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EXHIBIT 10.3
CONVEYANCE OF OVERRIDING ROYALTY INTEREST
FROM
CALLON PETROLEUM OPERATING COMPANY
"GRANTOR"
TO
DUKE CAPITAL PARTNERS, LLC
"GRANTEE"
DATED
JUNE 29, 2001
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TABLE OF CONTENTS
<Table>
ARTICLE 1
CONVEYANCE
Section 1.1 Conveyance....................................................... 1
Section 1.2 Repurchase Option and Right of First Refusal..................... 1
Section 1.3 Non-Operating, Non-Expense Bearing Interest...................... 2
Section 1.4 Marketing of Overriding Royalty Hydrocarbons..................... 2
Section 1.5 Certain Limitations.............................................. 3
Section 1.6 Royalties; Taxes................................................. 3
Section 1.7 Title............................................................ 3
Section 1.8 Mortgage or Assignment by Grantor................................ 3
Section 1.9 Pooling or Unitization........................................... 3
Section 1.10 Operations....................................................... 4
Section 1.11 Scope of the Overriding Royalty Interest......................... 4
Section 1.12 Settlement....................................................... 4
Section 1.13 Prudent Standard................................................. 4
Section 1.14 Royalty Relief................................................... 4
Section 1.15 Restrictions on Subsequently Created Interests................... 5
ARTICLE 2
DEFINITIONS
ARTICLE 3
MISCELLANEOUS
Section 3.1 Governing Law.................................................... 7
Section 3.2 Successors and Assigns........................................... 8
Section 3.3 Multiple Originals............................................... 8
Section 3.4 Perpetuities..................................................... 8
Section 3.5 Partial Invalidity............................................... 8
Section 3.6 Notices.......................................................... 8
EXHIBIT A Property Exhibits
EXHIBIT B Permitted Encumbrances
</Table>
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CONVEYANCE OF
OVERRIDING ROYALTY INTEREST
This Conveyance of Overriding Royalty Interest (this "Conveyance"),
made effective as of the Effective Time, is from Callon Petroleum Operating
Company, a Delaware corporation whose address is 200 North Canal Street,
Natchez, Mississippi 39121-1297, and whose Federal Tax I.D. Number is 94-0744280
("Grantor"), to Duke Capital Partners, LLC, a Delaware limited liability
company, whose mailing address is 128 South Tryon Street, Suite 1100, Charlotte,
North Carolina, 28202, and whose Federal Tax I.D. Number is 56-2186625
("Grantee").
WHEREAS, Grantor is the owner of an interest in the oil and gas leases
described in Exhibit A hereto, and Grantor has agreed to convey to Grantee the
Overriding Royalty Interest as defined in Section 1.1 below, as a condition of
that certain Credit Agreement dated June 29, 2001, by and among Callon Petroleum
Company, as Borrower thereunder, the lenders signatory thereto and Grantee, as
Administrative Agent thereunder (the "Credit Agreement"), pursuant to that
certain letter agreement dated the date hereof between Callon Petroleum Company
and Grantee; and
WHEREAS, capitalized terms as used herein shall have the meanings given
to them in Article II hereof unless otherwise defined herein.
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS:
ARTICLE 1
CONVEYANCE
SECTION 1.1 CONVEYANCE. For and in consideration of $1,000.00 and other
good and valuable consideration to Grantor cash in hand paid by Grantee, the
receipt and sufficiency of which is hereby acknowledged, Grantor hereby GRANTS,
BARGAINS, SELLS, CONVEYS, ASSIGNS, SETS OVER, AND DELIVERS unto Grantee, its
successors and assigns, effective as of the Effective Time, an overriding
royalty interest in and to each of the Leases equal to the Overriding Royalty
Percentage of all Hydrocarbons produced and saved from each of the Leases,
together with all and singular the rights and appurtenances thereto in anywise
belonging (the "Overriding Royalty Interest").
TO HAVE AND TO HOLD the Overriding Royalty Interest unto Grantee, its
successors and assigns forever, subject to the following terms, reservations,
rights of first refusal, provisions and conditions.
SECTION 1.2 REPURCHASE OPTION AND RIGHT OF FIRST REFUSAL. (a) Grantor
hereby RETAINS and RESERVES unto itself, its successors and assigns, an option
("Repurchase Option") to repurchase this Overriding Royalty Interest in all or
any Property in the event that Grantor has a binding contract to sell its
interest in such Property to a bona-fide third party purchaser. The repurchase
price to be paid to Grantee by Grantor shall be proportional to such bona-fide
third party purchaser's purchase price attributable to such Property. Grantee
hereby accepts this Conveyance subject to and acknowledges that the Overriding
Royalty Interest is burdened by such Repurchase Option. In connection with a
sale of all or substantially all of Grantor's interest in any Property to a
bona-fide third party purchaser,
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Grantor may give Grantee written notice stating the terms and conditions of such
offer ("Grantor's Offer Notice") and Grantee shall agree to sell its Overriding
Royalty Interest to Grantor on or before the same day Grantor's interest is sold
at the price described above on an "as is-where is" basis without representation
or warranty or indemnity of any kind except as to title with respect to any
claims by, through and under Grantee.
(b) If Grantee desires to sell, assign, convey or transfer all or any portion of
its Overriding Royalty Interest in any Property (the "Interest"), Grantee shall
give written notice ("Grantee's Offer Notice") to Grantor stating that Grantee
desires to effect such transfer and setting forth the material terms thereof.
The giving of the Grantee's Offer Notice by Grantee to Grantor shall constitute
an offer by Grantee to sell the Interest to Grantor pursuant to the terms set
forth in the Grantee's Offer Notice. Grantor shall have 15 days after its
receipt of the Grantee's Offer Notice in which to accept such offer by giving
written notice of acceptance to Grantee prior to the expiration of such 15-day
period. If Grantor accepts such offer, Grantee and Grantor shall exercise their
commercially reasonable efforts to effectuate the transfer as between them as
soon as practicable. If Grantor rejects in writing the offer set forth in the
Grantee's Offer Notice, or fails to respond within 15 days after its receipt of
the Grantee's Offer Notice, Grantee may consummate the sale to any bona-fide
third party purchaser, but only on terms equal to or better than those set forth
in the Grantee's Offer Notice. If Grantee does not consummate the sale within 90
days after receipt of written refusal by Grantee or expiration of the 15-day
period, as applicable, Grantee's right to effectuate the sale shall lapse, and
Grantee shall be required to again provide Grantor with a Grantee's Offer
Notice, provided, however, no such conveyance shall be valid until Grantor has
received a certified copy of such conveyance. This Section 1.2 shall not apply
with regard to conveyances of Interests in connection with Grantee's initial
syndication of the Facility (as such term is defined in the Credit Agreement).
SECTION 1.3 NON-OPERATING, NON-EXPENSE BEARING INTEREST. The Overriding
Royalty Interest conveyed hereby is a non-operating, non-expense-bearing
overriding royalty interest in the nature of an interest in real property, free
of all costs, risks and expenses, except to the extent (i) any such costs and
expenses are properly deductible in calculating the lessor's royalties payable
under the Leases to the United States Minerals Management Service ("MMS") and/or
(ii) any such costs and expenses are paid to unaffiliated third parties in
arms-length transactions (or affiliated entities at market rates) and directly
attributable to marketing, gathering, and delivering the Hydrocarbons to the
initial sales points, provided, however, that in no event shall such costs and
expenses be greater than proportionately equal to the costs and expenses that
are paid or payable by Grantor with respect to its interest in Hydrocarbons
produced from the Subject Interests ("Deductible Costs"). In no event shall
Grantee ever be liable or responsible in any way for the payment of any costs,
expenses, or liabilities attributable to the Subject Interests (or any part
thereof) or incurred in connection with the exploration, production, operations
or delivery of Overriding Royalty Hydrocarbons to the initial sales points
except as provided in the preceding sentence.
SECTION 1.4 MARKETING OF OVERRIDING ROYALTY HYDROCARBONS. Grantor shall
market or cause to be marketed the Overriding Royalty Hydrocarbons in the same
manner as Grantor markets or causes to be marketed Hydrocarbons attributable to
its Net Revenue Interest, as a reasonable and prudent operator. Grantor shall
pay, or cause to be paid, to Grantee the amount due in respect of the Overriding
Royalty Hydrocarbons that are produced and sold in
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any month no later than 26 days following the month in which the revenues
attributable to the sale of such Overriding Royalty Hydrocarbons are received by
Grantor.
SECTION 1.5 CERTAIN LIMITATIONS. Grantee shall look solely to the
Overriding Royalty Hydrocarbons for satisfaction and discharge of the Overriding
Royalty Interest, and Grantor shall not be personally liable for the payment and
discharge thereof.
SECTION 1.6 ROYALTIES; TAXES. The Overriding Royalty Hydrocarbons shall
be calculated as two percent (2%) of Grantor's Net Revenue Interests in the
Leases, with the result that the Overriding Royalty Hydrocarbons shall be
determined net of all Hydrocarbons allocable or otherwise attributable to all
royalties, overriding royalties (other than the Overriding Royalty Interest),
and other burdens on production allocable or otherwise attributable to the
Subject Interests that are reflected of record as of the Effective Time. Grantor
shall be responsible for the timely payment of all such royalties, overriding
royalties, and other burdens on production, and Grantor shall defend, indemnify,
and hold Grantee harmless from and against any loss or claim with respect to any
such royalties, overriding royalties, or other burdens on production or any
claim by the owners or holders of such royalties, overriding royalties, or other
burdens on production by, through or under Grantor, but not otherwise. Grantee
shall bear and pay all Taxes, income and franchise taxes attributable to the
Overriding Royalty Interest and the Overriding Royalty Hydrocarbons or
attributable to Grantee.
SECTION 1.7 TITLE. Grantor warrants and represents that the Leases are
valid and subsisting oil and gas leases covering the lands or waterbottoms
described in Exhibit A; subject to the Leases and Permitted Encumbrances,
Grantor's ownership of the Subject Interests entitles Grantor to a share of all
Hydrocarbons produced from or attributable to each Lease, and of the proceeds of
such production, after giving effect to and/or deducting all applicable
royalties, overriding royalties, and other burdens or payments out of production
(except the Overriding Royalty Interest), which is not less than the Net Revenue
Interest applicable to the relevant Lease, as set forth in Exhibit A associated
therewith. Grantor hereby binds Grantor and Grantor's legal representatives,
successors, and assigns to warrant and forever defend all and singular title to
the Overriding Royalty Interest and the Overriding Royalty Hydrocarbons unto
Grantee, its successors and assigns, against every person whomsoever lawfully
claiming or to claim the same or any part thereof by, through or under Grantor,
but not otherwise; provided however, the foregoing warranty shall not be
breached in any manner by the existence of the Permitted Encumbrances.
SECTION 1.8 MORTGAGE OR ASSIGNMENT BY GRANTOR. Except for Permitted
Encumbrances which do not create a lien to secure an obligation for borrowed
money, Grantor shall not mortgage, pledge, or hypothecate the Overriding Royalty
Interest or create or allow to remain thereon any lien or security interest on
any Overriding Royalty Hydrocarbons produced therefrom. Any purported mortgage,
pledge, hypothecation, lien, security interest, assignment, sale, conveyance, or
other transfer in contravention of the foregoing terms shall be null and void.
SECTION 1.9 POOLING OR UNITIZATION. This Conveyance is subject to all
applicable valid pooling or unitization orders, declarations or agreements
affecting any of the Leases or any part thereof, currently or in the future.
Further, in the event that the owners of the Leases, or the applicable
regulatory authorities, shall hereafter at any time or times create, amend,
terminate or declare a pool or unit for the development or production of Oil
and/or Gas
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that includes all or any part of any of the Leases, then in each such event such
pooling or unitization shall be binding upon and effective with regard to the
Overriding Royalty Interest insofar as it applies to the Leases included in such
pool or unit, without the necessity of Grantee's further consent to or approval
of such pool or unit.
SECTION 1.10 OPERATIONS. Grantor is under no obligation or duty,
insofar as Grantee is concerned, to pay any delay rentals or minimum royalties
becoming due under any of the Leases or otherwise to maintain any of the Leases
in force or effect by extending same or by operations thereon or production of
Oil, Gas, or other minerals, in any quantity therefrom, and the payment of any
such delay rentals, minimum royalties, taking of extensions or conduct or
cessation of operations or production of Oil, Gas, or other minerals under the
Leases shall be, as between the parties, at the sole discretion of Grantor.
Furthermore, this Conveyance shall not give rise to or create any obligation for
Grantor to obtain Grantee's consent or joinder or comply with any demand of
Grantee, with respect to the maintenance, operation (e.g. the decision to drill,
complete, rework or abandon wells), or abandonment of any platform or other
exploration, production, handling or treating facility, or the Leases, and the
execution of contracts related thereto.
SECTION 1.11 SCOPE OF THE OVERRIDING ROYALTY INTEREST. The Overriding
Royalty Interest shall not apply to Hydrocarbons lost, flared, vented or used in
support of producing, handling, transporting and processing Hydrocarbons derived
from or attributable to the Leases. The Overriding Royalty Interest shall not
apply to any Hydrocarbons attributable to Grantor's Net Revenue Interest that
are subject to a right of recoupment, forfeiture or relinquishment under the
applicable joint operating agreements; provided, however, the Overriding Royalty
Interest shall apply to any such Hydrocarbons if and when the Hydrocarbons are
no longer subject to such right of recoupment, forfeiture or relinquishment.
SECTION 1.12 SETTLEMENT. Grantee shall participate proportionately in
any in-kind or cash settlements received by Grantor for underproduction of
Hydrocarbons attributable to the Overriding Royalty Interest. Likewise, Grantee
shall have the obligation to participate in or reimburse Grantor as to Grantee's
proportionate share of any in-kind or cash settlements made or paid by Grantor
for overproduction of Hydrocarbons attributable to the Overriding Royalty
Interest.
SECTION 1.13 PRUDENT STANDARD. Grantor (subject to the terms and
provisions of any applicable operating agreements and subject to the other
provisions of this Conveyance and the Credit Agreement) shall take any and all
actions which a reasonably prudent non-operator would deem necessary or
advisable in the management, operation and control of the Subject Interests,
including, without limitation, the plugging and abandonment of any Hydrocarbon
well located on the Leases in accordance with good oil field practices without
regard to the existence of the Overriding Royalty Interest or any other royalty,
overriding royalty, or other interest created after the Effective Time.
SECTION 1.14 ROYALTY RELIEF. To the extent any of the Leases are
entitled to royalty relief pursuant to the regulations of the MMS, Grantee as
the owner of the Overriding Royalty Interest shall be entitled to two percent
(2%) of such royalty relief that is attributable to Grantor's Net Revenue
Interest shown on Exhibit A.
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SECTION 1.15 RESTRICTIONS ON SUBSEQUENTLY CREATED INTERESTS. To the
extent required by the express terms and provisions of any of the Permitted
Encumbrances identified in Exhibit B to this Conveyance, Grantor and Grantee
acknowledge and agree that this Conveyance is inferior to and is made expressly
subject to such Permitted Encumbrances, and Grantor acknowledges and agrees that
it shall indemnify and hold all of the parties to such Permitted Encumbrances,
other than itself, harmless from any and all claims and demands for payment that
may be asserted by Grantee as the owner of the Overriding Royalty Interest.
ARTICLE 2
DEFINITIONS
As used herein and in the exhibits hereto, the following terms shall
have the respective meanings ascribed to them below:
"Central Time" means Central Standard Time or Central Daylight Savings
Time in effect on the date in question.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in New York.
"Conveyance" shall have the meaning given to such term in the preamble
hereof.
"Credit Agreement" shall have the meaning given to such term in the
preamble hereof.
"Deductible Costs" shall have the meaning given to such term in Section
1.3 hereof.
"Effective Time" means 7:00 a.m., Central Time, on June 29, 2001.
"Gas" means natural gas and other gaseous hydrocarbons.
"Grantee" shall have the meaning given such term in the preamble
hereof.
"Grantor" shall have the meaning given such term in the preamble
hereof.
"Grantor's Offer Notice" and "Grantee's Offer Notice" shall have the
meaning given such terms in Section 1.2 hereof.
"Gross Working Interest" means, for each Lease or group of Leases, the
interest identified as "Working Interest" on Exhibit A.
"Hydrocarbons" means Oil and Gas.
"Interest" shall have the meaning given such term in Section 1.2
hereof.
"Lease" means each oil and gas lease described, referred to, or
identified in Exhibit A, insofar and only insofar as to the areas and/or depths
specified in Exhibit A, together with any renewal or extension of such lease (as
to all or any part or portion thereof), and any replacement lease taken upon or
in anticipation of expiration or termination of such lease (if executed and
delivered during the term of or within one year after expiration of the
predecessor lease), insofar
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only as any such replacement lease covers areas and/or depths specified in
Exhibit A as to the original lease; and "Leases" means all such leases, insofar
only as such leases cover such areas and/or depths, and all such renewals and
extensions and replacement leases.
"Legal Requirement" means any requirement imposed pursuant to any
statute, rule, regulation, order, permit or license of or Lease from any
applicable governmental body or by any applicable court order.
"MMS" shall have the meaning given such term in Section 1.3 hereof.
"Net Revenue Interest" means, for each Lease or group of Leases, the
interest identified as "Net Revenue Interest" on Exhibit A, as such interest may
be decreased pursuant to provisions of the applicable joint operating agreement.
"Oil" means crude oil, condensate and other liquid hydrocarbons.
"Overriding Royalty Hydrocarbons" shall mean the Hydrocarbons conveyed
to Grantee pursuant to Section 1.1 hereof.
"Overriding Royalty Interest" shall have the meaning given such term in
Section 1.1 hereof.
"Overriding Royalty Percentage" means, with respect to each Lease or
group of Leases, 2.00000% of the Net Revenue Interest.
"Permitted Encumbrance" means the following:
(a) the agreements, contracts and other documents described in Exhibit
B (to the extent the same are valid and enforceable and burden the Subject
Interests), and any instrument executed subsequent to the date of this
Conveyance pursuant to the express provisions of the applicable joint operating
agreements including, without limitation, the non-consent provisions and the
rights of recoupment, forfeiture or relinquishment provisions, as set forth in
the applicable joint operating agreements and the provisions thereof relative to
subsequently created interests which affect the Subject Interests;
(b) division orders and sales contracts;
(c) liens for taxes or assessments not yet delinquent;
(d) materialman's, mechanic's, repairman's, employee's, contractor's,
operator's, and other similar liens or charges arising in the ordinary course of
business, to the extent the same secure amounts not yet due and payable or that
are being contested in good faith by appropriate proceedings diligently
conducted;
(e) easements, rights-of-way, servitudes, permits, surface leases, and
other rights in respect of surface operations, to the extent the same do not
materially interfere with operations on, or the operation, value, or use of, any
Subject Interest; and
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(f) other valid and enforceable liens, charges, encumbrances,
contracts, agreements, obligations, defects, and irregularities affecting the
Subject Interests which, taken in the aggregate: (i) do not materially interfere
with operations on, or the operation, value, or use of, any Lease or any Subject
Interest; (ii) do not prevent Grantor from receiving any proceeds of production
from any Lease or Grantee from receiving proceeds of production attributable to
the Overriding Royalty Hydrocarbons from any Lease; and (iii) do not reduce
Grantor's net revenue interest in Hydrocarbons produced from any Lease to less
than the Net Revenue Interest applicable to the relevant Lease, other than as
the result of Grantor's election not to consent in proposed operations.
"Property" means any Subject Interest or group of Subject Interests
identified on Exhibit A.
"Repurchase Option" shall have the meaning given such term in Section
1.2 hereof.
"Subject Interests" or "Subject Interest" means the respective Gross
Working Interests and Net Revenue Interests of Grantor in and to the Leases, and
all lands now or hereafter pooled, communitized, or unitized therewith, even
though Grantor's interest be incorrectly or incompletely described in Exhibit A,
all as the same shall be enlarged by the discharge of any burdens, by the
reversion of any interest, or by the removal of any charges or encumbrances to
which any of the same may be subject, and any and all renewals and extensions of
any of the same.
"Taxes" means all ad valorem, property, occupation, gathering, pipeline
regulating, windfall profit, severance, gross production, Btu, energy, excise
and other taxes and governmental charges and assessments imposed on the Subject
Interests or the Overriding Royalty Interest, including the Overriding Royalty
Hydrocarbons, other than income taxes and franchise taxes.
ARTICLE 3
MISCELLANEOUS
SECTION 3.1 GOVERNING LAW. THIS CONVEYANCE AS TO EACH LEASE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH
THE PROPERTY DESCRIBED IN THE LEASE IS SITUATED IN OR IN FEDERAL WATERS ADJACENT
THERETO, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER
CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION, EXCEPT TO
THE EXTENT THE LAWS OF ANY OTHER JURISDICTION ARE MANDATORILY APPLICABLE AND
EXCEPT THE PARTIES HERETO HAVE ELECTED TO HAVE THIS CONVEYANCE FOR USURY LAW
PURPOSES GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. GRANTOR'S OBLIGATIONS
HEREUNDER WITH RESPECT TO THE OVERRIDING ROYALTY INTEREST ARE SUBJECT TO ALL
APPLICABLE LEGAL REQUIREMENTS.
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SECTION 3.2 SUCCESSORS AND ASSIGNS. The provisions and conditions
contained in this Conveyance shall run with the land and the respective
interests of Grantor and Grantee and shall be binding upon and inure to the
benefit of Grantor and Grantee and their respective successors and assigns. All
references herein to either Grantor or Grantee shall include their respective
successors and assigns.
SECTION 3.3 MULTIPLE ORIGINALS. This Conveyance may be executed in
multiple originals all of which shall constitute one and the same Conveyance.
SECTION 3.4 PERPETUITIES. It is not the intent of Grantor or Grantee
that any provision herein violate any applicable law regarding the rule against
perpetuities, the suspension of the absolute power of alienation, or other rules
regarding the vesting or duration of estates, and this Conveyance shall be
construed as not violating such rule to the extent the same can be so construed
consistent with the intent of the parties. In the event, however, that any
provision hereof is determined to violate any such rule, then such provision
shall nevertheless be effective for the maximum period (but not longer than the
maximum period) permitted by such rule that will result in no violation. To the
extent the maximum period is permitted to be determined by reference to "lives
in being," Grantor and Grantee agree that "lives in being" shall refer to
lifetime of the last to die of the living lineal descendants of the late Joseph
P. Kennedy (father of the late President of the United States of America).
SECTION 3.5 PARTIAL INVALIDITY. Except as otherwise expressly stated
herein, in the event any provision contained in this Conveyance shall for any
reason be held invalid, illegal or unenforceable by a court or regulatory agency
of competent jurisdiction, such invalidity, illegality or unenforceability shall
not affect any of the remaining provisions of this Conveyance which shall remain
in full force and effect.
SECTION 3.6 NOTICES. Notices required or otherwise given pursuant to or
in connection with this Conveyance shall be in writing and addressed to the
addresses set forth in the Credit Agreement.
[SIGNATURE PAGE FOLLOWS]
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EXECUTED and effective as of the Effective Time.
WITNESSES: GRANTOR:
/s/ Dianna J. Rosses CALLON PETROLEUM OPERATING
- -------------------------------------- COMPANY
Printed Name: Dianna J. Rosses
- --------------------------------------
By: /s/ John S. Weatherly
----------------------------------
/s/ Brian R. Howard John S. Weatherly
- -------------------------------------- Senior Vice President and
Printed Name: /s/ Brian R. Howard Chief Financial Officer
------------------------
WITNESSES: GRANTEE:
/s/ Dianna J. Rosses DUKE CAPITAL PARTNERS, LLC
- --------------------------------------
Printed Name: Dianna J. Rosses
------------------------
By: /s/ F. T. Webster
----------------------------------
/s/ Brian R. Howard F.T. Webster
- -------------------------------------- Executive Vice President
Printed Name: /s/ Brian R. Howard
------------------------
[Signature Page to Conveyence of Overriding Royalty Interest]
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THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
TEXAS
THIS INSTRUMENT was acknowledged before me on this 29 day of June,
2001, by John S. Weatherly, Senior Vice President and Chief Financial Officer of
Callon Petroleum Operating Company, a Delaware corporation, who is duly
authorized to execute the foregoing on behalf of said corporation.
LOUISIANA
On this 29th day of June, 2001, before me appeared John S. Weatherly,
to me personally known, who, being by me duly sworn did say that he is the
Senior Vice President and Chief Financial Officer of Callon Petroleum Operating
Company, a Delaware corporation, and that the seal affixed to said instrument is
the corporate seal of said corporation by authority of its Board of Directors
and that he acknowledged the instrument to be the free act and deed of the
corporation.
/s/ Valerie W. Vaclavik
---------------------------------
Notary Public in and for the
State of Texas
[Signature Page to Conveyence of Overriding Royalty Interest]
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THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
TEXAS
THIS INSTRUMENT was acknowledged before me on this 29th day of June,
2001, by F.T. Webster, Executive Vice President of Duke Capital Partners, LLC, a
Delaware limited liability company, who is duly authorized to execute the
foregoing on behalf of the said limited liability company.
LOUISIANA
On this 29th day of June, 2001, before me appeared F.T. Webster, to me
personally known, who, being by me duly sworn did say that he is the Executive
Vice President of Duke Capital Partners, LLC, a Delaware limited liability
company, and that the seal affixed to said instrument is the corporate seal of
said limited liability company by authority of its Board of Directors and that
he acknowledged the instrument to be the free act and deed of the limited
liability company.
/s/ Valerie W. Vaclavik
---------------------------------
Notary Public in and for the
State of Texas
[Signature Page to Conveyence of Overriding Royalty Interest]
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EXHIBIT A
TO THE
CONVEYANCE OF OVERRIDING ROYALTY INTEREST
PROPERTY EXHIBITS
MEDUSA PROJECT
OCS-G 16614
Dated: June 1, 1996
Lessor: United States of America
Lessee: Callon Petroleum Operating Company, et al.
Grantor's
Working Interest: 15.00000%
Grantor's
Net Revenue Interest: 13.12500%
Description: The above referenced oil and gas lease covering Block 538,
Mississippi Canyon, OCS Official Protraction Diagram, NH16-10,
INSOFAR AND ONLY INSOFAR: (i) as to those depths from the
surface to a depth limited to 100 feet below the stratigraphic
equivalent of the T4B productive interval located between
14,172'-14,250' MD (13,318'-13,382' TVD) in the Mississippi
Canyon 582 OCS-G 16623 #1 well on the Array Induction-Dipole
Sonic log dated 9/27/99, and (ii) as to the following portion
of said block: Starting at the Southeast corner of Mississippi
Canyon Block 538, proceed in a northerly direction along the
block boundary 11,200 feet; thence in a westerly direction
parallel to the north block boundary of Block 538 a distance
of 13,300 feet; thence in a southerly direction parallel with
the western boundary of Block 538 a distance of 5,100 feet;
thence turning 150.75 degrees East a distance of 7,000 feet to
the South boundary of Block 538, then easterly along the south
boundary of Block 538 a distance of 9,700 feet to the point of
beginning.
Exhibit A-1
15
EXHIBIT A
TO THE
CONVEYANCE OF OVERRIDING ROYALTY INTEREST
PROPERTY EXHIBITS
MEDUSA PROJECT
OCS-G 16623
Dated: June 1, 1996
Lessor: United States of America
Lessee: Callon Petroleum Operating Company, et al.
Grantor's
Working Interest: 15.00000%
Grantor's
Net Revenue Interest: 13.12500%
Description: The above referenced oil and gas lease covering Block 582,
Mississippi Canyon, OCS Official Protraction Diagram, NH16-10,
INSOFAR AND ONLY INSOFAR: (i) as to those depths from the
surface to a depth limited to 100 feet below the stratigraphic
equivalent of the T4B productive interval located between
14,172'-14,250' MD (13,318'-13,382' TVD) in the Mississippi
Canyon 582 OCS-G 16623 #1 well on the Array Induction-Dipole
Sonic log dated 9/27/99, and (ii) as to the following portion
of said block: Starting at the Northeast corner of Mississippi
Canyon Block 582, proceed in a westerly direction along the
north boundary of Block 582 a distance of 9,700 feet; thence
turning 60.75 degrees in a southerly direction a distance of
13,100 feet; thence in an easterly direction parallel to the
south boundary of Block 582 a distance of 3,500 feet to the
East boundary; thence in a northerly direction along the
eastern boundary of Block 582, 11,400 feet to the point of
beginning.
Exhibit A-2
16
EXHIBIT A
TO THE
CONVEYANCE OF OVERRIDING ROYALTY INTEREST
PROPERTY EXHIBITS
ENTRADA PROJECT
OCS-G 20797
Dated: January 1, 1999
Lessor: United States of America
Lessee: Callon Petroleum Operating Company, et al.
Grantor's
Working Interest: 20.00000%
Grantor's
Net Revenue Interest: 17.50000%
Description: The above referenced oil and gas lease covering Block 782,
Garden Banks, OCS Official Protraction Diagram, NG15-2,
INSOFAR AND ONLY INSOFAR: (i) as to those depths from the
surface to a depth limited to 100 feet below the stratigraphic
equivalent of the 5800 ms productive interval located between
19,875'-20,262' MD (19,864'-20,254' TVD) in the Garden Banks
782 OCS-G 20797 #2 ST1 well on the composite DGR-EWR logs, and
(ii) as to all of said Block 782, Garden Banks, LESS AND
EXCEPT the Northeast Quarter (NE/4).
OCS-G 22336
Dated: October 1, 2000
Lessor: United States of America
Lessee: Callon Petroleum Operating Company, et al.
Grantor's
Working Interest: 20.00000%
Grantor's
Net Revenue Interest: 17.50000%
Description: The above referenced oil and gas lease covering Block 738,
Garden Banks, OCS Official Protraction Diagram, NG15-02,
INSOFAR AND ONLY INSOFAR: (i) as to those depths from the
surface to a depth limited to 100 feet below the stratigraphic
equivalent of the 5800 ms productive interval located between
19,875'-20,262' MD (19,864'-20,254' TVD) in the Garden Banks
782 OCS-G 20797 #2 ST1 well on the composite DGR-EWR logs, and
(ii) as to the Southwest Quarter (SW/4) of said Block 738,
Garden Banks.
Exhibit A-3
17
EXHIBIT A
TO THE
CONVEYANCE OF OVERRIDING ROYALTY INTEREST
PROPERTY EXHIBITS
HABANERO PROJECT
OCS-G 15879
Dated: February 1, 1996
Lessor: United States of America
Lessee: Callon Petroleum Operating Company, et al.
Grantor's
Working Interest: 11.25000%
Grantor's
Net Revenue Interest: 9.84375%
Description: The above referenced oil and gas lease covering Block 341,
Garden Banks, OCS Official Protraction Diagram, NG15-02,
INSOFAR AND ONLY INSOFAR: (i) as to those depths from the
surface to a depth limited to 100 feet below the stratigraphic
equivalent of the Hab 55 productive interval located between
20,172'-20,248' MD (19,413'-19,475' TVD) in the Garden Banks
341 OCS-G 15879 #1 well on the Array Induction-Long Spaced
Sonic log dated 1/29/99, and (ii) as to the following portion
of said block: Starting from the Southeast corner of Garden
Banks Block 341, proceed in a northerly direction along the
east boundary of Block 341 a distance of 2,200 feet to the
point of beginning; thence in a westerly direction parallel to
the south boundary of Block 341 a distance of 7,300 feet;
thence in a northerly direction parallel to the east boundary
of Block 341 a distance of 8,300 feet; thence in an easterly
direction parallel to the southern boundary of Block 341 a
distance of 7,300 feet; thence in a southerly direction along
the east boundary of Block 341 a distance of 8,300 feet to the
point of beginning.
Exhibit A-4
18
EXHIBIT A
TO THE
CONVEYANCE OF OVERRIDING ROYALTY INTEREST
PROPERTY EXHIBITS
BOOMSLANG
OCS-G 18186
Dated: August 1, 1997
Lessor: United States of America
Lessee: Callon Petroleum Operating Company, et al.
Grantor's
Working Interest: 55.00000%
Grantor's
Net Revenue Interest: 45.83330%
Description: The above referenced oil and gas lease covering Block 994,
Ewing Bank, OCS Official Protraction Diagram, NH15-12, INSOFAR
AND ONLY INSOFAR: (i) as to those depths from the surface to a
depth limited to 100 feet below the stratigraphic equivalent
of the Bul 1 productive interval located between
12,472'-12,884' MD (11,435'-11,780' TVD) in Ewing Bank 994
OCS-G 18186 #1 well on the LWD logs, and (ii) as to the
following portion of said block: Starting at the Southeast
corner of Ewing Bank Block 994, proceed in a northerly
direction along the east boundary of Block 994 a distance of
12,500 feet; thence in a westerly direction parallel to the
north boundary of Block 994 a distance of 9,000 feet; thence
in a southerly direction parallel to the west boundary of
Block 994 a distance of 12,500 feet; thence in an easterly
direction along the south boundary of Block 994 a distance of
9,000 feet to the point of beginning.
Exhibit A-5
19
EXHIBIT "B"
TO THE
CONVEYANCE OF OVERRIDING ROYALTY INTEREST DATED JUNE 29, 2001
PERMITTED ENCUMBRANCES
Corporate Mortgage:
Act of Amended, Restated and Consolidated Mortgage, Assignment
of Production, Security Agreement and Fixture Filing and
Financing Statement Dated effective as of October 30, 2000
from Callon Petroleum Operating Company, Mortgagor to First
Union National Bank, as Administrative Agent, Mortgagee filed
in Plaquemines Parish, La, MOB 309, Folio 1072; Terrebonne
Parish, La. #1083092, Mtg. Book 1323; Cameron Parish, La
#267356, Mtg. Book 255; Iberia Parish, La, MOB 816, Entry No.
00-1351; St. Mary Parish, La, #242,411, MOB 856, Folio 180;
Minerals Management Service, OCS-G No. 16614, 16623, 18186,
15879.
UCC Financing Statement relating to the security agreement
cited above, filed in Plaquemines Parish, La #38-00-1625 and
Delaware Secretary of State #0079363.
UCC-1 Financing Statement (Security Agreement) between Callon
Petroleum Operating Company, Debtor, and First Union National
Bank as Administrative Agent, Secured Party, filed in
Plaquemines Parish, La #38-00-1692 and Delaware Secretary of
State #0080096.
UCC-3 Financing Statement (Assignment) Callon Petroleum
Operating Company from the Chase Manhattan Bank to First Union
National Bank, as Administrative Agent filed in Plaquemines
Parish, La #38-00-1699 and #38-00-1698 and Terrebonne Parish,
La #55-1083750.
Act of Supplement and Amendment to Act of Amended, Restated
and Consolidated Mortgage, Assignment of Production, Security
Agreement, Fixture Filing and Financing Statement by Callon
Petroleum Operating Company to First Union National Bank
adding Garden Banks Area, Block 782 and 738 effective June 29,
2001 and filed in the following parishes and jurisdictions:
Cameron, Iberia, Plaqeumines, St. Mary and Terrebonne Parishes
La. And Minerals Management Service.
Non-Conforming UCC-3 Amendment between Callon Petroleum
Operating Company as Debtor and First Union National Bank, as
Administrative Agent, as Secured party, referring to Original
Financing Statement No. 38-00-1625, filed November 9, 2000, in
Plaquemines Parish, La, amended to add Garden Banks Area,
Block 782 and 738.
Exhibit B-1
20
EXHIBIT "B"
TO THE
CONVEYANCE OF OVERRIDING ROYALTY INTEREST DATED JUNE 29, 2001
PERMITTED ENCUMBRANCES
Non-Conforming UCC-3 Partial Release between Callon Petroleum
Operating Company as Debtor and First Union National Bank, as
Administrative Agent, as Secured party, referring to Original
Financing Statement No. 38-00-1625, filed November 9, 2000, in
Plaquemines Parish, La, releasing from the Original Financing
Statement the following collateral: Garden Banks Area, Block
782 and 738.
MEDUSA
Leases: OCS-G 16623 dated effective June 1, 1996 between the United
States of America as Lessor and Callon Petroleum Operating
Company et al as Lessees covering All of Block 582 Mississippi
Canyon, OCS Official Protraction Diagram, NH 16-10, containing
5,760 acres.
OCS-G 16614 dated effective June 1, 1996 between the United
States of America as Lessor and Callon Petroleum Operating
Company et al, as Lessees covering All of Block 538,
Mississippi Canyon, OCS Official Protraction Diagram, NH 16-
10, containing 5,760 acres.
Joint Operating Agreement:
Dated effective February 1, 1999, between Murphy Exploration &
Production Company as Operator, Callon Petroleum Operating
Company, and British-Borneo Petroleum, Inc., covering
Mississippi Canyon Blocks 538, 539, 581 and 582 and all
exhibits thereto.
Well Participation Agreement:
Dated June 21, 1999 between Murphy Exploration & Production
Company, British-Borneo Petroleum, Inc. and Callon Petroleum
Operating Company, covering Mississippi Canyon Blocks 538,
582, 581, and 539.
Assignment of Record Title:
Dated effective October 15, 1999 between Murphy Exploration &
Production Company and Callon Petroleum Operating Company, as
Assignors and British-Borneo Petroleum, Inc., as Assignee
covering Mississippi Canyon Blocks 538, 539, 581, and 582.
Exhibit B-2
21
EXHIBIT "B"
TO THE
CONVEYANCE OF OVERRIDING ROYALTY INTEREST DATED JUNE 29, 2001
PERMITTED ENCUMBRANCES
HABANERO
Lease: OCS-G 15879 dated effective February 1, 1996 between the
United States of America as Lessor and Shell Offshore, Inc.,
as Lessee, covering All of Block 341, Garden Banks, OCS
Official Protraction Diagram, NG 15-2, containing 5,760 acres.
Joint Operating Agreement:
Dated effective November 1, 1998, between Shell Deepwater
Development Inc., Murphy Exploration & Production Company, and
Callon Petroleum Operating Company, covering Garden Banks
Block 341 and all exhibits thereto.
Exchange of Interest Agreement:
Letter dated February 2, 1998 between Shell Deepwater
Development, Inc., Murphy Exploration & Production Company and
Callon Petroleum Operating Company covering Garden Banks
Blocks 341, 253, 297, and 298.
Assignment of Record Title Interest:
Dated effective February 1, 1998, Shell Deepwater Development
Inc., Assignor to Murphy Exploration & Production Company and
Callon Petroleum Operating Company as Assignees cover Garden
Banks Block 341.
Reserve Commitment Agreement:
Dated March 20, 1997 between Garden Banks Gas Pipeline, LLC
and Shell Offshore, Inc., covering Garden Banks Block 341.
Auger Production Handling Term Letter:
Dated November 12, 1998 between Shell Deepwater Production
Inc., Murphy Exploration & Production Company, and Callon
Petroleum Operating Company.
Exhibit B-3
22
EXHIBIT "B"
TO THE
CONVEYANCE OF OVERRIDING ROYALTY INTEREST DATED JUNE 29, 2001
PERMITTED ENCUMBRANCES
ENTRADA
Leases: OCS-G 20797 dated effective January 1, 1999 between The United
States of America as Lessor, and Vastar Resources Inc. as
Lessee, covering All of Block 782, Garden Banks, OCS Official
Protraction Diagram, NG 15-2, containing 5,760 acres.
OCS-G 22336 dated effective October 1, 2000 between The United
States of America as Lessor, and Callon Petroleum Operating
Company and Vastar Resources, Inc., as Lessees, covering All
of Block 738, Garden Banks, OCS Official Protraction Diagram,
NG 15-02.
Participation Agreement:
Dated effective December 6, 1999 between Vastar Resources,
Inc. and Callon Petroleum Operating Company, covering Garden
Banks, Blocks 782, 826, 827, 785 and all exhibits thereto
including the joint operating agreement.
Assignment of Record Title:
Dated March 23, 2000 between Vastar Resources, Inc as Assignor
and Callon Petroleum Operating Company as Assignee, covering
Garden Banks Block 782.
Letter Agreement:
Dated May 11, 2000 between Vastar Resources, Inc., and Callon
Petroleum Operating Company. Amendment to Participation
Agreement dated December 6, 1999 to add Garden Banks 738 to
Exhibits "E" and "F".
BOOMSLANG
Lease: OCS-G 18186 dated effective August 1, 1997 between the United
States of America as Lessor, and Callon Petroleum Operating
Company, et al as Lessees, covering All of Block 994, Ewing
Bank, OCS Official Protraction Diagram, NH 15-12, containing
5,760 acres.
Exhibit B-4
23
EXHIBIT "B"
TO THE
CONVEYANCE OF OVERRIDING ROYALTY INTEREST DATED JUNE 29, 2001
PERMITTED ENCUMBRANCES
Operating Agreement:
Dated effective August 1, 1997 between Murphy Exploration &
Production Company, as Operator and Callon Petroleum Operating
Company, covering Ewing Bank Block 994.
Well Participation Agreement:
Dated June 26, 1998 between Murphy Exploration & Production
Company, Callon Petroleum Operating Company, and Santos USA
Corp., covering Ewing Bank Block 994.
Assignment of Oil and Gas Lease:
Dated effective June 1, 1998 between Murphy Exploration &
Production Company as Assignor and Callon Petroleum Operating
Company, as Assignee, covering Ewing Bank Block 994, (OCS-G
18186).
Assignment of Oil and Gas Lease:
Dated effective October 1, 1999 between Santos USA Corporation
as Assignor and Callon Petroleum Operating Company as
Assignee, covering OCS-G 18186, Block 994 Ewing Bank.
Assignment, Bill of Sale and Conveyance:
Dated October 1, 1999 between Santos USA Corporation as
Assignor and Callon Petroleum Operating Company as Assignee,
covering OCS-G 18186 No. 1 Well, Block 994 Ewing Bank.
Exhibit B-5