AGREEMENT OF LIMITED PARTNERSHIP

                               Mallard Hunter L.P.

                            Dated as of May 23, 2000
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                                TABLE OF CONTENTS
                                                                            Page

ARTICLE I                  Formation of Partnership............................1
         Section 1.1.      Formation...........................................1
         Section 1.2.      Name................................................1
         Section 1.3.      Business............................................1
         Section 1.4.      Places of Business, Registered Agent and Addresses..2
         Section 1.5.      Term................................................2
         Section 1.6.      Filings.............................................2

ARTICLE II                 Certain Definitions and References..................3
         Section 2.1.      Certain Defined Terms...............................3
         Section 2.2.      References and Construction........................11

ARTICLE III                Capitalization.....................................12
         Section 3.1.      Capital Contributions of General Partner...........12
         Section 3.2.      Capital Contributions of Limited Partner...........12
         Section 3.3.      Request for Additional Capital Contributions
                                of Limited Partner............................13
         Section 3.4.      Reduced Capital Contributions of Limited Partner...16
         Section 3.5.      Payments of Capital Contributions..................16
         Section 3.6.      Non-payment of Capital Contributions...............17
         Section 3.7.      Interest on and Return of Capital Contributions....20

ARTICLE IV                 Allocations and Distributions......................20
         Section 4.1.      Allocation of Profits and Losses...................20
         Section 4.2.      Special Allocations................................20
         Section 4.3.      Distributions......................................22

ARTICLE V                  Partnership Property...............................23
         Section 5.1.      Title to Partnership Property......................23
         Section 5.2.      Acquisition of the Assets..........................23
         Section 5.3.      Additional Acquisitions............................24
         Section 5.4.      Lease Sales........................................25
         Section 5.5.      Sales of Production................................25
         Section 5.6.      Operations on Partnership Assets...................26
         Section 5.7.      Hedge Arrangement..................................26
         Section 5.8.      Production.........................................27
         Section 5.9.      Environmental, Health and Safety Program...........27

ARTICLE VI                 Management.........................................28

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         Section 6.1.      Power and Authority of General Partner.............28
         Section 6.2.      Certain Restrictions on General Partner's Power
                                and Authority.................................28
         Section 6.3.      Duties and Services of General Partner.............30
         Section 6.4.      Liability of General Partner.......................31
         Section 6.5.      Limitations on Indemnification.....................31
         Section 6.6.      Costs, Expenses and Reimbursement..................31
         Section 6.7.      Organization and Third Party Acquisition Costs.....32
         Section 6.8.      Insurance..........................................33
         Section 6.9.      Tax Elections......................................33
         Section 6.10.     Tax Returns........................................34
         Section 6.11.     Appointment of Trustee to Receive Payments.........34

ARTICLE VII                Rights and Obligations of Limited Partner..........35
         Section 7.1.      Rights of Limited Partner..........................35
         Section 7.2.      Limitations on Limited Partner.....................35
         Section 7.3.      Liability of Limited Partner.......................35
         Section 7.4.      Access of Limited Partner to Data..................36
         Section 7.5.      Withdrawal and Return of Capital Contribution......36

ARTICLE VIII               Books, Records, Reports and Bank Accounts..........36
         Section 8.1.      Capital Accounts, Books and Records................36
         Section 8.2.      Reports............................................39
         Section 8.3.      Bank Accounts......................................41
         Section 8.4.      Information Relating to the Partnership............41
         Section 8.5.      Certain Notices....................................41

ARTICLE IX                 Assignments of Interests and Substitutions.........42
         Section 9.1.      Assignments by Limited Partner.....................42
         Section 9.2.      Assignment by General Partner......................43
         Section 9.3.      Merger or Consolidation............................43
         Section 9.4.      Removal of General Partner.........................43
         Section 9.5.      Right of General Partner Upon Removal..............44
         Section 9.6       Right of First Offer...............................45

ARTICLE X                  Dissolution, Liquidation and Termination...........45
         Section 10.1.     Dissolution........................................45
         Section 10.2.     Withdrawal by General Partner and Reconstitution...47
         Section 10.3.     Liquidation and Termination........................47
         Section 10.4.     Cancellation of Certificate........................49
         Section 10.5.     Certain Additional Agreements Regarding
                                Piggyback Rights..............................49

ARTICLE XI                 Representations and Warranties.....................50
         Section 11.1.     Representations and Warranties of General Partner..50

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         Section 11.2.     Representations and Warranties of Limited Partner..52

ARTICLE XII                Miscellaneous......................................53
         Section 12.1.     Notices............................................53
         Section 12.2.     Amendments.........................................53
         Section 12.3.     Partition..........................................53
         Section 12.4.     Entire Agreement...................................53
         Section 12.5.     No Waiver..........................................53
         Section 12.6.     Applicable Law.....................................53
         Section 12.7.     Successors and Assigns.............................53
         Section 12.8.     Exhibits...........................................53
         Section 12.9.     Survival of Representations and Warranties.........54
         Section 12.10. No Third Party Benefit................................54
         Section 12.11. Public Announcements..................................54
         Section 12.12. Counterparts..........................................54

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                        AGREEMENT OF LIMITED PARTNERSHIP

                               Mallard Hunter L.P.


     THIS  AGREEMENT  OF  LIMITED  PARTNERSHIP  (this  "Agreement")  is made and
entered  into  this  23rd  day of  May,  2000,  by and  between,  Magnum  Hunter
Production,  Inc., a Texas  corporation  (herein  sometimes  called the "General
Partner"),  and TIFD III-X Inc., a Delaware corporation (herein sometimes called
the "Limited Partner").  In consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:


                                    ARTICLE I

                            Formation of Partnership

     Section 1.1.  Formation.  Subject to the provisions of this Agreement,  the
parties hereto do hereby form a limited partnership (the "Partnership") pursuant
to the provisions of the Texas Revised Limited Partnership Act (Article 6132a-1,
Vernon's Texas Civil  Statutes)  (such Act, as amended from time to time, or any
successor statute or statutes thereto, being called the "Act").

     Section 1.2. Name. The name of the Partnership shall be Mallard Hunter 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 Assets (as defined
herein);  (b) to acquire  additional  Leases (as defined  herein);  (c) to hold,
maintain,  renew,  explore,  drill,  develop  and  operate  the  Assets 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
Assets and such additional Leases; (e) to farm-out,  sell, abandon and otherwise
dispose of the Assets,  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 Assets 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

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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 Assets 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 Assets 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 Assets 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 600 Las Colinas Blvd.,  Suite 1100,
Irving, Texas 75039. 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.

     (b) The  registered  office of the  Partnership  in Texas  shall be 600 Las
Colinas Blvd.,  Suite 1100,  Irving,  Texas 75039,  and the registered agent for
service  of process  on the  Partnership  shall be the  General  Partner,  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  shall be formed and commence 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.

     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,

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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 timely
request of the Limited Partner and within 60 days after the end of each calendar
year  commencing  with the calendar year ending  December 31, 2000,  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  acquisition  of the  Assets),  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  insurance  or
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

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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 ss. 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 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 Agreement,  as hereafter  changed,  modified or
amended in accordance with the terms hereof.

     "Area of Mutual  Interest"  shall  mean the  areas  covered  by each  Lease
acquired by the Partnership pursuant to the terms hereof plus all areas within a
one-half mile radius of the boundary lines of such Lease.

     "Assets"  shall  mean the  "Properties,"  as such  term is  defined  in the
Purchase Agreement.

     "Capital  Contributions"  shall mean for any Partner at the particular time
in question the aggregate of the dollar  amounts of any cash  contributed to the
capital  of the  Partnership,  or, if the  context in which such term is used so
indicates, the dollar amounts of cash 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
Assets or any additional  Lease acquired  pursuant to the terms hereof,  (b) all
costs incurred by the Partnership in locating, drilling, completing, equipping,

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deepening or  sidetracking a well located on the Assets 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
$50,000;  (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 Assets 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 the
agreed upon insurance coverage maintained in accordance with the terms hereof.

     "Change  in  Control"  shall  mean the  occurrence  during  the term of the
Partnership  of any of the  following:  (a) any  person (as such term is used in
Section 13(d) and 14(d(2) of the Securities and Exchange Act of 1934, as amended
(the "Exchange  Act")) is or becomes the "beneficial  owner" (as defined in Rule
13d-3 of the Exchange  Act),  directly or  indirectly,  of  securities of Parent
representing  40% or more of the combined voting power of the General  Partner's
then outstanding securities; (b) if, during any period of two consecutive years,
individuals  who at the  beginning  of  such  period  constitute  the  board  of
directors of the Parent cease for any reason to  constitute  at least a majority
thereof,  unless the  election or  nomination  for the  election by the Parent's
stockholders  of each new director was approved by a vote of at least  two-third
of the

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directors  then  still in office who were  directors  at the  beginning  of such
period; or (c) Parent ceases to own at least 80% of the voting securities of the
General Partner.

     "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; 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.ss.9601   et  seq.);   the  Hazardous   Material
Transportation   Act,  as  amended  (49   U.S.C.ss.180  et  seq.);  the  Federal
Insecticide,  Fungicide,  and  Rodenticide  Act, as amended (7  U.S.C.ss.136  et
seq.); the Resource  Conservation and Recovery Act, as amended (42 U.S.C.ss.6901
et seq.);  the Toxic  Substance  Control  Act, as amended (42  U.S.C.ss.7401  et
seq.);  the Clean Air Act, as amended  (42  U.S.C.ss.740  et seq.);  the Federal
Water Pollution Control Act, as

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<PAGE>
     amended (33 U.S.C.ss.1251 et seq.); the Occupational Safety and Health Act,
as amended (29 U.S.C.  ss.651 et seq.);  the Safe Drinking Water Act, as amended
(42  U.S.C.ss.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).

     "General  Partner"  shall mean  Magnum  Hunter  Production,  Inc.,  a Texas
corporation,  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 of  Partnership  properties
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.'s, 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 Guaranty dated as of even date herewith
executed by 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
ss.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.

     "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 Assets and any additional
Leases acquired pursuant to

                                        8
<PAGE>
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  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 (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 Inc., a Delaware  corporation,  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

                                        9
<PAGE>
     (f) the net  proceeds  derived  from  the  sale of  Partnership  properties
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

     (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.'s, 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.

     "Parent" shall mean Magnum Hunter Resources, Inc.

                                       10
<PAGE>
     "Partner   Nonrecourse  Debt"  shall  mean  any  nonrecourse  debt  of  the
Partnership (or portions  thereof) for which any Partner bears the economic risk
of loss.

     "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 Section 1.1.

     "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.

     "Phase I Period" shall mean the period from the Delivery Date until the end
of the first month in which Cumulative Payout is 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 liquidation and termination
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  Partnership's  Assets and any additional  Leases  acquired
pursuant to the terms hereof, net of any royalties, overriding royalty interests
and other similar  interests  burdening such Assets and Leases,  plus production
taxes and ad valorem taxes paid with respect to such Assets and Leases.

     "Purchase  Agreement"  shall  have the  meaning  assigned  to such  term in
Section 5.2(a).

     "Purchase  Price"  shall  have the  meaning  assigned  to such  term in the
Purchase Agreement.

     "Retained  Outside  Interest"  shall mean (a) the  properties and interests
described in Section 2.2 of the Purchase Agreement and (b) any other interest in
the Assets or other Leases hereafter acquired by the Partnership pursuant to the
terms hereof which the General Partner or an Affiliate acquires and owns for its
own account in accordance with the terms of this Agreement.

     "Seller"  shall  have the  meaning  assigned  to such term in the  Purchase
Agreement.

                                       11
<PAGE>
     "Simulated Basis",  "Simulated Gain",  "Simulated Depletion" and "Simulated
Loss"  shall  have the  respective  meanings  assigned  to such terms in Section
8.1(b).

     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.

                                       12
<PAGE>
                                   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 and elsewhere herein. 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
$22,918,500,  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  $200,000,
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(b) 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  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.

                                       13
<PAGE>
     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
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 (i)
except for requests  pursuant to clause (vii) or clause (ix) 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 and made by the Limited  Partner in the manner  provided  for in Section
3.5(c).

     (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.  Each  such  request  shall  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

                                       14
<PAGE>
event  shall  such  shorter  period be less than 15 days),  (ii) the  purpose or
purposes  for  which  the   proceeds  of  the   requested   additional   Capital
Contributions  are to be used,  (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,  and (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.  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.  In the
event  the  Limited  Partner  does  not  elect to pay all of the  categories  of
requested additional Capital Contributions (or operations or acquisitions within
a  given  category),  it may  elect  to pay  all  of the  Capital  Contributions
requested to be used for any of the remaining  categories of costs designated in
the General Partner's request as provided above (or, as to a given category, the
costs associated with any other operation or acquisition  within such category).
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.

     (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.

     (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

                                       15
<PAGE>
     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.

     (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 well
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 well shall be
charged to such separate  account,  and such separate  account shall be credited
with the Limited Partner's share of revenues from such well (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  well,  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. 200% 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;

     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

                                       16
<PAGE>
     or  accruing  with  respect to such well 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  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 in accordance with
Section 4.3, the amount so retained and not  distributed  shall reduce pro tanto
the  amount  of  Capital  Contributions  the  Limited  Partner  is  required  to
thereafter make.

     Section 3.5. Payments of Capital Contributions.

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

     (b) The Limited Partner shall pay the Capital  Contributions  referenced in
Section 3.2(b) within five business days after receipt by the Limited Partner 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 by the Limited  Partner 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

                                       17
<PAGE>
     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 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
shall be the exclusive remedy 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 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 a

                                       18
<PAGE>
     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 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 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

                                       19
<PAGE>
     by the Limited  Partner to the capital of the  Partnership for the purposes
for which contributions were initially  requested.  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, 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 give
notice of its election of the alternatives  listed above to the Limited Partner,
and if the General Partner elects the alternative  provided under Section 3.6(a)
and/or  Section  3.6(b),  the General  Partner shall be free at any time also to
proceed under this Section 3.6(c).

     (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 Section 3.6(b) shall be applicable, mutatis
mutandis, except that the last sentence of such Section 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).

                                       20
<PAGE>
     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.

     (b) No Partner  shall have the right to  withdraw  or be repaid any capital
contributed  by such Partner except (a) as provided in Sections 10.2 and 10.3 or
(b) in the instance when the  Partnership  receives a return of cash funds under
the Purchase  Agreement  due to an  adjustment  to the Purchase  Price (in which
event the General Partner shall cause the  Partnership to refund  immediately to
the Partners their respective allocable share of such cash funds).

                                   ARTICLE IV

                          Allocations and Distributions

     Section  4.1.  Allocation  of Profits  and  Losses.  Except as  provided in
Section 4.2,  each item of profit and loss of the  Partnership,  and all related
items of income, gain, loss, deduction and credit for income tax purposes, shall
be allocated for each fiscal year of the  Partnership to the General  Partner in
accordance  with  its GP  Sharing  Percentage,  and to the  Limited  Partner  in
accordance  with  its  LP  Sharing  Percentage;   provided,  however,  that  all
Catastrophe  Costs  and any  deductions  or  losses  relating  thereto  shall be
allocated to the General  Partner.  The General Partner shall make the foregoing
allocations as of the last day of each fiscal year,  taking into account whether
and when the end of the Phase I Period has occurred.

     Section 4.2. Special Allocations.

     (a) 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 shall be allocated to the General Partner in accordance
with its GP Sharing Percentage and to the Limited Partner in accordance with its
LP Sharing Percentage at the time of the acquisition of the Depletable Property,
and the amount  realized  on the sale or other  disposition  of each  Depletable
Property  shall  be  allocated  first  to the  Partners  in  proportion  to each
Partner's  respective  share of the Simulated  Basis in the Depletable  Property
sold,  and then in such amounts as to cause,  as nearly as  possible,  the total
amount realized from such sale or disposition allocated to the Partners to be in
proportion to the amounts they are entitled to receive under Section 4.3.

     (b) 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

                                       21
<PAGE>
     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.

     (c) Notwithstanding  any of the foregoing  provisions of this Article IV 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 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.

     (d) 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 4.2 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 (c) of
this  Section 4.2,  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

                                       22
<PAGE>
     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 4.2(d),
the Adjusted  Capital  Account  balance of the Deficit Partner 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 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  4.2(d);  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.

     Section 4.3. Distributions.

     (a) Within five 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)  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, 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.

     (c) 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.

     (d) Nothing contained in this Section 4.3 shall relieve the General Partner
from its  obligation  to bear 100% of  Catastrophe  Costs  pursuant  to  Section
4.1(a), and any Catastrophe Costs

                                       23
<PAGE>
     shall be charged against and reduce the GP Monthly Cash  Distribution  only
and shall have no impact on the LP Monthly Cash Distribution.

     (e)  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  Assets.   Contemporaneously  with  the
execution and delivery of this Agreement by the Partners, the General Partner is
hereby  authorized  to,  and shall,  (a)  execute  and  deliver on behalf of the
Partnership  that  certain  Purchase  and Sale  Agreement  dated as of even date
herewith (the "Purchase  Agreement") by and between the  Partnership,  as buyer,
and Magnum Hunter Production,  Inc., as seller, and (b) cause the Partnership to
consummate the acquisition of the Assets pursuant thereto.

     Section 5.3. Additional Acquisitions.

     (a) During the 180-day  period  commencing on the date hereof,  the General
Partner and its Affiliates  shall be permitted to acquire for their own separate
account an additional 10% working  interest in any of the Leases  comprising the
Walker Creek Unit.

                                       24
<PAGE>
     (b) Except to the extent  otherwise  provided in subsection (a) above,  if,
during the term of this Agreement,  the General Partner or an Affiliate  thereof
acquires  (or  proposes to acquire) a Lease or Leases  within the Area of Mutual
Interest (in this Section called the "Subject Leases"), the terms and provisions
of this Section 5.3(b) 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 (i) specify the
interest  the General  Partner or its  Affiliates  have  acquired (or propose to
acquire) in the Subject  Leases,  (ii) specify the  purchase  price (or proposed
purchase  price),  (iii)  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,  (iv)
include a summary of the pertinent  geological and geophysical  data relating to
the Subject Leases or proposed  development/Enhanced  Recovery  Operations,  (v)
include financial  projections relating to the Subject Leases and any internally
or externally prepared related engineering or reserve reports, (vi) describe the
nature  and  extent of  planned  title  examination  and  property  related  due
diligence (including, without limitation, environmental due diligence) and (vii)
such other  information as the General Partner deems material.  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, the
Partnership  shall acquire the  Applicable  Percentage (as defined in subsection
(c) below) 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).  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 (A) 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 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 (B) 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

                                       25
<PAGE>
     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 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 of either  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.

     (c) As used in subsection (b) above, the term "Applicable Percentage" shall
mean (i) when used with reference to an acquisition  under  subsection (b) of an
interest in the Walker Creek Unit,  50%, and (ii) when used with reference to an
acquisition  under  subsection (b) other than as provided in clause (i) above, a
percentage  computed by reference to the  Partnership's  pro rata portion of the
then existing aggregate interest held by the Partnership and the General Partner
(or an Affiliate of the General  Partner) in the Subject  Leases or the field or
other  applicable  portion or area of the Area of Mutual  Interest  in which the
Subject Leases are located.

     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  in Section  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 Assets or any additional Leases acquired pursuant

                                       26
<PAGE>
     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;  provided,  however,  that all such  sales  shall be upon terms and
conditions  which are the best terms and  conditions  available as determined in
good  faith  by  the  General   Partner   taking  into   account  all   relevant
circumstances,  including  but not limited  to,  price,  quality of  production,
access to 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  Assets.  The General Partner or an
Affiliate,  shall  act  as  operator  in  connection  with  operations  on  each
Partnership  Lease unless (a) another  person is  currently  serving as operator
under an  agreement  to which a Lease is subject or (b) any third party or third
parties (not  Affiliates of the General  Partner)  jointly owning such Lease and
with a controlling  interest will not otherwise  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
which are  reasonably  available to it to cause the actual  operator to properly
develop,  maintain and operate such Leases. 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 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. In no event shall the terms of any  operating or similar  agreement
under which the General  Partner or an Affiliate is  designated as operator 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).  The General Partner,  or
any  Affiliate,  shall not  substitute  another  party as operator or assign its
obligations as operator with respect to any  Partnership  Lease where it acts as
operator,  unless the Limited Partner  requests in the event the General Partner
is removed as such pursuant to Section 9.4 or the Limited Partner  dissolves the
Partnership  pursuant to any of subsections (c), (e), (f), (g) or (i) of Section
10.1 (and the General Partner agrees to use its reasonable best efforts to cause
the person designated by the Limited Partner to be the successor operator).

     Section 5.7. Hedge  Arrangement.  The General Partner  covenants and agrees
that, at the request of the Limited Partner,  the General Partner will cause the
Partnership  to hedge up to 85% of (a) the  Partnership's  proved  producing gas
reserves attributable to the Assets for not

                                       27
<PAGE>
     less than 60 months and (b) oil reserves attributable to the Assets for the
period  of not  less  than  24  months,  on such  terms  and  conditions  as are
satisfactory to the Limited  Partner.  The General Partner  covenants and agrees
that,  at the request of the Limited  Partner,  it will execute on behalf of the
Partnership such additional  Hedging  Transactions of the  Partnership's  proved
producing reserves attributable to the Assets and any additional Leases acquired
pursuant to the terms hereof on such terms and conditions as are satisfactory to
the Limited Partner. Any Hedging Transaction  contemplated  hereunder shall be a
"hedging transaction" as described in Treasury Regulation  ss.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 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 ss.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 (in this Section,
"EH&S") program (in this Section, the "EH&S Program"),  including regular review
and  evaluations,  aimed at ensuring  that the  Partnership's  operations on the
Assets 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:  (i)  identification  of environmental  concerns
associated with any  environmental  regulations  applicable to the Partnership's
operations;  (ii) adoption and  implementation  of an  environmental  management
system to assess and  control  the  environmental  impacts of the  Partnership's
operations;  and (iii)  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 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.

                                       28
<PAGE>
                                   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
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 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;

                                       29
<PAGE>
     (d)  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 $10,000 in proceeds  received by the  Partnership  or (iv) for such Leases or
interests  therein  or other  assets 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,
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;

     (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 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 Partners' 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;

                                       30
<PAGE>
     (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  (i) the General  Partner or an
Affiliate (including Gruy Petroleum Management Company) from serving as operator
in accordance with Section 5.6 or (ii) the Partnership  contracting  with Hunter
Gathering,  Inc.,  an  Affiliate  of the  General  Partner,  for the  gathering,
transporting,  processing and marketing of Partnership production, provided that
any charges to the  Partnership  by such Affiliate for such services shall be no
less favorable to the  Partnership  than those  available  from unrelated  third
parties in the area engaged in the business of rendering comparable services and
shall in no event exceed the charges  currently being assessed by such Affiliate
as of the date hereof with respect to such production); or

     (o) 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 respects with the terms of this
Agreement  and shall use its best efforts (i) to cause its  Affiliates to comply
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 all applicable
Environmental  Laws) 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.

     (b) With respect to the maintenance, exploration, development and operation
of the Assets and any additional  Leases acquired  pursuant to the terms hereof,
the General Partner shall have the standard of care of a reasonably  prudent and
diligent operator.  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 all activities relating to the conduct of
the business of the  Partnership  and 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

                                       31
<PAGE>
     the General Partner currently engages in and possesses, and agrees that the
General  Partner  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  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 the Limited
Partner 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) the General Partner was not guilty of
a breach of this Agreement,  gross negligence,  willful or wanton misconduct or,
if  applicable,  breach of a  fiduciary  duty owed by the General  Partner  with
respect  to  such  acts  or  omissions,   and  (ii)  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.

     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  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.

                                       32
<PAGE>
     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 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)  Commencing  on the Delivery  Date and subject to the last  sentence of
this subsection (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
the lesser of (i) 1% of Net Operating  Income (as defined  below) for such month
or (ii)  $8,000;  provided,  that  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 or if the General
Partner has been removed as provided herein;  provided further, that 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.  With  respect to the month  during  which the
Delivery  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 Operating  Income" shall mean, with
respect to a given month,  (i) the gross proceeds for such month received by the
Partnership  and  attributable  to any Hedging  Transaction  plus (ii) the gross
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 Assets and any additional Leases acquired
pursuant to the terms  hereof  less (iii) any Hedging  Costs for such month less
(iv) Lease Operating and Production Costs for such month less (v) direct, third-
party out of pocket costs and expenses  reasonably  incurred in connection  with
the  administration  of the  Partnership  for such  month,  including  the costs
referenced in Section 6.6(a).  Notwithstanding  the foregoing,  if at the end of
any  calendar  year  during  the term of the  Partnership  (or  portion  of such
calendar year if the Partnership is in existence for less than the full calendar
year), X is less than Y (with "X" being equal to the aggregate  Management  Fees
actually  paid to the  General  Partner  for  such  calendar  year  (or  portion
thereof), and "Y" being equal to the lesser of (A) 1% of aggregate Net Operating
Income for such calendar year (or portion thereof) or (B) $96,000 (or a pro rata
portion thereof if less than a full calendar year)), then the General Partner

                                       33
<PAGE>
     shall be entitled to receive,  and the Partnership shall pay to the General
Partner, a cash amount equal to the difference between X and Y.

     (c) Except as provided in this  Section  and in Sections  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 Assets  ("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
consultants  retained by the Limited  Partner in  connection  with its  proposed
investment in the  Partnership;  (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
Assets and (iii) the closing of the transactions contemplated 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 or such
other time as shall be mutually agreed upon by the Partners.  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  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  upon  the
Partnership's insurance coverage as provided above.

     Section 6.9. Tax Elections.

                                       34
<PAGE>
     (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; and

     (vi) 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 be 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 Assets 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.

     Section  6.10.  Tax Returns.  The General  Partner shall prepare and timely
file 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. 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

                                       35
<PAGE>
     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 is in default in the  performance  or  observance of any
material agreement,  covenant, term, condition or obligation hereunder, (c) 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 (d) 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 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 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  dissolution and
winding up by decree of court as provided  for in the Act,  (c) consult  with or
advise the General

                                       36
<PAGE>
     Partner  and (d)  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. 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 copy
any such data or information (or studies,  maps,  evaluations or reports derived
therefrom)  which  relates to the Assets 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.  Notwithstanding  the  foregoing,  the
Limited Partner shall not have the right to inspect, review or copy geophysical,
geological  and other similar data and  information  if the  Partnership  or the
General  Partner is subject to a valid,  bona fide  agreement  prohibiting  such
inspection,  review or copying. If requested by the Limited Partner, the General
Partner shall attempt to obtain an amendment or waiver of any such  agreement to
permit such data or other information to be provided to the Limited Partner upon
the execution by the Limited Partner of a similar agreement

                                       37
<PAGE>
     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 other 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 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

                                       38
<PAGE>
     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  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
                                       39
<PAGE>
     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 ss. 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  ss.
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,  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 Assets  and any  additional
Leases acquired  pursuant to the terms hereof,  except  succeeding  reports need
contain only material changes (if any) regarding the Assets 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
                                       40
<PAGE>
     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 for which  such
schedule  is given,  (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 60 days  after the end of each  month for which  such
report is given and  prepared  on a  production  month  basis,  a schedule  with
respect to such month and for all months of the Partnership's term prior to such
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  engineering  report with respect to
the Assets as of May 1, 2000, prepared by Cawley,  Gillespie & Associates,  Inc.
and identified in writing by the Partners on the Delivery Date.

     (e)  Quarterly  within 60 days after the end of each fiscal  quarter of the
Partnership  and  annually  within 120 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,  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  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

                                       41
<PAGE>
     independent  certified  public  accountants  for the  Partnership  shall be
Deloitte & Touche LLP or such other  nationally  recognized  firm of independent
certified  public  accountants as shall be designated by the General Partner and
approved by the Limited Partner.

     (f)  Annually  within  90 days  after  the end of each  fiscal  year of the
Partnership,  beginning with the fiscal year ending  December 31, 2000, 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.

     (g)  Promptly  upon  their  becoming  available,  copies  of all  financial
statements, reports, notices and proxy statements sent by the General Partner to
its  stockholders and all  registration  statements,  periodic reports and other
statements  filed by the General  Partner  with any  securities  exchange or any
similar governmental authority.

     (h)  Quarterly,  within 45 days after the end of each fiscal quarter of the
Partnership, a description and the status of any environmental investigation and
remediation activities then being conducted by the Partnership.

     (i)  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 the
best of its knowledge, 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).

     (j) Such other  reports and  financial  statements  as the General  Partner
shall determine or as the Limited Partner shall reasonably  request from time to
time.

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

                                       42
<PAGE>
     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 $250,000,000,
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.  The Limited Partner
shall  have on demand  true and full  information  of all things  affecting  the
Partnership  and its  activities  and a formal  account of  Partnership  affairs
whenever circumstances render it just and reasonable. During normal and 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 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 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 $50,000 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.
                                       43
<PAGE>
                                   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; (ii) the General Partner shall have given its
consent to such assignment  (which consent shall not be  unreasonably  withheld)
and (iii) 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. In the event of multiple assignees,  the General
Partner  shall have the right to request that one person be designated to act on
behalf of all assignees.

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

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<PAGE>
     Section 9.2.  Assignment  by General  Partner.  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)
a default  by the  General  Partner in the  performance  or  observation  of any
material agreement,  covenant, term, condition or obligation hereunder;  (iii) 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 any material respect on the date as
of which made;  (iv) 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); (v) a Change in Control; (vi) a default by Parent in the
performance  or  observation  of any  agreement,  covenant,  term,  condition or
obligation of the Guaranty; or (vii) a representation or warranty made by Parent
or by Parent or any of its officers in any writing  furnished in connection with
or pursuant to this  Agreement  or the  Guaranty  shall be false in any material
respect on the date as of which made.

     (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
only if and 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

                                       45
<PAGE>
     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 9.4, 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
to be received after Cumulative  Payout) 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  participation in the income,  gain, loss, credits or distributions of
the  Partnership,  (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

                                       46
<PAGE>
     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  (b) above,  the
closing of the purchase and sale of an Offered  Interest shall take place on the
fifteenth  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.

                                    ARTICLE X

                    Dissolution, Liquidation and Termination

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

     (a) The occurrence of December 31, 2020.

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

                                       47
<PAGE>
     (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 defaulted in
the  performance  or  observation  of any material  agreement,  covenant,  term,
condition or obligation hereunder, or (iii) 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 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 (i) the General Partner has breached
Section 9.2 or (ii) the General Partner has merged or consolidated  with another
entity without the prior written consent of the Limited Partner.

     (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.

     (h) The  election of the Limited  Partner by written  notice to the General
Partner (i) upon a default by Parent in the  performance  or  observation of any
agreement,  covenant, term, condition or obligation under the Guaranty,(ii) if a
representation or warranty made by Parent or by Parent or any of its officers in
any writing  furnished in connection  with or pursuant to this  Agreement or the
Guaranty shall be false in any material respect on the date as of which made, or
(iii) upon the occurrence of any of the events  described in Section  4.02(a)(4)
or  Section  4.02(a)(5)  of the Act with  respect  to Parent  (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).

     (i) The  election of the Limited  Partner by written  notice to the General
Partner upon a Change in Control.

     (j) The  occurrence  of any other  event  which  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

                                       48
<PAGE>
     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): (A) and such breach,
event or election occurs prior to Cumulative  Payout,  all interests and amounts
which the General Partner would otherwise receive under Section 10.3 (as General
Partner, unless a limited partnership interest is held by the General Partner as
a result of  Section  9.4 of this  Agreement  if the  General  Partner  has been
removed for cause) shall be reduced by 90%;  and (B) and such  breach,  event or
election  occurs after  Cumulative  Payout,  all interests and amounts which the
General Partner would otherwise  receive under Section 10.3 (as General Partner,
unless a limited partnership interest is held by the General Partner as a result
of Section 9.4 of this  Agreement  if the General  Partner has been  removed for
cause)  shall be reduced by 15%.  The  distribution  to the  Limited  Partner of
assets  under the  immediately  preceding  sentence  which  would  otherwise  be
distributable  to the General Partner in accordance with this Section 10.2 shall
constitute  liquidated  damages to the Limited  Partner  for a violation  by the
General  Partner  prior to  Cumulative  Payout  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 as provided for in Section 8.03 of the Act 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.

     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 one of the events specified in
Section 10.1(c),(e),  (f), (g), (h) or (i) has occurred as a result of an act by
the General Partner, 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. The steps
to be accomplished by the liquidator are as follows:

     (a) As  promptly  as  possible  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). After

                                       49
<PAGE>
     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 after receipt by the Limited  Partner of notice
that the liquidator has paid or made provision for all debts and  liabilities of
the Partnership) 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  4.3,  taking  into  account  whether the end of the Phase I Period 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
distribute  all remaining  cash and property to the Partners in the  percentages
provided in Section 4.3 with any distribution of property (valued as of the date
of distribution at its fair market value by the appraiser selected in the manner
provided  above)  being  treated  as a  distribution  of cash  for  purposes  of
determining  whether the end of the Phase I Period has occurred or will occur as
a result of such  distribution.  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 any distributions of property,  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.  It is intended that the foregoing
distributions  to each  Partner  will be  equal  to  each  Partner's  respective
positive  capital  account  balance as  determined  after  giving  effect to the
foregoing  adjustments  and to all  adjustments  attributable  to allocations of
items of income, gain, loss and deduction realized by the Partnership during the
taxable year in question and all adjustments  attributable to contributions  and
distributions of money and property effected prior to such distribution.  To the
extent  that  any such  Partner's  positive  capital  account  balance  does not
correspond to such distribution, the allocations provided for in Section 4.1 and
Section  4.2 shall be  adjusted,  to the least  extent  necessary,  to produce a
capital account balance for the Partner which  corresponds to the amount of such
distribution.  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 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 ss.  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

                                       50
<PAGE>
     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.

     Section 10.5. Certain Additional Agreements Regarding Piggyback Rights.

     (a) In the event the General Partner receives an offer to purchase all or a
portion of its Retained  Outside  Interest,  the General  Partner agrees that it
will not  consummate  any such  sale  unless  the  proposed  purchaser  has also
submitted a bona fide written offer to the Partnership to purchase an equivalent
pro rata portion of Partnership's  interest in the same assets on the same terms
and  conditions  as those offered to the General  Partner  (except to the extent
proportionately  adjusted to take into  account the  relative  interests  of the
parties in such assets).

     (b) In the event the  Partnership  receives an offer to  purchase  all or a
portion  of its  assets,  the  Partners  agree  that  the  Partnership  will not
consummate any such sale unless the proposed purchaser has also submitted a bona
fide written  offer to the General  Partner to purchase an  equivalent  pro rata
portion of the General Partner's  interest in the same assets (which interest is
a part of the Retained  Outside  Interest) on the same terms and  conditions  as
those offered to the Partnership (except to the extent proportionately  adjusted
to take into account the relative interests of the parties in such assets).

                                       51
<PAGE>
                                   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:

     (a) The General Partner is a corporation  duly organized,  validly existing
and in good standing under the laws of the State of Texas.

     (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  corporate
action,  and no other director or shareholder  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 corporate 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  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 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.

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<PAGE>
     (h)  No  consent,  approval,   authorization  or  order  of  any  court  or
governmental  agency  or  authority  or of any  third  party  which 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  finder  employed  or  retained  by the  General  Partner  in
connection with the Partnership or this Agreement.

     (j) As of the date hereof none of the financial statements or other written
documents or information delivered herewith or heretofore by or on behalf of the
General  Partner or Parent to the Limited Partner in connection with the General
Partner,  Parent, this Agreement,  the Assets 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,  Parent or the Assets (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 foresee) materially  adversely
affect (i) the  business,  property or assets,  or  financial  condition  of the
General  Partner or Parent or (ii) the Assets,  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  Partner or
Parent prior to the date hereof in connection with the transactions contemplated
hereby.

     (l) 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 come  within  the
registration  requirements  of the  Securities  Act of 1933, as amended,  or any
applicable state blue sky laws.

     (m) 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.

     (n) 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

                                       53
<PAGE>
     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  subsequent  to the Delivery  Date,  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.

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

     (a) The Limited  Partner is duly  organized,  validly  existing and in good
standing under the laws of its state of incorporation.

     (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 Certificate of Incorporation or Bylaws, 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) As of the Delivery  Date,  it is a  wholly-owned  subsidiary of General
Electric Capital Corporation.

                                       54
<PAGE>
                                   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
or facsimile  (provided that such  telegram,  telex or facsimile is confirmed by
expedited delivery service in the manner previously  described).  Each Partner's
address for notices and other  communications  hereunder shall be that set forth
opposite such Partner's  signature  hereto.  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.

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

                                       55
<PAGE>
     Section 12.8. Exhibits. Exhibits 2.1--Cash Factor Discount Table, 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.

     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,  each of which shall be deemed an original  and all of which shall
constitute but one and the same instrument.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       56
<PAGE>
     IN WITNESS  WHEREOF,  the undersigned has executed this Agreement as of the
day and year first above written.


                                            GENERAL PARTNER:

                                            MAGNUM HUNTER PRODUCTION, INC.


                                            By:
                                               -----------------------------


                                            ADDRESS FOR NOTICE PURPOSES:

                                            600 Las Colinas Blvd., Suite 1100
                                            Irving, Texas  75039
                                            Attention: Chris Tong
                                            Telecopy No.: (972)401-3110


     SIGNATURE   PAGE--Agreement  of  Limited  Partnership   providing  for  the
formation of Mallard Hunter L.P.

                                       57
<PAGE>
     IN WITNESS  WHEREOF,  the undersigned has executed this Agreement as of the
day and year first above written.

                                            LIMITED PARTNER:

                                            TIFD III-X INC.


                                             By:
                                                -----------------------


                                             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
























     SIGNATURE   PAGE--Agreement  of  Limited  Partnership   providing  for  the
formation of Mallard Hunter L.P.

                                       58