Document:

Exhibit
10.1

ORRI
DISTRIBUTION AGREEMENT

AND

LIMITED PARTNER INTEREST

PURCHASE AND SALE AGREEMENT

 

by and
among

 

BREITBURN
ENERGY PARTNERS I, L.P.

 

TIFD
III-X LLC,

 

and

 

BREITBURN
OPERATING L.P.

 

May 24,
2007

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I TERMS OF THE
  TRANSACTION

  	
   

  	
  1

  
	
   

  	
  Section 1.1.

  	
   

  	
  Agreement to Distribute Override and Sell and
  Purchase Interest

  	
   

  	
  1

  
	
   

  	
  Section 1.2.

  	
   

  	
  Purchase Price

  	
   

  	
  1

  
	
   

  	
  Section 1.3.

  	
   

  	
  Effective Date

  	
   

  	
  1

  
	
   

  	
  Section 1.4.

  	
   

  	
  Payment

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II CLOSING

  	
   

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS
  AND WARRANTIES OF SELLER

  	
   

  	
  2

  
	
   

  	
  Section 3.1.

  	
   

  	
  Title to Interests

  	
   

  	
  2

  
	
   

  	
  Section 3.2.

  	
   

  	
  Organization and Standing

  	
   

  	
  2

  
	
   

  	
  Section 3.3.

  	
   

  	
  Authority

  	
   

  	
  2

  
	
   

  	
  Section 3.4.

  	
   

  	
  Valid and Binding Agreement

  	
   

  	
  3

  
	
   

  	
  Section 3.5.

  	
   

  	
  Non-Contravention

  	
   

  	
  3

  
	
   

  	
  Section 3.6.

  	
   

  	
  Approvals

  	
   

  	
  3

  
	
   

  	
  Section 3.7.

  	
   

  	
  Pending Litigation

  	
   

  	
  3

  
	
   

  	
  Section 3.8.

  	
   

  	
  Brokers

  	
   

  	
  3

  
	
   

  	
  Section 3.9.

  	
   

  	
  Representations and Warranties on the Closing Date

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV DISCLAIMER

  	
   

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE V REPRESENTATIONS
  AND WARRANTIES OF BUYER

  	
   

  	
  5

  
	
   

  	
  Section 5.1.

  	
   

  	
  Organization

  	
   

  	
  5

  
	
   

  	
  Section 5.2.

  	
   

  	
  Power and Authority

  	
   

  	
  5

  
	
   

  	
  Section 5.3.

  	
   

  	
  Valid and Binding Agreement

  	
   

  	
  5

  
	
   

  	
  Section 5.4.

  	
   

  	
  Non-Contravention

  	
   

  	
  5

  
	
   

  	
  Section 5.5.

  	
   

  	
  Approvals

  	
   

  	
  5

  
	
   

  	
  Section 5.6.

  	
   

  	
  Proceedings

  	
   

  	
  6

  
	
   

  	
  Section 5.7.

  	
   

  	
  Investment Experience

  	
   

  	
  6

  
	
   

  	
  Section 5.8.

  	
   

  	
  Restricted Securities

  	
   

  	
  6

  
	
   

  	
  Section 5.9.

  	
   

  	
  Accredited Investor; Investment Intent

  	
   

  	
  6

  
	
   

  	
  Section 5.10.

  	
   

  	
  Independent Evaluation

  	
   

  	
  6

  
	
   

  	
  Section 5.11.

  	
   

  	
  Brokers

  	
   

  	
  6

  
	
   

  	
  Section 5.12.

  	
   

  	
  Disclosure to Seller

  	
   

  	
  6

  
	
   

  	
  Section 5.13.

  	
   

  	
  Representations and Warranties on Closing Date

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI COVENANTS OF THE
  PARTIES

  	
   

  	
  7

  
	
   

  	
  Section 6.1.

  	
   

  	
  Reasonable Best Efforts

  	
   

  	
  7

  
	
   

  	
  Section 6.2.

  	
   

  	
  Notice of Litigation

  	
   

  	
  7

  
	
   

  	
  Section 6.3.

  	
   

  	
  Fees and Expenses

  	
   

  	
  7

  
	
   

  	
  Section 6.4.

  	
   

  	
  Public Announcements

  	
   

  	
  7

  
	
   

  	
  Section 6.5.

  	
   

  	
  Tax Matters

  	
   

  	
  8

  
	
   

  	
  Section 6.6.

  	
   

  	
  Partnership Hedges

  	
   

  	
  8

  
							

 

 i
 

 

	
  

  	
  Section 6.7.

  	
   

  	
  Access to Books and Records

  	
   

  	
  9

  
	
   

  	
  Section 6.8.

  	
   

  	
  Assumption

  	
   

  	
  9

  
	
   

  	
  Section 6.9.

  	
   

  	
  Compliance With Partnership Agreement

  	
   

  	
  9

  
	
   

  	
  Section 6.10.

  	
   

  	
  Conveyance of Override

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII CLOSING
  CONDITIONS

  	
   

  	
  9

  
	
   

  	
  Section 7.1.

  	
   

  	
  Conditions Precedent to Parties’ Obligations to
  Close

  	
   

  	
  9

  
	
   

  	
  Section 7.2.

  	
   

  	
  Conditions Precedent to Seller’s Obligations

  	
   

  	
  10

  
	
   

  	
  Section 7.3.

  	
   

  	
  Conditions Precedent to Buyer’s Obligations

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII TERMINATION,
  AMENDMENT AND WAIVER

  	
   

  	
  11

  
	
   

  	
  Section 8.1.

  	
   

  	
  Termination

  	
   

  	
  11

  
	
   

  	
  Section 8.2.

  	
   

  	
  Effect of Termination

  	
   

  	
  11

  
	
   

  	
  Section 8.3.

  	
   

  	
  Amendment

  	
   

  	
  12

  
	
   

  	
  Section 8.4.

  	
   

  	
  Waiver

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX SURVIVAL OF
  REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION

  	
   

  	
  12

  
	
   

  	
  Section 9.1.

  	
   

  	
  Survival

  	
   

  	
  12

  
	
   

  	
  Section 9.2.

  	
   

  	
  Indemnification by Seller

  	
   

  	
  12

  
	
   

  	
  Section 9.3.

  	
   

  	
  Indemnification by Buyer

  	
   

  	
  13

  
	
   

  	
  Section 9.4.

  	
   

  	
  Indemnification Proceedings

  	
   

  	
  13

  
	
   

  	
  Section 9.5.

  	
   

  	
  Exclusivity

  	
   

  	
  13

  
	
   

  	
  Section 9.6.

  	
   

  	
  Indemnification Despite Negligence

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X MISCELLANEOUS

  	
   

  	
  14

  
	
   

  	
  Section 10.1.

  	
   

  	
  Notices

  	
   

  	
  14

  
	
   

  	
  Section 10.2.

  	
   

  	
  Entire Agreement

  	
   

  	
  15

  
	
   

  	
  Section 10.3.

  	
   

  	
  Binding Effect; Assignment; No Third Party Benefit

  	
   

  	
  15

  
	
   

  	
  Section 10.4.

  	
   

  	
  Severability

  	
   

  	
  15

  
	
   

  	
  Section 10.5.

  	
   

  	
  Governing Law

  	
   

  	
  15

  
	
   

  	
  Section 10.6.

  	
   

  	
  Further Assurances

  	
   

  	
  15

  
	
   

  	
  Section 10.7.

  	
   

  	
  Counterparts

  	
   

  	
  15

  
	
   

  	
  Section 10.8.

  	
   

  	
  Injunctive Relief

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI DEFINITIONS AND
  REFERENCES

  	
   

  	
  16

  
	
   

  	
  Section 11.1.

  	
   

  	
  Certain Defined Terms

  	
   

  	
  16

  
	
   

  	
  Section 11.2.

  	
   

  	
  Certain Additional Defined Terms

  	
   

  	
  17

  
	
   

  	
  Section 11.3.

  	
   

  	
  References and Construction

  	
   

  	
  18

  
	
   

  	
  Section 11.4.

  	
   

  	
  Joinder

  	
   

  	
  19

  

 

 ii

ORRI DISTRIBUTION AGREEMENT

AND

LIMITED PARTNER INTEREST

PURCHASE AND SALE AGREEMENT

THIS ORRI DISTRIBUTION AGREEMENT AND LIMITED
PARTNER INTEREST PURCHASE AND SALE AGREEMENT dated as of May 24,
2007, is made by and among Breitburn Energy Partners I, L.P., a Texas limited
partnership (the “Partnership”),
TIFD III-X LLC, a Delaware limited liability company (“Seller”),
and Breitburn Operating L.P., a Delaware limited partnership (“Buyer”).

RECITALS:

A.            Reference is
herein made to that certain Amended and Restated Agreement of Limited
Partnership dated as of May 5, 2003 (the “Partnership Agreement”),
governing the Partnership.  Seller’s
interest in the Partnership as a limited partner is herein called the “Interest”.

B.            The Partnership
desires to distribute the Override (as defined herein) to Seller, on the terms
and conditions set forth herein.

C.            Seller desires to
sell the Interest to Buyer, and Buyer desires to purchase the Interest from
Seller, on the terms and conditions set forth herein.

AGREEMENT:

NOW, THEREFORE, in consideration
of the foregoing Recitals and the mutual covenants and agreements contained
herein, Seller and Buyer do hereby agree as follows:

ARTICLE I

TERMS OF THE TRANSACTION

Section 1.1.           Agreement to
Distribute Override and Sell and Purchase Interest.   Subject
to the terms and provisions herein, the Partnership agrees to distribute to
Seller (or its designee) the Override (as defined herein) and Seller agrees to
sell and Buyer agrees to purchase, for the consideration hereinafter set forth,
the Interest.

Section 1.2.           Purchase Price.   In consideration of the sale of the Interest
to Buyer, Buyer shall pay to Seller a cash purchase price of $82,100,000 (the “Purchase Price”).

Section 1.3.           Effective Date.   The distribution of the Override shall be
effective as of 7:00 a.m., local Los Angeles, California time, on May 1, 2007,
and the purchase and sale of the Interest shall be effective immediately
thereafter (the “Effective Date”).

Section 1.4.           Payment. 

(a)           Contemporaneously
with the execution and delivery of this Agreement, Buyer shall tender to an
interest bearing account designated by Seller cash equal to $8,000,000 as a 

deposit (the “Deposit”). 
The Deposit shall be (i) applied to the Purchase Price pursuant to Section 1.4(b),
(ii) retained by Seller pursuant to Section 8.2 or
(iii) returned to Buyer pursuant to Section 8.2.  For federal income tax purposes, the interest
or other income earned on the Deposit shall be reported by Buyer, if the
Deposit is applied to the Purchase Price or returned to Buyer, and by Seller,
if the Deposit is retained by Seller.

(b)           At
the Closing, Buyer shall pay to Seller cash equal to the Purchase Price minus
the Deposit.  Payments by Buyer to Seller
of the Purchase Price shall be made in immediately available funds by confirmed
wire transfer to a bank account or accounts designated by Seller in writing to
Buyer.

ARTICLE
II

CLOSING

The closing of the transactions contemplated hereby
(the “Closing”) shall take place (i) at
the offices of Thompson & Knight LLP, 333 Clay Street, Suite 3300, Houston,
Texas, at 9:00 a.m. (local Houston, Texas time), on May 25, 2007, or
(ii) at such other time or place or on such other date as the parties
hereto shall agree.  The date on which
the Closing is required to take place is herein referred to as the “Closing Date.”  The
Closing of the distribution of the Override by Partnership to Seller shall
close first, and the Closing of the sale of the Interest shall close
immediately thereafter.

ARTICLE
III

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer that:

Section 3.1.           Title to Interests.   Seller
is (and at the Closing will be) the record and beneficial owner of, and upon
consummation of the transactions contemplated hereby Buyer will acquire good, valid,
and marketable title to, the Interest, free and clear of all Liens, other than
(i) those that may arise by virtue of any actions taken by or on behalf of
Buyer or its Affiliates, (ii) restrictions on transfer that may be imposed
by federal or state securities laws, (iii) restrictions on transfer under
the Partnership Agreement or (iv) Liens, if any, released at Closing.

Section 3.2.           Organization and
Standing.   Seller is duly
organized, validly existing and in good standing under the laws of the state of
its formation.

Section 3.3.           Authority.   Seller
has all requisite power and authority to execute, deliver, and perform this
Agreement and to consummate the transactions contemplated hereby.  This Agreement has been duly executed and
delivered by Seller and constitutes, and each other agreement, instrument, or
document executed or to be executed by Seller in connection with the
transactions contemplated hereby has been, or when executed will be, duly
executed and delivered by Seller and constitutes, or when executed and
delivered will constitute, a valid and legally binding obligation of Seller,
enforceable against Seller in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to the enforcement of creditors’
rights 

 2
 

generally and
the application of general principles of equity (regardless of whether that
enforceability is considered in a proceeding at law or in equity).

Section 3.4.           Valid and Binding
Agreement.   This Agreement has been duly executed and
delivered by Seller and constitutes, and each other agreement, instrument, or
document executed or to be executed by Seller in connection with the
transactions contemplated hereby to which it is a party has been, or when
executed will be, duly executed and delivered by Seller, and constitutes, or
when executed and delivered will constitute, a valid and legally binding
obligation of Seller, enforceable against it in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors’ rights generally and the application of general principles of equity
(regardless of whether that enforceability is considered in a proceeding at law
or in equity).

Section 3.5.           Non-Contravention.   Neither the execution, delivery, and
performance by Seller of this Agreement and each other agreement, instrument,
or document executed or to be executed by Seller in connection with the
transactions contemplated hereby to which Seller is a party nor the
consummation by Seller of the transactions contemplated hereby and thereby do
or will (i) conflict with or result in a violation of any provision of
Seller’s Governing Documents, (ii) do and will conflict with or result in
a violation of any provision of, or constitute (with or without the giving of
notice or the passage of time or both) a default under, or give rise (with or
without the giving of notice or the passage of time or both) to any right of
termination, cancellation, or acceleration under, any bond, debenture, note,
mortgage or indenture, or any material contract, agreement, or other instrument
or obligation to which Seller is a party or by which such Seller or any of such
Seller’s properties may be bound, or (iii) violate any Applicable Law
binding upon such Seller.

Section 3.6.           Approvals.   No
consent, approval, order, or authorization of, or declaration, filing, or
registration with, any Governmental Entity or of any third party is required to
be obtained or made by Seller in connection with the execution, delivery, or
performance by Seller of this Agreement, each other agreement, instrument, or
document executed or to be executed by Seller in connection with the
transactions contemplated hereby to which Seller is a party or the consummation
by Seller of the transactions contemplated hereby and thereby.

Section 3.7.           Pending Litigation.   There are no Proceedings pending or, to Seller’s
Knowledge, threatened, in which Seller is or may be a party affecting the
execution and delivery of this Agreement by Seller or the consummation of the
transactions contemplated hereby by Seller.

Section 3.8.           Brokers.   No
broker, investment banker, financial advisor or other Person is entitled to any
broker’s, finder’s, financial advisor’s or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Seller.

Section 3.9.           Representations and
Warranties on the Closing Date.   The representations and warranties made by
Seller in this Article III will be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if
such representations and warranties had been made by Seller on and as of the
Closing Date, except 

 3
 

that any such
representations and warranties which expressly relate only to an earlier date
shall be true and correct on the Closing Date as of such earlier date.

ARTICLE
IV

DISCLAIMER

EXCEPT AS SET FORTH IN THIS AGREEMENT, SELLER WILL
CONVEY TO BUYER THE INTEREST WITHOUT ANY EXPRESS, STATUTORY, OR IMPLIED
WARRANTY OR REPRESENTATION OF ANY KIND FROM SELLER OR ANY OF ITS AFFILIATES,
INCLUDING WARRANTIES OR REPRESENTATIONS RELATING TO (I) THE PARTNERSHIP,
(II) TITLE OF THE PARTNERSHIP IN AND TO ITS PROPERTIES AND OTHER ASSETS
(THE “PARTNERSHIP PROPERTIES”), (III) THE CONDITION OF THE PARTNERSHIP
PROPERTIES, (IV) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY OF THE
PARTNERSHIP PROPERTIES, (V) ANY IMPLIED OR EXPRESS WARRANTY OF THE FITNESS
OF THE PARTNERSHIP PROPERTIES FOR A PARTICULAR PURPOSE, (VI) ANY IMPLIED
OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS,
(VII) ANY AND ALL OTHER IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW
NOW OR HEREAFTER IN EFFECT, OR (VIII) ANY IMPLIED OR EXPRESS WARRANTY
REGARDING COMPLIANCE WITH ANY APPLICABLE ENVIRONMENTAL LAWS, THE RELEASE OF
MATERIALS INTO THE ENVIRONMENT, OR PROTECTION OF THE ENVIRONMENT OR HEALTH.  EXCEPT AS SET FORTH IN THIS AGREEMENT, IN
PURCHASING THE INTEREST BUYER ACCEPTS THE PARTNERSHIP PROPERTIES “AS IS,”  “WHERE IS,” AND “WITH ALL FAULTS” AND IN THEIR PRESENT
CONDITION AND STATE OF REPAIR.  WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS SET FORTH IN THIS
AGREEMENT, SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO (A) THE
AMOUNT, VALUE, QUALITY, QUANTITY, VOLUME, OR DELIVERABILITY OF ANY OIL, GAS, OR
OTHER MINERALS OR RESERVES IN, UNDER, OR ATTRIBUTABLE TO THE PARTNERSHIP
PROPERTIES, (B) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE, SAFETY, OR
ENVIRONMENTAL CONDITION OF THE PARTNERSHIP PROPERTIES, (C) THE GEOLOGICAL
OR ENGINEERING CONDITION OF THE PARTNERSHIP PROPERTIES OR ANY VALUE THEREOF OR
(D) THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION,
OR RECORDS FURNISHED TO BUYER BY SELLER IN CONNECTION WITH THE PARTNERSHIP OR
THE PARTNERSHIP PROPERTIES.  BUYER
EXPRESSLY ACKNOWLEDGES AND AGREES THAT (X) SELLER IS A LIMITED PARTNER OF
THE PARTNERSHIP; (Y) AS A LIMITED PARTNER, SELLER IS GENERALLY A “PASSIVE”
INVESTOR AND IS NOT INVOLVED IN THE DAY-TO-DAY OPERATIONS OF THE PARTNERSHIP
AND DOES NOT HAVE CONTROL OVER OR IMMEDIATE ACCESS TO PARTNERSHIP BOOKS,
RECORDS AND OTHER DATA OR INFORMATION; AND (Z) THAT AN AFFILIATE OF BUYER
IS THE GENERAL PARTNER OF THE PARTNERSHIP AND, IN THAT CAPACITY, HAS BEEN
PRIMARILY RESPONSIBLE FOR THE CONDUCT BY THE PARTNERSHIP OF ITS BUSINESS AND
OPERATIONS SINCE INCEPTION.  BUYER
AGREES THAT THE FOREGOING DISCLAIMER IS “CONSPICUOUS.”

 4
 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represent and
warrant to Seller that:

Section 5.1.           Organization.   Buyer is validly existing and in good standing
under the laws of the jurisdiction of its organization and has requisite power
and authority to carry on its business as now being conducted.

Section 5.2.           Power and Authority.   Buyer has all requisite power and authority to
execute, deliver, and perform this Agreement and each other agreement,
instrument, or document executed or to be executed by Buyer in connection with
the transactions contemplated hereby to which it is a party and to consummate
the transactions contemplated hereby and thereby.  The execution, delivery, and performance of
this Agreement and each other agreement, instrument, or document executed or to
be executed by Buyer in connection with the transactions contemplated hereby to
which it is a party, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
action of Buyer.

Section 5.3.           Valid and Binding
Agreement.   This Agreement has been duly executed and
delivered by Buyer and constitutes, and each other agreement, instrument, or
document executed or to be executed by Buyer in connection with the
transactions contemplated hereby to which it is a party has been, or when
executed will be, duly executed and delivered by Buyer, and constitutes, or
when executed and delivered will constitute, a valid and legally binding
obligation of Buyer, enforceable against it in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors’ rights generally and the application of general principles of equity
(regardless of whether that enforceability is considered in a proceeding at law
or in equity).

Section 5.4.           Non-Contravention.   Neither the execution, delivery, and
performance by Buyer of this Agreement and each other agreement, instrument, or
document executed or to be executed by Buyer in connection with the
transactions contemplated hereby to which it is a party nor the consummation by
it of the transactions contemplated hereby and thereby do or will
(i) conflict with or result in a violation of any provision of Buyer’s
Governing Documents, (ii) conflict with or result in a violation of any
provision of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any right of termination,
cancellation, or acceleration under, any bond, debenture, note, mortgage or
indenture, or any material contract, agreement, or other instrument or
obligation to which Buyer is a party or by which Buyer or any of Buyer’s
properties may be bound, or (iii) violate any Applicable Law binding upon
Buyer.

Section 5.5.           Approvals.   No
consent, approval, order, or authorization of, or declaration, filing, or
registration with, any Governmental Entity or of any third party is required to
be obtained or made by Buyer in connection with the execution, delivery, or
performance by Buyer of this Agreement, each other agreement, instrument, or
document executed or to be executed by Buyer in connection with the
transactions contemplated hereby to which it is a party or the consummation by
it of the transactions contemplated hereby and thereby.

 5
 

Section 5.6.           Proceedings.  There are no Proceedings pending or, to Buyer’s
Knowledge, threatened, in which Buyer is or may be a party affecting the
execution and delivery of this Agreement by Buyer or the consummation of the
transactions contemplated hereby by Buyer.

Section 5.7.           Investment
Experience.   Buyer acknowledges that it can bear the
economic risk of its investment in the Interest, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Interest.  Buyer is an Affiliate of the General Partner.

Section 5.8.           Restricted Securities.   Buyer understands that the Interest will not
have been registered pursuant to the Securities Act or any applicable state
securities laws, that the Interest will be characterized as “restricted
securities” under federal securities laws, and that under such laws and
applicable regulations the Interests cannot be sold or otherwise disposed of
without registration under the Securities Act or an exemption therefrom.

Section 5.9.           Accredited Investor;
Investment Intent.   Buyer is an accredited investor as defined in
Regulation D under the Securities Act. Buyer is acquiring the Interest for its
own account for investment and not with a view to, or for sale or other
disposition in connection with, any distribution of all or any part thereof,
except in compliance with applicable federal and state securities laws.

Section 5.10.        Independent Evaluation.   Buyer is an experienced and knowledgeable
investor in the oil and gas business and the business of owning and operating
oil, gas and mineral properties.  Buyer,
as a result of its affiliation with the General Partner, has had full and
complete access to the Partnership Properties, the officers, consultants and
other representatives of the Partnership, and the books, records, and files of
the Partnership (including those relating to the Partnership Properties).  In making the decision to enter into this
Agreement and to consummate the transactions contemplated hereby, Buyer, as a
result of its affiliation with the General Partner, has relied on (i) the
basis of its own independent investigation and knowledge of the Partnership and
the Partnership Properties, and (ii) the representations and warranties
made by Seller, and has been advised by and has relied solely on its own
expertise and legal, land, tax, reservoir engineering, and other professional
counsel concerning this transaction, the Partnership, the Partnership
Properties and the values thereof.

Section 5.11.        Brokers.   No
broker, investment banker, financial advisor or other Person is entitled to any
broker’s, finder’s, financial advisor’s or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Buyer.

Section 5.12.        Disclosure to Seller.   In view of (i) Buyer’s affiliation with the
General Partner and (ii) the General Partner’s duties and obligations as
general partner of the Partnership to Seller (in its capacity as the limited
partner thereof), and given Buyer’s access to information with respect to the
Partnership, the Partnership’s operations and the Partnership Properties, Buyer
represents and warrants that, to Buyer’s Knowledge, the General Partner has
made all material information concerning the Partnership and the Partnership
Properties available to, and has not withheld any material information from,
Seller (exclusive of facts and circumstances which 

 6
 

Seller
recognizes to be of a nature generally recognized and known in the oil and gas
industry (e.g., hydrocarbon prices may rise or fall)).

Section 5.13.        Representations and
Warranties on Closing Date.   The representations and warranties made in
this Article V will be true and correct in all material respects on
and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date,
except that any such representations and warranties which expressly relate only
to an earlier date shall be true and correct on the Closing Date as of such
earlier date.

ARTICLE
VI

COVENANTS OF THE PARTIES

Section 6.1.           Reasonable Best
Efforts.   Each party hereto agrees that it will not
voluntarily undertake any course of action inconsistent with the provisions or
intent of this Agreement and will use its Reasonable Best Efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
reasonably necessary, proper, or advisable under Applicable Laws to consummate
the transactions contemplated by this Agreement.

Section 6.2.           Notice of
Litigation.   Until the Closing, (i)  Buyer, upon learning
of the same, shall promptly notify Seller of any Proceeding which is commenced
or threatened against Buyer which affects this Agreement or the transactions
contemplated hereby and (ii) Seller, upon learning of the same, shall
promptly notify Buyer of any Proceeding which is commenced or threatened
against Seller which affects this Agreement or the transactions contemplated
hereby.

Section 6.3.           Fees and Expenses.

(a)           All
fees and expenses incurred in connection with this Agreement by Seller will be borne
by and paid by Seller, except as provided in Section 6.6 or unless
the transactions contemplated hereby are not consummated through no fault of
Seller (in which event, Buyer shall bear and pay such fees and expenses).

(b)           Without
limiting its covenants and agreements in Section 6.6, all expenses
incurred in connection with this Agreement by Buyer, the General Partner or by
the Partnership will be borne by and paid by Buyer, regardless of whether or
not the transactions contemplated hereby are consummated.

Section 6.4.           Public
Announcements.   Except as may be required by Applicable Law,
neither Buyer, Affiliates of the General Partner or the Partnership, on the one
hand, nor Seller, on the other, shall issue any press release or otherwise make
any statement to the public generally with respect to this Agreement or the
transactions contemplated hereby without the prior consent of the other parties
(which consent shall not be unreasonably withheld and which consent, if given
verbally, shall be confirmed in writing within one Business Day
thereafter).  Any such press release or
statement required by Applicable Law shall only be made after reasonable notice
to the other parties.

 7
 

Section 6.5.           Tax Matters.

(a)           The parties agree that the basis of the Override distributed to
Seller will be determined by Seller and Buyer as promptly as practicable
after the Closing by allocating to the Override a portion of the Partnership’s
basis in the leases burdened by the Override based on the relative fair market
value of the Override and the Partnership’s operating interests in such leases.

(b)           The
parties acknowledge that the sale of the Interest by Seller to Buyer will cause
the Partnership to terminate for federal income tax purposes on the Effective
Date pursuant to Section 708(b)(1)(B) of the Code.  Buyer hereby agrees to prepare, submit for
Seller’s approval in the manner provided in Section 6.10 of the
Partnership Agreement and timely file with the IRS or any other appropriate
taxing authorities all tax returns due for the Partnership (including the final
federal income tax return on IRS Form 1065 for the Partnership’s taxable period
that ends at the Effective Date) in accordance with Section 6.10 of the
Partnership Agreement.  If Seller fails
to approve any tax return referenced in the immediately preceding sentence,
Seller and Buyer agree to use their reasonable best efforts to resolve any
disagreement or dispute between them in respect of such return as promptly as
reasonably practicable. The parties further agree that no items of income,
gain, loss, deduction or credit attributable to periods after the Closing Date
shall be allocated to Seller and that Seller shall not be liable for any
Partnership-level Taxes or other Taxes attributable to periods, operations, or
oil and gas production after the Closing Date, except as attributable to the Override.

(c)           Pursuant
to Section 6.9 of the Partnership Agreement, the General Partner will elect in
accordance with Section 754 of the Code to adjust the basis upon the transfer
of the Interest.

Section 6.6.           Partnership Hedges.

(a)           (i) No later than one Business Day after the
date of this Agreement and subject to the terms of this Section 6.6, the
General Partner agrees to (and Buyer agrees to cause the General Partner)
to terminate the Partnership’s Hedges and (ii) at any time after this Agreement
is fully executed, the General Partner, at the sole discretion of the Buyer,
may cause the Partnership to enter into new Hedges (such Hedges, whether one or
more, the “New Hedge”).   Buyer agrees that all costs incurred by
Buyer, the General Partner, the Partnership or Seller and their respective
Affiliates in connection with the performance by Buyer of its covenants and
agreements in this Section 6.6 (including “breakage” costs) shall
be borne and paid exclusively by Buyer and the General Partner (in proportion
to the LP Sharing Percentage and GP Sharing Percentage, respectively, as
defined in the Partnership Agreement) or the Partnership, and if paid by the
Partnership will not otherwise affect the amount due Seller hereunder or under
the Partnership Agreement if the transactions contemplated hereby are not
consummated.

(b)           Seller,
in its capacity as the limited partner of the Partnership and by its execution
and delivery of this Agreement, hereby agrees and consents to the actions of
the General Partner and the Partnership described in subsection (a)
above for purposes of the Partnership Agreement, including Sections 5.7 and
6.2(j) thereof, subject to the following: 
(i) notwithstanding anything in the Partnership Agreement (including
Section 5.7 thereof) or herein to the contrary, in no instance will Seller, or
any Affiliate of Seller (including GE Capital Corporation) be required to
guarantee or otherwise have any personal liability or responsibility for the
New Hedge; and 

 8
 

(ii) prior
to entering into the New Hedge (if the New Hedge is entered into prior to the
Closing), the General Partner and the Seller must mutually agree on the
percentage amount of the Partnership’s forecast production from the proved
producing oil and gas reserves attributable to the Partnership’s Properties to
be hedged under the New Hedge.

Section 6.7.           Access to Books and
Records.  Buyer will preserve or
cause to be preserved all books and records of the Partnership for a period of
six years following the Closing and will allow Seller and its representatives
reasonable access to such records at all reasonable times for a purpose
reasonably related to (i) Seller’s ownership of the Interest in the
Partnership, (ii) the performance by Seller of its obligations, and the
enforcement by it of its rights, hereunder, or (iii) Seller’s contest of
the imposition of any Taxes resulting from its ownership of the Interest.  If Buyer desires to dispose of any such
records prior to the expiration of the six-year period referenced above, Buyer
shall provide notice of same to Seller, and Seller shall have a period of 10
Business Days to deliver written notice to Buyer that Seller elects to have
such records delivered to it (at the expense of Seller).  If Seller fails to deliver such notice within
the 10-Business Day period referenced above, Buyer shall the right to dispose
of the subject records.

Section 6.8.           Assumption.  Buyer will, at Closing, be deemed to have
assumed any and all duties, liabilities and obligations of Seller under the
Partnership Agreement, whether arising before, on or after the Effective Date
(the “Assumed Obligations”).

Section 6.9.           Compliance With
Partnership Agreement.   Buyer,
Seller and, by its execution hereof, the General Partner, agree that upon
consummation of the transactions contemplated hereby, (a) Section 9.1 of
the Partnership Agreement, which deals with assignments by the limited partners
of the Partnership, will be deemed to have been complied with in all respects,
and (b) Section 9.6 of the Partnership Agreement (Right of First Offer) will be
deemed to have been waived.

Section 6.10.        Conveyance of Override.  At Closing, Buyer or its Affiliates
(including the General Partner) will cause the
Partnership  to  execute and deliver to Seller (or its
designee) that certain Conveyance of Overriding Royalty Interest in the form
attached hereto as Exhibit 6.10 (the “Override”).

ARTICLE
VII

CLOSING CONDITIONS

Section 7.1.           Conditions Precedent
to Parties’ Obligations to Close. 
The obligation of Seller, on the one hand, or Buyer, on the other, to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment on or prior to the Closing Date of each of the following
conditions:

(a)           No
Proceeding (excluding any Proceeding initiated by Seller, Buyer, the General
Partner or the Partnership or any of their respective Affiliates) shall, on the
Closing Date, be pending or threatened seeking to restrain, prohibit, or obtain
damages or other relief in connection with this Agreement or the consummation
of the transactions contemplated hereby.

(b)           No
order, writ, injunction or decree shall have been entered and be in effect by
any court or any Governmental Entity of competent jurisdiction, and no statute,
rule, regulation 

 9
 

or other
requirement shall have been promulgated or enacted and be in effect, that on a
temporary or permanent basis restrains, enjoins or invalidates the transactions
contemplated hereby.

Section 7.2.           Conditions Precedent
to Seller’s Obligations.   The obligation of Seller to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
on or prior to the Closing Date of each of the following conditions:

(a)           Each
of the representations and warranties of Buyer contained in this Agreement
shall be true and correct in all material respects as of the date made and
(having been deemed to have been made again on and as of the Closing Date in
the same language) shall be true and correct in all material respects on and as
of the Closing Date.

(b)           Buyer
shall have performed and complied with in all material respects all covenants
and agreements required by this Agreement to be performed or complied with by
it on or prior to the Closing Date (including its covenants and agreements
contained in Section 6.6).

(c)           Seller
shall have received a certificate executed by a duly authorized officer of
Buyer dated the Closing Date, representing and certifying that the conditions
set forth in Sections 7.2 (a) and (b) have been satisfied.

(d)           Seller
shall have received all other agreements, instruments and documents which are
required by other terms of this Agreement to be executed or delivered by Buyer,
the General Partner or the Partnership prior to or in connection with the
Closing (including the Override).

Section 7.3.           Conditions Precedent
to Buyer’s Obligations.   The obligation of Buyer to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
on or prior to the Closing Date of each of the following conditions:

(a)           Each
of the representations and warranties of Seller contained in this Agreement
shall be true and correct in all material respects as of the date made and
(having been deemed to have been made again on and as of the Closing Date in
the same language) shall be true and correct in all material respects on and as
of the Closing Date.

(b)           Seller
shall have performed and complied with in all material respects all covenants
and agreements required by this Agreement to be performed or complied with by
it on or prior to the Closing Date.

(c)           Buyer
shall have received one or more certificates executed by a duly authorized
officer of Seller dated the Closing Date, (i) representing and certifying that
the conditions set forth in Sections 7.3 (a) and (b) have
been satisfied and (ii) certifying to the adoption and effectiveness of
resolutions adopted by the sole member of Seller authorizing the transactions
contemplated hereby.

(d)           Seller
shall have executed and delivered an Assignment of Limited Partner Interest
substantially in the form of Exhibit 7.3(d) in all material
respects.

 10
 

(e)           Buyer
shall have received all other agreements, instruments and documents which are
required by other terms of this Agreement to be executed or delivered by Seller
prior to or in connection with the Closing.

ARTICLE
VIII

TERMINATION, AMENDMENT AND WAIVER

Section 8.1.           Termination.   This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing in
the following manner:

(a)           by
mutual written consent of Seller and Buyer; or

(b)           by
either Seller, on the one hand, or Buyer, on the other, if:

(i)            the Closing shall not
have occurred on or before June 15, 2007, unless such failure to close shall be
due to a breach of this Agreement by the party seeking to terminate this
Agreement pursuant to this clause (i); or

(ii)           there shall be any
statute, rule, or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or a Governmental Entity
shall have issued an order, decree, or ruling or taken any other action
permanently restraining, enjoining, or otherwise prohibiting the consummation
of the transactions contemplated hereby, and such order, decree, ruling, or
other action shall have become final and nonappealable; or

(c)           by
Seller, if (i) Buyer shall have failed to fulfill in any material respect
any of its other obligations under this Agreement; or (ii) any of the
representations and warranties of Buyer contained in this Agreement shall not
be true and correct in all material respects and, in the case of each of clauses (i)
and (ii), such failure, misrepresentation, or breach of warranty
(provided it can be cured) has not been cured within ten days after written
notice thereof from Seller to Buyer, as the case may be; or

(d)           by
Buyer, if (i) Seller shall have failed to fulfill in any material respect
any of its obligations under this Agreement; or (ii) any of the
representations and warranties of Seller contained in this Agreement shall not
be true and correct in all material respects and, in the case of each of clauses (i)
and (ii), such failure, misrepresentation, or breach of warranty
(provided it can be cured) has not been cured within ten days after written
notice thereof from Buyer to Seller.

Section 8.2.           Effect of
Termination.   In the event of the termination of this
Agreement pursuant to Section 8 .1 by Seller, on the one hand, or
Buyer, on the other, written notice thereof shall forthwith be given to the
other party or parties specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall become void and have no effect,
except that the agreements contained in this Article VIII, in Sections 6.3,
6.4 and 6.6 and in Articles X and XI  shall survive the termination hereof.  Except as provided in the immediately
following sentence, nothing contained in this Section shall relieve any party
from liability for damages actually incurred as a result of any breach of this
Agreement.  If this Agreement is
terminated by Seller pursuant to (i) Section 8.1(b)(i) (and
Buyer is in material breach of this Agreement) or (ii) Section 8.1(c),
Seller shall retain the Deposit as liquidated damages (it being 

 11
 

agreed by the
parties that (x) the amount of actual damages incurred by Seller would be
difficult to calculate and (y) retention by Seller of the Deposit shall
not constitute a distribution to Seller by the Partnership under the
Partnership Agreement).  If this
Agreement is terminated under Section 8.1 for any other reason, the
Deposit shall be promptly returned to Buyer by Seller.

Section 8.3.           Amendment.   This
Agreement may not be amended except by an instrument in writing signed by or on
behalf of all the parties hereto.

Section 8.4.           Waiver.  Seller on the one hand, or Buyer, on the
other, may:  (i) waive any
inaccuracies in the representations and warranties of the other contained
herein or in any document, certificate, or writing delivered pursuant hereto,
or (ii) waive compliance by the other with any of the other’s agreements
or fulfillment of any conditions to its own obligations contained herein.  Any agreement on the part of a party hereto
to any such waiver shall be valid only if set forth in an instrument in writing
signed by or on behalf of such party.  No
failure or delay by a party hereto in exercising any right, power, or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power, or privilege.

ARTICLE
IX

SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION

Section 9.1.           Survival.

(a)           Each
representation and warranty of the parties hereto contained in this Agreement
shall survive the Closing until the first anniversary of the Closing Date (such
anniversary being called the “Survival Date”).  From and after a Survival Date, no party
hereto shall be under any liability hereunder with respect to any
representation or warranty, except with respect to matters as to which notice
has been received in accordance with Section 9.1(b).  All covenants of the parties hereto, to the
extent not otherwise fully performed at Closing, will survive the Closing.

(b)           No
party hereto shall have any indemnification obligation pursuant to this Article IX
or otherwise in respect of any representation, warranty or covenant unless it
shall have received from the party seeking indemnification written notice of
the existence of the claim for or in respect of which indemnification in
respect of such representation, warranty or covenant is being sought.  Such notice shall set forth with reasonable
specificity (i) the basis under this Agreement, and the facts that
otherwise form the basis of such claim, (ii) the estimate of the amount of
such claim (which estimate shall not be conclusive of the final amount of such
claim) and an explanation of the calculation of such estimate, including a
statement of any significant assumptions employed therein, and (iii) the
date on and manner in which the party delivering such notice became aware of
the existence of such claim.

Section 9.2.           Indemnification by
Seller.   Subject to the terms and conditions of this Article IX,
Seller shall indemnify, defend and hold harmless Buyer from and against any and
all claims, actions, causes of action, demands assessments, losses,
damages, liabilities, judgments, settlements, penalties, costs, and expenses
(including reasonable attorneys’ fees and expenses), of any nature whatsoever
(collectively, “Damages”),
asserted against, resulting to, 

 12
 

imposed upon,
or incurred by Buyer, directly or indirectly, by reason of or resulting
from any breach by Seller of (i) Seller’s representations and
warranties contained in Article III or (ii) Seller’s covenants
contained in this Agreement.

Section 9.3.           Indemnification by
Buyer.   Subject to the terms and conditions of this Article IX,
Buyer shall indemnify, defend and hold harmless Seller from and against any and
all Damages, asserted against, resulting to, imposed upon, or incurred by
Seller, directly or indirectly, by reason of or resulting from (i) any
breach by Buyer of its representations, warranties and covenants contained in
this Agreement, (ii) the Assumed Obligations or (iii) the Partnership
and its ownership and operation of its properties and other assets.

Section 9.4.           Indemnification
Proceedings.   In the event that any claim or demand for
which a party (an “Indemnifying Party”),
would be liable to the another party under Section 9.2 or Section 9.3
(an “Indemnified Party”) is
asserted against or sought to be collected from an Indemnified Party by a third
party, the Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of such claim or demand, but the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
under this Article IX, except to the extent the Indemnifying Party
demonstrates that the defense of such claim or demand is materially prejudiced
thereby.  The Indemnifying Party shall have
30 days from receipt of the above notice from the Indemnified Party (in this Section 9.4,
the “Notice Period”) to notify the
Indemnified Party whether or not the Indemnifying Party desires, at the
Indemnifying Party’s sole cost and expense, to defend the Indemnified Party
against such claim or demand; provided, that the Indemnified Party is hereby
authorized prior to and during the Notice Period to file any motion, answer or
other pleading that it shall deem necessary or appropriate to protect its interests
or those of the Indemnifying Party and not prejudicial to the Indemnifying
Party.  If the Indemnifying Party elects
to assume the defense of any such claim or demand, the Indemnified Party shall
have the right to employ separate counsel at its own expense and to participate
in the defense thereof.  If the
Indemnifying Party elects not to assume the defense of such claim or demand (or
fails to give notice to the Indemnified Party during the Notice Period), the Indemnified
Party shall be entitled to assume the defense of such claim or demand with
counsel of its own choice, at the expense of the Indemnifying Party.  If the claim or demand is asserted against
both the Indemnifying Party and the Indemnified Party and based on the advice
of counsel reasonably satisfactory to the Indemnifying Party it is determined
that there is a conflict of interest which renders it inappropriate for the
same counsel to represent both the Indemnifying Party and the Indemnified
Party, the Indemnifying Party shall be responsible for paying separate counsel
for the Indemnified Party; provided, however, that the Indemnifying Party shall
not be responsible for paying for more than one separate firm of attorneys to
represent all of the Indemnified Parties, regardless of the number of
Indemnified Parties.  If the Indemnifying
Party elects to assume the defense of such claim or demand, (i) no
compromise or settlement thereof may be effected by the Indemnifying Party
without the Indemnified Party’s written consent (which shall not be unreasonably
withheld) unless the sole relief provided is monetary damages that are paid in
full by the Indemnifying Party and (ii) the Indemnifying Party shall have
no liability with respect to any compromise or settlement thereof effected
without its written consent (which shall not be unreasonably withheld).

Section 9.5.           Exclusivity.   The
parties hereto agree that after Closing, in relation to any breach, default, or
nonperformance of any representation, warranty, covenant, or agreement made or
entered into by a party hereto pursuant to this Agreement or any certificate,
instrument, 

 13
 

or document
delivered pursuant hereto, the only relief and remedy available to the other
party hereto in respect of said breach, default, or nonperformance shall be
Damages, but only to the extent properly claimable hereunder and subject to the
terms and provisions of this Article IX; provided, however, that
the foregoing shall not be deemed to limit or modify the parties’ rights under Section
10.8.

Section 9.6.           Indemnification
Despite Negligence.   It is the express intention of the parties
hereto that each party to be indemnified pursuant to this Article IX shall
be indemnified and held harmless from and against all Damages as to which
indemnity is provided for under this Article IX, notwithstanding that any
such Damages arise out of or result from the ordinary, strict, sole, or
contributory negligence of such party and regardless of whether any other party
(including the other parties to this Agreement) is or is not also negligent.  The parties hereto acknowledge that the
foregoing complies with the express negligence rule and is conspicuous.

ARTICLE X

MISCELLANEOUS

Section 10.1.        Notices.  All notices, requests, demands, and other
communications required or permitted to be given or made hereunder by any party
hereto shall be in writing and shall be deemed to have been duly given or made
if (i) delivered personally, (ii) transmitted by first class
registered or certified mail, postage prepaid, return receipt requested,
(iii) sent by a recognized prepaid overnight courier service (which
provides a receipt), or (iv) sent by telecopy or facsimile transmission,
with receipt acknowledged, to the parties at the following addresses (or at
such other addresses as shall be specified by the parties by like notice):

If to Seller:

TIFD III-X LLC

c/o GE Commercial Finance—EFS

Stamford, Connecticut 06927-1550

Attention:  Carl W. Petersen

Fax No.:  203-961-5818

With a copy to (which shall not constitute notice to
any Seller):

Thompson & Knight LLP

333 Clay Street, Suite 3300

Houston, Texas 77002

Attention:  Michael K. Pierce

Fax No.:  832-397-8049

If to Buyer:

515 South Flower, Suite 4800

Los Angeles, California 90071

Attention:  Randall H. Breitenbach or
Halbert S. Washburn

Fax No.:  213-225-5916

 14
 

Such notices, requests, demands, and other
communications shall be effective upon receipt.

Section 10.2.        Entire Agreement.   This
Agreement, together with any Exhibits and Schedules hereto and other writings
referred to herein or delivered pursuant hereto, constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.

Section 10.3.        Binding Effect;
Assignment; No Third Party Benefit. 
 This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors, and permitted assigns.  Except as otherwise expressly provided in
this Agreement, neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by any of the parties hereto without
the prior written consent of the other parties. 
Except as provided in Article IX, nothing in this Agreement,
express or implied, is intended to or shall confer upon any Person other than
the parties hereto, and their respective heirs, legal representatives,
successors, and permitted assigns, any rights, benefits, or remedies of any
nature whatsoever under or by reason of this Agreement.

Section 10.4.        Severability.   If any
provision of this Agreement is held to be unenforceable, this Agreement shall
be considered divisible and such provision shall be deemed inoperative to the
extent it is deemed unenforceable, and in all other respects this Agreement
shall remain in full force and effect; provided, however, that if any such
provision may be made enforceable by limitation thereof, then such provision
shall be deemed to be so limited and shall be enforceable to the maximum extent
permitted by Applicable Law.

Section 10.5.        GOVERNING LAW.   THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAWS THEREOF.

Section 10.6.        Further Assurances.   From
time to time following the Closing, at the request of any party hereto and
without further consideration, the other party or parties hereto shall execute
and deliver to such requesting party such instruments and documents and take
such other action (but without incurring any material financial obligation) as
such requesting party may reasonably request in order to consummate more fully
and effectively the transactions contemplated hereby.

Section 10.7.        Counterparts.   This
instrument may be executed in any number of identical counterparts, each of
which for all purposes shall be deemed an original, and all of which shall
constitute collectively, one instrument. 
It is not necessary that each party hereto execute the same counterpart
so long as identical counterparts are executed by each such party hereto.  This instrument may be validly executed and
delivered by facsimile or other electronic transmission.

Section 10.8.        Injunctive Relief.   The parties hereto acknowledge and agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached.  It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of the 

 15
 

provisions of
this Agreement, and shall be entitled to enforce specifically the provisions of
this Agreement, in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under this Agreement or at law or in equity.

ARTICLE
XI

DEFINITIONS AND REFERENCES

Section 11.1.        Certain Defined Terms.   When used in this Agreement, the following
terms shall have the respective meanings assigned to them in this Section 11.1:

“Affiliate”
means any person directly or indirectly controlling, controlled by or under
common control with another person.

“Agreement”
means this Limited Partner Interest Purchase and Sale Agreement, as hereafter
amended or modified in accordance with the terms hereof.

“Applicable Law”
means any statute, law, principle of common law, rule, regulation, judgment,
order, ordinance, requirement, code, writ, injunction, or decree of any Governmental
Entity.

“Business Day” means a day other than a Saturday, Sunday
or day on which commercial banks in the United States are authorized or
required to be closed for business.

“Code” means the
Internal Revenue Code of 1986, or any successor statute thereto, as amended.

“Dollars” or “$” means U.S.
Dollars.

“Environmental Laws”
means all national, state, municipal or local laws, rules, regulations,
statutes, ordinances or orders of any Governmental Entity relating to
(a) the control of any potential pollutant or protection of the air, water
or land, (b) solid, gaseous or liquid waste generation, handling,
treatment, storage, disposal or transportation or (c) the regulation of or
exposure to hazardous, toxic or other substances alleged to be harmful (including
Hazardous Materials).

“General Partner”
means BEP (GP) I, LLC, a Delaware limited liability company.

“Governing Documents”
means, when used with respect to an entity, the documents governing the
formation and operation of such entity, including (a) in the instance of a
corporation, the articles or incorporation and bylaws of such corporation,
(b) in the instance of a partnership, the partnership agreement, and
(c) in the instance of a limited liability company, the certificate of
formation and limited liability company agreement.

“Governmental Entity”
means any court or tribunal in any jurisdiction (domestic or foreign) or any
federal, state, county, municipal, or other governmental or quasi-governmental
body, agency, authority, department, commission, board, bureau, or
instrumentality (domestic or foreign).

 16
 

“Hazardous Materials”
means (a) any substance or material that is listed, defined or otherwise
designated as a “hazardous substance” under Section 101(14) of CERCLA,
(b) any petroleum or petroleum products, (c) radioactive materials,
urea formaldehyde, asbestos and PCBs and (d) any other chemical substance
or waste that is regulated by any Governmental Entity under any Environmental
Law.

“Hedge” means the Partnership hedges
identified in Schedule I.

“Hydrocarbons”
means oil, gas, other liquid or gaseous hydrocarbons, or any of them or any
combination thereof, and all products and substances extracted, separated,
processed and produced therefrom.

“IRS” means the
Internal Revenue Service.

“Knowledge” of a
specified Person (or similar references to a Person’s knowledge) means all
information actually or constructively known to (a) in the case of a
Person who is an individual, such Person, or (b) in the case of a Person
which is corporation or other entity, an executive officer or employee who
devoted substantive attention to matters of such nature during the ordinary
course of his employment by such Person. 
A Person has “constructive knowledge” of those matters which the
individual involved could reasonably be expected to have as a result of
undertaking an investigation of such a scope and extent as a reasonably prudent
man would undertake concerning the particular subject matter.

“Lien” means any
claim, lien, mortgage, security interest, pledge, charge, option, right-of-way,
easement, encroachment, or encumbrance of any kind.

“Person” means
any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, enterprise, unincorporated organization, or
Governmental Entity.

“Proceedings”
means all proceedings, actions, claims, suits, investigations, and inquiries by
or before any arbitrator or Governmental Entity.

“Reasonable Best Efforts”
means a party’s reasonable best efforts in accordance with reasonable
commercial practice.

“Securities Act”  means the Securities Act of 1933, as amended.

“Taxes” means
any income taxes or similar assessments or any sales, excise, occupation, use,
ad valorem, property, production, severance, transportation, employment,
payroll, franchise, or other tax imposed by any United States federal, state,
or local (or any foreign or provincial) taxing authority, including any
interest, penalties, or additions attributable thereto.

Section 11.2.        Certain Additional
Defined Terms.   In addition to the terms as are defined in Section 11.1,
the following terms are used in this Agreement as defined in the Articles,
Sections or other subdivisions set forth opposite such terms:

 17
 

 

	
  Defined Term

  	
   

  	
  Reference

  
	
   

  	
   

  	
   

  
	
  Assumed Obligations

  	
   

  	
  Section 6.8

  
	
  Buyer

  	
   

  	
  Preamble

  
	
  Closing

  	
   

  	
  Article II

  
	
  Closing Date

  	
   

  	
  Article II

  
	
  Damages

  	
   

  	
  Section 9.2

  
	
  Deposit

  	
   

  	
  Section 1.4(a)

  
	
  Effective Date

  	
   

  	
  Section 1.3

  
	
  Indemnified
  Party

  	
   

  	
  Section 9.4

  
	
  Indemnifying
  Party

  	
   

  	
  Section 9.4

  
	
  Interest

  	
   

  	
  Recital A

  
	
  New Hedge

  	
   

  	
  Section 6.6

  
	
  Notice Period

  	
   

  	
  Section 9.4

  
	
  Override

  	
   

  	
  Section 6.10

  
	
  Partnership

  	
   

  	
  Recital A

  
	
  Partnership
  Agreement

  	
   

  	
  Recital A

  
	
  Purchase Price

  	
   

  	
  Section 1.2

  
	
  Seller

  	
   

  	
  Preamble

  
	
  Survival Date

  	
   

  	
  Section 9.1(a)

  

 

Section 11.3.        References and
Construction.   All references in
this Agreement to articles, sections, subsections and other subdivisions refer
to corresponding articles, sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise.

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

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

(c)           Words
in the singular form shall be construed to include the plural and vice  versa,
unless the context otherwise requires. Pronouns in masculine, feminine and
neuter genders shall be construed to include any other gender.

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

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

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

 18
 

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

Section 11.4.        Joinder.    The
General Partner joins in the execution of this Agreement for the purpose of
evidencing its agreement to the terms of Sections 6.3, 6.4, 6.6, 6.9 and
6.10.  By its execution and
delivery hereof, Seller, in its capacity as the limited partner of the
Partnership, hereby consents to the General Partner executing and delivering
this Agreement in the name and on behalf of the Partnership for purposes of the
Partnership Agreement, including Section 6.2 thereof.

[Remainder
of Page Intentionally Left Blank—Signature Pages Follow]

 19

IN WITNESS WHEREOF, the
undersigned have executed and delivered this Agreement as of the date set forth
above.

	
  

  	
  PARTNERSHIP:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BREITBURN
  ENERGY PARTNERS I, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  BEP (GP) I, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Halbert S. Washburn

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BREITBURN
  OPERATING L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  BREITBURN OPERATING GP, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Halbert S. Washburn

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  

  	
  FOR
  PURPOSES OF SECTION 11.4:

  
	
   

  	
   

  
	
   

  	
  BEP (GP)
  I, LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

SIGNATURE PAGE TO ORRI
DISTRIBUTION AGREEMENT AND LIMITED

PARTNER INTEREST PURCHASE AND SALE AGREEMENT

IN WITNESS WHEREOF, the
undersigned have executed and delivered this Agreement as of the date set forth
above.

	
  

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TIFD
  III-X LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  AIRCRAFT SERVICES CORPORATION,

  
	
   

  	
   

  	
  as sole member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Raymond G. Edgar, Jr.

  
	
   

  	
  Title:

  	
  Vice President

  

 

SIGNATURE PAGE TO ORRI
DISTRIBUTION AGREEMENT AND LIMITED

PARTNER INTEREST PURCHASE AND SALE AGREEMENTExhibit
10.2

 

 

 

AMENDED
AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

 

 

 

BreitBurn
Energy Partners I, L.P.

 

 

 

Dated as
of May 5, 2003

 

 

TABLE OF CONTENTS

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  	
  1

  
	
   

  	
  Formation of Partnership

  	
   

  	
  1

  
	
   

  	
   

  	
  Section 1.1.

  	
  Formation

  	
   

  	
  1

  
	
   

  	
   

  	
  Section 1.2.

  	
  Name

  	
   

  	
  2

  
	
   

  	
   

  	
  Section 1.3.

  	
  Business

  	
   

  	
  2

  
	
   

  	
   

  	
  Section 1.4.

  	
  Places of Business,
  Registered Agent and Addresses

  	
   

  	
  2

  
	
   

  	
   

  	
  Section 1.5.

  	
  Term

  	
   

  	
  3

  
	
   

  	
   

  	
  Section 1.6.

  	
  Filings

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  3

  
	
   

  	
  Certain Definitions and
  References

  	
   

  	
  3

  
	
   

  	
   

  	
  Section 2.1.

  	
  Certain Defined Terms

  	
   

  	
  3

  
	
   

  	
   

  	
  Section 2.2.

  	
  References and
  Construction

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  13

  
	
   

  	
  Capitalization

  	
   

  	
  13

  
	
   

  	
   

  	
  Section 3.1.

  	
  Capital Contributions of
  General Partner

  	
   

  	
  13

  
	
   

  	
   

  	
  Section 3.2.

  	
  Capital Contributions of
  Limited Partner

  	
   

  	
  13

  
	
   

  	
   

  	
  Section 3.3.

  	
  Request for Additional
  Capital Contributions of Limited Partner

  	
   

  	
  15

  
	
   

  	
   

  	
  Section 3.4.

  	
  Reduced Capital
  Contributions of Limited Partner

  	
   

  	
  19

  
	
   

  	
   

  	
  Section 3.5.

  	
  Payments of Capital
  Contributions

  	
   

  	
  19

  
	
   

  	
   

  	
  Section 3.6.

  	
  Non-payment of
  Capital Contributions

  	
   

  	
  20

  
	
   

  	
   

  	
  Section 3.7.

  	
  Interest on and Return of
  Capital Contributions

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  23

  
	
   

  	
  Allocations and Distributions

  	
   

  	
  23

  
	
   

  	
   

  	
  Section 4.1.

  	
  Allocation of Costs and
  Expenses

  	
   

  	
  23

  
	
   

  	
   

  	
  Section 4.2.

  	
  Allocation of Revenues

  	
   

  	
  23

  
	
   

  	
   

  	
  Section 4.3.

  	
  Income Tax Allocations

  	
   

  	
  24

  
	
   

  	
   

  	
  Section 4.4.

  	
  Distributions

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  28

  
	
   

  	
  Partnership Property

  	
   

  	
  28

  
	
   

  	
   

  	
  Section 5.1.

  	
  Title to Partnership
  Property

  	
   

  	
  28

  
	
   

  	
   

  	
  Section 5.2.

  	
  Acquisition of the
  Properties

  	
   

  	
  28

  
	
   

  	
   

  	
  Section 5.3.

  	
  Additional Acquisitions

  	
   

  	
  29

  
	
   

  	
   

  	
  Section 5.4.

  	
  Lease Sales

  	
   

  	
  30

  
	
   

  	
   

  	
  Section 5.5.

  	
  Sales of Production

  	
   

  	
  30

  
	
   

  	
   

  	
  Section 5.6.

  	
  Operations on Partnership
  Leases

  	
   

  	
  31

  
	
   

  	
   

  	
  Section 5.7.

  	
  Hedge Arrangement

  	
   

  	
  32

  
	
   

  	
   

  	
  Section 5.8.

  	
  Production

  	
   

  	
  32

  
	
   

  	
   

  	
  Section 5.9.

  	
  Environmental, Health and
  Safety Program

  	
   

  	
  32

  

 

 i
 

 

	
  ARTICLE VI

  	
  33

  
	
   

  	
  Management

  	
   

  	
  33

  
	
   

  	
   

  	
  Section 6.1.

  	
  Power and Authority of
  General Partner

  	
   

  	
  33

  
	
   

  	
   

  	
  Section 6.2.

  	
  Certain Restrictions on
  General Partner’s Power and Authority

  	
   

  	
  33

  
	
   

  	
   

  	
  Section 6.3.

  	
  Duties and Services of
  General Partner

  	
   

  	
  35

  
	
   

  	
   

  	
  Section 6.4.

  	
  Liability of General
  Partner

  	
   

  	
  36

  
	
   

  	
   

  	
  Section 6.5.

  	
  Limitations on
  Indemnification

  	
   

  	
  36

  
	
   

  	
   

  	
  Section 6.6.

  	
  Costs, Expenses and
  Reimbursement

  	
   

  	
  37

  
	
   

  	
   

  	
  Section 6.7.

  	
  Organization and Third
  Party Acquisition Costs

  	
   

  	
  38

  
	
   

  	
   

  	
  Section 6.8.

  	
  Insurance

  	
   

  	
  38

  
	
   

  	
   

  	
  Section 6.9.

  	
  Tax Elections

  	
   

  	
  39

  
	
   

  	
   

  	
  Section 6.10.

  	
  Tax Returns

  	
   

  	
  40

  
	
   

  	
   

  	
  Section 6.11.

  	
  Appointment of Trustee to
  Receive Payments

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  41

  
	
   

  	
  Rights and Obligations of Limited Partner

  	
   

  	
  41

  
	
   

  	
   

  	
  Section 7.1.

  	
  Rights of Limited Partner

  	
   

  	
  41

  
	
   

  	
   

  	
  Section 7.2.

  	
  Limitations on Limited
  Partner

  	
   

  	
  41

  
	
   

  	
   

  	
  Section 7.3.

  	
  Liability of Limited
  Partner

  	
   

  	
  41

  
	
   

  	
   

  	
  Section 7.4.

  	
  Access of Limited Partner
  to Data

  	
   

  	
  41

  
	
   

  	
   

  	
  Section 7.5.

  	
  Withdrawal and Return of
  Capital Contribution

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  42

  
	
   

  	
  Books, Records, Reports and Bank Accounts

  	
   

  	
  42

  
	
   

  	
   

  	
  Section 8.1.

  	
  Capital Accounts, Books
  and Records

  	
   

  	
  42

  
	
   

  	
   

  	
  Section 8.2.

  	
  Reports

  	
   

  	
  44

  
	
   

  	
   

  	
  Section 8.3.

  	
  Bank Accounts

  	
   

  	
  47

  
	
   

  	
   

  	
  Section 8.4.

  	
  Information Relating to
  the Partnership

  	
   

  	
  47

  
	
   

  	
   

  	
  Section 8.5.

  	
  Certain Notices

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  48

  
	
   

  	
  Assignments of Interests and Substitutions

  	
   

  	
  48

  
	
   

  	
   

  	
  Section 9.1.

  	
  Assignments by Limited
  Partner

  	
   

  	
  48

  
	
   

  	
   

  	
  Section 9.2.

  	
  Assignment by General
  Partner

  	
   

  	
  49

  
	
   

  	
   

  	
  Section 9.3.

  	
  Merger or Consolidation

  	
   

  	
  49

  
	
   

  	
   

  	
  Section 9.4.

  	
  Removal of General Partner

  	
   

  	
  49

  
	
   

  	
   

  	
  Section 9.5.

  	
  Right of General Partner
  Upon Removal

  	
   

  	
  50

  
	
   

  	
   

  	
  Section 9.6.

  	
  Right of First Offer

  	
   

  	
  51

  
	
   

  	
   

  	
  Section 9.7.

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

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  52

  
	
   

  	
  Dissolution, Liquidation and Termination

  	
   

  	
  52

  
	
   

  	
   

  	
  Section 10.1.

  	
  Dissolution

  	
   

  	
  52

  
	
   

  	
   

  	
  Section 10.2.

  	
  Withdrawal by General
  Partner and Reconstitution

  	
   

  	
  53

  
	
   

  	
   

  	
  Section 10.3.

  	
  Liquidation and
  Termination

  	
   

  	
  54

  
	
   

  	
   

  	
  Section 10.4.

  	
  Cancellation of
  Certificate

  	
   

  	
  55

  

 

 ii
 

 

	
  ARTICLE XI

  	
  55

  
	
   

  	
  Representations and Warranties

  	
   

  	
  55

  
	
   

  	
   

  	
  Section 11.1.

  	
  Representations and
  Warranties of General Partner

  	
   

  	
  55

  
	
   

  	
   

  	
  Section 11.2.

  	
  Representations and
  Warranties of Limited Partner

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  58

  
	
   

  	
  Miscellaneous

  	
   

  	
  58

  
	
   

  	
   

  	
  Section 12.1.

  	
  Notices

  	
   

  	
  58

  
	
   

  	
   

  	
  Section 12.2.

  	
  Amendments

  	
   

  	
  59

  
	
   

  	
   

  	
  Section 12.3.

  	
  Partition

  	
   

  	
  59

  
	
   

  	
   

  	
  Section 12.4.

  	
  Entire Agreement

  	
   

  	
  59

  
	
   

  	
   

  	
  Section 12.5.

  	
  No Waiver

  	
   

  	
  59

  
	
   

  	
   

  	
  Section 12.6.

  	
  Applicable Law

  	
   

  	
  59

  
	
   

  	
   

  	
  Section 12.7.

  	
  Successors and Assigns

  	
   

  	
  59

  
	
   

  	
   

  	
  Section 12.8.

  	
  Exhibits

  	
   

  	
  59

  
	
   

  	
   

  	
  Section 12.9.

  	
  Survival of
  Representations and Warranties

  	
   

  	
  59

  
	
   

  	
   

  	
  Section 12.10.

  	
  No Third Party Benefit

  	
   

  	
  59

  
	
   

  	
   

  	
  Section 12.11.

  	
  Public Announcements

  	
   

  	
  60

  
	
   

  	
   

  	
  Section 12.12.

  	
  Counterparts

  	
   

  	
  60

  

 

 iii

AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

BreitBurn Energy Partners I, L.P.

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

RECITALS:

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

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

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

AGREEMENT:

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

ARTICLE I

Formation of Partnership

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

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

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

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

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

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

 2
 

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

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

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

ARTICLE II

Certain Definitions and References

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

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

 3
 

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

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

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

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

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

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

 4
 

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

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

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

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

 5
 

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

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

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

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

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

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

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

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

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

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

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

 6
 

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

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

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

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

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

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

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

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

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

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

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

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

 7
 

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

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

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

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

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

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

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

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

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

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

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

 8
 

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

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

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

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

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

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

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

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

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

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

 9
 

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

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

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

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

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

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

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

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

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

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

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

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

 10
 

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

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

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

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

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

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

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

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

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

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

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

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

 11
 

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

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

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

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

Section 2.2.           References and
Construction.

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

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

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

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

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

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

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

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

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

 12
 

ARTICLE III

Capitalization

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

Section
3.2.           Capital
Contributions of Limited Partner.

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

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

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

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

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

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

(iii)           the Limited Partner shall have received:

 13
 

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

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

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

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

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

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

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

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

 14
 

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

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

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

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

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

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

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

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

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

 15
 

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

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

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

 16
 

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

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

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

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

 17

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

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

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

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

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

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

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

 18
 

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

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

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

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

Section
3.5.           Payments
of Capital Contributions.

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

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

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

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

 19
 

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

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

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

Section
3.6.           Non-payment
of Capital Contributions.

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

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

 20
 

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

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

 21
 

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

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

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

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

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

Section
3.7.           Interest
on and Return of Capital Contributions.

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

 22
 

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

ARTICLE
IV

Allocations
and Distributions

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

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

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

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

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

Section
4.2.           Allocation
of Revenues.

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

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

 23
 

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

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

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

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

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

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

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

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

 24
 

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

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

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

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

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

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

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

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

 25
 

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

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

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

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

 26
 

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

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

Section
4.4.           Distributions.

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

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

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

 27
 

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

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

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

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

ARTICLE V

Partnership
Property

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

Section 5.2.           Acquisition of the
Properties.

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

 28
 

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

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

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

 29
 

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

Section
5.4.           Lease
Sales.

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

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

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

 30
 

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

Section
5.6.           Operations
on Partnership Leases.

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

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

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

 31

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

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

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

 32
 

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

ARTICLE
VI

Management

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

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

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

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

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

 33
 

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

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

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

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

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

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

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

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

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

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

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

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

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

 34
 

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

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

Section
6.3.           Duties
and Services of General Partner.

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

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

 35
 

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

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

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

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

 36
 

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

Section
6.6.           Costs,
Expenses and Reimbursement.

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

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

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

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

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

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

 37
 

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

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

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

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

 38
 

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

Section
6.9.           Tax
Elections.

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

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

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

(iii)          To elect the accrual method of accounting;

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

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

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

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

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

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

 39
 

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

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

 40
 

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

ARTICLE
VII

Rights
and Obligations of Limited Partner

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

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

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

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

 41
 

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

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

ARTICLE
VIII

Books,
Records, Reports and Bank Accounts

Section
8.1.           Capital
Accounts, Books and Records.

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

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

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

 42
 

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

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

 43
 

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

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

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

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

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

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

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

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

 44
 

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

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

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

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

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

 45
 

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

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

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

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

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

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

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

 46
 

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

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

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

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

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

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

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

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

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

 47
 

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

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

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

ARTICLE
IX

Assignments
of Interests and Substitutions

Section
9.1.           Assignments
by Limited Partner.

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

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

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

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

 48
 

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

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

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

Section
9.4.           Removal
of General Partner.

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

 49

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

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

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

 50
 

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

Section
9.6.           Right of First Offer.

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

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

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

 51
 

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

ARTICLE X

Dissolution,
Liquidation and Termination

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

(a)           April 1, 2023.

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

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

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

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

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

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

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

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

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

Section
10.2.        Withdrawal by General
Partner and Reconstitution.

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

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

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

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

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

 54
 

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

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

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

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

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

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

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

ARTICLE
XI

Representations
and Warranties

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

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

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

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

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

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

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

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

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

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

 56
 

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

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

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

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

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

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

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

 57
 

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

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

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

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

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

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

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

ARTICLE
XII

Miscellaneous

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

 58
 

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

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

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

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

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

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

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

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

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

 59
 

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

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 60

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

	
   

  	
  GENERAL PARTNER:

  	 

	
   

  	
   

  	 

	
   

  	
  BEP (GP) I, LLC

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Randall H. Breitenbach

  	 

	
   

  	
  Title: Chief Executive Officer

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  ADDRESS FOR NOTICE PURPOSES:

  	 

	
   

  	
   

  	 

	
   

  	
  515 South Flower, Suite 4800

  	 

	
   

  	
  Los Angeles, California 90071

  	 

	
   

  	
  Attention: Randall H. Breitenbach or Halbert S.

  Washburn

  	 

	
   

  	
  Telecopy No.: 213-225-5916

  	 

	
   

  	
  Email: 

  	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  SOLELY FOR THE PURPOSE

  	 

	
   

  	
  OF EVIDENCING ITS AGREEMENT

  	 

	
   

  	
  TO WITHDRAW FROM THE PARTNERSHIP

  	 

	
   

  	
  AS PROVIDED IN THE RECITALS TO THIS

  	 

	
   

  	
  AGREEMENT AND THE TERMS OF

  SECTION 3.7(b):

  	 

	
   

  	
   

  	 

	
   

  	
  BEP (LP) I, LLC

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Randall H. Breitenbach

  	 

	
   

  	
  Title: Chief Executive Officer

  	 

							

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

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

	
   

  	
  LIMITED PARTNER:

  
	
   

  	
   

  
	
   

  	
  TIFD III-X LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  AIRCRAFT SERVICES CORPORATION,

  
	
   

  	
   

  	
  Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Jane S. Reichle, Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ADDRESS FOR NOTICE PURPOSES:

  
	
   

  	
   

  	
   

  
	
   

  	
  c/o GE Capital Corp.—SFG

  
	
   

  	
  120 Long Ridge Road - 3rd Floor

  
	
   

  	
  Stamford, Connecticut 06927-1550

  
	
   

  	
  Attention: Global Asset Management Operations

  
	
   

  	
  Telecopy No.: 203-961-2017

  
	
   

  	
  Email: jane.reichle@ge.com

  
					

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

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