CONVEYANCE OF OVERRIDING ROYALTY INTEREST
For
a
good and valuable consideration, the receipt of which is hereby acknowledged,
Sonterra Resources, Inc., a Delaware corporation, with principal offices located
at 000 Xxxxx Xxx Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000
(“Grantor”),
does
hereby grant, bargain, sell, transfer, assign and convey to Longview Marquis
Master Fund, L.P. (“Grantee”),
a
British Virgin Island limited partnership, whose address is c/o Summerline
Asset
Management LLC, 00 Xxxx Xxx Xxx Xxxx, 0xx
Xxxxx,
Xxxxx Xxxxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxxxxxx, an overriding royalty
interest (the “Overriding
Royalty”)
equal
to three percent (3%) of the Applicable Percentage (defined below) of the oil,
gas and other minerals in, under and that may be produced from the lands (a)
described in Exhibit “A” attached hereto and made a part hereof or (b) covered
by the oil and gas leases described in such Exhibit “A” (collectively the
“Subject
Lands”),
commencing at the Effective Time (defined below) and at all times thereafter.
As
used herein, the terms (i) “Subject
Leases”
refers
to the oil and gas leases described in Exhibit “A”, (ii) “Working
Interest”
and
“WI”
mean
the cost bearing percentage interest that the owner thereof must bear relative
to 100% of all costs to explore, develop, and produce oil and/or gas from the
applicable portion of the Subject Lands, and (iii) “Applicable
Percentage”
shall
mean, with respect to each portion of Subject Lands identified on Exhibit “A”,
the percentage set forth on such Exhibit “A” as the “Working Interest” or “WI”
for such portion of the Subject Lands.
It
is
understood and agreed that though the Overriding Royalty is conveyed by Grantor
to Grantee out of Grantor's interest (such interest, subject to the Overriding
Royalty, being herein called the “Burdened
Interest”)
in the
Subject Leases insofar as they cover Subject Lands, such Overriding Royalty
shall be equal to three percent (3%) of the Applicable Percentage of the oil,
gas and other minerals in, under and that may be produced from the Subject
Lands
(the “ORRI
Percentage”),
commencing at the Effective Time and at all times thereafter, and the ORRI
Percentage shall not be reduced by Grantor to less than 3% of the Applicable
Percentage for any reason, including, without limitation, the same shall not
be
reduced if the Working Interest of Grantor in a Subject Lease is less than
the
Working Interest stated on Exhibit “A” with respect to such Subject Lease or
that portion of the Subject Lands covered by such Subject Lease, or if the
interest in oil, gas and other minerals underlying any portion of the Subject
Lands which is covered by a particular Subject Lease (or group of Subject
Leases) is less than the entire interest in the oil, gas and other minerals
underlying such portion of the Subject Lands, or if the share of production
from
any portion of Subject Lands to which Grantor is entitled by virtue of its
ownership interest in the Subject Leases is less than the Applicable Percentage
set forth on Exhibit “A” for such portion of the Subject Lands.
TO
HAVE
AND TO HOLD the Overriding Royalty unto Grantee, its successors and assigns
forever. The Overriding Royalty herein conveyed, and the Burdened Interest
of
Grantor, shall be subject to the following provisions:
1. Grantor
shall have the obligation to market, or cause to be marketed, the oil, gas
and
other minerals produced from the Subject Lands and attributable to the
Overriding Royalty (the “ORRI
Hydrocarbons”)
on
behalf of and for the account of Grantee in arm's-length transactions with
reputable purchasers in accordance with prudent business judgment, with each
such sale to be: (i) upon terms and conditions which are the best terms and
conditions reasonably available taking into account all relevant circumstances,
including without limitation, price, quality of production, access to markets
or
lack thereof, minimum purchase guarantees, identify of purchaser and length
of
commitment, (ii) upon terms and conditions at least as favorable as (a) Grantor
obtains for the share of oil, gas and/or other minerals attributable to the
Burdened Interest in the Subject Lands to which such sale relates, (b) Grantor
obtains for its interest in other oil, gas and/or other minerals which are
of
comparable type and quality and which are produced in the same area as the
Subject Lands to which such sale relates, and (c) those obtained by any
Affiliates (below defined) of Grantor for oil, gas and/or other minerals
produced from the Subject Lands to which such sale relates or from lands in
the
same area, and (iii) made to a party who is not an Affiliate of Grantor. As
used
herein, “Affiliate”
shall
mean, with respect to any person or entity, another person or entity that,
directly or indirectly, (a) has an equity interest in that person or entity,
(b)
has a common ownership with that person or entity, (c) controls that person
or
entity, (d) is controlled by that person or entity or (e) shares common control
with that person or entity. “Control”
or
“controls”
for
purposes hereof means that a person or entity has the power, direct or indirect,
to conduct or govern the policies of another person or entity. Grantor shall
duly perform all obligations performable by it under production sales contracts
under which ORRI Hydrocarbons are sold and shall take all appropriate measures
to enforce the performance under each such production sales contract of the
obligations of the other parties thereto.
2. Grantor
does hereby represent and warrant to Grantee (i) that Grantor owns the interests
specified in Exhibit “A” hereto in and to the Subject Leases (and Grantor has
good and marketable title to such interests, free of liens and encumbrances,
except liens and encumbrances in favor of Summerline Asset Management, LLC
on
its own behalf and in its capacity as collateral agent), (ii) that Grantor
has
good right and authority to sell and convey the Overriding Royalty, and (iii)
that this Conveyance of Overriding Royalty Interest (“this
Conveyance”)
vests
in Grantee good and marketable title to the Overriding Royalty free of any
other
liens and encumbrances not referenced in this sentence. Grantor hereby covenants
and agrees to use its reasonable best efforts to rectify any defects in its
title to the interests specified in Exhibit “A” hereto, and otherwise to cause
the foregoing representations and warranties to be true and correct in all
respects (without giving effect to the exception set forth in the clause at
the
end of the immediately preceding sentence), to the extent reasonably possible.
Grantor hereby binds itself to warrant and forever defend, all and singular,
title to the Overriding Royalty unto Grantee, its successors and assigns,
against the claims and demands of all persons claiming or to claim the same
or
any part thereof by, through or under Grantor. This Conveyance is made with
full
substitution and subrogation of Grantee in and to all covenants and warranties
by others heretofore given or made.
3. Grantor
shall be obligated to explore, develop, operate and maintain the Burdened
Interest as would a prudent operator. As to any portions of the Burdened
Interest as to which Grantor is not the operator, Grantor shall take all such
action and exercise all such rights and remedies as are reasonably available
to
it to cause the operator to so explore, develop, maintain and operate such
portions of the Burdened Interest. Grantor shall promptly (and, unless the
same
are being contested in good faith and by appropriate proceedings, before the
same are delinquent) pay all costs and expenses (including all taxes and all
costs, expenses and liabilities for labor, materials and equipment incurred
in
connection with the Burdened Interests and all obligations to the holders of
royalty interests and other interests affecting the Subject Leases) incurred
in
developing, operating and maintaining the Burdened Interests.
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4. Grantor
shall revise and supplement Exhibit “A” promptly upon any increase in the
Grantor’s Working Interest in the Subject Lands, by purchase or otherwise, that
occurs at any time prior to the date on which Grantor has repaid in full all
of
the outstanding Notes (as defined in the Securities Purchase Agreement dated
November 13, 2008, between Grantor and Grantor, pursuant to which this
Conveyance was originally issued), to reflect such increase and to reflect
the
accordingly increased “Applicable Percentage” pertaining to the Subject Lands.
For purposes of clarification, upon any increase in Grantor’s Working Interests
in the Subject Lands that occurs at any time prior to the date on which Grantor
has repaid in full all of the outstanding Notes, whether or not Exhibit “A” has
been updated in accordance with this Section 4, such increase in Working
Interests shall become subject to this Overriding Royalty and with respect
to
that portion of the Subject Lands in which Grantor increases its Working
Interest, such increased Working Interest shall be the revised increased
“Applicable
Percentage”
for
such portion of the Subject Lands; provided, however, that the ORRI Percentage
shall (i) always equal 3% of the Applicable Percentage, as the same may be
increased from time to time pursuant to this Section 4, and (ii) with respect
to
each portion of Subject Lands identified on Exhibit “A”, the amount of the
Applicable Percentage, shall never be less than the percentage set forth on
such
Exhibit “A” as the “Working Interest” or “WI” for such portion of the Subject
Lands, as the same may be increased from time to time pursuant to this Section
4.
5. Grantee
shall be entitled to receive payment for all ORRI Hydrocarbons directly from
the
purchasers thereof or from other parties obligated to make payment therefor.
Grantor shall cause to be prepared and executed such division orders, transfer
orders, or instructions in lieu thereof, as Grantee (or any third party) may
require from time to time to cause payments to be made directly to Grantee.
In
the event that, for any reason, Grantee cannot (or does not) receive such
payments directly, the same shall be collected by Grantor and shall constitute
trust funds in Grantor's hands and shall be immediately paid over to Grantor.
Grantee may also, at any time, and from time to time, at Grantee's option,
take
all or any part of the ORRI Hydrocarbons in kind and all production sales
contracts entered into by Grantor covering ORRI Hydrocarbons shall be subject
to
such right; during such time or times as Grantee is so taking ORRI Hydrocarbons
in kind Grantor's obligation to market the same, as provided above, shall be
suspended as to the ORRI Hydrocarbons so taken, but shall again become effective
where Grantee elects to cease such taking in kind.
3
6. Grantor
shall keep full, true, and correct records of the oil, gas, and other
hydrocarbons produced from or attributable to the Subject Lands each calendar
month, and the portion attributable to the Overriding Royalty. Such records
may
be inspected by Grantee or its authorized representatives and copies thereof
may
be made by Grantee at all reasonable times upon prior written notice from
Grantee to Grantor requesting such inspection and copying. Grantee shall also
have, upon request, access to review all reports, data and information relating
to the Subject Lands or to exploration, development, production and other
operations conducted on the Subject Lands. On or before the earlier of (a)
the
fifth business day after Grantor’s first public disclosure, by issuance of a
press release or filing of a report with the Securities and Exchange Commission,
of Grantor’s production from the Subject Lands or other results of operations
for the most recently completed fiscal quarter or fiscal year, or (b) the last
day on which the Grantor can timely (without giving effect to any extensions
of
time permitted by Rule 12b-25 under the Securities Exchange Act of 1934) file
a
quarterly report on Form 10-Q or annual report on Form 10-K, as applicable,
with
respect to such fiscal quarter of fiscal year, Grantor shall (a) deliver to
Grantee a statement (a “Production
Statement”)
setting forth (i) the production from the Subject Lands for the most recently
completed fiscal quarter, (ii) the portion of such production attributable
to
the Overriding Royalty, (iii) to the extent Grantee does not receive direct
payment of proceeds from sale of ORRI Hydrocarbons (or take ORRI Hydrocarbons
in
kind) pursuant to Section 5 above,the gross proceeds (“ORRI
Collected Proceeds”)
attributable to the sale of ORRI Hydrocarbons (and the taxes and other costs
permitted to be deducted therefrom under Section 7 below) during such fiscal
quarter and (iv) such other data as Grantee may reasonably request in such
form
as Grantee may reasonably request, and (b) make a payment to Grantee of such
ORRI Collected Proceeds (less such costs permitted to be deducted therefrom
under Section 7 below) in immediately available funds by wire transfer (or
such
other form specified by Grantee) to such bank or location as Grantee may direct
from time to time in writing. No Production Statement delivered to Grantee
shall
contain any information regarding the production from the Subject Lands or
reserves that has not been publicly disclosed by Grantor or any other material
non-public information. If any Production Statement contains, or Grantor
otherwise provides Grantee, any information regarding aggregate production
from
the Subject Lands or reserves that has not been publicly disclosed (or any
other
material non-public information), Grantee shall have the right to make public
disclosure of such information and Grantee shall not have any liability to
Grantor, any of its subsidiaries or any of its or their respective officers,
directors, employees, shareholders or agents for any such disclosure. Grantor
shall not publicly disclose its results of operations for any fiscal quarter
or
fiscal year unless it contemporaneously publicly discloses, or prior thereto
has
publicly disclosed, the production from the Subject Lands for the most recently
completed fiscal quarter.
7. The
Overriding Royalty shall be free of all costs, expenses, and liabilities, of
whatever kind or character, except the Overriding Royalty shall bear its
proportionate share of the costs charged to Grantor by a third party (not an
Affiliate of Grantor) for compression, dehydration and transportation that
are
incurred between the first point of receipt of production by such third party
and the redelivery of such compressed and dehydrated production to Grantor.
Specifically, but not by way of limitation, the Overriding Royalty shall never
bear, either directly or indirectly, any costs, expenses or liabilities for
building, constructing, acquiring, drilling, developing, producing, operating,
gathering, separating, trucking, or transporting (except as set forth in the
first sentence of this Section 7) or any post production expenses, related
or
pertaining to the Subject Lands, Subject Leases, or xxxxx, pipelines, or other
facilities or improvements situated on the Subject Lands or lands pooled
therewith, or production of oil and/or gas from the Subject Lands or lands
pooled therewith; provided, however, the Overriding Royalty shall bear its
proportionate share of (i) the third party costs identified in the first
sentence of this Section 7 and (ii) production, severance and similar
taxes.
8. Xxxxxxx
agrees to execute and deliver, and, to the extent it is within Grantor's power
to do so, to cause any third parties to execute and deliver, to Grantee all
such
other and additional instruments and to do all such further acts and things
as
may be necessary more fully to vest in and assure to Grantee all of the rights,
titles, interests, remedies, powers and privileges herein granted or intended
so
to be.
4
9. Exhibit
“A” sets forth those certain portions, if any, of the Subject Lands that have
been pooled or unitized for the production of oil, gas and/or minerals prior
to
the date hereof. With respect to each such existing pool or unit set forth
on
such Exhibit “A”, and with respect to each pool or unit in which the Overriding
Royalty is included, as below provided, after the date hereof, the Overriding
Royalty in each portion of Subject Lands included in such pool or unit shall
apply to the portion of production from such pool or unit which is attributable
to such portion of Subject Lands under and by virtue of the applicable pooling
and unitization agreements, designations and/or orders. From and after the
date
hereof, Grantor shall have the right and power to unitize or pool in good faith
on customary terms any portion or portions of the Overriding Royalty with other
lands in which the mineral interest thereof is owned by a person or entity
other
than Grantor or an Affiliate of Grantor and on which is located, or will be
located, a well producing, or capable of producing, oil and/or gas in
commercially paying quantities (collectively “Third
Party Lands”);
provided, however, Grantor shall not have the right and power to unitize or
pool
any portion or portions of the Overriding Royalty with any non Third Party
Lands
without first obtaining the prior written consent of Grantee. If pursuant to
any
law, rule, regulation or order of any governmental body or official, any portion
of the Subject Lands is pooled or unitized in any manner, or if Grantee has
joined in or agreed to any pooling or unitization, the Overriding Royalty
insofar as it affects such portion of Subject Lands shall also be pooled and
unitized and, in each event, the Overriding Royalty shall apply to the
production which is attributable to such portion of Subject Lands under and
by
virtue of such pooling and unitization arrangements.
10. Nothing
herein contained shall in any way limit or restrict the right of Grantee to
sell, convey, assign or mortgage (or grant a deed of trust on) the Overriding
Royalty (including its rights, titles, interests, estates, remedies, powers
and
privileges appurtenant or incident to the Overriding Royalty under this
Conveyance) in whole or in part. No change of ownership of the Overriding
Royalty shall be binding upon Grantor until Grantor is furnished with copies
of
the original documents evidencing such change. Upon receipt by Grantor of copies
of the original documents evidencing a sale, conveyance, assignment or mortgage
(or grant of a deed of trust on) the Overriding Royalty, Grantor shall deal
with
the purchaser or assignee in place of Grantee and shall deal with the mortgagee
(or the beneficiary of the deed of trust) in addition to the Grantee, and
references herein to the Grantee shall thereafter also be deemed to be
references to such purchaser, assignee or mortgagee (or the beneficiary of
the
deed of trust).
5
11. If
the
Grantor proposes or intends to make any sale, transfer or other disposition
of
all or any portion of its Burdened Interest, including without limitation a
proposed or intended sale, transfer or disposition of its Burdened Interest
by
merger, reorganization, consolidation, or by sale of all or substantially all
of
its assets (other than a sale, transfer or other disposition to a directly
or
indirectly wholly-owned subsidiary of Grantor), and such sale, transfer or
other
disposition will result in Grantor owning less than a fifty percent (50%)
Working Interest in such Burdened Interest and/or resigning as operator of
such
Burdened Interest, Grantor shall so inform Grantee by notice in writing (the
“Transfer
Notice”)
describing the interest (or portion thereof) that is the subject of such
proposed or intended sale, transfer or disposition (the “Offered
Interest”),
and
the other pertinent and reasonable details of such proposed or intended sale,
transfer or disposition. Grantee shall thereupon have fifteen (15) days after
receipt of the Transfer Notice to notify Grantor in writing that Grantee desires
to participate in such sale, transfer or disposition and contribute the
Overriding Royalty, or some portion thereof, as a part of the properties to
be
covered by such sale, transfer or disposition. Failure of Grantee to notify
Grantor in writing that Grantee desires to participate in such sale, transfer
or
disposition within such fifteen (15) day period shall be deemed an election
by
Grantee not to participate. If Grantee does timely submit its notice to Grantor
(i) the Burdened Interest, or portion thereof that is to be covered by such
sale, transfer or disposition, shall not be sold or disposed of separate and
apart of the Overriding Royalty (or portion thereof as designated by Grantee
in
its notice) and (ii) Grantor and Grantee shall mutually agree upon the price
or
value that Grantee shall receive upon conclusion of such sale, transfer or
disposition for the Overriding Royalty (or portion thereof) that is to be a
part
of the properties covered by such sale, transfer or disposition. In the event
Grantor and Xxxxxxx cannot so mutually agree, Grantor and Grantee shall retain
the services of a petroleum reservoir engineer experienced in the valuation
of
oil and gas properties employed by Xxxxx Xxxxx & Associates of Houston,
Texas (or its successors in interest) to serve as the sole arbiter of such
disagreement (the “Arbiter”).
In
the event Xxxxx Xxxxx & Associates (or its successor in interest) is
unwilling or incapable of having one of its petroleum reservoir engineers serve
as Arbiter, then Grantor and Grantee shall mutually agree on the person to
serve
as Arbiter, and in the event Grantor and Grantee cannot so mutually agree,
the
selection of the Arbiter shall be made by a federal judge sitting in the
Southern District of New York in the borough of Manhattan, New York, New York,
upon petition filed by either Grantor or Grantee requesting that such selection
be made. The decision of the Arbiter as to such price or value Grantee shall
receive shall be delivered by the Arbiter within ten (10) days of his retention,
and shall be final as to Grantor and Grantee for all purposes. The costs of
such
Arbiter shall be borne equally by Grantor and Xxxxxxx.
12. Grantor
shall have the right without the joinder of Grantee to release, surrender and/or
abandon its Burdened Interest, or any part thereof, or interest therein, even
though the effect of such release, surrender or abandonment will be to release,
surrender or abandon the Overriding Royalty; provided, however, that Grantor
shall not release, surrender or abandon any Burdened Interest unless and until
Grantor has determined in good faith that such Burdened Interest will no longer
produce in paying quantities, and provided further that, Grantor will, at least
thirty (30) days prior to the release, surrender or abandonment (unless a lesser
period of time governing such release, surrender or abandonment is provided
for
in an applicable operating agreement entered into by and between Grantor and
a
person or entity that is not an Affiliate of Grantor, in which case at least
the
number of days provided for in such lesser time period) of any Burdened
Interest, or any part thereof or interest therein, notify Grantee (in writing,
giving a description of each Burdened Interest, or part thereof or interest
therein, proposed to be released, surrendered or abandoned, and the date upon
which such release, surrender or abandonment is projected to occur) and, if
Grantee shall so request, Grantor shall assign to Grantee the interests proposed
to be released, surrendered or abandoned, together with the interest
attributable to the Burdened Interests in all equipment located thereon or
used
in connection therewith; provided further that, in the event of such an
assignment from Grantor to Grantee, Grantee shall pay to Grantor the salvage
value of any equipment so conveyed by Grantor to Grantee.
6
13. Without
prior written notice to Grantee providing Grantee with the opportunity to
acquire the affected interest of Grantor at no additional cost to Grantee other
than assumption by Grantee of the obligations of Grantor pertaining to the
affected interest, Grantor shall not elect to be a non-participating party
(whether pursuant to an operating agreement or other agreement or arrangement,
including without limitation, non-consent rights and obligations imposed by
statute and/or regulatory agency) with respect to any drilling, deepening,
plugging back, reworking, sidetracking or completion (or other) operation on
any
Burdened Interest or elect to be an abandoning party with respect to a well
located on any Burdened Interest; provided, however, if such direct acquisition
by Grantee would be prohibited by the applicable operating agreement or other
agreement or arrangement and Grantee has timely notified Grantor that Grantee
elects to acquire such affected interest, Grantor agrees to use reasonable
commercial efforts to enter into a mutually satisfactorily contractual
arrangement with Grantee that would allow Grantee to indirectly acquire such
affected interest, or have the same economic consequences of ownership of such
affected interest, and not be in violation or breach of such applicable
operating agreement or other agreement or arrangement. Xxxxxxx agrees to provide
such prior written notice to Xxxxxxx as soon as is reasonably possible in order
to afford Grantee as much time as reasonably possible to respond. Such prior
written notice shall include information advising Grantee of the time period
required by the applicable operating agreement, other agreement or arrangement
for response on this matter, and failure on the part of Grantee to notify
Grantor of its election to acquire such affected interest within such time
period shall be deemed an election by Grantee to not acquire such affected
interest. Notwithstanding anything to the contrary contained herein, Grantor
shall not elect, as to any Burdened Interest, to be a non-participating party
with respect to any operation contemplated in this Section 11 in the event
Grantor or any Affiliate of Grantor will also be a participating party in such
operation.
14. The
Overriding Royalty shall apply to all renewals, extensions and other similar
arrangements (and/or interests therein) of the Subject Leases insofar as they
cover Subject Lands. A new lease taken before the expiration of the existing
Subject Lease which it replaced or within one (1) year after expiration of
such
Subject Lease, and covering the same interest (or any part thereof) that was
covered by the Subject Lease, shall be considered a renewal or extension for
the
purposes hereof. Additionally, the Overriding Royalty shall continue in force
and effect and not be extinguished in the event Grantor acquires the mineral
estate covered by a Subject Lease and thereafter releases such Subject
Lease.
15, The
agreements and obligations of Grantor in Sections 9, 11 and 13 above shall
not
be covenants running with the land and shall be personal agreements and
obligations of Grantor and any Affiliate of Grantor that shall terminate upon
a
sale, transfer or disposition of Grantor’s Burdened Interest to a third party
that is not an Affiliate of Grantor. All other covenants and agreements of
Grantor herein contained shall be deemed to be covenants running with the
Burdened Interest. All of the provisions hereof shall inure to the benefit
of
Grantee and its successors and assigns.
16. All
communications required or permitted to be given under this Conveyance shall
be
in writing and shall be given by registered or certified mail, postage prepaid
or telecopy, or by personal service (including express or courier service),
and
addressed to the addresses specified at the beginning of this Conveyance (or
to
such other address or telecopy number as may be designated in writing in
accordance herewith). Notices shall be deemed given upon
receipt.
7
17. This
Conveyance is being executed in several counterparts, all of which are
identical, except that, to facilitate recordation, in certain counterparts
hereof only that portion of Exhibit “A” which contains specific descriptions of
the Subject Lands located in the recording jurisdiction in which the counterpart
is to be recorded shall be included, and all other portions of Exhibit “A” shall
be included by reference only. Complete copies of this Conveyance containing
the
entire Exhibit “A” have been retained by Xxxxxxx and Xxxxxxx. All of such
counterparts together shall constitute but one and the same
instrument.
18. WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW, THIS CONVEYANCE SHALL BE CONSTRUED
AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE
AND
THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT THAT TO THE EXTENT THAT THE
LAW
OF A STATE IN WHICH A PORTION OF THE OVERRIDING ROYALTY IS LOCATED (OR WHICH
IS
OTHERWISE APPLICABLE TO A PORTION OF THE OVERRIDING ROYALTY) NECESSARILY OR,
IN
THE SOLE DISCRETION OF GRANTEE, APPROPRIATELY GOVERNS, WITH RESPECT TO
PROCEDURAL AND SUBSTANTIVE MATTERS RELATING TO THE CREATION, PERFECTION AND
VESTING OF THE OVERRIDING ROYALTY, AND OTHER RIGHTS AND REMEDIES OF THE GRANTEE
GRANTED HEREIN, THE LAW OF SUCH STATE SHALL APPLY AS TO THAT PORTION OF THE
OVERRIDING ROYALTY LOCATED IN (OR WHICH IS OTHERWISE SUBJECT TO THE LAWS OF)
SUCH STATE. GRANTOR AND GRANTEE HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR
IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN, AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING
IS
IMPROPER. GRANTOR AND GRANTEE HEREBY IRREVOCABLY WAIVE PERSONAL SERVICE OF
PROCESS AND CONSENT TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS SHOWN ABOVE
FOR SUCH PARTY, AND AGREE THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED
TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
THE PARTIES ACKNOWLEDGE THAT XXXXXXX’S PRINCIPAL OFFICE IS IN THE STATE OF NEW
YORK AND GRANTEE HAS MADE PAYMENTS TO GRANTOR FROM ITS BANK ACCOUNT LOCATED
IN
THE STATE OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS CONVEYANCE
OR
ANY TRANSACTION CONTEMPLATED HEREBY.
8
19. It
is not
the intent of the Grantor or Grantee that any provision herein violate any
applicable law regarding the rule against perpetuities, and this Conveyance
shall be construed as not violating such rule to the extent the same can be
construed consistent with the expressed intent of the Grantor and Grantee as
set
forth in this Conveyance. In the event, however, that any provision of this
Conveyance is determined to violate such rule, then such provision shall
nevertheless be effective for the maximum period (but not longer than the
maximum period) permitted by such rule that will result in no such violation.
To
the extent such maximum period is permitted to be determined by reference to
lives in being, Grantor and Xxxxxxx agree that “lives in being” shall refer to
the lifetime of the last to die of the now living lineal descendants of Xxxxxx
Xxxxxxx Xxxxxx Xxxx, 41st
President of the United States of America.
IN
WITNESS WHEREOF, this Conveyance is executed as of the date indicated below,
effective as of 7 o'clock a.m. local time at the locations of the Subject Lands,
respectively on November 13, 2008 (the “Effective
Time”)
[signatures
and acknowledgement pages to follow]
9
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“GRANTOR”
|
|
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By:
|
|
|
X.
X. Xxxxxxxxxx, President
|
|
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“GRANTEE”
|
|
|
LONGVIEW
MARQUIS MASTER FUND, L.P.
|
|
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By:
Viking Asset Management, LLC
|
|
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Its:
Investment Adviser
|
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By:
|
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Name:
Xxxxx X. Xxxx
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Title:
Chairman
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STATE
OF
TEXAS
)
)
ss:
COUNTY
OF
XXXXXX
)
The
foregoing instrument was acknowledged before me on this ___ day of _________,
2008, by X.X. Xxxxxxxxxx, President of Sonterra Resources, Inc., a Delaware
corporation, as the act and deed and on behalf of said corporation.
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Notary
Public, State of Texas
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[SEAL]
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(printed
name)
|
My
commission expires:
STATE
OF
)
) ss:
COUNTY
OF )
The
foregoing instrument was acknowledged before me on this ___ day of ___________,
2008, by Xxxxx X. Xxxx, Chairman of Viking Asset Management, LLC, as investment
adviser to Longview Marquis Master Fund, L.P., a British Virgins Island limited
partnership, as the act and deed of such _____________ on behalf of said limited
partnership.
|
Notary
Public, State and County of
|
|
|
[SEAL]
|
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(printed
name)
|
My
commission expires:
EXHIBIT
“A”
Shark
Prospect
|
1.
|
Oil
and Gas Lease dated July 1, 2003, from the State of Texas, as Lessor,
to
Cinco Natural Resources Corporation, as Lessee, covering Oil and
Gas Lease
No. M-103194, being the South One-Half (S/2) of State Tract 150,
Matagorda
Bay, Xxxxxxx County, Texas, containing approximately 320.0 acres,
recorded
in File No. 82095, Volume 349, Page 1 of the Official Records of
Xxxxxxx
County, Texas.
|
Lease
Interest:
Surface
down to 9400' true vertical depth as seen in the Xxxxxxxx Corporation –
Aquamarine Unit Well No. 1 (API No. 42-057-31600).
72.80
WI
/ 57.512% NRI
Rights
between 9401' and 50' below the stratigraphic equivalent of the top of the
9800'
Sand, said top of the 9800' Sand being equal to 9790' TVD as seen on the
electric log for the Xxxxxxxx Corporation – Aquamarine Unit Well No. 1 (API
No. 42-057-31600).
30.30%
WI
/ 23.55825% NRI
Rights
below 50' below the stratigraphic equivalent of the top of the 9800' Sand,
said
top of the 9800' Sand being equal to 9790' TVD as seen on the electric log
for
the Xxxxxxxx Corporation – Aquamarine Unit Well No. 1 (API No.
42-057-31600).
30.30%
WI
/ 23.331% NRI
Well
Interest:
Flash –
State Tract 150 No. 1 Well, API No. 00-000-00000: 72.80% WI / 57.512% NRI
(Shut-In)
Flash –
State Tract 150 Xx. 0 XX #0 Xxxx, API No. 00-000-00000: 72.80% WI / 57.512%
NRI
(Sidetrack well scheduled for 4th
Quarter
2008)
BOSS –
State Tract 150 No. 2 Well, API No. 00-000-00000: 30.30% WI / 23.55825% NRI
(Current NRI)
Recompletion
of the State Tract 150 No. 2 Well, API No. 00-000-00000, scheduled in 2009
will
be drilled by shallow owners only and Sonterra’s WI and NRI percentages are as
follows: 72.8% WI / 57.512% NRI (before a negotiated NPI to deep
interest owners).
Ray
Prospect
|
2.
|
Oil
and Gas Lease dated October 19, 2004, from the State of Texas, by
and
through the Commissioner of the General Land Office of the State
of Texas,
as Lessor, to Cinco Natural Resources Corporation, as Lessee, covering
Oil
and Gas Lease Number M-104265, being the South One-Half (S/2) of
Tract
175, Matagorda Bay, Matagorda and Xxxxxxx Counties, Texas, containing
approximately 320 acres as shown on the applicable Official Submerged
Area
Map on file in the Texas General Land Office, Austin, Texas, and
recorded
in the Official Records of Matagorda County, Texas, as File No. 050427,
and recorded in the Official Records of Xxxxxxx County, Texas, as
File No.
91879, Volume 400, Page 525.
|
Lease
Interest:
30.30%
WI / 22.04325% NRI
|
3.
|
Oil
and Gas Lease dated October 19, 2004, from the State of Texas, by
and
through the Commissioner of the General Land Office of the State
of Texas,
as Lessor, to Cinco Natural Resources Corporation, as Lessee, covering
Oil
and Gas Lease Number M-104266, being the South One-Half (S/2) of
Tract
178, Matagorda Bay, Matagorda County, Texas, containing approximately
320
acres as shown on the applicable Official Submerged Area Map on file
in
the Texas General Land Office, Austin, Texas, and recorded in the
Official
Records of Matagorda County, Texas, as File No.
050428.
|
Lease
Interest:
30.30%
WI / 22.04325% NRI
|
4.
|
Oil
and Gas Lease dated October 19, 2004, from the State of Texas, by
and
through the Commissioner of the General Land Office of the State
of Texas,
as Lessor, to Cinco Natural Resources Corporation, as Lessee, covering
Oil
and Gas Lease Number M-104267, being the North One-Half (N/2) of
Tract
179, Matagorda Bay, Matagorda County, Texas, containing approximately
320
acres as shown on the applicable Official Submerged Area Map on file
in
the Texas General Land Office, Austin, Texas, and recorded in the
Official
Records of Matagorda County, Texas, as File No.
050429.
|
Lease
Interest:
30.30%
WI / 22.04325% NRI
Starfish
Prospect
|
5.
|
Oil
and Gas Lease dated April 5, 2005, from the State of Texas, by and
through
the Commissioner of the General Land Office of the State of Texas,
as
Lessor, to Cinco Energy Corporation, as Lessee, covering Oil and
Gas Lease
Number M-104829, being the South One-Half (S/2) of Tract 96, Matagorda
Bay, Xxxxxxx County, Texas, containing approximately 320 acres as
shown on
the applicable Official Submerged Area Map on file in the Texas General
Land Office, Austin, Texas, and recorded in the Official Records
of
Xxxxxxx County, Texas, as File No. 92724, Volume 406, Page
35.
|
Lease
Interest:
30.30%
WI / 22.422% NRI (to April 5, 2009)/ 21.6645% NRI (after April 5,
2009)
|
6.
|
Oil
and Gas Lease dated July 19, 2005, from the State of Texas, by and
through
the Commissioner of the General Land Office of the State of Texas,
as
Lessor, to Cinco Resources, Inc., as Lessee, covering Oil and Gas
Lease
Number M-105371, being the North One-Half (N/2) of Tract 104, Matagorda
Bay, Xxxxxxx County, Texas, containing approximately 320 acres as
shown on
the applicable Official Submerged Area Map on file in the Texas General
Land Office, Austin, Texas, and recorded in the Official Records
of
Xxxxxxx County, Texas, as File No. 96377, Volume 426, Page
912.
|
Lease
Interest:
36.2874%
WI / 26.852676% NRI (to July 19, 2009) / 25.945491% (after July 19, 2009)
Barracuda
Prospect
|
7.
|
Oil
and Gas Lease dated April 5, 2005, from the State of Texas, by and
through
the Commissioner of the General Land Office of the State of Texas,
as
Lessor, to Cinco Energy Corporation, as Lessee, covering Oil and
Gas Lease
Number M-104827, being the North One-Half (N/2) of Tract 94, Matagorda
Bay, Xxxxxxx County, Texas, containing approximately 320 acres as
shown on
the applicable Official Submerged Area Map on file in the Texas General
Land Office, Austin, Texas, and recorded in the Official Records
of
Xxxxxxx County, Texas, as File No. 92722, Volume 406, Page
21.
|
Lease
Interest:
30.30%
WI / 22.422% NRI (to April 5, 2009)/ 21.6645% NRI (after April 5,
2009)
|
8.
|
Oil
and Gas Lease dated April 5, 2005, from the State of Texas, by and
through
the Commissioner of the General Land Office of the State of Texas,
as
Lessor, to Cinco Energy Corporation, as Lessee, covering Oil and
Gas Lease
Number M-104828, being the South One-Half (S/2) of Tract 94, Matagorda
Bay, Xxxxxxx County, Texas, containing approximately 320 acres as
shown on
the applicable Official Submerged Area Map on file in the Texas General
Land Office, Austin, Texas, and recorded in the Official Records
of
Xxxxxxx County, Texas, as File No. 92723, Volume 406, Page
28.
|
Lease
Interest:
30.30%
WI / 22.422% NRI (to April 5, 2009)/ 21.6645% NRI (after April 5,
2009)
Mackerel
Prospect
|
9.
|
Oil
and Gas Lease dated July 19, 2005, from the State of Texas, by and
through
the Commissioner of the General Land Office of the State of Texas,
as
Lessor, to Cinco Resources, Inc., as Lessee, covering Oil and Gas
Lease
Number M-105373, being the North One-Half (N/2) of Tract 175, Matagorda
Bay, Xxxxxxx and Matagorda Counties, Texas, containing approximately
320
acres as shown on the applicable Official Submerged Area Map on file
in
the Texas General Land Office, Austin, Texas, and recorded in the
Official
Records of Xxxxxxx County, Texas, as File No. 96378, Volume 426,
Page 919,
and recorded in the Official Records of Matagorda County, Texas,
as File
No. 063722.
|
Lease
Interest:
36.2874%
WI / 26.852676% (to July 19, 2009) / 25.945491% (after July 19, 2009)
|
10.
|
Oil
and Gas Lease dated October 4, 2005, from the State of Texas, by
and
through the Commissioner of the General Land Office of the State
of Texas,
as Lessor, to Cinco Resources, Inc., as Lessee, covering Oil and
Gas Lease
Number M-105679, being the North One-Half (N/2) of Tract 178, Matagorda
Bay, Matagorda County, Texas, containing approximately 320 acres
as shown
on the applicable Official Submerged Area Map on file in the Texas
General
Land Office, Austin, Texas, and recorded in the Official Records
of
Matagorda County, Texas, as File No.
059741.
|
Lease
Interest:
30.30%
WI / 22.422% NRI (to October 4, 2009)/ 21.6645% NRI (after October 4,
2009)
|
11.
|
Oil
and Gas Lease dated October 4, 2005, from the State of Texas, by
and
through the Commissioner of the General Land Office of the State
of Texas,
as Lessor, to Cinco Resources, Inc., as Lessee, covering Oil and
Gas Lease
Number M-105678, being the South One-Half (S/2) of Tract 176, Matagorda
Bay, Xxxxxxx and Matagorda Counties, Texas, containing approximately
320
acres as shown on the applicable Official Submerged Area Map on file
in
the Texas General Land Office, Austin, Texas, and recorded in the
Official
Records of Xxxxxxx County, Texas, as File No. 96971, Volume 429,
Page 918,
and recorded in the Official Records of Matagorda County, Texas,
as File
No. 059740.
|
Lease
Interest:
30.30%
WI / 22.422% NRI (to October 4, 2009)/ 21.6645% NRI (after October 4,
2009)
Sydney/150-Deep
Prospect
|
12.
|
Oil
and Gas Lease dated July 1, 2003, from the State of Texas, by and
through
the Commissioner of the General Land office of the State of Texas,
as
Lessor, to LLOG Exploration Texas, L.P., as Lessee, covering Oil
and Gas
Lease Number M-103190, being the North One-Half (N/2) of Tract 127,
Matagorda Bay, Xxxxxxx County, Texas, containing approximately 320
acres
as shown on the applicable Official Submerged Area Map on file in
the
Texas General Land Office, Austin, Texas, and recorded in the Official
Records of Xxxxxxx County, Texas, as File No. 00081323, Volume 344,
Page
875.
|
|
13.
|
Oil
and Gas Lease dated July 1, 2003, from the State of Texas, by and
through
the Commissioner of the General Land office of the State of Texas,
as
Lessor, to LLOG Exploration Texas, L.P., as Lessee, covering Oil
and Gas
Lease Number M-103191, being the South One-Half (S/2) of Tract 127,
Matagorda Bay, Xxxxxxx County, Texas, containing approximately 320
acres
as shown on the applicable Official Submerged Area Map on file in
the
Texas General Land Office, Austin, Texas, and recorded in the Official
Records of Xxxxxxx County, Texas, as File No.0081324, Volume 344,
Page
882.
|
|
14.
|
Oil
and Gas Lease dated July 1, 2003, from the State of Texas, as Lessor,
to
Cinco Natural Resources Corporation, as Lessee, covering Oil and
Gas Lease
No. M-103194, being the south one-half (S/2) of State Tract 150,
Matagorda
Bay, Xxxxxxx County, Texas, containing approximately 320.0 acres,
recorded
in File No. 82095, Volume 349, Page 1 of the Official Records of
Xxxxxxx
County, Texas. (This tract is also in the Shark
Prospect.)
|
|
15.
|
Oil
and Gas Lease dated July 1, 2003, from the State of Texas, by and
through
the Commissioner of the General Land office of the State of Texas,
as
Lessor, to LLOG Exploration Texas, L.P., as Lessee, covering Oil
and Gas
Lease Number M-103195, being the South One-Half (S/2) of Tract 151,
Matagorda Bay, Xxxxxxx County, Texas, containing approximately 320
acres
as shown on the applicable Official Submerged Area Map on file in
the
Texas General Land Office, Austin, Texas, and recorded in the Official
Records of Xxxxxxx County, Texas, as File No. 00081326, Volume 344,
Page
896.
|
|
16.
|
Oil
and Gas Lease dated July 1, 2003, from the State of Texas, by and
through
the Commissioner of the General Land office of the State of Texas,
as
Lessor, to LLOG Exploration Texas, L.P., as Lessee, covering Oil
and Gas
Lease Number M-103192, being the North One-Half (N/2) of Tract 128,
Matagorda Bay, Xxxxxxx County, Texas, containing approximately 320
acres
as shown on the applicable Official Submerged Area Map on file in
the
Texas General Land Office, Austin, Texas, and recorded in the Official
Records of Xxxxxxx County, Texas, as File No. 00081325, Volume 344,
Page
889.
|
|
17.
|
Oil
and Gas Lease dated July 6, 2004, from the State of Texas, by and
through
the Commissioner of the General Land office of the State of Texas,
as
Lessor, to LLOG Exploration Texas, L.P., as Lessee, covering Oil
and Gas
Lease Number M-104022, being the North One-Half (N/2) of Tract 150,
Matagorda Bay, Xxxxxxx County, Texas, containing approximately 320
acres
as shown on the applicable Official Submerged Area Map on file in
the
Texas General Land Office, Austin, Texas, and recorded in the Official
Records of Xxxxxxx County, Texas, as File No. 00088242, Volume 381,
Page
433.
|
|
18.
|
Oil
and Gas Lease dated July 19, 2005, from the State of Texas, by and
through
the Commissioner of the General Land office of the State of Texas,
as
Lessor, to LLOG Exploration Texas, L.P., as Lessee, covering Oil
and Gas
Lease Number M-105372, being the South One-Half (S/2) of Tract 154,
Matagorda Bay, Xxxxxxx County, Texas, containing approximately 320
acres
as shown on the applicable Official Submerged Area Map on file in
the
Texas General Land Office, Austin, Texas, and recorded in the Official
Records of Xxxxxxx County, Texas, as File No. 00095163, Volume 420,
Page
166.
|
Lease
Interest:
N/2 ST
150 (SAVE AND EXCEPT the portion excluded from the State Tract 127 No. 1 Unit,
being depths above the stratigraphic equivalent of 100’ below the base of the
9800’ Sand TVD as seen in the Xxxxxxxx Corporation Aquamarine Unit Well No. 1
(API No. 42-057-31600) and the S/2 of ST 154: 53.8 % WI / 39.6775 %
NRI
Lease
Interest:
INSOFAR
only as to that portion of the N/2 ST 150 excluded from the State Tract 127
No.
1 Unit, being depths above the stratigraphic equivalent of 100’ below the base
of the 9800’ Sand TVD as seen in the Xxxxxxxx Corporation Aquamarine Unit Well
No. 1 (API No. 42-057-31600): 74.8 % WI / 55.165% NRI
Lease
Interest:
S/2 and
the N/2 of ST 127; N/2 ST 128; and the S/2 of ST 151:
53.8
% WI
/ 38.3325 % NRI
Unit
Well Interest:
Sonterra –
State Tract 000 Xx. 0 Xxxx #0 Xxxx, API No. 00-000-00000:
|
A.
|
3.558523%
WI to Casing Point/ 5.113335% NRI to Casing
Point;
|
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B.
|
7.025190%
WI at Casing Point BPO of Raptor and Xxxxx non-consent WI and BPO
Rainier
4.5% WI / 5.113335% NRI;
|
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C.
|
6.571999%
WI APO Rainier 4.5% WI and BPO Raptor and Xxxxx non-consent WI /
4.783477
% NRI; and
|
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D.
|
11.359472%
WI APO Raptor and Xxxxx non-consent (and simultaneous back-in to
25% of
South Texas Oil’s WI/NRI **) / 8.268073 %
NRI
|
Unit
Description:
State
of
Texas Tract 127 No. 1 Unit Well #1, covering 2,240 acres, consisting of oil
and
gas leases covering the S/2 and the N/2 of State Tract 127; the N/2 of State
Tract 128; the S/2 of State Tract 151; the S/2 of State Tract 154; the S/2
ST
150, Save and Except depths above the stratigraphic equivalent of 100' below
the
base of the 9800' Sand TVD as seen in the Xxxxxxxx Corporation Aquamarine Unit
Well No. 1 (API No. 42-057-31600); and the N/2 ST 150 North Half of State Tract
150, Save and Except the depths above the stratigraphic equivalent
of 100
feet
below the base of the 9800’ Sand TVD as seen in the Xxxxxxxx Corporation
Aquamarine Unit Well No. 1 (API No. 42-057-31600) which shall be excluded from
the Term Pooling Agreement described below:
Term
Pooling Agreement from the Commissioner of the General Land Office, as Lessor,
to Sonterra Resources, Inc., as Lessee, dated February 20, 2008, but effective
December 11, 2008, and filed of record on February 28, 2008 as Instrument No.
111111 in the Official Records of Xxxxxxx County, Texas, forming a pooled unit
covering all depths, except from the surface to 10,000’ TVD on all of State
Lease M-103194 and that part of State Lease M-104022 shown on Exhibit “D”
attached thereto encompassing the S/2 of Tract 127 (M-103191); N/2 of Tract
127
(M-103190); N/2 of Tract 128 (M-103192); N/2 of Tract 150 (M-104022); S/2 of
Tract 151 (M-103195); and S/2 of Tract 154 (M-105372).
Pipeline:
An
undivided 100.0% interest in and to the seven (7) mile six-inch (6") S80 Gr
B
pipeline connecting Matagorda Bay, Xxxxxxx County, Texas State Tract 150 No.
1
line heater platform to the Xxxxxx Bay Facility onshore.
