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PAINEWEBBER/GEODYNE ENERGY
                        INCOME PRODUCTION PARTNERSHIP I-D
                         AMENDED AND RESTATED AGREEMENT
                                 OF PARTNERSHIP

        Amended and  Restated  Agreement  of  Partnership,  dated as of March 4,
1986,  among  Geodyne  Production  Company,  a  Delaware  corporation,   and  PW
Production   Inc.,   a  Delaware   corporation,   as  Managing   Partners,   and
PaineWebber/Geodyne  Energy Income Limited  Partnership I-D, an Oklahoma limited
partnership, as General Partner.

        Whereas,  PaineWebber/Geodyne  Energy Income Production  Partnership I-D
has  heretofore  been  formed  as  a  general   partnership  under  the  Uniform
Partnership Act of the State of Oklahoma pursuant to an Agreement of Partnership
dated as of December 10, 1985; and

        Whereas, the parties hereto desire to amend the Agreement of Partnership
of the Production Partnership and to restate said Agreement in its entirety;

        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. Any terms used in
this Agreement  which are defined in the Limited  Partnership  Agreement and are
not otherwise defined herein shall have the respective meanings set forth in the
Limited Partnership Agreement.

        "Accountants" shall mean Arthur Young & Company or such other nationally
recognized firm of independent  certified public accountants as shall be engaged
from time to time by the Managing Partners for the Production Partnership.

        "Acquisition  Reserve  Report" shall mean a Hydrocarbon  reserve  report
made available to the Production  Partnership  prepared by a qualified petroleum
engineering firm acceptable to

                                      -1-
<PAGE>

the Managing Partners 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 reasonable  inquiry with respect to the methods employed in such collection
and is satisfied  that the data so collected may be  reasonably  relied upon for
the  purpose  of  making  the  determination  reflected  in such  report,  (iii)
specifying the respective amounts of Proved Developed Producing Reserves, Proved
Developed  Nonproducing  Reserves,  or  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 Managing  Partners 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 the proposed  acquisition  of such
Producing Property and that such qualified petroleum engineering firm is relying
on information  furnished by the Managing Partners as to the historical  volumes
of any Hydrocarbons  actually produced and as to the proposed ownership interest
of the Production Partnership in such Producing Property.

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

        "Activation"  or  "Activated"  shall  mean the  date on  which  (i) with
respect to the Limited  Partnership,  the  subscribers for Units shall have been
admitted to the Limited Partnership as

                                      -2-
<PAGE>

Limited  Partners,  and (ii) with  respect to the  Production  Partnership,  the
Limited  Partnership shall have made its Capital  Contribution to the Production
Partnership.

        "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) any relative or spouse of the  specified
Person.  A reference to an Affiliate of the Managing  Partners  shall include an
Affiliate  of  either  or both of the  Managing  Partners.  Notwithstanding  the
foregoing,  no Person shall be deemed to be an Affiliate solely by reason of its
ownership of 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) interests in which were 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 a  Managing  Partner or
Affiliate thereof serves as general partner or venturer.

        "Agreement"   shall  mean  this  Amended  and   Restated   Agreement  of
Partnership as amended from time to time.

        "Capital Account" shall mean, as to any Partner,  the sum of the Capital
Contribution  by such  Partner,  plus its share of any Profits  (including  such
Partner's  deduction for depletion to the extent such  deduction does not exceed
the amount of cost depletion such Partner would be allowed) and distributions of
Production  Partnership  cash or  assets  to such  Partner  or on behalf of such
Partner in payment of any taxes or other expenses allocable to such Partner.

        "Capital Contribution" shall mean the total amount of money  contributed
to the Production Partnership by all Partners

                                      -3-
<PAGE>

or any class of Partners or any one Partner (or the  predecessor  holders of the
Interests  of such Partner or  Partners),  as the context  requires,  net of any
refunds pursuant to Section 3.4 of this Agreement.

        "Code" shall mean the Internal  Revenue Code of 1954, as amended (or any
corresponding provisions of succeeding law).

        "Commercial  Well" shall mean any Production  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.

        "Consent"  shall mean the  consent  of a Person,  given as  provided  in
Section 11.1, to do the act or thing for which the consent is solicited,  or the
act of granting such consent, as the context may require.

        "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 Production  Partnership  Well to a reservoir on a Lease or an offset
Lease, from which reservoir production is being obtained or, as determined by an
independent  petroleum  engineering  firm,  is  anticipated  to be obtainable in
commercial quantities, or the recompletion of an existing Production 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 Production Partnership by parties
other than the Managing  Partners or their  Affiliates,  whether incurred by the
Production  Partnership  directly or incurred by any of the Managing Partners or
their Affiliates,  including the annual audit fees, legal fees and expenses, the
costs of reviewing tax returns and reports,  the cost of reserve  reports (other
than the cost of  Acquisition  Reserve  Reports,  Engineering  Audit Letters and
evaluations thereof conducted on behalf of a Production Partnership) prepared by
independent  petroleum  engineering  firms,  and all other such  costs  directly
incurred by or for the benefit of the Production Partnership.

                                      -4-
<PAGE>

        "Distributable  Cash" shall  mean,   with  respect  to  the   Production
Partnership's  operations at any time, the amount of cash assets on hand at such
time less amounts  required to be retained out of such cash assets,  in the sole
judgment of the Managing Partners,  to pay costs,  expenses or other obligations
whether then accrued or anticipated to accrue in the future.

        "Engineering Audit Letter" shall mean a document prepared by a qualified
petroleum  engineering  firm  acceptable to the Managing  Partners 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 reasonable
inquiry with  respect to the methods  employed in the  collection,  analysis and
evaluation of the basic physical data upon which such determination is based and
is satisfied  that the data so collected may be  reasonably  relied upon for the
purpose of making the determination reflected in such report.

        "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,  geological,  engineering,
travel, office rent, telephone,  secretarial,  expense reimbursements of members
of the  Management  Committee  when acting on Production  Partnership  business,
employee   compensation  and  benefits,   and  other  items  of  a  general  and
administrative  nature,  whether  like or unlike  the  foregoing,  and any other
incidental  reasonable  expenses  reasonably  necessary  to the  conduct  of the
Production

                                      -5-
<PAGE>

Partnership's  business,  computed on a cost basis,  determined  by the Managing
Partners  in  accordance  with  generally  accepted  accounting  principles  and
reviewed by an independent  public  accountant or certified  public  accountant.
General and  Administrative  Costs shall not include any costs  includable under
the  foregoing  but which are  included as Property  Acquisition  Costs,  Direct
Administrative  Costs,  cost incurred in connection with  Development  Drilling,
Identified  Development  Drilling and Improved Recovery  projects,  or Operating
Costs.

        "General Partner" shall mean  PaineWebber/Geodyne  Energy Income Limited
Partnership I-D, an Oklahoma limited partnership,  acting in such capacity,  any
successor  in that  capacity,  and any other  General  Partner  admitted  to the
Production  Partnership  pursuant to the provisions of this Agreement subsequent
to the Activation of the Production Partnership.

        "Geodyne  Production" shall mean Geodyne  Production Company, a Delaware
corporation.

        "Hydrocarbons"  shall mean crude oil, natural gas,  condensate,  natural
gas liquids and other liquid or gaseous hydrocarbons.

        "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 Production  Partnership Well drilled by or on behalf of
the  Production  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 Production  Partnership Well, where (i) the drilling or recompletion of
such  Production  Partnership  Well  commences  after  the  acquisition  of such
Producing  Property by the Production  Partnership  and is conducted in order to
commence production of Hydrocarbons from Proved Undeveloped  Reserves identified
in the  Acquisition  Reserve  Report or  Engineering  Audit  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 Audit Letter in valuing such Proved  Undeveloped  Reserves
attributable to such Producing Property, and (iii) a portion of the cost paid by
the Production  Partnership  for such  Producing  Property is attributed by such
Acquisition   Reserve  Report  or  Engineering   Audit  Letter  to  such  Proved
Undeveloped  Reserves.  The term, Identified  Development  Drilling,  shall also
refer to any Production Partnership Wells drilled or recompleted on a

                                      -6-
<PAGE>

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  Audit Letter) which
have been categorized by the Managing Partners as Proved Undeveloped Reserves 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  Production
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 Production  Partnership  Well,  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   adjudication  of
bankruptcy  (except  that,  in  the  case  of  a  Managing  Partner,   the  term
"bankruptcy"  shall  mean  only  being  subject  to  Chapter  7 of  the  Federal
Bankruptcy  Reform  Act  of  1978),  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.

        "Income"  shall  mean the  gross  income of the  Production  Partnership
(other than  Investment  Income) as determined  for Federal income tax purposes,
including  all  capital  or Code  Section  1231  gains  (but not  losses) of the
Production Partnership.

        "Interest" shall mean the entire  ownership  interest (which may, either
for a Partner's Capital Account or a Partner's Profits interest, be expressed as
a percentage) of a Partner in the Production Partnership at any particular time,
including the rights and  obligations  of such Partner under this  Agreement and
the Act.

        "Investment Income" shall mean all interest and dividend

                                      -7-
<PAGE>

income earned on temporary investments of the Production Partnership at any time
prior to the time at which an amount equal to the Capital  Contributions  to the
Production  Partnership  available for the  acquisition of Producing  Properties
have  been  (i)  expended  or (ii)  returned  pursuant  to  Section  3.4 of this
Agreement.

        "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  Partners"  shall  mean the  limited  partners  of the  Limited
Partnership or any substituted limited partners thereof.

        "Limited Partnership" shall mean the  PaineWebber/Geodyne  Energy Income
Limited Partnership I-D, an Oklahoma limited partnership.

        "Limited Partnership Agreement" shall mean the agreement under which the
Limited Partnership was formed, as amended and restated.

        "Management  Committee"  shall  mean  the  committee,  composed  of  two
representatives  from each Managing  Partner,  established  for the purposes set
forth in Sections 4.lC and 4.2A(iii) of this Agreement.

        "Management  Fee" shall mean the fee paid by the Production  Partnership
to the  Managing  Partners  pursuant  to  Section  5.2(l) of this  Agreement  in
connection with their management of the affairs of the Production Partnership.

        "Managing  Partners" shall mean Geodyne  Production  Company, a Delaware
corporation,  and PW  Production,  Inc., a Delaware  corporation,  and any other
Person  admitted as  additional  or  Substituted  Managing  Partner  pursuant to
Article Six of this Agreement.

        "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 known address of such Person, the date of the certified

                                      -8-
<PAGE>

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 Production  Partnership  with respect to (i) the production and marketing of
Hydrocarbons from completed Production 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  Production  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 Production 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  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 Managing  Partners in connection  with the  organization  of the
Production  Partnership,  including,  without limitation,  the legal,  printing,
accounting and other costs incurred in connection  with the  organization of the
Production  Partnership,  including,  without limitation,  the legal,  printing,
accounting and other costs  incurred in connection  with  preparing,  filing and
recording this Agreement.

        "Partner" shall mean any Managing  Partner or any General Partner of the
Production Partnership.

        "Payout" shall mean that time at which cash distributions have been made
by the Limited  Partnership to the Limited  Partners  pursuant to Section 5.1 of
the Limited  Partnership  Agreement  (together  with any  distributions  to such
Limited Partners pursuant to Section 3.4 of the Limited Partnership  Agreement),
in an aggregate amount equal to the Limited Partners'  Capital  Contributions to
the Limited Partnership.

                                      -9-
<PAGE>

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

        "Prior Production Partnership" shall mean a general partnership of which
PW  Production  and Geodyne  Production  are  managing  partners,  and a limited
partnership,  of which  units  of  limited  partnership  interest  were  offered
pursuant to the Prospectus,  is the other general  partner,  formed prior to the
Activation of the Production Partnership.

        "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.

        "Production  Partnership"  shall mean the general  partnership  governed
under and pursuant to this Agreement,  as said general partnership may from time
to time be constituted.

        "Production Partnership Account" shall mean the bank account or accounts
maintained by the Managing Partners pursuant to Section 9.3.

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

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

        "Profits" and "Losses" shall mean the income or losses of the Production
Partnership  for Federal  income tax purposes  determined as of the close of the
Production Partnership's Fiscal Year, as well as, when the context requires, any
tax-exempt income and nondeductible expenses.

        "Property Acquisition Costs" shall mean, without duplication, the sum of
(1) the prices paid by the Production  Partnership  or a Managing  Partner or an
Affiliate to acquire a

                                      -10-
<PAGE>

Producing Property ultimately sold to the Production 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,  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 seller with respect to such  property to the date of its transfer to
the buyer;  (4) interest  actually  incurred by the  Managing  Partners or their
Affiliates  to acquire or  maintain  such  Producing  Properties  prior to their
transfer to the  Production  Partnership;  and (5) such  portion of the Managing
Partners'  or  Affiliates'   reasonable,   necessary  and  actual  expenses  for
geological,  geophysical,  seismic,  land,  engineering,  drafting,  accounting,
auditing, legal and other like services,  including the Production Partnership's
costs  incurred  (to the extent  consistent  with  generally  accepted  industry
standards) in connection  with the Production  Partnership's  review of proposed
acquisitions of Producing Properties, Reports and Engineering Audit Letters, all
allocated to the property in accordance  with the allocation  procedures used by
the Managing  Partners,  any of their Affiliates or the Production  Partnership;
provided  that the portion of the  Managing  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.

        "Prospect"  shall mean an area in which the Production  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 Managing  Partners and which is
reasonably  anticipated  by the  Managing  Partners  to  contain  at  least  one
reservoir.

        "Prospectus" shall mean the prospectus  pursuant to which the Units were
offered, and all supplements or amendments thereto, 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 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

                                      -11-
<PAGE>

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  Nonproducing  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.  Proved  reserves for other undrilled units
        are claimed only where it can be demonstrated with reasonable 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.

                                      -12-
<PAGE>

        "PW Production" shall mean PW Production Inc., a Delaware corporation.

        "Remove",  "Removed"  or  "Removal"  shall mean,  with  reference to the
removal of a Managing Partner, the termination of the management powers,  duties
and  responsibilities  of such Managing  Partner pursuant to Section 6.2 of this
Agreement and the removal of such Managing Partner as a Partner.

        "Royalty" shall mean an interest,  including an overriding royalty and 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.

        "Sale" shall mean any event or  transaction  that is, for Federal income
tax  purposes,  considered a sale,  exchange or  abandonment  by the  Production
Partnership of any Production Partnership Property.

        "State" shall mean the State of Oklahoma.

        "Subscription   Agreement   and  Power  of  Attorney"   shall  mean  the
Subscription  Agreement  and  Power  of  Attorney  in the form  attached  to the
Prospectus.

        "Substituted  Partner" shall mean any Person  admitted to the Production
Partnership as a Partner pursuant to Sections 7.3 and 10.2 of this Agreement.

        "Unit" shall mean a $1,000  investment in the Limited  Partnership  by a
Limited Partner  pursuant to the terms of a Subscription  Agreement and Power of
Attorney; provided, however, that fractional Units may be acquired to the extent
provided under Section 5.lB of the Limited Partnership Agreement.

        "Working  Interest"  shall mean the interest  (whether  held directly or
indirectly)  in a Lease  which is  subject  to some  portion  of the  expense of
production, development, operation or maintenance.

                                      -13-
<PAGE>

                                   ARTICLE TWO
             Continuation; Name, Place of Business and Office; Term
             ------------------------------------------------------

        Section 2.1.  Continuation
        --------------------------

        The parties hereto hereby  continue the general  partnership  heretofore
formed  pursuant to the provisions of the Act and the rights and  liabilities of
the  Partners  shall be as provided in the Act,  except as  otherwise  expressly
provided in this Agreement.

        Section 2.2.  Name, Place of Business and Office, Agent
        -------------------------------------------------------

        The   Production   Partnership   shall  be  conducted   under  the  name
PaineWebber/Geodyne  Energy Income  Production  Partnership I-D. The business of
the  Production  Partnership  may,  however,  be conducted  under any other name
deemed  necessary or desirable by the Managing  Partners in order to comply with
applicable  laws.  The office and principal  place of business of the Production
Partnership shall be c/o Geodyne  Production  Company,  320 South Boston Avenue,
The Mezzanine, Tulsa, Oklahoma 74103-3708. The Managing Partners shall record an
assumed name or fictitious  name  certificate  in the State and in each state in
which it owns  property  or  transacts  business  when deemed  necessary  by the
Managing Partners.

        The Managing Partners may change the principal place of business and the
location of such office and may establish such  additional  offices as they deem
advisable from time to time; provided,  however, that in the event the principal
place of business of the Production  Partnership shall be changed,  the Managing
Partners shall give written notice thereof to the Limited Partners.

        Section 2.3  Purpose
        --------------------

        The  business  and  purpose of the  Production  Partnership  shall be to
acquire,  own,  hold,  operate,  explore,  develop,  trade,  sell  and  exchange
Hydrocarbon  properties 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

                                      -14-
<PAGE>

properties or interests; to engage in development drilling and enhanced recovery
operations  thereon,  to  produce,   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 2.4.  Term
        ------------------

        The  Production  Partnership  shall  continue in force and effect  until
December 31, 1999,  provided that the Management  Committee may extend such term
for up to five periods of two years each,  or until  dissolution  prior  thereto
pursuant to the provisions hereof.

                                  ARTICLE THREE
                              Partners and Capital
                              --------------------

        Section 3.1.  Managing Partners
        -------------------------------

        A. The  names,  addresses  and  Capital  Contributions  of the  Managing
Partners  are set forth in  Schedule  A  attached  hereto  and are  incorporated
herein.  The  Managing  Partners  shall  not be  required  to make  any  Capital
Contribution except as set forth in Sections 3.lB, 3.4 and 8.2C.

        B. The  Managing  Partners  shall  also  contribute  an  amount  of cash
sufficient to pay their share of costs allocated to them pursuant to Section 5.3
of this  Agreement  to the extent  that the amount of Income  allocated  to them
(and/or  the  amount of  Production  Partnership  borrowings  incurred  on their
behalf) is insufficient to pay such costs.

        Section 3.2.  Other General Partner
        -----------------------------------

        The name,  address and Capital  Contribution of the Limited  Partnership
are set forth in Schedule A attached hereto and are hereby incorporated herein.

                                      -15-
<PAGE>

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

        The  Managing  Partners  shall  deposit  in the  Production  Partnership
Account the Capital  Contributions  of the Limited  Partnership and the Managing
Partners and apply such Capital Contributions to the payment of Organization and
Offering Costs and the Management Fee. The balance of such Capital Contributions
shall be held in the Production Partnership Account to be applied to the payment
of  Property  Acquisition  Costs and, to the extent not payable out of Income or
Investment Income,  Operating Costs,  General and Administrative  Costs,  Direct
Administrative Costs and other Production Partnership costs; provided,  however,
that such funds may be  temporarily  invested prior to the payment of such costs
in accordance with Section 9.3 of this Agreement.

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

        Any  portion of the  Capital  Contribution  of the  Limited  Partnership
(except for necessary  operating  capital) that has not been expended or that is
not, or in the determination of the Managing Partners, will not be committed for
expenditure  by the  second  anniversary  of the  Activation  of the  Production
Partnership will promptly be refunded to the Limited  Partnership as a return of
part of its Capital  Contribution  at the earlier of such  determination  or the
second anniversary of the Activation of the Production  Partnership.  Such funds
will be deemed to have been committed for expenditure by such date to the extent
they are payable under  contractual  agreements or  understandings  in effect on
such date, or have been applied to a reasonable  working capital reserve or have
been set  aside as a  condition  to  obtaining  any  financing  in the form of a
compensating balance or similar arrangement.  In addition, the Managing Partners
shall contribute cash to the Production Partnership (with respect to which their
Capital  Accounts will be credited) in an amount equal to the amount paid to the
Managing   Partners  in  respect  of  the  Management  Fee  attributable  (on  a
proportionate  basis) to the  unexpended  amount  of  Capital  Contributions  so
refunded,  which cash shall be refunded to the Limited Partnership together with
the unexpended  Capital  Contributions  so refunded.  Geodyne  Production and PW
Production  shall be responsible for the obligation of the Managing  Partners to
contribute  cash to the Production  Partnership  pursuant to this Section 3.4 in
the relative  percentages which they allocated between themselves the payment of
the Management Fee

                                      -16-
<PAGE>

pursuant to Section  5.2.  All  amounts so  refunded to the Limited  Partnership
shall reduce dollar for dollar its Capital Account.

        Section 3.5.  Production Partnership Capital
        --------------------------------------------

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

        B. The Production  Partnership shall not redeem any Partner's  Interest.
Except as provided in  Sections  3.4,  6.1,  6.2 and 8.2 of this  Agreement,  no
Partner  shall have the right to  withdraw  or receive any return of the Capital
Contribution.   Under   circumstances   involving   a  return  of  any   Capital
Contribution, no Partner shall have the right to receive any property other than
cash,  except as may  otherwise be provided in Sections 6.1, 6.2 and 8.2 of this
Agreement.

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

        Each Partner signatory hereto or subsequently admitted to the Production
Partnership  agrees that it shall remain  generally liable for any obligation or
recourse liability of the Production  Partnership  incurred during the period in
which it is a Partner.  However,  all present and future  Partners  hereby agree
among  themselves to  contribute to each other the amount of funds  necessary to
effectuate a sharing of such  Production  Partnership  obligations  and recourse
liabilities  in  proportion  to each  Partner's  share of such  obligations  and
liabilities at the time of their accrual.

                                      -17-
<PAGE>

                                  ARTICLE FOUR
                          Rights, Powers and Duties of
                          ----------------------------
                              The Managing Partners
                              ---------------------

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

        A. Subject to Section 4.lC of this  Agreement  and to the Consent of the
Limited  Partnership  as and  when  required  by this  Agreement,  the  Managing
Partners,  within the authority granted to them 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 Production  Partnership  and to make
all decisions  regarding the business of the  Production  Partnership  and shall
have all of the rights, powers and obligations of managing general partners of a
general  partnership  under the laws of the State.  The Managing  Partners shall
exercise those powers as a fiduciary to the Limited Partnership.

        B. No other Partner shall  participate  in the management of or have any
control over the Production  Partnership's  business nor shall any other Partner
have the power to represent,  act for, sign for or bind the Managing Partners or
the  Production  Partnership.  The Limited  Partnership  hereby  Consents to the
exercise  by the  Managing  Partners  of the  powers  conferred  on them by this
Agreement.

        C.  The  Managing  Partners'   management   authority  with  respect  to
significant  Production Partnership actions shall be exercised by the Management
Committee,  including without limitation such actions as: (i) the acquisition of
a Producing  Property or an option to  purchase a Producing  Property,  provided
that Geodyne Production shall have the authority to acquire Producing Properties
and  options  to  acquire  Producing  Properties  without  the  approval  of the
Management  Committee,  provided  further that (a) Geodyne  Production  does not
expend an aggregate amount of Production  Partnership  funds with respect to the
acquisition of Producing Properties whose aggregate  acquisition price, together
with the anticipated aggregate acquisition price of Producing Properties subject
to such  purchase  options,  is in  excess of 20% of the  Limited  Partnership's
Capital  Contribution,  and (b) no single acquisition of Producing Properties by
Geodyne

                                      -18-
<PAGE>

Production  pursuant to this proviso  shall exceed 10% of the Limited  Partners'
capital  contributions  to the  Limited  Partnership;  (ii)  the  incurrence  of
indebtedness;  (iii) the  determination of the amount of and the distribution of
Distributable  Cash to the Partners;  (iv) the engaging in and making  decisions
with respect to any Development  Drilling,  Identified  Development Drilling and
Improved  Recovery  operations;  (v) the sale or other transfer of any Producing
Property that constitutes a significant  portion of the assets of the Production
Partnership; and (vi) the determination not to extend the term of the Production
Partnership  as set  forth in  Section  2.4 of this  Agreement.  The  Management
Committee shall have the power to delegate its management authority with respect
to any  "significant"  action to a Managing Partner at such times and under such
conditions as it may decide in its own discretion.

        The Managing Partners' management authority respecting all other actions
which are in the ordinary course of the Production  Partnership's operations may
be exercised by either  Managing  Partner  without the  concurrence of the other
Managing Partner,  provided that the Managing Partner exercising such management
authority  shall,  upon  inquiry  by the  other  Managing  Partner,  notify  the
inquiring  Managing Partner of the nature of such actions undertaken without the
concurrence of the inquiring  Managing Partner.  The Management  Committee shall
have the authority (i) to determine  that the  "significant"  actions  specified
herein shall no longer be "significant" actions for the purposes of this Section
4.1C and to amend this Agreement  pursuant to Section l0.1A of this Agreement to
reflect  such  determination,  and  (ii) to  determine  which  other  Production
Partnership  operations,  other than those specified  herein,  are "significant"
actions for purposes of this Section 4.1C.

        Section 4.2.  Authority of the Managing Partners
        ------------------------------------------------

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

                                      -19-
<PAGE>

            (i) expend  the  Capital  Contributions  of the  Partners  and apply
      Production   Partnership  revenues,   subject  to  Section  4.3C  of  this
      Agreement, in furtherance of the business of the Production Partnership;

            (ii)  acquire,  explore,  develop,  manage and  operate  Hydrocarbon
      properties and interests therein (including  interests in corporations and
      partnerships  owning  Hydrocarbon  properties if in the Managing Partners'
      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
      Production 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 Production  Partnership an investment company
      within the meaning of the  Investment  Company Act of 1940,  and  provided
      further the Production  Partnership's interest in the underlying assets of
      any such  corporation  or  partnership is distributed as soon as practical
      thereafter to the Production  Partnership in redemption for the Production
      Partnership's  interest in such  corporation or  partnership) of all kinds
      and acquire units of limited partnership  interest tendered to the General
      Partners  pursuant  to the  terms of any right of  presentment  of a Prior
      Limited  Partnership  (as  defined in the Limited  Partnership  Agreement)
      (provided  that the Production  Partnership  shall not expend an aggregate
      amount in excess of 10% of the Limited  Partnership's Capital Contribution
      to acquire such units) and hold all such property,  interests and units in
      the  name  of the  Production  Partnership;  provided,  however,  that  in
      connection therewith, the Managing Partners 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 Production  Partnership's  interest
      in such  Producing  Property  in the  jurisdiction  where  such  Producing
      Property is located  pursuant to such  jurisdiction's  Uniform  Commercial
      Code 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

                                      -20-
<PAGE>

      Managing   Partners   believe   necessary  to  establish  the   Production
      Partnership's  priority of interest;  and,  provided,  further,  Producing
      Properties  may be  held  temporarily  in the  name of a  nominee  for the
      Production  Partnership if such action is deemed necessary by the Managing
      Partners to facilitate acquisition;

            (iii) execute such  instruments and agreements,  to do such acts, to
      employ  such  persons and to contract  for such  services as the  Managing
      Partners  determine are necessary or appropriate to conduct the Production
      Partnership's  business,  including  (x) the  employment  of any  Managing
      Partner or any Affiliate as an operator,  (y) the entering into management
      and  advisory  contracts,  and (z)  the  establishment  of the  Management
      Committee to  exercise,  pursuant to Section  4.lC of this  Agreement,  or
      supervise the exercise of the Managing  Partners' powers set forth in this
      Agreement,  subject to any  restrictions  contained in the Act and in this
      Agreement,  and to provide for any reasonable  compensation  to be paid to
      the Persons comprising the Management Committee pursuant to such contracts
      as the Managing Partners shall deem necessary and appropriate;

            (iv) execute, in the name of the Production  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
      Production Partnership;

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

            (vi) execute offers for United States and any state Leases on behalf
      of the Production  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; to 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,

                                      -21-
<PAGE>

      operator's  bonds and consents of surety;  and in general to do all things
      necessary or desirable on behalf of the Production  Partnership  regarding
      any United States or state Leases or offers therefor;  provided,  however,
      that the  Production  Partnership  shall have the  authority to acquire or
      otherwise  deal  with any such  interests  respecting  Leases  located  in
      "offshore waters" (as that term is generally understood in the oil and gas
      industry) only on the condition that the Production  Partnership shall not
      participate in any Development Drilling or Identified Development Drilling
      in "offshore waters" which are not state-owned waters;

            (vii) enter into any partnership agreement,  sharing arrangement, or
      joint  venture with any Person  acceptable  to the  Managing  Partners and
      which is engaged in any business or  transaction  in which the  Production
      Partnership  is  authorized  to  engage,   provided  that  the  Production
      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 Managing  Partners to be necessary  or  appropriate  to conduct the
      business of the Production Partnership;

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

            (x) subject to Section 4.3B of this Agreement,  abandon or otherwise
      dispose of any interest in Hydrocarbon

                                      -22-
<PAGE>

      properties acquired for the Production Partnership upon such terms and for
      such consideration as the Managing Partners 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  Production
      Partnership and to devote and expend the proceeds of any such sale for any
      of the purposes of the  Production  Partnership  for which the proceeds of
      borrowings may be applied;

            (xii) borrow  monies from time to time,  for the purpose and subject
      to the limitations  stated in Section 4.3C of this Agreement,  in the form
      of recourse or nonrecourse borrowings, or otherwise to draw, make, execute
      and  issue   promissory   notes  and  other  negotiable  or  nonnegotiable
      instruments and evidences of  indebtedness,  and to secure the payments of
      the sums so borrowed  and to mortgage,  pledge,  or assign in trust all or
      any  part  of  Production   Partnership   Property,   including  Producing
      Properties, production and proceeds of production, or to assign any monies
      owing or to be owing to the Production  Partnership,  and to engage in any
      other means of financing  customary in the petroleum  industry;  provided,
      however,  that a creditor who makes a nonrecourse  loan to the  Production
      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 Production Partnership other than as a secured creditor;

            (xiv) invest Capital  Contributions  temporarily in the  investments
      set forth in Section 9.3 of this Agreement;

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

            (xvi) 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 Production Partnership, purchase and

                                      -23-
<PAGE>

      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
      Production  Partnership  Property,  and  to  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 Production Partnership;

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

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

            (xix) sue and be sued, complain and defend in the name and on behalf
      of the Production Partnership;

            (xx) make such  classifications  and  determinations as the Managing
      Partners  deem  advisable,  having due regard for any  relevant  generally
      accepted accounting principles and oil and gas industry practices;

            (xxi) purchase insurance,  or extend the Managing Partners' or their
      Affiliates' insurance, at the Production Partnership's expense, to protect
      the  Production  Partnership  Property and the business of the  Production
      Partnership  against loss,  and to protect the Managing  Partners  against
      liability  to  third  parties   arising  out  of  Production   Partnership
      activities,  such  insurance to be in such  limits,  to be subject to such
      deductibles  and to  cover  such  risks  as  the  Managing  Partners  deem
      appropriate;

            (xxii) pay all ad  valorem  taxes  levied or  assessed  against  the
      Production  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 Production
      Partnership;

                                      -24-
<PAGE>

            (xxiii)  enter  into   agreements   on  behalf  of  the   Production
      Partnership  with  Affiliates  subject  to the  limitations  set  forth in
      Section 4.3B of this Agreement;

            (xxiv) sell all or  substantially  all of the  properties  and other
      assets  of the  Production  Partnership  to  themselves,  or any of  their
      Affiliates  or  any  other  person  and  to  receive  for  the  Production
      Partnership  consideration consisting of cash, securities,  other property
      or any other form of consideration,  or any combination  thereof,  at such
      prices  and for  such  forms  of  consideration  as they  deem in the best
      interests of the Limited Partners;  provided,  however,  that no such sale
      shall be consummated  without the prior Consent of the Limited Partnership
      pursuant to the provisions of Section 4.4B of this Agreement. In the event
      of the dissolution of the Production Partnership followed by any such sale
      of the  Production  Partnership's  assets,  the Managing  Partners  shall,
      subject to the provisions of Section 8.2 of this  Agreement,  be appointed
      the liquidating agents for the Production Partnership;

            (xxv)  make,  exercise or deliver  any  general  assignment  for the
      benefit of the Production Partnership's creditors, but only upon the prior
      Consent of the Limited  Partnership  pursuant to the provisions of Section
      4.4B of this Agreement;

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

            (xxvii) inform each other Partner of all administrative and judicial
      proceedings  for an adjustment  at the  Production  Partnership  level for
      partnership  tax items and forward to each other Partner 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  judgment,  and Geodyne Production shall perform all duties
      imposed by  Sections  6221  through  6232 of the Code as the "tax  matters
      partner" of the Production Partnership, including, but not limited to, the
      following:  (a) the power to conduct  all audits and other  administrative
      proceedings  (including  windfall  profit  tax  audits)  with  respect  to
      Production Partnership items; the power to extend the statute of

                                      -25-
<PAGE>

      limitations  for all Partners with respect to Production  Partnership  tax
      items;  and (b) the power to file a petition with an  appropriate  federal
      court for review of a final partnership administrative adjustment. Geodyne
      Production   shall  consult  with  PW  Production   with  respect  to  the
      performance of its duties as "tax matters partner."

      B. Reliance by Third Parties on Managing Partners'  Authority.  No person,
firm or corporation dealing with the Production Partnership shall be required to
inquire  into the  authority  of the  Managing  Partners 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 Managing  Partners
as to their due authorization.

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

      A. Except with respect to Producing  Properties  whose aggregate  purchase
price does not exceed 10% of the Limited Partners' capital  contributions to the
Limited  Partnership,  no Producing Property shall be acquired by the Production
Partnership  unless there has been prepared and evaluated  with respect  thereto
either an Acquisition  Reserve Report or an Engineering  Audit Letter acceptable
to the Management Committee;

      B. Neither the Managing Partners nor any Affiliate shall sell, transfer or
convey any or all of their  interest in Producing  Properties to the  Production
Partnership  or purchase or acquire any oil and gas  properties or interest from
the  Production  Partnership,   directly  or  indirectly,   except  pursuant  to
transactions  that are fair and reasonable to the Limited  Partnership under the
circumstances  at the time such  transaction is consummated.  Such  transactions
shall be further subject to the following restrictions:

            (i)  Prior to the  date on  which  the  Production  Partnership  has
      acquired its final Producing  Property,  neither the Managing Partners nor
      any Affiliate of a Managing  Partner  (other than an  Affiliated  Program)
      shall  acquire  any  Producing   Property  after  the  Activation  of  the
      Production  Partnership  unless prior thereto the  Production  Partnership
      shall have been offered the right to acquire

                                      -26-
<PAGE>

      such  Producing  Property,  or an  interest  therein,  and the  Management
      Committee  shall have  determined  that the  acquisition of such Producing
      Property,  or an interest  therein,  is not in the best  interests  of the
      Production Partnership;

            (ii)  Any  purchase  or sale of a  Producing  Property  from or to a
      Managing   Partner  or  any  Affiliate  shall  be  made  at  the  Property
      Acquisition  Cost for such Producing  Property as adjusted for intervening
      operations,  unless the Managing  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 a Managing Partner sells, transfers or conveys any oil, gas
      or other mineral interests or property to the Production  Partnership,  it
      must,  at the  same  time,  sell to the  Production  Partnership  an equal
      proportionate  interest in all its other property in the same Prospect.  A
      Sale or conveyance to the  Production  Partnership of less than the entire
      ownership  interest  of a  Managing  Partner  or  any  Affiliate  is  only
      permitted  if: (a) the  interests  retained or  obtained  by the  Managing
      Partners or  Affiliate  and  acquired by the  Production  Partnership  are
      either (x)  proportionate,  uniform and undivided Working Interests if the
      Producing  Property  acquired by the  Production  Partnership is a Working
      Interest or (y) proportionate,  uniform and undivided Royalty Interests if
      the  Producing  Property  acquired  by  the  Production  Partnership  is a
      Royalty,  (b) the  respective  obligations  of the  Managing  Partners  or
      Affiliate and the Production  Partnership are  substantially the same, and
      (c) the interest of the Managing  Partners or their Affiliates in revenues
      does not exceed the amount  proportionate to their interest.  The Managing
      Partners and their  Affiliates  may not retain or obtain any  overrides or
      other burdens on the interest obtained by the Production Partnership,  and
      may not enter into any Farmouts with respect to their  retained  interest,
      except to nonaffiliated third parties or to an Affiliated Program;

            (iv) In the event a Managing  Partner or any  Affiliate  proposes to
      acquire  an  interest  in a  Producing  Property  in which the  Production
      Partnership has an interest or in a

                                      -27-
<PAGE>

      Producing Property abandoned by the Production Partnership within one year
      preceding such proposed  acquisition,  such Managing  Partner or Affiliate
      shall offer the  interest to the  Production  Partnership;  and if cash or
      financing is not available to the Production  Partnership to purchase such
      interest,  neither such Managing  Partner nor  Affiliate  shall acquire an
      interest in such Producing Property. 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   Production
      Partnership's  interest in the Producing  Property.  This subsection shall
      not  apply  after  the  lapse  of  five  years  of the  Activation  of the
      Production  Partnership or to any Affiliated Program where the interest of
      such  Managing  Partner  is less  than or  equal  to its  interest  in the
      Production  Partnership,  there are no duplication of fees to the Managing
      Partners,  and the Managing  Partners do not obtain a greater benefit from
      purchase of the interest by the Affiliated  Program than they would if the
      interest were purchased by the Production Partnership;

            (v) During the existence of the Production Partnership and before it
      has  ceased  operations,   neither  Managing  Partner  nor  any  Affiliate
      (excluding  any  Affiliated  Program  where the interest of such  Managing
      Partner  is  less  than  or  equal  to  its  interest  in  the  Production
      Partnership)  shall  acquire,  retain or drill for its own account any oil
      and gas interest in any  Prospect  upon which the  Production  Partnership
      possesses an interest,  except for transactions  which comply with Section
      4.3B(iii) or 4.8 of this Agreement.  The geological  limits of a Producing
      Property  owned  by  the  Production  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
      the geological limits of a Producing Property,  as so enlarged,  encompass
      any  interest  held by either a  Managing  Partner  or an  Affiliate  of a
      Managing  Partner  (excluding an Affiliated  Program where the interest of
      such  Managing  Partner is  identical  to or less than its interest in the
      Production  Partnership),  such interest  shall be sold to the  Production
      Partnership in accordance with the provisions of Section  4.3B(iv) of this
      Agreement and any net income  previously  received by the Managing Partner
      or  Affiliate  shall  be paid  over to the  Production  Partnership.  If a
      Managing Partner acquires

                                      -28-
<PAGE>

      additional   acreage  or  interests  in  a  Prospect  of  the   Production
      Partnership,  it must  sell  such  to the  Production  Partnership  and is
      prohibited from retaining any such interest, except as may be permitted by
      Section  4.3B  of  this  Agreement.  Notwithstanding  the  foregoing,  the
      Production  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 (a) comply with Sections  4.3B(iii)  and 4.3B(iv) of this  Agreement,
      and (b)  are in  exchange  for  the  transferee's  obligation  to  conduct
      exploratory  drilling,   Development  Drilling,   Identified   Development
      Drilling  or  Improved  Recovery  operations  on  such  properties  or  in
      connection  with the  formation of a joint  venture  among the  Production
      Partnership and such Affiliated  Program,  provided that the  compensation
      arrangement or any other interest or right of the Managing Partners or any
      Affiliate  is  the  same  in the  Production  Partnership  and  Affiliated
      Program,  or, if  different,  the aggregate  compensation  of the Managing
      Partners  does not  exceed the lower of the  compensation  they would have
      received in the Production  Partnership or the Affiliated Program, and the
      terms of such Sale,  Farmout or  transfer  comply with the  provisions  of
      Section 4.8 of this Agreement;

            (vii) Any Sale of  inventory or other  materials  by the  Production
      Partnership  to any  Managing  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 any  Managing
      Partner or any Affiliate acts as operator of Producing Properties shall be
      of a nature customary in the industry and payments to any Managing 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  Managing
      Partner's  overhead  pursuant  to such  operating  agreement  will  not be
      duplicative of any reimbursement of General and

                                      -29-
<PAGE>

      Administrative Costs made pursuant to Section 5.2 of this Agreement; and

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

      C.  The  Managing  Partners  may  not  expend  any  amount  of  Production
Partnership funds over the term of the Production Partnership for the payment of
Production  Partnership  costs  (other  than  recompletion  costs)  incurred  in
connection  with  Development  Drilling and Identified  Development  Drilling in
excess of 10% of the amount of the Limited  Partners'  capital  contributions to
the  Limited  Partnership  and the  Production  Partnership  borrowings.  If the
Managing Partners determine that funds in addition to the Capital  Contributions
to the  Production  Partnership  are  required  for the  payment  of  Production
Partnership costs (other than Property Acquisition Costs), the Managing Partners
may apply or  reserve  Income  or  Investment  Income  for the  payment  of such
Production  Partnership  costs  and/or  the  Managing  Partners  may  cause  the
Production Partnership to borrow funds for the payment of Production Partnership
costs incurred in connection with Development Drilling,  Identified  Development
Drilling and Improved Recovery operations; 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 Limited  Partners'  capital  contributions  to the
Limited Partnership.

        D. Each Managing  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 Production  Partnership  costs by assigning to lenders all or
part of its Managing Partner's  interest in Profits and Distributable  Cash, and
by  granting  such  lenders a security  interest  or  mortgage  in an  undivided
interest  in any  Production  Partnership  Property  not to exceed its  Managing
Partner's percentage interest in Income;  provided,  however,  that the Managing
Partners, in the aggregate,  shall retain unencumbered at least a 1% interest in
each  of  Production  Partnership  Property,  Profits  and  Distributable  Cash.
Notwithstanding  anything to the contrary in this Agreement, in the event of any
sale or foreclosure of a Managing Partner's interest in full or partial

                                      -30-
<PAGE>

satisfaction of such borrowings,  appropriate  adjustments  shall be made in the
Capital Accounts of the Partners and in the method by which Income and costs are
allocated to the Partners to assure that the Limited  Partnership  and the other
Managing  Partner  will not bear any of the costs  attributable  to such sold or
foreclosed interest and that such Managing Partner will not share or participate
in any of the capital, Income, costs or distributions  attributable to such sold
or  foreclosed  interest  except  to the  extent  of the  unencumbered  interest
retained by such Managing Partner.

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

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

            (i) the  Production  Partnership  shall  not  make  any  loans  to a
      Managing Partner or any Affiliate;

            (ii) neither the Managing  Partners nor any Affiliate shall make any
      loans to the  Production  Partnership  except at a rate of interest not in
      excess  of  the  interest  cost  incurred  by  the  Managing  Partners  or
      Affiliates  or the  amount  of  interest  that  would  be  charged  to the
      Production  Partnership  (without  regard  to the  Managing  Partner's  or
      Affiliate's  financial  abilities or  guarantees)  by  unrelated  banks on
      comparable  loans  for the  same  purpose,  whichever  is  lower,  and the
      Managing  Partners 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 any  Managing  Partner or any  Affiliate
      shall  be  compensated  by  the  Production  Partnership  for  his  or her
      services;

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

                                      -31-
<PAGE>

              (v) on a monthly  basis,  costs paid and  revenues  received  by a
      Managing  Partner  or an  Affiliate  for  the  account  of the  Production
      Partnership  shall be determined  and the net amount  resulting  from such
      monthly  settlement  shall  be  deposited  into a  Production  Partnership
      Account and no funds which, after such monthly settlement,  are determined
      to be held for the account of the Production  Partnership shall be kept in
      any account other than a Production  Partnership Account, and the Managing
      Partners  shall not  employ,  or permit any other  Person to employ,  such
      funds in any manner except for the benefit of the Production  Partnership;
      it being  understood  that the  Managing  Partners  may invest  Production
      Partnership  funds temporarily in the investments set forth in Section 9.3
      of this Agreement pending their use by the Production  Partnership.  After
      such  monthly  settlement,   Production   Partnership  funds  may  not  be
      commingled  with separate  funds of either  Managing  Partner or any other
      entity; and

              (vi) the Limited Partnership shall not make any advance payment to
      the  Managing  Partners or their  Affiliates,  except  where  necessary to
      secure tax benefits of prepaid drilling costs.

      B.  Notwithstanding any other provision of this Agreement to the contrary,
without the prior  Consent of the Limited  Partnership  granted  pursuant to the
provisions of Article Eleven of this Agreement and the provisions of the Limited
Partnership Agreement, the Managing Partners shall not:

            (i)  lease,  sell,  or dispose  of all or  substantially  all of the
      Production Partnership's assets;

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

            (iii) except as set forth in Section  l0.1A,  amend any provision of
      this Agreement; or

            (iv) dissolve the Production Partnership.

      Section 4.5.  Other Agreements of the Managing Partners
      -------------------------------------------------------

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

                                      -32-
<PAGE>

              (i) the Managing  Partners and their Affiliates shall not take any
      action  with  respect  to  the  assets  or  property  of  the   Production
      Partnership which does not benefit exclusively the Production Partnership,
      including:

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

                  (b) the commitment of future production;

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

            (iii) the  Managing  Partners may never  profit  themselves  nor any
      Affiliate by  Development  Drilling,  Identified  Development  Drilling or
      Improved   Recovery   operations  in   contravention  of  their  fiduciary
      obligation to the Limited Partnership; and

            (iv) neither the Managing Partners nor any Affiliate shall render to
      the Production  Partnership any oil field,  equipage or drilling  services
      nor sell or lease to the Production  Partnership  any equipment or related
      supplies unless:

                  (a) such Person is engaged,  independently  of the  Production
            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 such
            Person has 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 Production Partnership;

                                      -33-
<PAGE>

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

                  (d) 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.

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

      The Managing  Partners may cause the  Production  Partnership to construct
gas  gathering  lines if, in the opinion of the Managing  Partners,  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 Partners as such. The Managing
Partners  may,  in their  discretion,  construct,  or cause  an  Affiliate  of a
Managing  Partner or other person to construct,  gathering lines from Production
Partnership  Wells to gas transmission  systems.  Whenever the Managing Partners
construct, or cause an Affiliate of a Managing Partner to construct, a gathering
line  from a  Production  Partnership  Well to a gas  transmission  system,  the
Production  Partnership  shall pay the  Managing  Partners 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 Managing Partners or to any Affiliate.

      Section 4.7.  Contracts with the Managing Partners and Affiliates
      -----------------------------------------------------------------

      All services provided to the Production  Partnership by a Managing 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
Production Partnership and any Managing Partner or any Affiliate shall contain a
provision which shall permit termination of the

                                      -34-
<PAGE>

contract by the Production Partnership without penalty on 30 days' prior written
notice. The Limited Partnership shall have the power to terminate, without cause
or penalty, any such contract on behalf of the Production Partnership.

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

      The  Management  Committee may dispose of Producing  Properties by Sale or
Farmout  when the  Management  Committee,  exercising  the standard of a prudent
operator,  determines that (a) the Production 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  Production  Partnership  to the point that
additional  Development  Drilling,  Identified  Development  Drilling,  Improved
Recovery operations or continued  production would no longer be desirable to the
Production  Partnership;   (c)  Development  Drilling,   Identified  Development
Drilling or Improved  Recovery  operations on the properties  would result in an
excessive  concentration of Production Partnership funds on a Producing Property
creating,  in the  opinion  of  the  Management  Committee,  undue  risk  to the
Production Partnership;  or (d) the best interests of the Production Partnership
would be served by the Sale or Farmout.  The  Production  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 Production Partnership pursuant to Farmouts.  Neither the Managing
Partners nor any Affiliate  shall enter into any Farmout or other agreement with
the Production  Partnership  where in consideration for services to be rendered,
an interest in production is payable to the Managing  Partners or any Affiliate,
unless the Production Partnership has previously expended or committed to expend
the  maximum  amount  that is  authorized  to use for  Development  Drilling  or
Identified  Development Drilling. Any Sale, Farmout or similar agreement between
the  Production  Partnership  and a Managing  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:

                                      -35-
<PAGE>

              (i) the Management Committee (or a Managing Partner, if management
      authority of the  Production  Partnership  with  respect  thereto has been
      delegated to it by the Management  Committee) exercising the standard of a
      prudent  operator,  shall  determine  that the Sale,  Farmout  or  similar
      agreement is in the best interests of the Production 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.

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

      The Managing Partners and the Management  Committee shall devote such time
to  the  Production  Partnership  as is  reasonably  required  to  carry  on the
Production  Partnership  business,  and the  Managing  Partners,  members of the
Management Committee and their 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 Managing Partners
and  their  Affiliates  shall  have the  right to  organize  and  operate  other
partnerships, joint ventures or other oil and gas investment programs similar to
the Limited Partnership and the Production Partnership.

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

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

                                      -36-
<PAGE>

      B. In any threatened,  pending or completed action,  suit or proceeding to
which the Managing  Partners are a party or are threatened to be made a party by
reason  of the  fact  that  they are the  Managing  Partners  of the  Production
Partnership  (other  than  an  action  by or in  the  right  of  the  Production
Partnership)  involving an alleged cause of action for damages  arising from the
performance of their duties under this Agreement or other activities relative to
the management and  disposition of Producing  Properties or production from such
properties,  the Production  Partnership  shall indemnify the Managing  Partners
against  expenses,  including  attorneys'  fees,  judgments  and amounts paid in
settlement,  actually and  reasonably  incurred by them in connection  with such
action,  suit or  proceeding  if they acted in good  faith and in a manner  they
reasonably  believed to be in the best interests of the Production  Partnership,
and provided that their conduct does not  constitute  negligence or  misconduct.
The  termination  of any  action,  suit or  proceeding  by  judgment,  order  or
settlement shall not of itself create a presumption  that the Managing  Partners
did not act in good faith and in a manner which they  reasonably  believed to be
in the best interests of the Production Partnership.

      C. In any  threatened,  pending or  completed  action or suit by or in the
right of the Production Partnership,  to which the Managing Partners are a party
or are  threatened  to be made a party,  involving an alleged cause of action by
the Limited  Partnership for damages arising from the activities of the Managing
Partners in the management of the internal affairs of the Production Partnership
as prescribed in this Agreement or by law, or both,  the Production  Partnership
shall indemnify the Managing  Partners against  expenses,  including  attorneys'
fees, actually and reasonably incurred by them in connection with the defense or
settlement  of such  action or suit if they  acted in good faith and in a manner
they  reasonably  believed  to  be in  the  best  interests  of  the  Production
Partnership  as specified  in this  subsection,  except that no  indemnification
shall be made in respect of any claim,  issue or matter as to which the Managing
Partners' course of conduct constituted negligence or misconduct.

      D. To the extent that a Managing Partner has been successful on the merits
or  otherwise  in defense  of any  action,  suit or  proceeding  referred  to in
Sections 4.l0B or 4.l0C of this Agreement,  or in defense of any claim, issue or
matter  therein,  the  Production  Partnership  shall  indemnify  it against the
expenses,  including  attorneys' fees, actually and reasonably incurred by it in
connection therewith.

                                      -37-
<PAGE>

      E. Any  indemnification  under Section 4.l0B and 4.10C of this  Agreement,
unless ordered by a court,  shall be made by the Production  Partnership only as
authorized in the specific  case and only upon a  determination  by  independent
legal counsel in a written  opinion that such  indemnification  is proper in the
circumstances  because the indemnified party has met the applicable  standard of
conduct set forth in Sections 4.l0B or 4.l0C of this Agreement.

      F. The Production Partnership shall not incur the costs of that portion of
insurance which insures the Managing  Partners for any liability as to which the
Managing Partners are prohibited from being indemnified under Section 4.10.

                                  ARTICLE FIVE
                       Distributions, Fees and Allocations
                       -----------------------------------

        Section 5.1.  Distributions of Production Partnership Funds
        -----------------------------------------------------------

        The   Distributable   Cash  of  the  Production   Partnership  shall  be
distributed  simultaneously to the Limited Partnership and the Managing Partners
within 45 days after the close of each calendar quarter. Each Partner's share of
each such  distribution of  Distributable  Cash shall be determined after giving
effect to the  allocations  set forth in Sections 5.3 and 5.4 of this  Agreement
for  such  period.   All  distributions  of  Distributable   Cash  shall  reduce
dollar-for-dollar the balances of the Partners' Capital Accounts.

        Section 5.2.  Fees and Reimbursement of Expenses to the Managing
                      Partners
        ----------------------------------------------------------------

        Geodyne  Production and PW Production shall receive as Managing Partners
(1) on a nonrecurring  basis, the Management Fee in an amount equal to 1-1/2% of
the Limited Partners' capital contributions to the Limited Partnership;  and (2)
reimbursement  for Direct  Administrative  Costs billed directly to the Managing
Partners and General and Administrative  Costs incurred by the Managing Partners
or their  Affiliates  allocable  to the  Production  Partnership,  except to the
extent that the Managing Partners or their Affiliates are otherwise reimbursed

                                      -38-
<PAGE>

for such costs  through  the payment of Property  Acquisition  Costs,  Operating
Costs or otherwise.  Geodyne Production and PW Production shall allocate between
themselves the payment of the  Management  Fee as follows:  in the event the Fee
(as defined in the Limited Partnership  Agreement)  (hereinafter  referred to as
the "Limited Partnership Fee") is less than the actual organization and offering
costs of the  Limited  Partnership  plus  Unreimbursed  Prior  Organization  and
Offering  Costs (as  defined in the  Limited  Partnership  Agreement),  then the
Management Fee shall be paid 60% to PW Production and 40% to Geodyne  Production
to the  extent  of such  deficiency,  60% to PW  Production  and 40% to  Geodyne
Production to the extent of organization and offering costs and the remainder of
the  Management  Fee  shall  be paid  75% to PW  Production  and 25% to  Geodyne
Production. In the event the Limited Partnership Fee is equal to or greater than
the actual  organization  and  offering  costs of the Limited  Partnership  plus
Unreimbursed  Prior  Organization  and Offering Costs (as defined in the Limited
Partnership  Agreement),  then  the  Management  Fee  shall  be  paid  60% to PW
Production  and 40% to  Geodyne  Production  to the extent of  organization  and
offering  costs and the  remainder  shall be paid as  follows:  in the event the
payment referred to in Section 3.6B(i) of the Limited Partnership  Agreement has
been made (but the payments in Section 3.6B(ii) and (iii) have not been made) to
the general  partners of the Limited  Partnership,  the  Management Fee shall be
paid 75% to PW  Production  and 25% to  Geodyne  Production;  in the  event  the
payment referred to in Section 3.6B(ii) of the Limited Partnership Agreement has
been  made (but the  payment  in  Section  3.6B(iii)  has not been  made) to the
general  partners of the Limited  Partnership,  the excess of the Management Fee
over the amount paid to the general partners of the Limited Partnership pursuant
to Section 3.6B(ii) of the Limited Partnership Agreement shall be paid 75% to PW
Production and 25% to Geodyne Production, the balance of the Management Fee, but
not in  excess  of 1% of the  Limited  Partners'  capital  contributions  to the
Limited  Partnership,  shall be paid  50% to PW  Production  and 50% to  Geodyne
Production, and any remaining balance of the Management Fee shall be paid 70% to
PW  Production  and 30% to  Geodyne  Production;  and in the event  the  payment
referred to in Section 3.6B(iii) of the Limited  Partnership  Agreement has been
made to the  general  partners  of the  Limited  Partnership,  the excess of the
Management  Fee over the amount  paid to the  general  partners  of the  Limited
Partnership pursuant to Section 3.6B(iii) of the Limited Partnership  Agreement,
but not in excess of 1% of the Limited  Partners'  capital  contributions to the
Limited  Partnership,  shall be paid  50% to PW  Production  and 50% to  Geodyne
Production, and the balance of the Management Fee

                                      -39-
<PAGE>

shall be paid 70% to PW Production and 30% to Geodyne Production.

      Section 5.3.  Allocation of Income, Investment Income, Costs and
                    Deductions
      ------------------------------------------------------

      A. The Income,  Investment Income,  Profits,  Production Partnership costs
and losses of the Production  Partnership shall be determined and allocated with
respect to each Fiscal Year of the  Production  Partnership  as of and within 75
days after the end of such Fiscal Year.

      B.  (i) 100% of  Investment  Income,  Property  Acquisition  Costs,  costs
      incurred in connection with Identified Development Drilling (including any
      interest,  commitment  fees and other  finance  charges  with  respect  to
      borrowings  incurred  in  connection  therewith)  and the  Management  Fee
      referred to in Section 5.2(1) of this Agreement shall all be allocated to,
      and borne by, the Limited  Partnership.  100% of Organization and Offering
      Costs  shall be  allocated  to, and borne by,  the  Managing  Partners  as
      follows:  60% to PW Production  and 40% to Geodyne  Production.  Except as
      otherwise provided in Sections 5.3B(ii) and 5.3B(iii), Income, General and
      Administrative  Costs,  Operating Costs, costs incurred in connection with
      Development  Drilling and Direct  Administrative  Costs shall be allocated
      among, and borne by, the Partners in the following percentages:

            (a)   Until Payout:
                  Limited Partnership                    90.9091%

                  PW Production and Geodyne
                  Production (in the aggregate)           9.0909%

            (b)   After Payout:
                  Limited Partnership                    85.8586%

                  PW Production and Geodyne
                  Production (in the aggregate)          14.1414%

      The Managing  Partners shall allocate  between  themselves their aggregate
      Interest before and after Payout as follows:  70% to PW Production and 30%
      to Geodyne  Production if the Production  Partnership is Activated  within
      twelve months after the date on which the

                                      -40-
<PAGE>

      registration  statement filed with the Securities and Exchange  Commission
      with respect to the Units is declared  effective (the  "Effective  Date"),
      and 60% to PW Production  and 40% to Geodyne  Production if the Production
      Partnership is Activated during the twelve month period ending twenty-four
      months after the Effective Date; provided, however, that if the Production
      Partnership was Activated more than twelve months after the Effective Date
      and the immediately  preceding Prior Production  Partnership was activated
      (as defined in the partnership  agreement respecting such Prior Production
      Partnership)  within  twelve  months  after the  Effective  Date,  then PW
      Production  shall be allocated that  percentage of the aggregate  Managing
      Partners'  Interest  represented by a fraction,  the numerator of which is
      equal  to the sum of (i) 70  multiplied  by the  number  of days  from the
      activation  of the  immediately  preceding  Prior  Production  Partnership
      through the date that is 12 months after the Effective  Date,  and (ii) 60
      multiplied by the number of days from the date that is 12 months after the
      Effective  Date  through  the  date of the  Activation  of the  Production
      Partnership, and the denominator of which is the total number of days that
      has  elapsed  from  the  activation  of the  immediately  preceding  Prior
      Production  Partnership to the  Activation of the Production  Partnership,
      and Geodyne  Production  shall be allocated  the balance of the  aggregate
      Managing Partners' Interest (such allocation between the Managing Partners
      of their aggregate  Interest being their "Sharing  Ratios").  The Managing
      Partners  shall have the authority to amend this  Agreement to provide for
      any different allocation between themselves at their discretion.

          (ii) As  used in  this  subsection,  the "Measuring Date" shall be the
      earlier  of the date on which  90% of the  Limited  Partnership's  Capital
      Contribution has been expended or the second anniversary of the Activation
      of the Production Partnership;  the first "Allocation Period" shall be the
      twelve  month  period  beginning  on the last day of the first full Fiscal
      Year  quarter  after the  Measuring  Date;  and each twelve  month  period
      following the end of the first Allocation Period shall also be referred to
      as an  "Allocation  Period".  Notwithstanding  anything  to  the  contrary
      contained herein,  if during each of the first two Allocation  Periods the
      amount of cash distributed to the Limited Partnership that is attributable
      to the  allocations  set forth in Section  5.3B(i) is less than a 15.1515%
      cumulative (but not compounded) twelve-month return on the

                                      -41-
<PAGE>

      Limited Partners' capital  contributions to the Limited Partnership,  then
      there shall be  distributed  to the  Limited  Partnership  thereafter  (in
      addition to the amount of  Distributable  Cash  distributed to the Limited
      Partnership  resulting from the allocations to the Limited Partnership set
      forth  in  Section  5.3B(i))  an  amount  of  cash  up to 50% of the  cash
      otherwise  distributable to the Managing Partners  thereafter  pursuant to
      the  allocations  set forth in Section 5.3B(i) not to exceed the amount of
      any  such  deficiency  (the  amount  of  such  cash  distribution  being a
      "Transfer Amount"),  and Income and costs sufficient to yield an amount of
      Distributable Cash equal to the Transfer Amount and otherwise allocable to
      the  Managing  Partners  during the Fiscal  Year in which such  Allocation
      Period ends and,  to the extent  necessary,  each  Fiscal Year  thereafter
      pursuant to Section 5.3B(i) shall be allocated to the Limited Partnership.
      If during any Allocation Period after the initial two Allocation  Periods,
      the Limited  Partnership is being  allocated  Income and costs pursuant to
      Section 5.3B(i) such that there is distributed to the Limited  Partnership
      an amount of cash in excess of a 15.1515%  cumulative (but not compounded)
      twelve-month return on the Limited Partners' capital  contributions to the
      Limited  Partnership  since the  beginning  of the  first  two  Allocation
      Periods  (such excess amount of cash being the  "Surplus"),  and there has
      been distributed to the Limited  Partnership a Transfer Amount, then there
      shall be  distributed  to the Managing  Partners  thereafter  an aggregate
      amount of cash otherwise distributable to the Limited Partnership pursuant
      to the allocations set forth in Section 5.3B(i) equal to the amount of any
      Surplus (the amount of such cash  distribution  being a "Reverse  Transfer
      Amount"),   and  Income  and  costs  sufficient  to  yield  an  amount  of
      Distributable  Cash equal to the  Reverse  Transfer  Amount and  otherwise
      allocable to the Limited  Partnership during the Fiscal Year in which such
      Allocation  Period  ends and,  to the extent  necessary,  each Fiscal Year
      thereafter  pursuant to Section 5.3B(i) shall be allocated to the Managing
      Partners;  provided,  however,  that the  amount of any  Reverse  Transfer
      Amount  distributed  to the Managing  Partners  shall not exceed an amount
      equal to the aggregate of the Transfer Amounts  distributed to the Limited
      Partnership less the aggregate of all Reverse Transfer Amounts  previously
      distributed to the Managing Partners.

                                      -42-
<PAGE>

          (iii)  Notwithstanding  anything  to the contrary contained herein, if
      on the seventh anniversary of the last day of the Fiscal Year in which the
      Production  Partnership  commences  Development  Drilling,  or  Identified
      Development  Drilling,  and  in  each  Fiscal  Year  thereafter,  (a)  the
      aggregate  amount  of Income  less the  aggregate  amount of direct  lease
      operating expenses and severance, ad valorem, windfall profits, excise and
      other taxes (but not income  taxes)  allocated to the Limited  Partnership
      pursuant to Section  5.3(B)(i)  attributable to production  resulting from
      Development  Drilling  and  Identified  Development  Drilling on Producing
      Properties is less than (b) the aggregate amount of costs allocated to the
      Limited  Partnership  pursuant to Section 5.3(B)(i) incurred in connection
      with Development Drilling and Identified Development Drilling on Producing
      Properties  during  each  Fiscal  Year  ending  seven or more years  prior
      thereto,  then  Income  and  costs  otherwise  allocable  to the  Managing
      Partners  pursuant to Section 5.3B(i) shall thereafter be allocated to the
      Limited Partnership until such deficiency in Income is eliminated.

          (iv)  For  purposes of the allocations  set forth in Section  5.3B(ii)
      of  this  Agreement,  the  amount  of  cash  distributed  to  the  Limited
      Partnership  for  purposes  of  determining  the  return  on  the  Limited
      Partners'  capital  contributions  to the  Limited  Partnership  shall not
      include any amounts attributable to the Production  Partnership's  payment
      of any windfall profits tax.

      C. All items of Income,  gain,  loss,  deduction and credit  allowable for
Federal income tax purposes and all recapture of any such deductions and credits
shall be  allocated  and charged or credited to the  Partners in the same manner
that the revenues,  costs or expenses giving rise to such items of income, gain,
loss,  deduction  and credit  are  allocated  and  charged.  Federal  income tax
deductions  for cost or  percentage  depletion  with  respect  to any  Producing
Property shall be determined at the Partner level and shall be determined in the
case of  percentage  depletion  on the  same  basis  that  the  Income  from the
Producing Property is allocated;  and the Production Partnership shall allocate,
under Section  612A(c)(7)(D)  of the Code,  its adjusted basis in each Producing
Property to the Partners in proportion to the interest of each in the Production
Partnership capital ultimately used to acquire that property. If such allocation
of basis is not permitted under the Code, the basis

                                      -43-
<PAGE>

of each such  property  shall be  allocated  in the  manner  which the  Managing
Partners deem will most closely achieve the result intended above.

      D. The Capital  Account of each Partner  shall be credited or debited with
its  Capital  Contribution  and  distributions  of  Distributable  Cash,  by the
adjusted basis of partnership property distributed in kind and with its share of
Income,  gain,  loss,  and deduction of the Production  Partnership.  Solely for
purposes of making adjustments to Capital Accounts,  the Production  Partnership
shall compute a simulated depletion allowance on each oil and gas property using
that method,  as between the cost depletion  method or the percentage  depletion
method  (without  regard to  limitations  which could apply to less than all the
Partners  such as the quantity  limitations  of Code Section  613A(c)(3))  which
results  in  the  greatest  simulated   depletion   allowance.   The  Production
Partnership's  simulated depletion allowance shall reduce each Partner's Capital
Account in the same  proportion as such Partner's share of the adjusted basis of
such  property  as  determined  in Section  5.3C  above.  In no event  shall the
Production  Partnership's  aggregate simulated depletion allowances with respect
to a  property  exceed  the  Production  Partnership's  adjusted  basis  in such
property  (maintained  solely for Capital  Account  purposes).  Upon the taxable
disposition  of an oil or  gas  property  by  the  Production  Partnership,  the
Production  Partnership's  gain or loss shall be determined  (solely for Capital
Account purposes) by subtracting its adjusted basis in such property (maintained
solely  for  Capital  Account  purposes)  from the  amount  realized  from  such
disposition.  Any resultant simulated gain shall be allocated to the Partners in
the same manner as that  portion of the amount  realized  from such  disposition
which  exceeds the  Production  Partnership's  adjusted  basis in such  property
(maintained  solely for Capital  Account  purposes) is allocated to the Partners
and shall increase such Partners'  Capital Accounts  accordingly.  Any resultant
simulated loss shall be allocated to the Partners in the same proportion as such
Partners (or their predecessors in interest) were allocated adjusted basis under
Section  5.3C with  respect to such  property  and shall  reduce such  Partners'
Capital Accounts accordingly.

      E. The  Capital  Accounts  of those  Partners  which are  charged  with an
expense of the Production Partnership 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.

                                      -44-
<PAGE>

      F. In  allocating  Income and costs for any Fiscal Year in which the ratio
for  sharing  Income  and  costs  changes  pursuant  to  Section  5.3B(i),   the
allocations  of Income and costs shall be made,  and the books of the Production
Partnership  shall be  closed,  as soon as  practicable  after  the date  Payout
occurs,  to determine  each Partner's  share of pre-change  Income and costs and
each Partner's share of post-change Income and costs for that Fiscal Year.

      G.  Proceeds  received from the Sale or transfer of all or any part of the
Production  Partnership's Producing Properties shall be allocated to the Limited
Partnership  and the Managing  Partners to the extent of their adjusted basis in
such sold or transferred Production Partnership Property.  Proceeds in excess of
said amount shall be allocated in accordance  with the  percentages set forth in
Section  5.3B(i) , except that,  notwithstanding  the provisions of Section 5.3F
and solely for purposes of this Section 5.3G,  where the proceeds from such Sale
are  distributed  to  the  Partners  and a  portion  of the  Distributable  Cash
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  Income  and  Distributable  Cash
attributable  to the  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.

      Section 5.4.  Determinations of Allocations and Distributions
      -------------------------------------------------------------

      Distributable Cash, Income, Investment Income, costs, deductions,  Profits
and Losses  allocable to the Partners shall be distributed or allocated,  as the
case may be, to the Persons who were Partners,  as of the last day of the fiscal
period for which the  distribution  or allocation is to be made,  except that in
any fiscal period in which a Partner sells, assigns or transfers all or any part
of such  Partner's  Interest  to any Person  who  during  the  fiscal  period is
admitted as a Substituted  Partner,  the Distributable Cash, Income,  Investment
Income,  costs,  deductions,  Profits and Losses attributable to the Interest so
sold,  assigned or transferred shall,  subject to the provisions of Section 10.2
of this Agreement, be allocated between the transferor and the transferee on the
basis of the number of days in the fiscal period before the admission, and on

                                      -45-
<PAGE>

and after the admission,  of the transferee as a Substituted Partner;  provided,
however,  that the  Distributable  Cash  attributable  to a Sale of a  Producing
Property  shall be distributed to those Partners who are Partners on the day the
distribution  of such  Distributable  Cash occurs.  The Managing  Partners shall
inform the other  Partners of the  occurrence  and terms of any such Sale by the
Production  Partnership  as  soon  as  practicable  after  such  Sale  has  been
consummated.

                                   ARTICLE SIX
              Transferability of Managing Partner's Interests
              -----------------------------------------------

      Section 6.1.  Transferability of Managing Partner's Interest
      ------------------------------------------------------------

      A.  Except as provided in  Sections  6.lB and 6.2B,  each of the  Managing
Partners  shall not have the right to retire,  withdraw,  transfer or assign its
Managing Partner Interest,  except that there may be substituted in its stead as
Managing  Partner any entity that has, by merger,  consolidation  or  otherwise,
acquired  substantially  all of its assets or capital  stock and  continued  its
business.

      B. Each Managing Partner may, upon at least ninety days' written notice to
the Limited  Partnership  and the other Managing  Partner,  cause the Production
Partnership  to  distribute,  in  partial  liquidation  of its  Interest  in the
Production Partnership, to such Managing Partner fractional, undivided interests
in the Producing  Properties of the Production  Partnership  (such interest of a
Managing Partner in a Producing Property  distributed is hereinafter referred to
as the "Distributed Interest") up to an aggregate interest equal in value to 75%
of the value of the Producing  Properties of the Production  Partnership that it
would have been entitled to upon a  hypothetical  liquidation  of the Production
Partnership after application of the provisions of Section 8.2 of this Agreement
(the  interest in a Producing  Property  of a Managing  Partner  retained in the
Production  Partnership is hereinafter  referred to as the "Retained  Interest")
provided, however, that no such distribution shall occur (i) more than once with
respect to a Managing Partner, (ii) prior to seven years after the Activation of
the Production  Partnership  and (iii) unless such Managing  Partner  obtains an
opinion of counsel to the Production

                                      -46-
<PAGE>

Partnership to the effect that such distribution will not result in any material
adverse  tax  consequence  to the  other  Managing  Partner  or to  the  Limited
Partners.  Notwithstanding  anything to the contrary in this  Agreement,  in the
event that any such distribution is made, appropriate  adjustments shall be made
in the Capital  Accounts of the Partners  and in the  allocation  of  Production
Partnership  Income and costs to assure that the other Managing Partner will not
share or  participate in any of the capital,  costs,  Income,  or  distributions
attributable to the Producing Properties of the Production Partnership except to
the extent of the Retained Interest of such Managing Partner.

      Section 6.2.  Removal of Managing Partners
      ------------------------------------------

       A.   (i) The power shall be vested in the Limited  Partnership  to remove
            at any time any Managing  Partner.  The power shall be vested in the
            Limited  Partnership  to consent  to the  admission  of a  successor
            Managing  Partner  following the Removal of any Managing  Partner by
            the Limited  Partnership.  A  successor  Managing  Partner  shall be
            selected  pursuant  to  the  provisions  of  Section  6.2D  of  this
            Agreement.

             (ii) (a) A  Managing  Partner  shall  have the power to Remove  the
            other  Managing  Partner,  and  pursuant  to  Section  l0.lA of this
            Agreement,  admit a  successor  Managing  Partner,  for  "Cause"  as
            defined in Section 6.2A(ii)(b), but for no other reason.

                    (b) "Cause" for  purposes  of Section  6.2A(ii)(a)  shall be
            deemed  to exist  only (i)  when a court of  competent  jurisdiction
            shall have made a final  determination  (which  determination is not
            successfully  appealed)  that a Managing  Partner has been guilty of
            gross negligence, fraud, intentional misconduct or similar breach of
            fiduciary  responsibility  in carrying  out its duties as a Managing
            Partner,  or (ii) a Managing  Partner is dissolved or  liquidated on
            account of  insolvency  or any other event  occurs  resulting in the
            appointment  of a trustee or receiver  who  acquires  control of the
            affairs of such Managing  Partner for the purpose of  dissolution or
            liquidation on account of  insolvency,  and such trustee or receiver
            is not dismissed within 90 days after appointment of such trustee or
            receiver,  or (iii) (a) a report on the audited financial statements
            of a Managing Partner and

                                      -47-
<PAGE>

            its consolidated  corporate  affiliates is issued by the independent
            accountants  for such Managing  Partner that is qualified on a going
            concern basis, or (b) either Managing  Partner  requests an audit to
            be  performed  of the other  Managing  Partner and its  consolidated
            corporate  affiliates by the  independent  accountants for the other
            Managing  Partner  (the  expense  of such  audit  being  paid by the
            Managing  Partner  requesting the audit) , and such audit results in
            the issuance of an opinion with respect to the financial  statements
            of  the  other  Managing  Partner  and  its  consolidated  corporate
            affiliates  for the period  ending,  and as of, the most recent date
            feasible, that is qualified on a going concern basis.

      B.    (i) In the event that a Managing  Partner is  Removed,  the  Removed
            Managing Partner's  Interest in the Production  Partnership shall be
            transferred  to the other Managing  Partner,  and the other Managing
            Partner  shall assign to the Removed  Managing  Partner a portion of
            Production  Partnership Income,  costs and Distributable Cash as and
            when such items are allocated or distributed, as the case may be, by
            the Production  Partnership equal to the percentage  interest of the
            Removed Managing Partner in the Production  Partnership prior to its
            Removal;  provided,  however,  that such assignment shall be reduced
            proportionately in the event of a foreclosure or sale referred to in
            Section 4.3D with respect to the Removed Managing Partner's interest
            transferred  to the  other  Managing  Partner  to the  extent of the
            foreclosed or sold interest.

            (ii) If a sole Managing Partner is Removed and a successor  Managing
            Partner is to be admitted to the Production Partnership, the removed
            Managing  Partner  shall not be Removed  until a successor  Managing
            Partner has been admitted to the Production  Partnership pursuant to
            Article 10 of this Agreement.

            (iii) In the event a sole Managing Partner is Removed by the Limited
            Partnership and a successor Managing Partner is to be admitted,  the
            incoming Managing Partner and the Removed Managing Partner shall, by
            mutual  agreement,  select an  independent  petroleum  consultant to
            value the Removed  Managing  Partner's  Interest  in the  Production
            Partnership. In

                                      -48-
<PAGE>

            determining  the  value  of the  Managing  Partner's  Interest,  the
            independent  consultant will take into account appropriate  discount
            factors in light of the risk of  recovery  of oil and gas  reserves,
            and, in any event,  will  utilize a "risk  factor"  discount no less
            than that  utilized in the most recent  offer  extended  pursuant to
            Section  7.5 of the  Limited  Partnership  Agreement,  if  any.  The
            incoming Managing Partner, or the Production Partnership, shall have
            the option to purchase  at least 20% of the  Interest of the Removed
            Managing  Partner  for  the  value  determined  by  the  independent
            appraisal. The Removed Managing Partner's Interest in the Production
            Partnership shall be transferred to the successor  Managing Partner,
            and the  successor  Managing  Partner  shall  assign to the  Removed
            Managing Partner a portion of Production  Partnership Income,  costs
            and  Distributable  Cash as and when  such  items are  allocated  or
            distributed, as the case may be, by the Production Partnership equal
            to the percentage  interest of the Removed  Managing  Partner in the
            Production  Partnership prior to Removal, less the portion purchased
            by the successor Managing Partner or the Production Partnership.

      C. Notwithstanding  Section 3.6, any Managing Partner who shall be Removed
pursuant  to the  provisions  of  Section  6.2  shall be  released  by the other
Partners from all liability for  Production  Partnership  debts and  obligations
incurred by the Production Partnership prior to the date of such Removal.

      D. Under  circumstances in which the Limited  Partnership  Consents to the
admission  of a successor  Managing  Partner,  such  admission  shall not become
effective unless the Production  Partnership  shall have received a certificate,
duly executed by or on behalf of such proposed successor Managing Partner to the
effect  that  it is  experienced  in  the  performance  (or  employs  sufficient
personnel who are experienced in performing) of functions of the type then being
performed by the Removed Managing Partner.

                                      -49-
<PAGE>

                                  ARTICLE SEVEN
                Transferability of Limited Partnership's Interest
               --------------------------------------------------

        Section 7.1.  Transferability of Limited Partnership's Interest
        ---------------------------------------------------------------

      No Sale,  exchange,  transfer or assignment  of the Limited  Partnership's
Interest may be made if in the opinion of counsel to the Production Partnership,
such Sale, exchange, transfer or assignment,  would (i) result in the Production
Partnership  being  considered to have terminated  within the meaning of Section
708 of the Code, or (ii) cause the Production  Partnership to lose its status as
a  partnership  for Federal  income tax  purposes.  In  addition,  the  Managing
Partners may require an opinion of the transferor's counsel, satisfactory to the
Managing Partners,  that such Sale,  exchange,  transfer or assignment would not
violate the Securities Act of 1933, as amended, or any state securities or "blue
sky" laws.

      Section 7.2.  Incapacity of Partners
      ------------------------------------

      If a Partner  (including a Managing  Partner) becomes  Incapacitated,  the
Person  who is its legal  representative  shall have all the rights of a Partner
for the  purpose  of  settling  or  managing  its  estate  and such power as the
Incapacitated Partner possessed to assign all or any part of its Interest and to
join with such  assignee in  satisfying  conditions  precedent to such  assignee
becoming a Substituted  Partner.  The Incapacity of a Partner shall not dissolve
the Production Partnership.

      Section 7.3.  Assignees and Substituted Partners
      ------------------------------------------------

      A.  The Production  Partnership  shall not  recognize  for any purpose any
purported sale, assignment or transfer of all or any fraction of the Interest of
the Limited  Partnership  unless the  provisions  of Section 7.1 shall have been
complied with and there shall have been filed with the Production  Partnership a
dated  Notification  of  such  sale,   assignment  or  transfer,   executed  and
acknowledged  by both the seller,  assignor  or  transferor  and the  purchaser,
assignee or transferee and such

                                      -50-
<PAGE>

Notification  (i)  contains  the  acceptance  by  the  purchaser,   assignee  or
transferee  of all of the  terms  and  provisions  of this  Agreement  and  (ii)
represents  that such sale,  assignment or transfer was made in accordance  with
all applicable laws and regulations.  Any sale,  assignment or transfer shall be
recognized  by the  Production  Partnership  as  effective  on the  date of such
Notification  if the date of such  Notification is within 30 days of the date on
which such Notification is filed with the Production Partnership,  and otherwise
shall be recognized as effective on the date such Notification is filed with the
Production Partnership.

      B. If the Limited  Partnership assigns all of its Interest to an assignee,
the Limited Partnership shall cease to be a Partner.

      C. A Person who is the  assignee of all or any fraction of the Interest of
the Limited  Partnership  shall be subject to all the provisions of this Article
Seven to the same  extent  and in the same  manner  as the  Limited  Partnership
desiring to make an assignment of its Interest.

      D. Any purchaser,  assignee,  transferee,  donee,  heir,  legatee or other
recipient of an Interest  shall be admitted to the  Production  Partnership as a
Substituted  Partner only with the Consent of the other Partners,  which Consent
may be  granted  or  withheld  by such  Partners  at  their  sole  and  absolute
discretion.  The  admission  of such Person as a  Substituted  Partner  shall be
evidenced  by the  execution  by the Partners of a  certificate  evidencing  the
admission  of such  Person  as a  Partner  and an  amendment  to this  Agreement
executed by the Managing  Partners on their own behalf,  as well as on behalf of
each other  Partner,  pursuant  to the power of  attorney  granted  pursuant  to
Section 12.5 of this Agreement.

      E. No Person shall become a  Substituted  Partner  until such Person shall
have satisfied the requirements of Section 10.2; provided, however, that for the
purpose of allocating Income,  Investment Income,  Profits,  Losses,  costs, and
Distributable Cash, a Person shall be treated as having become, and as appearing
in the records of the Production  Partnership  as, a Partner on such date as the
sale,  assignment or transfer to such Person was  recognized  by the  Production
Partnership pursuant to Section 7.3A.

                                      -51-
<PAGE>

        Section 7.4.  Incapacity of the Limited Partnership
        ---------------------------------------------------

        Upon the Incapacity of the Limited  Partnership or upon the seizure of a
Limited Partnership's Interest in the Production  Partnership,  the successor to
such Limited Partnership's Interest ("Successor") shall be deemed an assignee of
such Limited  Partnership's  Interest in the Production  Partnership and neither
the  Production  Partnership  nor the  Successor  shall have the right to demand
immediate valuation and payment of such Limited Partnership's Interest.

                                  ARTICLE EIGHT
                    Dissolution, Liquidation and Termination
                          of the Production Partnership
                          -----------------------------

        Section 8.1.  Events Causing Dissolution
        ----------------------------------------

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

            (i) the  expiration  of its term,  unless  its term  shall have been
      extended  by the  Management  Committee  pursuant  to Section  2.4 of this
      Agreement;

            (ii) the Incapacity of the sole Managing  Partner.  However,  within
      ninety days  thereafter the remaining  Partners may elect to  reconstitute
      the  Production  Partnership  prior  to  application  of  the  liquidation
      provisions of Section 8.2;

            (iii)  the  Sale  or  other  disposition  at  one  time  of  all  or
      substantially all of the assets of the Production  Partnership existing at
      the time of such Sale;

            (iv) the election to dissolve the Production  Partnership (a) by the
      Managing  Partners  (which  election  shall be Consented to by the Limited
      Partnership), or (b) by the Consent of all Partners;

            (v) ninety  days after the Removal  (unless the Limited  Partnership
      Consents to a Successor  pursuant to Section 6.2 of this Agreement) of the
      sole Managing Partner;

                                      -52-
<PAGE>

            (vi) the happening of any other event causing the dissolution of the
      Production  Partnership  under  the  laws of the  State,  except  that the
      Incapacity of any Partner (other than the sole Managing Partner) shall not
      dissolve the Production Partnership and the seizure of the Interest of any
      Partner shall not dissolve the Production Partnership.

      B. Dissolution of the Production Partnership shall be effective on the day
on which the event occurs  giving rise to the  dissolution,  but the  Production
Partnership  shall not  terminate  until the Managing  Partners  have recorded a
notice of dissolution of the Production Partnership in the proper records of any
jurisdiction  in which this  Agreement has been recorded and shall have complied
with the laws of the  states in which its does  business  and the  assets of the
Production Partnership have been distributed as provided in Section 8.2.

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

      Section 8.2.  Liquidation
      -------------------------

      A. Upon dissolution of the Production  Partnership,  its liabilities shall
be paid in the  order  provided  herein.  The  Managing  Partners  shall  either
distribute in kind or sell the  Production  Partnership's  property so that such
disposition  is in the best  interests  of the  Limited  Partnership,  and shall
execute all amendments  terminating  the Production  Partnership.  In connection
with any such  Sale,  the  Managing  Partners  shall  attempt to obtain the best
prices for such property.  Pending such Sales, the Managing  Partners shall have
the  right  to  continue  to  operate  and  otherwise  to deal  with  Production
Partnership  property.  In the event the Production  Partnership is dissolved on
account  of  the  Incapacity  or  Removal  of the  sole  Managing  Partner,  the
Production Partnership shall elect, in accordance with the provisions of Article
Eleven, a person (the "Liquidating Agent") to perform the function of a Managing
Partner in liquidating  the assets of the Production  Partnership and winding up
its affairs, and shall pay to such Liquidating

                                      -53-
<PAGE>

Agent its reasonable fees and expenses incurred in connection therewith. Gain or
loss realized on the Sale or other  disposition of the Production  Partnership's
assets will be credited to (in the case of gain) or charged against (in the case
of loss) each  Partner's  Capital  Account to the extent  allocable  to it under
Sections 5.3 and 5.4 of this  Agreement.  In the event of a distribution in kind
of (a) any  property  other  than an  interest  in a  Producing  Property,  each
Partner's  Capital  Account shall be debited with the portion of the  Production
Partnership's  adjusted  basis  thereof  attributable  to the  interest  therein
distributed to it and (b) any Producing Property or an interest in any Producing
Property, each Partner's Capital Account shall first be credited or debited with
its share of the  unrealized  appreciation  or  depreciation  in the fair market
value of said Producing  Property or interest in said Producing  Property.  Each
Partner's  share  of said  unrealized  appreciation  or  depreciation  shall  be
equivalent  to its share  (allocated  pursuant to  Sections  5.3 and 5.4 of this
Agreement) of the gain or loss on an actual Sale of such  Producing  Property or
interest  therein.  The  Capital  Account of each  Partner  to whom a  Producing
Property or an interest in a Producing  Property is distributed shall be debited
with the fair market  value of the  Producing  Property  distributed  to it. Any
liquidation  of the  Production  Partnership  shall  take place out of court and
without  application  being made therefor to the Secretary of State of the State
of Oklahoma.

      B. In settling  accounts after  dissolution,  the assets of the Production
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  Managing
Partners  and  any  Liquidating   Agent  for  any  expenses  of  the  Production
Partnership  paid by or  payable  to them to the  extent  they are  entitled  to
reimbursement  therefor  pursuant  to  this  Agreement;  (iii)  to  the  Limited
Partnership  in the  amount  equivalent  to the amount of its  positive  Capital
Account  balances  (as  adjusted  pursuant  to  Section  8.2A)  on the  date  of
distribution;  (iv) to the  Managing  Partners in the amount  equivalent  to the
amount of their  positive  Capital  Account  balances (as  adjusted  pursuant to
Section 8.2A) on the date of distribution;  and (v) the balance shall be paid to
the  Partners in the manner  provided  for by Sections  5.1, 5.3 and 5.4 of this
Agreement with respect to Distributable Cash.

                                      -54-
<PAGE>

      C. In the event that following the final  distribution  under Section 8.2B
the Managing  Partners have a deficit balance in their Capital Account balances,
they shall contribute cash to the Production  Partnership necessary to eliminate
said deficit  balances,  which amount shall be distributed to the other Partners
to the extent of their remaining positive Capital Account balances.

                                  ARTICLE NINE
               Books and Records; Accounting; Tax Elections; etc.
               --------------------------------------------------

        Section 9.1.  Books and Records
        -------------------------------

      The books and records of the Production Partnership, including information
relating  to the sale by the  Managing  Partners or any  Affiliates  of goods or
services to the  Production  Partnership,  and a list of the names and addresses
and Interests of all Partners,  shall be maintained by the Managing  Partners at
the principal  office of the Production  Partnership  for a period of five years
following  the  close of the  Fiscal  Year to which  they  relate  and  shall be
available  for  examination   there  by  any  Partner  or  its  duly  authorized
representatives  at any and all  reasonable  times.  Any  Partner,  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 Interests of the Partners.  The  Production  Partnership  may
maintain  such other books and records and may provide  such  financial or other
statements as the Managing Partners in their discretion deem advisable.

        Section 9.2.  Accounting Basis for Tax and Reporting Purposes;
                      Fiscal Year
        --------------------------------------------------------------

      The books and records of the Production  Partnership for tax purposes, for
purposes of this  agreement and for the purpose of reports to the Partners shall
be kept on the cash or accrual basis, as the Managing  Partners shall determine.
The Fiscal Year of the Production  Partnership shall be the calendar year to the
extent  permissible  and the Managing  Partners  shall use their best efforts to
obtain any necessary approvals therefor.

                                      -55-
<PAGE>

      Section 9.3.  Bank Accounts
      ---------------------------

      The  General  Partners  shall  maintain a bank  account or  accounts to be
maintained by the Managing Partners on behalf of the Production Partnership with
any bank in the United States having total assets in excess of $100,000,000. The
Managing Partners shall not deposit  Production  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 Production
Partnership's  business on such signature or signatures as the Managing Partners
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 United States corporations having
the  highest  credit  rating  granted by Moody's  Investors  Services,  Inc.  or
Standard & Poors Corporation, or other similar highly liquid investments.

      Section 9.4.  Reports
      ---------------------

      A.  The  Managing  Partners  shall  furnish  to  the  Limited  Partnership
sufficient information and data with respect to the properties and operations of
the Production Partnership in order to permit the Limited Partnership to satisfy
its  reporting   obligations  under  Section  9.4  of  the  Limited  Partnership
Agreement.

      B. The Managing  Partners shall file on a timely basis with the Securities
and  Exchange  Commission  all  filings  required  to be made by the  Production
Partnership  pursuant to the Securities Act of 1933, the Securities Exchange Act
of 1934, and the rules and regulations promulgated thereunder.

      Section 9.5.  Elections
      -----------------------

      The Managing  Partners shall cause the Production  Partnership to make all
elections  required or permitted to be made by the Production  Partnership under
the Code and not  otherwise  expressly  provided for in this  Agreement,  in the
manner that the Managing Partners believe will be most

                                      -56-
<PAGE>

advantageous to Limited Partnership, except that (i) the Managing Partners 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
Managing  Partners  shall make the election  under Section 263(c) of the Code to
expense all intangible  drilling and development costs in the initial Production
Partnership  Federal  income tax return  filed for the Fiscal Year in which such
costs are incurred.

                                   ARTICLE TEN
                                   Amendments
                                   ----------

        Section 10.1.  Proposal and Adoption of Amendments Generally
        ------------------------------------------------------------

      A. Notwithstanding anything to the contrary contained herein, the Managing
Partners may,  without prior notice or consent of any other  Partner,  amend any
provision of this  Agreement  (including  an  amendment  to admit an  additional
Managing Partner) if, in their opinion,  such amendment does not have a material
adverse effect upon the Limited Partnership.  Such amendment shall thereafter be
disclosed  to  the  Limited   Partners  within  a  reasonable  time  thereafter.
Amendments  to this  Agreement  to reflect  the  addition or  substitution  of a
Partner or the  admission of a successor  Managing  Partner shall be made at the
time and in the manner  referred to in Section 10.2. Any other amendment to this
Agreement may be proposed by the Managing  Partners or the Limited  Partnership.
The Partner or Partners  proposing  such  amendment  shall submit a Notification
containing  (a) the text of such  amendment,  (b) a statement  of the purpose of
such  amendment,  and (c) an  opinion  of  counsel  obtained  by the  Partner or
Partners proposing such amendment to the effect that such amendment is permitted
by the Act, will not impair the limited liability of the Limited  Partners,  and
will not adversely affect the  classification of the Limited  Partnership or the
Production  Partnership as  partnerships  for Federal  income tax purposes.  The
Managing Partners shall, within 15 days after receipt of any proposal under this
Section l0.lA, give Notification to all Partners of such proposed amendment,  of
such statement of purpose and of such opinion of counsel,  together, in the case
of an  amendment  proposed  by other  Partners,  with the views,  if any, of the
Managing Partners with respect to such proposed amendment.

                                      -57-
<PAGE>

      B.  Amendments to this  Agreement  shall be adopted if: (i) in the case of
amendments referred to in Section l0.2A, the conditions specified in Section 7.3
shall have been  satisfactorily  completed and the Production  Partnership shall
not have been furnished with an opinion of counsel to the Production Partnership
to the effect that such amendment will adversely  affect the  classification  of
the Limited  Partnership  or the  Production  Partnership  as  partnerships  for
Federal  income tax  purposes;  (ii) in the case of  amendments  referred  to in
Section  l0.2B,  the  conditions  specified  in  Section  6.2  shall  have  been
satisfactorily  completed;  or (iii) in the case of all other  amendments,  such
amendment shall have been Consented to by the Limited  Partnership  (unless such
Consent is not required pursuant to Section l0.lA);  provided,  however, that no
such  amendment  may:  (a) enlarge  the  obligations  of any Partner  under this
Agreement without the Consent of such Partner; (b) modify the method provided in
Article Five of determining and allocating or distributing,  as the case may be,
Income,  Investment  Income,  Profits,  Losses,  Distributable Cash or costs and
expenses  without  the  Consent  of  each  Partner  adversely  affected  by such
modification;  (c) amend  Sections  6.1 or 6.2  without  the  Consent of all the
Partners;  or (d) amend Sections 2.3, 4.3A,  4.3B, 4.3C, 4.3D, 4.4A, 4.4B, 4.5A,
4.9, 4.10 or this Article Ten without the Consent of all the Partners.

      C. Upon the adoption of any  amendment to this  Agreement,  the  amendment
shall be executed by the Managing Partners and all other Partners,  and shall be
recorded  in the proper  records  of the State and any other  state in which the
Production Partnership is then doing business.

      Section 10.2.  Amendments on Admission or Removal of Partners
      -------------------------------------------------------------

      A. If this  Agreement  shall  be  amended  to  reflect  the  admission  or
substitution  of a Partner,  the  amendment to this  Agreement may be adopted by
either of the Managing Partners,  the Person to be substituted or added, and the
assigning  Partner.  Any such  amendment  shall be  executed  on  behalf  of all
Partners but may be executed by the substituted or added Partner,  the assigning
Partner, and either of the Managing Partners,  individually and on behalf of all
of the other Partners pursuant to the power of attorney granted in Section 12.5.

                                      -58-
<PAGE>

      B. If this Agreement shall be amended to reflect the Removal of a Managing
Partner and the continuation of the business of the Production Partnership, such
amendment shall be signed by the remaining or successor  Managing Partner and by
the Removed Managing Partner.

      C. No Person  shall become a Partner,  unless such Person shall have:  (i)
become a party  to,  and  adopted  all of the  terms  and  conditions  of,  this
Agreement;  (ii) if such  Person  is other  than an  individual,  provided  upon
request the Managing  Partners  with  evidence  satisfactory  to counsel for the
Production  Partnership of such Person's authority to become a Partner under the
terms and provisions of this Agreement; and (iii) paid all reasonable legal fees
of  the  Production  Partnership  and  the  Managing  Partners  and  filing  and
publication costs in connection with such Person's becoming a Partner.

                                 ARTICLE ELEVEN
                          Consents, Voting and Meetings
                          -----------------------------

        Section 11.1.  Method of Giving Consent
        ---------------------------------------

      Any  Consent  required  by this  Agreement  may be given by a  Partner  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 Managing Partners 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 Managing  Partners prior to
the date upon which the vote of  Partners  are to be  counted.  Any  Partner may
waive notice of or  attendance  at any meeting of the Partners and may execute a
signed  written  consent.  Only the votes of  Partners  of record on the date of
Notification,  whether at a meeting or otherwise,  shall be counted. The laws of
the State  pertaining to the validity and use of corporate  proxies shall govern
the validity and use of proxies given by Partners.

      Section 11.2.  Meetings of Partners
      -----------------------------------

      The  Managing  Partners  may at any time call a meeting of the Partners or
for a vote,  without a  meeting,  of the  Partners  on  matters  upon  which the
Partners are entitled to vote, and shall

                                      -59-
<PAGE>

call for such a meeting or vote upon receipt of a  Notification  therefor of the
Limited  Partnership.  Within 15 days of the  receipt of the  Notification,  the
Managing  Partners  shall  notify all  Partners  of record as of the date of the
Notification 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. Any Production Partnership meeting or the date upon which
such  votes,  without a meeting,  will be  counted  (regardless  of whether  the
Managing  Partners  have  called for such  meeting  or vote upon the  request of
Limited  Partnership or have 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 Managing Partners. All expenses of the meetings,  voting and such
Notification shall be borne by the Production Partnership.

      Section 11.3.  Submissions to Other Partners
      --------------------------------------------

      The Managing  Partners shall give all the other Partners  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 other  Partners.
Such  Notification  shall  include  any  information  required  by the  relevant
provision of the Agreement or by law.

      Section 11.4.  Limited Partnership Consent
      ------------------------------------------

      To the extent allowed in the Limited Partnership  Agreement and subject to
Section 10.1, the Limited Partnership,  by and through more than 50% in Interest
(as to capital and Profits and Losses) of the Limited Partners,  may without the
concurrence of the Managing Partners:

        (a)  amend the Production Partnership Agreement;

        (b)  dissolve the Production Partnership;

        (c)  remove either or both Managing Partners and elect new ones;

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

                                      -60-
<PAGE>

        (e)  cancel or amend  the  terms of any  contract  for  services  with a
Managing Partner or any Affiliate thereof without penalty upon 30 days' notice.

                                 ARTICLE TWELVE
                            Miscellaneous Provisions
                            ------------------------

      Section 12.1.  Notification to the Production Partnership or the
                     Managing Partners
      ---------------------------------------------------------

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

      Section 12.2.  Binding Provisions
      ---------------------------------

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

      Section 12.3.  Applicable Law
      -----------------------------

      This Agreement shall be construed and enforced in accordance with the laws
of the State  applicable to contracts made and to be performed wholly within the
State.

      Section 12.4.  Separability of Provisions
      -----------------------------------------

      If for any  reason  any  provision  or  provisions  hereof  which  are not
material to the  purposes or business of the  Production  Partnership  or of the
Partners' Interests 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.

                                      -61-
<PAGE>

      Section 12.5.  Appointment of the Managing Partners as Attorney-in-Fact
      -----------------------------------------------------------------------

      A.  Each  Partner,  by  the  execution  of  this  Agreement,   irrevocably
constitutes  and  appoints  each of the Managing  Partners,  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)  all  certificates  and  other
instruments  (including  counterparts  of this  Agreement),  and  any  amendment
thereof,  including  any  amendment  substituting  a Partner,  that the Managing
Partners deem  appropriate to form,  reform,  qualify or continue the Production
Partnership (or a new partnership with  substantially the same provisions as the
Production  Partnership)  as a  partnership  in the  jurisdiction  in which  the
Production  Partnership  may conduct  business;  (ii) all  amendments  and other
instruments  necessary to admit into the  Production  Partnership  additional or
substituted  Partners  pursuant to Section 10.2;  (iii) all instruments that the
Managing  Partners deem  appropriate to reflect a change or  modification of the
Production Partnership in accordance with the terms of this Agreement (including
those necessary to reflect any additional Capital  Contributions);  and (iv) all
conveyances and other instruments that the Managing Partners deem appropriate to
reflect the dissolution and termination of the Production Partnership.

      B. The  appointment  by all Partners of each of the  Managing  Partners as
agent and attorney-in-fact shall be deemed irrevocable and to be a power coupled
with an interest,  in  recognition  of the fact that each of the Partners  under
this Agreement will be relying upon the power of the Managing Partners to act as
contemplated by this Agreement in any filing and other action by it on behalf of
the  Production  Partnership,  and shall  survive the  Incapacity  of any Person
hereby  giving such power and the transfer or  assignment  of all or any part of
the  Interest  of such  person;  provided,  however,  that in the  event  of the
transfer by a Partner of all of its Interest,  the foregoing  powers of attorney
of the  transferor  Partner  shall survive such transfer only until such time as
the transferee shall have been admitted to the Production Partnership as a

                                      -62-
<PAGE>

Substituted  Partner and all required  documents and instruments shall have been
duly executed, filed and recorded to effect such substitution.

      Section 12.6.  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 12.7.  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 12.8.  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 Partners.

GEODYNE PRODUCTION COMPANY                PW PRODUCTION INC.

By:   // Thomas W. Kitchin //             By:   // R. Joseph Davis //
      -----------------------                   ---------------------
      Thomas W. Kitchin,                        R. Joseph Davis,
      President                                 President

                                          PAINEWEBBER/GEODYNE ENERGY
                                          INCOME LIMITED PARTNERSHIP I-D

                                          By:   GEODYNE PROPERTIES, INC.
                                                General Partner

                                          By:   // Thomas W. Kitchin //
                                                -----------------------
                                                Thomas W. Kitchin,
                                                President

                                      -63-
<PAGE>

                                          BY:   PW ENERGY INC.
                                                General Partner

                                          By:   // R. Joseph Davis //
                                                ---------------------
                                                R. Joseph Davis,
                                                President

                                      -64-PAINEWEBBER/GEODYNE ENERGY
                        INCOME PRODUCTION PARTNERSHIP I-E
                         AMENDED AND RESTATED AGREEMENT
                                 OF PARTNERSHIP

        Amended and Restated Agreement of Partnership, dated as of September 10,
1986,  among  Geodyne  Production  Company,  a  Delaware  corporation,   and  PW
Production   Inc.,   a  Delaware   corporation,   as  Managing   Partners,   and
PaineWebber/Geodyne  Energy Income Limited  Partnership I-E, an Oklahoma limited
partnership, as General Partner.

        Whereas,  PaineWebber/Geodyne  Energy Income Production  Partnership I-E
has  heretofore  been  formed  as  a  general   partnership  under  the  Uniform
Partnership Act of the State of Oklahoma pursuant to an Agreement of Partnership
dated as of March 5, 1986; and

        Whereas, the parties hereto desire to amend the Agreement of Partnership
of the Production Partnership and to restate said Agreement in its entirety;

        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. Any terms used in
this Agreement  which are defined in the Limited  Partnership  Agreement and are
not otherwise defined herein shall have the respective meanings set forth in the
Limited Partnership Agreement.

        "Accountants" shall mean Arthur Young & Company or such other nationally
recognized firm of independent  certified public accountants as shall be engaged
from time to time by the Managing Partners for the Production Partnership.

        "Acquisition  Reserve  Report" shall mean a Hydrocarbon  reserve  report
made available to the Production  Partnership  prepared by a qualified petroleum
engineering firm acceptable to

                                      -1-
<PAGE>

the Managing Partners 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 reasonable  inquiry with respect to the methods employed in such collection
and is satisfied  that the data so collected may be  reasonably  relied upon for
the  purpose  of  making  the  determination  reflected  in such  report,  (iii)
specifying the respective amounts of Proved Developed Producing Reserves, Proved
Developed  Nonproducing  Reserves,  or  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 Managing  Partners 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 the proposed  acquisition  of such
Producing Property and that such qualified petroleum engineering firm is relying
on information  furnished by the Managing Partners as to the historical  volumes
of any Hydrocarbons  actually produced and as to the proposed ownership interest
of the Production Partnership in such Producing Property.

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

        "Activation"  or  "Activated"  shall  mean the  date on  which  (i) with
respect to the Limited  Partnership,  the  subscribers for Units shall have been
admitted to the Limited Partnership as

                                      -2-
<PAGE>

Limited  Partners,  and (ii) with  respect to the  Production  Partnership,  the
Limited  Partnership shall have made its Capital  Contribution to the Production
Partnership.

        "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) any relative or spouse of the  specified
Person.  A reference to an Affiliate of the Managing  Partners  shall include an
Affiliate  of  either  or both of the  Managing  Partners.  Notwithstanding  the
foregoing,  no Person shall be deemed to be an Affiliate solely by reason of its
ownership of 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) interests in which were 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 a  Managing  Partner or
Affiliate thereof serves as general partner or venturer.

        "Agreement"   shall  mean  this  Amended  and   Restated   Agreement  of
Partnership as amended from time to time.

        "Capital Account" shall mean, as to any Partner,  an account  maintained
on the books of the Production  Partnership in accordance with the provisions of
Section 5.3D below.

        "Capital  Contribution" shall mean the total amount of money contributed
to the  Production  Partnership  by all Partners or any class of Partners or any
one Partner (or the  predecessor  holders of the  Interests  of such  Partner or
Partners),  as the context requires,  net of any refunds pursuant to Section 3.4
of this Agreement.

                                      -3-
<PAGE>

        "Code" shall mean the Internal  Revenue Code of 1954, as amended (or any
corresponding provisions of succeeding law).

        "Commercial  Well" shall mean any Production  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.

        "Consent"  shall mean the  consent  of a Person,  given as  provided  in
Section 11.1, to do the act or thing for which the consent is solicited,  or the
act of granting such consent, as the context may require.

        "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 Production  Partnership  Well to a reservoir on a Lease or an offset
Lease, from which reservoir production is being obtained or, as determined by an
independent  petroleum  engineering  firm,  is  anticipated  to be obtainable in
commercial quantities, or the recompletion of an existing Production 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 Production Partnership by parties
other than the Managing  Partners or their  Affiliates,  whether incurred by the
Production  Partnership  directly or incurred by any of the Managing Partners or
their Affiliates,  including the annual audit fees, legal fees and expenses, the
costs of reviewing tax returns and reports,  the cost of reserve  reports (other
than the cost of  Acquisition  Reserve  Reports,  Engineering  Audit Letters and
evaluations thereof conducted on behalf of a Production Partnership) prepared by
independent  petroleum  engineering  firms,  and all other such  costs  directly
incurred by or for the benefit of the Production Partnership.

        "Distributable   Cash"  shall  mean,  with  respect  to  the  Production
Partnership's  operations at any time, the amount of cash assets on hand at such
time less amounts  required to be retained out of such cash assets,  in the sole
judgment of the

                                      -4-
<PAGE>

Managing  Partners,  to pay costs,  expenses or other  obligations  whether then
accrued or anticipated to accrue in the future.

        "Engineering Audit Letter" shall mean a document prepared by a qualified
petroleum  engineering  firm  acceptable to the Managing  Partners 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 reasonable
inquiry with  respect to the methods  employed in the  collection,  analysis and
evaluation of the basic physical data upon which such determination is based and
is satisfied  that the data so collected may be  reasonably  relied upon for the
purpose of making the determination reflected in such report.

        "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,  geological,  engineering,
travel, office rent, telephone,  secretarial,  expense reimbursements of members
of the  Management  Committee  when acting on Production  Partnership  business,
employee   compensation  and  benefits,   and  other  items  of  a  general  and
administrative  nature,  whether  like or unlike  the  foregoing,  and any other
incidental  reasonable  expenses  reasonably  necessary  to the  conduct  of the
Production  Partnership's business,  computed on a cost basis, determined by the
Managing Partners in accordance with generally  accepted  accounting  principles
and reviewed by an independent public accountant or certified public accountant.
General and

                                      -5-
<PAGE>

Administrative  Costs shall not include any costs includable under the foregoing
but which are  included as Property  Acquisition  Costs,  Direct  Administrative
Costs,  cost  incurred  in  connection  with  Development  Drilling,  Identified
Development Drilling and Improved Recovery projects, or Operating Costs.

        "General Partner" shall mean  PaineWebber/Geodyne  Energy Income Limited
Partnership I-E, an Oklahoma limited partnership,  acting in such capacity,  any
successor  in that  capacity,  and any other  General  Partner  admitted  to the
Production  Partnership  pursuant to the provisions of this Agreement subsequent
to the Activation of the Production Partnership.

        "Geodyne Production" shall mean Geodyne Production  Company,  a Delaware
corporation.

        "Hydrocarbons"  shall mean crude oil, natural gas,  condensate,  natural
gas liquids and other liquid or gaseous hydrocarbons.

        "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 Production  Partnership Well drilled by or on behalf of
the  Production  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 Production  Partnership Well, where (i) the drilling or recompletion of
such  Production  Partnership  Well  commences  after  the  acquisition  of such
Producing  Property by the Production  Partnership  and is conducted in order to
commence production of Hydrocarbons from Proved Undeveloped  Reserves identified
in the  Acquisition  Reserve  Report or  Engineering  Audit  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 Audit Letter in valuing such Proved  Undeveloped  Reserves
attributable to such Producing Property, and (iii) a portion of the cost paid by
the Production  Partnership  for such  Producing  Property is attributed by such
Acquisition   Reserve  Report  or  Engineering   Audit  Letter  to  such  Proved
Undeveloped  Reserves.  The term, Identified  Development  Drilling,  shall also
refer to any Production  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

                                      -6-
<PAGE>

related  Acquisition Reserve Report or Engineering Audit Letter) which have been
categorized by the Managing Partners as Proved Undeveloped Reserves 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  Production  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 Production  Partnership  Well,  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   adjudication  of
bankruptcy  (except  that,  in  the  case  of  a  Managing  Partner,   the  term
"bankruptcy"  shall  mean  only  being  subject  to  Chapter  7 of  the  Federal
Bankruptcy  Reform  Act  of  1978),  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.

        "Income"  shall  mean the  gross  income of the  Production  Partnership
(other than  Investment  Income) as determined  for Federal income tax purposes,
including  all  capital  or Code  Section  1231  gains  (but not  losses) of the
Production Partnership.

        "Interest" shall mean the entire  ownership  interest (which may, either
for a Partner's Capital Account or a Partner's Profits interest, be expressed as
a percentage) of a Partner in the Production Partnership at any particular time,
including the rights and  obligations  of such Partner under this  Agreement and
the Act.

        "Investment  Income" shall mean all interest and dividend  income earned
on temporary investments of the Production  Partnership at any time prior to the
time at which an amount  equal to the Capital  Contributions  to the  Production
Partnership available for the acquisition of Producing Properties have been

                                      -7-
<PAGE>

(i) expended or (ii) returned pursuant to Section 3.4 of this Agreement.

        "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  Partners"  shall  mean the  limited  partners  of the  Limited
Partnership or any substituted limited partners thereof.

        "Limited Partnership" shall mean the  PaineWebber/Geodyne  Energy Income
Limited Partnership I-E, an Oklahoma limited partnership.

        "Limited Partnership Agreement" shall mean the agreement under which the
Limited Partnership was formed, as amended and restated.

        "Management  Committee"  shall  mean  the  committee,  composed  of  two
representatives  from each Managing  Partner,  established  for the purposes set
forth in Sections 4.lC and 4.2A(iii) of this Agreement.

        "Management  Fee" shall mean the fee paid by the Production  Partnership
to the  Managing  Partners  pursuant  to  Section  5.2(l) of this  Agreement  in
connection with their management of the affairs of the Production Partnership.

        "Managing  Partners" shall mean Geodyne  Production  Company, a Delaware
corporation,  and PW  Production,  Inc., a Delaware  corporation,  and any other
Person  admitted as  additional  or  Substituted  Managing  Partner  pursuant to
Article Six of this Agreement.

        "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  known  address  of such  Person,  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

                                      -8-
<PAGE>

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 Production  Partnership  with respect to (i) the production and marketing of
Hydrocarbons from completed Production 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  Production  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 Production 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  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 Managing  Partners in connection  with the  organization  of the
Production  Partnership,  including,  without limitation,  the legal,  printing,
accounting and other costs incurred in connection  with the  organization of the
Production  Partnership,  including,  without limitation,  the legal,  printing,
accounting and other costs  incurred in connection  with  preparing,  filing and
recording this Agreement.

        "Partner" shall mean any Managing  Partner or any General Partner of the
Production Partnership.

        "Payout" shall mean that time at which cash distributions have been made
by the Limited  Partnership to the Limited  Partners  pursuant to Section 5.1 of
the Limited  Partnership  Agreement  (together  with any  distributions  to such
Limited Partners pursuant to Section 3.4 of the Limited Partnership  Agreement),
in an aggregate amount equal to the Limited Partners'  Capital  Contributions to
the Limited Partnership.

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

                                      -9-
<PAGE>

        "Prior Production Partnership" shall mean a general partnership of which
PW  Production  and Geodyne  Production  are  managing  partners,  and a limited
partnership,  of which  units  of  limited  partnership  interest  were  offered
pursuant to the Prospectus,  is the other general  partner,  formed prior to the
Activation of the Production Partnership.

        "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.

        "Production  Partnership"  shall mean the general  partnership  governed
under and pursuant to this Agreement,  as said general partnership may from time
to time be constituted.

        "Production Partnership Account" shall mean the bank account or accounts
maintained by the Managing Partners pursuant to Section 9.3.

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

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

        "Profits" and "Losses" shall mean the income or losses of the Production
Partnership  for Federal  income tax purposes  determined as of the close of the
Production Partnership's Fiscal Year, as well as, when the context requires, any
tax-exempt income and nondeductible expenses.

        "Property Acquisition Costs" shall mean, without duplication, the sum of
(1) the prices paid by the Production  Partnership  or a Managing  Partner or an
Affiliate  to acquire a Producing  Property  ultimately  sold to the  Production
Partnership,  including the price paid to acquire a purchase option with respect
to a Producing Property, lease bonuses and

                                      -10-
<PAGE>

equipment costs associated therewith;  (2) title insurance or examination costs,
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 seller
with  respect to such  property to the date of its  transfer  to the buyer;  (4)
interest  actually  incurred by the  Managing  Partners or their  Affiliates  to
acquire or maintain such  Producing  Properties  prior to their  transfer to the
Production  Partnership;  and (5) such  portion  of the  Managing  Partners'  or
Affiliates'   reasonable,   necessary  and  actual   expenses  for   geological,
geophysical,  seismic, land, engineering,  drafting, accounting, auditing, legal
and other like services,  including the Production  Partnership's costs incurred
(to the  extent  consistent  with  generally  accepted  industry  standards)  in
connection with the Production  Partnership's review of proposed acquisitions of
Producing  Properties,  Reports and Engineering Audit Letters,  all allocated to
the property in accordance  with the allocation  procedures used by the Managing
Partners, any of their Affiliates or the Production  Partnership;  provided that
the portion of the Managing  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.

        "Prospect"  shall mean an area in which the Production  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 Managing  Partners and which is
reasonably  anticipated  by the  Managing  Partners  to  contain  at  least  one
reservoir.

        "Prospectus" shall mean the prospectus  pursuant to which the Units were
offered, and all supplements or amendments thereto, 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 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:

                                      -11-
<PAGE>

              (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  Nonproducing  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.  Proved  reserves for other undrilled units
        are claimed only where it can be demonstrated with reasonable 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.

        "PW Production" shall mean PW Production Inc., a Delaware corporation.

                                      -12-
<PAGE>

        "Remove",  "Removed"  or  "Removal"  shall mean,  with  reference to the
removal of a Managing Partner, the termination of the management powers,  duties
and  responsibilities  of such Managing  Partner pursuant to Section 6.2 of this
Agreement and the removal of such Managing Partner as a Partner.

        "Royalty" shall mean an interest,  including an overriding royalty and 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.

        "Sale" shall mean any event or  transaction  that is, for Federal income
tax  purposes,  considered a sale,  exchange or  abandonment  by the  Production
Partnership of any Production Partnership Property.

        "State" shall mean the State of Oklahoma.

        "Subscription   Agreement   and  Power  of  Attorney"   shall  mean  the
Subscription  Agreement  and  Power  of  Attorney  in the form  attached  to the
Prospectus.

        "Substituted  Partner" shall mean any Person  admitted to the Production
Partnership as a Partner pursuant to Sections 7.3 and 10.2 of this Agreement.

        "Unit" shall mean a $1,000  investment in the Limited  Partnership  by a
Limited Partner  pursuant to the terms of a Subscription  Agreement and Power of
Attorney; provided, however, that fractional Units may be acquired to the extent
provided under Section 5.lB of the Limited Partnership Agreement.

        "Working  Interest"  shall mean the interest  (whether  held directly or
indirectly)  in a Lease  which is  subject  to some  portion  of the  expense of
production, development, operation or maintenance.

                                      -13-
<PAGE>

                                   ARTICLE TWO
             Continuation; Name, Place of Business and Office; Term
             ------------------------------------------------------

        Section 2.1.  Continuation
        --------------------------

        The parties hereto hereby  continue the general  partnership  heretofore
formed  pursuant to the provisions of the Act and the rights and  liabilities of
the  Partners  shall be as provided in the Act,  except as  otherwise  expressly
provided in this Agreement.

        Section 2.2.  Name, Place of Business and Office, Agent
        -------------------------------------------------------

        The   Production   Partnership   shall  be  conducted   under  the  name
PaineWebber/Geodyne  Energy Income  Production  Partnership I-E. The business of
the  Production  Partnership  may,  however,  be conducted  under any other name
deemed  necessary or desirable by the Managing  Partners in order to comply with
applicable  laws.  The office and principal  place of business of the Production
Partnership shall be c/o Geodyne  Production  Company,  320 South Boston Avenue,
The Mezzanine, Tulsa, Oklahoma 74103-3708. The Managing Partners shall record an
assumed name or fictitious  name  certificate  in the State and in each state in
which it owns  property  or  transacts  business  when deemed  necessary  by the
Managing Partners.

        The Managing Partners may change the principal place of business and the
location of such office and may establish such  additional  offices as they deem
advisable from time to time; provided,  however, that in the event the principal
place of business of the Production  Partnership shall be changed,  the Managing
Partners shall give written notice thereof to the Limited Partners.

        Section 2.3   Purpose
        ---------------------

        The  business  and  purpose of the  Production  Partnership  shall be to
acquire,  own,  hold,  operate,  explore,  develop,  trade,  sell  and  exchange
Hydrocarbon  properties 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

                                      -14-
<PAGE>

entities  that hold or are formed to acquire  interests  in such  properties  or
interests;  to engage in development  drilling and enhanced recovery  operations
thereon,  to produce,  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 2.4.  Term
        ------------------

        The  Production  Partnership  shall  continue in force and effect  until
December 31, 1999,  provided that the Management  Committee may extend such term
for up to five periods of two years each,  or until  dissolution  prior  thereto
pursuant to the provisions hereof.

                                  ARTICLE THREE
                              Partners and Capital
                              --------------------

        Section 3.1.  Managing Partners
        -------------------------------

        A. The  names,  addresses  and  Capital  Contributions  of the  Managing
Partners  are set forth in  Schedule  A  attached  hereto  and are  incorporated
herein.  The  Managing  Partners  shall  not be  required  to make  any  Capital
Contribution except as set forth in Sections 3.lB, 3.4 and 8.2C.

        B. The  Managing  Partners  shall  also  contribute  an  amount  of cash
sufficient to pay their share of costs allocated to them pursuant to Section 5.3
of this  Agreement  to the extent  that the amount of Income  allocated  to them
(and/or  the  amount of  Production  Partnership  borrowings  incurred  on their
behalf) is insufficient to pay such costs.

        Section 3.2.  Other General Partner
        -----------------------------------

        The name,  address and Capital  Contribution of the Limited  Partnership
are set forth in Schedule A attached hereto and are hereby incorporated herein.

                                      -15-
<PAGE>

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

        The  Managing  Partners  shall  deposit  in the  Production  Partnership
Account the Capital  Contributions  of the Limited  Partnership and the Managing
Partners and apply such Capital Contributions to the payment of Organization and
Offering Costs and the Management Fee. The balance of such Capital Contributions
shall be held in the Production Partnership Account to be applied to the payment
of  Property  Acquisition  Costs and, to the extent not payable out of Income or
Investment Income,  Operating Costs,  General and Administrative  Costs,  Direct
Administrative Costs and other Production Partnership costs; provided,  however,
that such funds may be  temporarily  invested prior to the payment of such costs
in accordance with Section 9.3 of this Agreement.

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

        Any  portion of the  Capital  Contribution  of the  Limited  Partnership
(except for necessary  operating  capital) that has not been expended or that is
not, or in the determination of the Managing Partners, will not be committed for
expenditure  by the  second  anniversary  of the  Activation  of the  Production
Partnership will promptly be refunded to the Limited  Partnership as a return of
part of its Capital  Contribution  at the earlier of such  determination  or the
second anniversary of the Activation of the Production  Partnership.  Such funds
will be deemed to have been committed for expenditure by such date to the extent
they are payable under  contractual  agreements or  understandings  in effect on
such date, or have been applied to a reasonable  working capital reserve or have
been set  aside as a  condition  to  obtaining  any  financing  in the form of a
compensating balance or similar arrangement.  In addition, the Managing Partners
shall contribute cash to the Production Partnership (with respect to which their
Capital  Accounts will be credited) in an amount equal to the amount paid to the
Managing   Partners  in  respect  of  the  Management  Fee  attributable  (on  a
proportionate  basis) to the  unexpended  amount  of  Capital  Contributions  so
refunded,  which cash shall be refunded to the Limited Partnership together with
the unexpended  Capital  Contributions  so refunded.  Geodyne  Production and PW
Production  shall be responsible for the obligation of the Managing  Partners to
contribute  cash to the Production  Partnership  pursuant to this Section 3.4 in
the relative percentages which they

                                      -16-
<PAGE>

allocated  between  themselves  the payment of the  Management  Fee  pursuant to
Section  5.2.  All amounts so refunded to the Limited  Partnership  shall reduce
dollar for dollar its Capital Account.

        Section 3.5.  Production Partnership Capital
        --------------------------------------------

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

        B. The Production  Partnership shall not redeem any Partner's  Interest.
Except as provided in  Sections  3.4,  6.1,  6.2 and 8.2 of this  Agreement,  no
Partner  shall have the right to  withdraw  or receive any return of the Capital
Contribution.   Under   circumstances   involving   a  return  of  any   Capital
Contribution, no Partner shall have the right to receive any property other than
cash,  except as may  otherwise be provided in Sections 6.1, 6.2 and 8.2 of this
Agreement.

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

        Each Partner signatory hereto or subsequently admitted to the Production
Partnership  agrees that it shall remain  generally liable for any obligation or
recourse liability of the Production  Partnership  incurred during the period in
which it is a Partner.  However,  all present and future  Partners  hereby agree
among  themselves to  contribute to each other the amount of funds  necessary to
effectuate a sharing of such  Production  Partnership  obligations  and recourse
liabilities  in  proportion  to each  Partner's  share of such  obligations  and
liabilities at the time of their accrual.

                                      -17-
<PAGE>

                                  ARTICLE FOUR
                          Rights, Powers and Duties of
                              The Managing Partners
                              ---------------------

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

        A. Subject to Section 4.lC of this  Agreement  and to the Consent of the
Limited  Partnership  as and  when  required  by this  Agreement,  the  Managing
Partners,  within the authority granted to them 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 Production  Partnership  and to make
all decisions  regarding the business of the  Production  Partnership  and shall
have all of the rights, powers and obligations of managing general partners of a
general  partnership  under the laws of the State.  The Managing  Partners shall
exercise those powers as a fiduciary to the Limited Partnership.

        B. No other Partner shall  participate  in the management of or have any
control over the Production  Partnership's  business nor shall any other Partner
have the power to represent,  act for, sign for or bind the Managing Partners or
the  Production  Partnership.  The Limited  Partnership  hereby  Consents to the
exercise  by the  Managing  Partners  of the  powers  conferred  on them by this
Agreement.

        C.  The  Managing  Partners'   management   authority  with  respect  to
significant  Production Partnership actions shall be exercised by the Management
Committee,  including without limitation such actions as: (i) the acquisition of
a Producing  Property or an option to  purchase a Producing  Property,  provided
that Geodyne Production shall have the authority to acquire Producing Properties
and  options  to  acquire  Producing  Properties  without  the  approval  of the
Management  Committee,  provided  further that (a) Geodyne  Production  does not
expend an aggregate amount of Production  Partnership  funds with respect to the
acquisition of Producing Properties whose aggregate  acquisition price, together
with the anticipated aggregate acquisition price of Producing Properties subject
to such  purchase  options,  is in  excess of 20% of the  Limited  Partnership's
Capital Contribution,

                                      -18-
<PAGE>

and (b) no single  acquisition  of Producing  Properties  by Geodyne  Production
pursuant  to this  proviso  shall  exceed 10% of the Limited  Partners'  capital
contributions to the Limited  Partnership;  (ii) the incurrence of indebtedness;
(iii) the  determination  of the amount of and the distribution of Distributable
Cash to the Partners;  (iv) the engaging in and making decisions with respect to
any Development Drilling,  Identified Development Drilling and Improved Recovery
operations;  (v) the sale or  other  transfer  of any  Producing  Property  that
constitutes a significant  portion of the assets of the Production  Partnership;
and (vi) the determination not to extend the term of the Production  Partnership
as set forth in Section 2.4 of this  Agreement.  The Management  Committee shall
have the  power  to  delegate  its  management  authority  with  respect  to any
"significant"  action  to a  Managing  Partner  at such  times  and  under  such
conditions as it may decide in its own discretion.

        The Managing Partners' management authority respecting all other actions
which are in the ordinary course of the Production  Partnership's operations may
be exercised by either  Managing  Partner  without the  concurrence of the other
Managing Partner,  provided that the Managing Partner exercising such management
authority  shall,  upon  inquiry  by the  other  Managing  Partner,  notify  the
inquiring  Managing Partner of the nature of such actions undertaken without the
concurrence of the inquiring  Managing Partner.  The Management  Committee shall
have the authority (i) to determine  that the  "significant"  actions  specified
herein shall no longer be "significant" actions for the purposes of this Section
4.1C and to amend this Agreement  pursuant to Section l0.1A of this Agreement to
reflect  such  determination,  and  (ii) to  determine  which  other  Production
Partnership  operations,  other than those specified  herein,  are "significant"
actions for purposes of this Section 4.1C.

        Section 4.2.  Authority of the Managing Partners
        ------------------------------------------------

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

                                      -19-
<PAGE>

              (i) expend the Capital  Contributions  of the  Partners  and apply
        Production  Partnership  revenues,  subject  to  Section  4.3C  of  this
        Agreement, in furtherance of the business of the Production Partnership;

              (ii) acquire,  explore,  develop,  manage and operate  Hydrocarbon
        properties and interests  therein  (including  interests in corporations
        and  partnerships  owning  Hydrocarbon  properties  if in  the  Managing
        Partners'  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 Production  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  Production
        Partnership  an investment  company within the meaning of the Investment
        Company Act of 1940, and provided  further the Production  Partnership's
        interest in the underlying assets of any such corporation or partnership
        is  distributed  as  soon  as  practical  thereafter  to the  Production
        Partnership in redemption for the Production  Partnership's  interest in
        such  corporation  or  partnership)  of all kinds and  acquire  units of
        limited  partnership  interest tendered to the General Partners pursuant
        to the terms of any right of presentment of a Prior Limited  Partnership
        (as defined in the Limited  Partnership  Agreement)  (provided  that the
        Production Partnership shall not expend an aggregate amount in excess of
        10% of the Limited  Partnership's  Capital  Contribution to acquire such
        units) and hold all such  property,  interests  and units in the name of
        the  Production  Partnership;  provided,  however,  that  in  connection
        therewith,  the  Managing  Partners  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 Production Partnership's interest
        in such  Producing  Property in the  jurisdiction  where such  Producing
        Property is located pursuant to such  jurisdiction's  Uniform Commercial
        Code and/or in the real property records of the clerk or recorder of the
        county in which the Producing Property is

                                      -20-
<PAGE>

        situated;  and, provided,  further,  that filings of such conveyances or
        agreements shall also be made as the Managing Partners believe necessary
        to establish the  Production  Partnership's  priority of interest;  and,
        provided,  further,  Producing Properties may be held temporarily in the
        name of a  nominee  for the  Production  Partnership  if such  action is
        deemed necessary by the Managing Partners to facilitate acquisition;

              (iii) execute such instruments and agreements, to do such acts, to
        employ such  persons and to contract  for such  services as the Managing
        Partners   determine  are  necessary  or   appropriate  to  conduct  the
        Production  Partnership's business,  including (x) the employment of any
        Managing Partner or any Affiliate as an operator,  (y) the entering into
        management  and advisory  contracts,  and (z) the  establishment  of the
        Management  Committee  to  exercise,  pursuant  to Section  4.lC of this
        Agreement,  or supervise the exercise of the Managing  Partners'  powers
        set forth in this Agreement,  subject to any  restrictions  contained in
        the  Act and in  this  Agreement,  and to  provide  for  any  reasonable
        compensation  to be  paid  to  the  Persons  comprising  the  Management
        Committee pursuant to such contracts as the Managing Partners shall deem
        necessary and appropriate;

              (iv) execute, in the name of the Production 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
        Production Partnership;

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

              (vi)execute  offers  for  United  States  and any state  Leases on
        behalf of the  Production  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;  to execute any plans of development  under unit  agreements,
        conveyances, subleases, mortgages,

                                      -21-
<PAGE>

        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 to do all things  necessary  or
        desirable on behalf of the Production  Partnership  regarding any United
        States or state Leases or offers therefor;  provided,  however, that the
        Production  Partnership shall have the authority to acquire or otherwise
        deal with any such  interests  respecting  Leases  located in  "offshore
        waters"  (as  that  term  is  generally  understood  in the  oil and gas
        industry) only on the condition that the  Production  Partnership  shall
        not  participate in any Development  Drilling or Identified  Development
        Drilling in "offshore waters" which are not state-owned waters;

              (vii) enter into any partnership  agreement,  sharing arrangement,
        or joint venture with any Person acceptable to the Managing Partners and
        which is engaged in any business or  transaction in which the Production
        Partnership  is  authorized  to  engage,  provided  that the  Production
        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  Managing  Partners  to be  necessary  or
        appropriate to conduct the business of the Production Partnership;

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

                                      -22-
<PAGE>

              (x)  subject  to  Section  4.3B  of  this  Agreement,  abandon  or
        otherwise dispose of any interest in Hydrocarbon properties acquired for
        the Production Partnership upon such terms and for such consideration as
        the Managing Partners 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  Production
        Partnership  and to devote and expend the  proceeds of any such sale for
        any of the purposes of the Production Partnership for which the proceeds
        of borrowings may be applied;

              (xii) borrow monies from time to time, for the purpose and subject
        to the limitations stated in Section 4.3C of this Agreement, in the form
        of recourse or  nonrecourse  borrowings,  or  otherwise  to draw,  make,
        execute and issue promissory notes and other negotiable or nonnegotiable
        instruments and evidences of indebtedness, and to secure the payments of
        the sums so borrowed and to mortgage,  pledge, or assign in trust all or
        any  part  of  Production  Partnership  Property,   including  Producing
        Properties,  production  and  proceeds of  production,  or to assign any
        monies owing or to be owing to the Production Partnership, and to engage
        in any other means of  financing  customary in the  petroleum  industry;
        provided,  however,  that a creditor who makes a nonrecourse loan to the
        Production  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 Production  Partnership other than
        as a secured creditor;

              (xiv) invest Capital Contributions temporarily in the  investments
        set forth in Section 9.3 of this Agreement;

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

                                      -23-
<PAGE>

              (xvi) 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 Production 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  Production
        Partnership  Property,  and to 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 Production Partnership;

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

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

               (xix) sue  and be  sued, complain  and defend in the name and  on
        behalf of the Production Partnership;

               (xx) make such classifications and determinations as the Managing
        Partners deem  advisable,  having due regard for any relevant  generally
        accepted accounting principles and oil and gas industry practices;

              (xxi)  purchase  insurance,  or extend the  Managing  Partners' or
        their Affiliates' insurance, at the Production Partnership's expense, to
        protect the  Production  Partnership  Property  and the  business of the
        Production  Partnership  against  loss,  and  to  protect  the  Managing
        Partners  against  liability to third parties  arising out of Production
        Partnership  activities,  such  insurance  to be in such  limits,  to be
        subject to such  deductibles  and to cover  such  risks as the  Managing
        Partners deem appropriate;

                                      -24-
<PAGE>

              (xxii) pay all ad valorem  taxes  levied or  assessed  against the
        Production  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 Production
        Partnership;

              (xxiii)  enter  into   agreements  on  behalf  of  the  Production
        Partnership  with  Affiliates  subject to the  limitations  set forth in
        Section 4.3B of this Agreement;

              (xxiv) sell all or  substantially  all of the properties and other
        assets of the  Production  Partnership  to  themselves,  or any of their
        Affiliates  or any  other  person  and to  receive  for  the  Production
        Partnership consideration consisting of cash, securities, other property
        or any other form of consideration,  or any combination thereof, at such
        prices  and for such  forms of  consideration  as they  deem in the best
        interests of the Limited Partners;  provided, however, that no such sale
        shall  be   consummated   without  the  prior  Consent  of  the  Limited
        Partnership   pursuant  to  the  provisions  of  Section  4.4B  of  this
        Agreement. In the event of the dissolution of the Production Partnership
        followed by any such sale of the Production  Partnership's  assets,  the
        Managing  Partners  shall,  subject to the  provisions of Section 8.2 of
        this Agreement,  be appointed the liquidating  agents for the Production
        Partnership;

              (xxv) make,  exercise or deliver  any general  assignment  for the
        benefit of the  Production  Partnership's  creditors,  but only upon the
        prior Consent of the Limited  Partnership  pursuant to the provisions of
        Section 4.4B of this Agreement;

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

              (xxvii)  inform  each  other  Partner  of all  administrative  and
        judicial  proceedings  for an adjustment at the  Production  Partnership
        level for partnership tax items and forward to each other Partner 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 judgment, and

                                      -25-
<PAGE>

        Geodyne  Production  shall  perform all duties  imposed by Sections 6221
        through 6232 of the Code as the "tax matters  partner" of the Production
        Partnership, including, but not limited to, the following: (a) the power
        to conduct all audits and other  administrative  proceedings  (including
        windfall  profit tax  audits)  with  respect to  Production  Partnership
        items;  the power to extend the statute of limitations  for all Partners
        with respect to Production  Partnership tax items;  and (b) the power to
        file a petition with an appropriate  federal court for review of a final
        partnership administrative adjustment.  Geodyne Production shall consult
        with PW Production with respect to the performance of its duties as "tax
        matters partner."

        B. Reliance by Third Parties on Managing Partners' Authority. No person,
firm or corporation dealing with the Production Partnership shall be required to
inquire  into the  authority  of the  Managing  Partners 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 Managing  Partners
as to their due authorization.

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

        A. Except with respect to Producing Properties whose aggregate  purchase
price does not exceed 10% of the Limited Partners' capital  contributions to the
Limited  Partnership,  no Producing Property shall be acquired by the Production
Partnership  unless there has been prepared and evaluated  with respect  thereto
either an Acquisition  Reserve Report or an Engineering  Audit Letter acceptable
to the Management Committee;

        B. Neither the Managing Partners nor  any Affiliate shall sell, transfer
or convey any or all of their interest in Producing Properties to the Production
Partnership  or purchase or acquire any oil and gas  properties or interest from
the  Production  Partnership,   directly  or  indirectly,   except  pursuant  to
transactions  that are fair and reasonable to the Limited  Partnership under the
circumstances  at the time such  transaction is consummated.  Such  transactions
shall be further subject to the following restrictions:

                                      -26-
<PAGE>

              (i)  Prior to the date on which  the  Production  Partnership  has
        acquired its final Producing Property, neither the Managing Partners nor
        any Affiliate of a Managing  Partner (other than an Affiliated  Program)
        shall  acquire  any  Producing  Property  after  the  Activation  of the
        Production  Partnership unless prior thereto the Production  Partnership
        shall have been offered the right to acquire such Producing Property, or
        an interest therein,  and the Management Committee shall have determined
        that the acquisition of such Producing Property, or an interest therein,
        is not in the best interests of the Production Partnership;

              (ii) Any  purchase  or sale of a Producing  Property  from or to a
        Managing  Partner  or any  Affiliate  shall  be  made  at  the  Property
        Acquisition Cost for such Producing Property as adjusted for intervening
        operations, unless the Managing 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 a Managing  Partner sells,  transfers or conveys any oil,
        gas  or  other   mineral   interests  or  property  to  the   Production
        Partnership,  it  must,  at  the  same  time,  sell  to  the  Production
        Partnership an equal proportionate interest in all its other property in
        the same Prospect. A Sale or conveyance to the Production Partnership of
        less than the entire  ownership  interest  of a Managing  Partner or any
        Affiliate is only  permitted if: (a) the interests  retained or obtained
        by the  Managing  Partners or Affiliate  and acquired by the  Production
        Partnership are either (x) proportionate,  uniform and undivided Working
        Interests  if  the  Producing   Property   acquired  by  the  Production
        Partnership  is a Working  Interest  or (y)  proportionate,  uniform and
        undivided  Royalty  Interests if the Producing  Property acquired by the
        Production  Partnership is a Royalty, (b) the respective  obligations of
        the Managing  Partners or Affiliate and the Production  Partnership  are
        substantially the same, and (c) the interest of the Managing Partners or
        their Affiliates in revenues does not exceed the amount proportionate to
        their  interest.  The  Managing  Partners and their  Affiliates  may not
        retain or obtain any

                                      -27-
<PAGE>

        overrides or other  burdens on the interest  obtained by the  Production
        Partnership,  and may not enter into any Farmouts  with respect to their
        retained  interest,  except  to  nonaffiliated  third  parties  or to an
        Affiliated Program;

              (iv)In the event a Managing  Partner or any Affiliate  proposes to
        acquire an  interest in a  Producing  Property  in which the  Production
        Partnership has an interest or in a Producing  Property abandoned by the
        Production   Partnership   within  one  year   preceding  such  proposed
        acquisition, such Managing Partner or Affiliate shall offer the interest
        to the Production Partnership; and if cash or financing is not available
        to the Production  Partnership  to purchase such interest,  neither such
        Managing  Partner  nor  Affiliate  shall  acquire  an  interest  in such
        Producing  Property.   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  Production
        Partnership's interest in the Producing Property.  This subsection shall
        not  apply  after  the  lapse  of five  years of the  Activation  of the
        Production  Partnership or to any Affiliated  Program where the interest
        of such  Managing  Partner is less than or equal to its  interest in the
        Production Partnership, there are no duplication of fees to the Managing
        Partners, and the Managing Partners do not obtain a greater benefit from
        purchase of the  interest by the  Affiliated  Program than they would if
        the interest were purchased by the Production Partnership;

              (v) During the existence of the Production  Partnership and before
        it has ceased  operations,  neither  Managing  Partner nor any Affiliate
        (excluding  any  Affiliated  Program where the interest of such Managing
        Partner  is  less  than  or  equal  to its  interest  in the  Production
        Partnership) shall acquire,  retain or drill for its own account any oil
        and gas interest in any Prospect upon which the  Production  Partnership
        possesses an interest, except for transactions which comply with Section
        4.3B(iii) or 4.8 of this Agreement. The geological limits of a Producing
        Property  owned  by the  Production  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 the

                                      -28-
<PAGE>

        geological limits of a Producing Property, as so enlarged, encompass any
        interest held by either a Managing Partner or an Affiliate of a Managing
        Partner  (excluding  an  Affiliated  Program  where the interest of such
        Managing  Partner  is  identical  to or less  than its  interest  in the
        Production  Partnership),  such interest shall be sold to the Production
        Partnership  in accordance  with the  provisions of Section  4.3B(iv) of
        this  Agreement and any net income  previously  received by the Managing
        Partner or Affiliate  shall be paid over to the Production  Partnership.
        If a Managing  Partner  acquires  additional  acreage or  interests in a
        Prospect  of the  Production  Partnership,  it  must  sell  such  to the
        Production  Partnership  and  is  prohibited  from  retaining  any  such
        interest,  except as may be permitted by Section 4.3B of this Agreement.
        Notwithstanding  the foregoing,  the Production  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 (a) comply with  Sections  4.3B(iii)  and 4.3B(iv) of
        this Agreement,  and (b) are in exchange for the transferee's obligation
        to  conduct  exploratory  drilling,   Development  Drilling,  Identified
        Development  Drilling or Improved Recovery operations on such properties
        or in  connection  with  the  formation  of a joint  venture  among  the
        Production  Partnership and such Affiliated  Program,  provided that the
        compensation  arrangement or any other interest or right of the Managing
        Partners or any Affiliate is the same in the Production  Partnership and
        Affiliated Program, or, if different,  the aggregate compensation of the
        Managing  Partners  does not exceed the lower of the  compensation  they
        would have  received in the  Production  Partnership  or the  Affiliated
        Program, and the terms of such Sale, Farmout or transfer comply with the
        provisions of Section 4.8 of this Agreement;

              (vii) Any Sale of inventory or other  materials by the  Production
        Partnership  to any Managing  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;

                                      -29-
<PAGE>

              (viii) Any  operating  agreements  pursuant to which any  Managing
        Partner or any Affiliate acts as operator of Producing  Properties shall
        be of a nature  customary  in the  industry and payments to any Managing
        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 Managing  Partner's  overhead  pursuant to such operating  agreement
        will  not  be   duplicative   of  any   reimbursement   of  General  and
        Administrative Costs made pursuant to Section 5.2 of this Agreement; and

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

        C. The  Managing  Partners  may not  expend  any  amount  of  Production
Partnership funds over the term of the Production Partnership for the payment of
Production  Partnership  costs  (other  than  recompletion  costs)  incurred  in
connection  with  Development  Drilling and Identified  Development  Drilling in
excess of 10% of the amount of the Limited  Partners'  capital  contributions to
the  Limited  Partnership  and the  Production  Partnership  borrowings.  If the
Managing Partners determine that funds in addition to the Capital  Contributions
to the  Production  Partnership  are  required  for the  payment  of  Production
Partnership costs (other than Property Acquisition Costs), the Managing Partners
may apply or  reserve  Income  or  Investment  Income  for the  payment  of such
Production  Partnership  costs  and/or  the  Managing  Partners  may  cause  the
Production Partnership to borrow funds for the payment of Production Partnership
costs incurred in connection with Development Drilling,  Identified  Development
Drilling and Improved Recovery operations; 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 Limited  Partners'  capital  contributions  to the
Limited Partnership.

                                      -30-
<PAGE>

        D. Each Managing  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 Production  Partnership  costs by assigning to lenders all or
part of its Managing Partner's  interest in Profits and Distributable  Cash, and
by  granting  such  lenders a security  interest  or  mortgage  in an  undivided
interest  in any  Production  Partnership  Property  not to exceed its  Managing
Partner's percentage interest in Income;  provided,  however,  that the Managing
Partners, in the aggregate,  shall retain unencumbered at least a 1% interest in
each  of  Production  Partnership  Property,  Profits  and  Distributable  Cash.
Notwithstanding  anything to the contrary in this Agreement, in the event of any
sale or  foreclosure  of a  Managing  Partner's  interest  in  full  or  partial
satisfaction of such borrowings,  appropriate  adjustments  shall be made in the
Capital Accounts of the Partners and in the method by which Income and costs are
allocated to the Partners to assure that the Limited  Partnership  and the other
Managing  Partner  will not bear any of the costs  attributable  to such sold or
foreclosed interest and that such Managing Partner will not share or participate
in any of the capital, Income, costs or distributions  attributable to such sold
or  foreclosed  interest  except  to the  extent  of the  unencumbered  interest
retained by such Managing Partner.

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

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

            (i) the  Production  Partnership  shall  not  make  any  loans  to a
        Managing Partner or any Affiliate;

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

                                      -31-
<PAGE>

              (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 any Managing  Partner or any Affiliate
        shall  be  compensated  by the  Production  Partnership  for  his or her
        services;

              (iv)other  than those  received for the account of the  Production
        Partnership,  no rebates may be received by any Managing  Partner or any
        Affiliate  in  connection  with  Production  Partnership  operations  or
        expenditures,  nor may any Managing 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 a
        Managing  Partner or an  Affiliate  for the  account  of the  Production
        Partnership  shall be determined and the net amount  resulting from such
        monthly  settlement  shall be deposited  into a  Production  Partnership
        Account  and  no  funds  which,  after  such  monthly  settlement,   are
        determined  to be held for the  account  of the  Production  Partnership
        shall  be  kept  in any  account  other  than a  Production  Partnership
        Account, and the Managing Partners shall not employ, or permit any other
        Person to employ, such funds in any manner except for the benefit of the
        Production  Partnership;  it being understood that the Managing Partners
        may invest  Production  Partnership funds temporarily in the investments
        set forth in  Section  9.3 of this  Agreement  pending  their use by the
        Production  Partnership.  After  such  monthly  settlement,   Production
        Partnership  funds may not be commingled  with separate  funds of either
        Managing Partner or any other entity; and

            (vi) the Limited  Partnership  shall not make any advance payment to
        the Managing Partners or their  Affiliates,  except  where  necessary to
        secure tax benefits of prepaid drilling costs.

      B.  Notwithstanding any other provision of this Agreement to the contrary,
without the prior  Consent of the Limited  Partnership  granted  pursuant to the
provisions of Article Eleven of this Agreement and the provisions of the Limited
Partnership Agreement, the Managing Partners shall not:

                                      -32-
<PAGE>

            (i)  lease,  sell,  or dispose  of all or  substantially  all of the
      Production Partnership's assets;

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

            (iii) except as set forth in Section  l0.1A,  amend any provision of
      this Agreement; or

            (iv)  dissolve the Production Partnership.

      Section 4.5.  Other Agreements of the Managing Partners
      -------------------------------------------------------

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

              (i) the Managing  Partners and their Affiliates shall not take any
      action  with  respect  to  the  assets  or  property  of  the   Production
      Partnership which does not benefit exclusively the Production Partnership,
      including:

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

                  (b) the commitment of future production;

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

              (iii) the Managing  Partners may never profit  themselves  nor any
      Affiliate by  Development  Drilling,  Identified  Development  Drilling or
      Improved   Recovery   operations  in   contravention  of  their  fiduciary
      obligation to the Limited Partnership; and

              (iv) neither the Managing  Partners nor any Affiliate shall render
      to the Production Partnership any oil field, equipage or drilling services
      nor sell or lease to the Production  Partnership  any equipment or related
      supplies unless:

                                      -33-
<PAGE>

                  (a) such Person is engaged,  independently  of the  Production
            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 such
            Person has 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 Production Partnership;

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

                  (d) 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.

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

      The Managing  Partners may cause the  Production  Partnership to construct
gas  gathering  lines if, in the opinion of the Managing  Partners,  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 Partners as such. The Managing
Partners  may,  in their  discretion,  construct,  or cause  an  Affiliate  of a
Managing  Partner or other person to construct,  gathering lines from Production
Partnership  Wells to gas transmission  systems.  Whenever the Managing Partners
construct, or cause an Affiliate of a Managing Partner to construct, a gathering
line  from a  Production  Partnership  Well to a gas  transmission  system,  the
Production  Partnership  shall pay the  Managing  Partners or such  Affiliate an
amount that is not greater than the  compensation  that an unrelated party could
have reasonably charged in an

                                      -34-
<PAGE>

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  Managing  Partners  or to any
Affiliate.

      Section 4.7.  Contracts with the Managing Partners and Affiliates
      -----------------------------------------------------------------

      All services provided to the Production  Partnership by a Managing 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
Production Partnership and any Managing Partner or any Affiliate shall contain a
provision  which shall  permit  termination  of the  contract by the  Production
Partnership  without  penalty on 30 days'  prior  written  notice.  The  Limited
Partnership  shall have the power to terminate,  without  cause or penalty,  any
such contract on behalf of the Production Partnership.

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

      The  Management  Committee may dispose of Producing  Properties by Sale or
Farmout  when the  Management  Committee,  exercising  the standard of a prudent
operator,  determines that (a) the Production 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  Production  Partnership  to the point that
additional  Development  Drilling,  Identified  Development  Drilling,  Improved
Recovery operations or continued  production would no longer be desirable to the
Production  Partnership;   (c)  Development  Drilling,   Identified  Development
Drilling or Improved  Recovery  operations on the properties  would result in an
excessive  concentration of Production Partnership funds on a Producing Property
creating,  in the  opinion  of  the  Management  Committee,  undue  risk  to the
Production Partnership;  or (d) the best interests of the Production Partnership
would be served by the Sale or Farmout.  The  Production  Partnership  shall not
conduct any drilling of wells other than  Development  Drilling  and  Identified
Development Drilling; provided, however, that the

                                      -35-
<PAGE>

drilling of wells other than  Development  Drilling and  Identified  Development
Drilling may be performed on behalf of the  Production  Partnership  pursuant to
Farmouts.  Neither the Managing  Partners nor any Affiliate shall enter into any
Farmout  or  other   agreement   with  the  Production   Partnership   where  in
consideration for services to be rendered,  an interest in production is payable
to the Managing Partners or any Affiliate, unless the Production Partnership has
previously expended or committed to expend the maximum amount that is authorized
to use for Development Drilling or Identified  Development  Drilling.  Any Sale,
Farmout or similar agreement  between the Production  Partnership and a Managing
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  Management   Committee  (or  a  Managing  Partner,   if
      management  authority of the Production  Partnership  with respect thereto
      has been  delegated  to it by the  Management  Committee)  exercising  the
      standard of a prudent operator,  shall determine that the Sale, Farmout or
      similar agreement is in the best interests of the Production  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.

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

      The Managing Partners and the Management  Committee shall devote such time
to  the  Production  Partnership  as is  reasonably  required  to  carry  on the
Production  Partnership  business,  and the  Managing  Partners,  members of the
Management Committee and their 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 Managing Partners
and  their  Affiliates  shall  have the  right to  organize  and  operate  other
partnerships, joint ventures or other oil and gas investment programs similar to
the Limited Partnership and the Production Partnership.

                                      -36-
<PAGE>

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

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

      B. In any threatened,  pending or completed action,  suit or proceeding to
which the Managing  Partners are a party or are threatened to be made a party by
reason  of the  fact  that  they are the  Managing  Partners  of the  Production
Partnership  (other  than  an  action  by or in  the  right  of  the  Production
Partnership)  involving an alleged cause of action for damages  arising from the
performance of their duties under this Agreement or other activities relative to
the management and  disposition of Producing  Properties or production from such
properties,  the Production  Partnership  shall indemnify the Managing  Partners
against  expenses,  including  attorneys'  fees,  judgments  and amounts paid in
settlement,  actually and  reasonably  incurred by them in connection  with such
action,  suit or  proceeding  if they acted in good  faith and in a manner  they
reasonably  believed to be in the best interests of the Production  Partnership,
and provided that their conduct does not  constitute  negligence or  misconduct.
The  termination  of any  action,  suit or  proceeding  by  judgment,  order  or
settlement shall not of itself create a presumption  that the Managing  Partners
did not act in good faith and in a manner which they  reasonably  believed to be
in the best interests of the Production Partnership.

      C. In any  threatened,  pending or  completed  action or suit by or in the
right of the Production Partnership,  to which the Managing Partners are a party
or are  threatened  to be made a party,  involving an alleged cause of action by
the Limited  Partnership for damages arising from the activities of the Managing
Partners in the management of the internal affairs of the Production Partnership
as prescribed in this Agreement or by law, or both,  the Production  Partnership
shall indemnify the

                                      -37-
<PAGE>

Managing  Partners against  expenses,  including  attorneys' fees,  actually and
reasonably incurred by them in connection with the defense or settlement of such
action  or suit if they  acted in good  faith  and in a manner  they  reasonably
believed to be in the best interests of the Production  Partnership as specified
in this subsection,  except that no indemnification  shall be made in respect of
any claim,  issue or matter as to which the Managing Partners' course of conduct
constituted negligence or misconduct.

      D. To the extent that a Managing Partner has been successful on the merits
or  otherwise  in defense  of any  action,  suit or  proceeding  referred  to in
Sections 4.l0B or 4.l0C of this Agreement,  or in defense of any claim, issue or
matter  therein,  the  Production  Partnership  shall  indemnify  it against the
expenses,  including  attorneys' fees, actually and reasonably incurred by it in
connection therewith.

      E. Any  indemnification  under Section 4.l0B and 4.10C of this  Agreement,
unless ordered by a court,  shall be made by the Production  Partnership only as
authorized in the specific  case and only upon a  determination  by  independent
legal counsel in a written  opinion that such  indemnification  is proper in the
circumstances  because the indemnified party has met the applicable  standard of
conduct set forth in Sections 4.l0B or 4.l0C of this Agreement.

      F. The Production Partnership shall not incur the costs of that portion of
insurance which insures the Managing  Partners for any liability as to which the
Managing Partners are prohibited from being indemnified under Section 4.10.

                                  ARTICLE FIVE
                       Distributions, Fees and Allocations
                       -----------------------------------

      Section 5.1.  Distributions of Production Partnership Funds
      -----------------------------------------------------------

      The Distributable Cash of the Production  Partnership shall be distributed
simultaneously  to the Limited  Partnership and the Managing  Partners within 45
days after the close of each calendar quarter. Each Partner's share of each such
distribution of  Distributable  Cash shall be determined  after giving effect to
the  allocations  set forth in Sections 5.3 and 5.4 of this  Agreement  for such
period. All distributions of

                                      -38-
<PAGE>

Distributable Cash shall reduce  dollar-for-dollar the balances of the Partners'
Capital Accounts.

      Section 5.2.  Fees and Reimbursement of Expenses to the Managing Partners
      -------------------------------------------------------------------------

      Geodyne  Production and PW Production  shall receive as Managing  Partners
(1) on a nonrecurring  basis, the Management Fee in an amount equal to 1-1/2% of
the Limited Partners' capital contributions to the Limited Partnership;  and (2)
reimbursement  for Direct  Administrative  Costs billed directly to the Managing
Partners and General and Administrative  Costs incurred by the Managing Partners
or their  Affiliates  allocable  to the  Production  Partnership,  except to the
extent that the Managing  Partners or their Affiliates are otherwise  reimbursed
for such costs  through  the payment of Property  Acquisition  Costs,  Operating
Costs or otherwise.  Geodyne Production and PW Production shall allocate between
themselves the payment of the  Management  Fee as follows:  in the event the Fee
(as defined in the Limited Partnership  Agreement)  (hereinafter  referred to as
the "Limited Partnership Fee") is less than the actual organization and offering
costs of the  Limited  Partnership  plus  Unreimbursed  Prior  Organization  and
Offering  Costs (as  defined in the  Limited  Partnership  Agreement),  then the
Management Fee shall be paid 60% to PW Production and 40% to Geodyne  Production
to the  extent  of such  deficiency,  60% to PW  Production  and 40% to  Geodyne
Production to the extent of organization and offering costs and the remainder of
the  Management  Fee  shall  be paid  75% to PW  Production  and 25% to  Geodyne
Production. In the event the Limited Partnership Fee is equal to or greater than
the actual  organization  and  offering  costs of the Limited  Partnership  plus
Unreimbursed  Prior  Organization  and Offering Costs (as defined in the Limited
Partnership  Agreement),  then  the  Management  Fee  shall  be  paid  60% to PW
Production  and 40% to  Geodyne  Production  to the extent of  organization  and
offering  costs and the  remainder  shall be paid as  follows:  in the event the
payment referred to in Section 3.6B(i) of the Limited Partnership  Agreement has
been made (but the payments in Section 3.6B(ii) and (iii) have not been made) to
the general  partners of the Limited  Partnership,  the  Management Fee shall be
paid 75% to PW  Production  and 25% to  Geodyne  Production;  in the  event  the
payment referred to in Section 3.6B(ii) of the Limited Partnership Agreement has
been  made (but the  payment  in  Section  3.6B(iii)  has not been  made) to the
general  partners of the Limited  Partnership,  the excess of the Management Fee
over the

                                      -39-
<PAGE>

amount paid to the  general  partners  of the  Limited  Partnership  pursuant to
Section  3.6B(ii) of the Limited  Partnership  Agreement shall be paid 75% to PW
Production and 25% to Geodyne Production, the balance of the Management Fee, but
not in  excess  of 1% of the  Limited  Partners'  capital  contributions  to the
Limited  Partnership,  shall be paid  50% to PW  Production  and 50% to  Geodyne
Production, and any remaining balance of the Management Fee shall be paid 70% to
PW  Production  and 30% to  Geodyne  Production;  and in the event  the  payment
referred to in Section 3.6B(iii) of the Limited  Partnership  Agreement has been
made to the  general  partners  of the  Limited  Partnership,  the excess of the
Management  Fee over the amount  paid to the  general  partners  of the  Limited
Partnership pursuant to Section 3.6B(iii) of the Limited Partnership  Agreement,
but not in excess of 1% of the Limited  Partners'  capital  contributions to the
Limited  Partnership,  shall be paid  50% to PW  Production  and 50% to  Geodyne
Production,  and the  balance  of the  Management  Fee  shall  be paid 70% to PW
Production and 30% to Geodyne Production.

      Section 5.3.  Allocation of Income, Investment Income, Costs and
                    Deductions
      ----------------------------------------------------------------

      A. The Income,  Investment Income,  Profits,  Production Partnership costs
and losses of the Production  Partnership shall be determined and allocated with
respect to each Fiscal Year of the  Production  Partnership  as of and within 75
days after the end of such Fiscal Year.

      B.  (i) 100% of  Investment  Income,  Property  Acquisition  Costs,  costs
      incurred in connection with Identified Development Drilling (including any
      interest,  commitment  fees and other  finance  charges  with  respect  to
      borrowings  incurred  in  connection  therewith)  and the  Management  Fee
      referred to in Section 5.2(1) of this Agreement shall all be allocated to,
      and borne by, the Limited  Partnership.  100% of Organization and Offering
      Costs  shall be  allocated  to, and borne by,  the  Managing  Partners  as
      follows:  60% to PW Production  and 40% to Geodyne  Production.  Except as
      otherwise provided in Sections 5.3B(ii) and 5.3B(iii), Income, General and
      Administrative  Costs,  Operating Costs, costs incurred in connection with
      Development  Drilling and Direct  Administrative  Costs shall be allocated
      among, and borne by, the Partners in the following percentages:

                                      -40-
<PAGE>

            (a)   Until Payout:
                  Limited Partnership             90.9091%

                  PW Production and Geodyne
                  Production (in the aggregate)    9.0909%

            (b)   After Payout:
                  Limited Partnership             85.8586%

                  PW Production and Geodyne
                  Production (in the aggregate)   14.1414%

      The Managing  Partners shall allocate  between  themselves their aggregate
      Interest before and after Payout as follows:  70% to PW Production and 30%
      to Geodyne  Production if the Production  Partnership is Activated  within
      twelve  months after the date on which the  registration  statement  filed
      with the Securities and Exchange  Commission  with respect to the Units is
      declared  effective (the "Effective  Date"),  and 60% to PW Production and
      40% to Geodyne  Production  if the  Production  Partnership  is  Activated
      during  the  twelve  month  period  ending  twenty-four  months  after the
      Effective Date; provided,  however, that if the Production Partnership was
      Activated  more  than  twelve  months  after  the  Effective  Date and the
      immediately  preceding  Prior  Production  Partnership  was  activated (as
      defined in the  partnership  agreement  respecting  such Prior  Production
      Partnership)  within  twelve  months  after the  Effective  Date,  then PW
      Production  shall be allocated that  percentage of the aggregate  Managing
      Partners'  Interest  represented by a fraction,  the numerator of which is
      equal  to the sum of (i) 70  multiplied  by the  number  of days  from the
      activation  of the  immediately  preceding  Prior  Production  Partnership
      through the date that is 12 months after the Effective  Date,  and (ii) 60
      multiplied by the number of days from the date that is 12 months after the
      Effective  Date  through  the  date of the  Activation  of the  Production
      Partnership, and the denominator of which is the total number of days that
      has  elapsed  from  the  activation  of the  immediately  preceding  Prior
      Production  Partnership to the  Activation of the Production  Partnership,
      and Geodyne  Production  shall be allocated  the balance of the  aggregate
      Managing Partners' Interest (such allocation between the Managing Partners
      of their aggregate  Interest being their "Sharing  Ratios").  The Managing
      Partners shall have the authority to amend this Agreement to provide for

                                      -41-
<PAGE>

      any different allocation between themselves at their discretion.

            (ii) As used in this  subsection,  the "Measuring Date" shall be the
      earlier  of the date on which  90% of the  Limited  Partnership's  Capital
      Contribution has been expended or the second anniversary of the Activation
      of the Production Partnership;  the first "Allocation Period" shall be the
      twelve  month  period  beginning  on the last day of the first full Fiscal
      Year  quarter  after the  Measuring  Date;  and each twelve  month  period
      following the end of the first Allocation Period shall also be referred to
      as an  "Allocation  Period".  Notwithstanding  anything  to  the  contrary
      contained herein,  if during each of the first two Allocation  Periods the
      amount of cash distributed to the Limited Partnership that is attributable
      to the  allocations  set forth in Section  5.3B(i) is less than a 15.1515%
      cumulative  (but  not  compounded)  twelve-month  return  on  the  Limited
      Partners'  capital  contributions to the Limited  Partnership,  then there
      shall be distributed to the Limited Partnership thereafter (in addition to
      the amount of Distributable  Cash  distributed to the Limited  Partnership
      resulting  from the  allocations to the Limited  Partnership  set forth in
      Section  5.3B(i))  an  amount  of  cash  up to 50% of the  cash  otherwise
      distributable  to  the  Managing  Partners   thereafter  pursuant  to  the
      allocations  set forth in Section  5.3B(i) not to exceed the amount of any
      such  deficiency (the amount of such cash  distribution  being a "Transfer
      Amount"),   and  Income  and  costs  sufficient  to  yield  an  amount  of
      Distributable Cash equal to the Transfer Amount and otherwise allocable to
      the  Managing  Partners  during the Fiscal  Year in which such  Allocation
      Period ends and,  to the extent  necessary,  each  Fiscal Year  thereafter
      pursuant to Section 5.3B(i) shall be allocated to the Limited Partnership.
      If during any Allocation Period after the initial two Allocation  Periods,
      the Limited  Partnership is being  allocated  Income and costs pursuant to
      Section 5.3B(i) such that there is distributed to the Limited  Partnership
      an amount of cash in excess of a 15.1515%  cumulative (but not compounded)
      twelve-month return on the Limited Partners' capital  contributions to the
      Limited  Partnership  since the  beginning  of the  first  two  Allocation
      Periods  (such excess amount of cash being the  "Surplus"),  and there has
      been distributed to the Limited  Partnership a Transfer Amount, then there
      shall be  distributed  to the Managing  Partners  thereafter  an aggregate
      amount of cash otherwise distributable to the Limited Partnership pursuant

                                      -42-
<PAGE>

      to the allocations set forth in Section 5.3B(i) equal to the amount of any
      Surplus (the amount of such cash  distribution  being a "Reverse  Transfer
      Amount"),   and  Income  and  costs  sufficient  to  yield  an  amount  of
      Distributable  Cash equal to the  Reverse  Transfer  Amount and  otherwise
      allocable to the Limited  Partnership during the Fiscal Year in which such
      Allocation  Period  ends and,  to the extent  necessary,  each Fiscal Year
      thereafter  pursuant to Section 5.3B(i) shall be allocated to the Managing
      Partners;  provided,  however,  that the  amount of any  Reverse  Transfer
      Amount  distributed  to the Managing  Partners  shall not exceed an amount
      equal to the aggregate of the Transfer Amounts  distributed to the Limited
      Partnership less the aggregate of all Reverse Transfer Amounts  previously
      distributed to the Managing Partners.

            (iii) Notwithstanding  anything to the contrary contained herein, if
      on the seventh anniversary of the last day of the Fiscal Year in which the
      Production  Partnership  commences  Development  Drilling,  or  Identified
      Development  Drilling,  and  in  each  Fiscal  Year  thereafter,  (a)  the
      aggregate  amount  of Income  less the  aggregate  amount of direct  lease
      operating expenses and severance, ad valorem, windfall profits, excise and
      other taxes (but not income  taxes)  allocated to the Limited  Partnership
      pursuant to Section  5.3(B)(i)  attributable to production  resulting from
      Development  Drilling  and  Identified  Development  Drilling on Producing
      Properties is less than (b) the aggregate amount of costs allocated to the
      Limited  Partnership  pursuant to Section 5.3(B)(i) incurred in connection
      with Development Drilling and Identified Development Drilling on Producing
      Properties  during  each  Fiscal  Year  ending  seven or more years  prior
      thereto,  then  Income  and  costs  otherwise  allocable  to the  Managing
      Partners  pursuant to Section 5.3B(i) shall thereafter be allocated to the
      Limited Partnership until such deficiency in Income is eliminated.

            (iv) For purposes of the allocations  set forth in Section  5.3B(ii)
      of  this  Agreement,  the  amount  of  cash  distributed  to  the  Limited
      Partnership  for  purposes  of  determining  the  return  on  the  Limited
      Partners'  capital  contributions  to the  Limited  Partnership  shall not
      include any amounts attributable to the Production  Partnership's  payment
      of any windfall profits tax.

                                      -43-
<PAGE>

        C. All items of Income,  gain, loss,  deduction and credit allowable for
Federal income tax purposes and all recapture of any such deductions and credits
shall be  allocated  and charged or credited to the  Partners in the same manner
that the revenues,  costs or expenses giving rise to such items of income, gain,
loss,  deduction  and credit  are  allocated  and  charged.  Federal  income tax
deductions  for cost or  percentage  depletion  with  respect  to any  Producing
Property shall be determined at the Partner level and shall be determined in the
case of  percentage  depletion  on the  same  basis  that  the  Income  from the
Producing Property is allocated;  and the Production Partnership shall allocate,
under Section  612A(c)(7)(D)  of the Code,  its adjusted basis in each Producing
Property to the Partners in proportion to the interest of each in the Production
Partnership capital ultimately used to acquire that property. If such allocation
of basis is not permitted  under the Code, the basis of each such property shall
be allocated in the manner  which the Managing  Partners  deem will most closely
achieve the result intended above.

        D. Capital Accounts shall be established and maintained for each Partner
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:

            (1) Each  Partner's  Capital  Account  shall be (i) increased by the
      amount of its  Capital  Contribution,  the fair  market  value of property
      contributed  by it to  the  Production  Partnership  (net  of  liabilities
      securing such  contributed  property that the  Production  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  (ii)  decreased  by  the  amount  of   Distributable   Cash
      distributed to it, the fair market value of property  distributed to it by
      the Production  Partnership (net of liabilities  securing such distributed
      property  that such  Partner is  considered  to assume or take  subject to
      under  section  752 of  the  Code)  and  allocations  to it of  Production
      Partnership  loss,  deduction (except to the extent such loss or deduction
      has previously been reflected

                                      -44-
<PAGE>

      in its Capital Account by adjustments thereto) and expenditures  described
      in section 705(a)(2)(B) of the Code.

            (ii) In the event Production  Partnership Property is distributed to
      a Partner, then, before the Capital Account of such Partner is adjusted as
      required by clause (i) of this Section 5.3D,  the Capital  Accounts of the
      Partners  shall be adjusted to reflect the manner in which the  unrealized
      Income,  gain, loss and deduction inherent in such Production  Partnership
      Property (that has not been reflected in such Capital Accounts previously)
      would be allocated among the Partners if there were a taxable  disposition
      of such Production  Partnership  Property for its fair market value on the
      date of distribution.

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

            (iv) The Partner's  Capital Accounts shall be adjusted for depletion
      and gain or loss with respect to the Production  Partnership's  oil or gas
      properties  in whichever of the  following  manners the Managing  Partners
      determine is in the best interests of the Partners:

                  (a) The  Partners'  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 less than all Partners); 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  Production  Partnership  taxable
            years  during  which  such  oil  or  gas  property  is  held  by the
            Production  Partnership.  Such  reductions  for  depletion  shall be
            allocated  among  the  Partners'   Capital   Accounts  in  the  same
            proportions as the adjusted basis in the particular property is

                                      -45-
<PAGE>

            allocated to each Partner. Upon the taxable disposition of an oil or
            gas  property  by  the   Production   Partnership,   the  Production
            Partnership's   simulated  gain  or  loss  shall  be  determined  by
            subtracting  its simulated  adjusted basis  (aggregate  adjusted tax
            basis of the Partners less simulated  depletion  allowances) in such
            property  from  the  amount  realized  on such  disposition  and the
            Partners'  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 Partners'  allocable  shares of the
            total amount realized on such disposition, or

                  (b)  The  Production  Partnership  shall  reduce  the  Capital
            Account  of each  Partner  in an  amount  equal  to  such  Partner's
            depletion  allowance with respect to each oil or gas property of the
            Production  Partnership  (for the  Partner's  taxable year that ends
            within  the  Production   Partnership's   taxable  year),  but  such
            reductions  for  depletion  shall  not  exceed  the  adjusted  basis
            allocated to such Partner  with respect to such  property.  Upon the
            taxable  disposition  of an oil or gas  property  by the  Production
            Partnership, the Capital Account of each Partner shall be reduced or
            increased,  as the  case may be,  by the  amount  of the  difference
            between such Partner's  allocable share of the total amount realized
            on such disposition and such Partner's  remaining adjusted tax basis
            in such property.

            (v) For purposes of determining  the Capital  Account balance of any
      Partner  as of the end of any  Production  Partnership  taxable  year  for
      purposes of Subsection 5.3I hereto,  such Partner's  Capital Account shall
      be reduced by:

                  (a) Adjustments  that, as of the end of such year,  reasonably
            are expected to be made to such Partner'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 Production
            Partnership, and

                                      -46-
<PAGE>

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

      E. The  Capital  Accounts  of those  Partners  which are  charged  with an
expense of the Production Partnership 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.

      F. In  allocating  Income and costs for any Fiscal Year in which the ratio
for  sharing  Income  and  costs  changes  pursuant  to  Section  5.3B(i),   the
allocations  of Income and costs shall be made,  and the books of the Production
Partnership  shall be  closed,  as soon as  practicable  after  the date  Payout
occurs,  to determine  each Partner's  share of pre-change  Income and costs and
each Partner's share of post-change Income and costs for that Fiscal Year.

      G.  Proceeds  received from the Sale or transfer of all or any part of the
Production  Partnership's Producing Properties shall be allocated to the Limited
Partnership  and the Managing  Partners to the extent of their adjusted basis in
such sold or transferred Production Partnership Property.  Proceeds in excess of
said amount shall be allocated in accordance  with the  percentages set forth in
Section  5.3B(i) , except that,  notwithstanding  the provisions of Section 5.3F
and solely for purposes of this Section 5.3G,  where the proceeds from such Sale
are  distributed  to  the  Partners  and a  portion  of the  Distributable  Cash
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  Income  and  Distributable  Cash
attributable to the portion of such Sale proceeds in excess of

                                      -47-
<PAGE>

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.

      H.  Notwithstanding  any other provision of this Agreement,  if, under any
provision of this  Agreement,  the Capital Account of any Partner is adjusted to
reflect  the  difference  between  the basis to the  Production  Partnership  of
Production  Partnership Property and such Production Partnership Property's fair
market value,  then all items of Income,  gain, loss, and deduction with respect
to such Production Partnership Property shall be allocated among the Partners so
as to take  account  of the  variation  between  the  basis  of such  Production
Partnership  Property and its fair market value at the time of the adjustment to
such Partner'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.

      I.    Notwithstanding anything to the contrary stated herein,

            (a) There shall be allocated to the Managing Partners, pro rata, any
      item of loss,  deduction,  credit or allowance  that, but for this Section
      5.3I,  would have been allocated to the other General  Partner that is not
      obligated to restore any deficit balance in such Partner's Capital Account
      and would have  thereupon  caused or  increased a deficit  balance in such
      Partner's  Capital  Account as of the end of the Production  Partnership's
      taxable  year  to  which  such  allocation   related  (after  taking  into
      consideration the provisions of Subsection 5.3D(v) hereof);

            (b) Any General Partner that is not obligated to restore any deficit
      balance in such Partner's  Capital  Account who  unexpectedly  receives an
      adjustment,  allocation or  distribution  specified in Subsection  5.3D(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 Managing Partners pursuant to clause (a) of this
      Subsection 5.3I, the Managing Partners 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

                                      -48-
<PAGE>

      amount of any such  allocations  of loss,  deduction,  credit or allowance
      allocated to such Partners pursuant to clause (a) of this Subsection 5.3I.

      Section 5.4.  Determinations of Allocations and Distributions
      -------------------------------------------------------------

      Distributable Cash, Income, Investment Income, costs, deductions,  Profits
and Losses  allocable to the Partners shall be distributed or allocated,  as the
case may be, to the Persons who were Partners,  as of the last day of the fiscal
period for which the  distribution  or allocation is to be made,  except that in
any fiscal period in which a Partner sells, assigns or transfers all or any part
of such  Partner's  Interest  to any Person  who  during  the  fiscal  period is
admitted as a Substituted  Partner,  the Distributable Cash, Income,  Investment
Income,  costs,  deductions,  Profits and Losses attributable to the Interest so
sold,  assigned or transferred shall,  subject to the provisions of Section 10.2
of this Agreement, be allocated between the transferor and the transferee on the
basis of the number of days in the fiscal  period before the  admission,  and on
and after the admission,  of the transferee as a Substituted Partner;  provided,
however,  that the  Distributable  Cash  attributable  to a Sale of a  Producing
Property  shall be distributed to those Partners who are Partners on the day the
distribution  of such  Distributable  Cash occurs.  The Managing  Partners shall
inform the other  Partners of the  occurrence  and terms of any such Sale by the
Production  Partnership  as  soon  as  practicable  after  such  Sale  has  been
consummated.

                                   ARTICLE SIX
                 Transferability of Managing Partner's Interests
                 -----------------------------------------------

        Section 6.1.  Transferability of Managing Partner's Interest
        ------------------------------------------------------------

        A. Except as provided in Sections  6.lB and 6.2B,  each of the  Managing
Partners  shall not have the right to retire,  withdraw,  transfer or assign its
Managing Partner Interest,  except that there may be substituted in its stead as
Managing  Partner any entity that has, by merger,  consolidation  or  otherwise,
acquired  substantially  all of its assets or capital  stock and  continued  its
business.

                                      -49-
<PAGE>

        B. Each Managing  Partner may, upon at least ninety days' written notice
to the Limited Partnership and the other Managing Partner,  cause the Production
Partnership  to  distribute,  in  partial  liquidation  of its  Interest  in the
Production Partnership, to such Managing Partner fractional, undivided interests
in the Producing  Properties of the Production  Partnership  (such interest of a
Managing Partner in a Producing Property  distributed is hereinafter referred to
as the "Distributed Interest") up to an aggregate interest equal in value to 75%
of the value of the Producing  Properties of the Production  Partnership that it
would have been entitled to upon a  hypothetical  liquidation  of the Production
Partnership after application of the provisions of Section 8.2 of this Agreement
(the  interest in a Producing  Property  of a Managing  Partner  retained in the
Production  Partnership is hereinafter  referred to as the "Retained  Interest")
provided, however, that no such distribution shall occur (i) more than once with
respect to a Managing Partner, (ii) prior to seven years after the Activation of
the Production  Partnership  and (iii) unless such Managing  Partner  obtains an
opinion  of  counsel  to the  Production  Partnership  to the  effect  that such
distribution  will not result in any  material  adverse tax  consequence  to the
other Managing Partner or to the Limited Partners.  Notwithstanding  anything to
the contrary in this Agreement, in the event that any such distribution is made,
appropriate  adjustments  shall be made in the Capital  Accounts of the Partners
and in the allocation of Production  Partnership Income and costs to assure that
the other Managing  Partner will not share or participate in any of the capital,
costs, Income, or distributions  attributable to the Producing Properties of the
Production  Partnership  except to the extent of the  Retained  Interest of such
Managing Partner.

       Section 6.2.  Removal of Managing Partners
       ------------------------------------------

       A.   (i) The power shall be vested in the Limited  Partnership  to remove
            at any time any Managing  Partner.  The power shall be vested in the
            Limited  Partnership  to consent  to the  admission  of a  successor
            Managing  Partner  following the Removal of any Managing  Partner by
            the Limited  Partnership.  A  successor  Managing  Partner  shall be
            selected  pursuant  to  the  provisions  of  Section  6.2D  of  this
            Agreement.

                                      -50-
<PAGE>

             (ii) (a) A  Managing  Partner  shall  have the power to Remove  the
            other  Managing  Partner,  and  pursuant  to  Section  l0.lA of this
            Agreement,  admit a  successor  Managing  Partner,  for  "Cause"  as
            defined in Section 6.2A(ii)(b), but for no other reason.

                    (b) "Cause" for  purposes  of Section  6.2A(ii)(a)  shall be
            deemed  to exist  only (i)  when a court of  competent  jurisdiction
            shall have made a final  determination  (which  determination is not
            successfully  appealed)  that a Managing  Partner has been guilty of
            gross negligence, fraud, intentional misconduct or similar breach of
            fiduciary  responsibility  in carrying  out its duties as a Managing
            Partner,  or (ii) a Managing  Partner is dissolved or  liquidated on
            account of  insolvency  or any other event  occurs  resulting in the
            appointment  of a trustee or receiver  who  acquires  control of the
            affairs of such Managing  Partner for the purpose of  dissolution or
            liquidation on account of  insolvency,  and such trustee or receiver
            is not dismissed within 90 days after appointment of such trustee or
            receiver,  or (iii) (a) a report on the audited financial statements
            of a Managing Partner and its consolidated  corporate  affiliates is
            issued by the independent accountants for such Managing Partner that
            is  qualified  on a going  concern  basis,  or (b)  either  Managing
            Partner  requests  an audit to be  performed  of the other  Managing
            Partner and its consolidated corporate affiliates by the independent
            accountants  for the other  Managing  Partner  (the  expense of such
            audit being paid by the Managing Partner requesting the audit) , and
            such audit results in the issuance of an opinion with respect to the
            financial   statements  of  the  other  Managing   Partner  and  its
            consolidated  corporate affiliates for the period ending, and as of,
            the most recent date feasible,  that is qualified on a going concern
            basis.

      B.    (i) In the event that a Managing  Partner is  Removed,  the  Removed
            Managing Partner's  Interest in the Production  Partnership shall be
            transferred  to the other Managing  Partner,  and the other Managing
            Partner  shall assign to the Removed  Managing  Partner a portion of
            Production  Partnership Income,  costs and Distributable Cash as and
            when such items are allocated or distributed, as the case may be, by
            the

                                      -51-
<PAGE>

            Production  Partnership  equal  to the  percentage  interest  of the
            Removed Managing Partner in the Production  Partnership prior to its
            Removal;  provided,  however,  that such assignment shall be reduced
            proportionately in the event of a foreclosure or sale referred to in
            Section 4.3D with respect to the Removed Managing Partner's interest
            transferred  to the  other  Managing  Partner  to the  extent of the
            foreclosed or sold interest.

            (ii) If a sole Managing Partner is Removed and a successor  Managing
            Partner is to be admitted to the Production Partnership, the removed
            Managing  Partner  shall not be Removed  until a successor  Managing
            Partner has been admitted to the Production  Partnership pursuant to
            Article 10 of this Agreement.

            (iii) In the event a sole Managing Partner is Removed by the Limited
            Partnership and a successor Managing Partner is to be admitted,  the
            incoming Managing Partner and the Removed Managing Partner shall, by
            mutual  agreement,  select an  independent  petroleum  consultant to
            value the Removed  Managing  Partner's  Interest  in the  Production
            Partnership.  In  determining  the value of the  Managing  Partner's
            Interest,   the  independent   consultant  will  take  into  account
            appropriate discount factors in light of the risk of recovery of oil
            and gas  reserves,  and, in any event,  will utilize a "risk factor"
            discount  no less  than  that  utilized  in the  most  recent  offer
            extended  pursuant  to  Section  7.5  of  the  Limited   Partnership
            Agreement,  if any. The incoming Managing Partner, or the Production
            Partnership,  shall have the option to  purchase at least 20% of the
            Interest of the Removed Managing Partner for the value determined by
            the independent  appraisal.  The Removed Managing Partner's Interest
            in the Production  Partnership shall be transferred to the successor
            Managing Partner, and the successor Managing Partner shall assign to
            the Removed  Managing  Partner a portion of  Production  Partnership
            Income,  costs and  Distributable  Cash as and when  such  items are
            allocated  or  distributed,  as the case may be,  by the  Production
            Partnership equal to the percentage interest of the Removed Managing
            Partner in the  Production  Partnership  prior to Removal,  less the
            portion   purchased  by  the  successor   Managing  Partner  or  the
            Production Partnership.

                                      -52-
<PAGE>

      C. Notwithstanding  Section 3.6, any Managing Partner who shall be Removed
pursuant  to the  provisions  of  Section  6.2  shall be  released  by the other
Partners from all liability for  Production  Partnership  debts and  obligations
incurred by the Production Partnership prior to the date of such Removal.

      D. Under  circumstances in which the Limited  Partnership  Consents to the
admission  of a successor  Managing  Partner,  such  admission  shall not become
effective unless the Production  Partnership  shall have received a certificate,
duly executed by or on behalf of such proposed successor Managing Partner to the
effect  that  it is  experienced  in  the  performance  (or  employs  sufficient
personnel who are experienced in performing) of functions of the type then being
performed by the Removed Managing Partner.

                                  ARTICLE SEVEN
                Transferability of Limited Partnership's Interest
               --------------------------------------------------

        Section 7.1.  Transferability of Limited Partnership's Interest
        ---------------------------------------------------------------

      No Sale,  exchange,  transfer or assignment  of the Limited  Partnership's
Interest may be made if in the opinion of counsel to the Production Partnership,
such Sale, exchange, transfer or assignment,  would (i) result in the Production
Partnership  being  considered to have terminated  within the meaning of Section
708 of the Code, or (ii) cause the Production  Partnership to lose its status as
a  partnership  for Federal  income tax  purposes.  In  addition,  the  Managing
Partners may require an opinion of the transferor's counsel, satisfactory to the
Managing Partners,  that such Sale,  exchange,  transfer or assignment would not
violate the Securities Act of 1933, as amended, or any state securities or "blue
sky" laws.

      Section 7.2.  Incapacity of Partners
      ------------------------------------

      If a Partner  (including a Managing  Partner) becomes  Incapacitated,  the
Person  who is its legal  representative  shall have all the rights of a Partner
for the purpose of settling or

                                      -53-
<PAGE>

managing  its estate and such power as the  Incapacitated  Partner  possessed to
assign  all or any  part of its  Interest  and to join  with  such  assignee  in
satisfying conditions precedent to such assignee becoming a Substituted Partner.
The Incapacity of a Partner shall not dissolve the Production Partnership.

      Section 7.3.  Assignees and Substituted Partners
      ------------------------------------------------

        A. The  Production  Partnership  shall not recognize for any purpose any
purported sale, assignment or transfer of all or any fraction of the Interest of
the Limited  Partnership  unless the  provisions  of Section 7.1 shall have been
complied with and there shall have been filed with the Production  Partnership a
dated  Notification  of  such  sale,   assignment  or  transfer,   executed  and
acknowledged  by both the seller,  assignor  or  transferor  and the  purchaser,
assignee or transferee and such  Notification (i) contains the acceptance by the
purchaser,  assignee or  transferee  of all of the terms and  provisions of this
Agreement and (ii) represents that such sale, assignment or transfer was made in
accordance with all applicable  laws and  regulations.  Any sale,  assignment or
transfer shall be recognized by the  Production  Partnership as effective on the
date of such  Notification if the date of such Notification is within 30 days of
the date on which such  Notification  is filed with the Production  Partnership,
and otherwise shall be recognized as effective on the date such  Notification is
filed with the Production Partnership.

      B. If the Limited  Partnership assigns all of its Interest to an assignee,
the Limited Partnership shall cease to be a Partner.

      C. A Person who is the  assignee of all or any fraction of the Interest of
the Limited  Partnership  shall be subject to all the provisions of this Article
Seven to the same  extent  and in the same  manner  as the  Limited  Partnership
desiring to make an assignment of its Interest.

      D. Any purchaser,  assignee,  transferee,  donee,  heir,  legatee or other
recipient of an Interest  shall be admitted to the  Production  Partnership as a
Substituted  Partner only with the Consent of the other Partners,  which Consent
may be  granted  or  withheld  by such  Partners  at  their  sole  and  absolute
discretion.  The  admission  of such Person as a  Substituted  Partner  shall be
evidenced  by the  execution  by the Partners of a  certificate  evidencing  the
admission of such Person as a Partner

                                      -54-
<PAGE>

and an amendment to this  Agreement  executed by the Managing  Partners on their
own behalf, as well as on behalf of each other Partner, pursuant to the power of
attorney granted pursuant to Section 12.5 of this Agreement.

      E. No Person shall become a  Substituted  Partner  until such Person shall
have satisfied the requirements of Section 10.2; provided, however, that for the
purpose of allocating Income,  Investment Income,  Profits,  Losses,  costs, and
Distributable Cash, a Person shall be treated as having become, and as appearing
in the records of the Production  Partnership  as, a Partner on such date as the
sale,  assignment or transfer to such Person was  recognized  by the  Production
Partnership pursuant to Section 7.3A.

        Section 7.4.  Incapacity of the Limited Partnership
        ---------------------------------------------------

        Upon the Incapacity of the Limited  Partnership or upon the seizure of a
Limited Partnership's Interest in the Production  Partnership,  the successor to
such Limited Partnership's Interest ("Successor") shall be deemed an assignee of
such Limited  Partnership's  Interest in the Production  Partnership and neither
the  Production  Partnership  nor the  Successor  shall have the right to demand
immediate valuation and payment of such Limited Partnership's Interest.

                                  ARTICLE EIGHT
                    Dissolution, Liquidation and Termination
                          of the Production Partnership
                          -----------------------------

        Section 8.1.  Events Causing Dissolution
        ----------------------------------------

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

                                      -55-
<PAGE>

              (i) the  expiration  of its term,  unless its term shall have been
      extended  by the  Management  Committee  pursuant  to Section  2.4 of this
      Agreement;

              (ii) the Incapacity of the sole Managing Partner.  However, within
      ninety days  thereafter the remaining  Partners may elect to  reconstitute
      the  Production  Partnership  prior  to  application  of  the  liquidation
      provisions of Section 8.2;

            (iii)  the  Sale  or  other  disposition  at  one  time  of  all  or
      substantially all of the assets of the Production  Partnership existing at
      the time of such Sale;

              (iv) the election to dissolve the  Production  Partnership  (a) by
      the Managing Partners (which election shall be Consented to by the Limited
      Partnership), or (b) by the Consent of all Partners;

              (v) ninety days after the Removal (unless the Limited  Partnership
      Consents to a Successor  pursuant to Section 6.2 of this Agreement) of the
      sole Managing Partner;

              (vi) the happening of any other event causing the  dissolution  of
      the Production  Partnership  under the laws of the State,  except that the
      Incapacity of any Partner (other than the sole Managing Partner) shall not
      dissolve the Production Partnership and the seizure of the Interest of any
      Partner shall not dissolve the Production Partnership.

      B. Dissolution of the Production Partnership shall be effective on the day
on which the event occurs  giving rise to the  dissolution,  but the  Production
Partnership  shall not  terminate  until the Managing  Partners  have recorded a
notice of dissolution of the Production Partnership in the proper records of any
jurisdiction  in which this  Agreement has been recorded and shall have complied
with the laws of the  states in which its does  business  and the  assets of the
Production Partnership have been distributed as provided in Section 8.2.

      C. Nothing contained in this Agreement shall impair, restrict or limit the
rights  and  powers  of the  Partners  under  the laws of the State or any other
jurisdiction in which the Production Partnership is doing business to reform and
reconstitute  themselves as a general partnership  following  dissolution of the
Production Partnership either under

                                      -56-
<PAGE>

provisions identical to those set forth herein or under any other provisions.

      Section 8.2.  Liquidation
      -------------------------

      A. Upon dissolution of the Production  Partnership,  its liabilities shall
be paid in the  order  provided  herein.  The  Managing  Partners  shall  either
distribute in kind or sell the  Production  Partnership's  property so that such
disposition  is in the best  interests  of the  Limited  Partnership,  and shall
execute all amendments  terminating  the Production  Partnership.  In connection
with any such  Sale,  the  Managing  Partners  shall  attempt to obtain the best
prices for such property.  Pending such Sales, the Managing  Partners shall have
the  right  to  continue  to  operate  and  otherwise  to deal  with  Production
Partnership  property.  In the event the Production  Partnership is dissolved on
account  of  the  Incapacity  or  Removal  of the  sole  Managing  Partner,  the
Production Partnership shall elect, in accordance with the provisions of Article
Eleven, a person (the "Liquidating Agent") to perform the function of a Managing
Partner in liquidating  the assets of the Production  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 Production Partnership's assets will be credited to (in
the case of gain)  or  charged  against  (in the  case of loss)  each  Partner's
Capital Account to the extent allocable to it under Sections 5.3 and 5.4 of this
Agreement. In the event of a distribution in kind of (a) any property other than
an interest in a Producing  Property,  each Partner's  Capital  Account shall be
debited with the portion of the Production  Partnership's adjusted basis thereof
attributable  to the interest  therein  distributed  to it and (b) any Producing
Property  or an interest  in any  Producing  Property,  each  Partner's  Capital
Account  shall  first be credited  or debited  with its share of the  unrealized
appreciation or depreciation in the fair market value of said Producing Property
or interest in said Producing Property.  Each Partner's share of said unrealized
appreciation  or  depreciation  shall  be  equivalent  to its  share  (allocated
pursuant to Sections  5.3 and 5.4 of this  Agreement)  of the gain or loss on an
actual Sale of such Producing Property or interest therein.  The Capital Account
of each  Partner to whom a  Producing  Property  or an  interest  in a Producing
Property  is  distributed  shall be debited  with the fair  market  value of the
Producing  Property  distributed  to  it.  Any  liquidation  of  the  Production
Partnership shall take place out

                                      -57-
<PAGE>

of court and without  application  being made therefor to the Secretary of State
of the State of Oklahoma.

        B. In settling accounts after dissolution,  the assets of the Production
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  Managing
Partners  and  any  Liquidating   Agent  for  any  expenses  of  the  Production
Partnership  paid by or  payable  to them to the  extent  they are  entitled  to
reimbursement  therefor  pursuant  to  this  Agreement;  (iii)  to  the  Limited
Partnership  in the  amount  equivalent  to the amount of its  positive  Capital
Account  balances  (as  adjusted  pursuant  to  Section  8.2A)  on the  date  of
distribution;  (iv) to the  Managing  Partners in the amount  equivalent  to the
amount of their  positive  Capital  Account  balances (as  adjusted  pursuant to
Section 8.2A) on the date of distribution;  and (v) the balance shall be paid to
the  Partners in the manner  provided  for by Sections  5.1, 5.3 and 5.4 of this
Agreement with respect to Distributable Cash.

        C. If any Managing  Partner has a deficit balance in its Capital Account
following the distribution(s)  provided for in Section 8.2B above, as determined
after taking into account all adjustments to its Capital Account for the taxable
year of the Production  Partnership during which such distribution(s)  occur, it
shall restore the amount of such deficit  balance to the Production  Partnership
within 90 days and such account  shall be  distributed  to the other  Parties in
accordance with their positive Capital Account balances.

      D. Upon the liquidation or partial  liquidation of any Managing  Partner's
Interest  pursuant to Article 6 hereof,  distribution  to the  Managing  Partner
whose  Interest is being  liquidated  shall be made pro rata to such  Partner in
accordance  with and to the extent of such Partner's  positive  Capital  Account
balance  after the  Partners'  Capital  Accounts  are  adjusted as if all of the
Production  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 Partners'  Capital  Accounts in accordance  with
the provisions of Article 5 hereof, provided,  however, that if such Partner has
a deficit  balance  in its  Capital  Account  following  such  distribution  (or
adjustment of such  Partner's  Capital  Account  pursuant to this Section 8.2D),
such Partner shall restore the amount of such deficit  balance to the Production
Partnership by the later of the end of the Production  Partnership  taxable year
in which the liquidation of such Partner's  Interest occurs or 90 days after the
date of such liquidation.

                                      -58-
<PAGE>

                                  ARTICLE NINE
               Books and Records; Accounting; Tax Elections; etc.
               --------------------------------------------------

        Section 9.1.  Books and Records
        -------------------------------

        The  books  and  records  of  the  Production   Partnership,   including
information  relating to the sale by the Managing  Partners or any Affiliates of
goods or services  to the  Production  Partnership,  and a list of the names and
addresses  and  Interests of all  Partners,  shall be maintained by the Managing
Partners at the principal  office of the Production  Partnership for a period of
five years following the close of the Fiscal Year to which they relate and shall
be  available  for  examination  there by any  Partner  or its  duly  authorized
representatives  at any and all  reasonable  times.  Any  Partner,  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 Interests of the Partners.  The  Production  Partnership  may
maintain  such other books and records and may provide  such  financial or other
statements as the Managing Partners in their discretion deem advisable.

      Section 9.2.  Accounting Basis for Tax and Reporting Purposes;
                    Fiscal Year
      --------------------------------------------------------------

      The books and records of the Production  Partnership for tax purposes, for
purposes of this  agreement and for the purpose of reports to the Partners shall
be kept on the cash or accrual basis, as the Managing  Partners shall determine.
The Fiscal Year of the Production  Partnership shall be the calendar year to the
extent  permissible  and the Managing  Partners  shall use their best efforts to
obtain any necessary approvals therefor.

      Section 9.3.  Bank Accounts
      ---------------------------

      The  General  Partners  shall  maintain a bank  account or  accounts to be
maintained by the Managing Partners on behalf of

                                      -59-
<PAGE>

the  Production  Partnership  with any bank in the United  States  having  total
assets  in excess of  $100,000,000.  The  Managing  Partners  shall not  deposit
Production  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 Production Partnership's business on such signature or
signatures as the Managing Partners 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 United  States  corporations  having the  highest  credit  rating  granted by
Moody's  Investors  Services,  Inc.  or Standard & Poors  Corporation,  or other
similar highly liquid investments.

      Section 9.4.  Reports
      ---------------------

      A.  The  Managing  Partners  shall  furnish  to  the  Limited  Partnership
sufficient information and data with respect to the properties and operations of
the Production Partnership in order to permit the Limited Partnership to satisfy
its  reporting   obligations  under  Section  9.4  of  the  Limited  Partnership
Agreement.

      B. The Managing  Partners shall file on a timely basis with the Securities
and  Exchange  Commission  all  filings  required  to be made by the  Production
Partnership  pursuant to the Securities Act of 1933, the Securities Exchange Act
of 1934, and the rules and regulations promulgated thereunder.

      Section 9.5.  Elections
      -----------------------

      The Managing  Partners shall cause the Production  Partnership to make all
elections  required or permitted to be made by the Production  Partnership under
the Code and not  otherwise  expressly  provided for in this  Agreement,  in the
manner that the Managing  Partners believe will be most  advantageous to Limited
Partnership, except that (i) the Managing Partners 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 Managing  Partners shall make the
election under Section 263(c) of the Code to expense all intangible drilling and
development costs in the

                                      -60-
<PAGE>

initial  Production  Partnership  Federal income tax return filed for the Fiscal
Year in which such costs are incurred.

                                   ARTICLE TEN
                                   Amendments
                                   ----------

        Section 10.1.  Proposal and Adoption of Amendments Generally
        ------------------------------------------------------------

      A. Notwithstanding anything to the contrary contained herein, the Managing
Partners may,  without prior notice or consent of any other  Partner,  amend any
provision of this  Agreement  (including  an  amendment  to admit an  additional
Managing Partner) if, in their opinion,  such amendment does not have a material
adverse effect upon the Limited Partnership.  Such amendment shall thereafter be
disclosed  to  the  Limited   Partners  within  a  reasonable  time  thereafter.
Amendments  to this  Agreement  to reflect  the  addition or  substitution  of a
Partner or the  admission of a successor  Managing  Partner shall be made at the
time and in the manner  referred to in Section 10.2. Any other amendment to this
Agreement may be proposed by the Managing  Partners or the Limited  Partnership.
The Partner or Partners  proposing  such  amendment  shall submit a Notification
containing  (a) the text of such  amendment,  (b) a statement  of the purpose of
such  amendment,  and (c) an  opinion  of  counsel  obtained  by the  Partner or
Partners proposing such amendment to the effect that such amendment is permitted
by the Act, will not impair the limited liability of the Limited  Partners,  and
will not adversely affect the  classification of the Limited  Partnership or the
Production  Partnership as  partnerships  for Federal  income tax purposes.  The
Managing Partners shall, within 15 days after receipt of any proposal under this
Section l0.lA, give Notification to all Partners of such proposed amendment,  of
such statement of purpose and of such opinion of counsel,  together, in the case
of an  amendment  proposed  by other  Partners,  with the views,  if any, of the
Managing Partners 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 l0.2A, the conditions specified in Section 7.3
shall have been  satisfactorily  completed and the Production  Partnership shall
not have been furnished with an opinion of counsel to the

                                      -61-
<PAGE>

Production  Partnership to the effect that such amendment will adversely  affect
the classification of the Limited  Partnership or the Production  Partnership as
partnerships  for Federal  income tax  purposes;  (ii) in the case of amendments
referred to in Section l0.2B, the conditions specified in Section 6.2 shall have
been  satisfactorily  completed;  or (iii) in the case of all other  amendments,
such amendment shall have been Consented to by the Limited  Partnership  (unless
such Consent is not required pursuant to Section l0.lA); provided, however, that
no such  amendment  may: (a) enlarge the  obligations  of any Partner under this
Agreement without the Consent of such Partner; (b) modify the method provided in
Article Five of determining and allocating or distributing,  as the case may be,
Income,  Investment  Income,  Profits,  Losses,  Distributable Cash or costs and
expenses  without  the  Consent  of  each  Partner  adversely  affected  by such
modification;  (c) amend  Sections  6.1 or 6.2  without  the  Consent of all the
Partners;  or (d) amend Sections 2.3, 4.3A,  4.3B, 4.3C, 4.3D, 4.4A, 4.4B, 4.5A,
4.9, 4.10 or this Article Ten without the Consent of all the Partners.

      C. Upon the adoption of any  amendment to this  Agreement,  the  amendment
shall be executed by the Managing Partners and all other Partners,  and shall be
recorded  in the proper  records  of the State and any other  state in which the
Production Partnership is then doing business.

      Section 10.2.  Amendments on Admission or Removal of Partners
      -------------------------------------------------------------

      A. If this  Agreement  shall  be  amended  to  reflect  the  admission  or
substitution  of a Partner,  the  amendment to this  Agreement may be adopted by
either of the Managing Partners,  the Person to be substituted or added, and the
assigning  Partner.  Any such  amendment  shall be  executed  on  behalf  of all
Partners but may be executed by the substituted or added Partner,  the assigning
Partner, and either of the Managing Partners,  individually and on behalf of all
of the other Partners pursuant to the power of attorney granted in Section 12.5.

      B. If this Agreement shall be amended to reflect the Removal of a Managing
Partner and the continuation of the business of the Production Partnership, such
amendment shall be signed by the remaining or successor  Managing Partner and by
the Removed Managing Partner.

                                      -62-
<PAGE>

      C. No Person  shall become a Partner,  unless such Person shall have:  (i)
become a party  to,  and  adopted  all of the  terms  and  conditions  of,  this
Agreement;  (ii) if such  Person  is other  than an  individual,  provided  upon
request the Managing  Partners  with  evidence  satisfactory  to counsel for the
Production  Partnership of such Person's authority to become a Partner under the
terms and provisions of this Agreement; and (iii) paid all reasonable legal fees
of  the  Production  Partnership  and  the  Managing  Partners  and  filing  and
publication costs in connection with such Person's becoming a Partner.

                                 ARTICLE ELEVEN
                          Consents, Voting and Meetings
                          -----------------------------

      Section 11.1.  Method of Giving Consent
      ---------------------------------------

      Any  Consent  required  by this  Agreement  may be given by a  Partner  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 Managing Partners 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 Managing  Partners prior to
the date upon which the vote of  Partners  are to be  counted.  Any  Partner may
waive notice of or  attendance  at any meeting of the Partners and may execute a
signed  written  consent.  Only the votes of  Partners  of record on the date of
Notification,  whether at a meeting or otherwise,  shall be counted. The laws of
the State  pertaining to the validity and use of corporate  proxies shall govern
the validity and use of proxies given by Partners.

      Section 11.2.  Meetings of Partners
      -----------------------------------

      The  Managing  Partners  may at any time call a meeting of the Partners or
for a vote,  without a  meeting,  of the  Partners  on  matters  upon  which the
Partners  are  entitled to vote,  and shall call for such a meeting or vote upon
receipt of a Notification therefor of the Limited Partnership. Within 15 days of
the receipt of the Notification, the Managing Partners shall notify all Partners
of  record  as of the date of the  Notification  as to the time and place of the
meeting, if called, and the general

                                      -63-
<PAGE>

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. Any Production Partnership meeting or the date upon which
such  votes,  without a meeting,  will be  counted  (regardless  of whether  the
Managing  Partners  have  called for such  meeting  or vote upon the  request of
Limited  Partnership or have 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 Managing Partners. All expenses of the meetings,  voting and such
Notification shall be borne by the Production Partnership.

      Section 11.3.  Submissions to Other Partners
      --------------------------------------------

      The Managing  Partners shall give all the other Partners  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 other  Partners.
Such  Notification  shall  include  any  information  required  by the  relevant
provision of the Agreement or by law.

      Section 11.4.  Limited Partnership Consent
      ------------------------------------------

      To the extent allowed in the Limited Partnership  Agreement and subject to
Section 10.1, the Limited Partnership,  by and through more than 50% in Interest
(as to capital and Profits and Losses) of the Limited Partners,  may without the
concurrence of the Managing Partners:

        (a)  amend the Production Partnership Agreement;

        (b)  dissolve the Production Partnership;

        (c)  remove either or both Managing Partners and elect new ones;

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

        (e)  cancel or amend  the  terms of any  contract  for  services  with a
Managing Partner or any Affiliate thereof without penalty upon 30 days' notice.

                                      -64-
<PAGE>

                                 ARTICLE TWELVE
                            Miscellaneous Provisions
                            ------------------------

      Section 12.1.  Notification to the Production Partnership
                     or the Managing Partners
      ---------------------------------------------------------

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

      Section 12.2.  Binding Provisions
      ---------------------------------

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

      Section 12.3.  Applicable Law
      -----------------------------

      This Agreement shall be construed and enforced in accordance with the laws
of the State  applicable to contracts made and to be performed wholly within the
State.

      Section 12.4.  Separability of Provisions
      -----------------------------------------

      If for any  reason  any  provision  or  provisions  hereof  which  are not
material to the  purposes or business of the  Production  Partnership  or of the
Partners' Interests 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.

                                      -65-
<PAGE>

      Section 12.5.  Appointment of the Managing Partners as Attorney-in-Fact
      -----------------------------------------------------------------------

      A.  Each  Partner,  by  the  execution  of  this  Agreement,   irrevocably
constitutes  and  appoints  each of the Managing  Partners,  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)  all  certificates  and  other
instruments  (including  counterparts  of this  Agreement),  and  any  amendment
thereof,  including  any  amendment  substituting  a Partner,  that the Managing
Partners deem  appropriate to form,  reform,  qualify or continue the Production
Partnership (or a new partnership with  substantially the same provisions as the
Production  Partnership)  as a  partnership  in the  jurisdiction  in which  the
Production  Partnership  may conduct  business;  (ii) all  amendments  and other
instruments  necessary to admit into the  Production  Partnership  additional or
substituted  Partners  pursuant to Section 10.2;  (iii) all instruments that the
Managing  Partners deem  appropriate to reflect a change or  modification of the
Production Partnership in accordance with the terms of this Agreement (including
those necessary to reflect any additional Capital  Contributions);  and (iv) all
conveyances and other instruments that the Managing Partners deem appropriate to
reflect the dissolution and termination of the Production Partnership.

      B. The  appointment  by all Partners of each of the  Managing  Partners as
agent and attorney-in-fact shall be deemed irrevocable and to be a power coupled
with an interest,  in  recognition  of the fact that each of the Partners  under
this Agreement will be relying upon the power of the Managing Partners to act as
contemplated by this Agreement in any filing and other action by it on behalf of
the  Production  Partnership,  and shall  survive the  Incapacity  of any Person
hereby  giving such power and the transfer or  assignment  of all or any part of
the  Interest  of such  person;  provided,  however,  that in the  event  of the
transfer by a Partner of all of its Interest,  the foregoing  powers of attorney
of the  transferor  Partner  shall survive such transfer only until such time as
the transferee shall have been admitted to the Production Partnership as a

                                      -66-
<PAGE>

Substituted  Partner and all required  documents and instruments shall have been
duly executed, filed and recorded to effect such substitution.

      Section 12.6.  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 12.7.  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 12.8.  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 Partners.

GEODYNE PRODUCTION COMPANY                PW PRODUCTION INC.

By:   // Thomas W. Kitchin //             By:   // Lawrence S. Kash //
      -----------------------                   ---------------------
      Thomas W. Kitchin,                        Lawrence S. Kash,
      President                                 President

                                      -67-
<PAGE>

                                          PAINEWEBBER/GEODYNE ENERGY
                                          INCOME LIMITED PARTNERSHIP I-E

                                          By:   GEODYNE PROPERTIES, INC.
                                                General Partner

                                          By:   // Thomas W. Kitchin //
                                                -----------------------
                                                Thomas W. Kitchin,
                                                President

                                          BY:   PW ENERGY INC.
                                                General Partner

                                          By:   // Lawrence S. Kash //
                                                ---------------------
                                                Lawrence S. Kash,
                                                President

                                 ACKNOWLEDGMENTS

STATE OF NEW YORK       )
                        )  ss.
COUNTY OF NEW YORK      )

      BEFORE ME, the undersigned Notary Public,  duly commissioned and qualified
in and for the County and State aforesaid, personally came and appeared Lawrence
S. Kash who,  after being duly sworn by me, did declare that he is the President
of PW  Production  Inc.  and  that by and  with the  authority  of the  Board of
Directors of PW Production  Inc. he executed the foregoing  Amended and Restated
Agreement  of  Partnership  of  PaineWebber/Geodyne   Energy  Income  Production
Partnership I-E as the free and voluntary act and deed of PW Production Inc. for
the purposes therein set forth.

      Subscribed and sworn to and  acknowledged by said Lawrence S. Kash on this
____ day of September, 1986.

                                          // Christa M. Bowen //
                                          -------------------------
                                             Notary Public
My Commission Expires:

August 31, 1988

                                      -68-
<PAGE>

STATE OF OKLAHOMA )
                  )  ss.
COUNTY OF TULSA   )

      BEFORE ME, the undersigned Notary Public,  duly commissioned and qualified
in and for the County and State  aforesaid,  personally came and appeared Thomas
W.  Kitchin  who,  after  being  duly sworn by me,  did  declare  that he is the
President of Geodyne  Production  Company and that by and with the  authority of
the Board of Directors of Geodyne  Production  Company he executed the foregoing
Amended and Restated  Agreement of  Partnership  of  PaineWebber/Geodyne  Energy
Income  Production  Partnership  I-E as the free and  voluntary  act and deed of
Geodyne Production Company for the purposes therein set forth.

      Subscribed and sworn to and  acknowledged by said Thomas W. Kitchin on the
10th day of September, 1986.

                                          // Glenda Devore //
                                          -------------------
                                            Notary Public
My Commission Expires:
July 16, 1990

                                      -69-
<PAGE>

STATE OF OKLAHOMA )
                  )  ss.
COUNTY OF TULSA   )

      BEFORE ME, the undersigned Notary Public,  duly commissioned and qualified
in and for the County and State  aforesaid,  personally came and appeared Thomas
W.  Kitchin  who,  after  being  duly sworn by me,  did  declare  that he is the
President of Geodyne Properties,  Inc. and that by and with the authority of the
Board of  Directors  of Geodyne  Properties,  Inc.  and as general  partner  for
PaineWebber/Geodyne  Energy  Income  Limited  Partnership  I-E he  executed  the
foregoing Amended and Restated  Agreement of Partnership of  PaineWebber/Geodyne
Energy Income Production  Partnership I-F as the free and voluntary act and deed
of Geodyne  Properties,  Inc. as general partner of  PaineWebber/Geodyne  Energy
Income Limited Partnership I-E for the purposes therein set forth.

      Subscribed and sworn to and  acknowledged by said Thomas W. Kitchin on the
10th day of September, 1986.

                                          // Glenda Devore //
                                          -------------------
                                            Notary Public
My Commission Expires:
July 16, 1990

                                      -70-
<PAGE>

STATE OF NEW YORK       )
                        ) ss.
COUNTY OF NEW YORK      )

      BEFORE ME, the undersigned Notary Public,  duly commissioned and qualified
in and for the County and State aforesaid, personally came and appeared Lawrence
S. Kash who,  after being duly sworn by me, did declare that he is the President
of PW Energy,  Inc. and that by and with the authority of the Board of Directors
of PW Energy, Inc. and as general partner for PaineWebber/Geodyne  Energy Income
Limited Partnership I-E he executed the foregoing Amended and Restated Agreement
of Partnership of  PaineWebber/Geodyne  Energy Income Production Partnership I-E
as the free and voluntary act and deed of PW Energy,  Inc. as general partner of
PaineWebber/Geodyne  Energy  Income  Limited  Partnership  I-E for the  purposes
therein set forth.

      Subscribed and sworn to and  acknowledged by said Lawrence S. Kash on this
9th day of September, 1986.

                                          // Christa M. Bowen //
                                          -----------------------
                                              Notary Public
My Commission Expires:
August 31, 1988

                                      -71-

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