Document:

Exhibit 10.29

 

UNITS OF LIMITED PARTNERSHIP
INTEREST IN THE PARTNERSHIP HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE OR OTHER
JURISDICTION.  WITHOUT SUCH REGISTRATION,
SUCH UNITS MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED,
EXCEPT UPON DELIVERY TO THE GENERAL PARTNER OF AN OPINION OF COUNSEL
SATISFACTORY TO THE GENERAL PARTNER OF THE PARTNERSHIP THAT REGISTRATION IS NOT
REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE GENERAL PARTNER OF THE
PARTNERSHIP OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE GENERAL
PARTNER TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE SECURITIES OR BLUE SKY
LAWS OF ANY STATE OR OTHER JURISDICTION. 
IN ADDITION, ANY TRANSFER OF UNITS REQUIRES THE PRIOR WRITTEN CONSENT OF
THE GENERAL PARTNER AND IS SUBJECT TO OTHER RESTRICTIONS PURSUANT TO THIS
AGREEMENT.

 

AGREEMENT OF LIMITED PARTNERSHIP

 

OF

 

CWEI ROMERE PASS, L.P.

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  DEFINITIONS

  
	
   

  
	
  1.01

  	
  Certain Definitions

  
	
  1.02

  	
  Construction

  
	
   

  	
   

  
	
  ARTICLE II

  ORGANIZATION

  
	
   

  
	
  2.01

  	
  Formation

  
	
  2.02

  	
  Name

  
	
  2.03

  	
  Registered
  Office; Registered Agent; Other Offices

  
	
  2.04

  	
  Purposes

  
	
  2.05

  	
  Certificate;
  Foreign Qualification

  
	
  2.06

  	
  Term

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  GENERAL PARTNER; MANAGEMENT

  
	
   

  
	
  3.01

  	
  Authority of General Partner

  
	
  3.02

  	
  Certain Restrictions on General Partner’s
  Power and Authority

  
	
  3.03

  	
  Duties and Services of General Partner

  
	
  3.04

  	
  Operating Agreements

  
	
  3.05

  	
  Admission of Additional General Partners

  
	
  3.06

  	
  Withdrawal of General Partner

  
	
  3.07

  	
  General
  Partner as Limited Partner

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  LIMITED PARTNERS

  
	
   

  
	
  4.01

  	
  Restrictions
  on Limited Partners

  
	
  4.02

  	
  Access to Information

  
	
  4.03

  	
  Admission of Additional Limited Partners

  
	
  4.04

  	
  Investment
  Representations of the Limited Partners

  
	
  4.05

  	
  Transfer Restrictions

  
	
  4.06

  	
  Permitted Transfers; Status as Assignee

  
	
  4.07

  	
  General Partner’s Right of Purchase

  
	
  4.08

  	
  Specific Performance

  
	
   

  	
   

  
	
  ARTICLE V

  CAPITAL CONTRIBUTIONS

  
	
   

  
	
  5.01

  	
  Capital Contributions of General Partner

  
	
  5.02

  	
  Initial Capital Contributions of Limited
  Partners

  
	
  5.03

  	
  Additional Capital Contributions of Limited
  Partners

  
	
  5.04

  	
  Capital Accounts

  
	
  5.05

  	
  Return of Capital Contribution

  

 

i

 

	
  ARTICLE VI

  SHARING, ALLOCATIONS AND DISTRIBUTIONS

  
	
   

  
	
  6.01

  	
  Sharing and Allocation of Costs and
  Expenses

  
	
  6.02

  	
  Sharing
  and Allocation of Revenues

  
	
  6.03

  	
  Allocations
  for Capital Account and Tax Purposes

  
	
  6.04

  	
  Distributions

  
	
  6.05

  	
  Withholding
  Taxes

  
	
   

  	
   

  
	
  ARTICLE VII

  BOOKS, RECORDS AND BANK ACCOUNTS

  
	
   

  
	
  7.01

  	
  Maintenance
  of Books

  
	
  7.02

  	
  Accounts

  
	
   

  	
   

  
	
  ARTICLE VIII

  DISSOLUTION, LIQUIDATION AND TERMINATION

  
	
   

  
	
  8.01

  	
  Dissolution

  
	
  8.02

  	
  Liquidation
  and Termination

  
	
  8.03

  	
  Termination

  
	
   

  	
   

  
	
  ARTICLE IX

  GENERAL PROVISIONS

  
	
   

  
	
  9.01

  	
  Offset

  
	
  9.02

  	
  Notices

  
	
  9.03

  	
  Entire
  Agreement

  
	
  9.04

  	
  Effect
  of Waiver or Consent

  
	
  9.05

  	
  Amendment or Modification

  
	
  9.06

  	
  Binding Effect

  
	
  9.07

  	
  Governing Law; Severability

  
	
  9.08

  	
  Further Assurances

  
	
  9.09

  	
  Waiver
  of Certain Rights

  
	
  9.10

  	
  Insurance

  
	
  9.11

  	
  Indemnification

  
	
  9.12

  	
  Counsel to the Partnership

  
	
  9.13

  	
  Power of Attorney

  
	
  9.14

  	
  Counterparts

  
	
  9.15

  	
  No
  Employment Contract

  
	
   

  
	
  Exhibit A – Schedule of Limited Partners

  
	
  Exhibit B – Area of Interest

  
	
  Exhibit C – Wells

  
	
  Exhibit D – Allocations of Profits and
  Losses and Other Tax Matters

  	
   

  
			

 

ii

 

AGREEMENT OF LIMITED PARTNERSHIP

 

OF

 

CWEI ROMERE PASS, L.P.

 

This AGREEMENT
OF LIMITED PARTNERSHIP OF CWEI ROMERE PASS, L.P. (this “Agreement”) is made and entered into as of
October 1, 2002 (the “Effective Date”),
by and among the Partners (as defined below).

 

FOR AND IN
CONSIDERATION OF the mutual covenants, rights, and obligations set forth in
this Agreement, the benefits to be derived from them, and other good and
valuable consideration, the receipt and the sufficiency of which is hereby
acknowledged, the Partners agree as follows:

 

ARTICLE
I

DEFINITIONS

 

1.01         Certain Definitions.  As used in this Agreement, the following terms have the following
meanings:

 

“Acquisition Costs” means
(i) the costs of acquiring a leasehold interest, including, without limitation,
direct costs of seismic data and interpretation, lease broker services, title
examinations, filing fees, and recording costs, and (ii) the fair value of
Partnership Properties contributed to the Partnership by the General Partner.

 

“Act” means the Texas
Revised Limited Partnership Act and any successor statute, as amended.

 

“Affiliate” means, when
used with reference to a specified Person, (a) any Person directly or
indirectly owning, controlling or holding power to vote 50% or more of the
outstanding voting securities of the specified Person, (b) any Person 50% or
more of whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or indirectly controlling, controlled by or under common control with
the specified Person, (d) if the specified Person is a corporation, any officer
or director of the specified Person or of any corporation directly or
indirectly controlling that specified Person, (e) if the specified Person is a
partnership, any general partner or if the general partner is a partnership,
the general partners of that partnership, and (f) if the specified Person is an
individual, such individual’s spouse and natural and adoptive lineal
descendants and trusts for the benefit of any such Persons.  For purposes of this definition, the ability
through share ownership or contractual arrangement to elect or cause the
election of a majority of the board of directors of a corporation shall
constitute “control.”

 

“Agreed Rate” means
3.596% per annum.

 

“Agreement” means this
Agreement of Limited Partnership, as amended or restated from time to time.

 

 

“Area of Interest” means
the area described in Exhibit B.

 

“Capital Account”
has the meaning set forth in Section 5.04.

 

“Capital Contribution”
means, for any Partner, the dollar amount of any cash contributed to the
capital of the Partnership and the fair value of any property contributed to
the Partnership by such Partner.

 

“Certificate” means the
certificate of limited partnership of the Partnership filed with the Secretary
of State of Texas, as amended or restated from time to time.

 

“Change in Control” has
the meaning set forth in Section 8.01(d).

 

“Code” means the Internal
Revenue Code of 1986, as amended.

 

“Contribution Date”
has the meaning set forth in Section 5.03(a).

 

“Contribution Notice” has
the meaning set forth in Section 5.03(a).

 

“CWEI” means Clayton
Williams Energy, Inc., a Delaware corporation.

 

“Event of Forfeiture”
has the meaning set forth in Section 4.07.

 

“Event of Withdrawal”
means the withdrawal of the General Partner as provided in Section 3.06.  The events described in subdivisions (4),
(5) and (8) of Section 4.02(a) of the Act shall not be Events of Withdrawal,
and a General Partner shall not cease to be a General Partner upon the
occurrence of any of such events.

 

“Exchange Act” means the
Securities Exchange Act of 1934, as amended.

 

“General
Partner” means Romere Pass Acquisition Corp., a Delaware corporation
and each other Person admitted as an additional or successor General Partner
pursuant to Section 3.05.

 

“Indemnified Person” has
the meaning set forth in Section 9.11.

 

“Lease” means 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 production 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.

 

“Limited Partner” means
each Person listed as a limited partner on Exhibit A and each other
Person admitted as an additional or successor Limited Partner pursuant to Section
4.03.

 

2

 

“Majority in Interest”
has the meaning set forth in Section 3.02.

 

“Non-Contributing Limited Partner”
has the meaning set forth in Section 5.03(b).

 

“Operating
Agreement” means an agreement between the operator and
non-operating interest owners in a Lease for the testing, development and
operation of a tract of land or Lease for the exploration and development of oil,
gas, minerals or hydrocarbons.

 

“Partner” means any
General Partner or any Limited Partner.

 

“Partnership” means
the limited partnership formed by the Partners pursuant to this Agreement.

 

“Partnership Counsel” has the meaning set forth in Section
9.12.

 

“Partnership Property”
means Leases and Wells in which the Partnership owns an undivided interest.

 

“Payout” means the
earliest calendar month during which the General Partner shall have received
distributions pursuant to Section 6.04 in an aggregate amount equal to
the sum of (i) the cumulative Capital Contributions made by the General Partner
pursuant to Section 5.01, plus (ii) an annual rate of return on such
Capital Contributuions equal to the Agreed Rate.  For this purpose, each distribution and Capital Contribution
shall be deemed to have been made on the last day of the month during which it
was made or received.

 

“Person” means an
individual, corporation, partnership, limited partnership, limited liability
company, business trust or other legal entity.

 

“Regulations” mean the
regulations promulgated by the United States Department of Treasury pursuant to
the Code.  All references herein to
sections of the Treasury Regulations shall include corresponding provision or
provisions of succeeding, similar, substitute, temporary or final Treasury
Regulations.

 

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

 

“Transfer” means any
sale, transfer, assignment, pledge, encumbrance, hypothecation, gift or
disposition of a Unit in whole or in part, or any rights or benefits to which a
holder of a Unit may be entitled as provided in this Agreement or the Act,
including, without limitation, the right to receive distributions in cash or in
kind.

 

“Unit” means a
Limited Partnership interest, or fraction thereof, in the Partnership.  The number of Units owned by each Limited
Partner and the total number of Units of the Partnership are set forth on Exhibit
A, as amended from time to time.

 

3

 

“Well” means a well in
which the Partnership  holds a
Working Interest derived from its ownership of one or more Leases.  The name and location of each “Well” is
shown on Exhibit C, as amended from time to time.

 

“Well Costs” means the
Partnership’s share of costs pursuant to any Operating Agreement for the
drilling, completing, equipping, deepening or sidetracking a Well, including,
without limitation:  (i) the costs
of surveying and staking the Well, the costs of any surface damages and the
costs of clearing, coring, testing, logging and evaluating the Well;
(ii) the costs of casing, cement and cement services for the Well;
(iii) the cost of plugging and abandoning the Well (including standard and
customary remediation activities associated therewith), if it is determined
that the Well would not produce in commercial quantities and should be
abandoned; (iv) all direct charges and overhead chargeable to the Partnership
with respect to the 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; (v) all costs incurred by the Partnership in
recompleting or plugging back any Well; (vi) all costs incurred by the
Partnership in reworking any Well if the rework is covered by an authority for
expenditure under the applicable Operating Agreement; (vii) 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); and
(viii) the costs of constructing production facilities, pipelines and other
facilities necessary to develop Partnership property 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; provided,
that Well Costs shall not include any Acquisition Costs.

 

“Working Interest” means
a fractional operating interest in a Lease that permits the Partnership to explore,
develop and produce one or more properties in the Area of Interest and bear its
percentage of the costs and expenses relating to the maintenance and
development of and operations relating to such properties in return for a share
of the mineral production from the property.

 

1.02         Construction.  Whenever the context requires, the gender of
all words used in this Agreement includes the masculine, feminine and
neuter.  All references to Articles and
Sections refer to articles and sections of this Agreement, and all references
to exhibits are to Exhibits attached to this Agreement, each of which is made a
part of this Agreement for all purposes.

 

ARTICLE
II

ORGANIZATION

 

2.01         Formation.  The Persons executing this Agreement agree
to form the Partnership as a limited partnership under the Act for the purposes
and upon the terms and subject to the conditions set forth in this Agreement.

 

4

 

2.02         Name.  The name of the Partnership is “CWEI Romere
Pass, L.P.”, and all Partnership business shall be conducted in that name or
such other names that comply with applicable law as the General Partner may
select from time to time.

 

2.03         Registered
Office;
Registered Agent; Other Offices.  The registered office of the Partnership in the State of Texas
shall be at such place as the General Partner may designate from time to
time.  The registered agent for service
of process on the Partnership in the State of Texas or in any other jurisdiction
shall be such Person or Persons as the General Partner may designate from time
to time.  The Partnership may have such
other offices as the General Partner may designate from time to time.

 

2.04         Purposes.  The purposes for which the Partnership is
formed are to (i) acquire, explore, hold, develop, produce, dispose of and
otherwise deal with Partnership Property, (ii) collect proceeds, payments and
other distributions from Partnership Property, (iii) make distributions to the
Partners in accordance with the terms hereof and (iv) engage in any other
business or activity that now or in the future may be necessary, incidental,
proper, advisable or convenient to accomplish the foregoing purposes
(including, without limitation, obtaining appropriate financing) and that is
not prohibited by the law of the jurisdiction in which the Partnership engages
in that business.

 

2.05         Certificate;  Foreign
Qualification. 
The General Partner shall execute and cause the Certificate to be filed
with the Secretary of State of Texas on or as soon as practicable after the
Effective Date.  Prior to the
Partnership’s conducting business in any jurisdiction other than Texas, the
General Partner shall cause the Partnership to comply, to the extent those
matters are reasonably within the control of the General Partner, with all
requirements necessary to qualify the Partnership as a foreign limited
partnership (or a partnership in which the Limited Partners have limited
liability) in that jurisdiction.  At the
request of the General Partner, each Limited Partner shall execute,
acknowledge, swear to and deliver all certificates and other instruments
conforming with this Agreement that are necessary or appropriate to form,
qualify, continue, dissolve and terminate the Partnership as a limited
partnership under the law of the State of Texas and to qualify, continue,
dissolve and terminate the Partnership as a foreign limited partnership (or a
partnership in which the Limited Partners have limited liability) in all other
jurisdictions in which the Partnership may conduct business, and to this end
the General Partner may use the power of attorney set forth in Section 9.13.

 

2.06         Term.   The term of Partnership shall commence on the
date of filing of the Certificate and shall continue until the close of
business on December 31, 2012, unless the Partnership is dissolved and
liquidated before such time in accordance with this Agreement.

 

ARTICLE
III

GENERAL PARTNER; MANAGEMENT

 

3.01         Authority of General Partner.  In
addition to the powers now or hereafter granted to a general partner of a
limited partnership under applicable law or which are granted to the General
Partner under other provisions of this Agreement, subject only to any express
limitations set forth in this Agreement, the General Partner shall have the
full and exclusive power and authority to do any and all things necessary,
incidental, proper, advisable or convenient for the 

 

5

 

furtherance of the purposes of
the Partnership and for the protection and benefit of the Partnership,
including without limitation:

 

(a)           to determine whether
to acquire, hold, develop or produce Partnership Property and other assets of
the Partnership and whether, when and on what terms to farm-out, sell, promote
or otherwise transfer any particular prospect, or any interest therein;

 

(b)           to make all decisions concerning the
desirability of payment, and the payment or supervision of payment, of all
delay rentals, shut-in royalty payments, minimum royalty payments and any other
similar or related payments;

 

(c)           to drill, complete, control, rework,
side-track, redrill, recomplete, produce, plug and/or abandon any or all of the
Wells;

 

(d)           to form and participate in tax
partnerships, joint ventures or other relationships that it deems desirable
with regard to Partnership prospects;

 

(e)           to make any expenditures and incur
any obligations it deems appropriate for the conduct of the activities of the
Partnership;

 

(f)            to acquire (including, without
limitation, to purchase at premium prices when deemed appropriate by the
General Partner), exchange, sell, lease, dispose of or exchange any or all
Partnership Property;

 

(g)           to use Partnership Property or credit
of the Partnership (including without limitation, cash on hand), for any
purpose not inconsistent with this Agreement and on any terms it deems
appropriate, including, without limitation, the financing of Partnership
operations and activities, the repayment of obligations of the Partnership and
the contribution obligations of others under third-party joint operating
agreements or similar agreements;

 

(h)           to negotiate, execute, deliver and
perform, in the name and on behalf of the Partnership, any contracts,
conveyances or other instruments which it considers appropriate for the conduct
of Partnership operations or the implementation of its powers under this
Agreement, including, without limitation, Operating Agreements, unit Operating
Agreements and joint development agreements, and the right to make any and all
elections that are required or necessary under the terms of any agreements;

 

(i)            to distribute cash, Partnership
Property or other assets of the Partnership to the Partners in accordance with
this Agreement;

 

(j)            to select and dismiss attorneys,
accountants, consultants and contractors of the Partnership and to determine
their compensation and other terms of engagement;

 

(k)           to acquire and maintain such
insurance, if any, for the benefit of the Partnership and the Partners as it
deems appropriate;

 

(l)            to establish operating and other
offices and facilities;

 

6

 

(m)          to borrow money,
incur indebtedness or make guaranties in the name or on behalf of the
Partnership and to secure the same by mortgages, deeds of trust, security
interests, pledges or other liens or encumbrances on all or any part of the
Partnership Property;

 

(n)           to construct
pipelines, drilling and production platforms and facilities, gas plants,
processing plants and other facilities incidental to the development of
Partnership Property and the production and marketing of oil and gas therefrom;

 

(o)           to execute and
deliver division orders and transfer orders upon such terms and conditions and
containing such provisions as the General Partner may consider appropriate; and

 

(p)           to control any
matters affecting the rights and obligations of the Partnership including the
conduct of litigation and other incurring of legal expenses and the settlement
of claims in litigation; provided, that, the General Partner shall not
be authorized to settle any claims for which any Limited Partner has, or may
have, any individual liability without the Limited Partner’s prior written
consent.

 

Any person dealing with the
Partnership shall be entitled to rely, and shall be fully protected in relying,
on the authority of the General Partner to act for the Partnership.

 

3.02         Certain Restrictions on General Partner’s
Power and Authority.  The General Partner shall not
have the power or authority to, and shall not, do, form or authorize any of the
following without the prior written consent of Limited Partners holding a
majority of the Units held by all Limited Partners (a “Majority in Interest”):

 

(a)           do any act in
contravention of this Agreement;

 

(b)           do any act which
would make it impossible to carry on the ordinary business of the Partnership;

 

(c)           possess Partnership
Property or other assets of the Partnership or assign any rights in specific
Partnership Property or assets for other than a Partnership purpose;

 

(d)           change or reorganize
the Partnership into any other legal form; or

 

(e)           commingle the funds
of the Partnership with the funds of any other person or entity.

 

3.03         Duties and Services of General Partner. 
The General Partner shall comply in all respects with the terms of this
Agreement and shall use its reasonable efforts to cause the Partnership to: (i)
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;
(ii) comply in all material respects with all applicable laws, ordinances or
governmental rules and regulations to which the Partnership is subject; and
(iii) obtain all licenses, permits, franchises and other governmental
authorizations material and necessary with respect to the ownership of
Partnership properties and the conduct of Partnership business and
operations.  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 for the furtherance
of the purposes of the Partnership; provided,

 

7

 

however, that the Partners acknowledge and
agree that neither the General Partner nor any Affiliate thereof nor any of
their respective officers, directors, employees or agents shall be required to
devote full time to Partnership business and may from time to time engage in
and possess interests in other business ventures of any and every type and
description, independently or with others, including without limitation, the ownership,
acquisition, exploration, development, operation and management of oil and gas
properties, oil and gas drilling programs and other partnerships similar to
this Partnership, and that neither the Partnership nor any Limited Partner
shall by virtue of this Agreement have any right, title, interest or expectancy
in or to such activities or ventures.  The Partners acknowledge and agree that the General Partner engages in
the same business as the Partnership, and that that General Partner has no duty
to any Limited Partner with regard to the operation of the General Partner’s
business affairs or prospects outside of the Partnership.  The Partners also agree and acknowledge that
the General Partner may operate the General Partner’s business affairs or prospects
outside of the Partnership without offering the Partnership or any Limited
Partner the right to participate in such other affairs or prospects.

 

3.04         Operating Agreements.  The General Partner shall use its reasonable efforts to cause the
Partnership to become a party to all applicable Operating Agreements for any
Partnership Property.  To the extent the
General Partner is not able to cause the Partnership to become a party to an
applicable Operating Agreement, the General Partner agrees to use its reasonable
efforts to act in accordance with the provisions of such Operating Agreement as
if the Partnership were a party to such Operating Agreement.  In addition, following dissolution and
liquidation of the Partnership, each Partner agrees to become a party to all
Operating Agreements in which the General Partner serves as operator, and
further agrees to use its reasonable efforts to become a party to all other
applicable Operating Agreements.  To the
extent any Partner is not able to become a party to an applicable Operating
Agreement, such Partner agrees to use its reasonable efforts to act in
accordance with the provisions of such Operating Agreement as if it were a
party to such Operating Agreement.

 

3.05         Admission of Additional
General Partners. 
After the date of this Agreement, the General Partner may admit one or
more additional General Partners at such times and upon such terms and
conditions as may be determined by the General Partner, in its sole
discretion.  Each such additional
General Partner, as a condition to its admission to the Partnership, shall
adopt and agree to be bound by the terms and provisions of this Agreement and
will assume all obligations and liabilities of the Partnership arising before
its admission as though it had been a General Partner when such obligations and
liabilities were incurred.

 

3.06         Withdrawal of General
Partner.  A
General Partner shall cease to be a General Partner and shall be deemed to have
withdrawn from the Partnership upon the General Partner’s written notice of its
withdrawal to the other Partners.  A
General Partner may not be removed as a General Partner.

 

3.07         General Partner as Limited Partner.  The General Partner shall also be treated as
a Limited Partner to the extent that it acquires, holds or becomes an assignee
of Units of a Limited Partner, whether pursuant to Section 5.03(b) or
otherwise.

 

8

 

ARTICLE IV

LIMITED PARTNERS

 

4.01         Restrictions on Limited Partners.  Notwithstanding any other provision of this
Agreement, a Limited Partner, in his or her capacity as such, shall not:

 

(a)           be allowed to manage or control or
take part in the management or control of the Partnership business or to act
for or bind the Partnership, such power being vested solely and exclusively in
the General Partner;

 

(b)           be entitled to be paid any fee,
salary or other compensation by the Partnership or General Partner or to have a
Partnership drawing account;

 

(c)           be entitled to receive any interest
or a return of Capital Contributions except as expressly provided for herein;

 

(d)           be entitled to a partition of
Partnership Property or other assets of the Partnership;

 

(e)           be bound by, nor be personally liable
for, the expenses, liabilities or obligations of the Partnership; provided,
however, that the foregoing shall not limit or expand any obligation or
liability of any Limited Partner to the Partnership set forth in this Agreement
or to the extent such obligation or liability is required by law; or

 

(f)            be entitled to withdraw from the
Partnership.

 

4.02         Access to Information.  A Limited Partner or a permitted assignee of Units, on written
request to the General Partner stating the purpose, may examine and copy, at
any reasonable time, for any proper purpose, and at the expense of the Limited
Partner or assignee, records required to be kept by the Partnership under
Section 1.07 of the Act and other information regarding the business affairs
and financial condition of the Partnership as is just and reasonable for the
Person to examine and copy.  On the
written request by any Limited Partner or an assignee of Units made to the
General Partner at the principal place of business of the Partnership, the
Partnership shall provide to the requesting Limited Partner or assignee,
without charge, true copies of:

 

(a)           this Agreement and the Certificate
and all amendments and restatements; and

 

(b)           any of the tax returns described in
Subdivision (2) of Subsection (a) of Section 1.07 of the Act.

 

Information
provided to or obtained by a Limited Partner or an assignee of Units relating
to the Partnership or Partnership Property shall be used by such Limited
Partner or assignee solely in furtherance of his or her interests as a Limited
Partner and shall not be used for any other purpose.  Limited Partners and assignees of Units shall maintain the
confidentiality of all such information and shall not disclose such information
to any other Person.  If a Limited
Partner or assignee of a Unit receives a request to disclose information
relating to the Partnership or Partnership Property under the terms of a
subpoena, investigative demand or order issued by a court or governmental
agency, the Limited Partner or assignee shall promptly notify the General

 

9

 

Partner of the existence, terms
and circumstances surrounding such request, so that the General Partner may
seek a protective order or confidential treatment of such information.

 

10

 

4.03         Admission of Additional
Limited Partners. 
The General Partner may admit an assignee of Units who has acquired
Units in a Transfer permitted under Sections 4.05, 4.06 or 5.03(b)
as an additional or successor Limited Partner to the Partnership at such times
and upon such terms and conditions as may be determined by the General Partner,
in its sole discretion.

 

4.04         Investment Representations of the Limited Partners.

 

(a)           Each Limited Partner is admitted to
the Partnership in reliance upon such Limited Partner’s representation to the
General Partner and the Partnership, which by executing this Agreement each
Limited Partner hereby confirms, that such Limited Partner is acquiring his or
her Units for his or her own account, for investment purposes only and not with
a view to the resale or distribution thereof, in whole or in part.  Each Limited Partner understands that the
Units have not been registered under the Securities Act and that any Transfer
of the Units may not be made without registration under the Securities Act or
pursuant to an applicable exemption therefrom. 
The Limited Partners understand that no market exists for any Units and
that it is unlikely that a market will ever exist for any Units.

 

(b)           Each Limited Partner represents that
he or she has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of an investment in the
Units.

 

4.05         Transfer Restrictions.  Except as provided in Sections 4.06
and 5.03(b), no Limited Partner shall Transfer any Units or any interest
therein without the prior written consent of the General Partner.  Any attempted Transfer in violation of this Section 4.05
shall be null and void, and the Partnership shall refuse to recognize any such
Transfer and shall not reflect on its records any change in ownership of such
Units pursuant to any such Transfer.

 

4.06         Permitted Transfers;
Status as Assignee.  A Limited Partner may Transfer all or any
portion of his or her Units (i) to the Partnership, (ii) to his or her spouse,
parents or natural or adoptive lineal descendants, or to one or more trusts or
partnerships established exclusively for the benefit of his or her spouse,
parents or natural or adoptive lineal descendants, or (iii) pursuant to Section
4.07; provided, that any such permitted assignee shall receive and
hold such rights subject to the provisions of this Agreement, including,
without limitation, the provisions of this Article IV.  A Limited Partner intending to Transfer
Units pursuant to this Section 4.06 shall provide at least 10 days
prior written notice of such proposed transfer to the General Partner.  An assignee of Units shall have only the
rights of an assignee under the Act and, except as expressly provided under the
Act, shall not be considered a Partner for any purpose under this Agreement or
otherwise unless and until such assignee is admitted to the Partnership as a
Limited Partner with the approval of the General Partner pursuant to Section
4.03.

 

4.07         General Partner’s Right
of Purchase.  The
General Partner shall have the right and option to purchase any and/or all
Units held by a Limited Partner following such Limited Partner’s admission to
or conviction of a felony or misdemeanor offense against CWEI or any of its
Affiliates (“Event of Forfeiture”).  The General Partner may exercise such right
and option of purchase within 60 days of an Event of Forfeiture.  The purchase price to be paid for the Units
held by the Limited Partner shall be equal to such Limited Partner’s Capital
Contribution as set forth on Exhibit A. 
To the extent the General Partner exercises its option to purchase a
Limited

 

11

 

Partner’s Units under this
provision, such Units shall then be held by the General Partner in accordance
with Section 3.07 hereof.

 

4.08         Specific Performance.  The parties agree that the Partnership and
each Partner would be irreparably damaged if any of the provisions of this Article IV
are not performed in accordance with their specific terms and that monetary
damages would not provide an adequate remedy in such event.  Accordingly, it is agreed that, in addition
to any other remedy to which they may be entitled, at law or in equity, the
Partnership, the General Partner and any nondefaulting Limited Partner shall be
entitled to injunctive relief to prevent breaches of the provisions of this Article IV
and specifically to enforce the terms and provisions hereof in any action
instituted in any court of competent jurisdiction.

 

ARTICLE V

CAPITAL CONTRIBUTIONS

 

5.01         Capital Contributions of
General Partner. The General Partner shall contribute to
the Partnership (i) cash in such amounts as shall be necessary to pay timely
the costs and expenses allocated and charged to the General Partner pursuant to
Section 6.01 and elsewhere herein, and (ii) an undivided 5% of the
General Partner’s interest in Partnership Property.  In the event any Partnership Property contributed to the
Partnership are subject to any liens or similar encumbrances, the General
Partner shall use reasonable efforts to cause such liens or similar
encumbrances to be released prior to any dissolution of the Partnership.

 

5.02         Initial Capital
Contributions of Limited Partners.  On the Effective Date, each Limited Partner
shall initially contribute to the Partnership cash in the amount of $10.00 per
Unit, as set forth on Exhibit A.

 

5.03         Additional Capital
Contributions of Limited Partners.

 

(a)           After Payout, if the General Partner
determines, in its sole discretion, that additional Capital Contributions from
the Limited Partners are required to fund the payment of costs and expenses
allocated and charged to the Limited Partners pursuant to Section 6.01
and elsewhere in this Agreement, the General Partner shall send written notice
to the Limited Partners (a “Contribution Notice”) setting forth the date on
which such additional Capital Contributions shall be payable (the “Contribution
Date”), which date shall be not less than 10 days after the date of the
Contribution Notice, the total amount of the additional Capital Contributions
required and the amount of the additional Capital Contribution to be made by
each Limited Partner pursuant to this Section 5.03(a).  Each Limited Partner’s additional Capital
Contribution shall be in proportion to the number of Units held by such Limited
Partner.

 

(b)           If a Limited Partner does not make an
additional Capital Contribution to the Partnership in the amount, at the time
or in the manner provided in Section 5.03(a) (a “Non-Contributing Limited Partner”), the
General Partner, in its sole discretion, may make the additional Capital
Contribution that the Non-Contributing Limited Partner failed to make within 20
days after the Contribution Date, in which case the Non-Contributing Limited
Partner, without further action on his or her part, shall be deemed to have
assigned to the General Partner on the Contribution Date the economic rights to
the Units held by the Non-Contributing Limited 

 

12

 

Partner, and the General
Partner, as the assignee of the Non-Contributing Limited Partner and the holder
of such Units, shall be entitled to receive all allocations of income, gain,
loss, deduction, credit or similar items, and all distributions, to which the
Non-Contributing Limited Partner would otherwise be entitled from and after the
Contribution Date.  The General Partner
shall hold such economic rights to the Units attributable to the
Non-Contributing Limited Partner until such time as the General Partner, as the
holder of such Units, shall have received distributions pursuant to Section
6.04 in an aggregate amount equal to the sum of (i) the additional Capital
Contributions made by the General Partner pursuant to this Section 5.03(b),
plus (ii) an annual rate of return on such additional Capital Contributions
from the Contribution Date equal to the prime rate as established from time to
time by Bank One NA, or its successors, plus 2%, whereupon the General Partner,
without further action on its part, shall be deemed to have re-assigned the
economic rights to such Units to the Non-Contributing Limited Partner.  The General Partner may use the power of
attorney set forth in Section 9.13 to reflect any assignment pursuant to
this Section 5.03(b).

 

5.04         Capital Accounts.  An individual capital account (a “Capital
Account”) shall be established and maintained for each Partner as provided in Exhibit
D.

 

5.05         Return of Capital
Contribution.  No
interest shall accrue on any Capital Contributions, and no Partner shall have
the right to withdraw or be repaid any Capital Contributions by such Partner
except as expressly provided for herein.

 

ARTICLE VI

SHARING, ALLOCATIONS AND DISTRIBUTIONS

 

6.01         Sharing and Allocation of
Costs and Expenses. 
All costs and expenses of the Partnership shall be allocated and charged
to the Partners as follows:

 

(a)           Acquisition Costs
shall be allocated (i) 100% to the General Partner before Payout and (ii) 1% to
the General Partner and 99% to the Limited Partners as a class after Payout;

 

(b)           Well Costs shall be
allocated (i) 100% to the General Partner before Payout and (ii) 1% to the
General Partner and 99% to the Limited Partners as a class after Payout;

 

(c)           All other costs and
expenses of the Partnership not specifically allocated above shall be allocated
(i) 100% to the General Partner before Payout and (ii) 1% to the General
Partner and 99% to the Limited Partners as a class after Payout.

 

All allocations made to Limited Partners “as a class” pursuant to this
Agreement shall be apportioned among the Limited Partners in proportion to the
number of Units held by such Limited Partners.

 

6.02         Sharing and Allocation of
Revenues.  All revenues of the Partnership
(which shall not include Capital Contributions and proceeds of loans to the
Partnership) shall be allocated (i) 100% to the General Partner before Payout
and (ii) 1% to the General Partner and 99% to the Limited Partners as a class
after Payout.

 

13

 

6.03         Allocations for Capital
Account and Tax Purposes.  Subject to Section 8.02(c), all items of income, gain, deduction,
loss, credit and amount realized shall be allocated to the Partners in
accordance with the provisions of Exhibit D.

 

6.04         Distributions. 
At least monthly (commencing with the first full calendar month after
the receipt by the Partnership of its first revenues other than Capital
Contributions and proceeds of loans to the Partnership), all cash funds of the
Partnership (exclusive of Capital Contributions or proceeds of loans) which the
General Partner reasonably determines are not needed for the payment of any
existing or reasonably foreseeable Partnership obligations and expenditures
shall be distributed to the Partners. 
All such cash funds of the Partnership shall be distributed to the
Partners in the same respective percentages as the revenues to which such cash
funds are attributable were allocated to the Partners pursuant to Section
6.02 (after deducting therefrom the costs and expenses charged to the
Partners pursuant to Section 6.01 and elsewhere herein); provided,
however, that if Payout would occur as a result of a distribution of
cash funds to the General Partner, such distribution shall be deemed to
constitute two distributions:  (i) the
first distribution shall consist of the amount of cash funds necessary to cause
Payout to occur, and (ii) the second distribution shall consist of the balance
of the funds then distributed.

 

6.05         Withholding Taxes.  The Partnership shall at all times be
entitled (but not obligated) to make payments required to discharge any obligation
of the Partnership or the General Partner to withhold or make payments to any
governmental authority with respect to any federal, state or local tax
liability of any Limited Partner for such taxes arising out of such Limited
Partner’s interest in the Partnership. 
The amount of each such payment made by the Partnership with respect to
any Limited Partner shall be deducted from any distributions otherwise payable
to such Limited Partner pursuant to this Agreement.  Notwithstanding anything contained in this Agreement to the
contrary, in the event the Partnership fails to withhold any federal, state or
local taxes in respect of any Limited Partner when required to do so (including
as a result of any change in law or interpretation thereof or otherwise) any
liability incurred by the Partnership (including any interest and penalties) as
a result of such failure shall be borne by such Limited Partner (and charged to
such Limited Partner’s Capital Account), and such Limited Partner shall
indemnify and hold harmless the Partnership and the General Partner from and
against any and all claims, demands, liabilities, costs, damages and causes of
action of any nature whatsoever related to such withholding obligation.

 

ARTICLE VII

BOOKS, RECORDS AND BANK ACCOUNTS

 

7.01         Maintenance of Books.  The books of account for the Partnership
shall be maintained on an accrual basis in accordance with the terms of this
Agreement, except that the Capital Accounts of the Partners shall be maintained
in accordance with Exhibit D. 
The accounting year of the Partnership shall be the calendar year.

 

7.02         Accounts. 
The General Partner shall establish and maintain one or more separate
bank and investment accounts and arrangements for Partnership funds in the
Partnership name with financial institutions and firms that the General Partner
determines.

 

14

 

ARTICLE VIII

DISSOLUTION, LIQUIDATION AND TERMINATION

 

8.01         Dissolution. 
The Partnership shall dissolve and its business and affairs shall be
wound up on the first to occur of the following:

 

(a)           the expiration of
the term of the Partnership set forth in Section 2.06;

 

(b)           the election of the
General Partner, in its sole discretion, to dissolve and liquidate the
Partnership;

 

(c)           an Event of
Withdrawal; provided, that upon the occurrence of an Event of Withdrawal if
there is at least one remaining General Partner, the business of the
Partnership shall be carried on by the remaining General Partner, and the
Partnership shall not be dissolved and its affairs shall not be wound up by
reason of such Event of Withdrawal; or

 

(d)           a Change of Control
(as hereinafter defined); provided, that if a Change in Control occurs
prior to Payout, dissolution of the Partnership shall be postponed until Payout
occurs.  For purposes of this Section
8.01(d), “Change in Control”
shall be deemed to have occurred if:

 

(i)            Any
Person, including a “group” as determined in accordance with Section 13(d)(3)
of the Exchange Act and the rules and regulations promulgated thereunder, is or
becomes, through one or a series of related transactions or through one or more
intermediaries, the beneficial owners, directly or indirectly, of securities of
CWEI representing 25% or more of the combined voting power of CWEI’s then
outstanding securities, other than a Person who is such a beneficial owner on
the Effective Date and any Affiliate of such Person;

 

(ii)           As
a result of, or in connection with, any tender offer or exchange offer, merger
or other business combination, sale of assets or contested election, or any
combination of the foregoing transactions (a “Transaction”),
the Persons who were directors of the Company before the Transaction shall
cease to constitute a majority of the Board of Directors of CWEI or any
successor to CWEI;

 

(iii)          Following
the Effective Date, CWEI is merged or consolidated with another corporation and
as a result of such merger or consolidation less than 40% of the outstanding
voting securities of the surviving or resulting corporation shall then be owned
in the aggregate by the former stockholders of CWEI, other than any party to
such merger or consolidation or any Affiliates of such party;

 

(iv)          A
tender offer or exchange offer is made and consummated for the ownership of
securities of CWEI representing 25% or more of the combined voting power of
CWEI’s then outstanding voting securities; or

 

(v)           CWEI
or a subsidiary of CWEI transfers more than 50% of its assets, or the last of a
series of transfers results in the transfer of more than 50% of the assets of
CWEI, to another corporation the capital stock of which is not wholly-owned by
CWEI.

 

15

 

For this purpose, the determination of what constitutes 50% of the
assets of CWEI shall be determined based on the sum of the values attributed to
(A) the oil and gas reserves of CWEI as reflected by the most recent reserve
report prepared or audited by CWEI’s independent petroleum engineers, (B)
CWEI’s undeveloped oil and gas properties as determined by an independent appraisal
thereof, and (C) the net book value of all other assets of CWEI, each taken as
of the date of the related transfer of assets.

 

8.02         Liquidation and Termination.  Upon dissolution of the Partnership, the
General Partner shall act as liquidator or may appoint one or more other
Persons to act as liquidator.  The
liquidator shall proceed to wind up the affairs of the Partnership and make
final distributions as provided in this Agreement. The costs of liquidation
shall be borne as a Partnership expense. Until final distribution, the
liquidator shall continue to operate the Partnership properties with all of the
power and authority of the General Partner. The steps to be accomplished by the
liquidator are as follows:

 

(a)           As promptly as
practicable after dissolution and again after final liquidation, the liquidator
shall cause a proper accounting to be made of the Partnership’s assets,
liabilities and operations through the last day of the calendar month in which
the dissolution occurs or the final liquidation is completed, as applicable;

 

(b)           From Partnership
funds, the liquidator shall pay all of the debts and liabilities of the
Partnership (including, without limitation, all expenses incurred in
liquidation) or otherwise make adequate provision for such debts and
liabilities, including, without limitation, by establishing a cash escrow fund
for contingent liabilities in such amount and for such term as the liquidator
may reasonably determine; and

 

(c)           All remaining assets
of the Partnership shall be distributed to the Partners as follows:

 

(i)            The
liquidator may sell any or all Partnership Property and other assets, including
to Partners, and any resulting gain or loss from each sale shall be computed
and allocated to the Capital Accounts of the Partners in accordance with Section
8.02(c)(iii);

 

(ii)           With
respect to all Partnership Property and other assets that have not been sold,
the fair market value of that Partnership Property and other assets shall be
determined and any unrealized income, gain, loss, and deduction inherent in
property that has not been reflected in the Capital Accounts of the Partners
previously shall be allocated among the Partners in accordance with Section
8.02(c)(iii);

 

(iii)          All
items of income, gain, loss and deduction referred to in Sections 8.02(c)(i)
and (ii) shall be allocated among the Partners in such a manner as to
cause, to the maximum extent possible, the positive Capital Account balance of
each Partner to equal the distribution such Partner would receive if the
distributions upon liquidation were made in accordance with Section 6.04
of this Agreement;

 

(iv)          Partnership Property and
other assets shall then be distributed among the Partners in accordance with
the positive Capital Account balances of the Partners, as

 

16

 

determined after taking into account all Capital Account adjustments
for the taxable year of the Partnership during which the liquidation of the
Partnership occurs (other than those made by reason of distributions pursuant
to this clause (iv)), and those distributions shall be made by the end of the
taxable year of the Partnership during which the liquidation of the Partnership
occurs (or, if later, 90 days after the date of the liquidation);

 

(v)           It
is intended that the distributions made to each Partner pursuant to this Section
8.02(c) be equal to the distributions to which such Partner would be
entitled if liquidating distributions were made in accordance with Section
6.04 of this Agreement.  To the
extent the Partners’ positive Capital Account balances after application of
Section 8.02(c)(iii) do not correspond to the amounts of such intended
distributions, the allocations provided for in Exhibit D for the fiscal
year in which the liquidation occurs shall be adjusted, to the maximum extent
possible, to produce Capital Account balances which correspond to the amount of
such intended distributions.

 

All distributions in kind to the Partners shall be made subject to the
liability of each distributee for his, her or its allocable share of costs,
expenses and liabilities previously incurred or for which the Partnership has
committed prior to the date of termination and those costs, expenses and
liabilities shall be allocated to the distributee under this Section 8.02.
The distribution of cash or property to a Partner in accordance with the
provisions of this Section 8.02 constitutes a complete return to the
Partner of his, her or its Capital Contributions and a complete distribution to
the Partner of his, her or its Units and all the Partnership Property and other
assets and constitutes a compromise to which all Partners have consented within
the meaning of Section 5.02(d) of the Act. To the extent that a Partner returns
funds to the Partnership, it has no claim against any other Partner for those
funds.

 

8.03         Termination. On completion of the distribution of
Partnership assets as provided in this Agreement, the Partnership is
terminated, and the General Partner (or such other Person or Persons as the Act
may require or permit) shall cause the cancellation of the Certificate and any
filings made as provided in Section 2.05 and shall take such other
actions as may be necessary to terminate the Partnership.

 

ARTICLE IX

GENERAL PROVISIONS

 

9.01         Offset.  Whenever the Partnership or the General
Partner is to pay any sum to any Partner, including pursuant to Section 4.07,
any amounts that Partner owes the Partnership or the General Partner or its
Affiliates may be deducted from that sum before payment.

 

9.02         Notices.  All notices, requests or consents required
or permitted to be given under this Agreement must be in writing and shall be
considered as properly given if mailed by first class United States mail,
postage paid, and registered or certified with return receipt requested, or if
delivered to the recipient in person, by courier or by facsimile
transmission.  Notices, requests and
consents shall be sent to a Limited Partner at the address shown on its
Signature Page for Limited Partners.  A
Limited Partner may change its address by giving written notice to the General
Partner.  Any notice, request or consent
to the Partnership or to the General Partner shall

 

17

 

be sent to the General Partner at its principal place of business, to
the attention of the Executive Vice President and Chief Operating Officer.

 

9.03         Entire Agreement.  This Agreement constitutes the entire
agreement of the Partners relating to the Partnership and supersedes all prior
contracts or agreements with respect to the Partnership, whether oral or
written.

 

9.04         Effect of Waiver or Consent.  A waiver or consent, express or implied, to
or of any breach or default by any Person in the performance by that Person of
its obligations with respect to the Partnership is not a consent or waiver to
or of any other breach or default in the performance by that Person of the same
or any other obligations of that Person with respect to the Partnership.  Failure on the part of a Person to complain
of any act of any Person or to declare any Person in default with respect to
the Partnership, irrespective of how long that failure continues, does not
constitute a waiver by that Person of its rights with respect to that default
until the applicable statute of limitations period has run.

 

9.05         Amendment or Modification.

 

(a)           Except as otherwise
provided in this Section 9.05, any amendment to this Agreement must be
proposed by the General Partner and approved in writing by the General Partner
and at least a Majority in Interest of the Limited Partners within 90 days of
its proposal to be effective.

 

(b)           The General Partner
may amend this Agreement without the consent of any Limited Partner (i) to
remove or correct any inconsistency, ambiguity or error contained herein,
provided that such amendment does not materially and adversely affect the
Limited Partners, (ii) to admit additional Partners pursuant to Sections
3.04 or 4.03 or (iii) to reflect any assignment of Units pursuant to
Section 5.03(b).

 

9.06         Binding Effect.  Subject to the restrictions on Transfers set
forth in this Agreement, this Agreement is binding on and inures to the benefit
of the Partners and their respective successors and assigns.

 

9.07         Governing Law; Severability.  THIS AGREEMENT IS GOVERNED BY AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF TEXAS, EXCLUDING ANY
CONFLICT OF LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE
CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION.  If any provision of this Agreement or its
application to any Person or circumstance is held invalid or unenforceable to
any extent, the remainder of this Agreement and the application of that
provision to other Persons or circumstances is not affected and that provision
shall be enforced to the fullest extent permitted by law.

 

9.08         Further Assurances.  In connection with this Agreement and the
transactions contemplated by it, each Partner shall execute and deliver any
additional documents and instruments and perform any additional acts that may
be necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.

 

18

 

9.09         Waiver of Certain Rights.  Except for the General Partner, each Partner
irrevocably waives any right it may have to maintain any action for dissolution
of the Partnership or for partition of the property of the Partnership.

 

9.10         Insurance.  The
Partnership may purchase and maintain insurance or enter into other
arrangements on behalf of the Partnership, the General Partner or any other
Person who is or was a “general partner,” as defined in Section 11.01 of the
Act, or a Limited Partner, who is or was serving at the request of the
Partnership or the General Partner as a “representative,” as defined in Section
11.01 of the Act, of any other enterprise, against any liability asserted
against the Person and incurred by the Person in that capacity or arising out
of the Person’s status in that capacity, regardless of whether the Partnership
would have the power to indemnify the Person against that liability under this
Agreement or the Act.  In the absence of
actual fraud, the judgment of the General Partner as to the terms and
conditions of the insurance or other arrangement and the identity of the insurer
or other Person participating in an arrangement shall be conclusive, and the
insurance or other arrangement shall not be voidable and shall not subject the
General Partner approving the insurance or other arrangement to liability, on
any ground, regardless of whether the General Partner will be a beneficiary.

 

9.11         Indemnification.

 

(a)           The Partnership
agrees to indemnify and hold harmless the General Partner, its Affiliates, and
their respective officers, directors, partners, members, managers, employees
and agents (each, an “Indemnified Person”)
to the fullest extent permitted by law, from and against all losses, costs,
liabilities, damages, and expenses (including, without limitation, costs of
suit and attorneys’ fees) paid or incurred in connection with or resulting from
any and all claims, actions or demands against such Indemnified Person that
arise out of or in any way relate to or are incidental to the Partnership, the
Partnership Property or the business or affairs of the Partnership; provided,
however, that this indemnity shall not extend to any bad faith, willful
misconduct, gross negligence or deliberate or intentional breach of any
material provision of this Agreement by such Indemnified Person.  THE PARTIES INTEND THAT THE INDEMNIFIED
PERSONS BE INDEMNIFIED PURSUANT TO THIS AGREEMENT FROM LIABILITY FOR THEIR OWN
SOLE, PARTIAL OR CONCURRENT NEGLIGENCE.

 

(b)           The indemnification
rights contained in this Section 9.11 shall be cumulative of and in
addition to any and all other rights, remedies and recourses to which any
Indemnified Person or their respective heirs, personal representatives,
successors and assigns shall be entitled, whether pursuant to some other
provisions of this Agreement, at law or in equity.

 

(c)           The Partnership
shall advance to any Indemnified Person all reasonable fees, costs and expenses
(including attorneys’ fees and related costs), of defending any claim, action
or demand that arises out of or in any way relates to or is incidental to the
Partnership, the Partnership Property, business or affairs; provided,
that such Indemnified Person agrees in writing to repay to the Partnership all
such advances in the event that it is finally determined that such Indemnified
Person is not entitled to indemnification hereunder with respect to such claim,
action or demand.

 

19

 

(d)           All damages awarded
by any court or paid in settlement in connection with any action in the nature
of a derivative action shall be paid to the Partnership by the Person bringing
such action.  As used herein, derivative
action shall mean an action brought by a Limited Partner on behalf of the
Partnership.

 

9.12         Counsel to the
Partnership.  The
General Partner may select and retain legal counsel to the Partnership and may
execute and deliver on behalf of the Partnership any consent to the
representation of the Partnership that counsel may request pursuant to the
rules of professional conduct or similar rules in any jurisdiction.  Counsel to the Partnership may also be counsel
to the General Partner.  The Partnership
has initially selected Vinson & Elkins L.L.P. (“Partnership Counsel”) as legal counsel to the Partnership.
Each Limited Partner acknowledges that Partnership Counsel does not represent
such Limited Partner as a Limited Partner, and that Partnership Counsel shall
owe no duties directly to such Limited Partner.  Each Limited Partner further acknowledges that, whether or not
Partnership Counsel has in the past represented or is currently representing
such Limited Partner with respect to other matters, Partnership Counsel has not
advised or represented the interests of any Limited Partner in the negotiation,
preparation, execution, delivery and performance of this Agreement.

 

9.13         Power of Attorney.  By the execution of this Agreement, each
Limited Partner does irrevocably constitute and appoint the General Partner,
with full power of substitution, as true and lawful attorney-in-fact and agent
with full power and authority to act in such Limited Partner’s name, place and
stead and to execute, file and record the Certificate as required under the Act
and to execute all other documents which such attorney-in-fact deems necessary
or reasonably appropriate:

 

(a)           to qualify or
continue the Partnership as a limited partnership in the State of Texas and in
all jurisdictions in which the Partnership may or intends to conduct business
or own property;

 

(b)           to reflect a change
in the identity of any Limited Partner, the admission of additional Partners
pursuant to this Agreement;

 

(c)           to reflect any
modification or amendment of this Agreement;

 

(d)           to reflect the
transfer or assignment of Units by a Limited Partner from time to time in
accordance with Section 4.08 or pursuant to Section 5.03(b),
including without limitation, a transfer or assignment of Units to the General
Partner;

 

(e)           to reflect the
dissolution and termination of the Partnership; or

 

(f)            to comply with
applicable assumed name laws.

 

9.14         Counterparts.  This Agreement may be executed in any number
of counterparts (including by facsimile transmission) with the same effect as
if all signing parties had signed the same document.  All counterparts shall be construed together and constitute the
same instrument.

 

9.15         No Employment Contract.  Nothing contained in this Agreement shall be
construed as conferring upon any Limited Partner who is or may become an
employee of CWEI 

 

20

 

or any Affiliate of CWEI any right to continue in the employment of
CWEI or any Affiliate of CWEI for any period of time or interfere with or
restrict in any way the rights of CWEI or any Affiliate of CWEI or such Limited
Partner to terminate the employment of such Limited Partner at any time for any
reason (or without any reason) whatsoever, with or without cause.

 

[Signature Pages Follow]

 

21

 

IN WITNESS WHEREOF, the
parties have executed this Partnership Agreement as of the Effective Date.

 

 

	
   

  	
  GENERAL PARTNER:

  
	
   

  	
   

  
	
   

  	
  ROMERE PASS ACQUISITION CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ L. PAUL LATHAM

  
	
   

  	
   

  	
  L. Paul Latham

  
	
   

  	
   

  	
  President

  

 

Signature Page for Agreement of Limited
Partnership

 

22

 

SIGNATURE PAGE FOR LIMITED PARTNER

 

The undersigned, desiring to become a limited partner in CWEI Romere
Pass, L.P., a Texas limited partnership (“Partnership”),
does hereby agree to all the terms and provisions of the Agreement of Limited
Partnership of the Partnership, including, without limitation, the power of
attorney set forth in Section 9.13 thereof.

 

 

	
  Date:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Type or Print Name of Limited Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fax:

  	
   

  
	
   

  	
   

  	
   

  
	
  .

  	
   

  	
  Taxpayer I.D. No

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Number of Units:

  	
   

  
								

 

Signature Page for Agreement of Limited
Partnership

 

23

 

EXHIBIT A

 

to Partnership Agreement of

CWEI Romere Pass, L.P.

 

Schedule of Limited Partners

 

 

	
  Limited
  Partners:

  	
   

  	
  No. of

  Units

  	
   

  	
  Initial

  Capital

  Contributions

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Patrick C. Reesby

  	
   

  	
  17.61

  	
   

  	
  $

  	
  176.10

  	
   

  
	
  L. Paul Latham

  	
   

  	
  13.33

  	
   

  	
  $

  	
  133.30

  	
   

  
	
  Mel G. Riggs

  	
   

  	
  13.33

  	
   

  	
  $

  	
  133.30

  	
   

  
	
  T. Mark Tisdale

  	
   

  	
  10.91

  	
   

  	
  $

  	
  109.10

  	
   

  
	
  Mark Heinen

  	
   

  	
  10.00

  	
   

  	
  $

  	
  100.00

  	
   

  
	
  Kelly Beckham

  	
   

  	
  7.66

  	
   

  	
  $

  	
  76.60

  	
   

  
	
  Tommy Bolin

  	
   

  	
  4.78

  	
   

  	
  $

  	
  47.80

  	
   

  
	
  Richard Wettaw

  	
   

  	
  4.78

  	
   

  	
  $

  	
  47.80

  	
   

  
	
  David Gregory Benton

  	
   

  	
  2.42

  	
   

  	
  $

  	
  24.20

  	
   

  
	
  Jerry F. Groner

  	
   

  	
  2.42

  	
   

  	
  $

  	
  24.20

  	
   

  
	
  Ron Halfacre

  	
   

  	
  1.91

  	
   

  	
  $

  	
  19.10

  	
   

  
	
  Clarence Wolfshohl

  	
   

  	
  1.91

  	
   

  	
  $

  	
  19.10

  	
   

  
	
  Kenneth A. Lipstreuer

  	
   

  	
  1.34

  	
   

  	
  $

  	
  13.40

  	
   

  
	
  Michael L. Pollard

  	
   

  	
  1.21

  	
   

  	
  $

  	
  12.10

  	
   

  
	
  John Kennedy

  	
   

  	
  0.91

  	
   

  	
  $

  	
  9.10

  	
   

  
	
  Danny R. Alford

  	
   

  	
  0.61

  	
   

  	
  $

  	
  6.10

  	
   

  
	
  Michael G. Cunningham

  	
   

  	
  0.61

  	
   

  	
  $

  	
  6.10

  	
   

  
	
  Janet Hazlett

  	
   

  	
  0.61

  	
   

  	
  $

  	
  6.10

  	
   

  
	
  Logan Irvin

  	
   

  	
  0.61

  	
   

  	
  $

  	
  6.10

  	
   

  
	
  Kim Jones

  	
   

  	
  0.61

  	
   

  	
  $

  	
  6.10

  	
   

  
	
  Dennis B. Polson

  	
   

  	
  0.61

  	
   

  	
  $

  	
  6.10

  	
   

  
	
  Donnie J. Pruitt

  	
   

  	
  0.61

  	
   

  	
  $

  	
  6.10

  	
   

  
	
  Robert L. Thomas

  	
   

  	
  0.61

  	
   

  	
  $

  	
  6.10

  	
   

  
	
  Denise Kelly

  	
   

  	
  0.30

  	
   

  	
  $

  	
  3.00

  	
   

  
	
  Matthew D. Swierc

  	
   

  	
  0.30

  	
   

  	
  $

  	
  3.00

  	
   

  
	
  Ron
  Gasser

  	
   

  	
  4.78

  	
   

  	
  $

  	
  40.78

  	
   

  
	
   

  	
   

  	
  104.78

  	
   

  	
  $

  	
  1,040.78

  	
   

  

 

A-1

 

EXHIBIT
B

 

to Partnership Agreement of

 

CWEI Romere Pass, L.P.

 

 

Area of Interest

 

 

The
Area of Interest shall be:

 

(a)
all properties described on Exhibit A to that certain Purchase and Sale
Agreement dated June 28, 2002 by and between JPC, L.L.C., MABB, Ltd.and TCAL,
LLC, as Seller, and Clayton Williams Energy, Inc., as Buyer; and

 

(b)
all well sites on acreage subsequently acquired by CWEI or any of its
subsidiaries which is contiguous to the properties described in (a) above.

 

B-1

 

EXHIBIT
C

 

to Partnership Agreement of

 

CWEI Romere Pass, L.P.

 

Wells

 

 

	
  Well Name

  	
   

  	
  Parish, State

  
	
   

  	
   

  	
   

  
	
  All wells described on Exhibit B to that certain
  Purchase and Sale Agreement dated June 28, 2002 by and between JPC, L.L.C.,
  MABB, Ltd. and TCAL, LLC, as Seller, and Clayton Williams Energy, Inc., as
  Buyer.

  	
   

  	
  Plaquemines,
  Louisiana

  
	
   

  	
   

  	
   

  
	
  [Such other wells as may be added from time to
  time]

  	
   

  	
   

  

 

C-1

 

EXHIBIT D

 

Allocations of Profits and Losses and Other Tax
Matters

 

 

ARTICLE I

 

TAX DEFINITIONS

 

Section
1.01  Definitions.  All capitalized terms used herein shall have the meanings
assigned to them in the Agreement of Limited Partnership of CWEI Romere Pass,
L.P. dated October 1, 2002 (the “Agreement”), or as follows:

 

“Adjusted Capital Account”
means the Capital Account maintained for each Partner, (a) increased by any
amounts that such Partner is obligated to restore or is treated as obligated to
restore under Regulation Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and
1.704-2(i)(5)), and (b) decreased by any amounts described in Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) with respect to such Partner.

 

“Minimum Gain” has
the meaning assigned to that term in Regulation Section 1.704-2(d).

 

“Partnership Nonrecourse Liability”
has the meaning assigned to that term in Regulation Section 1.752-1(a)(2).

 

“Partner Nonrecourse Debt”
has the meaning assigned to that term in Regulation Section 1.704-2(b)(4).

 

“Partner Nonrecourse Deductions”
has the meaning assigned to that term in Regulation Section 1.704-2(i)(1).

 

“Simulated Basis”
has the meaning set forth in Section 4.01(b) of this Exhibit.

 

“Simulated Depletion”
has the meaning set forth in Section 4.01(b) of this Exhibit.

 

“Simulated Gain” has
the meaning set forth in Section 4.01(b) of this Exhibit.

 

“Simulated Loss” has
the meaning set forth in Section 4.01(b) of this Exhibit.

 

ARTICLE II

 

ALLOCATIONS OF PROFIT AND LOSS

 

Section
2.01  Allocations for Capital Account and Tax Purposes.  Subject to Section 8.02 of the Agreement and
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:

 

D-1

 

(a)           Income from the sale of oil or gas
production and any credits allowed by Section 29 of the Code relating
thereto shall be allocated in the same manner as revenue therefrom is allocated
and credited pursuant to Section 6.02 of the Agreement.

 

(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 Code, the Partnership’s adjusted basis in each Depletable Property shall
be allocated to the Partners in proportion to each Partner’s respective share
of the costs and expenses which entered into the Partnership’s adjusted basis
for each Depletable Property, 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 6.02 of the
Agreement.  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 6.02 of the Agreement.

 

(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 6.01 of
the Agreement.

 

(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 6.02 of the Agreement, 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 6.01 of the Agreement.

 

(e)           All recapture of income tax deduction
resulting from the sale or other disposition of Partnership property shall 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)            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 6.02 of the Agreement.

 

(g)           Notwithstanding any of the foregoing
provisions of this Section 2.01 to the contrary:

 

D-2

 

(i)            If
during any fiscal year of the Partnership there is a net increase in Minimum
Gain attributable to a Partner Nonrecourse Debt that gives rise to Partner
Nonrecourse Deductions, each Partner bearing the economic risk of loss for such
Partner Nonrecourse Debt shall be allocated items of Partnership deductions and
losses for such year (consisting first of cost recovery or depreciation
deductions with respect to property that is subject to such Partner Nonrecourse
Debt and then, if necessary, a pro rata portion of the Partnership’s other
items of deductions and losses, with any remainder being treated as an increase
in Minimum Gain attributable to Partner Nonrecourse Debt in the subsequent
year) equal to such Partner’s share of Partner Nonrecourse Deductions, as
determined in accordance with applicable 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 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 Regulations.

 

(h)           The General Partner shall use all
reasonable efforts to prevent any allocation or distribution from causing a
negative balance in a Limited Partner’s Adjusted Capital Account.  Consistent therewith, and notwithstanding
any of the foregoing provisions of this Section 2.01 of this
Exhibit 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 Limited
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 Section 2.01(g) of this Exhibit, 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 Partners whose Adjusted Capital Accounts have a positive
balance remaining at such time (each, a “Positive
Partner”).  After any such
allocation, any Partnership income or gain (including Simulated Gain) 

 

D-3

 

that would otherwise be
allocated to the Deficit Partner shall be allocated instead to the Positive
Partners up to an amount equal to the Partnership loss or deduction allocated
to each 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 2.01(h), the Adjusted Capital Account balance of the
Deficit Partner remains less than zero at the end of a fiscal year, a pro rata
portion of each item of Partnership income or gain (including Simulated Gain)
otherwise allocable to the Positive Partners for such fiscal year (or if there
is no such income or gain allocable to the Positive Partners for such fiscal
year, all such income or gain (including Simulated Gain) so allocable in the
succeeding fiscal year or years) shall be allocated to the Deficit Partner in
an amount necessary to cause its Adjusted Capital Account balance to equal
zero; provided, that no allocation under this sentence shall have the effect of
causing the Positive Partner’s Adjusted Capital Account to be less than
zero.  After any such allocation, any
Partnership gain (including Simulated Gain) resulting from the sale or other
disposition of Partnership property that would otherwise be allocated to the
Deficit partner for any fiscal year under this Section 2.01 shall
be allocated instead to the Positive Partners 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 2.01(h);
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.

 

ARTICLE III

 

OTHER TAX MATTERS

 

Section 3.01  Tax Elections.

 

(a)           For tax purposes, the Partnership
shall elect to use the calendar as its taxable year, and to report income and
loss under the accrual method of accounting.

 

(b)           For tax purposes, the Partnership
shall elect to deduct expenses incurred in organizing the Partnership ratably
over a 60-month period as provided in section 709 of the Code.

 

(c)           For tax purposes, the Partnership
shall elect to treat all start-up expenditures as deferred expenses and to
deduct such expenses over a 60-month period as provided in section 195 of the
Code.

 

(d)           In connection with any Transfer or
other assignment of an interest in the Partnership permitted by the terms and
provisions of this Agreement, the General Partner shall, at the written request
of the transferor, transferee or other successor, cause the Partnership to make
an election to adjust the basis of the Partnership’s property in the manner
provided in sections 734(b) and 743(b) of the Code (or any like statute or
regulation then in effect), and such transferor, transferee or other successor
shall pay all costs incurred by the Partnership in connection therewith,
including, without limitation, reasonable attorneys’ and accountants’ fees.

 

D-4

 

 

(e)           Unless approved by the Partners, the
Partnership shall not file any election pursuant to sections 761 or 7701 of the
Code, section 301.7701-3 of the Regulations or otherwise, the effect of which
would cause the Partnership not to be treated as a partnership for Federal
income tax purposes.

 

(f)            Except as otherwise specifically
provided herein, the General Partner shall have the sole and absolute
discretion to make any other available election under the Code on behalf of the
Partnership without the prior approval by the Partners.

 

Section
3.02  Tax Matters Partner.  The General Partner is hereby designated the
“tax matters partner” of the Partnership pursuant to Section 6231(a)(7) of the
Code.

 

ARTICLE IV

 

CAPITAL ACCOUNT MAINTENANCE

 

Section
4.01  Maintenance of Capital Accounts.  An
individual Capital Account (a “Capital
Account”) shall be maintained by the Partnership for each Partner as
provided below:

 

(a)           The Capital Account
of each Partner shall, except as otherwise provided herein, be (A) credited by
such Partner’s Capital Contributions when made (net of liabilities secured by
contributed property that the Partnership is considered to assume or take
subject to under Section 752 of the Code), (B) 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, (C) credited with the Partner’s
share of Simulated Gain as provided in Section 4.01(b) of this Exhibit,
(D) debited by the amount of any item of tax deduction or loss allocated to
such Partner, (E) debited with the Partner’s share of Simulated Loss and
Simulated Depletion as provided in Section 4.01(b) of this Exhibit,
(F) 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 (G) 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 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.

 

(b)           The allocation of basis prescribed by
Section 613A(c)(7)(D) of the Code and provided for in Section 2.01(b) of
this Exhibit 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 Code 

 

D-5

 

(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 2.01(b) of this Exhibit) with respect to which such
depletion is claimed (“Simulated Depletion”).  The Partnership’s basis in any Depletable
Property is 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 2.01(b) of this Exhibit) is herein called
“Simulated Basis.”  No Partner’s Capital Account shall be
decreased, however, by Simulated Depletion deductions attributable to any
Depletable Property to the extent such deductions exceed such Partner’s
allocable share of the Partnership’s remaining Simulated Basis in such
property.  The Partnership shall compute
simulated gain (“Simulated Gain”)
or simulated loss (“Simulated Loss”)
attributable to the sale or other disposition of a Depletable Property based on
the difference between the amount realized from such sale or other disposition
and the Simulated Basis of such property, as theretofore adjusted.  Any Simulated Gain shall be allocated to the
Partners and shall increase their respective Capital Accounts in the same
manner as the amount realized from such sale or other disposition in excess of
Simulated Basis shall have been allocated pursuant to Section 2.01(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.

 

(c)           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 Code or comparable provisions of state law) and any
election by an individual Partner under Section 59(e)(4) of the 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
4.01 as if no such election had been made.

 

(d)           Capital Accounts shall be adjusted,
in a manner consistent with this Section 4.01, 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.

 

(e)           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
Regulation Section 1.704-1(b)(2)(iv)(g).

 

(f)            It is the intention of the Partners
that the Capital Accounts of each Partner be kept in the manner required under
Regulation Section 1.704-1(b)(2)(iv). 
To the extent any additional adjustment to the Capital Accounts is
required by such regulations, the General Partner is hereby authorized to make
such adjustment after notice to the Limited Partner.      [End of Exhibit D]

 

D-6Exhibit 4(i)

 

UBI

 

(LOGO inserted here)

 

INCORPORATED UNDER THE
LAWS OF THE STATE OF NEW JERSEY

 

 

CUSIP 913290 10 2

 

SEE REVERSE SIDE FOR

CERTAIN DEFINITIONS

 

This is to Certify that

 

is the owner of

 

FULLY PAID AND
NON-ASSESSABLE SHARES OF THE COMMON STOCK, NO PAR VALUE, OF

 

Unity Bancorp, Inc.

 

a corporation
incorporated under the laws of the State of New Jersey. The shares evidenced by
this certificate are transferable only on the stock transfer books of Unity
Bancorp, Inc. by the holder hereof, in person or by attorney, upon surrender of
this certificate properly endorsed.

                This certificate is not valid unless countersigned by
the Transfer Agent and registered by the Registrar.

                WITNESS the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.

 

Dated:

 

(signature)

Secretary

 

(SEAL inserted here)

 

(signature)

Chairman of the Board

 

Countersigned and
Registered:

REGISTRAR AND TRANSFER
COMPANY

By

Transfer Agent

and Registrar

Authorized Signature

 

 

Unity Bancorp, Inc.

 

The following
abbreviations, when used in the inscription on the face of this certificate,
shall be construed as though they were written out in full according to
applicable laws or regulations:

 

TEN COM _ as tenants in
common

UNIF GIFT MIN ACT _ . . .
.. . . . . . . Custodian . . . . . . . . .

 

(Cust)                        (Minor)

TEN ENT  _ as tenants by the entireties

under Uniform Gifts to
Minors

 

JT TEN _ as joint
tenants with right

of survivorship and not
as

 tenants in common

 Act . . . . . . . . . . . . . . . . . . . . .
..

                (State)

Additional abbreviations
may also be used though not in the above list.

 

 For value received, ________   hereby sell, assign and transfer unto

 

PLEASE INSERT SOCIAL
SECURITY OR OTHER

    IDENTIFYING NUMBER OF ASSIGNEE

 

PLEASE PRINT OR
TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE.

 

Shares

represented by the
within Certificate, and do hereby irrevocably constitute and appoin

 Attorney to transfer the said Shares on the
books  of  the  within named
corporation with full power of substitution in the premises.

 

Dated:

In the presence of

Signature

 

Signature

 

Note: The signature to
this assignment must correspond with the name of the stockholders(s) as written
upon the face of the certificate in every particular, without alteration or
enlargement, or any change whatever.

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