Exhibit 10.78
-----------------------------
Space above for County Recorder's Use
SECOND LIEN DEED OF TRUST,
ASSIGNMENT OF AS-EXTRACTED COLLATERAL, SECURITY AGREEMENT,
FIXTURE FILING AND FINANCING STATEMENT
FROM
BARON PRODUCTION LLC
TO
PCEC-B, LLC, AS TRUSTEE
FOR THE BENEFIT OF
PCEC SUB 1, LLC
A CARBON, PHOTOGRAPHIC, OR OTHER REPRODUCTION OF THIS INSTRUMENT IS
SUFFICIENT AS A FINANCING STATEMENT.
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. IN CERTAIN STATES, A POWER
OF SALE MAY ALLOW THE TRUSTEE OR THE BENEFICIARY TO TAKE THE MORTGAGED PROPERTY
AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE
GRANTOR UNDER THIS INSTRUMENT.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.
THIS INSTRUMENT COVERS PROCEEDS OF MORTGAGED PROPERTY.
THIS INSTRUMENT COVERS MINERALS AND OTHER SUBSTANCES OF VALUE WHICH MAY BE
EXTRACTED FROM THE EARTH (INCLUDING WITHOUT LIMITATION OIL AND GAS) AND THE
ACCOUNTS RELATED THERETO, WHICH WILL BE FINANCED AT THE WELLHEADS OF THE WELL OR
WELLS LOCATED ON THE PROPERTIES DESCRIBED IN THE EXHIBIT HERETO. THIS FINANCING
STATEMENT IS TO BE FILED OR FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL
ESTATE RECORDS OR SIMILAR RECORDS OF THE RECORDERS OF THE COUNTIES LISTED ON THE
EXHIBIT HERETO. THE GRANTOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE AND
IMMOVABLE PROPERTY CONCERNED, WHICH INTEREST IS DESCRIBED IN THE EXHIBIT
ATTACHED HERETO.
PORTIONS OF THE MORTGAGED PROPERTY ARE GOODS WHICH ARE OR ARE TO BECOME AFFIXED
TO OR FIXTURES ON THE LAND DESCRIBED IN OR REFERRED TO IN THE EXHIBIT HERETO.
THIS FINANCING STATEMENT IS TO BE FILED FOR RECORD OR RECORDED, AMONG OTHER
PLACES, IN THE REAL ESTATE RECORDS OR SIMILAR RECORDS OF EACH COUNTY IN WHICH
SAID LAND OR ANY PORTION THEREOF IS LOCATED. THE GRANTOR IS THE OWNER OF RECORD
INTEREST IN THE REAL ESTATE CONCERNED. THIS INSTRUMENT IS ALSO TO BE INDEXED IN
THE INDEX OF FINANCING STATEMENTS OR THE UCC RECORDS.
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Terms Defined Above...........................................1
Section 1.02. UCC and Other Defined Terms...................................2
Section 1.03. Definitions...................................................2
ARTICLE II
GRANT OF LIEN AND SECURED OBLIGATIONS
Section 2.01. Grant of Liens................................................4
Section 2.02. Grant of Security Interest....................................5
Section 2.03. Secured Obligations...........................................6
Section 2.04. Fixture Filing, Etc...........................................7
Section 2.05. Pro Rata Benefit..............................................7
ARTICLE III
ASSIGNMENT OF AS-EXTRACTED COLLATERAL
Section 3.01. Assignment....................................................7
Section 3.02. No Modification of Payment Obligations........................8
Section 3.03. Rights and Title of Consignee.................................9
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 4.01. Title.........................................................9
Section 4.02. Defend Title..................................................9
Section 4.03. Not a Foreign Person.........................................10
Section 4.04. Power to Create Lien and Security............................10
Section 4.05. Revenue and Cost Bearing Interest............................10
Section 4.06. Rentals Paid; Leases in Effect...............................10
Section 4.07. Operation By Third Parties...................................10
Section 4.08. Abandon, Sales...............................................10
Section 4.09. Failure to Perform...........................................11
ARTICLE V
RIGHTS AND REMEDIES
Section 5.01. Event of Default.............................................11
Section 5.02. Foreclosure and Sale.........................................11
Section 5.03. Substitute Trustees and Agents...............................13
i
Section 5.04. Judicial Foreclosure; Receivership...........................13
Section 5.05. Foreclosure for Installments.................................13
Section 5.06. Separate Sales...............................................13
Section 5.07. Possession of Mortgaged Property.............................14
Section 5.08. Occupancy After Foreclosure..................................14
Section 5.09. Remedies Cumulative, Concurrent and Nonexclusive.............14
Section 5.10. Discontinuance of Proceedings................................15
Section 5.11. No Release of Obligations....................................15
Section 5.12. Release of and Resort to Collateral..........................15
Section 5.13. Waiver of Redemption, Notice and Marshalling of
Assets, Etc..................................................15
Section 5.14. Application of Proceeds......................................16
Section 5.15. Resignation of Operator......................................16
Section 5.16. Indemnity....................................................17
ARTICLE VI
THE TRUSTEE
Section 6.01. Duties, Rights, and Powers of Trustee........................17
Section 6.02. Successor Trustee............................................18
Section 6.03. Retention of Moneys..........................................18
ARTICLE VII
MISCELLANEOUS
Section 7.01. Instrument Construed as Mortgage, Etc........................18
Section 7.02. Releases.....................................................19
Section 7.03. Severability.................................................19
Section 7.04. Successors and Assigns.......................................19
Section 7.05. Subordination................................................19
Section 7.06. Application of Payments to Certain Obligations...............19
Section 7.07. Nature of Covenants..........................................20
Section 7.08. Notices......................................................20
Section 7.09. Counterparts.................................................20
Section 7.10. Governing Law................................................20
Section 7.11. Financing Statement; Fixture Filing..........................20
Section 7.12. Execution of Financing Statements............................21
Section 7.13. Exculpation Provisions.......................................21
Section 7.14. References...................................................22
EXHIBITS
Exhibit A Oil and Gas Properties
ii
THIS SECOND LIEN DEED OF TRUST, ASSIGNMENT OF AS-EXTRACTED COLLATERAL,
SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT (this "Deed of
Trust") is entered into as of July 28, 2014 (the "Effective Date") by BARON
PRODUCTION LLC, a Texas limited liability company (the "Grantor"), in favor of
PCEC-B, LLC, as Trustee for the benefit of PCEC SUB 1, LLC, a Texas limited
liability company (together with its successors and assigns, the "Beneficiary").
R E C I T A L S
A. The Grantor, as seller, and the Beneficiary, as purchaser, have entered
into that certain Purchase and Sale Agreement dated as of the date hereof (such
Purchase and Sale Agreement, as amended, restated, supplemented, or otherwise
modified from time to time, the "Purchase and Sale Agreement"), for the sale and
purchase of the of Production Payment in the Subject Interests, as such terms
are defined in the Conveyance described below.
B. By way of that certain Conveyance of Term Overriding Royalty Interest
dated as of the date hereof (such Conveyance, as amended, restated,
supplemented, or otherwise modified from time to time, the "Conveyance"), the
Grantor conveyed the Production Payment to the Beneficiary.
C. Pursuant to that certain Production and Marketing Agreement dated as of
the date hereof (such Production and Marketing Agreement, as amended, restated,
supplemented, or otherwise modified from time to time, the "Production and
Marketing Agreement"), the Grantor has agreed to perform certain obligations
with respect to, among other things, the operation and production of the Subject
Interests and the marketing of the Production Payment Hydrocarbons (each, as
defined in the Conveyance).
D. The payment and performance of the obligations of the Grantor under the
Purchase and Sale Agreement, the Conveyance and the Production and Marketing
Agreement, and the other Production Payment Documents (defined below) are
guaranteed by Baron Energy, Inc., a Nevada corporation (the "Parent"), pursuant
to that certain Guaranty Agreement dated as of the date hereof (such Guaranty
Agreement, as amended, restated, supplemented, or otherwise modified from time
to time, the "Parent Guaranty Agreement").
E. The Purchase and Sale Agreement requires that the Grantor execute and
deliver this Deed of Trust.
F. Therefore, in order to comply with the terms and conditions of the
Purchase and Sale Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Grantor hereby
agrees as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Terms Defined Above. As used in this Deed of Trust, each term
defined above has the meaning indicated above.
1
Section 1.02 UCC and Other Defined Terms. Unless otherwise defined in the
Applicable UCC, each capitalized term used in this Deed of Trust and not defined
in this Deed of Trust, shall have the meaning ascribed to such term in the
Conveyance. Any capitalized term not defined in either this Deed of Trust or the
Conveyance shall have the meaning ascribed to such term in the Applicable UCC.
Section 1.03 Definitions.
"Applicable UCC" means the provisions of the Uniform Commercial Code
presently in effect in the jurisdiction in which the relevant UCC Collateral is
situated or which otherwise is applicable to the creation or perfection of the
Liens described herein or the rights and remedies of Beneficiary under this Deed
of Trust.
"Collateral" means collectively all the Mortgaged Property and all the UCC
Collateral.
"Credit Agreement" means that certain Credit Agreement dated as of the date
hereof, by and among, the Grantor, the Parent, and the lenders from time to time
parties thereto, Petro Capital, as administrative agent for such lenders, as
amended, restated, supplemented, or otherwise modified from time to time.
"Default Rate" shall mean a rate of interest per annum equal to 17%.
"Event of Default" has the meaning ascribed to such term in Section 5.01.
"Guarantor" means the Parent and any other party which is a guarantor of
the Secured Obligations, on any portion thereof, from time to time.
"Hydrocarbon Interests" means all rights, titles, interests and estates and
the lands and premises covered or affected thereby now or hereafter acquired by
the Grantor in and to oil and gas leases, oil, gas and mineral leases, or other
liquid or gaseous hydrocarbon leases, fee interests, surface interests, mineral
fee interests, overriding royalty and royalty interests, net profit interests
and production payment interests, including any reserved or residual interests
of whatever nature, in each case, which are described on Exhibit A; provided
that, it is the intent of the Grantor all of its interests be subject to the
Lien of this Deed of Trust even if (i) its interests on Exhibit A shall be
incorrectly described or a description of a part or all of such property or the
Grantor's interests therein be omitted limited to particular lands, specified
depths or particular types of property interests or (ii) such properties or
interests may be hereafter acquired.
"Hydrocarbons" means all oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom and all other minerals which may be
produced and saved from or attributable to the Oil and Gas Properties of the
Grantor, including all oil in tanks, and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests or other properties constituting Oil and Gas Properties; provided,
that the term "Hydrocarbons" shall not include the Production Payment (as
defined in the Conveyance).
2
"Indemnified Parties" means the Trustee, the Beneficiary, each Other
Secured Person and their officers, directors, managers, employees,
representatives, agents, attorneys, accountants and experts.
"Lien" means any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties.
"Mortgaged Property" means the Oil and Gas Properties and other properties
and assets described in Section 2.01(a) through Section 2.01(e). The Mortgaged
Property shall not include the Production Payment.
"Oil and Gas Properties" means (a) Hydrocarbon Interests; (b) the
properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c)
all presently existing or future unitization, communitization, pooling
agreements and declarations of pooled units and the units created thereby
(including without limitation all units created under orders, regulations and
rules of any Governmental Authority) which may affect all or any portion of the
Hydrocarbon Interests; (d) all operating agreements, production sales or other
contracts, farmout agreements, farm-in agreements, area of mutual interest
agreements, equipment leases and other agreements which relate to any of the
Hydrocarbon Interests or any interests therein or to the production, sale,
purchase, exchange, processing, handling, storage, transporting or marketing of
the Hydrocarbons from or attributable to such Oil and Gas Properties; (e) all
Hydrocarbons; (f) all tenements, hereditaments, appurtenances and properties in
any manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests, including all compressor sites, settling ponds and equipment or pipe
yards; and (g) all properties, rights, titles, interests and estates described
or referred to above whether now owned or hereinafter acquired, including any
and all property, real or personal, immoveable or moveable, situated upon, used,
held for use or useful in connection with the operating, working or development
of any of such Hydrocarbon Interests or property (excluding drilling rigs,
automotive equipment, rental equipment or other personal property which may be
on such premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil wells, gas wells, injection wells
or other wells, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, pipelines, sales and flow lines, gathering
systems, field gathering systems, salt water disposal facilities, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
steam generation facilities, meters, apparatus, equipment, appliances, tools,
implements, cables, wires, towers, casing, tubing and rods, surface leases,
rights-of-way, easements, servitudes licenses and other surface and subsurface
rights, together with all additions, substitutions, replacements, accessions and
attachments to any and all of the foregoing.
"Other Secured Persons" means each Indemnified Party and any legal owner,
holder, assignee or pledgee of any of the Secured Obligations.
"Paid In Full" means the irrevocable and indefeasible performance, and
payment in full in cash, of all Secured Obligations.
3
"Petro Capital" means Petro Capital Energy Credit, LLC, a Texas limited
liability company.
"Permitted Encumbrances" has the meaning specified in the Conveyance.
"Production Payment" has the meaning specified in the Conveyance.
"Production Payment Documents" means, collectively, the Purchase and Sale
Agreement, the Conveyance, the Production and Marketing Agreement, the Parent
Guaranty Agreement, this Deed of Trust and each other agreement, instrument,
certificate or other document at any time made or given by Grantor with or to
Beneficiary in connection with the Purchase and Sale Agreement, the Conveyance,
the Production and Marketing Agreement, the Parent Guaranty or this Deed of
Trust, including all supplements and amendments to and restatements of any of
the foregoing.
"Secured Obligations" has the meaning specified in Section 2.03.
"Trustee" means PCEC-B, LLC, whose address for notice hereunder is 3710
Rawlins Street, Suite 1000, Dallas, Texas 75219, and any successors and
substitutes in trust hereunder.
"UCC Collateral" means the property and other assets described in Section
2.02.
ARTICLE II
GRANT OF LIEN AND SECURED OBLIGATIONS
Section 2.01. Grant of Liens. The Grantor does by these presents hereby
GRANT, BARGAIN, SELL, ASSIGN, MORTGAGE, TRANSFER and CONVEY to the Trustee, for
the use and benefit of the Beneficiary and the Other Secured Persons, all the
following properties, rights and interests, TO HAVE AND TO HOLD unto the Trustee
forever to secure the payment and performance of the Secured Obligations:
(a) All rights, titles, interests and estates now owned or hereafter
acquired by the Grantor in and to the Oil and Gas Properties described on
Exhibit A.
(b) All rights, titles, interests and estates now owned or hereafter
acquired by the Grantor in and to all geological, geophysical, engineering,
accounting, title, legal and other technical or business data concerning the Oil
and Gas Properties, the Hydrocarbons or any other item of property which are in
the possession of the Grantor, and all books, files, records, magnetic media,
computer records and other forms of recording or obtaining access to such data.
(c) All rights, titles, interests and estates now owned or hereafter
acquired by the Grantor in and to all Hydrocarbons.
(d) Any property that may from time to time hereafter, by delivery or by
writing of any kind, be subjected to the Liens hereof by the Grantor or by
anyone on the Grantor's behalf; and the Trustee and/or the Beneficiary are
hereby authorized to receive the same at any time as additional security
hereunder.
4
(e) All of the rights, titles and interests of every nature whatsoever now
owned or hereafter acquired by the Grantor in and to the Oil and Gas Properties
described in Exhibit A and all other rights, titles, interests and estates and
every part and parcel thereof, including, without limitation, any rights,
titles, interests and estates as the same may be enlarged by the discharge of
any payments out of production or by the removal of any charges or Permitted
Encumbrances to which any of such Oil and Gas Properties or other rights,
titles, interests or estates are subject or otherwise; all rights of the Grantor
to Liens securing payment of proceeds from the sale of production from any of
such Oil and Gas Properties, together with any and all renewals and extensions
of any of such related rights, titles, interests or estates; all contracts and
agreements supplemental to or amendatory of or in substitution for the contracts
and agreements described or mentioned above; and any and all additional
interests of any kind hereafter acquired by the Grantor in and to the such
related rights, titles, interests or estates.
Notwithstanding any provision in this Deed of Trust to the contrary, in no
event is any Building (as defined in the applicable Flood Insurance Regulation)
or Manufactured (Mobile) Home (as defined in the applicable Flood Insurance
Regulation) included in the definition of "Mortgaged Property" and no Building
or Manufactured (Mobile) Home is hereby encumbered by this Deed of Trust. As
used herein, "Flood Insurance Regulations" shall mean (i) the National Flood
Insurance Act of 1968 as now or hereafter in effect or any successor statute
thereto, (ii) the Flood Disaster Protection Act of 1973 as now or hereafter in
effect or any successor statute thereto, (iii) the National Flood Insurance
Reform Act of 1994 (amending 42 USC 4001, et. seq.), as the same may be amended
or recodified from time to time, and (iv) the Flood Insurance Reform Act of 2004
and any regulations promulgated thereunder.
Any fractions or percentages specified on Exhibit A in referring to the
Grantor's interests are solely for purposes of the warranties made by the
Grantor pursuant to Section 4.01 and Section 4.05 and shall in no manner limit
the quantum of interest affected by this Section 2.01 with respect to any Oil
and Gas Property or with respect to any unit or well identified on Exhibit A.
Section 2.02. Grant of Security Interest. To further secure the payment and
performance of the Secured Obligations, the Grantor hereby grants to the
Beneficiary, for its benefit and the benefit of the Other Secured Persons, a
security interest in and to all of the following (whether now or hereafter
acquired by operation of law or otherwise) to the extent arising from or
pertaining, relating or attributable to any of the Mortgaged Property:
(a) all Accounts;
(b) all General Intangibles and all rights under insurance contracts and
rights to insurance proceeds;
(c) all Instruments;
(d) all Goods;
(e) all As-Extracted Collateral from or attributable to the Oil and Gas
Properties;
(f) all books and records pertaining to the Oil and Gas Properties;
5
(g) all Fixtures;
(h) all Hydrocarbons;
(i) to the extent not otherwise included, any other property insofar as the
it consists of personal property of any kind or character defined in and subject
to the Applicable UCC; and
(j) to the extent not otherwise included, all Proceeds and products of any
and all of the foregoing and all collateral security, guarantees and other
Supporting Obligations given with respect to any of the foregoing;
provided that, notwithstanding any other provision set forth in this Deed of
Trust, the term "Collateral" and the term "Mortgaged Properties" and the
component definitions thereof shall not include, and this Deed of Trust shall
not, at any time, constitute a grant of a security interest in or Lien on or
otherwise encumber, the Production Payment or any products or proceeds thereof.
Section 2.03. Secured Obligations. This Deed of Trust is executed and
delivered by the Grantor to secure and enforce the following (the "Secured
Obligations"):
(a) Payment and performance of all obligations and liabilities of the
Grantor and/or the Parent to the Beneficiary, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, any of the
Production Payment Documents or any other document made, delivered or given in
connection herewith or therewith, whether on account of covenants, agreements,
indemnities, costs, expenses (including all fees, charges and disbursements of
counsel to the Beneficiary that are required to be paid by the Grantor or the
Parent pursuant to any Production Payment Document) or otherwise.
(b) Any sums which may be advanced or paid by the Trustee or the
Beneficiary or any Other Secured Person under the Production Payment Documents
on account of the failure of the Grantor to comply with the covenants of the
Grantor contained herein or the other Production Payment Documents whether
pursuant to Section 4.09 or otherwise and all other obligations, liabilities and
indebtedness of the Grantor or any Guarantor arising pursuant to the provisions
of this Deed of Trust or any other Production Payment Document.
(c) Any and all renewals, modifications, amendments, substitutions,
rearrangements or extensions of any of the foregoing, whether in whole or in
part.
Notwithstanding anything herein to the contrary, the Secured Obligations do
not include the Production Payment.
Section 2.04. Fixture Filing, Etc. Without in any manner limiting the
generality of any of the other provisions of this Deed of Trust: (i) some
portions of the goods described or to which reference is made herein are or are
to become Fixtures on the land described or to which reference is made herein or
on Exhibit A; (ii) the security interests created hereby under applicable
provisions of the Applicable UCC will attach to all As-Extracted Collateral (all
minerals including oil and gas and the Accounts resulting from the sale thereof
at the wellhead or minehead located on the Oil and Gas Properties described or
to which reference is made herein or on Exhibit A) and all other Hydrocarbons;
6
(iii) this Deed of Trust is to be filed of record in the real estate records or
other appropriate records as a financing statement; and (iv) the Grantor is the
record owner of the real estate or interests in the real estate or immoveable
property comprised of the Mortgaged Property.
Section 2.05. Pro Rata Benefit. This Deed of Trust is executed and granted
for the pro rata benefit and security of the Beneficiary and the Other Secured
Persons to secure the Secured Obligations for so long as same remains unpaid and
thereafter until the Secured Obligations have been Paid in Full.
ARTICLE III
ASSIGNMENT OF AS-EXTRACTED COLLATERAL
Section 3.01. Assignment.
(a) Subject to the last sentence of paragraph (b) below, the Grantor has
absolutely and unconditionally assigned, transferred, conveyed and granted a
security interest, and does hereby absolutely and unconditionally assign,
transfer, convey and grant a security interest unto the Beneficiary in and to:
(i) all of its As-Extracted Collateral located in or relating to the
Mortgaged Properties located in the county where this Deed of Trust is filed,
including without limitation, all As-Extracted Collateral relating to the
Hydrocarbon Interests, the Hydrocarbons and all products obtained or processed
therefrom;
(ii) the revenues and proceeds now and hereafter attributable to such
Mortgaged Properties, including the Hydrocarbons, and said products and all
payments in lieu, such as "take or pay" payments or settlements; and
(iii) all amounts and proceeds hereafter payable to or to become payable to
the Grantor or now or hereafter relating to any part of such Mortgaged
Properties and all amounts, sums, monies, revenues and income which become
payable to the Grantor from, or with respect to, any of the Mortgaged
Properties, present or future, now or hereafter constituting a part of the
Hydrocarbon Interests.
(b) The Hydrocarbons and products are to be delivered into pipe lines
connected with the Mortgaged Property, or to the purchaser thereof, to the
credit of the Beneficiary, for its benefit and the benefit of the Other Secured
Persons, free and clear of all taxes, charges, costs and expenses; and all such
revenues and proceeds shall be paid directly to the Beneficiary, at its offices
in Dallas, Texas, with no duty or obligation of any party paying the same to
inquire into the rights of the Beneficiary to receive the same, what application
is made thereof, or as to any other matter. Notwithstanding anything to the
contrary contained herein, so long as no Event of Default has occurred and is
continuing, the Grantor shall have the right to collect all revenues and
proceeds attributable to the Hydrocarbons that accrue to the Oil and Gas
Properties or the products obtained or processed therefrom.
(c) Subject to the last sentence of paragraph (b) above, the Grantor agrees
to perform all such acts, and to execute all such further assignments, transfers
7
and division orders and other instruments as may be required or desired by the
Beneficiary or any party in order to have said proceeds and revenues so paid to
the Beneficiary. In addition to any and all rights of a secured party under
Sections 9-607 and 9-609 of the Applicable UCC, the Beneficiary is fully
authorized to receive and receipt for said revenues and proceeds; to endorse and
cash any and all checks and drafts payable to the order of the Grantor or the
Beneficiary for the account of the Grantor received from or in connection with
said revenues or proceeds and to hold the proceeds thereof as additional
collateral securing the Secured Obligations; and to execute transfer and
division orders in the name of the Grantor, or otherwise, with warranties
binding the Grantor. All proceeds received by the Beneficiary pursuant to this
grant and assignment shall be applied as provided in Section 5.14.
(d) The Beneficiary shall not be liable for any delay, neglect or failure
to effect collection of any proceeds or to take any other action in connection
therewith or hereunder; but the Beneficiary shall have the right, at its
election, in the name of the Grantor or otherwise, to prosecute and defend any
and all actions or legal proceedings deemed advisable by the Beneficiary in
order to collect such funds and to protect the interests of the Beneficiary
and/or the Grantor, with all costs, expenses and attorneys' fees incurred in
connection therewith being paid by the Grantor.
(e) The Grantor hereby appoints the Beneficiary as its attorney-in-fact to
pursue any and all rights of the Grantor to Liens in the Hydrocarbons securing
payment of proceeds of runs attributable to the Hydrocarbons. In addition to the
Liens granted to the Trustee and/or the Beneficiary in Section 2.01(e), the
Grantor hereby further transfers and assigns to the Beneficiary any and all such
Liens, security interests, financing statements or similar interests of the
Grantor attributable to its interest in the As-Extracted Collateral, any other
Hydrocarbons and proceeds of runs therefrom arising under or created by said
statutory provision, judicial decision or otherwise. The power of attorney
granted to the Beneficiary in this Section 3.01, being coupled with an interest,
shall be irrevocable until the Secured Obligations have been Paid in Full.
Section 3.02. No Modification of Payment Obligations. Nothing herein
contained shall modify or otherwise alter the obligation of the Grantor to make
prompt payment of all amounts constituting Secured Obligations when and as the
same become due regardless of whether the proceeds of the As-Extracted
Collateral and Hydrocarbons are sufficient to pay the same and the rights
provided in accordance with the foregoing assignment provision shall be
cumulative of all other security of any and every character now or hereafter
existing to secure payment of the Secured Obligations. Nothing in this Article
III is intended to be an acceptance of collateral in satisfaction of the Secured
Obligations.
Section 3.03. Rights and Title of Consignee. In addition to the rights,
titles and interests hereby conveyed pursuant to Section 2.01 of this Deed of
Trust, the Grantor hereby grants to the Beneficiary those Liens given to
purchasers of Hydrocarbons to secure their sale at the wellhead, including those
rights provided in Tex. Bus. & Com. Code ss.9.343 ("Tex. UCC"), as amended from
time to time.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Grantor hereby represents, warrants and covenants as follows:
Section 4.01. Title. To the extent of the undivided interests specified on
Exhibit A, the Grantor has good and defensible title to and is possessed of the
Hydrocarbon Interests and has good title to the UCC Collateral. The Collateral
is free of all Liens except Permitted Encumbrances.
8
Section 4.02. Defend Title. This Deed of Trust is, and always will be kept,
a direct second priority Lien upon the Collateral; provided that Permitted
Encumbrances may exist, but no intent to subordinate the priority of the Liens
created hereby is intended or inferred by such existence. The Grantor will not
create or suffer to be created or permit to exist any Lien, security interest or
charge prior or junior to or on a parity with the Lien of this Deed of Trust
upon the Collateral or any part thereof other than such Permitted Encumbrances.
The Grantor will warrant and defend the title to the Collateral against the
claims and demands of all other Persons whomsoever and will maintain and
preserve the Lien created hereby (and its priority) until the Secured
Obligations shall be Paid in Full. If (i) an adverse claim be made against or a
cloud develop upon the title to any part of the Collateral other than a
Permitted Encumbrance or (ii) any Person, including the holder of a Permitted
Encumbrance, shall challenge the priority or validity of the Liens created by
this Deed of Trust, then the Grantor agrees to immediately defend against such
adverse claim, take appropriate action to remove such cloud or subordinate such
Permitted Encumbrance, in each case, at the Grantor's sole cost and expense. The
Grantor further agrees that the Trustee and/or the Beneficiary may take such
other action as they deem advisable to protect and preserve their interests in
the Collateral, and in such event the Grantor will indemnify the Trustee and the
Beneficiary against any and all cost, attorneys' fees and other expenses which
they may incur in defending against any such adverse claim or taking action to
remove any such cloud.
Section 4.03. Not a Foreign Person. The Grantor is not a "foreign person"
within the meaning of the Code, Sections 1445 and 7701 (i.e. the Grantor is not
a non-resident alien, foreign corporation, foreign partnership, foreign trust or
foreign estate as those terms are defined in the Code and any regulations
promulgated thereunder).
Section 4.04. Power to Create Lien and Security. The Grantor has full power
and lawful authority to grant, bargain, sell, assign, transfer, mortgage and
convey a security interest in all of the Collateral in the manner and form
herein provided. No authorization, approval, consent or waiver of any lessor,
sublessor, Governmental Authority or other party or parties whomsoever is
required in connection with the execution and delivery by the Grantor of this
Deed of Trust.
Section 4.05. Revenue and Cost Bearing Interest. The Grantor's ownership of
the Hydrocarbon Interests and the undivided interests therein as specified on
Exhibit A will, after giving full effect to all Permitted Encumbrances, afford
the Grantor not less than those net interests (expressed as a fraction,
percentage or decimal) in the production from or which is allocated to such
Hydrocarbon Interest specified as Net Revenue Interest (as specified on Exhibit
A) on attached Exhibit A and will cause the Grantor to bear not more than that
portion (expressed as a fraction, percentage or decimal), specified as Working
Interest on Exhibit A, of the costs of drilling, developing and operating the
wells identified on Exhibit A except to the extent of any proportionate
corresponding increase in the Net Revenue Interest.
Section 4.06. Rentals Paid; Leases in Effect. All rentals and royalties due
and payable in accordance with the terms of any leases or subleases comprising a
part of the Mortgaged Property have been duly paid or provided for, and all
leases or subleases comprising a part of the Oil and Gas Property are in full
force and effect.
Section 4.07. Operation By Third Parties. If any portion of the Mortgaged
Property is comprised of interests which are not working interests or which are
not operated by the Grantor or one of its Affiliates, then with respect to such
interests and properties, the Grantor's covenants as expressed in this Article
IV are modified to require that the Grantor use reasonable commercial efforts to
obtain compliance with such covenants by the working interest owners or the
operator or operators of such Mortgaged Properties.
Section 4.08. Abandon, Sales. The Grantor will not sell, lease, assign,
transfer or otherwise dispose or abandon any of the Collateral except as
permitted by the Production and Marketing Agreement.
9
Section 4.09. Failure to Perform. The Grantor agrees that if it fails to
perform any act or to take any action which it is required to perform or take
hereunder or pay any money which the Grantor is required to pay hereunder, each
of the Beneficiary and the Trustee, in the Grantor's name or its or their own
name, may, but shall not be obligated to, perform or cause to perform such act
or take such action or pay such money, and any expenses so incurred by either of
them and any money so paid by either of them shall be a demand obligation owing
by the Grantor to the Beneficiary or the Trustee, as the case may be, and each
of the Beneficiary and the Trustee, upon making such payment, shall be
subrogated to all of the rights of the Person receiving such payment. Each
amount due and owing by the Grantor to each of the Beneficiary and the Trustee
pursuant to this Deed of Trust shall bear interest from the date of such
expenditure or payment to such Person until paid at the Default Rate.
ARTICLE V
RIGHTS AND REMEDIES
Section 5.01. Event of Default. The occurrence of any of the following
shall be an "Event of Default" under this Deed of Trust:
(a) any Performance Default (as defined in the Production and Marketing
Agreement); or
(b) any Event of Default (as defined in the Credit Agreement).
Section 5.02. Foreclosure and Sale.
(a) If an Event of Default shall occur and be continuing, to the extent
provided by applicable law, the Beneficiary shall have the right and option to
proceed with foreclosure and to sell all or any portion of such Mortgaged
Property at one or more sales, as an entirety or in parcels, at such place or
places in otherwise such manner and upon such notice as may be required by law,
or, in the absence of any such requirement, as the Beneficiary may deem
appropriate, and to make conveyance to the purchaser or purchasers. Where the
Mortgaged Property is situated in more than one jurisdiction, notice as above
provided shall be posted and filed in all such jurisdictions (if such notices
are required by law), and all such Mortgaged Property may be sold in any such
jurisdiction and any such notice shall designate the jurisdiction where such
Mortgaged Property is to be sold. Nothing contained in this Section 5.02 shall
be construed so as to limit in any way any rights to sell the Mortgaged Property
or any portion thereof by private sale if and to the extent that such private
sale is permitted under the laws of the applicable jurisdiction or by public or
private sale after entry of a judgment by any court of competent jurisdiction so
ordering. The Grantor hereby irrevocably appoints the Trustee and the
Beneficiary, with full power of substitution, to be the attorneys-in-fact of the
Grantor and in the name and on behalf of the Grantor to execute and deliver any
deeds, transfers, conveyances, assignments, assurances and notices which the
Grantor ought to execute and deliver and do and perform any and all such acts
and things which the Grantor ought to do and perform under the covenants herein
contained and generally, to use the name of the Grantor in the exercise of all
or any of the powers hereby conferred on the Trustee and/or the Beneficiary. At
any such sale: (i) whether made under the power herein contained or any other
legal enactment, or by virtue of any judicial proceedings or any other legal
right, remedy or recourse, it shall not be necessary for the Trustee or the
10
Beneficiary, as appropriate, to have physically present, or to have constructive
possession of, the Mortgaged Property (the Grantor hereby covenanting and
agreeing to deliver any portion of the Mortgaged Property not actually or
constructively possessed by the Trustee or the Beneficiary immediately upon his
or its demand) and the title to and right of possession of any such property
shall pass to the purchaser thereof as completely as if the same had been
actually present and delivered to purchaser at such sale, (ii) each instrument
of conveyance executed by the Trustee or the Beneficiary shall contain a general
warranty of title, binding upon the Grantor and its successors and assigns,
(iii) each and every recital contained in any instrument of conveyance made by
the Trustee or the Beneficiary shall conclusively establish the truth and
accuracy of the matters recited therein, including, without limitation,
nonpayment of the Secured Obligations, advertisement and conduct of such sale in
the manner provided herein and otherwise by law and appointment of any successor
trustee hereunder, (iv) any and all prerequisites to the validity thereof shall
be conclusively presumed to have been performed, (v) the receipt of the Trustee,
the Beneficiary or of such other party or officer making the sale shall be a
sufficient discharge to the purchaser or purchasers for its purchase money and
no such purchaser or purchasers, or its assigns or personal representatives,
shall thereafter be obligated to see to the application of such purchase money,
or be in any way answerable for any loss, misapplication or non-application
thereof, (vi) to the fullest extent permitted by law, the Grantor shall be
completely and irrevocably divested of all of its right, title, interest, claim
and demand whatsoever, either at law or in equity, in and to the property sold
and such sale shall be a perpetual bar both at law and in equity against the
Grantor, and against any and all other persons claiming or to claim the property
sold or any part thereof, by, through or under the Grantor, and (vii) to the
extent and under such circumstances as are permitted by law, the Beneficiary may
be a purchaser at any such sale, and shall have the right, after paying or
accounting for all costs of said sale or sales, to credit the amount of the bid
upon the amount of the Secured Obligations (in the order of priority set forth
in Section 5.14) in lieu of cash payment.
(b) If an Event of Default shall occur and be continuing, then (i) the
Beneficiary shall be entitled to all of the rights, powers and remedies afforded
a secured party by the Applicable UCC with reference to the UCC Collateral or
(ii) the Trustee or the Beneficiary may proceed as to any Collateral in
accordance with the rights and remedies granted under this Deed of Trust or
applicable law in respect of the Collateral. Such rights, powers and remedies
shall be cumulative and in addition to those granted to the Trustee or the
Beneficiary under any other provision of this Deed of Trust or under any other
Production Payment Document. Written notice mailed to the Grantor as provided
herein at least ten (10) days prior to the date of public sale of any part of
the Collateral which is personal property subject to the provisions of the
Applicable UCC, or prior to the date after which private sale of any such part
of the Collateral will be made, shall constitute reasonable notice.
11
Section 5.03. Substitute Trustees and Agents. The Trustee or Beneficiary
may appoint or delegate any one or more persons as agent to perform any act or
acts necessary or incident to any sale held by the Trustee or Beneficiary,
including the posting of notices and the conduct of sale, but in the name and on
behalf of the Trustee or Beneficiary. If the Trustee or Beneficiary shall have
given notice of sale hereunder, any successor or substitute trustee appointed
may complete the sale and the conveyance of the property pursuant thereto as if
such notice had been given by the successor or substitute trustee conducting the
sale.
Section 5.04. Judicial Foreclosure; Receivership. If any of the Secured
Obligations shall become due and payable and shall not be promptly paid, the
Trustee or the Beneficiary shall have the right and power to proceed by a suit
or suits in equity or at law, whether for the specific performance of any
covenant or agreement herein contained or in aid of the execution of any power
herein granted, or for any foreclosure hereunder or for the sale of the
Collateral under the judgment or decree of any court or courts of competent
jurisdiction, or for the appointment of a receiver pending any foreclosure
hereunder or the sale of the Collateral under the order of a court or courts of
competent jurisdiction or under executory or other legal process, or for the
enforcement of any other appropriate legal or equitable remedy. Any money
advanced by the Trustee and/or the Beneficiary in connection with any such
receivership shall be a demand obligation (which obligation the Grantor hereby
expressly promises to pay) owing by the Grantor to the Trustee and/or the
Beneficiary and shall bear interest from the date of making such advance by the
Trustee and/or the Beneficiary until paid at the Default Rate.
Section 5.05. Foreclosure for Installments. The Beneficiary shall also have
the option to proceed with foreclosure in satisfaction of any installments of
the Secured Obligations which have not been paid when due either through the
courts or by directing the Trustee to proceed with foreclosure in satisfaction
of the matured but unpaid portion of the Secured Obligations as if under a full
foreclosure, conducting the sale as herein provided and without declaring the
entire principal balance and accrued interest and other Secured Obligations then
due; such sale may be made subject to the unmatured portion of the Secured
Obligations, and any such sale shall not in any manner affect the unmatured
portion of the Secured Obligations, but as to such unmatured portion of the
Secured Obligations this Deed of Trust shall remain in full force and effect
just as though no sale had been made hereunder. It is further agreed that
several sales may be made hereunder without exhausting the right of sale for any
unmatured part of the Secured Obligations, it being the purpose hereof to
provide for a foreclosure and sale of the security for any matured portion of
the Secured Obligations without exhausting the power to foreclose and sell the
Mortgaged Property for any subsequently maturing portion of the Secured
Obligations.
Section 5.06. Separate Sales. The Collateral may be sold in one or more
parcels and to the extent permitted by applicable law in such manner and order
as the Beneficiary, in its sole discretion, may elect, it being expressly
understood and agreed that the right of sale arising out of any Event of Default
shall not be exhausted by any one or more sales.
Section 5.07. Possession of Mortgaged Property. If an Event of Default
shall have occurred and be continuing, then, to the extent permitted by
applicable law, the Trustee or the Beneficiary shall have the right and power to
enter into and upon and take possession of all or any part of the Collateral in
the possession of the Grantor, its successors or assigns, or its or their agents
or servants, and may exclude the Grantor, its successors or assigns, and all
12
persons claiming under the Grantor, and it's or their agents or servants wholly
or partly therefrom; and, holding the same, the Beneficiary may use, administer,
manage, operate and control the Collateral and conduct the business thereof to
the same extent as the Grantor, its successors or assigns, might at the time do
and may exercise all rights and powers of the Grantor, in the name, place and
stead of the Grantor, or otherwise as the Beneficiary shall deem best. All
costs, expenses and liabilities of every character incurred by the Trustee
and/or the Beneficiary in administering, managing, operating, and controlling
the Mortgaged Property shall constitute a demand obligation (which obligation
the Grantor hereby expressly promises to pay) owing by the Grantor to the
Trustee and/or the Beneficiary and shall bear interest from date of expenditure
until paid at the Default Rate.
Section 5.08. Occupancy After Foreclosure. In the event there is a
foreclosure sale hereunder and at the time of such sale the Grantor or the
Grantor's heirs, devisees, representatives, successors or assigns or any other
person claiming any interest in the Collateral by, through or under the Grantor,
are occupying or using the Mortgaged Property or any part thereof, each and all
shall immediately become the tenant of the purchaser at such sale, which tenancy
shall be a tenancy from day to day, terminable at the will of either the
landlord or tenant, or at a reasonable rental per day based upon the value of
the property occupied, such rental to be due daily to the purchaser; to the
extent permitted by applicable law, the purchaser at such sale shall,
notwithstanding any language herein apparently to the contrary, have the sole
option to demand immediate possession following the sale or to permit the
occupants to remain as tenants at will. In the event the tenant fails to
surrender possession of said property upon demand, the purchaser shall be
entitled to institute and maintain a summary action for possession of the
Mortgaged Property (such as an action for forcible entry and detainer) in any
court having jurisdiction.
Section 5.09. Remedies Cumulative, Concurrent and Nonexclusive. Every
right, power, privilege and remedy herein given to the Trustee or the
Beneficiary shall be cumulative and in addition to every other right, power and
remedy herein specifically given or now or hereafter existing in equity, at law
or by statute (including specifically those granted by the Applicable UCC in
effect and applicable to the Collateral or any portion thereof). Each and every
right, power, privilege and remedy whether specifically herein given or
otherwise existing may be exercised from time to time and so often and in such
order as may be deemed expedient by the Trustee or the Beneficiary, and the
exercise, or the beginning of the exercise, or the abandonment, of any such
right, power, privilege or remedy shall not be deemed a waiver of the right to
exercise, at the same time or thereafter any other right, power, privilege or
remedy. No delay or omission by the Trustee or the Beneficiary or any Other
Secured Person in the exercise of any right, power or remedy shall impair any
such right, power, privilege or remedy or operate as a waiver thereof or of any
other right, power, privilege or remedy then or thereafter existing.
Section 5.10. Discontinuance of Proceedings. If the Trustee or the
Beneficiary shall have proceeded to invoke any right, remedy or recourse
permitted hereunder or under any Production Payment Document or available at law
and shall thereafter elect to discontinue or abandon same for any reason, then
it shall have the unqualified right so to do and, in such an event, the parties
shall be restored to their former positions with respect to the Secured
Obligations, this Deed of Trust, the Collateral and otherwise, and the rights,
13
remedies, recourses and powers of the Trustee and the Beneficiary, as
applicable, shall continue as if same had never been invoked.
Section 5.11. No Release of Obligations. Neither the Grantor, any Guarantor
nor any other person hereafter obligated for payment of all or any part of the
Secured Obligations shall be relieved of such obligation by reason of: (a) the
failure of the Trustee to comply with any request of the Grantor, or any
Guarantor or any other Person so obligated to foreclose the Lien of this Deed of
Trust or to enforce any provision hereunder or under any Production Payment
Document; (b) the release, regardless of consideration, of the Mortgaged
Property or any portion thereof or interest therein or the addition of any other
property to the Mortgaged Property; (c) any agreement or stipulation between any
subsequent owner of the Mortgaged Property and the Beneficiary extending,
renewing, rearranging or in any other way modifying the terms of this Deed of
Trust without first having obtained the consent of, given notice to or paid any
consideration to the Grantor, any Guarantor or such other Person, and in such
event the Grantor, Guarantor and all such other person s shall continue to be
liable to make payment according to the terms of any such extension or
modification agreement unless expressly released and discharged in writing by
the Beneficiary; or (d) by any other act or occurrence save and except if the
Secured Obligations are Paid in Full.
Section 5.12. Release of and Resort to Collateral. The Beneficiary may
release, regardless of consideration, any part of the Collateral without, as to
the remainder, in any way impairing, affecting, subordinating or releasing the
Lien created in or evidenced by this Deed of Trust or its stature as a first and
prior Lien in and to the Collateral, and without in any way releasing or
diminishing the liability of any Person liable for the repayment of the Secured
Obligations. For payment of the Secured Obligations, the Beneficiary may resort
to any other security therefor held by the Beneficiary or the Trustee in such
order and manner as the Beneficiary may elect.
Section 5.13. Waiver of Redemption, Notice and Marshalling of Assets, Etc.
To the fullest extent permitted by law, the Grantor hereby irrevocably and
unconditionally waives and releases (a) all benefits that might accrue to the
Grantor by virtue of any present or future moratorium law or other law exempting
the Collateral from attachment, levy or sale on execution or providing for any
appraisement, valuation, stay of execution, exemption from civil process,
redemption or extension of time for payment; (b) all notices of any Event of
Default or of the Beneficiary's or any other secured Person's intention to
accelerate maturity of the Secured Obligations or of any election to exercise or
any actual exercise of any right, remedy or recourse provided for hereunder or
under any Production Payment Document or available at law; and (c) any right to
a marshalling of assets or a sale in inverse order of alienation. If any law
referred to in this Deed of Trust and now in force, of which the Grantor or its
successor or successors might take advantage despite the provisions hereof,
shall hereafter be repealed or cease to be in force, such law shall thereafter
be deemed not to constitute any part of the contract herein contained or to
preclude the operation or application of the provisions hereof. If the laws of
any state which provides for a redemption period do not permit the redemption
period to be waived, the redemption period shall be specifically reduced to the
minimum amount of time allowable by statute.
14
Section 5.14. Application of Proceeds. The proceeds of any sale of the
Mortgaged Property or any part thereof and all other monies received in any
proceedings for the enforcement hereof or otherwise, whose application has not
elsewhere herein been specifically provided for, shall be applied:
(a) First, to the payment of all expenses incurred by the Trustee or the
Beneficiary incident to the enforcement of this Deed of Trust or any of the
other Production Payment Documents to collect any portion of the Secured
Obligations (including, without limiting, the generality of the foregoing,
expenses of any entry or taking of possession, of any sale, of advertisement
thereof, and of conveyances, and court costs, compensation of agents and
employees, legal fees and a reasonable commission to the Trustee acting, if
applicable), and to the payment of all other charges, expenses, liabilities and
advances incurred or made by the Trustee or the Beneficiary under this Deed of
Trust or in executing any trust or power hereunder; and
(b) Second, to the Secured Obligations in such order and manner as
Beneficiary shall determine from time to time at its sole discretion.
Section 5.15. Resignation of Operator. In addition to all rights and
remedies under this Deed of Trust, at law and in equity, if any Event of Default
shall occur and the Trustee or the Beneficiary shall exercise any remedies under
this Deed of Trust with respect to any portion of the Mortgaged Property (or the
Grantor shall transfer any Mortgaged Property "in lieu of" foreclosure)
whereupon the Grantor is divested of its title to any of the Collateral, the
Beneficiary shall have the right to request that any operator of any Mortgaged
Property which is either the Grantor or any Affiliate of the Grantor to resign
as operator under the joint operating agreement applicable thereto, and no later
than 60 days after receipt by the Grantor of any such request, the Grantor shall
resign (or cause such other Person to resign) as operator of such Collateral.
Section 5.16. Indemnity. THE INDEMNIFIED PARTIES SHALL NOT BE LIABLE, IN
CONNECTION WITH ANY ACTION TAKEN, FOR ANY LOSS SUSTAINED BY THE GRANTOR
RESULTING FROM AN ASSERTION THAT THE BENEFICIARY HAS RECEIVED FUNDS FROM THE
PRODUCTION OF HYDROCARBONS CLAIMED BY THIRD PERSONS OR ANY ACT OR OMISSION OF
ANY INDEMNIFIED PARTY IN ADMINISTERING, MANAGING, OPERATING OR CONTROLLING THE
MORTGAGED PROPERTY INCLUDING SUCH LOSS WHICH MAY RESULT FROM THE ORDINARY
NEGLIGENCE OF AN INDEMNIFIED PARTY UNLESS SUCH LOSS IS CAUSED BY THE WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE OF THE INDEMNIFIED PARTY SEEKING INDEMNITY. NO
INDEMNIFIED PARTY SHALL BE OBLIGATED TO PERFORM OR DISCHARGE ANY OBLIGATION,
DUTY OR LIABILITY OF THE GRANTOR. THE GRANTOR SHALL AND DOES HEREBY AGREE TO
INDEMNIFY EACH INDEMNIFIED PARTY FOR, AND TO HOLD EACH INDEMNIFIED PARTY
HARMLESS FROM, ANY AND ALL LIABILITY, LOSS OR DAMAGE WHICH MAY OR MIGHT BE
INCURRED BY ANY INDEMNIFIED PARTY BY REASON OF THIS DEED OF TRUST OR THE
EXERCISE OF RIGHTS OR REMEDIES HEREUNDER. IF ANY INDEMNIFIED PARTY SHALL MAKE
ANY EXPENDITURE ON ACCOUNT OF ANY SUCH LIABILITY, LOSS OR DAMAGE, THE AMOUNT
THEREOF, INCLUDING COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES, SHALL BE A
DEMAND OBLIGATION (WHICH OBLIGATION THE GRANTOR HEREBY EXPRESSLY PROMISES TO
PAY) OWING BY THE GRANTOR TO SUCH INDEMNIFIED PARTY AND SHALL BEAR INTEREST FROM
THE DATE EXPENDED UNTIL PAID AT THE DEFAULT RATE. THE GRANTOR HEREBY ASSENTS TO,
RATIFIES AND CONFIRMS ANY AND ALL ACTIONS OF EACH INDEMNIFIED PARTY WITH RESPECT
TO THE MORTGAGED PROPERTY TAKEN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS
DEED OF TRUST. THE LIABILITIES OF THE GRANTOR AS SET FORTH IN THIS SECTION 5.16
SHALL SURVIVE THE TERMINATION OF THIS DEED OF TRUST.
15
ARTICLE VI
THE TRUSTEE
Section 6.01. Duties, Rights, and Powers of Trustee. The Trustee shall have
no duty to see to any recording, filing or registration of this Deed of Trust or
any other instrument in addition or supplemental thereto, or to give any notice
thereof, or to see to the payment of or be under any duty in respect of any tax
or assessment or other governmental charge which may be levied or assessed on
the Mortgaged Property, or any part thereof, or against the Grantor, or to see
to the performance or observance by the Grantor of any of the covenants and
agreements contained herein. The Trustee shall not be responsible for the
execution, acknowledgment or validity of this Deed of Trust or of any instrument
in addition or supplemental hereto or for the sufficiency of the security
purported to be created hereby, and makes no representation in respect thereof
or in respect of the rights of the Beneficiary. The Trustee shall have the right
to advise with counsel upon any matters arising hereunder and shall be fully
protected in relying as to legal matters on the advice of counsel. The Trustee
shall not incur any personal liability hereunder except for the Trustee's own
willful misconduct; and the Trustee shall have the right to rely on any
instrument, document, or signature authorizing or supporting any action taken or
proposed to be taken by him hereunder, believed by him in good faith to be
genuine.
Section 6.02. Successor Trustee. The Trustee may resign by written notice
addressed to the Beneficiary or be removed at any time with or without cause by
an instrument in writing duly executed on behalf of the Beneficiary. In case of
the death, resignation, or removal of the Trustee, a successor may be appointed
by the Beneficiary by instrument of substitution complying with any applicable
law, or, in the absence of any such requirement under applicable law, without
formality other than appointment and designation in writing. Written notice of
such appointment and designation shall be given by the Beneficiary to the
Grantor, but the validity of any such appointment shall not be impaired or
affected by failure to give such notice or by any defect therein. Such
appointment and designation shall be full evidence of the right and authority to
make the same and of all the facts therein recited. Upon the making of any such
appointment and designation, this Deed of Trust shall vest in the successor all
the estate and title in and to all of the Mortgaged Property and the successor
shall thereupon succeed to all of the rights, powers, privileges, immunities and
duties hereby conferred upon the Trustee named herein, and one such appointment
and designation shall not exhaust the right to appoint and designate an
additional successor but such right may be exercised repeatedly until the
Secured Obligations are Paid in Full. To facilitate the administration of the
duties hereunder, the Beneficiary may appoint multiple trustees to serve in such
capacity or in such jurisdictions as the Beneficiary may designate.
Section 6.03. Retention of Moneys. All moneys received by the Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated in any manner
from any other moneys (except to the extent required by law) and the Trustee
shall be under no liability for interest on any moneys received by him
hereunder.
16
ARTICLE VII
MISCELLANEOUS
Section 7.01. Instrument Construed as Mortgage, Etc. With respect to any
portions of the Mortgaged Property located in any State or other jurisdiction
the laws of which do not provide for the use or enforcement of a deed of trust
or the office, rights and authority of the Trustee as herein provided, the
general language of conveyance hereof to the Trustee is intended and the same
shall be construed as words of mortgage unto and in favor of the Beneficiary and
the rights and authority granted to the Trustee herein may be enforced and
asserted by the Beneficiary in accordance with the laws of the jurisdiction in
which such portion of the Mortgaged Property is located and the same may be
foreclosed at the option of the Beneficiary as to any or all such portions of
the Mortgaged Property in any manner permitted by the laws of the jurisdiction
in which such portions of the Mortgaged Property is situated.
This Deed of Trust may be construed as a mortgage, deed of trust,
conveyance, assignment, security agreement, fixture filing, pledge, financing
statement, hypothecation or contract, or any one or more of them, in order fully
to effectuate the Lien hereof and the purposes and agreements herein set forth.
Section 7.02. Releases.
(a) Full Release. If all Secured Obligations shall be performed and Paid In
Full, the Beneficiary shall forthwith cause satisfaction and discharge of this
Deed of Trust to be entered upon the record at the expense of the Grantor and
shall execute and deliver or cause to be executed and delivered such instruments
of satisfaction and reassignment as may be appropriate. Otherwise, this Deed of
Trust shall remain and continue in full force and effect.
(b) Partial Release. If any of the Mortgaged Property shall be sold,
transferred or otherwise disposed of by the Grantor in a transaction permitted
by the Purchase and Marketing Agreement, then the Beneficiary, at the request
and sole expense of the Grantor, shall promptly execute and deliver to the
Grantor all releases, re-conveyances or other documents reasonably necessary or
desirable for the release of the Liens created hereby on the Mortgaged Property.
Section 7.03. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction and the remaining provisions hereof
shall be liberally construed in favor of the Trustee, the Beneficiary and the
Other Secured Persons in order to effectuate the provisions hereof. The
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of any such provision in any other
jurisdiction.
Section 7.04. Successors and Assigns. The terms used to designate any party
or group of persons shall be deemed to include the respective heirs, legal
representatives, successors and assigns of such Persons.
Section 7.05. Subordination. This Deed of Trust is for all purposes
subordinate, junior and subject to the liens, security interests and assignments
created pursuant to the Security Documents (as defined in the Credit Agreement).
Neither the Beneficiary nor the Trustee shall exercise any remedies under
17
Article III or Article V of this Deed of Trust without the prior written consent
of Petro Capital.
Section 7.06. Application of Payments to Certain Obligations. If any part
of the Secured Obligations cannot be lawfully secured by this Deed of Trust or
if any part of the Mortgaged Property cannot be lawfully subject to the Lien
hereof to the full extent of the Secured Obligations, then all payments made
shall be applied on said Secured Obligations first in discharge of that portion
thereof which is not secured by this Deed of Trust.
Section 7.07. Nature of Covenants. The covenants and agreements herein
contained shall constitute covenants running with the land and interests covered
or affected hereby and shall be binding upon the heirs, legal representatives,
successors and assigns of the parties hereto.
Section 7.08. Notices. All notices, requests, consents, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed sufficiently given or furnished if delivered by registered or certified
United States mail, postage prepaid, or by personal service (including express
or courier service) at the addresses specified in Section 7.12 (unless changed
by similar notice in writing given by the particular party whose address is to
be changed). Any such notice or communication shall be deemed to have been given
either at the time of personal delivery or, in the case of delivery at the
address and in the manner provided herein, upon receipt; provided that, service
of notice as required by the laws of any state in which portions of the
Mortgaged Property may be situated shall for all purposes be deemed appropriate
and sufficient with the giving of such notice.
Section 7.09. Counterparts. This Deed of Trust is being executed in several
counterparts, all of which are identical, except that to facilitate recordation,
if the Mortgaged Property is situated in or on more than one county,
descriptions of only those portions of the Mortgaged Property located in or on
the county in which a particular counterpart is recorded shall be attached as
Exhibit A to such counterpart. Each of such counterparts shall for all purposes
be deemed to be an original and all such counterparts shall together constitute
but one and the same instrument. Complete copies of this Deed of Trust
containing the entire Exhibit A have been retained by the Beneficiary.
Section 7.10. Governing Law. Insofar as permitted by otherwise applicable
law, this Deed of Trust shall be construed under and governed by the laws of the
State of Texas; provided, however, that, with respect to any portion of the
Mortgaged Property located outside of the State of Texas, the laws of the place
in which such property is located in, or offshore area adjacent to (and State
law made applicable as a matter of Federal law), shall apply to the extent of
procedural and substantive matters relating only to the creation, perfection,
foreclosure of Liens and enforcement of rights and remedies against the
Mortgaged Property.
Section 7.11. Financing Statement; Fixture Filing. This Deed of Trust shall
be effective as a financing statement filed as a fixture filing with respect to
all Fixtures included within the Mortgaged Property and is to be filed or filed
for record in the real estate records, mortgage records or other appropriate
records of each jurisdiction where any part of the Mortgaged Property (including
said fixtures) are situated. This Deed of Trust shall also be effective as a
18
financing statement covering As-Extracted Collateral (including oil and gas and
all other substances of value which may be extracted from the ground) and
accounts financed at the wellhead or minehead of wells or mines located on the
properties subject to the Applicable UCC and is to be filed for record in the
real estate records, UCC records or other appropriate records of each
jurisdiction where any part of the Mortgaged Property is situated.
Section 7.12. Execution of Financing Statements. Pursuant to the Applicable
UCC, the Grantor authorizes the Beneficiary, its counsel or its representative,
at any time and from time to time, to file or record financing statements,
continuation statements, amendments thereto and other filing or recording
documents or instruments with respect to the Mortgaged Property without the
signature of the Beneficiary in such form and in such offices as the Beneficiary
reasonably determines appropriate to perfect the security interests of the
Beneficiary under this Agreement. The Grantor also authorizes the Beneficiary,
its counsel or its representative, at any time and from time to time, to file or
record such financing statements that describe the collateral covered thereby as
"all assets of the Beneficiary", "all personal property of the Beneficiary" or
words of similar effect. The Grantor shall pay all costs associated with the
filing of such instruments.
In that regard, the following information is provided:
Name of Debtor: Baron Production LLC
Address of Debtor 300 S. CM Allen Pkwy, Suite 400
San Marcos, Texas 78666
State of Formation/Location Texas
Organizational ID Number 801793395
Facsimile: (512) 392-7238
Telephone: (512) 392-5775
Principal Place of
Business of Debtor: Texas
Name of Secured Party: PCEC Sub 1, LLC
Address of Secured 3710 Rawlins Street
Party: Dallas, Texas 75219
Facsimile: 214.661.7760
Telephone: 214.661.7761
Owner of Record of
Real Property: Baron Production LLC
Section 7.13. Exculpation Provisions. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS DEED OF TRUST; AND AGREES
THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS DEED OF TRUST;
THAT IT HAS IN FACT READ THIS DEED OF TRUST AND IS FULLY INFORMED AND HAS FULL
NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS DEED OF TRUST;
19
THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE
THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS DEED OF TRUST; AND
HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS DEED OF TRUST; AND
THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS DEED OF TRUST RESULT IN ONE
PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND
RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY
HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR
ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS DEED OF TRUST ON THE BASIS
THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE
PROVISION IS NOT "CONSPICUOUS".
Section 7.14. References. The words "herein," "hereof," "hereunder" and
other words of similar import when used in this Deed of Trust refer to this Deed
of Trust as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Deed of Trust unless otherwise stated herein. Any reference
herein to an exhibit or schedule shall be deemed to refer to the applicable
exhibit or schedule attached hereto unless otherwise stated herein.
[SIGNATURES BEGIN NEXT PAGE]
20
EXECUTED this 28th day of July, 2014, to be effective as of the 28th day of
July, 2014.
BARON PRODUCTION LLC
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
STATE OF TEXAS ss.
ss.
COUNTY OF _______ ss.
This instrument was acknowledged before me on July ___, 2014, by
_________________________, the _________________________ of Baron Production
LLC, a Texas limited liability company, on behalf of said company.
-----------------------------------
Notary Public
Seal:
21
EXHIBIT A
DEED OF TRUST,
ASSIGNMENT OF AS-EXTRACTED COLLATERAL, SECURITY AGREEMENT,
FIXTURE FILING AND FINANCING STATEMENT
Introduction
The capitalized terms used but not defined in this Exhibit A are used as
defined in the Deed of Trust. For purposes of this Exhibit A the capitalized
terms not defined in the Deed of Trust are as follows:
1. "Working Interest" or "Gross Working Interest" and "W.I." or "G.W.I."
means an interest owned in an oil, gas and mineral lease that determines the
cost bearing percentage of the owner of such interest.
2. "Net Revenue Interest" or "N.R.I." means an interest (expressed as a
percentage or decimal fraction), determined net of all royalties, overriding
royalties, production payments or other burdens payable out of production, in
and to all Hydrocarbons produced and saved from or attributable to a Well. In
the case of any Well listed in Exhibit A, the Net Revenue Interest specified for
such Well shall mean the sum of the percentage or decimal fraction set forth
after the words "Net Revenue Interest" in the portion applicable to such Well
plus, in the case of any Well with respect to which a royalty interest and/or
overriding royalty is stated in this Exhibit A and applicable to such Well, the
percentage or decimal fraction set forth after the words "Royalty Interest" or
"Overriding Royalty Interest" in each such portion of Exhibit A.
3. "Well" means (i) any existing well identified in Exhibit A, including
replacement well drilled in lieu thereof from which gas is now or hereafter
produced and (ii) any well at any time producing or capable of producing gas
attributable to the Hydrocarbons as defined above, including any well which has
been shut-in, has temporarily ceased production or on which workover, reworking,
plugging and abandonment or other operations are being conducted or planned.
All references contained in this Exhibit A to the Oil and Gas Properties
are intended to include references to (i) the volume or book and page, file,
entry or instrument number of the appropriate records of the particular county
in the State where each such lease or other instrument is recorded and (ii) all
valid and existing amendments to such lease or other instrument of record in
such county records regardless of whether such amendments are expressly
described herein. A special reference is here made to each such lease or other
instrument and the record thereof for a more particular description of the
property and interests sought to be affected by the Deed of Trust and for all
other purposes.
For recording purposes, in regards to each county portion to this Exhibit
A, this Introduction may be attached to an original executed copy of the Deed of
Trust, Assignment of As-Extracted Collateral, Security Agreement, Fixture Filing
and Financing Statement to be separately filed of record in each county.
22
EXHIBIT A
(Continued)
EAST PEARSALL (STEWART) PROSPECT
TRACT 1 - 1985 ACRES
Lease 1: Oil and Gas Lease dated August 13, 2009, from Federal Royalty LLC, as
General Partner for Federal Royalty Partners, Ltd., as Lessor, to Sien Energy
Company, as Lessee, recorded by Memorandum of Oil and Gas Lease in Volume 66,
page 502, Official Public Records, Frio County, Texas, as amended, covering
1,985 acres of land, more or less, out of the A.B.&M. Survey 5, A-29, the
A.B.&M. Survey 7, A-30, the A.B.&M. Survey 9, A-31, the R.H. Adcock Survey 10,
A-1341 and the B.S.&F. Survey 1, A-111, Frio County, Texas.
Lease 2: Oil and Gas Lease dated March 26, 2009, from Cimarron Texas Minerals,
Ltd., as Lessor, to Sien Energy Company, as Lessee, recorded by Memorandum of
Oil and Gas Lease dated March 31, 2009 in Volume 67, page 831, Official Public
Records, Frio County, Texas, as amended, covering 1,985 acres of land, more or
less, being the same land described above in Lease 1.
Lease 3: Paid Up Oil and Gas Lease dated March 6, 2009, from Joseph M. Dawson,
Jr., as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66, page
504, Official Public Records, Frio County, Texas, as amended, covering 1,985
acres of land, more or less, being the same land described in Lease 1.
Lease 4: Paid Up Oil and Gas Lease dated March 6, 2009, from Dorothy D. Burlage,
as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66, page 508,
Official Public Records, Frio County, Texas, as amended, covering 1,985 acres of
land, more or less, being the same land described in Lease 1.
Lease 5: Paid Up Oil and Gas Lease dated January 16, 2009, from Hager Oil & Gas,
as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66, page 512,
Official Public Records, Frio County, Texas, covering 1,985 acres of land, more
or less, being the same land described in Lease 1.
Lease 6: Paid Up Oil and Gas Lease dated September 28, 2009, from Bill Bishop,
as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66, page 528,
Official Public Records, Frio County, Texas, covering 1,985 acres of land, more
or less, being the same land described in Lease 1.
Lease 7: Paid Up Oil and Gas Lease dated September 28, 2009, from Robert L. Dow,
Jr., as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66, page
524, Official Public Records, Frio County, Texas, covering 1,985 acres of land,
more or less, being the same land described in Lease 1.
23
Lease 8: Paid Up Oil and Gas Lease dated September 28, 2009, from Wesley K.
Winn, as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66, page
517, Official Public Records, Frio County, Texas, covering 1,985 acres of land,
more or less, being the same land described in Lease 1.
Lease 9: Paid Up Oil and Gas Lease dated September 28, 2009, from Tolar N.
Hamblen, III, as Lessor, to Sien Energy Company, as Lessee, recorded in Volume
67, page 828, Official Public Records, Frio County, Texas, covering 1,985 acres
of land, more or less, being the same land described in Lease 1.
Lease 10: Paid Up Oil and Gas Lease dated September 28, 2009, from Ginger
Busboom, as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66,
page 521, Official Public Records, Frio County, Texas, covering 1,985 acres of
land, more or less, being the same land described in Lease 1.
Lease 11: Paid Up Oil and Gas Lease dated August 24, 2009, from Mark E. McCourt
and wife, Susan McCourt, as Lessor, to Sien Energy Company, as Lessee, recorded
in Volume 66, page 536, Official Public Records, Frio County, Texas, covering
1,985 acres of land, more or less, being the same land described in Lease 1.
Lease 12: Paid Up Oil and Gas Lease dated August 24, 2009, from A.L. Furnace and
wife, Pauline Furnace, as Lessor, to Sien Energy Company, as Lessee, recorded in
Volume 66, page 532, Official Public Records, Frio County, Texas, covering 1,985
acres of land, more or less, being the same land described in Lease 1.
Lease 13: Paid Up Oil and Gas Lease dated August 10, 2009, from Dickerson
Resources, Arthur J. Milbarger and Joseph E. Stewart, as Lessor, to Sien Energy
Company, as Lessee, recorded in Volume 66, page 540, Official Public Records,
Frio County, Texas, covering 1,985 acres of land, more or less, being the same
land described in Lease 1.
Lease 14: Paid Up Oil and Gas Lease dated March 20, 2009, from Douglas C. Koch,
as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66, page 544,
Official Public Records, Frio County, Texas, as amended, covering 1,985 acres of
land, more or less, being the same land described in Lease 1.
Lease 15: Paid Up Oil and Gas Lease dated March 20, 2009, from Wayne A. Bissett,
as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66, page 550,
Official Public Records, Frio County, Texas, as amended, covering 1,985 acres of
land, more or less, being the same land described in Lease 1.
Lease 16: Paid Up Oil and Gas Lease dated December 3, 2007, from Clarence J.
Fraser, as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66,
page 556, Official Public Records, Frio County, Texas, covering 1,985 acres of
land, more or less, being the same land described in Lease 1.
24
Lease 17: Paid Up Oil and Gas Lease dated August 12, 2009, from Dorothy L.
Hardin, as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66,
page 559, Official Public Records, Frio County, Texas, covering 1,985 acres of
land, more or less, being the same land described in Lease 1.
Lease 18: Paid Up Oil and Gas Lease dated August 12, 2009, from Anne L. Madigan,
as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66, page 563,
Official Public Records, Frio County, Texas, covering 1,985 acres of land, more
or less, being the same land described in Lease 1.
Lease 19: Paid Up Oil and Gas Lease dated September 2, 2009, from Jessica
Stansell, as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 66,
page 567, Official Public Records, Frio County, Texas, covering 1,985 acres of
land, more or less, being the same land described in Lease 1.
Lease 20: Paid Up Oil and Gas Lease dated March 24, 2009, from Thornton Davis
Minerals, L.P., as Lessor, to Sien Energy Company, as Lessee, recorded in Volume
66, page 570, Official Public Records, Frio County, Texas, covering 1,985 acres
of land, more or less, being the same land described in Lease 1.
Lease 21: Paid-Up Oil and Gas Lease dated September 1, 2009, from Stewart
Information Services Corporation, as Lessor, to Sien Energy Company, as Lessee,
recorded by Memorandum of Oil and Gas Lease in Volume 66, page 574, Official
Public Records, Frio County, Texas, as amended, covering 1,985 acres of land,
more or less, being the same land described in Lease 1.
Lease 22: Paid-Up Oil and Gas Lease dated September 2, 2009, from Nathan Weaver,
as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 70, page 249,
Official Public Records, Frio County, Texas, covering 1,985 acres of land, more
or less, being the same land described in Lease 1.
Lease 23: Paid-Up Oil and Gas Lease dated September 2, 2009, from Jesse Walker,
as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 73, page 621,
Official Public Records, Frio County, Texas, covering 1,985 acres of land, more
or less, being the same land described in Lease 1.
Lease 24: Paid-Up Oil and Gas Lease dated March 23, 2011, from Wanda Weaver, as
Lessor, to Ricochet Energy, Inc., as Lessee, recorded in Volume 91, page 773,
Official Public Records, Frio County, Texas, covering 1,985 acres of land, more
or less, being the same land described in Lease 1.
Lease 25: Paid Up Oil and Gas Lease dated June 23, 2011, from Charles McClain,
as Receiver for Mineral Interests in Cause No. 11-03-00095CVF, for Nancy Brown
et al., as Lessor, to Ricochet Energy, Inc., as Lessee, recorded in Volume 92,
page 996, Official Public Records, Frio County, Texas, covering 1,985 acres of
land, more or less, being the same land described in Lease 1.
25
TRACT 2 - 640 ACRES
Lease 1: Paid Up Oil and Gas Lease dated November 6, 2009, from Roxana Kelfer,
Individually and as Trustee of the Louis A. Michael Trust, as Lessor, to Sien
Energy Company, as Lessee, recorded in Volume 68, page 237, Official Public
Records, Frio County, Texas, covering 640 acres of land, more or less, out of
the E.A. Mudd Survey 8, A-1333, Frio County, Texas.
Lease 2: Paid Up Oil and Gas Lease dated November 6, 2009, from Lynn Kendrick,
as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 68, page 242,
Official Public Records, Frio County, Texas, covering 640 acres of land, more or
less, out of the E.A. Mudd Survey 8, A-1333, Frio County, Texas, being the same
land described in Lease 1.
Lease 3: Paid Up Oil and Gas Lease dated November 6, 2009, from Caroline J.
Wanke, as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 68, page
247, Official Public Records, Frio County, Texas, covering 640 acres of land,
more or less, out of the E.A. Mudd Survey 8, A-1333, Frio County, Texas, being
the same land described in Lease 1.
Lease 4: Paid Up Oil and Gas Lease dated November 6, 2009, from Diana Morawski,
as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 68, page 251,
Official Public Records, Frio County, Texas, covering 640 acres of land, more or
less, out of the E.A. Mudd Survey 8, A-1333, Frio County, Texas, being the same
land described in Lease 1.
Lease 5: Paid Up Oil and Gas Lease dated November 6, 2009, from Claudia Davis,
as Lessor, to Sien Energy Company, as Lessee, recorded in Volume 68, page 255,
Official Public Records, Frio County, Texas, covering 640 acres of land, more or
less, out of the E.A. Mudd Survey 8, A-1333, Frio County, Texas, being the same
land described in Lease 1.
THE LEASES DESCRIBED ABOVE COVER THE FOLLOWING WELLS:
Wells WI NRI
----- -- ---
Ricochet - Stewart No. 1 Well 89.100000% 66.825000%
(API #42-163-33411 / RRC ID #15635)
Ricochet - Stewart No. 2 Well 89.100000% 66.825000%
(API #42-163-33455 / RRC ID #15635)
Ricochet - Stewart-Michael Unit No. 1 Well 89.100000% 66.907685%
(API #42-163-33535 / RRC ID #16563)
Ricochet - Stewart-Michael No. 2H Unit Well 89.100000% 66.825000%
(API #42-163-33550 / RRC ID #16379)
Ricochet - Stewart No. 4RE Well 95.466809% 71.600107%
(API #42-163-33585 / RRC ID #17349)
BREAZEALE PROSPECT (NEAL TRUST UNIT)
Lease 1: Paid Up Oil and Gas Lease dated July 25, 2011, from Iven A. Neal and
Ruby Neal, as Trustees of the Iven A. Neal and Ruby Neal Living Trust, as
26
Lessor, to Ricochet Energy, Inc., as Lessee, recorded by Memorandum of Paid Up
Oil and Gas Lease in Volume 95, page 113, Official Public Records, Frio County,
Texas, insofar as and only insofar as said lease covers 148.37 acres of land,
more or less, out of the B.S.&F. Survey No. 3, A-112, Frio County, Texas, being
the lands pooled in the Ricochet Energy, Inc. - Neal Trust No. 1H Unit as
described in a Declaration of Unit dated October 10, 2012, recorded in Volume
122, page 855, Official Records, Frio County, Texas.
Lease 2: Paid Up Oil and Gas Lease dated July 25, 2011, from James P. Neal and
Coleen F. Neal, as Trustees of the James P. Neal and Coleen F. Neal Living
Trust, as Lessor, to Ricochet Energy, Inc., as Lessee, recorded by Memorandum of
Paid Up Oil and Gas Lease in Volume 95, page 110, Official Public Records, Frio
County, Texas, insofar as and only insofar as said lease covers 148.37 acres of
land, more or less, out of the B.S.&F. Survey No. 3, A-112, Frio County, Texas,
being the lands pooled in the Ricochet Energy, Inc. - Neal Trust No. 1H Unit as
described in a Declaration of Unit dated October 10, 2012, recorded in Volume
122, page 855, Official Records, Frio County, Texas, and being the same land
described in Lease 1.
Lease 3: Oil and Gas Lease dated July 18, 2011, from Providence Minerals, LLC,
as Lessor, to Ricochet Energy, Inc., as Lessee, recorded by Memorandum of Oil
and Gas Lease in Volume 95, page 116, Official Public Records, Frio County,
Texas, insofar as and only insofar as said lease covers 127.9 acres of land,
more or less, out of the B.S.&F. Survey No. 3, A-112, Frio County, Texas, being
the lands pooled in the Ricochet Energy, Inc. - Neal Trust No. 1H Unit as
described in a Declaration of Unit dated October 10, 2012, recorded in Volume
122, page 855, Official Records, Frio County, Texas, and being part of the same
land described in Lease 1.
Lease 4: Oil and Gas Lease dated August 16, 2011, from Texas Osage Royalty Pool,
Inc., as Lessor, to Ricochet Energy, Inc., as Lessee, recorded by Memorandum of
Oil and Gas Lease in Volume 95, page 819, Official Public Records, Frio County,
Texas, insofar as and only insofar as said lease covers 127.9 acres of land,
more or less, out of the B.S.&F. Survey No. 3, A-112, Frio County, Texas, being
the lands pooled in the Ricochet Energy, Inc. - Neal Trust No. 1H Unit as
described in a Declaration of Unit dated October 10, 2012, recorded in Volume
122, page 855, Official Records, Frio County, Texas, and being part of the same
land described in Lease 1.
Lease 5: Paid Up Oil and Gas Lease dated September 30, 2011, from Vicki Lee
Gates and Sherri Lynn Tope, as Lessor, to Ricochet Energy, Inc., as Lessee,
recorded by Memorandum of Paid Up Oil and Gas Lease in Volume 99, page 37,
Official Public Records, Frio County, Texas, insofar as and only insofar as said
lease covers 65.59 acres of land, more or less, out of the B.S.&F. Survey No. 3,
A-112, Frio County, Texas, being the lands pooled in the Ricochet Energy, Inc. -
Neal Trust No. 1H Unit as described in a Declaration of Unit dated October 10,
2012, recorded in Volume 122, page 855, Official Records, Frio County, Texas.
Lease 6: Paid Up Oil and Gas Lease dated October 14, 2011, from The Collis and
Lucille Woodward Family Trust dated August 29, 1990, as Lessor, to Ricochet
Energy, Inc., as Lessee, recorded by Memorandum of Paid Up Oil and Gas Lease in
Volume 100, page 20, Official Public Records, Frio County, Texas, insofar as and
only insofar as said lease covers 88.02 acres of land, more or less, out of the
Frio County School Land League No. 1, A-310, Frio County, Texas, being the lands
pooled in the Ricochet Energy, Inc. - Neal Trust No. 1H Unit as described in a
27
Declaration of Unit dated October 10, 2012, recorded in Volume 122, page 855,
Official Records, Frio County, Texas.
Lease 7: Paid Up Oil and Gas Lease dated October 14, 2011, from The Clyde E. and
Valerie V. Woodward Family Trust dated November 12, 1996, as Lessor, to Ricochet
Energy, Inc., as Lessee, recorded by Memorandum of Paid Up Oil and Gas Lease in
Volume 100, page 18, Official Public Records, Frio County, Texas, insofar as and
only insofar as said lease covers 88.02 acres of land, more or less, out of the
Frio County School Land League No. 1, A-310, Frio County, Texas, being the lands
pooled in the Ricochet Energy, Inc. - Neal Trust No. 1H Unit as described in a
Declaration of Unit dated October 10, 2012, recorded in Volume 122, page 855,
Official Records, Frio County, Texas, and being the same land described in Lease
6.
THE LEASES DESCRIBED ABOVE COVER THE FOLLOWING WELL:
Wells WI NRI
----- -- ---
Ricochet - Neal Trust No. 1H Unit Well 100.000% 75.000%
(API #42-163-33643 / RRC ID #17593)
FRIO AUSTIN CHALK PROSPECT
(CULPEPPER AREA)
JANE T. CULPEPPER ET AL., LEASES
Lease 1: Oil and Gas Lease dated January 18, 2010, from Jane Culpepper, as
Lessor, to Ricochet Energy, Inc., as Lessee, recorded in Volume 70, page 672,
Official Public Records, Frio County, Texas, as amended by Amendment of Oil and
Gas Lease recorded in Volume 73, page 441, Official Public Records, Frio County,
Texas, covering 718 acres of land, more or less, out of the J. E. Roberts Survey
No. 4, A-903, the L.I.M. & C. Co. Survey No. 112, A-754 and the B.S. & F Survey
No. 3, A-109, Frio County, Texas.
Lease 2: Oil and Gas Lease dated January 18, 2010, from John Culpepper, as
Lessor, to Ricochet Energy, Inc., as Lessee, recorded in Volume 70, page 675,
Official Public Records, Frio County, Texas, as amended by Amendment of Oil and
Gas Lease recorded in Volume 73, page 444, Official Public Records, Frio County,
Texas, covering 593 acres of land, more or less, being a portion of the same
land described above in Lease 1.
Lease 3: Oil and Gas Lease dated January 18, 2010, from Jim Culpepper, as
Lessor, to Ricochet Energy, Inc., as Lessee, recorded in Volume 70, page 678,
Official Public Records, Frio County, Texas, as amended by Amendment of Oil and
Gas Lease recorded in Volume 73, page 446, Official Public Records, Frio County,
Texas, covering 593 acres of land, more or less, being a portion of the same
land described above in Lease 1.
Lease 4: Oil and Gas Lease dated January 18, 2010, from Bill Culpepper, as
Lessor, to Ricochet Energy, Inc., as Lessee, recorded in Volume 70, page 681,
Official Public Records, Frio County, Texas, as amended by Amendment of Oil and
Gas Lease recorded in Volume 73, page 448, Official Public Records, Frio County,
28
Texas, covering 593 acres of land, more or less, being a portion of the same
land described above in Lease 1.
Lease 5: Oil and Gas Lease dated January 18, 2010, from Nancy C. Flores, as
Lessor, to Ricochet Energy, Inc., as Lessee, recorded in Volume 70, page 684,
Official Public Records, Frio County, Texas, as amended by Amendment of Oil and
Gas Lease recorded in Volume 73, page 450, Official Public Records, Frio County,
Texas, covering 593 acres of land, more or less, being a portion of the same
land described above in Lease 1.
THE LEASES DESCRIBED ABOVE COVER THE FOLLOWING WELLS:
Wells WI NRI
----- -- ---
Ricochet - Culpepper No. 1H Unit Well 100.000% 80.000%
(API #42-163-33480 / RRC ID #16214)
Ricochet - Culpepper No. 2H Unit Well 100.000% 80.000%
(API #42-163-33494 / RRC ID #16115)
JAMES W. CULPEPPER ET AL., LEASES - (3C LEASES)
Lease 1: Oil and Gas Lease dated February 3, 2010, from James Culpepper and
wife, Kat Saunders, as Lessor, to Ricochet Energy, Inc., as Lessee, recorded in
Volume 70, page 765, Official Public Records, Frio County, Texas, covering
657.28 acres of land, more or less, out of the J. E. Roberts Survey No. 2, A-904
and the James Cummings Survey No. 105, A-269, Frio County, Texas.
Lease 2: Oil and Gas Lease dated February 3, 2010, from John Culpepper and wife,
Andrea M. Culpepper, as Lessor, to Ricochet Energy, Inc., as Lessee, recorded in
Volume 70, page 770, Official Public Records, Frio County, Texas, covering
657.28 acres of land, more or less, being the same land described above in Lease
1.
Lease 3: Oil and Gas Lease dated February 3, 2010, from Joe Culpepper, as
Lessor, to Ricochet Energy, Inc., as Lessee, recorded in Volume 75, page 590,
Official Public Records, Frio County, Texas, covering 104.14 acres of land, more
or less, out of the J. E. Roberts Survey No. 2, A-904 and the James Cummings
Survey No. 105, A-269, Frio County, Texas, being a portion of the same land
described above in Lease 1.
Lease 4: Oil and Gas Lease dated October 31, 2010, from Tommy J. Muston and
wife, Deborah A. Muston, as Lessor, to Ricochet Energy, Inc., as Lessee,
recorded by Memorandum of Oil and Gas Lease in Volume 83, page 692, Official
Public Records, Frio County, Texas, covering 224.14 acres of land, more or less,
out of the J. E. Roberts Survey No. 2, A-904 and the J. E. Roberts Survey No. 6,
A-905, Frio County, Texas, being a portion of the same land described above in
Lease 1.
THE LEASES DESCRIBED ABOVE COVER THE FOLLOWING WELLS:
29
Wells WI NRI
----- -- ---
Ricochet - 3C No. 1H Unit Well 100.000% 79.715823%
(API #42-163-33508 / RRC ID #16225)
Ricochet - 3C No. 2H Unit Well 100.000% 79.715823%
(API #42-163-33563 / RRC ID #16225)
KOTZEBUE LEASE
Oil and Gas Lease dated August 26, 2010, from David W. Kotzebue and wife,
Deborah R. Kotzebue, as Lessor, to Ricochet Energy, Inc., as Lessee, recorded by
Memorandum of Oil and Gas Lease in Volume 79, page 752, Official Public Records,
Frio County, Texas, originally covering 527.33 acres of land, more or less, out
of the J. E. Roberts Survey No. 4, A-903, Frio County, Texas, insofar as and
only insofar as said lease covers 400 acres of land, more or less, being the
retained acreage allocated to the Kotzebue No. 1 Well, as described in that
certain Partial Release of Oil and Gas Lease and Designation of Well Tract dated
effective January 1, 2014, executed by Ricochet Energy, Inc. et al., recorded in
Volume 150, page 793, Official Public Records, Frio County, Texas.
THE LEASE DESCRIBED ABOVE COVERS THE FOLLOWING WELL:
Wells WI NRI
----- -- ---
Ricochet - Kotzebue No. 1 Well 100.000% 75.000%
(API #42-163-33589 / RRC ID #17063)
EXPRESS RE-ENTRY PROSPECTS
CANTU-HENDERSON UNIT
Ricochet Energy, Inc. - Cantu-Henderson No. 1H Unit, being the pooled unit of
495.17 acres out of the J. Poitevent Survey No. 5, A-559 and the R.M. Harkness
Survey No. 6, A-890, Frio County, Texas, as more particularly described in that
certain Declaration of Unit dated September 24, 2010, executed by Ricochet
Energy, Inc., recorded in Volume 81, page 174, Official Public Records, Frio
County, Texas, pooling the acreage covered by the following described leases.
Lease 1: Oil, Gas and Mineral Lease dated September 17, 2008, from Herlinda G.
Cantu, as Lessor, to Express Oil & Gas, as Lessee, recorded in Volume 57, page
798, Official Public Records, Frio County, Texas, (and also recorded by
Memorandum of Oil and Gas Lease in Volume 57, page 796, Official Public Records,
Frio County, Texas), as amended, covering 177.45 acres, more or less, out of the
J. Poitevent Survey No. 5, A-559, Frio County, Texas, all of the 177.45 acres
covered by said lease, as more particularly described therein, being included in
this unit.
Lease 2: Oil, Gas and Mineral Lease dated October 28, 2008, from Winfred
Henderson and wife, Alice A. Henderson, as Lessor, to Express Oil & Gas, Co., as
30
Lessee, recorded in Volume 60, page 193, Official Public Records, Frio County,
Texas, covering 317.72 acres, more or less, out of the R. M. Harkness Survey No.
6, A-890 in Frio County, Texas and A-1014 in LaSalle County, Texas, all of the
317.72 acres covered by said lease, as more particularly described therein,
being included in this unit.
Lease 3: Oil, Gas and Mineral Lease dated October 28, 2008, from Jimmy
Henderson, as Lessor, to Express Oil & Gas, Co., as Lessee, recorded in Volume
60, page 200, Official Public Records, Frio County, Texas, covering 317.72
acres, more or less, out of the R. M. Harkness Survey No. 6, A-890 in Frio
County, Texas and A-1014 in LaSalle County, Texas, all of the 317.72 acres
covered by said lease, comprising the same lands described above in Lease 2,
being included in this unit.
Lease 4: Oil, Gas and Mineral Lease dated October 28, 2008, from Selfa A. Garza,
joined pro forma by her husband, Tino Garza, as Lessor, to Express Oil & Gas,
Co., as Lessee, recorded in Volume 60, page 180, Official Public Records, Frio
County, Texas, as ratified and amended, covering 317.72 acres, more or less, out
of the R. M. Harkness Survey No. 6, A-890 in Frio County, Texas and A-1014 in
LaSalle County, Texas, all of the 317.72 acres covered by said lease, comprising
the same lands described above in Lease 2, being included in this unit.
Lease 5: Oil, Gas and Mineral Lease dated November 17, 2008, from Linda Green,
joined pro forma by her husband, Ken Green, as Lessor, to Express Oil & Gas,
Co., as Lessee, recorded in Volume 60, page 173, Official Public Records, Frio
County, Texas, covering 317.72 acres, more or less, out of the R. M. Harkness
Survey No. 6, A-890 in Frio County, Texas and A-1014 in LaSalle County, Texas,
all of the 317.72 acres covered by said lease, comprising the same lands
described above in Lease 2, being included in this unit.
Lease 6: Oil, Gas and Mineral Lease dated November 17, 2008, from Larry Myrick,
as Lessor, to Express Oil & Gas, Co., as Lessee, recorded in Volume 60, page
187, Official Public Records, Frio County, Texas, covering 317.72 acres, more or
less, out of the R. M. Harkness Survey No. 6, A-890 in Frio County, Texas and
A-1014 in LaSalle County, Texas, all of the 317.72 acres covered by said lease,
comprising the same lands described above in Lease 2, being included in this
unit.
Lease 7: Oil, Gas and Mineral Lease dated July 10, 2009, from Donna Myrick, as
Lessor, to Express Oil & Gas, as Lessee, recorded by Memorandum of Oil, Gas and
Mineral Lease in Volume 63, page 76, Official Public Records, Frio County,
Texas, covering 317.72 acres, more or less, out of the R. M. Harkness Survey No.
6, A-890 in Frio County, Texas and A-1014 in LaSalle County, Texas, all of the
317.72 acres covered by said lease, comprising the same lands described above in
Lease 2, being included in this unit.
Lease 8: Oil, Gas and Mineral Lease dated November 17, 2008, from Janice
Hemphill, as Lessor, to Express Oil & Gas, Co., as Lessee, recorded in Volume
63, page 70, Official Public Records, Frio County, Texas, covering 317.72 acres,
more or less, out of the R. M. Harkness Survey No. 6, A-890 in Frio County,
Texas and A-1014 in LaSalle County, Texas, all of the 317.72 acres covered by
said lease, comprising the same lands described above in Lease 2, being included
in this unit.
31
THE LEASES DESCRIBED ABOVE COVER THE FOLLOWING WELL:
Wells WI NRI
----- -- ---
Ricochet - Cantu-Henderson No. 1H Unit Well 100.000% 77.042448%
(API #42-163-33426 / RRC ID #12392)
HARRIS LEASE
Oil, Gas and Mineral Lease dated January 13, 1976, from William Donald Harris
and wife, Mary Ann Harris, as Lessor, to Charles R. Stubblefield, as Lessee,
recorded in Volume 342, page 485, Deed Records, Frio County, Texas, covering
735.00 acres, more or less, out of the William Webber Survey, A-668 and the G.B.
Pilant Survey, A-540, Frio County, Texas, insofar as and only insofar as said
lease covers 281.4 acres of land, more or less, around the Ricochet Energy, Inc.
- Harris No. 2 and Harris No. 3 Wells (but expressly excluding the well and
wellbore for the Express Oil & Gas - Harris #4 Well [API # 42-163-32691]) in
Frio County, Texas.
THE LEASE DESCRIBED ABOVE COVERS THE FOLLOWING WELLS:
Wells WI NRI
----- -- ---
Ricochet - Harris No. 2 Well 90.000% 67.500%
(API #42-163-32604 / RRC ID #15063)
Ricochet - Harris No. 3 Well 90.000% 67.500%
(API #42-163-32647 / RRC ID #15063)
W.S. SHAFFER AND W.S. SHAFFER -B- LEASES
Oil, Gas and Mineral Lease dated September 9, 1958, from W.S. Shaffer and wife,
E.S. Shaffer, as Lessors to J.R. McLean, as Lessee, recorded in Volume 574, page
186, Deed Records, Taylor County, Texas, covering the following tracts:
Tract 1
Being 314.80 acres of land situated in Taylor County, Texas, and being the North
Half of Survey No. 12, Certificate No. 17/368, Block No. 3, S. P. RR Company
Lands, and being the same land described by metes and bounds in a Patent from
the State of Texas to J. L. Pierce, dated April 12, 1951, recorded in Volume
G-2, Page 143, of the Patent Records of Taylor County, Texas.
Tract 2
Being 167.5 acres, more or less, out of Survey No. 6, Certificate No. 4508, G.
C. & S. RR Company Lands in Taylor County, Texas being described as follows,
to-wit:
BEGINNING at the Northwest corner S. F. 15185, W. S. Shaffer Survey No. 1;
THENCE South 15(degree)East with the West line S.F. 15185, 2,293 varas, to
fence;
32
THENCE in a westerly direction with said fence to an inner corner of said G. C.
& S. RR Company Survey No. 6;
THENCE North 15(degree)West with a west line of said G. C. & S. RR Company
Survey No. 6, 2,152.2 varas to the South line of a tract owned by Sayles;
THENCE North 75o 25' East 425.6 varas with a fence to the place of beginning.
THE LEASE DESCRIBED ABOVE COVERS THE FOLLOWING WELLS:
Wells WI NRI
----- -- ---
Baron - W.S. Shaffer -B- #3 75.000% 56.250%
(API #42-441-81191 / RRC ID #11127)
Baron - W.S. Shaffer -B- #4 75.000% 56.250%
(API #42-441-81192 / RRC ID #11127)
W.S. SHAFFER -C- LEASE
Oil, Gas and Mineral Lease dated April 30, 1970, from M.C. Shaffer, et al, as
Lessors to J.D. Tompkins, as Lessee, recorded in Volume 880, page 501, Deed
Records, Taylor County, Texas, covering all of the W.S. Shaffer Survey No. 1,
S.F. 15185, Patented to W.S. Shaffer by the State of Texas on June 11, 1951, by
Patent No. 475, Volume 17-B, and containing 136.55 acres, more or less.
AS THE LEASE DESCRIBED ABOVE COVERS THE FOLLOWING WELL:
Wells WI NRI
----- -- ---
Baron - W.S. Shaffer -C- #1 75.000% 56.250%
(API #42-441-30235 / RRC ID #11495)
33