and may provide such financial or other statements as the Managing Partners in their discretion deem advisable. Section 9.2. Accounting Basis for Tax and Reporting Purposes; Fiscal Year -------------------------------------------------------------- The books and records of the Production Partnership for tax purposes, for purposes of this agreement and for the purpose of reports to the Partners shall be kept on the cash or accrual basis, as the Managing Partners shall determine. The Fiscal Year of the Production Partnership shall be the calendar year to the extent permissible and the Managing Partners shall use their best efforts to obtain any necessary approvals therefor. Section 9.3. Bank Accounts --------------------------- The General Partners shall maintain a bank account or accounts to be maintained by the Managing Partners on behalf of -59- the Production Partnership with any bank in the United States having total assets in excess of $100,000,000. The Managing Partners shall not deposit Production Partnership funds in an account with any bank in an aggregate amount in excess of 5% of such bank's total assets. Withdrawals shall be made only in the regular course of the Production Partnership's business on such signature or signatures as the Managing Partners may determine. All deposits and other funds not needed in the operation of the business may be deposited in interest-bearing accounts, certificates of deposit, money market funds (including those managed or marketed by the Dealer Manager or its Affiliates) or invested in short-term United States Government obligations maturing within one year, commercial paper of United States corporations having the highest credit rating granted by Moody's Investors Services, Inc. or Standard & Poors Corporation, or other similar highly liquid investments. Section 9.4. Reports --------------------- A. The Managing Partners shall furnish to the Limited Partnership sufficient information and data with respect to the properties and operations of the Production Partnership in order to permit the Limited Partnership to satisfy its reporting obligations under Section 9.4 of the Limited Partnership Agreement. B. The Managing Partners shall file on a timely basis with the Securities and Exchange Commission all filings required to be made by the Production Partnership pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder. Section 9.5. Elections ----------------------- The Managing Partners shall cause the Production Partnership to make all elections required or permitted to be made by the Production Partnership under the Code and not otherwise expressly provided for in this Agreement, in the manner that the Managing Partners believe will be most advantageous to Limited Partnership, except that (i) the Managing Partners shall not be required to make an election under Section 754 of the Code or corresponding provisions of applicable state income tax laws, and (ii) the Managing Partners shall make the election under Section 263(c) of the Code to expense all intangible drilling and development costs in the -60- initial Production Partnership Federal income tax return filed for the Fiscal Year in which such costs are incurred. ARTICLE TEN Amendments ---------- Section 10.1. Proposal and Adoption of Amendments Generally ------------------------------------------------------------ A. Notwithstanding anything to the contrary contained herein, the Managing Partners may, without prior notice or consent of any other Partner, amend any provision of this Agreement (including an amendment to admit an additional Managing Partner) if, in their opinion, such amendment does not have a material adverse effect upon the Limited Partnership. Such amendment shall thereafter be disclosed to the Limited Partners within a reasonable time thereafter. Amendments to this Agreement to reflect the addition or substitution of a Partner or the admission of a successor Managing Partner shall be made at the time and in the manner referred to in Section 10.2. Any other amendment to this Agreement may be proposed by the Managing Partners or the Limited Partnership. The Partner or Partners proposing such amendment shall submit a Notification containing (a) the text of such amendment, (b) a statement of the purpose of such amendment, and (c) an opinion of counsel obtained by the Partner or Partners proposing such amendment to the effect that such amendment is permitted by the Act, will not impair the limited liability of the Limited Partners, and will not adversely affect the classification of the Limited Partnership or the Production Partnership as partnerships for Federal income tax purposes. The Managing Partners shall, within 15 days after receipt of any proposal under this Section l0.lA, give Notification to all Partners of such proposed amendment, of such statement of purpose and of such opinion of counsel, together, in the case of an amendment proposed by other Partners, with the views, if any, of the Managing Partners with respect to such proposed amendment. B. Amendments to this Agreement shall be adopted if: (i) in the case of amendments referred to in Section l0.2A, the conditions specified in Section 7.3 shall have been satisfactorily completed and the Production Partnership shall not have been furnished with an opinion of counsel to the -61- Production Partnership to the effect that such amendment will adversely affect the classification of the Limited Partnership or the Production Partnership as partnerships for Federal income tax purposes; (ii) in the case of amendments referred to in Section l0.2B, the conditions specified in Section 6.2 shall have been satisfactorily completed; or (iii) in the case of all other amendments, such amendment shall have been Consented to by the Limited Partnership (unless such Consent is not required pursuant to Section l0.lA); provided, however, that no such amendment may: (a) enlarge the obligations of any Partner under this Agreement without the Consent of such Partner; (b) modify the method provided in Article Five of determining and allocating or distributing, as the case may be, Income, Investment Income, Profits, Losses, Distributable Cash or costs and expenses without the Consent of each Partner adversely affected by such modification; (c) amend Sections 6.1 or 6.2 without the Consent of all the Partners; or (d) amend Sections 2.3, 4.3A, 4.3B, 4.3C, 4.3D, 4.4A, 4.4B, 4.5A, 4.9, 4.10 or this Article Ten without the Consent of all the Partners. C. Upon the adoption of any amendment to this Agreement, the amendment shall be executed by the Managing Partners and all other Partners, and shall be recorded in the proper records of the State and any other state in which the Production Partnership is then doing business. Section 10.2. Amendments on Admission or Removal of Partners ------------------------------------------------------------- A. If this Agreement shall be amended to reflect the admission or substitution of a Partner, the amendment to this Agreement may be adopted by either of the Managing Partners, the Person to be substituted or added, and the assigning Partner. Any such amendment shall be executed on behalf of all Partners but may be executed by the substituted or added Partner, the assigning Partner, and either of the Managing Partners, individually and on behalf of all of the other Partners pursuant to the power of attorney granted in Section 12.5. B. If this Agreement shall be amended to reflect the Removal of a Managing Partner and the continuation of the business of the Production Partnership, such amendment shall be signed by the remaining or successor Managing Partner and by the Removed Managing Partner. -62- C. No Person shall become a Partner, unless such Person shall have: (i) become a party to, and adopted all of the terms and conditions of, this Agreement; (ii) if such Person is other than an individual, provided upon request the Managing Partners with evidence satisfactory to counsel for the Production Partnership of such Person's authority to become a Partner under the terms and provisions of this Agreement; and (iii) paid all reasonable legal fees of the Production Partnership and the Managing Partners and filing and publication costs in connection with such Person's becoming a Partner. ARTICLE ELEVEN Consents, Voting and Meetings ----------------------------- Section 11.1. Method of Giving Consent --------------------------------------- Any Consent required by this Agreement may be given by a Partner as follows: (i) at a meeting, in person, by a written proxy or signed writing directing the manner in which it desires that its vote be cast, which writing must be received by the Managing Partners prior to such meeting, or (ii) without a meeting, by a signed writing directing the manner in which it desires that its vote be cast, which writing must be received by the Managing Partners prior to the date upon which the vote of Partners are to be counted. Any Partner may waive notice of or attendance at any meeting of the Partners and may execute a signed written consent. Only the votes of Partners of record on the date of Notification, whether at a meeting or otherwise, shall be counted. The laws of the State pertaining to the validity and use of corporate proxies shall govern the validity and use of proxies given by Partners. Section 11.2. Meetings of Partners ----------------------------------- The Managing Partners may at any time call a meeting of the Partners or for a vote, without a meeting, of the Partners on matters upon which the Partners are entitled to vote, and shall call for such a meeting or vote upon receipt of a Notification therefor of the Limited Partnership. Within 15 days of the receipt of the Notification, the Managing Partners shall notify all Partners of record as of the date of the Notification as to the time and place of the meeting, if called, and the general -63- nature of the business to be transacted thereat, or if no such meeting has been called, of the matter or matters to be voted upon and the date upon which the votes will be counted. Any Production Partnership meeting or the date upon which such votes, without a meeting, will be counted (regardless of whether the Managing Partners have called for such meeting or vote upon the request of Limited Partnership or have initiated such event without such request) shall be not less than 30 or more than 60 days following mailing of the Notification thereof by the Managing Partners. All expenses of the meetings, voting and such Notification shall be borne by the Production Partnership. Section 11.3. Submissions to Other Partners -------------------------------------------- The Managing Partners shall give all the other Partners Notification of any proposal or other matter required by any provisions of this Agreement or by law to be submitted for the consideration and approval of the other Partners. Such Notification shall include any information required by the relevant provision of the Agreement or by law. Section 11.4. Limited Partnership Consent ------------------------------------------ To the extent allowed in the Limited Partnership Agreement and subject to Section 10.1, the Limited Partnership, by and through more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners, may without the concurrence of the Managing Partners: (a) amend the Production Partnership Agreement; (b) dissolve the Production Partnership; (c) remove either or both Managing Partners and elect new ones; (d) approve or disapprove the sale of all or substantially all of the assets of the Production Partnership; and (e) cancel or amend the terms of any contract for services with a Managing Partner or any Affiliate thereof without penalty upon 30 days' notice. -64- ARTICLE TWELVE Miscellaneous Provisions ------------------------ Section 12.1. Notification to the Production Partnership or the Managing Partners --------------------------------------------------------- Any Notification to the Production Partnership or the Managing Partners shall be sent to the principal office of the Production Partnership, as set forth in this Agreement. Except as provided herein, any Notification to a Partner shall be sent to its last known address. Section 12.2. Binding Provisions --------------------------------- The covenants and agreements contained herein shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the respective parties hereto. Section 12.3. Applicable Law ----------------------------- This Agreement shall be construed and enforced in accordance with the laws of the State applicable to contracts made and to be performed wholly within the State. Section 12.4. Separability of Provisions ----------------------------------------- If for any reason any provision or provisions hereof which are not material to the purposes or business of the Production Partnership or of the Partners' Interests are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement that are valid. -65- Section 12.5. Appointment of the Managing Partners as Attorney-in-Fact ----------------------------------------------------------------------- A. Each Partner, by the execution of this Agreement, irrevocably constitutes and appoints each of the Managing Partners, its true and lawful agent and attorney-in-fact with full power and authority in its name, place and stead to execute, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents, instruments and conveyances that may be necessary or appropriate to carry out the provisions or purposes of this Agreement, including without limitation: (i) all certificates and other instruments (including counterparts of this Agreement), and any amendment thereof, including any amendment substituting a Partner, that the Managing Partners deem appropriate to form, reform, qualify or continue the Production Partnership (or a new partnership with substantially the same provisions as the Production Partnership) as a partnership in the jurisdiction in which the Production Partnership may conduct business; (ii) all amendments and other instruments necessary to admit into the Production Partnership additional or substituted Partners pursuant to Section 10.2; (iii) all instruments that the Managing Partners deem appropriate to reflect a change or modification of the Production Partnership in accordance with the terms of this Agreement (including those necessary to reflect any additional Capital Contributions); and (iv) all conveyances and other instruments that the Managing Partners deem appropriate to reflect the dissolution and termination of the Production Partnership. B. The appointment by all Partners of each of the Managing Partners as agent and attorney-in-fact shall be deemed irrevocable and to be a power coupled with an interest, in recognition of the fact that each of the Partners under this Agreement will be relying upon the power of the Managing Partners to act as contemplated by this Agreement in any filing and other action by it on behalf of the Production Partnership, and shall survive the Incapacity of any Person hereby giving such power and the transfer or assignment of all or any part of the Interest of such person; provided, however, that in the event of the transfer by a Partner of all of its Interest, the foregoing powers of attorney of the transferor Partner shall survive such transfer only until such time as the transferee shall have been admitted to the Production Partnership as a -66- Substituted Partner and all required documents and instruments shall have been duly executed, filed and recorded to effect such substitution. Section 12.6. Entire Agreement ------------------------------- This Agreement constitutes the entire agreement among the parties. This Agreement supersedes any prior agreement or understanding among the parties and may not be modified or amended in any manner other than as set forth herein. Section 12.7. Paragraph Titles ------------------------------- Article and section titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text. Section 12.8. Counterparts --------------------------- This Agreement may be executed in several counterparts, all of which together shall constitute one agreement binding on all parties hereto, notwithstanding that all the parties have not signed the same counterpart except that no counterpart shall be binding unless signed by the General Partners. GEODYNE PRODUCTION COMPANY PW PRODUCTION INC. By: // Thomas W. Kitchin // By: // Lawrence S. Kash // ----------------------- --------------------- Thomas W. Kitchin, Lawrence S. Kash, President President -67- PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-E By: GEODYNE PROPERTIES, INC. General Partner By: // Thomas W. Kitchin // ----------------------- Thomas W. Kitchin, President BY: PW ENERGY INC. General Partner By: // Lawrence S. Kash // --------------------- Lawrence S. Kash, President ACKNOWLEDGMENTS STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Lawrence S. Kash who, after being duly sworn by me, did declare that he is the President of PW Production Inc. and that by and with the authority of the Board of Directors of PW Production Inc. he executed the foregoing Amended and Restated Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-E as the free and voluntary act and deed of PW Production Inc. for the purposes therein set forth. Subscribed and sworn to and acknowledged by said Lawrence S. Kash on this ____ day of September, 1986. // Christa M. Bowen // ------------------------- Notary Public My Commission Expires: August 31, 1988 -68- STATE OF OKLAHOMA ) ) ss. COUNTY OF TULSA ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Thomas W. Kitchin who, after being duly sworn by me, did declare that he is the President of Geodyne Production Company and that by and with the authority of the Board of Directors of Geodyne Production Company he executed the foregoing Amended and Restated Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-E as the free and voluntary act and deed of Geodyne Production Company for the purposes therein set forth. Subscribed and sworn to and acknowledged by said Thomas W. Kitchin on the 10th day of September, 1986. // Glenda Devore // ------------------- Notary Public My Commission Expires: July 16, 1990 -69- STATE OF OKLAHOMA ) ) ss. COUNTY OF TULSA ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Thomas W. Kitchin who, after being duly sworn by me, did declare that he is the President of Geodyne Properties, Inc. and that by and with the authority of the Board of Directors of Geodyne Properties, Inc. and as general partner for PaineWebber/Geodyne Energy Income Limited Partnership I-E he executed the foregoing Amended and Restated Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-F as the free and voluntary act and deed of Geodyne Properties, Inc. as general partner of PaineWebber/Geodyne Energy Income Limited Partnership I-E for the purposes therein set forth. Subscribed and sworn to and acknowledged by said Thomas W. Kitchin on the 10th day of September, 1986. // Glenda Devore // ------------------- Notary Public My Commission Expires: July 16, 1990 -70- STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Lawrence S. Kash who, after being duly sworn by me, did declare that he is the President of PW Energy, Inc. and that by and with the authority of the Board of Directors of PW Energy, Inc. and as general partner for PaineWebber/Geodyne Energy Income Limited Partnership I-E he executed the foregoing Amended and Restated Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-E as the free and voluntary act and deed of PW Energy, Inc. as general partner of PaineWebber/Geodyne Energy Income Limited Partnership I-E for the purposes therein set forth. Subscribed and sworn to and acknowledged by said Lawrence S. Kash on this 9th day of September, 1986. // Christa M. Bowen // ----------------------- Notary Public My Commission Expires: August 31, 1988 -71- EX-10.3 19 I-F, PRODUCTION PARTNERSHIP AGREEMENT PAINEWEBBER/GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F AMENDED AND RESTATED AGREEMENT OF PARTNERSHIP Amended and Restated Agreement of Partnership, dated as of December 17, 1986, among Geodyne Production Company, a Delaware corporation, and PW Production Inc., a Delaware corporation, as Managing Partners, and PaineWebber/Geodyne Energy Income Limited Partnership I-F, an Oklahoma limited partnership, as General Partner. Whereas, PaineWebber/Geodyne Energy Income Production Partnership I-F has heretofore been formed as a general partnership under the Uniform Partnership Act of the State of Oklahoma pursuant to an Agreement of Partnership dated as of September 10, 1986; and Whereas, the parties hereto desire to amend the Agreement of Partnership of the Production Partnership and to restate said Agreement in its entirety; Now, Therefore, in consideration of the mutual promises and agreements made herein, the parties, intending to be legally bound, hereby agree as follows: ARTICLE ONE Defined Terms -------------- The defined terms used in this Agreement shall, unless the context otherwise requires, have the meanings specified in this Article One. The singular shall include the plural and the masculine gender shall include the feminine, the neuter and vice versa, as the context requires. Any terms used in this Agreement which are defined in the Limited Partnership Agreement and are not otherwise defined herein shall have the respective meanings set forth in the Limited Partnership Agreement. "Accountants" shall mean Arthur Young & Company or such other nationally recognized firm of independent certified public accountants as shall be engaged from time to time by the Managing Partners for the Production Partnership. -1- "Acquisition Reserve Report" shall mean a Hydrocarbon reserve report made available to the Production Partnership prepared by a qualified petroleum engineering firm acceptable to the Managing Partners in connection with the proposed acquisition of a Producing Property, which shall include statements (i) identifying reserves of Hydrocarbons referred to in such report as Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves or Proved Undeveloped Reserves, as the case may be, and identifying all computations and determinations made for purposes of such report, including, without limitation, the present and future prices for Hydrocarbons and the present and future costs to produce and develop such Hydrocarbons used in such computations and determinations, (ii) with respect to the determination of the nature and extent of the reserves of Hydrocarbons reflected in such report, that the collection, analysis and evaluation of the basic physical data upon which such determination is based were performed by such qualified petroleum engineering firm or if such data were collected by another Person, that such qualified petroleum engineering firm has made reasonable inquiry with respect to the methods employed in such collection and is satisfied that the data so collected may be reasonably relied upon for the purpose of making the determination reflected in such report, (iii) specifying the respective amounts of Proved Developed Producing Reserves, Proved Developed Nonproducing Reserves, or Proved Undeveloped Reserves contained therein, and (iv) indicating such qualified petroleum engineering firm's opinion as to the respective estimated present values of future net revenues of each category of reserves contained therein determined in accordance with criteria satisfactory to the Managing Partners and otherwise in accordance with sound engineering and industry practices, including such standards and practices as may be promulgated by the Society of Petroleum Engineers of the American Institute of Mining and Metallurgical Engineers. Any such report may state that such qualified petroleum engineering firm expresses no opinion and makes no warranty or representation with respect to the proposed acquisition of such Producing Property and that such qualified petroleum engineering firm is relying on information furnished by the Managing Partners as to the historical volumes of any Hydrocarbons actually produced and as to the proposed ownership interest of the Production Partnership in such Producing Property. "Act" shall mean the Oklahoma Uniform Partnership Act, as amended from time to time. -2- "Activation" or "Activated" shall mean the date on which (i) with respect to the Limited Partnership, the subscribers for Units shall have been admitted to the Limited Partnership as Limited Partners, and (ii) with respect to the Production Partnership, the Limited Partnership shall have made its Capital Contribution to the Production Partnership. "Affiliate" shall mean, when used with reference to a specified Person: (a) any Person directly or indirectly owning, controlling, or holding with power to vote 10% or more of the outstanding voting securities of the specified Person; (b) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the specified Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with, the specified Person; (d) any Person who is an officer, director, partner or trustee of, or serves in a similar capacity with respect to, the specified Person or of which the specified Person is an officer, director, partner or trustee, or with respect to which the specified Person serves in a similar capacity; and (e) any relative or spouse of the specified Person. A reference to an Affiliate of the Managing Partners shall include an Affiliate of either or both of the Managing Partners. Notwithstanding the foregoing, no Person shall be deemed to be an Affiliate solely by reason of its ownership of limited partnership interests in a limited partnership. "Affiliated Program" shall mean a drilling or income program (whether in the form of a limited partnership, general partnership, joint venture or otherwise) interests in which were offered to persons or entities not engaged in a trade or business within the oil and gas industry (other than by virtue of its participation in an Affiliated Program) and of which a Managing Partner or Affiliate thereof serves as general partner or venturer. "Agreement" shall mean this Amended and Restated Agreement of Partnership as amended from time to time. "Capital Account" shall mean, as to any Partner, an account maintained on the books of the Production Partnership in accordance with the provisions of Section 5.3D below. "Capital Contribution" shall mean the total amount of money contributed to the Production Partnership by all Partners or any class of Partners or any one Partner (or the predecessor -3- holders of the Interests of such Partner or Partners), as the context requires, net of any refunds pursuant to Section 3.4 of this Agreement. "Code" shall mean the Internal Revenue Code of 1954, as amended (or any corresponding provisions of succeeding law). "Commercial Well" shall mean any Production Partnership Well which is capable of producing Hydrocarbons in commercial quantities, including those wells which are shut-in or which have not been abandoned within 60 days following the commencement of production. For purposes of this definition, production shall refer to the commencement of the commercial marketing of Hydrocarbons, and shall not include any spot sales of Hydrocarbon production as a result of testing procedures. "Consent" shall mean the consent of a Person, given as provided in Section 11.1, to do the act or thing for which the consent is solicited, or the act of granting such consent, as the context may require. "Development Drilling" shall mean all drilling and completing, or plugging and abandoning (after a determination that a well is not a Commercial Well), of a Production Partnership Well to a reservoir on a Lease or an offset Lease, from which reservoir production is being obtained or, as determined by an independent petroleum engineering firm, is anticipated to be obtainable in commercial quantities, or the recompletion of an existing Production Partnership Well; provided, however, that Development Drilling shall not include any Identified Development Drilling. "Direct Administrative Costs" shall mean the actual and necessary direct costs attributable to services provided to the Production Partnership by parties other than the Managing Partners or their Affiliates, whether incurred by the Production Partnership directly or incurred by any of the Managing Partners or their Affiliates, including the annual audit fees, legal fees and expenses, the costs of reviewing tax returns and reports, the cost of reserve reports (other than the cost of Acquisition Reserve Reports, Engineering Audit Letters and evaluations thereof conducted on behalf of a Production Partnership) prepared by independent petroleum engineering firms, and all other such costs directly incurred by or for the benefit of the Production Partnership. -4- "Distributable Cash" shall mean, with respect to the Production Partnership's operations at any time, the amount of cash assets on hand at such time less amounts required to be retained out of such cash assets, in the sole judgment of the Managing Partners, to pay costs, expenses or other obligations whether then accrued or anticipated to accrue in the future. "Engineering Audit Letter" shall mean a document prepared by a qualified petroleum engineering firm acceptable to the Managing Partners in connection with the proposed acquisition of a Producing Property, which shall include statements indicating that (i) such qualified petroleum engineering firm has reviewed an oil and gas reserve report prepared by the engineering staff of Geodyne Resources, Inc. or an Affiliate, (ii) in the opinion of such qualified petroleum engineering firm, the reserve report was prepared in accordance with sound engineering and industry practices, including such standards and practices as may be promulgated by the Society of Petroleum Engineers of the American Institute of Mining and Metallurgical Engineers, and (iii) with respect to the determination of the nature and extent of the reserves of Hydrocarbons reflected in such report, such qualified petroleum engineering firm has made reasonable inquiry with respect to the methods employed in the collection, analysis and evaluation of the basic physical data upon which such determination is based and is satisfied that the data so collected may be reasonably relied upon for the purpose of making the determination reflected in such report. "Farmout" shall mean an arrangement whereby the owner of a Lease or Working Interest agrees to assign his interest in certain specific acreage to the assignee, retaining some interest such as an overriding royalty interest, oil and gas payment, offset acreage or other type of interest, subject to the drilling of one or more specific wells or other performance as a condition of the assignment. "Fiscal Year" shall mean the calendar year. "General and Administrative Costs" shall mean all customary and routine legal, accounting, data processing, depreciation, geological, engineering, travel, office rent, telephone, secretarial, expense reimbursements of members of the Management Committee when acting on Production Partnership business, employee compensation and benefits, and other items of a general and administrative nature, whether like or unlike the foregoing, and any other incidental reasonable expenses -5- reasonably necessary to the conduct of the Production Partnership's business, computed on a cost basis, determined by the Managing Partners in accordance with generally accepted accounting principles and reviewed by an independent public accountant or certified public accountant. General and Administrative Costs shall not include any costs includable under the foregoing but which are included as Property Acquisition Costs, Direct Administrative Costs, cost incurred in connection with Development Drilling, Identified Development Drilling and Improved Recovery projects, or Operating Costs. "General Partner" shall mean PaineWebber/Geodyne Energy Income Limited Partnership I-F, an Oklahoma limited partnership, acting in such capacity, any successor in that capacity, and any other General Partner admitted to the Production Partnership pursuant to the provisions of this Agreement subsequent to the Activation of the Production Partnership. "Geodyne Production" shall mean Geodyne Production Company, a Delaware corporation. "Hydrocarbons" shall mean crude oil, natural gas, condensate, natural gas liquids and other liquid or gaseous hydrocarbons. "Identified Development Drilling" shall mean all drilling and completing, or plugging and abandoning (after a determination that a well is not a Commercial Well), of a Production Partnership Well drilled by or on behalf of the Production Partnership to a reservoir on a Lease or an offset Lease constituting all or a portion of a Producing Property or the recompletion of an existing Production Partnership Well, where (i) the drilling or recompletion of such Production Partnership Well commences after the acquisition of such Producing Property by the Production Partnership and is conducted in order to commence production of Hydrocarbons from Proved Undeveloped Reserves identified in the Acquisition Reserve Report or Engineering Audit Letter prepared in connection with such Producing Property, (ii) the costs of development of the Proved Undeveloped Reserves were taken into account in such Acquisition Reserve Report or Engineering Audit Letter in valuing such Proved Undeveloped Reserves attributable to such Producing Property, and (iii) a portion of the cost paid by the Production Partnership for such Producing Property is attributed by such Acquisition Reserve Report or Engineering Audit Letter to such Proved Undeveloped Reserves. The term, Identified Development Drilling, shall also refer to any -6- Production Partnership Wells drilled or recompleted on a Producing Property subsequent to the initial Identified Development Drilling conducted on such Producing Property in order to commence production of Hydrocarbons from Proved Undeveloped Reserves (in addition to those identified in the related Acquisition Reserve Report or Engineering Audit Letter) which have been categorized by the Managing Partners as Proved Undeveloped Reserves by virtue of production obtained from prior Identified Development Drilling conducted on such Producing Property. Any reference to costs incurred in connection with Identified Development Drilling shall include the interest, commitment fees and other financing charges and expenses of Production Partnership borrowings incurred to finance Identified Development Drilling. "Improved Recovery" shall mean all methods of supplementing natural forces and mechanisms of primary recovery or otherwise increasing the ultimate recovery from a Production Partnership Well, including, but not limited to, water flooding, pressure maintenance, gas cycling, fluid injection, polymer flooding, chemical flooding, and the use of miscible displacement fluids. "Incapacity" or "Incapacitated" shall mean the adjudication of bankruptcy (except that, in the case of a Managing Partner, the term "bankruptcy" shall mean only being subject to Chapter 7 of the Federal Bankruptcy Reform Act of 1978), of interdiction, of incompetence, or of insanity, or the death, dissolution or termination (other than by merger or consolidation under which the surviving entity agrees to assume all of the obligations and responsibilities of the merged or consolidated Person set forth in this Agreement), as the case may be, of any Person. "Income" shall mean the gross income of the Production Partnership (other than Investment Income) as determined for Federal income tax purposes, including all capital or Code Section 1231 gains (but not losses) of the Production Partnership. "Interest" shall mean the entire ownership interest (which may, either for a Partner's Capital Account or a Partner's Profits interest, be expressed as a percentage) of a Partner in the Production Partnership at any particular time, including the rights and obligations of such Partner under this Agreement and the Act. -7- "Investment Income" shall mean all interest and dividend income earned on temporary investments of the Production Partnership at any time prior to the time at which an amount equal to the Capital Contributions to the Production Partnership available for the acquisition of Producing Properties have been (i) expended or (ii) returned pursuant to Section 3.4 of this Agreement. "Lease" shall mean a lease, mineral interest, royalty or overriding royalty covering Hydrocarbons (or a contractual right to acquire such an interest), or an undivided interest therein or portion thereof, together with all easements, permits, licenses, servitudes and rights-of-way situated upon, or used or held for future use in connection with, the exploration, development or operation of such interest. "Limited Partners" shall mean the limited partners of the Limited Partnership or any substituted limited partners thereof. "Limited Partnership" shall mean the PaineWebber/Geodyne Energy Income Limited Partnership I-F, an Oklahoma limited partnership. "Limited Partnership Agreement" shall mean the agreement under which the Limited Partnership was formed, as amended and restated. "Management Committee" shall mean the committee, composed of two representatives from each Managing Partner, established for the purposes set forth in Sections 4.lC and 4.2A(iii) of this Agreement. "Management Fee" shall mean the fee paid by the Production Partnership to the Managing Partners pursuant to Section 5.2(l) of this Agreement in connection with their management of the affairs of the Production Partnership. "Managing Partners" shall mean Geodyne Production Company, a Delaware corporation, and PW Production, Inc., a Delaware corporation, and any other Person admitted as additional or Substituted Managing Partner pursuant to Article Six of this Agreement. "Notification" shall mean a writing, containing the information required by this Agreement to be communicated to any Person, hand delivered or sent by registered or certified mail, return receipt requested, postage prepaid, to such Person at the -8- last known address of such Person, the date of the certified receipt (or such other evidence of receipt) therefor being deemed the date of the giving of Notification; provided, however, that any written communication containing the information sent or delivered to the Person and actually received by the Person shall constitute Notification for all purposes of this Agreement. "Operating Costs" shall mean all expenditures made and costs incurred by the Production Partnership with respect to (i) the production and marketing of Hydrocarbons from completed Production Partnership Wells, including labor, fuel, repairs, hauling, materials, supplies, utility charges and other costs incident to or therefrom, costs of maintaining inventories incidental to the operations of Producing Properties, costs of making transfers of lease and well equipment to and from Production Partnership Wells, ad valorem and severance taxes, insurance and casualty loss expense, and compensation to well operators or others for services rendered in conducting such operations; (ii) the interest, commitment fees and other finance charges and expenses of Production Partnership borrowings incurred in connection with Development Drilling and Improved Recovery Projects; and (iii) processing facilities, pipelines, gas sales facilities, Improved Recovery projects, and other procedures and facilities necessary to produce efficiently the Hydrocarbon reserves from a Producing Property, all to the extent such costs and expenditures are not Property Acquisition Costs. "Organization and Offering Costs" shall mean all costs and expenses incurred by the Managing Partners in connection with the organization of the Production Partnership, including, without limitation, the legal, printing, accounting and other costs incurred in connection with the organization of the Production Partnership, including, without limitation, the legal, printing, accounting and other costs incurred in connection with preparing, filing and recording this Agreement. "Partner" shall mean any Managing Partner or any General Partner of the Production Partnership. "Payout" shall mean that time at which cash distributions have been made by the Limited Partnership to the Limited Partners pursuant to Section 5.1 of the Limited Partnership Agreement (together with any distributions to such Limited Partners pursuant to Section 3.4 of the Limited Partnership -9- Agreement), in an aggregate amount equal to the Limited Partners' Capital Contributions to the Limited Partnership. "Person" shall mean any individual, partnership, corporation, trust or other entity. "Prior Production Partnership" shall mean a general partnership of which PW Production and Geodyne Production are managing partners, and a limited partnership, of which units of limited partnership interest were offered pursuant to the Prospectus, is the other general partner, formed prior to the Activation of the Production Partnership. "Producing Property" shall mean any property (or interest in such property) with a well or wells capable of producing Hydrocarbons in commercial quantities or properties unitized with such properties or properties adjacent to such properties which are acquired as an incidental part of the acquisition of such properties. The term also includes well machinery and equipment, gathering systems, storage facilities or processing installations or other equipment and property associated with the production of Hydrocarbons. Interests in properties may include Working Interests, production payments, Royalties and other nonworking and nonoperating interests. "Production Partnership" shall mean the general partnership governed under and pursuant to this Agreement, as said general partnership may from time to time be constituted. "Production Partnership Account" shall mean the bank account or accounts maintained by the Managing Partners pursuant to Section 9.3. "Production Partnership Property" shall mean any interest, property and right of any type owned by the Production Partnership. "Production Partnership Well" shall mean any well in which the Production Partnership has an interest. "Profits" and "Losses" shall mean the income or losses of the Production Partnership for Federal income tax purposes determined as of the close of the Production Partnership's Fiscal Year, as well as, when the context requires, any tax-exempt income and nondeductible expenses. -10- "Property Acquisition Costs" shall mean, without duplication, the sum of (1) the prices paid by the Production Partnership or a Managing Partner or an Affiliate to acquire a Producing Property ultimately sold to the Production Partnership, including the price paid to acquire a purchase option with respect to a Producing Property, lease bonuses and equipment costs associated therewith; (2) title insurance or examination costs, transfer taxes, if any, and like charges in connection with the acquisition of Producing Properties; (3) delay rentals and ad valorem taxes paid by the seller with respect to such property to the date of its transfer to the buyer; (4) interest actually incurred by the Managing Partners or their Affiliates to acquire or maintain such Producing Properties prior to their transfer to the Production Partnership; and (5) such portion of the Managing Partners' or Affiliates' reasonable, necessary and actual expenses for geological, geophysical, seismic, land, engineering, drafting, accounting, auditing, legal and other like services, including the Production Partnership's costs incurred (to the extent consistent with generally accepted industry standards) in connection with the Production Partnership's review of proposed acquisitions of Producing Properties, Reports and Engineering Audit Letters, all allocated to the property in accordance with the allocation procedures used by the Managing Partners, any of their Affiliates or the Production Partnership; provided that the portion of the Managing Partner's or Affiliates' expenses allocated to the property, as set forth in items (3), (4) and (5), shall have been incurred not more than 36 months prior to the property transaction. "Prospect" shall mean an area in which the Production Partnership owns or intends to own one or more oil and gas interests, which is geographically defined on the basis of geological data by the Managing Partners and which is reasonably anticipated by the Managing Partners to contain at least one reservoir. "Prospectus" shall mean the prospectus pursuant to which the Units were offered, and all supplements or amendments thereto, if any. "Proved Reserves" shall mean those quantities of Hydrocarbons, which, upon analysis of geologic and engineering data, appear with reasonable certainty to be recoverable in the future from known Hydrocarbon reservoirs under existing economic and operating conditions. Proved reserves are limited to those -11- quantities of Hydrocarbons which can be expected, with little doubt, to be recoverable commercially at current prices and costs, under existing regulatory practices and with existing conventional equipment and operating methods. Depending upon their status of development, such proved reserves shall be subdivided into the following classifications and have the following definitions: (a) "Proved Developed Reserves" shall mean proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. This classification shall include: (1) "Proved Developed Producing Reserves" which are proved developed reserves which are expected to be produced from existing wells; and (2) "Proved Developed Nonproducing Reserves" which are proved developed reserves which exist behind the casing of existing wells, or at minor depths below the present bottom of such wells, which are expected to be produced through these wells in the predictable future, where the cost of making Hydrocarbons available for production should be relatively small compared to the cost of a new well. Additional Hydrocarbons expected to be obtained through the application of improved recovery techniques are included as "Proved Developed Reserves" only after testing by a pilot project or after the operation of an installed program has confirmed through production responses that increased recovery will be achieved. (b) "Proved Undeveloped Reserves" shall mean all reserves which are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Such reserves on undrilled acreage are limited to those drilling units offsetting productive units which are reasonably certain of production when drilled. Proved reserves for other undrilled units are claimed only where it can be demonstrated with reasonable certainty, based on accepted geological, geophysical and engineering studies and data, that there is continuity of production from an existing productive formation. No estimates for Proved Undeveloped Reserves are attributable to any acreage for which improved recovery is contemplated, unless the -12- techniques to be employed have been proved effective by actual tests in the same area and reservoir. "PW Production" shall mean PW Production Inc., a Delaware corporation. "Remove", "Removed" or "Removal" shall mean, with reference to the removal of a Managing Partner, the termination of the management powers, duties and responsibilities of such Managing Partner pursuant to Section 6.2 of this Agreement and the removal of such Managing Partner as a Partner. "Royalty" shall mean an interest, including an overriding royalty and a net profits interest, in gross production or the proceeds therefrom which does not require the owner thereof to bear any of the cost of production, development, operation or maintenance. "Sale" shall mean any event or transaction that is, for Federal income tax purposes, considered a sale, exchange or abandonment by the Production Partnership of any Production Partnership Property. "State" shall mean the State of Oklahoma. "Subscription Agreement and Power of Attorney" shall mean the Subscription Agreement and Power of Attorney in the form attached to the Prospectus. "Substituted Partner" shall mean any Person admitted to the Production Partnership as a Partner pursuant to Sections 7.3 and 10.2 of this Agreement. "Unit" shall mean a $1,000 investment in the Limited Partnership by a Limited Partner pursuant to the terms of a Subscription Agreement and Power of Attorney; provided, however, that fractional Units may be acquired to the extent provided under Section 5.lB of the Limited Partnership Agreement. "Working Interest" shall mean the interest (whether held directly or indirectly) in a Lease which is subject to some portion of the expense of production, development, operation or maintenance. -13- ARTICLE TWO Continuation; Name, Place of Business and Office; Term ------------------------------------------------------ Section 2.1. Continuation -------------------------- The parties hereto hereby continue the general partnership heretofore formed pursuant to the provisions of the Act and the rights and liabilities of the Partners shall be as provided in the Act, except as otherwise expressly provided in this Agreement. Section 2.2. Name, Place of Business and Office, Agent ------------------------------------------------------- The Production Partnership shall be conducted under the name PaineWebber/Geodyne Energy Income Production Partnership I-F. The business of the Production Partnership may, however, be conducted under any other name deemed necessary or desirable by the Managing Partners in order to comply with applicable laws. The office and principal place of business of the Production Partnership shall be c/o Geodyne Production Company, 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The Managing Partners shall record an assumed name or fictitious name certificate in the State and in each state in which it owns property or transacts business when deemed necessary by the Managing Partners. The Managing Partners may change the principal place of business and the location of such office and may establish such additional offices as they deem advisable from time to time; provided, however, that in the event the principal place of business of the Production Partnership shall be changed, the Managing Partners shall give written notice thereof to the Limited Partners. -14- Section 2.3 Purpose --------------------- The business and purpose of the Production Partnership shall be to acquire, own, hold, operate, explore, develop, trade, sell and exchange Hydrocarbon properties and interests therein of all kinds onshore and offshore in the continental United States, including, without limitation, interests in general or limited partnerships, joint ventures and other entities that hold or are formed to acquire interests in such properties or interests; to engage in development drilling and enhanced recovery operations thereon, to produce, transport, market, purchase and trade Hydrocarbons and products thereof; to purchase, lease, own, hold, operate, sell and exchange all equipment, machinery, facilities, systems and plans necessary or appropriate for such purposes; and to do any and all things necessary or proper in connection with or incident to the foregoing activities. Section 2.4. Term ------------------ The Production Partnership shall continue in force and effect until December 31, 1999, provided that the Management Committee may extend such term for up to five periods of two years each, or until dissolution prior thereto pursuant to the provisions hereof. ARTICLE THREE Partners and Capital -------------------- Section 3.1. Managing Partners ------------------------------- A. The names, addresses and Capital Contributions of the Managing Partners are set forth in Schedule A attached hereto and are incorporated herein. The Managing Partners shall not be required to make any Capital Contribution except as set forth in Sections 3.lB, 3.4 and 8.2C. B. The Managing Partners shall also contribute an amount of cash sufficient to pay their share of costs allocated to them pursuant to Section 5.3 of this Agreement to the extent that the amount of Income allocated to them (and/or the amount of Production Partnership borrowings incurred on their behalf) is insufficient to pay such costs. -15- Section 3.2. Other General Partner ----------------------------------- The name, address and Capital Contribution of the Limited Partnership are set forth in Schedule A attached hereto and are hereby incorporated herein. Section 3.3. Application of Capital Contributions -------------------------------------------------- The Managing Partners shall deposit in the Production Partnership Account the Capital Contributions of the Limited Partnership and the Managing Partners and apply such Capital Contributions to the payment of Organization and Offering Costs and the Management Fee. The balance of such Capital Contributions shall be held in the Production Partnership Account to be applied to the payment of Property Acquisition Costs and, to the extent not payable out of Income or Investment Income, Operating Costs, General and Administrative Costs, Direct Administrative Costs and other Production Partnership costs; provided, however, that such funds may be temporarily invested prior to the payment of such costs in accordance with Section 9.3 of this Agreement. Section 3.4. Certain Returns of Capital ---------------------------------------- Any portion of the Capital Contribution of the Limited Partnership (except for necessary operating capital) that has not been expended or that is not, or in the determination of the Managing Partners, will not be committed for expenditure by the second anniversary of the Activation of the Production Partnership will promptly be refunded to the Limited Partnership as a return of part of its Capital Contribution at the earlier of such determination or the second anniversary of the Activation of the Production Partnership. Such funds will be deemed to have been committed for expenditure by such date to the extent they are payable under contractual agreements or understandings in effect on such date, or have been applied to a reasonable working capital reserve or have been set aside as a condition to obtaining any financing in the form of a compensating balance or similar arrangement. In addition, the Managing Partners shall contribute cash to the Production Partnership (with respect to which their Capital Accounts will be credited) in an amount equal to the amount paid to the -16- Managing Partners in respect of the Management Fee attributable (on a proportionate basis) to the unexpended amount of Capital Contributions so refunded, which cash shall be refunded to the Limited Partnership together with the unexpended Capital Contributions so refunded. Geodyne Production and PW Production shall be responsible for the obligation of the Managing Partners to contribute cash to the Production Partnership pursuant to this Section 3.4 in the relative percentages which they allocated between themselves the payment of the Management Fee pursuant to Section 5.2. All amounts so refunded to the Limited Partnership shall reduce dollar for dollar its Capital Account. Section 3.5. Production Partnership Capital -------------------------------------------- A. No Partner shall be paid interest on any Capital Contribution to the Production Partnership or on such Partner's Capital Account, notwithstanding any disproportion therein as between Partners. B. The Production Partnership shall not redeem any Partner's Interest. Except as provided in Sections 3.4, 6.1, 6.2 and 8.2 of this Agreement, no Partner shall have the right to withdraw or receive any return of the Capital Contribution. Under circumstances involving a return of any Capital Contribution, no Partner shall have the right to receive any property other than cash, except as may otherwise be provided in Sections 6.1, 6.2 and 8.2 of this Agreement. Section 3.6. Liability of Partners ----------------------------------- Each Partner signatory hereto or subsequently admitted to the Production Partnership agrees that it shall remain generally liable for any obligation or recourse liability of the Production Partnership incurred during the period in which it is a Partner. However, all present and future Partners hereby agree among themselves to contribute to each other the amount of funds necessary to effectuate a sharing of such Production Partnership obligations and recourse liabilities in proportion to each Partner's share of such obligations and liabilities at the time of their accrual. -17- ARTICLE FOUR Rights, Powers and Duties of ---------------------------- The Managing Partners --------------------- Section 4.1. Management and Control of the Production Partnership ------------------------------------------------------------------ A. Subject to Section 4.lC of this Agreement and to the Consent of the Limited Partnership as and when required by this Agreement, the Managing Partners, within the authority granted to them under and in accordance with the provisions of this Agreement, shall have the full and exclusive right to manage and control the business and affairs of the Production Partnership and to make all decisions regarding the business of the Production Partnership and shall have all of the rights, powers and obligations of managing general partners of a general partnership under the laws of the State. The Managing Partners shall exercise those powers as a fiduciary to the Limited Partnership. B. No other Partner shall participate in the management of or have any control over the Production Partnership's business nor shall any other Partner have the power to represent, act for, sign for or bind the Managing Partners or the Production Partnership. The Limited Partnership hereby Consents to the exercise by the Managing Partners of the powers conferred on them by this Agreement. C. The Managing Partners' management authority with respect to significant Production Partnership actions shall be exercised by the Management Committee, including without limitation such actions as: (i) the acquisition of a Producing Property or an option to purchase a Producing Property, provided that Geodyne Production shall have the authority to acquire -18- Producing Properties and options to acquire Producing Properties without the approval of the Management Committee, provided further that (a) Geodyne Production does not expend an aggregate amount of Production Partnership funds with respect to the acquisition of Producing Properties whose aggregate acquisition price, together with the anticipated aggregate acquisition price of Producing Properties subject to such purchase options, is in excess of 20% of the Limited Partnership's Capital Contribution, and (b) no single acquisition of Producing Properties by Geodyne Production pursuant to this proviso shall exceed 10% of the Limited Partners' capital contributions to the Limited Partnership; (ii) the incurrence of indebtedness; (iii) the determination of the amount of and the distribution of Distributable Cash to the Partners; (iv) the engaging in and making decisions with respect to any Development Drilling, Identified Development Drilling and Improved Recovery operations; (v) the sale or other transfer of any Producing Property that constitutes a significant portion of the assets of the Production Partnership; and (vi) the determination not to extend the term of the Production Partnership as set forth in Section 2.4 of this Agreement. The Management Committee shall have the power to delegate its management authority with respect to any "significant" action to a Managing Partner at such times and under such conditions as it may decide in its own discretion. The Managing Partners' management authority respecting all other actions which are in the ordinary course of the Production Partnership's operations may be exercised by either Managing Partner without the concurrence of the other Managing Partner, provided that the Managing Partner exercising such management authority shall, upon inquiry by the other Managing Partner, notify the inquiring Managing Partner of the nature of such actions undertaken without the concurrence of the inquiring Managing Partner. The Management Committee shall have the authority (i) to determine that the "significant" actions specified herein shall no longer be "significant" actions for the purposes of this Section 4.1C and to amend this Agreement pursuant to Section l0.1A of this Agreement to reflect such determination, and (ii) to determine which other Production Partnership operations, other than those specified herein, are "significant" actions for purposes of this Section 4.1C. -19- Section 4.2. Authority of the Managing Partners ------------------------------------------------ A. In addition to any other rights and powers which the Managing Partners may possess under this Agreement and the Act, the Managing Partners shall, except and subject to the extent otherwise provided or limited in this Agreement, have all specific rights and powers required or appropriate to their management of the Production Partnership's business which, by way of illustration but not by way of limitation, shall include the following rights and powers to: (i) expend the Capital Contributions of the Partners and apply Production Partnership revenues, subject to Section 4.3C of this Agreement, in furtherance of the business of the Production Partnership; (ii) acquire, explore, develop, manage and operate Hydrocarbon properties and interests therein (including interests in corporations and partnerships owning Hydrocarbon properties if in the Managing Partners' judgment such purchase is a necessary or advisable step in acquiring interests in producing properties held by any such corporation or partnership, provided, no such purchase will be made for the purpose of investment in the securities of any such corporation or partnership, the Production Partnership will not conduct or participate in a hostile tender offer, and no such purchase will be made unless there is assurance that sufficient control of the corporation or partnership can be obtained in the initial acquisition to liquidate it, and it is determined the purchase would not thereby render the Production Partnership an investment company within the meaning of the Investment Company Act of 1940, and provided further the Production Partnership's interest in the underlying assets of any such corporation or partnership is distributed as soon as practical thereafter to the Production Partnership in redemption for the Production Partnership's interest in such corporation or partnership) of all kinds and acquire units of limited partnership interest tendered to the General Partners pursuant to the terms of any right of presentment of a Prior Limited Partnership (as defined in the Limited Partnership Agreement) (provided that the Production Partnership shall not expend an aggregate amount in excess of 10% of the Limited Partnership's Capital Contribution to acquire such units) and hold all such property, interests and units in -20- the name of the Production Partnership; provided, however, that in connection therewith, the Managing Partners shall, contemporaneously with the acquisition of a Producing Property, or as soon as practicable thereafter, file or cause to be filed for recordation an appropriate conveyance or agreement evidencing the Production Partnership's interest in such Producing Property in the jurisdiction where such Producing Property is located pursuant to such jurisdiction's Uniform Commercial Code and/or in the real property records of the clerk or recorder of the county in which the Producing Property is situated; and, provided, further, that filings of such conveyances or agreements shall also be made as the Managing Partners believe necessary to establish the Production Partnership's priority of interest; and, provided, further, Producing Properties may be held temporarily in the name of a nominee for the Production Partnership if such action is deemed necessary by the Managing Partners to facilitate acquisition; (iii) execute such instruments and agreements, to do such acts, to employ such persons and to contract for such services as the Managing Partners determine are necessary or appropriate to conduct the Production Partnership's business, including (x) the employment of any Managing Partner or any Affiliate as an operator, (y) the entering into management and advisory contracts, and (z) the establishment of the Management Committee to exercise, pursuant to Section 4.lC of this Agreement, or supervise the exercise of the Managing Partners' powers set forth in this Agreement, subject to any restrictions contained in the Act and in this Agreement, and to provide for any reasonable compensation to be paid to the Persons comprising the Management Committee pursuant to such contracts as the Managing Partners shall deem necessary and appropriate; (iv) execute, in the name of the Production Partnership, contracts for the sale of Hydrocarbons and division orders and transfer orders as necessary or incident to the sale of production on behalf of the Production Partnership; -21- (v) produce, treat, transport and market Hydrocarbons, execute processing contracts, transportation contracts, and enter into contracts for the marketing or sale of Hydrocarbons and other marketing agreements in the name of the Production Partnership, whether or not extending beyond the term of the Production Partnership; (vi) execute offers for United States and any state Leases on behalf of the Production Partnership; execute and file requests for approval of assignments of interests in United States and any state Leases, together with any and all contracts for the option, sale or purchase of such Leases or the sale or purchase of any products therefrom; to execute any plans of development under unit agreements, conveyances, subleases, mortgages, deeds of trust, affidavits or reports concerning the drilling of wells and production, designations of operator, Lease bonds, operator's bonds and consents of surety; and in general to do all things necessary or desirable on behalf of the Production Partnership regarding any United States or state Leases or offers therefor; provided, however, that the Production Partnership shall have the authority to acquire or otherwise deal with any such interests respecting Leases located in "offshore waters" (as that term is generally understood in the oil and gas industry) only on the condition that the Production Partnership shall not participate in any Development Drilling or Identified Development Drilling in "offshore waters" which are not state-owned waters; (vii) enter into any partnership agreement, sharing arrangement, or joint venture with any Person acceptable to the Managing Partners and which is engaged in any business or transaction in which the Production Partnership is authorized to engage, provided that the Production Partnership shall not be deemed thereby to be an "investment company" for purposes of the Investment Company Act of 1940, as amended; (viii) enter into and execute drilling contracts, Farmout agreements, operating agreements, unitization agreements, pooling agreements, unit or pooling designations, recycling contracts, dry hole, bottom hole and acreage contribution letters and agreements, participation agreements, agreements and conveyances respecting rights-of-way, agreements respecting surface and -22- subsurface storage and any other agreements customarily employed in the oil and gas industry in connection with the acquisition, exploration, development, operation, or abandonment of any Leases, and any and all other instruments or documents considered by the Managing Partners to be necessary or appropriate to conduct the business of the Production Partnership; (ix) pay or elect not to pay delay rentals on Production Partnership Properties as appropriate in the judgment of the Managing Partners, it being understood that the Managing Partners will not be liable for failure to make correct or timely payments of delay rentals if such failure was due to any reason other than negligence or lack of good faith; (x) subject to Section 4.3B of this Agreement, abandon or otherwise dispose of any interest in Hydrocarbon properties acquired for the Production Partnership upon such terms and for such consideration as the Managing Partners may determine; (xi) sell production payments payable out of all or any part of any one or more of the Producing Properties acquired by the Production Partnership and to devote and expend the proceeds of any such sale for any of the purposes of the Production Partnership for which the proceeds of borrowings may be applied; (xii) borrow monies from time to time, for the purpose and subject to the limitations stated in Section 4.3C of this Agreement, in the form of recourse or nonrecourse borrowings, or otherwise to draw, make, execute and issue promissory notes and other negotiable or nonnegotiable instruments and evidences of indebtedness, and to secure the payments of the sums so borrowed and to mortgage, pledge, or assign in trust all or any part of Production Partnership Property, including Producing Properties, production and proceeds of production, or to assign any monies owing or to be owing to the Production Partnership, and to engage in any other means of financing customary in the petroleum industry; provided, however, that a creditor who makes a nonrecourse loan to the Production Partnership shall not have or acquire, at any time as a result of making the loan, any direct or indirect interest in the profits, capital, or property of the Production Partnership other than as a secured creditor; -23- (xiv) invest Capital Contributions temporarily in the investments set forth in Section 9.3 of this Agreement; (xv) employ on behalf of the Production Partnership agents, employees, accountants, lawyers, geologists, geophysicists, landpersons, clerical help, and such other assistance and consulting and other services as may deem necessary or convenient and to pay therefor such remuneration as the Managing Partners may deem reasonable and appropriate; (xvi) purchase, lease, rent, or otherwise acquire or obtain the use of machinery, equipment, tools, materials, and all other kinds and types of real or personal property that may in any way be deemed necessary, convenient, or advisable in connection with carrying on the business of the Production Partnership, purchase and establish adequate inventories of equipment and material required or expected to be required in connection with its operations, dispose of tangible lease and well equipment for use or used in connection with Production Partnership Property, and to incur expenses for travel, telephone, telegraph, insurance, and for such other things, whether similar or dissimilar, as may be deemed necessary or appropriate for carrying on and performing the business of the Production Partnership; (xvii) enter into such agreements and contracts with such parties and to give such receipts, releases, and discharges with respect to any and all of the foregoing and any matters incident thereto as the Managing Partners may deem advisable or appropriate; (xviii) guarantee the payment of money or the performance of any contract or obligation by any person, firm, or corporation on behalf of the Production Partnership; (xix) sue and be sued, complain and defend in the name and on behalf of the Production Partnership; (xx) make such classifications and determinations as the Managing Partners deem advisable, having due regard for any relevant generally accepted accounting principles and oil and gas industry practices; -24- (xxi) purchase insurance, or extend the Managing Partners' or their Affiliates' insurance, at the Production Partnership's expense, to protect the Production Partnership Property and the business of the Production Partnership against loss, and to protect the Managing Partners against liability to third parties arising out of Production Partnership activities, such insurance to be in such limits, to be subject to such deductibles and to cover such risks as the Managing Partners deem appropriate; (xxii) pay all ad valorem taxes levied or assessed against the Production Partnership Properties, all taxes upon or measured by the production of Hydrocarbons therefrom, and all other taxes (other than income taxes) directly related to operations conducted by the Production Partnership; (xxiii) enter into agreements on behalf of the Production Partnership with Affiliates subject to the limitations set forth in Section 4.3B of this Agreement; (xxiv) sell all or substantially all of the properties and other assets of the Production Partnership to themselves, or any of their Affiliates or any other person and to receive for the Production Partnership consideration consisting of cash, securities, other property or any other form of consideration, or any combination thereof, at such prices and for such forms of consideration as they deem in the best interests of the Limited Partners; provided, however, that no such sale shall be consummated without the prior Consent of the Limited Partnership pursuant to the provisions of Section 4.4B of this Agreement. In the event of the dissolution of the Production Partnership followed by any such sale of the Production Partnership's assets, the Managing Partners shall, subject to the provisions of Section 8.2 of this Agreement, be appointed the liquidating agents for the Production Partnership; (xxv) make, exercise or deliver any general assignment for the benefit of the Production Partnership's creditors, but only upon the prior Consent of the Limited Partnership pursuant to the provisions of Section 4.4B of this Agreement; -25- (xxvi) take such other action and perform such other acts as may be deemed appropriate to carry out the business of the Production Partnership; and (xxvii) inform each other Partner of all administrative and judicial proceedings for an adjustment at the Production Partnership level for partnership tax items and forward to each other Partner within 30 days of receipt all notices received from the Internal Revenue Service regarding the commencement of a partnership level audit or a final partnership administrative judgment, and Geodyne Production shall perform all duties imposed by Sections 6221 through 6232 of the Code as the "tax matters partner" of the Production Partnership, including, but not limited to, the following: (a) the power to conduct all audits and other administrative proceedings (including windfall profit tax audits) with respect to Production Partnership items; the power to extend the statute of limitations for all Partners with respect to Production Partnership tax items; and (b) the power to file a petition with an appropriate federal court for review of a final partnership administrative adjustment. Geodyne Production shall consult with PW Production with respect to the performance of its duties as "tax matters partner." B. Reliance by Third Parties on Managing Partners' Authority. No person, firm or corporation dealing with the Production Partnership shall be required to inquire into the authority of the Managing Partners to take or refrain from taking any action or make or refrain from making any decision, but any person so inquiring shall be entitled to rely upon a certificate of the Managing Partners as to their due authorization. Section 4.3. Sales, Purchases and Operation of Producing Properties; Additional Financing --------------------------------------------------------------------- A. Except with respect to Producing Properties whose aggregate purchase price does not exceed 10% of the Limited Partners' capital contributions to the Limited Partnership, no Producing Property shall be acquired by the Production Partnership unless there has been prepared and evaluated with respect thereto either an Acquisition Reserve Report or an Engineering Audit Letter acceptable to the Management Committee; -26- B. Neither the Managing Partners nor any Affiliate shall sell, transfer or convey any or all of their interest in Producing Properties to the Production Partnership or purchase or acquire any oil and gas properties or interest from the Production Partnership, directly or indirectly, except pursuant to transactions that are fair and reasonable to the Limited Partnership under the circumstances at the time such transaction is consummated. Such transactions shall be further subject to the following restrictions: (i) Prior to the date on which the Production Partnership has acquired its final Producing Property, neither the Managing Partners nor any Affiliate of a Managing Partner (other than an Affiliated Program) shall acquire any Producing Property after the Activation of the Production Partnership unless prior thereto the Production Partnership shall have been offered the right to acquire such Producing Property, or an interest therein, and the Management Committee shall have determined that the acquisition of such Producing Property, or an interest therein, is not in the best interests of the Production Partnership; (ii) Any purchase or sale of a Producing Property from or to a Managing Partner or any Affiliate shall be made at the Property Acquisition Cost for such Producing Property as adjusted for intervening operations, unless the Managing Partner or such Affiliate has reasonable grounds to believe that cost is materially more or less than the fair market value of such property, in which case such sale or purchase shall be made at a price equal to the fair market value thereof as determined by an independent petroleum engineer; (iii) If a Managing Partner sells, transfers or conveys any oil, gas or other mineral interests or property to the Production Partnership, it must, at the same time, sell to the Production Partnership an equal proportionate interest in all its other property in the same Prospect. A Sale or conveyance to the Production Partnership of less than the entire ownership interest of a Managing Partner or any Affiliate is only permitted if: (a) the interests retained or obtained by the Managing Partners or Affiliate and acquired by the Production Partnership are either (x) proportionate, uniform and undivided Working Interests if the Producing Property -27- acquired by the Production Partnership is a Working Interest or (y) proportionate, uniform and undivided Royalty Interests if the Producing Property acquired by the Production Partnership is a Royalty, (b) the respective obligations of the Managing Partners or Affiliate and the Production Partnership are substantially the same, and (c) the interest of the Managing Partners or their Affiliates in revenues does not exceed the amount proportionate to their interest. The Managing Partners and their Affiliates may not retain or obtain any overrides or other burdens on the interest obtained by the Production Partnership, and may not enter into any Farmouts with respect to their retained interest, except to nonaffiliated third parties or to an Affiliated Program; (iv) In the event a Managing Partner or any Affiliate proposes to acquire an interest in a Producing Property in which the Production Partnership has an interest or in a Producing Property abandoned by the Production Partnership within one year preceding such proposed acquisition, such Managing Partner or Affiliate shall offer the interest to the Production Partnership; and if cash or financing is not available to the Production Partnership to purchase such interest, neither such Managing Partner nor Affiliate shall acquire an interest in such Producing Property. The term "abandon" for the purpose of this subparagraph shall mean the termination, either voluntary or by operation of the Lease or otherwise, of all of the Production Partnership's interest in the Producing Property. This subsection shall not apply after the lapse of five years of the Activation of the Production Partnership or to any Affiliated Program where the interest of such Managing Partner is less than or equal to its interest in the Production Partnership, there are no duplication of fees to the Managing Partners, and the Managing Partners do not obtain a greater benefit from purchase of the interest by the Affiliated Program than they would if the interest were purchased by the Production Partnership; (v) During the existence of the Production Partnership and before it has ceased operations, neither Managing Partner nor any Affiliate (excluding any Affiliated Program where the interest of such Managing Partner is less than or equal to its interest in the Production Partnership) shall acquire, retain or drill for its own account any oil and gas interest in any Prospect -28- upon which the Production Partnership possesses an interest, except for transactions which comply with Section 4.3B(iii) or 4.8 of this Agreement. The geological limits of a Producing Property owned by the Production Partnership shall be enlarged or contracted on the basis of subsequently acquired geological data to define the productive limits of a reservoir and must include all of the acreage determined by the subsequent data to be encompassed by such reservoir. If the geological limits of a Producing Property, as so enlarged, encompass any interest held by either a Managing Partner or an Affiliate of a Managing Partner (excluding an Affiliated Program where the interest of such Managing Partner is identical to or less than its interest in the Production Partnership), such interest shall be sold to the Production Partnership in accordance with the provisions of Section 4.3B(iv) of this Agreement and any net income previously received by the Managing Partner or Affiliate shall be paid over to the Production Partnership. If a Managing Partner acquires additional acreage or interests in a Prospect of the Production Partnership, it must sell such to the Production Partnership and is prohibited from retaining any such interest, except as may be permitted by Section 4.3B of this Agreement. Notwithstanding the foregoing, the Production Partnership will not be required to expend additional funds to acquire any such interest unless funds are available from the Capital Contributions of the Partners; (vi) Producing Properties may be sold, Farmed-out or otherwise transferred from or to an Affiliated Program only pursuant to transactions that (a) comply with Sections 4.3B(iii) and 4.3B(iv) of this Agreement, and (b) are in exchange for the transferee's obligation to conduct exploratory drilling, Development Drilling, Identified Development Drilling or Improved Recovery operations on such properties or in connection with the formation of a joint venture among the Production Partnership and such Affiliated Program, provided that the compensation arrangement or any other interest or right of the Managing Partners or any Affiliate is the same in the Production Partnership and Affiliated Program, or, if different, the aggregate compensation of the Managing Partners does not exceed the lower of the compensation they would have received in the Production Partnership or the Affiliated Program, and the terms of such Sale, Farmout or transfer comply with the provisions of Section 4.8 of this Agreement; -29- (vii) Any Sale of inventory or other materials by the Production Partnership to any Managing Partner or Affiliate shall be made at the applicable rates set forth in the standard form of the accounting procedure then recommended by the Council of Petroleum Accountants Societies of North America; (viii) Any operating agreements pursuant to which any Managing Partner or any Affiliate acts as operator of Producing Properties shall be of a nature customary in the industry and payments to any Managing Partner or any Affiliate for acting as operator shall not exceed the compensation which would be paid by unaffiliated third parties in the same geographic area for similar goods and services. Reimbursement of the Managing Partner's overhead pursuant to such operating agreement will not be duplicative of any reimbursement of General and Administrative Costs made pursuant to Section 5.2 of this Agreement; and (ix) To the extent a Managing Partner or any Affiliate acquires an interest in a Producing Property in which the Production Partnership acquires an interest, such Managing Partner or Affiliate shall pay its allocable portion of the cost of the preparation of the Acquisition Reserve Report or Engineering Audit Letter, as the case may be, respecting such Producing Property. C. The Managing Partners may not expend any amount of Production Partnership funds over the term of the Production Partnership for the payment of Production Partnership costs (other than recompletion costs) incurred in connection with Development Drilling and Identified Development Drilling in excess of 10% of the amount of the Limited Partners' capital contributions to the Limited Partnership and the Production Partnership borrowings. If the Managing Partners determine that funds in addition to the Capital Contributions to the Production Partnership are required for the payment of Production Partnership costs (other than Property Acquisition Costs), the Managing Partners may apply or reserve Income or Investment Income for the payment of such Production Partnership costs and/or the Managing Partners may cause the Production Partnership to borrow funds for the payment of Production Partnership costs incurred in connection with Development -30- Drilling, Identified Development Drilling and Improved Recovery operations; provided, however, that the aggregate outstanding principal amount of such borrowings shall not at any one time exceed an amount equal to 20% of the Limited Partners' capital contributions to the Limited Partnership. D. Each Managing Partner shall have the authority to secure the payment of borrowings incurred by it for its own account or for purposes of paying its allocable share of Production Partnership costs by assigning to lenders all or part of its Managing Partner's interest in Profits and Distributable Cash, and by granting such lenders a security interest or mortgage in an undivided interest in any Production Partnership Property not to exceed its Managing Partner's percentage interest in Income; provided, however, that the Managing Partners, in the aggregate, shall retain unencumbered at least a 1% interest in each of Production Partnership Property, Profits and Distributable Cash. Notwithstanding anything to the contrary in this Agreement, in the event of any sale or foreclosure of a Managing Partner's interest in full or partial satisfaction of such borrowings, appropriate adjustments shall be made in the Capital Accounts of the Partners and in the method by which Income and costs are allocated to the Partners to assure that the Limited Partnership and the other Managing Partner will not bear any of the costs attributable to such sold or foreclosed interest and that such Managing Partner will not share or participate in any of the capital, Income, costs or distributions attributable to such sold or foreclosed interest except to the extent of the unencumbered interest retained by such Managing Partner. Section 4.4. Prohibited Transactions ------------------------------------- A. Notwithstanding any other provision of this Agreement to the contrary, the following transactions are expressly prohibited: (i) the Production Partnership shall not make any loans to a Managing Partner or any Affiliate; (ii) neither the Managing Partners nor any Affiliate shall make any loans to the Production Partnership except at a rate of interest not in excess of the interest cost incurred by the Managing Partners or Affiliates or the amount of interest that would be charged to the Production Partnership (without regard to the Managing Partner's or -31- Affiliate's financial abilities or guarantees) by unrelated banks on comparable loans for the same purpose, whichever is lower, and the Managing Partners and Affiliates shall not receive points or financing charges or fees regardless of the amount; (iii) except as expressly contemplated hereby, no agent, attorney, accountant or other independent consultant or contractor who is also employed on a full-time basis by any Managing Partner or any Affiliate shall be compensated by the Production Partnership for his or her services; (iv) other than those received for the account of the Production Partnership, no rebates may be received by any Managing Partner or any Affiliate in connection with Production Partnership operations or expenditures, nor may any Managing Partner or any Affiliate participate in any reciprocal business arrangement that would circumvent any of the provisions of this Agreement; (v) on a monthly basis, costs paid and revenues received by a Managing Partner or an Affiliate for the account of the Production Partnership shall be determined and the net amount resulting from such monthly settlement shall be deposited into a Production Partnership Account and no funds which, after such monthly settlement, are determined to be held for the account of the Production Partnership shall be kept in any account other than a Production Partnership Account, and the Managing Partners shall not employ, or permit any other Person to employ, such funds in any manner except for the benefit of the Production Partnership; it being understood that the Managing Partners may invest Production Partnership funds temporarily in the investments set forth in Section 9.3 of this Agreement pending their use by the Production Partnership. After such monthly settlement, Production Partnership funds may not be commingled with separate funds of either Managing Partner or any other entity; and (vi) the Limited Partnership shall not make any advance payment to the Managing Partners or their Affiliates, except where necessary to secure tax benefits of prepaid drilling costs. -32- B. Notwithstanding any other provision of this Agreement to the contrary, without the prior Consent of the Limited Partnership granted pursuant to the provisions of Article Eleven of this Agreement and the provisions of the Limited Partnership Agreement, the Managing Partners shall not: (i) lease, sell, or dispose of all or substantially all of the Production Partnership's assets; (ii) make, exercise or deliver any general assignment for the benefit of the Production Partnership's creditors; (iii) except as set forth in Section l0.1A, amend any provision of this Agreement; or (iv) dissolve the Production Partnership. Section 4.5. Other Agreements of the Managing Partners ------------------------------------------------------- A. Anything in this Agreement to the contrary notwithstanding, it is agreed that: (i) the Managing Partners and their Affiliates shall not take any action with respect to the assets or property of the Production Partnership which does not benefit exclusively the Production Partnership, including: (a) the utilization of Production Partnership funds as compensating balances for the benefit of the Managing Partners or an Affiliate of a Managing Partner; and (b) the commitment of future production; (ii) all benefits from marketing arrangements or other relationships affecting property of any Managing Partner or its Affiliate and the Production Partnership shall be fairly and equitably apportioned according to the respective interests of each; (iii) the Managing Partners may never profit themselves nor any Affiliate by Development Drilling, Identified Development Drilling or Improved Recovery operations in contravention of their fiduciary obligation to the Limited Partnership; and -33- (iv) neither the Managing Partners nor any Affiliate shall render to the Production Partnership any oil field, equipage or drilling services nor sell or lease to the Production Partnership any equipment or related supplies unless: (a) such Person is engaged, independently of the Production Partnership and as an ordinary and ongoing business, in the business of rendering such services or selling or leasing such equipment and supplies to a substantial extent to other Persons in the oil and gas industry in addition to drilling and income programs in which such Person has an interest; (b) the compensation, price or rental therefor is competitive with the compensation, price or rental of other Persons in the area engaged in the business of rendering comparable services or selling or leasing comparable equipment and supplies which could reasonably be made available to the Production Partnership; (c) the drilling services are billed on either a per foot, per day or per hour rate, or some combination thereof; and (d) provided that, if such Person is not engaged in a business within the meaning of subdivision (a), then such compensation, price or rental shall be the cost of such services, equipment or supplies to such Person or the competitive rate which could be obtained in the area, whichever is less. Section 4.6. Construction of Gas Gathering Lines ------------------------------------------------- The Managing Partners may cause the Production Partnership to construct gas gathering lines if, in the opinion of the Managing Partners, it would be economically feasible and otherwise consistent with prudent operating practice to do so. The costs of any such gathering lines will be deemed to be Operating Costs and shall be charged to the accounts of the Partners as such. The Managing Partners may, in their discretion, construct, or cause an Affiliate of a Managing Partner or other person to construct, gathering lines from Production Partnership Wells to gas transmission systems. -34- Whenever the Managing Partners construct, or cause an Affiliate of a Managing Partner to construct, a gathering line from a Production Partnership Well to a gas transmission system, the Production Partnership shall pay the Managing Partners or such Affiliate an amount that is not greater than the compensation that an unrelated party could have reasonably charged in an arm's-length transaction for similar services in the area as a transmission fee for the transmission of all gas through the gathering system so constructed, and no other transmission fee shall be paid to the Managing Partners or to any Affiliate. Section 4.7. Contracts with the Managing Partners and Affiliates ----------------------------------------------------------------- All services provided to the Production Partnership by a Managing Partner or any Affiliate for which it is compensated shall be embodied in a written contract precisely setting forth the services to be rendered and the compensation to be paid. Each contract relating to a transaction between the Production Partnership and any Managing Partner or any Affiliate shall contain a provision which shall permit termination of the contract by the Production Partnership without penalty on 30 days' prior written notice. The Limited Partnership shall have the power to terminate, without cause or penalty, any such contract on behalf of the Production Partnership. Section 4.8. Farmouts ---------------------- The Management Committee may dispose of Producing Properties by Sale or Farmout when the Management Committee, exercising the standard of a prudent operator, determines that (a) the Production Partnership lacks sufficient funds to conduct Development Drilling, Identified Development Drilling or Improved Recovery operations on the properties and cannot obtain suitable alternative financing for such Development Drilling, Identified Development Drilling or Improved Recovery operations; (b) the properties have been downgraded by events occurring after assignment to the Production Partnership to the point that additional Development Drilling, Identified Development Drilling, Improved Recovery operations or continued production would no longer be desirable to the Production Partnership; (c) Development Drilling, Identified Development Drilling or Improved Recovery operations on the properties would result in an excessive concentration of Production Partnership funds on a -35- Producing Property creating, in the opinion of the Management Committee, undue risk to the Production Partnership; or (d) the best interests of the Production Partnership would be served by the Sale or Farmout. The Production Partnership shall not conduct any drilling of wells other than Development Drilling and Identified Development Drilling; provided, however, that the drilling of wells other than Development Drilling and Identified Development Drilling may be performed on behalf of the Production Partnership pursuant to Farmouts. Neither the Managing Partners nor any Affiliate shall enter into any Farmout or other agreement with the Production Partnership where in consideration for services to be rendered, an interest in production is payable to the Managing Partners or any Affiliate, unless the Production Partnership has previously expended or committed to expend the maximum amount that is authorized to use for Development Drilling or Identified Development Drilling. Any Sale, Farmout or similar agreement between the Production Partnership and a Managing Partner, Affiliate or Affiliated Program will be permitted under the restrictions set forth in this Article Four and will be subject to the following conditions: (i) the Management Committee (or a Managing Partner, if management authority of the Production Partnership with respect thereto has been delegated to it by the Management Committee) exercising the standard of a prudent operator, shall determine that the Sale, Farmout or similar agreement is in the best interests of the Production Partnership; and (ii) the terms of the Sale, Farmout or similar agreement are consistent with and in any case no less favorable than those utilized in the same geographic area for similar arrangements. Section 4.9. Other Operations ------------------------------ The Managing Partners and the Management Committee shall devote such time to the Production Partnership as is reasonably required to carry on the Production Partnership business, and the Managing Partners, members of the Management Committee and their Affiliates shall at all times be free, subject to any restrictions contained herein, to engage in all aspects of the Hydrocarbons and natural resources business for their own accounts and for the accounts of others. Without limiting the generality of the foregoing, the Managing Partners and their Affiliates shall have the right to organize and operate other -36- partnerships, joint ventures or other oil and gas investment programs similar to the Limited Partnership and the Production Partnership. Section 4.10. Prosecution, Defense and Settlement of Claims; Indemnification ------------------------------------------------------------- A. The Managing Partners shall arrange to prosecute, defend, settle or compromise actions at law or in equity at the expense of the Production Partnership as may be necessary to enforce or protect the interests of the Production Partnership. The Managing Partners shall satisfy any judgment, decree, decision or settlement, first, out of any insurance proceeds available therefor, next, out of the Production Partnership assets and Income, and, finally, out of the assets of the Managing Partners and the general partners of the Limited Partnership. B. In any threatened, pending or completed action, suit or proceeding to which the Managing Partners are a party or are threatened to be made a party by reason of the fact that they are the Managing Partners of the Production Partnership (other than an action by or in the right of the Production Partnership) involving an alleged cause of action for damages arising from the performance of their duties under this Agreement or other activities relative to the management and disposition of Producing Properties or production from such properties, the Production Partnership shall indemnify the Managing Partners against expenses, including attorneys' fees, judgments and amounts paid in settlement, actually and reasonably incurred by them in connection with such action, suit or proceeding if they acted in good faith and in a manner they reasonably believed to be in the best interests of the Production Partnership, and provided that their conduct does not constitute negligence or misconduct. The termination of any action, suit or proceeding by judgment, order or settlement shall not of itself create a presumption that the Managing Partners did not act in good faith and in a manner which they reasonably believed to be in the best interests of the Production Partnership. C. In any threatened, pending or completed action or suit by or in the right of the Production Partnership, to which the Managing Partners are a party or are threatened to be made a party, involving an alleged cause of action by the Limited Partnership for damages arising from the activities of the -37- Managing Partners in the management of the internal affairs of the Production Partnership as prescribed in this Agreement or by law, or both, the Production Partnership shall indemnify the Managing Partners against expenses, including attorneys' fees, actually and reasonably incurred by them in connection with the defense or settlement of such action or suit if they acted in good faith and in a manner they reasonably believed to be in the best interests of the Production Partnership as specified in this subsection, except that no indemnification shall be made in respect of any claim, issue or matter as to which the Managing Partners' course of conduct constituted negligence or misconduct. D. To the extent that a Managing Partner has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 4.l0B or 4.l0C of this Agreement, or in defense of any claim, issue or matter therein, the Production Partnership shall indemnify it against the expenses, including attorneys' fees, actually and reasonably incurred by it in connection therewith. E. Any indemnification under Section 4.l0B and 4.10C of this Agreement, unless ordered by a court, shall be made by the Production Partnership only as authorized in the specific case and only upon a determination by independent legal counsel in a written opinion that such indemnification is proper in the circumstances because the indemnified party has met the applicable standard of conduct set forth in Sections 4.l0B or 4.l0C of this Agreement. F. The Production Partnership shall not incur the costs of that portion of insurance which insures the Managing Partners for any liability as to which the Managing Partners are prohibited from being indemnified under Section 4.10. ARTICLE FIVE Distributions, Fees and Allocations ----------------------------------- Section 5.1. Distributions of Production Partnership Funds ----------------------------------------------------------- The Distributable Cash of the Production Partnership shall be distributed simultaneously to the Limited Partnership and the Managing Partners within 45 days after the close of each calendar quarter. Each Partner's share of each such -38- distribution of Distributable Cash shall be determined after giving effect to the allocations set forth in Sections 5.3 and 5.4 of this Agreement for such period. All distributions of Distributable Cash shall reduce dollar-for-dollar the balances of the Partners' Capital Accounts. Section 5.2. Fees and Reimbursement of Expenses to the Managing Partners ------------------------------------------------------------------------- Geodyne Production and PW Production shall receive as Managing Partners (1) on a nonrecurring basis, the Management Fee in an amount equal to 1-1/2% of the Limited Partners' capital contributions to the Limited Partnership; and (2) reimbursement for Direct Administrative Costs billed directly to the Managing Partners and General and Administrative Costs incurred by the Managing Partners or their Affiliates allocable to the Production Partnership, except to the extent that the Managing Partners or their Affiliates are otherwise reimbursed for such costs through the payment of Property Acquisition Costs, Operating Costs or otherwise. Geodyne Production and PW Production shall allocate between themselves the payment of the Management Fee as follows: in the event the Fee (as defined in the Limited Partnership Agreement) (hereinafter referred to as the "Limited Partnership Fee") is less than the actual organization and offering costs of the Limited Partnership plus Unreimbursed Prior Organization and Offering Costs (as defined in the Limited Partnership Agreement), then the Management Fee shall be paid 60% to PW Production and 40% to Geodyne Production to the extent of such deficiency, 60% to PW Production and 40% to Geodyne Production to the extent of organization and offering costs and the remainder of the Management Fee shall be paid 75% to PW Production and 25% to Geodyne Production. In the event the Limited Partnership Fee is equal to or greater than the actual organization and offering costs of the Limited Partnership plus Unreimbursed Prior Organization and Offering Costs (as defined in the Limited Partnership Agreement), then the Management Fee shall be paid 60% to PW Production and 40% to Geodyne Production to the extent of organization and offering costs and the remainder shall be paid as follows: in the event the payment referred to in Section 3.6B(i) of the Limited Partnership Agreement has been made (but the payments in Section 3.6B(ii) and (iii) have not been made) to the general partners of the Limited Partnership, the Management Fee shall be paid 75% to PW Production and 25% to Geodyne Production; in the event the payment referred to in Section 3.6B(ii) of the Limited -39- Partnership Agreement has been made (but the payment in Section 3.6B(iii) has not been made) to the general partners of the Limited Partnership, the excess of the Management Fee over the amount paid to the general partners of the Limited Partnership pursuant to Section 3.6B(ii) of the Limited Partnership Agreement shall be paid 75% to PW Production and 25% to Geodyne Production, the balance of the Management Fee, but not in excess of 1% of the Limited Partners' capital contributions to the Limited Partnership, shall be paid 50% to PW Production and 50% to Geodyne Production, and any remaining balance of the Management Fee shall be paid 70% to PW Production and 30% to Geodyne Production; and in the event the payment referred to in Section 3.6B(iii) of the Limited Partnership Agreement has been made to the general partners of the Limited Partnership, the excess of the Management Fee over the amount paid to the general partners of the Limited Partnership pursuant to Section 3.6B(iii) of the Limited Partnership Agreement, but not in excess of 1% of the Limited Partners' capital contributions to the Limited Partnership, shall be paid 50% to PW Production and 50% to Geodyne Production, and the balance of the Management Fee shall be paid 70% to PW Production and 30% to Geodyne Production. Section 5.3. Allocation of Income, Investment Income, Costs and Deductions ---------------------------------------------------------------- A. The Income, Investment Income, Profits, Production Partnership costs and losses of the Production Partnership shall be determined and allocated with respect to each Fiscal Year of the Production Partnership as of and within 75 days after the end of such Fiscal Year. B. (i) 100% of Investment Income, Property Acquisition Costs, costs incurred in connection with Identified Development Drilling (including any interest, commitment fees and other finance charges with respect to borrowings incurred in connection therewith) and the Management Fee referred to in Section 5.2(1) of this Agreement shall all be allocated to, and borne by, the Limited Partnership. 100% of Organization and Offering Costs shall be allocated to, and borne by, the Managing Partners as follows: 60% to PW Production and 40% to Geodyne Production. Except as otherwise provided in Sections 5.3B(ii) and 5.3B(iii), Income, General and Administrative Costs, Operating Costs, costs incurred in connection with Development Drilling and -40- Direct Administrative Costs shall be allocated among, and borne by, the Partners in the following percentages: (a) Until Payout: Limited Partnership 90.9091% PW Production and Geodyne Production (in the aggregate) 9.0909% (b) After Payout: Limited Partnership 85.8586% PW Production and Geodyne Production (in the aggregate) 14.1414% The Managing Partners shall allocate between themselves their aggregate Interest before and after Payout as follows: 70% to PW Production and 30% to Geodyne Production if the Production Partnership is Activated within twelve months after the date on which the registration statement filed with the Securities and Exchange Commission with respect to the Units is declared effective (the "Effective Date"), and 60% to PW Production and 40% to Geodyne Production if the Production Partnership is Activated during the twelve month period ending twenty-four months after the Effective Date; provided, however, that if the Production Partnership was Activated more than twelve months after the Effective Date and the immediately preceding Prior Production Partnership was activated (as defined in the partnership agreement respecting such Prior Production Partnership) within twelve months after the Effective Date, then PW Production shall be allocated that percentage of the aggregate Managing Partners' Interest represented by a fraction, the numerator of which is equal to the sum of (i) 70 multiplied by the number of days from the activation of the immediately preceding Prior Production Partnership through the date that is 12 months after the Effective Date, and (ii) 60 multiplied by the number of days from the date that is 12 months after the Effective Date through the date of the Activation of the Production Partnership, and the denominator of which is the total number of days that has elapsed from the activation of the immediately preceding Prior Production Partnership to the Activation of the Production Partnership, and Geodyne Production shall be allocated the balance of the aggregate Managing Partners' Interest (such allocation -41- between the Managing Partners of their aggregate Interest being their "Sharing Ratios"). The Managing Partners shall have the authority to amend this Agreement to provide for any different allocation between themselves at their discretion. (ii) As used in this subsection, the "Measuring Date" shall be the earlier of the date on which 90% of the Limited Partnership's Capital Contribution has been expended or the second anniversary of the Activation of the Production Partnership; the first "Allocation Period" shall be the twelve month period beginning on the last day of the first full Fiscal Year quarter after the Measuring Date; and each twelve month period following the end of the first Allocation Period shall also be referred to as an "Allocation Period". Notwithstanding anything to the contrary contained herein, if during each of the first two Allocation Periods the amount of cash distributed to the Limited Partnership that is attributable to the allocations set forth in Section 5.3B(i) is less than a 15.1515% cumulative (but not compounded) twelve-month return on the Limited Partners' capital contributions to the Limited Partnership, then there shall be distributed to the Limited Partnership thereafter (in addition to the amount of Distributable Cash distributed to the Limited Partnership resulting from the allocations to the Limited Partnership set forth in Section 5.3B(i)) an amount of cash up to 50% of the cash otherwise distributable to the Managing Partners thereafter pursuant to the allocations set forth in Section 5.3B(i) not to exceed the amount of any such deficiency (the amount of such cash distribution being a "Transfer Amount"), and Income and costs sufficient to yield an amount of Distributable Cash equal to the Transfer Amount and otherwise allocable to the Managing Partners during the Fiscal Year in which such Allocation Period ends and, to the extent necessary, each Fiscal Year thereafter pursuant to Section 5.3B(i) shall be allocated to the Limited Partnership. If during any Allocation Period after the initial two Allocation Periods, the Limited Partnership is being allocated Income and costs pursuant to Section 5.3B(i) such that there is distributed to the Limited Partnership an amount of cash in excess of a 15.1515% cumulative (but not compounded) twelve-month return on the Limited Partners' capital contributions to the Limited Partnership since the beginning of the first two Allocation Periods (such excess amount of cash being the "Surplus"), and there has been distributed to the Limited Partnership a -42- Transfer Amount, then there shall be distributed to the Managing Partners thereafter an aggregate amount of cash otherwise distributable to the Limited Partnership pursuant to the allocations set forth in Section 5.3B(i) equal to the amount of any Surplus (the amount of such cash distribution being a "Reverse Transfer Amount"), and Income and costs sufficient to yield an amount of Distributable Cash equal to the Reverse Transfer Amount and otherwise allocable to the Limited Partnership during the Fiscal Year in which such Allocation Period ends and, to the extent necessary, each Fiscal Year thereafter pursuant to Section 5.3B(i) shall be allocated to the Managing Partners; provided, however, that the amount of any Reverse Transfer Amount distributed to the Managing Partners shall not exceed an amount equal to the aggregate of the Transfer Amounts distributed to the Limited Partnership less the aggregate of all Reverse Transfer Amounts previously distributed to the Managing Partners. (iii) Notwithstanding anything to the contrary contained herein, if on the seventh anniversary of the last day of the Fiscal Year in which the Production Partnership commences Development Drilling, or Identified Development Drilling, and in each Fiscal Year thereafter, (a) the aggregate amount of Income less the aggregate amount of direct lease operating expenses and severance, ad valorem, windfall profits, excise and other taxes (but not income taxes) allocated to the Limited Partnership pursuant to Section 5.3(B)(i) attributable to production resulting from Development Drilling and Identified Development Drilling on Producing Properties is less than (b) the aggregate amount of costs allocated to the Limited Partnership pursuant to Section 5.3(B)(i) incurred in connection with Development Drilling and Identified Development Drilling on Producing Properties during each Fiscal Year ending seven or more years prior thereto, then Income and costs otherwise allocable to the Managing Partners pursuant to Section 5.3B(i) shall thereafter be allocated to the Limited Partnership until such deficiency in Income is eliminated. (iv) For purposes of the allocations set forth in Section 5.3B(ii) of this Agreement, the amount of cash distributed to the Limited Partnership for purposes of determining the return on the Limited Partners' capital contributions to the Limited Partnership shall not include any amounts attributable to the Production Partnership's payment of any windfall profits tax. -43- C. All items of Income, gain, loss, deduction and credit allowable for Federal income tax purposes and all recapture of any such deductions and credits shall be allocated and charged or credited to the Partners in the same manner that the revenues, costs or expenses giving rise to such items of income, gain, loss, deduction and credit are allocated and charged. Federal income tax deductions for cost or percentage depletion with respect to any Producing Property shall be determined at the Partner level and shall be determined in the case of percentage depletion on the same basis that the Income from the Producing Property is allocated; and the Production Partnership shall allocate, under Section 612A(c)(7)(D) of the Code, its adjusted basis in each Producing Property to the Partners in proportion to the interest of each in the Production Partnership capital ultimately used to acquire that property. If such allocation of basis is not permitted under the Code, the basis of each such property shall be allocated in the manner which the Managing Partners deem will most closely achieve the result intended above. D. Capital Accounts shall be established and maintained for each Partner in accordance with tax accounting principles and with valid regulations issued by the U.S. Treasury Department under subsection 704(b) of the Code (the "704 Regulations"). To the extent that tax accounting principles and the 704 Regulations may conflict, the latter shall control. In connection with the establishment and maintenance of such Capital Accounts, the following provisions shall apply: (1) Each Partner's Capital Account shall be (i) increased by the amount of its Capital Contribution, the fair market value of property contributed by it to the Production Partnership (net of liabilities securing such contributed property that the Production Partnership is considered to assume or take subject to under section 752 of the Code) and allocations to it of Income and gain (except to the extent such Income or gain has previously been reflected in its Capital Account by adjustments thereto) and (ii) decreased by the amount of Distributable Cash distributed to it, the fair market value of property distributed to it by the Production Partnership (net of liabilities securing such distributed property that such Partner is considered to assume or take subject to under section 752 of the Code) and allocations to it of Production Partnership loss, deduction (except to the extent such loss or deduction has previously been reflected -44- in its Capital Account by adjustments thereto) and expenditures described in section 705(a)(2)(B) of the Code. (ii) In the event Production Partnership Property is distributed to a Partner, then, before the Capital Account of such Partner is adjusted as required by clause (i) of this Section 5.3D, the Capital Accounts of the Partners shall be adjusted to reflect the manner in which the unrealized Income, gain, loss and deduction inherent in such Production Partnership Property (that has not been reflected in such Capital Accounts previously) would be allocated among the Partners if there were a taxable disposition of such Production Partnership Property for its fair market value on the date of distribution. (iii) If, pursuant to this Agreement, Production Partnership Property is reflected on the books of the Production Partnership at a book value that differs from the adjusted tax basis of such Production Partnership Property, then the Partners' Capital Accounts shall be adjusted in accordance with the 704 Regulations for allocations to the Partners of depreciation, depletion, amortization, and gain or loss, as computed for book purposes, with respect to such Production Partnership Property. (iv) The Partner's Capital Accounts shall be adjusted for depletion and gain or loss with respect to the Production Partnership's oil or gas properties in whichever of the following manners the Managing Partners determine is in the best interests of the Partners: (a) The Partners' Capital Accounts shall be reduced by a simulated depletion allowance computed on each oil or gas property using either the cost depletion method or the percentage depletion method (without regard to the limitations under the Code which could apply to less than all Partners); provided, however, that the choice between the cost depletion method and the percentage depletion method shall be made on a property-by-property basis and such choices shall be binding for all Production Partnership taxable years during which such oil or gas property is held by the Production Partnership. Such reductions for depletion shall be allocated among the Partners' Capital Accounts in the same proportions as the adjusted basis in the particular property is -45- allocated to each Partner. Upon the taxable disposition of an oil or gas property by the Production Partnership, the Production Partnership's simulated gain or loss shall be determined by subtracting its simulated adjusted basis (aggregate adjusted tax basis of the Partners less simulated depletion allowances) in such property from the amount realized on such disposition and the Partners' Capital Accounts shall be increased or reduced, as the case may be, by the amount of the simulated gain or loss on such disposition in proportion to the Partners' allocable shares of the total amount realized on such disposition, or (b) The Production Partnership shall reduce the Capital Account of each Partner in an amount equal to such Partner's depletion allowance with respect to each oil or gas property of the Production Partnership (for the Partner's taxable year that ends within the Production Partnership's taxable year), but such reductions for depletion shall not exceed the adjusted basis allocated to such Partner with respect to such property. Upon the taxable disposition of an oil or gas property by the Production Partnership, the Capital Account of each Partner shall be reduced or increased, as the case may be, by the amount of the difference between such Partner's allocable share of the total amount realized on such disposition and such Partner's remaining adjusted tax basis in such property. (v) For purposes of determining the Capital Account balance of any Partner as of the end of any Production Partnership taxable year for purposes of Subsection 5.3I hereto, such Partner's Capital Account shall be reduced by: (a) Adjustments that, as of the end of such year, reasonably are expected to be made to such Partner's Capital Account pursuant to paragraph (b)(2)(iv)(k) of the 704 Regulations for depletion allowances with respect to oil and gas properties of the Production Partnership, and -46- (b) Distributions that, as of the end of such year, reasonably are expected to be made to such Partner pursuant to Code section 704(e)(2), Code section 706(d), and paragraph (b)(2)(ii) of section 1.751-1 of regulations promulgated under the Code, and (c) Distributions that, as of the end of such year, reasonably are expected to be made to such Partner to the extent they exceed offsetting increases to such Partner's Capital Account that reasonably are expected to occur during (or prior to) the Production Partnership taxable years in which such distributions are expected to be made. E. The Capital Accounts of those Partners which are charged with an expense of the Production Partnership shall be credited with any portion of that expense which is finally determined, judicially or administratively, to be nondeductible for Federal income tax purposes, less any amortization or depreciation thereof incurred prior to the date that the credit is made. F. In allocating Income and costs for any Fiscal Year in which the ratio for sharing Income and costs changes pursuant to Section 5.3B(i), the allocations of Income and costs shall be made, and the books of the Production Partnership shall be closed, as soon as practicable after the date Payout occurs, to determine each Partner's share of pre-change Income and costs and each Partner's share of post-change Income and costs for that Fiscal Year. G. Proceeds received from the Sale or transfer of all or any part of the Production Partnership's Producing Properties shall be allocated to the Limited Partnership and the Managing Partners to the extent of their adjusted basis in such sold or transferred Production Partnership Property. Proceeds in excess of said amount shall be allocated in accordance with the percentages set forth in Section 5.3B(i) , except that, notwithstanding the provisions of Section 5.3F and solely for purposes of this Section 5.3G, where the proceeds from such Sale are distributed to the Partners and a portion of the Distributable Cash attributable to such Sale proceeds is sufficient in amount to cause Payout to occur in accordance with the allocation percentages in effect until Payout, Payout shall be deemed to occur such that Income and Distributable Cash attributable to the portion of such Sale proceeds in excess of -47- the portion of Sales proceeds sufficient in amount to cause Payout to occur shall be allocated in accordance with the allocation percentages in effect after Payout. H. Notwithstanding any other provision of this Agreement, if, under any provision of this Agreement, the Capital Account of any Partner is adjusted to reflect the difference between the basis to the Production Partnership of Production Partnership Property and such Production Partnership Property's fair market value, then all items of Income, gain, loss, and deduction with respect to such Production Partnership Property shall be allocated among the Partners so as to take account of the variation between the basis of such Production Partnership Property and its fair market value at the time of the adjustment to such Partner's Capital Account in accordance with the requirements of subsection 704(c) of the Code, or in the same manner as provided under subsection 704(c) of the Code. I. Notwithstanding anything to the contrary stated herein, (a) There shall be allocated to the Managing Partners, pro rata, any item of loss, deduction, credit or allowance that, but for this Section 5.3I, would have been allocated to the other General Partner that is not obligated to restore any deficit balance in such Partner's Capital Account and would have thereupon caused or increased a deficit balance in such Partner's Capital Account as of the end of the Production Partnership's taxable year to which such allocation related (after taking into consideration the provisions of Subsection 5.3D(v) hereof); (b) Any General Partner that is not obligated to restore any deficit balance in such Partner's Capital Account who unexpectedly receives an adjustment, allocation or distribution specified in Subsection 5.3D(v) hereof shall be allocated items of Income and gain in an amount and manner sufficient to eliminate such deficit balance as quickly as possible; and (c) In the event any allocations of loss, deduction, credit or allowance are made to the Managing Partners pursuant to clause (a) of this Subsection 5.3I, the Managing Partners shall be subsequently allocated all items of Income and gain until the aggregate amount of such allocations of Income and gain is equal to the aggregate -48- amount of any such allocations of loss, deduction, credit or allowance allocated to such Partners pursuant to clause (a) of this Subsection 5.3I. Section 5.4. Determinations of Allocations and Distributions ------------------------------------------------------------- Distributable Cash, Income, Investment Income, costs, deductions, Profits and Losses allocable to the Partners shall be distributed or allocated, as the case may be, to the Persons who were Partners, as of the last day of the fiscal period for which the distribution or allocation is to be made, except that in any fiscal period in which a Partner sells, assigns or transfers all or any part of such Partner's Interest to any Person who during the fiscal period is admitted as a Substituted Partner, the Distributable Cash, Income, Investment Income, costs, deductions, Profits and Losses attributable to the Interest so sold, assigned or transferred shall, subject to the provisions of Section 10.2 of this Agreement, be allocated between the transferor and the transferee on the basis of the number of days in the fiscal period before the admission, and on and after the admission, of the transferee as a Substituted Partner; provided, however, that the Distributable Cash attributable to a Sale of a Producing Property shall be distributed to those Partners who are Partners on the day the distribution of such Distributable Cash occurs. The Managing Partners shall inform the other Partners of the occurrence and terms of any such Sale by the Production Partnership as soon as practicable after such Sale has been consummated. ARTICLE SIX Transferability of Managing Partner's Interests ----------------------------------------------- Section 6.1. Transferability of Managing Partner's Interest ------------------------------------------------------------ A. Except as provided in Sections 6.lB and 6.2B, each of the Managing Partners shall not have the right to retire, withdraw, transfer or assign its Managing Partner Interest, except that there may be substituted in its stead as Managing Partner any entity that has, by merger, consolidation or otherwise, acquired substantially all of its assets or capital stock and continued its business. -49- B. Each Managing Partner may, upon at least ninety days' written notice to the Limited Partnership and the other Managing Partner, cause the Production Partnership to distribute, in partial liquidation of its Interest in the Production Partnership, to such Managing Partner fractional, undivided interests in the Producing Properties of the Production Partnership (such interest of a Managing Partner in a Producing Property distributed is hereinafter referred to as the "Distributed Interest") up to an aggregate interest equal in value to 75% of the value of the Producing Properties of the Production Partnership that it would have been entitled to upon a hypothetical liquidation of the Production Partnership after application of the provisions of Section 8.2 of this Agreement (the interest in a Producing Property of a Managing Partner retained in the Production Partnership is hereinafter referred to as the "Retained Interest") provided, however, that no such distribution shall occur (i) more than once with respect to a Managing Partner, (ii) prior to seven years after the Activation of the Production Partnership and (iii) unless such Managing Partner obtains an opinion of counsel to the Production Partnership to the effect that such distribution will not result in any material adverse tax consequence to the other Managing Partner or to the Limited Partners. Notwithstanding anything to the contrary in this Agreement, in the event that any such distribution is made, appropriate adjustments shall be made in the Capital Accounts of the Partners and in the allocation of Production Partnership Income and costs to assure that the other Managing Partner will not share or participate in any of the capital, costs, Income, or distributions attributable to the Producing Properties of the Production Partnership except to the extent of the Retained Interest of such Managing Partner. Section 6.2. Removal of Managing Partners ------------------------------------------ A. (i) The power shall be vested in the Limited Partnership to remove at any time any Managing Partner. The power shall be vested in the Limited Partnership to consent to the admission of a successor Managing Partner following the Removal of any Managing Partner by the Limited Partnership. A successor Managing Partner shall be selected pursuant to the provisions of Section 6.2D of this Agreement. -50- (ii) (a) A Managing Partner shall have the power to Remove the other Managing Partner, and pursuant to Section l0.lA of this Agreement, admit a successor Managing Partner, for "Cause" as defined in Section 6.2A(ii)(b), but for no other reason. (b) "Cause" for purposes of Section 6.2A(ii)(a) shall be deemed to exist only (i) when a court of competent jurisdiction shall have made a final determination (which determination is not successfully appealed) that a Managing Partner has been guilty of gross negligence, fraud, intentional misconduct or similar breach of fiduciary responsibility in carrying out its duties as a Managing Partner, or (ii) a Managing Partner is dissolved or liquidated on account of insolvency or any other event occurs resulting in the appointment of a trustee or receiver who acquires control of the affairs of such Managing Partner for the purpose of dissolution or liquidation on account of insolvency, and such trustee or receiver is not dismissed within 90 days after appointment of such trustee or receiver, or (iii) (a) a report on the audited financial statements of a Managing Partner and its consolidated corporate affiliates is issued by the independent accountants for such Managing Partner that is qualified on a going concern basis, or (b) either Managing Partner requests an audit to be performed of the other Managing Partner and its consolidated corporate affiliates by the independent accountants for the other Managing Partner (the expense of such audit being paid by the Managing Partner requesting the audit) , and such audit results in the issuance of an opinion with respect to the financial statements of the other Managing Partner and its consolidated corporate affiliates for the period ending, and as of, the most recent date feasible, that is qualified on a going concern basis. B. (i) In the event that a Managing Partner is Removed, the Removed Managing Partner's Interest in the Production Partnership shall be transferred to the other Managing Partner, and the other Managing Partner shall assign to the Removed Managing Partner a portion of Production Partnership Income, costs and Distributable Cash as and when such items are allocated or distributed, as the case may be, by the -51- Production Partnership equal to the percentage interest of the Removed Managing Partner in the Production Partnership prior to its Removal; provided, however, that such assignment shall be reduced proportionately in the event of a foreclosure or sale referred to in Section 4.3D with respect to the Removed Managing Partner's interest transferred to the other Managing Partner to the extent of the foreclosed or sold interest. (ii) If a sole Managing Partner is Removed and a successor Managing Partner is to be admitted to the Production Partnership, the removed Managing Partner shall not be Removed until a successor Managing Partner has been admitted to the Production Partnership pursuant to Article 10 of this Agreement. (iii) In the event a sole Managing Partner is Removed by the Limited Partnership and a successor Managing Partner is to be admitted, the incoming Managing Partner and the Removed Managing Partner shall, by mutual agreement, select an independent petroleum consultant to value the Removed Managing Partner's Interest in the Production Partnership. In determining the value of the Managing Partner's Interest, the independent consultant will take into account appropriate discount factors in light of the risk of recovery of oil and gas reserves, and, in any event, will utilize a "risk factor" discount no less than that utilized in the most recent offer extended pursuant to Section 7.5 of the Limited Partnership Agreement, if any. The incoming Managing Partner, or the Production Partnership, shall have the option to purchase at least 20% of the Interest of the Removed Managing Partner for the value determined by the independent appraisal. The Removed Managing Partner's Interest in the Production Partnership shall be transferred to the successor Managing Partner, and the successor Managing Partner shall assign to the Removed Managing Partner a portion of Production Partnership Income, costs and Distributable Cash as and when such items are allocated or distributed, as the case may be, by the Production Partnership equal to the percentage interest of the Removed Managing Partner in the Production Partnership prior to Removal, less the portion purchased by the successor Managing Partner or the Production Partnership. -52- C. Notwithstanding Section 3.6, any Managing Partner who shall be Removed pursuant to the provisions of Section 6.2 shall be released by the other Partners from all liability for Production Partnership debts and obligations incurred by the Production Partnership prior to the date of such Removal. D. Under circumstances in which the Limited Partnership Consents to the admission of a successor Managing Partner, such admission shall not become effective unless the Production Partnership shall have received a certificate, duly executed by or on behalf of such proposed successor Managing Partner to the effect that it is experienced in the performance (or employs sufficient personnel who are experienced in performing) of functions of the type then being performed by the Removed Managing Partner. ARTICLE SEVEN Transferability of Limited Partnership's Interest -------------------------------------------------- Section 7.1. Transferability of Limited Partnership's Interest --------------------------------------------------------------- No Sale, exchange, transfer or assignment of the Limited Partnership's Interest may be made if in the opinion of counsel to the Production Partnership, such Sale, exchange, transfer or assignment, would (i) result in the Production Partnership being considered to have terminated within the meaning of Section 708 of the Code, or (ii) cause the Production Partnership to lose its status as a partnership for Federal income tax purposes. In addition, the Managing Partners may require an opinion of the transferor's counsel, satisfactory to the Managing Partners, that such Sale, exchange, transfer or assignment would not violate the Securities Act of 1933, as amended, or any state securities or "blue sky" laws. Section 7.2. Incapacity of Partners ------------------------------------ If a Partner (including a Managing Partner) becomes Incapacitated, the Person who is its legal representative shall have all the rights of a Partner for the purpose of settling or -53- managing its estate and such power as the Incapacitated Partner possessed to assign all or any part of its Interest and to join with such assignee in satisfying conditions precedent to such assignee becoming a Substituted Partner. The Incapacity of a Partner shall not dissolve the Production Partnership. Section 7.3. Assignees and Substituted Partners ------------------------------------------------ A. The Production Partnership shall not recognize for any purpose any purported sale, assignment or transfer of all or any fraction of the Interest of the Limited Partnership unless the provisions of Section 7.1 shall have been complied with and there shall have been filed with the Production Partnership a dated Notification of such sale, assignment or transfer, executed and acknowledged by both the seller, assignor or transferor and the purchaser, assignee or transferee and such Notification (i) contains the acceptance by the purchaser, assignee or transferee of all of the terms and provisions of this Agreement and (ii) represents that such sale, assignment or transfer was made in accordance with all applicable laws and regulations. Any sale, assignment or transfer shall be recognized by the Production Partnership as effective on the date of such Notification if the date of such Notification is within 30 days of the date on which such Notification is filed with the Production Partnership, and otherwise shall be recognized as effective on the date such Notification is filed with the Production Partnership. B. If the Limited Partnership assigns all of its Interest to an assignee, the Limited Partnership shall cease to be a Partner. C. A Person who is the assignee of all or any fraction of the Interest of the Limited Partnership shall be subject to all the provisions of this Article Seven to the same extent and in the same manner as the Limited Partnership desiring to make an assignment of its Interest. D. Any purchaser, assignee, transferee, donee, heir, legatee or other recipient of an Interest shall be admitted to the Production Partnership as a Substituted Partner only with the Consent of the other Partners, which Consent may be granted or withheld by such Partners at their sole and absolute discretion. The admission of such Person as a Substituted Partner shall be evidenced by the execution by the Partners of a certificate evidencing the admission of such Person as a Partner -54- and an amendment to this Agreement executed by the Managing Partners on their own behalf, as well as on behalf of each other Partner, pursuant to the power of attorney granted pursuant to Section 12.5 of this Agreement. E. No Person shall become a Substituted Partner until such Person shall have satisfied the requirements of Section 10.2; provided, however, that for the purpose of allocating Income, Investment Income, Profits, Losses, costs, and Distributable Cash, a Person shall be treated as having become, and as appearing in the records of the Production Partnership as, a Partner on such date as the sale, assignment or transfer to such Person was recognized by the Production Partnership pursuant to Section 7.3A. Section 7.4. Incapacity of the Limited Partnership --------------------------------------------------- Upon the Incapacity of the Limited Partnership or upon the seizure of a Limited Partnership's Interest in the Production Partnership, the successor to such Limited Partnership's Interest ("Successor") shall be deemed an assignee of such Limited Partnership's Interest in the Production Partnership and neither the Production Partnership nor the Successor shall have the right to demand immediate valuation and payment of such Limited Partnership's Interest. ARTICLE EIGHT Dissolution, Liquidation and Termination of the Production Partnership ----------------------------- Section 8.1. Events Causing Dissolution ---------------------------------------- A. The Production Partnership shall be dissolved upon the happening of any of the following events: (i) the expiration of its term, unless its term shall have been extended by the Management Committee pursuant to Section 2.4 of this Agreement; (ii) the Incapacity of the sole Managing Partner. However, within ninety days thereafter the remaining Partners may elect to reconstitute the Production Partnership prior to application of the liquidation provisions of Section 8.2; -55- (iii) the Sale or other disposition at one time of all or substantially all of the assets of the Production Partnership existing at the time of such Sale; (iv) the election to dissolve the Production Partnership (a) by the Managing Partners (which election shall be Consented to by the Limited Partnership), or (b) by the Consent of all Partners; (v) ninety days after the Removal (unless the Limited Partnership Consents to a Successor pursuant to Section 6.2 of this Agreement) of the sole Managing Partner; (vi) the happening of any other event causing the dissolution of the Production Partnership under the laws of the State, except that the Incapacity of any Partner (other than the sole Managing Partner) shall not dissolve the Production Partnership and the seizure of the Interest of any Partner shall not dissolve the Production Partnership. B. Dissolution of the Production Partnership shall be effective on the day on which the event occurs giving rise to the dissolution, but the Production Partnership shall not terminate until the Managing Partners have recorded a notice of dissolution of the Production Partnership in the proper records of any jurisdiction in which this Agreement has been recorded and shall have complied with the laws of the states in which its does business and the assets of the Production Partnership have been distributed as provided in Section 8.2. C. Nothing contained in this Agreement shall impair, restrict or limit the rights and powers of the Partners under the laws of the State or any other jurisdiction in which the Production Partnership is doing business to reform and reconstitute themselves as a general partnership following dissolution of the Production Partnership either under provisions identical to those set forth herein or under any other provisions. Section 8.2. Liquidation ------------------------- A. Upon dissolution of the Production Partnership, its liabilities shall be paid in the order provided herein. The Managing Partners shall either distribute in kind or sell the Production Partnership's property so that such disposition is in -56- the best interests of the Limited Partnership, and shall execute all amendments terminating the Production Partnership. In connection with any such Sale, the Managing Partners shall attempt to obtain the best prices for such property. Pending such Sales, the Managing Partners shall have the right to continue to operate and otherwise to deal with Production Partnership property. In the event the Production Partnership is dissolved on account of the Incapacity or Removal of the sole Managing Partner, the Production Partnership shall elect, in accordance with the provisions of Article Eleven, a person (the "Liquidating Agent") to perform the function of a Managing Partner in liquidating the assets of the Production Partnership and winding up its affairs, and shall pay to such Liquidating Agent its reasonable fees and expenses incurred in connection therewith. Gain or loss realized on the Sale or other disposition of the Production Partnership's assets will be credited to (in the case of gain) or charged against (in the case of loss) each Partner's Capital Account to the extent allocable to it under Sections 5.3 and 5.4 of this Agreement. In the event of a distribution in kind of (a) any property other than an interest in a Producing Property, each Partner's Capital Account shall be debited with the portion of the Production Partnership's adjusted basis thereof attributable to the interest therein distributed to it and (b) any Producing Property or an interest in any Producing Property, each Partner's Capital Account shall first be credited or debited with its share of the unrealized appreciation or depreciation in the fair market value of said Producing Property or interest in said Producing Property. Each Partner's share of said unrealized appreciation or depreciation shall be equivalent to its share (allocated pursuant to Sections 5.3 and 5.4 of this Agreement) of the gain or loss on an actual Sale of such Producing Property or interest therein. The Capital Account of each Partner to whom a Producing Property or an interest in a Producing Property is distributed shall be debited with the fair market value of the Producing Property distributed to it. Any liquidation of the Production Partnership shall take place out of court and without application being made therefor to the Secretary of State of the State of Oklahoma. B. In settling accounts after dissolution, the assets of the Production Partnership shall be paid out in the following order: (i) to third party creditors, in the order or priority as provided by law; (ii) to the Managing Partners and any Liquidating Agent for any expenses of the Production Partnership paid by or payable to them to the extent they are entitled to reimbursement therefor pursuant to this Agreement; (iii) to the -57- Limited Partnership in the amount equivalent to the amount of its positive Capital Account balances (as adjusted pursuant to Section 8.2A) on the date of distribution; (iv) to the Managing Partners in the amount equivalent to the amount of their positive Capital Account balances (as adjusted pursuant to Section 8.2A) on the date of distribution; and (v) the balance shall be paid to the Partners in the manner provided for by Sections 5.1, 5.3 and 5.4 of this Agreement with respect to Distributable Cash. C. If any Managing Partner has a deficit balance in its Capital Account following the distribution(s) provided for in Section 8.2B above, as determined after taking into account all adjustments to its Capital Account for the taxable year of the Production Partnership during which such distribution(s) occur, it shall restore the amount of such deficit balance to the Production Partnership within 90 days and such account shall be distributed to the other Parties in accordance with their positive Capital Account balances. D. Upon the liquidation or partial liquidation of any Managing Partner's Interest pursuant to Article 6 hereof, distribution to the Managing Partner whose Interest is being liquidated shall be made pro rata to such Partner in accordance with and to the extent of such Partner's positive Capital Account balance after the Partners' Capital Accounts are adjusted as if all of the Production Partnership's property had been sold at its fair market value immediately prior to such distribution and the gain or loss realized on such sale charged or credited to the Partners' Capital Accounts in accordance with the provisions of Article 5 hereof, provided, however, that if such Partner has a deficit balance in its Capital Account following such distribution (or adjustment of such Partner's Capital Account pursuant to this Section 8.2D), such Partner shall restore the amount of such deficit balance to the Production Partnership by the later of the end of the Production Partnership taxable year in which the liquidation of such Partner's Interest occurs or 90 days after the date of such liquidation. -58- ARTICLE NINE Books and Records; Accounting; Tax Elections; etc. -------------------------------------------------- Section 9.1. Books and Records ------------------------------- The books and records of the Production Partnership, including information relating to the sale by the Managing Partners or any Affiliates of goods or services to the Production Partnership, and a list of the names and addresses and Interests of all Partners, shall be maintained by the Managing Partners at the principal office of the Production Partnership for a period of five years following the close of the Fiscal Year to which they relate and shall be available for examination there by any Partner or its duly authorized representatives at any and all reasonable times. Any Partner, or its duly authorized representatives, upon paying the costs of collection, duplication and mailing, shall be entitled for any proper purpose to a copy of the list of names and addresses and Interests of the Partners. The Production Partnership may maintain such other books and records and may provide such financial or other statements as the Managing Partners in their discretion deem advisable. Section 9.2. Accounting Basis for Tax and Reporting Purposes; Fiscal Year -------------------------------------------------------------------------- The books and records of the Production Partnership for tax purposes, for purposes of this agreement and for the purpose of reports to the Partners shall be kept on the cash or accrual basis, as the Managing Partners shall determine. The Fiscal Year of the Production Partnership shall be the calendar year to the extent permissible and the Managing Partners shall use their best efforts to obtain any necessary approvals therefor. Section 9.3. Bank Accounts --------------------------- The General Partners shall maintain a bank account or accounts to be maintained by the Managing Partners on behalf of the Production Partnership with any bank in the United States having total assets in excess of $100,000,000. The Managing Partners shall not deposit Production Partnership funds in an -59- account with any bank in an aggregate amount in excess of 5% of such bank's total assets. Withdrawals shall be made only in the regular course of the Production Partnership's business on such signature or signatures as the Managing Partners may determine. All deposits and other funds not needed in the operation of the business may be deposited in interest-bearing accounts, certificates of deposit, money market funds (including those managed or marketed by the Dealer Manager or its Affiliates) or invested in short-term United States Government obligations maturing within one year, commercial paper of United States corporations having the highest credit rating granted by Moody's Investors Services, Inc. or Standard & Poors Corporation, or other similar highly liquid investments. Section 9.4. Reports --------------------- A. The Managing Partners shall furnish to the Limited Partnership sufficient information and data with respect to the properties and operations of the Production Partnership in order to permit the Limited Partnership to satisfy its reporting obligations under Section 9.4 of the Limited Partnership Agreement. B. The Managing Partners shall file on a timely basis with the Securities and Exchange Commission all filings required to be made by the Production Partnership pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder. Section 9.5. Elections ----------------------- The Managing Partners shall cause the Production Partnership to make all elections required or permitted to be made by the Production Partnership under the Code and not otherwise expressly provided for in this Agreement, in the manner that the Managing Partners believe will be most advantageous to Limited Partnership, except that (i) the Managing Partners shall not be required to make an election under Section 754 of the Code or corresponding provisions of applicable state income tax laws, and (ii) the Managing Partners shall make the election under Section 263(c) of the Code to expense all intangible drilling and development costs in the initial Production Partnership Federal income tax return filed for the Fiscal Year in which such costs are incurred. -60- ARTICLE TEN Amendments ---------- Section 10.1. Proposal and Adoption of Amendments Generally ------------------------------------------------------------ A. Notwithstanding anything to the contrary contained herein, the Managing Partners may, without prior notice or consent of any other Partner, amend any provision of this Agreement (including an amendment to admit an additional Managing Partner) if, in their opinion, such amendment does not have a material adverse effect upon the Limited Partnership. Such amendment shall thereafter be disclosed to the Limited Partners within a reasonable time thereafter. Amendments to this Agreement to reflect the addition or substitution of a Partner or the admission of a successor Managing Partner shall be made at the time and in the manner referred to in Section 10.2. Any other amendment to this Agreement may be proposed by the Managing Partners or the Limited Partnership. The Partner or Partners proposing such amendment shall submit a Notification containing (a) the text of such amendment, (b) a statement of the purpose of such amendment, and (c) an opinion of counsel obtained by the Partner or Partners proposing such amendment to the effect that such amendment is permitted by the Act, will not impair the limited liability of the Limited Partners, and will not adversely affect the classification of the Limited Partnership or the Production Partnership as partnerships for Federal income tax purposes. The Managing Partners shall, within 15 days after receipt of any proposal under this Section l0.lA, give Notification to all Partners of such proposed amendment, of such statement of purpose and of such opinion of counsel, together, in the case of an amendment proposed by other Partners, with the views, if any, of the Managing Partners with respect to such proposed amendment. B. Amendments to this Agreement shall be adopted if: (i) in the case of amendments referred to in Section l0.2A, the conditions specified in Section 7.3 shall have been satisfactorily completed and the Production Partnership shall not have been furnished with an opinion of counsel to the Production Partnership to the effect that such amendment will adversely affect the classification of the Limited Partnership or the Production Partnership as partnerships for Federal income -61- tax purposes; (ii) in the case of amendments referred to in Section l0.2B, the conditions specified in Section 6.2 shall have been satisfactorily completed; or (iii) in the case of all other amendments, such amendment shall have been Consented to by the Limited Partnership (unless such Consent is not required pursuant to Section l0.lA); provided, however, that no such amendment may: (a) enlarge the obligations of any Partner under this Agreement without the Consent of such Partner; (b) modify the method provided in Article Five of determining and allocating or distributing, as the case may be, Income, Investment Income, Profits, Losses, Distributable Cash or costs and expenses without the Consent of each Partner adversely affected by such modification; (c) amend Sections 6.1 or 6.2 without the Consent of all the Partners; or (d) amend Sections 2.3, 4.3A, 4.3B, 4.3C, 4.3D, 4.4A, 4.4B, 4.5A, 4.9, 4.10 or this Article Ten without the Consent of all the Partners. C. Upon the adoption of any amendment to this Agreement, the amendment shall be executed by the Managing Partners and all other Partners, and shall be recorded in the proper records of the State and any other state in which the Production Partnership is then doing business. Section 10.2. Amendments on Admission or Removal of Partners ------------------------------------------------------------- A. If this Agreement shall be amended to reflect the admission or substitution of a Partner, the amendment to this Agreement may be adopted by either of the Managing Partners, the Person to be substituted or added, and the assigning Partner. Any such amendment shall be executed on behalf of all Partners but may be executed by the substituted or added Partner, the assigning Partner, and either of the Managing Partners, individually and on behalf of all of the other Partners pursuant to the power of attorney granted in Section 12.5. B. If this Agreement shall be amended to reflect the Removal of a Managing Partner and the continuation of the business of the Production Partnership, such amendment shall be signed by the remaining or successor Managing Partner and by the Removed Managing Partner. -62- C. No Person shall become a Partner, unless such Person shall have: (i) become a party to, and adopted all of the terms and conditions of, this Agreement; (ii) if such Person is other than an individual, provided upon request the Managing Partners with evidence satisfactory to counsel for the Production Partnership of such Person's authority to become a Partner under the terms and provisions of this Agreement; and (iii) paid all reasonable legal fees of the Production Partnership and the Managing Partners and filing and publication costs in connection with such Person's becoming a Partner. ARTICLE ELEVEN Consents, Voting and Meetings ----------------------------- Section 11.1. Method of Giving Consent --------------------------------------- Any Consent required by this Agreement may be given by a Partner as follows: (i) at a meeting, in person, by a written proxy or signed writing directing the manner in which it desires that its vote be cast, which writing must be received by the Managing Partners prior to such meeting, or (ii) without a meeting, by a signed writing directing the manner in which it desires that its vote be cast, which writing must be received by the Managing Partners prior to the date upon which the vote of Partners are to be counted. Any Partner may waive notice of or attendance at any meeting of the Partners and may execute a signed written consent. Only the votes of Partners of record on the date of Notification, whether at a meeting or otherwise, shall be counted. The laws of the State pertaining to the validity and use of corporate proxies shall govern the validity and use of proxies given by Partners. Section 11.2. Meetings of Partners ----------------------------------- The Managing Partners may at any time call a meeting of the Partners or for a vote, without a meeting, of the Partners on matters upon which the Partners are entitled to vote, and shall call for such a meeting or vote upon receipt of a Notification therefor of the Limited Partnership. Within 15 days of the receipt of the Notification, the Managing Partners shall notify all Partners of record as of the date of the Notification as to the time and place of the meeting, if called, and the general -63- nature of the business to be transacted thereat, or if no such meeting has been called, of the matter or matters to be voted upon and the date upon which the votes will be counted. Any Production Partnership meeting or the date upon which such votes, without a meeting, will be counted (regardless of whether the Managing Partners have called for such meeting or vote upon the request of Limited Partnership or have initiated such event without such request) shall be not less than 30 or more than 60 days following mailing of the Notification thereof by the Managing Partners. All expenses of the meetings, voting and such Notification shall be borne by the Production Partnership. Section 11.3. Submissions to Other Partners -------------------------------------------- The Managing Partners shall give all the other Partners Notification of any proposal or other matter required by any provisions of this Agreement or by law to be submitted for the consideration and approval of the other Partners. Such Notification shall include any information required by the relevant provision of the Agreement or by law. Section 11.4. Limited Partnership Consent ------------------------------------------ To the extent allowed in the Limited Partnership Agreement and subject to Section 10.1, the Limited Partnership, by and through more than 50% in Interest (as to capital and Profits and Losses) of the Limited Partners, may without the concurrence of the Managing Partners: (a) amend the Production Partnership Agreement; (b) dissolve the Production Partnership; (c) remove either or both Managing Partners and elect new ones; (d) approve or disapprove the sale of all or substantially all of the assets of the Production Partnership; and (e) cancel or amend the terms of any contract for services with a Managing Partner or any Affiliate thereof without penalty upon 30 days' notice. -64- ARTICLE TWELVE Miscellaneous Provisions ------------------------ Section 12.1. Notification to the Production Partnership of the Managing Partners ---------------------------------------------------------------- Any Notification to the Production Partnership or the Managing Partners shall be sent to the principal office of the Production Partnership, as set forth in this Agreement. Except as provided herein, any Notification to a Partner shall be sent to its last known address. Section 12.2. Binding Provisions --------------------------------- The covenants and agreements contained herein shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the respective parties hereto. Section 12.3. Applicable Law ----------------------------- This Agreement shall be construed and enforced in accordance with the laws of the State applicable to contracts made and to be performed wholly within the State. Section 12.4. Separability of Provisions ----------------------------------------- If for any reason any provision or provisions hereof which are not material to the purposes or business of the Production Partnership or of the Partners' Interests are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement that are valid. -65- Section 12.5. Appointment of the Managing Partners as Attorney-in-Fact ----------------------------------------------------------------------- A. Each Partner, by the execution of this Agreement, irrevocably constitutes and appoints each of the Managing Partners, its true and lawful agent and attorney-in-fact with full power and authority in its name, place and stead to execute, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents, instruments and conveyances that may be necessary or appropriate to carry out the provisions or purposes of this Agreement, including without limitation: (i) all certificates and other instruments (including counterparts of this Agreement), and any amendment thereof, including any amendment substituting a Partner, that the Managing Partners deem appropriate to form, reform, qualify or continue the Production Partnership (or a new partnership with substantially the same provisions as the Production Partnership) as a partnership in the jurisdiction in which the Production Partnership may conduct business; (ii) all amendments and other instruments necessary to admit into the Production Partnership additional or substituted Partners pursuant to Section 10.2; (iii) all instruments that the Managing Partners deem appropriate to reflect a change or modification of the Production Partnership in accordance with the terms of this Agreement (including those necessary to reflect any additional Capital Contributions); and (iv) all conveyances and other instruments that the Managing Partners deem appropriate to reflect the dissolution and termination of the Production Partnership. B. The appointment by all Partners of each of the Managing Partners as agent and attorney-in-fact shall be deemed irrevocable and to be a power coupled with an interest, in recognition of the fact that each of the Partners under this Agreement will be relying upon the power of the Managing Partners to act as contemplated by this Agreement in any filing and other action by it on behalf of the Production Partnership, and shall survive the Incapacity of any Person hereby giving such power and the transfer or assignment of all or any part of the Interest of such person; provided, however, that in the event of the transfer by a Partner of all of its Interest, the foregoing powers of attorney of the transferor Partner shall survive such transfer only until such time as the transferee shall have been admitted to the Production Partnership as a -66- Substituted Partner and all required documents and instruments shall have been duly executed, filed and recorded to effect such substitution. Section 12.6. Entire Agreement ------------------------------- This Agreement constitutes the entire agreement among the parties. This Agreement supersedes any prior agreement or understanding among the parties and may not be modified or amended in any manner other than as set forth herein. Section 12.7. Paragraph Titles ------------------------------- Article and section titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text. Section 12.8. Counterparts --------------------------- This Agreement may be executed in several counterparts, all of which together shall constitute one agreement binding on all parties hereto, notwithstanding that all the parties have not signed the same counterpart except that no counterpart shall be binding unless signed by the General Partners. GEODYNE PRODUCTION COMPANY PW PRODUCTION INC. By: // Thomas W. Kitchin // By: // Lawrence S. Kash // ----------------------- --------------------- Thomas W. Kitchin, Lawrence S. Kash, President President -67- PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP I-F By: GEODYNE PROPERTIES, INC. General Partner By: // Thomas W. Kitchin // ----------------------- Thomas W. Kitchin, President BY: PW ENERGY INC. General Partner By: // Lawrence S. Kash // --------------------- Lawrence S. Kash, President ACKNOWLEDGMENTS STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Lawrence S. Kash who, after being duly sworn by me, did declare that he is the President of PW Production Inc. and that by and with the authority of the Board of Directors of PW Production Inc. he executed the foregoing Amended and Restated Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-F as the free and voluntary act and deed of PW Production Inc. for the purposes therein set forth. Subscribed and sworn to and acknowledged by said Lawrence S. Kash on this ____ day of November, 1986. // Dorothy F. Haughey // ------------------------- Notary Public My Commission Expires: March 30, 1987 -68- STATE OF OKLAHOMA ) ) ss. COUNTY OF TULSA ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Thomas W. Kitchin who, after being duly sworn by me, did declare that he is the President of Geodyne Production Company and that by and with the authority of the Board of Directors of Geodyne Production Company he executed the foregoing Amended and Restated Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-F as the free and voluntary act and deed of Geodyne Production Company for the purposes therein set forth. Subscribed and sworn to and acknowledged by said Thomas W. Kitchin on the 13th day of November, 1986. // Cindy L. Hays // ------------------- Notary Public My Commission Expires: August 19, 1987 -69- STATE OF OKLAHOMA ) ) ss. COUNTY OF TULSA ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Thomas W. Kitchin who, after being duly sworn by me, did declare that he is the President of Geodyne Properties, Inc. and that by and with the authority of the Board of Directors of Geodyne Properties, Inc. and as general partner for PaineWebber/Geodyne Energy Income Limited Partnership I-F he executed the foregoing Amended and Restated Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-F as the free and voluntary act and deed of Geodyne Properties, Inc. as general partner of PaineWebber/Geodyne Energy Income Limited Partnership I-F for the purposes therein set forth. Subscribed and sworn to and acknowledged by said Thomas W. Kitchin on the 13th day of November, 1986. // Cindy L. Hays // ------------------- Notary Public My Commission Expires: August 19, 1987 -70- STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) BEFORE ME, the undersigned Notary Public, duly commissioned and qualified in and for the County and State aforesaid, personally came and appeared Lawrence s. Kash who, after being duly sworn by me, did declare that he is the President of PW Energy, Inc. and that by and with the authority of the Board of Directors of PW Energy, Inc. and as general partner for PaineWebber/Geodyne Energy Income Limited Partnership I-F he executed the foregoing Amended and Restated Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-F as the free and voluntary act and deed of PW Energy, Inc. as general partner of PaineWebber/Geodyne Energy Income Limited Partnership I-F for the purposes therein set forth. Subscribed and sworn to and acknowledged by said Lawrence S. Kash on this ____ day of November, 1986. // Dorothy F. Haughey // ------------------------ Notary Public My Commission Expires: March 30, 1987 -71- EX-10.4 20 I-D, AMENDMENT 1 TO PRODUCTION PARTNERSHIP AGMT. FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF PARTNERSHIP PAINEWEBBER/GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-D The Amended and Restated Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-D dated March 4, 1986 (the "Agreement") is hereby amended effective March 1, 1993, as follows: A. The first sentence of Section 2.2 is hereby deleted and replaced by the following provision: "The Production Partnership shall be conducted under the name Geodyne Energy Income Production Partnership I-D." B. All references in the Agreement to "PaineWebber/Geodyne Energy Income Production Partnership I-D" are hereby changed to "Geodyne Energy Income Production Partnership I-D." C. The third sentence of Section 2.2 is hereby deleted and replaced by the following provision: "The office and principal place of business of the Production Partnership shall be c/o Geodyne Production Company, Two West Second, Tulsa, Oklahoma 74103." D. The name of the "General Partner" and the "Limited Partnership" reflected in Article One has been changed from "PaineWebber/Geodyne Energy Income Limited Partnership I-D" to "Geodyne Energy Income Limited Partnership I-D". All references in the Agreement to the name of the "General Partner" and the "Limited Partnership" are hereby changed to reflect this name change. This change reflects a name change only and not a change of entity. E. On December 18, 1986, PW Production Inc., a Delaware corporation, was merged with and into Geodyne Production Company, a Delaware corporation ("Geodyne"), as evidenced by a Certificate of Merger of PW Production Inc. into Geodyne Production Company, filed of record on such date in the office of the Secretary of State of Delaware in Book 466 at Page 606. Geodyne survived the merger as the sole general partner of the PaineWebber/Geodyne Energy Income Production Partnership I-D. -1- In all other respects the Agreement is hereby ratified and affirmed. DATED: February 26, 1993 Managing Partner: Geodyne Production Company // Michael E. Luttrell // ------------------------- Michael E. Luttrell Executive Vice President General Partner Geodyne Energy Income Limited Partnership I-D By: Geodyne Properties1 Inc., General Partner By: // Michael E. Luttrell // ------------------------- Michael E. Luttrell, Executive Vice President -2- EX-10.5 21 I-E, AMENDMENT 1 TO PRODUCTION PARTNERSHIP AGMT. FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF PARTNERSHIP PAINEWEBBER/GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E The Amended and Restated Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-E dated September 10, 1986 (the "Agreement") is hereby amended effective March 1, 1993, as follows: A. The first sentence of Section 2.2 is hereby deleted and replaced by the following provision: "The Production Partnership shall be conducted under the name Geodyne Energy Income Production Partnership I-E." B. All references in the Agreement to "PaineWebber/Geodyne Energy Income Production Partnership I-E" are hereby changed to "Geodyne Energy Income Production Partnership I-E." C. The third sentence of Section 2.2 is hereby deleted and replaced by the following provision: "The office and principal place of business of the Production Partnership shall be c/o Geodyne Production Company, Two West Second, Tulsa, Oklahoma 74103." D. The name of the "General Partner" and the "Limited Partnership" reflected in Article One has been changed from "PaineWebber/Geodyne Energy Income Limited Partnership I-E" to "Geodyne Energy Income Limited Partnership I-E". All references in the Agreement to the name of the "General Partner" and the "Limited Partnership" are hereby changed to reflect this name change. This change reflects a name change only and not a change of entity. E. On December 18, 1986, PW Production Inc., a Delaware corporation, was merged with and into Geodyne Production Company, a Delaware corporation ("Geodyne"), as evidenced by a Certificate of Merger of PW Production Inc. into Geodyne Production Company, filed of record on such date in the office of the Secretary of State of Delaware in Book 466 at Page 606. Geodyne survived the merger as the sole general partner of the PaineWebber/Geodyne Energy Income Production Partnership I-E. -1- In all other respects the Agreement is hereby ratified and affirmed DATED: February 26, 1993 Managing Partner: Geodyne Production Company // Michael E. Luttrell// ------------------------ Michael E. Luttrell Executive Vice President General Partners: Geodyne Energy Income Limited Partnership I-E By: Geodyne Properties, Inc. General Partner By: // Michael E. Luttrell// ------------------------ Michael E. Luttrell, Executive Vice President -2- EX-10.6 22 I-F, AMENDMENT 1 TO PRODUCTION PARTNERSHIP AGMT. FIRST AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF PARTNERSHIP PAINEWEBBER/GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F The Amended and Restated Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-F dated December 17, 1986 (the "Agreement") is hereby amended effective March 1, 1993, as follows: A. The first sentence of Section 2.2 is hereby deleted and replaced by the following provision: "The Production Partnership shall be conducted under the name Geodyne Energy Income Production Partnership I-F." B. All references in the Agreement to "PaineWebber/Geodyne Energy Income Production Partnership I-F" are hereby changed to "Geodyne Energy Income Production Partnership I-F." C. The third sentence of Section 2.2 is hereby deleted and replaced by the following provision: "The office and principal place of business of the Production Partnership shall be c/o Geodyne Production Company, Two West Second, Tulsa, Oklahoma 74103." D. The name of the "General Partner" and the "Limited Partnership" reflected in Article One has been changed from "PaineWebber/Geodyne Energy Income Limited Partnership I-F" to "Geodyne Energy Income Limited Partnership I-F". All references in the Agreement to the name of the "General Partner" and the "Limited Partnership" are hereby changed to reflect this name change. This change reflects a name change only and not a change of entity. E. On December 18, 1986, PW Production Inc., a Delaware corporation, was merged with and into Geodyne Production Company, a Delaware corporation ("Geodyne"), as evidenced by a Certificate of Merger of PW Production Inc. into Geodyne Production Company, filed of record on such date in the office of the Secretary of State of Delaware in Book 466 at Page 606. Geodyne survived the merger as the sole general partner of the PaineWebber/Geodyne Energy Income Production Partnership I-F. -1- In all other respects the Agreement is hereby ratified and affirmed. DATED: February 26, 1993 Managing Partner: Geodyne Production Company // Michael E. Luttrell // ------------------------ Michael E. Luttrell Executive Vice President General Partner: Geodyne Energy Income Limited Partnership I-F By: Geodyne Properties, Inc., General Partner By: // Michael E. Luttrell // ------------------------- Michael E. Luttrell Executive Vice President -2- EX-10.7 23 I-D, AMENDMENT 2 TO PRODUCTION PARTNERSHIP AGMT. SECOND AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF PARTNERSHIP GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-D This Second Amendment to Amended and Restated Agreement of Partnership of Geodyne Energy Income Production Partnership I-D (the "Partnership") is entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as successor Managing Partner, and Geodyne Energy Income Limited Partnership I-D ("Geodyne I-D"), as General Partner. WHEREAS, on December 10, 1985, Geodyne Production Company ("Production"), as Managing Partner, and Geodyne I-D, as General Partner, executed and entered into that certain Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-D (the "Preformation Agreement"); and WHEREAS, on March 4, 1986, Production and Geodyne I-D executed and entered into that certain Amended and Restated Agreement of Partnership (the "Agreement"); and WHEREAS, on February 26, 1993, but effective March 1, 1993, Production and Geodyne I-D executed and entered into that certain First Amendment to Amended and Restated Agreement of Partnership (the "Agreement"), whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Production Partnership I-D" to "Geodyne Energy Income Production Partnership I-D", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, Section 10.1 of the Agreement provides that the managing partner of the partnership (the "Managing Partner") may, without prior notice or consent of any other Partner (as defined in the Agreement), amend any provision of this Agreement if, in its opinion, such amendment does not have a material adverse effect upon the Limited Partnership (as defined in the Agreement); and WHEREAS, Production merged with and into Geodyne Resources, Inc. ("Resources"), its parent corporation, effective June 30, 1996; and WHEREAS, Section 6.1 of the Agreement provides that the Managing Partner may assign its Managing Partner Interest to a Person which shall become a successor Managing Partner, if such assignment is in connection with a merger; and -1- WHEREAS, as a result of the merger of Production with and into Resources, ownership of the Managing Partner Interest in the Partnership is assigned to Resources by operation of law; and WHEREAS, as a result of the merger of Production with and into Resources, Resources has now succeeded to the position of Managing Partner of the Partnership; and WHEREAS, Resources, as Managing Partner, desires to amend the Agreement in order to reflect Resources as the new Managing Partner. NOW, THEREFORE, in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: All references in the Agreement to Geodyne Production Company as Managing Partner are hereby amended to reflect, instead, Geodyne Resources, Inc. as Managing Partner. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 1st day of July, 1996. Geodyne Production Company by Geodyne Resources, Inc. as successor by merger By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Resources, Inc. as Managing Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Energy Income Limited Partnership I-D as General Partner By Geodyne Resources, Inc. General Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President -2- EX-10.8 24 I-E, AMENDMENT 2 TO PRODUCTION PARTNERSHIP AGMT. SECOND AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF PARTNERSHIP GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E This Second Amendment to Amended and Restated Agreement of Partnership of Geodyne Energy Income Production Partnership I-E (the "Partnership") is entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as successor Managing Partner, and Geodyne Energy Income Limited Partnership I-E ("Geodyne I-E"), as General Partner. WHEREAS, on March 5, 1986, Geodyne Production Company ("Production"), as Managing Partner, and Geodyne I-E, as General Partner, executed and entered into that certain Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-E (the "Preformation Agreement"); and WHEREAS, on September 10, 1986, Production and Geodyne I-E executed and entered into that certain Amended and Restated Agreement of Partnership (the "Agreement"); and WHEREAS, on February 26, 1993, but effective March 1, 1993, Production and Geodyne I-E executed and entered into that certain First Amendment to Amended and Restated Agreement of Partnership (the "Agreement"), whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Production Partnership I-E" to "Geodyne Energy Income Production Partnership I-E", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, Section 10.1 of the Agreement provides that the managing partner of the partnership (the "Managing Partner") may, without prior notice or consent of any other Partner (as defined in the Agreement), amend any provision of this Agreement if, in its opinion, such amendment does not have a material adverse effect upon the Limited Partnership (as defined in the Agreement); and WHEREAS, Production merged with and into Geodyne Resources, Inc. ("Resources"), its parent corporation, effective June 30, 1996; and WHEREAS, Section 6.1 of the Agreement provides that the Managing Partner may assign its Managing Partner Interest to a Person which shall become a successor Managing Partner, if such assignment is in connection with a merger; and -1- WHEREAS, as a result of the merger of Production with and into Resources, ownership of the Managing Partner Interest in the Partnership is assigned to Resources by operation of law; and WHEREAS, as a result of the merger of Production with and into Resources, Resources has now succeeded to the position of Managing Partner of the Partnership; and WHEREAS, Resources, as Managing Partner, desires to amend the Agreement in order to reflect Resources as the new Managing Partner. NOW, THEREFORE, in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: All references in the Agreement to Geodyne Production Company as Managing Partner are hereby amended to reflect, instead, Geodyne Resources, Inc. as Managing Partner. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 1st day of July, 1996. Geodyne Production Company by Geodyne Resources, Inc. as successor by merger By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Resources, Inc. as Managing Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Energy Income Limited Partnership I-E as General Partner By Geodyne Resources, Inc. General Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President -2- EX-10.9 25 I-F, AMENDMENT 2 TO PRODUCTION PARTNERSHIP AGMT. SECOND AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF PARTNERSHIP GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F This Second Amendment to Amended and Restated Agreement of Partnership of Geodyne Energy Income Production Partnership I-F (the "Partnership") is entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as successor Managing Partner, and Geodyne Energy Income Limited Partnership I-F ("Geodyne I-F"), as General Partner. WHEREAS, on September 10, 1986, Geodyne Production Company ("Production"), as Managing Partner, and Geodyne I-F, as General Partner, executed and entered into that certain Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-F (the "Preformation Agreement"); and WHEREAS, on December 17, 1986, Production and Geodyne I-F executed and entered into that certain Amended and Restated Agreement of Partnership (the "Agreement"); and WHEREAS, on February 26, 1993, but effective March 1, 1993, Production and Geodyne I-F executed and entered into that certain First Amendment to Amended and Restated Agreement of Partnership (the "Agreement"), whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Production Partnership I-F" to "Geodyne Energy Income Production Partnership I-F", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, Section 10.1 of the Agreement provides that the managing partner of the partnership (the "Managing Partner") may, without prior notice or consent of any other Partner (as defined in the Agreement), amend any provision of this Agreement if, in its opinion, such amendment does not have a material adverse effect upon the Limited Partnership (as defined in the Agreement); and WHEREAS, Production merged with and into Geodyne Resources, Inc. ("Resources"), its parent corporation, effective June 30, 1996; and WHEREAS, Section 6.1 of the Agreement provides that the Managing Partner may assign its Managing Partner Interest to a Person which shall become a successor Managing Partner, if such assignment is in connection with a merger; and WHEREAS, as a result of the merger of Production with and into Resources, ownership of the Managing Partner Interest in the Partnership is assigned to Resources by operation of law; and -1- WHEREAS, as a result of the merger of Production with and into Resources, Resources has now succeeded to the position of Managing Partner of the Partnership; and WHEREAS, Resources, as Managing Partner, desires to amend the Agreement in order to reflect Resources as the new Managing Partner. NOW, THEREFORE, in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: All references in the Agreement to Geodyne Production Company as Managing Partner are hereby amended to reflect, instead, Geodyne Resources, Inc. as Managing Partner. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 1st day of July, 1996. Geodyne Production Company by Geodyne Resources, Inc. as successor by merger By: // Dennis R. Neill // --------------------- Dennis R. Neill President Geodyne Resources, Inc. as Managing Partner By: // Dennis R. Neill // --------------------- President Geodyne Energy Income Limited Partnership I-F as General Partner By General Resources, Inc. General Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President -2- EX-10.10 26 I-D, AMENDMENT 3 TO PRODUCTION PARTNERSHIP AGMT. THIRD AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF PARTNERSHIP GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-D This Third Amendment to Amended and Restated Agreement of Partnership of Geodyne Energy Income Production Partnership I-D (the "Partnership") is entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as successor Managing Partner, and Geodyne Energy Income Limited Partnership I-D ("Geodyne I-D"), as General Partner. WHEREAS, on December 10, 1985, Geodyne Production Company ("Production"), as Managing Partner, and Geodyne I-D, as General Partner, executed and entered into that certain Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-D (the "Preformation Agreement"); and WHEREAS, on March 4, 1986, Production and Geodyne I-D executed and entered into that certain Amended and Restated Agreement of Partnership (the "Agreement"); and WHEREAS, on February 26, 1993, but effective March 1, 1993, Production and Geodyne I-D executed and entered into that certain First Amendment to Amended and Restated Agreement of Partnership (the "Agreement"), whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Production Partnership I-D" to "Geodyne Energy Income Production Partnership I-D", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, on July 1, 1996, Production and Geodyne I-D executed and entered into that certain Second Amendment to Agreement, whereby all references in the Agreement to Geodyne Production Company as Managing Partner were amended to reflect, instead, Geodyne Resources, Inc. ("Resources") as Managing Partner; and WHEREAS, Section 10.1 of the Agreement provides that the Managing Partner (as defined in the Agreement) may, without prior notice or consent of any other Partner (as defined in the Agreement), amend any provision of this Agreement if, in its opinion, such amendment does not have a material adverse effect upon the Limited Partnership (as defined in the Agreement); and WHEREAS, the Agreement defines Managing Partner to mean Production and PW Production, Inc., and WHEREAS, the Agreement provides for the existence of a Management Committee, to be composed of two representatives of each Managing Partner, and -1- WHEREAS, on December 18, 1986, the two Managing Partners, Production and PW Production, Inc., merged, with Production as the survivor, and WHEREAS, as a result of said merger there is no longer a Management Committee for the Partnership; and WHEREAS, Resources, as successor Managing Partner, desires to amend the Agreement to substitute throughout the agreement the term "Managing Partner" for "Management Committee", and WHEREAS, Section 2.4 of the Agreement provides that the Partnership shall continue in full force and effect until December 31, 1999, provided that the Management Committee may extend the term of the Partnership for up to five periods of two years each or until dissolution prior thereto pursuant to the provisions of the Agreement, and WHEREAS, Resources has elected to extend the life of the Partnership an additional two years. NOW, THEREFORE, BE IT RESOLVED that in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: All references in the Agreement to "Management Committee" are hereby amended to reflect, instead, "Managing Partner." FURTHER RESOLVED, that Section 2.4. is hereby amended and restated as follows: The Production Partnership shall continue in force and effect until December 31, 2001, provided that the Managing Partner may extend such term for up to five periods of two years each, or until dissolution prior thereto pursuant to the provisions hereof. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 30th day of December, 1999. Geodyne Resources, Inc. as Managing Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President -2- Geodyne Energy Income Limited Partnership I-D as General Partner By Geodyne Resources, Inc. General Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President -3- EX-10.11 27 I-E, AMENDMENT 3 TO PRODUCTION PARTNERSHIP AGMT. THIRD AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF PARTNERSHIP GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-E This Third Amendment to Amended and Restated Agreement of Partnership of Geodyne Energy Income Production Partnership I-E (the "Partnership") is entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as successor Managing Partner, and Geodyne Energy Income Limited Partnership I-E ("Geodyne I-E"), as General Partner. WHEREAS, on March 5, 1986, Geodyne Production Company ("Production"), as Managing Partner, and Geodyne I-E, as General Partner, executed and entered into that certain Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-E (the "Preformation Agreement"); and WHEREAS, on September 10, 1986, Production and Geodyne I-E executed and entered into that certain Amended and Restated Agreement of Partnership (the "Agreement"); and WHEREAS, on February 26, 1993, but effective March 1, 1993, Production and Geodyne I-E executed and entered into that certain First Amendment to Amended and Restated Agreement of Partnership (the "Agreement"), whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Production Partnership I-E" to "Geodyne Energy Income Production Partnership I-E", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, on July 1, 1996, Production and Geodyne I-E executed and entered into that certain Second Amendment to Agreement, whereby all references in the Agreement to Geodyne Production Company as Managing Partner were amended to reflect, instead, Geodyne Resources, Inc. ("Resources") as Managing Partner; and WHEREAS, Section 10.1 of the Agreement provides that the Managing Partner (as defined in the Agreement) may, without prior notice or consent of any other Partner (as defined in the Agreement), amend any provision of this Agreement if, in its opinion, such amendment does not have a material adverse effect upon the Limited Partnership (as defined in the Agreement); and WHEREAS, the Agreement defines Managing Partner to mean Production and PW Production, Inc., and WHEREAS, the Agreement provides for the existence of a Management Committee, to be composed of two representatives of each Managing Partner, and -1- WHEREAS, on December 18, 1986, the two Managing Partners, Production and PW Production, Inc., merged, with Production as the survivor, and WHEREAS, as a result of said merger there is no longer a Management Committee for the Partnership; and WHEREAS, Resources, as successor Managing Partner, desires to amend the Agreement to substitute throughout the agreement the term "Managing Partner" for "Management Committee", and WHEREAS, Section 2.4 of the Agreement provides that the Partnership shall continue in full force and effect until December 31, 1999, provided that the Management Committee may extend the term of the Partnership for up to five periods of two years each or until dissolution prior thereto pursuant to the provisions of the Agreement, and WHEREAS, Resources has elected to extend the life of the Partnership an additional two years. NOW, THEREFORE, BE IT RESOLVED that in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: All references in the Agreement to "Management Committee" are hereby amended to reflect, instead, "Managing Partner." FURTHER RESOLVED, that Section 2.4. is hereby amended and restated as follows: The Production Partnership shall continue in force and effect until December 31, 2001, provided that the Managing Partner may extend such term for up to five periods of two years each, or until dissolution prior thereto pursuant to the provisions hereof. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 30th day of December, 1999. Geodyne Resources, Inc. as Managing Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President -2- Geodyne Energy Income Limited Partnership I-E as General Partner By Geodyne Resources, Inc. General Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President -3- EX-10.12 28 AMENDMENT 3 TO PRODUCTION PARTNERSHIP AGREEMENT THIRD AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF PARTNERSHIP GEODYNE ENERGY INCOME PRODUCTION PARTNERSHIP I-F This Third Amendment to Amended and Restated Agreement of Partnership of Geodyne Energy Income Production Partnership I-F (the "Partnership") is entered into by and between Geodyne Resources, Inc. ("Resources"), a Delaware corporation, as successor Managing Partner, and Geodyne Energy Income Limited Partnership I-F ("Geodyne I-F"), as General Partner. WHEREAS, on September 10, 1986, Geodyne Production Company ("Production"), as Managing Partner, and Geodyne I-F, as General Partner, executed and entered into that certain Agreement of Partnership of PaineWebber/Geodyne Energy Income Production Partnership I-F (the "Preformation Agreement"); and WHEREAS, on December 17, 1986, Production and Geodyne I-F executed and entered into that certain Amended and Restated Agreement of Partnership (the "Agreement"); and WHEREAS, on February 26, 1993, but effective March 1, 1993, Production and Geodyne I-F executed and entered into that certain First Amendment to Amended and Restated Agreement of Partnership (the "Agreement"), whereby it changed (i) the name of the Partnership from "PaineWebber/Geodyne Energy Income Production Partnership I-F" to "Geodyne Energy Income Production Partnership I-F", (ii) the address of the Partnership's principal place of business, and (iii) the address for the Partnership's agent for service of process; and WHEREAS, on July 1, 1996, Production and Geodyne I-F executed and entered into that certain Second Amendment to Agreement, whereby all references in the Agreement to Geodyne Production Company as Managing Partner were amended to reflect, instead, Geodyne Resources, Inc. ("Resources") as Managing Partner; and WHEREAS, Section 10.1 of the Agreement provides that the Managing Partner (as defined in the Agreement) may, without prior notice or consent of any other Partner (as defined in the Agreement), amend any provision of this Agreement if, in its opinion, such amendment does not have a material adverse effect upon the Limited Partnership (as defined in the Agreement); and WHEREAS, the Agreement defines Managing Partner to mean Production and PW Production, Inc., and WHEREAS, the Agreement provides for the existence of a Management Committee, to be composed of two representatives of each Managing Partner, and -1- WHEREAS, on December 18, 1986, the two Managing Partners, Production and PW Production, Inc., merged, with Production as the survivor, and WHEREAS, as a result of said merger there is no longer a Management Committee for the Partnership; and WHEREAS, Resources, as successor Managing Partner, desires to amend the Agreement to substitute throughout the agreement the term "Managing Partner" for "Management Committee", and WHEREAS, Section 2.4 of the Agreement provides that the Partnership shall continue in full force and effect until December 31, 1999, provided that the Management Committee may extend the term of the Partnership for up to five periods of two years each or until dissolution prior thereto pursuant to the provisions of the Agreement, and WHEREAS, Resources has elected to extend the life of the Partnership an additional two years. NOW, THEREFORE, BE IT RESOLVED that in consideration of the covenants, conditions and agreements herein contained, the parties hereto hereby agree as follows: All references in the Agreement to "Management Committee" are hereby amended to reflect, instead, "Managing Partner." FURTHER RESOLVED, that Section 2.4. is hereby amended and restated as follows: The Production Partnership shall continue in force and effect until December 31, 2001, provided that the Managing Partner may extend such term for up to five periods of two years each, or until dissolution prior thereto pursuant to the provisions hereof. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the 30th day of December, 1999. Geodyne Resources, Inc. as Managing Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President -2- Geodyne Energy Income Limited Partnership I-F q as General Partner By Geodyne Resources, Inc. General Partner By: // Dennis R. Neill // --------------------- Dennis R. Neill President -3- EX-23.1 29 RYDER SCOTT CONSENT RYDER SCOTT COMPANY PETROLEUM CONSULTANTS Fax (713) 651-0849 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191 CONSENT OF PETROLEUM ENGINEERING FIRM We consent to the reference to our name included in this Annual Report on Form 10-K for the year ended December 31, 1999 for Geodyne Energy Income Limited Partnership I-D. RYDER SCOTT COMPANY, L.P. Houston, Texas February 4, 2000 EX-23.2 30 RYDER SCOTT CONSENT RYDER SCOTT COMPANY PETROLEUM CONSULTANTS Fax (713) 651-0849 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191 CONSENT OF PETROLEUM ENGINEERING FIRM We consent to the reference to our name included in this Annual Report on Form 10-K for the year ended December 31, 1999 for Geodyne Energy Income Limited Partnership I-E. RYDER SCOTT COMPANY, L.P. Houston, Texas February 4, 2000 EX-23.3 31 RYDER SCOTT CONSENT RYDER SCOTT COMPANY PETROLEUM CONSULTANTS Fax (713) 651-0849 1100 Louisiana Suite 3800 Houston, Texas 77002-5218 Telephone (713) 651-9191 CONSENT OF PETROLEUM ENGINEERING FIRM We consent to the reference to our name included in this Annual Report on Form 10-K for the year ended December 31, 1999 for Geodyne Energy Income Limited Partnership I-F. RYDER SCOTT COMPANY, L.P. Houston, Texas February 4, 2000 EX-27.1 32 FDS --
5 0000799178 GEODYNE ENERGY INCOME LTD PSHP I-D 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 183,942 0 130,579 0 0 314,521 4,607,189 4,084,889 922,668 52,787 0 0 0 0 843,483 922,668 771,318 777,941 0 335,491 0 0 0 442,450 0 442,450 0 0 0 442,450 50.73 0
EX-27.2 33 FDS --
5 0000806613 GEODYNE ENERGY INCOME LTD PSHP I-E 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 891,310 0 772,416 0 0 1,663,726 26,692,096 23,118,865 5,859,238 278,771 0 0 0 0 5,390,503 5,859,238 4,161,530 4,856,176 0 2,326,774 0 0 0 2,529,402 0 2,529,402 0 0 0 2,529,402 49.27 0
EX-27.3 34 FDS --
5 0000811031 GEODYNE ENERGY INCOME LTD PSHP I-F 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 254,500 0 250,188 0 0 504,688 8,044,032 6,933,507 1,990,904 102,857 0 0 0 0 1,765,961 1,990,904 1,292,077 1,769,025 0 825,734 0 0 0 943,291 0 943,291 0 0 0 943,291 53.86 0
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