LIMITED PARTNERSHIP AGREEMENT OF HALLWOOD ENERGY 4, L.P.

EXHIBIT 10.21

LIMITED PARTNERSHIP AGREEMENT

OF

HALLWOOD ENERGY 4, L.P.
A DELAWARE LIMITED PARTNERSHIP

Dated as of August 23, 2005

THE INTERESTS IN THIS PARTNERSHIP HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE, AND THE HOLDER THEREOF CANNOT MAKE ANY SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR OTHER TRANSFER OF ANY SUCH INTERESTS EXCEPT PURSUANT TO AN OFFERING OF SUCH INTERESTS DULY REGISTERED UNDER THE ACT AND REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR UNDER SUCH OTHER CIRCUMSTANCES WHICH IN THE OPINION OF COUNSEL FOR THE PARTNERSHIP DOES NOT REQUIRE REGISTRATION UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES LAWS. ALSO SAID INTERESTS ARE “RESTRICTED SECURITIES” WITHIN THE MEANING OF RULE 144 PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT AND MAY BE SUBJECT TO THE LIMITATIONS AND REPORTING REQUIREMENTS OF SAID RULE UPON RESALE OR OTHER DISPOSITION THEREOF.

TABLE OF CONTENTS

LIMITED PARTNERSHIP AGREEMENT
OF
HALLWOOD ENERGY 4, L.P.

     THIS LIMITED PARTNERSHIP AGREEMENT (the “ Agreement ”) of Hallwood Energy 4, L.P. (the “ Partnership ”), dated as of August 23, 2005, is made by and among HEC 4 Management, LLC, a Delaware limited liability company, as the general partner (the “ General Partner ”), and The Hallwood Group Incorporated, a Delaware corporation, as Limited Partner, together with any other Persons who hereafter become Limited Partners in the Partnership as provided herein.

ARTICLE I

FORMATION OF PARTNERSHIP

      Section 1.1. Formation . Subject to the provisions of this Agreement, the parties hereby form a limited partnership pursuant to the Act.

      Section 1.2. Name . The name of the Partnership shall be Hallwood Energy 4, L.P. Subject to all applicable laws, the business of the Partnership shall be conducted in the name of the Partnership unless under the law of some jurisdiction in which the Partnership does business, such business must be conducted under another name, or unless the General Partner determines that it is advisable to conduct Partnership business under another name. In such a case, the business of the Partnership in such jurisdiction or in connection with such determination may be conducted under such other name or names as the General Partner shall determine to be necessary. The General Partner shall cause to be filed on behalf of the Partnership such partnership or assumed or fictitious name certificates or similar instruments as may from time to time be required by law.

      Section 1.3. Business . The business of the Partnership shall be (a) to explore for, develop, produce, store, treat, process, gather, transport, purchase or market oil, gas and related hydrocarbons; (b) to acquire properties which may be used in oil and gas activities, including but not limited to (i) leasehold interests, mineral interests and royalty interests, (ii) plants, pipelines, wells, facilities, equipment and other assets relating to such activities or properties and (iii) contracts, easements, servitudes, permits, licenses and other rights relating to the foregoing; (c) to farmout, sell, abandon and otherwise dispose of Partnership assets; (d) to effectuate commodity hedging transactions in order to minimize the risk associated with the fluctuation of prices to be received by the Partnership from the sale of oil, gas and related hydrocarbons and minerals from Partnership properties; (e) to participate in any of the foregoing activities either directly or indirectly through another partnership, limited liability company, joint venture, corporation or other agreement; and (f) to take all such other actions incidental or ancillary to any of the foregoing as the General Partner may determine to be necessary or desirable.

      Section 1.4. Places of Business; Registered Agent; Names and Addresses of Partners.

     (a) The address of the principal office and place of business of the Partnership shall initially be 3710 Rawlins, Suite 1500, Dallas, Texas 75219. The General Partner, at any time

and from time to time, may change the location of the Partnership’s principal place of business and may establish such additional place or places of business of the Partnership as the General Partner shall determine to be necessary or desirable.

     (b) The registered office of the Partnership in the State of Delaware shall be 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the registered agent for service of process on the Partnership at such address shall be The Corporation Trust Company. The General Partner, at any time and from time to time, may change the Partnership’s registered office or registered agent or both by complying with the applicable provisions of the Act, and may establish, appoint and change additional registered offices and registered agents of the Partnership in such other states as the General Partner shall determine to be necessary or advisable.

     (c) The General Partner is the sole general partner of the Partnership. The General Partner’s address is set forth on Exhibit A .

     (d) The address of the initial Limited Partner is set forth on Exhibit A .

      Section 1.5. Term . The Partnership was formed and commenced upon filing of the certificate of limited partnership of the Partnership with the Secretary of State of the State of Delaware on August 23, 2005, and the Partnership shall continue until December 31, 2055 or until terminated in accordance with Article VIII .

      Section 1.6. Filings . Upon the request of the General Partner, the Limited Partners shall promptly execute and deliver all such certificates and other instruments conforming hereto as shall be necessary for the General Partner to accomplish all filing, recording, publishing and other acts appropriate to comply with all requirements for the formation and operation of a limited partnership under the laws of the State of Delaware and for the qualification and operation of a limited partnership (or a partnership in which the Limited Partners have limited liability) in all other jurisdictions where the Partnership shall propose to conduct business. Prior to conducting business in any jurisdiction, the General Partner shall use its reasonable good faith efforts to cause the Partnership to comply with all requirements for the qualification of the Partnership to conduct business as a limited partnership (or a partnership in which the Limited Partners have limited liability) in such jurisdiction.

      Section 1.7. Title to Partnership Property . All property initially contributed to the Partnership or hereafter acquired by the Partnership, whether real or personal, tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually, shall have any ownership of such property. The Partnership may hold its property in its own name or in the name of a nominee which may be the General Partner or any of its Affiliates or any trustee or agent designated by it.

      Section 1.8. Power of Attorney.

     (a)  Authority to Execute Documents . Each Limited Partner hereby constitutes and appoints the General Partner (and its successors and assigns) and its duly authorized partners, officers, members, managers, agents and representatives, each with power of substitution, as its agent and attorney in fact with full power and authority in its name, place and stead to make,

execute, swear to and acknowledge, amend, file, record, deliver and publish (i) all certificates and other documents (including without limitation this Agreement and the Certificate of Limited Partnership) and all amendments and restatements thereof that the General Partner deems appropriate or necessary to qualify, or continue the 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 jurisdictions in which the Partnership may conduct business or own property; (ii) all documents that the General Partner deems appropriate or necessary to reflect any amendment of this Agreement in accordance with its terms; (iii) all conveyances and other documents that the General Partner deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement; (iv) all certificates and other documents (including this Agreement and the Certificate of Limited Partnership) and all amendments and restatements thereof relating to the admission or substitution of any Partner; (v) any fictitious or assumed name certificate required or permitted to be filed by or on behalf of the Partnership; and (vi) any other document which may hereafter be required by law to be filed for or on behalf of the Partnership.

     (b)  Authority to Approve Certain Acts . Each Limited Partner further appoints the General Partner (and its successors and assigns) and its duly authorized partners, officers, members, managers, agents and representatives, in its name, place and stead to consent to the admission of any substituted or additional Limited Partner or the admission of any substituted or additional General Partner pursuant to Article IX .

     (c)  Survival of Power . This limited Power of Attorney shall not be revoked and shall survive the assignment or transfer by a Limited Partner of all or part of its interest in the Partnership and is coupled with an interest and therefore shall survive the termination, revocation, dissolution, Bankruptcy, death, disability, incompetency or incapacity of any Limited Partner to the extent that it may legally contract for such survival and shall be binding upon each Limited Partner’s heirs, legatees, successors and assigns. Any Person dealing with the Partnership may conclusively presume and rely upon the fact that any document executed by such agent and attorney in fact is authorized, regular and binding without further inquiry.

      Section 1.9. Merger. The Partnership may merge with or into another limited partnership or other entity, or enter into an agreement to do so.

ARTICLE II

DEFINITIONS AND REFERENCES

      Section 2.1. Defined Terms . When used in this Agreement, the following capitalized terms shall have the respective meanings set forth below:

      “Act” means the Delaware Revised Uniform Limited Partnership Act, 6 Del. Code §17-101, et. seq., as amended, supplemented or restated from time to time, and any successor to such statute.

      “Affiliate” means (a) any Person directly or indirectly controlling, controlled by or under common control with another Person, and (b) any officer, director, member or partner of, or any

Person related by blood or marriage to, another Person or any Person described in subsection (a) of this paragraph.

      “Available Cash” means at any time of determination: (a) all cash and cash equivalents of the Partnership on hand at such time, less (b) the sum of all reserves in such amounts as the General Partner determines are required to (i) provide for the proper conduct of the business of the Partnership (including capital expenditures) and (ii) comply with applicable law and any covenants under any loan agreements, security agreements or other agreements to which the Partnership is a party.

      “Bankruptcy” of a Person means the occurrence of any of the events described in Section 18-304 of the Act with respect to such Person.

      “ Business Day” means each day of the week except Saturdays, Sundays, and days on which banking institutions are authorized by law to close in the States of Delaware or Texas.

      “ Capital Account” means the capital account maintained for each Partner pursuant to requirements of Exhibit B .

      “Capital Contributions” means for any Partner at any particular time the aggregate of the dollar amounts of any cash and the fair market value of any property contributed pursuant to Article III to the capital of the Partnership.

      “Class A Limited Partner” means any Person validly holding a Class A Partnership Interest.

      “Class B Limited Partner” means any Person validly holding a Class B Partnership Interest.

      “Class A Partnership Interest” means all rights and interests of a Class A Limited Partner under this Agreement, including (i) the right of a Class A Limited Partner, expressed as its Percentage Interest, to receive distributions of revenues, allocations of income and loss and distributions of liquidation proceeds in accordance with the terms of this Agreement, and (ii) all management rights, voting rights or rights to consent held by such Limited Partner under this Agreement.

      “Class B Partnership Interest” means all rights and interests of a Class B Limited Partner under this Agreement, including (i) the right of a Class B Limited Partner, expressed as its Percentage Interest, to receive distributions of revenues, allocations of income and loss and distributions of liquidation proceeds in accordance with the terms of this Agreement, and (ii) all management rights, voting rights or rights to consent, if any, held by such Limited Partner under this Agreement.

      “ Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time, as interpreted by the applicable regulations thereunder. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.

      “Confidential Information” means all proprietary information of the Partnership or its Affiliates, including business opportunities of the Partnership or its Affiliates, intellectual property, and any other information heretofore or hereafter acquired, developed or used by the Partnership or its Affiliates relating to its business, including without limitation any confidential information contained in any lease files, well files and records, production records, electric logs, core data, pressure data, production records, geological and geophysical reports and related data, memoranda, notes, records, drawings, manuals, correspondence, financial and accounting information, customer lists, statistical data and compilations, patents, copyrights, trademarks, trade names, inventions, formulae, methods, processes, agreements, contracts, manuals or any other documents relating to the business of the Partnership or its Affiliates, developed by, or originated by any third Person and brought to the attention of, the Partnership or its Affiliates; provided that Confidential Information shall not include any information which: (i) is or becomes publicly available other than through a breach of this Agreement; (ii) already is lawfully known by the recipient at the time of disclosure; (iii) becomes lawfully known to the recipient from a third Person not under a confidentiality obligation to another party hereto; (iv) was independently developed by the recipient; or (v) is required to be disclosed by applicable law, regulation or order of any governmental authority having jurisdiction.

      “ Fiscal Year” means the twelve-month period ending December 31 of each year; provided that the initial Fiscal Year shall be the period beginning on the effective date of this Agreement and ending December 31, 2005, and the last Fiscal Year shall be the period beginning on January 1 of the calendar year in which the final liquidation and termination of the Partnership is completed and ending on the date such final liquidation and termination is completed (to the extent any computation or other provision hereof provides for an action to be taken on a Fiscal Year basis, an appropriate proration or other adjustment shall be made in respect of the initial and final Fiscal Years to reflect that such periods are less than full calendar year periods).

      “General Partner” means HEC 4 Management, LLC, a Delaware limited liability company, and any Person who becomes a substituted general partner of the Partnership pursuant to the terms hereof.

      “Limited Partner” means a Person who is designated on Exhibit A as a Class A Limited Partner or a Class B Limited Partner, and any other Person who is admitted as a limited partner of any class of the Partnership pursuant to this Agreement.

      “Maximum Tax Liability” means an amount determined for each Partner for a Fiscal Year equal to the portion of the Partnership’s net income allocated to the Partner for such Fiscal Year (as determined by the General Partner) multiplied by the highest marginal federal and state income tax rates for individuals in effect for such Fiscal Year for that amount of the net income considered ordinary income and multiplied by the highest capital gains rate for individuals in effect for such Fiscal Year for that amount of the net income considered “net capital gains” (as such term is defined in Code Section 1222(11)). State taxes shall be calculated using the highest rates applicable for each Fiscal Year in any state in which any Partner is subject to state income taxation on its allocable share of Partnership income; federal taxes shall be calculated giving effect to allowable credits for state income taxes paid. In determining cumulative Maximum Tax Liability for purposes of Section 4.2(a) , net losses allocated to the Partner for a Fiscal Year that are allowed

to be carried forward under applicable tax laws shall be deducted from net income in succeeding years. For purposes of this definition, (a) income, gain, loss and deduction shall be determined, recognized and classified as provided in Sections B.2.1 through B.2.4 of Exhibit B (without regard to the allocations under Section B.2.7 of Exhibit B ), and (b) net income of the Partnership means the amount by which income and gains exceed its losses and deductions (as determined under Code Section 702(a), including items required to be separately stated thereunder) including Simulated Depletion (as defined in Exhibit B ) from and Simulated Gain or Loss on a sale of the Partnership’s oil and gas property as allocated under Sections B.2.1 through B.2.4 of Exhibit B .

      “Net Proceeds” means the proceeds received by the Partnership in connection with a Terminating Capital Transaction after payment of all reasonable costs and expenses incurred by the Partnership in connection with such transaction, including brokers’ commissions, loan fees, loan payments, repayments of indebtedness and other closing costs. Net Proceeds from a Terminating Capital Transaction shall also be increased by all other funds then held by the Partnership at the time of consummation of such transaction.

      “Partners” means the General Partner and the Limited Partners.

      “Partnership” means Hallwood Energy 4, L.P., a Delaware limited partnership.

      “Percentage Interest” means each Partner’s percentage interest reflected on the books of the Partnership as determined pursuant to this Agreement.

      “Person” means an individual, an estate, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust or any other entity.

      “Required Percentage” of the Class A Limited Partners, as to any agreement, election, vote or other action of the Class A Limited Partners, means those Class A Limited Partners whose combined Percentage Interests exceed 50% of the Percentage Interests of all Class A Limited Partners.

      “Terminating Capital Transaction” means any sale or other disposition of all or substantially all of the then remaining assets of the Partnership which is entered into in connection with, or which will result in, the liquidation of the Partnership.

      “Total Capital Contributions” means the total Capital Contributions to the Partnership by all Partners.

      “Total Distributions” means the total of all cash and the Fair Value of all property that have been distributed to the Partners, including the distributions to be made at the time of any determination under Section 4.2 , but excluding Tax Distributions.

      “Transfer” shall have the meaning set forth in Section 9.1 .

      “Unreturned Capital” means a Class A Limited Partner’s aggregate Capital Contribution reduced by the sum of distributions received by such Class A Limited Partner under Sections 4.2(a) and 4.3(a) .

      Section 2.2. References and Titles . All references in this Agreement to articles, sections, subsections, other subdivisions and exhibits refer to corresponding articles, sections, subsections, other subdivisions of this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any of such subdivisions are for convenience only and shall not constitute part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. The words “this Agreement”, “herein”, “hereof”, “hereby”, “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa , unless the context otherwise requires.

ARTICLE III

CAPITALIZATION

      Section 3.1. Percentage Interests.

     (a) The Percentage Interest of the General Partner in the Partnership shall be 0.01% and shall not be reduced by the admission of any additional Limited Partners to the Partnership. The Percentage Interests of all Limited Partners shall be in the aggregate 99.99%.

     (b) If the Partnership itself acquires any Class A Partnership Interest in the Partnership pursuant to a purchase right under Article IX or otherwise, the Class A Partnership Interests of the other Class A Limited Partners shall be increased, in proportion to their Percentage Interests, by the full amount of the Class A Partnership Interest acquired, so that the General Partner and the Limited Partners will thereafter have the same aggregate interests in the Partnership specified in Section 3.1(a) .

     (c) The General Partner may, without any consent or approval of the Limited Partners, from time to time admit Persons as Class B Limited Partners of the Partnership and may issue Class B Partnership Interests in the Partnership, as the General Partner determines to be appropriate, provided that the Percentage Interest of all Class B Partnership Interests shall not exceed twenty percent (20%) of the Percentage Interests of all Limited Partners that may be awarded to members of the management of the General Partner as an incentive for the formation and operation of the Partnership, plus an additional two percent (2%) of the Percentage Interests of all Limited Partners that may be awarded for other purposes. If the Partnership itself acquires any Class B Partnership Interest in the Partnership pursuant to a purchase right under Article IX or otherwise, (i) the Class A Partnership Interests of the Class A Limited Partners shall be increased, in proportion to their Percentage Interests, by the full amount of the Class B Partnership Interest acquired, (ii) the Class B Partnership Interests of the other Class B Limited Partners shall remain unchanged; and (iii) the percentages attributed to the Class A Limited Partners and the Class B Limited Partners in Sections 4.2(b) and 4.3(b) shall be adjusted as appropriate to reflect new aggregate percentage interests in the Partnership owned by the Class A Limited Partners and the Class B Limited Partners following such acquisition.

     (d) The Percentage Interest of each Partner on the date of this Agreement is as set forth in Exhibit A .

      Section 3.2. Capital Contributions . The cash contribution, if applicable, made by each Partner for its Partnership Interest as of the date of this Agreement is set forth in Exhibit A .

      Section 3.3. Additional Assessments . No additional assessments may be made on any Limited Partner for any purpose.

      Section 3.4. General Partner’s Capital Account . Notwithstanding anything herein to the contrary, the General Partner shall maintain a minimum Capital Account balance equal to 0.01% of the total positive Capital Account balances of all Partners, and whenever a Limited Partner makes a Capital Contribution to the Partnership, the General Partner shall immediately contribute to the Partnership capital equal to 0.01% of such Limited Partner’s Capital Contribution or a lesser amount (including zero) that causes the General Partner’s Capital Account balance to equal 0.01% of the total positive Capital Account balances of all Partners.

      Section 3.5. Additional Limited Partners .

     (a) In order to raise additional debt or equity capital, to acquire assets, to redeem or retire debt, to redeem interests in the Partnership, to adopt employee benefit plans for employees of the Partnership, to comply with any applicable laws or regulations or for any other Partnership purpose, the General Partner may, without any consent or approval of the Limited Partners, from time to time admit additional Persons as Limited Partners of the Partnership and may issue such classes of interests in the Partnership, or series of such classes, or rights, warrants or options to acquire interests of any class or series, as the General Partner determines to be appropriate, with such designations, rights, preferences, privileges and obligations as are specified by the General Partner in its sole discretion, including without limitation preferential distribution or voting rights or rights relating to conversion or redemption of interests. Upon the issuance of any class or series of interests in the Partnership that are not identical to interests whose rights, preferences and obligations are already specifically described in this Agreement, the General Partner (pursuant to its power of attorney from the Limited Partners), without the consent of any Limited Partner or assignee, may amend any provision of this Agreement and, if required by applicable law, execute, swear to, acknowledge, deliver, file and record an amended Certificate of Limited Partnership and whatever other documents may be required in connection therewith, as may be necessary or desirable to reflect the issuance of such class or series of interests and the relative rights, preferences and obligations of such class or series of interests. In addition, the General Partner is authorized to cause the issuance of any other type of security from time to time to Partners or other Persons on terms and conditions established in the sole discretion of the General Partner. Such securities may specifically include, without limitation, unsecured and secured debt obligations of the Partnership, debt obligations of the Partnership convertible into any class or series of Partnership interests that may be issued by the Partnership, rights, options or warrants to purchase any such class or series of interests or any combination of any of the foregoing. The General Partner is authorized to do all things it deems necessary or advisable in connection with any such future issuance, including compliance with any statute, rule, regulation or guideline of any federal, state or other governmental agency.

     (b) Notwithstanding the provisions of Section 3.5(a) or any other provision of this Agreement to the contrary, the issuance of additional Class A Limited Partnership Interests and Class B Limited Partnership Interests by the General Partner from time to time shall only reduce

the Percentage Interests of the then existing Class A Limited Partners and shall not reduce the Percentage Interests of any of the Class B Limited Partners.

      Section 3.6. No Preemptive Rights. No Person shall have any preemptive, preferential or other similar right with respect to (a) additional Capital Contributions; (b) issuance or sale by the Partnership of any class or series of Partnership Interests, whether unissued or hereafter created; (c) issuance of any obligations, evidences of indebtedness or other securities of the Partnership convertible into or exchangeable for, or carrying or accompanied by any rights to receive, purchase or subscribe to, any Partnership Interests; (d) issuance of any right of subscription to or right to receive, or any warrant or option for the purchase of, any Partnership Interests; or (e) issuance or sale of any other securities that may be issued or sold by the Partnership.

ARTICLE IV

ALLOCATIONS AND DISTRIBUTIONS

      Section 4.1. Allocation Among Limited Partners . All items of income, gain, loss, deduction and credit shall be allocated among the Partners as provided in Exhibit B .

      Section 4.2. Distributions of Available Cash . Subject to the provisions of Section 4.4 below, at such times as the General Partner shall determine in its sole discretion, all Available Cash of the Partnership (if any) shall be distributed among the Partners as follows and in the following order of priority:

     (a) First: 100% to the Class A Limited Partners and the General Partner, pro rata in accordance with the balances of their respective Unreturned Capital accounts until the balance of each Class A Limited Partner’s Unreturned Capital account is reduced to zero; and

     (b) Second: The balance, if any, to the General Partner, the Class A Limited Partners and the Class B Limited Partners, in proportion to their individual Percentage Interests.

      Section 4.3. Distributions of Net Proceeds from Terminating Capital Transaction . The Net Proceeds of a Terminating Capital Transaction, after payment of all of the Partnership’s debts and liabilities and the expenses of liquidation and/or the establishment of a reasonable reserve for the Partnership’s debts and liabilities (contingent or otherwise), if deemed necessary by the General Partner, and after taking into account all distributions to the Partners during such year pursuant to Section 4.2 , shall be distributed among the Partners as follows and in the following order of priority:

     (a) First: 100% to the Class A Limited Partners and the General Partner, pro rata in accordance with the balances of their respective Unreturned Capital accounts until the balance of each Class A Limited Partner’s Unreturned Capital account is reduced to zero; and

     (b) Second: The balance, if any, to the General Partner, the Class A Limited Partners and to Class B Limited in proportion to their individual Percentage Interests.

      Section 4.4. Restrictions on Distributions .

     (a) No distribution of property in kind shall be permitted except in accordance with Section 8.2 .

     (b) All distributions are subject to applicable law and contractual restrictions, if any.

ARTICLE V

MANAGEMENT

      Section 5.1. Power and Authority of General Partner .

     (a) The General Partner, subject to the express terms and conditions of its Regulations, shall conduct, direct and exercise full control over all activities of the Partnership. Except as otherwise expressly provided in Section 5.2 and elsewhere in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner, and the Limited Partners shall have no right of control over the business and affairs of the Partnership. In addition to the powers now or hereafter granted a general partner of a limited partnership under the Act or which are granted to the General Partner under any other provision of this Agreement, the General Partner shall have full power and authority to do all things deemed necessary or desirable by it to conduct the business of the Partnership in the name of the Partnership, including, without limitation (except as aforesaid), the right and power to:

     (1) acquire producing and non-producing oil and gas properties, leases, mineral interests, royalty or overriding royalty interests, fee rights, licenses, concessions or other rights covering oil, gas and related hydrocarbons (or contractual options or other rights to acquire any such 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 any such interest or the exploration, development or operation thereof, and otherwise act for, in the name of and on behalf of the Partnership with respect to such properties, all in accordance with the terms of this Agreement;

     (2) purchase or otherwise acquire other real or personal property of every nature, considered necessary or appropriate to carry on and conduct the business of the Partnership;

     (3) borrow monies for the purchase, development, exploration and maintenance of Partnership assets and other aspects of the Partnership’s business and from time to time draw, make, execute and issue promissory notes and other negotiable or non-negotiable instruments and evidences of indebtedness; to secure the payment of the sums so borrowed and mortgage, pledge or assign in trust all or any part of the property of the Partnership, and assign any monies owing or to be owing to the Partnership;

     (4) enter into any agreements of joint venture or partnership or for sharing of risks, expenses or profits, with any Person, government or agency thereof engaged in any business or transaction in which the Partnership is authorized to engage;

     (5) explore and prospect by geological, geophysical or other methods for the location of anomalies or other indications favorable to the accumulation of oil and gas, including specifically the power to contract with third Persons for such purposes;

     (6) maintain, develop, operate, manage and defend Partnership property; to drill, test, plug and abandon or complete and equip, rework and recomplete any number of wells on Partnership properties for the production of oil and gas; to contract with third Persons for such purposes; to carry out a program or programs of enhanced recovery operations on Partnership properties and to do any and all other things necessary or appropriate to carry out the terms and provisions of this Agreement which would or might be done by a normal and prudent operator in the development, operation and management of its own property;

     (7) enter into and execute operating agreements, drilling contracts, farmouts, dry and bottom hole and acreage contribution letters, participation agreements, gas processing agreements and any other agreements customarily employed in the oil and gas industry in connection with the acquisition, sale, development, exploration or operation of oil and gas properties, agreements as to rights-of-way and any and all other instruments or documents considered by the General Partner to be necessary or appropriate to carry on and conduct the business of the Partnership, for such consideration and on such terms as the General Partner may determine to be in the best interests of the Partnership;

     (8) sell the production accruing to Partnership properties and to execute gas sales contracts, casinghead gas contracts, transfer orders, division orders, or any other instruments in connection with the sale of production from the Partnership’s interest in such properties;

     (9) farm-out, sell, assign, convey or otherwise dispose of, for such consideration and upon such terms and conditions as the General Partner may determine to be in the best interests of the Partnership, all or any part of the Partnership property, any interest therein, or any interest payable therefrom, and in connection therewith to execute and deliver such deeds, assignments and conveyances containing such warranties as the General Partner may determine to be appropriate;

     (10) purchase, lease, rent or otherwise acquire or obtain the use of facilities, machinery, equipment, tools, materials and all other kinds and types of real or personal property that may in any way be deemed necessary, convenient, or advisable in connection with carrying on the business of the Partnership;

     (11) pay monies with respect to delay rentals, bonus payments, shut-in gas royalty payments, property taxes, surface damages, rights-of-way, easements and any

other amounts necessary or appropriate to the maintenance or operation of any Partnership property;

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

     (13) procure and maintain in force such insurance as the General Partner shall deem prudent to serve as protection against liability for loss and damage which may be occasioned by the activities to be engaged in by the Partnership or the General Partner on behalf of the Partnership;

     (14) quitclaim, surrender, release or abandon any Partnership property, with or without consideration therefor;

     (15) enter into commodity hedging transactions of any type whatsoever;

     (16) exercise all rights, powers, privileges and other incidents of ownership or possession with respect to assets owned by the Partnership;

     (17) acquire, exercise or fail to exercise any contractual options or other rights to acquire any asset on behalf of the Partnership;

     (18) prepay in whole or in part, refinance, recast, increase, modify or extend any liabilities affecting the Partnership property and in connection therewith execute any extensions or renewals of encumbrances on any or all of the Partnership property;

     (19) contract on behalf of the Partnership for the employment and services of employees and/or independent contractors, including but not limited to lawyers, financial advisors, underwriters, consultants and accountants;

     (20) take, or refrain from taking, all actions, not expressly proscribed or limited by this Agreement, as may be necessary or appropriate to accomplish the purposes of the Partnership;

     (21) institute, prosecute, defend, mediate, arbitrate and settle lawsuits or other judicial or administrative proceedings brought on or in behalf of, or against, the Partnership or the Partners in connection with activities arising out of, connected with, or incidental to this Agreement, and to engage counsel or others in connection therewith; and

     (22) take such other acts as may be incidental to the acts and things expressly authorized by this Agreement.

     (b) In accomplishing all of the foregoing and in fulfilling its obligations pursuant to this Agreement, the General Partner may, subject to Section 5.5 , retain or use any Affiliates’ personnel, properties and equipment or the General Partner may hire or rent those of third

Persons and may employ on a temporary or continuing basis outside accountants, attorneys, consultants and others on such terms as the General Partner deems advisable. No Person dealing with the Partnership shall be required to inquire into the authority of the General Partner to take any action or make any decision.

      Section 5.2. Certain Restrictions on General Partner’s Power and Authority . Notwithstanding anything else expressed or implied to the contrary in this Agreement, the General Partner shall not have the power or authority to cause the Partnership to, and shall not do, perform or authorize any of the following acts without having previously obtained the consent of the Required Percentage of the Class A Limited Partners, which consent may be obtained at a meeting of the Class A Limited Partners or by means of a written consent of the Required Percentage of the Class A Limited Partners:

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

     (b) possess Partnership property, or assign rights in specific Partnership property, for other than a Partnership purpose;

     (c) knowingly perform any act that would subject any Limited Partner to liability as a general partner in any jurisdiction;

     (d) make any payments of compensation or other consideration to the General Partner or any of its Affiliates, except to the extent expressly permitted herein;

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

     (f) effect any merger, conversion, share exchange, interest exchange, consolidation, recapitalization, reorganization or similar transaction;

     (g) effect the sale or other transfer in a single transaction or a series of related transactions of all or substantially all of the assets of the Partnership;

     (h) enter into or engage in any material transaction, contract, agreement, arrangement or operation that is unrelated to the Partnership’s business described in Section 1.3 or that constitutes any material deviation from the Partnership’s business strategy described in Section 1.3 ; or

     (i) except as expressly provided herein, to take any action with respect to the assets or property of the Partnership which benefits the General Partner or an Affiliate thereof to the detriment of the Limited Partners or the Partnership, including, among other things, utilization of funds of the Partnership as compensating balances for the benefit of the General Partner.

      Section 5.3. Duties and Services of the General Partner. The General Partner shall comply in all respects with the terms of this Agreement. In the conduct of the business and operations of the Partnership, the General Partner shall (i) use the care of an ordinarily prudent business Person to cause the Partnership (1) to comply with the terms and provisions of all agreements to which the Partnership is a party or to which its properties are subject, (2) to comply with all applicable laws, ordinances or governmental rules and regulations to which the

Partnership is subject and (3) to obtain and maintain all licenses, permits, franchises and other governmental authorizations necessary with respect to the ownership of Partnership properties and the conduct of the Partnership’s business and operations and (ii) attend to other day-to-day affairs of the Partnership in a manner which is in the best interests of the Partnership. The General Partner shall be obligated to perform the duties, responsibilities and obligations of the General Partner hereunder only to the extent that funds of the Partnership are available therefor.

      Section 5.4. Liability of Partners and Indemnification .

     (a) The General Partner, the Limited Partners and their Affiliates, and their partners, officers, directors, employees and agents, shall not be liable, responsible or accountable in damages or otherwise to the Partnership or the other Partners for any acts or omissions that do not constitute gross negligence, willful misconduct or a breach of the express terms of this Agreement or for transactions from which such person derived an improper personal benefit (which shall not include any benefit permitted by Section 5.7(b) or any other provision of this Agreement), and the Partnership shall indemnify and save harmless the General Partner, the Partners and their Affiliates, and their partners, officers, directors, employees and agents (individually an “ Indemnitee ”) from all liabilities for which indemnification is not prohibited by Delaware law, in each case to the extent that any such liability in any way relates to or arises out of or is alleged to relate to or arise out of any act or omission on the part of the Partnership, or the Indemnitee acting on behalf of the Partnership, for which the Indemnitee is not to be held accountable or otherwise liable under this Agreement. Any act or omission performed or omitted by an Indemnitee on advice of legal counsel or an independent consultant who has been employed or retained by the Partnership shall be presumed to have been performed or omitted in good faith without gross negligence or willful misconduct. THE PARTIES RECOGNIZE THAT THIS PROVISION SHALL RELIEVE ANY SUCH INDEMNITEE FROM ANY AND ALL LIABILITIES, OBLIGATIONS, DUTIES, CLAIMS, ACCOUNTS AND CAUSES OF ACTION WHATSOEVER ARISING OR TO ARISE OUT OF ANY ORDINARY NEGLIGENCE BY ANY SUCH INDEMNITEE, AND SUCH INDEMNITEE SHALL BE ENTITLED TO INDEMNIFICATION FROM ACTS OR OMISSIONS THAT MAY CONSTITUTE ORDINARY NEGLIGENCE .

     (b) The Partnership shall, except as prohibited by Delaware law, pay or reimburse expenses incurred by an Indemnitee in connection with (i) the Indemnitee’s appearance as a witness or other participation in a proceeding involving or affecting the Partnership at a time when the Indemnitee is not a named defendant or respondent in the proceeding, or (ii) the Indemnitee’s other indemnity rights under this Agreement, in advance of the final disposition of any proceeding, within thirty (30) days of the receipt by the Partnership from the Indemnitee of (x) a written request for such reimbursement and (y) in the case of a request pursuant to clause (ii), a signed statement that the Indemnitee is not accountable or otherwise liable under this Agreement for the losses alleged and will promptly reimburse the Partnership for the advances if it ultimately is found not to be entitled to the advances. If a claim is not paid in full by the Partnership within thirty (30) days after a written claim has been received by the Partnership, the Indemnitee may at any time thereafter bring suit against the Partnership to recover the unpaid amount of the claim and, if successful in whole or in part, the Indemnitee shall be entitled to be paid also the expense of prosecuting such claim. Neither the failure of the Partnership (including the General Partner, independent legal counsel, or the Limited Partners) to have made a

determination that indemnification of the Indemnitee is permissible in the circumstances because the Indemnitee has met the applicable standard of conduct, if any, nor an actual determination by the Partnership (including its General Partner, independent legal counsel, or its Limited Partners) that the Indemnitee has not met the standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the standard of conduct.

     (c) The General Partner shall have the right to require that any contract entered into by the Partnership provide that the General Partner shall have no personal liability for the obligations of the Partnership thereunder.

     (d) The indemnification provided by this Section 5.4 shall be in addition to any other rights to which each Indemnitee may be entitled under any agreement or vote of the Partners, as a matter of law or otherwise, both as to action in the Indemnitee’s capacity as a Partner or an officer, director, employee or agent of a Partner or as a Person serving at the request of the Partnership as set forth above and to action in another capacity, and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns, administrators and personal representatives of the Indemnitees.

     (e) In no event may an Indemnitee subject the Limited Partners to personal liability by reason of this indemnification provision.

     (f) An Indemnitee shall not be denied indemnification in whole or in part under this Section 5.4 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

      Section 5.5. Other Matters Concerning General Partner .

     (a) The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper Person or Persons and any act taken or omitted in reliance upon any such paper or documents shall be conclusively presumed to have been done or omitted in good faith.

     (b) The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted in reliance upon the opinion or advice of any such Person as to matters that the General Partner reasonably believes to be within such Persons’ professional or expert competence (including, without limitation, any opinion of legal counsel to the effect that the Partnership would “more likely than not” prevail with respect to any matter) shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion or advice.

     (c) The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through a duly appointed attorney or attorney-in-fact. Each such attorney or attorney-in-fact shall, to the extent provided by the General Partner in the power of

attorney, have full power and authority to do and perform each and every act and duty which is permitted or required to be done by the General Partner hereunder.

      Section 5.6. Duties of the Partners, Directors and Officers.

     (a) Except as otherwise expressly provided in this Agreement, none of the Limited Partners, the General Partner or any of their respective officers or Affiliates shall, to the fullest extent permitted by Section 17.1101(d) of the Act, have any duties (whether fiduciary, quasi-fiduciary or otherwise and whether existing by statute, in equity, at common law or otherwise) or obligations whatsoever, by virtue of the relationships established pursuant to this Agreement, to take or refrain from taking any action that may impact the Partnership, the General Partner, any Limited Partner or any of their respective Affiliates.

     (b) The provisions of this Agreement, including this Article V , to the extent they restrict the fiduciary and other duties and liabilities of a Person otherwise existing at law or in equity, constitute an agreement to restrict and replace such fiduciary and other duties and liabilities of such Person under Section 17-1101(d) of the Act, it being agreed and understood that the provisions of this Agreement, including this Article V , shall not restrict or replace any duties (whether fiduciary, quasi-fiduciary or otherwise and whether existing by statute, in equity, at common law or otherwise) or obligations of the Limited Partners, the General Partner, or their respective officers or Affiliates not arising by virtue of the relationships established pursuant to this Agreement. To the extent that, at law or in equity, a Limited Partner, the General Partner or any of their respective officers has duties (including fiduciary duties) and liabilities relating thereto to the Partnership, to a Limited Partner, to the General Partner or to any other Person that is a party to or is otherwise bound by this Agreement, such Limited Partner, General Partner, or officer shall not be liable to the Partnership, to any Limited Partner, to the General Partner or to any other Person that is a party to or is otherwise bound by this Agreement for its reliance on the provisions of this Agreement.

      Section 5.7. Contracts with Affiliates; Other Businesses .

     (a) The Partnership may enter into contracts and agreements with any Partner and/or any of its Affiliates for the rendering of services and the sale and lease of supplies and equipment on such arm’s-length terms that (a) are no less favorable to the Partnership than those available from unrelated third Persons and (b) are approved by the General Partner. No such contract or agreement shall be void or voidable solely for such reason and no Person having an interest in any such transaction shall have any liability to the Partnership or any Partner solely by virtue of such relationship or conflict.

     (b) The General Partner and each Affiliate thereof (including without limitation any director, officer, partner, member, manager, employee, agent or representative of the General Partner or any Affiliate thereof) may have business interests and engage in business activities in addition to those relating to the Partnership, including without limitation interests in and activities related to the businesses described in Section 1.3 or otherwise competitive with the business of the Partnership and neither the Partnership nor any other Partners shall have any rights in such other business interests or activities or in any income or profits therefrom.

      Section 5.8. Resolution of Conflicts of Interest .

     (a) Unless otherwise expressly provided herein, (i) whenever a potential conflict of interest exists or arises between the General Partner or any of its Affiliates, on the one hand, and the Partnership, or Limited Partner or assignee on the other hand, or (ii) whenever this Agreement or any other agreement contemplated herein provides that the General Partner shall act in a manner which is, or provide terms which are, fair and reasonable to the Partnership, or any Limited Partner or assignee, the General Partner shall resolve such conflict of interest, take such action or provide such terms, considering in each case (A) the relative interests of each party (including its own interests) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, (B) any customary or accepted industry practices and any customary or historical dealings with a particular Person, (C) any applicable generally accepted accounting practices or principles and (D) such additional factors as the General Partner determines in its sole discretion to be relevant, reasonable or appropriate under the circumstances. Any resolution, action or terms so made, taken or provided by the General Partner in respect of such conflict of interest shall not constitute a breach of this Agreement, any other agreement contemplated herein or any duty stated or implied by la