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EXHIBIT 4.4
BENTON OIL & GAS COMBINATION
PARTNERSHIP 1991-1, LP.
AGREEMENT OF LIMITED PARTNERSHIP
This is an Agreement of Limited Partnership (the "Agreement"), made
and entered into as of July 30, 1991, by and among Benton Oil and Gas
Company, a Delaware corporation ("Benton"), and Energy Partners, a
California corporation, as "Co-Managing General Partners", the Special
Limited Partners, and all other persons who are parties to this Agreement
by execution of this Agreement or a Subscription Agreement (herein so
called), or as assignees or transferees of such persons (collectively,
the "Subscribers" or the "Participants").
W I T N E S S E T H:
In consideration of the premises and mutual covenants herein
contained, the parties do hereby form a partnership (the "Partnership") under
and pursuant to the California Revised Limited Partnership Act, upon the
terms and conditions hereinafter set forth.
ARTICLE I.
NAME AND PRINCIPAL OFFICE
A. The business of the Partnership shall be conducted under
the name "Benton Oil & Gas Combination Partnership 1991-1, L.P."
B. The principal office of the Partnership and the address of
Energy Partners shall be 1001 Dove Street, Suite 180, Newport Beach,
California 92660-2816, provided that Benton or Energy Partners may change
the address of the principal office of the Partnership and of Energy Partners
by giving notice to all Partners. Energy Partners may maintain such other
offices for the Partnership as it may deem necessary or advisable.
C. The address of each Participant shall be that stated on
that Participant's Subscription Agreement or assignment document, subject
to written notice of change given by the Participant to Energy Partners.
ARTICLE II. DEFINITIONS
Adjusted Capital Account Deficit. With respect to any Partner, the
deficit balance, if any, in such Partner's capital account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:
(A) Add to such capital account the following items:
(i) The amount which such Partner is obligated,
pursuant to Paragraph D of Article XVIII of this Agreement or
otherwise, to contribute to the Partnership upon liquidation
of such Partner's Interest; and
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(ii) The amount which such Partner is deemed to
be obligated to restore to the Partnership pursuant to the
penultimate sentences of Treasury Regulation Sections
1.704-1T(b)(4)(iv)(f) and 1.704-1T(b)(4)(iv)(h)(5); and
(B) Subtract from such capital account such Partner's
share of the items described in Treasury Regulation
Sections 1.7041(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6).
Affiliate. An "Affiliate" of Benton or Energy Partners means: (a)
any person directly or indirectly owning, controlling, or holding, with power
to vote, ten percent (10%) or more of the outstanding voting securities of
Benton or Energy Partners; (b) any person, ten percent (10%) or more of
whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with the power to vote, by Benton or Energy Partners;
(c) any person directly or indirectly controlling, controlled by, or under
common control with Benton or Energy Partners; (d) any officer or director of
Benton or Energy Partners or their Affiliates; and (e) any entity for which
Benton or Energy Partners or their officers and directors acts in the
capacity of an officer, director or general partner.
Assessments. Additional amounts of capital which may be required by
the Partnership to be paid by a Participant in addition to his Subscription.
Benton. Benton Oil and Gas Company, a Delaware corporation, a
Co-Managing General Partner.
Casing Point. "Casing Point" means the point in time in the
drilling of a well when total depth has been reached, appropriate tests have
been made and a decision must be made to run and set production casing or
production liner, as the case may be, and a decision to commence attempting
to complete the well is made or the well is plugged and abandoned.
Code. The Internal Revenue Code of 1986, as amended.
Completion Costs. "Completion Costs" means, as to any well all
those costs incurred after Casing Point. Generally, these costs include all
costs, liabilities and expenses, whether tangible or intangible, necessary
to complete a well and bring it into production, including installation of
service equipment, tanks, and other materials necessary to enable the well to
deliver production.
Cost. When used in connection with selling Proven Producing
Properties, undeveloped leases and other interests to the Partnership or
providing for the drilling or completion of a Partnership Well by Benton,
Energy Partners or their Affiliates, "Cost" shall mean the sum of (1 ) the
amounts paid by Benton, Energy Partners or their Affiliates to unaffiliated
third parties for the property, including bonuses; (2) title insurance or
title examination costs, brokers commissions, filing fees, recording costs,
transfer taxes, if any, and like charges in connection with the acquisition
of the property; (3) delay rentals and ad valorem taxes paid with respect
to the property to the date of its transfer to the Partnership; (4) interest
on funds used to acquire or maintain the property; (5) equipment, drilling,
seismic and all other usual costs for the acquisition and development of a
property or having a well drilled; and (6) a portion of Benton's, Energy
Partners' or their Affiliates' reasonable, necessary and actual expenses
for geological, geophysical, seismic, engineering, drafting, accounting,
legal and other like services, including a share of compensation of
employees or others, allocated to the property in accordance with
generally accepted and customary industry practices, and screening costs
paid to third parties for
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geological, geophysical and seismic evaluations of Benton's, Energy
Partners' or their Affiliates' lease inventory, to the extent such
evaluations condemn the acreage prior to selection for the Partnership. Delay
rentals, ad valorem taxes, interest on funds used to acquire or maintain
properties and direct expenses will not be included in cost when such
expenses were incurred by Benton, Energy Partners or their Affiliates in
connection with the past drilling of wells which are not producers of
sufficient quantities of oil or gas to make commercially reasonable their
continued operation, or when such expenses, as enumerated in subsections (3)
and (4) hereof, were incurred more than thirty-six (36) months prior to
the purchase of the property interest by the Partnership. When used with
respect to services, "Cost" means the reasonable, necessary and actual
expenses incurred by Benton or its Affiliates on behalf of the Partnership in
providing such services, determined in accordance with generally accepted
and customary industry practices. Except as otherwise indicated or as
the context requires, cost means the price paid by Benton, Energy
Partners or their Affiliates in a fair or arm's length transaction.
Development Well. A well drilled as an additional well to the
same reservoir as other producing wells on a lease, or drilled on an offset
lease usually not more than one location away from a well producing from the
same reservoir.
Direct Expenses. Those third party expenses which are directly
attributable to the Partnership. These expenses include the costs of outside
accounting and auditing services, reserve and engineering reports, legal
fees and other third party expenses where such other third party costs would
not be incurred except for the requirements imposed by the terms of the
Partnership Agreement.
Energy Partners. Energy Partners, a California corporation, a
Co-Managing General Partner.
Exploratory Well. A well drilled either in search of a new and as
yet undiscovered pool of oil or gas, or to extend greatly the limits of a
field under development.
General and Administrative Expenses. Those reasonable and
necessary expenses incurred by Benton, Energy Partners and their
Affiliates for administering the Partnership including, without
limitation, computer use costs, accounting and legal fees, geological and
engineering costs, office rent, telephone expenses, secretarial salaries,
the cost of printing and mailing reports to the Participants and
reimbursement of the out-of-pocket operating costs (including employee costs
and a fair allocation of general office overhead computed on a cost basis) of
Benton, Energy Partners and their Affiliates which pertain to Partnership
business. All overhead costs shall be allocated in accordance with generally
accepted industry standards, subject to annual independent audit, except for
the first twelve (12) months of operations when the reimbursement shall be in
the form of a fee.
General Partner. A person or entity who executes the Subscription
Agreement and the Partnership Agreement as a General Partner and/or any person
who becomes a substituted General Partner in accordance with the terms of such
Partnership Agreement.
Joint and Several Liability. Joint liability is liability in which
co-obligors must all be joined as codefendants in any action, whereas joint
and several liability is where a claimant against the Partnership, at his
option, may sue any one or more of the obligors, in this case, the General
Partners.
Limited Partner. A person or entity who executes the
Subscription Agreement and the Partnership Agreement as a Limited Partner
and/or any person who becomes a substituted Limited Partner in accordance
with the terms of such Partnership Agreement.
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Lower Risk Well. A well which is lower risk than an Exploratory
Well due to its location in an area having a history of proven hydrocarbon
production and to its (a) being controlled seismically, (b) being
controlled through subsurface geology, or (c) proximity to existing, producing
wells.
Managing General Partners. Benton or Energy Partners, each of which is
a Co-Managing General Partner of the Partnership.
Memorandum. The Private Placement Memorandum, dated February 1,
1991, relating to the placement of preorganizational units of interest in the
Partnership.
Net Proceeds. The Proceeds, less the sum of Organization
and Marketing Expenses, Selling Commissions, the first year General and
Administrative Expenses and Partnership working capital.
Offering Termination Date. April 30, 1991 (subject to an extension of
up to 90 days).
Organization and Marketing Expenses; Selling Commissions.
Organization expenses include all costs of organizing the Partnership,
including, but not limited to, expenses for printing, mailing, and other
expenses of qualification of sale of securities under federal and state law,
including attorney fees, accounting fees, printing and reimbursement of time
and expenses incurred by the Co-Managing General Partners in connection with
organizing the Partnership. Marketing expenses include additional Selling
Commissions of one percent (1%) to three percent (3%) of the Subscriptions
of the Participants which will be paid to wholesalers and selected
broker/dealers who assist in coordination of and education of broker/dealers
participating in the placement of Units. Selling Commissions, including
wholesaling fees, to broker/dealers will not exceed ten percent (10%) of
Subscriptions. In addition, broker/dealers may receive a reimbursement of
their due diligence expenses in an amount not to exceed one-half of one
percent (0.5%) of the Subscriptions of the Participants, which amount may
be paid directly to broker/dealers or to Energy Partners to reimburse it for
due diligence expenditures. The total amount of Organization and Marketing
Expenses (exclusive of Selling Commissions) will not exceed six and one-half
percent (6.5%) of the Subscriptions of the Participants. Any costs In excess
of this amount will be borne by the Co-Managing General Partners.
Participant. Each person or entity holding any number of Units in
the Partnership, whether such individual owns these Units as a General
Partner or as a Limited Partner. The term Participant also includes
Benton and Energy Partners to the extent they purchase interests on the
same basis as other Participants and to the extent of their one percent (1%)
capital contributions.
Partner Minimum Gain. An amount, with respect to each "partner
nonrecourse debt" (within the meaning of Treasury Regulation
Section 1.7041-T(b)(4)(iv)(k)(4)), equal to the "partnership minimum gain"
(within the meaning of Treasury Regulation Sections 1.7041T(b)(4)(iv)(a)(2)
and 1.704-1T(b)(4)(1v)(c)) that would result if such partner nonrecourse debt
were treated as a "nonrecourse liability" (within the meaning of Treasury
Regulation Section 1.704-1T(b)(4)(iv)(k)(3)), determined in accordance with
Treasury Regulation Section 1.7041T(b)(4)(iv)(h).
Partner Nonrecourse Deductions. As defined in Treasury Regulation
Section 1.704-1T(b)-(4)(iv)(h)(3). The amount of Partner Nonrecourse Deductions
with respect to a "partner nonrecourse debt" (within the meaning of Treasury
Regulation Section 1.704-1T(b)(4)(iv)(k)(4)) for a Partnership fiscal year
equals the excess, if any, of the net increase, if any, in the amount of Partner
Minimum Gain attributable to such partner nonrecourse debt during such fiscal
year over the aggregate amount of any distributions during such fiscal year to
the Partner who bears the economic risk of loss for such partner nonrecourse
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debt to the extent such distributions are from the proceeds of such
partner nonrecourse debt and are allocable to an increase in Partner Minimum
Gain attributable to such partner nonrecourse debt, determined in accordance
with Treasury Regulation Sections 1.704-1T(b)(4)(iv)(h)(3).
Partners. Benton, Energy Partners, the Participants and the Special
Limited Partners (if any), all of whom are general partners or limited
partners under the California Revised Limited Partnership Act.
Partnership. Benton Oil & Gas Combination Partnership 1991-1, L.P.
Partnership Agreement. This Agreement of Limited Partnership.
Partnership Well Costs. The Costs of (a) acquiring leases,
performing geological, geophysical and seismic tests on leasehold property,
drilling, testing, completing or equipping wells, including geological and
engineering services, whether provided by Benton or third parties, (b)
constructing and/or purchasing facilities and equipment such as pumping
units, storage facilities and separators which are necessary for the operation
of a well, (c) constructing gathering lines from each well to a gas
transmission pipeline in the area, and (d) abandoning a well prior to
commercial production. Partnership Well Costs do not include the costs of
operating such wells or Direct Expenses or General and Administrative
Expenses of operating the Partnership.
Partnership Wells. The wells to be drilled by the Partnership,
including Development Wells, Lower Risk Wells and Exploratory Wells.
Proceeds. The amount paid by all Subscribers for Units in the
Partnership, including amounts paid by Benton or Energy Partners for Units,
and amounts paid by Benton and Energy Partners as capital contributions to
the Partnership.
Properties. Properties acquired by the Partnership, including
Proven Producing Properties, Recompletion Wells, Rework Wells and
Partnership Wells.
Prospect. An area in which the Partnership owns or intends to own one
or more oil and gas interests, which is geographically defined on the basis
of geological data by Benton and which is reasonably anticipated by Benton to
contain at least one reservoir.
Proven Producing Properties. Properties acquired by the
Partnership which are currently producing oil and/or gas.
Recompletion Wells; Rework Wells. Wells purchased by the
Partnership, which the Partnership intends to recomplete so as to enhance
their oil and/or gas production either by completing to a shallower or deeper
formation, refracing, or any other method designed to enhance oil and/or gas
revenues, in the discretion of the Co-Managing General Partners.
Special Limited Partners. The Special Limited Partners shall be
those broker/dealers, if any, admitted to the Partnership. The Special
Limited Partners shall make no contribution to the Partnership s capital and
shall not be liable for Assessments.
Subscriber. The investor who executes a Subscription Agreement and
becomes a Participant at such time as the Subscription is accepted by Energy
Partners.
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Subscription Agreement. The instrument executed by a Subscriber
which also constitutes execution of the Partnership Agreement upon acceptance
of the Subscription Agreement by Energy Partners.
Subscriptions. Monies paid by Subscribers as initial capital
contributions to the Partnership.
Units. Units of assessable preformation partnership interest in the
Partnership, and such interests after formation of the Partnership, each
representing an original capital contribution of Five Thousand Dollars
($5,000) to the Partnership.
ARTICLE III. PURPOSE
The sole purpose and ordinary business of the Partnership shall be
to explore for oil and gas, to acquire undeveloped leases and Proven
Producing Properties and other interests, to drill Exploratory Wells,
Lower Risk Wells and Development Wells, to acquire and recomplete existing
wells, to dispose of properties, and to conduct all other operations relating
to the exploration, production and sale of oil and gas as Benton deems to be
in the best interest of the Partnership, including the sale of all or
substantially all of the Partnership s assets. It is expected that
Partnership operations will be undertaken primarily in California, Texas,
Louisiana and the Gulf of Mexico but the Partnership may participate in other
areas of the country.
ARTICLE IV. CAPITAL OF THE PARTNERS
A. CAPITAL CONTRIBUTIONS
1. Each Participant has made a capital contribution to the
Partnership in cash equal to the amount set forth in the
Subscription Agreement submitted to Energy Partners by the
Participants and accepted by Energy Partners. A Participant's
interest in the Partnership, including his interest in undistributed
profits, will be subject to the debts of the Partnership.
2. Benton and Energy Partners will make a capital contribution
to the Partnership as required to pay their share of costs as provided
in Article V hereof, and in return for such payments, Benton, Energy
Partners and other General Partners shall be entitled to share in all
items of income, gain, loss, deduction or credit allocated to the
respective Partners as provided in Article VI.
3. Benton and Energy Partners will make a capital
contribution of one percent (1%) of the total contributions as a
General Partner.
4. Each Participant is subject to Assessments in the amount
of up to twenty-five percent (25%) of the amount of his original
capital contribution.
5. The Special Limited Partners shall not be liable for
Assessments or to make any other capital contributions to the
Partnership.
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B. DETERMINATION OF CAPITAL ACCOUNTS
A single capital account shall be maintained for each Partner
(or transferee of a Partner, which transferee shall succeed to the
allocable portion of the capital account of his transferor, as of the
effective date of the transfer). The capital account for each Partner
will be- determined based on the Treasury Regulations regarding maintenance
of capital accounts promulgated under Code Section 704(b), including
Treasury Regulation Section 1.704-1(b)(2)(iv)(g). Generally, these Treasury
Regulations provide that capital accounts of Partners shall be increased by
(1) the amount of money contributed by a Partner to the Partnership, (2) the
fair market value of, property contributed by a Partner to the
Partnership and (3) allocations to a Partner of Partnership taxable income
and gain (or items thereof). Capital accounts will be decreased by (1) the
amount of money distributed to a Partner by the Partnership, (2) the fair
market value of property distributed to a Partner by the Partnership,
(3) allocations of Partnership tax loss and deduction (or items thereof),
and (4) organizational and syndication costs which are not amortized.
In the event of a distribution in kind of any property, the capital
accounts of the Partners shall first be adjusted to reflect the manner in
which the unrealized income, gain, or loss inherent in the property
(which has not been previously reflected in capital accounts) would be
allocated among the Partners if there were a taxable disposition of the
property at its fair market value.
C. SIMULATED DEPLETION ACCOUNT
Solely for purposes of maintaining capital accounts, depletion with
respect to oil and gas properties shall be computed at the Partnership
level. The Partnership shall compute a simulated depletion allowance on each
oil or gas property using the percentage depletion method. The
Partnership's simulated depletion allowance shall reduce the Partners'
capital accounts in the same proportion as such Partners (or their
predecessors in interest) were allocated adjusted basis with respect to such
property. The aggregate capital account adjustments for simulated depletion
allowances with respect to an oil or gas property shall not exceed the
Partnership's adjusted tax basis in such property. Upon the taxable
disposition of an oil or gas property by the Partnership, the Partnership's
simulated gain or loss shall be determined by subtracting its simulated
adjusted basis in such property from the amount realized from such
disposition. (The Partnership's simulated adjusted basis in an oil and gas
property is determined in the same manner as adjusted tax basis except that
simulated depletion allowances are taken into account instead of actual
depletion allowances.) 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 Partnership's simulated adjusted basis in
such property is allocated to such Partners and shall increase such Partners'
capital accounts accordingly. Any resultant simulated loss shall be
allocated to the Partners in proportion to the Partners' allocable shares of
the total amount realized from the disposition of such property that
represents recovery of the Partnership's simulated adjusted basis in such
property, and shall reduce such Partners' capital accounts accordingly.
D. INTEREST ON CAPITAL
No interest shall be paid on the capital account of, or on any
capital contributed by, any Partner either before or after the time repayment
should be made.
ARTICLE V. COSTS CHARGED TO PARTNERS
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For purposes of determining liability for Assessments, sharing in
distributions and otherwise as provided herein, amounts expended by the
Partnership shall be charged as follows, provided that costs paid out of
Assessments shall only be charged to Partners who paid such Assessments:
A. PARTNERSHIP COSTS
All Partnership Well Costs, including completion costs, costs of
Recompletion Wells, costs of acquiring and developing Proven Producing
Properties, and geological, geophysical and seismic costs, and all
Organization and Marketing Expenses shall be allocated one hundred percent
(100%) to the Participants.
B. OPERATING COSTS
The expenses of operating Partnership Wells are to be charged in
the same ratio that revenues are shared in such wells, pursuant to paragraph
A of Article Vl. In addition, operating costs shall include the costs of
recompleting Partnership Wells.
C. OTHER COSTS
All General and Administrative Expenses shall be charged
seventy-five percent (75%) to the Participants and twenty-five percent
(25%) to the Co-Managing General Partners, except that the reimbursement of
General and Administrative Expenses payable to the Co-Managing General
Partners for the first twelve (12) months of the Partnership's operations
and equaling three percent (3%) of the Participants' Subscriptions shall be
charged entirely to the Participants. All costs which are not otherwise
specifically provided for in this Article V(A) above, including, but not
limited to Selling Commissions, shall be charged one hundred percent (100%)
to the Participants.
Costs charged to Participants and the Co-Managing General
Partners will be allocated among the Participants as provided in paragraph C
of Article VI.
D. LOSS ON SALE OF PARTNERSHIP ASSETS
If the Partnership sells any oil and gas property at a price which is
less than its undepleted cost, the Partnership shall charge the loss on such
sale to the Partners in the ratio of their remaining undepleted bases in such
property at the time of sale.
If the Partnership sells any asset, other than an oil and gas
property, at a price which is less than its undepreciated cost, the Partnership
shall charge the loss on such sale to the Partners who bore the cost of such
asset.
ARTICLE VI. ALLOCATION OF REVENUES AND DISTRIBUTIONS OF CASH
A. ALLOCATION OF REVENUES
All Partnership revenues shall be allocated seventy-four and
one-fourth percent (74.25%) to the Participants, twenty-four and
three-fourths percent (24.75%) to the Co-Managing General Partners and one
percent (1%) to the Special Limited Partners. For Partnership purposes,
revenues shall mean funds received by the Partnership from all sources, except
capital contributions, borrowings,
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Assessments and interest on subscriptions, whether occurring during the term
of the Partnership or occurring as part of any plan of dissolution and
liquidation of the Partnership; provided, however, that the portion of the
revenues generated by the taxable disposition of a Partnership oil and gas
property that represents recovery of its simulated adjusted tax basis therein
will be allocated to the Partners in the same proportion such Partners (or
their predecessors in interest) were allocated the basis of such property
pursuant to paragraph C of Article IV; provided, further, that the portion
of the revenues generated by the taxable disposition of a Partnership
asset, other than an oil and gas property, equal to the Partnership's
adjusted tax basis in such property shall be allocated to the Partners in the
same proportion that the Partners bore the cost of such asset.
B. CASH DISTRIBUTIONS
The Partnership expects to distribute quarterly, or on a more current
basis if so determined by the Co-Managing General Partners, amounts to the
Partners equal to approximately the difference between revenues allocated to
the respective Partners as provided in this Article Vl, and costs charged to
the Partners as provided in Article V. This provision shall not, however,
serve as a limitation on the right of the Co-Managing General Partners
to retain, pledge or use so much of the revenues or other assets of
the Partnership, including amounts required to eliminate any capital
deficit of the Partners, to conduct additional operations of the
Partnership, to establish reserves for anticipated expenditures, or to repay
any amounts borrowed by the Partnership to finance the conduct of such
operations.
C. ALLOCATIONS AMONG PARTICIPANTS, SPECIAL LIMITED PARTNERS AND
CO-MANAGING GENERAL PARTNERS
All allocations of income, gain, loss and deduction to the
Participants as a class shall be allocated among the Participants based on
the ratio of their respective paid capital contributions, including
Assessments. Expenses and other costs paid from Assessments shall be charged
only to those Partners who paid the Assessment. All allocation of income,
gain, loss, deduction to the Special Limited Partners, if any, shall be
allocated among the Special Limited Partners in such proportions as shall be
established at the time of their admission to the Partnership or as they
shall later agree. All allocations of income, gain, loss, deduction and all
capital contributions and Assessments to the Co-Managing General Partners
will be divided eighty percent (80%) to Benton and twenty percent (20%) to
Energy Partners.
ARTICLE VII. ELECTIONS AND TAX ALLOCATIONS
For purposes of federal income taxes, and appropriate state or
local income taxes, the following allocations shall be made:
A. To the extent permitted by law, and except as otherwise
provided by this Article VII, all income, gain, losses and deductions
shall be allocated to the party who has been charged with the
expenditures or credited with the revenues giving rise to such deductions or
income.
B. The basis of Partnership properties for purposes of Code
Section 613A(c)(7)(D) shall be allocated in the same ratio as Partnership
Costs are allocated.
C. Notwithstanding the foregoing, however, production required
to be allocated for the purpose of computing the depletion deduction
(including percentage depletion in excess of the depletable basis of the
property) shall be allocated in the ratio in which the related revenues are
shared.
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D. All tax credits and tax credit recapture shall be allocated
in the ratio in which revenues are shared at the time the expenditure giving
rise to such tax credit arises.
E. The Partnership shall make an election to deduct intangible
drilling and development costs on its federal Income tax return in
accordance with the option granted by the Code. No election shall be made
by the Partnership to be excluded from the application of the provisions of
Subchapter K of the Code.
F. In the event of the transfer of an interest in the
Partnership, or in the event of the distribution of property to any party
hereto, the Partnership may (but is not required to) file an election in
accordance with the applicable Treasury Regulations to cause the basis of
the Partnership's assets to be adjusted for federal income tax purposes as
provided by Code Sections 734 and 743.
G. Notwithstanding the foregoing provisions of this Article
VII, any allocation of loss or deduction to a Partner would reduce such
Participant's capital account balance below zero or would increase the
negative balance in such Participant's capital account at a time when another
Participant has a positive capital account balance, as determined at the close
of the period in respect of which the loss or deduction, as the case may be,
is to be allocated, such excess shall instead be allocated pro rata to
Participants having positive capital account balances until such capital
account balances are reduced to zero; provided, however, that in no event
shall there be a reallocation of any item of income, gain, loss or
deduction allocated among the Partners pursuant to this Agreement for prior
years.
Notwithstanding the foregoing provisions of this Article VII:
(1) The losses and deductions allocated to any
Partner pursuant to the foregoing provisions of this Article VII
shall not exceed the maximum amount of losses and deductions that can
be so allocated without causing such Partner to have an Adjusted
Capital Account Deficit at the end of any fiscal year. All losses
and deductions in excess of the limitation set forth in this clause
(1) shall be allocated to other Partners.
(2) If there is a net decrease in partnership
minimum gain (within the meaning of Treasury Regulation Sections
1.7041T(b)(4)(iv)(a)(2) and 1.704-1T(b)(4)(iv)(c)) during any
Partnership fiscal year, each Partner shall be specifically
allocated items of Partnership income and gain for such year (and,
if necessary, subsequent years) in an amount equal to the greater of:
(i) the portion of such Partner s share of the net decrease
in partnership minimum gain, determined in accordance with
Treasury Regulation Section 1.704-1T(b)(4)(iv)(f), that is
allocable to the disposition of Partnership property
subject to nonrecourse liabilities (within the meaning
of Treasury Regulation Section 1.704-1T(b)(4)(iv)(k)(3)),
determined in accordance with Treasury Regulation Section
1.704-1T(b)(4)(iv)(e), and
(ii) if such Partner would otherwise have an Adjusted
Capital Account Deficit at the end of such fiscal year, an
amount sufficient to eliminate such Adjusted Capital Account
Deficit.
The items of income and gain to be so specially allocated
pursuant to this clause (2) shall be determined in accordance with
Treasury Regulation Section 1.704-1T(b)(4)(iv)(e). This clause (2) is
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intended to comply with the minimum gain chargeback
requirement of Treasury Regulation Section 1.7041T(b)(4)(iv)(e) and
shall be interpreted consistently therewith.
(3) Notwithstanding any provision of this Paragraph G
to the contrary (except clause (2)), if there is a net decrease in
Partner Minimum Gain attributable to a partner nonrecourse debt
(within the meaning of Treasury Regulation Section
1.704-1T(b)(4)(iv)(k)(4)) during any Partnership fiscal year, each
Partner who has a share of the Partner Minimum Gain
attributable to such partner nonrecourse debt, determined in
accordance with Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(5),
shall be specially allocated items of Partnership income and gain for
such fiscal year (and, if necessary, subsequent years) in an amount
equal to the greater of:
(i) the portion of such Partner s share of the net
decrease in Partner Minimum Gain attributable to such
partner nonrecourse debt, determined in accordance with
Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(5), that is
allocable to the disposition of Partnership property subject
to such partner nonrecourse debt, determined in accordance
with Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(4), and
(ii) if such Partner would otherwise have an Adjusted
Capital Account Deficit at the end of such fiscal year, an
amount sufficient to eliminate such Adjusted Capital Account
Deficit.
The items of income and gain to be so specially allocated
pursuant to this clause (3) shall be determined in accordance with
Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(4). This clause (3)
is intended to comply with the minimum gain chargeback requirement
of Treasury Regulation Section 1.704-1T(b)(4)(iv)(h)(4) and shall be
interpreted consistently therewith.
(4) Subject to the priority rules of Treasury
Regulation Section 1.704-1T(b)(4), if any Partner unexpectedly receives
any adjustment, allocation or distribution described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
1.704-1T(b)(2)(ii)(d)(6), items of Partnership income and gain shall
be specially allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by Treasury
Regulation Sections 1.704-1 (b) and 1.704-1T, the Adjusted Capital
Account Deficit of such Partner as quickly as possible. It is intended
that this clause (4) qualify and be construed as a qualified
income offset within the meaning of Treasury Regulation Section
1.7041(b)(2)(ii)(d).
(5) If special allocations are required under clauses
(2), (3), and/or (4) in any fiscal year, such allocations shall be
made in the priorities required by Treasury Regulation Sections
1.704-1(b) and 1.704-1T.
(6) "Nonrecourse deductions" (within the meaning of
Treasury Regulation Section 1.704-1T(b)(4)(iv)(b)) for any fiscal year
or other period shall be specially allocated to the Partners in
proportion to their Units in the Partnership. Partner nonrecourse
deductions (within the meaning of Treasury Regulation Section
1.704-1T(b)(4)(iv)(h)(3)) for any fiscal year or other period
shall be specially allocated to the Partner who bears the economic
risk of loss with respect to the partner nonrecourse debt (within
the meaning of Treasury Regulation Section 1.704-1T(b)(4)(iv)(k)(4))
to which such partner nonrecourse deductions are attributable in
accordance with Treasury Regulation Section 1.704-1T(b)(4)(iv)(h).
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(7) The Partners acknowledge that all distributions of
cash (including distributions upon liquidation of the Partnership)
are intended to be made in accordance with the priorities set forth
in Articles V and VI and that the Partners capital accounts are
intended to reflect the manner in which such distributions are
intended to be made. The allocations set forth in clauses (1) (last
sentence), (2), (3), (4), and (6) (first sentence) (the
Regulatory Allocations ) are intended to comply with certain
requirements of Treasury Regulation Sections 1.704-1(b) and
1.704-1T(b)(4), but may result in distortions of the Partner's
capital accounts in relation to the distributions that each Partner
is intended to receive from the Partnership. Notwithstanding any
other provisions of this Article VII (other than the Regulatory
Allocations), the Regulatory Allocations shall be taken into account
in allocating other Profits, Losses and items of income, gain,
loss and deduction to the Partners so that, to the maximum extent
possible, at any point in time the Partners' capital accounts shall
reflect the manner in which distributions would be made to the
Partners, if the Partnership were liquidated and the proceeds of
such liquidation were distributed to the Partners in accordance with
Articles VI and XVIII.
ARTICLE VIII. APPLICATION OF PROCEEDS
Net Proceeds will be used solely for the conduct of Partnership
operations.
In view of the fact that Partnership activities will not
commence until sales are closed and Partnership operations commence,
Benton and Energy Partners reserve the right to change the estimated
allocation of Proceeds, as described below, in the best interest of the
Partnership. However, it is anticipated that the Net Proceeds will be
applied by the Partnership on the basis of approximately the following
percentages:
ACTIVITY - ASSUMING THE MINIMUM AMOUNT OFFERED IS RAISED PERCENTAGE
- -------------------------------------------------------- ----------
Acquisition of Proven Producing Properties 100%
Drilling and Completion of Partnership Wells -0-
ACTIVITY - ASSUMING THE MAXIMUM AMOUNT OFFERED IS RAISED PERCENTAGE
- ------------------------------------------------------------- ----------
Acquisition of Proven Producing Properties 60%
Drilling and Completion of Partnership Wells 40%
ARTICLE IX. FORMATION OF PARTNERSHIP
In the sole discretion of the Co-Managing General Partners, the
Partnership may be formed as soon as the minimum Subscriptions ($250,000)
have been raised. Additional Participants may be admitted to the
Partnership until the Offering Termination Date, as extended. From the time
the minimum Subscriptions have been received and the Partnership formed until
the Offering Termination
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Date or final closing date, the Partnership will close at the end of each
month and admit new Participants and will acquire either a greater working
interest in the Proven Producing Properties previously acquired or will
acquire interest in additional Proven Producing Properties.
At the sole discretion of the Co-Managing General Partners, the
Partnership may continue to have monthly closing dates until such time as
the Offering Termination Date occurs or the Partnership sales are closed.
Once the final termination date has occurred or the Partnership sales
have closed, then all Participants will share in all Partnership costs and
revenues on a proportionate basis thereafter. The Partnership will not
engage in any recompletions, nor will the Partnership drill any wells, until
the final termination date.
ARTICLE X. TERM AND CONVERSION OF GENERAL PARTNER UNITS
A. The term of the Partnership will commence on the date of
execution of this Agreement, and will continue until December 31, 2040, and
will terminate at such earlier time as all of the interests and properties
acquired for the Partnership have been fully depleted, disposed of, sold
or abandoned, unless sooner terminated as set forth in Article XVI or XVIII of
this Agreement.
The calendar year is the Partnership s fiscal year, subject to
change by Benton and Energy Partners as permitted by the Code.
B. Following the completion of the Partnership s drilling
activities (but in no event prior to January 1, 1993), at the option of
Benton and Energy Partners, and subject to the receipt of the opinion of
counsel described below, the General Partner Units may be converted to
Limited Partner Units. Such conversion shall occur upon compliance with
this paragraph B. All other rights and obligations under this Agreement
shall not be affected by such conversion. Prior to any such conversion,
Benton and Energy Partners shall obtain an opinion of tax counsel to the
Partnership to the effect that such conversion would not result in any
materially adverse federal tax consequences to the Partnership or the General
Partners. In order to accomplish such conversion, Benton and Energy
Partners will (i) amend this Agreement with such changes therein or
amendments thereto as are deemed appropriate by Benton and Energy
Partners and that do not adversely affect the General Partners, (ii) file
an amended Certificate of Limited Partnership with the Secretary of State
for the State of California and (iii) take such other actions as are
necessary or appropriate to accomplish conversion of the General Partner
interests. Notwithstanding the foregoing, Benton and Energy Partners shall
not be obligated to cause conversion of the Partnership or may delay
such conversion if Benton and Energy Partners or their tax counsel determine
that conversion at that time would not be in the best interests of the
General Partners.
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ARTICLE XI. RIGHTS AND OBLIGATIONS OF BENTON AND ENERGY PARTNERS
A. Benton and Energy Partners shall be the Co-Managing
General Partners of the Partnership and as such shall conduct, direct and
exercise full control over all activities of the Partnership. Generally,
Benton shall be primarily responsible for all of the Partnership's oil and gas
activities and Energy Partners shall be primarily responsible for all the
Partnership's administrative activities. In order to carry out the purposes
of the Partnership as set forth in Article III of this Agreement, the
Participants and the Special Limited Partners, if any, agree that Benton and
Energy Partners have the rights and obligations set forth below.
1. Benton may purchase or sell any oil and gas interest
and may execute on behalf of the Partnership any and all documents or
instruments of any kind which Benton may deem appropriate in carrying
out the interests of the Partnership, including, but without
limitation, deeds, assignments, leases, subleases, operating
agreements, farmout agreements, unitization agreements, pooling
agreements, sales contracts gas sales contracts, transportation
contracts, division orders, transfer orders, or other marketing
agreements, documents or instruments of any kind or character or
amendments thereto, which relate to the affairs of the Partnership;
2. Energy Partners shall maintain complete and accurate
books of account for the Partnership; said books shall be kept at the
principal office of the Partnership and shall be open to inspection
after reasonable notice and request by any Partner or his authorized
representative, at his own expense, at any time during ordinary
business hours;
3. Within one hundred fifty (150) days after the end of
the fiscal year, Energy Partners shall provide each Participant and
Special Limited Partner on an annual basis commencing at the end of
the second full year of Partnership operations an independent
petroleum engineer s appraisal of the status of the properties;
4. Energy Partners shall provide each Participant and
Special Limited Partner with an annual report (copies of which,
together with a report on oil and gas reserves and a tax information
report, shall be furnished to appropriate state securities
administrators, as required) within one hundred fifty (150) days (or
such shorter period as may be required by law) after the close of the
Partnership's fiscal year, containing the following information:
a) Financial statements, including the
balance sheet and statements of operations, Partners'
equity and changes in financial position, prepared in
accordance with generally accepted accounting principles and
accompanied by an auditor's report containing the opinion of
an independent certified public accountant;
b) A description of each Prospect in which the
Partnership owns an interest, including the cost,
location, number of acres under lease and interest owned
by the Partnership, except that succeeding reports win
contain only material changes from the preceding report;
c) A summary itemization by type and/or
classification of the total fees, reimbursements and
compensation paid by the Partnership, or indirectly on
behalf of the Partnership, to Benton, Energy Partners or
their Affiliates during the period; and
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d) A schedule reflecting the total Partnership
costs, and where applicable, the costs pertaining to each
Prospect, the costs paid by Benton and the costs paid by the
Participants and the Special Limited Partners, the total
Partnership revenues, the revenues received or credited to
Benton, and the revenues received or credited to the
Participants and the Special Limited Partners during the
period;
5. Energy Partners shall furnish a report to each
Participant and Special Limited Partner by March 15 of each year,
containing such information as Energy Partners deems necessary for the
proper presentation of federal income tax returns;
6. Energy Partners shall maintain, at the principal
office of the Partnership, copies of the Partnerships federal, state
and local income tax returns and reports for the six (6) most recent
years;
7. Benton will purchase, at the expense of the
Partnership, liability and other insurance to protect the Partnerships
properties and business;
8. Benton and Energy Partners may enter into any
agreement for the borrowing of money from a commercial bank or other
lending institution for payment of expenses of drilling and completion
activities on wells started with Proceeds, the acquisition of Proven
Producing Properties and for payment of General and Administrative
Expenses, including the purchase and lease of oil and gas properties
or equipment, and are authorized to assign any portion of, or all of,
the Partnerships properties and revenues therefrom for the purpose of
securing any such borrowed money; provided, however, that such
borrowing shall not exceed, in principal amount, twenty-five percent
(25%) of the Proceeds plus all paid Assessments; provided, further,
that in no event will the lender have the election to convert its
position as creditor Into an equally interest in the Partnership or in
Benton, Energy Partners or In any of their Affiliates;
9. Benton and Energy Partners may, in the sole exercise
of their discretion, make unsecured loans and advances to the
Partnership at Benton s and Energy Partners interest cost and may
otherwise borrow money and assign to the lender Partnership properties
and production therefrom as security; provided, however, that the
interest on loans and advances made by Benton and Energy Partners or
their Affiliates shall not exceed the amounts which would be charged
by unrelated banks (without regard to financial abilities or
guarantees) on comparable loans for the same purpose, and no fees,
points or other financing charges will be charged to the Partnership
by Benton, Energy Partners or their Affiliates;
10. In the states where the Partnership conducts
activities, Energy Partners may file any necessary instruments
required to qualify the Partnership to do business in the particular
state as a limited partnership, or to cause the limited partnership
status of the entity to be recognized;
11. Benton may cause title to Partnership property to be
held in the name of Benton; provided, however, that if property is
held in the name of Benton, an unrecorded assignment to the
Partnership shall be made and maintained in the Partnership's files;
provided, further, that any such assignment shall provide that the
properties are being held for the benefit of the Partnership and are
not subject to the debts, obligations or liabilities of Benton or its
Affiliates;
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12. Benton and Energy Partners may admit Participants,
Special Limited Partners or substituted Participants without the
consent of other Participants or Special Limited Partners; provided,
however, that any transferee of a Unit or a Special Limited Partners
interest will receive a right to share in the profits and capital of
the Partnership but will not be a substituted Partner without the
prior written consent of Benton and Energy Partners, which consent may
be given or withheld in their sole and absolute discretion; provided,
further, that Benton and Energy Partners will withhold their written
consent in the event that they have reasonably determined in their
sole discretion that such substitution could have an adverse effect on
the business activities or the legal or tax status of the Partnership,
under either state or federal law;
13. Benton and Energy Partners may admit one or more
additional managing general partners which may become a successor
entity to Benton and Energy Partners and take action which would have
the effect of providing an additional and/or a successor managing
general partner, if the holders of a majority of the Units outstanding
approve; provided, however, that such approval of the holders of Units
shall not be necessary if the additional managing general partner
proposed by Benton or Energy Partners is (1) an Affiliate of Benton or
Energy Partners; (2) an entity with which Benton or Energy Partners
has merged; or (3) a person or entity that has purchased all or
substantially all the assets of Benton or Energy Partners;
14. Benton and Energy Partners may call for a vote of the
Participants to be taken on the items set forth in Article XVI;
15. Energy Partners may cause the investment of
Partnership funds in short-term liquid securities until the
expenditure of such funds is necessary in connection with Partnership
activities;
16. Energy Partners and Benton may amend the Agreement,
including amending the Agreement to alter the Partnership's form so
that it becomes a different type of business entity, for business and
tax reasons, subject to the provisions of Article XVI;
17. Energy Partners and Benton may do any and all things
necessary or appropriate in order to accomplish the purpose of the
Partnership, subject to the provisions of this Agreement;
18. Energy Partners and Benton may conduct other oil and
gas drilling and acquisition programs or income programs which may
commence prior to, during or subsequent to the Partnership;
19. Benton may purchase assets from the Partnership in
connection with a dissolution of the Partnership, at a price which is
the greater of the then fair market value (which term shall mean the
value of the assets as determined by an independent oil an gas
engineer) or the highest bona fide offer for such assets by a third
party, if any, regardless of any difference between such fair market
value and the original cost to the Partnership of such assets (subject
to the approval of a majority in interest of the Participants if the
asset represents five percent (5%) or more of the initial value of the
assets of the Partnership);
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20. Energy Partners may make any and all elections for
purposes of federal, state or local income taxes that it deems
appropriate; and
21. Benton and Energy Partners may submit a partnership
claim or liability to arbitration or reference, assign the Partnership
property and trust for creditors or on the assignee s promise to pay
the debts of the partnership, confess a judgment or dispose of the
goodwill of the Partnership for adequate consideration.
B. Benton and Energy Partners shall have no authority on behalf
of the Partnership or themselves to:
1. Do any act in contravention of this Agreement;
2. Use Partnership property or commingle any Partnership
bank accounts or monies with funds of Benton, Energy Partners or their
Affiliates, or to make advances to Benton, Energy Partners or their
Affiliates, except where necessary to secure tax benefits of prepaid
drilling and completion costs, and in no event will such advances
include non-refundable payments for capital completion costs prior to
the time that a decision is made that the well warrants such
equipment;
3. Take any action with respect to partnership assets or
property which does not primarily benefit the Partnership, including,
among other things, the utilization of Partnership funds as
compensating balances for its own benefit, and the commitment of
future production n not in the best interests of the Partnership;
4. Make any loans of Partnership funds to Benton, Energy
Partners or their Affiliates;
5. Make or institute any marketing arrangements or other
relationships affecting the property of the Partnership where the
benefits are not fairly and equitably apportioned according to the
respective interests of all parties; or
6. Knowingly enter into any arrangements involving
working interests in any oil and gas property which commit the working
interest to be held in an entity which limits the liability of the
General Partners as to the working interest so as to cause the working
interest to be considered a passive activity so that losses from the
working interest may only offset passive activity income as set forth
in Code Section 469.
C. The following prohibitions and restrictions shall be
applicable to Benton:
1. If Benton sells, transfers or conveys all or any
portion of a lease to the Partnership, Benton must, at the same time,
sell, transfer, or convey to the Partnership an equal proportionate
interest in all its other leases in the same Prospects.
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2. A sale, transfer, or conveyance to the Partnership of
less than all of the ownership of Benton or its Affiliates in any
portion of a lease (the Subject Portion ) is prohibited unless the
interest retained by Benton or its Affiliates is a working interest,
the respective obligations of Benton or its Affiliates and the
Partnership to pay costs with respect to the Subject Portion are
proportionate to their respective working interests after the
transfer, and Bentons or its Affiliates interest in the revenues does
not exceed any amount proportionate to its retained working interest.
Benton or its Affiliates may not retain any overrides or other burdens
on the Subject Portion, and may not enter into any farmout
arrangements with respect to its retained interest, except to
nonaffiliated third parties or other partnerships sponsored by Benton.
For the purposes of this paragraph, the term Affiliate shall not
include another partnership where the interest of Benton is identical
to, or less than, Benton s interest in the Partnership.
3. Benton may never profit by drilling in contravention
of its fiduciary obligation to the Partners. All services provided to
the Partnership by Benton or its Affiliates will be embodied in a
written contract which precisely describes the services to be rendered
and all compensation to be paid.
ARTICLE XII. COMPENSATION OF BENTON AND ENERGY PARTNERS
Benton maintains a staff of geologists, engineers and land
personnel who are responsible for screening and acquisition of leases and
for conducting drilling and producing operations. The costs incurred in
maintaining these departments, including salaries of personnel, are allocable
in past to the Partnership's activities and are included in Partnership
Costs. Such costs shall be paid or reimbursed by the Partnership out of
Proceeds or revenues.
Benton and Energy Partners will also be reimbursed for General and
Administrative Expenses incurred on behalf of the Partnership as a fee for
the first twelve (12) months of Partnership operations and thereafter as a
reimbursement of expenses incurred. The amount of the fee which will be
allocated entirely to the Participants for the first twelve (12) months of
Partnership operations will be three percent (3%) of the Participants'
Subscriptions.
Signal Securities, Inc. will receive a wholesaling fee of up to three
percent (3%) of the total Units sold by the broker/dealers for which Signal
acts as a wholesaling broker/dealer.
As set forth in Article Vl, Benton and Energy Partners will share
in Partnership revenues in an amount in excess of their contribution to
Partnership costs. The Participants and the Special Limited Partners
consent to the receipt by Benton, Energy Partners and their Affiliates of
the benefits and profits set forth in this Article.
ARTICLE XIII. PROTECTION OF THE PARTIES
In any threatened, pending or completed action, suit or proceeding
to which the either of the Co-Managing General Partners was or is a party or
is threatened to be made a party by reason of the fact that
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it was or is a Co-Managing General Partner of the Partnership (other than an
action by or in the right of the Partnership) involving any alleged cause of
action for damages arising from the performance of oil and gas activities,
including exploration, development, completion, operation, or other
activities relative to management and disposition of oil and gas properties
or production from such properties, the Partnership will indemnify the
Co-Managing 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 or not
opposed to the best interests of the Partnership, and provided that their
conduct does not constitute negligence, misconduct or a breach of their
fiduciary obligations to the Participants and the Special Limited Partners.
The termination of any action, suit or proceeding by judgment, order or
settlement shall not, of itself, create a presumption that Benton or Energy
Partners did not act in good faith and in a manner which they reasonably
believed to be in or not opposed to the best interests of the Partnership.
In any threatened, pending or completed action or suit by the
Partnership in the right of the Partnership, to which a Co-Managing
General Partner was or is a party or is threatened to be made a party,
involving an alleged cause of action by a Participant or a Special Limited
Partner for damages arising from the activities of a Co-Managing General
Partner in the performance of management of the internal affairs of the
Partnership as prescribed by this Agreement, the Partnership will indemnify
the Co-Managing General Partner against expenses, including attorneys fees,
actually and reasonably incurred by it in connection with the defense or
settlement of such action or suit if it acted in good faith and in a manner
it reasonably believed to be in or not opposed to the best interests of the
Partnership, as specified in this paragraph, except that no indemnification
shall be made in respect of any claim, issue or matter as to which a Co-
Managing General Partner shall have been adjudged to be liable for
negligence, misconduct or breach of fiduciary obligation in the performance
of its duty to the Partnership unless and only to the extent that the court in
which such action or suit was brought shall determine upon application,
that, despite the adjudication of liability, but in view of all
circumstances of the case, a Co-Managing General Partner is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
To the extent that a Co-Managing General Partner has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to above, or in defense of any claim, issue or matter
therein, the Partnership shall indemnify a Co-Managing General Partner
against the expenses, including attorneys fees, actually and reasonably
incurred by it in connection therewith. Any such indemnification of a
Co-Managing General Partner shall be prohibited unless the Co-Managing
General Partner has determined in good faith that the course of conduct
which caused the loss or liability was in the best interest of the
Partnership; that such liability or loss was not the result of negligence
or misconduct by a Co-Managing General Partner; and that indemnification of
a Co-Managing General Partner or its Affiliates will not be allowed for
any liability imposed by judgment, and costs associated therewith, including
attorneys' fees, arising from or out of violation of state or federal
securities laws associated with the offer and sale of Partnership Units.
Indemnification will be allowed for settlements and related expenses of a
lawsuit alleging securities law violations, and for expenses incurred in
successfully defending such lawsuits, provided that a court either: (a)
approves the settlement and finds indemnification of the settlement and
related costs should be made or (b) approves indemnification of litigation
costs if a successful defense is made.
Any indemnification, unless ordered by a court, shall be made by the
Partnership only as authorized in the specific case and only upon a
determination by independent legal counsel in a written
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opinion that indemnification of a Co-Managing General Partner is proper in
the circumstances because a Co-Managing General Partner has met the
applicable standard of conduct set forth above.
The indemnification of a Co-Managing General Partner shall be limited
to and recoverable only out of the assets of the Partnership and not against
any Limited Partner or General Partner and indemnification of the Co-Managing
General Partners as to a third party is only with respect to such loss,
liability or damage not otherwise compensated for by insurance carried for the
benefit of the Partnership.
The Partnership may not incur the cost of that portion of
insurance which insures a Co-Managing General Partners from any liability
as to which the Co-Managing General Partner is prohibited from being
indemnified under this Article.
The General Partners hereby agree that each shall be solely and
individually responsible only for their pro rata share of the liabilities
and obligations of the Partnership, and any Participant who incurs liability
in excess of his pro rata share shall be entitled to contribution from the
other General Partners. Pursuant thereto, each Co-Managing General Partner
further agrees to indemnify each Participant from paying any liabilities or
obligations of the Partnership in excess of such Participant s capital
contribution. Furthermore, although the General Partners may be personally
liable for the liabilities and obligations to the Partnership, all such
liabilities and obligations shall be paid or discharged first with
Partnership assets (including insurance proceeds) before the General Partners
shall be obligated to pay or discharge any liability or obligation with their
personal assets.
ARTICLE XIV. RELATED PARTIES
Benton and Energy Partners and their Affiliates or related persons
or entities may be engaged or employed by the Partnership to render or
perform services for the Partnership and/or may sell property of any kind or
description to it, or may otherwise engage in transactions with the
Partnership. All such engagements, employments and other transactions shall
not be invalidated by reason of any such relationships so long as such person
is engaged, independently of the Partnership and as an ongoing business in
rendering such services or selling such equipment and supplies to a
substantial extent to other persons and such prices and terms are not higher
than those normally charged in the same geographic area by unaffiliated
persons or companies dealing at arm's length. If the person is not engaged in
business as provided above, then the price of such services shall be the cost
of such services, equipment or supplies to such person or the competitive
rate in the geographical area, whichever is less. Benton and Energy Partners
may be presently conducting or may conduct in the future other oil and gas
income, drilling and acquisition programs which may commence during or
subsequent to this Partnership. All contracts entered into between the
Partnership, Benton, Energy Partners and their Affiliates or related persons
or entities shall be terminated without penalty on not less than thirty (30)
days written notice by the Partnership or on sixty (60) days written
notice by Benton, Energy Partners or their Affiliates.
The leases transferred to the Partnership by Benton or its
Affiliates shall be sold at Cost unless Benton believes that the appraised
value is substantially lower than Cost. In such a case the value of the
lease will be determined by an independent appraiser and sold at the lower of
Cost or appraised value.
ARTICLE XV. RESTRICTIONS ON TRANSFERABILITY
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No Participant or Special Limited Partner shall have the power
to sell, assign or transfer his interest in the Partnership or to cause a
transferee to become a substituted Partner except upon the written consent of
Benton and Energy Partners. Each Participant and Special Limited Partner
specifically agrees to the admission of any substituted Partner as a Partner
when consented to by Benton and Energy Partners. Benton and Energy Partners
shall review any proposed transfer and shall withhold their consent In the
event they determine, in their sole and absolute discretion, that such
substitution could have an adverse effect on the business activities or the
legal or tax status of the Partnership or the remaining partners under
either state or federal law.
Each of Benton and Energy Partners may sell, assign, transfer, pledge
or encumber all or any portion of its rights to receive revenues as a
Co-Managing General Partner under this Partnership Agreement; provided,
however, that the assignment of such revenue interest shall not affect
Benton's and Energy Partners' other rights and obligations pursuant to this
Agreement.
In addition to the restrictions upon substitution of an additional
Participant or Special Limited Partner, neither a Participant nor a Special
Limited Partner may sell his rights to profits and capital In the Partnership
without furnishing Benton and Energy Partners with a copy of the offer to buy
such interest and giving Benton and Energy Partners the prior right for a
period of ten (10) days after receipt of written notice, to purchase such
interest on the terms contained in such offer. In the event Benton and
Energy Partners do not exercise their prior right to purchase such interest in
profits and capital within a ten (10) day period or notify the Participant or
Special Limited Partner that such right will not be exercised, the
Participant or Special Limited Partner shall have the right to sell his
interest in profits and capital for a period of forty-five (45) days.
Thereafter, the Participant or Special Limited Partner shall not sell any
part of his interest in profits and capital without again offering the same to
Benton and Energy Partners. A transferee of a Partner s right to profits
and capital who is not admitted as a Partner is not entitled to any of the
rights of a Partner. A transferee Participant or Special Limited Partner has
no greater right to terminate the Partnership than his transferor.
In no event shall any assignee or transferee hold less than one Unit
except by gift or operation of law.
ARTICLE XVI. RIGHTS, AUTHORITY AND LIABILITIES
OF PARTICIPANTS AND SPECIAL LIMITED PARTNERS
A. RIGHTS
By a majority vote of the outstanding Units, the Participants (but
not the Special Limited Partners) shall have the right to:
1. Remove Benton, Energy Partners and/or any successor
Co-Managing General Partner; terminate all contracts between the
Partnership and Benton, Energy Partners and their Affiliates; allow
Benton, Energy Partners or their Affiliates to remove all of their
property interests in the Partnership; and select a substitute
managing general partner or additional general partner to continue the
business of the Partnership;
2. Amend the Agreement, subject to the written consent
of Benton and Energy Partners concerning matter affecting their
interests in profits, losses, credits and property;
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3. Terminate the Partnership;
4. Approve the sale or exchange of all or substantially
all of the assets; and/or
5. Approve the admission of an additional general
partner proposed to be admitted as a Co-Managing General Partner by
Benton and Energy Partner, subject to the right of Benton and Energy
Partners to admit certain parties as general partners without the
consent of the Participants, as provided in paragraph 13 of Article
XI.
Either the Participants, upon the written request of ten percent
(10%) of the outstanding Units, or Benton or Energy Partners can cause a
vote to be taken with respect to the matters referred to above. Notice of a
meeting of the Participants will be mailed to the Participants within ten
(10) days of the receipt of such written notice unless compliance with
federal or state laws or regulations requires additional time. A meeting will
be held within sixty (60) days of the mailing of the notice. The presence,
in person or by proxy, of the holders of a majority of the Units outstanding
shall constitute a quorum and Participants may vote in person or by proxy at
any such meeting. If a quorum shall not be present or represented at any
meeting, a majority of the holders of Units entitled to vote at the meeting,
who are present in person or represented by proxy, may adjourn the meeting
from time to time, without notice other than announcement at the meeting,
until a quorum shall be present or represented. At any reconvening of an
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which could have been transacted at the
original meeting if a quorum had been present or represented. No matters
that would constitute taking part in control of the Partnership by the
Participants shall be considered at any meeting. In order to facilitate the
above rights, each Participant shall have a right to receive by mail the
complete list of names, addresses and interests of all other Participants, upon
written request to Energy Partners.
Any action that may be taken at a meeting of the Participants may
be taken without a meeting if a consent in writing setting forth the action
so taken is signed by Participants owning not less than the minimum Units
that would be necessary to authorize or take such action at a meeting at
which all the Participants were present and voted. Prompt notice of the
taking of action without a meeting shall be given to the Participants who have
not consented in writing.
Benton and Energy Partners shall have the right to amend the
Agreement; provided, however, that the Agreement shall not be amended by
Benton and Energy Partners in any material respect which would adversely
affect the rights of the Participants except by the affirmative vote of not
less than a majority of the outstanding amount of Units.
In the event that the Participants vote to remove Benton or Energy
Partners and substitute a new Co-Managing General Partner pursuant to
paragraph A of this Article XVI, the Partnership or the new Co-Managing
General Partner shall purchase the entire interest of
Benton or Energy Partners, including their interest in capital and
revenues on an assumed dissolution basis, at a price determined by mutual
agreement or by independent appraisal by a petroleum engineer selected by
mutual agreement. Such purchase shall provide for payment in full, or
assignment to Benton or Energy Partners of a direct interest in each
Partnership asset and/or liability equal to their then interest in revenue
and capital as determined above. Such payment or assignment shall occur at
the time of amendment of the Agreement and substitution of the new Co-Managing
General Partner.
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B. AUTHORITY
No Participant or Special Limited Partner other than a Co-Managing
General Partner has the power to manage or conduct Partnership business, to
act in the ordinary course of business for the Partnership or to sign for or
to bind the Partnership or any of its Partners and no such actions will be
considered to have been authorized by the other Partners.
C. LIABILITY
No Limited Partner shall be personally liable for any of the debts
of the Partnership or any of the losses thereof; provided, however, that the
amount committed by him to the capital of the Partnership, any return
thereof, and his interest in the Partnership's undistributed profits shall
be subject to liability. Additionally, a Limited Partner may be liable
for wrongfully distributed profits and interest on distributions in
return of capital.
If a Limited Partner receives the return of any part of his
contribution without violation of this Agreement or the California Revised
Limited Partnership Act, he shall be liable to the Partnership as
provided by such Act for the return of the amount of the returned
contributions but only to the extent necessary to discharge the
Partnership's liabilities to creditors who extended credit to the
Partnership during the period the contribution was held by the Partnership.
D. MISCELLANEOUS
No Participant or Special Limited Partner has any right of
repayment of his contributions to the Partnership except as expressly
provided in this Agreement. Participants have no right to vote on any
Partnership matters except as set forth in this Agreement. Special Limited
Partners have no voting rights except as provided by law. The Participants
and Special Limited Partners agree that they will not request a decree of
dissolution from a court until a majority vote of the outstanding Units
of Participants has approved such decree.
ARTICLE XVII. WITHDRAWAL OF BENTON OR ENERGY PARTNERS
A. EVENTS REQUIRING CONSENT OF ALL PARTNERS TO AVOID WITHDRAWAL
Except as waived in writing by all Partners at the time, Benton,
Energy Partners or any other General Partner shall cease to be a General
Partner of the Partnership upon the happening of any of the following events
of withdrawal: (1) Benton, Energy Partners or a General Partner withdrawing
from the Partnership by giving one hundred twenty (120) days written notice
to the other Partners, provided that the Partnership has completed its primary
drilling and completion activities and provided that the withdrawing Partner
pays all expenses incurred as a result of its withdrawal; (2) Benton, Energy
Partners or a General Partner is removed as a General Partner in accordance
with the terms of the Agreement; (3) in the case of a General Partner who is
a natural person, the death or adjudication or incompetency of a General
Partner; (4) in the case of a General Partner who is acting as a General
Partner by virtue of being a trustee of a trust, the termination of the trust,
but not merely the substitution of a new trustee; (5) in the case of a
General Partner which is a separate partnership, the dissolution and
commencement of winding up of the partnership; (6) in the case of Benton,
Energy Partners or a General Partner that is a corporation, the dissolution
of the corporation or the revocation of its charter; (7) in the case of an
estate,
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the distribution by the fiduciary of the estate s entire interest in the
Partnership; or (8) In the case of a General Partner that is any other legal
entity, the cessation of the legal existence of the legal entity.
Upon withdrawal, a General Partner other than Benton or Energy
Partners shall retain all rights to its proportionate share of revenues and
capital, but shall cease to have any vote or engage in any other activities
as a General Partner. The withdrawing General Partner will have the right to
transfer his interest subject to provisions of Article XV hereof.
B. EVENTS NOT CAUSING WITHDRAWAL
Neither Benton, Energy Partners nor any other General Partner shall
cease to be a general partner of the Partnership upon the happening of any of
the following events: (1) Benton, Energy Partners or a General Partner makes
an assignment for the benefit of creditors; (2) Benton, Energy Partners or
a General Partner files a voluntary petition in bankruptcy; (3) Benton,
Energy Partners or a General Partner is adjudicated bankrupt or insolvent;
(4) Benton, Energy Partners or a General Partner files a petition or answer
seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law or regulation; (5) Benton, Energy Partners or a General Partner files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against it in any proceeding of a type
described in clause (4), above; or (6) Benton, Energy Partners or a General
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator of Benton, Energy Partners or a General Partner or
of all or any substantial part of Benton's, Energy Partners' or a General
Partner's properties.
ARTICLE XVIII. DISSOLUTION
A. The parties specifically agree that the retirement,
resignation, expulsion, death, incompetency, bankruptcy, insolvency,
dissolution, withdrawal, conveyance of the interest of a Participant or
Special Limited Partner, or admission of a new partner, or express
decision of a Participant shall not dissolve the Partnership. In such
event, the heir, legal representative, successor or assign of such
Participant or Special Limited Partner, as the case may be, shall become an
assignee of such Participant's or Special Limited Partner's interest. Such
assignee shall not have the rights of a substituted Partner, unless (i) such
heir, legal representative, successor or assign shall execute an
addendum to this Agreement, agreeing to be bound by all of the terms and
conditions hereof and to assume all of the obligations of the deceased or
incapacitated Participant or Special Limited Partner hereunder and (ii) both
Benton and Energy Partners shall have consented to such substitution, which
consent may be given or withheld in their sole and absolute discretion. When
a Participant or Special Limited Partner dies or retires and the business
is continued, the Participant, Special Limited Partner or his estate has no
right to require the Partnership or the remaining Participants or Special
Limited Partners to make an evaluated purchase of his Partnership interest.
B. If, notwithstanding the intent of the Partners as set forth
in paragraph A. above, any event listed in paragraph A results in the
dissolution of the Partnership, such dissolution shall be considered in
contravention of the Agreement, and the Partnership shall be continued or
reconstituted. In the event that the Partnership is dissolved, despite the
intention of the Partners, through any acts pursuant to paragraph A. above,
the Partners agree that Energy Partners may take any action which it deems
necessary or appropriate to continue the partnership or to reform the
Partnership on terms as Identical as possible to this Agreement. In the
event that Energy Partners causes a continuation or reformation of the
Partnership, the liability of all Partners will be deemed to continue
uninterrupted.
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C. The following actions shall cause a dissolution of the
Partnership, provided that Benton or Energy Partners cannot take any
voluntary action to cause dissolution between the time it receives notice
from the Participants of their intent to remove a Co-Managing General
Partner and the completion of the voting and the actions, if any, authorized
by the voting:
1. The transfer or assignment of the entire interest of
Benton or Energy Partners unless a remaining Co-Managing General
Partner agrees to continue the Partnership;
2. The written vote or consent by Participants
representing a majority of the outstanding Units and as further
provided by Article XVI;
3. The conduct of the Partnership becoming unlawful;
4. The disposition of all or substantially all of the
assets of the Partnership;
5. The expiration of the term of the Partnership as
provided in Article X;
6. An event of withdrawal or expulsion of Benton and
Energy Partners, unless at the time there is at least one other
General Partner who carries on the business of the Partnership;
provided, however, that the Partnership is not dissolved and is not
required to be wound up by reason of any event of withdrawal if,
within ninety (90) days after the withdrawal, all remaining Partners
agree in writing to continue the business of the Partnership and to
the appointment of one or more managing general partners if necessary
or desired; or
7. The entry of a decree of judicial dissolution.
Any dissolution caused by an event other than those events listed
above as causes of dissolution will be considered a dissolution in
contravention of this Agreement.
D. Upon dissolution and winding up of the Partnership, all of
the assets of the Partnership may be liquidated, and all Partnership assets
shall be applied in the following order:
1. To creditors, including Partners who are creditors,
to the extent permitted by law, in satisfaction of liabilities of
the Partnership other than liabilities for distributions to
Partners; then
2. To Partners in proportion to their positive capital
account balances.
With respect to the distributions made in liquidation, Partners who
are not otherwise creditors shall not have the status of and be entitled to
the remedies available to a creditor of the Partnership. In the event of a
distribution of assets in kind, all assets to be distributed to the
Participants and the Special Limited Partners shall be distributed to an
independent trustee who shall hold title for the benefit of such participants
and Special Limited Partners, collect and distribute to such Participants
and Special Limited Partners all of the net income from such properties
and/or sell such properties as such independent trustee deems to be in the
best interests of, and at the expense of, the Participants and Special
Limited Partners. The independent trustee shall operate the liquidating trust
arrangement for so long as is
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necessary to sell or exchange Partnership Assets for cash on terms which the
trustee deems to be in the best interest of the Participants and Special
Limited Partners.
In the event the liabilities of the Partnership exceed its assets
upon liquidation or otherwise if any General Partner then has a negative
balance in its capital account, the General Partners must contribute funds to
the Partnership, within the period required by Treasury Regulation Section
1.704-1, in the ratio of their negative capital accounts until negative
capital accounts are eliminated. In the event any General Partner fails to
make the required contribution, Benton and Energy Partners agree to pay the
amounts required, and no Participant or Special Limited Partner shall have
any liability for the amounts not contributed by other Participants.
Upon termination of the Partnership, a statement shall be prepared by
the certified public accountant employed by the Partnership setting forth the
assets and liabilities of the Partnership and the distribution of cash or
property of the Partnership as prescribed above, and a copy of such statement
shall be furnished to each Partner within ninety (90) days after completion of
winding up of Partnership business.
For purposes of the liquidation of Partnership assets, the
discharge of its liabilities, and the distribution of the remaining funds
and/or assets among the Partners as above described, in the event that all
Partnership property is not sold, or in the sole discretion of Benton
cannot be sold so that distributions in kind to the Partners are
appropriate or necessary, Benton and Energy Partners shall cause all
Partnership assets to be appraised by a competent, qualified appraiser. Any
excess of fair market value, as evidenced by such appraisal, over book value
of any Partnership assets and any excess of book value over such fair market
value of any Partnership assets shall be deemed gains or losses of the
Partnership, as the case may be, and subject to the provisions of Articles V
and VI, above, Benton and Energy Partners shall have the authority on behalf
of the Partnership to sell, convey, exchange, buy back, or otherwise
transfer the assets of the Partnership upon such terms and conditions as it
determines appropriate subject to the terms of this Agreement. A reasonable
time shall be allowed for the orderly liquidation of the assets of the
Partnership to minimize normal losses of the liquidation period. Any return
of all or any portion of the contributions by a Partner to the capital of the
Partnership shall be made solely from or out of Partnership assets and Benton
and Energy Partners shall not be personally liable for any such return.
ARTICLE XIX. ASSESSMENTS AND BORROWINGS
The Participant are subject to the payment of one or more
Assessments as additional capital contributions to the Partnership. No
Assessment shall be made, however, to unless and until all original
Proceeds have been expended or committed. The failure of one or more
Participants to pay any Assessment does not result in personal liability,
but will result in the dilution of such Participants interest In all
Partnership revenues and costs. A Participant's interest in the Participants'
share of Partnership revenues is based on the ratio that the sum of his
Subscription and paid Assessments bears to the total sum of all Participants'
Subscriptions and Assessments paid by all Participants (including Benton and
Energy Partners to the extent they pay non-consenting Participants' shares of
Assessments). The failure of a Participant to pay his share of an Assessment
will reduce this ratio accordingly, as of the closing of the pre-Assessment
or Assessment period. to one or more Participants fail to pay such
Assessment, Benton and Energy Partners may contribute the nonconsenting
Participants' shares of such Assessment, at their election, which will
proportionately increase the interest of Benton and Energy partners in all
Partnership revenues and costs, on the same basis as Benton and Energy Partners
were a
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Participant. If the Participants fail to pay an amount equal to at least
fifty percent (50%) of the total Assessment requested, Benton or Energy
Partners have the option of either returning to the Participants all
Assessments contributed, or contributing the non-consenting Participants'
shares of such Assessment. If the amount contributed by the Participants
equals or exceeds fifty percent (50%) of the Assessment requested, Benton
or Energy Partners may contribute all or a portion of the non-consenting
Participants' shares of such Assessment and also may reduce the Partnership's
participation in the Prospect for which the Assessment was made by entering
into a farmout agreement with respect to such Prospect.
The cumulative amount of Assessments shall not exceed twenty-five
percent (25%) of the Proceeds of the Partnership.
After the Partnership has expended or committed its Proceeds for
property acquisitions and drilling operations, Benton and Energy Partners
may finance necessary additional operations by Partnership Assessments,
use of Partnership revenues, or borrowings. Assessments may be levied by
Benton and Energy Partners only for the purpose of conducting subsequent
operations on Prospects upon which evaluation had begun during the
Partnership's initial operation or on leases sufficiently related to such
Prospects as to merit, in Benton's and Energy Partners' judgment, additional
operations to fully develop those Prospects or to acquire additional
undeveloped leases located on the geological feature or features of Prospects
owned by the Partnership in order to fully develop and protect its Prospects.
Benton and Energy Partners will give written notice to each
Participant of the nature and purpose of any Assessment, the Participant's
proportionate share of the estimated costs, and the effect of the
Participant's not participating in the Assessment. A Participant may elect to
participate in an Assessment by notifying Benton and Energy Partners of his
intention to participate and sending the requested payment by mail within
twenty (20) days after Benton and Energy Partners mail the written Assessment
notice, unless such period is extended by Benton and Energy Partners.
Any participant shall be deemed to have refused to participate in any
Assessment by notifying Benton and Energy Partners of his election not to
participate or by failure to pay his share of the Assessment when due. In
the event that the proportionate interests of the Partners change by reason
of Assessments, solely for the purpose of allocating costs and revenues,
there shall be an interim closing of the Partnership financial books
immediately upon closing of the Assessment period, with all allocations made
as of the date of the interim closing according to the interests of the
partners immediately prior to payment of the Assessments. The pre-Assessment
or Assessment period closes on the last day established by Benton and Energy
Partners for the payment of an Assessment by the Participants.
Benton intends to develop the Partnership's Prospects fully
through the initial Proceeds and Assessments. However, no assurance can be
made that such funds will be sufficient. If such funds are not sufficient,
the Partnership may borrow the necessary funds, may farm out the undeveloped
portion of certain Prospects, or may sell or abandon certain undeveloped
leases.
ARTICLE XX. POWER OF ATTORNEY
The Participants and the Special Limited Partners constitute and
appoint Energy Partners and its successors and assigns, with full power
of substitution, as their true and lawful representative and
attorney-in-fact in their name, place and stead to make, execute, and sign any
duly adopted amendments
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to this Agreement and all such other instruments, documents and certificates
or amendments thereto which may from time to time be required by the laws of
the United States of America, the State of California or any other state in
which the Partnership shall determine to do business, or any political
subdivision or agency thereof, to effectuate, implement and continue the
valid subsisting existence of the Partnership. Such representative and
attorney-in-fact shall not, however, have any right, power or authority to
amend or modify this Agreement when acting in such capacities except when the
amendment is made pursuant to Article XVI.
ARTICLE XXI. TAX MATTERS PARTNER
Energy Partners is designated as the Tax Matters Partner as
referred to in Code Section 6231 (a)(7)(A). As Tax Matters Partner, Energy
Partners shall:
A. Receive notice of the beginning of administrative
proceedings by the Internal Revenue Service at the Partnership level;
B. Receive notice of the final Partnership administrative
adjustment resulting from any Internal Revenue Service administrative
proceedings;
C. Keep all Partners informed of all administrative and
Judicial proceedings as to proposed adjustments at the Partnership level;
D. Have authority to enter into a settlement agreement with the
Internal Revenue Service with respect to determination of Partnership tax
items which shall bind all other Partners who have not received notice of
the proceedings from the Internal Revenue Service and who have not filed a
statement with the Secretary of Treasury providing that the Tax Matters
Partner shall not have authority to bind the Partner, which settlement may
be on such terms as the Tax Matters Partner shall determine in Ks sole
discretion to be in the best interests of the Partners as a class;
E. Have authority to commence judicial action for readjustment
of Partnership items included in a notice of final Partnership administrative
adjustment, with the appropriate court and the Partnership items to be
contested selected at the sole discretion of the Tax Matters Partner, or to
elect not to commence such action at its sole discretion;
F. Have authority in its sole discretion to intervene on
behalf of the Partnership in any judicial action commenced by any other
Partner as to Partnership tax matters;
G. Have authority in its sole discretion to file a request
with the Internal Revenue Service for an administrative adjustment, as a
substituted Partnership return, or otherwise, and to request judicial review
on behalf of the Partnership as to any part of a request for administrative
adjustment not allowed by the Internal Revenue Service;
H. Have authority in its sole discretion to enter into an
agreement with respect to all Partners to extend the period for assessing
any tax which is attributable to any Partnership item (and no other person
shall be authorized to enter into such an agreement);
I. Upon receipt of a notice of the beginning of administrative
proceedings from the Internal Revenue Service, to furnish to the Internal
Revenue Service the name, address, profit interest and
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taxpayer identification number of each Partner in the Partnership during the
applicable Partnership tax year, and such revised or additional information as
may be required by law; and
J. Conform to any tax administrative requirements as may be
placed on the Tax Matters Partner by Treasury Regulations as to income tax
adopted after the formation of the Partnership.
ARTICLE XXII. MISCELLANEOUS PROVISIONS
A. NOTICES
Except as elsewhere provided herein, any notice to Benton which shall
be given in connection with the business of this Partnership shall be duly
given if written and addressed and delivered by mail or wire to Benton Oil
and Gas Company, 2151 Alessandro Drive, Suite 120, Ventura, California
93001, and any notice to Energy Partners which shall be given in connection
with the business of this Partnership shall be duly given if written and
addressed and delivered by mail or wire to Energy Partners, 1001 Dove
Street, Suite 180, Newport Beach, California 92660-2816. The effective date
of notice given shall be the date it is received by Benton or Energy Partners,
as the case may be.
Notices to a Participant Partner shall be considered given if
addressed and sent by mail or wire to the Participant at the address shown
on the subscription Agreement or assignment document or such other address
as the participant shall have previously furnished the Co-Managing General
Partners pursuant to this paragraph A. Notices to a Special Limited Partner
shall be considered given if addressed and sent by mail or wire to the
Special Limited Partner at such address as the Special Limited Partner
shall have previously furnished the Co-Managing General Partners pursuant to
this paragraph A.
B. BINDING NATURE
This Agreement shall be binding upon the parties hereto, their
successors, heirs, devisees, assigns, legal representatives, executors and
administrators.
C. ENTIRE AGREEMENT
This Agreement and the Subscription Agreement contain the entire
understanding between and among the parties and supersede any prior
understanding or agreements between or among them respecting the subject
matter. There are no representations, arrangements, understandings or
agreements, oral or written, relating to the subject matter of this Agreement
and the Subscription Agreement, except those fully expressed herein or
therein.
D. SEVERABILTY
If any provision of this Agreement shall be held to be invalid,
such holding shall not in any way whatsoever affect the validity of the
remainder of this Agreement.
E. COUNTERPARTS
Several copies of this Agreement may be executed. All executed
copies constitute one Agreement, binding on all parties, even though all
parties have not executed the original or the same copy.
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F. GOVERNING LAW
This Agreement has been executed and will be partially
performed in the State of California. All questions concerning this
Agreement and performance hereunder shall be judged and resolved in
accordance with the laws of California.
G. AMENDMENTS
Amendments may be made to this Agreement as provided under
Articles XI and XVI herein. Amendments shall be reduced to writing and, if
required, consented to by the Partners pursuant to Article XVI.
H. CAPTIONS
The captions of the several articles and paragraphs of this
Agreement are not part of the context thereof, are only guides or labels to
assist in locating or reading the several provisions thereof and shall be
ignored In construing it.
I. EXECUTION
Execution of the Subscription Agreement or acceptance of the
assignment of Units was or will be deemed an execution of this Agreement
on the date that the person becomes a Participant, which will occur when
Energy Partners accepts the Subscription Agreement or the assignment.
Execution of the Subscription Agreement or acceptance of the assignment of
Units constitutes authorization under Article XX for either of the
Co-Managing General Partners to file any certificate containing the names of
Subscribers or assignees as Participants, general partners and limited
partners.
J. PARTIES
The parties form this Partnership pursuant to the California
Revised Limited Partnership Act, as modified by the terms and conditions of
this Agreement. If any provision in this Agreement shall be held to be
invalid, such holding shall not in any way whatsoever affect the
validity of the remainder of this Agreement or affect the intent of the
parties to continue the Partnership pursuant to and make the
Partnership subject to a statute corresponding to the California Revised
Limited Partnership Act.
K. EVIDENCE OF SALES
Materials used in connection with the sale of Units in this
Partnership will be retained by Energy Partners for at least four (4) years
after the beginning of Partnership operations.
L. CERTIFICATE OF LIMITED PARTNERSHIP
A Certificate of Limited Partnership, as required by the California
Revised Limited Partnership Act, will be filed in the office of the
California Secretary of State and in such other places as may be required by
law. The Certificate of Limited Partnership shall provide that information
required under the law and such additional information as may be needed to
effectuate the terms of this Agreement. Such other filings may be made as
required to permit the Partnership to transact business in other jurisdictions.
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IN WITNESS WHEREOF, Benton, Energy Partners, the Participants and
the Special Limited Partners, if any, have executed this Partnership
Agreement, effective on the date first above written.
BENTON OIL AND GAS COMPANY, PARTICIPANTS
as Co-Managing General Partner By: Energy Partners as Attorney-in-Fact,
pursuant to Article XX and the
By: _______________________________ Subscription Agreement for the
A.E. Benton, President Participants listed on Exhibit A
ENERGY PARTNERS, By: _________________________________
As Co-Managing General Partner Michael J. Greer
President
By: _______________________________
Michael J. Greer
President
SPECIAL LIMITED PARTNERS
By: _______________________________
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