HALL-HOUSTON EXPLORATION II, L.P. Amended and Restated Agreement of Limited Partnership Dated as of April 21, 2006
Exhibit
10.8
▇▇▇▇-▇▇▇▇▇▇▇
EXPLORATION II, L.P.
Amended
and Restated
Dated
as of April 21, 2006
THE
LIMITED PARTNERSHIP INTERESTS OF ▇▇▇▇-▇▇▇▇▇▇▇ EXPLORATION II, L.P. HAVE NOT
BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
THE SECURITIES LAWS OF ANY STATE OR ANY OTHER SECURITIES LAWS IN RELIANCE
UPON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
LAWS. SUCH LIMITED PARTNERSHIP INTERESTS MUST BE ACQUIRED FOR INVESTMENT
ONLY
AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR
TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT,
ANY APPLICABLE STATE SECURITIES LAWS, AND ANY OTHER APPLICABLE SECURITIES
LAWS;
AND (II) THE TERMS AND CONDITIONS OF THIS AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP, AS AMENDED FROM TIME TO TIME. THEREFORE, PURCHASERS
OF SUCH
LIMITED PARTNERSHIP INTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
TABLE
OF CONTENTS
Page
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ARTICLE
I
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|
DEFINITIONS
AND CONSTRUCTION
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1.1
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DEFINITIONS;
GLOSSARY OF TERMS
|
1
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1.2
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CONSTRUCTION
|
1
|
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ARTICLE
II
|
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|
GENERAL
PROVISIONS
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||
|
2.1
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CONTINUATION
|
2
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2.2
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NAME
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2
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2.3
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ORGANIZATIONAL
CERTIFICATES AND OTHER FILINGS
|
2
|
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2.4
|
PURPOSE;
SIZE LIMITATION
|
2
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|
2.5
|
PRINCIPAL
OFFICE
|
2
|
|
2.6
|
REGISTERED
OFFICE AND REGISTERED AGENT
|
3
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2.7
|
TERM
|
3
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2.8
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ADMISSION
|
3
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2.9
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CO-INVESTMENTS
|
3
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ARTICLE
III
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COMMITMENTS;
CAPITAL CONTRIBUTIONS
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3.1
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COMMITMENTS
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4
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3.2
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CAPITAL
CONTRIBUTIONS
|
4
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3.3
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SUBSEQUENT
CLOSINGS
|
6
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3.4
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DEFAULTING
LIMITED PARTNER
|
7
|
|
ARTICLE
IV
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||
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CAPITAL
ACCOUNTS; ALLOCATIONS; DISTRIBUTIONS; RETURN
OF DISTRIBUTIONS
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4.1
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CAPITAL
ACCOUNTS
|
10
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4.2
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ALLOCATIONS
FOR ACCOUNTING PURPOSES
|
11
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4.3
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ALLOCATION
FOR INCOME TAX PURPOSES
|
14
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4.4
|
DISTRIBUTIONS
-- GENERAL PRINCIPLES
|
16
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4.5
|
AMOUNTS
AND PRIORITY OF DISTRIBUTIONS
|
17
|
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4.6
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TAX
DISTRIBUTIONS
|
18
|
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ARTICLE
V
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|
MANAGEMENT
OF THE PARTNERSHIP
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5.1
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GENERAL
PARTNER
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18
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5.2
|
LIMITED
PARTNERS
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21
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5.3
|
ADVISORY
COMMITTEE; RESOLUTION OF CONFLICTS OF INTEREST
|
21
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5.4
|
TRANSACTIONS
WITH AFFILIATES
|
22
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5.5
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OUTSIDE
ACTIVITIES
|
23
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ARTICLE
VI
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|
EXPENSES;
INSURANCE
|
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6.1
|
GP
EXPENSES
|
23
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6.2
|
PARTNERSHIP
EXPENSES AND ORGANIZATIONAL EXPENSES
|
23
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6.3
|
INSURANCE
COVERAGE
|
25
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ARTICLE
VII
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|
BOOKS
AND RECORDS; REPORTS AND OTHER FINANCIAL, LEGAL AND TAX
MATTERS
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7.1
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BOOKS
AND RECORDS
|
25
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7.2
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FINANCIAL
REPORTS AND TAX INFORMATION
|
25
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7.3
|
PARTNER
MEETINGS; VOTING AND CONSENT
|
26
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7.4
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FISCAL
YEAR
|
26
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7.5
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TAX
ELECTIONS
|
27
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ARTICLE
VIII
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TRANSFERS
AND WITHDRAWALS
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8.1
|
TRANSFERS
BY THE GENERAL PARTNER
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27
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8.2
|
TRANSFERS
BY THE LIMITED PARTNERS
|
28
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8.3
|
WITHDRAWALS
GENERALLY
|
29
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8.4
|
REMOVAL
OF THE GENERAL PARTNER
|
29
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ARTICLE
IX
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|
DISSOLUTION,
WINDING UP AND TERMINATION OF THE PARTNERSHIP
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9.1
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DISSOLUTION
|
30
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9.2
|
WINDING
UP
|
31
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9.3
|
FINAL
DISTRIBUTION
|
31
|
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9.4
|
TERMINATION
OF THE PARTNERSHIP
|
31
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ARTICLE
X
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EXCULPATION
AND INDEMNIFICATION
|
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10.1
|
EXCULPATION
|
32
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10.2
|
INDEMNIFICATION
|
32
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ARTICLE
XI
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|
MISCELLANEOUS
|
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|
11.1
|
AMENDMENTS
|
34
|
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11.2
|
ENTIRE
AGREEMENT
|
35
|
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11.3
|
SEVERABILITY
|
35
|
|
11.4
|
NOTICES
|
35
|
|
11.5
|
GOVERNING
LAW
|
36
|
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11.6
|
JURISDICTION;
VENUE
|
36
|
|
11.7
|
SUCCESSORS
AND ASSIGNS
|
36
|
|
11.8
|
COUNTERPARTS
|
36
|
|
11.9
|
INTERPRETATION
|
36
|
|
11.10
|
HEADINGS
|
36
|
|
11.11
|
CONFIDENTIALITY
|
37
|
|
11.12
|
EMPLOYEES
|
37
|
|
11.13
|
LEGAL
COUNSEL
|
37
|
Schedules:
Schedule
A - Partners
and Commitments
Exhibits:
Exhibit
A - Defined
Terms
GLOSSARY
OF DEFINED TERMS
The
location of the definition of each capitalized term used in this agreement
is
set forth in this Glossary of Defined Terms if it is not defined in Exhibit
A
hereto.
|
Additional
Amount
|
3.3(b)(i)
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|
Advisory
Committee
|
5.3(a)
|
|
Advisory
Committee Member
|
5.3(a)
|
|
Agreement
|
Recitals
|
|
Assumed
Tax Liability
|
4.6
|
|
Certificate
|
Recitals
|
|
Combined
Interest
|
8.4(b)
|
|
Defaulting
Limited Partner
|
3.4(a)
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|
Distributable
Cash
|
4.5
|
|
Effective
Date
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2.7
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Event
of Dissolution
|
9.1
|
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Final
Closing Date
|
3.3(a)
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Final
Distribution
|
9.3
|
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Fiscal
Year
|
7.5
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|
GP
Expenses
|
6.1
|
|
Indemnified
Party
|
10.1(a)
|
|
Legal
Counsel
|
11.13
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|
Original
Agreement
|
Recitals
|
|
Partnership
|
Recitals
|
|
Partnership
Expenses
|
6.2(a)
|
|
Prior
Funding Amounts
|
3.3(b)(ii)
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|
Purchase
Price
|
3.4(d)(i)
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|
Subsequent
Closing
|
3.3(a)
|
|
Tax
Distribution Date
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4.6
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|
Tax
Payments
|
4.4(d)(i)
|
AMENDED
AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
▇▇▇▇-▇▇▇▇▇▇▇
EXPLORATION II, L.P.
This
AMENDED AND RESTATED AGREEMENT of LIMITED PARTNERSHIP (including the Exhibits
and Schedules hereto and as further amended or restated from time to time,
this
“Agreement”)
of
▇▇▇▇-▇▇▇▇▇▇▇ Exploration II, L.P., a Delaware limited partnership (the
“Partnership”),
is
entered into as of the Effective Date by and among HHEP ▇▇ ▇▇, L.P., a Delaware
limited partnership, as the General Partner, and the Limited
Partners.
WHEREAS,
the Partnership was formed pursuant to (a) a Certificate of Limited Partnership,
dated February 16, 2006, which was executed by the General Partner and filed
for
recordation in the office of the Secretary of State of the State of Delaware
on
February 16, 2006 (the “Certificate”)
and
(b) an Agreement of Limited Partnership dated as of February 16, 2006 (the
“Original
Agreement”)
between the General Partner and ▇▇▇▇ ▇. ▇▇▇▇ (the “Initial
Limited Partner”);
and
WHEREAS,
the parties hereto desire to enter into this Agreement to reflect the admission
of the Persons, other than the General Partner and the Initial Limited Partner
(who were each previously admitted to the Partnership), as Limited Partners
in
the Partnership and to amend and restate the Initial Agreement in its entirety
as follows:
ARTICLE
I
Definitions
and Construction
1.1 Definitions;
Glossary of Terms.
Capitalized terms used in this Agreement (including the Exhibits and Schedules
hereto) but not defined in the body hereof shall have the meanings assigned
to
them in Exhibit A.
The
Glossary of Defined Terms, which follows the Table of Contents, sets forth
the
location in this Agreement of the definition of each capitalized term used
herein that is not defined in Exhibit
A.
1.2 Construction.
Unless
the context requires otherwise: (a) references to Articles and Sections
refer to Articles and Sections of this Agreement; (b) references to
Exhibits and Schedules are to the Exhibits and Schedules attached to this
Agreement, each of which is made a part hereof for all purposes; (c) any
pronoun
used in this Agreement shall include the corresponding masculine, feminine
or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa; and (d) the term “include” or “includes” means
includes, without limitation, and “including” means including, without
limitation. All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles, applied
on a consistent basis.
ARTICLE
II
General
Provisions
2.1 Continuation.
The
Partnership was formed by the filing of the Certificate and the Partnership
is
hereby continued as a limited partnership pursuant to the Act.
2.2 Name.
The
name of the Partnership shall be “▇▇▇▇-▇▇▇▇▇▇▇ Exploration II, L.P.” The General
Partner is authorized to make any variations in the Partnership’s name that the
General Partner may deem necessary or advisable; provided that (a) such
name shall contain the words “Limited Partnership” or the letters “LP” or the
equivalent translation thereof and any other designation required by applicable
law and (b) the General Partner shall promptly give notice of any such
variation to the Limited Partners.
2.3 Organizational
Certificates and Other Filings.
If
requested by the General Partner, the Limited Partners shall promptly execute
all certificates and other documents consistent with the terms of this Agreement
necessary for the General Partner to accomplish (a) all filing, recording,
publishing and other acts as may be appropriate to comply with all requirements
for (i) the formation and operation of a limited partnership under the laws
of the State of Delaware or (ii) the operation of the Partnership as an
entity in which the Limited Partners have limited liability in all jurisdictions
where the Partnership proposes to operate and (b) all other filings
required to be made by the Partnership.
2.4 Purpose;
Size Limitation.
(a) Purpose.
The
purposes of the Partnership are to (i) acquire, own, develop, operate,
maintain, renew, explore and equip Oil and Gas Interests in the Onshore U.S.
Gulf Coast and Offshore U.S. Gulf of Mexico areas, (ii) produce, collect,
store,
treat, deliver, market, sell or otherwise dispose of production from such
Oil
and Gas Interests, (iii) farm-out, sell, abandon and otherwise dispose of
any
such Oil and Gas Interests and other Partnership assets, (iv) acquire, own,
license, develop and dispose of geological and geophysical data related to
such
Oil and Gas Interests and (v) otherwise engage in any other business or activity
that now or hereafter may be necessary, incidental, proper, advisable or
convenient to accomplish the foregoing purposes (including obtaining financing
therefor as contemplated by this Agreement) and that is not forbidden by
the
laws of the jurisdictions in which the Partnership engages in such
businesses.
(b) Size
Limitation.
Notwithstanding
anything to the contrary in this Agreement, the Partnership shall not accept
Commitments, pursuant to the Subscription Agreements or otherwise, in excess
of
$150,000,000 in the aggregate, excluding the Commitment of the General
Partner.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-2-
2.5 Principal
Office.
The
Partnership shall maintain its principal office at, and its affairs shall
be
conducted from ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or such
place or places within the United States as the General Partner may
decide.
2.6 Registered
Office and Registered Agent.
The
address of the Partnership’s registered office in the State of Delaware is
Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
The name and address of the Partnership’s registered agent for service of
process in the State of Delaware is The Corporation Trust Company,
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Such registered office and
registered agent may be changed by the General Partner.
2.7 Term.
Unless
earlier dissolved and terminated pursuant to Article IX or otherwise, the
Partnership shall continue in business from the date that this Agreement
is
executed by the General Partner (the “Effective
Date”)
through the close of business on the 10th anniversary of the Effective Date;
provided, the General Partner may extend the term of the Partnership beyond
the
10th anniversary of the Effective Date for an additional five-year period
and,
with the approval of a Majority in Interest of the Limited Partners (which
will
not be unreasonably withheld), for successive five-year periods and, in each
case, shall give notice of any such extension to the Limited
Partners.
2.8 Admission.
The
General Partner and the Initial Limited Partner have been previously admitted
as
Partners in the Partnership. As of the Effective Date, each of the Persons
listed on Schedule
A
under
the heading “Limited Partners” is hereby admitted as a Limited
Partner.
2.9 Co-Investments.
Subject
to strategic reasons for involving other investment partners, fiduciary duties
of the General Partner to the Partnership and other reasonable considerations
such as legal and administrative matters, the General Partner may, in its
sole
discretion, allow one or more Limited Partners to invest, on a
Pro Rata Basis (or such other basis as is agreed to by the General
Partner and each of the Limited Partners that elect to participate in such
investment), in any Co-Investment Opportunity. The General Partner may condition
any Limited Partner’s participation in any Co-Investment Opportunity on that
Limited Partner bearing its pro rata share of out-of-pocket expenses incurred
by
the General Partner or the Partnership in analyzing, negotiating, documenting,
administering and otherwise pursuing such Co-Investment Opportunity. The
General
Partner may require each Limited Partner desiring to participate in a
Co-Investment Opportunity to become a limited partner in a special purpose
limited partnership or other pooled investment vehicle formed to make such
co-investment.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-3-
The
General Partner or an affiliate thereof may serve as the general partner
of any
such specially formed partnership. The limited partners shall reimburse the
general partner of any such special purpose limited partnership for all
out-of-pocket expenses incurred in such capacity. In addition, the General
Partner may in its sole discretion give certain Persons, including one or
more
of the Limited Partners, an opportunity to co-invest directly in a particular
Co-Investment Opportunity alongside the Partnership and not through any
co-investment vehicle. The General Partner shall adopt such procedures as
it
deems reasonable to administer the foregoing co-investment provisions, including
provisions relating to notice, accredited investor eligibility and other
suitability representations, election response times, funding mechanics and
default provisions; provided, however, that any agreement among the General
Partner, the Partnership and any Limited Partners with respect to any
Co-Investment Opportunity shall be on terms that are no less favorable to
the
Partnership than those available from unaffiliated parties in arm’s length
transactions. No investment by any Partner in any Co-Investment Opportunity
shall reduce such Partner’s Commitment.
ARTICLE
III
Commitments;
Capital Contributions
3.1 Commitments.
(a) Commitments.
Pursuant
to separate Subscription Agreements between the Partnership and each Limited
Partner, each Limited Partner has made the Commitment set forth opposite
such
Partner’s name on Schedule A hereto. The General Partner’s Commitment shall
equal .01% of the Commitments of all of the Partners, and the General Partner
shall increase its Commitment at each Subsequent Closing so that its Commitment
represents .01% of all Commitments.
(b) Early
Termination of Commitments.
(i) The
Management Principal shall be actively involved in consulting with and advising
the General Partner with respect to the business of the Partnership at all
times. If at any time the requirement provided in the preceding sentence
is not
complied with or at any time any Person (other than Persons who directly
or
indirectly own economic interests of the General Partner as of the Effective
Date or who are Affiliates of the GP Company or the Management Principal)
acquires more than 50% of the economic interests of the General Partner or
the
GP Company (directly or indirectly), a Required Interest of Limited Partners
may, by written consent delivered to the General Partner within 60 days after
such non-compliance becomes known to the Limited Partners, elect to terminate
the Commitment Period.
(ii) Notwithstanding
anything in this Agreement to the contrary, the General Partner may, by written
notice delivered to the Limited Partners, terminate the Commitment Period
at any
time in its sole discretion.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-4-
(iii) Following
the receipt of any consent or notice pursuant to this Section 3.1(b) by the
General Partner or the Limited Partners, as applicable, the Partnership shall
cease making any investments except for (i) Portfolio Investments that are
pending at the time and (ii) Follow-On Investments. Nothing in this Section
3.1(b) shall be construed to restrict the Partnership from incurring any
additional costs or expenses following the early termination of the Commitment
Period that are related to any Follow-On Investment or any Portfolio Investment
that was pending or held by the Partnership at the time of such early
termination of the Commitment Period.
3.2 Capital
Contributions.
(a) Limited
Partner Capital Contributions.
Each
Limited Partner agrees to make contributions to the capital of the Partnership
in cash from time to time payable in United States Dollars, in installments
as
follows:
(i) Portfolio
Investments.
With
respect to amounts to be contributed for Portfolio Investments, at any time
and
from time to time on or prior to the expiration or early termination of the
Commitment Period (or following the expiration or early termination of the
Commitment Period to the extent necessary to consummate a Portfolio Investment
with respect to which the Partnership had, prior to the expiration or early
termination of the Commitment Period, committed to invest), each Limited
Partner
shall, on any Payment Date, contribute to the Partnership its Pro Rata Share
of
the aggregate amount to be contributed by all Limited Partners for such
Portfolio Investment, but a Limited Partner in no event shall be required
to
make a Capital Contribution to the Partnership pursuant to this
Section 3.2(a)(i) on any date in an amount greater than its Unfunded
Commitment as of such date.
(ii) Partnership
Expenses and Organizational Expenses.
With
respect to Partnership Expenses and Organizational Expenses, at any time
and
from time to time during the term of the Partnership, on any Payment Date,
each
Limited Partner shall contribute to the Partnership its Pro Rata Share of
the
aggregate amount to be contributed by all Limited Partners on such date for
Partnership Expenses and Organizational Expenses; provided, that a Limited
Partner in no event shall be required to make Capital Contributions to the
Partnership on any date pursuant to this Section 3.2(a)(ii) in an amount
greater than its Unfunded Commitment as of such date.
(b) General
Partner Contributions.
The
General Partner shall make Capital Contributions on each Payment Date in
an
amount equal to .01% of all of the Capital Contributions to be made on such
date
by all Partners.
(c) Funding
Mechanics.
The
amount that a Limited Partner is required to contribute on any Payment Date
shall be specified by the General Partner in a Payment Notice delivered to
such
Limited Partner in respect of such Payment Date; provided, that a Limited
Partner in no event shall be required to make Capital Contributions to the
Partnership on any date in an amount greater than its Unfunded Commitment
as of
such date. Capital Contributions shall be made by wire transfer of immediately
available funds to the account specified in the related Payment Notice or
by
such other method as the General Partner specifies in such Payment
Notice.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-5-
(d) Interest;
Advances. Except
as
expressly provided in this Agreement, no Partner shall be entitled to any
interest or compensation by reason of its Capital Contributions or by reason
of
serving as a Partner. No Partner shall be required to lend any funds to the
Partnership.
(e) Certain
Expenditures Preceding the Effective Date.
Notwithstanding anything in this Agreement to the contrary, to the extent
that
the GP Company has made expenditures on behalf of the Partnership in respect
of
Organizational Expenses, Partnership Expenses or Portfolio Investments prior
to
the Effective Date then, in the sole discretion of the General Partner, the
GP
Company shall be reimbursed by the Partnership for the actual amount of such
expenditures.
(f) No
Third-Party Beneficiaries.
The
provisions of this Agreement relating to Capital Contributions shall not
confer
on any Person other than the General Partner (such as creditors of the
Partnership) the right to make any Payment Notice or other Capital Contribution
call.
3.3 Subsequent
Closings.
(a) Generally.
Subject
to Section 2.4(b), the General Partner may, in its sole discretion, admit
additional Limited Partners, or permit any existing Limited Partner to increase
its Commitment, at one or more subsequent closings that occur after the
Effective Date (each, a “Subsequent
Closing”);
provided, no Subsequent Closing shall occur after the date that is 180 days
after the Effective Date (the “Final
Closing Date”).
(b) Capital
Contributions at Subsequent Closings.
(i) Each
Limited Partner that is admitted or that increases its Commitment at a
Subsequent Closing shall make, at such Subsequent Closing, Capital
Contributions:
(A) for
Organizational Expenses in an amount such that such Limited Partner’s aggregate
Capital Contributions for Organizational Expenses incurred as of the date
of
such Subsequent Closing are equal to its Pro Rata Share of all such
Organizational Expenses;
(B) for
Partnership Expenses in an amount such that such Limited Partner’s aggregate
Capital Contributions for Partnership Expenses incurred as of the date of
such
Subsequent Closing are equal to its Pro Rata Share of all such Partnership
Expenses; and
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-6-
(C) for
all
Portfolio Investments in an amount such that such Limited Partner’s aggregate
Capital Contributions for such Portfolio Investments made by the Partnership
as
of the date of such Subsequent Closing and still retained by the Partnership
as
of the date of such Subsequent Closing are equal to its Pro Rata Share of
such
Portfolio Investments made by the Partnership as of the date of such Subsequent
Closing and still retained by the Partnership as of the date of such Subsequent
Closing;
plus
an
additional amount (“Additional
Amount”)
on
each amount described in clauses (A), (B) and (C) above at the Reference
Rate from the first Payment Date relating to the Capital Contributions made
to
discharge or fund the particular expense described under clause (A), (B)
or (C)
above to such Subsequent Closing date, pro rated based upon the actual number
of
days elapsed; provided, however, that no Additional Amount shall be payable
by
any Limited Partner in connection with any Subsequent Closing that occurs
on or
before the 28th day following the Effective Date.
(ii) Upon
receipt of any Capital Contribution referred to in Sections 3.3(b)(i)(A),
(B) and (C) and any Additional Amount required thereon in connection with
a
particular Subsequent Closing, within 30 days after such Subsequent Closing,
the
General Partner shall distribute such amounts pro rata among the Limited
Partners that were admitted at prior closings based on their respective Prior
Funding Amounts. As used herein, the term “Prior
Funding Amounts”
means,
with respect to each Limited Partner that was admitted at a prior closing,
the
difference between the Capital Contributions that such Limited Partner has
already made for Organizational Expenses, Partnership Expenses and Portfolio
Investments (but, for these purposes, disregarding any Additional Amounts
paid
by such Limited Partner at any prior closing), as the case may be, and such
Limited Partner’s Pro Rata Share of Organizational Expenses, Partnership
Expenses and Portfolio Investments, as the case may be, of all Limited Partners
redetermined after giving effect to the admission of additional Limited Partners
or increase in Commitments of any Limited Partners, in each case, at all
Subsequent Closings. Such amounts, pending their distribution to Partners,
shall
be invested in Temporary Investments. Any amounts (other than Additional
Amounts) distributed to a Limited Partner pursuant to this
Section 3.3(b)(ii) shall be added to such Limited Partner’s Unfunded
Commitment and thereafter shall be treated for all purposes of this Agreement
as
if such refunded amount had never been contributed to the Partnership.
Additional Amounts paid to the Partnership on the payments described in
Sections 3.3(b)(i)(A), (B) and (C) shall be treated solely for purposes of
this Agreement as though paid directly to existing Limited Partners by the
Limited Partners making such payment.
(iii) Notwithstanding
the foregoing provisions of this Section 3.3, if the General Partner
determines in its reasonable discretion that value of the Portfolio Investments
has materially increased prior to any Subsequent Closing, the General Partner
may elect to admit additional Limited Partners or accept increased Commitments
at such Subsequent Closing on terms more favorable to the Partnership and
to the
then existing Partners than those set forth in Sections 3.3(b)(i) and
3.3(b)(ii). In the event the General Partner admits additional Limited Partners
or accepts increased Commitments on such more favorable terms, the General
Partner shall modify the distributions due to the then existing Partners
so long
as such modified distributions are made on a pro rata basis as in
Section 3.3(b)(ii) and are not less than the distributions the then
existing Partners would have received pursuant to Sections 3.3(b)(ii) if
the
General Partner did not rely on this Section 3.3(b)(iii).
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-7-
3.4 Defaulting
Limited Partner
(a) If
any
Limited Partner fails to make, when due, any portion of a Capital Contribution
required to be contributed by such Limited Partner pursuant to this Agreement
or
to make any other payment required to be made by it hereunder when required
to
be made, then the Partnership shall promptly provide written notice of such
failure to such Limited Partner. If such Limited Partner fails to make such
Capital Contribution or such other payment within five Business Days after
receipt of such notice, then the Partnership shall promptly provide a subsequent
written notice of such failure to such Limited Partner. If such Limited Partner
fails to make such Capital Contribution or such other payment within 20 Business
Days after receipt of such subsequent written notice, then, for so long as
such
Limited Partner fails to make such Capital Contribution or such other payment,
such Limited Partner shall be deemed a “Defaulting
Limited Partner”
and
the
remaining provisions of this Section 3.4 shall apply.
(b) Any
Defaulting Limited Partner may, in the sole discretion of the General Partner
and in addition to any other remedy contained herein, be charged an additional
amount on the unpaid balance of any Capital Contributions or other payments
at
the Past Due Rate from the date such balance was due and payable through
the
date full payment for such balance is actually made, and to the extent such
additional amount is not otherwise paid such additional amount may be deducted
from any distribution to the Limited Partner. Any such additional amount
paid to
the Partnership (or retained by the Partnership from distributions otherwise
payable to such Defaulting Limited Partner) shall be allocated and distributed
to the other Partners pro rata on the basis of their respective
Commitments.
(c) The
General Partner shall have the right to determine, in its sole discretion,
whether or not any Defaulting Limited Partner shall be entitled to participate
in any vote or consent, or decision with respect to any vote, consent or
decision required or permitted by such Defaulting Limited Partner under this
Agreement. If the General Partner determines that such Limited Partner shall
not
be entitled to participate in any such vote, consent or decision, such vote,
consent or decision shall be tabulated or made as if such Defaulting Limited
Partner were not a Partner (and the terms “Required Interest” and “Majority in
Interest” shall be calculated without regard to the Interests of such Defaulting
Limited Partner).
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-8-
(d) i) In
accordance with the other provisions of this Section 3.4(d), the General
Partner, in its sole discretion, shall have the right, but not the obligation,
to allow the Partners (other than the Defaulting Limited Partner) to purchase,
and to cause the Defaulting Limited Partner to sell (without any action required
of the Limited Partner), the Defaulting Limited Partner’s Interest for a price
equal to the lesser of (A) 75% of the fair market value of such Defaulting
Limited Partner’s Interest and (B) 75% of the capital account balance of
such Defaulting Limited Partner existing as of the date of the General Partner’s
notice to such Defaulting Limited Partner of its delinquent Capital Contribution
or other amounts owed; provided, in no event shall the amount described in
this
clause (B) be less than zero (such amount, either (A) or (B), being
referred to as the “Purchase
Price”).
To
the extent that the Partners (other than the Defaulting Limited Partner)
have
elected not to purchase the Defaulting Limited Partner’s Interest, then the
General Partner may, in its sole discretion, allocate such portion of the
Defaulting Limited Partner’s Interest not then elected to be purchased to the
Partnership for purchase in accordance with Section 3.4(d)(iii). For the
purposes of this Section 3.4(d), the fair market value of the Defaulting
Limited Partner’s Interest shall be determined by the General Partner in good
faith. In determining such fair market value, the General Partner may, but
shall
not be obligated to, obtain an evaluation or appraisal from an independent
appraiser, investment advisor or investment banking firm with reasonable
experience in the oil and gas industry, all fees and expenses of which shall
be
borne by the Defaulting Limited Partner, provided that the Partnership shall
have the right to pay such fees and expenses and deduct the amount from amounts
payable to the Defaulting Limited Partner under this Section 3.4(d). At any
time
within 60 days following the determination of the fair market value of the
Defaulting Limited Partner’s Interest, the Partners may purchase the Defaulting
Limited Partner’s Interest in accordance with the provisions of Section
3.4(d)(ii). Upon tender of the consideration as set forth above to the
Defaulting Limited Partner, the Partners or the Partnership, as applicable,
shall be deemed to have purchased the Defaulting Limited Partner’s Interest and
the General Partner shall amend Schedule A to reflect such Defaulting Limited
Partner’s Commitment as zero. The payment of the Purchase Price to be made to
the Defaulting Limited Partner pursuant to Sections 3.4(d)(ii) or
3.4(d)(iii), as applicable, is, and shall be conclusively deemed to be, in
complete liquidation and satisfaction of all the rights and interest of the
Defaulting Limited Partner (and all Persons claiming by, through or under
the
Defaulting Limited Partner) in and with respect to the Partnership including
any
interest in the Partnership, any rights to specific Partnership property
and
(insofar as the affairs of the Partnership are concerned) against the Partners
and shall constitute a compromise to which all Partners have agreed pursuant
to
section 17-502(b) of the Act.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-9-
(ii) Subject
to Section 3.4(d)(i), the General Partner shall allocate the Defaulting Limited
Partner’s Interest to the Partners (other than the Defaulting Limited Partner)
on a pro rata basis (based on their relative Commitments) for purchase if
such
Partners (other than the Defaulting Limited Partner) so elect. The provisions
of
the preceding sentence shall be repeated until the entire Interest of the
Defaulting Limited Partner shall have been allocated to the purchasing Partners
(other than the Defaulting Partner). Any Limited Partner electing to purchase
a
portion of the Defaulting Limited Partner’s Interest shall be deemed to have
increased its Commitment by a proportionate share of the Defaulting Limited
Partner’s Commitment. Each Partner purchasing a portion of the Defaulting
Limited Partner’s Interest shall, as consideration for such purchase, tender to
such Defaulting Limited Partner either (as elected by such purchasing Partner
at
the time of such purchase) (A) cash in the amount of the Purchase Price for
such portion of the Defaulting Limited Partner’s Interest (pro-rated for the
portion of the Interest purchased by such Partner) or (B) a non-interest
bearing promissory note of such purchasing Partner (containing an express
provision that the holder of the promissory note would have recourse only
against the portion of the Interest purchased from such Defaulting Limited
Partner and not against the purchasing Partner for repayment of such promissory
note) in the original principal amount of the Purchase Price for such portion
of
the Defaulting Limited Partner’s Interest (pro-rated for the portion of the
Interest purchased by such Partner), due and payable on the date of the Final
Distribution.
(iii) Subject
to Sections 3.4(d)(i) and 3.4(d)(ii), the General Partner shall allocate
to the
Partnership for purchase such portion of the Defaulting Limited Partner’s
Interest that the Partners (other than the Defaulting Limited Partner) have
elected not to purchase. The Partnership may purchase such portion by tendering
to such Defaulting Limited Partner a non-interest bearing promissory note
of the
Partnership (containing an express provision that the holder of the promissory
note would have recourse only against the Defaulting Limited Partner’s Interest
and not against the Partnership or any of the Partnership’s assets for repayment
of such promissory note) in the original principal amount of the Purchase
Price,
due and payable on the date of the Final Distribution.
(e) No
right,
power or remedy conferred upon the General Partner in this Section 3.4
shall be exclusive, and each such right, power or remedy shall be cumulative
and
in addition to every other right, power or remedy whether conferred in this
Section 3.4 or now or hereafter available at law or in equity or by statute
or otherwise. No course of dealing between the General Partner and any
Defaulting Limited Partner and no delay in exercising any right, power or
remedy
conferred in this Section 3.4 or now or hereafter existing at law or in
equity or by statute or otherwise shall operate as a waiver or otherwise
prejudice any such right, power or remedy.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-10-
ARTICLE
IV
Capital
Accounts; Allocations; Distributions;
Return
of Distributions
4.1 Capital
Accounts.
(a) The
Partnership shall maintain for each Partner a Capital Account in accordance
with
the rules of Treasury Regulation section 1.704-1(b)(2)(iv). Such Capital
Account
shall be increased by (i) the cash amount or the Net Agreed Value of all
Capital Contributions made by such Partner to the Partnership pursuant to
this
Agreement and (ii) all items of Partnership income and gain (including
income and gain exempt from tax) computed in accordance with Section 4.1(b)
and allocated to such Partner pursuant to Section 4.2, and decreased by
(x) the amount of cash or Net Agreed Value of all actual and deemed
distributions of cash or property made to such Partner pursuant to this
Agreement and (y) all items of Partnership deduction and loss computed in
accordance with Section 4.1(b) and allocated to such Partner pursuant to
Section 4.2.
(b) For
purposes of computing the amount of any item of income, gain, loss or deduction
to be reflected in the Partners' Capital Accounts, the determination,
recognition and classification of any such item shall be the same as its
determination, recognition and classification for federal income tax purposes
(including any method of depreciation, cost recovery or amortization used
for
that purpose), provided, that:
(i) except
as
otherwise provided in Treasury Regulation section 1.704-1(b)(2)(iv)(m), the
computation of all items of income, gain, loss and deduction shall be made
without regard to any election under section 754 of the Code which may be
made
by the Partnership and, as to those items described in section 705(a)(1)(B)
or
705(a)(2)(B) of the Code, without regard to the fact that such items are
not
includable in gross income or are neither currently deductible nor capitalized
for federal income tax purposes;
(ii) any
income, gain or loss attributable to the taxable disposition of any Partnership
property shall be determined as if the adjusted basis of such property as
of
such date of disposition were equal in amount to the Partnership's Carrying
Value with respect to such property as of such date; and
(iii) upon
an
adjustment pursuant to Section 4.1(d) to the Carrying Value of any
Partnership property subject to depreciation, cost recovery, depletion or
amortization, any further deductions for such depreciation, cost recovery,
depletion or amortization attribut-able to such property shall be determined
as
if the adjusted basis of such property were equal to the Carrying Value of
such
property immediately following such adjustment.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-11-
(c) A
transferee of an Interest shall succeed to a pro rata portion of the Capital
Account of the transferor relating to the Interest transferred. If the transfer
causes a termination of the Partnership under section 708(b)(1)(B) of the
Code,
the Partnership's assets and liabilities shall be deemed to have been
transferred to a successor Partnership in exchange for the interests in the
successor Partnership and immediately thereafter, the Partnership shall be
deemed to have distributed the interests in the successor Partnership to
the
transferee and the remaining Partners in accordance with their respective
interests in the Partnership in the manner specified by Treasury Regulation
section 1.708-1(b)(4). In such event, the Carrying Values of the Partnership’s
assets shall not be adjusted immediately prior to such deemed transfer pursuant
to Section 4.1(d)(ii). The Capital Accounts of such successor Partnership
shall be maintained in accordance with the provisions of this
Section 4.1.
(d) ii) In
accordance with the provisions of Treasury Regulation section
1.704-1(b)(2)(iv)(f), upon a Partner's contribution to the Partnership of
cash
or properties in exchange for an Interest, the Capital Accounts of all Partners
and the Carrying Values of all Partnership assets shall, immediately prior
to
such issuance, be adjusted upward or downward to reflect any Unrealized Gain
or
Unrealized Loss attributable to the Partnership’s assets, as if such Unrealized
Gain or Unrealized Loss had been recognized on an actual sale of each such
property immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Section 4.2. In determining such
Unrealized Gain or Unrealized Loss, the fair market value of all Partnership
assets (including cash or cash equivalents) immediately prior to the issuance
of
an Interest shall be determined by the General Partner, using such reasonable
method of valuation as it may adopt.
(ii) In
accordance with the provisions of Treasury Regulation section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution
to
a Partner of any Partnership asset (other than a distribution of cash that
is
not in redemption or retirement- of an Interest), the Capital Accounts of
all
Partners and the Carrying Value of such Partnership asset shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership asset, as if such Unrealized Gain or Unrealized
Loss had been recognized in a sale of such asset immediately prior to such
distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 4.2. In
determining such Unrealized Gain or Unrealized Loss, the fair market value
of
each such distributed asset as of any date of determination shall be determined
by the General Partner, using such reasonable method of valuation as it may
adopt.
4.2 Allocations
for Accounting Purposes.
For
accounting purposes, all items of income, gain, loss, deduction and credit
of
the Partnership (except as provided in Section 9.3) shall be allocated
among the Partners as follows:
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-12-
(a) Except
as
may be required by the Code, Net Income and Net Loss shall be allocated among
the Partners as follows:
(i) Net
Income shall be allocated
(A) First,
100% to the General Partner until the cumulative amount allocated pursuant
to
this Section 4.2(a)(i)(A) for the current and each prior taxable year is
equal to the cumulative amount of Net Losses allocated to such Partner pursuant
to Section 4.2(a)(ii)(C);
(B) Second,
100% to the Partners until the cumulative amount of Net Income allocated
pursuant to this Section 4.2(a)(i)(B) for the current and each prior
taxable year is equal to the cumulative amount of Net Losses allocated to
such
Partners pursuant to Section 4.2(a)(ii)(B); and
(C) Thereafter,
30% to the General Partner and 70% to such Limited Partner.
(ii) Net
Loss
shall be allocated
(A) First,
30% to the General Partner and 70% to such Limited Partner until the cumulative
amount of Net Losses allocated pursuant to this Section 4.2(a)(ii)(A) for
the current and each prior taxable year is equal to the cumulative amount
of Net
Income allocated to such Partner pursuant to
Section 4.2(a)(i)(C);
(B) Second,
100% to the Partners in proportion to and to the extent of their Adjusted
Capital Account balances; and
(C) Thereafter,
100% to the General Partner.
(b) Simulated
Depletion with respect to each separate oil and gas property shall be allocated
to the Partners in the same proportion that the Partners (or their predecessors
in interest) were allocated the adjusted tax basis of such property under
Section 4.3(b). Simulated Gain attributable to the sale or other
disposition of an oil or gas property shall be allocated to the Partners
in the
same manner as the amount realized from such sale or other disposition in
excess
of the Carrying Value of such property is allocated to Partners pursuant
to
Section 4.3(c)(ii). Simulated Loss attributable to the sale or disposition
of an oil or gas property shall be allocated to the Partners in the same
proportion that the partners (or their predecessors in interest) were allocated
the adjusted tax basis of such property under Section 4.3(b).
(c) Gains
and
losses arising from the sale or other disposition of Partnership assets (other
than oil or gas properties) after the receipt by the Limited Partners of
their
respective Preferred Return Amounts under Section 4.5(a)(ii) shall be allocated
to the Partners in such a manner that, to the maximum extent possible, the
Capital Accounts of the Partners shall be in proportion to the percentage
amounts set forth in Section 4.5(a)(iii).
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-13-
(d) Notwithstanding
any other provisions of this Section 4.2, the following special allocations
shall be made for each taxable period:
(i) Notwithstanding
any other provision of this Section 4.2, if there is a net decrease in
Partnership Minimum Gain during any Partnership taxable period, each Partner
shall be allocated items of Partnership income and gain for such period (and,
if
necessary, subsequent periods) in the manner and amounts provided in Treasury
Regulation section 1.704-2(f)(6),(g)(2), and (j)(2)(i). For purposes of this
Section 4.2(d)(i), each Partner's Capital Account shall be determined and
the allocation of income or gain required hereunder shall be effected, prior
to
the application of any other allocations pursuant to this Section 4.2 with
respect to such taxable period. This Section 4.2(d)(i) is intended to
comply with the Partnership Minimum Gain chargeback requirement in Treasury
Regulation section 1.704-2(f) and shall be interpreted consistently
therewith.
(ii) Notwithstanding
the other provisions of this Section 4.2 (other than (i) above), if there
is a net decrease in Partner Nonrecourse Debt Minimum Gain during any
Partnership taxable period, any Partner with a share of Partner Nonrecourse
Debt
Minimum Gain at the beginning of such taxable period shall be allocated items
of
Partnership income and gain for such period (and, if necessary, subsequent
periods) in the manner and amounts provided in Treasury Regulation section
1.704-2(i)(4) and (j)(2)(ii). For purposes of this Section 4.2(d) each
Partner's Adjusted Capital Account balance shall be determined, and the
allocation of income and gain required hereunder shall be effected, prior
to the
application of any other allocations pursuant to this Section 4.2, other
than Section 4.2(d)(i) above, with respect to such taxable period. This
Section 4.2(d)(ii) is intended to comply with the Partner Nonrecourse Debt
Minimum Gain chargeback requirement in Treasury Regulation section 1.704-2(i)(4)
and shall be interpreted consistently therewith.
(iii) Except
as
provided in (i) and (ii) above, in the event any Partner unexpectedly receives
any adjustments, allocations or distributions described in Treasury Regulation
section 1.704-1(b)(2)(ii)(d)(4), (5), or (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 such Treasury Regulation,
the
deficit balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless such
deficit balance is otherwise eliminated pursuant to (i) or (ii)
above.
(iv) In
the
event any Partner has a deficit balance in its Adjusted Capital Account at
the
end of any Partnership taxable period, such Partner shall be specially allocated
items of Partnership gross income and gain in the amount of such excess as
quickly as possible; provided, that an allocation pursuant to this
Section 4.2(d)(iv) shall be made only if and to the extent that such
Partner would have a deficit balance in its Adjusted Capital Account after
all
other allocations provided in this Section 4.2(d) have been tentatively
made as if this Section 4.2(d)(iv) were not in this Agreement.
(v) Nonrecourse
Deductions for any taxable period shall be allocated to the Partners in
accordance with their respective Percentage Interests in the
Partnership.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-14-
(vi) Partner
Nonrecourse Deductions for any taxable period shall be allocated 100% to
the
Partner that bears the Economic Risk of Loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Treasury Regulation section 1.704-2(i). If more than one
Partner bears the Economic Risk of Loss with respect to a Partner Nonrecourse
Debt, Partner Nonrecourse Deductions attributable thereto shall be allocated
between or among such Partners in accordance with the ratios in which they
share
such Economic Risk of Loss.
(vii) To
the
extent an adjustment to the adjusted tax basis of any Partnership asset pursuant
to sections 734(b) or 743(b) of the Code is required, pursuant to Treasury
Regulation section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts shall
be
treated as an item of gain (if the adjustment increases the basis of the
asset)
or loss (if the adjustment decreases such basis), and such item of gain or
loss
shall be specially allocated to the Partners in a manner consistent with
the
manner in which their Capital Accounts are required to be adjusted pursuant
to
such provisions.
(viii) Notwithstanding
any other provision of this Section 4.2 other than the Required
Allocations, the Required Allocations shall be taken into account in making
the
Agreed Allocations so that, to the extent possible, the net amount of items
of
income, gain, loss and deduction allocated to each Partner pursuant to the
Required Allocations and Agreed Allocations, together, shall be equal to
the net
amount of such items that would have been allocated to each such Partner
under
the Agreed Allocations if the Required Allocations had not otherwise been
provided for in this Section 4.2.
(e) Upon
winding up of the Partnership, gain or loss from the sale of Partnership
Properties (including Net Income or Net Loss, Simulated Gains and Simulated
Losses and Unrealized Gain and Unrealized Loss inherent in Partnership assets
described in Section 9.3) shall be allocated among the Partners, to the
extent possible, in such amounts as will make the balance in each Partner’s
Capital Account equal the amount such Partner would be entitled to receive
if
the proceeds resulting from such sales (including any proceeds which would
have
resulted from the sale of Partnership assets described in Section 9.3) were
distributable under Section 4.5. If there is insufficient gain to so
balance the General Partner’s capital account, the amount of such deficit shall
be paid to the General Partner upon such winding up as a guaranteed payment
(within the meaning of section 707(c) of the Code) and the related deduction
shall be allocated wholly to the Limited Partners.
4.3 Allocation
for Income Tax Purposes.
(a) Except
as
provided in this Section 4.3, each item of income, gain, loss and deduction
of the Partnership for federal income tax purposes shall be allocated among
the
Partners in the same manner as such items are allocated for book purposes
under
Section 4.2.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-15-
(b) The
deduction for depletion with respect to each separate oil and gas property
(as
defined in section 614 of the Code) shall, in accordance with
section 613A(c)(7)(D) of the Code, be computed for federal income tax
purposes separately by the Partners rather than the Partnership. Except as
provided in Section 4.3(d), for purposes of such computation, the
proportionate share of the adjusted tax basis of each oil and gas property
allocated among the Partners shall be determined in accordance with the
following principles:
(i) In
the
case of a property acquired or developed prior to the receipt by the Limited
Partners of cumulative distributions under Section 4.5(a)(i) equal to the
aggregate of their respective Capital Contributions, to the Partners in
accordance with the percentage amounts set forth in Section
4.5(a)(i).
(ii) In
the
case of property acquired or developed prior to the receipt by the Limited
Partners of their respective Preferred Return Amounts under Section 4.5(a)(ii),
to the Partners in accordance with the percentage amounts set forth in Section
4.5(a)(ii).
(iii) In
all
other cases to the Partners in accordance with the percentage amounts set
forth
in Section 4.5(a)(iii).
Each
Partner, with the assistance of the General Partner, shall separately keep
records of its share of the adjusted tax basis in each separate oil and gas
property, adjust such share of the adjusted tax basis for any cost or percentage
depletion allowable with respect to such property and use such adjusted tax
basis in the computation of its cost depletion or in the computation of its
gain
or loss on the disposition of such property by the Partnership. Upon the
request
of the General Partner, each Limited Partner shall advise the General Partner
of
its adjusted tax basis in each separate oil and gas property and any depletion
computed with respect thereto, both as computed in accordance with the
provisions of this subsection. The General Partner may rely on such information
and, if it is not provided by the Limited Partner, may make such reasonable
assumptions as it shall determine with respect thereto.
(c) Except
as
provided in Section 4.3(d), for the purposes of the separate computation of
gain or loss by each Partner on the sale or disposition of each separate
oil and
gas property (as defined in section 614 of the Code), the Partnership’s
allocable share of the “amount realized” (as such term is defined in
section 1001(b) of the Code) from such sale or disposition shall be
allocated for federal income tax purposes among the Partners as
follows:
(i) first,
to
the extent such amount realized constitutes a recovery of the Simulated Basis
of
the property, to the Partners in the same percentages as the depletable basis
of
such property was allocated to the Partners pursuant to
Section 4.3(b);
(ii) second,
the remainder of such amount realized, if any, to the Partners so that, to
the
maximum extent possible, the total amount realized allocated to each Partner
under this Section 4.3(c)(ii) will equal such Partner’s distributive share
under Section 4.5(a) of the proceeds derived by the Partnership from such
sale
or disposition.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-16-
(d) The
Partners recognize that with respect to a Contributed Property and an Adjusted
Property, there may be a difference between the Carrying Value of such property
at the time of contribution or revaluation, as the case may be, and the adjusted
tax basis of such property at such time. In the case of a Contributed Property
or an Adjusted Property, all items of tax depreciation, cost recovery,
amortization, and gain or loss with respect to such Contributed or Adjusted
Properties (referred to as “Section
704(c) Items”)
shall
be allocated among the Partners to take into account the disparities between
the
Carrying Values and the adjusted tax basis with respect to such properties
in
accordance with the provisions of sections 704(b) and 704(c) of the Code
and the
Treasury Regulations under those sections; provided, however, that any tax
items
not required to be allocated under sections 704(b) or 704(c) of the Code
shall
be allocated in the same manner as such gain or loss would be allocated for
book
purposes under Section 4.2.
(e) All
items
of income, gain, loss, deduction and credit allocated to the Partners in
accordance with the provisions hereof and basis allocations recognized by
the
Partnership for federal income tax purposes shall be determined without regard
to any election under section 754 of the Code which may be made by the
Partnership; provided, however, such allocations, once made, shall be adjusted
as necessary or appropriate to take into account the adjustments permitted
by
sections 734 and 743 of the Code.
(f) If
any
deductions for depreciation, cost recovery or depletion are recaptured as
ordinary income upon the sale or other disposition of Portfolio Investments,
the
ordinary income character of the gain from such sale or disposition shall
be
allocated among the Partners in the same ratio as the deductions giving rise
to
such ordinary income character were allocated.
4.4 Distributions
-- General Principles.
(a) Generally. Except
as
otherwise expressly provided in this Agreement, no Partner or Assignee shall
have the right to withdraw capital from the Partnership or to receive any
distribution or return of its Capital Contribution. Distributions of Partnership
assets that are provided for in Section 4.5 or in Article IX shall be
made only to persons who, according to the books and records of the Partnership,
are as of the date determined by the General Partner, the holders of record
of
the Interests with respect to which distributions are to be made.
(b) Restrictions
on Distributions.
Notwithstanding anything in this Agreement to the contrary, no distribution
shall be made pursuant to Section 4.5(a): (i) during the Commitment Period,
it being understood that all cash available to the Partnership during the
Commitment Period shall be either invested in Portfolio Investments or used
to
pay Partnership Expenses and Organizational Expenses; (ii) if such
distribution would violate any contract or agreement to which the Partnership
is
then a party or any law, rule, regulation, order or directive of any
Governmental Authority then applicable to the Partnership; (iii) to the
extent that the General Partner reasonably determines that any amount otherwise
distributable should be retained by the Partnership to pay, or to establish
a
reserve for the payment of, any Partnership Expenses or any other expense,
liability or obligation of the Partnership, whether liquidated, fixed,
contingent or otherwise, including any abandonment liability with respect
to any
Oil and Gas Interest or (iv) to the extent that the General Partner
determines in its reasonable discretion that the cash available to the
Partnership is otherwise insufficient to permit such distribution.
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(c) Withholding.
Notwithstanding any other provision of this Agreement, the General Partner
is
authorized to take any action that it reasonably determines to be necessary
or
appropriate to cause the Partnership to comply with any United States federal,
state or local withholding requirement with respect to any allocation, payment
or distribution by the Partnership to any Partner or other Person. All amounts
so withheld, and, in the manner determined by the General Partner, amounts
withheld with respect to any allocation, payment or distribution by any Person
to the Partnership, shall be treated as distributions to the applicable Partners
under Section 4.5. If any such withholding requirement with respect to any
Partner exceeds the amount distributable to such Partner under Section 4.5,
or if any such withholding requirement was not satisfied with respect to
any
amount previously allocated or distributed to such Partner, such Partner
and any
successor or assignee with respect to such Partner’s Interest in the Partnership
hereby indemnifies and agrees to hold harmless the other Partners and the
Partnership for such excess amount or such withholding requirement, as the
case
may be.
4.5 Amounts
and Priority of Distributions.
(a) General
Distributions. Subject
to the restrictions set forth in Section 4.4(b), from time to time
following the expiration or early termination of the Commitment Period (but
at
least once each calendar quarter) the General Partner shall determine in
its
reasonable discretion to what extent (if any) the Partnership’s cash on hand
exceeds the sum of (i) its current expenses and other obligations and (ii)
any
reserves established by the General Partner in accordance with Section
4.4(b)(iii) (the amount of such excess being referred to herein as “Distributable
Cash”).
Within 15 days following each such determination, the General Partner shall
cause the Partnership to distribute all Distributable Cash to the Partners
in
accordance with this Section 4.5. All Distributable Cash shall, prior to
the distribution thereof, be allocated to the Partners in proportion to each
of
their respective Percentage Interests. The amount allocated to the General
Partner pursuant to the preceding sentence shall be distributed to the General
Partner. Amounts allocated to each Limited Partner pursuant to the third
sentence of this Section 4.5(a) shall be further allocated and distributed
between such Limited Partner, on the one hand, and the General Partner, on
the
other hand, as follows:
(i) first,
10% to the General Partner and 90% to such Limited Partner until such Limited
Partner has received pursuant to this clause (i) cumulative distributions
in an
amount equal to the aggregate of such Limited Partner’s Capital Contributions;
(ii) second,
20% to the General Partner and 80% to such Limited Partner until such Limited
Partner has received pursuant to this clause (ii) an amount equal to such
Limited Partner’s Preferred Return Amount; and
(iii) thereafter,
30% to the General Partner and 70% to such Limited Partner.
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(b) Distributions
in connection with Subsequent Closings.
Notwithstanding anything in this Agreement to the contrary, upon receipt
of any
Capital Contribution at a Subsequent Closing as referred to in clauses (A),
(B) or (C) of Section 3.3(b)(i) and any Additional Amount thereon, the
General Partner shall distribute such amounts among the Limited Partners
that
were admitted at prior closings in accordance with
Section 3.3(b)(ii).
4.6 Tax
Distributions.
Prior
to
making distributions pursuant to Section 4.5, to the extent the General
Partner determines in its reasonable discretion that the Partnership has
funds
on hand available for distribution, on or prior to April 1 of each year
(the “Tax
Distribution Date”),
the
Partnership shall distribute to the Partners an amount equal to such Partner’s
Assumed Tax Liability, if any. “Assumed
Tax Liability”
means
an amount, as determined in good faith by the General Partner, that is equal
to
(a) the cumulative amount of state and federal income taxes (including any
applicable estimated taxes) that would be due from such Partner as of such
Tax
Distribution Date, assuming such Partner were an individual resident of the
State of Texas and who earned solely the items of income, gain, deduction,
loss,
and/or credit allocated to such Partner pursuant to Section 4.3, reduced by
(b) all previous distributions made pursuant to this Section 4.6.
Distributions made pursuant to this Section 4.6 shall be treated as
advances of distributions to be made under Section 4.5 and shall be
credited against and shall reduce future distributions to be made to the
recipient Partner pursuant to that section.
ARTICLE
V
Management
of the Partnership
5.1 General
Partner.
(a) General
Powers of the General Partner.
The
management and operation of the Partnership shall be vested exclusively in
the
General Partner, which shall have the power by itself and shall be authorized
and empowered on behalf and in the name of the Partnership to carry out any
and
all of the objectives and purposes of the Partnership and to perform all
acts
and enter into and perform all contracts and other undertakings that it may
in
its sole discretion deem necessary or advisable or incidental thereto, all
in
accordance with and subject to the other terms of this Agreement.
(b) Specific
Powers of the General Partner.
Without
limiting the generality of Section 5.1(a), and in addition to any other
power or authority of the General Partner provided for elsewhere in this
Agreement, the General Partner is hereby authorized and empowered on behalf
and
in the name of the Partnership, or on its own behalf and in its own name,
or
through agents, as may be appropriate, all in accordance with and subject
to the
limitations contained elsewhere in this Agreement, to:
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(i) make
all
decisions concerning the origination, investigation, selection, negotiation,
acquisition, structuring, financing, operation, monitoring, disposition or
abandonment of Portfolio Investments;
(ii) enter
into mineral leases, farm-outs, farm-ins, exploration agreements, operating
agreements, drilling contracts, participation agreements, royalty agreements
and
other agreements relating to the ownership and operation of Oil and Gas
Interests;
(iii) market
or
exchange the oil, gas and liquids production accruing to the Partnership
or
otherwise acquired by the Partnership and to execute transfer orders, division
orders, gas sales agreements, gas processing agreements, product sales
agreements, exchange agreements, transportation agreements and any other
agreements in connection with such marketing, exchange, sale and transportation
of production;
(iv) enter
into commodity price hedging agreements with respect to any oil, gas or liquids
production , but only as a strategy of risk management (and not for speculative
purposes) in order to minimize the risk associated with the fluctuation of
prices to be received by the Partnership with respect to the Partnership’s
future oil, gas and liquids production;
(v) amend,
modify or rescind, or make elections, waivers or other decisions under, any
of
the agreements described in this Section 5.1(b) (in whole or in part) and
to
settle any disagreement arising under any of the same;
(vi) operate
and maintain any oil and gas ▇▇▇▇▇, injection and disposal ▇▇▇▇▇, production
equipment, pumps, compressor stations, pipelines and other assets relating
to
Oil and Gas Interests;
(vii) pay
delay
rentals, bonus payments, shut-in gas royalty payments, property taxes, surface
damages, rights of way, easements and any other amounts the General Partner
deems necessary or appropriate for the maintenance or operation of any Oil
and
Gas Interest;
(viii) explore
and prospect by geological, geophysical or other methods for the location
of
anomalies or other indications favorable to the accumulation of oil and gas,
including specifically the power to contract with third parties for such
purpose;
(ix) purchase,
acquire, lease, construct and operate equipment and any other type of personal
property in connection with the development, exploration, operation or
maintenance of any Oil and Gas Interest;
(x) purchase,
acquire, license and develop geological and geophysical data relating to
any Oil
and Gas Interest;
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(xi) contract
for the services of employees, agents, independent contractors, brokers,
consultants, engineers, attorneys, accountants and management
companies;
(xii) open,
maintain and close bank accounts, to designate and change signatories on
such
accounts and to draw checks and other orders for the payment of
monies;
(xiii) invest
Partnership funds that, from time to time, are not required for the operation
of
the business of the Partnership in Temporary Investments;
(xiv) collect
all sums due the Partnership;
(xv) ▇▇▇,
complain and defend in connection with any action, dispute or
liability;
(xvi) appear
and represent the Partnership before any governmental authority or regulatory
agency and make all necessary or appropriate filings before such authority
or
agency;
(xvii) prepare
and file all Partnership tax returns and, consistent with Article VII, to
make
all elections for the Partnership thereunder;
(xviii) pay
all
Partnership Expenses and Organizational Expenses;
(xix) subject
to the approval of a Required Interest of the Limited Partners, merge or
consolidate the Partnership with or into any other Person; and
(xx) enter
into and perform all other contracts, agreements and undertakings binding
upon
the Partnership, and to take any and all other action in connection with
the
Partnership, all as may be deemed by the General Partner to be necessary,
appropriate or advisable in furtherance of the Partnership’s business and
purpose as set forth in Section 2.4.
(c) Borrowing
and Guarantees.
The
General Partner may, in its sole discretion, cause the Partnership to (i)
borrow
money from any Person, including the General Partner and its Affiliates,
(ii)
guarantee loans
or
other extensions of credit to any Person, including the General Partner and
its
Affiliates (provided that no such guarantee shall extend beyond the term
of the
Partnership) and (iii) pledge or otherwise encumber any Partnership asset
in
connection with any such loan or guarantee, in each case for the purpose
of
covering Partnership Expenses and Organizational Expenses or making Portfolio
Investments; provided that the General Partner shall provide the Limited
Partners with prior written notice and disclosure of any borrowings from
a
Partner or its Affiliates and any such borrowings shall otherwise comply
with
the applicable provisions of Section 5.4. Notwithstanding anything in this
Agreement to the contrary, the aggregate amount of any outstanding indebtedness
for borrowed money incurred or guaranteed by the Partnership shall not exceed
$30,000,000. In connection with any indebtedness of the Partnership, the
General
Partner may, in its sole discretion, enter into interest rate hedging agreements
on behalf of the Partnership, but only as a strategy of risk management (and
not
for speculative purposes) in order to minimize the risk associated with the
fluctuation of interest rates to be paid by the Partnership with respect
to any
such indebtedness.
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(d) Nothing
in this Article V shall be construed to alter or modify the characterizations
and allocations of GP Expenses and Partnership Expenses set forth in Article
VI.
5.2 Limited
Partners.
Except
as expressly provided in this Agreement, no Limited Partner in its capacity
as
such shall have the right or power to participate in the management or affairs
of the Partnership, nor shall any Limited Partner in its capacity as such
have
the power to sign for or bind the Partnership. The exercise by any Limited
Partner of any right conferred herein shall not be construed to constitute
participation by such Limited Partner in the control of the business of the
Partnership so as to make such Limited Partner liable as a general partner
for
the debts and obligations of the Partnership for purposes of the
Act.
5.3 Advisory
Committee; Resolution of Conflicts of Interest.
(a) The
Partnership shall, within three months of the date of this Agreement, form
an
advisory committee which shall consist of not less than three nor more than
seven members, none of whom may be an Affiliate of the General Partner (the
“Advisory
Committee”).
The
members (each, an “Advisory
Committee Member”)
shall
be persons nominated by the General Partner and approved by a Majority in
Interest of the Limited Partners. Additional Advisory Committee Members and
replacement Advisory Committee Members shall be nominated by the General
Partner
and shall be approved by a Majority in Interest of the Limited Partners.
Any
Advisory Committee Member may be removed at any time, with or without cause,
by
resolution of, or by written consent signed by, at least a Majority in Interest
of the Limited Partners. Notwithstanding the foregoing, for so long as a
Limited
Partner holds a Percentage Interest of 15% or greater, such Limited Partner
shall be an Advisory Committee Member and shall not be subject to the approval
or removal by the Limited Partners.
(b) The
Advisory Committee shall meet at such times and from time to time as the
members
may determine. The Advisory Committee shall provide notice of each meeting
to
the General Partner. Advisory Committee Members shall receive from the
Partnership reimbursement for any out-of-pocket expenses reasonably incurred
in
connection with carrying out their functions for the Partnership.
(c) To
the
extent permitted under §17-303 of the Act for persons who are not deemed to
participate in the control of the business, the functions of the Advisory
Committee shall be (i) to
resolve any potential conflicts of interest between the Partnership, on the
one
hand, and the General Partner and its Affiliates, other than the Partnership,
on
the other hand, that may be presented to the Advisory Committee from time
to
time by the General Partner in its sole discretion;
(ii) to
perform such other functions and duties as are expressly provided by this
Agreement; and (iii) to review and discuss with the General Partner such
other matters as the General Partner shall request from time to time. All
approvals, disapprovals and other actions taken by the Advisory Committee
shall
be authorized by a majority of the Advisory Committee Members then holding
office. For purposes of Section 5.4 of this Agreement, the approval of a
majority of the Advisory Committee Members then holding office shall constitute
the approval of a Majority in Interest of Limited Partners.
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(d) The
Advisory Committee shall have the authority to adopt rules and procedures,
not
inconsistent with this Agreement, relating to the conduct of its
affairs.
(e) The
Advisory Committee Members shall exercise their best judgment in carrying
out
their functions for the Partnership. Each Advisory Committee Member shall
be
indemnified to the extent set forth in Section 10.2 of this
Agreement.
(f) The
General Partner shall be authorized but not required in connection with the
resolution of any conflict of interest to seek approval of the Advisory
Committee of any such resolution, and the General Partner may also adopt
a
resolution or course of action (including engaging in any transaction) that
has
not received approval of the Advisory Committee, so long as the General Partner
determines that the resolution or course of action taken with respect to
a
conflict of interest satisfies either of the standards set forth in Sections
5.4(b)(i) or (b)(ii).
5.4 Transactions
with Affiliates.
(a) Restrictions
on Certain Transactions with Affiliates.
Without
the prior approval of a Majority in Interest of Limited Partners, except
(i) for
the reimbursement by the Partnership to Fund I of up to $250,000 of legal,
accounting and other organizational expenses incurred by Fund I from which
the
Partnership has derived or will derive a significant benefit, (ii) for any
acquisition, farm-in, operating agreement or similar arrangement between
the
Partnership and Fund I with respect to any Oil and Gas Interest owned by
Fund I,
(iii) for the licensing or acquisition by the Partnership of, or reimbursement
of costs by the Partnership to Fund I with respect to, geological and
geophysical data licensed or acquired by Fund I or its Affiliates but to
be used
by the Partnership in connection with its Portfolio Investments and (iv)
as
otherwise expressly permitted or contemplated by this Agreement, the Partnership
shall not invest in, acquire assets from, or sell assets to (A) the General
Partner or its Affiliates or (B) any entity in which the General Partner or
its Affiliates (other than the Partnership) holds an investment of more than
5%
of the outstanding equity of such entity or is in a position of control.
Notwithstanding anything to the contrary in this Agreement, the transactions,
including the existence of any related conflicts of interest, described in
clauses (i) through (iv) of this Section 5.4(a) are hereby approved by all
Partners.
(b) Standards
for Transactions with Affiliates.
Notwithstanding anything in this Agreement to the contrary, all transactions
between the General Partner and its Affiliates (other than the Partnership),
on
the one hand, and the Partnership, on the other hand, shall be (i) on terms
that
are no less favorable to the Partnership than those available from unaffiliated
parties in arm’s length transactions, or (ii) fair and reasonable to the
Partnership, taking into account the totality of the relationships between
the
parties involved (including other transactions that may be particularly
favorable or advantageous to the Partnership). The terms of any transaction
approved by a Majority in Interest of
Limited Partners shall be conclusively deemed to be permitted by all Partners
and shall not constitute a breach of this Agreement or of any duty stated
or
implied by law or equity.
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(c) No
Other Restrictions.
Except
to the extent expressly prohibited by Sections 5.4(a) and (b), this Agreement
shall not be construed in any manner to preclude the General Partner, the
Management Principal, the GP Company or any of their respective Affiliates
from
possessing any business interest and engaging in any activity whatsoever
for
their own account and not the account of the Partnership, including business
interests and activities in direct competition with the
Partnership.
5.5 Outside
Activities.
(a) Notwithstanding
anything in this Agreement to the contrary, neither the General Partner,
the GP
Company, the Management Principal nor any of their respective Affiliates
have
any duty or obligation to present any Oil and Gas Interest or other investment
opportunity to the Partnership for consideration as a Portfolio Investment
and
shall be free to invest in any such Oil and Gas Interest or other investment
opportunity for their or their respective Affiliates’ own accounts and not the
account of the Partnership.
(b) Subject
to the confidentiality provisions in Section 11.11 and except as otherwise
expressly prohibited by this Agreement, a Limited Partner shall be entitled
to
and may have business interests and engage in activities in addition to those
relating to the Partnership, including business interests and activities
in
direct competition with the Partnership and may engage in transactions with,
and
provide services to, the Partnership. Neither the Partnership, any Partner
nor
any Person shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner.
ARTICLE
VI
Expenses;
Insurance
6.1 GP
Expenses.
The
General Partner, but not the Partnership or any Limited Partner, shall bear
and
be charged with all bonuses and other incentive compensation to the Management
Principal and the employees of the General Partner and the GP Company
(collectively, “GP
Expenses”).
6.2 Partnership
Expenses and Organizational Expenses.
(a) The
Partnership shall bear and be charged with the following costs and expenses
of
the Partnership and shall promptly reimburse the General Partner or the GP
Company, as the case may be, to the extent that any of such costs and expenses
are paid by such entities (the “Partnership
Expenses”):
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(i) all
expenses of the General Partner and the GP Company, other than GP Expenses,
incurred in managing and controlling the business and affairs of the
Partnership, including the relevant portion of salaries, employee benefits
and
other compensation of the Management Principal and other employees of the
General Partner and the GP Company;
(ii) all
administrative expenses of the Partnership incurred in the ordinary course
of
business, including the cost of the preparation of the annual audit, financial
and tax returns and tax reports required for Partners or the Partnership,
cash
management expenses and routine legal and accounting expenses;
(iii) all
out-of-pocket costs and expenses incurred in originating, investigating,
selecting, negotiating, acquiring, structuring, financing, operating,
monitoring, disposing of or abandoning of Portfolio Investments or transactions
that, if consummated, would constitute Portfolio Investments;
(iv) all
third-party expenses in connection with Portfolio Investments, including
any
financing, legal, accounting, management and consulting fees or expenses
as well
as any administrative expenses of any Prospect Generating Entity incurred
in the
ordinary course of business;
(v) all
premiums, deductibles and other costs associated with obtaining and maintaining
any insurance coverage with respect to the business and activities of the
Partnership, the General Partner and the GP Company;
(vi) interest
on and fees and expenses arising out of all borrowings made by the Partnership,
including the arranging thereof;
(vii) out-of-pocket
costs of any litigation, director and/or officer liability or other insurance
and indemnification or extraordinary expense or liability relating to the
affairs of the Partnership;
(viii) expenses
of liquidating the Partnership;
(ix) registration
expenses and any taxes, fees or other governmental charges levied against
the
Partnership and all expenses incurred in connection with any tax audit,
investigation, settlement or review of the Partnership,
(x) expenses
of any meetings of the Partners; and
(xi) expenses
of any meetings of the Advisory Committee and out-of-pocket expenses reasonably
incurred by members of the Advisory Committee in carrying out their functions
for the Partnership.
(b) In
addition to all Partnership Expenses, the Partnership shall bear and be charged
with all Organizational Expenses and shall promptly reimburse the General
Partner or the GP Company, as the case may be, to the extent that any
Organizational Expenses are paid by such entities.
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6.3 Insurance
Coverage.
The
Partnership shall obtain and maintain insurance coverage with respect to
the
business and activities of the Partnership, the General Partner and the GP
Company in such amounts as the General Partner determines in its sole
discretion.
ARTICLE
VII
Books
and Records; Reports and Other Financial, Legal and Tax
Matters
7.1 Books
and Records.
(a) The
General Partner shall keep or cause to be kept, until the third anniversary
of
the dissolution of the Partnership, complete and appropriate records and
books
of account. Except as otherwise expressly provided herein, such books and
records shall be maintained on a basis which allows for the proper preparation
of the Partnership’s financial statements and tax returns.
(b) The
names
of all Persons admitted as Partners and their status as General Partner or
a
Limited Partner shall be maintained in the records of the
Partnership.
(c) Any
Limited Partner or its duly authorized representatives shall be permitted,
upon
reasonable advance notice to the General Partner, to inspect the books and
records of the Partnership for any proper purpose and make copies thereof
and
obtain any information reasonably requested by such Limited Partner consistent
with reasonable confidentiality restrictions imposed by the General Partner
during normal business hours.
7.2 Financial
Reports and
Tax Information.
(a)
Within 45 days after the end of each of the first three Fiscal Quarters of
each
Fiscal Year of the Partnership, and within 90 days after the end of each
Fiscal
Year of the Partnership (subject in both cases to reasonable delays in the
event
of the late receipt of any necessary financial statements), the General Partner
shall send, or cause to be sent, to each Person who was a Partner during
such
period the following financial statements for the Partnership prepared in
accordance with generally accepted accounting principles, consistently
applied,
(i) a
balance
sheet as of the end of such period;
(ii) a
statement of income or loss and a statement of Partners’ capital for such
period;
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(iii) a
statement of cash flows; and
(iv) a
statement of changes in Partners’ equity; and
(b) Within
90
days after the end of each Fiscal Year of the Partnership (subject to reasonable
delays in the event of the late receipt of any necessary financial statements),
the General Partner shall send, or cause to be sent, to each Person who was
a
Partner during such period any tax information necessary for the Partners’
completion of their respective U.S. federal, state and local tax returns,
including copies of Schedule K-1 (Partner’s Share of Income, Credits,
Deductions, etc.).
7.3 Partner
Meetings; Voting and Consent.
(a) The
General Partner may in its sole discretion call a meeting of the Partnership
and
it shall promptly call a special meeting if a Required Interest of Limited
Partners so request. The General Partner shall give at least 21 days’ notice
(but not more than 60 days’ notice) of the time and place of any meeting to each
Limited Partner, which notice shall set forth the agenda for such meeting;
provided, if the General Partner fails to provide such notice within
15 days after the Limited Partners request for a special meeting in
accordance with the foregoing, any Limited Partner who was party to such
request
may give notice of such special meeting to each Partner.
(b) Any
action required to be, or which may be, taken at any meeting by the Partners
may
be taken in writing without a meeting if consents thereto are given by the
General Partner and Limited Partners holding Interests in an amount not less
than the amount that would be necessary to take such action at a
meeting.
(c) A
Limited
Partner may vote at any meeting either in person or by a proxy which such
Limited Partner has duly executed in writing. The General Partner may permit
Persons other than Partners to participate in any meeting; provided, no such
Person shall be entitled to vote.
(d) The
chairman of any meeting of the Partners shall be a Person affiliated with
and
designated by the General Partner. A Person designated by the General Partner
shall keep written minutes of all of the proceedings and votes of any
meeting.
(e) The
General Partner may set in advance a record date for determining the Limited
Partners entitled to notice of and to vote at any meeting or entitled to
express
consent to any action in writing without a meeting. No record date shall
be less
than 10 nor more than 60 days prior to the date of any meeting to which such
record date relates nor more than 10 days after the date of any notice by
the
General Partner seeking any action by written consent.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-27-
7.4 Fiscal
Year.
The
fiscal year (“Fiscal
Year”)
of the
Partnership shall be the calendar year or, in the case of the first and last
fiscal years of the Partnership, the fraction thereof commencing on the
Effective Date or ending on the date on which the winding up of the Partnership
is completed, as the case may be. The taxable year of the Partnership shall
be
determined under section 706 of the Code. The General Partner shall have
the authority to change the ending date of the Fiscal Year if the General
Partner shall determine that such change is reasonably necessary or appropriate,
provided that the General Partner shall promptly give notice of any such
change
to the Limited Partners.
7.5 Tax
Elections.
The
Partnership shall make the following elections on the appropriate tax
returns:
(a) to
adopt
the calendar year as the Partnership’s fiscal year;
(b) to
adopt
the accrual method of accounting and to keep the Partnership’s books and records
on the income-tax method;
(c) if
a
distribution of Partnership property as described in Section 734 of the
Code occurs or if a transfer of a Partnership Interest as described in
Section 743 of the Code occurs, on request by notice from any Partner, to
elect, pursuant to Section 754 of the Code, to adjust the basis of
Partnership properties;
(d) to
elect
to amortize the organizational expenses of the Partnership ratably over a
period
of 60 months as permitted by Section 709(b) of the Code; and
(e) any
other
election the General Partner may deem appropriate and in the best interests
of
the Partners.
Neither
the Partnership nor any Partner or Assignee may make an election for the
Partnership to be excluded from the application of the provisions of
Subchapter K of Chapter 1 of Subtitle A of the Code or any
similar provisions of applicable state law. Upon the transfer of all or a
portion of a Partner’s Interest in accordance with the terms of this Agreement,
the General Partner shall file on behalf of the Partnership, upon any affected
Partner’s request, an election under section 754 of the Code and in accordance
with applicable Treasury Regulations to cause the basis of the Partnership
property to be adjusted for federal income tax purposes as provided by section
743 or 734 of the Code.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-28-
ARTICLE
VIII
Transfers
and Withdrawals
8.1 Transfers
by the General Partner.
Without
the consent of a Required Interest of the Limited Partners, the General Partner
shall not have the right to Transfer its interest as the general partner
of the
Partnership; provided that, without the consent of any of the Limited Partners,
the General Partner may Transfer its interest as the general partner of the
Partnership to one of its Affiliates so long as such Affiliate is controlled,
directly or indirectly, by the same Person or Persons that control the General
Partner immediately prior to such Transfer. In the event of an assignment
or
other Transfer of all of its interest as a general partner of the Partnership
in
accordance with this Section 8.1, the General Partner’s assignee or
transferee shall be substituted in its place as general partner of the
Partnership and immediately thereafter the General Partner shall withdraw
as a
general partner of the Partnership.
8.2 Transfers
by the Limited Partners.
(a) A
Limited
Partner may not Transfer its Interest in whole or in part to any Person without
the prior written consent of the General Partner, which consent, solely in
the
case of a proposed Permitted Transfer, shall not be unreasonably withheld,
and
in other cases may be withheld in the sole discretion of the General Partner;
provided, the General Partner may withhold its consent to any Permitted Transfer
(and any such withholding of consent shall be deemed to have been reasonably
withheld) (i) if, in the General Partner’s reasonable judgment the
creditworthiness of the proposed Permitted Transferee is unsatisfactory in
light
of the obligations under this Agreement, (ii) if the General Partner
reasonably believes that such Transfer would not be within (or would cause
the
Partnership to fail to qualify for) one or more of the safe harbors described
in
paragraphs (e), (f), (g), (h), or (j) of Treasury Regulation
section 1.7704-1 or otherwise poses a material risk that the Partnership
will be treated as a “publicly traded partnership” within the meaning of
section 7704 of the Code and the regulations promulgated thereunder,
(iii) if such proposed Permitted Transferee’s ownership of the Limited
Partner’s Interest is reasonably likely to constitute beneficial ownership by
more than one Person for purposes of Section 3(c)(1) of the 1940 Act, (iv)
if the General Partner reasonably believes such proposed Permitted Transfer
may
cause all or any portion of the assets of the Partnership to constitute “plan
assets” under ERISA or the Code or (v) if such proposed Permitted
Transferee is not able to make the representations, warranties and covenants
substantially similar to those made by the subscribers in the Subscription
Agreements. Any such Transfer for which the General Partner has given consent
(including those to Affiliates) shall be effected by the execution and delivery
(by the transferor and transferee) of an instrument requiring (A) the
transferor and transferee to make representations, warranties and covenants
similar to those made by the subscribers in the Subscription Agreements,
(B) a legal opinion in form and from counsel reasonably acceptable to the
General Partner as to certain customary matters including (I) that such
Transfer is in compliance with applicable federal and state securities laws,
(II) that such proposed Transfer does not cause the Partnership to fail to
qualify for one or more of the safe harbors described in paragraphs (e),
(f),
(g), (h), or (j) of Treasury Regulation Section 1.7704-1 or otherwise pose
a material risk that the Partnership will be treated as a “publicly traded
partnership” within the meaning of section 7704 of the Code and the
regulations promulgated thereunder, (III) that such Transfer does not
result in more beneficial owners under Section 3(c)(1) of the 1940 Act than
existed before giving effect to the Transfer, (IV) that such Transfer would
not cause all or any portion of the assets of the Partnership to constitute
“plan assets” under ERISA or the Code and (V) that such Transfer would not
cause the Partnership to lose its status as a partnership for federal income
tax
purposes; provided, the General Partner may, in its sole discretion, waive
or
alter the opinions required to be given and (C) the proposed transferee to
assume all obligations of the proposed transferor including all obligations
with
respect to Unfunded Commitments.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-29-
(b) Each
Transferring Limited Partner agrees that it will pay, or it will cause the
transferee to pay, all reasonable expenses, including attorneys’ fees, incurred
by the Partnership in connection with Transfer of an Interest by such Limited
Partner.
(c) The
General Partner shall prohibit any Transfer or Admission (and shall not
recognize any such Transfer or Admission) if the General Partner reasonably
believes that such Transfer or Admission would not be within (or would cause
the
Partnership to fail to qualify for) one or more of the safe harbors described
in
paragraphs (e), (f), (g), (h), or (j) of Treasury Regulation
Section 1.7704-1 or otherwise poses a material risk that the Partnership
will be treated as a “publicly traded partnership” within the meaning of
section 7704 of the Code and the regulations promulgated
thereunder.
(d) A
Transfer that is made in violation of this Section 8.2 shall be null and
void ab initio
and, if
not cured to the satisfaction of the General Partner within 10 days after
notice
from the General Partner, the transferring Partner shall be deemed a Defaulting
Partner and the provisions of Section 3.4 shall apply as if the
transferring Partner had failed to make a Capital Contribution.
8.3 Withdrawals
Generally.
(a) The
General Partner may, in its sole discretion, allow any Limited Partner (other
than the General Partner) to withdraw from the Partnership and, upon such
withdrawal, the General Partner may terminate such Partner’s Commitment and may
cause the Partnership to distribute to such Limited Partner an amount of
cash
equal to the positive balance, if any, of such Limited Partner’s Capital
Account.
(b) Except
as
expressly provided in this Agreement, no Partner shall have the right to
withdraw from the Partnership or to withdraw any part of its Capital Account
or
Capital Contributions.
8.4 Removal
of the General Partner.
(a) At
any
time after the General Partner ceases to be an Affiliate of the GP Company
or
the Management Principal, the General Partner may be removed with the written
consent of the greater of a Required Interest of Limited Partners or a majority
in interest of Limited Partners as specified in Internal Revenue Service
Revenue
Procedure 94-46 (or any successor thereto). Any such action for removal also
must provide for the selection of a new General Partner. The new General
Partner
so selected shall be admitted to the Partnership as a General Partner with
such
Percentage Interest and such other rights and interests in the Partnership
as
the Limited Partners making such selection may specify, but only if such
new
General Partner shall have made such Capital Contribution as such Limited
Partners may specify and only if such new General Partner shall have executed
and delivered to the Partnership a document including such new General Partner’s
acceptance of all the terms and provisions of this Agreement, an agreement
to
perform and discharge timely all of its obligations and liabilities hereunder
and its address for notice hereunder. Such removal shall be effective only
immediately subsequent to such admission.
In
addition, the new General Partner shall cause this Agreement to be amended
to
reflect that, from and after the date of such new General Partner’s admission,
the new General Partner’s interest in all Partnership distributions and
allocations shall be its Percentage Interest. Except
as
expressly set forth in this Section 8.4(a), the Limited Partners shall have
no
right to remove the General Partner.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-30-
(b) Immediately
following the admission of the new General Partner in accordance with Section
8.4(a), the removed General Partner shall become a Limited Partner and its
general
partner interest and all of its other rights and interests in Partnership
allocations and distributions (collectively, the “Combined
Interest”)
shall
be
converted into an Interest, without reduction in such Combined Interest (but
subject to proportionate dilution by reason of the admission of the new General
Partner). The Percentage Interest attributable to such Interest shall be
determined by mutual agreement of the removed General Partner and the Advisory
Committee. If the removed General Partner and the Advisory Committee cannot
so
agree, then such Percentage Interest shall be determined by an independent
investment advisor or investment banker with reasonable experience in the
oil
and gas exploration and production industry that is selected by mutual agreement
of the removed General Partner and the Advisory Committee. In
making
its determination, such independent investment advisor or investment banker
may
consider any factors it may deem relevant and its determination shall be
final
and binding on the removed General Partner and the Limited Partners. The
costs
and expenses of such independent investment advisor or investment banker
shall
be borne by the Partnership. For
purposes of this Agreement, conversion of the Combined Interest of the removed
General Partner to an Interest will be characterized as if the removed General
Partner contributed its Combined Interest to the Partnership in exchange
for the
newly issued Interest. The new General Partner shall indemnify the removed
General Partner as to all debts and liabilities of the Partnership arising
on or
after the date on which the removed General Partner becomes a Limited
Partner.
ARTICLE
IX
Dissolution,
Winding Up and Termination of the Partnership
9.1 Dissolution.
The
existence of the Partnership shall continue until the Partnership is dissolved
and subsequently terminated, which dissolution shall occur upon the first
to
occur of any of the following events (each, an “Event
of Dissolution”):
(a) the
expiration of the term of the Partnership set forth in
Section 2.7;
(b) after
the
Commitment Period, at the time all of the Portfolio Investments have been
Disposed of;
(c) at
any
time upon the determination by the General Partner in its sole discretion;
or
(d) at
any
time after the General Partner ceases to be an Affiliate of the Management
Principal or the GP Company, upon the approval of a Required Interest of
the
Limited Partners.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-31-
9.2 Winding-up.
Upon
the occurrence of an Event of Dissolution, the Partnership shall be wound
up and
liquidated. The General Partner or, if there is no general partner, a liquidator
appointed by a Majority in Interest of the Limited Partners, shall proceed
with
the Dissolution Sale and the Final Distribution. In the Dissolution Sale,
the
General Partner or such liquidator shall use its commercially reasonable
efforts
to reduce to cash and cash equivalent items such assets of the Partnership
as
the General Partner or such liquidator shall deem it advisable to sell, subject
to obtaining fair value for such assets and any tax or other legal
considerations (including legal restrictions on the ability of a Limited
Partner
to hold any assets to be distributed in kind).
9.3 Final
Distribution.
After
the Dissolution Sale, the proceeds thereof and all other assets of the
Partnership shall be distributed (the “Final
Distribution”)
in one
or more installments in the following order of priority:
(a) to
the
payment of the expenses of the winding-up, liquidation and dissolution of
the
Partnership;
(b) to
pay
all creditors of the Partnership, including, in accordance with the terms
agreed
among them and otherwise on a pro rata and pari passu basis, Partners who
are
creditors;
(c) to
establish reserves, in amounts reasonably established by the General Partner
or
such liquidator, to meet other liabilities of the Partnership other than
to the
Partners or former Partners in respect of distributions owing to them
hereunder.
The
remaining proceeds, if any, plus any remaining assets of the Partnership,
shall
be applied and distributed to the Partners as soon as practicable, in accordance
with the positive balances of the Partners’ Capital Accounts, as determined
after taking into account all adjustments to Capital Accounts for the
Partnership taxable year during which the liquidation occurs. For purposes
of
the application of this Section 9.3 and determining Capital Accounts on
liquidation, all Unrealized Gain, Unrealized Loss and accrued income and
deductions of the Partnership shall be treated as realized and recognized
immediately before the date of distribution.
9.4 Termination
of the Partnership.
Upon
the completion of the dissolution and winding-up of the Partnership and the
distribution of all Partnership assets, the Partnership’s affairs shall
terminate and the Partnership shall cause to be executed and filed a Certificate
of Cancellation of the Certificate pursuant to the Act, as well as any and
all
other documents required to effectuate the termination of the
Partnership.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-32-
ARTICLE
X
Exculpation
and Indemnification
10.1 Exculpation.
(a) The
General Partner shall be subject to all of the liabilities of a general partner
in a partnership without limited partners; provided, however that to the
fullest
extent permitted by law, none of the General Partner, the Management Principal,
the GP Company, the Advisory Committee Members and any members, partners,
officers, directors, shareholders or managers of same and any individual
acting
on behalf of any other Person at the request of the General Partner in any
capacity similar to the foregoing (each, an “Indemnified
Party”),
shall
be liable to the Partnership or to any Limited Partner for any act or
omission taken or suffered by such Indemnified Party in connection with the
conduct of the affairs of the Partnership or the General Partner or otherwise
in
connection with this Agreement or the matters contemplated herein, except
to the
extent such act or omission constituted bad faith or willful misconduct or,
in
the case of a criminal matter, such Indemnified Party acted with knowledge
that
such act or omission was criminal.
(b) Except
as
expressly set forth in this Agreement, neither the General Partner nor any
other
Indemnified Party shall have any duties or liabilities, including fiduciary
duties, to the Partnership or any Limited Partner or Assignee and the provisions
of this Agreement, to the extent that they restrict, eliminate or otherwise
modify the duties and liabilities, including fiduciary duties, of the General
Partner or any other Indemnified Party otherwise existing at law or in equity,
are agreed by the Partners to replace such other duties and liabilities of
the
General Partner or such other Indemnified Party.
(c) To
the
extent that, at law or in equity, an Indemnified Party has duties (including
fiduciary duties) and liabilities relating thereto to the Partnership or
to the
Partners, the General Partner and any other Indemnified Party acting in
connection with the Partnership’s business or affairs shall not be liable to the
Partnership or to any Partner for its good faith reliance on the provisions
of
this Agreement.
(d) The
General Partner may consult with legal counsel and accountants selected by
it
and any act or omission suffered or taken by it on behalf of the Partnership
or
in furtherance of the interests of the Partnership in good faith in reliance
upon and in accordance with the advice of such counsel or accountants shall
be
full justification for any such act or omission, and the General Partner
shall
be fully protected and held harmless in so acting or omitting to act provided
that such counsel or accountants were selected with reasonable
care.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-33-
10.2 Indemnification.
(a) To
the
fullest extent permitted by law, the Partnership shall indemnify, defend
and
hold harmless each of the Indemnified Parties from and against any and all
claims (including derivative claims brought by or in the right of the
Partnership), liabilities, damages, losses, costs and expenses (including
amounts paid in satisfaction of judgments, in compromises and settlements,
as
fines and penalties and legal or other costs and reasonable expenses of
investigating or defending against any claim or alleged or threatened claim)
of
any nature whatsoever, known or unknown, liquidated or unliquidated, that
are
incurred by any Indemnified Party and arise out of or in connection with
the
affairs of the Partnership, or the performance by such Indemnified Party
of any
of the General Partner’s responsibilities hereunder or otherwise in connection
with the matters contemplated herein; provided that an Indemnified Party
shall
be entitled to indemnification hereunder only to the extent that such
Indemnified Party’s conduct does not constitute bad faith or willful misconduct
or, in the case of a criminal matter, such Indemnified Party did not act
with
knowledge that such conduct was criminal. The termination of any proceeding
by
settlement, judgment, order, conviction, or upon a plea of nolo contendere
or its
equivalent shall not, of itself, create a presumption that such Indemnified
Party’s conduct constituted bad faith or willful misconduct. The satisfaction of
any indemnification and any holding harmless pursuant to this
Section 10.2(a) shall be from and limited to Partnership assets, and no
Partner shall have any personal liability on account thereof beyond the amount
of its Unfunded Commitment.
(b) In
addition, in the sole discretion of the General Partner, the Partnership
may
indemnify and hold harmless any Person to the same extent provided in the
first
sentence of Section 10.2(a) by reason of such Person’s status as (i) an
employee, agent, trustee or other Affiliate of the Partnership, the General
Partner or the GP Company or (ii) a Person serving at the request of the
General
Partner in another Person in a capacity similar to those referred to in clause
(i) of this sentence, provided that in each case such Person’s conduct does not
constitute bad faith or willful misconduct or, in the case of a criminal
matter,
such Person did not act with knowledge that such conduct was criminal. Any
Person so indemnified and held harmless pursuant to the immediately preceding
sentence shall be deemed an “Indemnitee” for purposes of this Section
10.2.
(c) Expenses
reasonably incurred by an Indemnified Party in defense or settlement of any
claim that may be subject to a right of indemnification hereunder shall be
advanced by the Partnership prior to the final disposition thereof upon receipt
of an undertaking by or on behalf of the Indemnified Party to repay such
amount
to the extent that it shall be determined ultimately that such Indemnified
Party
is not entitled to be indemnified hereunder.
(d) The
right
of any Indemnified Party to the indemnification provided herein shall be
cumulative of, and in addition to, any and all rights to which such Indemnified
Party may otherwise be entitled by contract or as a matter of law or equity
and
shall extend to such Indemnified Party’s heirs, successors, assigns and legal
representatives.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-34-
(e) Except
as
provided below in this Section 10.2(d), each Indemnified Party shall be
permitted to engage counsel of its choice, at the Partnership’s expense, which
counsel shall be reasonably acceptable to the Partnership, in connection
with
any matter covered by the Partnership’s indemnity obligations described in
Section 10.2(a). In any action, suit or proceeding against multiple
Indemnified Parties, such Indemnified Parties shall jointly employ, at the
expense of the Partnership, counsel of the Indemnified Parties’ choice, which
counsel shall be reasonably satisfactory to the Partnership, in such action,
suit or proceeding; provided, that if retention of joint counsel by such
Indemnified Parties would create a conflict of interest, each Indemnified
Party
whose participation in such joint representation would cause such a conflict
shall have the right to employ, at the expense of the Partnership, separate
counsel of the respective Indemnified Party’s choice, which counsel shall be
reasonably satisfactory to the Partnership in such action, suit or proceeding;
provided further, that if any indemnitor shall acknowledge in writing its
liability to the Indemnified Party for any action, suit or proceeding brought
by
a third party in connection with which any Indemnified Party is seeking
indemnification, then such indemnitor shall be entitled to select the counsel
to
defend such action, suit or proceeding, subject to the approval of the
Indemnified Party, which approval shall not be unreasonably
withheld.
(f) If
this
Article X or any portion hereof shall be invalidated on any ground by any
court of competent jurisdiction, then the Partnership shall nevertheless
indemnify and hold harmless each Person indemnified pursuant to this Article
X
as to costs, charges and expenses (including attorneys’ fees), judgments, fines
and amounts paid in settle-ment with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative to the full extent
permitted by any applicable portion of this Article X that shall not have
been
invali-dated and to the fullest extent permitted by law.
ARTICLE
XI
Miscellaneous
11.1 Amendments.
(a) Except
as
required by law, this Agreement (including the Exhibits hereto) may be amended
or supplemented by the written consent of the General Partner and a Majority
in
Interest of the Limited Partners; provided that, other than as expressly
provided in this Agreement, no such amendment shall:
(i) increase
any Limited Partner’s Commitment, reduce its share of the Partnership’s
distributions, income and gains, or increase its share of the Partnership’s
losses, without, in each case, the written consent of each Limited Partner
so
affected;
(ii) change
the percentage of interests of Limited Partners necessary for any consent
required hereunder to the taking of an action unless such amendment is approved
by Limited Partners who then hold interests equal to or in excess of such
percentage interest for the subject of such proposed amendment; or
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-35-
(iii) amend
this Section 11.1 without the consent of each Limited Partner.
(b) Notwithstanding
anything in Section 11.1(a) to the contrary, this Agreement may be amended
by the General Partner without the consent of the Limited Partners to
(i) change the name of the Partnership pursuant to Section 2.2 hereof,
(ii) correct any printing, stenographic or clerical error or omissions,
provided that such amendment does not materially adversely affect the Interests
of any of the Limited Partners (other than those Limited Partners who approve
such amendment), or (iii) reflect (A) additional Limited Partners
admitted and additional Commitments made at any Subsequent Closing,
(B) changes to any Commitments and the identity of the Partners as a result
of a Transfer of an Interest made in accordance with this Agreement and
(C) changes to the Commitments or identity of the Parties as a result of
the default of any Partner to make a Capital Contribution when required under
this Agreement or under the circumstances described in
Section 3.4(d).
(c) Notwithstanding
anything in Section 11.1(a) to the contrary, the General Partner shall have
the right to amend this Agreement without the approval of any other Partner
to
the extent the General Partner reasonably determines, based upon written
advice
of tax counsel to the Partnership, that the amendment is necessary to provide
assurance that the Partnership will not be treated as a “publicly traded
partnership,” because it is entitled to “safe harbor” treatment under
section 7704 of the Code and the regulations promulgated thereunder;
provided, (i) such amendment shall not change the relative economic
interests of the Partners, reduce any Partner’s share of distributions, or
increase any Partner’s Commitment or its liability hereunder and (ii) the
General Partner provides a copy of such written advice and amendment to the
Limited Partners at least ten days prior to the effective date of any such
amendment and a Majority in Interest of the Limited Partners shall not have
made
a reasonable objection to such amendment prior to the effective date of such
amendment.
11.2 Entire
Agreement.
This
Agreement, the Subscription Agreements, and the other agreements referred
to
herein constitute the entire agreement among all of the Partners with respect
to
the subject matter hereof and supersede any prior agreement or understanding
among or between them with respect to such subject matter. The representations
and warranties of the Limited Partners in, and the other provisions of, the
Subscription Agreements shall survive the execution and delivery of this
Agreement.
11.3 Severability.
Each
provision of this Agreement shall be considered severable and if for any
reason
any provision which is not essential to the effectuation of the basic purposes
of this Agreement is determined by a court of competent jurisdiction to be
invalid or unenforceable and contrary to the Act or existing or future
applicable law, such invalidity shall not impair the operation of or affect
those provisions of this Agreement which are valid. In that case, this Agreement
shall be construed so as to limit any term or provision so as to make it
enforceable or valid within the requirements of any applicable law, and in
the
event such term or provision cannot be so limited, this Agreement shall be
construed to omit such invalid or unenforceable provisions.
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Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-36-
11.4 Notices.
All
notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if (a) delivered or
mailed, registered mail, first-class postage paid or (b) transmitted via
facsimile, if to any Partner, at such Partner’s address, or to such Partner’s
facsimile number, set forth on such Partner’s Subscription Agreement, and if to
the Partnership, to the General Partner at ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇,
or
to such other person or address as any Partner shall have last designated
by
notice to the Partnership, and in the case of a change in address by the
General
Partner, by notice to the Limited Partners. Any notice shall be deemed to
have
been duly given if personally delivered or sent by the mails or by facsimile
transmission confirmed by letter and will be deemed received, unless earlier
received, (i) if sent by certified or registered mail, return receipt
requested, when actually received, (ii) if sent by overnight mail or
courier, when actually received, (iii) if sent by facsimile transmission,
on the date sent if receipt is confirmed by telephone, and (iv) if
delivered by hand, on the date of receipt.
11.5 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of Delaware, excluding any conflict-of-laws rule or principle that
might
refer the construction or interpretation of this Agreement to the laws of
another State. In particular, the Partnership is formed pursuant to the Act,
and
the rights and liabilities of the Partners shall be as provided therein,
except
as herein otherwise expressly provided.
11.6 Jurisdiction;
Venue.
Any
action or proceeding against the parties relating in any way to this Agreement
may be brought and enforced in the courts of the State of Texas located in
▇▇▇▇▇▇ County and, to the extent subject matter jurisdiction exists therefor,
in
the courts of the United States for the Southern District of Texas, and the
parties irrevocably submit to the exclusive jurisdiction of the foregoing
courts
in respect of any such action or proceeding. The parties irrevocably waive,
to
the fullest extent permitted by law, any objection that they may now or
hereafter have to the laying of venue of any such action or proceeding in
the
courts of the State of Texas located in ▇▇▇▇▇▇ County or the United States
District Court for the Southern District of Texas, and any claim that any
such
action or proceeding brought in any such court has been brought in an
inconvenient forum.
11.7 Successors
and Assigns.
Except
with respect to the rights of Indemnified Parties hereunder, none of the
provisions of this Agreement shall be for the benefit of or enforceable by
the
creditors of the Partnership or any other Person, and, subject to compliance
with the transfer restrictions contained in this Agreement, this Agreement
shall
be binding upon and inure to the benefit of the Partners, and their legal
representatives, heirs, successors and permitted assigns.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-37-
11.8 Counterparts.
This
Agreement may be executed in one or more counterparts, all of which shall
constitute one and the same instrument.
11.9 Interpretation.
Wherever from the context it appears appropriate, each term stated in either
the
singular or the plural shall include the singular and the plural, and pronouns
stated in either the masculine or the neuter gender shall include the masculine,
the feminine and the neuter.
11.10 Headings.
The
section headings in this Agreement are for convenience of reference only,
and shall not be deemed to alter or affect the meaning or interpretation
of any
provisions hereof.
11.11 Confidentiality.
Each
Limited Partner will maintain the strict confidentiality of information that
is
non-public information furnished by the General Partner regarding the General
Partner and the Partnership (including (a) information regarding any
Portfolio Investment and (b) the identity of any Limited Partner) received
by such Limited Partner pursuant to this Agreement, except (i) as otherwise
reasonably requested or required by governmental regulatory agencies,
self-regulating bodies, law, legal process, or litigation in which such Limited
Partner is a defendant, plaintiff or other named party and (ii) as such
Limited Partner furnishes to its Affiliates, legal, accounting and other
professional advisors; provided that such Limited Partner shall be liable
to the
Partnership and the General Partner for any such Affiliate’s or any such legal,
accounting or other professional advisor’s failure to comply with the terms of
this Section 11.11.
11.12 Employees.
Notwithstanding anything to the contrary in this Agreement, the General Partner
may, in its discretion, waive in whole or in part for the benefit of any
Qualified Employee the provisions of this Agreement that would burden such
Qualified Employee’s distributions with any distributions to the General Partner
pursuant to Sections 4.5(a)(i), (ii) or (iii). If the General Partner waives
in
whole or in part any of such provisions, all other provisions of this Agreement
shall be construed in a manner that takes into account such waiver.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-38-
11.13 Legal
Counsel.
▇▇▇▇▇▇
& ▇▇▇▇▇▇ L.L.P. (“Legal
Counsel”)
is
counsel to the General Partner and the GP Company. The General Partner may
execute on behalf of the Partnership any consent to the representation of
the
Partnership that Legal Counsel may request pursuant to the rules of professional
conduct or similar rules in any jurisdiction. Each Limited Partner acknowledges
that Legal Counsel does not represent any Limited Partner in its capacity
as a
Limited Partner and that Legal Counsel shall owe no duties directly to a
Limited
Partner in its capacity as such. Each Limited Partner further acknowledges
that,
whether or not Legal Counsel has in the past represented or is currently
representing such Limited Partner with respect to other matters, Legal Counsel
has not represented the interests of any Limited Partner in the preparation
and
negotiation of this Agreement or any agreement delivered in connection herewith.
Each Limited Partner hereby consents to Legal Counsel representing the
Partnership, the General Partner, the GP Company or any of their respective
Affiliates in any matter relating to the governance and affairs of the
Partnership.
[signature
page follows]
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
-39-
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of April 21, 2006.
GENERAL
PARTNER:
|
HHEP
▇▇ ▇▇, L.P.
|
|||
|
By:
|
▇▇▇▇-▇▇▇▇▇▇▇
Exploration Partners, L.L.C.,
|
||
|
its
General Partner
|
|||
|
By:
|
/s/
▇▇▇▇ ▇. ▇▇▇▇
|
||
|
Name:
|
▇▇▇▇
▇. ▇▇▇▇
|
||
|
Title:
|
President
and Chief
Executive
Officer
|
||
LIMITED
PARTNERS:
By
the
General Partner as attorney-in-fact for all Limited Partners
now
and
hereafter admitted pursuant to powers of attorney now
and
hereafter granted to the General Partner in the Subscription
Agreement
between each such Limited Partner and the Partnership:
|
HHEP
▇▇ ▇▇, L.P.
|
|||
|
By:
|
▇▇▇▇-▇▇▇▇▇▇▇
Exploration Partners, L.L.C.,
|
||
|
its
General Partner
|
|||
|
By:
|
/s/
▇▇▇▇ ▇. ▇▇▇▇
|
||
|
Name:
|
▇▇▇▇
▇. ▇▇▇▇
|
||
|
Title:
|
President
and Chief
Executive Officer
|
||
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
Signature
Page
SCHEDULE
A
PARTNERS
AND COMMITMENTS
[OMITTED]
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
Schedule
A - Partners and Commitments
EXHIBIT
A
DEFINED
TERMS
“1940
Act”
means
the Investment Company Act of 1940, as amended, as the same may be further
amended from time to time.
“Act”
means
the Delaware Revised Uniform Limited Partnership Act, 6 Del. Code § 17-101
et seq.,
as the
same may be amended from time to time.
“Adjusted
Capital Account”
means
the Capital Account maintained for each Partner as of the end of each fiscal
year of the Partnership, (a) increased by any amounts that such Partner is
obligated to restore under the standards set by Treasury Regulation section
1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury
Regulation sections 1.704-2(g) and 1.704-2(i)(5)) and (b) decreased by
(i) the amount of all deductions in respect of depletion that, as of the
end of the fiscal year, are expected to be made to such Partner’s Capital
Account in respect of the oil and gas properties of the Partnership,
(ii) the amount of all losses and deductions that, as of the end of such
fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation section 1.751-1(b)(2)(ii), and (iii) the amount of all
distributions that, as of the end of such fiscal year, are reasonably expected
to be made to such Partner in subsequent years in accordance with the terms
of
this Agreement or otherwise to the extent they exceed offsetting increases
to
such Partner's Capital Account that are reasonably expected to occur during
(or
prior to) the year in which such distributions are reasonably expected to
be
made (other than increases as a result of a minimum gain chargeback pursuant
to
Sections 4.2(d)(i) or 4.2(d)(ii)). The foregoing definition of Adjusted
Capital Account is intended to comply with the provisions of Treasury Regulation
section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
“Adjusted
Property”
means
any property the Carrying Value of which has been adjusted pursuant to
Section 4.1(d)(i) or 4.1(d)(ii).
“Admission” means
the
admission of an Assignee as a Limited Partner.
“Affiliate”
means,
with respect to any Person, (a) any Person directly or indirectly
controlling, controlled by or under common control with such Person and
(b) any Person who, from time to time, is (i) an officer or director
of such Person or (ii) a spouse, a parent, a sibling or a child of such
Person, and (c) any Person that, directly or indirectly, is the beneficial
owner of 25% or more of any class of equity securities or other ownership
interests of such Person or of which such Person is directly or indirectly
the
owner of 25% or more of any class of equity securities or other ownership
interests.
“Agreed
Allocation”
means
any allocation, other than a Required Allocation, of an item of income, gain,
loss or deduction pursuant to the provisions of Section 4.1.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
Exhibit
A – Defined Terms
A-1
“Agreed
Value”
of
any
Contributed Property means the fair market value of such property at the
time of
contribution as agreed by the Partners.
“Assignee”
means
any Person that receives any Interest in connection with an Involuntary
Transfer; provided, such Person shall cease to be an Assignee if such person
is
admitted as a Limited Partner by the General Partner.
“Assumed
Tax Liability”
has the
meaning given to such term in Section 4.6.
“Business
Day”
means a
day which is not a Saturday, Sunday or a day on which banks in Houston, Texas
are generally closed.
“Capital
Account”
means
the capital account maintained for a Partner pursuant to
Section 4.1.
“Capital
Contribution”
means as
to any Partner at any time, the aggregate amount of capital actually contributed
(or deemed contributed in the case of the General Partner or the Initial
Limited
Partner) to the Partnership by such Partner pursuant to Sections 3.2(a),
3.2(b) and 3.3 on or prior to such time.
“Carrying
Value”
means
(a) with respect to a Contributed Property, the Agreed Value of such
property reduced (but not below zero) by all depreciation, depletion,
amortization and cost recovery deductions charged to the Partners’ Capital
Accounts in respect of such Contributed Property, and (b) with respect to
any other Partnership assets, the adjusted basis of such property for federal
income tax purposes, all as of the time of determination. The Carrying Value
of
any property shall be adjusted from time to time in accordance with Sections
4.1(d)(i) and 4.1(d)(ii) and to reflect changes, additions or other
adjustments to the Carrying Value for dispositions and acquisitions of
Partnership assets.
“Code”
means
the Internal Revenue Code of 1986, as the same may be amended from time to
time.
“Co-Investment
Opportunity”
means
the portion of any Portfolio Investment, or any potential transaction that,
if
consummated, would constitute a Portfolio Investment, that the General Partner
elects not to pursue for the Partnership’s account.
“Commitment”
means,
as to any Partner, the amount set forth in Schedule
A
hereto
as its “Commitment,” as such amount may be increased from time to time by such
Partner at a Subsequent Closing or reduced by reason of a Transfer of all
or
part of an Interest or by reason of actions taken pursuant to
Section 3.4.
“Commitment
Period”
means
the period from the Effective Date through the earlier of (a) the
Expiration Date and (b) the date on which the obligation of Limited
Partners to make Capital Contributions for Portfolio Investments is terminated
as provided in Section 3.1(b).
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
Exhibit
A – Defined Terms
A-2
“Contributed
Property”
means
each property or other asset, but excluding cash, contributed to the
Partnership. Once the Carrying Value of a Contributed Property is adjusted
pursuant to Section 4.1(d), such property shall no longer constitute a
Contributed Property, but shall be deemed an Adjusted Property.
“Curative
Allocation”
means
any allocation of an item of income, gain, deduction, loss or credit pursuant
to
the provisions of Section 4.2(d)(viii).
“Dispose,”
“Disposing”
and
“Disposition”
shall
mean a sale, assignment, transfer, gift, exchange, mortgage, pledge, grant
of a
security interest or other disposition or encumbrance, or the acts thereof,
whether voluntarily or by operation of law.
“Dissolution
Sale”
means
all sales and liquidations by or on behalf of the Partnership of its assets
in
connection with or in contemplation of the winding-up of the
Partnership.
“Economic
Risk of Loss”
has
the
meaning set forth in Treasury Regulation section 1.752-2(a).
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“Expiration
Date”
means
the third anniversary of the Effective Date, unless extended by the General
Partner in accordance with this Agreement.
“Fiscal
Quarter”
means
the calendar quarter or, in the case of the first and last fiscal quarters
of
the Partnership, the portion thereof commencing on the Effective Date or
ending
on the date on which the winding up of the Partnership is completed, as the
case
may be.
“Follow-On
Investment”
means
any investment in an existing Oil and Gas Interest held by the Partnership.
For
purposes of this definition, the term “investment” shall include any investment
of the type described in the second sentence of the definition of “Portfolio
Investment.”
“Fund
I”
means
▇▇▇▇-▇▇▇▇▇▇▇ Exploration, L.P., a Delaware limited partnership.
“General
Partner”
means
HHEP ▇▇ ▇▇, L.P., a Delaware limited partnership, and any general partner
substituted therefor in accordance with this Agreement but does not include
any
Person who has ceased to be a General Partner in the Partnership.
“GP
Company”
means
▇▇▇▇-▇▇▇▇▇▇▇ Exploration Partners, L.L.C, a Delaware limited liability company
and the general partner of the General Partner, and any successor thereto.
“Interest”
means
the entire limited partnership interest owned by a Limited Partner or Assignee
in the Partnership at any particular time, including the right of such Limited
Partner or Assignee to any and all benefits to which a Limited Partner or
Assignee may be entitled as provided in this Agreement, together with the
obligations of such Limited Partner or Assignee to comply with all the terms
and
provisions of this Agreement.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
Exhibit
A – Defined Terms
A-3
“Involuntary
Transfer”
means a
Transfer resulting from the death, incompetence, insolvency, bankruptcy,
involuntary termination, involuntary dissolution or liquidation of any
Person.
“Limited
Partners”
means
the parties shown as limited partners on the books and records of the
Partnership, including any Person who has been admitted to the Partnership
as a
substituted or additional Limited Partner in accordance with this Agreement
but
does not include any Person who has ceased to be a Limited Partner in the
Partnership.
“Majority
in Interest”
means,
with respect to any group of specified Partners, those of such Partners holding
more than 50% of the total Commitments of all such Partners.
“Management
Principal”
means
▇▇▇▇ ▇. ▇▇▇▇.
“Net
Agreed Value”
means,
(a) in the case of any Contributed Property, the Agreed Value of such
property reduced by any liabilities either assumed by the Partnership upon
such
contribution or to which such property is subject when contributed, and
(b) in the case of any property distributed to a Partner by the
Partnership, the Partnership's Carrying Value of such property (as adjusted
pursuant to Section 4.1(d)(ii)) at the time such property is distributed,
reduced by any indebtedness either assumed by such Partner upon such
distribution or to which such property is subject at the time of distribution,
in either case, as determined under section 752 of the Code.
“Net
Income”
means,
for any taxable period, the excess if any, of the Partnership’s items of income
and gain for such taxable period over the Partnership’s items of loss and
deduction for such taxable period. The items included in the calculation
of Net
Income shall be determined in accordance with Section 4.1 and shall not
include any items allocated under Sections 4.2(d)(i) - 4.2(d)(viii). Once
an
item of income, gain, loss or deduction that has been included in the initial
computation of Net Income is subjected to a Required Allocation or a Curative
Allocation, Net Income or Net Loss, whichever the case may be, shall be
recomputed without regard to such item.
“Net
Loss”
means,
for any taxable period, the excess if any, of the Partnership’s items of loss
and deduction for such taxable period over the Partnership’s items of income and
gain for such taxable period. The items included in the calculation of Net
Loss
shall be determined in accordance with Section 4.1 and shall not include
any items allocated under Sections 4.2(d)(i) - 4.2(d)(viii). Once an item
of
income, gain, loss or deduction that has been included in the initial
computation of Net Loss is subjected to a Required Allocation or a Curative
Allocation, Net Income or Net Loss, whichever the case may be, shall be
recomputed without regard to such item.
“Nonrecourse
Deductions”
means
any and all items of loss, deduction or expenditures (described in section
705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury
Regulation section 1.704-2(b), are attributable to a Nonrecourse
Liability.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
Exhibit
A – Defined Terms
A-4
“Nonrecourse
Liability”
has
the
meaning set forth in Treasury Regulation section 1.752-1(a)(2).
“Offshore
U.S. Gulf of Mexico”
means
the federal waters of the Gulf of Mexico.
“Oil
and Gas Interest”
means
any right, title, or interest (or contractual right to acquire any right,
title,
or interest) in, to and under any oil, gas, or other mineral lease or any
other
interest in oil and gas, including prospects, leases, ▇▇▇▇▇, mineral rights,
working interests, royalties, overriding royalties, net profits interests,
production payments, farm-ins, rights-of-way, easements, licenses and permits
and also including any right, title or interest (or contractual right to
acquire
and right, title or interest) in any geological or geophysical data related
to
any of the foregoing.
“Onshore
U.S. Gulf Coast”
means
the States of Texas, Louisiana, Mississippi, Alabama and Florida and the
State
waters adjacent thereto.
“Organizational
Expenses”
means
all out-of-pocket costs and expenses in connection with the formation and
organization of the Partnership and any related entities (including any
reimbursements to Fund I as contemplated by Section 5.4(a)(i)) and the offering
of interests in the Partnership, including any related legal and accounting
fees.
“Partner
Nonrecourse Debt”
has
the
meaning set forth in Treasury Regulation section 1.704-2(b)(4).
“Partner
Nonrecourse Debt Minimum Gain”
has
the
meaning set forth in Treasury Regulation section 1.704-2(i)(2).
“Partner
Nonrecourse Deductions”
means
any and all items of loss, deduction or expenditure (including any expenditure
described in section 705(a)(2)(B) of the Code) that, in accordance with the
principles of Treasury Regulation section 1.704-2(i), are attributable to
a
Partner Nonrecourse Debt.
“Partners”
means
the General Partner and the Limited Partners.
“Partnership
Minimum Gain”
means
that amount determined in accordance with the principles of Treasury Regulation
section 1.704-2(d).
“Past
Due Rate”
means
the lesser of (a) the per annum prime rate published in the Wall
Street Journal
or, if
no such rate is published therein, the rate quoted from time to time by a
New
York money center bank selected by the General Partner plus 4% and (b) the
maximum non-usurious rate of interest permitted by applicable law.
“Payment
Date”
means a
date on which the Partners are required to make Capital Contributions to
the
Partnership, which date (a) shall be specified in a Payment Notice
delivered to each Limited Partner from which a Capital Contribution is required
on such date, and (b) shall be at least 10 Business Days after the date of
delivery of a Payment Notice.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
Exhibit
A – Defined Terms
A-5
“Payment
Notice”
means a
written notice requiring Capital Contributions to the Partnership, which
notice
shall:
(a) specify
the amount required from the Limited Partner;
(b) specify
the purpose for which the Capital Contributions are required to be made;
and
(c) the
applicable Payment Date.
“Percentage
Interest”
means
with respect to any Partner, the ratio of such Partner’s aggregate Capital
Contributions (or deemed contribution in the case of the General Partner
or the
Initial Limited Partner) to the total Capital Contributions of all Partners;
provided that for these purposes (but not for the purpose of determining
Unfunded Commitments) the Capital Contribution of each Partner shall be adjusted
to reflect any changes to the Capital Account of such Partner as a result
of any
sale of a Defaulting Limited Partner’s Interest pursuant to
Section 3.4(d).
“Permitted
Transfer”
means
(a) with respect to any Partner, any Transfer to (i) any member of
such Partner’s immediate family, (ii) any trust, limited partnership,
limited liability company or other business entity having as its principal
beneficiaries or owners, such Partner or any other persons described in clause
(i); and (b) any Transfer by any trust or other entity described in clause
(a)(ii) preceding to its beneficiaries or owners.
“Permitted
Transferee”
means
any Person that receives all or any portion of an Interest pursuant to a
Permitted Transfer.
“Person”
means
any individual, partnership, corporation, limited liability company,
unincorporated organization or association, trust (including the trustees
thereof, in their capacity as such) or other entity.
“Portfolio
Investment”
means
any investment by the Partnership in any Oil and Gas Interest. For purposes
of
this definition, the term “investment” shall include any: (i) purchase price,
brokerage fees, recordation costs, title examination, title curative, reserve
evaluation, environmental review and other similar fees, costs and expenses
incurred in connection with any Oil and Gas Interest; (ii) costs, expenses
and
liabilities in connection with (a) acquiring, licensing, processing,
reprocessing and evaluating geological and geophysical data regarding any
Oil
and Gas Interest, (b) drilling, sidetracking, deepening, completing, plugging
back, recompleting and equipping any well relating to any Oil and Gas Interest,
(c) plugging and abandoning any such well that is a dry hole or that otherwise
is not completed as a well capable of producing in paying quantities and
(d)
acquiring and installing platforms, production facilities, gathering systems,
pipelines and other facilities necessary to develop and operate any Oil and
Gas
Interest and produce, collect, store, treat, process, deliver, market, sell
or
otherwise dispose of production from the ▇▇▇▇▇ located thereon; and (iii)
other
costs, expenses and liabilities related to any Portfolio Investment that
are
capital in nature, as determined in accordance with generally accepted
accounting principles.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
Exhibit
A – Defined Terms
A-6
“Preferred
Return Amount” means,
with respect to any Limited Partner, an amount of cumulative distributions
under
Section 4.5(a)(ii) that achieves a thirty percent (30%) internal rate of
return on the aggregate Capital Contributions made by such Limited Partner
through the particular date of determination, such internal rate of return
to be
calculated through the date of determination as if each such distribution
(taking into account all distributions of any portion of the Preferred Return
Amount) and Capital Contribution had been paid or made on the last day of
the
month during which it was actually paid or made. The Partners acknowledge
that
internal rate of return calculation methodologies differ and that different
internal rate of return calculation methodologies may result in different
internal rate of return results. Accordingly, the Partners agree that the
internal rate of return methodology to be used for purposes of this definition
shall be the methodology that would result in the same amount as if the “IRR”
function in Microsoft Excel were used.
“Pro
Rata Basis”
means,
for purposes of determining co-investment allocations pursuant to
Section 2.9, with respect to any Qualified First Closing Investor that
elects to participate in a co-investment opportunity, a fraction the numerator
of which is such Partner’s Commitment and the denominator of which is the sum of
the Commitments of all Qualified First Closing Investors that elect to
participate in such co-investment opportunity.
“Pro
Rata Share”
means,
determined separately for each Limited Partner:
(a) for
purposes of determining each Limited Partner’s Capital Contribution required to
be made under Sections 3.2 or 3.3, (i) until the time that all of the
Limited Partners’ (other than Qualified Employees with respect to whom the
General Partner grants a waiver pursuant to Section 11.12) Unfunded
Commitments have been reduced to zero, the percentage represented by the
proportion that such Limited Partner’s Unfunded Commitment bears to the Unfunded
Commitments of all of the Partners and (ii) from and after the time all of
the Limited Partners’ (other than Qualified Employees with respect to whom the
General Partner grants a waiver pursuant to Section 11.12) Unfunded
Commitments have been reduced to zero, the percentage represented by the
proportion that such Limited Partner’s Commitment bears to the Commitments of
all of the Partners; and
(b) for
purposes of determining the Capital Contribution requirement under
Section 3.3(b)(i) of each Partner that is admitted as a Limited Partner at
a Subsequent Closing or who increases its Commitment at a Subsequent Closing,
the percentage that such Limited Partner’s Commitment (if such Limited Partner
was first admitted as a Partner at such Subsequent Closing) or the incremental
increase of such Limited Partner’s Commitment made at such Subsequent Closing
(if such Limited Partner had previously been admitted as a Partner) represents
of the sum of (i) the aggregate Commitments of each Limited Partner
admitted to the Partnership at such Subsequent Closing and (ii) with
respect to each Limited Partner admitted to the Partnership prior to such
Subsequent Closing, the increase in the aggregate Commitments of each such
Limited Partner that arises at such Subsequent Closing.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
Exhibit
A – Defined Terms
A-7
“Prospect
Generating Entity”
means
any Person that presents oil and gas exploration prospects to the Partnership
for consideration by the Partnership as potential Portfolio
Investments.
“Qualified
Employee”
means
any Limited Partner that is an employee of the General Partner or the GP
Company.
“Reference
Rate”
means
the lesser of (a) 10% per annum and (b) the maximum non-usurious rate
of interest permitted by applicable law.
“Required
Allocations”
means
any allocation (or limitation imposed on any allocation) of an item of income,
gain, deduction or loss pursuant to Sections 4.2(d)(i) - 4.2(d)(vii)), such
allocations being directly or indirectly required by the Treasury Regulations
promulgated under section 704(b) of the Code.
“Required
Interest” means,
with respect to any group of specified Partners, those of such Partners holding
at least 75% of the total Commitments of all of such Partners.
“Section
704(c) Items”
has
the
meaning given that term in Section 4.3(d).
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Simulated
Basis”
shall
mean the Carrying Value of any oil and gas property (as defined in
Section 614 of the Code).
“Simulated
Depletion”
shall
mean, with respect to each oil and gas property, a depletion allowance computed
in accordance with federal income tax principles (as if the Simulated Basis
of
the property were its adjusted tax basis) and in the manner specified in
Treasury Regulation section 1.704-1(b)(2)(iv)(k)(2). For purposes of
computing Simulated Depletion with respect to any property, the Simulated
Basis
of such property shall be deemed to be the Carrying Value of such property,
and
in no event shall such allowance, in the aggregate, exceed such Simulated
Basis.
“Simulated
Gain”
shall
mean the excess of the amount realized from the sale or other disposition
of an
oil or gas property over the Carrying Value of such property.
“Simulated
Loss”
shall
mean the excess of the Carrying Value of an oil or gas property over the
amount
realized from the sale or other disposition of such property.
“Subscription
Agreement”
means
each Subscription Agreement entered into among the Partnership, the General
Partner and each Limited Partner pursuant to which such Limited Partner
subscribes to acquire an Interest and is admitted to the
Partnership.
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
Exhibit
A – Defined Terms
A-8
“Temporary
Investments” means:
(a) direct
obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America (or by any agency
thereof to the extent such obligations are backed by the full faith and credit
of the United States of America), in each case maturing within nine months
from
the date of acquisition thereof;
(b) without
limiting the provisions of paragraph (d) below, investments in commercial
paper
maturing within nine months from the date of acquisition thereof and having,
at
such date of acquisition, the highest credit rating obtainable from Standard
& Poor’s Corporation or from ▇▇▇▇▇’▇ Investors Service, Inc.;
(c) investments
in certificates of deposit, banker’s acceptances and time deposits maturing
within nine months from the date of acquisition thereof issued or guaranteed
by
or placed with, and money market deposit accounts issued or offered by, any
domestic office of any commercial bank organized under the laws of the United
States of America or any State thereof and that has a combined capital and
surplus and undivided profits of not less than $250,000,000;
(d) investments
in commercial paper maturing within nine months from the date of acquisition
thereof and issued by the holding company of any commercial bank organized
under
the laws of the United States of America or any State thereof that has
(i) a combined capital and surplus in excess of $1,000,000,000 and a rating
of at least AA or the equivalent thereof by Standard & Poor’s Corporation or
at least AA or the equivalent thereof by ▇▇▇▇▇’▇ Investors Service, Inc. and
(ii) commercial paper rated at least A-1 or the equivalent thereof by
Standard & Poor’s Corporation and at least P-1 or the equivalent thereof by
▇▇▇▇▇’▇ Investors Service, Inc.;
(e) investments
in repurchase obligations with a term of not more than seven days for underlying
securities of the types described in paragraph (a) above entered into with
any
office of any commercial bank meeting the qualifications specified in paragraph
(c) above; and
(f) other
short-term investments selected by the General Partner, provided they are
of at
least the quality of the investments specified in (a)-(e) above.
“Temporary
Investment Proceeds”
means
income from sources other than Portfolio Investments, net of Partnership
Expenses and reserves therefor allocable to such income in accordance with
Section 6.3(b).
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
Exhibit
A – Defined Terms
A-9
“Transfer”
including the correlative terms “Transferring,”
or
“Transferred”
means
any direct or indirect transfer, assignment, sale, gift, pledge, hypothecation
or other encumbrance, or any disposition (whether voluntary or involuntary
or by
operation of law), or the acts of the foregoing.
“Unfunded
Commitment”
means,
as to any Partner as of any date, an amount equal to:
(a) such
Partner’s Commitment, minus
(b)
the
aggregate amount of such Partner’s Capital Contributions (but not Additional
Amounts) made on or prior to such date, plus
(c) any
amounts distributed to such Partner pursuant to Section 3.3(b)(ii)
(excluding Additional Amounts), plus
(d) any
Commitment assumed by such Partner in connection with the purchase of all
or a
portion of another Partner’s Interest.
“Unrealized
Gain”
attributable to any item of Partnership property means, as of any date of
determination, the excess, if any, of (a) the fair market value of such
property as of such date (as determined under Section 4.1(d) over
(b) the Carrying Value of such property as of such date (prior to any
adjustment to be made pursuant to Section 4.1(d) as of such
date).
“Unrealized
Loss”
attributable to any item of Partnership property means, as of any date of
determination, the excess, if any, of (a) the Carrying Value of such
property as of such date (prior to any adjustment to be made pursuant to
Section 4.1(d) as of such date) over (b) the fair market value of such
property as of such date (as determined under Section 4.1(d)).
▇▇▇▇-▇▇▇▇▇▇▇
Exploration II, L.P.
Amended
and Restated Agreement of Limited Partnership
Exhibit
A – Defined Terms
A-10