<PAGE>
EXHIBIT 3.2
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
EV ENERGY GP, L.P.
A DELAWARE LIMITED PARTNERSHIP
SEPTEMBER 29, 2006
<PAGE>
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
EV ENERGY GP, L.P.
A DELAWARE LIMITED PARTNERSHIP
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S>
<C>
ARTICLE I.
DEFINITIONS...........................................................
1
SECTION 1.1
DEFINITIONS...........................................................
1
SECTION 1.2
CONSTRUCTION..........................................................
11
ARTICLE II.
ORGANIZATION..........................................................
12
SECTION 2.1
FORMATION.............................................................
12
SECTION 2.2
NAME..................................................................
12
SECTION 2.3 REGISTERED
OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE; OTHER OFFICES..
12
SECTION 2.4 PURPOSE
AND BUSINESS..................................................
12
SECTION 2.5
POWERS................................................................
13
SECTION 2.6 POWER OF
ATTORNEY.....................................................
13
SECTION 2.7
TERM..................................................................
14
SECTION 2.8 TITLE TO
PARTNERSHIP ASSETS...........................................
14
SECTION 2.9 CERTAIN
UNDERTAKINGS RELATING TO THE SEPARATENESS OF THE PARTNERSHIP..
15
ARTICLE III.
RIGHTS OF LIMITED
PARTNERS............................................ 16
SECTION 3.1 LIMITATION
OF LIABILITY...............................................
16
SECTION 3.2 MANAGEMENT
OF BUSINESS................................................
16
SECTION 3.3 OUTSIDE
ACTIVITIES OF THE LIMITED PARTNERS............................
17
SECTION 3.4 RIGHTS OF
LIMITED PARTNERS............................................
17
ARTICLE IV.
TRANSFER OF PARTNERSHIP
INTERESTS..................................... 18
SECTION 4.1 TRANSFER
GENERALLY....................................................
18
SECTION 4.2 TRANSFER
OF GENERAL PARTNER INTEREST..................................
18
SECTION 4.3 TRANSFER
OF A LIMITED PARTNER'S PARTNERSHIP INTEREST..................
19
SECTION 4.4
RESTRICTIONS ON
TRANSFERS............................................. 19
SECTION 4.5 THE
INVESTORS' RIGHTS AGREEMENT.......................................
19
ARTICLE V.
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP
INTERESTS........... 19
SECTION 5.1
CONTRIBUTIONS.........................................................
19
SECTION 5.2
CONTINUATION OF GENERAL PARTNER AND LIMITED PARTNER
INTERESTS......... 20
SECTION 5.3 INTEREST
AND WITHDRAWAL...............................................
20
SECTION 5.4 ISSUANCES
OF ADDITIONAL PARTNERSHIP INTERESTS.........................
20
SECTION 5.5 CAPITAL
ACCOUNTS......................................................
21
SECTION 5.6 LIMITED
PREEMPTIVE RIGHT..............................................
24
SECTION 5.7 FULLY PAID
AND NON-ASSESSABLE NATURE OF LIMITED PARTNER INTERESTS.....
24
</TABLE>
i
<PAGE>
<TABLE>
<S>
<C>
ARTICLE VI.
ALLOCATIONS AND
DISTRIBUTIONS......................................... 24
SECTION 6.1
ALLOCATIONS FOR CAPITAL ACCOUNT
PURPOSES.............................. 24
SECTION 6.2
ALLOCATIONS FOR TAX
PURPOSES.......................................... 29
SECTION 6.3
REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS;
DISTRIBUTIONS
TO RECORD
HOLDERS.....................................................
32
ARTICLE VII.
MANAGEMENT AND OPERATION OF
BUSINESS.................................. 32
SECTION 7.1
MANAGEMENT............................................................
32
SECTION 7.2
CERTIFICATE OF LIMITED
PARTNERSHIP.................................... 34
SECTION 7.3
RESTRICTIONS ON GENERAL PARTNER'S
AUTHORITY........................... 34
SECTION 7.4
REIMBURSEMENT OF THE GENERAL
PARTNER.................................. 35
SECTION 7.5 OUTSIDE
ACTIVITIES....................................................
36
SECTION 7.6 LOANS FROM
THE GENERAL PARTNER; LOANS OR CONTRIBUTIONS FROM
THE PARTNERSHIP OR GROUP
MEMBERS...................................... 37
SECTION 7.7
INDEMNIFICATION.......................................................
38
SECTION 7.8 LIABILITY
OF INDEMNITEES..............................................
40
SECTION 7.9 RESOLUTION
OF CONFLICTS OF INTEREST; STANDARD OF CONDUCT AND
MODIFICATION OF
DUTIES................................................ 40
SECTION 7.10 OTHER MATTERS
CONCERNING THE GENERAL PARTNER..........................
42
SECTION 7.11 RELIANCE BY
THIRD PARTIES.............................................
43
ARTICLE VIII.
BOOKS, RECORDS, ACCOUNTING AND
REPORTS................................ 43
SECTION 8.1 RECORDS
AND ACCOUNTING................................................
43
SECTION 8.2 FISCAL
YEAR...........................................................
43
SECTION 8.3
REPORTS...............................................................
43
ARTICLE IX.
TAX
MATTERS...........................................................
44
SECTION 9.1 TAX
RETURNS AND INFORMATION...........................................
44
SECTION 9.2 TAX
ELECTIONS.........................................................
44
SECTION 9.3 TAX
CONTROVERSIES.....................................................
44
SECTION 9.4
WITHHOLDING...........................................................
45
ARTICLE X.
ADMISSION OF
PARTNERS.................................................
45
SECTION 10.1 ADMISSION OF
LIMITED PARTNERS.........................................
45
SECTION 10.2 ADMISSION OF
SUCCESSOR GENERAL PARTNER................................
46
SECTION 10.3 AMENDMENT OF
AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP.........
46
ARTICLE XI.
WITHDRAWAL OR REMOVAL OF
PARTNERS..................................... 46
SECTION 11.1 WITHDRAWAL OF
THE GENERAL PARTNER.....................................
46
SECTION 11.2 REMOVAL OF THE
GENERAL PARTNER........................................
48
SECTION 11.3 INTEREST OF
DEPARTING GENERAL PARTNER.................................
48
SECTION 11.4 WITHDRAWAL OF
LIMITED PARTNERS........................................
49
ARTICLE XII.
DISSOLUTION AND
LIQUIDATION........................................... 49
SECTION 12.1
DISSOLUTION...........................................................
49
SECTION 12.2 CONTINUATION OF
THE BUSINESS OF THE PARTNERSHIP AFTER DISSOLUTION..... 49
SECTION 12.3
LIQUIDATOR............................................................
50
</TABLE>
ii
<PAGE>
<TABLE>
<S>
<C>
SECTION 12.4
LIQUIDATION...........................................................
50
SECTION 12.5 CANCELLATION OF
CERTIFICATE OF LIMITED PARTNERSHIP.................... 51
SECTION 12.6 RETURN OF
CONTRIBUTIONS...............................................
51
SECTION 12.7 WAIVER OF
PARTITION...................................................
51
SECTION 12.8 CAPITAL ACCOUNT
RESTORATION........................................... 51
ARTICLE XIII.
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS;
RECORD
DATE...........................................................
52
SECTION 13.1 AMENDMENTS TO BE
ADOPTED SOLELY BY THE GENERAL PARTNER................ 52
SECTION 13.2 AMENDMENT
PROCEDURES..................................................
53
SECTION 13.3 AMENDMENT
REQUIREMENTS................................................
56
SECTION 13.4 SPECIAL
MEETINGS......................................................
54
SECTION 13.5 NOTICE OF A
MEETING...................................................
54
SECTION 13.6
RECORD
DATE...........................................................
55
SECTION 13.7
ADJOURNMENT...........................................................
55
SECTION 13.8 WAIVER OF
NOTICE; APPROVAL OF MEETING; APPROVAL OF MINUTES............
55
SECTION 13.9 QUORUM AND
VOTING.....................................................
55
SECTION 13.10 CONDUCT OF A
MEETING..................................................
58
SECTION 13.11 ACTION WITHOUT A
MEETING.............................................. 56
SECTION 13.12 VOTING AND OTHER
RIGHTS............................................... 57
ARTICLE XIV. MERGER, CONSOLIDATION OR
CONVERSION............................................ 57
SECTION 14.1
AUTHORITY.............................................................
57
SECTION 14.2 PROCEDURE FOR
MERGER, CONSOLIDATION OR CONVERSION.....................
57
SECTION 14.3 APPROVAL BY
LIMITED PARTNERS..........................................
58
SECTION 14.4 CERTIFICATE OF
MERGER.................................................
59
SECTION 14.5 AMENDMENT OF
PARTNERSHIP AGREEMENT....................................
61
ARTICLE XV. GENERAL
PROVISIONS..............................................................
61
SECTION 15.1 ADDRESSES AND
NOTICES.................................................
61
SECTION 15.2 FURTHER
ACTION........................................................
61
SECTION 15.3 BINDING
EFFECT........................................................
62
SECTION 15.4
INTEGRATION...........................................................
62
SECTION 15.5
CREDITORS.............................................................
62
SECTION 15.6
WAIVER................................................................
62
SECTION 15.7
COUNTERPARTS..........................................................
62
SECTION 15.8 APPLICABLE
LAW........................................................
62
SECTION 15.9 INVALIDITY OF
PROVISIONS..............................................
62
SECTION 15.10 CONSENT OF
PARTNERS...................................................
62
SECTION 15.11 THIRD-PARTY
BENEFICIARIES.............................................
62
</TABLE>
iii
<PAGE>
FIRST
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
EV ENERGY GP, L.P.
A DELAWARE LIMITED PARTNERSHIP
This First
Amended and Restated Agreement of Limited Partnership of EV
Energy GP, L.P., a Delaware limited partnership, dated effective as
of September
29, 2006, is entered into by and among EV Management, L.L.C., a
Delaware limited
liability company, as the General Partner, together with any other
Persons who
become Partners in the Partnership or parties hereto as provided
herein. In
consideration of the covenants, conditions and agreements contained
herein, the
parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION
1.1 DEFINITIONS. The following definitions shall for all
purposes,
unless otherwise clearly indicated to the contrary, apply to the
terms used in
this Agreement.
"ADDITIONAL BOOK
BASIS" means the portion of any remaining Carrying Value
of an Adjusted Property that is attributable to positive
adjustments made to
such Carrying Value as a result of Book-Up Events. For purposes of
determining
the extent that Carrying Value constitutes Additional Book
Basis:
Any
negative adjustment made to the Carrying Value of an Adjusted
Property
as a result of either a Book-Down Event or a Book-Up Event shall
first be deemed
to offset or decrease that portion of the Carrying Value of such
Adjusted
Property that is attributable to any prior positive adjustments
made thereto
pursuant to a Book-Up Event or Book-Down Event.
If
Carrying Value that constitutes Additional Book Basis is reduced as
a
result of a Book-Down Event and the Carrying Value of other
property is
increased as a result of such Book-Down Event, an allocable portion
of any such
increase in Carrying Value shall be treated as Additional Book
Basis; provided,
that the amount treated as Additional Book Basis pursuant hereto as
a result of
such Book-Down Event shall not exceed the amount by which the
Aggregate
Remaining Net Positive Adjustments after such Book-Down Event
exceeds the
remaining Additional Book Basis attributable to all of the
Partnership's
Adjusted Property after such Book-Down Event (determined without
regard to the
application of this clause (b) to such Book-Down Event).
"ADDITIONAL BOOK BASIS DERIVATIVE ITEMS" means any Book Basis
Derivative
Items that are computed with reference to Additional Book Basis. To
the extent
that the Additional Book Basis attributable to all of the
Partnership's Adjusted
Property as of the beginning of any taxable period exceeds the
Aggregate
Remaining Net Positive Adjustments as of the beginning of such
period (the
"EXCESS ADDITIONAL BOOK BASIS"), the Additional Book Basis
Derivative Items for
such period shall be reduced by the amount that bears the same
ratio to the
amount of Additional Book Basis Derivative Items determined without
regard to
this sentence as the Excess Additional
<PAGE>
Book Basis bears to the Additional Book Basis as of the beginning
of such
period.
"ADJUSTED
CAPITAL ACCOUNT" means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a)
increased by
any amounts that such Partner is obligated to restore under the
standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed
obligated to
restore under Treasury Regulation Sections 1.704-2(g) and
1.704-2(i)(5)) and (b)
decreased by (i) the amount of all deductions in respect of
depletion that, as
of the end of such fiscal year, are reasonably expected to be made
to such
Partner's Capital Account in respect of the oil and gas properties
of the
partnership, (ii) the amount of all losses and deductions that, as
of the end of
such fiscal year, are reasonably expected to be allocated to such
Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code
and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (iii) the amount of all
distributions
that, as of the end of such fiscal year, are reasonably expected to
be made to
such Partner in subsequent years in accordance with the terms of
this Agreement
or otherwise to the extent they exceed offsetting increases to such
Partner's
Capital Account that are reasonably expected to occur during (or
prior to) the
year in which such distributions are reasonably expected to be made
(other than
increases as a result of a minimum gain chargeback pursuant to
Section 6.1(d)(i)
or Section 6.1(d)(ii)). The foregoing definition of Adjusted
Capital Account is
intended to comply with the provisions of Treasury Regulation
Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
"ADJUSTED
PROPERTY" means any property the Carrying Value of which has
been adjusted pursuant to Section 5.5(d)(i) or Section
5.5(d)(ii).
"AFFILIATE" means, with respect to any Person, any other Person
that
directly or indirectly through one or more intermediaries controls,
is
controlled by or is under common control with, the Person in
question. As used
herein, the term "control" means the possession, direct or
indirect, of the
power to direct or cause the direction of the management and
policies of a
Person, whether through ownership of voting securities, by contract
or
otherwise.
"AGGREGATE
REMAINING NET POSITIVE ADJUSTMENTS" means, as of the end of any
taxable period, the sum of the Remaining Net Positive Adjustments
of all the
Partners.
"AGREED
ALLOCATION" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant
to the
provisions of Section 6.1, including a Curative Allocation (if
appropriate to
the context in which the term "Agreed Allocation" is used).
"AGREED
VALUE" of any Contributed Property means the fair market value
of
such property or other consideration at the time of contribution as
determined
by the General Partner. The General Partner shall use such method
as it
determines to be appropriate to allocate the aggregate Agreed Value
of
Contributed Properties contributed to the Partnership in a single
or integrated
transaction among each separate property on a basis proportional to
the fair
market value of each Contributed Property.
"AGREEMENT" means this First Amended and Restated Agreement of
Limited
Partnership of EV Energy GP, L.P., as it may be amended,
supplemented or
restated from time to time.
<PAGE>
"ASSOCIATE" means, when used to indicate a relationship with any
Person,
(a) any corporation or organization of which such Person is a
director, officer
or partner or is, directly or indirectly, the owner of 20% or more
of any class
of voting stock or other voting interest; (b) any trust or other
estate in which
such Person has at least a 20% beneficial interest or as to which
such Person
serves as trustee or in a similar fiduciary capacity; and (c) any
relative or
spouse of such Person, or any relative of such spouse, who has the
same
principal residence as such Person.
"AVAILABLE
CASH" means, with respect to any Quarter ending prior to the
Liquidation Date,
(a) the
sum of all cash and cash equivalents of the Partnership on hand
at
the end of such Quarter, less
(b) the
amount of any cash reserves established by the General Partner
to
(i) satisfy general, administrative and other expenses and debt
service
requirements, (ii) permit the Partnership to make capital
contributions to the
MLP to maintain its 2% general partner interest upon the issuance
of partnership
securities by the MLP, (iii) comply with applicable law or any loan
agreement,
security agreement, mortgage, debt instrument or other agreement or
obligation
to which the Partnership is a party or by which it is bound or its
assets are
subject, or (iv) otherwise provide for the proper conduct of the
business of the
Partnership subsequent to such Quarter. Notwithstanding the
foregoing,
"Available Cash" with respect to the Quarter in which the
Liquidation Date
occurs and any subsequent Quarter shall equal zero.
"BOARD OF
DIRECTORS" means, with respect to the Board of Directors of the
General Partner, its board of directors or managers, as applicable,
if a
corporation or limited liability company, or if a limited
partnership, the board
of directors or board of managers of the general partner of the
General Partner.
"BOOK
BASIS DERIVATIVE ITEMS" means any item of income, deduction,
gain,
loss, Simulated Depletion, Simulated Gain or Simulated Loss
included in the
determination of Net Income or Net Loss that is computed with
reference to the
Carrying Value of an Adjusted Property (e.g., depreciation,
Simulated Depletion,
gain, loss, Simulated Gain or Simulated Loss with respect to an
Adjusted
Property).
"BOOK-DOWN
EVENT" means an event that triggers a negative adjustment to
the Capital Accounts of the Partners pursuant to Section
5.5(d).
"BOOK-TAX
DISPARITY" means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination,
the
difference between the Carrying Value of such Contributed Property
or Adjusted
Property and the adjusted basis thereof for federal income tax
purposes as of
such date. A Partner's share of the Partnership's Book-Tax
Disparities in all of
its Contributed Property and Adjusted Property will be reflected by
the
difference between such Partner's Capital Account balance as
maintained pursuant
to Section 5.5 and the hypothetical balance of such Partner's
Capital Account
computed as if it had been maintained strictly in accordance with
federal income
tax accounting principles.
<PAGE>
"BOOK-UP
EVENT" means an event that triggers a positive adjustment to
the
Capital Accounts of the Partners pursuant to Section 5.5(d).
"CAPITAL
ACCOUNT" means the capital account maintained for a Partner
pursuant to Section 5.5.
"CAPITAL
CONTRIBUTION" means any cash, cash equivalents or the fair
market
value of property that a Partner contributes to the
Partnership.
"CARRYING
VALUE" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all
depreciation,
depletion (including Simulated Depletion), amortization and cost
recovery
deductions charged to the Partners' Capital Accounts in respect of
such
Contributed Property, and (b) with respect to any other Partnership
property,
the adjusted basis of such property for federal income tax
purposes, all as of
the time of determination. The Carrying Value of any property shall
be adjusted
from time to time in accordance with Section 5.5(d)(i) and Section
5.5(d)(ii)
and to reflect changes, additions or other adjustments to the
Carrying Value for
dispositions and acquisitions of Partnership properties, as deemed
appropriate
by the General Partner.
"CERTIFICATE OF LIMITED PARTNERSHIP" means the Certificate of
Limited
Partnership of the Partnership filed with the Secretary of State of
the State of
Delaware as referenced in Section 2.3, as such Certificate of
Limited
Partnership may be amended, supplemented or restated from time to
time.
"CLAIM"
has the meaning ascribed to such term in the MLP Partnership
Agreement.
"CLOSING
DATE" has the meaning ascribed to such term in the MLP
Partnership Agreement.
"CODE"
means the Internal Revenue Code of 1986, as amended and in
effect
from time to time. Any reference herein to a specific section or
sections of the
Code shall be deemed to include a reference to any corresponding
provision of
any successor law.
"COMMISSION" means the United States Securities and Exchange
Commission.
"CONFLICTS
COMMITTEE" means a committee of the Board of Directors of the
General Partner composed entirely of three or more directors who
meet the
independence, qualification and experience requirements established
by the
Securities Exchange Act and the rules and regulations of the
Commission
thereunder and by the principal National Securities Exchange upon
which the
common units of the MLP are then listed or admitted for
trading.
"CONTRIBUTED PROPERTY" means each property or other asset, in such
form as
may be permitted by the Delaware Act, but excluding cash,
contributed to the
Partnership. Once the Carrying Value of a Contributed Property is
adjusted
pursuant to Section 5.5(d), such property shall no longer
constitute a
Contributed Property, but shall be deemed an Adjusted Property
"CONTRIBUTION AGREEMENT" has the meaning ascribed to such term in
the MLP
Partnership Agreement.
<PAGE>
"CURATIVE
ALLOCATION" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section
6.1(d)(ix).
"DELAWARE
ACT" means the Delaware Revised Uniform Limited Partnership
Act,
6 Del C. Section 17-101, et seq., as amended, supplemented or
restated from time
to time, and any successor to such statute.
"DEPARTING
GENERAL PARTNER" means a former General Partner from and after
the effective date of any withdrawal or removal of such former
General Partner
pursuant to Section 11.1 or Section 11.2.
"ECONOMIC
RISK OF LOSS" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"ENCAP
PARTNERSHIPS" means EnCap Energy Capital Fund V, L.P., a Texas
limited partnership, and EnCap V-B Acquisitions, L.P., a Texas
limited
partnership.
"ENERVEST"
means EnerVest Management Partners, Ltd. a Texas limited
partnership, and any successors thereto.
"EV
INVESTORS" means EV Investors, L.P. a Delaware limited
partnership.
"EV
PROPERTIES" means EV Properties, L.P., a Delaware limited
partnership.
"EVENT OF
WITHDRAWAL" has the meaning assigned to such term in Section
11.1(a).
"GENERAL
PARTNER" means EV Management, L.L.C., a Delaware limited
liability company, and its successors and permitted assigns that
are admitted to
the Partnership as general partner of the Partnership, in its
capacity as
general partner of the Partnership (except as the context otherwise
requires).
"GENERAL PARTNER INTEREST" means the management and ownership
interest, if any,
of the General Partner in the Partnership (in its capacity as a
general partner
without reference to any Limited Partner Interest held by it),
which may be
evidenced by Partnership Interests or a combination thereof or
interest therein,
and includes any and all benefits to which the General Partner is
entitled as
provided in this Agreement, together with all obligations of the
General Partner
to comply with the terms and provisions of this Agreement.
"GROUP"
means a Person that with or through any of its Affiliates or
Associates has any contract, arrangement, understanding or
relationship for the
purpose of acquiring, holding, voting (except voting pursuant to a
revocable
proxy or consent given to such Person in response to a proxy or
consent
solicitation made to 10 or more Persons), exercising investment
power or
disposing of any Partnership Interests with any other Person that
beneficially
owns, or whose Affiliates or Associates beneficially own, directly
or
indirectly, Partnership Interests.
"GROUP
MEMBER" means a member of the Partnership Group.
<PAGE>
"INDEMNITEE" means (a) the General Partner, any Departing General
Partner
and any Person who is or was an Affiliate of the General Partner or
any
Departing General Partner, (b) any Person who is or was a member,
partner,
director, officer, fiduciary or trustee of the Partnership, (c) any
Person who
is or was an officer, member, partner, director, employee, agent or
trustee of
the General Partner or any Departing General Partner or any
Affiliate of the
General Partner or any Departing General Partner, or any Affiliate
of any such
Person, (d) any Person who is or was serving at the request of the
General
Partner or any Departing General Partner or any such Affiliate as a
director,
officer, employee, member, partner, agent, fiduciary or trustee of
another
Person; provided, that a Person shall not be an Indemnitee by
reason of
providing, on a fee-for-services basis, trustee, fiduciary or
custodial services
and (e) any Person the General Partner designates as an
"Indemnitee" for
purposes of this Agreement.
"INITIAL
LIMITED PARTNER" means EnerVest in its capacity as a Limited
Partner.
"INVESTORS' RIGHTS AGREEMENT" means the Investors' Rights
Agreement, dated
of even date herewith, among the Partners relating to the ownership
and transfer
of their interests in the Partnership.
"INVESTORS' AGREEMENT" means the Investors Agreement dated April
12, 2006,
among the Partners.
"LIMITED
PARTNER" means, unless the context otherwise requires, each
Initial Limited Partner, each additional Person that becomes a
Limited Partner
pursuant to the terms of this Agreement, each additional Limited
Partner and any
Departing General Partner upon the change of its status from
General Partner to
Limited Partner pursuant to Section 11.3, in each case, in such
Person's
capacity as a limited partner of the Partnership.
"LIMITED
PARTNER INTEREST" means the ownership interest of a Limited
Partner in the Partnership and includes any and all benefits to
which such
Limited Partner is entitled as provided in this Agreement, together
with all
obligations of such Limited Partner to comply with the terms and
provisions of
this Agreement.
"LIQUIDATION DATE" means (a) in the case of an event giving rise to
the
dissolution of the Partnership of the type described in clauses (a)
and (b) of
the first sentence of Section 12.2, the date on which the
applicable time period
during which the holders of outstanding Partnership Interests have
the right to
elect to continue the business of the Partnership has expired
without such an
election being made, and (b) in the case of any other event giving
rise to the
dissolution of the Partnership, the date on which such event
occurs.
"LIQUIDATOR" means one or more Persons selected by the General
Partner to
perform the functions described in Section 12.3 as liquidating
trustee of the
Partnership within the meaning of the Delaware Act.
"MERGER
AGREEMENT" has the meaning assigned to such term in Section
14.1.
"MLP"
means EV Energy Partners, L.P., a Delaware limited partnership,
and
any successors thereto.
<PAGE>
"MLP
PARTNERSHIP AGREEMENT" means the First Amended and Restated
Agreement
of Limited Partnership of the MLP, as it may be amended or restated
from time to
time.
"NATIONAL
SECURITIES EXCHANGE" has the meaning ascribed to such term in
the MLP Partnership Agreement.
"NET
AGREED VALUE" means, (a) in the case of any Contributed Property,
the
Agreed Value of such property reduced by any liabilities either
assumed by the
Partnership upon such contribution or to which such property is
subject when
contributed, (b) in the case of any property distributed to a
Partner by the
Partnership, the Partnership's Carrying Value of such property (as
adjusted
pursuant to Section 5.5(d)) at the time such property is
distributed, reduced by
any indebtedness either assumed by such Partner or assignee upon
such
distribution or to which such property is subject at the time of
distribution,
in either case, as determined under Section 752 of the Code.
"NET
INCOME" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items
taken into
account in the computation of Net Termination Gain or Net
Termination Loss) for
such taxable year over the Partnership's items of loss and
deduction (other than
those items taken into account in the computation of Net
Termination Gain or Net
Termination Loss) for such taxable year. The items included in the
calculation
of Net Income shall be determined in accordance with Section 5.5(b)
and shall
include Simulated Gains, Simulated Losses and Simulated Depletion,
but shall not
include any items specially allocated under Section 6.1(d);
provided, that the
determination of the items that have been specially allocated under
Section
6.1(d) shall be made as if Section 6.1(d)(x) were not in this
Agreement.
"NET LOSS"
means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items
taken into
account in the computation of Net Termination Gain or Net
Termination Loss) for
such taxable year over the Partnership's items of income and gain
(other than
those items taken into account in the computation of Net
Termination Gain or Net
Termination Loss) for such taxable year. The items included in the
calculation
of Net Loss shall be determined in accordance with Section 5.5(b)
and shall
include Simulated Gains, Simulated Losses and Simulated Depletion,
but shall not
include any items specially allocated under Section 6.1(d);
provided, that the
determination of the items that have been specially allocated under
Section
6.1(d) shall be made as if Section 6.1(d)(x) were not in this
Agreement.
"NET
POSITIVE ADJUSTMENTS" means, with respect to any Partner, the
excess,
if any, of the total positive adjustments over the total negative
adjustments
made to the Capital Account of such Partner pursuant to Book-Up
Events and
Book-Down Events.
"NET
TERMINATION GAIN" means, for any taxable year, the sum, if
positive,
of all items of income, gain, loss or deduction recognized by the
Partnership
after the Liquidation Date. The items included in the determination
of Net
Termination Gain shall be determined in accordance with Section
5.5(b) and shall
include Simulated Gains, Simulated Losses and Simulated Depletion,
but shall not
include any items of income, gain or loss specially allocated under
Section
6.1(d).
<PAGE>
"NET
TERMINATION LOSS" means, for any taxable year, the sum, if
negative,
of all items of income, gain, loss or deduction recognized by the
Partnership
after the Liquidation Date. The items included in the determination
of Net
Termination Loss shall be determined in accordance with Section
5.5(b) and shall
include Simulated Gains, Simulated Losses and Simulated Depletion,
but shall not
include any items of income, gain or loss specially allocated under
Section
6.1(d).
"NONRECOURSE BUILT-IN GAIN" means with respect to any
Contributed
Properties or Adjusted Properties that are subject to a mortgage or
pledge
securing a Nonrecourse Liability, the amount of any taxable gain
that would be
allocated to the Partners pursuant to Section 6.2(d)(i)(A),
Section
6.2(d)(ii)(A) and Section 6.2(d)(iii) if such properties were
disposed of in a
taxable transaction in full satisfaction of such liabilities and
for no other
consideration.
"NONRECOURSE DEDUCTIONS" means any and all items of loss, deduction
or
expenditure (including any expenditure described in Section
705(a)(2)(B) of the
Code), Simulated Depletion or Simulated Loss that, in accordance
with the
principles of Treasury Regulation Section 1.704-2(b), are
attributable to a
Nonrecourse Liability.
"NONRECOURSE LIABILITY" has the meaning set forth in Treasury
Regulation
Section 1.752-1(a)(2).
"OMNIBUS
AGREEMENT" has the meaning ascribed to such term in the MLP
Partnership Agreement.
"OPERATING
AGREEMENT" has the meaning ascribed to such term in the MLP
Partnership Agreement.
"OPINION
OF COUNSEL" means a written opinion of counsel (who may be
regular counsel to the Partnership or the General Partner or any of
its
Affiliates) acceptable to the General Partner.
"PARTNER
NONRECOURSE DEBT" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"PARTNER
NONRECOURSE DEBT MINIMUM GAIN" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"PARTNER
NONRECOURSE DEDUCTIONS" means any and all items of loss,
deduction or expenditure (including any expenditure described in
Section
705(a)(2)(B) of the Code), Simulated Depletion or Simulated Loss
that, in
accordance with the principles of Treasury Regulation Section
1.704-2(i), are
attributable to a Partner Nonrecourse Debt.
"PARTNERS"
means the General Partner and the Limited Partners.
"PARTNERSHIP" means EV Energy GP, L.P., a Delaware limited
partnership,
and any successors thereto.
"PARTNERSHIP GROUP" means the Partnership, the MLP and all
Subsidiaries of
the MLP.
<PAGE>
"PARTNERSHIP INTEREST" means an ownership interest in the
Partnership,
which shall include General Partner Interests and Limited Partner
Interests.
"PARTNERSHIP MINIMUM GAIN" means that amount determined in
accordance with
the principles of Treasury Regulation Section 1.704-2(d).
"PERCENTAGE INTEREST" means (a) 0.01% with respect to the General
Partner,
(b) 71.24% with respect to EnerVest, (c) 23.75%, in the aggregate,
with respect
to EnCap Partnerships, and (d) 5.00% with respect to EV
Investors.
"PERSON"
means an individual or a corporation, limited liability
company,
partnership, joint venture, trust, unincorporated organization,
association,
government agency or political subdivision thereof or other
entity.
"PROPERTIES GP" means EV Properties GP, L.L.C., a Delaware
limited
liability company.
"QUARTER"
means, unless the context requires otherwise, a fiscal quarter
of the Partnership, or with respect to the first fiscal quarter of
the
Partnership after the Closing Date, the portion of such fiscal
quarter after the
Closing Date.
"RECAPTURE
INCOME" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or Section
743 of the
Code) upon the disposition of any property or asset of the
Partnership, which
gain is characterized as ordinary income because it represents the
recapture of
deductions previously taken with respect to such property or
asset.
"RECORD
DATE" means the date established by the General Partner for
determining (a) the identity of the Record Holders entitled to
notice of, or to
vote at, any meeting of Limited Partners or entitled to vote by
ballot or give
approval of Partnership action in writing without a meeting or
entitled to
exercise rights in respect of any lawful action of Limited Partners
or (b) the
identity of Record Holders entitled to receive any report or
distribution or to
participate in any offer.
"RECORD
HOLDER" means the Person in whose name a Limited Partner
Interest
is registered on the books that the Board of Directors has caused
the
Partnership to be kept as of the close of business on any Record
Date.
"REGISTRATION STATEMENT" has the meaning ascribed to such term in
the MLP
Partnership Agreement.
"REMAINING
NET POSITIVE ADJUSTMENTS" means as of the end of any taxable
period, with respect to any Partner, the excess of (a) the Net
Positive
Adjustments of the Partners as of the end of such period over (b)
the sum of
those Partners' Share of Additional Book Basis Derivative Items for
each prior
taxable period.
"REQUIRED
ALLOCATIONS" means (a) any limitation imposed on any allocation
of Net Losses or Net Termination Losses under Section 6.1(b) or
Section
6.1(c)(ii) and (b) any allocation of an item of income, gain, loss,
deduction,
Simulated Depletion or Simulated Loss
<PAGE>
pursuant to Section 6.1(d)(i), Section 6.1(d)(ii), Section
6.1(d)(iii), Section
6.1(d)(iv), Section 6.1(d)(vi) or Section 6.1(d)(viii).
"RESIDUAL
GAIN" or "RESIDUAL LOSS" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax
purposes
resulting from a sale, exchange or other disposition of a
Contributed Property
or Adjusted Property, to the extent such item of gain or loss or
Simulated Gain
or Simulated Loss is not allocated pursuant to Section 6.2(d)(i) or
Section
6.2(d)(ii), respectively, to eliminate Book-Tax Disparities.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as
amended, supplemented or restated from time to time, and any
successor to such
statute.
"SHARE OF
ADDITIONAL BOOK BASIS DERIVATIVE ITEMS" means in connection
with
any allocation of Additional Book Basis Derivative Items for any
taxable period,
with respect to any Partner, the amount that bears the same ratio
to such
Additional Book Basis Derivative Items as the Partners' Remaining
Net Positive
Adjustments as of the end of such period bears to the Aggregate
Remaining Net
Positive Adjustments as of that time.
"SIMULATED
BASIS" means the Carrying Value of any oil and gas property (as
defined in Section 614 of the Code).
"SIMULATED
DEPLETION" means, with respect to an oil and gas property (as
defined in Section 614 of the Code), a depletion allowance computed
in
accordance with federal income tax principles (as if the Simulated
Basis of the
property was its adjusted tax basis) and in the manner specified in
Treasury
Regulation Section 1.704-1(b)(2)(iv)(k)(2). For purposes of
computing Simulated
Depletion with respect to any property, the Simulated Basis of such
property
shall be deemed to be the Carrying Value of such property, and in
no event shall
such allowance for Simulated Depletion, in the aggregate, exceed
such Simulated
Basis.
"SIMULATED
GAIN" means the excess of the amount realized from the sale of
other disposition of an oil or gas property over the Carrying Value
of such
property.
"SIMULATED
LOSS" means the excess of the Carrying Value of an oil or gas
property over the amount realized from the sale or other
disposition of such
property.
"SPECIAL
APPROVAL" means approval by a majority of the members of the
Conflicts Committee.
"SUBSIDIARY" means, with respect to any Person, (a) a corporation
of which
more than 50% of the voting power of shares entitled (without
regard to the
occurrence of any contingency) to vote in the election of directors
or other
governing body of such corporation is owned, directly or
indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of
such Person or
a combination thereof, (b) a partnership (whether general or
limited) in which
such Person or a Subsidiary of such Person is, at the date of
determination, a
general or limited partner of such partnership, but only if more
than 50% of the
partnership interests of such partnership (considering all of the
partnership
interests of the partnership as a single class) is owned, directly
or
indirectly, at the date of determination, by such Person, by one or
more
Subsidiaries of such
<PAGE>
Person, or a combination thereof, or (c) any other Person (other
than a
corporation or a partnership) in which such Person, one or more
Subsidiaries of
such Person, or a combination thereof, directly or indirectly, at
the date of
determination, has (i) at least a majority ownership interest or
(ii) the power
to elect or direct the election of a majority of the directors or
other
governing body of such Person.
"SURVIVING
BUSINESS ENTITY" has the meaning assigned to such term in
Section 14.1.
"TRANSFER
AGENT" means such bank, trust company or other Person
(including
the General Partner or one of its Affiliates) as shall be appointed
from time to
time by the Partnership to act as registrar and transfer agent for
any
Partnership Interests; provided that, if no Transfer Agent is
specifically
designated for any such Partnership Interests, the General Partner
shall act in
such capacity.
"UNDERWRITING AGREEMENT" has the meaning ascribed to such term in
the MLP
Partnership Agreement.
"UNREALIZED GAIN" attributable to any item of Partnership property
means,
as of any date of determination, the excess, if any, of (a) the
fair market
value of such property as of such date (as determined under Section
5.5(d)) over
(b) the Carrying Value of such property as of such date (prior to
any adjustment
to be made pursuant to Section 5.5(d) as of such date).
"UNREALIZED LOSS" attributable to any item of Partnership property
means,
as of any date of determination, the excess, if any, of (a) the
Carrying Value
of such property as of such date (prior to any adjustment to be
made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of
such property
as of such date (as determined under Section 5.5(d)).
"U.S.
GAAP" means United States generally accepted accounting
principles
consistently applied.
"WITHDRAWAL OPINION OF COUNSEL" has the meaning assigned to such
term in
Section 11.1(b).
SECTION
1.2 CONSTRUCTION. Unless the context requires otherwise: (a)
any
pronoun used in this Agreement shall include the corresponding
masculine,
feminine or neuter forms, and the singular form of nouns, pronouns
and verbs
shall include the plural and vice versa; (b) references to Articles
and Sections
refer to Articles and Sections of this Agreement; (c) the terms
"include,"
"includes," "including," or words of like import shall be deemed to
be followed
by the words "without limitation"; and (d) the terms "hereof,"
"herein," or
"hereunder" refer to this Agreement as a whole and not to any
particular
provision of this Agreement. The table of contents and headings
contained in
this Agreement are for reference purposes only, and shall not
affect in any way
the meaning or interpretation of this Agreement.
<PAGE>
ARTICLE II.
ORGANIZATION
SECTION
2.1 FORMATION. The Partnership has been previously formed as a
limited partnership pursuant to the provisions of the Delaware Act.
The General
Partner and the Limited Partners hereby amend and restate in its
entirety the
Agreement of Limited Partnership of EV Energy GP, L.P. dated as of
April 17,
2006. Subject to the provisions of this Agreement, the General
Partner and the
Limited Partners hereby continue the Partnership as a limited
partnership
pursuant to the provisions of the Delaware Act. This amendment and
restatement
shall become effective on the date of this Agreement. Except as
expressly
provided to the contrary in this Agreement, the rights, duties
(including
fiduciary duties), liabilities and obligations of the Partners and
the
administration, dissolution and termination of the Partnership
shall be governed
by the Delaware Act. All Partnership Interests shall constitute
personal
property of the owner thereof for all purposes.
SECTION
2.2 NAME. The name of the Partnership shall be "EV Energy GP,
L.P." The Partnership's business may be conducted under any other
name or names
as determined by the General Partner, including the name of the
General Partner.
The words "Limited Partnership," "LP," "L.P.," "Ltd.," or similar
words or
letters shall be included in the Partnership's name where necessary
for the
purpose of complying with the laws of any jurisdiction that so
requires. The
General Partner may change the name of the Partnership at any time
and from time
to time and shall notify the Limited Partners of such change in the
next regular
communication to the Limited Partners.
SECTION
2.3 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE;
OTHER
OFFICES. The registered office of the Partnership required by the
Delaware Act
to be maintained in the State of Delaware shall be the office of
the initial
registered agent for service of process named in the Certificate of
Limited
Partnership or such other office (which need not be a place of
business of the
Partnership) as the Board of Directors may designate in the manner
provided by
law. The registered agent for service of process of the Partnership
in the State
of Delaware shall be the initial registered agent for service of
process named
in the Certificate of Limited Partnership or such other Person or
Persons as the
Board of Directors may designate in the manner provided by law. The
principal
office of the Partnership in the United States shall be at such a
place as the
Board of Directors may from time to time designate, which need not
be in the
State of Delaware, and the Partnership shall maintain records there
and shall
keep the street address of such principal office at the registered
office of the
Partnership in the State of Delaware. The Partnership may have such
other
offices as the Board of Directors may designate.
SECTION
2.4 PURPOSE AND BUSINESS. The purpose and nature of the
business
to be conducted by the Partnership shall be (a) to act as general
partner of the
MLP and (b) to engage in any business activity that is approved by
the General
Partner and that lawfully may be conducted by a limited partnership
organized
pursuant to the Delaware Act and, in connection therewith, to
exercise all of
the rights and powers conferred upon the Partnership pursuant to
the agreements
relating to such business activity; provided, however, that the
General Partner
shall not cause the Partnership to engage, directly or indirectly
in any
business activity that the General Partner determines would cause
the
Partnership or the MLP to be treated as an association taxable as a
corporation
or otherwise taxable as an entity for federal income tax
<PAGE>
purposes. To the fullest extent permitted by law, the General
Partner shall have
no duty or obligation to propose or approve, and may decline to
propose or
approve, the conduct by the Partnership of any business free of any
fiduciary
duty or obligation whatsoever to the Partnership or any Limited
Partner and, in
declining to so propose or approve, shall not be required to act in
good faith
or pursuant to any other standard imposed by this Agreement, any
other agreement
contemplated hereby or under the Delaware Act or any other law,
rule or
regulation or at equity.
SECTION
2.5 POWERS. The Partnership shall be empowered to do any and
all
acts and things necessary, appropriate, proper, advisable,
incidental to or
convenient for the furtherance and accomplishment of the purposes
and business
described in Section 2.4 and for the protection and benefit of the
Partnership.
SECTION
2.6 POWER OF ATTORNEY.
(a) Each
Limited Partner hereby constitutes and appoints the General
Partner and, if a Liquidator (other than the General Partner) shall
have been
selected pursuant to Section 12.3, the Liquidator, severally (and
any successor
to either thereof by merger, transfer, assignment, election or
otherwise) and
each of their authorized officers and attorneys-in-fact, as the
case may be,
with full power of substitution, as his true and lawful agent
and
attorney-in-fact, with full power and authority in his name, place
and stead,
to:
(i) execute, swear to, acknowledge, deliver, file and record in
the
appropriate public offices (A) all certificates, documents and
other
instruments (including this Agreement and the Certificate of
Limited
Partnership and all amendments or restatements hereof or thereof)
that the
General
Partner or the Liquidator determines to be necessary or
appropriate to form, qualify or continue the existence or
qualification of
the
Partnership as a limited partnership (or a partnership in which
the
limited
partners have limited liability) in the State of Delaware and
in
all other
jurisdictions in which the Partnership may conduct business or
own
property; (B) all certificates, documents and other instruments
that
the
General Partner or the Liquidator determines to be necessary or
appropriate to reflect, in accordance with its terms, any
amendment,
change,
modification or restatement of this Agreement; (C) all
certificates, documents and other instruments (including
conveyances and a
certificate of cancellation) that the General Partner or the
Liquidator
determines
to be necessary or appropriate to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this
Agreement;
(D) all
certificates, documents and other instruments relating to the
admission,
withdrawal, removal or substitution of any Partner pursuant to,
or other
events described in, Article IV, Article X, Article XI, or
Article
XII; (E) all certificates, documents and other instruments
relating
to the determination of the rights, preferences and privileges
of
any class
or series of Partnership Interests issued pursuant to Article
V;
and (F)
all certificates, documents and other instruments (including
agreements
and a certificate of merger) relating to a merger,
consolidation or conversion of the Partnership pursuant to Article
XIV;
and
(ii) execute, swear to, acknowledge, deliver, file and record
all
ballots,
consents, approvals, waivers, certificates, documents and other
instruments that the General Partner or the Liquidator determines
to be
necessary
or appropriate to (A) make, evidence, give, confirm or ratify
any vote,
consent, approval, agreement or other action
<PAGE>
that is
made or given by the Partners hereunder or is consistent with
the
terms of this
Agreement or (B) effectuate the terms or intent of this
Agreement;
provided, that when required by Section 13.3 or any other
provision
of this Agreement that establishes a percentage of the Limited
Partners
or of the Limited Partners of any class or series required to
take any
action, the General Partner and the Liquidator may exercise the
power of
attorney made in this Section 2.6(a)(ii) only after the
necessary
vote,
consent or approval of the Limited Partners or of the Limited
Partners
of such class or series, as applicable.
(iii) Nothing contained in this Section 2.6(a) shall be construed
as
authorizing the General Partner to amend this Agreement except
in
accordance
with Article XIII or as may be otherwise expressly provided for
in this
Agreement.
(b) The
foregoing power of attorney is hereby declared to be
irrevocable
and a power coupled with an interest, and it shall survive and, to
the maximum
extent permitted by law, not be affected by the subsequent death,
incompetency,
disability, incapacity, dissolution, bankruptcy or termination of
any Limited
Partner and the transfer of all or any portion of such Limited
Partner's
Partnership Interest and shall extend to such Limited Partner's
heirs,
successors, assigns and personal representatives. Each such Limited
Partner
hereby agrees to be bound by any representation made by the General
Partner or
the Liquidator acting in good faith pursuant to such power of
attorney; and each
such Limited Partner, to the maximum extent permitted by law,
hereby waives any
and all defenses that may be available to contest, negate or
disaffirm the
action of the General Partner or the Liquidator taken in good faith
under such
power of attorney. Each Limited Partner shall execute and deliver
to the General
Partner or the Liquidator, within 15 days after receipt of the
request therefor,
such further designation, powers of attorney and other instruments
as the
General Partner or the Liquidator may request in order to
effectuate this
Agreement and the purposes of the Partnership.
SECTION
2.7 TERM. The term of the Partnership commenced upon the filing
of
the Certificate of Limited Partnership in accordance with the
Delaware Act and
shall continue in existence until the dissolution of the
Partnership in
accordance with the provisions of Article XII. The existence of the
Partnership
as a separate legal entity shall continue until the cancellation of
the
Certificate of Limited Partnership as provided in the Delaware
Act.
SECTION
2.8 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible,
shall be
deemed to be owned by the Partnership as an entity, and no Partner,
individually
or collectively, shall have any ownership interest in such
Partnership assets or
any portion thereof. Title to any or all of the Partnership assets
may be held
in the name of the Partnership, the General Partner or one or more
third party
nominees, as the General Partner may determine. The General Partner
hereby
declares and warrants that any Partnership assets for which record
title is held
in the name of the General Partner or one or more third party
nominees shall be
held by the General Partner or such third party nominee for the use
and benefit
of the Partnership in accordance with the provisions of this
Agreement;
provided, however, that the General Partner shall use reasonable
efforts to
cause record title to such assets (other than those assets in
respect of which
the General Partner determines that the expense and difficulty of
conveyancing
makes transfer of record title to the Partnership impracticable) to
be vested in
the Partnership as soon as reasonably practicable;
<PAGE>
provided, further, that, prior to the withdrawal or removal of the
General
Partner or as soon thereafter as practicable, the General Partner
shall use
reasonable efforts to effect the transfer to the Partnership of
record title to
all Partnership assets held by the General Partner, and, prior to
any such
transfer, will provide for the use of such assets in a manner
satisfactory to
the General Partner. All Partnership assets shall be recorded as
the property of
the Partnership in its books and records, irrespective of the name
in which
record title to such Partnership assets is held.
SECTION
2.9 CERTAIN UNDERTAKINGS RELATING TO THE SEPARATENESS OF THE
PARTNERSHIP.
(a)
Separateness Generally. The Partnership shall conduct its business
and
operations in accordance with this Section 2.9.
(b)
Separate Records. The Partnership shall (i) maintain its books
and
records and its accounts separate from those of any other Person,
(ii) maintain
its financial records, which will be used by it in its ordinary
course of
business, showing its assets and liabilities separate and apart
from those of
any other Person, (iii) not have its assets and/or liabilities
included in a
consolidated financial statement of any Affiliate of the General
Partner unless
the General Partner shall cause appropriate notation to be made on
such
Affiliate's consolidated financial statements to indicate the
separateness of
the Partnership and the General Partner and their assets and
liabilities from
such Affiliate and the assets and liabilities of such Affiliate,
and to indicate
that the assets and liabilities of the Partnership and the General
Partner are
not available to satisfy the debts and other obligations of such
Affiliate
(except to the extent specified in the Contribution Agreement), and
(iv) file
its own tax returns separate from those of any other Person, except
to the
extent that the Partnership is treated as a "disregarded entity"
for tax
purposes or is not otherwise required to file tax returns under
applicable law
or is required under applicable law to file a tax return which is
consolidated
with another Person.
(c)
Separate Assets. The Partnership shall not commingle or pool its
funds
or other assets with those of any other Person, except the General
Partner, and
shall maintain its assets in a manner that is not costly or
difficult to
segregate, ascertain or otherwise identify as separate from those
of any other
Person.
(d)
Separate Name. The Partnership shall (i) conduct its business in
its
own name or in the name of the General Partner, (ii) use separate
stationery,
invoices, and checks, (iii) correct any known misunderstanding
regarding its
separate identity, and (iv) generally hold itself out as an entity
separate from
any other Person (other than the General Partner).
(e)
Separate Credit. The Partnership (i) shall pay its obligations
and
liabilities from its own funds (whether on hand or borrowed), (ii)
shall
maintain adequate capital in light of its business operations,
(iii) shall not
pledge its assets for the benefit of any other Person or guarantee
or become
obligated for the debts of any other Person (except to the extent
specified in
the Contribution Agreement or the Omnibus Agreement), (iv) shall
not hold out
its credit as being available to satisfy the obligations or
liabilities of any
other Person, (v) shall not acquire obligations or debt securities
(except to
the extent specified in the Contribution Agreement or the Omnibus
Agreement) of
EnerVest or the EnCap Partnerships or their respective Affiliates
(other than
the General Partner) nor the MLP or its Subsidiaries, (vi) shall
not make loans,
advances or capital contributions to EnerVest or the EnCap
Partnerships or their
respective Affiliates (other
<PAGE>
than the MLP or any of its Subsidiaries), and (vii) shall use its
commercially
reasonable efforts to cause the operative documents under which the
Partnership
or the General Partner borrows money, is an issuer of debt
securities, or
guarantees any such borrowing or issuance, to contain provisions to
the effect
that (A) the lenders or purchasers of debt securities,
respectively, acknowledge
that they have advanced funds or purchased debt securities,
respectively, in
reliance upon the separateness of the Partnership and the General
Partner from
any other Person, including any Affiliate of the General Partner
and (B) the
Partnership and the General Partner have assets and liabilities
that are
separate from those of other Persons, including any Affiliate of
the General
Partner; provided that, the Partnership may engage in any
transaction described
in clauses (v) or (vi) of this Section 2.9(e) if prior Special
Approval has been
obtained for such transaction and either (A) the Conflicts
Committee has
determined (by Special Approval) that the borrower or recipient of
the credit
support is not then insolvent and will not be rendered insolvent as
a result of
such transaction or (B) in the case of transactions described in
clause (v),
such transaction is completed through a public sale or a National
Securities
Exchange.
(f)
Separate Formalities. The Partnership shall (i) observe all
partnership formalities and other formalities required by its
organizational
documents, the laws of the jurisdiction of its formation, or other
laws, rules,
regulations and orders of governmental authorities exercising
jurisdiction over
it, (ii) engage in transactions with EnerVest or the Encap
Partnerships and
their respective Affiliates or the MLP or its Subsidiaries in
conformity with
the requirements of Section 7.9, and (iii) subject to the terms of
the Omnibus
Agreement, promptly pay, from its own funds, and on a current
basis, a fair and
reasonable share of general and administrative expenses, capital
expenditures,
and costs for shared services performed by EnerVest or the Encap
Partnerships or
their respective Affiliates of EnerVest or the Encap Partnerships
(other than
the General Partner). Each material contract between the
Partnership or the
General Partner, on the one hand, and EnerVest or the Encap
Partnerships or
their respective Affiliates of EnerVest or the Encap Partnerships
(other than
the General Partner), on the other hand, shall be in writing.
(g) No
Effect. Failure by the General Partner or the Partnership to
comply
with any of the obligations set forth above shall not affect the
status of the
Partnership as a separate legal entity, with its separate assets
and separate
liabilities or restrict or limit the Partnership from engaging, or
contracting
with EnerVest or the Encap Partnerships and their respective
Affiliates, for the
provision of services or the purchase or sale of products, whether
under the
Omnibus Agreement, Contract Operating Agreement or otherwise.
ARTICLE III.
RIGHTS OF LIMITED PARTNERS
SECTION
3.1 LIMITATION OF LIABILITY. The Limited Partners shall have no
liability under this Agreement except as expressly provided in this
Agreement or
the Delaware Act.
SECTION
3.2 MANAGEMENT OF BUSINESS. No Limited Partner, in its capacity
as
such, shall participate in the operation, management or control
(within the
meaning of the Delaware Act) of the Partnership's business,
transact any
business in the Partnership's name or have the power to sign
documents for or
otherwise bind the Partnership. Any action taken by any Affiliate
of the General
Partner or any officer, director, employee, member, manager,
general partner,
agent or trustee of the General Partner or any of its Affiliates,
or any
officer, director,
<PAGE>
employee, member, manager, general partner, agent or trustee of the
Partnership
or its Subsidiaries, in its capacity as such, shall not be deemed
to be
participation in the control of the business of the Partnership by
a limited
partner of the Partnership (within the meaning of Section 17-303(a)
of the
Delaware Act) and shall not affect, impair or eliminate the
limitations on the
liability of the Limited Partners under this Agreement.
SECTION
3.3 OUTSIDE ACTIVITIES OF THE LIMITED PARTNERS. Subject to the
provisions of Section 7.5, which shall continue to be applicable to
the Persons
referred to therein, regardless of whether such Persons shall also
be Limited
Partners, any Limited Partner shall be entitled to and may have
business
interests and engage in business activities in addition to those
relating to the
Partnership, including business interests and activities in direct
competition
with the Partnership and its Subsidiaries. Neither the Partnership
nor any of
the other Partners shall have any rights by virtue of this
Agreement in any
business ventures of any Limited Partner.
SECTION
3.4 RIGHTS OF LIMITED PARTNERS.
(a) In
addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.4(b), each
Limited Partner
shall have the right, for a purpose reasonably related to such
Limited Partner's
interest as a Limited Partner in the Partnership, upon reasonable
written demand
stating the purpose of such demand and at such Limited Partner's
own expense:
(i) to obtain true and full information regarding the status of
the
business
and financial condition of the Partnership;
(ii) promptly after its becoming available, to obtain a copy of
the
Partnership's state and local income tax returns for each year;
(iii) to obtain a current list of the name and last known
business,
residence
or mailing address of each Partner;
(iv) to obtain a copy of this Agreement and the Certificate of
Limited
Partnership and all amendments thereto, together with a copy of
the
executed copies of all powers of attorney pursuant to which
this
Agreement,
the Certificate of Limited Partnership and all amendments
thereto
have been executed;
(v)
to obtain true and full information regarding the amount of
cash
and a
description and statement of the Net Agreed Value of any other
Capital
Contribution by each Partner and that each Partner has agreed
to
contribute
in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of
the
Partnership as is just and reasonable.
(b)
Notwithstanding any other provision of this Agreement, the
General
Partner may keep confidential from the Limited Partners, for such
period of time
as the General Partner deems reasonable, (i) any information that
the General
Partner reasonably believes to be in the nature of trade secrets or
(ii) other
information the disclosure of which the General Partner in
<PAGE>
good faith believes (A) is not in the best interests of the
Partnership or its
Subsidiaries, (B) could damage the Partnership's or its
Subsidiaries' business
or (C) that the Partnership or any of its Subsidiaries is required
by law or by
agreement with any third party to keep confidential (other than
agreements with
Affiliates of the Partnership the primary purpose of which is to
circumvent the
obligations set forth in this Section 3.4).
ARTICLE IV.
TRANSFER OF PARTNERSHIP INTERESTS
SECTION
4.1 TRANSFER GENERALLY.
(a) The
term "transfer," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction (i)
by which the
General Partner assigns its General Partner Interest to another
Person and
includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage,
exchange or any other disposition by law or otherwise or (ii) by
which the
holder of a Limited Partner Interest assigns such Limited Partner
Interest to
another Person who is or becomes a Limited Partner, and includes a
sale,
assignment, gift, exchange or any other disposition by law or
otherwise,
including any transfer upon foreclosure of any pledge,
encumbrance,
hypothecation or mortgage.
(b) No
Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in
this Article IV.
Any transfer or purported transfer of a Partnership Interest not
made in
accordance with this Article IV shall be null and void.
(c)
Nothing contained in this Agreement shall be construed to prevent
a
disposition by any stockholder, member, partner or other owner of
the General
Partner of any or all of the issued and outstanding equity
interests of the
General Partner.
SECTION
4.2 TRANSFER OF GENERAL PARTNER INTEREST. No provision of this
Agreement shall be construed to prevent (and the Limited Partners
do hereby
expressly consent to) (a) the transfer by the General Partner of
all or a
portion of its General Partner Interest, which transferred General
Partner
Interest, to the extent not transferred to a successor General
Partner, shall
constitute a Limited Partner Interest or (b) the transfer by the
General
Partner, in whole and not in part, of its General Partner Interest
upon (i) its
merger, consolidation or other combination into any other Person or
the transfer
by it of all or substantially all of its assets to such other
Person or (ii)
sale of all or substantially all of the membership interests of the
General
Partner by its members if, in the case of a transfer described in
either clause
(a) or (b) of this sentence, the rights and duties of the General
Partner with
respect to the General Partner Interest so transferred are assumed
by the
transferee and the transferee agrees to be bound by the provisions
of this
Agreement. In the case of a transfer pursuant to this Section 4.2
to a Person
proposed as a successor general partner of the Partnership, the
transferee or
successor (as the case may be) shall, subject to compliance with
the terms of
Section 10.2, be admitted to the Partnership as the General Partner
immediately
prior to the transfer of the Partnership Interest, and the business
of the
Partnership shall continue without dissolution.
<PAGE>
SECTION
4.3 TRANSFER OF A LIMITED PARTNER'S PARTNERSHIP INTEREST.
Subject
to the terms of the Investors' Rights Agreement, a Limited Partner
may transfer
all, or a portion, of its Limited Partner Interest to another
Person, and,
following any such transfer, such Person may become a substituted
Limited
Partner pursuant to Section 10.1.
SECTION
4.4 RESTRICTIONS ON TRANSFERS.
(a)
Notwithstanding the other provisions of this Article IV, no
transfer
of any Partnership Interests shall be made if such transfer would
(i) violate
the then applicable federal or state securities laws or rules and
regulations of
the Commission, any state securities commission or any other
governmental
authority with jurisdiction over such transfer, (ii) terminate the
existence or
qualification of the Partnership under the laws of the jurisdiction
of its
formation, or (iii) cause the Partnership or the MLP to be treated
as an
association taxable as a corporation or otherwise to be taxed as an
entity for
federal income tax purposes (to the extent not already so treated
or taxed).
(b) The
General Partner may impose restrictions on the transfer of
Partnership Interests if it reviews an Opinion of Counsel that
determines that
such restrictions are necessary to avoid a significant risk of the
Partnership
or the MLP becoming taxable as a corporation or otherwise becoming
taxable as an
entity for federal income tax purposes. The General Partner may
impose such
restrictions by amending this Agreement; provided, however, that no
such
amendment or imposition of restrictions shall be effective if it is
in conflict
with a right of a Limited Partner under the Investors' Rights
Agreement.
SECTION
4.5 THE INVESTORS' RIGHTS AGREEMENT. The Partners have entered
into the Investors' Rights Agreement. Nothing in this agreement
shall change,
alter or amend the rights or obligations of the Partners set forth
in the
Investors' Rights Agreement. Any transfers of Partnership Interests
pursuant to
the Investors' Rights Agreement shall be deemed a transfer under
this Article
IV.
ARTICLE V.
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
SECTION
5.1 CONTRIBUTIONS.
(a) In
connection with formation of the Partnership, the General
Partner
made a cash Capital Contributions to the Partnership in exchange
for a 0.01%
General Partner Interest in the Partnership and was admitted as the
General
Partner of the Partnership, and EnerVest made a cash Capital
Contribution to the
Partnership in exchange for a 99.99% Limited Partner Interest in
the Partnership
and was admitted as a Limited Partner of the Partnership.
(b) On the
date of this Agreement, pursuant to the Investors' Agreement,
(i) the General Partner made an additional contribution of
cash;
(ii) EnerVest, as a Limited Partner, made an additional
contribution
of its
entire ownership interest in Properties GP and a portion of its
limited
partnership interest in EV Properties;
<PAGE>
(iii) EV Investors made a capital contribution of a portion of
its
limited
partnership interest in EV Properties in exchange for a Limited
Partner
Interest in the Partnership and was admitted as a Limited
Partner
of the
Partnership; and
(iv) The EnCap Partnerships made a capital contribution of a
portion
of its
limited partnership interest in EV Properties in exchange for a
Limited
Partner Interest in the Partnership and was admitted as a
Limited
Partner of
the Partnership.
SECTION
5.2 CONTINUATION OF GENERAL PARTNER AND LIMITED PARTNER
INTERESTS.
(a) The
Interest of the General Partner in the Partnership shall be
continued as a General Partner Interest with a Percentage Interest
of 0.01%,
subject to all of the rights, privileges and duties of the General
Partner under
this Agreement. Following the contributions described in Section
5.1(b), the
Partnership shall be deemed to have issued and/or adjusted
Partnership Interests
as follows: the Percentage Interest of EnerVest in the Partnership
shall be
71.24%, the aggregate Percentage Interest(s) of the EnCap
Partnerships in the
Partnership shall be 23.75% and the Percentage Interest of EV
Investors in the
Partnership shall be 5.00%. The Percentage Interest of each of the
EnCap
Partnership's shall be as set forth in the signature page hereof.
Each
Percentage Interest of EnerVest, the EnCap Partnerships and EV
Investors shall
be a Limited Partnership Interest.
(b) Upon
the issuance of any additional Limited Partner Interests by the
Partnership, the General Partner shall maintain its Percentage
Interest without
any requirement to make additional Capital Contributions. Except as
set forth in
Section 11.3 and Section 12.2(ii), the General Partner shall not be
obligated to
make any additional Capital Contributions to the Partnership.
SECTION
5.3 INTEREST AND WITHDRAWAL. No interest shall be paid by the
Partnership on Capital Contributions. No Partner shall be entitled
to the
withdrawal or return of its Capital Contribution, except to the
extent, if any,
that distributions made pursuant to this Agreement or upon
termination of the
Partnership may be considered as such by law and then only to the
extent
provided for in this Agreement. Except to the extent expressly
provided in this
Agreement, no Partner shall have priority over any other Partner
either as to
the return of Capital Contributions or as to profits, losses or
distributions.
Any such return shall be a compromise to which all Partners agree
within the
meaning of Section 17-502(b) of the Delaware Act.
SECTION
5.4 ISSUANCES OF ADDITIONAL PARTNERSHIP INTERESTS.
(a) The
Partnership may issue additional Partnership Interests and
options, rights, warrants and appreciation rights relating to the
Partnership
Interests for any Partnership purpose at any time and from time to
time to such
Persons for such consideration and on such terms and conditions as
the General
Partner shall determine, all without the approval of any Limited
Partners.
(b) Each
additional Partnership Interest authorized to be issued by the
Partnership pursuant to Section 5.4(a) may be issued in one or more
classes, or
one or more series of any such classes, with such designations,
preferences,
rights, powers and duties (which may be senior to existing classes
and series of
Partnership Interests), as shall be fixed by the General
Partner,
<PAGE>
including (i) the right to share in Partnership profits and losses
or items
thereof; (ii) the right to share in Partnership distributions;
(iii) the rights
upon dissolution and liquidation of the Partnership; (iv) whether,
and the terms
and conditions upon which, the Partnership may or shall be required
to redeem
the Partnership Interest (including sinking fund provisions); (v)
whether such
Partnership Interest is issued with the privilege of conversion or
exchange and,
if so, the terms and conditions of such conversion or exchange;
(vi) the terms
and conditions upon which each Partnership Interest will be issued,
evidenced by
certificates and assigned or transferred; (vii) the method for
determining the
Percentage Interest as to such Partnership Interest; and (viii) the
right, if
any, of each such Partnership Interest to vote on Partnership
matters, including
matters relating to the relative rights, preferences and privileges
of such
Partnership Interest.
(c) The
General Partner is hereby authorized and directed to take all
actions that it determines to be necessary or appropriate in
connection with (i)
each issuance of Partnership Interests and options, rights,
warrants and
appreciation rights relating to Partnership Interests pursuant to
this Section
5.4, (ii) the admission of additional Limited Partners and (iii)
all additional
issuances of Partnership Interests. The General Partner shall
determine the
relative rights, powers and duties of the holders of the
Partnership Interest or
other Partnership Interests being so issued. The General Partner
shall do all
things necessary to comply with the Delaware Act and is authorized
and directed
to do all things that it determines to be necessary or appropriate
in connection
with any future issuance of Partnership Interests or in connection
with the
conversion of the General Partner Interest into Partnership
Interest pursuant to
the terms of this Agreement, including compliance with any statute,
rule,
regulation or guideline of any federal, state or other governmental
agency.
SECTION
5.5 CAPITAL ACCOUNTS.
(a) The
Partnership shall maintain for each Partner (or a beneficial
owner
of Partnership Interests held by a nominee in any case in which the
nominee has
furnished the identity of such owner to the Partnership in
accordance with
Section 6031(c) of the Code or any other method acceptable to the
General
Partner) owning a Partnership Interest a separate Capital Account
with respect
to such Partnership Interest in accordance with the rules of
Treasury Regulation
Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased
by (i) the
amount of all Capital Contributions made to the Partnership with
respect to such
Partnership Interest and (ii) all items of Partnership income and
gain
(including Simulated Gain and income and gain exempt from tax)
computed in
accordance with Section 5.5(b) and allocated with respect to such
Partnership
Interest pursuant to Section 6.1, and decreased by (x) the amount
of cash or Net
Agreed Value of all actual and deemed distributions of cash or
property made
with respect to such Partnership Interest and (y) all items of
Partnership
deduction and loss (including Simulated Depletion and Simulated
Loss) computed
in accordance with Section 5.5(b) and allocated with respect to
such Partnership
Interest pursuant to Section 6.1.
(b) For
purposes of computing the amount of any item of income, gain,
loss, deduction, Simulated Depletion, Simulated Gain or Simulated
Loss which is
to be allocated pursuant to Article VI and is to be reflected in
the Partners'
Capital Accounts, the determination, recognition and classification
of any such
item shall be the same as its determination, recognition and
classification for
federal income tax purposes (including any method of depreciation,
cost recovery
or amortization used for that purpose), provided, that:
<PAGE>
(i) Solely for purposes of this Section 5.5, the Partnership
shall
be treated
as owning directly its proportionate share (as determined by
the
General Partner based upon the provisions of the applicable
Group
Member Agreement
or governing, organizational or similar documents) of all
property
owned by any other Group Member that is classified as a
partnership for federal income tax purposes and (y) any other
partnership,
limited
liability company, unincorporated business or other entity
classified
as a partnership for federal income tax purposes of which a
Group
Member is, directly or indirectly, a partner.
(ii) All fees and other expenses incurred by the Partnership to
promote
the sale of (or to sell) a Partnership Interest that can
neither
be
deducted nor amortized under Section 709 of the Code, if any,
shall,
for
purposes of Capital Account maintenance, be treated as an item
of
deduction
at the time such fees and other expenses are incurred and shall
be
allocated among the Partners pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation
Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain,
loss,
deduction,
Simulated Depletion, Simulated Gain or Simulated Loss shall be
made
without regard to any election under Section 754 of the Code
which
may be
made by the Partnership and, as to those items described in
Section
705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the
fact that
such items
are not includable in gross income or are neither currently
deductible
nor capitalized for federal income tax purposes. To the extent
an
adjustment to the adjusted tax basis of any Partnership asset
pursuant
to Section
734(b) or 743(b) of the Code is required, pursuant to Treasury
Regulation
Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment in the
Capital
Accounts
shall be treated as an item of gain or loss.
(iv) Any income, gain, loss, Simulated Gain or Simulated Loss
attributable to the taxable disposition of any Partnership property
shall
be
determined as if the adjusted basis of such property as of such
date of
disposition were equal in amount to the Partnership's Carrying
Value with
respect to
such property as of such date.
(v) In accordance with the requirements of Section 704(b) of
the
Code, any
deductions for depreciation, cost recovery, amortization or
Simulated
Depletion attributable to any Contributed Property shall be
determined
as if the adjusted basis of such property on the date it was
acquired
by the Partnership were equal to the Agreed Value of such
property.
Upon an adjustment pursuant to Section 5.5(d) to the Carrying
Value of
any Partnership property subject to depreciation, cost recovery
or
amortization, any further deductions for such depreciation,
cost
recovery,
amortization or Simulated Depletion attributable to such
property
shall be determined (A) as if the adjusted basis of such
property
were equal
to the Carrying Value of such property immediately following
such
adjustment and (B) using a rate of depreciation, cost recovery,
amortization or Simulated Depletion derived from the same method
and
useful
life (or, if applicable, the remaining useful life) as is
applied
for
federal income tax purposes; provided, however, that, if the asset
has
a zero
adjusted basis for federal income tax purposes, depreciation,
cost
recovery,
amortization or Simulated Depletion deductions shall be
determined
using any method that the General Partner may adopt.
<PAGE>
(vi) If the Partnership's adjusted basis in a depreciable or
cost
recovery
property is reduced for federal income tax purposes pursuant to
Section
48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall,
solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property
is
placed in
service and shall be allocated among the Partners pursuant to
Section
6.1. Any restoration of such basis pursuant to Section 48(q)(2)
of
the Code
shall, to the extent possible, be allocated in the same manner
to
the
Partners to whom such deemed deduction was allocated.
(c) A
transferee of a Partnership Interest shall succeed to a pro
rata
portion of the Capital Account of the transferor relating to the
Partnership
Interest so transferred.
(d) (i) In
accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership
Interests for
cash or Contributed Property, the issuance of Partnership Interests
as
consideration for the provision of services, the Capital Account of
all Partners
and the Carrying Value of each Partnership property immediately
prior to such
issuance shall be adjusted upward or downward to reflect any
Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as if
such Unrealized
Gain or Unrealized Loss had been recognized on an actual sale of
each such
property immediately prior to such issuance and had been allocated
to the
Partners at such time pursuant to Section 6.1 in the same manner as
any item of
gain, loss, Simulated Gain or Simulated Loss actually recognized
during such
period would have been allocated. In determining such Unrealized
Gain or
Unrealized Loss, the aggregate cash amount and fair market value of
all
Partnership assets (including cash or cash equivalents) immediately
prior to the
issuance of additional Partnership Interests shall be determined by
the General
Partner using such method of valuation as it may adopt; provided,
however, that
the General Partner, in arriving at such valuation, must take fully
into account
the fair market value of the Partnership Interests of all Partners
at such time.
The General Partner shall allocate such aggregate value among the
assets of the
Partnership (in such manner as it determines) to arrive at a fair
market value
for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than
a
distribution of cash that is not in redemption or retirement of
a
Partnership Interest), the Capital Accounts of all Partners and
the
Carrying
Value of all Partnership property shall be adjusted upward or
downward
to reflect any Unrealized Gain or Unrealized Loss attributable
to
such
Partnership property, as if such Unrealized Gain or Unrealized
Loss
had been
recognized in a sale of such property immediately prior to such
distribution for an amount equal to its fair market value, and had
been
allocated
to the Partners, at such time, pursuant to Section 6.1 in the
same
manner as any item of gain, loss, Simulated Gain or Simulated
Loss
actually
recognized during such period would have been allocated. In
determining such Unrealized Gain or Unrealized Loss the aggregate
cash
amount and
fair market value of all Partnership assets (including cash or
cash
equivalents) immediately prior to a distribution shall (A) in
the
case of an
actual distribution that is not made pursuant to Section 12.4
or in the
case of a deemed distribution, be determined and allocated in
the same
manner as that provided in Section 5.5(d)(i) or (B) in the case
of a
liquidating distribution pursuant to Section 12.4, be
<PAGE>
determined
and allocated by the Liquidator using such method of valuation
as it may
adopt.
SECTION
5.6 LIMITED PREEMPTIVE RIGHT. Except as provided in this
Section
5.6, in Section 5.2 and in the Investors' Rights Agreement, no
Person shall have
any preemptive, preferential or other similar right with respect to
the issuance
of any Partnership Interest, whether unissued, held in the treasury
or hereafter
created. The General Partner shall have the right, which it may
from time to
time assign in whole or in part to any of its Affiliates, to
purchase
Partnership Interests from the Partnership whenever, and on the
same terms that,
the Partnership issues Partnership Interests to Persons other than
the General
Partner and its Affiliates or to the EnCap Partnerships, to the
extent necessary
to maintain the Percentage Interests (other than the General
Partner Interest)
of the General Partner and its Affiliates equal to that which
existed
immediately prior to the issuance of such Partnership
Interests.
SECTION
5.7 FULLY PAID AND NON-ASSESSABLE NATURE OF LIMITED PARTNER
INTERESTS. All Limited Partner Interests issued pursuant to, and in
accordance
with the requirements of, this Article V shall be fully paid and
non-assessable
Limited Partner Interests in the Partnership, except as such
non-assessability
may be affected by Section 17-607 of the Delaware Act.
ARTICLE VI.
ALLOCATIONS AND DISTRIBUTIONS
SECTION
6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES. For purposes of
maintaining the Capital Accounts and in determining the rights of
the Partners
among themselves, the Partnership's items of income, gain, loss,
deduction,
Simulated Depletion, Simulated Gain and Simulated Loss (computed in
accordance
with Section 5.5(b)) shall be allocated among the Partners in each
taxable year
(or portion thereof) as provided herein below.
(a) Net
Income. After giving effect to the special allocations set
forth
in Section 6.1(d), Net Income for each taxable year and all items
of income,
gain, loss, deduction, Simulated Depletion, Simulated Gain and
Simulated Loss
taken into account in computing Net Income for such taxable year
shall be
allocated as follows:
(i) First, 100% to the General Partner until the aggregate Net
Income
allocated to the General Partner pursuant to this Section
6.1(a)(i)
for the
current taxable year and all previous taxable years is equal to
the
aggregate Net Losses allocated to the General Partner pursuant
to
Section
6.1(b)(iii) for all previous taxable years;
(ii) Second, 100% to the General Partner and the Limited
Partners,
in
accordance with their respective Percentage Int
