Exhibit 10.2

 

 

 

AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP

 

 

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BreitBurn Energy Partners I, L.P.

 

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Dated as of May 5, 2003

 

 

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TABLE OF CONTENTS

 

 

Page

 

 

 

ARTICLE I

 

1

 

Formation of Partnership

 

1

 

 

Section 1.1.

Formation

 

1

 

 

Section 1.2.

Name

 

2

 

 

Section 1.3.

Business

 

2

 

 

Section 1.4.

Places of Business, Registered Agent and Addresses

 

2

 

 

Section 1.5.

Term

 

3

 

 

Section 1.6.

Filings

 

3

 

 

 

 

 

 

ARTICLE II

 

3

 

Certain Definitions and References

 

3

 

 

Section 2.1.

Certain Defined Terms

 

3

 

 

Section 2.2.

References and Construction

 

12

 

 

 

 

 

 

ARTICLE III

 

13

 

Capitalization

 

13

 

 

Section 3.1.

Capital Contributions of General Partner

 

13

 

 

Section 3.2.

Capital Contributions of Limited Partner

 

13

 

 

Section 3.3.

Request for Additional Capital Contributions of Limited Partner

 

15

 

 

Section 3.4.

Reduced Capital Contributions of Limited Partner

 

19

 

 

Section 3.5.

Payments of Capital Contributions

 

19

 

 

Section 3.6.

Non-payment of Capital Contributions

 

20

 

 

Section 3.7.

Interest on and Return of Capital Contributions

 

22

 

 

 

 

 

 

ARTICLE IV

23

 

Allocations and Distributions

 

23

 

 

Section 4.1.

Allocation of Costs and Expenses

 

23

 

 

Section 4.2.

Allocation of Revenues

 

23

 

 

Section 4.3.

Income Tax Allocations

 

24

 

 

Section 4.4.

Distributions

 

27

 

 

 

 

 

 

ARTICLE V

28

 

Partnership Property

 

28

 

 

Section 5.1.

Title to Partnership Property

 

28

 

 

Section 5.2.

Acquisition of the Properties

 

28

 

 

Section 5.3.

Additional Acquisitions

 

29

 

 

Section 5.4.

Lease Sales

 

30

 

 

Section 5.5.

Sales of Production

 

30

 

 

Section 5.6.

Operations on Partnership Leases

 

31

 

 

Section 5.7.

Hedge Arrangement

 

32

 

 

Section 5.8.

Production

 

32

 

 

Section 5.9.

Environmental, Health and Safety Program

 

32

 

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ARTICLE VI

33

 

Management

 

33

 

 

Section 6.1.

Power and Authority of General Partner

 

33

 

 

Section 6.2.

Certain Restrictions on General Partner’s Power and Authority

 

33

 

 

Section 6.3.

Duties and Services of General Partner

 

35

 

 

Section 6.4.

Liability of General Partner

 

36

 

 

Section 6.5.

Limitations on Indemnification

 

36

 

 

Section 6.6.

Costs, Expenses and Reimbursement

 

37

 

 

Section 6.7.

Organization and Third Party Acquisition Costs

 

38

 

 

Section 6.8.

Insurance

 

38

 

 

Section 6.9.

Tax Elections

 

39

 

 

Section 6.10.

Tax Returns

 

40

 

 

Section 6.11.

Appointment of Trustee to Receive Payments

 

40

 

 

 

 

 

 

ARTICLE VII

41

 

Rights and Obligations of Limited Partner

 

41

 

 

Section 7.1.

Rights of Limited Partner

 

41

 

 

Section 7.2.

Limitations on Limited Partner

 

41

 

 

Section 7.3.

Liability of Limited Partner

 

41

 

 

Section 7.4.

Access of Limited Partner to Data

 

41

 

 

Section 7.5.

Withdrawal and Return of Capital Contribution

 

42

 

 

 

 

 

 

ARTICLE VIII

42

 

Books, Records, Reports and Bank Accounts

 

42

 

 

Section 8.1.

Capital Accounts, Books and Records

 

42

 

 

Section 8.2.

Reports

 

44

 

 

Section 8.3.

Bank Accounts

 

47

 

 

Section 8.4.

Information Relating to the Partnership

 

47

 

 

Section 8.5.

Certain Notices

 

47

 

 

 

 

 

 

ARTICLE IX

48

 

Assignments of Interests and Substitutions

 

48

 

 

Section 9.1.

Assignments by Limited Partner

 

48

 

 

Section 9.2.

Assignment by General Partner

 

49

 

 

Section 9.3.

Merger or Consolidation

 

49

 

 

Section 9.4.

Removal of General Partner

 

49

 

 

Section 9.5.

Right of General Partner Upon Removal

 

50

 

 

Section 9.6.

Right of First Offer

 

51

 

 

Section 9.7.

Conversion of Portion of General Partner Interest Upon Expiration of Phase I
Period

51

 

 

 

 

 

 

ARTICLE X

52

 

Dissolution, Liquidation and Termination

 

52

 

 

Section 10.1.

Dissolution

 

52

 

 

Section 10.2.

Withdrawal by General Partner and Reconstitution

 

53

 

 

Section 10.3.

Liquidation and Termination

 

54

 

 

Section 10.4.

Cancellation of Certificate

 

55

 

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ARTICLE XI

55

 

Representations and Warranties

 

55

 

 

Section 11.1.

Representations and Warranties of General Partner

 

55

 

 

Section 11.2.

Representations and Warranties of Limited Partner

 

57

 

 

 

 

 

 

ARTICLE XII

58

 

Miscellaneous

 

58

 

 

Section 12.1.

Notices

 

58

 

 

Section 12.2.

Amendments

 

59

 

 

Section 12.3.

Partition

 

59

 

 

Section 12.4.

Entire Agreement

 

59

 

 

Section 12.5.

No Waiver

 

59

 

 

Section 12.6.

Applicable Law

 

59

 

 

Section 12.7.

Successors and Assigns

 

59

 

 

Section 12.8.

Exhibits

 

59

 

 

Section 12.9.

Survival of Representations and Warranties

 

59

 

 

Section 12.10.

No Third Party Benefit

 

59

 

 

Section 12.11.

Public Announcements

 

60

 

 

Section 12.12.

Counterparts

 

60

 

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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP

BreitBurn Energy Partners I, L.P.

THIS AGREEMENT OF LIMITED PARTNERSHIP (this “Agreement”) is made and entered
into this 5th day of May, 2003, by and between BEP (GP) I, LLC, a Delaware
limited liability company (herein sometimes called the “General Partner”), and
TIFD III-X LLC, a Delaware limited liability company (herein sometimes called
the “Limited Partner”).

RECITALS:

A.            Reference is herein made to that certain Agreement of Limited
Partnership dated as of March 25, 2003 (the “Original Agreement”), by and
between the General Partner, as sole general partner, and BEP (LP) I, LLC, a
Delaware limited liability company (the “Original Limited Partner”), as the sole
limited partner, establishing BreitBurn Energy Partners I, L.P., a Texas limited
partnership (the “Partnership”).  Pursuant to the Original Agreement, the
Partnership entered into a hedge described more particularly in Exhibit A
attached hereto (the “Existing Hedge”).

B.            The General Partner and the Limited Partner deem it in their
mutual best interests and in the best interests of the Partnership (i) for the
Partnership to return to the Original Limited Partner its capital contribution
and for the Original Limited Partner to withdraw from the Partnership as a
limited partner, (ii) for the Limited Partner to be admitted to the Partnership
as a limited partner, and (iii) for the General Partner and the Limited Partner
to amend and restate the Original Agreement to evidence their agreement to,
among other things, make cash capital contributions to the Partnership in order
to effect the acquisition by the Partnership of certain oil and gas properties
from BreitBurn Energy Company LLC.

C.            By its execution of a counterpart of this Agreement, the Original
Limited Partner evidences its agreement to withdraw from the Partnership
effective immediately upon the execution and delivery of this Agreement by the
parties hereto.

AGREEMENT:

NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants and agreements contained herein, the parties hereto do hereby amend
and restate the Original Agreement to read in its entirety as follows:

ARTICLE I

Formation of Partnership

Section 1.1.           Formation.  The Partnership (a) has heretofore been
formed as a limited partnership pursuant to the terms and condition of the
Original Agreement and the provisions of the Texas Revised Limited Partnership
Act (Article 6132a-1, Vernon’s Texas Civil Statutes)

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(such Act, as amended from time to time, or any successor statute or statutes
thereto, being called the “Act”), and (b) is hereby continued as a limited
partnership pursuant to the terms and conditions of this Agreement and the Act..

Section 1.2.           Name.  The name of the Partnership shall be BreitBurn
Energy Partners I,  L.P.  Subject to all applicable laws, the business of the
Partnership shall be conducted in the name of the Partnership unless under the
law of some jurisdiction in which the Partnership does business such business
must be conducted under another name.  In such a case, the business of the
Partnership in such jurisdiction may be conducted under such other name or names
as the General Partner shall determine to be necessary so long as it does not
affect adversely the limited liability of the Limited Partner hereunder or
jeopardize in any manner the title to or ownership of any Partnership Leases (as
herein defined) or other assets.  The General Partner shall cause to be filed on
behalf of the Partnership such partnership or assumed or fictitious name
certificate or certificates or similar instruments as may from time to time be
required by law.

Section 1.3.           Business.  Subject to the other provisions of this
Agreement, the business of the Partnership shall be: (a) to acquire the
Properties (as defined herein); (b) to acquire additional Leases (as defined
herein); (c) to hold, maintain, renew, explore, drill, develop and operate the
Properties and such additional Leases; (d) to produce, collect, store, treat,
deliver, market, sell or otherwise dispose of oil, gas and related hydrocarbons
and minerals from the Properties and such additional Leases; (e) to farm-out,
sell, abandon and otherwise dispose of the Properties, additional Leases and
other Partnership assets; (f) to enter into swaps, options, future contracts and
other transactions to hedge or to otherwise minimize the risk associated with
the fluctuation of prices to be received by the Partnership from the sale of
oil, gas and related hydrocarbons and minerals from the Properties and any
additional Leases acquired pursuant to the terms hereof; and (g) to take all
such other actions incidental to any of the foregoing as the General Partner may
determine to be necessary or appropriate. Notwithstanding the foregoing and any
other provision of this Agreement, the Partnership shall not (i) acquire (A) any
additional Leases, except as expressly provided herein, (B) any carbon-dioxide
removal, sulfur removal or other equipment for the processing or treatment of
gas or other hydrocarbons, whether on or off the Properties or additional Leases
acquired pursuant to the terms hereof (other than equipment acquired as part of
and at the same time as the acquisition of the Properties or an additional Lease
or otherwise in accordance with this Agreement), (C) any refining facilities or
(D) any transportation facilities except pipelines and gathering systems
connecting the Properties or additional Leases acquired pursuant to the terms
hereof with other gathering systems or transmission pipelines, or (ii) engage in
the contract drilling business or any other business except as expressly
permitted herein.

Section 1.4.           Places of Business, Registered Agent and Addresses.

(a)           The principal United States office and place of business of the
Partnership and its street address shall be 515 South Flower, Suite 4800, Los
Angeles, California 90071.  The General Partner, at any time and from time to
time, may change the location of the Partnership’s principal United States
office and place of business as the General Partner shall determine to be
necessary or appropriate, provided notice thereof is concurrently given to the
Limited Partner.

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(b)           The registered office of the Partnership in Texas shall be 1021
Main St., Suite 1150, Houston, Texas 77002, and the registered agent for service
of process on the Partnership shall be CT Corporation System, a corporation
whose business address is the same as the Partnership’s registered office.  The
General Partner, at any time and from time to time, may change the Partnership’s
registered office or registered agent or both by complying with the applicable
provisions of the Act and giving concurrent notice thereof to the Limited
Partner and may establish, appoint and change additional registered offices and
registered agents of the Partnership in such other states as the General Partner
shall determine to be necessary or advisable.

Section 1.5.           Term.  The Partnership was formed and commenced upon the
completion of filing for record of an initial certificate of limited partnership
of the Partnership with the Secretary of State of the State of Texas on March
25, 2003, and shall continue until terminated as provided herein.

Section 1.6.           Filings.  Upon the request of the General Partner, the
Limited Partner shall promptly execute and deliver all such certificates and
other instruments conforming hereto as shall be necessary for the General
Partner to accomplish all filing, recording, publishing and other acts
appropriate to comply with all requirements for the formation and operation of
the Partnership as a limited partnership under the laws of the State of Texas
and for the qualification or reformation and operation of the Partnership as a
limited partnership in all other jurisdictions where the Partnership shall
propose to conduct business.  Prior to the conducting of any business in any
jurisdiction, the General Partner shall:  (a) to the full extent necessary to
establish limited liability for the Limited Partner under the laws of such
jurisdiction and otherwise to comply with the laws of such jurisdiction, cause
the Partnership to comply with all requirements for the registration,
qualification or reformation of the Partnership to conduct business as a limited
partnership in such jurisdiction and (b) at the request of the Limited Partner,
obtain an opinion of reputable counsel in such jurisdiction satisfactory in all
respects to the Limited Partner as to such registration, qualification or
reformation and as to the limited liability of the Limited Partner under the
laws of such jurisdiction.  Thereafter, the General Partner shall cause the
Partnership to continue to comply with all such requirements and all other
requirements necessary to maintain the limited liability of the Limited Partner
in each jurisdiction where the Partnership does business and, upon request of
the Limited Partner, the General Partner shall furnish to the Limited Partner an
opinion or opinions of legal counsel for the Partnership as to compliance with
such requirements and such limited liability.

ARTICLE II

Certain Definitions and References

Section 2.1.           Certain Defined Terms.  When used in this Agreement, the
following terms shall have the respective meanings assigned to them in this
Section 2.1 or in the sections, subsections or other subdivisions referred to
below:

“Acquisition Cost” shall mean, (a) with respect to the purchase by the
Partnership from the General Partner or its Affiliates of any Lease (exclusive
of the purchase pursuant to the

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Purchase Agreement), the costs as described in clause (b) immediately below
incurred by the General Partner and/or its Affiliates in acquiring such Lease
and (b) with respect to the acquisition by the Partnership of any Lease other
than those purchased pursuant to clause (a) immediately above, the sum of
(i) the price paid or contractually agreed to be paid for such Lease to the
lessor, assignor or grantor of such Lease, including lease bonuses, advance
rentals and other acquisition costs and (ii) title examination costs, broker’s
commissions, attorneys’ fees, due diligence fees, filing fees, recording costs,
and transfer and sales taxes, if any, and other similar costs incurred with
respect to such Lease in connection with its acquisition, but excluding any
actual, allocated or imputed interest expense.

“Act” shall have the meaning assigned to such term in Section 1.1.

“Adjusted Capital Account” shall mean the capital account maintained for each
Partner as of the end of each fiscal year (a) increased by (i) the amount of any
unpaid Capital Contributions unconditionally agreed to be contributed by such
Partner under Article III, if any, and (ii) an amount equal to such Partner’s
allocable share of the Partnership’s Minimum Gain, as computed on the last day
of such fiscal year in accordance with applicable Treasury Regulations, and
(b) reduced by (i) the amount of all depletion deductions reasonably expected to
be allocated to such Partner in subsequent years and charged to such Partner’s
capital account, (ii) the amount of all losses and deductions reasonably
expected to be allocated to such Partner in subsequent years under
Sections 704(e)(2) and 706(d) of the Internal Revenue Code and Treasury
Regulation § 1.751-1(b)(2)(ii), and (iii) the amount of all distributions
reasonably expected to be made to such Partner 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.

“Affiliate” shall mean (a) any person directly or indirectly owning, controlling
or holding with power to vote 10% or more of the outstanding voting securities
of the General Partner, (b) any person 10% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held with power to
vote by the General Partner, (c) any person directly or indirectly controlling,
controlled by or under common control with the General Partner, (d) any officer,
director, member, manager or partner of the General Partner or any person
described in clause (a), (b) or (c) of this paragraph, or (e) any person related
by blood, adoption or marriage to any person referred to in clause (c) or clause
(d) of this paragraph.  As used in this Agreement, the term “person” shall
include an individual, an estate, a corporation, a partnership, a limited
liability company, an association or other entity, a joint stock company and a
trust.

“Agreed Rate” shall mean a rate per annum which is equal to the lesser of (a) a
rate which is one percent (1%) above the prime rate of interest of JP Morgan
Chase Bank, New York, New York, as announced or published by such bank from time
to time (adjusted from time to time to reflect any changes in such rate
determined hereunder) or (b) the maximum rate from time to time permitted by
applicable law.

“Agreement” shall mean this Amended and Restated Agreement of Limited
Partnership, as hereafter changed, modified or amended in accordance with the
terms hereof.

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“Area of Mutual Interest” shall mean the area described more particularly in
Exhibit 2.1   AMI.

“Capital Contributions” shall mean, for any Partner at the particular time in
question, the aggregate of the dollar amounts of any cash or the fair market
value of any properties (as agreed upon by the Partners) contributed to the
capital of the Partnership, or, if the context in which such term is used so
indicates, the dollar amounts of cash or fair market value of properties agreed
to be contributed, or requested to be contributed, by such Partner to the
capital of the Partnership.

“Capital Costs” shall mean (a) all geological and geophysical costs incurred by
the Partnership to the extent any of such costs are incurred in connection with
Partnership wells drilled or proposed to be drilled on the Properties or any
additional Lease acquired pursuant to the terms hereof, (b) all costs incurred
by the Partnership in locating, drilling, completing, equipping, deepening or
sidetracking a well located on the Properties or any additional Lease acquired
pursuant to the terms hereof, including (i) the costs of surveying and staking
such well, the costs of any surface damages and the costs of clearing, coring,
testing, logging and evaluating such well, (ii) the costs of casing, cement and
cement services for such well, (iii) the cost of plugging and abandoning such
well (including standard and customary remediation activities associated
therewith) if it is determined that such well would not produce in commercial
quantities and should be abandoned and (iv) all direct charges and overhead
chargeable to the Partnership with respect to such well under any applicable
operating agreement until such time as all operations are carried out as
required by applicable regulations and sound engineering practices to make such
well ready for production, including the installation and testing of wellhead
equipment, or to plug and abandon a dry hole; (c) all costs incurred by the
Partnership in recompleting or plugging back any Partnership well; (d) all costs
incurred by the Partnership in reworking any Partnership well when the
Partnership’s reasonably anticipated share of such costs is greater than
$25,000; (e) all costs incurred by the Partnership in locating, drilling,
completing, equipping, deepening or sidetracking any enhanced recovery producer
or injector well (including the costs of all necessary surface equipment such as
steam generators, compressors, water treating facilities, injection pumps, flow
lines and steam lines) or otherwise conducting Enhanced Recovery Operations; and
(f) all costs incurred by the Partnership in constructing production facilities,
pipelines and other facilities necessary to develop the Properties and
additional Leases acquired pursuant to the terms hereof and produce, collect,
store, treat, deliver, market, sell or otherwise dispose of oil, gas and other
hydrocarbons and minerals therefrom; but such term shall not include any Lease
Operating and Production Costs, Acquisition Costs or Catastrophe Costs.

“Catastrophe Costs” shall mean all costs, expenses and damages incurred by the
Partnership as a result of the failure of the General Partner to cause the
Partnership to obtain or carry the types or amounts of insurance coverage agreed
upon from time to time by the Partners in accordance with Section 6.8, but such
term shall not include (a) the deductible amounts under any insurance coverage
arranged by or on behalf of the Partnership or with respect to its property or
operations to the extent such deductible amounts have been approved or agreed to
by the Limited Partner in accordance with Section 6.8 and (b) any costs,
expenses and damages incurred by the Partnership that are in excess of or
excluded from the agreed upon insurance coverage maintained in accordance with
the terms hereof.

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“CGA Report” shall have the meaning assigned to such term in Section 8.2(d).

“Contributing Partner” shall have the meaning assigned to such term in
Section 3.6(d).

“Cumulative Payout” shall mean, with respect to each month, X minus Y, where:

“X”= the sum of (i) such month’s Monthly Payout plus (ii) all previous months’
Monthly Payouts plus (iii) any distribution received by the Limited Partner
under Section 4.4(b) times the Payout Discount Factor for the month in which
such distribution is so received; and

“Y” = the sum of (i) the Capital Contribution made by the Limited Partner
pursuant to the terms hereof during such month times the Payout Discount Factor
for such month plus (ii) each Capital Contribution previously made by the
Limited Partner pursuant to the terms hereof times the Payout Discount Factor
for the month in which such Capital Contribution was made.

“Defaulting Partner” shall have the meaning assigned to such term in
Section 3.6(d).

“Deficit Partner” shall have the meaning assigned to such term in
Section 4.3(i).

“Delivery Date” shall mean the date on which this Agreement has been fully and
unconditionally executed and delivered by each of the parties hereto.

“Depletable Property” shall have the meaning assigned to such term in
Section 4.3(b).

“Enhanced Recovery Operations” shall mean any operations or project intended to
increase the recovery of oil and/or gas from a pool by artificial means or by
the application of energy extrinsic to the pool, which artificial means or
application shall include pressuring, cycling, pressure maintenance, injection
to the pool of a substance or form of energy, or other operations or projects
that would be commonly considered secondary or tertiary operations or projects,
but such term shall not include the injection in a well of a substance or form
of energy for the sole purpose of (a) aiding in the lifting of fluids in the
well, or (b) stimulation of the pool at or near the well by mechanical,
chemical, thermal or explosive means.

“Environmental Laws” shall mean all applicable federal, state and local laws,
rules and regulations, orders, judgments, decrees and other legal requirements
relating to pollution or the regulation and protection of human health, safety,
the environment or natural resources, including, but not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. § 9601 et seq.); the Hazardous Material Transportation
Act, as amended (49 U.S.C. § 180 et seq.); the Federal Insecticide, Fungicide,
and Rodenticide Act, as amended (7 U.S.C. § 136 et seq.); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. § 6901 et seq.); the Toxic
Substance Control Act, as amended (42 U.S.C. § 7401 et seq.); the Clean Air Act,
as amended (42 U.S.C. § 740 et seq.); the Federal Water Pollution Control Act,
as amended (33 U.S.C. § 1251 et seq.); the Occupational Safety and Health Act,
as amended (29 U.S.C. § 651 et seq.); the Safe Drinking Water Act, as amended

6

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(42 U.S.C. § 300f et seq.); and their state and local counterparts or
equivalents and any transfer of ownership notification or approval statute.

“Event of Default” shall have the meaning assigned to such term in
Section 3.6(b).

“Existing Hedge” shall have the meaning assigned to such term in Paragraph A of
the Recitals hereto.

“General Partner” shall mean BEP (GP) I, LLC, a Delaware limited liability
company, in its capacity as general partner of the Partnership and any person
who becomes a substituted general partner of the Partnership pursuant to the
terms hereof.

“GP Monthly Cash Distribution” shall mean, with respect to any month:

(a)           the Production Sales Proceeds received during such month and
attributable to any Hedging Transaction multiplied by the GP Sharing Percentage
for such month plus the Production Sales Proceeds received during such month
from the sale of hydrocarbons (other than in connection with a Hedging
Transaction) multiplied by the GP Sharing Percentage for such month; less

(b)           Lease Operating and Production Costs paid during such month
multiplied by the GP Sharing Percentage for such month; less

(c)           Hedge Costs paid during such month multiplied by the GP Sharing
Percentage for such month; less

(d)           the amounts which the General Partner reasonably determines should
be added to the Partnership’s cash reserves multiplied by the GP Sharing
Percentage (it being agreed that the Partnership’s cash reserves, including all
additions thereto, shall not exceed the remainder of the total Partnership costs
and expenses the General Partner reasonably anticipates will be incurred within
a 60 day period commencing as of the date of the determination of the GP Monthly
Cash Distribution, minus the total Production Sales Proceeds the General Partner
reasonably anticipates will be received by the Partnership during such period);
plus

(e)           any cash reserves which the General Partner reasonably believes
are no longer necessary to retain multiplied by the GP Sharing Percentage for
such month; plus

(f)            the net proceeds derived from the sale by the Partnership of
properties, fixtures and equipment (exclusive of net proceeds distributable
under Section 4.4(b)) multiplied by the GP Sharing Percentage for such month;
plus

(g)           any other funds received by the Partnership during such month
(including insurance proceeds, to the extent not expended by the Partnership)
multiplied by the GP Sharing Percentage for such month; less

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(h)           payments made during such month on principal and interest on
permitted Partnership indebtedness multiplied by the GP Sharing Percentage for
such month; less

(i)            the Management Fee multiplied by the GP Sharing Percentage for
such month; less

(j)            other direct, third party out-of-pocket costs paid by the
Partnership for such month (e.g., costs of obtaining audits of the Partnership’s
books and records, fees and expenses attributable to the preparation of the
Partnership’s tax returns) multiplied by the GP Sharing Percentage for such
month.

“GP Sharing Percentage” shall mean, when used with respect to any month, 100%
minus the LP Sharing Percentage in effect during such month.

“Guaranty” shall mean that certain Limited Guaranty Agreement of even date
herewith executed by the Parent in favor of the Partnership and the Limited
Partner.

“Hedge Costs” shall mean the costs of arranging, modifying or terminating a
Hedging Transaction, or which otherwise arise in respect or as a result of a
Hedging Transaction.

“Hedging Transaction” shall mean any commodity hedging transaction pertaining to
oil, gas and related hydrocarbons and minerals, whether in the form of a swap
agreement, option to acquire or dispose of a futures contract, whether on an
organized commodities exchange or otherwise, or similar type of financial
transaction classified as “notional principal contracts” pursuant to Treasury
Regulation Section 1.512(b)-1(a)(1). Any Hedging Transaction shall be identified
in the books and records of the Partnership as a “hedging transaction” in the
manner and at the times prescribed by Treasury Regulation §1.1221-2(e).

“Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute or statutes.

“Key Persons” shall mean Randall H. Breitenbach and Halbert S. Washburn.

“Lease” shall mean a lease, mineral interest, royalty or overriding royalty, fee
right, mineral servitude, license, concession or other right covering oil, gas
and related hydrocarbons (or a contractual right to acquire such an interest) or
an undivided interest therein or portion thereof, together with all
appurtenances, easements, permits, licenses, servitudes and rights-of-way
situated upon or used or held for future use in connection with such an interest
or the exploration, development or operation thereof.  A “Lease” shall also mean
and include all rights and interests in all lands and interests unitized or
pooled therewith pursuant to any law, rule, regulation or agreement.

“Lease Operating and Production Costs” shall mean all costs incurred by the
Partnership in connection with the maintenance of the Properties and any
additional Leases acquired pursuant to the terms hereof (except drilling and
similar obligations) and the production and marketing of oil, gas and related
hydrocarbons from completed wells (including wells which have been involved in
Enhanced Recovery Operations) in which the Partnership has an interest

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pursuant to this Agreement, including costs incurred for all delay rentals,
shut-in royalties and similar payments, royalties on lost or flared gas or gas
used for which payment is required, labor, fuel, repairs, transportation,
supplies, utility charges, ad valorem, severance, excise and similar taxes, the
cost of reworking any well (except to the extent provided in the definition of
Capital Costs), the costs of plugging and abandoning any well plus standard and
customary remediation activities associated therewith (except to the extent
provided in the definition of Capital Costs) and compensation to well operators,
consultants and others and insurance in connection with the foregoing; but such
term shall not include any Capital Costs, Catastrophe Costs, or Acquisition
Costs.

“Limited Partner” shall mean TIFD III-X LLC, a Delaware limited liability
company, and any person who becomes a substituted limited partner of the
Partnership pursuant to the terms hereof.

“LP Monthly Cash Distribution” shall mean, with respect to any month:

(a)           the Production Sales Proceeds received during such month and
attributable to any Hedging Transaction multiplied by the LP Sharing Percentage
for such month plus the Production Sales Proceeds received during such month
from the sale of hydrocarbons (other than in connection with a Hedging
Transaction) multiplied by the LP Sharing Percentage for such month; less

(b)           Lease Operating and Production Costs paid during such month
multiplied by the LP Sharing Percentage for such month; less

(c)           Hedge Costs paid during such month multiplied by the LP Sharing
Percentage for such month; less

(d)           the amounts which the General Partner reasonably determines should
be added to the Partnership’s cash reserves multiplied by the LP Sharing
Percentage (it being agreed that the Partnership’s cash reserves, including all
additions thereto, shall not exceed the remainder of the total Partnership costs
and expenses the General Partner reasonably anticipates will be incurred within
a 60 day period commencing as of the date of the determination of the LP Monthly
Cash Distribution, minus the total Production Sales Proceeds the General Partner
reasonably anticipates will be received by the Partnership during such period);
plus

(e)           any cash reserves which the General Partner reasonably believes
are no longer necessary to retain multiplied by the LP Sharing Percentage for
such month; plus

(f)            the net proceeds derived from the sale by the Partnership of
properties, fixtures and equipment (exclusive of net proceeds distributable
under Section 4.4(b)) multiplied by the LP Sharing Percentage for such month;
plus

(g)           any other funds received by the Partnership during such month
(including insurance proceeds, to the extent not expended by the Partnership)
multiplied by the LP Sharing Percentage for such month; less

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(h)           payments made during such month on principal and interest on
permitted Partnership indebtedness multiplied by the LP Sharing Percentage for
such month; less

(i)            the Management Fee multiplied by the LP Sharing Percentage for
such month; less

(j)            other direct, third party out-of-pocket costs paid by the
Partnership for such month (e.g., costs of obtaining audits of the Partnership’s
books and records, fees and expenses attributable to the preparation of the
Partnership’s tax returns) multiplied by the LP Sharing Percentage for such
month.

“LP Sharing Percentage” shall mean, (a) when used with respect to each month
during the Phase I Period, 99%, and (b) when used with respect to each month
during the Phase II Period, 65%.

“Management Fee” shall have the meaning assigned to such term in Section 6.6(b).

“Minimum Gain” shall mean (a) with respect to Partnership Nonrecourse
Liabilities, the amount of gain that would be realized by the Partnership if it
disposed of (in a taxable transaction) all Partnership properties which are
subject to Partnership Nonrecourse Liabilities in full satisfaction of such
liabilities, computed in accordance with applicable Treasury Regulations and (b)
with respect to each Partner Nonrecourse Debt, the amount of gain that would be
realized by the Partnership if it disposed of (in a taxable transaction) the
Partnership property that is subject to such liability in full satisfaction of
such liability, computed in accordance with applicable Treasury Regulations.

“Monthly Payout” shall mean, with respect to any month, an amount equal to the
LP Monthly Cash Distribution received by the Limited Partner during such month
times the Payout Discount Factor.

“Organization and Third Party Acquisition Costs” shall have the meaning assigned
to such term in Section 6.7.

“Original Agreement” shall have the meaning assigned to such term in Paragraph A
of the Recitals hereto.

“Original Limited Partner” shall have the meaning assigned to such term in
Paragraph A of the Recitals hereto.

“Parent” shall mean BreitBurn Energy Company, LLC, a California limited
liability company.

“Partner Nonrecourse Debt” shall mean any nonrecourse debt of the Partnership
(or portions thereof) for which any Partner bears the economic risk of loss.

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“Partner Nonrecourse Deductions” shall mean the amount of deductions, losses and
expenses equal to the net increase during the year in Minimum Gain attributable
to a Partner Nonrecourse Debt, reduced (but not below zero) by proceeds of such
Partner Nonrecourse Debt distributed during the year to the Partners who bear
the economic risk of loss for such debt, as determined in accordance with
applicable Treasury Regulations.

“Partners” shall mean the General Partner and the Limited Partner.

“Partnership” shall have the meaning assigned to it in Paragraph A of the
Recitals hereto.

“Partnership Nonrecourse Liabilities” shall mean any nonrecourse liabilities (or
portions thereof) of the Partnership for which no Partner bears the economic
risk of loss.

“Payout Discount Factor” shall mean, as of any given month, the value for such
month as set forth in Exhibit 2.1—Cash Discount Factor Table.

“Permitted Transferee” shall mean, when used with respect to Key Person, (i) any
entity owned and controlled entirely by Key Person or (ii) any trust established
by Key Person, the sole trustee of which is Key Person and the beneficiaries of
which are Key Person’s spouse and children.

“Phase I Period” shall mean the period from the Delivery Date until the end of
the first calendar month in which Cumulative Payout is greater than or equal to
zero; provided, that in the event Cumulative Payout is greater than or equal to
zero as a result of a sale of property or other similar transaction occurring at
a point in time during any calendar month, the Phase I Period shall be deemed to
have expired as of such point in time and with respect to all amounts in excess
of the amount required to cause the Cumulative Payout to be greater than or
equal to zero.

“Phase II Period” shall mean the period commencing immediately upon the
expiration of the Phase I Period and ending upon the termination and liquidation
of the Partnership.

“Positive Partner” shall have the meaning assigned to such term in
Section 4.3(i).

“Production Sales Proceeds” shall mean revenues received from the sale of
production from the Properties and any additional Leases acquired pursuant to
the terms hereof, net of (a) any royalties, overriding royalty interests and
other similar interests burdening the Properties and such additional Leases and
(b) production taxes and ad valorem taxes attributable to the Properties and
such additional Leases.

“Properties” shall mean the “Properties,” as such term is defined in the
Purchase Agreement.

“Purchase Agreement” shall mean that certain Purchase and Sale Agreement of even
date herewith by and between the Partnership and Parent.

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“Purchase Agreement Closing Date” shall mean the date of “Closing,” as such term
is defined in the Purchase Agreement.

“Purchase Price” shall mean the “Purchase Price,” as such term is defined in the
Purchase Agreement.

“Simulated Basis”, “Simulated Gain”, “Simulated Depletion” and “Simulated Loss”
shall have the respective meanings assigned to such terms in Section 8.1(b).

“Voting Stock” shall mean, when used with respect to the General Partner, stock
or other equity interests which have general voting power under ordinary
circumstances to elect all of the members of the Board of Directors of the
General Partner and to otherwise control the management and policies of the
General Partner.

Section 2.2.           References and Construction.

(a)           All references in this Agreement to articles, sections,
subsections and other subdivisions refer to corresponding articles, sections,
subsections and other subdivisions of this Agreement unless expressly provided
otherwise.

(b)           Titles appearing at the beginning of any of such subdivisions are
for convenience only and shall not constitute part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.

(c)           The words “this Agreement”, “this instrument”, “herein”, “hereof”,
“hereby”, “hereunder” and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited.

(d)           Words in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise requires.

(e)           Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.

(f)            The word “or” is not exclusive and the word “includes” and its
derivatives means “includes, but is not limited to” and corresponding derivative
expressions.

(g)           No consideration shall be given to the fact or presumption that
one party had a greater or lesser hand in drafting this Agreement.

(h)           All references herein to $ or dollars shall mean to United States
dollars.

(i)            Unless the context otherwise requires or unless otherwise
provided herein, the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments or restatements of such agreement,
instrument or document, provided that nothing contained in this subsection shall
be construed to authorize such renewal, extension, modification, amendment or
restatement.

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ARTICLE III

Capitalization

Section 3.1.           Capital Contributions of General Partner.  The General
Partner shall contribute in cash to the Partnership such amounts as shall be
necessary to pay timely the costs and expenses allocated and charged to the
General Partner in Sections 3.3 and 4.1. Such Capital Contributions shall be
paid to the Partnership by the General Partner from time to time in the
appropriate amounts concurrently with each payment to the Partnership by the
Limited Partner of its Capital Contributions or, with respect to costs allocated
solely to the General Partner, when necessary for the Partnership to pay timely
such costs.

Section 3.2.           Capital Contributions of Limited Partner.

(a)           Subject to the provisions of this Section 3.2 and
Section 3.5(a) and except as otherwise provided herein, the Limited Partner
shall make a Capital Contribution to the Partnership in an aggregate amount not
to exceed $34,675,001.46, which Capital Contribution shall be used exclusively
by the Partnership for the payment of the Limited Partner’s allocated share (in
accordance with Section 4.1) of the Purchase Price.

(b)           Subject to the provisions of this Section 3.2 and Section 3.5(b)
and except as otherwise provided herein, the Limited Partner shall make a
Capital Contribution to the Partnership in an aggregate amount not to exceed
$427,500, which Capital Contributions shall be used exclusively by the
Partnership for the payment of the Limited Partner’s allocated share (in
accordance with Section 4.1) of Organization and Third Party Acquisition Costs.

(c)           Subject to the provisions of this Section 3.2 and Section 3.5(c)
and except as otherwise provided herein, the Limited Partner shall make Capital
Contributions to the Partnership in an aggregate amount not to exceed its
allocated share (in accordance with Section 4.1) of Hedge Costs, which Capital
Contributions shall be used exclusively by the Partnership for such purpose

(d)           Notwithstanding anything to the contrary herein, the obligation of
the Limited Partner to make the Capital Contributions referenced in
subsections (a), (b), and (c) above shall be expressly conditioned upon the
following:

(i)             the Limited Partner shall have determined in its sole discretion
that all conditions precedent to the obligations to consummate the transactions
contemplated under the Purchase Agreement have been satisfied;

(ii)            without limiting paragraph (vi) below, the General Partner shall
have performed its obligations under Section 5.7;

(iii)           the Limited Partner shall have received:

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(A)          an opinion of a law firm reasonably acceptable to the Limited
Partner, dated the Purchase Agreement Closing Date and in form, scope and
content acceptable to the Limited Partner and covering the matters described in
Exhibit 3.2(d)(iii) and such other matters as the Limited Partner shall
reasonably request;

(B)           an officer’s certificate of the General Partner dated the Purchase
Agreement Closing Date with respect to (1) the attached articles of organization
of the General Partner, and all amendments thereto, (2) the attached limited
liability company agreement of the General Partner, and all amendments thereto,
(3) the attached resolutions of the board of directors of the General Partner
authorizing the execution, delivery and performance of all documents to be
executed by the General Partner in connection with the formation of the
Partnership, the execution and delivery of the Purchase Agreement and related
documents and the consummation of the transactions contemplated hereunder and
thereunder, and (4) the incumbency and specimen signature(s) of the persons
signing the documents to be executed by the General Partner in connection with
the formation of the Partnership, the execution and delivery of the Purchase
Agreement and related documents and the consummation of the transactions
contemplated hereunder and thereunder;

(C)           a tax opinion of Thompson & Knight LLP, Dallas, Texas, or such
other law firm as is reasonably acceptable to the Limited Partner, dated the
Purchase Agreement Closing Date and in form, scope and content acceptable to the
Limited Partner;

(D)          a partnership formation opinion of Thompson & Knight LLP, Dallas,
Texas, or such other law firm as is reasonably acceptable to the Limited
Partner, dated the Purchase Agreement Closing Date and in form, scope and
content acceptable to the Limited Partner;

(E)           a certificate of existence confirming the existence of the
Partnership under the laws of the State of Texas;

(F)           certificate(s) of existence and good standing confirming the
existence and good standing of the General Partner under the laws of the State
of Delaware;

(G)           certificate(s) of existence and good standing confirming the
existence and good standing of the Parent under the laws of the State of
Delaware; and

(H)          such other certificates, documents, and other instruments in
respect to the General Partner and its owners as shall be reasonably requested
by the Limited Partner.

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(iv)          the Partnership shall have qualified to do business in the State
of California;

(v)           all the representations and warranties of the General Partner
contained in this Agreement shall be true and correct in all material respects
as of the date made and (having been deemed to have been made again on and as of
the Purchase Agreement Closing Date in the same language) shall be true and
correct in all material respects on and as of the Purchase Agreement Closing
Date (and the Limited Partner shall have received a certificate acceptable to it
from the General Partner dated the Purchase Agreement Closing Date to that
effect);

(vi)          the General Partner shall have performed and complied with in all
material respects all covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Purchase Agreement Closing
Date (and the Limited Partner shall have received a certificate acceptable to it
from the General Partner dated the Purchase Agreement Closing Date to that
effect);

(vii)         no preliminary or permanent injunction or other order, decree, or
ruling issued by any governmental entity, and no statute, rule, regulation, or
executive order promulgated or enacted by any governmental entity, shall be in
effect which restrains, enjoins, prohibits or otherwise makes illegal the
consummation of the transactions contemplated under this Agreement or the
Purchase Agreement;

(viii)        all consents, approvals, orders, authorizations, and waivers of,
and all declarations, filings, and registrations with, third parties (including
governmental entities) required to be obtained or made by or on the part of the
parties hereto or to the Purchase Agreement or otherwise necessary for the
consummation of the transactions contemplated hereunder or under the Purchase
Agreement, shall have been obtained or made and shall be in full force and
effect on and as of the Purchase Agreement Closing Date (excluding, for purposes
hereof, consents of third parties to assignments of the Properties as provided
for in the Purchase Agreement); and

(ix)           the Limited Partner shall have received a Phase I environmental
report with respect to the Properties satisfactory to it in form, scope and
content.

(f)            Notwithstanding anything to the contrary herein, the Capital
Contributions referenced in subsections (a), (b) and (c) above shall be the
maximum contribution to the Partnership that the Limited Partner shall be
required to make (unless the Limited Partner otherwise elects as provided in
Section 3.3) and shall be subject to reduction as provided in Section 3.4.

Section 3.3.           Request for Additional Capital Contributions of Limited
Partner.

(a)           Subject to this Section 3.3 and the other terms and provisions
hereof, the General Partner may request additional Capital Contributions from
the Limited Partner to be used exclusively for the payment of its allocated
share (pursuant to Section 4.1) of (i) Capital Costs of the type described in
clause (a) of the definition thereof, (ii) Capital Costs of the type described
in clause (b) of the definition thereof, (iii) Capital Costs of the type
described

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in clause (c) of the definition thereof, (iv) Capital Costs of the type
described in clause (d) of the definition thereof, (v) Capital Costs of the type
described in clause (e) of the definition thereof, (vi) Capital Costs of the
type described in clause (f) of the definition thereof, (vii) Acquisition Costs
under the circumstances described in Section 5.3, and (viii) cost overruns
associated with any project or operation with respect to which the Limited
Partner has previously agreed to make Capital Contributions hereunder.  Each of
the categories of expenditures described in clauses (i), (ii), (iii), (iv), (v),
(vi), (vii) and (viii) of this Section 3.3(a) may include such contingent
amounts as the General Partner in good faith shall determine to be appropriate
under the circumstances.

(b)           Requests for additional Capital Contributions pursuant to this
Section 3.3 shall be made by the General Partner and agreed to by the Limited
Partner separately with respect to each operation or acquisition included in any
given category of expenditures as specified in subsection (a) above.  Requests
pursuant to this Section 3.3 shall not be made more often than quarterly each
year unless approved by the Limited Partner (i) except for requests pursuant to
clause (vii) or clause (viii) of subsection (a) above, (ii) except in the event
the request is attributable to a proposal from an unrelated third party or (iii)
unless an emergency or some other urgent need for funds exists outside of the
reasonable control of the General Partner.  Payments of any additional Capital
Contributions agreed to be made by the Limited Partner pursuant to this
Section 3.3 shall be requested by the General Partner in the manner provided for
in subsection (c) below and made by the Limited Partner in the manner provided
for in Section 3.5(e).

(c)           Notice of any request for additional Capital Contributions made by
the General Partner shall be in writing and sent to the Limited Partner at its
address as provided in Section 12.1.  With respect to the category of costs
described in clauses (i), (ii), (iii), (iv), (v) and (vi) of Section 3.3(a),
each request shall cover all of the Capital Costs intended to be incurred during
the next three months (and with respect to any Partnership well or Enhanced
Recovery Operation or facility, the costs estimated to be incurred in connection
with such well or operation or facility).  With respect to the category of costs
described in clause (vii) of Section 3.3(a), each request shall contain the
information specified in Section 5.3.  With respect to the category of costs
described in clause (viii) of Section 3.3(a), each request shall cover the
reasonably anticipated overruns associated with the subject operation or
project.  With respect to any given workover, new drilling or waterflood
operation for which Capital Contributions are requested under an authority for
expenditure, the General Partner shall be permitted (if it so elects) to include
in its request a proposed charge for its internal technical staff (including
geologist, geophysicists, and engineers) performing services on such operation. 
Each such request shall generally be in the form attached hereto as Exhibit
3.3(c) and also set forth (i) the date by which the Limited Partner must elect
in writing to make the requested additional Capital Contributions, which date
shall not be less than 30 days from the date the General Partner mails or sends
such request, unless a shorter period is provided to the General Partner under
any applicable “authority for expenditure” submitted by an operator other than
the General Partner or an Affiliate, in which event such shorter period shall
also be applicable to the election period of the Limited Partner (provided that
in no event shall such shorter period be less than 15 days, unless an emergency
exists or some other urgent need for funds exist outside of the reasonable
control of the General Partner, in which instance the General Partner shall
endeavor to provide the Limited Partner with as much time to elect as is
reasonable practicable), (ii) the purpose or purposes for which the proceeds of
the requested additional Capital Contributions are to be used,

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(iii) a copy of the applicable “authority for expenditure” submitted in
connection with the well or operation, (iv) to the extent practicable, a summary
of the pertinent geological data relating to each well or operation with respect
to which the proceeds that are requested are to be expended and financial
projections with respect to the expenditure of such additional Capital
Contributions and the revenue projected to be received therefrom, (v) with
respect to any well or operation with respect to which the proceeds requested
are to be expended, a statement as to whether or not the General Partner
recommends the Partnership participate therein, (vi) a summary of the action
that the General Partner anticipates it will take under Section 3.3(d) and any
applicable operating agreement if the Limited Partner does not elect to make
such requested additional Capital Contributions and (vi) if the request is for
an “authority for expenditure” which contains a proposed charge for the General
Partner’s internal technical staff (including, geologists, geophysicists, or
engineers), as provided in the immediately preceding sentence, a line item or
items specifying in reasonable detail the proposed charge and the rationale for
the proposed inclusion.  In connection with any request pertaining to an
Enhanced Recovery Operation, the General Partner shall endeavor to confine such
request to the extent possible in accordance with generally accepted industry
standards to those matters or items, which should be conducted in conjunction
with each other.  Thereafter, the General Partner shall promptly furnish to the
Limited Partner such additional information concerning the use and application
of the requested additional Capital Contributions as the Limited Partner shall
reasonably request.  The Limited Partner shall respond to any such request for
Capital Contributions as soon as reasonably possible, but in any event on or
before the date set forth in the request.  In the event the Limited Partner does
not elect to pay all of the categories of requested additional Capital
Contributions (or an “authority for expenditure” or acquisitions within a given
category), it may elect and so indicate in its response to the General Partner
which of the Capital Contributions requested the Limited Partner agrees to pay
(or, as to a given category, which of the “authority for expenditures” or
acquisitions within such category, but not as to individual cost items with
respect to a given operation or acquisition).  The General Partner shall not use
any Capital Contributions received from the Limited Partner pursuant to this
Section 3.3 and designated for payment of one category of costs to pay any other
category of costs, except to the extent multiple categories of costs are
included in the same approved additional Capital Contribution request, in which
case the total amount reflected in such request may be used to pay any of the
category of costs included in that request.

(d)           If the Limited Partner declines to make any additional Capital
Contributions requested by the General Partner or fails to give timely notice to
the General Partner pursuant to a request for additional Capital Contributions
made pursuant to Section 3.3(a), the General Partner may elect to take any
action specified in paragraphs (1) through (7) below with respect to each Lease,
Partnership well, operation or project to which the request pertains, if
appropriate:

(1)            With respect to the acquisition of Leases pursuant to
Section 5.3, the General Partner or its Affiliates may purchase or retain for
its or their own account the Leases not acquired by the Partnership.

(2)            The General Partner may cause the Partnership (to the extent it
can do so under any applicable operating agreement) to abandon the operation or
project, in which event all costs (if any) thereafter incurred in abandoning the
operation or project shall be borne by the Partnership.

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(3)            The General Partner may cause the Partnership to sell, farm-out
or otherwise dispose of the well or Lease (or the applicable part thereof) to
which such operation or project pertains to any person; provided, however, that
no such sale, farm-out or other disposition may be made to the General Partner
or any Affiliate thereof without the prior written consent of the Limited
Partner, which consent shall not be unreasonably withheld or delayed.

(4)            In the event a well or Lease to which such proposed operation or
project pertains is subject to an operating agreement, the General Partner may
cause the Partnership to elect not to participate in a proposed operation and to
assume the status of a “non-consenting party” under such operating agreement;
provided, however, that neither the General Partner nor any of its Affiliates
shall be permitted to pay or shall pay the Partnership’s non-consenting share of
costs or expenses or any part thereof with respect to such operation or project
under such operating agreement.

(5)            The General Partner may (provided that it has recommended under
Section 3.3(c) that the Partnership participate in such proposed operation or
project) pay the requested additional Capital Contributions the Limited Partner
declined to pay, and the amount so paid by the General Partner with respect to
such operation or project shall be credited to a separate account, which
separate account shall be charged and credited as follows:

(x)            Subject to subparagraph (y) of this Section 3.3(d)(5), all of the
Limited Partner’s share of costs and expenses with respect to such operation or
project shall be charged to such separate account, and such separate account
shall be credited with the Limited Partner’s share of revenues from such
operation or project (after deducting all production, severance, excise and
similar taxes relating thereto).  Until the total amount credited to such
separate account equals the amount specified in subparagraph (y) of this
Section 3.3(d)(5) with respect to such operation or project, the General Partner
shall be allocated all of the costs and expenses charged to such separate
account, and the Limited Partner shall be deemed to have relinquished to the
General Partner, and the General Partner shall have allocated to it and be
entitled to receive, all of the revenues credited to such separate account.

(y)           If, as and when the total amount of revenues received by and
credited and allocated to the General Partner under subparagraph (x) of this
Section 3.3(d)(5) shall equal the sum of the following to the extent they are
appropriate:

a.              300% of the amount charged to such separate account for Capital
Costs; and

b.             100% of the amount charged to such separate account for Lease
Operating and Production Costs;

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no further amounts shall be charged or credited to such separate account, and
the Limited Partner’s share of all revenues and costs and expenses thereafter
arising or accruing with respect to such operation or project shall be
allocated, charged and credited to the Limited Partner.

(6)            With respect to a request pertaining to the category of costs
specified in clause (vi) of Section 3.3(a), the General Partner shall take such
action as shall be mutually agreed upon by the Partners.

(7)            The General Partner may take such other actions as may be
mutually agreed upon by the Partners.

Section 3.4.           Reduced Capital Contributions of Limited Partner.  In the
event the Partnership or the General Partner properly retains a portion of the
Limited Partner’s share of Partnership revenues in accordance with Section 4.4
for the purpose of paying any Acquisition Costs, Capital Costs, Hedge Costs, or
Organization and Third Party Acquisition Costs allocated to the Limited Partner
hereunder, the amount so retained and not distributed shall reduce pro tanto the
amount of Capital Contributions the Limited Partner is required to thereafter
make for the purpose of paying such costs.

Section 3.5.           Payments of Capital Contributions.

(a)           The Limited Partner shall pay the Capital Contributions referenced
in Section 3.2(a) on the Purchase Agreement Closing Date.

(b)           The Limited Partner shall pay the Capital Contributions referenced
in Section 3.2(b) within five business days of the Limited Partner’s receipt of
a request from the General Partner for such purpose.

(c)           The Limited Partner shall pay the Capital Contributions referenced
in Section 3.2(c) promptly after receipt of a request from the General Partner
for such purpose.

(d)           Except as otherwise provided in subsections (a), (b) and (c)
above, the Limited Partner shall pay its Capital Contributions monthly upon
request by the General Partner in such amounts as are required to pay its share
of all costs and expenses properly allocated to it hereunder.  The General
Partner may request on a monthly basis additional payments of the Capital
Contributions agreed to be made by the Limited Partner for the Limited Partner’s
share of (i) all costs and expenses estimated to have been and/or to be incurred
by the Partnership during that calendar month except those for which advances
have previously been made or for which payment will be made from another source
and (ii) those costs and expenses estimated to be incurred by the Partnership
during the next succeeding calendar month.  Each monthly request for payment
shall be adjusted to the extent the Limited Partners’ cumulative share of actual
Partnership disbursements for the preceding calendar month’s costs and expenses
is either greater or less than the amounts previously contributed by the Limited
Partner for such purpose.  Any request for payment by the Limited Partner of
Capital Contributions shall be in writing and shall set forth (1) the type,
nature or items of Partnership costs or expenses for which such payment will be
used by the Partnership, including a division of the costs and expenses as
contemplated in

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clauses (i) and (ii) of this Section 3.5(d) and the adjustment referred to in
this Section 3.5(d), (2) the net amount of the Capital Contributions to be paid
by the Limited Partner and (3) the date by which payment of such Capital
Contributions shall be received, which shall not be less than five business days
from the date the notice is received by the Limited Partner.

(e)           Payments by the Limited Partner of its Capital Contributions shall
be made by wire transfer of immediately available funds to the Partnership’s
account as designated by the General Partner by notice to the Limited Partner
pursuant to Section 12.1.

(f)            Any additional Capital Contributions agreed to be made by the
Limited Partner pursuant to Section 3.3 may be requested only during the period
commencing on the date they were originally requested by the General Partner
under Section 3.3 and ending three months thereafter with respect to Capital
Contributions to be used to pay Acquisition Costs and six months thereafter with
respect to Capital Contributions to be used to pay Capital Costs and shall only
be requested for and expended on the respective purposes for which they were
agreed to be made.

Section 3.6.           Non-payment of Capital Contributions.

(a)           Except as otherwise provided in the following sentence, the
Partnership shall have the right to pursue the remedies described in this
Section 3.6 and any remedy existing at law or in equity for the collection of
the unpaid amount of the Capital Contributions agreed to be made in Sections 3.1
and 3.2 or hereafter agreed to be made in accordance with Section 3.3, including
the prosecution of a suit against a defaulting Partner.  In the event of a
default by a Partner of its obligation to make Capital Contributions with
respect to its allocable share hereunder of Hedge Costs, the provisions of
subsection (d) below and any guaranty of GE Capital Corporation under
Section 5.7 shall be the exclusive remedies of the Partnership and the other
Partner.

(b)           In the event that the Limited Partner fails or refuses to make
when due its share of Capital Contributions, the General Partner shall be
entitled (but shall not be obligated) to make such Capital Contributions to the
Partnership which the Limited Partner is obligated to make and the amount so
advanced shall be treated as a loan from the General Partner to the Limited
Partner and shall bear interest from the date of such advance at a rate equal to
the Agreed Rate.  The General Partner shall notify the Limited Partner of any
such advance and request payment by the Limited Partner of the amount so
advanced, together with interest thereon from the date of the advance.  If the
Limited Partner fails or refuses to pay to the General Partner the amount so
advanced, together with interest thereon from the date of the advance, and if
such failure or refusal persists for a period of 30 days following notice from
the General Partner to the Limited Partner, (such occurrence being called herein
an “Event of Default”), the General Partner shall be entitled to proceed under
this Section 3.6(b).  In addition to the rights in Section 3.6(a), the Limited
Partner hereby grants to the Partnership and the General Partner a lien upon and
security interest in the Limited Partner’s interest in the Partnership and in or
to all assets attributable to and proceeds of and from such interest in the
Partnership to secure the payment of contributions required under this
Agreement, and authorizes the General Partner, upon the occurrence of an Event
of Default, if it elects to proceed under this alternative, to foreclose such
lien or security interest in any manner provided for by the laws of the State of
Texas for the foreclosure of such lien or security interest (including the
exercise of the rights of a secured party under the Texas

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Uniform Commercial Code).  If the General Partner elects this alternative, the
Limited Partner shall be liable for all costs and expenses of the General
Partner in instituting and prosecuting such suit or foreclosing such lien or
security interest, including all reasonable attorneys’ fees expended in
connection therewith.  The Limited Partner hereby agrees that the General
Partner may file one or more financing statements with respect to the security
interest granted hereby in order to perfect such security interest, and the
Limited Partner hereby agrees to execute such financing statements at the
request of the General Partner.  The Limited Partner further hereby appoints the
General Partner as its agent and attorney-in-fact for the purpose of signing and
filing any such financing statements, which appointment is coupled with an
interest and expressly made irrevocable.  In the event of a non-judicial
foreclosure, the proceeds of the disposition of the Partnership interest of the
Limited Partner shall be applied as follows:  (i) first, to the reasonable
expenses incurred by the Partnership and the General Partner in collecting such
proceeds; and (ii) next, to the satisfaction of the portion of the Limited
Partner’s contribution then due.  The Limited Partner shall be liable for any
deficiency, and the General Partner shall account to the Limited Partner for any
surplus.  Any purchaser of the Limited Partner’s interest in the Partnership
shall assume the obligations of the Limited Partner under this Agreement and
shall succeed to the right of the Limited Partner as to the allocation of
profits and losses of, and as to distributions from, the Partnership
thereafter.  The defaulting Limited Partner hereby grants the General Partner an
irrevocable special power of attorney, coupled with an interest, which shall
survive the dissolution, bankruptcy, or legal disability of the Limited Partner,
to take all actions necessary on its behalf to sell, assign or transfer the
Partnership interest of the Limited Partner to such person or persons as shall
acquire such Partnership interest as provided in this Section 3.6(b) should an
Event of Default be deemed to have occurred with respect to the Limited
Partner.  In the event that the General Partner elects to foreclose upon the
Limited Partner’s interest in the Partnership, the Partners agree that 30 days
prior notice shall be reasonable notice of any proposed public or private
foreclosure sale.  Notwithstanding the foregoing, the General Partner shall not
foreclose upon the interest of the Limited Partner in the Partnership if the
Event of Default giving rise to the exercise of remedies under this Section 3.6
arises out of a bona fide dispute regarding the interpretation or implementation
of this Agreement.

(c)           The Partnership may retain any revenues otherwise distributable to
the Limited Partner pursuant to this Agreement in an amount equal to the amount
the Limited Partner failed or refused to contribute as required pursuant to the
terms of this Agreement, together with interest on such past-due amounts at a
rate equal to the Agreed Rate.  Any amount so withheld shall be deemed, for all
purposes of this Agreement, to have been distributed to the Limited Partner and,
other than that portion of such amounts representing interest, be deemed to have
been recontributed by the Limited Partner to the capital of the Partnership for
the purposes for which contributions were initially requested. To the extent
that the General Partner has advanced funds to the Partnership or incurred costs
in the collection of same as a result of the default of the Limited Partner, the
General Partner shall be entitled to be reimbursed and paid the amount of such
advance plus interest at the Agreed Rate from the amounts so withheld from the
Limited Partner.  If any dispute as to whether an Event of Default existed is
resolved in favor of the Limited Partner, then the General Partner shall pay to
the Partnership for distribution to the Limited Partner an amount equal to any
amounts wrongly paid by the Limited Partner to the Partnership which should have
instead been paid to the Partnership by the General Partner, or any amounts
distributed by the Partnership to the General Partner instead of the Limited
Partner,

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in connection with such Event of Default together with interest thereon at a
rate equal to the Agreed Rate, and all costs and expenses of the Limited Partner
in resolving such dispute, including all attorneys’ fees expended in connection
therewith.  The General Partner shall be free at any time also to proceed under
this Section 3.6(c) in addition to any other remedies hereunder or as provided
by law.

(d)           If a Partner (the “Defaulting Partner”) fails or refuses to make
Capital Contributions to the Partnership hereunder when due to pay its allocable
share hereunder of Hedge Costs and the other Partner (the “Contributing
Partner”) in the Defaulting Partner’s stead makes such Capital Contributions to
the Partnership, then the terms and provisions of this Section 3.6(d) shall be
operative.  Specifically, in the instance described above, the Contributing
Partner may exercise either of the following options:

(i)            The Contributing Partner may treat the payment by it of the
Defaulting Partner’s Capital Contributions as a loan to the Defaulting Partner,
which loan shall bear interest from the date the payment is made at a rate equal
to the Agreed Rate.  Further, as between the Contributing Partner and the
Defaulting Partner, the terms and provisions of Sections 3.6(b) and 3.6(c) shall
be applicable, mutatis mutandis, except that the last sentence of Section 3.6(b)
shall be disregarded.

(ii)           The Contributing Partner may treat the payment by it of the
Defaulting Partner’s Capital Contributions as Capital Contributions from the
Contributing Partner, in which case the Contributing Partner shall be entitled
to receive all of the distributions that would otherwise be paid to the
Defaulting Partner hereunder until that point in time at which the Contributing
Partner has received from such distributions an amount equal to 300% of the
amount of the Capital Contributions made by the Contributing Partner in the
Defaulting Partner’s stead; provided, however, that if this option is elected,
the Defaulting Partner’s share of the Hedge Costs paid with such Capital
Contributions, and any deductions or losses relating thereto for state or
federal income tax purposes, shall be allocated to the Contributing Partner; and
provided further, that the Defaulting Partner’s share of Partnership revenues,
and any income or gain relating thereto for state or federal income tax
purposes, shall be allocated to the Contributing Partner until the revenues so
allocated equal the distributions to be made to the Contributing Partner under
this paragraph (ii).

(iii)          If the Contributing Partner borrows funds in order to make the
payment required by the Defaulting Partner, the Contributing Partner may pledge
its right to receive distributions under this Section 3.6(d), which would have
been made to the Defaulting Partner to secure such borrowings.

Section 3.7.           Interest on and Return of Capital Contributions.

(a)           No interest shall accrue on any contributions to the capital of
the Partnership; however, all interest which accrues on Partnership funds shall
be allocated and credited to the Partners in accordance with Section 4.2.

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(b)           No Partner shall have the right to withdraw or be repaid any
capital contributed by such Partner except (a) as provided in Sections 4.4(b),
10.2 and 10.3, (b) in the instance when the Partnership receives a return of
cash funds under the Purchase Agreement due to a post-closing adjustment to the
Purchase Price, as defined in the Purchase Agreement (in which event the General
Partner shall cause the Partnership to refund immediately to each of the Limited
Partner and the General Partner its respective allocable share of such cash
funds) or (c) that upon execution and delivery of this Agreement by the parties
hereto, the Partnership shall promptly distribute to the Original Limited
Partner $800 cash, which distribution shall constitute a full and complete
return to the Original Limited Partner of the aggregate amount of all Capital
Contributions made by the Limited Partner to the Partnership pursuant to the
Original Agreement (and by its execution of a counterpart of this Agreement, the
Original Limited Partner acknowledges and affirms that upon receipt of the cash
amount referenced above, it shall have no further rights or interest whatsoever
in the Partnership).

ARTICLE IV

Allocations and Distributions

Section 4.1.           Allocation of Costs and Expenses.  Except as provided in
Sections 3.3 and 3.6, all costs and expenses of the Partnership shall be
allocated and charged to the Partners as follows:

(a)           All Catastrophe Costs incurred by the Partnership shall be
allocated 100% to the General Partner.

(b)           In the event the transactions contemplated by the Purchase
Agreement are consummated, Organization and Third Party Acquisition Costs shall
be allocated 1% to the General Partner and 99% to the Limited Partner.  In the
event the transactions contemplated by the Purchase Agreement are not
consummated, Organization and Third Party Acquisition Costs shall be allocated
100% to the General Partner.

(c)           The Purchase Price shall be allocated 1% to the General Partner
and 99% to the Limited Partner.

(d)           All other costs and expenses of the Partnership not specifically
allocated above shall be allocated (i) to the General Partner in accordance with
its GP Sharing Percentage and (ii) to the Limited Partner in accordance with its
LP Sharing Percentage.

Section 4.2.           Allocation of Revenues.

(a)           Except as provided in Sections 3.3 and 3.6, all revenues of the
Partnership (which shall not include Capital Contributions and loans to the
Partnership) shall be allocated and credited to the Partners as follows:

(i)            Insurance proceeds, to the extent not otherwise expended by the
Partnership to preserve and protect Partnership property in the event of an
accident or

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other occurrence or to pay Partnership liabilities or other obligations arising
from an accident or other occurrence, shall be allocated between the Partners in
the same manner as the revenues from the sale of the property to which such
insurance proceeds related would be allocated under this Section 4.2.

(ii)           All revenues used to repay any principal, interest or other
amounts owing with respect to any Partnership borrowings or indebtedness shall
be allocated to the Partners in the same proportions as the costs and expenses
paid with such borrowings or indebtedness were allocated to the Partners (and,
with respect to any indebtedness to which any property acquired by the
Partnership is subject at the time of its acquisition, in the same proportions
as costs are allocated under Section 4.1(b) at the time such property is
acquired by the Partnership).

(iii)          After making the allocation provided for in Section 4.2(a)(ii)
and taking into account the revenues allocated therein, all additional revenues
resulting from the sale or other disposition of Depletable Property (as defined
in Section 4.3(b)) shall be allocated to the Partners in the same percentages as
the costs of the property sold were allocated, to the extent such revenues
constitute a recovery of Simulated Basis of such Depletable Property, up to an
amount equal to the Partnership’s Simulated Basis in such property at the time
of such sale or disposition.  Thereafter, revenues resulting from any such sale
or disposition shall be allocated to the Partners in a manner which will cause
the aggregate of all revenues allocated to the Partners from such sale or
disposition (to the extent possible) to equal the amounts which would have been
allocated under Section 4.2(a)(iv) in the absence of this Section 4.2(a)(iii).

(iv)          All other revenues of the Partnership not specifically allocated
above shall be allocated (A) to the General Partner in accordance with its GP
Sharing Percentage and (B) to the Limited Partner in accordance with its LP
Sharing Percentage.

(b)           All dry hole and bottom hole and similar contributions shall not
be considered to be revenues hereunder but shall be applied to reduce the
Capital Costs of the respective wells to which they relate.

Section 4.3.           Income Tax Allocations.  Except as otherwise provided
herein, for purposes of any applicable federal, state or local income tax law,
rule or regulation items of income, gain, deduction, loss, credit and amount
realized shall be allocated to the Partners as follows:

(a)           Income from the sale of oil or gas production and any credits
allowed by Section 29 of the Internal Revenue Code relating thereto shall be
allocated in the same manner as revenue therefrom is allocated and credited
pursuant to Section 4.2.

(b)           Cost and percentage depletion deductions and the gain or loss on
the sale or other disposition of property the production from which is subject
to depletion (herein sometimes called “Depletable Property”) shall be computed
separately by the Partners rather than the Partnership.  For purposes of
Section 613A(c)(7)(D) of the Internal Revenue Code, the Partnership’s adjusted
basis in each Depletable Property acquired by the Partnership shall be

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allocated to each Partner in an amount equal to the portion of the costs and
expenses which entered into such basis actually paid by such Partner or paid by
the Partnership with funds contributed by or allocated to such Partner, and the
amount realized on the sale or other disposition of each Depletable Property
shall be allocated to the Partners in proportion to each Partner’s respective
share of the revenue from the sale or other disposition of such property
provided for in Section 4.2(a)(iii) or Section 4.2(a)(iv), as applicable.  For
purposes of allocating amounts realized upon any such sale or disposition which
are deemed to be received for federal income tax purposes and are attributable
to Partnership indebtedness or indebtedness to which the Depletable Property is
subject at the time of such sale or disposition, such amounts shall be allocated
in the same manner as Partnership revenues used for the repayment of such
indebtedness would have been allocated under Section 4.2(a)(ii).

(c)           Items of deduction, loss and credit not specifically provided for
above (other than loss from the sale or other disposition of Partnership
property), including depreciation, cost recovery and amortization deductions,
shall be allocated to the Partners in the same manner that the costs and
expenses of the Partnership that gave rise to such items of deduction, loss and
credit were allocated pursuant to Section 4.1.

(d)           Gain from the sale or other disposition of Partnership property
that is not specifically provided for above shall be allocated to the Partners
in a manner which reflects each Partner’s allocable share of the revenue from
the sale of the Partnership property provided for in Section 4.2, and loss from
the sale or other disposition of Partnership property that is not specifically
provided for above shall be allocated to the Partners in a manner which reflects
each Partner’s allocable share of the costs and expenses of the Partnership
property provided for in Section 4.1.

(e)           All recapture of income tax deductions resulting from the sale or
other disposition of Partnership property shall, to the maximum extent possible,
be allocated to the Partner to whom the deduction that gave rise to such
recapture was allocated hereunder to the extent that such Partner is allocated
any gain from the sale or other disposition of such property.

(f)            Income resulting from the Partnership’s receipt of dry hole,
bottom hole or similar contributions shall be allocated in the same manner as
the costs to which they were applied were allocated.

(g)           Any other items of Partnership income or gain not specifically
provided for above shall be allocated in the same manner as the revenue that
resulted in such income or gain is allocated and credited pursuant to
Section 4.2.

(h)           Notwithstanding any of the foregoing provisions of this
Section 4.3 to the contrary:

(i)            If during any fiscal year of the Partnership there is a net
increase in Minimum Gain attributable to a Partner Nonrecourse Debt that gives
rise to Partner Nonrecourse Deductions, each Partner bearing the economic risk
of loss for such Partner Nonrecourse Debt shall be allocated items of
Partnership deductions and losses for such year (consisting first of cost
recovery or depreciation deductions with respect to property

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that is subject to such Partner Nonrecourse Debt and then, if necessary, a pro
rata portion of the Partnership’s other items of deductions and losses, with any
remainder being treated as an increase in Minimum Gain attributable to Partner
Nonrecourse Debt in the subsequent year) equal to such Partner’s share of
Partner Nonrecourse Deductions, as determined in accordance with applicable
Treasury Regulations.

(ii)           If for any fiscal year of the Partnership there is a net decrease
in Minimum Gain attributable to Partnership Nonrecourse Liabilities, each
Partner shall be allocated items of Partnership income and gain for such year
(consisting first of gain recognized, including Simulated Gain, from the
disposition of Partnership property subject to one or more Partnership
Nonrecourse Liabilities and then, if necessary, a pro rata portion of the
Partnership’s other items of income and gain, and if necessary, for subsequent
years) equal to such Partner’s share of such net decrease (except to the extent
such Partner’s share of such net decrease is caused by a change in debt
structure with such Partner commencing to bear the economic risk of loss as to
all or part of any Partnership Nonrecourse Liability or by such Partner
contributing capital to the Partnership that the Partnership uses to repay a
Partnership Nonrecourse Liability), as determined in accordance with applicable
Treasury Regulations.

(iii)          If for any fiscal year of the Partnership there is a net decrease
in Minimum Gain attributable to a Partner Nonrecourse Debt, each Partner shall
be allocated items of Partnership income and gain for such year (consisting
first of gain recognized, including Simulated Gain, from the disposition of
Partnership property subject to Partner Nonrecourse Debt, and then, if
necessary, a pro rata portion of the Partnership’s other items of income and
gain, and if necessary, for subsequent years) equal to such Partner’s share of
such net decrease (except to the extent such Partner’s share of such net
decrease is caused by a change in debt structure or by the Partnership’s use of
capital contributed by such Partner to repay Partner Nonrecourse Debt) as
determined in accordance with applicable Treasury Regulations.

(i)            The General Partner shall use all reasonable efforts to prevent
any allocation or distribution from causing a negative balance in the Limited
Partner’s Adjusted Capital Account.  Consistent therewith, and notwithstanding
any of the foregoing provisions of this Section 4.3 to the contrary, if for any
fiscal year of the Partnership the allocation of any loss or deduction (net of
any income or gain) to any Partner would cause or increase a negative balance in
such Partner’s Adjusted Capital Account as of the end of such fiscal year (the
“Deficit Partner”) after taking into account the provisions of subsection (h) of
this Section 4.3, only the amount of such loss or deduction that reduces the
balance to zero shall be allocated to such Deficit Partner and the remaining
loss or deduction shall be allocated to the Partner whose Adjusted Capital
Account has a positive balance remaining at such time (the “Positive Partner”). 
After any such allocation, any Partnership income or gain (including Simulated
Gain) that would otherwise be allocated to the Deficit Partner shall be
allocated instead to the Positive Partner up to an amount equal to the
Partnership loss or deduction allocated to the Positive Partner under the
preceding sentence; provided, however, that no allocation of income or gain
realized shall be made under this sentence if the effect of such allocation
would be to cause the Adjusted Capital Account of the Deficit Partner to be less
than zero.  If, after taking into account the allocation in the first sentence
of this Section 4.3(i), the Adjusted Capital Account balance of the Deficit
Partner

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remains less than zero at the end of a fiscal year, a pro rata portion of each
item of Partnership income or gain (including Simulated Gain) otherwise
allocable to the Positive Partners for such fiscal year (or if there is no such
income or gain allocable to the Positive Partners for such fiscal year, all such
income or gain (including Simulated Gain) so allocable in the succeeding fiscal
year or years) shall be allocated to the Deficit Partner in an amount necessary
to cause its Adjusted Capital Account balance to equal zero; provided, that no
allocation under this sentence shall have the effect of causing the Positive
Partner’s Adjusted Capital Account to be less than zero.  After any such
allocation, any Partnership gain (including Simulated Gain) resulting from the
sale or other disposition of Partnership property that would otherwise be
allocated to the Deficit Partner for any fiscal year under this Section 4.3
shall be allocated instead to the Positive Partner until the amount of gain so
allocated equals the amount of gain (including Simulated Gain) previously
allocated to such Deficit Partner under the preceding sentence of this
Section 4.3(i); provided, however, that no allocation of gain (including
Simulated Gain) shall be made under this sentence if the effect of such
allocation would be to cause the Adjusted Capital Account of a Deficit Partner
to be less than zero.

(j)            In accordance with Section 704(c) of the Internal Revenue Code
and the Treasury Regulations thereunder, income and deductions with respect to
any property contributed to the Partnership shall, solely for federal income tax
purposes, be allocated among the Partners in a manner to take into account any
variation between the adjusted tax basis of such property to the Partnership and
its fair market value at the time of contribution.  In making such allocations,
the General Partner shall use such method or methods permitted under applicable
Treasury Regulations as may be approved by the Limited Partner in accordance
with Section 6.9(a).

Section 4.4.           Distributions.

(a)           Within 30 days after the end of each month, the General Partner
shall cause the Partnership to make a distribution (i) to the Limited Partner of
its LP Monthly Cash Distribution for such month and (ii) to the General Partner
of its GP Monthly Cash Distribution for such month.

(b)           The General Partner shall cause the Partnership to make a
distribution to the Partners of their allocable share (as determined under
Section 4.2(a)) of the net proceeds of sale resulting from any permitted sale or
disposition of Leases or other Partnership assets (other than in connection with
the liquidation of the Partnership) within two business days after the closing
of such sale or disposition; provided, that the General Partner shall be
entitled to reserve from such distribution such amount which is, or which the
General Partner reasonably anticipates will be, subject to any post-closing
adjustment and which reserve shall be approved by the Limited Partner; provided,
further, that the General Partner shall distribute such reserve or portions
thereof at such times as it reasonably determines that the contingencies for
which such reserve has been established have been satisfied.

(c)           Notwithstanding the foregoing or any other provision contained in
this Agreement, (i) unless the Limited Partner otherwise consents in writing or
defaults in the payment of any Capital Contributions previously agreed to be
made by it, the General Partner shall not be entitled to cause the Partnership
to retain any of the Limited Partner’s share of Partnership revenues for the
purpose of paying (directly or indirectly) any Acquisition Costs,

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Capital Costs, Hedge Costs, or Organization and Third Party Acquisition Costs,
or (ii) the Partnership may retain such insurance proceeds and other amounts as
the General Partner shall reasonably determine are necessary to pay Partnership
liabilities and expenses upon the occurrence of an accident (e.g., a blowout),
catastrophe or similar event (and, in connection therewith, to restore, preserve
or protect Partnership property) or to comply with all applicable Environmental
Laws, ordinances, rules and regulations.

(d)           Payment of all distributions made by the Partnership to the
Limited Partner shall be made by wire transfer of immediately available funds in
accordance with such written instructions to the General Partner as may be
provided by the Limited Partner from time to time.

(e)           Nothing contained in this Section 4.4 shall relieve the General
Partner from its obligation to bear 100% of Catastrophe Costs pursuant to
Section 4.1(a).

(f)            All distributions in liquidation of a Partner’s interest in the
Partnership shall be made in accordance with Section 10.3.

ARTICLE V

Partnership Property

Section 5.1.           Title to Partnership Property.  All property owned by the
Partnership, whether real or personal, tangible or intangible, shall be deemed
to be owned by the Partnership as an entity, and no Partner, individually, shall
have any ownership of such property.  The Partnership shall hold all of its
assets in the name of the Partnership unless under the law of some jurisdiction
in which the Partnership owns assets such assets must be held in another name. 
In such a case, such assets in such jurisdiction shall be held under such other
name or names (except the name of the General Partner, any Affiliate of the
General Partner or the name of the Limited Partner) as the General Partner shall
determine to be necessary so long as it does not affect adversely the limited
liability of the Limited Partner hereunder or jeopardize in any manner the title
to or ownership of any Partnership Leases or other assets.  The General Partner
shall promptly take all such action as it shall deem necessary or appropriate,
or as may be required by law, to perfect and preserve the ownership interest of
the Partnership in all Leases, and (if requested by the Limited Partner) upon
recordation of title to a Lease shall promptly supply the Limited Partner with a
copy of such recorded title.  In the event the Partnership acquires assets in a
jurisdiction which prohibits the Partnership from holding such assets in the
name of the Partnership and such assets are held in another name, the General
Partner shall obtain an opinion of reputable counsel in such jurisdiction
addressed to the Limited Partner and satisfactory in all respects to the Limited
Partner that the Partnership has taken all action necessary and appropriate, or
required by law, to perfect and preserve the ownership interest of the
Partnership in all such assets.

Section 5.2.           Acquisition of the Properties.

(a)           Immediately after the execution and delivery of this Agreement by
the parties hereto, the General Partner is authorized to, and shall, execute and
deliver on behalf of the

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Partnership, the Purchase Agreement, provided the Purchase Agreement is
substantially in the form of the version submitted to and approved by the
Partners on or prior to the date hereof as the final draft in all material
respects.

(b)           If the Purchase Agreement is executed and delivered by the General
Partner on behalf of the Partnership in accordance with subsection (a) above,
the General Partner shall cause the Partnership to consummate the purchase of
the Properties pursuant to the terms and conditions of the Purchase Agreement,
provided that the conditions set forth in Section 3.2(d) to the Limited
Partner’s obligation to make Capital Contributions have been satisfied.

Section 5.3.           Additional Acquisitions.  If, during the term of this
Agreement but after the Purchase Agreement Closing Date, the General Partner or
an Affiliate thereof acquires (or proposes to acquire) a Lease or Leases inside
of the Area of Mutual Interest (in this Section called the “Subject Leases”),
the terms and provisions of this Section 5.3 shall be operative.  Specifically,
upon the acquisition (or proposed acquisition) under the circumstances described
above, the General Partner shall notify the Limited Partner, which notice shall
(a) specify the interest the General Partner or its Affiliates have acquired (or
propose to acquire) in the Subject Leases, (b) specify the purchase price (or
proposed purchase price), (c) describe the development and/or Enhanced Recovery
Operations, if any, the General Partner reasonably anticipates will be engaged
in on the Subject Leases and the estimated costs associated therewith,
(d) include a summary of the pertinent geological and geophysical data relating
to the Subject Leases or proposed development/Enhanced Recovery Operations,
(e) include financial projections relating to the Subject Leases and any
internally or externally prepared related engineering or reserve reports,
(f) describe the nature and extent of planned title examination and property
related due diligence (including, without limitation, environmental due
diligence) and (g) such other information as the General Partner deems material,
including the depths to be acquired and whether the Partnership or a third party
presently owns such depths as covered by the Subject Leases in the Area of
Mutual Interest.  Thereafter, the General Partner shall promptly furnish to the
Limited Partner any additional information concerning the Subject Leases or the
proposed development/Enhanced Recovery Operations as the Limited Partner may
reasonably request (including, without limitation, the reports of consultants
and outside engineers).  Subject to the Limited Partner agreeing to make
additional Capital Contributions to the Partnership with respect to the Subject
Leases pursuant to Section 3.3 or as otherwise provided below in this
Section 5.3, the Partnership shall acquire not less than 95.96% of the interest
of the General Partner and its Affiliates in such Subject Leases (or, if
applicable, which the General Partner or its Affiliates propose to acquire
therein) pursuant to the terms set forth in the notice. Prior to the acquisition
by the Partnership of the Subject Leases, the General Partner shall notify the
Limited Partner of any material change in the nature and extent of the title
examination and property related due diligence plan and the reason therefor and
of any fact discovered in due diligence that materially adversely affects the
economics or risks associated with the Subject Leases; provided that no such
notice need be given to the Limited Partner if the Limited Partner has elected
not to make additional Capital Contributions with respect thereto.  The Limited
Partner may withdraw its election to make additional Capital Contributions with
respect to the proposed acquisition and related activity, at any time prior to
the Partnership committing to acquire the Subject Leases, by so notifying the
General Partner in writing if (i) there is discovered during due diligence a
fact or facts not presented to the Limited Partner in the initial evaluation of
the proposed acquisition that materially adversely affects the economics or
risks associated with the Subject Leases to be

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acquired and such material adverse effect cannot be remedied to the reasonable
satisfaction of the Limited Partner prior to the acquisition by the Partnership
or (ii) more than three months have passed since the Limited Partner notified
the General Partner of such Limited Partner’s election to make Capital
Contributions with respect to such acquisition and related activity.  The
interest in each Lease assigned by the General Partner and each Affiliate
thereof to the Partnership pursuant to this Section 5.3 shall be assigned,
conveyed and transferred without warranty of title, either express or implied,
except as to all persons claiming or to claim the same or any part thereof by,
through and under the General Partner or such Affiliate but not otherwise and
with a further warranty that the General Partner or such Affiliate has not
placed any lien, encumbrance, burden or other restriction on such Lease or, if
the General Partner or such Affiliate has previously placed a lien, encumbrance,
burden or other restriction on such Lease, that such lien, encumbrance, burden
or other restriction is being concurrently released or has been released.  In
connection with any acquisition of Leases by the Partnership pursuant to this
Section 5.3, the General Partner or an Affiliate thereof shall not retain from
or otherwise burden the interest in any Lease assigned to the Partnership with
any overriding royalty, net profits interest, carried interest, reversionary
interest, production payment or other burden in favor of itself, its officers,
directors and employees or any other person, except in connection with an
acquisition by the General Partner or such Affiliate pursuant to a transaction
where an unrelated third party transferring the Lease retains such an interest
or burden with respect to all of the Lease acquired by the General Partner or
Affiliate.  With respect to each Lease acquired by the Partnership pursuant to
this Section 5.3, such acquisition shall include, to the extent of the interest
in the Lease purchased by the Partnership as provided above in this Section 5.3,
all rights to all horizons under such Lease which were available for purchase
and considered appropriate for acquisition by the Partnership.  Under no
circumstances shall the General Partner or any Affiliate thereof acquire rights
to any separate horizon within or under a Lease in which the Partnership has an
interest without first offering such rights to the Partnership under this
Section 5.3.

Section 5.4.           Lease Sales.

(a)           Except as provided in this Section 5.4, in Section 6.2(d) and
elsewhere herein, the General Partner may sell, farm-out, abandon or otherwise
dispose of any Partnership Lease, on such terms as the General Partner deems
reasonable and in the best interests of the Partnership and the Limited Partner.

(b)           Except as expressly permitted and recognized in Sections 5.3 and
10.3, neither the General Partner or any of its Affiliates nor any of their
employees shall acquire, directly or indirectly, any Lease (or any interest
therein) from the Partnership unless the Limited Partner has previously approved
in writing such acquisition.

Section 5.5.           Sales of Production.  The General Partner shall have the
right to cause the Partnership to sell any oil or gas produced by or for the
account of the Partnership, including but not limited to crude oil, condensate,
natural gas liquids and natural gas (including casinghead gas) which may be
produced from or allocated to the Properties or any additional Leases acquired
pursuant to the terms hereof, to such purchaser and on such terms and conditions
as the General Partner shall determine to be in the best interest of the
Partnership, taking into account all relevant circumstances, including but not
limited to, price, quality of production, access to

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markets, minimum purchase guarantees, identity of purchaser, and length of
commitment and, in any event, on terms no less favorable to the Partnership than
the General Partner or any Affiliate thereof has recently obtained or is
obtaining for arm’s length sales, exchanges or dispositions of the General
Partner’s or such Affiliate’s production of similar quantity and quality in the
same geographic area where the Partnership’s production is located.

Section 5.6.           Operations on Partnership Leases.

(a)           The General Partner or an Affiliate thereof, shall act as operator
in connection with operations on each Partnership Lease and, subject to
subsection (b) below, receive compensation and reimbursement from the
Partnership in connection therewith (regardless of whether there is an operating
agreement) unless (i) another person is serving as operator under an agreement
to which a Lease is subject or (ii) any third party or third parties (not
Affiliates of the General Partner) jointly owning such Lease and with a
controlling interest will not agree.  As to those Partnership Leases with
respect to which the General Partner is not the operator, the General Partner
shall take such actions and exercise such rights and remedies that are
reasonably available to it to cause the actual operator to properly develop,
maintain and operate such Leases.

(b)           In the event the Partnership and any third party jointly own any
Lease and operations thereon are conducted pursuant to an operating agreement,
(i) if the third party is designated as operator thereunder, the Partnership
shall pay the costs and expenses charged to it thereunder and (ii) if the
General Partner or any of its Affiliates is designated as operator, the General
Partner or such Affiliate shall receive for its account from the third party
such third party’s share and from the Partnership the Partnership’s share of all
compensation and reimbursement provided to the operator thereunder; provided,
however, that the charges to the Partnership by the General Partner or any of
its Affiliates when acting as the designated operator (regardless of whether
there is an operating agreement or regardless of whether or not a third party is
also a party thereto) shall not exceed those set forth in or permitted by this
Agreement or the “Accounting Procedure” (as herein called) attached hereto as
Exhibit 5.6 (although the operating agreement, if any, may otherwise provide),
and in no event shall the terms of any such operating agreement vary or effect
this Agreement or the Accounting Procedure or the duties and obligations of the
General Partner hereunder (and in the event of a conflict the terms and
provisions of this Agreement shall prevail).

(c)           The General Partner shall not substitute another party as
operator, resign as operator or assign its obligations as operator with respect
to any Partnership Lease where it acts as operator (exclusive, however, of an
assignment to an entity controlling, controlled by or under common control with
the General Partner), unless the Limited Partner so requests in writing to the
General Partner in the event the General Partner is removed as such pursuant to
Section 9.4 or the Limited Partner elects to dissolve the Partnership pursuant
to any of subsections (c), (e), (f), (g) or (i) of Section 10.1 (in which event
the General Partner agrees that it will immediately resign as operator and to
use its reasonable efforts to cause the person designated by the Limited Partner
to be the successor operator and to act in good faith and cooperate in all
respects with the Partnership, the Limited Partner and the successor operator in
transferring operations and in effecting an efficient and successful
transition).

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Section 5.7.           Hedge Arrangement.  The Partners hereto ratify and
confirm the Existing Hedge.  The General Partner covenants and agrees that, at
the request of the Limited Partner and subject to the condition described below,
it will execute on behalf of the Partnership such additional Hedging
Transactions of the Partnership’s proved producing reserves attributable to the
Oil and Gas Properties and any additional Leases acquired pursuant to the terms
hereof on such terms and conditions as are satisfactory to the Limited Partner.
Notwithstanding the foregoing, it is agreed that the General Partner’s
obligation under the immediately preceding sentence shall be conditioned upon
the General Partner having received from the Limited Partner reasonable
assurance that the Limited Partner has the financial ability to fund its
allocable share hereunder of Hedge Costs attributable to the subject Hedging
Transaction (it being agreed, however, that the guaranty by GE Capital
Corporation of the Partnership’s funding obligations in respect of such Hedging
Transaction shall be deemed to satisfy this condition).  Any subsequent Hedging
Transaction contemplated hereunder shall be a “hedging transaction” as described
in Treasury Regulation §1.1221-2 to reduce the risk of price changes for oil and
gas produced by the Partnership in volumes equal to the notional amounts
provided in the documents evidencing such Hedging Transaction.  At the time of
the execution and delivery by the Partnership of the documents evidencing a
subsequent Hedging Transaction, the General Partner shall take such additional
steps as may be necessary to identify the Hedging Transaction in the books and
records of the Partnership as a “hedging transaction” in the manner and at the
time prescribed by Treasury Regulation §1.1221-2(e).

Section 5.8.           Production.  Throughout the term of the Partnership, the
General Partner shall instruct any operator of any Partnership Lease to produce
on behalf of the Partnership not less than the Partnership’s entire working
interest in the production attributable to such Lease; provided, however, the
General Partner shall not be so obligated (a) in circumstances when it is
necessary to restrict production on such Lease for the purpose of performing
general maintenance and workover activities thereon in connection with
maintaining production; (b) if the Partnership is precluded from so doing by any
applicable state, local or federal law, order or regulation; (c) if the
Production Sales Proceeds attributable to such Lease are inadequate to cover
Lease Operating and Production Expenses attributable thereto; or (d) if the
General Partner gives notice to the Limited Partner that due to a cause or
causes beyond the reasonable control of the General Partner, including, for
purposes of illustration, an act of God, strike, act of public enemy, war,
blockade, public riot, lightening, fire, violent storm, flood, explosion or
governmental restraint, it is unable to do so.

Section 5.9.           Environmental, Health and Safety Program. The General
Partner, at the cost and expense of the Partnership, shall implement, and
maintain a formal, comprehensive written environmental health and safety program
(in this Section, the “EH&S Program”), including regular review and evaluations,
aimed at ensuring that the Partnership’s operations on the Properties or any
additional Leases acquired pursuant to the terms hereof are conducted in
compliance with all applicable Environmental Laws.  At a minimum, the EH&S
Program shall include: (a) identification of environmental concerns associated
with any environmental regulations applicable to the Partnership’s operations;
(b) adoption and implementation of an environmental management system to assess
and control the environmental impact of the Partnership’s operations; and
(c) implementation of periodic EH&S audits conducted either internally or by
independent consultants with documented corrective action responding to such
audits.  The EH&S Program shall involve senior management of the General
Partner, include a

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formal written corporate environmental policy, and identify by name or position
the person with overall responsibility for EH&S compliance, as well as those
person(s) who are responsible for specific EH&S areas.

ARTICLE VI

Management

Section 6.1.           Power and Authority of General Partner.  Except as
provided in Section 6.2 and elsewhere in this Agreement and except as otherwise
provided by applicable law, the General Partner shall have full and exclusive
power and authority on behalf of the Partnership to manage, control, administer
and operate the properties, business and affairs of the Partnership in
accordance with this Agreement and to do or cause to be done any and all acts
deemed by the General Partner to be necessary or appropriate thereto.

Section 6.2.           Certain Restrictions on General Partner’s Power and
Authority.  Notwithstanding any other provisions of this Agreement to the
contrary, the General Partner shall not have the power or authority to, and
shall not, do, perform or authorize any of the following without the prior
written consent of the Limited Partner:

(a)           To borrow any money in the name or on behalf of the Partnership,
or otherwise draw, make, execute and issue promissory notes and other negotiable
or non-negotiable instruments and evidences of indebtedness, except that the
General Partner may borrow money in the name and on behalf of the Partnership in
such amounts as the General Partner shall reasonably determine are necessary to
preserve and protect Partnership property upon the occurrence of an accident
(e.g., a blowout), catastrophe or similar event or to comply with all applicable
Environmental Laws, ordinances, rules and regulations;

(b)           To mortgage, pledge, assign in trust or otherwise encumber any
Partnership property, or to assign any monies owing or to be owing to the
Partnership, except to secure the payment of any borrowing permitted in Section
3.6(d)(iii) or Section 6.2(a) and except for customary liens contained in or
arising under any operating agreements, construction contracts and similar
agreements executed by or binding on the Partnership with respect to amounts not
yet due or not yet delinquent (or, if delinquent, that are being contested by
the General Partner in good faith) or except for statutory liens for amounts not
yet due or not yet delinquent (or, if delinquent, that are being contested by
the General Partner in good faith), provided that in no event shall the General
Partner mortgage, pledge, assign in trust or otherwise encumber the
Partnership’s right to receive Capital Contributions from the Limited Partner;

(c)           To sell, assign, farm-out, abandon or otherwise dispose of any
Partnership Lease except (i) where the Lease disposed of consists solely of
horizons or depths which do not have attributable to them any proved reserves,
(ii) as provided in Sections 3.3(d)(2) and 3.3(d)(3), (iii) with respect to any
given calendar year, for sales or other dispositions by the Partnership during
such year up to (but not to exceed) an aggregate (non-cumulative) amount equal
to $25,000 in proceeds received by the Partnership or (iv) for such Leases or
interests therein as the General Partner shall reasonably determine to be
necessary to raise funds to pay Partnership liabilities and expenses (other than
Catastrophe Costs) upon the occurrence of an accident,

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catastrophe or similar event (and, in connection therewith, to restore, preserve
and protect Partnership property) or to comply with all applicable environmental
or other laws, ordinances, rules and regulations;

(d)           To guarantee in the name or on behalf of the Partnership the
payment of money or the performance of any contract or other obligation of any
person except for responsibilities customarily assumed under operating
agreements considered standard in the industry;

(e)           To make any advance payments of compensation or other
consideration to the General Partner or any of its Affiliates;

(f)            To bind or obligate the Partnership with respect to any matter
outside the scope of the Partnership business;

(g)           To merge or consolidate the Partnership with any partnership or
other person or entity, convert the Partnership to a general partnership or
other entity or agree to an exchange of interests with any other person;

(h)           To use the Partnership name, credit or property for other than
Partnership purposes;

(i)            To loan any Partnership funds to the General Partner or any of
its Affiliates;

(j)            To enter into a Hedging Transaction, except for the Existing
Hedge and as provided in Section 5.7, and to amend or terminate any agreements
or other document evidencing a Hedging Transaction or waive any rights of the
Partnership thereunder;

(k)           To acquire any Lease in violation of the terms of this Agreement;

(l)            To alter, supplement, modify or amend the Purchase Agreement or
any other document or instrument executed in connection therewith in any
material respect, waive any of the General Partner’s or the Partnership’s rights
or any of seller’s duties and obligations thereunder in any material respect, or
make any material election, determination or agreement thereunder;

(m)          To compromise or settle any lawsuit, administrative matter or other
dispute where the amount the Partnership may recover or might be obligated to
pay, as applicable, is in excess of $25,000;

(n)           To enter into any contract or agreement with the General Partner
or any Affiliate thereof for the rendering of services or the sale or lease of
supplies (except that the foregoing shall not preclude the General Partner or an
Affiliate from serving as operator in accordance with Section 5.6);

(o)           To agree to accommodate any alternative uses of the Properties
substantially unrelated to the production of oil or gas therefrom and which may
create potential liability for the Partnership, given the nature of the
Partnership’s operations, provided that the General

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Partner and its Affiliates may operate on the Properties covering the Sawtelle
Field for drilling and development operations on their interests in the Sawtelle
Field outside of the Area of Mutual Interest; or

(p)           Except as expressly provided herein, to take any action with
respect to the assets or property of the Partnership which benefits the General
Partner or any of its Affiliates to the detriment of the Limited Partner or the
Partnership, including, among other things, utilization of funds of the
Partnership as compensating balances for its own benefit.

Section 6.3.           Duties and Services of General Partner.

(a)           The General Partner shall comply in all material respects with the
terms of this Agreement and shall use its reasonable efforts (i) to cause its
Affiliates to comply in all material respects with the terms of this Agreement;
and (ii) in the conduct of the business and operations of the Partnership, to
cause the Partnership (A) to comply in all material respects with the terms and
provisions of all agreements to which the Partnership is a party or to which its
properties are subject, (B) to comply in all material respects with all
applicable laws, ordinances or governmental rules and regulations to which the
Partnership is subject (including, without limitation, all applicable federal,
state and local Environmental Laws, ordinances, rules and regulations) and (C)
to obtain and maintain all licenses, permits, franchises and other governmental
authorizations necessary with respect to the ownership of Partnership properties
and the conduct of Partnership business and operations.  It is recognized and
affirmed that the General Partner, in complying with its obligations set forth
in clause (ii) of the immediately preceding sentence, shall utilize Partnership
funds and assets and shall not be obligated to use its own funds and assets,
except to the extent that its allocable share of Partnership funds and assets
are so utilized; provided, that the foregoing shall not be deemed to limit or
modify any other duty or obligation of the General Partner hereunder with
respect to the Partnership’s funds and assets.

(b)           With respect to the maintenance, exploration, development and
operation of the Properties and any additional Leases acquired pursuant to the
terms hereof with respect to which the General Partner (or Affiliate) serves as
operator, the General Partner (or such Affiliate) shall act in a good and
workmanlike manner.  With respect to the Limited Partner and its interests in
the Partnership, the General Partner shall have the duties set forth in
Section 4.04 of the Texas Revised Partnership Act and shall discharge such as
provided in Section 4.04(d) of the Texas Revised Partnership Act, provided that
(i) the General Partner shall at all times act with integrity and in good faith
and utilize its reasonable best efforts in resolving conflicts of interest; (ii)
during the existence of the Partnership, the General Partner shall devote such
time and effort to the Partnership business and operations as shall be necessary
to promote fully the interests of the Partnership and the mutual best interests
of the Partners; however, and subject to the foregoing and the other express
provisions of this Agreement, it is specifically understood and agreed that the
General Partner shall not be required to devote full time to Partnership
business; and (iii) subject to the other express provisions of this Agreement,
the Limited Partner acknowledges that the General Partner and its Affiliates
currently engage in and possesses, and agrees that the General Partner and its
Affiliates may continue to engage in and possess, interests in other business
ventures of any and every type and description, independently or with others,
including the ownership, acquisition, exploration, development, operation and
management of oil and gas properties, oil and gas drilling programs and
partnerships similar to this Partnership, and neither

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the Partnership nor the Limited Partner shall by virtue of this Agreement have
any right, title or interest in or to such independent ventures. With respect to
the maintenance and safekeeping of Partnership funds, the General Partner shall
owe the Partnership and the Limited Partner a fiduciary duty.

(c)           The General Partner covenants and agrees that it will at all times
retain and have available to it and the Partnership a professional staff and
outside consultants which together will be reasonably adequate in size,
experience and competency to discharge properly the duties and functions of the
General Partner hereunder and under any applicable operating and other
agreements, including, engineers, geologists and other technical personnel,
attorneys, accountants and secretarial and clerical personnel.

Section 6.4.           Liability of General Partner.  The General Partner shall
not be liable, responsible or accountable in damages or otherwise to the
Partnership or the Limited Partner for, and (subject to Section 6.5) the
Partnership shall indemnify and save harmless the General Partner from any
costs, expenses, losses or damages (including attorneys’ fees and expenses,
court costs, judgments and amounts paid in settlement) incurred by reason of its
being General Partner, provided it has acted in good faith on behalf of the
Partnership and in a manner reasonably believed by it to be within the scope of
the authority granted to it by this Agreement and in the best interests of the
Partnership, and provided further that (i) in connection with performing its
obligations as operator of those Properties or additional Leases acquired
hereunder for which it is designated operator, the General Partner (or
Affiliate, if serving as operator) was not guilty of gross negligence or willful
misconduct, (ii) in connection with performing its obligations as general
partner of the Partnership, the General Partner was not guilty of a material
breach of this Agreement resulting in a loss or damage to the Limited Partner,
gross negligence, willful or wanton misconduct or, if applicable, breach of the
fiduciary duty owed by the General Partner as set forth in the last sentence of
Section 6.3(b), with respect to such acts or omissions, and (iii) the
satisfaction of any indemnification and any saving harmless shall be from and
limited to Partnership assets (which shall be converted to cash to the extent
necessary in a manner appropriate to protect the interests of all Partners) and
not from any Capital Contributions to be made by the Limited Partner hereunder,
and the Limited Partner shall not have any personal liability on account
thereof.  To the extent that the General Partner is required to act in the “best
interest” of the Partnership, the General Partner shall act in a manner that is
fair and reasonable to the Partnership and the Limited Partner, considering the
relative interests of each party and the benefits and burdens relating to such
interests, reasonable and customary industry practices and generally accepted
accounting principals.  Any such determination, in the absence of the bad faith
by the General Partner, shall not constitute a breach of this Agreement or any
standard of care or duty imposed herein or in the Act.

Section 6.5.           Limitations on Indemnification.  The rights of the
General Partner under Section 6.4 with respect to indemnification from the
Partnership shall be subject to the provisions of Article 11 of the Act.  Any
indemnification under Section 6.4 shall be made by the Partnership only as
permitted herein and, unless the General Partner was wholly successful on the
merits, only upon a determination by a court upon the request of the General
Partner or by independent legal counsel selected by the General Partner and
satisfactory to the Limited Partner in a written opinion that indemnification of
the General Partner is permitted (a) under the

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circumstances because it has met the applicable standard of conduct set forth in
Section 6.4 and (b) pursuant to Article 11 of the Act.

Section 6.6.           Costs, Expenses and Reimbursement.

(a)           Subject to the other express provisions of this Agreement, all
direct, third-party out of pocket costs and expenses reasonably incurred in the
Partnership’s business shall be paid from Partnership funds, including but not
limited to, costs of obtaining audits of the Partnership’s books and records
(including the fees and expenses of the Partnership’s independent public
accountants), the fees and expenses attributable to the preparation of the
Partnership’s tax returns and reports, the fees and expenses of the independent
petroleum engineer referenced in Section 8.2(f), outside legal costs, general
taxes, fees, costs and expenses in connection with the winding up and
termination of the Partnership’s business and affairs, and other direct,
third-party out of pocket costs and expenses of the Partnership.

(b)           The Partnership shall pay, and the General Partner shall be
entitled to receive, a monthly fee (the “Management Fee”) in an amount equal to
4% of Net Monthly Operating Income, subject to the following:

(i)            the General Partner shall not be paid the Management Fee for any
month (or portion thereof) in which the Partnership’s right to receive revenues
has been assigned to a trustee pursuant to Section 6.11, if the General Partner
withdraws from the Partnership, if the General Partner has been removed as
provided herein or if the General Partner or an Affiliate is no longer serving
as operator of those properties then owned by the Partnership with respect to
which the General Partner or an Affiliate is serving as operator pursuant to
Section 5.6;

(ii)           the General Partner shall not be paid the Management Fee for any
month (or portion thereof) during which the business and affairs of the
Partnership are being wound up for liquidation purposes pursuant to
Section 10.3, if the General Partner is not acting as liquidator hereunder; and

(iii)          with respect to the month in which the Purchase Agreement Closing
Date occurs and the last month during which the Management Fee is payable
hereunder if the obligation to pay such fee terminates prior to the last day of
such month, the monthly Management Fee shall be prorated based on the number of
days during such month in which the General Partner is entitled to receive the
Management Fee divided by the total number of days in such month.

As used in this subsection (b), the term “Net Monthly Operating Income” shall
mean, with respect to a given month, (1) the Production Sales Proceeds for such
month received by the Partnership and attributable to any Hedging Transaction,
plus (2) the Production Sales Proceeds for such month received by the
Partnership from the sale of hydrocarbons (other than in connection with any
Hedging Transaction) produced from or otherwise attributable to the Properties
and any additional Leases acquired pursuant to the terms hereof less (3) any
Hedging Costs for such month less (4) Lease Operating and Production Costs for
such month.

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In connection with the Sawtelle Field, the Partners recognize and affirm that
75% of the Management Fee (i.e., 3%) is intended to cover the costs of surface
operations associated with the production, processing, transportation, marketing
and sale of production incurred by the General Partner or an Affiliate of the
General Partner that purchases the oil at the wellhead. Accordingly, if a third
party not an Affiliate of the General Partner, becomes the successor General
Partner, the Partnership shall pay a management fee directly to BEP (GP), LLC or
its Affiliate to the extent it is operating the surface facilities associated
with the oil produced from the Partnership’s interest in the Sawtelle Field and
the Partners will thereafter in good faith accordingly reduce the Management Fee
paid to the successor General Partner attributable to the Sawtelle Field, taking
into account, however,  the percentage of the Management Fee referenced above.

(c)           Except as provided in this Section, in Section 3.3 (if, and to the
extent that, the Limited Partner approves a request for additional Capital
Contributions that includes a charge for the General Partner’s technical staff,
including geologists, geophysicists and internal engineers, as provided in such
section), and in Sections 3.6, 5.6 and 6.7, the General Partner and its
Affiliates shall not be paid any fee, compensation or reimbursement or be
entitled to or charge the Partnership for or on account of their services,
services of their officers, employees or consultants, fees or compensation of
those geologists, geophysicists and engineers who are employed by them or
otherwise retained by them, office expense, overhead or any other general or
administrative costs or expense.

Section 6.7.           Organization and Third Party Acquisition Costs.  The
Partnership from time to time shall pay directly, or shall reimburse the General
Partner and the Limited Partner for any payment by them of, the following fees,
costs and expenses incurred in connection with the initial organization of the
Partnership and the acquisition of the Properties (“Organization and Third Party
Acquisition Costs”): (a) all reasonable fees and expenses incurred by them
(including fees for outside legal services) in connection with the preparation
and filing of all certificates, opinions and documents required pursuant to
Sections 1.2 and 1.6; (b) the fees, costs and expenses of the outside petroleum
engineers and other third party consultants retained by the Limited Partner in
connection with the formation of the Partnership or the acquisition of the
Properties; (c) all reasonable fees, costs and expenses of legal counsel to the
Limited Partner in connection with (i) the negotiation, preparation and
execution (or review, as applicable) of this Agreement, the Purchase Agreement
and all related documents, (ii) a due diligence review of the Properties and
(iii) the closing of the transactions contemplated hereunder and under the
Purchase Agreement; and (d) all reasonable fees and expenses of legal counsel to
the Limited Partner in connection with the Limited Partner’s consideration of
any waiver of its rights under this Agreement or any proposed amendment or
supplement to this Agreement.

Section 6.8.           Insurance.  The General Partner shall cause the
Partnership to obtain (and maintain during the entire term of the Partnership),
or the General Partner shall carry for the benefit of the Partnership, insurance
coverage in such amounts, with provisions for such deductible amounts and for
such purposes as the General Partner and the Limited Partner have agreed upon
below and thereafter shall agree upon in writing on or about July 1 of each
year.  Where appropriate, the General Partner may include the Partnership or the
Limited Partner as additional insureds on any policies otherwise carried by the
General Partner and the costs thereof shall be allocated to the Partnership on a
basis mutually agreed upon in writing by the General

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Partner and the Limited Partner from time to time.  The Partners hereby agree
that the General Partner shall initially carry for the benefit of the
Partnership insurance coverage in the amounts, with provisions for such
deductible amounts and for the purposes, specified in Exhibit 6.8.  Thereafter,
the Partners shall review and agree in writing upon the Partnership’s insurance
coverage as provided above.

Section 6.9.           Tax Elections.

(a)           The General Partner shall make the following elections on behalf
of the Partnership:

(i)            To elect, in accordance with Section 263(c) of the Internal
Revenue Code and applicable regulations and comparable state law provisions, to
deduct as an expense all intangible drilling and development costs with respect
to productive and non-productive wells and the preparation of wells for the
production of oil or gas;

(ii)           To elect the calendar year as the Partnership’s fiscal year if
permitted by applicable law;

(iii)          To elect the accrual method of accounting;

(iv)          If requested by the Limited Partner, to elect, in accordance with
Sections 734, 743 and 754 of the Internal Revenue Code and applicable
regulations and comparable state law provisions, to adjust basis in the event
any Partnership interest is transferred in accordance with this Agreement or any
Partnership property is distributed to any Partner;

(v)           To elect to treat all organizational and start-up costs of the
Partnership as deferred expenses amortizable over 60 months under Sections 195
and 709 of the Internal Revenue Code;

(vi)          To elect under Section 6231(a)(1)(B)(ii) of the Internal Revenue
Code to have the provisions of Sections 6221 through 6234 of the Internal
Revenue Code apply to the Partnership; and

(vii)         To elect with respect to such other federal, state and local tax
matters as the General Partner and the Limited Partner shall agree upon from
time to time.

(b)           No Partner shall elect or cause the Partnership to elect to have
the Partnership treated as an association taxable as a corporation.

(c)           The General Partner agrees to use its best efforts to cause any
tax partnership which governs any of the Properties or any additional Leases
acquired pursuant to the terms hereof to make an election under Section 754 of
the Internal Revenue Code if such election would be beneficial to the
Partnership.

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Section 6.10.        Tax Returns.  The General Partner shall cause to be
prepared and timely filed all federal, state and local income and other tax
returns and reports as may be required as a result of the business of the
Partnership, which returns shall be signed by the independent certified public
accountants of the Partnership.  Not less than 30 days prior to the date (as
extended) on which the Partnership intends to file its federal income tax return
or any state income tax return, the return proposed to be filed by the General
Partner shall be furnished to the Limited Partner for review and comments.  In
addition, not more than 10 days after the date on which the Partnership actually
files its federal income tax return or any state income tax return, a copy of
the return so filed by the General Partner shall be furnished to the Limited
Partner.  The General Partner shall be designated the tax matters partner under
Section 6231 of the Internal Revenue Code and shall promptly notify the Limited
Partner if any tax return or report of the Partnership is audited or if any
adjustments are proposed by any governmental body.  In addition, the General
Partner shall promptly furnish to the Limited Partner all notices concerning
administrative or judicial proceedings relating to federal income tax matters as
required under the Internal Revenue Code.  During the pendency of any such
administrative or judicial proceeding, the General Partner shall furnish to the
Limited Partner periodic reports, not less often than monthly, concerning the
status of any such proceeding.  Without the consent of the Limited Partner, the
General Partner shall not extend the statute of limitations, file a request for
administrative adjustment, file suit concerning any tax refund or deficiency
relating to any Partnership administrative adjustment or enter into any
settlement agreement relating to any Partnership item of income, gain, loss,
deduction or credit for any fiscal year of the Partnership.

Section 6.11.        Appointment of Trustee to Receive Payments.  The Limited
Partner may cause the Partnership at the Partnership’s expense to assign the
Partnership’s right to receive revenues to a trustee named by the Limited
Partner (a) if the General Partner has committed fraud, willful or intentional
misconduct or gross negligence in the performance of its duties hereunder, (b)
if the General Partner has failed to make timely a distribution of cash or
property due and owing to the Limited Partner hereunder, which failure shall
have continued for at least five days after the General Partner has knowledge
thereof or after written notice of default has been given to the General Partner
by the Limited Partner (whichever comes first), (c) if the General Partner has
failed to make timely a Capital Contribution it is obligated to make to the
Partnership hereunder, (d) if the General Partner has failed to perform or
observe any material agreement, covenant, term, condition or obligation
hereunder (other than the agreements, covenants, terms, conditions or
obligations described in clauses (a), (b) and (c) above), which failure shall
have continued for at least 30 days after the General Partner has knowledge
thereof or after written notice of default has been given to the General Partner
by the Limited Partner (whichever comes first), (e) if a representation or
warranty made by the General Partner herein or by the General Partner or any of
its officers in any writing furnished in connection with or pursuant to this
Agreement shall be false in material respect on the date as of which made, or
(f) upon the occurrence of any of the events described in either
Section 4.02(a)(4) or in Section 4.02(a)(5) of the Act (except that with respect
to Section 4.02(a)(5) the operative number of days shall be 60 instead of those
set forth in such Section).  Such trustee shall receive and hold Partnership
revenues for the benefit of all the Partners, but shall not have the rights of
the General Partner hereunder.  The trustee’s sole right and responsibility
shall be to receive Partnership funds and disburse them in accordance with the
other provisions of this Agreement.  In the event a trustee is appointed
pursuant to this Section 6.11 and the default is cured or the action or event
under or with respect to the bankruptcy law is completely dismissed or

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eliminated, the General Partner and the Limited Partner shall, at the request of
either the General Partner or the Limited Partner, cause the trustee to be
discharged at the Partnership’s expense; provided that in the reasonable
judgment of the Limited Partner, its interest under this Agreement will not be
adversely affected by any such discharge.

ARTICLE VII

Rights and Obligations of Limited Partner

Section 7.1.           Rights of Limited Partner.  In addition to the other
rights specifically set forth herein, the Limited Partner shall have the right
to:  (a) have the Partnership books and records (including those required in
Section 1.07 of the Act) kept at the principal United States office of the
Partnership and at all reasonable times to inspect and copy any of them, (b)
have on demand true and full information of all things affecting the Partnership
and a formal account of Partnership affairs whenever circumstances render it
just and reasonable, (c) have dissolution and winding up by decree of court as
provided for in the Act, (d) consult with or advise the General Partner and (e)
exercise all rights of a limited partner under the Act (except to the extent
otherwise specifically provided for herein).

Section 7.2.           Limitations on Limited Partner.  Except as otherwise
provided herein, the Limited Partner shall not have the authority or power in
its capacity as a Limited Partner to act as agent for or on behalf of the
Partnership or any other Partner, to do any act which would be binding on the
Partnership or any other Partner, or to incur any expenditures on behalf of or
with respect to the Partnership.  The General Partner shall not hold out or
represent to any third party that the Limited Partner has any such right or
power or that the Limited Partner is anything other than a “limited partner” in
the Partnership.

Section 7.3.           Liability of Limited Partner.  The Limited Partner shall
not be liable for the debts, liabilities, contracts or other obligations of the
Partnership except to the extent of any unpaid Capital Contributions agreed to
be made by the Limited Partner as set forth in Section 3.2 (which shall be
subject to reduction as provided for in Section 3.4), any additional Capital
Contributions hereafter agreed to be made by the Limited Partner in accordance
with Section 3.3 (which shall also be subject to reduction as provided for in
Section 3.4) and the Limited Partner’s share of the assets (including
undistributed revenues) of the Partnership; and in all events, the Limited
Partner shall be liable and obligated to make payments of its Capital
Contributions only as and when such payments are due in accordance with the
terms of this Agreement, and the Limited Partner shall not be required to make
any loans to the Partnership.  The Partnership shall indemnify and hold harmless
the Limited Partner in the event it (a) becomes liable for any debt, liability,
contract or other obligation of the Partnership except to the extent expressly
provided in the preceding sentence or (b) is directly or indirectly required to
make any payments with respect thereto.

Section 7.4.           Access of Limited Partner to Data.  During the term of
the Partnership, the Partnership may acquire or have access to geophysical,
geological and other similar data and information.  The Limited Partner and its
agents and representatives, at any time either during the term of or after
termination of the Partnership, shall have the right to inspect, review and

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copy (subject to the terms of any valid, bona fide agreement binding upon the
Partnership prohibiting such inspection, review or copying) any such data or
information (or studies, maps, evaluations or reports derived therefrom) which
relates to the Properties or other Leases which the Partnership owns or has
owned or which has been paid for with Partnership funds and to consult with the
Partnership’s independent certified public accountants and independent petroleum
engineers and the General Partner’s technical personnel with respect to
Partnership matters.  Upon liquidation of the Partnership, copies of all such
documents shall be distributed to the General Partner and to the Limited Partner
if so requested by it.  If the Partnership is subject to a valid, bona fide
agreement prohibiting the inspection, review or copying of certain Partnership
data or information, the General Partner shall, if requested by the Limited
Partner, attempt to obtain an amendment or waiver of any such agreement to
permit such data or information to be provided to the Limited Partner upon
execution by the Limited Partner of a similar agreement and, in any event, shall
attempt in advance of execution of any such agreement to obtain permission for
the Limited Partner to inspect, review and copy any such data or information.

Section 7.5.           Withdrawal and Return of Capital Contribution.  The
Limited Partner shall not be entitled to (a) withdraw from the Partnership
except upon the assignment by the Limited Partner of all of its interest in the
Partnership and the substitution of such Limited Partner’s assignee as a Limited
Partner of the Partnership in accordance with Section 9.1, or (b) the return of
its Capital Contributions except to the extent, if any, that distributions made
pursuant to the express terms of this Agreement may be considered as such by law
or by unanimous agreement of the Partners, or upon dissolution and liquidation
of the Partnership, and then only to the extent expressly provided for in this
Agreement and as permitted by law.

ARTICLE VIII

Books, Records, Reports and Bank Accounts

Section 8.1.           Capital Accounts, Books and Records.

(a)           Except as may otherwise be required by this Agreement, the General
Partner shall keep books of account for the Partnership in accordance with
generally accepted accounting principles consistently applied in accordance with
the terms of this Agreement.  Such books shall be maintained at the principal
United States office of the Partnership and shall be maintained by the General
Partner for review by the Limited Partner during the term of the Partnership and
for a period of five years thereafter.  The calendar year shall be selected as
the accounting year of the Partnership and the books of account shall be
maintained on an accrual basis.

(b)           An individual capital account shall be maintained by the
Partnership for each Partner as provided below:

(i)            The capital account of each Partner shall, except as otherwise
provided herein, be (A) credited by such Partner’s Capital Contributions when
made, (B) credited by the fair market value of any property contributed to the
Partnership by such Partner (net of liabilities secured by such contributed
property that the Partnership is considered

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to assume or take subject to under Section 752 of the Internal Revenue Code),
(C) credited with the amount of any item of taxable income or gain and the
amount of any item of income or gain exempt from tax allocated to such Partner
(taking into account any reallocation pursuant to Sections 3.3 and 3.6), (D)
credited with the Partner’s share of Simulated Gain as provided in paragraph
(ii) of this Section 8.1(b), (E) debited by the amount of any item of tax
deduction or loss allocated to such Partner (taking into account any
reallocation pursuant to Sections 3.3 and 3.6), (F) debited with the Partner’s
share of Simulated Loss and Simulated Depletion as provided in paragraph (ii) of
this Section 8.1(b), (G) debited by such Partner’s allocable share of
expenditures of the Partnership not deductible in computing the Partnership’s
taxable income and not properly chargeable as capital expenditures, including
any non-deductible book amortizations of capitalized costs, and (H) debited by
the amount of cash or the fair market value of any property distributed to such
Partner (net of liabilities secured by such distributed property that such
Partner is considered to assume or take subject to under Section 752 of the
Internal Revenue Code).  Immediately prior to any distribution of assets by the
Partnership that is not pursuant to a liquidation of the Partnership or all or
any portion of a Partner’s interest therein, the Partners’ capital accounts
shall be adjusted by (X) assuming that the distributed assets were sold by the
Partnership for cash at their respective fair market values as of the date of
distribution by the Partnership and (Y) crediting or debiting each Partner’s
capital account with its respective share of the hypothetical gains or losses,
including Simulated Gains and Simulated Losses, resulting from such assumed
sales in the same manner as each such capital account would be debited or
credited for gains or losses on actual sales of such assets.  Notwithstanding
the foregoing sentence, the Partnership shall not distribute any property in
kind to any Partner except as provided in Section 10.3.

(ii)           The allocation of basis prescribed by Section 613A(c)(7)(D) of
the Internal Revenue Code and provided for in Section 4.3(b) and each Partner’s
separately computed depletion deductions shall not reduce such Partner’s capital
account, but such Partner’s capital account shall be decreased by an amount
equal to the product of the depletion deductions that would otherwise be
allocable to the Partnership in the absence of Section 613A(c)(7)(D) of the
Internal Revenue Code (computed without regard to any limitations which
theoretically could apply to any Partner) times such Partner’s percentage share
of the adjusted basis of the property (determined under Section 4.3(b)) with
respect to which such depletion is claimed (herein called “Simulated
Depletion”).  The Partnership’s basis in any Depletable Property as adjusted
from time to time for the Simulated Depletion allocable to all Partners (and
where the context requires, each Partner’s allocable share thereof, which share
shall be determined in the same manner as the allocation of basis prescribed in
Section 4.3(b)) is herein called “Simulated Basis”.  No Partner’s capital
account shall be decreased, however, by Simulated Depletion deductions
attributable to any Depletable Property to the extent such deductions exceed
such Partner’s allocable share of the Partnership’s remaining Simulated Basis in
such property.  The Partnership shall compute simulated gain (“Simulated Gain”)
or simulated loss (“Simulated Loss”) attributable to the sale or other
disposition of a Depletable Property based on the difference between the amount
realized from such sale or other disposition and the Simulated Basis of such
property, as theretofore adjusted.  Any Simulated Gain shall be allocated to the
Partners and shall increase their respective

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capital accounts in the same manner as the amount realized from such sale or
other disposition in excess of Simulated Basis shall have been allocated
pursuant to Section 4.3(b).  Any Simulated Loss shall be allocated to the
Partners and shall reduce their respective capital accounts in the same
percentages as the costs of the property sold were allocated up to an amount
equal to each Partner’s share of the Partnership’s Simulated Basis in such
property at the time of such sale.

(iii)          Any adjustments of basis of Partnership property provided for
under Sections 734 and 743 of the Internal Revenue Code and comparable
provisions of state law (resulting from an election under Section 754 of the
Internal Revenue Code or comparable provisions of state law) and any election by
an individual Partner under Section 59(e)(4) of the Internal Revenue Code to
amortize such Partner’s share of intangible drilling and development costs shall
not affect the capital accounts of the Partners (unless otherwise required by
applicable Treasury Regulations), and the Partners’ capital accounts shall be
debited or credited pursuant to the terms of this Section 8.1 as if no such
election had been made.

(iv)          Capital accounts shall be adjusted, in a manner consistent with
this Section 8.1, to reflect any adjustments in items of Partnership income,
gain, loss or deduction that result from amended returns filed by the
Partnership or pursuant to an agreement by the Partnership with the Internal
Revenue Service or a final court decision.

(v)           In the case of property carried on the books of the Partnership at
an amount which differs from its adjusted basis, the Partners’ capital accounts
shall be debited or credited for items of depreciation, cost recovery, Simulated
Depletion, amortization and gain or loss (including Simulated Gain or Simulated
Loss) with respect to such property computed in the same manner as such items
would be computed if the adjusted tax basis of such property were equal to such
book value, in lieu of the capital account adjustments provided above for such
items, all in accordance with Treasury Regulation § 1.704-1(b)(2)(iv)(g).

(vi)          It is the intention of the Partners that the capital accounts of
each Partner be kept in the manner required under Treasury Regulation
§ 1.704-1(b)(2)(iv).  To the extent any additional adjustment to the capital
accounts is required by such regulation, the General Partner is hereby
authorized to make such adjustment after notice to the Limited Partner.

Section 8.2.           Reports.  The General Partner shall deliver to the
Limited Partner the following financial statements and reports at the times
indicated below:

(a)           Daily, via facsimile or email, when the Partnership has any direct
drilling operations in progress, a drilling report detailing the progress as
reported by the subject drilling superintendent.

(b)           Monthly, within 30 days after the end of the month for which such
report is given, (i) a general description of the Properties and any additional
Leases acquired pursuant to the terms hereof, except succeeding reports need
contain only material changes (if any) regarding the

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Properties and such Leases, and (ii) a description of each sale, farmout or
other transfer or disposition by the Partnership of any Lease occurring during
such month, including the reasons therefor, parties thereto and terms thereof;
provided, that if there is no activity to report with respect to a given month,
the report may so state that.

(c)           Monthly, within 30 days after the end of each month in which joint
interest billings are processed and revenue disbursements are made, (i) a
schedule prepared on a cash basis for such month and substantially in the form
of Exhibit 8.2(c)(i) in all material respects and (ii) a schedule prepared on a
cash basis for all months of the Partnership’s term prior to such month, not to
exceed twelve months, and substantially in the form of Exhibit 8.2(c)(ii) in all
material respects.

(d)           Monthly, within 30 days after the end of each month in which joint
interest billings are processed and revenue disbursements are made, a schedule
prepared on a production month accrual basis with respect to the following month
and for all months of the Partnership’s term prior to the following month, not
to exceed twelve months, substantially in the form of Exhibit 8.2(d) in all
material respects.  For purposes of preparing such schedule, projected amounts
shall be derived from that certain final engineering report with respect to the
Oil and Gas Properties as of April 1, 2003, prepared by Cawley Gillespie &
Associates, Inc. (the “CGA Report”).  For example, estimated April production
would be reported in June.

(e)           Semi-annually, within 30 days after June 30 and December 1 of each
year, a schedule for the month of June or December (as applicable) and for all
months of the Partnership’s term prior to such month, not to exceed twelve
months, setting forth with respect to each Partnership Lease the information
contained in Exhibit 8.2(d), page one.

(f)            Quarterly within 60 days after the end of each fiscal quarter of
the Partnership and annually within 90 days after the end of each fiscal year of
the Partnership, (i) financial statements as of the end of and for such period,
including a balance sheet and statements of income (subject to estimated, not
actual depletion for quarterly reporting purposes), Partners’ equity, status of
Cumulative Payout and cash flows, prepared in accordance with generally accepted
accounting principles, and, with respect to the annual financial statements,
accompanied by a report of the Partnership’s independent certified public
accountants stating that (A) their examination was made in accordance with
generally accepted auditing standards and that in their opinion such financial
statements fairly present the Partnership’s financial position, results of
operations and cash flow in accordance with generally accepted accounting
principles consistently applied, and (B) in the normal course of making the
examination and reporting on the financial statements described above, nothing
came to their attention which caused them to believe that the revenues and costs
and expenses allocated to the Partners hereunder were not allocated in
accordance with the specific allocation provisions of this Agreement, (ii) a
schedule reflecting for such period the total costs of the Partnership and the
costs charged to the General Partner and the costs charged to the Limited
Partner, the total revenues of the Partnership and the revenues credited to the
account of the General Partner and to the account of the Limited Partner and a
reconciliation of such expenses and revenues to the provisions of Article IV and
Sections 3.3 and 3.6, (iii) a summary itemization by type and/or classification
of the total fees, compensation and reimbursement paid by the Partnership (or
indirectly on behalf of the Partnership) to the General Partner and its
Affiliates, which summaries shall be accompanied by

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a report of the Partnership’s independent certified public accountants stating
that in preparing such summaries nothing came to their attention which caused
them to believe that any transaction between the General Partner or an Affiliate
thereof and the Partnership did not comply with Section 6.2(n) or Section 6.6,
or if they did so conclude, a statement specifying such noncompliance, and (iv)
a schedule reflecting the capital account balances of each Partner prepared
pursuant to the provisions of Section 8.1(b). The independent certified public
accountants for the Partnership shall be a nationally recognized firm of
independent certified public accountants as shall be designated by the General
Partner and approved by the Limited Partner.

(g)           Annually within 90 days after the end of each fiscal year of the
Partnership, beginning with the fiscal year ending December 31, 2003, a report
containing (i) an estimation of the oil and gas reserves, classified by
appropriate categories, as of the end of the preceding fiscal year attributable
to the interest of the Partnership and of the Limited Partner therein, (ii) a
projection of the rate of production of and net income from such reserves with
respect to each such interest, (iii) a calculation of the present worth of such
net income discounted at a rate or rates designated from time to time by the
Limited Partner, and (iv) a schedule or complete description of all assumptions,
estimates and projections made or used in the preparation of such report,
including estimated future product prices, capital expenditures, operating
expenses and taxes.  Each such report shall be prepared in accordance with
customary and generally accepted standards and practices for petroleum
engineers, and shall be based on such assumptions as to costs, product prices
and similar factors as (x) prescribed by Rule 4-10 of Regulation S-X promulgated
by the Securities and Exchange Commission and (y) the Limited Partner shall
designate from time to time and shall be prepared by an independent petroleum
engineer designated by the General Partner and approved by the Limited Partner.

(h)           Annually within 90 days after the end of each fiscal year of the
General Partner,  unaudited financial statements of the General Partner similar
to those required for the Partnership in Section 8.2(f)(i).

(i)            Quarterly, within 60 days after the end of each fiscal quarter of
the Partnership, a description and the status of any environmental remediation
activities then being conducted by the Partnership.

(j)            Annually, within 90 days after the end of each fiscal year of the
Partnership, a statement from the General Partner to the effect that, to its
knowledge after due inquiry, the Partnership is in compliance in all material
respects with all applicable environmental laws and regulations (provided, that
if the General Partner is unable to make such statement on an unqualified basis,
the General Partner shall generally describe any qualifications or exceptions to
such statement).

(k)           Such other reports and financial statements as the General Partner
shall determine or as the Limited Partner shall reasonably request from time to
time, including all filings, if any, with the Securities and Exchange Commission
or public announcements of the General Partner.

The cost of such reporting paid to third parties (except pursuant to
Section 8.2(h))shall be paid by the Partnership as a Partnership expense.

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In connection with the foregoing, the Partners agree that: (i) the Partnership
shall adopt SFAS 133, Accounting for Derivative Instruments and Hedging
Activities (in this paragraph, the “Statement”), (ii) the Partnership will
comply with the terms and provisions of the Statement, including measuring the
value of the Partnership’s derivative instruments on at least a quarterly basis
and maintaining all required documentation and (iii) they will cooperate in good
faith to determine the form and nature of all reports requested by the Limited
Partner to verify compliance with the Statement.

Also in connection with the foregoing, the General Partner agrees to cooperate
and provide reasonable assistance to the Limited Partner in connection with the
establishment by the Limited Partner of a system that would allow the reports
identified in subsections (a) through (e) above to be filed via an electronic
datafile from the General Partner’s accounting system to the Limited Partner’s
(or affiliate’s) website.

Section 8.3.           Bank Accounts.  The General Partner shall cause one or
more accounts to be maintained in the name of the Partnership in one or more
banks which each have capital, surplus and undivided profits of at least
$200,000,000 and are otherwise approved by the Limited Partner, which accounts
shall be used for the payment of expenditures incurred by the Partnership in
connection with the business of the Partnership and in which shall be deposited
any and all receipts of the Partnership.  All amounts shall be and remain the
property of the Partnership and shall be received, held and disbursed by the
General Partner for the purposes specified in this Agreement.  There shall not
be deposited in any of such accounts any funds other than funds belonging to the
Partnership, and no other funds shall in any way be commingled with such funds.

Section 8.4.           Information Relating to the Partnership.  Upon request,
the General Partner shall supply to the Limited Partner any information
requested regarding the Partnership or its activities.  During ordinary business
hours, the Limited Partner and its authorized agents and representatives shall
have reasonable access to all books, records and materials in the Partnership’s
offices regarding the Partnership or its activities and, at the sole risk of the
Limited Partner, to the drill site of each Partnership well.

Section 8.5.           Certain Notices. Without limiting its obligations
hereunder, the General Partner shall promptly notify the Limited Partner in
writing:

(a)           of the occurrence of any material adverse change in the
Partnership’s operations or properties;

(b)           of the occurrence of any material adverse change in the General
Partner’s financial condition taken on a consolidated basis;

(c)           of any material default by the General Partner in the performance
of any of its obligations hereunder;

(d)           of any inspection by governmental authorities, notice of
violations issued by any such entities, pending administrative or judicial
proceeding, claim or any violation identified by

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the General Partner, to the extent any such inspection, notice, proceeding,
claim or violation relate to compliance by the Partnership with Environmental
Laws and could reasonably be expected to result in a fine, penalty, loss or
damage to the Partnership of $25,000 or more;

(e)           in the event the General Partner changes the location of its
principal office or principal place of business; and

(f)            in the event the Limited Partner becomes entitled to remove the
General Partner pursuant to Section 9.4, immediately after the General Partner
becomes aware of such event.

ARTICLE IX

Assignments of Interests and Substitutions

Section 9.1.           Assignments by Limited Partner.

(a)           The interest of the Limited Partner in the Partnership shall be
assignable in whole or in part, subject to the following:  (i) no such
assignment shall be made if such assignment would result in the violation of any
applicable federal or state securities laws and (ii) the Partnership shall not
be required to recognize any such assignment until the instrument conveying such
interest has been delivered to the General Partner for recordation on the books
of the Partnership.

(b)           Unless an assignee becomes a substituted Limited Partner in
accordance with the provisions set forth below, such assignee shall not be
entitled to any of the rights granted to the Limited Partner hereunder, other
than the right to receive allocations of income, gain, loss, deduction, credit
and similar items and distributions to which the assignor would otherwise be
entitled, to the extent such items are assigned, and the Limited Partner shall
continue to be responsible for its obligations hereunder.

(c)           An assignee of the interest of the Limited Partner, or any portion
thereof, shall become a substituted Limited Partner entitled to all of the
rights of the Limited Partner if, and only if (i) the assignor gives the
assignee such right, (ii) the General Partner consents to such substitution
(which consent shall not be unreasonably withheld) and (iii) the assignee
executes and delivers such instruments, in form and substance reasonably
satisfactory to the General Partner, as the General Partner may deem necessary
or desirable to effect such substitution and to confirm the agreement of the
assignee to be bound by all of the terms and provisions of this Agreement.  Upon
the satisfaction of such requirements, the General Partner shall concurrently
(or as of such later date as shall be provided for in any applicable written
instruments furnished to the General Partner) admit any such assignee as a
substituted Limited Partner of the Partnership and reflect such admission and
the date thereof in the records of the Partnership.

(d)           The Partnership and the General Partner shall be entitled to treat
the record owner of any Partnership interest as the absolute owner thereof in
all respects and shall incur no liability for distributions of cash or other
property made in good faith to such owner until such time as a

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written assignment of such interest that complies with the terms of this
Agreement has been received by the General Partner.

Section 9.2.           Assignment by General Partner.  Except as provided in
Section 9.7, the interest of the General Partner in the Partnership shall not be
assigned, mortgaged, pledged, subjected to a security interest or otherwise
encumbered, in whole or in part, without the prior written consent of the
Limited Partner in its sole and absolute discretion.

Section 9.3.           Merger or Consolidation.  Notwithstanding the provisions
of Sections 9.1 or 9.2, the merger or consolidation by a Partner with another
entity shall not be considered an assignment of an interest in the Partnership,
and upon the merger or consolidation of such Partner, the resulting entity shall
continue as a Partner.

Section 9.4.           Removal of General Partner.

(a)           Subject to the provisions hereof, the Limited Partner may remove
the General Partner with cause and select a new General Partner to operate and
carry on the business and affairs of the Partnership.  As used in this
Section 9.4 and in Section 9.5, “with cause” shall mean the occurrence of any of
the following:  (i) the commission by the General Partner of fraud, willful or
intentional misconduct or gross negligence in the performance of its duties
hereunder; (ii) the failure of the General Partner to make timely a distribution
of cash or property due and owing to the Limited Partner hereunder, which
failure shall have continued for at least five days after the General Partner
has knowledge thereof or after written notice of default has been given to the
General Partner by the Limited Partner (whichever comes first); (iii) the
failure of the General Partner to make timely a Capital Contribution it is
obligated to make to the Partnership hereunder; (iv) the failure of the General
Partner to perform or observe any material agreement, covenant, term, condition
or obligation hereunder (exclusive of the agreements, covenants, terms,
conditions or obligations described in clauses (i), (ii) and (iii) above), which
failure shall have continued for at least 30 days after the General Partner has
knowledge thereof or after written notice of default has been given to the
General Partner by the Limited Partner (whichever comes first); (v) a
representation or warranty made by the General Partner herein or by the General
Partner or any of its officers or Affiliates in any writing furnished in
connection with or pursuant to this Agreement shall be false in any material
respect on the date as of which made; (vi) the occurrence of any of the events
described in Section 4.02(a)(4) or Section 4.02(a)(5) of the Act (except that
with respect to Section 4.02(a)(5), the operative number of days shall be 60
instead of the numbers set forth in such Section); (vii) (A) the dissolution (or
other similar event) of the General Partner or the Parent, (B) the failure of
one or both Key Persons (or their respective Permitted Transferees) to, directly
or indirectly, own greater than 5% of the issued and outstanding Voting Stock in
the aggregate of the Parent and greater than 50% of the Voting Stock of the
General Partner and any Affiliate thereof serving as the operator of the
Partnership’s properties, or (C) the resignation, retirement or removal of each
Key Person as an executive officer (or similar title or capacity) of the Parent,
the General Partner or an Affiliate thereof serving as the operator of the
Partnership’s properties or the determination by the Limited Partner that
neither Key Person is actively involved in the ongoing management and
supervision of the business and operations of the Parent, the General Partner,
any Affiliate thereof serving as the operator of the Partnership’s properties,
or the Partnership; or (viii) a default by the Parent in the performance or
observation of any agreement, covenant, term or condition of the Guaranty.

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(b)           In the event the Limited Partner elects to remove the General
Partner in accordance with the provisions of Section 9.4(a) hereinabove, any
successor General Partner will be named in, and its appointment as such will be
effective as of a date specified in, a notice to the General Partner from the
Limited Partner exercising its right to remove the General Partner and select
the successor General Partner.  The removal of the General Partner shall be
effective when the following conditions have been satisfied: (i) a successor
General Partner shall have been selected and shall have agreed to accept the
responsibilities of a General Partner; and (ii) this Agreement and the
Certificate of Limited Partnership of the Partnership shall have been duly
amended to name the new General Partner.  To the extent required by the laws of
any jurisdiction to which the Partnership or this Agreement is subject, the
Partners hereby unanimously consent to the admission of such successor General
Partner and hereby appoint such successor General Partner as the agent and
attorney in fact for each Partner (including the retiring General Partner) for
the purpose of signing, swearing to and filing an amendment to the certificate
of limited partnership of the Partnership and all other necessary or appropriate
documents in connection with the substitution of such successor General Partner.

(c)           The provisions of this Section 9.4 shall not be the sole remedy of
the Limited Partner in the event the General Partner is removed with cause, and
in such event the Partnership and/or the Limited Partner shall have all other
rights and remedies as shall be available to them pursuant to this Agreement, at
law or in equity to redress any wrong or damage arising from the event or
circumstances giving rise to the General Partner’s removal with cause.

Section 9.5.           Right of General Partner Upon Removal.  In the event the
General Partner is removed in accordance with Section 9.4, the incoming General
Partner shall have the right to purchase from the removed General Partner a one
percent general partner interest in the Partnership at a price equal to the
appraised value thereof.  Such appraised value shall be determined by a
qualified independent appraiser who is mutually agreed upon by both the removed
General Partner and the incoming General Partner within 30 days after the
selection of the incoming General Partner.  If the removed General Partner and
the incoming General Partner cannot mutually agree upon a single independent
appraiser within such period, they shall each select their own independent
appraiser and those two appraisers shall select a third independent appraiser. 
The cost of such appraisal shall be borne by the removed General Partner. The
incoming General Partner’s option to acquire such interests must be exercised by
notice in writing to the removed General Partner not more than 20 days after the
selection of the incoming General Partner and the purchase price for such
interest shall be paid in cash not more than 30 days after receipt by the
parties of the report of the appraiser setting forth the appraised value.  In
the event the incoming General Partner does not elect to purchase the one
percent general partner interest of the removed General Partner pursuant to the
provisions of this Section 9.5, such interest shall be converted to a limited
partner interest in the Partnership.  Further, in any event any remaining
general partner interest of the removed General Partner in the Partnership
(i.e., the additional interests in profits, losses and distribution received or
to be received after the expiration of the Phase I Period) shall be converted to
a limited partner interest in the Partnership and the removed General Partner
shall continue as a limited partner, but without any right to vote, consent,
approve or otherwise make any determination under this Agreement; provided, that
after such conversion any amendment to this Agreement that would change (a) the
status of the removed General Partner as a limited partner hereof, (b) the
removed General Partner’s

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participation in the income, gain, loss, credits or distributions of the
Partnership (including any increase upon the expiration of the Phase I Period),
(c) the removed General Partner’s obligation to contribute capital to the
Partnership or (d) this proviso, shall require the written consent of the
removed General Partner.

Section 9.6.           Right of First Offer.

(a)           If the Limited Partner proposes to make any sale or other
disposition of all or any portion of its interest in the Partnership (other than
a sale or other disposition to a person controlling, controlled by or under
common control with the Limited Partner and whether or not the Limited Partner
has received an offer for such interest), the Limited Partner shall so inform
the General Partner by notice in writing (in this Section 9.6, the “Transfer
Notice”) describing the interest (or portion thereof) that is the subject of
such proposed disposition (in this Section 9.6, the “Offered Interest”) and 
requesting that the General Partner submit an offer to purchase the Offered
Interest.  The General Partner shall thereupon have thirty days after receipt of
the Transfer Notice to submit an offer in writing to the Limited Partner to
purchase the Offered Interest, which offer shall be in reasonable detail. 
Failure of the General Partner to submit an offer in writing to the Limited
Partner to purchase the Offered Interest within such thirty-day period shall be
deemed an election by the General Partner not to submit an offer.  If the
General Partner submits an offer in writing to purchase the Offered Interest in
accordance with this Section, the Limited Partner shall have the option to
accept such offer, to decline the offer and retain the Offered Interest, or to
sell the Offered Interest to a third party, provided that (i) any sale to a
third party is consummated within 120 days after the expiration of the above
thirty day period and is on terms and conditions no less favorable to the
Limited Partner than those contained in the offer submitted by the General
Partner and (ii) the terms of Section 9.1 are complied with.  If the General
Partner elects not to, or fails to, deliver any such offer in writing to the
Limited Partner within such thirty-day period, the Limited Partner shall have
the option to sell the Offered Interest to a third party on such terms and
conditions as agreed upon between them, provided that any such sale is
consummated within 120 days after the expiration of the above thirty day period
and the terms of Section 9.1 are complied with.

(b)           If the Limited Partner elects to accept an offer of the General
Partner to purchase the Offered Interest as provided in subsection (a) above,
the closing of the purchase and sale of an Offered Interest shall take place on
the 30th day following the date of delivery to the General Partner of the
Limited Partner’s election to accept such offer (or if such day is a Saturday,
Sunday, or legal holiday in the State of Connecticut, the first day thereafter
that is not a Saturday, Sunday, or legal holiday) at 10:00 a.m., local time, in
the offices of the Limited Partner set forth on the Limited Partner’s signature
page of this Agreement, or on such other date and at such other time and place
as may be agreed to by both Partners.  At the closing, the Limited Partner shall
take all action necessary to convey the Offered Interest to the General Partner,
free of all liens and encumbrances, against receipt of the purchase price
therefor.

Section 9.7.  Conversion of Portion of General Partner Interest Upon Expiration
of Phase I Period.  Upon expiration of the Phase I Period, the General Partner
shall have the option, exercisable by notice in writing to the Partnership and
to the Limited Partner at any time, to convert that portion of its interest in
the Partnership as general partner in excess of 1% to an interest in the
Partnership as a limited partner; provided, that (i) that the rights, duties and

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obligations of the General Partner to the Partnership and the Limited Partner
shall not be affected thereby; (ii) such interest as a limited partner will be
an economic interest in the Partnership and will not have attributable thereto
any voting, consent, approval or other similar rights; and (iii) the General
Partner shall not be permitted to assign, mortgage, pledge or otherwise encumber
its interest in the Partnership as a limited partner without the Limited
Partner’s prior written consent, other than an assignment to an entity in which
one or both of the Key Persons own greater than 50% of the Voting Stock.

ARTICLE X

Dissolution, Liquidation and Termination

Section 10.1.        Dissolution.  The Partnership shall be dissolved upon the
occurrence of any of the following:

(a)           April 1, 2023.

(b)           The consent in writing of the General Partner and the Limited
Partner.

(c)           The election of the Limited Partner by written notice to the
General Partner if at the time such notice is given (i) the General Partner has
committed fraud, willful or intentional misconduct or gross negligence in the
performance of its duties hereunder, (ii) the General Partner has failed to make
timely a distribution of cash or property due and owing to the Limited Partner
hereunder, which failure shall have continued for at least five days after the
General Partner has knowledge thereof or after written notice of default has
been given to the General Partner by the Limited Partner (whichever comes
first), (iii) the General Partner has failed to make timely a Capital
Contribution it is obligated to make to the Partnership hereunder, (iv) the
General Partner has failed to perform or observe any material agreement,
covenant, term, condition or obligation hereunder (exclusive of the agreements,
covenants, terms, conditions or obligations described in clauses (i), (ii) and
(iii) above), which failure shall have continued for at least 30 days after the
General Partner has knowledge thereof or after written notice of default has
been given to the General Partner by the Limited Partner (whichever comes
first), or (v) a representation or warranty made by the General Partner herein
or by the General Partner or any of its officers or Affiliates in any writing
furnished in connection with or pursuant to this Agreement shall be false in any
material respect on the date as of which made.

(d)           The sale or other disposition of all or substantially all of the
assets of the Partnership.

(e)           The occurrence of an event of withdrawal from the Partnership by
the General Partner as provided for in Section 4.02(a) of the Act.

(f)            The election of the Limited Partner by written notice to the
General Partner if at the time such notice is given the General Partner has
breached Section 9.2.

(g)           The election of the Limited Partner by written notice to the
General Partner at any time after the third anniversary of the Delivery Date.

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(h)           The failure of the Partnership to consummate the acquisition of
the Properties.

(i)            The election of the Limited Partner by written notice to the
General Partner upon (i) the dissolution (or other similar event) of the General
Partner or the Parent, (ii) the failure of one or both Key Persons (or their
respective Permitted Transferees) to, directly or indirectly, own greater than
5% of the issued and outstanding Voting Stock of the Parent and greater than 50%
of the issued and outstanding Voting Stock of the General Partner or any
Affiliate thereof serving as operator of the Partnership’s properties, (iii) the
resignation, retirement or removal of both Key Persons as an executive officer
(or similar title or capacity) of the Parent, the General Partner, or an
Affiliate thereof serving as operator of the Partnership’s properties or the
determination by the Limited Partner that neither Key Person is actively
involved in the ongoing management and supervision of the business and
operations of the Parent, the General Partner, any Affiliate thereof serving as
operator of the Partnership’s properties, or the Partnership or (iv) the Parent
has defaulted in the performance or observation of any agreement, covenant, term
of condition of the Guaranty.

(j)            The occurrence of any other event that under the Act causes the
dissolution of a limited partnership.

Section 10.2.        Withdrawal by General Partner and Reconstitution.

(a)           Except as specifically permitted in Section 9.2, the General
Partner covenants and agrees not to (i) withdraw voluntarily from the
Partnership, either directly, by dissolution, by transfer of its Partnership
interest or by any other voluntary act (including any event of withdrawal from
the Partnership by the General Partner as provided in Section 4.02(a) of the
Act), or (ii) allow seizure, attachment, garnishment, foreclosure or other
taking of its Partnership interest.  If the General Partner breaches any
provision of this Section 10.2 or Section 9.2, if an event described in
Section 10.1(e) occurs, or if an election is made by the Limited Partner to
dissolve the Partnership pursuant to Section 10.1(f) or Section 10.1(i), all
interests and amounts which the General Partner would otherwise receive under
Section 10.3 shall be reduced by the following applicable percentages of such
interest and amount: 90% if the withdrawal, breach, event or election occurs
during the Phase I Period; and 10% if the withdrawal, breach, event or election
occurs during the Phase II Period.  The distribution to the Limited Partner of
assets which would otherwise be distributable to the General Partner but for
this Section 10.2 shall constitute liquidated damages to the Limited Partner for
a violation by the General Partner of the covenant and agreement contained in
the first sentence of this Section 10.2, the parties having agreed that the
amount of actual damages would be difficult or impossible to calculate.

(b)           Notwithstanding the foregoing Section 10.2(a) or any other
provision of this Agreement, (i) the Partnership may be reconstituted and its
business continued without being wound up if the Limited Partner so elects
within 90 days after the event causing dissolution of the Partnership and
(ii) the provisions of Section 6.02 (including subsection (b) thereof) of the
Act shall be applicable to the Partnership except that the right to recover
damages from the withdrawing General Partner pursuant to Section 6.02(a) of the
Act shall be governed by Section 10.2(a) of this Agreement.

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Section 10.3.        Liquidation and Termination.  Upon dissolution of the
Partnership (unless it is reconstituted and its business continued without being
wound up as provided for in Section 10.2(b)), the General Partner shall act as
liquidator or may appoint in writing one or more liquidators who shall have full
authority to wind up the affairs of the Partnership and make final distribution
as provided herein; provided, however, that if dissolution is caused by any of
the events specified in Section 10.1(c),(e), (f), (g) or (i), the liquidator
shall be a person selected in writing by the Limited Partner.  The liquidator
shall continue to operate the Partnership properties with all of the power and
authority of the General Partner.  If the liquidator is someone appointed by the
Limited Partner in accordance with the terms hereof, the General Partner shall
act in good faith and cooperate in all respects with the liquidator in
connection with the liquidation and winding up of the Partnership, including the
process of marketing and selling the Partnership assets to third party or
parties.  The steps to be accomplished by the liquidator are as follows:

(a)           As promptly as possible (and, in any event, within 45 days) after
dissolution and again after final liquidation, the liquidator shall cause a
proper accounting to be made by the Partnership’s independent accountants of the
Partnership’s assets, liabilities and operations through the last day of the
month in which the dissolution occurs or the final liquidation is completed, as
appropriate.

(b)           The liquidator shall pay all of the debts and liabilities of the
Partnership or otherwise make adequate provision therefor (including the
establishment of a cash escrow fund for contingent liabilities in such amount
and for such term as the liquidator may reasonably determine and as the Limited
Partner shall approve).  After making payment or provision for all debts and
liabilities of the Partnership, the Partners’ capital accounts shall then be
adjusted by (i) assuming the sale of all remaining assets of the Partnership for
cash at their respective fair market values (as determined by an appraiser
selected by the Limited Partner within 30 days of the date of dissolution) as of
the date of termination of the Partnership, (ii) assuming the distribution of
such cash at such time in the percentages required under Sections 4.2 and 4.4,
taking into account whether Cumulative Payout has occurred or would occur as a
result of such distribution, and (iii) debiting or crediting each Partner’s
capital account with its respective share of the hypothetical gains or losses
resulting from such assumed sales in the same manner as each such capital
account would be debited or credited for gains or losses on actual sales of such
assets.  In the event that the Limited Partner fails to notify the General
Partner of its selection of an appraiser pursuant to the preceding sentence
within the time period specified therein, the General Partner shall be entitled
to select such appraiser.  The liquidator shall then by payment of cash or
property (valued as of the date of termination of the Partnership at its fair
market value by the appraiser selected in the manner provided above) distribute
to the Partners such amounts as are required to pay the positive balances of
their respective capital accounts.  To the extent possible and provided that the
ownership of such property would not be in violation of any rule or regulation
then applicable to the Limited Partner, such a distribution shall be in kind
unless otherwise agreed to by the General Partner and the Limited Partner.  In
making distributions of property in satisfaction of such capital account
balances, the liquidator shall distribute, to the extent possible, undivided
interests in each Lease in the same percentages as the Partners share revenues
from such Lease.  Each Partner shall have the right to designate another person
to receive any property which otherwise would be distributed in kind to that
Partner pursuant to this Section 10.3 and Section 10.2 if that Section is
applicable.  Any distributions to the Partners in

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liquidation of the Partnership shall be made by the later of the end of the
taxable year in which the liquidation occurs, or 90 days after the date of such
liquidation.  For purposes of the preceding sentence, the term “liquidation”
shall have the same meaning as set forth in Treasury Regulation
§ 1.704-1(b)(2)(ii)(g) as in effect at such time.

(c)           Any Leases distributed to the Partners shall be subject to the
operating agreements then in effect with respect to such Leases; provided,
however, that if any of such Leases is subject to an operating agreement to
which an unaffiliated third person is not a party, such Leases shall be subject
to a standard form operating agreement as shall be agreed upon by the Partners. 
Upon written request made by any Partner, the liquidator shall sell the
Partnership Leases and other properties and assets that otherwise would be
distributable to such Partner under this Section 10.3 at the best cash price
available therefor and distribute such cash (after deducting all expenses
reasonably relating to such sale) to such Partner.  Such sale shall be on behalf
of such Partner and shall be treated as the sale by such Partner of its interest
in such properties, and any gain or loss attributable to such sale and any
proceeds therefrom shall be for the account of such Partner.

(d)           The provisions of subsections (b) and (c) of this Section 10.3
shall be subject to the effect of Section 10.2 if that Section is applicable.

(e)           Except as expressly provided herein, the liquidator shall comply
with any applicable requirements of the Act and all other applicable laws
pertaining to the winding up of the affairs of the Partnership and the final
distribution of its assets.

(f)            The distribution of cash and/or property to the Limited  Partners
in accordance with the provisions of this Section 10.3 shall constitute a
complete return to the Limited Partner of its Capital Contributions and a
complete distribution to the Limited Partner of its interests in the Partnership
and all Partnership property.

(g)           No Partner with a negative balance in its capital account shall be
liable to the Partnership or any other Partner for the amount of such negative
balance upon dissolution and liquidation.

Section 10.4.        Cancellation of Certificate.  Upon the completion of the
distribution of Partnership assets as provided herein, the Partnership shall be
terminated, and the liquidator (or the Partners if necessary) shall cause the
cancellation of the certificate of limited partnership of the Partnership and
shall take such other actions as may be necessary to terminate the Partnership.

ARTICLE XI

Representations and Warranties

Section 11.1.        Representations and Warranties of General Partner.  The
General Partner represents, warrants and covenants to the Limited Partner as
follows:

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(a)           The General Partner is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware.

(b)           The General Partner is duly qualified or will qualify to transact
business in every jurisdiction where the character of the properties owned or
held by the Partnership or where the nature of the business transacted by the
Partnership makes qualification by it necessary or appropriate in order for the
Partnership to conduct its business.

(c)           The General Partner has the requisite power and authority to
execute and deliver this Agreement and to perform its obligations hereunder
(including, without limitation, the power and authority to act as General
Partner of the Partnership).

(d)           The execution, delivery and performance by the General Partner of
this Agreement has been duly and validly authorized by all requisite limited
liability company action of the General Partner, and no other such action is
required to be taken to authorize such execution, delivery and performance.

(e)           The execution, delivery and performance by the General Partner of
this Agreement is within its limited liability company powers and will not (i)
be in contravention of or violate any provisions of its charter or other
governing documents, as amended to the date hereof, or (ii) be in contravention
of or result in any breach or constitute a default under any applicable law,
rule, regulation, judgment, license, permit or order or any material loan, note
or other agreement or instrument to which the General Partner is a party or by
which it or any of its properties are bound.

(f)            When delivered to the Limited Partner, this Agreement will have
been duly and validly executed and will be binding upon the General Partner and
enforceable in accordance with the terms hereof.

(g)           Except for a change of law over which the General Partner has no
control (and the General Partner shall immediately notify the Limited Partner
when the General Partner learns of such occurrence), the foregoing
representations, warranties and covenants shall remain true and accurate in all
material respects during the term of the Partnership, and the General Partner
will neither take action nor permit action to be taken which would cause any of
the foregoing representations to become untrue or inaccurate in any material
respect.

(h)           No consent, approval, authorization or order of any court or
governmental agency or authority or of any third party that has not been
obtained is required in connection with the execution, delivery and performance
by the General Partner of this Agreement.

(i)            Neither the General Partner nor any of its Affiliates has
employed or retained any broker, agent or finder in connection with this
Agreement or the transactions contemplated herein, or paid or agreed to pay any
brokerage fee, finder’s fee, commission or similar payment to any person on
account of this Agreement or the transactions provided for herein; and the
General Partner shall indemnify and hold harmless the Partnership and the
Limited Partner from any costs, including attorneys’ fees, and liability arising
from the claim of any broker, agent or

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finder employed or retained by the General Partner in connection with the
Partnership or this Agreement.

(j)            None of the financial statements or other written documents or
information delivered herewith or heretofore by or on behalf of the General
Partner or the Parent to the Limited Partner in connection with the General
Partner, the Parent, this Agreement, the Properties and the operations to be
conducted hereunder contains any untrue statement of a material fact or omits to
state any material fact (other than facts which the Limited Partner recognizes
to be industry risks normally associated with the oil and gas business)
necessary to keep the statements contained herein or therein from being
misleading.  There is no fact peculiar to the General Partner, the Parent or the
Properties (other than facts which the Limited Partner recognizes to be industry
risks normally associated with the oil and gas business) which materially
adversely affects or in the future may (so far as the General Partner can now
reasonably foresee) materially adversely affect (i) the business, property or
assets, or financial condition of the General Partner or the Parent or (ii) the
Properties, and which has not been set forth in this Agreement or in the other
documents, certificates and statements furnished to the Limited Partner by or on
behalf of the General Partners prior to the date hereof in connection with the
transactions contemplated hereby.

(k)           To the best knowledge of the General Partner, the General Partner
and its Affiliates and persons acting on their behalf have not taken any action,
or failed to take any action, which has caused the organization of the
Partnership and the issuance of the interests in the Partnership to be required
to be registered under the Securities Act of 1933, as amended, or any applicable
state blue sky laws.

(l)            There is no pending or, to the best of the General Partner’s
knowledge, threatened judicial, administrative or arbitral action, suit or
proceeding against or investigation of the General Partner which is not fully
insured against (except standard deductible amounts) and which might materially
and adversely affect the financial condition of the General Partner or its
ability to perform its obligations under this Agreement.

(m)          During the preceding 12-month period, the General Partner and its
Affiliates and persons acting on their behalf have not sold (except to a limited
number of persons who have represented themselves to be accredited investors, as
defined in Rule 501 promulgated by the Securities and Exchange Commission) any
interest in the Partnership or similar interests; with respect to any sales of
interests similar to the Partnership by the General Partner and its Affiliates
and persons acting on their behalf within six months after the date of this
Agreement, the General Partner shall do nothing which would require the
registration of these interests under the Securities Act of 1933, and the rules
and regulations promulgated thereunder, as well as applicable state securities
laws.

(n)           The General Partner is a wholly-owned subsidiary of the Parent.

Section 11.2.        Representations and Warranties of Limited Partner.  The
Limited Partner represents, warrants and covenants to the General Partner as
follows:

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(a)           The Limited Partner is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware.

(b)           The Limited Partner has all requisite power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.

(c)           The execution, delivery and performance by the Limited Partner of
this Agreement are within its powers and do not and will not (i) contravene or
violate any provisions of its governing documents, as amended to the date
hereof, or (ii) contravene or result in any breach of or constitute a default
under any applicable law, rule or regulation or any loan, note or other
agreement or instrument to which it is a party or by which it or any of its
properties are bound.

(d)           When delivered to the General Partner, this Agreement will be duly
and validly executed by the Limited Partner and will be binding upon it in
accordance with the terms hereof.

(e)           Neither the Limited Partner nor any person acting on its behalf
has employed or retained any broker, agent or finder in connection with the
transactions provided for herein, or agreed to pay any brokerage fee, finder’s
fee, commission or similar payment to any person on account of the transactions
provided for herein; and the Limited Partner shall indemnify and hold harmless
the Partnership and the General Partner from any costs, including attorneys’
fees, and liability arising from the claim of any broker, agent or finder
employed or retained by the Limited Partner in connection with the Partnership
or this Agreement.

(f)            It is acquiring its interest in the Partnership as an investment
and not with a view to the resale or other distribution to the public; provided,
however, that the disposition of its interest shall at all times be and remain
within its control.

(g)           It is a wholly-owned subsidiary of General Electric Capital
Corporation.

ARTICLE XII

Miscellaneous

Section 12.1.        Notices.  All notices, elections, demands or other
communications required or permitted to be made or given pursuant to this
Agreement shall be in writing and shall be considered as properly given or made
if given by (a) personal delivery, (b) expedited delivery service with proof of
delivery, (c) first class mail postage prepaid, or (d) prepaid telegram, telex,
facsimile or email (provided that such telegram, telex, facsimile or email is
confirmed by proof of delivery).  Each Partner’s address for notices and other
communications hereunder shall be that set forth opposite such Partner’s
signature hereto; provided, however, that when in this Agreement it is provided
that a time period shall commence when a notice is received, such time period
shall commence upon actual receipt by the addressee regardless of when the
notice is given or made.  The Limited Partner may change its address by giving
notice in writing to the General Partner of its new address, and the General
Partner may change its address by giving notice in writing to the Limited
Partner of its new address.

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Section 12.2.        Amendments.  This Agreement may be changed, modified, or
amended only by an instrument in writing duly executed by both Partners.

Section 12.3.        Partition.  Each of the Partners hereby irrevocably waives
for the term of the Partnership any right that such Partner may have to maintain
any action for partition with respect to the Partnership property.

Section 12.4.        Entire Agreement.  This Agreement, that certain letter
agreement dated as of even date herewith by and between Parent and the
Partnership, and the other documents contemplated hereunder constitute the full
and complete agreement of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, both written and
oral, between the parties hereto with respect to the subject matter hereof.

Section 12.5.        No Waiver.  The failure of any Partner to insist upon
strict performance of a covenant hereunder or of any obligation hereunder,
irrespective of the length of time for which such failure continues, shall not
be a waiver of such Partner’s right to demand strict compliance in the future. 
No consent or waiver, express or implied, to or of any breach or default in the
performance of any obligation hereunder shall constitute a consent or waiver to
or of any other breach or default in the performance of the same or any other
obligation hereunder.

Section 12.6.        Applicable Law.  This Agreement and the rights and
obligations of the parties hereunder shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Texas.

Section 12.7.        Successors and Assigns.  Subject to Article IX, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.

Section 12.8.        Exhibits.  Exhibits  A, 2.1—AMI, 2.1—Cash Factor Discount
Table, 3.2(d)(iii), 3.3(c), 5.6, 6.8, 8.2(c)(i), 8.2(c)(ii) and 8.2(d) to this
Agreement are attached hereto.  Each Exhibit is incorporated herein by reference
and made a part hereof for all purposes and references to this Agreement shall
also include such Exhibit unless the context in which used shall otherwise
require.

Section 12.9.        Survival of Representations and Warranties.  All
representations, warranties and covenants made by the General Partner or the
Limited Partner in this Agreement or any other document contemplated thereby or
hereby shall be considered to have been relied upon by the other party hereto
and shall survive the execution and delivery of this Agreement or such other
document, regardless of any investigation made by or on behalf of any such
party.

Section 12.10.             No Third Party Benefit.  Nothing in this Agreement,
either express or implied, is intended to or shall confer upon any person other
than the parties hereto, and their respective successors and permitted assigns,
any rights, benefits, or remedies of any nature whatsoever under or by reason of
this Agreement.

59

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Section 12.11.             Public Announcements.  Except as may be required by
applicable law or by obligations pursuant to any listing agreement with any
national securities exchange, neither the General Partner nor the Limited
Partner shall issue any press release or otherwise make any public statement
with respect to this Agreement or the transactions contemplated hereby without
the prior written approval of the other party, which approval shall not be
unreasonably withheld.  Any such press release or public statement required by
applicable law or by obligations pursuant to any listing agreement with any
national securities exchange shall only be made after reasonable notice to the
other party.

Section 12.12.             Counterparts.  This Agreement may be executed in
several counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to the other parties. In
making proof of this Agreement, it shall not be necessary to produce or account
for more than one counterpart. A telecopied facsimile of an executed counterpart
of this Agreement shall be sufficient to evidence the binding agreement of a
party to the terms hereof..

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

60

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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the day
and year first above written.

 

GENERAL PARTNER:

 

 

 

 

 

BEP (GP) I, LLC

 

 

 

 

 

 

 

 

By:

 

 

 

Name: Randall H. Breitenbach

 

 

Title: Chief Executive Officer

 

 

 

 

 

 

 

 

ADDRESS FOR NOTICE PURPOSES:

 

 

 

 

 

515 South Flower, Suite 4800

 

 

Los Angeles, California 90071

 

 

Attention: Randall H. Breitenbach or Halbert S.
Washburn

 

 

Telecopy No.: 213-225-5916

 

 

Email:

 

 

 

 

 

 

 

 

 

 

SOLELY FOR THE PURPOSE

 

 

OF EVIDENCING ITS AGREEMENT

 

 

TO WITHDRAW FROM THE PARTNERSHIP

 

 

AS PROVIDED IN THE RECITALS TO THIS

 

 

AGREEMENT AND THE TERMS OF
SECTION 3.7(b):

 

 

 

 

 

BEP (LP) I, LLC

 

 

 

 

 

By:

 

 

 

Name: Randall H. Breitenbach

 

 

Title: Chief Executive Officer

 

SIGNATURE PAGE—Amended and Restated Agreement of Limited Partnership of
BreitBurn Energy Partners I, L.P.

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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the day
and year first above written.

 

LIMITED PARTNER:

 

 

 

TIFD III-X LLC

 

 

 

 

By:

AIRCRAFT SERVICES CORPORATION,

 

 

Managing Member

 

 

 

 

 

 

By:

 

 

 

 

Jane S. Reichle, Vice President

 

 

 

 

 

 

 

ADDRESS FOR NOTICE PURPOSES:

 

 

 

 

c/o GE Capital Corp.—SFG

 

120 Long Ridge Road - 3rd Floor

 

Stamford, Connecticut 06927-1550

 

Attention: Global Asset Management Operations

 

Telecopy No.: 203-961-2017

 

Email: jane.reichle@ge.com

SIGNATURE PAGE—Amended and Restated Agreement of Limited Partnership of
BreitBurn Energy Partners I, L.P.

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