PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
                        AGREEMENT OF LIMITED PARTNERSHIP

                                TABLE OF CONTENTS

                                   ARTICLE ONE

Defined Terms                                                     A-1

                                   ARTICLE TWO

Name, Place of Business and Office; Term
Section 2.1       Name, Place of Business and Office, Agent       A-10
Section 2.2       Purpose                                         A-11
Section 2.3       Term                                            A-11

                                  ARTICLE THREE

Partners and Capital
Section 3.1       General Partner                                 A-11
Section 3.2       Limited Partner and Unit Holders                A-12
Section 3.3       Application of Capital Contributions            A-12
Section 3.4       Certain Returns of Capital                      A-12
Section 3.5       Partnership Capital                             A-13
Section 3.6       Liability of Partners                           A-13

                                  ARTICLE FOUR

Management
Section 4.1       Management and Control of the Partnership       A-14
Section 4.2       Authority of the General Partner                A-14
Section 4.3       Sales, Purchases and Operation of Producing
                  Properties; Additional Financing                A-19
Section 4.4       Prohibited Transactions                         A-23
Section 4.5       Restrictions on the Authority of the
                  General Partner                                 A-24
Section 4.6       Construction of Gas Gathering Lines             A-26
Section 4.7       Contracts With the General Partner and
                  Affiliates                                      A-26
Section 4.8       Farmouts                                        A-27
Section 4.9       Other Operations                                A-27
Section 4.10      Prosecution, Defense and Settlement of
                  Claims; Indemnification                         A-28
Section 4.11      Duties and Obligations of the General
                  Partner                                         A-29
Section 4.12      Compensation of the General Partner             A-30
Section 4.13      Dealer Manager                                  A-31

                                  ARTICLE FIVE

Allocations and Distributions
Section 5.1       Allocation of Costs and Expenses                A-31
Section 5.2       Allocation of Revenues                          A-32
Section 5.3       Allocations Among Unit Holders                  A-33
Section 5.4       Capital Accounts                                A-34
Section 5.5       Allocations for Federal Income Tax Purposes     A-37
Section 5.6       Minimum Interest of General Partner             A-38
Section 5.7       Distributions                                   A-38


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                                   ARTICLE SIX

Withdrawal or Removal of General Partner or General Partner's
Interest in Partnership Properties
Section 6.1       Withdrawal of General Partner or General
                  Partner's Interest in Partnership Properties    A-38
Section 6.2       Assignment of General Partner Interest          A-39
Section 6.3       Removal of General Partner                      A-40
Section 6.4       Option to Purchase Interest From Former
                  General Partner                                 A-40
Section 6.5       Power to Admit Successor General Partner        A-40
Section 6.6       Incapacity of the General Partner               A-41
Section 6.7       Termination of Contracts with General Partner   A-41

                                  ARTICLE SEVEN

Assignment of Limited Partner Interests to Unit Holders
Section 7.1       Assignments of the Interests of Depositary      A-42
Section 7.2       Rights of Unit Holders                          A-43
Section 7.3       Conversion of Units into Limited Partner
                  Interests                                       A-44

                                  ARTICLE EIGHT

Transferability of Units
Section 8.1       Assignments of Units                            A-44
Section 8.2       Substituted Limited Partners                    A-47
Section 8.3       Eligible Investors                              A-48
Section 8.4       Death, Incompetency or Dissolution of a
                  Unit Holder                                     A-49

                                  ARTICLE NINE

Dissolution, Liquidation and Termination of the Partnership
Section 9.1       Events Causing Dissolution                      A-49
Section 9.2       Liquidation                                     A-50

                                   ARTICLE TEN

Books and Records; Accounting; Tax Elections; Etc.
Section 10.1      Books and Records                               A-52
Section 10.2      Accounting Basis for Tax and Reporting
                  Purposes; Fiscal Year                           A-53
Section 10.3      Bank Accounts                                   A-53
Section 10.4      Reports                                         A-53
Section 10.5      Elections                                       A-55

                                 ARTICLE ELEVEN

Amendments; Merger
Section 11.1      Proposal and Adoption of Amendments Generally   A-55
Section 11.2      Amendments on Admission or Removal of Partner   A-56
Section 11.3      Merger                                          A-57
Section 11.4      Exchange Offers                                 A-57


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<PAGE>



                                 ARTICLE TWELVE

Consents, Voting and Meetings
Section 12.1      Methods of Giving Consent                       A-58
Section 12.2      Meetings of Unit Holders                        A-59
Section 12.3      Limitations on Requirements for Consents        A-59
Section 12.4      Submissions to Unit Holders                     A-59
Section 12.5      Acting Without Concurrence of General Partner   A-59

                                ARTICLE THIRTEEN

The Depositary
Section 13.1      Depositary Receipts                             A-60
Section 13.2      Depositary or Affiliate as Transfer Agent
                  And Registrar                                   A-61
Section 13.3      Duties of Depositary                            A-61
Section 13.4      Depositary Not a Trustee, Issuer, Etc.          A-62
Section 13.5      Indemnification of the Depositary               A-62
Section 13.6      Limitation of Expense Reimbursements            A-63

                                ARTICLE FOURTEEN

Miscellaneous Provisions
Section 14.1      Notification to the Partnership or the
                  General Partner                                 A-63
Section 14.2      Binding Provisions                              A-63
Section 14.3      Applicable Law                                  A-63
Section 14.4      Separability of Provisions                      A-63
Section 14.5      Appointment of the General Partner as
                  Attorney-in-Fact                                A-63
Section 14.6      Entire Agreement                                A-64
Section 14.7      Paragraph Titles                                A-64
Section 14.8      Counterparts                                    A-64



                                     -iii-
<PAGE>
         PAINEWEBBER/GEODYNE ENERGY INCOME LIMITED PARTNERSHIP III-E
                        AGREEMENT OF LIMITED PARTNERSHIP

      Agreement of Limited  Partnership,  dated as of December 26, 1990, between
Geodyne Production  Company,  a Delaware  corporation,  as General Partner,  and
Geodyne Depositary Company, a Delaware corporation, as the Limited Partner.

      WHEREAS,  the parties hereto wish to form a limited  partnership under the
Oklahoma  Revised Uniform Limited  Partnership Act pursuant to this Agreement of
Limited Partnership;

      NOW,  THEREFORE,  in  consideration  of the mutual promises and agreements
made  herein,  the  parties,  intending  to be legally  bound,  hereby  agree as
follows:

                                   ARTICLE ONE

                                  DEFINED TERMS

      The  defined  terms  used in this  Agreement  shall,  unless  the  context
otherwise  requires,  have the  meanings  specified  in this  Article  One.  The
singular  shall  include the plural and the  masculine  gender shall include the
feminine, the neuter and vice versa, as the context requires.

      "Accountants" shall mean Ernst & Young or such other nationally recognized
firm of independent  certified public  accountants as shall be engaged from time
to time by the General Partner for the Partnership.

      "Acquisition  Reserve Report" shall mean a Hydrocarbon reserve report made
available to the Partnership prepared by a qualified petroleum  engineering firm
acceptable to the General Partner in connection with the proposed acquisition of
a Producing Property, which shall include statements (i) identifying reserves of
Hydrocarbons  referred to in such report as Proved Developed Producing Reserves,
Proved Developed  Non-Producing  Reserves or Proved Undeveloped Reserves, as the
case may be,  and  identifying  all  computations  and  determinations  made for
purposes of such report, including,  without limitation,  the present and future
prices for  Hydrocarbons and the present and future costs to produce and develop
such  Hydrocarbons  used in such  computations  and  determinations,  (ii)  with
respect  to the  determination  of the  nature  and  extent of the  reserves  of
Hydrocarbons  reflected  In such  report,  that  the  collection,  analysis  and
evaluation  of the basic  physical data upon which such  determination  is based
were performed by such  qualified  petroleum  engineering  firm or, if such data
were collected by another Person, that such qualified petroleum engineering firm
has made inquiry with respect to the methods employed in such collection,  (iii)
specifying the respective amounts of Proved Developed Producing Reserves, Proved
Developed  Non-Producing  Reserves  and Proved  Undeveloped  Reserves  contained
therein, and (iv) indicating such qualified petroleum engineering firm's opinion
as to the  respective  estimated  present  values of future net revenues of each
category of reserves  contained  therein  determined in accordance with criteria
satisfactory  to the General  Partner and  otherwise  in  accordance  with sound
engineering  and industry  practices,  including such standards and practices as
may be  promulgated  by the  Society  of  Petroleum  Engineers  of the  American
Institute of Mining and Metallurgical  Engineers. Any such report may state that
such  qualified  petroleum  engineering  firm  expresses no opinion and makes no
warranty or representation with respect to



                                      A-1
<PAGE>



the proposed  acquisition  of such  Producing  Property and that such  qualified
petroleum  engineering  firm is relying on information  furnished by the General
Partner as to the historical  volumes of any Hydrocarbons  actually produced and
as to the  proposed  ownership  interest of the  Partnership  in such  Producing
Property

      "Acquisitions  and  Operations  Fee"  shall  mean  the  fee  paid  by  the
Partnership to the General  Partner  pursuant to Section 4.12B of this Agreement
in connection with the Partnership's acquisition of Producing Properties and the
conduct of its business operations.

      "Act" shall mean the Oklahoma Revised Uniform Limited  Partnership Act, as
amended from time to time.

      "Activation"  or "Activated"  shall mean the date on which the Certificate
of Limited Partnership is filed with the Oklahoma Secretary of State.

      "Affiliate"  shall mean,  when used with reference to a specified  Person:
(a) any Person directly or indirectly owning, controlling, or holding with power
to vote  10% or more  of the  outstanding  voting  securities  of the  specified
Person;  (b) any Person 10% or more of whose  outstanding  voting securities are
directly  or  indirectly  owned,  controlled,  or held with power to vote by the
specified Person; (c) any Person directly or indirectly controlling,  controlled
by, or under common control with, the specified Person; (d) any Person who is an
officer,  director,  partner or trustee of, or serves in a similar capacity with
respect to, the specified Person or of which the specified Person is an officer,
director,  partner or trustee,  or with  respect to which the  specified  Person
serves  in a  similar  capacity;  and  (e) the  spouse  or any  relative  of the
specified Person sharing the same household.  Notwithstanding the foregoing,  no
Person shall be deemed to be an Affiliate  solely by reason of its  ownership of
units or limited partnership interests in a limited partnership.

      "Affiliated  Program" shall mean a drilling or income program  (whether in
the  form of a  limited  partnership,  general  partnership,  joint  venture  or
otherwise),  whether currently existing or hereafter formed,  interests in which
were or are  offered to Persons or  entities  not engaged in a trade or business
within the oil and gas industry (other than by virtue of its participation in an
Affiliated  Program) and of which the General  Partner or an  Affiliate  thereof
serves as general partner, venturer, sponsor or manager.

      "Agreement" shall mean this Agreement of Limited Partnership as originally
executed and as amended from time to time.

      "Capital Account" shall mean, as to any Partner,  an account maintained on
the books of the  Partnership  in accordance  with the provisions of Section 5.4
below.

      "Capital  Contribution"  shall mean the cash  contribution of a Partner to
the Partnership.

      "Certificate of Limited Partnership" shall mean the certificate of limited
partnership,  and any and all amendments thereto and restatements thereof, filed
on behalf of the Partnership as required under the Act.



                                      A-2
<PAGE>




      "Code"  shall mean the Internal  Revenue Code of 1986,  as amended (or any
corresponding provisions of succeeding law).

      "Commercial  Well"  shall  mean any  Partnership  Well which is capable of
producing Hydrocarbons in commercial quantities, including those wells which are
shut-in  or  which  have  not  been  abandoned  within  60  days  following  the
commencement of production.  For purposes of this  definition,  production shall
refer to the commencement of the commercial marketing of Hydrocarbons, and shall
not  include  any spot sales of  Hydrocarbon  production  as a result of testing
procedures.

      "Commissions"  shall mean the cash fees payable to the Dealer  Manager and
the Selected  Dealers in connection with their  participation in the offering of
Units.

      "Consent" shall mean the consent of a Person, given as provided in Section
12.1, to do the act or thing for which the consent is  solicited,  or the act of
granting such consent, as the context may require.

      "Dealer   Manager"  shall  mean  PaineWebber   Incorporated,   a  Delaware
corporation.

      "Depositary"   shall  mean   Geodyne   Depositary   Company,   a  Delaware
corporation,  as the sole initial  Limited Partner or any Person who at the time
of reference  thereto has been admitted to the  Partnership  with the consent of
the General Partner as a successor to the interest of Geodyne Depositary Company
in the  Partnership,  which will upon the Activation of the Partnership  acquire
and  hold  on  behalf  of  the  Unit  Holders  the  Limited  Partner   interests
attributable to the Units issued to the Unit Holders.

      "Depositary  Receipt" shall mean a document  issued in registered  form by
the Depositary evidencing the ownership of one or more Units.

      "Development Drilling" shall mean all drilling and completing, or plugging
and abandoning (after a determination  that a well is not a Commercial Well), of
a  Partnership  Well drilled to the same  reservoir  from which  another well or
other  wells  on a  Lease  or  an  offset  Lease  are  being  produced,  or  the
recompletion  of  an  existing   Partnership  Well;  provided,   however,   that
Development Drilling shall not include any Identified Development Drilling.

      "Direct  Administrative  Costs" shall mean the actual and necessary direct
costs attributable to services provided to the Partnership by parties other than
the General Partner or its Affiliates, whether incurred by or for the benefit of
the  Partnership  directly or incurred by the General Partner or its Affiliates,
including the annual audit fees, legal fees and expenses,  the cost of reviewing
tax  returns  and  reports,  the cost of  evaluations  prepared  by  Independent
Petroleum  Engineers  pursuant to Section l0.4C of this  Agreement and all other
such costs directly  incurred by or for the benefit of the  Partnership.  Direct
Administrative  Costs shall not include any  Organization  and Offering Costs or
any General and Administrative Costs.



                                      A-3
<PAGE>




      "Eligible  Investor"  shall  mean a  person  who is  qualified  to hold an
interest in oil and gas Leases on federal lands,  including offshore areas under
federal laws and regulations in effect from time to time. As of the date of this
Agreement,  the term  "Eligible  Investor"  means:  (i) a citizen  of the United
States who has attained the age of majority under the laws of the state in which
he resides,  (ii) an  association  (including a  partnership,  joint  tenancy or
tenancy in common)  organized or existing under the laws of the United States or
any state or territory thereof,  all of the members of which are citizens of the
United  States or (iii) a  corporation  organized  under the laws of the  United
States or any state or territory thereof,  of which corporation,  to the best of
its  knowledge,  not more than 5% of the voting stock,  or of all the stock,  is
owned or controlled by citizens of countries that deny to United States citizens
privileges to own stock in  corporations  holding oil and gas Leases  similar to
the  privileges  of  non-United  States  citizens  to own stock in  corporations
holding an interest in federal Leases, and, in each case, whose interest, direct
or  indirect,  in federal oil and gas Leases,  applications,  offers and options
therefor does not exceed 246,000 acres in the same state,  of which no more than
200,000 acres are under option,  nor does it exceed 300,000 acres in each of the
northern and southern leasing districts of Alaska, of which no more than 200,000
acres are held under option in each of such districts.

      "Engineering  Review Letter" shall mean a document prepared by a qualified
petroleum  engineering firm acceptable to the General Partner in connection with
the proposed acquisition of a Producing Property, which shall include statements
indicating that (I) such qualified  petroleum  engineering  firm has reviewed an
oil  and gas  reserve  report  prepared  by the  engineering  staff  of  Geodyne
Resources, Inc. or an Affiliate, (ii) in the opinion of such qualified petroleum
engineering  firm,  the reserve  report was  prepared in  accordance  with sound
engineering  and industry  practices,  including such standards and practices as
may be  promulgated  by the  Society  of  Petroleum  Engineers  of the  American
Institute of Mining and Metallurgical  Engineers,  and (iii) with respect to the
determination of the nature and extent of the reserves of Hydrocarbons reflected
in such report, such qualified petroleum  engineering firm has made inquiry with
respect to the methods  employed in the  collection,  analysis and evaluation of
the basic physical data upon which such determination is based.

      "Farmout"  shall  mean an  arrangement  whereby  the  owner  of a Lease or
Working  Interest agrees to assign his interest in certain  specific  acreage to
the assignee,  retaining some interest such as an overriding  royalty  interest,
oil and gas payment,  offset  acreage or other type of interest,  subject to the
drilling of one or more specific  wells or other  performance  as a condition of
the assignment.

      "Fiscal Year" shall mean the calendar year.

      "General and  Administrative  Costs" shall mean all  customary and routine
legal,  accounting,  data  processing,  depreciation  (other  than  depreciation
relating  to real  property),  geological,  engineering,  travel,  office  rent,
telephone, secretarial, employee compensation and benefits, and other items of a
general and administrative nature, whether like or unlike the foregoing, and any
other  incidental   expenses   reasonably   necessary  to  the  conduct  of  the
Partnership's  business,  and generated by the General  Partner or any Affiliate
other than an  Affiliated  Program  computed on a cost basis,  determined by the
General Partner in accordance with generally accepted accounting principles



                                      A-4
<PAGE>



and subject to review by the  Accountants in connection with the annual audit of
the Partnership and its Affiliates.  General and Administrative  Costs shall not
include any Direct  Administrative  Costs or Organization  and Offering Costs of
the Partnership.

      "General  Partner"  shall  mean  Geodyne  Production  Company,  a Delaware
corporation,  acting in such  capacity,  and any  other  Person  admitted  as an
additional or substituted  General Partner pursuant to the provisions of Article
Six of this Agreement.

      "Hydrocarbons" shall mean crude oil, natural gas, condensate,  natural gas
liquids and other liquid or gaseous  hydrocarbons  and any minerals  produced in
association therewith.

      "Identified  Development Drilling" shall mean all drilling and completing,
or  plugging  and  abandoning  (after  a  determination  that  a  well  is not a
Commercial  Well),  of a  Partnership  Well  drilled  by or  on  behalf  of  the
Partnership to a reservoir on a Lease or an offset Lease  constituting  all or a
portion of a Producing  Property or the recompletion of an existing  Partnership
Well,  where (I) the drilling or recompletion of such Partnership Well commences
after the  acquisition  of such  Producing  Property by the  Partnership  and is
conducted  in  order  to  commence   production  of  Hydrocarbons   from  Proved
Undeveloped Reserves identified in the Acquisition Reserve Report or Engineering
Review Letter  prepared in connection  with such  Producing  Property,  (ii) the
costs of development of the Proved Undeveloped  Reserves were taken into account
in such Acquisition  Reserve Report or Engineering Review Letter in valuing such
Proved Undeveloped Reserves attributable to such Producing Property, and (iii) a
portion  of the cost paid by the  Partnership  for such  Producing  Property  is
attributed by such  Acquisition  Reserve Report or Engineering  Review Letter to
such Proved Undeveloped  Reserves.  The term,  Identified  Development Drilling,
shall also refer to any Partnership  Wells drilled or recompleted on a Producing
Property subsequent to the initial Identified  Development Drilling conducted on
such Producing  Property in order to commence  production of  Hydrocarbons  from
Proved  Undeveloped  Reserves  (in addition to those  identified  in the related
Acquisition  Reserve  Report  or  Engineering  Review  Letter)  which  have been
categorized by the General Partner as such by virtue of production obtained from
prior Identified  Development Drilling conducted on such Producing Property. Any
reference to costs incurred in connection with Identified  Development  Drilling
shall  include the interest,  commitment  fees and other  financing  charges and
expenses of Partnership  borrowings  incurred to finance Identified  Development
Drilling.

      "Improved Recovery" shall mean all methods of supplementing natural forces
and mechanisms of primary recovery or otherwise increasing the ultimate recovery
from a  Partnership  Property,  including,  but not limited to, water  flooding,
pressure maintenance,  gas cycling, fluid injection,  polymer flooding, chemical
flooding and the use of miscible displacement fluids.

      "Incapacity"  or  "Incapacitated"  shall  mean the  entry of any order for
relief  under  any  bankruptcy  law  (except  that,  in the case of the  General
Partner, the term "bankruptcy" shall mean only being subject to Chapter 7 of the
Bankruptcy Code of 1984), the adjudication of interdiction,  of incompetence, or
of insanity,  or the death,  dissolution or termination (other than by merger or
consolidation  under  which the  surviving  entity  agrees to assume  all of the
obligations and  responsibilities of the merged or consolidated Person set forth
in this Agreement), as the case may be, of any Person.



                                      A-5
<PAGE>



      "Independent  Petroleum  Engineer"  shall mean a Person  with no  material
relationship  to the General Partner or its Affiliates who is in the business of
rendering  fair  market  value  opinions  regarding  the  value  of oil  and gas
properties  based upon the  evaluation  of all  pertinent  economic,  financial,
geologic and engineering information available to the General Partner.

      "Investment  Income" shall mean all interest and dividend income earned on
temporary  investments of the Partnership at any time prior to the time at which
an amount equal to the Capital  Contributions  to the Partnership  available for
the acquisition of Producing  Properties have been (i) expended or (ii) returned
pursuant to Section 3.4 of this Agreement.

      "I/P Partnership" shall mean a partnership formed as a part of the program
captioned "PaineWebber/Geodyne Institutional/Pension Energy Income Partners" and
any subsequent Affiliated Program formed by the General Partner or any Affiliate
for investment primarily by pension and other tax-exempt plans and accounts.

      "Lease"  shall  mean a lease,  mineral  interest,  royalty  or  overriding
royalty  covering  Hydrocarbons  (or a  contractual  right  to  acquire  such an
interest),  or an undivided  interest therein or portion thereof,  together with
all easements, permits, licenses, servitudes and rights-of-way situated upon, or
used or held for future use in connection with, the exploration,  development or
operation of such interest.

      "Limited Partner" shall mean the Depositary and any Substituted  Limited
Partners.

      "Net  Profits  Interest"  shall mean an interest in one or more  Producing
Properties  which  entitles the holder  thereof to a share of the gross revenues
from the production of  Hydrocarbons  from the Producing  Property or Properties
less all operating, production,  development,  transportation,  transmission and
marketing  expenses,  and all  severance,  sales,  ad valorem  and excise  taxes
attributable to such production.

      "Notification"  shall mean a writing,  containing the information required
by this Agreement to be  communicated  to any Person,  hand delivered or sent by
registered or certified mail, return receipt requested, postage prepaid, to such
Person at the last address of such Person  reflected on the official  records of
the  Partnership,  the date of the certified  receipt (or such other evidence of
receipt) therefor being deemed the date of the giving of Notification; provided,
however,  that any written  communication  containing  the  information  sent or
delivered  to the Person and actually  received by the Person  shall  constitute
Notification for all purposes of this Agreement.

      "Operating  Costs" shall mean all expenditures  made and costs incurred by
the Partnership with respect to (I) the production and marketing of Hydrocarbons
from completed  Partnership  Wells,  including labor,  fuel,  repairs,  hauling,
materials,  supplies,  utility charges and other costs incident to or therefrom,
costs of  maintaining  inventories  incidental  to the  operations  of Producing
Properties,  costs of making  transfers of lease and well  equipment to and from
Partnership  Wells, ad valorem and severance taxes,  insurance and casualty loss
expense,  and compensation to well operators or others for services  rendered in
conducting such operations; (ii) the interest, commitment fees and other finance
charges and expenses of



                                      A-6
<PAGE>



Partnership  borrowings  incurred in connection  with  Development  Drilling and
Improved Recovery  projects;  and (iii) processing  facilities,  pipelines,  gas
sales  facilities,   Improved  Recovery  projects,   and  other  procedures  and
facilities  necessary to produce efficiently and market the Hydrocarbon reserves
from a Producing Property, all to the extent such costs and expenditures are not
Property Acquisition Costs.

      "Organization  and  Offering  Costs"  shall  mean all costs  and  expenses
incurred  by the General  Partner  and its  Affiliates  in  connection  with the
organization and activation of the Partnership,  including,  without limitation,
the legal, printing,  accounting and other direct and indirect costs incurred in
connection  with preparing this  Agreement and the  preparation  and filing of a
Certificate  of Limited  Partnership,  the costs  incurred  with  respect to the
registration for offer and sale of the Units under applicable  federal and state
securities  laws, the wholesale  offering and marketing fees and expenses of the
Dealer Manager and a subsidiary of Geodyne Resources, Inc. which is a registered
broker-dealer,  and other front-end fees.  Organization and Offering Costs shall
not include  the  Commissions  paid to the Dealer  Manager or  reallowed  to the
Selected  Dealers,  but  shall  include  fees and  expenses  (including  expense
reimbursements)  paid to Persons in connection with the offering and issuance of
Units, including due diligence expenses.

      "Partner"  shall mean the General  Partner or any  Limited  Partner of the
Partnership.

      "Partnership" shall mean the limited partnership formed hereby.

      "Partnership  Account" shall mean the bank account or accounts established
by the General Partner pursuant to Section 10.3 of this Agreement.

      "Partnership Property" shall mean all interest,  property and right of any
type owned by the Partnership.

      "Partnership  Well"  shall mean any well in which the  Partnership  has an
interest.

      "Payout" shall mean that time at which cash  distributions  have been made
by the  Partnership  to the Unit Holders  (together with their  predecessors  in
interest) in an aggregate  amount equal to $100 for each whole Unit held by each
such Unit Holder.

      "Person" shall mean any  individual,  partnership,  corporation,  trust or
other entity.

      "Prior Limited  Partnership" shall mean any limited partnership  activated
prior to the Activation of the Partnership of which depositary units or units of
limited partnership interest were offered and sold pursuant to the Prospectus or
pursuant to the prospectus  prepared for the  PaineWebber/Geodyne  Energy Income
Program   I,  the   PaineWebber/Geodyne   Energy   Income   Program  II  or  the
PaineWebber/Geodyne   Institutional/Pension   Energy  Income   Partners  or  any
subsequent Affiliated Programs pursuant to which I/P Partnerships are formed.



                                      A-7
<PAGE>




      "Producing  Property"  shall  mean  any  property  (or  interest  in  such
property) with a well or wells capable of producing  Hydrocarbons  in commercial
quantities or properties unitized with such properties or properties adjacent to
such  properties  which are acquired as an incidental part of the acquisition of
such properties. The term also includes well machinery and equipment,  gathering
systems,  storage facilities or processing  installations or other equipment and
property associated with the production of Hydrocarbons. Interests in properties
may  include  Working  Interests,   production  payments,  Royalties  and  other
nonworking and nonoperating interests.

      "Property  Acquisition Costs" shall mean, without duplication,  the sum of
(1) the prices paid by the Partnership or the General Partner or an Affiliate to
an unaffiliated  Person to acquire a Producing  Property  ultimately sold to the
Partnership,  including the price paid to acquire a purchase option with respect
to a Producing Property, lease bonuses and equipment costs associated therewith;
(2) title  insurance or examination  costs,  brokers'  commissions  and finders'
fees, filing fees,  recording fees,  transfer taxes, if any, and like charges in
connection with the acquisition of Producing  Properties;  (3) delay rentals and
ad valorem  taxes paid by the buyer with respect to such property to the date of
its transfer to the Partnership; (4) interest and other financing fees and costs
actually  incurred  by the  General  Partner  or its  Affiliates  to  acquire or
maintain such Producing  Properties  prior to their transfer to the Partnership;
and (5) all reasonable,  necessary and actual  expenses  incurred by the General
Partner  or an  Affiliate  in  connection  with  the  acquisition  of  Producing
Properties  and paid to third  parties who are not  Affiliates  for  geological,
geophysical,  seismic, land, engineering,  drafting, accounting, auditing, legal
and other like  services,  including the  Partnership's  costs  incurred (to the
extent consistent with generally accepted industry standards) in connection with
the  Partnership's  review of proposed  acquisitions  of  Producing  Properties,
whether or not acquired and the  preparation  and review of Acquisition  Reserve
Reports  and  Engineering  Review  Letters,  all  allocated  to the  property in
accordance with the allocation  procedures used by the General  Partner,  any of
its  Affiliates  or the  Partnership;  provided  that the portion of the General
Partner's or  Affiliates'  expenses  allocated to the property,  as set forth in
items (3), (4) and (5),  shall have been  incurred not more than 36 months prior
to the property transaction.

      "Property  Investment  Period" shall have the meaning set forth in Section
5.2.

      "Prospect"  shall mean an area in which the Partnership owns or intends to
own one or more oil and gas  interests  which is  geographically  defined on the
basis  of  geological  data by the  General  Partner  and  which  is  reasonably
anticipated by the General Partner to contain at least one reservoir.

      "Prospectus"  shall mean the  prospectus  pursuant to which the Units were
offered,  including  all  supplements  or amendments  thereto  delivered in such
offering, if any.

      "Proved Reserves" shall mean those quantities of Hydrocarbons, which, upon
analysis of geologic and engineering data,  appear with reasonable  certainty to
be recoverable in the future from known  Hydrocarbon  reservoirs  under existing
economic  and  operating  conditions.  Proved  Reserves  are  limited  to  those
quantities of Hydrocarbons which can be expected, with



                                      A-8
<PAGE>



little doubt, to be recoverable  commercially at current prices and costs, under
existing  regulatory  practices  and with  existing  conventional  equipment and
operating  methods.  Depending  upon their  status of  development,  such Proved
Reserves  shall be subdivided  into the following  classifications  and have the
following definitions:

                 (a) "Proved  Developed  Reserves"  shall mean  Proved  Reserves
      which can be expected to be recovered through existing wells with existing
      equipment and operating methods. This classification shall include:

                       (1)  "Proved  Developed  Producing  Reserves"  which  are
            Proved  Developed  Reserves  which are expected to be produced  from
            existing wells; and

                       (2) "Proved Developed  Non-Producing  Reserves" which are
            Proved Developed  Reserves which exist behind the casing of existing
            wells,  or at minor depths  below the present  bottom of such wells,
            which  are  expected  to be  produced  through  these  wells  in the
            predictable future, where the cost of making Hydrocarbons  available
            for production  should be relatively small compared to the cost of a
            new well.

            Additional   Hydrocarbons   expected  to  be  obtained  through  the
      application  of  Improved  Recovery  techniques  are  included  as "Proved
      Developed  Reserves"  only after  testing by a pilot  project or after the
      operation  of  an  installed  program  has  confirmed  through  production
      responses that increased recovery will be achieved.

                 (b) "Proved Undeveloped Reserves" shall mean all reserves which
      are expected to be recovered  from new wells on undrilled  acreage or from
      existing  wells where a  relatively  major  expenditure  is  required  for
      recompletion.  Such  reserves  on  undrilled  acreage are limited to those
      drilling units offsetting productive units which are reasonably certain of
      production when drilled; provided that Proved Reserves for other undrilled
      units can be claimed where it can be demonstrated with certainty, based on
      accepted  geological,  geophysical and engineering  studies and data, that
      there is continuity of production from an existing  productive  formation.
      No  estimates  for Proved  Undeveloped  Reserves are  attributable  to any
      acreage for which Improved Recovery is contemplated, unless the techniques
      to be employed have been proved effective by actual tests in the same area
      and reservoir.

      "Revenues"  are  the  Partnership's   gross  revenues  from  all  sources,
including interest income, proceeds from sales of production,  the Partnership's
share of revenues from  partnerships  or joint ventures of which it is a member,
proceeds from sales or other  dispositions  of  Hydrocarbon  properties or other
Partnership  assets,  provided that contributions to Partnership  capital by the
Partners  and  the  proceeds  of any  Partnership  borrowings  are  specifically
excluded.

      "Royalty"  shall mean an  interest,  including an  overriding  royalty but
excluding a Net Profits Interest,  in gross production or the proceeds therefrom
which does not require the owner thereof to bear any of the cost of  production,
development operation or maintenance.



                                      A-9
<PAGE>




      "Selected  Dealer"  shall mean a member in good  standing of the  National
Association  of Securities  Dealers,  Inc. which has been selected by the Dealer
Manager to offer and sell the Units.

      "State" shall mean the State of Oklahoma.

      "Subscription Agreement" shall mean the Subscription Agreement in the form
attached to the Prospectus as Exhibit B.

      "Subsequent  Limited  Partnership"  shall  mean  any  limited  partnership
activated after the Activation of the Partnership of which Units are offered and
sold pursuant to the Prospectus.

      "Substituted  Limited  Partner" shall mean any Unit Holder admitted to the
Partnership as a Substituted Limited Partner pursuant to Section 7.3 or Sections
8.1 and 8.2 of this Agreement.

      "Unit"  shall mean an  increment  of the  attributes  of the interest as a
Limited  Partner that is either (I) assigned to a Unit Holder by the  Depositary
and is evidenced by a  Depositary  Receipt or (ii) unless the context  otherwise
requires, is held directly by a Substituted Limited Partner and, in either case,
which increment represents a subscription amount of $100.

      "Unit  Holders"  shall mean any Person who holds  Depositary  Receipts  in
accordance with Section 7.1 or Section 8.1 hereof as reflected in the records of
the Partnership and the Depositary and, unless the context  otherwise  requires,
any Person who becomes a Substituted Limited Partner.

      "Unit  Holders'  Subscriptions"  shall mean the  aggregate  dollar  amount
(initially  subscribed for by Unit Holders) determined by multiplying the number
of Units issued to the Unit Holders by $100.

      "Working  Interest"  shall mean the  interest  (whether  held  directly or
indirectly) in a Lease which is burdened with the obligation to pay some portion
of the expense of production,  development,  operation or maintenance. A Working
Interest does not include a Net Profits Interest.


                                   ARTICLE TWO

                   NAME, PLACE OF BUSINESS AND OFFICE; TERM

      Section 2.1      Name, Place of Business and Office, Agent
      ----------------------------------------------------------

      The  Partnership  shall be  conducted  under the name  PaineWebber/Geodyne
Energy Income Limited  Partnership  III-E.  The business of the Partnership may,
however,  be conducted under any other name deemed necessary or desirable by the
General  Partner  in order to  comply  with  applicable  laws.  The  office  and
principal place of business of the Partnership  shall be c/o Geodyne  Production
Company, 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The
agent for  service  of process on the  Partnership  shall be Geodyne  Production
Company, 320 South Boston Avenue, The Mezzanine, Tulsa, Oklahoma 74103-3708. The
General  Partner may change the principal  place of business and the location of
such office and may establish such additional



                                      A-10
<PAGE>



offices as it deems advisable from time to time; provided,  however, that in the
event the principal place of business of the Partnership  shall be changed,  the
General  Partner shall  provide  Notification  thereof to the Unit Holders.  The
General  Partner shall not be obligated to provide a copy of the  certificate of
limited  partnership  as  filed  with  the  Oklahoma  Secretary  of State to the
Depositary or Unit Holders.  A Unit Holder may obtain a copy of such certificate
of limited  partnership  by making a written  request  therefor  to the  General
Partner.


      Section 2.2  Purpose
      --------------------

      The  business  and purpose of the  Partnership  shall be to acquire,  own,
hold, operate, explore, develop, trade, sell and exchange Hydrocarbon properties
and processing and transportation  facilities and interests therein of all kinds
onshore and  offshore  in the  continental  United  States,  including,  without
limitation,  interests in general or limited  partnerships,  joint  ventures and
other entities that hold or are formed to acquire  interests in such  properties
or interests; to engage in Development Drilling, Identified Development Drilling
or other drilling  operations  specifically  authorized by this  Agreement,  and
enhanced recovery operations thereon; to produce,  process,  transport,  market,
purchase and trade Hydrocarbons and products thereof;  to purchase,  lease, own,
hold, operate, sell and exchange all equipment,  machinery,  facilities, systems
and plans  necessary or  appropriate  for such  purposes;  and to do any and all
things  necessary  or proper in  connection  with or incident  to the  foregoing
activities.

      Section 2.3  Term
      -----------------

      The  Partnership  shall  continue  in force and effect for a period of ten
(10) years from the date of its  Activation,  provided that the General  Partner
may extend the term of the  Partnership for up to five periods of two years each
if it believes each such extension is in the best interests of the Unit Holders,
or until dissolution prior thereto pursuant to the provisions hereof.


                                  ARTICLE THREE

                              PARTNERS AND CAPITAL

      Section 3.1  General Partner
      ----------------------------

      A. The name,  address and Capital  Contribution  of the General  Partner
are set forth in Schedule A which is attached hereto and  incorporated  herein
by reference.

      B. The  General  Partner  shall  not be  required  to make any  additional
Capital  Contribution  except as set forth in the next  sentence and in Sections
3.4 and 9.2C. The General Partner shall  contribute an amount of cash sufficient
to pay its  share of costs  allocated  to it  pursuant  to  Section  5.1 of this
Agreement  as such costs are  incurred to the extent that the amount of Revenues
allocated  to it (and/or the amount of  Partnership  borrowings  incurred on its
behalf) is insufficient to pay such costs.



                                      A-11
<PAGE>




      Section 3.2  Limited Partner and Unit Holders
      ---------------------------------------------

      A.     The   name,    address   and   Capital    Contribution   of   the
Depositary  as Limited  Partner  are set forth in Schedule A which is attached
hereto and incorporated herein by reference.

      B.     Neither the  Depositary  nor any Unit Holder shall be required to
make any additional Capital Contribution to the Partnership.

      C. The Depositary shall engage in no business  activity and shall incur no
liabilities  other than acting as Depositary  for the  Partnership  or any other
limited  partnership  that is an Affiliated  Program.  The Depositary  shall not
amend its Certificate of  Incorporation  or By-laws without the prior Consent of
the Unit Holders holding a majority of the outstanding Units.

      Section 3.3  Application of Capital Contributions
      -------------------------------------------------

      The General Partner shall deposit in the  Partnership  Account the Capital
Contributions  and apply such  Capital  Contributions  to (I) pay to the General
Partner the aggregate  amount due pursuant to Section 4.12B in  consideration of
the General  Partner's  payment of  Organization  and Offering  Costs,  (ii) pay
Commissions,  and  (iii)  pay  to  the  General  Partner  the  Acquisitions  and
Operations Fee. The balance of such Capital  Contributions  shall be held in the
Partnership  Account to be applied to the payment of Property  Acquisition Costs
and, to the extent not payable out of Revenues or Investment  Income,  Operating
Costs, General and Administrative  Costs, Direct  Administrative Costs and other
Partnership  costs;  provided,  however,  that  such  funds  may be  temporarily
invested prior to the payment of such costs in accordance with Section 10.3.

       Section 3.4  Certain Returns of Capital
       ---------------------------------------

      A. Any portion of the Capital  Contribution of the Partnership (except for
necessary  operating  capital)  that has not been expended or that is not, or in
the determination of the General Partner,  will not be committed for expenditure
by the second  anniversary of the Activation of the Partnership will promptly be
refunded to the Unit Holders as a return of part of their Capital  Contributions
at the earlier of such determination of the second anniversary of the Activation
of the  Partnership.  In addition,  the General Partner shall contribute cash to
the Partnership  (with respect to which its Capital Account will be credited) in
an  amount  equal to that  portion  of the total of (I) the  amount  paid to the
General  Partner in respect of the  Acquisitions  and  Operations  Fee, (ii) the
amount  paid to the  General  Partner  in  consideration  of its  payment of the
Organization  and  Offering  Costs,   and  (iii)  the  Commissions,   which  are
attributable  (on a  proportionate  basis) to the  unexpended  amount of Capital
Contributions  so  refunded,  which cash shall be refunded  to the Unit  Holders
together with the unexpended Capital  Contributions so refunded.  All amounts so
refunded  to the Unit  Holders  shall  reduce  dollar for dollar  their  Capital
Accounts.



                                      A-12
<PAGE>




      B. The  Prospectus  may  provide  that if  certain  conditions  (which may
include the condition that the General  Partner,  on behalf of the  Partnership,
has  acquired or entered  into a  commitment  to acquire  interests in Producing
Properties  which the General  Partner  believes  will meet  certain  objectives
described in such  Prospectus)  have not been satisfied on or before a specified
date, the Partnership will return all Unit Holders'  Subscriptions together with
all interest  earned  thereon.  If such conditions are a term of the offering of
the Units and by such specified date such conditions have not been met, then the
General  Partner will return all Unit Holders'  Subscriptions  together with all
interest thereon and the Partnership shall thereupon be dissolved and terminated
in  accordance  with the  terms  hereof.  To the  extent  any  Acquisitions  and
Operations  Fees,  payments in respect of  Organization  and Offering  Costs and
Commissions have been paid, the General Partner will make cash  contributions to
the Partnership in the same manner as provided in Section 3.4A.

       Section 3.5  Partnership Capital
       --------------------------------

      A. No Partner  shall be paid interest on any Capital  contribution  to the
Partnership  or  on  such  Partner's   Capital  Account,   notwithstanding   any
disproportion therein as between Partners.

      B.  Except as provided in  Sections  3.4,  6.1 and 9.2 of this  Agreement,
neither the General Partner nor any Unit Holder shall have the right to withdraw
from the  Partnership  or to  withdraw  or  receive  any  return of its  Capital
Contribution.   Under   circumstances   involving   a  return  of  any   Capital
Contribution,  no Unit Holder shall have priority over any other Unit Holder nor
shall any Unit Holder have the right to receive  any  property  other than cash,
except as may otherwise be provided in this Agreement.

       Section 3.6  Liability of Partners
       ----------------------------------

      A.  Except as provided in the Act,  neither  the  Depositary  nor the Unit
Holders  shall be  personally  liable for any debts,  liabilities,  contracts or
obligations of the Partnership. To the extent that any distribution is deemed to
constitute a return of capital under the Act, the General Partner shall not seek
to recover any  distribution  unless the  General  Partner has applied all other
available  Partnership  assets to the payment of liabilities of the  Partnership
and the liabilities of the  Partnership,  other than to Partners,  have not been
fully paid,  satisfied,  assumed or  discharged.  The Unit  Holders that are not
Substituted  Limited  Partners  shall  have no  obligation  to return  any funds
distributed to them by the Partnership  that are later determined to be a return
of the  Capital  Contributions.  In no event  shall the  Depositary  or any Unit
Holder be obligated to make any  contribution to the Partnership for any purpose
whatsoever other than Capital  Contributions of the Depositary  representing the
proceeds of the offering of Units.

      B. Each of the General  Partner and any  successor or  additional  General
Partner  subsequently  admitted to the  Partnership  agrees that it shall remain
liable for any  obligation  or recourse  liability of the  Partnership  incurred
during  the  period  in which it is a  General  Partner  and to the  extent  the
Partnership has incurred liability.



                                      A-13
<PAGE>




                                  ARTICLE FOUR

                                   MANAGEMENT

       Section 4.1Management and Control of the Partnership
       -----------------------------------------------------

      A. Subject to the Consent of the Unit Holders as and when required by this
Agreement,  the General Partner, within the authority granted to it under and in
accordance  with  the  provisions  of this  Agreement,  shall  have the full and
exclusive  right  to  manage  and  control  the  business  and  affairs  of  the
Partnership and to make all decisions  regarding the business of the Partnership
and shall have all of the rights, powers and obligations of a general partner of
a limited partnership under the laws of the State.

      B. The Depositary and the Unit Holders,  as such, shall not participate in
the management of or have any control over the Partnership's  business nor shall
the Depositary or the Unit Holders,  as such,  have the power to represent,  act
for, sign for or bind the General Partner or the Partnership. The Depositary and
each of the Unit Holders hereby  Consent to the exercise by the General  Partner
of the powers conferred on it by this Agreement.

       Section 4.2  Authority of the General Partner
       ---------------------------------------------

      A. In addition to any other  rights and powers  which the General  Partner
may possess under this Agreement and the Act, the General Partner shall,  except
and subject to the extent otherwise provided or limited in this Agreement,  have
all specific  rights and powers required or appropriate to its management of the
Partnership's  business  which,  by  way  of  illustration  but  not  by  way of
limitation, shall include the following rights and powers to:

                 (i)  expend the Capital  Contributions  of the  Partners  and
      apply  Partnership  Revenues  in  furtherance  of  the  business  of the
      Partnership;

                (ii) acquire,  explore,  develop, manage and operate Hydrocarbon
      properties and processing and  transportation  facilities of all kinds and
      interests  therein  (including  interests in corporations and partnerships
      owning Hydrocarbon properties and processing and transportation facilities
      of all kinds if in the  General  Partner's  judgment  such  purchase  is a
      necessary or advisable step in acquiring interests in Producing Properties
      held by any such  corporation or partnership,  provided,  no such purchase
      will be made for the purpose of investment  in the  securities of any such
      corporation  or  partnership,   the   Partnership   will  not  conduct  or
      participate in a hostile  tender offer,  and no such purchase will be made
      unless there is assurance that  sufficient  control of the  corporation or
      partnership  can be obtained in the initial  acquisition  to liquidate it,
      and it is determined the purchase would not thereby render the Partnership
      an investment  company within the meaning of the Investment Company Act of
      1940, and provided  further the  Partnership's  interest in the underlying
      assets of any such  corporation  or  partnership is distributed as soon as
      practical thereafter to the



                                      A-14
<PAGE>



      Partnership  in  redemption  for  the   Partnership's   interest  in  such
      corporation  or  partnership)  of all  kinds  and hold all such  property,
      interests  and units in the name of the  Partnership;  provided,  however,
      that in connection therewith, the General Partner shall, contemporaneously
      with the  acquisition of a Producing  Property,  or as soon as practicable
      thereafter,  file or cause  to be filed  for  recordation  an  appropriate
      conveyance  or agreement  evidencing  the  Partnership's  interest in such
      Producing  Property in the jurisdiction  where such Producing  Property is
      located  pursuant  to such  jurisdiction's  Uniform  Commercial  Code  (or
      comparable  law)  and/or  in the real  property  records  of the  clerk or
      recorder of the county in which the Producing  Property is situated;  and,
      provided,  further,  that filings of such  conveyances or agreements shall
      also be made as the General  Partner  believes  necessary to establish the
      Partnership's  priority of interest;  and,  provided,  further,  Producing
      Properties may be held in the name of Geodyne Nominee Corporation, or such
      other entity  designated by the General  Partner whose only business is to
      hold title, as nominee for the Partnership if such action is deemed by the
      General  Partner to be necessary or beneficial to the  Partnership and the
      nominee conducts no other business or operations;  provided,  however,  no
      Producing Properties shall be held in the name of a nominee on a permanent
      basis unless the General Partner obtains either a ruling from the Internal
      Revenue  Service or an opinion of qualified tax counsel to the effect that
      such  arrangement  does not change the ownership status of the Partnership
      for federal income tax purposes;

               (iii)  execute such  instruments  and  agreements,  do such acts,
      employ such persons and contract for such services as the General  Partner
      determines  are  necessary  or  appropriate  to conduct the  Partnership's
      business, including the employment of the General Partner or any Affiliate
      as an operator, and the entering into management and advisory contracts;

                (iv) execute, in the name of the Partnership,  contracts for the
      sale of Hydrocarbons  and division orders and transfer orders as necessary
      or incident to the sale of production on behalf of the Partnership;

                 (v) produce, treat, transport and  market Hydrocarbons, execute
     processing contracts and transportation  contracts and enter into contracts
     for the marketing or sale of Hydrocarbons and other marketing agreements in
     the name of the  Partnership,  whether or not extending  beyond the term of
     the Partnership;

                (vi)  execute  offers for United  States and any state Leases on
      behalf of the  Partnership;  execute  and file  requests  for  approval of
      assignments  of interests in United States and any state Leases,  together
      with any and all contracts for the option, sale or purchase of such Leases
      or the sale or purchase of any  products  therefrom;  execute any plans of
      development  under unit  agreements,  conveyances,  subleases,  mortgages,
      deeds of trust, affidavits or reports concerning the drilling of wells and
      production,  designations of operator,  Lease bonds,  operator's bonds and
      consents of surety; and in general do all things necessary or desirable on
      behalf of the  Partnership  regarding any United States or state Leases or
      offers therefor;



                                      A-15
<PAGE>




            (vii) enter into any partnership  agreement,  sharing arrangement or
      joint venture with any Person  acceptable to the General Partner and which
      is engaged in any  business or  transaction  in which the  Partnership  is
      authorized to engage,  provided that the  Partnership  shall not be deemed
      thereby to be an  "investment  company"  for  purposes  of the  Investment
      Company Act of 1940, as amended;

            (viii)   enter  into  and  execute   drilling   contracts,   Farmout
      agreements,   operating  agreements,   unitization   agreements,   pooling
      agreements,  unit or pooling designations,  recycling contracts, dry hole,
      bottom hole and acreage contribution letters and agreements, participation
      agreements,   agreements   and   conveyances   respecting   rights-of-way,
      agreements  respecting  surface  and  subsurface  storage  and  any  other
      agreements  customarily employed in the oil and gas industry in connection
      with the acquisition,  exploration,  development, operation or abandonment
      of any Leases,  and any and all other instruments or documents  considered
      by the  General  Partner to be  necessary  or  appropriate  to conduct the
      business of the Partnership;

                (ix)  pay or  elect  not to pay  delay  rentals  on  Partnership
      Properties as appropriate in the judgment of the General Partner, it being
      understood that the General Partner will not be liable for failure to make
      correct or timely  payments of delay  rentals if such  failure were due to
      any reason other than negligence or lack of good faith;

                (x) abandon or otherwise  dispose of any interest in Hydrocarbon
      properties  acquired  for the  Partnership  upon  such  terms and for such
      consideration as the General Partner may determine;

                (xi) sell production  payments payable out of all or any part of
      any one or more of the Producing  Properties  acquired by the  Partnership
      and  devote  and  expend  the  proceeds  of any  such  sale for any of the
      purposes of the  Partnership  for which the proceeds of borrowings  may be
      applied;

                (xii)  borrow  monies from time to time,  for the  purposes  and
      subject to the limitations stated in Section 4.3C, in the form of recourse
      or nonrecourse  borrowings,  or otherwise  draw,  make,  execute and issue
      promissory  notes and other  negotiable or  nonnegotiable  instruments and
      evidences of indebtedness, and secure the payments of the sums so borrowed
      and  mortgage,  pledge or  assign in trust all or any part of  Partnership
      Property,  including  Producing  Properties,  production  and  proceeds of
      production,  or assign any monies owing or to be owing to the Partnership,
      and engage in any other  means of  financing  customary  in the  petroleum
      industry;  provided, however, that a creditor who makes a nonrecourse loan
      to the Partnership  shall not have or acquire,  at any time as a result of
      making the loan, any direct or indirect  interest in the profits,  capital
      or property of the Partnership other than as a secured creditor;

            (xiii)       invest     Capital     Contributions     and    other
      Partnership  funds  temporarily in the  investments set forth in Section
      10.3;



                                      A-16
<PAGE>




            (xiv)  employ  on  behalf  of  the  Partnership  agents,  employees,
      accountants,  lawyers, geologists,  geophysicists,  landpersons,  clerical
      help and such other  assistance  and  consulting and other services as the
      General  Partner may deem necessary or convenient and to pay therefor such
      remuneration as the General Partner may deem reasonable and appropriate;

                (xv) purchase,  lease,  rent or otherwise  acquire or obtain the
      use of machinery,  equipment,  tools,  materials,  and all other kinds and
      types  of  real  or  personal  property  that  may  in any  way be  deemed
      necessary,  convenient  or advisable in  connection  with  carrying on the
      business of the Partnership,  purchase and establish adequate  inventories
      of  equipment  and  material  required  or  expected  to  be  required  in
      connection  with  its  operations,  dispose  of  tangible  lease  and well
      equipment for use or used in connection  with  Partnership  Property,  and
      incur expenses for travel,  telephone,  telegraph,  insurance and for such
      other things, whether similar or dissimilar, as may be deemed necessary or
      appropriate   for  carrying  on  and   performing   the  business  of  the
      Partnership;

            (xvi) enter into such agreements and contracts with such parties and
      give such receipts, releases and discharges with respect to any and all of
      the foregoing and any matters  incident thereto as the General Partner may
      deem advisable or appropriate;

            (xvii)  guarantee the payment of money or the  performance  of any
      contract or obligation by any person,  firm or  corporation on behalf of
      the Partnership;

            (xviii)  sue and be sued,  pursue  and  participate  in  arbitration
      proceedings,  complain  and defend and  settle  and  compromise  claims or
      causes of action in the name and on behalf of the Partnership;

            (xix) make such  classifications  and  determinations as the General
      Partner  deems  advisable,  having due regard for any  relevant  generally
      accepted accounting principles and oil and gas industry practices;

                (xx) purchase insurance, or extend the General Partner' 5 or its
      Affiliates'  insurance,  at the  Partnership's  expense,  to  protect  the
      Partnership Property and the business of the Partnership against loss, and
      to protect the General Partner against  liability to third parties arising
      out of Partnership activities,  such insurance to be in such limits, to be
      subject to such deductibles and to cover such risks as the General Partner
      deems appropriate;

               (xxi) pay all ad valorem  taxes  levied or  assessed  against the
      Partnership  Properties,  all taxes upon or measured by the  production of
      Hydrocarbons  therefrom  and all other taxes  (other  than  income  taxes)
      directly related to operations conducted by the Partnership;

               (xxii)    enter    into    agreements    on   behalf   of   the
      Partnership with Affiliates;



                                      A-17
<PAGE>




               (xxiii)   sell  or   otherwise   dispose  of  for  value  all  or
      substantially all of the properties and other assets of the Partnership to
      the General Partner or any of its Affiliates or Affiliated Programs or any
      other Person and receive for the Partnership  consideration  consisting of
      cash,  securities,  other property or any other form of consideration,  or
      any combination thereof, at such prices and in such forms of consideration
      as it deems in the best interests of the Unit Holders; provided,  however,
      that no such sale shall be  consummated  without the prior  Consent of the
      Unit Holders pursuant to the provisions of Section 4.5D of this Agreement.
      In the event of the  dissolution of the  Partnership  followed by any such
      sale of the Partnership's  assets,  the General Partner shall,  subject to
      the  provisions  of  Section  9.2 of  this  Agreement,  be  appointed  the
      Liquidating Agent for the Partnership;

               (xxiv) make,  exercise or deliver any general  assignment for the
      benefit of the Partnership's creditors, but only upon the prior Consent of
      the Unit Holders pursuant to the provisions of Section 4.5D;

               (xxv) take such other  action and perform  such other acts as may
      be deemed appropriate to carry out the business of the Partnership;

               (xxvi)  perform all duties  imposed by Sections 6221 through 6232
      of the  Code on the  General  Partner  as  "tax  matters  partner"  of the
      Partnership,  including (but not limited to) the following:  (a) the power
      to conduct all audits and other administrative proceedings with respect to
      Partnership tax items;  (b) the power to extend the statute of limitations
      for all Partners with respect to Partnership  tax items;  (c) the power to
      file a petition  with an  appropriate  federal court for review of a final
      Partnership  administrative  adjustment; and (d) the power to enter into a
      settlement  with the  Internal  Revenue  Service on behalf of, and binding
      upon,  each of the Unit Holders having less than a 1% interest in Revenues
      unless such Unit Holder  notifies  the  Internal  Revenue  Service and the
      General Partner that the General Partner may not act on its behalf; and

               (xxvii) cause the  Partnership  to redeem or repurchase the Units
      held by a Unit  Holder  at a  purchase  price  determined  by the  General
      Partner if at any time the  Partnership  or General  Partner  receives  an
      opinion of counsel that there exists  substantial risks of cancellation or
      forfeiture  of any  property  in which  the  Partnership  has an  interest
      because of the citizenship or other status of that Unit Holder.

      B. No person,  firm or corporation  dealing with the Partnership  shall be
required to inquire into the authority of the General Partner to take or refrain
from  taking any action or make or refrain  from  making any  decision,  but any
person so inquiring  shall be entitled to rely upon a certificate of the General
Partner as to its due authorization.



                                      A-18
<PAGE>




      Section 4.3 Sales, Purchases and Operation of Producing Properties;
                  Additional Financing
      -------------------------------------------------------------------

      A.  Producing  Properties  whose  purchase  price  exceeds 10% of the Unit
Holders' Subscriptions may be acquired by the Partnership only if an Acquisition
Reserve Report or an  Engineering  Review Letter has been received and evaluated
by the General Partner with respect thereto.

      B. Neither the General  Partner,  Geodyne  Resources,  Inc. nor any Person
controlled by Geodyne Resources,  Inc. shall sell, transfer or convey any or all
of its  interest  in  Producing  Properties  to the  Partnership  or purchase or
acquire any oil and gas properties or interest from the Partnership, directly or
indirectly,  except pursuant to transactions that are fair and reasonable to the
Unit  Holders  under  the  circumstances  at the time any  such  transaction  is
consummated.   Except  as  otherwise   provided  in  Section  4.3E  below,  such
transactions shall be further subject to the following restrictions:

                (i) Prior to the date on which the  Partnership has acquired its
      final Producing Property,  neither the General Partner, Geodyne Resources,
      Inc. nor any Person controlled by Geodyne  Resources,  Inc. (other than an
      Affiliated  Program)  shall  acquire  any  Producing  Property  after  the
      Activation  of the  Partnership  unless  the  General  Partner  shall have
      determined  that the  acquisition  by the  Partnership  of such  Producing
      Property,  or an interest  therein,  would not be in the best interests of
      the Partnership;

                (ii) Any purchase or sale of a Producing Property from or to the
      General Partner or any Affiliate shall be made at the Property Acquisition
      Cost for such Producing  Property as adjusted for intervening  operations,
      unless the General  Partner or such  Affiliate has  reasonable  grounds to
      believe that cost is materially more or less than the fair market value of
      such  property,  in which  case such sale or  purchase  shall be made at a
      price  equal  to  the  fair  market  value  thereof  as  determined  by an
      Independent Petroleum Engineer;

                (iii) If the General  Partner  sells,  transfers  or conveys any
      oil,  gas or other  mineral  interest or property to the  Partnership,  it
      must,  at the same  time,  sell  the  Partnership  an equal  proportionate
      interest in all its other property in the same Prospect.  A sale, transfer
      or  conveyance  to the  Partnership  of less  than  the  entire  ownership
      interest of the General Partner or any Affiliate is only permitted if: (a)
      the interests retained or obtained by the General Partner or Affiliate and
      acquired  by the  Partnership  are either (x)  proportionate,  uniform and
      undivided  Working  Interests if the  Producing  Property  acquired by the
      Partnership  is a  Working  Interest  or (y)  proportionate,  uniform  and
      undivided  Royalty  Interests if the  Producing  Property  acquired by the
      Partnership is a Royalty,  (b) the  respective  obligations of the General
      Partner or Affiliate and the Partnership are  substantially  the same, and
      (c) the interest of the General  Partner or its Affiliate in revenues does
      not exceed the amount  proportionate to its interest.  The General Partner
      and its  Affiliate may not retain or obtain any overrides or other burdens
      on the interest  obtained by the  Partnership,  and may not enter into any
      Farmouts with respect to its retained  interest,  except to  nonaffiliated
      third parties or to an Affiliated Program;



                                      A-19
<PAGE>




                (iv) In the event the General Partner or any Affiliate  proposes
      to  acquire an  interest  in a Prospect  in which the  Partnership  has an
      interest or in a Prospect  abandoned  by the  Partnership  within one year
      preceding  such  proposed  acquisition,  the General  Partner or Affiliate
      shall offer the interest to the  Partnership;  and if cash or financing is
      not available to the  Partnership to purchase such  interest,  neither the
      General  Partner nor Affiliate shall acquire an interest in such Prospect.
      The term  "abandon"  for the purpose of this  subparagraph  shall mean the
      termination,  either  voluntary or by operation of the Lease or otherwise,
      of all of the  Partnership's  interest in the  Prospect.  This  subsection
      shall not apply  after the lapse of five  years of the  Activation  of the
      Partnership or to any Affiliated Program where the interest of the General
      Partner is less than or equal to its interest in the Partnership, there is
      no duplication  of fees to the General  Partner,  and the General  Partner
      does not obtain a greater  benefit  from  purchase of the  interest by the
      Affiliated  Program  than it would if the interest  were  purchased by the
      Partnership;

                (v) During the  existence of the  Partnership  and before it has
      ceased   operations,   neither  the  General  Partner  nor  any  Affiliate
      (excluding  any  Affiliated  Program  where the  interest  of the  General
      Partner is less than or equal to its  interest in the  Partnership)  shall
      acquire,  retain or drill for its own account any oil and gas  interest in
      any Prospect upon which the Partnership possesses an interest,  except for
      transactions  which comply with Section 4.3B(iii) or 4.8. In the event the
      Partnership  abandons its interest in a Prospect,  this restriction  shall
      continue for one year following  abandonment.  The geological  limits of a
      Prospect owned by the  Partnership  shall be enlarged or contracted on the
      basis of  subsequently  acquired  geological data to define the productive
      limits of a reservoir  and must include all of the acreage  determined  by
      the subsequent  data to be encompassed by such  reservoir.  If, during the
      period  of  five  years  from  the  Activation  of  the  Partnership,  the
      geological  limits of a Prospect,  as so enlarged,  encompass any interest
      held  by the  General  Partner  or an  Affiliate  of the  General  Partner
      (excluding an Affiliated Program where the interest of the General Partner
      is  identical  to or less  than its  interest  in the  Partnership),  such
      interest  shall  be  sold  to  the  Partnership  in  accordance  with  the
      provisions of Section 4.3B(iv) and any net income  previously  received by
      the General Partner or Affiliate shall be paid over to the Partnership. If
      the General Partner acquires additional acreage or interests in a Prospect
      of the Partnership, it must sell such to the Partnership and is prohibited
      from  retaining any such  interest,  except as may be permitted by Section
      4.3B.  Notwithstanding the foregoing, the Partnership will not be required
      to expend  additional  funds to acquire any such interest unless funds are
      available from the Capital Contributions of the Partners;

                (vi) Producing  Properties may be sold,  Farmed-out or otherwise
      transferred from or to an Affiliated Program only pursuant to transactions
      that comply with Sections  4.3B(iii),  4.3B(iv) or 4.8,  provided that the
      compensation  arrangement  or any other  interest  or right of the General
      Partner or any  Affiliate is the same in the  Partnership  and  Affiliated
      Program,  or, if different,  the  compensation of the General Partner does
      not exceed the lower of the  compensation  it would have  received  in the
      Partnership or the Affiliated Program;



                                      A-20
<PAGE>




               (vii) Any Sale of inventory or other materials by the Partnership
      to the General Partner or Affiliate shall be made at the applicable  rates
      set  forth  in  the  standard  form  of  the  accounting   procedure  then
      recommended  by the Council of  Petroleum  Accountants  Societies of North
      America;

               (viii) Any  operating  agreements  pursuant  to which the General
      Partner or any Affiliate acts as operator of Producing Properties shall be
      of a nature  customary in the industry and payments to the General Partner
      or any Affiliate for acting as operator shall not exceed the  compensation
      which would be paid by  unaffiliated  third parties in the same geographic
      area  for  similar  goods  and  services.  Reimbursement  of  the  General
      Partner's  overhead  pursuant  to such  operating  agreement  will  not be
      duplicative of any reimbursement of General and Administrative  Costs made
      pursuant to Section 4.12; and

                (ix) To the extent the General Partner or any Affiliate acquires
      an interest in a Producing  Property in which the Partnership  acquires an
      interest1 the General Partner or Affiliate shall pay its allocable portion
      of the  cost of the  preparation  of the  Acquisition  Reserve  Report  or
      Engineering  Review Letter,  as the case may be, respecting such Producing
      Property.

For  purposes  of  subparagraph  (ii) above,  each  adjustment  for  intervening
operations shall be a reduction in the amount of the Property  Acquisition Costs
equal to the amount of revenues  attributable  to the interests in the Producing
Properties  from the time of their  acquisition  by the General  Partner or such
Affiliate  until they are  subsequently  transferred  to a Partnership  less the
total amount of (x) the  expenditures  made and costs  incurred,  if any, by the
General  Partner or its Affiliate in the production and marketing of oil and gas
from wells located on the Producing  Properties;  (y) an imputed interest charge
on the amount of the funds of the General  Partner or Affiliate  used to acquire
the interests in the Producing  Properties  for which no actual  interest  costs
were incurred, from the time of the expenditure thereof to acquire the interests
in the Producing Properties until the recovery or reimbursement thereof pursuant
to this Agreement at a rate equal to the lesser of the weighted  average rate of
interest  then  being  paid by the  General  Partner  or such  Affiliate  on its
outstanding  indebtedness  or the prime rate of interest  then being  charged by
Norwest Bank Minnesota, N.A., provided that such interest rate shall in no event
exceed the maximum allowed by law; and (z) expenditures  made and costs incurred
by the General  Partner or such  Affiliate,  if any, for processing  facilities,
pipelines, gas sales facilities,  Improved Recovery projects, drilling costs and
other procedures and facilities  necessary to produce efficiently and market the
oil and gas reserves from a Producing Property, all to the extent such costs and
expenditures are not Property Acquisition Costs.

      C. The General Partner may not expend any amount of Partnership funds over
the term of the  Partnership  for the payment of  Partnership  costs (other than
recompletion  costs)  incurred  in  connection  with  Development  Drilling  and
Identified  Development  Drilling in excess of 10% of the sum of: (I) the amount
of the Unit  Holders'  Subscriptions,  plus (ii) the  Partnership's  permissible
borrowings.  If the  General  Partner  determines  that funds in addition to the
Capital  Contributions  are required for the payment of Partnership costs (other
than  Property  Acquisition  Costs),  the  General  Partner may apply or reserve
Revenues or Investment Income for the payment of



                                      A-21
<PAGE>



such  Partnership  costs and/or the General Partner may cause the Partnership to
borrow funds for the payment of Partnership  costs  incurred in connection  with
Development  Drilling,  Identified  Development  Drilling and Improved  Recovery
operations,  and capital  expenditures  or abandonment  costs for processing and
transportation  facilities;  provided,  however,  that the aggregate outstanding
principal  amount of such borrowings  shall not at any one time exceed an amount
equal  to 20% of the  Unit  Holders'  Subscriptions.  No  creditor  who  makes a
nonrecourse loan to the Partnership may have or acquire, at any time as a result
of making the loan, any direct or indirect  interest in the profits,  capital or
property of the Partnership other than as a secured creditor.

      D. The General  Partner  shall have the authority to secure the payment of
borrowings  incurred  by it for its own  account or for  purposes  of paying its
allocable share of Partnership  costs by assigning to lenders all or part of its
rights to receive  distributions of Partnership  Revenues,  and by granting such
lenders  a  security  interest  or  mortgage  in an  undivided  interest  in any
Partnership  Property  not  to  exceed  its  percentage  interest  in  Revenues;
provided, however, that the General Partner shall retain unencumbered at least a
1% interest in each item of Partnership  Property,  and each item of Partnership
Revenues,  gain,  loss,  deduction and credit.  Notwithstanding  anything to the
contrary  in this  Agreement,  in the  event of any sale or  foreclosure  of the
General Partner's  interest in full or partial  satisfaction of such borrowings,
appropriate  adjustments  shall be made in the  Capital  Accounts of the General
Partner  and Unit  Holders  and in the  method by which  Revenues  and costs are
allocated to the General Partner and Unit Holders to assure that the Partnership
will not bear any of the costs attributable to such sold or foreclosed  interest
and that  the  General  Partner  will not  share  or  participate  in any of the
capital,   Revenues,  costs  or  distributions  attributable  to  such  sold  or
foreclosed  interest except to the extent of the unencumbered  interest retained
by the General Partner.  The General Partner shall indemnify the Partnership and
the Unit Holders  against any expenses  resulting  from a sale or foreclosure of
the General Partner's interest.

      E. The  provisions  of Section 4.3B  notwithstanding,  if the  Partnership
intends to acquire Working  Interests,  acquisitions of Net Profits Interests by
one or more I/P  Partnerships  may be made in connection with the  Partnership's
acquisitions  of Working  Interests.  Net Profits  Interests  acquired by an I/P
Partnership  may either be carved-out of the Working  Interests or reserved from
the Working  Interests by the sellers of such Working Interests on such basis as
the General  Partner  determines.  The Net Profit  Interests  acquired by an I/P
Partnership may not exceed 75% of the net profits  attributable to the aggregate
Working  Interests  in  all  of  the  Producing   Properties   acquired  by  the
Partnerships  together.  The primary  factor in  determining  the sharing of net
profits  between the Working  Interests  acquired by the Partnership and the Net
Profits  Interest  acquired by the I/P  Partnership  will be the amount of money
contributed  to each  acquisition  by each  purchaser.  In fixing  such  sharing
percentages,  the General Partner need not give special  consideration  to risks
associated with the ownership of the Working  Interests or to costs of equipment
which will be owned by the Partnership as a Working Interest owner if such costs
will be amortized  against the proceeds of oil and gas production in arriving at
the amount of net  profits  from  which the I/P  Partnership's  (as Net  Profits
Interest holder) share of production is determined. If the amount of money



                                      A-22
<PAGE>



contributed by each purchaser ever is not the primary factor in determining such
sharing of net  profits,  then the sharing will be based upon a valuation of the
respective  interests  made  by a  Independent  Petroleum  Engineer.  If the I/P
Partnership  acquires a Royalty  interest  in a  Producing  Property  in which a
Working Interest is acquired by the Partnership,  each participant's  portion of
the  purchase  price  will be  determined  on the  basis  of an  appraisal  by a
Independent  Petroleum  Engineer  of the fair  market  values of the  respective
interests  in  the  property  being  acquired   (taking  into  account  the  tax
consequences applicable to the several participants).  If the General Partner or
an Affiliate other than an Affiliated  Program  acquires an interest in any such
property  acquisition,  such  appraisal  will  be  performed  by an  Independent
Petroleum  Engineer and if the aggregate revenue interest of the General Partner
and its Affiliates in any Affiliated  Program  participating  in such a property
acquisition  is  greater  than  their  aggregate  revenue  interest  in the  I/P
Partnership, then with respect to the property interests so acquired the greater
aggregate  revenue  interest  shall be  reduced  so as not to exceed  the lesser
revenue interest.

      F. The General  Partner may cause the  Partnership to acquire assets which
may  otherwise  not be  considered  suitable for  investment or operation by the
Partnership  if they are acquired as part of a package  consisting  primarily of
Producing Properties;  provided,  however, that in the event any such assets are
acquired by the  Partnership,  the General Partner shall use its best efforts to
sell or otherwise  dispose of such assets for value as soon as practical and any
proceeds  realized from such sale or  disposition  shall be allocated  among the
General  Partner  and the Unit  Holders  in the same  proportions  as the  costs
thereof were charged to their respective accounts.

      Section 4.4 Prohibited Transactions
      -----------------------------------

      Notwithstanding any other provision of this Agreement to the contrary, the
following transactions are expressly prohibited:

                (i)   the Partnership  shall not make any loans to or purchase
      a production payment from the General Partner or any Affiliate;

                (ii) neither the General  Partner nor any  Affiliate  shall make
      any loans to the Partnership except at a rate of interest not in excess of
      the interest  cost  incurred by the General  Partner or  Affiliates or the
      amount of  interest  that  would be charged  to the  Partnership  (without
      regard to the General  Partner's  or  Affiliate's  financial  abilities or
      guarantees) by unrelated  banks on comparable  loans for the same purpose,
      whichever  is lower,  and the  General  Partner and  Affiliates  shall not
      receive points or financing charges or fees regardless of the amount;

               (iii)  except  as  expressly   contemplated   hereby,  no  agent,
      attorney,  accountant or other independent consultant or contractor who is
      also employed on a full-time basis by the General Partner or any Affiliate
      shall be compensated by the Partnership for his or her services;



                                      A-23
<PAGE>




               (iv)  other  than  those   received   for  the   account  of  the
      Partnership,  no rebates may be  received  by the  General  Partner or any
      Affiliate in connection with Partnership  operations or expenditures,  nor
      may the General  Partner or any Affiliate  participate  in any  reciprocal
      business  arrangement  that would circumvent any of the provisions of this
      Agreement;

               (v) on a monthly basis,  costs paid and revenues  received by the
      General Partner or an Affiliate for the account of the  Partnership  shall
      be determined and the net amount  resulting  from such monthly  settlement
      shall be deposited  into a Partnership  Account and no funds which,  after
      such monthly settlement,  are determined to be held for the account of the
      Partnership shall be kept in any account other than a Partnership Account,
      and the General  Partner  shall not employ,  or permit any other Person to
      employ,   such  funds  in  any  manner  except  for  the  benefit  of  the
      Partnership;  it being  understood  that the  General  Partner  may invest
      Partnership funds temporarily in the investments set forth in Section 10.3
      of this Agreement pending their use by the Partnership. After such monthly
      settlement, Partnership funds may not be commingled with separate funds of
      the General Partner or any other Person; and

               (vi) the  Partnership  shall not make any advance  payment to the
      General  Partner or its  Affiliates,  except where necessary to secure tax
      benefits of prepaid drilling costs.

       Section 4.5 Restrictions on the Authority of the General Partner
       ----------------------------------------------------------------

      A.    Anything in this Agreement to the contrary notwithstanding,  it is
agreed that:

                (i) the General  Partner and its  Affiliates  shall not take any
      action with  respect to the assets or property  of the  Partnership  which
      does not benefit primarily the Partnership, including:

                      (a)   the   utilization   of   Partnership    funds   as
            compensating  balances  for the benefit of the General  Partner or
            an Affiliate of the General Partner; and

                      (b)   the   commitment   of   future   production   from
            Partnership Properties;

                (ii)  all  benefits  from   marketing   arrangements   or  other
      relationships  affecting property of the General Partner or its Affiliates
      and the Partnership shall be fairly and equitably apportioned according to
      the respective interests of each;

               (iii)  neither the General  Partner nor any  Affiliate may profit
      itself  by  Development  Drilling,   Identified  Development  Drilling  or
      Improved Recovery operations in contravention of its fiduciary  obligation
      to the Partnership; and

               (iv) neither the General  Partner nor any Affiliate  shall render
      to the Partnership any oil field, equipage, drilling or other services nor
      sell or lease to the Partnership any equipment or supplies unless:



                                      A-24
<PAGE>




                      (a)  such   Person  is  engaged,   independently   of  the
            Partnership and as an ordinary and ongoing business, in the business
            of rendering  such services or selling or leasing such equipment and
            supplies to a substantial extent to other Persons in the oil and gas
            industry in addition  to drilling  and income  programs in which the
            General Partner and its Affiliates have an interest;

                      (b)  the   compensation,   price  or  rental  therefor  is
            competitive with the compensation,  price or rental of other Persons
            in the area engaged in the business of rendering comparable services
            or selling or leasing comparable  equipment and supplies which could
            reasonably be made available to the Partnership; and

                      (c)   the  drilling  services are billed on either a per
            foot, per day or per hour rate, or some combination thereof;

provided that, if such Person is not engaged in a business within the meaning of
subdivision  (a), then such  compensation,  price or rental shall be the cost of
such  services,  equipment  or supplies to such Person or the  competitive  rate
which could be obtained in the area, whichever is less.

      B.    The General Partner shall not have the authority to:

                (i)   do any act in  contravention  of this Agreement or which
      would  make it  impossible  to carry  on the  ordinary  business  of the
      Partnership;

                (ii)  confess a judgment against the Partnership;

               (iii)  possess   Partnership   Property  or  assign,   pledge  or
      hypothecate  rights in  specific  Partnership  Property  for other  than a
      Partnership purpose except as otherwise permitted in Section 4.3D;

                 (iv)  admit a Person  as a  General  Partner  or a  Substituted
      Limited  Partner  or permit  any  transfer  of Units  except as  otherwise
      provided herein; or

                 (v) knowingly perform any act which would result in loss of the
      Depositary's  or any  Substituted  Limited  Partner's  status as a limited
      partner  under  the Act or the laws of the  State  or the loss of  limited
      liability  under  the  laws  of  any  other   jurisdiction  in  which  the
      Partnership is doing business, or would subject the Depositary or any Unit
      Holder to liability as a general partner in any jurisdiction including use
      of the  Depositary's or a Unit Holder's name in conducting the business of
      the Partnership.

      C. The General Partner shall not lease, sell, abandon or otherwise dispose
of  any  assets  of the  Partnership  to the  General  Partner  or to any of its
Affiliates, except as otherwise permitted by this Agreement;  provided, however,
that if the  Partnership  should  own any  inventory  or other  materials,  such
inventory or materials may be transferred  to the General  Partner or any of its
Affiliates at the applicable  rates set forth in the standard form of accounting
procedure then recommended by the Council of Petroleum  Accountants Societies of
North America.



                                      A-25
<PAGE>




      D.  Notwithstanding any other provision of this Agreement to the contrary,
without the prior Consent of Unit Holders owning 50% or more of the  outstanding
Units granted  pursuant to the provisions of Article  Twelve of this  Agreement,
the General Partner shall not:

                (i)   lease,  sell or dispose of all or  substantially  all of
      the  Partnership's  assets  except  pursuant  to  Article  Nine  of this
      Agreement;

                (ii)  make,  exercise or deliver any  general  assignment  for
      the benefit of the Partnership's creditors; or

                (iii) except as set forth in Sections  8.1F or 11.1A,  amend any
      provision of this Agreement.

      Section 4.6 Construction of Gas Gathering Lines
      -----------------------------------------------

      The General  Partner may cause the  Partnership to construct gas gathering
lines  if, in the  opinion  of the  General  Partner,  it would be  economically
feasible and otherwise  consistent with prudent operating practice to do so. The
costs of any such gathering lines will be deemed to be Operating Costs and shall
be charged to the accounts of the General  Partner and Unit Holders as such. The
General Partner may, in its discretion,  construct, or cause an Affiliate of the
General Partner or other person to construct,  gathering lines from  Partnership
Wells to gas transmission systems.  Whenever the General Partner constructs,  or
causes an Affiliate of the General Partner to construct, a gathering line from a
Partnership Well to a gas  transmission  system,  the Partnership  shall pay the
General  Partner  or such  Affiliate  an  amount  that is not  greater  than the
compensation  that an  unrelated  party  could  have  reasonably  charged  in an
arm's-length  transaction for similar services in the area as a transmission fee
for the transmission of all gas through the gathering system so constructed, and
no  other  transmission  fee  shall  be paid to the  General  Partner  or to any
Affiliate.

      Section 4.7 Contracts with the General Partner and Affiliates
      -------------------------------------------------------------

      All services  (other than services  provided  pursuant to this  Agreement)
provided to the Partnership by the General Partner or any Affiliate for which it
is compensated  shall be embodied in a written contract  precisely setting forth
the  services to be rendered  and the  compensation  to be paid.  Each  contract
relating to a transaction between the Partnership and the General Partner or any
Affiliate  shall  contain a provision  which  shall  permit  termination  of the
contract by the  affirmative  vote of Unit  Holders  owning more than 50% of the
outstanding Units without penalty on 30 days' prior written notice.



                                      A-26
<PAGE>




      Section 4.8 Farmouts
      --------------------

      The General Partner may dispose of Producing Properties by Sale or Farmout
when it, exercising the standard of a prudent operator,  determines that (a) the
Partnership lacks sufficient funds to conduct Development  Drilling,  Identified
Development  Drilling or Improved  Recovery  operations  on the  properties  and
cannot obtain  suitable  alternative  financing for such  Development  Drilling,
Identified  Development  Drilling  or  Improved  Recovery  operations;  (b)  the
properties  have been  downgraded by events  occurring  after  assignment to the
Partnership  to the  point  that  additional  Development  Drilling,  Identified
Development Drilling, Improved Recovery operations or continued production would
no longer be desirable to the Partnership; (c) Development Drilling,  Identified
Development  Drilling or Improved  Recovery  operations on the properties  would
result  in an  excessive  concentration  of  Partnership  funds  on a  Producing
Property  creating,  in the  opinion of the General  Partner,  undue risk to the
Partnership; or (d) the best interests of the Partnership would be served by the
Sale or Farmout.  The Partnership  shall not conduct any drilling of wells other
than  Development  Drilling  and  Identified  Development  Drilling;   provided,
however,  that the  drilling  of  wells  other  than  Development  Drilling  and
Identified  Development  Drilling may be performed on behalf of the  Partnership
pursuant  to  Farmouts  or  when  such  drilling  may  be  deemed  necessary  or
appropriate  to  preserve  or  protect  the  Partnership's  interest  in or  the
production from a Producing  Property.  Any Sale,  Farmout or similar  agreement
between the Partnership and the General Partner, Affiliate or Affiliated Program
will be permitted under the restrictions set forth in this Article Four and will
be subject to the following conditions:

                 (i) the General  Partner,  exercising the standard of a prudent
      operator,  shall determine that the Sale,  Farmout or similar agreement is
      in the best interests of the Partnership; and

                (ii) the terms of the Sale,  Farmout  or similar  agreement  are
      consistent  with and in any case no less  favorable than those utilized in
      the same geographic area for similar arrangements

Except as required by Section  4.3B(iii) or (iv), a  Partnership  shall  acquire
only  those  Leases  that are  reasonably  required  for the  operations  of the
Partnership1  and no Leases shall be acquired for the purpose of subsequent Sale
or Farmout,  unless such Leases are a part of an acquisition  which is sold as a
package only, or unless the acquisition of undeveloped Leases by the Partnership
is made  after a well has  been  drilled  nearby  by  third  parties  to a depth
sufficient to indicate that such an  acquisition is in the best interests of the
Partnership.


      Section 4.9 Other Operations
      ----------------------------

      The  General  Partner  shall  devote  such time to the  Partnership  as is
reasonably  required  to  carry on the  Partnership  business,  and the  General
Partner  and  its  Affiliates  shall  at  all  times  be  free,  subject  to any
restrictions  contained herein, to engage in all aspects of the Hydrocarbons and
natural  resources  business  for their own  accounts  and for the  accounts  of
others. Without limiting the generality of the foregoing, the General



                                      A-27
<PAGE>



Partner and its  Affiliates  shall have the right to organize and operate  other
partnerships,  joint ventures or other oil and gas investment  programs  whether
similar or dissimilar to the Partnership.

      Section 4.10 Prosecution, Defense and Settlement of Claims;
                   Indemnification
      -----------------------------------------------------------

      A. The General  Partner  shall  arrange to  prosecute,  defend,  settle or
compromise  actions at law or in equity at the expense of the Partnership as may
be necessary to enforce or protect the interests of the Partnership. The General
Partner shall satisfy any judgment,  decree, decision or settlement,  first, out
of any insurance  proceeds  available  therefor,  next,  out of the  Partnership
assets and Revenues, and, finally, out of the assets of the General Partner.

      B. Neither the General  Partner nor any of its  Affiliates  shall have any
liability  to any  Unit  Holder  for  any  liability  or  loss  suffered  by the
Partnership which arises out of any action or inaction of the General Partner or
such  Affiliate  if the  General  Partner  or such  Affiliate,  in  good  faith,
determines  that  such  course  of  conduct  was in the  best  interests  of the
Partnership,  the General  Partner or such  Affiliate was acting on behalf of or
performing services for the Partnership,  and such liability or loss was not the
result of negligence or misconduct of the General Partner or such Affiliate. The
General  Partner  and  each  of  its  Affiliates  shall  be  indemnified  by the
Partnership against any losses,  judgments,  liabilities,  expenses, and amounts
paid in settlement of any claims  sustained by it or them in connection with the
Partnership,  provided  that  the same  were not the  result  of  negligence  or
misconduct  on  the  part  of  the  General  Partner  or  such  Affiliate.   Any
indemnification  under this Section  4.10 shall be  satisfied  solely out of the
assets and Revenues of the  Partnership.  All amounts payable under this Section
4.10 shall be a liability of the  Partnership  only and the Unit Holders and the
Depositary will not have any liability therefor.

      C. Notwithstanding the foregoing,  the General Partner, its Affiliates and
any  Person  acting as a  broker-dealer  shall not be  indemnified  for  losses,
liabilities,  or expenses arising from or out of an alleged violation of federal
and  state  securities  laws by any  such  party  unless  (1)  there  has been a
successful adjudication on the merits of each count involving alleged securities
law  violations  as to the  particular  indemnitee;  (2) such  claims  have been
dismissed with prejudice on the merits by a court of competent  jurisdiction  as
to the particular indemnitee;  or (3) a court of competent jurisdiction approves
a settlement  of the claims  against the  particular  indemnitee  and finds that
indemnification  of the  settlement  and related costs should be made,  and such
indemnitee  has apprised the court of the published  position of the  Securities
and  Exchange  Commission  and the position of any state  securities  regulatory
authorities of those states in which the  plaintiffs  claim they were offered or
sold Units  regarding  indemnification  for violations of security laws prior to
obtaining court approval of such indemnification.

      D. The Partnership  shall not incur the costs of that portion of insurance
which  insures the General  Partner  for any  liability  as to which the General
Partner is prohibited from being indemnified under Section 4.10.



                                      A-28
<PAGE>




       Section 4.11 Duties and Obligations of the General Partner
       ----------------------------------------------------------

       The General Partner shall:

                (i)  use its  best  efforts  to take  all  actions  that  may be
      necessary or appropriate for the continuation of the  Partnership's  valid
      existence as a limited  partnership or partnership in commendam  under the
      laws of the  State  and the laws of any  other  jurisdiction  in which the
      Partnership is doing business;

                (ii) devote to the Partnership the time that it shall deem to be
      necessary  to conduct the  Partnership's  business and affairs in the best
      interests of the Partnership;
                (iii) be under a fiduciary  duty and  obligation  to conduct the
      affairs  of the  Partnership  in the best  interests  of the  Partnership,
      including  the  safekeeping  and use of all  Partnership  funds and assets
      (whether  or not in the  immediate  possession  or control of the  General
      Partner) and the use thereof for the benefit of the Partnership;

                (iv) at all times act with integrity and good faith and exercise
      due diligence in all activities relating to the conduct of the business of
      the Partnership and in resolving conflicts of interest;

                (v) prepare or cause to be prepared  and shall file on or before
      the due date (or any  extension  thereof) any federal,  state or local tax
      returns required to be filed by the Partnership;

                (vi)  cause the  Partnership  to pay any taxes  payable by the
      Partnership;

                (vii)  use its best  efforts  to  cause  the  Partnership  to be
      formed,  reformed,  qualified  to do  business,  or  registered  under any
      applicable  assumed or fictitious name statute or similar law in any state
      in which the Partnership then owns property or transacts business, if such
      formation,  reformation,  qualification  or  registration  is necessary or
      advisable in its counsel's opinion to protect the limited liability of the
      Depositary and the Unit Holders or to permit the  Partnership  lawfully to
      own property or transact business;

                (viii) cause to be filed the Certificate of Limited  Partnership
      as required by the Act and any necessary  amendments to the Certificate of
      Limited  Partnership and other similar  documents that are required by law
      to be filed and recorded for any reason, in the office or offices that are
      required  under  the laws of the  State or any  other  state in which  the
      Partnership is then formed or qualified;

                (ix) do all other acts and things (including making publications
      or  periodic  filings  of this  Agreement  or  amendments  hereto or other
      similar documents without the necessity of mailing or delivering copies of
      them to each  Unit  Holder)  that may now or  hereafter  be  deemed by the
      General Partner to be necessary,



                                      A-29
<PAGE>




                      (a)   for the  perfection  and continued  maintenance of
            the  Partnership  as a limited  partnership  under the laws of the
            State,

                      (b) to protect the limited liability of the Depositary and
            the Unit Holders under the laws of the State and other jurisdictions
            in which the Partnership is doing business, and

                      (c)  to  cause  this  Agreement,   certificates  or  other
            documents to reflect  accurately  the  agreement of the Partners and
            the Unit Holders, the identity of the Depositary as the sole initial
            Limited Partner and the amount of the Capital  Contribution  made by
            the Depositary on behalf of the Unit Holders;

                (x) from time to time submit to any appropriate state securities
      administrator all documents, papers, statistics and reports required to be
      filed with or submitted to such state securities administrator; and

                (xi) inform each Unit Holder of all  administrative and judicial
      proceedings for an adjustment at the Partnership level for partnership tax
      items and  forward  to each Unit  Holder  within  30 days of  receipt  all
      notices  received  from  the  Internal   Revenue  Service   regarding  the
      commencement  of  a  partnership   level  audit  or  a  final  partnership
      administrative  adjustment,  and  perform  all  other  duties  imposed  by
      Sections  6221  through  6232 of the Code on the  General  Partner as "tax
      matters partner" of the Partnership,  including those set forth in Section
      4.2A (xxvi) of this Agreement.

       Section 4.12     Compensation of the General Partner
       -----------------------------------------------------

      A. Except as provided in Articles Four and Five, the General Partner shall
not,  either in its capacity as General  Partner or in its individual  capacity,
receive any salary, fees or profits from the Partnership.

      B. In consideration of its payment of Organization and Offering Costs, the
General Partner shall be paid in cash by the Partnership an amount equal to: (1)
3.5% of individual  Unit Holders'  Subscriptions  for 2,500 Units or less,  (ii)
2.625% of individual Unit Holders'  Subscriptions  for more than 2,500 Units but
less than or equal to 5,000  Units,  (iii)  1.75% of  individual  Unit  Holders'
Subscriptions  for more than 5,000 Units but less than or equal to 7,500  Units,
(iv) 1.0% of individual  Unit Holders'  Subscriptions  for more than 7,500 Units
but less than or equal to 10,000  Units,  (v) .25% of  individual  Unit Holders'
Subscriptions  for more than 10,000 Units but less than 100,000 Units,  and (vi)
no  Organization  and Offering Costs shall be paid for individual  Unit Holders'
Subscriptions  of  100,000  Units  or more.  In  consideration  of its  services
rendered  in  connection  with  the   Partnership's   acquisition  of  Producing
Properties and the conduct of its business operations, the General Partner shall
be paid the  Acquisitions  and  Operations Fee in an amount equal to 3.5% of the
Unit Holders' Subscriptions.  Notwithstanding the foregoing, the General Partner
shall not be  entitled to any payment in respect of  Organization  and  Offering
Costs  nor the  Acquisitions  and  Operations  Fees in the  event  that the Unit
Holders'  Subscriptions  are to be returned in accordance with Section 3.4B as a
result of a failure to satisfy conditions specified in the Prospectus.



                                      A-30
<PAGE>




      C. The General  Partner shall be reimbursed by the Partnership for General
and  Administrative  Costs and Direct  Administrative  Costs  incurred  by it on
behalf of the Partnership,  and such costs shall be allocated among the Partners
as set forth in Section 5.1 of this Agreement.  The aggregate  amount of General
and Administrative Costs allocable to the accounts of the Unit Holders for which
the General  Partner  will be  reimbursed  will not,  (i) in the first 12 months
following  Activation of the Partnership,  exceed an amount equal to 2.5% of the
Unit Holders' Subscriptions,  and (ii) in any succeeding 12-month period, exceed
an amount equal to 1% of the Unit  Holders'  Subscriptions;  provided,  however,
that   notwithstanding   the   foregoing,   the  amount  of  such   General  and
Administrative  Costs allocated to the Unit Holders during each of the third and
subsequent 12-month periods of Partnership operations shall not exceed an amount
equal  to  15%  of  Revenues  allocable  to  their  accounts.  All  General  and
Administrative  Costs allocable to the accounts of the Unit Holders will be paid
solely out of Revenues  allocable  to the Unit  Holders.  To the extent that the
General   Partner   determines   that  Revenues  are   insufficient   to  permit
reimbursement in full of such General and Administrative  Costs in the period in
which they are  incurred or accrued (or the  General  Partner  elects to receive
less than the full  amount  payable  in order that  funds may be  available  for
distribution  to Unit  Holders  or any other  reason)  or the  amounts  actually
reimbursed  by the  Partnership  do not exceed the foregoing  limitations,  such
unpaid or unused  General  or  Administrative  Costs may be  carried  forward or
backwards  and  increase  the  maximum  amount  of   reimbursable   General  and
Administrative Costs for any other period.

      Section 4.13  Dealer Manager
      ----------------------------

      The Dealer Manager shall have no duties,  responsibilities  or obligations
to the Partnership,  the General Partner, the Depositary or any Unit Holder as a
consequence of its right to receive  Commissions,  except to the extent provided
under the  Securities  Act of 1933,  as  amended.  The  Dealer  Manager  has not
assumed, and will not assume, any responsibility with respect to the Partnership
nor  will  it be  permitted  by  the  General  Partner  to  assume  any  duties,
responsibilities or obligations  regarding the management,  operations or any of
the  business  affairs of the  Partnership  subsequent  to the date on which the
Partnership is Activated.


                                  ARTICLE FIVE

                          ALLOCATIONS AND DISTRIBUTIONS

      Section 5.1 Allocation of Costs and Expenses
      --------------------------------------------

      All fees and payments to the General  Partner  required by Section  4.12B,
Commissions  and  costs  incurred  in  connection  with  Identified  Development
Drilling (including any interest, commitment fees and other finance charges with
respect to borrowing incurred in connection  therewith) and Property Acquisition
Costs will be charged 99% to the Unit Holders and 1% to the General Partner. All
Organization  and Offering Costs will be charged entirely to the General Partner
(in  consideration of which the General Partner will be paid the amount provided
in the first sentence of Section  4.12B).  Except as otherwise  provided in this
Article Five, Operating Costs,



                                      A-31
<PAGE>



costs and expenses of Development  Drilling,  General and Administrative  Costs,
Direct Administrative Costs and all other Partnership costs and expenses will be
charged to the accounts of the General  Partner and the Unit Holders in the same
proportions that Revenues are being allocated to them at the time such costs and
expenses  are  incurred.  Notwithstanding  anything  to the  contrary  contained
herein,  if and to the extent the Partnership  sells any Producing  Property and
applies any portion of the proceeds  thereof to the  purchase of any  additional
Producing Properties, the Property Acquisition Costs of the additional Producing
Properties shall, to the extent of the amount of such proceeds,  be allocated to
and borne by the General  Partner and the Unit  Holders in the same  proportions
that such sale proceeds were allocated and credited to them.

      Section 5.2 Allocation of Revenues
      ----------------------------------

      A.  Investment  Income will be allocated 99% to the Unit Holders and 1% to
the General  Partner.  Except as otherwise  provided in this Article Five and in
Section 4.3F, until Payout, all other Partnership Revenues will be allocated 95%
to the Unit Holders and 5% to the General Partner.  After Payout,  Revenues will
be allocated 85% to the Unit Holders and 15% to the General  Partner;  provided,
however,  that if, at  Payout,  the  total  amount  of cash  distributed  by the
Partnership to the Unit Holders from the commencement of the Property Investment
Period has averaged on a  twelve-month  basis an amount that is less than 12% of
the Unit Holders'  Subscriptions,  the  percentage of Revenues  allocated to the
General Partner will increase to only 10% and the Unit Holders will be allocated
90% thereof until such time, if ever, that the distributions to the Unit Holders
from the commencement of the Property  Investment  Period reaches a twelve-month
average equal to at least 12% of the Unit Holders' Subscriptions,  at which time
Revenues will  thereafter be allocated 15% to the General Partner and 85% to the
Unit Holders.  As used herein the "Property  Investment  Period" shall mean that
period which begins with the first day of the calendar quarter  following either
(I) the calendar quarter during which 90% of the Partnership's capital available
for purchasing Producing  Properties has been so expended,  or (ii) the calendar
quarter  in which 50% of the  Partnership's  capital  available  for  purchasing
Producing  Properties has been so expended,  as the General Partner shall elect.
Where proceeds from the Sale of all or any part of the  Partnership's  Producing
Properties are  distributed  to the Partners and a portion of the  distributable
amount  attributable  to such Sale  proceeds  is  sufficient  in amount to cause
Payout to occur in accordance  with the  allocation  percentages in effect until
Payout,  Payout shall be deemed to occur such that Revenues  attributable to the
distributed  portion  of such Sale  proceeds  in excess of the  portion of Sales
proceeds  sufficient  in amount to cause  Payout to occur shall be  allocated in
accordance with the allocation percentages in effect after Payout.

      B.  Notwithstanding the other provisions of this Section 5.2 and except as
provided in Section 4.3F, if the  allocation of Revenues  realized from the sale
of any  Hydrocarbon  property  would result in the  recognition  of a "simulated
loss",  as such term is defined in  Treasury  Regulation  ss.1.704-1(b),  by the
Partnership,  then such  Revenues  shall,  to the  extent  of the  amount of the
"simulated  adjusted tax basis", as such term is defined in Treasury  Regulation
ss.  1.704-1(b),  of such  Hydrocarbon  property,  be  allocated  to the General
Partner and the Unit Holders in the same proportions that the aggregate adjusted
tax basis of such  property  was  allocated  to them (or their  predecessors  in
interest) pursuant to Section 5.5(u).



                                      A-32
<PAGE>




      Section 5.3 Allocations Among Unit Holders
      ------------------------------------------

      A.  Allocations of costs,  expenses and Revenues to the Unit Holders other
than  Substituted  Limited  Partners  herein shall be actually  allocated to the
Depositary for the account of the Unit Holders.  All profits and losses and each
item of Revenues,  gain, loss,  cost,  deduction or credit allocated to the Unit
Holders,  as a class,  shall be  allocated to each Unit Holder in the ratio that
(I) the number of Units  held of record by each Unit  Holder as of the first day
of each month  during  the  period  ("Monthly  Record  Date")  bears to (ii) the
aggregate  number  of  Units  outstanding  on each  such  Monthly  Record  Date.
Distributions  pursuant to Section  5.7 hereof  will be made to Unit  Holders of
record on the  first  day of the  calendar  quarter  to which  the  distribution
relates in the ratio  which (x) the number of Units owned of record by each Unit
Holder on such date bears to (y) the aggregate  number of Units  outstanding  on
such date. Such payment shall  constitute  full payment and  satisfaction of the
Partnership's  liability in respect of such payment  regardless  of any claim of
any Person who may have an interest in such  payment by reason of an  assignment
or otherwise.

      B. Except as  provided in  subsections  (i) through  (iv) of this  Section
5.3B,  in the case of a change in a Unit  Holder's  interest in the  Partnership
during a taxable year of the Partnership,  all Partnership Revenues, gain, loss,
deduction or credit allocable to the Unit Holders shall be allocated pursuant to
Section  5.3A above to the  Persons who were Unit  Holders  during the period to
which such item is attributable  in accordance with the Unit Holders'  interests
in the  Partnership  during such period  regardless of when such item is paid or
received by the Partnership.

                (i) With  respect to certain  "allocable  cash basis  items" (as
      such term is defined in the Code) of  Partnership  Revenues,  gain,  loss,
      deduction or credit,  if, during any taxable year of the Partnership there
      is change in any Unit Holder's  interest in the Partnership,  then, except
      to the extent provided in regulations  prescribed under Section 706 of the
      Code,  each Unit Holder's  allocable  share of any  "allocable  cash basis
      item" shall be determined by (I) assigning the appropriate portion of each
      such item to each day in the period to which it is attributable,  and (ii)
      allocating the portion  assigned to any such day among the Unit Holders in
      proportion to their interests in the Partnership at the close of such day.

                (ii) If, by adhering to the method of  allocation  described  in
      the  immediately  preceding  subsection of this Section 5.3B, a portion of
      any "allocable  cash basis item" is  attributable to any period before the
      beginning of the  Partnership  taxable year in which such item is received
      or paid,  such  portion  shall be (a)  assigned  to the  first  day of the
      taxable year in which it is received or paid, and (b) allocated  among the
      persons  who were Unit  Holders  in the  Partnership  during the period to
      which such portion is  attributable  in accordance with their interests in
      the Partnership during such period.

               (iii) If any portion of any  "allocable  cash basis item" paid or
      received by the  Partnership in a taxable year is attributable to a period
      after the close of that taxable  year,  such portion shall be (a) assigned
      to the last day of the taxable year in which it is paid or  received,  and
      (b)  allocated  among the persons who are Unit  Holders in  proportion  to
      their interests in the Partnership at the close of such day.



                                      A-33
<PAGE>




                (iv) If any  deduction  is allocated to a person with respect to
      an  "allocable  cash  basis  item"  attributable  to a period  before  the
      beginning  of the  Partnership  taxable year and such person is not a Unit
      Holder of the  Partnership  on the first  day of the  Partnership  taxable
      year,  such deduction  shall be capitalized by the Partnership and treated
      in the manner provided for in Section 755 of the Code.

       Section 5.4 Capital Accounts
       ----------------------------

      Capital  Accounts  shall be  established  and  maintained  for the General
Partner and each Unit Holder in accordance  with tax  accounting  principles and
with valid regulations  issued by the U.S. Treasury  Department under subsection
704(b) of the Code (the "704  Regulations").  To the extent that tax  accounting
principles and the 704  Regulations may conflict,  the latter shall control.  In
connection with the establishment and maintenance of such Capital Accounts,  the
following provisions shall apply:

                (i) The General Partner's or Unit Holder's Capital Account shall
      be (x) increased by the amount of cash  contributed by or on behalf of the
      General  Partner  or Unit  Holder,  the  fair  market  value  of  property
      contributed by it or on its behalf to the Partnership  (net of liabilities
      securing such  contributed  property that the Partnership is considered to
      assume or take subject to under  section 752 of the Code) and  allocations
      to it of income and gain  (except to the  extent  such  income or gain has
      previously been reflected in its Capital  Account by adjustments  thereto)
      and (y) decreased by the amount of cash distributed to the General Partner
      or Unit  Holder,  the fair  market  value of property  distributed  to the
      General  Partner or Unit  Holder by the  Partnership  (net of  liabilities
      securing such distributed property that the General Partner or Unit Holder
      is  considered to assume or take subject to under Section 752 of the Code)
      and allocations to it of Partnership loss, deduction (except to the extent
      such loss or  deduction  has  previously  been  reflected  in its  Capital
      Account by  adjustments  thereto)  and  expenditures  described in Section
      705(a)(2)(B) of the Code.

                (ii) In the event  Partnership  Property is  distributed  to the
      General  Partner or Unit Holder,  then,  before the Capital Account of the
      General  Partner or Unit  Holder is  adjusted as required by clause (I) of
      this  Section 5.4,  the Capital  Accounts of the General  Partner and Unit
      Holders  shall be adjusted  to reflect the manner in which the  unrealized
      income,  gain, loss and deduction  inherent in such  Partnership  Property
      (that has not been reflected in such Capital Accounts previously) would be
      allocated  among the  General  Partner  and Unit  Holders  if there were a
      taxable disposition of such Partnership Property for its fair market value
      on the date of distribution.

                (iii) If,  pursuant to this Agreement,  Partnership  Property is
      reflected  on the books of the  Partnership  at a book value that  differs
      from the adjusted tax basis of such Partnership Property, then the General
      Partner's  and  Unit  Holders'  Capital  Accounts  shall  be  adjusted  in
      accordance with the 704 Regulations for allocations to the General Partner
      and Unit  Holders of  depreciation,  depletion,  amortization  and gain or
      loss,  as computed for book  purposes,  with  respect to such  Partnership
      Property.



                                      A-34
<PAGE>




                (iv) The General  Partner's and Unit Holders'  Capital  Accounts
      shall be reduced by a simulated  depletion  allowance computed on each oil
      or gas property using either the cost  depletion  method or the percentage
      depletion  method (without regard to the limitations  under the Code which
      could  apply to fewer than all of the General  Partner and Unit  Holders);
      provided,  however,  that the choice between the cost depletion method and
      the percentage  depletion  method shall be made on a  property-by-property
      basis and such choices shall be binding for all Partnership  taxable years
      during  which such oil or gas  property is held by the  Partnership.  Such
      reductions  for depletion  shall not exceed the aggregate  adjusted  basis
      allocated to the General Partner and Unit Holders with respect to such oil
      or gas property.  Such  reductions for depletion  shall be allocated among
      the  General  Partner's  and Unit  Holders'  Capital  Accounts in the same
      proportions as the adjusted basis in the particular  property is allocated
      to the General Partner and each Unit Holder.  Upon the taxable disposition
      of an oil or gas property by the Partnership,  the Partnership's simulated
      gain or loss shall be determined  by  subtracting  its simulated  adjusted
      basis  (aggregate  adjusted tax basis of the General  Partner and the Unit
      Holders less  simulated  depletion  allowances)  in such property from the
      amount  realized on such  disposition  and the General  Partner's and Unit
      Holders' Capital  Accounts shall be increased or reduced,  as the case may
      be, by the amount of the  simulated  gain or loss on such  disposition  in
      proportion to the General Partner's and Unit Holders'  allocable shares of
      the total amount realized on such disposition.

                (v) For purposes of determining  the Capital  Account balance of
      the General  Partner and any Unit Holder as of the end of any  Partnership
      taxable year, the General Partner's and such Unit Holder's Capital Account
      shall be reduced by:

                      (a)  Adjustments  that,  as  of  the  end  of  such  year,
            reasonably are expected to be made to the General Partner's and such
            Unit Holder's Capital Account pursuant to paragraph (b)(2)(iv)(k) of
            the 704 Regulations for depletion allowances with respect to oil and
            gas properties of the Partnership, and

                      (b)  Allocations of loss and deduction that, as of the end
            of such year,  reasonably  are  expected  to be made to the  General
            Partner or such Unit  Holder  pursuant to Code  Section  704(e) (2),
            Code section 706(d), and paragraph  (b)(2)(ii) of Section 1.751-1 of
            regulations promulgated under the Code, and

                      (c)  Distributions  that,  as of  the  end of  such  year,
            reasonably  are  expected to be made to the General  Partner or such
            Unit Holder to the extent they exceed  offsetting  increases  to the
            General  Partner's  or  such  Unit  Holder's  Capital  Account  that
            reasonably   are   expected  to  occur  during  (or  prior  to)  the
            Partnership taxable years in which such distributions reasonably are
            expected to be made.

                (vi)  The  Capital  Accounts  of the  General  Partner  and Unit
      Holders  which are charged with an item of  Partnership  expense  shall be
      credited  with any portion of that  expense  which is finally  determined,
      judicially or administratively, to be nondeductible for federal income tax
      purposes,  less any amortization or depreciation thereof incurred prior to
      the date that the credit is made.



                                      A-35
<PAGE>




               (vii) In allocating income and costs for any Fiscal Year in which
      the ratio for sharing and costs  changes  pursuant  to Section  5.2A,  the
      allocations  of  income  and  costs  shall be made,  and the  books of the
      Partnership  shall be closed, as soon as practicable after the date Payout
      occurs, to determine the General Partner's and each Unit Holder's share of
      pre-change  income  and  costs  and the  General  Partner's  and each Unit
      Holder's share of post-change income and costs for that Fiscal Year.

               (viii)  Notwithstanding  any other provision of this Agreement to
      the  contrary,  if,  under any  provision of this  Agreement,  the Capital
      Account of the  General  Partner or any Unit Holder is adjusted to reflect
      the  difference  between  the  basis  to the  Partnership  of  Partnership
      Property and such Partnership Property's fair market value, then all items
      of income,  gain,  loss and  deduction  with  respect to such  Partnership
      Property shall be allocated among the General Partner and the Unit Holders
      so as to  take  account  of  the  variation  between  the  basis  of  such
      Partnership  Property  and  its  fair  market  value  at the  time  of the
      adjustment to the General  Partner's or such Unit Holder's Capital Account
      in accordance with the  requirements of subsection  704(c) of the Code, or
      in the same manner as provided under subsection 704(c) of the Code.

               (ix)     Subject only to the provisions of Subsection 5.4(x),

                      (a) There shall be allocated to the General  Partner,  any
            item of loss,  deduction,  credit or  allowance  that,  but for this
            Subsection 5.4(ix) would have been allocated to any Unit Holder that
            is not  obligated  to  restore  any  deficit  balance  in such  Unit
            Holder's   Capital  Account  and  would  have  thereupon  caused  or
            increased a deficit balance in such Unit Holder's Capital Account as
            of  the  end  of  the  Partnership's  taxable  year  to  which  such
            allocation  related (after taking into  consideration the provisions
            of Subsection 5.4(v) hereof);

                      (b) Any Unit Holder that is not  obligated  to restore any
            deficit   balance  in  such  Unit  Holder's   Capital   Account  who
            unexpectedly  receives an  adjustment,  allocation  or  distribution
            specified in Subsection  5.4(v)  hereof shall be allocated  items of
            income and gain in an amount and manner sufficient to eliminate such
            deficit balance as quickly as possible; and

                      (c) In the  event  any  allocations  of  loss,  deduction,
            credit or  allowance  are made to the  General  Partner  pursuant to
            clause (a) of this Subsection 5.4(ix),  the General Partner shall be
            subsequently  allocated  all  items of  income  and gain  until  the
            aggregate  amount of such allocations of income and gain is equal to
            the aggregate  amount of any such  allocations  of loss,  deduction,
            credit or  allowance  allocated to the General  Partner  pursuant to
            clause (a) of this Subsection 5.4(ix).



                                      A-36
<PAGE>




                (x) In the event there is a net decrease in the "minimum  gain,"
      as such term is defined in the 704 Regulations,  of the Partnership during
      a Partnership  taxable year, the General Partner and all Unit Holders with
      deficit  Capital  Account  balances  at the  end of  such  year  shall  be
      allocated,  before any other  allocation  is made under this Article Five,
      income  and  gain of the  Partnership  for  such  taxable  year  (and,  if
      necessary, subsequent years) in the amount and in the proportion necessary
      to  eliminate  such  deficits  as quickly  as  possible.  The  allocations
      required  by this  Subsection  5.4(x)  shall be made as required by and in
      accordance with Section 1.704-1(b)(4)(iv)(e) of the 704 Regulations. It is
      intended  that the  provision  set forth in this  Subsection  5.4(x)  will
      constitute   a  "minimum   gain   chargeback"   as  described  in  Section
      1.704-1(b)(4)(iv)(e)  of the 704  Regulations.  The 704 Regulations  shall
      control in the case of any conflict  between the 704  Regulations and this
      Subsection 5.4(x).

      Section 5.5 Allocations for Federal Income Tax Purposes
      -------------------------------------------------------

      With respect to the various  allocations  of Partnership  Revenues,  gain,
loss, deduction and credit for federal income tax purposes,  it is hereby agreed
as follows:

                (i) To the extent permitted by law, all charges,  deductions and
      losses  shall be  allocated  for federal  income tax  purposes in the same
      manner as the costs in  respect  of which  such  charges,  deductions  and
      losses are charged to the General Partner and Unit Holders,  respectively.
      The General  Partner and Unit Holders  bearing the costs shall be entitled
      to  the  deductions   (including,   without   limitation,   cost  recovery
      allowances,   depreciation  and  cost  depletion)  and  credits  that  are
      attributable to such costs.

                (ii) The  Partnership  shall allocate to the General Partner and
      each Unit  Holder its  portion of the  adjusted  basis in each  depletable
      Partnership  Property  as required  by Section  613A(c)(7)(D)  of the Code
      based upon the interest of the General  Partner or such Unit Holder in the
      capital  of the  Partnership  as of the  time of the  acquisition  of such
      Partnership Property. To the extent permitted by the Code, such allocation
      shall be based upon the General  Partner's or said Unit Holder's  interest
      (x) in the Partnership capital used to acquire the property, or (y) in the
      adjusted basis of the property if it is contributed to the Partnership. If
      such  allocation of basis is not permitted under the Code, then basis will
      be allocated in the  permissible  manner which the General  Partner  deems
      will most closely achieve the result intended above.

                (iii) Partnership Revenues shall be allocated for federal income
      tax purposes in the same manner as they are  allocated  to the  respective
      accounts of the General Partner and Unit Holders pursuant to Sections 5.2,
      5.3 and 5.4 above.




                                      A-37
<PAGE>




                (iv)  Depreciation  or cost  recovery  allowance  recapture  and
      recapture of intangible  drilling and development  costs, if any, due as a
      result of sales or  dispositions  of assets shall be allocated in the same
      proportion that the depreciation,  cost recovery  allowances or intangible
      drilling  and   development   costs  being  restored  or  recaptured  were
      allocated.


       Section 5.6Minimum Interest of General Partner
       -----------------------------------------------

      Notwithstanding  anything to the contrary that may be expressed or implied
in this  Agreement,  the  aggregate  interest  of the  General  Partner  in each
material item of Partnership Revenues,  gain, loss, deduction or credit shall be
equal  to at least  one  percent  of each  such  item at all  times  during  the
existence of the Partnership.  In determining the General Partner's  interest in
such items, Units owned by the General Partner shall not be taken into account.

      Section 5.7 Distributions
      -------------------------

      The  Partnership's  cash available for distribution will be distributed to
the  Unit  Holders  and  the  General  Partner  in  the  same  proportions  that
Partnership Revenues have been allocated to them after giving effect to previous
distributions  and to portions of such Revenues  theretofore used or retained to
pay  costs  incurred  or  expected  to be  incurred  in  conducting  Partnership
operations  or to repay  borrowings  theretofore  or expected  to be  thereafter
obtained by the  Partnership.  Amounts which  otherwise  would  constitute  cash
available  for  distribution  and which  consist  of  proceeds  from the sale of
Producing  Properties may be used or committed to acquire  additional  Producing
Properties at any time within 36 months of the  Activation  of the  Partnership.
Within 50 days after the end of each calendar quarter,  the General Partner will
determine the amount of cash available for distribution and will distribute such
amount,  if any,  to the  Unit  Holders  and the  General  Partner  as  promptly
thereafter as reasonably  possible.  The General Partner's  determination of the
cash  available  for  distribution  will be  conclusive  and  binding  upon  all
Partners. In no event, however, shall funds be advanced or borrowed for purposes
of  distributions,  if  the  amount  of  such  distributions  would  exceed  the
Partnership's  accrued and received  Revenues from the previous  four  quarters,
less paid and accrued Operating Costs with respect to such Revenues.


                                   ARTICLE SIX

                   WITHDRAWAL OR REMOVAL OF GENERAL PARTNER
           OR GENERAL PARTNER'S INTEREST IN PARTNERSHIP PROPERTIES

      Section 6.1 Withdrawal of General Partner or General Partner's Interest
                  in Partnership Properties
      -----------------------------------------------------------------------

      A.     The  General  Partner  (including  by  definition  any  successor
General Partner) shall have the right to retire or withdraw upon 120 days'



                                      A-38
<PAGE>



Notification to the Unit Holders, subject to its obligation to pay all costs and
expenses incurred by the Partnership by virtue of such retirement or withdrawal;
provided,  however,  that no such  retirement or  withdrawal  shall be permitted
before the fifth  anniversary of the Activation of the  Partnership  without the
Consent of the Unit Holders owning 50% or more of the outstanding Units.

      B. The General  Partner may,  from time to time and upon at least 90 days'
Notification to the Unit Holders and without  withdrawing  from or resigning its
position as General  Partner,  cause the  Partnership to distribute,  in partial
liquidation  of  its  interest  in  the  Partnership,  to  the  General  Partner
fractional,  undivided interests in the Producing  Properties of the Partnership
(such  interest of the General  Partner in a Producing  Property  distributed is
hereinafter  referred  to as  the  "Distributed  Interest")  up to an  aggregate
interest  equal in value to 80% of the value of the Producing  Properties of the
Partnership that it would have been entitled to upon a hypothetical  liquidation
of the  Partnership  after  application  of the  provisions  of Section 9.2 (the
interest  in a  Producing  Property  of  the  General  Partner  retained  in the
Partnership is hereinafter  referred to as the "Retained  Interest");  provided,
however,  that no such  distribution  shall  occur  unless the  General  Partner
obtains  an  opinion of  counsel  to the  Partnership  to the  effect  that such
distribution will not result in any material adverse tax consequence to the Unit
Holders or the  Partnership.  Notwithstanding  anything to the  contrary in this
Agreement,  in the event that any such distribution is made, the General Partner
shall:

            (1) make  appropriate  adjustments  in the  Capital  Account  of the
      General  Partner and in the allocation of Partnership  Revenues,  expenses
      and costs to assure that the General Partner will not share or participate
      in any of the capital,  costs,  Revenues or distributions  attributable to
      the Producing  Properties of the  Partnership  except to the extent of the
      Retained Interest of the General Partner;

            (2) not voluntarily or otherwise dispose of its Distributed Interest
      unless  the  undivided  interest  of the  Partnership  in  such  Producing
      Properties  is also sold or disposed of for a  proportionately  equivalent
      consideration;

            (3)  ensure   that  the  Unit   Holders'   share  of   General   and
      Administrative Costs and Direct  Administrative Costs does not increase as
      a result of such withdrawal; and

            (4) indemnify the Unit Holders  against any expenses  resulting from
      such withdrawal.

      Section 6.2 Assignment of General Partner Interest
      --------------------------------------------------

      Subject to Section 12.3 and Section  6.5B,  upon  obtaining the Consent of
Unit Holders owning more than 50% of the outstanding  Units, the General Partner
may assign or transfer  its  General  Partner  interest to a Person  which shall
become a successor  General  Partner;  provided,  however,  that no such Consent
shall be required in connection  with an assignment or transfer  pursuant to the
merger,  consolidation or transfer of all or substantially  all of the assets of
the General Partner.



                                      A-39
<PAGE>




      Section 6.3 Removal of General Partner
      --------------------------------------

      A.     Subject to Section  12.3,  the Unit Holders  owning more than 50%
of the outstanding Units,  shall have the authority to, and shall,  remove the
General Partner.

      B.  (i) If the Unit  Holders  elect  to  remove  the  General  Partner  as
permitted under this Section,  and further elect to continue the business of the
Partnership  with one or more successor  General  Partners,  the removed General
Partner shall not be removed until a successor General Partner has been selected
by the Unit Holders and admitted to the Partnership pursuant to Section 11.2.


            (ii)  Notwithstanding  Section 3.6B,  any General  Partner who shall
withdraw  or be removed  shall be  released  and  indemnified  by any  successor
General  Partner  from and  against  all  liability  for  Partnership  debts and
obligations incurred by the Partnership prior to the time of such removal.

      Section 6.4 Option to Purchase Interest from Former General Partner
      -------------------------------------------------------------------

      In the event the General  Partner  withdraws or is removed and a successor
General  Partner is selected,  the incoming  General  Partner and the  departing
General  Partner shall,  by mutual  agreement,  select an independent  petroleum
consultant to value the departing General Partner's interest in the Partnership.
The  incoming  General  Partner,  or the  Partnership,  shall have the option to
purchase  at  least  20%  of  the  interest  of the  departing  General  Partner
(including any Distributed Interests distributed to the General Partner pursuant
to Section 6.1B) for the value  determined  by the  independent  appraisal.  The
departing General Partner's  interest in the Partnership shall be transferred to
the successor General Partner, and the successor General Partner shall assign to
the  departing  General  Partner a portion of  Partnership  Revenues,  costs and
rights to receive Partnership distributions as and when such items are allocated
or distributed,  as the case may be, by the Partnership  equal to the percentage
interest of the departing  General Partner in the Partnership  prior to removal,
less the portion purchased by the successor General Partner or the Partnership.

      Section 6.5 Power to Admit Successor General Partner
      ----------------------------------------------------

      A. If the General  Partner has  withdrawn  or been  removed,  Unit Holders
owning more than 50% of the outstanding Units shall have the right and authority
to appoint and admit a successor  General  Partner  meeting the  requirements of
Section 6.5B to take the place of the departing General Partner.



                                      A-40
<PAGE>




      B. If there is admitted to the  Partnership a successor  General  Partner,
such admission shall not become effective unless (a) the Partnership  shall have
received a certificate, duly executed by or on behalf of such proposed successor
General  Partner,  to the effect that:  (I) it is  experienced in performing (or
employs sufficient personnel who are experienced in performing) functions of the
type then being performed by the departing  General  Partner,  (ii) it has a net
worth  sufficient to satisfy the net worth  requirements  of the Code,  Treasury
Regulations,  the Internal Revenue Service or the courts applicable to a general
partner in a limited  partnership in order to ensure that the  Partnership  will
not fail to be classified for federal  income tax purposes as a partnership  and
(iii) such Person,  if other than an  individual,  has the authority to become a
successor  General  Partner  under  the  terms  of this  Agreement;  and (b) the
proposed successor General Partner shall have (I) become a party to, and adopted
all of the terms and  conditions of this  Agreement and (ii) paid all reasonable
legal fees of the  Partnership  and filing and  publication  costs in connection
with such Person's  becoming a successor  General  Partner.  The  Certificate of
Limited  Partnership  shall be amended to reflect the  withdrawal  of the former
General Partner and the admission of the successor General Partner.

      Section 6.6 Incapacity of the General Partner
      ---------------------------------------------

      A. In the event of the Incapacity of the General Partner,  the Partnership
shall be dissolved.  However,  within 90 days thereafter the Unit Holders owning
more than 50% of the outstanding Units may elect to reconstitute the Partnership
prior to application of the liquidation provisions of Section 9.2.

      B. Upon the Incapacity of the General Partner, the Person who is its legal
representative shall have all the rights of a General Partner for the purpose of
settling  or  managing  its estate and such power as the  Incapacitated  General
Partner  possessed  to assign all or any part of its  interest  and to join with
such assignee in satisfying  conditions  precedent to such assignee's becoming a
substituted General Partner.

      Section 6.7 Termination of Contracts with General Partner
      ---------------------------------------------------------

      Subject to and upon  fulfilling  the conditions of Section 12.3, the power
shall be  vested in the Unit  Holders  owning  more than 50% of the  outstanding
Units to  terminate  any or all  contracts  between the  General  Partner or any
Affiliate and the Partnership, and select a replacement Person therefor.




                                      A-41
<PAGE>




                                  ARTICLE SEVEN

             ASSIGNMENT OF LIMITED PARTNER INTERESTS TO UNIT HOLDERS

      Section 7.1 Assignments of the Interests of Depositary
      ------------------------------------------------------

      A. Pursuant to Sections 7.1B and 13.1, the Depositary  shall issue to each
Person purchasing one or more Units a Depositary  Receipt evidencing such Units.
The Partnership  shall  recognize as a Unit Holder,  for the number of Units for
which the Partnership has received proceeds,  each Person to whom the Depositary
issues a Depositary Receipt as of the date provided in Section 13.1 or otherwise
as the General Partner shall determine in accordance with the provisions of this
Agreement.

      B. The Depositary, by the execution of this Agreement, irrevocably assigns
to the Unit  Holders  all of the  Depositary's  beneficial  (but not the record)
rights and  interest in and to the  Partnership,  except as  otherwise  provided
herein, as of the date of Activation of the Partnership. The rights and interest
so transferred and assigned shall include, without limitation, the following:

                (i) all rights to receive  distributions  of uninvested  Capital
      Contributions  pursuant to Section 3.4 and the right to receive rebates of
      Commissions and Organization and Offering Costs pursuant to Section 3.4;

                (ii)  all  rights  to  receive  distributions  of  Partnership
      funds or assets under the terms of this Agreement or under the Act;

               (iii)  all  rights  in  respect  of  allocations  of each item of
      Revenues, gain, loss, deduction and credit pursuant to Article Five;

               (iv) all rights in respect of allocations  to Capital  Accounts
      pursuant to Section 5.4;

                (v)   all rights to receive  any  proceeds of  liquidation  of
      the Partnership pursuant to Section 9.2;

               (vi) all rights to  inspect  books and  records  and to receive
      reports pursuant to Article Ten;

               (vii) the right to bring  derivative  actions pursuant to the Act
      (in  the  event  any  such  action  must  be  brought  in the  name of the
      Depositary  as a Limited  Partner,  the  Depositary  agrees to bring  such
      action, at the expense of the Unit Holder(s) requesting such action); and

            (viii)  all  rights  which the  Depositary  has,  or may have in the
      future,  under this  Agreement or the Act,  except as  otherwise  provided
      herein.



                                      A-42
<PAGE>




      C. The  General  Partner,  by the  execution  of this  Agreement,  and any
Substituted  Limited  Partner,  by its adoption of this  Agreement,  pursuant to
Section 7.3,  irrevocably  consents to and  acknowledges  that (i) the foregoing
assignment pursuant to Section 7.1B by the Depositary to the Unit Holders of the
Depositary's  beneficial rights and interest in the Partnership is effective and
(ii) the Unit Holders are intended to be third-party beneficiaries of all rights
and  privileges  of the  Depositary  hereunder.  The  General  Partner  and  any
Substituted  Limited  Partner  covenant and agree that, in  accordance  with the
foregoing  transfer and assignment,  all the Depositary's  beneficial rights and
privileges  hereunder may be exercised by the Unit Holders,  including,  without
limitation, those listed in Section 7.1B.

      D. The Depositary, by execution of this Agreement,  irrevocably commits to
exercise its rights to vote and Consent as a Limited  Partner in accordance with
directions it receives from the Unit Holders as provided herein.

      E. The  Depositary  may transfer its interest as the Depositary to another
Person only with the Consent of the General  Partner and Unit Holders other than
Substituted Limited Partners owning more than 50% of the outstanding Units.

      F.  All  Persons  becoming  Unit  Holders  will by their  payment  for and
acceptance  of  Depositary  Receipts  agree to  comply  with and be bound by the
terms,  conditions and obligations of and will be entitled to all rights of Unit
Holders under this Agreement.

      G.     Other  than  pursuant  to  Sections  7.1B,   7.1E  and  7.2,  the
Depositary  shall  not  transfer,  assign,  encumber,  pledge  or  hypothecate
any of its interest in the Partnership.

      Section 7.2 Rights of Unit Holders
      ----------------------------------

      A. In  accordance  with the transfer and  assignment  described in Section
7.1B, it is the intention of the parties  hereto that,  except to the extent set
forth in Section 3.6B,  Unit Holders shall have the same rights and  obligations
that Limited Partners have under this Agreement and under the Act. The fiduciary
duties and obligations of the General Partner to Limited  Partners under the Act
and this Agreement shall extend to the Unit Holders.

      B. Without  limiting the  generality of Section  7.2A,  persons who become
Limited  Partners  pursuant  to Section 7.3 below and other Unit  Holders  shall
share pari passu on the basis of one Limited Partner  interest for one Unit, and
shall be  considered  a single  class,  with  respect  to all  rights to receive
distributions and allocations pursuant to this Agreement.

      C.  Subject to Section  12.2,  Unit  Holders  shall vote on all matters in
respect of which they are  entitled to vote (either in person,  by proxy,  or by
written  consent),  as a single  class,  with  each Unit  entitled  to one vote;
provided,  however,  that the  Depositary  shall  vote on  behalf of and only as
directed by the Unit Holders who are not Substituted Limited Partners.



                                      A-43
<PAGE>




      Section 7.3 Conversion of Units  into Limited Partner Interests
      ---------------------------------------------------------------

       Subject to the  consent of the  General  Partner,  which  consent  may be
granted or withheld in its absolute  discretion,  any Unit Holder who desires to
convert his Units into an equal number of Limited Partner interests (which shall
be included  in the  meaning of "Units" as such term is used in this  Agreement)
may  do so  following  Activation  of  the  Partnership  by  delivering  to  the
Depositary an executed  subscription  agreement and transfer  application (which
are available  upon request from the General  Partner),  accompanied  by written
instructions  which  set forth an  intention  to  become a  Substituted  Limited
Partner and request  admission as such to the  Partnership,  together  with such
other instruments or documents as the General Partner or the Depositary may deem
necessary or desirable,  including the written  acceptance  and adoption by such
Unit  Holder  of  the   provisions  of  this   Agreement   and  the   execution,
acknowledgement  and  delivery  to the  General  Partner  of a special  power of
attorney,  the form and  content  of which are  reasonably  satisfactory  to the
General  Partner.  Such executed  documents shall be accompanied by a payment to
the  Partnership by such Unit Holder of a fee (not to exceed $100) for legal and
administrative  costs and  recording  fees.  Unit Holders  becoming  Substituted
Limited Partners will be admitted to the Partnership  quarterly,  or as promptly
as possible after the  commencement  of the next calendar  quarter.  Persons who
effect such  conversion  will  thereafter  be deemed to have an equal  number of
Units of interest as a Limited Partner and the Substituted  Limited Partner will
not be able to re-exchange such units of Limited Partner interests for Units.


                                  ARTICLE EIGHT

                        TRANSFERABILITY OF UNITS Section

       Section 8.1  Assignments of Units
       ---------------------------------

      A.  Subject to the  provisions  of Section 8.4, no Unit Holder may assign,
sell,  transfer  or  exchange  his Units  without  the  approval  of the General
Partner.  In exercising  its  obligations  under this Section 8.1A,  the General
Partner  shall use its best effort to ensure that the terms of transfer  are not
in  contravention  of any of the  provisions  of this  Agreement  and  shall not
approve any transfer:

                (i)   to a Person who makes a market in the Units;

                (ii)  which is  effected  through a  matching  agent  unless the
      procedures  of such  matching  agent with respect to the transfer of Units
      have been  approved  by the  General  Partner as not being  incident  to a
      public trading of such securities within the meaning of Code Section 7704,
      469(k) or 512(c);



                                      A-44
<PAGE>




                (iii) if such sale, assignment, transfer or exchange would be in
      violation of any applicable  federal or state  securities  laws (including
      any applicable  suitability  standard and the restrictions on transfer set
      forth in Rule  260.141.11  of Title  10 of the  California  Administrative
      Code) or would cause the Partnership to be taxed as an entity other than a
      partnership under the Code;

               (iv)  if  such  sale,  assignment,  transfer  or  exchange,  when
      aggregated  with all other  transfers  during the same taxable year of the
      Partnership,  would result in both (a) the transfer of more than 5% of the
      Units (excluding Permitted Transfers) and (b) the transfer of more than 2%
      of the Units (excluding  Permitted  Transfers and transfers made through a
      Matching  Service),  unless the  General  Partner  shall have  received an
      opinion of counsel that such sale, assignment, transfer or exchange may be
      made without material  adverse tax  consequences to the Unit Holders.  For
      purposes of this  subsection,  the "Permitted  Transfers"  shall mean: (1)
      transfers  in which the basis of the Units in the hands of the  transferee
      is determined, in whole or in part, by reference to its basis in the hands
      of the  transferor  or is determined  under  Section 732 of the Code;  (2)
      transfers at death; (3) transfers  between members of a family (as defined
      in Section  267(c)(4)  of the Code);  (4) the  issuance  of Units by or on
      behalf of the Partnership in exchange for cash, property or services;  (5)
      distributions from a retirement plan qualified under Section 401(a) of the
      Code;  and (6)  Block  Transfers.  The term  "Block  Transfer"  means  the
      transfer  by a Unit Holder in one or more  transactions  during any thirty
      consecutive day period of Units representing in the aggregate more than 5%
      of the  total  interests  in  Partnership  capital  or  profits.  The term
      "Matching  Service" has the meaning and the conditions to sale ascribed to
      it in Internal  Revenue  Service  Notice 88-75.  For purposes of the above
      limitations,  the  percentage of Units  transferred  during a taxable year
      shall equal the sum of the monthly  percentage of Units  transferred.  The
      monthly  percentage  of  Units  transferred  in  any  month  shall  be the
      percentage  equal to a fraction  the  numerator  of which is the number of
      Units  transferred  during such month and the  denominator of which is the
      number of Units  outstanding on the last day of such month,  provided that
      the  denominator  shall not include Units owned by the General  Partner or
      any Person related to the General  Partner  (within the meaning of Section
      267(b) or 707(b)(1) of the Code);

                (v) except for  transfers by gift or  inheritance,  intra-family
      transfers,  transfers  resulting  from family  dissolutions,  transfers to
      Affiliates or transfers of such  transferor's  entire remaining holding of
      Units,  any sale,  assignment,  transfer  or  exchange of Units that would
      result in the transferors' holding less than ten (10) Units;

               (vi)   except as  provided  in Section 8.3 unless and until the
      transferee  has  certified  to the  Partnership  that he is an  Eligible
      Investor; or

               (vii) to any entity exempt from federal  income tax under Section
      501 of the Code, to any Person  defined in Section  168(h)(2) of the Code,
      to any Individual  Retirement  Account as defined in Section 408(a) of the
      Code,  to any  Keogh  Plan,  to any  nonresident  alien or to any  foreign
      Entity.



                                      A-45
<PAGE>




The General  Partner  shall give  Notification  to all Unit Holders in the event
that sales, exchanges, transfers or assignments have generally been suspended.

      B. Any attempted sale,  assignment,  transfer or exchange in contravention
of the provisions of this Section 8.1 shall, unless otherwise  determined by the
General Partner in its sole discretion, be void and deemed ineffectual and shall
not bind or be recognized by the Partnership.

      C. The  Partnership  need not recognize for any purpose any  assignment of
Units  unless there shall have been filed with the  Partnership  and recorded on
the  Partnership's  books  a  duly  executed  and  acknowledged   instrument  of
assignment, and such instrument evidences the written acceptance by the assignee
of all of the terms  and  provisions  of this  Agreement,  represents  that such
assignment was made in accordance  with all applicable  laws and regulations and
in all other  respects  is  satisfactory  in form and  substance  to the General
Partner.

      D. The Partnership need not (but, at least in the case of (i) below,  may,
in its sole  discretion,  do so) recognize  for any purpose any purported  sale,
assignment  or  transfer  of all or part of the  Units,  if, in the  opinion  of
counsel:

                (i)  such  sale,   assignment   or  transfer   would  cause  the
      Partnership to be treated as an association  taxable as a corporation  for
      federal  income  tax  purposes,  or,  when added to the total of all other
      sales or  exchanges  of interests  within the  preceding 12 months,  would
      result in the Partnership's being considered to have terminated within the
      meaning of Section 708 of the Code;  and the General  Partner is expressly
      authorized to enforce this  provision by suspending  transfers if and when
      any  such  transfer   would  result  in  transfers  of  interests  in  the
      Partnership which represent in the aggregate 50% (or such lower percentage
      as  may  be  deemed  prudent  by  the  General  Partner)  or  more  of all
      Partnership interests;

                (ii) such sale,  transfer or assignment  would violate any state
      securities  or "blue  sky"  laws  (including  any  applicable  suitability
      standards) applicable to the Partnership or the Units to be transferred or
      assigned,  except  in the case of  transfers  upon  the  death of the Unit
      Holder (by bequest or inheritance) or by operation of law; or

                (iii)  such  sale,   transfer  or  assignment  might  cause  the
      Partnership to be classified as a publicly traded  partnership  within the
      meaning of Code Section 7702, 469(k) or 512(c).

      E. Unless otherwise provided by the General Partner, any sale,  assignment
or transfer  of Units shall be  recognized  by the  Partnership  as of the first
business day of the calendar  quarter  following the approval of such assignment
or transfer by the General  Partner,  or as soon thereafter as practicable.  The
General  Partner  shall  not  approve  sales,   assignments  or  transfers  more
frequently  than quarterly  unless it receives a written opinion of counsel that
more frequent  approvals shall not jeopardize the  Partnership's  federal income
tax status as a partnership.  The  Partnership  and the General Partner shall be
entitled to treat the  assignor of such Units as the absolute  owner  thereof in
all respects, and shall incur no liability for any allocation of Revenues, costs
or expenses,  distribution  or transmittal  of reports or notice  required to be
given to Unit  Holders  hereunder  which is made in good faith to such  assignor
until such time as the written instrument of assignment has been received by the
Partnership and recorded on its books.



                                      A-46
<PAGE>




      F. The General Partner may reasonably interpret,  and is hereby authorized
to take such action as it deems necessary or desirable to effect,  the foregoing
provisions  of this  Section 8.1.  The General  Partner  may, in its  reasonable
discretion and without the approval of the Unit Holders, amend the provisions of
this  Agreement  in such manner as may be necessary or desirable to (I) preserve
the  tax  status  of  the   Partnership   as  a  partnership  or  (ii)  avoid  a
classification  of the Partnership as a publicly traded  partnership  within the
meaning of Code Section 7704, 469(k) or 512(c).  The General Partner may, in its
reasonable  discretion and without the approval of the Unit Holders,  also amend
the   provisions  of  this  Agreement  to  include   provisions   governing  the
transferability  of interests in the Partnership which may be approved in future
legislation,   Treasury   Regulations,    administrative   rulings   and   other
pronouncements  or judicial  decisions.  The Unit Holders  shall be given prompt
Notification of any amendments permitted by this Section 8.1F.

      G. No purported  sale,  assignment  or transfer by a  transferor  of Units
shall be recognized  unless (I) the transferor  shall have represented that such
transfer  (x) was  effected  through a  broker-dealer  or  matching  agent whose
procedures  with  respect to the  transfer  of Units have been  approved  by the
General Partner as not being incident to a public trading market and not through
any other  broker-dealer  or matching  agent or (y)  otherwise  was not effected
through a broker-dealer or matching agent which makes a market in Units or which
provides a readily  available,  regular  and ongoing  opportunity  to holders of
Units to sell or exchange  their Units  through a public  means of  obtaining or
providing  information  of offers to buy,  sell or  exchange  Units and (ii) the
General Partner determines that the circumstances  described in Section 8.1A(iv)
have not occurred and will not occur and that otherwise such sale, assignment or
transfer  would not, by itself or together  with any other  sales,  transfers or
assignments,  be likely to result in the  Partnership's  being  classified  as a
publicly traded partnership.

      H.     Unit Holders who are  residents of the State of  California  must
meet  the   restrictions   on  transfers  set  forth  in  Rule  260.141.11  of
Title 10 of the California Administrative Code.

      I.  Except as  provided  in  Section  8.4,  no  transfer  of Units will be
recorded or  otherwise  recognized  by the  Depositary  or  Partnership  for any
purpose  whatsoever  unless  and  until  the  transferee  has  certified  to the
Depositary  that he is an Eligible  Investor  and,  unless the transfer is among
members  of the  immediate  family of the  transferor  Unit  Holder,  has paid a
transfer  fee to  reimburse  the  Depositary  for  all  actual,  reasonable  and
necessary  expenses (not to exceed $50 per  transaction)  incurred in connection
with the transfer.

      J.     A  transferee  who has accepted an  assignment  of Units shall be
deemed  to have  agreed  to  comply  with and be bound by all of the terms and
conditions of this Agreement.

      Section 8.2 Substituted Limited Partners
      ----------------------------------------

      A. The  Consent  of the  General  Partner  shall be  required  before  the
assignee of any Units shall be admitted as a Substituted Limited Partner,  which
Consent  may be  withheld  in the sole and  absolute  discretion  of the General
Partner.



                                      A-47
<PAGE>




      B.     No person  shall have the right to become a  Substituted  Limited
Partner in place of his assignor  unless all of the following  conditions  are
first satisfied:

                (1) a duly  executed  and  acknowledged  written  instrument  of
      assignment  complying  with  Section  8.1 shall  have been  filed with the
      Partnership and recorded on its books,  which instrument shall specify the
      Units being  assigned and set forth the intention of the assignor that the
      assignee  succeed to the  assignor's  interest  as a  Substituted  Limited
      Partner in his place;

                (2) the  transferor  and his  assignee  shall have  executed and
      acknowledged  such  other  instruments  as the  General  Partner  may deem
      necessary or desirable to effect such substitution,  including the written
      acceptance  and  adoption  by the  assignee  of  the  provisions  of  this
      Agreement  as the same may be amended,  his  agreement  to be bound by the
      terms  hereof,  and his  execution,  acknowledgment  and  delivery  to the
      General  Partner of a special  power of attorney,  the form and content of
      which are reasonably satisfactory to the General Partner; and

                (3) a transfer fee sufficient to cover all  reasonable  expenses
      connected with such  substitution (not to exceed $50) shall have been paid
      to the Partnership.

      C.  By  executing  or  adopting  this  Agreement,  the  Depositary,   each
Substituted  Limited  Partner and, by the  purchase of a Unit,  each Unit Holder
hereby consents to the admission of Substituted  Limited Partners by the General
Partner in accordance with the foregoing.

       Section 8.3 Eligible Investors
       ------------------------------

      A. If the General Partner determines that a Unit Holder is not an Eligible
Investor  then the Unit Holder  shall  immediately  be divested of its rights to
Consent on matters  submitted to Unit Holders (and no such Units shall be deemed
outstanding for purposes of Consents of Unit Holders under this  Agreement).  At
any time after it can and does certify that it has become an Eligible  Investor,
a Unit Holder may, upon  application to the General  Partner,  retain all of the
rights and benefits attributable to his Units.

      B.  If at any  time  (i)  the  Partnership,  the  General  Partner  or the
Depositary  receives an opinion of counsel to the effect that the citizenship or
other status of a Unit Holder may result in the forfeiture or  cancellation of a
federal Lease or otherwise  affects the  eligibility of the  Partnership to hold
federal Leases or (ii) the  Partnership or the General  Partner is named a party
in any judicial or  administrative  proceeding  that seeks the  cancellation  or
forfeiture of any property in which the Partnership  has an interest  because of
the  citizenship  (or any other status that subjects the Partnership to the risk
of losing its eligibility to acquire or hold interests in federal Leases) of any
one or more Unit  Holders,  the  General  Partner may notify the Unit Holder and
purchase the Units of such Unit Holder for its own account, at such time and for
such amount as the General Partner may determine in its sole discretion. Nothing
in this  Section 8.3 shall  prevent a Unit Holder  from  transferring  his Units
prior to the date set for such purchase by the General Partner.


                                      A-48
<PAGE>




      Section 8.4 Death, Incompetency or Dissolution of a Unit Holder
      ---------------------------------------------------------------

      If a Unit  Holder  who is an  individual  dies  or a  court  of  competent
jurisdiction  adjudges  him  to be  incompetent  to  manage  his  person  or his
property, such Unit Holder's executor,  administrator,  guardian, conservator or
other legal representative may exercise all of such Unit Holder's rights for the
purpose of settling his estate or  administering  his  property,  including  any
power under this Agreement of an assignee to become a Unit Holder or Substituted
Limited Partner. If a Unit Holder is a corporation, trust or other entity and is
dissolved or terminated,  the powers of such Unit Holder may be exercised by its
legal representative or successor.


                                  ARTICLE NINE

                          DISSOLUTION, LIQUIDATION AND
                         TERMINATION OF THE PARTNERSHIP

       Section 9.1 Events Causing Dissolution
       --------------------------------------

      A.     The Partnership shall be dissolved upon the happening of any of
the following events:

                (i)   the expiration of its term, without any continuation
      thereof as set forth in Section 2.3;

                (ii) the Incapacity of the General Partner;  provided1  however,
      within ninety (90) days  thereafter  the Unit Holders owning more than 50%
      of the outstanding  Units may elect to reconstitute the Partnership  prior
      to application of the liquidation provisions of Section 9.2;

                (iii)  the  sale  or  other  disposition   (including,   without
      limitation,  a disposition pursuant to Section 3.4B) at one time of all or
      substantially all of the assets of the Partnership existing at the time of
      such sale;

                (iv) the election to dissolve the Partnership (a) by the General
      Partner (which election shall be Consented by the Unit Holders owning more
      than 50% of the outstanding  Units), or (b) by the Consent of Unit Holders
      owning more than 50% of the outstanding Units;

                (v) ninety (90) days after the removal or withdrawal of the sole
      General Partner  (unless a successor is elected  pursuant to Section 6.5);
      or

                (vi) the happening of any other event causing the dissolution of
      the Partnership under the laws of the State, except that the Incapacity of
      the Depositary or any Unit Holder shall not dissolve the  Partnership  and
      the  seizure of the  interest of the  Depositary  shall not  dissolve  the
      Partnership.



                                      A-49
<PAGE>




      B.  Dissolution of the Partnership  shall be effective on the day on which
the event occurs giving rise to the dissolution,  but the Partnership  shall not
terminate  until the General Partner has recorded a notice of dissolution of the
Partnership  with the  office of the  Secretary  of State of the State and shall
have  complied  with the laws of the other states in which it does  business and
the assets of the Partnership have been distributed as provided in Section 9.2.

      C. Nothing contained in this Agreement shall impair, restrict or limit the
rights and powers of the Unit  Holders  under the laws of the State or any other
jurisdiction   in  which  the  Partnership  is  doing  business  to  reform  and
reconstitute  themselves as a limited partnership  following  dissolution of the
Partnership either under provisions identical to those set forth herein or under
any other provisions.

      D. If the  Partnership  is  dissolved as a result of an event set forth in
Sections  9.1A(ii) or (v), Unit Holders owning more than 50% of the  outstanding
Units may appoint an interim manager of the Partnership,  who shall have and may
exercise only the rights,  powers and duties of a general  partner  necessary to
preserve  Partnership  assets,  until (I) a successor General Partner is elected
pursuant  to Section  6.5,  if the  Partnership  is  reconstituted,  or (ii) the
Partnership is liquidated pursuant to Section 9.2. The interim manager shall not
be liable as a general  partner to the  Depositary  or Unit  Holders  and shall,
while acting in such capacity, be entitled to the same indemnification rights as
are set forth in Section 4.10.

      Section 9.2 Liquidation
      -----------------------

      A.  Subject to Section  9.1,  upon  dissolution  of the  Partnership,  its
liabilities  shall be paid in the order  provided  herein.  The General  Partner
shall sell or otherwise dispose of the  Partnership's  Property and other assets
and shall execute all amendments terminating the Partnership. In connection with
any such sale,  the General  Partner shall attempt to obtain the best prices for
such property.  Pending such sales,  the General Partner shall have the right to
continue to operate and  otherwise  to deal with  Partnership  property.  In the
event the  Partnership  is dissolved on account of the  Incapacity or removal of
the General  Partner,  the  Partnership  shall  elect,  in  accordance  with the
provisions of Article Twelve, a Person (the "Liquidating  Agent") to perform the
function of the General Partner in liquidating the assets of the Partnership and
winding up its affairs,  and shall pay to such Liquidating  Agent its reasonable
fees and expenses incurred in connection therewith. Gain or loss realized on the
sale or other  disposition of the  Partnership's  assets will be credited to (in
the case of gain) or charged against (in the case of loss) the General Partner's
and each Unit Holder's  Capital  Account to the extent  allocable to the General
Partner and such Unit Holder under Sections 5.1 and 5.2. Any  liquidation of the
Partnership  shall take place out of court and  without  application  being made
therefor to the Secretary of State of the State.

      The  Liquidating  Agent shall  agree not to resign at any time  without 15
days' prior  Notification and (if other than the General Partner) may be removed
at any time, with or without cause, by Notification of removal  approved by Unit
Holders owning more than 50% of the outstanding Units. Upon dissolution, removal
or resignation of the Liquidating Agent, a successor and substitute  Liquidating
Agent (who shall have and succeed to all



                                      A-50
<PAGE>



rights,  powers and duties of the original  Liquidating Agent) shall,  within 30
days  thereafter,  be  selected  by Unit  Holders  owning  more  than 50% of the
outstanding  Units.  The right to appoint a successor or substitute  Liquidating
Agent in the manner  provided  herein shall be recurring and  continuing  for so
long as the functions and services of the  Liquidating  Agent are  authorized to
continue  under  the  provisions  hereof,  and  every  reference  herein  to the
Liquidating  Agent  shall be  deemed  to refer  also to any  such  successor  or
substitute  Liquidating  Agent  appointed  in the manner  herein  provided.  The
Liquidating Agent shall have and may exercise,  without further authorization or
Consent  of any of the  parties  hereto,  all of the powers  conferred  upon the
General  Partner  under the terms of this  Agreement  (but subject to all of the
applicable  limitations,  contractual  and otherwise,  upon the exercise of such
powers,  other than the  limitation  on sales set forth in Section  4.5C) to the
extent  necessary  or desirable  in the good faith  judgment of the  Liquidating
Agent to carry out the duties and functions of the  Liquidating  Agent hereunder
for and during such period of time as shall be  reasonably  required in the good
faith  judgment  of  the  Liquidating  Agent  to  complete  the  winding-up  and
liquidation of the Limited Partnership as provided for herein.

      Notwithstanding   the   provisions   of  Section  9.1  which  require  the
liquidation  of the  assets  of the  Partnership,  but  subject  to the order of
priorities set forth herein,  if on dissolution of the Partnership,  the General
Partner or Liquidating Agent determines that an immediate sale of part or all of
the Partnership's assets would be impracticable or would cause undue loss to the
Unit  Holders,  the General  Partner or  Liquidating  Agent may, in its absolute
discretion,  defer for a reasonable  time the  liquidation  of any assets except
those necessary to satisfy  liabilities of the Partnership  (other than those to
the General  Partner and Unit  Holders) or place those  assets in a  liquidating
trust to hold  until such time as the  assets  are sold or  depleted;  provided,
however,  that such assets will be  transferred  to a liquidating  trust only if
before the transfer the General Partner or Liquidating Agent shall have received
the opinion of Counsel to the Partnership that the operation of such liquidating
trust  pursuant  to its terms will not result in such  liquidating  trust  being
treated  as an  association  taxable as a  corporation  for  federal  income tax
purposes.  Furthermore,  if the  dissolution  of the  Partnership is effected by
virtue  of a merger  or  combination  with  another  entity  or by  virtue  of a
transfer,  sale or exchange  of all or  substantially  all of the  Partnership's
asset for which at least a portion of the  consideration  consists of securities
of another entity, such securities may be distributed to the General Partner and
Unit  Holders  in kind and there  shall be no  obligation  to sell or  otherwise
dispose of such  securities  for cash or to place them in a  liquidating  trust;
provided,  however,  that no such  securities  shall be  distributed to the Unit
Holders upon  liquidation  unless (I) the securities are readily  marketable and
(ii) pro rata amounts of such  securities (to the extent such  securities may be
divided in equal pro rata amounts) are distributed to each Unit Holder.

      B. In settling accounts after  dissolution,  the assets of the Partnership
shall be paid out in the following order: (i) to third-party  creditors,  in the
order or  priority  as  provided  by law;  (ii) to the  General  Partner and any
Liquidating Agent for any expenses of the Partnership paid by or payable to them
to the extent  they are  entitled  to  reimbursement  therefor  pursuant to this
Agreement;  (iii) to all of the Unit  Holders  in the amount  equivalent  to the
amount of their  positive  Capital  Account  balances (as  adjusted  pursuant to
Section 9.2A) on the date of  distribution;  (iv) to the General  Partner in the
amount equivalent to the amount of its positive



                                      A-51
<PAGE>



Capital  Account  balance (as adjusted  pursuant to Section 9.2A) on the date of
distribution;  and (v) the balance, if any, shall be paid to the General Partner
and Unit Holders in the manner in which Revenues are then being allocated.

      C. If the  General  Partner has a deficit  balance in its Capital  Account
following the distribution(s)  provided for in Section 9.2B above, as determined
after taking into account all adjustments to its Capital Account for the taxable
year of the  Partnership  during  which  such  distribution(s)  occur,  it shall
restore the amount of such deficit balance to the Partnership within 90 days and
such amount shall be  distributed  to the Unit Holders in accordance  with their
positive Capital Account balances.

      D. Upon the  liquidation or partial  liquidation of the General  Partner's
interest pursuant to Article Six hereof, any distribution to the General Partner
shall be made pro rata in  accordance  with and to the  extent  of its  positive
Capital  Account balance after the General  Partner's and Unit Holders'  Capital
Accounts are adjusted as if all of the  Partnership's  Property had been sold at
its fair market value  immediately  prior to such  distribution  and the gain or
loss realized on such Sale charged or credited to the General Partner's and Unit
Holders'  Capital  Accounts in accordance with and to the extent of its positive
Capital  Account balance after the General  Partner's and Unit Holders'  Capital
Accounts are adjusted as if all of the  Partnership's  Property had been sold at
its fair market value  immediately  prior to such  distribution  and the gain or
loss realized on such Sale charged or credited to the General Partner's and Unit
Holders'  Capital  Accounts in  accordance  with the  provisions of Article Five
hereof; provided,  however, that if the General Partner has a deficit balance in
its Capital Account  following such  distribution  (or adjustment of the General
Partner's  Capital Account  pursuant to this Section 9.2D),  the General Partner
shall restore the amount of such deficit balance to the Partnership by the later
of the end of the  Partnership  taxable  year in which  the  liquidation  of the
General Partner's Interest occurs or 90 days after the date of such liquidation.

      E.  Notwithstanding  anything to the contrary in this Agreement,  upon the
dissolution  and  termination  of the  Partnership,  the  General  Partner  will
contribute  to the  Partnership  the lesser of: (a) the  deficit  balance in its
Capital  Account;  or (b)  the  excess  of 1.01  percent  of the  total  Capital
Contributions of the Unit Holders over the capital previously contributed by the
General Partner.


                                   ARTICLE TEN

               BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS; ETC.

      Section 10.1 Books and Records
      ------------------------------

      The books and records of the Partnership,  including  information relating
to the sale by the General Partner or any Affiliates of goods or services to the
Partnership,  and a list of the  names  and  addresses  and  Units  of all  Unit
Holders,  shall be maintained by the General Partner at the principal  office of
the Partnership for a period of six years following the close of the Fiscal Year
to which they relate and shall be available  for  examination  there by any Unit
Holder or its duly authorized representatives



                                      A-52
<PAGE>



at any  and all  reasonable  times.  Any  Unit  Holder  or its  duly  authorized
representatives,  upon paying the costs of collection,  duplication and mailing,
shall be  entitled  for any  proper  purpose  to a copy of the list of names and
addresses and Units of the Unit Holders. The Partnership may maintain such other
books and records and may provide  such  financial  or other  statements  as the
General Partner in its discretion deems advisable.

      Section 10.2 Accounting Basis for Tax and Reporting Purposes; Fiscal Year
      -------------------------------------------------------------------------

      The books and records of the Partnership for tax purposes, for purposes of
this Agreement and for the purpose of reports to the Partners,  shall be kept on
the accrual basis. The Fiscal Year of the Partnership shall be the calendar year
to the extent  permissible and the General Partner shall use its best efforts to
obtain any necessary approvals therefor.

      Section 10.3 Bank Accounts
      --------------------------

      The General Partner shall maintain a bank account or accounts on behalf of
the Partnership with any bank in the United States having total assets in excess
of $100,000,000.  The General Partner shall not deposit  Partnership funds in an
account  with any bank in an  aggregate  amount in  excess of 5% of such  bank's
total  assets.  Withdrawals  shall be made  only in the  regular  course  of the
Partnership's  business on such  signature or signatures as the General  Partner
may  determine.  All deposits and other funds not needed in the operation of the
business may be deposited in interest-bearing accounts, certificates of deposit,
money market funds (including those managed or marketed by the Dealer Manager or
its Affiliates) or invested in short term United States  Government  obligations
maturing within one year,  commercial paper of corporations  organized under the
laws of any state of the United  States or the  District of Columbia  having the
highest credit rating granted by Moody's Investors  Service,  Inc. or Standard &
Poor's Corporation, or other similar highly liquid investment.

      Section 10.4 Reports
      --------------------

      A. The  General  Partner  shall close the  Partnership's  books of account
promptly  at the  close of each  Fiscal  Year and an annual  examination  of the
Partnership's  financial  statements  shall be  performed  at the expense of the
Partnership by the  Accountants.  The General  Partner shall furnish to the Unit
Holders an annual  report within 120 days after the close of each Fiscal Year of
the  Partnership  commencing  with the Fiscal Year in which the  Partnership was
Activated. If requested by a Unit Holder, the General Partner shall also furnish
such Unit  Holder  with a report  within 75 days  after the end of the first six
months of the Fiscal  Year in which  such  request  was made,  or within 75 days
after the request is made, whichever is later. Such report will contain at least
the following information:



                                      A-53
<PAGE>




                (i)  Financial   statements  for  the  Partnership's   accounts,
      including a balance  sheet,  statement of income,  statement of changes in
      partners'  capital and statement of cash flow prepared on an accrual basis
      in  accordance   with  generally   accepted   accounting   principles  and
      accompanied  by a report of the  Accountants  together  with their opinion
      thereon,  except that the  semi-annual  financial  statements  need not be
      audited;

                (ii) A summary itemization,  by type and/or  classification,  of
      the total fees and compensation,  including any General and Administrative
      Cost reimbursement, paid by the Partnership or indirectly on their behalf,
      to the General Partner and any Affiliate;

                (iii) A  description  of each  Producing  Property  acquisition,
      including the costs therefor,  in which the Partnership  owns an interest,
      except  succeeding  reports need contain only material changes  (including
      all material farmouts,  development drilling, improved recovery operations
      and abandonments), if any, regarding Producing Properties already reported
      upon. In the case of wells that have been abandoned  after  production has
      commenced,  a statement  justifying such abandonment  shall be included if
      the General  Partner or an Affiliate is the operator.  With respect to all
      material  Farmouts,  the statement  shall include a  justification  of the
      Farmout,  location, time, to whom made and a general description of terms;
      and

                (iv) A schedule  reflecting  a list of the wells  drilled by the
      Partnership and the costs thereof.

      B. Within 60 days after the end of each fiscal  quarter,  each Unit Holder
will receive an "investor  statement"  which  summarizes his current quarter and
cumulative cash distributions in the Partnership.

      C. Within 120 days after the end of the Fiscal Year  following  the Fiscal
Year in which Activation of the Partnership occurs, and annually thereafter, the
General Partner shall furnish to the Unit Holders a computation as of the end of
the immediately  preceding Fiscal Year, based upon engineering  reports prepared
by one or more qualified independent petroleum engineering firms with respect to
Producing  Properties  containing  Proved  Reserves equal to at least 80% of the
Proved  Reserves of the  Partnership  (with the computation as to any balance of
the Partnership's Proved Reserves being based upon petroleum engineering reports
prepared by the General Partner or an Affiliate),  of the total estimated Proved
Developed  Producing  Reserves,  Proved Development  Non-Producing  Reserves and
Proved Undeveloped Reserves owned by the Partnership, the estimated dollar value
thereof stated in then existing prices and escalated  prices (as provided by the
General Partner). In addition,  the computation shall include an estimate of the
time required for the  extraction of such reserves and the present worth of such
reserves and the  estimate  shall  contain a statement  that because of the time
period  required to extract such  reserves  the present  value of revenues to be
obtained in the future is less than if immediately receivable.



                                      A-54
<PAGE>




      D. In addition to the report described in Section 10.4C of this Agreement,
if an event  occurs to the  knowledge of the General  Partner or its  Affiliates
leading to a reduction or an increase of such Proved  Reserves of more than 10%,
excluding reduction as a result of normal production,  an additional computation
and estimate  similar to that  described in Section  10.4C shall be sent to each
Unit Holder as soon as possible.

      E. By March 15 of each year, the General  Partner will furnish a report to
each Unit Holder  containing such  information as is pertinent for completion of
his respective federal, state and other income tax returns.

      F. The General  Partner  shall file on a timely basis with the  Securities
and  Exchange  Commission  all filings  required  to be made by the  Partnership
pursuant to the Securities Act of 1933, the Securities  Exchange Act of 1934 and
the rules and regulations promulgated thereunder. The General Partner shall make
available  to any Unit  Holder  upon the Unit  Holder's  request,  copies of any
report filed by or on behalf of the Partnership with the Securities and Exchange
Commission.  The General  Partner  shall cause a copy of any reports sent to the
Unit Holders under  paragraphs A, C, D and E hereof to be sent to the California
Commissioner of Corporations.

      G.     The General  Partner  agrees to make all relevant  financial  and
engineering  reports  available  for review by a Unit Holder on request at the
offices of the Partnership.

      Section 10.5 Elections
      ----------------------

      The General  Partner  shall cause the  Partnership  to make all  elections
required  or  permitted  to be made by the  Partnership  under  the Code and not
otherwise  expressly  provided  for in this  Agreement,  in the manner  that the
General Partner believes will be most  advantageous to the Unit Holders,  except
that (i) the General  Partner  shall not be  required to make an election  under
Section 754 of the Code or  corresponding  provisions of applicable state income
tax laws,  and (ii) the General  Partner  shall make the election  under Section
263(c) of the Code to expense all intangible  drilling and development  costs in
the initial  Partnership  federal income tax return filed for the Fiscal Year in
which such costs are incurred.

                                 ARTICLE ELEVEN

                               AMENDMENTS; MERGER

      Section 11.1 Proposal and Adoption of Amendments Generally
      ----------------------------------------------------------

      A.  Notwithstanding  anything to the contrary herein,  the General Partner
may, without prior notice or Consent of any Unit Holder,  amend any provision of
this Agreement (including an amendment to admit an additional General Partner or
a successor  General  Partner in the event of the  withdrawal  or removal of the
General  Partner) if, in its opinion,  such  amendment  does not have a material
adverse  effect upon the Unit Holders or otherwise is permitted by Section 8.1F.
Amendments  to this  Agreement  to reflect  the  addition or  substitution  of a
Limited Partner or the admission of a successor General Partner shall be made at
the time and in the manner referred to in



                                      A-55
<PAGE>



Section  11.2.  Any other  amendment  to this  Agreement  may be proposed by the
General Partner or holders of at least 10% of the outstanding  Units. The Person
or Persons  proposing such amendment shall submit a Notification  containing (a)
the  text  of  such  amendment,  and  (b) a  statement  of the  purpose  of such
amendment.  The  General  Partner  shall,  within 15 days  after  receipt of any
proposal under this Section 11.1A,  give  Notification to the Depositary and all
Unit Holders of such  proposed  amendment,  of such  statement of purpose and of
such opinion of counsel,  together,  in the case of an amendment proposed by any
Unit  Holders,  with the views,  if any, of the General  Partner with respect to
such proposed amendment.

      B.  Amendments to this  Agreement  shall be adopted if: (I) in the case of
amendments referred to in Section 11.2 the conditions  specified in Section 6.5B
shall have been satisfactorily completed and the Partnership shall not have been
furnished with an opinion of counsel to the  Partnership to the effect that such
amendment  will  adversely  affect the  classification  of the  Partnership as a
partnership  for federal  income tax  purposes;  (ii) in the case of  amendments
referred to in Section 8.IF, the conditions specified in said Section shall have
been  satisfactorily  completed;  or (iii) in the case of all other  amendments,
such amendment shall have been Consented to by Unit Holders owning more than 50%
of the  outstanding  Units  (unless  such  Consent is not  required  pursuant to
Section 11.1A of this Agreement); provided, however, that no such amendment may:
(a) enlarge the obligations of the General Partner or any Unit Holder under this
Agreement  or convert the  interest  of any Unit  Holder into the  interest of a
General  Partner or modify the limited  liability of any Unit Holder without the
Consent of such  Partner or Unit  Holder;  (b)  modify  the method  provided  in
Article Five of determining and allocating or distributing,  as the case may be,
each item of income,  gain, loss, cost,  deduction or credit without the Consent
of the General Partner if it would be adversely  affected by such  modification,
and any Unit Holder which may be adversely affected,  by such modification;  (c)
amend  Sections  4.9,  4.10,  6.1,  6.2,  6.3 or 6.4  without the Consent of the
General  Partner;  or (d) amend Sections 2.3, 4.2, 4.4, 4.5, 4.11,  this Article
Eleven or Section  12.3 unless the Consent of the Unit  Holders  owning at least
two-thirds of the outstanding Units is obtained.

      C. Upon the adoption of any  amendment to this  Agreement,  the  amendment
shall  be  executed  by the  General  Partner  (both  on its own  behalf  and as
attorney-in-fact  for any Substituted  Limited Partners) and the Depositary and,
if  necessary  or  appropriate,  shall be recorded in the proper  records of the
State and any other state in which the Partnership is then doing business.

      Section 11.2  Amendments on Admission or Removal of Partner
      -----------------------------------------------------------

      If this  Agreement  or the  Certificate  of Limited  Partnership  shall be
amended to reflect  the  withdrawal  or removal of the  General  Partner and the
continuation of the business of the Partnership,  such amendment shall be signed
by the  remaining  or  successor  General  Partner  and by the  removed  General
Partner.



                                      A-56
<PAGE>




      Section 11.3  Merger
      --------------------

      The Partnership may merge or consolidate  with or into one or more limited
partnerships,   general   partnerships,   corporations,   business   trusts   or
associations,  or  unincorporated  businesses if (i) Consented to by the General
Partner and by Unit Holders  owning more than 50% of the  Outstanding  Units and
(ii)  such  merger  or  consolidation  is  permitted  under the Act or any other
applicable law.


      Section 11.4  Exchange Offers
      -----------------------------

      Neither the General  Partner nor its  Affiliates  will make or cause to be
made any offer to a Unit  Holder to  exchange  such  Unit  Holder's  Units for a
security unless:

      (a)   such offer is made after the  expiration  of two years  after such
            Partnership commenced operations;

      (b)   such offer is made to all Unit Holders;

      (c)   such  offer  is on a basis  no more  advantageous  to the  General
            Partner,  exchange  offeror or  underwriter of the offer and their
            respective affiliates,  than to Unit Holders,  provided,  however,
            that the foregoing  clause shall not prohibit,  if permitted under
            applicable  state  and  self-regulatory  organization  guidelines:
            (i)compensation  (including  the issuance of  securities)  to such
            persons in exchange for such  persons'  other balance sheet assets
            (non-Partnership  interests) for inclusion of the General  Partner
            in the exchange  offer or tender of other  balance sheet assets of
            the General Partner,  underwriter or their affiliates,  based upon
            exchange  valuation  principles  consistent with these guidelines;
            (ii)  compensation  to an  underwriter  for services in connection
            with the offer provided,  however,  that no compensation  shall be
            payable  to an  underwriter  for the  tender of  interests  by the
            exchange  offeror,  its affiliates or the  underwriter;  and (iii)
            compensation that may be permitted under subparagraph (g) below;

      (d)   payments for services  rendered by any Person in  connection  with
            the exchange are fully supportable, actual and necessary;

      (e)   in  computing  the  exchange  ratio,  the value of reserves  used is
            supported  by an  appraisal  prepared  by an  independent  petroleum
            consultant as of the most current  feasible  date,  and the value of
            all other  material  balance  sheet  assets,  including  undeveloped
            acreage,  is at fair market value as  determined  by an  independent
            qualified appraiser;

      (f)   the offer is made pursuant to all registration  requirements under
            both federal and state laws;



                                      A-57
<PAGE>




      (g)   if the  exchange  offeror  is a  corporation,  the  offer is made in
            compliance with applicable NASAA Guidelines for corporate securities
            and may not allow a security with different rights and privileges to
            be issued to the General  Partner or its Affiliates  unless there is
            justification therefor;

      (h)   the offer does not allow for an accelerated  reversionary interest
            to the  General  Partner  without  regard to the  existing  payout
            provisions;

      (i)   additional   shares  or  units  to  be  issued  pursuant  to  future
            reevaluation   of  properties   include   reevaluation   of  similar
            properties held by Unit Holders;

      (j)   there will be no overrides newly established to the General Partner,
            exchange offeror, or affiliates on leases to be part of the exchange
            and any overrides to be established to non-affiliates on such leases
            and the basis therefor are disclosed in detail;

      (k)   all  properties  to be  exchanged  are to be evaluated on the same
            basis or standard of evaluation; and

      (1)   material  properties of the General  Partner or its  Affiliates to
            be exchanged have complete cost disclosure;

provided, however, that the General Partner may avoid any of such conditions and
restrictions for which waivers or consents are obtained from  appropriate  state
securities  administrators or agencies.  Notwithstanding the foregoing,  neither
the General  Partner nor its  Affiliates  shall have any  obligation to make any
exchange offer to Unit Holders.

                                 ARTICLE TWELVE

                          CONSENTS, VOTING AND MEETINGS

      Section 12.1  Methods of Giving Consent
      ---------------------------------------

      Any Consent of a Unit Holder  required by this Agreement may be given by a
Unit  Holder as  follows:  (I) at a meeting,  in person,  by a written  proxy or
signed  writing  directing the manner in which it desires that its vote be cast,
which writing must be received by the General Partner prior to such meeting,  or
(ii) without a meeting,  by a signed  writing  directing  the manner in which it
desires  that its vote be cast,  which  writing  must be received by the General
Partner  prior to the date  upon  which  the  votes  of Unit  Holders  are to be
counted. Any Unit Holder may waive notice of or attendance at any meeting of the
Unit Holders and may execute a signed  written  consent.  Only the votes of Unit
Holders of record on the date set by the  General  Partner  (which date shall be
not less  than 10 days and not more  than 60 days  prior to the date set for the
meeting or consent),  whether at a meeting or otherwise, shall be counted. Units
held by the  General  Partner and its  Affiliates  which,  as a result  thereof,
cannot be voted,  will not be deemed  outstanding  for  purposes of  calculating
whether a  sufficient  number  of Units  have  consented.  The laws of the State
pertaining  to the  validity  and use of  corporate  proxies  shall  govern  the
validity and use of proxies given by the Unit Holders.



                                      A-58
<PAGE>




      Section 12.2  Meetings of Unit Holders
      --------------------------------------

      The General  Partner may at any time call a meeting of the Unit Holders or
for a vote,  without a meeting,  of the Unit  Holders on matters  upon which the
Unit Holders are entitled to provide  their  Consent,  and shall call for such a
meeting or vote upon receipt by the General  Partner of a request  therefor made
by Unit Holders owning at least 10% of the  outstanding  Units as of the date of
receipt  of such  request.  Within 15 days of the  receipt of the  request,  the
General  Partner  shall  notify all Unit Holders of record as of the date set by
the General Partner (which date shall be not less than 10 days and not more than
60 days  prior to the date set for the  meeting or  consent)  as to the time and
place of the meeting,  if called,  and the general  nature of the business to be
transacted  thereat,  or if no such  meeting has been  called,  of the matter or
matters to be voted upon and the date upon which the votes will be counted.  The
date of any meeting of Unit Holders or the date upon which such votes, without a
meeting,  will be counted  (regardless of whether the General Partner has called
for such meeting or vote upon the request of Unit Holders or has initiated  such
event  without  such  request)  shall be not less  than 30 or more  than 60 days
following mailing of the Notification thereof by the General Partner. Units held
by the General Partner and its Affiliates may not be voted by them. All expenses
of the meetings, voting and such Notification shall be borne by the Partnership.


      Section 12.3  Limitations on Requirements for Consents
      ------------------------------------------------------

      Notwithstanding  anything to the contrary contained in this Agreement, the
powers of the Unit Holders set forth in Sections 4.5D,  6.3A,  6.6A,  6.7, 11.1A
and 12.5 shall not be deemed to be granted to the Unit Holders or exercisable by
them if counsel for the Partnership or counsel designated by Unit Holders owning
at least 10% of the outstanding  Units renders an opinion to the effect that the
grant or the exercise of those powers or the result thereof is prohibited by the
Act, will impair the limited  liability of the Depositary or the Unit Holders or
will affect the  classification  of the Partnership as a partnership for federal
income tax purposes.


     Section 12.4  Submissions to Unit Holders
     -----------------------------------------

      The General  Partner shall give all the Unit Holders  Notification  of any
proposal or other matter  required by any provisions of this Agreement or by law
to be submitted for the  consideration  and approval of the Unit  Holders.  Such
Notification shall include any information required by the relevant provision of
the Agreement or by law.

      Section 12.5  Acting without Concurrence of General Partner
      -----------------------------------------------------------

      Except as limited by Sections  12.3 and 11.1B,  Unit  Holders  owning more
than 50% of the outstanding Units,  without the necessity for concurrence by the
General Partner may vote to:


                                      A-59
<PAGE>




            (a)   amend the Agreement;

            (b)   dissolve the Partnership;

            (c)   remove the General Partner and elect a new General Partner;

            (d)   approve or disapprove the sale of all or  substantially  all
      of the assets of the Partnership; or

            (e) cancel or amend the terms of any contract for services  with the
      General Partner or any Affiliate which shall be without penalty,  provided
      30 days' written notice is given.

                                ARTICLE THIRTEEN

                                 THE DEPOSITARY

      Section 13.1  Depositary Receipts
      ---------------------------------

      A. Within 45 days of the  Activation of the  Partnership,  the  Depositary
will execute and forward to each Unit Holder Depositary  Receipts evidencing the
ownership  by the Unit Holder as of the date of  Activation  the Units for which
such Unit Holder subscribed.

      B.  Pursuant  to the terms of  Section  8.1,  upon  receipt  of a properly
executed  application for transfer,  the Depositary  shall within three business
days execute and forward Depositary Receipts to the respective transferees.

      C. Depositary Receipts may be endorsed with, have incorporated in the text
thereof or be accompanied  by such legends or recitals,  attachments or changes,
not  inconsistent  with the provisions of this Agreement,  as may be required to
comply with any  applicable  law or regulation or to conform with any usage with
respect thereto,  or to indicate any special  limitation or restriction to which
any particular Unit may be subject,  or as may for any other reason be required.
Each  Depositary  Receipt shall be duly executed on behalf of the  Depositary by
the  manual  or  facsimile  signature  of  a  duly  authorized  officer  of  the
Depositary.  No  Depositary  Receipt shall be entitled to any benefit under this
Agreement or be valid for any purpose unless it bears such signature.

      D. All Depositary  Receipts  executed by the Depositary  shall be numbered
consecutively.  The Unit Holder of each  numbered  Depositary  Receipt  shall be
registered on the books of the Depositary maintained pursuant to Section 13.3A.

      E. Upon  surrender  by the Unit  Holder  in  person or by duly  authorized
attorney  of one or  more  Depositary  Receipts  at the  Depositary's  principal
office, or at any other office it may designate for the purpose, for split-up or
combination,  the Depositary shall,  subject to the terms and conditions of this
Agreement  and the  Depositary  Receipt,  execute  and  deliver  one or more new
Depositary  Receipts in authorized  denominations  as requested,  evidencing the
same  aggregate  number  of  Units as  evidenced  by the  Depositary  Receipt(s)
surrendered.



                                      A-60
<PAGE>




      F. If any Depositary Receipt is mutilated,  destroyed, lost or stolen, the
Depositary shall execute and deliver a Depositary Receipt in like form and tenor
in  exchange  and  substitution  for the  mutilated,  destroyed,  lost or stolen
Depositary Receipt; provided, that the Depositary may require the Unit Holder to
(I) surrender any mutilated  Depositary Receipt,  (ii) file with the Depositary,
in a form and  manner  satisfactory  to it,  proof of the  destruction,  loss or
theft, and of such Unit Holder's ownership,  of the Depositary Receipt and (iii)
furnish to the Depositary  reasonable  indemnification  (including posting of an
indemnity bond) satisfactory to the Depositary.

      G. As a condition  precedent  to the  execution  and  delivery,  transfer,
split-up,  combination,  surrender,  conversion  or exchange  of any  Depositary
Receipt,  the Depositary may require (i) payment of any fee required  hereby and
payment of a sum sufficient for  reimbursement of any tax or other  governmental
charge with respect thereto,  (ii) production of proof  satisfactory to it as to
the identity and  genuineness  of any signature or  endorsement or as to the due
authorization  of the action,  (iii) filing of such information and execution of
such  documents by the  transferor  and/or the  transferee as may be required by
this  Agreement or the  Depositary  Receipt or otherwise is deemed  necessary or
appropriate by the Depositary and (iv) compliance with such other  conditions as
may be imposed under  applicable laws and  regulations.  The Depositary shall be
entitled to rely upon, and shall not have any liability to the Partnership,  the
General Partner, any Unit Holder or any other Person with respect to the content
of any proof  submitted to it pursuant to this Section 13.1G,  and shall have no
obligation to inquire as to the truth and accuracy  thereof  (except for acts or
omissions resulting from the Depositary's gross negligence).

      H.  All  Depositary  Receipts  surrendered  to  the  Depositary  shall  be
canceled. The Depositary shall retain all canceled Depositary Receipts and other
instruments,   documents  and  records  in  accordance  with  the  policies  and
regulations  of the  Depositary,  federal  securities  laws  and the  rules  and
regulations  of any  securities  exchange  or market  upon which the  Depositary
Receipts may be listed or quoted.

      Section 13.2 Depositary or Affiliate as Transfer Agent and Registrar
      --------------------------------------------------------------------

      The  Depositary  or an  Affiliate  shall  also be the  transfer  agent and
registrar for the Depositary  Receipts unless  prohibited by law,  regulation or
any applicable rule of a securities exchange or market. In its capacity as such,
subject to the terms and  conditions of this  Agreement,  the Depositary or such
Affiliate shall transfer record  ownership of the Units by bookkeeping  entry on
the books and records maintained pursuant to Section 13.3A.

      Section 13.3 Duties of Depositary
      ---------------------------------

      A.     In performing its duties hereunder the Depositary shall:

                (i) maintain at its principal  office a current list of the full
      name and last known home or  business  address  of each Unit  Holder,  set
      forth in alphabetical order which list shall be available during



                                      A-61
<PAGE>



      ordinary  business  hours for  examination  and copying at the  reasonable
      request,  and at the  expense,  of any Unit Holder or his duly  authorized
      representative, or copies of such list may be requested in writing for any
      proper purpose by any Unit Holder or his duly  authorized  representative;
      provided that the reasonable  costs of fulfilling such request,  including
      copying expenses, shall be paid by the Unit Holder making such request. In
      addition, the Depositary shall, as required, furnish to the Securities and
      Exchange  Commission,  any report,  financial  statement or  communication
      received  from  the  Partnership  or the  General  Partner  that  is  made
      generally available to Unit Holders;

                (ii)  keep all  records  required  to be kept,  for the  periods
      specified,  and shall file with the Securities and Exchange Commission all
      materials  required to be so filed,  under the Securities  Exchange Act of
      1934, by virtue of its status as Depositary.  A copy of any material filed
      by the Depositary with the Securities and Exchange  Commission  shall also
      be provided to the Partnership  within two business days after its filing.
      To  the  extent  that  any  such  filing  requires  information  from  the
      Partnership or the General Partner, such information shall be furnished to
      the  Depositary  by the  General  Partner  in  sufficient  quantity  and a
      sufficient  time in advance of the date the filing is  required to be made
      to enable the Depositary to comply with such requirements; and

               (iii) keep books at its  corporate  office  for the  transfer  of
      Depositary Receipts.  The books shall be open during normal business hours
      for inspection by the Unit Holders. The Depositary may, however, close the
      transfer books, at any time or from time to time, when deemed expedient by
      it in connection with the performance of its duties hereunder.

      B. Upon the request of the  Partnership,  the Depositary shall as promptly
as  practicable  furnish to the  Partnership a list, as of the date specified in
such  request,  of  the  names,   addresses  and  social  security  or  taxpayer
identification numbers of all Unit Holders.

      Section 13.4 Depositary Not a Trustee, Issuer, etc.
      ---------------------------------------------------

      The Depositary is not a trustee and it is intended that the Depositary, in
its  capacity  as  depositary,  shall  not  be  deemed  to  be  an  "issuer"  or
"underwriter"  of  securities  under the federal  securities  laws or applicable
state  securities  laws;  it being  expressly  understood  and  agreed  that the
Depositary,  in its capacity as a Limited Partner of the Partnership,  is acting
only in a ministerial capacity.

      Section 13.5 Indemnification of the Depositary
      ----------------------------------------------

      The Depositary  shall be indemnified by the Partnership to the same extent
and subject to the same conditions and  restrictions as provided in Section 4.10
of this Agreement with respect to the indemnification of the General Partner.



                                      A-62
<PAGE>




      Section 13.6 Limitation of Expense Reimbursements
      -------------------------------------------------

      The  expenses of the  Depositary  otherwise  reimbursable  to it under the
terms of this  Agreement  and the fees payable to it hereunder  shall not exceed
the lesser of (i) an amount equal to 90% of the competitive price which would be
charged by  non-affiliated  persons  rendering  similar  services in the same or
comparable  geographic location or (ii) the costs and expenses of the Depositary
incurred in rendering such services.


                                ARTICLE FOURTEEN

                            MISCELLANEOUS PROVISIONS

       Section 14.1  Notification to the Partnership or the General Partner
       --------------------------------------------------------------------

      Any  Notification  to the Partnership or the General Partner shall be sent
to the  principal  office of the  Partnership,  as set forth in this  Agreement.
Except as provided  herein,  any  Notification to a Unit Holder shall be sent to
its last known address.

      Section 14.2  Binding Provisions
      --------------------------------

      The covenants and  agreements  contained  herein shall be binding upon and
inure to the benefits of the heirs,  executors,  administrators,  successors and
assigns of the respective parties hereto.

      Section 14.3  Applicable Law
      ----------------------------

      This Agreement shall be construed and enforced in accordance with the laws
of the State.

      Section 14.4  Separability of Provisions
      ----------------------------------------

      If for any  reason  any  provision  or  provisions  hereof  which  are not
material to the purposes or business of the  Partnership  are  determined  to be
invalid and contrary to any existing or future law,  such  invalidity  shall not
impair the  operation of or affect  those  portions of this  Agreement  that are
valid.


      Section 14.5  Appointment of the General Partner as Attorney-in-Fact
      --------------------------------------------------------------------

      The  Depositary,   by  the  execution  of  this   Agreement,   irrevocably
constitutes  and appoints  the General  Partner as its true and lawful agent and
attorney-in-fact  with full power and authority in its name,  place and stead to
execute,  acknowledge,  deliver,  swear to,  file and record at the  appropriate
public offices such documents, instruments and conveyances that may be necessary
or  appropriate  to carry out the  provisions  or  purposes  of this  Agreement,
including without limitation: (I) the Certificate of Limited


                                      A-63
<PAGE>



Partnership and other  certificates and instruments  (including  counterparts of
this Agreement), and any amendment thereof, including any amendment substituting
a Limited  Partner  pursuant  to Section  8.2,  that the General  Partner  deems
appropriate  to form,  reform,  qualify or continue  the  Partnership  (or a new
partnership  with  substantially  the same  provisions as the  Partnership) as a
limited  partnership  (or a partnership  in which the Partners will have limited
liability  comparable to that provided by the Act) in the  jurisdiction in which
the Partnership may conduct  business;  (ii) all amendments to the foregoing and
to this  Agreement  necessary  to  admit  into  the  Partnership  additional  or
substituted General Partners pursuant to Section 11.2 (iii) all instruments that
the General Partner deems appropriate to reflect a change or modification of the
Partnership  in accordance  with the terms of this  Agreement  (including  those
necessary to reflect additional Capital Contributions); and (iv) all conveyances
and other  instruments that the General Partner deems appropriate to reflect the
dissolution and termination of the Partnership.

      Section 14.6   Entire Agreement
      -------------------------------

      This Agreement  constitutes the entire  agreement among the parties.  This
Agreement  supersedes any prior agreement or understanding among the parties and
may not be modified or amended in any manner other than as set forth herein.

      Section 14.7   Paragraph Titles
      -------------------------------

      Article and section titles are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the text.

      Section 14.8   Counterparts
      ---------------------------

      This  Agreement  may be  executed  in several  counterparts,  all of which
together  shall  constitute  one  agreement   binding  on  all  parties  hereto,
notwithstanding that all the parties have not signed the same counterpart except
that no counterpart shall be binding unless signed by the General Partner.

                                    GEODYNE PRODUCTION COMPANY,
                                    as General Partner

                                    By:   /s/ Michael E. Luttrell
                                          ----------------------
                                          Michael E. Luttrell
                                          Executive Vice President


                                    GEODYNE DEPOSITARY COMPANY, as
                                    the Limited Partner


                                     By:   /s/ Michael E. Luttrell
                                           ----------------------
                                           Michael E. Luttrell
                                           Executive Vice President



                                      A-64
<PAGE>



                                   SCHEDULE A

                                 General Partner

Name and Address                                Capital Contribution

Geodyne Production Company                              $100
320 South Boston Avenue
The Mezzanine
Tulsa, Oklahoma 74103-3708
                                 Limited Partner

Name and Address                                Capital Contribution

Geodyne Depositary Company                           $41,826,600
320 South Boston Avenue
The Mezzanine
Tulsa, Oklahoma 74103-3708



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